Federal Circuit ruling on website-based trademark specimens

In a mundane but useful decision, the Federal Circuit recently overturned the PTO’s “bright-line rule that a trademark specimen of use taken from a website must contain a picture.”

In In re Sones, No. 2009-1140 (Fed. Cir. Dec. 23, 2009), the specimen consisted of two webpage print-outs. One was a page from a website advertising a “charity bracelet” under the asserted mark "ONE NATION UNDER GOD™." There was no picture of the bracelet on the webpage, only a placeholder icon stating “Photo not available.” This webpage appeared to allow the user to click on an “Add to Cart” icon, indicating that the item could be ordered right off the website. The applicant also provided a sample webpage order form with the bracelet in the "cart."

The test that the Federal Circuit articulated in lieu of the website-picture requirement is that the website specimen “must in some way evince that the mark is ‘associated’ with the goods and serves as an indicator of source.” The court noted that while a picture is “an important consideration,” all relevant factors should be assessed, including whether the webpage specimen has a “point of sale nature,” whether the actual or inherent features of the product are recognizable from the textual description, and the use of the “™” symbol.

While the Court rejected the PTO’s “website-picture” requirement, the Court did not approve the specimen at issue, but instead remanded for a determination whether the specimen met the newly-articulated test.

2d Circuit Federal Trademark Dilution Act decision in Starbucks v. Charbucks dispute

The Second Circuit today revived Starbucks' Federal Trademark Dilution Act (FTDA) claim against the mark CHARBUCKS, but affirmed a judgment, entered after a bench trial, dismissing Starbucks' federal infringement and New York state dilution claims.

In Starbucks Corp. v. Wolfe's Borough Coffee, Inc., No. 08-3331-cv (Dec. 3, 2009), the Second Circuit found that the district court erred in ruling against Starbucks on the FTDA claim when it held that the "similarity" factor in the FTDA claim requires that the accused mark be "substantially similar." Rather, the latest version of the FTDA (which was amended in 2005 to address the Supreme Court's interpretation of the FTDA in Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003)), contains no such requirement, providing only that the courts assess only "the degree of similarity."

The Second Circuit's opinion contained a few more interesting statements, including:

• "intent to capitalize on [the senior user's] reputation" is irrelevant to a federal infringement claim; only "intent to deceive" or "mislead" the public is relevant;
• intent to create an association is the relevant type of intent for FTDA claims;
• even if a product name sounds pejorative, that isn't necessarily a "tarnishing" use if the mark isn't marketed as a pejorative and the product is of high quality;
• Unlike the current FTDA, New York dilution law does require "substantial similarity"; and
• "Charbucks" was not a protected parody but an (unprotected) "subtle satire."
  

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.

11th Circuit decision on ACPA (i.e., cybersquatting) damages

The Eleventh Circuit recently held that statutory damages under 15 U.S.C. § 1117(d) for violations of the Anticybersquatting Consumer Protection Act (ACPA), 15 U.S.C. § 1125(d)):

1. are designed to punish cybersquatters and deter future violations; and, as such
2. may be ordered in the absence of any actual damages; and
3. are not duplicative of any actual damages awarded under 15 U.S.C. § 1117(a) for infringement or unfair competition.

The case is St. Luke’s Cataract and Laser Institute. P.A. v. Sanderson, No. 08-11848 (11th Cir. July 9, 2009).

9th Circuit TM decision: standards for preliminary injunction ordering product recall

The 9th Circuit recently decided that a preliminary injunction ordering a recall of infringing product should not be ordered based simply on a showing that the four traditional preliminary injunction factors favor an injunction. Rather, the court must in addition consider the following additional factors: (a) whether the infringement was willful or intentional; (b) whether the risk of confusion and injury to the trademark owner outweighs the burden of a recall; and (c) whether there is a substantial danger to the public due to the infringing activity.

