Wednesday, November 01, 2006

October TM Case Roundup

There have been a number of circuit court decisions involving trademark law in the past month, but I haven’t been as current as I should have been in reporting them. So here are the thumbnail sketches on the October roundup:

Federal Circuit Nixes Trademark Damages in Patent Case as “Impermissible Double Recovery” – In Aero Products Int’l, Inc. v. Intex Recreation Corp., No. 05-1283 (Fed. Cir. Oct. 2, 2006), the Federal Circuit used Federal Circuit law, not regional circuit law, in determining that, where “damages flow from the same operative facts,” a recovery for trademark infringement as well as for patent infringement is an impermissible double recovery. In that case, the court held that the operative facts were “sales of the infringing mattresses.” To me, this seems like a really broad-brush holding. What about the value added to the sales of the infringing mattresses by using a confusingly similar mark? What about damage to the company’s goodwill? What about damages for possible remedial advertising? And who knows what other potential types of damage can crop up despite the fact that the “operative facts” of the case revolve around “sales of infringing _______.” Once again, the Federal Circuit issues a shaky decision on trademark law.

Ninth Circuit Decides Case Involving Priority & “Tacking” Issues; Court Also Holds that the “Innocent Prior User” Defense of 15 U.S.C. § 1115(b)(5) Does NOT Require that the Junior Use be in a Geographically Remote Area – In Quicksilver, Inc. v. Kymsta Corp., No. 04-55529 (9th Cir. Oct. 6, 2006), the priority/tacking issue was very fact-specific and therefore had no earth-shattering legal pronouncements. In holding that the defendant innocently adopted and used its allegedly infringing mark before the plaintiff registered its mark, the Ninth Circuit held that § 1115(b)(5) doesn’t have the same “geographic remoteness” element that the common law has. There’s apparently a split in the circuits on this, the 9th and the 4th Circuits say no remoteness required; the 6th has required geographic remoteness, and Professor McCarthy agrees.

Ninth Circuit Holds that “Progressive Encroachment” Does Not Preclude a Laches Defense Where the Defendant Did Not Change the Mark to be More Similar and Where the Defendant’s Increased or New Sales Simply Represented “Normal Business Growth” – In Tillamook Country Smoker, Inc. v. Tillamook County Creamery Ass’n, No. 04-35843 (9th Cir. Oct. 11, 2006), the Ninth Circuit faced a pretty egregious case of laches and estoppel. The plaintiff tried to wriggle out of it by pointing to “progressive encroachment” doctrine. Under this principle, laches can be excused if the defendant changes its business significantly so as to make the likelihood of confusion much greater. This typically is shown by pointing to changes in a mark to make it more similar, or changes in products or retail outlets that bring the defendant closer to what the plaintiff does. In this case, the 9th Circuit held that where a defendant’s changes are simply natural business growth, progressive encroachment doesn’t apply, and a lazy plaintiff is out of luck.

Federal Circuit Decides that the Name Given to a Seed Varietal in a PVP Certificate Can’t Later be Registered as a Trademark Because, by Definition, It’s Generic – The court suggested that a way around this is to have two names for it: one generic and one the brand name. See In re Pennington Seed, Inc., No. 06-1133 (Fed. Cir. Oct. 19, 2006).

Sixth Circuit Upholds Summary Judgment that Hummer Grille Design and Overall Appearance Is Protectible and Infringed – In General Motors Corp. v. Lanard Toys, Inc., No 05-2085 (6th Cir. Oct. 25, 2006), the GM sued a toy maker over a toy car that looked like a HUMMER, alleging that it infringed its registered grill design trademark and the overall (unregistered) trade dress of its HUMMER vehicle. The Sixth Circuit had not trouble upholding summary judgment that the grill design mark was infringed. The trade dress issue presented more problems, but the Court ultimately upheld summary judgment that the trade dress was non-functional, had secondary meaning, and was infringed. In its analysis, there were two noteworthy points. First, the 6th Circuit held that GM adequately described the trade dress when it described the trade dress it sought to protect as “the exterior appearance and styling of the vehicle design which includes the grille, slanted and raised hood, split windshield, rectangular doors, squared edges, etc.” Second, the 6th Circuit refused to preclude two secondary meaning surveys that were conducted several years after infringement began. While not questioning that secondary meaning is to be judged at the time infringement begins, the 6th Circuit nevertheless refused to issue a blanket rule that post-infringement surveys are irrelevant. It noted that it didn’t want to issue a rule that would have the effect of excluding such a potentially probative tool in the vast majority of cases, and said that district courts could assess whether to reduce the probative value to give a post-infringement secondary meaning survey by considering the amount of time between the infringement start date and the date of the survey.

Seventh Circuit Chastises Parties and District Court for Treating a Trademark Settlement Agreement as Though It Were a Consent Judgment – This decision shows what trouble, confusion, and expense can occur when the parties don’t follow rule 65(d) to the letter. If parties to a trademark suit (or any other kind of suit) want their settlement to be enforceable as a court order (i.e., as a consent judgment rather than as a private settlement agreement) Rule 65(d) requires that the judgment itself be specific and that its directives not refer to or incorporate terms from other documents. In Blue Cross and Blue Shield Ass’n v. American Express Co., No. 05-4004 (7th Cir.Oct. 30, 2006), the district court and the parties thought American Express’s agreement that it wouldn’t use the term BLUE as a trademark was a consent judgment. But it wasn’t. It was a regular settlement agreement. The only order the district court entered was an order dismissing the case and saying that it retained jurisdiction to enforce the agreement. This problem resulted in the appeals court ordering multiple briefs on jurisdiction and, generally, a lot of time and money being needlessly spent. As the court dryly noted about the lawyers’ inattention to this problem: “If these lawyers were physicians, their patients would be dead.” (The specifics of the 7th Circuit’s resolution of whether AmEx complied with the agreement aren’t really significant.)

