Avvo Decision Raises Important Questions About Opinion-Fact Dichotomy in False Advertising Cases

Rating websites have become a popular means to review products and services – from restaurants and vacation spots,  ordinary consumer goods, to professionals like doctors, dentists and lawyers.  But rating sites can be a double-edged sword – good ratings can increase business and market share, but negative ones can hurt the bottom line.  

 What can companies do about negative ratings – especially when they believe they are the result of some flawed methodology or calculation?

Examining a recent decision of a New York federal court, dismissing false advertising claims against the attorney rating site Avvo.com, sheds light on what can and cannot be done legally to deal with what may be unfair or flawed ratings. 

 While ratings themselves are generally construed as non-actionable opinion, representations about how a site creates and calculates its rating are often factual and, if misrepresented, could form the basis of a legal claim.

Rolex Case Highlights Importance of Dilution Claim

When a trademark achieves fame and renown, free-riders and pirates are often not far behind. Usually the attempt to exploit someone else’s mark comes in the same or related competitive space, and a regular infringement charge will work. 

What happens, though, when someone uses the same mark in a totally different and unrelated field?  Trademarks generally only confer rights within a particular market for particular goods or services, and an infringement claim (requiring a likelihood of confusion) may be harder to prove. 

So what can the trademark owner do in that situation?  A recent suit filed by Rolex in federal court in Texas may shed light on this issue. If the mark is a very famous and renown mark, then there may be a claim for what is known as “dilution.”

 

Federal Circuit Bases Personal Jurisdiction on Enforcement Letter

A patent owner sends a cease and desist letter to a would be infringer in a remote location.  The recipient of the letter files a declaratory judgment claim of non-infringement in its home district; the patent owner’s only contact to the district is the enforcement letter.  Is that sufficient for jurisdiction? 

Since Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355 (Fed. Cir. 1998), the Federal Circuit has held that such letters, as a matter of policy, do not suffice to give rise to jurisdiction.

But in December, the Federal Circuit upheld jurisdiction in just such a situation.  Jack Henry & Assocs. v. Plano Encryption Techs. LLC, 910 F.3d 1199 (Fed. Cir. 2018).  Although it did attempt to distinguish Red Wing Shoe on the facts of the case, it is now unclear when an enforcement letter could lead to jurisdiction in a distant forum.

Patent owners for now must be more careful when sending out such letters and understand that they may be risking litigation in a distant forum.  Conversely, recipients of such letters, especially from non-practicing entities (often referred to as trolls) may have greater leverage to sue in their own forum.

Supreme Court Affirms that Secret Sales Can Trigger the On-Sale Barpa

We previously wrote, http://www.springutlaw.com/blog/2018/2/8/federal-circuit-interprets-aia-on-sale-bar-to-include-confidential-sales-leaves-open-issue-of-completely-secret-sale, about a Federal Circuit decision, Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc. (2018), which held that the patent on-sale bar is triggered by confidential sales of technology, even though the invention is not disclosed to the public, and that this law was not changed by the America Invents Act of 2011 (AIA). 

The Supreme Court has now affirmed that ruling, holding that the long-standing construction of “on-sale” in the statute was not changed by the AIA.

It often happens that parties enter into confidential agreements for the commercial exploitation of technology that is intended to be patented. These parties need to be aware that these agreements might well be deemed a “sale,” triggering the one-year clock for the on-sale bar.

Trademark Trial and Appeal Board Allows Consumer Standing to Oppose Trademark Registration

A recent TTAB decision, Curtin v. United Trademark Holdings, Inc. (TTAB 2018), allowed a consumer of the products at issue to assert standing to oppose the registration of the mark RAPUNZEL for dolls, based on the consumer’s allegations of consumer harm.  The TTAB held that there is no requirement that one has a commercial interest or be a competitor of the applicant for standing.

Companies who seek to register marks that arguably are descriptive or generic now may face expanded chances for opposition to their registration of such marks. 

Proposed Patent Office Rules Would Allow Many More Software and Business Patents

The Patent Office recently proposed (and requested comments on) a new set of rules designed to determine whether a patent application is directed to eligible subject matter.  This has been a hot issue ever since the Supreme Court’s 2014 decision in Alice Corp. v. CLS Bank International.  Since that case, many software and business method patents have been held invalid.  However, in 2016 the Federal Circuit decided Enfish LLC v. Microsoft Corp, which carved a large exception from Alice.  Courts since have upheld more software patents.

