Friday, May 3, 2019

USPTO issues Examination Guidelines for Post-Farm Bill Examination of Trademarks for Cannabis and Cannabis-Related Goods and Services


After months of uncertainty regarding how the U.S. Patent and Trademark Office (“PTO”) was going to be handling trademark applications that recite cannabis-related goods and services following the enactment of the 2018 Farm Bill, the PTO issued Examination Guide 01-19 on May 2, 2018 to provide some guidance for trademark applicants and trademark attorneys moving forward.

Prior to the enactment of the 2018 Farm Bill, the PTO typically refused registration of any trademark application the basis that use of a mark in connection with anything relating to cannabis was a violation of the federal Controlled Substances Act (CSA), and therefore, the mark was not in lawful use in commerce (nor could the applicant have had a bona-fide intent to use such mark in lawful commerce).

However, on December 20, 2018, 2018 Farm Bill was signed into law and amended the CSA to remove hemp from the definition of marijuana, and thus cannabis plants and derivatives (most notably CBD) that contain no more than 0.3% tetrahydrocannabinol (THC) on a dry-weight basis are no longer controlled substances under the CSA.

For trademark applications filed on or after December 20, 2018 which identify cannabis-related goods (including CBD), the 2018 Farm Bill now removes the CSA as a ground for refusal of registration so long as the goods are derived from “hemp.” Nonetheless, the PTO will require the identification of goods to specify that they contain less than 0.3% THC so that the goods set forth in the trademark application are compliant with federal law.

However, for applications filed before December 20, 2018 that identify goods encompassing cannabis-related products or CBD, registration will be refused due to the unlawful use or lack of bona fide intent to use in lawful commerce under the CSA on the date the application was filed. The PTO maintains that such pre-Farm Bill applications did not have a valid basis to support registration at the time of filing because the goods violated federal law at the time.

However, because the goods are now potentially lawful if they are derived from “hemp” and contain less than 0.3% THC, the PTO will be allowing applicants the option of amending the filing date and filing basis of the application to overcome the CSA as a ground of refusal.  Applicant’s will have to specifically state for the record that such a change to the filing date is being authorized and must establish a valid filing basis under 37 C.F.R. §2.34 by satisfying the relevant requirements. If the application was originally filed based on Section 1(a) use-in-commerce, then applicants will have to amend the basis to instead be based on Section 1(b) intent to use – presumably followed by a subsequent filing of an amendment to allege use. [Comment – this is what the Examination Guideline states regarding use-in-commerce , but I’ve personally reached out to the PTO regarding this point as it seems that if the applicant is amending the filing date, but the applicant can claim use-in-commerce as of that December 20, 2018 filing date, then why can’t the applicant leave the application basis as Section 1(a) use-in-commerce based on the new filing date … to be continued.]

Applicants will also be required to amend the identification of goods to specify that the CBD or cannabis products contain less than 0.3% THC. The PTO also appears to be recommending that in lieu of amending the filing basis, applicants could simply abandon its old application and file a new one.

However, even though cannabis-related goods may now be legal under the CSA, the PTO notes that not all goods for CBD or hemp-derived products are lawful following the 2018 Farm Bill. Most notably, the use of CBD in foods or dietary supplements may still violate the Federal Food Drug and Cosmetic Act on the basis that the use of a drug or substance undergoing clinical investigations (as CBD currently is since it is an active ingredient in FDA-approved drugs and is a substance undergoing clinical investigations) without approval of the U.S. Food and Drug Administration (FDA) violates the FDCA. The 2018 Farm Bill explicitly preserved FDA’s authority to regulate products containing cannabis or cannabis-derived compounds under the FDCA. Thus, registration of trademarks for foods, beverages, dietary supplements, or pet treats containing CBD will still be refused as unlawful under the FDCA, even if derived from hemp, as such goods may not be introduced lawfully into interstate commerce.

Wednesday, June 27, 2018

Gatorade's Fair Use Defense Defeats SportFuel Trademark Infringement Lawsuit

On June 14, 2018, the U.S. District Court for the Northern District of Illinois granted summary judgment in favor of PepsiCo, Inc. and its subsidiary, The Gatorade Company (“Gatorade”), against the trademark infringement claims brought by SportFuel, Inc. (“SportFuel”), the owner of the registered trademark SPORTFUEL, over Gatorade’s use of the advertising slogan “The Sports Fuel Company.”  SportFuel, Inc. v. PepsiCo, Inc. et al, Case No. 16-cv-07868 (N.D. Ill. 2018) (decision here).