Marlyn Nutraceuticals , Inc. v. Mucos Pharma GMBH, No 08-15101 (9th Cir. July 2, 2009), concerned competing sales of an enzyme-based dietary supplement. The district court ordered a recall based only on an assessment of the four traditional preliminary injunction factors: (1) likelihood of success; (2) irreparable harm; (3) balance of harms favoring the movant; and (4) the public interest. But the 9th Circuit held that a preliminary injunction ordering a recall goes beyond preservation of the status quo. Instead, a recall constitutes a “mandatory” injunction, which requires an additional showing. In the context of a trademark infringement case, the 9th Circuit, agreeing with a prior 3d Circuit decision, held that district courts must consider the three additional factors set forth above. In particular, the 9th Circuit noted that if “the district court makes a finding that the infringing product causes a substantial risk of danger to the public, it should order a recall.”

Interestingly, the 9th Circuit also noted that irreparable harm may be presumed from a showing of likelihood of success, a position that other courts have suggested is at odds with the Supreme Court patent injunction decision in eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).

8th Circuit: Intervening receipt of "incontestability" status defeats collateral estoppel in renewed trademark suit

The 8th Circuit recently handed down a decision holding that collateral estoppel did not bar a second trademark suit between the parties when, in between the two suits, the plaintiff received § 15 incontestability. The case concerned a unique fact situation that probably won’t pop up in any dispute we’ll ever see, but in case you’re still interested, I summarize it below.

Here’s the chronology in B & B Hardware v. Hargis Industries, Inc., No. 07-3866 (8th Cir. June 22, 2009): Plaintiff registered its mark. Defendant then petitioned the TTAB to cancel it. A short while later—and before Plaintiff’s registration qualified for incontestability status—Plaintiff sued Defendant for infringement in SUIT 1. The TTAB subsequently stayed Defendant's cancellation proceeding. A jury then found against Plaintiff in SUIT 1, expressly finding that its mark was merely descriptive and lacked secondary meaning. When the TTAB matter resumed, however, the TTAB wouldn’t let Defendant assert mere descriptiveness/lack of secondary meaning. It said it was too late to add that claim (which apparently was not one of the initial grounds for cancellation), and dismissed Defendant’s cancellation petition. Later, Plaintiff’s registration achieved incontestable status under § 15. Plaintiff then sued Defendant for infringement again in SUIT 2.

Defendant argued that collateral estoppel barred SUIT 2 because the jury in SUIT 1 previously held that the mark was merely descriptive and lacked secondary meaning. The 8th Circuit, however, disagreed. It held that the receipt of incontestability status constituted a “significant intervening factual change”—and reflected something more than just “the mere passage of time”—thus allowing PLAINTIFF to escape the clutches of collateral estoppel.

8th Circuit decision on laches and "progressive encroachment"

Did the 8th Circuit recently make “progressive encroachment” more of a formalistic, procedural headache than it had been? That’s how its decision in Champagne Louis Roederer v. J. Garcia Carrion, S.A., No. 08-2907 (8th Cir. June 24, 2009), seemed to me.

Roederer makes the famous CRISTAL high-end champagne; Carrion and its predecessor (“Carrion”) make a much cheaper Spanish sparkling wine under the marks CRISTALINO and CRISTALINO JAUME SERRA. There were plenty of times when Roederer had been aware of CRISTALINO. Roederer opposed Carrion’s attempts to register one or more of these marks in Spain in 1989, in Colombia in 1991, and in the U.S. in the mid-1990s. Roederer also saw an affidavit in another case in 1995 from which it learned that a Cost Plus store in California was stocking CRISTALINO. In 2002, Carrion filed another application for CRISTALINO in the U.S., and Roederer filed a TTAB opposition.

But Roederer didn’t file a district court action until 2006. The district court dismissed the lawsuit based on laches because it found that Roederer learned in 1995 that Carrion was selling CRISTALINO in the U.S., and by that time Carrion was selling as many bottles of CRISTALINO as Roederer was selling of CRISTAL.

