Category: Intellectual Property

Consumer Public Interest Lawsuit Seeks 21 Million RMB for Counterfeit Trademark Sales of Starbucks in China

On November 22, 2020, the Jiangsu Provincial Consumer Protection Committee announced they filed a public interest lawsuit on October 26, 2020 against Shuangshan Food (Xiamen) Co., Ltd. for selling counterfeited Starbucks coffee.  Shuangshan was previously subject to criminal prosecution for the sale of the counterfeit coffee amounting to 7 million RMB (~$1 million USD). This is the first consumer civil punitive damages public interest litigation in Jiangsu Province and the demand for compensation of 21 million RMB is the highest demand ever made in China in a consumer civil public interest litigation.

In February 2018, the Wuxi City Market Supervision Department received a report stating that there were counterfeit “Starbucks” brand coffee being sold. An investigation determined the “Starbucks” coffee sold by Shuangshan was a counterfeit product. After verification, the market supervision department notified the Wuxi public security department. Later, it was found that the coffee sold by Shuangshan Company was not authorized by the owner of the “Starbucks” brand. Under the premise of knowing that the purchased products were counterfeit, Shuangshan still forged customs declaration documents and false authorization documents, and sold the products. The counterfeit Starbucks coffee went to more than 50 merchants in 18 provinces across China, and finally sold to end consumers.  In 2019, the Xinwu District Procuratorate prosecuted Shuangshan Company and related personnel with a verdict reached  in December. At the same time, the Xinwu District Procuratorate recommended that the Jiangsu Provincial Consumer Protection Committee file a consumer civil public interest lawsuit.

The Jiangsu Provincial Consumer Protection Committee concluded that the case was an intellectual property case involving counterfeit trademarks. The facts were clear and fixed, the amount involved was huge, and the infringement was serious.  The fake coffee sales constituted fraud and the Committee therefore claimed punitive compensation of three times the amount involved. On October 26, 2020, the Wuxi Intermediate People’s Court formally accepted the case.

How to distribute any funds collected by the Committee as a result of the lawsuit has yet to be determined.

 

Starbucks Thanks You Letter

ARTICLE BY Aaron Wininger of Schwegman, Lundberg & Woessner, P.A.
For more articles on IP law, visit the National Law Review Intellectual Property section.

Anheuser-Busch Not Liable for False Advertising for Pointing Out to Consumers that Miller Lite and Coors Light Use “Corn Syrup”

Anheuser-Busch and Molson Coors produce some of the best-selling light beers in the United States — Bud Light, and Miller Lite and Coors Light, respectively — and regularly attack each other with witty ad campaigns. During Super Bowl LIII, Anheuser-Busch unveiled an advertisement campaign focused on the idea that Bud Light is made using rice as opposed to corn syrup. The Bud Light advertisements called attention to Miller Lite and Coors Light’s use of corn syrup as a source of sugar for the fermentation process. In response, Molson Coors advertised that its beer tastes better because of the corn syrup, which is not the same as high-fructose corn syrup used in other consumer products. Molson Coors also filed a lawsuit arguing that Anheuser-Busch violated Section 43 of the Lanham Act “by implying that a product made from corn syrup also contains corn syrup.”

Section 43 of the Lanham Act deals with false advertising and states that “[a]ny person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.” After Super Bowl LIII, Molson Coors filed a federal lawsuit claiming Anheuser Busch’s high-profile ads duped consumers into thinking that Miller Lite and Coors Light contained corn syrup, when in reality corn syrup is merely used as a “brewing fermentation aid” that does not end up in the final product.  Molson Coors Bev. Co. USA LLC v. Anheuser-Busch Cos., LLC, 957 F.3d 837 (7th Cir. 2020).

The district court found that Anheuser Busch’s did not violate the Lanham Act and Molson Coors appealed to the Seventh Circuit. The appellate court framed the issue as a simple one: whether the true statement made in Anheuser-Busch’s advertisements—“their beer is made using corn syrup and ours isn’t”—wrongly implies that “their beer contains corn syrup.”

Molson Coors acknowledged that both Miller Lite and Coors Light are made using corn syrup and that Bud Light is not. Molson also acknowledged that corn syrup is listed as an ingredient in both Miller Lite and Coors Light. Molson, however, insisted that the list of ingredients is not the same as what the finished product “contains.” The Seventh Circuit found that although it is possible for an ingredient list to be treated as “inputs” instead of a list of what is in the finished product, the common usage of an ingredients list equates to the constituents of the product. Additionally, Anheuser-Busch never advertised that the rival products “contain” corn syrup, but consumers could infer as much from the statements made. But the Seventh Circuit found that consumers could infer the same thing from Molson’s own ingredient list. The court could not hold that it was false or misleading for a rival to make a statement that a competitor makes about itself.

