Parody is considered fair use in copyright law and, as the recent Wal-Mart ruling demonstrated, in trademark law. But where do legitimate commentary or criticism end, and outright infringement and trademark abuse begin?

Parody – originating from the Greek words for "against" and "song" – has come to mean a humorous form of social commentary or criticism in which one work imitates another. In the intellectual property environment, trademark parody is imitation that pokes fun at the mark or, according to the Fourth Circuit Court of Appeals, "a simple form of entertainment conveyed by juxtaposing the irreverent representation of the trademark with the idealized image created by the mark's owner."

With the recent court rulings on trademark parody cases, the latest being the Wal-Mart/Wal-queda/Wal-ocaust case, the question arises: Do copyright law and trademark law allow for parody?

There is, of course, an inherent conflict between the parodist and the creator of the work that is being parodied. In the IP arena, brand owners are highly unlikely to allow their protected trademarks to be used to advance the parodist's agenda, which is why the latter often relies on the fair-use defense to forestall any liability for copyright infringement. The parody defense is indeed part of the fair use defense found in Section 107 of the Federal Copyright Statute. And the trademark law also provides some statutory "fair use" protection that is so narrow, however, that the courts have added three additional categories: nominative, comparative advertising, and parody.

Richard Stim, author of Whoops I'm in Business: A Crash Course in Business Ethics, put it another way in a post in businessweek.com: Lawsuits would be avoided and trademark parody would not have problems if it doesn't compete with trademarked goods and services and doesn't confuse consumer perception. In other words, the reader must "get the joke" and not associate the parody product with the original trademarked goods.

Unfortunately for brand owners, recent court rulings indicate judicial leniency when it comes to parody as a defense against infringement. A few examples:

• Haute Diggity Dog (HDD) manufactures and sells plush chew toys for dogs, naming them after famous designer labels, such as Chewy Vuitton, Dog Perignon and Jimmy Chew. HDD may have found it funny but Louis Vuitton wasn't laughing as it proceeded to sue HDD for trademark infringement, trademark dilution, copyright infringement and other claims. The Fourth Circuit ruled in favor of HDD, saying the names were a comment on conspicuous consumption and were not proven to result in likelihood of confusion.
• 2 Live Crew was sued by music publisher Acuff-Rose Inc. for its rap parody of Roy Orbison's song, Oh, Pretty Woman. While the trial court agreed with the fair use parody defense, the Sixth Circuit reversed the ruling because of the commercial nature of the 2 Live Crew rendition and the presumption of market harm on the original Orbison version. The Supreme Court, however, accepted 2 Live Crew's song as a parody because it "reasonably could be perceived as commenting on the original or criticizing it, to some degree."
• Wal-Mart recently lost its legal battle against a Conyers, Georgia man whom it accused of violating its trademark for selling t-shirts and other items that featured the phrases "Wal-ocaust" and "Wal-Qaeda." The district judge ruled that Charles Smith may continue to run his Web sites, pointing out that Smith has a disclaimer on his Wal-ocaust site stating that it has no affiliation with Wal-mart Stores, Inc. and that people would not likely confuse Wal-Mart's trademarks with Smith's parodies.

According to some legal experts, though, fair use is NOT an automatic defense against trademark infringement. And it will only be successful when the newly created work that claims to be parody is a valid parody and if it meets the four fair use criteria. While many courts indeed find for the defendant, especially when the parody is done in a non-commercial context, anti-dilution laws may kick in when the parodist strays into the commercial arena and the parody is so outrageous and degrading as to result in a clearly demonstrable tarnishment of the original mark.

So, while some saw a First Amendment victory in the Wal-Mart case, others, like a reader of webpronews.com, saw something else: the absence of real parody (Wal-Mart had nothing to do with the Holocaust or with terrorism), the blurry line between real criticism and possible slander, and false association that could damage a trademark by giving it an unfavorable meaning.