Intellectual Property

BELMORA LLC v. BAYER CONSUMER CARE AG, No. 15-1335

Decided: October 27, 2015

The Fourth Circuit concluded that the district court erred in reversing the U.S. Trademark and Appeal Board’s decision to cancel Belmora’s registration for the FLANAX mark based on deceptive use, and in dismissing Bayer Consumer Care AG’s false association and false advertising claim.  Therefore the court vacated and remanded the case for further proceedings.

Since the 1970’s, Bayer Consumer Care AG (“BCC”) owned the trademark “FLANAX” in Mexico and sold naproxen sodium pain relievers under that mark in Mexico and other parts of Latin America.  Belmora LLC owned the FLANAX trademark in the United States and used it in the U.S. since 2004 in the sale of its naproxen sodium pain relievers.  BCC and its U.S. sister company Bayer HealthCare LLC (“BHC,” and collectively with BCC, “Bayer”) contend that Belmora used the FLANAX mark to deliberately deceive Mexican-American consumers into thinking they were purchasing BCC’s product.  Belmora’s early FLANAX packaging closely mimicked BCC’s Mexican FLANAX in color scheme, font size and type face; Belmora made statements that its FLANAX brand was the same FLANAX produced by BCC in Mexico; and Belmora hired telemarketers to state that Belmora was “the direct producers of FLANAX in the U.S. and that “FLANAX is a very well known medical product in the Latino American market, For FLANAX is sold successfully in Mexico.”  Bayer pointed to evidence that these actions by Belmora resulted in Belmora’s distributors, vendors, and marketers believing that its FLANAX was the same or affiliated with BCC’s FLANAX.  Thus Bayer filed a petition with the U.S. Trademark Trial and Appeal Board (“TTAB”) to cancel Belmora’s registration, and also filed claims for false association and false advertising.

In dismissing Bayer’s false association and advertising claim, the district court concluded that 1) Bayer’s claims fell outside the Lanham Act’s “zone of interest”—and [were] not cognizable—“because Bayer does not possess a protectable interest in the FLANAX mark in the United States,” and 2) that a “cognizable economic loss under the Lanham Act” cannot exist as to a “mark that was not used in the United States commerce.”  However, the Fourth Circuit determined that the district court conflated the Lanham Act’s infringement provision in § 32, with unfair competition claims pled under § 43.  The plain language of § 43 does not require that a plaintiff possess or have used a trademark in U.S. commerce as an element of the cause of action.  Under this section, it is the defendant’s use in commerce—Belmora’s FLANAX mark—that creates the injury under the terms of the statute.

What § 43(a) does require is that Bayer was “likely to be damaged” by Belmora’s “use [] in commerce” of its FLANAX mark and related advertisement.  The Supreme Court, in Lexmark International, Inc. v. Static Control Components, Inc., established two background principles to determine if a person met the “likely to be damaged” element of § 43(a).  First the plaintiff’s claim must fall within the zone of interest.  Second, the statutory cause of action must be limited to plaintiffs whose injuries were proximately caused by violations of the statute.  The Fourth Circuit concluded that BCC adequately pled a § 43(a) false association claim for purposes of the zone of interest prong because Belmora’s misleading association with BCC’s FLANAX caused BCC customers to buy the Belmora FLANAX in the US instead of purchasing BCC’s FLANAX in Mexico, which caused BCC to loose revenue.  Furthermore, by deceiving distributors and vendors, Belmora made FLANAX more available to consumers, which further exacerbated BCC’s losses.  The Court further concluded that BCC meet the second requirement of proximate cause because BCC identified economic or reputational injury flowing directly from the deception wrought by Belmora’s conduct.  Lastly, because the district court misinterpreted the language of the Lanham Act, the Fourth Circuit concluded that Bayer was entitled to bring its cancellation claim.

Accordingly, the Court vacated the district court’s judgement and remanded the case for further proceedings.

Full Opinion

Aleia M. Hornsby

HUMPHREYS & PARTNERS ARCHITECTS, L.P. v. LESSARD DESIGN, INC., NO. 14-2030

Decided: June 23, 2015

The Fourth Circuit affirmed the district court’s award of summary judgment to Defendant, Lessard Inc., on the basis that no reasonable jury could find that the two apartment designs at issue were similar.  

Plaintiff, Humphreys & Partners Architects (HPA), is an architecture firm that designed a high-rise residential tower known as Grant Park in 2001. In 2003, HPA registered the Grant Park design as an architectural work with the United States Copyright Office. The Grant Park building was constructed in Minneapolis, Minnesota in 2004. In 2008, Sixth Penrose Investing Co. began developing a high-rise apartment building called Two Park Crest in McLean, Virginia and solicited design proposals from HPA and Defendant, Lessard. Penrose chose Lessard to design the Two Park Crest Project.

HPA filed this action alleging one count of copyright infringement against Lessard. Lessard argued that they did not copy the Grant Park design and that the two designs are not substantially similar. HPA supported its claim with an expert, who identified nine characteristics that are shared by both designs. The district court granted Defendants’ motion for summary judgment because there was no direct evidence of copying and no reasonable jury could find that the Grant Park and Two Park Crest designs are objectively similar.

