No silver bullet for innovator in bullion market

Provident Precious Metals, LLC v. Northwest Territorial
Mint, LLC, 2015 WL 4522923, No. 3:13–CV–02942 (N.D. Tex. July 27, 2015)
 
Interesting TM/copyright case that straddles the boundaries
of so-called aesthetic and “utilitarian” functionality: is the accuracy of a
replica product a matter of utilitarian or aesthetic functionality?  Does it make any difference?
 
Provident sued NWTM seeking a declaratory judgment of invalidity
and non-infringement of NWTM’s alleged copyrights, trademarks, and trade dress
rights; NWTM made the counterclaims you’d expect. Provident and NWTM make
precious metals in the shape of famous types of ammunition (“replica bullets”).
[Slackjawed wonder/gender analysis of this market omitted]
 
NWTM first conceived of the idea of using silver bullion to
copy famous ammunition into sizes that would easily convert to weights in even
troy ounces in 2008.  NWTM therefore measured
sample ammunition with a digital caliper and micrometer, viewed pictures of
sample bullets on the Internet, and consulted published industry standards for
ammunition dimensions. NWTM also bought hundreds of different ammunition
rounds, focusing on popular shapes and sizes, and sought to recreate bullets at
volumes that approximated even weights. NWTM altered the dimensions of the
original .45 round it chose to match the desired bullion weight, but still
sought to appeal to a “gun person, or anyone buying bullion.” NWTM ultimately
resorted to CAD software to make the code used by its manufacturing machines.
 
According to the designer, once the bullet was “machined,”
it would be weighed, and if it “weigh[ed] right they wouldn’t adjust it to meet
[the particular dimension].”  The weight
dictated the form.  NWTM stamped the base
of each bullet with a “head stamp” containing certain information, including
the product’s metal designation (silver, or “Ag”), source (NWTM), weight, and
purity. “The format of the head stamp intentionally resembled the format of
head stamps on actual ammunition, and was intended to convey that the replica
bullet ‘has intrinsical [sic] value,’ similar to money.”  NWTM sells its replica bullets in boxes or
bags designed to “evoke the feeling of military surplus ammunition,” and to
“best present the product to a military customer, to evoke the military
design.”  It advertised its replica
bullets, which went on sale in January 2013, as “virtually identical to their
ammunition counterparts,” claiming for example that one bullet “faithfully
duplicates the famed .50 BM so well-known to military personnel and weapon
enthusiasts,” that its silver 7.62 NATO (.308) is a “near exact, non-firing
replica,” and so on.
 

Provident claimed to have come up with the replica bullet
idea independently of NWTM, but whatever. 
It too used CAD and minor adjustments to achieve the desired
weight.  Provident instructed its
manufacturer to make the head stamp look as similar to live ammunition as
possible, and to include the weight, purity, composition, and “PM,” Provident’s
“mint mark.” Both parties used Tahoma font, with Provident contending that this
was the font that looked closest to real ammunition.  Provident designed its packaging to “look
like an ammo box,” and began selling copper replicas in 2013, with silver
arriving in November.
 

NWTM filed three related trademark applications. In January
2013, it filed an ITU application for “SILVER BULLET BULLION,” for use in
association with “[p]recious metals, namely, gold and silver bullion,” “BULLION”
disclaimed.  This was published for
opposition in June 2013, and Provident duly opposed; PTO proceedings have been
suspended pending the outcome of this suit. 
(B&B and ITUs really don’t
fit together, do they?)
 
In August 2013, NWTM filed another ITU application for
“BULLET BULLION,” for use in association with “[p]recious metals, namely gold
and silver bullion.”  The PTO issued an
office action refusing to register the mark as merely descriptive; the
application has been suspended pending final disposition of a prior application
filed by a third party, but the examiner rejected NWTM’s argument that the term
wasn’t descriptive.
 
In March 2014, NWTM filed another “COPPER BULLET BULLION,” which
Provident opposed after it was published for opposition.
 
In June 2014, NWTM filed five copyright applications for its
five types of silver replica bullets, listing them as “sculptures.”  The Copyright Office denied registration because
the new material did “not contain a sufficient amount of original authorship.”  
 
The court turned first to trademark.  Under governing precedent, “the concept of
descriptiveness must be construed rather broadly.”  If imagination is required to connect the term
to the product, it’s suggestive; if the term conveys information about the
product, it’s descriptive. 
Alternatively, courts ask “whether others in the same business would
generally need the word to adequately describe their product or service.”
 
