Two MORE recent TM decisions in the 9th Circuit

The Ninth Circuit has always seemed to have more than its fair share of interesting trademark cases. Here are two more noteworthy recent decisions.

Aesthetic Functionality of Audi and VW logos on car accessories -- A few weeks ago, I noted a decision of the 6th Circuit concerning the use of a car manufacturer's logo on replacement grilles made by an unlicensed company, wondering why the issue of aesthetic functionality never came up. Well, in Au-Tomotive Gold, Inc. v. Volkswagen of America, Inc., No. 04-16174 (9th Cir. Aug. 11, 2006), the issue was squarely raised and addressed. The case involved key chains, license plates, and license plate frames bearing exact replicas of the VW circle logo and the Audi four-ring logo. The district court had granted summary judgment to the unauthorized manufacturer of these items, holding that its use of the logos was aesthetically functional as a matter of law because the logos themselves were what drove the sales of the items: people liked the logos.

Natch, Audi and VW appealed. The 9th Circuit reversed. In a well-reasoned opinion, the Court discussed the history of the elusive concept of aesthetic functionality, from the 1938 Restatement of Torts through the Supreme Court's recent TrafFix decision. Ultimately, the 9th Circuit held that where the "entire significance" of the allegedly aesthetically-functional feature is its value as an identifier of source, then use of the mark is "naked appropriation" rather than appropriate. The Court -- correctly, in my view -- pointed out that to hold otherwise "would be the death knell for trademark protection."

Adoption (in dictum) of the "Sublicensing Rule" in TM cases -- In a case involving the tortuous twists and turns in the saga of the GLENN MILLER mark for music and related stuff, the 9th Circuit in Miller v. Glenn Miller Productions, Inc., No. 04-55874 (9th Cir. July 19, 2006), rejected a licensee's argument that it should be able to sub-license without express permission from the licensor in the absence of a prohibition against it. It adopted the rule that licensees can't sublicense without express permission (which was born in patent and copyright cases) because if the rule were otherwise it would make it hard for a licensor to exercise its duty to supervise and control use of its mark, thus undermining markholders' rights. Makes sense to me.

The problem, however, was that the 9th Circuit also rejected the licensors' claims based on laches, thus making the entire discussion about how the licensors were wronged dicta. That darn activist 9th Circuit! Next thing, they'll be ruling that the Pledge of Allegiance can by copyrighted by atheists. God . . . , er, . . . Someone help us.

Two (relatively) recent TM decisions

I'm a little behind because of vacation, etc., but here are two interesting appeals court decisions from the last few weeks.

11th Circuit "Fair Use" Decision -- In International Stamp Art, Inc. v. United States Postal Service, No. 05-13492 (11th Cir. July 18, 2006), the plaintiff owned a registration for a perforated border (like on a stamp) in connection with a line of "stamp art" cards and postcards. The USPS had previously licensed certain of its stamp designs to the plaintiff for use on these cards, but then went into business for itself selling them (with the obligatory "perforated border"). The plaintiff sued and the USPS raised the "fair use" defense, arguing that it didn't use the perforated border as a mark, but that the border simply descriptively depicted a portion of the stamp that was reproduced on the card.

The only issue on appeal was whether the USPS acted in "good faith." The 11th Circuit held that good faith means only that the defendant did NOT "intend to trade on the goodwill of the trademark owner by creating confusion as to the source of the goods or services." The 11th Circuit found that the USPS satisfied this standard, in part because there was no evidence of bad faith and in part because the USPS "provided affirmative evidence of good faith in showing that it prominently places its own familiar Eagle trademark on the backs of its stamp art products thereby identifying them as Postal Service products rather than the products of anyone else in the marketplace."

An explicit holding that use of a house mark supports a showing of good faith is a useful precedent to remember.

9th Circuit Decision Warning About Promiscuous Use of Ex Parte TROs -- In Reno Air Racing Association v. McCord, No. 04-16001 (9th Cir. July 7, 2008), the 9th Circuit went on a rant about how important it is for district court to remember that Rule 65(b) has stringent requirement that must be met before a court can issue a TRO without notice. Essentially, the 9th Circuit said that ex parte TROs are appropriate only where (a) it is impossible for the plaintiff to find the defendant; or (b) the defendant can be found, but the plaintiff can make a SPECIFIC showing that the defendant would disregard a direct court order AND would hide or dispose of the goods before the hearing could take place. The specific showing must either be of the defendant's past activities or of activities of similarly situated persons.

The court also talked a bit about what language to use to properly describe the enjoined trademark in an injunctive order.

Having been bushwhacked (twice) by too-casually-issued ex parte TROs, I'm going to tuck this one away for future use.

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.

Eighth Circuit copyright decision on expert testimony and "substantial similarity" test

Can "substantial similarity" of expression be the subject of expert testimony? No, says the Eighth Circuit in The Rottlund Co. v. Pinnacle Corp., No. 05-1296 (8th Cir. June 20, 2006).

The case involved allegations that the defendant infringed plaintiff's copyrights in townhouse design plans. In a copyright case, plaintiffs must show ownership of a valid copyright (this was not at issue) and copying of protected expression. Copying of protected expression can be shown by direct evidence of copying OR indirectly by showing (a) access to the copyrighted materials (this was not at issue) and (b) substantial similarity of both (i) ideas (this was not at issue) and (ii) expression. (The three elements that were not at issue were decided in plaintiff's favor at summary judgment.)

So the real issues left for the jury were: was there direct copying; and were the defendants' works substantially similar to the expression in plaintiff's works?

The Eighth Circuit explained that to determine whether there's a substantial similarity of expression, expert opinion and "analytical dissection" (i.e., element-by-element comparison) are impermissible. Instead, substantial similarity of expression is an "intrinsic" issue: it is measured by the response of an ordinary, reasonable person.

The trial court, however, had allowed the defendants to put on an expert who testified regarding what he believed to be key differences between several individual elements of parties' townhouse layouts. He also testified several times that, in his opinion, these differences led him to the conclusion that there was "no copying." The jury apparently believed the expert, and found against the plaintiff.

The Eighth Circuit reversed and remanded for a new trial because the district court not only shouldn't have let the expert analytically dissect the individual elements of expression, but it shouldn't have entertained ANY expert testimony at all on the intrinsic issue of similarity of expression. Because that element depends on the perception of an ordinary, reasonable person, that's something the jury should decide for itself. Further, the Eighth Circuit rejected the defendant's explanation that the expert's testimony was merely rebuttal of some small amount of evidence of direct copying, saying that the expert's testimony was "unhelpful" on the "ultimate issue" of copying.

9th Circuit decision regarding rejecting state attempt to claim ownership of private party's trademarks

The Ninth Circuit recently decided a trademark case that, while interesting, involves a fact pattern unlikely to pop up again anytime soon. Department of Parks and Recreation v. Bazaar del Mundo Inc., No. 05-02244-JTM (May 24, 2006), concerned a dispute over the marks CASA DE BANDINI and CASA DE PICO. These two marks were being used by the party that for decades had the concession for restaurants it ran under the same name in San Diego's Old Town State Historic park. Before giving the concession to the defendant, the California Department of Parks and Recreation ("Parks Dept") hadn't used these marks for restaurants or as trademarks for anything else. The Parks Dept argued that it had previously used the names in brochures for the park, but the 9th Circuit held that these were only historic references, not uses as trademarks. The 9th Circuit also held that the Parks Dept's concession agreement with the defendants was merely a standard leasing arrangement, not a trademark license, thus rejecting the Parks Dept's argument that it MUST have owned trademark rights -- or else why would it have purported to license them?

The Parks Dept was apparently upset with the defendant because, after the concession expired and the Parks Dept re-bid it and wanted to award it to someone else, it found out that the defendant (the prior concessionaire) had registered the marks years before, and had taken the position that not only could the new concessionaire not use them, but also that the old concessionaire could continue to use them in another location.

Second Circuit decision on copyright "fair use"

The Second Circuit recently issued a opinion discussing whether use of a few shrunk-down images of copyrighted concert posters in a historical coffee table book about the Grateful Dead violated copyright law.

In Bill Graham Archives v. Doris Kindersley Ltd., No. 05-2514-cv (2d Cir. May 9, 2006), the plaintiff noticed the use of its images in the book, which it found HARD TO HANDLE. It sued the defendant, and said THE RACE IS ON. Its complaint tried to take the book's publishers to SHAKEDOWN STREET using the copyright laws, but the defendant claimed fair use, and that was THE RUB. And once the district court analyzed the fair use factors, it said it LOOKS LIKE RAIN for the plaintiff, who was told on summary judgment to BEAT IT ON DOWN THE LINE, and ended up the LOSER in the district court.

At the Second Circuit, the EYES OF THE [copyright] WORLD were upon the court. Of the four "fair use factors" in 17 U.S.C. § 107, the Second Circuit focused primarily on "the purpose and character" of the defendants' use. The court held that the defendants' use of the work was "transformative," in that it used only a few images, in much-reduced size, and integrated them into a historical timeline and provided historical information about the concerts depicted in the posters. The court also noted that the plaintiff's works constituted only a very small portion of the challenged book, and that the defendants hadn't used the works in the advertising for the book. This was the most important factor, in the Second Circuit's view, and it had a RIPPLE effect on the THE OTHER ONEs (fair use factors, that is).

