The Line Between Trademark Infringement and Parody

 

The Second Circuit Court of Appeals affirms that a canvas tote bag with a graphic image of Louis Vuitton’s trademark is parody, not trademark infringement.

Louis Vuitton Malletier, S.A. v. My Other Bag, Inc., 16-241-cv, 2d Circuit Court of Appeals, Dec. 22, 2016.

Trademarks facilitate purchasing decisions by consumers by signaling that behind certain goods or services stands a particular source. Of course, trademarks can also be used as decoration on t-shirts and other goods; but sometimes, the decoration itself is the trademark — that is, it uniquely identifies the source. Like the red soles of Christian Louboutin, Louis Vuitton’s configuration of the interlocking letters, “LV,” surrounded by flower-like symbols (the “Toile Monogram” design) serves as both decoration and trademark.

Trademark law exists to prevent competitors from copying trademarks for two reasons: first, to protect the consumer’s decision-making process; and, second (in the words of Supreme Court Justice Breyer) to help “assure a producer that it (and not an imitating competitor) will reap the financial, reputation-related rewards associated with a desirable product. The law thereby encourages the production of quality products and simultaneously discourages those who hope to sell inferior products by capitalizing on a consumer’s inability quickly to evaluate the quality of an item offered for sale.” Qualitex Co. v. Jacobson Products Co., Inc., 514 U.S. 159, 163-4 (1995).

In May 2014, Louis Vuitton Malletier, S.A. (“LVM”) sued My Other Bag, Inc. (“MOB”), for reproducing graphics of LVM leather bags on one side of MOB’s canvas tote bag. The other side of the MOB bags read “My Other Bag…” — a reference to the long-standing joke occasionally seen on bumper stickers on unglamorous cars, e.g., “My other car is a Porsche.” MOB used graphics of two different LVM bags, shown here, one with the Toile Monogram design trademark, and the other with the checkerboard “Damier” design, but instead of an interlocking “LV,” MOB used its own initials. Picturing an LVM bag on the side of a canvas tote bag was a joke, but LVM didn’t find it funny.[1] In fact, LVM’s case against MOB is the latest in a series of failed litigation brought by LVM against parodies.

In 2006, LVM went after Haute Diggity Dog, LLC, a small business that manufactured and sold pet products, many of them parodying famous marks, including “Chewy Vuiton” dog toys, which took the form of little plush “handbags” suggesting (but not mimicking) LVM’s Toile Monogram design. (Among other differences, Haute Diggity used an interlocking “CV” instead of “LV”.) LVM claimed trademark infringement and “trademark dilution,” a cause of action granted to famous marks to punish “blurring” (i.e., misappropriating a mark for use on a dissimilar product) and “tarnishment” (misappropriating a mark for use on low quality or unsavory products). LVM also claimed copyright infringement, since the Toile Monogram, as a design existing apart from handbags, is protected by copyright. In addition to objecting to the use of the Toile Monogram mark on dog toys, LVM claimed that the toys were also likely to tarnish LVM’s marks because they “pose a choking hazard for some dogs.”

The District Court slapped down LVM’s claims, and the Fourth Circuit Court of Appeals agreed: “Chewy Vuiton” dog toys were successful parodies,[2] and the distinctiveness of LVM’s marks was not threatened by “Chewy Vuiton.” Parody, a form of fair use, is a complete statutory defense to a charge of trademark dilution, but not against trademark infringement (e.g., passing off a product under a third party’s trademark, thereby leading consumers to believe that the product came from the trademark owner).

In 2007, LVM sent a cease and desist letter to Danish artist Nadia Plesner, for selling t-shirts and posters to raise money for the charity “Divest for Darfur.” The artwork showed a malnourished child holding a chihuahua dressed in pink in one arm, and carrying on the other arm a bag that resembled Louis Vuitton’s “Audra” bag, with an altered Toile Monogram design. (Here, the interlocking “LV” was replaced by an interlocking “SL” for the name of the artist’s campaign, “Simple Living.”) Plesner was living in Holland at the time.

Unable to afford to go to fight a court case, Plesner stopped selling the t-shirts and posters. In 2010, however, she repainted the Darfur child in a painting that she titled “Darfurica,” which was exhibited for the first time in the Odd Fellow Palace in Copenhagen in January 2011. By the end of the exhibit, she received an injunction, obtained (unbeknowst to Plesner) by LVM from a court in The Hague. Plesner was ordered to stop showing the painting in the gallery and online, and to pay 5,000 Euros per day until she complied. In May, she went to The Hague and made her case. A month later the court reversed the injunction and ordered LVM to pay part of her legal costs.

Louis Vuitton’s attack on Plesner’s artwork is a real head-scratcher, given that Mattel tried a similar thing in 1999 when it sued artist Tom Forsythe, who produced a series of photographs of a nude and provocatively posed Barbie in or around various household appliances. (She ends up in a blender.) Mattel lost and was ordered to pay the artist $1.8 million in legal fees.

Unlike LVM`s case against Plesner, the case against MOB involved not a work of art, but a commercial product. MOB’s purpose was parody, but to LVM, MOB was merely trading on the strength of the Toile Monogram mark. As in LVM`s failed litigation against Haute Diggity Dog, LVM also claimed both “trademark dilution” and copyright infringement claim.

In order to prove trademark infringement, LVM needed to prevail on a host of factors used to analyze whether the use amounts to an infringement. In the Second Circuit, courts use the “Polaroid Factors,” a set of criteria first mentioned by Judge Friendly in the 1961 case, Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492 (2d Cir., 1961). “The problem of determining how far a valid trademark shall be protected with respect to goods other than those to which its owner has applied it,” Judge Friendly wrote, “has long been vexing…”

Where the products are different, the prior owner’s chance of success is a function of many variables: the strength of his mark, the degree of similarity between the two marks, the proximity of the products, the likelihood that the prior owner will bridge the gap [i.e., begin selling directly competing products], actual confusion, and the reciprocal of defendant’s good faith in adopting its own mark, the quality of defendant’s product, and the sophistication of the buyers. Even this extensive catalogue does not exhaust the possibilities — the court may have to take still other variables into account.

Polaroid Corp. v. Polarad Electronics Corp., supra, 287 F.2d at 496.

LVM failed to prevail on any of the Polaroid Factors. Although LVM`s handbags and MOB’s canvas tote bags could theoretically be purchased by the same consumers, there is an enormous gulf between the quality of the products, their prices, and the venues in which they are sold. LVM was unable to come up with any convincing evidence of consumer confusion – and consumers were considered sophisticated enough to know that LVM, whose handbags run upwards of one or two thousand dollars, was not the source of an inexpensive canvas tote bag prominently marked “My Other Bag.” The court also found that there was no likelihood that MOB would be entering the luxury handbag market (i.e., “bridge the gap”).

