Trademark & Copyright Law Blog : Intellectual Property Lawyers & Attorneys : Foley Hoag Law Firm : Washington D.C., Boston

On Tuesday, high-end shoe designer Christian Louboutin told the Second Circuit that District Court Judge Victor Marrero got it wrong when he ruled that Louboutin failed to make a preliminary showing that his hallmark red-soled shoes were entitled to trademark protection, basing that holding on the broad rule that a single color for fashion items could not be trademarked under the Lanham Act.

The dispute arose when Louboutin filed suit against Yves St. Laurent in April, 2010, asserting that several monochrome shoes featured in YSL’s Cruise 2011 collection infringed and diluted Louboutin’s trademark for red lacquered outsoles for high-end designer footwear.

YSL counterclaimed seeking cancellation of Louboutin’s mark on the ground that the mark was functional, invoking the doctrine of aesthetic functionality. This complex doctrine (which perhaps seems less so only in the minds of law professors who weighed in as amici) prevents a would-be trademark holder from laying claim to a mark whose aesthetic features confer a non-reputational benefit that cannot be duplicated by alternative designs.

According to the district court, laying claim to a single color for a fashion item effectively forecloses other designers from using that color in the claimed way. The court likened extending trademark protection under those circumstances to giving Picasso the right to enjoin Monet from painting images of water in the blue hue that is the hallmark of Picasso’s Blue Period. Such a result, the court reasoned, was as unacceptable in the fashion industry as it would be in the art context since “the greatest range for creative outlet exists…where every painter and designer in producing artful works enjoys equal freedom to pick and choose color from every streak of the rainbow.”

Among the many issues raised on appeal by Louboutin and YSL, (not to mention amici Tiffany & Co. and International Trademark Association, the most interesting is whether the aesthetic functionality doctrine bars a single color from ever serving as a mark for a fashion item. Louboutin and INTA point out, for example, that the red tab has been recognized as a source indicator for Levi’s apparel. However, that tab is a label affixed to the goods and is not an inextricable part of the goods themselves. It is interesting to consider whether courts would draw a distinction between color as used on a label and a color that is applied to the apparel itself, and whether it makes a difference if the color dominates the item in question.

Regardless of the outcome, current and future mark holders may be rewarded for Louboutin digging in his heels: Reports about oral argument suggest that the panel seems skeptical about the breadth of the district court’s ruling. If the ruling is upheld, it seems likely to be on narrower grounds.

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A version of this article, which was co-authored by Anthony E. Rufo, was reprinted in the World Trademark Review.

How can the owners of famous trademarks enforce their rights without being given the dreaded “trademark bully” label? The answer lies in knowing where to draw the line, and in exercising diplomacy in letting people know when the line has been crossed.

Many brand owners tolerate minor third party uses of their marks, including unauthorized parodies, fan clubs and the like, which are undertaken in good faith. But brand owners must act to protect their rights when third parties go too far. Potential red flags include actual confusion, complaints from customers, impact on sales, and formal trademark filings by third parties. In these circumstances, a line has been crossed and trademark owners can and should consider taking action. To protect themselves from bullying accusations, however, trademark owners would do well to emphasize in all of their communications the specific “over the line” factors that drove them to action.

North Face’s 2009 lawsuit against the “South Butt” defendants illustrates these principles. The defendants claimed that their use of THE SOUTH BUTT name and “arc” logo on clothing was a parody of THE NORTH FACE. A parody defense can put brand owners in a difficult position, because no one wants to be perceived as not getting the joke. In fact, a savvy brand owner knows that embracing those in the marketplace who are poking a little fun can often make for excellent public relations. So why was filing suit the right thing for North Face to do? Because the defendants repeatedly tried to register THE SOUTH BUTT as a trademark for clothing, which could have potentially curtailed North Face’s own rights and made future policing efforts against third parties more difficult.

In contrast, the Coca-Cola fan site on Facebook did not cross any obvious lines - it was created by two guys who just happened to love Coke. So what did Coca-Cola do about these individuals representing its brand to millions of social media subscribers? It decided to make the Facebook fan page the “real thing” and sponsor its creators, inviting them to meet with Coca-Cola executives in Atlanta and collaborate on marketing initiatives. This was a brilliant (and popular) strategy because the Facebook page posed no commercial threat, and Coca-Cola was able to support its biggest fans rather than shut down their Facebook site.

So what can you learn from these examples as a brand owner? If an infringer crosses the line and you have to enforce your rights, try to stay ahead of the spin and make sure the public knows you were left with little choice. If no line is crossed, consider whether a marketing-driven approach might be preferable to legal action. While you may not be able to escape the “trademark bully” label in all situations, careful line-drawing and tailored communications can help you manage the risks and, hopefully, portray your brand enforcement efforts in a positive light.

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Anheuser-Busch InBev NV, owner of the U.S. “Budweiser” mark for beer, has recorded a small success in its longstanding efforts to establish worldwide exclusive rights to the Budweiser mark by purchasing the rights to Budweiser trademarks held by a small Czech brewery, Budejovicky Mestansky Pivovar.

However, this is a victory in a small skirmish in InBev’s much larger trademark war with another Czech brewer, state-owned Budejovicky Budvar NP. InBev (through Anheuser-Busch) and Budvar have been engaged in multiple disputes related to the Budweiser mark for many years. In one of the most recent decisions, the European Court of Justice ruled in 2011 that InBev and Budvar could both continue to sell beer in the UK under the Budweiser mark, because they had both been doing so for at least 30 years. “Although the names are identical, UK consumers are well aware of the difference between the beers of Budvar and those of Anheuser-Busch, since their tastes, prices and get-ups have always been different,” the court said.

The trademark dispute arises from the fact that, for many centuries, beer has been brewed in the Czech town of Ceske Budejovice, which is called Budweis in German. The mark Budweiser was, originally at least, a geographically descriptive mark, because Budweiser means “from Budweis.” Meanwhile, in the US, Anheuser-Bush adopted the trademark Budweiser because the mark was well known in Germany as a mark for beer. Because InBev owns the Budweiser mark in the US, Budvar’s beer is sold in the US under the mark “Czechvar.”

On its website, Budvar states that it is involved in 22 court disputes in 14 countries with Inbev, and that in the period of 2000-2009, 115 court disputes and administrative procedures before patent offices were finalized, 82 of which resulting in favour of Budweiser Budvar. Budvar claims that that “vast majority of court rulings have thus confirmed Budweiser Budvar's rights to its trademarks”. No doubt InBev takes a different view.

The St. Louis Post-Dispatch, in an article here, suggests that InBev may seek to buy a stake in Budvar if the Czech government sells the brewer. Given the multiplicity of disputes, it appears it would take a strategic move like that finally to resolve this dispute. Until that happens, we have not heard the last of the battle of the Buds.

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Stating that the antidilution law should be used as “a scalpel, not a battle axe,” Judge Laura Taylor Swain of the Southern District of New York once again found that Starbucks failed to prove that the famous STARBUCKS trademark was likely to be diluted by the use of the marks CHARBUCKS BLEND, MR. CHARBUCKS, and MISTER CHARBUCKS on dark roasted coffee. In her December 23 opinion, she ordered that judgment be entered in favor of the defendant, Wolfe’s Borough Coffee, Inc., and that the long-running case be closed.

This is the third ruling that Judge Swain has made against Starbucks. It may not be the final word, however, as Starbucks may appeal yet again.