AROUND & AROUND the arguments went on the other three fair use factors. While the plaintiff got some GOOD LOVIN' on the creative nature of its work (the second fair use factor), the court held that its significance amounted to JACK STRAW in light of the importance of the first factor. The court also found that the "amount and substantiality" of the work copied was small, and that plaintiff's use of thumbnails didn't eat into the market for or value of the originals, which were not ever licensed in such a way.

Concluding that only a SHIP OF FOOLS would side with the plaintiff on this one, the Second Circuit said, IT'S ALL OVER NOW, leaving the plaintiff in the COLD RAIN AND SNOW. Its copyright claim looking like a BROKEDOWN PALACE, the plaintiff had to say, YOU WIN AGAIN, and ultimately ended up GOIN' DOWN THE ROAD FEELIN' BAD.

Since the court thought its legal analysis should NOT FADE AWAY, this opinion will be published.

"Advice of Counsel" Defense and Scope of Waiver of Privileges

When a defendant in a patent case (or a trademark case, for that matter) introduces evidence of communications or documents otherwise falling within some privilege in defense of a charge of willful infringement, then quite obviously that privilege is waived. The question is, how far does the waiver extend? The Federal Circuit recently issued a very clear explanation of its view concerning the scope of the waiver that necessarily flows from a defendant's disclosure that he relied on advice given by counsel.

In In re Echostar Communications Corp., Misc. Nos. 803, 805 (Fed. Cir. May 1, 2006), defendant Echostar asserted, in response to a charge of willful infringement, that it had relied on the advice given by its in-house counsel. Echostar later got additional advice from an outside law firm, but elected not to rely on it. The plaintiff, however, moved to compel and got a district court order that, because Echostar was relying on its in-house counsel's advice as a defense, it waived attorney-client privilege and attorney work-product immunity as to all communications from any counsel on that subject, whether or not it was communicated to Echostar. That last italicized bit is important, because, remember, the "advice of counsel" defense goes to the defendant's state of mind. So the district court's ruling, in essence, said that even information not communicated to the client is relevant to the client's state of mind. Yikes!

The Federal Circuit had problems with it too. They focused on work-product doctrine, since they viewed the scope of a work-product waiver as being narrower than a waiver of the attorney-client privilege. Specifically, waivers of privilege are for all privileged materials on the same subject, but a work product waiver extends only to "factual" or "non-opinion" work product on the same subject matter.

The court then broke down the scope of the work product waiver into three categories: (1) documents that themselves are a communication, like a letter or e-mail; (2) documents that discuss or memorialize a communication between the lawyer and the client, but aren't themselves communicated to the client; and (3) documents that analyze the law, the facts, trial strategy, or anything else that reflect the attorney's mental processes, but aren't sent to the client. The court explained that categories (1) & (2), since they either embody or discuss a communication to the client, do inform the client's state of mind, and are discoverable. But category (3) documents, since they aren't communication to the client, don't and aren't.

Seems about right to me. And I see no reason why this reasoning ought not to apply to trademark cases as well. Overall, a good, sensible opinion from a circuit that (at least on trademark matters), I frequently disagree with.

Two interesting decisions on injunctive relief and on discriminatory state food labeling laws

The following two decisions raise what I think are interesting, if not common, issues.

In Lakeview Technologies, Inc. v. Robinson, No. 05-4433 (7th Cir. May 1, 2006), the defendant, an individual, stole plaintiff's trade secrets, and the plaintiff sought a preliminary injunction against defendant's use of the secrets. The district court denied the injunction for various reasons, one of which was that, since a damage award could be calculated, the plaintiff had an adequate remedy at law. The Seventh Circuit said that the ability to calculate damages could potentially make the legal remedy adequate, but not if the defendant couldn't pay it. In such a case, a defendant could only avoid the preliminary injunction if he put up an adequate bond or other good security in lieu of the injunction (Judge Easterbrook's opinion called it a "non-injunction bond").

Piazza's Seafood World, LLC v. Odom, No. 05-30098 (5th Cir. May 4, 2006) involved a suit by a seller of Chinese farm-raised catfish under the CAJUN BOY and CAJUN DELIGHT marks to enjoin enforcement of two Louisiana statutes: The "catfish statute" prohibited sales of any non-American catfish as "catfish," even if it was biologically the same species; the "Cajun statute" prohibited labeling food from outside Louisiana as "Cajun" or "Creole" unless the food was "substantially transformed by processing in Louisiana." The Fifth Circuit held that the "catfish statute" violated the dormant foreign commerce clause of the Constitution because it facially discriminated against foreign commerce, and the state gave no good reason for it. The Court enjoined the "Cajun statute" because it failed the 4-part test for permissible regulation of commercial speech set forth in Central Hudson Gas v. Public Service Commission, 447 U.S. 557 (1980). Important to the court's decision was that use of the CAJUN BOY and CAJUN DELIGHT marks was not actually or inherently misleading as to Chinese-raised fish, as required by Central Hudson, but only "potentially" misleading, in light of the fact that the plaintiff clearly labeled its packages "Product of China."

Second Circuit copyright decision on statutory damages

The Second Circuit recently decided a case that raised the issue of how to count the number of statutory damage awards are available under section 504(c)(1) of the Copyright Act. In WB Music Corp. v. RTV Communications Group, Inc., No. 04-3890, 04-3892 & 04-3901 (2d Cir. Apr. 19, 2006), the defendant had sold seven CDs that infringed plaintiffs' copyrights in 13 songs. Section 504(c)(1) provides for one statutory damage award for each work that is infringed. The last sentence of section 504(c)(1) further provides that, for purposes of calculating statutory damages, all parts of a derivative work or compilation constitute one work.

The trial court thought that since the defendants' infringing CDs were compilations, that meant there were seven infringing works. The Second Circuit disagreed, holding that the last sentence refers to the copyrighted works, not the infringing works. Therefore, since the defendants infringed 13 different songs, they were on the hook for 13 statutory damage awards.

Coupla Trademark Decisions (1st and 5th Circuits)

The First and Fifth Circuit recently handed down trademark decisions.

In Borinquen Biscuit Corp. v. M.V. Trading Corp., No. 05-2591 (1st Cir. Apr. 4, 2006), the First Circuit upheld a preliminary injunction against an accused infringer. In so doing, the court spent considerable time discussing the parties' respective burdens on the issue of the distinctiveness as to an unregistered, registered but not yet incontestable mark, and a registered and incontestable mark. In an interesting side issue, the defendant tried to show that the plaintiff's mark was weak because the PTO had issued several registrations including the mark. The First Circuit turned this against the defendant on the issue of whether the mark was inherently distinctive, observing that the PTO wouldn't have issued so many registrations for the mark without requiring 2(f) showings of secondary meaning if the mark wasn't inherently distinctive. I wouldn't have seen that boomerang effect coming, but now we're all forewarned (at least in the First Circuit).

In Icee Distributors Inc. v. J & J Snack Foods Corp., No. 04-30060 (5th Cir. Apr. 11, 2006), the Fifth Circuit rejected trademark infringement claims by one licensee against another licensee. Essentially, the court decided that the plaintiff licensee had no claim under the Lanham Act because the licensor (also a defendant) had validly licensed the defendant licensee. Since the licensor couldn't have sued the defendant licensee for infringement, neither could the other licensee, whose rights were only as great as the licensor's. There were also some other side issues in play, but that's the core trademark holding.

Seventh Circuit decision concerning Computer Fraud and Abuse Act

I know this isn't strictly trademark, copyright, or trade secret law, but the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030 et seq., does seem to pop up in many trade secret-related disputes I've worked on.

The Seventh Circuit issued a decision under the CFAA about a month ago that got me thinking about a potentially new way to use the CFAA. Before I get into the new way, the decision in International Airport Centers, L.L.C. v. Citrin, No. 05-1522 (7th Cir. March 8, 2006), primarily concerned whether the defendant in this civil case under the CFAA, who had intentionally erased important data from his company-issued laptop just before he got canned, had caused the "transmission" of a command or program that caused damage and whether he was "authorized" to have erased the data. (The data was important to the employer and it didn't have any copies of the data, and the ex-amployee, after deleting the critical information, then started up his own competing business.)

The district court had dismissed the case, but Judge Posner, writing for the panel, held that such conduct would violate the CFAA.

But this got me thinking about spoliation of evidence during the course of litigation. Normally, when that happens, lawyers tend to think of it in terms of discovery sanctions and "adverse inference" jury instructions. But if, during the course of litigation, someone is found to have intentionally deleted or erased relevant computer data, might that not fall under the CFAA? Section 1030(a)(5)(A)(i) prohibits the intentional transmission of a program or command that causes damage to the computer so long as he wasn't "authorized" to do so. Section 1030(a)(5)(A)(ii) & (iii) prohibit intentional access to a protected computer that recklessly causes damage, or just causes damage, all without "authorization."