The 8th Circuit reversed. It held that progressive encroachment can alter the date that a laches defense begins to run (which other courts have noted). But where the 8th Circuit seemed (at least to me) to go further was in holding that, where progressive encroachment is asserted, the date runs from the time that the trademark holder first possesses an “actionable and provable” claim. It then said that this analysis requires an assessment of all of the likelihood of confusion factors at the time that the plaintiff first received notice of the defendant’s infringing use (in this case, the court assumed that was 1995, when Roederer found out about the California Cost Plus sales). The 8th Circuit reversed and remanded because the district court hadn’t made that full assessment.

My two cents: This test just seems too formalistic. Also, it would almost necessarily seem to have the effect of unduly lengthening and complicating trials. The parties will have to prove infringement at two times: the present time, and whatever the laches date is alleged to be. I have always conceptualized progressive encroachment as focusing on a less rigid analysis. Courts would look at objective and subjective facts concerning what the infringer had been doing and how confusing and damaging that was, and then see whether there was any substantial and relatively sudden change to the nature of the use or the extent of damage, as opposed to the simple results of natural growth in the marketplace. If it was just natural growth, laches began running at the earlier date; if there was a big, sudden change, laches began running at the later date. My view, of course, could be wrong, but in any event be forewarned about how the 8th Circuit apparently now analyzes progressive encroachment allegations.

2d Circuit: Re-sale of goods whose UPC codes are removed or altered can constitute TM infringement

Similar to the 10th Circuit case I posted recently, the 2d Circuit recently issued a decision concerning whether re-sale of materially altered goods under the original trademark can constitute trademark infringement.

In Zino Davidoff SA v. CVS Corp., No. 07-2872 (June 19, 2009), the plaintiff manufactures high-end fragrances. It sells primarily through authorized dealers. Its quality control and anti-counterfeiting programs rely in large part on UPC codes in the bottom of each product. The various information embedded in the codes permits Davidoff to control quality by being able to trace back any defective product so it can implement effective recalls, etc. The unique numbering in the codes also permits Davidoff to detect counterfeit products, since counterfeiters either don’t use such codes or their replicas of the codes don’t conform to the format of the Davidoff codes.

The plaintiff caught CVS selling the products with the UPC codes removed, and sued for trademark infringement, obtaining a preliminary injunction.

The Second Circuit affirmed the injunction, holding that -- regardless of whether the goods were genuine or counterfeit, and regardless of whether the goods are of lesser quality than Davidoff’s product -- the re-sale of these goods with the Davidoff UPC code removed interfered with Davidoff’s legitimate quality control and anti-counterfeiting programs. The court also noted that the removal of the UPC codes was detectable by consumers of such luxury goods, but its decision did not appreciably rely on this ground for sustaining the injunction.

10th Circuit: Re-sale of materially-altered original goods not immunized by first sale doctrine from Lanham Act liability

The 10th Circuit recently handed down an important trademark decision concerning “first sale doctrine” and non-genuine goods. In Beltronics USA, Inc. v. Midwest Inventory Distribution, LLC, No. 07-3340 (10th Cir. April 9, 2009), the court held that:

(1) first sale doctrine does not immunize a re-seller of goods that are materially different from genuine goods from Lanham Act liability (no biggie here); and

(2) differences in warranty or service terms can constitute such a material difference (this was the important part).

Beltronics makes radar detectors. It had only two authorized distributors, but these two companies sometimes sold to other (unauthorized) companies for re-sale. The authorized distributors stripped Beltronics’ serial number from the product (or placed a phony serial number label on the product) before shipping to the unauthorized re-sellers. The unauthorized products were then sold on eBay. Beltronics’ warranty policy precludes coverage for detectors not bearing the original serial number. A few customers returned detectors bought on eBay for warranty service but Beltronics told them the goods weren’t covered. The customers were angry and blamed Beltronics for deceiving them.

In addition to the holdings mentioned above, the court noted that it was theoretically possible for such re-sellers of materially-different goods to avoid liability if they disclosed the differences in a manner sufficient to prevent confusion. But the 10th Circuit upheld the district court’s factual finding that the instances of actual confusion here (and resulting loss of goodwill) indicated that the defendants’ disclosures in this case were inadequate.

