Prior use can’t be determined on motion to dismiss, even using Wayback Machine

Posted on December 31, 2015 by rtushnet
My Health, Inc. v. General Electric Co., 2015 WL 9474293,
No. 15-cv-80 (W.D. Wis. Dec. 28, 2015)
 
GE allegedly uses MYHEALTH on a section of its website that
provides health and benefits information to GE employees, http://ift.tt/1mrYzcM,
infringing plaintiff’s incontestable trademark.  GE argued that it had priority, but this could
not be determined on a motion to dismiss.
 
GE argued that its website was a document specifically
referred to in the complaint, thus incorporated by reference.  Separately, GE argued that the court could take
judicial notice of the historical content of the GE website based on print-outs
from the Internet Archive, showing use at least by November 2005, before My
Health’s 2008 registration.  The court
rejected both arguments.  “GE’s website
is not a simple document that can be incorporated by reference into the
complaint. A website, particularly one like GE’s, is a dynamic library of
documents.”  No more would a citation to
the NYT website incorporate everything on newyorktimes.com by reference.  Separately, “a snapshot of a moment in time,
which is all the Internet Archive can provide, does not establish the
continuous use for particular purposes that GE must show to establish priority
over My Health’s rights.”  Nor would the
court take judicial notice of Internet Archive printouts anyway.  They would have to be authenticated by an
Internet Archive employee, and that made them inappropriate for judicial
notice.
 
My Health’s registration was incontestable and couldn’t be
cancelled because of another’s prior use, but a senior user who could show
continuous use could have common-law trademark rights unaffected by any
subsequent registration.  (This is an
interesting strategic dilemma.  I might possibly
have gone with descriptive fair use; did GE really acquire trademark rights by
using a term just for information for its employees?)  But the court couldn’t consider priority, a
factual issue, on a motion to dismiss.
 
Even if the court considered the Wayback Machine evidence,
showing some prior use wouldn’t sustain GE’s burden of showing prior rights. My Health plausibly alleged a
protectable interest in its mark, even though GE might later prove an
affirmative defense based on a priority.
 
Likewise, My Health plausibly alleged consumer confusion
(among GE employees?).  My Health alleged
that the marks were virtually identical and differed only in insignificant ways
(“My Health” versus “myHealth”); that the parties market similar products
(patented remote patient care technology versus websites to facilitate
exchanges between medical professionals and patients); and that both parties
market their offerings to consumers via the internet. My Health alleged that
potential licensees and customers found GE’s products because of the accused
mark and confused GE’s offerings with My Health’s. GE’s website invites
customers to “[g]o to the main U.S. myHealth site” and allegedly created “the
impression that GE’s website is run and operated by My Health.” Assuming these
facts to be true, they plausibly alleged likely confusion.  [Here, current law’s indifference to the
identity of people suffering confusion hurts GE.]   

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Bait and switch on different versions of the same brand isn’t TM infringement

Posted on December 31, 2015 by rtushnet
Adobe Sys. Inc. v. Christenson, No. 12-1731 (9th Cir. Dec.
30, 2015)
 
Adobe loses this case because of pleading and discovery
choices, allowing the 9th Circuit to avoid harder first sale
questions.  Christenson sold Adobe
software, which he purchased from a third-party distributor, without Adobe’s
authorization.  Adobe argued that first
sale didn’t apply because Adobe never sells (copies of) its software. A
declaration by its Anti-Piracy Enforcement Manager described different ways that
Adobe licenses software.  Adobe also
submitted evidence of customer returns and complaints in which customers
complained that they had received software licensed for academic use from
Christenson despite having understood that they had purchased software
appropriate for non-academic users.  However, Adobe pled trademark infringement,
not false advertising.
 
Christenson filed a motion to preclude Adobe from relying on
contracts, licenses, or agreements that Adobe failed to disclose under Rule
26(a), which was granted.  Since it was
uncontroverted that Christenson purchased genuine copies of Adobe software, the
trial court reasoned that the burden shifted to Adobe to show that there had
been no first sale, which it could not do. 
The trademark claim failed because the use was nominative.
 
