Wednesday, April 09, 2008

Two interesting 11th Circuit decisions (by the same panel!); ALSO, Several Posts that Blogger deleted during a 7-month period from 2007-08

The issues the 11th Circuit addressed in two interesting recent cases included progressive encroachment, fraud on the PTO in obtaining registration, metatags, and the application of the Supreme Court's decision in the recent patent case eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) to trademark claims.

In Angel Flight of Georgia, Inc. v. Angel Flight America, Inc., No. 07-11460 (11th Cir. Apr. 4, 2008), the court affirmed the district court's rejection of laches and acquiescence defenses on the facts in the case because it found progressive encroachment (the defendant had recently greatly expanded its use of plaintiff's mark in plaintiff's territory) and resulting inevitable confusion.

The Angel Flight court also held that if a person falsely states in a section 1(a) affidavit that no other person has the right to use the mark, but knows that others with rights are in fact using it, then the registration is subject to cancellation for fraud.

In the second case, North American Medical Corp. v. Axiom Worldwide, Inc., No. 07-11574 (11th Cir. Apr. 7, 2008) the court found that use of a competitor's trademarks in metatags would constitute infringement. In this case, the use of the plaintiff's marks in metatags, for some reason, were not fully hidden, but actually appeared in the blurb describing the defendant's website in the Google search results listing. (I don't know enough about computer programming or the way Google searches the web to know why that would happen -- I thought that metatags didn't show up at all unless you actively searched the source code for particular webpages.) Anyway, the court held that this went beyond "initial interest confusion" (which it did not accept or reject as a basis for liability in the 11th Circuit) and caused instead a likelihood of "source confusion" -- which it differentiated from initial interest confusion because "source confusion" cannot be dispelled simply by taking a closer look, as initial interest confusion can be.

Despite affirming the liability aspect of this preliminary injunction appeal, the North American Medical court vacated the preliminary injunction based on eBay. Ruling that eBay's rejection of broad rules either pro- or anti-injunction "is applicable to the instant case," the Court held that eBay wasn't limited to patent law, and it wasn't limited to permanent injunctions. The Court remanded to the district court to determine whether the familiar "presumption of irreparable harm" is one of those general rules that eBay prohibits and, if so, to take evidence on whether irreparable harm was likely to occur absent an injunction. I believe that this is the most explicit appellate discussion to date on whether eBay applies to trademark law. (I believe it does, as I wrote in this article.) It also held that eBay, which concerned permanent injunctions, applies equally to preliminary injunction cases (which, , I also predicted in my article).


10th Circuit decision regarding VAIL and 1-800-SKI-VAIL

The 10th Circuit, in a 2-1 decision, yesterday affirmed a district court ruling, after a bench trial, that the defendants' 1-800-SKI-VAIL toll-free number for Vail, Colorado related marketing services does not infringe the plaintiff's VAIL mark for ski resort services. Vail Assocs., Inc. v. Vend-Tel-Co., No. 05-1058 (10th Cir. Feb. 7, 2008). I don't think this opinion announced any significant legal rules, but rather was more fact-based.

The opinions are kind of analytical messes, in my view. I had to read it through twice to figure out exactly what the analysis was. My conclusion is that the majority was persuaded that 1-800-SKI-VAIL referred to VAIL and skiing descriptively, not as a mark for resort services, although section 1115(b)(4) and the phrase "fair, descriptive use" are never mentioned anywhere in the opinion. The majority then analyzed the evidence on the likelihood of confusion factors, and found no clear errors on any of these factors based on the evidence at trial. Presumably, this can be rationalized as determining whether the use was "fair" even if it was descriptive.

The dissent also focused on the likelihood of confusion factors, but came to the opposite conclusion. The majority, however, repeatedly chided the dissent for blowing off the "clearly erroneous" standard of review.


2d Circuit decision re whether 3rd party proposing TM to a company "used" proposed mark

This recent 2d Circuit case may be useful to companies who receive unsolicited "suggestions" from third parties about services, products, or marks.

A guy (hereinafter, the "guy") sent several credit card companies a proposal for personalized credit cards with the cardholder's picture on it. The guy proposed using the tagline "My Life, My Card" in connection with them. None of the companies accepted the guy's proposal, but around the same time, American Express's ad agency independently came up with a theme for some ads where celebrities talk about how they use their AmEx cards. The ad agency proposed using the slogan "MY LIFE. MY CARD." with the ad campaign.

When AmEx began airing the ads, a legal tussle broke out.

