LIKELIHOOD OF CONFUSION®

The Supreme Court handed down a huge decision in copyright law today, ruling in Kirtsaeng v. John Wiley & Sons, Inc. that the first sale doctrine, which allows for legally acquired copyright-protected works (or, in trademark, goods bearing a trademark) to be resold by their owners, applies to works made overseas — notwithstanding language in the Copyright Act that many courts had held suggested otherwise.

My first involvement in litigation centered on this question was in a case called Pearson v. Textbook Discounters in the Southern District of New York.  It is one of many such cases that had been brought by textbook publishers against resellers of “foreign editions” of American textbooks.  At the time, despite some questioning in a number of decisions, the overwhelming trend (especially in that District) was in favor of the publishers’ efforts to utilize a provision of the Copyright Act to control prices charged to American students for their college textbooks by forbidding the domestic sale of cheaper — but materially identical — versions for the overseas market.  Eric Goldman explains well in this 2009 post about another case Pearson and other publishers brought at the same time, Pearson Education, Inc. v. Liu, 2009 WL 3064779 (S.D.N.Y. Sept. 25, 2009):

Defendants are book resellers participating on various websites under the alias “JMBooks.” They purchase legitimate copies of cheaper international editions of textbooks, ship them to the US, and then resell them online to US students in competition with the US editions of the same textbooks. The court describes the differences between the international and US editions:

The textbooks plaintiffs publish are customized for the geographical markets in which they are sold. Editions authorized for sale in the United States are of the highest quality, and are printed with strong, hard-cover bindings with glossy protective coatings. Sometimes, plaintiffs include academic supplements, such as CD-ROMs or passwords to restricted websites, with these books. Editions authorized for sale outside of the United States, by contrast, have thinner paper, different bindings, different cover and jacket designs, fewer ink colors, and lower-quality photographs and graphics. These foreign editions are not bundled with academic supplements such as CD-ROMs. The cover of a foreign edition may include a legend indicating that the book is a “Low Price Edition” or only authorized for sale in a particular country or geographic region.  The foreign editions are uniformly manufactured outside the United States.

Students usually purchase a textbook only because the instructor required it, and even then they expect to “enjoy” the textbook for only [one] quarter or semester. So many students may not care about the lower quality printing or absence of various supplements, in which case the international editions could serve as a viable and cost-effective substitute for the US editions. Accordingly, Internet resale of the international editions creates a major channel conflict for the publishers and destroys their efforts to price discriminate by geography.

To block this substitution (in technical speak, to stop the parallel importation of the grey market goods), the publishers invoke the importation right in copyright law (17 USC 602). The defendants respond that the importation right, like the distribution right in 106(3), is subject to the First Sale limitations in Sec. 109(a). If so, the defendants hoped to take advantage of the fact that they bought legitimate copies of the international editions to allow them to freely resell those copies to US buyers.

That hope wasn’t working out so well.  I had hoped, therefore, to get my client out of New York court.  I argued for dismissal on the ground of personal jurisdiction, based on the fact that my client had nothing to do with the place. That didn’t stop me, however, from hinting broadly to the judge that maybe the underlying claims — which, believe it or not, including claims of trademark infringement — stunk anyway, as I wrote in my moving brief (indulge me here!):

This lawsuit alleges a number of causes of action against defendants, who are in the business of lawfully buying the foreign editions of textbooks published by plaintiffs for overseas use, and making them available for sale to American students seeking lower cost alternatives to the “United States Editions” of those books.    The Complaint goes to great lengths to explain why the U.S. editions are much more valuable to those students – e.g., because they offer features such as better quality paper, online resources, ribbon bookmarks, prettier covers and “different” bindings.   In contrast, the “Foreign Editions” of these works lack these qualities and, of primary concern to plaintiffs, are a lot cheaper to produce and thus can be sold at a profit in poorer lands.

Plaintiffs, however, insist that they stay there.  They allege that the law of copyright, trademark and unfair competition make it unlawful for American students, whether or not burdened by the expense of higher education, to economize by buying the cheaper books published by plaintiff but intended for use only by foreigners.

Based on the silence of the Complaint as to the matter of choice, it appears that the publisher plaintiffs have no interest in whether these students or their parents want to, or can, pay the premium plaintiffs charge for sturdy paper, online supplements, graphic design or impressive ribbons sewn right into the binding. Textbook publishers such as plaintiffs are insulated from such concerns in general, because unlike typical consumers, purchasers of academic textbooks have no control over what texts they will be required to utilize in their studies; that is determined by their instructors.  Read More…

First posted on May 13, 2012.In the previous INTA post I raised the question of how a significant session discussing a significant topic — the effect of developments in keyword advertising cases on trademark rights on May 9th, the first day of the 2012 Annual Meeting — could have been so seriously skewed.  I promised, as they say in Washington (but not the way they mean it when they say it), to extend and  clarify my remarks.

I linked to this item from Managing Intellectual Property, the really interesting part of which will be discussed in another post.  We’ll start there, however:

More than 1,400 attendees crowded into a session on keyword advertising yesterday, where Rosetta Stone counsel John Ramsey and other panelists shared their frustrations about the issue and also faced tough questions about the proper legal approach.

