Court Denies Extraterritorial Application of Lanham Act

In a February 1, 2016 ruling, Judge Jed S. Rakoff issued a decision explaining his reasoning for the dismissal of the plaintiff’s trademark action seeking to find that the holder of a presumptively valid foreign trademark had abandoned the mark. The plaintiff and defendant had originally been commonly owned. After a corporate reorganization, the plaintiff became an exclusive licensee of the defendant’s trademarks outside the United States. The plaintiff began this action contending that the defendant had abandoned the foreign marks under the Lanham Act by failing to exercise any control, including quality control, over the marks. Judge Rakoff ruled that

as a matter of law, . . . the Lanham Act may not be applied extraterritorially to adjudicate the validity or ownership status of foreign trademarks. This is because it is firmly settled that “[a] trademark has separate legal existence under each country’s laws, and trademark rights exist in each country solely according to that nation’s laws.” . . . Consistent with that principle, courts in this Circuit have repeatedly held that determination of the validity of foreign trademarks in their foreign applications is not just a matter of choice of law but that, rather, United States courts are simply not in the business of adjudicating foreign trademark rights in such circumstances.

Court Declines to Dismiss Lanham Act Claim Based on Misleading ISBN

In a May 5, 2014 ruling, Judge Katherine B. Forrest denied a motion to dismiss the plaintiffs’ amended complaint asserting a Lanham Act violation. The original complaint included copyright infringement claims which were dismissed after the Supreme Court’s 2013 ruling in Kirtsaeng “that the first sale doctrine applied to purchase of publications outside of the United States.” In declining to dismiss the Lanham Act claim for false representation or description, Judge Forrest wrote:

The allegations in the Amended Complaint provide specificity as to how defendants are alleged to have mislead purchasers of foreign editions of publications. In short, plaintiffs assert that defendant has used the International Standard Book Number (“ISBN”) for English language editions of publications, as well as images of the covers of English language editions, in a manner that conveys a “net impression” that the buyer will receive an English language edition of the publication. Defendants I fact sell foreign editions. Because foreign editions may have different content and publication quality, plaintiffs are concerned that sales of one masquerading as the other will result in harm to their goodwill and reputation. The Lanham Act prohibits actions which deceive consumers and impair a producer’s goodwill.

The Court rejected the contention that the ISBN is not a trademark, noting first that plaintiffs’ claim is for false description and finding that it “is plausible that a unique mark associated with a good – such as an ISBN number – would represent or describe origin.”

Court Reaffirms Willfulness Requirement for Recovery of Lanham Act Monetary Damages

In a January 16, 2014 ruling, Judge Katherine B. Forrest denied defendant ContextMedia, Inc.’s motion for summary judgment on plaintiff Guthrie Healthcare System’s Lanham Act and related state law claims, but ruled that Guthrie was not entitled to its actual d
amages or lost profits, and so struck its jury trial demand. With regard to the damages claim, Judge Forrest wrote that in “order for a plaintiff to recover its damages or defendants’ profits as to these [Lanham Act] claims, a plaintiff must show actual consumer confusion, bad faith, or willful deception.” The Court then found that “plaintiff has failed to raise a triable issue of fact as to these elements,” and dismissed the damages claim. In reaching its conclusion, the Court noted the split in District decisions as to whether a 1999 amendment to the Lanham Act damages provisions altered the willfulness requirement for an award of damages (which was especially strong in the Second Circuit). Judge Forrest found “the rationale of those courts continuing to require willfulness as more persuasive.” and continued the willfulness requirement.

With regard to the conclusion of no willfulness, the Court found that: (1) the defendant commissioned a third party designer to design its allegedly infringing logo; (2) neither the defendant’s principal nor the designer were aware of the plaintiff’s mark at the time, and (3) the Trademark Office registered three of the defendant’s marks that allegedly infringed the plaintiff’s mark, negating any inference that the defendant should have known of the infringement. Judge Forrest rejected as insufficient as a matter of law plaintiff’s supposedly contrary evidence that the defendant failed to conduct a trademark search before adopting its mark and that the defendant continued to use the mark after being sued. So the Court rejected the plaintiff’s claim for its lost profits, but did hold that the defendant could be liable for nominal damages and costs if infringement is found.

