Significant precedential TTAB decision concerning fraudulent intent and "advice of counsel"

I don’t usually report on TTAB decisions, but this one looks significant. It concerns “advice of counsel” and proof of fraudulent intent in the wake of In re Bose Corp., 580 F.3d 1240 (Fed. Cir. 2009).

In M.C.I. Foods, Inc. v. Bunte, Cancellation No. 92046056 (TTAB Sept. 13, 2010), Bunte cross-petitioned to cancel MCI’s registration for fraud. MCI’s registration listed many types of Mexican foods (including tortilla chips), but MCI never used it for tortilla chips. MCI’s president testified that he made a list of goods he wanted to have on the application (including items he knew MCI hadn't used the mark on, like tortilla chips), but testified that the list “was discussed with counsel.” Bunte’s attorney asked no further questions about the discussions with counsel.

Based on the evidence that MCI provided the list to counsel and discussed it with counsel, the TTAB found that MCI did not intend to deceive the PTO. The TTAB qualified its ruling by noting that it was not holding that merely asserting “advice of counsel” creates a per se defense to fraudulent intent. Rather, it faulted Bunte for not following up and obtaining testimony concerning what counsel’s actual advice, if any, was. So, evidence that counsel’s advice was sought can be exonerating if there is no further evidence that counsel’s advice (or lack thereof) undercut this evidence of good faith. In other words, evidence that the accused party sought the “advice of counsel” creates a presumption of good faith, and the presumption stands unless outweighed by contrary evidence.

NB: The TTAB did not discuss the necessarily-implicated issue of whether an accused party waives the attorney-client privilege merely by invoking or referring to the obtaining of counsel’s advice.

Absent fraud, the TTAB denied cancellation, instead restricting MCI’s registration to the items that it actually used the mark on.

Three recent trademark and copyright decisions of note

In the past week or so there have been a few appellate trademark and copyright decisions that, while not earth shattering, probably merit a brief note.

In Seller Agency Council, Inc. v. Kennedy Center for Real Estate Educ., Inc., No. 08-56791 (9th Cir. Sept. 3, 2010), the Ninth Circuit officially defined the equitable defense of acquiescence in a trademark case with the three-part test other circuits have used: (1)the senior user actively represented it would not assert a claim; (2) the delay between the representation and the assertion of the claim was not excusable; and (3) the delay prejudiced the defendant.

In the ongoing saga of the copyright-infringing Baltimore Ravens football logo design, the 4th Circuit held that the fair use defense insulated the Ravens—who discontinued the infringing logo several years ago—from liability for displaying the infringing logo in a pictorial collage of the organization’s history in its corporate office, but not for selling highlight films from the years when the players wore the infringing design on their helmets. Bouchat v. Baltimore Ravens L.P., No. 08-2381 (4th Cir. Sept. 2, 2010).

In a patent/trademark case in which the district court made some seemingly bizarre trademark rulings, the Federal Circuit held that a trademark invalidity declaratory judgment cannot be dismissed for lack of an Article III case or controversy where the mark owner has actually sued the party seeking the D.J. for infringement. (One would have thought that this is not a concept that needs to be rectified at the appeals level.) In another part of the opinion, the Federal Circuit also used imprecise nomenclature when it repeatedly referred to a demand for a disgorgement of profits as a “damage” claim—an imprecision that could cause confusion down the line since the principles applying to each remedy are quite different. Green Edge Enters., LLC v. Rubber Mulch Etc., LLC, No 2009-1455 (Fed. Cir. Sept. 7, 2010).

7th Circuit decision re product design trade dress turns on construction of French contract

In a recent decision, the Seventh Circuit ruled that a trade dress dispute involving nearly identical-looking French press coffee makers turned on the construction, under French law, of a French contract between the parties. In Bodum USA, Inc. v. La Cafetiere, Inc., No. 09-1892 (7th Cir. Sept. 2, 2010), the Court ruled that the plaintiff had signed a contract that permitted the defendant to sell the accused design in all countries but France. Since the issue was use in the U.S., the defendant won.

While the court technically sidestepped the issue of whether the design was protectable under the Lanham Act (all but saying that it wasn't), there were three separate opinions totaling 36 pages (the majority by Judge Easterbrook, with concurrences by Judges Posner and Wood) concerning how foreign law should be proved under Fed. R. Civ. P. 44.1. In short, Judges Easterbrook and Posner think not only that Rule 44.1 does not require expert testimony, but that expert testimony is a lousy way to determine foreign law. They think judges should simply research it, like they do any federal or state law. Judge Wood agreed that rule 44.1 doesn't require expert testimony, but she thinks it's a good idea, mostly because in the translated research materials that judges would typically obtain, nuances can sometimes be missed.

3 Interesting Lanham Act Decisions (2 trade dress and 1 contributory infringement)

Two 7th Circuit trade dress/functionality decisions

The same panel of the Seventh Circuit, with the same judge writing, decided two separate product configuration trade dress cases on the same day, both involving registered, incontestable dresses, and both on functionality grounds (what are the odds?). In Jay Franco & Sons, Inc. v. Franek, No. 09-2155 (7th Cir. Aug. 11, 2010), the court (Easterbrook, J.) held that registered, incontestable trade dress consisting of a round-shaped beach towel was functional, because it allowed tan-seeking users to pivot to follow the sun without moving the towel. The court cited not only the registrant’s own promotional materials, but also a third-party utility patent claiming the round shape for a beach towel. The court also thought the design was aesthetically functional because the round shape was pleasing, and there aren’t many other pleasing alternative shapes.

And in Specialized Seating, Inc. v. Greenwich Industries, L.P., No. 07-1435 (7th Cir. Aug. 11, 2010), the court (again, Easterbrook, J.) held that the registered, incontestable trade dress consisting of the design of a metal folding chair was functional. The plaintiff itself had obtained four utility patents on different aspects of the chair, and together they covered every element covered in the trade dress. Because that finding alone invalidated the trade dress, the court did not reach the issue of whether the registrant defrauded the PTO by “neglecting” to mention three of its patents to the trademark examining attorney.

4th Circuit “tied product” contributory infringement decision

In Georgia Pacific Consumer Prods., PL v. Von Drehle Corp., No. 09-1942 (4th Cir. Aug. 10, 2010), the plaintiff GP manufactured the touchless “enMotion” paper towel dispenser for commercial customers. It then leased the dispensers to its distributors with the right to sublease them to its commercial customers, but only for use with GP’s expensive “enMotion” paper (which did not sport any trademarks that users could see when using the dispenser). The defendant manufactured cheap replacement rolls and specifically targeted its sales to establishments who were “subleasing” the “enMotion” dispensers. Analogizing this fact pattern to a branded COKE soda fountain in which an establishment uses generic cola, the Fourth Circuit held that the defendant committed contributory infringement, because end users would be likely to think that the paper being dispensed from the “enMotion” dispenser was “enMotion” paper.

TV Guide summaries of recent TM and copyright decisions

In the past three weeks, there have been a few interesting appeals court decisions on trademark and copyright issues. Here is my take on the salient points:

• The 9th Circuit -- following recent Federal Circuit precedent concerning "[THING].COM" marks -- held that the alleged word mark ADVERTISING.COM was generic for "on-line advertising services." Advertise.com, Inc. v. AOL Advertising, Inc., No. 10-55069 (9th Cir. Aug. 3, 2010).

• In a fact-intensive "likelihood of confusion" decision notable only for the parties' and the court's seeming confusion over what "initial interest confusion" is, the 8th Circuit held that the defendant's SENSORYFLAVORS mark for "flavor delivery systems" (which I think is basically a line of flavor enhancing food additives) did not infringe its rival's SENSIENT FLAVORS mark, particularly in light of the sophisticated corporate customers each party sold to. Sensient Tech. Corp. v. SensoryEffects Flavor Co., No. 09-2686 (8th Cir. July 21, 2010).

• Two copyright decisions turned on the proper filtering out of unprotectable ideas. In Mattel, Inc. v. MGA Entertainment, Inc., No. 09-55673 (9th Cir. July 22, 2010), a Mattel employee (under an employment agreement assigning his work product to Mattel) two-timed his employer by providing a rival toy company with the idea for, and sketches and a crude sculpt of, a doll that MGA eventually transformed into the successful BRATZ line of dolls and characters. In an entertaining opinion by Judge Kozinski, the 9th Circuit held that the district court improperly enjoined the rival and improperly transferred its BRATZ line to Mattel. The main thrust of the opinion was that the finished BRATZ characters were too different from the rough sketches and crude sculpt that Mattel owned (through the employment agreement) once the unprotectable "ideas" were filtered out. On the same day, the 11th Circuit resolved a dispute between rival "binkie" (i.e., baby pacifier) makers on the same basis. In Baby Buddies, Inc. v. Toys "R" Us, Inc., No. 08-17021 (11th Cir. July 22, 2010), the products were binkies embodying a teddy bear and a ribbon bow into the design. Like the 9th Circuit in the Bratz case, the 11th Circuit held that, once the idea of a teddy bear shaped and ribbon bow-bearing binkie was filtered out, the way the defendant (Toys "R" Us) expressed those ideas was not substantially similar to the plaintiff's design.
  

11th Circuit trademark decision puts cart before horse

In a dispute involving a Hollywood restaurant's claim that an Atlanta restaurant infringed its mark, the 11th Circuit seemed unnecessarily to go through an entire (and error-filled) likelihood of confusion analysis before ruling that the defendant was a good faith, geographically remote junior user. Instead of viewing the "good faith, geographic remoteness" argument as an affirmative defense, however, it expressly viewed it as an additional likelihood of confusion factor.

