Monday, November 14, 2016

Notre Dame Law Review Symposium, Panel Three

Moderated by Shubham Mukherjee

Graeme B. Dinwoodie, University of Oxford Law, “Territoriality in the Protection and Enforcement of Trademark Rights”

As trade becomes more geog. expansive, so too do TM rights need to expand. Not new: goes back to 1883 Paris Convention.  Madrid Convention starting in 1890s, updated for 20th/21st century.  End point of that process is unitary TM rights. Beginnings are in Benelux in 1960s; EU has unitary rights—28, soon to be 27, countries—for 20 years. That’s a model for 6/7 other groupings in the world that are thinking of replicating, e.g., in Africa, ASEAN.

Nationwide federal registration in US was unitary right in 50 states. What’s interesting is ways in which the parallel doesn’t work, which suggests problems w/EU approach.  EU: CTM: you can now get a single TM w/single application through Alicante in Spain; don’t need intent to use.  Pure registration system. Under one reading, you only need to use the mark w/in 5 years in one country and you get to keep the whole 500 million people; can get EU wide relief by one lawsuit, instead of having to sue country by country.  It’s a lot cheaper, and generous on rules for registrability v. British IPO. 

Idea: facilitate trade at regional level by avoiding problems of overlapping rights.  We have diverse and unintegrated market in social, cultural, linguistic terms compared to legal. Result: we might increase conflicts and clearance costs.  How best to right-size TM rights? 

Project engages w/2 debates: relationship b/t registration and use, b/c this problem is most acute when the registration’s scope doesn’t come close to the actual scope.  Also, problem of clutter on the register, which motivated 2012 reform effort.  UKIPO is particularly concerned about this.  Beebe & Fromer study question premise of infinite supply of word marks.  PTO reform about increased evidence of use is evidence of concern for this issue too.

Clutter is sometimes about number of marks; Madrid Protocol has contributed.  But clutter is also a function of size of footprint granted. This includes geographic scope.  EU TM (no longer called CTM) occupies a very large space b/c a single EUTM blocks national rights in all 28 countries. Tremendous amount of dead space created.

Normative policy issues raised by current issues: What is the nature of the EU project?  Fraught issue right now, but we have a political project: is Europe a single market, or a collection of markets?  How far can politically defined territories get ahead of social and commercial patterns of change w/o provoking judicial resistance? There has in fact been great resistance to idea of single market, esp. by British judges. If we really want unitary rights, there has to be more attention to the state/federal relationship. Benelux abolished national registration when they adopted a unitary system; US got closer to abolishing despite claims to recognize state rights; EU hasn’t.  EU created CTM courts, but they aren’t actually federal courts; they’re national courts wearing a CTM hat. Commandeered by federal system, and that changes how they think about EUTMs. 

Cases: The rule is you have to make use w/in 5 years or it’s potentially subject to revocation. W/in national system, use has to be w/in country. For CTM, has to be w/in EU.  What does that mean?  Is use in Britain still use in the EU?  That would be useful for TM owners; takes pressure off of expansion.  Court of Justice answer (typical): it depends.  May be sufficient, but not necessarily. Large countries assumed that if it was used in their territory, it was sufficient.  Rule 2: DHL case, 2011: French and European offices had issued a registration for WebShipping for guess what.  Where should relief be granted?  Court has int’l jurisdiction, so relief should be available through the EU. Two exceptions: when claimant didn’t seek relief outside the area; where there is no adverse effect by the challenged use on the function of the mark outside an area, for example where linguistic differences would prevent confusion. 

In last year, Sofa Works v. Sofaworkshop, involved British pushback.  Reasoning: use in Britain justifies inference of likely expansion through Britain. But that doesn’t justify an inference of likely expansion to Spain.  There are lots of products that simply won’t sell in Spain, e.g. British food.  Therefore, use in UK will not maintain CTM. However, there was confusion in Britain, and relief was granted for passing off.  Heavily criticized by TM offices, but it is beginning to ask the right questions about whether it makes sense to extend a mark to 500 million people and 23 languages when use is limited.  Another case: green e for car rental, confusing logos. Court grants relief only in the UK.  Claimant hadn’t provided evidence of confusion through EU, which would be really expensive to litigate.

Another example: names that are confusing to Germans, but not confusing because of semantic differences to English speakers.  Relief could be limited to Germans, but burden is on defendant to show that.  He thinks that’s the right burden approach, and the right question.

