Sunday, March 30, 2008

TTAB upholds opposition based on applicant’s failure to show bona fide intent to use

On March 28, 2008, the Trademark Trial and Appeal Board (the “Board”) handed down a precedential decision upholding an opposition by L.C. Licensing, Inc., the owner (at the time the opposition was filed) of the word mark ENYCE and mark ENYCE and design (pictured above) both for apparel and headwear, against Cary Berman, the applicant for the mark ENYCE for custom automotive accessories. See L.C. Licensing, Inc. v. Cary Berman, Opposition No. 91162330 (TTAB March 28, 2008) (precedential) (decision here).

While a more detailed analysis of this precedential decision (which also had a 2(d) likelihood of confusion issue) can be found on The TTABlog®, what makes this decision interesting and important is that one of the grounds for sustaining the opposition was the applicant’s lack of bona fide intent-to-use when the application was filed.

L.C. Licensing maintained that Mr. Berman lacked the requisite bona fide intention to use the ENYCE mark in commerce on the identified goods. The Board, citing Lane Limited v. Jackson International Trading Company Kurt D. Bruhl Gesellschaft m.b.G. & Co. KG, 33 USPQ2d 1352 (TTAB 1994) and Commodore Electronics Ltd. v. CBM Kabushiki Kaisha, 26 USPQ2d 1503 (TTAB 1993), stated that the determination of whether applicant had the requisite bona fide intention to use the mark ENYCE on the goods identified in the application must be a fair objective determination based on all of the circumstances and that “absent other facts which adequately explain or outweigh the failure of an applicant to have any documents supportive of or bearing upon its claimed intent to use its mark in commerce, the absence of documentary evidence on the part of an applicant regarding such intent is sufficient to prove that the applicant lacks a bona fide intention to use the mark in commerce as required by Section 1(b).”

Mr. Berman acknowledged not having any documents evidencing an intent to use the ENYCE mark on any custom automotive accessories. The Board also quoted the following deposition exchange regarding Mr. Berman’s intent to use the ENYCE mark:
Q. Did you intend – when you filed this [application] did you intend to actually use [the ENYCE mark] on all these goods?
A. Again, there is no business model associated with this until I receive permission to go ahead and use it and then the business model will be produced.
Q. That’s not the question. When you filed this application, serial number 78320850, did you intend to use the mark ENYCE on fitted car covers?
A. Perhaps –
Q. It’s a yes or no answer.
A. I don’t have any – there’s no specific intentions at this time.
Q. No. At that time though. At the time you filed the application.
A. A car bra, if you want to call that a fitted car cover.
Q. Is that a fitted car cover?
A. Yes, I guess.
Q. Shift knobs?
A. Shift knobs, yes.
Q. You intended to use ENYCE on shift knobs.
A. Yes.
Q. On brake pads?
A. Probably not.
Q. No?
A. No.
Q. You didn’t intend to use ENYCE on brake pads?
A. No.
Q. License plate holders?
A. Probably.
Q. Spoilers?
A. Probably.

The Board found no evidence which explained or which outweighed the failure of Mr. Berman to have any documents to support his claimed intent to use the ENYCE mark in connection with custom automotive accessories at the time he filed the application. Furthermore, his explanation of not wanting to create a business model until the opposition had been decided did not explain his failure to have any documents whatsoever at the time the application that would demonstrate his bona fide intent to use the mark. The Board further noted that the mere assertion of an intent to use the mark without corroboration of any sort, documentary or otherwise, is unlikely to provide credible evidence to establish a bona fide intention to use a mark.

In short, Mr. Berman’s lack of any evidence to corroborate a bona fide intent to use the mark when he filed the application supported the conclusion that Mr. Berman did not have a bona fide intent to use the ENYCE mark on custom automotive accessories when he filed his intent—to-use application.

This decision builds on the Board’s non-precedential decision last year in Intel Corp. v. Emeny, Opposition No. 91123312 (TTAB May 15, 2007) (decision here). In that case, the applicant, Steven Emeny, filed an intent-to-use application to register the mark IDEAS INSIDE for what the Board described as a “broad listing of goods and services.” When the application was published for opposition, Intel opposed registration on the grounds of likelihood of confusion and dilution over its mark INTEL INSIDE. Intel later added an additional ground for opposing registration – that the applicant did not have a bona fide intention to use the mark in connection with the recited services. While "bona fide" is not defined in the Lanham Act, the legislative history which introduced intent-to- use applications suggest that Congress intended the test of “bona fide” to be shown by “objective” evidence of “circumstances” showing “good faith.”

Intel had the initial burden to prove by a preponderance of the evidence that Emeny lacked a bona fide intent to use his mark in connection with the recited services. Intel focused on the fact that Emeny had no documentation to show his plans to use the mark. The Board found this complete absence of any clear, objective evidence to be sufficient for Intel to meet its burden that Emeny lacked the requisite bona fide intention to use the mark unless Emeny could provide an explanation as to why no such documents exist.

The Board found that the evidence in the case supported the conclusion that Emeny lacked the requisite bona fide intent. The application filed by Emeny (along with 8 others like it, which went abandoned) included “an unreasonably broad listing of goods and services.” The Board focused on the fact that there was no evidence of any business plans, nor any evidence of a single business contact with any potential partner who would supply the goods that Emeny would sell. Emeny did not divulge any business or marketing plans and admitted that he conducted no specific planning and never promoted or sold any goods under the mark. The Board concluded that he had no evidence of a bona fide intent to use the mark and upheld Intel’s opposition.

Conclusion
The important lesson for all trademark applicants is that when you file Section 1(b) intent-to-use trademark application, you had better have both a bona fide intent to use the mark for which you are filing as well as some kind of objective evidence documenting such bona fide intent.

Friday, March 28, 2008

Sensient Flavors obtains Temporary Restraining Order against SensoryFlavors

On March 10, 2008, Sensient Technologies Corporation along with one of its subsidiaries, Sensient Flavors LLC (together “Sensient”), filed a lawsuit in the U.S. District Court for the Eastern District of Missouri again SensoryFlavors, Inc., Performance Chemicals & Ingredients Co., Diehl Food Ingredients, Inc., and Highlander Partners, L.P. (collectively “SF”) alleging trademark infringement and unfair competition under the Lanham Act, common law, and Missouri law as well as trademark dilution under Missouri law. See Sensient Technologies Corporation et al v. SensoryFlavors, Inc. et al, Case No. 4:08CV00336 ERW (E.D. Mo. March 10, 2008). Along with the complaint, Sensient filed a Motion for a Preliminary Injunction which sought a temporary restraining order (“TRO”) against SF’s use of the SensoryFlavors name, logo, and website.

For more than 125 years, Sensient Technologies has been in the business of developing and distributing flavors, fragrances, and colors used in food, beverage, household care, and personal products. Previously known as Universal Foods Corporation, the company, in 2000, decided to rebrand itself by creating the mark “Sensient” and began to change its entire corporate identity around the mark. The company has received numerous registrations for the mark SENSIENT including, inter alia, “cosmetic fragrances and food emulsifiers” and “food and beverage colorants

On February 13, 2008, Givaudan Flavours North America (“Givaudan”), a manufacturer and supplier of flavors for ice cream and other dairy products, changed its name to SensoryFlavors Inc. after being acquired by Performance Chemicals & Ingredients Co. (link to press release). Givaudan and Sensient Flavors were direct competitors in the area of ice cream and dairy flavors. In addition, the President of SensoryFlavors Inc. is Charles Nicolais, who served as the head of Sensient Colors, Inc., another subsidiary of Sensient Technologies and sister company of Sensient Flavors, from February 2004 through July 2005.

Sensient maintains that the name SensoryFlavors was chosen to cause confusion with its Sensient Flavors name. SF asserts that the name was an outgrowth of the SensoryEffects word mark and design registered in 2004 and that they wanted to build on the goodwill of such make by developing a similar name for the acquired flavor business (replacing the word “Effects” with the generic word “Flavors”).

The court analyzed the usual four factors for determining whether to issue a TRO: (1) the threat of irreparable harm to the moving party; (2) balancing the harm and injury to the non-moving party in granting the injunction; (3) the probability of the success on the merits; and (4) the public interest. See Phelps-Roper v. Nixon, 509 F.3d 480, 484 (8th Cir. 2007).

Probability of the success on the merits
The court first analyzed probability of the success on the merits. The court found, on balance, that Sensient was likely to prevail on its claims, specifically, for purposes of deciding the motion, Sensient’s federal trademark infringement claim.

The six factors analyzed by the court for determining whether SF’s use of its mark was likely to cause confusion as to the source or sponsorship of the goods or services are:

1) the strength of the plaintiff's mark; 2) the similarity between the plaintiff's mark and defendant's marks; 3) the degree to which the allegedly infringing product competes with the plaintiff's goods; 4) the alleged infringer's intent to confuse the public; 5) the degree of care reasonably expected of potential customers, and 6) evidence of actual confusion.

Davis v. Walt Disney Co., 430 F.3d 901, 903 (8th Cir. 2005).