So if under the Federal Rules governing discovery, a party has a duty not to destroy potentially relevant information, does that mean the party isn't "authorized" under the CFAA? That would look to be the key question. Further, if the adverse party needed to spend more than $5000 to retrieve (or try to retrieve) the data (whether lawyer time or computer forensics experts or whatever), the adverse party might even be able to amend his claims or counterclaims to assert a CFAA claim in that case, thus maximizing the chances that the jury or the judge gets to hear, in excruciating detail, about the evidence that was destroyed.

Is this a possibility? Anyone spot any bone-headed flaw in my thinking?

Third Circuit decision in family seed business trademark/trade secret dispute

The Third Circuit recently issued a long decision dealing primarily with a complicated dispute over trademark ownership rights in the context of a dispute between several entities that grew out of a successful family business. There was also an interesting question involving the intersection of trade secret rights and the Federal Seed Act.

I won’t even try to summarize the salient facts concerning the ownership and use of the Doebler family name in Doeblers’ Pennsylvania Hybrids, inc. v. Doebler, No. 04-3848 (March 23, 2006), but there were a couple of legal points discussed by the Third Circuit that bear mentioning. First, on the trademark side, one of the Doebler parties was on the manufacturing side, the other was on the marketing/sales side. Looking to Professor McCarthy’s treatise, the Third Circuit noted that in disputes where manufacturers and distributors are quarrelling over who owns the mark, McCarthy suggests that the courts first look to whether a contract takes care of the question. If not, McCarthy suggests that courts look to a multi-factor test to determine what a typical consumer of the goods would perceive about who owns the mark. The Third Circuit, while not rejecting this “consumer expectation” test (there was no contract dealing with the issue) in all circumstances, limited when it could be applied. It held that where, as in the Doebler case, it was clear that one of the parties started out owning the mark and the issue was whether subsequent events resulted in transfer or abandonment of rights, the “consumer expectation” test had no application. Because the party challenging the first owner was essentially saying that, through subsequent events, the original owner “forfeited” its rights in the mark, courts should strictly apply the traditional tests to determine whether there had been an assignment or abandonment, rather than use a “balancing test” to decide whether such a forfeiture of rights had occurred. (Ed. I find this to be pretty solid reasoning.)

On the trade secret side, the issue was whether the plaintiff’s brand names for different hybrid vegetable seed varietals could be “trade secrets.” I know, I know, how can a brand name be a trade secret?, you ask. Well, hybrids are the first generation of pure bred “inbred” varietals. Apparently, the hybrids’ brand names in this case uniquely corresponded to the two inbred varieties used to make them. It was the defendants’ knowledge of what inbreds made up each of the plaintiff’s hybrids that the plaintiff wanted the defendants to stop using. Under the trade secret claim, the plaintiffs had gotten an injunction at the district court prohibiting the defendants from selling any of the hybrids sold by the plaintiff or disclosing any of the pedigrees of those hybrids.

The Third Circuit reversed this aspect of the district court’s decision, primarily on the ground that the third-party “foundation” seed companies that sold inbred seeds to the parties (so they could make their hybrids) pretty much told all their customers for inbred seeds which inbred seed varieties to cross-breed in a given agricultural zone, and most customers followed this advice. So the combinations weren’t “secret” at all.

The Third Circuit was also concerned that considering the parentage of the plaintiff’s hybrids to be a trademark could potentially conflict with the Federal Seed Act (FSA). The FSA requires that seeds be sold under their varietal name. Regulations under the FSA require that hybrid designations are treated as varietal names, and that the first company to name a new varietal sets the varietal name that other companies must thereafter follow. So the defendants needed to be able to use their knowledge of the make-up of the plaintiffs’ varietals and the plaintiff’s varietal names to comply with the FSA and associated federal regulations.

Federal Circuit decision on copyright and design patent issues concerning furniture design

The Federal Circuit recently reversed a district court summary judgment ruling of no copyright infringement and no design patent infringement in a case involving competing furniture. Amini Innovation Corp. v. Anthony California, Inc., No. 05-1159 (Fed. Cir. March 3, 2006) concerned copyright registrations for "carved ornamental woodwork" on furniture items and a design patent on a bed frame.

On the copyright claim, the Federal Circuit (applying 9th Circuit precedent) noted that a plaintiff has to show ownership of a copyright and copying of protected expression. Since there was no evidence of literal copying, the court looked to the "access + substantial similarity" indirect way of showing copying. And in the 9th Circuit, the more access, the less a plaintiff needs to show on substantial similarity. Since there wasn't much evidence of access, the court required "striking" similarity. But only similarity in expression counts, and since purely utilitarian articles don't receive copyright protection, the court focused solely on the carvings themselves.

Under the 9th Circuit's two-part "extrinsic/intrinsic" test for substantial similarity, courts must first perform the "extrinsic" test: an "objective comparison of specific expressive elements," in which the court analytically dissects the work (and maybe takes expert testimony). If under this test the two works "share a similarity of ideas and expression as measured by external, objective criteria," courts are then to apply the "intrinsic" test, which asks whether an ordinary reasonable audience would find substantial similarity in the "total concept and feel of the works."

The Federal Circuit was OK with the district judge's performance of the extrinsic test, but held that the district judge went wrong when he performed the intrinsic test himself, deciding "the fact intensive question of the total concept and feel of the carvings in the furniture." The Federal Circuit believed that a reasonable jury could have determined that there was a substantial similarity in the total concept and feel of the works.

As to the design patent, the Federal Circuit held that the district court's claim construction focused too much on the details of the ornamentation rather than the overall design of the bed post. Further, the Federal Circuit found again that the district court had usurped the jury function in performing an element-by-element analysis in determining that no reasonable jury could have found that the accused product was substantially similar. Instead, the district court was supposed to have analyzed "the design as a whole from the perspective of an ordinary observer."

I don't know about you, but to me these types of cases are analytical minefields.

2d Circuit decision on "loss" requirement in Computer Fraud and Abuse Act action

I usually don't bother commenting on unpublished circuit court decisions, particularly in circuits like the Second Circuit where you can't even mention them as precedent, but this one is worth noting.

In Nexans Wires S.A. v. Sark-USA, Inc., No. 05-3820-cv (2d Cir. Feb. 13, 2006), the Second Circuit issued an unpublished opinion (they call them "summary orders") affirming summary judgment against a plaintiff on its claim under the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. 1030 et seq. The CFAA is a neat little criminal statute, with an express but limited civil right of action, aimed generally at unauthorized access to protected computers with the intent to defraud or cause damage.

The key issue was whether the damage claimed by the plaintiff caused a qualifying "loss," as that term is specifically defined in the CFAA, of over $5,000 in any 1 year period. The plaintiffs claimed that the defendants misappropriated confidential data from their computers that caused the plaintiffs to lose over $10 million in profits. Well over the statutory threshold, right? Not so fast, said the court.

The CFAA defines loss as "any reasonable cost to any victim . . . and any revenue lost . . . because of interruption of service" from the unauthorized computer access. It was this last limitation on causation that did in the plaintiff. The court held that there was no evidence that the lost alleged $10 million in lost revenue was due to any "interruption of service." The plaintiffs' "Plan B" argument was that they spent $8000 to fly their German execs over to the US to investigate the defendants' misappropriation, but the court said there was no evidence that the German execs actually performed any computer investigation or repair, or any other type of preventative security measures, for that matter. Rather, the evidence was that they were in the US solely to assess the business loss associated with the misappropriation.

The moral is, remember this important limitation on the $5,000 loss threshold when assessing potential CFAA claims.

10th Circuit decision on unauthorized sales of genuine goods

The 10th Circuit recently issued an opinion in an interesting case involving issues of (1) unauthorized sales of genuine products and (2) use of the trademark holder's mark on the Internet in various ways.

In Australian Gold, Inc. v. Hatfield, No. 03-6218 (10th Cir. Feb. 7, 2006), the appeals court affirmed a jury verdict in which the plaintiffs were awarded a total of $550,000 in damages on their trademark infringement claims (and much more money for compensatory and punitive damages on their state law non-trademark claims).

The plaintiffs sold tanning products through authorized distributors to tanning salons who then sold to consumers. Distributors signed agreements that required them to undergo training sessions about the proper use of the products (which might not work properly or could even injure people if misused) so that the distributors could train their salon customers, and the distribution agreements also prohibited selling to anyone but real salons. The defendants, who were not salons, bought from rogue distributors who did not adhere to the re-sale restrictions, and the defendants in turn re-sold the products to anyone over the Internet. In connection with defendants' Internet sales, defendants used the trademarks on their websites, in their metatags, and in connection with a key word program run by search engine Overture.com through which the defendants paid for enhanced search listings when users typed in plaintiffs' marks.

The defendants raised a number of defenses, but chief among them, at least as to the product sales themselves, was "first sale doctrine" -- the principle that it's OK for someone who buys the trademark holders' goods to simply re-sell them. The 10th Circuit rejected the first sale doctrine defense, however, because in its view the defendants went further than simply re-selling: they used the trademark on their website in a way that made it seem like they were authorized dealers when they actually weren't.

