Kaleb McNeely

Klutch Sports Group is a well-known sports management company that was founded in his home city by Cleveland native Rich Paul and that represents – most famously – LeBron James (also born and raised in Ohio). Klutch Sports owns a family of trademarks for the KLUTCH name, as well as rights in various KLUTCH logos, including: Since its founding in 2012, Klutch Sports has continued to grow, expanding not only across the United States but internationally as well. In 2019, for example, Klutch Sports entered into a partnership with United Talent Agency, LLC, a large global talent agency, and by 2025, Forbes listed Klutch Sports as the fifth most valuable sports agency. Despite this growth, the company and its founder remain deeply rooted in their Ohio origins. That’s probably why Paul and Klutch Sports took particular offense when an Ohio cannabis company – founded only in 2020 – not only named itself “Klutch Cannabis,” but is also using the same black-and-gold color motif and a virtually identical font as Klutch Sports. The following comparison shows just how similar the companies’ branding is: Doesn’t exactly look like a coincidence, especially when the companies are from the same state. Klutch Sports first sent Klutch Cannabis a series of demands that Klutch Cannabis stop using the mark. When that didn’t work, on March 16, 2026, Klutch Sports filed a complaint against Klutch Cannabis in federal court in the Northern District of Ohio, alleging trademark infringement and related claims. The complaint noted that both companies sell apparel, including sportswear, that prominently feature the KLUTCH mark: Moreover, as one would expect, both companies use the KLUTCH mark on packaging, on social media, and in other forms of advertising and marketing. The complaint also alleges both likelihood of confusion – and actual confusion. It notes that professional athletes and sports celebrities “routinely invest in, own, and publicly endorse cannabis brands.” As a result, according to Klutch Sports, consumers are accustomed to seeing a connection with sports, professional athletes, and their agents, and cannabis companies, and thus confusion in the marketplace is likely. The complaint also references a few examples of what it claims is actual confusion. In one instance, someone commented on a new article announcing the opening of one of Klutch Cannabis’s dispensaries: “Is there any connection between Klutch Cannabis and Klutch Sports Group?” In another example – and to add insult to injury – when Rich Paul himself visited a Klutch Cannabis dispensary in Cleveland, someone recognized him and informed Mr. Paul that he was planning to buy Klutch Cannabis’s sweatshirt, apparently under the impression that Klutch Cannabis was affiliated with Klutch Sports. Finally, the complaint alleges that multiple individuals have contained Klutch Sports under the mistaken belief that Klutch Sports owns or operates Klutch Cannabis. How is this dispute likely to play out? Well, on the one hand, Klutch Cannabis could try to argue that it sells products to different customers than those of Klutch Sports – and that in general there isn’t a lot of product overlap. But given the geographic proximity, the identical use of “Klutch” (with a “K” no less), and the similar color motif and font, consumer confusion does seem to be fairly likely. And given the Klutch Cannabis’s use of a similar mark is almost certainly not an accident, it’s probably not going to win this battle.

Last year we reported on the Trader Joe’s labor union’s success in dismissing a trademark infringement action that Trader Joe’s had filed against the union, Trader Joe’s United, in the Central District of California. At the time, we noted that Trader Joe’s had appealed the dismissal to the Ninth Circuit. That turned out to be a very good decision on Trader Joe’s part. On September 8, the Ninth Circuit issued a decision reversing the district court’s dismissal, vacating the award of attorneys’ fees, and remanding for further proceedings. The Ninth Circuit’s decision is instructive – both from the perspective of trademark law and that of labor law. As you may recall from our previous post, the district court’s decision – a rare dismissal of a trademark infringement action at the pleading stage – appeared to be based upon the court’s suspicion that Trader Joe’s was weaponizing trademark law to put pressure on its union. For the Ninth Circuit, however, there simply wasn’t sufficient evidence of that to dismiss the lawsuit. After a brief recitation of the relevant factual background, the appellate court applied the Ninth Circuit’s eight-factor Sleekcraft test for likelihood of confusion. On the first factor, strength of the mark, there was no dispute that it weighed in favor of Trader Joe’s, a well-known and popular grocer. The Ninth Circuit also found that the next factor, proximity of the goods, weighed in favor of Trader Joe’s. While the district court had noted that tote bags were the only product type sold by both parties, the appellate court held that a plaintiff like Trader Joe’s need not establish that the parties are direct competitors to satisfy this factor. Rather, the proper inquiry is whether consumers are likely to associate the parties’ products – in other words, whether customers are likely to be confused about the source or sponsorship of the products. The Ninth Circuit thought that such confusion was indeed likely, particularly given the viral popularity of Trader Joe’s tote bags. The Ninth Circuit also rejected the district court’s reliance on context in assessing the proximity factor. While context is certainly important, the issue here wasn’t that Trader Joe’s United used its employer’s name for the purposes of identifying the union (that is fine and likely would not support a trademark infringement action). Rather, Trader Joe’s complaint was that the union used its mark on merchandise it sold to consumers. Moving on to the next factor, similarity of the marks, the Ninth Circuit again held that this factor favored Trader Joe’s. Both parties used the same capitalized lettering, red color, stylized fonts, and concentric circles. And the appellate court again noted that it was not the use of Trader Joe’s name that was problematic – it was the union’s commercial use of the mark on merchandise. Moreover, while the union argued that its use of a raised fist made it apparent that its marks criticize Trader Joe’s labor practices, the Ninth Circuit didn’t think it was so simple. As that court saw it, a raised fist can signify different things and consumers might even think that Trader Joe’s itself was expressing solidarity with social justice causes. The appellate court next considered the five remaining factors, marketing channels, type of goods and degree of care exercised by purchasers, evidence of actual confusion, defendant’s intent, and likelihood of product expansion, and held that these factors were neutral. But because the first three factors weighed in favor of Trader Joe’s, the Ninth Circuit concluded that the district court erred in dismissing Trader Joe’s trademark infringement and unfair competition claims. As the court put it, “[t]his is not one of the rare trademark infringement cases in which there is no plausible likelihood that a reasonably prudent consumer would be confused about the origin of the goods allegedly bearing the Trader Joe’s distinctive marks.” Trader Joe’s had also asserted a dilution by blurring claim against the union, a claim the district court also dismissed on the basis that Trader Joe’s United’s use of the Trader Joe’s mark constituted nominative fair use. But unfortunately for the union, it had never raised this issue in its briefing before the district court. As such, Trader Joe’s never had the opportunity to test this theory and the Ninth Circuit held that the district court again erred in dismissing the dilution claim. Finally, the Ninth Circuit grappled with the labor law issue of whether this case “involved or grew out of” a labor dispute such that the Norris-LaGuardia Act prohibited the court from issuing injunctive relief. The district court, which clearly thought this lawsuit was about Trader Joe’s attempting to strong-arm a pesky labor union, concluded that the case did indeed involve or grow out of a labor dispute such that it was divested of jurisdiction to issue injunctive relief. The Ninth Circuit, on the other hand, though it was far too early to make that determination. Neither party had moved for preliminary injunctive relief and Trader Joe’s had not yet established its entitlement to such relief by prevailing on any of its claims. Given that, and given the parties’ dispute about the timing of Trader Joe’s lawsuit and its previous demand (i.e., whether it was a response to the National Labor Relations Board filing a complaint against Trader Joe’s), the appellate court thought it was premature to conclude that the “employer-employee relationship [is] the matrix of the controversy” such that the Norris-LaGuardia Act was implicated. So, the union’s victory last year was short-lived and it now has to duke it out with its employer in the district court. One wonders if perhaps the union will conclude that it’s just not worth selling tote bags and other merchandise if it means a protracted and expensive litigation. For trademark litigators, the Ninth Circuit’s decision is another reminder that – absent defenses like lack of jurisdiction – it’s just really hard to get a trademark infringement action dismissed at the pleading stage.

John Wick is a highly successful film franchise starring Keanu Reeves as a hitman who reluctantly emerges from retirement to avenge the killing of his pet beagle (among other offenses committed by a group of not-very-nice Russian gangsters). The first movie in the series came out in 2014 and was a surprise hit, grossing over $80 million at the box office. That initial success led to three sequels, a prequel TV series, and an upcoming spin-off film. John Wick is one of the rare franchises that has achieved greater success with each installment, and ticket sales for the series now exceed $1 billion. To capitalize on this remarkable success, the owner of the franchise, Summit Entertainment, LLC, registered the mark JOHN WICK with the U.S. trademark office for a host of goods and services, including movies, video games, accessories, and entertainment services. Summit has also licensed the right to use the JOHN WICK mark to others, including in connection with backpacks, T-shirts, mugs, and duffle bags. All appeared to be going well for the John Wick brand – until Jane Wick entered the scene. No, John did not get married; nor did an estranged older sister suddenly appear at John’s doorstep. Rather, in February 2024, a company called Jane Wick LLC filed a trademark application for the use of the mark JANE WICK in connection with ammunition bags, leather bags, and athletic apparel. Jane Wick aims to capture the women gun owner market – its vision is to “revolutionize women’s shooting by making it functional and beautiful.” It’s unclear if John Wick would think that a fancy leather bag can make shooting “functional and beautiful.” What we do know is that Summit, the franchise owner, is not at all happy about the use of the JANE WICK mark. In fact, last month Summit filed a Notice of Opposition with the Trademark Trial and Appeal Board, claiming that it would be damaged by issuance of a registration for the JANE WICK mark. The Opposition details the success of the JOHN WICK franchise, noting its total box offices revenues of over $1 billion, the list of awards the films have won, and Summit’s use, promotion, and licensing of the JOHN WICK mark. The Opposition also includes descriptions and photographs of JOHN WICK branded products, including backpacks, duffle bags, T-shirts, coffee cups, and figurines. The Opposition goes on to note that, in addition to common law rights in the JOHN WICK mark, Summit has three registered trademarks for the mark. Given there is no dispute about priority (the first John Wick movie came out ten years before Jane Wick filed her trademark application), the key issue here will be likelihood of confusion. The facts here would seem to be in Summit’s favor. JANE WICK uses the same last name as JOHN WICK, and it similarly uses the generic female name (i.e., Jane Doe). The fact that John Wick is a hitman – and there is a great deal of shooting in his movies – may also make confusion likely, as Jane Wick is not just selling bags – it’s selling ammunition bags. Hard to believe that the name Jane Wick was a completely random choice and not meant to relate in some way to John Wick, the renowned fictional gunman. Finally, while JOHN WICK is primarily a film franchise, the mark is also used with goods similar to Jane Wick’s products such as backpacks and clothing. All in all, Jane Wick may have an uphill battle. It’s too early to say how this will pan out. The parties presumably had communications prior to Summit’s filing of an Opposition but apparently weren’t able to resolve their differences. And if Summit succeeds in shooting down Jane Wick’s trademark application, would it be content or would it up the aggression and sue Jane Wick for trademark infringement? John Wick didn’t go out looking for a fight but he wasn’t one to back down either. It looks like the same can be said for the film franchise’s owner.

