Thursday, September 23, 2010

Hard Rock Café Sues Hard Rock Hotel & Casino

On September 21, 2010, Hard Rock Cafe International (USA), Inc. (“HRCI”) filed a lawsuit in the U.S. District Court for the Southern District of New York against various defendants that use the “Hard Rock” trademark, most notably the group of companies which own and/or operate the Hard Rock Hotel & Casino in Las Vegas, Nevada (the “Defendants”). See Hard Rock Cafe International (USA), Inc. v. Hard Rock Hotel Holdings, LLC et al, Case No. 10-cv-07244 (S.D.N.Y. Filed September 21, 2010). A copy of the complaint can be downloaded here (HT: Steve Green). The Las Vegas Sun has an article on the lawsuit here (see also and Las Vegas Review Journal).

HRCI filed the action “in order to protect the enormous goodwill in its world-renowned trademarks from being systematically diminished, devalued and damaged by the wrongful conduct of Defendants.” HRCI claims that the Defendants are using the “Hard Rock” trademarks in a manner that has intentionally, materially breached the terms of a 1996 license agreement entered into with HRCI’s predecessor-in-interest and violates HRCI’s trademark rights to such marks.

More specifically, HRCI claims that the Defendants’ actions at the Hard Rock Hotel/Casino have caused HRCI’s marks to “become associated with objectionable and offensive conduct that is at odds with the brand imagery of the HARD ROCK trademarks” and “failed to use their best efforts to protect the goodwill associated with” HRCI’s trademarks.

The complaint spends several pages going through the history of the Hard Rock Café and the creation of the worldwide successful HARD ROCK brand by original founders Peter Morton and Isaac Tigrett.

Then, in 1990, The Rank Group, Plc (“Rank”), HRCI’s predecessor-in-interest, acquired all of Tigrett’s interests in the business then operated under the HARD ROCK Marks at that time. In June 1996, Rank entered into a transaction with Morton whereby Morton sold to Rank his interests in the business then conducted under the HARD ROCK Marks, with the exception of ownership of the Hard Rock Hotel & Casino in Las Vegas and the option to develop other properties using the HARD ROCK HOTEL and HARD ROCK CASINO marks in certain geographic areas.

According to the complaint, Rank acquired all right, title and interest to all HARD ROCK marks registered and used around the world and Morton received a license from Rank (through a Rank IP licensing special purpose entity, Rank Licensing, Inc.) to use the HARD ROCK HOTEL and HARD ROCK CASINO marks on a limited basis and subject to a number of conditions. Rank Licensing later assigned all right, title and interest in the HARD ROCK Marks to HRCI. (Note: The few assignment records reviewed regarding the some HARD ROCK registrations did not show this precise chain of title – see, e.g., here and here).

The complaint next asserts that in February 2007, as part of a buyout of Peter Morton’s interests in the Hard Rock Hotel/Casino business, Morton assigned the rights granted to and obligations imposed on him by the 1996 License Agreement to one of the Defendants, HRHH IP, LLC. And since that time, HRHH IP, LLC and Hard Rock Hotel Holdings, LLC have been licensees of HRCI under the 1996 License Agreement (and apparently represented to third party sublicensees that they are licensees under such agreement).

After detailing various sections of the License Agreement regarding use of the marks and protecting the goodwill, the complaint then gets into the juicy details which give rise to the dispute.

(looks like harmless, innocent fun)

In November 2008, a reality television program titled “Rehab: Party at the Hard Rock Hotel” (“Rehab”) began airing throughout the United States. Rehab supposedly depicts events occurring during pool parties held on Sundays at the Hard Rock Hotel & Casino in Las Vegas. [I use the word “supposedly” because does anybody really believe that “reality” shows actually depict reality anymore – as opposed to carefully calculated and constructed entertainment programs designed to appear as if they depict reality?]

