2d Cir.: Nike's broad covenant-not-to-sue for TM infringement kills jurisdiction over invalidity/cancellation DJ under MedImmune test

Nike was recently rewarded for pulling a potentially risky litigation move: trying to avoid a troublesome DJ/cancellation counterclaim by unilaterally issuing a broad covenant-not-to-sue. This move is a little like surrendering without knowing for sure if the adversary can shoot you when you raise your hands.


After filing an action alleging Yums infringed Nike’s marks for its “Air Force 1” shoes, Yums filed a counterclaim for a DJ of invalidity and a demand that Nike’s registrations be cancelled. Apparently the counterclaim gave Nike second thoughts, because it then sent Yums a covenant not to sue for footwear “based on the appearance of any [Yum’s] current and/or previous footwear product designs.” Nike then moved to dismiss: (1) its own infringement claims without prejudice under FRCP 41(a)(2) and (2) Yum’s counterclaim without prejudice for lack of a case or controversy under FRCP 12(b)(1).

The 2d Circuit affirmed the dismissal of the counterclaims for lack of a case or controversy. Applying the test under MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007), the court ignored whether Yums retained any “reasonable apprehension” of suit, and focused only on whether there remained any “real and substantial” controversy after the broad covenant was issued.

Based primarily on the breadth of the covenant (which covered all past and present Yum’s designs and any future sales of present designs) and on the lack of any evidence that Yum’s intends to infringe or counterfeit through any future design, the Second Circuit held that the basis for a DJ evaporated upon issuance of the covenant, and that the request for cancellation (under 15 U.S.C. § 1119) is merely a remedy, not an independent source of jurisdiction.

The case is Nike, Inc. v. Already, LLC d/b/a Yums, No. 11-314-cv (2d Cir. Nov. 10, 2011).

1st Circuit: Insurance Policy "Antitrust Exclusion" Also Excludes False Advertising/Labeling Claim

The First Circuit recently held that an insurer was not required to defend and indemnify its insured against claims for misleading product labeling.

Accused of deceptive trade practices, false and misleading advertising, and deceptive labeling (the court did not specify whether these were federal and/or state claims), Welch Foods sought defense and indemnity from its insurer.

The policy at issue in Welch Foods v. National Union Fire Ins. Co., No. 10-2261 (1st Cir. Oct. 24, 2011) (per curiam), which otherwise covered the claims, contained the italicized exclusion below:

Antitrust Exclusion

The Insurer shall not be liable to make any payment for Loss in connection with a Claim made against the Insured . . . alleging, arising out of, based upon or attributable to, or in any way involving, either directly or indirectly, antitrust violations, price fixing, price discriminations, unfair competition, deceptive trade practices and/or monopolies, including any actions, proceedings, claims or investigations related thereto . . . . (emphasis added)

The terms “unfair competition” and “deceptive trade practices” were undefined.

The Court rejected Welch’s argument that, because the heading (“Antitrust Exclusion”) and several of the listed violations focused on anticompetitive antitrust-type behavior, the terms “unfair competition” and “deceptive trade practices” must also refer to antitrust-type behavior—not false advertising or false labeling.

10th Circuit: infringement of patent(!) covering "promotion" or "advertising" may trigger insurance policy covering "advertising injury"

The 10th Circuit recently reinstated a company’s lawsuit to force its insurers to defend and indemnify it in a patent infringement against the company. The case serves as a reminder to insureds to read through their insurance policies carefully each time they are sued and not to reflexively assume that a patent infringement claim (or any other type of case) may not be covered.


Dish Network Corp. v. Arch Specialty Ins. Co. et al., No. 10-1445 (10th Cir. Oct. 17, 2011), involved patent infringement claims by the well-known patent plaintiff Ronald A. Katz Technology Licensing, L.P. The complaint did not mention advertising. Nor did it specify which patent claims were infringed and how. But some of the claims of the asserted patents mentioned systems and processes for advertising or promoting products.

The policies at issue provided for coverage of claims asserting “misappropriation of advertising ideas or style of doing business.” Under Colorado law, the 10th Circuit held:

(1) “when the underlying complaint alleges any facts or claims that might fall within the ambit of the policy, the insurer must tender a defense”;

(2) to avoid the duty to defend, insurers “must prove [the claim] cannot” fall within the policy;

(3) while such cases may be rare, “patent infringement can qualify as an advertising injury if the patent involves any process or invention which could reasonably be considered an “advertising idea’”;

(4) given the patent complaint’s general allegations, the insurers could not disprove that the claim did not encompass the allegation that Dish Network’s advertising infringed the patent claims that disclosed processes and systems for promoting or advertising products (i.e. “advertising ideas”);

(5) the required “causation” for the advertising injury was satisfied by the patent complaint’s typical “irreparable harm” allegation that the infringer “continues” to infringe and won’t stop “unless enjoined by this Court”; and

(6) the duty to defend an entire suit arises when “the complaint even potentially alleges conduct within the policy”—it’s not restricted to the “core complaint” or “primary grievance,” and advertising need not be the “sole cause of the alleged injury.”

9th Cir.: Apple Not Misuse Copyright by Restricting Use of MAC OS X Operating System Software to Apple computers

The 9th Circuit today held that Apple may continue to prohibit buyers (i.e., licensees) of its MAC OS X operating system software from using the system on non-Apple computers.


The ruling in Apple Inc. v. Psystar Corp., No. 10-15113 (9th Cir. Sept. 28, 2011), concerned Apple’s claim that Psystar infringed Apple’s software copyright when it (1) bought Apple software, (2) imaged it on to non-Apple computers, and (3) then sold the computers (together with a CD containing an unopened, purchased copy of the Apple software).

The court held that the purported license agreement accompanying each CD containing MAC OS X made the transaction of buying the software a valid license and not a simple sale. (If it had been a simple sale, then first sale doctrine would have ended Apple’s ability to restrict how Psystar used the software.) The agreement stated that it was a license, not a sale, and contained significant use and transfer restrictions. It therefore met the “license not sale” test of Vernor v. Autodesk, Inc., 621 F.3d 1102, 1111 (9th Cir. 2010).

Nor did the restrictions in the license amount to copyright misuse, because they “reasonably restrict[ed] use of the software” but did not “prevent the development of competing products.” The court distinguished decisions in cases where similar restrictions on which products software could be used with effectively made it impossible for users to develop competing software.

The lesson: use restrictions in software copyright licenses may be very strict indeed unless the restrictions effectively prevent users from developing competing products.

9th Cir.: Anti-cybersquatting law not cover "re-registration" (i.e., renewal) of domain name . . .

. . . as long as the initial registration was lawful. The case is GoPets Ltd. v. Hise, No. 08-56110 (9th Cir. Sept. 22, 2011).

Here’s the timeline. In 1999, defendant Hise registered the domain name gopets.com. Gopets.com is among over 1300 domain names that Hise registered in the last decade. In other words, he’s a “domain name ‘entrepreneur.’” In 2004, plaintiff GoPets started a PC game under the name GoPets, featuring virtual pets that move between the computers of registered users. Later, plaintiff began a series of unsuccessful negotiations with Hise to buy the domain name.

During the negotiations, lots transpired. Hise transferred the domain name to his company. Plaintiff registered its GoPets mark. A month later, Hise’s company “re-registered”—I am not sure why the court refused to use the word “renewed”—the domain name registration. Plaintiff filed and lost a UDRP arbitration because Hise registered before plaintiff began using GoPets. Hise then registered 17 different domain names incorporating “gopets.” Hise’s last demand to plaintiff was $5 million. Finally, plaintiff sued in court.

The 9th Circuit held that Hise’s original registration of gopets.com was lawful, because the ACPA (15 U.S.C. § 1125(d)) requires that a claimant own a “mark that is distinctive at the time of registration”—and plaintiff didn’t begin using its mark until years later. The court further held that “re-registration” (renewal) is not subject to the ACPA if the initial registration was lawful. But the court held that Hise’s subsequent registrations of the 17 “gopets” variant domain names after Hise began negotiations with plaintiff violated the ACPA.

