Tuesday, January 26, 2016

Lexmark gives some non-TM owners standing to sue for infringement

Innovation Ventures, LLC v. NVE, Inc., 2016 WL 266396, No. 08-11867 (E.D. Mich. Jan. 21, 2016)
This long-lived dispute goes another round of various motions in limine.  Innovation sued NVE for trademark infringement; NVE counterclaimed for false advertising.  Here, the court applies Lexmark to resolve disputed questions around trademark ownership, and decides that the jury will hear all the evidence and render an advisory verdict about the equitable issues, because the false advertising counterclaim and unclean hands defense to trademark infringement are so intertwined.
NVE sought to present its unclean hands defense to the jury; Innovation sought to prevent NVE from presenting evidence about unclean hands to the jury and to bifurcate the trial.  The unclean hands evidence was: (1) Innovation’s allegedly improper registration of domain names using NVE’s 6 Hour POWER name, including www.sixhourpower.com and www.6hourpower.com; (2) Innovation’s alleged efforts to keep NVE’s products off the retail shelves; (3) Innovation’s alleged opposition to NVE’s application to register “6 Hour POWER” with the PTO; and (4) Innovation’s publication and distribution of a “Legal Notice” which NVE claims mislead retailers into removing NVE’s products from the shelves because it over-broadly identified the products against which Innovation had obtained an injunction. (Similarly named products from a different producer.)
Innovation wanted to try its trademark infringement claim to the jury first, without allowing the jury to hear any evidence about false advertising or unclean hands.  Innovation argued that the false advertising claim would be moot if Innovation won because NVE would have had no legal right to sell an infringing 6 Hour POWER product in the first place. And if Innovation lost, any  unclean hands evidence would be irrelevant, though a second trial could be held on false advertising.  NVE pointed out that this would let Innovation put its best case forward, and not allow NVE to provide a full defense. 
The court decided that all the legal and equitable issues would be presented to the same jury, and the jury would be instructed to return advisory verdicts on the factual questions related to the equitable claims, with the final decision on the equitable issues being reserved to the Court.  While Innovation argued that unclean hands evidence would be unduly prejudicial, many factual questions were common to the legal and equitable claims, requiring their presentation to the jury.  The unclean hands evidence largely overlapped with the false advertising counterclaim.  Moreover, the jury would be aided by a “full presentation of the real circumstances that surrounded how these parties acted in competition with one another.” Evidence of Innovation’s alleged efforts to get retailers to remove NVE’s products from store shelves “could indicate a concerted effort on behalf of Plaintiff to drive Defendant out of the market.”
Innovation’s concerns about prejudice were not dispositive because some of the evidence—that relevant to false advertising—“is rightfully before the jury and prejudice arising therefrom cannot be considered unfair prejudice.” Any additional risk of prejudice from the less serious unclean hands evidence could be avoided by carefully instructing the jury, and didn’t outweigh NVE’s right to a jury trial and the needs of judicial efficiency.
Innovation did win confirmation of its standing.  Previously, NVE argued that Innovation didn’t own the underlying trademark when it sued.  NVE argued that it learned during discovery that a separate company may have owned the 5 Hour ENERGY trademark when the case was filed, and the court agreed that it appeared that, at some point in time, this separate entity was in fact the owner, and Innovation had only a nonexclusive license.
However, Innovation sued under §43(a), and argued that it didn’t need to own a mark to pursue its claims as long as it showed it was likely to be harmed by infringement.  (It also argued that, by subsequent agreement with the third party, it became the owner nunc pro tunc of the trademark, but the court didn’t reach that argument.)  The court agreed that Innovation adequately alleged sufficient commercial interest in the mark to have standing under Lexmark.  (Sorry, Justice Scalia. Until you give us another simple name for it, it’s standing.)
Under § 43(a), “any person who believes that he or she is or is likely to be damaged” may bring a claim for infringement resulting from false association or false advertising, “without regard to any ownership interest the plaintiff may have in the trademark.”  This means that manufacturers, competitors, distributors, and others may have standing if they satisfy Lexmark, which the court characterized as setting the standard for “whether a non-owner plaintiff has standing to raise a claim under § 43(a).” 
Innovation fell within the zone of interests protected by the Lanham Act—its interests were those of a person engaged in commerce, with commercial interests in reputation or sales at stake, and not those of a mere deceived consumer.  NVE couldn’t defend by arguing that a third party had superior rights; such a jus tertii defense is disfavored in trademark law.  Moreover, Innovation alleged proximate cause: that the introduction of NVE’s allegedly infringing product resulted in lost sales and association with a competing product.

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