In rejecting the false advertising claims, the appeals court said Molson Coors “brought this problem on itself” by listing corn syrup in its ingredients. Whether the use of corn syrup is a bad thing is for “consumers rather than the judiciary to decide.” The Seventh Circuit ruled that Anheuser-Busch did not violate the Lanham Act’s ban on false advertising by running Bud Light ads that mocked Miller Lite and Coors Light for using corn syrup. The court noted that “[l]itigation should not be a substitute for competition in the market,” which is what Molson Coors was trying to do in this case. The court even seemed to suggest that “[i]f Molson Coors does not like the sneering tone of Anheuser-Busch’s ads, it can mock Bud Light in return.”

COPYRIGHT © 2020, STARK & STARK
ARTICLE BY Gene Markin of Stark & Stark
For more articles on corn syrup litigation, visit the National Law Review Litigation / Trial Practice section.

Louis Vuitton Playing Chess or Checkers? The CJEU Annuls’ The Invalidation of Louis Vuitton EU Trademark

Louis Vuitton received a favorable decision from the EU General Court (“General Court”) in June 2020 which may assist brand owners seeking IP protection of their decorative patterns. The decision confirms the distinctive character an EU trade mark must possess in order to benefit from protection throughout the EU as well as highlighting how patterns may be protected through registration as a trade mark rather than under other forms of IP protection such as copyright or design protection. However, the decision also reaffirmed the EU’s strict approach to assessing the unitary character of EU trade marks, which potentially sets a high bar for applicants to clear.

Background

In 2008, Louis Vuitton had obtained EU trade mark protection for the mark displayed below, the Damier Azur mark, in relation to class 18 goods including luggage, bags and leather goods. In 2015 a Polish individual, Norbert Wisniewski, challenged the validity of the mark by filing an application for invalidity with the EUIPO.

 

 

The ‘Damier Azur’ mark

In 2016 the Cancellation Division of the EUIPO declared Louis Vuitton’s trade mark invalid under Article 59(1)(a) of the EU Trade Mark Regulation (“EUTMR”) on the grounds that the mark was devoid of any distinctive character in line with Article 7(b) of the EUTMR. The Cancellation Division did not agree with Louis Vuitton’s claim that the mark had acquired distinctiveness through its use. Louis Vuitton then took its claim to the EUIPO Second Board of Appeal who also dismissed their claim and agreed with the Cancellation Division.

General Court

In 2019 the matter was appealed to the General Court of the CJEU and Louis Vuitton put forward two main arguments that:

  1. the Second Board of Appeal had incorrectly assessed the inherent distinctive character of the Damier Azur mark as the Board had relied on ‘well-known facts’ to supplement the arguments presented by Mr Wisniewksi in the absence of any concrete and substantial evidence for a declaration of invalidity; and
  2. the Board of Appeal had failed to carry out an overall assessment of the Damier Azur mark and had therefore erred in its assessment of the distinctive character acquired through use of the mark.

With regard to point one, the General Court considered that the Board of Appeal had relied upon a number of well-known facts in its decision including how the chequerboard pattern of the mark was a commonplace figurative pattern, which is permissible. The General Court determined that the Board had been correct in its finding that the mark was a basic and a commonplace pattern that did not depart significantly from the norms of the sector and that this was a well-known fact within the meaning of case law. The first argument was therefore rejected.

As to argument two, the General Court inferred that the Board of Appeal had focused on evidence which expressly referred to a specific set of Member States and had excluded other evidence without conducting any further analysis on said evidence. The General Court determined that the excluded evidence did contribute to the arguments put forward by Louis Vuitton concerning the acquired distinctiveness of the mark including the widespread use of the mark across the whole of the EU and the market shares held by the mark in each Member State. The General Court thus found that the Board of Appeal had failed to sufficiently take into account the distinctive character of the mark in relation to the goods and services for which it is registered.