The Second Circuit, in American Express Co. v. Goetz, No. 06-2184-cv (2d Cir. Feb. 4, 2008), held that the guy had not "used" the slogan as a trademark. It cited McCarthy and a line of cases dealing with ad agencies whose business is to suggest ad campaigns to others. These cases hold that the ad agencies don't actually "use" the suggested marks to identify their services. Instead, they propose that others use it. Rather than a mark, it's simply the ad agencies' creative work (which may, in certain instances, be subject to copyright protection). So here, the guy was out of luck because he didn't "use" the mark to identify his own business.


Puzzling 9th Circuit Decision

Wow -- there's really been a spate of holiday season trademark decisions. Well, they do make great stocking stuffers!

The 9th Circuit today issued an especially puzzling opinion. In Applied Information Sciences Corp. v. eBay, Inc., No. 05-56123 (Dec. 28, 2007), "the district court granted eBay's motion [for summary judgment] on the ground that AIS does not have a valid, protected interest in the mark." The 9th Circuit did not mention whether eBay's motion concerned any other issues.

The 9th Circuit held that AIS did have a valid, protected interest in its mark, but then affirmed the grant of summary judgment in eBay's favor anyway "because in opposing eBay's motion for summary judgment AIS failed to produce any admissible evidence tending to show a likelihood of confusion, or even address any of the Sleekcraft factors."

So here's the confusing part:
(a) did eBay's motion also contend that there was no genuine issue of material fact on likelihood of confusion (the 9th Circuit didn't say); or

-- and this next possibility is more troubling --

(b) did eBay's motion not also contend that there was no likelihood of confusion?
If it's (b), why was AIS supposed to put in evidence that there was a likelihood of confusion if the motion concerned validity and protectibility? Is the implicit, unstated rationale based upon the sometimes-cited-but-more-often-forgotten burden-shifting under rule 56? Specifically, some cases hold that where the moving party does not bear the burden of proof, and it moves for summary judgment on less than all elements of the nonmoving party's claim, the moving party with the burden of proof is required to come forward with evidence on each element of its claim.


4th Cir.: Foreign Applicants May be Subpoenaed to Travel to the US and Testify in TTAB Proceedings

In a 2-1 decision, the 4th Circuit today held that a foreign trademark applicant with no real presence whatsoever in the US may be compelled by a subpoena under 35 U.S.C. § 24 to provide rule 30(b)(6) testimony in the E.D. Va. (because the PTO is located there). This statute empowers district courts to issue subpoenas in aid of PTO proceedings "for any witness residing or being within such district."

The majority in Rosenruist-Gestao E Servicos LDA v. Virgin Enterprises Ltd., No. 06-1588 (Dec. 27, 2007), based its ruling primarily on the ground that nothing in 35 U.S.C. § 24 limits the term "witness" to real people, and so it applies to corporations if they are the "witness." Due to a technicality in the procedural posture of the case, the majority expressly declined to reach the foreign applicant's argument that it didn't qualify as "residing or being within such district." That didn't stop the majority, however, from issuing a one-line footnote -- which it admitted was dictum -- suggesting that the mere act of applying for a registration satisfies the "residing or being within such district" requirement.

The dissent -- which I found pretty persuasive -- really took the majority to task for blowing off the PTO's interpretation (in the TBMP) of the limited reach of subpoena power in inter partes proceedings, as well as the majority's use of procedural technicalities to dodge the issue of whether the applicant, solely by virtue of applying for a registration, thereby rendered itself "residing or being within [the E.D. Va.]" The dissent also lamented that the majority ignored international comity concerns.

By the way, this case would appear fully to apply to inter partes patent proceedings too.

If the applicant has the $$, this decision would seem a likely candidate for en banc rehearing.


3d Cir. Decision re: Trade Dress and Store Brand Equivalents Products

The Third Circuit recently issued a fairly lengthy decision concerning how close the packaging of store brand equivalent products can come in mimicking brand name products.

The decision in McNeil Nutritionals, LLC v. Heartland Sweeteners, LLC, No. 07-2644 (Dec. 24, 2007) came on an appeal of an order denying McNeil Nutritionals' motion for a preliminary injunction against several store brand equivalents of SPLENDA sweetener. Although the Third Circuit's analysis is largely turned on the specific facts in the case, it did reverse-in-part as to certain of the store brands manufactured by Heartland, largely on its assessment of the prominence of the logo and name of the store itself on the package. The Court acknowledged that, "[a]rguably under our holding, store brands can 'get away' with a little more similarity than other defendants' products when they prominently display a well-known label, i.e., a store-specific signature . . . ." (Slip op. at 39.) The Court suggested, however, that this was in part a consequence of the fact that -- at least with respect to stores that use their logos prominently in the store and on other store-brand products -- consumers are familiar enough with the store logo that when they see it prominently displayed on a package that has some similarities with the national brand, they can still tell the difference. (Id.)


