My latest acquisition

 They're even in my size! Heavy, but not as hard to walk in as I feared.

when weak TM claims do better than seemingly strong false advertising claims

Sanho Corp. v. Kaijet Technol. Int’l, 2024 WL 4553279, --- F.Supp.3d ----, No. 1:18-cv-05385-SDG (N.D. Ga. May 20, 2024)

Note: A jury found Kaijet liable for design patent and copyright infringement after this opinion, but rejected the TM claims, which I guess says something about a jury’s ability to distinguish claims. It didn’t get a chance to decide the false advertising claims, which I think reflects courts’ relatively lax approach to TM compared to the rigors to which false advertising claims are subjected before reaching a jury; personally, I likely would have gone the other way.

Sanho sells accessories under the HyperDrive name, including MacBook dongles. Kaijet sells competing UltraDrive MacBook dongles. 

Kaijet product

Sanho product

(My spouse uses a third competitor that looks basically indistinguishable; FWIW, he says that he would not buy the same product again because it's easy to whack it in a way that detaches it from the laptop and that a cable connection would have been a better choice.)

Sanho has a registration for HYPERDRIVE.

HyperDrive logo

UltraDrive logo

The court first found that there was a factual issue about whether the hubs were “power adapters” as specified in the trademark registration. The hubs can be used “to transmit[ ] power from a ‘source’ (MacBook Pro) to a ‘sink’ (a cell phone being charged).”

The court also found a factual issue on likely confusion between UltraDrive and HyperDrive, reasoning that because a power hub is not a drive (and also that there’s a Star Wars reference), the mark was suggestive. Third-party use of the weak components “hyper” and “drive” didn’t reduce the strength of the mark (but somehow that didn’t make confusion less likely just because the overlap was in “drive”). Although the marks weren’t similar in appearance, they were “similar in sound, meaning, and usage,” since they both had a two-syllable prefix followed by the word “drive,” and “hyper” and “ultra” were roughly synonymous. They were directly competing. Although there’s a distinction between bad “[i]ntent to benefit from a competitor’s goodwill” and good “intent to copy,” they’re often related and bad can be inferred from good, as it could be here. Email communications repeatedly referenced Sanho’s design, and expressed a desire to use similar elements in its own product. Kaijet US changed its existing product name from “ultrastation” to “UltraDrive” after Sanho began selling its hubs, and as Kaijet US was preparing to introduce a competing product into the same market.

Whether there was evidence of actual confusion was a contested issue about interpreting consumer complaints.

Sanho’s false advertising claim  alleged that the defendants falsely advertised a hub as an “8-in-1” product, when it contains only seven ports. But the court agreed that this wasn’t literally false, and Sanho offered no evidence of likely confusion. It seems like a jury should at least have addressed the literal falsity issue, because it’s hard to say that no reasonable jury could have found literal falsity, when there are eight numbers for ports and the numbers don’t correspond to, or even add up to as far as I can tell, eight distinct functions. But the court reasoned that “labels do, in fact, count out eight functions. Several of those functions do seem duplicative—(5) and (6) are both labeled ‘USB 3.0.,’ (7) and (8) are both labeled ‘Memory Card’—but that suggests the labels are misleading, not literally false.” I would instead have said that means that both possible meanings—number of functions or number of ports—are literally false.  

neither eight functions nor eight ports shown

There were also factual disputes on the copyright infringement claim based on the parties’ packages.  Sanho’s packaging contained both protectable and non-protectable elements: 

Sanho packaging

Non-protectable are Sanho’s product name and description, the packaging’s selection of typographies and colors, and familiar images such as MacBooks and laptop ports.

Also non-protectible are functional elements like the listing of product information and specifications. The way in which the product-shaped cutout or window on the front of the packaging allows consumers to view the product without opening the packaging is likewise functional and therefore non-protectable.

However, there was “a spark of creativity here in Sanho’s arrangement and coordination of the packaging’s otherwise unprotectible constituent elements—most notably in the alignment of the right side of the product-shaped cutout with the left edge of a depiction of a MacBook to suggest the physical docking of the hub to the laptop.” Packaging for similar products contained “more or less the same elements—product name and description, specifications and features, cutouts or windows—but in a variety of arrangements, none of them resembling Sanho’s in overall layout, and none of them suggesting its product’s physical compatibility with another device in the way that Sanho’s does.”

packaging front comparison

packaging side comparison

The court found that defendants

appropriated the most original element of Sanho’s design: the cutout in the center showing the product hub physically interfacing with a depiction of a MacBook to the right. In addition, the front of [defendants’] packaging presents mostly the same information as Sanho’s, and in the same layout: product name at top, product description at bottom, “4K” and “50 Gbps” callouts at bottom right. The back of j5create’s packaging, like Sanho’s, depicts a MacBook, open at a similar angle and viewed from a similar perspective, with the product hub attached and its ports labeled, followed by a bulleted list detailing the ports’ capabilities. The left side panel of [defendants] packaging, like Sanho’s, depicts and labels the hub’s ports. These are significant similarities in the packagings’ arrangement and coordination of dominant design features.

But they were also “far from identical,” including differences in color and font, as well as defendants’ product carrying product specifications in four languages and depicting the product’s side profile on the side of the package. Because substantial similarity is qualitative, this was for the jury.

Finally, the court rejected Kaijet’s false advertising counterclaim based on Sanho’s allegedly false “fake review campaign” of positive product reviews on Amazon, based on failure to show materiality. It was insufficient to provide:

1. A study showing that 74% of respondents “read online reviews” from online stores like Amazon and BestBuy;

2. A study showing that 32.7% of respondents cited “[p]roduct reviews and recommendations as a “[m]ain reason for shopping at Amazon”; and

3. Sanho CEO Daniel Chin’s declaration testimony that “The UltraDrive is an inferior and lower quality version of the HyperDrive. It receives less favourable customer rating reviews on Best Buy’s website and has many complaints.”

“Evidence about where consumers read online reviews is not probative of what they do with the information in those reviews. Likewise, evidence about why consumers choose to shop at Amazon is not probative of why they would choose the HyperDrive over the UltraDrive, when the latter was sold exclusively through Best Buy.” There was no evidence tending to prove that Sanho’s alleged fake reviews caused consumers to buy Sanho’s products instead of defendants’, and self-interested testimony on superiority was insufficient. (This is a bit of conflating materiality with harm causation, but ok. Imagine a court finding evidence that consumers generally care about brand names, or other general testimony about branding, insufficient in a TM case!)

Also, defendants failed to rebut Sanho’s evidence of immateriality, which was deposition testimony that No such evidence has been produced. Furthermore, the Kaijet Defendants have failed to meaningfully rebut Sanho’s evidence of immateriality: deposition testimony that the Sanho product had a better aggregate rating on Best Buy (where it is actually sold) than it did on Amazon, and Sanho’s expert’s testimony that the sales metrics of its products, both of themselves and relative to the sales metrics of Kaijet, were uncorrelated with the timing of Sanho’s alleged fake review campaign. No reasonable jury could find, on this record, that Sanho’s fake review campaign was material.

associating two differently named products can't cause dilution, which requires similar marks

In re Soclean, Inc., Marketing, Sales Practices & Prods. Liab. Litig., No. 22-mc-152, MDL No. 3021, 2024 WL 4444819 (W.D. Pa. Oct. 8, 2024)

Previous discussion of MDL. As previously noted, SoClean is a dominant player in the market for medical devices that sanitize continuous positive airway pressure machines (CPAPs), which treat sleep apnea and respiratory conditions. It alleged that the Philips defendants, who make such devices, engaged in false advertising about one of SoClean’s devices in order to deflect blame for the Philips devices’ design defects. Philips counterclaimed for false advertising, trademark dilution, and state-law deceptive trade practices. This opinion adopts in part and rejects in part a special master recommendation that SoClean’s motion to dismiss the counterclaims be denied.