Unsurprisingly, given the Haute Diggity Dog decision, LVM lost both in the District Court and on appeal to the Second Circuit. LVM attempted to argue that the District Court erred by finding that MOB’s use of the Toile Monogram design was parody, but the Second Circuit would have none of it. “At the same time that they mimic LV’s designs and handbags in a way that is recognizable,” the Second Circuit wrote,

they do so as a [graphic image] on a product that is such a conscious departure from LV’s image of luxury—in combination with the slogan “My other bag”—as to convey that MOB’s tote bags are not LV handbags. The fact that the joke on LV’s luxury image is gentle, and possibly even complimentary to LV, does not preclude it from being a parody.

In any event, the nature of MOB’s business—it sells quite ordinary tote bags with [graphic images] of various luxury-brand handbags, not just LVM’s, printed thereon—and the presence of “My other bag,” an undisputed designation of source, on one side of each bag,  independently support summary judgment for MOB on this designation-of-source issue.

LVM fared no better on its copyright claim: “MOB’s parodic use of LVM’s designs,” the Court held, produces a “new expression and message that constitutes transformative use.”

Parodists should probably thank LVM for losing cases involving trademark parody in two federal jurisdictions. In 1994, the Supreme Court ruled in Campbell v. Acuff-Rose Music, Inc. that rap group 2 Live Crew’s appropriation of Roy Orbison’s song, “Pretty Woman,” was not copyright infringement, but parody. (As with trademark dilution, parody is a statutory defense against claims of copyright infringement.) Since that decision, the courts have come to embrace the idea that parody should also be permitted (at least under some circumstances) as a defense to trademark infringement. Despite this trend, it has been the practice of many major trademark owners to make overbroad claims and excessive threats, sometimes commencing litigation knowing that the parodist can’t afford to fight, and will quickly give in to their demands. Hopefully, this most recent decision, which has received ample publicity, will make companies like LVM think twice before engaging in such tactics.

Endnotes

[1] The Toile Monogram was first registered with the United States Patent and Trademark Office in 1932. While LVM’s case against MOB was pending in New York, the General Court of the E.U. invalidated the Damier Trademark because it was “a basic and banal feature composed of very simple elements” and lacked any brand-specific features. It is also likely unprotectable in the United States.

[2] For trademark purposes, “[a] ‘parody’ is defined as a simple form of entertainment conveyed by juxtaposing the irreverent representation of the trademark with the idealized image created by the mark’s owner … A parody must convey two simultaneous — and contradictory — messages: that it is the original, but also that it is not the original and is instead a parody. People for the Ethical Treatment of Animals v. Doughney, 263 F.3d 359, 366 (4th Cir. 2001). This second message must not only differentiate the alleged parody from the original but must also communicate some articulable element of satire, ridicule, joking, or amusement. Thus, [a] parody relies upon a difference from the original mark, presumably a humorous difference, in order to produce its desired effect. Jordache Enterprises, Inc. v. Hogg Wyld, Ltd., 828 F.2d 1482, 1486 (10th Cir.1987) (finding the use of “Lardashe” jeans for larger women to be a successful and permissible parody of “Jordache” jeans).” Louis Vuitton Malletier S.A v. Haute Diggity Dog LLC, 507 F. 3d 252 (4th Cir. 2007). (Internal quotes omitted.)

USPTO Changes in Requirements for Declarations of Use

We previously reported the Declarations of Use pilot program by the USPTO. Examiners could request additional evidence when they questioned the evidence filed. These requests applied to both national and international registrations. As a result of the pilot program, the goods and services listed in the vast majority of the registrations questioned were limited to those in actual use. The USPTO is now proceeding to make the pilot program procedures part of the official rules. The objective is to have a more precise register of trademarks. Although the entire rulemaking process is not complete, these new regulations are likely to be implemented swiftly.

The key provision is:

The Office may require the owner [or holder of an International Registration] to furnish such information, exhibits, affidavits or declarations, and such additional specimens as may be reasonably necessary to the proper examination of the affidavit or declaration under section 8 [section 71] of the Act or for the Office to assess and promote the accuracy and integrity of the register.

See Federal Register – 6/22/2016 amending TMEP Sections 2.161 and 7.37

This rule gives the USPTO great latitude. Examiners can request additional information from a registrant to determine that the affidavit of use is accurate, and in particular that the mark is in use for all of the goods and services listed in the registration. United States law requires that an application filed on the basis of intent-to-use and converted to use, or based on use, must be in use for all of the goods and services. This is also true for the filing of Declarations of Use.

This new rule will be particularly problematic to foreign registrants where there is a tendency to include items in the list of goods and services that are beyond the scope of the business of the trademark owner. This common practice is because foreign trademark rights are more specifically limited to the actual goods and services listed in the registration. Rather under US law rights are evaluated under a likelihood of confusion analysis which can extend beyond the specific goods and services listed in the registration.

This rule further supports our regular recommendation to trademark owners to list those goods and services that are in actual use for the mark in order to minimize problems with the registration in the future. A likelihood of confusion determination is made on a variety of factors. Importantly, when pursuing an infringement, a trademark owner should not have to defend the registration from attack on the basis of non-use or fraud in the procurement or maintenance of the registration. The mark must be in use for all of the goods and services listed.

The USPTO published in the Federal Register on February 10, 2017, that there would be a 60 day freeze of the implementation of the foregoing rule change given the January 20, 2017 Presidential Executive Order requiring that any agency rule change comply with the order. The effective date was March 21, 2017, and as of now, no additional rules or regulations have been published or apparently implemented.

We note that the proposed rule went through exhaustive testing, analysis and public comment, and the Trademark Bar has supported the implementation of the rule to effectuate a cleaner and more accurate registry of trademarks.

Who Stole the Milano Cookie from the Cookie Jar?

On December 2, 2015, Pepperidge Farm filed suit against Trader Joe’s in Connecticut federal district court, alleging that Trader Joe’s Crispy Cookies infringe on Pepperidge Farm’s Milano cookie configuration trademark and causes “dilution by blurring,” a term of art in trademark law that indicates “an association arising from the similarity between a mark and a famous mark that impairs the distinctiveness of the famous mark.” Trademark Dilution Revision Act of 2006 (“TDRA”), Section 43(c), Lanham Act, 15 U.S.C. § 1125(c)(2)(B) (2006). Some might call the TDRA a license to bully, but in this case Pepperidge Farm has hardly picked on a small fry.

Pepperidge Farm’s trademark, which registered on September 28, 2010, but was first used (and first used in commerce) on December 31, 1977, is described in the registration as follows:

The mark consists of a configuration of a cookie comprised of a filling sandwiched between two oval-shaped cookies. The notch depicted near the upper portion of one of the cookies represents a small portion of the cookie that bumps out of the otherwise flat contoured surface.

Both the mark (the “Milano Configuration”) and a specimen cookie are pictured below. Pepperidge Farm Milano TMcontends that its Milano Configuration is famous, and it may well be: a well-regarded treatise on trademark law, McCarthy on Trademarks, argues that a mark is famous if “it is known to more than fifty percent of the defendant’s potential customers.” Marks that have been determined to be famous include VICTORIA’S SECRET, BEANIE BABIES, WAWA, COCA-COLA, THE GREATEST SHOW ON EARTH, 7-ELEVEN, NIKE, BUICK, DUPONT and KODAK.

