Time for the 12 O'Clock Boyz to go: court shuts down (c)/TM lawsuit against documentary & feature film about Baltimore bikers

Monbo v. Nathan, --- F.Supp.3d ----, 2022 WL 4591905, No. 18-CV-5930 (MKB) (E.D.N.Y. Aug. 26, 2022)

Late, but just showed up in my Westclip! Plaintiffs alleged that defendants’ 2013 documentary about an aspiring dirt-bike rider in Baltimore, titled “12 O’Clock Boys” and upcoming feature film based on it infringe their copyrights on their 2001 documentaries “12 O’Clock Boyz” and 2003 sequel “12 O’Clock Boyz: The Paparazzi Edition,” featuring the 12 O’Clock Boyz urban dirt-bike stunt group. Plaintiffs also alleged infringement of Monbo’s right of publicity, unjust enrichment, and violations of the Lanham Act and related Maryland trademark law. The court, in a careful opinion, rejected all the claims.

From PR newswire, apparently a still from the 2001 film

registered trademark

For the 2001 Documentary, Monbo “organize[d] a group of highly skilled dirt-bike riders” to participate in a scripted film “that would highlight the exploits of an ostentatious group of dirt-bike riders in Baltimore called 12 O’Clock Boyz.” Monbo allegedly coined the phrase 12 O’Clock Boyz “to describe the way in which riders would elevate the front of their bikes and ride only on the back wheels until their bikes would be perpendicular to the road or in the ‘12 O’Clock’ position.” The 2001 Documentary “sold 50,000 copies in two weeks and revolutionized the Baltimore dirt-bike culture,” inspiring a sequel and plans to make a third film. Plaintiffs allegedly used the 12 O’Clock Boyz trademarks since 2001 and registered the marks in 2016.

Nathan directed the allegedly infringing 2013 Documentary, which “tells the story of Pug, a thirteen-year-old child who wants to be a ‘12 O’Clock Boy,’ just like [he] has repeatedly watched in [the 2001 and 2003 Documentaries].” Plaintiffs claimed infringement, including “the character Pug, clips, the title card, concepts, feel, mood, theme, and approach.”

Defendants' 2013 documentary

Both parties’ works are “docu-fiction” set in Baltimore. Both the 2001 and 2013 movies begin with a news clip used “[t]o give [the] feel of a documentary”: the 2001 Documentary with “actual news footage from a Baltimore TV News segment” and the 2013 Documentary with the voice of “a real radio host.” Both include interviews with people sitting on the front steps of a house; transitions from riding scenes to interview scenes; a clip of the 12 O’Clock Boyz riding down the street, slow-motion shots of the riders; film of the riders from a moving vehicle; and the 12 O’Clock Boyz themselves. Both incorporate the theme of death: the 2001 Documentary pays respect to a rider, “Buck,” who passed away during filming, and the 2013 Documentary discusses Pug’s brother, Tibba, who passed away during filming of that work. In addition, a character called “Pug” appeared with his hat turned backwards in the 2001 Documentary and in the 2013 Documentary. Monbo choreographed scenes of the 12 O’Clock Boyz riding in formation that are similar to a scene used on the DVD cover of the 2013 Documentary.

In addition, seventeen minutes into the 2013 Documentary, the title card from their 2001 film appears, followed by “upward of thirty” excerpts from Plaintiffs’ films taken without permission. Monbo appeared as an actor in the 2001 and 2003 Documentaries, was interviewed in “[a]t least two” of the segments defendants used, and was not compensated for the use of his likeness. Defendants allegedly used editing tools to compress scenes that constituted “about 70% or more of” the 2001 Documentary into minutes of footage that then appeared in the 2013 Documentary.

In addition, the design of the title of the 2013 Documentary was allegedly similar to plaintiffs’ registered 12 O’Clock Boyz logo. Defendants also used 12oclockboys.com to promote and sell the 2013 Documentary, leading to the trademark infringement claims.

While the feature film apparently would not use the title 12 O’Clock Boys, plaintiffs still objected because the feature film makers allegedly filmed a script in Baltimore with the following plot:

Mouse wants nothing more than to be a part of the Midnight Clique, a tough group of Baltimore bike riders, who rule the summertime streets. As he navigates the challenges of coming of age in a complicated world, he learns the hard way that the choices you make early on can change your life forever.

Pug in the 2013 Documentary, like Mouse in the feature film, wants to be a veterinarian but also wants to join a group of dirt-bike riders; both feature skilled dirt-bike riders; and both are set in Baltimore. The feature film defendants allegedly infringed on plaintiffs’ mark by using “12 O’Clock Boyz” as a working title on IMDB and used “Twelve,” a “colorable imitation of Plaintiffs’ registered 12 O’Clock Boyz mark,” to promote their film.

While the court went through the works in detail, to give you a sense of the level of generality at which the copyright arguments are pitched, I’ll just share one comparison: The 2001 documentary begins, after the title screen, with a shot of a man riding a four-wheeler down a city street, front wheels in the air. A newscaster’s voice plays over the scene, stating “it’s the stunt every four-wheeler rider wants to master.” By contrast, the 2013 Documentary begins with footage of Pug in a van at night. A male radio host narrates, harshly criticizing “these little scumbags on these dirt bikes in our downtown.”

The court found the claims of direct, contributory, and vicarious copyright infringement time-barred because plaintiffs didn’t submit evidence of continuing infringement by the moving defendants within 3 years of the filing of the complaint. But also, the documentaries weren’t substantially similar, and, “even if the 2013 Documentary is substantially similar to the 2001 Documentary under the fragmented literal similarity test due its use of clips from the 2001 Documentary, Plaintiffs’ claim with respect to this documentary is barred by the fair use doctrine.”

The similarities in setting, theme, etc. were unprotectable elements, including “a local boy’s dream” to become part of the Twelve O’Clock Boyz.  “[I]t is a fact in the public domain that the 12 O’Clock Boyz are from Baltimore and ride in these specific locations,” as was “the presence of dirt-bike riders in the neighborhoods where they ride in real life” and “a scene of them riding in a group, as they do regularly.”

The dirt-bike riders in the 2001 Documentary, including Pug, were “stock characters” and not protectable elements. “The concept of skilled riders who perform daring stunts is not novel, and this basic character type flows from the theme of a work about dirt-bike riding. In addition, the characters are not developed beyond these attributes.” 2013 Pug “shares no similarities” with 2001 Pug “other than having the same name and wearing a backwards baseball cap. However, the fact that these characters share the same name does not by itself make them substantially similar.” And wearing a backwards hat is a “generic and generalized character trait[ ]” that is not protectable. But, limiting the force of these statements, the court continued that it was more significant that 2001 Pug was introduced as an adult with no exploration of how he joined, whereas 2013 Pug was the main character and protagonist “who faces conflict between the desire to join a group of dirt-bike riders and his aspiration to become a veterinarian, and the viewer sees Pug grow up over the course of several years, as his ambition remains constant and his riding skills develop.” They had a different “total concept and feel.”

The various shared filming techniques (starting with a news clip, filming in slo-mo and from a moving vehicle, transitioning between riding scenes and interview scenes, etc.) were likewise unprotectable as standard in the genre. “Plaintiffs do not have the exclusive right to make docu-fiction about dirt-bike riders, as methods of story-telling are not protectable.” Also, use of a single 2001 clip in which the 12 O’Clock Boyz are depicted riding down the street was not “qualitatively or quantitatively significant to the 2001 Documentary, and is therefore a de minimis similarity that does not, on its own, give rise to a finding of substantial similarity between the works.” Also, paying respect to someone who passed away during filming was “too general to be protectable,” and, as with other elements, there were “no similarities in the works’ treatment of this theme — the 2001 Documentary acknowledges Buck’s passing in a simple overlay at the end of the film, while the 2013 Documentary incorporates Tibba’s death as part of its plot and explores its impact on Pug.”

Ultimately, the 2001 Documentary was “an approximately half-hour-long series of loosely connected clips of 12 O’Clock Boyz riders displaying their riding prowess,” while the 2013 Documentary, nearly twice as long, was “a narrative work with a different tone, characters who are developed and whose relationships are explored, and a clearer and more complex plot that follows Pug across several years as he faces challenges and pursues his goal to become a rider.” This gave them a different “total concept and feel.” So too with plaintiffs’ 2003 Documentary.

What about fragmented literal similarity based on use of clips from the 2001 Documentary (no clips from the 2003 Documentary were allegedly used)? Even accepting that substantial similarity was present (qualitative significance would be a fact question), fair use protected the uses.

The uses comprised eighty-seven seconds of the 2001 Documentary (3.7%), edited into seventy-five seconds—“a selection of stunts and two short interview segments.”

Defendants argued that the clips “were included to enable viewers ... to understand the impact of the legends appearing in the 2001 [Documentary] on Pug’s desire to mimic their feats, join the 12 O’Clock Boyz and to recapture Pug’s treasured memory of watching it with his brother, Tibba.”

The use was transformative because it put the clips into a new context: “a locally popular tape that had inspired Pug to start dirt-bike riding [with] personal significance to Pug because he had watched it, along with the 2003 Documentary, many times with Tibba.” Commerciality wasn’t a significant weight against this transformativeness.

