Monday, March 02, 2015

Court misapplies FTDA, not TDRA, to political speech

Hershey Co. v. Friends of Steve Hershey, 2015 WL 795841, No. WDQ–14–1825. (D. Md. Feb. 24, 2015)
Disappointing ruling on political speech and infringement now supplemented by flat-out wrong ruling on dilution.  Hershey sued the Friends of Steve Hershey for political signs that looked too much like the Hershey trade dress, alleging infringement, dilution, and breach of a previous agreement to stop using the Hershey trade dress. Having previously granted Hershey’s motion for a preliminary injunction on infringement grounds, the court didn’t revisit that in its ruling on Friends of Steve Hershey’s motion to dismiss.
Defendants argued that Hershey failed to plead standing for false designation of origin because it failed to plead lost sales, per Lexmark. Hershey alleged that the “Defendant’s willful and deliberate acts ... have caused injury and damages to [the] Plaintiffs, [and] have caused irreparable injury to [the] Plaintiffs’ goodwill and reputation ....”  Lexmark, the court here reasoned, was a false advertising case, serving only the Lanham Act purpose of  “‘protect[ing] persons engaged in [commerce within the control of Congress] against unfair competition.’” Thus, to fall within the Act’s zone of interests, a false advertising plaintiff must allege an injury to a commercial interest in reputation or sales.”
False association is different because false association suits also serve the Act’s purpose “to regulate commerce within the control of Congress by making actionable the deceptive and misleading use of marks in such commerce” and “to prevent fraud and deception in such commerce by the use of reproductions, copies, counterfeits, or colorable imitations of registered marks.” Because Hershey was within the Act’s “zone of interest,” it didn’t have to plead withheld sales, though it was required to plead proximate cause: “economic or reputational injury flowing directly from” the defendants’ actions.  The fact that Hershey pled damage to its goodwill and reputation was sufficient to survive a motion to dismiss.  (Some courts might have called this a bare recitation of the legal elements; compare recent treatment of harm for irreparable harm purposes.)
Dilution is where it got ugly.  As you know, Bob, § 1125(c) (3)(C) of the Act provides that “[a]ny noncommercial use of a mark” “shall not be actionable as dilution by blurring or dilution by tarnishment under this subsection.” American Family Life Insurance v. Hagan, another political speech case, said that
[a]s courts have noted, the “noncommercial use” exemption codified at § 1125(c)(4)(B) “presents a bit of a conundrum because it seems at odds with the earlier requirement [recited at § 1125(c)(1) ] that the junior use be a ‘commercial use in commerce.’ If a use has to be commercial in order to be dilutive, how then can it also be noncommercial so as to satisfy the exception of section 1125(c)(4)(B)?” Mattel, 296 F.3d at 904. The answer to this question is that, when Congress passed the Federal Trademark Dilution Act (“FTDA”), it used the phrase “noncommercial use” as a somewhat inexact, shorthand reference to “speech protected by the First Amendment.”
Thus, the noncommercial use exemption could only apply if the defendants’ actions qualified as speech protected by the First Amendment.  But the preliminary injunction ruling found that the campaign signs were infringing, and thus not protected speech.  Motion to dismiss denied.
Comment: That’s just wrong, not least because the language discussed in Hagan is not the present statutory language, which got rid of the admittedly awkward “commercial use in commerce” predicate, replaced by “use … in commerce,” which is broader than “commercial speech,” followed by a specific “noncommercial use” exception.  The present statutory language used by the TDRA more clearly gives effect to Judge Kozinski’s sensible interpretation of the FTDA in Mattel: the meaning of the exception is “speech that is noncommercial under the First Amendment definition of noncommercial”—which was what the Hagan court ultimately said. (The court here neglected to note that Hagan ended up rejecting the standard used here—the Hagan court was summarizing plaintiff’s argument, which the court here quotes as if it were the Hagan court’s conclusion. Rather, the Hagan court then disagreed, for largely the reasons I’m about to give.)
Although Steve Hershey’s speech may not be “protected” by the First Amendment for purposes of other causes of action, it is most certainly “First Amendment noncommercial” in that it is political speech, not speech proposing an economic transaction.  (Arguably being a politician is in Steve Hershey’s economic interest given what politicians are allowed to accept from donors these days, but I still can’t imagine that fact making political speech into commercial speech.) The court’s understanding of “noncommercial use” makes the exception either completely redundant—if speech is protected by the First Amendment in that sense, no act of Congress can make it otherwise—or illogically dependent on the outcome of separate causes of action: suppose that Steve Hershey’s speech was defamatory and thus unprotected by the First Amendment for purposes of a defamation cause of action.  Could it therefore also be dilutive?  Trademark infringement is not dilution, so the fact that it’s not “protected” for infringement purposes should have no more effect on the dilution exception than defamation would.
Sigh. Anyhow, Maryland trademark infringement/unfair competition claims survived because the federal claims did. So did the breach of contract claim.

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