Federal Circuit Weighs In on Step One of Two-Step Inter Partes Review Procedure

By on July 28, 2014
Leave a comment

In St. Jude Medical, Cardiology Div. v. Volcano Corp., 749 F.3d 1373, 110 U.S.P.Q.2D (BNA) 1777 (Fed. Cir. Apr. 24, 2014), the Federal Circuit, almost predictably, declined to consider a denied petition to institute an inter partes review (IPR) filed by St. Jude Medical.  In rendering its decision, the Federal Circuit followed the language of 35 U.S.C. § 314(d), which states that “[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.”

While Section 314(d) might have been the only reasoning needed to decide the case, the Federal Circuit included additional discussion regarding the two-step nature of IPRs: step one comprising the U.S. Patent and Trademark Office Director’s decision whether to institute the IPR; and step two comprising a decision under § 318(a) by the Patent and Trial Appeal Board regarding patentability after conducting the IPR proceeding (i.e., a final written decision).  See, e.g., Belkin Int’l, Inc. v. Kappos, 696 F.3d 1379, 104 U.S.P.Q.2D (BNA) 1348 (Fed. Cir. 2012). (It may be noteworthy that Belkin involved an inter partes re-examination, yet the Federal Circuit used this case as the basis for the two-step nature of IPR.)

Under 35 U.S.C. § 319, the Board’s decision under § 318(a) (i.e., after the Director’s decision and the IPR is in motion) is appealable.  It appears that the Federal Circuit included this discussion to highlight its view that the Director’s decision whether to institute an IPR is not considered to be a “final written decision” of the Board under § 318(a).  Moreover, to clear up any confusion, the court observed that 28 U.S.C. § 1295(a)(4)(A) (jurisdiction of the Federal Circuit after appeal from, inter alia, IPR) did not provide jurisdiction to review the Director’s decision.  Rather, § 1295(a)(4)(A), similar to 35 U.S.C. § 319, refers to final Board decisions under 35 U.S.C. § 318(a), according to the court.

The court was careful to point out that its decision followed the Director’s decision regarding a formality issue of a late IPR petition, but would likely apply to all decisions of the Director on whether to institute an IPR.

Interestingly, on the same day, the Federal Circuit also denied petitions for mandamus related to the Director’s decisions regarding IPR requests by two different parties – Dominion Dealer Solutions, and Procter & Gamble Co.  Dominion sought review of the Director’s decision not to institute several of its IPR requests.  See In re Dominion Dealer Solutions, LLC, 749 F.3d 1379, 110 U.S.P.Q.2D (BNA) 1780 (Fed. Cir. Apr. 24, 2014).  Conversely, Procter & Gamble, as patent owner, sought mandamus for review of the Director’s decision to institute an IPR request.  See In re Procter & Gamble Co., 749 F.3d 1376, 110 U.S.P.Q.2D (BNA) 1782 (Fed. Cir. Apr. 24, 2014).  In its denial of mandamus of these cases, the Federal Circuit cited similar reasoning as was set forth in the St. Jude Medical decision.  It is noteworthy that Dominion Dealer Solutions had concurrently sought review of the Director’s decision not to institute an IPR in the Eastern District of Virginia in addition to its mandamus petitions.  See Dominion Dealer Solutions, LLC v. Lee, 2014 U.S. Dist. LEXIS 54350 (E.D. Va. April 18, 2014).  This District Court action failed as well.

In light of the St. Jude Medical decision, it is important to ensure that IPR petitions are timely filed, complete and accurate, and meet § 314(a) subject matter threshold limitations (i.e., “a reasonable likelihood” of prevailing on at least one of the challenged claims).  A variety of guidance is available on threshold issues in the form of representative Board decisions to institute IPR proceedings, though detailed discussion of this guidance is beyond the scope of this article.  See, e.g., Microsoft Corp. v. Proxyconn, Inc., IPR2012-00026 Decision to Institute, Paper 17, Dec. 21, 2012; Garmin Int’l, Inc. v. Cuozzo Speed Techs LLC, IPR2012-00001 Decision to Institute, Paper 15, Jan. 9, 2013; Microstrategy, Inc. v. Zillow, Inc., IPR2013-00034 Decision to Institute, Paper 22, Apr. 22, 2013.

