Friday, March 26, 2010

Court finds no abandonment of ATLA mark by American Association for Justice

The American Association for Justice (“AAJ”) (formerly the Association of Trial Lawyers of America) won a signfiicant victory in its trademark infringement lawsuit against The American Trial Lawyers Association (“TheATLA”) (previous blog posts here and here) when the court found that the AAJ had not abandoned its trademark rights to the ATLA mark despite having intentionally made the decision to change its name from ATLA to AAJ. See American Association for Justice v. The American Trial Lawyers Association et al, Case No. 07-cv-04626, 2010 U.S. Dist. LEXIS 25325 (D. Minn. March 18, 2010). article here.

TheATLA tried to argue that AAJ abandoned its rights to ATLA when it made the decision to change its name. In ruling against TheATLA, the court noted the following:

[A] prospective intent to abandon a mark does not establish abandonment. Electro Source, LLC v. Brandess-Kalt-Aetna Group, Inc., 458 F.3d 931, 937 (9th Cir. 2006). Rather, “abandonment requires complete cessation or discontinuance of trademark use.” Id. at 938. A single bona fide use of a mark “‘is sufficient against a claim of abandonment.’” Id. (quoting Carter-Wallace, Inc. v. Procter & Gamble Co., 434 F.2d 794, 804 (9th Cir. 1970)). If use of the trademark is not actually discontinued, “the intent not to resume use prong of abandonment does not come into play.” Id. at 937-38. Because abandonment constitutes a forfeiture of a property right, it “must be strictly proved” by the party seeking abandonment. See Iowa Health Sys., Inc. v. Trinity Health Corp., 177 F. Supp. 2d 897, 918 (N.D. Iowa 2001) (quotation marks omitted).

The court found that after the official name change in December 2006, AAJ continued to identify itself as “formerly the Association of Trial Lawyers of America” on its website, in advertisements, and mailings to prospective members:

Such use of the designation “formerly” to capitalize on the goodwill and source identification of the marks constitutes bona fide use. Cf. First Fed. Sav. & Loan Ass’n of Council Bluffs v. First Fed. Sav. and Loan Ass’n of Lincoln, 929 F.2d 382, 385 (8th Cir. 1991) (“The new savings and loan plans to capitalize on First Federal Council Bluffs’ good name by advertising itself as the ‘former First Federal.’ This [may] support a continuation of the injunction [prohibiting the defendant’s use of First Federal] for as long as the identification with the former institution is used by the new owners.”); Alliant Energy Corp. v. Alltel Corp., 344 F. Supp. 2d 1176, 1187 (S.D. Iowa 2004) (“Despite a name change, a trademark may still possess significant goodwill and remain a valuable asset to a company. . . . Even in cases such as the present one, where there are extensive efforts to notify the public of the name change, there is still the possibility that goodwill remains in the marks.”).

The court found this evidence alone warranted summary judgment in favor of AAJ and against TheATLA on TheATLA’s affirmative defense of abandonment. The court further reinforced its decision by noting that AAJ had continued to license ATLA to at least one licensee who has continuously used the mark, several publications continued to be published using the ATLA mark, and AAJ maintained the and websites to direct users to the organization’s new website (which capitalized on the source identification and goodwill of the ATLA mark by directing those individuals who were drawn to the website by the ATLA mark to the new AAJ website).

With the exception of the issue of abandonment, the court denied the summary judgment motions filed by both sides. The case now moves on to trial.

Thursday, March 18, 2010

The Cupcakery suffers minor setback in lawsuit against former employee

I previously wrote (link here) about the trademark infringement lawsuit filed by The Cupcakery, LLC (“The Cupcakery”) against former employee Andrea Ballus and her company Sift: A Cupcakery, LLC (“Sift” and together with Ballus, the “Defendants”) in Nevada District Court. See The Cupcakery, LLC v. Ballus et al, Case No. 09-cv-00807 (D. Nev.).

