Pattishall IP Blog

April 12, 2016

Pattishall Prevails for Bayer in Landmark Unfair Competition Case

Filed under: Litigation, Pattishall — Tags: , , , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 1:47 pm

Phil Barengolts and Bradley Cohn prevailed in the U.S. Court of Appeals for the Fourth Circuit for Bayer Consumer Care AG and Bayer Healthcare LLC in Belmora LLC v. Bayer Consumer Care AG and Bayer Healthcare LLC, No. 15-1335 (4th Cir. March 23, 2016). The Court held that ownership of a U.S. trademark is not a prerequisite for asserting unfair competition and related claims under Section 43(a) of the Lanham Act, or to cancel a trademark registration for misrepresentation under Section 14(3). This is an important clarification of U.S. unfair competition law.

Bayer Consumer Care sells naproxen sodium pain reliever in Mexico under the trademark FLANAX, which is well known in that country. Bayer does not sell FLANAX in the United States, instead selling ALEVE. Bayer sued a U.S. company, Belmora LLC, for using the FLANAX mark in the U.S. to falsely suggest to U.S. consumers–in particular, Mexican-Americans–that Belmora’s FLANAX pain reliever was the same as Bayer’s Mexican FLANAX pain reliever. Bayer sued for unfair competition and false advertising, and petitioned to cancel Belmora’s trademark registration for FLANAX because of Belmora’s misrepresentation.

On March 23, the Fourth Circuit held Bayer was entitled to sue Belmora, reversing the trial court ruling that Bayer could not proceed with its claims because it does not own the FLANAX mark in the U.S. The Fourth Circuit found that “the plain language of § 43(a) does not require that a plaintiff possess or have used a trademark in U.S. commerce as an element of the cause of action.” Based on that finding, and relying on the Supreme Court’s 2014 landmark decision in Lexmark v. Static Control, the Fourth Circuit held Bayer’s claims fell within the Lanham Act’s zone of interest and that Bayer had alleged injuries that were proximately caused by Belmora’s actions.

Many courts previously assumed a party must own a U.S. trademark to bring Section 43(a) claims. However, the Fourth Circuit held that assumption is wrong. A defendant who passes off its products as the plaintiff’s is liable under Section 43(a), regardless of whether the plaintiff actually owns a U.S. trademark. For instance, as the Fourth Circuit explained, a plaintiff can sue a defendant who uses a generic (and hence unprotectable) word to falsely associate its products with the plaintiff’s. Or, as in the present case, a plaintiff can sue a defendant who uses the plaintiff’s non-U.S. trademark to create a false association in the United States.

The Fourth Circuit noted that in a situation where merely “a few isolated consumers . . . confuse a mark with one seen abroad,” the owner of the non-U.S. trademark will “face difficulty” in establishing a Section 43(a) claim. But “the story is different when a defendant, as alleged here, has — as a cornerstone of its business — intentionally passed off its goods in the United States as the same product commercially available in foreign markets in order to influence purchases by American consumers.” In such a situation, the owner of the non-U.S. trademark has viable Section 43(a) claims.

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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 27, 2012

Fourth Circuit Overturns Laches Defense Victory for Clear Channel

Filed under: Litigation, Trademark (General) — 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.

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