Regarding the strength of the SENSIENT mark, the court found it to be a fanciful mark entitled to the broadest protection (but noting that the Flavors part of the name is generic or at most descriptive and Sensient has not shown any evidence that its use of the word Flavors has acquired a secondary meaning).

As for similarity between the marks, because the goods at issue (food flavors) are virtually identical, the degree of similarity that need be shown by Sensient is less. The court found the marks to have a strong phonetic similarity, which is particularly important given that customers are usually contacted over the phone. The court found this factor to weigh in favor of granting the TRO.

The third factor favored Sensient because SF’s allegedly infringing product competes with Sensient’s products. As for SF’s intent to confuse the public, the court did believe that SF’s rationale for its name overcame the obvious prior relationship of SF’s president to Sensient (which creates a strong inference of an intent to confuse) and the knowledge that SF had of Sensient Flavors' existence in the relevant market. The court found that this factor favored granting the TRO.

The degree of care exercised by potential customers actually favored SF because, in this case, potential customers are sophisticated business entities and a high degree of care can be expected.

Finally, regarding evidence of actual confusion, the court found this factor irrelevant under the circumstances given the short period of time in which SensoryFlavors has been operating under such name and the fact that it is too early for Sensient to provide any evidence of actual confusion.

Irreparable Harm
The court relied upon the showing of a likelihood of confusion as support for a showing of irreparable harm (citing Louis Vuitton Malletier v. Burlington Coat Factory Warehouse Corp., 426 F.3d 532, 537 (2d Cir. 2005). Since the court found a likelihood of confusion, the court found that Sensient did face a threat of irreparable harm.

Harm to Defendants
While the court acknowledged that SF may suffer some harm form the TRO, the little harm that would be inflicted (given the short period of time in which SF has used the new name) was outweighed by the irreparable harm to Sensient’s long-established goodwill in the relevant industry.

Public Interest
Because neither party submitted any strong evidence that the public interest would be impacted either way by the TRO and the fact that there is always the public interest in preventing confusion by enforcing trademark laws, the court found this factor to favor granting the TRO.

Conclusion
The court concluded that, on balance, the factors favored granting the TRO to stop SF from using the SensoryFlavors name, and on March 20, 2008, so ordered and set a hearing on Sensient's preliminary injunction (scheduled for today). Of course, given that the factors for deciding a preliminary injunction are the same as the factors for deciding a TRO, SF’s chances of success are not looking very good.

Wednesday, March 26, 2008

Portugal-based Rosenruist-Gestao files U.S. Supreme Court Cert. Petition on Fourth Circuit’s Decision to Enforce 35 U.S.C. §24 Subpoena

The TTABlog® posted a copy (link here) of the U.S. Supreme Court Petition for a Writ of Certiorari filed March 20, 2008, by Portuguese Company Rosenruist-Gestao E Servicos LDA (“Rosenruist-Gestao”). See Rosenruist-Gestao E Servicos LDA, fka Rosenruist-Gestao E Servicos Sociedade Unipessoal LDA v. Virgin Enterprises Limited, No. 07-1214 (U.S. March 20, 2008). The Petition seeks review of the 2-1 decision by the U.S. Court of Appeals for the Fourth Circuit holding that a foreign corporation (Rosenruist-Gestao) can be compelled to answer a Rule 30(b)(6) deposition subpoena issued pursuant to 35 U.S.C. §24 arising out of a TTAB opposition filed by Virgin Enterprises Limited opposing Rosenruist-Gestao’s intent-to-use trademark application for the mark VIRGIN GORDA. See Rosenruist-Gestao E Servicos LDA v. Virgin Enterprises Ltd., 511 F.3d 437 (4th Cir. 2007); see also Rosenruist-Gestao E Servicos Sociedade Unipessoal LDA v. Virgin Enterprises Limited, Opposition No. 91161535 (TTAB Filed July 29, 2004). Summaries of the Fourth Circuit’s decision can be found on Filewrapper.com and The TTABlog®.

The legal questions presented in Rosenruist-Gestao’s Petition are:

1. Does 35 U.S.C. § 24 authorize a district court to subpoena foreign witnesses with no contact with the United States other than the filing of a trademark application to appear personally for deposition in Virginia when the rules and procedures of the United States Patent and Trademark Office do not authorize such depositions but, instead, permit alternate means for obtaining testimony?

2. Is a foreign company with no employees, locations or other business in the United States a “witness residing or being” within the Eastern District of Virginia under 35 U.S.C. § 24 solely because it filed a trademark application with the United States Patent and Trademark Office?

The Petition first focuses on the split among the U.S. Circuit Courts of Appeals with respect to the interpretation of 35 U.S.C. §24 and requests the U.S. Supreme Court resolve the split. The First, Third, and Fifth Circuits have held that §24 authorizes district courts to issue subpoenas for evidence when the PTO’s rules and procedures authorize the parties to obtain such evidence. As such, PTO litigants cannot obtain discovery under §24 which exceeds the scope of discovery contemplated by the PTO’s own rules and procedures – and the PTO’s rules do not authorize depositions of non-resident foreign applicants, but instead propose alternative methods for taking testimony of foreign witnesses, such as taking the testimony of a non-resident alien by deposition on written questions (see 37 CFR §§ 2.123(a)(2) and 2.124) or either through letters rogatory or through letters of request under The Hague Convention (see TBMP §703.01(f)(3)).

The Tenth Circuit and now the Fourth Circuit, however, have held that the full scope of discovery available under the Federal Rules of Civil Procedure is available under §24 to a party involved in a contested proceeding before the PTO.

In addition to noting the Circuit split over the scope of §24, the Petition also argues that the Fourth Circuit’s decision misconstrues the plain language of §24, which applies to witnesses “residing or being within” the court’s district and is not meant to apply to a foreign company with no ties to the U.S. other than the filing of a trademark application (as evidenced by the PTO’s own interpretation of the statute – see TBMP §703.01(f)(2)). The Petition argues that the Fourth Circuit’s interpretation of the meaning of witnesses “residing or being within” the court’s district is one of important first impression given that, if left to stand, the decision would establish an unreasonable precedent whereby all foreign applicants of U.S. trademarks will be subject to the subpoena power of the U.S. District Court for the Eastern District of Virginia in any trademark disputes – a precedent that goes against long-standing principles of comity and international law.

Vegas™Esq. comments:
Rosenruist-Gestao has a good chance of having its Petition granted given the circuit split and the far-reaching consequences of the Fourth Circuit’s decision. One wonders why Rosenruist-Gestao opted to go straight to the U.S. Supreme Court without first seeking an en banc rehearing at the Fourth Circuit. Given the 2-1 split and the passionate reason of the dissenting opinion, there was a good chance that the full court would have at least heard the case and possibly even reached a different decision.

The bigger question I have is – what’s really driving these two companies to spend so much time and resources over this issue? Why is Virgin so intent on taking a deposition of a person rather than using written interrogatories? Why is Rosenruist-Gestao so intent on fighting for this intent-to-use mark?


Monday, March 24, 2008

Trademark 101: Registering domain names as trademarks

I am often asked about whether a domain name can be registered as a trademark.

The answer is Yes – a domain name can be registered as a trademark or service mark with the U.S. Patent and Trademark Office (“USPTO”), subject to certain qualifications (although these qualifications actually apply to non-domain name trademark/service mark applications as well).

First and foremost, in order to be registered as a trademark/service mark, a domain name, like any trademark/service mark, must serve as an actual identifier of a source of goods or services. If the mark would be perceived as nothing more than an Internet address where the applicant can be located online, then the USPTO will refuse registration. The mark, as shown in the specimen of use submitted to the USPTO (advertisements, product labels, etc.), must be presented in a manner that will be perceived by ordinary consumers to indicate source and not as merely an informational indication of the domain name address used to access a web site. See In re Eilberg, 49 USPQ2d 1955 (TTAB 1998). An applicant’s intent, hope or expectation does not determine whether the mark functions as a mark. See In re Standard Oil Co., 275 F.2d 945, 125 USPQ 227 (C.C.P.A. 1960).

In addition, because advertising one’s own products or services is not deemed to be a “service” for which an applicant can obtain service mark protection under the Lanham Act, a domain name which hosts a web site used by business for the sole purpose of advertising its own products or services cannot be registered as a service mark for such a service (e.g., where a domain name service mark applicant claims that its services are “providing information in the field of . . .” but in actuality, the website merely serves to advertise the applicant’s underlying goods or services).

Finally, any application to register a domain name as a trademark/service mark is subject to the same basic statutory restrictions to which all trademark/service mark registration applications are subject. The average consumer familiar with the Internet recognizes that every Uniform Resource Locator (“URL”) (i.e. web address) contains both “http://www” at the beginning and some top-level domain (“TLD”) at the end (e.g., “.com,” “.net,” or “.org”). As such, neither of these two parts of a domain name serve any kind of source-identifying function, and thus their addition to an otherwise unregistrable mark typically will not render the resulting domain name registrable. See In re Reed Elsevier Properties Inc., 482 F.3d 1376, 82 USPQ2d 1378 (Fed. Cir. 2007) (LAWYERS.COM generic for “providing an online interactive database featuring information exchange in the fields of law, legal news and legal services”); In re Oppedahl & Larson LLP, 373 F.3d 1171, 71 USPQ2d 1370 (Fed. Cir. 2004) (PATENTS.COM merely descriptive of computer software for managing a database of records and for tracking the status of the records by means of the Internet).

