Zest IP Holdings, LLC v. Implant Direct Mfg. LLC, No.
10cv541, 2015 WL 1510755 (S.D. Cal. Feb. 3, 2015)
As usual, I’m ignoring the patent parts of this
patent/trademark/false advertising case.
Zest alleged that Implant Direct sold the “GoDirect” dental attachment
product and the GoDirect Prosthetic System (“GPS”) in violation of Zest’s patents
and falsely and unfairly used the ZEST® and LOCATOR® trademarks when marketing them.
Zest and Implant Direct used to have a distributorship relationship, giving
Implant Direct a nonexclusive right to sell Zest’s products. Implant Direct then designed its GoDirect
implant, copying the geometry of the Locator “abutment attachment surface”—the top
part of the implant. Implant Direct
marketed the GoDirect implant as “compatible” with Zest’s Locator® attachment
system: as usable in conjunction with Zest’s Locator® liner and cap, which are
the other parts of the system. Litigation resulted.
Zest succeeded in its motion for spoliation and discovery
abuse sanctions based on failure to implement a litigation hold, which will
merit an adverse jury instruction at trial.
Implant Direct’s successor in interest IDSI argued that the
trademark claims were barred by nominative fair use. Under New
Kids, we ask whether (1) the product was “readily identifiable” without use
of the mark; (2) defendant used more of the mark than necessary; or (3)
defendant falsely suggested he was sponsored or endorsed by the trademark
holder. “If the nominative use does not satisfy all the New Kids factors, the
district court may order defendants to modify their use of the mark so that all
three factors are satisfied; it may not enjoin nominative use of the mark altogether.”
However, the court held that IDSI forfeited affirmative
defenses that weren’t pled, and that nominative fair use was an unpled
affirmative defense. (This strikes me as
obviously wrong. The Ninth Circuit has
been very, very clear that nominative fair use substitutes for the ordinary confusion test in cases in which its
application is appropriate (D is using the mark to identify P’s
goods/services). I can’t see how it’s the
defendant’s burden to plead which
confusion test applies, when it is always the plaintiff’s burden to show
confusion. In copyright, would we
require the defendant to plead that abstraction/filtration/comparison or the more
discerning observer test applies in order to take advantage of those tests,
assuming they were appropriate under circuit precedent?) Thus, summary judgment on Zest’s trademark
claims was denied.
This seems to raise a real practical problem: how is one to
instruct a jury to evaluate the trademark claims? Even courts that don’t use New Kids recognize that the standard
multifactor test doesn’t work well when the defendant’s use identifies the
plaintiff. Similarity of marks and
similarity of goods/services will not have the ordinary effect they have if the
defendant was using the mark to identify its own goods/services. I guess
the ultimate lesson is: don’t aggravate the district court until it refuses to
listen to your good arguments as well as your bad ones.
IDSI also argued that the false designation of origin/false
advertising claims were subject to Rule 9(b), and the court agreed, but found
the heightened pleading requirements satisfied. The following allegation pled
the who, what, when, where, and how:
Implant Direct is using the ZEST
and LOCATOR trademarks in a prominent manner in connection with the “GoDirect”
product such that consumers are likely to be confused into believing that the
“GoDirect” product is authorized, endorsed or sponsored by Zest. (A printout of
this advertisement from the Implant Direct website is attached hereto as
Exhibit H). Further, the words “Featuring ZEST LOCATOR Compatible Platform” are
also likely to cause confusion, deception or mistake because the “GoDirect”
product is not in fact “compatible” with the Zest LOCATOR attachment system,
but is instead a copy of one or more of the components of the Zest LOCATOR
attachment system. Furthermore, the use of the same words “Featuring Zest
LOCATOR Compatible Platform” in describing the “Go Direct” and the Zest Locator
is likely to cause confusion, deception or mistake among consumers.
(I’m tempted to describe the favorable treatment given to
false association compared to false advertising in 9(b) jurisprudence as
literally “special pleading,” but what jumps out at me more is that the
contention that the IDSI implant isn’t “compatible” because it’s a “copy” makes
the overall falsity claim laughable. In
what sense would a consumer ever expect that “compatible” didn’t include the
possibility “it’s exactly the same, which is why it fits”? In what way could this distinction ever be
material?) See above re: good/bad
arguments.
1 comment:
Although I agree it's "obviously wrong", I've seen nominative fair use get unreasonably muddled by district courts in the 9th circuit. The 9th Circuit clearly said in Tabari that the plaintiff bears the burden of proving that the defendant's use wasn't nominative fair use. But some district courts seem to get bunched up by copyright fair use being a statutory affirmative defense, or by the statement in Fortune Dynamic that classic fair use is an affirmative defense. I had this come up in a California case several years ago, and I had to argue uphill to get leave to amend the answer when the plaintiff said the NFU issue had been waived. There's no reason NFU should be treated as an affirmative defense, but every reason it should be plead as one.
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