Wednesday, August 26, 2009

Ninth Circuit Tackles Trademark Tacking in “O'” Trademark Dispute

The Ninth Circuit addressed the unique issue of trademark tacking in affirming a lower court’s decision on a trademark lawsuit between two companies that produce clothing aimed towards participants of motor cross racing. See One Industries, LLC v. Jim O’Neal Distributing, Inc., No 08-55316, 2009 U.S. App. LEXIS 18967 (9th Cir. August 24, 2009).

On the one side is Jim O’Neal Distributing, Inc. (“O’Neal”), an apparent leader in the industry with 17.5% of the market for motocross apparel and helmets in 1998. Since 1991, O’Neal has used a stylized “O” followed by an apostrophe (the “O’ mark”) on its products. However, over the years, O’Neal used several different version of this O’ mark.

For purposes of this case, the relevant marks were the 1997 version – a thicker, boxier O’ mark with rounded corners (the “Rounded O’ mark”) – and the 2003 version – which abandoned the rounded corners of the 1997 mark in favor of an angular approach (the “Angular O’ mark”).

One Industries, LLC (“One Industries”) was originally founded in 1997 and began by selling stickers and decals; however, by 2003, One Industries had added helmets and clothing to its product lines which made it a competitor with O’Neal.

In 1999, One Industries developed the “One Icon” mark, which it describes as two interlacing number ones (pictured above), and also developed an angular version of the word “One” in its name (the “One Angular” mark) (pictured below). One Industries uses both of these marks on motorcycle-related apparel and headgear.

In 2006, O’Neal accused One Industries of infringing the 2003 Angular O’ mark as well as the O’NEAL mark. One Industries believed that O’Neal was misrepresenting the length of time that it had been using its O’ mark and that the One Icon and One Angular marks, which were created and registered in 1999, were actually senior to the Angular O’ mark created in 2003. One Industries filed a declaratory judgment action that its One Icon and One Angular marks did not infringe O’Neal’s trademarks. O’Neal in turn asserted counterclaims for trademark infringement.

Before discovery commenced, One Industries moved for a more definite statement under Federal Rule of Civil Procedure 12(e), arguing that O’Neal’s complaint did not identify the particular O’ mark that it claimed was allegedly infringed. O’Neal claimed that the O’ mark, with some slight changes over the years, was always the same mark.

The district court granted One Industries’ motion for a more definite statement reasoning that the two of the marks appear to be more than slightly different. O’Neal then amended its counterclaims to assert infringement of the 1997 Rounded O’ mark (in order to get around One Industries’ 1999 priority date for its own marks). The district court subsequently granted summary judgment to One Industries on all claims and O’Neal appealed.

O’Neal maintained that the district court erred by refusing to “tack” the different versions of the O’ mark dating back to 1991 since, according to O’Neal, each iteration of the O’ mark constituted a continuation of the same mark rather than a creation of a new mark.

As the Court of Appeals explains,

Tacking matters because One Industries first used the One Icon in 1999 -- after O’Neal developed the 1997 Rounded O’ mark but before O’Neal created the 2003 Angular O’ mark. It is a cardinal principle of federal trademark law that the party who uses the mark first gets priority. See Brookfield Commc’ns, Inc. v. West Coast Entm’t Corp., 174 F.3d 1036, 1047 (9th Cir. 1999) (“It is axiomatic . . . that the standard test of ownership is priority of use . . . [T]he party claiming ownership must have been the first to actually use the mark in the sale of goods or services.” (internal quotation marks omitted)). Thus, if the Rounded and Angular O’ marks are the same mark, then the district court should have compared the One Icon with the 2003 Angular O’ mark; if the marks are different, however, then the district court correctly compared the One Icon with the 1997 Rounded O’ mark.

