Monday, March 30, 2009

“Heavy Hitter” Socks Trademark Infringer with Attorneys Fees Award

Michael Atkins’ Seattle Trademark Lawyer blog posted today (link here) about a trademark infringement victory for Las Vegas’ favorite personal injury lawyer, Glen Lerner.

The Ninth Circuit Court of Appeals affirmed a Nevada District Court decision awarding Lerner $124,375 in attorney’s fees for the willful infringement of Lerner’s “ONE CALL. THAT’S ALL” slogan as well as infringement of Lerner’s copyrights. See Invision Production & Media Services, Inc. v. Glen J. Lerner Legal Services, No. 07-15778 (9th Cir. March 24, 2009) (unpublished).

While the Ninth Circuit previously affirmed the fees under copyright law, the Ninth Circuit remanded the case back to the district court for additional explanation by the court of the fees awarded under trademark law as well as a breakdown of what fees were for copyright infringement and what were for trademark infringement. The district court, on remand, was much more specific about its conclusion that the case was “exceptional” for purposes of award attorneys fees under the Lanham Act (15 U.S.C. 1117(a)). The district court also allocated 60 percent of the fees to the trademark issues and 40 percent to the copyright issue.

Those attorneys fees should come in handy in Lerner’s other trademark battle over his other well-known slogan “HEAVY HITTER” (previously blogged here). One interesting parallel between Lerner’s battle with Invision over “ONE CALL. THAT’S ALL” and his battle with Richard Sackett and LawCo USA, PLLC over “HEAVY HITTER” is the “naked license” argument. Invision had tried to argue that Lerner’s use of the “ONE CALL-THAT’S ALL” mark pursuant to a license agreement with the prior owner of the mark (before it was assigned to Invision) inured to Invision’s benefit – an argument that Invision lost because Invision could not show that it exerted any control over the quality of services provided under the mark – a prerequisite for a licensee’s use of a mark to inure to the licensor’s benefit. See Bancamerica Int’l USA Trust v. Tyfield Importers, Inc., 289 F.3d 589, 595 (9th Cir. 2002). In Lerner’s lawsuit against Sackett and LawCo, Lerner also argued that the license agreement he had with the owner of the “Heavy Hitters” mark was a naked license because the licensor failed to exercise any control over the quality of Lerner’s legal services.

Wednesday, March 25, 2009

SmileyWorld's Franklin Loufrani Suffers Setback in Quest for World Domination of the Smiley Face

I have previously written (here and here) about the efforts by Franklin Loufrani to claim exclusive ownership rights over the famed “smiley face” (although admittedly those posts were primarily focused more on the efforts of Eat ‘N Park Hospitality Group, Inc. to claim exclusive rights to a “smiley face” on a cookie).

Loufrani has been embroiled in several trademark oppositions with Wal-Mart at the Trademark Trial and Appeal Board (“TTAB”) over the “smiley face”. Wal-Mart had opposed two of Loufrani’s applications (here and here) to register his Smiley design mark (pictured above). See Wal-Mart Stores, Inc. v. Franklin Loufrani, Opposition Nos. 91150278 and 91154632. Wal-mart also sought to register its own Smiley logo (pictured below), which Loufrani later opposed. See Loufrani v. Wal-Mart Stores, Inc., Opposition No. 91152145 (Filed July 23, 2002).

As reported by The TTABlog®, the TTAB handed down a decision on March 20, 2009, which sustained Wal-Mart's opposition to Loufrani’s application and dismissed Loufrani's opposition to Wal-Mart's application (an outcome that certainly did not make Loufrani smile). See Wal-Mart Stores, Inc. v. Franklin Loufrani, Oppositions Nos. 91150278, 91154632, and 91152145 (March 20, 2009) (not precedential).

The Board stated that the “smiling face” design is a “ubiquitous, non-inherently distinctive design” and a “common feature of modern American culture.” Nonetheless, the Board found that Wal-Mart had proven that its Smiley had acquired distinctiveness prior to Loufrani's priority date of June 3, 1997 – based on its “truly impressive” amount of money on advertising (including television) before Loufrani’s filing date.

Wal-Mart's Smiley on Display

Moreover, the Board found that consumers viewing Loufrani’s “smiley” would view the mark as ornamental because the word “Smiley” is the commonly used name for the “ubiquitous, non-inherently distinctive” smiley face symbol, and thus concluded that his mark was not inherently distinctive. (Loufrani’s applications were filed based on intent-to-use, so he could not argue acquired distinctiveness as Wal-Mart did).

The Board also found a likelihood of confusion between Wal-Mart’s smiley face and Loufrani’s proposed mark for 17 out of the 23 classes of goods recited Loufrani’s application (not that it mattered since the Board’s finding of non-distinctiveness applied to the entire application).

It will be interesting to see if Loufrani continues his fight given the Board’s opinion about non-distinctiveness.

In addition, given that it took a “truly impressive” amount of money for Wal-Mart to stake a claim on a “ubiquitous, non-inherently distinctive design” that has become a “common feature of modern American culture,” one wonders if Eat ‘N Park can continue to claim exclusive rights to its “smiley” cookies when most (if not all) of Eat ‘N Park’s defendants are merely decorating a cookie with that captures this famed ornamental symbol.

Does anybody out there really think that Eat ‘N Park has the same “impressive” advertising dollars to back up its claim of acquired distinctiveness? As the TTAB stated “Considering that we have already determined that the smiling face is a common feature of modern American culture, [acquired distinctiveness] will not be something easily achieved."

It is surprisngly difficult to find a good JPEG of Wal-Mart's actual mark that is the subject of its trademark registration application. The above picture was from the PTO's database. But I thought I might share some of the more creative versions of the logo that I found on various websites while looking -- many of which (as you might guess) do not have a favorable opinion of Wal-Mart.

Tuesday, March 24, 2009

Salt Lake City Sues TSA Over SIMPLIFLY

On March 23, 2009, Salt Lake City Corporation (“SLC”), the municipal corporation which includes the Salt Lake City Department of Airports which operates and manages the Salt Lake City International Airport, filed a trademark infringement lawsuit against the U.S. Department of Homeland Security (“DHS”) and its airport seucurity division, the Transportation Security Administration (“TSA”), in the U.S. District Court for the District of Utah. See Salt Lake City Corporation v. Department of Homeland Security et al, Case No. 09-cv-00257 (D. Utah.). A copy of the complaint can be viewed here. Newspaper reports on the lawsuit can be found here and here.

SLC holds a federal trademark registration for the mark SIMPLI-FLY which it claims to have used since July 2003 in connection with its airport customer assistance and information services (e.g., providing information to callers regarding airport security, airline procedures, and other airport services and facilities). The mark was registered February 21, 2005. I was unable to find any current picture of SLC's use of its mark, but pictured below is the specimen provided by SLC when it filed its application.

At issue in SLC’s complaint is TSA’s use of the term SIMPLIFLY on its website in connection with providing information and recommendations regarding airport security procedures. A copy of TSA’s “SIMPLIFLY” poster is shown below.