Cognac, which originates from a specific region of France and is named after the commune of Cognac, is far more popular outside its native country. Indeed, according to the industry group Bureau National Interprofessional du Cognac or BNIC, an astonishing 98% of cognac is exported. Cognac has a strong following in the African-American community, and is especially beloved by American rappers and hip-hop artists, many of whom serve as brand ambassadors or owners. As we previously covered, that connection includes a record label named “Cologne & Cognac Entertainment” and their U.S. trademark application for musical performances and services under this mark:     BNIC opposed the application on the grounds that COGNAC is a geographical indication and that Cognac producers own a common law certification mark for COGNAC. The Trademark Trial and Appeal Board, however, sided with applicants, holding that there was no likelihood of confusion because – at least according to the Board – the COGNAC certification mark was simply not famous enough. After BNIC appealed and the Federal Circuit held oral argument, we predicted that the Board’s decision appeared to be on shaky ground. That premonition turned out to be correct – on August 6, the Federal Circuit issued a decision vacating the Board’s dismissal of BNIC’s opposition and remanding to the Board for reconsideration. The Court began by explaining that unlike trademarks, “which indicate a single source of a product or service, certification marks are used by a person other than its owner with authorization from its owner.” Certification marks generally certify regional or other origin, material, quality, accuracy, and other characteristics. Notably, certification marks of regional origin are exempted from the Lanham Act’s general rule precluding “primarily geographically descriptive” marks. The Court then noted that although not registered with the PTO, it is undisputed that COGNAC is a common law certification mark. BNIC is an organization responsible for controlling and protecting the certification mark COGNAC for brandy manufactured in the Cognac region of France. The key issue on appeal was whether the use of the COGNAC mark for hip-hop music and production services was likely to cause confusion. The Board had held that confusion was not likely, in part because it concluded that the COGNAC mark was not strong or famous. It also dismissed BNIC’s dilution claim because, among other reasons, the Board did not think that BNIC had proven the fame element of dilution. The Federal Circuit first considered the issue of the COGNAC mark’s fame, the dominant factor in the In re E.I. DuPont DeNemours & Co., 476 F.2d 1357, 1361 (CCPA 1973) likelihood of confusion analysis. It held that the Board had erred in requiring that COGNAC be famous for its certification status. In the court’s view, a certification mark can be famous for many reasons, including geographic origin, and it does not need to be famous for its certification function. Thus, the Board’s failure to consider whether or not COGNAC was famous as an indicator of geographic origin was an error. The court also took issue with the Board’s holding that substantial sales and advertising of COGNAC certified products could not establish the mark’s fame because those products also bear brand names, such as HENNESSEY. Just because a certification mark is used with a brand name mark does not mean that the certification mark itself is not famous. As the court noted, certification marks are often present with a brand name mark because they can only be used on third-party products. The Board therefore should have determined whether a portion of the sales and advertising evidence could be attributed to the COGNAC mark (rather than just the brand name mark) such that the evidence was indicative of fame for the certification mark. The Federal Circuit also disagreed with the Board’s conclusion that the marks at issue are dissimilar. As the court explained, just because COGNAC informs consumers of the product’s geographic origin does not mean it cannot also “project an image of sophistication and elegance.” Indeed, the Cologne & Cognac Entertainment record label’s mark projects such an image precisely because of its use of the COGNAC mark. The Board also erred in its analysis of the similarity of both the goods and services and the trade channels. Instead of comparing BNIC’s services to those of the record label, the Board should have compared the goods, services, and trade channels of certified users of the COGNAC mark (e.g, HENNESSEY) to those of the record label. Finally, the court turned to BNIC’s dilution claim, which the Board had dismissed. Here, again, the court disagreed with the Board’s analysis. First, BNIC’s failure to explicitly plead that their certification mark was famous prior to Cologne & Cognac Entertainment’s constructive date of first use did not require dismissal of the dilution claim because the Notice of Opposition provided sufficient notice to meet the pleading standards (and the record label had failed to file a motion to dismiss). Second, as discussed above, the Board’s conclusions regarding the mark’s fame were erroneous and did not support a finding that COGNAC is not famous for purposes of dilution. It will be interesting to see how the Board responds to this slap-down from the Federal Circuit, and whether reconsideration changes its conclusion. But the Federal Circuit’s decision can only be helpful to owners of certification marks, particularly those indicative of geographic origin. We suspect there was much rejoicing among Cognac producers when this decision came out – and probably more than a few celebratory bottles of the fine French brandy consumed. Santé!

Trader Joe’s is a hugely popular grocery chain that has expanded from its Southern California origins to operate close to 600 stores across the United States. Although Trader Joe’s has traditionally had a reputation as an ethical company, accusations of union-busting have tarnished the grocer’s image as a good employer. Moreover, the company’s latest tack in its labor disputes – suing its employees’ union for trademark infringement – isn’t going so well. Earlier this year, Judge Herman D. Vera of the U.S. District Court for the Central District of California tossed the case, finding there was no likelihood of confusion posed by the Trader Joe’s union’s products. In its decision, the Court made clear that it viewed Trader Joe’s lawsuit as a bad-faith effort to pressure the union, and warned that it was dangerously close to sanctionable conduct. Trader Joe’s United (the “Union”) is a labor union that represents certain Trader Joe’s employees at multiple stores across the country. Trader Joe’s has resisted efforts on the part of its employees to unionize, and the National Labor Relations Board has filed multiple complaints against Trader Joe’s relating to union elections. In July 2023, the NLRB even filed a consolidated complaint against Trader Joe’s, asserting claims for various unfair labor practices. In what is unlikely a coincidence, six days after the NLRB complaint was filed, Trader Joe’s commenced a trademark infringement action against the Union. As one would expect, Trader Joe’s owns multiple registered trademarks, including the iconic wine bottle-with-bread-and-cheese logo. Trader Joe’s uses its marks not only in connection with food and beverage products, but also in the sale of branded merchandise, such as its ubiquitous tote bags. The Union also sells certain products on its own website, including mugs, apparel, buttons, and tote bags bearing the Union name and designs relating to its mission of labor activism. In the court action, Trader Joe’s alleged that the Union’s merchandise infringes on Trader Joe’s marks – it was particularly upset about the Union’s sale of reusable tote bags. Trader Joe’s claimed that the Union was using the marks in a purely commercial fashion that resulted in a likelihood of consumer confusion. After setting forth the Twombly standard for a motion to dismiss, the Court moved on to address the substance of the claims. It first dismissed Trader Joe’s’ claim for injunctive relief, holding that the Norris-LaGuardia Act, which prohibits federal courts from issuing injunctive orders in labor disputes, foreclosed that claim. In doing so, the Court hinted that it viewed the case as a transparent ploy to pressure the Union, noting that the history of the parties’ labor disputes, including the timing of this lawsuit, “combined with the weakness of [Trader Joe’s’] claims leads the Court to the conclusion that this case is an attempt to weaponize the legal system to gain advantage in an ongoing labor dispute between Trader Joe’s and the Union representing its workers.” Ouch. The Court then turned to the trademark infringement claims. As there was no debate that Trader Joe’s had a valid, protectable trademark, the Court confined its analysis to the likelihood of confusion issue. The Ninth Circuit uses a test similar to the Second Circuit’s Polaroid test, based upon the AMF Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979) decision. Per Sleekcraft, courts consider eight factors to determine whether there is a likelihood of confusion: (1) strength of the mark; (2) proximity or relatedness of the goods; (3) similarity of the sight, sound and meaning of the marks; (4) evidence of actual confusion; (5) degree to which the marketing channels converge; (6) types of goods and degree of care consumers are likely to exercise when purchasing them; (7) intent of defendants in selecting the infringing mark; and (8) likelihood that the parties will expand their product lines. Here, the Court found that the goods at issue were not sufficiently related. Tote bags were the only product type sold by both parties. Even more importantly, the Court held that the context in which consumers find the Union’s products (on its website, which is openly critical of Trader Joe’s’ labor practices) minimizes the likelihood that the public will mistakenly believe the goods at issue are related. This fact was also relevant to the marketing channels prong, which the Court found weighed against a possible likelihood of confusion. As the Court put it, “[c]onsumers only encounter the Union’s products in the context of its website, which is steeped in the language of labor activism.” The Court also found insufficient similarity between the products, which again favored the Union. Notably, Trader Joe’s claimed that it was not suing the Union over the use of the name “Trader Joe’s.” Absent the fact that both parties’ products used the name “Trader Joe’s,” however, there simply was not much similarity between the products. The Court considered the other Sleekcraft factors to be “relatively unimportant or neutral” in this case. But because the factors discussed above weighed so strongly in the Union’s favor, the Court granted the Union’s motion to dismiss Trader Joe’s’ trademark infringement claims with prejudice. The Court also held that Trader Joe’s had failed to plead facts suggesting the possibility of trademark dilution, and dismissed that case of action too. While the Court made sure to do the required Sleekcraft analysis, it knew this was no ordinary trademark dispute, and was not about to pretend otherwise. Indeed, it stated at the outset that it was going to “point out the obvious” – that this action “is undoubtedly related to an existing labor dispute, and it strains credulity to believe that the present lawsuit – which itself comes dangerously close to the line of Rule 11 – would have been filed absent the ongoing organizing efforts that Trader Joe’s employees have mounted (successfully) in multiple locations across the country.” Trader Joe’s has now appealed the dismissal. Given the Court’s reference to Rule 11 (i.e., sanctions), the Union is almost certainly going to ask the Ninth Circuit to award the Union its fees. If the Ninth Circuit also thinks Trader Joe’s is weaponizing trademark law to gain leverage in a labor dispute, then indeed Trader Joe’s might be on the hook for the Union’s legal fees. Stay tuned for more on this case.

Artificial Intelligence (AI) is one of the hottest topics in technology, with businesses studying how to utilize its benefits and at least some workers wondering if smarter and cheaper AI technologies will replace them. Here at the TMCA, we have been covering an AI-related issue of particular interest to IP attorneys – the ongoing battle of Dr. Stephen Thaler to copyright artwork created by AI software. Back in June 2022, Thaler filed a federal lawsuit in the District of Columbia challenging the Copyright Office’s refusal to register artwork Thaler had created using AI on the basis that human authorship is a requirement for copyright protection. Thaler then moved for moved for summary judgment in January 2023 on the sole legal issue of whether an AI-generated work is copyrightable, and Copyright Office cross-moved on the same issue. As we noted at the time, Thaler had a creative argument. In brief, Thaler posited that an AI programmer is like an employer, the AI is like an employee, and so a programmer like Thaler should be considered the owner of the AI artwork created by the AI/employee under the work for hire doctrine. Thaler’s attempt to equate AI technology with human employees is not likely to calm the fears of those who believe their jobs might be outsourced to machines in the not too distant future. It also didn’t convince the District Court that AI-generated works are entitled to copyright protection. In a decision issued last month, Judge Beryl Howell denied Thaler’s motion for summary judgment and granted the Copyright Office’s cross-motion. As the Court put it in succinct fashion: “Human authorship is a bedrock requirement of copyright.” In reaching its conclusion, Judge Howell addressed and dismissed all of Thaler’s arguments in support of his claim that his AI-generated artwork (which was displayed on P. 2 of the decision) was entitled to copyright protection. For example, the Court held that Thaler’s “work for hire” argument “put the cart before the horse.” The issue was not who could register a copyright, but rather whether any valid copyright existed in a work absent human involvement. Interestingly, the Court noted that Thaler had argued that there was in fact a degree of human involvement in the “development, use, ownership, and prompting of the AI generating software.” Unfortunately for Thaler, however, that alleged human involvement was not in the record, as Thaler had represented to the Copyright Office that the AI system generated the work autonomously and that he played no role in its creation. One wonders if a copyright application that emphasized the human involvement in directing and prompting AI would have more luck (and the Court itself pondered this issue towards the end of its decision). Photographs are entitled to copyright protection – isn’t there an argument that AI is just a more sophisticated form of machine but that AI-generated works are still human works? Maybe, though in the next section the Court drew a distinction between cameras and AI. The Court agreed with Thaler that copyright law has proven malleable enough to cover works created with new technologies – in fact, Section 102(a) of the current Copyright Act itself provides that copyright attached to “original works of authorship fixed in any tangible medium of expression, now known or later developed.” But human creativity is nonetheless, as the Court stated, “the sine qua non at the core of copyrightability.” As the Supreme Court held in Burrow-Giles Lithographic Co. v. Sarony, 111 U.S. 53, 58 (1884), photographs are the copyrightable creations of authors despite their use of a mechanical device because the photographic result represents the “original intellectual conceptions of the author.” Photographs, then, are more like paintings than AI-generated works. Thaler had no more success in arguing that the Copyright Act doesn’t define “author.” The Court consulted two dictionaries and concluded that the plain meaning of “author” means an “originator with the capacity for intellectual, creative, or artistic labor” (i.e., a human being). Such an interpretation is consistent with, in the view of the Court, “centuries of settled understanding” in copyright and patent law. Further evidence that copyright recognition requires human involvement is that numerous courts have consistently rejected copyright claims even when the claimed author was divine. Similarly, the works of monkeys are not entitled to copyright protection. The Court seems to conclude that if neither gods nor monkeys can register copyrights, then neither should AI be able to do so. Or at least one wishing to copyright an AI-generated work needs to show a great deal more human input than Thaler did.