Court Finds Commodore Computer Marks Infringed

In a December 17, 2013 ruling, Judge Richard J. Sullivan entered judgment against defendant Asiarim Corporation after a bench trial in favor of plaintiff C=Holdings B.V. on its claim, among others, for trademark infringement of the "Commodore" marks for computers that were popular in the 1980's.  The principal dispute at trial was the ownership of C=Holdings, which had been a subsidiary of Asiarim until a claimed spin-off.  There was no dispute at trial that C=Holdings owned the registrations for the Commodore marks, and that another subsidiary of Asiarim had previously been licensed to use the marks.

Judge Sullivan began the analysis of the trademark infringement claim by noting that "when a plaintiff sues for infringement of its registered mark, the defendant bears the burden of production and persuasion to rebut the presumption of ownership" of the mark provided by the registration.  Judge Sullivan rejected defendant Asiarim's contention that it was the owner of the mark, in fact ruling that Asiarim's attempt to claim ownership was fraudulent.  Thus, the Court concluded "that C=Holdings owns the Commodore trademarks, and that any unsanctioned use by Asiarim would amount to an infringement."

Court Rejects Patent Infringement and Unfair Competition Claims

In a December 9, 2013 ruling, Judge Richard J. Sullivan granted the defendants' motion for summary judgment of non-infringement in plaintiff Enzo Biochem, Inc.'s patent infringement action.  Enzo entered into a distribution agreement with PerkinElmer to manufacture and distribute Enzo's patented biotechnology inventions.  PerkinElmer appointed defendants Molecular Probes, Inc. and Orchid Biosciences, Inc. as sub-distributors.  In dismissing the patent infringement claims against Molecular Probes and Orchid Biosciences, the Court noted that "[b]ecause the features of the accused product are not in dispute, the Court may construe Claim 1 and then compare it to the undisputed features" of the accused product. 

Judge Sullivan rejected the defendants' argument that Enzo's proposed construction was limited solely by statements made to the PTO during prosecution of the patent-in-suit, and instead looked both to the language of the claim, and to the prosecution history.  The Court wrote that as "it turns out, though, the language of Claim 1 aligns with Enzo's statements to the PTO," and concluded that "[b]ased on the record before the Court, Enzo's statements to the PTO have not been wrenched from their context or mischaracterized; rather, they clearly set forth a difference -- evident on the face of Claim 1 -- between the accused features" of the challenged product.

Court Declines to Dismiss Lanham Act Claims for Mark on Supplemental Register

In a November 19, 2013 ruling, Judge Louis L. Stanton largely denied defendant American Tibetan Health Institute, Inc.'s motion to dismiss plaintiff C&L International Trading Inc.'s action asserting Lanham Act and related claims.  C&L had a design mark registered on the Trademark Office's supplemental register that incorporated the word mark "Tibetan Baicao Tea," and a registration for the word mark alone with New York State's Department of State.  American Tibetan claimed that it had its own registration for the identical word mark on the Trademark Office's principal register.  American Tibetan filed a trademark infringement action against C&L, and C&L started this separate trademark infringement action against American Tibetan, which did not mention American Tibetan's trademark registration.

American Tibetan moved to dismiss C&L's complaint, arguing that its superior rights arising from its registration on the principal register should prevail.  The Court noted that although American Tibetan's superior rights could provide a defense, C&L's complaint does not mention American Tibetan's registration and so cannot be considered on a motion to dismiss.  Judge Stanton also ruled that C&L's complaint adequately alleged that American Tibetan had abandoned any rights it might ever have had in the marks.

Court Dismisses Third Party Claim Seeking to Shift Blame for Copyright Infringement

In a November 4, 2013 ruling, Judge Paul A. Engelmayer granted summary judgment dismissing with prejudice the third party complaint of defendant Monster Energy Company against a disk jockey known as "Z-Trip" arising from The Beastie Boys' copyright infringement and Lanham Act claims against Monster Energy over a remix made by Z-Trip that included four Beastie Boys songs and that Monster Energy used in a promotional video.  The Beastie Boys sued Monster Energy for copyright infringement and a Lanham Act violation, and Monster Energy asserted a third party claim against Z-Trip for breach of contract and fraud in falsely representing that Z-Trip and Monster Energy had permission to use the Beastie Boys songs.