False advertising: SoClean argued that Philips failed to allege adequately causation because there are multiple intervening steps between the alleged consumer deception and Philips’ alleged injury. Philips’ theory was that SoClean’s claim that its device was compatible with the Philips devices was false, which influenced consumers to use SoClean’s device with Philips devices -- thereby damaging Philips’ products by causing the foam to degrade, as well as harming the reputation of Philips’ products, and causing a decline in Philips’ sales.

This satisfied Lexmark and created a factual issue on proximate cause because the alleged harm flowed from SoClean’s own pronouncement that its device was compatible with Philips’ devices. Intervening causes such as the FDA alert about cleaning CPAP machines and Philips’ voluntary recall could affect damages but weren’t enough to warrant dismissal.

Trademark dilution: This requires an association arising from similarities between two marks that causes damage. There is no dilution claim for associating one marked product with a differently marked product. Thus, SoClean’s compatibility chart, which stated that SoClean’s products were “compatible with free adapter” with Philips’ products, could not “lessen the capacity of Philips’ mark to identify and distinguish Philips’ mark from SoClean’s mark.”

New Hampshire Consumer Protection Act: The relevant theories were that (1) SoClean made representations about characteristics its product did not have (i.e., full compatibility); and (2) SoClean made representations about its sponsorship, approval, affiliation or connection with Philips.

As for the first, it was

certainly reasonable to infer that a consumer would understand the references to 'compatibility” to mean that the SoClean device can actually be used with the Philips device without causing harm to the Philips device or to consumers who use both devices together. As Philips analogized, a consumer seeing a claim that a charging cable was compatible with a certain phone would conclude that the cable not only physically fit, but also would “charge their phone without frying the motherboard.”

This was enough at the motion to dismiss stage, as was pleading consumer confusion about affiliation or approval.

SoClean argued that the counterclaims were untimely even under the discovery rule.

Under New Hampshire law, “Once a defendant has established that the statute of limitations would bar an action, the plaintiff has the burden of raising and proving that the discovery rule is applicable to an action that would otherwise be barred by the statute of limitations.” On the face of the counterclaims, the action wasn’t brought within three years (the state consumer protection period). Thus, the burden shifted to Philips to plead sufficient facts to plausibly support the application of the discovery rule, and it didn’t explain why it reasonably took so long to reach the conclusion that SoClean’s product increased the risk that Philips foam would degrade. So the state claims were dismissed with leave to amend.

As for the Lanham Act, laches generally can’t be determined on the basis of the pleadings, despite laches being apparent on the face of the counterclaims because of the relevant dates. The Third Circuit is more plaintiff-friendly: the discovery rule has a “fundamentally plaintiff-friendly purpose” and “is grounded in the notion that it is unfair to deny relief to someone who has suffered an injury but who has not learned of it and cannot reasonably be expected to have done so.” And “a plaintiff is not required to plead, in a complaint, facts sufficient to overcome an affirmative defense.” We don’t yet know when Philips knew or reasonably should have known about its counterclaims; at this stage, that helps Philips.

Another API (c) case with false advertising and contract claims too

Trackman, Inc. v. GSP Golf AB, 2024 WL 4276497, No. 23 Civ. 598 (NRB) (S.D.N.Y. Sept. 24, 2024)

Trackman makes the golf simulator game Perfect Golf, which offers users the ability to virtually play some of the most famous golf courses in the world. Defendants allegedly copied key components of Trackman’s copyrighted software and falsely suggested, in promotions and advertisements, that defendants were authorized to use the well-known courses in their game.

Although the court dismissed a contract claim, copyright and false advertising claims survived.

Plaintiff’s Perfect Golf simulator allows users to design golf courses; has “an API4 for external tournament sites to be able to fully integrate into Perfect Golf for online real-time scoring and tracking”; and allows users to play each other on courses designed in the simulator. Using a combination of radars and cameras, plaintiff’s launch monitors track the full trajectory of a golf shot. Launch monitors incorporated into plaintiff’s simulator technology, which allows users to play golf indoors using real clubs and balls in front of an “impact screen” that displays the simulation and keeps golf balls from ricocheting back at the player after they are hit.

Perfect Golf has a EULA that bans reverse engineering.

Although Perfect Golf used to be compatible with third-party launch monitors, as of August 2020, Perfect Golf users had to buy plaintiff’s launch monitors to play the game.

Defendant saw the compatibility-breaking as an opportunity to replace Perfect Golf and be compatible across a number of launch monitors.

This first required developing golf simulator software, eventually called GSPro. GSPro allegedly copied Perfect Golf’s course-creating code as well as copied Perfect Golf’s ‘combine’ feature,” which “enables golfers to identify strengths and weaknesses in their game.” Defendants also allegedly developed an online platform to host tournament play by GSPro users that copied Perfect Golf’s API data structures for simulating golf competitions. And they allegedly copied golf courses created on Perfect Golf’s course design platform.

In addition, defendants allegedly claimed that course selection included “iconic, branded courses like St. Andrews in Scotland and various PGA Tour Tournament Players Club courses throughout the United States” without having the licenses “required” to offer those courses, while plaintiff had “diligently sought and obtained permission[ ], including trademark licenses, from the owners of branded golf courses,” including St. Andrews and various PGA Tour courses. “Eventually, in 2023, the trademark owners of the St. Andrews and PGA Tour courses sent cease-and-desist letters to defendants, after which defendants ‘removed, disabled access to, or renamed the St. Andrews and PGA Tour courses,’” but plaintiffs argued that the damage had been done.

The court refused to hold on a motion to dismiss that the API data structures at the center of the dispute (which sound like they’re needed for interoperability) were not copyrightable, relying on the Federal Circuit’s decision in Google v. Oracle. The structures at issue include “shared naming conventions that allows a simulated golf tournament site … both to communicate with [client] software … and to process data, like how many shots it takes for a player to complete a hole in the golf simulation.”

The court found that plaintiff sufficiently pled the “modest” requirements of originality by alleging that it spent “years” developing the program, which provides, among other things, “an immersive experience centered on high-resolution visuals” and “hyper-realistic gameplay.” (Why does this make the API protectable?) It also alleged that it “built” an API. (That very verb signals the issue.) But: “Such allegations, at this stage, are more than sufficient to demonstrate that Perfect Parallel both independently developed the subject API structures and made numerous creative decisions in doing so.” Anyway, questions of originality are generally inappropriate for determination on a motion to dismiss. Likewise, whether plaintiff’s API structures were a protectable process or method of operation couldn’t be determined on a motion to dismiss.

Estoppel/license defenses were also premature, and the complaint satisfied the discovery rule on its face for statute of limitations purposes.

However, the court dismissed the breach of contract claim, finding the EULA’s anti-reverse engineering provisions preempted by copyright law. “Put simply, plaintiff claims that defendants breached the [reverse engineering] Provision by ‘studying and analyzing’ plaintiff’s software as part of its efforts to develop its own competing golf simulator software that would be compatible with Course Forge courses and third-party hardware.”

The disputed work was clearly within the scope of copyright—software/literary work. For express preemption to apply, “the state law claim must involve acts of reproduction, adaptation, performance, distribution, or display.” That was true here. But a claim isn’t preempted if it has an extra element that makes it qualitatively different. Unlike other circuits, the Second Circuit has instructed that the “extra element” inquiry is not “mechanical” but instead “requires a holistic evaluation of the nature of the rights sought to be enforced, and a determination whether the state law action is qualitatively different from a copyright infringement claim.”