Factor two was of little weight, especially since defendants reproduced the excerpts “to illustrate their effect on Pug, rather than because the stunts captured in the 2001 Documentary add creative value to the 2013 Documentary.” The original filmography in the 2013 Documentary “captures many similar stunts, at greater length, in higher-definition film.” Plus, the 2001 Documentary was already published.

Factor three: Except for about 12 seconds showing the 12 O’Clock Boyz title, every other excerpt was 2-4 seconds of longer stunt or interview segments, which was reasonable in light of the transformative purpose. The amount taken was “quantitatively small,” and could not substitute for the 2001 Documentary.

Factor four: Plaintiffs didn’t argue that they lost licensing fees; instead, they argued that they were losing purchases of their documentaries because the 2013 Documentary implied that the parties were associated. But the 2013 Documentary was not a market substitute, because it was transformative of a small portion of the 2001 Documentary. “[I]t is unlikely that potential purchasers of the 2001 Documentary would opt to acquire the 2013 Documentary in order to see the seventy-five seconds of clips from the 2001 Documentary in preference to the original.”

Right of publicity and unjust enrichment claims were preempted. (I’m not sure, but this might well be the most explicit statement there is that uses protected by fair use against infringement are also protected by preemption against ROP claims, where the claimant consented to be in the original.)

Preemption is less favored for right of publicity claims that “vindicate substantial state law interests,” such as those regulating false endorsements or otherwise protecting consumers. Where there is no such interest, and where a right of publicity suit, “although ostensibly an invocation of [a plaintiff’s] rights to control the use of his persona in publicity, is so devoid of the substantial interests protected by that right” that it is best described as a “thinly disguised” copyright claim, such a suit is impliedly preempted.

Monbo’s right of publicity claim was both expressly and impliedly preempted because it focused on use of his image in works covered by plaintiffs’ copyright claim. There was no false endorsement concern. “In the context of the film, it is unambiguous that he is depicted in an excerpt from the 2001 Documentary.” The excerpts were neither derogatory nor an invasion of Monbo’s privacy, and this use of a right of publicity suit “could substantially interfere with the utilization of a work in ways explicitly permitted by the Copyright Act, such as for uses that would qualify as fair use under 17 U.S.C. § 107.” Thus, this claim “does not seek to vindicate any substantial state interests distinct from those furthered by the copyright law” and was preempted by the Copyright Act.

So too with unjust enrichment, which was based on defendants’ copying. The Second Circuit has held that “[w]hile enrichment is not required for copyright infringement,” it does “not ... go[ ] far enough to make the unjust enrichment claim qualitatively different from a copyright infringement claim.”

Trademark etc. claims: Claims for infringement of a registered mark were untimely because they accrued before registration occurred. Lanham Act claims based on common-law rights were barred by laches. The court applied the analogous Maryland statute of limitations (three years); plaintiffs sent a threat letter in late 2014 and didn’t sue for over four years, giving rise to a presumption of laches (and time-barring the state law trademark claims). Plaintiffs offered no evidence in response, but, in light of their pro se status and the equitable nature of laches, the court also considered the merits.

The claims were based on defendants’ use of the phrase “12 O’Clock Boys” as the title for the 2013 Documentary and use of the 2001 Documentary’s title card in the 2013 Documentary, as well as twelveoclockboys.com.

Title of documentary: Rogers barred the claim, though the court made the now-usual mistake of saying that explicit misleadingness is determined by applying the Polaroid factors, which if taken seriously would mean there was no separate Rogers test at all. (For those not totally immersed in Rogers cases, the language about applying the Polaroid factors in a First Amendment-protective way comes from title-v-title cases, which Rogers itself excluded from its scope, and makes sense in that context—meaning that the court here uses the right test for the wrong reason.)

There was no explicit misleadingness here as to source or content. Before registration, the phrase “appears to have been descriptive and thus not particularly strong,” given Monbo’s argument that it was “a phrase coined by [Monbo] to describe the way in which riders would elevate the front of their bikes and ride only on the back wheels until their bikes would be perpendicular to the road or in the ‘12 O’Clock’ position.” Similarity of marks and proximity of goods favored Monbo, and bridging the gap was irrelevant. But there was no evidence of actual consumer confusion, despite the presence of both on the marketplace since 2013. And bad faith wasn’t present; when plaintiffs alleged infringement, defendants responded that they’d done an extensive trademark search and found no conflicts. Also, the 2013 Documentary was “a higher quality production,” making potential confusion less harmful. [OK, the court says less likely, but this factor, to the extent it has any reason to exist, is really about risk tolerance.] And the relevant consumer group was “assumed to be relatively unsophisticated because the item at issue, a film, is inexpensive and marketed to the general class of consumers rather than to experts.”

Under Polaroid via title-v-title cases, this didn’t add up to a “particularly compelling” likelihood of confusion. Also, “even if a significant number of consumers would not pay attention to the end credits of the 2013 Documentary, the end credits, as well as the promotional materials for the 2013 Documentary attached to the Amended Complaint as exhibits, clearly indicate that the producers of the 2013 Documentary are not the individuals who produced Plaintiffs’ films.”

Also, to the extent that the claims were based on failure to credit plaintiffs for the use of clips, those were Dastar-barred.

Use of the title card from plaintiffs’ documentary in the film’s content was nominative fair use. In the Second Circuit, this is assessed by using the Polaroid factors plus the Third Circuit’s NFU factors ((1) whether the use of the plaintiff’s mark is necessary to describe both the plaintiff’s product or service and the defendant’s product or service, that is, whether the product or service is not readily identifiable without use of the mark; (2) whether the defendant uses only so much of the plaintiff’s mark as is necessary to identify the product or service; and (3) whether the defendant did anything that would, in conjunction with the mark, suggest sponsorship or endorsement by the plaintiff holder). Since those are largely normative inquiries, they fit poorly with the majority of the Polaroid factors, which are framed in empirical terms, and—as the court here does—the only way to balance them is intuitively.

Here, the 2013 Documentary showed the title card of the 2001 Documentary containing the mark at the beginning of the excerpts from the 2001 Documentary. “They use the card to identify the film that Pug is watching, and they accompany that segment of the video with Pug’s narration that he used to watch the film with Tibba.” Nothing about that implied endorsement, “and, considered in the context of the 2013 Documentary having its own title and credits in a distinct font, the use does not confuse viewers as to the origin of the 2013 Documentary.”

Dilution: Failed for want of federal fame.

ACPA: The domain name was registered before plaintiffs registered their mark. The phrase was descriptive, and there was no evidence of acquired distinctiveness beyond plaintiffs’ use of the mark since 2001 and the existence of a 2003 article in a Baltimore newspaper describing the 12 O’Clock Boys and noting their documentaries. Thus the cybersquatting claim failed.

The court also dismissed claims against other defendants only involved with the feature film, which didn’t use the 12 O’Clock Boys name or have more than glancing similarities with plaintiffs’ documentaries. “[T]o the extent the plot of Plaintiffs’ works can be understood as one of inspiring young riders to join the 12 O’Clock Boyz, this is a general plot idea that is not protectable beyond the manner in which it is expressed, and, in any event, the Feature Film’s concept of a young boy who wants to join a dirt-bike group does not appear in Plaintiffs’ works — it only appears in the 2013 Documentary.”

As for trademark claims, stray references to “12 O’Clock Boys” or “Twelve” as a potential title of the film (ultimately titled “Charm City Kings”) were insufficient. “Twelve” was insufficient because there was no allegation plaintiffs had a valid trademark in that world. Nor was use on Wikipedia, IMDB, or advertising of “12 O’Clock Boys” as a potential title on Wikipedia, IMDB, or in advertising for the film enough given Rogers. “[T]he relevant population of consumers of the Feature Film — filmgoers — are not likely to confuse the source of the Feature Film and Plaintiffs’ documentaries, particularly given that both include explicit source designations.”

Initial interest false advertising (aka bait and switch) in Google ads

Beacon Plumbing & Mechanical Inc. v. Sposari Inc., 2016 WL 5795282, No. C15-1613 (W.D. Wash. Mar. 17, 2016)

Beacon sued defendants, including Sposari, which does buisiness as Mr. Rooter Plumbing Services, for trademark infringement and dilution (federal claim dismissed) and related claims.  The internet ads at issue said “Call 24/7 Beacon Plumbing” and displayed the address “beacon.callnow-plumber.com.”  However, the ads eld to a website advertising “Mr. Rooter Plumbing.”  The court found that the false advertising allegations plausibly alleged materiality.  It was plausible that a consumer who clicked on this ad could experience actual confusion and “conclude that Beacon Plumbing and Mr. Rooter Plumbing are the same entity.” This mistake, “combined with intent to purchase plumbing services from Beacon Plumbing,” would likely influence a purchasing decision.  Though Beacon didn’t cite cases finding initial interest confusion cognizable as such for a false advertising claim, the argument made sense. (It’s also usually known as “bait and switch” in false advertising law.)

The ACPA claim failed, however, because “beacon” in “beacon.callnow-plumber.com”—is a third-level domain, and third-level domain names aren’t within the ACPA’s reach.