If a domain name is composed of merely descriptive terms, then the PTO may refuse registration under §2(e)(1) of the Lanham Act (15 U.S.C. §1052(e)(1)), on the ground that the mark is merely descriptive. If a domain name is composed of generic terms, the then the PTO may refuse registration under §2(f), 15 U.S.C. §1052(f) on the ground that the mark is generic. While the rule is that the addition of “http://www” and/or a TLD to an otherwise unregistrable mark typically will not render the resulting domain name registrable, the Federal Circuit has stated that in rare, exceptional circumstances, a term that is not distinctive by itself may acquire some additional meaning from the addition of a TLD. See In re Steelbuilding.com, 415 F.3d 1293, 1297, 75 USPQ2d 1420, 1422 (Fed. Cir. 2005) (STEELBUILDING.COM highly descriptive, but not generic, for “computerized on-line retail services in the field of pre-engineered metal buildings and roofing systems”).

If a domain name is composed of just a surname, then the PTO may refuse registration under §2(e)(4) of the Lanham Act (15 U.S.C. §1052(e)(4)), on the ground that the mark is primarily merely a surname. If a domain name is composed of geographic terms, then the PTO may, depending on how the geographic term is used, refuse registration on the grounds that the domain name containing a geographic term may be:

  • primarily geographically descriptive under §2(e)(2) of the Lanham Act (15 U.S.C. §1052(e)(2));
  • primarily geographically deceptively misdescriptive under §2(e)(3) of the Lanham Act (15 U.S.C. §1052(e)(3));
  • deceptive under §2(a) of the Lanham Act (15 U.S.C. §1052(a)); or
  • merely descriptive or deceptively misdescriptive under §2(e)(1) of the Lanham Act (15 U.S.C. §1052(e)(1)).

However, for an applicant facing domain name rejections based on §2(e)(1) merely descriptive or deceptively misdescriptive, §2(e)(2) primarily geographically descriptive, or §2(e)(4) primarily merely a surname, the applicant can try to show acquired distinctiveness under §2(f) of the Lanham Act (15 U.S.C. §1052(f)).

In short, in order to ascertain whether a domain name can be registered as a trademark/service mark, the applicant must first determine whether the second-level domain name, by itself, would be registrable. If so, then the applicant must determine if the domain name has been promoted in commerce in a way that the domain name serves as a source identifier (rather than just a source of information about the applicant or the applicant’s goods and services).

Friday, March 21, 2008

Pro Se Plaintiff Files Some Kind of Trademark Lawsuit Against MySpace


For those of you who get a kick out of reading complaints filed by pro se plaintiffs, check out this lawsuit (link here) that purports to be a trademark infringement lawsuit against MySpace, Inc. (“MySpace”) filed on March 20, 2008, by pro se plaintiff Donnell Mitchell (d/b/a Phenomenon Licensing) (“Mitchell”) in the U.S. District Court for the Northern District of Ohio. See Phenomenon Licensing v. MySpace, Inc., Case No. 08-cv-0691 (N.D. Ohio).

The impetus for the lawsuit would appear to be a cancellation petition filed by MySpace with the Trademark Trial and Appeal Board ("TTAB") to cancel a trademark registration that Mitchell obtained for the mark MYSPACE (for magnetically encoded credit cards; magnetically encoded debit cards; sunglasses) on August 28, 2007. See MySpace, Inc. v. Mitchell Donnell, Cancellation No. 92048120 (TTAB Filed Sept. 14, 2007). MySpace also filed an opposition against Mitchell for a pending intent-to-use application for the mark MY SPACE (for banking; credit card services; debit card services; insurance services, namely, writing property and casualty insurance; insurance underwriting services for all types of insurance; money order services; on-line banking services; bonding services; bail bonding). See MySpace, Inc. v. Mitchell Donnell, Opposition No. 91181141 (TTAB Filed Dec. 7, 2007).

Mitchell argues that MySpace, by filing its cancellation petition and opposition, is violating his “trademark and civil rights” by engaging in intimidation and harassment in order to force small business owners like himself out of business. Mitchell also argues that MySpace is committing anti-trust violations by seeking to cancel a mark that MySpace failed to oppose during the opposition phase and because it would give MySpace the exclusive rights to use two generic words “My” and “Space” for goods and services outside the scope of MySpace’s current goods and services. Mitchell seeks an injunction from the court to stop MySpace from “continuing its discrimination.”

In all of the apparent research that Mitchell must have done in order to make his complaint look somewhat similar to what a trademark lawyer would have filed, Mitchell apparently overlooked §14 of the Lanham Act (15 U.S.C. §1064) which provides that a petition to cancel a trademark registration can be filed by any person who believes that he is or will be damaged by the registration of a mark on the principal register (including damage as a result a likelihood of dilution) within five years from the date of the registration and anytime if the registered mark was obtained fraudulently. As such, MySpace is well within its rights to file its cancellation petition. Perhaps Mitchell intended to file a declaratory relief action in order to fight this battle with MySpace in Ohio court rather than the TTAB.

It is interesting that of all the TTAB actions that MySpace has taken against trademark applicants seeking marks with the words MY and SPACE (click here for list notices of opposition filed as well as filed extensions of time), Mr. Mitchell’s application is the single one that slipped under their radar screen and actually got registered (a little surprising once you learn the proseuction history).

Even more interesting (and in my opinion, amusing) is the prosecution history which resulted in Mitchell obtaining his registration – and which also provides MySpace with a great deal of evidence to support its allegations of fraud in its cancellation proceeding.

Mitchell filed his Section 1(a) use-in-commerce application on September 26, 2006, for a variety of goods including computer game programs, magnetically encoded cards, sunglasses, MP3 players, cameras, binoculars, ear plugs, cellular telephones, and electronic handheld units for the wireless receipt and transmission of data that enable the user to keep track of or manage personal information. Mitchell claimed first use in commerce as early as January 31, 1990. The application contained the usual language that “the applicant declares that it is using the mark in commerce, or the applicant's related company or licensee is using the mark in commerce, on or in connection with the identified goods and/or services” and Mitchell signed the usual declaration regarding statements made in the application. Below is the specimen of use he submitted with the application.


MySpace claims that Mitchell’s specimen of use was never in use, but merely created for purposes of obtaining the registration.

But this is only the beginning.

On October 4, 2006, Mitchell filed a Preliminary Amendment amending the Drawing of the mark for which he was seeking registration from MYSPACE to MYSPACE MOBILE and amending the description of goods and services. The same specimen was submitted and dates of use remained unchanged.

On October 7, 2006, Mitchell filed another Preliminary Amendment amending the owner section to list a non-existent corporation named Myspace Mobile Inc. and listing himself as President and amending the description of goods and services slightly. The same specimen was submitted and dates of use remained unchanged.

On October 15, 2006, Mitchell filed another Preliminary Amendment changing the ownership to Mitchell Donnell L. and amending the description of goods and services slightly. The same specimen was submitted and dates of use remained unchanged.

On October 23, 2006, Mitchell filed another Preliminary Amendment amending the Drawing of the mark for which he was seeking registration from MYSPACE MOBILE (word mark) to MYSPACE MOBILE (with the “mobile” all lowercase letters in smaller font under MYSPACE). The same specimen was submitted and dates of use remained unchanged.

On November 17, 2006, Mitchell filed another Preliminary Amendment amending the description of goods and services to add “Gaming machines.” The same specimen was submitted and dates of use remained unchanged.

On November 30, 2006, Mitchell filed two Preliminary Amendments amending the Drawing of the mark for which he was seeking registration from MYSPACE MOBILE to MYSPACE PREPAID (with the “prepaid” all lowercase letters in smaller font under MYSPACE).

On December 3, 2006, Mitchell filed another Preliminary Amendment amending the Drawing of the mark for which he was seeking registration from MYSPACE PREPAID back to MYSPACE MOBILE (with the “mobile” all lowercase letters in smaller font under MYSPACE).

{I’m not making this up folks –ed.}

On January 10, 2007, Mitchell (as President) filed another Preliminary Amendment amending the description of goods and services to remove “Gaming machines.” The amendment also modified the date of first use in commerce to as early as October 24, 1997. The same specimen was submitted.

On February 5, 2007, Mitchell filed another Preliminary Amendment making a minor correction to the description of goods and services.

On February 26, 2007, the USPTO sent out a non-final office action refusing registration on the grounds of likelihood of confusion over three registered trademarks, two of which are held by MySpace. The Examining Attorney also cited two earlier filed pending applications by MySpace. The Examiner Attorney also informed Mitchell that his proposed changes to the Drawing of his mark were unacceptable “because it would materially alter the essence or character of the mark. 37 C.F.R. §2.72; TMEP §§807.14 et seq.”

