Fee award justified in case involving fraud on the PTO

Amusement Art, LLC v. Life is Beautiful, LLC, 2017 WL 2259672, No. 2-14-cv-08290
(C.D. Cal. May 23, 2017)
Initial ruling discussed here.  Defendant LIB hosts the Life is Beautiful festival in Las Vegas, Nevada—an annual event that features music, art, food, and other programming. One of the logos initially associated with the event was an image of a heart made of splattered paint. Amusement Art is owned by artist Thierry Guetta and his wife Debora Guetta. Guetta’s first solo art exhibition, held in 2008, was entitled “Life is Beautiful” and Guetta incorporated that phrase into some of his artwork. Guetta also previously produced artwork depicting a heart accented by splattered paint. Amusement Art sued for trademark and copyright infringement and related claims.
After the lawsuit began, LIB determined that a number of the statements of use Amusement submitted to the PTO to receive “Life is Beautiful” registrations were false. Although Amusement voluntarily surrendered 8 of its registrations, it continued to claim a 2014 registration in connection with festivals and art events.  The court granted LIB’s motion for summary judgment on all claims and its counterclaims for cancellation.  As for the trademark claims based on “Life is Beautiful,” the court found them barred by the doctrine of unclean hands.  For trademark claims based on the heart design, the design didn’t function as a mark, nor did Amusement show that the design was valid and protectable.  On the copyright claim, no rational jury could find the two images were “virtually identical,” “as is required when asserting a copyright claim based on a ubiquitous image such as a heart design.”
Here, the court granted LIB’s fee request as to the Lanham Act claims, but not the copyright claim, reducing its request through various deductions to a bit over $922,000 in total, out of a request for roughly twice that.  Applying Octane Fitness, the court reasoned that a party’s bad motivation or fraudulent conduct is “archetypal” conduct warranting fee-shifting under the Lanham Act.  Thus, fraud on the PTO is routinely deemed to be exceptional.  Given the extent of the fraudulent conduct in this case, the court found that LIB was entitled to recover for fees incurred in connection with the “Life is Beautiful” trademark claims.  The infringement claims were initially based on eight fraudulently-obtained registrations where Amusement claimed the use of the “Life is Beautiful” mark in connection with 257 categories of goods, but it obtained the registrations by staging photographs and submitting false declarations. Amusement responded that it surrendered the eight fraudulently-obtained registrations and that the infringement claim was ultimately premised on a ninth registration that was not fraudulently-obtained. Nope.  Amusement “attempted to fraudulently ‘secure a monopoly over most plausible uses of the phrase “Life is Beautiful” without actually investing any resources into developing the goodwill of their brand.’ Plaintiff then subjected others to the burden of litigation on the basis of all of those marks.”  Its abandonment of the fraudulently obtained marks didn’t clean its hands, nor did it make this case unexceptional.
LIB argued that the weakness of the heart design infringement claim also justified a fee award. Amusement’s 30(b)(6) witness stated that she considered the heart design a copyright image rather than a trademark image. Also, there was a lack of evidence substantiating Amusement’s claim that the limited use of the design in Guetta’s artwork rose to the level of a protectable trademark. The court agreed that the claim was “exceptionally weak.” Even if the court ignored the corporate representative’s statement, Amusement submitted “no evidence of actual use of the mark as a trademark and no evidence that the mark would be recognized by a consumer as a source identifier. … [T]his case is not one where there was inadequate evidence to create a triable issue but rather almost no evidence.”
However, the court denied fees on the copyright claim.  LIB pointed to the absence of any evidence of direct copying and the visual differences between the images.  Amusement did own a valid copyright, though, and “the evidence suggests this action was brought in good faith to protect that copyright. Moreover, although the court concluded that a copyright claim pertaining to a ubiquitous image such as this heart design must be evaluated under the virtually identical standard, it was not unreasonable for Plaintiff to urge a less stringent standard.” There were in fact similarities between the images, even if not enough to create a triable issue of fact. Nor were deterrence interests served by awarding fees, since owners of valid copyrights “are entitled to bring enforcement actions against images that bear visual similarity to their copyrighted design.”
As for apportioning the time spent between Lanham Act and other claims, including congruent state law claims, much of the work related to all the claims.  Moreover, the parties addressed the state law claims for unfair competition and common law trademark infringement only as derivative of the Lanham Act claims.  Ultimately, the court concluded that work related to the Lanham Act claim made up 60% of the total reasonable attorneys’ fees here.  