According to the complaint, the behavior depicted in Rehab is “entirely at odds with the brand image of the HARD ROCK Marks.” Specifically,

Rehab portrays the Las Vegas HARD ROCK HOTEL & CASINO, a property operated under trademarks owned and licensed by HRCI, as a destination that revels in drunken debauchery, acts of vandalism, sexual harassment, violence, criminality and a host of other behavior that most members of the general consuming public of the United States who regularly frequent or are potential patrons of HRCI’s HARD ROCK CAFE restaurants and other properties operated under the HARD ROCK Marks would find unseemly and objectionable.

[Comment: Isn’t the "Hard Rock" brand image one that is associated closely with rock and roll music, which itself is associated with the image of sex, drugs, and rock and roll – sounds like the behavior depicted complements the brand imagery of the HARD ROCK marks quite nicely].

The complaint also maintains that the Rehab show portrays the staff of the Las Vegas Hard Rock Hotel & Casino as “unprofessional, incompetent, and/or physically and emotionally abusive to hotel guests and other staff.” [ed. – have you seen how rowdy and obnoxious some guests get while living it up in “Vegas”?] Of course, HRCI claims that it “prides itself on offering guests at its HARD ROCK CAFE restaurants and other properties operated under the HARD ROCK Marks dining and entertainment experiences that are pleasurable, fun and consistent with the democratic free spirit of rock music.” [Comment: I think the people engaging in the debauchery at the Rehab pool party were certainly having an entertainment experience that was pleasurable, fun and consistent with the democratic free spirit of rock music – and those watching the show from their homes would surely switch places if they could.]

HRCI then references some highly publicized arrests that occurred in September 2009 at the Rehab pool party where eight patrons were arrested for engaging in acts of solicitation of prostitution and drug distribution (Las Vegas Sun article here) – alleging that Defendants “allowed” the Rehab pool parties to become associated with criminal activity.

The complaint then quotes various communications from members of the public expressly various negatives comments about the Hard Rock Hotel/Casino after viewing the Rehab television show, including communications by members of the public who believe HRCI is responsible for the conduct depicted in the show.

HRCI received assurances from Defendants that the “negative associations” created by the show would be addressed, HRCI alleges that the third season of Rehab “depict the same offensive and depraved conduct portrayed in the first two seasons.” [ed. – does this type of language make anybody else want to check out this show now?]

HRCI maintains that this is harming the reputation and goodwill of the HARD ROCK Marks in violation of the 1996 License Agreement (which requires Defendants to use best efforts to maintain the goodwill of the HARD ROCK Marks). HRCI further maintains that by allowing the Rehab TV show to be aired – and causing the HARD ROCK Marks to become associated with “unsavory, offensive conduct that the majority of the American consuming public finds to be objectionable” [ed.—And yet, the ratings have been high enough to bring it back for a third season so people are watching!] – are intentionally damaging such goodwill.

HRCI also argues that Defendants breached a provision of the 1996 License Agreement by using the mark “HARD ROCK HOTEL” in the title of the Rehab show without HRCI authorization.

HRCI next argues that Defendants have begun branding certain facilities at the Las Vegas property using the acronym HRH (e.g., HRH Tower, HRH Beach Club, HRH Beach Club Bar & Grill) and even branding the property itself as the HRH HARD ROCK HOTEL & CASINO – with the HRH acronym being more prominent than the HARD ROCK HOTEL & CASINO trademark – in an attempt to create a sub-brand of the Hard Rock Marks over which Defendants can claim possesses independent goodwill and capable of being used independently of HRCI (HRCI does have one trademark registration for HRH for clothing items). HRCI maintains that such actions violate the 1996 License Agreement because Defendants are using a mark which is likely to cause confusion with and dilute the distinctive quality of the HARD ROCK Marks.

HRCI’s next focus is on Defendant’s sublicensing of the HARD ROCK HOTEL and HARD ROCK CASINO trademarks to the Cherokee Nation Enterprises, which operates a Hard Rock Hotel & Casino in Tulsa, Oklahoma, and to Pueblo of Isleta Indian tribe which operates a Hard Rock Hotel & Casino in Albuquerque, New Mexico.