St. Jude Medical carries special significance for parties currently accused of infringing a patent in a District Court that are deciding whether to file an IPR request.  In particular, 35 U.S.C. § 315(b) prohibits IPR requests beyond one year after an infringement complaint, including counterclaims alleging infringement.  See St. Jude Medical, Cardiology Division, Inc. v. Volcano Corp., IPR2013-00258 (PTAB 2013); Accord Healthcare v. Eli Lilly and Co., IPR2013-00356 (PTAB 2013).  Passing beyond that one-year threshold is a basis for the Director denying the institution of an IPR; which decision is unappealable.

Accordingly, if you are approaching the § 315(b) deadline for filing an IPR petition, you should carefully craft your petition so that it meets the § 314(a) threshold, and it isn’t determined to be defective due to informalities.  In certain cases a defective petition can be fixed to address formalities, while the filing date of the original petition is accorded.  See, e.g., Macauto U.S.A. v. Baumeister & Ostler GmbH & Co., IPR2012-00004, Notice of Defective Petition, Paper 6, Sept. 21, 2012.  In other situations, where the defect may affect the substance of the petition, a new petition filing date may be accorded when the defect is corrected.  See Ariosa Diagnostics v. Isis Innovation Ltd., IPR2012-00022, Notice of Incomplete Petition, Paper 5, Sept. 27, 2012 (requiring correction of Exhibits).

Filed under Federal Circuit, Inter Partes Review, Patent, Patent Trial and Appeals Board

Does Your Business Need a Trademark Audit?

By and on July 22, 2014

A trademark audit evaluates and reports on the status of your business’ trademarks and related name rights.  An audit outlines considerations relevant to your ability to secure, protect and enforce your rights and, if desired, provides an appraisal of the dollar value of these rights.

To know if you need a trademark audit, consider:

  • Does your business use a brand name for your goods or services, has this brand name been registered and can you locate these registrations?
  • Does your business use different names for its goods and services, have these names been registered and can you locate these registrations?
  • Does your business use its brand name as your domain name and do you have confirmation of your domain name registration?
  • Does your business use a domain name and has that domain name been registered?
  • Does your business do business out of the United States and are your names registered in the countries where you do business?
  •  Does your business use the names of others and do you have copies of the authorizations to use those names?

Your answers to these questions will indicate if it is time to contact an IP audit specialist to ask about a trademark audit.

Filed under Trademark

Does Your Business Need a Trade Secret Audit?

By and on July 7, 2014

A trade secret audit evaluates and reports on the status of your business’ trade secrets.  A trade secret audit outlines considerations relevant to your ability to secure, protect and enforce your trade secrets and, if desired, provides an appraisal of the value of these trade secrets.

To know if you need a trade secret audit, consider:

  • Does your business rely on information that is not readily known to others and that provides a business advantage over your competitors and do you require a confidential disclosure agreement to be signed to see such information?
  • Does your business have and maintain a trade secret program?
  • Does your business monitor terminated employees, the single largest reason trade secrets are lost?
  • Does your business permit others to examine and use your trade secrets, do you require a use license and do you have copies of these agreements?
  • Does your business use trade secretsof others and do you require maintenance of these outside trade secrets?
  • Do you have copies of authorizations to examine and use the trade secrets of others?

Your answers to these questions will indicate if it is time to contact an IP audit specialist to ask about a trade secret audit.

Filed under Trade Secrets

What Octane Fitness Means for Determining “Exceptional” Patent Cases

By on May 28, 2014

While many argue that the U.S. Supreme Court’s recent opinion in Octane Fitness LLC v. Icon Health & Fitness Inc. means bad news for so-called patent “trolls” (i.e., entities that buy patents solely for the purpose of suing others for infringing the claims of the patent), the reality may be that the new, relaxed standard for proving an “exceptional” patent case will result in little change to the legal landscape.

The Patent Act, specifically 35 U.S.C. § 285, authorizes district courts to award attorneys’ fees to prevailing parties in “exceptional” cases.  In 2005’s Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., the U.S. Court of Appeals for the Federal Circuit defined an “exceptional” case as one that involves material misconduct related to litigation, or misconduct related to securing the patent.  Absent such misconduct, sanctions could be “imposed against the patentee only if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.”  The parties must also establish the “exceptional” nature of the case by “clear and convincing evidence.”

