Tag Archives: Resellers

Legal in Phoenix, liable in Central Islip

Originally posted 2014-12-31 08:20:34. Republished by Blog Post Promoter

Sandra Day O'Connor courthouse in her glory

Sandra Day O’Connor Federal Courthouse, Phoenix, Arizona

UPDATE: All the below is still very relevant, very important and very significant — except as to the final judgment, which has been vacated by consent and replaced with this Agreed Injunction and Order.

My client S&L Vitamins and I just suffered a devastating loss in its Eastern District of New York litigation against Australian Gold (now owned by a holding company called New Sunshine, LLC) after a five-day jury trial on claims by AG for tortious interference with contract and trademark infringement.  I posted both sides’ trial briefs here.  The jury instructions in the Australian Gold case are here.  I will post more documents later.

Before sharing the verdict and recounting some extraordinary highlights of the trial, here’s some background.  I am focusing on the contrast between this outcome and the mirror-image rulings on virtually identical operative facts in the Designer Skin case, discussed below, also involving my client — not because it must be the case that the court in Designer Skin was right and the court in Australian Gold was wrong, but to point out the utter inconsistency of these rulings and the impossibility of doing business in such a legal environment: Read More…

Aw, shucks

We already covered the Designer Skin v. S&L Vitamins summary judgment decision, and linked to commentators Greg Beck, Bill Patry, Rebecca Tushnet, Eric Goldman and Jason Lee Miller.

But it’s positively nerve-wracking reading the commentary of someone like Evan Brown! 😉

Online use of trademarks and copyrights by “unauthorized distributors”

LIKELIHOOD OF CONFUSION does not generally comment about active cases in which we are directly involved. But a very important and detailed (61 pages!) summary judgment decision came down in the U.S. District Court for the Eastern District of New York last week, in the case of S & L Vitamins, Inc. v. Australian Gold, Inc., 2:05-cv-1217 in which I represent the plaintiff. And while we will not comment on the decision, for obvious reasons, any reader of this blog involved in trademarks and the Internet will want to read it. So here it is. Credit to David Nieporent, co-author on the plaintiff’s brief!

UPDATE: Cogent commentary from Eric Goldman and Matthew Sag; now comes Rebecca Tushnet.

U.S. District of Arizona: “No automatic injunction upon a finding of copyright infringement”

Not that the plaintiffs in the Designer Skin case didn’t get an injunction:  They did (here it is); a narrow one utilizing proposed language by defendants explicitly permitting S&L to use its own photographs of Designer Skin merchandise on its website (see the prior post).  But the Court ruled that they were not entitled to it merely by virtue of proving copyright infringement.  Here’s an excerpt from the opinion, discussing the point:

The parties dispute the law governing the issuance of a permanent injunction in a copyright-infringement case. Relying on MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 520 (9th Cir. 1993), Designer Skin argues that “a permanent injunction [should] be granted in a copyright infringement case when liability has been established and there is a threat of continuing violations.”  Conversely, S & L Vitamins argues that the MAI rule has been overruled by the recent Supreme Court opinion in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), and that the traditional four-factor test reaffirmed by eBay applies.

MAI’s general rule may accurately describe the result of applying the four-factor test to a copyright-infringement case in which liability has been established and there is a threat of continuing violations. Nevertheless, as Judge Wilson persuasively demonstrated in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 518 F. Supp. 2d 1197, 1209-10 (C.D. Cal. 2007), this general rule, as a rule, is clearly inconsistent with the Supreme Court’s decision in eBay. Thus, for the reasons given by Judge White in Grokster, Designer Skin’s reliance on this pre-eBay rule is unavailing, and the Court will apply the traditional four-factor test. . . .

This is an important holding, making the District of Arizona among the handful of earliest courts to apply the rule of eBay to copyright infringement.  After the jump, you can see how the court did apply it to one particular factor of interest, the need for a plaintiff seeking an injunction to prove irreparable harm.  The court agreed with S&L that past infringement does not lead to a presumption of future infringement. Unfortunately, to our client’s (nominal) detriment, and despite our argument that, seeing as how Designer Skin enunciated no coherent description of harm it suffered by the infringement — and that, in fact, it probably benefited from it — an injunction should not issue, the court found that there was irreparable harm, for reasons best expressed in its own words. Read More…

Fat lady sings: Findings of Facts and Conclusions of Law in Designer Skin v S & L Vitamins

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!

