Whole Buncha Stuff

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

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

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

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

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

Federal Circuit Addresses Genericism, Descriptiveness, and Acquired Distinctiveness

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

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

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

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

5th Circuit decision on copyrightability of garment designs

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Permanent Litigation (KP, that is)

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

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

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

Pre-emption: Copyright Act v. Right of Publicity

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

Mi jury demand es tu jury demand

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

9th Circuit Botches "Relatedness of Goods" Inquiry?

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

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

4th Circuit on proving up copyright infringer's profits

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

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

Blogger ate my homework

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

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

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

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

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

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

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

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

2d Circuit Declares Open Season on Cuban Marks

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

8th Circuit Food Fight over LOUIS KEMP Mark

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

Ingredients:

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

Let's Cook:

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

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

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

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

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

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

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

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

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

3d Circuit Holds Lanham Act Claim Barred by Laches

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

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

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

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

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

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

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

7th Circuit Says Prevailing Defendants in Copyright Cases Presumptively Entitled to Attorneys' Fees

In Woodhaven Homes & Realty, Inc. v. Hotz, No. 03-4158 (7th Cir. Jan. 28, 2004), the 7th Circuit reiterated its recent holding that prevailing defendants in copyright cases are "presumptively entitled (and strongly so) to recover attorney fees." Otherwise, plaintiffs could coerce settlements with impunity even in frivolous cases, and defendants would be discouraged from asserting their rights in court. (Slip op. at 3.) The court suggested, however, that defendants who incur way more in legal fees than the plaintiff demands may have their fee award reduced as a result. (p.4).

8th Circuit Affirms Perpetual Injunction Against Use of Trade Secrets

If you're a user of Premarin brand hormone replacement product, you probably don't want to read footnote 2 in the 8th Circuit's decision in Wyeth v. Natural Biologics, Inc., No. 03-3651 (8th Cir. Jan. 24, 2005). The case involved allegations by the drug's maker that a competitor stole the trade secrets needed to make the product, whose prime ingredient, natural conjugated estrogens--and here's the yucky part--"is made by extracting conjugated estrogens from pregnant mare urine." (Slip op. at 3 n.2).

Of interest in the 8th Circuit's opinion is its discussion of a whole bunch of circumstantial evidence--there was no direct evidence of theft--that supported the district court's finding that the defendant misappropriated the secret process (pp. 5-6.) The court found it particularly significant that no one had, for decades, been able to replicate the Wyeth process, and the court believed that this fact gave rise to an inference that the defendant must have gotten it illegally.

But in the statute of limitations discussion, that fact proved a one way street headed exactly where the plaintiff wanted to go. A process may be so hard to replicate that when someone replicates it, it must be stealing, right? But when the trade secret owner sees that the defendant has replicated it, he isn't charged with notice that the defendant stole it. (pp. 6-9.) Huh?

Anyway, on to remedy. The district court forever barred the defendant from all activity related to the development of natural conjugated estrogens. The defendant thought that the injunction ought to be limited to whatever "head start" the misappropriation gave it. . . but forever? Sheesh!

The 8th Circuit affirmed the permanent timeout, however, primarily because the defendant acted very sneakily during the litigation, destroying evidence, lying, hiding things, whistling some nameless tune while looking around innocently, etc. So sneaky, in fact, that the district court felt that the defendant couldn't be trusted to comply with any order that gave it any wiggle room. The 8th Circuit affirmed on this point. (pp. 9-10.) And I would be missing a marketing opportunity if I were to fail to mention that this holding seems to be in line with my scintillating article, Permanent Injunctions in Trade Secret Actions: Is a Proper Understanding of the Role of the Inadequate Remedy at Law/Irreparable Harm Requirement the Key to Consistent Decisions?, 28 AIPLA Q. J. 124 (Spring 2000). Alas, the court didn't cite to it. Bummer.

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

Plaintiff Gets Injunction Despite Sloppy Trademark Practices

On January 13, the Sixth Circuit affirmed a preliminary injunction prohibiting a defendant's further use of the plaintiff's TUMBLEBUS mark for a preschool gym on wheels. The plaintiff really dodged a bullet, however, that was aimed at the sloppy way she let her customers use her trademark.

In Tumblebus, Inc. v. Cranmer, the plaintiff uses the TUMBLEBUS mark both for sales of reoutfitted school buses and for the operation of several buses in the Louisville area. The buses the plaintiff sold to 3rd parties not only looked like the plaintiff's buses, but she also (1) allowed the buyers to use the TUMBLEBUS mark, (2) gave them training lessons in how to pitch the services, and (3) further entered into informal oral agreements about where these buyers could operate. In other words, the plaintiff's business looked a lot like a haphazard and informal form of franchising . . . but without the oversight and quality control.

This informality resulted in a legal dispute when one of the plaintiff's purchasers began operating in the Louisville area, which the plaintiff considered HER territory. The purchaser later sold to someone else, who continued to operate in Louisville.

Suing the purchaser of the used bus, the plaintiff was still able to win a preliminary injunction and get it affirmed by the 6th Circuit. The courts found that the defendant had failed to create a factual record sufficient to find the mark was, or had become, generic. The court also rejected the argument that the mark was descriptive because it found "preschool gym on wheels" more appropriate as a description and thought that TUMBLEBUS required a bit of imagination.

Finally, the courts also rejected an abandonment-through-naked-licensing argument because the one geographic are where that argument really didn't apply was Louisville -- where the plaintiff herself was the exclusive operator.

The lesson here . . . . well, maybe there is no lesson here, since the plaintiff seems to have gotten away with some pretty loosey-goosey business practices. Next time, however, TUMBLEBUS may not be so lucky.