Pattishall IP Blog

May 11, 2012

Cuervo Misses the Mark in Sixth Circuit Appeal Involving Seals on Liquor Bottles

Filed under: Litigation, Trade Dress — Tags: , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 12:14 pm

by Jeffrey A. Wakolbinger, Trademark Attorney

By U.S. regulation, a bottle labeled as “bourbon” must contain contents that were made in the United States according to certain procedures.  And by order of the Sixth Circuit, a bottle topped with a red, dripping-wax seal, must be made by Maker’s Mark.  See Maker’s Mark v. Diageo N. Am., No. 10-5508 (6th Cir. May 9, 2012).

Maker’s Mark Distillery, Inc., makes bourbon whisky and sells it in bottles topped with a distinctive, red, dripping wax.[1]  Maker’s Mark has packaged its product this way since 1958, when the wife of the man credited with the recipe first used the family deep fryer to apply a wax seal to the top of a bottle.  In 1985, Maker’s Mark obtained U.S. Trademark Registration No. 1,370,465 for a “wax-like coating covering the cap of the bottle and trickling down the neck of the bottle in a freeform irregular pattern.”

Jose Cuervo started producing its “Reserva de la Familia” premium tequila in 1995 and initially topped its bottles with a straight-edged wax seal.  By 2001, however, bottles sold in the United States were adorned with a red, dripping-wax seal.  Maker’s Mark brought suit in 2003, seeking to enjoin Cuervo’s use of this registered mark and also seeking an award of damages.  Cuervo counterclaimed for cancellation of the trademark.

After a six-day bench trial in—where else?—Kentucky, a district court found that Maker’s Mark’s wax seal is a valid trademark and that Cuervo had infringed it.  The court enjoined Cuervo permanently “from using red dripping wax on the cap of a bottle in the sale, offering for sale, distribution or advertising of Cuervo tequila products at any locality within the United States.”  The court denied Maker’s Mark’s claim for dilution and request for damages, as well as Cuervo’s counterclaim for cancellation.  The judgment was affirmed by the Sixth Circuit on May 9, 2012.

Judge Martin, writing for the Sixth Circuit, provides an interesting analysis of the doctrine of aesthetic functionality and the familiar likelihood-of-confusion factors as applied to the wax seals of the two distillers, but not before waxing academic on the history of bourbon itself.  Judge Martin discusses how bourbon is made (using corn as the primary grain, a sour-mash method of production, and new, charred oak barrels for aging); where the name originated (Bourbon County, Kentucky); and other interesting bits of bourbon trivia.  (Who knew that President Truman liked to start his day with a walk, a rubdown, a light breakfast, and a shot of bourbon?)

One issue addressed on appeal is the concept of “aesthetic functionality,” recognized in dicta in TrafFix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23 (2001).  The Sixth Circuit had previously proposed that “where an aesthetic feature (like color), serves a significant function . . . courts should examine whether the exclusive use of that feature by one supplier would interfere with legitimate competition.”  Maker’s Mark, slip op. at 8 (quoting Antioch Co. v. W. Tramming Corp., 347 F.3d 150, 155 (6th Cir. 2003)).  But it had never expressly adopted the doctrine and did not do so in this case.  Instead, the court applied two alternative tests for functionality and agreed with the district court’s finding that Cuervo’s argument failed under either test.  Under the “comparable alternatives” test, a design is functional if it deprives competitors of a “variety of comparable alternatives [they] may use to compete in the market”; under the “effective competition” test, a design is functional if it is likely to “hinder the ability of another manufacturer to compete effectively in the market for the product.”  Maker’s Mark, slip op. at 9 (quoting Abercrombie & Fitch Stores, Inc. v. Am. Eagle Outfitters, Inc., 280 F.3d 619, 642 (6th Cir. 2002)).  The court found that neither test was met here because it would not be difficult or costly for competitors to design around the mark, and “red wax is not the only pleasing color of wax . . . nor does it put competitors at a significant non-reputation related disadvantage to be prevented from using red dripping wax.”

Having held that the dripping-wax trademark is not subject to cancellation on grounds of functionality, the court applied the Sixth Circuit’s Frisch factors and held that the balance of those factors compels a finding of infringement. The court relied heavily on the district court’s finding that the Maker’s Mark’s trademark is “extremely strong,” and it reached its conclusion despite finding that the “likely degree of purchaser care” factor “clearly” favors Cuervo.

The Sixth Circuit also affirmed the district court’s award of $66,749.21 of Maker’s Mark’s $72,670.44 in requested costs.  Cuervo argued that, because Maker’s Mark did not succeed on its claim for damages or its request for a permanent injunction on its dilution claim, Maker’s Mark was not a “prevailing party” as that term is used in Federal Rule of Civil Procedure 54(d).  The Sixth Circuit rejected that argument, stating, “Maker’s Mark did not need to win every claim to be considered the prevailing party.”

Thus, the case serves as a useful reminder that a party need not claim total victory in order to be a “prevailing party” entitled to costs under Rule 54, as well as an interesting read for anyone interested in the aesthetic-functionality doctrine—or curious about such things as the brand of General Grant’s favorite whiskey.