Wednesday, September 06, 2006

6th Circuit decision involving interplay of patents with functionality defense

In a sea of not-so-interesting recent decisions, a recent trade dress decision of the 6th Circuit stood out.

The case is Fuji Kogyo Co. v. Pacific Bay International, Inc., No. 05-5854 (6th Cir. Aug. 23, 2006). The plaintiff was trolling for a finding that the defendant had infringed its asserted trade dress rights in the shape of the eyelets that are attached to fishing rods (you know, those things that the line goes through). The plaintiff had previously several utility patents AND several design patents on the various eyelet configurations it asserted. After a bench trial, the district court found them all functional and threw back the plaintiff's case.

The 6th Circuit affirmed. It first noted that the design patents provided presumptive evidence of non-functionality, since you can't get design patents for functional stuff. But the appeals court nevertheless with the district court that there was a whole school of evidence that rebutted that presumption of nonfunctionality.

In its discussion, the 6th Circuit did several interesting things.

First, it used the old CCPA "Morton-Norwich test" to determine if the claimed trade dress was functional. As to the part of the Morton-Norwich test that looks at whether any utility patent tout the utilitarian features claimed as trade dress, the 6th Circuit, citing TrafFix Displays, found that the plaintiff's expired utility patents were literal embodiments of two of the asserted eyelet configurations.

Going further, the 6th Circuit used patent law's doctrine of equivalents in holding that two other of the asserted eyelet configurations, while not literally within the claims of the patents, performed substantially the same function in substantially the same way to obtain the same result. The 6th Circuit rejected the plaintiff's argument that the district court was required to first do a claim construction analysis to determine if the patents could be VALIDLY be construed to cover the asserted trade dress. (In other words, the plaintiff, who wanted a narrow reading of the patent, wanted the court to check out the prior art so that the plaintiff could argue for a narrow range of equivalents.) The 6th Circuit rejected this interesting argument, holding that the district court's job wasn't to construe the patent in such a way as to avoid a finding of invalidity, but simply to determine if what it said (both in claims and in the specification) was probative, relevant evidence on the issue trade dress functionality.

I think the Court's overall analysis makes sense, and I particularly like the way it implicitly holds that the user-friendly Morton-Norwich test is fully consistent with the Supreme Court's confusing TrafFix decision. Anytime an appeals court says, either implicitly or explicitly, that TrafFix didn't turn everything upside down and some of the tried-and-true old precedents still apply, I'm a happy camper, er, fisherman.

Tuesday, August 29, 2006

Three not-so-interesting circuit decisions -- TV Guide version

Here are links to 3 recent earth-(non)shattering trademark and copyright decisions.

In Schwan's IP, LLC v. Kraft Pizza Co., No. 05-3463 (8th Cir. Aug. 18, 2006), the court held that the mark BRICK OVEN is generic for . . . . . no, not brick ovens, but for . . . . . wait for it . . . . . . PIZZA!! Descriptive, I could see. But generic??? "Um, waiter, I'd like to order the brick oven with extra pepperoni. And can you get the busboy to structurally reinforce our table while we wait?" Sheesh.

In R.J. Reynolds Tobacco Co. v. Cigarettes Cheaper!, No. 05-1456 (7th Cir. Aug. 24, 2006), the Seventh Circuit came to the unremarkable conclusion that the sale in the U.S. of "gray market" goods -- i.e., goods that are in fact produced under authority of the trademark owner but exclusively sold outside the U.S. -- can constitute infringement if the gray market goods are "materially different" than their U.S. market counterparts.

And in T-Peg, Inc. v. Vermont Timberworks, Inc., No. 05-2866 (1st Cir. Aug. 18, 2006), the First Circuit reversed a grant of summary judgment to the defendant in a copyright case involving the Architectural Works Copyright Protection Act amendments to the Copyright Act. The court's analysis was fact-intensive, focusing on the substantial similarity issue.

Saturday, August 19, 2006

3d Circuit decision on whether a TTAB decision collaterally estops a later infringement case

The Third Circuit recently decided that a district court infringement case was properly dismissed on grounds of collateral estoppel based on a prior TTAB cancellation proceeding between the parties on the same mark. The case was more notable -- at least from a trademark standpoint -- for what it DIDN'T discuss, rather than what it did discuss.

The 3d Circuit's decision in Jean Alexander Cosmetics v. L'Oreal USA, Inc., No. 05-4321 (3d Cir. Aug. 14, 2006), focused primarily on the element of collateral estoppel that requires that the issue on which collateral estoppel is sought have been "necessary to the decision" in the earlier litigation. Because the TTAB decision was based on alternative holdings, either one of which would have supported the ultimate decision, the Third Circuit engaged in an extended discussion of this issue, trying to figure out whether it preferred the position of the First Restatement of Judgments (alternative holdings can result in preclusion) or the Second Restatement (neither of alternative holdings can result in preclusion). It chose the First Restatement's position.

Oddly, the Third Circuit didn't even raise the issue of whether the TTAB decision on likelihood of confusion was identical to the issue of likelihood of confusion to be litigated in the district court infringement action. You might recall that the Second Circuit held nine years ago that there sometimes are substantial differences in the factors and facts that the TTAB considers in its cases (the TTAB does not always assess what is actually going on in the marketplace and frequently limits its analysis to what is stated on a registration or application) and what district courts consider in infringement cases (district courts, at least in the 2d Circuit, are supposed to look at what is going on in the "entire marketplace context"). See, e.g., Levy v. Kosher Overseers Ass'n of Amer., Inc., 104 F.3d 38 (2d Cir. 1997) (sorry, no link). The Levy court refused to apply collateral estoppel where the TTAB's decision didn't assess those marketplace factors.

9th Circuit decision on whether TM abandonment occurs DURING a sell-off of inventory of TM'ed goods

In an interesting and well-reasoned decision, the Ninth Circuit recently addressed whether a trademark is abandoned during a sell-off of inventory of trademarked goods, but before a complete cessation of the liquidation of trademarked inventory. The answer, it said, was NO.