The dispute began in 1997, when Wolfe’s Borough Coffee, which does business as Black Bear Micro Roastery, started selling coffee under the names CHARBUCKS BLEND, MR. CHARBUCKS, and MISTER CHARBUCKS from a retail outlet called “The Den” in New Hampshire. Starbucks sent Wolfe’s a demand letter, but Wolfe’s refused to accede because “basically this was a large corporation coming at me and telling us what to do.” Starbucks then brought suit in the Southern District of New York.

After a two-day trial in 2005, Judge Swain ruled against Starbucks on all of its claims. While the case was on appeal in 2006, Congress enacted the Trademark Dilution Revision Act, which provided that a plaintiff need only show a likelihood of dilution, not actual dilution, to prevail. The Second Circuit remanded so that the lower court could reconsider the evidence in light of the new law.

On remand, Judge Swain accepted additional briefs but no new evidence. Once again, she ruled against Starbucks on all of its claims. In her 2008 opinion, Judge Swain held that the two marks must be “very or substantially similar” in order for dilution to occur, and that the use of MR. before CHARBUCKS alone defeats Starbuck’s dilution claim.

Starbucks appealed (again), and the Second Circuit remanded (again), this time on the basis that the prior requirement of “substantially similar” marks no longer applied in dilution cases. The Second Circuit’s 2009 opinion also noted that Wolfe's' admitted intention to associate its mark with Starbucks weighed in favor of Starbucks’ position, and that the statutory defense of fair use through parody did not apply to Wolfe’s because it was using the disputed name as a designation for Wolfe’s own products.

The case was once again remanded to Judge Swain, who accepted additional briefs on the issues identified by the Second Circuit. On December 23, 2011, six years from the date of her initial ruling, Judge Swain issued her opinion and ruled - you guessed it - against Starbucks on all remaining claims. Judge Swain acknowledged that four of the six dilution factors weighed in favor of Starbucks, namely, the distinctiveness of the STARBUCKS mark, Starbucks’ exclusivity of use, the high degree of recognition of the STARBUCKS mark, and Wolfe's' intent to associate its mark with the STARBUCKS mark. But Judge Swain found that the similarity between the marks was minimal, and therefore that factor favored Wolfe’s, and that the actual association factor weighed only minimally in Starbucks’ favor.

Judge Swain evaluated the similarity of the marks as they actually appeared in the context in which the parties’ products were offered, and noted that Wolfe’s did not use CHARBUCKS alone, but rather in combination with the words BLEND, MR. or MISTER. Judge Swain further noted that the parties used different colors and fonts on their packaging, and that Wolfe's'  packaging identified Wolfe’s as a “Micro Roastery” located in New Hampshire. On this basis, Judge Swain found that there was not “an association, arising from the similarity of the relevant marks, that impairs the distinctiveness of the famous mark,” and that Starbucks’ dilution claim must therefore fail.

It will be interesting to see whether Starbucks will appeal and, if so, whether the Second Circuit will conclude that Judge Swain finally got it right or whether she simply did an end-run around the “substantially similar” issue. As of this date, it appears that Wolfe’s is still selling CHARBUCKS BLEND on its website. Stay tuned.

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As most readers know, the Supreme Court held in the 2006 eBay decision that injunctions were no longer to be the norm in patent cases, and irreparable harm was not to be presumed. Instead, injunctions are within the equitable discretion of the district court, and are to be granted only if the plaintiff has shown entitlement under the traditional multi-factor test.

It’s been clear for some time that the same principles now apply in copyright and trademark cases as well. The First Circuit, for instance, addressed eBay in the context of a trademark cases in the Voice of the Arab World decision, and several courts have applied the holding to copyright cases, such as the Second Circuit in the J.D. Salinger case.

What does this mean for plaintiffs in trademark and copyright cases? This is still unclear, and the question will be very case specific. In October, the Federal Circuit reversed a lower court’s denial of a permanent injunction in a patent case, implying that eBay shouldn’t be read too broadly. The court wrote this interesting summary:

Although eBay abolishes our general rule that an injunction normally will issue when a patent is found to have been valid and infringed, it does not swing the pendulum in the opposite direction. In other words, even though a successful patent infringement plaintiff can no longer rely on presumptions or other shortcuts . . . it does not follow that courts should entirely ignore the fundamental nature of patents as property rights granting the owner the right to exclude.

Some courts, though, appear not to share the Federal Circuit’s view that the "pendulum" is now neutral. Last month, a district court in Maryland, citing eBay, denied post-trial injunctive relief to a prevailing plaintiff in a copyright case. In that case, the plaintiff showed that the Baltimore Ravens NFL franchise had copied his drawing of a “Flying B Logo” without authority, and the Fourth Circuit had held that use of a similar logo (see below) in films and video clips was not fair use.

But on remand, the district court compelled the defendant Baltimore Ravens to pay “reasonable compensation,” which seems to constitute something other than statutory damages or wrongful profits, and then cited the adequacy of that compensation as a reason for denying the requested injunction. The eBay decision appears to have spawned at least one judicially created compulsory licensing scheme.

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The lawsuit between Twitter and Twittad about which we wrote previously has ended barely a month after it began. Twitter and Twittad announced on October 10, 2011, that they have settled their dispute over Twittad’s registration of LET YOUR AD MEET TWEETS as a trademark. While the full terms of the settlement agreement are confidential, the Wall Street Journal reports that Twitter will drop its lawsuit, and Twittad will assign its rights in the registration to Twitter, although Twittad will continue to use the tagline with its services. Indeed, by October 11, Twitter had filed a notice of voluntary dismissal of the litigation, and Twittad had recorded with the U.S. Patent and Trademark Office an assignment to Twitter of the entire interest in its registration. Twitter has also restored Twittad’s Twitter account, which it had suspended during the dispute. The apparent assignment-and-license-back arrangement is in line with Twitter’s stated policy of encouraging third parties to build identifiable enhancements to the Twitter “ecosystem” while maintaining its claim to trademark rights in the term TWEET.
 

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UPDATE: Twitter and Twittad have settled their dispute. Click here for details. 

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The online “microblogging” service Twitter filed suit last month against Twittad, LLC, a company that enlists Twitter users to participate in advertising campaigns for pay. Twittad has registered the phrase LET YOUR AD MEET TWEETS with the United States Patent and Trademark Office (PTO) as an identifier for its advertising-related services. The lawsuit represents the latest step in Twitter’s efforts to assert proprietary rights in the term “tweet,” which, according to the Online Etymology Dictionary, has been used since at least 2007 as “the word for what one does” on Twitter.

Twitter launched its service in 2006 and first filed to register its trademark in the name TWITTER in 2007. When it came to filing trademark registration applications for TWEET, however, Twitter was a bit late to the party. It first applied to register TWEET for blogging, telecommunications, and social networking services on April 16, 2009. This application has been suspended pending resolution of three applications previously filed by third parties for marks that the PTO thinks could be confusingly similar: TWEETMARKS, COTWEET, and TWEETPHOTO. On August 26, 2010, Twitter filed a separate application to register TWEET for software and for advertising and marketing services. By that time, the PTO was able to cite ten previously filed, potentially confusing applications. In addition, Twittad’s LET YOUR AD MEET TWEETS mark, filed on July 2, 2008, had proceeded to registration on October 20, 2009. Finding a likelihood of confusion with an already registered mark, the PTO provisionally rejected Twitter’s second application.

