(c), TM, and other claims from busted partnership to sell colored copper fixtures

Chiusa v. Stubenrauch, 2022 WL 2793579, No. 3:21-cv-00545 (M.D. Tenn. Jul. 15, 2022)

The parties in this case are former business associates, which is one reason there are so many different claims. Stubenrauch is the controlling member of CV, which makes and sells unusually colorful “residential fixtures and décor made from aged and/or etched copper.” 

examples of finishes from opinion

Chiusa is the owner and operator of CC, which “create[es] commercial websites and sell[s] various products for manufacturers.”

The parties worked together to launch a website selling Stubenrauch’s copper lampshades and mirrors. They then agreed that Chiusa would create and operate a website, colorcopper.com, marketing and distributing Stubenrauch’s copper sheets “to a new industry for copper countertops, bar tops and kitchen backsplash.” Though the parties went forward, “they never signed a formal written document memorializing and defining the nature of their business relationship.” [Reminds me of the recent Twitter meme: terrify your lawyer in five words. “There’s no written agreement” will do it.]

CC has a recent trademark registration for a design mark “consist[ing] of the stylized wording ‘COLOR COPPER.COM”, [with] a diamond shape between the wording ‘COLOR’ and ‘COPPER’ made up of four smaller diamonds, each diamond having a pattern inside of it,” COPPER.COM disclaimed.

Chiusa alleged that it was a normal supplier-distributor relationship, in which consumers would order through the colorcopper.com website he controlled, Stubenrauch and CV would then fill the order and usually dropship the finished product directly to the customer using Chiusa’s shipping account except when they shipped to Chiusa who’d send it on.

After nearly a decade, however, Stubenrauch contacted another man, Wasser, about creating a new website for CV. Stubenrauch told Wasser that he was free to use photos and text from Chiusa’s website. Chiusa eventually discovered this and declined an offer to work with Wasser, who allegedly “proceeded to misappropriate the moneys coming in through the website while never delivering any copper products to customers,” eventually “abscond[ing] with the money.”

Chiusa, allegedly concerned for his own reputation, took down CC’s http://www.colorcopper.com and also refused to sell the site to Stubenrauch. “In in an attempt to right the ship and offset his losses, Stubenrauch created a new website.” The new site, coloredcopper.com, apparenlty used many of the photographs that Chiusa had used and reproduced at least some portions of the original site’s text.

Chiusa has a copyright registration for the website obtained during this dispute. “The certificate expressly states that the ‘[p]revious version of the website’ is excluded from the registration, but that language is not accompanied by any clarification regarding which elements were new, and therefore (at least potentially) covered by the registration, and which were old, and therefore subject to the disclaimer.”  Chiusa also has a registration for a brochure, stating that he created “text, photograph(s), [and] artwork on p.1” therein. “The copy of the brochure deposited with the copyright office is 50 pages long and consists primarily of photographs depicting products and product features purportedly available from ‘ColorCopper.com.’”

The site also uses a logo that is allegedly too similar to CC’s logo.

“Stubenrauch also allegedly created a new website directly competing with another of Chiusa’s ventures,” an “ancillary business selling various types of epoxy products over the internet” under the trade name ULTRACLEAR EPOXY. Stubenrauch’s epoxy website also used language that appeared to be taken directly from Chiusa’s site. There’s a similar copyright registration for this site.

Chiusa’s claims: willful copyright infringement; breach of the oral distribution agreement; trademark infringement, false advertising, trade dress/trade name infringement, and false designation of origin undre the Lanham Act; a Tennessee Consumer Protection Act claim; and conversion.

Copyright: Defendants argued that plaintiffs didn’t sufficiently identify protected elements of the websites and brochure, given that the registrations provided “little, if any, guidance for sorting the claimed elements from the non-claimed elements. Moreover, there are likely some elements of the underlying works that are not only not Chiusa’s, but are not protectable by copyright at all…. [S]imple facts and common turns of phrase that appear in marketing materials—for example, about the features of a material or technology—are not protected by copyright.”

The court noted that functional/utilitarian features of marketing materials might be excluded from protection, citing Star Athletica.

Given the pleading standard, dismissal at this stage was not warranted, even though defendants might well be right that many elements of the underlying websites were purely functional and/or factual and are not entitled to copyright protection. “[O]ther elements, such as the visual depictions and creative verbal descriptions included on the websites and in the brochure, are plausibly entitled to protection. While the plaintiffs could have been more precise in breaking down all of the constituent elements for which they are asserting protection, . . . plaintiffs have specifically identified at least some plausibly protected elements in the websites and brochure that were replicated in some of the defendants’ materials,” including specific photos from the Chiusa website.

