12 FOR 2012

Here is a link to the materials from last night's IP presentation at the Brewhouse.

Thanks to all those who came, and especially to those who helped close it down.

Upcoming IP Seminar in Norwalk, CT

I will be hosting a seminar at The Brewhouse Restaurant - 13 Marshall Street, Norwalk, CT, Thursday, February 2, 2012, 6:00 PM – 7:30 PM

The program is entitled:

12 for 2012: 12 Things Every Business Needs To Know About IP This Year -

12 key factors to consider in your IP strategy for 2012. Summarized in 12 slides within 48 minutes, with a 12 minute Q&A.

Complimentary cocktails and hors d'oeuvres.

Topics will include:

The impact of the America Invents Act on IP Strategy;

The advantages and disadvantages of IP licenses and sales;

How to adapt to 2011 case law hostile to rights owners;

The powerful branding trick used by the world’s most successful brand owners;

The real reason copyright registration is important; and

What to expect now that SOPA is dead.

If you are interested, please register at :www.foxrothschild.com/events/eventDetail.aspx

I look forward to seeing everyone there.

 

 

POST-LICENSE USE OF TRADEMARK IS COUNTERFEITING

A former trademark licensee’s continued use of a trademark after termination of the license constitutes trademark counterfeiting. That is the holding in a recent District of Indiana default judgment case, Century 21 v. Destiny Real Estate. The court explained:

If an unrelated entity had created an identical trademark and provided authorized goods or services (or the kind provided by the owner of the mark) under that mark, there would be no question that there was counterfeiting. The Court can conceive of no reason why an ex-franchisee should escape liability for counterfeiting simply because that person had access to a franchisor’s original marks because of the former relationship and therefore did not need to reproduce an identical or substantially similar mark.

Other courts have come to differing conclusions on this issues, in various contexts. In a 1997 case, the 6th Circuit held that a franchisee’s holdover use of a trademark was not counterfeiting. The 9th Circuit held that the licensee’s holdover was counterfeiting in a 2005 case involving continuing use of the Idaho potato certification mark.

The significance is that pursuant to 15 U.S.C. § 1117(b), if he is found to be a counterfeiter, the former licensee can be liable for statutory damages(up to $2 million in cases of willful counterfeiting), and will be liable for three times profits or damages, whichever amount is greater, together with a reasonable attorney’s fee unless the court finds “extenuating circumstances.” If he is merely an infringer, statutory damages are not available and treble damages and attorneys’ fees are less certain to be awarded. They may be awarded “subject to the principles of equity.”

The Century 21 court’s damage, injunction and individual liability analyses also are noteworthy. Century 21 sought its actual damages plus treble damages. The court held that such an amount would be quadruple, rather than treble damages, one multiple too many. The court further reduced the award to two times damages, on the ground that the liquidated damages provided for in the license agreement and awarded by the Court coincided with the actual damages, and therefore to awarded treble damages in addition would again result in quadruple recovery.

On a cheerful note for trademark owners, the Court granted a permanent injunction, finding that “the injury especially justifying injunctive relief is the loss of control over and harm to its valuable name and trademark, in which it has invested substantial effort and money over time to develop goodwill.” If that is going to suffice under Ebay, trademark owners may not need to be as concerned that injunctions against infringers will be harder to come by.

The court declined to impose liability on Destiny Real Estate’s principal. After surveying the law on individual liability for corporate trademark infringement, the Court found that Century 21’s allegations that the individual was President of the company and authorized or approved of the misconduct were not sufficient bases to hold the individual liable for the corporation’s infringement.
 

INTENT TO USE A TRADEMARK MUST BE SUPPORTED BY DOCUMENTARY EVIDENCE

Trademark applicants filing intent-to-use applications must possess documentary evidence of their “bona fide intention” to use the applied-for mark in connection with the claimed goods and services. Failure to do so may result in a successful opposition of the application or cancellation of a resulting registration, as a recent decision by the Trademark Trial and Appeal Board confirmed (Spirits Int'l B.V. v. S.S. Taris Zeytin Ve Zeytinyagi Tarim Satis Kooperatifleri Birligi, Opposition No. 91163779, 99 U.S.P.Q.2d 1545 (T.T.A.B. 2011)).