On March 1, 2007, Mitchell (now VP) responded to the USPTO’s office action by amending the description of goods and services considerably, focusing on magnetically encoded credit cards, debit cards, and prepaid cards, and sunglasses. According to the response, Mitchell originally amended the drawing “because we were under the impression that we had to submit another name with our original filing due to USPTO pseudo law” (referencing the USPTO’s notice of pseudo marks – in this case, the PTO assigned the case the pseudo mark “MY SPACE” (with a space between the MY and SPACE). However, the response goes on to actually amend the Drawing once again to change it from MYSPACE to MY SPACE. {Again, not making this up –ed.} Finally, the response included several other specimens of use, like the following:



And just when you thought it couldn’t get any better, on March 3, 2007, Mitchell filed two additional responses to the USPTO’s non-final office action. In the first response, Mitchell filed the statement “We wish to again submit under 1(b) instead of 1(a) so that we have a chance to change our my spacecard logos in an effort to not be confused with any other myspace registered names. We're are trying to make sure that our products currently being used in commerce are not being confused with other my space named trademarks in existence.” Then, approximately twenty minutes later, a second response was filed amending his application from a Section 1(a) use-in-commerce application to a Section 1(b) intent-to-use application. In addition, Mitchell submitted a specimen that was merely the words MYSPACE (with the A upside down).
Does anybody else find this as amusing as I do?

On April 11, 2007, the PTO sent out an Examiner’s Amendment following a phone call with Mitchell. The Amendment cleaned up the mess that had been created by Mitchell’s recent responses and put the application in the condition that went on to be published for opposition (on May 23, 2007) and ultimately registered (on August 28, 2007). And by paring down the description of goods and services to just “ magnetically encoded credit cards; magnetically encoded debit cards; sunglasses,” the Examining Attorney withdrew the Section 2(d) likelihood of confusion rejections and the references to the earlier-filed pending applications (a little surprising given the fame of MYSPACE by that time, but that's why we have opposition periods).

MySpace apparently discovered the registration soonafter because the company filed its petition for cancellation less than a month later.

MySpace claims that it has been unable to find any such use by Mitchell of his mark and maintains that Mitchell’s statements that he was using the mark in commerce as early as October 24, 1997 and that the specimens he attached were actually used in commerce are false and constitute fraud on the USPTO. And given the obvious materiality of such allegedly false statements to the USPTO’s determination to register his mark, MySpace maintains the mark should be cancelled.

While not necessarily relevant to the instant cancellation, MySpace notes that Mitchell also sought to register a mark similar to FACEBOOK (but with the C backwards) (the application went abandoned November 29, 2007).

While the allegations of fraud seem most appropriate given the usual circumstances, MySpace also throws in likelihood of confusion and dilution as grounds for cancellation.

One would expect the TTAB, with the aggressive stance that it has been taken lately with respect to fraud, to scrutinize closely Mitchell’s dates of first use and specimens of use. Let’s see evidence that the mark was actually being used on each of the items mentioned in the registration as early as October 24, 1997. After all, Mitchell’s registration is only prima facie evidence of his ownership of the mark and right to use the mark. MySpace will certainly be able to make out a case that Mitchell was not using the marks on the goods set forth in the registration on the dates he claims. In such case, if Mitchell cannot set forth evidence proving his use on the dates asserted, his registration will almost certainly be cancelled.

And why am I not surprised that Mitchell's own domain forwards to http://www.my-spaceship.com/?



Thursday, March 20, 2008

IRS Field Memo provides guidance for drafting trademark sale agreements

Alvarez and Marsal recently sent out a newsletter (link here) that discussed a December 28, 2007 Internal Revenue Service Field Attorney Advice memorandum addressing a taxpayer’s ultimately unsuccessful attempt to recharacterize a license agreement as a sales agreement for tax purposes. See FAA 20075201F (Taxation of License Agreement).

While the intellectual property at issue in the heavily-redacted field memorandum is a patent, the insight provided by the memo is just as applicable to trademarks. And while the memo cannot be used or cited as precedent, it does provide some important lessons for lawyers drafting trademark sales agreements in how such agreements will be interpreted by the IRS for tax purposes.

The most important lessons from this memo (as applied to the trademark realm) are:
  • The plain language of the agreement matters. If it reads like a license agreement and states the parties’ intent that the agreement be a license agreement, then the IRS will not likely accept an argument (or even extrinsic evidence) that it was actually meant to be a sales agreement.

  • Make sure that the transferor has complete rights to the trademarks being transferred. A seller cannot sell what it does not own. If the seller does not have full ownership rights to the trademarks being “sold” (e.g., the trademarks are subject to preexisting license agreements), then how can an agreement which purports to transfer such rights be deemed a sales agreement.

  • A seller must transfer “all substantial rights” in its trademarks for the transfer to be deemed a sale. If any “substantial” rights are retained by the seller, then the agreement looks more like a license rather than a sales agreement, and will be treated as such.

For companies that have entered into trademark or other intellectual property sales agreements that are still within the statute of limitations for federal tax assessments, such agreements may need to be reviewed in light of the above insights provided by the memo to ensure that a company’s characterization of an agreement as a sales agreement can stand up to the FIN 48 “more likely than not” standard that most companies must now contend with regarding their uncertain tax positions.

Wednesday, March 19, 2008

The TTABlog finally gets the ®ecognition it deserves.

Congratulations to John Welch of The TTABlog®, who, after an unsuccessful appeal to the institutution to which he has devoted his blogging life, finally got his ® for THE TTABLOG based on acquired distinctiveness under Section 2(f).

I've updated the name on my list of blog links -- along with a long overdue ® for Ron Coleman's Likelihood of Confusion® (sorry for the oversight Ron).

Can registrations for Seattle Trademark Lawyer and Vegas Trademark Attorney be far behind? Prof. Marc Randazza's post on The Legal Satyricon (link here) gives me hope.

“Vegas” Magazine Mega-Publisher Sues Connecticut Niche Publisher Over a “Niche” mark

On March 14, 2008, Niche Media Holdings, LLC (“NMH”) filed a lawsuit against Niche Downtown, LLC and Joseph A. Gazzola (the “Defendants”) in the U.S. District Court for the District of Nevada. A copy of the complaint can be downloaded here.

March 2008 Cover of "Vegas" Magazine

NMH is the publisher of such well-known regional magazines as “Los Angeles Confidential,” “Ocean Drive,” and “Vegas” – those oversized glossy magazines with articles and advertising catering to a high-end luxury market.

In its complaint, NMH claims to own rights to several marks containing the word “niche.” NMH currently has federal trademark applications pending for each of the following marks containing the word “niche”:

All of the applications are directed to the same two basic classes of goods and services—a series of printed magazines (class 16) and providing a series of online magazines (class 41), both featuring the lifestyles of high net worth individuals covering the areas of movies, theater, fashion, night-life, entertainment, art, ecology, sports, leisure, restaurants, travel, transportation, business, politics and music. (Note: The application for NICHE MEDIA currently reflects only one class; however, the examining attorney is requiring a separation into the same two classes as the others. In addition, while NICHE MEDIA ONLINE currently reflects these two classes, only class 41 will likely remain because the examining attorney inadvertently led NMH, through its amended description, to expand the scope of the goods and services outside the scope of the original application.)

With the exception of NICHE MEDIA, which was filed on August 2, 2005 as a use-in-commerce application based on alleged first use dating back to October 2000, all of the above applications were filed under as intent-to-use applications:

  • NICHE MEDIA ONLINE (filed December 29, 2005 – still under non-final)
  • NICHE MEDIA WORLDWIDE (filed December 29, 2005 – will be published for opposition April 8, 2008)
  • NICHE ACCESS (filed July 7, 2005 – will be published for opposition April 8, 2008)
  • NICHE MEDIA'S PALM BEACH (filed December 23, 2005 – will be published for opposition April 8, 2008)

It is interesting to note that a specimen of use was not submitted with the original application for NICHE MEDIA. One wonders if this was merely an oversight on the part of NMH when it originally filed the application or if it was because NMH could not procure a specimen that showed use of the mark on the goods and services set forth in the application at the time of filing. Based on the description of the specimen set forth in the application, however, NMH appears to be relying upon something similar to the below masthead (from NMH’s website).





At issue in the complaint are actions taken by Defendant Gazzola, a Connecticut resident, who organized Niche Downtown, LLC on September 15, 2006, and began conducting business under the name “Niche Hartford Magazine.” On November 17, 2006, Defendant Gazzola registered the domain name http://www.nichehartford.com/, which at the time promoted the pending publication of the magazine “Niche Hartford,” which was formally launched in January 2007 with the publication of its premier issue. The Defendants have since published five additional issues of the quarterly magazine.





NMH supposedly sent a cease and desist letter to the Defendants (although the date is not specified in the complaint). Defendants apparently did not comply with NMH’s demands, and have expanded the number of “marks” using the term “Niche” on its website including “NicheMagazine,” “Niche Advertising,” “Niche Editions,” “Niche Gallery,” and “NicheFamily.”