Without getting much into specifics, HRCI alleges that the way the HARD ROCK Marks are being used at the Tulsa property are “inconsistent with the brand image HRCI has cultivated over many years” – citing on that “the range of services, character of the establishment and the experience offered to customers is incompatible with consumer expectations for goods and services branded with the HARD ROCK Marks.” [Comment: Are they not offering debaucherous pool parties?]. HRCI cites to some signage that is supposedly not the type of use allowed under the 1996 License Agreement and also mentions the use of the HARD ROCK HOTEL & CASINO mark in the restaurant name “Toby Keith’s I Love This Bar & Grill” where the HARD ROCK mark is subordinate (again, in violation of the provisions in 1996 License Agreement requiring the HARD ROCK Marks to be depicted more prominently, requiring HRCI consent, and requiring HRCI to have copies of all sublicense agreements made between Defendants and third party sublicensees).

HRCI maintains that Defendants have failed in their obligations to ensure that, for its sublicensees, the HARD ROCK Marks are used in a manner that is consistent with the reputation and goodwill of the HARD ROCK Marks. Similar allegations are made regarding Defendants sublicensing at the Albuquerque property.

HRCI’s final focus is the registration by the Defendants of numerous Internet domain names containing variations of the HARD ROCK Marks, including, and, in violation of provisions of the 1996 License Agreement preventing the registration of domain names containing any HARD ROCK Marks.

HRCI’s causes of actions are for breach of contract, declaratory judgment regarding the enforceability of the 1996 License Agreement in light of Defendants’ intentional breaches, federal and state trademark dilution, registered and common law trademark infringement, and federal and common law unfair competition.

Friday, September 17, 2010

Egg Works Left With Egg On Its Face After Court Denies Preliminary Injunction Against Egg World

(I doubt they are smiling today)

The owners of the Las Vegas breakfast restaurants The Egg & I and Egg Works got egg on their face when a federal court denied their motion for preliminary injunction against a competing Las Vegas restaurant named Egg World.

Back in June, Bradley Burdsall, along with his two companies Egg Works, Inc. and Egg Works 2, LLC (collectively “Egg Works”), brought a trademark infringement lawsuit against Egg World, LLC, and two of its principals, Gabrijel Krstanovic, and Dejan Debeljak (collectively “Egg World”). See Egg Works, Inc. et al v. Egg World LLC et al, Case No. 10-cv-01013 (D. Nev.). A copy of the complaint can be downloaded here. The Las Vegas Sun ran an article about the dispute back when the suit was filed.

Probably figuring that upstart Egg World would not have the financial resources to devote towards legal fees, Egg Works came out guns blazing filing a Motion for Temporary Restraining (which was quickly denied) followed by a Motion for Preliminary Injunction – along with what can only be described as a litany of declarations from purportedly confused consumers that Egg Works submitted in support of its argument for trademark infringement of its registered mark EGG WORKS and for why an injunction should be issued immediately against Egg World while the lawsuit is pending.

An evidentiary hearing was held and on September 14, 2010, District court Judge Lloyd George denied Egg Works motion for preliminary injunction on the basis that Egg Works had not shown a likelihood of success on the merits of its trademark infringement claims. A copy of the court's order can be viewed here.

Analyzing the likelihood of confusion between Egg Works and Egg World, the court went though each of the Sleekcraft factors.

Regarding “strength of the mark,” the court rejected Egg Work’s unsupported assertion that the mark does not directly convey any feature or characteristic of its services to consumers and concluded that the mark was “descriptive” and “not entitled to protection absent a showing of secondary meaning” (an issue which Egg Works had not expressly addressed). As such, the court stated that “the descriptive nature of the mark indicates that this factor is likely to weigh in favor of defendants.” [Comment: Not sure how this reconciles with the fact that the PTO did register the EGG WORKS service mark, albeit with a disclaimer for the word EGG. Nonetheless, the court’s comments still reflect that Egg Works’ mark is not as strong as Egg Works would have this court believe].