The Fourth Circuit agreed that HPA failed to carry its burden of identifying a specific similarity between the Two Park Crest design and the protected elements of its Grant Park design. The evidence merely showed that the two apartments incorporate nine of the same concepts, but it does not establish that the two designs have a similar overall form, or that the designs arrange or compose elements and spaces in a similar manner.

Accordingly, the Court affirmed the district court’s judgment.

Full Opinion

Meredith Weisler

 

DESIGN RES., INC. v. LEATHER IND. OF AMERICA, NO. 14-1990

Decided: June 18, 2015

The Fourth Circuit held that Design Resources, Inc. (DRI) failed to show that Defendants made false or misleading descriptions or representations of facts in commercial advertising about DRI’s leather-like product.  On that basis, the Fourth Circuit affirmed the district court in granting summary judgment for Defendants on DRI’s claim for false advertising under the Lanham Act.  

DRI manufactures furniture coverings for sale to furniture manufacturers.  In 2006, DRI developed a leather-look covering made of polyurethane, poly/cotton, and leather, which it named NextLeather.  In December 2006 and January 2007, DRI asked Dr. Cory with the Leather Industries of America (“LIA”) for advice on labeling and composition testing NextLeather.  Dr. Cory said that the product could not be marketed as leather, but could be labeled, “‘not leather,’ ‘reconstituted leather,’ or ‘[b]onded leather.’”  DRI marketed NextLeather as bonded leather, listed the product’s composition on a label, and sold samples of Next Leather to 25 furniture manufacturers, so they could show furniture made with NextLeather at the 2007 Spring High Point Market.  Prior to the Market, Ashley Furniture (“Ashley”), a leading furniture manufacturer and retailer, placed a series of advertisements in a trade magazine.  One of the advertisements read in part “‘Is it REALLY LEATHER? . . .  Some upholstery suppliers are using leather scraps that are misrepresented as leather . . . .  Know What You Are Buying . . . .’”  In July, 2007, the same trade publication published two articles.  In the first article, entitled “‘Chemist fears confusion over imitators may hurt category,’” Dr Cory was quoted saying that calling leather alternatives, like bonded leather, leather was deceptive and fraudulent, and that bonded leather was not leather, but a synthetic material with leather fibers on the bottom.  The second article advocated against calling bonded leather by that name as being confusing to consumers who would think it to be leather.  Dr. Cory was quoted as saying that calling bonded leather by that name was deceptive and not representative of its vinyl or polyurethane composite nature.  

In February 2010, DRI sued Ashley, Ashley’s president, LIA, and Dr. Cory for false advertising under the Lanham Act, and for violations of various North Carolina and Washington laws.  The district court dismissed Ashley’s president and Dr. Cory for lack of personal jurisdiction.  DRI argued that the Ashley ad targeted DRI because DRI was the only company selling the type of product the advertisement described, and the advertisement was false, because DRI did not market its product as leather.  DRI argued that, in the first article, Dr. Cory accused DRI of selling a fraudulent product, but that they did not sell NextLeather as leather.  Regarding Dr. Cory’s statement in the second article, DRI argued that it was false because marketing NextLeather as bonded leather was both allowed and encouraged.  Finally, DRI argued that the advertisement and articles damaged its customer relationships. DRI moved for partial summary judgment, and Ashley and LIA cross-moved for summary judgment.  The district court granted summary judgment to Ashley and LIA, finding that DRI failed to present sufficient evidence that the advertisement or articles were false or misleading.  

To establish a claim for false advertising under the Lanham Act, the Plaintiff must first show that the Defendants made a false or misleading statement or representation of facts in a commercial advertisement.  The Fourth Circuit found that DRI did not meet that first element, and therefore affirmed the district court without analyzing the other elements of a false advertising claim.

With regard to the advertisement, the Fourth Circuit first found that it could not be literally false, since it referred to products marketed as leather, not as bonded leather, like NextLeather.  The Fourth Circuit also found that the advertisement could not be literally false by implication, since finding falsehood in the advertisement would require going beyond the face of the advertisement to the context of the advertisement.  Finally, the court found that the advertisement could not be impliedly false, because DRI did not show that consumers were confused by the advertisement.

The Fourth Circuit next analyzed the two articles.  In regards to the first article, the Fourth Circuit found that Dr. Cory’s statement could not be false because it was true.  In regards to the second article, the Fourth Circuit found Dr. Cory’s statement was not false advertising, because the statement was a hypothesis rather than implying a fact, and opinions are not actionable under the Lanham Act.

For these reasons, the Fourth Circuit affirmed the district court’s grant of summary judgment to the Defendants.

Full Opinion

Katherine H. Flynn

 

THE RADIANCE FOUND., INC. v. NAT’L ASS’N FOR THE ADVANCEMENT OF COLORED PEOPLE, NO. 14-1568

Decided: May 19, 2015

The Fourth Circuit held that The Radiance Foundation (“Radiance”) neither infringed upon, nor diluted through tarnishment, the National Association for the Advancement of Colored People’s (“NAACP”) trademarks when Radiance authored an article entitled “NAACP: National Association for the Abortion of Colored People.”  The Fourth Circuit vacated the district court’s injunction against Radiance, and remanded to the court with instructions to dismiss the NAACP’s counterclaims for trademark infringement and dilution. 

NAACP is the nation’s largest and oldest civil rights organization, and owns several trademarks, including “NAACP,” and “National Association for the Advancement of Colored People.” Radiance is a non-profit which seeks to educate the public from a Christian perspective about issues impacting the African-American community.  In January, 2013, Radiance’s founder wrote an article entitled “NAACP: National Association for the Abortion of Colored People,” which criticized the NAACP’s Image Awards, ties to Planned Parenthood, and its purported position on abortion.  The article appeared on two Radiance websites, and one third-party site, in somewhat different formats.  On both Radiance websites, the article appeared next to a link to donate to Radiance.  On the third-party site, the NAACP’s Scales of Justice graphic was beneath the article headline.  The NAACP sent a cease-and-desist letter to Radiance.  Radiance brought a declaratory action, arguing that it had neither infringed upon, nor diluted, NAACP’s trademarks, and that its use of the marks was protected under the First Amendment.  The NAACP counterclaimed for trademark infringement and trademark dilution.  The district court found for the NAACP on all claims, and granted a permanent injunction prohibiting Radiance from using “National Association for the Abortion of Colored People” in a way that created the likelihood of confusion or dilution among consumers.  Radiance appealed to the Fourth Circuit.

The Fourth Circuit began its analysis by noting the  values behind the Lanham Act and the First Amendment.  The Lanham Act, which protects trademarks from infringement and dilution, protects consumers from confusion in the marketplace.  The First Amendment provides for free expression of ideas.  To prevent the two from conflicting, for infringement to occur under the Lanham Act, the infringer must use the trademark holder’s mark “‘in connection with’ goods or services in a manner that is ‘likely to cause confusion’” as to the source of the goods or services.  The Fourth Circuit first found that Radiance had not used the NAACP’s marks in connection with the sale, or offering for sale, of goods or services. The speech here, the court found, was more political or social than commercial in nature while the language of the Lanham Act statute requires something more like commercial speech for the mark to have been used “in connection with” the sale of goods or services.  The court argued that, to extend Lanham Act protections against infringement to the trademark use here would bring the Act into conflict with the First Amendment, especially given that the definition of a good or service remains fuzzy.  The Fourth Circuit also countered the district court’s argument that Radiance had used the mark in connection with its goods or services because the Radiance article appeared in a Google search for “NAACP,” thereby potentially sending users to Radiance’s article, instead of NAACP’s websites, and thus creating a connection to NAACP’s goods and services.  The Fourth Circuit reasoned that the Lanham Act usually protects against use of the mark in connection with the infringer’s goods, not the trademark holder’s. The court further reasoned that Radiance used the trademark only in the article title, not in the website domain name, which previous case law had held to be enough for a mark to be used “in connection with” the sale of goods or services.  The court found that Radiance did not use the marks in close enough connection with the sale, or offer for sale, of any of its own goods or services, since it only provided information on its websites, and the use of the marks was too attenuated from the donation seeking on the sites.

The Fourth Circuit also found that there was no likelihood of confusion from Radiance’s use of the NAACP’s trademarks.  The district court found such confusion in part because surveys showed people thought NAACP stood for National Association for the Abortion of Colored People.  The Fourth Circuit, however, reasoned that trademark protections protect against confusion about the source of goods, not the marks themselves, nor the position of the trademark holders on political or social issues.  Further, the court thought it unlikely that consumers would think an article highly critical of the NAACP was from the NAACP.  The court felt that this was particularly true given the satirical nature of the mark use, the fact that the domain names and webpage headings where the article appeared indicated organizations other than the NAACP, and the fact that the trademark was used in a title, which is generally supposed to be about article contents, not authorship.

Finally, the Fourth Circuit found that there was no dilution by tarnishment here.  The Lanham Act prohibits using another’s mark in commerce in a way that dilutes the mark’s value by harming the reputation of the mark, but the Act provides explicit exceptions for: 1) fair use, 2) news reporting and news commentary, and 3) noncommercial use.  The Fourth Circuit found that the NAACP showed a prima facie case for dilution by tarnishment, but Radiance’s use was both a fair use, and a noncommercial use.  Radiance’s use was a fair use because it used the mark to critique the NAACP.  Radiance’s use was noncommercial because the article was not an advertisement, and the possibility of donating to Radiance on the website where the article appeared was not sufficient to make the use commercial.  Further, a reasonable consumer was unlikely to read the article as offering a transaction.  On this basis, and upholding Radiance’s First Amendment right to free speech, the Fourth Circuit vacated the district court’s injunction against Radiance

Full Opinion

Katherine H. Flynn

VONROSENBERG v. LAWRENCE, NO. 14-1122

Decided: March 31, 2015

The Fourth Circuit held that in considering whether to abstain in cases where a plaintiff seeks both declaratory and nondeclaratory relief, a federal court’s task is to determine whether exceptional circumstances justify surrendering jurisdiction.

This appeal arises from a dispute between two clergymen who each believe himself to be the leader of the Protestant Episcopal Church (the “Church”) in the Diocese of South Carolina.  Bishop Mark Lawrence (“Lawrence”) was allegedly ousted from his position as Bishop of the Dioscese of South Carolina in December 2012.  Bishop Charles VonRosenberg (“VonRosenberg”) was elected and installed by a Convention of the Diocese to be Lawrence’s replacement.  On January 4, 2013, Lawrence filed suit in South Carolina alleging service mark infringement and improper use of names, styles, and emblems under state law.  VonRosenberg subsequently filed the present action seeking declaratory and injunctive relief, alleging that Lawrence improperly continued to use the Church’s service marks and falsely advertised himself as leader of the Church after he had been replaced, in violation of the Lanham Act, 15 U.S.C. §§ 1114, 1125(a)(1)(A) (2012).  Lawrence asked the District Court to abstain in favor of the pending state court proceedings.  The District Court of South Carolina granted Lawrence’s motion to abstain, relying on doctrine articulated in Brillhart v. Excess Insurance Co. of America, 316 U.S. 491 (1942) which gives courts “broad discretion to … decline to grant[] declaratory relief”.

The Fourth Circuit ultimately concluded that the district court had used the wrong standard when it decided to abstain.  The Brillhart/Wilton standard used by the district court gives federal courts broad discretion to abstain from deciding declaratory judgment actions when concurrent state proceedings are underway.  The Fourth Circuit noted that it had never expressly held which abstention standard applies to a federal complaint, like VonRosenberg’s, which asserts claims for declaratory and nondeclaratory relief.  The Fourth Circuit rejected the Brillhart/Wilton standard in mixed cases because it would “deprive a plaintiff of access to a federal forum simply because he sought declaratory relief in addition to an injunction or money damages.”  Ultimately, the Court adopted the Colorado River standard for all cases where a plaintiff seeks declaratory and nondeclaratory relief.  The Colorado River standard states that a federal court’s task is to “ascertain whether there exists ‘exceptional’ circumstances . . . to justify the surrender of [federal] jurisdiction.”  Colorado River Water Conservation District v. United States, 424 U.800, 813 (1976).  The Court further stated that the only exception to the standard arises when a party’s request for the nondeclaratory relief is frivolous or only made to avoid the Brillhart standard.  Because the district court did not apply the Colorado River standard, the Fourth Circuit vacated the District Court’s decision and remanded for further proceedings consistent with its opinion.

Full Opinion

William Yarborough

GEORGIA-PACIFIC CONSUMER PRODS. V. VON DREHLE CORP., NO. 13-2003

Decided: March 30, 2015 

The Fourth Circuit vacated, reversed in part, and remanded in part the judgment of the district court that von Drehle’s infringement justified a permanent, nationwide injunction, treble damages, attorney’s fees, and prejudgment interest.

Von Drehle produced paper towels that were capable of being used in Georgia-Pacific Consumer Products LP’s (“Georgia-Pacific”) proprietary paper-towel dispensers. In response, Georgia-Pacific launched three actions against von Drehle and its distributors alleging trademark violations. In the first two actions, the Western District of Arkansas and the Northern District of Ohio ruled against Georgia-Pacific’s claims. Both decisions were affirmed by the Eighth and Sixth Circuits, respectively. However, in the Eastern District of North Carolina, Georgia-Pacific prevailed. The Court found von Drehle’s infringement to be “willful and intentional,” and therefore issued treble damages, attorney fees, prejudgment interest, and a permanent, nationwide injunction prohibiting von Drehle from infringing Georgia-Pacific’s trademarks. Von Drehle appealed the district court’s remedies, arguing (1) the injunction was unduly broad geographically in light of the Eighth and Sixth Circuits’ rulings, (2) the court applied the wrong legal standard for trebling jury awards, (3) the court applied the wrong legal standard for awarding attorney fees, and (4) the court applied the wrong legal standard for awarding prejudgment interest.

The Fourth Circuit agreed with all of von Drehle’s arguments.  First, the Court held that the District Court abused its discretion by applying a nationwide injunction. The Court noted that to enforce an injunction in circuits that had ruled against Georgia-Pacific would be an affront to the jurisdiction of those courts and that comity required the Court to limitthe injunction to the Fourth Circuit.

Second, the Court held that the District Court applied the wrong standard to treble damages. The District Court relied upon the Larsen “willful and intentional” standard, which applies only to recovery under § 1117(b) for the knowing and intentional use of a counterfeit trademark. The Court found Larsen to be inapplicable because von Drehle was not accused of using a counterfeit mark.  The Court also found § 1117(a) to be inapplicable because the damages trebled were based upon profits, whereas § 1117(a) allows for trebling damages only for actual damages.

Third, the Court held that the District Court erred in finding “exceptional” circumstances to grant attorney’s fees because the District Court conflated von Drehle’s willful and intentional conduct with the proper standard, which requires willful and intentional infringement. The Court noted that the Supreme Court’s decision in Octane Fitness provided guidance that attorney’s fees are appropriate where the non-prevailing party’s position is either frivolous or objectively unreasonable. The Court found von Drehle’s position to be reasonable, in spite of the finding of infringement, and therefore rejected attorney’s fees.

Finally, the Court rejected prejudgment interest on similar grounds as its rejection of treble damages and attorney’s fees. Because von Drehle did not use a counterfeit mark, nor were there exceptional circumstances, the Court found no circumstances to justify prejudgment interest. Accordingly, the Court vacated, reversed, and remanded the District Court’s order.

Full Opinion

Robert I. Smith, III

 

MCAIRLAIDS, INC. v. KIMBERLY-CLARK CORP., NO. 13-2044

Decided: June 25, 2014

The Fourth Circuit held that a genuine issue of material fact existed for the jury to determine whether McAirlaids’ pixel pattern on absorbent pads was functional or merely an ornamental device.

McAirlaids, Inc., patented its manufacturing process for making absorbent pads, but it also registered its pixel pattern, which involved a repeating pattern of dots that fused the absorbent materials together, as trade dress with the U.S. Patent and Trademark Office.  McAirlaids initiated a suit against Kimberly-Clark Corp. after Kimberly-Clark began using a similar dot pattern on its absorbent bed mats, which are manufactured in a different way than McAirlaids’ pads.  The district court granted summary judgment to Kimberly-Clark on the issue of whether McAirlaids’ pixel pattern was functional, and thus not protectable as trade dress.

The Fourth Circuit emphasized that summary judgment is only appropriate when there is no genuine issue of material fact.  In this case, the Court addressed the issue of whether the pixel pattern used in the bonding process by McAirlaids for its absorbent pads was functional.  Functionality is generally a question for a jury.  In re Becton, Dickinson & Co., 675 F.3d 1368, 1372 (Fed. Cir. 2012); Clicks Billiards, Inc. v. Sixshooters, Inc., 251 F.3d 1252, 1258 (9th Cir. 2001).  Trademark law indefinitely protects designs that link a product with its manufacturer, TrafFix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23, 28 (2001); whereas, patent law protects new product designs, or functions, for a limited time, Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 164 (1995).  The functionality doctrine promotes competition by preventing trademark law, which protects competition by protecting a firm’s reputation, from impeding competition by allowing the inventor to monopolize a useful product design or function.  Qualitex, 514 U.S. at 164.  The functionality doctrine has been incorporated into the Lanham Act.  15 U.S.C. § 1052(e).  Proof of a design element’s functionality is a complete defense in trademark-infringement cases.  Shakespeare Co. v. Silstar Corp. of Am., 9 F.3d 1091, 1102 (4th Cir. 1993).

The Fourth Circuit distinguished this case from TrafFix, where the U.S. Supreme Court reasoned that the design feature in question was “the reason the device works” and determined that the product design was functional based on evidence of other utility patents and evidence of the product designs functionality.  Id. at 33–34.   First, the burden of proof was different because in TrafFix the design element was not registered as a trade dress.  Additionally, the defending party had to show that the design element was nonfunctional under the Lanham Act.  15 U.S.C. § 1125(a)(3).  However, in this case, the design element was registered as a trade dress, which serves as prima facie evidence that the design element was nonfunctional.  15 U.S.C. § 1057(b); Christian Louboutin S.A. v. Yves Saint Laurent Am. Holdings, 696 F.3d 206, 224 (2d Cir. 2012).  The Court reasoned that this prima facie evidence caused a burden shifting effect, which required the challenging party to prove that the trade dress was invalid by a preponderance of the evidence.  Second, in TrafFix, the design element was protected under utility patents.  In this case, however, the Court noted that the process of manufacturing the absorbent pads was protected by patent, but the pixel design element was not.  “[T]he pattern is not the ‘central advance’ of any utility patent” as it was in TrafFix.  The Court determined that the patents were evidence of the pixel design element’s functionality, but they were not the “strong evidence” of the patents found in TrafFix.  Thus, the Fourth Circuit found that TrafFix was inapplicable to the facts in this case.

Next, the Fourth Circuit addressed the weight given to the facts in this case by the district court, holding that McAirlaids presented sufficient evidence to demonstrate a genuine issue of material fact regarding the functionality of the design element.  Reviewing the evidence in the light most favorable to McAirlaids as the nonmoving party, the Court assessed the design element’s functionality based on four factors: (1) the existence of utility patents; (2) advertising focusing on the utilitarian advantages of a design; (3) the availability of “functionally equivalent designs[;]” and (4) the effect of the design on manufacturing.  Valu Engineering, Inc. v. Rexnord Corp., 278 F.3d 1268, 1274 (Fed. Cir. 2002) (citing In re Morton-Norwich Prods., Inc., 671 F.2d 1332, 1340-41 (C.C.P.A. 1982)).  The Court reviewed the testimony of McAirlaids officials, who stated that the pixel pattern was picked for aesthetic reasons, and at evidence of a marketing campaign that described the “unique bonding pattern” as increasing absorbency.  Testimony also indicated that other patterns could have been chosen, though these patterns must fall within certain sizing and spacing specifications to be effective.  Ultimately, the Fourth Circuit reasoned that a jury would be the most appropriate way to decide the issue because determining the functionality of design element requires credibility determinations and the weighing of evidence.

Full Opinion

Verona Sheleena Rios

Swatch AG v. Beehive Wholesale, LLC, No 12-2126

Decided: January 7, 2014

The Fourth Circuit held that the district court did not err in finding that the marks at issue in this trademark infringement case were not confusingly similar and therefore affirmed the district court’s order dismissing all claims.

This trademark infringement claim arose out of a dispute between a well-known Swiss watchmaker, Swatch AG (“Swatch”), and Beehive Wholesale, LLC (“Beehive”), a Louisiana company engaged in wholesale and retail sales of a variety of products including watches and watch parts. Swatch is the owner of three U.S. registrations for the mark SWATCH. Beehive produces and sells watch bands and faces under the mark SWAP. Beehive’s products are defined by the fact that the parts are interchangeable. Swatch brand watches, on the other hand, do not include interchangeable components. And, are typically sold at a higher price point. Beehive applied to register its mark in mid-2004. The application was preliminarily granted and published for opposition on December 26, 2005. Swatch filed a notice of opposition in April 2008, primarily arguing that the similarity between the two marks in combination with the similar character of their products was likely to result in confusion among customers as to the origin of the goods. It also argued that SWAP was too generic to be registered. The Trademark Trial and Appeal Board (“TTAB”) held a hearing on the opposition and dismissed all counts.

Swatch then filed suit and added new claims for trademark infringement and federal unfair competition under the Lanham Act; trademark dilution under the Trademark Dilution Act; state trademark infringement under Virginia law; and common law unfair competition.  Though Swatch presented documentary evidence not presented to the TTAB, the district court affirmed the TTAB, holding that there was no likelihood of confusion between the two marks and no likelihood that SWAP would dilute SWATCH. It dismissed Swatch’s infringement and unfair competition claims as a matter of law. It also concluded that Beehive’s mark is registrable because it is suggestive, not merely descriptive. This appeal followed.

On appeal, the Fourth Circuit first noted that the district court articulated its standard of review erroneously; stating de novo review of the entire record is required where new evidence is submitted. The district court, however, stated it would apply a hybrid review to its analysis. This was incorrect because the district court had evidence available that was not considered by the TTAB. Nonetheless, the court found that the district court recited sufficient facts of its own to support its opinion.

Addressing Swatch’s first challenge, the Fourth Circuit held that the district court committed no error in determining that the SWAP mark was suggestive rather than descriptive. In so doing, the court noted that the district court found that SWAP was suggestive because merely showing the mark and the product together would be insufficient to convey its attributes. Next, the court addressed Swatch’s challenge that the district court erred in holding that there was no likelihood of confusion. Rejecting this contention, the court found that the lower court properly found that despite the name of SWATCH and the similarity of the goods, the lack of similarity between the marks, lack of predatory intent, lack of similar advertising and only minimal similarity in facilities, in combination with the most significant factor, actual confusion, resulted in no likelihood of confusion between SWATCH and SWAP. In addition, because there was no likelihood of confusion between the marks, the court held, as a matter of law, that Swatch’s federal, state, and common law trademark infringement and unfair competition claims were properly dismissed. Similarly, because the two marks were found not to be confusingly similar, Swatch’s dilution claim was also properly dismissed.

Full Opinion

– W. Ryan Nichols

Bouchat v. Baltimore Ravens, L.P., Nos. 12-2543 & 12-2548

Decided: December 17, 2013

The Fourth Circuit affirmed the district court’s decision that the defendants’ use of plaintiff’s “Flying B” logo that was used as the Baltimore Ravens’ logo from 1996 to 1998 in historical films and in historical exhibits was “fair use” and thus, did not infringe on the plaintiff’s copyright.

Prior to the Baltimore Ravens’ first season in 1996, Plaintiff, Frederick Bouchat accused the Ravens of using his “Flying B” logo without his permission. After the 1998 season, the Ravens adopted a new logo on their uniforms and merchandise. Bouchat and the Ravens subsequently underwent several rounds of litigation. In this, the fifth suit between Bouchat and the Ravens, Bouchat sued the NFL and the Ravens (collectively “Defendants”) over the use of the Flying B logo in videos shown on the NFL network and photographs located on the club level of the Ravens’ stadium. The district court found that the Defendants’ limited use of the Flying B logo constituted “fair use” of the logo, and thus, was not copyright infringement. Bouchat appealed.

On appeal, the Fourth Circuit first affirmed the district court’s finding that the NFL Network’s use of the Flying B was not copyright infringement. The Flying B logo is seen in three videos: Top Ten Draft Picks, Top Ten Draft Busts, and Sound FX. In the two Top Ten videos, the Flying B logo appears for less than one second, and is seen in video clips recounting the historical careers of NFL players. The NFL’s Sound FX video features audio clips from famous Ravens’ linebacker, Ray Lewis. One of the segments features a clip of Lewis at training camp where the Flying B logo is visible on some of the players’ helmets. Another shows Lewis making a tackle where the Flying B logo is visible on a helmet for less than a second. The Fourth Circuit found that the NFL’s use of the Flying B in these instances constituted “fair use,” primarily because the use of the logo was “transformative,” meaning that the NFL “employ[ed] the quoted matter in a different manner of or for a different purpose from the original.” The court explained that the videos were intended to present some historical narrative about NFL history, and not as an identifier for the Baltimore Ravens. Furthermore, the use of the logo was so insubstantial that the court found it “can be perceived only by someone who is looking for it.” Therefore, the NFL’s use of the Flying B logo constituted “fair use” that was not copyright infringement.

Similarly, the Fourth Circuit held that the Ravens’ use of photographs featuring the Flying B logo on its club level at the Ravens’ stadium was fair use that did not qualify as copyright infringement. The club level provides fans a host of amenities including spacious seating, carpeted floors, specialty concessions, and enhanced customer service. The cost of these tickets can exceed $350 per game. Within the club level concourse, there is a timeline tracing the Ravens’ history beginning in 1881. The portion of the exhibit covering the 1996 and 1997 seasons features ticket stubs and photos bearing the Flying B logo. The court again concluded that that the use of the Flying B was “transformative.” The court emphasized that the “Flying B logo is included merely as an incidental component of this broader historical narrative.” Moreover, the “historical” focus of the timeline artifacts differs significantly from the branding and identifying purpose that the Flying B originally served. Therefore, the Fourth Circuit affirmed the district courts’ decision that Defendants did not infringe on Bouchat’s copyright of the Flying B logo.