1st Cir.: Compare infringing software with copyrighted code, not modified, non-copyrighted version

There are two critical lessons for software companies in Airframe Systems, Inc. v. L-3 Communications Corp., No. 10-2001 (1st Cir. Sept. 14, 2011):

    (1) It’s not enough to register the copyright in the original source code. When you modify it, register the modified versions too; and

    (2) retain copies of all prior versions because you never know which one you might need in an infringement case.

Plaintiff Airframe registered the original software code, then licensed defendant L-3 to use that code. As its clients changed computer systems, Airframe routinely modified its software. When L-3 upgraded its computer system, it got ahold of a newer version of the code and began using it. Airframe found out and sued.

The First Circuit noted that to prove infringement, a plaintiff has to prove both “factual copying” of the copyrighted work and “substantial similarity.” Faced with a summary judgment motion, Airframe put in an affidavit showing how similar L-3’s software was with an updated but unregistered version of the copyrighted software. (The court didn’t explain why Airframe didn’t compare the infringing code to the original, registered code.) The 1st Circuit affirmed summary judgment against Airframe, explaining that Airframe never proved the content of its registered software, so it couldn’t, as a matter of law, establish factual copying.

9th Cir.: ISPs providing servers for Louis Vuitton counterfeiters are contributory infringers

Money quote: ISPs who “physically host websites on their servers and route internet traffic to and from those websites” perform a service that “is the Internet equivalent of leasing real estate.”

The court in Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc., No. 10-15909 (Sept. 9, 2011) dealt with claims of contributory trademark infringement and contributory copyright infringement.

There were lots of holdings on both liability and damages as to contributory infringers. On the trademark liability side, the court noted that Vuitton had to show that the defendant “continued to supply its services to one who it knew or had reason to know was engaging in trademark infringement” and “had direct control and monitoring (sic) of the instrumentality used by a third party to infringe.” The ISPs were found to have “direct control over the ‘master switch’ that kept the websites online and available.”

As to the copyright claim, the court noted that Vuitton had to prove that the defendant “materially contributed” to the copyright infringement, and that “material contribution turns on whether the activity in question ‘substantially assists’ direct infringement.” The court concluded that “providing direct infringers with server space satisfies that standard.”

The court also held that statutory counterfeiting damages are available not just against direct counterfeiters, but also against those who contribute to counterfeiting. As to copyright statutory damages, the court held that “a plaintiff may receive a single statutory award for all infringements of any one copyrighted work from either (1) any one defendant, where the defendant is separately liable, or (2) multiple defendants, where those defendants are jointly and severally liable.” (emphasis added).

TTAB opinion about scope of bona fide intent to use challenges (some or all of goods?)

The TTABlog recently pointed out a precedential TTAB decision that could be read to throw doubt on the scope of any claim that the applicant/registrant lacked a bona fide intent to use the mark in connection a class of goods in which the applicant lists several specific goods. I thought it was settled that lack of BFI to use on some specific goods didn’t sink the other goods listed, but maybe it’s not settled after all.

The decision is Spirits Int’l, B.V. v. S.S. Tataris Zetin, Opp. No. 91163779 (July 6, 2011). You should read the TTABlog’s take on the decision. My own reading of the opinion – which is certainly less than clear on this point -- is that it does not create a categorical rule that lack of BFI for any good in the class knocks out the whole class. The opinion states that the lack of BFI count was pleaded as to the two classes in their entireties. The opinion also notes that there was also a more specific allegation that there was no BFI as to any alcoholic beverages listed among the non-alcoholic beverage goods in the application.  From these statements I infer that the specific allegation that there was no BFI as to alcoholic beverages was not a limitation on the scope of the claim, but simply a factual allegation that the opposer pleaded in support of its broader "whole class" claim.

At trial, the opposer introduced evidence in the form of lack of any documents as to some of the goods (the alcoholic beverages). This was sufficient to shift the burden of production the applicant, who then submitted nothing. Thus, when the applicant failed to put in any evidence whatsoever and failed to file a merits brief, the claim adjudicated was the "whole class" claim. I infer from this that if the applicant had submitted sufficient evidence of BFI as to non-alcoholic goods, then the opposition would have been only partially sustained, and only the alcoholic products would have been struck.

Still, this ruling is unclear enough that it could be argued to support a more categorical rule. An applicant in this position should certainly consider (as noted in the opinion) deleting specific goods as to which BFI is lacking or questionable so as not to endanger registration as to the other goods where BFI is provable, at least until the TTAB clarifies its position on this.

Thanks to TTABlog for highlighting the issue.

Night vision goggles don't prevent 11th Circuit from botching another trademark decision

I called out the 11th Circuit last year for faulty reasoning in a restaurant trademark dispute, and now, it appears, they’ve botched another trademark case. It was a dispute between a manufacturer of night vision goggles and its sales/distribution partner, and the issue was proof of secondary meaning.

In Knights Armament Co. v. Optical Sys. Tech. Inc., No. 09-14480 (11th Cir. Sept. 2, 2011), OTSI developed and manufactured the product to sell to the US military.  It partnered with another company (KAC) that has a lot of experience marketing to the military. OTSI came up with the trademarks UNIVERSAL NIGHT SIGHT and UNS.  KAC’s contracts with the government touted the products under these marks.  After selling a bunch of OTSI’s goggles to the military, KAC began developing a competing goggles under the marks KNIGHTSCOPE, UNIVERSAL KNIGHTSCOPE and UKS.

Finding that OTSI owned the marks UNIVERSAL NIGHT SIGHT and UNS, but that the marks were descriptive, the court attempted to determine whether the marks had developed secondary meaning. Affirming the district court’s “no” decision, the 11th Circuit said that no secondary meaning could have developed because “there was no indication [in the government contracts] that the UNS/Universal Nightsight mark belonged to OTSI, and not KAC, [so] consumers had no reason to associate OTSI’s mark with its product, and not KAC.”

It seems to me that this reasoning is at odds with the principle that, for secondary meaning to exist, consumers need not associate the mark with a specific company, but only with a single source, even if the source is anonymous. Thus, the 11th Circuit asked and answered the wrong question: whether OTSI made it clear to the military that these were its trademarks. The right question was whether the government associated the marks with a single source—any single source (even if that was the distributor, KAC). It seems like the answer here would have been “yes”—but because the court framed its analysis around the wrong question, the facts referenced in the opinion don’t permit that question to be answered with absolute certainty. But whatever the facts relevant to that question were, they would almost certainly have to viewed through the lens of the principle that, as between a distributor of a product (a licensee) and the manufacturer (the licensor), the manufacturer owns the rights in the mark it selected.

I wonder if the parties properly briefed this issue.  Trademark law can get pretty arcane, and if a party's lawyers aren't very familiar with it, issues can be missed, courts can be led astray, and decisions can be framed incorrectly.  In patent cases, clients and general litigators generally know to call in specialists.  In trademark cases, not so much.

Patsy's Italian Restaurant: The most complicated trademark litigation in history?

Patsy's Italian Restaurant, Inc. v. Banas, No. 08-4487 (2d Cir. Aug. 24, 2011).

There is no way I can boil this decision down to two paragraphs.  Or even five.  Nor can I find even one significant legal lesson from it.  It's a really factually-complicated, fact-driven decision.  Read it at your own risk.

Three thoughts occur to me after trying to read it:  (1) how is it that restaurants, more than any other type of business, seems to get into these unbelievably messy fractured ownership disputes?; (2) this is yet another case that leaves me jealously wondering how to get clients this litigious!; and (3) why are these people fighting over New York pizza trademarks, anyway?  Far better (indeed, the best) pizza comes from New Haven -- where it is spelled "apizza" and pronounced "ah-beetz."   New York pizza isn't even worth a cease-and-desist letter. 

9th Cir. overturns another copyright injunction because eBay nixes presumption of irreparable harm

Putting an exclamation point on a recent panel ruling that eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) overrules prior 9th Circuit precedents that a showing of likely success on the merits of a copyright infringement claim gave rise to a presumption of irreparable harm, the 9th Circuit again so held today, vacating a preliminary injunction in another copyright case.  See Flexible Lifeline Sys., Inc. v. Precision Lift, Inc., No. 10-35987 (9th Cir. Aug. 22, 2011).

