Pattishall IP Blog

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.

 * * *

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 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 23, 2012

What’s In A (Domain) Name? What A Cybersquatter Calls A Web Site By Any Other Name Would Not Sell For A Million Dollars Or Provide A Platform For A Three-Year Old’s Artwork

Filed under: Cybersquatting — Tags: , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 3:41 pm

by Phillip Barengolts, Trademark Attorney

In “one [of] a series of domestic disputes between” Paul Bogoni and Vicdania Gomez, Gomez registered the domain names paulbogoni.org and paulbogoni.com without his authorization.[1]  She offered to sell the domain names for $1 million each and posted content on one of them related to certain of her and her daughter’s artwork.  Bogoni sued under the personal name protection provisions of the Anti-cybersquatting Protection Act, 15 U.S.C. § 8131, seeking a preliminary injunction.  He prevailed when Gomez’s defense of use in connection with a copyrighted work failed to show her good faith registration.  Bogoni v. Gomez, No. 11 civ 08093 (S.D.N.Y. Jan. 6, 2012).[2]

Gomez initially populated paulbogoni.org with statements that her three-year old daughter wrote and operated the website, which would donate proceeds to charity from the sale of art objects called “Angel” and “Airplane.”  A message on the site stated, “Hi, I’m Vittoria and this my [sic] first website that my mommy helped me launch in order to begin my journey in making the world a better place.”  The web site advised visitors that the two art objects were constructed at an arts institution named “Make Meaning in the Upper West Side of Manhattan.”  The “Airplane” object was titled “Bogoni.”  Finally, the web site displayed the following statement: “I will am [sic] also selling this domain name www.PAULBOGONI.ORG and www.PAULBOGONI.COM for $1Million (ONE MILLION DOLLARS) each.”  A photograph of “Airplane” appeared on the web site a month after the filing of Bogoni’s complaint and Gomez never explained the relationship between the name Bogoni and the “Airplane.”

Under these facts, Bogoni satisfied his burden to show that Gomez: (1) registered a domain name that consists of his name; (2) did so without the Bogoni’s consent; and (3) had the specific intent to profit from Bogoni’s name by selling the domain name for financial gain.[3]  The court’s analysis turned on the availability of a defense to cybersquatting liability for

“good faith registration of a [personal] domain name . . . if such name is used in, affiliated with, or related to a work of authorship protected under Title 17 . . . and if the person registering the domain name is the copyright owner or licensee of the work [and] the person intends to sell the domain name in conjunction with the lawful exploitation of the work.”

15 U.S.C. § 8131(1)(B).

The Court found that Gomez exhibited an absence of good faith based upon the facts in evidence, and her offer to sell the domain names was not “in conjunction” with the sale of the two art objects.  Thus, she did not qualify for this copyrighted work defense.  The Court’s injunction did not require Gomez to transfer the domain names, however, but only required her to stop using them, which she did by removing all content.  Currently, paulbogoni.org simply states “underconstruction.”

This decision illustrates a key distinction between a claim over the use of a personal name as a domain name under the ACPA versus the Uniform Domain Name Dispute Resolution Policy: the UDRP does not protect personal names that are not trademarks as well, even the names of famous people who do not use their names in connection with a designation for their business.  See http://www.wipo.int/amc/en/domains/search/overview2.0/ (response to question 1.6).  Business executives who find themselves subject to attack or pseudo-extortion through domain names incorporating their personal names may be able to take advantage of this targeted ACPA claim, as well as claims under state laws protecting rights of privacy.

* * *

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] Although the Court is vague on specifics, this statement is telling: “[T]he parties made clear to the Court during oral argument that the parties’ relationship is, at the very least, contentious.”

[3] The Court discussed at some length whether Bogoni satisfied the third prong of this test because of some prior decisions finding that personal name cybersquatting to recover a debt would avoid liability.  See Carl v. BernardJCarl.com, 409 F. App’x 628, 630 (4th Cir. 2010) (per curium) (unpublished).

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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.”

December 13, 2011

Judge In New Mexico Issues Temporary Restraining Order Against Research In Motion To Prevent Use Of BBX Mark At Conference In Singapore

Filed under: International, Litigation — Tags: , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 11:01 am

by Phillip Barengolts, Trademark Attorney

Research In Motion (RIM) planned to introduce its newest mobile platform at the BLACKBERRY developers’ conference (DevCon) in Singapore.  It was going to call it BBX – until Basis International obtained a temporary restraining order against RIM’s use of the name the day before the conference opened.  See Basis Int’l Ltd. v. Research In Motion, Ltd., No. 11‑cv-953, slip op. (D.N.M. Dec. 6, 2011).[1]  Now, RIM is going to call the platform BLACKBERRY 10.  Meanwhile, the suit continues with a hearing on Basis’s motion for preliminary injunction, scheduled for December 19.