Takeaway points

The decision by the General Court reaffirms the wide scope of evidence and rigorous determination that must be followed by the courts and IP administrative bodies. The General Court also emphasized the need for a mark to be distinctive throughout the whole of the EU rather than just across a defined set of Member States, which is often a high threshold for applicants to meet (as seen in the Kit Kat case, among others). Although the General Court did annul the decision of the Second Board of Appeal on the basis of an error in the full assessment of the evidence, it is still not yet fully clear whether Louis Vuitton’s excluded evidence would be sufficient to prove the required distinctiveness of the mark as the General Court made no comment on this point. This is an intriguing space to follow and we will keep you updated as the case progresses.

Copyright 2020 K & L Gates
For more articles on IP law, visit the National Law Review Intellectual Property section.

Ongoing Challenges for Fashion Brands in Germany – Legal Issues with Style Names Revisited

Using first names as style names to assist consumers in distinguishing between certain items, styles or washes within a collection is a widespread practice in the fashion industry. Compared to numerical identifiers, names may trigger emotions and are much easier to remember. Style names may be used in manifold ways, e.g. on labels sewn in the inside of garments, hangtags and boxes or in advertising material such as catalogues and offers on the internet. What many companies do not realize is that the use of style names involves legal risks. Many names are already registered as trademarks, which may give rise to trademark conflicts.

Germany has become a popular venue for disputes involving style names in recent years. Only comparatively few claims are raised by actual competitors, though. Rather, there are trade mark owners trying to benefit from the peculiarities of German civil procedure and trade mark law by monitoring the market for possibly infringing style names in order to collect legal fees and damages. In many cases, such claimants will threaten to sue other companies in the distribution chain, including retailers, in order to put pressure on the fashion company to settle regardless of the merits.

In this blog post, we would like to raise awareness for the legal issues involved with style names in Germany and address ways how best to deal with them.

Trade Mark Infringing Use or Mere Model Designation?

According to European case law, the owner of a trade mark may oppose the use of a sign identical with the trade mark for goods identical with those for which the trade mark is registered only if such use is liable to adversely affect one of the functions of the trade mark, in particular its essential function of guaranteeing to consumers the origin of the goods.

Whether a style name is perceived by consumers as enabling them to distinguish that product from those of a different origin, rather than being used as a reference to differentiate between a fashion company’s own styles, may give rise to considerable debate. In fact, many style names have over time become renowned brands – such as Gucci’s “Jackie” or Mulberry’s “Alexa”. Correspondingly, the case law of the German instance courts on whether the use of a sign as a style name constitutes trade mark infringing use has not been uniform. As German law allows for forum shopping, trade mark owners would usually seek the assistance of the courts in Hamburg and Frankfurt, which regularly assumed that style names are understood by the relevant public as an indication of origin and thus as (secondary) trade marks.

Notably, cease and desist letters are often sent by companies which do not manufacture or supply clothing or accessories, or at the very least are not known for this, but rather hold trade marks and engage in enforcing their rights to collect attorney fees and damages. Such right holders will usually not let a party “off the hook,” unless it issues a formal cease and desist declaration (with a contractual penalty clause, as is common practice under German law) and makes a payment to settle the case amicably. To increase pressure, these claimants will threaten to interfere with the fashion company’s distribution system by sending warning letters and/or suing commercial customers.

Guidelines by the German Federal Court of Justice

As at least some courts took an extremely right-holder-friendly approach, such cases were until recently hard to defend. Prospects of defense have improved, however, thanks to the judgments of the German Federal Court of Justice in “SAM”[1] and “MO”[2].

In these decisions, the Federal Court of Justice clarified that the use of a distinctive and non-descriptive sign as a style name does not in itself allow the conclusion that the sign is used as a trade mark. The fact that the style name is perceived as an indication of origin must be positively determined every single time. On that basis, the Court established some general guidelines for assessing whether a style name is used as a trade mark in an individual case:

  • First names used by several manufacturers as style names or particularly common first names – As followed from the Court’s previous case law[3], such names may be understood by the public as mere model designations. It could not be concluded from this, however, that less common first names are always understood as an indication of origin.
  • Directly affixed to the product – The public will typically see an indication of origin when a sign is directly affixed to the product, e.g. on a label sewn in the inside of the waistband or on a leather piece attached on the outside of the waistband.
  • Use on hangtags – The printing of a style name on hangtags attached to the garment could also be understood as an indication of origin under the circumstances.
  • Use in sales offers, e.g. in catalogues or on the internet – If the sign is used in a sales offer, e.g. in a catalog or on the internet, the offer as a whole and the character of the sign must be considered. If it can be assumed that the style name is well known, there is a strong argument in favor of using it as a trade mark, regardless of the further circumstances. Even if the style name is not known, use as a trade mark can be assumed, in particular if the style name is used in direct connection with the manufacturer’s or umbrella brand. In addition, an eye-catching emphasis speaks for use as a trade mark.