Likewise, the epoxy website included “a number of full sentences that appear verbatim (or nearly so) on the plaintiffs’ site,” e.g.:

[UltraClear epoxy/DuraClear™ epoxy] boasts the most advanced level of shine, gloss, reflectivity, clarity and depth, and it locks in those optical qualities forever. The most sophisticated system of synthetic polymeric-based protection available. Our Commercial-grade epoxy is engineered specifically for Bar Tops, Tabletops & Countertops.

This text contained “some creative elements that are plausibly entitled to protection, such that outright copying would be prohibited.” In a footnote, the court noted defendants’ argument that the overlapping text was selected for SEO reasons, not expression-based reasons, but the court declined to resolve whether that mattered to protectability, “because the plaintiffs have sufficiently pleaded infringement of other elements.” Still, “the cited text is neither an unintelligible list of keywords nor separate from the user-facing portions of the websites, and the defendants identify no caselaw suggesting that such language becomes exempt from copyright protection merely because its author had search engine results in mind, among the other functions of the text, when writing it.”

Likewise, at this stage only, the court rejected the argument that plaintiffs failed to plead ownership of the copied elements. At least for the copper website and the brochure, the delay in registration could prevent any presumption of ownership based on the prima facie validity of the registration.  “The lack of that presumption, however, is primarily a hindrance to a plaintiff’s ability to make his case, not his ability to plead it. Regardless of any delay in seeking registration, a plaintiff can state a claim by sufficiently pleading actual ownership.” At this stage, the bare-bones allegations that the “copyrighted pictures, images, text, and artwork embodied” in the websites and brochure were “either created, taken, bought by, or assigned to” the plaintiffs were barely enough, given that it was plausible that plaintiffs might have come to hold the rights to different elements in different ways, e.g., Chiusa could have written some text himself, purchased rights to a photo, and commissioned another photo as a work for hire.

The court cautioned that it was paying attention to the ownership issue, resolution of which would likely require “considerably more detail than they have pleaded.” Still, “defendants have not identified any caselaw suggesting that, in order to state a plausible claim for relief for copyright infringement, a plaintiff must plead not only ownership itself but also the detailed story of how the plaintiff obtained that ownership.”

Trademark: Defendants argued that “color copper” is just an ordinary and straightforward way to describe copper that has been treated to have a striking color. At this stage, the court need not resolve whether plaintiffs pled—or could prove—any rights in “color copper” the phrase on its own or colorcopper.com, the registered design mark sufficed to plead ownership of a protectable mark. The registration was rebuttably presumed valid.

As to the phrase “color copper,” the court rejected plaintiffs’ argument that it was arbitrary. Plaintiffs reaosned that “a mere description of the copper would refer to it as ‘colored’ or ‘colorful,’ rather than using ‘color’ as an adjective.” [Note effects on the scope of their rights against descriptive uses.] No: “a grammatically flawed description is still a description. A consumer who heard the phrase ‘color copper’ would reasonably assume that it referred to copper that was, for some reason, not the ordinary color—and they would be correct.” Still, plaintiffs plausibly pled secondary meaning [at least of the design mark, I think[ and also plausibly pled that at least some of defendants’ materials infringed.

comparison of marks

The similarities in logos weren’t limited to the two-letter difference in the word element; both used descending font sizes, all caps, bright colors for “Color” or “Colored,” followed by a duller tone for “copper.com” And each logo used a pictorial design consisting of four squares in similar, although not identical, colors and patterns evocative of the underlying copper products; “indeed, the defendants’ logo of stacked squares looks somewhat like a person simply shuffled the plaintiffs’ logo squares together. It is entirely plausible that an ordinary, unsophisticated consumer could be confused by these similarities.”

Nonetheless, the court cautioned that “defendants’ arguments, although not sufficient to warrant dismissal of the plaintiffs’ claims, raise serious and real issues about the boundaries of the plaintiffs’ rights that may well persist in this case”:

The plaintiffs have no authority to prevent any competitor from using ordinary language to describe colorful copper. Nor do they have any right to prevent a competitor from adopting a non-confusing name or logo that, like theirs, evokes the features of multicolored copper products. There are, therefore, significant limits to what the plaintiffs can expect to prevent the defendants from doing. The court’s holding therefore should not be construed to suggest that the plaintiffs are likely to establish rights that are nearly as broad as they seek. What matters for the purposes of Rule 12(b)(6), however, is whether the plaintiffs have plausibly alleged some trademark infringement, and they have done so. The court therefore will not dismiss those claims.

A nice statement that should probably guide the parties’ discussions.

