Monday, August 26, 2013

Standard trademark claim, ill-fitting nominative use analysis

E Clampus Vitus v. Steiner, 2013 WL 4431992 (E.D. Cal. Aug. 16, 2013)

Plaintiff sued a number of defendants for infringement of its trademarks. After the court kicked out the earlier complaint for insufficient specificity, ECV filed an amended complaint, and this one largely did the job.  ECV alleged that it owned marks for “E Clampus Vitus,” “Clampers,” “ECV,” and related design marks using symbols and words; it used them to identify members of its historical organization, to notify members of upcoming events, and to sell goods including pins, headgear, and shirts.

Defendant Joseph Zumwalt Chapter 169 E Clampus Vitus is a corporation, and the individual defendants are former ECV members who allegedly created the Joseph Zumwalt Chapter.  ECV alleged that they used its marks on at least 6 specific occasions since 2011, including events at which they sold pins, hats, and T-shirts using ECV’s marks and marched under an “E Clampus Vitus” banner.  In one case, when they sold food and other goods under a “Georgetown Clampers” banner, ECV allged that its local chapter couldn’t participate in the same event because the authorities mistakenly issued a permit to the defendants, believing them affiliated with ECV’s local chapter.  Most recently, defendants allegedly created an online forum for “Joseph Zumwalt ECV 169” to sell products such as lighters bearing ECV’s marks, while ECV alleged that it conducts similar sales to raise funds for charitable purposes. ECV sued for trademark infringement and state-law unfair competition and false advertising.

The court first found that ECV had sufficiently stated claims against individual named defendants.  The complaint alleged specific details about their particular roles in identified events.  Likewise, it properly alleged sufficient facts to impose individual liability for the corporate defendant’s actions, even if they weren’t necessarily corporate officers: the complaint allged that the individual defendants created the corporation to exploit ECV’s marks. Being volunteer members of an organization wasn’t the problem; the problem was these specific defendants’ allegedly unique role in creating the corporation and organizing the infringement.  Active participation as a moving force in the decision to infringe can justify individual liability.  Here, ECV alleged that the individual defendants acted “knowingly, intentionally and deliberately” to infringe.

The court also rejected the nominative fair use defense on the pleadings, somewhat sketchily.  On factor (1), the court described the test as allowing a use “only when no descriptive substitute exists,” which is just wrong, and stated that defendants could just identify themselves as “Joseph Zumwalt Chapter 169” without infringing.  On factor (2), using no more than necessary, again despite precedent stating no disclaimers are required, the court found that “Defendants similarly fail to identify limits on their use of Plaintiff’s marks. Unlike the defendant in Playboy, Defendants fail to identify how they actively disclaimed any sponsorship or endorsement.”  More persuasively, the court pointed to the allegations that defendants claimed that their events were “official,” confusing the public into thinking them authorized by ECV—a serious factor (3) problem.

The amended complaint also alleged facts sufficient to sustain a likely confusion claim.  ECV alleged that the parties’ activities were similar, if not identical—they sold the same types of merchandise at similar events, and conducted similar online raffles.  ECV also specifically identified the marks allegedly infringed, and alleged that the word marks were used exactly on hats, shirts, and pins for sale, as well as on banners and in advertising.  The parties allegedly operate in the same geographic areas.  Though ECV didn’t need to allege actual confusion, it did allege specific facts about confusion (new members mistakenly enrolled with defendants instead of ECV), and it alleged intentional attempts to use ECV’s history and marks to cause confusion.  This was enough to plausibly plead confusion, even if it didn’t cover every factor.

Though ECV didn’t specifically allege that the goods defendants sold weren’t genuine, it was a fair inference from the complaint, and anyway ECV also alleged that defendants “inappropriately used Plaintiff’s marks in advertising,” which was an independent basis of infringement. 

Defendants argued that the California law claims failed because they didn’t allege lost money or property, aka “some form of economic injury.”  But ECV alleged that it had lost income and profits from lost merchandise sales, which was enough.  And the complaint met Rule 9(b)’s standard, as required for a California FAL claim: it identified specific defendants, specific events, and specific activities that constituted false advertising.  “Rather than using conclusory language, the FAC specifically alleges that this use of terms such as “official” along with Plaintiff’s marks could be misleading because potential members may think Plaintiff is hosting or sponsoring the event.”

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