Ramsey could not discuss specifics of the company’s closely watched case with Google over trademarks as keywords in sponsored ads, but he explained to attendees the aggravation the brand has experienced over search results incorporating the ROSETTA STONE trademark that managed to appear above links to the company’s authentic site.

Ramsey has every right to be aggravated:  Rosetta Stone has a serious counterfeiting problem; the real actors are essentially untouchable; and it sure as heck seems as if Google is making money off it by taking the pirates’ money for display advertising.

I am not unsympathetic to the concept that intermediaries — at some level — should be held to account for their actions; as regular readers know to death by now, I have long advocated that secondary liability attach to eBay for its comparable role in this process, and remain at odds with many, including the Second Circuit, on this topic.  I was also involved in early efforts, not all of which I can disclose, to get at what seems to be willful blindness by at least some credit-card issuers – an effort regarding which, of course, some small results have finally been achieved by others.

On the other hand, as an outgrowth of my work defending entrepreneurs against fallacious trademark claims based on “unauthorized distribution” of branded merchandise as well as my First Amendment work involving bloggers, I have had the opportunity to see the Lanham Act misused a slightly different way:  As a would-be workaround of the safe harbor provision of Section 230 of the CDA.  That is, they are state-law defamation claim dressed up as federal trademark infringement suits.

Now, as dissimilar as Google and eBay may be in their purported roles as secondary infringers, gripe sites in Section 230 cases are yet another increment less similar.

Yet the claims against all three types of defendants raise related issues:

• Infringement allegedly arising out of SEO-related techniques, such as keyword purchases, metatags and supposed “black hat” SEO
• Network or affiliate marketing where the ad content is not controlled by the defendant
• Claims of consumer confusion based on affiliation or sponsorship arising out of such advertisements

Would the distinction among fact patterns and defendants be acknowledged in this discussion, which was advertised as addressing SEO in trademark infringement but whose focus was the arguably unique (and, by the way, pending) case of Google v. Rosetta Stone?  I was quite interested in this panel and not unsympathetic to Rosetta’s plight.  Yet.

My heart sank, however, when I heard John Ramsey–however understandably–utilizing the loaded vocabulary of advocacy, not reflection:  Defendants in SEO cases operate “rogue websites”; they use “black hat SEO”: they are guilty of the well-known tort of “diversion.”  Well, okay:  Rosetta is dealing with rogue sites utilizing black hat SEO that diverts traffic to trademark infringers.  Really.

But while the use of these terms by the man responsble for solving Rosetta’s counterfeiting problem is understandable, they colored the presentation at the outset.  Not that hardly anyone else seemed to mind.  Let’s put it this way:  When I turned to a neighbor sitting with me in the front row and made some comment about where this panel seemed to be going, a fellow behind me sneered, “What do you, work for Google or something?”

Read More…

Originally posted 2005-09-08 01:30:05. Republished by Blog Post Promoter

Google and Geico have settled.

Originally posted 2011-02-01 12:46:49. Republished by Blog Post Promoter

The threat from abroad?!

During my traditional end-of-December goof-off here I didn’t pay adequate attention to the important non-ruling in Costco v. Omega, which involves an issue I have had some involvement in.  That is the application of the First Sale Doctrine in copyright to what I think should be considered the specious category of “overseas only” copyright-protected material.  It’s another “diversion” play.  I think they’re all nonsense.  But unlike most diversion nonsense, this bit may have a statutory basis that has to be addressed.  Our Supreme Court … didn’t.  And neither did LIKELIHOOD OF CONFUSION®, but then again, I don’t get the big bucks to like those guys.

The other difference is I can just wing it, or, worse, crib from someone else.  So, as is so often the case when I miss one like that, however, I get the advantage of, well, copying from someone else.  Here’s some of what Richard Bergovoy has to say about it:

The United States Supreme Court deadlocked 4-4 on the question of whether the “first sale doctrine” permits copyrighted goods manufactured overseas but not authorized for sale in the United States to be sold here on the “gray market,” upholding a Ninth Circuit opinion which ruled in favor of the copyright owner that the doctrine does not apply.

The unsigned opinion in Costco Wholesale Corp. v. Omega S.A. was one of the shortest in the Court’s history: “The judgment is affirmed by an equally divided Court.” . . .

The case involved Omega Seamaster watches manufactured in Switzerland that were engraved on the underside with a US copyrighted “Omega Globe Design.” Omega sold the watches only for distribution in South America, but they found their way to the United States, where they were resold by Costco stores in California at a price of $1,299, compared to the $1,999 suggested retail price for authorized US resellers.

Omega sued Costco for copyright infringement on the grounds that Costco’s unauthorized sales of the Seamaster watches infringed Omega’s exclusive right under Section 106(3) of the Copyright Act of 1976 to distribute its work by sale, rental, lease, or lending.

Costco countered that Omega’s exclusive distribution right was preempted by the so-called first sale doctrine of Section 109(a) of the Copyright Act, which states that, “the owner of a particular copy…lawfully made” within the meaning of the Copyright Act is not subject to Section 106(3), so that once a copyright owner consents to the sale of its work, it loses its distribution right with respect to those copies, and the purchaser is free to transfer ownership in any way it wishes. . . .

