Monday, October 29, 2018

We Buy Houses registration defeats fee award despite its genericity

Express Homebuyers USA, LLC v. WBH Marketing, Inc., No. 17-cv-00736, 2018 WL 5303327 (E.D. Va. Oct. 25, 2018)

Disappointingly, the court here treats assertion of registered trademarks as what seems like a complete defense to arguments that defendant should receive a fee award because of the exceptionality of the case.  This discounts any recognition that trademark examination is far from complete compared to the factual development at trial, and also any inquiry into what the registrations were for.  Here, Express initially sought cancellation of the “We Buy Houses” and “” marks, the former of which was registered for things like “printed instruction, educational, and teaching materials for real estate,” and the latter for “real estate and investment services, namely providing on-line information in the field of real estate procurement for others.”  Of course, both were used to attempt to control the advertising of services provided by—you guessed it—firms that buy houses.  I once wrote that “Applicants and the PTO spend much time and effort crafting the equivalent of an exquisitely detailed origami crane; rather than considering the details, courts then ask the equivalent of ‘is this paper folded?’ and move on.”  This case illustrates one of the consequences of that mismatch.

Despite the fairly clear genericity of the “marks” at issue, the court was decisive that “by no stretch of the imagination is this case ‘exceptional’; it is not a rare, extraordinary or otherwise unique trademark case. To the contrary, this case is a garden variety trademark case challenging two registered trademarks that use a phrase that is used in common parlance to signify a service.”  Except that most registrations aren’t of “a phrase that is used in common parlance to signify a service”!  Still, defendant WBH’s position that the marks weren’t generic could not be objectively unreasonable because “the fact that the PTO had registered the Marks gave defendant an objectively reasonable legal and factual basis to argue that the Marks were not generic.”  Note again the failure to continue the sentence: generic for what? 

Then the court says the registrations “weigh[] strongly against” a finding of exceptionality, though it seems to mean “decisively against” in the absence of abusive litigation practices.  The registrations created a presumption of validity, which made it “not objectively unreasonable for defendant to take the position that the Marks were valid. To find otherwise would undermine the policy of encouraging trademark owners to defend and enforce their presumptively valid trademarks.”  Again, the court doesn’t take into account the limited information available to the PTO and the special knowledge trademark claimants have about their own business, increasing the incentive to abuse the process—and note that the reasoning means that no case in which a party successfully claims for cancellation of a registration can be “exceptional” even though Octane Fitness (which the court applies) indicates that objective unreasonability of a defense can be considered in exceptionality. 

(Patent examination is much more rigorous than trademark examination, yet Octane Fitness pretty clearly stands for the proposition that objective unreasonability of a substantive claim by a patentee, not just unreasonable litigation tactics, can be exceptional. Given the presumptive validity of a patent, why would this be possible if the court is right about the objective reasonability of asserting a registered right?  One possible answer, though not the only one: it depends against what the plaintiff is asserting its registered right—but the court doesn’t consider that here, probably because the parties are direct competitors, which still shouldn’t excuse it from examining what the registrations were for, as well as whether the PTO had equal access to the information that market participants had.)

This case also wasn’t exceptional simply because WBH made erroneous claims about the law (arguing that clear and convincing evidence of genericity was required, and that the evidence of generic use was unauthenticated hearsay). A case should not be deemed “exceptional” simply because “snippets of the record or isolated arguments clearly lack merit.” So too, WBH’s futile motion for reconsideration of the summary judgment decision repeating arguments that were already made and rejected on summary judgment wasn’t enough, nor were its counterclaims about false advertising and actual harm therefrom.  WBH’s position that Express’s statements were factual and thus actionable was rejected only after careful consideration of the context of the statements. WBH’s position that it was harmed by Express’s advertising wasn’t sufficient for exceptionality, even though Verisign, Inc. v. XYZ.COM LLC held that a Lanham Act false advertising claimant must show actual rather than mere presumed damages. WBH acknowledged that it lacked evidence that any lost potential customers as a result of plaintiff’s allegedly misleading advertisements. “Still, defendant confronted and attempted to distinguish Verisign I at the motion to dismiss and summary judgment stages, which weighs against a finding that defendant’s position was frivolous even though that attempt was ultimately unsuccessful.”

Finally, this case wasn’t exceptional because of the need “to advance considerations of compensation and deterrence,” given that WBH acted as a trademark troll that bullied competitors to stop using an important marketing phrase—“we buy houses.” “This argument fails because courts have sensibly concluded that it is not appropriate for a district court to police the marketplace and punish so-called trolls who take steps to protect their presumptively valid rights in intellectual property. Indeed, plaintiff’s argument conflicts with the Fourth Circuit’s clear policy that trademark owners should be encouraged, rather than deterred, to enforce their presumptively valid trademark rights.”

That’s dispiriting enough, but it’s even more depressing that the court doesn’t think this case stands out from an ordinary trademark case even at the sub-fee award level. Does the court think that most trademarks are used to suppress useful information from competitors?  Suggestive, arbitrary and fanciful marks—which comprise the vast majority of registered marks—don’t pose even the risks of granting rights in descriptive terms, much less generic terms.  This failure to recognize that trademarks vary in the risks they pose to competition may explain why the court concludes that “if the proverbial bell curve representing the range of trademark cases was developed, this case would clearly fall in the middle, or at least within two standard deviations of the mean.”

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