On appeal, the court of appeals noted that “some purported
software licensing agreements may actually create a sale.”  But first: who bears the initial burden of
showing ownership through lawful acquisition? 
The answer: the party asserting the defense, to wit, the defendant.  (Which is too bad for anyone who doesn’t keep
receipts for the books they buy.)  To
pass summary judgment, “the party asserting a first sale defense must come
forward with evidence sufficient for a jury to find lawful acquisition of
title, through purchase or otherwise, to genuine copies of the copyrighted
software.”  If the copyright owner claims
that the defendant couldn’t acquire title because the software [read “copies of
the software”] was never sold, only licensed, the burden shifts back to the
copyright owner to show such a license. 
The copyright owner is in a superior position to show the terms of any
such licenses.  “[F]airness dictates that
a litigant ought not have the burden of proof with respect to facts
particularly within the knowledge of the opposing party.” And, without the
burden shift, the defendant would have to prove a negative; a downstream
possessor “is hardly in a position to prove either a negative—the absence of a
license—or the unknown—the terms of the multiple transfers of the software.”
 
Christenson discharged his burden by showing legitimate
sales from third-party distributors of Adobe software. Adobe didn’t produce its
alleged licenses until too late, and excluding its evidence was not an abuse of
discretion.  Its “effort to substitute
general testimony and generic licensing templates in lieu of the actual
licensing agreements does not withstand scrutiny.”  Calling an agreement a “license” is not
dispositive; the precise terms matter for first sale, and here there was no
admissible evidence about those terms.
 
As for the Lanham Act claim, Adobe “confuses the claim that
it made—trademark infringement—with the claim it wishes it had made—unfair
competition, or false advertising.”  It
pled infringement, and nominative fair use precluded that claim.  On appeal, Adobe argued that Christenson
engaged in a “bait and switch” tactic of selling Adobe products licensed as
academic or OEM products by describing them as “full” or “retail” versions,
misleading consumers as to which version they would receive. But that was a
false advertising theory, not a trademark infringement theory, since there was
no claim that the marks weren’t applied to genuine Adobe products, or that
“Adobe Acrobat Pro” was only the mark for the non-academic/OEM version.  Christenson’s use of the marks was to
identify the products themselves and not to “inspire a mistaken belief on the
part of consumers that the speaker is sponsored or endorsed by the trademark
holder.”

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Selfie restraint: It’s hard to show fame and irreparable harm

Posted on December 30, 2015 by rtushnet
ArcSoft, Inc. v. Cyberlink Corp., 2015 WL 9455516, No.
15-cv-03707 (N.D. Cal. Dec. 28, 2015)
 
ArcSoft makes the Perfect365 selfie editing app, and sued
defendants for infringing and diluting the trademarks/trade dress of that app
with their YouCam Perfect selfie editing app. 
ArcSoft claimed first use of the Perfect365 mark as of Nov. 2, 2011, and
registered it in 2012, along with a design mark for “Perfect365” and the image
of a human face.  It alleged that over 20
million US consumers have downloaded the app, and that it had “significant
acquired distinctiveness and goodwill” in its mark and in the term “Perfect”
for selfie editing apps.  “The famous
Kardashian family, including Kim Kardashian, Kendall Jenner, and Kylie Jenner
(perhaps the world’s foremost authorities on the selfie), reportedly use the
Perfect365 app to edit their widely-consumed selfies,” amplifying Perfect365’s
consumer recognition.  ArcSoft also
alleged substantial media coverage of the app.
 

Interface for Perfect365

Logo for Perfect365

In addition, ArcSoft claimed to own the following trade
dress: A distinctive purple color scheme throughout the app and app icon; the
Perfect365 mark; the “distinctive (in function and form) photo-taking feature,
which utilizes the smart device’s camera within the app to enable the user to
easily take and edit selfies all within the confines of the app,” with a
circular shutter button at the bottom of the screen comprised of an inner white
circle surrounded by circular bands in ArcSoft’s purple; and the photo-editing
and beautification function of the app, featuring icons reflecting selfie
editing options (e.g., for editing “Blemishes,” “Blush,” and eye features) at
the bottom of screen in ArcSoft’s purple when selected, over a white
rectangular band.  It alleged that this
trade dress had both inherent and acquired distinctiveness.
 

