Looks like the 88th Academy Awards couldn’t stay out of the spotlight if it wanted to, first dealing with the #OscarsSoWhite controversy and now starting a lawsuit over the swag bags being given out at the awards. Forbes values this year’s swag bag at $232,000 and it includes such classics as: a $250 marijuana vaporizer; $1,900 “vampire breast lift” skin treatments; $250 vibrator; $275 Swiss-made toilet paper; and a 10-day first class trip to Israel, just to name a few. The company providing the gift bags is Distinctive Assets (DA), which specializes in “offering celebrity placement, product introduction and branding opportunities within the entertainment industry.”

Last year DA allegedly promised the Academy that it would change its ways and stop marketing its goodie bags in a manner that implies the Academy endorses DA or its products – so you can kind of see why the Academy would put its foot down when DA used slogans like “Everyone Wins At The Oscars®! Nominee Gift Bags,” and “Everyone Wins Nominee Gift Bags in Honor of the Oscars®,” this year.

DA is an independent corporation that is unaffiliated with the Oscars, but many news outlets did not make that distinction when reporting on this year’s extravagant haul. For the Academy, the combination of the price-tag (exorbitant!), contents (unwholesome!), and media attention (unfavorable!), was too much, and they filed suit on February 16, 2016. The Academy has not given out swag bags of its own accord since 2007, when the IRS decided to pay closer attention to the practice (Pro Tip: gift bag recipients are supposed to claim all the goodies as income on their taxes).

THE BIG (FAIRLY) SHORT COMPLAINT

The 23-page complaint filed in the Central District of California includes claims for trademark infringement, false advertising, and trademark dilution. The complaint puts a lot of emphasis on the media stories surrounding the swag bags, not merely because they imply the Academy is associated with putting together and giving them, but also because many of the stories focus on the “less-than-wholesome nature” of the products and the “unseemliness of giving such high value gifts . . . to an elite group of celebrities.” According to the Academy, not only is DA infringing its trademarks, but it’s diluting their distinctiveness, and tarnishing their goodwill.

LANHAM ACT: FURY ROAD

Trademark law stems from the commerce clause of the U.S. Constitution. Because Congress can regulate commerce between the states, it was entitled to enact the Lanham Act which includes trademark infringement, false advertising, and dilution (non-exhaustively). Because many businesses operate throughout the USA and rely on their trademarks, Congress deemed it appropriate to federally regulate trademark standards.

A trademark is any recognizable symbol, including words, shapes, colors, sounds, and smells, which identifies a product or service and denotes its source, distinguishing that product or service from other sources. Therefore, a trademark must (1) identify the source of a product or service, distinguishing it from others and (2) represent the goodwill associated with that service. Goodwill is the amount of value a company’s good reputation adds to its overall value as a business. Further, a trademark must be used in commerce in order to have protectable rights attach to it, and must be distinctive.

CLAIMS OF SPIES: Trademark Infringement & Dilution

The test for trademark infringement is whether the junior user’s mark (in this case DA) is likely to create confusion with the senior user’s (the Academy) use of the mark. A “junior user” is the second user to adopt the same trademark after an older – senior – user, meaning that trademarks fall into the “first come first served” category of legal protection. Here, the Academy must establish (1) the validity of its marks, likely through its many registrations, and (2) that DA’s use is likely to cause confusion among consumers, meaning that consumers will believe the Academy is involved in the selection and giving of the swag bags.

Trademark dilution, on the other hand, is not focused on consumer protection; dilution statutes protect the trademark owner’s interest in the value of a famous mark by providing relief against tarnishment of the mark’s reputation (goodwill) or the blurring of its distinctiveness. A court will determine if a mark is famous by considering factors such as (1) length of use; (2) amount of sales and advertising; (3) public recognition; and (4) the absence of similar marks – it is a very difficult standard to obtain, and most trademark owners fail at this step, though it seems unlikely that the Academy would have an issue. Dilution of a trademark erodes its prestige and distinctiveness, lessening its capacity to identify and distinguish the goods and services associated with it. And though similarity between the marks is necessary, a likelihood of confusion – which is essential to an infringement claim – is not. The products do not even need to be competing.

There are two types of dilution, blurring and tarnishing. Tarnishing happens when the defendant, here DA, associates the Academy’s mark with unsavory goods or activities, such as marijuana vapes and sex toys. Blurring occurs when a unique and well-known mark, such as “Oscars” is used for unrelated goods or services, like decadent swag bags, which reduces the public’s association of the mark with the Academy and its goods and services. This creates the possibility that the mark will lose its ability to serve as a unique identifier of the Academy’s brand. Thus, this dilution claim requires showing that (1) the Academy’s trademarks are famous; (2) DA’s use was adopted after the initial mark became famous; (3) the new mark, DA’s use of “Oscars” on swag bags, is likely to cause dilution of the old; and (4) DA is using “Oscars” in commerce for commercial purposes.

SPOTLIGHT: False Advertising

Lastly, false advertising occurs when a company misrepresents the nature, characteristics, qualities, or geographic origins of its goods and services in commercial advertising. Basically, if an advertisement uses “claims” which are untrue, it can open liability for false advertising litigation. The definition of a “claim” is incredibly broad, it is any statement in an ad that may be subject to proof, even implied statements. So an advertiser, such as DA, is obligated to support all reasonable interpretations of the claims made in its advertising. From the look of things, DA is going to be hard pressed to show that a reasonable interpretation of “Everyone Wins At The Oscars®! Nominee Gift Bags,” does not include Academy sponsorship of the swag bags.

Overall, it looks like DA will have it tough showing any good-faith use of the “Oscars” trademark, be it in terms of infringement, dilution, or false advertising. Looks like The Revenant isn’t the only thing featuring a mauling this Oscars’ season.