state courts do nominative fair use too

Instant Infosystems, Inc. v. Open Text, Inc., 2017 WL
3634547, No. B276691 (Cal. Ct. App. Aug. 24, 2017)
Another illustration of the principle that courts don’t like
to do two dilution analyses—this state court only talks about federal dilution,
assuming that the analysis is the same for both.  Open Text owns RightFax, software that allows
users to fax documents via computer, without a fax machine.  Instant and Open Text had a contractual
relationship; after that ended, Open Text allegedly told customers that Instant
wasn’t permitted to service RightFax. Instant disagreed and sued for tortious
interference and violation of the UCL. 
Open Text counterclaimed for trademark infringement, dilution, and false
advertising under state and federal law, as well as breach of contract, and
sought a preliminary injunction, which the trial court denied. The false
advertising claim was based on emails from Instant stating that certain
RightFax products would be reaching its “support end of life” or “end of life.”
The court of appeals affirmed the denial of the preliminary injunction.
The court reviewed the denial of the preliminary injunction
for abuse of discretion; the factors are (1) likelihood of success on the
merits and (2) interim harm to the plaintiff absent an injunction compared to
harm to the defendant with an injunction.
The court of appeals used the Ninth Circuit nominative fair
use “defense,” holding that all three prongs are factual questions.  Though the trial court issued only a one-line
order, California courts of appeal presume the trial court made all findings
necessary to support the order, and thus affirm if substantial evidence exists
to support such findings.  Factor one:
there was evidence that the service Instant provides for support of RightFax is
not readily identifiable without specifically naming RightFax.  Factor two: Instant submitted evidence that
it used only so much of the mark as was reasonably necessary to identify its
own service. On Instant’s RightFax webpage, Instant states: “Instant
InfoSystems has been providing world-class technical support for RightFax for
nearly 20 years. Our vast experience and depth of technical expertise with
RightFax has helped large and small companies implement reliable, secure, and
cost-effective solutions for sending and receiving documents ….”  Factor three: There was evidence that Instant’s
homepage, which displays a list of Instant InfoSystems’s partners, doesn’t list
Open Text as a partner. It also had a Web page dedicated to explaining the
company’s history, the previous partnership with Open Text, and that the
partnership had come to an end. Though Instant at one point referred to itself
as “the Right Fax Experts,” this was replaced with “the Fax Experts,” and
Instant removed all references to partnership awards from Open Text from its
website.  (Query whether these last steps
were necessary; certainly it would seem fair and truthful to put the awards on
the history page.)  Based on all this,
substantial evidence supported the trial court’s implied finding of nominative
fair use.
Nominative fair use also precludes a finding of trademark
dilution because, by definition, it doesn’t “create an improper association in
consumers’ minds between a new product and the trademark holder’s mark.”
False advertising: the parties submitted conflicting
evidence pertaining to whether a consumer would be deceived regarding the term
“end of life.” Open Text’s declaration from its RightFax product manager stated
that he had to make on-site visits to customers to convince them RightFax would
continue to be supported after the emails, and that Instant had informed
several customers RightFax was dead, which required him to respond. But
Instant’s declaration from a former employee at RightFax’s previous owner stated
that “end of life” was used properly by Instant as it was understood in the
industry, and was even used in such a way by Open Text’s current partners when
referring to RightFax.  Presuming that
the trial court resolved the conflicting evidence in favor of Instant, the
court of appeals affirmed the finding of no likely success on the merits.
Finally, substantial evidence supported the implied finding
that the balance of harms didn’t tip in favor of Open Text. Instant’s harm if
the preliminary injunction was granted was the loss of business involving
RightFax services, which it had been performing for 15 years.  The status quo was seven months of Instant using
the RightFax trademark on its Web site and in other communications, which an
injunction would immediately change. Further, Open Text waited more than seven
months after terminating the parties’ agreement to object to the continued use
of the RightFax mark, supporting the trial court’s finding on the balance of
harms.

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