Although the case was widely anticipated by both copyright owners (movie studios, record companies) and luxury goods manufacturers on the one hand, and retailers on the other hand, to bring clarity to the often tangled law of gray market goods, the Court’s split left in place the Ninth Circuit’s opinion for that circuit only, but set forth no single national standard and created no Supreme Court precedent. It is likely the Court will need to revisit the issue.

Similarly, in another widely anticipated IP case, delivered in June, the Court in Bilski v. Kappos fractured into three separate but overlapping opinions without setting forth a clarifying standard for what is patentable subject matter in the digital age.

Takeaway: For cases arising in the jurisdiction of the Ninth Circuit . . ., copyright owners will be able to pursue copyright infringement lawsuits against gray market sellers of their copyrighted goods that they manufactured overseas, and did not authorize for resale in the United States. Although not addressed in the Costco case, note that manufacturers may also have rights to sue gray market sellers under trademark law (the Lanham Act) to prevent US sales of their trademarked goods, if there is any material difference between the foreign version and the authorized US version, such as different product features or warranty coverage.

I don’t think I like it.

Originally posted 2010-06-28 01:00:01. Republished by Blog Post Promoter

Let's hear it for New York

Judge Harold Baer of the U.S. District Court for the Southern District of New York (the “home court” for LIKELIHOOD OF CONFUSION®)  has never been afraid to stick his neck out, at least a little bit.  He’s done it this time in the battle of, or rather by, the brands against trademark counterfeiting.   In a decision dated June 23rd, Judge Baer has bucked the trend against finding secondary trademark liability against hardly any party that profits from counterfeiting by denying a motion to dismiss claims of contributory trademark infringement brought by Gucci against a group of credit card processing companies in Gucci America Inc. v. Frontline Processing Corp., et al. (The decision is here.)

This is a favorite topic of mine, and obviously a still developing area of law.  Three years ago almost to the day I wrote the following in these very pixels:

Reuters reports that in Perfect 10, Inc. v. Visa Intl. Serv. Assn., 494 F.3d 788, 793 (9th Cir. 2007) the Ninth Circuit has affirmed (opinion here), 2-1, a ruling that there is no third-party copyright or trademark liability for credit card companies such as Visa and MasterCard or the banks that process their transactions, arising from their central — essential, really — role in the sale of counterfeit merchandise (including, as in this case, unauthorized copies of dirty pictures) on the Internet:

Writing for the majority, Judge Milan Smith Jr. said credit card processors, unlike Web search providers, do not direct online traffic. “They in no way assist or enable Internet users to locate infringing material, and they do not distribute it,” Smith wrote.“Here, the infringement rests on the reproduction, alteration, display and distribution of Perfect 10′s images over the Internet,” Smith wrote.

If you didn’t guess from the title, I disagree with this. Why do judges keep missing this? The credit card companies are very much in the profit chain of infringing websites — websites that do nothing but sell counterfeit goods — and they make no serious effort, even when notified, to prevent this activity from occurring. . . . I’m not alone; not by a long shot. The dissenter? Only Alex Kozinski, who also recognizes that the majority errs — really, in my view, demonstrates real intellectual dishonesty — in that they

recognize, as they must, that helping consumers locate infringing content can constitute contributory infringement but they consign the means of payment to secondary status. … But why is locating infringing images more central to infringement than paying for them?

Here Judge Baer, considering the facts as alleged in the Gucci case, had no problem overcoming the high (too high, I’ve argued) standard set by the Second Circuit in Tiffany v. eBay for a finding of  ”willful blindness“:

Here, Gucci has made substantial factual allegations about the knowledge of all three defendants.   Read More…

Revised from Friday’s original post.

In the previous INTA post I raised the question of how a significant session discussing a significant topic — the effect of developments in keyword advertising cases on trademark rights on May 9th, the first day of the 2012 Annual Meeting — could have been so seriously skewed.  I promised, as they say in Washington (but not the way they mean it when they say it), to extend and  clarify my remarks.

I linked to this item from Managing Intellectual Property, the really interesting part of which will be discussed in another post.  We’ll start there, however:

More than 1,400 attendees crowded into a session on keyword advertising yesterday, where Rosetta Stone counsel John Ramsey and other panelists shared their frustrations about the issue and also faced tough questions about the proper legal approach.

Ramsey could not discuss specifics of the company’s closely watched case with Google over trademarks as keywords in sponsored ads, but he explained to attendees the aggravation the brand has experienced over search results incorporating the ROSETTA STONE trademark that managed to appear above links to the company’s authentic site.

Ramsey has every right to be aggravated:  Rosetta Stone has a serious counterfeiting problem; the real actors are essentially untouchable; and it sure as heck seems as if Google is making money off it by taking the pirates’ money for display advertising.

I am not unsympathetic to the concept that intermediaries — at some level — should be held to account for their actions; as regular readers know to death by now, I have long advocated that secondary liability attach to eBay for its comparable role in this process, and remain at odds with many, including the Second Circuit, on this topic.  I was also involved in early efforts, not all of which I can disclose, to get at what seems to be willful blindness by at least some credit-card issuers – an effort regarding which, of course, some small results have finally been achieved by others.

On the other hand, as an outgrowth of my work defending entrepreneurs against fallacious trademark claims based on “unauthorized distribution” of branded merchandise as well as my First Amendment work involving bloggers, I have had the opportunity to see the Lanham Act misused a slightly different way:  As a would-be workaround of the safe harbor provision of Section 230 of the CDA.  That is, they are state-law defamation claim dressed up as federal trademark infringement suits.

