Seattle Trademark Lawyer

David Donoguhe’s Chicago IP Litigation Blog features a new decision from the Northern District of Illinois.

The punch line is if you’re a corporate officer, you can’t expect to find protection behind the corporate shield if you were involved in directing your company to infringe a trademark.

That may come as a surprise, but the law’s by no means unique to the Seventh Circuit. A case out of the Central District of California last year summarizes the rule of law in these parts as well:

“An individual who personally directs a corporation in committing trademark infringement, or who personally commits those acts, is personally liable for that infringement.

“This is particularly true when a single individual is the corporation’s sole shareholder, sole officer, and sole manager, and performs the infringing acts himself; that person will be individually liable for the intellectual property infringements committed by the corporation. Such personal liability does not depend on piercing the corporate veil.”

See Partners for Health & Home, L.P. v. Seung Wee Yang, No. 09-07849, 2011 WL 5387075 (C.D. Cal. Oct. 28, 2011).

This means that regardless if you’re at the helm of a big company — or serve as both CEO and chief bottle washer at a small company — you can be personally liable if your firm is on the hook for trademark infringement.

In other words, you personal assets could be at risk. That’s not to mean the sky is falling. It’s just to say that you could have more of a personal interest in how your company’s trademark case turns out than you might have thought.

We’ve talked about what competitors can’t say about your trademark.

So what about ways competitors — and others — legally can use your trademark without your permission?

Here’s a quick list (again, not exhaustive):

• Comparative use.  Pepsi famously put its cola to the test against Coca-Cola’s in the “Pepsi Challenge.” Your competitor likewise can use your trademark in trying to sell its goods or services — as long as it’s done so in a way that’s accurate. So, your competitor can say its product is cheaper. It lasts longer. It’s more effective. It can identify your product by name. It even can identify you by name. None of that is trademark infringement or false advertising as long as the comparison doesn’t make a false statement of fact or tend to mislead consumers.
• Descriptive use. If you use SPEEDY as a trademark in connection with oil change services, you’re going to have a hard time complaining about your competitor’s use of “quick,” “fast,” or even “speedy” to tout the competing services it provides. Your trademark does not give you monopoly rights over the word. Obviously, it doesn’t remove any words from the dictionary. If your competitor isn’t using the description as a trademark — in other words, if it only uses your mark as an accurate description of its services — it’s within its rights to do so. That’s one of the down-sides to your using a descriptive trademark.
• Collateral use. You’re Brand X. You make lawn mowers. I repair lawn mowers. I’m perfectly ok advertising the fact that I repair Brand X lawn mowers. I just can’t imply that you have approved me or that we have a relationship that doesn’t exist. That usually means I can use your name but not your logo, and only so much of your name as is needed to get my message across. You have no say in the matter, unless my use suggests you have authorized me as a provider of repairs or the like.
• Nominative use. If you’re the Rolling Stones (lucky you!), there’s only so many ways someone can describe you without using your name. The “British rock group consisting of Mick Jagger, Keith Richards, Charlie Watts, and Ronnie Wood” doesn’t exactly roll off the tongue. Since it’s so much easier for me instead to refer to you as the “Rolling Stones,” I’m allowed to do so — even as part of a profit-making venture. My only limitation would be I can’t use any more of your mark (such as your logo) than is needed for me to do so. I’ll get in trouble if my use suggests an affiliation that doesn’t exist (like you approved my use). That would mean I can’t sell t-shirts with “Rolling Stones” in big letters, but I can organize and sell memberships in an unauthorized fan club.
• Parody and criticism. Your customer or former employee isn’t happy with you. If he or she wants to use your brand in a “sucks” or hater Web site saying how you’ve got a bad product or you’re a bad company, he or she can certainly do that. The information conveyed must be accurate, meaning he or she can’t say your product causes cancer if it doesn’t. But the First Amendment gives speakers broad rights to criticize. That includes making fun of your name or logo if it’s done in a way that clarifies the use doesn’t come from you and, instead, is criticizing or commenting about you.

The theme here is that fair use must be “fair.” If the use suggests an affiliation with the trademark owner, or that the owner has approved the message, that use isn’t fair (and is deceptive and illegal) if no such relationship actually exists. This is the intersection of trademark law and our constitutionally-protected right to free speech.

Yesterday’s post was about false advertising, which got me thinking…. What are things a competitor can’t do in competing with you to make a sale?

Here’s a quick rundown:

• It can’t create a likelihood of confusion with you, if you came first. This is the essence of trademark infringement. A later-adopter can’t come into your market with a name or brand that is likely, i.e., probable, to confuse consumers into thinking that its goods or services come from you, are approved by you, or are affiliated with you. It doesn’t matter if your trademark is registered, since trademark rights automatically arise from use. It doesn’t even matter if your competitor was innocent in creating the likelihood of confusion. If its brand, company name, product name, or other marketing tool tends to mislead customers into thinking your competitor’s goods or services come from you, you may be able to put a stop to it. Caveats exist, but this is where the inquiry starts.
• It can’t misrepresent its product or your product. The right to free speech isn’t unlimited. Just like you can’t yell “fire” in a crowded theater, your competitor can’t lie about the qualities of its product or make a false comparison to your products. That means Honda can say Toyota’s cars are wimpy (in its humble opinion), but it can’t say its cars get twice the gas mileage Toyotas get when that’s not true (since it’s a statement of fact that’s provably false). 
• It can’t use your trademark in its domain name. This is cybersquatting. It means no one — regardless of whether they’re a competitor — can register your trademark (or a confusingly similar variation) as part of its domain name in the hopes of either ransoming the domain name to you or profiting from Web traffic that was meant for your site. The Lanham Act provides for statutory damages that begin at $1,000 and go up to $100,000 per infringing domain name, as well as an award of attorney’s fees. Again, there are caveats, but the Anticybersquatting Consumer Protection Act gives trademark owners a big stick to use against bad actors that hope to take wrongful advantage of your brand in their domain names.
• It can’t use your brand as a search engine keyword. Maybe. This is still up in the air. But the Central District of California last year slapped one law firm from buying its competitor’s trademark as a search engine keyword, finding its doing so constituted willful trademark infringement. The court doubled the trademark owner’s lost profits to $292k and awarded it attorney’s fees. See Binder v. Disability Group, Inc., 772 F. Supp. 2d 1172 (C.D. Cal. 2011). It’s still a gray area, but Binder might get traction. It’s certainly gotten some courts’ attention.
• Other things your competitor can’t do. If your brand is a household name, no one (competitor or not) can use it in a way that would tend to lessen the impact your brand has on consumers. That’s trademark dilution. If you manufacture goods, no one can put your trademark on goods that aren’t made by you. That’s counterfeiting. A competitor can’t say its goods — most commonly agricultural products — come from your special part of the world if they don’t. (This means a shellfish company can’t say its oysters come from pristine Penn Cove when they were grown in less favorable waters.) That’s a false designation of origin. 

This list isn’t exhaustive, and there are a lot of gray areas. But hopefully this will help you put a label on your competitor’s bad acts when you know in your gut what they’re doing isn’t fair.

Next time: You mean they can get away with that? Things competitors can say about your products and you in the course of honest competition.

Skydive Arizona, Inc., has sold skydiving services under its SKYDIVE ARIZONA trademark since 1986.

Cary Quattrocchi, Ben Butler, and others, d/b/a 1800SkyRide (“Skyride”), operate an advertising service that makes skydiving arrangements for customers and issues certificates that can be redeemed at a number of skydiving drop zones.

Skydive Arizona sued Skyride in the District of Arizona for false advertising, trademark infringement, and cybersquatting. On its false advertising claim, it alleged that Skyride misled consumers wanting to skydive in Arizona by stating that Skyride owned skydiving facilities in Arizona when it did not. It also alleged that Skyride deceived consumers into believing that Skydive Arizona would accept Skyride’s skydiving certificates when it would not.

Following partial summary judgment and a trial, a jury awarded Skydive Arizona $1 million in actual damages for false advertising, $2.5 million in actual damages for trademark infringement, $2,500,004 in profits resulting from the trademark infringement, and $600,000 for statutory cybersquatting damages.

Skyride appealed the court’s finding of liability for false advertising on summary judgment on the ground its false statements were not material to consumers’ purchasing decisions. In particular, Skyride argued that customer James Flynn’s declaration that supported the materiality element was ambiguous and fell short of survey evidence that courts often accept as proof.

The Ninth Circuit wasn’t convinced. “Skydive Arizona’s decision to proffer declaration testimony instead of consumer surveys to prove materiality does not undermine its motion for partial summary judgment. Although a consumer survey could also have proven materiality in this case, we decline to hold that it was the only way to prove materiality. Indeed, as we held in Southland Sod [Farms v. Stover Seed Co., 108 F.3d 1134, 1140 (9th Cir.1997)], consumer surveys tend to be most powerful when used in dealing with deceptive advertising that is ‘literally true but misleading.’ Here, Defendants’ advertisements were both misleading and false. Flynn’s declaration proved that consumers had been actually confused by SKYRIDE’s websites and advertising representations. The district court’s materiality finding was further supported by Skydive Arizona’s evidence of numerous consumers who telephoned or came to Skydive Arizona’s facility after having been deceived into believing there was an affiliation between Skydive Arizona and SKYRIDE.”

The case cite is Skydive Arizona, Inc. v. Quattrocchi, __ F.3d. __, No. 10-16196, 2012 WL 763545 (9th Cir. Mar. 12, 2012).

Plaintiff AR Pillow, Inc., makes pillows designed to reduce acid reflux in infants.

Defendant Annette Cottrell owns pollywogbaby.com, is a former distributor of plaintiff’s pillows, and sells pillows that compete with plaintiff’s pillows.

Plaintiff sued Ms. Cottrell for trademark infringement, unfair competition, and defamation arising out of her use of plaintiff’s AR PILLOW trademark on her Web site along with the statements that she had “chosen to discontinue the product” and that the plaintiff’s pillow requires babies to bend their legs, which AR Pillow claims is false.

Plaintiff moved for a temporary restraining order or preliminary injunction seeking to stop such use.

On March 13, Western District Judge Richard Jones denied the motion, finding AR Pillow was not likely to succeed on the merits of its trademark infringement claim. In short, the court found there wasn’t much in Ms. Cottrell’s Web site that was likely to cause confusion with plaintiff’s trademark.

For example, on the “actual confusion” likelihood of confusion factor, the court noted: “Here, plaintiffs argue that there is evidence that at least one customer was actually confused by defendant’s use of the mark on her website. Plaintiffs allege that they ‘received a call from a customer seeking to cancel an order from an AR Pillow from pollywogbaby.com.’ Nothing in this allegation suggests that the customer was confused. Rather, it suggests that she was not confused because she knew that AR Pillow was different than pollywogbaby.com. Receiving unfavorable information about a product is not the same as consumer confusion.”

The case cite is AR Pillow Inc. v. Cottrell, No. 11-1962 (W.D. Wash. March 13, 2012) (Jones, J.).