Tuesday, July 05, 2016

Stunning scope of color TM leads court to cabin registrations

Cedar Valley Exteriors, Inc. v. Professional Exteriors, Inc., No. 13-CV-2537 (D. Minn. Jun. 29, 2016)

See DuetsBlog’s 2012 entry on what appears to be a related case, in which the plaintiff roofing/repair company sued a different competitor for using orange on its signs.  (Related DuetsBlog entry on pervasive use of orange in the home improvement industry, making the PTO’s actions here even more troubling and plaintiff’s lawsuits seem even more anticompetitive.)

One might call this case a poster child for the problem of too-broad trademark registrations.  The court begin by deeming Cedar Valley’s service marks

highly unusual in two respects: First, both marks are for a color— specifically, the color orange. And second, both marks are extraordinarily broad. Together, the two marks appear to cover any use of any shade of orange in any article of clothing or any form of advertisement related to any aspect of the construction industry. Thus, for example, the use of orange safety vests on a construction site would appear to be encompassed by the registered marks—something that would no doubt come as a surprise to thousands of contractors.

How Cedar Valley was able to persuade the United States Patent and Trademark Office (“PTO”) to register such marks is a mystery, particularly given that Cedar Valley has used only particular shades of orange; used it only on shirts, lawn signs, and a few other advertising items; and used it only in connection with a narrow slice of the construction industry. But the PTO did register the marks [and they became incontestable], and, as a result, this lawsuit raises a number of difficult legal and factual issues. 

The court ultimately amends Cedar Valley’s registration and finds that there are outstanding questions of fact on likely confusion.

Cedar Valley logo

Flashy Cedar Valley logo

The plaintiff is primarily in the residential repair business, which it gets through “door-knocking campaigns, use of yard signs, [and] referrals and other advertising,” as well as through preferential relationships with insurance companies and their intermediaries.  Professional Exteriors does residential “remodel[ing] [and] restoration,” including similar services.  Sixty to seventy percent of its work consists of “insurance restoration” of storm-damaged homes.

“Cedar Valley uses orange on the signs that it puts on customers’ lawns and the shirts that its employees wear, as well as on flyers, door hangers, and other advertising materials.” Cedar Valley picked orange “[b]ecause it stands out more than other colors,” and because orange was “the most obnoxious, loud” color it could put on signs and shirts, according to its witness.

In 2008, Cedar Valley registered two service marks involving the color orange:

Registration No. 3,429,642 (“the ’642 mark”) is for “the color orange as applied to yard signs and other advertising materials used in advertising the services.” The drawing depicts a solid-orange yard sign outlined by dotted lines. Registration No. 3,429,643 (“the ‘643 mark”) is for “the color orange as applied to clothing worn during the performance of the services.” The drawing depicts a solid- orange short-sleeved polo shirt outlined by dotted lines.

Shirt registration

Sign specimen

Shirt specimen

Sign registration

The description of the services includes “building construction and repair; building inspection; construction and renovation of buildings; construction and repair of buildings; general construction contracting; installing siding; roofing contracting; roofing installation; roofing repair; [and] roofing services . . . .”

RT here: Examining TSDR, I found that the shirt mark had initially been nonfinally rejected for failure to function as a mark, with the 2(f) statement of five years of continuous use deemed insufficient because the nature of the claimed matter—the color of a shirt worn by an employee—wasn’t such that consumers would ordinarily perceive it as a mark.  The same was true for orange for signs.

In its response to the examining attorney, Cedar Valley argued that color was in fact registrable.  It also argued that its sales of over $12 million/year and its pervasive use of orange in marketing qualified orange as a trademark for its services, since its 250 sales reps each spoke in person to 5,000 potential customers per year (which works out to roughly 20/day in a 5-day week, yikes) and thus 1.25 million people were exposed to their orange clothing each year, not to mention anyone who saw their orange-clad workers on 1,500 roofing etc. jobs per year.  

Cedar Valley submitted employee declarations that they “often receive telephone calls from prospective and actual customers who often times invariably ask for them to confirm if Applicant is the roofing/siding company with the ‘orange signs’, ‘orange flyers’ and/or ‘orange shirts’.”  (Often times invariably?  The declarations themselves say “sometimes,” which is at least plausible; there are three employee declarations repeating this statement, though only one considers it common—her estimate is 30 calls/week; the other two employees only answered the phone when the receptionist was unavailable.)  Plus, Cedar Valley contended that there was evidence of actual confusion in that “a member of the purchasing public recently mistook services of a competitor wearing orange shirts as the services as provided by the Applicant.”  (In the declaration, the declarant states that the relevant customer signed a contract with a Cedar Valley sales rep, who unbeknownst to Cedar Valley gave her contact information to a competitor.  When the competitor showed up to perform the work, it’s not particularly surprising that she thought it was Cedar Valley; I can’t imagine the absence of orange shirts would have changed anything.) 

"We're the guys with the orange signs!"

The examining attorney accepted these claims; I saw no further correspondence.  The only “look for” advertising in the TSDR record was “we’re the guys with the orange signs!” on the second page of an orange flyer.  It’s hard to expect examiners to know how pervasive a color is in any given industry, but I still think this has facts consistent with rejections upheld by the TTAB, given the high burden of proof that color claimants should face.

