IP Law Chat : IP Law Chat -- Hendricks & Lewis, intellectual property, trademark, copyright and technology attorneys

This case involved Rosetta Stone's appeal from the district court's grant of Google's motion to dismiss and motion for summary judgment on Rosetta Stone's trademark-related claims.  (The district court's order on the motion to dismiss is found here; its order on the motion for summary judgment is found here.)

Rosetta Stone in essence alleged that Google's policies allowing advertisers both to purchase keywords, including trademarks, that trigger the advertiser's ad and link when the keyword is searched and to use trademarks in the ad text itself created a likelihood of confusion and actual confusion that misled consumers to purchase counterfeit ROSETTA STONE software.

Rosetta Stone sued Google for direct, contributory, and vicarious trademark infringement, trademark dilution, and unjust enrichment.

As noted, Google's motion to dismiss Rosetta Stone's unjust enrichment claim was granted as was its summary judgment motion on all remaining claims.  The Fourth Circuit reversed the district court's order on the direct infringement, contributory infringement, and dilution claims but affirmed it on the vicarious infringement and unjust enrichment claims.

First, the issues on which the Fourth Circuit reversed the district court.

As to Rosetta Stone's direct trademark infringement claim, the Fourth Circuit concluded that the district court had erred both in finding that there was no genuine issue of material fact as to whether Google's use of the ROSETTA STONE mark created a likelihood of confusion and in concluding that the functionality doctrine shielded Google from liability.

On the likelihood of confusion issue, the Fourth Circuit concluded that the district court had inappropriately viewed the evidence as it would in a bench trial and that there was sufficient evidence of three of the likelihood of confusion factors--intent, actual confusion, and consumer sophistication--to create a genuine issue of fact precluding summary judgment.

As to the district court's conclusion that the use of the ROSETTA STONE marks as keywords was protected by the functionality doctrine and therefore non-infringing, the Fourth Circuit held that the district court had improperly focused on whether the marks made Google's product more useful when the appropriate question was whether the marks were functional as Rosetta Stone used them.  Because there was nothing functional about Rosetta Stone's use of its own marks, the Fourth Circuit rejected the functionality doctrine as an affirmative defense available to Google.

On contributory infringement, the Fourth Circuit concluded that there was sufficient evidence "to establish a question of fact as to whether Google continued to supply its services to known infringers," and thus reversed the district court's decision to the contrary.

 As to the dilution claim, the Fourth Circuit concluded that neither basis for the district court's decision supported a grant of summary judgment.

The Fourth Circuit concluded that the district court had erred in requiring Rosetta Stone to establish, as part of its prima facie case, that Google was using the ROSETTA STONE marks as source identifiers for Google's own products and basing that requirement on the fair use defense available under the Federal Trademark Dilution Act ("FTDA").

Not only was it Google's rather than Rosetta Stone's obligation to establish fair use, the Fourth Circuit concluded that the district court had erred in making "nontrademark use coextensive with the 'fair use' defense."  Specifically, the Fourth Circuit held that the FTDA's fair use defense required a showing both "that defendant's use was 'other than as a designation of source'" and that "defendant's use . . . qualif[ied] as a 'fair use.'"

The Fourth Circuit likewise concluded that the district court had improperly focused only on the fact that Rosetta Stone's brand awareness had increased since Google had revised its trademark policy in finding that Rosetta Stone had failed to show that use of the marks was likely to impair the distinctiveness or harm the reputation of its marks.  On remand, the Fourth Circuit stated that the district court should address other factors that may inform its determination of that question.

The Fourth Circuit also directed the district court on remand to reconsider whether Rosetta Stone's mark was famous for purpose of its dilution claim, which required a determination of when Google made its first allegedly diluting use of the mark and whether the mark was famous at that point.

Second, the two issues on which the Fourth Circuit affirmed the district court's decision.

On the vicarious infringement question, the Fourth Circuit concluded that Rosetta Stone's evidence that Google jointly controls the appearance of ads or sponsored links on its search-results page was not evidence "that Google acts jointly with any of the advertisers to control the counterfeit ROSETTA STONE products" and therefore summary judgment in favor of Google was proper.

And as to the unjust enrichment claim, the Fourth Circuit concluded that Rosetta Stone's allegations were insufficient to withstand even a motion to dismiss and thus affirmed the district court's order.  Specifically, the Fourth Circuit held that "Rosetta Stone failed to allege facts showing that it 'conferred a benefit' on Google for which Google 'should reasonably have expected' to repay."

