Monday, June 17, 2019

Uncommon sense on the presumptions granted by registration

Uncommon, LLC v. Spigen, Inc., No. 18-1917 (7th Cir. Jun. 11, 2019)

The PTO has sometimes found “capsule” merely descriptive of cellphone cases, but it also allowed Uncommon to register CAPSULE for such cases in 2013.   (A prior registration for “capsule” for such cases was cancelled in 2015 for failure to renew.)  Uncommon sued a rival, Spigen, that also used the term and had done so since 2010, with no knowledge of Uncommon’s use. Spigen applied to register “Capsule Capella,” “Capsule Solid,” and “Air Capsule,” but the PTO decided that “capsule” was descriptive. Capsule Solid ended up on the Supplemental Register, and the PTO required Spigen to disclaim “capsule” for Capsule Capella.  It also initially refused “Rugged Capsule” and “Capsuled Ultra Rugged” on grounds of descriptiveness and confusion with Uncommon’s mark; those applications had been suspending pending this litigation. The district court granted Spigen summary judgment and the court of appeals affirmed, saying some things about registration.
the accused cases

Uncommon's cases

Spigen produced a survey to prove that consumers didn’t associate “capsule” with Uncommon’s cases, and it erroneously disclosed the person who conducted the survey as a “non-testifying expert.” Admitting the survey anyway wasn’t an abuse of discretion on these “unusual” facts, because Uncommon gamed the system by not seeking discovery or other corrective measures when the error became manifest, and it was reasonable to call the error harmless.  (The court suggested that it also would’ve been fine to exclude the survey: survey evidence generally requires a foundation, which will require expert testimony.)

With the survey, there was no genuine issue of material fact: the registration was invalid and there was no mark to protect, or any likelihood of consumer confusion.

The registration was prima facie evidence of validity.  It allowed one of two presumptions, but not both: if the mark was registered without a requirement of showing secondary meaning, it would be presumed inherently distinctive; if it was registered as descriptive with secondary meaning, it would be presumed to have such meaning. Since Uncommon didn’t register under §2(f), the presumption was of suggestiveness.

The Seventh Circuit has said that the presumption is “easily rebuttable, since it merely shifts the burden of production to the alleged infringer.” The presumption “evaporates,” or “burst[s],” when the challenger presents evidence of invalidity.  Some have criticized this approach; though the Seventh Circuit doesn’t say so explicitly (somewhat surprisingly, given the general frankness of that court’s approach), the PTO’s inconsistent practice here demonstrates the wisdom of the Seventh Circuit’s rule. Fundamentally, examination is not nearly as rigorous as the testing provided by litigation, and where B&B preclusion doesn’t apply, it makes sense to take another look once the challenger has provided reason to do so.  (Of course, this doesn’t help much for incontestable registrations, whether or not registered under §2(f), but you do what you can.)  But anyway, even if Spigen had both burdens, production and persuasion, it would win here.

A descriptive mark “need not describe the product completely, but it must depict an important characteristic of the product.” By contrast, a suggestive mark “requires the observer or listener to use imagination and perception to determine the nature of the goods.” Drawing the line can be done by looking at “how, and how often, the relevant market uses the word in question.” The answer is a lot, and descriptively.  At least ten competitors used the word in their case names; one was even named Capsule Case Corp.  Previous cases have used the prevalence of “bliss” in the beauty care market and “platinum” in the financial services market to deem those terms descriptive; so too here.

Uncommon argued that these were all infringers “freeloading on Uncommon’s good reputation with consumers.” But there was no evidence of such a good reputation, or even evidence of copying. Uncommon also argued that, in the internet age, people throw lots of words into their product names to get hits, so competitors’ use of the term should be discounted.  That didn’t make sense; in fact, the example showed lots of descriptive terms packed into a long name.

Likewise, using the imagination test, “capsule” was descriptive.  “The mark directly conveys an idea: coverage, storage, protection—encapsulation—all of which the cellphone cases provide, according to Uncommon’s registration.” It didn’t depend on the technical meaning of capsule.  The Seventh Circuit is also dubious about using dictionaries, “because dictionaries often cite historical and dated definitions.”  But the dictionary here reaffirmed what the market’s use and imagination test already revealed: “capsule” describes cellphone cases. Spigen’s evidence included definitions like: “a small case, envelope, or covering,” “any object that can be used to hold things,” and a “small container.” “A cellphone case obviously fits the bill.”  The district court shouldn’t have relied heavily on them, but they weren’t “obscure, functionally irrelevant, or out-of-date” and could legitimately constitute “a piece of the puzzle.” Thus, “if, hypothetically, consulting dictionaries revealed that they do not define ‘capsule’ in a manner that so easily fits cellphone cases, Uncommon might have evidence in its favor. A factfinder could potentially infer from such omissions that ‘capsule’ does not describe cellphone cases.”