2d Cir. opinion on disgorgement remedy in FTC false advertising actions

The Second Circuit recently decided that a provision of the Federal Trade Commission (FTC) Act that authorizes district courts to issue injunctions implicitly authorizes the courts to order full disgorgement of all revenues (not merely profits) from the illegal conduct issue as “equitable ancillary relief”—a/k/a “equitable cleanup doctrine.”

I found this interesting for at least three reasons:

(1) The empowering statute (15 U.S.C. § 53(b)) says nothing whatsoever about monetary relief. In pertinent part, it provides: “[I]n proper cases the [FTC] may seek, and after proper proof, the court may issue, a permanent injunction.”

(2) The court said that this statute authorized disgorgement of all ill-gotten revenues, not just profits. Thus, any attempt by a defendant to subtract expenses or costs, or to show its efforts lost money, are immaterial. All the defendant is permitted to do is show that the FTC’s figures for revenue were inaccurate. In contrast, in trademark cases under the Lanham Act, only profits are subject to disgorgement, and a defendant may introduce evidence of costs and expenses incurred in the subject activity.

(3) The Second Circuit is not the first appeals court to hold (1) and (2). The 5th, 7th, 8th, 9th, 10th, and 11th Circuits agree that this section of the FTC Act authorizes disgorgement. And the 1st, 7th, and 10th Circuits agree it’s disgorgement of revenues, not just profits.

Although those of you more familiar with FTC practice may not find these concepts surprising, I had not previously been aware of the existence and sweeping nature of the implicit disgorgement remedy in FTC cases.

The case is FTC v. Bronson Partners, LLC, No. 10-0878 (2d Cir. Aug. 19, 2011).

9th Circuit withdraws controversial Betty Boop decision, decides to remand case on narrower grounds; trademark licensing programs are safe once again

Back in February, I reported with alarm that the 9th Circuit rejected a trademark infringement claim by the purported owners of the BETTY BOOP cartoon character, issuing an opinion resting on an interpretation of aesthetic functionality doctrine that was so broad that it posed a substantial threat to the ability of pro sports, college, and character licensing companies to stop counterfeiters on the entire West Coast.

On rehearing, and after receiving amicus briefs from INTA, the Motion Picture Association of America, and the companies that license all major pro sports and collegiate trademarks, the Ninth Circuit withdrew the opinion, and substituted a ruling based on narrower grounds that eliminates the commercial and enforcement problems of the original opinion.

The case is now remanded to district court to determine whether the plaintiff can prove secondary meaning in light of the "fractured ownership" of Betty Boop rights among possibly several companies.

UPDATE:  Many people I've talked to about the case have asked whether, procedurally, this was an unusual step for the court to take.  Yes and no.  Frequently losing parties ask for rehearings based on things they think the appeals court overlooked or got wrong.  In most cases, the court can address the substance of the rehearing petition by adding a paragraph or a footnote, or making some minor changes to, the opinion.  On that basis, they'll deny the rehearing and simply substitute a new opinion containing those minor changes.  While the court used this procedure here, the changes it made were major, and that, in my experience, is unusual.

The prior opinion went astray when the appeals court decided the trademark claim on a basis no party raised or briefed.  While an appeals court can affirm a case on any basis supported by the record (i.e., not necessarily the basis on which the district court decided the case), appeals courts typically do so only when the appellee actually BRIEFS those other possible bases, and the appellant has an opportunity to reply.  It circumvents the adversarial process when the appeals court affirms on a merits-related basis that neither party ever raised.  In the superseding opinion, the 9th Circuit panel completely fails to acknowledge both its mistake in deciding the case on a merits-related basis neither party raised or addressed and the fact that it got the law wrong on that unbriefed issue (probably because it was embarrassed).  It would have been gutsier to acknowledge its errors.

8th Cir: Registered mark "300-850" for credit rating services invalid for descriptiveness and fraud on PTO

The 8th Circuit today upheld a jury verdict that the registered mark “300-850,” owned by FICO (a credit assessment service provider), was invalid because it was descriptive. (The court didn't say what listed goods and services were, but the PTO website reveals it's "Credit scoring services and credit risk management and risk management services". ) The court found that consumers perceived the mark to convey a range of credit scores, rather than as an indicator of source.

The court also upheld the jury’s verdict that FICO committed fraud on the PTO in obtaining registration of the mark. Specifically, FICO responded to a initial descriptiveness refusal by providing a literally true but “artful” response tricked the Examining Attorney into thinking that FICO, and FICO alone, used the phrase as a mark, when in fact FICO simply used it as a range of credit scores, as did others.

The case is Fair Isaac Corp. v. Experian Information Solutions, Inc., No. 10-2281 (8th Cir. Aug. 17, 2011).*


* The opinion also upholds the dismissal of FICO's antitrust claim against the three credit bureau defendants.

2d Cir: Copyright “first sale doctrine” applies only to U.S.-manufactured works

Last year in Omega S.A. v. Costco Wholesale Corp., the Supreme Court was set to decide whether the 9th Circuit correctly held that “first sale doctrine” under 17 U.S.C.§ 109(a)—which applies to copies “lawfully made under this title”—does not apply to items manufactured outside the United States unless they were previously imported and sold in the U.S. with the copyright owner’s permission. But dividing 4-4, it was able only to issue a non-precedential affirmance.

Today, a 2-1 majority of the 2d Circuit in John Wiley & Sons, Inc. v. Kirtsaeng, No. 09-4896 (Aug. 15, 2011), went a bit further than the 9th Circuit, holding that the § 109(a) defense applies, without conditions, only to domestically-manufactured works. The court believed that this reading comports better with a copyright holder’s right under § 602(a)(1) to prohibit the importation into the U.S. of copyrighted works acquired abroad. In other words, applying § 109(a) to works manufactured abroad would render § 602(a)(1) impotent in the majority of cases.

5th Cir. decides SHOE SHOW not “substantially similar” to THE SHOE DEPT.

This was a contract case—not a dispute under the Lanham Act. A mall leased space for a shoe retailer called THE SHOE DEPT. The retailer also operated shoe stores elsewhere called SHOE SHOW and BURLINGTON SHOES. The contract said the retailer couldn’t open a store with a “substantially similar trade-name” nearby. When the retailer opened a SHOE SHOW nearby, the mall said nothing, until much later when the retailer tried to get out of the lease. Then the mall complained about the nearby SHOE SHOW.

Ostensibly under Ohio law, but borrowing from a few trademark precedents, the 5th Circuit found that SHOE SHOW is not “substantially similar” to THE SHOW DEPT. The given reason was that “shoe” is generic or descriptive, and so doesn’t count in the comparison, and “show” is not substantially similar” to “dept.” The court made quite clear that it thought the mall was being opportunistic: that it knew darn well that the retailer operated SHOE SHOWs also; that it could have, but didn’t, contract for a prohibition against nearby SHOE SHOWs; and that it was seizing on the fudgy nature of the term “substantially similar” to try to gain advantage in the lease dispute.

(NB – I wonder if, under Ohio law, an acquiescence defense could have been interposed. Seems this would have more directly addressed the court’s concern with opportunism.)

The case is Almeda Mall, L.P. v. Shoe Show, Inc., No. 10-20587 (5th Cir. Aug. 8, 2011)

7th Cir. flip-flops on whether district court challenge of TTAB cancellation waives state sovereign immunity

Several months ago, I reported on a 7th Circuit decision that a state did not waive sovereign immunity by challenging a TTAB cancellation through a de novo action in federal district court rather than a straight appeal to the Federal Circuit. Well, on rehearing, the 7th Circuit has now changed its mind. Citing the procedural advantages of a de novo district court action over a straight Federal Circuit appeal, the 7th Circuit held that it would be unfair to allow a state to choose an advantageous federal forum and later be able to claim sovereign immunity if the adverse party asserted counterclaims against it.

Board of Regents of the Univ. of Wisc. Sys. v. Phoenix Int’l Software, Inc., No. 08-4164 (7th Cir. Aug. 5, 2011).