In Tana v. Dantanna's, No. 09-15123 (11th Cir. July 15, 2010), the plaintiff (Dan Tana) is the owner of an Italian restaurant in Hollywood called Dan Tana's. Defendant Dantanna's is a surf-and-turf restaurant with a sports theme in Atlanta. Among the controversial statements the court made in the likelihood of confusion analysis was its holding that the "goods and services provided in the parties' restaurants are strikingly dissimilar." I.e, Italian restaurant vs. sporty surf-and-turf joint. This seems far too fine a distinction to make where comparing the parties' services. In my view, sit-down place vs. sit-down place is about as far as this sort of parsing should go. In addition, the court concluded that the parties do not engage in similar advertising because they have different websites, which the court opined would suggest "two completely unrelated restaurants." Again, the court is parsing it too fine and missing the point. That both parties advertise primarily via the Internet should weigh in favor of confusion, not against it.

The court ultimately reached the right result (exonerating the defendant), but the court's unnecessary likelihood of confusion discussion will provide unfounded excuses for infringers in future cases.

Three Interesting Trademark Decisions

Thursday and Friday last week must have been the circuits’ annual “Get Out Your Trademark Opinions Already Festival™”. There were three decisions of note.

9th Circuit (Kozinski, J.) Nominative Fair Use Decision

The Ninth Circuit upheld the use of the domain names “buy-a-lexus.com” and “buyorleaselexus.com” by personalized auto shoppers (a/k/a auto brokers) who specialize in Lexi. In Toyota Motor Sales, U.S.A., Inc. v. Tabari, No. 0755344 (9th Cir. July 8, 2010), Judge Kozinski’s panel opinion is an interesting read, but the main take-away appears to be:

(1) nominative fair use is not an affirmative defense, but instead replaces the traditional multi-factor likelihood of confusion test in cases where the accused infringer asserts that he is indeed referring to the plaintiff’s mark; and

(2) the trademark owner bears the burden of proving that the asserted nominative use will cause confusion (i.e., is not “fair”) under the familiar three-part test that asks whether: (a) the product or service is readily identifiable without using the mark; (b) the defendant used more of the mark than was needed; and (c) the defendant falsely suggested affiliation or endorsement.

10th Circuit Reverses Award of Attorney’s Fees to Successful Counterfeiting Defendant

Plaintiff sues for counterfeiting, seeking TRO. Plaintiff gets TRO, but it’s vacated because a search by U.S. Marshalls finds no counterfeit goods. Plaintiff then unsuccessfully seeks preliminary injunction. Plaintiff appeals. No dice. Plaintiff petitions for cert. Denied. Plaintiff then voluntarily dismisses the case without prejudice, before the answer is filed. Is the defendant a “prevailing party”?

Nope. Not when the vacatur of the TRO and the denial of the preliminary injunction were based on failure to demonstrate irreparable harm and the dismissal was without prejudice. So holds Lorillard Tobacco Co. v. Engida, No. 08-1037 (10th Cir. July 9, 2010).

3d Circuit Reverses Bench Trial Finding of No Likelihood of Confusion

The Third Circuit came down hard on the district judge in Sabsina Corp. v. Creative Compounds, LLC, No. 08-3255 (3d Cir. July 9, 2010). The district judge’s oral findings and conclusions after a bench trial ignored several of likelihood of confusion factors and contained clearly errors on others, according to the appeals court. The panel noted that this is the second case in which they’ve reviewed trademark bench trial findings and conclusions from this particular judge and that he did the same thing (and was reversed) the first time. The analysis itself isn’t that noteworthy, except where the 3d Circuit points out that “intent is largely irrelevant” to the likelihood of confusion analysis because advertising history “suggests that consumer reactions usually are unrelated to manufacturer intentions.” (Those of you who have heard me rant on the relevance of intent know that this statement is music to my ears.)

9th Circuit (Kozinski) opinion on dilution of non-coined marks

VISA claimed that "eVisa" for "multilingual education and information" services on the Internet diluted its famous mark by blurring. In Visa Int'l Serv. Ass'n v. JSL Corp., No. 08-15206 (9th Cir. June 28, 2010), the 9th Circuit agreed.

Judge Kozinski's opinion focused on issues that can arise when the plaintiff's mark is a real word in the dictionary (e.g., "VISA," as opposed to a coined term like XEROX). Two ways this circumstance can affect a dilution-by-blurring claim are whether the plaintiff's mark is distinctive enough to be protected under the dilution statute and whether the defendant can claim a fair descriptive use.

The court held that even a word appearing in the dictionary can be distinctive enough to qualify for dilution protection (under 15 USC § 1125(c)(1)), so long as the plaintiff isn't using it descriptively. Judge Kozinski mentioned TIDE and CAMEL, among other examples sprinkled throughout the court's opinion.

The court also rejected what appeared to be the defendant's "fair descriptive use" defense (15 USC § 1125(c)(3)(A)), saying using eVisa for multilingual education did not evoke the dictionary definition of "visa."

Fed. Cir. Overturns Yet Another E.D. Tex. “No Transfer” Order

The Federal Circuit yesterday rejected a plaintiff’s attorney’s attempt to “game the system” by arranging to have its client open up what appeared to be a sham office in the E.D. Tex. before filing a patent suit there against an Indiana company.

In In re Zimmer Holdings, Inc., No. 2010-M938 (Fed. Cir. June 24, 2010), the evidence showed that the plaintiff's Longview, Texas, office was shared with another of plaintiff’s counsel’s clients. The plaintiff was not registered to do business in Texas, had no employees in Texas, and actually has deeper ties to Michigan, where it conducts its R&D, where its two officers reside, and where its patent prosecution is done. But the district court denied a section 1404(a) transfer.

The Federal Circuit granted the defendant's petition for mandamus. It chastised the district court for admittedly refusing to “scrutinize litigants’ business decisions to determine whether opening an office in a particular location has a legitimate business purpose or is merely a tactic to manipulate venue.” Citing Hertz Corp. v. Friend, 130 S. Ct. 1181, 1195 (2010), the Federal Circuit urged district courts to do just that. Calling the Longview office "a legal fiction" (slip op. at 8), the court held that manipulation is precisely what transpired in this case: “This is a classic case where the plaintiff is attempting to game the system by artificially seeking to establish venue by sharing office space with another of the trial counsel’s clients.” (Id. at 6.)

5th Circuit lays out analytical framework for assessing distinctiveness of registered design mark

The Fifth Circuit yesterday issued an opinion discussing how to analyze the distinctiveness of a registered design mark. In Amazing Spaces, Inc. v. Metro Mini Storage, No. 09-20702 (5th Cir. June 2, 2010), the court first held that the presumption of validity flowing from registration was not itself enough to stave off summary judgment of nondistinctiveness (at least in this case).

Moving on to an assessment of inherent distinctiveness, the court held that this registered design mark:



could not be analyzed under the seminal distinctiveness (generic, descriptive, suggestive, arbitrary/fanciful) test set forth in Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4 (2d Cir. 1976) (Friendly, J.) (generic, descriptive, suggestive, arbitrary/fanciful) because it was a "futile endeavor" to try to apply any of those labels to the mark. (The court resisted saying that Abercrombie could never be applied to a non-word mark, however.)

Instead, the court applied the distinctiveness test from Seabrook Foods, Inc. v. Bar-Well Foods Ltd., 568 F.2d 1342 (CCPA 1978), which is geared more toward design marks. The Seabrook test looks at whether the design is a common shape or form of ornamentation (as opposed to being unusual in its field), or is capable of being perceived as an indicator of source apart from any words it is used with. Applying Seabrook, the court held that so many others use designs similar to this one that it was not inherently distinctive.

The mark owner tried to establish secondary meaning by offering evidence of long usage, substantial sales revenue, and substantial advertising expenditures. But the 5th Circuit affirmed summary judgment of no secondary meaning because the evidence showed that the mark owner primarily used the mark as a form of ornamentation, along with word marks that were more clearly the main product identifiers. In other words, these other facts severed the inferential link the mark owner tried to make between this circumstantial evidence and the conclusion that the star design itself thereby acquired secondary meaning.

Tom

9th Circuit: Receipt of application, not issuance of registration certificate, prerequisite to copyright suit

17 U.S.C. § 411(a) provides that "no civil action for infringement of the copyright in any United States work shall be instituted until . . . registration of the copyright claim has been made in accordance with this title." In Cosmetic Ideas, Inc. v. IAC/InteractiveCorp., No. 08-56079 (9th Cir. May 25, 2010), the 9th Circuit held that § 411(a) is satisfied when the Copyright Office receives a completed application, not when it actually issues a certificate of registration. This issue has split the circuits, with the 9th Circuit joining the 5th and 7th against the 10th and 11th.

6th Circuit Gives Victoria's Secret a Dilution Win Against Victor's Little Secret in Round 2

In a fractured decision, the Sixth Circuit yesterday revisited the trademark dilution dispute between Victoria’s Secret and the Kentucky “adult” store, Victor’s Little Secret. V Secret Catalogue, Inc. v. Victor’s Secret Stores, Inc.¸, No. 08-5793 (6th Cir. May 19, 2010). The case had previously risen all the way up to the Supreme Court, which in 2003 held that Victoria’s Secret had failed to prove actual dilution under the old dilution law and remanded the case. In response, Congress quickly expanded the dilution law to cover “likelihood of dilution.”

