Jaz hands: Joseph Abboud loses name to company he sold

Background from Counterfeit Chic here.
JA Apparel Corp. v. Abboud, 2008 WL 2329533 (S.D.N.Y.)

In a long and thorough decision, the magistrate judge concluded that noted fashion designer Joseph Abboud had transferred all rights to use his name in a commercial manner to JA Apparel, a menswear label he launched in 1987. He sold the label in 2000 for $65.5 million, along with the associated names, trademarks, etc., including “Joseph Abboud,” “designed by Joseph Abboud, “JOE,” “JA,” and similar or derivative terms. There was also a non-compete agreement lasting until mid-July 2007. Before that time, Abboud engaged in a number of activities preparatory to launching a new menswear line, “jaz,” though the launch itself was not during the restricted period. He presented the new line to manufacturers and negotiated (though did not execute) licensing agreements. Shortly after the restricted period expired, a trade publication identified the new line as coming out in Fall 2008 and showed pictures of the line. Abboud told the publication that he was free to use his name on marketing or advertising materials; his position was that he could use his name “in an informational way” to indicate that he was the designer of jaz, and that the only use prohibited by the transfer agreement was “trademark use.” Proposed ads used the phrase “by the award-winning designer Joseph Abboud.”

The basic problem was that Abboud’s reputation was built in building plaintiff’s goodwill; they grew up together. Having parted, would JA the person or JA the business get the goodwill associated with the name? For purposes of the litigation, Abboud conceded that he wasn’t seeking to use his name on clothes, labels, or hang tags, and plaintiff conceded that Abboud could be in the fashion business and could personally present jaz to prospective purchasers such as Bloomingdale’s. So the issue was whether Abboud could use his name in advertising or marketing materials.

As a matter of contract interpretation, the court agreed with plaintiffs that the agreement transferred more than “trademark use,” and instead granted “the exclusive right to use [Abboud’s] name in connection with goods and services” or “for commercial purposes.” Abboud retains the right to be himself and to make media appearances as himself, or as a fashion expert, but not to use his name and make media appearances to promote competing goods and services.

As a result, the use of phrases like “a new composition by designer Joseph Abboud” and “by the award-winning designer Joseph Abboud” for jaz would breach the parties’ contract, irrespective of trademark use or infringement.

On the trademark infringement claims, Abboud argued that his proposed use of his name was fair use and protected commercial speech under the First Amendment. The court largely declined to resolve the infringement claims, since the contract forecloses what might otherwise be permissible under the Lanham Act. However, the court indicated its opinion that Abboud’s proposed uses would infringe JA’s trademark rights, based largely on the strength of the marks, the proximity of the goods, and evidence of some actual confusion in the industry even before jaz entered the market.

Though fair use under §33(b) allows some level of confusion, it requires that a term be used descriptively and not as a mark, as well as good faith. Abboud’s proposed uses would serve as a mark in that his name would be an indicator of source. Indeed, the PTO regularly grants trademarks in the form “designed by X.” Moreover, Abboud’s name is not descriptive of some aspect of the product itself—the “ingredients, quality or composition”—but rather of the source of the product. Finally, the court couldn’t ignore the contract when assessing whether Abboud was acting in good faith. The contract expressly covered terms like those Abboud proposed to use. As if that weren’t enough, the court also noted the high level of likely confusion as another strike against fair use, as allowed by KP Permanent. “It is patently obvious that consumers seeing JA Apparel’s products, marked or advertised as ‘Joseph Abboud’ or ‘by Joseph Abboud,’ would be utterly confused as to whether the ‘jaz’ products advertised as ‘by designer Joseph Abboud,’ were derived from the same source.”

As for the First Amendment, parties can privately contract to give up what would otherwise be free speech rights. (If not for the contract, this would be an extremely tough claim: this would be an example of truthful speech that is probably not “inherently” misleading under the Supreme Court’s commercial speech jurisprudence, though I can see the case for claiming that confusing use of the name is “inherently” misleading.)

In the end, the court saw this case as an illustration of the inherent risks to the seller of a transaction of this type. “After Abboud began designing and marketing clothes under his personal name, with great and deserved success, the name ‘Joseph Abboud’ became closely associated with a brand of clothing, and the personal nature of his name naturally lost some of its identity.” The goodwill associated with his name and the goodwill associated with the trademark was “blurred” in consumers’ eyes, and in cases of conflict, the trademark prevails. In a modern economy, almost everything is alienable—including identity. The alternative would be to say that there are some things that can’t be sold, no matter how much money is offered—moral rights. This case illustrates the American position.

JA was entitled to a permanent injunction against Abboud, barring him from using his name to market (advertise, promote, etc.) any goods or services to the consuming public. Though personal name injunctions must be carefully assessed, the fact that Abboud sold his name and goodwill to JA makes a sweeping injunction more tolerable. This does not bar personal appearances to the trade or public appearances at events or on TV as, “for example, a philanthropist or fashion commentator, if those appearances are unrelated to the promotion or sale of goods and services.” (Notably, the goodwill—or even tarnishment—generated by those appearances will likely accrue to JA, as the entity making commercial use of the Joseph Abboud name, since it will be unlikely that consumers will learn that Abboud and JA have parted ways.)

The court also found that Abboud’s preparations for jaz had breached the “extraordinarily broad” noncompete agreement. Given the broad terms here, including a ban on working with any entity that “proposes to engage” in competition with JA, it was a breach for Abboud to basically take over, through complex financial maneuvers, a competing shirt manufacturer, and likewise to complete sample products shown to future business partners and the media.