On April 29, however, the Supreme Court rejected the standard set by the Federal Circuit, finding it unduly rigid.  Instead, the Supreme Court found that “an ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.  District courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances.”

The Supreme Court also rejected the “clear and convincing evidence” burden on the movant, finding that “Section 285 demands a simple discretionary inquiry; it imposes no specific evidentiary burden, much less such a high one.  Indeed, patent-infringement litigation has always been governed by a preponderance of the evidence standard.”

In Highmark Inc. v. Allcare Health Mgmt. Sys., 134 S.Ct. 1744 (2014), a Supreme Court opinion issued the same day that is in line with the notion that district courts are to be given more discretion in determining § 285 issues, the high court found that district courts’ § 285 decisions must be reviewed by appellate courts under an “abuse of discretion” standard rather than a de novo standard.

In Octane Fitness and Highmark, the Supreme Court remanded the cases in light of the new standards.

While the district court presiding over Octane Fitness adopted the prior, more rigid standard under Brooks Furniture, nothing in its Sept. 6, 2011, decision denying attorney’s fees and costs under § 285 indicates that the district court would change its mind under the new Octane Fitness standard.  Although the district court ultimately found the infringement theory unpersuasive, it did not find the claims frivolous.  The district court was unmoved by the fact that the patentee never commercialized the patent at issue (though the patentee appears to have commercialized other fitness equipment). The district court also was unmoved by email records from stray employees stating that the lawsuit would bring a competitive advantage, as patentees are entitled to exclude all infringers, and “[s]imply bringing suit to gain a competitive advantage is not evidence of bad faith.”  Therefore, even under the new, less rigid standard, the court may nevertheless find that the Octane Fitness case is not “one that stands out from others with respect to the substantive strength of a party’s litigating position . . . or the unreasonable manner in which the case was litigated.”

Indeed, courts, having been given more rather than less discretion, may very well arrive at the same result under the old and new standard.  On May 12, a U.S. District Court in Texas was unwilling to modify its pre-Octane Fitness decision that denied attorney’s fees under § 285.  In Bianco v. Globus Med., Inc., Case No. 2:12-CV-00147-WCB, 2014 U.S.Dist.LEXIS 64805 (E.D.Tex. May 12, 2014), the court had previously found that the plaintiff should not be listed as a co-inventor of certain patents. However, the plaintiff’s claims regarding co-inventorship were not frivolous, nor did the case otherwise “set itself apart”: The plaintiff did provide a set of drawings reflecting his ideas to the defendant, and the defendant admitted receiving and examining them.  Further, the court found that “[i]t is common ground between the parties that the drawings, in the context in which they were submitted, constitute the contribution [plaintiff] made to the development of the disputed products.”  The defendant’s claim for § 285 “exceptional” fees as to the co-inventorship issue also was likely unconvincing given that a jury had found the defendant otherwise liable for misappropriating the plaintiff’s trade secrets.

Legal experts and commentators have opined that the relaxed standards of Octane Fitness may apply mostly to lawsuits filed by patent trolls.  Given the White House’s stance on such trolls, and the heightened joinder requirement for patent lawsuits under the America Invents Act (targeting the fact that patent “trolls” were filing one lawsuit against multiple, unrelated defendants), it’s not unreasonable to think that the Supreme Court feels similarly wary (and weary) of patent trolls.  But if the Supreme Court does feel that way, Octane Fitness does little to propel patent troll lawsuits to “exceptional” cases warranting attorneys’ fees.  Cases must still stand out “from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”  In other words, what’s at issue is still the strength of the case or other misconduct.  Absent a commercial use requirement for patentee-plaintiffs (which would present its own set of problems), patent trolls appear to be held to the same standards as any other patentee-plaintiffs.

Given the relaxed standards of proof, and the Supreme Court’s reiteration of the district court’s ability to decide § 285 issues with discretion, the real impact of the Octane Fitness decision may simply be that fewer parties will decide to appeal § 285 rulings.  Time will tell if Octane Fitness will affect patent trolls more so than other patentee-plaintiffs.

