Starbucks Loses Big Against CHARBUCKS in the Court of Appeals

Starbucks lost a significant trademark appeal before a panel of three judges of the U.S. Court of Appeals for the Second Circuit in a case that it had brought against a small coffee shop that had named itself "CHARBUCKS".

Starbucks had filed a trademark infringement and dilution suit in federal court in New York against Black Bear Micro Roastery, which is operating a "CHARBUCKS"-named coffee shop in Tuftsboro, New Hampshire.

Starbucks' legal claim rested almost entirely on the theory that the play on the word STARBUCKS by  Black Bear constituted dilution by blurring.

Blurring is a species of trademark dilution that does not require that consumers are confused into thinking that the Plaintiff makes, endorses or sponsors the Defendant's products or services, but merely that the unauthorized use is likely to "blur" the mark's distinctive quality.

Blurring is distinct from the tarnishment theory of dilution, which seeks to determine if the famous mark is being called into disrepute by association with unsavory themes or words.

After a two day bench trial, the District Court rejected Starbucks' evidence, and found that the Defendant's use was not likely to blur the fame or distinctiveness of the famous Seattle coffee brand.

Starbucks subsequently appealed, and this week, a panel of three judges unanimously agreed that Starbucks had failed to carry its burden of proof at trial.  Starbucks has said that it respects but disagrees with the panel's decision.  Starbucks may seek review by the entire Circuit Court, in a rare but not unprecedented legal maneuver.

Samsung and Its Outside Counsel Facing Sanctions For Breaching Confidentiality: But Will the Punishment Fit the Offense?

Before Apple and Samsung litigated their now epic patent trial before a federal district court, they were engaged in routine discovery practices, which involved the exchange of the fierce competitors’ highly sensitive licensing information.

To be sure, such disclosure is commonplace and indeed required by discovery in the United States' Federal Rules of Civil Procedure.

To address the potential mishandling of proprietary and confidential information, parties routinely stipulate to entry of a “Protective Order.”

This stipulation takes the form of a Court Order which allows the parties and their counsel to designate documents and information into categories or tiers.

When documents contain highly sensitive information, such as pricing or key licensing terms, the parties are usually able to mark documents as “Outside Counsel’s Eyes Only,” and file such documents under a strict seal so the public cannot get access through the Court’s docket.

Responsible outside counsel take great pains to respect these orders, often at significant cost and inefficiency. Multiple drafts of the same document must be created and digital firewalls maintained with redactions and password-protected file folders.

These day-to-day procedures involved in handling competitors' sensitive data can be onerous to the parties and their outside counsel litigating these cases, but such measures are viewed as necessary to ensure that litigants feel that their sensitive information is not being acquired by their competitors in the guise of discovery exchange.

In the now famous Apple/Samsung patent case, highly confidential licensing terms were apparently contained in a draft expert report on damages that was forwarded to Samsung’s internal personnel without any redactions whatsoever.

The leak of the confidential information only came to light after the case was effectively over, when Samsung happened to be negotiating a license with third party Nokia.  According to testimony, a Samsung executive told Nokia that he knew the terms of the Apple-Nokia license and was able to recite its terms verbatim during the negotiation.  Nokia told Apple, who demanded a formal investigation.

After a Court-ordered investigation, it turns out that Samsung’s outside counsel had posted a draft of its expert’s report on a client file-sharing site that was accessible by Samsung’s staff, and e-mailed instructions for accessing the site, which included over fifty Samsung employees who were not permitted to access the highly confidential information contained therein.

Samsung's outside counsel has essentially admitted that all of the above did indeed occur, but denies that the violation was intentional. Samsung incredibly argues that no sanctions whatsoever are warranted, despite the harm to Apple and the threat to the integrity of the discovery process.

The Magistrate Judge appears to be mulling what sanctions are appropriate for the apparent violation of the Court’s Protective Order.

Frequently, outside counsel entering into the exchange of sensitive discovery materials during intellectual property litigation are asked by their clients whether to trust that the terms of protective orders are respected by their adversaries.

And the standard response that outside counsel typically give to their clients is supposed to allay their concerns:  Any violations of the Protective Order wil be swiftly punished by the Court, thus deterring misconduct.

But let’s face reality for a moment:  Unless the fines imposed on Quinn Emanuel, Samsung’s outside counsel here, are truly draconian in nature, the misconduct is likely to go largely unpunished.