If purpose is to expand trade, we should recognize that TM is as much about social and commercial boundaries as it is about political boundaries. You play w/existing doctrine aggressively to test the premises.  Maybe consider Max Planck proposal to adopt something like concurrent use (after a sufficient period of nonexpansion by registrant). Unitary rights become less sensible, ironically, the larger the union gets. Be more conscious about diversity in 28 countries than 6.  If we do embrace unitary right, then you have to really think about institutional design, b/c it’s very hard for German judges or British judges to really think of themselves as the generic “European consumer,” esp. if they’re not in a European court with judges from other countries.  Would need more empirical evidence, contra recent British rejection of surveys.

Timothy R. Holbrook, Emory University School of Law, “Boundaries, Territoriality, and Patent Infringement Remedies”

Will the court demand clear statement of extraterritorial enforceability?  Age of digital products makes it more important.  ITC lacks jurisdiction to regulate transmission of digital files across borders. But in other cases, extraterritoriality occurs: use of a system, part of which is outside the US, can infringe so long as the control is in the US. You can infringe by offering to sell where the sale is contemplated to take place in the US, even if the sale doesn’t occur and the offer occurs in Norway. Overseas acts of inducement count if the acts of infringement are domestic.  Intent to assemble components overseas can lead to liability. So there’s a lot of inconsistency in Fed. Cir. jurisprudence. One area where they finally decide to draw the line, in the wrong place, is damages: you can’t get damages from foreign sales even if there is a predicate act of infringement in the US.  Idea is that patent damages are compensatory and patent rights are territorial.  Even if the infringement is the foreseeable but-for cause of the harm, Fed. Cir. has drawn the line at territoriality.  Courts say they don’t care about conflicts of laws, but the cases’ reasoning involve consideration of conflicts.

Mark A. Lemley, Stanford Law School, “Did eBay Irreparably Injure Trademark Law”

Four-factor test from eBay: whether and how it extends outside patent law.  Short answer: whether or not it should, it’s going to, as 2nd and 9th have done w/© law; 3 circuits have applied to TM; and if you read the TM statute it looks an awful lot like the patent statute: may grant injunctions in accordance w/ principles of equity. 

How do we apply eBay to TM cases?  Wants to suggest that policies of TM law are and should be pretty different from patent law, and that means we ought to be significantly more willing to grant injunctions even applying eBay, and that has actually occurred in the cases applying eBay to TM.

Four problems w/current application to TM: (1) eBay is intended as a flexible, case-specific test; no bright-line rules but balancing.  That said, 9th Circuit has said these are rules. You must show the presence of all four factors: irreparable harm, lack of remedy at law, balance of equities, public interest.  Second, we’ve made it really hard to prove irreparable injury. How would you prove injury?  My consumers were confused, maybe: they thought they were buying my product, but they were buying my competitor’s product and they were unhappy and they blamed me. There are problems w/that—it’s inherently hard to demonstrate actual confusion.  They might not know they’re confused if they don’t have anything to complain about.  [But can’t you show lost sales or lost reputation in those scenarios? And are competitors really the standard example:]  9th Circuit says that allowing confusion to substitute for harm would eliminate the irreparable injury requirement b/c likely success on the merits would then demonstrate irreparable injury. But if we take away evidence of consumer confusion, we’re tying at least one hand behind our back.  9th Circuit is also skeptical of reputational harm.  You can’t simply demonstrate that loss of control is irreparable injury; you need reputational harm evidence.  [Or at least evidence that the D’s product is bad—as I read the cases, that’s all the courts in the 9th Circuit are asking for.]  This is troubling esp. in combination with the gatekeeper inquiry.  

Many people have suggested we should presume irreparable injury; has some sympathy for that but we might not go that far. At a minimum,  need to be more flexible about what evidence can demonstrate actual injury.

Third, adequate remedy at law: in patent, copyright we have robust damages regimes. If you win your case, you will get money.  Even if there is no injury from patent infringement, b/c statute provides floor of reasonable royalty; so too in © w/statutory damages.  TM is very different. Normally doesn’t award damages as a result of TM infringement; traditional remedy was an injunction. Damages tend to be involved only when sales diversion has been shown, or when I can show that D is a willful infringer. In some circuits, this may be changing as a result of accident of 1999 statutory change about dilution, but still in the majority of circuits you won’t get damages most of the time you win your TM suit. Combined with difficulty of getting an injunction, we come to surprising conclusion that I can win my TM suit, show confusion, and win neither damages nor an injunction. Seems like a bad idea as a matter of law/equity and not consistent w/idea of existence of adequate remedy at law.