One issue raised by O’Neal was the fact that the district court resolved the issue on a Rule 12(e) motion for a more definite statement rather than in the context of a summary judgment motion. O’Neal felt that summary judgment was premature because discovery had not yet been completed and O’Neal had been deprived of the opportunity to demonstrate that evolving versions of the O’ mark created the same, continuing commercial impression to consumers. While the Ninth Circuit acknowledged that “tacking requires a highly fact-sensitive inquiry” and that the “better practice is to resolve it on summary judgment, after full discovery,” in this case, the court was persuaded that there was no reversible error because O’Neal failed to ask the district court to postpone ruling until after discovery and did not move for reconsideration. “Having acquiesced in the resolution of the issue in the disposition of the Rule 12(e) motion, O’Neal cannot now complain that the district court should have acted differently.”

As for the merits of O’Neal’s tacking claim, the court laid out the legal standard as follows:

A trademark owner may “claim priority in a mark based on the first use date of a similar, but technically distinct, mark--but only in the exceptionally narrow instance where the previously used mark is the legal equivalent of the mark in question or indistinguishable therefrom such that consumers consider both as the same mark.” Brookfield, 174 F.3d at 1047-48 (internal quotation marks omitted). Tacking is a question of fact. See Quiksilver, Inc. v. Kymsta Corp., 466 F.3d 749, 759 (9th Cir. 2006). “A question of fact may be resolved as a matter of law if reasonable minds cannot differ and the evidence permits only one conclusion.” Id.

“The standard for ‘tacking’ . . . is exceedingly strict: [t]he marks must create the same, continuing commercial impression, and the later mark should not materially differ from or alter the character of the mark attempted to be tacked.” Brookfield, 174 F.3d at 1048 (internal quotation marks omitted). Our precedent demonstrates that tacking is allowed only in narrow circumstances. In Brookfield, we concluded that “” cannot be tacked onto “The Movie Buff’s Movie Store.” Id. at 1049. There, we reasoned that “ ‘The Movie Buff’s Movie Store’ and ‘’ are very different, in that the latter contains three fewer words, drops the possessive, omits a space, and adds ‘.com’ to the end.” Id. Similarly, in Quiksilver, we held that the district court erred in tacking “QUIKSILVER ROXY” onto “ROXY.” Quiksilver, 466 F.3d at 760. We reasoned that “a reasonable jury could easily conclude that ‘QUIKSILVER ROXY’ and ‘ROXY’ did not create the ‘same, continuing commercial impression’ at the time the ‘ROXY’ brand was introduced.” Id.

Because the district court decided the tacking issue as a matter of law, the court was faced with deciding whether O’Neal’s Rounded O’ mark, developed in 1997, and the Angular O’ mark, developed in 2003, differ to such a degree that no reasonable jury could conclude that they create the “same, continuing commercial impression.”

In affirming the lower court’s decision, the Ninth Circuit panel stated the following regarding O’Neal’s two marks:

We recognize that this is a close case, but we agree with One Industries and with the district court that O’Neal cannot meet the “exceedingly strict” standard for tacking. Although both marks consist of a styled O followed by an apostrophe, the similarities largely end there. The apostrophes are markedly different: in the Rounded O’ mark it is entirely separated from the O and appears to be a standard apostrophe. In contrast, the Angular O’ mark’s apostrophe is connected to the main image and looks like a triangle. The lower and upper horizontal lines on the Rounded O’ mark are thinner than the corresponding lines on the Angular O’ mark. While the Rounded O’ mark is boxy, the Angular O’ mark looks like the outline of a lemon. These differences, in our view, establish that the two marks are not “indistinguishable.” Brookfield, 174 F.3d at 1047. Like the marks at issue in Brookfield and Quiksilver, the Rounded O’ mark and the Angular O’ mark differ in several material respects.

The court also noted that cases from other circuits and from the Trademark Trial and Appeal Board have only allowed tacking when the marks are “virtually identical.” As such, the court concluded that the district court properly granted One Industries’ motion for a more definite statement because the differences between O’Neal’s Rounded O’ mark and Angular O’ mark are so material that they do not meet the “exceptional” instances where tacking should be allowed.

