9th Circuit decision vacating injunction against making disparaging comments about a trademark

The Ninth Circuit today vacated a preliminary injunction prohibiting a defendant from making disparaging comments about a trademark.

The dispute in The Freecycle Network, Inc. v. Oey, No. 06-16219 (9th Cir. Sept. 26, 2007) garnered significant interest from First Amendment law professor types. The plaintiff is a company that encourages people to coordinate recycling efforts to minimize landfill issues. The defendant was previously affiliated with Freecycle, and had initially encouraged Freecycle to protect its FREECYCLE trademark. Later, he changed his mind and decided the public should be free to use “Freecycle” as a generic term to describe the sort of coordinated recycling services that the plaintiff performed. So he began communicating via the Internet encouraging people to use the term generically and to express his opinion that FREECYCLE didn’t qualify as a proper trademark.

The district court enjoined the defendant from making any further statements disparaging Freecycle’s trademark.

On appeal, a bunch of amici screamed and yelled about the First Amendment problems with such an injunction, but the Ninth Circuit avoided the constitutional issue by ruling that: (1) the defendant hadn’t used the mark “in commerce”; (2) even if there had been a “use in commerce,” there was no likelihood of confusion; (3) there is no cause of action under the Lanham Act for “trademark disparagement”; (4) even if there were, the plaintiff hadn’t proved that the alleged elements of its alleged cause of action were satisfied; (5) there was no false statement of fact (only a lay opinion about the legal validity of the mark) and therefore no Lanham Act false advertising; and (6) the Lanham Act contains no provision preventing the generic use of a trademark.

The Ninth Circuit noted, however, that it was expressing no opinion about whether the defendant’s activities were unlawful under any state law claims.

6th Circuit decision concerning a spat between wineries over trademark use of a geographically descriptive AVA name

Just because the 6th Circuit doesn't encompass Napa Valley doesn't mean it can't mediate spats between wineries. In Leelanau Wine Cellars, Ltd. v. Black & Red, Inc., No. 06-2391 (6th Cir. Sept. 20, 2007), the 6th Circuit confronted a claim that the winery name "Chateau de Leelanau Vineyard and Winery" infringed plaintiff's registration for LEELANAU CELLARS. Michigan's Leelanau Peninsula is a governmentally-approved American Viticultural Area (AVA).

While the 6th Circuit's review of the grant of summary judgment to the plaintiff was largely fact-intensive, it did not that the common element of the two marks (Leelanau) is geographically descriptive, and therefore weak, and this weakness was highlighted by the donning of AVA status to Leelanau Peninsula. The opinion also contained some useful discussion concerning factors that affect the admissibility and probative value of confusion surveys.

11th Circuit decision concerning when a district court can overturn credibility determinations of magistrate judges on r&r's

In Amlong & Amlong, P.A. v. Denny's, Inc., No. 04-14499 (amended Sept. 17, 2007), the district judge had referred a sanctions motion to the magistrate judge to hold an evidentiary hearing. After hearing extensive testimony, the magistrate judge reported and recommended that the sanctions motion be denied, finding that the attorney in question did not act in bad faith. The district judge, conducting its "de novo determination" as required by 28 U.S.C. § 636(b), disagreed after reviewing the transcript of the hearing before the magistrate judge, and concluded that the testimony showed bad faith.

The 11th Circuit held that the district judge erred in rejecting the magistrate judge's implicit determination that the lawyer's testimony concerning the acts in question and the motives for them was credible. The appeals court held that "[r]ejecting credibility findings made by a magistrate judge without holding a new hearing is permissible only when there is an 'articulable basis for rejecting the magistrate's original resolution of credibility.' " Since there wasn't any such "articulable basis" here, the court reversed.

10th Circuit decision (unpublished) on the phrase "anything of value" in the Computer Fraud and Abuse Act

The Computer Fraud and Abuse Act (18 U.S.C. § 1030) provides a private civil cause of action against one who "knowingly and with intent to defraud, accesses a protected computer without authorization, or exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of value" (there are other required elements as well). In Triad Consultants, Inc. v. Wiggins, No. 07-1007 (10th Cir. Sept. 17, 2007) , it was alleged that fired President and COO (Wiggins), who was required by agreement to return all Triad property, unsuccessfully tried to get a third-party to restore a back-up tape of Triad computer data into a useable format.

The 10th Circuit held that Triad failed to state a claim because the "complaint set forth a sequence of facts showing that [Wiggins] never obtained any information from the tapes." Accordingly, "[b]ecause Triad alleged no facts showing that Wiggins accessed the information on the tape, it cannot establish one of the elements of a claim under § 1030(a)(4), that Wiggins obtained "anything of values." The court rejected the argument that the tapes themselves had intrinsic value, because "value is relative to one's needs and objectives," and if Wiggins couldn't use the information on the tapes, then they had no value to him.

6th Circuit decision employing an uber-lenient causation standard for copyright damages

The Sixth Circuit recently issued a decision, that, in my opinion, stretched the well-established causation requirement for copyright damages beyond the breaking point.

In Thoroughbred Software Int'l, Inc. v. Dice Corporation, No. 06-2080 (6th Cir. June 14, 2007), the plaintiff licensed software to the defendant. Under the license, the licensee was permitted to copy and install the software on end-users' computers, but had to pay a license fee each time it did so. Further copying by the defendant was prohibited. At trial, the plaintiffs proved that the defendant made several copies of the software for which it did not pay the plaintiff. Some involved software the defendant installed on end-users' computers. Some copies were never installed on anyone's computer.