NMH claims that the Defendants, by using the term “niche” on its magazine, in its domain name, and on its website, are attempting to trade on the goodwill and reputation of NMH and attempting to create a false association between NMH and the Defendants. NMH claims unfair competition (arising from the Defendants’ infringement of NMH’s unregistered marks) under Section 43(a) of the Lanham Act (15 USC §1125(a)), cybersquatting under Section 43(d) of the Lanham Act (15 USC §1125(d)), common law trademark infringement, and intentional interference with a prospective economic advantage.

NMH seeks injunctive relief to stop the Defendants from using any more marks or registering any domain names containing the term “niche” and from publishing its “Niche Hartford” magazine. NMH also seeks a court order transferring the http://www.nichehartford.com/ domain name to the NMH. Finally, NMH seeks the usual damages (compensatory, consequential, statutory, punitive) as well as interest, costs, and attorneys’ fees.


Vegas™Esq. Comments:
At first glance, NMH’s trademark infringement case would appear weak. After all, can NMH really claim to own the exclusive right to the word “niche” in the magazine world? However, when you start to apply the Sleekcraft factors for determining likelihood of confusion between the marks at issue, NMH’s case for trademark infringement does not appear so weak after all.

Regarding strength of the mark, NMH’s complaint asserts that it has spent substantial sums of money to advertise and promote its NICHE MEDIA name in print, broadcast media, and online. NMH can likely back this up, in which case this factor likely favors NMH.

As for similarity of the marks, while NMH uses the mark NICHE MEDIA and the Defendants use NICHE HARTFORD, the dominant part of each mark is the word NICHE (MEDIA is descriptive, as evidence by the disclaimer that NMH will certainly have to file to obtain its federal registration and HARTFORD is geographically descriptive of the subject matter of the Defendants’ magazine). So this factor favors NMH as well. Even if you only compare NMH’s NICHE MEDIA word marks with Defendant’s stylized NICHE HARTFORD logo, there is still enough similarity (black color, similar lettering) that the factor slightly favors NMH.

The relatedness of the goods is an interesting question. NMH is not really using its NICHE MEDIA mark on magazines per se, but rather the mark is used to promote a “series” of printed and online magazines featuring the lifestyles of high net worth individuals. Defendants, on the other hand, are using the mark as the name of an actual magazine that features articles and advertising of interest to local residents of the Hartford, Connecticut area. While I personally think that the content of the magazine is an important distinguishing factor, especially given NMH’s admitted focus on high net worth customers, a court is more likely to focus on the general fact that both marks are used in connection with magazines and not so much the content of those magazines (although NMH can probably also argue that there is some similarity in content as well). As such, the goods are likely to be deemed related, in which case this factor favors NMH.

Both parties use at least one form of the same type of marketing channels (online), so this favors NMH. It’s not clear from the complaint the degree to which the Defendants distribute hard copies of its magazines to the same stores where NMH’s magazines are sold, but there is likely to be some overlap.

Regarding customer degree of care, given the type of goods involved (low cost magazines), purchasers are not likely to exercise a high degree of care when purchasing, so this factor favors NMH.

Defendants’ intent in selecting the name “niche” is not clear, but I would be willing to give the Defendants the benefit of the doubt that the name was chosen not to capitalize on NMH’s goodwill, but rather for the more common meaning of “niche” (signifying something designed for a specialized market). The Defendants are located in the Hartford, Connecticut area and have carved out their own little “niche” by creating a magazine catering to the local community. Barring the discovery by NMH of any strong evidence of the Defendants’ intent to trade off NMH’s reputation and goodwill, this factor favors the Defendants.

Finally, as for likelihood of expansion, the complaint notes that NMH already distributes three of its publications to the Hartford, Connecticut area (“Boston Commons,” “Gotham,” and “Hamptons”), so this factor favors NMH.

Therefore, even though I doubt that the Defendants’ current use of the name NICHE HARTFORD for its local magazine seriously threatens NMH’s mark and reputation associated with its series of printed and online luxury lifestyle magazines, a balancing of the factors does tend to favor a finding of a likelihood of confusion.

However, while NMH may be able to stop the Defendants from using the “NICHE” mark in connection with their Hartford magazine, it might not be able to stop the Defendants from some of its other expanded uses of the word NICHE (for goods and services beyond its magazine).

Monday, March 17, 2008

Royal trademark battle over who will be the reigning WINE KING of New Jersey

The “Real” Wine King?
(Photo Credit: Will Bullas)
(used with permission)

Last Monday, a New Jersey district court judge denied a motion for preliminary injunction brought by the owner of three Northern New Jersey liquor stores named “Wine King” against a Southern New Jersey liquor store that is also using the name “Wine King.” See MNI Management, Inc. v. Wine King, LLC, et al., Case No. 07-6111 (D. N.J. March 10, 2008). A brief background article can be read here. A copy of the decision is available upon request.

The case is an illustration of what can happen when a business does not seek federal registration of its business’ trademarks and service marks, and instead must rely on the rules protecting unregistered trademarks. In addition, while most people recognize that “likelihood of confusion” is an important part of demonstrating infringement, this case also illustrates that such confusion actually comes in two forms – direct confusion and reverse confusion.

The plaintiff, MNI Management, Inc. (“MNI”), operates three liquor stores in Northern New Jersey under the trade name WINE KING (two in Bergen County and one in Morris County) with a combined sales volume over $10 million per year. MNI’s predecessor-in-interest began using the trade name WINE KING in 1998 to identify its retail liquor store and began using the mark as a service mark in 2001 (the “First Mark”) with the opening of its second and third locations. MNI affixed the First Mark to its store signage in 2001 and promoted the mark in its print ads and flier inserts (the web page http://www.thewineking.com/ was not functional as of the date of the decision). MNI also offers a frequent buyer program in which over 13,000 customers from New Jersey and other nearby states have enrolled. MNI filed a Section 1(a) use-in-commerce application for the mark WINE KING on November 19, 2007, for, inter alia, retail store services in the field of alcoholic and non-alcoholic beverages and wine accessories (with a first use in commerce date of 2001) . The application is scheduled to be published for opposition on April 8, 2008.

The defendant, Wine King, LLC, is the company established by defendant Venkata G.R. Indukuri (“Indukuri” and together with Wine King, LLC, the “defendants”) to own and operate a retail wine and liquor store. In March 2006, Indukuri asked his accountant to investigate forming an LLC under the name Wine King, LLC. When the accountant informed Indukuri that no other corporations or LLCs were named “Wine King” and that “Wine King” was not a registered trademark, Indukuri instructed his accountant to form Wine King, LLC. The defendants signed a lease for a retail store location in Southern New Jersey (Monmouth County) in June 2007. In October 2007, defendants filed an application to register the WINE KING mark (the “Second Mark”) with the state of New Jersey – defendants maintain that they did not know about MNI’s retail stores at that time. While the state application was initially rejected because proper specimens and a proper description were not included, defendants refiled and were issued the Second Mark on November 26, 2007. Defendants opened their retail store on November 16, 2007. Defendants are advertising their retail stores through a highway billboard, on radio and TV ads in the Monmouth County area, in newspapers, and online (http://www.wine-king.com/).


MNI apparently discovered defendants' use of the WINE KING mark around November 16, 2007. A cease and desist letter was sent on November 21, 2007, but the defendants refused to comply with MNI’s demands. On December 26, 2007, MNI filed its trademark infringement complaint alleging trademark infringement and unfair competition under the Lanham Act and New Jersey common law along with a motion for a preliminary injunction to enjoin the defendants from infringing the mark WINE KING.

In the court’s memorandum opinion, the district court concluded that MNI had not proven all of the elements necessary to obtain a preliminary injunction. In particular, the court found that the MNI had not shown a reasonable probability of success on the merits with respect to its claims

Preliminary Injunction
For a moving party to be granted the “extraordinary remedy” of injunctive relief, the court must consider whether (1) the movant has shown a reasonable probability of success on the merits, (2) the movant will be irreparably injured by denial of the relief, (3) granting the preliminary relief will result in even greater harm to the nonmoving party, and (4) granting the preliminary relief is in the public interest. ACLU of N.J. v. Black Horse Pike Reg'l Bd. of Educ., 84 F.3d 1471, 1477 n.2 (3d Cir. 1996); see also AT&T Co. v. Winback & Conserve Program, Inc., 42 F.3d 1421, 1427 (3d Cir. 1994). The court grants the preliminary injunction only if the moving party has produced sufficient evidence to convince the court that all four factors favor the preliminary injunction.

Reasonable Probability of Success
In demonstrating the first factor -- reasonable probability of success on the merits – the party seeking the injunction has the burden to make a prima facie case showing a reasonable probability that it will prevail on the merits. Oburn v. Shapp, 521 F.2d 142, 148 (3d Cir. 1975).