The PTO’s proposed rules now incorporate the Enfish ruling and broadly permits many forms of software patents.  The key difference appears to be between algorithms that merely use generic computers to perform a task, and algorithms that make computers function better, such as more efficient database or more accessible graphical user interfaces.

For software developers, the proposed rules will likely make many more applications eligible for patent protection, provided they can be conformed to the new rules.  For many companies, however, it appears that in the future there is an increased possibility there will be targets of patent enforcement efforts. It has been estimated that 60 percent of patent troll cases involve software or other similar technology. 

Primary Importance of Secondary Meaning in Securing Powerful Trade Dress Protection

Two recent cases provide important insights in maximizing the chances of gaining trade dress protection.

Designs are a crucial element to fashion – a design that stands out from the crowd can both make a fashion statement and drive demand.  But a successful design is often quickly followed by copying and knockoffs that can dilute and even destroy the success of what was a fashion icon. 

Fashion companies look to intellectual property law to protect their designs.  Among the available legal protections is trade dress – where the design itself functions as a trademark, distinguishing the product as emanating from one designer or fashion house. 

While trade dress can be a powerful form of legal protection, it has rigorous legal requirements, and a company seeking such protection needs to exploit a smart strategy to gain and maintain such protection. 

One case, involving a unique design for bikinis, emphasizes the importance of the power of social media to generate recognition, and the importance of maintaining good records of such recognition.The other case, involving handbag designs, shows the importance of both survey evidence and maintaining exclusivity – controlling third party uses of the same or similar designs

Influencer Arrangements Generate Lawsuits and Legal Issues

As new commercial and business arrangements are introduced and become popular, the law struggles to keep up.  This has been particularly the case with regard to social media, which seems to be evolving at the speed of light.  The use of influencers is a popular and growing way to promote brands and products among luxury goods and fashion companies. 

On the surface, the process seems simple:  a brand contracts with an influencer(s) (celebrities or those who have large followings on social media) to create a particular number of promotional posts and/or to appear at promotional events. 

But two recent lawsuits between promoters and influencers show that the legal parameters of how to structure these arrangements are still being worked out.

Use of influencers can be a powerful tool to promote luxury and other fashion brands. But attention to the details of the influencer arrangement and the contract terms at the time of engagement can avoid significant problems and headaches later. As in many commercial relationships, an ounce of prevention can be worth a pound of cure.

Copyright Case Teaches How to Deal with Trolls

A recent decision dealt with a “copyright troll,” an attorney that had filed over 500 copyright cases in the Southern District of New York alone.  Pereira v. 3072541 Canada Inc.  Although the case denied attorney’s fees to the defendant, the history of the case recites several procedural steps that defense counsel used to thwart the plaintiff, who had sought a substantial settlement ($25,000) largely on the procedural burden of litigating the case.

The case teaches valuable lessons in how to effectively deal with a troll

Court Opinion Doubling $130 Million Jury Verdict Provides a Roadmap for What Not to Do When Accused of Patent Infringement

A recent decision in a patent infringement case from the Central District of California, Alfred E. Mann Foundation for Scientific Research v. Cochlear Corp. awarded enhanced damages for patent infringement, doubling a jury verdict of $130 Million.  The case (which involved cochlear implant technology used for the hearing impaired) reads like a primer of what not to do as a defendant in a patent case.

            While the court weighed a variety of factors to arrive at the decision to double the damages award, perhaps the most glaring was the defendant’s reaction after the jury verdict.  Its Annual Report stated that the jury’s verdict “will not disrupt Cochlear’s business or customers in the United States.”  Combined with the fact that the evidence indicated that the infringing products generated $1.8 billion in revenue (with gross profit margins of 75% to 92%), it was apparent that the defendant had not gotten the message. 

Honey Badger Case Shows Limits of First Amendment Protection in Trademark Cases

A recent Ninth Circuit decision, Gordon v. Drape Creative, Inc. (2018), involving two well-known “Honey Badger” trademarks, shows the limits of the First Amendment defense in trademark cases. 

Parties that seek to use trademarks in creative ways would be well advised to consider its facts when determining whether to proceed or risk legal exposure.