YouCam Perfect interface

YouCam Perfect logo

Trademark dilution: ArcSoft failed to sufficiently allege federal
fame (also required under California law). 
Alleging 20 million US downloads, along with “widespread and favorable
recognition of its Perfect365 Mark throughout the United States,” was
insufficient, despite allegations of celebrity use and media coverage from
outlets from the New York Times to Allure and TechCrunch.  Although the
Perfect365 mark was registered, other factors in assessing fame weighed “heavily”
against ArcSoft.
 
Defendants’ alleged use began in February 2014, and ArcSoft
didn’t plausibly allege that it acquired fame in the approximately 28 months
that passed between its first use date of November 2, 2011 and then.  It didn’t allege that the widespread
recognition and media coverage occurred before February 2014, or allege details
about its advertising.  Even assuming,
contrary to the court’s expectation, that 20 million downloads sufficed (in a
nation of over 318 million), again ArcSoft didn’t allege how many of those
occurred before February 2014.  Nor were
there any nonconclusory allegations about the extent to which consumers
actually recognized the Perfect365 Mark.  Dilution claims dismissed, with leave to
amend.
 
As for trade dress infringement, ArcSoft likewise failed to
plead nonfunctionality.  Given the
explicit functionality of many of the features claimed in its initial
description, ArcSoft retreated in its moving papers to claiming (1) “a
distinctive purple color scheme,” (2) “a unique app icon for the Perfect365
app,” (3) the “Perfect365 Mark itself,” (4) “a circular shutter button at the
bottom of the screen comprised of an inner white circle surrounded by
distinctive circular bands in ArcSoft’s purple,” and (5) the “icons reflecting
selfie editing options …at the bottom of [the] screen in ArcSoft’s
distinctive purple when selected, over a white rectangular band,” or even
further, to “how the shutter button [and] [selfie editing] icons look.”  However, given the importance of defining
trade dress sufficiently to give defendants adequate notice, Arcsoft’s
“shifting-sands approach” to defining the trade dress was insufficient.  Given the apparent concession that the trade
dress described in the complaint wasn’t the trade dress ArcSoft wanted to
assert, this claim was also dismissed with leave to amend.
 
That left only alleged word mark infringement in ArcSoft’s
motion for preliminary injunction, which the court denied for failure to show
irreparable harm.  After Herb Reed
Enterprises, LLC v. Florida Entm’t Mgmt., Inc., 736 F.3d 1239 (9th Cir. 2013), likely
confusion isn’t enough to show irreparable harm, nor are conclusory statements
about lost control over reputation and damage to goodwill.  Thus, ArcSoft’s claims of actual confusion
and lost goodwill, and allegations that these losses were “incalculable,” were
insufficient.  So were claims that
ArcSoft’s success depended on a “broad and loyal user base,” perhaps meaning to
evoke the idea of network effects.
 
ArcSoft offered one incident that provided “some, but not
much, support for its claim of loss of goodwill.” A user, “Rosiella
ShadowsHeart,” posted a one-star review of ArcSoft’s Perfect365 app, stating
“they stole the whole ui and all from You Cam Makeup.” This evidence was “on
the right track,” but still didn’t show irreparable harm.  First, the reference to the whole user
interface meant that the user was relying on the (not-yet-protected) trade
dress, not just the word mark.  Second, a
review consisting of “a single, somewhat ambiguous sentence by an anonymous
internet user” was of minimal probative value even under the relaxed
evidentiary standard applicable to preliminary injunction motions.

An additional declaration from ArcSoft’s legal counsel was no more helpful.  The declaration stated that the number of
users of its app in 2015 had materially decreased by about 1/3 compared to
2014, while defendants engaged in increasingly aggressive promotional efforts.  Moreover, ArcSoft “commenced in-depth
discussions with a major cosmetics company to enter into a partnership to
implement looks sponsored by said company in our Perfect365 app,” but the company
ultimately elected to use the YouCam Makeup app.  This didn’t show a sufficient connection
between the infringement and the lost business, since the timing of defendants’
incorporation and marketing didn’t support a reasonable inference that the
number of Perfect365 app users decreased because of confusion.  Any decrease in downloads, users, and ad
sales reflected economic injury, which could be remedied by money damages.  Also, the cosmetics company, on these
allegations, understood the difference between the two and chose YouCam. “That
is what happens when products compete.”

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UK ASA doesn’t think “in association with” is enough to disclose an ad

Posted on December 30, 2015 by rtushnet

See this ruling on an ad for Michelin tires.  Note also the stricter regulation of comparative advertising than in the US.

