Unduly long 9th Circuit opinion on boundary between descriptive and suggestive marks

In what struck me as an unusually long opinion, the 9th Circuit took on the difference between descriptive and suggestive marks. Lahoti v. VeriCheck, Inc., No. 08-35001 (9th Cir. Nov. 16, 2009) concerned a DJ brought by a previously-adjudicated cybersquatter concerning his registration of the domain name "vericheck.com." The district court found for the defendant, ruling on summary judgment that the mark VERICHECK was inherently distinctive and that the plaintiff acted in bad faith.

The 9th Circuit affirmed the finding of bad faith, but vacated the finding of inherent distinctiveness because the district court, in its view, relied in part on erroneous legal reasoning. In its long discussion, the 9th Circuit noted that it is proper for a court to weigh in favor of a finding of inherent distinctiveness that the PTO has allowed others to register the mark at issue for similar products without requiring a showing of secondary meaning.

7th Circuit decision on who gets to "copyright" derivative works

Here's a good lesson in how to bite the hand that previously fed you.

In Schrock v. Learning Curve Int'l, Inc., No. 08-1296 (7th Cir. Nov. 5, 2009), the owner of copyrights in toy characters licensed a company to make the toys. The toy maker then licensed a photographer to take photos of the toys for marketing purposes. When the toymaker stopped using the photographer, the photographer registered the photos and sued the character owner and the toymaker for copyright infringement for continuing to use the photos. The district court dismissed the photographer's case, saying that the photographer needed permission to "copyright" the photos.

The 7th Circuit reinstated the photographer's claim. Assuming that the photos were derivative works, the 7th Circuit held a couple of things. First, it held that derivative works are subject to the same minimal originality requirements as any other type of work and the photos of the toys were original enough for copyright protection as derivative works.

Second, it noted that, to sue for infringement, the person creating the derivative work must have both (a) the permission of the owner of the copyright in the underlying work to create the derivative work (not a problem in this case) and (b) the right to "copyright" the derivative work. As to (b), however, the 7th Circuit disagreed with the district court, noting that copyright law normally vests the copyright in the derivative work in the creator of the derivative work unless the owner of the underlying copyright contractually alters this ownership arrangement.

Since the record was inconclusive on whether the arrangement was contractually altered, the court remanded the case.

2d Circuit decision allowing consumer class action alleging Walker Process antitrust claim to go forward

Today the Second Circuit reversed the dismissal of a Walker Process antitrust claim brought against prescription drug sellers whose patent on the drug was previously held unenforceable.

It's a long (but interesting) decision, so I'll take my shot at a TV Guide®-type summary. First, the Court held that the consumer class has antitrust standing. In part the Court based this on the fact that type of damage the consumers sustained -- overcharging -- would go unremedied if only competitors could bring this type of action. Second, the Court held that the class's complaint satisfies both rule 9(b) and Iqbal. Both discussions are informative.

The case is In re: DDAVP Direct Purchaser Antitrust Litigation, No. 06-5525 (2d Cir. Oct. 16, 2009).

5th Circuit (in Unpublished Opinion) Says Strength of Junior User’s Mark May be Relevant in Reverse Confusion Analysis

Seemingly approving of other circuits’ holdings that, in a reverse confusion case, the strength of the junior user’s mark is relevant, the 5th Circuit vacated summary judgment in the reverse confusion case of The Great Amer. Rest. Co. v. Domino’s Pizza LLC, No. 08-40654 (5th Cir. Sept. 30, 2009). The court designated its short, four-page opinion as “unpublished,” however. While unpublished opinions can be cited pursuant to Fed. R. App. P. 32.1, the 5th Circuit’s local rule 47.5.4 states that its unpublished opinions “are not precedent.” So it’s questionable how much weight any court might give it.

I believe this is the first time that the 5th Circuit has mentioned the “reverse strength” concept applying in a reverse confusion case. Off the top of my head I know that the 3d and 9th Circuits also take this view (the 5th Circuit cited only the 3d Circuit’s decision in A&H Sportswear, Inc. v. Victoria’s Secret Stores, Inc., 237 F.3d 198 (3d Cir. 2000)). The court did not address, however, whether the strength of the senior user’s mark remains relevant (or how) in the likelihood of reverse confusion calculus.

