10th Circuit decision on whether TTAB proceedings and old C&D letters create DJ jurisdiction

I think this is the first appeals court decision to address whether the nascently infamous footnote 11 in MedImmune, Inc. v. Genentech, Inc., 127 S. Ct. 764 (2007) applies to trademark cases. Yup, it does.

In Surefoot LC v. Sure Foot Corp., No. 06-4294 (10th Cir. July 8, 2008), the DJ defendant had sent the DJ plaintiff several cease & desist letters making accusations of infringement in 1998-99. Then it stopped. In 2002, the DJ plaintiff started filing applications to register the mark at issue. When the first one issued, the DJ defendant petitioned the TTAB to cancel it. After that, any time the DJ plaintiff filed an application, the DJ defendant opposed it. All these TTAB disputes are still pending. But since 1999, there were no further threats of infringement lawsuits.

The 10th Circuit first held that MedImmune applied to Lanham Act cases and that its footnote 11 overruled its former “reasonable apprehension of imminent suit” standard for DJ jurisdiction in trademark cases. It held that under MedImmune the controversy must be “definite and concrete, touching the legal relations of parties having adverse interests” and that the dispute be “real and substantial and admit of specific relief through a conclusive decree, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.”

Applying this test, the 10th Circuit held that the combination of the several TTAB proceedings, taken together with the 1990s cease and desist letters and threats (which the DJ defendant never withdrew) satisfied the requirements for DJ jurisdiction. It remanded for the district court to determine whether it should nevertheless exercise its discretion (based on a multi-factor test) not to entertain the suit.

The court refused to opine whether the lapse of more time since the last cease and desist letters or fewer TTAB proceedings would satisfy the new, yet old, MedImmune test.

5th Circuit Adopts Presumption of Irreparable Harm by Rejecting Presumption of Irreparable Harm

In Paulsson Geophysical Serv., Inc. v. Sigmar, No. 07-50406 (5th Cir. May 23, 2008), the US plaintiff licensed the named US defendant (Sigmar) and his US company (RSI) to "promote Paulsson's MASSIVE 3D VSP services in Mexico." RSI immediately turned around and, going beyond merely "promoting" Paulsson's services, "licensed" its Mexican sister company, RSM, to "use" Paulsson's mark in Mexico, and RSM did. In Mexico. They just didn't use Paulsson's services with Paulsson's mark.

Paulsson sued in the US and got a preliminary injunction. The 5th Circuit affirmed. First it found it had extraterritorial subject matter jurisdiction even though the infringement was limited to Mexico because US companies were involved, there was no conflict with Mexican law, and the defendants obtained financing for their Mexican business in the US. In so holding, the 5th Circuit made fairly clear that, for a case claiming trademark infringement in a foreign country to have enough "effect" on US commerce to trigger the Lanham Act, a court need not limit its inquiry to the actual challenged transaction, but can look at all sorts of ancillary activity too.

Now to the irreparable harm issue. As you know, courts are beginning to apply eBay's holding ("no broad rules for or against patent injunctions") to the "presumption of irreparable harm" concept in trademark cases. See, e.g., N. Am. Med. Corp. v. Axion Worldwide, Inc., No. 07-11574, 2008 WL 918411, at *12 (11th Cir. Apr. 7, 2008), which I previously blogged on. The Fifth Circuit had been the last holdout on adopting this presumption. While patting itself on the back for holding out, and citing eBay, the Fifth Circuit in this case then turned around, however, and -- in effect -- adopted the presumption. It said it wasn't, but, really, it was. It said that "loss of control of the quality" of services RSM was offering (and mentioning the size of the RSM transaction), was enough to prove irreparable harm.

So the lesson here is this: To get the presumption of irreparable harm in TM cases in the 5th Circuit, simply have your client speculate, er, I mean "testify," about the potentially devastating consequences of the lack of control (i.e., "OMG! What if the defendants' [goods] [services] are sub-par? Their customers will probably think it's us!! And they'll, like, hate us forever!! OMG!"). And voila! Irreparable harm! (Just don't say "presumption.")

Two interesting 11th Circuit decisions (by the same panel!); ALSO, Several Posts that Blogger deleted during a 7-month period from 2007-08

The issues the 11th Circuit addressed in two interesting recent cases included progressive encroachment, fraud on the PTO in obtaining registration, metatags, and the application of the Supreme Court's decision in the recent patent case eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) to trademark claims.

In Angel Flight of Georgia, Inc. v. Angel Flight America, Inc., No. 07-11460 (11th Cir. Apr. 4, 2008), the court affirmed the district court's rejection of laches and acquiescence defenses on the facts in the case because it found progressive encroachment (the defendant had recently greatly expanded its use of plaintiff's mark in plaintiff's territory) and resulting inevitable confusion.