SportFuel is a Chicago-based sports nutrition and wellness consulting firm that also sells a variety of SportFuel-branded dietary supplement powders and capsules.  SportFuel owns two registered trademarks for the name SPORTFUEL – one for “food nutrition consultation,” “nutrition counseling,” and “providing information about dietary supplements and nutrition” (U.S. Trademark Registration No. 3,495,513) and another for “dietary supplements” and “sports drinks enhanced with vitamins” (U.S. Trademark Registration No. 4,832,297).

Gatorade began using the phrase “sports fuel” internally in 2012 in marketing presentations describing their “Sports Fuel” products (which it defined as products designed to improve athletic performance in contrast to sports nutrition products) and describing the growing “Sports Fuel” product market.  In 2015, with full knowledge of SportFuel’s trademark rights, Gatorade began a nationwide rebranding campaign using the slogan “Gatorade The Sports Fuel Company.”  Gatorade obtained a trademark registration for GATORADE THE SPORTS FUEL COMPANY in 2016 (Reg. No. 5,025,026) – although it included a disclaimer of any exclusive rights to “The Sports Fuel Company” apart from the mark as shown in response to an office action which found “The Sports Fuel Company” to be merely descriptive.  Gatorade maintained that it did not use the slogan on any product packaging or labeling – rather, its products used the GATORADE trademark or the G-bolt design mark. 

SportFuel filed its lawsuit against Gatorade and PepsiCo in August 2016 alleging causes of action for trademark infringement, unfair competition, and false designation of origin in violation of the Lanham Act as well as related claims of trademark infringement and unfair competition under state law and common law.  Gatorade filed a motion for summary judgment on all of SportFuel’s claims on two separate grounds – 1) SportFuel has not presented evidence from which a reasonable jury could find likelihood of confusion (a necessary element to all of SportFuel’s claims) and 2) Gatorade’s use of the term “Sports Fuel” in the slogan “Gatorade The Sports Fuel Company” is protected under the fair use doctrine.  The court granted Gatorade’s motion entirely on the grounds of fair use and did not address the likelihood of confusion argument. 

The court first identified the fair use defense and its elements:

Under section 1115(b)(4) of Lanham Act, however, the “fair use” defense allows a junior user of a mark to use the mark “in good faith in its descriptive sense, as opposed to its trademark sense.” Ideal Indus., Inc. v. Gardner Bender, Inc., 612 F.2d 1018, 1027 (7th Cir. 1979); see also 15 U.S.C. § 1115(b)(4); Sorensen v. WD-40 Co., 792 F.3d at 722. The fair use defense “is based on the principle that no one should be able to appropriate descriptive language through trademark registration.” Packman, 267 F.3d at 639 (citation omitted). To prevail on a fair use defense, the defendant must show that (1) it did not use the mark as a trademark; (2) the mark is descriptive of the defendant’s goods or services, and; (3) it used the mark “fairly and in good faith.” Sorensen, 792 F.3d at 722.

With respect to the first element of the fair use defense – showing that it did not use “Sports Fuel” as a trademark – Gatorade argued that it used the term “Sports Fuel” in its slogan “Gatorade The Sports Fuel Company” to describe the type of products it sells rather than to signify the source of the products.  Even though there was no dispute that Gatorade uses its name and G-bolt design mark on its product packaging and advertising, this did not preclude a finding that Gatorade’s use of the words “Sports Fuel” could be viewed as a source identifier of Gatorade’s products.  Nonetheless, in analyzing Gatorade’s actual use of the slogan “The Sports Fuel Company,” the court focused heavily on how the word “Gatorade” typically appeared above the slogan and in a much more noticeably larger and bolder font.  And in those instances where the word “Gatorade” appeared on the same line and in the same font as the slogan, the word “Gatorade” was bolded so that it would stand out from the slogan.


The court found that “The fact that the Gatorade house mark appears more prominently than the rest of the slogan reduces the likelihood that Gatorade is using “Sports Fuel” as an indicator of source.”  The court rejected SportFuel’s argument that a Gatorade executive had admitted using “Sports Fuel” as a trademark given that he was not a trademark expert and just giving an opinion.  Moreover, the fact that Gatorade had sought to register “Gatorade The Sports Fuel Company” as a trademark did not change the court’s analysis given Gatorade’s express disclaimer of “The Sports Fuel Company” as part of its trademark registration. 