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Jeffrey A. Wakolbinger is an attorney with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois.  Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues.   Jeff’s practice focuses on trademark and copyright litigation, as well as domestic and international trademark, Internet, e-commerce, and copyright law.

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[1] As noted in the Sixth Circuit’s opinion, “whiskey” is the preferred spelling in the United States, while “whisky” is the typical spelling in Scotland and Canada.  Maker’s Mark nonetheless identifies its product as “bourbon whisky”—without the “e.”

April 27, 2012

Hey Ya! District Court Dismisses Copyright Lawsuit Against André 3000′s “Class of 3000″

Filed under: Copyright, Litigation — Tags: , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 3:40 pm

by Seth I. Appel, Trademark Attorney

In 1997, Timothy McGee pitched an animated TV series, “The Music Factory of the 90′s,” to The Cartoon Network.  McGee’s show, set in Atlanta, centered on Tony “The Play Maker” Rich, a wealthy corporate attorney who leaves his law firm to become a music producer.  The show would feature animated versions of well-known guest musicians.  Each episode would include a musical performance, and at the end of the episode the guests would appear in their live-action state.  The show would deal with serious issues such as racism and violence, and it aimed to teach viewers lessons about the music industry and life.  The Cartoon Network rejected “The Music Factory of the 90′s” because it did not meet the network’s programming needs at the time.

Nearly ten years later, The Cartoon Network debuted “Class of 3000,” an animated series co-created and co-produced by Andre “Andre 3000″ Benjamin, best known as one-half of the hip-hop duo Outkast.  This show was also set in Atlanta.  It focused on Sunny Bridges, a musical superstar who returned to Atlanta to teach, and his students at a performing arts school.  Sunny displayed supernatural abilities and lived in a magical house in the woods.  Benjamin provided the voice of Sunny, and each episode included his original music.  According to the complaint, “Class of 3000″ taught viewers lessons, and the plan was for animated versions of real artists to appear on the show.

In May 2008, “Class of 3000″ concluded its second and final season.  Shortly following, McGee brought suit against Benjamin, The Cartoon Network, and its parent company, Turner Broadcasting Systems, Inc., alleging copyright infringement and other claims.

The court granted the motion to dismiss of The Cartoon Network and TBS, the only defendants that McGee served, because McGee was unable to show probative similarity between “The Music Factory of the 90′s” and “Class of 3000.”  McGee v. Benjamin 3000, 102 U.S.P.Q.2d 1299 (D. Mass. March 20, 2012).

To demonstrate copyright infringement a plaintiff must establish (1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original.  There was no dispute McGee satisfied the first element.  He owned a copyright registration for a treatment of “The Music Factory of the 90′s” and related materials.  However, McGee could not demonstrate actionable copying.

In the First Circuit, establishing copying involves two steps.  First, the plaintiff must show that the defendant “actually copied the work as a factual matter,” either through direct evidence or through indirect evidence of access and probative similarity.  In comparing the works to determine similarity, only protectible elements are relevant; the court must ignore “unprotected ideas or unoriginal expressions.”  Second, if court finds probative similarity, then it considers substantial similarity.  “Two works are substantially similar if a reasonable, ordinary observer, upon examination of the two works would conclude that the defendant unlawfully appropriate the plaintiff’s protectable expression.”

The court found McGee’s claims insufficient with respect to probative similarity.  McGee’s vague references to similarities in “location, characters, content, format, and dramatis personnae” were not enough.  The only specific similarities, the court explained, were that both shows take place in Atlanta; both shows involve the music industry; and both shows involve a character who left his job to try something new.  But McGee does not have the exclusive right to any of these elements.

McGee’s argument regarding probative similarity runs up against several hurdles often encountered by those who seek to enforce a copyright in a treatment for a television show, movie, or theatrical performance. Most notably, there are very few elements of the Music Factory treatment that are original; most of the alleged similarities are noncopyrightable “basic concepts and ideas” or “stock scenes and characters.”

Because ideas are not protected by copyright, whether or not the defendants copied McGee’s ideas was irrelevant.  Further, under the scenes a faire doctrine, copyright generally does not protect “plots, subplots or themes” insofar as they are “for all practical purposes indispensable, or at least customary, in the treatment of a given subject matter.”  For example, “the plot device of a protagonist leaving one profession to embark on an unrelated profession with little experience but considerable passion is a familiar one.”

Likewise, copyright does not protect stock characters.  The court found that several characters in the parties’ shows, such as young musicians and a tough executive, were largely stock characters.  Meanwhile, the shows’ main characters – Sunny and The Play Maker – were “in certain fundamental senses … almost polar opposites.”

Therefore, McGee’s copyright claim failed based on the absence of probative similarity.  The court added that McGee also could not establish substantial similarity.  In that regard, it pointed to additional differences in “format and tone,” and added that the themes of the two shows were in conflict.  While “The Music Factory of the 90′s” celebrated the pursuit of money and fame, “Class of 3000″ emphasized the love of music and creativity.

McGee reflects the difficulty in establishing copying infringement in this context.  Copyright owners must beware that basic concepts and ideas are not protectable, nor are routine storylines or stock characters.  Superficial similarities between creative works are often not actionable.