Federal Circuit Clarifies Analysis for Preliminary Injunction in Patent Cases

The Federal Circuit recently issued a precedential opinion clarifying, in two respects, the proper analysis for deciding whether to grant a preliminary injunction in patent cases.

In Titan Tire Corp. v. Case New Holland, Inc., No. 2008-1078 (Fed. Cir. June 3, 2009), the court first noted that the basic standard for issuance of a preliminary injunction in any type of case is the four-factor test set forth recently by the Supreme Court in Winter v. Natural Resource Defense Council, 129 S. Ct. 365, 374 (2008): “[a] plaintiff seeking a preliminary injunction must establish [1] that he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest.” (emphasis added). Prior to Winter, each circuit had its own variation of the test, but the Federal Circuit acknowledged that the Winter test “is now the definitive one,” and that the movant bears the burden of persuasion on these factors.
Second, the court addressed the patent-specific issue of the parties’ respective burdens concerning the invalidity at the preliminary injunction stage. In a nutshell, the Federal Circuit held:

• The trial court must weigh the available evidence for and against validity;
• If there is a “substantial question of invalidity,” then the patentee has by definition not shown that he is likely to succeed on the merits;
• A “substantial question of invalidity” exists where “the alleged infringer has presented an invalidity defense that the patentee has not shown lacks substantial merit”; and
• While the “clear and convincing evidence” standard for proving invalidity does not apply at the preliminary injunction stage, the judge should consider that the infringer must meet that standard at trial in deciding whether, at the preliminary injunction stage, a substantial question of invalidity exists.

5th Circuit: Need "Fixed" Product Design to Invoke DJ Jurisdiction in Trade Dress Dispute

On May 8, the 5th Circuit affirmed the dismissal of a declaratory judgment action concerning the trade dress of a bottom-dump truck trailer design. In Vantage Trailers, Inc. v. Beall Corp., No. 08-21039 (5th Cir. May 8, 2009), the defendant Beall owned a registered trademark for the design of its bottom-dump trailer. It learned that its rival, Vantage, had begun to manufacture and offer to sell a competing bottom-dump trailer, and so wrote Vantage a nasty letter accusing the new trailer design of trade dress infringement. Vantage sued for a declaration of noninfringement.

The 5th Circuit, however, pointed out that during the litigation Vantage had made certain modifications to the external configuration of the trailers. During this period, Vantage also sent one of its customers different depictions of the trailer. Based primarily on these facts, the 5th Circuit concluded that Vantage was thus “not immediately prepared to manufacture and sell trailers at the time it filed suit.” As a consequence, the courts entertaining the dispute would be unable to “compare [the shape of Vantage’s trailers] against that of Beall’s trailers” to determine whether trade dress infringement existed. Citing two patent DJ decisions (one from the Federal Circuit and a much older one from the 7th Circuit), the 5th Circuit held that Vantage “failed to meet its burden to show that its design was substantially fixed as to the potentially infringing elements, i.e., the appearance of the trailers, at the time of suit” (emphasis added), and therefore affirmed dismissal of the declaratory judgment action for lack of an immediate and real controversy.

The War of 1404 Continues

The Federal Circuit recently issued two precedential orders concerning transfers under 28 U.S.C. § 1404(a). Both concerned E.D. Tex. cases.

In In re Volkswagen of America, Inc., No. Misc. 897 (Fed. Cir. May 22, 2009), the court denied a writ of mandamus that sought to overturn the E.D.Tex. court's refusal to transfer two patent infringement cases (based on the same patents) brought by a Texas company against many, many auto manufacturers located around the world. In a short order, the court agreed with the district court that it made sense to try such a case in one district. Apparently the Federal Circuit viewed the E.D. Tex. as good as any other district for that purpose.

In In re Genentech Inc. and Biogen, Inc., No. Misc. 901 (Fed. Cir. May 22, 2009), however, the court granted the writ of mandamus and ordered the E.D. Tex. to transfer a patent suit brought by a German company against a San Diego company and a San Francisco company to San Francisco. In a lengthier discussion, the Federal Circuit explained that the district court made several legal errors in its convenience analysis.