The remainder of the court’s decision addresses the district court’s decision finding no likelihood of confusion with O’Neal’s marks. The court, reviewing the lower court’s summary judgment decision de novo and applying the eight factor test used by the Ninth Circuit for determining “likelihood of confusion” set forth in AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979), concluded that there was no likelihood of confusion in this case – primarily based on the dissimilarity of the marks, the lack of evidence of actual confusion, and the weakness of the mark given the presence of other similar O marks in the marketplace. “In the absence of evidence of actual confusion or intent to deceive, we decline to grant O’Neal a virtual monopoly on the use of the letter “O” on motorcycle helmets. The mere fact that the two companies are direct competitors and happen to use the same letter on their products is not sufficient to show infringement.” The same was true for the claims that One Industries’ marks infringed on O’Neal’s O’NEAL mark (marks were entirely different). And such lack of confusion also refuted O’Neal’s claims of trade dress infringement (which were based on the position of the O’NEAL on a helmet).

Accordingly, the Court of Appeals affirmed the district court’s granting of the motion for more definite statement and motion for summary judgment in favor of One Industries.

Judge Graber, concurring in part and dissenting in part, believed that the district court erred in resolving the tacking question as a matter of law in a motion for a more definite statement:

In my view, it was inappropriate for the court to decide that O’Neal was not permitted to tack its 2003 mark to its older marks as a matter of law in a pre-discovery Federal Rule of Civil Procedure 12(e) order. At that stage in the litigation, it would have been impossible for the district court to conclude that reasonable minds could not differ and that the evidence permitted only one conclusion regarding tacking. Indeed, the court made no such finding, and the majority itself concedes that this is a “close case.” Maj. op. at 11609. The order granting the motion states only that the “Court is unpersuaded by O’Neal’s claim that it uses only one mark that has been slightly altered over the years.” That conclusory statement, unsupported by any evidence in the record at that time, is not enough to decide the highly fact-dependent question of tacking as a matter of law. I would therefore reverse and remand.

Friday, August 21, 2009

Anytime Fitness Sues Las Vegas Franchisee

On August 20, 2009, Anytime Fitness, Inc. (“Anytime Fitness”) filed a lawsuit in Minnesota Federal District Court against Las Vegas residents Lawrence Fagan and Linda Fagan and several of their Nevada limited liability companies (Rainbow Fitness, LLC; Fort Apache Fitness, LLC; and Blue Diamond Fitness, LLC) for breach of contract and trademark infringement. See Anytime Fitness, Inc. v. Rainbow Fitness, LLC et al, Case No. 09-cv-02185 (D. Minn.). A copy of the complaint (but without the over 100 pages of exhibits) can be downloaded here. [Update: The full complaint with exhibits can be downloaded here.]

AFI is the franchisor of the international Anytime Fitness franchise of small-scale 24 hour fitness centers. AFI owns the U.S. registered trademark ANYTIME FITNESS for “health and fitness club services.”

In April 2008, the Fagans, through their LLCs, entered into five year Franchise Agreements with AFI to open Anytime Fitness centers at three Las Vegas valley locations. The agreements each contained a forum selection clause choosing Minnesota as the sole forum for litigating disputes under the Agreement.

According to the complaint, as a franchisee of the Anytime Fitness “System,” the Fagans received information and know-how about operating a largely unstaffed 24-hour co-ed fitness center (with a limited “menu” of services that purportedly allows AFI’s business model to succeed where others have failed).

The Agreements included a covenant not to compete whereby the Fagans agreed that during the term of the Agreements, they would not start a competing fitness center business in their protected territory or within five miles of any Anytime Fitness location. The Agreements also gave the Fagans the right to use AFI’s trademarks in the promotion of their franchised locations.

