Look Before You Leap: Trademark Decision Highlights Importance of Thorough Pre-Litigation Assessment of Case

A recent Ninth Circuit decision, Virag, S.R.L. v. Sony Computer Entertainment America LLC, highlights that companies considering litigation need to ask two hard questions:

  • What are our chances of success, and what are the other side’s best defenses?
  • What is the business purpose of bringing suit?

All indications are that this was a case that should never have been brought. The case involved display of a trademark (for commercial flooring products) in a race-car video game by Sony. The court affirmed summary dismissal based on a long-standing First Amendment limitation on trademark suits. Apart from that, the claims appear both very weak under basic trademark law and to have little business purpose. Meanwhile, the plaintiff spent significant legal fees and now faces defending a big fee application from the defendants.

The takeaway: don’t be led down the primrose path. Ask the hard questions before bringing suit. And make sure you are getting frank advice from your counsel.

A recent Ninth Circuit case illustrates how companies need to engage in thorough pre-litigation assessment of a case before bringing it. Such review is crucial in avoiding both waste of corporate resources and exposure to significant liability for fees.

In Virag, S.R.L. v. Sony Computer Entertainment America LLC, ---Fed.Appx.--- (2017), the Ninth Circuit broadly applied a court-developed First Amendment carveout to trademark law for artistic uses of a mark. That rule was first enunciated by the Second Circuit in Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989) and adopted by the Ninth Circuit in Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894, 902 (9th Cir. 2002).

In Rogers, the Second Circuit held that the First Amendment requires courts to construe the Lanham Act “to apply to artistic works only where the public interest in avoiding consumer confusion outweighs the public interest in free expression.” In order to balance First Amendment interests against trademark interests, the Second Circuit created a rule that use of a mark (or a name) is not actionable “unless the title has no artistic relevance to the underlying work whatsoever, or, if it has some artistic relevance, unless the title explicitly misleads as to the source or the content of the work.”

Virag involved racing video games marketed by Sony. The games allowed players to race virtual cars on famous race courses, including a simulation of a famous racetrack course in Monza, Italy. Virag is an established European-based commercial flooring company, and owns U.S. Trademark registrations for its mark VIRAG. Sony’s game included a realistic background of the track as it appears to the racers. The VIRAG trademark appears on a banner on a bridge in the actual Monza race course, and Sony’s game incorporated the banner with the mark in its depiction of that bridge in the game to give a realistic depiction of that race.

Virag brought suit for trademark infringement. Sony invoked the Rogers/Mattel doctrine and moved for summary judgment, which the district court granted. The Ninth Circuit’s affirmance rejected a controversial line of district-court cases that would have limited that doctrine to cultural icons – marks or names that are “of such cultural significance that [they have] become an integral part of the public’s vocabulary.” Rogers involved a claim by famous actress Ginger Rogers over use of her name; Mattel involved a reference to the famous Barbie doll in the song Barbie Girl.

Virag, on the other hand is a relatively obscure name, known only among commercial flooring customers, hardly a cultural icon. No matter, held the Ninth Circuit. The Rogers/Mattel test “applies regardless whether the VIRAG trademark has independent cultural significance.”

Even apart from First Amendment issues, a trademark plaintiff has to prove likelihood of confusion to prevail. One wonders how the Virag plaintiffs intended to do so. Sony did not label its game “Virag” nor even use that name on its packaging or promotion. The name simply appeared as part of the realistic scenery in the virtual depiction of the Rally of Monza racetrack, and a small part at that. Is it reasonable to contend that a player of Sony’s game, seeing that mark as part of the virtual scenery, would be misled or confused into believing that Virag had sponsored (let alone marketed) Sony’s game?

Apart from the legal weakness of the case, one could also question what harm was caused to Virag’s business that prompted it to bring suit. Did its commercial reputation suffer from being featured in the realistic background scenery of a video game? Did its commercial-flooring business suffer? If not, what was the point of the suit?

Virag has no doubt already expended considerable fees in litigating the case in district court and then appealing to the Ninth Circuit. It now faces an attorney’s fee motion in the district court (which the parties agreed to defer until after the appeal was determined).

All signs indicate that Virag was a case that should never have been brought. Clients are entitled to frank advice from their lawyers as to their chances of success in litigation. They might determine that it is worthwhile to bring a case that is a long-shot.

But careful assessment of both the chances of success and the business purpose of the litigation are important exercises before embarking on what might be an expensive course.