9th Circuit: atty's fees UNavailable in counterfeiting case where statutory damages elected!

If a prevailing plaintiff in a counterfeiting case elects statutory damages under 15 USC § 1117(c), does he qualify for attorney's fees too under § 1117(b)? Not in the 9th Circuit anymore, according to K & N Engineering, Inc. v. Bulat, No. 06-55393 (9th Cir. Dec. 18, 2007).

The court reasoned as follows: actual damages and/or defendant's profits are available under § 1117(a). Section 1117(b) says that counterfeiting plaintiffs get "three times such damages or profits, . . . together with a reasonable attorney's fee." Section 1117(c) allows the prevailing counterfeiting plaintiff to "elect . . . instead of actual damages and profits . . . , an award of statutory damages." Section 1117(c) doesn't mention attorney's fees, so attorney's fees under § 1117(b) aren't available if a plaintiff chooses statutory damages under § 1117(c). (The court didn't say whether the plaintiff could still argue it gets attorney's fees under the "exceptional case" aspect of § 1117(a).)

To me, this makes no sense. Section 1117(b) applies to counterfeiting cases. It provides for treble damages/profits AND attorney's fees. Section 1117(c) says that a plaintiff can pick statutory damages "instead of actual damages and profits under subsection (a)." It does not say "instead of actual damages and profits and attorney's fees." It doesn't explicitly purport to provide an alternative to all of subsection (b), just to "actual damages and profits under subsection (a)." Automatic attorney's fees aren't damages, aren't profits, and aren't in subsection (a). Thus, the more natural reading would seem to be that the prevailing counterfeiting plaintiff can choose between actual damages under subsection (a) or statutory damages under subsection (c), and still get automatic fees under subsection (b).

I don't know if other circuits have dealt with this issue, but the 9th Circuit certainly didn't cite any in support of this surprising result.


11th Circuit decision concerning post-sale confusion and misuse of another's TM on hidden parts

Is it infringement when a company uses someone else's trademark on an internal part that is ordinarily hidden from view?

The 11th Circuit recently rejected such a claim. In Custom Mfg. and Eng'g, Inc. v. Midway Servs., Inc., No. 05-12906 (Nov. 21, 2007), the product was a water meter reading system marketed to apartment complex owners. The defendant used the plaintiff's "Custom Manufacturing" mark on an internal circuit board for the meter. The plaintiff's mark was visible only upon removing an opaque plastic housing unit that fully enclosed the circuit board. To borrow from (and distinguish) a very familiar product, while there may in fact have been something analogous to "Intel" on the "Inside," potential buyers and users would not know that there was "Custom Manufacturing" inside without disassembling the unit.

The plaintiff argued that post-sale confusion was likely, because repair technicians or inspecting fire marshals would see the plaintiff's mark. The 11th Circuit rejected this argument, not for legal insufficiency, but for lack of proof. It held that the plaintiff had failed to proffer sufficient evidence "that it was likely that third-party technicians would view and be confused as to the origin of the circuit boards." The Court viewed as an "antecedent question" the issue of whether anyone was "likely to see the circuit boards at all."

The lesson here would appear to be that it is important, when arguing that non-external misuse of a mark is infringing, to present proof that the relevant user or purchaser group would (or did) actually see the misused trademark. Without such proof, the alleged infringement would be, as the 11th Circuit quipped, "like a proverbial tree falling in the forest" with no one around to hear it.


4th Cir. decision allowing parodies may hurt well-known marks

In a decision that could hurt owners of well-known or iconic marks, the Fourth Circuit recently handed Louis Vuitton a defeat in its attempt to stop a pet products company from selling a dog chew toy in the shape of a handbag and labeled CHEWY VUITON. The Court’s legal rationale concerned how parodies fit within the statutes that govern trademark law. Although Fourth Circuit rulings are binding only in federal courts in Maryland, Virginia, West Virginia, North Carolina, and South Carolina, this decision, if followed by other courts, could have a significant impact on the future ability of the owners of well-known marks to enforce their rights against parodic uses.

In Louis Vuitton Malletier, S.A. v. Haute Diggity Dog, LLC, No. 06-2267 (4th Cir. Nov. 13, 2007), Louis Vuitton had sued Haute Diggity Dog—which sells a number of dog toys and beds with names that spoof well-known luxury brands, including Chewnel No. 5, Dog Perignon, Sniffany, and Furcedes—for trademark infringement under the Lanham Act, 15 U.S.C. § 1114, and trademark dilution under the recently-amended Federal Trademark Dilution Act (“FTDA”), 15 U.S.C. § 1125(c).

