Category Archives: Trademarks

No Friends in the Diamond Business.

A later-filed, Lanham Act suit between two diamond merchants, which sell ‘enhanced’ gemstones, hits on the issue of standing. In Diascience Corp. v. Blue Nile, Inc., 2009 WL 1938970 (S.D.N.Y. 2009), the district court revists the somewhat unresolved law of Lanham Act standing. Taken to an extreme, the courts could place standing in Lanham Act cases on a footing equal to antitrust standing. It could define a zone of protected commercial interests, and require that the claimant to compete in the same “relevant market” as the defendant.

The District Judge notes the 1980 2nd Circuit decision, which declined to decide whether “section 43(a)’s provision allowing suit ‘by any person who believes he is or is likely to be damaged’,” is ” a matter of standing to sue, or as an element of the substantive claim.” Some would wonder why the 2nd Circuit hasn’t answered that after nearly 30 years. It has decided that the harm that confers standing can be presumed, or if that is not triggered, then what need be shown to meet a “heightened showing of injury and causation.” Citing the most recent Supreme Court ruling on motions to dismiss, the district judge found that Diascience had pleaded enough to go forward with “discovery limited to the issue of standing.” That limitation may lack the clarity of the litigants’ gemstones, since for 29 years the 2nd Circuit hasn’t cut a line between what shows “standing” and what shows the “substantive” Lanham Act claim. Discovery on!

Another point worthy of modest surprise was the denial of a stay of this later-filed suit. In the first case, Blue Nile alleged that Diascience had “false advertising” on its website. That is different, and does “not bear on” the claim by Diascience in the later-filed case that there is “false advertising [on] Blue Nile’s website.” That distinction was enough for the judge to refuse to stay the later-filed case in the Southern District pending the upcoming trial in the earlier-filed suit in the Western District.  But, can I get it wholesale?

Divebombing The Yellow.

Guess what color is a registered trademark of Wham-O for water slide toys?

The answer is in the Ninth Circuit’s affirmance Friday of a verdict finding willful infringement of the color yellow. 2009 WL 1360963. Wham-O was able to preclude testimony by the infringer’s expert on the topic of the “competitive advantages offered by use of the color yellow,” but hey, that was harmless.

Wham-O prevailed against a defense of functionality – that color keeps you from diving into the yard – using the testimony of “its employees” that yellow is not the “only color that stands out against green grass or evokes the appropriate aesthetic response.” True, once you miss diving into the grass and hit the slide, you can work the aesthetics of your slide moves, e.g., the gator, the torpedo, the flivver, the gargoyle, the OK-Dad-let-the-kids-have-a-turn, etc.

Let the yellow be a lesson –  the color of plastic may be the color of money.

Some Laches Getting Down to the `Skins.

The D.C. Circuit has affirmed the ruling that laches bars Native Americans claim of disparagement by the use of the mark “Washington Redskins.” 2009 WL 1350607.

It took only from 1992 until 5/15/09 to reach that issue. What threshold prejudice was there in the time that passed from registration of the mark, in 1967, up to the time of the cancellation proceeding? The death of Edward Bennett Williams, who was the pater familias of the Redskins’ football franchise. It was claimed that Williams, the founder of Williams & Connolly, had met with Native American leaders to hear their views on registration of the trademark. There too was economic prejudice since during the delay, the team had invested heavily in branding and merchandising the Washington Redskins, e.g., Sonny J. and Billy the Kid jerseys.

There was, however, the closing question of disparagment by the 1990 registration of “The Redskinettes,” and the concomitantly shorter 29-month delay in complaining about that. Dismissing the claim against the “Redskins” was sauce for gander, and so, good enough to goose the Redskinettes’ claim.

Lawyers are Generic.

Today, the CAFC affirmed a refusal to register lawyers.com on the Supplemental Register.  Why? Because lawyers are “generic.”  More to my way of thinking was the point that whether the matter sought to be registered is, or is not, generic, is a question of fact.  That provokes the paradox, that as a matter of fact, lawyers are not generic, but the word lawyers is generic.  Perhaps Pee Wee Herman said it best: “I know you are, but what am I.”

What Else Can Happen to an Innocent Infringer?

Defendant in CCA Global v. Carpetmax Flooring Center (W.D. KY) must wonder where he can catch a break.  First, he buys a business with an ongoing, undisclosed infringement, and as a result, personally liability is imposed.  Then, his counsel misses the notice of appeal deadline, and the district court finds no “excusable” neglect.  And your clients thought they were having a tough quarter.
Paul Fuller believed Ken Crandall’s statement that he had a CarpetMax franchise license for part of Southern Indiana.  Together they formed a corporation, KP Investments, which operated a CarpetMax store in that locale, which Fuller ran day-to-day.  Turned out that Crandall was not a licensee, and the use of the CarpetMax trademark was unauthorized.  Once this became known, Fuller changed the store name, and bought out Crandall.  Still, the owner of the trademark sued for infringement.  Fuller relied on the defense that every businessperson thinks they have – – no liability because the infringing actions were done by the corporation.  CCA pressed for personal liability against Fuller, and won.  The Court ruled that whether Fuller “knew the use of the mark was unauthorized is of no import.”  His day-to-day operation of the CarpetMax store “were not simply actions of a corporate officer.”  Thus, Fuller was held personally liable for trademark infringement.

Then, due “to a misunderstanding between Defendants’ trial counsel and Defendants’ newly assigned appellate counsel” about the deadline for appealing, the 30-days passed without a notice being filed.  On their motion to extend under F.R. App. Proc. 4(a), the District Court refused to exercise its discretion to extend.  It found that the failure to file the notice of appeal was “undoubtedly the result of ‘inadvertence’ and/or ‘mistake’.”  Even so, that neglect was not “excusable” since it was due to an “understandable” mistake in calculating the due date, and an “understandable miscommunication” between trial and appellate counsel.  If such neglect were “excusable,” then the Court said every act of neglect would be too.

One wonders why counsel so often wait until the due date to file.  It is easier to withdraw a notice of appeal than it is to get one filed out of time.  Sure, there is gamesmanship in waiting to see if the other side will appeal, especially in patent cases with counterclaims.  Still, the worst outcome of that ‘game’ is less painful than that of forfeiting the right to appeal.

All The $$$ Comes From One Pocket, or Out Of the Same Mattress.

In yet another case of infringing goods on the shelves of Wal-Mart, Aero Prods. Int’l, Inc. v. Intex Rec. Corp., (CAFC 2OCT06) that portion of the damages awarded for the infringing trademark was vacated, because the mark was upon the beds that infringed the patent.  To allow a reasonable royalty for infringing the bed patent, plus award profits of the infringer for infringing the trademark would be an “impermissible double recovery.”  Quare: if the infringer paid a reasonable royalty to make the patented bed, would more $$ have to be paid to license the trademark on the beds?
An aspect of the ruling that seems odd is that the Federal Circuit arrogates that the issue of trademark damages will not be decided under regional circuit precedent.  Since the CAFC affirms the patent damages, one wonders why the trademark award is governed by CAFC precedent; and, is there a chance that the patent case and trademark case could have been separate suits that ended up in two Circuit courts for review.
My read of Aero is that the CAFC does not see how the two statutory phrases, “damages adequate to compensate for the [patent] infringement,” and “subject to principles of equity, to recover (1) defendant’s profits” for the trademark infringement, can co-exist and be accorded co-equal meaning.
In the end, the CAFC opts out of any statutory analysis, and holds “the result [is] compelled by [its] Bowers, Catalina Lighting, [etc.]” precedent, and conversely, that reliance on a 9th Circuit case “would be contrary to our [CAFC] decisions in Bowers, Catalina Lighting, [etc.].”
While some part of the trademark award may be duplicative the reasonable patent royalty awarded, that issue more appropriately would be remanded for the district judge to “mold” the damage award, not for the CAFC to vacate it.

6th Circuit Takes on the Dress and Functionality of a Patent Court.

What is the leading Circuit ruling on patent law in 2006, not authored by the Federal Circuit? Fuji Kogyo Co., Ltd. v. Pacific Bay Int’l. (6th Cir. 8/23/2006).The alleged infringement concerned the shape of guides on fishing poles, which after the utility patents expired, were registered as trademarks. The Circuit agreed with the finding after a bench trial that the configuration of the fishing line guides was functional, and so, not protectible under the Lanham Act. It affirmed “based solely on our understanding of patent law,” and the trademarks were cancelled, and the counts for unregistered trade dress were dismissed.Clearly, the 6th Circuit learned from Trafix Devices, where it gave little weight to expired patents that claimed the component later asserted as a trademark. The Supreme Court reversed, stating that a “utility patent is strong evidence” of functionality. 523 U.S. at 29-30. In Fuji Kogyo repeated mention is made, and substantial weight given to, the expired utility patents and to design patents that claim or show “nearly identical” guides. The decsion runs through the best mode, the two-step assessment for literal infringement, intrinsic evidence, and the doctrine of equivalents. (The doctrine of equivalents is alive, at least in the 6th Circuit.)The case turns on evidentiary standards, and the clearly erroneous rule. The parties offered conflicting evidence as to whether the “curved legs” of the guides were an arbitrary choice or a functional feature. The district court sided with functionality, and the 6th Circuit agreed, because that was not clearly erroneous.

