Saturday, March 28, 2009

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.,, 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.