The Angel Flight court also held that if a person falsely states in a section 1(a) affidavit that no other person has the right to use the mark, but knows that others with rights are in fact using it, then the registration is subject to cancellation for fraud.

In the second case, North American Medical Corp. v. Axiom Worldwide, Inc., No. 07-11574 (11th Cir. Apr. 7, 2008) the court found that use of a competitor's trademarks in metatags would constitute infringement. In this case, the use of the plaintiff's marks in metatags, for some reason, were not fully hidden, but actually appeared in the blurb describing the defendant's website in the Google search results listing. (I don't know enough about computer programming or the way Google searches the web to know why that would happen -- I thought that metatags didn't show up at all unless you actively searched the source code for particular webpages.) Anyway, the court held that this went beyond "initial interest confusion" (which it did not accept or reject as a basis for liability in the 11th Circuit) and caused instead a likelihood of "source confusion" -- which it differentiated from initial interest confusion because "source confusion" cannot be dispelled simply by taking a closer look, as initial interest confusion can be.

Despite affirming the liability aspect of this preliminary injunction appeal, the North American Medical court vacated the preliminary injunction based on eBay. Ruling that eBay's rejection of broad rules either pro- or anti-injunction "is applicable to the instant case," the Court held that eBay wasn't limited to patent law, and it wasn't limited to permanent injunctions. The Court remanded to the district court to determine whether the familiar "presumption of irreparable harm" is one of those general rules that eBay prohibits and, if so, to take evidence on whether irreparable harm was likely to occur absent an injunction. I believe that this is the most explicit appellate discussion to date on whether eBay applies to trademark law. (I believe it does, as I wrote in this article.) It also held that eBay, which concerned permanent injunctions, applies equally to preliminary injunction cases (which, , I also predicted in my article).

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10th Circuit decision regarding VAIL and 1-800-SKI-VAIL

The 10th Circuit, in a 2-1 decision, yesterday affirmed a district court ruling, after a bench trial, that the defendants' 1-800-SKI-VAIL toll-free number for Vail, Colorado related marketing services does not infringe the plaintiff's VAIL mark for ski resort services. Vail Assocs., Inc. v. Vend-Tel-Co., No. 05-1058 (10th Cir. Feb. 7, 2008). I don't think this opinion announced any significant legal rules, but rather was more fact-based.

The opinions are kind of analytical messes, in my view. I had to read it through twice to figure out exactly what the analysis was. My conclusion is that the majority was persuaded that 1-800-SKI-VAIL referred to VAIL and skiing descriptively, not as a mark for resort services, although section 1115(b)(4) and the phrase "fair, descriptive use" are never mentioned anywhere in the opinion. The majority then analyzed the evidence on the likelihood of confusion factors, and found no clear errors on any of these factors based on the evidence at trial. Presumably, this can be rationalized as determining whether the use was "fair" even if it was descriptive.

The dissent also focused on the likelihood of confusion factors, but came to the opposite conclusion. The majority, however, repeatedly chided the dissent for blowing off the "clearly erroneous" standard of review.

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2d Circuit decision re whether 3rd party proposing TM to a company "used" proposed mark

This recent 2d Circuit case may be useful to companies who receive unsolicited "suggestions" from third parties about services, products, or marks.

A guy (hereinafter, the "guy") sent several credit card companies a proposal for personalized credit cards with the cardholder's picture on it. The guy proposed using the tagline "My Life, My Card" in connection with them. None of the companies accepted the guy's proposal, but around the same time, American Express's ad agency independently came up with a theme for some ads where celebrities talk about how they use their AmEx cards. The ad agency proposed using the slogan "MY LIFE. MY CARD." with the ad campaign.

When AmEx began airing the ads, a legal tussle broke out.

The Second Circuit, in American Express Co. v. Goetz, No. 06-2184-cv (2d Cir. Feb. 4, 2008), held that the guy had not "used" the slogan as a trademark. It cited McCarthy and a line of cases dealing with ad agencies whose business is to suggest ad campaigns to others. These cases hold that the ad agencies don't actually "use" the suggested marks to identify their services. Instead, they propose that others use it. Rather than a mark, it's simply the ad agencies' creative work (which may, in certain instances, be subject to copyright protection). So here, the guy was out of luck because he didn't "use" the mark to identify his own business.

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Puzzling 9th Circuit Decision

Wow -- there's really been a spate of holiday season trademark decisions. Well, they do make great stocking stuffers!

The 9th Circuit today issued an especially puzzling opinion. In Applied Information Sciences Corp. v. eBay, Inc., No. 05-56123 (Dec. 28, 2007), "the district court granted eBay's motion [for summary judgment] on the ground that AIS does not have a valid, protected interest in the mark." The 9th Circuit did not mention whether eBay's motion concerned any other issues.