Comments

As usual, the devil is in the detail. Whilst it is relatively clear that use of a style name on the product can often be assumed as trade mark use, recent decisions by the courts[4] illustrate that in advertising every single detail of the offer has to be taken into consideration. This includes the overall layout of the offer and the relationship of the sign in suit to the manufacturer’s or umbrella brand and further article designations such as price, size, product description and delivery modalities. Nevertheless, the guidelines developed by the German Federal Court of Justice open up considerable room for argument.

As far as preventive measures are concerned, for fashion companies using hundreds or even thousands of style names, worldwide trade mark clearance is not always an option in view of the considerable costs involved. As soon as it crystallizes that a style name may become important for the company’s business, it is worth protecting it by trade mark registrations. In addition, compliance with a few simple rules when using style names based on the German Federal Court of Justice’s guidelines can minimize the risk of objections significantly.

[1] BGH, judgment of 7 March 2019, case I ZR 195/17 – SAM.

[2] BGH, judgment of 11 April 2019, case I ZR 108/18 – MO.

[3] Cf. BGH, judgment of 19 December 1960, case I ZR 39/59 – Tosca; BGH, judgment of 20 March 1970, case I ZR 7/69 – Felina-Britta; BGH, judgment of 26 November 1987, case I ZR 123/85 – Gaby.

[4] See, for example, Frankfurt Court of Appeals, judgment of 13 August 2020, case 6 U 94/17 – MO; Frankfurt Court of Appeals, judgment of 1 October 2019, case 6 U 111/16 – SAM; Hamburg Court of Appeals, judgment of 28 November 2019, case 5 U 65/18 – Rock Isha; Hamburg Court of Appeals, judgment of 19 December 2019, case 3 U 191/18 – MYMMO MINI.

© Copyright 2020 Squire Patton Boggs (US) LLP
For more articles on intellectual property, visit the National Law Review intellectual property law section.

Copyright Office Implements Mass Registration For Short Online Literary Works

Highlights

  • The new Group Registration for Short Online Literary Works (GRTX) permits up to 50 short online literary works to be registered simultaneously
  • GRTX permits a single registration certificate, at a much lower cost than previously
  • GRTX applies to online content only, such as articles, blogs and social media posts

The United States Copyright Office recently implemented a new group registration process for registering multiple, short online literary works under a single copyright registration.

This process – referred to as Group Registration for Short Online Literary Works (GRTX) – is designed for those who regularly publish content online, such as articles, blogs and social media posts; but not the likes of emails, podcasts or audiobooks.

The new GRTX can include between two and 50 works within a single $65 copyright application. The process offers a significant cost savings, as previously 50 works would cost more than $3,000 in application fees.

The GRTX requirements include the following:

  1. the works need to be first published online (or simultaneously with a physical form publication)
  2. the works must have been published during the same three-month period
  3. the works must be between 50 and 17,500 words
  4. the works may not be works made for hire
  5. the GRTX registration only applies to the text of the short literary work

If registration is granted, the holder will receive a single registration certificate and registration number for the entire group of works.

Law clerk Nick Rivera contributed to this alert.

© 2020 BARNES & THORNBURG LLP

 

ARTICLE BY Jonathan P. Froemel of Barnes & Thornburg LLP
For more articles on copyright law, visit the National Law Review Intellectual Property section.

“Can’t Hold Us” Liable: Macklemore & Ryan Lewis Win Affirmance in Copyright Suit

The US Court of Appeals for the Fifth Circuit affirmed a grant of summary judgment on the issue of copyright infringement and an award of attorneys’ fees against the plaintiff under the Copyright Act. Although the Court noted that it lacked jurisdiction to review sanctions against the plaintiff’s attorney, it observed that counsel went beyond “vigorous representation.” Batiste v. Lewis, Case Nos. 19-30400, -30889 (5th Cir. Sept. 22, 2020) (Clement, J.).

