The other Redbox case: the color may fade, but not the mark

Redbox Automated Retail, LLC v. Xpress Retail LLC, 2018 WL
950098, No. 17 C 5596 (N.D. Ill. Feb. 20, 2018)
Redbox sued defendant DVDXpress alleging trademark
infringement and false advertising; DVDXpress moved to dismiss and asserted counterclaims/affirmative
defenses, some of which the court here rejects. The parties compete in the
market for DVD rental services through automated vending machines called
kiosks. Redbox has registered trademarks for its word mark and for the kiosks’ red
color scheme.
Redbox alleged that DVDXpress recently began using kiosks
that are entirely red in color, making them confusingly similar to Redbox’s
kiosks. Redbox also alleged infringement from DVDXPress’s use the term “redbox”
in the metadata for its website in order to capture searches for Redbox.  [Practice note: this use of metadata is
probably useless and though it’s unlikely to be confusing in practice, the case
law here is terrible. It is thus risky to use another’s trademark in metadata,
though the court here does better than most (while conflating descriptive and
nominative fair use).]  Finally, Redbox
alleged that DVDXpress falsely advertises that customers can rent movies
through DVDXpress twenty-eight days before the same movies become available
through Redbox.
  
DVDXpress counterclaimed for tortious interference with its contractual
relationship with Weis Markets, which signed a DVD Rental Kiosk Agreement with
DVDXpress in July 2017 and accordingly asked Redbox to remove its kiosks, but four
days after Redbox filed this suit, Redbox indicated that it wouldn’t remove its
kiosks “on Weis’s requested schedule.” Redbox removed the last of its kiosks
from Weis’s stores in late October 2017, after DVDXpress filed its
counterclaim.
The counterclaim plausibly alleged that the continued
presence of Redbox’s kiosks at Weis’s stores through late October caused Weis
to breach the contract for exclusive kiosk provision or made it impossible for
DVDXpress to perform by taking up the places for kiosks in the stores.  Delay, rather than total noncompliance, can
be just as malicious as outright refusal to act.  Given that Redbox informed Weis that Redbox
was seeking an injunction against DVDXpress and “would be concerned if more red
DVDXpress kiosks began to appear in the marketplace,” it was plausible that the
delay stemmed not from some independent logistical difficulty, but rather from
Redbox’s illegitimate “desire to stop (or at least slow) the expansion of
DVDXpress’s business.”
Acquiescence as an affirmative defense: According to
DVDXpress, Redbox has been aware since 2002 of DVDXpress’s use of the color red
on its kiosks, and in 2007, DVDXpress and Redbox were temporarily merged under
then-parent company Coinstar, Inc. “One can reasonably infer that, while the
two companies were merged, Redbox affirmatively approved DVDXpress’s use of the
red color scheme on its kiosks. That plausible scenario is sufficient for the
acquiescence defense to survive at the pleading stage.”
Fair use as an affirmative defense: “It is plausible that,
when DVDXpress included the term ‘redbox’ in the metadata for its website, it
did so ‘fairly and in good faith … to describe’ its own kiosks.”
Unclean hands: DVDXpress that Redbox deceptively advertised
“no late fees” and Blu-Ray quality discs, and falsely advertised that certain
DVDs would be available at Redbox kiosks on their release dates.  Unclean hands has to relate to the matter in
which the claimant seeks relief: if the claimant’s right wasn’t the result of
the alleged wrongdoing, then it’s unrelated to the litigation’s subject matter.
Also, unclean hands “is disfavored where a plaintiff seeks to enforce laws,
such as a false advertising prohibition, that protect the public,” especially
where the defendant could challenge the plaintiff’s conduct through a
counterclaim or separate suit. Here, the alleged misstatements had nothing to
do with Redbox’s allegations; even Redbox’s own allegedly false ads about
availability didn’t “help Redbox acquire the right (to enjoin DVDXpress’s
assertions that its kiosks have certain movies twenty-eight days before Redbox)
that it seeks to enforce here.”  A few
courts have allowed the defense in similar circumstances, but the court here
found that the “obvious hypocrisy in one company suing a competitor for doing
the very same thing it did in the past (and got away with) … does not warrant
denying an otherwise merited injunction or other relief, especially when the
relief would end a deceptive practice that is harmful to the public.”
DVDXpress also asserted an abandonment defense, alleging
only that “Redbox has discontinued its use of the color red on its kiosks in
the ordinary course of business, at least, with regard to certain locations,
namely at Walmart retail stores,” and that “Redbox has allowed a number of
their kiosks to fade to a color that could better be described as pink.” That’s
not enough to suggest discontinuance of red, and the court struck the defense.

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