The main dispute at issue in Electro Source LLC v. Brandess-Kalt-Aetna Group, Inc., No. 04-55844, -55909, -56648 (9th Cir. Aug. 14, 2006), was who owned a mark: a party that took an assignment from a trademark owner while the trademark owner's business was in the process of winding down and while he was slowly selling off remaining inventory; or an unrelated party that had been using the mark since before the assignment. The unrelated third party alleged that the assignee got no prior rights from the assignor because assignor abandoned the mark when he decided to wind-down the business and sell off his inventory of trademarked goods.

The 9th Circuit held that there was no abandonment. It explained that abandonment requires two elements: (1) discontinuation of "bona fide use of the mark in the ordinary course of trade"; and (2) intent not to resume such use. Taking the element of intent first, the 9th Circuit held that, so long as there is continued use, a "subjective intent to abandon the mark or business" or a "prospective declaration of intent to cease use in the future" by itself isn't enough to result in abandonment. The court concluded that "unless the trademark use is actually terminated, the intent not to resume prong of abandonment does not come into play."

As to whether there was a discontinuation of use, the 9th Circuit held that "abandonment requires complete cessation of trademark use." Further, "[e]ven a single instance of use is sufficient . . . if such use is made in good faith." It explained that "[g]ood faith nominal or limited sales of trademarked goods are sufficient . . . where the circumstances legitimately explained the paucity of sales." A wind-down or sell-off qualifies as "good faith" use. The court distinguished such "good faith" sales from sales taking place under a "trademark maintenance program," which are insufficient to avoid abandonment.

Friday, August 11, 2006

Two MORE recent TM decisions in the 9th Circuit

The Ninth Circuit has always seemed to have more than its fair share of interesting trademark cases. Here are two more noteworthy recent decisions.

Aesthetic Functionality of Audi and VW logos on car accessories -- A few weeks ago, I noted a decision of the 6th Circuit concerning the use of a car manufacturer's logo on replacement grilles made by an unlicensed company, wondering why the issue of aesthetic functionality never came up. Well, in Au-Tomotive Gold, Inc. v. Volkswagen of America, Inc., No. 04-16174 (9th Cir. Aug. 11, 2006), the issue was squarely raised and addressed. The case involved key chains, license plates, and license plate frames bearing exact replicas of the VW circle logo and the Audi four-ring logo. The district court had granted summary judgment to the unauthorized manufacturer of these items, holding that its use of the logos was aesthetically functional as a matter of law because the logos themselves were what drove the sales of the items: people liked the logos.

Natch, Audi and VW appealed. The 9th Circuit reversed. In a well-reasoned opinion, the Court discussed the history of the elusive concept of aesthetic functionality, from the 1938 Restatement of Torts through the Supreme Court's recent TrafFix decision. Ultimately, the 9th Circuit held that where the "entire significance" of the allegedly aesthetically-functional feature is its value as an identifier of source, then use of the mark is "naked appropriation" rather than appropriate. The Court -- correctly, in my view -- pointed out that to hold otherwise "would be the death knell for trademark protection."

Adoption (in dictum) of the "Sublicensing Rule" in TM cases -- In a case involving the tortuous twists and turns in the saga of the GLENN MILLER mark for music and related stuff, the 9th Circuit in Miller v. Glenn Miller Productions, Inc., No. 04-55874 (9th Cir. July 19, 2006), rejected a licensee's argument that it should be able to sub-license without express permission from the licensor in the absence of a prohibition against it. It adopted the rule that licensees can't sublicense without express permission (which was born in patent and copyright cases) because if the rule were otherwise it would make it hard for a licensor to exercise its duty to supervise and control use of its mark, thus undermining markholders' rights. Makes sense to me.

The problem, however, was that the 9th Circuit also rejected the licensors' claims based on laches, thus making the entire discussion about how the licensors were wronged dicta. That darn activist 9th Circuit! Next thing, they'll be ruling that the Pledge of Allegiance can by copyrighted by atheists. God . . . , er, . . . Someone help us.

Wednesday, August 09, 2006

Two (relatively) recent TM decisions

I'm a little behind because of vacation, etc., but here are two interesting appeals court decisions from the last few weeks.

11th Circuit "Fair Use" Decision -- In International Stamp Art, Inc. v. United States Postal Service, No. 05-13492 (11th Cir. July 18, 2006), the plaintiff owned a registration for a perforated border (like on a stamp) in connection with a line of "stamp art" cards and postcards. The USPS had previously licensed certain of its stamp designs to the plaintiff for use on these cards, but then went into business for itself selling them (with the obligatory "perforated border"). The plaintiff sued and the USPS raised the "fair use" defense, arguing that it didn't use the perforated border as a mark, but that the border simply descriptively depicted a portion of the stamp that was reproduced on the card.

The only issue on appeal was whether the USPS acted in "good faith." The 11th Circuit held that good faith means only that the defendant did NOT "intend to trade on the goodwill of the trademark owner by creating confusion as to the source of the goods or services." The 11th Circuit found that the USPS satisfied this standard, in part because there was no evidence of bad faith and in part because the USPS "provided affirmative evidence of good faith in showing that it prominently places its own familiar Eagle trademark on the backs of its stamp art products thereby identifying them as Postal Service products rather than the products of anyone else in the marketplace."

An explicit holding that use of a house mark supports a showing of good faith is a useful precedent to remember.

9th Circuit Decision Warning About Promiscuous Use of Ex Parte TROs -- In Reno Air Racing Association v. McCord, No. 04-16001 (9th Cir. July 7, 2008), the 9th Circuit went on a rant about how important it is for district court to remember that Rule 65(b) has stringent requirement that must be met before a court can issue a TRO without notice. Essentially, the 9th Circuit said that ex parte TROs are appropriate only where (a) it is impossible for the plaintiff to find the defendant; or (b) the defendant can be found, but the plaintiff can make a SPECIFIC showing that the defendant would disregard a direct court order AND would hide or dispose of the goods before the hearing could take place. The specific showing must either be of the defendant's past activities or of activities of similarly situated persons.