The court next turned its attention to the factor of actual confusion, which even the court acknowledges “[f]rom the outset, Egg Works has relied heavily on its argument of actual confusion” and how Egg Works submitted “numerous declarations of consumers” and even called consumers as its first three witnesses. The court then provides a good background legal discussion, citing the Ninth Circuit’s recent decision in Fortune Dynamic, Inc. v. Victoria's Secret Stores Brand Mgmt., ___ F.3d ___ , Case No. 08-56291 (9th Cir. Aug. 19, 2010), into the often overlooked, but important distinction between relevant confusion and non-relevant confusion.

Regarding Egg Works' evidence of actual confusion in the form of customer declarations, the court found that “the evidence presented by Egg Works reveals that a substantial number of consumers expressed a non-relevant confusion; confusion that resulted from something other than Egg World’s mark.”

The court noted several declarations from consumers mentioning that they were looking for the “Egg & I” restaurant and got confused when they saw Egg World. The court dismissed each of these declaration as express non-relevant confusion: “While the court agrees that these consumers are expressing confusion, their statements also establish that they are expressing a non-relevant confusion. Although the plaintiffs brought this action and motion to protect Egg Works’ mark, and though none of the above quoted declarants were subjected to cross-examination, each expressed confusion concerning the Egg & I. As Egg Works acknowledged and argued, this matter does not concern the Egg & I.”

The court recognized that the evidence “strongly indicates that the source of the consumers’ non-relevant confusion is the close affiliation between the Egg & I and Egg Works.” Other declarations from consumers supported customer recognition of this affiliation – consumers expressing a belief that Egg World was part of the Egg & I and Egg Works affiliated restaurants.

The court then eloquently explained how this particular type of consumer confusion is not relevant confusion for purposes of determining if Egg World infringes Egg Works:

While each of these declarants reveal their knowledge of the relationship between the Egg & I and Egg Works, they also reveal that this relationship is the source of their confusion. Each of the declarants quantify the relationship between the Egg & I and Egg Works as being a chain or group of restaurants. Each states a confusion whether Egg World was owned by or part of the Egg & I and Egg Works chain or group of restaurants. Based upon this belief, these consumers express a non-relevant confusion that Egg World was being opened as part of the chain or group of restaurants that includes Egg Works and Egg & I. Stated otherwise, the plaintiffs’ marketing successfully informed their consumers that they operated three breakfast and lunch restaurants under two dissimilar names that included the word “egg.” The consumers, so educated, submitted declarations expressing confusion whether the plaintiffs opened (or were opening) a fourth breakfast and lunch restaurant using a third name that included the word “egg.”

(emphasis added). [Comment: It’s statements like these that restores my faith in an impartial court’s ability to cut through all of the legal arguments propounded by attorneys on both sides and ascertain the truth – and then articulate that truth so brilliantly, eloquently, and concisely]. And with those words, the court essentially knocked away all of Egg Works evidence of actual confusion and found that Egg Works was not likely to succeed in showing that this factor weighed in their favor.

Regarding “similarity of the mark,” on the one hand, the court recognized that Egg Works disclaimed the word “EGG” in their trademark registration. The court, noting how one consumer in their declaration equated “egg” to the Egg & I restaurant (which is not Egg Works mark at issue, stated that:

The consumer’s reliance upon the disclaimed “egg” in relation to an entity that is not before the court suggests that little weight can be given to the similarity caused by the fact that both “Egg Works” and “Egg World” begin with the descriptive word “egg.”

The court also found “Egg World” and “Egg Works” are dissimilar in meaning and definition. Nonetheless, the court, mindful that similarities are given greater weight than differences, concluded that Egg Works is as likely to succeed as it is likely to fail in showing that this factor weighed in its favor – and accordingly, found this factor to neither favor Egg Works or Egg World.

On “relatedness of the services,” this favored Egg Works because both operate breakfast/lunch restaurants. Regarding “intent in selecting the mark,” the court rejected Egg Works purported evidence that the Defendants chose the Egg World mark after seeing Egg Works. The court also commented that “the conceptual strength of both ‘Egg Works’ and ‘Egg World’ strongly indicates that both are descriptive rather than suggestive.” The court found that this factor did not favor either side.