While some courts have held that the promise element of a contract claim suffices, categorically exempting contract claims from preemption, the Second Circuit hasn’t. (And in an age of unavoidable contracts of adhesion, saying that as a matter of law there’s an actual “promise” and then that the promise avoids preemption seems wrong.) In the Second Circuit, “a breach of contract claim is preempted if it is merely based on allegations that the defendant did something that the copyright laws reserve exclusively to the plaintiff (such as unauthorized reproduction, performance, distribution, or display).”

Plaintiff argued that its contract claim was distinguishable because it is specifically (and carefully) “directed to the non-copying acts of studying and analyzing copyrighted works.” But, evaluating the nature of the rights sought to be enforced “holistically” showed that the contract claim was centrally about copying (or studying) in order to create competing works. Defendants’ “studying and analyzing” were “part and parcel of their broader infringing conduct that is at the heart of plaintiff’s copyright claims (i.e., unlawfully developing, producing, and distributing plaintiff’s software).”

Then, in a footnote revealing a fundamental misunderstanding, the court noted the strategic reasons for a breach of a contract claim, if the API structures turn out not to be copyrightable—in that case plaintiff would be “wholly or partly without a remedy.” Thus, the court dismissed the contract claim without prejudice if there are “substantial changes in the law.” This is a flat-out mistake about 301’s scope, which doesn’t just apply when there are valid © claims. It applies when the subject matter is the same as ©’s subject matter, whether or not the material at issue is protectable. That’s why you can’t use state law to protect works whose copyright has expired, or the facts in a work. If it’s a claim whose gravamen is copying a fixed work, then the unprotectability of the copied material doesn’t matter.

And then the court upheld a false advertising claim that seems quite problematic to me. Plaintiff alleged that defendants “sought to commercially advertise and promote the availability of iconic branded golf courses for simulator play on the SGT platform,” which misleadingly suggested that they were “authorized to offer genuine, trademarked courses,” when, in reality, defendants “lacked the rights to offer these branded courses.” The court agreed that plaintiff didn’t allege literal falsity, but found that implied falsity was plausible.

The claims weren’t literally false because “iconic, branded golf courses” were available for play. But they might have falsely implied licensing/endorsement, and plaintiff didn’t need to provide extrinsic evidence of deception at this stage. Also (ugh), intentional deception might obviate the need for evidence of confusion, and the facts here might allow that theory: Defendants allegedly

(1)  knew that they did not have the requisite authorization to make available the trademarked courses; (2) made a litany of statements on social media and elsewhere suggesting that they had such authorization; and (3) made these statements with the intention of influencing “a significant number of users” to purchase SGT subscriptions and GSPro downloads on the basis that they could play “at some of the most coveted courses around the world.”

Even though (3) was true, that was enough for the court.

What about materiality? It was plausible that consumers would care about whether the courses endorsed defendants, because the courses are official partners of plaintiff, which was plausibly related to plaintiff’s success.

What about Dastar? Some courts have rejected Lanham Act claims premised upon false representations of licensing status.” E.g., Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137 (9th Cir. 2008), rejected the plaintiff’s argument that “the licensing status of each work is part of the nature, characteristics, or qualities of the karaoke products” because they weren’t characteristics of the goods themselves. But the court found this line of cases to be irrelevant to the false advertising claim here. “Dastar and the like are concerned about impermissibly blurring the lines between trademark and copyright law.” The claims here were “based solely on the SGT Defendants’ misleading statements regarding the licensing of trademarked courses, not the licensing of expressive copyrighted (or copyrightable) material…. [T]he misrepresentations at issue have nothing to do with claims of authorship of an expressive work or creation of an invention.” Plaintiff wasn’t suing over copying the simulated version of the course.

This is a little weird given that the representations of the courses were copyrightable representations—the license was a license to represent the courses, not to play on them or replicate them in the physical world. More to the point, though, the analysis does not fit well with today’s textualism. Dastar says that is about the meaning of “origin” in the Lanham Act, even if that interpretation was motivated in significant part by avoiding a TM/© conflict. Dastar says that “origin” does not include the origin of intangible content—including who “stands behind” that intangible content. It specifically addresses the argument that intangible origin could well matter to consumers for “communicative” goods. You can get there textually by saying that “nature, characteristics or qualities” is broader than “origin,” for sure. But I think these days you have to take that step.

It’s also worth noting that the TM claim here is based on the representation of golf courses in the game, which shouldn’t require permission any more than a book about the golf courses would—there are pretty significant Rogers issues as well, and the trademark claimants aren’t even actually here to make their claims.

For-profit company can republish ASTM standards incorporated by reference into law

Am. Soc. for Testing & Materials v. UpCodes, Inc., No. 24-1895 (E.D. Pa. Oct. 2, 2024)

ASTM, which produces technical standards, sued UpCodes  for providing free online access to unauthorized copies of ten ASTM standards, all of which have been incorporated by reference into state and local legal codes. ASTM sought a preliminary injunction based on its copyright and trademark claims, which the court denied.

Over seventy percent of ASTM’s revenue comes from the sale of its standards. Along with individual sales, ASTM sells a publication entitled ASTM Standards in Building Codes that contains over 13,000 ASTM standards including the ten at issue here.

“Although local, state, and federal jurisdictions reference ASTM standards in their laws, it is accepted that ASTM does not lobby the government—or other entities—to reference their standards.” Nonetheless, ASTM’s official form and style manual indicates that certain ASTM standards are “developed for reference in model building codes.” Plus, “when ASTM standards are adopted into law, ASTM can market its own compliance-focused training materials.”

UpCodes is a for-profit start-up, which only publishes standards that, in its view, have been adopted into law by specific jurisdictions. Users of the UpCodes website can filter their searches by jurisdiction or by the original publisher of the adopted standard. Any user with an UpCodes account can freely view and copy a supported jurisdiction’s laws , and they can also purchase a subscription to access UpCodes’ premium features, including bookmarking, annotating, and automation tools. Posting these standards therefore “may provide UpCodes with tangential benefits like drawing users to its website, increasing active account numbers, and enabling the collection of user information.”

Each unauthorized copy that UpCodes posted at issue here includes what ASTM describes as “expressly non-mandatory” material, such as explanatory notes, supplementary materials, appendices, and Annexes. UpCodes identifies ASTM as the original publisher. Since promulgating the ten standards at issue, ASTM has published updated versions of nine of them.

When a standard is incorporated by reference,

the incorporated standard may be enforced against regulated entities without being included in the text of the law itself. When this happens, a regulated entity will not find the text of the standard that details their legal obligations in the official public code. They must look elsewhere to access the content of the standard. Often, that access comes with a price. The private standard-developing organizations that create these referenced standards typically copyright their work and charge fees for users to access them.

When federal agencies incorporate by reference privately authored materials, federal law requires copies of incorporated standards to be, at a minimum, available for public inspection at the Office of the Federal Register’s reading room in Washington D.C., and in the promulgating agency’s public library. ASTM also operates an online read-only reading room (with no print or download options) for ASTM standards that have been incorporated into federal law.

But no such law regulates state or local government incorporation by reference. The standards at issue in this case were not available online for free before UpCodes posted them. Although incorporation by reference can save money and work, it can create “serious notice and accountability problems.” “[P]lacing legally binding standards behind paywalls undermines the ‘principle that [government] should provide regulated parties fair warning of the conduct [a regulation] prohibits or requires.’” This may also hinder mechanisms of democratic accountability.

Incorporation by reference can also occur indirectly: A government incorporates by reference a third-party publication. That publication incorporates by reference a separate privately authored standard. Whether incorporation by reference is direct or indirect, neither involve having “the content of the technical standard reprinted in the text of the law itself. Thus, people are typically unable to view the content of these standards unless they pay a fee.”