In essence, the Sixth Circuit interpreted the revised law to create a rule that puts a finger on the scales of justice in favor of a mark owner when the junior user uses a mark that (1) creates an association with the senior user’s mark and (2) is used in connection with sex-related products. One judge in the majority called it a “rebuttable presumption” or a “res ipsa loquitur-like effect.” (Opinion of Merritt, J.) The other judge in the majority called it an “inference.” (Opinion of Gibbons, J.) The dissenting judge (Moore, J.) called it “wrong.”

The dissent noted that the only evidence in the record was that one army officer at a nearby base was offended by the junior user’s mark. The dissent explained that evidence that one person is offended by the junior user’s mark or commercial sex-related activities is not the same thing as evidence that the senior user’s reputation has been tainted. The dissenter noted that this paucity of likely reputational harm is especially significant where the evidence showed that the senior user (Victoria’s Secret) uses its mark in ways that relate to sex as well.

I am inclined to agree with the dissent—based on the facts sets forth in the opinion—on the failure of the plaintiff’s evidentiary showing here. I agree Congress intended to liberalize the dilution law by expanding it to be triggered by likely dilution. But I don’t think Congress intended that expansion to mean that there should be a presumption or inference in the absence of any evidence of likely harm.

Ninth Circuit enjoins unauthorized sale of “VW” badges on a marquee license plate

This is a decision I think is best categorized as right decision, wrong reasoning. The declaratory judgment plaintiff in Au-Tomotive Gold Inc. v. Volkswagen of America, Inc., No. 08-16005 (9th Cir. May 6, 2010) sold several auto accessories displaying the VW design, including a “marquee” license plate with a VW design badge mounted on it. It purchased the badge from authorized VW dealers, altered them so they could be stuck on a marquee license plate, then stuck them on the plate and sold them. At the point of sale, Au-Tomotive Gold used a disclaimer stating that the plates were not VW plates.

In a previous decision, the 9th Circuit held that these products would likely create post-sale confusion among non-purchasers who see the license plate—which did not themselves in any way identify Au-Tomotive Gold as the manufacturer. But the 9th Circuit remanded for consideration of the “first sale” defense.

This time around, a different panel of the 9th Circuit affirmed the district court’s rejection of the defense. It held that the first sale defense did not apply because post-sale, nonpurchasers viewing the license plate were likely to think it was a VW product. The Court seemed to distinguish—but did not explain why—cases where the re-seller simply repackaged the trademark owners goods and placed a label on the repackaged goods disclosing that they had been repackaged. The Court also cited, but stated it was not relying on, cases where a purchaser bought a trademarked good, altered it, and re-sold it without disclosing the alteration.

The Court also seemed quite concerned with Au-Tomotive Gold “free-riding” on the demand for VW emblems on marquee license plates.

To me, this is a puzzling and unsatisfying decision. If the first appeal turned on likelihood of confusion, and the remanded issue (first sale) also turned on the same finding, then why the remand? I think the court would have done better to rely on the cases it said it wasn’t relying on: those that hold that folks who materially alter trademarked goods can’t re-sell them under the original trademark. I guess the second panel was in a pickle because the first panel remanded on the wrong issue.

(Hat tip to Locke Lord associate Kathryn Barrett for alerting me to this decision)

Second Circuit gets rid of presumption of irreparable harm in copyright injunction cases

The Second Circuit yesterday overruled prior precedent that provided for a presumption of irreparable harm in the preliminary injunction context in copyright cases. In Salinger v. Colting, No. 09-2878 (2d Cir. Apr. 29, 2010), the Second Circuit held that the Supreme Court’s decision in eBay, Inc. v. MercExchange, LLC, 547 U.S. 388 (2006)--in which the Supreme Court, in a patent case, rejected general or categorical rules favoring or disfavoring injunctions--was not limited to patent cases.

The new test for a preliminary injunction (in copyright cases in the Second Circuit) is now:

1. (a) likelihood of success on the merits; or

(b) sufficiently serious merits questions and the balance of hardships tipping decidedly in the movant’s favor;

2. a demonstration of likely irreparable harm;

3. consideration of the balance of hardships; and

4. confirmation that the public interest would not be disserved.

As to factor (2), the Court softened the blow to copyright holders, however, by hinting that courts could consider “historical tendencies” in past copyright cases in assessing the showing of irreparable harm. It will be interesting to see whether such “historical tendencies” will actually put litigants pretty close to where they were under the “presumption of irreparable” standard.

While the Court was careful to limit its holding to copyright cases, nothing I could find in the opinion suggested that the Second Circuit would not also extend eBay to trademark cases once the issue is squarely presented to it. However, in what might have been an instance of purposeful judicial foreshadowing, the Court noted that historically courts have tended to find “possible marketplace confusion” as an example of irreparable harm. Hmmm.

Ninth Circuit Decision on the line between descriptiveness and suggestiveness

In Zobmondo Entertainment, LLC v. Falls Media, LLC, No. 08-56831 (9th Cir. Apr. 26, 2010), the 9th Circuit reversed the district court’s ruling, on summary judgment, that the registered mark “WOULD YOU RATHER . . . ?” for books and games was merely descriptive and that its registration should be canceled.

While largely fact-specific, the 9th Circuit opinion is notable in a least a couple of respects. First, it discusses three different tests that could be employed to determine whether a challenged mark is suggestive or descriptive: the “imagination” test, which focuses on how much thought consumers need, when confronted with the mark, to make conclusions about the nature of the product; the “competitors’ needs” test, which focuses on the extent to which, if any, competitors need to use the mark to describe their competing products; and the “extent of use” test, which looks at the frequency with which competitors actually use the mark on similar merchandise. (To me, there looks to be little difference between the “competitors’ needs” test and the “extent of use” test.)

Second, the court gave substantial weight to the fact that the PTO registered the mark without requiring proof of secondary meaning.

Finally, the court highlighted the challenger’s citation of statements by people associated with the registrant that seemed to indicate that they thought “WOULD YOU RATHER . . . ?” was a good mark for the precise reason that it described the subject of the book and the game. Good evidence to look for in discovery.

Three recent decisions re: architectural copyrights; a stolen domain name; and copyright/trade secret ownership in the employment context

While interesting, the following three recent decision don’t seem to warrant extended analysis, so here are the TV Guide summaries:

2d Circuit Throws Out Architectural Copyright Claim on 12(b)(6) Motion Based on Designs Appended to Complaint

Don’t plead yourself out of court. That may be the lesson of Peter F. Gaito Architecture, LLC v. Simone Dev. Corp., No. 09-2613-cv (Apr. 7, 2010). The plaintiff copyright owner alleged that a developer infringed his copyrighted plans, and attached depictions of the designs to its complaint. Assuming for purposes of argument that copying occurred, the Second Circuit compared the two designs for substantial similarity. Concluding that the depictions demonstrated that only general ideas and concepts—not protectable expression—was misappropriated, the court affirmed dismissal of the case. Of course, not attaching the depictions of the designs to the complaint would likely have only postponed the dismissal to the summary judgment stage, but it may have increased leverage for some kind of monetary settlement in the meantime.

9th Circuit Grapples with Conflict of Laws Issue in Domain Name Conversion Case

In an intensely-fact specific case involving a claim that the defendants converted the plaintiff’s domain name registration (replete with a bad guy in the PRC, an innocent purchaser for value defense, and a cameo appearance by Ralph Lauren), the 9th Circuit in CRS Recovery, Inc. v. Laxton, No. 08-17306 (Apr. 6, 2010), engaged in a lengthy discussion of the policies underlying the respective laws of Virginia and California to determine a tricky and potentially outcome-determinative choice-of-law issue.

9th Circuit Analyzes Employee/Independent Contractor Issue to Decide Who Owns Copyrights and Trade Secrets in Computer Software Source Code

In JustMed, Inc. v. Byce, No. 07-35861 (Apr. 5, 2010), the Ninth Circuit went through a lengthy, fact-intensive analysis of the often-litigated issue of whether the author of copyrightable material or creator of a trade secret was an employee or independent contractor of a company claiming that it owned the individual’s work. The case is interesting in that it seems to somewhat alter the traditional weighing of the factors relevant to that determination to fit the context of small, non-traditional, techie start up companies.

2d Cir. decision rejecting Tiffany's allegations that eBay liable for sale of counterfeit goods

The Second Circuit today affirmed judgment in favor of eBay and against Tiffany in Tiffany’s much-publicized case against eBay for permitting the sale of counterfeit Tiffany products in its on-line auctions. The case involved significant rulings in the area of (1) buying “sponsor links” on Internet search engines using others’ trademarks, and also (2) as to the liability of an on-line auction site for hosting sales of counterfeit goods.

In Tiffany (NJ) Inc. v. eBay Inc., No. 08-3947 (2d Cir. Apr. 1, 2010), the Second Circuit first rejected Tiffany’s claim of direct trademark infringement. Although eBay bought Yahoo! sponsor ads/links using Tiffany’s trademark, the court found that this was a nominative fair use of the Tiffany mark, because Tiffany goods were in fact available on eBay.

The Second Circuit next rejected Tiffany’s claim that eBay contributorily infringed the Tiffany marks by facilitating the sale of counterfeit goods at auction. Citing the Supreme Court’s familiar standard from Inwood v. Ives, 456 U.S. 844 (1982), and decisions from other circuits concerning flea markets, the Second Circuit first ruled that eBay exerted substantial enough control over the auctions on its site to potentially be subject to contributory liability. But because eBay effectively stopped known instances of counterfeiting pursuant to its various programs designed to stop sale of counterfeit and infringing goods, the Second Circuit ruled that eBay did not run afoul of the Inwood v. Ives prohibition against continuing to permit sales of known counterfeit items or permit known counterfeiters to continue to list on eBay.