The court also talked a bit about what language to use to properly describe the enjoined trademark in an injunctive order.

Having been bushwhacked (twice) by too-casually-issued ex parte TROs, I'm going to tuck this one away for future use.

Monday, July 10, 2006

6th Circuit decision in TM case involving GM emblems on replacement grilles for cars

You know how cars' grilles have the manufacturers' trademark designs on them? Well, in General Motors Corp. v. Keystone Automotive Industries, Inc., No. 05-1712 (June 30, 2006), GM sued a manufacturer of replacement grilles over that issue. The replacement maker didn't actually put the emblem itself on it. It put a piece of plastic in the outline of the emblem, onto which the official emblem (which could be separately purchased from GM) could be affixed. The court called this plastic outline a "placeholder."

The district court granted summary judgment for the replacement maker on likelihood of confusion. The 6th Circuit agreed as to point-of-sale purchaser. They knew they were getting a non-GM replacement grille. But the 6th Circuit said that folks downstream in the river of commerce might be confused, and any shoddiness could be incorrectly attributed to GM. (There was also an issue of fact as to whether the placeholder was visible to downstream commerce waders.)

This is all pretty straightforward. But the silent "elephant in the room," in my mind, was aesthetic functionality. The Court noted in passing that, after GM filed suit, the defendant removed the placeholders in the shapes of the GM trademarks, and the defendant's sales of replacement grilles immediately went down. Turns out that buyers of replacement grilles actually DESIRE to have grilles with the emblems on them.

So why didn't the 6th Circuit "grille" the parties on this issue? It seems like a textbook example of aesthetic functionality. Recall that the Supreme Court in Qualitex Co. v. Jacobson Products Corp., 514 U.S. 559 (1995) , said that "if a design's aesthetic value lies in its ability to confe[r] a significant benefit that cannot practically be duplicated by the use of alternative designs, then the design is functional. The ultimate test of aesthetic functionality . . . is whether the recognition of trademark rights would significantly hinder competition."

Who knows -- maybe the defense wasn't raised. In any event, enjoy.

Wednesday, June 21, 2006

Eighth Circuit copyright decision on expert testimony and "substantial similarity" test

Can "substantial similarity" of expression be the subject of expert testimony? No, says the Eighth Circuit in The Rottlund Co. v. Pinnacle Corp., No. 05-1296 (8th Cir. June 20, 2006).

The case involved allegations that the defendant infringed plaintiff's copyrights in townhouse design plans. In a copyright case, plaintiffs must show ownership of a valid copyright (this was not at issue) and copying of protected expression. Copying of protected expression can be shown by direct evidence of copying OR indirectly by showing (a) access to the copyrighted materials (this was not at issue) and (b) substantial similarity of both (i) ideas (this was not at issue) and (ii) expression. (The three elements that were not at issue were decided in plaintiff's favor at summary judgment.)

So the real issues left for the jury were: was there direct copying; and were the defendants' works substantially similar to the expression in plaintiff's works?

The Eighth Circuit explained that to determine whether there's a substantial similarity of expression, expert opinion and "analytical dissection" (i.e., element-by-element comparison) are impermissible. Instead, substantial similarity of expression is an "intrinsic" issue: it is measured by the response of an ordinary, reasonable person.

The trial court, however, had allowed the defendants to put on an expert who testified regarding what he believed to be key differences between several individual elements of parties' townhouse layouts. He also testified several times that, in his opinion, these differences led him to the conclusion that there was "no copying." The jury apparently believed the expert, and found against the plaintiff.

The Eighth Circuit reversed and remanded for a new trial because the district court not only shouldn't have let the expert analytically dissect the individual elements of expression, but it shouldn't have entertained ANY expert testimony at all on the intrinsic issue of similarity of expression. Because that element depends on the perception of an ordinary, reasonable person, that's something the jury should decide for itself. Further, the Eighth Circuit rejected the defendant's explanation that the expert's testimony was merely rebuttal of some small amount of evidence of direct copying, saying that the expert's testimony was "unhelpful" on the "ultimate issue" of copying.

Monday, May 29, 2006

9th Circuit decision regarding rejecting state attempt to claim ownership of private party's trademarks

The Ninth Circuit recently decided a trademark case that, while interesting, involves a fact pattern unlikely to pop up again anytime soon. Department of Parks and Recreation v. Bazaar del Mundo Inc., No. 05-02244-JTM (May 24, 2006), concerned a dispute over the marks CASA DE BANDINI and CASA DE PICO. These two marks were being used by the party that for decades had the concession for restaurants it ran under the same name in San Diego's Old Town State Historic park. Before giving the concession to the defendant, the California Department of Parks and Recreation ("Parks Dept") hadn't used these marks for restaurants or as trademarks for anything else. The Parks Dept argued that it had previously used the names in brochures for the park, but the 9th Circuit held that these were only historic references, not uses as trademarks. The 9th Circuit also held that the Parks Dept's concession agreement with the defendants was merely a standard leasing arrangement, not a trademark license, thus rejecting the Parks Dept's argument that it MUST have owned trademark rights -- or else why would it have purported to license them?

The Parks Dept was apparently upset with the defendant because, after the concession expired and the Parks Dept re-bid it and wanted to award it to someone else, it found out that the defendant (the prior concessionaire) had registered the marks years before, and had taken the position that not only could the new concessionaire not use them, but also that the old concessionaire could continue to use them in another location.

Tuesday, May 16, 2006

Second Circuit decision on copyright "fair use"

The Second Circuit recently issued a opinion discussing whether use of a few shrunk-down images of copyrighted concert posters in a historical coffee table book about the Grateful Dead violated copyright law.