Seth I. Appel is an associate attorney at Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois.  Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues.  Mr. Appel’s practice focuses on litigation, transactions, and counseling with respect to trademark, trade dress, copyright and Internet law.

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April 11, 2012

Fourth Circuit Reverses Grant Of Summary Judgment In Rosetta Stone v. Google: Google’s AdWords Program To Be Put On Trial

Filed under: Internet, Litigation, Trademark (General) — Tags: , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 6:07 pm

by Uli Widmaier, Trademark Attorney

I.   Summary

Rosetta Stone, a leading language-learning software producer, sued Google for trademark infringement and dilution based on Google’s sale of Rosetta Stone’s marks as keywords.  In 2010, the District Court for the Eastern District of Virginia entered summary judgment against Rosetta Stone’s trademark claims (direct, contributory, and vicarious trademark infringement; dilution), and dismissed Rosetta Stone’s unjust enrichment claim.  See Rosetta Stone Ltd. v. Google, Inc., 730 F. Supp. 2d 531 and 732 F. Supp. 2d 628 (E.D. Va. 2010).

Rosetta Stone appealed.  On April 9, 2012, the Fourth Circuit issued its long-awaited decision.  See Rosetta Stone Ltd. v. Google, Inc., — F.3d –, No. 10-2007, 2012 WL 1155143 (4th Cir. April 9, 2012).  The Court reversed the district court’s summary judgment rulings in Google’s favor on Rosetta Stone’s three most important claims – for direct infringement, contributory infringement, and dilution.  The decision is notable for the Court’s frank criticism directed at the district court’s orders, finding substantial flaws in the district court’s analysis of both the factual record and the applicable legal doctrine.  The Fourth Circuit’s analysis contains a number of important assessments of actual confusion evidence, a defendant’s level of knowledge necessary to prove contributory infringement, the possibility of a plaintiff’s proving dilution when recognition of the plaintiff’s mark actually increased during the relevant time period, and several other matters. In light of these determinations, the Fourth Circuit’s affirmance of summary judgment on Rosetta Stone’s claims for vicarious infringement and dismissal of Rosetta Stone’s unjust enrichment claim provides scant comfort for Google.

The Fourth Circuit’s decision may well influence the approach to keyword advertising cases under U.S. trademark law.  With this decision, the law would seem to have become more favorable to trademark owners whose marks are being sold and used as keywords.  Search engines may reconsider some of their keyword advertising practices.  Parties who use others’ trademarks as keywords for their own sponsored links may wish to assess whether any of their practices may be affected by the Fourth Circuit’s analysis.  This is particularly true for situations in which the trademarks used as keywords also appear in the text of a sponsored link.  In the meantime (and barring a settlement), the fate of Google’s current keyword advertising model stands to be determined by a jury.

II.   A Circuit Split in the Making?

The Fourth Circuit’s evaluation of the evidence of actual and likely consumer confusion stands in contrast to two recent decisions from the Ninth Circuit, Toyota Motor Sales, USA, Inc., v. Tabari, 610 F.3d. 1171 (9th Cir. 2010) and Network Automation, Inc., v. Advanced System Concepts, Inc., 638 F.3d 1137 (9th Cir. 2011). The Ninth Circuit premised these decisions on its finding that consumers have become sophisticated in exploring search engine results, including sponsored links.  According to the Ninth Circuit, consumers understand what sponsored links are, recognize them by their labels and graphic set-offs on search results pages, and are “ready to hit the back button whenever they’re not satisfied with a site’s contents.”  Tabari, 610 F.3d at 1179; see also Network Automation, 638 F.3d at 1152.  Moreover, “consumers don’t form any firm expectations about the sponsorship of a website until they’ve seen the landing page – if then.  This is sensible agnosticism, not consumer confusion.”  Tabari, 610 F.3d at 1179.

Contrast this with the Fourth Circuit’s observation in Rosetta Stone that “even well-educated, seasoned Internet consumers are confused by the nature of Google’s sponsored links and are sometimes even unaware that sponsored links are, in actuality, advertisements.  At the summary judgment stage, we cannot say on this record that the consumer sophistication factor favors Google as a matter of law.”  In fact, the Court noted, such uncertainty constitutes “quintessential actual confusion evidence.”  Rosetta Stone at *10.

“Sensible agnosticism” versus “quintessential actual confusion evidence” – these are rather different, and potentially outcome-determinative, evaluations of rather similar states of mind.  It remains to be seen how these two different approaches will play out in the evolution of trademark law as it relates to keywords and sponsored links. (more…)

March 28, 2012

Court Deals Blow to Hasbro in Dispute Involving Transformers Trademark

Filed under: Litigation, Trademark (General) — Tags: , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 10:34 am

by Jeffrey A. Wakolbinger, Trademark Attorney

The storyline developed to market the “Transformers” line of toy robots that transform into vehicles and other objects is probably familiar to any child of the ’80s and certainly to anyone who contributed to the box-office success of the 2007 Transformers movie and its sequels.  It’s a battle between Optimus Prime’s virtuous Autobots and Megatron’s evil Decepticons, an epic robot battle between good and evil.

A somewhat less epic battle is being waged in the Central District of California, where Hasbro, the owner of the Transformers brand, has sued Asus Computer International, a manufacturer of high-end electronics, for trademark infringement and dilution.  See Hasbro, Inc. v. Asus Computer Int’l, Inc., No. 11-cv-10437 (C.D. Cal. Mar. 23, 2012).[1]

Hasbro owns a registration for TRANSFORMERS in class 28 for “toy action figures, toy vehicles, and toy robots convertible into other visual forms.”  Taking advantage of renewed interest in the Transformers brand (owing to the success of the recent film franchise), Hasbro launched the Emmy-nominated “Transformers Prime” animated television series in November 2010 and applied to register its TRANSFORMERS PRIME mark in classes 28 and 41.

On January 4, 2011, Asus announced the launch of its Eee Pad Transformer tablet computer, which uses Google’s Android operating system and is capable of “transforming” from a tablet computer into a laptop when connected to a mobile docking station.  The name did not go unnoticed by Hasbro, which sent Asus a cease-and-desist letter two weeks after the announcement.  Asus’s counsel responded, asserting that Hasbro’s mark did not apply to netbook computers and that Asus’s use of the term was merely descriptive.  No further communications between the parties were exchanged, and Asus began selling the Eee Pad Transformer tablet in April 2011.  On October 19, 2011, Asus announced the second generation of its tablet: the Eee Pad Transformer Prime.  According to Asus, the word “prime” was added to signify the premium nature of the product and “to emphasize the tablet was first in time, rank, authority, and significance.”  It’s also the last name of the Autobots’ protagonist.  Hasbro filed suit on December 16, 2011, and moved for a preliminary injunction shortly thereafter.

The district court denied Hasbro’s motion on March 23, 2012.  The court found that Hasbro failed to establish a likelihood of success on the merits of its claims, explaining, among other things, that Hasbro’s computer-related products, including Transformers-themed USB storage devices, speakers, laptop skins, and a toy “educational laptop,” were “gimmicky,” while Asus’s “sleek” products were anything but.  The court held that this and other equitable considerations weighed against granting the “extraordinary and drastic remedy of preliminary relief.”

The court accepted Asus’s uncontroverted evidence that it would suffer considerable hardship from the recall of goods already in circulation—particularly in light of the very short window of opportunity for computer manufacturers to capitalize on the latest technology—and rejected Hasbro’s claims of hardship in light of the fact that Hasbro waited eleven months after sending a cease-and-desist letter and eight months after Asus launched its original Eee Pad Transformer tablet before filing suit.  Although it may have been the announcement of Asus’s Eee Pad Transformer Prime tablet that ultimately pushed Hasbro into filing, Hasbro still waited two months before filing its complaint on the eve of Asus’s second-generation tablet’s launch.

One could argue that the court’s focus should have been on the time between the announcement of Asus’s second-generation Eee Pad Transformer Prime tablet and Hasbro’s filing, but this is hardly the first case in which a court has resisted a party’s claimed need of immediate injunctive relief in light of a perceived delay in bringing the matter before the court.  Although the denial of a motion for preliminary injunction is not a total defeat, it is often more than meets the eye.  A party making such a motion risks prematurely committing to legal theories and factual positions, losing goodwill with the court, and losing bargaining power with the defendant.  Hasbro’s ultimate likelihood of success remains to be seen, but the outcome of this dispute may easily be influenced by this early decision.  Trademark owners and their counsel must carefully evaluate the strength of their claims and consider appropriate equitable concerns before seeking the “extraordinary and drastic remedy of preliminary relief.”

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Jeffrey A. Wakolbinger is an attorney with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois.  Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues.   Jeff’s practice focuses on trademark and copyright litigation, as well as domestic and international trademark, Internet, e‑commerce, and copyright law.

March 27, 2012

Fourth Circuit Overturns Laches Defense Victory for Clear Channel

Filed under: Trademark (General), Litigation — Tags: , , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 10:17 am

by Phillip Barengolts, Trademark Attorney

Trademark owners have a duty to police their rights or risk erosion or even loss of those rights.  This duty does not extend to every known infringement, but alleged infringers often assert unaddressed third-party use of other infringing marks as a means of defeating a trademark infringement claim against them.  Thus, a trademark owner should engage in a consistent level of policing to protect its investment in its brand.

As with most types of tort claims, waiting to file suit against a particular infringer carries the risk that the equitable doctrine of laches will bar the suit.  In most jurisdictions laches, may bar monetary relief for trademark infringement, but rarely precludes injunctive relief.  The Fourth Circuit’s recent decision in Ray Commn’s, Inc. v. Clear Channel Commn’s, Inc., No. 11-1050 (4th Cir. Mar. 8, 2012),[1] highlights the difficulty of prevailing on a laches defense and provides guidance for plaintiffs overcoming a laches problem in a suit.

The dispute concerned the trademark AGRINET, used for competing agricultural news radio programs.  Both parties used the mark for many years, but it was undisputed that Ray Communications (“RCI”) was the prior user in all geographic areas.  The relevant issue for laches was whether RCI delayed so long as to bar its trademark infringement claim as a matter of law.  The district court said yes, granting Clear Channel summary judgment on RCI’s trademark infringement claim.  The Fourth Circuit reversed, finding the district court abused its discretion.