Apparently, sometime in April 2009, AFI showed Lawrence Fagan a closed Anytime Fitness center location at 6300 West Charleston Blvd. in Las Vegas to see if he would be interested in taking over that location. The landlord had purchased the equipment from the former franchisee and had apparently been speaking with Fagan about reopening the center. Fagan declined AFI’s offer to open an Anytime Fitness location at this Charleston location.

Then, according to AFI, the Fagans turned around and began operating a fitness center at this location on Charleston under the name Lifestyle Fitness 24/7 (“Lifestyle Fitness”). Of course, according to the City of Las Vegas, the business license for the Lifestyle Fitness located on Charleston is in the name of Anthony Pasquale and was issued on July 23, 2009. [Of course, his own Linked-In page states that he is a co-owner and the City of Las Vegas’ records also reflect his title as President 100% although there is no indication of a corporation as owner].

AFI claims that Lifestyle Fitness is using AFI’s “System” including the same membership agreement, the same keyless entry system, same equipment layout, the same limited menu of services, and has been using materials and equipment obtained from AFI’s suppliers. [Query – if a third party came in and took over a location that was formerly an Anytime Fitness just as it was before it was closed but simply changed the name, wouldn’t one expect that the same equipment, keyless entry system, services menu, etc. would simply be part of what was left over to purchase.]

AFI also claims that the Fagans intend to open another fitness location (currently under construction) under the Lifestyle Fitness name at the intersection of Warm Springs Road and South Durango Drive in Las Vegas. AFI further claims that the Fagans are promoting their Lifestyle Fitness locations using AFI’s registered mark. AFI also claims that the “key fobs” located at the fitness center locations which allow patrons 24 hour access to the fitness center were purchased through an affiliate of AFI and use AFI’s proprietary software. [Weren’t the key fobs already installed at the Charleston location?]

AFI further alleges that the Fagans are planning on allowing members of its three Anytime Fitness locations access to their two Lifestyle Fitness centers. AFI also asserts that the Fagans are informing the members at their Anytime Fitness locations that they will either be converted to Lifestyle Fitness centers or closed down (and such members transferred to their Warm Springs & Durango location). Finally, AFI claims that the Fagans are soliciting employees and members at their existing Anytime Fitness locations to come over to their Lifestyle Fitness locations.

AFI sent a letter to the Fagans on August 7, 2009, reminding them of their non-compete obligations under the Franchise Agreements and demanding that they cease any competition. The Fagans responded to AFI’s letter with an e-mail on August 17, 2009, but apparently did not address the issue of whether they were competing with AFI. AFI responded to this e-mail with two specific questions about any involvement by the Fagans with the Charleston location or any other fitness center in Las Vegas. The Fagans answered “No” to both questions on August 19, 2009. Apparently, AFI did not believe the Fagans’ answers.

AFI’s causes of action are for breach of contract, federal and common trademark infringement, federal and common law unfair competition, violations of Minnesota’s deceptive trade practices act and unlawful trade practices act, unjust enrichment, misappropriation of trade secrets, and tortious interference with contractual relations and prospective economic relations. AFI is seeking the usual injunctive relief and damages (actual and treble), as well as costs and attorneys fees.

Wednesday, August 19, 2009

Arnold Sues Sara Lee Over SANDWICH THINS

Arnold Products, Inc. (“Arnold”), a company known for its premium bread products (and which is part of the Bimbo Bakeries USA company), filed a trademark infringement lawsuit against Sara Lee Corporation (“Sara Lee”) in the U.S. District Court for the Southern District of California. See BBU, Inc. et al v. Sara Lee Corporation, et al., Case No. 09-cv-01787 (S.D. Cal. Filed August 17, 2009). A copy of the complaint can be downloaded here.