SLC believes that TSA’s continued use of the mark in connection with airport security information services is likely to cause confusion with its registered service mark. SLC sent a cease and desist letter to TSA on January 11, 2008, and then a follow-up cease and desist letter on December 31, 2008 – neither TSA or DHS replied to SLC’s letter as and evidenced by the above link, TSA is still using SIMPLIFLY.

SLC’s causes of action are for registered trademark infringement under 15 U.S.C. §1114, false designation of origin under 15 U.S.C. §1125(a), common law trademark infringement and unfair competition, trademark dilution under 15 U.S.C. §1125(c) [ed.-seriously…famous?], and deceptive trade practices under Utah law (Utah Code Ann. §13-11a-3).

Monday, March 23, 2009

Is "The Good Guy" the next "Heavy Hitter"?

There’s a new personal injury lawyer in town (or at least a new one advertising on TV) . . . Sam Harding (pictured above -- complete with cowboy hat).

You know times must be tough … even for lawyers…based on the amount of lawyer ads running on TV these days -- or perhaps it is an indication that TV stations have lowered their ad rates for TV commercials to such a level that such advertisements are now more cost effective for attorneys, but I digress.

Anyway, I got a smile when I saw Mr. Harding’s TV commercial the other night (which you can see on his website He promotes himself as “The Good Guy” – and even has a TM next to the phrase (pictured above). While it would be more accurate to use SM instead of TM since Mr. Harding is using the phrase in connection with the sale of services and not goods, Mr. Harding is a personal injury lawyer, not a trademark lawyer, so I’ll give him a pass on that. However, I’m not so sure about the actual mark “The Good Guy.”

When lawyers in Las Vegas think about advertisements using a catchphrase that begins with “The,” most of us immediately think of “The Heavy Hitter” . . . excuse me, “Heavy Hitter” Glen Lerner. Described in my prior blog post here, Lerner once had a run in with the State Bar of Nevada over his use of “The Heavy Hitter.” Sometime in 2001, Lerner began promoting himself as “The Heavy Hitter” in connection with his legal services. While the ad campaign grabbed the attention of the Las Vegas public (indeed, I think most people still describe Lerner as “The Heavy Hitter” although they’ll say it with a grin), it also got the attention of the State Bar of Nevada, who told Lerner that calling himself “The” Heavy Hitter was false and misleading because it’s a statement that he is the only heavy hitter. Instead, the Nevada Bar told Lerner that he could only be “a” heavy hitter. Click here for a Las Vegas Review Journal article on the “heavy hitter” dispute between Lerner and the State Bar of Nevada.

(I'm sure Lerner considers himself a Good Guy too)?

Which begs the question – is Sam Harding calling himself “The” Good Guy false and misleading because it’s a statement that he is the only good guy? Of course, I know several people who would argue that any lawyer using the phrase “Good Guy” in connection with their services is false and misleading, but that’s another issue.

The Nevada Supreme Court changed its rules on attorney advertising back in 2007 (click here for article on the change). On the one hand, the rules were relaxed to no longer prohibit advertising that was been considered “bad taste” in the past. On the other hand, the Nevada Supreme Court also implemented a much stricter requirement that attorneys submit copies of their ads to the State Bar for review within 15 days after publication or broadcast – and if the Bar deems an ad to be inaccurate or misleading, then it must be pulled.

So assuming that Harding followed Supreme Court Rules and submitted his ad, then, depending on how long ago it was submitted, there is a chance that the ad may have already been reviewed and deemed suitable by the State Bar.

So if Harding can call himself “The Good Guy,” does that mean that Lerner can finally go back to calling himself “The Heavy Hitter”? Assuming, of course, that Lerner can overcome the trademark infringement battle in which he is currently embroiled over his use of the “Heavy Hitter” mark (discussed in my prior blog post here).

Friday, March 20, 2009

Ninth Circuit “Eviscerates” Laches Defense Against Trademark Infringement

The Ninth Circuit has denied a defendant the defense of laches against a plaintiff despite the fact that the plaintiff waited seven years to assert its trademark rights – all because the defendant had (in the majority’s view) not spent that enough money developing the alleged infringing mark as its own (and thus was not prejudiced by the delay). See Internet Specialties West, Inc. v. Milon-Digiorgio Enterprises, Inc., Nos. 07-55199, 07-55087 (9th Cir. March 17, 2009).

Internet Specialties West, Inc. (“ISW”) and Milon-Digiorgio Enterprises, Inc. (“MDE”) are both internet service providers. ISW registered the domain name in May 1996. In July 1998, MDE registered the domain name ISW discovered MDE’s website in late 1998, but took no action at the time supposedly because while ISW offered dial-up, DSL and T-1 internet access nationwide, MDE only offered dial-up access in Southern California.

MDE expanded it business nationwide in 2002 and began offering DSL in 2004. In 2005, ISW sent a cease and desist letter to MDE and later brought a trademark infringement lawsuit against MDE’s use of the name ISPWest. See Internet Specialties West, Inc. v. Milon-Digiorgio Enterprises, Inc., Case No. 05-cv-03296, 05-cv-03296 (C.D. Cal.). A jury found that while MDE had infringed ISW’s mark, there was no damages from the infringement. Nonetheless, with such finding, the district court imposed an injunction against any further use of the mark by MDE. Moreover, the district court also determined that ISW’s claims were not barred by laches.

MDE appealed the district court’s decision to the Ninth Circuit Court of Appeal. A divided Ninth Circuit panel affirmed the jury’s verdict on infringement and also upheld the district court’s decisions on laches and the injunction imposed on MDE.

The defense of laches is often categorized as embodying the principle that a plaintiff cannot sit on the knowledge that another company is using its trademark, and then later come forward and seek to enforce its rights. See Grupo Gigante S.A. de C.V. v. Dallo & Co., 391 F.3d 1088, 1102-03 (9th Cir. 2004). The two part test for the defense of laches is 1) was the plaintiff’s delay in bringing suit was unreasonable and 2) was the defendant prejudiced by the delay. See Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 838 (9th Cir. 2002); Tillamook Country Smoker, Inc. v. Tillamook County Creamery Association, 465 F.3d 1102, 1108 (9th Cir. 2006). The six factors analyzed by courts in deciding whether laches precludes a claim are: “1) the strength and value of trademark rights asserted; 2) plaintiff’s diligence in enforcing mark; 3) harm to senior user if relief denied; 4) good faith ignorance by junior users; 5) competition between senior and junior users; and 6) extent of harm suffered by junior user because of senior user’s delay.” E-Systems, Inc. v. Monitek, Inc., 720 F.2d 604, 607 (9th Cir. 1983).

The Ninth Circuit found that the district court had wrongfully decided the first issue and that indeed ISW’s delay in bringing suit was unreasonable. The district court found that the relevant period of time started running in 2004; however, the court found that the earlier 1998 date was when ISW knew or should have known about its cause of action based on ISW’s actual notice of MDE’s use of the mark in connection with internet services. Based on this earlier date of 1998, ISW’s filing of an action outside of the applicable four-year statute-of-limitations period created a presumption that laches applied.