Final problem: the public interest: plays a pretty small role in most patent and © cases. There are occasional cases in which court sees a bad idea to grant an injunction, e.g. when the patentee owns a patent on sewage treatment and wants the city of Milwaukee to shut down the sewage treatment plant.  That’s not a good idea.  But mostly it’s between D and P. In TM law, if you won it’s b/c you showed that consumers were confused; a court that denies an injunction is saying that the consumers can continue in their confusion.  [This is why I’m ok with the rule that Lemley is not: much of the time, these conclusions are wrong/don’t matter to consumers.]

Return to pre-eBay is unlikely, and there are some benefits from its application. Case by case inquiry can help us look at difference b/t strong claim of infringement—counterfeit or knockoff—and more extreme extensions where the theory is that a completely unrelated product confuses consumers about some relationship with no bearing on a purchasing decision.  eBay can serve a positive role—weeding out unnecessary cases by weeding out the remedies. But to do so we’ve got to apply it in a flexible, case by case way, with a recognition that there is injury to P and to public in the core TM case.

Moderated by Shubham Mukherjee, Whirpool Corporation

Dinwoodie: both other papers ask whether there ought to be transcendental principles across borders or across types of IP. If courts are looking at extraterritoriality in patent in a more horizontal way, maybe the © cases can provide some guidance. Q what courts are really doing in eBay cases.

Lemley: not really clear b/c many courts don’t talk about eBay. Maybe b/c haven’t thought about it, or maybe b/c they think it’s so easy to satisfy they don’t discuss it.  When they talk about it, a minority grant injunctions.

Dinwoodie: TRIPS bars compulsory licensing in TMs.  If denying injunction = judicially created compulsory licensing, that might create an issue.

Lemley: no remedy isn’t the same as compulsory licensing (or is it?).  Dinwoodie is focused on geog. expansion. Wished you’d do more w/product expansion, which is equally important for clutter costs.   But is anything plausible in a world where so much is online?  I’m not directing my product to Spain, but everyone in Spain can see it, and it will be seen alongside the Spanish competitor and everyone else.

Dinwoodie: people have talked about the product scope extension more than geog, but it’s an important part of clutter, particularly in Europe b/c we don’t interrogate goods in the specification. In Europe, the list of goods/services is 50% larger for the same mark in Europe v. USPTO.  Internet: in theory, that’s important, but courts have become more restrained about the extent to which they’ve said that internet use is use everywhere. Both in EU and US.

Lemley: thinking about what we tie our royalty calculation to, and how that relates to our theory of harm or benefit. If making, using, selling, offering to sell is infringing, then maybe anything can trigger damages. But maybe the benefit someone gets is where they use it, not the fact that the salesperson happens to be sitting in the US to make a foreign sale for a use in a foreign country.  We’ve talked about the idea of a locus of infringement, where the harm is centered; a locus of injury or locus of benefit might help.

Holbrook: agreed.

Lemley: Dilution statute expressly says no damages unless willfulness; hard to say there’s an adequate remedy at law without damages; problems of proof in dilution are even harder than problems of proof in TM, b/c whole concept of blurring involves not being injured by one instance.  This combines to suggest that even if you do what I suggest re: eBay, we might be granting injunctions in fewer dilution cases, but not none—the consumer interest is nonexistent.  But no adequate remedy at law—he’d think courts would rebel against that, though 9th Circuit hasn’t.

McKenna: thinking about why the 9th Circuit decided to do this—there was a pretty significant time gap b/t eBay and the adoption in TM. Something about the brokenness of infringement doctrine—courts are increasingly skeptical there’s any harm; courts let the skepticism arise at the remedies stage. Hard to figure out how you talk about this without any recognition of the substantive standard. Herb Reed itself is a weird case where there might not be TM harm.

Lemley: Yeah, we might not love the finding of infringement in Herb Reed or San Miguel, but doesn’t think it’s considered decisionmaking but rather accident. Herb Reed is a preliminary injunction case.  They then in dictum say we should apply eBay b/c we require irreparable harm in © case and in permanent injunction TM cases; neither of the cited cases say what they say it says.

McKenna: if all the cases citing eBay are cases w/reservations about harm in general, that could be the driver.

Lemley: not citing eBay is more likely to be counterfeit, bad lawyer, default rather than choice of cases by judge.

Arti Rai: The Court is taking cases to make transubstantive law from the patent context where there hasn’t been percolation. Maybe disproportionate number of patent extraterritoriality cases creates impoverishment for the record—the district courts don’t have the opportunity to create as rich a record. 

Holbrook: good point.

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