One of Arnold’s products is a sandwich-sized flatbread (a supposed healthier alternative to a traditional bread bun) which Arnold markets under the name “Sandwich Thins” (and sometimes under the brand name Oroweat instead of Arnold). On June 16, 2009, Arnold registered the mark SANDWICH THINS (SANDWICH disclaimed) for “Bread” with the U.S. Patent and Trademark Office.

According to the complaint, Sara Lee recently sent out some marketing information to grocery stores nationwide promoting a similar sandwich-size flatbread product under the marks SANDWICH THINS and THINS marks that Sara Lee was planning to launch on September 14, 2009 (pictures can be seen on page 6 of the complaint although they are not very clear). Sara Lee’s advertisements even mentioned how Arnold’s products have established public awareness about such flatbread sandwich products.

Arnold claims that Sara Lee’s imminent use of the marks SANDWICH THINS and THINS in connection with the intended sandwich-sized flatbread goods, is likely to cause confusion with Arnold’s registered mark and will trade on the goodwill Arnold has established in the SANDWICH THINS mark.

So does Arnold have a “thin” trademark infringement case? Or is this another example of a company being on the forefront of establishing a particular brand name for a product and a competitor trying to trade on such goodwill with its own competing product?

Friday, August 14, 2009

ICAAN Delivers Death Knell to Domain Tasting

ARS Technica reports on the “end of domain tasting” after the implementation of ICAAN’s most recent excessive cancellation penalty of $6.75 per withdrawn domain name. ICAAN’s report on the results of its new policy can be downloaded here.

Monday, August 10, 2009

Not-so-wise trademark application for WISE LATINA

It never ceases to amaze me how events in the news will drive enterprising individuals to file for trademark protection on some phrase that has captured the public's attention with visions of grandeur of having an exclusive monopoly on said phrase (typically in connection with using the phrase on a t-shirt).

In this case, the phrase is WISE LATINA – made famous by the too often repeated (and taken out of context) quote that so many Republican Senators focused upon in order to try and come up with some kind of criticism against now Supreme Court Justice Sonia Sotomayor from a lecture she gave at the University of California (Berkeley) School of Law in 2001: “I would hope that a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion than a white male who hasn't lived that life.”

A Wise Latina Indeed!

On July 24, 2009, Cultural Communications LLC filed a trademark registraiton application with the U.S. Patent and Trademark Office (“PTO”) to register the mark WISE LATINA for the following goods: “Full line of clothing, footwear, and headgear, namely, aprons, bandanas, bathing suits, bathrobes, beachwear, belts, body shapers, bottoms, caps, coats, dresses, ear muffs, earbands, footwear, gloves, hats, head wear, infant wear, jackets, jeans, lingerie, neckwear, nightwear, pajamas, pants, rainwear, robes, shirts, shoes, shorts, skirts, sleepwear, slippers, socks, stockings, suits, suspenders, sweaters, swimwear, tops, undergarments, underwear, and vests.” The basis of the application was use-in-commerce with first use date in commerce of July 24, 2009.

Of course, what I find most interesting about this application is the specimen submitted to the PTO (see picture below) in order to show use of the mark WISE LATINA as a trademark identifying the clothing goods.

If you look closely, the shirt's tag reads “American Apparel.” So is this a “Wise Latina” brand t-shirt or is this just an “American Apparel” brand t-shirt that someone emblazoned with the ornamentation “Wise Latina”?

In addition, this is just a picture of t-shirt. While the PTO does not require an applicant to submit specimens showing use of the mark in connection with all of the goods listed in the application, in order for the application to not be deemed fraudulent, the applicant must still be using the mark in connection with all of the goods listed . . .or else the ultimate trademark registration (if it issues with goods on which the mark was not being used at the time of filing) is tainted by fraud. Do you think that Cultural Communications was really using the mark WISE LATINA as a mark (and not just ornamental use) in connection with all of the clothing items listed in the application?

And finally, does the trademark applicant in these circumstances really believe that a trademark registration for the mark WISE LATINA in connection with clothing is really going to be able to stop other people from printing t-shirts emblazoned with the words WISE LATINA (with most consumers associating that phrase more with Justice Sotomayor’s now famous quote than with a particular seller of goods)?