As to the use of the marks on defendants' websites, the 10th Circuit held that this created a likelihood of "initial interest confusion" because these trademark uses were an attempt to divert traffic seeking plaintiffs' products to defendants' websites. According to the court, this hurt the plaintiffs in several ways: First, since defendants also sold other companies' tanning products, the plaintiffs may have lost sales to competitors. Second, the plaintiffs lost opportunities for additional or upgraded sales that frequently occur when authorized tanning salon professionals handle the sales. Third, there was the potential for damage to plaintiffs' goodwill (or even lawsuits) if the products were misused due to lack of instruction from authorized tanning salon re-sellers.

As to the $$ amount of the damages, the court noted that it's really hard to quantify trademark damages, but held that the jury was within its rights to link the quantum of damages to the amount of money that the defendants had received in revenue for their unauthorized sales.

There are many other interesting issues in the court's discussion, but those are the highlights that jump out at me concerning the trademark issues.

1st Circuit decision on reverse confusion

In a pretty plain vanilla decision, the First Circuit recently affirmed a jury verdict of infringement in a reverse confusion case. In Attrezzi, LLC v. Maytag Corp., No. 05-2098, -2181 (Jan. 27, 2006), the court affirmed the jury's determination that Maytag's use of ATTREZZI (which is Italian for "tools") on its Jenn-Air line of small kitchen appliances infringed the plaintiff's prior use of ATTREZZI for a single location store for upscale kitchen products and services, including small kitchen appliances. The pivotal facts, based on the court's discussion, seemed to be: (1) that there were several instances of actual confusion (although the court characterized them as "limited"); and (2) Maytag's in-house counsel initially opined that the plaintiff's mark, which showed up in a pre-adoption search, was "a problem," but later changed his mind when company execs told him to "take another look" at the issue (nudge nudge, wink wink).

There was nothing earth-shattering in the decision, although other noteworthy aspects of the court's opinion include:

• noting that a defendant's use of its well-known house mark in conjunction with the accused mark in a reverse confusion case actually exacerbates, not diminishes, the likelihood of confusion; and
• holding that attorney's fees expended by the plaintiff in initially fighting the defendant's ITU before the plaintiff sued was a compensable item of actual damage.

Because of the way the First Circuit's website is set up, I can't link directly to the opinion, but here's the link to the home page of the First Circuit website. Use the docket number to search for the opinion.

UPDATE: A nice anonymous comment provided me the static link to the opinion: It's this.

4th Circuit Decision on Likelihood of Confusion Factors

In a relatively straightforward decision, the 4th Circuit recently affirmed summary judgment of non-infringement in CareFirst of Maryland, Inc. v. First Care, P.C., No. 04-2493 (4th Cir. Jan. 11, 2006). In CareFirst, the plaintiff was a a large HMO and the defendant was a small group of primary care doctors. The 4th Circuit, in performing its analysis, primarily rested its decision on the following factors:

• Lack of proof that the plaintiff's mark was strong, despite $50 million in advertising over the last 10 years, having millions of customers covered by plaintiff's health plan, and hundreds of press mentions. The court heavily discounted this circumstantial evidence of strength because the CareFirst mark almost always appeared together with the distinctive Blue Cross Blue Shield design.
• The court also discounted the fact that the marks at issue used the same two words, although in different order, for similar reasons: the fact that the CareFirst mark almost always appeared with the distinctive Blue Cross Blue Shield design "serve[s] to lessen any confusion that might otherwise be caused by the textual similarity between the two marks."
• The court also found persuasive that the two marks had coexisted for 9 years without any known instances of actual confusion. The court also found that plaintiff's survey failed to show enough confusion to be probative.

10th Circuit decision on willfulness in a TM case

The 10th Circuit recently wrote an opinion concerning "willfulness" in trademark cases. Specifically, the issue was, what does a plaintiff need to show to survive partial summary judgment on the issue of whether the defendant's alleged infringement was willful? Here's the opinion in Western Diversified Services, Inc. v. Hyundai Motor America, Inc., No. 03-4248 (Nov. 1, 2005). Nothing earth-shattering, but might be useful if this issue ever comes up in one of your cases.

3d Circuit decision concerning nominative fair use

A couple of weeks ago (sorry, I've been pretty busy), the Third Circuit handed down a VERY LONG split opinion concerning the proper way to analyze "nominative fair use" arguments. Nominative fair use concerns situations where Company A uses Company B's trademark to refer to Company B in Company A's name or advertising. Examples loosely taken from past cases include the company name "Stan's Independent VW Repair Shop" or advertising by Terri Welles that stated, among other things, that she was a former "Playboy Playmate of the Year."

Generally, courts have largely followed the 9th Circuit's approach to such cases (since the 9th Circuit has more opinions on the subject than any other court), which holds that a nominative use is fair if: (1) the product or service in question is not readily identifiable without use of the trademark; (2) the defendant uses only so much of the mark as is reasonably necessary to identify the product or service (i.e., no multiple or repeating uses, no use of the other company's distinctive logos, scripts, or trade dress, etc.); and (3) the user must do nothing to suggest sponsorship or endorsement by the trademark holder. Further, the Ninth Circuit and most other circuits view nominative fair use not as an affirmative defense, but as a way to negate likelihood of confusion.

Well, this wasn't good enough for the 3d Circuit. In Century 21 Real Estate Corp. v. Lending Tree, Inc., No. 03-4700 (this .pdf file will take time to load, and you may need to click "refresh" several times before you can upload it), the court held that nominative fair use IS an affirmative defense. It seemed to think this was required by the recent Supreme Court decision in KP Permanent Make-Up. Although by itself this doesn't really matter in my view (given that civil cases are based on a "more likely than not" standard of proof and a defendant is going to put on this evidence no matter who's got the ultimate burden), the problem is that the 3d Circuit went further held that plaintiff's in cases where nominative fair use is an issue can succeed in showing a likelihood of confusion based solely on a showing on a shortened list of confusion factors: price, level of consumer care, actual confusion, and intent.

The dissenting judge (in his own very long opinion) thought that this tinkering with the 9th Circuit's test simply muddied things up. Although I don't have time right now to explain fully why (and you'd all be bored silly if I tried) I think the dissent got it right. KP Permanent Make-Up dealt with a statutory affirmative defense. Nominative fair use isn't in the statute. It's a court-made doctrine, and the courts that made it have always viewed it as a way to negate likelihood of confusion. Making it a defense and simultaneously making it easier for the plaintiff to show likelihood of confusion not only doesn't make sense, but also would tend, I think, to seriously limit a defendant's ability to make the case for nominative fair use.

Anyway, it's a thought-provoking exchange if you've got a couple of hours.

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."

3d Circuit copyright validity decision re registration of a "group" of things

The 3d Circuit recently decided an interesting copyright dispute involving a sculptures made to resemble large rocks inscribed with various poems. I think the court's discussion of the issue of infringement isn't that noteworthy, but its discussion of the validity of the plaintiff's registration is.

In Kay Berry, Inc. v. Taylor Gifts, Inc., No. 04-3809 (3d Cir. Aug. 30, 2005), the plaintiff created a bunch of different rock/poem sculpture products (these were mass-produced items, not, you know, "museum" art). The plaintiff registered them en masse by sending the Copyright Office a catalog containing photos of its entire line of rock/poems. The Copyright Office issued a single registration for "sculptural works with design and text."

The defendant knocked off one of the rock/poems and, when sued, argued that the registration was invalid as a "group registration" under section 408(c)(1) because they weren't "related" enough. The 3d Circuit agreed that the registration wasn't valid under the group registration rules promulgated by the Copyright Office at 37 CFR §§ 202.3(b)(4) -(9), because those rules are the only authority for registration of a "group" of related products, and they don't explicitly extend to a group of sculptural works.

The court, however, said that the registration was valid as a single work registration under 37 CFR § 202.3(b)(3), which permits a single registration of a "published work" of a single claimant such that "all copyrightable elements that are otherwise recognizable as self-contained works . . . are included in a single unit of publication." The court rejected the argument that, for a single work registration under this rule, the works had to be "related."

In a long footnote, the court directed the district court, on remand, to determine the scope of such a copyright. In particular, the court intimated the possibility that a published work containing both new and pre-existing materials may be limited in some way, perhaps to only the expressive material added by the claimant.

9th Circuit reverse confusion decision

The 9th Circuit recently decided a reverse confusion case. M2 Software, Inc. v. Madacy Entertainment, No. 03-55957 (9th Cir. Aug. 31, 2005) concerned an appeal from a jury verdict of no reverse confusion. I won't bore you with the court's discussion of each of the Sleekcraft factors and a bunch of other uninteresting issues, but what I found notable was the court's rejection of the plaintiff's argument that the reverse confusion jury instruction was too narrow.

The trial court instructed the jury that reverse confusion occurs when the "consumers doing business with the [small] senior user mistakenly believe that they are dealing with the larger junior user" (emphasis mine). The plaintiff argued that "dealing with" is too narrow; that reverse confusion also occurs if the consumers believe there is an affiliation, connection, or association between the parties. But the court said that the instruction was correct.