The Lanham Act can have extraterritorial application to stop foreign use of an infringing mark under appropriate circumstances.  As stated in the order:

This Court may issue an injunction having extraterritorial effect in order to prevent trademark violations under the Lanham Act where: the extraterritorial conduct would, if not enjoined, have a significant effect on United States commerce, and then only after consideration of the extent to which the citizenship of the defendant and the possibility of conflict with trademark rights under the relevant foreign law might make issuance of the injunction inappropriate in light of international comity concerns.

Id. at 3.

The court decided the facts satisfied these conditions, so issuing a temporary restraining order was appropriate.  From this author’s view, three facts convinced the court: (1) RIM was going to use a mark identical to Basis’s mark; (2) the parties targeted identical consumers, i.e., business software developers; and (3) actual confusion had already arisen – upon RIM’s original announcement of the BBX platform in October, Basis had been contacted about the connection between RIM and Basis.

RIM, a Canadian company, argued that the Lanham Act should not be applied to stop the use of BBX by RIM’s Singapore subsidiary (which was running the conference), but the court found that line of reasoning unpersuasive.  “It is naive to believe that further confusion of the BBX mark in the United States will be confined to only those attending the conference from this country.”  Id. at 4 (emphasis in original).  The court did not explore this conclusion, but did say that “it is not a stretch to state that RIM is attempting global publicity, much of which is aimed at BASIS’s core customer base—U.S. software developers.”

Companies with products in international markets must be cognizant that use of a mark that has a substantial or significant effect on U.S. commerce may result in a violation of the Lanham Act.  This was true even before the age of the Internet, but the Internet has helped blur national boundaries – with no small help from RIM and its BLACKBERRY.

 *          *          *

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.

December 1, 2011

E-Discovery In The Board: A Reasoned Approach

Filed under: E-Discovery, TTAB — Tags: , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 4:27 pm

by Phillip Barengolts, Trademark Attorney

The Trademark Trial and Appeal Board (the “Board”) generally follows the Federal Rules of Civil Procedure for purposes of its proceedings, including with respect to discovery.  Thus, discovery of electronically stored information (“ESI”) has become as important in Board proceedings as in federal court litigation.  Unlike a number of federal courts, which have struggled with these issues and sometimes ruled in ways that greatly increase the costs of litigation, the Board recently struck a reasonable balance for engaging in e-discovery in its proceedings.  Specifically, the Board denied an applicant’s motion to compel an opposer to engage in extensive e-discovery in the precedential decision in Frito-Lay North America, Inc. v. Princeton Vanguard, LLC, Opposition No 91195552 and Cancellation No. 92053001 (T.T.A.B. Nov. 16, 2011).[1]

The underlying dispute involves Frito-Lay’s opposition to Princeton’s application to register PRETZEL CRISPS for “pretzel crackers.”[2]  During their mandatory discovery conference, the parties failed to agree on discovery of ESI.  After both both parties served requests for documents, including ESI, Princeton extensively reviewed and produced its relevant ESI – costing Princeton approximately $200,000, with an anticipated $100,000 more to comply with its ongoing obligations under the Federal Rules.  Frito-Lay was less forthcoming, so Princeton moved to compel Frito-Lay to produce ESI in the same manner as Princeton.

At its heart, the dispute is best summed up in the words of the parties’ attorneys (as quoted in the Board’s Order):

  • Princeton’s counsel complained that Frito-lay had not conducted “attorney-managed electronic data retrieval and search” and this “failure to conduct an attorney-supervised ESI retrieval, search (using appropriate keywords) and review has substantially prejudiced [Princeton’s] ability to defend.”  Moreover, “[n]o cost, burden or other reason allows [Frito-Lay] to rely on custodians to search their own files where the results of that policy are clearly insufficient. . .”;
  • Frito-Lay’s counsel responded that Frito-Lay had conducted a “reasonable investigation to locate, gather and produce documents reasonably responsive” to Princeton’s discovery requests, including by identifying document custodians and asking them to search their own files and computers.  Further, attorney-supervised searches of ESI would cost Frito-Lay an additional $70,000 – $100,000, “an expense that would far outweigh the benefit of any information in determining the matters at issue in this proceeding,” especially since the claims in the proceeding pertained solely to Princeton’s mark and Frito-Lay.[3]