In Bill Graham Archives v. Doris Kindersley Ltd., No. 05-2514-cv (2d Cir. May 9, 2006), the plaintiff noticed the use of its images in the book, which it found HARD TO HANDLE. It sued the defendant, and said THE RACE IS ON. Its complaint tried to take the book's publishers to SHAKEDOWN STREET using the copyright laws, but the defendant claimed fair use, and that was THE RUB. And once the district court analyzed the fair use factors, it said it LOOKS LIKE RAIN for the plaintiff, who was told on summary judgment to BEAT IT ON DOWN THE LINE, and ended up the LOSER in the district court.

At the Second Circuit, the EYES OF THE [copyright] WORLD were upon the court. Of the four "fair use factors" in 17 U.S.C. § 107, the Second Circuit focused primarily on "the purpose and character" of the defendants' use. The court held that the defendants' use of the work was "transformative," in that it used only a few images, in much-reduced size, and integrated them into a historical timeline and provided historical information about the concerts depicted in the posters. The court also noted that the plaintiff's works constituted only a very small portion of the challenged book, and that the defendants hadn't used the works in the advertising for the book. This was the most important factor, in the Second Circuit's view, and it had a RIPPLE effect on the THE OTHER ONEs (fair use factors, that is).

AROUND & AROUND the arguments went on the other three fair use factors. While the plaintiff got some GOOD LOVIN' on the creative nature of its work (the second fair use factor), the court held that its significance amounted to JACK STRAW in light of the importance of the first factor. The court also found that the "amount and substantiality" of the work copied was small, and that plaintiff's use of thumbnails didn't eat into the market for or value of the originals, which were not ever licensed in such a way.

Concluding that only a SHIP OF FOOLS would side with the plaintiff on this one, the Second Circuit said, IT'S ALL OVER NOW, leaving the plaintiff in the COLD RAIN AND SNOW. Its copyright claim looking like a BROKEDOWN PALACE, the plaintiff had to say, YOU WIN AGAIN, and ultimately ended up GOIN' DOWN THE ROAD FEELIN' BAD.

Since the court thought its legal analysis should NOT FADE AWAY, this opinion will be published.

Thursday, May 11, 2006

"Advice of Counsel" Defense and Scope of Waiver of Privileges

When a defendant in a patent case (or a trademark case, for that matter) introduces evidence of communications or documents otherwise falling within some privilege in defense of a charge of willful infringement, then quite obviously that privilege is waived. The question is, how far does the waiver extend? The Federal Circuit recently issued a very clear explanation of its view concerning the scope of the waiver that necessarily flows from a defendant's disclosure that he relied on advice given by counsel.

In In re Echostar Communications Corp., Misc. Nos. 803, 805 (Fed. Cir. May 1, 2006), defendant Echostar asserted, in response to a charge of willful infringement, that it had relied on the advice given by its in-house counsel. Echostar later got additional advice from an outside law firm, but elected not to rely on it. The plaintiff, however, moved to compel and got a district court order that, because Echostar was relying on its in-house counsel's advice as a defense, it waived attorney-client privilege and attorney work-product immunity as to all communications from any counsel on that subject, whether or not it was communicated to Echostar. That last italicized bit is important, because, remember, the "advice of counsel" defense goes to the defendant's state of mind. So the district court's ruling, in essence, said that even information not communicated to the client is relevant to the client's state of mind. Yikes!

The Federal Circuit had problems with it too. They focused on work-product doctrine, since they viewed the scope of a work-product waiver as being narrower than a waiver of the attorney-client privilege. Specifically, waivers of privilege are for all privileged materials on the same subject, but a work product waiver extends only to "factual" or "non-opinion" work product on the same subject matter.

The court then broke down the scope of the work product waiver into three categories: (1) documents that themselves are a communication, like a letter or e-mail; (2) documents that discuss or memorialize a communication between the lawyer and the client, but aren't themselves communicated to the client; and (3) documents that analyze the law, the facts, trial strategy, or anything else that reflect the attorney's mental processes, but aren't sent to the client. The court explained that categories (1) & (2), since they either embody or discuss a communication to the client, do inform the client's state of mind, and are discoverable. But category (3) documents, since they aren't communication to the client, don't and aren't.

Seems about right to me. And I see no reason why this reasoning ought not to apply to trademark cases as well. Overall, a good, sensible opinion from a circuit that (at least on trademark matters), I frequently disagree with.

Friday, May 05, 2006

Two interesting decisions on injunctive relief and on discriminatory state food labeling laws

The following two decisions raise what I think are interesting, if not common, issues.

In Lakeview Technologies, Inc. v. Robinson, No. 05-4433 (7th Cir. May 1, 2006), the defendant, an individual, stole plaintiff's trade secrets, and the plaintiff sought a preliminary injunction against defendant's use of the secrets. The district court denied the injunction for various reasons, one of which was that, since a damage award could be calculated, the plaintiff had an adequate remedy at law. The Seventh Circuit said that the ability to calculate damages could potentially make the legal remedy adequate, but not if the defendant couldn't pay it. In such a case, a defendant could only avoid the preliminary injunction if he put up an adequate bond or other good security in lieu of the injunction (Judge Easterbrook's opinion called it a "non-injunction bond").