It seems to me that this is an unjustified narrowing of the scope of a reverse confusion claim. I think most courts agree that forward confusion (i.e, the issue in plain vanilla infringement cases) encompasses more than simply erroneous beliefs that one company is the other; it covers confusion as to association, sponsorship, affiliation, etc. Why treat reverse confusion cases any differently? I can't think of a good reason to make reverse confusion a narrower type of claim. Am I missing something?

In any event, if you're representing a defendant accused of creating reverse confusion, keep this case in mind.

4th Circuit decision in a typosquatting/gripe site case

Last week the 4th Circuit decided against Jerry Falwell in a case concerning an individual who operated http://www.fallwell.com/ as a gripe site to criticize Falwell's views on certain issues.

In Lamparello v. Falwell, No. 04-2011 (4th Cir. Aug. 24, 2005), the court addressed claims under both the Lanham Act for TM infringement and the Anti-Cybersquatting Act. The parties stipulated that Lamparello never sold any goods or services on his website, but that at one point he had a link to Amazon.com's page offering a book that contained views consistent with Lamparello's and contrary to Falwell's on certain issues.

As to the Lanham Act claim, the Court declined to decide whether, as Lamparello argued, the Lanham Act applies only to "commercial speech" as that term is understood under 1st Amendment law, deciding instead that there was no likelihood of confusion based on the appearance of the Lamparello's web site.

The Court then analyzed Falwell's "initial interest confusion" argument separate from the regular likelihood of confusion analysis. The court sort of pooh-poohed the argument initially, calling it a "relatively new and sporadically applied doctrine" -- sporadically applied? I thought at least half the circuits explicitly accepted it -- noting that the 4th Circuit had never applied it. But then the Court sidestepped an "up or down vote" (to use a buzzword used a lot in certain political contexts these days) on the doctrine, holding that, whether it's a valid legal theory under the Lanham Act or not, it would apply only where the defendant competes with the plaintiff for sales. While I'm usually not a big fan of the 4th Circuit's trademark jurisprudence, this distinction seems to make some sense to me.

Finally, in a long but pretty uninteresting discussion, the 4th Circuit decided that Lamparello didn't meet the "bad faith" standard in the Cybersquatting Act.

7th Circuit's Recent Trade Dress/Reverse Passing Off Decision (follow-up)

Something has been slowly gnawing at me concerning the issue I didn't discuss in my 8/14 entry concerning the 7th Circuit's decision in Bretford Manufacturing, Inc. v. Smith System Manufacturing Corp., No. 03-3932 (7th Cir. Aug. 8, 2005) (Easterbrook, J.).

It involves the Court's rejection of the plaintiff's reverse passing off claim. The plaintiff alleged that the defendant, which was trying to but hadn't yet been able to produce a knock-off computer table, nevertheless cobbled together a sample table based mostly on its own components, but including the important V-shaped legs feature removed from one of the plaintiff's tables. The plaintiff then used the sample as part of its successful pitch to get the Dallas school system to place a sizeable order for tables.

Judge Easterbrook looked at the Supreme Court's decision in Dastar Corp. v. 20th Century Fox Film Corp., and read it really broadly. Remember, Dastar turned on the meaning of the word "source" in the Lanham Act, and in the specific context of a derivative video work based on an pre-existing work whose copyright had expired -- i.e., a "communicative" product, and one that was presumptively in the public domain. Ignoring these facts, Judge Easterbrook said that Dastar asks only whether the consumer knows who has produced the finished product, regardless of whose components go into it. He rhetorically asked, essentially, whether it's reverse passing off if the table seller doesn't disclose that it got its wood from Oregon Clear Cut Lumberyard, its nuts and bolts from Smith Screw Company, and vinyl molding from Jones Vinyl Corp. Of course the answer is no. Duh.

But this case was different. Oregon Clear Cut and Smith and Jones don't sell tables. They sell components used to make a variety of things, including tables. When a competitor in the table business, however, sees its product being sold under another's mark, that's reverse passing off. And when what is taken is less than the complete product, then most circuits take the position that the question is whether the defendant's product is substantially different from the product the plaintiff sells -- a grey area that will change with each case. In my view it's way too simplistic and wrong, as well as based on an overbroad reading of Dastar, to say that there's no reverse passing off in any case when the customer knows who assembled the product.

Let's take Judge Easterbrook's position to an extreme to see if it holds. Let's say Pepsi decides to change its business model. It decides to buy COKE brand soft drink (good TM usage!) from Sam's Club, pour it into a big vat, add one grain of Domino brand sugar per each 12 ounces, and rebottle under the PEPSI brand. Under Judge Easterbrook's analysis, this is not reverse passing off because Pepsi made the finished product and the consumer is told that. C'mon. No way.

In any event, however, I don't think that Judge Easterbrook needed to address this tricky issue (or to make such a sweeping pronouncement of the death of reverse passing off) -- although he clearly wanted to -- because it seems to me that there was a standing issue "standing" in the way. In a nutshell, there was no mention of any showing that the defendant's use of the plaintiff's component caused it to lose the Dallas sale (so much for the damage claim), and since the Dallas pitch was a one-time, non-repeated thing, there was no standing to ask for an injunction.

Whether I'm right or not on the goofy standing issue, it's clear that the 7th Circuit is now a risky place to bring a reverse passing off claim.

7th Circuit decision re proof of secondary meaning in product configuration cases

The 7th Circuit recently issued what seems to be a significant decision about what is necessary to prove secondary meaning in product configuration trade dress case. And it seems to make a survey just about indispensable.

In Bretford Manufacturing, Inc. v. Smith System Manufacturing Corp., No. 03-3932 (7th Cir. Aug. 8, 2005) (Easterbrook, J.), the plaintiff asserted trade dress protection for the V-shaped table legs of its computer table. Following Wal-Mart v. Samara Brothers, the district court required the plaintiff to prove secondary meaning in the asserted product configuration trade dress, as opposed to claiming it was inherently distinctive.

So the plaintiff pointed to the fact that for 7 years, it was the only manufacturer of computer table with V-shaped legs, and during that time it spent over $4 million to promote the tables, and was successful in selling 200,000 tables. Not bad, eh?

Not good enough, said Judge Easterbrook. He reasoned that:
"In the end, all Bretford has to go on is the fact that it was the only maker of such tables for eight years and spent more than $4 million to promote sales. If that were enough to permit judgment in its favor, new entry would be curtailed unduly by the risk and expense of trademark litigation, for every introducer of a new design could make the same sort of claim." (Slip op. at 5.)
The rest of the panel, in awe of this Jedi master of law and economics, nodded in unanimous agreement.

I think this answers the wrong question. The question shouldn't be whether the plaintiff's assertion of trade dress rights in product configuration curtails new entry in that exact market. Of course it does. And the risk increases the longer the plaintiff is out there alone. But the Supreme Court didn't categorically reject product configuration cases because of this risk. It simply said that in such cases a plaintiff needs to prove secondary meaning. An accepted (if risky) way to prove up secondary meaning is to show a long period of exclusivity in the market, with substantial sales success, along with substantial promotional activity. In this case, those numbers were pretty impressive, and the Court didn't mention any countervailing evidence.

But if these numbers didn't cut it, then, at least in the 7th Circuit, it's going to be virtually impossible for anyone to prove secondary meaning in a product's design with sales & advertising figures alone. And I doubt that the Court that slapped down this evidence is going to be swayed by affidavits of selected consumers ("merely anecdotal," no doubt), no matter how many you can drum up. Plaintiffs are going to have to strongly consider ponying up for a real survey.

(Judge Easterbrook also addressed, in his inimitable style, a weak reverse passing off claim in the case.)

As always, it's fun to read a Judge Easterbrook opinion, but I think this one is wrong.

9th Circuit Decision on Genericism

The Ninth Circuit recently issued an opinion in Yellow Cab Co. of Sacramento v. Yellow Cab of Elk Grove, Inc., No. 03-16218 (9th Cir. Aug. 9, 2005), in which it re-affirmed that the owner of an unregistered mark confronted with a challenge to the validity of the mark (such as the genericism defense raised in the case) has the burden to prove that the mark is valid and protectable.

The court performed its genericism analysis by literally asking itself and answering itself the questions "who are you; what are you?" I'm not sure I've ever seen genericism analyzed in a way that sounds like a game kids play at preschool, but, hey, whatever works.

5th Circuit decision on the requirement that copyright transfers be in writing

In its recent decision in Lyrick Studios, Inc. v. Big Idea Productions, Inc., No. 03-10837 (Aug. 5, 2005), the 5th Circuit addressed the requirement in section 204(a) of the Copyright Act that copyright transfers be in writing. The general fact pattern is probably pretty common: the copyrighted matter was commercially successful, and the parties acted for a while like there was an agreement, but then the relationship soured and the original creator decided to do business with someone else. So the jilted business partner tries to cobble together a bunch of things that aren't agreements on their own, but, the argument goes, together -- voila! -- they constitute a "writing."

Well, no dice, said the 5th Circuit. The Court not only examined the documents in detail, but it also examined several other other cases involving disputes about whether a sufficient writing existed. So this case is one to keep in mind if you're facing this sort of question.