In addition to the trademark infringement allegations regarding use of the term “Cupcakery” (which The Cupcakery claims as its exclusive trademark but which Defendants claim has become generic for a cupcake bakery), The Cupcakery also set forth a claim for common law fraud based on Ballus’ failure to disclose certain information to The Cupcakery prior to, and during the course of her employment (such as her intent to move to California, her intent to open a competing cupcake; the fact that she had registered Sift as a limited liability company with the California Secretary of State). The Cupcakery tried to argue that such omissions constituted intentional misrepresentations because there existed a “special relationship” between The Cupcakery and Ballus arising from her signing of a confidentiality agreement that gave rise to a duty to disclose such information.

However, as reported by Las Vegas Sun, the Court granted Defendants’ Motion to Dismiss The Cupcakery’s fraud claim (but with leave to amend) because Plaintiff failed to cite to any language in the confidentiality agreement that imposed a duty on Ballus to disclose the type of intentions that The Cupcakery now claims should have been disclosed (and the failure of which would rise to the level of common law fraud). A copy of the Order can be downloaded here.

The court stated the following regarding Plaintiff’s allegations regarding a “special relationship” between The Cupcakery and Ballus:

Plaintiff has failed to demonstrate that the relationship between Ballus and Plaintiff, her employer, was such that Ballus’s failure to disclose gives rise to a misrepresentation or fraud claim. While Plaintiff avers that Plaintiff signed a confidentiality agreement which may give rise to the creation of a special relationship, Plaintiff has failed to include the language of said agreement, or how this alleged agreement imposed upon Plaintiff a duty to disclose that she intended to move to California, that she had any intention to open a cupcake business, or that she had registered Sift as a limited liability company with the California Secretary of State.

The Motion to Dismiss was only directed to the fraud claim, so the court’s decision only dismissed that single claim. The case will continue forward on the more interesting (at least more interesting to me) issues regarding The Cupcakery trademark rights to the term “cupcakery” in connection with a cupcake bakery.

Meanwhile, much to my surprise given that parties usually suspend TTAB proceedings when a related district court action is pending, it appears that the opposition filed by The Cupcakery against Sift’s application to register the mark Sift: A Cupcakery is moving forward towards the trial period over the next few months. See The Cupcakery, LLC v. Sift: A Cupcakery LLC, Opposition No. 91188833 (T.T.A.B. Filed February 12, 2009). The parties may have a decision by the TTAB on the trademark questions before the district court even has the opportunity to address any trademark issues.

Saturday, March 13, 2010

Court Concludes No Likelihood of Confusion between AutoZone and OilZone/WashZone and AutoZone’s Claims Barred by Laches

I previously blogged (link here) about the trademark infringement lawsuit brought by automotive parts retailer AutoZone against Illinois businessman, Michael Strick, doing business under the service marks Oil Zone and Wash Zone. The Seventh Circuit reversed a district court’s decision finding no likelihood of confusion as a matter of law between the AUTOZONE mark and Strick’s use of OILZONE and WASHZONE. See AutoZone, Inc. et al v. Strick et al., Appeal No. 07-2136 (7th Cir. September 11, 2008). The decision sent the case back the lower court for trial.

After a bench trial was held on November 2 and 3, 2009, U.S. District Court Judge John Darrah on March 8, 2010, issued findings of fact and conclusions of law which rule in favor of Strick and against AutoZone. The court concluded that Strick's use of the OIL ZONE and WASH ZONE names and marks was not likely to cause consumer confusion with AutoZone’s mark, and, in the alternative, AutoZone’s lawsuit was barred the doctrine of laches. See AutoZone, Inc. et al v. Strick, 2010 U.S. Dist. LEXIS 21928, Case No. 03-cv-8152 (N.D. Ill. March 8, 2010).

Because there was no issue regarding the protectibiliyt of AutoZone’s marks, the decision came down to likelihood of confusion. The court went through an analysis of the seven likelihood of confusion factors set forth in CAE, Inc. v. Clean Air Engineering, Inc., 267 F.3d 660, 677-78 (7th Cir. 2001).