Batiste, a local musician, sued Macklemore & Ryan Lewis, an internationally famous hip-hop duo, for copyright infringement. Batiste alleged that the duo sampled his songs without authorization. As support, Batiste submitted the expert report of a musicologist, Milton, but Milton later admitted that Batiste had conducted the analysis and written the report, and that Milton did not even have access to the necessary software. The district court excluded the report, which Batiste then sought leave to resubmit in his own name. The district court denied leave because Batiste had not disclosed himself as an expert and because the new report was untimely. The district court subsequently granted the defendants’ motion for summary judgment, finding that Batiste had failed to submit sufficient evidence of Macklemore and Lewis’s alleged access to Batiste’s work or of probative similarity between Macklemore and Lewis’s works and Batiste’s. The district court then awarded fees to Macklemore and Lewis under the Copyright Act (17 USC § 505) and made Batiste’s attorney (Hayes) jointly and severally liable for the fees award as a sanction under 28 USC § 1987. Batiste appealed.

Addressing the district court’s summary judgment of no infringement, the Fifth Circuit considered Batiste’s proofs as to access and similarity.

Batiste tried to prove access through “widespread dissemination” and “chain of events” theories. The Court held that Batiste’s evidence of widespread dissemination was insufficient because it only established “quite limited” dissemination of Batiste’s music. Batiste’s chain of events theory—under which Macklemore and Lewis allegedly accessed Batiste’s work by playing a concert at a venue near a record store that sold Batiste’s music—raised only a “bare possibility” of access and was therefore also insufficient.

On the issue of similarity, the Court explained that because of Batiste’s failure to show access, he needed to show “striking similarity” to withstand summary judgment. The Court rejected Batiste’s argument that “overwhelming evidence of access” obviated any need for him to show similarity. The Court compared the allegedly infringing songs to Batiste’s and found them insufficiently similar for a jury to find striking similarity. The Court also rejected Batiste’s invitation to adopt the US Court of Appeals for the Sixth Circuit’s ruling in Bridgeport, which held a showing of similarity unnecessary in some circumstances. The Fifth Circuit noted that Bridgeport has been widely criticized, and pointed out that Bridgeport considered the issue of substantial similarity (which dictates whether factual copying, once established, is legally actionable), whereas the issue in this case was probative similarity (which raises an inference of factual copying).

Batiste challenged the award of attorneys’ fees as erroneous absent a finding of frivolousness or bad faith. The Court rejected Batiste’s argument as inconsistent with the Supreme Court of the United States’ 2016 decision in Kirtsaeng (citing and quoting its 1994 decision in Fogerty), which list frivolousness or bad faith among other non-controlling factors that district courts may consider in exercising discretion to award fees.

Finally, the Court noted that that it lacked jurisdiction to consider the sanction against Batiste’s attorney Hayes, because Hayes was not listed as a party on the notice of appeal. The Court nonetheless excoriated Hayes for his role in the submission of the Milton report and “remind[ed] Hayes of his ethical and professional obligations as a lawyer and advise[d] him to take those obligations seriously,” stating, “We certainly do.”

© 2020 McDermott Will & Emery
For more articles on copyright infringement, visit the National Law Review Intellectual Property section.

The Wild (Kanye) West of Trade Secret Theft

Musical artist and fashion icon Kanye West is being sued by a video and ecommerce company called MyChannel Inc. (MYC) that claims he breached their mutual nondisclosure agreement and took “their proprietary and confidential technology and information to fuel the e-commerce engine” of his Yeezy brand. MYC filed its lawsuit in the US District Court for the Central District of California. The minority-owned business alleges that West made “lavish promises to MYC of millions of dollars in economic reward,” as well as the formation of a lucrative partnership providing millions more[.]” In return, MYC asserted that it agreed to provide Kanye West—and did in fact provide Kanye West—with “tens of thousands of hours of investment in Yeezy in reliance on those promises and the MYC-Kanye partnership.”

At the heart of MYC’s complaint is its allegation that it developed a unique video platform—including a unique, proprietary “shopability” function that was protected by a nondisclosure agreement—to grow the ecommerce operation of West’s Yeezy brand. According to MYC, West brazenly rebranded MYC as his own company, referring to it as “YZY Tech” to partners like Adidas. MYC claims that West and his Yeezy brand then breached their obligations to compensate MYC for its work, yet they nevertheless continued to use MYC’s ecommerce platform, including MYC’s shopability function. In fact, MYC alleges that West’s “closest confidents [sic] and business advisors reached out to MYC’s founders” noting similarities between their work and the platform West continued to use, reasonably believing that MYC was responsible for the content.

