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).