The 9th Circuit held that AIS did have a valid, protected interest in its mark, but then affirmed the grant of summary judgment in eBay's favor anyway "because in opposing eBay's motion for summary judgment AIS failed to produce any admissible evidence tending to show a likelihood of confusion, or even address any of the Sleekcraft factors."

So here's the confusing part:
(a) did eBay's motion also contend that there was no genuine issue of material fact on likelihood of confusion (the 9th Circuit didn't say); or

-- and this next possibility is more troubling --

(b) did eBay's motion not also contend that there was no likelihood of confusion?
If it's (b), why was AIS supposed to put in evidence that there was a likelihood of confusion if the motion concerned validity and protectibility? Is the implicit, unstated rationale based upon the sometimes-cited-but-more-often-forgotten burden-shifting under rule 56? Specifically, some cases hold that where the moving party does not bear the burden of proof, and it moves for summary judgment on less than all elements of the nonmoving party's claim, the moving party with the burden of proof is required to come forward with evidence on each element of its claim.

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4th Cir.: Foreign Applicants May be Subpoenaed to Travel to the US and Testify in TTAB Proceedings

In a 2-1 decision, the 4th Circuit today held that a foreign trademark applicant with no real presence whatsoever in the US may be compelled by a subpoena under 35 U.S.C. § 24 to provide rule 30(b)(6) testimony in the E.D. Va. (because the PTO is located there). This statute empowers district courts to issue subpoenas in aid of PTO proceedings "for any witness residing or being within such district."

The majority in Rosenruist-Gestao E Servicos LDA v. Virgin Enterprises Ltd., No. 06-1588 (Dec. 27, 2007), based its ruling primarily on the ground that nothing in 35 U.S.C. § 24 limits the term "witness" to real people, and so it applies to corporations if they are the "witness." Due to a technicality in the procedural posture of the case, the majority expressly declined to reach the foreign applicant's argument that it didn't qualify as "residing or being within such district." That didn't stop the majority, however, from issuing a one-line footnote -- which it admitted was dictum -- suggesting that the mere act of applying for a registration satisfies the "residing or being within such district" requirement.

The dissent -- which I found pretty persuasive -- really took the majority to task for blowing off the PTO's interpretation (in the TBMP) of the limited reach of subpoena power in inter partes proceedings, as well as the majority's use of procedural technicalities to dodge the issue of whether the applicant, solely by virtue of applying for a registration, thereby rendered itself "residing or being within [the E.D. Va.]" The dissent also lamented that the majority ignored international comity concerns.

By the way, this case would appear fully to apply to inter partes patent proceedings too.

If the applicant has the $$, this decision would seem a likely candidate for en banc rehearing.

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3d Cir. Decision re: Trade Dress and Store Brand Equivalents Products

The Third Circuit recently issued a fairly lengthy decision concerning how close the packaging of store brand equivalent products can come in mimicking brand name products.

The decision in McNeil Nutritionals, LLC v. Heartland Sweeteners, LLC, No. 07-2644 (Dec. 24, 2007) came on an appeal of an order denying McNeil Nutritionals' motion for a preliminary injunction against several store brand equivalents of SPLENDA sweetener. Although the Third Circuit's analysis is largely turned on the specific facts in the case, it did reverse-in-part as to certain of the store brands manufactured by Heartland, largely on its assessment of the prominence of the logo and name of the store itself on the package. The Court acknowledged that, "[a]rguably under our holding, store brands can 'get away' with a little more similarity than other defendants' products when they prominently display a well-known label, i.e., a store-specific signature . . . ." (Slip op. at 39.) The Court suggested, however, that this was in part a consequence of the fact that -- at least with respect to stores that use their logos prominently in the store and on other store-brand products -- consumers are familiar enough with the store logo that when they see it prominently displayed on a package that has some similarities with the national brand, they can still tell the difference. (Id.)

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9th Circuit: atty's fees UNavailable in counterfeiting case where statutory damages elected!

If a prevailing plaintiff in a counterfeiting case elects statutory damages under 15 USC § 1117(c), does he qualify for attorney's fees too under § 1117(b)? Not in the 9th Circuit anymore, according to K & N Engineering, Inc. v. Bulat, No. 06-55393 (9th Cir. Dec. 18, 2007).

The court reasoned as follows: actual damages and/or defendant's profits are available under § 1117(a). Section 1117(b) says that counterfeiting plaintiffs get "three times such damages or profits, . . . together with a reasonable attorney's fee." Section 1117(c) allows the prevailing counterfeiting plaintiff to "elect . . . instead of actual damages and profits . . . , an award of statutory damages." Section 1117(c) doesn't mention attorney's fees, so attorney's fees under § 1117(b) aren't available if a plaintiff chooses statutory damages under § 1117(c). (The court didn't say whether the plaintiff could still argue it gets attorney's fees under the "exceptional case" aspect of § 1117(a).)