There's some other interesting stuff in the opinion about what happens to preliminary injunction bonds when the winner of the case keeps changing. (The copyright owner won a preliminary injunction, posted a bond, lost at trial, lost the bond, then won on appeal and wanted the money back.)

1st Circuit decision re extraterritorial application of Lanham Act

Adding yet another take on when it's OK to apply the Lanham Act to foreign defendants and/or foreign activities, the 1st Circuit recently decided not to follow the kinda seminal decision of the Second Circuit in Vanity Fair Mills v. T. Eaton Co., 234 F.2d 633 (2d Cir. 1956). Back during the days of McCarthyism and "duck-and-cover," Vanity Fair held that courts should assess (without really saying HOW to assess) (1) whether the defendant is a US citizen; (2) whether the defendant's actions have a substantial effect on US commerce; and (3) whether relief would create a conflict with foreign law.

In a long and scholarly opinion in McBee v. Delicia Co., No. 04-2733 (1st Cir. Aug. 2, 2005) (click on link, click "opinions", type in the case number "04-2733", and click "submit search"), the 1st Circuit decided that the Vanity Fair factors needed to be "disaggregated." It thought that the first Vanity Fair factor (whether the defendant is a US citizen), should be the preliminary inquiry. The 1st Circuit suggested that the answer to that question would have an impact upon how much of an effect the defendant's foreign activities would be required to have on US commerce (US citizen, less; foreigner, more). (The court also briefly noted that US activities of foreign defendants are automatically within the subject matter jurisdiction of US courts over Lanham Act claims).

Because the defendant in the case was foreign company, and the activities at issue (with a minor exception I won't tell you about) were purely foreign activities, the 1st Circuit then went on to put a finer point on how much of an effect on US commerce is required for subject matter jurisdiction over such foreign activities of foreign defendants. Looking for guidance more from recent Supreme Court antitrust decisions than from the Supreme Court's much older Bulova Watch Lanham Act decision, the 1st Circuit decided that there has to be "a substantial effect on United States commerce" -- which, of course is the second Vanity Fair factor. The court said this test needs to be applied with an eye toward the dual goals of the Lanham Act: protecting US consumers from being confused, and protecting the goodwill of trademark owners in their marks.
The 1st Circuit then "disaggregated" the third Vanity Fair factor (comity with foreign law), saying that issue wasn't a question of subject matter jurisdiction, but rather was a question of whether that jurisdiction, if it exists, ought to be exercised.

Applying the new test, the 1st Circuit said there wasn't subject matter jurisdiction over the plaintiff's claim concerning the defendant's Japanese language website because few Americans can read Japanese and there wasn't any evidence of Americans going to the website and being confused. Nor was there jurisdiction over the plaintiff's claim concerning the Japanese company's sales in Japan because there was virtually no evidence that Americans either were exposed to and confused by the defendant's mark in Japan or that the defendant's goods sold in Japan were making their way back into the US in substantial amounts.

Whole Buncha Stuff

What, with vacation and an office move, I've been a little behind on new developments. To catch up, here's the TV Guide version of some recent decisions this month.

Counterfeiting. In a case I initially missed because it was a criminal case -- not a civil suit -- the 10th Circuit held in United States v. Foote, No. 03-3263 (July 6, 2005), that the criminal counterfeiting definition, 18 USC § 2320(e)(1), which, like its civil counterpart, 15 USC § 1114(1)(b), requires a likelihood of confusion, covers post-sale confusion. The case concerned a defendant who sold "replicas" of prestigious branded items to customers who, it was assumed, knew full well that the items were fakes.

8th Circuit Gives Cold Shoulder to Weak Ice Cream Mark. "Frosty Treats" is a company that operates a fleet of vans that cruise residential neighborhoods and sell frozen goodies. Problem is, the FROSTY TREATS brand doesn't appear prominently on the trucks. It appears on a sign no larger than the myriad of other stickers festooning the truck displaying the "frosty treats" within. Oh, that reminds me, the mark is also highly descriptive. So when the mark appeared on an evil ice cream truck in a Sony video game, Frosty Treats was ill-prepared to defend its rights. The 8th Circuit held, in Frosty Treats, Inc. v. Sony Computer Entertainment America, Inc., No. 04-2502 (July 25, 2005), that the FROSTY TREATS mark was descriptive and that the plaintiff failed to prove up secondary meaning. Oh yeah, and there was no likelihood of confusion, either. In so doing, the 8th Circuit also trashed the plaintiff's shoddy survey. NOTE: To access the decision after linking, click on Opinions by Month/Year, select July 2005, and scroll until you come to it.

10th Circuit Requires Copyright Office to Issue Registration Before Suit Can Be Filed. In La Resolana Architects, PA v. Clay Realtors Angel Fire, No. 04-2127, (July 26, 2005), the Tenth Circuit, in a detailed opinion, held that "[t]he Copyright Office must approve or reject the application before registration occurs or a copyright infringement action can be brought." In taking this approach, the 10th Circuit broke with the 5th Circuit's rule, which is that it is enough to have filed the application, together submitting the proper specimen and fee. Although the 10th thought it was the second circuit to have taken the "registration required" approach, I believe that it's actually the third circuit to have done so explicitly, since the 10th Circuit overlooked at least the 9th Circuit cases requiring registration. See, e.g., S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081 (9th Cir. 1989); Kodadek v. MTV Networks, Inc., 152 F.3d 1209 (9th Cir. 1998). (There may be other circuits too, but I've researched the 9th Circuit's approach before and know of those 2 cases.)

11th Circuit Sinks Vessel Hull Infringement Complaint. In a straightforward (but rare) suit under the Vessel Hull Design Protection Act, 17 USC § 1301 et seq., the 11th Circuit held in Maverick Boat Company, Inc. v. American Marine Holdings. Inc., No. 04-11259 (July 27, 2005), that the Act means what it says when it provides that only a "substantial" change to an existing design can qualify for protection under the Act.

Federal Circuit Addresses Genericism, Descriptiveness, and Acquired Distinctiveness

In the recent Federal Circuit decision in In re Steelbuilding.com, No. 04-1447 (July 11, 2005), the Federal Circuit held that the TTAB erred in holding the mark STEELBUILDING.COM generic. In a decision that provides a helpful roadmap for future cases (particular for "________.com" marks), the Court held that the Board described the genus wrong, made its decision on too little evidence, and gave too short shrift to the effect of the ".com" TLD portion of the asserted mark.

Unfortunately for the applicant, the Federal Circuit did uphold the Board's decision that the mark was merely descriptive and, over a dissent, that it lacked secondary meaning. Curiously, the majority didn't even mention much of the evidence in the record that Judge Linn's dissent thought required a vacatur of the Board's finding of no secondary meaning. It's frustrating when a dissent mentions evidence in a record that it thinks requires a contrary result, yet the majority doesn't even deign to say why that evidence didn't require a different result from the one it reached. That situation makes it hard to figure out how to use the decision as precedent in future disputes.

6th Circuit decision re reasonable royalty damages in a trade secret action

The 6th Circuit today issued an opinion -- available at this link -- in which it affirmed an award of damages based on a reasonable royalty measure in a trade secrets case under Ohio law. Since Ohio trade secrets law is based on the Uniform Trade Secrets Act, which has been adopted by 44 states (I think) in some form, this decision may have wider applicability than just to Buckeye fans.

5th Circuit decision on copyrightability of garment designs

In Galiano v. Harrah's Operating Co., Inc., No. 04-30521, -30806 (5th Cir. July 8, 2005), the 5th Circuit addressed the copyrightability of clothing designs.

The case involved uniforms for casino employees. The plaintiff, an independent clothing designer, designed them for Harrah's, and Harrah's began ordering the plaintiff-designed uniforms from third-party clothing suppliers, since the plaintiff didn't have the capacity to manufacture the uniforms. After the contract between the plaintiff and Harrah's ended, Harrah's kept ordering plaintiff-designed uniforms from the suppliers. The designer somehow felt aggrieved by this--the opinion doesn't explain exactly why--and so she sued, "weaving" her law "suit" out of the "fabric" of copyright law.

All agreed that the uniform designs were very creative, but the district court nevertheless found the copyright claim "torn": it held that the designs were not entitled to copyright protection because the uniforms' artistic elements weren't conceptually separable from their utilitarian aspects. "Dressing up" the issue in this fashion, the district court held that the definition of "pictorial, graphic, or sculptural works" (17 USC § 101) didn't "fit". Under this definition, copyright protection "vests" in useful articles only if the design of them "incorporates pictorial, graphic, or sculptural features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article."

There are many variants of the "conceptual separability test" out there, including the 7th Circuit's recent and lengthy decision in Pivot Point International, Inc. v. Charlene Products, Inc., 372 F.3d 913 (7th Cir. 2004), but the 5th Circuit said none of these "one-size-fits-all" tests really "suited" the case, and so "skirted" around the question of whether to adopt a general test. Instead, it decided to "fashion" a rule specifically for, and explicitly limited to, garment design cases only: the likelihood-of-marketability test.