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high-tech look can’t fool reasonable consumers about orthotics

Kommer v. Bayer Consumer Health, — F.Supp.3d —-, 2017 WL
2231162, 16 Civ. 1560 (S.D.N.Y. May 18, 2017)
Bayer sells Dr. Scholl’s foot care products, including the
Dr. Scholl’s Custom Fit Orthotics Inserts. In many stores, they are sold
alongside defendants’ point-of-sale kiosk, the Dr. Scholl’s Custom Fit
Orthotics Foot Mapping Kiosk, which features a platform for customers to stand
on and a computer monitor at top. 

The instructions direct customers to remove
their shoes and step onto the Kiosk platform; the system recommends the best
Insert model for the user’s feet. There are fourteen different models of
pre-fabricated, pre-packaged Inserts, and the Kiosk will always recommend one
of the models. The Dr. Scholl’s website touts the custom fit kiosk to “recommend
the Custom Fit Orthotic Inserts that are right for you.”  The complaint alleged that the arch
measurements from the kiosk were imprecise, depending on an individual’s weight
and stance, and that reliance on arch measurements isn’t sufficient to
prescribe a custom fit orthotic.  Kommer
experienced foot pain; he paid $333 for custom orthotics, then tried the kiosk
and ended up buying the recommended inserts for $50, allegedly higher than
similar inserts that sell for $10.  He
alleged that, had he known the truth that the inserts were “standardized, mass
produced over-the-counter shoe inserts” he would not have bought them, and that
his foot pain increased after using them while his prescribed orthotics
relieved the pain. 
The basic claims, brought under N.Y. GBL §§ 349 and 350,
were that defendants (1) misled consumers into believing that the Inserts were
“functionally equivalent” to orthotics fitted and prescribed by a medical
professional, and (2) misled customers into believing that the Inserts are
individualized to a consumer’s “unique physical characteristics,” and not
simply “generic, pre-fabricated, mass-produced, over-the-counter shoe inserts.”
The allegedly misleading acts included the use of “Custom Fit Orthotic” in the
product name, the Kiosk’s use of “pseudo-technology,” and the use of
designations “such as ‘CF440’ ” on the Insert models—designations which Kommer
alleged weren’t found on other Dr. Scholl’s products, and which “suggest a
level of precision and exactitude that is not present in the product.”
The court first found that Kommer lacked Article III standing
to seek injunctive relief, regardless of the public policy reasons for allowing
such standing.  Kommer essentially
conceded that he wouldn’t buy the inserts, or be misled by the marketing, again
in the future.
The court also found that Kommer hadn’t plausibly alleged
material misleadingness, which is evaluated from the objective standpoint of a
reasonable consumer. “At the point that the consumer is directed to select a
pre-packaged Insert stacked along shelves on the side of the Kiosk … it is no
longer reasonable for him to think that he is getting a product ‘individually
designed’ for his feet.”

In the alternative, Kommer argued that the marketing would
lead consumers to believe that the Inserts are the functional equivalent of
prescribed, individually-made orthotics.  But the kiosk instructions also contained a disclaimer:
“The Dr. Scholl’s Custom Fit Orthotic Center uses state of the art technology
to measure your feet, but does not diagnose medical conditions. It is not
intended to take the place of your podiatrist. See your podiatrist as needed
for diagnosis and treatment of medical conditions.”  Disclaimers aren’t always sufficient, but
this one was. It was printed in “reasonably-sized font right at the top of the
Instructions” and was sufficiently clear even before a consumer made a purchase
or even stepped on the kiosk. Nor was it inconsistent with defendants’ other
representations, and it was unclear how designations such as “CF440” would lead
a reasonable consumer to believe that he was getting over-the-counter inserts comparable
to prescribed ones, “particularly when Plaintiff does not allege that such
designations are unique to, or even typical of, the latter.”  Kommer didn’t explain how “high
technology-looking” marketing was inherently deceptive.  “To the extent that a consumer may
overestimate the function of the Kiosk … the disclaimer provides adequate clarification
of its capabilities.”

