No dog in this fight: PTO makes a cancelled mark incontestable

Nola Spice Designs, LLC v. Haydel Enterprises Inc., No. 13-30918, — F.3d – (5th Cir. Apr. 8, 2015)
Opinion below, rejecting trademark and copyright claims based on competing Mardi Gras bead dog designs. (And a reminder: sending a DMCA notice is not risk-free: that’s what triggered the sequence of events ultimately leading to the invalidation of Haydel’s so-called marks.)
Mardi Gras in New Orleans features parade krewes that throw strands of plastic beads to onlookers, who in turn sometimes twist those strands into the shape of a dog, known unsurprisingly as a bead dog. In 2008, Haydel commissioned an artist to design a mascot, which was named “Mardi Gras Bead Dog.” In 2009, Haydel successfully registered “MARDI GRAS BEAD DOG” and its bead dog design for king cake pastries, jewelry, and clothing (shirts, hats, and baby jumpsuits). The bead dogs in Haydel’s jewelry are made of sterling silver. It also registered a copyright to a work called “Bead Dog” in “photograph(s), jewelry design, 2-D artwork, sculpture.”
Haydel’s Mardi Gras Bead Dog sculpture

Haydel’s initial design mark as registered

In May 2012, Raquel Duarte formed Nola Spice Designs, which sells necklaces and earrings featuring bead dog trinkets twisted by hand from beads and wire, following the same general method that Duarte used to make bead dogs as a child during Mardi Gras.

Nola Spice bead dogs

Haydel sent Nola Spice a C&D; Nola Spice sought a declaratory judgment of noninfringement, cancellation of Haydel’s bead dog marks, and relief from unfair competition. Haydel counterclaimed for copyright and trademark infringement, unfair trade practices, and trademark dilution.

The court of appeals began with the proposition that the registrations were prima facie evidence of inherent distinctiveness. (In a footnote, the court clarified that the registrations issued based on a finding of inherent distinctiveness, without examination of secondary meaning. I will have more to say both about Haydel’s conduct before the PTO and the PTO’s conduct in a moment, but particularly the allowance of the word mark on that basis is disappointing.) Nola Spice could rebut this presumption by showing lack of inherent distinctiveness, which would have to be analyzed separately for the word mark and the design mark.
Note that if the PTO had registered a product design without evidence of secondary meaning, it would plainly have erred after Wal-Mart. Haydel’s claims here conflated “design mark” as in “two-dimensional drawing applied to a portion of a product to indicate its source” with “product design.” Haydel had a registered design mark, not a registered product design, and extending its rights over one to the other would be deeply problematic, given the resultant evasion of Wal-Mart. Its initial specimen clearly showed a design mark (although how that mark qualifies as being applied to the claimed products is an exercise left for the reader).
Initial Haydel specimen of use (note that carton apparently contains or contained “pralines”)
Haydel’s 2015 specimen for the design mark for jewelry, by contrast, is consistent with the claim it made here: the product design.
Haydel 2015 specimen for clothing

Haydel 2015 specimen for jewelry
Close-up of Haydel jewelry
It is a mystery to me how the 2015 specimen was acceptable evidence of “use” of the design mark, which bears only a general family resemblance to the shape of the jewelry. How many practitioners find this acceptable? I also wonder how often this kind of 2D design/3D design bootstrapping occurs. Another reason to worry about (1) deadwood on the Register, and (2) deference to PTO findings.
And speaking of which! The PTO’s online database (TSDR) is very clear that, as of Oct. 2013, the marks had been ordered cancelled by the district court. Nonetheless, the very next entries in TSDR for both marks are the Jan. 2015 Section 8/15 declaration and accompanying specimen. A Section 15 incontestability declaration requires the declarant to attest that “no final decision adverse to the owner’s claim of ownership of such mark for those goods or services exists, or to the owner’s right to register the same or to keep the same on the register; and, no proceeding involving said rights pending and not disposed of in either the U.S. Patent and Trademark Office or the courts exists.”  I’m not sure what should be done about the Section 8 renewals while the district court had ordered the marks cancelled, but there’s no question that the Section 15 incontestability declarations should not have been filed.
Haydel’s attorney signed the declarations. In fairness to him, the litigation seems to have been conducted by a different firm. Nonetheless, one must question whether he adequately (1) checked TSDR to see whether there was in fact a pending or final decision (he’s attorney of record—shouldn’t he have learned about the case when it was entered into TSDR?), (2) counseled his client about the requirements of Section 15 to ensure that the declaration he was going to file was accurate (if he did so, his client has done him a great disservice), or (3) otherwise investigated the facts surrounding the marks himself. I do not see how this declaration could have been filed by a lawyer and client working together properly.
This should be merely an embarrassing mistake, since the Section 15 declarations are so obviously wrong … except that the PTO too apparently made no effort to see if there was anything in its own records that would mandate rejection of the Section 15 declarations. Instead, the PTO accepted the declarations. As a result, marks that had been ordered cancelled, and whose cancellations were just affirmed by the Fifth Circuit on the grounds of lack of distinctiveness, were deemed incontestable in January 2015.
Now what? I presume that the actual invalidation of the marks trumps the erroneous incontestability as well as the Section 8 renewal, but shouldn’t the PTO sort this out of its own accord?  The Lanham Act makes actual lack of pending challenge/invalidation into separate requirements from the requirement that the registrant file its declaration of incontestability.  Compare 15 U.S.C. §1065(1) & (2) with§1065(3).  Thus, I’d say the fact that the PTO responded positively to Haydel’s invitation to err should not benefit Haydel, even in the absence of fraud.  (This differs from the argument “the PTO shouldn’t have granted incontestability because there was no secondary meaning,” which won’t (park ‘n) fly, in that incontestability doesn’t require any additional evidence of secondary meaning beyond the initial registration; it does require that there be no pending/final challenge to the validity of the mark.)
OK, let’s get back to the litigation. The word mark: The court of appeals found that “Mardi Gras Bead Dog” was not generic for jewelry, clothing, or king cakes. The record, in the light most favorable to Haydel, showed that the term meant a dog made from Mardi Gras beads. Haydel’s proprietor testified that “[b]ead dog, beaded dog, a dog made of beads are all common terms for describing” a dog made from Mardi Gras-style beads. The artist who created Haydel’s bead dog design agreed at his deposition that the terms “Mardi Gras” and “bead dog” “naturally go together:” “You know, it’s a bead dog. It’s kind of hard . . . not [to] put them together, Mardi Gras.” The Copyright Office likewise noted that “Mardi Gras bead dogs . . . have apparently become well-known and traditional parts of Mardi Gras.” But Haydel doesn’t sell Mardi Gras bead dogs; it sells silver jewelry in the shape of bead dogs, clothing with the image of a bead dog, and king cakes containing or accompanied by bead dog figurines. Thus, the words were descriptive of a characteristic of the products, not the products themselves.
[Side note: this constitutes at least deceptive misdescriptiveness as to the jewelry, no? Separately: If I sold a foam block shaped like a piece of cheese, would “cheese” be merely descriptive of my product? I would think that “Mardi Gras bead dog” is generic for anything that portrays Mardi Gras bead dogs. That is, “this is a Mardi Gras bead dog T-shirt” seems like a perfectly good answer to the question “what is it” when the “it” looks like the shirts in the 2015 clothing specimen.  But much of that depends on how the bead dog design is used—as a mark or as decoration for the shirt.]
But that does mean the term was descriptive. “[T]he concept of descriptiveness must be construed rather broadly.” No imagination is required to see that the term conveys information about Haydel’s clothing, jewelry, and king cake: “The bead dog design embodied in each of these products is, in Haydel’s words, a ‘rendering of the old time bead dog.’” Haydel’s own public statements closely linked these products to the traditional Mardi Gras bead dog. No reasonable juror could find the phrase suggestive or arbitrary for these goods.