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one note on In re Tam: TM as right to suppress others’ speech

Posted on December 22, 2015 by rtushnet

Judge Reyna’s dissent makes a point that I think courts will find very hard to grapple with, whatever the fate of 2(a) or disparagement specifically:

Judge Dyk concurs in the result today only because he believes the content of Mr. Tam’s mark is so “indisputably expressive” that it cannot be regulated under the lesser standards applied to commercial speech. Dyk, J., concurring at *20-21. But if the expressive content of the mark precludes regulation, on what authority may the government grant Mr. Tam the exclusive right to use this mark in commerce? Whatever standard of scrutiny protects the content of Mr. Tam’s trademark from government regulation, that same standard must necessarily be overcome by the government’s substantial interest in the orderly flow of commerce, or no trademark could issue.

To look at it from the flipside, there’s a mismatch between the rationale for protecting commercial speech–it provides useful information!–and the rationale for giving registrants complete freedom to choose non-inherently informational symbols to which they attach meaning.

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Update: SanMedica v. Amazon favorably settles

Posted on December 22, 2015 by rtushnet
Victory is mine! 
Bring me the finest muffins and bagels in all the land!  Public Citizen represented me in a lawsuit to
unseal the key information in SanMedica v. Amazon, a case that applied the 1-800 Contacts rule that ad clickthrough
rates provide an upper bound to the percentage of consumers who could have been
confused online—but sealed the rate it found sufficient to avoid summary
judgment.  After the court granted my
motion to intervene, the parties
agreed to unseal most of the information we sought, including this fact,
which is crucial to understanding the decision. 
Thanks so much to Scott Michelman and the other lawyers at Public
Citizen who brought this about.  More to
come when the unsealing occurs and I can at last see the significance of the
case for keyword infringement litigation more generally.

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Transformative work of the day, Star Wars edition

Posted on December 21, 2015 by rtushnet
The Washington
Post shows how Ken Burns would recount the Intergalactic Civil War (so
bonus right of publicity issue too).  Note use of clips from the films–also a DMCA 1201/exemption issue.  (You’re welcome, Washington Post!)

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A dreaded sunny day for Abbott & Costello heirs: play made fair use of Who’s On First

Posted on December 18, 2015 by rtushnet
TCA Television Corp. v. McCollum, No. 15 Civ. 4325 (S.D.N.Y.
Dec. 17, 2105)
 
The “critically-acclaimed Broadway dark comedy, Hand to God,” used dialogue from the
iconic comedy routine, Who’s On First?
both in the play and in a promotional video for the play (which sadly, I can’t
find online).  Claiming rights in the
routine, plaintiffs, heirs of Abbott and Costello, sued for copyright infringement,
and the court found fair use on the pleadings.
 
According to the complaint: Abbott and Costello first
performed the Routine on March 24, 1938, as a live radio broadcast for The Kate
Smith Hour. In November 1940, they signed a work-for-hire agreement with
Universal Pictures Company that assigned to Universal “all the rights to the
duo’s performances of Who’s On First in One
Night and The Naughty Nineties.” One Night (1940) was the first
publication for 1909 Act purposes; the Routine was then expanded in The Naughty Nineties in 1945.  These films were properly registered and
renewed.  Universal then quitclaimed its interest
in the Routine to the duo’s heirs (through a chain not relevant here).
 
Accepting all the allegations in the complaint as true, Abbott
and Costello assigned their common law copyright in the Routine to UPC. UPC’s
registration of the initial copyright in One
Night was “therefore the first time that it obtained [statutory] copyright
under the 1909 Act[,] upon UPC’s registration with the Copyright Office.” The
publication of the Routine within the film then, under circuit precedent, extinguished
the common law copyright in the unpublished version of the Routine.  “Because as much of the 1938 Routine as was
disclosed in the motion picture was published when the motion picture was
published, and because the law treats motion pictures as a unitary works, the
copyrights in One Night and The Naughty Nineties that UPC registered
‘merged’ the Routine with the films.” 
(Citing 16 Casa Duse, LLC v. Merkin, 791 F.3d 247, 257-58 (2d Cir. 2015)
(holding that because “[f]ilmmaking is a collaborative process typically
involving artistic contributions from large numbers of people,” statutory
copyright in the film itself could be undermined if “copyright subsisted
separately in each of their contributions to the completed film”).
 