The most interesting question on appeal was whether the plaintiff should have been awarded damages for the copies that were NOT installed on any end-user's computer. They were just sitting there in defendant's office, gathering dust.

The defendant argued that, since it never installed the uninstalled copies on anyone's computer, the plaintiff didn't lose any of the licensing fees provided in the license for them, so there was no damage. Sixth Circuit acknowledged that a plaintiff "must prove the existence of a causal connection" between the alleged infringement and the alleged damage. It then pointed to a 2d Circuit case where someone had used a copyrighted object in an ad campaign without obtaining permission. The 2d Circuit case held that the copyright owner should have received a reasonable royalty for the use of the copyrighted object in the ad campaign.

The 6th Circuit then stretched this holding even further (way too far, in my view), and used it as the basis to hold that the plaintiff should receive a reasonable royalty even as to the copies that were made but never used. Its basis for doing this was that it was more equitable to give something to the plaintiff for the unlawful copies than to let the wrongdoer off scot-free as to those wrongly-made copies. This would seem to make a mockery of the causation requirement, as this "principle" would apply in almost every case, causation or not.

So if you want a broad interpretation of the causation requirement, here's your authority.

5th Circuit Shoots Down Creative Attempt to Remove a State Law Trademark Case

The Fifth Circuit recently shot down a creative attempt to remove a state court case claiming trademark infringement under Texas law (not under the Lanham Act) to federal court. In In re Hot-Hed Inc., No. 06-20893 (5th Cir. Jan. 30, 2007), the plaintiff sued in Texas state court, alleging trademark dilution under the Texas Business & Commerce Code, and trademark infringement and unfair competition under Texas common law. In its prayer for relief, the plaintiff demanded “attorneys’ fees as allowed by law.” The defendant removed to federal court, alleging that the claim raised a “federal question.”

The plaintiff moved to remand, saying that its complaint didn’t say a word about federal law. The defendant convinced the district court, however, that the phrase “attorneys’ fees as allowed by law,” which appeared in the prayer, must have meant federal law (i.e., the Lanham Act), since none of the three asserted Texas law claims permit the recovery of attorneys’ fees.

On mandamus, the Fifth Circuit disagreed. It said that Texas case law indicates that the plaintiff might have been able to ask for a declaratory judgment under the Texas Declaratory Judgment Act, even though the complaint didn’t mention the Texas D.J. Act or demand declaratory relief. And under Tex. Civ. Prac. & Rem. Code § 37.009, attorneys’ fees are available for a D.J. under the Texas D.J. Act. Applying the principle that “any doubt about the propriety of removal must be resolved in favor of a remand,” the Fifth Circuit ordered the district court to check out if diversity jurisdiction existed, and, if not, to remand. The Fifth Circuit also seemed swayed by the principle that removal of a trademark case is improper if the plaintiff doesn’t clearly state he’s seeking relief under the Lanham Act.

6th Circuit Decides Interesting Copyright and Trademark Case Involving Repackaging and Reselling of Audio Recordings of Books

First the copyright part of the case. Under copyright law, the legitimate owner of a “copy or a phonorecord” can “sell or otherwise dispose of them” without the consent of the copyright owner. 17 U.S.C. § 109(a). There’s an exception, however, in § 109(b)(1)(A). It says that:

Notwithstanding the provisions of subsection (a), unless authorized by the owners of copyright in the sound recording . . . and in the case of a sound recording in the musical works embodied therein, . . . the owner of a particular phonorecord . . . may [not], for the purposes of direct or indirect commercial advantage, dispose of, or authorize the disposal of, the possession of that phonorecord . . . by rental, lease, or lending . . . .”

This exception came about in the early 1980s because record companies were concerned that they were losing too much business through record and tape rentals (to people would simply copy the rented music). In Brilliance Audio, Inc. v. Haights Cross Communications, Inc., No. 05-1209 (Jan. 26, 2007), the question was whether this exception applied to rentals of audio recordings of books. The Sixth Circuit though that the statutory language could go either way. (I had to read this part of the opinion three times to see how it could be read NOT to include recordings of books, but I digress.) Because it considered the language capable of going either way, the court jumped into the dreaded legislative history and discussed evanescent notions of “policy.” To make a long story short, the court decided that, in 1984, Congress was concerned only with music recordings. Nobody mentioned books on tape at all. And as to policy, the court decided that exceptions to the first sale doctrine should be construed narrowly, since such exceptions would “upset the bargain” in copyright law between copyright owners (who want to protect their creative works) and the rights of owners of stuff (to do what they want with their stuff). So it concluded that first sale doctrine exonerated the defendant on the copyright count.

The trademark claim was that the defendant was repackaging and re-selling the audio books in violation of the Lanham Act. The plaintiff sold two different versions of the audio books: one for consumers and one for libraries. It claimed that the defendant was taking the consumer versions and labeling them as library versions. The court (correctly in my view) upheld the trademark claim in the face of a first sale defense because (a) the plaintiff alleged that the defendant’s labeling didn’t make clear that the product was repackaged, plus (b) the goods weren’t “genuine” because there were differences between the two versions.