Justice Sotomayor practiced in the area of trademark law before moving to the judiciary. What do you think her thoughts would be regarding this application?

Thursday, August 6, 2009

Pepsi Loses Motion for Preliminary Injunction Against Coke’s Energy Drink Ads

I previously wrote (link here) about the false advertising lawsuit filed in U.S. District Court for the Southern District of New York by Stokely-Van Camp, Inc. (owned by Quaker Oats which is controlled by PepsiCo Inc.) – the maker of the Gatorade energy drink – against The Coca-Cola Co. and its energy drink division, Energy Brands Inc. , which makes the Powerade energy drink.

On Tuesday, a U.S. District Court denied Pepsi’s Motion for Preliminary Injunction after determining that Pepsi had not shown either a likelihood of irreparable injury or a likelihood of success on the merits. See Stokely-Van Camp, Inc. v. The Coca-Cola Company et al., Case No. 09-03741 (S.D.N.Y. August 4, 2009). A copy of the 54 page decision can be downloaded here. Reuters and Courthousenews both ran news coverage of the decision.

Pepsi came up with the idea for Gatorade ION+, its planned calcium-enriched sports drink formula with its “sweat-emulating reformulation,” when it learned of Coke’s Powerade's ION4 product that was coming to market. Unfortunately, Pepsi’s supply of calcium dried up and so Pepsi had to change its advertising to eliminate references to calcium and magnesium – something that Coke took advantage of in some comparative ads as part of its Powerade marketing campaign that sparked the lawsuit by Pepsi in the first place. The court noted that while Pepsi complains about Coke’s claims regarding the presence of calcium and magnesium in Powerade ION4, Pepsi had made virtually the same claims about its own Gatorade formula (before being forced by circumstances to eliminate such references). The court stated that Pepsi “cannot, having jumped on the bandwagon of calcium and magnesium first, now jump off and claim that Coca-cola must get off too.”

Of course, both sides have their own spin on the outcome. Coke described the decision as “a complete win” for its sports drink [ed. - leave it to PR people to turn a legal decision into a product endorsement]. On the other hand, Pepsi notes that Coke stopped its “disparaging claims” against Gatorade in its advertising (a campaign that Coke described as short-lived anyway) after the lawsuit was filed, so Pepsi feels that it accomplished what it set out to do [ed. – unless, of course, Coke decides to start the campaign back up again now that there is no threat of a preliminary injunction enjoining Coke from doing so].

Tuesday, August 4, 2009

Court Preliminarily Enjoins U.S. Government's Seizure of Items Bearing MONGOLS Membership Mark

Pamela Chestek’s Property, Intangible blog provides an update on the Mongols trademark saga (previously blogged here) that dominated the headlines last October when, after the government seized the registered collective membership mark MONGOLS as part of a U.S. government racketeering indictment against the Mongols Motorcycle Club ("Mongols"), a court entered a broad injunction order which essentially prevented members of the Mongols from wearing any clothing bearing the MONGOLS mark. [Note: while there does exist a second registered trademark for M.C. (and Design), this registered mark was not part of the court’s amended restraining order at issue].

A Member of the Mongols (who was not part of the criminal indictment) brought a civil action seeking injunctive relief against the government from any seizure of his items bearing the MONGOLS mark which identified his membership in the Mongols. The court concluded that the government’s seizure of the trademark under the RICO statute was improper because the government’s RICO indictment was against individual members of the Mongols and not against the entity which owns the MONGOLS mark, and thus the U.S. government could not seize such property under RICO. Accordingly, the court granted the preliminary injunction enjoining the government from seizing any property items bearing the MONGOLS collective membership mark. See Rivera v. United States, Case No. 09-cv-2435 (C.D. Calif. Aug. 3, 2009).