Now, as dissimilar as Google and eBay may be in their purported roles as secondary infringers, gripe sites in Section 230 cases are yet another increment less similar.

Yet the claims against all three types of defendants raise related issues:

• Infringement allegedly arising out of SEO-related techniques, such as keyword purchases, metatags and supposed “black hat” SEO
• Network or affiliate marketing where the ad content is not controlled by the defendant
• Claims of consumer confusion based on affiliation or sponsorship arising out of such advertisements

Would the distinction among fact patterns and defendants be acknowledged in this discussion, which was advertised as addressing SEO in trademark infringement but whose focus was the arguably unique (and, by the way, pending) case of Google v. Rosetta Stone?  I was quite interested in this panel and not unsympathetic to Rosetta’s plight.  Yet.

My heart sank, however, when I heard John Ramsey — however understandably — utilizing the loaded vocabulary of advocacy, not reflection:  Defendants in SEO cases operate “rogue websites”; they use “black hat SEO”: they are guilty of the well-known tort of “diversion.”  Well, okay:  Rosetta is dealing with rogue sites utilizing black hat SEO that diverts traffic to trademark infringers.  Really.

But while the use of these terms by the man responsble for solving Rosetta’s counterfeiting problem is understandable, they colored the presentation at the outset.  Not that hardly anyone else seemed to mind.  Let’s put it this way:  When I turned to a neighbor sitting with me in the front row and made some comment about where this panel seemed to be going, a fellow behind me sneered, “What do you, work for Google or something?”

Read More…

Originally posted 2006-01-22 12:59:35. Republished by Blog Post Promoter

I was on a panel called “Trademark Rights vs. Free Speech” at the Fall 2000 INTA Trademarks in Cyberspace Conference with Marty Schwimmer and David Bernstein. (Five years later I’m still glowing from the reflected brilliance!) The moderator was IP superstar Brendan O’Rourke, who cruelly, on-the-record, and correctly reminded me, “Ron, you lost the Jews for Jesus case, okay? Okay?” Yeah, well, okay. But that doesn’t mean the next guy–in this case, Google–has to! The “Jews for Jesus Whistle Blower” writes, at his Jews for Jesus blog:

Google has a few more days to respond to Jews for Jesus’ lawsuit over the rights to a blog. I bet Jews for Jesus is praying ferverently (and keeping their collective fingers crossed) that Google will give in. What is the likelihood that Google will set a precedent that all anyone has to do is sue Google and they’ll give in? Seems to me that Google is principled. And if they are willing to defend themselves against the government, there’s a good chance they’ll defend themselves against Jews for Jesus.

If Google doesn’t give in, will Jews for Jesus wilt? How much money do they have to pursue the control of a simple blog?

WB, they have plenty of money, and, as you cannily point out, they’re using this litigation to raise more. Jews for Jesus claimed (off the record) during the Brodsky litigation to have raised more in sympathetic donations than they spent on Thelen Reid’s legal fees. We’ll never know if that was true, but it’s food for thought.

As far as the “other side” went, although Steve Brodsky was the sole defendant and there was nothing but the most casual (well, and virtual) link between him and Rabbi Toviah Singer, certainly the two were aligned sympathetically. Rabbi Singer later told me that as a result of the controversy and the traffic that was generated as a result of the publicity for his website, a number of Messianic Jews (i.e., Christians with gefilte fish) returned to the Jewish fold. Maybe he was able to raise a dollar or too himself.

It is fair enough to say that the litigation was more helpful for J4J than it was for either Steve Brodsky, Rabbi singer or anti-J4J missionaries. The real loser, of course, was the law of trademark infringement, which still has not fully recovered. The most egregious aspect of J4J’s arguments on this point (as opposed to the even worse arguments–such as the cooked up “commercial use”–in the opinion) is the very premise that there is, with respect to these website cases, anything even approximating LIKELIHOOD OF CONFUSION.

As we put it in the Third Circuit brief which, among others, future Supreme Court justice Samuel Alito by all indications did not read (although he was on the panel that rubber-stamped the District Court decision with one sentence of affirmation):

Liability under the Lanham Act requires a showing, inter alia, of likelihood of confusion as to source. Scott Paper Co. v. Scott’s Liquid Gold, Inc., 589 F.2d 1225, 1228 (3d Cir. 1978). But, appellee has submitted no admissible proof to support a finding that confusion is likely.
. . .

[I]t takes virtually no time for even self-described “unsophisticated” users to quickly realize they are at Mr. Brodsky’s site, not that of appellee. The honesty of the non-confusing message on Mr. Brodsky’s website is in stark contrast to the defendant’s website in Planned Parenthood:

Because the words on the top of the page load first, the user is first greeted solely with the “Welcome to the Planned Parenthood Page!” It is highly likely that an Internet user will still believe that she has found plaintiff’s web site at that point.

42 U.S.P.Q.2d at 1438. That kind of confusion is simply impossible in the case of Mr. Brodsky’s website . . . In response to this argument, the District Court found that an individual may be a sophisticated consumer of the Internet but may be an unsophisticated consumer of information about religious organizations. Such a user may find his or her way to the Defendant Internet site and then be confused; the Defendant Internet site advocates views antithetical to those of the Plaintiff Organization.