Twitter appears to be employing a multifaceted strategy in addressing these earlier filers. In some cases, it has been able to find a business solution. For example, it obtained an assignment of the registration for COTWEET and is now licensing the mark back to the developers of the CoTweet service. In May of 2011, Twitter acquired TweetDeck, Inc., which owned an application for TWEETDECK that had been cited against Twitter’s second TWEET application. Other roadblocks have disappeared with no obvious intervention from Twitter. For example, the company behind TWEETPHOTO (a mark that also borrowed from Twitter’s font and trade dress) rebranded and changed its focus, abandoning its TWEETPHOTO application. In still other cases, Twitter has adopted a more aggressive stance. It has initiated an opposition proceeding before the Trademark Trial and Appeal Board (TTAB) attacking TWEETMARKS, the final remaining obstacle to Twitter’s first TWEET application.

The Twittad case is the first time Twitter has sought the intervention of the federal courts in defense of its asserted trademark rights, and the fact that it chose to bring a civil action rather than a cancellation proceeding before the TTAB suggests that it means business. Twitter’s complaint raises no infringement claim and simply asks the court to order cancellation of Twittad’s registration. As grounds for the cancellation, Twitter argues that Twittad has not used the phrase LET YOUR AD MEET TWEETS as a trademark to identify its services; that the phrase is generic or, at best, descriptive; and that, if Twittad has used the phrase in a trademark sense, such use is confusingly similar to Twitter’s prior use of TWEET.

Twittad’s answer to the complaint, if it chooses not to settle, is likely to raise some interesting issues about the arguable genericness of TWEET. According to the Wall Street Journal, Twittad’s founder is of the opinion that “because Twitter’s users came up with ‘tweet,’ the word is fair game.” The Oxford Dictionaries and Merriam-Webster web sites have added definitions for “tweet” – as both a noun and a verb, in lowercase – that refer to posting on Twitter. And the PTO has raised mere descriptiveness objections to applications for TWEETPHOTO and SPONSORED TWEETS, citing such dictionary definitions of “tweet”; both companies eventually abandoned their applications.

Twitter itself must walk a fine line faced by many brand owners who want their marks to achieve broad consumer recognition and market dominance, but want to protect their trademark significance. This tension is perhaps especially fraught in the Internet space, where users can participate so effectively in coining and popularizing new terms for new concepts. Twitter is attempting to hold its ground while enabling growth on the Twitter platform through a set of policies laid out on its website. These guidelines allow other companies to use names beginning with Tw- or Twit- and containing “Tweet,” as long as their services are designed to be used exclusively with Twitter, and as long as they don’t apply to register a trademark containing “Twitter” or “Tweet.” (Perhaps Twitter learned some of these lessons from TweetMyJobs.com, which works with Twitter, Facebook, and a number of others services, and sailed through the PTO application process back in 2009 to obtain a registration for TWEETMYJOBS.) The guidelines also, somewhat quixotically, admonish everyone to “capitalize the T in … Tweet!”

While Twitter may well prevail on Twitter’s arguments that TWEET is a famous mark solidly associated with its services in the public mind, the game of catch-up it currently finds itself playing should serve as a reminder of the importance of paying attention to trademark protection early in the development of new brands, products, and services.

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As mentioned in our prior blog entry, Facebook has sued Teachbook.com LLC in the Northern District of Illinois for infringement of the ubiquitous FACEBOOK mark, after losing a venue battle in the Northern District of California this past May.

Facing an astronomically larger opponent, Teachbook went for an aggressive strategy that has tempted many a defendant: to see if, despite the very high hurdle imposed by Rule 12, it could get the suit dismissed prior to discovery. It’s very difficult to win such motions even under the more defendant-friendly Iqbal standard, and this one was denied.

Teachbook’s main argument was one with some initial appeal. The only overlapping portion of the marks, it argued, were the “-BOOK” elements, and “book” is a generic term. The district court held, however, that while “book” is indeed generic for certain purposes -- such as in LeBook Publishing, Inc. v. Black Book Photography, Inc., 418 F.Supp.2d 305 (S.D.N.Y. 2005), where the district court judge held on a Rule 12 motion that “The Black Book” as used on a printed directory did not infringe “Le Book NY” as used on a similar directory -- it is not generic as used by these parties. The court wrote: “Even in this age of ‘e-books,’ social networking services do not fall within the category of what one would traditionally call ‘books.’” (According to a footnote in the opinion, Teachbook had attempted to fudge the distinction between the LeBook case and the present one by claiming that “book” is generic for “directory and networking services.”)

Interestingly, Teachbook also tried to obtain dismissal based on the following statement appearing on its website:

Many schools forbid their teachers to maintain Facebook and MySpace accounts because of the danger that students might learn personal information about their teachers. With Teachbook, you can manage your profile so that only other teachers and/or school administrators can see your personal information, blogs, posts, and so on. Teachbook is all about community, utility, and communication for teachers.

Teachbook argued that this showed that it “publicly and affirmatively distinguished its services from those of Facebook,” so that it could not be alleged to have bad intent. Facebook, however, countered that Teachbook was creating more confusion by “touting itself as a substitute for Facebook.” The district court was unwilling to resolve this issue in Teachbook’s favor. It asked, “who is to say these teachers might not think that Teachbook is Facebook’s response to some schools banning teachers from using Facebook?”

Teachbook made many more arguments in the case, none of which carried the day. Having now made all its best arguments and received a lukewarm evaluation from the district court judge, Teachbook now faces a long and difficult battle against an imposing opponent.

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As reported recently, Facebook has dropped its suit against Lamebook, the subject of our prior blog entry, pursuant to a settlement agreement. This followed Facebook’s unsuccessful attempt to have the case transferred to its home turf in the Northern District of California.

According to the news report, Lamebook got to keep its name as part of the settlement, and did not even have to change its logo with the evocative “thumbs-down” icon and blue rectangle; all it had to do was add a not-so-prominent disclaimer at the top of its website at www.lamebook.com, and agree not to seek to register LAMEBOOK as a trademark. Presumably Facebook concluded that Lamebook’s parody defense was a winning hand, and (in the words of the song) “knew when to fold ‘em.”

As mentioned in a comment responding to our prior post by Prof. Jessica Silbey of Suffolk Law School, this suit was just one battle in a larger war in which Facebook is seeking to control a broad field of “-book” formative marks. Another, against the operators of the www.teachbook.com website, was dismissed on jurisdictional grounds this past May, but was quickly re-filed with the U.S. District Court for the Northern District of Illinois. That case is pending.

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A trademark is more than a designation of source. It is also a symbol of quality, attesting to the consistent, predictable nature of the identified goods or services. Consumers rely upon marks to insure that they purchase the same product or service they have come to know from prior experience.

For this reason, a company that uses its mark through licensees must control the quality of the goods and services that the licensees sell under the mark. If the licensor fails to do this--if it engages in “naked licensing” that fails to ensure a consistent and repeatable experience for consumers--the mark may lose its meaning as a predictor of quality and effectively cease to be a mark.

In such cases, the legal penalty is a finding of trademark abandonment. Having failed to maintain and preserve the meaning of its mark, the licensor forfeits its rights. The mark may then be freely used or appropriated by others.