JA sought injunctive relief extending the noncompete obligation for the amount of time that Abboud was in breach, but the court declined to do so. Abboud didn’t actually compete by selling any clothes during the period of the agreement, and JA didn’t show harm resulting from the breach. JA argued that Abboud’s acts allowed him to sell clothes a full season earlier than he could have without the breach, but it didn’t show that a Fall 2008 launch was impossible from a mid-July 2007 start. The harm to third parties who’ve now contracted for jaz clothes outweighs any speculative injury to JA. JA also sought half a million dollars in damages, allegedly representing the profits of one of Abboud’s partners during the noncompete period. The court was likewise dubious, viewing the request for money as inconsistent with the demand for an injunction, which assumes that legal remedies are inadequate; the agreement itself provided for injunctive relief, not monetary damages. Moreover, the evidence at trial was that the partner lost money (its nearness to bankruptcy was why Abboud invested during the noncompete period; he’d been informed that the company would go out of business if he didn’t act before mid-July 2007), so there were no profits to award.

Abboud counterclaimed for false endorsement, false advertising, state-law right of publicity violations, and general unfair competition for using slogans such as “Hey Joseph, What Should I Wear?” “Do You Know Joe?” and “Ask Joseph Abboud,” which allegedly implied a continuing connection. The state-law right of publicity claim was easy: JA had written consent to use Abboud’s name. More generally, almost all the claims were defeated because JA bought the exclusive right to commercially use the Joseph Abboud name in connection with goods and services. The court noted in a footnote that there were misleading ways JA could act—at the extreme, it would violate Abboud’s rights to falsely claim that “Joseph Abboud, the designer, will be at Bloomingdale’s to present JA Apparel's new fall line of menswear.” But that hadn’t happened here. There was no evidence that consumers understood JA’s slogans to indicate an association with Abboud the individual, as opposed to Abboud the brand.

Abboud alleged false advertising under §43(a)(1)(B) based on the idea that JA’s ads created the false impression that Abboud was still associated with JA, and that JA thus benefits from Abboud’s unique reputation as a designer. The court found no explicit falsity—JA just used the Abboud marks and names it owned. Even assuming implicit falsity, there was no showing of confusion. In addition, Abboud’s state-law deceptive practices claims failed because he failed to show harm to consumers at large.

Unfair competition and copyright preemption

Rutledge v. High Point Regional Health System, -- F.Supp.2d --, 2008 WL 2264239 (M.D.N.C.)

Plaintiff is a doctor who developed a surgical weight loss procedure, the Mini Gastric Bypass, and various materials for use with the procedure. He registered copyrights for these materials, including a patient information form, a patient consent form, and various manuals. He licenses other doctors to use the materials. The individual defendants are doctors who worked for a health care company with whom Rutledge contracted, and they had access to the copyrighted materials and performed the MGB procedure. In May 2006, the contract with Rutledge ended, but defendants allegedly continue to reproduce, distribute, and display the copyrighted materials on their website and perform the surgery. Rutledge sued for copyright infringement and violation of the North Carolina Unfair and Deceptive Trade Practices Act.

Defendants moved to dismiss the UDTPA count on the ground of §301 copyright preemption. This requires that the state-law rights at issue cover a work within the subject matter of copyright and be equivalent to a right protected by copyright, without any extra element. Everyone agreed that the materials were within the subject matter of copyright.

The key question was whether the UDTPA created rights “equivalent to” copyright rights. If an extra element is required instead of or in addition to reproduction, distribution, or display, etc., there’s no preemption. The extra element must change the nature of the claim, making it qualitatively different from copyright.

The court noted that, when an extra element in an unfair competition claim is found, there’s usually a separate allegation of some specific act of unfair competition (breach of trust, fraud). Usually, courts should look at the required elements of the state claim, but sometimes they have to look at the underlying allegations. Such deeper analysis may be required for UDTPA claims, since the UDTPA is such a broad regulation of unfair and deceptive conduct. Stating a claim under the UDTPA requires an allegation of (1) an unfair or deceptive act or practice, (2) in or affecting commerce, (3) that injured the plaintiff. (2) and (3) aren’t going to be extra elements, and so the question is whether (1) is different from what the Copyright Act covers. Sometimes that will be true, and other times it won’t be.

Rutledge argued that misrepresentation and deception were extra elements that distinguished the state-law cause of action: (1) misrepresentation of the materials as defendants’ own; (2) alteration of the materials; (3) “surreptitious” posting of the originals on the internet; and (4) unauthorized use of the materials. The court found that, to survive preemption, the definition of what constitutes unfairness and deception needed to rest on alleged misconduct separate from acts governed by the Copyright Act.

The misrepresentation claim was nothing more than reverse passing off, “the natural consequences of a Copyright Act violation.” With no separate statement or half-truth, there was no extra element. Alteration, too, was merely an alleged violation of either the derivative works right or, more likely, the reproduction right via substantial similarity. “Surreptitious” posting, however sneakily done in the middle of the night, was also just a copyright violation. Unauthorized “use” requires a pause—“use” is not a copyright right, but to the extent plaintiff meant reproduction, distribution, and display, that’s again just a copyright claim. Plaintiff also alleged use of the materials to perform medical treatment. The court treated this as an allegation of use of the ideas, rather than the expression. The Copyright Act bars protection for ideas, and as part of that preempts idea claims like this where no contractual violation is alleged. (Depending on the claims, “use” could also mean simply consulting the materials, which implicates no copyright rights but is allowed by the first sale doctrine.)

Today's propaganda coup

How best to illustrate the claim that copyright owners' use of the DMCA is poorly targeted? Get DMCA notices sent to printers by making their IP addresses visible using BitTorrent. Well played, U Wash programmers; well played. I have yet to read the full report, but I do wonder how often the problem of a user apparently requesting a file but not actually downloading it -- which seems to be why the printers got their notices -- causes false positives, and why we should care (that's at least an attempt to download, in the ordinary case EDITED: absent deliberate misidentification, which was what was involved here) compared to the problem of dynamically assigned IP addresses. The report indicates that the dynamic assignment issue is, at least in theory, a source of false positives that has nothing to do with an attempted download by the person accused or a deliberate attempt to frame a particular IP address. Completely accidental misidentification strikes me as a potentially serious enforcement problem.