Tiffany pointed to evidence that nearly three-quarters of its goods sold on eBay are counterfeit. The Second Circuit, however, rejected the notion that generalized knowledge that many counterfeit items are being sold can trigger contributory liability under Inwood v. Ives, particularly in view of the substantial anti-counterfeiting steps that eBay has implemented. In so doing, the Second Circuit admitted that it was adopting a somewhat narrow reading of the Inwood v. Ives standard of continued support in the face of a “reason to know” of infringing activity. The court also noted that such generalized knowledge does not rise to the culpable level of “willful blindness.”

The court also quickly dispatched Tiffany’s trademark dilution claim (because eBay did not itself use the Tiffany marks).

Finally, the court remanded Tiffany’s claim of false advertising for the district court to determine whether any of eBay’s ads were implicitly misleading as to the nature of the Tiffany goods that were listed on eBay.

9th Cir. decision re enforcement of judgment by levying on and auctioning off domain names

In Office Depot, Inc. v. Zuccarini, No. 07-16788 (9th Cir. Feb. 26, 2010), the Ninth Circuit held Office Depot’s money judgment against notorious cybersquatter could be enforced by levying upon and selling off his domain names.

VeriSign, the registry for all “.com” and .net” domain names, is located in the N.D. Cal. The 9th Circuit permitted an enforcement procedure comprising: (1) registering the judgment in the N.D. Cal.; and (2) moving for the appointment of a receiver, who would then (3) obtain the domain names from the VeriSign registry and sell them off at auction. In approving this procedure, the court held that domain names are “property” that can be levied upon under California law. The court further held that, for purposes of the quasi in rem jurisdiction that applied to such attachment proceedings, domain names are located wherever the registry or registrar is located.

Fed. Cir. holds government liable for copyright infringing stamp depicting Korean War Veterans Memorial

In a fascinating and factually unique case that I won’t try to fully summarize, a 2-1 panel majority of the Federal Circuit held that the U.S. government is liable to the sculptor of the soldier figures in the government’s Korean War Veterans Memorial for copyright infringement based on a commemorative U.S. postage stamp bearing a photograph of the soldier figures. Gaylord v. United States, No. 2009-5044 (Fed. Cir. Feb. 25, 2010).

The sculptor was a subcontractor. The prime contractor for the Memorial had a contract with the government providing that government would own the copyrights in the end product and that the project was a work made for hire. The government paid the subcontractor/sculptor $775,000 to create the figures. The sculptor later registered copyrights in the figures.

The majority ignored the government contract because the parties (curiously) didn’t brief it, and ruled that: (1) the sculptor owned valid copyrights; (2) the stamp was not a fair use; and (3) the government was not a joint author because the only contributions made by the government’s designees were suggestions (i.e., uncopyrightable ideas). The majority remanded for a determination of damages—which will probably be substantial in light of the fact that the government sold $17 million worth of stamps.

In dissent, Judge Newman lambasted the majority for ignoring the contract and for ignoring a statute that provides that there is no right of action against the government for infringement of copyrights inuring in works created in service to the government (28 U.S.C. § 1498).

5th Circuit decision on "innocent infringer" damages reduction defense in copyright case

The 5th Circuit recently whacked a defendant found liable for copyright infringement by downloading, and possibly sharing, 37 of the plaintiff’s copyrighted songs through a peer-to-peer file-sharing network. Maverick Recording Co. v. Harper, No. 08-51194 (5th Cir. Feb. 25, 2010).

The district court had entered summary judgment of infringement. The plaintiff requested minimum statutory damages of $750 per song under 17 USC § 504(c)(1), but the defendant argued that she was an innocent infringer and therefore should be liable only for the 17 USC § 504(c)(2) reduced amount of $200 per song. The district court found that the defendant’s testimony—that she was too young to understand that such free downloading and sharing constituted copyright infringement—created a trial issue.

The copyright owner accepted the $200 per song judgment, but reserved the right to appeal the innocent infringer issue if the infringer appealed. The infringer appealed.

Bad idea.

The Fifth Circuit affirmed the infringement finding and threw out the infringer’s weak due process argument (to paraphrase the defense: “$200 per song is unconstitutional given that I was young and naive”). The Fifth Circuit then found that the infringer’s "young and ignorant of the law" argument immaterial to the “innocent infringement” defense as well because the copyright owner put copyright notices on its “phonorecords” (e.g., CDs). Even though there was no evidence that the file-downloading infringer ever saw a CD, 17 USC § 402(d) prohibits the “innocent infringement” reduction where the infringer had “access” to the “phonorecord,” a point that the infringer failed to contest. Having stripped away the innocent infringer reduction, the Fifth Circuit remanded for entry of judgment for the amount the copyright owner originally requested: $750 per song.

11th Cir. decision on copyrightability of blank forms

In Utopia Provider Sys., Inc. v. Plummer, No. 09-11160 (Feb. 19, 2010), the 11th Circuit addressed the test for determining the copyrightability of blank forms. At issue was a series of print and electronic forms developed for hospital emergency room treatment. The forms contained a detailed series of headings with blank spaces for a treating physician to input a patient's medical history, present symptoms, physical exam results, diagnosis and treatment decisions, and instructions. The more specific aspects of the forms were different for different problems.

The court first noted that blank forms are not copyrightable unless they convey information or original pictorial expression. Examples of non-copyrightable forms include baseball scorecards and check stubs. In contrast, diaries for "baby's first year" might be an example of a form that could be copyrightable. Because, in the court's view, the headings of the medical forms at issue did not convey any information, but simply called for the recordation of the information that any responsible physician would ask or note in such emergency room visits, the court held that the forms were not copyrightable.

Federal Circuit ruling on website-based trademark specimens

In a mundane but useful decision, the Federal Circuit recently overturned the PTO’s “bright-line rule that a trademark specimen of use taken from a website must contain a picture.”

In In re Sones, No. 2009-1140 (Fed. Cir. Dec. 23, 2009), the specimen consisted of two webpage print-outs. One was a page from a website advertising a “charity bracelet” under the asserted mark "ONE NATION UNDER GOD™." There was no picture of the bracelet on the webpage, only a placeholder icon stating “Photo not available.” This webpage appeared to allow the user to click on an “Add to Cart” icon, indicating that the item could be ordered right off the website. The applicant also provided a sample webpage order form with the bracelet in the "cart."

The test that the Federal Circuit articulated in lieu of the website-picture requirement is that the website specimen “must in some way evince that the mark is ‘associated’ with the goods and serves as an indicator of source.” The court noted that while a picture is “an important consideration,” all relevant factors should be assessed, including whether the webpage specimen has a “point of sale nature,” whether the actual or inherent features of the product are recognizable from the textual description, and the use of the “™” symbol.

While the Court rejected the PTO’s “website-picture” requirement, the Court did not approve the specimen at issue, but instead remanded for a determination whether the specimen met the newly-articulated test.

2d Circuit Federal Trademark Dilution Act decision in Starbucks v. Charbucks dispute

The Second Circuit today revived Starbucks' Federal Trademark Dilution Act (FTDA) claim against the mark CHARBUCKS, but affirmed a judgment, entered after a bench trial, dismissing Starbucks' federal infringement and New York state dilution claims.

In Starbucks Corp. v. Wolfe's Borough Coffee, Inc., No. 08-3331-cv (Dec. 3, 2009), the Second Circuit found that the district court erred in ruling against Starbucks on the FTDA claim when it held that the "similarity" factor in the FTDA claim requires that the accused mark be "substantially similar." Rather, the latest version of the FTDA (which was amended in 2005 to address the Supreme Court's interpretation of the FTDA in Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003)), contains no such requirement, providing only that the courts assess only "the degree of similarity."

The Second Circuit's opinion contained a few more interesting statements, including:

• "intent to capitalize on [the senior user's] reputation" is irrelevant to a federal infringement claim; only "intent to deceive" or "mislead" the public is relevant;
• intent to create an association is the relevant type of intent for FTDA claims;
• even if a product name sounds pejorative, that isn't necessarily a "tarnishing" use if the mark isn't marketed as a pejorative and the product is of high quality;
• Unlike the current FTDA, New York dilution law does require "substantial similarity"; and
• "Charbucks" was not a protected parody but an (unprotected) "subtle satire."
  

Unduly long 9th Circuit opinion on boundary between descriptive and suggestive marks

In what struck me as an unusually long opinion, the 9th Circuit took on the difference between descriptive and suggestive marks. Lahoti v. VeriCheck, Inc., No. 08-35001 (9th Cir. Nov. 16, 2009) concerned a DJ brought by a previously-adjudicated cybersquatter concerning his registration of the domain name "vericheck.com." The district court found for the defendant, ruling on summary judgment that the mark VERICHECK was inherently distinctive and that the plaintiff acted in bad faith.

The 9th Circuit affirmed the finding of bad faith, but vacated the finding of inherent distinctiveness because the district court, in its view, relied in part on erroneous legal reasoning. In its long discussion, the 9th Circuit noted that it is proper for a court to weigh in favor of a finding of inherent distinctiveness that the PTO has allowed others to register the mark at issue for similar products without requiring a showing of secondary meaning.

7th Circuit decision on who gets to "copyright" derivative works

Here's a good lesson in how to bite the hand that previously fed you.

In Schrock v. Learning Curve Int'l, Inc., No. 08-1296 (7th Cir. Nov. 5, 2009), the owner of copyrights in toy characters licensed a company to make the toys. The toy maker then licensed a photographer to take photos of the toys for marketing purposes. When the toymaker stopped using the photographer, the photographer registered the photos and sued the character owner and the toymaker for copyright infringement for continuing to use the photos. The district court dismissed the photographer's case, saying that the photographer needed permission to "copyright" the photos.

