October TM Case Roundup

There have been a number of circuit court decisions involving trademark law in the past month, but I haven’t been as current as I should have been in reporting them. So here are the thumbnail sketches on the October roundup:

Federal Circuit Nixes Trademark Damages in Patent Case as “Impermissible Double Recovery” – In Aero Products Int’l, Inc. v. Intex Recreation Corp., No. 05-1283 (Fed. Cir. Oct. 2, 2006), the Federal Circuit used Federal Circuit law, not regional circuit law, in determining that, where “damages flow from the same operative facts,” a recovery for trademark infringement as well as for patent infringement is an impermissible double recovery. In that case, the court held that the operative facts were “sales of the infringing mattresses.” To me, this seems like a really broad-brush holding. What about the value added to the sales of the infringing mattresses by using a confusingly similar mark? What about damage to the company’s goodwill? What about damages for possible remedial advertising? And who knows what other potential types of damage can crop up despite the fact that the “operative facts” of the case revolve around “sales of infringing _______.” Once again, the Federal Circuit issues a shaky decision on trademark law.

Ninth Circuit Decides Case Involving Priority & “Tacking” Issues; Court Also Holds that the “Innocent Prior User” Defense of 15 U.S.C. § 1115(b)(5) Does NOT Require that the Junior Use be in a Geographically Remote Area – In Quicksilver, Inc. v. Kymsta Corp., No. 04-55529 (9th Cir. Oct. 6, 2006), the priority/tacking issue was very fact-specific and therefore had no earth-shattering legal pronouncements. In holding that the defendant innocently adopted and used its allegedly infringing mark before the plaintiff registered its mark, the Ninth Circuit held that § 1115(b)(5) doesn’t have the same “geographic remoteness” element that the common law has. There’s apparently a split in the circuits on this, the 9th and the 4th Circuits say no remoteness required; the 6th has required geographic remoteness, and Professor McCarthy agrees.

Ninth Circuit Holds that “Progressive Encroachment” Does Not Preclude a Laches Defense Where the Defendant Did Not Change the Mark to be More Similar and Where the Defendant’s Increased or New Sales Simply Represented “Normal Business Growth” – In Tillamook Country Smoker, Inc. v. Tillamook County Creamery Ass’n, No. 04-35843 (9th Cir. Oct. 11, 2006), the Ninth Circuit faced a pretty egregious case of laches and estoppel. The plaintiff tried to wriggle out of it by pointing to “progressive encroachment” doctrine. Under this principle, laches can be excused if the defendant changes its business significantly so as to make the likelihood of confusion much greater. This typically is shown by pointing to changes in a mark to make it more similar, or changes in products or retail outlets that bring the defendant closer to what the plaintiff does. In this case, the 9th Circuit held that where a defendant’s changes are simply natural business growth, progressive encroachment doesn’t apply, and a lazy plaintiff is out of luck.

Federal Circuit Decides that the Name Given to a Seed Varietal in a PVP Certificate Can’t Later be Registered as a Trademark Because, by Definition, It’s Generic – The court suggested that a way around this is to have two names for it: one generic and one the brand name. See In re Pennington Seed, Inc., No. 06-1133 (Fed. Cir. Oct. 19, 2006).

Sixth Circuit Upholds Summary Judgment that Hummer Grille Design and Overall Appearance Is Protectible and Infringed – In General Motors Corp. v. Lanard Toys, Inc., No 05-2085 (6th Cir. Oct. 25, 2006), the GM sued a toy maker over a toy car that looked like a HUMMER, alleging that it infringed its registered grill design trademark and the overall (unregistered) trade dress of its HUMMER vehicle. The Sixth Circuit had not trouble upholding summary judgment that the grill design mark was infringed. The trade dress issue presented more problems, but the Court ultimately upheld summary judgment that the trade dress was non-functional, had secondary meaning, and was infringed. In its analysis, there were two noteworthy points. First, the 6th Circuit held that GM adequately described the trade dress when it described the trade dress it sought to protect as “the exterior appearance and styling of the vehicle design which includes the grille, slanted and raised hood, split windshield, rectangular doors, squared edges, etc.” Second, the 6th Circuit refused to preclude two secondary meaning surveys that were conducted several years after infringement began. While not questioning that secondary meaning is to be judged at the time infringement begins, the 6th Circuit nevertheless refused to issue a blanket rule that post-infringement surveys are irrelevant. It noted that it didn’t want to issue a rule that would have the effect of excluding such a potentially probative tool in the vast majority of cases, and said that district courts could assess whether to reduce the probative value to give a post-infringement secondary meaning survey by considering the amount of time between the infringement start date and the date of the survey.

