Thursday, September 27, 2007

Born freecycle

Freecycle Network, Inc. v. Oey, --- F.3d ----, 2007 WL 2781902 (9th Cir.)

Oey was preliminarily enjoined “from making any comments that could be construed as to disparage upon [The Freecycle Network]’s possible trademark and logo” and ordered to “remove all postings from the [I]nternet and any other public forums that he has previously made that disparage [The Freecycle Network]’s possible trademark and logo.” The Ninth Circuit vacated this injunction.

Plaintiff TFN is an Arizona nonprofit “dedicated to encouraging and coordinating the reusing, recycling, and gifting of goods.” It coordinates over 3,700 Freecycle groups worldwide. (Disclosure: I was a member of the Arlington group for a while and admire the organization.) People use Freecycle to offer items they no longer want, avoiding or at least delaying the trip to the landfill.

TFN claimed to have consistently used the marks FREECYCLE and THE FREECYCLE NETWORK and “The Freecycle Network” logo since May 2003 to refer to itself. But it also admitted that it initially used the term “freecycle,” freecycling, freecycler, etc. to refer more generally to the act of recycling goods for free via the Internet. In 2004, based on Oey’s advice – he was then a member – TFN decided to police its use of the term and to pursue trademark registration for it. Shortly after filing its registration application, TFN implemented a strict usage policy, drafted by Oey. In early 2006, the mark was published for opposition, and an opposition was filed; the mark remains unregistered, and the opposition was stayed pending the outcome of a Northern District of California challenge (by a group founded by Oey) seeking a declaration that “freecycle” is generic.

Obviously, Oey experienced a change of heart about TFN and the putative Freecycle mark. By mid-2005, Oey was making statements in email and on the internet that “freecycle” was generic and incapable of trademark status, encouraging others to use the term in its generic sense and to oppose TFN’s pending registration. He did not oppose trademark status for the full name “The Freecycle Network.” He argued that established genericism would help TFN in its marketing mission, spreading the “freecycle” concept.

In spring 2006, TFN sued Oey for contributory trademark infringement and trademark disparagement under the Lanham Act, injurious falsehood, defamation, and intentional interference with a business relationship under Arizona law. The district court granted a preliminary injunction based on the Lanham Act claims, and the Ninth Circuit stayed the injunction pending appeal.

The district court characterized the trademark issue as one of infringement. But it didn’t analyze (or even mention) the factors in the likelihood of confusion test. Instead, the district court found (1) TFN has a mark, (2) Oey at one time believed (1) and sought to protect the mark, and (3) he later publicly encouraged the disparagement of the mark. Even if all three things are true, they don’t demonstrate likely success on the merits. (The court of appeals also noted that the actions Oey encouraged others to take aren’t actionable under the Lanham Act either, making success on a contributory infringement claim unlikely. Nothing in the record suggests intentional inducement of infringement, or that third parties actually used the mark to infringe. Encouraging the use of a claimed mark in its generic sense is not actionable.)

Specifically, the court held that Oey’s actions were likely not “use in commerce” – here not used as a jurisdictional term about Congress’s power under the Commerce Clause, but deployed as a limiting construction precluding Lanham Act coverage when the defendant didn’t use the mark “to promote any competing service or reap any commercial benefit whatsoever.” Oey just expressed his opinion about TFN’s trademark rights and encouraged like-minded individuals to do the same.

Even if Oey’s statements were “use in commerce,” they were not likely to cause confusion about the connection between Oey’s services (or any others’ services) with TFN. His statements neither mentioned any competing service or product, nor claimed affiliation with TFN. (If other groups, relying on Oey’s analysis, called themselves “freecycle networks,” presumably that could cause confusion, but it does seem mistaken to hold Oey responsible for that possibility.)

Finally, his statements couldn’t be false advertising, because they weren’t made in “commercial advertising or promotion.” And then the court made a holding that may come up in more standard Lanham Act cases: Oey’s statements didn’t concern “the nature, characteristics, qualities, or geographic origin” of “another person's goods, services, or commercial activities.” Statements about the mark, the court held, are not statements about the services.

Though the case law is divided, some courts have suggested that statements about a competitor’s trademark rights (or lack thereof) could be false advertising. Suppose a true competitor said “Our competition claims to have a trademark on Product X, but they don’t.” It may well be that no reasonable consumer would take this as a statement about the competition’s honesty or competence – though I’m not so sure – but the interpretation in this case cuts off potential liability under the Lanham Act as a definitional matter. The court, however, did not address the perhaps more common situation of statements accusing a competitor of trademark infringement, which might be more clearly within the category “commercial activities.”

Also, Oey didn’t disparage TFN’s goods or services; rather, many of his statements “appear aimed at ensuring the ongoing success of TFN and its services.” He said things like, “Let everyone know that TFN does not need to control freecycling for TFN to be successful”; “[Keeping the term ‘freecycle’ in the public domain] fits well with a ‘viral’ marketing approach to freecycle. People hear about it and want to know where it came from--which will lead back to [TFN] without strong trademark enforcement. It will also generate lots of goodwill”; and “My alternative also has consequences but I firmly believe it is a much better choice for [TFN] in the long run.” (TFN might consider itself damned with faint praise.)

TFN also alleged “trademark disparagement” under §43(a). But no such claim exists; TFN’s allegations of false statements, made with malice, about TFN’s mark, track a common law slander of title claim. The court found no textual basis for a Lanham Act claim from these elements, and a corresponding absence of precedent supporting them. Even if trademark disparagement were cognizable under the Lanham Act, TFN didn’t show likely success because Oey’s statements weren’t false. “At worst, Oey offered an erroneous legal opinion (by a layperson) that TFN lacked trademark rights in the term ‘freecycle.’” And statements of opinion aren’t generally actionable under the Lanham Act. There has been no formal determination yet that TFN has trademark rights in “freecycle.” Oey’s statement that TFN lacks such rights can’t be a false statement of fact until those rights are definitively established. And, the court added, Oey would in that case remain free to argue that the decision to grant TFN such rights was a mistake.

TFN’s basic complaint is that Oey shouldn’t be allowed to use or encourage the use of “freecycle” in its generic sense. But the court held that TFN’s mark, like all marks, is always at risk of becoming generic if the relevant public appropriates it. Genericide has both social costs and social benefits for communication. Trademark owners are free to undertake PR campaigns and police a mark’s use. But the Lanham Act doesn’t grant this kind of policing power. The court expressed no opinion on whether genericide was an available theory under other causes of action, and declined to address the First Amendment objections to TFN’s legal campaign, leaving those matters for the district court on remand.

No comments: