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Hastings Law Journal

Authors

Leah L. Scholer

Abstract

The theory of reverse confusion has confounded courts because of the unique equities involved in this type of trademark infringement. Reverse confusion results when an infringer, typically a larger company, swamps the reputation of the trademark holder. The infringement causes the trademark holder to lose control of its brand, because confused customers think of the better- known brand, rather than the trademark holder, when they see the trademark. For example, a well-known reverse confusion case began with a swimwear manufacturer that held the trademark "Miraclesuit." When Victoria's Secret expanded its "Miracle Bra" brand to swimwear, customers who were more familiar with the Miracle Bra brand than Miraclesuit bought the latter, thinking the swimwear belonged to Victoria's Secret.

The current methods for awarding relief in reverse confusion cases do not adequately address the equities involved and either lead to insufficient or excessive compensation. Some courts deny the trademark holder damages because the infringer's sales stem from the infringer's own goodwill or because the infringement increases the trademark holder's sales; these cases fail to address the trademark holder's loss. On the other hand, some courts award excessive damages based solely upon a deterrence rationale.

This Note answers the question of how courts should fashion a remedy in cases of willful reverse confusion: Courts should award damages based on a royalty rate, meaning the rate upon which negotiating parties would settle. A royalty rate comports with the Lanham Act, which governs trademark infringement remedies and which states that damages should corn pensate the trademark holder rather than penalize the infringer. A royalty rate balances the equities: it represents the unjust gain to the infringer-the value of the trademark use-but avoids disgorging profits attributable to the infringer's own goodwill and does not require courts toplace a speculative value on the trademark holder's lost control of the trademark.

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