Rosetta Stone alleged that Google's keyword auctions of the ROSETTA STONE marks was an involuntary benefit that it conferred on Google and that Google is therefore "knowingly using the goodwill" established by those marks to derive revenues.  But the Fourth Circuit concluded that Rosetta Stone had not "alleged facts supporting its general assertion that Google 'should reasonably have expected' to pay for the use of marks in its keyword query process."

The case cite is Rosetta Stone Ltd. v. Google, Inc., No. 10-2007 (4th Cir. Apr. 9, 2012).

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Because this decision was well covered during my hiatus from blogging, I'll (try to) keep this brief.

In June 2010, the Southern District of New York granted summary judgment in favor of YouTube on all of Viacom's copyright claims, finding that YouTube was entitled to the protections of the Digital Millennium Copyright Act's ("DMCA") safe harbor provisions.  (SDNY's decision here; my discussion of the decision here.)

On appeal, the Second Circuit:

• concluded that the SDNY correctly held that the safe harbor provision of Section 512(c)(1)(A) "requires knowledge or awareness of facts or circumstances that indicate specific and identifiable instances of infringement";
• concluded that the "willful blindness doctrine" may apply "in appropriate circumstances" to demonstrate the knowledge or awareness of specific instances of infringement required under Section 512(c)(1)(A);
• vacated the grant of summary judgment because a reasonable jury could conclude that YouTube had the requisite knowledge or awareness under Section 512(c)(1)(A) and remanded for the SDNY to determine that issue and to consider the application of the "willful blindness doctrine";
• concluded that the SDNY erred "by requiring 'item-specific' knowledge of infringement in its interpretation of the 'right and ability to control' infringing activity under 17 U.S.C. 512(c)(1)(B)," and reversed and remanded for further fact-finding on the issues of control and financial benefit;
• concluded that the SDNY "correctly held that three of the challenged YouTube software functions--replication, playback, and the related videos feature--occur 'by reason of the storage at the direction of a user' within the meaning of 17 U.S.C. 512(c)(1)," but remanded for further fact-finding regarding a fourth software function, specifically involving syndication of YouTube videos to third parties.

In case its directions for remand were not clear, the Second Circuit also specifically directed that the parties be allowed to brief specific issues "with a view to permitting renewed motions for summary judgment as soon as practicable," including:

• "Whether, on the current record, YouTube had knowledge or awareness of any specific infringements (including any clips-in-suit not expressly noted in this opinion);"
• "Whether, on the current record, YouTube willfully blinded itself to specific infringements;"
• "Whether YouTube had the 'right and ability to control' infringing activity within the meaning of [Section] 512(c)(1)(B); and"
• "Whether any clips-in-suit were syndicated to a third party and, if so, whether such syndication occurred 'by reason of the storage at the direction of the user' within the meaning of [Section] 512(c)(1), so that YouTube may claim the protection of the [Section] 512(c) safe harbor."

The case cite is Viacom Int'l, Inc. v. YouTube, Inc., Docket Nos. 10-3270-cv, 10-3342-cv (2d Cir. Apr. 5, 2012).

There was extensive coverage of the Second Circuit's decision but Eric Goldman's Technology & Law Blog provides an excellent discussion of the case as well as a number of links to case materials.

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Skydive Arizona apparently owns and operates one of the largest skydiving centers in the world, including providing planes and personnel for skydiving events in 30 states other than Arizona.  It has operated under the mark "SKYDIVE ARIZONA" since 1986.

The defendants, referred to as SKYRIDE, operated an internet and telephone-based service that made skydiving arrangements and issued certificates that could be redeemed at various drop zones around the country.  SKYRIDE owned and operated numerous related websites and registered a number of domain names specific to Arizona including skydivearizona.net, arizonaskydive.com, and skydivingarizona.com.

Skydive Arizona did not advertise with or accept certificates issued by SKYRIDE.

Skydive Arizona sued SKYRIDE for false advertising, trademark infringement, and cybersquatting under the Lanham Act.  Skydive Arizona alleged that SKYRIDE misled consumers as to SKYRIDE's ownership of skydiving facilities in Arizona when in fact SKYRIDE neither owned nor operated any such facilities.  Skydive Arizona also alleged that SKYRIDE misled consumers into believing that Skydive Arizona would accept SKYRIDE's certificates.