Seventh Circuit Chastises Parties and District Court for Treating a Trademark Settlement Agreement as Though It Were a Consent Judgment – This decision shows what trouble, confusion, and expense can occur when the parties don’t follow rule 65(d) to the letter. If parties to a trademark suit (or any other kind of suit) want their settlement to be enforceable as a court order (i.e., as a consent judgment rather than as a private settlement agreement) Rule 65(d) requires that the judgment itself be specific and that its directives not refer to or incorporate terms from other documents. In Blue Cross and Blue Shield Ass’n v. American Express Co., No. 05-4004 (7th Cir.Oct. 30, 2006), the district court and the parties thought American Express’s agreement that it wouldn’t use the term BLUE as a trademark was a consent judgment. But it wasn’t. It was a regular settlement agreement. The only order the district court entered was an order dismissing the case and saying that it retained jurisdiction to enforce the agreement. This problem resulted in the appeals court ordering multiple briefs on jurisdiction and, generally, a lot of time and money being needlessly spent. As the court dryly noted about the lawyers’ inattention to this problem: “If these lawyers were physicians, their patients would be dead.” (The specifics of the 7th Circuit’s resolution of whether AmEx complied with the agreement aren’t really significant.)

6th Circuit decision involving interplay of patents with functionality defense

In a sea of not-so-interesting recent decisions, a recent trade dress decision of the 6th Circuit stood out.

The case is Fuji Kogyo Co. v. Pacific Bay International, Inc., No. 05-5854 (6th Cir. Aug. 23, 2006). The plaintiff was trolling for a finding that the defendant had infringed its asserted trade dress rights in the shape of the eyelets that are attached to fishing rods (you know, those things that the line goes through). The plaintiff had previously several utility patents AND several design patents on the various eyelet configurations it asserted. After a bench trial, the district court found them all functional and threw back the plaintiff's case.

The 6th Circuit affirmed. It first noted that the design patents provided presumptive evidence of non-functionality, since you can't get design patents for functional stuff. But the appeals court nevertheless with the district court that there was a whole school of evidence that rebutted that presumption of nonfunctionality.

In its discussion, the 6th Circuit did several interesting things.

First, it used the old CCPA "Morton-Norwich test" to determine if the claimed trade dress was functional. As to the part of the Morton-Norwich test that looks at whether any utility patent tout the utilitarian features claimed as trade dress, the 6th Circuit, citing TrafFix Displays, found that the plaintiff's expired utility patents were literal embodiments of two of the asserted eyelet configurations.

Going further, the 6th Circuit used patent law's doctrine of equivalents in holding that two other of the asserted eyelet configurations, while not literally within the claims of the patents, performed substantially the same function in substantially the same way to obtain the same result. The 6th Circuit rejected the plaintiff's argument that the district court was required to first do a claim construction analysis to determine if the patents could be VALIDLY be construed to cover the asserted trade dress. (In other words, the plaintiff, who wanted a narrow reading of the patent, wanted the court to check out the prior art so that the plaintiff could argue for a narrow range of equivalents.) The 6th Circuit rejected this interesting argument, holding that the district court's job wasn't to construe the patent in such a way as to avoid a finding of invalidity, but simply to determine if what it said (both in claims and in the specification) was probative, relevant evidence on the issue trade dress functionality.

I think the Court's overall analysis makes sense, and I particularly like the way it implicitly holds that the user-friendly Morton-Norwich test is fully consistent with the Supreme Court's confusing TrafFix decision. Anytime an appeals court says, either implicitly or explicitly, that TrafFix didn't turn everything upside down and some of the tried-and-true old precedents still apply, I'm a happy camper, er, fisherman.