Trade dress: Plaintiffs didn’t provide much detail about what they meant by that; the epoxy websites looked nothing like each other. While the copper websites looked more similar, “most instances of resemblance arise out of the use of the allegedly copyright-protected photographs. While those uses may be illegal under copyright law, it is implausible that those photographs themselves are distinctive in the marketplace as signals of the origin of the underlying goods, and the First Amended Complaint provides no meaningful basis for reaching such a conclusion.” Given the breadth of trade dress, plaintiffs are under more of a burden to tell courts what they mean when they use the phrase in pleading infringement. In particular, they should, to the extent feasible, “separate[ ] out and identif[y] in a list” each of the “discrete elements which make up th[e] combination” of features that the plaintiffs seek to protect. They did not do so here, so the court dismissed the trade dress claims.

False advertising: The allegations identified “merely describe the supposed underlying trademark infringement.” The plaintiffs speculated that defendants made false claims about their epoxy, but didn’t include any factual allegations supporting that. The plaintiffs therefore have not identified any basis for supporting a claim for false advertising that is not wholly redundant with their trademark infringement claims.” Dismissed.

Trade name infringement: Not a separate claim. At this stage in our trademark jurisprudence, “a ‘trade name’ is not a distinct piece of intellectual property that can be ‘infringed’ distinctly from its protectability as a trademark.” It may be a distinct concept, but it does not create a distinct cause of action. Also dismissed.

False designation of origin: This, by contrast, is listed in the statute, but,

[a]s a practical matter, … the issue typically comes up ony when the nature of a particular allegation is such that there may have been a false designation of origin distinct from simply infringing on another’s trademark and creating confusion about a product’s source. For example, false designation of origin may come up, distinctly from trademark infringement, when a seller has falsely attributed a product to a particular geographic location or particular artisan. Allegations of that sort, however, are not at issue in this case.

So was this just another label for trademark infringement? The plaintiffs argued that they were alleging that “Stubenrauch and CV falsely designated themselves as the authors of the Infringing CV Website and the Infringing Epoxy Website, as well as the actual services offered on Plaintiffs’ Websites. Thusly failing to properly designate Plaintiffs as the author and the source of the services being advertised on Plaintiffs’ Websites is a material misrepresentation as to the origination of the Works embodied in the Infringing CV Website and the Infringing Epoxy Website which creates a likelihood of confusion that mistakenly causes the public to draw the conclusion that Mr. Stubenrauch and CV are the authors of the Works.”

Dastar definitively bars this kind of claim as to goods. Can plaintiffs successfully characterize this as a claim about services to evade Dastar? I think plainly not, given that consumers aren’t buying the service of website design from defendants, and defendants are in fact both the origin of the goods and of any services related to delivering the goods—the only things that consumers plausibly buy. The various Sound Choice cases are pretty clear on this point, which is reinforced by the fact that the only likely confusion actually alleged in the above quote is about the authorship of the works.

True, the reference to “services” allowed “a false designation of origin claim that is redundant with trademark infringement.” I think the court should have asked “which services have their origin allegedly falsely designated in this theory?”

Still, that doesn’t matter very much, and the court was very clear that any claim “based on a false statement of authorship of a creative work—like a website—should be brought pursuant to copyright laws, not the Lanham Act.” Thus, the false designation of origin claim was dismissed, without prejudice to plaintiffs’ ability to rely on “potentially overlapping arguments” in support of their trademark infringement claims. [A little confusingly stated, but I think overall it’s clear that the court will allow traditional trademark claims but not reverse passing off claims based only on the presence of copied material.]

TCPA: Defendants’ conduct was covered by the TCPA to the extent that it replicated the Lanham Act claim that survived. They argued, however, that plaintiffs didn’t sufficiently allege ascertainable loss, as required by the TCPA. Under that law, “[a]n ascertainable loss is a deprivation, detriment, or injury that is capable of being discovered, observed, or established.” This was a potential problem because the parties were not in competition by the time the defendants took their allegedly improper actions.

The plaintiffs were only ever in the colorful copper business because they were distributing the defendants’ products in conjunction with the defendant, and they stopped doing so in connection with the Wasser situation—not the later alleged infringement. The plaintiffs, at least according to the story told in the First Amended Complaint, did not have an independent competing operation that could be harmed by the infringement in real time. No sale has gone to the defendants that could have gone to the plaintiffs.

The court thought it was still “possible” to identify an ascertainable injury in such circumstances, but plaintiffs hadn’t done so. Conclusory language of injury “might be sufficient in a case in which the facts themselves make the nature of the underlying damages obvious. In this instance, however, more explanation was required.” Mere invasion of a right was insufficient under the TCPA without ascertainable harm.

I ask again, as I often do: why doesn’t this problem also defeat Article III standing for trademark infringement?

Breach of contract: Dismissed for contract reasons: plaintiffs didn’t explain what conduct constituted breach.

Conversion: Dismissed because all allegedly appropriated property was intangible and not subject to the conversion cause of action. Even ignoring the preempted copying-copyrighted-material allegations, registering a different, similar domain name does not constitute conversion of an existing domain name.