3d Cir.: HAVANA CLUB brand not falsely imply made in Cuba where label clearly says "Puerto Rican Rum"

In yet another long-running, multi-forum dispute (where do I go to get such litigious clients??), the 3d Circuit held that the brand name HAVANA CLUB appearing on a label for rum did not, as a matter of law, imply to ordinary consumers that the rum was made in Cuba or sourced from Cuban ingredients.

In Pernod Ricard USA, LLC v. Bacardi U.S.A., Inc., No. 10-2354 (3d Cir. Aug. 4, 2011), the district court rejected the plaintiff’s false advertising claim under the Lanham Act as a matter of law, holding that plaintiff’s survey, which concluded that 18% of respondents were misled, was immaterial because the label also “clearly and truthfully” stated that the rum was from Puerto Rico. The 3d Cir agreed, holding that in “rare” occasions like this case the words in a challenged ad, read as a whole, are so clear that a court can ignore surveys to the contrary and dismiss a false advertising case as a matter of law.

9th Cir.: After eBay v. MercExchange, Perfect 10 not entitled to presumption of irreparable harm for Google copyright infringement

In the latest installment of the long-running litigation between Perfect 10 and Google over Perfect 10's copyrighted model images, the 9th Circuit affirmed the denial of a preliminary injunction against Google because Perfect 10 failed to demonstrate irreparable harm.

The 9th Circuit first ruled that the Supreme Court's decision in eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) -- a patent case in which the Court held a general or categorical rule favoring or disfavoring injunctions -- was not limited to patent cases. Following the lead of the 2d Circuit in Salinger v. Colting, 607 F.3d 68 (2d Cir. 2010) (which I previously noted here) the 9th Circuit held that eBay also applies to cases under the Copyright Act. In so doing, the 9th Circuit overruled its pre-eBay precedents consistently holding that a showing of likely success on the merits of a copyright infringement claim gave rise to a presumption of irreparable harm.

The 9th Circuit then affirmed the district court's finding that Perfect 10 failed to show that Google's infringement had caused irreparable harm.  The Court held that the post-eBay causation requirement was not satisfied simply by a documented and dramatic decline in Perfect 10's revenues from fees to download photos of its models as the number of free Google thumbnail images increased.

The decision is Perfect 10, Inc. v. Google, Inc., No. 10-56316 (9th Cir. Aug. 3, 2011).

7th Circuit: Raised quilting pattern on toilet paper functional; trademark protection denied

In an entertaining opinion peppered with puns, the 7th Circuit affirmed the dismissal of Georgia-Pacific’s claims that the raised quilting patterns on Kimberly-Clark’s Cottonette brand of toilet paper infringed Georgia-Pacific’s alleged trademark rights in the raised quilting pattern of its Quilted Northern brand. The appeals court agreed with the district court that Georgia-Pacific utility patents and advertising touted the utilitarian benefits of the raised quilting pattern. The court was unpersuaded that the existence of design patents on the quilting pattern undercut what it viewed as clear statements in G-P’s utility patents about the utilitarian benefits of the quilting.


The case is Georgia-Pacific Consumer Prods. LP v. Kimberly-Clark Corp., No. 10-3519 (7th Cir. July 28, 2011).

9th Cir.: Keyword ads misleading; “splash screen” portal with bold disclaimer conditionally approved

TrafficSchool.com, Inc. v. Edriver Inc., No. 08-56518 (9th Cir. July 28, 2011), involved the folks who own DMV.org (and also display several “[state].dmv.org” domains that resolve to DMV.org) – a website that is designed to assist people in renewing licenses, buying car insurance, registering vehicles, drivers’ ed classes, dealing with traffic tickets, and other car-related issues. Competitors complained that DMV.org’s domain names, which were prominently displayed in sponsored ads when Google users searched for certain government/vehicle related terms, fooled users into thinking that DMV.org was a state entity and clicking on the links. The plaintiffs alleged that they lost revenues, such as click-through referral fees, because of the deception and sued under the false advertising provisions of the Lanham Act.

The 9th Circuit affirmed standing primarily because the parties competed for click-through referral revenues with overlapping service providers and because lots of people were tricked into thinking DMV.org was a government entity. The 9th Circuit also affirmed conditionally approved the district court’s injunction requiring a “splash screen” that immediately appeared when users clicked on DMV.org’s sponsored ads, and which clearly warned that DMV.org was not a government website.  The 9th Circuit thought that requiring the splash screen in perpetuity implicated First Amendment commercial speech concerns.  It therefore remanded so that the district court could either (a) explain what conditions the defendant needed to fulfill to have the splash screen requirement lifted or, in the alternative, (b) simply enjoin the defendants from making false or misleading statements on their website.

As to money, the 9th Circuit refused to award profits because the plaintiffs produced no evidence of past monetary injury or causation. But the court remanded for a determination whether the plaintiffs should get attorneys’ fees, primarily because the court viewed the plaintiffs as having paid a lot of money to ameliorate a concrete harm to the public caused by DMV.org’s deceptive practices.

(NB:  subsequent corrections to initial post made by strikethrough and underlining, except in the title, where Blogger doesn't permit strikethrough and underlining.)

7th Circuit: Decisions on Assignability of TM License; Originality of Architectural Plans

In In re XMH Corp., No. 10-2596 (7th Cir. July 26, 2011), an appeal of a bankruptcy court decision, Judge Posner held that the debtor could not assign an allegedly executory trademark license because the agreement was silent on assignability and trademark law’s default rule is that “trademark licenses are not assignable in the absence of a clause expressly authorizing assignment.”


In the architectural copyright case, the panel held that the architect failed to demonstrate that its designs were original (and therefore protectable) where they were based “for the most part” on its hotel-chain client’s prototype, and the few differences were “specifically requested by [the client] through written requests accompanied by graphic designs.” The case was Nova Design Build, Inc. v. Grace Hotels, LLC, No. 10-1738 (7th Cir. July 26, 2011).

Opinion styles and public perception of judicial legitimacy

Here’s a link to an interesting psychological research paper on people’s perceptions of the legitimacy of judicial decisionmaking. It has two basic conclusions. First, and not surprisingly, people tend to view decisions resulting in outcomes they agree with as more legitimate. And they don’t care as much about the reasoning when they agree with the outcome.


But the second finding has significant implications for how judicial decisions are written. The study assessed people’s views of the legitimacy of 4 kinds of written decisions: (1) a simple “party X wins” decision; (2) a decision giving one short reason why party X wins; (3) a decision listing several reasons favoring the victor, party X; and (4) a decision fairly setting forth each side’s arguments, acknowledging the difficulty of the issues presented, and then choosing party X as the victor because its arguments were, on balance, more persuasive.

In my 20 years of practice, I’ve seen several type (1) and type (3) decisions. I’ve seen fewer type (2) decisions, and fewer still examples of the most “legitimate” type (4) decisions. In fact, in the most significant (to me) appellate decision rendered in one of my cases, I very unsatisfactorily lost in a type (3) decision.

But this study – which concludes that further research is needed – certainly indicates that the judiciary could enhance its governmental legitimacy in the public’s eyes by issuing opinions that acknowledge both sides of an argument (where appropriate).

(HT to How Appealing for noticing the article)

UPDATE (8/5/2011):  Recently received a district court order denying a complicated 12(b)(1) motion I wrote concerning whether a DJ action actually raised a justiciable case or controversy.  It raised very subtle arguments.  The court basically ignored the complexities presented, significantly oversimplified our arguments, and wrote the opinion as if it were an easy decision (kind of like the appellate decision I referenced above -- a variation on the type (3) decision).  Nothing is more frustrating.  Rule against me?  Fine, I have no problem with that.  But at least accurately characterize my arguments and explain why you disagree.  Really, lawyers can handle an honest loss.       

8th Circuit Tom & Jerry, Wizard of Oz copyright decision

In an interesting decision, the 8th Circuit today largely upheld an injunction against AVELA (yes, the folks from the infamous Betty Boop case I previously blogged and wrote about) prohibiting it from selling certain items bearing reproductions of Tom & Jerry and characters from the Wizard of Oz. 