Filed under Patent

The Secret to Success: Use of Trade Secrets Warrants Damages Equal to License Price

By on May 14, 2014

On April 22, the California Court of Appeal, Sixth Appellate District, held that the use of trade secrets warrants damages equal to the license price, not the purchase price.

Grail Semiconductor, Inc. invented a new, faster microchip.  The chip used induction to collect electric charges and accelerate computer processes.  Grail discussed the induction technology in 2001 with Mitsubishi Electric, Inc.  Mitsubishi signed a nondisclosure agreement and attended a presentation, but refused to invest.  Mitsubishi’s subsidiary then began to manufacture products with the same inductive design only three years later.

Damages for the breach of a nondisclosure agreement typically reflect the stolen property’s value.  “Value,” however, is a vague term.  It might mean 1) purchase price; 2) projected royalties; or 3) actual profits.  The jury defined “value” as the purchase price.  It awarded around $123 million, the amount for which Grail could sell the technology.  Its calculations reflected projected profits in Grail’s business plan.

However, the jury’s calculation method was not valid.  The appellate court held in Grail Semiconductor Inc. v. Mitsubishi Electric & Electronics USA, Inc., case number 1-07-CV098590, that damages should reflect the price to license the product, not purchase it.  Mainly, Grail could lease the technology to other companies, despite the misappropriation.  The technology, therefore, retained most of its value; Grail and Mitsubishi were the only two companies that knew it.

Furthermore, the court refused to grant a JNOV as Mitsubishi was still liable – it just owed less money.  It also said that damages were a sufficient remedy, though the nondisclosure agreement required an injunction.  Ultimately, it ordered a new trial so a different jury could correctly compute damages.

Consequently, the improper use of trade secrets may warrant fewer damages than disclosure. Plaintiffs who sue for the illicit use of trade secrets may need to consider accepting lower settlement offers.  They might also want to describe a marketing strategy for which mere use of a trade secret completely impairs its value.

Filed under Trade Secrets

Webinar Addresses Trademark Issues Important to Businesses

By on April 16, 2014

Today the Gordon & Rees Intellectual Property Practice Group presented a webinar titled “What You Need to Know About Trademarks” that discussed areas of critical importance to businesses regarding trademarks. Topics included the establishment of trademark rights through use; the differences between common law and registered marks; the value in a federal trademark registration; trademark searching before adopting a mark; the proper use of trademark marking; foreign trademark registrations; infringement actions in federal and state court; and appeals, oppositions and cancellation proceedings before the Trademark Trial and Appeal Board. To listen to the webinar, click here.

We will be holding webinars throughout the year on various intellectual property subjects including copyrights and patents. To join us, click here.

Filed under Foreign Trademark Registration, Trademark, Trademark Trial and Appeal Board

Five Tips to Avoid Theft of Trade Secrets in Your Supply Chain

By on March 19, 2014

Trade secret theft is illegal and commonplace. A 2010 report found the number of trade theft cases in federal court doubled between 1988 and 1998, and doubled again between 1995 and 2004.

IP graphWhile external threats (e.g. data thieves) and internal threats (e.g. negligent or rogue employees) comprise the majority of bad actors in the theft of trade secrets, supply chain relationships provide additional vulnerabilities. This is because when corporations outsource, they share highly sensitive and valuable trade secrets with foreign subsidiaries, joint-venture partners and third-party vendors. Examples include customer lists, manufacturing processes, production and sales strategies. A 2013 report issued by the Center for Responsible Enterprise and Trade (CREATe.org) contains numerous tales of trade secret thievery and provides practical guidance on securing supply chains and mitigating risks associated with trade secret theft. Read the report in full here, or consider our summary of the five practical tips its authors provide:

1.   Conduct a Strategic Assessment of the Company’s Trade Secrets

Establish an internal trade secrets program and identify who is charged with ensuring compliance (e.g. chief security officer or general counsel). What the company considers confidential should not be a mystery to the corporate officers and should be clearly and repeatedly communicated to employees. Strictly limit access to the confidential materials as necessary to perform job functions. Consider which trade secrets really need to be transferred to suppliers. As the CREATe report notes, segmenting a manufacturing process across multiple suppliers is one way to ensure the company’s intellectual property is not concentrated in one place for thieves to steal.