When you hear the word “gruyere,” what comes to mind? A bucolic region in the mountains of Switzerland? Perhaps the Gruyère region of neighboring France? Or, more likely, you think of a type of cheese. Not just any old cheese though – according to the Oxford Companion to Cheese, gruyere cheese is “widely considered among the greatest of all cheeses.” In a delightfully cheese-pun stuffed decision, the Fourth Circuit Court of Appeals recently held that U.S. cheese consumers primarily think of “gruyere” as a type of cheese, rather than a product specific to the Gruyère regions of Switzerland and France. As such, the Court found that the term “gruyere” was too generic to warrant a certification mark of geographic origin. As the Fourth Circuit explained, gruyere cheese originated in the district of La Gruyère in the Canton of Fribourg, Switzerland, in 1115 AD. The original area of production expanded to include other areas of Switzerland and certain neighboring areas of France. According to sources the court quoted, Swiss and French gruyere “producers make cheese from the unpasteurized milk of cows that graze on alpine grasses.” As is common in Europe, Switzerland and France have approved “Gruyère” as a protected designation of origin and a protected geographical indication, respectively. Those designations set forth detailed requirements for the gruyere production process, including that the cheese only be produced in specified areas of Switzerland and France. The U.S., however, does not extend similar protections to gruyere cheese. While the FDA has a general standard of identity of “Gruyere cheese,” that standard does not impose any geographic restrictions on where gruyere-labeled cheese can be produced. It’s no surprise that, as a result, cheese from all over the world – as well as from U.S. states such as Wisconsin and Idaho – has been labeled and sold as gruyere in the U.S. for decades. Of course, it’s also not a huge surprise that Swiss and French gruyere producers aren’t terribly keen on (maybe even cheesed off about) what the court termed “the indiscriminate labeling of cheese as gruyere in the United States.” In 2015, a Swiss and a French gruyere consortium (appellants in the Fourth Circuit case) teamed up to file an application with the USPTO to register the word “GRUYERE” as a certification mark. The intended mark would certify that the cheese originates in the Gruyère region of Switzerland and France, and would preclude any cheese produced outside that region from using the “GRUYERE” label. However, a group of U.S. dairy producers/importers (appellees in the Fourth Circuit) opposed the certification mark, arguing that the term “gruyere” was generic as to cheese and therefore not eligible for the certification. The TTAB agreed with the Opposers that “GRUYERE” is generic and could not be registered as a certification mark. After the Consortiums challenged that decision in a Virginia district court, the district court reached a similar conclusion and granted summary judgment for Opposers. The Consortiums then appealed to the Fourth Circuit, which noted that “[l]ike a fine cheese, this case has matured and is ripe for our review.” (Given the number of cheese puns in the decision, one wonders if the judges and their clerks nibbled on some gruyere while drafting the opinion.) The court began with a brief but helpful refresher course on certification marks, including indications of regional origin. The federal Lanham Act, 15 U.S.C. § 1127, defines a certification mark as “any word, name, symbol, or device, or any combination thereof” that is used “to certify regional or other origin, material, mode of manufacture, quality, accuracy, or other characteristics of such person’s goods or services or that the work or labor on the goods or services was performed by members of a union or other organization.” The court explained that, unlike a typical trademark, a “geographic certification mark is not used by the owner of the mark; rather, the owner of the certification mark controls how others use the mark.” Certification marks are, however, registrable “in the same manner and with the same effect as are trademarks.” 15 U.S.C. § 1054. Of course, this means that the same standards apply – including that a generic name (i.e., the name of a class of products or services) is ineligible for registration as a certification mark. The Fourth Circuit noted that the “critical issue in genericness cases is whether members of the relevant public primarily use or understand the term sought to be protected to refer to the genus of goods or services in question.” In this case, the issue was whether the cheese-consuming public primarily understand the term “GRUYERE” as referring to a type of cheese (i.e., generic), rather than indicating that the cheese was produced in the Gruyère region of Switzerland and France (i.e., non-generic). The district court had granted summary judgment to Opposers on the basis of three categories of evidence. First, the FDA standard of identity for “Gruyere cheese” indicates the mark is generic. Second, the district court held that USDA import data (which showed the prevalence of imported gruyere from countries other than Switzerland and France), as well as evidence of domestically produced gruyere-labeled cheese, favors a finding of genericness. Third, the district court found that “common usage” of the term gruyere shows that it is generic. On appeal, the Fourth Circuit agreed with the district court that the FDA standard of identity for “Gruyere cheese,” which does not contain any geographic restrictions on where the cheese can be produced, supports a finding that the term “GRUYERE” is generic. The court noted that, while the FDA standard of identity for “Gruyere cheese” does not preclude registration of the “GRUYERE” certification mark, that standard of identity “presents strong evidence that GRUYERE is a generic term.” Moving on to the second category of evidence (non-Swiss/French imports and domestically produced gruyere), the Fourth Circuit agreed with the Consortiums that the district court made an improper inference from the USDA import data. Specifically, the district court erroneously concluded that that data showed that the majority of gruyere-labeled cheese imported into the U.S. was from countries other than Switzerland and France, when that was unclear at best. Unfortunately for the Consortiums, despite this improper inference, the Fourth Circuit nonetheless held that “a substantial quantity of cheese has been imported to the United States from countries other than Switzerland and France and sold to consumers as gruyere.” Similarly, while conceding that some of the Consortiums’ criticisms of the domestically-produced gruyere cheese evidence had merit, the appellate court still concluded from the evidence that millions of pounds of domestic-produced cheese are sold as gruyere in the U.S. Next, the Fourth Circuit discussed the evidence of common usage of the term gruyere. Yet again, the court found that even though the district court had made mistakes, they didn’t impact the conclusion. The district court had first looked at various dictionary definitions of the term gruyere and concluded that most of those definitions did not limit the meaning of gruyere to cheese produced in Switzerland and France. But, as the Consortiums pointed out, some definitions do define “Gruyere cheese” as being produced or originating in Switzerland or France. Thus, the Fourth Circuit held that the district court erred in concluding from dictionary definitions of gruyere that the term was generic. But the district court had also considered references to gruyere in the media, and the Fourth Circuit agreed that those references – many of which described gruyere as originating in places other than Switzerland and France – supports a finding of genericness. Finally, the Fourth Circuit addressed the Consortiums’ argument that summary judgment was improper because Opposers failed to provide consumer survey evidence. In the court’s words, that “argument slices the cheese too thinly.” While survey evidence is common in genericness cases, it is not mandatory and evidence of consumer understanding of a mark may be obtained from any competent source. In sum, the court held that because the evidence made clear that cheese consumers in the U.S. understand “GRUYERE” to refer to a type of cheese (and not cheese from a particular region), the term is generic and the district court properly granted summary judgment to Opposers.

Last month, the Court of Appeals for the Eleventh Circuit weighed in for the first time on the scienter requirement for copyright infringement under Section 1202(b) of the Digital Millennium Copyright Act or “DMCA.” In Victor Elias Photography, LLC v. Ice Portal, Inc., the Eleventh Circuit held that the DMCA has a “double scienter requirement” – not only does an alleged infringer need to know that so-called “copyright management information” or “CMI” has been removed or altered, the infringer also has to know that the removal would likely result in copyright infringement. In this decision, the Eleventh Circuit joined the Second and Ninth Circuits in holding that the defendant has to know that removing CMI would likely lead to future infringement, and not just make infringement possible or easier to accomplish. Victor Elias, the sole owner of the plaintiff (“Elias”), is a professional photographer who specializes in taking photographs of hotels and resorts throughout the U.S., Mexico, and the Caribbean, which he then licenses to these hotels and resorts. Elias registers his photographs for copyright and embeds CMI in the metadata of the images, which identifies Elias as owner and is used to find instances of copyright infringement. The defendant, a division of Shiji (US), Inc., acts as an intermediary between hotels and online travel agents, such as Expedia, by providing images of the hotels to these agents. In order to optimize the quality of the photographs, Shiji converts them to a different format, which sometimes erases metadata, including the CMI. Like any conscientious copyright owner, Elias regularly monitors the internet for evidence of copyright infringement. When, in 2016, he found unauthorized copies of his photographs on websites (including some non-online travel agent websites) from which his CMI had been stripped, Elias sued Shiji for violation of the DMCA. After discovery, the district court granted summary judgment to Shiji, concluding that Elias could not satisfy the “second scienter requirement” of Section 17 U.S.C. § 1202(b) of the DMCA. In other words, Elias had not established that Shiji “knew or had reason to know that its actions would induce, enable, facilitate, or conceal infringement.” Elias then appealed to the Eleventh Circuit. On appeal, the court noted that interpretation of Section 1202(b) of the DMCA was an issue of first impression in the Eleventh Circuit. That section prohibits a person from intentionally removing or altering CMI, or distributing works from which CMI has been removed or altered, “knowing, or . . . having reasonable grounds to know, that it will induce, enable, facilitate, or conceal [copyright infringement].” It was the last part of that provision that was at the crux of this dispute, and that the Eleventh Circuit sought to interpret. The court looked to its sister Circuits for guidance, as both the Second and the Ninth Circuits had previously addressed this provision. In Mango v. BuzzFeed, Inc., 970 F.3d 167 (2d Cir. 2020), the Second Circuit had held that, to establish a violation of Section 1202(b), a plaintiff must prove that the defendant distributed works originally containing CMI while (i) knowing that the CMI had been removed or altered without authorization and (ii) knowing or having reasonable grounds to know that such distribution “will induce, enable, facilitate, or conceal an infringement.” Those two knowledge elements are known as the “double-scienter requirement” of Section 1202(b). In Stevens v. Corelogic, Inc., 899 F.3d 666 (9th Cir. 2018), the Ninth Circuit had similarly held that a violation of Section 1202(b) requires the defendant to possess the mental state of knowing, or having a reasonable basis to know, that the defendant’s actions “will induce, enable, facilitate, or conceal an infringement.” Given the express language of the statute, Elias conceded that Section 1202(b) had a double-scienter requirement. Elias nonetheless argued that a defendant should be held liable if it knows, or has reasonable grounds to know, that its actions “make infringement generally possible or easier to accomplish.” Shiji, on the other hand, argued that a defendant must know or have reasonable grounds to know that removing CMI would likely lead to future infringement. In other words, the fight here was essentially about the probability of future infringement – does it have to be likely or just generally possible? Following the reasoning of the Ninth Circuit in Stevens, the court concluded that Shiji had the better of the argument. As the court noted, under Elias’s proposed standard, “the defendant would always know that its actions would ‘induce, enable, facilitate, or conceal’ infringement because distributing protected images wrongly cleansed of CMI would always make infringement easier in some general sense.” The court reasoned that such an interpretation would “effectively collapse the first and second scienter requirements.” (It would also mean we wouldn’t get to use the fun phrase “double-scienter requirement!”). Applying its statutory interpretation to this case, the court affirmed the district court, holding that Elias had failed to submit evidence sufficient to create a genuine issue of material fact as to whether Shiji knew or had reason to know that its actions “will induce, enable, facilitate, or conceal infringement” of Elias’ copyrighted works. Elias had argued that Shiji’s involvement in a 2016 arbitration involving allegations of CMI removal, as well as examples of images of Elias’ photographs on non-party websites that had been stripped of his CMI, reflected that Shiji had or had reason to have such knowledge. The court, however, found that the arbitration was factually distinguishable and would not have given Shiji any reason to know that its software’s effects on CMI would make copyright infringement “likely.” Similarly, the court held that there was no evidence linking Shiji’s actions of removing CMI with the instances of infringement Elias had discovered online. Did the court get it right? It seems so, at least on these facts, since there doesn’t appear to have been any evidence that Shiji knew or should have known that its action would make copyright infringement likely. The Eleventh Circuit’s statutory interpretation seems on the mark too – and is in accord with the conclusions reached by the Second and Ninth Circuits. What’s beyond doubt is that plaintiffs alleging a violation of Section 1202(b) have a very high burden indeed in these Circuits. Not just scienter – double-scienter!!