Piazza's Seafood World, LLC v. Odom, No. 05-30098 (5th Cir. May 4, 2006) involved a suit by a seller of Chinese farm-raised catfish under the CAJUN BOY and CAJUN DELIGHT marks to enjoin enforcement of two Louisiana statutes: The "catfish statute" prohibited sales of any non-American catfish as "catfish," even if it was biologically the same species; the "Cajun statute" prohibited labeling food from outside Louisiana as "Cajun" or "Creole" unless the food was "substantially transformed by processing in Louisiana." The Fifth Circuit held that the "catfish statute" violated the dormant foreign commerce clause of the Constitution because it facially discriminated against foreign commerce, and the state gave no good reason for it. The Court enjoined the "Cajun statute" because it failed the 4-part test for permissible regulation of commercial speech set forth in Central Hudson Gas v. Public Service Commission, 447 U.S. 557 (1980). Important to the court's decision was that use of the CAJUN BOY and CAJUN DELIGHT marks was not actually or inherently misleading as to Chinese-raised fish, as required by Central Hudson, but only "potentially" misleading, in light of the fact that the plaintiff clearly labeled its packages "Product of China."

Wednesday, April 26, 2006

Second Circuit copyright decision on statutory damages

The Second Circuit recently decided a case that raised the issue of how to count the number of statutory damage awards are available under section 504(c)(1) of the Copyright Act. In WB Music Corp. v. RTV Communications Group, Inc., No. 04-3890, 04-3892 & 04-3901 (2d Cir. Apr. 19, 2006), the defendant had sold seven CDs that infringed plaintiffs' copyrights in 13 songs. Section 504(c)(1) provides for one statutory damage award for each work that is infringed. The last sentence of section 504(c)(1) further provides that, for purposes of calculating statutory damages, all parts of a derivative work or compilation constitute one work.

The trial court thought that since the defendants' infringing CDs were compilations, that meant there were seven infringing works. The Second Circuit disagreed, holding that the last sentence refers to the copyrighted works, not the infringing works. Therefore, since the defendants infringed 13 different songs, they were on the hook for 13 statutory damage awards.

Monday, April 17, 2006

Coupla Trademark Decisions (1st and 5th Circuits)

The First and Fifth Circuit recently handed down trademark decisions.

In Borinquen Biscuit Corp. v. M.V. Trading Corp., No. 05-2591 (1st Cir. Apr. 4, 2006), the First Circuit upheld a preliminary injunction against an accused infringer. In so doing, the court spent considerable time discussing the parties' respective burdens on the issue of the distinctiveness as to an unregistered, registered but not yet incontestable mark, and a registered and incontestable mark. In an interesting side issue, the defendant tried to show that the plaintiff's mark was weak because the PTO had issued several registrations including the mark. The First Circuit turned this against the defendant on the issue of whether the mark was inherently distinctive, observing that the PTO wouldn't have issued so many registrations for the mark without requiring 2(f) showings of secondary meaning if the mark wasn't inherently distinctive. I wouldn't have seen that boomerang effect coming, but now we're all forewarned (at least in the First Circuit).

In Icee Distributors Inc. v. J & J Snack Foods Corp., No. 04-30060 (5th Cir. Apr. 11, 2006), the Fifth Circuit rejected trademark infringement claims by one licensee against another licensee. Essentially, the court decided that the plaintiff licensee had no claim under the Lanham Act because the licensor (also a defendant) had validly licensed the defendant licensee. Since the licensor couldn't have sued the defendant licensee for infringement, neither could the other licensee, whose rights were only as great as the licensor's. There were also some other side issues in play, but that's the core trademark holding.

Wednesday, April 05, 2006

Seventh Circuit decision concerning Computer Fraud and Abuse Act

I know this isn't strictly trademark, copyright, or trade secret law, but the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030 et seq., does seem to pop up in many trade secret-related disputes I've worked on.

The Seventh Circuit issued a decision under the CFAA about a month ago that got me thinking about a potentially new way to use the CFAA. Before I get into the new way, the decision in International Airport Centers, L.L.C. v. Citrin, No. 05-1522 (7th Cir. March 8, 2006), primarily concerned whether the defendant in this civil case under the CFAA, who had intentionally erased important data from his company-issued laptop just before he got canned, had caused the "transmission" of a command or program that caused damage and whether he was "authorized" to have erased the data. (The data was important to the employer and it didn't have any copies of the data, and the ex-amployee, after deleting the critical information, then started up his own competing business.)

The district court had dismissed the case, but Judge Posner, writing for the panel, held that such conduct would violate the CFAA.

But this got me thinking about spoliation of evidence during the course of litigation. Normally, when that happens, lawyers tend to think of it in terms of discovery sanctions and "adverse inference" jury instructions. But if, during the course of litigation, someone is found to have intentionally deleted or erased relevant computer data, might that not fall under the CFAA? Section 1030(a)(5)(A)(i) prohibits the intentional transmission of a program or command that causes damage to the computer so long as he wasn't "authorized" to do so. Section 1030(a)(5)(A)(ii) & (iii) prohibit intentional access to a protected computer that recklessly causes damage, or just causes damage, all without "authorization."

So if under the Federal Rules governing discovery, a party has a duty not to destroy potentially relevant information, does that mean the party isn't "authorized" under the CFAA? That would look to be the key question. Further, if the adverse party needed to spend more than $5000 to retrieve (or try to retrieve) the data (whether lawyer time or computer forensics experts or whatever), the adverse party might even be able to amend his claims or counterclaims to assert a CFAA claim in that case, thus maximizing the chances that the jury or the judge gets to hear, in excruciating detail, about the evidence that was destroyed.

Is this a possibility? Anyone spot any bone-headed flaw in my thinking?

Wednesday, March 29, 2006

Third Circuit decision in family seed business trademark/trade secret dispute

The Third Circuit recently issued a long decision dealing primarily with a complicated dispute over trademark ownership rights in the context of a dispute between several entities that grew out of a successful family business. There was also an interesting question involving the intersection of trade secret rights and the Federal Seed Act.