To meet the “bona fide intention” requirement, applicants should have reasonably concrete plans to commercialize all of the claimed goods and services under the mark, and applicants should be taking steps to implement those plans, such as by undertaking product research and development, market research, or development of promotional materials. A mere hope or desire that business will expand at some point in the future to encompass additional goods or services is not sufficient. When an applicant does have a bona fide intention to use a mark, the applicant should produce documentary evidence of that intention, such as photographs of product prototypes, draft promotional materials or product specifications, draft business plans, or records of meetings such as presentations to potential investors. This written record could be key in saving an application or registration.

Trademark owners and applicants should also be careful in selecting the goods and services for listing in an application. It is sometimes very tempting, especially with goods such as clothing, to list a broad array of goods that applicant hopes to sell at some point in the future (or does not want someone else selling under the same mark). But without a bona fide intention to use the mark for those goods, supported by documentary evidence, the entire application or registration could be in jeopardy. It is also important to keep in mind that applicants must continue to have a bona fide intention to use the mark on all listed goods and services throughout prosecution of the application, and upon filing of a statement of use, the applicant must submit a sworn statement that the mark is used with all listed goods and services. There are procedures to divide out goods and services not yet in use so applicants can obtain a registration on the active goods and services and maintain a pending application on the remainder.

 

The foregoing is a guest post authored by Chris Kinkade of Fox Rothschild's Princeton, NJ office.

 

 

WHAT ARTISTS CAN LEARN ABOUT BRANDING FROM THE PARTRIDGE FAMILY

In a few words, your brand can be even more valuable than your talent. This is the lesson we can draw from recent litigation brought by the actor David Cassidy against the owner of The Partridge Family. As a star of The Partridge Family, David Cassidy may have been well-compensated for his work on each episode, and he undoubtedly has earned significant residual income from re-runs over the years. Apparently only now, however, has he realized the amount of income he lost because he did not share in revenue received from merchandise sales. He recently filed suit claiming that he is owed a fortune.

Artists should be as concerned about revenue opportunities that may arise beyond their actual work, opportunities such as merchandising or endorsements, as they should about the amount they are paid to perform. They should try to ensure that their talent contracts guarantee them a share in revenues generated from merchandising. And they must then police such uses to be sure they are receiving their rightful share. Better not to be seeking your fortune three decades later.
 

A TRADEMARK SURVEY CHECKLIST

Here is a six-step checklist for trademark infringement litigants hoping to prove likelihood of confusion through survey evidence. Litigants who carefully consider each of these issues should have a better chance of having their survey results admitted in evidence.  It is derived from last year’s summary judgment decision in Competitive Edge v. Staples in the Northern District of Illinois.

1. Universe - Be sure to correctly identify the “universe” of respondents. It should be consumers in the market at issue. If the universe is erroneous or undefined, the reliability of the survey is diminished.

2.  Sample – The sample population must represent the universe, and be neither under-inclusive nor over-inclusive.

3. Clear Questions – Survey Questions must be clear and precise..

4. Filter Questions – The survey should include some open ended questions. Acceptable answers should include “don’t know.”

5. Double Blind – Ideally neither the questioner nor the respondents should know the reason for the survey.

6. Data Collection and Recording – Questions must be asked, and responses recorded, consistently and accurately.
 

ABUSE OF PROCESS REQUIRED FOR A CASE TO BE EXCEPTIONAL UNDER THE LANHAM ACT

The Lanham Act authorizes courts to award attorneys’ fees to the prevailing party in “exceptional cases.” 15 U.S.C § 1117. The Seventh Circuit addressed what it means for a case to be exceptional last year in Nightingale Home Healthcare v. Anodyne Therapy. The Seventh Circuit settled on the following standard.

[A] case under the Lanham Act is “exceptional,” in the sense of warranting an award of reasonable attorneys’ fess to the winning party, if the losing party was the plaintiff and was guilty of abuse of process in suing, or if the losing party was the defendant and had no defense yet persisted in the trademark infringement or false advertising for which he was being sued, in order to impose costs on his opponent.