However, in analyzing the second factor (prejudice resulting from the unreasonable delay in bringing suit), the Court found that MDE was not prejudiced by the 7 year delay by ISW in enforcing its trademark rights. It is this particular point where the Ninth Circuit panel split. The dissent found obvious prejudice from MDE’s expansion of its business from 2,000 customers to 13,000 customers along with the accompanying sales and expenses.

The majority opinion, however, felt differently stating:
While we are sympathetic to MDE’s position, the meaning of prejudice in this context is not so simple. “If this prejudice could consist merely of expenditures in promoting the infringed name, then relief would have to be denied in practically every case of delay.” Tisch Hotels, Inc. v. Americana Inn, Inc., 350 F.2d 609, 615 (7th Cir. 1965). Laches is meant to protect an infringer whose efforts have been aimed at “build[ing] a valuable business around its trademark” and “an important reliance on the publicity of [its] mark.” 6 McCarthy on Trademarks and Unfair Competition § 31:12 (citations omitted) (emphases added). Therefore, we feel compelled to analyze whether MDE’s claim of prejudice is based on “mere[ ] expenditures in promoting the infringed name,” Tisch Hotels, 350 F.2d at 615, or whether it is based on an investment in the mark ISPWest as the identity of the business in the minds of the public. See Jarrow, 304 F.3d at 835-36 (finding prejudice where had the plaintiff “filed suit sooner, [the infringer] could have invested resources in an alternative identity . . . in the minds of the public.”)

The majority noted that the district court had found that MDE did not demonstrate prejudice from ISW’s delay in bringing suit because MDE had not expend any time or resources during the interim developing brand recognition of its mark. The district court focused on the fact that most of MDE’s advertising was in the form of “pay-per-click” advertisements (which typically did not include the ISPWest mark) – efforts that the court stated “creates little to no brand awareness.” “It is a simple premise that MDE cannot create 'public association' between ISPWest and the company if it does not even use the ISPWest mark in its most prevalent form of advertising.” The district court also found that MDE would not have to undertake significant advertising expenditures to change its name at this juncture. Finally, the majority did not feel that its view of what constitutes prejudice was in defiance of the court’s prior decision in Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 838 (9th Cir. 2002) and Grupo Gigante S.A. de C.V. v. Dallo & Co., 391 F.3d 1088, 1102-03 (9th Cir. 2004).

As such, the majority found no error or abuse of discretion in the district court’s finding that MDE was not prejudiced, and thus laches would not bar ISW’s lawsuit. The majority also found the scope of the district court’s injunction requiring MDE to cease all use of the mark reasonable in order to prevent consumer confusion.

Judge Andew Kleinfeld’s dissenting opinion agrees with every part of the majority opinion’s decision on laches – except for the decision regarding prejudice, which Kleinfeld describes as an enunciating “a new and unfair standard for prejudice in trademark law. . . . The practical effect of this new rule is to eviscerate the defense of laches in trademark law.”

Kleinfeld noted that the key to the majority’s rationale was its holding that “[i]f this prejudice could consist merely of expenditures in promoting the infringed name, then relief would have to be denied in practically every case of delay.” The dissent further notes that this language came from a Seventh Circuit decision where the delay was less than under a year and the infringement was deliberate as opposed to the instant case where the delay was far in excess of the applicable statute of limitations and the infringement was arguably not deliberate.

Kleinfeld's dissent focuses on the fact that when ISW first discovered ISPWest, the company only had about 2000 customers; and yet by the time ISW brought action, ISPWest had grown to 13,000 customers with over $1.5 million in marketing expenses. In Kleinfeld's view, this showed that MDE continued to build a valuable business around its trademark during the time that the plaintiff delayed the exercise of its legal rights – which is sufficient for establishing prejudice. “All this expansion happened while Internet Specialties knew about the infringement and did nothing to stop it. Until today, ISPWest’s five or sixfold expansion of its business would have been more than enough to establish prejudice.”

One of the key (and most eloquent) statements made by Kleinfeld is the following:
As the majority concedes, Jarrow Formulas, Inc. v. Nutrition Now, Inc., establishes that laches is presumed to bar a claim made outside of the analogous limitations period, 4 years here. 304 F.3d 829, 835-36 (9th Cir. 2002).The district court did not apply this presumption because, as the majority holds, it failed to determine the proper period for laches. Majority Op. at 3410-11. In fact, the district court applied a presumption against laches. Accordingly, the district court necessarily committed an abuse of discretion on this issue, and we cannot properly defer to its discretion. The majority’s deferential review is erroneous.

Kleinfeld argued that the majority’s decision cannot be reconciled with the Ninth Circuit’s decision in Grupo Gigante in which the Ninth Circuit did not mention a need for “brand awareness” or “public association” before finding laches in the Grupo Gigante case – what mattered was that the party asserting laches “has continued to build a valuable business around its trademark during the time that the plaintiff delayed the exercise of its legal rights.” The same decision also reinforced the importance of a trademark holding conducting “an effective policing effort” in order to obtain judicial enforcement of its trademarks. Moreover, in Grupo Gigante, the Ninth Circuit held that the plaintiff “cannot simply wait without explanation to see how successful the defendant’s business will be and then ask for an injunction to take away the good will developed by defendant in the interim.”

Kleinfeld further notes that the Ninth Circuit based its decision to apply laches in E-Systems v. Monitek, Inc., where the defendant “incurred substantial advertising expenditures and rapidly expanded its business” despite the fact that the plaintiff sued the same year that it discovered the infringement but barred because of a 6-year delay from the time when it should have known about the infringement.

Kleinfeld argues that where the presumption of prejudice applies (and there is no question that it does in this case), the prejudice exists where an infringer is “forced to abandon its long-term investment in its presentation of [its product] to the public.” (citing Jarrow Formulas, 304 F.3d at 840).

Kleinfeld also added his own thoughts about the injunction being an abuse of discretion because it failed to take into account the “public interest” of the burden on MDE’s customers who will have to change their e-mail addresses because MDE can no longer use the domain name. “Thousands of individuals ought not be required to alert family, friends, business contacts, banks, listservs, and their online subscription providers of a change in e-mail address, all because of Internet Specialties’ delay. An injunction without even weighing these burdens on the innocent is an abuse of discretion.”

But nothing says it better than Kleinfeld’s closing paragraph:
The majority’s evisceration of laches means that a big company can lurk in the tall grass while its little prey gradually fattens itself by dint of great effort and expense. Then, when the small competitor has succeeded, the big company can shake it down for a cut of its hard-won success, or destroy the name under which it innocently did business for years. That is trademark law as protection racket, rather than trademark law as prevention of consumer confusion.
[Comment: What about trademark troll?]