6th Circuit decision on IP license transfers through intra-corporate mergers

The Sixth Circuit today held that a copyright (or patent) license that expressly provides that it is non-assignable or non-transferrable is breached when (1) the licensee merges with its corporate sibling entity, (2) the licensee is not the surviving entity, and (3) state law provides that the surviving entity owns all the assets of the constituent entities.

The court noted that even if the license hadn’t expressly addressed assignability or transferability, federal common law would have led to the same result because its default rule prohibits transfer of a patent or copyright license without authorization.

The case is Cincom Systems, Inc. v. Novelis Corp., No. 07-4142 (6th Cir. Sept. 25, 2009).

Couple of Marginally Interesting TM Decisions (9th Cir. and Fed. Cir.)

Hey, They Copied My Product Idea and Owe Me Mega-$$

First, a Ninth Circuit decision dealing with the familiar and usually unsuccessful case of someone claiming that a defendant copied their idea for what ultimately became a tremendously successful product. At issue in Art Attacks Ink, LLC v. MGA Entertainment Inc., No. 07-56110 (9th Cir. Sept. 16, 2009) were the popular line of BRATZ dolls. The court shot down the plaintiff’s copyright claim because the plaintiff had insufficient evidence of copying or access by the defendants. The plaintiff’s trade dress claim foundered on the shoals of inadequate proof of secondary meaning.

Numbers as Secondary Trademarks

Hidden in the middle of the patent decision in Vita-Mix Corp. v. Basic Holding, Inc., No. 2008-1479 (Fed. Cir. Sept. 16, 2009), was the Federal Circuit’s discussion of whether the asserted trademark—here, the numerical designation 5000—functioned as a trademark or merely as a “grade designation.” The plaintiff used the number in the mark “Vita-Mix® 5000,” to distinguish it from the plaintiff’s previous products, the “Vita-Mix® 3600” and “Vita-Mix® 4500.” Given that the plaintiff didn't use the number apart from the mark “Vita-Mix® 5000,” and in light of plaintiff’s concession that the number served only to differentiate from the two previous “Vita-Mix®” products, the Federal Circuit held that "5000" reflected only the “style or grade” of product and possessed neither inherent nor acquired distinctiveness.

Commentary: The Vita-Mix case touches upon, but doesn’t really discuss, an issue that has always intrigued me: the tension between the numbers=style/grade “presumption” (if you can call it that) and the principle that a product can bear more than one trademark. Think, for example, whether the numbers in the following designations are trademarks or mere style/grade designations: BMW 530, BOEING 767, MITCHELL 300. There are probably circumstances at which a number used in this manner becomes a separately protectable trademark, but I’ve never had the opportunity to research exactly where that line is drawn.

6th Circuit decision affirming dismissal of TM infringement complaint under rule 12(b)(6)

In a decision with potentially important procedural ramifications, the 6th Circuit today affirmed the rule 12(b)(6) dismissal of a trademark infringement complaint for failure to state a claim.

In Hensley Mfg., Inc. v. ProPride, Inc., No. 08-1834 (6th Cir. Sept. 3, 2009), the plaintiff alleged it was the owner of the HENSLEY mark, which it purchased from Jim Hensley when it purchased Hensley’s trailer hitch business. Jim Hensley then started working with a competing company (ProPride). At ProPride, Hensley designed a competing trailer hitch, and to promote it, ProPride created some print advertisements and webpages that talked about “the Jim Hensley Hitch Story,” described Jim Hensley’s history of designing trailer hitches at Hensley Mfg., and touted how he has now designed an even better hitch at ProPride. The ads and webpages all contained a disclaimer that Jim Hensley is no longer affiliated with Hensley Mfg. The complaint attached the ads and print-outs of the webpages.

The district court dismissed the complaint under rule 12(b)(6) finding that the allegations and attachments showed that the fair use defense applied as a matter of law.

The 6th Circuit affirmed. The court held that it need not get into the likelihood of confusion factors because the complaint and its attachments showed, as a matter of law, that the word “Hensley” was not being used as a trademark (i.e., an indicator of source). Examining the attachments closely, the court held that they conclusively demonstrated instead that the name “Hensley” was being used lawfully solely to refer to the individual accomplishments and reputation of Jim Hensley, and the attached ads and webpages did not create a likelihood of confusion as to source.