Famous marks are generally afforded a greater scope of protection than non-famous marks. Indeed, if Pepperidge Farm is able to show that the Milano Configuration is famous, then in order to win on its claim of “dilution by blurring,” at least in the Second Circuit where this case has been brought, Pepperidge Farms will not need to prove that Crispy Cookies are visually substantially similar to Milano cookies.* Rather, it will only need to prove that they are similar enough, along with other factors weighed in Pepperidge Farm’s favor, including:

  • the degree of inherent or acquired distinctiveness of the Milano Configuration;
  • the extent to which Pepperidge Farm is engaging in substantially exclusive use of its Milano Configuration;
  • the degree of recognition of the the Milano Configuration;
  • whether Trader Joe’s use of the Milano Configuration is intended to create an association with the Milano Configuration; and
  • any actual association between the Crispy Cookie and the Milano Configuration.

(*Note: Some circuits still require substantial similarity as a threshold test for trademark dilution.)

crispy cookiesWhether Crispy Cookies are similar enough to the Milano Configuration is a judgment call. In the complaint, Pepperidge Farm describes the Crispy Cookie as “a chocolate filling sandwiched between two rounded rectangular cookies, mimicking an overall oval shape.” The use of of the word “oval” is somewhat misleading, as the Crispy Cookie is more rectangular than oval, and it doesn’t contain the Milano’s famous notch, as can be seen in the image below. How a jury comes out on that question is anyone’s guess.

To bolster its infringement and dilution claims, Pepperidge Farm also contends that Trader Joe’s mimics Pepperidge Farm’s packaging. Displayed on the package of Crispy Cookies (see below) are three cookies upright in a fluted (apricot-hued) paper cup, but there are no fluted paper cups in Trader Joe’s packaging: the cookies sit in a plastic tray. Pepperidge Farm uses fluted (white) cups inside the package, but has not shown fluted cups on its packaging since the 1990s. Pepperidge Farm further claims that Trader Joe’s upright bag is intended to mimic that of the Milano, when most cookie packs are oriented horizontally.

Current packagingPepperidge Farm’s argument that Trader Joe’s use of an image of Crispy Cookies sitting in a fluted (albeit apricot-hued) paper cup to create an association in consumers’ minds is not a bad one, given that the actual Crispy Cookies packaging includes no fluted paper cups inside. However, claiming that the image on Trader Joe’s packaging is mimicking the image on Pepperidge Farm’s packaging from twenty years ago seems to be a stretch.

As a separate claim, Pepperidge Farm alleges that Trader Joe’s product is “likely to cause confusion, mistake, and/or deceive purchasers, potential purchasers, and the relevant public and trade at the time of purchase, as well as post purchase as to the source or sponsorship or approval of the Infringing Product, and/or as to its affiliation with Pepperidge Farm.” Pepperidge Farm will have a very difficult time convincing a judge or jury that any significant consumer confusion could arise at the time of purchase, given the sophistication of consumers of Milano cookies, few people shopping at Trader Joe’s will think that Milano cookies were inside the Crispy Cookies bag or that Pepperidge Farm was affiliated with Trader Joe’s. Most people will recognize Crispy Cookies as a merely competing product, with biscuits of similar texture and color, and chocolate filling — configurations not owned by Pepperidge Farm. However, if the Milano Configuration is famous, the question won’t be consumer confusion at the time of purchase, but consumer association. Regardless of whether the Milano Configuration is famous, Trader Joe’s will surely have its greatest difficulty in a post-purchase context, where consumers may not see the associated packaging. As with many trademark infringement suits involving claims of fame and similarity, the case will likely be determined by consumer surveys.

The TDRA poses the greatest risk of liability to Trader Joe’s because Pepperidge Farm’s burden of proof regarding the similarity of the two products will be so much lower. Moreover, in most instances, the statute provides only for an injunction against further dilution; but if Pepperidge Farm can show that Trader Joe’s sought willfully to trade on Pepperidge Farm’s reputation or to cause dilution, then Pepperidge Farm may be able to recover Trader Joe’s profits and, if the facts revealed in the case are egregious enough, legal fees. Recovery of profits and an award of legal fees is also possible if the jury finds that the Milano Configuration is not famous, but the configuration of Crispy Cookies is substantially similar to the Milano Configuration, and Trader Joe’s acted intentionally and egregiously. It wouldn’t be a surprise to see Trader Joe’s withdraw its Crispy Cookies from the marketplace in the near future, at least in their present form.

 

Trademark Trolls & Trademark Bullies

Trademark Trolls

You have to expect it. There are domain name trolls who register domain names in an attempt to extract money from its rightful owner; and there are patent trolls, who attempt to enforce patent rights far beyond their patent’s actual value or contribution to prior art. Enter the trademark troll and trademark bully.

Trademark trolls attempt to (or actually do) register a mark with the intent of demanding payment from companies that have adopted the same or similar marks, often in another country. This is common in China. For example, as reported by Peter Mendelson in the International Trademark Association (INTA) Bulletin on December 1, 2015, Li Dao Zhi (Li), a Shanghai company, registered the mark Ka Si Te (a transliteration of “Castel”) in China in 2002, a year after French winemaker Castel Frères SAS began selling wine under the mark, Zhang Yu Ka Si Te. It wasn’t until 2005 that Castel Frères was aware of Li’s registration. Castel filed a request to cancel based on Li’s non-use, but while the request was pending, Li initiated use and sued Castel for infringement. The Court ruled in favor of Li and ordered Castel to pay over USD $5 million, but the Chinese high court suspended the decision and fine and ordered the case retried.

Similar situations in China, few with happy endings, have affected such companies as Tesla Motors and New Balance Athletic Shoes.

As this problem is not necessarily limited to China, but can happen in any country (particularly those in which a trademark belongs to the party who is “first to file”), the lesson is that whenever a company is contemplating doing business in a country, that company should apply to register its marks well in advance of entering the marketplace. (Winemaker Castel actually entered the Chinese market in 1998, possibly tipping off Li that there was a trademark up for grabs.) WebTM files and prosecutes trademark applications in the United States and worldwide directly through the Madrid Protocol and National applications through local counsel. (“Prosecutes” in this context means doing the necessary work to see that a mark is registered.) A description of our services and a listing of our fees are provided elsewhere on this website.