Regarding the similarity of the mark, while they all three contained the word “zone” (preceded by a short one or two syllable word), the court found that the marks have significant differences, including color, letter capitalization, the appearance of the individual letters altogether and even the graphical elements conveying movement or speed, that made the marks only somewhat similar. The court also took into account the retail context in which the marks appeared to find that confusion was even less likely:

Furthermore, confusion between the marks is even less likely when the marks are considered in the physical retail context in which they are displayed by the parties and perceived by the consumer. Specifically, the exterior appearance of the Oil Zone facilities significantly diminishes the probability of consumer confusion by associating either location with AutoZone. The Wheaton Oil Zone location is a simple concrete building with a green Oil Zone sign. The Naperville Oil Zone/Wash Zone location is a white building with a blue roof. Neither has an appearance even slightly resembling a typical AutoZone store, which has the standardized, uniform look consistent with a retail store operated as part of a nationwide chain. In contrast, the Oil Zone locations present the appearance of two small, independent businesses, not associated with any national commercial entity.

Regarding similarity of the products and/or services offered, while the businesses may generally relate to care and maintenance of automobiles, the court found that Oil Zone and Wash Zone primarily provide automotive services while AutoZone primarily sells automotive products. The court rejected as unsupported by any evidence AutoZone’s claims that consumers would believe these are service-only centers of AutoZone.

Regarding the “area and manner of concurrent use” factor, the court found differences in the customer bases of the two businesses (65% of Strick's customers are women while 20% of AutoZone customers are women; AutoZone has a very high percentage of DIY customers while Strick’s facilities provide basic automobile maintenance services to automobile owners). The court also noted that AutoZone customers generally seek to purchase products for use by the customer in performing maintenance and repair on an automobile whereas Oil Zone/Wash Zone customers are seeking to purchase both the part and the installation and repair or maintenance service. The court also found that the physical appearance of the interior of Strick's facilities make it unlikely that a consumer would believe that the business sold auto parts. Similarly, the typical AutoZone store is a retail facility with large glass windows but no car bays with an interior that contains aisles of shelves stocked with automobile parts and accessories. The court also noted that there is no significant concurrent use of the marks in advertising because AutoZone’s ads are mostly nationwide through television, radio, newspapers, and sponsorship of professional teams, while Strick’s primary means of advertising is through direct mail -- a method not used extensively by AutoZone.This factor favored no likelihood of confusion.

As for the degree of care likely to be exercised by consumers, the court rejected AutoZone’s arguments that customers are likely to exercise a low degree of care because most of the products and services sold by Autozone and Strick are inexpensive in light of the “distinct difference in essentially the sale of services offered by Strick and the sale of products offered by AutoZone.”

Sidenote: The court could not resist pointing out that AutoZone, in its own proposed findings of fact and conclusions of law, stated that “Strick's customer base consists largely of individuals who live or work within a three-mile radius of one of its two locations, which suggests that those customers are drawn to Strick's business because they are convenient to customers' homes and offices, and that these customers would continue to frequent Strick's business regardless of the names used to identify those operations,” which the court took as an admission by AutoZone that Strick's customers are drawn from a limited surrounding area, familiar with his business and not dependent on Strick's use of any particular mark. [ed.--Oops!]

There was no dispute that AutoZone’s marks were strong, and thus the “strength of the mark” factor favored AutoZone. AutoZone admitted that it had no evidence of actual confusion. While the court acknowledged that evidence of actual confusion is not required to show likelihood of confusion, lack of such evidence over an extended period of time may indicate lack of actual confusion. In this case, Strick had been using the OIL ZONE mark for over 13 years and AutoZone had no evidence of any incident of confusion between the marks during this time period – even though AutoZone had two facilities located within a mile of Strick’s locations. “Therefore, the absence of actual confusion, particularly when considered in the context of these facts, fails to support AutoZone's claim.”