All three claimed word marks, SILVER BULLET BULLION (SBB),
COPPER BULLET BULLION (CBB), and BULLET BULLION (BB), weredescriptive, because
they immediately conveyed the “characteristics, qualities, and ingredients of
NWTM’s replica bullets without requiring the consumer to make any mental leap.”  Bullion is a generic term for precious metals
in mass/in bars or ingots.  Though copper
isn’t conventionally understood as bullion, the price increases of the last few
years, it was reasonable to define “bullion” broadly enough to include copper;
Merriam-Webster defined “bullion” as “metal in the mass.”
 
NWTM argued that the terms were meaningless prior to the
existence of its replica bullets, and consumers might have thought of images of
bars or coins with bullet-related art on them. 
Plus, the SBB and CBB marks had been published for opposition.  But publication for opposition entitles NWTM
to no presumption (only actual registration does).  Second, the descriptiveness test isn’t
applied in the abstract: it’s applied to these products, which are replica
bullets.  The metal words describe the
material of the replica, and “bullet” describes the shape.  In the alternative, competitors would “almost
certainly” need to use the words in the marks to describe their products.  (I understand why the court didn’t go this
far, but silver, copper, and bullet at least are generic.)  “There are simply a limited variety of
descriptors that can be used to describe products of this sort, and granting
NWTM the trademarks it seeks would effectively preclude potential competitors
from marketing goods with the terms ‘bullet’ or ‘bullion.’ NWTM has simply not
addressed how its competitors could describe their products without using the
terms employed in NWTM’s SBB, CBB, and BB marks.”
 
NWTM couldn’t show secondary meaning. “The burden to
establish secondary meaning is substantial and requires a high degree of proof.”  NWTM didn’t produce any evidence of secondary
meaning, and, “in a borderline case where it is not at all obvious that a
designation has been used as a mark, survey evidence may be necessary to prove
trademark perception.”  NWTM argued that
it lacked survey evidence “because NWTM’s customers tend to buy bullion as a
hedge against what they see as the U.S. government’s failing monetary policy,
and those same customers would be skeptical of a phone call inquiring about the
manufacturer of the bullion products they own.” 
Nonetheless, the burden of proof was still on NWTM.
 
NWTM also sought to protect its alleged trade dress,
described as a bullion piece of silver or copper that:
(1) has a head stamp with a central
circular groove (which suggests the primer cap for a real bullet), surrounded
by the following information in a circular pattern towards the outer edge of
the base of the bullion piece:
(a) metal designation such as “Ag”
or “Cu”;
(b) indication of purity;
(c) a weight; and
(d) abbreviation for the company
name;
(2) is sold in packaging that
evokes a military or gun enthusiast feel by including:
(a) a caliber designation that is
suggested by the general shape of the bullion piece (i.e., .45 ACP, 7.62 NATO
(or .308), .50 BMG, or 20 MM, or 12 gauge for shotgun shell);
(b) a designation of “grains”
associated with gun powder of the bullet, giving an indication of the power of
the associated real bullet type; and
(c) is sold in boxes in rows that
evoke the feeling of a real box of ammunition, or in a plastic bag container
with the same information in (a) and (b); and
(3) while not being an exact copy
or “replica” of a real bullet, has the shape of the bullion piece that evokes
the feeling of such a bullet. [NB: if you have to describe your trade dress as
evoking a feeling, you are probably in trouble.]
 
The head stamp was functional.  It identified the weight, composition,
purity, and source of the bullion used to make the replica bullet, as is
apparently standard practice for bullion products. NWTM argued that the
information could be located anywhere on the bullion piece, and that the
combination of elements—head stamp, shape, and packaging—had a consistent look
that was inherently distinctive.  Nope. 
 
[T]he features that comprise the
head stamp, and the head stamp considered as a whole, were designed to emulate
the head stamp on actual ammunition, and therefore, are “essential to the use
or purpose” and “affect the cost or quality” of the head stamp. NWTM sought to
establish a link with military service members, veterans, and gun enthusiasts.
Thus, the head stamp is functional because it emulates actual ammunition, which
would give NWTM a non-reputation-related advantage over its competitors,
particularly in appealing to military service members and gun enthusiasts, who
would very likely perceive head stamps that did not resemble actual ammunition
as being of lesser quality.
 
The head stamp was also not inherently distinctive.  (Although the court didn’t mention this, it
can’t possibly be under Wal-Mart:
it’s product design, not product packaging.)  Each of its features emulated the head stamp
on actual ammunition—it used a standard font, and the circular groove on the
base simulated the primer of actual ammunition. If it created a distinctive,
consistent look, “that look is that of actual ammunition.” Putting the
information elsewhere on the bullet “would undermine the theme and purpose of
NWTM’s replica bullets—emulating actual ammunition.”  None of the elements were suggestive,
arbitrary, or fanciful, either individually or taken together.
 

Packaging: NWTM’s packaging referenced the caliber of
ammunition and the grain count, which made the packaging resemble, and “evoke[d]
the feel of,” real ammunition boxes. This too was functional, because it served
to remind consumers of an actual ammunition box, “and allowing it to do so with
trade dress protection would put NWTM’s competitors at a significant
non-reputation-related disadvantage.”  Even if the packaging were distinctive and
nonfunctional, there would be no confusion, as a matter of law. Provident
prominently featured its name on the outside of its boxes, and the text on its
packaging was inscribed directly on the top of the boxes. NWTM’s boxes had text
inscribed on a label on the outside cover that included many of the descriptive
features included on the head stamp, with NWTM inconspicuously included on the
bottom left corner of the label. There was no “meaningful” evidence supporting a
likelihood of confusion other than the general similarity of shape.
 
Bullet shape: this was unprotectable as lacking
distinctiveness.  Any differences between
NWTM’s products and actual ammunition were imperceptible to actual consumers,
and were also functional. Changes in dimension and weight were designed to make
products that weighed in even troy ounces, in part in order to give them
intrinsic value as a financial investment—“the weight dictated the form,”
according to NWTM’s designer. 
 
NWTM argued that the combination of these functional,
nondistinctive features were distinctive in their “total impression.”  The court wasn’t persuaded.  “[T]he overall impression of the elements,
each of which has only trivial differences with the features of actual
ammunition, serves to identify NWTM’s product as a bullet.”
 
Even if the trade dress were nonfunctional, NWTM failed to
show secondary meaning. NWTM argued that it heavily promoted the new product;
that it sold over 191,000 pieces of SBB and CBB through June 2014; that it had
100% of the market share for silver bullet bullion from January to October
2013; that Provident copied NWTM; that, according to NWTM’s CEO, at least four
customers contacted him to ask whether Provident’s products were in fact
manufactured by NWTM, and a customer expressed confusion on Provident’s
Facebook page; and a video on the “Salivate Metal” YouTube channel featured a
reviewer pondering whether the real manufacturer of Provident’s product was
actually NWTM.
 
Even if all of this unambiguously weighed in NWTM’s favor,
there was still no empirical evidence of secondary meaning.  There was no admissible consumer testimony or
survey evidence; its customers’ posited unwillingness to be surveyed again
didn’t relieve it from its burden, “particularly given that its customers
constitute a unique demographic.”  (That’s
one way to put it.)  The time of use
weighed against NWTM—other cases have found 3½ years of exclusivity to be
“relatively brief,” while NWTM had 10 months. 
While the substantial amount of NWTM’s sales would weigh in its favor,
that wasn’t enough.  NWTM claimed that
its marketing was successful but provided no evidence on the amount it spent
marketing the trade dress.
 
Turning to copyright:  “A mere reproduction of a work in a different
medium does not constitute a sufficient variation to meet the originality
threshold for copyright protection.” See L. Batlin & Son, Inc. v. Snyder,
536 F.2d 486, 491 (2d Cir.1976).  NWTM
argued that its replica bullets were original because they didn’t correspond to
actual ammunition, sometimes varying in dimension by a quarter of an inch or
more. NWTM argued that it was an innovator and that there was significant
creative effort that went into making the product, including testing, trial and
error, and the creation of numerous prototypes between 2008 and 2012.
 
No again.  Any
differences between the replica bullets and actual ammunition were trivial or
functional: (1) the composition, i.e., silver or copper (functional); (2) the
dimensions (imperceptible and functional in order to make a bullet in even troy
ounces); (3) the shape (functional); and (4) the weight (functional).  Even were that not so, merger would still
apply: the expression of a bullet in bullion couldn’t be separated from the
idea. “[T]he only way NWTM can express a .45 ACP design is to replicate it, and
if NWTM were to make significant variations in its replica, the product would
no longer be identifiable as a .45 ACP design.”
 
NWTM argued that Provident engaged in false
advertising/unfair competition by claiming to have its own mint, allowing it to
minimize manufacturing costs and pass on savings to consumers. But NWTM failed
to timely identify false advertising as the foundation for its unfair
competition claim, which it earlier said was based on trademark
infringement.  Also, without copyright
and trademark claims, there were no actionable unjust enrichment claims.

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