The 6th Circuit also expressly approved of the district court’s having based the dismissal on the “fair use” defense, even though, by first moving to dismiss the complaint, the defendants hadn’t even pleaded it yet. The 6th Circuit reasoned that there’s nothing wrong with dismissing a complaint where the allegations conclusively establish an affirmative defense as a matter of law.

IMPLICATIONS: One of the lessons here might be to be careful not to plead yourself out of court. Specifically, it might be useful to consider whether the complaint in this case could have been dismissed under rule 12(b)(6) if the plaintiff hadn’t attached copies of the offending ads and webpages. On the other hand, the 6th Circuit referenced at the outset the (arguably heightened) “plausibility” pleading standard in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), although it did not ultimately appear to rest the dismissal in any significant way on the “implausibility” of the factual allegations in the complaint itself. So it may conversely be useful to consider if there is such a thing as a trademark complaint that is too bare-boned. At minimum, however, in any trademark case where a plaintiff is considering unusually detailed factual allegations and/or attaching copies of the allegedly infringing uses to the complaint, the pleader would do well to consider whether the pleading would survive the sort of analysis the 6th Circuit used here.

9th Circuit decision on "tacking" doctrine in context of an evolving trademark design

The Ninth Circuit yesterday decided an interesting case involving the concept of “tacking” the use of one form of a trademark onto another. In One Industries, LLC v. Jim O’Neal Distributing, Inc., No. 08-55316 (9th Cir. Aug. 24, 2009), the trademark owner claimed that the defendant’s stylized letter “O” infringed its stylized “O”. Since the trademark owner’s most recent stylized “O” was closest to the defendant’s stylized “O” but was also adopted after the defendant adopted its stylized “O,” the trademark owner tried to “tack” its junior stylized “O” onto its more senior stylized “O”s.

The 9th Circuit held that tacking doctrine is extremely strict—so strict that it wouldn’t allow the trademark owner to tack the 2003 “O” onto the older “O”s because they did not create the same, continuing commercial impression. (Sorry, I can't figure out how to upload images of the O's so you can see them, but they're in the opinion).

Having rejected tacking, the court then compared the trademark owner’s 1997 “O” to the defendant’s 1999 “O”.*

The 9th Circuit held that, in the absence of actual confusion, and because the “O” field was crowded with other stylized “O”s, these two “O”s were too different to give rise to a likelihood of confusion.

* Interestingly, the court did not explain why it was allowing the trademark owner to assert infringement based on a mark it abandoned in 2003. I mean, shouldn't the Defendant, if anyone, have been the one asserting that the Plaintiff moved closer to it and was, as a result, the infringer??

9th Circuit decision giving broad interpretation to copyright venue statute

Small law firm with purely local practice in S.D. Cal. copies the “elder law” section of a Northern California firm’s website. Northern California firm sues for copyright infringement in N.D. Cal.

Venue proper?

Yup.

And if you’re not asleep yet and are interested in why, I try below to summarize the decision.

In a 2-1 decision, the 9th Circuit recently took a broad view of the copyright venue statute, 28 U.S.C. § 1400(a). Section 1400(a) provides that venue is proper where the defendant “resides or may be found.” So how is it that a small San Diego firm “resides or may be found” in Northern California?

Under 9th Circuit precedent, the copyright venue inquiry is the same inquiry as for personal jurisdiction. The 9th Circuit test for specific personal jurisdiction focuses on whether the defendant “purposefully directed” his activities at the forum or a resident. That, in turn, requires use of the three-part “Calder effects” test. See Calder v. Jones, 465 U.S. 783 (1984) ((1) intentional act (2) expressly aimed at forum (3) causing known, likely harm in the forum). While not crystal clear, prior precedent in the 9th Circuit seemed to indicate that “express aiming” requires something more than an intentional act causing harm to a known resident of the forum.

The majority thought there was “something more” in this case because the S.D. Cal. law firm “individually targeted” the N.D. Cal. law firm for the purpose of competing in the same area of law, and possibly confusing potential clients about who authored the text at issue. The dissent thought that the majority’s analysis conflated the “express aiming” part of the Calder effects test with the “known likely harm” part.

