Friday, July 31, 2015

No silver bullet for innovator in bullion market

Provident Precious Metals, LLC v. Northwest Territorial Mint, LLC, 2015 WL 4522923, No. 3:13–CV–02942 (N.D. Tex. July 27, 2015)
Interesting TM/copyright case that straddles the boundaries of so-called aesthetic and “utilitarian” functionality: is the accuracy of a replica product a matter of utilitarian or aesthetic functionality?  Does it make any difference?
Provident sued NWTM seeking a declaratory judgment of invalidity and non-infringement of NWTM’s alleged copyrights, trademarks, and trade dress rights; NWTM made the counterclaims you’d expect. Provident and NWTM make precious metals in the shape of famous types of ammunition (“replica bullets”). [Slackjawed wonder/gender analysis of this market omitted]
NWTM first conceived of the idea of using silver bullion to copy famous ammunition into sizes that would easily convert to weights in even troy ounces in 2008.  NWTM therefore measured sample ammunition with a digital caliper and micrometer, viewed pictures of sample bullets on the Internet, and consulted published industry standards for ammunition dimensions. NWTM also bought hundreds of different ammunition rounds, focusing on popular shapes and sizes, and sought to recreate bullets at volumes that approximated even weights. NWTM altered the dimensions of the original .45 round it chose to match the desired bullion weight, but still sought to appeal to a “gun person, or anyone buying bullion.” NWTM ultimately resorted to CAD software to make the code used by its manufacturing machines.
According to the designer, once the bullet was “machined,” it would be weighed, and if it “weigh[ed] right they wouldn’t adjust it to meet [the particular dimension].”  The weight dictated the form.  NWTM stamped the base of each bullet with a “head stamp” containing certain information, including the product’s metal designation (silver, or “Ag”), source (NWTM), weight, and purity. “The format of the head stamp intentionally resembled the format of head stamps on actual ammunition, and was intended to convey that the replica bullet ‘has intrinsical [sic] value,’ similar to money.”  NWTM sells its replica bullets in boxes or bags designed to “evoke the feeling of military surplus ammunition,” and to “best present the product to a military customer, to evoke the military design.”  It advertised its replica bullets, which went on sale in January 2013, as “virtually identical to their ammunition counterparts,” claiming for example that one bullet “faithfully duplicates the famed .50 BM so well-known to military personnel and weapon enthusiasts,” that its silver 7.62 NATO (.308) is a “near exact, non-firing replica,” and so on.

Provident claimed to have come up with the replica bullet idea independently of NWTM, but whatever.  It too used CAD and minor adjustments to achieve the desired weight.  Provident instructed its manufacturer to make the head stamp look as similar to live ammunition as possible, and to include the weight, purity, composition, and “PM,” Provident’s “mint mark.” Both parties used Tahoma font, with Provident contending that this was the font that looked closest to real ammunition.  Provident designed its packaging to “look like an ammo box,” and began selling copper replicas in 2013, with silver arriving in November.