The main points raised by the Fourth Circuit in vacating the district court’s decision were:

1.      Although RCI knew of Clear Channel’s uses of AGRINET in certain regions of the country for over 25 years, because it did not use the AGRINET mark in those regions, its trademark infringement claim had not yet accrued;

2.      There was a genuine dispute as to RCI’s grant of licenses to some of Clear Channel’s predecessors-in-interest (even though RCI had trouble producing those licenses in discovery); and

3.      Evidence that Clear Channel had stopped using AGRINET in some jurisdictions to facilitate settlement suggested that Clear Channel would not suffer any economic injury from changing its mark.

The key teachings of this decision are that laches does not start to run until the trademark owner is aware of the infringement, as distinct from mere knowledge of the use.  Keeping a record of all trademark licenses, and other grants of permission, helps protect trademark owners in future suits.  Finally, at least in the Fourth Circuit, to bar injunctive relief, a defendant must meet a higher standard than the traditional factors of 1) knowledge, 2) unreasonable delay, and 3) undue prejudice to the defendant.

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Phillip Barengolts is a partner with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois.  Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues.  Mr. Barengolts’ practice focuses on litigation, transactions, and counseling in domestic and international trademark, trade dress, Internet, and copyright law.  He teaches trademark and copyright litigation at John Marshall Law School, and co-authored Trademark and Copyright Litigation, published by Oxford University Press.

March 16, 2012

Bare Trademark Rights? Naked Cowboy’s Infringement Action Against CBS Dismissed

Filed under: Litigation, Trademark (General) — Tags: , , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 2:11 pm

By Janet Marvel, Trademark Attorney

Robert John Burck has made a career as a New York street performer.  He is (arguably) famous under his alias, “The Naked Cowboy”, appearing with his guitar in Times Square, clad only in a hat, boots and briefs.  In Naked Cowboy v. CBS, 101 USPQ2d 1841 (S.D.N.Y. Feb. 22, 2012), Burck sued CBS for what he believed was a  take-off of his Naked Cowboy character in the CBS television soap opera “The Bold and the Beautiful,” a segment of which CBS later posted on You Tube.  In the soap opera episode, a character appears clad similarly to the Naked Cowboy, namely, with guitar, boots, hat and briefs only.  Burck alleged trademark infringement, state and federal unfair competition, fraud, and violation of New York’s right of privacy statute, New York Civil Rights Law §§ 50, 51.  The court dismissed the complaint, holding that while Burck owned trademark rights in “Naked Cowboy,” CBS had not used “Naked Cowboy” in commerce

CBS titled its You Tube clip “The Bold and the Beautiful – Naked Cowboy” and  purchased the You Tube adword “naked cowboy.”  The court held that purchase of adwords was not trademark use because Defendants did not use the term “naked cowboy” in a way that denotes source or sponsorship.  The holding with respect to adword use seems directly contrary to the holding in Rescuecom Corp. v. Google, Inc., 562 F.3d 123 (2d Cir. 2009), which held that Google’s sale of adwords constituted use in commerce.  Indeed, for support, the Naked Cowboy court cited Merck v. Mediplan Health Consulting, Inc., 425 F. Supp. 2d 402, 415 (SDNY 2006), the holding of which Rescuecom cast into doubt.

The court also held that CBS’s use of “Naked Cowboy” in the title of its You Tube clip was not intended (at least on the facts plaintiff pled) to trade on the plaintiff’s goodwill, and therefore that it was “fair use.”  Fair use typically requires a showing that the mark is used nominatively, descriptively, or comparatively.  Reading between the lines, the court must have considered that any performer with boots, briefs and a guitar was an (almost) “naked cowboy,” hence the use was descriptive.

Nor did the court find that the soap opera actor’s costume infringed that of the Naked Cowboy, because Burck plasters “Naked Cowboy” and “Tips” across his articles of clothing, while the actor did not.

Finally, the court rejected the Naked Cowboy’s claim that CBS violated New York’s right of privacy statute, which forbids the “use [] for advertising purposes or for purposes of trade,  the name, portrait or picture of any living person, without prior consent.”  N.Y. Civ. Rights § 50.  The court rejected this argument, citing the Burck’s previous loss in Burck v. Mars, a case in which the Naked Cowboy alleged that a talking M&M candy violated his right of privacy:  “[T]he right of privacy  does not extend to fictitious characters adopted or created by celebrities[,] and it does not protect ‘a trademarked costumed character publicly performed by a person.’”

The case, while probably not doctrinally correct should give hope to naked cowboys everywhere.

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Janet Marvel is a partner with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois.  Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues.  Ms. Marvel’s practice focuses on litigation, transactions, and counseling in domestic and international trademark, trade dress, Internet, and copyright law.  She co-authored the Fifth Edition of the Trademarks and Unfair Competition Deskbook, recently published by LexisNexis.

