When Can Competitors Legally Use Your Trademark in Advertising

Picture this: You’re scrolling through your social media feed when you spot a competitor’s ad featuring your brand name prominently. They’re comparing their product to yours, using your trademark without permission. You reach for the phone to call your lawyer, ready to file a cease-and-desist letter. But is this actually illegal?

The surprising answer might be no. Under certain circumstances, competitors can legally use your trademark in their advertising. In fact, U.S. law in particular encourages it as beneficial to consumers and competition, and the same might apply in other regions. But there’s a fine line between legal comparative advertising and trademark infringement that every business owner needs to understand to ensure they’re up to date on trademark protection measures.

The Legal Foundation on Why Competitors Can Use Your Mark

The Federal Trade Commission actually encourages businesses to name competitors directly rather than referring to “Brand X.” The reasoning is straightforward: consumers make better purchasing decisions when they have access to truthful comparative information. A competitor might run an ad stating, “Our widget is 20% cheaper than [your brand’s] widget,” and that’s perfectly legal, provided that what they’re saying is actually true.

This permission falls under a legal doctrine called “nominative fair use.” The concept states that sometimes the only reasonable way to identify a product is by using its trademark. A repair shop can’t really advertise that they fix iPhones without using the word “iPhone.” Putting “We repair that popular smartphone made by Apple” would be absurd.

Another option is parody, such as when a product is named or advertised to call to mind another product that may or may not be in the same industry. For a parody to be successful (i.e., defensible in court), the product or service making a parody must construe it so that there’s no chance that it gets confused with the original mark. This means making enough changes to distance it from the inspiration. At the same time, the parody must be intended for comedic, satirical, or simply callback purposes rather than achieving commercial gain.

The Three-Prong Test: When Use Becomes Fair Use

Courts can evaluate whether a competitor’s use of your trademark qualifies as fair use by applying a three-part test. All three conditions must be met for the use to be considered legal.

First, the product must not be readily identifiable without using the trademark. If your competitor could easily describe what they’re comparing without mentioning your brand name, they should. But if there’s no practical alternative, such as referring to a specific product or service that consumers only know by your brand name, using the trademark may be necessary and legal.

Second, only as much of the mark as necessary should be used. This means using a word mark is acceptable, but reproducing the entire logo, distinctive fonts, color schemes, and other design elements is going overboard. For example, a competitor can say “Compatible with Apple AirPods” but can’t display Apple’s logo. The trademark needs to be in plain text that matches the rest of the ad.

Finally, nothing in the use can suggest sponsorship, endorsement, or affiliation. The competitor’s ad must make it crystal clear that they’re not affiliated with your company and that you’re not endorsing their product. Any implication of partnership, approval, or official relationship crosses the line into infringement.

Where Competitors Commonly Use Your Trademark Legally

Comparative advertising is perhaps the most visible example of nominative fair use. Pepsi can compare its taste to Coca-Cola’s. A lesser-known software company can benchmark its speeds against Microsoft’s products. As long as the comparisons are truthful, substantiated by evidence, and don’t mislead consumers, these uses are protected.

Take the famous “Pepsi Challenge” campaign. Pepsi conducted actual blind taste tests at malls, served both sodas in unmarked cups, and published results showing consumer preference. Because the tests were legitimate, the comparisons were truthful, and Pepsi clearly identified both products, the campaign was legally defensible.

Compatibility and repair services are another common scenario. If you manufacture phone cases, you can advertise “Compatible with iPhone 15” without Apple’s permission. If you run an independent repair shop, you can state “We repair BMW vehicles” without being an authorized dealer. The key here is accuracy in describing your own services, as you’re simply informing customers what products you work with, not claiming to be an official representative. This extends to parts and accessories retailers, which might need to use manufacturers’ trademarks to indicate what their products work with.

The Line Between Legal and Illegal Use

There are four main scenarios where using another’s trademark can mean legal issues:

• Tarnishment – i.e., when a competitor uses your trademark in a way that damages your brand’s reputation. MTD once created an ad showing an animated deer (resembling John Deere’s logo) running from MTD’s lawn tractor while being chased by barking dogs. The court ruled this went too far, as the alterations and negative portrayal tarnished Deere’s brand beyond simple comparison.
• False or misleading comparisons – An ad stating “Our product costs less than [competitor]” is fine if true. But an ad implying your competitor’s product is dangerous, of inferior quality, or produced unethically without solid evidence crosses into false advertising.
• Suggesting endorsement or affiliation – Phrases like “Preferred by [your brand] customers” or “Works better than [your brand]’s own accessories” can create confusion about whether you’ve endorsed or collaborated with the competitor.
• Prominent or repeated use – If a competitor mentions your brand name once for comparison purposes, that’s likely fair use. But if they plaster your trademark throughout their website, use it in their domain name, or display it more prominently than their own brand, that suggests they’re trying to capitalize on your reputation rather than make legitimate comparisons.

The Keyword Advertising Gray Area

One particularly contentious area is using competitors’ trademarks as keywords in online advertising. If a competitor bids on using your trademark as a keyword to trigger their ads when someone searches for your brand, is that infringement?

Most courts have ruled that using a trademark as a keyword alone doesn’t constitute infringement. After all, it’s just SEO targeting. However, if the ad text itself uses your trademark in a way that confuses consumers about source or sponsorship, that crosses into infringement. For example, an ad triggered by your trademark that reads “Official [your brand] Parts” when the advertiser isn’t actually affiliated with you would be problematic.

The safest approach is to bid on competitor keywords but ensure your ad copy clearly distinguishes your business from theirs and doesn’t suggest any affiliation.

How to Respond When Competitors Use Your Trademark

If you discover a competitor using your trademark, don’t immediately assume it’s infringement. First, analyze whether their use meets the three-prong fair use test:

• Are they using your mark necessarily?
• Are they using only as much as needed?
• Are they avoiding any suggestion of endorsement?

If the use appears to be fair use but bothers you, consider whether it’s worth fighting. Truthful comparative advertising, while uncomfortable, isn’t illegal. Attempting to shut down legitimate fair use can backfire, making your company look anti-competitive or afraid of honest comparison. Plus, the cost of court proceedings might not be worth the hassle, especially if your claim gets denied.

However, if the use clearly violates fair use standards, start with a cease-and-desist letter outlining the specific violations and requesting that they modify or stop their advertising. Many issues are resolved at this stage, since the other side will also likely not want to go to court over a single ad.

For persistent violations, professional trademark protection services can help you evaluate the strength of your case, document the infringement, and pursue appropriate remedies through trademark authorities or courts.