The Washington Consumer Protection Act claim required, along with falsity causing harm to the plaintiff, a public interest impact.  A practice must have “the capacity to deceive ‘a substantial portion’ of the public.” Relevant factors include: “(1) Were the alleged acts committed in the course of defendant’s business? (2) Did defendant advertise to the public in general? (3) Did defendant actively solicit this particular plaintiff, indicating potential solicitation of others? (4) Did plaintiff and defendant occupy unequal bargaining positions?” Also, “intentional trademark infringement can satisfy the public interest impact element.” Given that (1) and (2) were allegedly present, and the allegations of intentional infringement, the court found that the CPA claim could continue.

Porn site's use of TMs in metatags not confusing

Multifab, Inc. v. ArlanaGreen.com, 122 F. Supp. 3d 1055 (E.D. Wash. 2015)

 

Plaintiff made commercial industrial components and equipment, and used the name “Multifab” for at least 25 years.  It has the multifabinc.com domain name. ArlanaGreen.com features pornographic images and videos, and allegedly caused confusion by using Multifab’s name to promote its services.  Defendants defaulted.  Nonetheless, the court concluded that Multifab failed to show trademark infringement or false advertising under the Lanham Act, cyberpiracy under the Anti–Cybersquatting Consumer Protection Act, or a violation of Washington’s Consumer Protection Act.

 

Infringement: lack of proximity of the goods weighed heavily against a finding of confusion, as did the degree of consumer care and the unlikelihood of any expansion into competing territory. “Sales of pornography and industrial equipment do not target the same class of purchasers in any discernable way, the products are not similar in use or function, nor are they complementary in any sense.”  (Insert your own dirty joke.)  Internet shoppers are accustomed to trial and error, and Multifab’s goods would be bought by buyers likely to be familiar with the commercial industrial equipment market, using a high degree of care. See M2 Software, Inc. v. Madacy Entm’t, 421 F.3d 1073, 1084 (9th Cir. 2005) (because purchasers of music management databases are highly sophisticated members of the music industry, the possibility that they could be confused about music management products and services “is almost nil” regardless of any trademark).  So the strength of Multifab’s mark (suggestive), the similarity of the parties’ marks (identical), and defendants’ apparent bad intent favored Multifab, but that just wasn’t enough given the factors making confusion unlikely.  There was no evidence of actual confusion.

 

False advertising claims failed for the same reasons, as did state consumer protection law claims.

 

ACPA claims failed because the conduct here didn’t involve use of a domain name, whether at the top or second level.  Instead, defendants were using metatags and website content.

Thermolife sues critic's blog for cybersquatting

A reader pointed me to this lawsuit, alleging cybersquatting against https://ronkramermusclebeach.wordpress.com/ based on Thermolife's Muscle Beach marks.  You may notice that this isn't really a domain name, but a blog hosted on WordPress.  In an in rem proceeding, will the court be able to recognize both the problem with the ACPA claims in terms of "domain name" and the problem with alleging cybersquatting?  The site appears to be highly critical and classic fair use.

UDRP expenses count as injury for purposes of TM case

Migliore & Associates, LLC v. Kentuckiana Reporters, LLC, No. 3:13–CV–315, 2015 WL 730058 (W.D. Ky. Feb. 19, 2015)

 

Note: a genuine pleasure to read! Thank you, Judge Heyburn. Migliore, a court reporter, sued Kentuckiana for trademark infringement and ACPA cybersquatting.  The court here denied Kentuckiana’s motion for summary judgment.

 

Intro: “The court reporter game is a tough racket. It’s tougher still when a competitor registers an internet domain name that is confusingly similar to your business name then links it to its own website.” Migliore’s website is at miglioreassociates.com. “Searches on popular internet search engines associate her with court reporting and Migliore & Associates,” and she’s spent thousands of dollars each year promoting her business through print ads, internet listing, and marketing materials.  Kentuckiana registered andorreporters.com, actionreporters.com, coultereporting.com, coulterreporters.com, kentuckycourtreporting.com, kycourtreporter.com, and lisamigliore.com. Five, including the last, were similar or identical to the business names of Kentuckiana competitors. Kentuckiana redirected hits to those websites to its own site.

 

Migliore sent a C&D; Kentuckiana discontinued the redirection but refused to transfer the domain name.  Migliore filed a UDRP action, during which Kentuckiana maintained that it registered the disputed domain name to use it as a possible “gripe site” or “fact check site” regarding Migliore’s public comments on policy issues related to the court reporter industry. But no content was ever developed for the website. The WIPO arbitrator decided that Kentuckiana acted in bad faith and ordered it to transfer the domain name to Migliore. But Kentuckiana still refused to reimburse Migliore for the costs of bringing the WIPO action, so Migliore sued.

 

Kentuckiana argued that Migliore lacked standing for want of injury in fact.  “[J]ust because an injury is difficult to measure or quantify does not mean that the injury is nonexistent.”  Injury can exist without provable money damages.  “Beyond legal niceties, it borders on the absurd to assert that purchasing a domain name that includes a variation of a competitor’s personal name, then linking that website to your own, would cause no injury to your competitor…. [A]t the very least, Migliore incurred damage control costs that satisfy the injury requirement for Article III standing.”

 

It’s important to distinguish the elements necessary to prove a violation of the Lanham Act from the elements necessary to justify a certain remedy. “Lanham Act plaintiffs can sometimes recover for damage control without showing actual confusion or actual damages”; these remedies serve to encourage quick response and the mitigation of damage.  Such costs are awardable when a plaintiff can show (1) likelihood of confusion or damage to profits, goodwill, or sales; (2) that the damage control expenses were caused by defendant’s Lanham Act violation; and (3) that the damage control efforts were reasonable and proportionate to the damage likely to occur.  This category of remedy would be appropriate here, viewing the facts in the light most favorable to Migliore. Thus, she had standing.

 

Kentuckiana argued that the Sixth Circuit limited damage control costs to false advertising cases, but the court disagreed—the Sixth Circuit has narrowly limited presumptive damages to cases of comparative false advertising, but damage control is a different kind of measure.

 

Kentuckiana also contended that Migliore lacked a protectable interest in lisamigliore.com and that its use of that domain name was not likely to cause confusion within the relevant purchasing community for court reporting services. The court found a genuine issue of material fact as to both.

 

Migliore provided sufficient evidence to allow a jury to conclude that “Lisa Migliore” had attained secondary meaning in the relevant purchaser market.  Though she had no consumers ready to testify about the distinctiveness of “Lisa Migliore” and no consumer surveys on the topic, Migliore had exclusive use in Louisville since 1997 (and possibly exclusive use of “Migliore” for court reporting in the US). She’d served thousands of customers.  “Other court reporters—even Kentuckiana at one point—have referred business to Migliore. And, most glaring, others have intentionally copied her name.”  Kentuckiana’s own copying helped establish secondary meaning: “Kentuckiana claims it meant to use the domain name as a gripe site. Fine. But no one would have visited this gripe site—and Kentuckiana’s copying would have been futile—if ‘Lisa Migliore’ had not attained some secondary meaning.”

 

Similarly, there was a genuine issue of material fact on confusion.  True, as with secondary meaning, Migliore was weak on some of the factors—there was no showing of actual confusion, and Kentuckiana continued to claim intent to use the site as a gripe site.  But a jury should decide.  “[T]here is reason to believe that “Lisa Migliore” is a stronger mark than Kentuckiana lets on. Remember: it copied the mark. It did so for a reason.”

 

The parties competed to provide fungible services (stenographic versus digital reporting), using the same marketing channel.  Though purchasers arguably are sophisticated clients, it wasn’t “unimaginable” that a lawyer “referred by a colleague to ‘Lisa Migliore’ may, after being redirected from www.lisamigliore.com to www.kentuckianareporters.com, believe that ‘Lisa Migliore’ is in fact associated with Kentuckiana and pay for Kentuckiana’s services without further inquiry.”  Kentuckiana claimed intent to create a gripe site, but it never did. Given the redirection, and its registration of multiple competitors’ names, “it is easy to infer that Kentuckiana merely wanted to redirect customers away from Migliore and other rivals to its own website.”

 

So too with ACPA.  Bad faith intent to profit could be inferred from the fact of registration of copycat names for several competitors, all redirected to Kentuckiana’s site.  Kentuckiana claimed that its webmaster was the only person with the know-how or ability to cause this redirection, and that because Kentuckiana never told him to redirect, this must have been an accident. “Fair enough. But Migliore claims otherwise, the bad faith inference is reasonable, so there is a genuine issue of material fact that warrants sending these questions to the jury.” 

 

The safe harbor for gripe sites was not dispositive.  “Kentuckiana asks this Court not to punish it for exercising its First Amendment right to take part in the political process via this nascent gripe site.”  But “troubling questions” remained: “If this was a gripe site, why was content never added? Why did Kentuckiana register similar domain names to other competitors, even when some of those competitors were not involved in the relevant public policy debate? Why did the domain names redirect to Kentuckiana’s site?”  Maybe the redirection was an accident, but the facts viewed in the light most favorable to Migliore entitled her to reach a jury, where she’d have to prove bad faith.