The court gave no weight to the “similarity of marketing channels” since the “only overlap of any significance identified by Egg Works is that both restaurants use exterior signs” and since the nearest Egg Works restaurant is located more than four miles from Egg World, such “marketing channel” “does little to suggest that confusion is likely to result from defendant’s use of its mark.”

The court found the factor of “likelihood of expansion into other markets” to be neutral based on the presented evidence – which thus favors the defendants (since its Egg Works burden to prove that the factors are in its favor in a motion for preliminary injunction).

Regarding the “degree of care likely to be exercised by consumers,” the court found that the evidence of this factor was “equivocal” because on the one hand, some Egg Works consumers “exercised so little care that they were initially confused by seeing the word egg on Egg World’s sign”, yet the evidence also indicated that the “actual confusion was caused by plaintiffs’ operation of three restaurants using two names.” [Hmm, one wonders why Mr. Burdsall has maintained the one “Egg & I” location rather than rebranding it as Egg Works in order to create a uniform brand? After all, wouldn't this also avoid confusion with the Ft. Collins, Colorado-based The Egg & I franchise chain which owns a trademark registration for the mark THE EGG & I?]

Based on its balancing of the Sleekcraft factors, the court concluded that Egg Works was not likely to succeed on the merits of showing a likelihood of confusion caused by the Defendant’s use of Egg World.

[Full Disclosure: The law firm I work for does represent one of the Defendants in some legal matters, but did not represent any of the Defendants in this case.]

Wednesday, September 15, 2010

Dairy Queen Denied Preliminary Injunction Against Blizz Frozen Yogurt

In late July, there was a flurry (pun intended) of new reports (here and here) on the trademark dispute between American Dairy Queen Corp. (“DQ”), the company behind the ice cream chain Dairy Queen and its popular BLIZZARD ice cream treat, and a California yogurt company named Yogubliz Inc., which obtained a trademark registration for the mark BLIZZBERRY and sought to register the mark Blizz Frozen Yogurt. Morris Turek, a trademark attorney who blogs at, has a detailed post on the dispute here.

The lawsuit actually originated back on May 17, 2010, soon after Yogubliz received a cease and desist letter from DQ regarding Yogubliz’s use of BLIZZBERRY and BLIZZ FROZEN YOGURT. Yogubliz filed the action in the United States District Court for the Central District of California seeking a declaratory judgment that its BLIZZBERRY and BLIZZ FROZEN YOGURT marks did not infringe DQ’s BLIZZARD marks. See Yogubliz Inc. v. American Dairy Queen Corp., Case No. 10-cv-03677 (C.D. Cal.). DQ subsequently filed counterclaims for trademark infringement as well as cancellation of Yogubliz’s BLIZZBERRY trademark registration. Yogubliz’s complaint and DQ’s Answer and Counterclaims can be viewed here.

DQ also initiated two proceedings with the Trademark Trial and Appeal Board -- an opposition against Yogubliz’s pending trademark application for BLIZZ FROZEN YOGURT (see American Dairy Queen Corporation v. Yogubliz, Inc., Opposition No. 91195789) and a cancellation proceeding against Yogubliz’s trademark registration for BLIZZBERRY (see American Dairy Queen Corporation v. Yogubliz, Inc., Cancellation No. 92052818).

In the federal court litigation, DQ subsequently filed a motion for preliminary injunction. Reuters reported yesterday that the federal court denied DQ its motion for a preliminary injunction on the basis that DQ failed to show a likelihood of success on the merits of any of its claims. See Yogubliz Inc. v. American Dairy Queen Corp., Case No. 10-cv-03677 (C.D. Cal. September 3, 2010). A copy of the court’s order denying DQ’s Motion for Preliminary Injunction can be viewed here.

The primary Sleekcraft factors where DQ apparently lost its argument on likelihood of confusion were similarity of the marks, relatedness of the goods, and marketing channels.

