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

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1 SECONDARY MEANING To establish secondary meaning, a manufacturer must show that, in the minds of the public, the primary significance of a product feature or term is to identify the source of the product rather than the product itself. I.P. Lund Trading ApS v. Kohler Co., 163 F.3d 27, 49 U.S.P.Q.2d 1225 (1st Cir. 1998). Strong and distinctive trademarks, such as fanciful words and words used in arbitrary ways receive greater protection than weak, generic marks. Some words are so common within a particular context that they cannot secure any trademark protection until they acquire a special association with a particular source of consumer products or services. This association is called secondary meaning. Pursuant to this doctrine, words which have a primary meaning of their own may by long use in connection with a particular product, come to be known by the public as specifically designating that product. Flynn v. AK Peters, Ltd., 377 F.3d 13, 71 U.S.P.Q.2d 1810 (1st Cir. 2004). When a descriptive phrase becomes associated with a single commercial source, the phrase is said to have acquired distinctiveness or secondary meaning, and therefore functions as a trademark. See 15 U.S.C. 1052(f) ( [N]othing [herein] shall prevent the registration of a mark used by the applicant which has become distinctive of the applicant s goods in commerce. ). For example, when the public perceives the phrase SPORTS ILLUSTRATED as a particular sports magazine in addition to its primary meaning as a description of a specific feature or element, the phrase has acquired distinctiveness or secondary meaning and may receive trademark protection. Boston Duck Tours, LP v. Super Duck Tours, LLC, 531 F.3d 1 (1st Cir. 2008). Whether a term has acquired secondary meaning can be shown by circumstantial evidence and direct evidence. Circumstantial evidence of secondary meaning includes evidence on the following factors: (1) the length and manner of its use; (2) the nature and extent of advertising and promotion of the mark; and (3) the efforts made in the direction of promoting a conscious connection, in the public s mind, between the name or mark and a particular product or venture. Boston Beer Co., Ltd. v. Slesar Bros. Brewing Co., 9 F.3d 175, 182 (1st Cir. 1993). Also, the size or prominence of an enterprise may warrant the inference that its name has acquired secondary meaning. President and Trustees of Colby College v. Colby College-New Hampshire, 508 F.2d 804, (1st Cir. 1975). [C]onsumer surveys and testimony are the only direct evidence on the question of secondary meaning. Boston Beer Co., 9 F.3d at 182. As to what kind of testimony suffices, although one case appears to hold that testimony of individual consumers is required, other cases are not so limited. Compare Yankee Candle Co. v. Bridgewater 1

2 LIKELIHOOD OF CONFUSION Candle Co., 259 F.3d 25, 43 (1st Cir. 2001) (citing customer surveys and testimony of individual consumers, as the only direct evidence probative of secondary meaning, court dismisses testimony of retailers and distributors active in the field and familiar with the plaintiff s products as hardly evidence of whether the consuming public forms the same association ), with President and Trustees of Colby College, 508 F.2d at 808 (holding that the testimony by the President of Middlebury College (Vermont) was relevant to establish secondary meaning of Colby College (Maine); Granite State Trade School, LLC v. The New Hampshire School of Mechanical Trades, Inc., 120 F.Supp.2d 56, 63 (D.N.H. 2015) (secondary meaning shown by Defendant s candid admission that members of the trade community in New Hampshire associate the term Granite State with the markholder specifically, rather than with a generic trade school that happens to be located in New Hampshire). The First Circuit generally looks to an illustrative non-exclusive, multi-factor list to determine whether a likelihood of confusion exists: 1) the similarity of the marks; 2) the similarity of the goods (or, in a service mark case, the services); 3) the relationship between the parties channels of trade; 4) the juxtaposition of their advertising; 5) the classes of prospective purchasers; 6) evidence of actual confusion; 7) the defendant s intent in adopting its allegedly infringing mark; and 8) the strength of the plaintiff s mark. The Shell Company (Puerto Rico) Limited v. Los Frailes Service Station, 605 F.3d 10, 21 fn. 9 (1st Cir. 2010) quoting Int l Ass n of Machinists v. Winship Green Nursing Ctr., 103 F.3d 196, 201 (1st Cir. 1996). See also Visible Sys. v. Unisys, 551 F.3d 65, 73 (1st Cir. 2008). These factors are not to be applied mechanically. Courts may consider other factors and may accord little weight to factors that are not helpful on the particular facts of a case. Beacon Mut. Ins. Co. v. One Beacon Ins. Group, 376 F.3d 8, 71 U.S.P.Q.2d 1641 (1st Cir. 2004); eight-part likelihood of confusion test established in Pignons S.A. de Mecanique de Precision v. Polaroid Corp., 657 F.2d 482,487 (1st Cir. 1981). 2

