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

This copyright infringement case involved two competitors that provide consulting services "aimed at improving employee communication and negotiation skills within the workplace."

The plaintiff, Situation Management Systems, Inc. ("SMS") had developed training materials focused on teaching these skills and specifically three training workbooks ("Positive Power & Influence", "Positive Negotiation Program", and "Promoting and Implementing Innovation").  After SMS was acquired in bankruptcy proceedings in 2001, a number of employees left the company, several of whom started defendant ASP. Consulting LLC ("ASP").  ASP then developed training workbooks including three that SMS claimed infringed its copyrights in its workbooks.

The district court found that ASP had in fact copied SMS's works but entered a judgment of noninfringement because it concluded that ASP's works were not substantially similar to the very limited protectable aspects of SMS's works.

The First Circuit disagreed with the district court, however, primarily with the district court's conclusions with regard to the "originality" necessary for copyright protection.  Ultimately, the First Circuit concluded that the "district court's originality analysis was obviously tainted by its own subjective assessment of the works' creative worth" which the First Circuit noted "displayed nothing but pejorative disdain for the value of SMS's works."  The quotations from the district court cited by the First Circuit appeared to support the characterization of the district court's opinion of SMS's works.

In concluding that SMS's works were "dominated by unprotectable material," the district court opined that

[t]hese works exemplify the sorts of training programs that serve as fodder for sardonic workplace humor that has given rise to the popular television show The Office and the movie Office Space.  They are aggressively vapid--hundreds of pages filled with generalizations, platitudes, and observations of the obvious.

Similar comments and characterizations are sprinkled throughout the district court's opinion along with seemingly tangential asides including a brief description of the Civil War's Battle of the Crater and a recitation of Shakespeare's Sonnet 18.  Also, in the footnote describing the Battle of the Crater, the district court stated that

[i]t is appropriate to note that law clerk Alex Ewing, Esq., the creative analyst behind this opinion, is the great-great-grandson of George Washington Condrey, a sergeant in Lane's North Carolina Brigade, who believed until his dying day that he had accidentally shot Stonewall Jackson.

And in another footnote in the district court's 34-page opinion, apparently in connection with its substantive discussion of originality, the court noted that "[a]propos of naming concepts, it is interesting to note that The Origin of the Species does not actually include the word evolution" and then quotes the passage of the book from which that word evolved.

Returning to the legal issues, the First Circuit readily concluded that SMS had satisfied the originality requirement for all of the three works at issue and remanded the case back to the district court to consider the question of substantial similarity in light of the standards articulated by the First Circuit.

The First Circuit's opinion in Situation Management Systems, Inc. v. ASP. Consulting, LLC, can be found here (PDF, 20 pages) and the District Court's (somewhat unusual) opinion can be found here (PDF, 34 pages).

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Internet Specialties West and Milon-Digiorgio Enterprises, Inc. are both internet service providers offering substantially similar services.  Internet Specialties uses the domain name "ISWest.com" and it registered that domain name in May 1996.  MDE uses the domain name "ISPWest.com", which it registered in July 1998.  Internet Specialties learned of ISPWest's existence in late 1998 but took no action against it because the company was not concerned about competition from ISPWest at that time.

After 1998, ISPWest continued to expand, including offering nation-wide service in 2002 and DSL in mid-2004.  In 2005, Internet Specialties took action, sending ISPWest a cease-and-desist letter and filing a lawsuit alleging that the use of the "ISPWest.com" domain name constituted trademark infringement under the Lanham Act.  In a bifurcated trial, the jury found that ISPWest had infringed on Internet Specialties' trademark but found no damages.  The district court in turn denied ISPWest's laches defense and issued an injunction against its use of the name "ISPWest".

The Ninth Circuit panel split on the primary issue on review--the analysis of ISPWest's laches defense to Internet Specialties' trademark infringement claim.

Both the majority and the dissent agreed on certain aspects of ISPWest's laches defense.  For example, both agreed that the laches period began in 1998, when Internet Specialties first learned of ISPWest's existence.  Because Internet Specialties did not file suit within the applicable four-year statute of limitations period starting from 1998, there was a presumption that laches applied.

But the majority and the dissent parted ways on the question of prejudice to ISPWest resulting from Internet Specialties' unreasonable delay in bringing suit for approximately six years.  The majority concluded that ISPWest could not show prejudice simply by demonstrating that it had spent money expanding its business but rather must show that during the delay, it developed "brand recognition of its mark."  Thus, although the majority expressed sympathy for ISPWest's position--during Internet Specialties' delay in bringing suit, ISPWest expanded from 2,000 to 13,000 customers and grew from $518,848 in sales to $2,422,463 in sales--it concluded that ISPWest had failed to show "that its identity had much at all to do with the mark ISPWest, inasmuch as [it] did not rely on its mark to attract customers."

Judge Kleinfeld, writing in dissent, disagreed with the majority's view of the type of prejudice that must be proven and asserted that the practical effect of what he characterized as a new rule in the Ninth Circuit "is to eviscerate the defense of laches in trademark law."  Relying on an earlier Ninth Circuit case, Grupo Gigante S.A. de C.V. v. Dallo & Co., 391 F.3d 1088 (authored by Judge Kleinfeld), the dissent argued that the rule had long been that for purposes of laches, prejudice is established if the party asserting the defense proves "it has continued to build a valuable business around its trademark during the time that the plaintiff delayed the exercise of its legal rights."  Based on ISPWest's "five or sixfold" expansion of its business during Internet Specialties' delay, the dissent concluded that ISPWest had met its burden of proving such prejudice.

