AIPLA TRADEMARK LITIGATION COMMITTEE LEGAL STANDARDS OF THE FEDERAL CIRCUIT COURTS UPDATE

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1 SECONDARY MEANING Courts in the Fifth Circuit use the following seven-factor test to determine whether a mark has acquired secondary meaning: 1) length and manner of use of the mark or trade dress; 2) volume of sales; 3) amount and manner of advertising; 4) nature of use of the mark or trade dress in newspapers and magazines; 5) consumer-survey evidence; 6) direct consumer testimony; and 7) the defendant s intent in copying the mark or trade dress. Amazing Spaces Inc v Metro Mini Storage, 608 F3d 225, 248 (5th Cir 2010); Test Masters Educ l Servs. v. Robin Singh Educ l Servs., 799 F.3d 437, 445 (5th Cir. 2015); Nola Spice Designs v. Haydel Enters., 783 F.3d 527, 544 (5th Cir. 2015). Survey evidence is the most direct and persuasive way of establishing secondary meaning. Zatarains v. Oak Grove Smokehouse, 698 F.2d 786, 795 (5th Cir. 1983). See Test Masters Educ l Servs., 799 F.3d at (discussing flaws of survey); Honestech v. Sonic Solutions, 430 F. App x 359 (5th Cir. 2011) (unreported) (affirming admissibility of secondary meaning survey). LIKELIHOOD OF CONFUSION Courts in the Fifth Circuit assess the likelihood of confusing using a non-exhaustive list of digits of confusion, which include: 1) the type of mark allegedly infringed; 2) the similarity between the marks; 3) the similarity of products or services; 4) the identity of the retail outlets and purchasers; 5) the identity of the advertising media used; 6) the defendant's intent; 7) the evidence of actual confusion; and 8) the degree of care exercised by potential purchasers.

2 Streamline Production Sys. v. Streamline Mfg., 851 F.3d 440, 453 (5th Cir. 2017). No single factor is dispositive and the standard does not require a positive finding on a majority of these digits of confusion. Conan Properties, Inc. v. Conan Pizza, Inc., 752 F.2d 145, 150 (5th Cir. 1985). See also Scott Fetzer Co. v. House of Vacuums, 381 F.3d 477, (5th Cir. 2004) (flawed survey does not show confusion among potential consumers); Amstar Corp. v. Domino s Pizza, 615 F.2d 252, (5th Cir. 1980) (discussing flaws in each party s survey); Namer v. Broadcasting Board of Governors, 628 F. App x 910, (5th Cir. 2015) (unreported) (affirming survey). INITIAL INTEREST CONFUSION Actionable under the Lanham Act in this circuit under Elvis Presley Enterprises, Inc. v. Capece, 141 F.3d 188 (5th Cir. 1998) - instead of actual confusion may establish initial interest confusion - initial interest confusion gives junior user credibility during early stages of transaction; can bar senior user from consideration by consumer even though consumer is no longer confused after initial encounter - bring patrons to the door with initial interest who may stay or make a purchase thus defendant benefits (actual sale not required though) PRELIMINARY INJUNCTION STANDARD A preliminary injunction may be granted only if plaintiff establishes the following four elements: 1) a substantial likelihood of success on the merits; 2) a substantial threat that plaintiff will suffer irreparable harm injury if the injunction is denied; 3) that the threatened injury outweighs any damage that the injunction might cause defendants; and 4) that the injunction will not disserve the public interest. Sugar Busters LLC, v. Brennan, 177 F.3d 258, (5th Cir. 1999). See Paulsson Geophysical Servs. v. Sigmar, 529 F.3d 303, 309 (5th Cir. 2008) (affirming preliminary injunction); Escamilla v. M2 Technology, 581 F. App x. 449 (5th Cir. 2014) (affirming denial of PI); Diageo North America v. Mexcor, 661 F. App x 806 (5th Cir. 2016) (unreported) (discussing scope of permanent injunction and questioning use of obey the law injunction).

3 LACHES Laches has three elements: 1) delay in asserting one s trademark rights; 2) lack of excuse for the delay; and 3) undue prejudice to alleged infringer caused by the delay. Abraham v. Alpha Chi Omega, 708 F.3d 614, (5th Cir. 2013) (extended discussion of different elements of laches defense). See also Bd. of Supervisors v. Smack Apparel Co., 550 F.3d 465, (5th Cir. 2008) (district court properly declined to apply laches defense because of defendant s bad faith in attempting to derive a benefit from the plaintiffs reputation); Elvis Presley Enterprises, Inc. v. Capece, 141 F.3d 181, 205 (5th Cir. 1998) (period for laches begins when the plaintiff knew or should have known of the infringement). The elements of the defense of acquiescence are: 1) assurances; 2) reliance; and 3) undue prejudice. Abraham, 708 F.3d at 624 (explaining differences between laches and acquiescence). See Pennzoil-Quaker State Co. v. Miller Oil & Gas Operations, 779 F.3d 290, (5th Cir. 2015) ( some form of realized, not potential, economic investment made in reliance on the markholder s statements is key to a finding of prejudice ). ABANDONMENT A trademark is abandoned if these two elements are proven: 1) the use of the trademark was discontinued; and 2) intent not to resume such use. Vetter v. McAtee, 850 F.3d 178, 184 (5th Cir. 2017) (jury need not be instructed that some trademark use is excusable ). Nonuse for two (2) consecutive years is prima facie evidence of abandonment. The burden is on party claiming abandonment. Vais Arms Inc., v. George Vais, 383 F.3d 287 (5th Cir. 2004).

4 FAIR USE Fair use defense requires that proof that the allegedly infringing term be descriptive of the goods and be used fairly and in good faith and not as a trade or service mark. Soweco v. Shell Oil Co., 617 F.2d 1178, , 1196 (5th Cir. 1980) (affirming jury instructions regarding definition of good faith and fairly ). See Waco Intern., Inc. v. KHK Scaffolding Houston, 278 F.3d 523, 534 (5th Cir. 2002) ( use of a mark for comparison or reference purposes falls under the category descriptive as defined in section 1115(b)(4) ). See also Zatarains, Inc. v. Oak Grove Smokehouse, Inc., 698 F.2d 786 (5th Cir. 1983) (Defendants are free to use the [accused terms] in their ordinary descriptive sense, so long as such use will not tend to confuse consumers as to the source of the goods ), abrogated in part by KP Permanent Make-up Inc v Lasting impression I Inc, 543 U.S. 111, 116 (2004). The Fifth Circuit has recognized the shield of nominative use (or nominative fair use ) where the defendant: 1) uses only so much of the mark as necessary to identify the product or service; and 2) does not do anything that suggests affiliation, sponsorship, or endorsement by the markholder, but has yet to affirm a finding of noninfringement based on nominative use in a reported opinion. See Pebble Beach Co. v. Tour 18 I, Ltd., 155 F.3d 526, (5th Cir. 1998) ( the court should usually consider the nominative-use claim in conjunction with its likelihood of confusion analysis to avoid lowering the standard of confusion ); Bd. of Supervisors v. Smack Apparel Co., 550 F.3d 465, (5th Cir. 2008) (nominative use defense is not available when the defendant intended to capitalize on consumer confusion); Southwest Recreational Ind. v. FieldTurf, 2002 WL , *8 (5th Cir. August 13, 2002) (unreported) (court affirms finding of no likelihood of confusion when mark was legitimately used for comparative advertising and there was a complete absence of actual or initial consumerconfusion evidence ). USE OF INTERNET KEYWORDS The Fifth Circuit has not issued a reported opinion containing a definitive discussion of how to analyze infringement issues relating to internet keywords. See College Network, Inc. v. Moore Educational Publishers, Inc., 378 F. App x 403 (5th Cir. 2010) (unreported) (declining to apply the Ninth Circuit s controlling troika or internet trinity test to allegations of infringement based on defendants purchase and use of Google and Yahoo keywords because the Fifth Circuit has never adopted this rule and the plaintiff did not preserve error); Southwest Recreational Ind. v. FieldTurf, 2002 WL , *7-8 (5th Cir. August 13, 2002) (unreported) (reviewing Ninth Circuit authority, court dismisses as mistaken the argument that meta tagging another company s trademark necessarily constitutes trademark infringement ); Southern Snow Mfg. Co. v. Sno Wizard Holdings, Inc., 829 F. Supp. 2d 431, 436 (E.D.La. 2011) (discounting mark similarity in a metatag or hidden text case because with internet metatags, keywords, and hidden text the user never actually sees the trademarks or