With respect to “similarity of the mark,” the court stated as follows:

[T]he Blizz Frozen Yogurt and Blizzard marks are relatively dissimilar. When considered as they appear on their respective products, the marks share nothing in common besides the spelling of the initial syllable. The font, color, and surrounding graphics of the two marks is different. The word Blizzard in Dairy Queen’s mark presented in all caps, in blue, using a straight lined font. It is topped with a depiction of snow, and backed by a red band that reads “THE ORIGINAL ONLY AVAILABLE AT DQ.” In contrast, Yogubliz’s frozen yogurt cups read “Blizz Frozen Yogurt.” The word Blizz is emphasized, appearing in pink, capitalized but not in all caps, using a stylized wavy line font. A pink and purple spiral appears next to the word Blizz on the cup. Even emphasizing similarities over differences, little connects the two marks as they appear on their respective products.
. . . [DQ] correspondingly devotes the bulk of its argument to the similarities between the words Blizz and Blizzard. Blizz and Blizzard do sound alike in that blizz is the initial syllable of the word blizzard. However, it is not clear that the word blizz, encountered independently, brings to mind the word blizzard. There is no indication that blizz is an abbreviation of blizzard in common usage. Dairy Queen’s contention that blizz has no meaning other than as an abbreviation of blizzard is unavailing. It could just as easily be associated with the word bliss. Further, products often are marketed under names that are nonsense or invented words. Thus, like Pez, Pringles, or a host of other brand names, it is unclear that Blizz has any independent meaning aside from the product it is attached to. Therefore, this critical factor weighs against Dairy Queen’s case.

As for relatedness of the goods, the court found that soft serve ice cream and frozen yogurt, while similar in that they “serve the same overall purpose for a consumer (a sweet treat),” they are not complementary goods and not closely related especially “given the health and taste differences between the two.” While the court recognized that similar marks can still cause confusion even when products are not closely related, the court found this factor to tip in favor of Yogubliz, but not dispositive.

As for the marketing channels used, while the court acknowledged that both products reach consumers through retail outlets,

the products are not marketed at a common retail location. Blizzards are sold at Dairy Queen restaurants, while Blizz Frozen Yogurt is sold through Yogubliz’s frozen yogurt shops. There is little possibility that a consumer could mistakenly seek a Blizzard in walking into a Blizz Frozen Yogurt or Blizzberry store if the consumer was aware that the Blizzard is a Dairy Queen product. There is also a distinction between the two retail locations where the products are available. While Dairy Queen operates fast food restaurants where Blizzards are offered alongside hamburgers, french fries and other food, the Yogubliz stores sell only desserts.

In response to DQ argument’s that a consumer might still think that Dairy Queen owned or sponsored Yogubliz’s shops, the court stated the following:

It is unclear, however, what would cause a consumer to believe that the stores operated by Yogubliz were owned by or affiliated with the Dairy Queen stores. There is some similarity, however weak, between the marks of Dairy Queen and Yogubliz’s respective products. But, there is no similarity alleged between the name or overall appearance of a Dairy Queen Restaurant and a Blizz Frozen Yogurt store. The argument for affiliation would thus turn on the idea that Blizzard is such an iconic brand that a store bearing some weak similarity to the name of that product would be assumed by customers to have some affiliation with the Dairy Queen company. This argument is strained, and cannot be accepted without supporting evidence. Overall, this factor weighs against Dairy Queen.

The court also rebuffed DQ’s trademark dilution claim on the grounds that the BLIZZ FROZEN YOGURT mark is not “nearly identical” to DQ’s BLIZZARD mark.

Having found no likelihood of success on the merits of any of DQ’s claims, the court denied DQ’s motion for preliminary injunction.

Of course, the court’s denial of a motion for preliminary injunction, while signaling to DQ that its case might be weak, does not bring this dispute to an end. It merely means that DQ failed to present sufficient evidence at this early stage that it would ultimately success on its claims such that it was entitled to a preliminary injunction at this early stage of the litigation.

Whether DQ will continue the fight after suffering this initial defeat is anybody’s guess. In the end, like most David and Goliath litigations, it may come down to how long can the relatively small Yogubliz do battle with the behemoth DQ (which is owned by Warren Buffett’s Berkshire Hathaway Inc.) – and how important this particular battle is to both sides.