Designer Skin v. S&L Vitamins trial update

The remaining issues in the case, you may recall, were copyright infringement and Arizona unfair competition. Here is the status per this morning’s minute entry in the court’s electronic case filing docket:

Minute Entry. Proceedings held before Judge James A Teilborg on 7/16/2008: Jury Trial – Day 2 held. Plaintiff’s case continues. Evidence and testimony presented. Plaintiff rests. Defendant rests. The Court grants defendant’s oral Rule 50 Motion as to statutory damages, actual damages and unfair competition claim. The Court grants defendant’s oral Rule 50 motion to dismiss defendant Lawrence Sagarin as a defendant. The remaining issue in the case is the injunction issue. Closing arguments. Jury deliberations. Jury to return at 9:00 a.m. 7/17/2008 to resume deliberations. (Court Reporter David German.) (TLB )

A tad terse and bloodless — quite unlike how trial has gone.  Not terse or bloodless at all.  [UPDATE:  Here’s the transcript.  Dismissal of the damages claims were stipulated; see the ruling from the bench at page 124 of the PDF for the ruling as to Sagarin.]

“The Court grants defendant’s oral Rule 50 Motion as to statutory damages, actual damages and unfair competition claim” means “The Court grants defendant’s’ oral motion to dismiss Designer Skin’s claims for statutory damages, actual damages and unfair competition. (Earlier on the court declined to take our “suggestion” of a lack of copyright jurisdiction.)

So, so far: No damages, no plaintiff attorneys’ fees in play. Jury (advisory per Rule 39(c) of the Federal Rules of Civil Procedure; injunction against further use of Designer Skin’s “electronic renderings” is not a jury issue, but they are charged with deciding whether there was copyright infringement) is out; they return this morning, Phoenix time, at 9.

We will update and backfill…

UPDATE: The jury returned a verdict of infringement on 42 of the 54 copyrights. In post-verdict interviews, interestingly, the jurors reported they would have awarded no damages, or nominal damages, had the judge permitted them to consider damages. (Per the above the damages claims were dismissed.) The jurors rejected the idea that a manufacturer is entitled to damages in connection with the sale by third parties of merchandise the manufacturer already sold once before, regardless of the legal theory. This came as quite a surprise to the plaintiff’s legal team, whereas the advisory verdict of infringement (which the court indicated he would adopt) was not particularly surprising to us… considering.


Designer Skin v. S&L continued: “S&L had a perfect right to sell this product”

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. Read More…

Canada: Copyright law not meant to protect distribution networks

Canada Coat of ArmsThe Gray Blog reports that the Canadian Supreme Court has rejected an attempt — the sort made all day all over North America — to utilize IP law as a “guaranteed distribution network protection act.” It’s the “grey market” or “parallel market” issue: Does a company have the right to demand that its goods be sold only through “authorized dealers”?

The law is pretty clear that it can’t, but firms cook up all sorts of causes of action — tortious interference with contract, trademark infringement and dilution — to try to make get around the free market and to protect their distributors. This, in turn, protects their ability to control both retail prices and brand placement. These are completely legitimate business goals, but misusing the IP laws to achieve them is crooked. Unfortunately, the courts — typically dizzied by the assertion of the strong trademark rights that companies big enough to have this isue are likely to have — go along with this all too often.

Copyright, if you can make it work, is the best for this, because it has those famous teeth: Attorneys’ fees and statutory damages. The prospect of losing a copyright case is devastating for a small business. So big firms claim that all sorts of things, such as product descriptions, labels, the way the sun reflects off the bottle — are “protected works.”

Well, in Canada at least, that goose won’t fly.  In this case, the focus was on the applicability of the first-sale doctrine (which gives someone who owns stuff to sell it to whomever he wants once he himself bought it lawfully) to an overseas sale:

The Court explained that “[f]or KCI to succeed, it must show that Euro imported works that would have infringed copyright if they had been made in Canada by the persons who made them.” However, in the case of KCI, the products at issue were Toblerone bars bearing copyrighted works which where first manufactured and sold in Europe by the Licensors and owners of the copyrights. The Court reasoned that under section 27(2)(e) of the Copyright Act KCI as a licensee may not sue the owners of the copyrights for copyright infringement. Its only remedy is for breach of contract. Accordingly, no cause for copyright infringement exists against the legitimate purchaser.

“Toblerone bars bearing copyrighted works.”  It’s preposterous that the court even got this far.  The distortion of the IP regime seems irreversible.

