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.
Wednesday, April 26, 2006
Monday, April 17, 2006
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.
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.
Wednesday, April 05, 2006
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?
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?
Wednesday, March 29, 2006
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.
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.
Wednesday, March 08, 2006
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.
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.
Friday, February 17, 2006
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.
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.
Friday, February 10, 2006
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.
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.
Thursday, February 02, 2006
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.
Monday, January 16, 2006
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.
Sunday, November 06, 2005
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.
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.
Sunday, October 02, 2005
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."
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."
Thursday, September 01, 2005
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.
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.
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.
Wednesday, August 31, 2005
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.
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.
Wednesday, August 17, 2005
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.
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.
Sunday, August 14, 2005
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.
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.
Tuesday, August 09, 2005
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.
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.
Monday, August 08, 2005
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.)
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.)
Saturday, August 06, 2005
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.
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.
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