For the litigators among you, this dispute likely has a familiar ring.  (more…)

November 30, 2011

Green Day Awarded Attorneys’ Fees Against Artist After Defeating Copyright Infringement and Unfair Competition Claims With Fair Use Defense

Filed under: Copyright, Litigation — Tags: , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 3:27 pm

Categories: Copyright, Litigation
Tags: Copyright, Fair Use, Attorney’s Fees, Phillip Barengolts

by Phillip Barengolts, Trademark Attorney

Green Day, a punk band most of us know for the song Good Riddance,[1] and others remember for songs like Basket Case,[2] was sued by artist Derek Seltzer for copyright infringement and unfair competition over Green Day’s use of his work Scream Icon in connection with Green Day’s song East Jesus Nowhere.[3]  More precisely, Green Day’s co-defendant Roger Staub, a photographer and set designer photographed a torn Scream Icon poster he saw on the corner of Sunset Boulevard and Gardner Avenue in Los Angeles, altered the color and contrast, added a brick background, and superimposed a red spray-painted cross over the image.  On summary judgment, Green Day defeated the copyright claim with a fair use defense and the unfair competition claim because Green Day did not use Scream Icon in a trademark manner.[4]  For a thorough discussion of that decision, see Professor Tushnet’s post at http://tushnet.blogspot.com/2011/08/fair-useaesthetic-functionality-save.html.  Seltzer has appealed the ruling and briefing is scheduled to close in April 2012.

Just before Thanksgiving, the Court awarded Green Day $128,000 and its co-defendants an additional $72,000 in attorneys’ fees.  Seltzer v. Green Day, Inc., No. 10-2103 (C.D. Cal. Nov. 17, 2011).[5]  In an arguably close case that turned on fair use analysis, why did the court grant Green Day its fees?  Let’s take a closer look.

Under the Copyright Act, a court “may award a reasonable attorneys’ fee to the prevailing party . . .” 17 U.S.C. § 505.  The court properly referred to the Supreme Court’s decision in Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994), which highlighted that a prevailing defendant must be treated similarly to a prevailing plaintiff in the award of attorneys’ fees.  The court observed, “The pivotal inquiry is whether the successful defense furthered the goals of the Copyright Act.”  It then proceeded to analyze the Ninth Circuit’s attorneys’ fees factors: “ (1) the degree of success; (2) frivolousness; (3) motivation; (4) the objective unreasonableness of the losing party’s factual and legal arguments; and (5) the need, in particular circumstances, to advance considerations of compensation and deterrence.

Immediately, we see a problem for the plaintiff when, according to the court, plaintiff cited to bad law in the Ninth Circuit, which had established a “dual” standard for attorneys’ fees in copyright claims – plaintiffs usually won them, defendants had to show a plaintiff’s claim was objectively unreasonable or frivolous.  The court was harsh: “Plaintiff’s citation to Hustler, a case applying the ‘dual’ standard rejected by the Supreme Court in Fogerty, edges close to an affirmative attempt to mislead the Court.” (more…)

November 22, 2011

First Amendment Right To Anonymous Speech Trumps Right To Discover Identity Of Blogger Alleged To Have Infringed Copyrighted Works of Art Of Living Foundation

Filed under: Constitution, Copyright, First Amendment — Tags: , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 1:02 pm

Categories: Copyright, First Amendment, Constitution

Tags: First Amendment, Discovery , Phillip Barengolts

by Phillip Barengolts, Trademark Attorney

“Skywalker’s First Amendment right to anonymous speech outweighs the need for discovery at this time.” Art of Living Foundation v. Does 1-10, No. 10-cv-05022 (N.D. Cal. Nov. 9, 2011).[1]  This statement and the decision in Art of Living Foundation has significant consequences for intellectual property owners pursuing claims against defendants hiding behind privacy services, pseudonyms, or using other identity blocking methods – an increasingly common obstacle to enforcing intellectual property rights.

But first, a few words about the parties.  The Art of Living Foundation (“AOLF”) is an international “educational and humanitarian” organization dedicated to teaching the spiritual lessons of “His Holiness Ravi Shankar.”[2]  Technically, the plaintiff in this case is the U.S. branch of AOLF.  The defendants, who go by the pseudonyms “Skywalker” and “Klim,” write blogs that criticize AOLF.  Allegedly, they are disgruntled former participants in AOLF.