The last two clauses in the excerpt above constitute a non-sequitur. They also make no sense in the context of the actual website at issue, which explicitly states its opposition to “the Jews for Jesus cult” and disclaims any affiliation with appellee. Concluding that Mr. Brodsky is not part of a Jews for Jesus organization does not require any particular “sophistication.” It only requires the ability to read.

In fact, the courts routinely define “sophistication” in much less “sophisticated” terms than did the court below, where a simple grasp of the obvious is all that is required to negate confusion. Thus, in Girls Scouts v. Personality Posters Mfg. Co., 304 F. Supp. 1228, 1231 (S.D.N.Y. 1969), the court ruled that “rational analysis” precluded confusion about whether the Girl Scouts were the source of a poster depicting a pregnant girl in the well-known uniform of the Girl Scouts appearing with the caveat “BE PREPARED.” Similarly, in Stop the Olympic Prison v. United States Olympic Committee, supra, 489 F. Supp. at 1123, a poster reading “Stop the Olympic Prison” was held not to violate the trademark of the United States Olympic Committee. The court reasoned as follows:

On the basis of its own examination of the poster, the Court finds it extremely unlikely that anyone would presume it to have been produced, sponsored or in any way authorized by the U.S.O.C. While at a fleeting glance, someone might conceivably mistake it for a poster advertising the Olympics, nobody could conceivably retain such a misconception long enough to do any harm: for example, there is no danger that anyone would purchase or display it as such.

Id. . . .  As in Girl Scouts and Olympic Prison, no rational person could believe that Mr. Brodsky’s message was in any way affiliated with appellee. The District Court nonetheless held that confusion is likely because Mr. Brodsky’s site is “related” to that of appellee [and that the use of the trademark was in fact more, not less, protected for this reason, on fair use grounds!-- RDC]. The court below inexplicably rejected the inescapable conclusion that consumers can dispel any confusion if they merely trouble to read Mr. Brodsky’s message, the way Chellathurai, Kalstein and Sanchez did.

If you’re still with me, here’s a last nail from the Third Circuit reply brief:

In defending the District Court’s likelihood of confusion analysis, appellee comes again to its prized exhibits: the three “confusion affidavits” of Chellathurai, Kalstein and Sanchez. There is little left to debate regarding whether these affidavits demonstrate confusion, or, more likely, the absence of confusion. This Court will simply have to read them. A076, A080, A257. Appellee suggests that the District Court found “initial interest confusion” here. Opp. Brief. at 37. But this doctrine is mentioned nowhere in the opinion below. Developed in a sales context, it has been applied only where “a potential purchaser is initially confused [such that] the [senior seller] may be precluded from further consideration.”

Weiss Assoc., Inc. v. HRL Assoc., Inc., 902 F.2d 1546 (Fed. Cir. 1990) (emphasis added). Thus it does not apply here. In fact, in Girl Scouts the Southern District of New York rejected transient confusion as proof of trademark harm in a social-commentary context:

Even if we hypothesize that some viewers might at first believe that the subject of the poster is actually a pregnant Girl Scout, it is highly doubtful that any such impression would be more than momentary or that any viewer would conclude that the Girl Scouts had printed or distributed the poster.

304 F. Supp. at 1231. As the Girl Scouts court recognized, ephemeral moments of confusion that do not threaten to divert sales are not evidence of actionable harm under the Lanham Act. Real harm must be shown to overcome the constitutional protection of free speech:

No evidence is found anywhere in the record before the court that the poster has to date damaged the plaintiff in any way. No facts are presented to show that contributions to the organization have fallen off, that members have resigned, that recruits have failed to join, that sales . . . have decreased, or that voluntary workers have dissociated themselves or declined to support the honorable work of the organization.

Id. at 1235. Similarly, there is no evidence in this case of any actionable or even discernible harm that appellee has suffered as a result of Mr. Brodsky’s website. Even the court below admitted that the publicity surrounding this dispute was, far from harmful, undoubtedly a boon for appellee. A436-37. And all three supposedly confused affiants found their way to appellee’s website, undeterred by Steven Brodsky and more zealous than ever in their devotion to appellee. In fact, their reports to appellee negate the suggestion of confusion; again from Girl Scouts:

[I]ndignation is not confusion. To the contrary, the indignation of those who [reported the offending use] would appear to make it clear that they feel that the Girl Scouts are being unfairly put upon, not that the Girl Scouts are the manufacturers or distributors of the object of indignation.

Id. at 1231. This passage perfectly describes the three “confusion” affidavits here: indignant, yes, but certain that appellee was not the source of Mr. Brodsky’s website. They were not confused.

They were not confused. Unfortunately, a lot of people were, and are–about what the Lanham Act is, and is not, meant to protect, and don’t get this key point:  Indignation is not confusion. We can survive that, as long as too many of them aren’t judges.

It’s a good bet, as Whistle Blower suggests, that Google will get a better hearing than lone idealist Steve Brodsky did in his case, and not just because it is better heeled. (My old firm, Pitney Hardin, handled the Brodsky litigation pro bono.) And the issues are somewhat different.