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A box size whopper? Slack fill claims for candy continue

Bratton v. Hershey Co., 2017 WL 2126864, No. 16–cv–4322 (W.D.
Mo. May 16, 2017)
Bratton sued over alleged slack fill in Reese’s Pieces and
Whoppers candy boxes.  He alleged that:
Consumers spend an average of 13
seconds making an in-store purchasing decision. The decision is heavily
dependent on a product’s packaging, in particular, the package dimensions. When
faced with a large box and a smaller box, both containing the same amount of
product, a consumer is more likely to choose the larger one, thinking it is a
better value.
About 29% of each Reese’s Pieces box was allegedly slack
filled, and about 41% of each Whoppers box. 
Bratton sued under the Missouri Merchandising Practices Act
(MMPA) for a Missouri consumer subclass, which requires (1) the purchase of
goods or services, (2) primarily for personal or household purposes; and (3) an
ascertainable loss of money or property, (4) as a result of, or caused by, the
use or employment by another person of a method, act, or practice declared
unlawful under the MMPA. The MMPA is “ ‘paternalistic legislation designed to
protect those that could not otherwise protect themselves,’ ” High Life Sales
Co. v. Brown–Forman, Corp., 823 S.W.2d 493, 498 (Mo. 1992), and is thus very
broadly written.  Unlawful practices
include “any deception, fraud, false pretense, false promise,
misrepresentation, unfair practice or the concealment, suppression, or omission
of any material fact in connection with the sale or advertisement of any
merchandise in trade or commerce.” 
Reliance is not required. “[I]n order to prevent evasion by overly
meticulous definitions,” the statutory scheme does not provide definitions of
any particular unlawful practices. Thus, “[f]or better or worse, the literal
words cover every practice imaginable and every unfairness to whatever degree.”
The Missouri Attorney General has authority to promulgate
rules under the MMPA. Under those rules,  “deception” is defined as “any method, act,
use, practice, advertisement or solicitation that has the tendency or capacity
to mislead, deceive or cheat, or that tends to create a false impression,” and
“[i]t is deception for any person in an advertisement or sales presentation to
use any format which because of its overall appearance has the tendency or
capacity to mislead consumers.” The rules further provide that reliance and
intent are not elements that must be proven to establish deception or misrepresentation,
nor is proof of deception, fraud, or misrepresentation required.
Given this breadth, the allegations of the complaint that
the packaging misled Bratton to believe that the boxes contained more candy
than they actually did, and that the actual value of the product was less than
the value as represented by the packaging, were sufficient. “Hershey’s candy
boxes are opaque and non-pliable, and a reasonable consumer could conclude that
the size of a box suggests the amount of candy in it.”  The court’s conclusion was reinforced by
Bratton’s allegations about federal regulations barring slack fill, subject to
exceptions that Bratton alleged didn’t apply. Regardless of whether he could
prove his MMPA claim by pointing to such violation, the existence of the federal
prohibition “supports the reasonableness of a consumer’s belief that the
package of candy he purchases will not have 29% or 41% non-functional
Hershey argued that “[c]onsumers are well aware of the fact
that substantially all commercial packaging contains some empty space”; that
“[i]t is common knowledge in ‘our industrial civilization’ that substantially
all packaged goods include some amount of empty or ‘head’ space, which is
necessary for efficient manufacturing and distribution”; and that “a reasonable
consumer, upon picking up the Reese’s Pieces or Whoppers container, would
instantly realize that it is not filled to the brim: with each movement of the
package, its contents noticeably and audibly rattle.” But the allegations of
the complaint controlled, and Hershey’s statements were not facts of which the
court could take judicial notice. 
Anyway, realizing that the package wasn’t filled to the brim didn’t
contradict Bratton’s allegations that the boxes were substantially empty and
that they could easily be more full. 
Deliciously, Hershey deposited sample boxes with the court, but the
court declined to make findings of fact “about what conclusions a reasonable
consumer would draw about the amount of product in the course of deciding to
purchase the boxes.”
Hershey also argued that the clear and accurate labeling on
the packages—net weight, number of pieces of candy per serving, and number of
servings per box—was fatal to Bratton’s claim because it tells a consumer how
much candy is in the box. An ingredient list is not required on packaging “so
that manufacturers can mislead consumers and then rely on the ingredient list
to correct those misrepresentations and provide a shield from liability for
that deception.” A reasonable consumer “would expect that the ingredient list
comported with the representations on the packaging, and … in any event, the
manufacturer was in the superior position to know and understand the
ingredients in the product, and whether they comported with the packaging.” The
same is true for the dimensions of the boxes as for the ingredients.
Hershey then argued that Bratton failed to allege
ascertainable loss under the MMPA. Ascertainable loss involves “the
benefit-of-the-bargain rule, which compares the actual value of the item to the
value of the item if it had been as represented at the time of the
transaction.” The allegations here were sufficient:
Bratton alleged that the value of the products he purchased
was less than the value of the products as represented by size of the boxes.