The district court entered summary judgment in Skydive Arizona's favor for false advertising and a jury found in its favor on the remaining claims, awarding $1 million in damages for willful false advertising, $2.5 million in actual damages for willful trademark infringement, more than $2.5 million in lost profits, and statutory damages of $100,000 for each of six violating domain names.

Post-verdict, the district court doubled the jury's actual damages awards for false advertising and trademark infringement, raising those awards to $2 million and $5 million, respectively.

After quickly affirming the district court's grant of summary judgment in favor of Skydive Arizona on the false advertising claim, the Ninth Circuit addressed the "gravamen" of the appeal, namely, the district court's decision on damages.

The Ninth Circuit affirmed the district court's upholding of the jury's award of actual damages and lost profits and rejected SKYRIDE's contention that the entire judgment should be vacated because it was grossly excessive and punitive.

The Ninth Circuit disagreed, however, with the district court's damages enhancement.  Although the Lanham Act allows an award of up to triple the amount of lost profits, actual damages, and costs to compensate the mark holder, it "has been construed to expressly forbid the award of damages to punish an infringer."  But the Ninth Circuit concluded that the district court's damages-enhancement decision had an improper "punitive motivation" requiring reversal of the enhancement of the actual damages award.

As modified by the Ninth Circuit's decision, Skydive Arizona was thus awarded $1 million in actual damages for false advertising, $2.5 million in actual damages for trademark infringement, $2,500,004 in lost profits for the infringement, and $600,000 in statutory damages for cybersquatting.

Judge Noonan wrote an opinion dissenting in part on the question of whether there was proof of harm to Skydive Arizona's goodwill to support the $2.5 million in damages.

The case cite is Skydive Arizona, Inc. v. Quattrocchi, No. 10-16099 (9th Cir. Mar. 12, 2012).

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This case involved a number of trademark issues but one seemed more interesting. 

National Business Forms & Printing ("NBFP") is a commercial printer that makes signs, stickers, banners, decals and the like.  Ford Motor sued NBFP for, among other claims, trademark infringement and dilution under the Lanham Act for NBFP's use of 14 of Ford's trademarked logos on these materials.

As to the dilution claim, although the district court concluded that the Ford marks at issue were famous, it found that NBFP had not made "use" of the marks in identifying its own goods or services as required by the Trademark Dilution Revision Act ("TDRA") in filling printing orders from used car dealers.

The Fifth Circuit agreed with the district court "that NBFP did not 'use' Ford's marks (as the TDRA contemplates that term) in identifying or distinguishing its own goods or services merely by reproducing them for customers as part of its commercial printing business" and therefore Ford's dilution claim failed.

The case cite is Nat'l Bus. Forms & Printing, Inc. v. Ford Motor Co., No. 10-20023 (5th Cir. Feb. 16, 2012).

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Louis Vuitton sued defendants for trademark counterfeiting and infringement under the Lanham Act and the district court awarded it $3 million in statutory damages and more than $500,000 in attorneys' fees.

On appeal, defendants argued, in part, that by electing to receive statutory damages under 15 U.S.C. 1117(c), Louis Vuitton waived its ability to receive an attorneys' fee award because subsection (c), unlike subsections (a) and (b), did not explicitly provide for such an award.

Subsection (a) provides that a plaintiff may be entitled "to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action."  15 U.S.C. 1117(a).  The last sentence in subsection (a) states that the "court in exceptional cases may award reasonable attorney fees to the prevailing party."

Subsection (c), dealing with the use of counterfeit marks, provides that the plaintiff may elect to recover statutory damages "instead of actual damages and profits under subsection (a)[.]"  No explicit mention is made to an award of attorneys' fees (or costs for that matter).

Acknowledging that district courts had gone both ways on the issue (and in some cases have simply avoided explicitly answering the question) and noting that the Ninth Circuit had explicitly identified but not answered this specific question, the Second Circuit ultimately concluded that an election of statutory damages under subsection (c) did not preclude an award of attorneys' fees in "exceptional cases" under subsection (a).

The case cite is Louis Vuitton Malletier S.A. v. LY USA, Inc., Docket No. 08-4483-cv(L) (2d Cir. March 29, 2012).

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Time for a few brief mentions of interesting cases and developments in the law after another busy period which kept me from blogging. 