Haute Diggity Dog asserted that its CHEWY VUITON chew toy was merely a “parody” of the LOUIS VUITTON mark, and therefore did not infringe or dilute the LOUIS VUITTON mark. The district court agreed, granting summary judgment in favor of Haute Diggity Dog, based on the observation that successful parodies must, by definition, both call to mind the object of the parody and simultaneously differentiate the parody from the object of the parody.

The Fourth Circuit largely agreed with this rationale. In its analysis, the Fourth Circuit did not regard “parody” as a per se defense to claims under the Lanham Act or the FTDA. Instead, it stated that, once a challenged use is found to be a “parody,” that finding must influence the way the court assesses the multiple “likelihood of confusion” factors commonly used under the Lanham Act and the multiple dilution factors expressly set forth in the FTDA.

To qualify as a parody under the Fourth Circuit’s test, the parodic use must satisfy three elements. It must: (1) “convey just enough of the original design to allow the consumer to appreciate the point of the parody”; (2) “communicate some articulable element of satire, ridicule, joking, or amusement”; and (3) be different enough so that it also “communicates that it is not [the original] product.”

One of the more significant aspects of the Fourth Circuit’s analysis was its remarks about how the “fame and popularity” of the original mark weighs in the legal analysis. In infringement and dilution cases not involving parodies, the “fame and popularity” of the original mark weighs in favor of a finding of infringement or dilution. But under the Fourth Circuit’s analysis, “the opposite may be true when a legitimate claim of parody is involved.”

Applying this reverse rule, the Fourth Circuit held that the “Chewy Vuiton” parodic use meant that consumers would be unlikely to be confused because they would “readily recognize” it as a parody. As to dilution, the Court similarly held that the stronger the brand owner’s mark, the “more likely that a parody will not impair the distinctiveness of the mark.”

This analysis would appear to punish a brand owner's success in promoting its mark by making the brand owner more susceptible to parodies and other attempts to capitalize on the brand owner's hard-won goodwill through impugning, mocking, or joking. That result itself may appear to represent a “parody” of the Lanham Act and, especially, the FTDA, which are designed to give broader protection to brand owners in direct proportion to their success in promoting their marks.


5th Cir. decision ordering E.D. Tex. to transfer a case under 1404(a)

Yesterday the Fifth Circuit sent a shot across the bow of the E.D. Tex. concerning its reluctance to transfer cases. Although it was a products liability case, I read it as holding implications for -- and maybe even silently directed at -- patent cases there, as well.

In re Volkswagen of Am., Inc., No. 07-40058 (5th Cir. Oct. 24, 2007) involved a Dallas (i.e., N.D. Tex.) car wreck that spawned a product liability case against VW. In an earlier unpublished panel decision, the 5th Circuit rejected a petition for mandamus to order the transfer to Dallas. On rehearing, the Court flip-flopped, and ordered transfer.

The Court went through the governing 1404(a) transfer factors pretty thoroughly. Some of the parts of the decision I thought were notable were:
• The Court said that the oft-repeated concept of the "weight given to a plaintiff's choice of forum" simply means that the movant has the burden of proof to show "good cause" for transfer, and no more than that.
• Under 1404(a), "good cause" for transfer means "when the transferee forum is clearly more convenient, a transfer should be ordered."
• A court should NOT completely discount that the documents and physical evidence are located outside the district simply because of "advances in copying technology and information storage." (Maybe the advent of "Beam me up, Scottie" technology might require future re-visiting of this notion).
• Where witnesses reside more than 100 miles from the court, the inconvenience to them increases as the distance beyond 100 miles increases.
But the biggest hint to me that the Fifth Circuit may have been thinking of patent cases too was its discussion of the citizenry of Marshall's interest in the case. The E.D. had said they had a interest in a case involving allegedly defective VWs because VWs are available in the district. The 5th Circuit said that this analysis "eviscerates" the public interest factor where the relevant events took place, and the documents and witnesses are located, outside the district. The Court then ended re-emphasizing this point:

The record indicates that the [car] was purchased from a location in the Dallas Division, and that Marshall, Texas, has no Volkswagen dealership. But again, the larger point is the one we emphasize: that a product is available within a given jurisdiction is insufficient to neutralize the legitimate local interest in adjudicating local disputes.

Since the Federal Circuit looks to regional circuit precedents in reviewing challenges to 1404(a) decisions, it would appear that this last point will perhaps be a significant factor in future venue disputes in E.D. Tex. patent cases. Arguably, it may even apply more forcefully in patent cases, where the E.D. Tex.'s interest in IP rights is more theoretical than its interest in a case involving an allegedly defective car available there.

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