The veracity of MYC’s claims will be tested in court as it litigates its claims against Kanye West. In the meantime, this case demonstrates that theft of intellectual property does not always occur in the shadows with, for instance, employees clandestinely misappropriating trade secrets. Rather, misappropriation of intellectual property can sometimes occur in plain sight when business deals and/or partnerships deteriorate. It is important, then, to clearly delineate rights to intellectual property and carefully craft nondisclosure agreements that protect assets exchanged with prospective partners.

© 2020 Jones Walker LLP
For more articles on trade secrets, visit the National Law Review Intellectual Property section.

Amrock Lawsuit Spotlights Consequences of Litigious Gamesmanship

Trade Secret Litigation Commentary

 

On June 3, the Texas Fourth Court of Appeals reversed and remanded the dumbfounding $740 million award in Title Source v. HouseCanary – a welcome development for American innovation and business collaboration. On the back of years-long litigation, a fresh trial of the case can offer important signals for corporations on the risks and rewards of collaboration, as well as deliver much-needed guidance on best practices to navigate already murky trade secret protections.

For the uninitiated, litigation between HouseCanary and Title Source (now Amrock) was borne out of a contract the two companies entered in 2015. The arrangement obligated the delivery of an automated valuation model (AVM) and an app to Title Source at a rate of $5 million per year for HouseCanary’s efforts. Title Source intended to use the software and app as a platform to provide customers the ability to assess property values digitally alongside other services the company offers, like title insurance and closing services. After HouseCanary failed to meet its contractual obligation to deliver a working AVM app, Title Source sued for breach of contract.

HouseCanary then filed a counter claim including allegations that Title Source had misappropriated proprietary information, in this case trade secrets, in an attempt to make an app of its [Title Source’s] own. After a six-week trial that concluded in March 2018, a Texas jury decided in favor of HouseCanary and awarded nearly three-quarters of a billion dollars – one of the largest tort settlements of the year.

Should anyone be keeping score at home, that means the case’s settlement was valued at nearly 150 times the annual payout HouseCanary was to receive from its work with Title Source and dwarfed the firm’s multiple rounds of venture funding by over $600 million. For HouseCanary, litigation proved more profitable than any of its own business ventures, and the settlement certainly outstripped the going market rates on AVMs.

By the conclusion of the original trial, it seemed clear that Title Source had not misappropriated HouseCanary’s trade secrets or proprietary information in building its own app. Further, HouseCanary’s own expert witness testified that there weren’t “any fingerprints, any clues, any reference to any HouseCanary technology” in the app Title Source developed on its own.

Regrettably, the jury’s finding against Title Source was based on inaccurate and incomplete information, unsubstantiated inadmissible character attacks, and back-of-the-napkin math from a questionable damages ‘expert.’ It seemed to be more focused on sticking it to corporate America rather than the actual facts and merits of the case. Not only was the jury gravely mislead, but they also never heard critical information which came to light days after the trial concluded.

Post-trial statements by a former HouseCanary executive turned whistleblower clarified that there was never a “working version” of the app to be delivered to Title Source, and per three more former HouseCanary executives, that the company didn’t have “any IP to steal.” The cogency of HouseCanary’s allegations were further thrown into question when the company, six weeks after the trial’s closure, moved to seal a number of exhibited documents from court record.

As I wrote previously, once the sealing motion was overturned, the documents should “provide another look at the technology in question, which will provide clarity whether there were trade secrets to be stolen.” This is especially important when considered in tandem with the whistleblower testimony.

These and other erroneous inclusions and fatal procedural errors led to a Texas appellate court overturning the verdict and ordering a new trial. The ramifications of the decision in the new trial promise to be immense, especially if HouseCanary invokes Texas’ Uniform Trade Secrets Act for a second time. The Act has been adopted by 47 states total, and significantly broadens the implications of this trial for business operations in all kinds of industries by setting precedent for other lawsuits.

Trade secret litigation has increased tremendously in the past decade, with over 2,700 cases since 2009; add on the massive original settlement and the ruling may very well set the tone for the future of trade secret litigation and the standard of intellectual property protections.

Given the new evidence that has emerged since the jury delivered its decision in 2018, the cards certainly appear stacked against HouseCanary successfully duping the retrial jury. There is little doubt that businesses and innovators everywhere will be awaiting the verdict of the Texas court for clarity on trade secret protections and our court system’s tolerance for overwhelmingly apparent legal gamesmanship.

© George Nethercutt

Authored by George Nethercutt of The George Nethercutt Foundation, a guest contributor to the National Law Review.

For more on trade secrets, see the National Law Review Intellectual Property law section.