Abuse of process the court explained, is the misuse of legal process primarily to accomplish a purpose for which it was not designed, such as in a Lanham Act case, suing “to obtain a competitive advantage independent of the outcome of the case by piling litigation costs on a competitor.”

The abuse of process standard for exceptional Lanham Act cases in the Seventh Circuit is less exacting than the Federal Circuit’s test for finding an exceptional case for purposes of awarding attorneys fees in a patent case, discussed in my April 14, 2011 post. The Federal Circuit requires not only subjective bad faith but objective unreasonableness to qualify a patent case as exceptional.

The court surveyed precedent nationwide and found an absence of consensus on a precise standard. That portion of the opinion is a good resource for litigants in every circuit. A researcher can start there and then move to the authorities cited from the particular court in which he is litigating.
 

A THREE STEP CHECKLIST TO AVOID NAKED TRADEMARK LICENSING

The threat of a trademark being deemed abandoned as a result of naked licensing sometimes seems more theoretical than practical. Trademark abandonment is a harsh remedy, subject to a high burden of proof for its proponent, and there are multiple ways to structure a trademark license such that the trademark licensor can “police” the licensee’s use of the trademark without thoroughly inspecting every licensed product. A recent case from the Ninth Circuit reminds us, however, that there are minimum standards that trademark licensors must meet.

The concept behind the prohibition on naked licensing is intuitive. If a trademark owner allows a licensee to use his trademark without ensuring that the licensed products meet the standards the trademark has come to symbolize in the minds of consumers, the trademark loses its symbolic value and we might as well allow anyone else to use it.

In FreecycleSunnyvale v. The Freecycle Network, the Ninth Circuit affirmed a decision that a non-profit recycling group (which one might think would make a sympathetic trademark owner) failed to do the minimum. The opinion suggests the following three step checklist for trademark licensors to follow when licensing their trademarks.

1. Put it in the contract – This seems obvious. There should be written license agreement that specifies the standards to be maintained. The license should say that the licensor has rights to either inspect or supervise to ensure that standards are maintained.

2. Do what you say – Whatever you say you are going to do, be it inspection or supervision, do it.

3. Prove you can trust the licensee – It is permissible to rely on the licensee to handle the day-to day, if there is a “close working relationship.” If you are going to do that, include in either the body of the contract or the “whereas” clauses, the basis of the close working relationship and reasons why the licensee can be trusted based on past history or mechanisms in place. Be sure to permit more extensive scrutiny if the relationship changes, and if the relationship does change, re-evaluate the measures in place to determine if more control is needed.

By doing those three things, trademark licensors stand a better chance of avoiding the harsh punishment of trademark abandonment.
 

ARE WEB SEARCHERS IMMUNE TO INITIAL INTEREST CONFUSION?

Recent case law suggests that the theory of trademark infringement on the Internet based on initial interest confusion may be on the wane, and that companies may feel more comfortable including trademarks other than their own in their Website metatags and purchasing advertisements keyed to another's mark.

Metatags are words invisibly embedded in Web pages. They cause search engines such as Google to identify the tagged Web pages in response to queries containing the tagged term. Many trademark practitioners have objected to the practice of including trademarks other than one’s own in metatags on Websites.

The basis for the objection is initial interest confusion. The theory of initial interest confusion is that a consumer looking for a particular product, if wrongly directed to the source of a similar product, may buy the similar product instead. Picture, for example, a hungry family looking for McDonald’s who see a sign pointing east and follow it to Mac’s Diner. When they arrive, they might just eat at Mac’s rather than doubling back and continuing to search for McDonald’s. Translated to the Web, the thought is that if a competitor were to include the words “Fox Rothschild” in its metatags, one who sees the competitor’s site in the list of sites returned by search for “Fox Rothschild” might go to the competitor’s site instead of the Fox Rothschild site.