 

Trademark Bullies

Trademark bullies are a bit different from trolls. The trademark bully is the company that sends cease and desist letters to, or actually sues, other companies, claiming infringement on their trademarks beyond what is really justified. Most trademark bullies are big companies with well-known or “famous” trademarks, and big budgets to go after smaller companies. While the law recognizes that “famous” marks (a term of art in trademark law) are entitled to a wider scope of protection than regular trademarks, many companies use their power to go beyond what the law really provides, knowing full well that the smaller company won’t have the resources or economic interest to fight.

arcuateSometimes, of course, these companies send cease and desist letters or initiate actions with good cause. In other cases, there is clear overreaching. Levi Strauss is a good example of a trademark bully when it comes to their back-pocket “Arcuate” trademark, shown at left. Levi Strauss has, over the years, gone after dozens of companies (including our clients) for allegedly mimicking the Arcuate mark, and has been successful (mainly by settlement) in the pretrial phases of most of those cases. The resolve of Levi Strauss to create a wide scope of protection around its Arcuate mark can be seen in a litigation it brought against Abercrombie & Fitch Trading Co. in 2007. In that case, Levi Strauss alleged that Abercrombie’s back pocket design (below right) was confusingly similar to the Arcuate mark, and therefore infringing. Levi Strauss also alleged that Abercrombie’s mark would dilute the distinctiveness of the Arcuate mark, which is “famous.” (Whether a mark is “famous” is determined by looking at such factors as general public recognition, duration of use, amount of advertising and promotion, and the economic value of the mark. The term applies only to widely recognized trademarks.)

Having the resources to fight, Abercrombie took the case to trial, where the jury ruled in favor of Abercrombie, finding that although the Arcuate mark is famous, the two marks were not confusingly similar. However, that still left the question of trademark dilution, which is decided by courts, not juries, under a special statute designed to protect famous trademarks, the Trademark Dilution Revision Act of 2006 (the “TDRA”), Section 43(c) of the Lanham Act, 15 U.S.C. § 1125(c). To that end, the jury gave an advisory (non-binding) opinion that the two marks were not so similar that they were essentially the same mark, and the District Court found in Abercrombie’s favor. Levi Strauss appealed to the Ninth Circuit, arguing that the District Court’s requirement for applying the TDRA (i.e., that the two marks be so similar so as to be essentially the same mark) was in error. The Ninth Circuit agreed, ruling that neither a finding that the two marks were essentially the same, nor even a finding of confusing similarity, was required before Abercrombie could be found guilty of violating the TDRA. Abercrombie’s mark only needed to be similar enough in the court’s eyes, based on such criteria as the degree of fame and distinctiveness of the mark. Levi Strauss ultimately won the case, but had the Arcuate mark not been famous, the lower court decision would have stood. (The back-pocket design for which Levi Strauss went after our client wasn’t even a tenth as close to the Arcuate mark as Abercrombie’s mark was.)

a&fThe United States Department of Commerce looked at the issue of trademark bullying in 2010-2011, but concluded that if there was any overreach, it was better dealt with by Rule 11 sanctions (for bringing a frivolous lawsuit) or awarding of attorneys’ fees to prevailing parties. Three factors make this suggestion rather unhelpful. First, courts are reluctant to decide what is frivolous when a claim is “colorable” (i.e., not stark raving mad). Second, the “American rule” provides that legal fees are not awarded to a prevailing party unless expressly authorized by statute, this wasn’t the most helpful of suggestions. Section 35(a)(3) of the Lanham Act provides that courts “may award reasonable attorney fees to the prevailing party” in exceptional cases, but courts rarely find that a case is “exceptional,” and many require evidence of fraud or bad faith (e.g., evidence that the plaintiff knew that it had no case and brought it anyway for malicious reasons).

The issue of trademark bullying is still alive, however, and there is probably greater awareness today of the problem of trademark bullying with websites such as www.lumendatabase.org, dedicated to exposing overreaching practices of (mostly) economically powerful trademark holders. In 2014, the Supreme Court visited the issue of when legal fees should be awarded to a defendant in a patent case, involving a statute with the exact same discretionary language as in the Lanham Act. In Octane Fitness, LLC v. Icon Health and Fitness, Inc., 134 S.Ct. 1749 (2014), the Supreme Court reversed the Federal Circuit’s definition of the “exceptional case” as one which was, by clear and convincing evidence, “objectively baseless” and brought in “subjective bad faith.” (In support of its decision, the Supreme Court pointed to the Federal Circuit’s decision Noxell Corp. v. Firehouse No. 1 Bar-B-Que Restaurant, 771 F.2d 521 (D.C. Cir. 1985), a trademark case that defined “exceptional” under the Lanham Act as “uncommon” or “not run-of-the-mill.” Oddly enough, the Federal Circuit didn’t even discuss Noxell in its decision in Octane Fitness.)

While the reasoning in Octane Fitness has found its way into a few Lanham Act cases in which attorneys’ fees have been granted to defendants (see, e.g., Fair Wind Sailing, Inc. v. Dempster, 764 F. 3d 303 (3d Cir. 2014) (where the complaint failed to allege sufficient facts to establish trade dress infringement); and Renna v. County of Union N.J., 2015 WL 93800, (D.N.J. 2015) (awarding legal fees to party who displayed the un-registrable seal of Union County, NJ, during a public access TV exposé regarding government shenanigans — but that really was an egregious case), in the Second Circuit (covering New York, Connecticut and Vermont) the prevailing test for awarding legal fees in trademark cases still appears to be the presence of smoking-gun evidence of fraud or bad faith. This is an almost impossible standard to meet except in the worst of circumstances.

If you receive a cease and desist letter and think you are being bullied, don’t simply roll over and sign any document that is demanded by the aggrieved trademark owner. Rather, contact an attorney experienced in handling these matters. (You can contact us. We regularly handle trademark claims of all kinds in addition to bringing trademark infringement lawsuits.) Many times, with a little pushback, satisfactory settlements can be reached or, at any rate, damage can be contained.

Changes to the European Trademark System are Imminent

A major revision to the European Union trademark system that will affect both Community trademarks (CTM) and individual country trademarks (of EU member states) is imminent. Some of the changes are administrative and some legal, while others directly affect trademark filings and renewals. A summary of the changes is as follows:

Administrative:

  • The Community Trademark will be renamed European Union Trade Mark
  • OHIM (the name of the trademark office as of the date of this post) will be renamed to European Union Intellectual Property Office

Changes Affecting Trademark Filing and Renewal:

  • Goods and services will have to be specifically described. Filing for class headings &/or listing all of the goods in a class will no longer be permitted.
  • There will be separate fees for each class in which trademark registration is sought, as is already the case in the United States. (As of the date of this posting, a single trademark application could include up to three classes for no additional fee.)

Legal:

  • All National offices will be required to implement administrative procedures for trademark cancellation. (Until now, trademark cancellation has only been possible in some countries via court proceedings.)
  • Some of the changes will require EU member states to harmonize their laws regarding trademark infringement and remedies, as well as make it somewhat easier for trademark holders to stop infringing goods from coming into the EU or being distributed thereafter. Also in the package, which can be viewed online, are directives aimed at protecting the public from overzealous and overreaching trademark owners.

Although still proposed, the new regulations, as my recent trip to Europe made clear, are destined to be implemented quickly — possibly as early as Q2-2016, although EU member states will have three years in which to implement them. This is the first significant change to the European trademark system in more than 20 years.