The Philadelphia Building Code states that the 2018 International Building Code “is incorporated as if fully set forth herein, subject to [] local amendments.” As the IBC’s Chapter on Referenced Standards explains, “[t]he International Building Code contains numerous references to standards promulgated by other organizations that are used to provide requirements for materials and methods of construction . . . . These standards, in essence, are part of this code to the extent of the reference to the standard.” The ten ASTM standards at issue are so incorporated. If individuals violate the Philadelphia Building Code, they can face fines of up to three hundred dollars a day per violation.

Reading the fair use factors in light of copyright’s purposes, UpCodes’ copying was likely to be fair use.

Factor one “considers the reasons for, and nature of, the copier’s use of an original work.” The court deemed UpCodes’ use of the standards “largely noncommercial,” since it didn’t derive any direct monetary profit from publishing them. And the transformative nature of the use outweighed its status as a for-profit company. “UpCodes achieves the distinct objective of making the law freely accessible and educating the public on the contents of binding laws. Unlike ASTM, UpCodes seeks neither to publish industry best practices nor to ‘positively impact[] public health and safety’ by developing high-quality technical standards.” This use had a different character and further purpose from ASTM’s use.

The court declined to see both purposes as “providing information to professionals.” UpCodes focused on standards that have been enacted into law, while ASTM sought to publish standards that improve safety and performance. One objective indication of that different purpose (following Warhol) that weighed in UpCodes’ favor was that ASTM has updated 9 of the 10 standards, but UpCodes doesn’t publish the updated versions because they’re not the law, showing that the reasons for copying were different than ASTM’s reasons for publishing. (Although this isn't a big data case, it follows the pattern, which Warhol may have accelerated, of courts being more confident in identifying different purpose in identical copies than different "character" when the latter requires assessing the meaning of physical changes to the copied work.)

In addition, the use was “justified because it furthers the goal[s] of copyright,” including “enriching public knowledge.” And it was “justified because copying is reasonably necessary to achieve [UpCodes’] new purpose.” As UpCodes explained, “[i]f [it] attempted to express that law using other words . . . it would not be publishing the law of Philadelphia.” The DC Circuit’s decision in Public Resource was persuasive, even though UpCodes is not a nonprofit, given the mostly noncommercial nature of the use. Although the explanatory notes, supplementary materials, and appendices weren’t binding, the court agreed with the DC Circuit that, “because law is interpreted contextually, even explanatory and background material will aid in understanding and interpreting legal duties” and, like legislative history, such materials “may prove [] important for resolving ambiguities in the portions of standards that set forth the directly binding legal obligations.”

Factor two: Technical standards generally “fall at the factual end of the fact-fiction spectrum, which counsels in favor of finding fair use.” And because “the express text of the law falls plainly outside the realm of copyright protection,” “standards incorporated by reference into law are, at best, at the outer edge of ‘copyright’s protective purposes.’” The nature of the work, that is, is that it has been incorporated into law, weighing “heavily” in favor of fair use.

Factor three: It’s ok to copy the whole thing when that’s reasonable in relation to the purpose and character of the use. “[T]his amount of copying was plainly reasonable in relation to UpCodes’ objective.” Like the DC Circuit, the court agreed that this factor “strongly” supported fair use because the copying was limited “to only what is required to fairly describe the standard’s legal import.”  

Factor four: Following Google v. Oracle’s directive that “a potential loss of revenue is not the whole story,” the court analyzed both the source of any market harm and the countervailing public benefits of the copying. Courts must consider “whether enforcing a copyright will allow the copyright holder to gain profits that would ‘interfere with, not further, copyright’s basic creativity objectives’” and balance the monetary effects against the public benefits, a consideration that was “especially weighty” when it came to standards that have been given the force of law.

Using this analysis, the fourth factor didn’t weigh clearly in either side’s favor. It was “plain” that free availability from UpCodes would have a market effect on purchases of the standards from ASTM.  Nonetheless, copyright “should not grant anyone more economic power than is necessary to achieve the incentive to create,” and “ASTM may have other incentives to continue developing technical standards even if some of its standards lose their copyright protection after being enacted into law”: “its mission of promoting product quality and public safety, its professional interest in being recognized as a global leader in standard development, and other monetary benefits that it may derive after its standards are incorporated into law, like profits derived from marketing its own compliance-focused training materials.”

And of course the countervailing public benefits were substantial—there was no requirement that referenced standards enacted by state and local jurisdictions be publicly available, but significant practical value to the public of unfettered access to such incorporated standards. “For example, journalists have explained that this access is essential to inform their news coverage; union members have explained that this access helps them advocate and negotiate for safe working conditions; and the NAACP has explained that this access helps citizens assert their legal rights and advocate for legal reforms.”

Weighing the factors, the use was fair. After all, copyright law is not designed for the primary purpose of providing “a special private benefit” to authors like ASTM. The court didn’t see why incorporation by reference was any different from direct incorporation into law for fair use purposes, since the legal consequences were “virtually indistinguishable.” (Is it even “virtually” indistinguishable? Maybe for the commentary.)

Trademark: This was nominative fair use. In nominative fair use cases, “the alleged infringer uses the trademark holder’s mark to describe the trademark holder’s product, even if the alleged infringer’s ultimate goal is to describe his own product.” Like car mechanics identifying VWs as among the types of cars they repair, UpCodes used ASTM’s mark in a nominative manner. And “the only practical way” for UpCodes to refer to them was to use the term, because the entities that incorporated the standards into law did so.

In the Third Circuit, courts use a modified LOC case in nominative use cases. Under that test, two usually key factors—similarity between the owner’s mark and the allegedly infringing mark, and strength of the owner’s mark—are ignored (because in a NFU situation they wouldn’t actually bear on likely confusion/the use is justified even, or especially, because it’s identical to a strong mark). Although district courts have discretion, four other factors are likely to be relevant: (1) the price of the goods and other factors indicative of the care and attention expected of consumers when making a purchase; (2) the length of time the defendant has used the mark without evidence of actual confusion; (3) the intent of the defendant in adopting the mark; and (4) the evidence of actual confusion. Only if those factors favor a likely confusion finding does the burden shift to the defendant to show that it’s satisfied the NFU test. ASTM didn’t make it to the burden-shifting stage.

Here, length of defendant’s use was short and thus not very probative one way or another. But the relevant consumers were sophisticated: ASTM’s standards are “targeted at technical people” including “engineers, architects, builders, and suppliers and manufacturers of construction materials.”

UpCodes’ intent was not to “confuse or deceive consumers as to the product’s source . . . .” Instead, “ASTM” was the only practical way to refer to the standards; its intent was accuracy.

And there was no evidence of actual confusion.

Thus, there was no likely success on the merits.

(It’s not even obvious that there’s more to do for summary judgment, certainly on the copyright claims.)

Copyright preemption in trade dress claims?

Scotts Company LLC v. SBM Life Science Corp., --- F.Supp.3d ----, No. 2:23-cv-1541, 2024 WL 4217446 (S.D. Ohio Sept. 18, 2024)

Scotts makes consumer lawn, garden, pesticide, and insecticide products, including under the “ORTHO” brand. Scotts alleged rights in its red mark, black trade dress, black label, and yellow barrier design that were allegedly infringed by competitor SBM’s competing products. Unsurprisingly, the court accepts those claims on a motion to dismiss, but seems to get the copyright preemption analysis backwards.

Scotts sufficiently alleged fame for dilution purposes.