The 7th Circuit reinstated the photographer's claim. Assuming that the photos were derivative works, the 7th Circuit held a couple of things. First, it held that derivative works are subject to the same minimal originality requirements as any other type of work and the photos of the toys were original enough for copyright protection as derivative works.

Second, it noted that, to sue for infringement, the person creating the derivative work must have both (a) the permission of the owner of the copyright in the underlying work to create the derivative work (not a problem in this case) and (b) the right to "copyright" the derivative work. As to (b), however, the 7th Circuit disagreed with the district court, noting that copyright law normally vests the copyright in the derivative work in the creator of the derivative work unless the owner of the underlying copyright contractually alters this ownership arrangement.

Since the record was inconclusive on whether the arrangement was contractually altered, the court remanded the case.

2d Circuit decision allowing consumer class action alleging Walker Process antitrust claim to go forward

Today the Second Circuit reversed the dismissal of a Walker Process antitrust claim brought against prescription drug sellers whose patent on the drug was previously held unenforceable.

It's a long (but interesting) decision, so I'll take my shot at a TV Guide®-type summary. First, the Court held that the consumer class has antitrust standing. In part the Court based this on the fact that type of damage the consumers sustained -- overcharging -- would go unremedied if only competitors could bring this type of action. Second, the Court held that the class's complaint satisfies both rule 9(b) and Iqbal. Both discussions are informative.

The case is In re: DDAVP Direct Purchaser Antitrust Litigation, No. 06-5525 (2d Cir. Oct. 16, 2009).

5th Circuit (in Unpublished Opinion) Says Strength of Junior User’s Mark May be Relevant in Reverse Confusion Analysis

Seemingly approving of other circuits’ holdings that, in a reverse confusion case, the strength of the junior user’s mark is relevant, the 5th Circuit vacated summary judgment in the reverse confusion case of The Great Amer. Rest. Co. v. Domino’s Pizza LLC, No. 08-40654 (5th Cir. Sept. 30, 2009). The court designated its short, four-page opinion as “unpublished,” however. While unpublished opinions can be cited pursuant to Fed. R. App. P. 32.1, the 5th Circuit’s local rule 47.5.4 states that its unpublished opinions “are not precedent.” So it’s questionable how much weight any court might give it.

I believe this is the first time that the 5th Circuit has mentioned the “reverse strength” concept applying in a reverse confusion case. Off the top of my head I know that the 3d and 9th Circuits also take this view (the 5th Circuit cited only the 3d Circuit’s decision in A&H Sportswear, Inc. v. Victoria’s Secret Stores, Inc., 237 F.3d 198 (3d Cir. 2000)). The court did not address, however, whether the strength of the senior user’s mark remains relevant (or how) in the likelihood of reverse confusion calculus.

6th Circuit decision on IP license transfers through intra-corporate mergers

The Sixth Circuit today held that a copyright (or patent) license that expressly provides that it is non-assignable or non-transferrable is breached when (1) the licensee merges with its corporate sibling entity, (2) the licensee is not the surviving entity, and (3) state law provides that the surviving entity owns all the assets of the constituent entities.

The court noted that even if the license hadn’t expressly addressed assignability or transferability, federal common law would have led to the same result because its default rule prohibits transfer of a patent or copyright license without authorization.

The case is Cincom Systems, Inc. v. Novelis Corp., No. 07-4142 (6th Cir. Sept. 25, 2009).

Couple of Marginally Interesting TM Decisions (9th Cir. and Fed. Cir.)

Hey, They Copied My Product Idea and Owe Me Mega-$$

First, a Ninth Circuit decision dealing with the familiar and usually unsuccessful case of someone claiming that a defendant copied their idea for what ultimately became a tremendously successful product. At issue in Art Attacks Ink, LLC v. MGA Entertainment Inc., No. 07-56110 (9th Cir. Sept. 16, 2009) were the popular line of BRATZ dolls. The court shot down the plaintiff’s copyright claim because the plaintiff had insufficient evidence of copying or access by the defendants. The plaintiff’s trade dress claim foundered on the shoals of inadequate proof of secondary meaning.

Numbers as Secondary Trademarks

Hidden in the middle of the patent decision in Vita-Mix Corp. v. Basic Holding, Inc., No. 2008-1479 (Fed. Cir. Sept. 16, 2009), was the Federal Circuit’s discussion of whether the asserted trademark—here, the numerical designation 5000—functioned as a trademark or merely as a “grade designation.” The plaintiff used the number in the mark “Vita-Mix® 5000,” to distinguish it from the plaintiff’s previous products, the “Vita-Mix® 3600” and “Vita-Mix® 4500.” Given that the plaintiff didn't use the number apart from the mark “Vita-Mix® 5000,” and in light of plaintiff’s concession that the number served only to differentiate from the two previous “Vita-Mix®” products, the Federal Circuit held that "5000" reflected only the “style or grade” of product and possessed neither inherent nor acquired distinctiveness.

Commentary: The Vita-Mix case touches upon, but doesn’t really discuss, an issue that has always intrigued me: the tension between the numbers=style/grade “presumption” (if you can call it that) and the principle that a product can bear more than one trademark. Think, for example, whether the numbers in the following designations are trademarks or mere style/grade designations: BMW 530, BOEING 767, MITCHELL 300. There are probably circumstances at which a number used in this manner becomes a separately protectable trademark, but I’ve never had the opportunity to research exactly where that line is drawn.

6th Circuit decision affirming dismissal of TM infringement complaint under rule 12(b)(6)

In a decision with potentially important procedural ramifications, the 6th Circuit today affirmed the rule 12(b)(6) dismissal of a trademark infringement complaint for failure to state a claim.

In Hensley Mfg., Inc. v. ProPride, Inc., No. 08-1834 (6th Cir. Sept. 3, 2009), the plaintiff alleged it was the owner of the HENSLEY mark, which it purchased from Jim Hensley when it purchased Hensley’s trailer hitch business. Jim Hensley then started working with a competing company (ProPride). At ProPride, Hensley designed a competing trailer hitch, and to promote it, ProPride created some print advertisements and webpages that talked about “the Jim Hensley Hitch Story,” described Jim Hensley’s history of designing trailer hitches at Hensley Mfg., and touted how he has now designed an even better hitch at ProPride. The ads and webpages all contained a disclaimer that Jim Hensley is no longer affiliated with Hensley Mfg. The complaint attached the ads and print-outs of the webpages.

The district court dismissed the complaint under rule 12(b)(6) finding that the allegations and attachments showed that the fair use defense applied as a matter of law.

The 6th Circuit affirmed. The court held that it need not get into the likelihood of confusion factors because the complaint and its attachments showed, as a matter of law, that the word “Hensley” was not being used as a trademark (i.e., an indicator of source). Examining the attachments closely, the court held that they conclusively demonstrated instead that the name “Hensley” was being used lawfully solely to refer to the individual accomplishments and reputation of Jim Hensley, and the attached ads and webpages did not create a likelihood of confusion as to source.

The 6th Circuit also expressly approved of the district court’s having based the dismissal on the “fair use” defense, even though, by first moving to dismiss the complaint, the defendants hadn’t even pleaded it yet. The 6th Circuit reasoned that there’s nothing wrong with dismissing a complaint where the allegations conclusively establish an affirmative defense as a matter of law.

IMPLICATIONS: One of the lessons here might be to be careful not to plead yourself out of court. Specifically, it might be useful to consider whether the complaint in this case could have been dismissed under rule 12(b)(6) if the plaintiff hadn’t attached copies of the offending ads and webpages. On the other hand, the 6th Circuit referenced at the outset the (arguably heightened) “plausibility” pleading standard in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), although it did not ultimately appear to rest the dismissal in any significant way on the “implausibility” of the factual allegations in the complaint itself. So it may conversely be useful to consider if there is such a thing as a trademark complaint that is too bare-boned. At minimum, however, in any trademark case where a plaintiff is considering unusually detailed factual allegations and/or attaching copies of the allegedly infringing uses to the complaint, the pleader would do well to consider whether the pleading would survive the sort of analysis the 6th Circuit used here.

9th Circuit decision on "tacking" doctrine in context of an evolving trademark design

The Ninth Circuit yesterday decided an interesting case involving the concept of “tacking” the use of one form of a trademark onto another. In One Industries, LLC v. Jim O’Neal Distributing, Inc., No. 08-55316 (9th Cir. Aug. 24, 2009), the trademark owner claimed that the defendant’s stylized letter “O” infringed its stylized “O”. Since the trademark owner’s most recent stylized “O” was closest to the defendant’s stylized “O” but was also adopted after the defendant adopted its stylized “O,” the trademark owner tried to “tack” its junior stylized “O” onto its more senior stylized “O”s.

The 9th Circuit held that tacking doctrine is extremely strict—so strict that it wouldn’t allow the trademark owner to tack the 2003 “O” onto the older “O”s because they did not create the same, continuing commercial impression. (Sorry, I can't figure out how to upload images of the O's so you can see them, but they're in the opinion).

Having rejected tacking, the court then compared the trademark owner’s 1997 “O” to the defendant’s 1999 “O”.*

The 9th Circuit held that, in the absence of actual confusion, and because the “O” field was crowded with other stylized “O”s, these two “O”s were too different to give rise to a likelihood of confusion.

* Interestingly, the court did not explain why it was allowing the trademark owner to assert infringement based on a mark it abandoned in 2003. I mean, shouldn't the Defendant, if anyone, have been the one asserting that the Plaintiff moved closer to it and was, as a result, the infringer??