From my perspective, these are all welcome changes, with the possible exception of additional fees for filing in multiple classes. However, the goal of the fee change is laudable. By modestly reducing the cost of trademark registration, while adding fees where more than one class is claimed in an application or renewal, the European Union Intellectual Property Office hopes to discourage overbroad trademark claims — a typical problem in the EU. Our clients have often faced the situation where they wish to clear their marks for use in the EU, but are blocked by a substantially similar mark covering a class that isn’t even in use. Hopefully the new regulations will clear out a lot of this “dead wood.”

Corporate Officers May Be Personally Liable for Company Infringements

A recent court order denying a motion to dismiss an action for trademark and copyright infringement reiterates the well-established principle that corporate officers who engage directly in conduct that infringes on the intellectual property rights of others may be held liable for the infringement despite having acted in his or her corporate capacity.

Asher Worldwide Enterprises, LLC (“AWE”), owner of reliabuy.com, sued Housewaresonly.com, Incorporated and its principals, Stuart and Marcia Rubin (collectively, the “Rubins”) for unfair competition under the Lanham Act and for copyright infringement. AWE alleged, among other things, that the Rubins infringed on AWE’s copyrights by copying product descriptions from reliabuy,com and reproducing them on housewaresonly.com, a competing website. (See, Asher Worldwide Enterprises, LLC v. Housewaresonly.com, Incorporated, United States District Court, Northern District of Ill., Case No. 12 C 568.)

As alleged by AWE, the Rubins’ copying wasn’t inadvertent. In late 2009 and early 2010, AWE published 65 product descriptions on reliabuy.com and several months later 47 of them appeared on housewaresonly.com. In August 2010, AWE published 25 more descriptions and all of them subsequently appeared on housewaresonly.com. The Rubins allegedly copied descriptions again in October 2010, publishing 75 of 139 new reliabuy.com product descriptions. And when AWE redesigned its website to focus on discount commercial restaurant equipment, the Rubins started a competing site (restaurantkitchenwarehouse.com) and copied over 200 product descriptions that had been created by AWE.

The Rubins unsuccessfully argued that they could not be held liable for infringements by their corporation unless there was some “special showing” — for example, that the corporation served as their “alter ego.” That argument was quickly shot down by the court. Citing Seventh Circuit precedent, the district court ruled that the plaintiff need only allege that the corporate officers “acted willfully and knowingly and personally participated in the infringing activities or used the corporation to carry out their own deliberate infringement.”

While merely being an officer in a corporation is not enough to invoke personal liability, the court held, “[w]hen corporate officers are in control of the decisions of the corporation at all times, [ ] they may be liable for the intellectual property infringements of the corporation.”

That an individuals was acting on behalf of his or her corporation is no defense to personal liability for trademark and copyright infringement.

The standards for imposing personal liability on corporate officers — and employees — are similar in most, if not all, federal circuits and state courts. The Supreme Court spoke on the subject in Calder v. Jones, 465 U.S. 783 (1984), a libel case brought by Shirley Jones against the National Enquirer and two of its employees, an editor and writer who were responsible for the offending article. In ruling that the individual defendants could be haled into court in California, Justice Rehnquist observed that “their status as employees does not somehow insulate them from jurisdiction… In this case, petitioners are primary participants in an alleged wrongdoing intentionally directed at a California resident.”

That principal has not changed over the years. In 2009, the Ninth Circuit held that an individual “is liable under the Lanham Act for ‘torts which he authorizes or directs or in which he participates, notwithstanding that he acted as an agent of the corporation and not on his own behalf.'” POM Wonderful LLC v. Purely Juice, Inc. and Paul Hachigian, No. 08-56375 (9th Cir. 2009), citing Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 734 (9th Cir. 1999) (quoting Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1015 (9th Cir. 1986.)

McCarthy also teaches that trademarks, like copyrights, may be infringed upon by individuals as well as a corporation, and “all participants, including those acting merely as officers of a corporation, may be jointly and severally liable.” McCarthy on Trademarks, Chapter 25, Section 25:24.

In short, corporate officers and employees who engage directly in infringing conduct do not escape personal liability merely because they acted in a corporate capacity. A copy of the AWE decision, dated August 26, 2013, can be accessed here.

 

Can Gail Zappa Stop Anyone from Using the Name “Captain Beefheart”?

On June 18th, the United States Patent and Trademark Office (PTO) issued a “Notice of Allowance” to Gail Zappa, permitting her to file a statement of use within the next three years demonstrating that she is using CAPTAIN BEEFHEART as a trademark. It has been widely misreported in the music media that Gail Zappa already “trademarked” the name, but the Notice of Allowance only paves the way for registration, which may or may not happen down the road. Moreover, even if the Trademark Office registers the mark, she may not be entitled to it lawfully. Captain Beefheart, for the uninitiated, is the moniker used by composer, performer and artist Don van Vliet beginning in 1964, long before he ever met Frank or Gail Zappa. Mr. van Vliet died in 2010. [Correction: van Vliet knew Frank Zappa in High School. But he didn’t record for Zappa until long after he recorded for other record labels.]

Let’s take a look at what Gail Zappa did to get this far.

On August 3, 2012, Ms. Zappa filed a sworn Declaration with the PTO stating that

she believes she is entitled to use [CAPTAIN BEEFHEART] in commerce; to the best of her knowledge and belief, no other person, firm, corporation or association has the right to use said mark in commerce either in identical form or in such near resemblance thereto as may be likely, when applied to the goods or services of such other person, to cause confusion, or to cause mistake, or to deceive….

In other words, Ms. Zappa told the PTO that she is the only person with the right to use Mr. van Vliet’s moniker in commerce — to the exclusion of EMI, Virgin International, Buddha Records (acquired by Bertelsmann Music Group, which released a remastered Safe as Milk and The Mirror Man Sessions) and any other record company that recorded and released “Captain Beefheart” recordings. In fact, Ms. Zappa’s registration is not just for records, but identifies a wide range of products to which she intends to claim exclusive rights:

International Class 009

  • Audio and video recordings featuring music and concerts;
  • musical sound recordings;
  • musical video recordings;
  • phonograph records featuring music;
  • pre-recorded CDs, DVDs, audio tapes, video tapes, audio discs, video discs, audio cartridges, and video cartridges featuring music and concerts;
  • downloadable audio recordings, downloadable video recordings, and downloadable MP3 files all featuring music and concerts;
  • downloadable motion picture films, downloadable television shows and downloadable radio shows all featuring music and concerts;
  • downloadable multimedia files featuring music and concerts;
  • electronic publications, namely, books, magazines, manuals, journals, catalogs, brochures, newsletters, featuring music and concerts recorded on computer media;
  • interactive multimedia computer game programs;
  • music-composition software;
  • software for creating music;
  • software featuring musical sound recordings and musical video recordings;
  • multimedia software recorded on CD-ROM featuring music and concerts;
  • electronic game software;
  • downloadable ring tones for mobile phones;
  • downloadable graphics for mobile phones;
  • sunglasses.