Under the new likelihood of marketability test, a garment design is entitled to copyright protection upon a showing that it has "actual or potential market value as a stand-alone piece of artwork," (Slip Op. at 10), i.e., "the capacity of the item to moonlight as a piece of marketable artwork." (Id.) Because the plaintiff had made no showing under this newly-adopted test--but who knows what was in her "briefs"--the case against her was all but "sewn up": the 5th Circuit affirmed summary judgment in Harrah's favor.

2d Circuit Absolves WhenU's Pop-up Ad Program

In a noteworthy (but in my view conceptually muddled) decision, the 2d Circuit recently held that WhenU--an Internet marketing company--didn't violate the Lanham Act through its pop-up ad & coupon program.

WhenU sells pop-up advertising. The pop-ups appear on computer screens of Internet users who have installed the WhenU program on their computers. The ads vary in size, shape, and placement, but they all are framed by a border displaying the words "A WhenU Offer--click?" The advertisers are usually competitors of, or in a business related to, the company whose website the computer user is on or the search result screen on which the company appears. Advertisers can't sign up to always have their ads appear when a user is on a competitor's site, but they sign up to be included in group of several advertisers whose pop-ups are randomly chosen for display when the triggering event happens.

The pop-ups are triggered by a database of web addresses, search terms, and key word algorithms kept by WhenU in an unseen directory maintained by When U.

One of the triggering web addresses in the WhenU directory was www.1800contacts.com, the web address of a company that used 1-800CONTACTS as a service mark for selling contact lenses.

The 2d Circuit reversed the district court's entry of a preliminary injunction against WhenU's "use" of the www.1800contacts.com web address as a trigger for competitors' pop-up ads. The 2d Circuit believed that WhenU did not "use" the plaintiff's mark by either maintaining the web address in WhenU's hidden directory or by causing the corresponding pop-up ad to appear.

As to the secret directory, the court said that (a) the inclusion of the plaintiff's web address was not the same thing as inclusion of the plaintiff's mark (even though they're similar), and (b) in any event, the fact that it was secret was not a "use" in connection with the sale of goods, in that the use was hidden from the purchasing public. I think the first reason is pretty flimsy, but the second reason goes to the heart of the matter, and I think gets it right.

As to the pop-ups themselves, the court again found no "use" as required by the Lanham Act. It again rested its decision in part on the flimsy distinction between the triggering address and mark itself. In another unconvincing section, the 2d Circuit pointed out that there was no "use" because other search terms (like "eye care") triggered 1-800CONTACTS' competitor's pop-up ads. More solidly, I think, however, the court also pointed out that the pop-up ads themselves don't actually use the plaintiff's mark or anything like it. And, of course, as a result, the pop-ups themselves are clearly marked as something other than the web page on which they are superimposed, and they're not themselves confusing. My own view is that the Court therefore should have rested its analysis of the pop-up ads themselves on the ground that they were unlikely to cause confusion, rather than lack of "use."

The 2d Circuit also pointed out that WhenU's program isn't different from vendors who pay retail stores to place their competing, but not confusingly similar, brands, right next to a well-known competing brand. Of course, this begs the question whether THAT practice is legal, but even so, it's a decent analogy.

Overall, I think this is probably the right result, but the analysis leaves something to be desired.

Permanent Litigation (KP, that is)

Amazing. Some lawyers have all the luck -- clients who actually want to litigate their trademark disputes up and down and all around the federal court system. I'm talking about the KP Permanent Make-Up case, which is back at the 9th Circuit after a remand from the Supreme Court.

In this round, the 9th Circuit re-analyzed the district court's summary judgment in favor of accused infringer KP. While the 9th Circuit had no trouble identifying lots of fact issues that required trial, the most important aspect of the 9th Circuit's decision is how it assessed the scope of enforceable rights that the plaintiff owned through its incontestable MICRO COLORS & design registration (which it called a "logo mark"). The 9th Circuit stated several times that the mark owner's rights from such a registration cover not only the whole design (including the words), but also the words "MICRO COLORS" alone, which the court said was appropriate because the words were, in its view, "most salient feature of the logo mark." Accordingly, the 9th Circuit wouldn't let the accused infringer challenge the words MICRO COLORS alone as merely descriptive and lacking secondary meaning.

This broad view that the incontestability of a design mark extends to the words alone if they are the most salient feature of the design mark is, in my view, more controversial than the 9th Circuit lets on. But this is certainly a weapon to remember in future cases.

Pre-emption: Copyright Act v. Right of Publicity

The 7th Circuit recently held that the Copyright Act does not pre-empt state law claims that use of a person's photograph violates the person's right of publicity. According to the court in Toney v. L'Oreal USA, Inc., No. 03-2184 (7th Cir. May 6, 2005), the Copyright Act protects works of authorship in a fixed medium, whereas the state right of publicity protects a person's "persona," which is not so fixed. The court believed the two rights were different enough to escape preemption.

Mi jury demand es tu jury demand

The Ninth Circuit recently held that a plaintiff who didn't demand a jury trial on his trademark and trade dress infringement claims was nevertheless entitled to a jury trial on those claims under the defendant's demand for a jury trial on its counterclaims for business disparagement and false advertising, where the counterclaims were based on the alleged falsity of plaintiff's statements to customers that the defendant was infringing plaintiff's TM and trade dress rights. Whew! Long sentence! The court thought the claims and counterclaims were related enough that the plaintiff could have reasonably relied on the defendant's demand. California Scents v. Surco Prods., Inc., No. 03-56116 (May 6, 2005).

9th Circuit Botches "Relatedness of Goods" Inquiry?

The Ninth Circuit recently decided a reverse confusion case against the plaintiff. The decision in Surfvivor Media, Inc. v. Survivor Productions, No. 02-17064 (May 4, 2005) is not particularly interesting, however, except in its assessment of the "relatedness of the goods" factor in the likelihood of confusion analysis. In that paragraph, the court didn't assess whether the goods of the parties overlap, are complementary, or are otherwise related. Characterizing its task as to determine whether customers "could reasonably conclude that the products came from the same source," the court said there was no evidence to suggest that customers would "conclude that the products came from the same source," pointing as well to the near total absence of actual confusion evidence. See id. at 4851. This seems wrong to me in that it both (a) suggests that survey or other actual confusion evidence is required as to what is supposed, in my view, to be a different factor, and (b) collapses the ultimate likelihood of confusion inquiry into the relatedness of the goods factor.

Nevertheless, this precedent may come in handy when representing accused infringers.

4th Circuit on proving up copyright infringer's profits

Maybe because it was the day before taxes were due, but I missed the 4th Circuit's April 14 decision in Bonner v. Dawson, No. 04-1440. In Bonner, the court held that the plaintiff must do more than simply point to the infringer's TOTAL profit stream, and then sit back. Instead, the plaintiff has the initial burden to point to a particular profit stream and prove "some causal link between the infringement and the particular profit stream" he is seeking to recoup. Slip op. at 5-6. In Bonner, the plaintiff architect satisfied the initial burden by pointing to the income the building owner derived from leases in the infringing building.

Despite satisfying his initial burden, however, the plaintiff couldn't recover because the defendant had presented adequate evidence that the rent money was the result of factors other than the copyrighted design elements. Id. at 7.

Blogger ate my homework

Haven't posted in a while, but tried to last week. Unfortunately, as I clicked "Publish Post," Blogger croaked. All was lost. This "Retrieve Post" stuff? Didn't work. So herewith, below, are overly simplistic and only marginally humorous synopses of some recent decisions for the attention-span impaired. As you will see, it wasn't a good month for owners of what they thought were trademark rights or copyrights:

• What parts of the graphic and user interface of a video golf game are protectible under trade dress and copyright law? None, that's what, sez the 7th Circuit in Incredible Technologies, Inc. v. Virtual Technologies, Inc., No. 03-3785 (March 15, 2005).

• How about part numbers and part drawings in a transmission parts catalog? Protectible under copyright law? Nope, quoth the 6th Circuit in ATC Distribution Group, Inc. v. Whatever It Takes Transmissions & Parts, Inc., No. 03-6505 (March 30, 2005).

• OK, what about a last name registered as a trademark under German law? Out of luck in Murica, says the Federal Circuit in In re Rath, No. 04-1419, -1420 (March 24, 2005).

• I don't own the copyright, but I have an assignment of all causes of action from the copyright owner, so I can sue, right? Wrong, according to the en banc 9th Circuit in Silvers v. Sony Pictures Entertainment, Inc., No. 01-56069 (March 25, 2005).

• I've got a jury finding of intentional trademark infringement. Pretty exceptional, huh? I get fees, don't I? Well, don't I?? Nope. Intentional doesn't mean the same thing as willful, says a panel of the 9th Circuit, apparently deciding the case without their Roget's Thesaurus. Watec Co. v. Liu, No. 03-55823, -56079 (March 30, 2005).

• Hey! There's a guy using my trademark for the domain name of a web site where he says rotten things about me. Doesn't trademark law prohibit that? Not if he's just griping. That's not "use in connection with the sale of goods," as required under the Lanham Act, but you might have a beef under the Anticybersquatting Act. Bosley Medical Inst., Inc. v. Kremer, No. 04-55962 (9th Cir. April 4, 2005).