A 4th Circuit Copyright Decision that Stretches Fair Use Too Far?

A.V. v. iParadigms, LLC, No. 08-1424 (4th Cir. Apr. 16, 2009) involved a company that offers an on-line anti-plagiarism service to high schools and colleges who want to make sure their students aren’t cheating.

iParadigms signs up schools for a fee. The schools then require their students to submit all their term papers through iParadigms’ “Turnitin” program. The program stores the papers and compares them to content on the Internet and with all previously-submitted papers and other materials in the database it keeps. The service then creates an “Originality Report” for the school, suggesting how much of the work, if any, is not original.

Some students challenged whether this service violated their copyrights in their papers. The decision addressed many issues, but one of the key disputes was whether iParadigms’ service fell within the fair use provisions of 17 U.S.C. § 107.

Perhaps the most controversial part of the ruling was on the first fair use factor: “the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes.” Keep in mind that iParadigms is a for-profit company that enjoys millions of dollars of revenues from “Turnitin” and that it does not alter the papers in its database in any way. So one would think that with a for-profit motive and no physical transformative use, this factor disfavors fair use, right? Wrong. The 4th Circuit held that the purpose of unauthorized copying was transformative (iParadigms’ purpose was plagiarism detection, not the creative purpose of the students) notwithstanding that it didn’t alter the documents. And this transformative “purpose” trumped the fact that iParadigms raked in beaucoup $$ from its program.

The rest of the opinion is worth reading too. See if you don’t get the impression, like I did, that this was a result-driven decision (teaching students that plagiarism is wrong is a good thing, right?).

2d Cir. decision allowing Lanham Act complaint against Google's "Adwords" program

The Google programs allow companies to “buy” keywords that may consist of competitors’ trademarks and, when an Internet user searches Google for that keyword/trademark, have Google’s search result page display an ad and a link for the purchaser’s website.

Rescuecom Corp. v. Google Inc., No. 06-4881 (2d Cir. Apr. 3, 2009) held that the district court erred in concluding that the complaint failed to state a claim because Google didn’t “use” the keyword/mark “in commerce.” Rejecting this reasoning, the Second Circuit held that the complaint alleged that Google indeed uses the mark in commerce by displaying it—and even suggesting it—to potential purchasers of advertisements through the two Google Adwords and Keywords Suggestions Tool. The fact that the Internet searcher doesn’t see the mark in a resulting ad in a later search didn’t seem to matter to the Court once the Court found that the complaint had alleged use by Google at the stage of selling their programs to advertisers.
Since it was properly alleged that Google’s programs did in fact “use” the plaintiff’s marks in commerce, and the complaint also alleged that the resulting ads were likely to cause confusion, the Court remanded the case to the district court for further proceedings.

Fed. Cir. decision involving use of prosecution history in a trademark case

Be careful what you say to the PTO in trying to register your mark. The Federal Circuit’s recent decision in Aycock Engineering, Inc. v. Airflite, Inc., No. 2008-1154 (March 30, 2009), shows how prosecution history can sometimes be as dispositive in trademark disputes as it is in patent cases.

Airflite filed a petition to cancel Aycock’s registration for AIRFLITE for the service of “arranging for individual reservations for flights on airplanes.” The key issue was whether Aycock ever “used” the mark. If not, bye-bye registration. This required construction of the meaning of the service Aycock identified in the registration.

The prosecution file showed a lot of back-and-forth between the PTO and Aycock, in the course of which Aycock made several representations about the nature of the service. These representations made clear that Aycock’s service involved putting a traveler in touch with an air charter company with empty seats to fill.