In Warner Bros. Entertainment, Inc. v. X One X Productions, No. 10-1743 (8th Cir. July 5, 2011), the films featuring these characters were copyrighted, but certain pre-film publicity photos and drawings of the characters were not.  The issue was whether, and to what extent, the public domain status of the pre-film publicity photographs and drawings of the characters immunized AVELA from reproducing both exact duplicates and tweaked reproductions.  The court's analysis focused on whether the tweaked aspects of the AVELA reproductions were derived from aspects of the characters developed in the films themselves.

11th Circuit adopts "joint endeavors" test to determine who owns trademark rights where ownership is unclear

What should a court do to determine who owns a trademark where it is unclear who or which of two or more claimants owns it? In a case involving a dispute whether a music group’s members or its manager owns trademark rights in the group’s name, the 11th Circuit yesterday held that in “joint endeavors” such as this, courts should: (1) first identify what “qualities or characteristics” for which the group is known; and (2) figure out who actually controls those qualities or characteristics.

In Crystal Entertainment & Filmworks, Inc. v. Jurado, No. 10-11837 (11th Cir. June 21, 2011), the plaintiff management company’s predecessor came up with the band’s name, hired the original band’s members, songwriter, and producer, and arranged for the original band’s performances. After a few fruitless years, however, new band members in 1986 replaced the original members. Despite the new members’ having signed two license agreements in the 2000s acknowledging the management company’s ownership of the mark, the district court found that the management company could not prove that it had exercised control over the new members or taken any role in scheduling their performances. The 11th Circuit did not find these findings to be clearly erroneous. Under the “joint endeavors” test, the court held that the replacement band members therefore controlled the qualities and characteristics for which the band is known by the public.

2d Cir. broadens copyright preemption as to state law “misappropriation of hot news” claims

Barclays Capital Inc. v. Theflyonthewall.com, Inc., No. 10-1372 (2d Cir. June 20, 2011), involved allegations that the uncovering and dissemination of financial firms’ daily securities trading recommendations constituted copyright infringement and the New York common law tort of misappropriation of “hot news.” Such a misappropriation claim was first accepted in the days of federal common law in Int’l News Serv. v. Associated Press, 248 U.S. 215 (1918) (“INS”), but really hasn’t gotten much traction since.

The defendant conceded copyright infringement. The only question on appeal was whether the misappropriation claim was preempted.

The panel majority’s decision turned on whether a five-part test set forth in a prior “hot news” case, NBA v. Motorola, Inc., 105 F.3d 841 (2d Cir. 1997), was dictum. In NBA, the Second Circuit held that the NBA’s misappropriation claim was preempted, but suggested that an INS-type misappropriation claim could survive preemption if it required an “extra element” beyond those required for copyright infringement. The NBA court posited a five-part test that it believed would characterize a non-preempted claim possessing such an extra element.

The panel majority characterized the NBA court’s five-part test as dictum. Instead, the panel majority compared the misappropriation claim itself to that involved in NBA and determined that they were alike in that (1) the plaintiffs in both cases “created” the news (as opposed to simply reporting it) and (2) defendants in both cases gave proper attribution to the respective plaintiffs for the news. The court contrasted this with the facts in the INS case, where the plaintiff was a news reporting service, not the “creator” of the news itself, and the defendant had taken credit for the report it obtained from the plaintiff. Since the plaintiffs’ claims in NBA and Barclays were alike in these respects (and unlike INS), the panel majority held that, like the claim in NBA, the plaintiffs’ misappropriation claims were similarly preempted.

The concurring judge would not have rejected the NBA court’s five-part test as dictum, but instead would have found preemption due to the failure of the plaintiffs to demonstrate one of the five parts of the NBA test (direct competition between the parties).

D.C. Cir.: Licensee estoppel prevents licensee from arguing ownership due to naked licensing

In a decision involving unique circumstances, the D.C. Circuit held today that a licensee was precluded by licensee estoppel from arguing that the licensor abandoned the licensed mark by engaging in “naked licensing.” The licensee argued, unsuccessfully, that licensee estoppel shouldn’t preclude it from asserting that it owned the mark because it was undisputed that:

• The licensor ceased monitoring the licensee in 1991;
• The licensor went bankrupt in 1991, and, a few years after the bankruptcy was converted to Chapter 7 in 1993, the licensor’s former owners misappropriated the mark (from the trustee) and re-started the essentially the same business under the mark;
• The bankruptcy court then entered an order enjoining the licensor’s former owners from continuing to use the mark; and
• Business associates of the licensor’s former owners later purchased the marks from the trustee.

Although it’s hard to draw categorical conclusions from such a unique case, it’s at least safe to say that, if a licensee can’t assert ownership/abandonment in these circumstances, licensee estoppel is pretty robust in the D.C. Circuit.

The case is John C. Flood of Va., Inc. v. John C. Flood, Inc., No. 10-7098 (D.C. Cir. June 17, 2011)

3d Circuit: Removal of NON-DIGITAL author info violates DIGITAL Millennium Copyright Act

Peter Murphy photographed two of New Jersey’s radio “shock jocks” for a NJ magazine. In the magazine, Murphy was identified, in the margin of the photo, as the photographer. The radio station that employed the jocks scanned the image, deleted Murphy’s name from the margin, and posted the photo on their website for a promotion.

Murphy sued for violation of §§ 1202(b) & (c) of the Digital Millennium Copyright Act. Section 1202(b) prohibits removal of “copyright management information,” and § 1202(c) defines “copyright management information” as “information conveyed in connection with copies . . . of a work . . . , including in digital form . . . the name of the author . . . .”

The 3d Circuit rejected the station’s argument that § 1201 of the Act—which mentions circumvention of “technological measures”—limits § 1202’s coverage to some sort of automated copyright management system. Instead, the 3d Circuit said that §§ 1202(b) & (c) include automated technological measures, but don’t require that the removed or altered copyright management information be digital or automated.

The court also rejected a weak fair use argument.

The case is Murphy v. Millennium Radio Group LLC, No. 10-2163 (3d Cir. June 14, 2011).

Puzzling (to me) 7th Circuit Cypress Hill copyright decision

In Johnson v. Cypress Hill, No. 08-3810 (7th Cir. June 1, 2011), the 7th Circuit affirmed summary judgment against a plaintiff who claimed that the hip-hop group Cypress Hill infringed his alleged copyright in a 1969 sound recording. Because it’s a 1969 (i.e., pre-1972) sound recording, however, the plaintiff could not have had a copyright in it under 17 USC § 301(c).

After getting poured out on summary judgment, the plaintiff (among other arguments) asked the district court and then the 7th Circuit to rule that the dismissal was not on the merits but rather due to lack of subject matter jurisdiction (because he possessed no copyright). The Seventh Circuit refused, holding that Reed Elsevier, Inc. v. Muchnick, 130 S. Ct. 1237 (2010) “foreclosed” that argument.

But I thought Reed Elsevier held only that lack of a copyright registration was not a jurisdictional requirement. In the Cypress Hill case, by contrast, the issue isn’t whether a copyright was registered, but whether any copyright exists at all. How does Reed Elsevier foreclose the argument that where no copyright exists at all there is no subject matter jurisdiction under the Copyright Act?

Any thoughts?

1st Cir. TM injunction case: eBay 4-factor test generally applies, but acquiescence and delay dispositive

In a fact-specific decision, the First Circuit recently held that eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006)—which confirmed that the traditional 4-factor injunction test applies to patent cases—also applies to trademark cases. But the circuit court declined to rule specifically whether eBay eliminates the familiar “presumption of irreparable harm” that automatically flows from a showing of trademark infringement.

The basis the court used to sidestep this precise issue was that the record showed that any such presumption was overcome by the movant’s delay and acquiescence. The court also touched on progressive encroachment without actually calling it that, rejecting the movant’s progressive encroachment argument by holding that the nonmovant’s recent changes were “not sufficiently qualitatively different” from the harm flowing from the prior infringement.

The case is Voice of the Arab World, Inc. v. MDTV Med. News Now, Inc., No. 10-1396 (1st Cir. May 27, 2011).