To me, this makes no sense. Section 1117(b) applies to counterfeiting cases. It provides for treble damages/profits AND attorney's fees. Section 1117(c) says that a plaintiff can pick statutory damages "instead of actual damages and profits under subsection (a)." It does not say "instead of actual damages and profits and attorney's fees." It doesn't explicitly purport to provide an alternative to all of subsection (b), just to "actual damages and profits under subsection (a)." Automatic attorney's fees aren't damages, aren't profits, and aren't in subsection (a). Thus, the more natural reading would seem to be that the prevailing counterfeiting plaintiff can choose between actual damages under subsection (a) or statutory damages under subsection (c), and still get automatic fees under subsection (b).

I don't know if other circuits have dealt with this issue, but the 9th Circuit certainly didn't cite any in support of this surprising result.

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11th Circuit decision concerning post-sale confusion and misuse of another's TM on hidden parts

Is it infringement when a company uses someone else's trademark on an internal part that is ordinarily hidden from view?

The 11th Circuit recently rejected such a claim. In Custom Mfg. and Eng'g, Inc. v. Midway Servs., Inc., No. 05-12906 (Nov. 21, 2007), the product was a water meter reading system marketed to apartment complex owners. The defendant used the plaintiff's "Custom Manufacturing" mark on an internal circuit board for the meter. The plaintiff's mark was visible only upon removing an opaque plastic housing unit that fully enclosed the circuit board. To borrow from (and distinguish) a very familiar product, while there may in fact have been something analogous to "Intel" on the "Inside," potential buyers and users would not know that there was "Custom Manufacturing" inside without disassembling the unit.

The plaintiff argued that post-sale confusion was likely, because repair technicians or inspecting fire marshals would see the plaintiff's mark. The 11th Circuit rejected this argument, not for legal insufficiency, but for lack of proof. It held that the plaintiff had failed to proffer sufficient evidence "that it was likely that third-party technicians would view and be confused as to the origin of the circuit boards." The Court viewed as an "antecedent question" the issue of whether anyone was "likely to see the circuit boards at all."

The lesson here would appear to be that it is important, when arguing that non-external misuse of a mark is infringing, to present proof that the relevant user or purchaser group would (or did) actually see the misused trademark. Without such proof, the alleged infringement would be, as the 11th Circuit quipped, "like a proverbial tree falling in the forest" with no one around to hear it.

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4th Cir. decision allowing parodies may hurt well-known marks

In a decision that could hurt owners of well-known or iconic marks, the Fourth Circuit recently handed Louis Vuitton a defeat in its attempt to stop a pet products company from selling a dog chew toy in the shape of a handbag and labeled CHEWY VUITON. The Court’s legal rationale concerned how parodies fit within the statutes that govern trademark law. Although Fourth Circuit rulings are binding only in federal courts in Maryland, Virginia, West Virginia, North Carolina, and South Carolina, this decision, if followed by other courts, could have a significant impact on the future ability of the owners of well-known marks to enforce their rights against parodic uses.

In Louis Vuitton Malletier, S.A. v. Haute Diggity Dog, LLC, No. 06-2267 (4th Cir. Nov. 13, 2007), Louis Vuitton had sued Haute Diggity Dog—which sells a number of dog toys and beds with names that spoof well-known luxury brands, including Chewnel No. 5, Dog Perignon, Sniffany, and Furcedes—for trademark infringement under the Lanham Act, 15 U.S.C. § 1114, and trademark dilution under the recently-amended Federal Trademark Dilution Act (“FTDA”), 15 U.S.C. § 1125(c).

Haute Diggity Dog asserted that its CHEWY VUITON chew toy was merely a “parody” of the LOUIS VUITTON mark, and therefore did not infringe or dilute the LOUIS VUITTON mark. The district court agreed, granting summary judgment in favor of Haute Diggity Dog, based on the observation that successful parodies must, by definition, both call to mind the object of the parody and simultaneously differentiate the parody from the object of the parody.

The Fourth Circuit largely agreed with this rationale. In its analysis, the Fourth Circuit did not regard “parody” as a per se defense to claims under the Lanham Act or the FTDA. Instead, it stated that, once a challenged use is found to be a “parody,” that finding must influence the way the court assesses the multiple “likelihood of confusion” factors commonly used under the Lanham Act and the multiple dilution factors expressly set forth in the FTDA.

To qualify as a parody under the Fourth Circuit’s test, the parodic use must satisfy three elements. It must: (1) “convey just enough of the original design to allow the consumer to appreciate the point of the parody”; (2) “communicate some articulable element of satire, ridicule, joking, or amusement”; and (3) be different enough so that it also “communicates that it is not [the original] product.”

One of the more significant aspects of the Fourth Circuit’s analysis was its remarks about how the “fame and popularity” of the original mark weighs in the legal analysis. In infringement and dilution cases not involving parodies, the “fame and popularity” of the original mark weighs in favor of a finding of infringement or dilution. But under the Fourth Circuit’s analysis, “the opposite may be true when a legitimate claim of parody is involved.”