And is anybody else out there surprised that Pinkberry, well known for its aggressive stance against any frozen yogurt store using any type of mark ending in “berry” (see prior blog post here) never went after Yogubliz's use of BLIZZBERRY?

Monday, September 13, 2010

District Court Dismisses Tiffany’s Final Claim Against eBay

Tiffany & Co.’s last chance at any kind of legal claim against eBay, Inc. in the long-running contributory trademark infringement lawsuit between the parties arising from the alleged sale of counterfeit Tiffany goods on eBay’s auction website came to an end today when District Court Judge Richard Sullivan concluded that there was “insufficient evidence” to support the false advertising claim that remained after the Second Circuit Court of Appeals in April of this year affirmed (decision here) most of the District Court’s earlier decision (previously blogged here) in favor of eBay. See Tiffany (NJ) Inc. and Tiffany and Company v. eBay, Inc., Case, No. 04-cv-04607 (S.D.N.Y. September 13, 2010). A copy of the court’s order can be viewed here. New stories on the decision from Reuters, Bloomberg, and WSJ. For blog posts on the Second Circuit’s April 2010 decision dismissing nearly all of Tiffany’s claims, see Ron Coleman and Eric Goldman.

Wednesday, September 8, 2010

GroupOn Sues Australian Companies for Trademark Infringement

Groupon, Inc. (“Groupon-US”), the Illinois-based company which specializes in offering daily group discounts and coupons for various goods and services to subscribing members of its website, filed suit in the U.S. District Court for the Northern District of Illinois against two Australian companies, Groupon Pty. Ltd. (“Groupon-Australia”) and Scoopon Pty., Ltd. (“Scoopon”), that are also in the business of offering “group coupon” services in Australia. See Groupon, Inc. v. Groupon Pty. Ltd. et al, Case No. 10-cv-05634 (N.D. Ill. Filed September 3, 2010). A copy of the complaint (without exhibits) can be downloaded here.

Groupon-US has a registration for the mark GROUPON (registered September 22, 2009) in connection with “promoting the goods and services of others by providing a website featuring coupons, rebates, price-comparison information, product reviews, links to the retail websites of others, and discount information.” Groupon-US also obtained a Community Trade Mark registration for the GROUPON mark (claiming priority to its March 13, 2009 U.S. application filing date). See CTM Reg. No. 008226508. Unfortunately for Groupon-US, the company did not have the foresight to also file an application to register the mark in Australia within the six month window of opportunity to claim priority to its U.S. trademark application. Groupon-US claims to operate in over 200 cities nationwide and in 29 countries throughout the world (although the complaint does not state whether or not Australia is one of those 29 countries where it offers its services).

The main crux of the current complaint is the fact that Scoopon, through the website, offers the same type of daily discount/coupon services as Groupon-US using the similar mark SCOOPON (the complaint neglects to mention that Scoopon’s services appear to be currently limited to offerings in eight different Australian cities). Of course, what Groupon-US is probably more upset about is the fact that Groupon-Australia also registered the domain name, which currently displays a “Coming Soon” page “from the people behind Scoopon.” Causing Groupon-US further grief is the fact that on March 18, 2010, Scoopon filed an application with IP Australia (Australia’s version of the U.S. Patent and Trademark Office) to register the mark GROUPON (No. 1351539). Five days later, Groupon-US filed its own application with IP Australia to register the GROUPON mark (No. 1352123) and in July, Groupon filed an opposition against Scoopon’s application.

Groupon-US’s causes of action are for federal trademark infringement, unfair competition, and dilution, deceptive trade practices under Illinois law, and common law trademark infringement. Groupon-US also obtained two copyright registrations for its website -- VAu1-012-452 (registered February 18, 2010) and VAu1-015-272 (registered March 11, 2010). These copyright registrations also form the basis of a copyright infringement cause of action by Groupon-US which alleges that Scoopon’s website infringes Groupon-US’s copyrighted website.

