Tuesday, March 13, 2018

Redbox's claims miss release window for injunctive relief

Redbox Automated Retail, LLC v. Xpress Retail LLC, 2018 WL 1240345, No.17 C 5596 (N.D. Ill. Mar. 9, 2018)

The parties compete in the market for DVD rental services through automated vending machines called kiosks. “In early 2016, Redbox learned that DVDXpress was using kiosks that were, like Redbox’s, entirely red in color. Around the same time, Redbox also learned that DVDXpress was advertising—on its kiosks, its website, and elsewhere—that customers could rent movies through DVDXpress twenty-eight days before the same DVDs became available through Redbox.”

Nearly a year later, one Redbox official wrote in an email, “I think that’s false advertising[.] We are day and date for most,” then asked the CEO whether DVDXpress’s red kiosks infringed Redbox’s “trademarks or other IP.” The CEO replied: “No it does not. We have looked at [sic] many times. Nothing we can do except get these locations.” Four months later (15 months after learning of the comparative advertising) Redbox sent a C&D.  More than three months after that, Redbox sued. 

Given this recitation of the facts, you won’t be surprised to learn that a preliminary injunction was denied due to Redbox’s delay.  The court didn’t even consider whether eBay changed the Lanham Act presumption of irreparable injury (it does) because the delay would rebut any presumption.

Redbox argued that, at first, only lower-level employees knew of DVDXpress’s alleged infringement. “But that assertion is not backed by evidence in the record, and in any event Redbox does not explain why it would be relevant to determining when it, as a company, learned of the infringement.”  The email from the CEO stating that the company had already looked “many times” into the matter of DVDXpress’s red kiosks and concluded that there was no infringement was only icing; it showed that Redbox was “well aware of [its] rights and had concluded that they were not violated.”

Redbox argued that it didn’t delay in bringing the false advertising claim because it sought relief based only on DVDXpress’s advertising regarding DVDs released between December 2016 and July 2017. But the content of DVDXpress’s advertising—“Rent it here first 28 days before … Redbox”—hadn’t changed since early 2016.  Redbox argued that DVDXpress’s comparative advertising was only “partially false” in early 2016, and that Redbox brought suit when the advertising became false as to more DVDs through new agreements with Warner Bros., Fox, and Universal Pictures decreasing the delay between a DVD’s release and its availability at Redbox kiosks.  If there had been a 28-delay for all such films in early 2016, then waiting to sue would have been a good idea.  But of the 24 recent movies Redbox claimed to have available within 28 days, only 8 were distributed by these studios.  There was no evidence that DVDXpress’s advertising as to those studios’ DVDs was any less false in early 2016. And even as to those studios, Redbox was releasing some DVDs from them earlier—five out of the 8 it named were distributed before the new agreement. Thus, the comparative advertising couldn’t have converted to “substantially false” as a result of those agreements.  Indeed, the emails showed that people at Redbox believed the advertising was false in early 2017.

Nor would the court stop the clock when Redbox sent its C&D. “If the letter had led to negotiations with DVDXpress, then Redbox perhaps could not be faulted for waiting to see if the dispute could be resolved out of court. But DVDXpress never answered the letter, and Redbox proceeded to wait a further three months before filing suit.” That delay “severely undermines any sense of urgency that might otherwise have attached to Redbox’s request for preliminary injunctive relief.”

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