Vegas™Esq. Comments:
If it’s not apparent from the tone of the above write-up, I find the majority’s decision quite troubling – for all of the reasons articulated by Judge Kleinfeld's eloquent dissent. This decision is screaming for en banc review and I certainly expect MDE to petition for such review.

Thursday, March 19, 2009

March Madness Trademark Frenzy

Much like how the Super Bowl® brand championship football game becomes a perennial favorite topic of trademark gurus every January, the same can be said for the trademark MARCH MADNESS during the month of March. See L.A. Times article “March Madness attracts the eagle eyes of trademark lawyers.”

This year, Michael Atkins’ Seattle Trademark Lawyer Blog reminds us of the interesting history of the MARCH MADNESS trademark – via citation to the Fifth Circuit’s decision in Madness Athletic Association, LLC v. Netfire Inc., 120 Fed. Appx. 540 (5th Cir. 2005) .

Has everybody completed their March Madness® brand college basketball tournament brackets?

Wednesday, March 18, 2009

Geisha LLC Denied Summary Judgment Over New York Man’s JAPONAIS Trademark Registration

There was another court decision in the long running battle between the founders of the restaurant Japonais and a New York man who was first to file a trademark registration application for the JAPONAIS mark with the U.S. Patent and Trademark Office (“USPTO”). See Geisha LLC. v. Tuccillo, 2009 U.S. Dist. LEXIS 20300, Case No. 05-cv-05529 (N.D. Ill. March 13, 2009). The decision was a setback for the Japonais restaurant founders and underscores the importance of businesses taking the steps to seek trademark registrations early for their intended their trademarks and service marks in order to protect their subsequent ability to expand the use of such marks nationwide.

Geisha LLC (“Geisha”) is the founder of the European/Japanese fusion restaurant “Japonais.” The company was formed in December 2001 and sometime thereafter selected “Japonais” (English for “Japanese”) as the name for its planned restaurant. In early 2003, Geisha created the JAPONAIS design mark pictured above. Unfortunately, Geisha did not seek to apply for registration of its name or logo sometime before it opened its first restaurant in downtown Chicago on September 23, 2003. While the Japonais restaurant received some nationwide press from Bon Appetit magazine, Conde Nast Traveler, and Time magazine, Geisha’s JAPONAIS design mark only appeared in advertisements in the Chicago market

On June 25, 2004 – nine months after the restaurant opened (and two weeks after an article about the restaurant appeared in Time magazine) – a man named Roy Tuccillo, owner of Anchor Frozen Foods, a New York-based frozen seafood supply company, filed an intent-to-use application with the USPTO for the mark JAPONAIS (coincidentally with the same style as the logo created by Geisha having an inverted V in place of the A) in connection with restaurant and lounge services. Tuccillo testified in deposition that he had used his JAPONAIS mark as far back as 2000 when he put it on a store front window where he sold his frozen seafood (Tuccillo offered an undated photo of a unidentified store front window as evidence).

Geisha did not discover Tuccillo’s intent-to-use application until September 2005 – long after the period for Geisha to file an opposition to registration had expired. The PTO issued a Notice of Allowance on August 23, 2005. Geisha’s counsel notified Tucillo’s attorney about Geisha’s rights to the JAPONAIS mark to which Tucillo apparently replied that he intended to use the name in connection with a future restaurant and lounge. Geisha then filed the instant action against Tucillo on September 26, 2005, claiming, among its ten causes of action, false designation of origin under 15 U.S.C. § 1125(a). While the case was proceeding, Geisha opened two additional Japonais restaurants – one in New York City and the other in Las Vegas – using its JAPONAIS design mark.

Geisha’s complaint had also sought declaratory relief that Geisha possessed superior rights in the mark and that Tuccillo’s intended use of the mark would constitute infringement – relief that was preliminarily denied because Tuccillo had not yet used the mark and was not immediately threatening to do so.

On May 2, 2008, however, Tuccillo filed a Statement of Use declaring that he was using the mark in commerce in connection with restaurant and lounge services. Tuccillo’s specimen of use was a menu showing the JAPONAIS mark as well as a photo of the mark etched onto a window. Geisha subsequently moved for summary judgment on its false designation of origin claim arguing that Tuccillo’s conduct in registering and using the mark constituted false designation of origin.

The court denied Geisha’s motion for summary judgment based on genuine disputed issues of material fact, particularly on the issue of whether the geographic reputation of Geisha’s restaurant and the JAPONAIS mark had penetrated the New York area such that Geisha could claim prior common law trademark rights.

The court first analyzed Geisha’s rights in the JAPONAIS mark at the time Tuccillo filed his application. Because Geisha did not apply to register the mark with the USPTO, Geisha was not entitled to the presumption of constructive notice nationwide, and thus must show evidence that its rights extended beyond the Chicago area. While the general rule is that a junior user who is unaware of the senior user’s use may adopt a mark in a geographically distinct area provided that the mark has not been registered, one exception to this rule is where the senior user’s reputation extends beyond the immediate geographic area where the mark is employed.

In analyzing Geisha’s reputation, the court noted that by June 2004, most of Japonais’s publicity had been in the Chicago media and in trade publications and the particular stylized JAPONAIS mark appeared in only three advertisements in Chicago-based publications before Tuccillo filed his application. In the end, the court found that it could not conclude, as a matter of law, based on the evidence in the record that the JAPONAIS mark had obtained such widespread notoriety by June 2004 that Geisha possessed common law rights in the mark in New York at the time Tuccillo filed his application.

The court further noted that Geisha’s expansion to New York and Las Vegas does not create enforceable trademark rights in New York that Tuccillo violated by opening his restaurant because Tuccillo had filed an intent-to-use application giving him an effective date of first use of June 2004 with respect to the JAPONAIS mark despite not actually using it until May 2008 – the wonderful benefit of the intent-to-use trademark laws. Indeed, any party that begins using the mark after an intent-to-use application is filed will be treated as a junior user with respect to such intent-to-use trademark applicant.

The court then eloquently explained an important distinction (often misunderstood) between constructive use and constructive notice (citations omitted):

Constructive notice, obtained when a mark is actually registered on the principal registry, prevents further use of the mark by others. Even senior users may be restricted to the areas they operated in at the time of registration. Constructive use, by contrast, prevents a third party from acquiring any rights in the trademark as of the date the intent-to-use application was filed. Under this doctrine, Tuccillo will have a constructive use date of June 25, 2004, the date he filed the ITU application. Constructive use is subject to two important limitations that are relevant here: first, constructive use is contingent upon actual registration of the mark, and second, constructive use does not bar use of the mark by senior users.

At the time of the court’s decision, Tuccillo’s mark had not yet registered, which left the question of Tuccillo’s constructive use priority in question. Well, there is no longer any doubt because Tuccillo’s mark was registered yesterday, March 17, 2008 (U.S. Registration No. 3,591,621). [Geisha has promised to initiate a cancellation proceeding with the Trademark Trial and Appeal Board -- meanwhile, Geisha's own trademark registration applications (here and here) are suspended].