In Hand to God, “Jason,
the play’s shy and repressed main character, finds a creative escape from his
religious small-town life through his hand sock-puppet, named Tyrone.”  Tyrone begins in Jason’s mother’s Christian
Puppet Ministry, but “begins to develop a life of its own, possibly due to
demonic possession.”  The use of the
Routine is as follows:
 
About fifteen minutes into the
play, Jason attempts to impress his crush, Jessica, by performing about one
minute and seven seconds of the Routine, with Tyrone as Costello and Jason as
Abbott. Impressed, Jessica asks Jason if he made up the dialogue himself, and
he says “yes.” The audience is intended to recognize the famous Abbott and
Costello sketch and find humor when Tyrone, the puppet, calls Jason a liar and
tells Jessica that the sketch “is a ‘famous routine from the Fifties.”‘ The
puppet proceeds to insult Jessica, saying, “You’d know that if you weren’t so
stupid,” and then exposes Jason’s feelings for Jessica. (“It doesn’t matter
because he thinks you’re hot.”). Providing a contrast with the soft-spoken
Jason, the puppet Tyrone’s outrageous and subversive behavior escalates over
the course of the play, and its post-Routine outburst provides a starting point
for the gradual exposure of the darker side of Jason’s personality.
 
The nature of the work: creative and iconic, weighing in
plaintiffs’ favor.  Amount taken: about
one minute and seven seconds, while the Routine in One Night runs about three minutes and The Naughty Nineties goes almost nine minutes; the play uses a
hybrid of the first thirty-seven seconds of One
Night and the first minute and six seconds of The Naughty Nineties.  Because even one line, “Who’s on first?” is
instantly recognizable, and the play uses more than that, the amount factor
slightly favors the plaintiffs, though this factor is comparatively less
important than transformativeness.  [Hey,
if it’s a unitary work, how come we aren’t measuring amount by the percentages
of the total films represented by the routine? Here, the qualitative part of
the assessment probably remains similar, but chopping up works into parts has
risks for fair use, which is one supporting justification for the ultimate
holding in Garcia v. Google, cited by
the court here.]
 
Effect on the market: alleged harm to the licensing market
wasn’t enough; a reasonable observer wasn’t likely to find that Jason and his
puppet’s reenactment of the Routine could usurp the market for the original
Abbott and Costello performance. “Furthermore, Defendants’ transformative use
of the Routine could arguably broaden the market for the original work, as it
exposes a new audience of viewers to the work of the classic American comedy
duo.”  This is even a stronger statement
of this market-enhancing conclusion than that in Google, I think.  Favors
defendants.
 
The determinative factor, however, was
transformativeness.  The use of the scene
using the Routine in the promotional video (which might only have images from
the scene, not dialogue, if it’s like others I looked at) showed a commercial
purpose.  Defendants used that clip
because it was representative of the plot, and also was specifically mentioned
in many articles and reviews of the play. 
But commerciality can be discounted in transformativeness cases.
 
Commentary isn’t necessary. The relevant distinction is whether
the new work “merely ‘supersede[s] the objects’ of the original . . . or
instead adds something new, with a further purpose or different character,
altering the first with new expression, meaning or message.” Creating “a
distinct visual aesthetic and overall mood” for the audience is transformative.  Here, the tone of the new performance was “markedly
different,” using the Routine to create a background for the increasingly
sinister development of Tyrone’s character. 
This creates a new understanding/aesthetic about the relationship
between horror and comedy absent from Abbott & Costello’s performances.  Jason and his hand, rather than two actors,
perform the Routine to contrast his seemingly soft-spoken personality and his
inner nature, which isn’t the same purpose as the original. Though both
performances evoke laughter, that doesn’t matter: the Routine provides comic
relief in the play for reasons that differ from the humor of the original
sketch.  Tyrone breaks the fourth wall
when he tells Jessica that she should recognize the routine—he’s sharing an
inside joke with the audience.  “The
audience laughs at Jason’s lie, not, as Plaintiffs claim, simply the words of
the Routine itself.”  And for the lie to
be apparent, the original needs to be recognizable.