Ortho red design mark

The allegations were, along with pictures, sufficient to allege a defined, distinctive trade dress:

The distinctive packaging of certain Scotts’ ORTHO control products consists of a unique arrangement of colors, graphic elements, font styles and text, with a black background with some lighter gradations of gray, a prominent placement of a red pentagon containing a brand name in white lettering above horizontal information bars that start on the left side of the label and connect into a circular or arc design that contains an image of green plant material. One information bar is yellowish/gold and the other information bar is silver. A product name is placed between the pentagon design and the information bars.

Ortho black trade dress

This was sufficiently definite; it didn’t include terms like “such as” or “for example,” which can be problematic.

However, coordinate state law claims under the Ohio Deceptive Trade Practices Act were preempted by §301 because the alleged extra element—the fact that the copied matter was put on products and sold on products that compete with Scotts’—didn’t qualitatively distinguish Scotts’ copyright claim from its trade dress claim. “[B]ased on Scotts’ allegations, the source of any likelihood of confusion—the extra element required to advance Scotts’ state-law claims—is the same activity that forms Scotts’ copyright claim,” so it wasn’t qualitatively different. (As TM gets more property-like, this argument may be more attractive to courts; when “confusion” is more notional than real, it seems less like an extra element.)

The court did find a copyright claim based on label similarity plausible. “Each [label has] a primarily black background, lighter gradations of gray, a prominent placement of a red pentagon containing white lettering where the brand name is, and horizontal information bars in yellowish/gold and silver that extend from the left side of the label to a circular image depicting green plant material.”

accused SBM trade dress--I really can't see substantial similarity of protectable expression here; this seems to conflate (c) and TM

The court doesn't separately deal with the copyright claim over the yellow barrier design, which to me clearly falls on the idea side of the idea/expression line:

False advertising: Scotts challenged SBM’s advertising statements that its Brush Killer Product kills brush for up to 12 months, protects for up to 12 months, and provides consumers with up to 365 days of control. Scotts alleged that the products do not provide the advertised protection for up to 12 months or 365 days; that was sufficient to allege falsity. At least the court is equally lenient with TM and false advertising?

Organic search results aren't TM "use"

Alsa Refinish LLC v. Walmart Inc., 2024 WL 3914512, No. 2:23-cv-08536-SVW-MAR (C.D. Cal. Jul. 31, 2024)

In 2024, people are still bringing keyword advertising cases. Walmart wins summary judgment.

Alsa sells paint, including chrome paint, and claims common-law rights in  “Alsa,” “Alsa Chrome Paint,” “Alsa Easy Chrome,” “Easy Chrome,” “Mirrachrome,” and “Mirra chrome.” Walmart offers an online marketplace on which it and third parties sell products. There are no infringing products on Walmart.com. Thus, searching Walmart’s website with Alsa’s claimed marks results in search listings that aren’t related to Alsa.

Still, Alsa argued that Walmart was using its marks in advertising in confusing ways. Walmart does pay for keyword ads. It does not pay for organic search listings.  

Presumably because Walmart is a big seller, a search for the term “easy chrome paint walmart” results in several sponsored links to products on Walmart.com along with an organic link for a Walmart webpage named “Easy Chrome Paint,” and a search for “walmart alsa easy chrome paint” results in a Walmart webpage named “Alsa Easy Chrome.”

"easy chrome paint walmart" search with sponsored Walmart results and organic result

Google result for "walmart alsa easy chrome paint" showing organic Walmart result "Alsa Easy Chrome(256)"

But Alsa couldn’t identify any sponsored keyword ads that used Alsa’s marks. Walmart did bid $0.45 for the phrase “Alsa Chrome Paint,” but received zero impressions as a result. Alsa focused on organic search results. Those organic results were

the same webpages one would arrive at by navigating to Walmart.com and entering the alleged Marks (e.g., “Alsa Easy Chrome”) into Walmart’s own search bar. This happens because when a term is entered into the search bar on Walmart’s website, the URL (i.e., the web address) for the Walmart search results page will often include the terms that were searched. For example, when a user searches “Alsa Chrome Paint” on Walmart.com, the URL for the search results page is listed as follows: https://www.walmart.com/search?q=%22ALSA+CHROME+PAINT%22. A Walmart search results page such as this will periodically be “indexed” by Google so that the page appears on Google’s own search results.

If a user clicks on the organic result, they will go to the same page on Walmart.com that they would have gotten to by putting the same phrase in the Walmart search bar.

 Under 9^th Circuit precedent, a court can conclude that summary judgment in a keyword case is appropriate “without delving into any factors other than: (1) the type of goods and the degree of care likely to be exercised by the purchaser; and (2) the labeling and appearance of the products for sale and the surrounding context on the screen displaying the results page.”

First, “[b]ecause Walmart does not pay search engines to return organic search results or index webpages, it does not ‘use’ the marks in connection with the sale or advertisement of goods.” The fact that Google sometimes indexed search result pages on Walmart didn’t change that. “Plaintiff does not show that the alleged Marks appear anywhere else on Walmart.com apart from where they are inputted as search terms. Walmart’s website does not label any of its products under the alleged Marks or contain any infringing products. Ultimately, Plaintiff has pointed out no evidence that Walmart did anything to appear on these unsponsored Google search results.”

As to “Alsa Chrome Paint,” there were no clicks, meaning no infringement was possible.

As to Walmart-sponsored results to the query “easy chrome paint Walmart,” the court agreed with Walmart that those links were not triggered by use of “easy chrome,” but by the separate words “easy,” “chrome,” and “paint.” (I would think "Walmart" probably also played some role in triggering Walmart-sponsored results.) This too did not constitute a “use” of Alsa’s putative mark. Even assuming that it did, running sponsored ads in response to a Google search for “easy chrome paint Walmart” didn’t cause likely confusion.

There was no source confusion because Walmart didn’t sell any infringing products. There was also no initial interest confusion. Plaintiff’s cheapest product was $59, and “chrome paint products appear to be specialized or even ‘sophisticated’ items rather than everyday goods.” A reasonably prudent consumer accustomed to shopping online would exercise greater care. Moreover, each Walmart product in Google’s “sponsored” results was clearly labeled with the name of the product along with a photograph, and with the word “Walmart.” None of the sponsored products made any reference to the phrase “Easy Chrome” or the other putative marks. And finally, the sponsored results were “clearly distinguishable from objective search results.” Thus, confusion was unlikely.

Dilution also failed for want of “use.”

6th Circuit applies JDI to political speech, but holds that disclaimers avoid confusion

Libertarian National Committee, Inc. v. Saliba, No. 23-1856 (6th Cir. Aug. 28, 2024)

Dissenting members of the Libertarian Party of Michigan maintain that they are the true Michigan affiliate. The Libertarian National Committee sued and the district court enjoined them from using the Libertarian Party mark. In an opinion that follows JDI in insisting that “use as a mark” is the appropriate speech-protective line, the court of appeals mostly affirms, though it vacates the injunction as to fundraising that uses a pop-up disclaimer to inform donors of the substance of the dispute, which the court of appeals finds avoids likely confusion. [This is probably best understood as a normative version of “reasonable consumers wouldn’t be confused.”]

Defendants, even after the dispute began, kept identifying themselves as the Libertarian Party of Michigan in connection with soliciting donations, filing campaign finance paperwork, and promulgating platform positions, endorsements, and commentary critical of the Chadderdon-chaired group. The core holding: “[D]efendants’ use of the LNC’s mark to, among other things, solicit party donations, fill out campaign finance paperwork, advertise events, and espouse political platform positions and commentary falls within the scope of the Lanham Act.” “Services” are broadly defined, and the Lanham Act reaches noncommercial speech at least to the extent of covering uses as a mark. Although prior cases protecting noncommercial/political actors have sometimes reasoned that political positions etc. aren’t “services” within the scope of the Act, they are better understood as in fact standing for the principle that, for example, discussing and critiquing the trademark owner is not a source-identifying use. 