2.   Conduct Appropriate Contractual Due Diligence

Does the supplier have a reputation for intellectual property rights violations, trade complaints or export control issues?  Has anyone asked? Verify that the supplier had implemented nondisclosure agreements with its employees and consultants.  Outsourcing may reduce costs, but without thorough due diligence, the corporation exposes itself to unknown risk.

3.   Ensure Strong Contractual Protections

If you don’t ask, you don’t get. Review the contractual requirements to ensure favorable terms from the supplier necessary to safeguard the company’s intellectual property. This may include clear language identifying the confidential material, prohibitions on wrongful disclosure, auditing rights, further assurances, and return of material on termination of the contract. For jurisdictions with weak laws on trade secret misappropriation, arbitration may be a preferable contractual remedy for a dispute. Limit the supplier’s ability to subcontract and/or retain the right to inspect or refuse the supplier’s subcontractors.

4.   Take Appropriate Operational and Security Measures

Building an internal culture of compliance communicates the value of the company’s intellectual property assets to employees who will interact with your supply chain vendors. With favorable contractual terms permitting inspection and auditing rights of the supply chain vendor, budget for period audits and exercise those rights. A vendor may not tell you about a data breach affecting your trade secret unless your contract requires it, and you may never know if you don’t inspect. Review of the vendor’s compliance with the strong contractual protections is necessary to identify any problems.

5.   Take Appropriate Action After the Business Relationship Ends

Departing employees should be reminded of their nondisclosure agreement obligations. Return of company materials and electronic access rights must be rigidly and timely enforced.  Where appropriate, it may be prudent to advise a competitor who has hired an ex-employee of the ongoing duty not to disclose the company’s trade secrets.

Filed under Trade Secrets

On the Metaphysics of Intellectual Property Law

By on March 7, 2014

How many angels can dance on the head of a pin?  What is the meaning of life?  When might Godot finally show up?  Questions like this can elicit many answers, and they won’t be wrong.

Is intellectual property law the same way?  A recent 2-1 decision by the quixotic Ninth U.S. Circuit Court of Appeals so indicates.  In Garcia v. Google, Inc., a Feb. 26 decision, the appeals court reversed the district court’s denial of a preliminary injunction in a copyright case that would have ordered the removal from YouTube of an anti-Muslim film that included a performance by the plaintiff actress.  Chief Judge Alex Kozinski, writing for the majority, found that the plaintiff had a copyright in her own artistic performance, and that the implied license she would normally have been deemed to have granted to the filmmaker was exceeded when he used it for a polemical movie entirely unlike the “action” film that had been described to her.  Judge Randy Smith dissented, applying a strict legal analysis of the appropriate standard of review.

It seems pretty clear on reading these opinions that this was a case, if not of hard facts making bad law, at least of results-oriented reasoning by the majority, a fact not lost on the dissent.  The defendant filmmaker had lied to the plaintiff and misused her performance, and the result had been that she and everyone else associated with the film had been the subject of an Islamic fatwa and received death threats, and the plaintiff had been forced to move and take other security precautions.  It plainly strained Judge Kozinski’s view of common sense that the plaintiff could not be protected.  And although it would be completely unworkable if every actor and actress in a movie owned a copyright that could be used to hold up publication, the majority was careful to say that normally there would be at least an implied license to use the performance in the finished work.  So all of this may be a distinction without a difference.

Nevertheless it serves as a useful reminder to IP practitioners to never lose sight of the equities.  Judges no less than juries want to feel that they have done the right and moral thing.  How many of us have argued for a defendant that there was no proof of speculative damages, yet have the trier of fact come back with a damages award because they did not like the defendant’s conduct?  At the end of the day — and maybe at the beginning — this is a people business.

Filed under Copyright

Whose Name Is It Anyway?

By on February 3, 2014

Rapper William Leonard Roberts II, professionally known as Rick Ross, was recently the victor in a legal dispute with former drug trafficker Ricky D. Ross over the use of Roberts’ stage name.

According to the California Court of Appeal’s Dec. 23, 2013, opinion in Ross v. Roberts, et al., plaintiff Ricky D. Ross, also known as “Freeway Rick Ross,” rose to infamy in the 1980s as he ruled the West Coast while overseeing a multimillion-dollar cocaine trafficking enterprise and became a street legend.  Ross’ network packaged and transported cocaine directly into at least six states and indirectly into many others.  He was the subject of the Black Entertainment Television true-crime documentary series “American Gangster,” which profiled the rise and fall of certain criminals.