Federal courts have adopted a special set of rules for trademark infringement cases involving expressive content, which, for First Amendment reasons, makes it harder for a trademark owner to enforce its rights when the accused use involves expressive content, such as the title or content of movies, video games, etc.  The test originates in Rogers v. Grimaldi (2d Cir. 1989), but has most often been applied by the Ninth Circuit in a long line of cases. 

The Honey Badger case, however, involved very minimal creativity – the mark was used on greeting cards with virtually no embellishment, and it appears that there was a deliberate intent to exploit the mark.  The Ninth Circuit reversed a grant of summary judgment for the defendant, finding that there was an issue for trial as to whether the mark was used in a way that was “explicitly misleading as to [the] source or content” of the product. 

The Gordon opinion is helpful in understanding the limits of the First Amendment defense in these types of cases.

Getting into Trouble Again for Copying, Balenciaga This Time Gets Sued by a Car Freshener Company

Fashion companies depend on new designs and ideas to differentiate them from their competitors.  But allowing designers free creative rein without vetting the new designs for legal issues can get a company in trouble.  A recent case illustrates the point well.

We recently blogged about a copyright infringement suit by a New York souvenir company against Balenciaga for copying its designs.  Balenciaga has now gotten in trouble again – this time for copying the well-known design of a commonly used car freshener (shaped like a pine tree and usually hung from the rearview mirror). 

Although these items are far from being luxury items – a package of three sells for $3 at Target – their design is well known.  This is now the second time that Balenciaga has been sued (in New York’s Southern District court) for misappropriation of the design of an inexpensive product for use as a luxury product, in this case, a $275 key chain.

Second Circuit Recognizes Broad Trademark Priority Even for New Channels of Trade

In American trademark law, trademark rights are gained through use – use of the mark in connection with the goods and services.  A recent Second Circuit decision, Excelled Sheepskin & Leather Coat Corp. v. Oregon Brewing Company (2018), indicates that the rights gained through use can be broader than might have been previously supposed.

Specifically, the Second Circuit held, contrary to the district court’s decision, that a trademark owner had priority in certain types of goods (t-shirts, sweatshirts, hats and other apparel) over the defendant.  Although, at first, the plaintiff had only been using the mark for apparel as an adjunct to support its main business, beer, and even though it did not commence selling these products in clothing stores until after the defendant has already done so, it nevertheless had priority. It could therefore assert an infringement claim after it had begun distributing these products in clothing stores. 

The appellate court held that once the plaintiff established priority in these types of apparel, it has that with respect to any distribution channel for the same goods.

The takeaway is that when researching prior uses of a mark (for example, in clearing use of a mark), one must look to any uses of the mark in connection with the same or similar goods.  That another party might be marketing the goods in a different manner or a different purpose may not change the fact that it has prior rights.

Failure to Do Due Diligence in IP Acquisition Means Copyright Infringement Claim Is Barred

Companies which acquire IP rights must, of course, make efforts to ensure that ownership of what they are acquiring is secure. 

As one company learned in a recent copyright decision by the Second Circuit, Latin America Music Co. v. Spanish Broadcasting System (2018), failure to undertake proper due diligence as to the chain of title may mean the loss of the ability to enforce those rights. 

The takeaway, of course, is that any time rights are transferred (whether through a straight acquisition, merger, or corporate reorganization), the acquiring entity must make sure that no one else has claimed rights in the works at issue.Otherwise, it may discover that it has acquired an unenforceable and hence worthless right

Two Second Circuit Decisions Emphasize Importance of Clear Articulation of Trade Dress Elements

Two recent Second Circuit decisions, International Leisure Products v. Funboy LLC (2018) and Eliya Inc. v. Steve Madden (2018) both upheld dismissal of complaints involving trade dress claims, because the complaints failed to include a clear and enforceable definition of the claimed rights.  Even though they included pictures, and one of them even contained an extensive, seven paragraph list of elements, neither were sufficient to state a claim.

 Trade dress can be a very powerful (and long-lasting) form of IP protection, but it also has many court-imposed requirements, because courts are wary of allowing what could be an anti-competitive weapon. 

 One such requirement is that the putative trade dress owner clearly articulate the elements of what makes its claimed “dress” distinctive from other competitive goods.  This clear articulation allows courts to judge whether the claimed trade dress is functional, whether an accused item is infringing and to formulate an injunction against an infringing defendant.

