Ugg boots trademark dispute

A pair of UGG boots from the United States where the name is trademarked

A pair of Ugg boots made in Australia where the name is generic

The Lanham Act is the primary statute governing federal trademark law in the United States;[8] however, as it only applies to "commerce which may lawfully be regulated by Congress",[9] it does not address terms that are used in foreign countries.[notes 1] The doctrine of foreign equivalents guideline serves this purpose.[8]

Under the doctrine of "foreign equivalents", a foreign language term used in a foreign country that is considered generic in that country cannot be imported into the United States and used as a trademark. In applying the doctrine, the courts consistently refer to two policy rationales.[10] The first rationale, "the doctrine serves the interests of domestic competition":[10]

"Because of the diversity of the population of the United States, coupled with temporary visitors, all of whom are part of the United States marketplace, commerce in the United States utilizes innumerable foreign languages. No merchant may obtain the exclusive right over a trademark registration if that exclusivity would prevent competitors from designating a product as what it is in the language their customers know best." — Otokoyama Co. Ltd. Vs Wine of Japan Import Inc.[10][11]

The second rationale, "the doctrine serves the interests of international comity":[10]

"Because United States companies would be hamstrung in international trade if foreign countries granted trademark protection to generic English words, the United States reciprocates and refuses trademark protection to generic foreign words." — Enrique Bernat F., S.A. v. Guadalajara, Inc.[10][12]

However, the Trademark Manual of Examining Procedure ("TMEP") states that the test for applying the doctrine of foreign equivalents is "whether, to those American buyers familiar with the foreign language, the word would denote its English equivalent".[notes 2][10][13] Thus the doctrine is generally interpreted by courts as not applying if the generic word is not a word from a foreign language, but one from an English-speaking foreign country.[notes 3][notes 4][14]

Court cases have noted that the generic status accorded to English-language words in foreign countries has no bearing on the registration of marks in the United States. The genericity argument was invoked for Ugg boots and was rejected by a U.S. district court which cited the following cases in support.[14] In Anheuser-Busch, Inc. v. Stroh Brewery Co., the court rejected as irrelevant the generic usage of the phrase "L.A. beer" in Australia for low-alcohol beer.[14][15] The court ruled that "a term may be generic in one country and suggestive in another"[16] and that genericity in Australia was irrelevant.[17] In Carcione v. The Greengrocer, Inc., the court rejected as irrelevant the generic use of the term "Greengrocer" in most English speaking countries for a retailer of fruit. The court rejected the argument on the grounds that it is irrelevant how a term is used outside the United States:[16] "The parties agree that the term is generic in Britain. Since we deal here with American trademark law, and thus American consumers, neither British usage nor the dictionary definition indicating such usage are determinative."[14][18] In another case, the court stated that while a term may be generic in another country, if "it is not so recognized in this country [the U.S.]... the mark must still be regarded as arbitrary and fanciful in the United States." and thus remains eligible for registration as a trademark in the United States.[19]

As the doctrine is a guideline rather than a rule, it has been criticized with commentators noting that United States courts are often contradictory and inconsistent in their application of the doctrine, and that it provides little guidance to owners when choosing their marks or to courts when assessing protectability or likelihood of mark confusion.[8] It has been suggested by the International Trademark Association that the doctrine be abolished and replaced with one that applies equally to all foreign words, regardless of whether they are from a foreign language or an English language, and that they take into account that country's trademark laws. Under the proposed changes, "Terms that are generic are never protectible as trademarks and are never registerable".[20][21]

Deckers UGG logo as registered in 1999.
Deckers has registered "ugg" as a trademark in over 130 countries.

The UGG trademark has been the subject of dispute in several countries. The trademark for "Ugh-Boots" has been removed from the trademark registry in Australia for non-use.[2] Outside Australia and New Zealand, "UGG", in capital letters, is a registered trademark of Deckers Outdoor Corporation.[14]

In 1971, an Australian surfer, Shane Steadman, registered the name "UGH-BOOTS" as a trademark in Australia and began selling sheepskin boots under that name. In 1982 he registered the name "UGH" and a logo containing a stylised Sun with the words "UGG AUSTRALIA".[4] In 1979, Brian Smith, another Australian surfer, applied to be the United States distributor for Country Leather, a Western Australian manufacturer of ugg boots, and began selling their Australian-made boots in New York and to surfers in California.[22] In 1987 he set up Ugg Holdings Inc. and in 1995 purchased the trademarks from Steadman. In 1996 he sold his interest to Deckers and in 1999 Deckers registered the trademarks for "UGG" in the US and 25 foreign countries.[4][23][24] Deckers began asserting its new trademark and sent out cease and desist letters to Australian manufacturers who were using the name ugg for their boots but otherwise took little action.[2] In the early 2000s, demand for ugg boots was soaring, partly as a result of US$8 million spent on marketing by Deckers, but also due to several celebrity endorsements.[2]

For the nine months to September 2004, UGG boots sales totaled $39.2 million, an increase of 180% over the previous year. Plans were also in place to expand the UGG brand to cover hats, scarves and gloves.[25] With the continuing rise in popularity, Deckers now began a serious effort to halt the use of the name "ugg" by other manufacturers. Deckers' law firm, Middletons of Melbourne, sent cease and desist letters to a number of Australian and American manufacturers who were selling uggs over the Internet, preventing them from selling uggs on eBay or from using the word in their domain names or registered business names.[26]