Defendant Roberts admittedly lived a different life.  He is a successful recording artist who is professionally known as Rick Ross.  Although Roberts, through his lyrics and music, has created a fictional image of a cocaine-trafficking gangster, he in fact attended college on a football scholarship and was once a correctional officer.  He later signed a record deal with Island Def Jam, a major record label known for breaking hip-hop superstars such as Kanye West and Jeezy.

While in jail, Ross read a magazine article about up-and-coming rappers and learned of Roberts’ use of the stage name Rick Ross.  In 2010, Ross sued Roberts, his record label and several other parties in California state court for allegedly misappropriating his name and likeness to further Roberts’ rap music career.  Ruling that the First Amendment protected Roberts’ creative expression, the state court judge granted summary judgment in his favor.

California, like most jurisdictions, recognizes that “the right of publicity protects an individual’s right to profit from the commercial value of his her identity.”  Gionfriddo v. Major League Baseball (2001) 94 Cal.App. 4th 400, 4009.  California also recognizes a statutory right of publicity. Comedy III Productions, Inc. v. Gary Saderup, Inc. (2001) 25 Cal.4th 387, 391 (Comedy III).  California Civil Code § 3344(a) provides, in pertinent part, that “[a]ny person who knowingly uses another’s name, voice, signature, photograph, or likeness, in any manner, on or in products, merchandise, or goods, or for purposes of advertising or selling, or soliciting purchases of, products, merchandise, goods or services, without such person’s prior consent . . . shall be liable for any damages sustained by the person or persons injured as a result thereof.”

The appellate court in Ross, citing the California Supreme Court’s analysis in Comedy III, applied the transformative test and chose to “ ‘balance’ the right of a celebrity to control the commercial exploitation of his or her likeness . . .  against another individual’s right to free expression under the First Amendment.”  The application of the transformative test seeks to determine “whether the new work merely ‘supersede[s] the objects’ of the original creation . . . or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning or message.”  It looks at “whether a product containing a celebrity’s likeness is so transformed that it has become primarily the defendant’s own expression rather than the celebrity’s likeness.

Comedy III involved a visual artist who sold lithographs and T-shirts bearing the faces of the Three Stooges.  The transformative test became whether the use of celebrity likeness “is one of the ‘raw materials’ from which an original work is synthesized, or whether the depiction or imitation of the celebrity is the very sum and substance of the work in question.”  Relying on Comedy III, the Ross court also noted that First Amendment protection extends not only to visual expressions but to all forms of expression, including written and spoken words and music.

In Ross, the court acknowledged that Roberts’ “work — his music and persona as a rap musician—relies to some extent on plaintiff’s name and persona.  Roberts chose to use the name ‘Rick Ross.’  He raps about trafficking in cocaine and brags about his wealth. These were ‘raw materials’ from which Roberts’ music career was synthesized. But these are not the ‘very sum and substance’ of Roberts’ work.”

Further, “Roberts created a celebrity identity, using the name Rick Ross, of a cocaine kingpin turned rapper.  He was not simply an imposter seeking to profit solely off the name and reputation of Rick Ross. Rather, he made music out of fictional tales of dealing drugs and other exploits— some of which related to plaintiff.  Using the name and certain details of an infamous criminal’s life as basic elements, he created original artistic works.”

Simply, Roberts’ fictional entertainment persona was found to be transformative.  So the answer to the question of whose name is it anyway is both Ross and Roberts.

Filed under Trademark

But For Trademark Parody – Jovial Jabs or Bad for the Brand?

By on January 13, 2014

In the somewhat murky world of trademark parody disputes, various courts often are torn as to how to best reach the appropriate decision. Such uncertainty, among other PR and business considerations, often leads some plaintiffs to ponder whether they might have been better off having a good chuckle and ignoring tongue-in-cheek brands in their space rather than marching into court.

However, since lawyers typically aren’t paid for public relations consultations, judge for yourself how these parties faired as we look at some common themes of interesting trademark parody cases decided over the past few years worth some light-hearted discussion.  If you don’t crack a smile reading about these cases, and the creative minds behind them, definitely stick to reading legal treatises.