The dissent pointed to prior 9th Circuit precedent that held that if the defendant isn’t targeting potential clients in the forum, then there’s no “express aiming.” And here, the defendant was targeting only San Diego clients.

The case is Brayton Purcell LLP v. Recordon & Recordon, No. 07-15383 (9th Cir. Aug. 5, 2009).

4th Circuit decision on “public use doctrine”

Public use doctrine concerns whether a company can acquire trademark rights in a mark it doesn’t use, but instead is a nickname by which the public refers to it or its goods and services. That’s how the term “Coke” came to be a trademark of Coca-Cola. But the plaintiff in George & Co. v. Imagination Entertainment Ltd., No. 08-1921 (4th Cir. July 27, 2009) didn’t fare as well as Coca-Cola did in days gone by.

George had used the term LEFT CENTER RIGHT for a dice game in the 1980s, but then abandoned that mark in favor of its abbreviation LCR. When the defendant later began using LEFT CENTER RIGHT, George sued. Sensing defeat if it asserted only LCR, George tried to claim that, even though it stopped using LEFT CENTER RIGHT, the public still used that term to refer to George’s dice game.

The 4th Circuit rejected the argument. It held that public use doctrine should be narrowly construed to apply only where: (1) the formal mark that is the object the public nickname is well-known (e.g., COCA-COLA or BUDWEISER); and (2) the nickname “adds distinctiveness” to the formal mark (e.g., COKE or BUD). Applying these principles to the facts in the case, the 4th Circuit held that LCR wasn’t well-known and that simply elongating it to LEFT CENTER RIGHT didn’t add to its distinctiveness.

(There’s also a lengthy and unremarkable discussion of the likelihood of confusion analysis.)

Federal Circuit holds HOTELS.COM generic and refuses registration

The Federal Circuit continued what some may consider a stubborn refusal to acknowledge how modern-day business is done over the Internet by holding the mark HOTELS.COM generic and refusing to allow it to be registered as a trademark.

In In re Hotels.com, L.P., No 2008-1429 (Fed. Cir. July 23, 2009), the applicant argued, to no avail, that it was not a hotel, but instead provided travel related information and travel agency services. The Federal Circuit thought that since a large part of those services involved hotels, the services were close enough to the name to be generic. The Federal Circuit also stuck by the PTO’s consistent policy that adding “.com” to a generic name doesn’t make the generic name into a trademark. For evidentiary reasons, the Federal Circuit also discounted several consumer affidavits and a survey for evidentiary showing that 76% of respondents thought HOTELS.COM was a brand.

Some (maybe a lot) may argue that this decision ignores that Internet-savvy consumers may increasingly view designations in the form “product category.com” as brand names for services facilitating commerce in that product category. But the question may not be ripe for reconsideration by the en banc court until presented in a case avoiding the evidentiary shortcomings identified in this one.

11th Circuit decision on corporate domain name renewal policies and "bad faith" element of cybersquatting case

In an interesting decision, the 11th Circuit ruled that 3M did not exhibit bad faith in continuing to renew a domain name that they did not use and which consisted of a trademark they previously abandoned. In Southern Grouts and Mortars, Inc. v. 3M Co., No. 08-15850 (11th Cir. July 23, 2009), the plaintiff really wanted 3M’s “diamondbrite.com” domain name. Even though it wasn’t using it, 3M refused to sell it to Southern Grouts, so Southern Grouts sued for cybersquatting under the ACPA (15 U.S.C. § 1125(d)).

3M previously acquired the DIAMOND BRITE mark and the domain name from another company, but quickly stopped using the mark, and a short time later stopped displaying content on the “www.diamondbrite.com” website. The PTO in due course cancelled 3M's DIAMOND BRITE registrations for failure to show continuing use. 3M kept renewing the domain name, however, for two reasons: (1) it was concerned that someone would pick it up and use it in a manner that could be confused with 3M’s unrelated DIAMOND GRADE mark; and (2) it had a corporate policy of continuing to renew its registered domain names indefinitely unless there was an explicit corporate decision not to.

The 11th Circuit held that on these facts, 3M could not be held to have acted in bad faith, a necessary element of an action under the ACPA.