Applying this reverse rule, the Fourth Circuit held that the “Chewy Vuiton” parodic use meant that consumers would be unlikely to be confused because they would “readily recognize” it as a parody. As to dilution, the Court similarly held that the stronger the brand owner’s mark, the “more likely that a parody will not impair the distinctiveness of the mark.”

This analysis would appear to punish a brand owner's success in promoting its mark by making the brand owner more susceptible to parodies and other attempts to capitalize on the brand owner's hard-won goodwill through impugning, mocking, or joking. That result itself may appear to represent a “parody” of the Lanham Act and, especially, the FTDA, which are designed to give broader protection to brand owners in direct proportion to their success in promoting their marks.

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5th Cir. decision ordering E.D. Tex. to transfer a case under 1404(a)

Yesterday the Fifth Circuit sent a shot across the bow of the E.D. Tex. concerning its reluctance to transfer cases. Although it was a products liability case, I read it as holding implications for -- and maybe even silently directed at -- patent cases there, as well.

In re Volkswagen of Am., Inc., No. 07-40058 (5th Cir. Oct. 24, 2007) involved a Dallas (i.e., N.D. Tex.) car wreck that spawned a product liability case against VW. In an earlier unpublished panel decision, the 5th Circuit rejected a petition for mandamus to order the transfer to Dallas. On rehearing, the Court flip-flopped, and ordered transfer.

The Court went through the governing 1404(a) transfer factors pretty thoroughly. Some of the parts of the decision I thought were notable were:
• The Court said that the oft-repeated concept of the "weight given to a plaintiff's choice of forum" simply means that the movant has the burden of proof to show "good cause" for transfer, and no more than that.
• Under 1404(a), "good cause" for transfer means "when the transferee forum is clearly more convenient, a transfer should be ordered."
• A court should NOT completely discount that the documents and physical evidence are located outside the district simply because of "advances in copying technology and information storage." (Maybe the advent of "Beam me up, Scottie" technology might require future re-visiting of this notion).
• Where witnesses reside more than 100 miles from the court, the inconvenience to them increases as the distance beyond 100 miles increases.
But the biggest hint to me that the Fifth Circuit may have been thinking of patent cases too was its discussion of the citizenry of Marshall's interest in the case. The E.D. had said they had a interest in a case involving allegedly defective VWs because VWs are available in the district. The 5th Circuit said that this analysis "eviscerates" the public interest factor where the relevant events took place, and the documents and witnesses are located, outside the district. The Court then ended re-emphasizing this point:

The record indicates that the [car] was purchased from a location in the Dallas Division, and that Marshall, Texas, has no Volkswagen dealership. But again, the larger point is the one we emphasize: that a product is available within a given jurisdiction is insufficient to neutralize the legitimate local interest in adjudicating local disputes.

Since the Federal Circuit looks to regional circuit precedents in reviewing challenges to 1404(a) decisions, it would appear that this last point will perhaps be a significant factor in future venue disputes in E.D. Tex. patent cases. Arguably, it may even apply more forcefully in patent cases, where the E.D. Tex.'s interest in IP rights is more theoretical than its interest in a case involving an allegedly defective car available there.

9th Circuit decision vacating injunction against making disparaging comments about a trademark

The Ninth Circuit today vacated a preliminary injunction prohibiting a defendant from making disparaging comments about a trademark.

The dispute in The Freecycle Network, Inc. v. Oey, No. 06-16219 (9th Cir. Sept. 26, 2007) garnered significant interest from First Amendment law professor types. The plaintiff is a company that encourages people to coordinate recycling efforts to minimize landfill issues. The defendant was previously affiliated with Freecycle, and had initially encouraged Freecycle to protect its FREECYCLE trademark. Later, he changed his mind and decided the public should be free to use “Freecycle” as a generic term to describe the sort of coordinated recycling services that the plaintiff performed. So he began communicating via the Internet encouraging people to use the term generically and to express his opinion that FREECYCLE didn’t qualify as a proper trademark.

The district court enjoined the defendant from making any further statements disparaging Freecycle’s trademark.

On appeal, a bunch of amici screamed and yelled about the First Amendment problems with such an injunction, but the Ninth Circuit avoided the constitutional issue by ruling that: (1) the defendant hadn’t used the mark “in commerce”; (2) even if there had been a “use in commerce,” there was no likelihood of confusion; (3) there is no cause of action under the Lanham Act for “trademark disparagement”; (4) even if there were, the plaintiff hadn’t proved that the alleged elements of its alleged cause of action were satisfied; (5) there was no false statement of fact (only a lay opinion about the legal validity of the mark) and therefore no Lanham Act false advertising; and (6) the Lanham Act contains no provision preventing the generic use of a trademark.