9th Circuit decision giving broad interpretation to copyright venue statute

Small law firm with purely local practice in S.D. Cal. copies the “elder law” section of a Northern California firm’s website. Northern California firm sues for copyright infringement in N.D. Cal.

Venue proper?

Yup.

And if you’re not asleep yet and are interested in why, I try below to summarize the decision.

In a 2-1 decision, the 9th Circuit recently took a broad view of the copyright venue statute, 28 U.S.C. § 1400(a). Section 1400(a) provides that venue is proper where the defendant “resides or may be found.” So how is it that a small San Diego firm “resides or may be found” in Northern California?

Under 9th Circuit precedent, the copyright venue inquiry is the same inquiry as for personal jurisdiction. The 9th Circuit test for specific personal jurisdiction focuses on whether the defendant “purposefully directed” his activities at the forum or a resident. That, in turn, requires use of the three-part “Calder effects” test. See Calder v. Jones, 465 U.S. 783 (1984) ((1) intentional act (2) expressly aimed at forum (3) causing known, likely harm in the forum). While not crystal clear, prior precedent in the 9th Circuit seemed to indicate that “express aiming” requires something more than an intentional act causing harm to a known resident of the forum.

The majority thought there was “something more” in this case because the S.D. Cal. law firm “individually targeted” the N.D. Cal. law firm for the purpose of competing in the same area of law, and possibly confusing potential clients about who authored the text at issue. The dissent thought that the majority’s analysis conflated the “express aiming” part of the Calder effects test with the “known likely harm” part.

The dissent pointed to prior 9th Circuit precedent that held that if the defendant isn’t targeting potential clients in the forum, then there’s no “express aiming.” And here, the defendant was targeting only San Diego clients.

The case is Brayton Purcell LLP v. Recordon & Recordon, No. 07-15383 (9th Cir. Aug. 5, 2009).

4th Circuit decision on “public use doctrine”

Public use doctrine concerns whether a company can acquire trademark rights in a mark it doesn’t use, but instead is a nickname by which the public refers to it or its goods and services. That’s how the term “Coke” came to be a trademark of Coca-Cola. But the plaintiff in George & Co. v. Imagination Entertainment Ltd., No. 08-1921 (4th Cir. July 27, 2009) didn’t fare as well as Coca-Cola did in days gone by.

George had used the term LEFT CENTER RIGHT for a dice game in the 1980s, but then abandoned that mark in favor of its abbreviation LCR. When the defendant later began using LEFT CENTER RIGHT, George sued. Sensing defeat if it asserted only LCR, George tried to claim that, even though it stopped using LEFT CENTER RIGHT, the public still used that term to refer to George’s dice game.

The 4th Circuit rejected the argument. It held that public use doctrine should be narrowly construed to apply only where: (1) the formal mark that is the object the public nickname is well-known (e.g., COCA-COLA or BUDWEISER); and (2) the nickname “adds distinctiveness” to the formal mark (e.g., COKE or BUD). Applying these principles to the facts in the case, the 4th Circuit held that LCR wasn’t well-known and that simply elongating it to LEFT CENTER RIGHT didn’t add to its distinctiveness.

(There’s also a lengthy and unremarkable discussion of the likelihood of confusion analysis.)

Federal Circuit holds HOTELS.COM generic and refuses registration

The Federal Circuit continued what some may consider a stubborn refusal to acknowledge how modern-day business is done over the Internet by holding the mark HOTELS.COM generic and refusing to allow it to be registered as a trademark.

In In re Hotels.com, L.P., No 2008-1429 (Fed. Cir. July 23, 2009), the applicant argued, to no avail, that it was not a hotel, but instead provided travel related information and travel agency services. The Federal Circuit thought that since a large part of those services involved hotels, the services were close enough to the name to be generic. The Federal Circuit also stuck by the PTO’s consistent policy that adding “.com” to a generic name doesn’t make the generic name into a trademark. For evidentiary reasons, the Federal Circuit also discounted several consumer affidavits and a survey for evidentiary showing that 76% of respondents thought HOTELS.COM was a brand.

Some (maybe a lot) may argue that this decision ignores that Internet-savvy consumers may increasingly view designations in the form “product category.com” as brand names for services facilitating commerce in that product category. But the question may not be ripe for reconsideration by the en banc court until presented in a case avoiding the evidentiary shortcomings identified in this one.

11th Circuit decision on corporate domain name renewal policies and "bad faith" element of cybersquatting case

In an interesting decision, the 11th Circuit ruled that 3M did not exhibit bad faith in continuing to renew a domain name that they did not use and which consisted of a trademark they previously abandoned. In Southern Grouts and Mortars, Inc. v. 3M Co., No. 08-15850 (11th Cir. July 23, 2009), the plaintiff really wanted 3M’s “diamondbrite.com” domain name. Even though it wasn’t using it, 3M refused to sell it to Southern Grouts, so Southern Grouts sued for cybersquatting under the ACPA (15 U.S.C. § 1125(d)).

3M previously acquired the DIAMOND BRITE mark and the domain name from another company, but quickly stopped using the mark, and a short time later stopped displaying content on the “www.diamondbrite.com” website. The PTO in due course cancelled 3M's DIAMOND BRITE registrations for failure to show continuing use. 3M kept renewing the domain name, however, for two reasons: (1) it was concerned that someone would pick it up and use it in a manner that could be confused with 3M’s unrelated DIAMOND GRADE mark; and (2) it had a corporate policy of continuing to renew its registered domain names indefinitely unless there was an explicit corporate decision not to.

The 11th Circuit held that on these facts, 3M could not be held to have acted in bad faith, a necessary element of an action under the ACPA.

11th Circuit decision on ACPA (i.e., cybersquatting) damages

The Eleventh Circuit recently held that statutory damages under 15 U.S.C. § 1117(d) for violations of the Anticybersquatting Consumer Protection Act (ACPA), 15 U.S.C. § 1125(d)):

1. are designed to punish cybersquatters and deter future violations; and, as such
2. may be ordered in the absence of any actual damages; and
3. are not duplicative of any actual damages awarded under 15 U.S.C. § 1117(a) for infringement or unfair competition.

The case is St. Luke’s Cataract and Laser Institute. P.A. v. Sanderson, No. 08-11848 (11th Cir. July 9, 2009).

9th Circuit TM decision: standards for preliminary injunction ordering product recall

The 9th Circuit recently decided that a preliminary injunction ordering a recall of infringing product should not be ordered based simply on a showing that the four traditional preliminary injunction factors favor an injunction. Rather, the court must in addition consider the following additional factors: (a) whether the infringement was willful or intentional; (b) whether the risk of confusion and injury to the trademark owner outweighs the burden of a recall; and (c) whether there is a substantial danger to the public due to the infringing activity.

Marlyn Nutraceuticals , Inc. v. Mucos Pharma GMBH, No 08-15101 (9th Cir. July 2, 2009), concerned competing sales of an enzyme-based dietary supplement. The district court ordered a recall based only on an assessment of the four traditional preliminary injunction factors: (1) likelihood of success; (2) irreparable harm; (3) balance of harms favoring the movant; and (4) the public interest. But the 9th Circuit held that a preliminary injunction ordering a recall goes beyond preservation of the status quo. Instead, a recall constitutes a “mandatory” injunction, which requires an additional showing. In the context of a trademark infringement case, the 9th Circuit, agreeing with a prior 3d Circuit decision, held that district courts must consider the three additional factors set forth above. In particular, the 9th Circuit noted that if “the district court makes a finding that the infringing product causes a substantial risk of danger to the public, it should order a recall.”

Interestingly, the 9th Circuit also noted that irreparable harm may be presumed from a showing of likelihood of success, a position that other courts have suggested is at odds with the Supreme Court patent injunction decision in eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).

8th Circuit: Intervening receipt of "incontestability" status defeats collateral estoppel in renewed trademark suit

The 8th Circuit recently handed down a decision holding that collateral estoppel did not bar a second trademark suit between the parties when, in between the two suits, the plaintiff received § 15 incontestability. The case concerned a unique fact situation that probably won’t pop up in any dispute we’ll ever see, but in case you’re still interested, I summarize it below.

Here’s the chronology in B & B Hardware v. Hargis Industries, Inc., No. 07-3866 (8th Cir. June 22, 2009): Plaintiff registered its mark. Defendant then petitioned the TTAB to cancel it. A short while later—and before Plaintiff’s registration qualified for incontestability status—Plaintiff sued Defendant for infringement in SUIT 1. The TTAB subsequently stayed Defendant's cancellation proceeding. A jury then found against Plaintiff in SUIT 1, expressly finding that its mark was merely descriptive and lacked secondary meaning. When the TTAB matter resumed, however, the TTAB wouldn’t let Defendant assert mere descriptiveness/lack of secondary meaning. It said it was too late to add that claim (which apparently was not one of the initial grounds for cancellation), and dismissed Defendant’s cancellation petition. Later, Plaintiff’s registration achieved incontestable status under § 15. Plaintiff then sued Defendant for infringement again in SUIT 2.

Defendant argued that collateral estoppel barred SUIT 2 because the jury in SUIT 1 previously held that the mark was merely descriptive and lacked secondary meaning. The 8th Circuit, however, disagreed. It held that the receipt of incontestability status constituted a “significant intervening factual change”—and reflected something more than just “the mere passage of time”—thus allowing PLAINTIFF to escape the clutches of collateral estoppel.

