Tokidoki, LLC v. Fortune Dynamic, Inc., 2009 WL 2366439 (C.D. Cal.) Tokidoki sued Fortune for trademark and copyright infringement and related torts, including dilution. Fortune counterclaimed to cancel Tokidoki’s registration for its design: a heart above crossbones.
Facts found by the court
Tokidoki’s ITU identified the intended goods as: Class 025 "Men's, women's and children's clothing; namely, shirts, T-shirts, sweatshirts, tank top, vests, dickies, blouses, coats, jackets, sweaters, sweatshirts, pullovers, skirts, dresses, pants, sweat pants, shorts, beach wear, swimwear, belts, hats, caps, visors and footwear," Class 018 "Wallets," and Class 026 "Hair clips." Its statement of use claimed that the mark was in use in commerce on or in connection with all the listed goods.
If you’re a trademark lawyer, you can tell where this is heading. The only goods in those classes that were actually using the mark at that time were t-shirts, shirts, and belts.
Over time, Tokidoki began using the mark for sweatshirts, knitwear, hats, caps, and footwear. Tokidoki sued H&M for infringement, which lead H&M to counterclaim for cancellation, at which point Tokidoki filed a post-registration amendment to reduce from 24 to 3 the goods it claimed to be using with the mark.
Tokidoki had other problems with its copyright registration: it initially told defendants and the court that the copyrighted work it had registered was the heart and crossbones design. Not so! It was for Tokidoki’s Fall 2005 catalog, which contained (images of) products bearing numerous designs, including a single heart and crossbones design. Tokidoki registers all its catalogs, and also registers individual “characters” appearing on various products, including: Tigrotto, soccer bunny, Adios star, Cactus girl, Latte, Mozzarella, Nana star, mint girl, Mou Mou 2, Bastardino, Diavoletti, Fantasmino, baby Mou Mou, and Camo & Adios. But not the heart above crossbones design.
In its registration, Tokidoki represented that Simone Legno was the author of the work and that Tokidoki owned the copyright by assignment. Not so! Legno created the heart and crossbones design, but he wasn’t the author of the Fall 2005 catalog, which was created by Tokidoki. There was some more testimony about the Legno-Tokidoki assignment that the court deemed not credible. Among other things, the attachment to the purported, late-discovered assignment agreement showed an image of the design with a ®, but the assignment supposedly predated registration by 2 years; plenty of people misuse the ®, so this alone wouldn’t convince me, but there were numerous other facts that detracted from Tokidoki’s credibility. The assignment problems weren’t really all that important, since registration is a prerequisite to subject matter jurisdiction, but they dug Tokidoki deeper.
Worse, this all came out against a pretty dissimilar product: the court ruled that Fortune’s print with two hearts and crossed drumsticks was less similar to Tokidoki’s heart above crossbones than other designs with one heart superimposed over crossbones, which Tokidoki’s witness testified was not substantially similar to Tokidoki’s design. Nor was there good evidence of access to Tokidoki’s fall 2005 catalog, if it mattered.
In one year spanning 2006-2007, Tokidoki sent C&Ds to at least 15 companies about using a heart and cross design. All but one was using a heart above crossbones; one was using a heart above arrows. Tokidoki sued at least four of the companies, including Fortune. Since then, Tokidoki has sent C&Ds to about 20 more companies about a heart above crossbones design.
Tokidoki labels its products with a different registered mark, the heart above crossbones design plus the word “tokidoki.” Licensees must also use the word “tokidoki” on or in connection with the products they make under the licensing agreements.
Fortune, meanwhile, makes women’s and children’s shoes. Its president liked a Punkrose shoe printed with a design with a star above crossbones, but didn’t want to copy the Punkrose print design, so Fortune changed the star to a heart and instructed its manufacturer to use the Punkrose shoe as a model, but produce red hearts instead of stars, using the stars on the original to set the size for the hearts. The resulting shoes were clearly labeled with the SODA brand name. The court found that Fortune hadn’t heard of Tokidoki or its design until six months after Fortune designed its shoe. Thus, there was no copying or intent to capitalize on Tokidoki’s goodwill.
After the C&D, Fortune changed the design by adding a second heart and changing the crossbones to crossed drumsticks, believing that this was not an infringing design. 
(Sorry for the lack of detail; this was the best picture I could find.) Again, the shoes were clearly labeled with the SODA brand name.
Other facts relevant to likely confusion: Fortune’s shoes aren’t sold in the same stores that sell Tokidoki products, but in low-end retail stores such as Wet Seal. (They’re also available online, as my image search efforts revealed.) Tokidoki brands are sold in high-end department stores, boutiques, specialty stores, and the Tokidoki website. The price differential is substantial: SODA shoes sell for $10-15 and Tokidoki shoes sell for $60-120. All Tokidoki shoes use the “tokidoki” name, while all Fortune shoes use one of Fortune’s brand names or a private label. There’s no store or supplier/vendor overlap.
Moreover, the use of a single heart above crossbones by apparel/footwear sellers is widespread in the US. There’s no evidence of actual confusion with either of the Fortune designs.
Tokidoki submitted a survey, but the court found it so leading and unrealistic that it couldn’t measure anything real. Respondents were shown two products in succession and asked whether they were somehow connected. “[T]he fair and non-leading way in which experts now conduct this type of survey is to show the plaintiff’s and defendant's product in the context of a number of products about which they would be questioned. This removes the spotlight from the products of the plaintiff and defendant, helps avoid making obvious what the survey is about, and makes the survey more realistic and less leading.”
Moreover, the control question was inadequate to screen out the high level of noise expected from a very leading survey. A control should be “as close to the allegedly infringing design as possible without itself being infringing, so that one can accurately gauge the noise level.” The controls—paisley and cherry prints—“were so different from the heart and crossbones design that their use could only have picked up some of the noise, not all of it.”
Comment: This is not obvious as a matter of formal logic: pure yea-saying would seem to be the same no matter what the control is, if people were faulty respondents in perfectly uniform ways. But there is an intuition out there that yea-saying is often subject to basic plausibility checks—at some point, some yea-sayers will say no. If that’s true, then noise will not be consistent regardless of the stimulus, which puts a high premium on choosing the right control, one that generates the right level of noise. But how do we know what that level is? The court’s “closest non-infringing design” makes sense—except that it will often be hard, to say the least, for the parties to agree on what that is.
Anyway, the survey was also problematic because the test Tokidoki products were atypical: decorated only with a heart and crossbones, and none of the typical Japanese-inspired artwork and characters, thus presenting an atypical exposure.
There were other problems, including the choice of a universe of consumers who might buy both products, instead of encompassing “a significant portion of the relevant universe”—people who’d only buy Fortune shoes.
The court further found that Tokidoki suffered no injury in fact, including damages, lost sales, or royalties. Tokidoki licensed character artwork portfolios, but never just the heart and crossbones design, and its witness testified that it would not license the design alone, so it couldn’t claim lost royalties.
Nor was there any evidence of dilution, and given the widespread use of similar designs by others, Fortune’s use can’t be shown to have caused dilution or likely dilution. Moreover, the same widespread use shows that the design, if famous, is not famous as a mark for Tokidoki, “and there is no evidence tending to show that the consuming public associates the single heart above crossbones design exclusively with Tokidoki.”
Legal holdings: Trademark
As you’d expect, Fortune won its counterclaim for cancellation. Registrants have to confirm the accuracy of their statements before signing declarations of use. Statements of goods on which the mark is used are particularly important to the PTO: they are material. Knowledge of use is peculiarly within applicants’ knowledge; there is no excuse for getting this wrong, and thus if you do get it wrong, you’ve probably committed fraud on the PTO. Tokidoki should have known that its statement of use was wrong, and in fact the court found that the employee in charge of getting the registration did know.
