Ohio State v. Redbubble – Strategy scores in overtime

Old friend David H. Bernstein explains what happened in the Sixth Circuit’s Redbubble decision, via INTA:

Nice job, David!

There’s a link to Redbubble, a sort of combination of Etsy and Zazzle, in the pic at the very bottom of this post. The trademark infringement question was, obviously, not “if,” but “when.” And the case seems to have captured his imagination — which is probably why his law firm authored INTA’s amicus brief, or maybe it’s the other around. Either way, David also posted about it on IP Watchdog, along with his Debevoise partner Megan Bannigan and associate Marissa MacAneney.

And that post includes some interesting details. Such as this one, which involved a doomed attempt to turn the aforementioned “when” into “never”:

Although Redbubble’s terms of use claim that the artists – not Redbubble – are the “sellers” of the products, Redbubble arranges for the both the manufacture and shipment of the products, compensating the artists for a portion of the sales. Even though Redbubble characterizes the artists as the sellers of the items, the products are shipped to consumers in packages bearing Redbubble’s logos. Redbubble also handles the logistics of any returns or refunds. . . .

Practice tip: Your terms of service are the boss of me under the law of contract. But not necessarily the law of torts!

But look, look — here’s the fun part: Secondary trademark liability! Yes? No? Maybe?

[In another Redbubble case,]. Atari Interactive, Inc. v. Redbubble, Inc., Case No. 4:18-cv-03451-JST (N.D. Cal. Jan. 28, 2021)[, the] court specifically rejected the district court’s decision in OSU that Redbubble’s business model meant that it was not using the trademarks in commerce; the court also noted that Redbubble may be contributorily liable for the artists’ infringement (an issue that was not presented in the OSU case because OSU relied only on direct infringement, not secondary infringement).

In an earlier case, however, the Central District of California agreed with Redbubble and rejected claims of direct infringement, relying in part on the OSU district court decision. In that case, Brandy Melville, a teen-favorite women’s fashion brand, sued Redbubble for direct, vicarious and contributory trademark infringement, counterfeiting, false designation of origin, and unfair competition, alleging Redbubble created, manufactured and distributed large quantities of counterfeit Brandy Melville apparel and products. Y.Y.G.M. SA d.b.a. Brandy Melville v. Redbubble, Inc., 2:19-cv-04618 (C.D. Cal). The court granted Redbubble’s motion for summary judgment with respect to direct infringement, citing the OSU decision, and with respect to vicarious liability (because Brandy Melville failed to provide sufficient evidence of the requisite partnership, agency, or substantial control to sustain such a claim). The court rejected Redbubble’s efforts to evade all liability, though. The court held that there was enough evidence to create a material dispute of fact about Redbubble’s knowledge of infringing activity its platform, which could give rise to contributory liability.

Now what’s going on here with the direct liability versus secondary liability issue? Why did Ohio State have to rely entirely on direct infringement here, which is the part David is mostly (and importantly) talking about?

It’s actually addressed in the opinion, which comes in the context of, did Ohio State (OSU) waive its secondary liability claims here or not?

Before addressing the merits of OSU’s arguments, we first address Redbubble’s argument that OSU did not preserve its theory that Redbubble could be vicariously liable under the Lanham Act. Asserting that neither OSU’s motion for summary judgment nor its complaint mentioned vicarious Lanham Act liability, Redbubble argues that OSU may not rely on that theory for the first time on appeal. And we agree..

[T]he record shows that OSU (1) knew the difference between direct and vicarious trademark infringement liability and (2) actively chose to pursue only a direct infringement claim. For instance, OSU’s motion for summary judgment relies on the distinction between “contributory trademark infringement” and “direct trademark infringement” to distinguish its claim from contributory trademark claims, which suggests OSU recognized an available legal argument and decided not to pursue it—a classic example of waiver.

So far, so straightforward. Here’s where it gets really interesting, though:

Although OSU concedes that it did not use the term vicarious liability below, it contends that it preserved its vicarious-liability claims because (1) the vicarious-liability argument is “a new facet of [its] consistent claim,” (2) its summary judgment motion touched on a vicarious-liability theory without using those “magic words,” (3) its complaint and motion for summary judgment informed Redbubble about the claim’s factual basis, and (4) failure to make an argument below is not always fatal to raising it on appeal. We address OSU’s responses in turn.

To start, OSU paints its vicarious Lanham Act theory as “a new facet of [its] consistent claim.” (Id. at 23.) And it claims that the fact that its complaint only alleged that Redbubble alone “was responsible for the advertising, manufacture, and sale of infringing products” was an excusable mistake because it didn’t know about Redbubble’s relationship with third-party vendors. (Id. (emphasis omitted).) Yet nothing stopped OSU from asserting vicarious-liability claims in the complaint or attempting to amend its complaint once it learned more about Redbubble’s marketplace. Grubbs and other cases describing vicarious Lanham Act liability existed before this litigation, and Redbubble’s business plan was easily ascertainable. Furthermore, OSU admits that vicarious Lanham Act liability has different elements [from] direct Lanham Act liability, so OSU’s vicarious liability theory is plainly not an offshoot of the direct Lanham Act claim it raised below.