Most lawyers are familiar with the well-known legal maxim that “ignorance of the law is no excuse.” In a 6-3 opinion issued on February 24, 2022, in a copyright case, the Supreme Court nonetheless held that ignorance of the law is a valid excuse in certain circumstances. Let’s take a look at the decision to see why. Unicolors, Inc. v. H&M Hennes & Mauritz, L.P. involved allegations by Unicolors, a fabric designer, that the multinational Swedish fashion company H&M Had infringed Unicolors’ copyrights. After a California jury found in Unicolors’ favor, H&M sought a determination that those copyrights were invalid because Unicolors included inaccurate information on its registration application, rendering the registration invalid. Specifically, H&M claimed that Unicolors had improperly filed a single application seeking registration for 31 separate works, even though Unicolors had at different times sold some designs separately to different customers. As such, the Copyright Office’s “single unit of publication” requirement (which provides that a single registration can cover multiple works only if those works were “included in the same unit of publication”) barred Unicolors from filing a single application. The district court denied H&M’s motion, holding that under Section 411(b) of the Copyright Act, a copyright registration that contains inaccurate information is valid, unless the inaccurate information was included with knowledge that it was inaccurate. The district court reasoned that because Unicolors did not know that it failed to satisfy the “single unit of publication” requirement, the inaccuracy did not invalidate its copyright. Unhappy with that result, H&M appealed to the Ninth Circuit, which reversed the district court. The Ninth Circuit held that it didn’t matter if Unicolors knew it failed to satisfy the “single unit of publication” requirement. In the Ninth Circuit’s view, the statute only excused good-faith mistakes of fact, not law. Since Unicolors had known the relevant facts – but not the law – it could not rely on the Copyright Act’s safe harbor. It was now Unicolors’ turn to be unhappy, and it appealed to the Supreme Court. In an opinion written by Justice Breyer, the Supreme Court held that Section 411(b) of the Copyright Act does not distinguish between a mistake of law and a mistake of fact. As such, lack of knowledge of either fact or law can excuse inaccuracy in a copyright registration. Justice Breyer – apparently an avid bird-watcher – began with, well, a bird analogy. Here’s how it went: If someone mistakes a scarlet tanager (red with black wings) for a cardinal (all red) because they didn’t see the bird’s black wings, that’s a mistake of fact. If, on the other hand, the person saw the black wings but didn’t know that scarlet tanagers – but not cardinals – have black wings, that would be a “labeling mistake.” Justice Breyer likened the bird labeling mistake to Unicolors’ mistake – Unicolors had the facts right, it just didn’t know the proper scope of the label “single unit of publication.” (Keep an “eagle” eye peeled for further bird analogies from Justice Breyer as he prepares to retire from the Court.) The opinion then proceeded to explain the bases for its holding that mistakes of law, and not just those of fact, are covered by the Copyright Act’s safe harbor for good-faith errors. First, the statute itself states that the inaccurate information must be included on the application “with knowledge that it was inaccurate” in order to invalidate the copyright registration. Knowledge, however, is equally applicable to both facts and law. Moreover, according to the Supreme Court, other statutory provisions in the Copyright Act make clear that “knowledge” means “actual, subjective awareness of both the facts and the law.” While using legislative history as a guide has fallen out of fashion of late, Justice Breyer also diplomatically noted that “those who consider legislative history will find that history persuasive here.” The legislative history here indicates that Congress enacted the safe harbor provision of Section 411(b) to make it easier, not more difficult, for non-lawyers to obtain valid copyright registrations. If that is true, it makes little sense to excuse mistakes of fact, but not those of law (i.e., the type of mistakes one would expect non-lawyers to make more often). The Supreme Court also considered and rejected two arguments that H&M made. First, the Supreme Court did not think that H&M’s interpretation of the statute would make it too easy for copyright holders to avoid the consequences of inaccurate applications, as circumstantial evidence may lead to a conclusion of actual awareness or willful blindness, neither of which is protected under the safe harbor. Second, the maxim “ignorance of the law is no excuse” applies to criminal cases, not to a civil case concerning the scope of a safe harbor provision. One interesting thing to ponder is whether this decision will only affect the interpretation of Section 411(b)’s safe harbor provision or whether litigants and courts will apply the Supreme Court’s reasoning in other contexts. We know that lack of knowledge of the law is generally not a defense in criminal actions, but might it be a defense in certain civil cases where “knowledge” is a necessary element? We shall see.

The minor hockey league ECHL iced a win over the San Diego Gulls hockey club earlier this month when a judge in the Central District of California granted ECHL’s motion for summary judgment dismissing all of the Gulls’ claims. The court found that because a 2015 agreement between the parties did not transfer any copyright in a gull-playing-hockey logo, ECHL was not on the hook for the Gulls’ legal fees and settlement payment in a separate action. Back in February 2015, ECHL assigned certain trademarks to the San Diego Gulls hockey team, including the word mark “Gulls,” any depiction of a seagull in the context of hockey or a hockey team, and a logo showing a sea gull waving a hockey stick (the issue of whether gulls actually play hockey was apparently not considered by the court). The trademarks and logo were defined in the agreement as the “Marks.” In addition to the trademarks, the 2015 agreement also assigned to the Gulls a list of social media names with the word “Gulls.” The Marks and the social media names were collectively defined as the “Intellectual Property.” As part of that agreement, ECHL represented that (1) it had the right, power, and authority to enter into the Agreement; and (2) the Mark was freely assignable and unencumbered by adverse claims. All seemed fine until a little over a year later, when an individual named Robert Barros filed a copyright infringement action against the Gulls, alleging that he owned artwork entitled “San Diego Gulls” (pictured below) and that he had registered this artwork with the United States Copyright Office. Unfortunately for the Gulls, Barros’ artwork appeared to be “birds-of-a-feather” with the logo they had purchased from ECHL and were using to promote their team. The copyright litigation with Barros proved painfully expensive for the Gulls. By the time it was over, they had racked up a whopping $750,000 in attorneys’ fees and paid $330,000 to Barros to settle the matter. Ouch. While the Gulls probably wanted to drop their gloves and challenge ECHL to an old-school hockey fight, they decided instead (presumably on the advice of their lawyers) to sue ECHL for breach of contract and intentional misrepresentation. The basis of both the Gulls’ claims was that ECHL had falsely represented that the assigned rights were free and clear of any claims, when in fact Barros had a colorable (and, for the Gulls, costly) copyright claim to the Gulls’ logo. The Gulls filed their complaint in September 2019, and ECHL filed a motion to dismiss two months later. Interestingly, ECHL only sought dismissal of the intentional misrepresentation claim, asserting that it was not pleaded with the requisite particularity. In January 2020, the court denied ECHL’s motion to dismiss and the parties engaged in discovery. Then, on March 19, 2021, ECHL filed their motion for summary judgment seeking dismissal of both claims. In its summary judgment decision, the court quickly identified the relevant issue, which was one of contractual interpretation rather than intellectual property law. As the court phrased it, the Gulls’ claims “rise and fall based on whether the 2015 Agreement transferred any copyright in the [gull-with-hockey-stick] Logo.” In other words, if the copyright in the Gulls’ logo was among the assets transferred in the 2015 assignment agreement, then ECHL shouldn’t have represented that the assets were free and clear of claims. If, however, copyright rights were not among the assets assigned, then ECHL did not breach the agreement or make any misrepresentations – despite the fact that Barros had a copyright claim to the Gulls’ logo. The court reviewed the applicable provisions of the 2015 agreement and concluded that that agreement “unambiguously defines the scope of the assets being transferred, which does not include copyright in the [Gulls’] Logo.” Specifically, according to the court, the Agreement transferred all of ECHL’s rights in the “Intellectual Property”, which in turn was expressly defined as including only the “Marks” and a list of social media names containing the word “Gulls.” As such, the court held that ECHL did not breach any provision of the assignment agreement or make any misrepresentation when it warranted that the intellectual property it was assigning to the Gulls was unencumbered by any adverse claims. Barros may have had a valid copyright claim but ECHL was under no obligation to disclose that because they weren’t assigning any copyright to the Gulls. A few takeaways from this decision: First, given that this decision appears to be based on nothing more than interpretation of an unambiguous contractual provision, one wonders why ECHL didn’t move to dismiss both claims on the contractual interpretation issue. Second, this case serves as another reminder that you need to do your own due diligence when you purchase IP assets (or any assets, for that matter). If the Gulls had discovered Barros’ copyright before entering into the 2015 agreement, they could have avoided two messy and expensive litigations – or at least made ECHL pay for the Barros litigation. Finally, it bears repeating that contracts mean what they say and only what they say. If you want copyright rights to be encompassed within the rights assigned under a contract, make sure you include them – and don’t expect a court to add them later if you don’t.

The Ohio State Buckeyes may have lost the college football national championship to Alabama earlier this year but OSU can take some consolation from its recent victory in a trademark case before the Sixth Circuit Court of Appeals. In The Ohio State University v. Redbubble, Inc., Case No. 19-3388 (6th Cir. Feb. 25, 2021), the Sixth Circuit reversed a lower court’s grant of summary judgment in favor of defendant Redbubble, an Australian online retailer that OSU had sued for trademark infringement and related claims. In doing so, the Sixth Circuit grappled with an increasingly relevant issue in the digital age: whether e-commerce companies are liable for trademark infringement arising from products they sell in the online marketplace. Redbubble operates an online marketplace for print-on-demand products based on user-submitted artwork. Independent artists upload images to Redbubble’s interface and consumers can place an order for a customized item. Once a consumer makes a purchase, Redbubble contacts the artist and arranges the manufacturing and shipping of the product with independent third parties. The shipped products, however, are delivered in Redbubble packaging with Redbubble tags. Back in 2017, OSU discovered products on Redbubble’s marketplace that displayed OSU’s trademarked images without approval. Redbubble declined to remove the offending articles unless OSU complied with onerous demands for identification of the infringing articles, following which OSU sued it for trademark infringement, counterfeiting, and unfair competition (under both the Lanham Act and Ohio’s right-of-publicity law) in the Southern District of Ohio. The parties subsequently cross-moved for summary judgment, and the district court granted summary judgment for Redbubble, holding that “Redbubble did not ‘use’ OSU’s trademarked images in operating its business model under the Lanham Act because it only acted as a ‘transactional intermediary’ between buyers, sellers, manufacturers, and shippers. On appeal, the Sixth Circuit first addressed OSU’s argument that Redbubble was vicariously liable under the Lanham Act. The appellate court held that, while OSU might have a good argument for vicarious liability, it was barred from pursuing that claim because it had failed to raise the issue in the district court (litigators, don’t let this happen to you - make sure to raise every possible argument in the trial court or you risk being barred from pursuing even meritorious claims on appeal). The Sixth Circuit then moved on to the more interesting question: did Redbubble “use” OSU’s trademarks under the Lanham Act by marketing and selling infringing products? The Court first noted that online marketplaces, like eBay and Amazon, that merely facilitate sales for independent vendors generally escape Lanham Act liability. On the other hand, parties who design and print trademark-infringing goods typically violate the Lanham Act, as do direct sellers of offending products (whether brick-and-mortar stores or company websites). So, which is Redbubble? The Court distilled the question as follows: “What level of involvement and control must a defendant exercise over the creation, manufacture, or sale of offending goods to be considered akin to a ‘seller’ or ‘manufacturer’ to whom Lanham Act liability applies?” The Court stated that, based upon Sixth Circuit precedent, a key distinction between a direct seller who “uses” a trademark and a mere facilitator of sales is “the degree to which the party represents itself, rather than a third-party vendor, as the seller, or somehow identifies the goods as its own.” In this case, the evidence suggested that “products ordered on Redbubble’s website do not yet exist, come into being only when ordered through Redbubble, and are delivered in Redbubble packaging with Redbubble tags.” Thus, Redbubble is more than just a “passive facilitator” – it “brings trademark-infringing products into being by working with third-party seller to create new Redbubble products, not to sell the artists’ products.” In the mind of the Sixth Circuit, that “use” of OSU’s trademark was sufficient to preclude summary judgment in Redbubble’s favor. After discussing OSU’s Ohio right-of-publicity claim (again reversing the district court’s grant of summary judgment to Redbubble on this claim too), the Court considered whether OSU was entitled to summary judgment on its claims. On that issue, the Sixth Circuit concluded that there was insufficient record evidence and so remanded for additional fact-finding. According to the Court, the factual gaps include the precise nature of Redbubble’s contractual relationships with third-party manufacturers and shippers, the degree to which Redbubble is involved in selecting and imprinting trademark-infringing designs on its products, Redbubble’s involvement in product returns, and facts relating to potential defenses Redbubble might have. While the final outcome of this case is uncertain, OSU can certainly be pleased with the Sixth Circuit’s decision. More generally, this case contributes to an understanding of when and how online retailers may be liable for trademark infringement – at least in the Sixth Circuit. The general lesson? Unless an online retailer is clearly a passive facilitator of third-party sales like Amazon or eBay, it needs to be careful how involved it is in the product manufacturing and sales process or it runs the risk of being sued for trademark infringement. Also, lawyers: make sure you preserve issues for appeal!

