Monday, June 22, 2009

Seasons, rings, and Lanham Act epicycles

AFL Philadelphia LLC v. Krause, 2009 WL 1562992 (E.D. Pa.)

The Philadelphia Soul, an arena football team, had its 2009 season cancelled because of financial problems, though the team hopes to return next year. The team and Joseph Krause, a former employee, sued each other over events related to the cancellation: plaintiffs for copyright and trademark infringement and other claims related to a design for the 2008 Championship Ring to be distributed to players, coaches, and executives; and Krause for Lanham Act violations/misappropriation of name. This decision denied plantiffs’ motion to dismiss the counterclaims.

Krause is the former director of sales, with responsibility for game and season ticket sales. He alleged that he was hired for his strong reputation in the sports and entertainment business, and that his success promoting the team enhanced his solid reputation.

The 2009 season was suspended in mid-December 2008; Krause and other employees were given one week notice of termination. Krause alleged that the cancellation was hugely unpopular, especially among 2009 season ticket holders, who criticized the team’s failure to immediately issue refunds and complained to the Pennsylvania AG.

Krause alleged that, after he was terminated, the team sent email to its fans about the season’s cancellation that falsely identified his email address as the source. He alleged that the team sought to cause confusion about his association with the decision and to trade on his good name.

The counterclaim defendants argued that Krause lacked prudential standing (a false advertising question most places, though the 3rd Circuit says that the test should be the same for (a)(1)(A) and (a)(1)(B)). Because standing doctrine has become one of the most screwed-up areas of the Lanham Act, the court devoted a bunch of effort to determining whether Krause had pled not only harm to his own reputation but benefit to the team as the result of the use of his name. Arguably he did, so (considering the other Conte Bros. factors) he had prudential standing, even though the nature of his injury was “somewhat remote” from the type of harm Congress wanted to address in the Lanham Act.

Next question: was Krause’s name a valid mark? He pled sufficient facts to allege secondary meaning. The trouble is that, especially in the 3rd Circuit, false endorsement cases are a bizarre hybrid of (a)(1)(A) and (a)(1)(B); Krause hadn’t alleged that his name was used in advertising, just that it had secondary meaning in the abstract. The court concluded that because he was bringing a “false designation” claim, he didn’t need to make “allegations regarding advertising,” but that the same test for secondary meaning applies to false designation and false advertising claims and that Krause had pled enough to overcome the secondary meaning hurdle.

The team argued that there was no likelihood of confusion, because the email showed that it came from the Philadelphia Soul, with an address. However, the email’s from line was “From: Joe Krause [mailto:jkrause],” thus indicating that the email originated from Krause, albeit in his role as employee. (Another thing to insert in one’s employment contracts, apparently: control over employees’ email addresses and right to use in marketing.) So Krause sufficiently pled likely confusion (the court using, by the way, the trademark factors here).

Krause also counterclaimed for misappropriation of name, a variant of the privacy tort. The court found that he’d validly pled that the email appropriated his good name and reputation, and that he didn’t need to plead that his name was appropriated for commercial advantage, because that’s a component of the right of publicity, which is a different tort. However, Krause had also alleged that the team’s purpose was commercial, as distinguished from an incidental use of his name.

No comments: