Ugly facts doom “Life is Beautiful” infringement claim: fraud on the PTO bars claim

Amusement Art, LLC v. Life Is Beautiful, LLC, 2016 WL
6998566, No. 14-cv-08290 (C.D. Cal. Nov. 29, 2016)
Defendant LIB hosts the Life is Beautiful festival in Las
Vegas. In developing the festival’s style, founder Rehan Choudhry collected
digital images from Google searches related to his concept, which included
artwork created by Thierry Guetta, aka Mr. Brainwash, including the phrase
“LIFE IS BEAUTIFUL.”  Choudhry hired a
graphic designer to develop the festival’s logo; the result was a heart made of
splattered paint. The first festival was held in the fall of 2013, and repeated
annually, featuring music, food and alcohol tastings, public speakers, and art
exhibitions and installations.
festival logo

Example of Mr. Brainwash art using Life is Beautiful

Amusement Art licenses IP produced by artist Thierry Guetta.
Guetta’s his first solo art exhibition in 2008, entitled “Life is Beautiful,” followed
by six other exhibitions using that name through 2012.  In some of his artwork, Guetta incorporates phrases
such as “Life is Beautiful.” In mid–2013, a common acquaintance introduced LIB
to Guetta’s business associates and encouraged the two parties to consider
possible collaboration.  But an in-person
meeting a year later went badly.  After
further discussions, Amusement Art sued for trademark and copyright
infringement of “Life is Beautiful” and Guetta’s “splashed paint heart designs.”
Between 2011 and 2012, Amusement Art filed eight ITUs for
“Life is Beautiful” covering paints, electronics and accessories, jewelry, paper
goods and printed matter, rubber goods, leather goods, housewares and glassware,
and textiles. AA executives filed Statements of Use, under penalty of perjury,
asserting that AA had actually used the phrase “Life is Beautiful” as a
trademark to sell approximately 257 categories of goods within the application
classes. AA also submitted pictures of various goods with “Life is Beautiful”
sales tags attached to them. In September of 2014, one month before suing, AA
also filed an application for Life is Beautiful” for festival and community
events.
When LIB determined that AA didn’t actually sell many of the
goods on which it obtained registrations, it told AA that it was going to seek
cancellation on the basis of fraud on the PTO. AA surrendered eight of the
registrations, but retained its 2014 registration in connection with festivals
and art events.
LIB argued that all of plaintiffs’ “Life is Beautiful”-based
trademark claims were barred by unclean hands.   This requires clear and convincing evidence
“[1] that the plaintiff’s conduct is inequitable and [2] that the conduct
relates to the subject matter of [Plaintiff’s] claims.”  The inequitable conduct here was fraud on the
PTO in claiming use.  AA argued that
there was no evidence that its statements were made knowingly or with intend to
defraud the PTO.
Fraud on the PTO in acquiring a patent can give rise to an
unclean hands defense.  Similar logic
bars recovery in trademark.  Cancelling a
registration for fraud requires: “(1) a false representation regarding a
material fact; (2) the registrant’s knowledge or belief that the representation
is false; (3) the registrant’s intent to induce reliance upon the
misrepresentation; (4) actual, reasonable reliance on the misrepresentation;
and (5) damages proximately caused by that reliance.” The parties didn’t
dispute that the statements of use submitted by AA were material false statements
nor that the PTO reasonably relied on those misrepresentations.
As for knowledge and intent elements, “no rational jury
could credit Plaintiffs’ claim that the false statements were innocent mistakes
in light of the extent of the deception.” 
AA filed eight separate registrations representing use on hundreds of
categories of goods.  There was no
evidence that AA mistakenly believed it actually sold most of the claimed
goods.  Instead, AA argued that the
executives who filed the applications were not native English speakers and that
they filed the applications without the assistance of an attorney. “This
explanation is implausible given that Plaintiffs have lived in the United
States and spoken English for over 30 years and have also affirmed that they
have filed trademark applications across the world.”  But the bigger problem was that AA didn’t
explain the several “deceptive” photos submitted with the applications showing
goods staged with “Life is Beautiful” tags though these goods were never
actually sold.
 

specimen for sculpture

specimen for banners

specimen for handbags

first specimen for tape

second specimen for tape

Further, no reasonable jury could find that reliance on
these false representations didn’t cause damage:
By falsely securing the
registration of marks that they never used and then later suing LIB on the
basis of those marks, there is no question that Plaintiffs have harmed LIB. But
the more pervasive harm in this case is the cost imposed on a public that
relies on the integrity of the [trademark] system…. Instead of furthering the
Lanham Act’s goal of fostering competition in the marketplace, Plaintiffs
attempted to 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. Plaintiffs falsely claimed ownership over the mark in
eight classes of goods covering nearly 250 specific items. In doing so,
Plaintiffs may have chilled potential competitors from entering the marketplace
and developing their own brand identifications across an array of goods. To put
into perspective the extent of the fraud, Plaintiffs registered the mark in
nearly one–fifth of all possible classifications, asserting use in goods as
varied as food coloring, watch boxes, beach umbrellas, cleaning sponges,
talking children’s books, and crime scene tape. In fact, after eliminating
trademark classifications that would plainly be inapplicable to the phrase at
issue or Plaintiffs’ business, the court could identify only four or five
additional classifications in which Plaintiffs could have even conceivably
registered this mark. While it is difficult to measure after the fact the
precise magnitude of the harm of Plaintiffs’ actions, the court concludes that
there is no triable issue whether Plaintiffs’ acted inequitably.
[Note that the specimen of use for sculpture at least raises
issues of use as a mark v. ornamental use that really should have gotten more
attention, while the specimen for “banners” doesn’t show the claimed mark at
all!  The PTO is
supposed to look at the specimen to make sure it shows use as a mark/to see
issues that couldn’t have been resolved without a specimen … like whether the
specimen shows the mark at all.  The
specimen first shown for tape was initially refused, correctly, for mere ornamentality, and then AA submitted a revised specimen, so the examiner there got it right.]
Unclean hands also requires that the inequitable conduct
“relates to the subject matter of [Plaintiff’s] claims.” AA argued that this requirement
would only apply if “the plaintiff has engaged in precisely the same type of conduct
about which it complains,” to wit, infringement.  Nope, fraud on the PTO in procuring the right
asserted counts; “the relevant inquiry is ‘not [whether] the plaintiff’s hands
are dirty, but [whether] he dirtied them in acquiring the right he now asserts,
or [whether] the manner of dirtying renders inequitable the assertion of such
rights against the defendants.’ ” AA dirtied its hands in acquiring at least
eight of the registrations asserted against LIB.
There was a closer question as to the registration of the
phrase “Life is Beautiful” in connection with exhibitions and festivals, which
Plaintiffs filed shortly before filing suit.  This registration was the subject of cancellation
proceedings before the PTO, but AA hadn’t surrendered it, and there was
evidence of actual use with at least some claimed categories of
goods/services.  Still, the fraud barred
all of AA’s infringement claims.  The
earlier filings potentially deterred competitors in hundreds of
categories.  After that, AA became aware
of LIB’s use in a category AA had yet to claim; it filed another application in
that category; then it sued.  Under the
circumstances, unclean hands applied.
Unclean hands also requires balancing the equities of the
plaintiff’s and defendant’s wrongdoing. 
Here, that weighed in LIB’s favor. 
AA attempted to profit off its fraud “both by deterring competitors and
by subjecting Life is Beautiful to the present litigation,” undermining “the
sanctity of a trademark registration system that relies on parties truthfully
representing which marks are bona fide source identifiers and which are not.”  AA’s weak trademark infringement claim didn’t
offset that claim.
Indeed, the determination that AA didn’t actually use “Life
is Beautiful” as a mark “would be fatal to any claim for trademark infringement
of the ‘Life is Beautiful’ mark, and provides an alternative ground for
resolving that issue.”  LIB argued that
AA’s use was merely ornamental, just one of several positive phrases Guetta
used in his artwork under the mark “Mr. Brainwash.”  LIB contended that use of the phrase as the title
of an art show or as a mark on the back of canvasses didn’t qualify the phrase
as a mark.
AA responded by asserting that its registration “constitutes
prima facie evidence of the validity of the registered mark and of
[Plaintiffs’] exclusive right to use the mark on the good and services
specified in the registration.” But where one party has presented evidence
rebutting a claim to a trademark, the registration is “merely evidence ‘of
registration,’ nothing more.”  Given LIB’s
evidence that AA’s mark was not actually a source identifier and that the
majority of the marks at issue were fraudulently obtained, the presumption of
validity alone was not sufficient to avoid summary judgment.
Although AA surrendered eight registrations, LIB still
wanted summary judgment on its counterclaim for cancellation, to avoid any
attempt by AA to file new statements of use and reassert the same infringement
claims.  Before the TTAB, an attempt to
surrender rather than face judgment would require the written consent of every adverse
party to the proceeding, in order to prevent the creation of mootness and
evasion of a judgment to which the adverse party was entitled.  That logic also applied here. 
“Without an entry of judgment, there is nothing to stop
Plaintiffs from refiling their marks after the conclusion of this litigation,
and once again fraudulently deter potential competitors from entering the
marketplace or subject Defendants to renewed trademark infringement actions.”  True, “an ‘actual controversy’ must exist not
only ‘at the time the complaint is filed,’ but through ‘all stages’ of the
litigation.” Already, LLC v. Nike, Inc., 133 S. Ct. 721, 726 (2013). But “a
defendant cannot automatically moot a case simply by ending its unlawful conduct
once sued, and thus “a defendant claiming that its voluntary compliance moots a
case bears the formidable burden of showing that it is absolutely clear the
allegedly wrongful behavior could not reasonably be expected to recur.”  If AA had no intention of fraudulent refiling,
judgment would cause little harm, while giving LIB “substantial assurance” that
it could build its business. Thus, the court granted the cancellation
counterclaims.
The court also granted summary judgment on AA’s trademark
infringement and copyright infringement causes of action based on an image of a
“splashed painted heart.” For the first two years of the Life is Beautiful
festival, LIB used a painted heart design as the logo; that image can still be
seen in connection with the festival on social media.
 