NWTM filed three related trademark applications. In January 2013, it filed an ITU application for “SILVER BULLET BULLION,” for use in association with “[p]recious metals, namely, gold and silver bullion,” “BULLION” disclaimed.  This was published for opposition in June 2013, and Provident duly opposed; PTO proceedings have been suspended pending the outcome of this suit.  (B&B and ITUs really don’t fit together, do they?)
In August 2013, NWTM filed another ITU application for “BULLET BULLION,” for use in association with “[p]recious metals, namely gold and silver bullion.”  The PTO issued an office action refusing to register the mark as merely descriptive; the application has been suspended pending final disposition of a prior application filed by a third party, but the examiner rejected NWTM’s argument that the term wasn’t descriptive.
In March 2014, NWTM filed another “COPPER BULLET BULLION,” which Provident opposed after it was published for opposition.
In June 2014, NWTM filed five copyright applications for its five types of silver replica bullets, listing them as “sculptures.”  The Copyright Office denied registration because the new material did “not contain a sufficient amount of original authorship.”  
The court turned first to trademark.  Under governing precedent, “the concept of descriptiveness must be construed rather broadly.”  If imagination is required to connect the term to the product, it’s suggestive; if the term conveys information about the product, it’s descriptive.  Alternatively, courts ask “whether others in the same business would generally need the word to adequately describe their product or service.”
All three claimed word marks, SILVER BULLET BULLION (SBB), COPPER BULLET BULLION (CBB), and BULLET BULLION (BB), weredescriptive, because they immediately conveyed the “characteristics, qualities, and ingredients of NWTM’s replica bullets without requiring the consumer to make any mental leap.”  Bullion is a generic term for precious metals in mass/in bars or ingots.  Though copper isn’t conventionally understood as bullion, the price increases of the last few years, it was reasonable to define “bullion” broadly enough to include copper; Merriam-Webster defined “bullion” as “metal in the mass.”
NWTM argued that the terms were meaningless prior to the existence of its replica bullets, and consumers might have thought of images of bars or coins with bullet-related art on them.  Plus, the SBB and CBB marks had been published for opposition.  But publication for opposition entitles NWTM to no presumption (only actual registration does).  Second, the descriptiveness test isn’t applied in the abstract: it’s applied to these products, which are replica bullets.  The metal words describe the material of the replica, and “bullet” describes the shape.  In the alternative, competitors would “almost certainly” need to use the words in the marks to describe their products.  (I understand why the court didn’t go this far, but silver, copper, and bullet at least are generic.)  “There are simply a limited variety of descriptors that can be used to describe products of this sort, and granting NWTM the trademarks it seeks would effectively preclude potential competitors from marketing goods with the terms ‘bullet’ or ‘bullion.’ NWTM has simply not addressed how its competitors could describe their products without using the terms employed in NWTM’s SBB, CBB, and BB marks.”
NWTM couldn’t show secondary meaning. “The burden to establish secondary meaning is substantial and requires a high degree of proof.”  NWTM didn’t produce any evidence of secondary meaning, and, “in a borderline case where it is not at all obvious that a designation has been used as a mark, survey evidence may be necessary to prove trademark perception.”  NWTM argued that it lacked survey evidence “because NWTM’s customers tend to buy bullion as a hedge against what they see as the U.S. government’s failing monetary policy, and those same customers would be skeptical of a phone call inquiring about the manufacturer of the bullion products they own.”  Nonetheless, the burden of proof was still on NWTM.
NWTM also sought to protect its alleged trade dress, described as a bullion piece of silver or copper that:
(1) has a head stamp with a central circular groove (which suggests the primer cap for a real bullet), surrounded by the following information in a circular pattern towards the outer edge of the base of the bullion piece:
(a) metal designation such as “Ag” or “Cu”;
(b) indication of purity;
(c) a weight; and
(d) abbreviation for the company name;
(2) is sold in packaging that evokes a military or gun enthusiast feel by including:
(a) a caliber designation that is suggested by the general shape of the bullion piece (i.e., .45 ACP, 7.62 NATO (or .308), .50 BMG, or 20 MM, or 12 gauge for shotgun shell);
(b) a designation of “grains” associated with gun powder of the bullet, giving an indication of the power of the associated real bullet type; and
(c) is sold in boxes in rows that evoke the feeling of a real box of ammunition, or in a plastic bag container with the same information in (a) and (b); and
(3) while not being an exact copy or “replica” of a real bullet, has the shape of the bullion piece that evokes the feeling of such a bullet. [NB: if you have to describe your trade dress as evoking a feeling, you are probably in trouble.]
The head stamp was functional.  It identified the weight, composition, purity, and source of the bullion used to make the replica bullet, as is apparently standard practice for bullion products. NWTM argued that the information could be located anywhere on the bullion piece, and that the combination of elements—head stamp, shape, and packaging—had a consistent look that was inherently distinctive.  Nope. 
[T]he features that comprise the head stamp, and the head stamp considered as a whole, were designed to emulate the head stamp on actual ammunition, and therefore, are “essential to the use or purpose” and “affect the cost or quality” of the head stamp. NWTM sought to establish a link with military service members, veterans, and gun enthusiasts. Thus, the head stamp is functional because it emulates actual ammunition, which would give NWTM a non-reputation-related advantage over its competitors, particularly in appealing to military service members and gun enthusiasts, who would very likely perceive head stamps that did not resemble actual ammunition as being of lesser quality.
The head stamp was also not inherently distinctive.  (Although the court didn’t mention this, it can’t possibly be under Wal-Mart: it’s product design, not product packaging.)  Each of its features emulated the head stamp on actual ammunition—it used a standard font, and the circular groove on the base simulated the primer of actual ammunition. If it created a distinctive, consistent look, “that look is that of actual ammunition.” Putting the information elsewhere on the bullet “would undermine the theme and purpose of NWTM’s replica bullets—emulating actual ammunition.”  None of the elements were suggestive, arbitrary, or fanciful, either individually or taken together.