For what it’s worth, this distinction roughly tracks my pre-JDI proposal to focus on whether reasonable citizens can tell who is speaking when it comes to noncommercial speech, although my version notably relies on traditional First Amendment tiers of scrutiny and—perhaps foretelling coming Supreme Court moves—the court here does not. This is going to create further doctrinal crinkles when trademark owners assert that noncommercial uses cause sponsorship/affiliation confusion; one of the merits of tiers of scrutiny, which can concededly be replicated by other methods with which modern courts have less experience, is that they provide a framework for assessing the strength of the relevant interests and the fit between a particular imposition of liability and those interests.

“[I]n the narrow context where a defendant uses the trademark as a source identifier, the Lanham Act does not offend the First Amendment by imposing liability in the political arena.” The court is right to say that the results of previous cases, if not their language/statutory interpretation, are relatively consistent with the line it draws—if you agree that none of the previously protected uses, including domain names like taubmansucks.com, were “source-identifying” if they didn’t sell (competing?) goods. But what this means is that now most of the speech-protective work will be done in the “source-identifying” inquiry. This is easy with people calling themselves the Libertarian Party, and has been relatively easy for courts dealing with individual “articles” (how the court describes both Farah v. Esquire Magazine, 736 F.3d 528 (D.C. Cir. 2013), and the Radiance Foundation “National Association for the Abortion of Colored People” case). But plaintiffs will adapt, and it might not stay easy for lots of representational art.

Thus, without going into factor analysis, the court of appeals found that most of the challenged uses were unauthorized and likely to be confusing. However:

Defendants also used the LNC’s trademark on their website to solicit donations. In connection with the donation tab, defendants displayed one of two pop-up disclaimers notifying the potential donor of the governance dispute, the LNC’s recognition of the Chadderdon-led faction, and that any donations would be going solely to defendants. The disclaimers also included hyperlinks to the Chadderdon-led affiliate’s website. By clearly explaining the identity of the donation recipient, these disclaimers ameliorated the confusion the Lanham Act seeks to prevent. The disclaimers also resemble those we have previously found sufficient to eliminate a likelihood of confusion. Accordingly, defendants’ use of the trademark in connection with their online solicitation of donations, when accompanied by appropriate disclaimers, does not create a sufficient likelihood of confusion as to the recipient of the funds and thus cannot be the predicate for Lanham Act liability.

Query: are defendants therefore entitled to a modification of the injunction to allow them to apply the same disclaimers to other things they do, like running the rest of the website or sending materials to officials?

Court accepts survey with disclaimer control that causes 38% confusion

 Another ruling in the PNC v. Plaid case:

PNC Financial Services Gp. v. Plaid Inc., 2024 WL 3691607, No. 2:20-cv-1977 (W.D. Pa. Aug. 7, 2024)

Daubert motions for this case. I’ll only discuss the stuff I find interesting.  

Kivetz was PNC’s survey expert. The survey showed respondents a 22-second video clip simulating the user flow within fintech app Venmo from 2019: the Venmo home screen that an already-registered Venmo user would see when they opened the app, then a cursor moving between the Venmo screens. The survey then showed a series of static screens that a consumer would see when connecting a bank account to their Venmo account, including the Plaid Link consent, institution select, and credentials panes. There were limited interactive elements on the screens.

The test group for this survey was shown the Plaid user interface that allegedly appropriated PNC’s marks. The control group was shown a “workup” of what a “Plaid branding only” user interface would look like.

Test stimulus, L; control stimulus, R

Richard Craswell's work on controls in surveys remains a must-read in this area: choosing a noninfringing control is often very important because it can determine the amount of net confusion. One particularly interesting point here: the "control" shows very high levels of confusion (38%), which would ordinarily seem like a lot. PNC would ordinarily have a strong incentive to argue that disclaimers don't work. But that would run up against a strong preference for truthful speech, especially if the alternative seems to be that PNC can control what apps its customers can use. There'd be some obvious competition law problems with that as well as nominative fair use (what Plaid argued before PNC dropped the argument that the current screen, which is not entirely unlike the control, infringed). Craswell makes the argument that there is an implicit cost-benefit analysis in control selection: we're asking what's the least confusing option that's worth it. If some confusion is irreducible but we still want the activity to continue, that's the level of confusion we should accept. That could indeed justify a control with 38% confusion, but that may not be something many TM owners want to admit. And it calls into question the broad definition of "affiliation" confusion that courts have adopted--often by assuming that "affiliation" in the Lanham Act means whatever consumers think it means in response to survey questions, although it could reasonably be read more strongly or consumers could be educated/asked for their definitions thereof.

Anyway, after the survey showed the stimuli, it then asked: “which company provides this credentials screen,” “does the company that provides this credential screen have a business affiliation or connection with another company or companies,” “with which other company or companies does the company that provides this credentials screen have a business affiliation or business connection,” and “did...the company that provides this credentials screen receive approval or sponsorship from another company or companies?”

PNC’s expert Kivetz concluded that 79% of the participants in the test group were confused into believing that the company that provides that credentials screen either (1) was PNC (75%); (2) has a business affiliation or connection with PNC (5.9%); and (3) received approval or sponsorship from PNC (5.4%). (Id. at 59–60). In contrast, participants in the control group experienced a confusion rate of 38.1%. The net confusion rate (the difference between the two confusion rates) was 41.3%.

Plaid challenged the survey based on the control, the lack of an interactive process in the survey, and the failure to limit the survey to PNC customers. The sample issue didn’t merit exclusion; the survey included potential PNC customers by asking potential respondents whether they engage in online banking and geographically limiting the population to states in which PNC had a physical branch location. Anyway, any effect of the allegedly skewed sample was “speculative,” since the broader question was about “whether the average consumer who connects a bank account to cash payment and investment account fintech applications would be confused by the use of a given set of marks (PNC’s) on Plaid’s user interface(s) during the connection process.” So too with the static visuals—that increased survey completion, and if respondents had actual options they might have tried to reach a different bank’s credentials login screen. The survey explained to respondents what was happening; they could click on and read the Plaid privacy policy before going forward.

The control group argument gave the court more pause. The control screen “displayed a disclaimer that was not present in the Plaid Link user interface, at least at the later stages of a consumer’s interactions with Plaid Link.” This could have been “so visually different (and perhaps, so obviously affiliated with Plaid) from the PNC institutional and credentials login screens that it diluted the confusion results on that side of the survey.” But the control was also similar, though not identical, to the credentials screen Plaid actually uses today. This was a question of weight, not admissibility. The disclaimer left nearly 2/5 of respondents confused, which undermined the assertion that the control wrongly pushed people away from PNC.

However, the expert’s opinion on “tarnishment” was excluded since it relied on non-record evidence of “bad acts” by Plaid and he only speculatively linked that to PNC, rather than showing a basis relying on a reliable process or analysis.

Plaid’s consumer confusion expert, Dhar, used a “consumer journey approach,” designed to mimic what users would be seeing when deciding whether to buy or use a given product or service. He opined that users were unlikely to be confused by Plaid’s use of PNC’s marks, especially given consumers’ ultimate goal of connecting their bank accounts to a given fintech app. He also opined that any confusion wasn’t material, based on internal Plaid testing, “which purportedly shows that the effect of the usage of bank marks on the institutional login and credentials login screens had minimal impact on consumer conversion (that is, minimal effect on whether consumers entered their banking information into the fintech app via Plaid Link).”

The court declined to exclude Dhar’s testimony. He provided context that might assist a jury, opining that “by the time a given user encountered a Plaid Link screen within a fintech app, the decisions to (1) download the app, (2) use it, and (3) link a bank account were likely already made,” meaning that confusion was unlikely. “While an expert’s application of their own experience and of principles in the field may not be as empirically rigorous as an experiment or a survey, FRE 702 does not bar the admission of more ‘qualitative’ expert testimony.” His methodology was not novel or pseudoscience; the consumer journey approach is “well recognized” in the field of consumer behavior.  