Quinn Emanuel undoubtedly billed millions upon millions of dollars in legal fees to Samsung for its litigation services, and any fine imposed is likely to be paltry in comparison to the violence such conduct does to the integrity of the discovery process and the commercial harm to Apple.

And, in the event that the fines imposed the Magistrate were truly draconian in nature, what is the likelihood that Judge Koh would enforce them?  The Court has already reduced the damages awarded to Apple against Samsung by the jury from over $1billion to less than half.

Further, even if Judge Koh found the nerve to impose a draconian penalty against the misconduct, Quinn Emanuel and Samsung will inevitably appeal to the U.S. Court of Appeals for the Ninth Circuit.  What are the odds that that California-based appellate court would sustain a draconian penalty against Samsung and/or its outside counsel?  Slim to none, I suspect.

Therefore, while Quinn Emanuel very well may have inadvertently violated the Protective Order rather than willfully, parties facing high-stakes intellectual property litigation requiring the exchange of highly sensitive data with competitors would be well advised to consider the risks inherent in litigating against a fierce adversary with all the wrong incentives, in a legal system that is far too tolerant of discovery abuses.

The Selfie Trademark: Struggling to Own the New Slang

In the modern world of interactive social media, new words are invented, used and discarded at lightning speed.

Indeed, the lexicon of online social media is replete with an entirely new vocabulary composed of Internet "slang."  There are thousands of examples percolating on the Internet, with dictionaries and even online translators devoted to these emerging linguistic trends.

Some examples of words that started as Internet slang and which are now mainstream are: "cookies" (a small piece of data embedded in an Internet browser), "photoshopped" (referring to the popular software graphics program that allows for visual 'touching up' of digital photographs) and "spam," (those annoying bulk e-mail messages that clog up our inboxes).

But some entrepreneurs are hoping that such slang terms are capable of functioning as trademarks. For example, the word "selfie" means a photograph taken of oneself (usually with a smartphone) that is planned to be uploaded to Facebook, Instagram, Imgur or another social media networking website.

But several brand owners are trying to monopolize this term, even before it fully enters the mainstream lexicon.  

Thinkboks LLC, an Illinois based software development company, has filed a formal trademark application for "SELFIE" in connection with "computer application software for allowing hands free photographs on portable electronic devices."  Thinkboks claims that it first used the term in commerce in 2012.

Screenshot of Thinkboks.com

The Trademark Office was not persuaded and recently denied the application on the basis that “SELFIE” is defined as “a slang term used to describe a photo that is taken of oneself for the purpose of uploading it to social networking sites  and image sharing websites, such as Facebook, Instagram or Imgur”.

To illustrate his point, the Examiner attached screenshots of websites (italicized emphasis added) in which the term was used by third parties descriptively:  “With our face detection and timer modes, you will love taking selfies at home or on the go!” and "It’s simple and easy and it helps with taking selfies! . . .”

The Examiner found that as shown by the Internet evidence, the wording “SELFIE” and/or its inflected forms is used to describe a feature, subject matter, use, and/or the nature of selfie software, i.e., software for taking pictures of oneself.   

Material obtained from the Internet is generally accepted as competent evidence to determine if a mark is being used widely as a descriptive term.  Accordingly, Thinkboks' trademark application was rejected on grounds of descriptiveness under Trademark Act Section 2(e)(1).

In addition to or in the alternative to submitting evidence and arguments in support of registration, Thinkboks can amend the application to seek registration on the Supplemental Register.

However, that approach means that Thinkboks would need to wait as long as five years to renew its attempt to receive a trademark registration, and would need to swear under oath that, during the interim five years, it alone made "substantially exclusive use" of that mark in commerce.

Therefore, if Thinkboks cannot successfully monopolize usage using legal means, it can only succeed by convincing the marketplace generally that "SELFIE" is associated exclusively with it.  And that's likely an uphill endeavor.

In the meantime, others are trying a similar strategy.

Selfie Social, a New Jersey-based company, is seeking to register the trademark for "Selfie Social" in connection with computer applications used for the collection of photographs.  The Examiner rejected this application on the same "descriptiveness" grounds.

Further, an unidentified person or company currently cloaked with privacy protection services has apparently registered the domain name "SELFIE.COM" and is accepting requests for new screen names.

If this isn't Thinkboks' domain name, they may face an even steeper uphill climb than they bargained for.