At least two courts this year have now rejected the initial interest confusion theory for Internet users. The first was the U.S. Court of Appeals for the 9th Circuit in Toyota Motor Sales v. Tabari, 610 F.3d 1171. In that case, Judge Kozinski wrote:

When a domain name making nominative use of a mark does not actively suggest sponsorship or endorsement, the worst that can happen is that some consumers may arrive at the site uncertain as to what they will find. But in the age of FIOS, cable modems, DSL and T1 lines, reasonable, prudent and experienced internet consumers are accustomed to such exploration by trial and error. They skip from site to site, ready to hit the back button whenever they’re not satisfied with a site’s contents. They fully expect to find some sites that aren’t what they imagine based on a glance at the domain name or search engine summary. Outside the special case of trademark.com, or domains that actively claim affiliation with the trademark holder, consumers don’t form any firm expectations about the sponsorship of a website until they’ve seen the landing page—if then. This is sensible agnosticism, not consumer confusion. So long as the site as a whole does not suggest sponsorship or endorsement by the trademark holder, such momentary uncertainty does not preclude a finding of nominative fair use. (citations omitted.)

The Massachusetts Superior Court adopted the same reasoning earlier this month in Jenezebar v. Long Bow Group, quoting portions of the Toyota opinion and elaborating that: “This court finds that this initial uncertainty does not qualify as confusion and is an inevitable part of Web searching.”

These two cases suggest a possible trend of judicial skepticism regarding initial interest confusion as a theory of trademark infringement on the Internet.
 

New WIPO Site A Useful Tool

WIPO, the World Intellectual Property Organization, recently launched the WIPO Gold website.  WIPO Gold functions as a portal through which one can access all of the various WIPO online resources, including for domain name arbitrations, patents and trademarks.  I spent some time trying it out and found it very useful.  If you use any of the WIPO resources or have international IP issues, WIPO Gold is worth visiting.

Exergen and Bose: The Federal Circuit Revisits Fraud

The United States Court of Appeals for the Federal Circuit (“Federal Circuit”) recently published two opinions, a first enunciating a heightened standard for pleading inequitable conduct in a patent case under Rule 9(b) of the Federal Rules of Civil Procedure (“Rule 9(b)”); and a second clarifying the test for determining whether an applicant of a trademark application or registration renewal has committed fraud on the U.S. Patent & Trademark Office (“PTO”). In Exergen v. Wal-Mart Stores, Inc., et. al., despite the Federal Circuit’s reversal concerning both the validity of one Exergen patent and alleged infringement of two other patents by defendants, the court nonetheless proceeded to address the remaining inequitable conduct issue. The court took the opportunity to clarify and heighten at least the initial burden on an accused infringer attempting to allege patentee inequitable conduct. First noting that determination of an adequate pleading under Rule 9(b) alleging inequitable conduct in a patent case poses a question for Federal Circuit law, the court took the lead from the Seventh Circuit Court of Appeals, holding that there are two distinct requirements for pleading inequitable conduct under Rule 9(b); a factual requirement and a scienter requirement:

(i) factual requirement - the pleading party must first identify, with specificity, the who, what, when, where, and how the material misrepresentation or omission was committed; and,

(ii) scienter requirement - the pleading party must show sufficient facts from which a court can reasonably infer knowledge of the withheld material and a specific intent to deceive the PTO.

Specific intent, the court went on to say, must include a plausible suggestion of a “‘deliberate decision to withhold a known material reference’ or to make a knowingly false misrepresentation.” While acknowledging that scienter may be averred to generally using knowledge and belief type pleadings, the Court stressed that the pleading must nevertheless set forth specific facts upon which a belief is reasonably based. Thus, the Exergen court states that mere knowledge of the existence of a material prior art reference and the patentee’s failure to disclose that reference during prosecution falls below the threshold level for pleading inequitable conduct under Rule 9(b).