With respect to the second element of the fair use defense – showing that Gatorade’s use of “Sports Fuel” was in a manner which is descriptive of its goods or services – Gatorade’s argument that its use of “Sports Fuel” would clearly be recognized by consumers as descriptive of “foods and beverages designed to be consumer before, during, or after sports activity” was bolstered by the fact that the PTO had also determined that the phrase “The Sports Fuel Company” was descriptive and had to be disclaimed by Gatorade in its trademark registration application (“As SPORTS FUEL is commonly used in reference to sports nutrition, consumers encountering the wording THE SPORTS FUEL COMPANY in the proposed mark would readily understand it to mean that the goods are provided by a company that provides sports nutrition.”). In addition, Gatorade’s internal marketing documents regarding the slogan “The Sports Fuel Company” had identified “Sports Fuel products” as “[i]tems specifically designed to improve athletic performance.”  As such, the court found that Gatorade’s use of “Sports Fuel” was in a manner which is descriptive of its goods or services and further found that SportFuel had not presented any evidence giving rise to a genuine factual dispute regarding whether Gatorade used the term “Sports Fuel” to describe the nature of the products it sells.

Finally, with respect to the third element of the fair use defense – showing that Gatorade used “Sports Fuel” fairly and in good faith only to describe its own goods or services – Gatorade argued that there was no genuine factual issue in dispute given that “sports fuel” did accurately describe Gatorade’s expanded product line, Gatorade disclaimed exclusive rights to “The Sports Fuel Company” in its registered trademark, and the concurrent use of its famous GATORADE mark and/or G-bolt design mark in conjunction with the advertising slogan left no doubt regarding the source of Gatorade’s products. 

SportFuel tried to argue that summary judgment was not warranted on the issue of Gatorade’s intent and good faith because Gatorade was aware of SportFuel’s marks prior to beginning public use of its slogan and because Gatorade did not stop using the slogan even after SportFuel had put Gatorade on notice regarding its claims of infringement.  However, the court held that “evidence that Gatorade had knowledge of SportFuel’s mark is insufficient to permit a reasonable inference of bad faith” and Sport Fuel “must point to something more that suggests subjective bad faith.”  Further, the court held that “the fact that Gatorade did not stop using the slogan after SportFuel filed this lawsuit alleging infringement is not probative of bad faith” since Gatorade believed its use did not constitute infringement and there had been no prior adjudication of the issue.  The court found that SportFuel failed to offer any evidence that would support a reasonable inference that Gatorade acted in bad faith.

The court concluded that even with all reasonable inferences drawn in SportFuel’s favor, “no reasonable jury could find that Gatorade’s use of the phrase “Sports Fuel” in its slogan “Gatorade The Sports Fuel Company” is anything other than a fair use.”  As such, the court concluded that Gatorade’s use of “Gatorade The Sports Fuel Company” is protected under the fair use doctrine and granted summary judgment in Gatorade’s favor on all of SportFuel’s claims.  And having granted summary judgment based on fair use, the court chose not to address the parties’ arguments on the issue of likelihood of confusion.  See KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 543 U.S. 111, 124 (2004) (a defendant invoking the fair use defense need not establish that its use of the mark in question will not cause consumer confusion).

Thursday, May 24, 2018

Dr. Seuss Trademark Claims Against Parody Book Title Dismissed

On May 21, 2018, the U.S. District Court for the Southern District of California granted a Motion for Judgment on the Pleadings filed by the creators of a Dr. Seuss-Star Trek mash-up parody book entitled “Oh, the Places You’ll Boldly Go!” (the “Boldly” book) against trademark infringement claims brought by Dr. Seuss Enterprises LP (the owner of the intellectual property rights associated with the Dr. Seuss books).  See Dr. Seuss Enterprises, L.P. v. ComicMix LLC et al, Case No. 16-cv-02779 (S.D. Cal.) (decision here).