Nonetheless, there was sufficient uncertainty that the court was able to conclude that Geisha was not entitled to judgment as a matter of law on its false designation of origin claim. The court held that Tuccillo could not have violated Geisha’s rights in the mark in New York unless Geisha possessed common law rights in New York prior to the constructive use date of June 25, 2004 – and that the extent of Geisha’s common law rights is a contested issue of material fact that precludes summary judgment.

The court further noted that while Geisha’s expanding use of the Japonais mark in New York would ordinarily not be precluded because it occurred before Tuccillo’s date of registration (i.e., the date of constructive notice), in this case, Geisha had actual notice of Tuccillo’s pending application prior to its expansion. As the court stated, “If constructive notice that Tuccillo possesses rights in the mark bars Geisha from expanding its use of the mark, surely Geisha is under similar constraints where it has actual notice of Tuccillo’s application.” (italics in original). The court added that “It would be inequitable to hold Tuccillo in violation of Geisha’s trademark rights in these circumstances. Geisha did not operate in New York prior to Tuccillo’s filing the ITU application, in which Tuccillo swore he had a bona fide intention to use the mark in the restaurant and lounge industry and that he had no knowledge of any other use of that mark in the industry.”

In the end, the court was unable to conclude, as a matter of law, that Tuccillo had no rights to the JAPONAIS mark or that Tuccillo infringed Geisha’s trademark rights when he opened his restaurant, and therefore, denied Geisha’s motion for summary judgment.

Tuesday, March 17, 2009

The Ritz Wins Early Victory Against §38 Damage Claims

On March 9, 2009, U.S. District Court Judge Norma Shapiro found that a Pennsylvania company’s counterclaims for damages under 15 U.S.C. §1120 arising from alleged fraudulent registrations were barred by the statute of limitations. See The Ritz Hotel, Ltd. v. Shen Manufacturing Co., Inc., 2009 U.S. Dist. LEXIS 18873, Case No. 05-cv-04730 (E.D. Penn. March 9, 2009).

The Ritz
(London, England)

On January 7, 2005, The Ritz Hotel, Ltd. (“RHL”), the United Kingdom corporation which owns the famed “Ritz” hotel chain along with various trademark registrations containing the word RITZ including, among others, RITZ PARIS, HOTEL RITZ, RITZ ESCOFFIER, and THE RITZ KIDS, filed for declaratory relief of noninfringement against Shen Manufacturing Co., Inc. (“Shen”), which also holds various registered trademarks for the mark RITZ for cleaning and polishing clothes, ironing board pads and covers, tablecloths and beach towels, and bathrobes, aprons, and laundry bags, dish clothes, towels, mitts, and place mats along with various unregistered common law marks such as RITZ PRO SERIES, RITZ STERLING, RITZ SUPREME, RITZ ROYALE, and RITZ CLASSICS. The action, which had been filed by RHL in the Southern District of New York, was transferred to the Eastern District of Pennsylvania on August 22, 2005, pursuant to 28 U.S.C. §1404(a).

In response to RHL’s declaratory judgment action, Shen, on September 16, 2005, filed its original answer and counterclaims against RHL (later amended on August 16, 2006) to include a counterclaim for damages under §38 of the Lanham Act, 15 U.S.C. §§1120, for damages resulting from RHL’s alleged fraudulent registration of five trademarks with the United States Patent and Trademark Office (“PTO”). Section 38 of the Lanham Act (15 U.S.C. §1120) states: “Any person who shall procure registration in the Patent and Trademark Office of a mark by a false or fraudulent declaration or representation, oral or in writing, or by any false means, shall be liable in a civil action by any person injured thereby for any damages sustained in consequence thereof.” An action for damages under §38 is for damages resulting from the PTO's registration of a trademark based on fraud on the PTO by the registrant.

In this case, three of the five RHL trademark registrations at issue in Shen’s §38 counterclaim were RITZ for cutlery, RITZ ESCOFFIER for food products, and RITZ PARIS for cosmetics (the remaining two were voluntarily abandoned by RHL). Shen sought to recover damages resulting from alleged fraud or falsity in RHL's applications for these three marks, including lost profits as the result of its inability to market its own Ritz-branded cookware, as well as recovering attorneys' fees and costs for contesting the alleged fraudulent registrations.

RHL filed a motion for partial summary judgment to dismiss Shen’s §38 counterclaim on the basis that the fraud claims had not been plead with sufficient specificity and on the grounds that the counterclaims were not filed within the applicable statute of limitations.

Since the Lanham Act has no statute of limitations, courts look to state statute of limitations for analogous types of actions to determine whether such claims are timely filed. Because the counterclaims in this case were filed subsequent to the case being transferred, the state statute of limitations governing Shen’s §38 fraud counterclaim depends on whether the counterclaim is deemed a compulsory or permissive counterclaim.

For compulsory counterclaims, the statute of limitations applicable in the forum where the complaint was filed governs not only the complaint but also compulsory counterclaims filed subsequent to transfer under 28 U.S.C. §1404(a). However, the court held that because a permissible counterclaim does not “relate back” to the events underlying an opposing party's claim, then, by definition, it was filed independently of the opposing claim and not in direct response. As such, a permissive counterclaim filed after transfer under §1404(a) should therefore be decided under the same governing law as would apply had it been filed ab initio in the transferee forum.

Because RHL’s original claim was for declaratory relief that its trademarks and business activities in the United States do not infringe on Shen's trademarks and Shen’s §38 fraud counterclaim was for damages resulting from RHL's alleged false or fraudulent statements made to the PTO while procuring certain registrations, the court found this counterclaim to be permissive. “The issues in resolving Shen's counterclaim for damages for fraudulent procurement relate entirely to whether the registrations were issued by the PTO in reliance on false or fraudulent representations, and what if any damages Shen suffered as a result. Whether RHL infringed Shen's trademarks is not the same legal or factual issue. Because counterclaim count III is permissive, Pennsylvania choice of law principles determine the applicable statute of limitations.”

In analyzing Pennsylvania’s choice of law principles, the law of two states could apply – Pennsylvania (Shen’s domicile) or Virginia (where the PTO is located and where RHL's alleged fraudulent conduct occurred). Because both states have two year statute of limitations for fraud, the court chose to apply Pennsylvania law.

Having determined the statute of limitations, the court next turned to when Shen first had notice of the fraud. The court noted that, under Section 22 of the Lanham Act (15 U.S.C. §1072) “Registration of a mark on the principal register . . . shall be constructive notice of the registrant's claim of ownership thereof.”

With respect to RHL’s RITZ ESCOFFIER mark, the mark was registered on December 31, 2002, and thus, a timely claim for fraud under §38 would have been on or before January 2, 2005. Thus, Shen’s counterclaim for fraud with respect to this mark was not filed until September 16, 2005, and so the court held that this claim was barred by the statute of limitations.

With respect to RHL’s RITZ PARIS mark, the mark was registered on December 3, 2003, and thus a timely claim for fraud under §38 would have been on or before December 3, 2005. Because Shen’s counterclaim for fraud with respect to this mark was not filed until September 16, 2005, the court held that this claim also was barred by the statute of limitations.