The first thing that comes to mind when seeing Groupon-US’s attempt to have the scope of its trademark rights spread beyond the borders of the United States (and Europe) is the “terrioritality” principle articulated eloquently by the Second Circuit Court of Appeals in ITC Ltd. v. Punchgini, Inc., 482 F.3d 135, 155 (2nd Cir. 2007):

The principle of territoriality is basic to American trademark law. See American Circuit Breaker Corp. v. Or. Breakers, Inc., 406 F.3d 577, 581 (9th Cir. 2005); Kos Pharms., Inc. v. Andrx Corp., 369 F.3d 700, 714 (3d Cir. 2004); Buti v. Impressa Perosa, S.R.L., 139 F.3d 98, 103 (2d Cir. 1998); Person's Co. v. Christman, 900 F.2d 1565, 1568-69 (Fed. Cir. 1990). As our colleague, Judge Leval, has explained, this principle recognizes that

a trademark has a separate legal existence under each country's laws, and that its proper lawful function is not necessarily to specify the origin or manufacture of a good (although it may incidentally do that), but rather to symbolize the domestic goodwill of the domestic markholder so that the consuming public may rely with an expectation of consistency on the domestic reputation earned for the mark by its owner, and the owner of the mark may be confident that his goodwill and reputation (the value of the mark) will not be injured through use of the mark by others in domestic commerce.

Osawa & Co. v. B & H Photo, 589 F. Supp. 1163, 1171-72 (S.D.N.Y. 1984).

Precisely because a trademark has a separate legal existence under each country's laws, ownership of a mark in one country does not automatically confer upon the owner the exclusive right to use that mark in another country. Rather, a mark owner must take the proper steps to ensure that its rights to that mark are recognized in any country in which it seeks to assert them.

(footnote omitted); see also my prior blog post discussing the exceptions to the “terrioritality” principle.

Of course, in the instant lawsuit, however, Groupon-US is not claiming trademark rights in Australia (although that is probably the subject of the pending opposition). Rather, Groupon-US argues that the Defendants use of SCOOPON in Australia (and the registration of the domain name) infringes Groupon-US’s U.S. trademark rights. The basis for such claims are reflected in the allegations set forth by Groupon-US to claim jurisdiction over these foreign defendants within the State of Illinois:
  • [Scoopon] is doing business in this district, and defendant has promoted discounted goods and services of others on their website, and provided services allowing consumers to purchase coupons, in connection with marks confusingly similar to Groupon's mark, in this district. Further, defendants are foreign corporations, being incorporated in Australia, and provide an Internet website with a substantial effect on United States commerce, and a substantial effect on commerce in this district. [Comment—how exactly does the use of SCOOPON by an Australian company in connection with offering group coupons for goods and services in Australia have a substantial effect on United States commerce and specifically on commerce in Illinois?]

  • Defendant Groupon Pty. Ltd. has regularly and systematically engaged in business in this district by offering its services to the citizens of Illinois through its website at which states that the website is "from the people behind Scoopon". [Comment—since when did a “Coming Soon” sign equate to regular and systematic engagement in business?]

  • Defendant Scoopon Pty. Ltd. has regularly and systematically engaged in business in this district by offering its services to the citizens of Illinois through its website at [Comment—how many citizens of Illinois are going to be interested in coupons for goods and services offered by businesses which are located thousands of miles away?]
While Scoopon may have an interactive website accessible by Illinois residents, there is no indication that Scoopon directed its services at Illinois residents (none of the cities served by Scoopon are in Illinois, or even in the United States) or knew that its services would cause any harm to Groupon-US (assuming that Groupon-US had no presence in Australia – other than its own internet presence – before Scoopon began using the SCOOPON Mark or registered the domain name).

So would an Illinois court’s exercise of personal jurisdiction over these Australian companies comport with the principles of “fair play and substantial justice” (especially given that Groupon-US is already engaged in a battle over the GROUPON name in Australia and could just as easily pursue a civil action against the Defendants in Australia)? We shall see.