Previously, Defendants argued that Plaintiff’s trademark infringement claims should be dismissed because Defendants’ title choice was protected by the First Amendment under the limiting construction provided for in the landmark case Rogers v. Grimaldi, 75 F.2d. 994 (2nd Cir. 1989):

Under the Rogers two-prong test, the title of an expressive work does not violate the Lanham Act “unless the title has no artistic relevance to the underlying work whatsoever, or, if it has some artistic relevance, unless the title explicitly misleads as to the source or the content of the work.” Mattel Inc. v. MCA Records, Inc., 296 F.3d 894, 902 (9th Cir. 2002) (internal quotation marks omitted) (quoting Rogers, 875 F.2d at 999). This test “insulates from restriction titles with at least minimal artistic relevance that are ambiguous or only implicitly misleading but leaves vulnerable to claims of deception titles that are explicitly misleading as to source or content, or that have no artistic relevance at all.” Rogers, 875 F.2d at 1000.

Defendants had argued that there is nothing misleading about its “Boldly” book title and that the use of the title was directly relevant to the underlying creative work.  Plaintiff focused its opposition on a specific portion of the Rogers decision – footnote 5 – to argue that this case was different.  That footnote 5 stated that the outlined “limiting construction would not apply to misleading titles that are confusingly similar to other titles. The public interest in sparing consumers this type of confusion outweighs the slight public interest in permitting authors to use such titles.” Rogers, 875 F.2d at 999 n.5.

In its order on the motion to dismiss, the Court found that Defendants’ invocation of Plaintiff’s trademarks was relevant to the book’s artistic purposes and that the title did not explicitly mislead as to its source or content.  However, with respect to the footnote exception, while the Ninth Circuit had not directly addressed such exception, because other district courts had determined that the exception is applicable, the Court decided that it would not dismiss Plaintiff’s trademark claims on First Amendment grounds pursuant to Rogers.

However, on November 16, 2017, the Ninth Circuit Court of Appeals issued its opinion in the case Twentieth Century Fox Television a Division of Twentieth Century Fox Film Corp. v. Empire Distribution, Inc., 875 F.3d 1192 (9th Cir. 2017).  This case involved a dispute between a record label named Empire Distribution and the companies behind the television show Empire (and its portrayal of a fictional music label named “Empire Enterprises”).  As expected, the Ninth Circuit invoked the Rogers test in deciding if the allegedly infringing use of EMPIRE as the title of an expressive work was protected by the First Amendment. 

Empire Distribution had argued that the limiting construction of the Rogers test did not apply because of footnote 5.  However, the Ninth Circuit rejected Empire’s argument for an exception based on footnote 5 – nothing that the footnote had only ever been cited once by an appellate court, and even then the Second Circuit had rejected its applicability. 875 F.3d at 1197 (citing Cliffs Notes, Inc. v. Bantam Doubleday Dell Publ’g Grp., Inc., 886 F.2d 490 (2d Cir. 1989)).  The Ninth Circuit stated “[t]he exception the footnote suggests may be ill-advised or unnecessary” because identifying confusingly similar titles “has the potential to duplicate either the likelihood-of-confusion test or the second prong of Rogers” and “conflicts with our precedents, which ‘dictate that we apply the Rogers test in [Lanham Act] § 43(a) cases involving expressive works.’” Id. (alternation in original) (quoting Brown v. Elec. Arts, Inc., 724 F.3d 1235, 1241–42 (9th Cir. 2013)).

With this revised interpretation of the Rogers test in hand, the Court then reevaluated Defendants’ use of the Boldly title under the First Amendment.  The Court reaffirmed its previous findings that Defendants’ invocation of Plaintiff’s alleged trademark is relevant to Boldly’s artistic purpose

As well-put by the court in CI Games S.A. v. Destination Films, No. 2:16-cv-5719-SVW-JC, 2016 WL 9185391 (C.D. Cal. Oct. 25, 2016): “It is clear to the Court that the artistic relevance prong of the Rogers test is meant to ensure that the title in question uses the potential trademark to express or describe its own content rather than merely to attract notoriety using a trademark in its title that is irrelevant to the underlying work.” Id. at *6.

As for the second prong – whether the alleged use explicitly misleads as to the source or content of the work – the question is “whether there was an ‘explicit indication,’ ‘overt claim,’ or ‘explicit misstatement’ that caused . . . consumer confusion.” Brown, 724 F.3d at 1245. (quoting Rogers, 875 F.2d at 1001).  The Court noted that not only did no such statement appear in Defendants’ work, but that Defendants actually went out of their way on the Boldly copyright page to inform readers that it was a work of parody that was not associated with or endorsed by Dr. Seuss.  While Plaintiff disputed the effectiveness of such disclaimers, “what cannot be disputed is that there is no statement in Boldly to the contrary, i.e., that the work is associated with or endorsed by Plaintiff.” (emphasis in original).  Moreover, Defendants’ use of similar text and design for their book title is not enough to be an “explicit misstatement.”  Without any clear evidence that the title of Boldly explicitly misleads as to the source of the work, the Court found that the second prong had been satisfied by Defendants. 