Shen attempted to argue that the constructive notice provisions of §1072 were inapplicable to this particular mark, which actually registered based on §44 of the Lanham Act (15 U.S.C. §1126) because such registration does not require actual use in U.S. commerce to register. The court rejected this argument stating:

Section 22 does not distinguish between a domestic registration under §1 and a foreign registration under §44. Section 44 allows a would-be registrant to apply for trademark protection with a “bona-fide intention to use” without meeting §1(b)'s requirement that the registrant demonstrate actual use within six months following registration. Sections 1 and 44 were amended simultaneously in 1988 to allow an application to the PTO for trademark registration with a bona fide intention to use, Pub. L. 100-667, §§103, 133, 102 Stat. 3935, 3946 (1988); this suggests a Congressional intent that a §1(b) and §44 registration function equally except when otherwise provided.

The court felt no sympathy for Shen’s pleas that applying §22's constructive notice provision to a §44 registration makes it almost impossible to sue a foreign registrant under §38. Shen argued that an intelligent foreign registrant could gain immunity from a §38 claim by applying to the PTO under §44 with a fraudulent affidavit of bona fide intention to use and keeping the mark out of U.S. commerce long enough to have the fraud claim barred by the state-law statute of limitations. The court simply stated that “the court will not invalidate §38's statute of limitations with regard to a false or fraudulent §44 registration without an explicit Congressional statement.”

Finally, with respect to RHL’s RITZ mark, the mark originally registered on June 18, 1996, and an affidavit of continued use was filed in June 2002. The court noted that §22's constructive notice provision applies only to the original trademark registration, and that the June 2002 affidavit of continued use was not constructive notice of asserted ownership of the mark in calculating the timeliness of Shen's claim.

The court noted, however, that Shen had been put on notice of RHL’s claims of ownership as of July 21, 2003, when RHL invoked the registered mark as a defense against claims brought by Shen. The court held that a timely claim by Shen based on a false or fraudulent declaration by RHL would have to have been filed on or before July 21, 2005. Because Shen’s original counterclaim for fraud with respect to this mark was not filed until September 16, 2005, the court held that this claim also was barred by the statute of limitations.

Thus, the court granted RHL's motion for partial summary judgment of Shen’s counterclaim for damages under §38 of the Lanham Act based on RHL’s alleged fraudulent procurement of three trademark registration was granted on the basis that Shen’s counterclaim was time-barred as to all three registrations.

Friday, March 13, 2009

Michael E. Hall Ups The Ante In The Trademark Blawgosphere

Those of us in the small world of trademark blogs already know Michael E. Hall for his comments and insights on trademark law which he often posts on other trademark blogs.

Well Michael has finally decided to take the plunge into the legal blogosphere by starting his own trademark law blog – Registration Ruminations (admittedly a better blog name than Las Vegas Trademark Attorney).

Michael, who is now hanging his own shingle, brings his experience as an examining attorney at the U.S. Patent and Trademark Office as well as a lawyer in private practice at the intellectual property law firm Knobbe Martens Olson & Bear.

I would like to welcome Michael to the party and look forward to reading his regular ruminations on the world of trademark prosecution before the U.S. Patent and Trademark Office. (Check out his recent post explaining the details on how PTO Examining Attorneys are evaluated for purposes of bonuses – a valuable insight for all trademark practitioners). Anybody else out there who regularly follows trademark blogs should certainly add his blog to your blogroll. Good luck Michael.

Thursday, March 12, 2009

Chicago Cubs Sue Another Wrigley Field Rooftop Club

I previously wrote (link here) about the trademark infringement lawsuit filed in February 2008 by the Chicago National League Ball Club, L.L.C., the owner of the Chicago Cubs Major League Baseball team (the “Cubs”), against the owners of two baseball clubs in the business of selling rooftop seats which allow patrons to watch Cubs games played at Wrigley Field because of the close proximity of Wrigley Field to the building rooftops where the clubs operate.

Aerial Photo of Wrigley Field showing building rooftops in the distance.
(Photo Credit: Aerial Views)

While that particular lawsuit was settled by the parties in May 2008, the Cubs are at it again. On March 10, 2009, Chicago National League Ball Club, L.L.C., brought a similar lawsuit against T. Lamb, Inc. (doing business as the “Lakeview Baseball Club”) in the U.S. District Court for the Northern District of Illinois. See Chicago National League Ball Club, L.L.C. v. T. Lamb, Inc., Case No. 09-cv-01523 (N.D. Ill.). A copy of the complaint can be downloaded here.

The complaint notes that the Cubs, through years of investing substantial sums of money both in advertising and promotion as well as the baseball team itself, have built up substantial consumer recognition and goodwill with respect to its numerous trademarks relating to the “Cubs” and “Wrigley Field” including:
The Lakeview Baseball Club is located at 3633 North Sheffield, Chicago, Illinois 60613 –across the street from Wrigley Field and with an excellent view of the field from its rooftop. The complaint alleges that T. Lamb has been charging patrons fees to view the Cubs’ home games from this rooftop and supposedly made over $2 million in 2008 alone.

Lakeview Baseball Club

This lawsuit, however, is slightly different than the one that the Cubs previously filed. In this case, the Cubs had filed lawsuits against T. Lamb (along with other rooftop owners) in 2003 resulting in a settlement agreement whereby T. Lamb was permitted to charge admission on the day of any Cubs home games in return for paying a fee to the Cubs. T. Lamb paid the fees due to the Cubs under the settlement agreement for the 2004 through 2007 seasons. Then, in early 2009, T. Lamb apparently notified the Cubs that it would not pay the fee for the 2008 season. Based on this breach, the Cubs terminated the settlement agreement.

In addition to this breach of contract, the complaint alleges that T. Lamb is still improperly using the Cubs’ trademarks in promoting its rooftop club despite a cease and desist notification from the Cubs. [Ed – click here to view the club’s own brochure and decide for yourself if T. Lamb is using the Cubs’ trademarks in any sense that is other than fair.] The complaint specifically focuses on the fact that when an individual visits the Lakeview Baseball Club website, the title of the website’s home page reads “Lakeview Baseball Club (Chicago Cubs© Wrigley Field© Rooftop).” [Ed – do you think they meant to use the © copyright symbol instead of the ® symbol for a registered tradmark?] The Cubs’ trademarks also appear in other parts of T. Lamb’s website [ed. – although arguably in fair use sense: e.g., “Whether you just want to catch a Chicago Cubs game at Wrigley Field” “rooftop entertaining, including employee and client parties overlooking Wrigley Field©.” In the past we've hosted Cubs© themed wedding receptions]. The complaint also alleges that the website claims that the club is “endorsed by the Chicago Clubs” (although I was unable to find such language on the website in conducting my own quick search).