Texas anti-SLAPP law doesn't protect lawyer's ads

NCDR, L.L.C. v. Mauze & Bagby, P.L.L.C., 2014 WL 941049, --- F.3d ---- (5^th Cir. Mar. 11, 2014)

M&B, a Texas law firm, solicited former dental patients from plaintiff Kool Smiles’ dental clinics as potential clients.  Allegedly, “M&B ran television, radio, and internet advertisements, and developed a website that strongly implied, or even accused, Kool Smiles of performing unnecessary, and at times harmful, dental work on children to obtain government reimbursements.” Kool Smiles sued for trademark infringement, false advertising (standing?), and “cyber-piracy” (I assume cybersquatting) under the Lanham Act.  Kool Smiles also sued under state law for defamation, business disparagement, injury to business reputation, and “trade name and service mark dissolution” (dilution?).  The district court denied M&B’s anti-SLAPP motion, determining that M&B’s speech was within the commercial speech exemption to Texas’s anti-SLAPP statute, the Texas Citizen’s Participation Act.  The court of appeals affirmed the only issue on appeal: the applicability of the TCPA to the state claims (M&B didn’t appeal the rejection of its attempt to apply the TCPA to the federal claims as well).

A structural comment: while I have no objection to M&B’s interlocutory appeal, which does address an important question, merely listing plaintiff’s claims makes clear that there are bigger problems with this case, which should be cut down to the disparagement/defamation claims that could, depending on the facts, potentially be sustained, and the junk should be kicked out pronto.  M&B brought “several” motions to dismiss, but the district court rejected them all—according to the district court, the motions just generally attacked the plausibility/particularity of the complaints, without getting into the doctrinal reasons that the Lanham Act/trademark claims could not succeed. 

The court of appeals had jurisdiction over this interlocutory appeal because, under the collateral order doctrine, the district court’s order conclusively determined the disputed question; resolved an important issue separate from the merits; and was effectively unreviewable on appeal from a final judgment.

The TCPA provides an expedited means to kick out claims relating to protected speech and suspend discovery on such claims.  The party bringing the claim must establish “by clear and specific evidence a prima facie case for each essential element of the claim in question” to avoid dismissal.  Kool Smiles waived the argument that the TCPA doesn’t apply in federal court because it conflicts with the Federal Rules of Civil Procedure, so that remains unresolved.

The district court held that M&B’s conduct was within the “commercial speech” exception to the TCPA, in that M&B is primarily engaged in selling legal services to clients and that the challenged ads offered those services to potential customers.  The statute says that it: “[D]oes not apply to a legal action brought against a person primarily engaged in the business of selling or leasing goods or services, if the statement or conduct arises out of the sale or lease of goods, services, or an insurance product or a commercial transaction in which the intended audience is an actual or potential buyer or customer.”

There are no state supreme court cases interpreting the TCPA.  Four intermediate cases have analyzed the commercial speech exemption, but none were exactly on point.  One involved a defamation case arising from a series of articles in a newspaper. The court in that case borrowed the California anti-SLAPP standard for determining whether the exemption applied, including whether “the cause of action arises from a statement or conduct by that person consisting of representations of fact about that person’s or a business competitor’s business operations, goods, or services.” The stories didn’t arise out of the sale of newspapers, so the exemption didn’t apply.

Here, the challenged language arose directly from the solicitation of M&B’s services.  “The solicitation of a service or good is inherent in the sale of the service. Otherwise, there would be a mostly arbitrary distinction created. For example, statements made while fixing a customer’s roof would be exempted, but statements made while convincing a customer to hire the roofer to fix the roof would not.” 

Two other cases concerned businesses upset with their BBB ratings. Both held that the commercial speech exemption didn’t apply, so the BBB’s speech was protected, because the BBB’s intended audience was not an actual or potential buyer or customer; the BBB sells its services to businesses, not to the general public, and the latter was the intended audience of the reviews at issue. Here, though, M&B’s intended audience was its potential customers—potential legal clients.

M&B relied on California precedent protecting attorney ads.  But there’s a clause in the California statute not present in Texas’s.  California’s statute’s commercial speech exemption requires that the speech “consists of representations of fact about that person’s or a business competitor’s business operations, goods, or services.” Soliciting clients by using statements about noncompetitors doesn’t fall within that description. But Texas’s commercial speech exemption contains no such limitation.  Thus, M&B’s ads and other client solicitation are exempted from the TCPA’s protection because M&B’s speech arose from the sale of services where the intended audience was an actual or potential customer.

Domain names in the news: political scandal edition

Christie Official At Center Of Probe Bought Domain Names Of Governor’s Political Opponents, via Firedoglake.  ACPA problem?

Lanham Act and ACPA damages not dischargeable in bankruptcy

In re Butler (Skydive Arizona, Inc. v. Butler), Bkcy. No. 11–40930, No. 11–4037, 2013 WL 5591922 (N.D. Ca. Sept. 9, 2013)

Here, the debtor was unable to discharge his liability for violation of ACPA, trademark infringement, and false advertising, because of the collateral estoppel effect of judge and jury findings in the underling cause of action.  The judge granted summary judgment on the false advertising claim, while the jury found Butler (and other defendants) liable for trademark infringement and cybersquatting.  The jury found, by clear and convincing evidence, that the infringement and false advertising were willful.  The district court awarded attorneys’ fees, emphasizing the defendants’ “seeming disregard for the people they harmed or the reputation they sullied....” and that exceptionality can come from willfulness, which the jury had found.  While the Ninth Circuit reversed the district court’s punitive doubling of the jury’s award of actual damages, it did not touch the underlying factual findings.  Plaintiff’s proof of claim in the bankruptcy case was therefore diminished but still in the multimillion-dollar range.

Exceptions to discharge are construed narrowly, but debts incurred by “willful and malicious injury by the debtor to another entity or to the property of another entity” are nondischargeable.  The question was the collateral estoppel effect of the earlier proceedings.  ACPA violations require both bad faith and an absence of safe harbor protection for a reasonable belief in fair/lawful use.  Thus, a finding of liability for cybersquatting requires an intent to cause harm and constitutes “willful and malicious injury,” and the debtor was collaterally estopped from asserting dischargeability.

The court reasoned similarly on the trademark infringement and false advertising claims, though intent is not a required element on those.  The jury specifically found that the trademark infringement was willful; though the verdict by itself didn’t specify whether the acts themselves were willful or they were willfully done with intent to cause harm, “intentional infringement is tantamount to intentional injury under bankruptcy law” because “the intent to infringe and the intent to deprive the mark’s owner of the value and benefit of his property are opposite sides of the same coin.”   Also, even in the absence of record evidence on the defendant’s intent to cause harm, the trial court’s additional findings on the need for attorney’s fees answered the question. 

The trial court’s finding took the damages award, as well as the fee award, into the nondischargeable category.  

The same logic applied to the false advertisng claims: the jury found willfulness and injury is an element of false advertising (note that it isn’t for trademark, apparently!).  “Therefore, a defendant could not willfully commit false advertising without intending to cause harm.”  The trial court found that defendants falsely claimed to own skydiving centers in various locations where they didn’t and unfairly used plaintiff’s photos on their own website. Combined with the court’s finding of exceptionality, this was enough for collateral estoppel to kick in.

it's ok to assume that cybersquatting caused damage

Migliore & Associates, LLC v. Kentuckiana Reporters, LLC, No. 3:13–CV–315–H, 2013 WL 5323035 (W.D. Ky. Sept. 20, 2013)

This is a cybersquatting and Lanham Act case that I only noted because of its illustration of the ways in which judicial common sense under Iqbal/Twombly disproportionately favors certain causes of action.  Lisa Migliore Black and her company sued competing court reporting company Kentuckiana for registering lisamigliore.com and redirecting it to Kentuckiana’s own website.  The court found that ACPA didn’t require pleading actual damages as an element of the claim, that statutory damages of up to $100,000 might be available, and that plaintiffs adequately alleged plausible injury—Kentuckiana’s possible profits, to which Black would be entitled as one category of damages—from the redirection.  “Plaintiffs’ inability to verify whether and to what extent Kentuckiana profited from its actions or how many—if any—customers were diverted is immaterial at this early stage of litigation.”  Likewise, the §43(a) claim was plausible.

But Kentuckiana argued that there was a general standing problem: though the complaint alleged that Kentuckiana attempted to attract users, plaintiffs didn’t allege that any actual traffic or customers had been diverted.  True, Article III requires an “actual or imminent, not conjectural or hypothetical” injury as one of the “irreducible constitutional minimum[s]” of standing.  But at the pleading stage, “general factual allegations of injury resulting from the defendant’s conduct may suffice.” Before discovery, plaintiffs’ inability to identify whether any business was diverted or any consumers were confused wasn’t material.  The injury was still plausible.

When ex parte situations conceal real legal issues

ViaView, Inc. v. Blue Mist Media, 2012 WL 6007204 (D. Nev.)

The court accepted ViaView’s contention that it owned both isanyoneup.com “and all associated trademark rights and goodwill.”  Defendants used isanyoneup in various domain names, including .net, isanyoneupnudes.com, and isanyoneupvideos.com, where they publish “involuntary pornography.”  ViaView “purchased the ISANYONEUP mark in April of 2012” (herein lies the problem, of which more below) and associates the mark with its campaign to stop “bullying behavior.”  ViaView sued for cybersquatting, unfair competition/trademark infringement, breach of contract, civil conspiracy, and intentional interference with contractual relations.  The court only considered the ACPA claims in granting the TRO.