Because the service mark in this case was not registered on the federal register, relief is found under Section 43(a) of the Lanham Act. In order for a plaintiff to prevail on a trademark infringement claim for an unregistered mark under federal law (as well as New Jersey law), such plaintiff must show that (1) the mark is valid and legally protectable, (2) the plaintiff is the legal owner of the mark, and (3) the defendant's use of a similar mark is likely to create confusion concerning the origin of the plaintiff's goods or services. Freedom Card, Inc. v. J.P. Morgan Chase & Co., 432 F.3d 463, 470 (3d Cir. 2005);

Valid and Legally Protectable
The district court concluded that MNI’s mark was valid and legally protectable on the basis that it is inherently distinctive. The court found that the mark was suggestive in that it suggests rather than describes the characteristics of MNI’s services and it is not immediately apparent from the combination of “Wine” and “King” what services MNI provides. The court also found that even it were merely descriptive, the First Mark was protectable because it had acquired secondary meaning in MNI’s geographic area (through MNI’s marketing efforts) at the time and place that the defendants began using the Second Mark.

Ownership
Regarding the second factor for proving trademark infringement, a plaintiff must show ownership of the mark at issue. In order for a court to determine ownership of an unregistered trademark, the court considers (1) priority of use and (2) market penetration.

Normally, priority of use is determined by the first party to use a mark – the senior user is the first to use the mark anywhere in the United States while the junior user is the second user of a mark regardless of whether the junior user adopts and uses a mark in a geographically remote location. To the extent that two users of the same mark are competing in the same market, the trademark rights of the senior user will trump those of the junior user.

However, where the two users of the same mark are operating in geographically remote markets, priority is not legally relevant. Because trademark rights grow out of use (and not mere adoption), a senior user cannot stop the use of mark in a market into which the senior user has not somehow reached and where the mark may already represent the source of origin of some other party. A senior user of an unregistered trademark enters a new market subject to the trademark rights already acquired in good faith by another user. This is known as the “Tea Rose-Rectanus” doctrine. See ACCU Personnel, Inc. v. Accustaff, Inc., 846 F.Supp. 1191, 1205 (D. Del. 1994).

Therefore, for a senior user to claim trademark rights in a particular market, the senior user must show evidence of (1) market penetration in a particular market, (2) reputation in a particular market, or (3) a “zone of natural expansion” extending into a particular market. Laurel Capital Group, Inc. v. BT Fin. Corp., 45 F.Supp.2d 469, 482 (W.D. Pa. 1999). [Note: While the Third Circuit Court of Appeals has neither expressly embraced nor rejected the reputation theory and the zone of natural expansion theory to show market penetration, other district courts within the Third Circuit have endorsed both theories while others have noted that whether a senior user is entitled to protection is to be decided only under four factors of the market penetration theory.]

The market penetration of the senior user's trademark must be significant enough to pose a real likelihood of confusion among the consumers in that area, and is analyzed under four factors as of the time the junior user first adopted and began using the trademark: (1) volume of sales; (2) positive and negative growth trends in the area; (3) the number of actual customers in relation to the potential number of customers; and (4) the amount of advertising in the area. Natural Footwear Ltd. v. Hart, Schaffner & Marx, 760 F.2d 1383, 1398-99 (3d Cir. 1985).

As for reputation, the court analyzes whether a senior user's reputation has penetrated a particular market area prior to the junior user's first use of the mark.

Furthermore, to the extent the senior user has failed to establish market penetration in a particular market, the court can also look at whether the senior user is entitled to a “zone of natural expansion” through evidence of constant expansion and a small distance between the two users’ markets and conclude that the senior user is reasonably expected to expand in the junior user’s market. The mere hope of expansion is not sufficient to establish a zone of natural expansion. Instead, the court considers several factors as of the date the junior user adopted and began the mark:

Rather, when determining whether a junior user falls within the senior user's zone of natural expansion, the Court considers, as of the date the junior user adopted and used the mark, (1) the geographic distance from the senior user's actual location to the perimeter of the claimed zone, (2) the nature of the business and the size of the senior user's zones of market penetration and reputation, (3) the history of the senior user's expansion and assessment as to when the senior user could potentially reach the zone the senior user claims, and (4) whether it would take a “great leap forward” for the senior user to enter the zone; that is, whether expansion into the claimed zone is the next logical step. Laurel Capital Group, Inc., 45 F.Supp.2d at 493 (quotation and citations omitted); ACCU Personnel, Inc., 846 F.Supp. at 1209

2008 U.S. Dist. LEXIS 18091 at *26-27.

Finally, if a senior user cannot prove entitlement to trademark protection under one of the above three theories, a junior user is entitled to trademark protection in the junior user's market so long as the mark was adopted and used in good faith. And, at least in the Third Circuit, a user's prior knowledge of the senior user's trademark is not enough, by itself, to compel a finding of bad faith, and instead is only probative of the question whether the junior user acted in bad faith.

Likelihood of Confusion
If a senior user shows superior rights in the mark in the relevant geographic area, then the senior user must demonstrate that the junior user's use of the mark is likely to cause confusion as to the source and origin of the goods or services

The district court goes on to describe the two specific types of “likelihood of confusion” that a plaintiff can assert -- likelihood of “direct confusion” or likelihood of “reverse confusion.” Direct confusion is where the junior user of a mark attempts to free-ride on the reputation and goodwill of the senior user by adopting a confusingly similar or identical mark. Reverse confusion, however, involves the situation where junior user begins using the mark of a senior user in such a way that the junior user’s use of the mark overwhelms the senior user’s use such that the public will assume that the senior user’s goods and services are those of the junior user. In effect, reverse confusion causes the senior user to lose the product identity and goodwill that the senior user has built up with respect to its mark.

The same “likelihood of confusion” factors are analyzed for each type of confusion. Because the district court is in the Third Circuit, the factors are the ten “Lapp” factors:

(1) the degree of similarity between the senior user's mark and the alleged infringing mark, (2) the conceptual and commercial strength of the senior user's mark, (3) the price of the goods and other factors indicative of the care and attention expected of consumers when making a purchase, (4) the length of time the junior user has used the mark without evidence of actual confusion arising, (5) the intent of the junior user in adopting the mark to “ride on the goodwill of the senior user's mark”, (6) the evidence of actual confusion, (7) whether the goods, competing or not competing, are marketed through the same channels of trade and advertised through the same media, (8) the extent to which the targets of the parties' sales efforts are the same, (9) the relationship of the goods in the minds of consumers, whether because of the near-identity of the products, the similarity of function, or other factors, and (10) other facts suggesting that the consuming public might expect the senior user to (i) manufacture both products, (ii) manufacture a product in the junior user's market, or (iii) expand into the junior user's market.

Id. at *29; see also Interpace Corp. v. Lapp, Inc., 721 F.2d 460, 463 (3d Cir. 1983); A & H Sportswear, Inc. v. Victoria's Secret Stores, Inc., 237 F.3d 198, 215 (3d Cir. 2000).

However, with respect to “reverse confusion,” some of the factors are analyzed slightly differently. For example, analysis of the strength of the two marks focuses on the commercial strength of the junior user's mark and the conceptual strength of the senior user's mark. In addition, the intent of the junior user in adopting the mark focuses on intent to exploit confusion in order to push the senior user out of the market. Furthermore, evidence of actual confusion may involve evidence that the public thought that the junior user was the source of the senior user's product or that the public would expect the larger junior user to be the manufacturer of both user’s products.

Likelihood of Direct Confusion
Because neither party in this case had registered its mark federally or with New Jersey by the time the defendants began using the Second Mark (i.e., the date the defendants opened their store for business), the initial question of ownership first had to be determined by analyzing each user’s territorial rights under the “Tea Rose-Rectanus” doctrine.

While MNI is the senior user (having first used its mark in 2001) in this case, such prior use does not resolve ownership because the parties used their marks in different geographic areas within New Jersey.

The court found that MNI could not show that it had penetrated defendant’s geographic market or that its reputation extended into defendant’s geographic market. With MNI’s stores located solely in Northern New Jersey, MNI could not show any actual retail sales in defendants' market. Furthermore, MNI had no concrete plans to expand into defendant’s geographic market. With most of MNI’s customers in Northern New Jersey, MNI could not show a large number of actual and potential customers in the defendants’ geographic market. MNI’s did not show that it had engaged in any advertising in defendants' market and conceded that most of its advertising was on its own stores. Moreover, the mere fact that some customers residing in defendants' market happen to have patronized MNI’s stores was insufficient to prove that MNI’s reputation zone encompasses the towns or counties in which such customers reside.

MNI also failed to show that it is entitled to a “zone of natural expansion” into defendants' market. The two markets are approx. 70 miles apart and MNI’s market penetration and reputation focused on Northern New Jersey and MNI’s limited expansion efforts have only been in the Northern New Jersey area. The mere hope of expansion is not enough to establish a zone of natural expansion, and indeed MNI had no concrete plans to expand into defendants' market.

Finally, the court found that MNI had failed to provide sufficient evidence showing that the defendants lacked good faith when they adopted and began using the Second Mark.

As such, the court concluded that MNI had not established the necessary market penetration of the First Mark in defendants' geographic area to allow MNI to claim to be the legal owner of such unregistered mark in the defendants' market. Because MNI could not establish legal ownership of such mark in the defendants' market, it could not meet the second element necessary for a plaintiff to prevail on a trademark infringement claim for an unregistered mark.

Likelihood of Reverse Confusion
The court then went on to find that MNI had not established a likelihood of reverse confusion in its market either.