With both prongs of the Rogers test satisfied, the Court ruled that Defendants were entitled to a judgment on the pleadings as to Plaintiff’s trademark claims relating to the title of Boldly.  While Plaintiff had also pled trademark rights in the font and illustration style, because the Court had not determined if Plaintiff had protectable trademark rights in the font and illustration style of the Dr. Seuss book and only analyzed the title of the book (which it had previously determined was a protectable trademark when it analyzed Defendants’ Boldly book title), the Court’s dismissal of Plaintiff’s trademark claims was limited to just those relating to the title of Boldly. 

Tuesday, May 1, 2018

Different Firm Name, Same Great Las Vegas Trademark Attorney

After years of contemplation, I finally decided to go out on my own and established my own law practice which will continue representing clients in connection with various intellectual property matters (trademarks, copyrights, trade secrets, and domain names) as well as general business legal matters.

My new contact information is as follows:

Ryan Gile
Gile Law Group Ltd.
10655 Park Run Drive, Suite 230
Las Vegas, Nevada  89144
Phone: (702) 703-7288

Thursday, February 18, 2016

The Rat Pack is . . . Generic! -- Ninth Circuit Affirms Nevada District Court’s Decision that “The Rat Pack” is Generic in connection with “Rat Pack” tribute shows

The title of this blog post could also be entitled “How I won at the Ninth Circuit without doing a thing.” 

On February 16, 2016, the Ninth Circuit Court of Appeals issued its ruling in the appeal that was filed in 2013 by TRP Entertainment, LLC, seeking to overturn the Nevada district court’s 2009 decision which found that the “Rat Pack” was generic and ordered a disclaimer of the term “RAT PACK” on TRP’s trademark registration for “THE RAT PACK IS BACK.”  A copy of the decision can be downloaded here.   See TRP Entertainment, LLC v. BC Entertainment et al., Case No. 13-16754 (9th Cir.)

In upholding the lower court’s decision, the Ninth Circuit found that “the record demonstrates that the term ‘The Rat Pack’ describes a type of live entertainment show and does not identify any particular producer of a Rat Pack tribute show.”  The Court noted that even TRP had referred to “Rat Pack performances as a ‘genre’ of entertainment.”  As such, the district court did not err in determining that “The Rat Pack” is generic in the context of live shows about or in tribute to members of the Rat Pack.  The Ninth Circuit also held that the district court did not abuse its discretion in ordering a disclaimer of the term “The Rat Pack” modifying TRP’s trademark registration (citing 15 U.S.C. § 1119, which allows a court to order the modification of a trademark registration to include a disclaimer of generic components).  As such, the Ninth Circuit affirmed the district court’s grant of partial summary judgment and remanded the case back to the district court to instruct the Director of the United States Patent and Trademark Office to enter a disclaimer of the term “THE RAT PACK” on TRP’s trademark registration for ““THE RAT PACK IS BACK.” 

In order to understand how this victory is one for which I can claim some credit, I will defer to my prior detailed post on the district court’s decision when it was first handed down.  I was no longer Defendants’ counsel of record on the case at the time the decision was handed down, but it was the Motion for Partial Summary Judgment that I prepared and filed on behalf of the Defendants in that case that the district court ultimately ruled on in deciding that “Rat Pack” was generic – a decision that the Ninth Circuit has now affirmed.

Moreover, I was not involved in any briefings relative to TRP’s appeal, so that is why I write that I won at the Ninth Circuit without doing a thing – because indeed I did not.   In fact, the Ninth Circuit ruled against TRP despite having no substantive opposing briefs filed by the Defendants.  Original Defendant Barrie Cunningham did send a one page letter to the Ninth Circuit asking for the lower court’s decision to be upheld, but otherwise, no briefs were filed by the Defendants arguing in favor of upholding the lower court’s decision – which makes the decision of the Ninth Circuit to uphold the decision anyway all the more sweeter.  This victory for Defendants also demonstrates that just because no one opposes you on appeal does not necessarily mean you are going to win your appeal.