The Cubs’ causes of action are for breach of contract for T. Lamb’s breach of the settlement agreement as well as the same single count (citing 15 U.S.C. §§ 1114, 1116(d) and 1125) cited in the Cubs previous rooftop lawsuit which argues that T. Lamb’s marketing efforts are willful and wanton actions designed to trade off of the Cubs trademarks and goodwill and which are likely to cause confusion as to the affiliation, association or connection between T. Lamb’s club and the Cubs and as to the sponsorship or approval of T. Lamb’s business activities by the Cubs and adversely affect Cubs’ ticket sales as well as the ticket sales of the Cubs’ rooftop licensees.

The Cubs are asking for injunctive relief to stop T. Lamb from using the Cubs’ trademarks and engaging in any marketing which is likely to cause consumer confusion regarding affiliation with or sponsorship or approval by the Cubs of T. Lamb’s business. The Cubs also seek compensatory damages, T. Lamb’s profits, treble damages, statutory damages under 15 U.S.C. § 1117(c) (for alleged counterfeiting), interest, costs and attorneys’ fees.

It is not yet apparent whether the Cubs, as they did in the prior lawsuit, will threaten to obstruct this particular rooftop view of Wrigley Field enjoyed by T. Lamb’s club.

Tuesday, March 10, 2009

Rosetta Stone Announces Settlement of Search Engine Keyword Trademark Infringement Lawsuit

A blogging two-for-Tuesday . . .

I previously wrote (link here) about the trademark infringement lawsuit filed last year by Rosetta Stone Ltd. (“Rosetta Stone”), the publisher of the Rosetta Stone line of interactive computer software for learning foreign languages, against two New Zealand companies, Rocket Languages Ltd. and Libros Media Ltd. (together “Rocket”) along with two specifically named individuals (Ishmael Lopez and Matthew Weidner) who each operated various “language review” websites (through which they supposedly were paid a 75% commission by Rocket for every Rocket Languages product sold through their websites) and who made the unfortunate mistake of promoting their websites by purchasing “Rosetta Stone” as advertising keywords in Google's AdWords program and Yahoo's Marketing Solutions program.

Rosetta Stone issued a press release today proclaiming victory in this particular lawsuit by announcing that it had “successfully settled” its trademark infringement lawsuit against Ishmael Lopez and Matthew Weidner.

Under the terms of settlement, Lopez and Weidner will “each cease using Rosetta Stone trademarks in online paid search advertising campaigns and on their online websites and operations.” The press release also notes that Lopez and Weidner “will provide Rosetta Stone with monetary compensation.” In other words, Lopez and Weidner will stop purchasing the Rosetta Stone name as a keyword and Rosetta Stone was able to get some money out of them to pay its attorneys fees.

Not surprisingly, Rosetta Stone is painting this as a large victory against “the illegal use of Rosetta Stone’s trademarks and confusingly similar variations as keywords in search engine advertising programs and in the header and text of the resulting sponsored links.”

Or perhaps it’s just another case where it simply did not make economic sense for these two guys to fight a legal battle against a large company like Rosetta Stone in order to continue using Rosetta Stone’s trademarks as keywords.

Incorp Services Sues Legalzoom Over False Statements

This lawsuit is a little stale in the blogging world (filed about a month ago), but since it doesn’t seem to have gotten much press anywhere and it involves three of my favorite things (Nevada, business formation, and trademark law), I could not help but give it a passing mention.

On February 10, 2009, Incorp Services, Inc., (“Incorp”) a company that helps parties form corporations and other business entities throughout the United States and which also offers registered agent services for business entities nationwide, filed a lawsuit against, Inc. (“Legalzoom”), the “document preparation” company that also helps interested parties form corporations and other business entities, in the U.S. District Court for the District of Nevada. See Incorp Services, Inc., v., Inc., Case No. 09-cv-00273 (D. Nev.). A copy of the complaint can be downloaded here.

Incorp alleges that since at least 2008, customers who have formed business entities through Legalzoom and who wanted to use Incorp as their registered agent have been told by LegalZoom’s telephone representatives that Incorp “is not in good standing” with several states, that Incorp “cannot be used” as a registered agent; that InCorp is “not licensed to do business in” certain states: that Incorp “cannot legally do business in” certain states; that InCorp is “not legal” in certain states; and other similar statements – all of which Incorp asserts are false given its good standing status in all fifty states and the District of Columbia.

Incorp’s causes of action are for “trade libel” under 15 U.S.C. 1125(a)(1)(B) (i.e., misrepresenting the qualities of Incorp’s services and commercial activities), defamation, and deceptive trade practices under Nevada law (N.R.S. § 598.0915). Incorp seeks injunctive relief along with a retraction from Legalzoom as well as compensatory and punitive damages, costs, and attorneys fees.

Query: I don’t suppose Legalzoom’s “document preparation” services covers preparing an Answer to this complaint.

Thursday, March 5, 2009

Nothing says Sweet & Sour like a Cupcake and Crossbones

Yesterday's post was about cookies . . . today's is about cupcakes (sort of).

John M. Earle is the owner of the federally registered Cupcake and Crossbones trademark (pictured above) for ornamental pins, duffle bags, wallets, shirts, polo shirts, sweatshirts, hats, shorts, pants, scarves, and jackets.

Johnny Cupcakes, Inc. (“Johnny Cupcakes”) is the company which sells merchandise emblazoned with Earle’s Cupcake and Crossbones mark. Johnny Cupcakes has two stores in Massachusetts (Boston and Hull) and one store in Los Angeles, California, along with its online store found at the website

On March 3, 2009, Johnny Cupcakes and Earle filed a trademark infringement lawsuit against two Ontario, California residents, Clark Perez and Jo-Ann Perez, for supposedly selling “counterfeit” acrylic necklaces on eBay that display the Cupcake and Crossbones mark (the authentic necklace is pictured above) and which are apparently being mailed from a particular U-Store-It Trust location in California (and thus the reason the U-Store-It self-storage chain is named as a party). See Johnny Cupcakes, Inc. et al. v. U-Store-It Trust et al., Case No. __________ (D. Mass.). A copy of the complaint can be viewed here.

The causes of action are counterfeiting under 15 U.S.C. § 1114, federal trademark infringement and unfair competition under 15 U.S.C. § 1125(a), federal trademark dilution under 15 U.S.C. § 1125(c) [ed - famous?. . . really?], and common law trademark infringement and unfair competition.

A quick search of eBay did not reveal any current listings of any Cupcake and Crossbones necklaces (counterfeit or otherwise).

Wednesday, March 4, 2009

“Smiley” Cookie Owner Brings More Frowns With Another Trademark Infringement Lawsuit

I previously blogged (link here) about the trademark infringement lawsuit brought by Eat N' Park Hospitality Group (“Eat 'N Park”) against The Clever Cookie Corp. over the latter company’s sale of cookies that Eat 'N Park claimed were “confusingly similar” to its federally registered smiley face design for cookies (pictured above). This lawsuit – filed in 2007 and technically dismissed for want of prosecution only to be refiled by Eat 'N Park again on June 26, 2008 (see Eat ‘N Park Hospitality Group, Inc. et al. v The Clever Cookie Corp., Case No.08-cv-00886 (W.D. Penn)) – remains pending.