Still, Whistle Blower says that the Reverend David Brickner, the pleasant, non-Jewish head of Jews for Jesus, thinks this is the second coming of the Brodsky case. Jews for Jesus attorneys Thelen Reid probably hope so (though perhaps not every Thelen Ried partner is singing from the same sheet of music on the topic of God and intellectual property). WB beleives that from a legal point of view this seems like somewhat wishful thinking. (Not to mention the fact that this case was filed in the federal court in New York, not New Jersey, and that Judge Lechner of the former court has retired and moved onto bigger and better things.)

Then again, the Rev. Brickner’s statement is hardly the first instance of wishful confusion to eminate from the the precincts of Jews for Jesus–not hardly.

Originally posted 2008-09-05 17:01:27. Republished by Blog Post Promoter

The District of Arizona ruled today in a case we defended through trial and have reported on here extensively.  The decision is here; the minute entry on the electronic docket reads as follows:

FINDINGS OF FACT AND CONCLUSIONS OF LAW – that S & L Vitamins has infringed Designer Skin’s copyrights in the electronic renderings of the 42 products styled [by various brand names] and that Designer Skin is entitled to a permanent injunction enjoining S & L Vitamins from any such future infringement of these copyrights;

FURTHER ORDERED that S & L Vitamins has not infringed Designer Skin’s copyrights in the electronic renderings of the 12 products styled [by various brand names];

FURTHER ORDERED that each party shall bear its own costs in this matter.

Signed by Judge James A Teilborg

No attorneys’ fees for either side.  The injunction reads as follows (per the minute entry); prefatory language is omitted and emphasis is added:

FINAL JUDGMENT AND PERMANENT INJUNCTION in favor of Designer Skin, LLC against S&L Vitamins, Inc. . . . S & L Vitamins . . . are hereby immediately and permanently ENJOINED from publicly displaying, using, copying, or otherwise infringing Designer Skin’s copyrights in these electronic renderings for any purpose whatsoever. Nothing herein, however, shall be construed to enjoin S & L Vitamins from taking, using, or displaying original photographs of the physical Products themselves in connection with S & L Vitamins’ sale of the Products on the internet.

Signed by Judge James A Teilborg

Interested persons may wish to ponder how, and to what extent, the Court addressed the issues framed by the counsel for the respective parties, including identification of what indeed are “Designer Skin’s copyrights in [its] electronic renderings,” by considering the proposed findings and facts and conclusions of law submitted by the plaintiffs, and by the defendants, respectively.

For practitioners interested in the law of injunctions, the most interesting part of the decision concerns the court’s application of the rule in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) that there is no automatic entitlement to an injunction upon a finding of infringement to a copyright infringement case.  We have made a separate post addressing that part of the decision.

S&L’s website is here, by the way.  Buy Designer Skin lotion from S&L!  It’s the way both sides pay their lawyers!

Originally posted 2008-06-25 17:46:19. Republished by Blog Post Promoter

‘Diversion’

Originally uploaded by Ron Coleman

We have written before (as have some judges) about the dubious concept of “diversion,” usually used to rationalize the equally dubious concept of “initial interest confusion,” as well as in cases where claims for tortious interference with contract have been used as a way to protect distribution networks from Internet-based competition. Regarding the former, we’ve argued as follows:

Professor McCarthy, whose views on the topic were relied on in early initial interest infringement cases, is (not surprisingly) aware of this issue. He acknowledges that his original metaphor—a misleading sign on the highway that beckons a driver to an Exxon station, only to deliver the driver, after turning off the main road, to a “Brand X” pump— has been criticized as inapplicable to the Internet context. Consider the metatag case Bihari v. Gross as follows:

Use of the highway billboard metaphor is not the best analogy to a metatag on the Internet. The harm caused by a misleading sign on the highway is difficult to correct. In contrast, on the information superhighway, resuming one’s search for the correct website is relatively simple. With one click of the mouse and a few seconds delay, a viewer can return to the search engine’s results and resume searching for the original website.

McCarthy’s response is that “this is a difference of degree, not of kind,” because of the “unearned advantage” being gained by the one misusing the trademark to get unearned attention in the first place. McCarthy’s point may be a nice one standing alone in a trademark infringement context. But in a broadband trademark dilution world, it proves too much and has given trademark owners too powerful of a weapon to silence dissent or unwished attention. By and large, the main engine of trademark enforcement on the Internet is via what Siegrun Kane calls “the Dilution Solution.” It enables owners of “famous” marks to score damages and attorneys’ fees regardless of whether any harm is done to the trademark owner or even the mark itself.

As to the distribution cases, as we wrote in a brief point that was completely ignored a while back by the Central District of California (it just happens to be what’s handy):

As the court said in John Paul Mitchell Systems, in which it rejected a tortious interference claim based on so-called “diversion,” courts across the country “have been suspicious of the claim that disruption of these exclusive distribution arrangements causes any pecuniary injury . . .”, citing H.L. Hayden Co. v. Siemens Medical Sys., Inc., 879 F.2d 1005, 1024 (2d Cir.1989), Graham Webb Int’l Ltd. Partnership v. Emporium Drug Mart, Inc., 916 F.Supp. 909, 918 (E.D.Ark.1995) (“no basis for concluding that [any] lost sales would be greater than the increased revenue resulting from the availability of the product in ordinary retail outlets”), Matrix Essentials, Inc. v. Cosmetic Gallery, Inc., 870 F.Supp. 1237, 1250 (D.N.J.1994) (rejecting “diversion” claims against purchasers from retailers).