Traditional Mardi Gras bead dog trinket
Moreover, competitors would likely need these terms to describe their own products; a magazine published by Haydel described the traditional bead dog as “a fond memory of Mardi Gras’ past and symbol of the City’s youth.” Another magazine article called the traditional bead dog as “an iconic Mardi Gras symbol.” “Given the bead dog’s popularity and its close connection to Mardi Gras, common sense indicates that other vendors would need to use the term ‘Mardi Gras bead dog’ to describe their own Mardi Gras-themed clothing, accessories, and baked goods containing the image of a bead dog.”
Haydel failed to raise a genuine issue of material fact on inherent distinctiveness, as was its burden once the presumption of inherent distinctiveness had been rebutted.
The design mark fared similarly, under a different test. The design mark was described in the registration as “a stylized dog wearing a beaded necklace, with the dog being formed by a series of spheres designed to look like Mardi Gras style beads. The dog has two eyes and a nose, all formed by smaller beads.” The Seabrook Foodstest for design mark distinctiveness asks
[1] whether it was a “common” basic shape or design, [2] whether it was unique or unusual in a particular field, [3] whether it was a mere refinement of a commonly-adopted and well-known form of ornamentation for a particular class of goods viewed by the public as a dress or ornamentation for the goods, or [4] whether it was capable of creating a commercial impression distinct from the accompanying words.
Nola Spice did not argue that the bead dog design was product design trade dress under Wal-Mart, though it should’ve with respect to the jewelry. I’ve argued elsewhere that courts should embrace defendant-side functionality in appropriate circumstances, like Louboutin v. YSL, and I’d say the same is true here: Because defendant’s products are alleged to infringe in their design, not in the application to a separate product of a two-dimensional image as an indicator of source, only secondary meaning should let plaintiff proceed.
Anyway, in the relevant market context, Nola Spice’s evidence overcame the presumption of inherent distinctiveness and indeed showed lack of inherent distinctiveness as a matter of law. The parties fought over the definition of the relevant market (pastries, clothing, and jewelry, said Haydel, while Nola Spice said “bead dogs”). The court of appeals chose “the market for Mardi Gras-themed products.” This definition was consistent with Haydel’s advertising, which described its clothing as “Mardi Gras Bead Dog parade gear” and its jewelry as a way to “[s]how your Mardi Gras spirit year round.” King cake is also a Mardi Gras tradition.
In that market, the design was not “so unique, unusual or unexpected” that it would “automatically be perceived by customers as an indicator of origin.” Instead, the record was full of evidence that Haydel’s design was “substantially similar to the traditional bead dog that parade-goers have long crafted from Mardi Gras beads.” Haydel’s principal testified that every bead dog that could be made would “look like” Haydel’s trademarked design, and another witness associated with Haydel likewise testified that there was not “any other way to make a bead dog” besides Haydel’s bead dog design. The record showed traditional bead dogs similar to Haydel’s design. Haydel argued that its design was distinct because its design has eyes, a nose, a tail, and a necklace. So did others in the record, and anyway that was a mere “refinement.” No reasonable juror could find inherent distinctiveness.
With the presumption of inherent distinctiveness gone, Haydel had the burden of showing secondary meaning (or a genuine issue of fact, to avoid summary judgment). The burden of demonstrating secondary meaning “is substantial and requires a high degree of proof.” The court of appeals accepted the idea that “Haydel began using its marks in October 2008, when it placed a statue of its mascot in front of its bakery, three-and-a-half years before Nola Spice began selling bead dog jewelry.” Notice that this idea of “use” is pretty flexible, since it’s a more general “we have a dog statue” and not “we are applying this image and phrase to specific goods.” Anyhow, this was relatively brief as length of use went.
Haydel sold bead dog-related items worth approximately $30,500 between January 2007 and May 2013, about 80 clothing items and 300 jewelry items. These numbers were low compared to other sales found to support secondary meaning, e.g., 916,385 cases of Fish-Fri between 1964 and 1979 in one case and recent sales of over $93 million in another. Haydel’s affidavit said that it spent more than $594,000 between October 2008 and August 2013 on “the development and promotion and expanding the use” of Haydel’s bead dog mascot, but “development” may not have affected public perception, and just spending money doesn’t itself cause secondary meaning.
The most significant promotional effort was “Paws on Parade,” an exhibit coordinated with the Louisiana Society for the Prevention of Cruelty to Animals to raise awareness about animal welfare. About 74 bead dog sculptures “embody[ing]” the design mark, each about 54 inches long and 42 inches tall, were displayed throughout New Orleans from January to September 2012.  Each had a plaque with various names, including the SPCA, Haydel, the artist, and the organization that sponsored the sculpture.  The court of appeals found that this had little probative value on secondary meaning.  The statues didn’t feature the word mark, and the record didn’t “raise an inference” that the exhibit caused the consuming public to associate the design mark with a single source.  Haydel’s name on the plaque was no more prominent than names of other people and organizations involved in the exhibit, and the plaques weren’t highly noticeable.