Lucky Brand has emerged victorious in the latest skirmish of its nearly 20-year trademark litigation battle with Marcel Fashions, a competitor in the apparel business. In Lucky Brand Dungarees, Inc. v. Marcel Fashions Group, Inc., its second trademark decision of this term, the Supreme Court unanimously reversed the U.S. Court of Appeals for the Second Circuit, holding that Lucky Brand is not precluded from raising a defense that it could have raised in a previous lawsuit between the same parties. The Lucky Brand opinion, however, rested on narrow grounds and left for another day the questions of whether there is such a thing as “defense preclusion” and, if so, when it is appropriate. The first round of this war began in 2001, when Marcel sued Lucky Brand, alleging that Lucky Brand’s use of the phrase “Get Lucky” infringed Marcel’s registered trademark for GET LUCKY. That case ended in a settlement, whereby Lucky Brand agreed to cease using the phrase “Get Lucky,” and Marcel released certain claims regarding Lucky Brand’s use of its own trademarks (which included various marks containing the word “Lucky”). In the second round (commenced in 2005), Lucky Brand sued Marcel for violating certain of its trademark rights, and Marcel in turn filed several counterclaims based on Lucky Brand’s alleged continued use of the phrase “Get Lucky.” While Lucky Brand initially argued that the counterclaims were barred by the prior settlement agreement, it did not pursue that defense and the court in the 2005 Action permanently enjoined Lucky Brand from copying or imitating Marcel’s “Get Lucky” mark. In 2011, Marcel again sued Lucky Brand for continuing to infringe the “Get Lucky” mark, though the allegations involved different marks used by Lucky Brand claimed to be infringing and different conduct than in the 2005 Action. After extended litigation, Lucky Brand moved to dismiss, arguing—for the first time since early in the 2005 Action—that Marcel had released its claims in the 2001 Action settlement agreement. Marcel countered that Lucky Brand could not invoke the release defense because it could have pursued that defense in the 2005 Action, but did not. The U.S. Court of Appeals for the Second Circuit agreed with Marcel, holding that the doctrine of “defense preclusion” prohibited Lucky Brand from raising the release defense in the 2011 Action when it had failed to do so in the 2005 Action. In a decision authored by Justice Sotomayor (who practiced in the field of trademarks and intellectual property law prior to ascending to the bench), the Supreme Court reversed and remanded the case to the Second Circuit. The Supreme Court framed the key issue as whether “defense preclusion” is a valid application of res judicata, a term that encompasses both issue preclusion (also known as collateral estoppel) and claim preclusion. Issue preclusion, which precludes a party from re-litigating an issue actually decided in a prior case and necessary to the judgment, did not apply here because the scope of the settlement release was never actually litigated in the 2005 Action. The related doctrine of claim preclusion prevents parties from raising issues that could have been raised and decided in a prior action—even if they were not actually litigated. The question at issue here was whether claim preclusion barred Lucky Brands from asserting its settlement defense in the 2011 Action. The Supreme Court noted at the outset that “[t]here may be good reasons to question any application of claim preclusion to defenses.” It did not need to resolve this more general question, however, because for claim preclusion to bar a defense in a later action, the two suits must arise from the same transaction or involve a “common nucleus of operative facts.” In Lucky Brand, the Supreme Court held that the two suits “were grounded on different conduct, involving different marks, occurring at different times” and “[t]hey thus did not share a ‘common nucleus of operative facts.’” Specifically, in the 2005 Action, Marcel’s claims were based on a combination of Lucky Brand trademarks and the use of the phrase “Get Lucky,” while the 2011 Action did not involve any use of the “Get Lucky” phrase. Moreover, the 2011 Action concerned conduct that occurred after the conclusion of the 2005 Action. The Supreme Court noted that this principle is particularly salient in the trademark context, “where the enforceability of a mark and likelihood of confusion between marks often turns on extrinsic facts that change over time” and “liability for trademark infringement turns on marketplace realities that can change dramatically from year to year.” The Lucky Brand decision underscores what all legal practitioners take for granted: the facts matter. Here, because the two actions involved different facts and claims, the Supreme Court found that Lucky Brand’s failure to invoke its release defense in the 2005 Action did not bar it from raising that defense in the 2011 Action. As noted, however, the Supreme Court left undecided the larger issue of whether it is ever appropriate to apply claim preclusion to bar defenses, and there are compelling policy considerations for either position. On the one hand, one of the goals of claim preclusion is to resolve issues at the earliest opportunity – and this principle would seem equally applicable to defenses. On the other hand, requiring defendants to litigate every possible defense at every stage in litigation might have the deleterious effect of increasing litigation time and costs – which preclusion doctrines seek to minimize. It will be interesting to see how this issue plays out and whether the Supreme Court eventually resolves it definitively. In the meantime, litigators (particularly in the trademark field) would be well-advised to carefully analyze the relevant facts in order to determine whether a defense is required – or could potentially be barred – by the doctrine of “defense preclusion” since that doctrine appears to have survived for possible future application under the proper factual circumstances.

A bong distributor with a reputation as a serial trademark plaintiff managed to persuade a Florida federal court that it should not be on the hook for the prevailing party’s attorney’s fees. In Sream Inc. et al. v. CIJ Enterprises Inc., Plaintiffs Roor, a German “water pipe” maker and its U.S. licensee, Sream, alleged that defendant CIJ infringed Plaintiffs’ trademark by selling a bong at its convenience store that bore the Roor mark. After CIJ prevailed at trial, it moved for attorney’s fees. On March 3, however, Judge Reinhart of the Southern District of Florida issued an order denying the motion on the grounds that CIJ had failed to establish that the case was exceptional under the Lanham Act. Judge Reinhart began with a brief overview of the applicable law regarding what constitutes an exceptional case. As another Southern District of Florida court noted, courts may consider whether there was purposeful, intentional or willful conduct that went beyond "mere negligence” in assessing whether a case is exceptional. An attorney’s fees award may also be justified when a plaintiff has brought an "obviously weak" Lanham Act claim and the evidence shows that the plaintiff acted in bad faith and with an "improper motive.” The policy reason for this doctrine is clear:  to, ahem, weed out frivolous claims. As this case demonstrates, however, it is no easy feat to recoup attorney's fees under the exceptional case doctrine. In this case, CIJ made three principal arguments in support of its position that this was an exceptional case justifying an award of attorney’s fees. CIJ first argued that Plaintiffs were on notice of the weakness of their case, as a judgment had been entered against them in a similar case, Sream, Inc. v. Smokers Edge, LLC, just nine months earlier. Notably, in Smokers Edge, the court had ruled it was an exceptional case meriting an award of attorney’s fees. Next, CIJ claimed that Plaintiffs’ “apparent business model” is to file trademark infringement lawsuits against “smaller, stand-alone, independent stores” and obtain settlements before trial an (oh no, not again) chronic litigant, if you will. According to CIJ, Plaintiffs likely earn more revenue from these settlements than from sales of their water pipes. Finally, CIJ contended that Plaintiffs’ attempt to obtain damages for allegedly infringing the mark of what it deemed an unlawful product made this an exceptional case. CIJ noted that Plaintiffs’ bongs had competed in the Cannabis Cup (the horror!) and that it had asserted the affirmative defense of illegality. Apparently, CIJ failed to see the irony in raising this argument given that its own presence in the bong market is what led to the suit to begin with. Judge Reinhart found CIJ’s Smokers Edge argument to be its strongest. In that case, the same plaintiffs had raised identical claims against a smoke shop that sold a counterfeit Roor water pipe. Nevertheless, Judge Reinhart found several reasons to distinguish the two cases. First, while the Smokers Edge court found that the bongs at issue were not “remotely similar in design, construction or quality,” the CIJ court found that a consumer seeing the two bongs next to each other could reasonably conclude that both came from the same source. Second, the defendant in Smokers Edge had twice made settlement offers that the plaintiffs rejected; in this case, however, there was no evidence that CIJ had offered to settle and been rebuffed (perhaps CIJ should have—please make it stop—tried to hash it out with Plaintiffs before trial?). Third, in Smokers Edge, despite the fact that the plaintiffs knew the identity of the distributor who sold the counterfeit bong to the defendant, they had never investigated the distributor nor sought to add them as a party, suggesting that the infringement was not actually causing Plaintiffs the harm they claimed. By contrast, in CIJ, there was nothing in the record regarding the distributor’s identity. Fourth, Judge Reinhart was also unpersuaded by CIJ’s argument that Plaintiffs did not actually care about the alleged infringement and only brought these actions to achieve settlement payments. As the court noted, there was no evidence Plaintiffs’ settlement proceeds exceeded their sales revenues (as CIJ had speculated), and Plaintiffs had a reasonable basis for bringing an infringement action, despite the fact they ultimately failed to prevail. Finally, the court rejected CIJ’s claim that the case was exceptional due to the alleged illegality of the water pipes. CIJ’s affirmative defenses did not include a claim that Plaintiffs had fraudulently procured their trademark by misrepresenting the nature of their water pipes. And, at least according to testimony from Plaintiffs’ corporate representative, Plaintiffs “advertise and market their water pipes only for tobacco use.” One suspects, of course, that most consumers of Roor bongs employ them for marijuana use. Absent evidence of misrepresentations to the USPTO, however, the fact that most consumers likely use Plaintiffs’ bongs to smoke an unlawful product does not make this case exceptional. It’s not at all surprising that winning trademark defendants are anxious to have their attorney’s fees paid—particularly when it appears to them that the plaintiff is in the trademark infringement litigation business. Judge Reinhart’s opinion reminds us once again that, absent truly exceptional cases, the expectation of an attorney’s fees award under the Lanham Act is generally nothing but … a pipe dream.