So our view over here is that “diversion” is baloney. And the above completely spontaneous BlackBerry Pearl street photograph lays it all out perfectly — the menacing threat, or threatening menace, of DIVERSION: A woman in a sandwich board standing in front of Sacks Fifth Avenue during summer sale week (we did rather well, thank you) trying to entice buyers to a second-floor deep-discount suit emporium a few blocks downtown. Full disclosure requires that we admit that the moment that resulted in the picture actually motivated us to revisit the topic here.

Look at her diverting people! Wrongfully! Confusingly! They think they’re going to Sacks but she’s saying no, come to Fernando’s Suit-A-Rama for a better buy! They hardly know what to do!

Diversion, right? Riiiiiight.

UPDATE:  Further diversions.

Originally posted 2007-11-27 14:59:05. Republished by Blog Post Promoter

Judges — especially in the Eastern District of New York — are picking up what’s going on in the “elite salons” end of the trademarks-as-distribution-method-enforcement scam:

A federal judge has blasted the L’Oréal company, and former federal law enforcement officials it employs, for trying to bolster what he said was a very weak civil case by attempting to get former Justice Department colleagues to prosecute criminally a longtime business opponent. …

U.S. District Judge Leonard Wexler in Central Islip recently ruled against Paris- and New York-based L’Oréal in a 2004 civil lawsuit brought by the company against Ronkonkoma-based Quality King Distributors, a $3-billion-a-year distributor of hair-care and other products, as well as its spinoff company, N.J.-based Pro’s Choice. The suit was the most recent round of an ongoing 17-year legal battle between L’Oréal and Quality King.

L’Oréal sought in its suit the enforcement of a 1990 injunction that barred Quality King and Pro’s Choice from buying and reselling an upscale line of hair shampoos and conditioners, sold by L’Oréal under the names Matrix and ARTec.

L’Oréal maintains that to keep the value, integrity and status of the products, they are supposed to be sold only by company-trained professionals in fashionable salons. Matrix alone “has been the number one professional hair brand on the market, with an estimated 16 percent market share,” L’Oréal said in court papers.

Quality King and Pro’s Choice, however, were obtaining the products in violation of the injunction by buying them, or, as it is called, diverting them, from middlemen and reselling them to nonqualified dealers, L’Oréal contended.

In his opinion, Wexler declined to enforce the old injunction, in effect, throwing out L’Oréal’s case against the two companies.

The judge said that if L’Oréal wanted seriously “to stop diversion of Matrix products,” it could terminate those of its distributors who are the sources of the diverted products. L’Oréal sought in its suit the enforcement of a 1990 injunction that barred Quality King and Pro’s Choice from buying and reselling an upscale line of hair shampoos and conditioners, sold by L’Oréal under the names Matrix and ARTec.

Well put, and it’s exactly how Dick Troll put it a little while ago.

Here’s the opinion. Certainly not what Baker & Hostetler were expecting, or promising their client, as they trekked out to the most inhospitable courthouse in creation in Central Islip!

Originally posted 2008-07-18 13:50:34. Republished by Blog Post Promoter

Unfortunately for future defendants in the position of our client, Internet retailer S&L, U.S. District Judge James Teilborg’s decision from the bench in the District of Arizona dismissing the damages claims of suntan lotion manufacturer Designer Skin will not be officially published, being an oral opinion. Well, it will not be published unless and until it is quoted and affirmed by the Ninth Circuit, which a Designer Skin lawyer has promised will happen soon — though not exactly in those words. (Earlier post here.)

Fortunately we can mitigate some of the sting of the lack of officially published precedent, for now, and on our electronic mimeograph machine “publish” that opinion. The ruling is below; an example of the subject “electronic renderings” is at left; the transcript of the entire colloquy, including the striking of the would-be “damages” testimony of the company’s president, Beth Romero, and the argument of counsel can be downloaded here.

Disclosure: Neither counsel nor court had prepared particularly thoroughly for these oral motions or the ruling from the bench, which came up earlier in the proceedings than had been anticipated for reasons we will discuss next week. Therefore, in contrast to a situation where one can read each side’s thoroughly researched and argued written briefs and then a meticulously sourced judicial opinion, the oratorical edges in the transcript linked to above as well as the opinion also set forth below may appear somewhat rough all around. Be kind to all of us as you consider them.

The Court has, obviously, heard the evidence and heard the arguments of counsel and I have previously granted the motion to strike certain of the damage evidence from Miss Romero and set forth my reasons why. The Court has now granted the unopposed motion to dismiss the claim for statutory damages. I now grant the Rule 50 motion with respect to actual damages on the bases that there has been no showing of actual damages suffered as a result of the alleged copyright infringement.

As I pointed out earlier, there has been a witting or unwitting conflation between the alleged lifting of the electronic image from Designer’s website and pasting it on the S & L website, and yet we’ve heard virtually all the evidence, in fact, I think it’s fair to say all the so-called damage evidence, directed at product. In other words, the difference here is between the alleged copyright infringement in connection with the image and the product distribution issues.