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March 14, 2012

Sky Diving for Dollars: Ninth Circuit Upholds Jury’s $6 Million Award to Skydive Arizona for Defendants’ Trademark Infringement, False Advertising, and Cybersquatting

Filed under: Advertising, Litigation, Trademark (General) — Tags: , , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 11:12 am

by Phillip Barengolts, Trademark Attorney

Skydive Arizona sued a group of defendants, collectively called “Skyride” by the court, for trademark infringement, false advertising, and cybersquatting.  At trial, the jury awarded Skydive Arizona $1 million in actual damages for false advertising, $2.5 million in actual damages for trademark infringement, $2,500,004 in defendant’s profits from the trademark infringement, and $600,000 for statutory cybersquatting damages.  The district court, upon its own initiative, then doubled the two actual damages awards, for a total of $10.1 million.  Finally, the district court enjoined Skyride from operating in Arizona.  Skyride appealed and, except for the doubling of actual damages, lost.[1]  See Skydive Arizona, Inc. v. Quattrocchi, No. 10-16099 (March 12, 2012), available here: http://www.ca9.uscourts.gov/datastore/opinions/2012/03/12/10-16099.pdf.

Trademark and false advertising litigation is different from other commercial litigation in many respects, but what the Ninth Circuit opinion highlights is the difference in precision required to support monetary damages.  Skyride’s appeal focused on the lack of evidentiary support for the jury award.  Specifically, Skyride argued that the district court abused its discretion by:

(1) upholding the jury’s actual damages award, because Skydive Arizona did not present sufficient evidence concerning the amount of damages; (2) upholding the jury’s lost profits award, because the jury failed to deduct SKYRIDE’s expenses and costs based on the “clearly erroneous” testimony of Skydive Arizona’s expert; (3) enhancing the jury’s damages award to punish SKYRIDE; and (4) upholding and enhancing the entire actual damages, lost profits, and statutory damages award, because the judgment was grossly excessive.

Other than (3), the Ninth Circuit found these arguments unpersuasive.

Under the Lanham Act, a court may award the following in its discretion: (1) defendant’s profits; (2) any damages sustained by the plaintiff; and (3) the costs of the action.  15 U.S.C. § 1117(a).  “In assessing profits the plaintiff shall be required to prove defendant’s sales only.”  Id.  A mark holder is held to a lower standard in proving the exact amount of actual damages.  See La Quinta Corp., 603 F.3d 327, 342 (9th Cir. 2010).  Plaintiff’s damages are measured in the same manner as in tort cases: “the reasonably foreseeable harms caused by the wrong.”  A jury award may be supported by “crude” measures “based upon reasonable inferences.”  See Intel Corp. v. Terabyte Int’l, Inc., 6 F.3d 614, 621 (9th Cir. 1993).

The jury had only the following evidence to support the actual damages award: three exhibits showing Skydive Arizona’s advertising expenditure for the years 1997-2007, declarations and witness testimony blaming Skydive Arizona for problems caused by Skyride’s acts, and counsel’s request that the jury consider Skydive Arizona’s need to engage in corrective advertising.

To establish Skyride’s profits, Skydive Arizona presented an expert who calculated Skyride’s revenues by:

calculating the number of Arizona residents identified in SKYRIDE’s records and then increasing that number by 2.131 to account for files missing residence information.  He then multiplied that number by an average transaction amount, and then adjusted for resulting revenue from out-of-state residents who also jumped in Arizona.  Lastly, [he] added an interest factor of 10%, using the prejudgment interest rate applicable under Arizona law.

Skyride argued after trial and on appeal that this expert testimony was clearly erroneous because “he did not properly deduct vendor payments or overhead costs, and he applied an improper interest rate.”  The Ninth Circuit stressed that Skyride did not challenge the admissibility of this expert testimony under Federal Rule of Evidence 702 through a Daubert challenge at any point during the trial and, therefore, upheld the award of profits.  Of course, both courts could also have pointed out that, under the Lanham Act, the burden of deducting vendor payments and overhead was Skyride’s and not Skydive Arizona’s.

Skyride finally won a point on appeal by successfully arguing that the district court doubled the damages awards to punish Skyride.  Lanham Act damages must be compensatory and cannot be punitive. 15 U.S.C. § 1117(a).  The district court’s commentary surrounding the doubling conveyed its distaste for Skyride’s “purposefully deceitful” conduct and need for Skyride to “accept the wrongfulness of [its] conduct.”

Skyride’s last argument was that the overall award of $10 million at trial was grossly excessive and punitive for a company with “only $23 million” in nationwide gross revenues.  The Ninth Circuit easily dismissed this contention that, essentially, Skyride was “too small to justify such a large award.”

So, here is what you need to support a $6 million damages award in a trademark and false advertising case: an unsympathetic defendant, proof of your advertising expenditures, proof of defendant’s revenues, and evidence suggesting the need for corrective advertising.  Your results may vary.

*       *      *

 Phillip Barengolts is a partner with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois.  Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues.  Mr. Barengolts’ practice focuses on litigation, transactions, and counseling in domestic and international trademark, trade dress, Internet, and copyright law.  He teaches trademark and copyright litigation at John Marshall Law School, and co-authored Trademark and Copyright Litigation, published by Oxford University Press.

[1] Skydive Arizona appealed the geographic scope of the injunction as being too narrow and lost, but we won’t address that here.  For further background on this case and the facts at issue, see http://blog.ericgoldman.org/archives/2010/05/geographic_trad.htm.