Jack Urbont sued Sony and others alleging copyright infringement and New York common law claims relating to his rights to the musical composition and sound recording of the "Iron Man Theme."  Sony moved to dismiss in part Urbont's copyright infringement claims relating to alleged infringements occurring prior to May 21, 2007, asserting that those claims were untimely.

The question presented to the Southern District of New York was the proper rule to apply to determine when a copyright infringement claim "accrued" under the Copyright Act, 17 U.S.C. 507(b).

Sony urged the injury rule, under which a claim accrues at the time of each act of infringement regardless of the copyright owner's knowledge of the infringement.  Urbont, in turn, urged the discovery rule, under which a claim does not accrue until the copyright owner knows or has reason to know of the injury that forms the basis of the copyright infringement claim.

The SDNY noted that neither the Supreme Court nor the Second Circuit has ruled on the accrual rule applicable to federal copyright infringement claims and that district courts in the Second Circuit had followed both rules at different times.

But, after noting that since the 2004 decision in Auscape Int'l v. Nat'l Geographic Soc'y, 409 F. Supp. 2d 235 (S.D.N.Y. 2004), a majority of the district courts had applied the injury rule, and after its own review of the legislative history of the Copyright Act and Supreme Court and Second Circuit guidance, the SDNY concluded that the injury rule provided the appropriate approach for determining when a copyright infringement claim accrues.

The case cite is Urbont v. Sony Music Entm't, 11 Civ. 4516 (NRB) (S.D.N.Y. March 27, 2012).

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The Supreme Court granted cert yesterday in a Second Circuit case addressing the question of the applicability of the first sale doctrine of the Copyright Act to copyrighted works that are legally acquired abroad and then resold in the United States.  The Second Circuit concluded that the first sale defense in Section 109(a) of the Copyright Act applies only to copies of copyrighted works manufactured in the United States.

The case cite is Kirtsaeng v. John Wiley & Sons, Inc., No. 11-697.

You can find the original post about the Second Circuit's opinion here.

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Kinbook, LLC developed an application available on Facebook intended to allow the sharing of online messages, photos and videos among friends and family.  The application allows users to create private "sub-social" networks and upload data to offsite storage.

After learning that Facebook had aggressively opposed trademark applications for "_____Book" formative marks for applications connected with Facebook, Kinbook decided to name its Facebook application "Kinbox" and "Munchkinbox" (the latter being for use by children and their family).

Kinbook launched its application on Facebook in December 2009 and its marks were registered with the PTO in September 2010.

In November 2010, Microsoft released the "Kinect" gaming sensor for use in connection with its XBOX 360 console.  The "Kinect" is a hardware sensor that allows a user to operate and interface with the XBOX 360 using gestures and spoken commands.

Also, in April 2010, Microsoft launched a new line of mobile smartphones known as "Kin One" and "Kin Two."  Two months later, Microsoft announced that it would cease production of the "Kin" phones.

 Claiming that Microsoft's "Kinect" mark was confusingly similar to its "Kinbox" mark, Kinbook sued Microsoft for unfair competition and reverse trademark infringement under the Lanham Act.  Microsoft moved for summary judgment and the District Court granted its motion.

The District Court's opinion contains no surprises or new statements of law but is still a worthwhile read for its resolution of the likelihood of confusion question in a concise and straightforward manner that is peppered with a sense of humor.

One example is the court's discussion regarding the "sophistication of the consumers" factor of the likelihood of confusion analysis.  According to Microsoft, its target audience for XBOX 360 users is 5 to 80 years of age, which led Kinbook to argue that the court should look to the least sophisticated consumer, namely, the 5-year-old, who could easily confuse "Kinbox" and "Kinect."  The District Court was not impressed with the argument:

First, it would be completely unreasonable to assign a 5 year-old as "the reasonably prudent purchaser" for the purposes of this analysis.  No matter what else the ever-remarkable current-day precocious 5 year-old can accomplish, this Court cannot fathom a 5 year-old with either the faculties or the financial means to independently purchase a retail item costing hundreds of dollars.  Second, even the hypothetical precocious 5 year-old dispatched by indulgent parents (or grandparents) to make her or his own selections of amusement would likely be able to distinguish between a free software application, and a $150 piece of gaming hardware.

The court also rejected the argument that the fact that the parties both marketed their products on the internet, and specifically Facebook, increased the likelihood of confusion, noting that "advertising on the internet and, more specifically, on Facebook has become vast and indiscriminate, and 'virtually every business today' uses the internet and Facebook for marketing purposes."