Haydel also put one or two bead dog statues outside its bakery, atop a pedestal that reads “Haydel’s Mardi Gras Bead Dog.” Haydel’s principle testified that “hundreds of people” take pictures with the bead dog statue every day. But again, there was no evidence that the sculptures led consumers to make a source identification. “Indeed, Haydel’s inclusion of its own name before ‘Mardi Gras Bead Dog’ on the pedestal suggests a generic use of that phrase.” Plus, a single sculpture was “necessarily limited” in ability to connect with consumers, and anyway Haydel didn’t claim a mark for sculptures, but for clothing, jewelry, and king cake. “Given the bead dog’s popularity in New Orleans and the similarities between Haydel’s design and a traditional bead dog, even a consumer who associated the large bead dog sculptures with a single source would not automatically associate other merchandise bearing a bead dog image with a single source.” And Haydel’s promotions with respect to those products were limited—on its website and in its annual magazine. Press coverage was also slim, and there was no identified coverage of the claimed marks in connection with clothing, jewelry, or king cake. 
Haydel argued that Nola Spice’s copying supported a finding of secondary meaning, but Nola Spice didn’t use the claimed word mark, and the evidence of intent to copy the design mark was pretty bad.  Duarte briefly posted images of statues from the Paws on Parade exhibit on Nola Spice’s webpages on Facebook, Pinterest, and Twitter. But the record didn’t support an inference that Duarte knew Haydel provided the mold for these statues, or that she intended to copy Haydel’s design in crafting her bead dog jewelry.
There was no consumer testimony or survey evidence. Given all that, Haydel failed to raise a fact issue on secondary meaning.  Thus, the infringement claims were properly rejected and the marks were properly cancelled. Likewise with federal dilution, and state dilution (does not require fame, but does require distinctiveness).
Haydel also argued that Nola Spice engaged in passing off by putting a photo on Facebook (and Twitter and Pinterest) of Duarte posing with a bead dog sculpture from the Paws on Parade exhibit. Only the sculpture’s ears, eyes, and part of its nose were visible in the photograph. Duarte later replaced the photograph on Facebook with a photograph of herself posing with another Paws on Parade statue, which has the head of a crawfish and the body of a bead dog. Next to the photograph was an image of a poster created by Haydel portraying about thirty miniature versions of the bead dog sculptures from Paws on Parade. This didn’t violate §43(a), because though §43(a) covers more than trademark infringement, the bead dog lacked distinctiveness and doesn’t act as a source identifier. Thus, using the image on Nola Spice’s webpages couldn’t cause confusion “as to the origin, sponsorship, or approval” of Nola Spice’s goods.
Copyright infringement: Nola Spice didn’t argue that Haydel’s work as a whole was unprotectable, and it also didn’t dispute factual copying for these purposes.  Instead, it rested its defense on lack of substantial similarity, and the court of appeals agreed.  The record showed that the idea of a bead dog could be expressed in various ways, so merger didn’t itself preclude a finding of infringement, but no reasonable jury could find substantial similarity of protectable expression here.
The viewpoint at issue was that of an ordinary observer, considering the importance of the copied protectable elements to the copyrighted work as a whole.  Given the presence of unprotectable elements, the analysis was similar to abstraction/filtration/comparison used for computer programs; there was no reason to limit that test to software.
Haydel conceded that the bead dog design was a derivative work of traditional bead dogs, and that the body was unprotectable.  It argued that its “original contributions include, among other things, the selection and arrangement of a necklace, nose, eyes, and a tail, all made of
smaller beads.” But “anatomical features on replicas of animals are ideas not entitled to copyright protection.” And the “necklace” could also be seen as a “collar,” another public domain idea as applied to dogs. The manner of expression could be protectable.
From the protectable elements, the similarity between the parties’ bead dogs was “the expression of the collar as a ring of small spheres.”  The torso of Haydel’s dog had three spheres, while Nola Spice’s dog had one.  Haydel’s bead dog was made of pressed-together spheres, while Nola Spice used visible wire.  The tail of Haydel’s bead dog was two spheres and no wire, while the tales of Nola Spice’s bead dogs include a curled wire, alone or with one or two spheres. The nose of Haydel’s bead dog was a single sphere, while the noses of Nola Spice’s bead dogs include a curled wire.  And Nola Spice’s bead dogs didn’t have eyes. “No reasonable juror could conclude that Nola Spice’s bead dogs bear a substantial similarity to the way in which the eyes, nose, and tail are expressed in Haydel’s bead dog.”  That left only the collar.  “As a threshold matter, we question whether using bead-shaped spheres for a bead dog’s collar is sufficiently original to merit copyright protection.” At least, its minimal originality counseled against a finding of substantial similarity.The collar was both qualitatively and quantitatively insignificant in relation to Haydel’s work as a whole, and no reasonable jury could find substantial similarity based solely on Haydel’s expression of a collar.
Haydel argued that its evidence of substantial similarity came from confused customers.  Haydel’s principal said he “personally heard several customers of Haydel’s Bakery asking whether Nola Spice Designs sells Haydel’s MARDI GRAS BEAD DOG jewelry and telling our staff that they (the customers) believed that Nola Spice Designs sold Haydel’s MARDI GRAS BEAD DOG jewelry.” “This vague allegation of consumer confusion by a self-interested party possesses little probative value.”  But more important, any confusion would have come from the two designs in their entirety, “and would therefore have been based largely on unprotectable elements.”

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