The Ninth Circuit noted, however, that it was expressing no opinion about whether the defendant’s activities were unlawful under any state law claims.

6th Circuit decision concerning a spat between wineries over trademark use of a geographically descriptive AVA name

Just because the 6th Circuit doesn't encompass Napa Valley doesn't mean it can't mediate spats between wineries. In Leelanau Wine Cellars, Ltd. v. Black & Red, Inc., No. 06-2391 (6th Cir. Sept. 20, 2007), the 6th Circuit confronted a claim that the winery name "Chateau de Leelanau Vineyard and Winery" infringed plaintiff's registration for LEELANAU CELLARS. Michigan's Leelanau Peninsula is a governmentally-approved American Viticultural Area (AVA).

While the 6th Circuit's review of the grant of summary judgment to the plaintiff was largely fact-intensive, it did not that the common element of the two marks (Leelanau) is geographically descriptive, and therefore weak, and this weakness was highlighted by the donning of AVA status to Leelanau Peninsula. The opinion also contained some useful discussion concerning factors that affect the admissibility and probative value of confusion surveys.

11th Circuit decision concerning when a district court can overturn credibility determinations of magistrate judges on r&r's

In Amlong & Amlong, P.A. v. Denny's, Inc., No. 04-14499 (amended Sept. 17, 2007), the district judge had referred a sanctions motion to the magistrate judge to hold an evidentiary hearing. After hearing extensive testimony, the magistrate judge reported and recommended that the sanctions motion be denied, finding that the attorney in question did not act in bad faith. The district judge, conducting its "de novo determination" as required by 28 U.S.C. § 636(b), disagreed after reviewing the transcript of the hearing before the magistrate judge, and concluded that the testimony showed bad faith.

The 11th Circuit held that the district judge erred in rejecting the magistrate judge's implicit determination that the lawyer's testimony concerning the acts in question and the motives for them was credible. The appeals court held that "[r]ejecting credibility findings made by a magistrate judge without holding a new hearing is permissible only when there is an 'articulable basis for rejecting the magistrate's original resolution of credibility.' " Since there wasn't any such "articulable basis" here, the court reversed.

10th Circuit decision (unpublished) on the phrase "anything of value" in the Computer Fraud and Abuse Act

The Computer Fraud and Abuse Act (18 U.S.C. § 1030) provides a private civil cause of action against one who "knowingly and with intent to defraud, accesses a protected computer without authorization, or exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of value" (there are other required elements as well). In Triad Consultants, Inc. v. Wiggins, No. 07-1007 (10th Cir. Sept. 17, 2007) , it was alleged that fired President and COO (Wiggins), who was required by agreement to return all Triad property, unsuccessfully tried to get a third-party to restore a back-up tape of Triad computer data into a useable format.

The 10th Circuit held that Triad failed to state a claim because the "complaint set forth a sequence of facts showing that [Wiggins] never obtained any information from the tapes." Accordingly, "[b]ecause Triad alleged no facts showing that Wiggins accessed the information on the tape, it cannot establish one of the elements of a claim under § 1030(a)(4), that Wiggins obtained "anything of values." The court rejected the argument that the tapes themselves had intrinsic value, because "value is relative to one's needs and objectives," and if Wiggins couldn't use the information on the tapes, then they had no value to him.

6th Circuit decision employing an uber-lenient causation standard for copyright damages

The Sixth Circuit recently issued a decision, that, in my opinion, stretched the well-established causation requirement for copyright damages beyond the breaking point.

In Thoroughbred Software Int'l, Inc. v. Dice Corporation, No. 06-2080 (6th Cir. June 14, 2007), the plaintiff licensed software to the defendant. Under the license, the licensee was permitted to copy and install the software on end-users' computers, but had to pay a license fee each time it did so. Further copying by the defendant was prohibited. At trial, the plaintiffs proved that the defendant made several copies of the software for which it did not pay the plaintiff. Some involved software the defendant installed on end-users' computers. Some copies were never installed on anyone's computer.

The most interesting question on appeal was whether the plaintiff should have been awarded damages for the copies that were NOT installed on any end-user's computer. They were just sitting there in defendant's office, gathering dust.

The defendant argued that, since it never installed the uninstalled copies on anyone's computer, the plaintiff didn't lose any of the licensing fees provided in the license for them, so there was no damage. Sixth Circuit acknowledged that a plaintiff "must prove the existence of a causal connection" between the alleged infringement and the alleged damage. It then pointed to a 2d Circuit case where someone had used a copyrighted object in an ad campaign without obtaining permission. The 2d Circuit case held that the copyright owner should have received a reasonable royalty for the use of the copyrighted object in the ad campaign.