The case cite is Kinbook, LLC v. Microsoft Corp., No. 10-4828 (E.D. Pa., Jan. 24, 2012).

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UPDATE: Back in June 2010, I wrote about the Tenth Circuit's decision in Golan v. Holder, Nos. 09-1234 & 09-1261 (10th Cir. June 21, 2010), which upheld the constitutionality of Section 514 of the Uruguay Round Agreements Act (URAA).  The URAA granted copyright protection to certain foreign works that had been in the public domain in the United States.  To round out the discussion of the case, see here for the Supreme Court's January 2012 decision agreeing with the Tenth Circuit and concluding that Section 514 is constitutional.

And for more history on the case, here is my original report on the case from June 2010:

Plaintiffs are various persons and entities who made their livelihoods by performing, distributing and selling public domain artistic works.  Plaintiffs brought this action challenging the constitutionality of the Copyright Term Extension Act and Section 514 of the Uruguay Round Agreements Act (URAA), the latter of which granted copyright protection to certain foreign works that had been in the public domain in the United States.  Somewhat more specifically, Section 514 restored "copyrights in foreign works that were formerly in the public domain in the United States for one of three specified reasons:  failure to comply with formalities, lack of subject matter protection, or lack of national eligibility."  As a result, the plaintiffs were either prohibited from using such previously public domain works or were required to pay cost-prohibitive licensing fees to the copyright holders.  (The Tenth Circuit's opinion gives a significantly more detailed description of Section 514.)

The District Court for the District of Colorado initially granted summary judgment to the government and on appeal, the Tenth Circuit concluded that the plaintiffs' challenge to the Copyright Term Extension Act was foreclosed by the Supreme Court's decision in Eldred v. Ashcroft, 537 U.S. 186 (2003).  In addition, although the Tenth Circuit concluded that Section 514 of the URAA had not exceeded the limitations of the Copyright Clause of the U.S. Constitution, it held that the plaintiffs had "shown sufficient free expression interests in works removed from the public domain to require First Amendment scrutiny" of Section 514.  The matter was thus remanded to the District Court to determine and apply the appropriate level of constitutional scrutiny to Section 514.

Upon remand, the parties agreed that Section 514 is a content-neutral regulation of speech thereby subject to intermediate scrutiny.  On cross-motions for summary judgment, the District Court granted the plaintiffs' motion, concluding that Section 514 was unconstitutional to the extent it "suppresses the right of reliance parties to use works they exploited while the works were in the public domain."  Both parties appealed: the government argued that Section 514 did not violate the First Amendment and the plaintiffs argued that the District Court had failed to provide all of the relief they had requested.

On appeal, analyzing Section 514 as a content-neutral regulation of speech, the Tenth Circuit reversed the District Court's decision, concluding that "the government has demonstrated a substantial interest in protecting American copyright holders' interests abroad, and Section 514 is narrowly tailored to advance that interest."

As to the importance of the government interest asserted, the Tenth Circuit had "no difficulty in concluding that the government's interest in securing protections abroad for American copyright holders" satisfied the applicable standard.  Section 514 secured foreign copyrights for American works, which previously had been unprotected, and thereby preserved the authors' economic and expressive interests.  The court noted that some estimated that billions of dollars were lost each year because foreign countries were not providing copyright protections to American works in the public domain abroad.

The Tenth Circuit also concluded that Section 514 was narrowly tailored to further the substantial government interest asserted.  The court cited evidence that foreign countries could be expected to provide only as much protection to American copyright holders as the United States would provide to foreign copyright holders and that some countries might follow the United States' example in that regard.  Thus, in order to secure the benefits to American authors for their works abroad, the United States needed to impose the same burden on parties like the plaintiffs in the United States that it sought to impose on such foreign parties abroad.  In short, "the benefit that the government sought to provide to American authors is congruent with the burden that Section 514 imposes on [so-called] reliance parties."

The Tenth Circuit thus reversed the District Court's grant of summary judgment in favor of the plaintiffs, concluding that "because Section 514 advances a substantial government interest, and it does not burden substantially more speech than necessary to advance that interest, it is consistent with the First Amendment."

The case cite is Golan v. Holder, Nos. 09-1234 & 09-1261 (10th Cir. June 21, 2010).

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