3d Circuit: For waiver of privilege, timing makes a difference

If a third party is present during an otherwise privileged communication, the privilege is waived, right? Not exactly, said the Third Circuit today. If a third party is present when the privileged communication is made, the privilege doesn’t attach at all. That’s different from a true waiver situation where a communication that is privileged when made is later disclosed to a third party.

This distinction makes a practical difference when the party asserting waiver wants to see documents beyond the initial communication(s) via a “scope of waiver” argument. If the initial communication(s) was not privileged when made, then there could be no waiver and consequently no opportunity to seek other privileged communications on the subject via a “scope of waiver” argument. The party asserting waiver gets only the initial communication(s).

The case is In re Application of Chevron Corp., No. 10-4699 (3d Cir. May 25, 2011), and the initial communications at issue were made in the presence of filmmakers who were—at the behest of the plaintiffs’ lawyers—shooting a movie of a notorious Ecuadorian environmental case against Chevron (while the case was going on).

2d Cir. decision about injunction bonds, attorneys' fees, and the presumption of recovery

The Second Circuit today decided that a wrongfully enjoined party (1) is entitled to a “rebuttable presumption in favor of recovery . . . for provable damages” against a FRCP 65(c) injunction bond; and (2) such damages may include attorneys’ fees if they were fees that were “incurred in complying with the injunction.” (emphasis added).

As to the “presumption,” the Second Circuit indicated that the presumption attaches only after “the wrongfully enjoined party . . . first demonstrate[s] that the damages sought were proximately caused by the wrongful injunction” and “properly substantiate[s] the damages sought.” (This doesn’t seem to me to be much of a presumption, since it sounds a lot like what any injured party in any case needs to prove to obtain damages.)

The case is Nokia Corp. v. InterDigital, Inc., No. 10-1358 (2d Cir. May 23, 2011).

For those interested, the injunction—which was later vacated and therefore “wrongful”—required InterDigital to stay or terminate its ITC proceeding against Nokia and another company as to Nokia, based on an alleged arbitration agreement between InterDigital and Nokia. So instead of one ITC proceeding, InterDigital for a while had to arbitrate against Nokia while it litigated an ITC proceeding against the other company. InterDigital later claimed that it incurred substantial attorneys’ fees staying the ITC proceeding as to Nokia and having to incur duplicative fees and expenses litigating its claims against Nokia and the other company in two different forums.

3d Cir: Copyright Act permits prejudgment interest in disgorgement of profits cases

Prejudgment interest is normally associated with making an injured party whole by providing interest on monetary awards for past damages. In William A. Graham Co. v. Haughey, No. 10-2762 (3d Cir. May 16, 2011), the Third Circuit permitted prejudgment interest to be added to an award of the infringer’s profits as well, even where no damages were sought. The Court noted that: (1) nothing in the Copyright Act prohibits prejudgment interest on a disgorgement award; and (2) prejudgment interest and disgorgement serve the same interests (making the claimant whole and preventing unjust enrichment).

7th Circuit/Judge Easterbrook trademark decision on quality control/naked licensing/abandonment

Eva's Bridal Ltd. v. Halanick Enterprises, Inc., No. 10-2863 (7th Cir. May 10, 2011) contains a short but interesting discussion by Judge Easterbrook about the proper way to look at "quality control." The mark owner trusted the licensee and felt confident he was maintaining high standards, but the agreement between the parties contained no quality control provisions whatsoever and the owner took no steps to monitor the good and services or how the mark was used. Judge Easterbrook said that quality control doesn't mean feeling confident that the licensee is maintaining high quality. Rather, it's about the owner taking steps to insure that the quality is consistent and predictable.

The court affirmed the finding of abandonment through naked licensing.

9th Circuit (en banc): Copyright Act not preempt California implied contract claim based on submission of "idea" for TV show

The en banc 9th Circuit today held that copyright law doesn’t preempt a writer’s “implied contract” claim under California law that he submitted materials containing an idea for a TV show to a studio or producers with the understanding that he'd be compensated by receiving a share of the profits if the studio or producers use the idea.

The dissent argued that there’s a difference between state law claims that the writer: (a) sold the idea/concept with the implied understanding he’d be compensated (dissent says not preempted because it’s a classic implied contract); and (b) presented the idea with the implied understanding that he was retaining control over the idea unless the studio used it, in which case he’d be compensated (dissent says preempted because the writer is retaining control, which is closer to what copyright law protects). The dissent thought this writer’s claim was closer to (b).

The case is Montz v. Pilgrim Films & Television, Inc., No. 08-56954 (9th Cir. May 4, 2011) (en banc).

9th Circuit decision on "exceeds authorized access" in criminal Computer Fraud and Abuse Act case

Yesterday the 9th Circuit (in a 2-1 decision) held that a criminal defendant "exceeded authorized access," as set forth in the Computer Fraud and Abuse Act, 18 U.S.C. 1030 et seq., when he or she "violates the employer's computer access restrictions--including use restrictions." Does that sound pretty broad to you? Sounds that way to me.

And it sounds that way to others, too. If you ever "Google" anything at work, I commend this blog post in The Volokh Conspiracy (a blog run by a group of (mostly) libertarian law professors) on this recent 9th Circuit decision (United States v. Nosal, No. 10-10038, (Apr. 28, 2011)). It has been my experience almost every civil action for trade secret misappropriation in the last ten years (and lots of other IP and employment cases) potentially implicate the CFAA one way or another, and this is yet another decision -- others are discussed in the opinion -- that shows just how broadly the criminal provisions of the Act can be read.

4th Circuit Applies eBay v. MercExchange Injunction Standard to False Advertising Case

Yesterday the 4th Circuit affirmed a $13.5 million jury verdict and a permanent injunction against Mead Johnson for false advertising about a competitor’s infant formula. In so doing, the court in PBM Prod., LLC v. Mead Johnson & Co., No. 10-1421 (4th Cir. Apr. 20, 2011), applied the injunction standard set forth in the Supreme Court’s patent law decision in eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), and held that PBM had introduced sufficient evidence of irreparable harm. The court pointed “primarily” to survey evidence that Mead Johnson’s statements actually misled survey participants. Secondarily, the court noted that damage to “goodwill” and “reputation” also support a finding of irreparable harm. (Of course, this latter basis seems to comes pretty close to the sort of presumption or universal rule rejected by the eBay court.)

The 4th Circuit also held that evidence that a false advertising plaintiff had previously sued the defendant for false advertising is relevant to the defendant’s “intent in making its misleading claims” in the later case, which in turn could relieve the plaintiff of the burden of showing that the defendant’s impliedly misleading claims actually confused people.

5th Circuit: combination of things in public domain COULD be a trade secret if combination is secret

In Tewari De-Ox Sys., Inc. v. Mountain States/Rosen, L.L.C., No. 10-50137 (5th Cir. Apr. 5, 2011), the Fifth Circuit reversed summary judgment for the defendant in a trade secret case under Texas law. The district court had held that the plaintiff could not prove that its alleged packaging process -- designed to retard meat spoilage -- was a secret, because the various steps or components of the process were either previously disclosed in plaintiff's prior patent application or in the public domain. Reversing, the Fifth Circuit held that disclosure of all the components of a process does not necessarily preclude trade secret status IF the alleged combination of the components is both unique and a secret. The Court discussed other issues, too, but this was the most important bit.

D.C. Circuit holds that 1998 law bars renewal of Cuba-owned trademarks

Yesterday the D.C. Circuit, in a 2-1 decision, ruled that the Cuban government-owned company Cubaexport could not renew its HAVANA CLUB trademark for rum. In Empresa Cubano Exportadora de Alimentos y Productos Varios v. United States Dep't of Treasury, No. 09-5196 (D.C. Cir. Mar. 29, 2011), the majority held that a provision in a 1998 appropriations act which prohibited transactions or payments to the PTO under 31 CFR § 515.527 (which at the time referred to registrations and renewals as “transactions”), was not impermissibly retroactive as to Cubaexport. Noting that a “vested right” was required to invoke the presumption against retroactivity, the majority held that Cubaexport did not have a “vested right” in renewal because the Cuban trademark regulations at issue also contained an express reservation allowing them to be amended or modified at any time. The dissent argued that the Supreme Court’s retroactivity jurisprudence makes clear that a statute that impairs an existing “substantive right” is impermissibly retroactive, and that the majority was reading “vested right” to mean something more than substantive rights, thus “driv[ing] a large hole in the presumption against retroactivity.” The dissenting judge noted that Cubaexport had a substantive, existing right to renew its registration, notwithstanding the theoretical possibility that hypothetical future regulations could have eliminated that right.