TracFone wins another DMCA round

Tracfone Wireless, Inc. v. GSM Group, Inc., --- F. Supp. 2d --, 2008 WL 2215059 (S.D. Fla.) (magistrate)

Following the lead of an earlier case, the court held that buying plaintiff’s prepaid wireless phones, then reconfiguring them so they could be used on networks outside the US, violated the DMCA. Phones are sold below cost in order to sell the airtime cards, and defendants’ practices mean that phone buyers don’t need to buy the airtime cards. The procedure allegedly involves the “alteration, erasure or removal” of TracFone’s software.

Tracfone sued for breach of contract, trademark infringement, unfair competition, copyright infringement, circumvention, trafficking in circumvention technology, false advertising, and generic state torts.

Defendants argued that the Librarian’s §1201 rulemaking provided them with an exemption for circumvention that enables wireless handsets to connect to a wireless network, when circumvention has the “sole purpose” of lawfully connecting to a wireless network. The magistrate, following the earlier—uncontested—case, held that since defendants sold the handsets for profit, they didn’t have the “sole purpose” of connecting to a network. As I said before, I call shenanigans; the exemption only has meaning if it allows people to open the phones and resell them, because otherwise the exemption is useless. “Sole purpose” should refer to whether there’s any relationship to copyright infringement—see also the Lexmark and Chamberlain cases.

The court also refused to dismiss the state-law deceptive and unfair trade practices claims. The argument was that buying TracFone phones in bulk, removing the software, then reselling the phones as new was a deceptive trade practice. The court found that trademark infringement is an unfair and deceptive trade practice that triggers state law. (Let me get this straight: removing restrictions on the phones, so they’re more useful to consumers, is an unfair trade practice. Look, I’m all for consumer protection, but TracFone’s practices don’t protect consumers, they protect its business model. To the extent that defendants’ practices invalidate the warranty, that needs to be disclosed to avoid trademark infringement and consumer deception, but I’d sure like to know how many warranty claims defendants’ customers are likely to make. I think the motion to dismiss was properly denied, but unless there are some other facts present I wouldn’t think this would survive summary judgment.)

Imagine a Wonderful World: transformation in purpose and form

Bill Patry has posted on the recent, correct fair use finding in the lawsuit Yoko Ono brought against the producers of the anti-evolution movie Expelled. This is the core of the finding that the use was transformative, though the song and the recording themselves were copied: Defendants “put the song to a different purpose, selected an excerpt containing the ideas they wanted to critique, paired the music and lyrics with images that contrast with the song’s utopian expression, and placed the excerpt in the context of a debate about the role of religion in public life.” That is, by showing images of totalitarian societies along with lyrics expressing a utopian desire to see religion removed from public life, the movie suggests that the utopia of Imagine is, in fact, a dystopia.

What interests me is that there is precedent from the SDNY—albeit in dicta—that such ironic contrasts are not fair use because a licensing market exists for them. In Abilene Music Inc. v. Sony Music Entertainment, Inc., the court stated,

it bears emphasis that The Forest's alteration of the tone, lyrics and musical features of Wonderful World makes clear that the song itself is a target of parodic criticism, and that the creators of The Forest are not merely using the original song as an ironic or satirical device to comment on what they view as a less than wonderful world. The latter kind of use, which typically requires licensing, can be illustrated by the song's use in certain films. For example, in Terry Gilliam's 12 Monkeys, the Armstrong recording of Wonderful World is played over the final credits, ironically contrasted with the film's depiction of a distinctly dystopian science fiction future, and in Barry Levinson's Good Morning, Vietnam, the song is played on the sound track accompanying scenes of wartime violence and destruction. In these cases, the original song itself is used (essentially in its entirety) to comment on negative aspects of the real or imagined worlds depicted by the filmmakers, but the song itself is not parodied.

Though the court in the Expelled case says that it’s not influenced by the filmmakers’ explanation of their intent to criticize John Lennon’s Imagine, it is hard to see what the difference is, in themselves, between Expelled and 12 Monkeys in their use of a utopian song contrasting with a dystopia, both of which can easily be read as commentary on the naivete of the original songs. One is more specific—Imagine critiques religion, while Wonderful World just says life is beautiful—but both express sentiments that are legitimate targets of criticism. Yes, literary critics could probably distinguish the two uses, but is that what we want our courts to do? As literary critics, courts are often excellent lawyers.

The Abilene Music court seems to want “transformation” to take place on the music and lyrics of the song itself, while the Ono court accepts, as the Second Circuit latterly held, that transformation is actually a matter of purpose and not a matter of creating a derivative work. Tony Reese’s forthcoming piece on this shift in the meaning of transformativeness proved prescient in this case. While helping with the problem of the transformative/derivative line, transformation-as-purpose foregrounds a different problem: How do you know what the appropriate purpose of the original is? John Lennon's purpose can, perhaps, be defined as the promotion of the message in the original, but there are many other copyright owners whose purpose could credibly be: make as much money, by licensing as many variants, as possible. The original work, like a Swiss Army knife, could be multipurpose.

Total Recut

Total Recut is a website focusing on video remixes, with many embedded YouTube videos it offers as good examples of various forms. The music video category is, to my eye, woefully populated, given the incredible wealth of fanvids out there. There's a contest for creating a What is Remix Culture? video running now; the deadline has been extended. Unfortunately, the guidelines discourage using more than a short music clip, even though that's not all that fair use will allow under appropriate circumstances. But the site is worth exploring.

I find the disclaimer particularly interesting:

None of the audio/visual content is hosted on this site. All media is embedded from other sites such as Google Video, YouTube, DailyMotion etc. Therefore; this site has no control over the copyright issues of the streaming media.

I'm all about fair use, and I think that a good-faith belief in the fair use status of the works should excuse any contributory infringement claim. But ultimately, the risk-reducing strategy of embedding YouTube videos puts the burden on YouTube and the other commercial sites of defending fair use rights. And, as non-evil as Google may be, its interests are not the same as those of its users. We need noncommercial sites to host remix videos, and we will need them more as filtering reaches more and more of YouTube and the like.

Overlawyered: prevailing defendant gets reduced fee award

Spalding Laboratories, Inc. v. Arizona Biological Control, Inc., 2008 WL 2227501 (C.D. Cal.)