The world-renowned Danish toy maker Lego has scored an important (albeit partial) win in its nearly 8-year-old copyright litigation against fellow toy maker Best-Lock Construction Toys. On July 25, 2019, Judge Haight of the U.S. District Court for the District of Connecticut issued an opinion on the parties’ competing motions for summary judgment in Lego A/S et al. v. Best-Lock Construction Toys, Inc. et al., No. 11-cv-01586-CSH. The order granted Lego’s motion for partial summary judgment on its copyright infringement claim, Best-Lock’s counterclaims, and all but one of Best-Lock’s affirmative defenses; and denied Best-Lock’s cross motion for summary judgment. The one ‘stumbling block” for Lego was the Court’s refusal to grant summary judgment on Best-Lock’s affirmative defense of equitable estoppel, meaning that claim will need to be tried before Lego can declare complete victory. The case involved a dispute about the similarity – or lack thereof – between Lego’s “minifigure” figurines – “small, three-dimensional toys depicting people” – and Best-Lock’s minifigures, which are designed to be attached to other minifigures, including those produced by Lego. Although Best-Lock has been selling its minifigures in the United States since 1998, and although the parties had been involved in extensive litigation outside the U.S., Lego apparently never voiced any objection to Best-Lock’s U.S. sales or threatened litigation until it commenced this lawsuit in 2011. Unfortunately for Lego, that fact proved key in denying it a full victory at this stage. Lego filed this action back in October of 2011, alleging that Best-Lock infringed two of Lego’s registered copyrights covering its minifigures (the “Lego Copyrights”). In response, Best-Lock asserted various affirmative defenses and counterclaims, claiming, among other things, that the Lego Copyrights are invalid and unenforceable; Best-Lock is entitled to a declaratory judgment of non-infringement; and Lego’s claims are barred by the doctrine of equitable estoppel. Judge Haight first addressed Lego’s motion for copyright infringement, which claimed that Lego owns valid copyrights that cover the sculpture of its minifigures (i.e., the Lego Copyrights); Best-Lock has copied the protectable elements of the minifigures; and such copying is illegal because there is a substantial similarity between Best-Lock’s figures and the protectable elements of Lego’s minifigures. The Court applied the Supreme Court’s Feist test, which provides that a copyright infringement plaintiff must show ownership of a valid copyright; and copying of the constituent elements of the work that are original.” The Court first held that the Lego Copyrights are valid and enforceable (and Best-Lock’s counterclaims and affirmative defenses of invalidity are without merit) because, among other things: (1) the certificates of registration give rise to a presumption that the Lego Copyrights are valid; (2) Lego’s patents on the same figurines do not rebut this presumption; (3) the fact that certain design elements in question are functional does not render the Lego Copyrights invalid; and (4) Best-Lock failed to present evidence of factual inaccuracies in Lego’s copyright applications. Having established that the Lego Copyrights are valid, Judge Haight moved on to the more difficult issue of whether Best-Lock actually copied Lego’s protectable work and whether such copying was illegal “because substantial similarity existed between [Best-Lock’s] work and the protectable elements of [Lego’s] work.” Noting that direct evidence of copying is rare, the Court considered whether there was indirect evidence that Best-Lock had copied Lego’s minifigures. Indirect evidence of copying can be established by access to the copyrighted work and probative similarity that leads to the inference of actual copying. Judge Haight easily concluded that Best-Lock had access to Lego’s copyrighted work. Not only are Lego’s minifigures “among the most universally recognized toys in the world,” Best-Lock’s CEO had direct and personal access to Lego’s minifigures. Indeed, in a newspaper interview he likely now regrets, Best-Lock’s CEO claimed that Lego had copied bricks invented by a British psychologist in the 1940’s and admitted that he “did the [Best-Lock] figures because I want to piss [Lego] off.” Ouch! On the issue of probative similarity, the Court held that the products at issue “are not just ‘probatively similar,’ but indistinguishable in most respects.” Accordingly, the Court found that no reasonable trier of fact could determine that Best-Lock did not actually copy Lego. Moving on to the issue of whether Best-Lock’s copying was improper, the Court noted that, to establish illegal copying, “the court must find a substantial similarity between the protectable elements of the two works.” In a related principle, an infringement plaintiff “must show that the defendant appropriated the plaintiff’s particular means of expressing an idea, not merely that he expressed the same idea.” Substantial similarity may be determined by the “ordinary observer test” (i.e., whether the average lay observer would recognize the alleged copy as having been appropriated from the copyrighted work) or the “more discerning observer test” (which excludes the unprotectable elements from consideration and compares only the protectable elements for substantial similarity). While recognizing that the question of substantial similarity is usually one of fact, Judge Haight stated that it was entirely appropriate for a district court to resolved substantial similarity if the similarities “are so striking that no reasonable juror could find that the alleged infringer did not copy the plaintiff’s protected works.” A key issue in determining the substantial similarity question was whether certain elements of the Lego minifigures were purely utilitarian (i.e., functional and not protectable). Best-Lock argued that the shape of the Lego minifigures’ torso was functional because this feature “enables movement” of the minifigures’ arms. The Court rejected this argument, holding that it was the minifigure joints – not the shape of the torso – that enable movement, and that “[m]erely having some incidental effect on the nature of that movement, without more, does not make an element ‘functional.’” Similarly, the Court dismissed Best-Lock’s argument that the Lego minifigures’ square feet and square legs are functional, as feet and legs do not need to be square to enable a figure to stand. The Court further concluded that the elements of the Lego minifigures at issue are sufficiently original to be entitled to protection. Finally, the Court held that a comparison of the respective minifigures makes clear that Best-Lock’s minifigures “are not just similar to Lego’s minifigures―they are identical.” Thus, because Best-Lock unlawfully copied Lego’s minifigures and Lego had valid copyrights covering those minifigures, the Court concluded that Best-Lock infringed Lego’s copyrights. That was, however, not the end of the story. Best-Lock had asserted an affirmative defense of equitable estoppel, arguing that Lego’s long-standing tolerance of Best-Lock’s U.S. sales barred Lego from now asserting a claim for copyright infringement. As the Court explained, the elements of an equitable estoppel defense are: (1) knowledge by the plaintiff of the defendant’s infringing acts; (2) the plaintiff’s intention that the defendant rely on its acts or omissions or the defendant’s right to believe that it was intended to rely on the plaintiff’s conduct; (3) the defendant’s ignorance of the true facts; and (4) the defendant’s detrimental reliance on the plaintiff’s conduct. Lego conceded that the first element of the test was satisfied. With respect to the second element, the Court held that Lego’s history of litigation and threatened litigation outside the U.S., coupled with its failure to even threaten litigation in the U.S. until it brought this suit in 2011, “raises a genuine issue of material fact as to whether Best-Lock was ‘misled into reasonably and justifiably believing’ that ‘Lego would not pursue its claims.” The Court also concluded that the evidence presented by Best-Lock raises a triable issue of fact as to whether Best-Lock was aware that Lego owned copyrights in the Lego minifigures. Finally, the Court held that it was reasonable to infer that Best-Lock’s investment and growth in the U.S. “was an affirmative business decision at least partially driven by Lego’s actions and inaction” (i.e., Best-Lock detrimentally relied on Lego’s conduct). In light of the foregoing, the Court held that Lego was not entitled to summary judgment on Best-Lock’s equitable estoppel claim, and that the availability of that defense would be resolved at a plenary bench trial. Lego has to be pleased with the overall result, which came after nearly eight years of hard-fought litigation. However, the fact that Lego did not achieve full victory at this stage should serve as a cautionary tale for other IP holders. The lesson is: if you think someone is infringing your IP rights and you don’t take any action to stop that infringement, you run the risk that any claims you later assert against the infringer may be barred by equitable estoppel. Put simply, make sure you police your IP carefully!

The U.S. Supreme Court’s blockbuster rulings in Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal represented a major shift in federal pleading standards. Resolution of motions to dismiss frequently turns on whether a complaint meets Twombly’s so-called “plausibility” standard. In the context of a motion to dismiss a petition for cancellation of a trademark registration, however, not much appears to have changed since Twombly and Iqbal, at least in the context of a claim of abandonment. Late last year, in Lewis Silkin LLP v. Firebrand LLC, the Trademark Trial and Appeal Board denied a motion to dismiss, holding that an allegation that a trademark owner is not using a mark with its goods and services, and has no intent to resume use, is legally sufficient to plead an abandonment claim. Notably, the Board reiterated its position that the “the same pleading standard for abandonment claims has been in effect since the 1989 implementation of the [Trademark Law Revision Act of 1988].” Is the Board simply ignoring Twombly? And can it really do that? The answer to the latter is certainly no – indeed, the Board noted that it follows the “federal standard of notice pleading,” including the plausibility standard articulated in Twombly and Iqbal. Whether the Board is properly applying Twombly is a closer question, one that probably will not be definitively answered until the Court of Appeals for the Federal Circuit weighs in on the pleading standard for cancellation claims. In the Lewis Silkin proceeding, Respondent Firebrand moved to dismiss a petition for cancellation of its registration for the mark FIREBRAND for a “newsletter dealing with brand and product development” and “business consultation services.” The cancellation petition pleads merely that “[o]n information and belief, Respondent is not using Respondent’s Mark on or in connection with Respondent’s Goods and Services with no intent to resume such use.” Under the Lanham Act, a mark is deemed to be “abandoned” when its use has been discontinued with intent not to resume such use. Applying that statutory definition, the Board held that “an abandonment claim must plead nonuse, which is use that has been discontinued, plus ‘intent not to resume such use.’” Firebrand argued that Lewis Silkin’s mere recitation of the statutory elements is insufficient to meet the Iqbal/Twombly standard for pleadings. That standard requires that a complaint “state a claim to relief that is plausible on its face,” and cautions that “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” While Firebrand seems to have a point, the Board did not agree. Rather, it observed that the “much-quoted reference to ‘threadbare’ recitals does not establish a per se pleading standard” and, quoting Iqbal, stated that “[d]etermining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” In other words, “while the Iqbal/Twombly standard applies to all civil complaints, the Supreme Court makes clear that there is flexibility in application of the standard.” The Board then noted that, while the Federal Circuit has not applied the Iqbal/Twombly standard to abandonment claims, its application of that standard to pleadings of patent infringement is “instructive,” as the Federal Circuit has repeatedly denied motions to dismiss that seek overly-detailed pleading. The Board also referenced three previous cases in which it had occasion to apply the Iqbal/Twombly standard to abandonment claims. In each of those cases, the Board held that the Iqbal/Twombly standard did not require more than the traditional pleading of nonuse plus intent not to resume. Finally, the Board distinguished its pre-Iqbal decision in Otto Int’l Inc. v. Otto Kern Gmbh because in that case, the petition to cancel, among other things, failed to allege that the respondent had discontinued use of its mark with an intent not to resume use. By contrast, in Lewis Silkin, the Petitioner’s “abandonment claim is not merely a formulaic recitation of the elements of the claim, because . . . the allegations of nonuse plus intent serve both to describe the claim and to describe the necessary facts to support the claim.” The Board did provide some clues as to the policy rationale for its arguably questionable application of the Iqbal/Twombly standard to cancellation claims. Specifically, the Board stated that it saw no purpose in requiring detailed pleading requirements for an abandonment claim, particularly in light of the fact that there is no list of activities that always show trademark use, and actual intent not to resume use “also must relate to the use in commerce of the mark.” The Board was also “reluctant to see pleadings devolve into wrangling over whether specific factual allegations offered to demonstrate nonuse and intent not to resume use are sufficient to support the abandonment claim,” as “matters addressing what activities constitute use in commerce under the Trademark Act are best, and traditionally, left to trial.” The Board further remarked that any concerns about an increase in unwarranted abandonment claims could be addressed by participation in discovery conferences, the imposition of sanctions, and the issuance of precedential orders. Although not explicitly touched on by the Board, a less stringent pleading standard for abandonment claims makes some sense in view of the fact that evidence of lack of intent to resume use will generally only be in the possession of the mark owner. As such, it would be unrealistic to expect a petitioner for cancellation to know and plead all the facts necessary to prevail on an abandonment claim. Perhaps this is what the Board was getting it when it noted that Iqbal requires “the reviewing court to draw on its judicial experience and common sense” in applying the Iqbal/Twombly standard. Whether the Board is ultimately right – and whether its standard for cancellation claims passes muster under Iqbal and Twombly – will have to await a decision by the Federal Circuit or, better yet, the Supreme Court. Until that happens, however, cancellation petitioners need only plead that a trademark owner is not using a mark with its goods and services, and has no intent to resume use to survive a motion to dismiss.