ACPA makes a person liable who has a bad faith intent to profit from a “mark” (not a word) and registers/uses a domain name that is identical or confusingly similar to “that mark.”

As noted, the court accepted plaintiff’s ownership claims, and that the mark was distinctive at the time defendants registered their domain names because the mark was inherently distinctive (as to what?).  Also, “it can hardly be disputed that Defendants' domain names are ‘identical or confusingly similar’ to Plaintiff's mark.”

ACPA has a nonexhaustive list of nine factors for determining bad faith, including the defendant’s potentially good reasons for using the domain name, indicia of bad behavior like registering a bunch of similar domains and providing fake contact information, and “intent to divert consumers from the mark owner's online location to a site accessible under the domain name that could harm the goodwill represented by the mark, either for commercial gain or with the intent to tarnish or disparage the mark, by creating a likelihood of confusion as to the source, sponsorship, affiliation, or endorsement of the site.”  The court found that “most, if not all, of these factors” supported a finding of bad faith.  Defendants used the domain names to direct consumers to another site, yougotposted, and thus had the apparent intent to divert consumers with resulting confusion.  Plus, they used the entire mark.

Irreparable injury is generally presumed from likely success on the merits in a trademark case; the balance of equities tipped in plaintiff’s favor since defendants were just using the domain names as redirects anyway; and the public interest is against confusion.  And issuing the TRO would maintain the status quo by returning the allegedly infringing domain names to the domain name registrar.  (Hunh?  Returning the parties “to the respective positions that they held before Defendants began using the allegedly infringing domains,” as the court next says, is hardly maintaining the status quo.)

Now here is why I am confused by the decision: BullyVille bought “revenge porn” site IsAnyoneUp.com and associated it with its antibullying site, specifically stating:

**NOTICE** - BullyVille.com, its parent ViaView Inc. and other corporate parents (the "Affiliates") have purchased only the domain name , and did so in order to shut the site down and to put an end to its ignoble activities. We have not assumed any right, interest, ownership, control or responsibility for any content previously accessible or displayed on IsAnyoneUp.com, and expressly disclaims the same. Do not submit photographs to us, as we disagree with the prior site's business model, and flatly reject it.

That defines transfer in gross, which means that the mark has been abandoned and plaintiff has no rights in the mark for the terrible services formerly provided using the mark.  Sometimes strangers to a mark snap up an abandoned one, and at times the previous owner has been able to do something about that based on residual goodwill (which here means badwill, I guess), but that’s explicitly been disclaimed here, and the equally terrible defendants are much closer to delivering the terrible services formerly associated with the mark than the plaintiff (which is weird in its own way, as detailed in the article linked above).

Okay, you might respond, but BullyVille has a new mark for new services that began with the transfer in gross.  That seems plausible, though query whether causing a domain name to redirect to BullyVille counts as “use” of the mark for services.  If there is use, I’m sure it’s valid as inherently distinctive as to antibullying services.  But the ACPA factors wouldn’t counsel in plaintiff’s favor treating the mark as newborn: defendants have no bad faith intent to profit from the only thing plaintiffs own, the rights in the mark for antibullying services. The reason defendants used the domain names at issue is because plaintiff lacks secondary meaning in the new use.  In the simplest terms, on these facts I can’t see how defendants had a bad faith intent to profit from plaintiff’s mark, as required by the statute.  Their interest in registering these domain names would be exactly the same if plaintiff didn’t exist, because of the residual secondary meaning of the abandoned mark.  In some ways, this decision is like saying that Delta Airlines has an ACPA claim against a interloping, non-Delta Faucet registrant of deltafaucets—that’s not the Delta at issue!

Now, maybe this just doesn’t matter, because it’s unlikely to come up in anything but a somewhat bizarre set of circumstances, because it’s a TRO, and because crappy defendants get treated badly.  I hope so!

Can firms advertise using names of inactive lawyers?

Hullverson v. Hullverson, 2012 WL 6013209 (E.D. Mo.)

James Hullverson sued his family members John and Thomas Hullverson along with his former law partners Ringkamp, Becker, and Burke, and former law firm, The Hullverson Law Firm, P.C., alleging violation of the Lanham Act and the Missouri Rules of Professional Conduct.  James alleged that defendants, by continuing to use John and Thomas’s names in their ads when those two are voluntarily inactive members of the Missouri bar, were falsely advertising.

The alleged violations of the Missouri Rules of Professional Conduct provided no independent cause of action.  James argued that the violations of the rules were integral to his false advertising claim and provided an objective standard for what is misleading as well as what’s false, but the court also found references to the RPC immaterial to the Lanham Act claims and struck the relevant allegations.

James sought to enjoin defendants from continuing to advertise that John and Thomas were firm attorneys and from linking James’s website with defendants’ hullverson.com site.

James alleged that he owned a federal registration for Hullverson & Hullverson and that the similarity in names and services created a risk of confusion.  Defendants argued that their use of the Hullverson Law Firm mark predated James’s first use by at least 20 years, since he only started when he left defendants’ employ and started his own Hullverson & Hullverson law firm in 1998.  But registration creates a rebuttable presumption of validity, and the court accepted James’s allegations about the likely confusion factors.  (It seems to me that the special rules for personal names should be doing more work here, at least under Iqbal/Twombly.  And that if defendants establish prior use of the nature alleged, James should be at risk for fees.)

The court also accepts as an ACPA claim the allegation that defendants “have linked his Hullverson & Hullverson L.C. internet domain to their www.hullverson.com website, thereby misappropriating his name and the name of his firm and directing traffic away from Plaintiff and to Defendants.”  Linking doesn’t implicate ACPA, so the reference to "domain" must really mean "mark," but I think it indicates a certain casualness in the opinion.

The false advertising claim was based on the allegation that John and Thomas are inactive and unauthorized to practice law in Missouri, but are still featured prominently in signs/ads.  This allegedly created an illegal bait-and-switch for clients.  Defendants argued that these representations didn’t relate to the “nature, characteristics and qualities” of their services.  James argued that these constituted a misrepresentation of the “origin of services.”  At this stage of the pleadings, that was enough.

Taking credit for firm founders' prior work creates Lanham Act problems

Basile Baumann Prost Cole & Assocs., Inc. v. BBP & Assocs. LLC, 2012 WL 2426132 (D. Md.)

How can a company show its heritage when there’s been a split between founders?  As this case shows, it can be a risky endeavor, and the breakup agreement might not cover all the issues.

In 1990, Basile, Prost, and Baumann formed an economics and real estate consulting firm, Basile Baumann Prost & Associates, Inc.   It advised local, state, and federal agencies and used the acronyms “BBPA” and “BBP,” and in 1995 launched bbpa.com.  Basile and Prost worked mostly at the state and local level, while Baumann spent most of his time with the US Navy.  In 2006, Baumann sold his share to Cole, and the company changed its name to Basile Baumann Prost Cole & Associates, Inc., which began to refer to itself as “BBPC,” used as a logo and on business cards, though the webside stayed bbpa.com.

The parties disputed whether the plaintiff, herein the Corporation, stopped or continued using BBP and BBPA after Cole was added; Cole said it continued, especially among clients “with longstanding relationships with the firm,” while Basile said it didn’t.  The Corporation’s marketing materials included lists of awards the firm received and client testimonials, e.g., “BBPC displayed aggressive, well organized efforts to expedite the project .... BBPC went out of their [sic] way ... at short notice to ensure financial documents were finalized.”

In 2009, Basile and Prost, who worked with state and local governments, decided to split with Cole, who worked mainly with the Navy.  The Corporation agreed to redeem Basile and Prost’s shares in exchange for $1.8 million, 83 jobs, 138 “leads and proposals,” and “[a]ll goodwill created on all past contracts and clients by Basile and Prost [within the last four years] to include but not be limited to any and all use of job qualifications and materials and job references for Basile and Prost's contracts and clients.”  The Corporation “retain[ed] all [other] assets, properties[,] and rights,” including the company name, office location and lease, telephone number, domain name and website, two-thirds of the Corporation's staff, and 70 percent of its contracts by revenue, along with the direct federal defense-related goodwill etc.  A noncompete clause provided that, for four years, Basile and Prost would not “in any manner ... actively solicit business from any party who [wa]s currently a prospective client or ha[d] been, at any time during the four ... years prior to the date of [the] Agreement, an active client ... of ... Cole and the Corporation.”

Basile and Prost then formed BBP & Associates LLC, an “economics and real estate development advisory firm” in Annapolis.  For some time, the LLC shared office space with the Corporation. The LLC used the following logos, along with bbpallc.com:

Apparently internally, Basile proposed the following statement distinguishing the LLC from the Corporation: “[i]f you must say when we were organized, better wording might be ‘BBPC was founded in 1990, and in 2009 was legally restructured, resulting in the formation of BBP and Associates LLC.’”  The LLC then sent an announcement to Basile and Prost's industry contacts and current, former, and potential clients, stating that “BBP & Associates, LLC (BBP LLC) ha[d] moved to a new location!”  A mass email followed:

Ralph Basile and Jim Prost are pleased to announce the establishment of BBP & Associates, LLC (BBP LLC). The firm continues to service all of the state, local, private[,] and non-direct Department of Defense work conducted by the firm that they founded in 1990. That firm, which was reorganized at the end of 2009 and is trading as BBPC, continues to service the remaining direct contract with the Department of the Navy….