The 6th Circuit then stretched this holding even further (way too far, in my view), and used it as the basis to hold that the plaintiff should receive a reasonable royalty even as to the copies that were made but never used. Its basis for doing this was that it was more equitable to give something to the plaintiff for the unlawful copies than to let the wrongdoer off scot-free as to those wrongly-made copies. This would seem to make a mockery of the causation requirement, as this "principle" would apply in almost every case, causation or not.

So if you want a broad interpretation of the causation requirement, here's your authority.

5th Circuit Shoots Down Creative Attempt to Remove a State Law Trademark Case

The Fifth Circuit recently shot down a creative attempt to remove a state court case claiming trademark infringement under Texas law (not under the Lanham Act) to federal court. In In re Hot-Hed Inc., No. 06-20893 (5th Cir. Jan. 30, 2007), the plaintiff sued in Texas state court, alleging trademark dilution under the Texas Business & Commerce Code, and trademark infringement and unfair competition under Texas common law. In its prayer for relief, the plaintiff demanded “attorneys’ fees as allowed by law.” The defendant removed to federal court, alleging that the claim raised a “federal question.”

The plaintiff moved to remand, saying that its complaint didn’t say a word about federal law. The defendant convinced the district court, however, that the phrase “attorneys’ fees as allowed by law,” which appeared in the prayer, must have meant federal law (i.e., the Lanham Act), since none of the three asserted Texas law claims permit the recovery of attorneys’ fees.

On mandamus, the Fifth Circuit disagreed. It said that Texas case law indicates that the plaintiff might have been able to ask for a declaratory judgment under the Texas Declaratory Judgment Act, even though the complaint didn’t mention the Texas D.J. Act or demand declaratory relief. And under Tex. Civ. Prac. & Rem. Code § 37.009, attorneys’ fees are available for a D.J. under the Texas D.J. Act. Applying the principle that “any doubt about the propriety of removal must be resolved in favor of a remand,” the Fifth Circuit ordered the district court to check out if diversity jurisdiction existed, and, if not, to remand. The Fifth Circuit also seemed swayed by the principle that removal of a trademark case is improper if the plaintiff doesn’t clearly state he’s seeking relief under the Lanham Act.

6th Circuit Decides Interesting Copyright and Trademark Case Involving Repackaging and Reselling of Audio Recordings of Books

First the copyright part of the case. Under copyright law, the legitimate owner of a “copy or a phonorecord” can “sell or otherwise dispose of them” without the consent of the copyright owner. 17 U.S.C. § 109(a). There’s an exception, however, in § 109(b)(1)(A). It says that:

Notwithstanding the provisions of subsection (a), unless authorized by the owners of copyright in the sound recording . . . and in the case of a sound recording in the musical works embodied therein, . . . the owner of a particular phonorecord . . . may [not], for the purposes of direct or indirect commercial advantage, dispose of, or authorize the disposal of, the possession of that phonorecord . . . by rental, lease, or lending . . . .”

This exception came about in the early 1980s because record companies were concerned that they were losing too much business through record and tape rentals (to people would simply copy the rented music). In Brilliance Audio, Inc. v. Haights Cross Communications, Inc., No. 05-1209 (Jan. 26, 2007), the question was whether this exception applied to rentals of audio recordings of books. The Sixth Circuit though that the statutory language could go either way. (I had to read this part of the opinion three times to see how it could be read NOT to include recordings of books, but I digress.) Because it considered the language capable of going either way, the court jumped into the dreaded legislative history and discussed evanescent notions of “policy.” To make a long story short, the court decided that, in 1984, Congress was concerned only with music recordings. Nobody mentioned books on tape at all. And as to policy, the court decided that exceptions to the first sale doctrine should be construed narrowly, since such exceptions would “upset the bargain” in copyright law between copyright owners (who want to protect their creative works) and the rights of owners of stuff (to do what they want with their stuff). So it concluded that first sale doctrine exonerated the defendant on the copyright count.

The trademark claim was that the defendant was repackaging and re-selling the audio books in violation of the Lanham Act. The plaintiff sold two different versions of the audio books: one for consumers and one for libraries. It claimed that the defendant was taking the consumer versions and labeling them as library versions. The court (correctly in my view) upheld the trademark claim in the face of a first sale defense because (a) the plaintiff alleged that the defendant’s labeling didn’t make clear that the product was repackaged, plus (b) the goods weren’t “genuine” because there were differences between the two versions.

October TM Case Roundup

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

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

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

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

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

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

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

6th Circuit decision involving interplay of patents with functionality defense

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

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

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

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

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

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

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

Three not-so-interesting circuit decisions -- TV Guide version

Here are links to 3 recent earth-(non)shattering trademark and copyright decisions.

In Schwan's IP, LLC v. Kraft Pizza Co., No. 05-3463 (8th Cir. Aug. 18, 2006), the court held that the mark BRICK OVEN is generic for . . . . . no, not brick ovens, but for . . . . . wait for it . . . . . . PIZZA!! Descriptive, I could see. But generic??? "Um, waiter, I'd like to order the brick oven with extra pepperoni. And can you get the busboy to structurally reinforce our table while we wait?" Sheesh.