3 INITIAL INTEREST CONFUSION PRELIMINARY INJUNCTION STANDARD In a gray market goods case, a material difference between goods simultaneously sold in the same market under the same name creates a presumption of consumer confusion. Bose Corp. v. Ejaz, 732 F.3d 17, 27 (1st Cir. 2013). Likelihood of confusion is the test used to determine the geographic scope of prior use rights under Section 15, U.S.C Dorpan, C.L. v. Hotel Melia, Inc., 728 F.3d 55, (1st Cir. 2013). The First Circuit has not officially recognized initial interest confusion as leading to trademark infringement, but it was discussed as being possible if the plaintiff can show that an appreciable number of reasonably prudent consumers would likely be confused. Hearts on Fire Co., LLC v. Blue Nile, Inc., 603 F. Supp. 2d 274, (D. Mass. 2009) ( Mere diversion, without any hint of confusion, is not enough. ); but see Northern Light Technology, Inc. v. Northern Lights Club, 97 F. Supp. 2d 96, 113 (D. Mass. 2000) (stating that initial interest confusion is not cognizable under trademark law in the First Circuit). Before granting a preliminary injunction, a court must consider: 1) the likelihood of the movant s success on the merits; 2) the anticipated incidence of irreparable harm if the injunction is denied; 3) the balance of relevant equities (i.e., the hardship that will befall the nonmovant if the injunction issues contrasted with the hardship that will befall the movant if the injunction does not issue); and 4) the impact, if any, of the court s action on the public interest. Mercado-Salinas v. Bart Enterprises Int l Ltd., 671 F.3d 12, 19 (1st Cir. 2011), quoting Borinquen Biscuit Corp. v. M.V. Trading Corp., 443 F.3d 112, (1st Cir. 2006). See also Voice of the Arab World, Inc. v. MDTV Medical News Now, Inc., 645 F.3d 26, 32 (1st Cir. 2011). ( [a] plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest ). See J.L. Powell Clothing LLC v. Powell, 590 Fed. Appx. 3, *5 (1st Cir. 2014) (court suggests that a contractual agreement that irreparable damage would occur in the event of a breach might not support the irreparable injury element). In this circuit, proving likelihood of success on the merits is the sine qua non of a preliminary injunction. Arborjet, Inc. v. Rainbow Treecare Scientific Advancements, Inc., 794 F.3d 168, 173 (1st Cir. 2015). See Keds Corp. v. Renee Int l Trading Corp., 888 F.2d 215, 220 (1st Cir. 1989) ( In a trademark case, the key issue is 3

4 likelihood of success on the merits because the other decisions will flow from that ruling. ); Borinquen Biscuit Corp. v. M.V. Trading Corp., 443 F.3d 112, 115 (1st Cir. 2006) ( the cynosure of this four-part test is more often than not the movant s likelihood of success on the merits ). A request to preliminarily enjoin trademark infringement is subject to traditional equitable principles, as set forth by the Supreme Court in [ebay, Inc. v. MercExchange, LLC, 547 U.S. 388 (2006)]. Voice of the Arab World, Inc. v. MDTV Medical News Now, Inc., 645 F.3d 26, 32 (1st Cir. 2011). Although it has acknowledged that there is no principled reason why [ebay] should not apply to a request for preliminary injunction to halt trademark infringement, Id., 645 F.3d at 33, the First Circuit has expressly declined to decide whether as a rule that trademark plaintiff who demonstrates a likelihood of success on the merits creates a presumption of irreparable harm. Id. See also Swarovski Aktiengesellschaft v. Building No. 19, Inc., 704 F.3d 44, (1st Cir. 2013) ( [w]hether or not the presumption remains viable in this context, it is difficult to see how irreparable harm could be established without a finding of confusion ). To the extent any such presumption might exist, the presumption is inoperative if the plaintiff delays in bringing suit or moving for preliminary injunctive relief. Id., 654 F.3d at Compare Polar Corp. v. Pepsico, Inc., 789 F.Supp.2d 219, 239 (D. Mass. 2011) (presumption of irreparable harm not rebutted by alleged 7-month delay in seeking injunctive relief) with Jagex Ltd. v. Impulse Software, 750 F. Supp.2d 228, (D.Mass. 2010) (2- year delay in filing suit and additional 5-month delay in seeking preliminary injunction undermines claim of irreparable harm). LACHES Laches bars assertion of a claim where a party s delay in bringing suit is unreasonable and results in prejudice to the opposing party. K-Mart Corp. v. Oriental Plaza, Inc., 875 F.2d 907 (1st Cir. 1989). Laches requires proof of (1) lack of diligence by the party against whom the defense is asserted, and (2) prejudice to the party asserting the defense. Oriental Financial Group, Inc. v. Cooperativa de Ahorro y Credito Oriental, 698 F.3d 9, 21 (1st Cir. 2012). However, laches only applies where the plaintiff knew or should have known of the infringing conduct. Id. The doctrine of progressive encroachment can bar the laches defense in a trademark case: As a general rule the progressive encroachment doctrine requires proof that (1) during the period of the delay the plaintiff could reasonably conclude that it should not bring suit to challenge the allegedly infringing activity; (2) the defendant materially altered its infringing activities; and (3) suit was not unreasonably delayed after the alteration in 4