Standing to pursue injunctive relief: Hershey argued that, now that Bratton
knows about the slack fill, he can’t plausibly claim that he’s subject to
further harm.  However, the court found
that Bratton adequately pled a threat of ongoing or future harm, which is
fairly traceable to Hershey’s conduct: Hershey continues to sell slack-filled
candy boxes.  If Hershey changes its
practices, Bratton alleged, he’s likely to buy the products in the future.  The fact of Bratton’s discovery of the truth
doesn’t make the packaging less misleading.

Likewise, Bratton sufficiently pled unjust enrichment.  The question of whether he could represent a
Missouri or nationwide class was not appropriate for resolution at this stage.

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Suing for false advertising as abuse of process

Bobrick Washroom Equipment, Inc. v. Scranton Products, Inc.,
2017 WL 2126320, No. 14-CV-00853 (M.D. Pa. May 16, 2017)
In May 2014 SP sued Bobrick, alleging that it “carefully
orchestrated a campaign to scare architects, product specifiers, procurement
representatives, building owners, and others in the construction industry into
believing that Scranton Products’ toilet partitions are fire hazards, are
unsafe and pose health and safety risks if used in building projects across the
country.” After SP voluntarily dismissed the claim, Bobrick filed a complaint
asserting false advertising and wrongful use of civil proceedings under
Pennsylvania’s Dragonetti Act, as well as common law unfair cornpetition and
abuse of process claims.
Bobrick’s Lanham Act and unfair competition claims arose
from SP’s alleged misrepresentations of “thousands of its high density
polyethylene (‘HDPE’) toilet partitions sold for installation in schools and
other public and private buildings as being compliant with applicable fire,
life safety, and building code requirements.” SP allegedly falsely represented
that its HDPE toilet partitions comply with the requirements of the NFPA 286
room-corner test, a fire performance test promulgated by the National Fire
Protection Association, even though SP allegedly improperly modified and
manipulated the test methodology to produce a favorable result, thereby
invalidating the test, and sold toilet partitions with a different chemical
composition and physical structure than those it claimed to have successfully
tested under NFPA 286.
As for the abuse of process-type claims, Bobrick alleged
that SP knew or should have known that its central claims—similar to those
challenged in the false advertising claims here—were false, but sued anyway,
for “the improper purpose of stifling legitimate competition by Bobrick,
silencing Bobrick’s efforts to educate market participants about code
requirements in the interest of public safety, and inflicting financial harm on
Bobrick for unfair competitive advantage by increasing Bobrick’s costs and
otherwise.” The result was “[n]early three years of costly and time-consuming
litigation.”  SP also allegedly destroyed
numerous relevant documents while contemplating litigation and made discovery
more costly in various ways, including by miseading Bobrick and the court.

The court first found that false advertising was cognizable as unfair
competition under Pennsylvania common law, which was not limited to passing
off.  Then it refused to dismiss the
abuse of process claim. “Generally speaking, to recover under a theory of abuse
of process, a plaintiff must show that the defendant used legal process against
the plaintiff in a way that constituted a perversion of that process and caused
harm to the plaintiff.”  Though un-of-the-mill
discovery disputes cannot constitute an abuse of process under Pennsylvania
law, Bobrick alleged “facts far more detailed and nefarious: that SP knew that
some or all of its HDPE toilet partitions did not actually comply with NFPA 286
(i.e., its claims were baseless) yet SP nevertheless continued to prosecute
this lawsuit for nearly three years, all while stifling Bobrick’s legitimate
discovery efforts for the specific purpose of financially harming Bobrick and
gaining a competitive advantage in the marketplace.” 

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coffee cup lid trade dress survives functionality challenge

If I have the right image of the defendant’s coffee cup lid, this is a good example of the difficulties separating scope from validity: the challenged design is noticeably different from the registered design, and it seems to me that the case that the overall concept is functional is stronger than the case that the specific implementation is functional.  I guess we’ll see.

Solo Cup Operating Corp. v. Lollicup USA, Inc., 2017 WL
2152424, No. 16 C 8041 (N.D. Ill. May 17, 2017)
Solo Cup has a registered product configuration mark for its
“Traveler” coffee-cup lid:

The lid was also the subject of design and utility patents that
expired in 2001 and 2003, and which were disclosed to the PTO during the registration
process.  Solo alleged that Lollicup’s
Karat lids infringed its mark.