Packaging: NWTM’s packaging referenced the caliber of ammunition and the grain count, which made the packaging resemble, and “evoke[d] the feel of,” real ammunition boxes. This too was functional, because it served to remind consumers of an actual ammunition box, “and allowing it to do so with trade dress protection would put NWTM’s competitors at a significant non-reputation-related disadvantage.”  Even if the packaging were distinctive and nonfunctional, there would be no confusion, as a matter of law. Provident prominently featured its name on the outside of its boxes, and the text on its packaging was inscribed directly on the top of the boxes. NWTM’s boxes had text inscribed on a label on the outside cover that included many of the descriptive features included on the head stamp, with NWTM inconspicuously included on the bottom left corner of the label. There was no “meaningful” evidence supporting a likelihood of confusion other than the general similarity of shape.
Bullet shape: this was unprotectable as lacking distinctiveness.  Any differences between NWTM’s products and actual ammunition were imperceptible to actual consumers, and were also functional. Changes in dimension and weight were designed to make products that weighed in even troy ounces, in part in order to give them intrinsic value as a financial investment—“the weight dictated the form,” according to NWTM’s designer. 
NWTM argued that the combination of these functional, nondistinctive features were distinctive in their “total impression.”  The court wasn’t persuaded.  “[T]he overall impression of the elements, each of which has only trivial differences with the features of actual ammunition, serves to identify NWTM’s product as a bullet.”
Even if the trade dress were nonfunctional, NWTM failed to show secondary meaning. NWTM argued that it heavily promoted the new product; that it sold over 191,000 pieces of SBB and CBB through June 2014; that it had 100% of the market share for silver bullet bullion from January to October 2013; that Provident copied NWTM; that, according to NWTM’s CEO, at least four customers contacted him to ask whether Provident’s products were in fact manufactured by NWTM, and a customer expressed confusion on Provident’s Facebook page; and a video on the “Salivate Metal” YouTube channel featured a reviewer pondering whether the real manufacturer of Provident’s product was actually NWTM.
Even if all of this unambiguously weighed in NWTM’s favor, there was still no empirical evidence of secondary meaning.  There was no admissible consumer testimony or survey evidence; its customers’ posited unwillingness to be surveyed again didn’t relieve it from its burden, “particularly given that its customers constitute a unique demographic.”  (That’s one way to put it.)  The time of use weighed against NWTM—other cases have found 3½ years of exclusivity to be “relatively brief,” while NWTM had 10 months.  While the substantial amount of NWTM’s sales would weigh in its favor, that wasn’t enough.  NWTM claimed that its marketing was successful but provided no evidence on the amount it spent marketing the trade dress.
Turning to copyright:  “A mere reproduction of a work in a different medium does not constitute a sufficient variation to meet the originality threshold for copyright protection.” See L. Batlin & Son, Inc. v. Snyder, 536 F.2d 486, 491 (2d Cir.1976).  NWTM argued that its replica bullets were original because they didn’t correspond to actual ammunition, sometimes varying in dimension by a quarter of an inch or more. NWTM argued that it was an innovator and that there was significant creative effort that went into making the product, including testing, trial and error, and the creation of numerous prototypes between 2008 and 2012.
No again.  Any differences between the replica bullets and actual ammunition were trivial or functional: (1) the composition, i.e., silver or copper (functional); (2) the dimensions (imperceptible and functional in order to make a bullet in even troy ounces); (3) the shape (functional); and (4) the weight (functional).  Even were that not so, merger would still apply: the expression of a bullet in bullion couldn’t be separated from the idea. “[T]he only way NWTM can express a .45 ACP design is to replicate it, and if NWTM were to make significant variations in its replica, the product would no longer be identifiable as a .45 ACP design.”
NWTM argued that Provident engaged in false advertising/unfair competition by claiming to have its own mint, allowing it to minimize manufacturing costs and pass on savings to consumers. But NWTM failed to timely identify false advertising as the foundation for its unfair competition claim, which it earlier said was based on trademark infringement.  Also, without copyright and trademark claims, there were no actionable unjust enrichment claims.

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