Abandonment is a harsh penalty, but as shown by a trio of recent cases, the courts will impose it in appropriate circumstances. Last year the Ninth Circuit held that Freecycle, a well-known charitable recycling organization, had abandoned its FREECYCLE logo by failing to exercise quality control over its “licensees”-- really just a loose affiliation of online member groups. FreecycleSunnyvale v. The FreeCycle Network, 626 F.3d 509 (9th Cir. 2010). There was no written or oral license agreement. Freecycle had sent an e-mail to its members urging them to use its mark on a non-commercial basis, and had posted a few voluntary guidelines and policies on its website. However, it had made no effort to enforce even these minimal standards. The Court also found that Freecycle did not have a close working relationship with its members that would justify its reliance on their own quality controls. Freecycle’s charitable status and the highly sympathetic nature of its mission did not prevent the Court from imposing the ultimate sanction.

Earlier this year, the Trademark Trial and Appeal Board of the U.S. Patent and Trademark Office found that a party seeking to cancel a registered mark had set forth a sufficient claim of abandonment through uncontrolled (i.e., naked) licensing. Zoba International Corp. v. DVD Format/Logo Licensing Corp., 98 USPQ.2d 1106 (TTAB 2011). The Petition to Cancel alleged that the registrant permitted DVD replicators to use its DVD logo in a manner that did not comply with its standards “for extensive periods of time with indifference.” This pleading was deemed sufficient to survive a motion to dismiss.

Most recently, the Seventh Circuit held that the owners of a bridal wear shop had abandoned their mark EVA’S BRIDAL by failing to exercise any control over their licensee (who also happened to be one of their relatives). Eva’s Bridal Salon Ltd. v. Halanick Enterprises, Inc., 2011 U.S. App. LEXIS 9539 (7th Cir. 2011). As in the Freecycle case, there was a complete lack of oversight. The license agreement did not contain any quality control provisions; it did not give the licensors supervisory authority over the licensee; and the licensors never tried to exercise such authority. In view of these extreme circumstances, the Court held that the plaintiffs had abandoned the mark, and that their former licensee could continue to use it free of charge.

The lesson of these cases is clear: abandonment is a genuine threat, and one that licensors should take care to avoid. The license should expressly give the trademark owner a right of quality control, including the right to inspect the licensees’ goods or services, and the owner should actively exercise that right.

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UPDATE:  More Thoughts on the "Trademark Bully" Report: The Department of Commerce did a Good Job with a Bad Assignment

Posted by: Julia Huston on 1:20PM, May 17, 2011 

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The long-awaited study of so-called trademark bullies was recently released by the Department of Commerce. As you may recall from our prior blog post, the study was the result of legislation filed by Senator Leahy of Vermont and signed into law by President Obama on March 17, 2010 (Pub. L. 111-146, Sec. 4). The legislation gave the Secretary of Commerce one year to “study and report to [Congress] the extent to which small businesses may be harmed by litigation tactics [by corporations] [the purpose of which is] attempting to enforce trademark rights beyond a reasonable interpretation of the scope of the rights granted to the trademark owner." (Subsequent to enactment, the words “of corporations” were stricken and replaced by "the purpose of which is" by Pub.L. 111-295, Sec. 6(h).)

Senator Leahy apparently requested the study because he was frustrated that Vermonster, a local brewery of beers and ales in his home state, was being targeted by Hansen Beverage Company, the producer of Monster Energy Drink. The legislation was quickly passed by the House and Senate, before anyone in the intellectual property community had a chance to react or submit comments.

This unfortunate legislation is an example of what lawyers call "bad facts make bad law." Many people questioned the wisdom of commissioning an expensive study of trademark issues during a severe national budget crisis, especially given the other priorities facing the nation. Others felt that so-called trademark bullying did not deserve any more attention than patent bullying or any other kind of litigation-related bullying.

The Department of Commerce dutifully undertook the required study, and publicly released the results on April 27, 2011. Ultimately the study did not tell us anything that we did not already know. The study revealed that some people think that over-aggressive trademark enforcement is a problem, and some do not. The views expressed to the Department of Commerce were largely drawn from the respondents' own anecdotal experiences rather than any consensus among similarly situated constituents. The Department of Commerce ultimately could not answer the question that Congress had posed, and acknowledged that, "Given the limited data available, it is extremely difficult to determine the extent to which trademark owners may be purposefully overreaching when enforcing their rights, and doing so with sufficient regularity for it to qualify as a significant problem."

The Department of Commerce did not recommend any radical changes in trademark law or practice, but instead suggested exploring ways to educate potential trademark litigants and make pro bono counsel available to parties who cannot afford attorneys. While these ideas are certainly uncontroversial, they are also not likely to make a significant difference in the way that trademarks are enforced and defended in the United States.

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 The decision by Apple Corps, the Beatles’ music company, to allow distribution of Beatles songs on iTunes appears to have been vindicated by the initial sales figures achieved (two million singles sold in the first week, reports Billboard). However, the release of Beatles’ music on iTunes, the final act in the resolution of the long-running trademark dispute between Apple Computer and Apple Corps, also illustrates the basic truth underlying the resolution of many trademark negotiations: the company with the biggest consumer footprint ultimately wins.

When the first Apple Computer v. Apple Corps trademark dispute was settled in 1981, Apple Computer agreed not to enter the music business and Apple Corps agreed not to enter the computer business (a history of the dispute is chronicled here). And yet, 26 years after the 1981 settlement, as part of the final resolution of the parties’ dispute, Apple Computer became the owner of Apple Corps’ music trademarks (for example, U.S. Registration No. 78430230 for the word mark APPLE, assignment to Apple Computer recorded January 7, 2008). Apple Corps, which once successfully challenged Apple Computer to protect Apple Corps’ own music trademarks, is now a mere licensee of those same marks from Apple Computer -- a clear demonstration of the effect of changed economic circumstances. The assignment by Apple Corps of its marks evidently represents a significant weakening of Apple Corps’ rights in the APPLE mark, as a licensee always faces some risk of loss of the license, even if the license is expressed to be irrevocable.

The major reason for this change in circumstances is iTunes, which has not only provided Apple Computer with strong trademark rights in the mark APPLE used for music distribution, but also -- not incidentally -- significant revenues with which to acquire ownership of the Apple Corps’ trademarks. Surely Apple Corps’ revenues from the Beatles remained none too shabby, even without iTunes. But iTunes is now the largest music retailer in the United States. It certainly seems likely that, when the most recent Apple v. Apple dispute settled in 2007, far more music consumers would have associated the mark APPLE with iTunes than with the Beatles. The resolution of the trademark dispute confirmed the existing reputation of the APPLE mark in the minds of consumers familiar with iTunes. And, evidently, in agreeing to their iTunes deal, even Apple Corps found it difficult to ignore the potential revenues from this powerful new distribution channel.

Looking at the history of this dispute and the various settlement agreements of the parties over the years, it appears that the parties may not have foreseen the effect of the Internet on the development of the computer and music industries. Obviously, in an ideal world an attorney preparing a settlement agreement should consider the client’s business as it might be in the future, as well as the way it is at the time the settlement is being negotiated. When possible, a settlement agreement should anticipate such changes.

Of course, there are limits to how much one can foresee. Frankly, if an attorney working in 1981 could have predicted the emergence and eventual dominance of digital music distribution, he or she probably should not have been spending time negotiating trademark settlement agreements. As this long-running dispute demonstrates, however, companies should be mindful that changes in circumstances can shift the balance of power dramatically, and so should not be shy in leveraging that position to reshape prior agreements -- to take one final bite at the apple, so to speak.