Spalding sued defendant (ARBICO) for false advertising of its fly control products under the Lanham Act. The case went to a jury; the court allowed Spalding to re-open its case to address evidentiary holes. After Spalding rested, the court granted judgment as a matter of law to ARBICO. ARBICO moved for attorneys’ fees, which the court granted in part. (ARBICO asked for over $800,000, and the court granted $95,000.)

The Lanham Act allows a fee award in exceptional circumstances, which can occur when a plaintiff’s case is groundless, unreasonable, vexatious, or pursued in bad faith. Spalding had a good faith basis for making its claims at first. However, after the court excluded all the key elements of Spalding’s case, “doom[ing]” its claims, Spalding’s insistence on pursuing the case for 10 days in front of a jury became exceptional. Its evidence of literal falsity was excluded, and it had no survey evidence showing that a significant portion of the relevant consuming public was misled, but it made “empty promises” of such survey evidence and “afforded no time in proving liability,” focusing instead on “self-serving damages calculations.”

As a result, ARBICO was entitled to fees from the first day of trial through the motion for fees. ARBICO’s billing records showed over $220,000 in fees for that period, but the court adjusted downwards to account for the attorneys’ block billing, as well as some duplication, mistakes, and excesses. “While the Court does not contend that ARBICO’s attorneys intended to ‘pad’ their bills, it surmises that ARBICO’s attorneys (and paralegals) often acted with a degree of zeal and thoroughness beyond that which would have been exercised by a reasonable attorney.” Attorneys and paralegals who billed 13-17 hours a day for attending and preparing for trial, when trial never exceeded 6 hours per day, “show[ed] commendable industry but [were] nonetheless unreasonable.” In the end, the court deducted 15% for block billing; 30% for duplicative, multiple and excessive billing; 5% for time billed as travel; and 10% apportioned to non-Lanham Act unfair competition claims.

False comparative and credential claims enjoined

Healthport Corp. v. Tanita Corp. of America, 2008 WL 2224398 (D.Or.))

Healthport sued Tanita for patent infringement related to the parties’ competing body composition monitors. Tanita counterclaimed for false advertising. After the court granted Tanita summary judgment on the patent claims, the parties cross-moved for summary judgment on the Lanham Act and state unfair competition counterclaims.

Healthport has two public web sites, one targeting healthcare professionals and one targeting employers and healthcare benefits providers. Both describe ELG, which is Healthport’s metabolic analyzer (a body composition monitor). Healthport claimed that the ELG was “the only metabolic analyzer patented in the United States and abroad for unequaled accuracy and validity in the prediction of human body composition,” whose “patented accuracy” was “backed by the largest study on body composition analyzers ever conducted, including more than 750 subjects from a wide demographic population.” Healthport relied on two studies by USC, though neither was a head-to-head study. Neither study found “unequaled” accuracy, just accuracy. Healthport also owns two patents for the ELG, but neither patent suggests anything about comparative accuracy or validity.

In addition, the websites offer information about Healthport’s management team, including Richard Wooten, Healthport’s president and chief technology officer. The sites said that Wooten “received his M.S. degree from Oregon Graduate School of Health Sciences and a B.S. in Biology from Portland State University.” This is not true, as Wooten has no college or graduate degrees.

Healthport challenged Tanita’s standing. In the 9^th Circuit, Lanham Act false advertising standing requires a commercial injury that is competitive—that could cause sales diversion. But Healthport’s own witnesses testified that the parties were competitors. Healthport also argued that it derived no revenue from the healthcare plan detailed on its websites, so Tanita suffered no competitive injury. But Tanita wasn’t challenging the healthcare plan; it was attacking statements about the ELG and Wooten. The ELG statements were inherently comparative and could divert business from Tanita, which also sells body composition monitors.

Healthport then argued that its website wasn’t “commercial advertising or promotion.” But the sites are commercial speech; the parties compete; they exist to sell health-related services; and they’re accessible to the public. That’s commercial advertising under the Lanham Act.

The court found that the Wooten credential statements were literally false. As for the ELG statements, there were three possible interpretations of the “only patented/unequaled accuracy” statement, but each was literally false. (1) It’s literally false to say that the ELG is the only patented metabolic analyzer. (2) It’s literally false to claim that the ELG is patented for unequaled accuracy and validity, or that it’s the only analyzer so patented. (3) It’s unsubstantiated to say that the ELG is unsurpassed in accuracy and validity when compared to other body composition analyzers, and lack of substantiation for a “tests prove” claim is treated like literal falsity.

Healthport argued that Tanita needed to show actual deception through consumer surveys or market research. The court disagreed. Courts may presume deception and reliance in cases of intentional false statements, even if there’s little overt reference to a competitor’s product. For online advertising, where an advertiser need not spend substantial funds to reach a wide audience, there’s no need to show substantial investment in a claim before presuming deception and reliance. Independently, non-comparative false statements can justify injunctive relief if they’re material.

The ELG statements were material. Tanita provided evidence from health professionals who testified that they seek the most accurate equipment and that claims of superior accuracy or patented accuracy would influence their buying decisions. Wooten’s credentials were a closer issue, but Healthport’s co-founder testified that his advanced medical degree is important to Healthport customers. This was sufficient for an injunction.

Tanita overreached, however, in requesting corrective advertising, disgorgement of profits, and attorneys’ fees.

Profits can be awarded even if there’s no proof the advertiser’s conduct was willful—lost profits serve as a surrogate for damages. In comparative advertising cases, courts can presume injury because the benefit to one advertiser necessarily harmed the other. Without a direct comparison, however, the plaintiff must show evidence of injury. Or the plaintiff can recover defendant’s profits under an unjust enrichment theory, at a court’s discretion; a willful violation can support an award of profits, but doesn’t require one. Here, the court determined that an award was inappropriate; there was no evidence that Healthport profited from its false claims.

Tanita requested an order of corrective advertising on all Healthport websites and by way of notice to all of Healthport’s clients. But there was no evidence that a large audience actually saw the sites or that consumers were actually deceived. Thus, no corrective advertising was necessary.