Aycock took several steps towards getting his service off the ground, including signing up several air charter companies, and argued that this showed that he “used” the mark in commerce. The TTAB and Federal Circuit disagreed. Using Aycock’s own prosecution history statements against him to construe the meaning of the identified services, the TTAB and Federal Circuit held that “use” required, in this context, that Aycock have at least tried to have signed up a traveler or two. Signing up air charter companies was merely a step towards offering the service, but didn’t constitute the service itself, which required a traveler as well as a plane. Because there was no evidence that Aycock ever actually offered the service to the traveling public, the registration was canceled.

9th Circuit decision on laches and "public interest" factor in trademark injunction case

In a 2-1 decision in Internet Specialties West, Inc. v. Milon-DiGregorio Enterprises¸ No. 07-55087 (March 17, 2009), the Ninth Circuit affirmed an injunction requiring an Internet service provider to stop using its domain name. One of the effects of the injunction was that the defendant’s 13,000 customers, who innocently used the infringing domain name as part of their individual email addresses (e.g., johndoe@infringingname.com), had to change their e-mail addresses.

The majority and dissent agreed on infringement. The fractures in the panel was mainly over laches and whether the “public interest” favored the injunction.

On laches, the issue was whether the defendant’s 6-year investment in its business—which resulted in growth from 2,000 subscribers to 13,000 subscribers—by itself was enough to show that the defendant was prejudiced by the plaintiff’s delay. The dissent thought that, under 9th Circuit precedent, this was a sufficient showing of prejudice. The majority ruled, however, that “mere expenditures in promoting the infringed name” was not enough under 9th Circuit authority: the defendant must also have developed “brand awareness” or “brand recognition” or “an identity as a business based on its mark”—which the majority thought the defendant failed to do prove.

As to the public interest aspect of the injunction, the majority and dissent disagreed on whether the inconvenience to 13,000 customers of informing all of their e-mail contacts of their new e-mail addresses outweighed the general public’s interest in not being confused.

2d Circuit decision re presumption of irreparable harm in trade secret cases

The Second Circuit appears to have made it a bit more difficult to rely upon a presumption of irreparable harm flowing from a finding of misappropriation of trade secrets.

In Faiveley Transport Malmo AB v. Wabtec Corp., No. 08-5126 (2d Cir. Mar. 9, 2009), the Court held that it is “not correct” that a “presumption of irreparable harm automatically arises upon the determination that a trade secret has been misappropriated.” Slip op. at 10-11 (emphasis added). The court stated that “[a] rebuttable presumption of irreparable harm might be warranted in cases where there is a danger that, unless enjoined, a misappropriator of trade secrets will disseminate those secrets to a wider audience or otherwise irreparably impair the value of those secrets.” Id. at 11 (emphasis added). In contrast, the court noted that damages would tend to be a complete remedy when the “misappropriator seeks only to use those secrets . . . .” Id. (emphasis added). Because there was no evidence that the defendant intended further dissemination, only use, of the trade secrets, the court vacated the preliminary injunction in the case.

4th Circuit decision invalidating OBX as trademark for bumperstickers

In an interesting decision, OBX-Stock, Inc. v. Bicast, Inc., No. 06-1769 (Feb. 27, 2009), the 4th Circuit held that the term OBX was geographically descriptive of the Outer Banks seashore in North Carolina. The court thus ruled that the plaintiff – who was the acknowledged "inventor" of the term and the first to use it on the now ubiquitous oval bumperstickers (and on other products) – could not stop others from using the term on bumperstickers.

The court based its decision primarily on the fact that, while the term was not necessarily geographically descriptive when it was coined, the plaintiff’s advertising and promotion was designed to, and did, make the term synonymous in the eyes of the public with the Outer Banks itself, and not with a particular source or brand of goods. The court also noted that copycats had gotten out of hand, and the plaintiff's policing efforts had largely failed.

In an interesting aside, the court highlighted the fact that the PTO rejected the plaintiff’s application to register the mark five (5) times before finally allowing it, and then only after intense lobbying from the North Carolina congressional delegation. The court stated that the more quickly and easily a mark is allowed, the more likely it is to be valid (i.e.¸ distinctive). Conversely, the more difficult it is to convince the PTO to allow registration, the more likely it is invalid.