So short of an appeal by TRP of the Ninth Circuit’s decision to the U.S. Supreme Court or possibly a request for reconsideration with the Ninth Circuit, this decision marks the end of the great “Rat Pack Generic” saga that started as far back as 13 years ago.  The glory days of TRP claiming to have exclusive rights to the term “THE RAT PACK”  in connection with a “Rat Pack” tribute show – much like the “Rat Pack” itself – is forever gone. 

Friday, April 10, 2015

Sam’s Club Loses Motion to Dismiss David Yurman Trademark Lawsuit Based on First Sale Doctrine Defense

In September 2014, luxury jewelry designer David Yurman filed a trademark infringement lawsuit against Sam’s Club over the alleged unauthorized sales of David Yurman jewelry at Sam’s Club stores.  See David Yurman Enterprises LLC and David Yurman IP LLC v. Sam’s East, Inc. and Sam’s West Inc., Case No. 14-cv-02553 (S.D. Tex. Filed September 4, 2014).  Click here for a news article on the complaint.

In the complaint, Yurman alleged that Sam’s Club, through its purchase and resale of genuine David Yurman jewelry from authorized David Yurman retailers, infringed on Yurman’s trademark rights to the DAVID YURMAN mark as well as intentionally interfered with Yurman’s contractual relations with its authorized retailers. 

Sam’s Club filed a motion to dismiss Yurman’s complaint for failure to state a claim, primarily on the basis that its sale of Yurman’s genuine jewelry was protected by the “first sale doctrine.”  On April 9, 2015, the Court denied Sam’s Club’s motion to dismiss finding that Yurman’s complaint had sufficiently pled causes of actions for trademark infringement (sufficient to overcome Sam’s Club assertion of the “first sale doctrine” defense) as well as for tortious interference with contractual relations.  See David Yurman Enterprises LLC et al v. Sam’s East, Inc., Case No. 14-cv-02553 (S.D. Tex. April 9, 2015) (court order here)

As part of Yurman’s complaint, Yurman asserted that it only sells its jewelry through its own boutiques and authorized retailers who sign an Authorized Retailer Agreement that “expressly prohibits the transshipment, diversion, or transfer of any Yurman products to any other party.”  Yurman further asserted that Yurman’s Authorized Retailer Agreement and the prohibition against selling its jewelry to any other parties were well known in the retail industry, especially retailers of jewelry products.  As such, Sam’s Club was well aware of the prohibition (or certainly became aware after Sam’s Club was notified by Yurman to stop such purchasing), and yet intentionally sought out and purchased Yurman jewelry from one or more of Yurman’s authorized retailers despite knowing that such retailers were prohibited from selling the jewelry to Sam’s Club.  There was no dispute that Sam’s Club was selling authentic Yurman jewelry products at its stores and that Sam’s Club is not a Yurman-authorized retailer of its jewelry. 

Most importantly, Yurman alleged that “Sam’s Club prominently advertised and promoted the jewelry in its stores and on its website, in an effort to drive traffic to its stores” and that in its stores, Sam’s Club was “displaying Yurman products, placards and packaging displaying the Yurman trademark” and supposedly even Yurman-issued certificates of authenticity.  Yurman alleged that Sam’s Club’s actions created “the false impression that Sam’s Club is among Yurman’s network of authorized retailers, and has caused consumer confusion and disappointment.” (e.g., unlike an authorized Yurman retailer, Sam’s Club, at the point of purchase, was not being able to service customers purchasing or attempting to purchase DAVID YURMAN jewelry products sold in its stores).

In support of its trademark infringement claims, Yurman basically argued that Sam’s Club’s “display of the jewelry and its packaging; the prominent placement of placards, certificates, and other Yurman materials; and the prominent advertisement of Yurman products in its stores and on its website to create foot traffic to the stores, all create the false impression that Sam’s Club is authorized to sell Yurman products and that its products have been sourced directly from Yurman.”  In response, Sam’s Club maintained that Yurman’s trademark infringement claims were barred by the “first sale doctrine” (i.e., because Sam’s Club was selling genuine Yurman jewelry identified by the David Yurman trademark, there is no potential for consumer confusion regarding the source of the goods).