COVID-19: FTC Acts Fast, Lambasts Missing Masks

Section 5 of the Federal Trade Commission Act (15 U.S.C. Section 45(a)) provides worthwhile remedies for the types of unfair competition that intellectual property practitioners find quite familiar, and practitioners should give them due consideration.  Selling COVID-19 masks you don’t have provides a good example.

In a case filed in early July (FTC press release) the FTC took a Staten Island business to task, along with its owner, for claiming that masks, respirators and other “PPE’s” (personal protection equipment) was “in stock” and “would ship the next day” (Complaint).  The website “supergooddeals.com” continues to lead off with its signature slogan, “Pay Today, Ships Tomorrow” (https://supergooddeals.com/; also accessed by the author on July 31, 2020).

Apparently starting in March 2021, supergooddeals.com began selling PPE.  According to the FTC complaint, the website claimed that the desired masks were “IN STOCK” (complaint paragraphs 19 and 20).  The FTC complaint gives no indication as to whether or not the “in stock” claim was accurate, but instead pleads the examples of several consumers who never received masks, and numerous complaints to which supergooddeals.com never responded.

The FTC complaint also implies that to the extent that some orders may have been shipped, they were shipped on terms that were far less favorable than supergooddeals.com advertised, and when shipments never arrived (or perhaps were never sent) supergooddeals.com failed to give buyers the opportunity to change their mind, or offer a refund or any modification in price terms (e.g. Complaint paragraphs 29-31).

Supergooddeals.com also apparently attempted to conceal their failures (worse verbs could be applied) by producing shipment labels carrying the promised shipping date, but for packages that either would never ship, or shipped much later than the labelled date.  Supergooddeals.com apparently didn’t realize that when a business creates its own USPS shipping labels, “An electronic record is generated on the ship date indicating that your package has been mailed and the Postal Service is expecting to see your package that day.” Click-N-Ship Field Information Kit

(For those of us that may merely be tardy, the same USPS webpage suggests mailing the package on the next business day.  Checking for a friend.)

The FTC also asserted MITOR (“Mail, Internet, or Telephone Order Merchandise,” 16 CFR Part 435) which defines the terms in the name, defines unfair and deceptive practices in context, requires certain activities, and lists some exceptions (including, for reasons known only on K Street, “orders of seeds and growing plants”).

So, the alleged infractions include:

  • Advertising a delivery date that you know you cannot meet,
  • Advertising items that you don’t have in stock
  • Producing a false mailing label in an attempt to prove the shipping date, and
  • Failing to cancel orders when requested or provide prompt refunds

The Federal Trade Commission Act has worthwhile remedies for such activities, and as the Complaint indicates (paragraphs 58 and 59) the FTC plans to seek them against supergooddeals.com.

So, the people get their money back from supergooddeals.com and all’s well that ends well. Right?

Not exactly.  The FTC Act offers no private right of action in these circumstances.  The Fair Debt Collection Practices Act (FDCPA) 15 USC Section 1692(d) which is generally under the Federal Trade Commission, provides private remedies in the consumer debt arena, but a private party otherwise has no right to the remedies sought against supergooddeals.com under the FTC Act.

At this point, however, the intellectual property (“IP”) practitioner may have an extra arrow up his or her sleeve:  Section 43(a) of the Lanham Act (15 USC 1125(a)) if—IF—the parties can be defined as competitors in the section 43(a) sense.

FTC § 5(a)

Lanham Act § 43(a)

Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful.

(1)Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—

Anchor(A)

is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

Anchor(B)

in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities,

shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

The Lanham Act applies to false representations (etc.) about goods and services in interstate commerce, but plaintiffs attempting to stretch section 43 (a) too far have been turned down e.g., Radiance Found., Inc. v. NAACP, 786 F.3d 316 (4th Cir., 2015) (The Radiance Foundation, an African American influenced pro-life organization, criticized the NAACP over the NAACP position on abortion.  The NAACP issued a cease and desist letter and the Radiance Foundation filed a declaratory judgment complaint arguing that neither trademark infringement nor dilution had occurred.  The NAACP counterclaimed under (inter alia) section 43(a).  The Fourth Circuit held that for a number of reasons, including the lack of competing goods or services in the section 43(a) sense, the NAACP did not have a trademark remedy in these circumstances.)