 In any IP program, foundational work – securing the IP right – is crucial.  The takeaway is that a central part of foundational work is creation of a clear and distinctive list of elements that will pass court muster.  The qualification of the list has to satisfy several legal requirements (distinctiveness, non-functionality, clear warning to competitors). 

 

Use of a Trademark Merely to Maintain a Trademark Registration Does Not Constitute Valid Trademark Use and Causes Loss of Attorney-Client Privilege

 

The federal court in Oregon ruled that a major footwear company committed fraud on the Trademark Office when it applied for renewal of a trademark application, and certified its continued use of the trademark, even though that use had no commercial purpose other than to preserve the trademark registration. 

The submission of the renewal to the Trademark Office constituted fraud – and thus the trademark owner’s communications with its counsel on the renewal lost protection of the attorney-client privilege under the crime-fraud exception.  Adidas America, Inc. v. TRB Acquisitions LLC (D.Ore. 2018).

The decision has important lessons for trademark owners.  Most important is that use of a trademark to establish trademark rights must have a commercial purpose – use cannot be done merely to acquire (or retain) a trademark registration. This is so even where the use is sales in large quantities.

German Website Operator Held Subject to U.S. Jurisdiction

A recent decision by the First Circuit in a trademark infringement case, Plixer Intl v. Scrutinizer GmbH (1st Cir 2018) held that a German website used to sell software services, had done substantial business with U.S. customers, and was subject to a trademark infringement suit in the U.S. by another company claiming that the trademark used to market the services infringed its rights. 

This was the case despite the fact that the website did not specifically target the U.S., but merely offered the services to the world at large (to be paid in Euros).  What clinched the finding of jurisdiction was that the company had done significant U.S. business (about $200,000) over three years.

Although the site had a forum selection clause requiring its customers to litigate any disputes in Germany, the plaintiff was not a customer – its claim of trademark infringement lay completely outside any contractual relationship the German company had with its customers.

The decision is significant not only for foreign companies, but also for website operators in the U.S.  Websites that do business with any states might subject their owners to jurisdiction where the site does business – even if the site is not specifically targeted to particular states. 

The plaintiff in the Plixer case brought its claims in the District of Maine, hardly a convenient forum for many large companies.  It is easy to see how, under the same reasoning, a California or New York based website that does significant business throughout the country could be subject to suit in many jurisdictions.

Ninth Circuit Decision Requires Greater Pre-Suit Investigation for Copyright Piracy Cases

A recent Ninth Circuit decision, Cobbler Nevada, LLC v. Gonzales (2018), requires greater due diligence before a copyright enforcement suit can be brought.

Downloading of movies and other copyrighted content is a major problem for many copyright owners, and they have fought back by tracing the illegal downloading to an IP address.  But the Ninth Circuit has held that merely identifying the IP address and its associated subscriber is insufficient to bring suit. 

The take away is that copyright owners are going to need to do a more thorough pre-suit investigation – and perhaps use advances in technology – to more precisely trace infringing downloads before bringing suit.

Jewelry Trademark Case Shows Importance of IP Foundation Work and Selection of Mark

A Sixth Circuit decision, Sterling Jewelers, Inc. v. Artistry Ltd. (2018), demonstrates the importance of (1) legal guidance in picking a trademark and avoiding weak marks that will only provide a narrow scope of protection and (2) proper foundational work to secure trademark rights.  The plaintiff in the case failed to do both, and learned the hard way that the rights it thought it had were far less effective than expected.

Souvenir Company’s Copyright Suit Against Balenciaga Shows Need for Luxury Goods Companies to Undertake Due Diligence

Usually, luxury goods companies are the victims of knockoffs and infringements – an expensive fashions item is copied by a cheap imitator.  However, an interesting twist has come up in a recent copyright suit against Kering’s Balenciaga. A souvenir company selling cheap souvenirs claims copying by the fashion company, at prices 100 times the original!

The takeaway is that high-end companies should not assume that they are immune from getting into trouble by copying others’ designs.  While new designs are the lifeblood of fashion, counsel’s due diligence before they are introduced can avoid major legal headaches.  And, once a charge of copying is made, ignoring it would only make matters worse.  These are lessons that Balenciaga may now learn the hard way.