After filing a complaint for defamation, trade secret misappropriation, trade libel, and copyright infringement, AOLF sought expedited discovery to learn the true identities of Skywalker and Klim.  The magistrate in the case granted this request and AOLF issued subpoenas to Google and Automattic – the companies that host the defendants’ blogs.  AOLF’s stated purpose for the subpoenas was to serve the complaint upon the defendants.  The defendants made special appearances through counsel to move to quash these subpoenas, among other motions that ultimately left only the copyright and trade secret misappropriation claims pending.[3]

(more…)

November 17, 2011

Alibaba.Com Found Subject To General Personal Jurisdiction In Missouri – And Possibly In Any State

Filed under: Litigation, Trademark (General) — Tags: , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 10:38 am

Categories: Trademark (General), Litigation
Tags: Trademark, Personal Jurisdiction, Phillip Barengolts

by Phillip Barengolts, Trademark Attorney

Cepia makes ZhuZhu Pets.[1]  For purposes of our discussion here, Alibaba’s primary business is <alibaba.com>, an Internet website that facilitates international business-to-business transactions.  Cepia sued Alibaba Group Holdings Limited and Alibaba.Com Hong Kong Limited for trademark infringement, trade dress infringement, false advertising, false designation of origin, copyright infringement, unfair competition, and dilution over Alibaba’s facilitation of the sale of counterfeit and unauthorized ZhuZhu Pets merchandise by hosting a link on <alibaba.com> that directed users to a ZhuZhu Pets microsite featuring ZhuZhu Pets products for sale from various sellers of such merchandise.  Both Alibaba entities moved to dismiss for lack of personal jurisdiction.  The United States District Court for the Eastern District of Missouri held that Alibaba Group Holdings Limited was not subject to jurisdiction in St. Louis, while Alibaba.Com Hong Kong Limited was.  Cepia LLC v. Alibaba Group Holdings Ltd., No. 4:11–CV–273, 2011 WL 5374747 (E.D. Mo. Nov. 8, 2011).[2]

We are going to assume reader familiarity with the general standards governing personal jurisdiction, but in short form: to exercise personal jurisdiction over a defendant, the federal court must satisfy the long-arm statute of the state in which it sits (Missouri) as well as the due process requirements of the Fourteenth Amendment to the U.S. Constitution.  Due process requires that a plaintiff show that a non-resident has “minimum contacts” with the forum state and that the maintenance of the lawsuit does not offend “traditional notions of fair play and substantial justice.”

The Court declined to exercise jurisdiction over Alibaba Holdings because Cepia failed to show that Alibaba Holdings “so controlled and dominated the affairs of Alibaba.Com that the latter’s corporate existence was disregarded” despite Alibaba Holdings’ ownership of the ALIBABA trademarks, ownership stake in <alibaba.com>, the two companies’ use of the same name and logo, and sharing a chairman for their separate boards of directors.  Moreover, the Court found that all the alleged acts were perpetrated by Alibaba.Com without direct input from Alibaba Holdings.[3]

Alibaba.Com, however, was subject to general (not just specific) personal jurisdiction.  Of greatest interest for other trademark owners facing problems on <alibaba.com>, are the reasons the Court gave for exercising general personal jurisdiction over Alibaba.Com.  They were: 1) the effect of Alibaba.Com’s alleged intellectual property infringement (a tort) would be felt by Cepia in Missouri; 2) Alibaba.Com had relationships with 1,211 third-party suppliers in Missouri – none of whichsold ZhuZhu merchandise; and 3) Alibaba.Com had two paid users from Missouri.  In the Court’s words:

Alibaba.Com’s commercial relationships with third party sellers are a critical aspect of its operation. Further, Alibaba.Com’s commercial relationships with third party sellers are not a one time event, but rather a continuing critical component of its business. Alibaba.Com maintains 1,211 such relationships with suppliers in Missouri. Accordingly, Alibaba.Com’s contacts with Missouri are systematic and continuous in such a manner that supports general personal jurisdiction. By maintaining systematic and continuous commercial relationships with at least 1,211 people or entities in Missouri, Alibaba.Com, has purposefully availed itself of Missouri’s laws.

Whether this Court’s analysis would hold up in another jurisdiction is an open question, but this decision likely raises the potential that Alibaba.Com can be sued anywhere in the U.S..  If Alibaba.Com has 1,211 sellers based in Missouri, there is a strong likelihood that it has a significant number of sellers in your state.

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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, recently published by Oxford

[footnotes]

[1] Go to http://www.zhuniverse.com/ (you won’t be disappointed).

[3] The Court also declined to assert personal jurisdiction under Fed. R. Civ. P. 4(k)(2), which permits a federal court to exercise jurisdiction over an entity that has sufficient contacts with the U.S. generally but not with any state in particular.