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Reading list: Lanham Act standing after Lexmark

Posted on December 17, 2015 by rtushnet

Virginia E. Scholtes, The Lexmark Test for False Advertising Standing: When Two Prongs Don’t Make a Right, 30 Berkeley Tech. L.J. 1023 (2015):

Part I of this Note tracks the development of standing under § 43(a) of
the Lanham Act and analyzes the three-way circuit split on false
advertising standing that existed before the Lexmark decision. Part II
describes the Supreme Court’s decision in Lexmark, focusing on the
Court’s reasoning for formulating the new two-pronged test and the
Court’s interpretation of the Lanham Act’s purpose. Part III assess the
extent to which both the zone-of-interests prong and the proximate cause
prong serve the purposes of the Lanham Act. First, Part III shows how
the zone-of-interests prong gives a right of action to plaintiffs with an
injury the Lanham Act was intended to protect, focusing on the issue of
consumer standing under § 43(a). Next, Part III explains two situations
where the proximate cause prong may fail to serve the purpose of the
Lanham Act: when the defendant has a low market share, and when the
plaintiff’s injury was inflicted through network effects. Finally, Part III
analyzes courts’ application of the proximate cause prong in false
advertising cases and concludes that the relaxed application of the
proximate cause requirement will likely prevent this prong from barring
plaintiffs who otherwise fall within the class of plaintiffs the Lanham Act
was intended to protect. Overall, the Lexmark test for federal false
advertising standing serves the purpose of the Lanham Act because it
grants a cause of action to plaintiffs with a commercial injury, thus
deterring unfair competition.

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Defendant can’t take advantage of TM abandonment it created

Posted on December 17, 2015 by rtushnet
Axiom Worldwide, Inc. v. HTRD Group Hong Kong Ltd., 2015 WL
8113965, No. 8:11–cv–1468–T–33 (M.D. Fla. Oct. 30, 2015)
 
Axiom sued seeking to confirm its ownership of certain IP,
including trademarks, related to medical devices, and for infringement resulting from its unauthorized use.  It won summary judgment against numerous
defendants, and prevailed again after a non-jury trial, receiving damages and a
permanent injunction, which was affirmed.
 
Defendants sought modification of the permanent injunction,
which enjoined them from using Axiom’s trademarks, including “DRX 9000” and
“Axiom Worldwide” for any commercial purpose. 
Defendants alleged that Axiom had abandoned the marks for medical
devices; that the federal registrations for Axiom Worldwide and DRX 9000 had
been cancelled; that Axiom has had no substantive operations in the United
States since 2010; and that at least since 2011, no new devices in the “DRX”
line could be offered for sale in the U.S. because the FDA 510(k) pre-market
clearances for those devices were de-listed. Thus, the legal basis for the
injunction allegedly no longer existed.
 
Axiom responded that it hadn’t abandoned the marks but
rather licensed them to other companies, who were using them on the internet at
http://ift.tt/1TS7ejI, in fax blasts to doctors, and at trade shows both
domestically and internationally. Also, Axiom argued that defendants had
flagrantly violated the injunction, and that any nonuse was their fault.  The court heard testimony from James Gibson,
president of Axiom.
 
An injunction may be modified when its original purposes are
not being fulfilled in any material respects, or perhaps when the party seeking
modification shows that a significant change in circumstances warrants revision.
 Either way, defendants failed to show
entitlement to a change.  Defendants
argued that the abandonment of the marks, and their consequent availability to
the public, constituted a change in circumstances.
 
Gibson conceded that Axiom had no substantive business
operations in the United States, apart from litigation, since 2010, although he
testified to Axiom’s efforts post-judgment and post-appeal to regain a footing
in the DRX medical device service and sales market.  Nonuse for three years is prima facie
evidence of abandonment, creating a rebuttable presumption of intent not to
resume use.  Moreover, intent to resume
use “cannot be far-flung or indefinite; rather there must be an intent to
resume use within the reasonably foreseeable future.”  However, here, much of the period of nonuse
was caused by defendants and others like them, and was excusable; further, Axiom
took efforts to resume meaningful use of the marks in a timely manner.
 
For some background: Axiom created an LLC and transferred
certain assets to the LLC; the LLC ran into financial trouble and its assets
were bought by HTRD, which filed paperwork with the PTO to assign Axiom’s
trademarks to itself.  HTRD used Excite
Medical to make and sell DRX devices using Axiom’s trademarks, designs, and
other intellectual property.  It was this
that led to the lawsuit which established that Axiom owned the relevant IP. The
court ordered the cancellation of HTRD’s registrations of the trademarks and
directed the PTO to amend its records to show Axiom as the owner.
 