5 knows that they are in use ); Mary Kay, Inc. v. Weber, 601 F. Supp. 2d 839, 856 (N.D. Tex. 2009) (citing Tiffany Inc. v. ebay, Inc., 576 F. Supp. 2d 463, 499 (S.D.N.Y. 2008), internal use of the mark... as a key word to trigger the display of sponsored links is not use of the mark in a trademark sense and [t]he critical question is whether the advertisement suggests affiliation or endorsement ). SECONDARY LIABILITY Citing Inwood Labs, Inc. v. Ives Labs, Inc., 456 U.S. 844 (1982), the Fifth Circuit held in Rolex Watch USA v. Meece that a defendant is liable for contributory trademark infringement by distributing parts if he continued to supply his parts to one whom he knew or had reason to know is engaging in trademark infringement. Rolex Watch USA, Inc. v. Meece, 158 F.3d 816, (5th Cir. 1998) (affirming finding of no contributory infringement because there was no evidence that defendant continued to supply parts to [third parties] he either knew, or had reason to know, were engaging in trademark infringement ). As to vicarious liability for trademark infringement, see Clearline Technologies, Ltd. v. Cooper B-Line, Inc., 871 F. Supp. 2d 607, (S.D.Tex. 2012) (both parties agreed that the test for vicarious liability requires a finding that the defendant and the infringer have an apparent or actual partnership, have authority to bind one another in transactions with third parties or exercise joint ownership or control over the infringing product). DILUTION To state a dilution claim under the Trademark Dilution Revision Act (TDRA), 15 U.S.C. 1125(c), the plaintiff must show that: 1) it owns a famous and distinctive mark; 2) that the defendant has commenced using the plaintiff s marks in a manner that dilutes those marks; 3) that the similarity between the defendant s marks and the plaintiff s marks gives rise to an association between the marks; and 4) that the association is likely to impair the distinctiveness of the plaintiff s marks or harm the reputation of the plaintiff s marks. National Business Forms and Printing, Inc. v. Ford Motor Co., 671 F.3d 526, (5th Cir. 2012) (holding that a commercial printer does not use a mark (as the TDRA contemplates that term) merely by reproducing it for customers as part of its commercial printing business). See Nola Spice Designs v. Haydel Enterprises, 783 F.3d 527, 544 (5th Cir. 2015) (because the plaintiff s marks are not distinctive, district court properly granted

6 summary judgment on federal dilution claim and Louisiana state law dilution claim); Scott Fetzer Co. v. House of Vacuums, 381 F.3d 477, (5h Cir. 2004) (rejecting claim that using the Kirby mark to advertise rebuilt Kirby vacuum cleaners necessarily tarnishes the brand: Trademark law does not entitle markholders to control the market in marked products ). DAMAGES Plaintiff, subject to the principles of equity, is entitled to recover defendant's profits, any damages sustained by the plaintiff and the costs of the action. In exceptional cases, court may award attorney fees to prevailing party. 15 U.S.C. 1117(a). Courts in the Fifth Circuit consider the following non-exclusive list of factors in determining whether an award of profits under 1117(a) is appropriate: 1) whether the defendant had the intent to confuse or deceive; 2) whether sales have been diverted; 3) the adequacy of other remedies; 4) any unreasonable delay by the plaintiff in asserting rights; 5) the public interest in making the misconduct unprofitable; and 6) whether it is a case of palming off. Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d 526, 554 (5th Cir. 1998). Once an award of profits is found to be appropriate, a markholder is only entitled to those profits attributable to the unlawful use of its mark. Id. See Texas Pig Stands, Inc. v. Hard Rock Cafe Intern., Inc., 951 F.2d 684, 696 (5th Cir. 1992), reh g denied, 966 F.2d at (5th Cir. 1992) (affirming district court s denial of profits because of lack of evidence showing that any of Defendant s profits were the result of its infringement of the mark: Hard Rock would have sold just as many pig sandwiches by any other name ); Quick Technologies, Inc. v. Sage Group, 313 F.3d 338, (5th Cir. 2002) (willful infringement is not a prerequisite to an accounting of profits); Retractable Technologies, Inc. v. Becton- Dickinson & Co., 842 F.3d 883, (5th Cir. 2016) (false advertising case); Streamline Production Systems, Inc. v. Streamline Mfg., Inc., 851 F.3d 440, (5th Cir. 2017) (benefits received by Defendant, including low risk of accelerated market entry and referral business, did not support an unjust enrichment award in the form of an accounting for profits, where there was no evidence of palming off, diverted sales, or profit due to use of the mark, or fraud, duress, or undue advantage). The Act allows Defendant s profits to be determined based upon gross sales made by Defendant. American Rice Inc. v. Producers Rice Mill Inc., 518 F.3d 321, (5th

7 Cir. 2008). The Fifth Circuit has affirmed use of a royalty-based measure of damages for trademark infringement. See Boston Professional Hockey Ass n v. Dallas Cap & Emblem Mfg., 597 F.2d 71, (5th Cir. 1979); Streamline Production Systems, Inc., 851 F.3d at (reversing award of royalties because there was no evidence that some or all of defendant s profits were attributable to infringement). In Baker v. DeShong, the Fifth Circuit extended the Octane Fitness standard (Octane Fitness, LLC. v. Icon Health and Fitness, Inc., 134 S.Ct (2014)) for finding a patent case exceptional to Lanham Act claims: an exceptional case is one where (1) in considering both governing law and the facts of the case, the case stands out from others with respect to the substantive strength of the party s litigating position; or (2) the unsuccessful party has litigated the case in an unreasonable manner. Baker v. DeShong, 821 F.3d 620, 624 (5th Cir. 2016). GP: v1