Anyhow, back to the present dispute: Professional Exteriors began in 2010, and has used orange on its advertising and promotional materials, including yard signs and shirts.  After a 2011 C&D was ignored, Cedar Valley sent another in 2013 adding a demand for $25,000 in damages, then sued.
Professional Exteriors logo

Another Professional Exteriors logo

Photo with Professional Exteriors shirt
The court expressed concern about the apparent scope of the registrations.  At times, Cedar Valley argued that the marks were narrower than “any shade of orange in any article of clothing or any form of advertisement related to any aspect of the construction industry, … although Cedar Valley had difficulty explaining how they were narrower.”  The court appointed a trademark lawyer as an expert witness.  The expert described Cedar Valley’s marks as “very unusual” and the legal issues raised by those marks as “very hard.”  He concluded that the functionality and “phantom mark” doctrines justified amending the marks, but nonetheless recommended summary judgment for Cedar Valley on likely confusion.  The court agreed with the first part, but, as the responsible entity for legal determinations, not on the latter.

Mark Lemley & Mark McKenna will be glad to hear how the court approached the issue:

Before the Court can assess the merits of Cedar Valley’s infringement claims and Professional Exteriors’ defenses, the Court must first determine the scope of the registered marks. That is, before the Court can answer such questions as “how strong are the marks?” and “how similar are Professional Exteriors’ marks to Cedar Valley’s marks?,” the Court must first determine the precise scope of Cedar Valley’s registered marks. 

Functionality limits the scope of color marks.  In particular, functionality bars registration of orange for earplugs, because “orange is particularly visible and facilitates safety checks.”  So too with payphones, which if orange are easier to find in an emergency. And likewise with safety in the construction industry.  Given the breadth of the written descriptions of the marks, they encompassed functional use of orange in “clothing” and “advertising materials” across the entire construction industry.  Read literally, the registrations would cover construction workers’ safety vests and some of the orange signs at construction sites, which could be deemed advertising materials.  However, the court wasn’t sure if the record showed that orange serves the same safety function in residential repairs as it did on large construction sites.  (In my neighborhood, they use orange cones for small repairs all the time—it’s an easily understood warning sign.)  Still, orange was functional in most of the construction industry.  There was also a question about the eye-catching use of orange, that is, aesthetic functionality, but the record was contested at this point.

Given the record, Cedar Valley’s registrations had to be amended to be limited to “installing siding; roofing contracting; roofing installation; roofing repair; [and] roofing services.”

Separately, the marks as described were also illegitimate phantom marks. “[U]nder the Lanham Act and the rules promulgated thereunder, a trademark application may only seek to register a single mark.”  A mark that might change is not a single mark.  “The prohibition against phantom marks serves the primary purpose of federal trademark registration, which is providing notice to the public of the registrant’s ownership of the mark,” and allows people to search the register to figure out what’s there.

Color marks are subject to the phantom mark rule, and Cedar Valley’s marks conflicted with it on their face.  However, the TMEP allows an exception for color service marks when an applicant “seeks to register a single color as a service mark used on a variety of items not viewed simultaneously by purchasers.”  They can represent the mark as “a solid-colored square with a dotted peripheral outline . . . .” TMEP § 1202.05(d)(ii). The idea is that a color service mark can be applied to a variety of objects (“e.g., stationery, uniforms, pens, signs, shuttle buses, store awning, and walls of the store”), but still create for the consumer a unified “distinct commercial impression.”  (The court pointed out that Home Depot has its own registration for orange for advertising for installation services, “including, notably, the installation of ‘roofing’ and ‘seamless gutters.’”)

The court’s expert expressed doubt about the validity of this exception; the TMEP notes that no court has blessed it, and, as a policy matter, it’s not clear that such a registration provides adequate notice.  The court didn’t need to decide the matter, though, because Cedar Valley hadn’t registered a solid-colored square with a dotted peripheral outline.  The drawings depicted a lawn sign and a polo shirt.  And, “[i]n the case of a discrepancy between the drawing and the written description of a color mark, the drawing controls the text”:

To hold otherwise would be to ignore the public-notice function of trademark law. Cedar Valley’s marks cannot be allowed to encompass any type of advertising materials and any article of clothing, because the drawings in the registrations depict only a yard sign and a polo shirt, and thus indicate to anybody who finds Cedar Valley’s registrations in a trademark search that the marks are limited to those particular objects. The drawings do not give anyone wanting to establish their own service marks adequate notice that Cedar Valley’s marks encompass more than lawn signs and polo shirts.

The drawings also determined the particular covered shade of orange, though the court noted that infringement by different shades of orange would still be possible.  And the drawings determined the particular manner in which orange was claimed: “the entire surface” of short-sleeved polo shirts and yard signs, not orange stripes or orange trim or orange lettering against a non-orange background—though again, that didn’t exclude infringement claims against such uses.  (Though, especially with functionality concerns, I think the registration’s limits should weigh very heavily against a finding of infringement in such cases.)

The court also held that it had power to rectify the register even as to incontestable marks, which the parties didn’t contest.  And since the changes here aren’t based on lack of distinctiveness, that seems correct.

On to likely confusion, where there was conflicting evidence on the strength of the marks and the degree of competition  between the parties; there was no evidence of bad intent or actual confusion; and the consumers were likely to pay a lot of attention.  There were also factual disputes about the functionality of orange in connection with roofing and siding.  Finally, though Cedar Valley emphasized the incontestability of its marks, Professional Exteriors could still argue that the marks were weak because they lacked distinctiveness or secondary meaning.

No comments: