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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March 25, 2014

Lexmark Case Decided – U.S. Supreme Court Creates New Standard for False Advertising Claims

Filed under: Advertising, Trademark (General) — Tags: , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 5:45 pm

Widmaier_Uli_1 F LRBy: Uli Widmaier

In Lexmark Int’l, Inc., v. Static Control Components, Inc., No. 12-873 (March 25, 2014), the U.S. Supreme Court held that a party alleging false advertising under Section 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a), must show “an injury to a commercial interest in sales or business reputation proximately caused by the defendant’s misrepresentations.”

This holding creates a new standard for false advertising claims and invalidates familiar legal doctrine.

THE FACTS OF THE CASE
Lexmark, the defendant in this lawsuit, manufactures laser printers and sells toner cartridges for these printers. Static Control, the plaintiff, makes components for remanufacturers of Lexmark printer cartridges.
Static Control had alleged “lost sales and damage to its business reputation” as a direct result of Lexmark’s false, misleading, and derogatory statements about Static Control and its clients, the remanufacturers of Lexmark toner cartridges.

THE LAW PRIOR TO LEXMARK
U.S. courts had long used “three competing approaches to determining whether a plaintiff has standing to sue [for false advertising] under the Lanham Act.” A plaintiff who did not have the requisite standing could not bring a false advertising claim.

The Supreme Court rejected each of these tests. They are no longer valid law.

THE NEW LAW
In Lexmark, the Supreme Court held that a plaintiff’s ability to sue for false advertising is no longer a question of “standing.”

Rather, it “presents a straightforward question of statutory interpretation: Does the cause of action in Sec. 1125(a) extend to plaintiffs like Static Control?” Put another way, the question is “whether Static Control falls within the class of plaintiffs whom Congress has authorized to sue under Sec. 1125(a).”‘

The courts must answer this question by considering two factors: (a) the zone of interests protected by the law invoked, and (b) proximate cause.

(a)    Zone of Interests – For the zone of interests inquiry, the Supreme Court held that the plaintiff must allege and prove “an injury to a commercial interest in reputation or sales.”

This requirement is not met by “a consumer who is hoodwinked into purchasing a disappointing product,” or by “a business misled by a supplier into purchasing an inferior product.”

(b)    Proximate Cause – For the proximate cause inquiry, the Supreme Court held that the plaintiff must allege and prove “economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising; and that occurs when deception of consumers causes them to withhold trade from the plaintiff.”

This requirement is not met “when the deception produces injuries to a fellow commercial actor that in turn affect the plaintiff.”

APPLYING THE NEW LAW TO STATIC CONTROL’S FALSE ADVERTISING CLAIM

(a)    Zone of Interests – Static Control alleged that its “position in the marketplace has been damaged by Lexmark’s false advertising.” Therefore, the Supreme Court held, Static Control is “within the zone of interests” protected by Section 43(a) of the Lanham Act.

(b)    Proximate Cause – Static Control also satisfied the proximate cause requirement because it alleged “that Lexmark disparaged its business and products by asserting that Static Control’s business was illegal.” As the Supreme Court explained, “when a party claims reputational injury from disparagement, competition is not required for proximate cause; and that is true even if the defendant’s aim was to harm its immediate competitors, and the plaintiff merely suffered collateral damage.”

In addition, Static Control’s specific business model supported a finding of proximate cause. Static Control’s products “both (1) were necessary for, and (2) had no other use than, refurbishing Lexmark toner cartridges.” Therefore, any false advertising directed at remanufacturers of Lexmark toner cartridges “necessarily injured Static Control as well.”

The Supreme Court noted that its approval of Static Control’s false advertising claim extends only to Static Control’s allegations. Static Control still has to prove both the zones of interest element and the proximate cause element of its Section 43(a) claim with factual evidence.

EDWARD S. ROGERS AND THE MEANING OF “UNFAIR COMPETITION”
The term “unfair competition” does not mean that the plaintiff and the defendants must actually be competitors.

To drive home that oft-misunderstood point, the Supreme Court quoted a 1929 (!) article in the Yale Law Journal by the drafter of the Lanham Act and former name partner of the Pattishall law firm, Edward S. Rogers. Rogers – whom the Supreme Court calls a “leading authority in the field” – put the matter memorably: “There need be no competition in unfair competition, just as there is no soda in soda water, no grapes in grape fruit, no bread in bread fruit, and a clothes horse is not a horse but is good enough to hang things on.”