Back in February, we covered the trademark dispute between the U.S. Army and the Las Vegas Golden Knights professional ice hockey team.  As we predicted, the Army and the Golden Knights have now settled that matter by executing a co-existence agreement allowing both parties to continue using their respective marks. Although that dispute is now resolved, and hockey stars are in the midst of their well-deserved off-season breaks, professional hockey continues to make trademark news this summer.  On July 23, the National Hockey League filed a federal lawsuit, accusing a group of Illinois-based companies and their owner of trademark infringement, false association, dilution, copyright infringement, and unfair competition.  According to the NHL’s complaint, defendants The Hockey Cup LLC, ABC Stein LLC, and A&R Collectibles, Inc. are all owned and managed by one Roger Dewey, who is also named as a defendant in the lawsuit.  The NHL alleges that the “unauthorized use of NHL intellectual property is the very foundation of Defendants’ businesses,” and that Defendants have “made extensive, unauthorized use of NHL and Member Club trademarks and trade dress when marketing and selling products to the public.”  The NHL takes particular exception to Defendants marketing and selling a plastic beer stein (which the complaint labels the “Infringing Stein”) that is a replica of the NHL’s famous Stanley Cup trophy.  The complaint includes the following depictions of the Stanley Cup and the “Infringing Stein”: [one_half]The STANLEY CUP Trophy [/one_half] [one_half_last]The Infringing Stein [/one_half_last] A cause of further distress to the NHL is the fact that Defendants allegedly market the Infringing Stein to create a false impression that the NHL is associated with Defendants and their products.  For example, the complaint claims that Defendants have called the Infringing Stein “The Stanley Stein” and “The Hockey Cup,” have paired images of the Infringing Stein with other NHL trademarks, and use packaging that imitates what the NHL calls the “well-known travel case for the actual Stanley Cup trophy” (depicted in the complaint with the below illustrations). [one_half]The STANLEY CUP Trophy Case [/one_half] [one_half_last]The Infringing Stein Case [/one_half_last] To make matters even worse (from the NHL’s perspective), the Infringing Stein is allegedly “poorly designed and made cheaply,” which the NHL contends causes additional damage to its goodwill and reputation.  Indeed, the complaint quotes Amazon.com reviews as stating that the Infringing Stein is “impossible to clean,” has “no beer flow,” and (gasp!) is “terribly difficult to fill and drink out of and results in flat bear [sic].”[1]  As hockey fans will know, drinking champagne from the Stanley Cup is a time-honored tradition for trophy winners (Alex Ovechkin was pictured in a Las Vegas club drinking champagne from Lord Stanley’s trophy after winning the Cup this spring).  We have yet to hear of a Stanley Cup winner complaining that the Cup is difficult to drink out of or that it “results in flat [champagne]”! As one might expect, the NHL’s lawsuit is not the opening volley in this battle.  Indeed, had Defendants simply gone about their business, quietly selling cheap plastic Stanley Cup replicas, it’s possible the NHL would have left them alone.  Instead, however, Defendants filed intent-to-use trademark applications in the PTO in 2017 for the following design marks to be used on mugs and beer cups: [one_half][/one_half] [one_half_last][/one_half_last] The NHL then filed an opposition to Defendants’ trademark applications, citing twelve NHL Stanley Cup-related trademark registrations and alleging Defendants’ marks would create a likelihood of confusion.  Defendants responded aggressively, to say the least – filing counterclaims in the PTO seeking cancellation of all twelve of the Stanley Cup registrations cited in the NHL’s opposition.  Apparently incensed by Defendants’ cheek, the NHL then commenced this lawsuit. Given their past conduct in the PTO, Defendants are not likely to fold easily.  Legally speaking, however, they may be on thin ice.  Notably, even though the NHL does not appear to currently sell beer mugs or steins in the shape of the Stanley Cup, it is not required to prove lost sales to prevail in this lawsuit.  Instead, the NHL need only show that there is a likelihood of confusion as to source, sponsorship, connection, or affiliation.  In other words, if a consumer goes online, sees the Infringing Stein, and is likely to think that the product or its manufacturer is affiliated with the NHL (not an unreasonable assumption), that is probably enough.  We will continue to follow the developments in this case but – as of now – the smart money seems to be on the NHL emerging victorious. [1] A review of Amazon.com reveals that the Infringing Stein is actually fairly popular – with a review score of 4.2 out of 5 – suggesting that the NHL may have cherry-picked some of the less enthusiastic reviews.

In a wake-up call to businesses that offer non-compliant consumer warranties, last week the Federal Trade Commission announced that its staff had sent warning letters to six major companies that market and sell automobiles, cellular devices and video gaming systems. According to the FTC, the letters express concerns that the companies’ warranties may be prohibited by the Magnuson-Moss Warranty Act (which governs consumer product warranties) and the FTC Act because they “tie warranty coverage to the use of particular products or services.” The Magnuson-Moss Warranty Act provides in part that: No warrantor of a consumer product may condition his written or implied warranty of such product on the consumer’s using, in connection with such product, any article or service (other than article or service provided without charge under the terms of the warranty) which is identified by brand, trade, or corporate name. 15 U.S.C. § 2302(c). In addition to the exception for articles or services “provided without charge,” a company may apply for a waiver from the FTC if: (1) “the warranted product will function properly only if the article or service so identified is used in connection with the warranted product, and (2) the Commission finds that such a waiver is in the public interest.” 15 U.S.C. § 2302(c). The FTC staff determined that the following examples from the six companies’ warranties were problematic in light of 15 U.S.C. § 2302(c): The use of [the company’s parts] is required to keep your . . . manufacturer’s warranties and any extended warranties intact. This warranty shall not apply if this product . . . is used with products not sold or licensed by [company name]. This warranty does not apply if this product . . . had had the warranty seal on the [product] altered, defaced, or removed. The FTC Staff directed the six companies to review their warranty provisions and revise them if necessary, and informed the companies that the FTC Staff would be reviewing their written warranties and promotional materials after 30 days. Businesses that offer warranties covering consumer products would be well-advised to take a fresh look at their warranties. If those warranties are tied to use of a particular product or service, they may run afoul of the Magnuson-Moss Warranty Act unless the product or service is offered for free or the company has obtained a waiver from the FTC.

The Vegas Golden Knights, an expansion team based in Las Vegas that joined the National Hockey League (NHL) earlier this year, have had a surprisingly successful “rookie year,” both on the ice and at the box office.  This month, however, the Golden Knights encountered opposition to their efforts to register the mark “Las Vegas Golden Knights” from an unusual source – the U.S. Army.  On January 10, 2018, the Army fired its opening (slap) shot – a Notice of Opposition to the Golden Knights’ trademark application based upon likelihood of confusion with the U.S. Army Parachute Team Golden Knights’ common law mark.  The key issue for the U.S. Patent and Trademark Office to consider (and one our readers may wish to ponder themselves) is whether anyone is likely to confuse an Army parachute team and a professional hockey team. The U.S. Army’s Golden Knights’ Mark According to its Notice of Opposition, the U.S. Army has been using its Golden Knights’ mark in connection with its U.S. Army Parachute Team (nicknamed the Golden Knights) since 1969.  The U.S. Army claims that it owns common law rights in both the Golden Knights’ mark and in the black+gold/yellow+white color trade dress, which is used by the Army’s West Point Military Academy hockey team (you are likely not alone if you were unaware that West Point had a hockey team).  In support of its Notice of Opposition, the Army contends that the Las Vegas hockey team’s registration of the Golden Knights’ mark would likely cause consumer confusion and suggests a connection between the Army and the Vegas Golden Knights. The Vegas Golden Knights’ Trademark Application In June of 2016, the NHL awarded an expansion franchise for Las Vegas to a consortium led by Bill Foley, with the team due to hit the ice for the first time in the fall of 2017.  In an interesting twist to this story, Foley is a West Point graduate who has been public about his great admiration for the U.S. Army.  Indeed, the U.S. Army’s Notice of Opposition notes that: The Vegas Golden Knights’ General Manager commented on that team’s use of the Army’s colors, stating “Bill Foley is a West Point guy, sort of using those colors. You know his history at West Point.  You know about the classmates he had that he lost serving this country.  So, those colors mean a lot to us. . .” Foley was aware of the U.S. Army parachute team and even tried to get them to appear at a Vegas Golden Knights team event (the attempt was unsuccessful); Foley originally wanted to name his hockey team the “Black Knights” but dropped that idea due in part to opposition from the Army (the fact that Chicago’s NHL team is named the Blackhawks may have also been a concern); and The Vegas GM admitted: “We were going to be the Black Knights, but we already had the Blackhawks in the league, so the league, so the league was trying to get us to come up with another name, so another name used at West Point is the Golden Knights for the parachute team.” Despite (or, it appears, because of) the similarity to the Army’s parachute team nickname, Foley ultimately settled on the name “Golden Knights” for his team.  On August 23, 2017, Foley’s ownership group, Black Knight Sports and Entertainment, LLC (Foley seems to have really wanted to call something “Black Knight”) filed an application to register the mark Las Vegas Golden Knights, in standard characters, for “Entertainment services, namely, professional ice hockey exhibitions.”  Vegas did not claim any colors for use with the mark and disclaimed the words “Las Vegas” in the applied for mark. The Golden Knights’ Defenses Given the admissions of its owner and General Manager, one would think that the Vegas Golden Knights’ trademark application is on thin ice.  However, the fact that its name was admittedly modeled after the U.S. Army’s parachute team’s nickname does not necessarily spell defeat for Vegas.  Indeed, the Golden Knights offered a preview of some of their main arguments in a witty but strongly-worded public relations statement issued in response to the Notice of Opposition, stating: We strongly dispute the Army’s allegations that confusion is likely between the Army Golden Knights parachute team and the Vegas Golden Knights major-league hockey team.  Indeed, the two entities have been co-existing without any issues for over a year (along with several other Golden Knights trademark owners) and we are not aware of a single complaint from anyone attending our games that they were expecting to see a parachute team and not a professional hockey team.  (italics added) In other words, no one is likely to confuse the Vegas Golden Knights with the Army’s parachute team and, in fact, there has been no actual evidence of any such confusion to date (because no one goes to a hockey game to see parachuters).  Vegas’ point about other “Golden Knights trademark owners” is also an interesting one.  A search of the USPTO website reveals multiple registrations for that mark, including one by the College of Saint Rose in Albany, New York, whose athletic teams are called the “Golden Knights.”  Another New York state university, Clarkson University, also uses the name “Golden Knights” for its sports teams.  One wonders why the Army apparently is fine with those universities using the mark but not the Vegas hockey team – is the prospect of achieving an advantageous settlement with the Vegas Golden Knights part of the Army’s strategy?    Settlement in the Offing? Indeed, settlement does seem like a distinct possibility.  On January 25, 2018, Black Knight Sports and Entertainment LLC filed a consent motion for suspension of the Opposition proceeding, stating that the “parties are actively engaged in negotiations for the settlement of this matter.” Such a conclusion makes sense and would likely benefit both parties.  To succeed on its Opposition, the Army faces the difficult challenge of showing a likelihood of confusion.  Even apart from the legal issues, however, it’s not at all clear what the Army hopes to gain from fighting this to the bitter end.  The Vegas Golden Knights have been a great success so far and the Army can surely benefit from the tribute paid to it by the hockey team.  The U.S. military has built successful marketing relationships with numerous sports leagues – why not capitalize on the Vegas Golden Knights’ success and partner with the team?  Perhaps that was the intention all along – and the Notice of Opposition was just a tactic for negotiating a better deal.