Well, Eat 'N Park is at it again. On February 26, 2009, the company filed a similar trademark infringement lawsuit against a New Jersey-based online company named Forget-Me-Knot Gifts (“FMK”) over its sale of “Smiley Face” cookies. See Eat ‘N Park Hospitality Group, Inc. et al. v Forget-Me-Knot Gifts, Case No. 09-cv-00255 (W.D. Penn.). A copy of the complaint can be found here.

Based on what could be found on their website, FMK appears to sell smiley face cookies as part of their business of selling gift baskets and cookie bouquets.

Forget-Me-Knot Gifts'
Get Well Basket and Cookie Bouquet

FMK may have already decided that it does not want to fight the lawsuit – the links where its smiley face cookies appear all indicate that “SORRY, THIS GIFT IS CURRENTLY NOT AVAILABLE. We are redesigning this gift...please check back for new version.”

And while it’s sad that a company like Eat ‘N Park can stop a small business like FMK from using a universally recognized design like the smiley face on a cookie (and the company isn’t even Franklin Loufrani of SmileyWorld fame), who can blame them for not wanting to spend hundreds of thousands of dollars just to defend its right to use the design – with very little chance of recovering any attorney’s fees even if FMK were to prevail.

But let’s see Eat ‘N Park go up against the victor of Loufrani v. Wal-Mart Stores, Inc., Opposition No. 91152145 (TTAB Filed July 23, 2002). [Interesting Sidenote: When I typed “SmileyWorld” into the GOOGLE brand search engine, Eat ‘N Park’s website came up as a sponsored link. Looks like Eat ‘N Park has purchased Mr. Loufrani’s mark as a Google adword. I guess Eat ‘N Park has no problem trading off the goodwill that has been built up by the self-proclaimed king of all Smileys.]

Monday, March 2, 2009

Fourth Circuit Affirms Lower Court Decision That OBX Creator Has No Trademark Rights To The Term

Pamela Chestek over at her blog Property, intangible discusses the Fourth Circuit’s recent decision in OBX-Stock, Inc. v. Bicast, Inc., No. 06-1769 (4th Cir. Feb. 27. 2009). The decision serves as a good reminder about the importance of using a trademark as a trademark.

Too many people not familiar with trademark law fail to appreciate that just because you come up with a unique word or slogan and affix that word or slogan to various goods (most often T-shirts or other souvenir items) does not mean that you are using the word or slogan as a trademark, especially in the case where the term is acknowledged to signify a specific geographic location. Trademarks are supposed to serve as source identifiers for a company’s goods and services – not as an identifier of something else for which you then use on goods and services.

As the court eloquentlystated in this case:

Trademark law, at a general level, protects the goodwill represented by particular marks, enabling consumers readily to recognize products and their source and to prevent consumer confusion between products and between sources of products. The marks enable consumers to make informed, independent decisions about quality and other product characteristics. But the law also protects the "linguistic commons" by denying mark holders an exclusive interest in words that do not identify goodwill attached to products or product sources but rather are used for their common meaning or meanings not indicative of products and product sources. See America Online, Inc. v. AT & T Corp., 243 F.3d 812, 821 (4th Cir. 2001); see generally 1 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 1:27 (4th ed. 2008).

In this case, the plaintiff (“OBX-Stock”) had coined the term “OBX” as a reference to the Outer Banks of North Carolina and made money selling products with OBX affixed thereon. The evidence showed that the public came to embrace OBX as a reference to the Outer Banks (thanks in part to OBX-Stock's sale of merchandise emblazoned with the OBX mark).

A company can obtain trademark rights over geographically descriptive marks with evidence of acquired distinctiveness. Of course, you must first use the mark as a source identifier – and not in its geographically descriptive sense. In this case, the court found that OBX-Stock affixed the letters OBX to stickers, souvenirs, and other sundries not to label an OBX brand product produced by OBX-Stock, but to indicate an association with the Outer Banks (i.e., OBX-Stock’s use of OBX on its souvenirs was always meant to be a reference the Outer Banks, and not to communicate that the souvenirs were produced by OBX-Stock).

In this case, the court found that the evidence indicated overwhelmingly that "OBX" is [ed. - OBX-Stock used OBX as] a geographically descriptive or generic term for the Outer Banks. Moreover, OBX-Stock had failed to show any evidence that any consumer associates OBX with its products or with OBX-Stock itself.

The court found that OBX-Stock had failed to show ownership of a valid trademark and therefore dismissed its trademark infringement lawsuit. [Interestingly, the entire lawsuit was brought because of the Defendant’s use of the mark “OB Xtreme” on some stickers. Given the outcome, one wonders if this particular suit against Bicast was the smartest decision.]

Curiously, even though the Court of Appeals affirmed the district court’s decision that "OBX" was either generic or a descriptive mark without secondary meaning, the court did not overrule the district court’s decision not to order cancellation of OBX-Stock’s trademark registrations. For OBX-Stock’s trademark registrations on the Principal Register based on Section 2(f), the court’s decision would appear to nullify the 2(f) basis for maintaining the registration.

The court noted that the district court had concluded that Bicast’s evidence did not conclusively establish that every one of OBX-Stock’s trademark registrations should be cancelled. The court also seems to fault Bicast for not having filed counterclaims seeking cancellation (and only arguing the point on summary judgment). The court justifies its decision by stating that “Bicast has received an adequate remedy through the district court’s summary judgment in its favor, and the court’s final adverse decision on trademark validity will preclude OBX-Stock’s marks from becoming incontestable.”

Of course, while this is good for Bicast, what about future parties who may be afraid of using the OBX mark (even in a geographically descriptive fashion) for fear of being sued by OBX-Stock.

Last year, the Third Circuit reversed a district court’s decision not to order the USPTO to enter a disclaimer of the term “Cocoa Butter Formula” (which was found to be generic) on the principal registration of the mark “Palmer's Cocoa Butter Formula.” See E.T. Browne Drug Co. v. Cococare Prods., Inc., Nos. 06-4543 & 06-4658, 2008 U.S. App. LEXIS 16585 (3rd Cir. August 5, 2008). While the lower court had declined to order relief under 35 U.S.C. § 1119 believing that it would not benefit the party requesting such relief, the Court of Appeals reversed stating “even if Cococare will not benefit from that disclaimer, we should not allow the absence of a disclaimer on the principal register to confuse a future business into believing that it may not use the term ‘Cocoa Butter Formula.’”

Similarly, in this case, future businesses should not be confused by OBX-Stock’s trademark registrations for the OBX mark into believing that they may not use the term OBX (particularly as a reference to the Outer Banks). In my opinion, the Third Circuit should have remanded the case back to the district court to order OBX-Stock’s trademark registrations (at least those on the Principal Register based on Section 2(f)) to be cancelled.