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Lamebook, LLC operates a website, www.lamebook.com, at which people can submit amusing (or merely “lame”) messages and photos appearing on facebook.com – its tag line is “the funniest and lamest of facebook.” (Warning: some of the content is funny or lame mainly because it is off-color.) The editors screen the submissions and remove identifying information before displaying them on the site in various categories (such as “TypOHs”), and make revenue selling advertising space (as of this writing, the site had an Alexa® U.S. traffic ranking of 1,302, and ads for AUTOZONE and well-known car manufacturers were prominently featured). Imagine a business analogous to “America’s Funniest Home Videos,” except with your Facebook “friends” choosing which of your pictures, videos and writings to submit to the show.

Following months of cease and desist letters and on-again, off-again settlement discussions, Lamebook recently filed suit (PDF) in federal district court in the Western District of Texas for a declaration of non-infringement and non-dilution. Not to be outdone, Facebook responded with an infringement and dilution suit in the Northern District of California.

Aside from the obviously derivative name, Facebook has other complaints about Lamebook’s functionality and trade dress: Lamebook uses a logo that is similar to Facebook’s (although having recently added a thumbs-down icon before the word), and offers “like this” and other features similar to Facebook functions. Facebook goes so far as to call the services on Lamebook’s site “the same as and/or related to the services provided by Facebook” (the former part of that characterization being a bit of a stretch). Lamebook responds that the mimicry of the name, logo and functionality are all part of the parody.

Lamebook faces at least two obstacles in establishing its parody defense. First, as discussed in this prior blog entry discussing the marks CHARBUCKS, CHEWY VUITON, and THE SOUTH BUTT, a mark does not fit into the statutory definition of parody unless it is used “other than as a designation of source for the person’s own goods or services.” 15 U.S.C. Section 1125(c)(3)(A). Since it fails this requirement, Lamebook’s service mark will be subject to the far murkier (and sometimes contradictory) standards articulated in prior cases dealing with parody and satire. There is an excellent discussion of these decisions in Anthony Fletcher’s recent article in The Trademark Reporter, titled “The Product with the Parody Trademark: What’s Wrong with CHEWY VUITON?” (INTA members can link to the article here.)

Second, in order to qualify as a parody, the mark must be used in order to target the subject mark in some fashion – not to merely use the mark as a “hook” for a parody about something else entirely. By analogy, under the copyright fair use doctrine (as discussed in this prior blog entry), one cannot change the lyrics to a copyrighted musical work to contain a political message unrelated to the song lyrics themselves, and then claim the work is parodic. Along these lines, a Facebook cease and desist letter attached to Lamebook’s complaint focuses on the case of Dr. Seuss Enterprises LP v. Penguin Books USA Inc., 42 USPQ2d 1184 (9th Cir. 1997), in which a book about the OJ Simpson case called The Cat NOT in the Hat! was found to be non-parodic, since it did not target Dr. Suess’ work in any way but merely used its imitation of the author’s title and style “to get attention” while commenting about something else entirely.

One might question whether this dispute is really analogous to the Dr. Seuss case. Commenting about the funny, disturbing or lame material on Facebook would seem far closer to commenting about Facebook itself, as opposed to using an author’s title and rhyming format to make a point about a criminal trial. How does one differentiate between commenting on the ubiquitous social medium that is Facebook, versus commenting on the content that appears on the medium?

Given that both sides reference lengthy prior discussions, the most likely outcome appears to be some form of settlement between the parties (perhaps involving a very prominent disclaimer). If the case progresses, however, it will be very interesting to see how the parody defense plays out.

It will also be interesting to see if Facebook raises – perhaps in the course of a dilution by tarnishing argument—privacy issues that are not addressed in either complaint. While YouTube videos are posted for the world to see, much Facebook content is available only to selected “friends” to see (even if those friends might number in the hundreds or thousands); neither the friend submitting the information nor Lamebook has permission to publish the content. While Lamebook obscures names and other identifying information, “scrambles” faces in photos and removes postings on request, some of these postings and photos might well be recognizable to people who know the author or subject before they are taken down. Might some people become more reluctant to post on Facebook as a result? More to the point of a dilution claim, might they form a negative impression of the Facebook brand? 

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The U.S. Court of Appeals for the Federal Circuit (CAFC) has affirmed the decision of the Trademark Trial and Appeal Board (TTAB) that Chippendales’ “Cuffs & Collar” trade dress (pictured below) is not inherently distinctive for “adult entertainment services, namely, exotic dancing for women in the nature of live performances.” In re Chippendales USA, Inc., No. 2009-1370 (Fed. Cir. October 1, 2010) (PDF).

For nearly ten years, Chippendales has been trying to obtain a registration of its trade dress based on inherent distinctiveness rather than acquired distinctiveness or “secondary meaning.” Chippendales filed its first application on November 27, 2000, but for various reasons it was forced to accept a secondary-meaning registration. This registration issued in 2003 and is now incontestable; but Chippendales is not satisfied, and rightly so.

An inherently distinctive mark is preferable to a mark based on secondary meaning, for several reasons. The rights in an inherently distinctive mark attach upon first use, but the rights in a secondary-meaning mark attach only when distinctiveness is acquired. In some cases, this can give rise to difficult questions of priority. A plaintiff’s mark may have an earlier date of first use than the challenged mark, but if the challenged mark was used before the plaintiff’s mark acquired distinctiveness, the plaintiff may be out of luck.

More generally, an inherently distinctive mark is often regarded as stronger than a mark that has acquired distinctiveness through use. With a secondary-meaning mark, a plaintiff may have a harder time preventing infringing uses on related goods or services that are not listed in the mark’s registration. Chippendale’s attorney has noted that infringers will often demand evidence of acquired distinctiveness with regard to such goods and services, resulting in increased litigation costs.

Chippendales accordingly filed a new application to register its Cuffs & Collar trade dress in 2005, claiming inherent distinctiveness. The PTO Examiner rejected this claim, and in 2009 the TTAB affirmed. Chippendales appealed to the CAFC, but on October 1st, the Court upheld the Board’s decision.

The Court sided with Chippendales on a few issues. It agreed that Chippendales’ current registration efforts are not mooted by the existence of its earlier incontestable registration, stating “The potential for benefit in an infringement suit of a registration based on inherent distinctiveness creates a viable controversy.” The Court also rejected the Board’s suggestion that any costume worn by adult entertainers lacks inherent distinctiveness: “Simply because the live adult entertainment industry generally involves ‘revealing and provocative’ costumes does not mean that there cannot be any such costume that is inherently distinctive.” For the rest, however, Chippendales lost on all points.

Chippendales argued that the inherent distinctiveness of its mark should be determined as of 1979, when the mark was first used, rather than as of the present. The Court disagreed:

[T]rademark rights are not static…A term or device that was once inherently distinctive may lose its distinguishing characteristics over time….It would be unfair for an applicant to delay an application for registration and then benefit from having distinctiveness measured at the time of first use. This would allow an applicant to preempt intervening uses that might have relied on the fact that the registration for the mark as inherently distinctive had not been sought at an earlier date.