Granted, Ms. Zappa’s application is an “intent to use” application — meaning that she hasn’t necessarily used CAPTAIN BEEFHEART as a “source identifier” (see below) on any of these products yet — but it’s hard to imagine that in the coming months she’ll be placing the mark on goods in all these categories. Nonetheless, she has 4 options:

(1) She can file a statement of use for the specified goods. If she goes this route, she must already have used the mark in commerce on all of them. Trademark Manual of Examining Procedure (TMEP) §1109.03. For instance, it’s not enough to release a CAPTAIN BEEFHEART DVD but not CAPTAIN BEEFHEART electronic game software or CAPTAIN BEEFHEART sunglasses. Registrants who try to fool the PTO by filing a statement of use without actually using the trademark for all the specified goods risk having their trademark canceled at a later date.

(2) She can ask the PTO for up to five additional 6-month extensions to file the statement of use in anticipation of releasing goods in all the specified categories;

(3) She can “divide” her application, allowing the trademark to be registered for the categories she’s actually using, while retaining an active intent-to-use application for the remaining goods; or

(4) She can allow the mark to be registered for the categories she’s actually using and relinquish the remaining categories.

There are a number of pitfalls to a broad trademark application of this type. Living performers who attempt to register their names as trademarks in Class 9 are generally surprised to find out that the PTO will reject their applications on the basis that the proposed mark only identifies a featured performer on a sound recording and doesn’t function as a trademark to identify and distinguish the applicant’s goods from those of others and to indicate the source of applicant’s goods.

Section 1202.09(a)(ii) (“Evidence that a Performer’s Name is a Source Identifier”) of the TMEP tells trademark examiners that

The use of the author’s or performer’s name on a series of works does not, in itself, establish that the name functions as a mark. The record must also show that the name serves as more than a designation of the writer or performer, i.e., that it also serves to identify the source of the series. See In re First Draft, 76 USPQ2d 1183, 1191 (TTAB 2005) (holding pseudonym FERN MICHAELS identified only the author and did not function as a mark to identify and distinguish a series of fictional books because the “evidence of promotion” was “indirect and rather scant,” despite applicant’s showing that the name had been used as an author’s name for 30 years; that 67 separate books had been published under the name, and approximately 6 million copies had been sold; that the book jackets listed the titles of other works by Fern Michaels and promoted her as a bestselling author; that the author had been inducted into the New Jersey Literary Hall of Fame; and that there was a www.fernmichaels.com website); In re Chicago Reader Inc., 12 USPQ2d 1079, 1080 (TTAB 1989) (holding CECIL ADAMS, used on the specimen as a byline and as part of the author’s address appearing at the end of a column, merely identifies the author and does not function as a trademark for a newspaper column).

The PTO will make an exception, however, where the performer’s name is used on a series of sound recordings and where the applicant states (truthfully) that s/he controls the quality of the recordings and the use of the name, such that the name has come to represent an assurance of quality to the public. TMEP §1202.09(a)-(a)(ii), (a)(ii)(B); see In re Polar Music, 714 F.2d at 1572, 221 USPQ at 318; In re First Draft, 76 USPQ2d at 1189-90.

This would seem difficult, if not impossible, to demonstrate in the case of an artist like Captain Beefheart, who recorded for various record labels both before and after he met the Zappas. Without exception, recording agreements grant the labels the right to use a performer’s name, real and fictitious, for as long as their rights last (and generally in perpetuity). Thus, if called to account, Ms. Zappa may not be able to show her entitlement to exclusive use of the Captain Beefheart name. It would be interesting to know whether Ms. Zappa has purchased all extant Captain Beefheart recordings, or acquired posthumous rights of publicity for Mr. van Vliet under Cal. Civ Code § 3344.1. That right lasts for 70 years after death and is freely transferable, licensable, or descendible. Although federal trademark law supersedes state law, it only does so if there is a legitimate claim to a federal trademark in the first place. Unfortunately, the PTO is not obliged to ask these questions or investigate the veracity of any statements made by Ms. Zappa in her application, but may simply rely on the fact that her declarations are made under penalty of fine or imprisonment.

Finally, even if Ms. Zappa obtains a registration on any of the goods specified in her application, she may not be able to enforce those rights against prior users, particularly those who acquired rights to use Mr. Van Vliet’s moniker in connection with sound and audiovisual recordings. Ms. Zappa’s claim over the CAPTAIN BEEFHEART trademark, even if it registers, is far from assured.

Trademark Holding Companies: Speculative Benefits, Certain Pitfalls

From time to time clients ask us whether they should “protect” their trademarks from their company’s liabilities by setting up a separate trademark holding company. Often they have heard about tax savings or read something online suggesting that any company with substantial trademark assets to protect ought to be segregating them into a separate corporate entity. Except in exceptional circumstances, however, the trademark holding company is a bad idea.

Trademark holding companies were originally devised by lawyers as tax-saving devices — specifically to reduce an operating company’s corporate franchise tax liabilities in the state or states of operation. (Corporate franchise taxes are the taxes a corporation pays to a state for the privilege of doing business there.) Theoretically, the savings could be substantial. The holding company is typically set up in Delaware or Nevada, where there is no corporate income tax on intangibles (like trademarks). The parent company transfers its trademarks to the holding company, which then licenses them back in return for a royalty. The royalty is then treated as an expense to the operating company and tax-free income for the holding company. This sleight of hand may still work in some jurisdictions, but in many places, the courts have already caught on.

No Tax Savings in New York.

Under New York law, trademark holding companies have been consistently disregarded as a means of reducing taxes. The lead case regarding tax liability is Sherwin-Williams Co. v. Tax Appeals Tribunal, 2004 NY Slip Op 07737 [12 AD3d 112] October 28, 2004. There, the New York Court of Appeals (New York State’s highest court) upheld a determination that Sherwin-Williams (an Ohio corporation) was required to report the income earned by its trademark holding company (a Delaware corporation) formed for the purpose of holding some 500 Sherwin-Williams domestic trademarks. The establishment of the holding company and the licenses back to the parent company, the court said, lacked any valid business purpose apart from tax avoidance.

Sherwin-Williams argued that it formed the holding company to: (1) improve quality control oversight with regard to its many licensees and franchisees; (2) enhance its ability to enter into third-party licensing arrangements at advantageous royalty rates; (3) insulate its  trademarks from the parent company’s liabilities; and (4) have flexibility in preventing a hostile takeover. To accomplish those purposes, the holding company established separate office space in Delaware and named as President an individual who had no previous association with the parent company. The tax tribunal and New York courts found these reasons unpersuasive. Not only did the parent company call the shots on management of the trademarks, but the President of the trademark holding company was a person who had no prior experience as a trademark manager. Thus the deduction for royalties that Sherwin-Williams’ operating company paid to its subsidiary holding company was disallowed and the combined income of both entities — the operating company and the holding company — was found subject to New York state corporate franchise tax.

The Sherwin-Williams case is only the most recent New York case to reach this conclusion regarding the reduction of tax liability via trademark holding companies. How would Sherwin-Williams have fared in a lawsuit in which it was sued for trademark infringement or in which the operating company was sued for breach of contact by a licensee or by a consumer for product liability?