The final factor was Strick’s intent. The court found credible and persuasive Strick’s testimony that he had not heard of AutoZone at the time he created the OIL ZONE name and mark in 1996. The court also rejected AutoZone's evidence that its Chicago-area advertising somehow put Strick on notice when he opened his business: “AutoZone did not provide specific evidence as to what advertising was done in Chicago prior to 1996. Considering the evidence presented, it is reasonable to conclude that Strick created OIL ZONE before AutoZone had fully developed its Chicago advertising campaign.” In addition, the two AutoZone stores nearest to Strick at the time he opened his first location were forty miles away, which the court found could not have reasonably provided notice of the AUTOZONE mark. The court found no persuasive evidence that Strick intended to "palm off" his business as AutoZone

Weighing all of the factors above, the court found that AutoZone had failed to establish by a preponderance of the evidence that Strick's use of the OIL ZONE and WASH ZONE marks were likely to cause confusion among consumers (finding that only the strength of the mark weighed in favor of AutoZone, which was significantly outweighed by the dissimilarity of the marks and the products and services offered by the parties).

The court also addressed Strick’s alternative argument that the doctrine of laches bars AutoZone's claims. AutoZone became aware of Strick's use of OIL ZONE and WASH ZONE in December 1998, but did nto contact Strick until a cease and desist letter was sent in February 2003. This four year delay was outside the three-year statute of limitations found in the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/10a(e), and therefore, there was a presumption of unreasonable delay applied.

AutoZone attempted to argue that its delay was not unreasonable and was excusable due to AutoZone's other ongoing enforcement actions between 1998 and 2003 (even having in-house counsel testify regarding AutoZone’s procedures for monitoring and prioritizing trademark enforcement actions). But the court shot down AutoZone quite directly stating “It is clear that the actual reason AutoZone did not pursue this case in a reasonably timely manner was not that it was too busy with other enforcement actions but, rather, that for whatever reason, it gave the case file no attention for nearly four years. This does not excuse AutoZone's delay. Therefore, AutoZone has not overcome the presumption that its four-year delay was unreasonable.” (footnote omitted).

After determining unreasonable delay, the court turned to the question of whether Strick has shown prejudice due to AutoZone's inaction. While AutoZone tried to argue that Strick had presented no concrete evidence that he has built up good will or customer loyalty over the last four years, the court rejected the need for such evidence in showing prejudice: “It is undisputed that Strick spent four years and a substantial sum promoting the Oil Zone name. Forcing him to change that name now would obviously cause a loss in terms of both time and money. Thus, Strick has shown that he has been prejudiced by AutoZone's delay.” While AutoZone argued that that Strick had not shown that he relied on AutoZone's delay and that AutoZone's action induced Strick to adversely change his position, the court rejected the argument that such a showing was required (citing recent Seven Circuit case law) and held that Strick did not need to make any further showing with respect to prejudice.

Accordingly, the court held that AutoZone unreasonably delayed in bringing this suit, and Strick would be prejudiced by allowing AutoZone to now assert its rights and applied the doctrine of laches to bar AutoZone’s lawsuit.

Wednesday, March 10, 2010

A New Chapter Opens in the “Who Dat” Trademark Story

Earlier this year, the “Super Bowl” trademark story of the year centered not around the NFL’s usual efforts to crack down on unauthorized use of the SUPER BOWL trademark, but instead about purported efforts by the NFL to claim ownership to the mark WHO DAT (coverage of the dispute here and here)

On March 4, 2010, Who Dat? Inc. (“WDI”) filed a lawsuit against the NFL, the New Orleans Saints, the Louisiana Secretary of State and the State of Louisiana. See Who Dat?, Inc. v. NFL Properties, LLC et al, Case No. 10-cv-00154 (M. D. La. March 4, 2010). A copy of the complaint can be downloaded here (or here). Other press coverage here, here and here.

Courthousenews provides an excellent summary of the pertinent allegations of the 60 page, 189 paragraph, 16 count action complaint (which includes pictures) which tells quite a story about the two men who created the “Who Dat” fight song for the New Orleans Saints back in 1983 and began the dream of creating a name that would make them millions . . . and how the dream became a “nightmare.” But the following paragraph near the beginning of the complaint summarizes the crux of the dispute:

Who Dat?, Inc. developed and nurtured “WHO DAT” for over twenty-five years and was uniquely positioned to reap substantial financial rewards in connection with the 2009-2010 National Football League season. On the eve of that success, NFLP and the Saints filed public documents falsely claiming ownership and first use of the phrase. As anyone would have anticipated, the public voiced outrage and State of Louisiana officials publically challenged the claims made by the NFLP and Saints. Since those entities were not the first users of the phrase and had no standing to make the claims made, they publically conceded that they did not own the phrase. With that concession in hand, state officials declared victory and further declared that the phrase belongs to the people as it is in the public domain. As a natural consequence of these actions, Who Dat?, Inc. was not able to obtain the financial fruits of its labor.