5 infringing activity. Oriental Financial Group, Inc., 698 F.3d at To the extent there is a rule that a trademark plaintiff who demonstrates a likelihood of success on the merits creates a presumption of irreparable harm, the presumption is inoperative if the plaintiff delays in bringing suit or moving or preliminary injunctive relief. Voice of the Arab World, Inc. v. MDTV Medical News Now, Inc., 645 F.3d (1st Cir. 2011). ABANDONMENT FAIR USE A trademark owner who fails to use a mark for three consecutive years may be deemed to have abandoned the mark. To rebut a prima facie showing of abandonment, a purported trademark owner must demonstrate that it intends to resume use in the reasonably foreseeable future. Conclusory testimony will not suffice; the owner must show evidence of activities engaged in during the nonuse period that manifest intent to resume use. General Healthcare Ltd. v. Qashat, 364 F.3d 332 (1st Cir. 2004). The ordinary use of a descriptive mark for descriptive purposes will amount to fair use. WCVB-TV v. Boston Athletic Ass n., 926 F.2d 42, 17 U.S.P.Q.2d 1688 (1st Cir. 1991). A use is fair where a descriptive portion of an otherwise distinctive trademark is used to describe a product rather than to appropriate goodwill. (Shelby v. Factory Five Racing, Inc., 684 F.Supp.2d 205, (D.Mass. 2010); quoting Tyco Healthcare Group LP v. Kimberly-Clark Corp., 463 F. Supp.2d 127, 136 (D.Mass. 2006). Although the First Circuit has recognized the underlying principle of nominative fair use, it has never endorsed any particular version of the doctrine. See Universal Comm. Systems, Inc. v. Lycos, Inc., 478 F.3d 413, 424 (1st Cir. 2007) (the First Circuit has not decided whether to endorse the Ninth Circuit s test for nominative fair use); Swarovski Aktiengesellschaft v. Building No. 19, Inc., 704 F.3d 44, 53 (1st Cir. 2013) ( without at this time endorsing any particular approach to the nominative fair use doctrine, court of appeals holds that district court erred by granting preliminary injunction after rejecting nominative fair use defense without first finding that defendant s use of the mark was likely to cause confusion). USE OF INTERNET KEYWORDS Purchase of trademarked keywords is a use for trademark purposes. Hearts on Fire Co., LLC v. Blue Nile, Inc., 603 F. Supp. 2d 274, 282 (D. Mass. 2009) (use of trademark as a keyword trigger for sponsored links whose text did not contain plaintiff s trademark is actionable for surviving a motion to dismiss); see also Boston Duck Tours, LP v. Super Duck Tours, LLC, 527 F. Supp.2d 205, 207 (D.Mass. 2007). 5