This fraud damaged Fortune by causing it to spend a lot of money to defend itself in this case. Thus, Fortune had standing to petition for cancellation. The registration was void at the time it issued.
So now Tokidoki had to prove its claimed mark valid. That was not going to happen: (1) Widespread use eroded any inherent distinctiveness it might have had. (2) Without the accompanying word “tokidoki,” there was no evidence of secondary meaning.
Belt and suspenders: assuming it’s a mark, it’s a commonplace mark in a crowded field, thus weak. The confusion factors weighed in Fortune’s favor. Though the marks (without their accompanying word marks) are similar—but not identical—the goods aren’t related enough and don’t use similar enough marketing channels to cause likely confusion.
Dilution: the claimed mark has to meet the standard exemplified by Tiffany, Polaroid, Rolls Royce, and Kodak. This one didn’t.
Injunctive relief, separately, would be inappropriate under eBay because Fortune stopped producing either challenged design in 2007 and doesn’t intend to start again. (Though there is now no barrier to it doing so!) Also, Tokidoki, which never sought a preliminary injunction, failed to submit evidence of irreparable injury.
Legal holdings: Copyright
The court’s finding of absence of copying was fatal to any infringement claim. Tokidoki’s argument that there was access and copying was based on “unsubstantiated inference” that just because Fortune’s principals “engage in trend shopping every four to six weeks at various shopping malls and look through fashion magazines to get ideas regarding fashion trends, they must have seen the Tokidoki brand and must have known that it was a ‘hot brand.’” Tokidoki neither showed a specific chain of events establishing access nor wide enough dissemination prior to Fortune’s first use to justify an inference of copying. Nor did Tokidoki show “striking similarity” such that copying is the only credible explanation for the similarities between the two works. The simplicity and commonplace elements of the design make independent creation and coincidence highly plausible. And the court found that Fortune established independent creation. (I think it’s almost impossible to establish independent creation, especially when most works are in theory accessible over the internet; independent creation is doing moral work, or policing the idea/expression boundary, in many of the cases in which it is applied.)
Plus there was the registration difficulty. Registering the Fall 2005 catalog didn’t register the individual work: where ownership differs between a compilation and a contribution, registering the compilation in the name of the compilation owner doesn’t register the individual work. Here, the designer retained ownership, because there was no credible evidence of an assignment to Tokidoki.
(Given the holes in the case, it’s hard to choose where to reject Tokidoki’s claim. But I’d argue that the overall law would have been best served by finding that the design was not copyrightable—admittedly, the Ninth Circuit is terrible on microworks, as Justin Hughes calls them. But, especially given the evidence of widespread use by others, this design seems too minimally creative even for the Roth v. Universal Greeting Cards circuit.)
The court emphasized that not only had Tokidoki failed to meet its burden of proof, but that to the extent that its proof depended on witness credibility, that credibility weighed heavily in favor of Fortune, which had consistency and business records on its side. Tokidoki’s witnesses contradicted themselves; Tokidoki falsely represented the nature of its copyright registration to the court and to Fortune (practice point: don’t do that—as a friend of mine said about a different matter, we can see you); its evidence of the transfer of rights was highly suspect; and it committed fraud on the PTO.
Comment: Years after Medinol, the basic use requirement still trips registrants up. Note also the effect on Tokidoki’s overall credibility. Now, it’s possible that this invalid registration scared off some competitors—Tokidoki was aggressive in asserting its claims--but overall the false statement of use probably left Tokidoki worse off than if it had relied on common-law rights, and certainly worse off than a valid registration based on the goods that actually used the mark, not least because the average court would be fairly willing to find the other (unused but listed) goods related in any subsequent infringement action. (Rejected arguments: Tokidoki’s attorney wasn’t authorized to file the statement of use; Tokidoki misunderstood US requirements and thought that designing products in the US and selling them elsewhere would count as use—unpersuasive given that a bunch of the listed goods weren’t being sold anywhere.)
Okay, these aren't directly relevant to the case, but they were too cute to exclude from the post:
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