8th Circuit decision on laches and "progressive encroachment"

Did the 8th Circuit recently make “progressive encroachment” more of a formalistic, procedural headache than it had been? That’s how its decision in Champagne Louis Roederer v. J. Garcia Carrion, S.A., No. 08-2907 (8th Cir. June 24, 2009), seemed to me.

Roederer makes the famous CRISTAL high-end champagne; Carrion and its predecessor (“Carrion”) make a much cheaper Spanish sparkling wine under the marks CRISTALINO and CRISTALINO JAUME SERRA. There were plenty of times when Roederer had been aware of CRISTALINO. Roederer opposed Carrion’s attempts to register one or more of these marks in Spain in 1989, in Colombia in 1991, and in the U.S. in the mid-1990s. Roederer also saw an affidavit in another case in 1995 from which it learned that a Cost Plus store in California was stocking CRISTALINO. In 2002, Carrion filed another application for CRISTALINO in the U.S., and Roederer filed a TTAB opposition.

But Roederer didn’t file a district court action until 2006. The district court dismissed the lawsuit based on laches because it found that Roederer learned in 1995 that Carrion was selling CRISTALINO in the U.S., and by that time Carrion was selling as many bottles of CRISTALINO as Roederer was selling of CRISTAL.

The 8th Circuit reversed. It held that progressive encroachment can alter the date that a laches defense begins to run (which other courts have noted). But where the 8th Circuit seemed (at least to me) to go further was in holding that, where progressive encroachment is asserted, the date runs from the time that the trademark holder first possesses an “actionable and provable” claim. It then said that this analysis requires an assessment of all of the likelihood of confusion factors at the time that the plaintiff first received notice of the defendant’s infringing use (in this case, the court assumed that was 1995, when Roederer found out about the California Cost Plus sales). The 8th Circuit reversed and remanded because the district court hadn’t made that full assessment.

My two cents: This test just seems too formalistic. Also, it would almost necessarily seem to have the effect of unduly lengthening and complicating trials. The parties will have to prove infringement at two times: the present time, and whatever the laches date is alleged to be. I have always conceptualized progressive encroachment as focusing on a less rigid analysis. Courts would look at objective and subjective facts concerning what the infringer had been doing and how confusing and damaging that was, and then see whether there was any substantial and relatively sudden change to the nature of the use or the extent of damage, as opposed to the simple results of natural growth in the marketplace. If it was just natural growth, laches began running at the earlier date; if there was a big, sudden change, laches began running at the later date. My view, of course, could be wrong, but in any event be forewarned about how the 8th Circuit apparently now analyzes progressive encroachment allegations.

2d Circuit: Re-sale of goods whose UPC codes are removed or altered can constitute TM infringement

Similar to the 10th Circuit case I posted recently, the 2d Circuit recently issued a decision concerning whether re-sale of materially altered goods under the original trademark can constitute trademark infringement.

In Zino Davidoff SA v. CVS Corp., No. 07-2872 (June 19, 2009), the plaintiff manufactures high-end fragrances. It sells primarily through authorized dealers. Its quality control and anti-counterfeiting programs rely in large part on UPC codes in the bottom of each product. The various information embedded in the codes permits Davidoff to control quality by being able to trace back any defective product so it can implement effective recalls, etc. The unique numbering in the codes also permits Davidoff to detect counterfeit products, since counterfeiters either don’t use such codes or their replicas of the codes don’t conform to the format of the Davidoff codes.

The plaintiff caught CVS selling the products with the UPC codes removed, and sued for trademark infringement, obtaining a preliminary injunction.

The Second Circuit affirmed the injunction, holding that -- regardless of whether the goods were genuine or counterfeit, and regardless of whether the goods are of lesser quality than Davidoff’s product -- the re-sale of these goods with the Davidoff UPC code removed interfered with Davidoff’s legitimate quality control and anti-counterfeiting programs. The court also noted that the removal of the UPC codes was detectable by consumers of such luxury goods, but its decision did not appreciably rely on this ground for sustaining the injunction.

10th Circuit: Re-sale of materially-altered original goods not immunized by first sale doctrine from Lanham Act liability

The 10th Circuit recently handed down an important trademark decision concerning “first sale doctrine” and non-genuine goods. In Beltronics USA, Inc. v. Midwest Inventory Distribution, LLC, No. 07-3340 (10th Cir. April 9, 2009), the court held that:

(1) first sale doctrine does not immunize a re-seller of goods that are materially different from genuine goods from Lanham Act liability (no biggie here); and

(2) differences in warranty or service terms can constitute such a material difference (this was the important part).

Beltronics makes radar detectors. It had only two authorized distributors, but these two companies sometimes sold to other (unauthorized) companies for re-sale. The authorized distributors stripped Beltronics’ serial number from the product (or placed a phony serial number label on the product) before shipping to the unauthorized re-sellers. The unauthorized products were then sold on eBay. Beltronics’ warranty policy precludes coverage for detectors not bearing the original serial number. A few customers returned detectors bought on eBay for warranty service but Beltronics told them the goods weren’t covered. The customers were angry and blamed Beltronics for deceiving them.

In addition to the holdings mentioned above, the court noted that it was theoretically possible for such re-sellers of materially-different goods to avoid liability if they disclosed the differences in a manner sufficient to prevent confusion. But the 10th Circuit upheld the district court’s factual finding that the instances of actual confusion here (and resulting loss of goodwill) indicated that the defendants’ disclosures in this case were inadequate.

Federal Circuit Clarifies Analysis for Preliminary Injunction in Patent Cases

The Federal Circuit recently issued a precedential opinion clarifying, in two respects, the proper analysis for deciding whether to grant a preliminary injunction in patent cases.

In Titan Tire Corp. v. Case New Holland, Inc., No. 2008-1078 (Fed. Cir. June 3, 2009), the court first noted that the basic standard for issuance of a preliminary injunction in any type of case is the four-factor test set forth recently by the Supreme Court in Winter v. Natural Resource Defense Council, 129 S. Ct. 365, 374 (2008): “[a] plaintiff seeking a preliminary injunction must establish [1] that he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest.” (emphasis added). Prior to Winter, each circuit had its own variation of the test, but the Federal Circuit acknowledged that the Winter test “is now the definitive one,” and that the movant bears the burden of persuasion on these factors.
Second, the court addressed the patent-specific issue of the parties’ respective burdens concerning the invalidity at the preliminary injunction stage. In a nutshell, the Federal Circuit held:

• The trial court must weigh the available evidence for and against validity;
• If there is a “substantial question of invalidity,” then the patentee has by definition not shown that he is likely to succeed on the merits;
• A “substantial question of invalidity” exists where “the alleged infringer has presented an invalidity defense that the patentee has not shown lacks substantial merit”; and
• While the “clear and convincing evidence” standard for proving invalidity does not apply at the preliminary injunction stage, the judge should consider that the infringer must meet that standard at trial in deciding whether, at the preliminary injunction stage, a substantial question of invalidity exists.

5th Circuit: Need "Fixed" Product Design to Invoke DJ Jurisdiction in Trade Dress Dispute

On May 8, the 5th Circuit affirmed the dismissal of a declaratory judgment action concerning the trade dress of a bottom-dump truck trailer design. In Vantage Trailers, Inc. v. Beall Corp., No. 08-21039 (5th Cir. May 8, 2009), the defendant Beall owned a registered trademark for the design of its bottom-dump trailer. It learned that its rival, Vantage, had begun to manufacture and offer to sell a competing bottom-dump trailer, and so wrote Vantage a nasty letter accusing the new trailer design of trade dress infringement. Vantage sued for a declaration of noninfringement.

The 5th Circuit, however, pointed out that during the litigation Vantage had made certain modifications to the external configuration of the trailers. During this period, Vantage also sent one of its customers different depictions of the trailer. Based primarily on these facts, the 5th Circuit concluded that Vantage was thus “not immediately prepared to manufacture and sell trailers at the time it filed suit.” As a consequence, the courts entertaining the dispute would be unable to “compare [the shape of Vantage’s trailers] against that of Beall’s trailers” to determine whether trade dress infringement existed. Citing two patent DJ decisions (one from the Federal Circuit and a much older one from the 7th Circuit), the 5th Circuit held that Vantage “failed to meet its burden to show that its design was substantially fixed as to the potentially infringing elements, i.e., the appearance of the trailers, at the time of suit” (emphasis added), and therefore affirmed dismissal of the declaratory judgment action for lack of an immediate and real controversy.

The War of 1404 Continues

The Federal Circuit recently issued two precedential orders concerning transfers under 28 U.S.C. § 1404(a). Both concerned E.D. Tex. cases.

In In re Volkswagen of America, Inc., No. Misc. 897 (Fed. Cir. May 22, 2009), the court denied a writ of mandamus that sought to overturn the E.D.Tex. court's refusal to transfer two patent infringement cases (based on the same patents) brought by a Texas company against many, many auto manufacturers located around the world. In a short order, the court agreed with the district court that it made sense to try such a case in one district. Apparently the Federal Circuit viewed the E.D. Tex. as good as any other district for that purpose.

In In re Genentech Inc. and Biogen, Inc., No. Misc. 901 (Fed. Cir. May 22, 2009), however, the court granted the writ of mandamus and ordered the E.D. Tex. to transfer a patent suit brought by a German company against a San Diego company and a San Francisco company to San Francisco. In a lengthier discussion, the Federal Circuit explained that the district court made several legal errors in its convenience analysis.

A 4th Circuit Copyright Decision that Stretches Fair Use Too Far?

