A Conyers, Ga., man has won a two-year legal battle with Wal-Mart, which has demanded he stop making and selling T-shirts, beer steins and other items that sport slogans such as "Wal-ocaust" and "Wal-Qaeda." U.S. District Judge Timothy C. Batten Sr. rejected Wal-Mart's claims that Charles Smith, a 50-year-old computer store owner who thinks the retailing giant is "taking over the world," violated the company's trademark.
Judge Batten also noted that the yellow smiley face that adorns Wal-Mart signs is not entitled to common-law trademark protection, a decision that one of Smith's lawyers said could hurt Wal-Mart in an unrelated, pending trademark action over the right to the sunny symbol of happiness.
Smith said he came up with the Wal-ocaust slogan while reading a book about the history of the Nazi party. "I read that some of the first groups that were persecuted by the Nazis were unions and liberals," he said. "I thought, 'Wow. Taking over the world, persecuting unions and liberals. Sounds like Wal-Mart.'"
He started producing his Wal-ocaust-themed products and offering them for sale at the Web site www.cafepress.com, which allows sellers to create their own home pages to market their items.
One design shows a bird resembling a Nazi eagle grasping the yellow smiley face in its talons, similar to depictions of the Nazi eagle clutching a swastika. Another reads, I ♥ WALHOCAUST. They have FAMILY VALUES, and their ALCOHOL, TOBACCO and FIREARMS are 20% OFF. A third proclaims, WALHOCAUST: Come in for the LOW prices, stay for the KNIFE fights.
The first letter from Wal-Mart, received Dec. 28, 2005, demanded that he cease selling the Wal-ocaust products.
On New Year's Day 2006, Smith said, he posted the Wal-Mart missive on a Yahoo! message board and got a response from activist filmmaker Robert Greenwald, who has made "Wal-Mart: The High Cost of Low Price."
Greenwald, Smith said, connected him to Stanford law professor Lawrence Lessig, a constitutional and Internet law expert and a proponent of reduced restrictions on copyright, trademark and other forms of intellectual property.
In February 2006, Wal-Mart's outside counsel, Robert L. Raskopf of Quinn Emanuel, wrote a letter to Lessig, again demanding that Smith stop producing and selling his Wal-ocaust merchandise.
Smith said Lessig helped him find a legal team -- lead counsel Paul E. Levy at Public Citizen in Washington and Gerald R. "Gerry" Weber Jr., then of the local chapter of the American Civil Liberties Union. In March 2006 they brought a declaratory judgment action against Wal-Mart, asking that a judge find that Smith was entitled to sell his anti-Wal-Mart products and maintain his related domain names.
Wal-Mart filed counterclaims, alleging trademark infringement and dilution by tarnishment, unfair competition and cybersquatting, a reference to Smith's ownership of www.walocaust.com.
Batten's order, issued March 20, gave Smith a complete victory.
Wal-Mart claimed that as a merchandiser, Smith was diluting its marks and tarnishing them via negative connotations with the Nazi regime and later with al-Qaida. But Batten wrote that tarnishment caused by a parody which satirizes a product or image is not actionable under anti-dilution statutes because of the free speech protections of the First Amendment.
"A claim of dilution applies only to purely commercial speech," Batten wrote. Even if speech benefits the speaker economically, it is noncommercial so long as it consists primarily of noncommercial elements -- such as religious or political commentary, he continued.
Batten wrote that a reasonable juror could find only that Smith's primary intent was to express himself and that commercial success was a secondary motive at best.
Although Smith sold his items on CafePress for a 30 percent markup, Batten added, Smith never advertised or marketed his goods beyond notifying family, friends and a few Internet discussion groups. He did not claim an exclusive right to his designs and offered free, downloadable copies so people could print their own bumper stickers with his slogans.
Levy, Smith's attorney from Public Citizen, said "This is one of the first cases since the new Trademark Dilution Revision Act was handed down where a judge has looked at the noncommercial use defense."
To prove its claim that Smith's products were causing consumer confusion, Wal-Mart hired New York survey expert Dr. Jacob Jacoby to conduct two studies on the issue. Data for the studies was collected by intercepting shoppers at malls around the country and showing them, among other things, a Wal-ocaust T-shirt or a simulation of Smith's Wal-Qaeda CafePress homepage.
According to the order, the Jacoby studies interviewed about 650 consumers and ended up using the responses of roughly 500 of them. His conclusions: 48 percent of respondents suffered point-of-sale confusion; nearly 41 percent indicated Web site confusion; and almost 12 percent were less likely to shop at Wal-Mart after seeing Smith's designs.
Both sides in the case moved to exclude the other's experts only to be denied by Batten. But in an analysis of Jacoby and his methodology that accounts for more than 30 pages of the order, Batten gave Jacoby's reports virtually no evidentiary weight.
Batten found that Jacoby's survey was of "dubious value as proof of consumer confusion," and that it contained "numerous substantial flaws."
In addressing the issue of the yellow smiley face, Batten said that trademark protection is available only to distinctive marks, and to establish a common-law right in the smiley face, Wal-Mart must show it has imbued the mark with secondary meaning.
Simley said he did not know how the current ruling would affect his company's other trademark action.
The case, decided by Batten in the Northern District of Georgia, is Smith v. Wal-Mart, No. 1:06-cv-526.