At the outset, it is important to distinguish between what is parody and what is not.  Although sometimes confused with sarcasm and/or satire, both of which lean toward derision, parody is different and often looked upon more favorably in our culture, likely due to its joviality.  Where trademark law often becomes intertwined, is that for parody to work it necessarily relies upon an interrelationship to a prior known object or text giving meaning and the basis for the presumed humor.  However, those prior known text/object owners often choose not to laugh off the jovial jab, instead bringing trademark infringement suits claiming likelihood of consumer confusion.

To begin our analysis of this unique brand of cases, we need look no further than the recent final appeal decision that concluded a 12-year dispute between Starbucks and Black Bear Micro Roastery’s “Charbucks” blend.  Impressively, the defendant weathered the bitter battle and prevailed, with the 2nd U.S. Circuit Court of Appeals determining there was no sufficient finding of likelihood of consumer confusion through blurring of Starbucks brand.  See Starbucks Corp., et al. v. Wolfe’s Borough Coffee, Inc. d/b/a Black Bear Micro Roastery (2nd Cir. 2013).  In the final analysis, a survey of 600 people became a key piece of evidence showing that less than 5 percent of consumers thought they could actually buy “Charbucks” blend at Starbucks stores.

One case worth noting that slid past most people — although it is admittedly somewhat juvenile and without rulings on the merits — illustrates what may come of similar disputes between parties with significant market disparity.  Not long ago, a teenage boy had a great idea.  What if he mocked some really popular clothing brand, and then sold it to those amused by the obviously humorous contrast?  Brilliant!  Sort of.  As evidenced in The North Face Apparel Corp. v. The South Butt, initiated in 2009, a teenager did just that and started a clothing brand by flipping the iconic half-dome curves of the North Face logo upside down.  The North Face was not amused.

After several cease-and-desist letters did not garner the desired effect, nor did their success in an opposition to prevent The South Butt from gaining trademark registration, The North Face sued The South Butt in the U.S. District Court for the Eastern District of Missouri alleging trademark infringement in addition to drawing sizable amounts of public awareness.  In The South Butt’s answer to the complaint, the teenager’s lawyers somewhat accurately quipped “[b]ut for the actions of North Face, the South Butt saga might have been relegated to local Friday fish-fry banter.”

The case did not get to the merits before a confidential settlement was worked out in 2010 and The North Face made it go away.  However, one wonders if The North Face would have been better off laughing this one off after a quiet victory at the trademark office, particularly once articles about the lawsuit made national news and the company ended up filing another suit a few years later to enforce the settlement because The South Butt’s product apparently was still in demand.

A more recent battle, where the humorist ultimately won the war, is the Facebook-Lamebook dispute.  Graphic designers in Austin, Texas, established Lamebook to out all those who end up oversharing (i.e., TMI) on Facebook.  The idea behind the launch of the site was to showcase the funniest and lamest of Facebook and get public feedback, arguably as a means for social commentary of modern society.  As with The South Butt dispute, Facebook went after Lamebook by alleging trademark infringement and dilution and requesting that Lamebook cease and desist.  However, Lamebook took the offensive in the U.S. District Court for the Western District of Texas and filed a declaratory judgment that it did not violate Facebook’s rights. Lamebook claimed it was protected as a parody under the First Amendment.  Ultimately, the two came to an agreement in 2011 allowing the Lamebook site to continue its mission and provide revenues to its founders, albeit without its own federal registrations and with a disclaimer on its homepage.

What can we glean from these and other similar cases?  Parody is not really an affirmative defense to trademark infringement, although it may be a means to show lack of likelihood of confusion. Rather, parody is an assertion of First Amendment rights concerning noncommercial speech for the most part.   Thus, one should pay careful attention to the reasons and target chosen to be mocked.

Trademark infringement issues surrounding confusion are more likely to be excused where there is an artistic or social message behind the parody and not mere commercial interests.  Further, the allegedly infringed mark itself ideally should be the interrelated element for the parody defense under the First Amendment.  Despite the above, it would appear the courts do not take themselves too seriously on the matter with various circuits taking slightly different approaches to get to the most amicable results.

Filed under Trademark

← Older posts

Newer posts →