JTH Tax LLC v. AMC Networks Inc.

District court holds that portrayal of fictional tax preparation business “Sweet Liberty Tax Services” in hit television show Better Call Saul qualified for protection under Rogers v. Grimaldi test and therefore did not infringe plaintiff’s trademark “Liberty Tax Service.”

Plaintiff JTH Tax LLC sued AMC Networks Inc. and Sony Pictures Television Inc., the creators of the hit television show Better Call Saul, alleging that a fictional tax preparation business named “Sweet Liberty Tax Services” portrayed in the show infringed the “Liberty Tax Service” trademark that plaintiff used for its tax preparation business. Better Call Saul is a spinoff of and prequel and sequel to defendants’ critically acclaimed television series Breaking Bad. The series follows Jimmy McGill, a former con artist who adopts the name Saul Goodman and becomes a criminal defense attorney. 

Plaintiff argued that the fictional Sweet Liberty Tax Services, which is operated in the show by a convicted felon and his wife who defraud their clients by skimming money from their tax refunds, had several visual similarities to plaintiff’s own business, including an inflatable Statue of Liberty, American flag imagery and a Statue of Liberty wall mural in the office. Defendants moved to dismiss, arguing that the Second Circuit’s Rogers v. Grimaldi test barred plaintiff’s claims.

The court first addressed plaintiff’s argument that the Rogers test did not apply because defendants used plaintiff’s marks in advertisements and promotional material for the show. The court rejected this argument, holding that Rogers applies to expressive works that combine artistic expression and commercial promotion, and therefore defendants’ minimal use of plaintiff’s mark in promotional material did not bar the defense. 

The court next considered whether the Rogers test applied to plaintiff’s claims after the Supreme Court’s recent holding in Jack Daniel’s Properties, Inc. v. VIP Prod. LLC that Rogers does not apply when an alleged infringer uses a trademark as a designation of source for the infringer’s own products or services. The court held that Rogers applied because defendants used plaintiff’s marks in furtherance of the show’s plot, not as a means to identify the source of the show or any of defendants’ products. 

The court next applied the two-prong Rogers test, which provides that an artistic work is protected by the First Amendment from a trademark infringement claim unless the plaintiff can show that either (1) the use of its trademark in an expressive work was not artistically relevant to the underlying work or (2) the trademark is used to “explicitly mislead” the public as to the source or content of the underlying work.

As to the first prong, a showing of artistic relevance is met “unless the use of the mark has no artistic relevance to the underlying work whatsoever” and was instead chosen merely “to exploit the publicity value of the plaintiff’s mark or brand.” Here, the court found that the fictional business, Sweet Liberty Tax Services, was relevant to the series’ plot because it was clearly ironic and closely related to the plot line of a recently released felon running a tax service. The court similarly rejected plaintiff’s argument that the question of artistic relevance could not be resolved on a motion to dismiss, as the complaint lacked any allegations that Sweet Liberty Tax Services was chosen for commercial rather than artistic reasons. 

As to the second prong, even where the use of a trademark bears some artistic relevance to an underlying artistic work, the First Amendment does not shield such use from an infringement claim if it “explicitly misleads as to the source or the content of the work.” A work is “explicitly misleading” if it “induces members of the public to believe” that it was created or otherwise authorized by the plaintiff. To assess this prong, the court applied the Polaroid factors used to determine the likelihood of consumer confusion in a trademark infringement claim, with the important qualification that the “likelihood of confusion” assessed under these factors “must be particularly compelling to outweigh the First Amendment interest recognized in Rogers.”

The court found that the first Polaroid factor—the strength of the mark—weighed in plaintiff’s favor because defendants did not dispute that plaintiff’s mark was strong. 

The court next considered the second factor—the similarity of the marks—which required the court to consider the context in which the marks are displayed and whether the competing marks create the same impression so that a consumer who is familiar with plaintiff’s mark would be confused by defendants’ mark in isolation. The court found that the marks were dissimilar because plaintiff’s marks appear in connection with its many tax preparation locations, whereas the fictional Sweet Liberty Tax Services appeared in a single episode of defendants’ TV show and in a few social media posts and advertisements. Based on the allegations in the complaint, the court therefore did not find that consumers would likely be confused by the similarity of the marks. The second factor therefore favored defendants.

The third factor—competitive proximity—looks at the extent to which the products compete with each other in the marketplace. The court held that this factor favored defendants because the products—a tax service and a television show—are entirely dissimilar and there is no overlap between the manner in which the products are advertised or sold. 

The fourth Polaroid factor evaluates the likelihood that the senior user (here, plaintiff) will “bridge the gap” by expanding into related fields that compete with the junior user. Citing the “substantial” gap between tax services and television production and the lack of any stated intent by plaintiff to enter the entertainment industry, the court held that this factor favored defendants.

On the fifth Polaroid factor—evidence of actual confusion—plaintiff submitted a screenshot of a Google search result for “Liberty Tax Service” that yielded an image of Sweet Liberty Tax Services from Better Call Saul alongside other accurate photos of plaintiff’s business. The court rejected this evidence, citing case law holding that a faulty internet search result does not constitute evidence of consumer confusion. The court thus held that the absence of evidence of actual consumer confusion factor was neutral.

The sixth Polaroid factor examines whether defendant adopted its mark in bad faith, i.e., “with the intention of capitalizing on plaintiff’s reputation and goodwill and any confusion between his and the senior user’s product.” Plaintiff argued that defendants’ addition of the word Sweet and ‘s’ to ‘Service’ demonstrates that their unauthorized use was in bad faith. The court rejected this argument because the complaint did not plead any facts suggesting that defendants sought to attract viewers by associating Better Call Saul with plaintiff’s tax preparation business. 

The seventh factor is the quality of the marks; if the quality of the junior user’s mark is inferior to that of the senior user’s mark, there is an increased risk of reputational harm. The court rejected plaintiff’s argument that defendants linked plaintiff’s trademarks and trade dress to inferior quality services and portrayed plaintiff’s marks in an unsavory context, holding that the complaint lacks facts suggesting that viewers of the show will not understand that Sweet Liberty Tax Services is a fictional business operated by fictional characters in a work of fiction. The court accordingly held that the seventh factor weighed in defendants’ favor. 

Finally, the eighth Polaroid factor—the “sophistication of the consumer”—turns on the general rule that “the more sophisticated the purchaser, the less likely he or she will be confused by the presence of similar marks in the marketplace.” The court found this factor to be neutral because the complaint did not allege facts regarding consumer sophistication.

Balancing the Polaroid factors, all but one of which either favored defendants or were neutral, the court concluded that defendants’ use of Sweet Liberty Tax Services was not likely to cause consumer confusion, and it dismissed plaintiff’s Lanham Act claims. The court declined to exercise supplemental jurisdiction over plaintiff’s state law claims and dismissed them without prejudice. 

Summary prepared by Tal Dickstein and David Forrest