Wednesday, February 14, 2007

Seagull becomes albatross for multilevel marketer

Thanks to Greg Lastowka for pointing me to this case:

Bach v. Forever Living Products U.S., Inc., 2007 U.S. Dist. LEXIS 8424 (W.D. Wash. 2007)

Plaintiff Richard Bach wrote a book, Jonathan Livingston Seagull, which was published in 1970 with photographs by plaintiff Russell Munson. Defendants (FLP) make and distribute health and beauty products through multi-level marketing, and also provide management services for U.S. resorts. Plaintiffs allege that defendants used a copyrighted photo from JLS as their corporate logo, and have used excerpts from JLS in their advertising, promotional, and training materials directed at independent distributors and end-users. They allege this is copyright infringement as well as trademark infringement and false endorsement.

Defendants used the name and title of JLS, as well as the image of a white seagull on a blue background, extensively. For example, “in a 2003 promotional video, FLP's marketing director stated that FLP's brand is ‘the Jonathan brand,’ and that ‘Jonathan is really the basis of what Forever is about.’” FLP has called its seagull logo “Jonathan” or “Jonathan Livingston Seagull” since the company was founded in 1978. For over twenty years, it has given “Jonathan” bonuses to successful distributors, called its distributors “Jonathans,” given “Jonathan Livingston Seagull” statues to top sellers, and held “Jonathan Days” to motivate distributors. In a 2005 Style Guide, FLP specified how a white seagull on a blue background – an image “strikingly similar” to the cover of the U.S. edition of JLS – was to be used in signs, flags and banners.

In a sensible interpretation of Dastar (that is nonetheless, like many sensible things courts do, somewhat underexplained), the court ruled that both the copyright and trademark claims could proceed, because the two areas of law protect against different wrongs. The key is that there are two different wrongs in this case, though there may not always be. That is, plaintiffs’ copyright claims target defendants’ copying of the cover photo and excerpts from JLS, whereas the trademark claims target defendants’ use of the character/title/trade dress of the book in ways that served to brand defendants’ products. Though the court doesn’t use the term, the key here is defendants’ alleged use of Jonathan Livingston Seagull “as a mark” rather than their simple copying, which would be nonactionable under the Lanham Act after Dastar.

Significant issues of ownership of the alleged marks do remain; because they’re all unregistered, Bach has the burden of proof to establish his rights. Among other things, there’s a question whether Bach forfeited any trademark rights in “Jonathan Livinston Seagull” through naked licensing of the movie rights. The court found that a contract giving Bach approval rights for certain aspects of the film, like the score, the title, and the final cut, and evidence that he may have exercised informal control over movie merchandising, created a factual question for later resolution. Bach’s reservations of “droit moral,” however, did not factor into the court’s decisions, because he had no such moral rights in the US and thus that contract provision didn’t give him any relevant control.

A separate issue was whether plaintiffs owned trade dress rights in the book cover design, a white seagull in silhouette against a blue background. Not all editions of the book bear this design, creating further factual issues (framed here as ones of abandonment); because S&S exercised control in the US, and because S&S asserted that it would pursue trademark infringement claims against another book that looked like JLS, the court refused to rule in defendants’ favor at this stage. More interestingly, defendants argued that the owner of the rights, if any, was the publisher, Simon & Schuster. In April 2006, S&S conveyed any interest it owned in the book trade dress to plaintiffs, as did the heirs of the book cover designer in May 2006. Defendants argued – with reason, it seems to me – that the assignments were unhelpful because trademark rights can’t be transferred apart from the business with which the mark has been associated. But in this context, the court reasoned, the goodwill associated with the book was already more the author’s and the photographer’s than the publisher’s. Thus, the assignments were consistent with the trademark policy that goodwill should serve to maintain continuity between a source and a product or service.

Indeed, the court ruled, plaintiffs have standing to sue for infringement “regardless of whether they own or owned the trade dress rights” because, under the relevant portion of the Lanham Act, they have standing if they’re likely to be damaged by the defendants’ conduct. They have a commercial interest in the mark, based on the damages and profits to which they’d be entitled if they win. “Because Plaintiffs have a right to royalties from others’ use of the Jonathan Livingston Seagull mark and trade dress, Plaintiffs have standing to sue under section 43(a) of the Lanham Act regardless of whether they technically own the trade dress at issue.” (Put that way, it seems just a bit circular. I’m not sure the court is wrong in outcome, but the question whether plaintiffs used the mark in commerce in a way sufficient to create federal rights is at least tricky. I’m willing to entertain the idea that they are the beneficiaries of S&S’s use, but it can’t be the case that ownership is irrelevant.)

A final factual issue was whether plaintiffs could show secondary meaning sufficient to establish the existence of trade dress. The court denied summary judgment based on plaintiffs’ evidence that JLS is one of the most widely read novels of all time and received significant publicity. (Compare to the PTO rule that no single title is registrable, because it remains descriptive of the specific underlying work; only series titles can be deemed to have trademark meaning.) Plaintiffs also pointed to defendants’ intentional copying, which is often deemed evidence of secondary meaning.

Defendants’ evidence against secondary meaning – the idea that the trade dress identifies a source rather than a product -- was, nonetheless, pretty good. They offered a survey showing 0% unaided recall of plaintiffs or of JLS among participants when presented with a seagull on a blue background. After they were informed that the image was from a book cover (which they wouldn’t necessarily think when seeing defendants’ non-book products), only 5% mentioned JLS. Moreover, in deposition, S&S stated that it didn’t use the book cover to identify S&S, but instead as “a marketing tool” for the product – the book.

Still, there were genuine issues of material fact on secondary meaning.

On likelihood of confusion, plaintiffs submitted depositions from several distributors who believed that defendants had the permission “of the people who owned the rights to the book” for the use of the name and the character. A survey found that 35% of current, former and potential multi-level marketing distributors believed that defendants had permission from the “owners of the rights," for net confusion of 31%. The court accepted the “permission” form of the survey questions, and found that the rest of the defendants’ criticisms went to weight rather than admissibility.

Defendants offered three surveys of defendants’ distributors and general consumers, including the survey that found 0% unaided awareness of JLS (moving up to 44% with “highly aided” awareness), but that just created a factual dispute. Defendants argued that “permission” is not the same as endorsement or approval, but the court held that a factfinder could draw an inference from consumers’ perception of permission to consumers’ perception of endorsement or approval.

Given the intentional copying here, defendants had an upwards climb. But not an insurmountable one at trial, I think, given the unclear evidence of secondary meaning. And there may be unresolved statute of limitations/laches issues as well.

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