The Court stated the following regarding the “first sale doctrine” defense:
Under the rule “a distributor who resells trademarked goods without change is not liable for trademark infringement.” Mary Kay, Inc. v. Weber, 301F. Supp. 2d 839, 852 (N.D. Tex. 2009) (internal quotations omitted). However, there are two exceptions to the rule: 1) “[t]he doctrine does not protect alleged infringers who sell trademarked goods that are ‘materially’ different from those sold by the trademark owner;” and 2) the doctrine will not protected alleged infringers “if they have given off the false impression that they are affiliated with or sponsored by” the trademark owner. Id. The second exception is relevant to this case. Under this rule, an unauthorized dealer may use a mark to advertise or promote truthfully that it sells a certain trademarked product, so long as the advertisement or promotion does not suggest affiliation or endorsement by the mark holder. Id. (quoting Fetzer, 381 F.3d at 484).

In analyzing whether Yurman had pled sufficient facts to show that the use of the Yurman trademark creates a likelihood of confusion as to an affiliation between Sam’s Club and Yurman, the Court noted that “Yurman has pled that the stores had Yurman products and materials prominently displayed, which suggests the Yurman products were highlighted more than other products. . .[and] that Sam’s Club had prominent advertisements of the Yurman products on its website in an effort to drive foot traffic to its stores, which suggests the Yurman jewelry was featured in a way that other jewelry was not. The context of the use was that Sam’s Club was featuring Yurman products more aggressively and prominently than other products to gain more traffic to its stores.”  Because the “[p]rominent and pervasive use of a mark will suggest affiliation,” the Court found Yurman had pled sufficient facts to state claim for likelihood of confusion.

As for Sam’s Club reliance on the “first sale doctrine” defense, “the defense must be apparent on the face of the claim, and the rule does not apply if Sam’s Club has given off the false impression that it is affiliated with Yurman.”  Sam’s Club relied heavily upon another case, Matrix Essentials, Inc. v. Emporium Drug Mart, Inc., of Lafayette, 988 F.2d 587, 593 (5th Cir.1993), which held that “the mere unauthorized stocking and sale of trademarked products is not a trademark violation.”  However, the Court distinguished that case from the instant case because Yurman “alleges more than the mere unauthorized stocking and sale is occurring here. Yurman also alleges prominent and aggressive advertising, including on the Sam’s Club’s website, and a prominent display of Yurman materials and jewelry within its stores. Matrix Essentials anticipates that if more action is taken beyond mere unauthorized stocking and sale of a trademarked product, a claim might survive summary judgment.”  Accordingly, the Court denied Sam’s Club motion to dismiss Yurman’s trademark infringement claim (as well as Yurman’s other claims for false designation of origin and unfair competition, for similar reasons).

As for Yurman’s claim for tortious interference with a contract, Yurman argued that despite Sam’s Club knowledge of Yurman’s Authorized Retailer Agreement with every authorized retailers of its products prohibiting the transshipment, diversion or transfer of its products to any other party,”Sam’s Club obtained significant inventories of Yurman products to sell in Sam’s Club stores throughout the United States. . . .” And if Sam’s Club did not know about the prohibition in the Authorized Retailer Agreement initially, Sam’s Club was certainly put on notice when Yurman demanded that Sam’s Club stop inducing Yurman’s retailers into breaching their agreement (a demand that Sam’s Club refused).  Yurman further alleged that Sam’s Club could not have acquired such large inventories of Yurman products without having intentionally induced one of Yurman’s retailers to breach its Agreement with Yurman.  Based on these factual assertions, the Court found Yurman’s pleadings were sufficient to make out a claim for tortious interference with a contract

Accordingly, the Court denied Sam’s Club’s motion to dismiss.

Monday, March 16, 2015

Righthaven Remembered

It’s hard to believe that Righthaven, the company that was going to change the news media business by applying the patent lawsuit business model to the enforcement of copyrights, filed its first series of lawsuits five years to go.  (The events were so notable that even this trademark dedicated blog could not resist writing up a copyright related post).

To mark the anniversary, former Las Vegas Sun Reporter Steve Green (now a staff writer with the Orange County Register), who helped shine a spotlight on Righthaven as the company embarked on and went about its controversial copyright enforcement campaign, published a new article last week which looks back upon the rise and demise of Righthaven (including new quotes from Righthaven founder Steve Gibson who continues to stand by the actions taken by Righthaven).

See the photo of Steve Gibson and the infamous “bluetooth” headset. (Photo © Las Vegas Sun)