I won’t even try to summarize the salient facts concerning the ownership and use of the Doebler family name in Doeblers’ Pennsylvania Hybrids, inc. v. Doebler, No. 04-3848 (March 23, 2006), but there were a couple of legal points discussed by the Third Circuit that bear mentioning. First, on the trademark side, one of the Doebler parties was on the manufacturing side, the other was on the marketing/sales side. Looking to Professor McCarthy’s treatise, the Third Circuit noted that in disputes where manufacturers and distributors are quarrelling over who owns the mark, McCarthy suggests that the courts first look to whether a contract takes care of the question. If not, McCarthy suggests that courts look to a multi-factor test to determine what a typical consumer of the goods would perceive about who owns the mark. The Third Circuit, while not rejecting this “consumer expectation” test (there was no contract dealing with the issue) in all circumstances, limited when it could be applied. It held that where, as in the Doebler case, it was clear that one of the parties started out owning the mark and the issue was whether subsequent events resulted in transfer or abandonment of rights, the “consumer expectation” test had no application. Because the party challenging the first owner was essentially saying that, through subsequent events, the original owner “forfeited” its rights in the mark, courts should strictly apply the traditional tests to determine whether there had been an assignment or abandonment, rather than use a “balancing test” to decide whether such a forfeiture of rights had occurred. (Ed. I find this to be pretty solid reasoning.)

On the trade secret side, the issue was whether the plaintiff’s brand names for different hybrid vegetable seed varietals could be “trade secrets.” I know, I know, how can a brand name be a trade secret?, you ask. Well, hybrids are the first generation of pure bred “inbred” varietals. Apparently, the hybrids’ brand names in this case uniquely corresponded to the two inbred varieties used to make them. It was the defendants’ knowledge of what inbreds made up each of the plaintiff’s hybrids that the plaintiff wanted the defendants to stop using. Under the trade secret claim, the plaintiffs had gotten an injunction at the district court prohibiting the defendants from selling any of the hybrids sold by the plaintiff or disclosing any of the pedigrees of those hybrids.

The Third Circuit reversed this aspect of the district court’s decision, primarily on the ground that the third-party “foundation” seed companies that sold inbred seeds to the parties (so they could make their hybrids) pretty much told all their customers for inbred seeds which inbred seed varieties to cross-breed in a given agricultural zone, and most customers followed this advice. So the combinations weren’t “secret” at all.

The Third Circuit was also concerned that considering the parentage of the plaintiff’s hybrids to be a trademark could potentially conflict with the Federal Seed Act (FSA). The FSA requires that seeds be sold under their varietal name. Regulations under the FSA require that hybrid designations are treated as varietal names, and that the first company to name a new varietal sets the varietal name that other companies must thereafter follow. So the defendants needed to be able to use their knowledge of the make-up of the plaintiffs’ varietals and the plaintiff’s varietal names to comply with the FSA and associated federal regulations.

Wednesday, March 08, 2006

Federal Circuit decision on copyright and design patent issues concerning furniture design

The Federal Circuit recently reversed a district court summary judgment ruling of no copyright infringement and no design patent infringement in a case involving competing furniture. Amini Innovation Corp. v. Anthony California, Inc., No. 05-1159 (Fed. Cir. March 3, 2006) concerned copyright registrations for "carved ornamental woodwork" on furniture items and a design patent on a bed frame.

On the copyright claim, the Federal Circuit (applying 9th Circuit precedent) noted that a plaintiff has to show ownership of a copyright and copying of protected expression. Since there was no evidence of literal copying, the court looked to the "access + substantial similarity" indirect way of showing copying. And in the 9th Circuit, the more access, the less a plaintiff needs to show on substantial similarity. Since there wasn't much evidence of access, the court required "striking" similarity. But only similarity in expression counts, and since purely utilitarian articles don't receive copyright protection, the court focused solely on the carvings themselves.

Under the 9th Circuit's two-part "extrinsic/intrinsic" test for substantial similarity, courts must first perform the "extrinsic" test: an "objective comparison of specific expressive elements," in which the court analytically dissects the work (and maybe takes expert testimony). If under this test the two works "share a similarity of ideas and expression as measured by external, objective criteria," courts are then to apply the "intrinsic" test, which asks whether an ordinary reasonable audience would find substantial similarity in the "total concept and feel of the works."

The Federal Circuit was OK with the district judge's performance of the extrinsic test, but held that the district judge went wrong when he performed the intrinsic test himself, deciding "the fact intensive question of the total concept and feel of the carvings in the furniture." The Federal Circuit believed that a reasonable jury could have determined that there was a substantial similarity in the total concept and feel of the works.

As to the design patent, the Federal Circuit held that the district court's claim construction focused too much on the details of the ornamentation rather than the overall design of the bed post. Further, the Federal Circuit found again that the district court had usurped the jury function in performing an element-by-element analysis in determining that no reasonable jury could have found that the accused product was substantially similar. Instead, the district court was supposed to have analyzed "the design as a whole from the perspective of an ordinary observer."

I don't know about you, but to me these types of cases are analytical minefields.

Friday, February 17, 2006

2d Circuit decision on "loss" requirement in Computer Fraud and Abuse Act action

I usually don't bother commenting on unpublished circuit court decisions, particularly in circuits like the Second Circuit where you can't even mention them as precedent, but this one is worth noting.

In Nexans Wires S.A. v. Sark-USA, Inc., No. 05-3820-cv (2d Cir. Feb. 13, 2006), the Second Circuit issued an unpublished opinion (they call them "summary orders") affirming summary judgment against a plaintiff on its claim under the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. 1030 et seq. The CFAA is a neat little criminal statute, with an express but limited civil right of action, aimed generally at unauthorized access to protected computers with the intent to defraud or cause damage.

The key issue was whether the damage claimed by the plaintiff caused a qualifying "loss," as that term is specifically defined in the CFAA, of over $5,000 in any 1 year period. The plaintiffs claimed that the defendants misappropriated confidential data from their computers that caused the plaintiffs to lose over $10 million in profits. Well over the statutory threshold, right? Not so fast, said the court.