The underlying facts, briefly, are as follows:  In connection with their promotion of an upcoming album, the Beastie Boys authorized Z-Trip to make a Megamix of their older music, and to post it on his website for free download.  Monster Energy later hired Z-Trip to DJ at an event sponsored by Monster Energy, and recorded the event for a promotional video.  There were some brief conversations and email exchanges between a Monster employee and Z-Trip about what music Monster Energy could use for the video.  Z-Trip suggested the Beastie Boy Megamix, which was available for free download, but there was no discussion about permission or clearance to use the music.  The Monster Energy employee assumed from the mention of the free download that the Megamix was available for use in Monster Energy's promotional video.

Court Holds that Mere Registration of Domain Names Does Not Constitute "Use in Commerce" Under the Lanham Act

In an August 26, 2013 ruling, Judge Deborah A. Batts granted in part defendants' motion to dismiss Courtalert.com, Inc.'s complaint asserting. Courtalert.com and defendant e-law.com both supply alerts about court filing to lawyers and others users.  Courtalert.com alleged that e-law.com registered five domain names incorporating Courtalert.com's trademarks in full.  e-law.com cancelled the domain names following Courtalert.com's objection, but Courtalert.com sued anyway, asserting five Lanham Act claims (trademark infringement, unfair competition, false designation of origin, cybersquatting and dilution), and a state unjust enrichment claim.

The Court dismissed the trademark infringement claim, holding that Courtalert.com had failed to allege use of the infringing marks in commerce.  Judge Batts noted that there are circumstances under which a defendant's use of a mark can satisfy the "use in commerce" standard if it has an impact on the plaintiff's commercial activities, but found that Courtalert.com's complaint did not claim such use.  In particular, Judge Batts wrote:

The Complaint does not claim, for instance, that when typed into the address bar, any of the five domain names at issue directs visitors to Defendants' commercial website.  Nor does Plaintiff allege that the domains names, when typed in, lead users to information opposing Plaintiff's products or service.  In fact, Plaintiff does not allege that any message at all results when the domain names are typed in.  As such, a critical component of the "classically competitive" behavior is missing here, and Defendants' behavior seems to amount to nothing more than mere registration of a domain name.

Dismissal of False Designation of Origin Claim Denied

In an August 19, 2013 ruling, Judge Thomas P. Griesa denied defendants' motion to dismiss plaintiff Pop Bar, LLC's complaint, including a Lanham Act unfair competition claim.  Pop Bar makes and sells customizable Italian gelato, sorbet and frozen yogurt on a stick under its Popbar and Popbar system marks, and licenses others to do the same.  The defendant, Hip Pops, LLC, approached Pop Bar about becoming a franchisee, and signed a confidentiality agreement before receiving Pop Bar's "recipes and formulas, specially designed equipment, systems and methods of making customized Popbar products, and ideas for Popbar food trucks."  Negotiations then broke down under circumstances that Pop Bar contended show that Hip Pop never intended to enter into a deal with Pop Bar, and merely acted as if it would do so to gain access to Pop Bar's confidential information.  Hip Pop subsequently introduced competing products under the HipPOP mark.  Pop Bar sued, asserting a variety of claims, including false designation of origin under the Lanham Act.

Attorneys' Fees Denied in Trademark Infringement Action Despite Bad Faith

In an August 12, 2013 ruling, Judge Colleen McMahon denied defendant Conduit Limited's post-trial motions for judgment as a matter of law and plaintiff MyPlaycity, Inc.'s ("MPC") motion for attorneys' fees in what the Court characterized as a "long, tortuous" litigation.  Before trial, Judge McMahon had entered summary judgment of liability in favor of MPC on its Lanham Act claims, common law trademark infringement and unfair competition claims, and unjust enrichment claim.  The Court "also concluded that Conduit had acted in bad faith as a matter of law."  After a damages trial, the jury awarded $500,000 in disgorgement of Conduit's profits.  Despite the clear wording of 15 U.S.C. § 1117(a) that the plaintiff need only prove the defendant's sales in seeking an award of profits and the burden is on the defendant to prove any offsets, Conduit argued that "MPC bore the burden of distinguishing between Conduit's profits flowing from its infringing activity and from its non-infringing uses of MPC's trademark."  The defendant's argument was based principally on Burndy Corp. v. Teledyne Indus., Inc., 748 F.2d 767 (2d Cir. 1984).  Judge McMahon considered that case and the cases discussing it, and concluded that "Conduit is wrong to assert that Burndy (or any other of the cases it cites) required MPC to do more than demonstrate the gross amount of Conduit's . . . profits from activity related to" MPC's use of the mark.  It then became Conduit's burden under Section 35(a) of the Lanham Act to prove that this entire amount was to unjust enrichment."  The Court considered, and rejected, a variety of other attacks on the damages award, and ultimately upheld it in its entirety.