Attorneys’ fees are available in exceptional Lanham Act cases, including cases of willful, fraudulent, or deliberate deception. Intentional acts are insufficient; there must be deliberate intent to deceive consumers. Because Healthport’s liability rested on a presumption of consumer deception and reliance, and because the intentionally false statement about Wooton’s credentials was only marginally material, the court found a fee award unjustified.

Washington Post covers tangled copyright claims

That ubiquitous "Footprints" poem, in which it's revealed that G-d carries you through your times of trouble, turns out to have equally ubiquitous authorship claims, and now a lawsuit, despite the fact that the claimed author's story clearly indicates divestive publication without notice before 1978 (not to mention ridiculous delay in asserting any rights there might somehow be). Rachel Aviv's article for the Poetry Foundation goes through the literary evidence of the poem's antecedents. "Along with [four people profiled in the piece,] at least a dozen other people have claimed, less rigorously, to have penned this poem. None of their accounts are particularly convincing, yet they all seem to genuinely believe they wrote the poem. They describe the words coming out effortlessly, even uncontrollably, as if they were finally articulating something they’d always known."

Louis Vuitton loses, verily

Louis Vuitton Malletier v. Dooney & Bourke, Inc., SDNY (May 30, 2008) – thanks to Sarah Trombley for the copy of the opinion.

In the latest ruling in this “seemingly endless and often contentious litigation,” the district court ruled once again in favor of D&B on LV’s claim that DB infringed and diluted its multicolor trade dress. (Other phrases from the intro: “shamefully long,” “painfully thin distinctions,” “immature posturing.” Also, Susan Scafidi will presumably be interested to see that the court uses “fashionista” as a noun not requiring any definition.)

LV’s Multicolore bags earned it $145 million in the US as of November 2006, while D&B’s multicolored “It Bags” earned $100 million. LV sued D&B; the court denied relief, but the Second Circuit reversed, holding that it had been error for the court to subject the marks to a side-by-side comparison. Notably, the court appointed special masters to deal with the large volume of expert testimony, and adopted the special masters’ report and recommendations with some modifications.

Because LV sought damages and began the suit in 2004, the court applied the FTDA standards (requiring proof of actual dilution, and, under Second Circuit precedent, both inherent and acquired distinctiveness for fame) rather than the newer TDRA standards.

The court expressed some exasperation that LV continued to tinker with its definition of the mark at issue (a classic problem in trade dress litigation, though also a classic benefit to the plaintiff in terms of tailoring the definition to what the defendant did). The court defined the mark as the LV monogram in 33 colors set against a white or black background. The Second Circuit had already held that the mark is inherently distinctive and has secondary meaning. (I would have thought this was product design, since the mark is a repeated pattern that’s inseparable from the product being sold, and Wal-Mart seems on point. That is, LV isn’t really complaining about a single use of the DB monogram in LV-like colors; its objection is precisely that the whole handbag is covered with monograms, so this isn’t an ordinary case in which a mark is affixed once or in a couple of places to the product. Rather, the design as a whole is what consumers recognize. Sounds like trade dress to me. However, the parties apparently agreed that this was not a trade dress case—and I can see why D&B, a trademark owner with its own powerful interests in enhanced fashion protection, would go along with that.)

In any event, despite strength and proximity favoring LV, D&B prevailed. On similarity, there was no evidence that the similarity was enough to cause a likelihood of confusion among ordinary consumers, whether through initial interest, pre-sale, post-sale, or at sale. The differences between the marks are memorable enough to dispel any likely confusion. The different monograms, and their different positions on the bags, particularly the LV bags’ use of geometric shapes as well as letters, distinguish the bags even “from a distince, in a store window, from across a room, from a passing car,” etc. While all LV monograms use the same color for both letters, the D&B monogram uses different colors. D&B creates a “softer, unfocused” effect, while LV uses “crisp, bold, individual colors that appear more as a collection of distinct colors.”

LV claimed that it had actual confusion evidence; D&B replied that LV had failed to produce a single actually confused consumer, and that after 4 years and hundreds of millions of dollars in sales, such an absence pointed towards no likelihood of confusion. The court agreed with D&B. A “very generous[]” reading of the evidence revealed de minimis confusion at best. Rather, what the evidence suggested was that D&B’s bags were capable of calling LV bags to mind. One young girl, for example, reportedly held her D&B bag up to a LV display and said, “Look, my bag looks almost identical to the Louis Vuitton!” (As smoking guns go, it’s no “Chicken step on Barney.”) The court held that the fact that consumers thought D&B copied LV favored D&B, because it showed that they were distinguishing the two sources. LV may hate being associated with D&B, but association isn’t confusion.

The next key factor was intent. The court had previously found no deliberate fraud by D&B, but LV argued that there was bad faith, including in the creation of a fake “waiting list” for It Bags imitating the actual waiting list for LV Multicolore bags. In addition, LV submitted expert testimony that 6 of the 7 DB monogram colors were similar to LV colors, which allegedly showed bad faith because of the thousands of possible colors D&B might have used. Awareness of the plaintiff’s mark isn’t bad faith if there’s no evidence of intent to deceive. The court held that, while the evidence was thin, a jury could conclude that D&B was “inspired” by the LV mark; however, it went no further than that.

On consumer sophistication, D&B argued that its fashion-conscious consumers were likely to make clear brand distinctions. LV contended that this wouldn’t affect post-sale consumers, and that D&B’s It Bags were targeted at teenagers, who “are presumptively not sophisticated.” (Comment: Hah! The common denigration, in trademark law, of the sophistication of younger consumers just baffles me. The teens targeted by D&B may give out personal information on MySpace and Facebook inappropriately—they are certainly not “sophisticated” for all purposes—but they are board-certified forensic investigators when it comes to fashion.) The court said that it couldn’t “reasonably be disputed” that both parties’ consumers are sophisticated and discerning. In fact, they are “sophisticated, hyper fashion-conscious, and are not likely to be easily confused regardless of their youth.” Even if these factors are diminished in the post-sale context, most cases finding post-sale confusion involve counterfeits.