The CFAA defines loss as "any reasonable cost to any victim . . . and any revenue lost . . . because of interruption of service" from the unauthorized computer access. It was this last limitation on causation that did in the plaintiff. The court held that there was no evidence that the lost alleged $10 million in lost revenue was due to any "interruption of service." The plaintiffs' "Plan B" argument was that they spent $8000 to fly their German execs over to the US to investigate the defendants' misappropriation, but the court said there was no evidence that the German execs actually performed any computer investigation or repair, or any other type of preventative security measures, for that matter. Rather, the evidence was that they were in the US solely to assess the business loss associated with the misappropriation.

The moral is, remember this important limitation on the $5,000 loss threshold when assessing potential CFAA claims.

Friday, February 10, 2006

10th Circuit decision on unauthorized sales of genuine goods

The 10th Circuit recently issued an opinion in an interesting case involving issues of (1) unauthorized sales of genuine products and (2) use of the trademark holder's mark on the Internet in various ways.

In Australian Gold, Inc. v. Hatfield, No. 03-6218 (10th Cir. Feb. 7, 2006), the appeals court affirmed a jury verdict in which the plaintiffs were awarded a total of $550,000 in damages on their trademark infringement claims (and much more money for compensatory and punitive damages on their state law non-trademark claims).

The plaintiffs sold tanning products through authorized distributors to tanning salons who then sold to consumers. Distributors signed agreements that required them to undergo training sessions about the proper use of the products (which might not work properly or could even injure people if misused) so that the distributors could train their salon customers, and the distribution agreements also prohibited selling to anyone but real salons. The defendants, who were not salons, bought from rogue distributors who did not adhere to the re-sale restrictions, and the defendants in turn re-sold the products to anyone over the Internet. In connection with defendants' Internet sales, defendants used the trademarks on their websites, in their metatags, and in connection with a key word program run by search engine through which the defendants paid for enhanced search listings when users typed in plaintiffs' marks.

The defendants raised a number of defenses, but chief among them, at least as to the product sales themselves, was "first sale doctrine" -- the principle that it's OK for someone who buys the trademark holders' goods to simply re-sell them. The 10th Circuit rejected the first sale doctrine defense, however, because in its view the defendants went further than simply re-selling: they used the trademark on their website in a way that made it seem like they were authorized dealers when they actually weren't.

As to the use of the marks on defendants' websites, the 10th Circuit held that this created a likelihood of "initial interest confusion" because these trademark uses were an attempt to divert traffic seeking plaintiffs' products to defendants' websites. According to the court, this hurt the plaintiffs in several ways: First, since defendants also sold other companies' tanning products, the plaintiffs may have lost sales to competitors. Second, the plaintiffs lost opportunities for additional or upgraded sales that frequently occur when authorized tanning salon professionals handle the sales. Third, there was the potential for damage to plaintiffs' goodwill (or even lawsuits) if the products were misused due to lack of instruction from authorized tanning salon re-sellers.

As to the $$ amount of the damages, the court noted that it's really hard to quantify trademark damages, but held that the jury was within its rights to link the quantum of damages to the amount of money that the defendants had received in revenue for their unauthorized sales.

There are many other interesting issues in the court's discussion, but those are the highlights that jump out at me concerning the trademark issues.

Thursday, February 02, 2006

1st Circuit decision on reverse confusion

In a pretty plain vanilla decision, the First Circuit recently affirmed a jury verdict of infringement in a reverse confusion case. In Attrezzi, LLC v. Maytag Corp., No. 05-2098, -2181 (Jan. 27, 2006), the court affirmed the jury's determination that Maytag's use of ATTREZZI (which is Italian for "tools") on its Jenn-Air line of small kitchen appliances infringed the plaintiff's prior use of ATTREZZI for a single location store for upscale kitchen products and services, including small kitchen appliances. The pivotal facts, based on the court's discussion, seemed to be: (1) that there were several instances of actual confusion (although the court characterized them as "limited"); and (2) Maytag's in-house counsel initially opined that the plaintiff's mark, which showed up in a pre-adoption search, was "a problem," but later changed his mind when company execs told him to "take another look" at the issue (nudge nudge, wink wink).

There was nothing earth-shattering in the decision, although other noteworthy aspects of the court's opinion include:

  • noting that a defendant's use of its well-known house mark in conjunction with the accused mark in a reverse confusion case actually exacerbates, not diminishes, the likelihood of confusion; and
  • holding that attorney's fees expended by the plaintiff in initially fighting the defendant's ITU before the plaintiff sued was a compensable item of actual damage.

Because of the way the First Circuit's website is set up, I can't link directly to the opinion, but here's the link to the home page of the First Circuit website. Use the docket number to search for the opinion.

UPDATE: A nice anonymous comment provided me the static link to the opinion: It's this.

Monday, January 16, 2006

4th Circuit Decision on Likelihood of Confusion Factors

In a relatively straightforward decision, the 4th Circuit recently affirmed summary judgment of non-infringement in CareFirst of Maryland, Inc. v. First Care, P.C., No. 04-2493 (4th Cir. Jan. 11, 2006). In CareFirst, the plaintiff was a a large HMO and the defendant was a small group of primary care doctors. The 4th Circuit, in performing its analysis, primarily rested its decision on the following factors:

  • Lack of proof that the plaintiff's mark was strong, despite $50 million in advertising over the last 10 years, having millions of customers covered by plaintiff's health plan, and hundreds of press mentions. The court heavily discounted this circumstantial evidence of strength because the CareFirst mark almost always appeared together with the distinctive Blue Cross Blue Shield design.
  • The court also discounted the fact that the marks at issue used the same two words, although in different order, for similar reasons: the fact that the CareFirst mark almost always appeared with the distinctive Blue Cross Blue Shield design "serve[s] to lessen any confusion that might otherwise be caused by the textual similarity between the two marks."
  • The court also found persuasive that the two marks had coexisted for 9 years without any known instances of actual confusion. The court also found that plaintiff's survey failed to show enough confusion to be probative.