The dissent also rejected the majority's attempt to distinguish Grupo Gigante.  The majority argued that there "is a significant difference between the public association of a grocery store [at issue in Grupo Gigante] and its name, versus the public association of MDE and ISPWest" and that "[a] grocery store's very identity rests in its name."  Indeed, the discussion of prejudice in Grupo Gigante does not appear to support whatever distinction the majority was attempting to articulate between a grocery store name and a domain name.  To the contrary, the Ninth Circuit in Grupo Gigante merely stated that by opening a second grocery store after the senior user learned of the alleged infringement and "by operating both stores for an additional four years after that use was discovered," the junior user was prejudiced by the delay.

You can find a copy of the Ninth Circuit's decision in Internet Specialties West, Inc. v. Milon-DiGiorgio Enterprises, Inc., including the dissent, here (PDF, 25 pages).

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It is still in its infancy but the lawsuit between Shepard Fairey and The Associated Press over Fairey's use of a photograph taken by an AP photographer to create his well-known "Obama Hope" poster (and other related works) has already generated some interesting reading.  Specifically, the AP filed its answer to Fairey's complaint for declaratory and injunctive relief and asserted several counterclaims against Fairey and related entities for copyright infringement, a declaratory judgment and violation of the DMCA.

The core issue is whether Fairey's use of the AP photo constituted fair use.  Fairey contends that his use of the photo "as a visual reference" was fair use and emphasizes the transformative nature of his creation:

"Fairey transformed the literal depiction contained in the [AP] Photograph into a stunning, abstracted and idealized visual image that creates powerful new meaning and conveys a radically different message that has no analogue in the original photograph."

Fairey also alleges that he "did not create any of the Obama Works for the sake of commercial gain", that the AP photo was a "factual" work, that he used only a reasonable portion of the photo, and that his use did not impose any "significant or cognizable harm" to the value of the AP photo.

The AP's answer disputes Fairey's characterization of his use of the AP photo, claiming that Fairey's work copies "all the distinctive and unequivocally recognizable elements of the Obama Photo in their entire detail, retaining the heart and essence of The AP's photo[.]"

But the AP's counterclaims go on to say much more about both the AP and Fairey, apparently in order to paint a picture of the "equities of this lawsuit" as the AP sees them.  For example, AP's counterclaim alleges that Fairey has shown "willful disregard for the property rights of others" but has acted "hypocritically and aggressively when it comes to the protection of Fairey's works and enforcement against those who make use of them."  The AP also describes the parties' pre-filing discussions and alleges Fairey's counsel "reneged" on a "standstill agreement" by filing the lawsuit.

A copy of Fairey's complaint can be found here (PDF, 15 pages) and the AP's answer and counterclaims can be found here (PDF, 61 pages--with pictures--but worth the read).

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In a fairly straight forward yet interesting trademark case involving rights to the mark "OBX", the Fourth Circuit affirmed the grant of summary judgment to the defendant, finding that OBX is a geographically descriptive abbreviation referring to the Outer Banks of North Carolina that had not acquired secondary meaning and therefore was not a valid trademark.  Nonetheless, the Fourth Circuit also affirmed the District Court's exercise of its discretion not to order the cancellation of the registrations the plaintiff had obtained for the OBX mark.

In 1994, James Douglas, the founder of the plaintiff OBX-Stock, Inc., "cleverly invented 'OBX' as an abbreviation for the 'Outer Banks' of North Carolina."  The plaintiff then enjoyed considerable success selling a variety of products with the OBX letters affixed to them.  Unfortunately for the plaintiff, however, the abbreviation caught on and, as the Court noted, entered the "linguistic commons" such that businesses and residents of the Outer Banks used the abbreviation "on a daily basis to refer to the Outer Banks."

Moreover, in the course of the case, Douglas testified that the company's product "was actually the OBX in general since it had not been used before."  Nonetheless, after PTO examiners rejected the plaintiff's application to register the OBX mark five times, OBX-Stock was ultimately successful in obtaining registration but only after "intervention" by North Carolina's congressional delegation (the opinion does not describe the nature of this "intervention" but the Fourth Circuit stated that it undermined any support the registrations may have offered).

After obtaining registrations for the OBX mark, OBX-Stock began efforts to police the mark, including suing the defendant, Bicast, Inc., in connection with its sale of oval stickers bearing "OB Xtreme".  OBX lost on summary judgment, however,as the District Court found that the OBX mark had become generic or was geographically descriptive without secondary meaning.  Based on what appears to be substantial evidence--particularly the testimony of Douglas that OBX stood for the Outer Banks--and the lack of evidence establishing any secondary meaning, the Fourth Circuit readily agreed with the District Court.

The Fourth Circuit's opinion in OBX-Stock, Inc. v. Bicast, Inc., Nos. 06-1769, 06-1887 (4th Cir., Feb. 27, 2009), can be found here (PDF, 13 pages).

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