A.V. v. iParadigms, LLC, No. 08-1424 (4th Cir. Apr. 16, 2009) involved a company that offers an on-line anti-plagiarism service to high schools and colleges who want to make sure their students aren’t cheating.

iParadigms signs up schools for a fee. The schools then require their students to submit all their term papers through iParadigms’ “Turnitin” program. The program stores the papers and compares them to content on the Internet and with all previously-submitted papers and other materials in the database it keeps. The service then creates an “Originality Report” for the school, suggesting how much of the work, if any, is not original.

Some students challenged whether this service violated their copyrights in their papers. The decision addressed many issues, but one of the key disputes was whether iParadigms’ service fell within the fair use provisions of 17 U.S.C. § 107.

Perhaps the most controversial part of the ruling was on the first fair use factor: “the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes.” Keep in mind that iParadigms is a for-profit company that enjoys millions of dollars of revenues from “Turnitin” and that it does not alter the papers in its database in any way. So one would think that with a for-profit motive and no physical transformative use, this factor disfavors fair use, right? Wrong. The 4th Circuit held that the purpose of unauthorized copying was transformative (iParadigms’ purpose was plagiarism detection, not the creative purpose of the students) notwithstanding that it didn’t alter the documents. And this transformative “purpose” trumped the fact that iParadigms raked in beaucoup $$ from its program.

The rest of the opinion is worth reading too. See if you don’t get the impression, like I did, that this was a result-driven decision (teaching students that plagiarism is wrong is a good thing, right?).

2d Cir. decision allowing Lanham Act complaint against Google's "Adwords" program

The Google programs allow companies to “buy” keywords that may consist of competitors’ trademarks and, when an Internet user searches Google for that keyword/trademark, have Google’s search result page display an ad and a link for the purchaser’s website.

Rescuecom Corp. v. Google Inc., No. 06-4881 (2d Cir. Apr. 3, 2009) held that the district court erred in concluding that the complaint failed to state a claim because Google didn’t “use” the keyword/mark “in commerce.” Rejecting this reasoning, the Second Circuit held that the complaint alleged that Google indeed uses the mark in commerce by displaying it—and even suggesting it—to potential purchasers of advertisements through the two Google Adwords and Keywords Suggestions Tool. The fact that the Internet searcher doesn’t see the mark in a resulting ad in a later search didn’t seem to matter to the Court once the Court found that the complaint had alleged use by Google at the stage of selling their programs to advertisers.
Since it was properly alleged that Google’s programs did in fact “use” the plaintiff’s marks in commerce, and the complaint also alleged that the resulting ads were likely to cause confusion, the Court remanded the case to the district court for further proceedings.

Fed. Cir. decision involving use of prosecution history in a trademark case

Be careful what you say to the PTO in trying to register your mark. The Federal Circuit’s recent decision in Aycock Engineering, Inc. v. Airflite, Inc., No. 2008-1154 (March 30, 2009), shows how prosecution history can sometimes be as dispositive in trademark disputes as it is in patent cases.

Airflite filed a petition to cancel Aycock’s registration for AIRFLITE for the service of “arranging for individual reservations for flights on airplanes.” The key issue was whether Aycock ever “used” the mark. If not, bye-bye registration. This required construction of the meaning of the service Aycock identified in the registration.

The prosecution file showed a lot of back-and-forth between the PTO and Aycock, in the course of which Aycock made several representations about the nature of the service. These representations made clear that Aycock’s service involved putting a traveler in touch with an air charter company with empty seats to fill.

Aycock took several steps towards getting his service off the ground, including signing up several air charter companies, and argued that this showed that he “used” the mark in commerce. The TTAB and Federal Circuit disagreed. Using Aycock’s own prosecution history statements against him to construe the meaning of the identified services, the TTAB and Federal Circuit held that “use” required, in this context, that Aycock have at least tried to have signed up a traveler or two. Signing up air charter companies was merely a step towards offering the service, but didn’t constitute the service itself, which required a traveler as well as a plane. Because there was no evidence that Aycock ever actually offered the service to the traveling public, the registration was canceled.

9th Circuit decision on laches and "public interest" factor in trademark injunction case

In a 2-1 decision in Internet Specialties West, Inc. v. Milon-DiGregorio Enterprises¸ No. 07-55087 (March 17, 2009), the Ninth Circuit affirmed an injunction requiring an Internet service provider to stop using its domain name. One of the effects of the injunction was that the defendant’s 13,000 customers, who innocently used the infringing domain name as part of their individual email addresses (e.g., johndoe@infringingname.com), had to change their e-mail addresses.

The majority and dissent agreed on infringement. The fractures in the panel was mainly over laches and whether the “public interest” favored the injunction.

On laches, the issue was whether the defendant’s 6-year investment in its business—which resulted in growth from 2,000 subscribers to 13,000 subscribers—by itself was enough to show that the defendant was prejudiced by the plaintiff’s delay. The dissent thought that, under 9th Circuit precedent, this was a sufficient showing of prejudice. The majority ruled, however, that “mere expenditures in promoting the infringed name” was not enough under 9th Circuit authority: the defendant must also have developed “brand awareness” or “brand recognition” or “an identity as a business based on its mark”—which the majority thought the defendant failed to do prove.

As to the public interest aspect of the injunction, the majority and dissent disagreed on whether the inconvenience to 13,000 customers of informing all of their e-mail contacts of their new e-mail addresses outweighed the general public’s interest in not being confused.

2d Circuit decision re presumption of irreparable harm in trade secret cases

The Second Circuit appears to have made it a bit more difficult to rely upon a presumption of irreparable harm flowing from a finding of misappropriation of trade secrets.

In Faiveley Transport Malmo AB v. Wabtec Corp., No. 08-5126 (2d Cir. Mar. 9, 2009), the Court held that it is “not correct” that a “presumption of irreparable harm automatically arises upon the determination that a trade secret has been misappropriated.” Slip op. at 10-11 (emphasis added). The court stated that “[a] rebuttable presumption of irreparable harm might be warranted in cases where there is a danger that, unless enjoined, a misappropriator of trade secrets will disseminate those secrets to a wider audience or otherwise irreparably impair the value of those secrets.” Id. at 11 (emphasis added). In contrast, the court noted that damages would tend to be a complete remedy when the “misappropriator seeks only to use those secrets . . . .” Id. (emphasis added). Because there was no evidence that the defendant intended further dissemination, only use, of the trade secrets, the court vacated the preliminary injunction in the case.

4th Circuit decision invalidating OBX as trademark for bumperstickers

In an interesting decision, OBX-Stock, Inc. v. Bicast, Inc., No. 06-1769 (Feb. 27, 2009), the 4th Circuit held that the term OBX was geographically descriptive of the Outer Banks seashore in North Carolina. The court thus ruled that the plaintiff – who was the acknowledged "inventor" of the term and the first to use it on the now ubiquitous oval bumperstickers (and on other products) – could not stop others from using the term on bumperstickers.

The court based its decision primarily on the fact that, while the term was not necessarily geographically descriptive when it was coined, the plaintiff’s advertising and promotion was designed to, and did, make the term synonymous in the eyes of the public with the Outer Banks itself, and not with a particular source or brand of goods. The court also noted that copycats had gotten out of hand, and the plaintiff's policing efforts had largely failed.

In an interesting aside, the court highlighted the fact that the PTO rejected the plaintiff’s application to register the mark five (5) times before finally allowing it, and then only after intense lobbying from the North Carolina congressional delegation. The court stated that the more quickly and easily a mark is allowed, the more likely it is to be valid (i.e.¸ distinctive). Conversely, the more difficult it is to convince the PTO to allow registration, the more likely it is invalid.

Supreme Court Decision Clarifying Preliminary Injunction Standards

In a few circuits, preliminary injunctions are decided using a sliding scale test: the higher the likelihood of success, the less irreparable harm need be proved, so when success looks like a sure thing, sometimes only the "possibility" of irreparable harm will suffice.

Not any more. In Winter v. NRDC, No. 07-1239 (U.S. Nov. 12, 2008), the Supreme Court rejected the notion that preliminary injunctions may be entered based on a showing of only the "possibility" of irreparable harm. (Slip op. at 12.) Instead, the movant must make a "clear showing" on each of the four relevant factors.

Historically, the circuits' varying preliminary injunction tests often play a role in deciding where a trademark plaintiff should file suit. This decision, however, should -- if the circuits actually cite and follow it -- go a long way to eliminating this as a forum-shopping concern.

5th Circuit's en banc decision on section 1404(a) transfers in In re VW

In this much anticipated decision, the en banc court has directed the E.D. Tex. to transfer this car crash case, which had the barest connection, if any, to that district, to the N.D. Tex., Dallas Division.

For those who don't want to wade through 37 pages of majority and dissenting opinions, it looks to me that this decision will be as relevant to patent cases as the now-vacated prior panel opinion would have been. How the E.D. Tex. judges will APPLY the case, however, will certainly be an interesting question. As with the prior panel's opinion, the en banc decision:

• said that the oft-repeated concept of the "weight given to a plaintiff's choice of forum" simply means that the movant has the burden of proof to show "good cause" for transfer, and no more than that.
• held that under 1404(a), "good cause" for transfer means "when the transferee forum is clearly more convenient, a transfer should be ordered."
• said that a court should NOT completely discount that the documents and physical evidence are located outside the district simply because of "advances in copying technology and information storage."
• re-affirmed the 5th Circuit rule of thumb that where witnesses reside more than 100 miles from the court, the inconvenience to them increases as the distance beyond 100 miles increases.

Perhaps most importantly, the court discounted that the denizens of Marshall may have an interest in the case simply because the product is available there. The en banc court reasoned that such a concept could apply "virtually to any judicial district or division in the United States."