Lollicup asserted a bunch of defenses, some of which the
court rejects here, including fraud on the PTO. 
Fraud occurs when the applicant “withhold[s] from the Patent and
Trademark Office … material information or fact which, if disclosed to the
Office, would have resulted in the disallowance of the registration sought or
to be maintained,” or makes “a deliberate attempt to mislead the PTO into
registering [the] mark by presenting materially false and misleading
information to the PTO when … seeking the trademark registration.” Lollicup
argued that Solo’s statements made during the application process about
non-functionality constituted fraud.
Under Traffix, the
existence of a utility patent that encompasses the product configuration
claimed “is strong evidence that the features therein claimed are functional,”
but not completely dispositive. 
Functionality isn’t a fact that can be withheld from the PTO but a
determination for the examiner. Thus, for fraud to relate to functionality, a
party must either withhold from the examiner information or facts that are
material to the determination of whether the mark is functional or present
false or misleading information that is material to the functionality
determination.  Lollicup argued that
Solo’s representations that certain features of its lid were ornamental were inconsistent
with representations made to the patent examiner about those features’
functionality. “But as any practitioner before the PTO would likely concede,
applications advocate for a result by highlighting facts that are favorable.
Where, as here, the trademark examiner was in a position to agree or disagree
with the characterizations contained in the application by studying the patent
itself, such an argument made by a trademark applicant does not give rise to a
reasonable inference of fraudulent intent.”
Similarly, Solo’s director of product development submitted
a declaration to the PTO stating that (a) the lid had the same basic functional
characteristics of competing lids and (b) the configuration didn’t affect the cost
of manufacturing the lid to the disadvantage of others in the marketplace.
These were potentially false and misleading but they characterized the
configuration in “broad terms that are not demonstrably false nor directly contrary
to the patent disclosure,” which claimed that the configuration assisted in
The court similarly dismissed false advertising claims based
on Solo’s allegedly false use of the registration symbol on its lid.  The trademark was registered and the court
dismissed the fraud claims.  “[U]se of
the ® symbol on its registered lids cannot be a false statement of fact prior
to cancellation or abandonment of that mark.” Even if the trademark is
ultimately cancelled, it will still have been registered and thus there was no
false claim in prior use of the symbol.
A similar fate awaited Lollicup’s claims of
unconstitutionality of the registration and preemption under federal patent
law.  The right to copy a design upon
expiration of a patent is “far from absolute.” Thomas & Betts Corp. v.
Panduit Corp., 138 F.3d 277, 287 (7th Cir. 1998). 

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Reading list: Shakespeare’s literary disputes

Bonus points for beginning with a great Hamlet quote (the best use of which I ever saw was a production that arranged the scenes so that when Hamlet disparages what he’s reading as “words, words, words” he is reading his letters to Ophelia, which she has returned to him).

Barbara Lauriat, Literary and Dramatic Disputes in Shakespeare’s Time
Journal of International Dispute Settlement, Forthcoming

Disputes over literary works and plays — between one authors and another, one publisher and another, and between authors and publishers — have arisen since the ancient world. This is to be expected, since publishing poems and plays and producing theatrical performances can have significant economic, political, and emotional implications all at the same time. The nature and legal frameworks governing these disputes have changed dramatically over the centuries, however, particularly with regard to the proprietary rights involved.

Though modern copyright law did not exist at the time, the Elizabethan age saw a high degree of professionalism of theatrical performance, book publishing, and dramatic authorship. When audiences are clamoring for novel entertainments, authorship is becoming a professional activity, and profits are to be made, customs and traditions inevitably arise — as do violations of those customs and traditions. This article discusses the framework of authorship and publishing in Shakespeare’s time and examines some of the disputes that arose and how they were resolved in a context where the legal remedies were limited. Methods from patronage to private guild “courts” to theft to public denunciation to outright violence were employed in attempts to maintain profitable businesses in publishing and theatre.

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New article: fixing incontestability

With apologies to John Welch, who hates the term.

Fixing Incontestability: The Next Frontier?
Boston University journal of Science and Technology Law, Forthcoming


Incontestability is a nearly unique feature of American trademark law, with a unique American implementation. The concept of incontestability allows a trademark registrant to overcome arguments that a symbol is merely descriptive of features or qualities of the registrant’s goods or services—for example, “Juicy” for apples. Incontestability provides a nearly irrebuttable presumption of trademark meaning, which is a powerful tool for trademark owners. Unfortunately, incontestability is not granted as carefully as its power would counsel. Courts may misunderstand either the prerequisites for, or the meaning of incontestability, allowing trademark claimants to assert rights that they don’t actually have

Incontestability needs clearer signals about what it is and when it is available. In the absence of serious substantive examination of incontestability at the PTO—which seems unlikely to materialize any time soon—changes designed to increase the salience of incontestability’s requirements to filers and to courts could provide some protection against wrongful assertions. Incontestability can only serve the trademark system if it is granted properly and consistently.

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