As previously discussed, the First Mark was found to be valid and protectable. Furthermore, with respect to market penetration, the defendants did not dispute that MNI had penetrated its own geographic market, and therefore was the legal owner of the mark in MNI’s market. Therefore, having determined validity and ownership, the court went on to apply the “Lapp” factors to determine likelihood of reverse confusion.

The degree of similarity favored MNI because both parties are using the identical mark WINE KING, which have the same overall commercial impression, and thus reverse confusion is likely if defendants are permitted to use the Second Mark in MNI’s geographic market. The degree of care exercised by consumers favored MNI because consumers typically do not exercise a high degree of care when purchasing a relatively low cost item such as a bottle of alcohol. Regarding similar trade channels and similar customers, the court found that there were some similarities between the type of marketing campaigns run by each party (signage, print ads, online websites) which are directed to the same type of customers, namely purchasers of alcohol and alcohol-related products, in each party’s market (which may then frequent the other party’s stores while traveling in New Jersey). As such, the court found this factor to favor a finding of reverse confusion. Regarding the relationship of the goods in the minds of consumers, the court found that this factor also favored a finding of reverse confusion because of the similarity of the services offered by each party.

Regarding actual confusion, however, while MNI showed evidence of three instances of actual confusion on the part of MNI’s suppliers, MNI did not offer any evidence of actual confusion on the part of MNI’s customers (e.g., customers mistakenly assuming that defendants' store is connected to MNI’s stores) or defendants' customers (e.g., customers mistakenly assuming MNI’s stores are connected to defendants' store). While recognizing that the defendants just started using the mark in November 2007 and that evidence of actual confusion may still arise, the court held that this factor presently favored the defendants.

In addition, with respect to defendants’ intent to confuse, the issue becomes defendants’ intent to cause reverse confusion (i.e. to push the senior user out of the market); however, the court found that MNI had not provided any evidence of any such intent on the part of the defendants when the defendants adopted and began using the Second Mark. The court noted that a search for a federal or state registration of the mark at the time defendants adopted and began using the Second Mark would not have even revealed anything because MNI’s trademark was unregistered at the time. As such, while there was evidence that the defendants may have been careless in their search regarding the name WINE KING (i.e., defendants may not have looked hard enough to see if anyone else was using the name), such evidence by itself is not enough to show that the defendants had the requisite intent to push MNI out of its market.

What appears to have been the most important factor in the court’s decision, however, is with respect to the strength of the two marks, which the court found does not indicate that reverse confusion is likely. In a reverse confusion context, the conceptual strength of the First Mark is compared to the commercial strength of the Second Mark; and in order to determine the latter, the court compares the commercial strength of the Second Mark with that of the First Mark and determines whether the defendants have employed a marketing or advertising campaign in MNI’s market that has saturated public awareness of the defendants' mark. See Freedom Card, Inc. v. J.P. Morgan Chase & Co., 432 F.3d 463, 473 (3d Cir. 2005). In order for this factor to favor MNI, MNI must show that while the First Mark is conceptually strong, the Second Mark, though the defendants’ aggressive marketing efforts, has become commercially stronger in MNI’s market.

The court agreed that the First Mark is conceptually strong (based on the aforementioned “suggestive” nature). However, the court also found that the First Mark is commercially strong in MNI’s Northern New Jersey geographic market based on MNI’s large customer base, sales volume, and advertising efforts. The defendants do not operate a store in either one of the counties in which MNI currently operates. In addition, the court found that defendants’ newspaper, television, and radio advertising primarily occurred in the Southern New Jersey area. The court rejected the minimal amount of advertising that may have occurred either in MNI’s market or online – finding that such efforts do not establish that the defendants' use of the Second Mark has saturated MNI’s market with awareness of that mark. Therefore, while the First Mark is conceptually strong, the commercial strength of the First Mark compared to the commercial strength of the Second Mark in MNI’s market does not suggest that a likelihood of reverse confusion.

On balance, the court found that the MNI had not established that the defendants’ use of the Second Mark is likely to create reverse confusion in MNI’s market concerning the origin of MNI’s services. Because MNI had not established a likelihood of confusion, it could not meet the third element necessary for a plaintiff to prevail on a trademark infringement claim for an unregistered mark.

Irreparable Injury
Regarding the second factor for deciding to grant a preliminary injunction (irreparable harm), because MNI could not demonstrate a likelihood of direct or reverse confusion, the court would not presume that MNI would be irreparably harmed by defendants’ continued use of the Second Mark. Furthermore, in response to MNI’s argument that the injunction was necessary to prevent loss of control of reputation, loss of trade, and loss of goodwill, the court noted that MNI, as discussed above, has not shown that either MNI or the defendants have penetrated the others’ market such that the defendants' use of the Second Mark is likely to affect MNI’s reputation, goodwill, or trade.

Harm to Defendants
Regarding the third factor for deciding to grant a preliminary injunction (greater harm to nonmoving party), the court found that the defendants would be irreparably harmed if injunctive relief were granted because they would likely have to change their name in order to continue their services and would lose the goodwill behind that name that they have been building (even though only for a short amount of time). The court added that an injunction would be a particularly extraordinary remedy in this case given that MNI has not presented a compelling case of infringement. On balance, the court concluded that granting the injunction would harm defendants more than denying the injunction would harm MNI.

The Public Interest
Regarding the final factor for deciding to grant a preliminary injunction (the public interest), the court reiterated that the basic public interest implicated in nearly all Lanham Act infringement cases is “the interest in prevention of confusion, particularly as it affects the public interest in truth and accuracy.” However, since the court concluded that the defendants' continued use of the Second Mark does not create a likelihood of confusion with respect to the First Mark, the public interest would not be served by the granting of a preliminary injunction, and indeed, the public interest in free competition would be better served by allowing the defendants to continue operating. Thus, the public interest factor weighs in favor of denying MNI’s claim for injunctive relief.

Conclusion
This case serves as a good illustration to those who may not appreciate the potential downside of not applying for federal registration of their trademarks and service marks. If MNI had sought and received a federal registration for its WINE KING mark back when it first began using it as a service mark in 2001, MNI would have been in a much stronger position to make its current case for trademark infringement (and more likely, the defendants would not have even chosen the name once their representative had uncovered that the name was already being used as a service mark for liquor stores).

Two of the primary benefits of federal registration is that the certificate of registration serves as prima facie evidence of the registrant’s ownership of the mark and registrant’s exclusive right to use the registered mark in commerce on or in connection with the goods or services specified in the certificate (see §7(b) of the Lanham Act, 15 U.S.C. §1057(b)) and provides constructive nationwide notice to the public of the registrant's claim of ownership of the mark (see §22 of the Lanham Act, 15 U.S.C. §1072).


MNI was unable to make its case for likelihood of direct confusion given the court’s conclusion that MNI was not even the owner of such mark in defendants' geographic area. MNI’s geographically limited use of the mark would not have been a factor had MNI obtained a federal registration. In addition, if MNI had registered the First Mark, then the defendants could not have maintained that they did not know about the mark when they began using the Second Mark. The defendants would be deemed to have been put on constructive notice of MNI’s mark and of MNI's prima facie exclusive right to use the registered mark in commerce on or in connection with the goods or services specified in the certificate.

While the court’s opinion is merely a decision on MNI’s motion for preliminary injunction, the court’s analysis of MNI’s case for likelihood of confusion does not bode well for MNI. Unless the parties work out some kind of agreement, it looks like there may be two reigning WINE KINGs in New Jersey.

One possibility that similarly situated parties often pursue is for MNI and the defendants to enter into a non-royalty license agreement whereby the defendants license the WINE KING mark from MNI. This way, MNI benefits from the use of its mark in another part of New Jersey (and can proclaim itself the sole WINE KING of the State) and the defendants can continue to use the mark without interruption and without additional cost (although subject to the terms set forth in the license agreement such as quality control).

Meanwhile, with MNI’s federal service mark application on its way to registration (assuming no party attempts to oppose it), MNI may soon be able to proclaim itself the WINE KING of the U.S. Once MNI has its federal registration, then MNI can at least prevent the defendants from expanding the use of the WINE KING beyond the defendants’ current little fiefdom in Southern New Jersey.



Thursday, March 13, 2008

Prof. Randazza explains Ornamental Use vs. Trademark Use as only he can

I’ve written previously about trademark applicants who seemingly confuse ornamental use with trademark use. (See prior posts on GIRLICIOUS, the "Smiley Cookie," and ALASKA GROWN.)

But I particularly enjoyed reading Prof. Marc Randazza’s own take on this common misunderstanding by trademark applicants in his blog post yesterday (link here) on The Legal Satyricon with respect to the pending intent-to-use trademark application for the mark COCKAHOLIC as well as the pending opposition filed by a woman who claims prior user rights for having already used the same mark on T-shirts. See Benee Hudson v. Sports-Aholic, Inc., Opposition No. 91181581 (T.T.A.B. Filed December 22, 2007).

I also share Marc’s surprise that the PTO, being so uptight these days with respect to marks comprising "immoral or scandalous matter," even allowed the mark to be published in the first place (the PTO did not even issue a single office action).