A past Corporation client forwarded the email to Cole and asked whether the Corporation was going to change its name.  The LLC’s financial manager testified that, in 2010, several LLC clients sent payments to the Corporation, which would then deposit the money and cut a check to the LLC.  The LLC gave presentations in North Carolina and Virginia using the green BBP logo, describing itself as a nationally recognized firm with projects in 47 states and 4/5 countries, serving over 1250 clients.  The Corporation also received mail from the city of Orlando intended for the LLC.

In May 2010, Basile told Cole that the Corporation had violated the non-compete provision of their greement by improperly soliciting local government work, and listing on its website two projects that Basile and Prost had done in the past four years.  The Corporation removed the two projects from its website, then asked Basile and Prost to stop using the BBP “service mark,” change the appearance of the LLC’s website (specifically mentioning the color scheme and borders), and adopt a replacement name.  The LLC responded that the Corporation had abandoned BBP and BBPA, but changed its website and logo:

Shortly, the LLC modified the logo further:

An entity called RKG submitted a proposal to a Rhode Island planning authority listing the LLC as its subcontractor, describing the LLC in terms similar to those above, stating that the LLC had been involved in Defense Department/Navy downsizing, and including an LLC brochure listing many projects purportedly completed by the LLC that were in fact completed by the Corporation when Basile was a principal.  The planning authority awarded the contract in part because of RKG’s experience with the Navy.  The Corporation also submitted a proposal under the name “Basile Baumann Prost Cole & Associates, Inc.”  Cole later wrote to a representative of the Planning Authority to ask how another firm had been able to obtain a copy of the Corporation's sealed bid. She responded that she “remember[ed] [Cole's] firm and another who submitted a proposal having almost the same name.”  She “[did]n't know if that [had] caused any confusion amongst the proposals.”  A prospective client of the Corporation forwarded it an email from the LLC describing the LLC’s work, including its work in Baton Rouge; the client wrote that he’d “noted your work in Baton Rouge.”  There’s more, including alleged confusion by a representative of the LLC’s insurer and another client who’d been transferred from the Corporation to the LLC, but those events give the flavor of what went on; the LLC continued to attribute to itself projects that the Corporation had engaged in before the split, and claimed to have existed for a number of years before its formation.

After the lawsuit was filed, the LLC altered its website claims to have “caused construction of over $7 billion of development in 47 states and 4 countries while assisting over 1,100 public sector clients meet their development objectives” by adding a note, “*Includes locations where work was managed and/or completed by senior BBP LLC staff, including assignments by Basile and Prost when they were Principals and senior technical staff at other consulting firms.”  The LLC’s website also used endorsements verbatim from the Corporation’s marketing materials (sometimes with the substitution of the LLC’s name for the entity named in the Corporation’s testimonials, e.g., “BBP LLC displayed aggressive, well organized efforts to expedite the project .... BBP LLC went out of their [sic] way ... at short notice to ensure financial documents were finalized”).  After the Corporation sued, the LLC changed these testimonials to refer to Basile and Prost, with brackets to indicate the alterations.  Below the testimonials, the LLC added the same asterisked note.  Of 36 testimonials on the LLC’s website, only 3 weren’t originally from the Corporation’s marketing materials.  Its website also listed the same awards as the Corporation did, in the same order, with the same photos; the asterisk also got added there.

The court denied the parties’ cross motions for summary judgment on the Lanham Act claims.  First, the court rejected the LLC’s argument that the Corporation doesn’t own “BBP,” since it transferred or abandoned the goodwill associated with such marks.  The Corporation argued that it transferred only the personal goodwill of Basile and Prost.  While a sale of a business and its goodwill will carry with it the trademark of the business even if not expressly mentioned, what happened here was more complicated.  It was clearly not the sale of the Corporation’s entire business and goodwill, and thus didn’t necessarily transfer the trademark.  Nor did the LLC meet its burden of showing that the Corporation abandond BBP marks, at least as to services for state and local governments, by transferring certain assets and agreeing not to compete with Basile and Prost in that market for four years.  The Corporation was still using the bbpa.com website and BBPC mark; Cole also testified that the firm still used “BBP” and “BBPA,” especially among clients “with longstanding relationships with the firm.”  There was also no showing that the Corporation lacked the intent to use the marks in the reasonably foreseeable future; it was still providing services to governments and institutional clients, and one could reasonably read the parties’ agreement to bar the Corporation only from soliciting certain clients of Basile and Prost's for four years.

The court also found sufficiently disputed facts on likely confusion.  The marks are similar; the parties are both based in Annapolis and arguably perform similar work in economics/real estate consulting.  The LLC’s ads had been similar to the Corporation’s, as had its website.  A reasonable jury could find intent to confuse because the second B in BBP refers to Baumann, who’d never been affiliated with the LLC but did work for the Corporation.  Defendants also made several representations “that could reasonably be construed as attempts to present the LLC as the Corporation.” In an email to an employee (which the court treated as relevant without addressing whether this was a relevant audience), Basile said that the Corporation had been “legally restructured, resulting in the formation of [the LLC].”  And in several bids for work and in marketing materials, the LLC said that it existed long before its January 2010 formation and its claimed to have completed projects that were done by Basile and Prost when they were principals at the Corporation. Its website said that it had provided services to “literally hundreds of clients” when it had advised “far fewer” than 70 to 80 clients.

Evidence of payments made to the wrong entity and misdirected mail, etc. might not count as actual consumer confusion, but still counted as evidence a reasonable jury could use to find likely confusion.

The Corporation also alleged that the LLC’s statements about its clients, testimonials, projects, and awards and recognitions constituted false advertising under the Lanham Act.  The LLC argued that the Corporation failed to show materiality or injury.  The court defined materiality as a claim to have “a characteristic that most consumers would find appealing,” which I think is too narrow.  Anyway, the LLC claimed to have served about 600 clients, which were mostly served by the Corporation; it claimed to have accomplished a number of “firsts” in its industry, ditto; it claimed to have completed 45 projects, ditto; and it used testimonials describing work done by the Corporation and claimed awards given to the Corporation.  The defendants argued that no customer would purchase the LLC’s services by reading the website literature, but would rather contact it directly and learn more; thus the claims weren’t material.

The Corporation disagreed; if the website didn’t help get business, why would the LLC put it together?  The court found that a reasonable jury could find materiality.  The claims at issue all related to characteristics a consumer would want from a consulting firm, and materiality is generally a question of fact for the jury.  Similarly, a jury could find likelihood of injury from sales diversion/lessened goodwill.

Defendants also argued that they were just intending to tout the achievements of Basile and Proust, but intent isn’t an element of a Lanham Act violation.  (It seems to me this is better framed as a literal falsity/implied falsity argument.) 

For similar reasons, the ACPA claim against bbpallc.com survived.  Defendants argued that there was no confusing similarity, and based their argument in part on their Google search for “BBP,” which didn’t turn them up; the search the court relied on a search for “BBP Annapolis,” which produced links to the LLC’s site as the top two results and the Corporation’s as the third.  Given the evidence on likely confusion, a jury could infer that the defendants intended to divert customers by creating a likelihood of confusion as to the source of the LLC’s site.

The evidence was, however, insufficient to grant the Corporation’s cross motion for summary judgment.  For example, the LLC’s business focuses mainly on state and local government, while the Corporation is primarily focused on the Navy.  Because neither targets the general public, a reasonable jury could find that consumers’ sophistication made confusion unlikely.  Even the crossed wires on payments have other explanations: they were made shortly after the transfer of contracts to Basile and Proust, and may have been transitional artifcats.  The other confusion instances might be dismissed as de minimis.  In addition, a jury could favor the defendants on intent.  They sent out a mass email distinguishing the LLC from the Corporation, and changed their website and logo when the Corporation complained.

The Ninth Circuit shrugs; nonconsumer confusion can be evidence of consumer confusion

Rearden LLC v. Rearden Commerce, Inc., --- F.3d ----, 2012 WL 2402012 (9^th Cir.)

HT Eric Goldman

Rearden LLC, Rearden Productions LLC, Rearden Studios LLC, Rearden, Inc., and Rearden Properties LLC appealed from summary judgment granted to Rearden Commerce on Rearden LLC etc.’s Lanham Act and ACPA claims.  The court of appeals found that genuine issues of material fact precluded summary judgment.  To my mind, the most notable part of this opinion is something that neither party really had the incentive to argue (in part because of pending trademark applications): they claimed that “Rearden” was suggestive, when I would think that it’s quite obviously descriptive in that it is a surname.

Both parties took their inspiration from Ayn Rand’s Hank Rearden.  Steve Perlman founded Rearden Steel, Inc. in May 1999, then changed its name to Rearden Studios, Inc. in March 2002, Rearden, Inc. in October 2004, and, finally, Rearden LLC in June 2006.  Perlman founded several other Rearden companies: Rearden Studios LLC (which also went through a bunch of Rearden name changes), Rearden Productions LLC (which began life as Look Aside but quickly changed to a Rearden variant), and Rearden Properties LLC.