On August 3, 2017, the shoe manufacturer Adidas scored important legal victories in its long-running trademark dispute with the shoemaker Skechers.  Adidas America, Inc. et al. v. Skechers USA, Inc. (D. Or. 2017) involved trademark infringement allegations by Adidas related to its iconic three-stripe logo, the trade dress of its “Stan Smith” shoe design and its Supernova word mark.  In a thorough 63-page opinion, Judge Marco A. Hernandez of the District of Oregon denied Skechers’ motion for summary judgment on Adidas’ trademark infringement claims and granted Adidas’ cross-motion for summary judgment on Skechers’ affirmative defenses of genericness, functionality and fair use. Adidas commenced the action in September 2015, alleging that: (1) Skechers’ Onix shoe infringed Adidas’ Stan Smith trade dress; (2) Skechers’ Cross Court shoe infringed Adidas’ well-known three-stripe mark; and (3) Skechers infringed Adidas’ Supernova word mark by selling a shoe also named Supernova.  In February 2016, Judge Hernandez granted Adidas’ motion for a preliminary injunction prohibiting Skechers from selling its Onix and Cross Court shoes and from using the word “Supernova.” Adidas’ Stan Smith Trade Dress and Skechers’ Onix Shoe The court noted that Adidas’ “Stan Smith shoe was commonly worn by tennis players in the 1970s and gained its namesake from Stan Smith, who wore the shoe when he won Wimbledon in 1972.”  The Stan Smith shoe has enjoyed considerable success, with total worldwide sales running to 40 million pairs and advertising expenditures in the tens of millions of dollars.  In 2014, Skechers began designing its Onix shoe which, as the pictures below illustrate, shares many of the same design features with the Stan Smith shoe. A Rule 30(b)(6) witness testified that the Skechers CEO gave orders to produce a knock-off of the Stan Smith shoe, and the company used code words to mask its activities such as “Stan Smi$h.” In support of its motion for summary judgment, Skechers argued that the Stan Smith trade dress:  (1) is generic on the grounds that it is indefinite, overbroad and so common to the industry that it does not identify a particular source; and (2) is not distinctive because Adidas cannot establish secondary meaning. The court rejected Skechers’ “divide and conquer” approach of dissecting individual elements of the Stan Smith trade dress, instead taking a “holistic” approach that led to a finding that Skechers had failed to meet its burden that the trade dress was either indefinite or in common use as a whole in the industry.  Applying the six-factor test for secondary meaning set forth in Adidas-Salomon AG v. Target Corp., 228 F. Supp. 2d 1192, 1207 (D. Or. 2002), the court further held that, notwithstanding the lack of consumer survey evidence proffered by Adidas, the Stan Smith shoe had acquired distinctiveness through secondary meaning, in part due to Adidas’ significant marketing efforts.  The court acknowledged 9th Circuit precedent holding that survey evidence can provide the most persuasive evidence of secondary meaning, but held that Adidas had otherwise “produced strong circumstantial evidence” that purchasers associated the Stan Smith trade dress with a single source.  Further, the evidence of Skechers’ “meticulous efforts to copy the Stan Smith shoe” weighed in favor of a finding of secondary meaning. Finally, the court granted Adidas’ motion for summary judgment on Skechers’ functionality defense, again rejecting Skechers’ “divide and conquer” approach. The court held  that Skechers failed to show the Stan Smith design as a whole (and not just individual parts) was functional.  Interestingly, Adidas also took the position that while the Stan Smith shoe design might have been considered a “performance” tennis shoe when it was first created in 1972, “times have changed over the course of forty-five years” such that the shoe design no longer yielded any utilitarian advantage.  In other words, even if the features were functional at inception, they no longer remained so and instead performed a source-identifying function. The Three-Stripe Mark and the Cross Court Shoe The court then turned to Skechers’ motion for summary judgment with respect to Adidas’ infringement allegations based on its three-stripe mark.  Adidas has used its famous (and actively enforced) three-stripe mark on shoes, storefronts, packaging, and advertisements since at least 1952.  In the court’s words, “[the three-stripe mark] is widely recognized and consumers strongly associate the [it] with adidas.”  Over the past twenty years, Adidas has sued Skechers multiple times for infringing the mark; each time, the parties reached a settlement in which Skechers agreed to stop selling the allegedly infringing footwear.  In 2015, Adidas learned that Skechers was producing a Cross Court shoe featuring an “E” shaped design that Adidas claimed is confusingly similar to the three-stripe mark (see comparison photos below). Skechers Relaxed Fit Cross Court TR Adidas Ultra Boost with the Three-Stripe Mark Denying Skechers’ motion for summary judgment on Adidas’ three-stripe mark infringement claims, the court concluded that at least some of the factors in the multi-part likelihood of confusion analysis favored Adidas, such as the strength of the three-stripe mark and the relatedness of the products.  Adidas did not present any survey evidence of actual confusion, and argued that none was necessary to prove a likelihood of confusion.  Skechers conducted its own survey, purportedly showing a low level of 6.1% post-sale confusion. Adidas attacked Skechers’ survey as flawed on several grounds.  On this record, the court determined that the actual confusion factor in the likelihood of confusion analysis favored Skechers, as Adidas did not present its own survey and its criticisms of the Skechers survey did “not relieve it of its own burden under this factor of producing evidence of actual confusion.”  Turning to the dilution claim, the court likewise concluded that since at least some of the relevant factors favored Adidas, summary judgment was not appropriate. The Supernova Mark Adidas has produced, sold, and promoted footwear bearing the Supernova mark since the late 1990’s. It alleged that Skechers infringed Adidas’ mark by selling a shoe also named Supernova.  Skechers asserted a descriptive fair use affirmative defense, contending that it used the Supernova mark to describe the shoe’s “cosmic” color scheme. It also argued that the word only appeared in small lettering on the shoebox UPC sticker labels and in website listings and that its prominent use of source-identifying trademarks minimized the risk that Supernova would be understood in a trademark sense. The court granted Adidas’ motion for summary judgment on the fair use affirmative defense, holding that Skechers had used the term Supernova as the shoe’s name and therefore as a trademark. Skechers also offered no evidence showing that consumers understood Supernova to describe the shoe rather than as the name of the shoe. The court then addressed certain remedy-related summary judgment motions, granting two of Adidas’ motions (one in part), reserving ruling on another, and denying Skechers’ motion. In sum, Adidas was a clear winner in this decision - just as it was at the preliminary injunction stage in 2016.  As any seasoned litigator will tell you, however, litigation is a marathon and not a sprint – this case is far from over.  We at The TMCA will continue to monitor this action and keep you updated.

The Kardashians, America’s favorite celebrity family, have been having a tough time of late, with Kim Kardashian being robbed at gunpoint in her Paris apartment, and her husband Kanye West attracting criticism for his support of Donald Trump.  A federal appeals court has recently added to the Kardashians’ woes. In a pun-laden opinion, the Eleventh Circuit Court of Appeals affirmed the district court’s ruling in Kroma Makeup EU, LLC v. Boldface Licensing + Branding, Inc. that the Kardashian sisters Kim, Kourtney, and Khloe (the “Kardashians”) could not rely on the doctrine of equitable estoppel to compel Plaintiff Kroma Makeup EU, LLC (“Kroma EU”) to arbitrate its claims.  The Eleventh Circuit noted that at “first blush, the issue appears to require application of Florida’s doctrine of equitable estoppel under which a party to an agreement who relies on it in a dispute with a non-party can be required by that non-party to comply with other terms of the agreement, including the arbitration clause.”  However, as the court put it, “there is a wrinkle in this case:  the arbitration clause which the non-party to the agreement is seeking to enforce is explicitly limited to disputes between the parties.”  Where the arbitration clause is so limited, the Eleventh Circuit held that the non-party (the Kardashians) could not “re-sculpt what appears on the face of a contract” to force a party to the agreement (Kroma EU) to arbitrate its claims against the Kardashians. Background Back in 2004, the make-up company By Lee Tillett, Inc. (“Tillett”) developed and registered the Kroma trademark for a cosmetics line.  In 2012, Tillet entered into an agreement giving Kroma EU the exclusive rights to sell and distribute Kroma products in the EU.  The agreement contained an arbitration clause, stating in relevant part that “the Parties agree that disputes arising between them . . .  should be considered [in] independent arbitration in the State of Florida, United States.” While the Kroma EU agreement was in effect, the Kardashians entered into a licensing agreement with Boldface Licensing + Branding, Inc. (“Boldface”) to create a Kardashian makeup line named “Khroma.”  Boldface filed a lawsuit against Tillet for a declaratory judgment of non-infringement, and Tillett asserted counterclaims against Boldface and the Kardashians for trademark infringement. After that suit settled, Tillett refused to share any of the settlement proceeds with Kroma EU.  As a result, Kroma EU brought claims for trademark infringement and tortious interference with contract against Boldface, claims for vicarious liability for trademark infringement against the Kardashians, and a claim for promissory estoppel against Tillett.  The district court granted Tillett’s motion to compel Kroma EU to arbitrate, but denied the Kardashians’ motion to compel Kroma EU to arbitrate its claims against them.  The Kardashians appealed to the Eleventh Circuit. Analysis The Eleventh Circuit first clarified that although federal law generally governs arbitration agreements, the “issue of whether a non-signatory to an agreement can use an arbitration clause in that agreement to force a signatory to arbitrate a dispute between them is controlled by state law,” and that the parties “agree that Florida law controls on that issue.” The Kardashians argued that even though they are non-signatories to the agreement between Kroma EU and Tillett, they could nonetheless compel Kroma EU to arbitrate its claims by relying on Florida’s doctrine of equitable estoppel.  Under that doctrine, a defendant who is a non-signatory to an agreement containing an arbitration clause can force arbitration of a signatory’s claims when “the signatory . . . must rely on the terms of the written agreement in asserting its claims against the non-signatory.” As the court explained, however, a “non-signatory cannot invoke the doctrine to compel arbitration of claims that are not within the scope of the arbitration clause.”  Relying on the Florida District Court of Appeal’s decision in Koechli v. BIP International, Inc., 870 So. 2d 940 (Fla. 1st DCA 2004), the Eleventh Circuit held that, to invoke equitable estoppel, the Kardashians would need to show not only that Kroma EU was relying on the agreement to assert its claims against them, but also that the scope of the arbitration clause covered the dispute. The court then turned to the arbitration clause at issue, which by its own terms was limited to disputes between the “Parties.”  Because the Kardashians were not “Parties” to the agreement within the scope of the arbitration clause, the court held that they were barred from relying on equitable estoppel to compel arbitration of the claims against them. In doing so, the court rejected the Kardashians’ argument that such a conclusion ignores the “equitable nature” of the doctrine of equitable estoppel, which (in the Kardashians’ view) should operate to permit a non-signatory who is not bound by an agreement to enforce it notwithstanding the fact that the claims are outside the scope of the arbitration clause.  Indeed, the court found that “[s]uch a holding would be, well, inequitable” because it would “effectively be rewriting the agreement between the signatories about which disputes they would arbitrate to require one of them to arbitrate disputes that they had not agreed to.”  As the court explained, “Kroma EU never consented to arbitrate any disputes between it and the Kardashians or any other non-signatory.  All it consented to arbitrate were disputes between it and the other party, which was Tillett.”  By contrast, if the arbitration clause was not limited to disputes between the parties, but covered “any disputes concerning the validity, interpretation, etc., of the contract . . ., the Kardashians may have been able to use equitable estoppel to require Kroma EU to arbitrate the dispute between it and them. Given the rash of pro-arbitration decisions from the federal courts in recent years, the Kroma EU decision might seem surprising.  It should not be, however, since the court did no more than affirm the basic contract law principle familiar to all first-year law school students:  contracts are generally limited by their terms, and may not be rewritten by courts (or parties to a litigation).  As the Eleventh Circuit artfully concluded:  “Like makeup, Florida’s doctrine of equitable estoppel can only cover so much . . . . The district court correctly denied the Kardashians’ motion to compel Kroma EU to arbitrate the dispute between them.”