While some other commentator can compare all the cases, I had doubts whether all Circuits agree with the 6th Circuit’s fundamental proposition in Fuji Kogyo, that the functionality defense is “a factual determination” and as such, is “reviewed only for clear error.” What earlier was meant when reviewing a district court ruling “that, as a matter of law, Antioch’s trade dress was functional,” in Antioch Co. v. Western Trimming, (6th Cir. 10/20/2003)? Consider too trade dress being “functional as a matter of law,” in Eppendorf-Netheler, Ritter, 289 F.3d 351 (5th Cir. 2002), or that “as a matter of law, that Tie Tech’s product configuration is functional,” in Tie Tech v. Kinedyne, 296 F.3d 778 (9th Cir. 2002), or that applying the “functionality doctrine to a trademark that is …incontestible …is a question of law,” in Wilhelm Pudenz GmbH v. Littlefuse, 177 F.3d 1204 (11th Cir. 1999).

Overall, the Circuit sticks with the leading concepts of patent law, using those as a foil to slice apart the claim for trademark protection.

That Chevy bowtie is bogus – Says who.

Trademark infringement is something every layperson, and law student, thinks they can spot.  An imitator cobbles together fenders and bodywork, then affixes the Chevrolet “bowtie” on the front, and puts it up for sale.

Infringement – right?  Well, maybe, according to recent decisions that remand for “further proceedings consistent” therewith.  Both involve after-market car parts bearing the famous logos of automakers.  In GM v. Keystone Autom., (6th Cir. 6/30/2006), it was “replacement grilles” with “placeholders” or recesses shaped to accept the Chevy bowtie or the GMC logo.  In Au-Tomotive Gold v. VW, (9th Cir. 8/11/2006), the items were “license plates, license plate frames and key chains” bearing the VW and Audi marks.  Even with direct, intentional copying of the automakers well-known marks, proving trademark infringement was, well, not so easy.  Both district courts granted summary judgment to the alleged infringers.

The eight-factor test for proving a likelihood of confusion is reviewed in both Circuit cases.  Additionally, the 9th Circuit gave extensive treatment to the defensive doctrine of aesthetic functionality.  Taken all together, the trademark owners faced a lot of turns through this maze of factors, defenses and doctrines.

In trademark litigation, one key battle is over who is the “public” which the mark may likely confuse.  Is it wholesale purchasers, retail consumers, or the general public?  The level of purchaser sophistication, etc., varies.  In the 6th Circuit case, the ruling against the trademark owners was affirmed because “there is no likelihood of confusion ‘at the point of sale’ to body shops” who know they are purchasing aftermarket, replacement grilles.

The 6th Circuit segmented the purchasers into those collision repairs shops and their customers, and “downstream” customers, who buy cars not knowing about the aftermarket grilles.  It held that factual issues precluded summary judgment as to downstream confusion.  The 9th Circuit collapsed the keychain and accessory market into one group of wholesale and retail buyers.  Though “Auto Gold sells its products to the wholesale market, the ultimate consumers are the same.”  Then it summed the confusion evidence from the entire market, and reversed the summary judgment.  The 6th Circuit separated the direct and second-line purchasers, and set out six “principles” of “downstream confusion” that reflect how “knockoffs can harm the general public and the original manufacturer.”  There was no “evidence of actual confusion” in the direct market.  The 6th Circuit then used six principles to weigh the “potential fo downstream confusion.”  The 9th Circuit merged the “downstream confusion” analysis into the larger factor of “actual confusion.”  The “law in the Ninth Circuit is clear that ‘post-purchase confusion,’ i.e., ..[by] someone other than the purchaser who, for example, simply sees the item …can establish the required likelihood of confusion under the Lanham Act.”

Thus, in cases where the buyer markets are segmented, the trademark owner must make an eight factor showing for the direct market, then again, for the downstream market.  Evidence of confusion may be split between these markets, which can reduce its effectiveness.  A key example in these two cases was the disclaimers on the imitation products.  The aftermarket grilles are received by the body shop with clear indications of origin, and of not being GM parts.  That lead the courts to conclude that confusion was impossible.  In the 9th Circuit case, the general rule was that in cases of “verbatim copying …plaintiff’s reputation and goodwill should not be rendered forever dependent on the effectiveness of fineprint disclaimers often ignored by consumers.”  Still, both Circuits required that disclaimers be consistent and comprehensive.  Should your street vendor clients be advised to work under a banner sign – “These are not Vuitton purses.”

Overall, cases involving plain and intentional copying of famous trademarks must still get past the eight factor test of likelihood of confusion.  To prevail, the trademark owner must prove the commercial realities of the desired market for the original and knockoff products, and who truly are the customers.