Supergooddeals.com certainly dealt (and continues to deal) in “goods” in the sense of section 43(a).  Nevertheless, the “hundreds of” consumers listed in (e.g.) paragraph 26 of the FTC complaint don’t have a section 43(a) remedy against supergooddeals.com because such customers are not “competitors” of supergooddeals.com in the sense required by section 43(a).  Stated more formally, for individual defrauded customers, the answer to, “whether a legislatively conferred cause of action encompasses a particular plaintiff’s claim” is “no.” (Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 132 (2014). (“A consumer who is hoodwinked into purchasing a disappointing product may well have an injury-in-fact cognizable under Article III, but he cannot invoke the protection of the Lanham Act—a conclusion reached by every Circuit to consider the question.”)

Does Pat Peoples have any Silver Lining here?  Well, yes. In addition to a possible contractual remedy, most states have some form of general “unfair competition is illegal” statute as well as consumer protection remedies.

For the time being, however, these defrauded consumers have Uncle Sam on their side, and when “Uncle” sues he usually gets the job done.

 

Copyright 2020 Summa PLLC All Rights Reserved

ARTICLE BY Philip Summa and Summa PLLC.
For more FTC PPE Actions see the National Law Review Coronavirus News section.

The Naked Truth About Trademark Cancellation: Only Harm, No Proprietary Interest Required

The US Court of Appeals for the Federal Circuit determined that a contracting party that contractually abandoned any proprietary interest in a mark may still bring a cancellation action if it can “demonstrate a real interest in the proceeding and a reasonable belief of damage.” Australian Therapeutic Supplies Pty. Ltd. v. Naked TM, LLC, Case No. 19-1567 (Fed. Cir. July 24, 2020) (Reyna, J.) (Wallach, J., dissenting).

Australian sold condoms with the marks NAKED and NAKED CONDOMS, first in Australia in early 2000, then in the United States in 2003. Two years later, Australian learned that Naked TM’s predecessor had registered a trademark NAKED for condoms in September 2003. Australian and Naked TM communicated by email regarding use of the mark for a few years. Naked TM contended that the parties reached an agreement; Australian disagreed and said no final terms were agreed upon. Australian filed a petition to cancel the NAKED trademark registration. Ultimately, and after trial, the Trademark Trial and Appeal Board (TTAB) concluded that Australian lacked standing because it had reached an informal agreement that Naked TM reasonably believed was an abandonment of any right to contest Naked TM’s registration of NAKED. Thus, the TTAB found that Australian lacked a real interest in the proceeding because it lacked a proprietary interest in the challenged mark. Australian appealed.

The Federal Circuit reversed. First, the Court clarified that the proper inquiry was a matter of proving an element of the cause of action under 15 USC § 1064 rather than standing. The Court explained that, contrary to the TTAB’s conclusion, “[n]either § 1064 nor [its] precedent requires that a petitioner have a proprietary right in its own mark in order to demonstrate a cause of action before the Board.” Assuming without deciding that the TTAB correctly determined that Australian had contracted away its rights, the Court found that fact irrelevant. Ultimately, even though an agreement might be a bar to showing actual damages, a petitioner need only show a belief that it has been harmed to bring a petition under § 1064.

The Federal Circuit found that Australian had a reasonable belief in its own damage and a real interest in the proceedings based on a history of two prior applications to register the mark, both of which the US Patent and Trademark Office rejected on the basis that they would have created confusion with Naked TM’s mark. The Court rejected Naked TM’s argument that Australian’s abandonment of those applications demonstrated there was no harm, instead concluding that Australian’s abandonment of its applications did not create an abandonment of its rights in the unregistered mark. Moreover, as a prophylactic rationale, the Court explained that Australian’s sales of products that might be found to have infringed the challenged registration also create a real interest and reasonable belief in harm.

Judge Wallach dissented. Although he agreed that the TTAB erred by imposing a proprietary-interest requirement to bring suit under § 1064, he disagreed that Australian properly demonstrated an alternative, legitimate interest—i.e., a belief of damage with a reasonable basis in fact. Judge Wallach would have given dispositive weight to the agreement between Australian and Naked TM in which Australian supposedly gave up any right to contest Naked TM’s rights in the mark NAKED.

Practice Note: Ultimately, although the majority and dissent disagreed about how to apply the law to the facts, Australian Therapeutic Supplies stands as a firm reminder that something less than a proprietary interest is required in order to challenge a trademark registration. How much less is a fact-specific inquiry.

© 2020 McDermott Will & Emery

For more on trademark cancellation, see the National Law Review Intellectual Property law section.