UPDATE:  Related developments, and otherwise, in places closer to home (regular readers can skip those links!  you’ve seen them already).

The second time as farce

On the occasion of the S&L Vitamins v. Australian Gold trial, I reposted what I wrote here six months earlier about the first of these these jointly evil twin litigation matters, conducted in appropriately welcoming environs, in which our client is entwined:

O'Connor federal courthouseYesterday I was here, in the stupidestly-designed courthouse on God’s brutally-baked brown desert earth — the Sandra Day O’Connor Courthouse in sunny Phoenix, Arizona. It is truly a marvel of architectural arrogance: Imagine being so utterly uninterested in anything besides how you’d like your box of Erector Set pieces to look like at the award ceremony that you design a massive building, notionally meant for human habitation, that is actually a gigantic greenhouse that grabs scorching-hot sunbeams from one of the hottest atmospheres on the continent and just plays them across a massive, uncoolable interior atrium.

This monster has an evil twin in my own neighborhood, named after the entirely more prosaic former U.S. Senator and ur-fixer Alfonse D’Amato, in his home turf in Long Island. The “other” U.S. Courthouse for the Eastern District of New York (its better-known and far-better-loved older sibling overlooks the Brooklyn Bridge) is every bit as soulless and unconnected to how people use built space. Like the Arizona torture chamber, this one features cold, ornament-free, angular hard white spaces, a soaring atrium and a complete denial of the human spirit. Both feature vast plazas requiring five minutes of walking from the curb to the front door that, when shown on the architect’s drawings, must have depicted lunchtime building workers gaily eating their lunches, taking in the sun, flirting and strumming guitars — a true communitarian dream in federal jurisprudential space, and far enough from any possible truck bomb to make those shared moments entirely carefree.

But no has ever relaxed in either one of these plazas. The one in Central Islip is too windblown to hang out in almost any weather.  The D’Amato tower truly epitomizes the concept of a white elephant; it is the only building of its scale for what must be 20 miles all around — a largely empty monument to federally funded megalomania. On almost any day the sun beats off the bright white surfaces so intensely that polarized lenses are de rigeur and blinded lawyers quickly scurry across the plaza through the revolving-door entrance and into the heartless, icy lobby.

D'Amato Federal courthouse EDNYBut this same formula truly amounts to a miniature Judicial Conference death valley when applies in sunny Phoenix.  (Read more…)

Hot fun in the summer time

A little while I ago I uploaded, at J.D. Supra, the three days of trial transcripts from last year’s desert extravaganza, the Designer Skin v. S & L Vitamins trial.  Which, er, technically speaking, I lost.  I had already won the 95% of it that didn’t go to the jury.  But, still.  The non-technical non-losing was really wild.  No, seriously.

PhoenixOf course you’d have to be a litigation junkie, or something worse, to really read through it — unless, of course, you knew what was in there.  Believe me, this is one fun transcript.  I am not kidding.

But you won’t.

So I have done for you — in honor of the year that has passed, and all the tanning lotion that has flowed under the bridge since then, and because I am feeling extremely creative — what I had always wanted to do:  I have excerpted sections of the transcript relating to one issue which, as dry as it sounds, made this trial an absolute real-time heart-stopping drama of the highest order.  And I have gone through the trouble of opening up a Scribd account and embedding the excerpts here so I can show you this fun document right here on the blog.  Because it is that wild.

That issue was, what if you haven’t subpoenaed your adversary’s principals… but one of them is in town for the trial… and you subpoena him in the hotel lobby after the first night… or maybe you didn’t, after all…

Stop laughing!  You have to read it.

And do remember, as you do read it:   One, this is a little piece of the trial we did well on, but what was left for the jury (the question of copyright infringement, although without damages), they returned a good, clean verdict finding liability.   And, two, the other side was — believe me — living in a world, both substantively and procedurally, they did not create.  Rather, they were doing their level best to prosecute claims they must have known, up to though surely not beyond the point of ethical justification, were frivolous, as part of their client’s cynical strategy of litigation by attrition.  It eventually paid off, and destroyed my clients’ businesses and a large part of their lives, and didn’t do much for LIKELIHOOD OF CONFUSION®’s accounts receivables.  So be it:  This is the life of the law.

The rest is commentary.  Are you ready?  Okay, put on the a/c (full blast) — this was Phoenix courthouse — and here we go:

Witness by Ron Coleman