6 SECONDARY LIABILITY To establish contributory infringement, plaintiff must show that defendant intentionally induced the infringer to infringe plaintiff s trademark or continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement. Landrau v. Betancourt, 554 F. Supp.2d 114 (D.P.R. 2007). See Getty Petroleum Corp. v. Aris Getty, Inc., 55 F.3d 718, (1st Cir. 1995) (affirming finding of contributory liability for trademark infringement for defendant who knowingly delivered unbranded gasoline to co-defendant Aris, knew that the Aris was not an authorized franchisee, and knew that many Aris customers believed they were receiving branded gasoline). To prove contributory infringement by supplying a product, a plaintiff must show that the defendant (1) intentionally induced the primary infringer to infringe, or (2) continued to supply an infringing product to an infringer with knowledge that the infringer is mislabeling the particular product supplied. Scholz v. Goudreau, 132 F.Supp.2d 239, 249 (D.Mass. 2015) (internal citations omitted). When the alleged direct infringer supplies a service rather than a product, for liability to attach, there must be direct control and monitoring of the instrumentality used by a third party to infringe the plaintiff s mark. Id. See Coach, Inc. v. Sapatis, 994 F.Supp.2d 192, 199 (D.N.H. 2014) ( the relevant inquiry is whether the defendant had sufficient control over the individuals directly engaging in such infringement ). Vicarious liability for trademark infringement requires a finding that the defendant and the infringer have an actual or apparent partnership, have authority to bind one another in transactions with third parties or exercise joint ownership or control over the infringing product. Scholz v. Goudreau, 132 F.Supp.2d at (internal citations omitted). The district court in Coach, Inc. v. Sapatis extended the Inwood Labs test for contributory trademark infringement to contributory trade dress infringement, contributory false designation of origin and false advertising, and contributory dilution. Coach, Inc. v. Sapatis, 994 F. Supp. 2d at

7 DILUTION The Federal Anti-Dilution Statute, 15 U.S.C. 1125(c), generally provides protection to the owner of a famous mark from any use that causes dilution of the distinctive quality of the mark. Only a select number of marks, however, may qualify as famous, and Congress intended the courts to be discriminating and selective in categorizing a mark as famous. As a result, the test of whether a mark has acquired fame is considered more rigorous and requires a great deal more than the analysis employed to determine if secondary meaning exists. If a plaintiff cannot show that its mark is distinctive or has acquired secondary meaning, it cannot establish fame. Bay State Sav. Bank v. Baystate Financial Services, LLC, 484 F. Supp.2d 205, 218 (D.Mass. 2007) (quoting LP. Lund Trading v. Kohler Co., 163 F.3d 27 (1st Cir. 1998)) (internal quotations omitted). The use of marks in a political context is not commercial and thus is exempt from the statutory prohibition against dilution. Scholz v. Goudreau, 132 F.Supp.2d 239, 253 (D.Mass. 2015) (no dilution of mark Boston when defendant is filmed at a political rally for Mike Huckabee stating: Barry Goudreau from Boston. I like Mike. ). DAMAGES Attorney s Fees: Fraud or bad faith may justify an attorneys fees award in some cases, but a finding of bad faith or fraud is not a necessary precondition. Willfulness short of bad faith or fraud will suffice when equitable considerations justify an award and the district court supportably finds the case exceptional. Tamko Roofing Products, Inc. v. Ideal Roofing Co., Ltd., 282 F.3d 23, 61 U.S.P.Q.2d 1865 (1st Cir. 2002). The First Circuit has not yet construed the criterion for awarding attorneys fees to a prevailing defendant in the context of the Lanham Act. Ji v. Bose Corp., 626 F.3d 116 (1st Cir. 2010). See Empire Today, LLC v. National Floors Direct, Inc., 788 F. Supp.2d 7, (D.Mass. 2011) (prevailing defendant s request for attorneys fees denied). Defendant s Profits: If injunctive relief provides a complete and adequate remedy, then the equities of the case may not require an accounting of profits. An award of defendant s profits is appropriate where the products directly compete, and plaintiff need not show fraud, bad faith, or palming off. The court left undecided if the plaintiff must always show willfulness, but it did hold plaintiff must show willfulness if the reason for awarding the profits is only to deter egregious conduct. Also, an award of defendant s profits is appropriate even when the majority of the parties goods are not in direct competition. Tamko Roofing Products, Inc. v. Ideal Roofing Co., Ltd., 282 F.3d 23, 61 U.S.P.Q.2d 1865 (1st Cir. 2002). 7

8 The infringer s profits can provide a measure of damages for trademark infringement when the plaintiff and defendant products are in direct competition: Under this direct competition theory, the plaintiff and defendant products may be such that complete substitutes that a sale by the infringer under the infringed part s mark is almost automatically a lost sale by the plaintiff. (Fishman Transducers, Inc. v. Paul, 684 F.3d 187, 196 (1st Cir. 2012). However, a showing of direct competition requires a substantial degree of equivalence and substantiality. Id. WILLFULNESS The burden of proof for a finding of willfulness is preponderance of evidence. Fishman Transducers, Inc. v. Paul, 684 F.3d 187, 193 (1st Cir. 2012). GP: v1 8