He wouldn’t be permitted to testify on the ultimate likelihood of consumer confusion, but he could testify as an expert about how the considerations outlined in his report impact the applicable factors: “the care consumers take in using fintech apps and Plaid Link and/or the relationship of Plaid Link and PNC in the minds of consumers.”

The court also allowed Dhar’s materiality opinion.  “Plaid ran a series of internal tests and studies that addressed the impact of Plaid’s use of bank logos in its user interface, and the notion that the data were unreliable solely because the data came from Plaid is inaccurate.” He explained the internal testing in his expert report, with detailed descriptions, and he applied scientific principles to the data, including in his visualizations. “Plaid was experimenting with different institutional selection and credentials panes for years, seeking to measure conversion rate, i.e., whether users would be more inclined to enter their banking information depending on the presentation of the given user interface. These tests are squarely applicable to one of the ultimate merits issues in this case: whether consumers were more or less likely to enter their banking credentials when Plaid used PNC’s marks.”

The court allowed PNC’s damages expert’s disgorgement analysis, though not his “contributed capital” damages theory, which was based on the idea that Plaid’s use of PNC’s marks constituted a forced investment in Plaid by PNC. That latter had issues of fit and reliability.

“PNC never made an investment in Plaid, and the notion that the fact finder in this case should view a portion of Plaid’s enhanced valuation over time as directly and proportionally attributable to the connections that Plaid made between PNC consumers and fintech apps during a one-year span in Plaid’s early days in a straight-line fashion is the kind of speculative opinion, unmoored from scientific rigor, that courts are to exclude under FRE 702.”

The disgorgement opinion, though, was fine because, given the statutory burden-shifting, it was ok to assume that 100% of PNC conversions were attributable to Plaid’s use of PNC’s marks.

Plaid’s damages expert, like its consumer expert, relied on Plaid’s internal testing suggesting that PNC customers using Plaid Link to connect their bank account to a fintech app “would still have connected their PNC account...95 percent to 99 percent of the time,” regardless of whether PNC’s marks were displayed. It was ok for the expert to rely on studies she didn’t conduct, especially a study that perfectly fit a key question here.

Duelling marketing experts also mostly got in. PNC’s marketing expert opined that Plaid benefited from the usage of PNC’s marks and that Plaid’s usage of PNC’s marks harmed PNC’s brand. His report purported “to demonstrate how PNC built its brand, how it continues to invest in its brand, how valuable its brand is, how Plaid utilized PNC’s brand (and the brands of other banks), and how that usage impacted PNC’s brand.” The court excluded his opinion regarding the general risk of harm to PNC’s brand from Plaid’s use, but not the rest of it. (Given that 2019 is now several years in the past, presumably there’s also real-world data about whether the brand was harmed.)

It was ok to use a qualitative analysis of “bad press” that allegedly came about from Plaid’s screens’/CSRs’ criticism of PNC. This went to the claim that required evidence of damage to goodwill (that is, false advertising). But his opinion that the mere use of PNC’s marks, in and of itself, put PNC’s brand at risk wasn’t reliable; it was speculation rather than expert analysis.

Beyond that, it also appears to the Court to be nothing more than an argumentative truism, akin to saying that a person lending her car to another necessarily places all of the assets of the lender at risk in the event the loaned car becomes involved in an accident. Adding the patina of an expert opinion to such a truism does not aid the finder of fact and is therefore unnecessary, as that is an argument that PNC can make without relying on expert testimony. Under FRE 702, PNC has not met its burden in demonstrating the reliability of this particular opinion. This specific aspect of Dr. Carpenter’s testimony—that Plaid’s use of PNC’s marks inherently placed PNC’s brand at considerable risk—is therefore excluded.

Plaid’s marketing expert rebutted PNC’s experts. It was also ok for him to use qualitative analysis.

PNC also offered proposed expert testimony on Plaid’s cybersecurity in “seeking as part of its damages out-of-pocket costs incurred [by PNC] from fraud on PNC customers that used Plaid Link.”  But the expert was unable to link the use of the trademarks to that harm, as opposed to Plaid’s retention of customer authentication information. Here, it mattered that the record showed that “at least some meaningful portion of PNC customers would have used Plaid Link even without visibility of PNC marks.” And Plaid’s central causal contribution was allegedly storing PNC customer data and then, critically, “auto populating” the “challenge question” authentication credentials that a PNC customer previously entered into the Plaid Link screens. That just wasn’t sufficiently tied to the trademark claims. The experts were unable to quantify or differentiate the harms to PNC that were caused by the marginal customers who might have been driven by the use of the marks.

However, if Plaid relied on its own cybersecurity processes or questioned those of PNC, expressly or by implication, the court might allow an expert to opine on “the mechanics of how authentication credentials operate generally and any vulnerabilities such would foster.”

Also, PNC would be allowed to use lay witness testimony that it contended demonstrates that “Plaid’s true purpose in using PNC’s marks was not to ease consumer use in connecting to fintech apps but was instead to increase Plaid’s data repository of consumer banking information for its own purposes.” And PNC would be permitted via lay witnesses to state generally what motivated it to alter how it dealt with Plaid, and how/why its limitations on PNC customer access to fintech apps via Plaid Link came to be, since that’s relevant to intent. “Lay or expert testimony as to who caused/did not cause the 2019 Cybersecurity Event, and the details ‘under the hood’ and/or explanations of that Event, will not be permitted, as such would readily lead to substantial jury confusion in light of the actual claims/defenses in this case and would likely generate substantial undue prejudice that eclipses any probative value under FRE 403.”

Plaid must face jury on PNC's TM/advertising claims, but has good laches/acquiescence argument

PNC Financial Services Gp. v. Plaid Inc., 2024 WL 3687956, No. 2:20-cv-1977 (W.D. Pa. Aug. 7, 2024)

PNC is “a large, diversified financial institution offering retail and wholesale banking services,” while Plaid connects cash payment and investment account applications like Venmo, Robinhood, and Coinbase with a user’s banks. This allows a user to input the username and password affiliated with their bank account to create the connection between the user’s bank and the fintech app so money can be transferred between them.

PNC interface, L; Plaid connection interface with PNC logo, R

sample Plaid bank selection workflow

PNC alleged that Plaid infringed its trademarks by replicating the authentic PNC log-on screen to get them to provide private financial information, allowing Plaid to collect their data. Plaid responded that PNC knew about this as early as 2017 and worked with Plaid to make it easier for PNC customers to connect to fintech apps. The relationship became hostile in 2019, when a third party allegedy got PNC customer information that had been obtained by Plaid and leaked it on the “Dark Web.” At that point, PNC blocked Plaid from accessing/linking PNC account information using Plaid Link software in fintech apps.

Plaid allegedly then presented PNC consumers who were trying to connect to fintech apps via Plaid Link with messaging screens, using allegedly confusing branding, that said, “we’re currently experiencing connectivity issues with this bank” and “PNC has made a change that prevents you from being able to link your accounts.” One such screen also provided a link to the CFPB website and advised such users that they could file a complaint against PNC about their lack of fintech app access with that federal enforcement agency, “which PNC says led to users (who were presumably PNC retail customers) filing complaints against PNC with the CFPB. Plaid’s messaging also encouraged PNC customers to change banks.” In late 2020, a new Plaid user interface finally propitiated PNC.

PNC sued for counterfeiting, infringement, and false advertising/unfair competition under federal and Pennsylvania law. This opinion denies summary judgment to everybody on everything they sought, including claims and defenses.