Turning to the central issue of whether the Cuffs & Collar trade dress is inherently distinctive, the Court applied the test established in Seabrook Foods, Inc. v. Bar-Well Foods, Ltd., 568 F.2d 1342 (CCPA 1977). Specifically, the Court asked if the mark was viewed by the public as “a mere refinement of a commonly-adopted and well-known form of ornamentation” for the goods or services. The Court answered this question in the affirmative, finding that Chippendales’ mark is a mere refinement or variation of the Playboy bunny costume, a trade dress for adult entertainment services that also features a collar and cuffs, along with other elements.

The Court’s reasoning is opening to question. Having decided that inherent distinctiveness must be determined as of the present, the Court apparently found that the Playboy bunny costume is currently “a commonly-adopted and well-known form of ornamentation” for adult entertainment. However, the evidence for this finding was slender at best. The bunny costume may have been notorious in 1979 when Chippendales began using its mark, but the last Playboy clubs were shut down over 20 years ago. As Wikipedia notes, Playboy magazine “has seen a decline in circulation and cultural relevance” since the 1970s, and the Playboy empire is now a shadow of its former glory. The Court noted that Playboy owns some active registrations of the bunny costume for, inter alia, casino and nightclub services. However, all of these registrations date from 2007 or later. Are they really enough to establish that the bunny costume is “commonly-adopted” and “well-known” at the present time?

One may also wonder whether the Cuffs & Collar trade dress would really be seen as a “mere refinement” of a female outfit featuring bunny ears, a bunny tail and an abbreviated bustier. In such an ensemble, the cuffs and collar are the last things that draw focus. Would people viewing the trade dress depicted above really think of a Playboy bunny, or regard the Cuffs & Collar as a minor variation of the bunny outfit?

In any case, Chippendales is now back at square one, and must consider its options of requesting an en banc rehearing by the CAFC or filing a petition for certiorari to the Supreme Court. The thought of this case being heard by Roberts, Alito, Scalia, Thomas, Kennedy, Breyer, Ginsburg, Sotomayor and Kagan is certainly interesting, but one doubts that it will happen.

Lesson for trademark owners: Chippendales’ quest for inherent distinctiveness is not quixotic. The CAFC has clearly acknowledged “[t]he potential for benefit in an infringement suit of a registration based on inherent distinctiveness.” While a ten-year fight may not be practicable for most parties, trademark owners should consider making at least some extra effort to obtain an inherently distinctive registration rather than one based on secondary meaning.

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In what would appear to be the final chapter of the battle between online giant eBay and luxury jeweler Tiffany, a Southern District of New York judge has bounced Tiffany’s false advertising claim, the only claim remaining following a Second Circuit decision earlier this year.

On remand, the district court focused on whether eBay’s advertisements about the availability of Tiffany merchandise on its site misled or confused customers since at least some purportedly Tiffany products were counterfeit. Tiffany conceded that there was no extrinsic evidence measuring the effect of eBay’s ads on consumers, but argued that instances in which customers unwittingly purchased counterfeit Tiffany merchandise or complained to eBay about counterfeit Tiffany goods demonstrated that consumers were actually misled. The court disagreed (PDF), reasoning that that evidence did not show the effect of eBay’s ads on consumers in general, and more importantly, failed to demonstrate that eBay’s ads actually misled any consumer.  Tiffany (NJ) Inc. & Tiffany and Co. v. Ebay, Inc., No. 04 Civ. 4607 (RJS) (S.D.N.Y. September 10, 2010).

In an effort to resuscitate its false advertising claim, Tiffany also argued that the ads were false by necessary implication and that eBay intentionally misled customers by circulating its ads knowing that its site contained many listings for counterfeit Tiffany goods. Those contentions fared no better. The false by necessary implication doctrine, the court held, did not apply because that doctrine only applied to assertions that an advertisement was literally false, a proposition previously rejected by the district court and the Second Circuit. The court further ruled that Tiffany waived its argument that eBay intentionally misled or confused customers by not raising it at trial or on appeal. Even if it hadn’t waived that argument, the court continued, Tiffany’s assertion was meritless because it failed to show that eBay engaged in the sort of egregious misconduct necessary to show an intent to deceive as nothing in the record suggested eBay knew that its advertisements were misleading consumers, and eBay had, in fact, employed a number of anti-counterfeiting measures to prevent the sale of Tiffany knock-offs.

While the district court’s decision focused on the dearth of evidence indicating that consumers had been misled by eBay’s ads, eBay’s extensive anti-counterfeiting efforts doubtlessly placed eBay in a better position to avoid false advertising liability.

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The Massachusetts Appeals Court has served up a reminder to Massachusetts trademark licensors that they may be subject to liability for injuries caused by defective products bearing their licensed mark, even if they are not the manufacturer or seller of the defective product. Under the "apparent manufacturer" doctrine, a nonseller trademark licensor may be liable for defective products if the licensor "participated substantially" in the design, manufacture or distribution of the products. In Lou and others v. Otis Elevator Company, No. 09-P-632 (Mass. Ap. Ct. September 3, 2010), Otis had licensed its marks and its technology to a Chinese joint venture. The plaintiff, a Massachusetts resident who was four years old at the time of the accident, was injured in Tianjin, China by an escalator manufactured by the joint venture. The plaintiff's hand was almost severed by the escalator. Otis did not manufacture or distribute the escalator, but the escalator bore the "OTIS" mark and it had been manufactured under Otis' technology license. After a trial in 2007, Otis was found liable and the plaintiff was awarded $3.3 million in damages, plus $3.3 million in prejudment interest.

Otis appealed, arguing that the trial judge had erred by instructing the jury in a manner that expanded the "apparent manufacturer" doctrine. The appeals court disagreed (PDF), holding that a nonseller trademark licensor who participates substantially in the design, manufacture or distribution of the licensee's products may be held liable under Massachusetts law as an apparent manufacturer. By licensing its technology, as well as its mark, Otis had participated substantially in the design of the relevant product.

While the fact that Otis had licensed its technology as well as its trademark weighed strongly in favor of liability in this case, even where a mark is licensed without any accompanying technology, many courts will find liability based on the licensor's duty to control the quality of the products that bear its marks.

For transactional attorneys, this case illustrates the importance of including in any license of trademarks and technology an indemnity protecting the licensor against product liability suits. Due to the inconsistent treatment of trademark licensors in product liability cases, it would be prudent to include such an indemnity provision even if the trademark is licensed without any other technology or intellectual property rights. The license should also require the licensee to maintain adequate insurance so that it can meet its indemnification obligations. 

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In American Needle, Inc. v. National Football League, the U.S. Supreme Court held that the National Football League was subject to suit under the Sherman Antitrust Act regarding its practices in licensing team trademarks to merchandisers. Between 1963 and 2000, the IP licensing entity set up by the league, NFL Properties, had “granted nonexclusive licenses to a number of vendors,” including American Needle, “permitting them to manufacture and sell apparel bearing team insignias.” In 2000, however, an exclusive license was granted to Reebok. American Needle, having lost out on the deal, responded with an antitrust suit in the Northern District of Illinois, which made it to the Supreme Court eight years later.

The question posed in the case was whether the NFL teams are separate decision-making entities for purposes of this analysis, or whether NFL Properties should be viewed as a single entity. If the latter, there can be no potential liability for antitrust violations, as it takes two to tango and a single entity cannot “conspire with itself.” Disagreeing with both the district court judge and the Seventh Circuit Court of Appeals, the Supreme Court held unanimously that NFL Properties should not be treated as a single entity, but merely as a joint venture of separately managed competitors, each owning its own intellectual property rights and fully capable of conspiring to violate the antitrust laws. Thus, summary judgment in favor of the NFL was reversed, and the suit allowed to proceed.