In other words, it is a mistake, explained the Supreme Court, “to infer that because the Lanham Act treats false advertising as a form of unfair competition, it can protect only the false-advertiser’s direct competitors.”

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Uli Widmaier 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. The firm advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues. Uli’s practice focuses on domestic and international trademark, copyright, trade dress and Internet law and litigation.

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January 17, 2014

CrossFit Cybersquatter Gets Dealt Multiple Blows

Filed under: Cybersquatting, Domain Name, TM Registration — Tags: , , , , , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 2:52 pm

Paul Borovay F LRBy Paul A. Borovay, Associate

In CrossFit, Inc. v. Results Plus Personal Training Inc, the panel held that an unsubstantiated “consent to transfer” will not avoid an adverse ruling.  National Arbitration Claim Number: FA1305001498576 (June 28, 2013).  The domain names at issue were <crossfitagawam.com>, <crossfitansonia.com>, <crossfitbeaconfalls.com>, and many other “crossfit”-derivative .com domain names referring to different cities across the United States.

CrossFit, Inc. provided workout and gym products and services.  Its revenue mainly came from licensing its registered CROSSFIT marks and programs to affiliate gyms around the country.  Typically the affiliate would register a “crossfit” domain name that included a geographic designator, e.g., crossfitboston.com.  The Respondent, Results Plus Personal Training Inc., was a competitor of Crossfit.  It registered 113 domain names, most of which “do nothing but add the name of a famous or popular city [to] the CrossFit mark.”  Most were used for parked web pages, often with advertising hyperlinks for Respondent and other competitors.  The panel found that Respondent registered that large amount of domain names “to resell them exclusively to Complainant and its affiliates.”  It was a “bad faith endeavor to confuse Internet users into believing Complainant or its CrossFit mark is at the source of the content, all so Respondent can advance its goals to generate revenue.”

Results Plus argued that GoDaddy.com led it to believe that it could legally register and use these domain names in the manner that it did.  Although CrossFit had filed a federal court action seeking $9 million in damages, the Panel determined that it retained authority to proceed to decision.  To avoid an adverse ruling, Results Plus offered to transfer the domain names to Crossfit on the condition that Crossfit pay Results Plus $1,300, which Results Plus argued was “far less” than it had spent maintaining the 113 domain names.

The Panel observed that an effective consent to transfer does not ordinarily arise when the transfer is subject to the condition precedent of a markholder’s payment of fees. The Panel found that Complainant has not implicitly consented in its Complaint to the transfer of the disputed domain names without a decision on the merits by the Panel.  The Panel observed that this “consent-to-transfer” approach was one way cybersquatters tried to avoid adverse holdings, but it normally was ineffective, especially when the alleged “consent” required the transfer of money to the respondent.  The Panel ultimately found that Results Plus did not have any legitimate interest in the disputed domain names and had acted in bad faith, and ordered the domain names transferred to Cross Fit.

This case highlights that trademark owners can bring an action to transfer  multiple infringing domain names from a single cybersquatter under the Uniform Domain-Name Dispute Resolution Policy (commonly referred to as “UDRP”).  The UDRP sets forth the grounds on which arbitrators base their decisions, but there are several different dispute resolution forums from which to choose, all with their own local rules, procedures and leanings.  While I do not practice CrossFit myself, I know a good 1-2 punch when I see one – and, for now, Results Plus is down for the count.

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Paul A. Borovay is an associate 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.   Paul’s practice focuses on litigation in trademark, media, online gaming and entertainment, advertising, as well as trademark prosecution and counseling.

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January 15, 2014

Ninth Circuit Declares GoDaddy Not Contributorily Liable For Cybersquatting

Filed under: Cybersquatting, Domain Name, TM Registration — Tags: , , , , , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 1:08 pm

Paul Borovay F LRBy Paul A. Borovay, Associate

In December, the Ninth Circuit held that the Anticybersquatting Consumer Protection Act (ACPA), 15 U.S.C. § 1125(d), does not support a cause of action for contributory cybersquatting.  Petroliam Nasional Berhad v. GoDaddy.com, Inc., 737 F.3d 546, 548 (9th Cir. 2013).[1]

Petrolium Nasional Berhad (Petronas), a major oil and gas company with its headquarters in Kuala Lumpur, Malaysia, owns the trademark PETRONAS.  In 2009, Petronas discovered that a third party had registered the domain names “petronastower.net” and “petronastowers.net.”  The third party then used GoDaddy’s domain name forwarding services to forward visitors of the two domain names to a pornographic web site. GoDaddy took no action against the alleged cybersquatting, claiming that (1) it did not host the site; and (2) it was prevented by the Uniform Domain Name Dispute Resolution Policy (“UDRP”) from participating in trademark disputes regarding domain name ownership.  Id. at 548.