• Finally, the 8th Circuit held that (a) a bankruptcy court order approving the sale of assets, including "all intellectual property," was a valid transfer of ownership in copyrights, (b) an appellate court should review a district court's finding of "substantial similarity" under the clearly erroneous standard, not de novo (a bad sign for the appellant in the case), and (c) no jury trial for plaintiffs who drop their damage claims prior to trial. Taylor Corp. v. Four Seasons Greetings, LLC, No. 04-1088 (April 11, 2005). (Hard to do anything flip with that decision -- sorry.)

2d Circuit Declares Open Season on Cuban Marks

Well, that's not what they actually said in Empresa Cubana del Tabaco v. Culbro Corp., No. 04-2527 (Feb. 24, 2005), but that's the effect. The plaintiff was a Cuban cigar company famous for its COHIBA cigars. But alas, the Cuban trade embargo prohibits their sale in the US. So the defendant, an unrelated US company, decided to market its own COHIBA cigars in the US, admittedly based on the international fame of the unavailable original. AND THE SECOND CIRCUIT LET THEM GET AWAY WITH IT! Why? Because the very same embargo prohibits the Cuban company from acquiring any enforceable trademark rights in the mark in the US. With no rights, the Cuban company's Lanham Act case went up in smoke. Interestingly, the Second Circuit took an even stricter view of the effect of the Cuban embargo than the US Departments of Justice and the Treasury took in their amicus submission. Is there a cert petition in the humidor?

8th Circuit Food Fight over LOUIS KEMP Mark

The 8th Circuit recently presided over a food fight over the trademark LOUIS KEMP. In Kemp v. Bumble Bee Seafoods, Inc., No. 02-3797 (Feb. 23, 2005), the recipe for the dispute was as follows:

Ingredients:

• 1 man (Louis Kemp) who has sold the rights to use his name as a trademark on seafood
• 1 company to buy the mark
• 1 contract memorializing the deal
• millions of $$ spent by the company making the man's name famous
• 1 ton of second thoughts by the man upon seeing how famous the company made his name

Let's Cook:

Take the LOUIS KEMP mark, mix in the millions of advertising $$, and allow it to rise. In a separate pan, allow Louis Kemp the man to stew in his own juices with the second thoughts and the contract. Add in a plan to use his name for DIFFERENT food items than the ones specifically listed in the contract wherein he sold his rights. Stir and heat in a federal district court at 400 degrees until the dispute comes to a boil and begins smoking. Garnish the trial court's decision with parsley. Serves 3 appellate judges.

The law the 8th Circuit discussed was pretty straightforward, primarily involving an assessment of the likelihood of confusion factors.

To access the decision, go to the 8th Circuit's opinion search page, click on Opinions by Month/Year, select February 2005, and scroll until you come to it.

3d Circuit holds "willfulness" no longer prerequisite for accounting of trademark infringer's profits

The 3d Circuit recently joined the 5th Circuit in holding that the 1999 amendment to section 35(a) of the Lanham Act, 15 USC § 1117(a) -- which added language allowing monetary awards for a "willful violation" of the anti-dilution statute but not adding the word "willful" as to § 43(a) violations -- means that willfulness is now NOT a prerequisite for disgorgement of the infringer's profits. In Banjo Buddies, Inc. v. Renofsky, No. 03-2038 (Feb. 22, 2005), the court held that Congress's failure to add the word willful was, in a word, willful, given that it is charged with knowing that the courts had pretty much, at that time, uniformly been interpreting section 35(a) to require willfulness before ordering disgorgement. The court listed several nonexhaustive factors that a court should consider in deciding whether to award disgorgement of profits, including (1) willfulness, (2) lost sales, (3) adequacy of other remedies, (4) any unreasonable delay in asserting rights, (5) public interest in making the misconduct unprofitable, and (6) whether it's a case of "palming off." In discussing the district court's award of the infringer's profits, the court also noted that "there is no requirement that the defendant's profits approximate the plaintiff's damages" and that an award of the infringer's profits is available if the infringer was unjustly enriched, if the plaintiff sustained damages, OR if the award is necessary for deterrence. (Slip op. at 18.)

9th Circuit says settlement moots Gator.com v. LL Bean dispute

Many folks are aware that Gator.com and LL Bean have been duking it out in California over the legality under the Lanham Act and the Copyright Act of Gator.com's practice of signing up web surfers to receive pop-up ads tied to the web sites they were viewing. The district court kicked the case on Bean's pre-answer rule 12(b)(2) motion, holding that there was no personal jurisdiction over Bean in California. While the personal jurisdictional issue was under en banc consideration at the 9th Circuit, the parties settled the substance of their dispute, with Gator.com phasing out its pop-ups when web surfers are on Bean's website, and Bean releasing Gator.com from liability for claims of infringement, etc.

The settlement had a strange wrinkle, however. If Bean were to win the appeal (no personal jurisdiction over Bean), then Gator.com would pay it an additional 10K. If Gator.com were to win (p.j. over Bean in Cal.), then Bean got nothing.

Although it isn't clear to me why the parties wanted to continue to have the appeal heard with such a paltry stake riding on it (precedent?), they nevertheless pressed forward. But the en banc 9th Circuit pressed back, and held that the parties' settlement mooted the case. The court reasoned that the 10K personal jurisdiction was a "side bet" only: the REAL dispute as to whether Gator.com's business practices were legal was fully resolved by the settlement. The court distinguished prior cases where a settlement payment was contingent on the outcome of an appeal by noting that, in such cases, the contingent payment was in essence a liquidated amount for damages claimed in the original dispute. In this dispute, by contrast, said the court, there is no damage claim (because Bean moved to dismiss and won before it answered and counterclaimed?), and the personal jurisdiction argument has nothing to do with the substance of the controversy between the parties.

3d Circuit Holds Lanham Act Claim Barred by Laches

The Third Circuit discussed the laches defense to a Lanham Act false advertising claim in Santana Products Inc. v. Bobrick Washroom Equipment, Inc., No. 03-1845 (3d Cir. Feb. 9, 2005). In Santana, the plaintiff filed his false advertising claim 7 years after he first learned of the defendant's alleged false statements. The defendant raised statute of limitations and laches defenses. Since the Lanham Act doesn't have a stated statute of limitations, the district court looked to "borrow" one from state law. But it held that the statute of limitations defense didn't fully bar the claim, just that part of it that was outside the 6-year limitation it borrowed from what it viewed as the most appropriate Pennsylvania law, the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL). But because the plaintiff first learned of the false statements outside the UTPCPL's 6-year limit, the district court held that a presumption of laches arose. It also held that the plaintiff's delay was inexcusable. Ultimately, however, it rejected the laches defense because it concluded that the plaintiff had proven that the defendant wasn't prejudiced by the delay. In other words, the district court held that a plaintiff can overcome laches so long as it can defeat a showing of EITHER (a) inexcusable delay OR (b) prejudice to the defendant.

The 3d Circuit held that the district court should have dismissed the Lanham Act claim as barred by laches. It agreed with the district court's choice of the UTPCPL statute of limitations as the proper guidepost for the false advertising claim (take heed -- this may not be the proper source from which to borrow for a Lanham Act trademark infringement claim). It also agreed that a presumption of laches arose because of the plaintiff's seven-year wait. But it disagreed that a plaintiff facing a presumption of laches need overcome only one of the two elements of laches. The plaintiff needs to show BOTH that its delay was excusable AND that the defendant wasn't prejudiced by the delay. (Slip op. at 29.) The 3d Circuit discussed the issue in some detail despite several of its prior opinions expressly so holding, probably because the plaintiff had cited a district court decision written by Senior Third Circuit Judge Becker (when he was a district judge) that adopted the "either/or" rule for overcoming the presumption of laches.

11th Circuit Certifies "Advertising Injury" Insurance Issue in Lanham Act Case to Florida Supreme Court

Most trademark litigators know that, where possible, a plaintiff should plead that the alleged infringer's acts were willful and intentional. It helps in the likelihood of confusion inquiry and any secondary meaning debate, and, in most circuits, it also triggers the plaintiff's ability to seek "big gun" relief, such as treble damages, attorneys' fees, and disgorgement of the infringer's profits.

And if you've defended such cases in situations where there may be insurance coverage for "advertising injury," you might have heard the insurer squawk about how the allegation of intentional or willful infringement triggered a common exclusion in such policies for intentional acts.

The issue of whether an insurance policy covers the particular claims is an issue of state law, and federal courts usually put on their Erie hats and decide them. In Vector Products, Inc. v. Hartford Fire Insurance Co., No. 04-10975 (Jan. 26, 2005), however, the allegation of willful conduct complicated things. One of Vector's competitors claimed that Vector was engaged in false advertising, and brought a Lanham Act claim against it. Probably to try to qualify for additional remedies, the competitor claimed that Vector's acts were intentional. The insurer then refused to defend because of that allegation. Realizing that allegations of willfulness might trigger the exclusion against the insurer's duty to defend, yet wasn't required for Lanham Act liability, the 11th Circuit thought the issue of coverage was sufficiently subtle and unsettled under Florida law to require a punt to the Florida Supreme Court.

Insurers and trademark litigators will be watching the runback on this one.