Extraterritorial conduct isn’t relevant to laches, but clear house mark defeats counterfeiting charge

Gibson Brands, Inc. v. John Hornby Skewes & Co. Ltd., No.
CV 14-00609, 2016 WL 7479317 (C.D. Cal. Dec. 29, 2016)
Gibson sued JHS for infringement of its trade dress rights
in guitar body shapes. 
The court first rejected JHS’s motion for summary judgment
on laches and acquiescence as to one claimed mark.  In 1994, Gibson and JHS entered into an
agreement allowing JHS to sell guitars with a certain body shape, not at issue here
(the Les Paul shape). In 2004, however, JHS received a C&D from Gibson’s
attorneys asking JHS to stop producing guitars that infringe on Gibson’s Les
Paul and SG trademarks. JHS reminded Gibson about the previously negotiated
agreement about the Les Paul shape.  As
to the SG, JHS said that it “incorporate[d] significant detail changes” to
avoid confusion with Gibson’s guitars and noted that Gibson “holds no UK
registration” on the SG shape.  However,
JHS said it was willing to consider Gibson’s suggestions for changes. Gibson replied
that “[o]thers have typically exaggerated the asymmetrical nature of the design
by lifting the lower left portion of the guitar and extending the upper left
horn on the guitar.”
JHS alleged that it made the suggested changes, but received
another letter stating that JHS’s VS6 model wasn’t as distinctive as its LVS6
model, and requesting the same exaggeration in the horn for the VS6.  JHS replied that “we are confident there is
no confusion in the marketplace…. the VS6/LVS6 horn shapes are mirror images
of one another and the ‘exaggerated’ horn is used on both right-handed and
left-handed models.”  This was the final
message.
Afterwards, JHS began selling guitars that allegedly
infringed the SG body shape in the United States. JHS argued that it reasonably
relied on Gibson’s 2004 correspondence as an “active representation” that JHS’s
VS6 guitar did not infringe on the SG trade dress.
The court refused to grant summary judgment in JHS’s favor,
even though Gibson was aware of the UK business in 2004 and waited to sue until
2014.  Gibson successfully argued that
the relevant date for measuring laches was when JHS first sold its guitars in
the US market, giving rise to a Lanham Act claim.  (Given what courts have said about
extraterritorial application of the Lanham Act, I’m not sure this is completely
consistent—there are circumstances in which JHS’s UK sales could still have
triggered a Lanham Act claim had Gibson brought it.) The court cited Hearst Corp.
v. Stark, 639 F. Supp. 970 (N.D. Cal. 1986), a copyright case rejecting a
similar laches argument based on extraterritorial conduct.
The same problem existed for the acquiescence argument.  The court agreed with Gibson that Gibson’s
2004 letter “cannot be understood as a blanket concession that JHS’s guitar did
not infringe on Gibson’s trademark nor can it be interpreted as consenting to
JHS doing business in the United States where Gibson had potentially actionable
trademark rights.” Gibson might decline to litigate extraterritorial trademark
violations “for any number of reasons,” while still intending to assert
domestic rights. Also, even assuming JHS’s reasonable reliance on the 2004
exchange, there was still a requirement of inexcusable “delay between the
active representation and assertion of the right or claim.” And the delay here
between US sales and suit was reasonable.
JHS did win summary judgment on Gibson’s counterfeiting
claim.  The Lanham Act defines a
counterfeit mark as “a spurious mark which is identical with, or substantially
indistinguishable from, a registered mark.”  This targets “hard core” infringement, “stitch-for-stitch
copies of those of another brand.” JHS argued that each allegedly infringing
guitar—guitars including either an allegedly infringing body shape or headstock—bore
its trade name.  Guitars are typically
identified by the name on the guitar, something that Gibson’s own
representatives and experts confirmed (e.g., “If you want to know who made a
guitar, you should look at the name that’s on the guitar. That’s common sense”;
“I don’t know who manufactured this guitar. It’s a Gibson body shape,
certainly, but as we can’t see anything else, I can’t tell you for certain who
made that guitar.”).  Every guitar
headstock had the JHS trade name, “Vintage” in a stylized font, on the front
and “Vintage A John Hornby Skewes Product” on the back.
Gibson argued that “Vintage” wasn’t enough because the word
“vintage” might be misunderstood as indicating the age of a guitar rather than
as a brand name or source identifier. One of JHS’s own sales managers testified
that U.S. consumers were confused by the trade name Vintage because they
thought it meant old and not that it was the guitar brand, and Gibson also pointed
to several other instances where people were confused by the brand name Vintage
and misidentified a JHS guitar as a Gibson. 
Gibson also argued that the marks on the back were put where a consumer was
unlikely to see them and printed in a small font that was difficult to read.

The court determined that no reasonable jury could find that
JHS used counterfeit Gibson marks. “Without determining the specific level of
similarity, if any, between the guitars, the court finds that the body shapes
and headstocks of the JHS guitars in question are not identical or
substantially indistinguishable from the Gibson body shapes and headstocks.” Along
with those differences, the parties both acknowledged that guitars are
typically identified by the branding on the headstock.  “[N]o rational jury could find that a
particular body shape or headstock stamped with a different guitar brand is a
counterfeit of a Gibson trademark.”  
Even if a consumer might read a “Vintage” ad as a reference to an older
guitar, “it is implausible that a consumer looking at a guitar would understand
the stylized Vintage logo to be an indicator of the guitar’s age rather than a
brand name.”  Distinguishing the
Costco/Tiffany ring case as one in which Costco used the Tiffany mark to
identify essentially identical copies of the Tiffany design, the court observed
that inconspicuous disclaimers might be insufficient to defeat a counterfeiting
claim based on product design trade dress, but “[t]o find that anything less
than an ‘identical’ or ‘substantially indistinguishable’ product can give rise
to a counterfeit claim would risk rendering ‘all trademark infringement claims
… counterfeiting claims.”

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