These entities have offices in San Francisco and Palo Alto, employing approximately one hundred employees in total, and they have a number of websites, including the main rearden.com (since April 2001), reardensteel.com (Nov. 1999), reardenstudios.com (Mar. 2002), and reardenlabs.com (May 2005).  They are technology incubators and artistic production companies.  Tech incubators provide resources and support for start-ups, including “office space, personnel, equipment, IT infrastructure, funding, credit guarantees, insurance, administrative services, benefits, travel services, marketing, creative ideas, intellectual property, and domain names.”  They’ve entered into a partnership with TriNet, a human resources company, to provide their affiliates with “online access to payroll and benefits management services as well as the ability to purchase such services as airline, hotel, and dining reservations, car services, and event tickets.”

Rearden LLC is the one that really does this; Rearden Productions LLC and Rearden Studios LLC specialize in high definition and animated movie production services, while Rearden Properties LLC is a property ownership and management company that rents three units in a San Francisco building to the other Rearden entities.

Appellants have a registration for “Rearden Studios” and logo.  They also filed ITUs for “Rearden,” “Rearden Companies,” “Rearden Commerce Email,” “Rearden Personal Email,” “Rearden Mobile,” “Rearden Wireless,” and “Rearden Communications.”  And they alleged infringement of other claimed Rearden marks, including most of the above along with “Rearden LLC,” “Rearden Productions,” “Rearden Properties,” “Rearden Entertainment,” “Rearden, Inc.,” “Rearden Labs,” “and “Rearden Steel.”  The district court, encouraged by appellants, focused on “Rearden.”

Rearden Commerce, Inc., is “a Silicon Valley-based business concierge company. Simply put, it offers a proprietary web-based platform called the ‘Rearden Personal Assistant,’ which links its clients, specifically businesses and professionals, to an online marketplace where they then are able to search for, compare, purchase, and manage a variety of business and travel-related services from more than 130,000 different vendors (including such well-known companies as American Airlines, Hertz, Hilton, and WebEx). The available services include air, car, hotel, and dining reservations, event tickets, web conferencing, and package shipping.”  Patrick Grady founded the company in 1999, when it was Gazoo Corp. and then Talaris.  Talaris reserved “Rearden, Inc.” as a California corporate name in August 2004, but lost the reservation to appellants in October, so it reserved “Rearden Commerce” in November and changed its name to Rearden Commerce in January 2005. ReardenCommerce.com launched in February 2005 (it had been purchased in August 2004). In March 2005, it filed trademark applications for “Rearden Commerce” and its associated logo.  When they were published for opposition in July/October 2006, appellants became aware of Rearden Commerce.

Rearden Commerce also bought various domain names in March 2005, registering .com/.org etc. families for reardeninc, reardenco and reardenc.  On the same day in October 2006 that it agreed to an extension of time for appellants to oppose its registrations, Rearden Commerce registered reardenllc.com, and soon thereafter reardenllc.net, reardenmobile.com, and mobilerearden.com.  The reardenllc domain names soon began redirecting to Rearden Commerce’s main site.  Appellants sued in November 2006.  Rearden Commerce then ceased the redirection and “parked” the domain names, refusing to assign them to appellants.  It refused to agree to a stipulated preliminary injunction limiting it to reardencommerce, but offered to maintain the domain names in parked status in return for appellants’ agreement to withdraw their applications for “Rearden Commerce Email, Rearden Personal Email, Rearden Mobile, Rearden Wireless, Rearden Communications, Rearden Companies, and Rearden,” which Rearden Commerce suggested were based on its marks and products.  The district court granted a preliminary injunction against Rearden Commerce only as to reardenllc domain names.

The district court first asked whether the Rearden companies had used “Rearden” in commerce; it was dubious, because the evidence suggested that the Rearden companies had served only to incubate Perlman’s ideas, and that no one actually paid Rearden to have their ideas incubated.  Appellants suggested that people could come to Rearden.  However, the district court ultimately assumed without deciding that there was a triable issue of fact on use in commerce.

Instead, the court found that there was no likely confusion.  The suggestiveness of the Rearden mark and the similarities between the parties’ marks weighed, albeit only somewhat, in favor of likely confusion.  The other factors, however, weighed against likely confusion, particularly the proximity of the services and the degree of purchaser care, with marketing channels also weighing against confusion and no help from actual confusion or bad faith intent.  “According to the District Court, no reasonably prudent consumer seeking to obtain start-up support would mistake Rearden Commerce's online marketplace for Appellants' incubation business. In turn, no prudent consumer seeking a web-based means to search, compare, and purchase a variety of business services would mistake Appellants' start-up incubation services for Rearden Commerce's online personal assistant program.”  In addition, the district court rejected appellants’ evidence of confusion, which came from vendors/industry insiders, not members of the relevant consuming public.  E.g., “a Rearden Commerce customer known as QubicaAMF expressed confusion as to which “Rearden” it conducted business with after receiving a subpoena in this lawsuit, and Appellants received dozens of misdirected emails originally intended for Rearden Commerce, some of which were sent by Rearden Commerce's own customers).”  This latter at most involved confusion over proper names/addresses (what other courts have characterized as lookup errors, from the days of yellow pages).

The district court, after some motion practice, turned to the cybersquatting claims.  It determined that appellants couldn’t establish a valid interest in any Rearden mark before July 2005, thus entitling Rearden Commerce to summary judgment for domain names acquired before that date.  A reasonable jury could, however, find use after that, such as appellants’ entry in a “Reel Directory” and an agreement to provide editing services to Electronic Arts.  This left ReardenLLC.com, ReardenLLC.net, ReardenMobile.com, MobileRearden.com, and ReardenC.com.  The district court found that the statutory factors generally favored Rearden Commerce on the issue of whether it acted with a bad faith intent to profit with respect to those domain names, though matters were complicated with respect to the reardenllc domain names.  The court ultimately found good faith because of Rearden Commerce’s belief that it was the mark owner and its unconditional offer, at oral argument on summary judgment, to transfer the domain names to appellants.

The court of appeals reversed.  Summary judgment is disfavored in trademark cases.

First, the court found genuine issues of material fact on use in commerce before July 2005.  Use means bona fide use, not use made merely to reserve rights in a mark.  Mere advertising by itself can’t establish priority of use.  But the circuit applies a totality of the circumstances approach.  Evidence of actual sales or lack thereof isn’t dispositive.  Non-sales activity can be relevant to show that the mark has been adequately displayed to the public and that a service has been rendered in commerce.

Appellants argued that they offered incubation-related services to a variety of start-up companies, including securing millions in outside funding for Rearden Steel Technologies (2001), spinning the company off as Moxi Digital (2002), providing incubation services to Ice Blink Studios (2004), and other activities after 2005.  Many, and possibly all, of these incubated companies were created by Perlman himself.  If appellants had only ever incubated Perlman’s ventures and never provided or even offered their services to outsiders, that wouldn’t be use in commerce because it wouldn’t be sufficiently public to identify or distinguish their services to an appropriate segment of the public.  But, the court of appeals thought, there were genuine issues of material fact about whether appellants provided incubation services to outsiders.  Rearden did have a written contract to provide studios to Ice Blink.

Also, there was “more than enough” evidence that appellants provided non-incubation services to prevent summary judgment.  Appellants “participated in” a 2001 Cinemax movie project, and one of the Rearden entities was expressly identified in the credits of “How to Make a Monster” as furnishing motion capture services.  There was also a 2003 licensing agreement with Life Aquatic Productions, a 2006 editing services agreement between Electronic Arts and Rearden Studios, the “Reel Directory” published in July 2005 identifying Rearden Studios as providing various editing-related services and welcoming independent filmmakers, a 2005 DVD identifying Rearden Studios as providing DVD design and editoral studios, and two 2005 DVD independent films listing Rearden Studios in the credits.  This created a genuine issue of material fact as to whether appellants’ services were rendered in commerce, and also used or displayed in the sale of services.  As to the latter, appellants generated publicity about their services and the marks, including stories in trade and other publications (19 pre-2005 news stories), appearances at trade shows and publicity parties including Rearden Steel’s own launch party, and distribution of Rearden merchandise.

A reasonable finder of fact would not be required to find in favor of appellants, but the issue did have to be resolved at a trial.  Facts favoring Rearden commerce include the undisputed assertion before the district court that appellants only ever provided services to Perlman himself and no one actually paid for idea incubation, and appellants’ failure to file trademark applications for the “Rearden,” “Rearden Companies,” “Rearden Commerce Email,” and “Rearden Personal Email” marks until May 2007.  Perlman claimed under oath, in connection with the “Rearden Studios” trademark applications, that the “Rearden Studios” mark was not used until February 23, 2005, at which point Rearden Commerce had already changed its name from Talaris.

Turning to likely confusion, appellants’ theory was unjust enrichment: “consumers could be more inclined to do business with Rearden Commerce because they mistakenly believe that its services are sponsored by or affiliated with Appellants.”  (Sorry, Mark McKenna.)  If true, this would deprive appellants of the opportunity to charge for the use of their marks and could also risk damage to their reputation or goodwill if Rearden Commerce’s services were bad.