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November 14, 2011

Second Circuit Rules That Presenting Covenant Not To Sue Eliminates Subject Matter Jurisdiction Over Declaratory Judgment Action For Non-Infringement And Cancellation Of Trademark Registration

Filed under: Litigation, Trademark (General) — Tags: , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 3:56 pm

Categories: Trademark (General), Litigation
Tags: Trademark, Subject Matter Jurisdiction, Covenant Not To Sue, Phillip Barengolts

by Phillip Barengolts, Trademark Attorney

Nike sued Yums for infringement of Nike’s registered trade dress in the Air Force 1 shoe.  Yums counterclaimed for a ruling that the claimed dress “is not a valid trademark,” a declaration of non-infringement, and cancellation of Nike’s registration.[1]  Nike then provided Yums a covenant not to sue and moved to dismiss its complaint with prejudice and the counterclaims without prejudice.  The district court held that the covenant ended the controversy between the parties and dismissed Yums’s counterclaims for lack of subject matter jurisdiction.  The Second Circuit affirmed in Nike, Inc. v. Already, LLC, _ F.3d _, 2011 WL 5429154 (2d Cir. Nov. 10, 2011).[2]

A bit of background: if you followed, played, or were remotely interested in basketball or hip-hop in the ‘80s, Nike’s Air Force 1 is an iconic shoe and you know what it looks like.  It has been featured in a number of hip-hops songs and music videos, and has been worn and promoted by a number of players in the National Basketball Association.  Yums targets the urban and hip-hop market with its shoes and one of the implicated shoes was sponsored by hip-hop artist SOULJA BOY.  Nike’s Air Force 1 and Yums’s Soulja Boy shoes are shown below.

This litigation was part of Nike’s campaign against imitation Air Force 1 shoes, which proved very successful – except for Yums, which apparently refused to agree to Nike’s demands to stop making shoes that look like the Soulja Boy shoe shown above.  After extensive negotiations, “Nike determined that the time and expense of continued litigation against Defendant [was] not justified,” in part, because the infringement was de minimis.[3]  It then provided Yums with the covenant not to sue, which required Nike to:

refrain from making any claim(s) or demand(s), or from commencing, causing, or permitting to be prosecuted any action in law or equity, against [Yums] or any of its [successors or related entities and their customers], on account of any possible cause of action based on or involving trademark infringement, unfair competition, or dilution, under state or federal law in the United Sates [sic] relating to the [Air Force 1 trade dress] based on the appearance of any of [Yums]’s current and/or previous footwear product designs, and any colorable imitations thereof, regardless of whether that footwear is produced, distributed, offered for sale, advertised, sold, or otherwise used in commerce before or after the Effective Date of this Covenant.

Yums decided to pursue its counterclaims “because Nike’s litigation-and the ′905 Registration itself-constituted a ‘continuing libel’ against Yums by making it appear that Yums had infringed and continued to infringe Nike’s trademark.”  Yums had not and has not, however, petitioned to cancel Nike’s registration in the Patent and Trademark Office.

The Second Circuit ruled that, to determine whether a covenant not to sue eliminates the case or controversy requirement for a declaratory judgment action involving a trademark, courts must look at: “(1) the language of the covenant, (2) whether the covenant covers future, as well as past, activity and products, and (3) evidence of intention or lack of intention, on the part of the party asserting jurisdiction, to engage in new activity or to develop new potentially infringing products that arguably are not covered by the covenant.”  The Second Circuit had little trouble finding that Nike’s covenant eliminated any possibility of a controversy and discounted Yums’s arguments that investors were turned off by Nike’s allegations and would continue to stay from Yums as a result.  The Second Circuit also agreed with other federal circuits that have opined on the issue that cancellation under 15 U.S.C. § 1119 does not create an independent basis for jurisdiction in federal court.  The Court also affirmed that no attorneys’ fees would be awarded to Yums.

Trademark owners who file suits to protect their marks and later find that the potential benefit of the suit in the marketplace may not be worth the expense now have confirmation that a covenant not to sue may extricate them from the suit.

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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, recently published by Oxford University Press.

[footnotes]

[1] The Answer and Counterclaim is worth a look for its attempt to claim that Nike’s shoe trade dress is in the public domain name or unprotectable because it constitutes unpatented patentable subject matter.  The Answer can be found here: http://www.pattishall.com/pdf/Answer_to_Nike_complaint.pdf.

[3] Nike’s Memorandum of Law in support of its Motion to Dismiss, Doc. 38, 1:09-cv-06366 (filed Apr. 12, 2010).

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