In R.J. Reynolds Tobacco Co. v. Cigarettes Cheaper!, No. 05-1456 (7th Cir. Aug. 24, 2006), the Seventh Circuit came to the unremarkable conclusion that the sale in the U.S. of "gray market" goods -- i.e., goods that are in fact produced under authority of the trademark owner but exclusively sold outside the U.S. -- can constitute infringement if the gray market goods are "materially different" than their U.S. market counterparts.

And in T-Peg, Inc. v. Vermont Timberworks, Inc., No. 05-2866 (1st Cir. Aug. 18, 2006), the First Circuit reversed a grant of summary judgment to the defendant in a copyright case involving the Architectural Works Copyright Protection Act amendments to the Copyright Act. The court's analysis was fact-intensive, focusing on the substantial similarity issue.

3d Circuit decision on whether a TTAB decision collaterally estops a later infringement case

The Third Circuit recently decided that a district court infringement case was properly dismissed on grounds of collateral estoppel based on a prior TTAB cancellation proceeding between the parties on the same mark. The case was more notable -- at least from a trademark standpoint -- for what it DIDN'T discuss, rather than what it did discuss.

The 3d Circuit's decision in Jean Alexander Cosmetics v. L'Oreal USA, Inc., No. 05-4321 (3d Cir. Aug. 14, 2006), focused primarily on the element of collateral estoppel that requires that the issue on which collateral estoppel is sought have been "necessary to the decision" in the earlier litigation. Because the TTAB decision was based on alternative holdings, either one of which would have supported the ultimate decision, the Third Circuit engaged in an extended discussion of this issue, trying to figure out whether it preferred the position of the First Restatement of Judgments (alternative holdings can result in preclusion) or the Second Restatement (neither of alternative holdings can result in preclusion). It chose the First Restatement's position.

Oddly, the Third Circuit didn't even raise the issue of whether the TTAB decision on likelihood of confusion was identical to the issue of likelihood of confusion to be litigated in the district court infringement action. You might recall that the Second Circuit held nine years ago that there sometimes are substantial differences in the factors and facts that the TTAB considers in its cases (the TTAB does not always assess what is actually going on in the marketplace and frequently limits its analysis to what is stated on a registration or application) and what district courts consider in infringement cases (district courts, at least in the 2d Circuit, are supposed to look at what is going on in the "entire marketplace context"). See, e.g., Levy v. Kosher Overseers Ass'n of Amer., Inc., 104 F.3d 38 (2d Cir. 1997) (sorry, no link). The Levy court refused to apply collateral estoppel where the TTAB's decision didn't assess those marketplace factors.

9th Circuit decision on whether TM abandonment occurs DURING a sell-off of inventory of TM'ed goods

In an interesting and well-reasoned decision, the Ninth Circuit recently addressed whether a trademark is abandoned during a sell-off of inventory of trademarked goods, but before a complete cessation of the liquidation of trademarked inventory. The answer, it said, was NO.

The main dispute at issue in Electro Source LLC v. Brandess-Kalt-Aetna Group, Inc., No. 04-55844, -55909, -56648 (9th Cir. Aug. 14, 2006), was who owned a mark: a party that took an assignment from a trademark owner while the trademark owner's business was in the process of winding down and while he was slowly selling off remaining inventory; or an unrelated party that had been using the mark since before the assignment. The unrelated third party alleged that the assignee got no prior rights from the assignor because assignor abandoned the mark when he decided to wind-down the business and sell off his inventory of trademarked goods.

The 9th Circuit held that there was no abandonment. It explained that abandonment requires two elements: (1) discontinuation of "bona fide use of the mark in the ordinary course of trade"; and (2) intent not to resume such use. Taking the element of intent first, the 9th Circuit held that, so long as there is continued use, a "subjective intent to abandon the mark or business" or a "prospective declaration of intent to cease use in the future" by itself isn't enough to result in abandonment. The court concluded that "unless the trademark use is actually terminated, the intent not to resume prong of abandonment does not come into play."

As to whether there was a discontinuation of use, the 9th Circuit held that "abandonment requires complete cessation of trademark use." Further, "[e]ven a single instance of use is sufficient . . . if such use is made in good faith." It explained that "[g]ood faith nominal or limited sales of trademarked goods are sufficient . . . where the circumstances legitimately explained the paucity of sales." A wind-down or sell-off qualifies as "good faith" use. The court distinguished such "good faith" sales from sales taking place under a "trademark maintenance program," which are insufficient to avoid abandonment.

Two MORE recent TM decisions in the 9th Circuit

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

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

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

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

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

Two (relatively) recent TM decisions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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