Preliminary Injunction Against MAXIM Deodorant Denied, Court Finds "Insufficient" Harm to the Brand From Unlicensed Use

In a startling decision, a federal court refused to grant a court order against the continued unauthorized use the trademark "MAXIM" to sell antiperspirant, on the basis that the likely consumer confusion and harm to the brand was not sufficiently "irreparable" to justify a preliminary order halting the infringement.

Maxim magazine is a popular mens' "lifestyle" magazine with a circulation of over two million. Maxim magazine's publishers, Alpha Media Group, intend to license the "MAXIM" trademark to a line of body sprays, perfumes and colognes.

Corad Healthcare, Inc. manufactures antiperspirants to treat hyperhidrosis, a medical condition which causes excessive sweating. Corad has used the term MAXIM since 2001, but historically used clinical-looking packaging  on "prescription-strength" medication.

More recently, Corad began to use colorful packaging with "lifestyle" graphics, such as pictograms denoting golf and exercise. Further, Corad's "Maxim" name on its antiperspirant wipes started to look a lot more like Maxim's logo.  Consequently, upon learning of the new packaging, Alpha Media sued Corad, and sought a preliminary injunction.

The Accused Products

The court rejected the plaintiff's application for a preliminary injunction.  In its decision denying Alpha's motion, the District Court essentially agreed that there was the potential for Maxim's publishers to lose the ability to control its brand through Corad's unlicensed third party use. However, the Court then found that the publishers did not put forth evidence that such a result "will, in fact, occur."

The problem with the court's decision is that it requires a brand owner to prove the impossible until after the damage is already done.

Furthermore, a simple economic analysis demonstrates the flaw in the Court's logic.

It used to be the law that a preliminary injunction should usually issue when the use of a mark creates a likelihood of confusion in the consumers' minds as to the ownership or sponsorship of a product, because a high probability of confusion as to sponsorship almost inevitably establishes irreparable harm.

However, in 2010, in Salinger v. Colting, Judge Calabresi sitting in the Second Circuit Court of Appeals, penned a copyright decision finding that "a court deciding whether to issue an injunction must not adopt 'categorical' or 'general' rules or presume that a party has met an element of the injunction standard.

In plain English, Judge Calabresi effectively required that intellectual property owners factually "prove" the impossible, before it occurs:  that they are likely to be harmed by unlicensed third parties abusing their rights.

The reason such factual proof is impossible is not because it is untrue. It is because there is no simple way to measure the harm to a brand before such harm actually occurs. And once that harm occurs, it cannot be recovered. Judge Calabresi is a renowned law and economics scholar who should fully understand this point.

Here is an example:  Suppose Maxim's publishers seek to market and expand their brand to sell antiperspirants.  They set up a meeting with an established company that manufactures and distributes such products (such as Procter and Gamble).

In this hypothetical scenario, P&G would decline to market the Maxim-branded products on the basis that the trademark is already registered and used by Corad.

There is no way to ever calculate with precision the economic "harm" wrought on Alpha by the continued existence of Corad's unlicensed product in the marketplace.  

However, the economic opportunity cost to Alpha is significant:  It cannot meaningfully market a product that was its right to do so until after trial, which could be four years away.

At the conclusion of the lawsuit, a jury might award damages to Alpha Media based upon Corad Healthcare's infringement.

However, as this chart shows, the recovery of Corad's profits does not equal the opportunity cost to Maxim's publishers.  In other words, Alpha loses out on more than Corad actually gains:

The Second Circuit Court of Appeals has ignored this reality, and effectively would require that intellectual property owners suffer these losses.

The problem is that Corad will never be able to adequately compensate the publishers for the harm it causes to the brand owner.  Such "irreparable injury" is precisely why preliminary injunctions were commonplace when a brand owner could prove a high likelihood of confusion.

Under the new, "non-categorical" standard in the Second Circuit, brand owners must suffer these losses due to no fault of their own.

Canada Goose Sues Sears For Selling "Knockoff" Parkas

Canada Goose, maker of high quality and fashionable parkas, has filed a trademark infringement lawsuit in a Toronto federal court against Sears Canada, Inc., accusing the department store of selling a 'lower-end' misleading 'knockoff' jacket that is causing consumer confusion.

The Canada Goose design at issue is three quarters length, with a genuine coyote fur-trimmed hood called the "Kensington Parka" that sells for $695.00.  Canadian news reports that the accused Sears jacket sells for $199.00.

Last year, Canada Goose launched a similar trademark infringement lawsuit against Toronto-based International Clothiers, Inc. The parties settled that suit on undisclosed terms. Both disputes center around the of a logo in a circle.