Federal Circuit: "Capital City Bank" marks not confusingly similar to CITIBANK

The Federal Circuit today handed Citigroup a loss in its opposition proceeding pitting its CITIBANK marks against several marks containing the words “CAPITAL CITY BANK.” Although the decision in Citigroup Inc. v. Capital City Bank Group, Inc., No. 2010-1369 (Fed. Cir. Mar. 28, 2011) was fairly fact-specific, a couple of legal points stood out. First, the Federal Circuit rejected the TTAB’s practice of considering only “reasonable” manners of depicting word (standard character) marks. The court stopped short of re-defining exactly what range of depictions should be considered, however, leaving ambiguity as to exactly what the precise broadening effect of this holding will be. Second, the court noted that “pervasive” use of the phrase “City Bank” in other financial service marks (both registered marks and those found used on various bank websites) “limits the protection afforded to the CITIBANK mark." Interestingly, on appeal, Citigroup waived its arguments as to dilution.

8th Circuit "Church Fight" Trademark Decision

In Community of Christ Copyright Corp. v. Devon Park Restoration Branch of Jesus Christ’s Church, No. 10-1707 (8th Cir. Mar. 21, 2011), the Eighth Circuit addressed several issues:

● whether the mark REORGANIZED CHURCH OF JESUS CHRIST OF LATTER DAY SAINTS is generic (no, in part because of lack of proof of what the public thought and in part based on precedent that church names generally are considered descriptive, not generic);

● whether the use of a church’s trademark by an unauthorized congregation can constitute trademark infringement (yes, it can, and, in this case, did);

● whether the plaintiff was entitled to a permanent injunction (yes, because it prevailed on the merits and irreparable harm is presumed in trademark cases – no mention of the possible impact of eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006)); and

● whether it was an abuse of discretion to whack a small independent congregation with a $348,000 attorneys fees award (no, because there was “willful infringement” in that the defendant ignored the plaintiff’s cease-and-desist letter – which seems like a pretty flimsy reason given the defenses in this unique case resulted in a published opinion).

9th Cir.: Purchase of Competitors' Trademark for Google AdWords Listing is "Use in Commerce"; Court Clarifies Confusion Analysis in Internet Setting

Yesterday the 9th Circuit decided that a company’s purchase of a Google AdWords listing using a competitor’s trademark is a “use in commerce” potentially subjecting the purchaser to liability for trademark infringement under the Lanham Act. In NetWork Automation, Inc. v. Advanced Sys. Corp., No. 10-55840 (Mar. 8, 2011), the 9th Circuit also tried to clarify how to use its version of the well-known multi-factor likelihood of confusion test in this specific Internet setting. The court then vacated the district court’s preliminary injunction. It isn't clear to me whether the 9th Circuit wanted, or even was permitting, the district court to re-assess whether a preliminary injunction was warranted under the newly-clarified confusion analysis.

At the threshold, the 9th Circuit agreed with the 2d Circuit’s decision in Rescuecom Corp. v. Google Inc., 562 F.3d 123 (2d Cir. 2009) that Google’s sale of a trademark as a trigger for an AdWords listing qualifies as a “use in commerce.”

In probably the most significant aspect of its attempt to clarify how to apply the Sleekcraft confusion factors in this setting, the 9th Circuit indicated that when assessing the “similarity” of the parties’ marks, the courts must pay attention to the “labeling and appearance” of the purchased advertisement, including whether it identifies the alleged infringer’s business. The court also noted that the graphics and text that the Internet service provider (here, Google) uses to distinguish the purchased ads from the search results also plays into the confusion calculus, as does the degree of care exercised by typical searchers.

Very unsettling 9th Circuit "Betty Boop" decision on copyright and trademark in BETTY BOOP character

[WARNING: longer-than-usual discussion because of the scariness of the 9th Circuit’s decision]

The 1930s creator of the cartoon character BETTY BOOP transferred all his copyrights in the character in 1941 to a second company, who later transferred it a third company, etc. The creator’s company folded in the meantime. Eventually, the family of the original creator started a new company to purchase back and exploit the BETTY BOOP character. After purchasing those rights (at least that’s what they thought they got) from several possible sources, the family sued the defendants, who sell handbags and t-shirts featuring the BETTY BOOP character, for copyright and trademark infringement. The district court dismissed both claims, holding that the family failed to prove up at least one of the transfers in each of the alternative chains of title, and that this scotched the copyright claim, and that so many people currently use the character on various goods, the family couldn’t claim ownership of a trademark in it either. In a 2-1 decision, the 9th Circuit affirmed the dismissal. Fleischer Studios, Inc. v. A.V.E.L.A., Inc., No. 09-56317 (9th Cir. Feb. 23, 2011).

The Copyright Claim

On the copyright side, the chain of title argument isn’t so much interesting because of its merits, but because of the appellate procedural issue via which the defendants won. The family’s opening appeal brief challenged only one of the chain of title arguments. In response, the defendants not only raised the argument on which they defeated that chain of title theory at the district court, but also an alternative ground for affirming the district court’s dismissal (one they hadn’t raised at the district court). In their reply, the family argued that even under the defendant’s new ground, the chain of title would have ended up with a company from whom the family had also purchased rights back! Indeed, this was one of the alternative title chains the family argued in the district court. But the panel majority held that by not raising the alternative chain of title argument in their opening brief, the family had waived the argument, even though they addressed it fully in their reply to rebut an argument in the appellee’s brief. Moral of this part of the story? It’s this: You know how appellate judges are always urging appellants not to challenge everything and just focus on the best one or two issues?? Well, forget all that. Raise everything. Or pay the price.

But that’s not even the scariest part of the decision.

The Trademark Claim

This is where the panel majority seems to go completely off the rails, resting their decision on a flawed concept that neither party—neither party!—argued or briefed. Resting its decision on Int’l Order of Job’s Daughters v. Lindeburg & Co., 633 F.2d 912 (9th Cir. 1980), the panel majority held that the BETTY BOOP character on the defendant’s t-shirts and handbags did not serve as a trademark because it was the very thing that made the t-shirts and handbags desirable. The panel explained that this made it “functional.” The panel majority also placed emphasis on the facts that the defendants “never designated the merchandise as ‘official’ [family] merchandise or otherwise affirmatively indicated sponsorship” and, moreover, the family “did not show a single instance in which a customer was misled.” Holy cow. I see several issues here, e.g., how does this square with: (a) the concept that a likelihood of confusion as to whether some form of legal permission was required to use an image is indeed actionable confusion; (b) the concept that actual confusion isn’t required; and (c) prior 9th Circuit (and other circuit) decisions that where the alleged trademark is the very thing consumers desire, appropriating it is infringement and is not insulated by functionality doctrine. See Automotive Gold, Inc. v. Volkswagen of America, Inc., 457 F.3d 1062 (9th Cir. 2006) (citing the Nike Swoosh, the Playboy bunny ears, the Mercedes tri-point star, and the Ferrari stallion). And where does this leave Mr. Clean, Aunt Jemima, the Jolly Green Giant, Tony the Tiger, the Pillsbury Doughboy, the Geico Gecko, and, well, you get the picture.