Uggs-N-Rugs factory in Kenwick, Western Australia

The manufacture of ugg boots in Australia was primarily a cottage industry. Individually lacking the resources to fight Deckers, 20 Australian manufacturers formed the Australian Sheepskin Association to fight the corporation's claim, arguing that "ugg" is a generic term referring to flat-heeled, pull-on sheepskin boots.[27][28] They further argued that Australian manufacturers had been making and trading this style of boot for decades, including exporting them to the US. One of these manufacturers, Perth's Uggs-N-Rugs, who had been manufacturing uggs since 1978 and selling them online since 1996, appealed to Australian trademark regulators, IP Australia.[2] The officer who heard the case stated that the "evidence overwhelmingly supports the proposition that the terms (ugg, ugh and ug boots) are interchangeably used to describe a specific style of sheepskin boot and are the first and most natural way in which to describe these goods." In 2006 Uggs-N-Rugs won the right to use the term UGG BOOT/S and variations such as UGH BOOT/S.[2] The case was the subject of a 2006 television documentary, The Good, The Bad and The Ugg Boot.[29] Counsel for Uggs-N-Rugs was David Stewart[30] instructed by Wrays: Counsel for Deckers was Christian Dimitriadis[31] instructed by Ashurst.

Deckers retained the rights to their UGG logo as trade mark protection only applies for the way the mark appears in its entirety and not for the words it contains. The name Ugg/UGG was determined to be generic after the Registrar of Trade Marks found that registration did not confer "rights in the generic term, or terms, from which it is derived" and that the identity of the various trade marks "derive from the hyphenated nature of the expression." Therefore, UGH boots, UG boots and UGG boots ("or other variations") without hyphens are all generic terms in Australia.[32] IP Australia also ruled that the trademark "UGH-boots" (with hyphen) should be removed from the trademark register for non-use as Deckers had only been using the UGG logo, not the UGH marks.[2][4] Deckers initially declined to pay Uggs-N-Rugs court costs as required by the 2006 ruling.[33] Following the publication of a Wall Street Journal article which referred to the oversight, Deckers paid the costs in September 2010.[34] The ruling only applies in Australia and Deckers still owns the trademarks in other jurisdictions such as the US, China, Japan and the European Union.[2]

In 1998, Deckers demanded that the American company Koolaburra cease infringing the UGG trademark. Koolaburra replied that they did not use the name "UGG" or "UGH" and that the only mark they used was "Ug". Deckers sent a further "cease and desist" letter in 2001 and another in 2003 but Koolaburra declined to stop using the name "Ug" and in 2004, Deckers filed a case against Koolaburra in the California federal court alleging (1) trademark infringement, (2) false designation of origin (Koolaburra labelled their boots "Australian Ug Boots"), (3) trademark dilution, (4) cybersquatting, (5) unfair competition, (6) trade disparagement, (7) unjust enrichment and (8) breach of contract (Deckers claimed that in 1998 Koolaburra had agreed to stop using the name Ug). Koolaburra in turn challenged that the name UGG was generic and not entitled to trademark protection. As the UGG mark was registered, Deckers was entitled to the assumption that it was not generic, thus the burden of proof rested with Koolaburra.[14]

In support, Koolaburra provided the testimony of America's National Surfing Team coach Peter Townend and Nordstrom's footwear buyer Heather Kolkey. These declarations were accepted by the court as anecdotal. Additionally, Koolaburra provided three instances of the generic usage of Ugg in American magazines; however, the court pointed out that the most recent was dated 1980. Koolaburra also quoted the New York City published Oxford English Dictionary definition of "Ugg"; however, this was rejected after Deckers petitioned the Dictionary to change the definition of "Ugg" from "a kind of soft sheepskin boot" to a definition that included UGG's trademark, which the OED agreed to do.[14][34] Koolaburra then argued that the UGG trademark was invalid as Brian Smith had fraudulently registered the name by giving false representations that the term was not generic, arguing that "as an Australian citizen, Smith knew of the fact that the term Ugg was a generic term". This was rejected by the court as fraud requires an applicant to "knowingly" make the false representations, ruling that such belief was subjective, and finding that even if Smith knew the term was generic in Australia, he may have "honestly held [a] good faith belief" that it was not generic in the United States.[14]

Deckers countered through submitting declarations from four professionals in the footwear industry who stated that "UGG" is widely recognized in the industry as a brand name, not a generic term and provided the court with survey evidence supporting that consumers in the US consider UGG to be a brand name; among women aged 18 to 45 who had purchased footwear valued over $100 in the last 12 months, 58% believed UGG was a brand name while only 11% thought it generic. Koolaburra then argued that the term was generic under the doctrine of "foreign equivalents" (Under U.S. law, a term used in another country that is considered generic in that country cannot be imported into the United States and used as a trademark). This was rejected as the doctrine only applied to terms in a foreign language.[14] In February 2005, the court ruled for Deckers on their claims of "trademark infringement" and "unfair competition", finding that a consumer would likely be confused with the similarity in "appearance, sight and sound" between "Ug" and UGG" as the parties were marketing in direct competition with identical products. However, the court declined to rule on the validity of trademarks in Australia as it was considered inappropriate to interfere with another country's rulings.[14]

The Australian Sheepskin Association is attempting to change the name UGG into a regional mark similar to that achieved for Champagne which would negate its trademark status in many jurisdictions. Deckers in response has focused on the fact that its UGG boots are made in China and not Australia.[35] In 2012, sales of Deckers UGG boots totaled over US$630 million while the UGG brand, which now includes hats, scarves, gloves, slippers, casuals, jackets, coats, and handbags[25] totaled over US$1 billion with 30% of sales outside of the United States.[7]