Are sports franchises really independent actors with regard to their trademark rights? On the one hand, it’s certainly true that each individual team owns its marks, as searching the Patent and Trademark Office database of trademark registrations will show. Yet those with experience in the sports business know that virtually all intellectual property issues of the various leagues are centrally managed – from collection and ownership of copyrighted historical footage, to enforcement against unauthorized merchandisers, to promotion of web sites and internet broadcasting rights. One well-publicized example involves the dispute earlier this year concerning the “Who Dat” slogan of the NFL champion New Orleans Saints: the controversial cease and desist action against manufacturers of T-Shirts bearing the popular slogan came not from the team, but from the league. 

It’s interesting to contrast the Supreme Court’s vision of teams as independent owners of trademark rights with the picture that emerges from a different suit filed in 2007 and settled last year. In Madison Square Garden, L.P. v. National Hockey League, the owners of the New York Rangers sued the National Hockey League to gain control of their own website, newyorkrangers.com, after the league voted (over the objection of Rangers owners) to run all team websites on a league-controlled format through a league server. The complaint accused the NHL of “seizing the Rangers website” and stated, “The NHL began as a legitimate joint venture producing a product – major league men’s professional ice hockey competition – that no one club can produce alone . . . But by seeking to control the competitive activities of independent businesses . . . the NHL has become an illegal cartel.”

The NHL counterclaimed that the Rangers were violating the league’s constitution and by-laws by even bringing the suit, and pointed out, as noted by the district court judge, that in 1994 “the Member Clubs, with the Rangers’ vote, granted the League exclusive worldwide rights to use or license team trademarks for various marketing purposes, such as advertising and the sale and distribution of ‘products and services . . . of any nature.’” The district court found that the Rangers failed to show a likelihood of success on the merits given this broad assignment of rights. The suit was later settled and dismissed.

Thus, the Rangers, though nominal owners of the registered mark, not only lacked the ability to run their own website utilizing their mark, but had arguably contracted away their right to even go to court to contest the issue. In light of this, can we truly say that sports franchises are independent actors pursuing their own interests in their marks? Perhaps the further development of the American Needle case on remand will shed more light on the issue.

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There is something for trademark holders and service providers alike in the Second Circuit’s opinion in Tiffany (NJ), Inc. v. eBay Inc. (PDF). In that case, the court held, among other things, that eBay’s Herculean anti-counterfeiting measures precluded direct and contributory liability for trademark infringement. The court reasoned that under either theory of liability, the mere fact that a service provider, such as eBay, knows in a very general sense that its website contains counterfeit products will not, standing alone, suffice to establish infringement. In the court’s view, liability premised on a service provider’s inducement of infringing conduct requires, at a minimum, that the service provider know or have reason to know that specific listings involve the sale of counterfeit goods.

While the court ultimately held that eBay did not directly or indirectly infringe the Tiffany trademarks, the extent of eBay’s efforts to combat the sale of counterfeit goods on its website sets the bar high for other online marketplaces utilizing similar business models. To the extent trademark holders may reasonably hold other service providers to eBay’s high anti-counterfeiting standards, service providers may soon finding themselves expending considerable resources to establish or strengthen their own policing regimes to insulate them from claims of contributory infringement. In dictum, the court suggested that the failure to take adequate counterfeiting measures, together with reason to suspect that counterfeit goods were being sold on a service provider's website, could potentially support a contributory infringement claim grounded in a service provider’s willful blindness to infringing conduct. In those circumstances, a court may very well impute the requisite knowledge to the service provider.

Although eBay Inc. arguably imposes stringent anti-counterfeiting requirements on service providers, the opinion reaffirms a place for providers, such as eBay, in the secondary market for brand name goods.

The court did not let eBay entirely off the hook, however. Notwithstanding eBay’s efforts to combat the sale of counterfeit goods, the court held that eBay could be liable for false advertising insofar as eBay advertised the sale of Tiffany jewelry on its website knowing that some of the “Tiffany” products on its website were not authentic. In the absence of a carefully worded disclaimer, eBay’s advertisements representing that eBay sold Tiffany merchandise could have misled or confused consumers into believing that all products identified by eBay sellers as "Tiffany" goods were authentic. Because the district court did not consider consumer confusion, the court remanded the false advertising claim, thus warning service providers that general knowledge that a service provider may be providing a forum to counterfeiters may result in false advertising liability regardless of a service provider’s diligence in rooting out counterfeit goods.

The bottom line for resellers of branded goods is that they should adopt comprehensive policies to guard against the sale of counterfeit items, and, equally importantly, take appropriate steps to implement those policies and address any complaints in a timely manner. For their part, trademark holders should monitor whether counterfeits are being sold on resale sites, and bring any suspected counterfeits to the immediate attention of the reseller in accordance with the reseller's posted policies. Should those efforts be unsuccessful, trademark holders should be prepared to confer with counsel and explore what next steps might be necessary.

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As previously reported, North Face sued South Butt for trademark infringement and dilution for using the name THE SOUTH BUTT and an arc designed to evoke the well-known logo for THE NORTH FACE. On the eve of a preliminary injunction hearing, the parties reported that they had settled their claims.

The Court thereafter entered two consent injunctions - one against the South Butt defendants (PDF), and another against a store that sold the allegedly infringing products (PDF). South Butt thereafter abandoned its federal trademark application for THE SOUTH BUTT (PDF), which will result in judgment being entered against South Butt in the trademark opposition proceeding before the Trademark Trial and Appeal Board because North Face did not consent to the abandonment.

So it is all over for South Butt, right? Not so fast. Although the terms of the settlement are confidential, there are a number of red flags suggesting that things may not be what they seem.

First and foremost, South Butt is still selling clothing bearing the accused mark THE SOUTH BUTT through its website. In the absence of North Face's permission, this would constitute a clear violation of the April 12 consent injunction against the South Butt defendants and subject them to contempt of court proceedings. Given the posture of the case, it is clear that North Face is allowing South Butt to continue selling accused products through its website in this manner.

What should we make of this? It is possible that North Face is allowing South Butt to continue to sell merchandise bearing the mark THE SOUTH BUTT under license from North Face, most likely for a royalty. Alternatively, North Face may be allowing South Butt to run out its inventory of accused products, either with or without a license.

The fact that the disclaimers of affiliation with North Face, such as they were, no longer appear on the website would normally point in the direction of a license. In this unusual case, however, it is possible that the disclaimers were removed because North Face found them offensive and did not wish to draw any attention to its association with South Butt. (According to the Answer (PDF), South Butt's website carried the following disclaimer: "We are not in any fashion related to nor do we want to be confused with The North Face Apparel Corp. or its products sold under "The North Face" brand. If you are unable to discern the difference between a face and a butt, we encourage you to buy North Face products.")

Second, the consent injunctions are subject to an important qualifier: "without the express written permission of The North Face." Thus, the injunctions themselves contemplate that North Face may give written permission for the defendants to use THE SOUTH BUTT as a trademark going forward, and it appears that this has occurred.

Third, the consent injunction against the store provides that the injunction will become permanent "unless a final non-appealable judgment is entered against The North Face" finding that South Butt has not engaged in any trademark violations, and further provides that the injunction shall "immediately dissolve without further order of the Court upon on a voluntary dismissal by Plaintiff of this action against the remaining Defendants." This language would appear to contemplate that the case might resolve unfavorably to North Face, despite the fact that the parties have already reported the case as settled.