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February 9, 2012

Defendant Hoist Manufacturer Awarded Attorney’s Fees in Trade Dress Case Secalt v. Wuxi Shenxi Construction Machinery

Filed under: Litigation, Trade Dress — Tags: , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 12:30 pm

By Janet Marvel, Trademark Attorney

In Secalt S.A. v. Wuxi Shenxi Construction Machinery Co., Ltd., Nos. 10-17007 & 11-15066, 2012 WL 373102 (9th Cir. Feb. 7, 2012), plaintiff, a manufacturer of traction hoists (typically used for commercial building and window washing), alleged that it owned trade dress rights in the following design:

The Ninth Circuit ruled for the defendant, the maker of an apparently identical product.  The court’s opinion rested on its conclusion that, to paraphrase, no one cares what a traction hoist looks like, as long as it works.  Id. at *4.  Since plaintiff’s design was not the subject of a federal trademark registration, plaintiff was required to prove that it was non-functional and that it had secondary meaning.  Plaintiff could not prove non-functionality.  A design is functional if it “is essential to the use or purpose of the article, or affects the cost or quality of the article.”  Inwood Laboratories v. Ives Laboratories, 456 U.S. 844 n.10 (1982).

The Ninth Circuit, after citing the confusing de jure and de facto definitions of functionality (which have been rejected as unhelpful by the TTAB), considered the much more understandable factors set forth in Disc Golf Ass’n v. Champion Discs, Inc., 158 F.3d 1002 (9th Cir. 1988).  Those factors are:  “(1) whether the design yields a utilitarian advantage, (2) whether alternative designs are available, (3) whether advertising touts the utilitarian advantages of the design, and (4) whether the particular design results from a comparatively simple or inexpensive method of manufacture.”  Secalt, 2012 WL 373102, at *4 (citing Disc Golf, 158 F.3d at 1006).

No factor supported the plaintiff.  Plaintiff’s own engineers testified that the hoist’s features were utilitarian.  There were alternative designs, but they were functional too.  Plaintiff’s own advertising stated that its hoists were rectangular (“cubist” in plaintiff’s trade dress parlance) so they would not roll off of tables.  All hoists cost pretty much the same, so the last factor was neutral.  The court found that plaintiff’s evidence was so lacking that defendant was entitled to its attorney’s fees.

The Secalt case provides the opportunity to revisit a best practice in trade dress protection.

Although a utilitarian design can only be protected for a limited time, and a purely ornamental design does not necessarily function as a source indicator, when designing a product, the  developer has the opportunity to consider adding a unique feature and repeating it throughout a product line.  If this is possible, then the product manufacturer has the opportunity to use the feature to develop and support brand recognition, even after its utility patent for the product expires, at which time copyists otherwise legally would be allowed to create competing identical products.

 *     *     *

Janet Marvel is a partner with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois.  Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues.  Ms. Marvel’s practice focuses on litigation, transactions, and counseling in domestic and international trademark, trade dress, Internet, and copyright law.  She co-authored the Fifth Edition of the Trademarks and Unfair Competition Deskbook, recently published by LexisNexis.

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January 13, 2012

False Advertising Claim Over Statements In Billing Letter To Patients Not Sufficiently Pled Under Lanham Act

Filed under: Advertising, Litigation — Tags: , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 2:24 pm

by Phillip Barengolts, Trademark Attorney

Ameritox is “the nation’s leader in pain medication monitoring, offering urine drug testing services to help physicians assess medication adherence of patients on chronic opioid therapy.”  Millennium Laboratories is “a national, research-based medication monitoring company whose test offering, technology, customer support, educational resources and experts are specifically focused on clinicians who treat chronic pain.”  Essentially, the companies are urine testing labs that compete in the market for monitoring drug levels in patients who complain of chronic pain because such drugs are very susceptible to abuse.  Ameritox sued Millennium over an alleged scheme to provide improper inducements to physicians to use Millennium’s testing services over those of other companies.  The claims included false advertising under the Lanham Act and a related claim of common law unfair competition.[1]  Millennium moved to dismiss these claims and prevailed (with leave to amend). See Ameritox Ltd. v. Millennium Laboratories, Inc., 8:11-cv-775 (M.D. Fla. Jan. 6, 2012).[2]

As part of this alleged scheme, Ameritox claimed that Millennium provided an “advertisement” to its physician customers that informed patients that they would not be responsible for any additional charges beyond those billed to the patients’ insurance companies or Medicare.  The court identified this “advertisement” as a billing letter, i.e., the letter a patient receives that shows the amounts charged, covered by insurance/Medicare, and owed by the patient.  Ameritox asserted that this letter was misleading because “patients enrolled in Medicare, by law, are not subject to any deductible or co-payments for clinical laboratory services, thus any benefit to a Medicare patient is, in fact illusory.”  It was this letter primarily at issue under the Lanham Act and common law unfair competition claims.