But wait, there’s more! The panel majority then decided that, since it had gone this far astray, it might as well throw in a little overbroad dictum to boot. So it went on to opine that the family’s claim was also precluded by the Supreme Court’s decision in Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003)—another decision that neither party had cited or discussed. (So much for the time-worn truism that the whole point of the adversarial process is to sharpen the issues for decision.) The panel stated that Dastar precluded the assertion of any trademark rights in the BETTY BOOP character because the family couldn’t prove ownership of the copyright in the character. What? The panel majority reasoned that Dastar stands for the proposition that “a party may not assert a trademark infringement action against an alleged infringer if that action is essentially a substitute for a copyright infringement action.” Yikes! That is quite an overstatement of Dastar, in my view. In other words, if you think you own a design mark that consists of copyrightable expression, you’d better be able to prove you own the copyright too. Or to say it a different way, if you decide to adopt a public domain graphic as a trademark, you’re out of luck. Of course, Dastar said no such thing, as it concerned a section 43(a) action for failure to provide correct attribution concerning who compiled and edited a video consisting of a compilation of war footage (a/k/a “implied reverse passing off”), not a traditional claim for trademark infringement. The whole point of Dastar was that failure to correctly attribute who contributed to the creation of a product was not a representation of “source” actionable under the Lanham Act. But, of course, in contrast, a classic trademark infringement action is precisely that: an action to stop confusion as to source. And this case was not about which Asian or Central American sweatshop actually produced the t-shirts or handbags (with or without child labor and 18 hour-days), but whether they were sponsored by the owners of the BETTY BOOP mark.

Now, I’m not definitively saying that the trademark aspect of this decision is wrong—I want to think about it some more—but, sheesh, there’s a lot of “stuff” to chew on here.

If this decision isn’t reversed on en banc rehearing, it will surely spawn a whole raft of law review case notes and other articles.

UPDATE: Having thought a little more about it, the "Job's Daughters" part of the trademark holding has potentially grave implications for professional and college logo licensing. People generally buy these sports/college logo clothing not for the "assurance of quality through source identifying" connotation of the team's or college's logo, but because they desire to wear clothing with the logo for associational or other reasons, such as liking the way it looks. Just like wearing a character such as, say, Betty Boop. Indeed, the Job's Daughters case specifically rejected the 5th Circuit's seminal Boston Bruins licensing decision (510 F.2d 1004 (5th Cir. 1975)), which paved the way for this sort of official licensing.

9th Circuit: Links to competing services turn cybersquatting into infringement

The 9th Circuit today ruled that an “Internet entrepreneur” (possibly a euphemism for “cybersquatter”) who ran a website at the address not only was guilty of cybersquatting, but also infringed VeriCheck’s VERICHECK mark. What is interesting about the case is that the infringing website was not for a competing service, but was one of those typical “cybersquatter” sites that simply lists lots of seemingly random links to several third party sites. These listings, however, included links to sites of competitors of VeriCheck. Although the Court did not say who was responsible for the appearance of those links (e.g., the cybersquatter or his ISP), the mere existence of links to competing services turned cybersquatting into cybersquatting + infringement (with a dollop of attorneys’ fees).

The case is Lahoti v. VeriCheck, Inc., No. 10-35388 (9th Cir. Feb. 16, 2011) (previous appeal discussed here).

9th Circuit: Amended Federal Dilution Law Does Not Require Defendant’s Mark to be “Identical or Nearly Identical” to Plaintiff’s

The 9th Circuit today revived a federal trademark dilution claim because the district court used the “identical or nearly identical” standard in its analysis of the claim. In Levi Strauss & Co. v. Abercrombie & Fitch Trading Co., No. 09-16322 (Feb. 8, 2011), Levi Strauss claimed that the stitching pattern on the back pockets of certain A&F jeans diluted Levi’s famous “arcuate” stitch design. The district court instructed the advisory jury to determine whether the patterns were identical or nearly so. Based in part on their advisory finding that the marks did not meet this standard, the district court found no dilution.

The 9th Circuit reversed and remanded. It found this standard to have its genesis in cases under state dilution laws and under the original version of the federal dilution act. Although more recent 9th Circuit decisions had repeated this standard in cases involving the 2006 amended version of the dilution statute, the Levi panel did not believe these decisions had squarely addressed the issue. Performing its own analysis, the panel held that the 2006 amendments provided no textual support for the “identical or nearly identical” standard. It specifically noted that the amended act targets dilution caused by “the similarity” between marks, and requires assessment of the “degree of similarity.” The panel believed that the lack of any reference to identicality or substantial similarity in the amended statute was a significant omission that precluded any more stringent requirement.

9th Cir. addresses procedural effect of presumption of validity under § 410(c) of the Copyright Act

The 9th Circuit today highlighted the procedural ramifications of the presumption of validity afforded by § 410(c) of the Copyright Act.

In United Fabrics Int’l, Inc. v. C&J Wear, Inc., No. 09-65499 (9th Cir. Jan. 26, 2010), the district court (sua sponte) dismissed plaintiff’s copyright claims, saying that: (1) the plaintiff hadn’t produced sufficient evidence of the “chain of title” in the underlying design (which it got from an Italian firm); and (2) the plaintiff hadn’t produced evidence that the designs, which were registered as a published collection, were actually published as a collection, as required under 37 CFR 202.3(4)(b).

The 9th Circuit reversed, holding that the district court ignored the statutory presumption of validity when it required the copyright owner to prove these things without first identifying evidence to the contrary. The appeals court noted that it was the defendants’ burden to first explode the presumption by coming up with some proof to the contrary on these issues.

3d Cir.: later-created "memorandum of transfer" of copyright not enough; historical evidence of transfer also required

Section 204(a) of the Copyright Act requires that, to be valid, a transfer of copyright ownership must be in writing, such as a “memorandum of the transfer.” The Third Circuit recently rejected the Ninth Circuit’s requirement that the memorandum of the transfer be “more or less contemporaneous” with the transfer, and held that a memorandum of transfer executed almost 9 years after the alleged transfer was fine (at least where the transferor and the transferee both signed it). But the court further held that there must also be historical evidence – beyond the later-created memorandum -- that the transfer actually occurred. The accused infringer in the case (who was not the transferor) had successfully moved for summary judgment challenging that the transfer ever occurred, and the Third Circuit affirmed that the transferee failed to raise a genuine issue of material fact on that point.

The case is Barefoot Architect, Inc. v. Bunge, No. 09-4495 (3d Cir. Jan. 14, 2011).

8th Cir.: disgorgement of profits under Lanham Act does not, in all cases, require proof of actual confusion

The Eighth Circuit today clarified that its precedents do not necessarily require proof of actual confusion to qualify for an award of disgorgement of the infringer’s profits in all cases. It held that where a licensee willfully uses the mark for services beyond those authorized in the license, the licensor may seek disgorgement.

While the court did not expressly limit its ruling to this factual setting, it was careful to avoid broad dictum implying that disgorgement is available in all trademark infringement settings, irrespective of proof of actual confusion.

The case is Masters v. UHS of Del., Inc., No. 09-3543 (8th Cir. Jan. 6, 2011).

9th Cir. decision on re-sale of "promotional only" copies of music CDs

Promotional music CDs that were sent, unsolicited, from a record company to music critics and radio stations, were subject to “first sale doctrine” and could be freely re-sold—notwithstanding a disclaimer stating that the discs were licensed only and could not be re-sold or transferred.

In UMG Recordings, Inc. v. Augusto, No. 08-55998 (9th Cir. Jan. 4, 2011), Mr. Augusto somehow obtained a bunch of these promotional CDs and re-sold them on eBay. UMG sued him for copyright infringement, arguing that the disclaimer stamped on the discs precluded his “first sale defense”:

"This CD is the property of the record company and is licensed to the intended recipient for personal use only. Acceptance of this CD shall constitute an agreement to comply with the terms of the license. Resale or transfer of possession is not allowed and may be punishable under federal and state laws."


The court rejected UMG’s argument that the disclaimer created a license primarily because the UMG sent the CDs out unsolicited. The court also noted that no recipients responded back to UMG, and that UMG did not even try to figure out the status of the copies it sent to the initial recipients.

The court also held that the “Unordered Merchandise Statute,” 39 U.S.C. § 3009—the Unordered Merchandise Statute???; that's some good lawyering!—explicitly permits the recipients of any unsolicited merchandise sent through the mail or similar means to dispose of the merchandise any way they want. The court held that UMG’s unilateral attempt to create a license was inconsistent with this law.