Interestingly, while several Louisiana state trademark registrations are noted throughout the complaint as evidence of WDI’s trademark rights, WDI had very few federal registrations to evidence its trademark rights. One was for soft drinks, but it has since been canceled (the 5 year statement of use was not filed). Another was for the mark WHO DAT BLUE BAND, but as noted in the complaint, this was registered by a third party in 2004, and only assigned to WDI in December 2009 in order to resolve a cancellation proceeding filed by WDI.

WDI had several other intent-to-use trademark applications pending, but each went abandoned for lack of any Statement of Use, including two applications for clothing (here and here) and two applications for potato chips (here and here) – all filed on the basis of intent-to-use and all went abandoned after no Statement of Use was filed. One additional use-in-commerce application for bumper stickers went abandoned after failing to respond to an office action.

More recently, WDI filed another use-in-commerce application for WHO DAT on January 7, 2010, covering musical sound recordings and various clothing items (claiming date of first use going back to October 1983). Unfortunately, WDI’s application to register the mark for its clothing goods will inevitably be suspended pending the outcome of two earlier filed applications for WHO DAT (currently allowed and awaiting a Statement of Use from the applicant and WHO DAT' JE CROIS.

One has to wonder why WDI did not follow through with its federal trademark registrations for clothing if, as stated in the complaint, it was licensing the mark to third parties for use in connection with shirts and other products. It certainly recognized the importance of seeking federal registrations – as evidenced by its prior applications. And while it’s not clear how WDI may have sold its goods throughout the years, it currently sells its goods through the website – – a domain name registered on August 13, 2009.

The situation serves as lesson that a trademark is only as good as its ability to serve as a unique source identifier for a particular source of goods or services. Just because you come up with a unique phrase does not mean that you have any exclusive rights to the term to the extent you are not actually using it in a manner that would be recognized as a source identifier in connection with particular goods and services. As for WDI, it's one thing to talk about having created a unique term or phrase – its quite another to have the evidence to show that it has always served as a unique identifier for WDI's goods and services. We shall see.

Tuesday, March 2, 2010

Ninth Circuit Clarifies How Domain Names Can Be Attached By Creditors

Last week, the Ninth Circuit Court of Appeal clarified last week that creditors seeking to attach writ of executions against domain names in order to satisfy outstanding judgments can do so by levying the domain names through a court appointed receiver in a jurisdiction where either the domain name registrar or registry is located. See Office Depot, Inc. v. Zuccarini, No. 07-16788 (9th Cir. Feb. 26, 2010). Seattle Trademark Lawyer and Technology & Marketing Law Blog both have detailed posts on the court’s decision.

Basically, the Ninth Circuit upheld its prior decision in Kremen v. Cohen, 337 F.3d 1024, 1030 (9th Cir. 2003) that domain names are intangible property which can subject to a writ of execution. One important nuance highlighed by the court's decision is that while domain names cannot be subject to a turnover order under California law because they cannot be taken into custody, a domain name can be transferred to an appointed receiver who can then sell the domain name in order to satisfy a judgment.

Moreover, based on the sections of the Anticybersquatting Consumer Protection Act that allow for in rem actions to be filed against domain names in either the jurisdiction of the registrar or the registry, the court further concluded that under California law domain names are located where the registry is located for the purpose of asserting quasi in rem jurisdiction (so-called “attachment jurisdiction” because the jurisdiction establishes ownership of property in a dispute unrelated to the property – in thiscase, the original lawsuit brought by Office Depot for cybersquatting against Zuccarini involved a single domain name and resulted in a judgment that Office Depot then sought to satisfy by going after other domain names owned by Zuccarini).