Full Opinion

– Wesley B. Lambert

Dash v. Mayweather, No. 12-1899

Decided: September 26, 2013

Holding that the Appellant Anthony Dash (“Dash”) was not entitled to damages under 17 U.S.C. § 504(b), the Fourth Circuit affirmed the district court’s grant of summary judgment in favor of Floyd Mayweather, Jr. (“Mayweather”), Mayweather Promotions, Mayweather Promotions LLC, Philthy Rich Records, Inc., and World Wrestling Entertainment, Inc. (“WWE”), (collectively “Appellees”).

In 2005, Dash composed an instrumental track, entitled “Tony Gunz Beat” (“TGB”); however, he failed to file a copyright application until sometime in 2009 and has never received revenue from TGB. In February 2008, Mayweather contracted with the WWE, agreeing to promote and perform at Wrestlemania XXIV. The contract did not address Mayweather’s entrance music. However, the WWE communicated to Mayweather at some point prior to the event that it had selected a song. Nonetheless, on the eve of the event, one of Mayweather’s associates communicated to the WWE that Mayweather would be entering to a different song, entitled “Yep.” Mayweather’s manager represented to the WWE that Mayweather owned all rights to the song and was granting the WWE rights to use it in connection with his appearance. On March 30, 2008, Mayweather appeared at Wrestlemania XXIV, entering the arena to “Yep,” which played for approximately three minutes. Over a year later, in August of 2009, Mayweather appeared on the WWE’s live weekly program, RAW. Again, “Yep” was played in connection with his appearance. Dash claims that “Yep” combines lyrics with his now-copyrighted instrumental, TGB. Therefore, the claimed infringement is alleged to have occurred after Dash composed TGB, but before his copyright registration became effective.

At the district court level, the proceedings were bifurcated with respect to liability and damages. The parties stipulated to the existence and amount of several revenue streams associated with Wrestlemania XXIV and the August 24, 2009, RAW broadcast. The parties further stipulated that Dash had adduced no evidence indicating that the playing of the song “Yep” at the two events increased any of the WWE revenue streams beyond that which would have existed had it not been played, and that Dash had adduced no evidence that the WWE received any additional revenue beyond that which would have existed had it not been played. The parties submitted partial summary judgment motions concerning Dash’s entitlement to actual and profit damages under 17 U.S.C. § 504. To prove his damages, Dash relied on a report prepared by a retained expert, Dr. Michael Einhorn. The report discussed the amount of both actual and profit damages Dash had sustained based on the alleged infringement (the  “Einhorn Report”). The Einhorn Report listed four benchmark-licensing fees paid to other artists for the use of their music at Wrestlemania XXIV. Based on those fees, the Einhorn Report concluded that Dash’s actual damages were “no more than $3,000.” After considering the Einhorn Report, the district court concluded that Dash was neither entitled to actual nor profit damages and determined that the case need not proceed to the liability phase. Subsequently, Dash moved for reconsideration. His motion was denied and this appeal followed.

On appeal, the Fourth Circuit first addressed Dash’s entitlement to actual damages. Because Dash admitted that he never commercially exploited TGB, the burden shifted to him to provide non-speculative evidence establishing a genuine dispute as to the existence of damages. As he did at the district court level, Dash relied on the Einhorn Report’s estimation of the licensing fee he might have been paid to support his actual damages claim. After reviewing the Einhorn Report in detail, the court found that the lost licensing fee estimation was too speculative, primarily because it did not establish a fair market value for TGB rather it merely established that, in the event TGB did have a market value, it was less than $3,000.

The court noted that it was taking the opportunity to aid plaintiffs and their experts going forward by noting the many deficiencies in the Einhorn Report that compelled its conclusion. Having concluded that Dash failed to establish his entitlement to actual damages, the court next addressed his claim for profit damages. Following a summary of Fourth Circuit jurisprudence on the issue, the court held that many of the revenue streams claimed by Dash had no conceivable connection to the infringement because they involved revenues that consumers and businesses paid to Appellees, or agreed to pay Appellees, prior to discovering that “Yep” would be played. With respect to the revenue streams for which a conceivable connection arguably did exist, the court held that Dash failed to provide non-speculative evidence of a causal link between the infringement and the claimed revenues. In so holding, the court relied on the parties’ stipulations that Dash adduced no evidence that the playing of “Yep” either increased any of the WWE revenue streams or that the WWE received any additional revenue as a result of playing “Yep.”

Full opinion

-W. Ryan Nichols

Metropolitan Regional Information Systems, Inc. v. American Home Realty Network, Nos. 12-2102, 12-2432

Decided: July 17, 2013

American Home Realty Network (“AHRN”) and Metropolitan Regional Information Systems, Inc. (“MRIS”) both operate an online multiple listing service (“MLS”). MRIS brought suit against AHRN, arguing that AHRN’s unauthorized use of photographs on its MLS constituted infringement under the Copyright Act. The district court entered an injunction prohibiting AHRN from displaying MRIS’s photographs on its website. AHRN appealed the injunction, but the Fourth Circuit affirmed the district court.