It is clear that the beef, if you may, on the part of the plaintiffs is the selling of product by S & L, and we’ve heard evidence in terms of how much money Designer has spent in their product development, how much they’ve spent in their product image, the money they’ve spent in their diversion program, and it would appear that is all directed at seeking out product distributors such as S & L.

But even if one could assume that somehow it is to seek out and take action against a copyright infringement of its images, there is no basis for this jury or any reasonable jury to attempt to connect how much of those expenditures are connected to the images themselves as opposed to the product distribution issues.

Likewise, the references to S & L’s profits are simply, again, gross references to revenues and ultimately to profits without any reasonable basis to differentiate how much of that is attributable to the copyright infringement as opposed to the product sales.

It has been argued, but I believe without basis, that the mere fact that the image that has been lifted is now associated with a product, that somehow that, if you may, attaches to the product, infects that product such that all sales of that product can now be made the subject of a damage calculation.

This is not a case where an image was lifted and then was actually placed on somebody else’s product and there’s an attempt to force a disgorgement of profits made by that product. Indeed, as we’ve said several times, if S & L had simply photographed the product and used the photograph of the product in connection with its advertisement, that would not be actionable.

There is the argument that there have been lost licensing fees and/or royalties. There is obviously no evidence of the quantification of either of those, nor how they could either. Alternatively, and now having heard the evidence and seen the evidence and seen the website presentations, it is clear to me that the portraying of Designer Skin’s product images on the website next to the S & L logo cannot cause any confusion that somehow S & L is associated with Designer Skin or is a so-called authorized distributor.

And again, we must remind ourselves that S & L — though much to the chagrin of Designer — S & L had a perfect right to sell this product, and the mere fact the S & L logo is next to the product does not and I believe could not result in any bases for confusion. Read More…

Here’s a roundup of what other people are saying about the decision in Network Automation, Inc. v. Advanced System Concepts, Inc. involving keyword advertising using other folks’ trademarks (a form of the dreaded “diversion“!) and perhaps implicating secondary liability for trademark infringement:

• Marty Schwimmer:  ”‘Forget it Jake, It’s the Ninth Circuit’ - I’m stealing that joke from Prof Tushnet’s critique of the Network Automation keyword case.  I agree with much of her analysis, however I disagree  with her (and this panel’s) view of channels of trade as a LoC factor, but that’s an argument for another day.  Also, check out Prof. Goldman’s discussion.”

We’ve had surprisingly few appellate decisions involving keyword advertising generally, and almost none involving trademark owners’ lawsuits against keyword advertisers (as opposed to suing keyword sellers like search engines). On that basis alone, this ruling is important. The case is also remarkable because the opinion, written by highly regarded Judge Wardlaw, gets so many things right. Perhaps that sounds like damning with faint praise, but the reality is that the Ninth Circuit’s Internet trademark law has become horribly tortured due to deeply flawed opinions like the 1999 Brookfield case. This opinion deftly cuts through the accumulated doctrinal cruft and lays a nice foundation for future Internet trademark jurisprudence.

The only sour note is that the opinion makes some unnecessary and empirically shaky “presumptions”–exactly the kind of unfortunate appellate court fact-finding that got the Ninth Circuit into trouble into the first place. Still, given how this opinion could have turned out, I still give this opinion very high marks.

Even in the middle of a good decision reversing a finding of likely confusion based simply on targeting ads to the competitor’s trademark, the Ninth Circuit can manage to reach out and do silly things: for example, the court said that (declaratory judgment) plaintiff Network’s use of the mark to buy keywords was use in commerce, and further said that Google’s sale of keywords was the same (“We now agree with the Second Circuit that such use is a ‘use in commerce’ under the Lanham Act.”). I guess we’ve all just agreed secondary and primary liability are the same for keywords? But Google gets a big kiss for its sponsored links labeling later in the opinion doubtless of more practical significance to it than a mostly-lost conceptual battle about trademark use.

Because the panel can’t outright admit that Brookfield’s initial interest confusion analysis was just wrong, it increases the formal complexity of trademark law by hiving off metatag cases—they’re just different from keyword cases, which are different from domain name cases, for which the “internet troika” of similarity of marks, relatedness of goods, and simultaneous use of the internet still makes sense. Though of course we should at this point refer to the “internet duo” since it’s such a rarity to find a mark without an internet presence and the court explicitly endorses giving this factor “little weight”—indeed, the district court erred by weighing similar marketing channels against Network.

We have often discussed on this blog the misuse of trademark law to suppress online speech that protects and benefits consumers, including both consumer commentary and comparative advertising.  A Ninth Circuit decision yesterday should make it harder to pursue such claims.

Yesterday’s decision, Network Automation v. Advanced Systems Concepts, will be of particular interest in litigation over keyword advertising using trademarks, which we have defended as an important means for comparative advertising that provides useful information to consumers.  The decision strongly implies that neither the purchase nor the sale of keyword ads using trademarks is inherently infringing.  But the ruling also walks the Ninth Circuit away from several past rulings that are often cited by trademark holders to attack consumer criticism as well (although, to be fair, the Ninth Circuit itself has never applied its precedents that way).  The opinion holds out hope for a more sensitive treatment of claims about online trademark infringement.