In other words, if you didn’t know at the beginning, you knew before the end. That’s what amendment of a complaint is for. Strike one. And the next swing-and-miss is an argument that OSU kind of sort of did really allude to vicarious liability — in its reply brief on summary judgment.

That is not a good place for it to be. Anyway, the Circuit says even then, “OSU only discussed Redbubble’s dealings with third-party vendors—it never articulated a legal claim for vicarious liability. So the record belies OSU’s argument.” And that’s a worse place to be.

So is the argument, also rejected, that even if they never really “invoked the magic words,” the facts pleaded made out enough of a potential vicarious liability case to avoid waiver. After all, OSU argued, Redbubble could put two and two together, right?

Wrong:

OSU next asserts that failure to invoke the magic words of “vicarious liability” neither waives nor forfeits the argument because Redbubble was ‘informed of the factual basis for the claim'” given the facts in OSU’s complaint and its Lanham Act argument.

Dude. Even if that were true — this isn’t a Rule 12(b)(6) motion! It’s summary judgment! You have to do more than put the other guy on notice, much less vague and non-descript notice, of a legal claim you haven’t asserted!

[T]his Circuit has refused to apply Johnson [v. City of Shelby, 574 U.S. 10, 12 (2014)] to summary judgment cases. . . . . Even though OSU might have a strong argument for vicarious liability, we find no injustice in barring OSU from pursuing a claim it chose not to pursue below. Thus, we decline to exercise our discretion to excuse a party’s forfeiture or waiver.

All said, Redbubble rightly stresses the absence of vicarious-liability argumentation in the record below. And OSU’s reasons for excusing that omission fall short. So we decline to address the merits of OSU’s vicarious Lanham Act liability theory because OSU failed to preserve that claim.

In other words, this is my guess (though if anyone knows more from the pleadings or otherwise I’d like to hear it): OSU’s lawyers decided to go for what looked like a “stronger” case for direct infringement because, kind of like civil RICO claims, secondary trademark liability claims make judges roll their eyes. One reason for this is that so many of them find it kind of hard to get right.

So it seems that was a tactical call by the OSU team, otherwise known as the Attorney General of the State of Ohio: Let’s make the strong case for direct infringement instead of pleading a kitchen-sink complaint.

The only problem is that when you try to handicap a judge’s reaction to your strategy, you have to take into consideration the likelihood of the judge getting your point. And the jjudge here did not properly apprehend something pretty basic-sounding: What constitutes direct infringement?

Ironically, the OSU guys ultimately were saved from what probably was a pretty good, if risky, strategy by a rare occurrence: a Circuit Court of Appeals caring about what a district court did wrong in a trademark case. I am sure it did not hurt, on that score, that the plaintiff was Ohio State, its lawyers were the State of Ohio and the opinion was written by a former partner of Taft Stettinius & Hollister… you know, of Cincinnati.

You just get a certain amount of attention paid, is all I’m saying. And then INTA comes to town, you know?

It also didn’t hurt that, seizing on the waiver of the secondary claims by OSU, Redbubble seems to have overplayed its hand. It argued, in effect, “Yep, real shame they blew the vicarious liability claim here, because if we infringed at all, that’s how we did it. That is the way we did infringe, I’d say, right there, but what can we do if they’re going to go waiving stuff and things?”

To which the Sixth Circuit responded:

Redbubble . . . contends that only “affirmative `use'” creates direct Lanham Act liability—the “in connection with” language only operates to permit indirect or vicarious liability. Yet Redbubble doesn’t explain why the statutory text cabins itself to vicarious liability only. And if the statutory text creates those claims, then it is strange that courts have found vicarious Lanham Act liability based on the statute’s common law tort backdrop rather than the text itself. See, e.g., Rosetta Stone Ltd. v. Google, Inc., 676 F.3d 144, 165 (4th Cir. 2012) (describing vicarious Lanham Act liability as “essentially the same as in the tort context” without relying on the statutory text). This undermines Redbubble’s position that the Lanham Act’s language or context narrows the word “use.”

Looking at this Circuit’s Lanham Act precedent, it seems that one key distinction between a direct seller who “uses” a trademark under the Act and a mere facilitator of sales who does not is the degree to which the party represents itself, rather than a third-party vendor, as the seller, or somehow identifies the goods as its own. A retailer who sells products directly to a customer at a brick-and-mortar store is indisputably a seller to whom the Lanham Act applies. See Lorillard 453 F.3d at 381. An online marketplace like eBay that clearly indicates to consumers that they are purchasing goods from third-party sellers is not. See Multi Time Mach., 804 F.3d at 938-41 (finding Amazon not liable for the trademark infringement committed by parties using its platform because “Amazon clearly labels the source of the products it offers for sale” and is not a seller). Here, although the record is sparse, it appears that products ordered on Redbubble’s website do not yet exist, come into being only when ordered through Redbubble, and are delivered in Redbubble packaging with Redbubble tags. Under those facts, the district court erred in affirmatively placing Redbubble on the passive end of the liability spectrum.

Cool case! Nice win for INTA and the Debevoise crew. Thanks for flagging it, DHB!