Also worth reading are Marc’s opinions about "immoral or scandalous" rejections under Section 2(a). Check out his postings on two decisions last year by the Trademark Trial and Appeal Board -- first to uphold a Section 2(a) rejection of the mark YOU CUM LIKE A GIRL and then three weeks later overturning a similar Section 2(a) rejection and approving for registration the mark CUMBRELLA.

Tuesday, March 11, 2008

A Trademark Battle of the Brains


Exodus Film Fund I, LLC (“Exodus”), under the name Exodus Film Group, is the producer of an animated motion picture titled “Igor” scheduled to be released in October 2008. One of the characters created by Exodus in connection with the movie is “Brian the Brain” (pictured below), described as “a scientific lab experiment consisting of a brain floating in a jar filled with liquid that sits on top of a base, who is frustrated because the label of the jar reads ‘Brian’ instead of ‘Brain,’ hence the name ‘Brian the Brain.’”


Exodus claims to have been using the BRIAN THE BRAIN character continuously since July 15, 2005, in connection with its animated motion picture and related collateral products and merchandise. On September 28, 2007, Exodus filed a Section 1(b) intent-to-use application to register the design mark for various goods related to its pending animated movie. That application is still pending.

On March 7, 2008, Exodus filed an opposition against Mega Brands International (“MBI”) opposing the registration of two of MBI’s pending trademark applications for the word mark BRIAN THE BRAIN (one for interactive electronic educational game machines and one for apparatus containing software featuring educational learning device). See Exodus Film Fund I, LLC v. Mega Brands International, Oppositions No. 91182864 and 91182865 (T.T.A.B.). Copies of the Notice of Opposition in each case can be downloaded here and here. MBI filed its two trademark applications as intent-to-use applications on March 9, 2007 -- one was published for opposition on September 11, 2007, while the other was published for opposition on March 4, 2008.


Exodus’ opposition notes that while MBI filed its trademark applications as intent-to-use and the applications are only for the word mark BRIAN THE BRAIN, MBI is actually currently using its mark in commerce by selling its BRIAN THE BRAIN educational toy (pictured above) through its own website as well as on Amazon.com and The Sharper Image. Exodus argues that MBI’s BRIAN THE BRAIN character of a brain in a jar sitting on a base is confusingly similar to Exodus’ own BRIAN THE BRAIN character.

Exodus argues that through its promotion of its animated film at conventions, to financiers, to distributors, and general publicity about the film, Exodus' BRIAN THE BRAIN character has come to be associated exclusively with Exodus. As such, Exodus argues that MBI’s applications should be refused registration based on Exodus’ priority of use (an alleged earlier use date of July 15, 2005) as well as likelihood of confusion based on the similarity in appearance and sound of the marks and similarity of goods sold under such marks (i.e., the electronic goods and toys on which MBI uses its mark are commercially related to the type of goods that Exodus asserts is likely to be potentially offered to consumers in connection with the release of its animated movie).


Friday, March 7, 2008

Las Vegas Creator of HAREM BODY CHAINS Files Trademark Infringement Lawsuit Against eBay Competitor


On March 4, 2008, Trinity's Jewelry LLC filed a trademark infringement lawsuit in the U.S. District Court for the District of Nevada against Inquisition Tattoo, Inc. and its husband and wife owners, Tatiana Metaxa (aka Tatiana Eivin or Tatiana Metaxa-Rosenfeld) and Michael Metaxa (collectively, the "defendants"). See Trinity's Jewelry LLC v. Inquisition Tatto, Inc. et al, Case No. 08-cv-00273 (D. Nev. March 4, 2008). A copy of the complaint (excluding exhibits due to the large number of exhibits and my limited blogging budget) can be downloaded here.

In the summer of 2003, Lori Jeanne Foell started making and selling her own style of body chains under the business name Trinity’s Jewelry. She sells one line of her body chains under the marks HAREM and HAREM BODY CHAINS through her website http://www.trinitysjewelry.com/ and http://www.harembodychains.com/. On March 15, 2007, Foell filed a federal trademark application for the mark HAREM BODY CHAINS ("body chains" disclaimed) for jewelry chains (claiming first use in commerce on September 1, 2003). The mark was subsequently registered on November 13, 2007.

On January 25, 2008, Foell organized Trinity's Jewelry LLC ("TJ"), and assigned all of her right, title and interest in and to the Trinity’s Jewelry business to TJ. On January 30, 2008, TJ filed a second federal trademark application for the mark HAREM for jewelry (claiming the same first use in commerce date of September 1, 2003). That application is currently pending. On February 14, 2008, Foell executed a Nunc Pro Tunc assignment of the HAREM BODY CHAINS trademark registration to TJ, which was recorded by the USPTO on February 28, 2008.

Defendants, under the eBay username "inquisition-tattoo," operate the online eBay store "Sexy Naughty Crotchless." According to the complaint, the defendants are using TJ’s HAREM mark to sell its own body chains through the defendants’ eBay store, website, and MySpace page, including using the HAREM mark in the title of its body chain eBay listings and displaying the HAREM mark on several other pages in combination with other various words serving as search engine "keywords."

Without the benefit of actually reviewing the multitude of exhibits attached to the complaint, one can glean from a quick search of defendants’ eBay store and some pending auctions for body chains that they do use the word "harem" in numerous places in connection with body chains:

"exotic dancer harem chain"
"harem neck to waist chains"
"Full Body HAREM Belly Chain Figaro 925 Silver sep SEXY"
"That makes this harem chain so sensual"
"This beautiful harem belly chain is totally adjustable, one size fits all."
"Looking for ultimate HAREM belly chain which will include ALL IN ONE?"

On December 22, 2007, TJ sent a cease and desist letter to defendants. Defendants promptly responded by claiming that they were not infringing TJ’s marks because they use the word Harem in different combinations of words that do not overlap with TJ’s registered mark HAREM BODY CHAINS. Defendants’ counsel wrote to TJ on January 4, 2008, attempting to argue that the defendants are justified in using the name HAREM as they do based on an alleged prior third party use of the term to identify body chains by someone identified as "Strangeblades," which also has a web page devoted to selling various "harem chains" (along with the claim "Harem Body Chains™ is a trademark name for Strangeblades & More exclusive designs first published by December 2002.") TJ maintains that Strangeblades assertion of superior rights is without basis.

TJ’s first cause of action alleges willful infringement of TJ’s federally registered mark in violation of §32 of the Lanham Act (15 U.S.C. §1114) and willful use of TJ’s marks as a false designation or origin and false and misleading representation of fact in violation of §43(a) of the Lanham Act (15 U.S.C. §1125(a)(1)(A)). The complaint alleges that defendants’ are using TJ’s HAREM mark on similar goods (body chains) sold to similar customers ("women seeking accessories that will make them more attractive to male partners") through similar marketing channels (online) with the intent of deceiving and misleading consumers and wrongfully trading on TJ’s goodwill and reputation.

TJ argues that the defendants’ use of TJ’s marks allows the defendants to take advantage of and benefit from TJ’s name and reputation in order to create confusion and divert sales from TJ by offering similar-looking lesser-quality body chains at much cheaper prices. The complaint cites several examples of similar jewelry sold by the defendants at a fraction of TJ’s price (e.g., a body chain that would sell for $179 by TJ sells for $49 by the defendants).

TJ seeks injunctive relief to stop the defendants from using the mark "harem" in connection with jewelry as well as actual damages, treble damages, costs and attorney’s fee.

TJ’s second cause of action alleges false advertising by the defendants in violation of §43(a)(1)(B) of the Lanham Act (15 U.S.C. §1125(a)(1)(B) (for misleading representation of fact in the defendants’ promotion of its goods misrepresenting the nature, characteristics, and qualities of their goods).

TJ argues that the defendants regularly advertise their body chain jewelry as "solid gold" or "solid silver" when in fact such items are actually gold-plated or silver-plated. The defendants allegedly use such descriptions as "SOLID 18K GOLD Gep Full Body Bell Chain Chains HOT" and "Solid 925 SILVER sep Full Body Belly Chain chains Eros." TJ argues that such descriptions are false and misleading because the goods are not solid gold or silver, but rather gold or silver electroplated. The defendants use the little-known abbreviations "gep" (for gold electroplating) and "sep" (for silver electroplating) in the titles of their product offerings. However, TJ argues that the abbreviations are typically presented in lower case lettering (along with the description of the product) in stark contrast to the ALL UPPERCASE description of SOLID 18K GOLD or Solid 925 SILVER, which makes the gep/sep abbreviations appear to be associated with the product description and not the gold/silver description. In addition, TJ argues that the defendants mislead consumers by directly contradicting the gep/sep abbreviations by using the qualifiers "SOLID" "18K GOLD" and "925 SILVER."

TJ maintains that such misleading advertising harms TJ’s sales and damages TJ’s reputation by making TJ’s truthfully advertised goods appear overpriced compared to the defendant’s cheap, but deceptively advertised goods. TJ seeks injunctive relief to stop the defendants from such false and misleading advertising as well as actual damages, treble damages, costs and attorney’s fee.