Guetta heart
First, LIB argued that AA didn’t use the heart design as a
mark, but rather as an ornamental element in works and on merchandise. The
court found that corporate representative Deborah Guetta’s testimony
constituted an acknowledgement that the heart design didn’t function as a mark;
she said the image was a “copyright image” and not a “trademark image.”  Even crediting AA’s explanation that she was
referring to registration, there still was no factual issue here.  The heart design would require secondary
meaning to be protected as a mark, and the limited use here—also described by
the court as “sporadic use of the mark in Guetta’s artwork”—was insufficient,
despite a statement by one of LIB’s employees that the image was a logo.
Copyright infringement: LIB argued that they hired a
designer who independently created the design. Even assuming the designer had
access to AA’s heart, there was no substantial similarity. “Where the image at
issue is ubiquitous, the copying must be exact.”  Plaintiffs argued that one AA employee couldn’t
tell the difference (which really wasn’t the right interpretation of his
statement), and that the fact that both parties used similar heart images along
with the phrase “Life is Beautiful” supports a finding of substantial
similarity.
No rational jury could find the two heart designs “virtually
identical”:
Guetta’s heart is largely a
monochromatic faded red while LIB uses at least two shades of two colors—red
and purple—to depict their heart. Guetta’s heart is composed of a much more
dramatic splash of plaint with splatters reaching across the canvas, compared
to LIB’s more controlled drip pattern on the heart. Moreover, Guetta’s heart looks
like a handmade image with no smooth portions in the heart outline, while LIB’s
looks like it may have been computer–generated with extended smooth lines for
several portions of the heart’s outline.

Finally, use in connection with “Life is Beautiful” didn’t
support a finding of substantial similarity. The court didn’t like this “additive
approach” to determining whether the images “actually in dispute” were
themselves substantially similar. LIB also identified a logo from an uninvolved
third party that also uses the phrase “Life is Beautiful” with a splattered
heart design, “suggesting that such coincidences can occur without any further
meaning.” 
unrelated design

from Blogger http://ift.tt/2gOdWNT

Advertisements
This entry was posted in Uncategorized and tagged , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s