Here again, a reasonable jury could go either way.  Two factors, strength of the mark and similarity of the marks, weighed in favor of appellants.  “Indeed, a reasonable jury could give great weight to these two factors, especially when viewed together.”  And there were genuine issues of material fact on proximity of goods, evidence of actual confusion, marketing channels, and likely expansion of product lines.

The Ninth Circuit specifically stated that the district court properly characterized Rearden as a suggestive mark because “it takes only a small exercise of imagination to associate this name, made famous in the business community (and elsewhere) as an image or paragon of entrepreneurial success by Rand's highly successful and influential novel, with the incubation of start-up enterprises.”  Sigh.  Also, it was correct to reject Rearden Commerce’s argument that the mark was weak because over 840 other companies use Rearden or some variation in their names.  Only four identify as tech or engineering firms, and each of those has headquarters outside of California, lacks an Internet presence, and employs fewer than five people. “A reasonable finder of fact could accord more significant weight to this factor than did the District Court, particularly in light of evidence that Appellants have undertaken efforts to promote the mark in association with their services; we have observed that ‘advertising expenditures can transform a suggestive mark into a strong mark.’”  

Similarity, of course, also favored appellants, especially given that Rearden Commerce naturally often referred to itself as “Rearden.”  True, it’s common for multiple companies to use similar names and marks, such as Johnson & Johnson, Johnson Publications, Howard Johnson's, Johnson Controls, Johnson Products, and S.C. Johnson.  But a reasonable jury could determine that this factor weighs “significantly” in appellants’ favor, especially given the possible cumulative effect of strength and similarity.

On proximity of the services, the Ninth Circuit favors flexibility.  In the light most favorable to appellants, there was evidence that the parties “(1) offered arguably similar technology platforms to their respective customers (i.e., Appellants have offered an online means, as part of their incubation business, for clients to arrange business, travel, and other services through TriNet while, on the other hand, Rearden Commerce has provided businesses with an online marketplace for businesses to purchase and manage similar services from a variety of third parties); (2) attended the same trade shows; (3) appeared in the same publications; and (4) relied on private investment funding from the same sources.”  A reasonable jury could go the other way too, finding that an incubator doesn’t really compare to an online business concierge marketplace.

It was on evidence of actual confusion that the court of appeals made the most law.  While the court rejected appellants’ theory of confusion among “non-purchasing consumers,” it ruled that confusion among non-consumers could create an inference of consumer confusion.

Appellants began with the proposition that incubation services, by definition, are not directed towards the general public.  They typically deal with investors, other businesses seeking strategic partnerships, marketers, business strategists, vendors, suppliers, and media outlets.  “Various outlets, like trade shows and trade publications, are therefore critical to a successful incubation process as well as to a successful incubation business.”  Thus, they concluded, an incubator sells the start-up itself to investors and the like. 

The court found this theory “open-ended and unsupported.”  “It is difficult to see who exactly could not be included as a ‘non-purchasing consumer’ under their interpretation of this concept, which apparently includes those who sell to, as well as buy from, the entity.”  The relevant consumer for purposes of incubation is the hiring start-up.  Trademark law prevents only against mistaken purchasing decisions, not against confusion generally.

However, non-consumer confusion may be relevant to likely confusion “where there is confusion on the part of: (1) potential consumers; (2) non-consumers whose confusion could create an inference that consumers are likely to be confused; and (3) non-consumers whose confusion could influence consumers.”  In those cases, non-consumer confusion “bears a relationship” to consumer confusion.  In a footnote, the court said it wasn’t deciding whether other circumstances also justified taking non-consumer confusion into account.  Its rationale for leaving the class open was pure dilution, despite the confusion language: “we do not decide whether confusion on the part of such nonconsumers as vendors and suppliers, potential employees, and investors should be considered merely because such confusion could affect the trademark holder's business, goodwill, or reputation.”

In the TrafficSchool.com case, the court already recognized non-consumer confusion as a relevant proxy—there, it was law enforcement officials and state DMV employees confused about the official status of DMV.org.  “[I]f even these parties, who presumably have much more familiarity with governmental DMVs, are confused about the defendants' website, then it is probable that consumers, who have less familiarity, would also experience confusion.”  If sophisticated non-consumers are confused, that might be evidence that less sophisticated consumers would be confused, whereas confusion by non-sophisticated non-consumer “may shed little or no light on whether a sophisticated consumer would likewise be confused.”  Also, the court has recognized relevance where non-consumer confusion can contribute to consumer confusion, such as post-sale confusion.

There were two record incidents of actual consumer confusion: a customer of Rearden Commerce, QubicaAMF, expressed confusion as to which “Rearden” it was conducting business with after receiving a subpoena in the instant lawsuit. Also, appellants received dozens of misdirected e-mails actually intended for Rearden Commerce, some sent by Rearden Commerce's own customers.

As for non-consumer evidence, trade and other publications, as well as trade show organizers and attendees, have confused the parties or believed that Rearden Commerce was founded by Perlman or somehow is associated with him and the various Rearden companies.  The Ninth Circuit lumped together examples of uncertainty, which some courts treat as the opposite of confusion, with confusion: “For example, the author of a March 23, 2005 CNET News.com article observed that ‘the main question in the conference hallways [at the PC Forum trade show] was whether the company [Rearden Commerce] had any relationship to Rearden Steel, the set-top box outfit started years ago by WebTV founder Steve Perlman’ and that, ‘[i]t doesn't, but the association made many wiggly.’”  Another 2008 article, discussing $100 million in funding for Rearden Commerce, clearly believed that this company was created by the “legendary inventor,” Perlman, and the “technology incubator” he founded; the article also featured an excerpt from a recent interview with Perlman and included his picture. A Rearden Commerce employee testified that he was asked about “a dozen times” on the first day of the April 2008 Web 2.0 show whether the companies were somehow affiliated or related.

This type of confusion could fall into any of the three relevant categories the court of appeals identified.  “In particular, it appears that the confusion of presumably knowledgeable and experienced trade journalists and trade show organizers could very well influence the purchasing decisions of consumers.”

There was also evidence of confusion by other non-consumers, “evidently either in a position in which to influence consumers or to serve as their proxy”: (1) appellants' prospective employees; (2) a vendor; (3) an investor (Mac-Quarie Group, which entered into an agreement with Rearden Commerce and then negotiated with appellants over a $1 billion lease); (4) appellants' auditors; and (5) their patent attorneys. “Tellingly, Rearden Commerce and Grady were cautioned about using the ‘Rearden’ name before the company's name was ultimately changed in 2005. For example, Rearden Commerce's public relations consultant stated in a December 8, 2004 email that: ‘Also, there is a guy who has a small thing called Rearden Steel, the one who started Web TV. That might confuse folks in the beginning.’”

A reasonable finder of fact could still find in Rearden Commerce’s favor, given that this evidence might have no bearing on actual consumer confusion. “For instance, a reasonable jury could find that presumably sophisticated start-ups looking for critical incubation services could not really be misled by some mistakes in a trade publication.”  Other reasons to discount the evidence included that the confusion evidence related only to names/email addresses, not to the full marks.  Indeed, Rearden Commerce suggested that appellants attempted to generate confusion evidence by doing things like removing email filters and moving their booth at the Web 2.0 show.  But these accusations of good faith only highlighted the existence of genuine factual issues.

There were also genuine issues of material fact on marketing channels used (the parties appeared in the same trade publications and participated in the same trade shows) and likelihood of expansion of product lines (Perlman testified that Rearden had been developing wireless technology since 1999).  Meanwhile, Rearden Commerce had, among other things, developed its own “mobile wireless product,” registered mobilerearden.com and reardenmobile.com, and had an interest in further expansion.  (Isn’t having an interest in mobile apps a bit like having an internet presence these days?)

Similar factual issues preserved the ACPA claim.  A reasonable jury could weigh more heavily than the district court did that Rearden Commerce has never used Rearden LLC to describe itself, given that it’s one of appellants’ legal names.  Also, the timing suggests that Rearden Commerce might have been trying to use the domain names as leverage in negotiations, which the ACPA doesn’t let you do absent some other interest.  (Compare filing an ITU for "Rearden Commerce," which is apparently fair game for exerting leverage.)  Rearden Commerce’s general counsel testified, “So, yes, at that point in time, there was I find out that there's a party opposing my trademark application that I feel has no right to oppose my trademark application, and I need to protect my mark, and I need to—and those were two marks that I hadn't obtained in the past.”  A reasonable jury could find that Rearden Commerce simply purchased domain names it initially overlooked, but it could also find bad faith, especially given the apparent absence of any formal policy or method for Rearden Commerce’s registrations.

There were also genuine issues of material fact on Rearden Commerce’s good or bad faith after appellants first accused it of cybersquatting.  Though Rearden Commerce did deactivate the LLC.com domain names when confronted and then unconditionally offered to transfer them to appellants, that was just one fact for the jury to evaluate.  Earlier, it offered to maintain them as non-directing only on the condition that appellants abandon some trademark applications.