The court of appeals declined to rely on third-party registrations.  The PTO granted Vatra’s registration and Uncommon’s, but “more often than not, and more recently,” it decided that “capsule” was merely descriptive.  “[G]iven the internal inconsistency, we find little that can be reasonably gleaned from the Office’s registration decisions.”  [Which is why the bubble-bursting presumption is a good one.]

Uncommon had one more bad argument, which was that, because “capsule” could describe an array of products, it couldn’t be descriptive. Although some circuits—including, appallingly, the Second—have endorsed this reasoning, the Seventh has it right.  “A term need not ‘bring to mind the product in question’ to be descriptive, nor must it ‘depict the [product] itself.’ It is enough that the mark in fact ‘refers to a characteristic of the’ product.” 

Uncommon relatedly pointed to the survey, which showed that consumers don’tt often associate “capsule” with cellphone cases (only 14 percent of the time). Again: “A descriptive mark need not immediately invoke in the consumer’s mind the product itself; it must directly convey a characteristic of the product.” Thus, “Work-N-Play” as a name for vehicles with convertible interiors was descriptive not because consumers quickly associate “Work-N-Play” with interior-convertible vans, but because the vans were in fact “usable both for work and for play.” “Consumers may not immediately think ‘cellphone cases’ when they hear ‘capsule,’ but ‘capsule’ describes a quality of cellphone cases all the same.”  [Other courts, please take heed. Big is descriptive for every one of the many, many things that are big.]

With the registration’s presumption of inherent distinctiveness rebutted, the court turned to secondary meaning.  Since it wasn’t a §2(f) registration, there was no presumption here.  Spigen submitted one of the more “helpful” kinds of evidence: the survey, which showed that very few customers (six percent) were familiar with “capsule” as a brand name; only slightly more (14 percent) could connect the mark to cellphone cases when prompted; and barely any (less than one percent) associated “capsule” with Uncommon. Even assuming that manner and length of use favored Uncommon, no factfinder could reasonably decide that a substantial number of consumers think of “capsule” as the product of one cellphone-case maker.

Uncommon argued that, because “capsule” had a similar amount of consumer recognition as a few other brands in the survey, it had “reached a level of distinctiveness.” No, because none of the “capsule” comparators had much recognition either (citing McCarthy and past judicial requirements of at least 37% recognition).

Confusion was also unlikely. “[V]iewing the record in  Uncommon’s favor, as we must, the similarity of the marks favors Uncommon, albeit slightly,” as did product similarity and area/manner of use (they’re sold nationwide through online retailers).  “But the inference to which Uncommon is entitled is not a strong one. Selling through Amazon and eBay is ubiquitous, and it is hard to devise a more generalized customer base than nationwide cellphone owners.”  The products were cheap, meaning consumers wouldn’t exercise much care.

But the remaining factors decisively favored Spigen, particularly strength.  The court of appeals called “capsule” a “weak mark,” but of course, lacking inherent or acquired distinctiveness, it is not a mark at all.  There was no other evidence of the marketing power of the mark, and neither party’s cases featured “capsule” prominently.”We fail to see how there is a likelihood of confusion caused by a mark that is hardly featured.” There was also no evidence of actual consumer confusion or an attempt to pass off. “The marks are, at most, barely similar, and they are too weak to confuse any purchaser, especially in the absence of evidence of any intentional freeloading.” 

[On this record, they’re not marks!  You were doing so well!  I suspect the desire to call these terms “marks” has to do with the abandonment of passing off as a separate tort, as indicated by the repeated reference to intentional copying—the court of appeals has in the back of its collective mind that maybe sometimes intentionally confusing copying (as opposed to copying to achieve some non-reputation-related reason, like the fact that “capsule” is a useful descriptive term) should be actionable.  But you don’t actually need a “mark” to make that tort work, as Mark McKenna often reminds us.]

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