Limitations on Liability.

Sherwin-Williams argued to the New York courts that it formed its trademark holding company in part to “insulate the trademarks from the parent’s liabilities,” but the court found ample reason to find the two companies were simply alter egos — at least from the standpoint of tax liability – including the fact that control over the quality of the Sherwin-Williams’ goods came from the parent company, rather than its subsidiary. That finding would not bode well for other types of claims. Automobile Insurance Co. of Hartford v. Murray, Inc., 04-CV-770A (LGF), a 2008 decision from the U.S. District Court, Western District of New York, bears this out. In that case, a lawnmower manufacturer that was sued for product liability attempted to defend itself on the basis that its trademark holding company was the actual owner and licensor of the trademark and therefore the wrong party had been sued. The court examined the organization and function of the holding company, however, and determined that it was formed “with no other business purpose … except to hold and license” the operating company’s trademarks. Consequently, the operating company was found to be the “de facto” or “actual” licensor.

Indeed, in most situations it is doubtful that a trademark holding company would be effective at protecting anything. The operating company/”licensee” will not be able to insulate itself from trademark infringement claims of its subsidiary holding company / “licensor.” Any such lawsuit would almost of necessity be brought against both companies, since both would have played a part in the alleged infringement. Nor is the trademark holding company/”licensor” likely to get away with pointing to its “licensee” (which is usually the licensor’s parent company!) as the sole party liable for breaches of contract or product liability. As one of the leading experts on trademark law has said, “in general, it is accurate to conclude that there is a very substantial risk that a trademark licensor … will be held liable for the torts of licensees…” McCarthy § 18:74 under the theory that the the licensee is a related company. This is especially true where the two companies share board members, management and/or office space. Notwithstanding Murray, where only the operating company was sued, it is the customary practice for attorneys when filing suit to include as many different entities and individuals as could be liable or capable of paying a judgment. In short, whether the claim is asserted against the operating company or its holding company, piercing the corporate veil would not be difficult.

The only possible protection that a holding company might afford to the trademark is an instance in which the operating company is sued for reasons unrelated to its licensing and business activities — for example, if the operating company defaulted on a mortgage or lease, or was sued for some kind of tortious (non-product-related) conduct — but even there, if the operating company’s assets were insufficient to satisfy the judgment, the trademarks might still be reachable as assets of the operating company.

Legal Pitfalls of Licensing through Trademark Holding Companies

In deciding whether to pierce the corporate veil of a trademark holding company, the courts will consider a number of factors, including whether the two companies have common directors or officers; whether the parent corporation owns all or most of the stock in the subsidiary; whether the parent finances the subsidiary; whether the subsidiary has any business with any entities other than the parent; whether the subsidiary has any assets other than those conveyed to it by the parent; and whether employees, officers and directors of the parent (and not the holding company) are the ones controlling the quality of the goods sold under the marks owned by the holding company. In principal, setting up a holding company is easy. But forming and operating one that will be recognized by the courts as an independent entity is time-consuming and expensive. And there is no bulletproof formula for success. In the cases cited above, the holding companies had different management, their own offices, and multiple licensees (i.e., various sources of income), but still failed in their purported objectives. A trademark holding company owned by a parent operating company is by its very nature suspect, but an “independent” holding company owned personally by the owners of a parent operating company is no better. In addition to these problems, there is the legal risk that a trademark holding company just might put a company’s trademarks at risk.

Although trademark holding companies are common, not only have they not been fully endorsed by the courts, but they have also caused damage to trademark owners. Not long ago, one of our clients sued two trademark infringers. The client’s trademarks are owned by a holding company (established by predecessor counsel, not us). One of the defenses mounted by the other side in a countersuit for invalidity is that the licensor holding company doesn’t exercise sufficient control over its licensees. Rather, they argued, control is exercised by the holding company’s parent corporation and the holding company has therefore made a “naked license.” The remedy for a naked license is for the court to declare that the trademark in question was abandoned by the trademark owner. In CNA Financial Corp. v. Brown, 922 F. Supp. 567 (M.D. Fla. 1996), reconsideration den. by 930 F. Supp. 1502 (M.D. Fla. 1996), aff’d, 162 F.3d 1334 (11th Cir. 1998), a court did just that. CNA lost its trademark because the court found that it did not actually control the quality of the services offered by its licensees, but only controlled how the marks themselves were used. (The issue in our client’s case was never addressed by the court, as the case was subsequently settled in our client’s favor.)

This is not the only risk. A holding by a court that an operating company is the de facto or actual licensor of the trademark, as in the Murray case cited above, opens the door to the corollary conclusion that the holding company’s trademark applications and maintenance filings in the PTO were fraudulent, since the holding company may not be the true owner of the trademark. That would be an additional ground for cancellation of trademark registration.

There are still other complications, including how a court or the PTO will view a transfer of a trademark to a holding company, without a transfer of the accompanying “goodwill.” Under U.S. law, trademarks cannot be assigned “in gross” but must be assigned together with the business (i.e., the goods and services) represented by the trademarks. In other words, because the “goodwill” is created by the business, a trademark cannot exist independently of it. A transfer of a trademark to a holding company may thus be considered an assignment in gross, which is voidable and subjects the trademark to cancellation. Indeed, if the holding company does no business other than licensing, it may be very difficult to claim that any goodwill at all is associated with the legal owner of the mark.

These latter issues have not been directly addressed either by the courts or the PTO. However, the risk of losing one’s trademarks by transferring them to a U.S. holding company, when weighed against some very speculative benefits, hardly seems worth it.

(In a future posting, I will deal with a slightly different scenario: where the trademark holding company is located outside the United States.)

.xxx Domains – Sunrise, Landrush and General Registration

Every business with an Internet presence knows the importance of registering its URLs across multiple domains to be sure that customers and clients find them and not a competitor. For the same reason, companies often (wisely) register URLs that might be associated with them in the minds of consumers, e.g., variations on their web addresses and registered trademarks, as well as URLs incorporating their unregistered trademarks, trade names and product names. While “cybersquatting” — the practice of registering and sitting on a URL that uses a trademark belonging to another for the purpose of selling it back to the trademark owner for profit — is unlawful, the remedy is expensive and not without risk. (The arbitration procedure under ICANN’s Uniform Domain Name Dispute Resolution Policy costs thousands of dollars; suing in federal court under the Anticybersquatting Consumer Protection Act (ACPA), tens of thousands.)  The only commercially viable way for a business to protect the widest range of its trademarks, trade names and product names from being used in the web addresses of others is to register preemptively. [See ICANN]

With the launching of the new .xxx domain next year for adult entertainment businesses, many non-adult businesses will also want to prevent triple-x associations with their registered trademarks, trade names and product names. They can do so during two periods.

Sunrise A & B:

From September 7, 2011 through 12:00pm ET on October 28, 2011, registered trademarks owners may register URLs identical to their trademarks either for the purpose of opening live adult websites under those names (the “Sunrise A” program) or for the purpose of blocking their trademarks from future registration in the .xxx domain (the “Sunrise B” program). (Sunrise B is also open to adult businesses that don’t support the creation of the .xxx domain.) URLs registered under Sunrise B will resolve to a standard page indicating that the domain is reserved from use through ICM’s Rights Protection Program and the publicly available WHOIS information will reflect the ICM Registry information and not the applicant’s personal information. This way the public will have no reason to think the registrant has moved into the adult entertainment market or availed itself of a .xxx domain.

However, there are two catches. First, the URL to be registered must correspond exactly to the  registered trademark. Businesses cannot, at this stage, block variations, even confusingly similar ones. (For example, Electronic Arts, Inc. the owner of registered trademarks for “EA” and “EA Sports,” would be able to register both ea.xxx and easports.xxx, but not eagames.com.) Second, if a non-adult and an adult business share the same trademark but for different classes of products or services, and both apply during the Sunrise period, the adult business (under Sunrise A) will be notified of the Sunrise B blocking attempt, but will be awarded the .xxx URL. The intent of this procedure, according to ICANN, is to put the Sunrise A registrant on notice that there is a claim. In the event that the Sunrise B business later sues the Sunrise A registrant to block use of the trademark, the latter cannot claim it was an innocent user.

At Network Solutions, Sunrise B registration costs $329.99 with no future fees. Sunrise A registration costs $200.00 for the application, $129.99 per year. Comparative prices may be found at Go Daddy, Enom, and Name.com.

Landrush and General Registration:

Anyone wishing to register URLs that are variations on their registered marks, or URLs of unregistered trademarks, trade names, personal names or product names, must wait until December 6, 2011, at 11:00 am, when general registration begins. Between the close of the Sunrise programs and the beginning of the general registration is a “Landrush” period open only to those who plan on hosting actual adult websites. General registration, however, is open to anyone and will be on a first come, first serve basis. Registration should be done as early as possible, since there will be plenty businesses and individuals worldwide who will grab up as many URLs as they can, as quickly as they can, hoping to sell them later at high prices.

By law, one may not register a URL utilizing a trademark (or confusingly similar variations thereof) belonging to another, whether or not that trademark is registered. Going after a registrant, however, is not always easy. Plaintiffs bear the burden of proving that the URL in question, if not identical, is “confusingly similar” and that the URL was registered and is being used in bad faith. For unregistered marks, the Plaintiff may have to prove that it was the first to use it in the marketplace. Spending a few hundred dollars (or in the case of multiple URL registrations, a few thousand dollars) may be worth it to avoid the prohibitive cost and uncertainty of litigation. It may also be worth it to avoid being associated with a domain reserved for the adult entertainment industry.

Key Dates:

  • Sunrise A – September 7, 2011 through 16:00 UTC on October 28, 2011
  • Sunrise B – September 7, 2011 through 16:00 UTC on October 28, 2011
  • Landrush – November 8, 2011 at 16:00 UTC thru November 25, 2011 at 16:00 UTC
  • General Availability – December 6, 2011 at 16:00 UTC

 

Does a likelihood of irreparable injury standard make the availability of injunctive relief in trademark cases more difficult?

The Supreme Court in Winter v. Natural Resources Defense Council, — U.S. —-, 129 S.Ct. 365, 374 (2008) held that that the Ninth Circuit’s “possibility” standard in granting preliminary injunctions is too lenient reiterating the standard requires plaintiffs seeking preliminary relief to demonstrate irreparable injury is likely in the absence of an injunction. In the Ninth Circuit, to obtain injunctive relief, a plaintiff must establish (1) a likelihood of success on the merits, (2) a likelihood of irreparable harm absent a preliminary injunction, (3) that the balance of equities tips in favor of issuing an injunction and (4) that an injunction is in the public interest. In the Winter case, the Supreme Court ultimately weighed the public interest factor in favor of the Navy, lifting the limitations imposed on use of “mid-frequency active” sonar during integrated training exercises in the waters off southern California.

Previously in trademark cases, a plaintiff was entitled to a presumption of irreparable harm upon showing a probable success on the merits. See GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1204-05 (9th Cir.2000). However, in Winter, the Supreme Court held that “[i]ssuing a preliminary injunction based only on a possibility of irreparable harm is inconsistent with our characterization of injunctive relief as an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.” Winter, at 375-76 (emphasis added). A plaintiff is no longer entitled to a presumption of irreparable harm on the ground that it has shown a likelihood of success on the merits. Rather, plaintiff must demonstrate that in the absence of a preliminary injunction, the applicant is likely to suffer irreparable harm before a decision on the merits can be rendered. The mere possibility of some remote future injury would be insufficient under this new test enunciated by the Supreme Court.

A preliminary injunction is an extraordinary remedy never awarded as of right. The court must always balance the competing claims of injury and consider the effect on each party of the granting or withholding of the requested relief. Here, the court has expanded its emphasis upon the public consequences in employing the extraordinary remedy of injunction. Interestingly, the court deemed the Navy’s concerns about the preliminary injunction “speculative” because the Navy had not operated under similar procedures before noting that this is almost always the case when a plaintiff seeks injunctive relief to alter a defendant’s conduct.

It is unclear if the Winter decision overrules the Second Circuit alternative test that a party may obtain injunctive relief if it shows that (1) there are questions so serious, substantial, difficult, and doubtful as to make them fair ground for litigation and thus more deliberate investigation; and (2) the harm that it would suffer is ‘decidedly’ greater than the harm that its adversary would suffer is still valid law. See, Buffalo Courier-Express, Inc. v. Buffalo Evening News, Inc., 601 F.2d 48, 58 (2d Cir.1979).

Since the Winter decision there have been a number of district court and appellate court decisions that have considered this “heightened” standard. It appears that the courts are giving the public interest factor additional attention, but with little change in result. If anything, it would seem that the courts will be careful to more fully address this public interest factor in the future and accordingly it should be addressed in a motion for preliminary relief. Because the very essence of trademark law is to protect the consumer from being confused, there is an inherent public interest in every trademark case to prevent a likelihood of consumer confusion.

Facebook places your Trademarks at risk

Starting June 13, 2009 Facebook users can create personalized URLs for their Facebook pages. http://www.facebook.com/username/ where “username” is the name that you register. These personalized URLs are offered on a first-come, first-serve basis. The intention is that “friends” can go directly to your personalized URL.

Because this is just another avenue for infringers to try and steal trademarks from rightful owners, and since the law on this area is developing we are recommending that our clients immediately create accounts on facebook and register their trademarks as personalized URLs. For example, I have registered: http://www.facebook.com/WebTM. There is nothing particularly interesting at my facebook wall, but it is there.

So if you go and try and register your trademark as a personalized URL, and it is taken, Facebook is providing a means to complain by its “Notice of Intellectual Property Infringement (Non-Copyright Claim)”.If someone adopts your trademark as a personal URL on Facebook, report it immediately. Should you require any assistance in dealing with this, please contact me directly.