In the end, the factors pointed towards summary judgment for D&B. Mark strength plus product proximity couldn’t suffice when the other factors tilted against LV.

On dilution, Second Circuit precedent made clear that a dilution claim can’t succeed unless the marks are “very” or “substantially” similar. The differences discussed in the confusion analysis made the marks too dissimilar for a dilution finding, as well. Nonetheless, and doubtless anticipating yet another appeal, the court reviewed the other elements of a FTDA claim. Though LV established fame as of the time D&B entered the market, LV’s evidence of actual dilution was still insufficient as a matter of law. Moseley was clear that evidence of mental association—which was present—was not sufficient to show actual dilution. There was no evidence of impact on the ability of the LV mark to identify and distinguish LV’s products; in fact, much of the evidence of association suggested that consumers thought less of D&B for copying. LV’s market share has only grown since the It Bags were introduced.

As for state dilution, LV’s mark was distinctive, but, using the Mead Data six-factor test for blurring under state law, no reasonable juror could find a likelihood of dilution. Dissimilarity, again, was key. Consumer sophistication favored D&B. Though there was some evidence of intent to associate the D&B bags with LV, that evidence was de minimis and insufficient to outweigh the other key factors. Here, product proximity and renown of the senior mark, while favoring LV, were also insufficient. Renown of the senior mark is only important to the extent that there’s similarity between the marks. No amount of fame can create actionable dilution in itself; fame can lead to dominance in a category, so that people will almost always think of Coke when they think of soda, and even when they think of Pepsi—but that doesn’t mean that Pepsi dilutes Coke.

Secret sharer: Moseley and V's Secret are still at it

V Secret Catalogue, Inc. v. Moseley, 2008 WL 2152189 (W.D. Ky.)

It’s baaaaack! And it has a surprise twist. The Supreme Court reversed the Sixth Circuit and remanded on April 3, 2003. Six days later, the Moseleys filed a motion to vacate the injunction. Sixteen days after that, V Secret replied.

On July 26, 2007, the Sixth Circuit remanded the case to the district court for proceedings “consistent with” Moseley. In the interim, of course, came the TDRA and its new likelihood of dilution standard. Because the case was pending when the TDRA was enacted, and because V Secret didn’t seek damages, the district court correctly determined that the TDRA (and not, in fact, Moseley) applied, as is plain from the statute itself. In other words: the dilatoriness of the court of appeals in carrying out its ministerial task negated the Supreme Court’s ruling as to the Moseleys. And then, when the court of appeals did manage to issue its one-line order, it was blatantly wrong.

Because Moseley no longer governed, the court looked at the Sixth Circuit’s original holding that consumers would “link” a store called “Victor’s Little Secret” to Victoria’s Secret and would likely “automatically” think of the latter after seeing the former. This, the court of appeals had held, was a “classic” tarnishing use. But then again, that was FTDA analysis; the district court determined to start over with the TDRA.

There was no dispute over the fame of Victoria’s Secret. As you may recall, under the TDRA’s blurring factors, the court is invited to consider (1) mark similarity; (2) the distinctiveness of the famous mark; (3) substantially exclusive use of the famous mark; (4) the degree of recognition of the famous mark; (5) intentional association with the famous mark; and (6) actual association.

On similarity, the marks must be “identical” or “nearly identical” or “substantially similar” for dilution to apply at all. The original name, Victor’s Secret, was nearly identical, and the addition of “Little” in small type was not much of a change. Substantial similarity was present.

On distinctiveness, the court adopted the analysis of the court of appeals, which looked to the Abercrombie spectrum to analyze distinctiveness apart from fame (secondary meaning). Victoria’s Secret is arbitrary and thus highly distinctive. The company is engaged in substantially exclusive use of the mark. There is also a high degree of consumer recognition, as shown by the brand’s marketplace success.

The court had previously held that the Moseleys’ innocent explanation for choosing the name—that they were referring to Victor Moseley’s decision to keep his plans to open a store secret from his previous employer—was not credible, and that they intended to create an association in consumers’ minds. The court relied on “the notable similarity between the two marks alone” to discredit this explanation, but also pointed out that Moseley testified that he was unemployed before he opened the store.
The similarities in font (I'm not sure I see those) and the fact that both stores sell lingerie “is too remarkable a coincidence” to accept the claim that the Moseleys didn’t know about Victoria’s Secret.

What, then, of actual association? An army colonel complained to Victoria’s Secret about Victor’s Secret, which was evidence of one person’s actual association. As Moseley said, association is not necessarily blurring, but in assessing likely dilution rather than actual dilution it is still probative. (When does association make dilution more likely, and when doesn’t it matter? Sadly and predictably, courts use the “likelihood” standard to ignore questions about what the heck dilution actually would be, if it existed.)

Given that the only evidence of association came from one offended army colonel (why do discussions of Moseley always talk about his profession? Is it because he’s a man? If the person who complained had been a woman, do you think she’d be a “consumer”?), the court concluded that the association between the marks had not been shown to be likely to impair the distinctiveness of Victoria’s Secret. Though the colonel “readily associated” the two marks, he didn’t “link” Victor’s Secret to the Victoria’s Secret brand. There was “no question in his mind” that Victoria’s Secret was not Victor’s Secret. His outrage was evidence of tarnishment, but not blurring.

Thus, though the factors mostly favored blurring, the evidence of actual reception showed no blurring of the mark’s distinctiveness. Victoria’s Secret chose not to submit any other evidence of actual blurring (and, as a large corporation, could readily have done so if such evidence existed). Victoria’s Secret argued that the court of appeals found dilution by blurring when it concluded that consumers would “automatically” link the two. But the district court concluded that the old court of appeals opinion lacked any factual analysis, and was inconsistent with the Supreme Court’s holding that association could be distinguished from blurring, because association doesn’t necessarily reduce the capacity of a famous mark to identify the trademark owner.