The first notice of cancellation for failure to file a
section 8 declaration for “Axiom Worldwide” came while HTRD claimed to own the
marks and before the district court’s ruling that Axiom owned the marks. A
later notice of cancellation, for the “DRX 9000” word mark, came after the
entry of judgment, when the marks had been reassigned to Axiom.  HTRD filed the first required Section 8
Declarations for both marks between the fifth and sixth anniversaries of the
registration, but the PTO rejected the declaration for “Axiom Worldwide”
because HTRD didn’t have proper chain of title. For the “DRX 9000” mark, the
PTO accepted the declaration from HTRD, but cancelled the registration for
failure to file the declaration at the ten-year mark.  In any event, the owner didn’t properly file
section 8 declarations, and that couldn’t be blamed on the PTO or someone else.
 
In April 2011, purportedly to protect the marketplace from
counterfeit goods, Axiom de-listed its DRX 9000 series of products with the
FDA, which prevented it from making DRX devices in the U.S. After the
litigation, Axiom conveyed the trademarks to other entities, as a result of
substantial judgments against it.  One of
those other entities is currently authorized by the FDA to manufacture DRX 9000
devices, because it re-listed the 510(k) clearance with the FDA this year.  Although these entities haven’t made new
devices, Gibson testified that they could do so if they received a customer
order, and that they’d been advertising new machines for sale since attending a
trade show in January 2015 in Dubai. They also attended trade shows in Nevada
and the West Coast and intended to go to others ithis fall. The DRX 9000 mark
and the Axiom Worldwide trademark and logo have been used at these trade shows.
Axiom also showed “fax blasts” from between February and June 2014, promoting
the sale of service parts and used devices for the DRX machines (the latter for
international customers, which would seem to create a use in the US issue). Gibson
further testified that he attempted to regenerate Axiom’s business activity but
was unable to obtain investors who were fearful of the injunction and of defendants’
continued violations.
 
Axiom showed that defense counsel, on behalf of defendant
Excite Medical, filed an application with the PTO to register “DRX 9000” for
medical devices in May 2015.  Its declaration
that “the applicant is the owner of the trademark or service mark” or
alternatively, that “the applicant is entitled to use the mark in commerce” and
that “the signatory believes …. no other person has the right to use the mark
in commerce ….” was, according to Axiom, clearly false, and a blatant
violation of the injunction. Defendants responded that it was merely an ITU
application, and that  Excite Medical
intended to use the mark for “back braces,” not for the spinal decompression
device at issue in this litigation.
 
The court concluded that, “despite some missteps and
apparent difficulty getting business restarted, the whole of this litigation
demonstrates Axiom’s efforts to reclaim the marks for use of the marks in
commerce.”  Its actions of suing after
learning that HTRD claimed ownership of the intellectual property and had
reassigned the Axiom trademarks to itself and begun manufacturing and selling
DRX 9000 devices weighed against any finding of inexcusable nonuse. “While
Axiom ceased further operations pending a determination that it owned the
marks, its conduct in seeking to regain control of its marks and intellectual
property simply does not lend support to Defendants’ claims of abandonment nor
their request for modification.”  The court
wasn’t willing to allow defendants to benefit from a problem they’d helped
cause.  Their attempts to do so included
the ITU, since the injunction explicitly prevented defendants from “[m]aking
representations that they own or are authorized to use any of the trademarks or
intellectual property rights and proprietary information this Court has found
belong to Axiom.” Defendants’ and their counsel’s belief in the marks’
abandonment didn’t displace the injunction, and their insistence on testing its
boundaries weighed against a finding that the injunction had served its
intended purpose.
 
Although Axiom’s financial circumstances made it doubtful
that Axiom itself could reenter the DRX sales or service business, it had
post-litigation licensing agreements that allowed it and its transferee to do
so, and those entities were actively marketing the DRX products and using the
marks for their sales and service efforts. (The court again didn’t address the
international v. use in the US aspects of this marketing.)  “[T]hese intentional and concrete efforts to
reestablish business in the DRX line of machines are not far flung or
indefinite.”

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