MRIS operates an online MLS where it compiles property listings into a database for real estate brokers and agent subscribers. By paying an online subscription fee and assenting to terms of use, subscribers may upload their real estate listings to the MRIS database. If the listing contains photographs, subscribers must agree to irrevocably assign to MRIS the copyrights in each photograph by clicking a button to agree. In exchange, subscribers have access to all of the listings in the database and have a nonexclusive license to display those listing on their own brokerage or agency websites. MRIS affixes its mark and copyright notice to all photographs in the database. MRIS registers its copyrights to the photographs in quarterly registrations of the database as a compilation. AHRN, on the other hand, is a California real estate broker that operates a national real estate search engine. In the operation of its site, AHRN displayed listings containing copyrighted photographs from the MRIS database. The district court enjoined AHRN’s use of MRIS photographs only, and not the use of any textual elements that are considered part of the compilation. AHRN appealed the injunction.

On appeal, AHRN that the district court erred in granting a preliminary injunction for two reasons: (1) MRIS failed to properly register copyrights on the individual photographs when registering its database; and (2) MRIS does not possess a copyright interest in the photographs because MRIS’s electronic terms of use failed to adequately transfer the copyrights of the photograph from the subscribers to MRIS. The Fourth Circuit disagreed with AHRN’s first argument, finding that the registration of the database as a whole was sufficient to register the photographs contained in the compilation. The Fourth Circuit stated that courts have disagreed as to whether the failure to include the individual authors of the photographs in the copyright registration when the photographs are part of a collective work defeats copyright protection. The Fourth Circuit ultimately sided with those courts holding that the registration of a collective work is sufficient to permit an infringement action on behalf of the component works “as long as the registrant owns the rights to the component as well.” The court found that it would be “absurd and inefficient” to require the registrant of a collective work to list each author for “an extremely large number of component works.” Furthermore, the Copyright Act’s specific goal is to ease the burden on group registration.

Next, AHRN argued that MRIS failed to establish ownership in a valid copyright because the terms of use that a subscriber must assent to by clicking does not operate as a valid assignment of rights under the Copyright Act. The Fourth Circuit agreed with MRIS, however, finding that the E-Sign Act, which affirms the validity of electronic agreements, makes the click-through agreement a valid assignment, notwithstanding its electronic form. As a preliminary matter, the court noted that where, as in the present situation, the copyright author and the assignee have no dispute as to the validity of the assignment, courts typically do not allow a third party infringer to object to the validity of the assignment under the copyright act. More importantly, the court held that, under the E-Sign Act, “clicking yes” to terms of use that assign the copyrights to MRIS satisfies the assignment requirements under the Copyright Act. Although the E-Sign Act has several narrow limitations, none apply in the present case. Therefore, the court held that electronic agreements to assign copyrights are valid, and thus, MRIS is likely to succeed in establishing its ownership of copyright interests in the copied photographs.

Full Opinion

– Wesley B. Lambert

Building Graphics v. Lennar Corp., No. 11-2200

Decided:  February 26, 2013

The Fourth Circuit affirmed the district court’s award of summary judgment in favor of Defendants, Lennar Corporation, Lennar Carolinas, LLC, and Drafting & Design, Inc., concluding that the Plaintiff, Building Graphics, Inc., lacked sufficient evidence to support a prima facie case of copyright infringement.

Plaintiff alleged that Defendants infringed on three home plans that Plaintiff created and obtained copyrights for, and Plaintiff sought damages and injunctive relief against Defendants.  Defendants subsequently filed motions for summary judgment, which the district court granted after “concluding there was insufficient evidence on critical elements of [Plaintiff’s] infringement claim.”  The Fourth Circuit reviewed the district court’s decision de novo and stated that in order “‘[t]o establish a claim for copyright infringement, a plaintiff must prove that it owned a valid copyright and that the defendant copied the original elements of that copyright.’”  (citation omitted).  Because the Court found that it was clear that Plaintiff held valid copyrights to the three plans at issue, it determined the question on appeal to be “whether Lennar copied Building Graphics’ house plans.”  After noting that “[c]opying can be proved through direct or circumstantial evidence” and that direct evidence in copyright infringement claims is often hard to establish, the court focused on whether the Plaintiff had successfully relied on circumstantial evidence in its infringement claim.

To establish a copyright claim based on circumstantial evidence, the Court found that Plaintiff needed to satisfy two elements: (1) “that it is reasonably possible that Lennar had access to the Building Graphics plans,” and (2) “‘that the defendant’s work is ‘substantially similar’ to the protected material.’”  (citation omitted).  In order to satisfy the first element, the Court stated that Plaintiff must “demonstrat[e] that the infringer had an opportunity to view or to copy the protected material” and “must establish more than a ‘mere possibility that such an opportunity could have arisen” such that it is “‘reasonably possible that the paths of the infringer and the infringed work crossed.’”  (citation omitted).  After reviewing precedent cases, the Court concluded that Plaintiff “has not shown a chain of events or wide dissemination sufficient to show a reasonable possibility that Lennar had access to [its] plans.”  It found that the facts and circumstances of the case “amount[ed] to inferences built upon inferences” which “do not give rise to more than a mere possibility of access.”  Thus, the Court held that the Plaintiff had failed to establish the first element required to substantiate its copyright claim, and it affirmed the district court’s grant of summary judgment in favor of the Defendants.

Full Opinion

– Allison Hite

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