Millennium argued that the letter was not “commercial advertising or promotion,” as required under 15 U.S.C. § 1125(a), because it was sent to patients while the relevant consumers were physicians.  Ameritox countered that: a) the letter was distributed both to patients and physicians; and b) patients also were potential customers.  The court rejected Ameritox’s argument because Ameritox “failed to allege that the Millennium Billing Letter was sufficiently disseminated to the relevant purchasing public.”  Specifically, the court noted that Ameritox’s amended complaint was not clear about who actually was the relevant purchasing public and “how many consumers in the relevant purchasing public Millennium contacted.”[3]

The Court found Ameritox’s factual allegations that the letter was misleading to be sufficient, but at the same time Ameritox had not plausibly pled that the billing letter was likely to deceive potential customers.  The Court did not explain these seemingly contradictory findings beyond stating that Ameritox’s allegation that “Millennium’s statements are…likely to deceive a substantial portion of the targeted customers,” was nothing more than a naked assertion devoid of further factual enhancement – the type of pleading prohibited by the Supreme Court’s decisions in Iqbal and Tombly.  It is not clear what factual enhancement the Court would accept as sufficient to support an allegation of likelihood of deception.  Professor Tushnet wonders whether Ameritox may have to plead that it has a survey in hand. See http://tushnet.blogspot.com/2012/01/pleading-standard-dooms-misleadingness.html.  It seems to this author that explaining how an advertisement is misleading usually would be sufficient to underpin how it is likely to deceive potential consumers.  For example, here (assuming what Ameritox states turns out to be true, as one must on a motion to dismiss), it seems that Ameritox is claiming that patient-consumers are likely to be deceived into believing they are receiving a benefit by having their tests conducted by Millennium because of Millennium’s statements about patients not having to make co-pays, etc.  Perhaps Ameritox needs to be explicit on this point when it amends its complaint, even if such pleading seems above and beyond the notice pleading required by the Federal Rules.

Finally, the Court found insufficient to plead materiality to the purchasing decision Ameritox’s allegation that “Millennium’s false or misleading statements have already, and will continue to, influence materially purchasing decisions to the extent that customers choose Millennium’s services instead of those offered by Ameritox.”  This author sees a pretty direct connection between conveying to a consumer that they don’t have to pay as much when using one company’s service over a competitor’s and the likelihood that the consumer will go with the cheaper provider (essentially, Ameritox alleges that Millennium’s statements convey this type of message).  That is, deception over a price difference seems very material to a consumer’s purchase decision, but maybe that’s just me.  Again, the court may be looking for Ameritox to be more explicit when it re-pleads, but it provided no guidance.

Ultimately, this Court appears to have taken a strict view of the requirements enunciated in Iqbal/Twombly regarding facts that must be pled to support allegations of false advertising under the Lanham Act.  Ameritox was given leave to amend, so we anticipate more specific allegations in the amended complaint.  This decision underscores the need for plaintiffs to be explicit about the impact of an allegedly false advertisement on the target consumers which likely will require more pre-complaint investigation and analysis, as well as artful pleading.  Whether other courts follow this precedent remains to be seen.

*          *          *

Phillip Barengolts is a partner with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois.  Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues.  Mr. Barengolts’ practice focuses on litigation, transactions, and counseling in domestic and international trademark, trade dress, Internet, and copyright law.  He teaches trademark and copyright litigation at John Marshall Law School, and co-authored Trademark and Copyright Litigation, published by Oxford University Press.

[footnotes]

[1] Ameritox also asserted claims under the Florida Deceptive and Unfair Trade Practices Act that are not at issue here.

[3] According to the opinion, Ameritox alleged only that “Millennium’s services are offered, advertised, and sold to customers throughout the country.”

January 5, 2012

Using An Employee’s Personal Social Media Accounts Without Her Authorization To Market Employer May Create Liability Under Trademark And Electronic Privacy Laws

Filed under: Advertising, Litigation, Right of Publicity, Trademark (General) — Tags: , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 10:55 am

by Phillip Barengolts, Trademark Attorney

We’ve all been taught that our work e-mail and social media accounts are owned by our employers, so watch what you say and realize that you have no expectation of privacy in those accounts.  But what happens when an employee uses a personal account to promote her employer?  According to one court, the employer’s use of these accounts without the employee’s authorization can lead to liability under the Lanham Act and the Stored Communications Act. Maremont v. Susan Fredman Design Group, Ltd., Case No. 10 C 7811 (N.D. Ill. Dec. 7, 2011).[1]

The plaintiff, Jill Maremont, was the Director of Marketing, Public Relations, and E-commerce for the defendant Susan Fredman Design Group, Ltd. (SFDG), a prominent interior design firm based in Chicago.  As part of a social media marketing campaign for SFDG, Maremont created a blog on SFDG’s website.  She also promoted SFDG through her personal Twitter and Facebook accounts., including by linking to the SFDG website and blog.  She entered and stored all account access information, including passwords for her personal Twitter and Facebook accounts, on the SFDG server.  She never gave authority to anyone to access her personal Twitter and Facebook accounts. Maremont’s compensation was, in part, based on the overall sales of SFDG, so she had every incentive to promote SFDG.

After suffering a serious accident, Maremont could not work for some time and SFDG decided to continue posting to Maremont’s personal accounts to promote SFDG.  Once she found out, Maremont asked SFDG to stop – but SFDG did not.  After some back and forth about Maremont returning to work for SFDG, she went to another company and sued SFDG over the use of her social media accounts.  (more…)

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