The court clearly noted that even when a party successfully pleads inequitable conduct by the patentee under Rule 9(b), that “to prevail on the merits, the accused infringer must prove both materiality and intent by clear and convincing evidence.” (citing Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008)). Thus, the Exergen court does not distinguish Star, but instead inserts a early, clear, and substantial hurdle to an accused infringer alleging inequitable conduct by requiring a substantial depth of factual knowledge regarding patentee conduct in order to reach through to the scienter requirement to provide an adequate pleading under Rule 9(b); a depth of ‘knowledge’ which in most cases will not be available to the accused infringer during the initial stages of litigation. While scienter has always been an element to inequitable conduct, the logical effect of the Exergen holding may be to curb accused infringers from generically including an inequitable conduct defense at the pleading stage. As suggested by Judge Pauline Newman in her dissent in McKesson Information Solutions v. Bridge Medical, litigation tends to distort the complex procedures of patent prosecution. Judge Newman argued that this distortion should be reduced by requiring a clear showing of deceptive intent on the part of the patentee. While McKesson directly addressed the merits of an inequitable conduct allegation during the trial phase, this concept, through Exergen, now seems to be in play at the early pleading stage through application of a strict factual requirement supporting an inference of the patentee’s specific intent to commit fraud on the PTO. Thus, for all intent and purpose, the Exergen holding may stem early accusations of inequitable conduct, at least leaving any such action to flow from information obtained during discovery in the form of a later amended pleading under Rule 15(a)(2).

The Federal Circuit again addressed the issue of fraud on the PTO in In re Bose, Appeal No. 2008-1448 (Fed. Cir., Aug. 31, 2009) (“Bose”). Bose initiated an opposition against the HEXWAVE trademark application, with Hexwave, Inc. filing a counterclaim for cancellation of Bose’s WAVE trademark, asserting that the Bose committed fraud on the PTO by submitting their Section 8/9 renewal application, a renewal application where Bose stated that the WAVE mark was still being ‘used in commerce’ on various products, including audio tape recorders and players. The Trademark Trial and Appeal Board (“Board”) determined that the tape recorder and players were no longer being manufactured and sold by Bose, but instead were presently subjected only to warranty-based repairs. The Bose General Counsel who signed the Section 8/9 affidavit testified to his believe that such activity constituted use in commerce, as required for renewal of a trademark registration. The Board disagreed, ruling that Bose committed fraud on the PTO, cancelling the WAVE registration in its entirety. Bose appealed. The Federal Circuit reversed, and methodically reviewed their own precedent on trademark fraud cases as well as their predecessor court, the Court of Customs and Patent Appeals, noting “[f]raud in procuring a trademark registration or renewal occurs when an applicant knowingly makes false, material representations of fact in connection with his application.” (quoting from Torres v. Cantine Torresella S.r.l., 808 F.2d 46, 48 (Fed. Cir. 1986)). And subsequently honing in on the intent of the applicant, based on the knowledge of the applicant; noting the prohibition of applicants “making knowingly inaccurate or knowingly misleading statements.” (quoting from Bart Schwartz Int’l Textiles, Ltd. V. Fed. Trade Comm’n, 289 F.2d 665, 669 (CCPA 1961), with emphasis provided in Bose). And so again, similar to Exergen, a showing of fraud under the Lanham Act requires a showing of a misrepresentation of a material fact, and that such misrepresentation was made knowingly by the applicant.

With this review in hand, the Bose court quickly zeroed in on an earlier Board decision in Medinol v. Neuro Vasx, Inc., 67 USPQ2d 1205 (T.T.A.B. 2003), where the Board held that a trademark applicant commits fraud when a representation of fact has been made to support an application, and that the applicant knows or should know that such a representation was false or misleading. The court took express exception with the Board, stating that the linking of subjective intent to the concept of “should have known” effectively, and erroneously, equates the fraud standard in trademark law to a simple negligence standard.

The Bose court, in similar fashion to Exergen (with Chief Judge Michel sitting on both panels) expressly stated that “[s]ubjective intent to deceive, however, difficult it may be to prove, is an indispensable element in the analysis” of fraud in procuring or retaining a trademark registration. While the court acknowledged that intent to deceive the PTO in these situations can be “inferred from indirect and circumstantial evidence,” nonetheless “such evidence must still be clear and convincing, and inferences drawn from lesser evidence cannot satisfy the deceptive intent requirement.” (citing Star at 1366).

The Exergen and Star decisions show the Federal Circuit’s desire to briefly and succinctly define and/or clarify the parameters required to support a showing inequitable conduct or fraud on the PTO. These decisions effectively signal that any such allegation must be supported by a stable of facts showing that the accused party understood that questionable actions amounted to deceitful activity in their dealings with the PTO.