Gioconda Law Group and Arthur Kenzie Settle Domain Name Dispute

The Gioconda Law Group PLLC and Arthur Wesley Kenzie have settled the dispute that had been pending before the New York federal district court, involving the misspelled domain name GIOCONDOLAW.COM.

The parties to the underlying dispute settled their differences through a mutually acceptable Settlement Agreement under which the GIOCONDOLAW.COM domain name will be permanently transferred to the law firm.  The Agreement is in the process of being submitted to the federal district court for final approval.

The parties disagree about whether the particular methodologies employed constitute an 'interception' of e-mail, and could therefore violate the Wiretap Act.  Furthermore, Arthur Kenzie has denied any wrongdoing or cybersquatting.

However, both parties agree that the vulnerability that this case exposes is indeed very important and one that all organizations should take seriously.

Furthermore, the public disclosure of discovery in this case may have revealed third parties' vulnerabilities in a manner that could have raised even greater data security concerns.

The use of unencrypted, misaddresses e-mail can create significant security risks to organizations, and all all organizations should also consider registering multiple misspellings of their domain names and using encrypted e-mail protocols to mitigate this risk.

Stock Image on ObamaCare Site Invites Scorn, Ridicule on Amateur Model

Aspiring models, be warned.

Now that the initial launch of the federal "ObamaCare" website has been declared an unmitigated logistical disaster, an odd intellectual property issue has been mentioned by bloggers and political pundits:  the rights of the models depicted in the stock photography used on the site.

When HealthCare.gov launched live on October 1, tens of millions of Americans visited the site to view an ethnically ambiguous, attractive 20-something woman smiling back, promising affordable health care.  "ObamaCare Girl" is precisely the target demographic that the administration is hoping sign up for health care.

Fox News called the smiling woman depicted in the stock photograph "mysterious," writing that "she smiles back at countless frustrated Americans as they tried to log onto the ObamaCare website."  The Washington Times dubbed her "Glitch Girl," and created a pseudo-mystery around her identity.

Since its launch, the website has crashed repeatedly, leading Congressional leaders to demand an accounting for the $300M dollars that have been spent on the website so far, given that few applicants have been satisfactorily able to sign up through the portal.

The unknown model whose face was used on the site may not be pleased with the newfound notoriety, but may have no legal recourse.

"Stock" photography is offered commercially by a wide variety of sources, such as Getty Images, Corbis, iStockPhoto.com and ShutterStock.com.  For an appropriate license fee, any user can easily download and use stock images for a variety of applications, including blogs and websites.

When objects depicted in the stock images are inanimate, the only release that is secured by the distributor is a license or assignment from the photographer.  Photographers are paid a scaled fee based on, among other things, the number of times that their images are downloaded and used.

However, when models are used in the images, the photographer typically secures a standard "release," which grants the licensees (including the distributors and end users) the right to pretty much plaster the image all over their websites and blogs.

The models essentially agree to release any claims that they might otherwise have for invasion of privacy, or appropriation of likeness under states' laws, in exchange for a nominal sum received from the photographer. In most cases, amateur models are paid very little to nothing per image, and give up all rights to control how their likenesses are used.

In the case of the anonymous woman whose face ended up appearing on a website viewed by millions of annoyed Americans, that notoriety might have been more than she bargained for.

The New York Daily News has noted that the image of ObamaCare Girl has now been removed, only to be replaced by stale graphics.

Use of Square Bottle Sparks Trade Dress Lawsuit With Jack Daniel's

Fox News is reporting on a newly-filed trademark lawsuit pending between Jack Daniel's Properties, Inc., a subsidiary of Brown-Forman, the makers of Jack Daniel's whiskey and Defendants J&M Concepts, and Popcorn Sutton Distilling, LLC, a small distiller.

Photo Courtesy of Ann Richardson

Sutton's whiskey is packaged in a very similar square bottle, with angular proportions and dimensions that are clearly reminiscent of the classic Jack Daniels' whiskey bottle.

Sutton's alcoholic beverage is named after a famous moonshiner Marvin "Popcorn" Sutton.  Sutton, known for his long gray beard and overalls, committed suicide by carbon monoxide poisoning in 2009 rather than go to prison for violating alcohol manufacturing laws.  According to Wikipedia, Sutton received his "Popcorn" nickname after damaging a bar's faulty popcorn vending machine with a pool cue in the 1960's.