Counterfeiting is probably the most eye-opening charge. A jury could find that the marks used by Plaid were spurious, that is, substantially indistinguishable from PNC’s actual marks and suggesting a false origin. There were “subtle color differences,” but indistinguishability was a “hallmark” question of fact.  And, interestingly, counterfeiting has to cover the “same” goods and services as the registrant’s, and the court considered it a jury question whether this was so. A jury could rationally conclude that Plaid and PNC do not offer the same financial services, given that “Plaid is not a bank.” Its customers are primarily fintech apps, not bank account holders. However, a reasonable jury could also find that Plaid offers the same “financial services” as PNC, or at least that both offer “financial services” covered by PNC’s registrations, especially given statements Plaid made to the PTO that it offered financial services. (The court did find that there was no judicial estoppel preventing Plaid from offering a defense that the services weren’t the “same,” given the gray areas involved.) A jury could also conclude that even if bank customers aren’t Plaid customers, they’re Plaid’s target audience—although how that matches up with the counterfeiting requirement I don’t know.

Trademark claims: The court declined to do a shortcut around the likely confusion factors despite the similarity of the uses and related services. (As is so common these days, the real issue is affiliation confusion, which also matters.)

The “consumer care” factor weighed against Plaid because of evidence that “Plaid Link’s entire system was designed to make consumers feel more comfortable in providing Plaid their banking information,” e.g. “[W]e use the bank logo and color scheme because it has a significant impact on conversion. It gives users more familiarity and trust in completing the linking flow.” Although banking may be “high engagement,” the evidence of confusion in the survey was “rather high (perhaps surprisingly high) in the control condition” at 38%; Plaid’s own statements indicated that using the logos made consumers more “comfortable” “and thereby perhaps less likely to be careful with their banking information”; and Plaid’s own experts “emphasize[d] that Plaid Link’s design structure promotes near-autonomous consumer decision making.”

But other consumer-based factors were up for grabs. A jury could readily conclude that “Plaid and PNC provide far different services and market to very different customers.” [Part of the issue here is: who’s confused about what? Plaid’s customers aren’t likely to be confused.]

Length of time/actual confusion: Record evidence “unconnected to Plaid’s messaging on the heels of the 2019 Cybersecurity Event” was “relatively sparse.” A consumer complaint cited by PNC might be relevant to false advertising, but didn’t obviously show trademark confusion:  

Venmo says they have lost connection with my bank – sounds like Venmo’s problem. I attempt to reconnect. Then the ‘Plaid’ screen appears. (As noted, I’m sure it’s safer to have this extra level of security – when it functions). Then the PNC (?) ‘Enter your credentials’ screen appears; when I enter my username and password the PNC screen says ‘the username you provided was incorrect.’ I have called PNC to confirm my username, and it’s the same one that works on the pnc.com site. So what next?

Maybe the complaining consumer believed that Plaid is a security feature of PNC, but “this consumer complaint could also be read as saying that Plaid is an independent software service that provides another level of security. More importantly, there is minimal other record evidence of actual confusion based exclusively off of Plaid’s use of PNC’s marks.” There was the survey, but a jury could find in Plaid’s favor.

Plaid’s purposes— “consumer ease of use and bank identification”—were not bad faith as a matter of law. However, bad faith isn’t required, only “intentional conduct” [what can this possibly mean? It seems to turn knowledge into bad intent]. And “statements from Plaid’s CEO regarding Plaid’s efforts to conceal its use of bank marks from the banks supports the conclusion that Plaid’s intent was willing and voluntary.” That is, the CEO told employees to make sure that they did not send an email announcing the addition of over 6,000 new bank logos to Plaid Link to the banks themselves. “A jury could readily conclude that Plaid wanted to guise itself in the marks of other banks, including PNC.”

PNC has a stake in another company, Akoya, designed to compete with Plaid. “[W]hile a jury could reasonably conclude that PNC is likely to indirectly compete with Plaid and that Plaid’s use of PNC’s marks harms PNC’s hypothetical future efforts in the account linking and data aggregation field, a jury could also conclude that PNC is prosecuting this case less to foster its own expansion plans and more to undermine Plaid before advancing its competing product.”

False advertising: This claim was based on Plaid’s messaging screens blaming PNC after PNC implemented changes that prevented users from using Plaid to link their PNC accounts with their chosen fintech apps. Plaid encouraged consumers to report PNC to the CFPB, and Plaid customer service representatives told those customers to switch banks.

Surprisingly, the court found that these statements could be “intentionally misleading,” because the statements “implicitly place the culpable fault on PNC for the measures it took to protect its customers’ data after the 2019 Cybersecurity Event. … [A] jury could conclude that Plaid did not tell PNC customers the full story, namely that there had been a security breach involving Plaid by which PNC customers’ private data was leaked on the ‘Dark Web.’” And the reference to the CFPB “could also be found to imply that PNC’s conduct was at least wrongful, if not illegal.” [But the precedents usually agree that statements by laypeople about violations of laws that are arguable/not yet decided are not factual and therefore can’t violate the Lanham Act. Unless Plaid was under a duty to disclose the security incident, it’s usually ok to give only information that favors yourself.] And PNC identified “multiple communications from consumers to the CFPB regarding their dissatisfaction with PNC after Plaid’s messaging screens went live,” such as “PNC has blocked access to Plaid, which allows me to transfer funds in and out of my account. It’s extremely inconvenient and I will have to switch banks because of it.” But that doesn’t demonstrate deception! That was true! Still, the court found this to be evidence of materiality.

Nor could Plaid win summary judgment on harm. A jury could find harm to goodwill.

PNC didn’t manage to kick out laches/acquiescence as a defense. PNC delayed four years before objecting, and another before suing, “despite evidence that shows that PNC worked with Plaid during much of that four-year period and had access to demos that showed PNC what the Plaid Link user interface looked like.” Prejudice was a closer question; it may have run up the potential damages, and Plaid could argue that to the jury. Acquiescence was similar: there was “plenty of record evidence that suggests that PNC made a thoughtful decision to continue working with Plaid despite having access to Plaid’s allegedly infringing user interface, at least in demo version, such that PNC conveyed implied consent to Plaid to use PNC marks as it did.” A jury could find this was more than mere inaction, especially given the participation of PNC senior executives.

Punchbowl, punchback: district court finds confusion unlikely between invitation and political news sites

Punchbowl, Inc. v. AJ Press LLC, 2:21-cv-03010-SVW-MAR (C.D. Cal. Aug. 22, 2024)

Punchbowl home page

Punchbowl News home page

On remand from the 9^th Circuit, the court conducts a multifactor likely confusion analysis and finds that Punchbowl’s digital invitation services are too distinct for likely confusion with Punchbowl News’s political reporting. Two points stand out: first, the court considers it significant that mostly women use Punchbowl and mostly men use Punchbowl News.

Second, there’s a useful discussion of misdirected communications in light of the unrelatedness of the services. There were about 100, which in the context of thousands of queries a year for each party was not significant. Moreover, misdirected communications may be probative of the fact that the names are similar, but not of likely confusion, because relevant confusion has to relate to some kind of purchase opportunity. Otherwise, trademark would turn into a right in gross:

Ultimately, the dissimilarity and lack of proximity between the services provided by Plaintiff and Defendant carry the day. This conclusion is the obvious one. At worst, some consumers might mistakenly contact one party when they mean to contact the other party. A misaddressed email, Facebook comment, or X post is a negligible friction that stems from the fact that both parties have named their services a common word. No reasonable consumer would purchase a subscription to a party planning software platform when they intended to subscribe to a news website (or vice versa) because they thought they came from the same source. No reasonable jury could find otherwise.