But it wasn’t over: The court also considered tarnishment, which is defined as “association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark.” Tarnishment generally occurs when the plaintiff’s trademark is linked to shoddy products or is portrayed in an unwholesome or unsavory context. And here, Victoria’s Secret finally won. The brand “scrupulously avoids” sexually explicit goods, limiting itself to a “sexy and playful” image, and Victor’s Little Secret sold “unwholesome, tawdry merchandise.” (This has to be the one instance in which someone looked at Victoria’s Secret and thought “Hey, that’s a wholesome mark!”)

Bonus link: What is Victoria's Secret parody (images of bulimia).

Blogrolling

A marketing fellow at Frankfurt Kurnit Klein & Selz, a media and entertainment law firm, sent me a nice note about the firm’s new blog focusing on advertising to children—CARU, COPPA, lawsuits involving toymakers, cereal advertising restrictions in the UK, and so on, mostly pretty straight reporting. There are a few months’ worth of posts up now, so if it sounds plausible to any of my readers, they can check it out. My blogroll policy is not so much a policy as it is entirely undefined; once in a while I add or remove links of possible interest to my imagined audience. Anyone is welcome to nominate candidates, but I’ll probably be most receptive to advertising law-related sites, and secondarily trademark law-related sites, because of their relative rarity.

While I'm linking, though, I should really tout xkcd.com, accurately billed as "a webcomic of romance, sarcasm, math and language." Though "programming" should probably have been in there too. One of the folks in the registrar's office at Georgetown law has Exploits of a Mom up on the wall; even if you don't know what "drop table" does, I bet you can figure it out from context. My current favorite is Action Movies--side note, River Tam and I have the same initials! Sadly, I can't kill you with my brain. Anyway, if you check out xkcd, don't miss the little text boxes that pop up when you mouse over the images, either.

Riders on the Storm: Doors members can't use pictures of Jim Morrison at concerts

Densmore v. Manzarek, 2008 WL 2209993 (Cal.App. 2 Dist.)

Raymond Manzarek, Robert Krieger, and John Densmore met in a meditation class in LA in 1965. At Manzarek’s suggestion, they formed a band with Manzarek’s acquaintance Jim Morrison. Over forty years later, the trial court enjoined Manzarek and Krieger from holding themselves out as the band The Doors, and awarded over $3.2 million to Densmore and his partnership with Jim Morrison’s heirs. The court found that defendants had engaged in false advertising and enjoined various forms of advertising of “The New Doors” or “The 21^st Century Doors” that deemphasized everything but the “Doors” and that incorporated the classic Doors logo.

Most of the claims in the case focused on the partnership agreements in operation before and after Morrison’s death. I will skip over large portions of the legal analysis, focusing on the overlap between trademark and false advertising claims and on the injunction granted to redress violations of the right of publicity.

A jury found that both sides had breached various agreements, and that defendants had violated the Morrison Estate’s California statutory publicity rights, but rejected the state and federal unfair competition claims submitted to it. The jury also awarded zero damages for breach, but the trial court determined that it could still award lost profits to the plaintiffs, a conclusion upheld on appeal.

The publicity rights claims stemmed from the display of Jim Morrison’s image to the audience at about 30 concerts; the image was shown from 30 to 90 seconds at the beginning of Manzarek’s band’s set. In several cities, ads for the band used Morrison’s voice singing Doors songs, and merchandise used words and phrases associated with Morrison.

The advertising/trademark issues on appeal focused on the fact that the jury found that there had been no trademark infringement or unfair competition. But the court determined that false advertising was an equitable issue and entered judgment for plaintiffs. (Because the jury awarded zero monetary damages for the right of publicity claim, the court awarded $750, the statutory minimum.) On appeal, defendants argued that the court’s false advertising ruling was inconsistent with the jury’s findings on the trademark/unfair competition issues. The jury instructions provided that they should find for plaintiffs if use of the names “The Doors” or “The Doors of the 21^st Century” was likely to cause confusion or was likely to deceive people into thinking that use of the names was authorized or constituted unfair business practices or false advertising.

The court of appeals held that the jury verdict wasn’t necessarily inconsistent with the false advertising claim. On the first argument, the false advertising claim requires untrue or misleading advertising, and an ad can be untrue or misleading without causing confusion about source. Comment: true but entirely irrelevant, since the court discusses no element of the advertising that is misleading for any other reason but source identification. The court continued that, under California law, false advertising has slightly different elements than unfair competition; though case law holds that a false advertising violation necessarily violates the unfair competition statute, this is only true as an “abstract proposition,” and a jury might find one without the other, for example if there is no “business practice” for purposes of the unfair competition law. Comment: Again, the court offers no reason to think any relevant element of an unfair competition claim might have been missing here. The court also discounted the jury instructions specifically mentioning false advertising because the jury wasn’t instructed on the elements of false advertising. So, though it was a “close question,” the unfair competition and false advertising claims weren’t duplicates, and the court could find false advertising without defying the jury verdict.

Anyway, the jury’s verdict was only advisory, and the trial court could disregard it, because this was an equitable claim. The trial court found that the advertising was false in that it stated that defendants’ band was The Doors. But the band was not The Doors. It’s true enough that no one seeing the ads would expect to see Jim Morrison perform. But the ad wasn’t for Jim Morrison. It was for the band known as The Doors. (This is, I think, slicing the salami rather fine. What is The Doors, once we admit that consumers know that it’s not a group that includes Jim Morrison? The court implicitly holds, for reasons known best to itself, that a band that includes two of the three surviving original members is not The Doors.)

Defendants can continue to identify themselves as founding or original members of The Doors, subject to limits on placement, wording, and font size, and a ban on using the classic Doors logo or any font similar in style to the classic Doors logo.

The court further sustained an injunction against using Morrison’s name, likeness, voice or image to promote defendants’ band. Here the court turned performance critic: “From an artistic or musical perspective, briefly displaying a photograph of Morrison during or immediately prior to a concert adds nothing to the performance and is, in fact, not a part of the performance.” I suspect most rock critics and performance theorists would disagree; combining audio and visual is a primary reason to attend a live performance. But, the court continued, “[t]he only reason to display a photograph of the iconic Morrison is to suggest that the band is a continuation of his work and artistry--in short, to add Morrison’s luster to the band and thus to profit from his name and likeness,” and that’s what the right of publicity statute bans.