How can this be? As in the case of the dog that did not bark, the court papers contain a significant omission -- judgment has not been entered, and North Face's claims against the South Butt defendants have not been dismissed. Therefore, despite the entry of the consent injunctions, the case remains open and the dispute has not been fully and finally adjudicated. It is possible that the parties are attempting to resolve their claims through means of alternative dispute resolution and have agreed to forgo litigation in the interim. It is also possible that certain settlement terms are subject to time periods which have not yet run, and that a consent judgment or dismissal will be filed at later time as dictated by the settlement terms.

While South Butt may have won this round, it appears to have made some significant concessions to North Face. More importantly, the last chapter of this trademark saga may not have been written. While there is no telling how this dispute will ultimately play out, particularly now that it is out of the public spotlight, fans of South Butt products should probably get them while they can -- just in case.

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Proving that history repeats itself, the TTAB recently decided a case that is strongly reminiscent of a matter we handled several years ago. In 2005 we defeated a challenge by Missiontrek Ltd. Co. to the registration of the software mark ONFOLIO, owned by our client Onfolio, Inc. Missiontrek claimed that ONFOLIO was confusingly similar to its previously-registered software mark CARTAGIO. 

Instead of filing an answer to this challenge, we moved for summary judgment, claiming that the marks were so different that no facts developed in discovery or at trial could lead to a finding of confusing similarity. Although the TTAB rarely decides such issues without a factual record, it did so in this case, agreeing with us that “the dissimilarity of the marks in their entireties substantially outweighs any other relevant factors and is dispositive of the issue of likelihood of confusion.” Missiontrek Ltd. Co. v. Onfolio, Inc., 80 USPQ.2d 1381, 1383 (TTAB 2005) (PDF). The Board accepted our arguments that the only common element of the two marks was the suffix “IO,” that this is an ordinary English suffix found in numerous registered software marks, and that CARTAGIO and ONFOLIO were otherwise entirely different in appearance, sound and meaning. 

Missiontrek tried to support its case by submitting a “survey.” This was actually just a series of e-mails sent by the company’s president to 42 persons, only eight of whom responded. According to Missiontrek, two of these eight people said that the marks were confusingly similar, leading it to proclaim that “25%” of the survey respondents supported its position.  The Board quickly discounted this evidence, noting that the true percentage of respondents was two out of 42, and agreeing with our contentions that the survey was prepared and administered by a biased party, was not based on recognized survey techniques, and was not analyzed in a statistically meaningful way.

Moving ahead to 2010, we note that the Board has now decided the case of Bridgestone Firestone North American Tire, LLC and Bridgestone Corporation v. Federal Corporation, Opposition No. 91168556 (TTAB February 24, 2010) (PDF), finding no likelihood of confusion between Bridgestone’s tire marks POTENZA and TURANZA and the applicant’s tire mark MILANZA. As in Missiontrek, Bridgestone claimed that the marks at issue were confusingly similar because they shared the same suffix (in this case, “NZA”), and tried to support this claim with a survey. As in Missiontrek, the applicant argued that the suffix appeared in other registered marks.  As in Missiontrek, the Board rejected the likelihood of confusion claim, finding that “the dissimilarity of the marks simply outweighs all the other factors,” and also finding that Bridgestone’s survey was too flawed in its methodology to be probative. 

The one significant difference from Missiontrek is that Bridgestone claimed to own a family of marks ending in “NZA,” and that this alleged family made the suffix distinctive of its products. However, the Board held that Bridgestone had failed to prove the existence of an “NZA” family, since it had never emphasized the suffix in its advertising, and had always used the marks with the term BRIDGESTONE, which was the real focus of its marketing.

There are two lessons to be gleaned by comparing these cases. First, marks that share only a common suffix are unlikely to be deemed confusingly similar. Second, those who forget the past are doomed to repeat it.

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In a lawsuit that has grabbed the attention of the trademark community, The North Face Apparel Corp. sued The South Butt, LLC, its founder (college student Jimmy Winkelmann), and a pharmacy that sold allegedly infringing goods for using the mark THE SOUTH BUTT on clothing that resembled the style of clothing sold under the well-known mark THE NORTH FACE. According to the Complaint (PDF), South Butt repeatedly attempted to register THE SOUTH BUTT as a trademark and offered to sell its business to North Face for $1 million. The Answer (PDF) describes Jimmy Winkelmann as a "cherubic teenager, budding entrepreneur and college freshman from the heartland of America" who "founded his company with parodic respect for Plaintiff." North Face moved for a preliminary injunction, and its motion was scheduled to be heard on April 12, 2010.

In a court filing (PDF) made on April 5, 2010, the pharmacy defendant advised the Court that all parties had reached a settlement of the case. While the terms of the settlement were not disclosed, it appears that SOUTH BUTT clothing continues to be sold on the South Butt website and is featured on the South Butt Facebook page.

Regardless of the settlement terms, the fact that the case was settled without a judicial decision as to the underlying parody issue represents a lost opportunity for trademark owners and parodists alike. In 2006, the Trademark Dilution Revision Act (TDRA) articulated for the first time the requirements for parody as "fair use" of a famous mark, explicitly stating that the use must be "other than as a designation of source for the person's own goods or services." 15 U.S.C. Section 1125(c)(3)(A).

Courts have not adopted a consistent approach to parody of famous marks under the TDRA. In one of the early parody cases construing the TDRA, the Fourth Circuit held that dog chew toys bearing the name CHEWY VUITON did not dilute the famous LOUIS VUITTON mark. Louis Vuitton Malletier S.A. v. Haute Diggity Dog, LLC, 507 F.3d 252 (4th Cir. 2007) (PDF). While the Court acknowledged that the defendant used CHEWY VUITON as a designation of source for its dog toys, and that the statutory fair use language therefore did not apply, it proceeded to find that the defendant was engaged in a successful parody because under the dilution factors it intended to create a parody and that is how the association would be perceived. Id. at 266-67.

This stands in contrast to the recent CHARBUCKS case, in which the Second Circuit found that the use of the CHARBUCKS mark on coffee could not escape liability for diluting the famous STARBUCKS mark based on a parody defense because CHARBUCKS was used as a source identifier and was too subtle to constitute a parody. Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., 588 F.3d 97 (2d Cir. 2009) (PDF).

The North Face v. South Butt case presented an opportunity for the Eight Circuit to address the differing approaches to parody head-on. Assuming that the settlement is consummated, that opportunity will be lost, and the case law in this area will remain inconsistent. The owners of famous brands and their parodists will have to wait until another day for the courts to further articulate the requirements for parody under the TDRA.

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Welcome to the Foley Hoag Trademark & Copyright Law Blog! In this space, we will aim to keep you apprised of significant developments in the law of trademarks, copyright, false advertising, domain names and the Internet, and related areas.

We will also share with you our thoughts on key legal developments, highlight instructive real-world lessons in intellectual property policing and protection, and discuss emerging intellectual property issues. We hope you find it useful, and welcome your comments and feedback.

Julia Huston
Chair of Trademark, Copyright and Unfair Competition Practice Group

Joshua Jarvis
Blog Editor and Associate, Trademark, Copyright and Unfair Competition Practice Group

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