Jack Daniel's, produced in Lynchburg, Tennessee, filed the suit in federal district court in Nashville, alleging that the Defendants' use of a square bottle is likely to cause confusion among consumers.

The Complaint further alleges that the Jack Daniel's square bottle has been "a consistent commercial impression" for decades. That packaging is part of "one of the oldest, longest-selling and most iconic consumer products" in U.S. history, the Complaint alleges.

Jack Daniel's specifically describes its claimed "Trade Dress" as a "combination of a square-shaped bottle with angled shoulders that house a raised signature on four sides, and beveled corners, and labeling with a white on black color scheme and filigree designs."

While Jack Daniel's does not own a federally registered trademark on the square bottle shape standing alone, it does own a trademark for the labeling elements of its claimed "Trade Dress."  

The Defendants' website which had been advertising the accused whiskey appears to have been shut down, possibly in response to the filing of the lawsuit.

Trade dress lawsuits involving alcohol bottle shapes are rare, but not unheard of. For example, in 2012, the Ninth Circuit Court of Appeals reversed the lower court's dismissal of a case involving a skull-shaped vodka bottle.  In that case, the Court noted that the shape of a skull for a bottle was purely ornamental, served no functional purpose whatsoever and may have garnered sufficient secondary meaning among the consuming public to be identified with its producer.  Further, the Appeals Court noted the availability of many alternative designs to competitors.

"Champagne" Tastes Trigger Trademark Disputes with Apple, Others

For decades, the Comité Champagne, a French industry trade organization dedicated to protecting the French Champagne region's world famous vintners, have aggressively policed the marketplace and prosecuted any unauthorized use of the word "champagne." 

Such is the reason that the bottle of California's slightly cheaper bubbly you may have opened on New Year's Eve was termed "sparkling white wine," and not "champagne."

According to the Comité's website, the "reputation and importance of the Champagne appellation has long been a source of envy for other producers, spawning hundreds of imitations every year...Champagne is a unique product born of the shared heritage of Winegrowers and Champagne Houses whose livelihoods depend on protecting that heritage."

The website claims that the Comité has a "duty to protect consumers against misleading claims made for any wines, beverages or products that trade off Champagne’s reputation as an appellation of guaranteed origin and quality."

The Champagne Regions of France

Accordingly, it is the stated policy of the Comité Champagne  to prosecute anyone who misappropriates the reputation or identity of the Champagne appellation.

It seems perfectly reasonable for the Comité to try and thwart counterfeit champagne beverages, and is has done so very effectively.

However, the Comité also seems to take its role as defender of the appellation so seriously that it attacks any uses of the word "champagne" to describe color or style, even when not used in connection with beverages.

Most recently, for example, Apple introduced the new iPhone 5 series, in a metallic gold color initially planned to be described as "champagne."

However, the Comité saw fit to send a warning letter to Apple before the phone was launched, contending that the term "champagne" was a trademarked geographic designation, and that Apple's use would inevitably lead to litigation.  Apple backed off, and now simply calls the color "gold."

The Wall Street Journal now reports that the Comité is at it again, this time threatening a glass bottled water distributor that had planned on using the tagline: "the Champagne of waters."

Not wanting to fight a lawsuit, the distributor dropped the tag line.

The Gold/"Champagne" iPhone

In the past, the Comité has also successfully barred the use of the term ‘Champagne’ in connection with unauthorized toothpastes, mineral water for pets, toilet paper, underwear and shoes.

But is such aggressive policing of the wider marketplace really necessary?

Traditionally, brand protection advocates would argue that it is critical to protect the marketplace against any and all unauthorized uses, even those outside of the core area of protection.

Failure to do so, they warn, could lead to the most dreaded outcome: "genericide" and ultimate abandonment of the trademark itself.

Examples of once famous trademarks that have fallen victim to such a fate include aspirin, yo-yo, escalator, kerosene, zipper, cellophane and thermos.

But in none of these instances did the widespread unauthorized usage that led to the trademarks' destruction start outside of the core market, leading to the slippery slope of genericide that brand owners dread.

Rather, the trademark owners were simply so successful in their core market, everyone else adopted the term to describe the product category itself.  Eventually, no one knew that any particular thermos originated from one source or manufacturer.

It is that fear that drives makers of Kleenex-brand tissues, Xerox-brand copiers and Band-Aid brand bandages, to frequently remind us that their products are brands, not the names of generic products.

Brand protection advocates must carefully balance their clients' important need to protect against trademark erosion, and the wider realities of the marketplace.