Petronas sued GoDaddy in the United States District Court for the Northern District of California on a number of theories, including cybersquatting under 15 U.S.C. § 1125(d), and contributory cybersquatting. Following limited discovery, the district court granted summary judgment in favor of GoDaddy. Petroliam Nasional Berhad v. GoDaddy.com, Inc., 897 F. Supp. 2d 856 (N.D. Cal. 2012) aff’d, 737 F.3d 546 (9th Cir. 2013).  Petronas appealed only with respect to its claim of contributory cybersquatting.

The Ninth Circuit defined cybersquatting as “registering a domain name associated with a protected trademark either to ransom the domain name to the mark holder or to divert business from the mark holder.” Petroliam, 737 F.3d at 550 n. 3 (citing Bosley Med. Inst., Inc. v. Kremer, 403 F.3d 672, 680 (9th Cir.2005)).  Under the ACPA, a person may be civilly liable “if … that person has a bad faith intent to profit from that mark … and registers, traffics in, or uses a [protected] domain name.” 15 U.S.C. § 1125(d)(1)(A). Petronas argued that the ACPA provided for a cause of action for contributory cybersquatting, claiming that “Congress intended to incorporate common law principles of secondary liability into the Act by legislating against the backdrop of the common law of trademark infringement and by placing the ACPA within the Lanham Act.”  Petroliam, 737 F.3d at 550.  The Ninth Circuit disagreed.

Beginning its analysis with the text of the ACPA, the Ninth Circuit noted that the ACPA imposes civil liability for cybersquatting on persons that “register[ ], traffic[ ] in, or use[ ] a domain name” with the “bad faith intent to profit” from that protected mark. 15 U.S.C. § 1125(d)(1)(A). The plain language of the statute thus prohibits the act of cybersquatting, but limits when a person can be considered to be a cybersquatter. Id.  Taking notice that the statute makes no express provision for secondary liability, the Ninth Circuit held that “[e]xtending liability to registrars or other third parties who are not cybersquatters, but whose actions may have the effect of aiding such cybersquatting, would expand the range of conduct prohibited by the statute from a bad faith intent to cybersquat on a trademark to the mere maintenance of a domain name by a registrar, with or without a bad faith intent to profit.” Petroliam, 737 F.3d at 550-51.

Petronas then argued that Congress incorporated the common law of trademark, including contributory infringement, into the ACPA, citing a number of district courts decisions that relied on that reasoning in finding a cause of action for contributory cybersquatting. See Verizon Cal., Inc. v. Above.com Pty Ltd., 881 F.Supp.2d 1173, 1176–79 (C.D.Cal.2011); Microsoft Corp. v. Shah, No. 10–0653, 2011 WL 108954, at *1–3 (W.D.Wash. Jan. 12, 2011); Solid Host, NL v. Namecheap, Inc., 652 F.Supp.2d 1092, 1111–12 (C.D.Cal.2009); Ford Motor Co. v. Greatdomains.com, Inc., 177 F.Supp.2d 635, 646–47 (E.D.Mich.2001).[2]  Again, the Ninth Circuit was not persuaded, holding that the “circumstances surrounding the enactment of the ACPA [. . . ] do not support the inference that Congress intended to incorporate theories of secondary liability into that Act.”  Distinguishing between the Lanham Act’s codification of unfair competition and common law trademark infringement and the ACPA, the Ninth Circuit stated that claims under traditional trademark law and the ACPA have distinct elements. Petroliam, 737 F.3d at 552  (for example, under the ACPA a mark holder must prove “bad faith,” which is not a requirement under traditional trademark infringement claims, and cybersquatting liability, unlike traditional trademark infringement, does not require commercial use of a domain name).[3]  As a consequence, the Ninth Circuit held that the ACPA simply created a new statutory cause of action to address the new cybersquatting problem and that imposing secondary liability on domain name registrars would unnecessarily expand the scope of the ACPA.

