Gibson’s ‘Baseless’ Trademark Claims Run Into Antitrust Wall

A federal judge slapped down Gibson Brands Inc. for bringing a trademark claim to an antitrust fight, highlighting the varied lenses through which two very different areas of law address unfair dominance of a market.

Heritage Guitar Inc. convinced a Michigan federal court that Gibson’s counterclaims accusing Heritage of infringing its iconic Les Paul guitar shape were “objectively baseless.”

Gibson brought the shot-down counterclaims after Heritage asked the court for declaratory and injunctive relief against allegations of trademark infringement laid out in a series of cease-and-desist letters from Gibson. Heritage later amended its complaint with allegations that Gibson was violating antitrust law by bringing “sham” trademark claims in pursuit of cornering the market for high-end electric guitars. The antitrust claims in the case remain pending.

The dispute raises broader questions about the proper bounds of trademark law, and how drawing those lines affects the calculus of antitrust fights. Both areas guard against anticompetitive behavior, but in fundamentally different ways: While antitrust law targets anticompetitive acts, trademark law blocks protections for product features that would box out potential competitors, inviting a monopoly.

In theory, trademarks can’t be functional or provide a commercial advantage beyond indicating who made a product. But accusations of leveraging trademark protection to monopolize such an advantage still emerge, and stacking the two already complex areas of law can make such antitrust claims difficult to pin down.

In Gibson’s case, the US District Court for the Western District of Michigan ruled that its trademark claims were explicitly barred under a 1991 settlement agreement between the two companies, rendering them baseless. Heritage, then, could keep making guitars sharing certain similarities with Gibson’s—though it couldn’t move its designs any closer to the trademarked shapes.

But without that agreement, proving even baseless trademark claims amount to an antitrust violation is a heavy lift, law professor Christopher Jon Sprigman of New York University said.

“It’s hard to say the plaintiff was bringing an objectively baseless trademark suit not intending to vindicate trademark rights, but to use litigation as a club to drive the competitor out of the market,” said Sprigman, who focuses both on intellectual property and antitrust law.

The 1991 agreement’s standard for whether Heritage’s newer guitars are “closer in appearance to” the Les Paul is vague, creating uncertainty that generally favors the IP holder in an antitrust context, law professor William Hubbard of the University of Baltimore said. Claims that an IP owner violated antitrust law generally lose, he said.

“To hold an IP owner to an antitrust violation because they misunderstood the scope of the agreement chills the assertion of more IP rights in the future,” Hubbard said. “Because of that, courts are very unwilling to aggressively chill intellectual property rights.”

At the same time, the claimed IP has to qualify for protection. Even without an agreement barring the trademark claims, IP law’s limitation on trademark protection for features that go beyond identifying who made a product could give Heritage an out.

“You don’t want to give a trademark if the reason people value this is for the way it looks, not because the look says ‘I’m a Gibson guitar,’” intellectual property law professor Mark Lemley of Stanford University said. “But trademark owners regularly bring claims that try to push that line or test that boundary.”

Narrow market?

Both areas of law split products into markets, but for different purposes. While trademark law does so to determine whether consumers would be confused by a mark’s use, antitrust does so to determine if products directly compete. If Gibson could establish that there’s not a specific market for the shape of guitars it makes—separate from the general guitar market—an antitrust claim would become much more difficult.

Heritage alleged the two, narrowly-defined relevant markets are based on single- and double-cutaway electric guitars. The court found that sufficient to avoid a quick loss based on the vast array of other competing designs, despite Gibson’s argument that the market definitions were improperly narrow and lacked factual evidence.

The court’s finding is not a final resolution, IP and antitrust law professor Stacey Dogan of Boston University Law School said, and the market definition could change as the lawsuit moves forward. But it’s in Heritage’s best interest to keep the markets as narrow as possible—meaning it must show that customers care about a specific market for the single- and double-cutout guitar body shapes rather than viewing guitars as generally interchangeable.

Heritage’s market definition feels circular, said Patricia Campbell, a University of Maryland Law School professor. For example, it cites “the ‘iconic’ single-cutaway shape with Florentine cutaway of the Les Paul and Heritage H-150,” as if using the products to describe but not define the market.

“The court says, ‘Well, that’s not necessarily too narrow of a market definition because it’s not limited to a particular brand,’” Campbell said. “If they’d said the market was about Les Paul guitars, that would be too narrow, but because they’re using it descriptively it passes muster for now.”

Campbell also found it surprising the court went so far as to call Gibson’s trademark claims in the cease-and-desist letters objectively baseless before discovery. That moves the question to Gibson’s motivation in sending the letters, she said.

Complicating factors

Sprigman noted that “antitrust law is very deferential to property rights,” including trademark rights. That makes whether those rights exist pivotal: If the trademark rights do exist, there’s nothing anticompetitive about suing to protect them.

Most word and logo trademarks exist to clearly identify the source of a product: a swoosh may appeal to a consumer, but mainly because it says Nike Inc. made the product. The question can become harder with trade dress—a class of trademarks that include the appearance of the product itself.

A particularly complicated factor in disputes over product designs is the “aesthetic functionality” doctrine, which denies trademark protection to designs that, even if not functional, still provide a competitive advantage. A heart-shaped box may not affect the utility of the chocolates inside, but it would still appeal to consumers beyond signaling who made it.

The Supreme Court has explicitly acknowledged aesthetic functionality in cases that don’t take the doctrine head-on, saying in a few opinions that a feature couldn’t be protected as a trademark if it created a “significant non-reputation related disadvantage.”

But courts apply the doctrine inconsistently; the Fifth Circuit has rejected the doctrine outright despite high court dicta. That may have led a different accused Gibson infringer to instead unsuccessfully argue Gibson guitar shapes at issue are generic, which comes with a different standard.

Despite the unpredictability, it remains “easier and cleaner” to have a mark invalidated than to win an antitrust claim in such a conflict, said Lemley, who also writes about antitrust law. Antitrust invokes complicated questions that are irrelevant to trademark validity, such as determining standing, analyzing and defining markets, and establishing harm and a causal link, he said.

Lemley also said the difficulty of fully cleaving the design of a product from its commercial benefits makes it problematic to extend potentially monopoly-granting trademark protection for such characteristics. Even if the guitar designs don’t affect sound or ease of use, they may simply be looks that consumers crave, independent of who made them.

“We would definitely be better off saying the trademark doesn’t extend that far,” Lemley said.