Magistrate Recommends Statutory Trademark Damages and Permanent Injunction Against Counterfeiters

In an August 9, 2013 ruling, Magistrate Judge Frank Maas recommended a $9 million award of statutory trademark damages to Tiffany (NJ) LLC against a series of related defendants (all but one of whom is located in China) and their credit card processor and entered a permanent injunction, but declined to enter a turnover order of funds held in Chinese banks pending an appeal to the Second Circuit of a similar order in another action.  Tiffany filed its complaint against the defendants alleging that they, "through a series of companies and websites, unlawfully manufactured, marketed and sold counterfeit versions of trademarked Tiffany products over the internet, in violation of the Lanham Act."  Tiffany also sued the defendants' credit processor, 95epay, alleging contributory infringement.  All defendants defaulted, and an inquest was ordered.  None of the defendants appeared at the inquest, although three Chinese banks holding defendants' assets and that had previously been restrained appeared to contest a turnover order on, among other grounds, China's bank secrecy laws.

Prevailing Defendant Denied Award of Attorneys' Fees in Lanham Act Claim

In an August 7, 2013 ruling, Judge Jed S. Rakoff denied the motion of defendants House of Cheatham Inc. and Robert Bell for attorneys' fees under the Lanham Act after the defendants prevailed on the trademark infringement, false designation of origin, unfair competition and state dilution claims brought by the plaintiff, Akiro LLC.  The Court first noted that Second Circuit case law "'allows recovery of a reasonable attorney's fee only on evidence of fraud or bad faith,'"  although some cases have allowed fees where the suit was a "'competitive ploy'" or where the suit is initiated with "'ulterior business motives.'"  In support of their motion, "defendants largely focus[ed] on such matters of the timing of Akiro's decision to commence this action, particular tactical decisions, and the expense of defendants' defense."  The Court, however, ruled that "the proper inquiry centers on whether or not Akiro 'had a credible, good faith basis on which to rest its Lanham Act claims."  After considering the (albeit limited) evidence presented at trial, Judge Rakoff held that "the Court cannot conclude that Akiro lacked a good-faith basis for its claims," and denied an award of fees.

Summary Judgment Denied on Trademark Infringement and Unfair Competition Claims

In an August 15, 2013 ruling, Judge Paul A. Crotty denied Gogo Sports, Inc.'s motion to dismiss Lifeguard Licensing Corp.'s complaint, including the trademark, unfair competition and false designation of origin Lanham Act claims.  Lifeguard Licensing owns the "Life guard" and "Lifeguard" marks for swim trunks, men's underwear, bags, clothing and accessories.  Lifeguard Licensing does not manufacture goods itself, but licenses others to use its marks.  Defendant Gogo started selling its own "Life Guard San Francisco"-branded goods in 2009.  Lifeguard Licensing engaged in settlement discussions with Gogo, but ultimately did not pursue the matter.  In June 2010, Gogo obtained registration of its marks with the USPTO, and Lifeguard Licensing then started this action in December 2010.

Gogo moved for summary judgment on the trademark claim, contending that there had been an improper assignment in gross of Lifeguard Licensing's marks earlier in the chain of title, that Lifeguard Licensing engaged in naked licensing without adequate quality controls. and that the "Life guard" and "Lifeguard" marks had become generic.  The Court rejected these arguments.  With regard to the assignment in gross, Judge Crotty traced the chain of title of the marks and concluded that each assignment had been accompanied by a transfer of the corresponding goodwill, and the marks were thus not assigned in gross.  The Court also rejected the naked licensing argument, finding that "Gogo fails to present any evidence of Lifeguard's inadequate license supervision," and that, on the contrary, "the record is replete with compelling evidence of Lifeguard's supervision of its marks."  Judge Crotty wrote that in "light of Lifeguard's quality control efforts, the Court finds that it has not abandoned the Lifeguard Marks through naked licensing."