The Ninth Circuit’s decision was not surprising.  The purpose of the ACPA and the UDRP is to provide trademark owners with a remedy against those actively using their trademarks in “bad faith.”  As a domain name forwarding provider, GoDaddy simply did not meet the explicit definition of a “cybersquatter.”  Consequently, trademark owners must use the tools the ACPA and the UDRP provide to go after those the ACPA defines as liable, that is, the cybersquatters themselves.[4]

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Paul A. Borovay is an associate 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.   Paul’s practice focuses on litigation in trademark, media, online gaming and entertainment, advertising, as well as trademark prosecution and counseling.


[2] The Ninth Circuit commented that some of these district courts that recognized a cause of action for contributory liability required that a plaintiff show “exceptional circumstances” in order to hold a registrar liable under that theory. See Above.com Pty Ltd., 881 F.Supp.2d at 1178; Shah, 2011 WL 108954, at *2; Greatdomains.com, Inc., 177 F.Supp.2d at 647. The Ninth Circuit noted that the “exceptional circumstances” test has no basis in either the Act, or in the common law of trademark. Petroliam Nasional Berhad v. GoDaddy.com, Inc., 737 F.3d 546, 553 (9th Cir. 2013).  Rather than attempt to cabin a judicially discovered cause of action for contributory cybersquatting with a limitation created out of whole cloth, the Ninth Circuit explicitly declined to recognize such a cause of action in the first place.  Id.

[3] As a practical point, the Ninth Circuit noted that GoDaddy, a registrar holding over 50 million domain names, would have to presumably analyze its customer’s subjective intent with respect to each domain name, using the nine factor statutory test outlined in 15 U.S.C. § 1125(d)(1)(B).  Moreover, domain name service providers would then be forced to inject themselves into trademark and domain name disputes. which is contrary to the purpose of the ACPA and the UDRP. Petroliam Nasional Berhad v. GoDaddy.com, Inc., 737 F.3d 546, 549-54 (9th Cir. 2013).

[4] UDRP proceedings are a cost-effective means to protect your trademark online and to keep third parties from diverting people from your legitimate websites and siphoning off ad revenue.

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January 10, 2014

Kanye West Sends Cease and Desist Letter to Stop New COINYE WEST Virtual Currency

Filed under: Cybersquatting, Domain Name, TM Registration — Tags: , , , , , , , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 12:01 pm

Paul Borovay F LRBy Paul A. Borovay, Associate

Whether you are in the Yeezus camp or the My Beautiful Dark Twisted Fantasy camp, or even if either of those references mean nothing to you, you might still be interested to know that a new currency is in development – in a few days we will all be able to own some COINYE WEST.  Or will we?

As the Wall Street Journal first reported, Kanye West has tried to stop seven anonymous coders behind a new virtual currency called COINYE WEST, similar to bitcoin.  Not surprisingly, Kanye West, by and through his attorneys, has claimed trademark infringement, unfair competition, cyberpiracy and dilution.  You can read the cease and desist letter here.  While the company has changed its domain name from coinyewest.com to coinyeco.in, the coders launched their site on January 7.

West has built a music empire on his KANYE WEST brand, a brand that, according to West’s interview with BBC Radio 1, is the most influential in the world.  As if being the “number one rock star on the planet” was not enough, West’s “I am a God” statement truly makes him a being to reckon with.

While West might be a bit high and mighty (pun intended), he does understand the importance of protecting his brand.  This situation highlights the cross section between trademark rights and the new and evolving internet frontier.  First it was domain names, then came AdWords, and now crypto currency.  While COINYE WEST might face an uphill battle if the case proceeds to court, similar disputes are certain to arise as new technologies develop.  At Pattishall, we strive to stay on the forefront of emerging technologies.  And, while I may not be in the market for any COINYE in the near future, I will be ready to purchase some KARDASH-CASH if Kim Kardashian ever makes any available.[1]

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Paul A. Borovay is an associate 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.   Paul’s practice focuses on litigation in trademark, media, online gaming and entertainment, advertising, as well as trademark prosecution and counseling.


[1] KARDASH-CASH is not a real trademark, nor is it a real currency.  I just made it up for fun.

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