Under the injunction, defendants can use Morrison’s likeness for any “legitimate” purpose, “such as an account of the history of The Doors, or in telling the story of 20th century rock and roll. The only act it prohibits is using Morrison’s name and likeness to promote appellants’ band or their concerts.” When you’re at the concert already, how does using the image “promote” the band? What if the original band members begin the show with reminiscences of “the history of The Doors”? Though the ruling with respect to actual ads makes some sense, the court should have drawn the line at conventional commercial speech. (Note that the ruling for ads only makes sense because concerts aren’t excluded from the California right of publicity statute by the provision that protects ads for “a play, book, magazine, newspaper, musical composition, audiovisual work, radio or television program, single and original work of art, [or] work of political or newsworthy value.”)

The dissent began by pointing out that “[t]he members of our community who diligently served as trial jurors in this case for nearly fourteen weeks would be startled to learn that their months of work counted for nothing.” There was a major screw-up in trial management—a month into trial, plaintiffs informed everyone that their claims were largely equitable, not legal, and the parties continued to fight over the legal/equitable line for months after the trial ended. Under the circumstances, the dissent would have bound the plaintiffs to the jury’s findings, allowing an injunction against further breach of the contract, but not damages.

As the dissent explained in a footnote, the jury apparently thought that everybody involved had behaved badly, justifying findings of liability on all sides without transfer of money. This, the dissent thought, was quite consistent with the evidence: “Densmore was unable or unwilling to tour; but, rather than giving Manzarek and Krieger the go-ahead with his blessing, he blocked them from performing with other musicians as The Doors of the 21st Century. Manzarek and Krieger knew that the rule of the partnership was unanimity, but when Densmore acted unreasonably, they just went ahead in a ‘to-heck-with-him’ manner. The Estates consist of people who have never touched a musical instrument or a microphone but want to take money from Morrison's former band-mates who - in their mid-60s - are out working.”

However, the dissent would have held that the false advertising claim failed. The trial court’s finding of false advertising based on the use of the name The Doors, a photo of Jim Morrison, and the logo/font associated with The Doors was inconsistent with the jury’s finding of no liability on the trademark and unfair competition claims. Moreover, the majority didn’t explain what was false or misleading: “Surely no one buying a ticket in the 21st century to see The Doors in concert would expect to see Jim Morrison perform. He has been dead for some 37 years. Indeed, Morrison vies with Janis Joplin, Jimi Hendrix, and John Lennon for the title of world’s most famous rock musician to have died young.” (The dissent’s obvious correctness on this point was blunted by its introduction of this problem as a question of the line between falsity and misleadingness, which allowed the majority to respond by parsing doctrine instead of explaining what a reasonable consumer viewing the ad might mistakenly think.)

In any event, the dissent would have held that plaintiffs lacked standing to sue for false advertising, because they had not suffered an injury in fact, nor had they lost money or property as a result of the unfair competition. The jury awarded zero dollars to the plaintiffs on their claims, and the plaintiffs conceded at the start of trial that they were not claiming any harm to their catalogue.

False advertising with a side order of dilution

The LA Times features a story on Mt. Shasta Brewing Co.'s legal troubles. It's beer, but the federal government argues that the bottle cap's reference to marijuana, "Try LEGAL Weed," is false and misleading. (Remember the controversy over Cocaine energy drink? There's also Blow energy powder, with a similar shtick but less publicity.) Here, though, the brewer is actually in Weed, California, so the matter is at least more debatable than the Cocaine issue. But not much more: as the LAT notes, "Weed has a tradition of exploiting the double-entendre of its name. A pithy placard on the way out of town announces 'Temporarily Out of Weed.' Gas stations sell 'High on Weed' T-shirts. (The town, after all, is at an elevation of 3,500 feet.)"

The brewer also gets in a dig at a competitor: "While stomping on him, Dillmann says, the government treats Budweiser with kid gloves, despite the fact that 'This Bud's for You also could be mistaken for marijuana slang.

'They sell Bud. We sell Weed,' he said. 'What's the difference?'"

Lawyer in the Dell: bait and switch ads enjoined

AP: New York judge says Dell misled customers

A New York judge concluded today that Dell engaged in repeated false and deceptive advertising of its promotional credit financing and warranties.

State Supreme Court Justice Joseph Teresi ordered the computer retailer to more clearly disclose that most customers don't qualify for free financing or get "next day" repair service.

…"For too long at Dell the promise of customer service was a bait and switch that left thousands of people paying for essentially no service at all," [New York Attorney General Andrew] Cuomo said. "This decision sends an important message that all corporations will be held accountable for the promises they make to consumers."

… The company noted earlier that it had 6 million transactions in New York between 2003 and 2006, with alleged complaints representing only a tiny fraction. Dell also told the court that it has started selective recording and auditing of sales representatives to avoid misrepresentations and has invested millions of dollars in customer service and technical support, significantly reducing customer waiting times on the phone.

According to the judge, Dell ads offered promotions like free flat-panel monitors, additional memory, rebates, instant discounts and financing with no interest or no payments for a period to "well qualified" or "best qualified" customers. However, Cuomo's submissions indicated as few as 7 percent of New York applicants qualified for some promotions.

"Most applicants, if approved for credit, were offered very high interest rate revolving credit accounts ranging from approximately 16 percent up to almost 30 percent interest without the prominently advertised promotional interest deferral," Teresi wrote. …

"Dell certainly has knowledge of the relative numbers of customers who qualify for various promotions," Teresi wrote. "It is therefore determined that Dell has engaged in prominently advertising the financing promotions in order to attract prospective customers with no intention of actually providing the advertised financing to the great majority of such customers. Such conduct is deceptive and constitutes improper 'bait advertising."'

Many customers applied for credit thinking they would get the promotional rate, Teresi wrote. He enjoined Dell from advertising promotional rates without prominently disclosing how many applicants are likely to qualify, as well as the usual credit terms.