6th Circuit decision in TM case involving GM emblems on replacement grilles for cars

You know how cars' grilles have the manufacturers' trademark designs on them? Well, in General Motors Corp. v. Keystone Automotive Industries, Inc., No. 05-1712 (June 30, 2006), GM sued a manufacturer of replacement grilles over that issue. The replacement maker didn't actually put the emblem itself on it. It put a piece of plastic in the outline of the emblem, onto which the official emblem (which could be separately purchased from GM) could be affixed. The court called this plastic outline a "placeholder."

The district court granted summary judgment for the replacement maker on likelihood of confusion. The 6th Circuit agreed as to point-of-sale purchaser. They knew they were getting a non-GM replacement grille. But the 6th Circuit said that folks downstream in the river of commerce might be confused, and any shoddiness could be incorrectly attributed to GM. (There was also an issue of fact as to whether the placeholder was visible to downstream commerce waders.)

This is all pretty straightforward. But the silent "elephant in the room," in my mind, was aesthetic functionality. The Court noted in passing that, after GM filed suit, the defendant removed the placeholders in the shapes of the GM trademarks, and the defendant's sales of replacement grilles immediately went down. Turns out that buyers of replacement grilles actually DESIRE to have grilles with the emblems on them.

So why didn't the 6th Circuit "grille" the parties on this issue? It seems like a textbook example of aesthetic functionality. Recall that the Supreme Court in Qualitex Co. v. Jacobson Products Corp., 514 U.S. 559 (1995) , said that "if a design's aesthetic value lies in its ability to confe[r] a significant benefit that cannot practically be duplicated by the use of alternative designs, then the design is functional. The ultimate test of aesthetic functionality . . . is whether the recognition of trademark rights would significantly hinder competition."

Who knows -- maybe the defense wasn't raised. In any event, enjoy.

6th Circuit decision concerning product configuration trade dress (Les Paul guitars)

This case is a couple of weeks 0ld -- sorry. Been really busy at my real job. Oh yeah, and fleeing from a hurricane.

The 6th Circuit in Gibson Guitar Corp. v. Paul Reed Smith Guitars, L.P., No. 04-5836 (6th Cir. Sept. 12, 2005) pretty much flatly rejected application of "initial interest confusion" in product configuration cases. The plaintiff argued that, at a distance in a music store, customers may initially be attracted to the defendant's guitars because the shape of them is sorta similar to the shape of plaintiff's Les Paul guitars. The court rejected this "at a distance" type of confusion, because it was concerned that so many products look sufficiently at a distance that such a test would almost always be satisfied, making it, really, no test at all. The court was also concerned that the inability of such cases to be tossed on summary judgment, which is similar to Justice Scalia's concern, in Wal-Mart v. Samara Brothers, that applying inherent distinctiveness concepts to product configuration trade dress could lead to anti-competitive strike suits that would unduly hinder competition. While the court said it was limiting its holding to the facts of the case, the reasoning it used is going to be hard to escape in future cases in the 6th Circuit.

The court also rejected "post sale confusion," but on wrong-headed reasoning. Under the heading "Post-Sale Confusion," it addressed, not post-sale confusion, but a "lack of irreparable harm" argument. In essence what the court said was that post-sale confusion isn't applicable here because the defendant's guitars aren't inferior to plaintiff's. Seems to me that's a weak rebuttal to a defendant's argument of, "What's the harm if people are confused? My guitars are good." Of course, the correct response to that argument, when made in opposition to an irreparable harm argument, is that it is the loss of control of one's reputation that is the harm, since the defendant can at any time decide to produce shoddy merchandise. The point is, the plaintiff no longer controls its own goodwill's destiny.

To complicate things, the heading the Court used for the actual post-sale confusion argument was "Gibson's Smoky Bar Theory of Confusion." In this argument, Gibson apparently argued (persuasively I would have thought) that if a consumer saw a performer in a concert or club using defendant's guitar and didn't like the sound of the performance, the consumer might mistakenly attribute the poor sound to plaintiff's guitars. Seems right to me. But the Court rejected it, again on the ill-considered basis that the defendant's guitars were high quality, and that "Gibson is helped, rather than harmed, by any such confusion."

I've always thought that the 6th Circuit was rather hit-or-miss with trademark and trade dress cases, and this one, I think, is a "miss."