Posted on November 9, 2012 by Catherine M. Clayton

Supreme Court Hears Oral Argument in Already LLC v. Nike, Inc.

On Wednesday, the Supreme Court heard oral argument in the case of Already, LLC d/b/a Yums v. Nike, Inc. As we reported previously, that case arose from an appeal of the Second Circuit’s decision affirming the Southern District of New York’s holding that a covenant not to sue entered in a trademark dispute ended the case and controversy between the parties. We enclose the full transcript of the oral argument. 

During oral argument, at which this author was present, Already, LLC d/b/a Yums’ (“Yums”) attorney argued that the covenant would force it to be the "involuntary licensee" of Nike. He analogized the challenged registration to a scarecrow, arguing that it creates "informational injury" by improperly stopping competitors from producing similar shoes, under color of right.

Significantly, Nike’s covenant not-to-sue only extended to claims based on Yums’ current and past products and "colorable imitations" thereof. It did not preclude that Yums might later be sued based on the challenged registration for other shoe designs.

Nike’s attorney urged the Court that the covenant obviated any injury to Yums arising from the registration. He argued that Yums had failed to show that it had plans to produce any shoes that would not be covered by Nike's covenant not-to-sue. However, he admitted that, if Yums had plans to produce the exact shoe covered by Nike's registration, sufficient harm would be present for the federal court to have continuing Article III jurisdiction.

The justices asked a number of questions, including whether any covenant not-to-sue could ever suffice in a trademark action if the underlying registration remained valid. Justices Breyer and Sotomayor both noted that the record did not affirmatively show that Yums had plans to develop an exact replica of the Nike shoe at issue. However, Yums’ attorney reminded the court that the record was not fully developed in the district court proceeding, and urged that the procedural posture of the case is analogous to that of a summary judgment, where all reasonable inferences should be drawn in Yums' favor, as the non-moving party.

The Supreme Court is expected to hand down its decision prior to June 30, 2013. Gibbons will continue to monitor developments in this case.


Catherine M. Clayton is a Director in the Gibbons Intellectual Property Department.
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Posted on October 2, 2012 by Owen J. McKeon

Protecting Fashion Designs: The Innovative Design Protection Act of 2012

Just as design patents for smart phones and yoga pants are recently making headlines, the Senate Judiciary Committee has approved a bill, S. 3523, entitled the Innovative Design Protection Act of 2012, which would extend copyright-like protection to fashion designs (the “Act”).

The protection of the proposed Act would extend to “fashion design[s],” defined as the appearance as a whole of an article of apparel including men’s, women’s or children’s clothing, including undergarments, outer wear, gloves, footwear, headgear, handbags, purses, wallets, tote bags, belts and eyeglass frames. Given that many other countries already have laws that provide design protection for fashion design, the passage of the Act has the potential to help encourage and sustain the U.S. fashion industry.

The essence of the bill, which is sponsored by Senator Charles Shumer of New York, is to protect fashion designs from knockoffs that are substantially identical in overall appearance to the original elements of the design. Under the proposed Act, protection would be limited to unique, distinguishable, non-trivial and non-utilitarian variation over prior designs. The protection would not extend to parties that independently came up with the same design, reproduced a single copy of the design for personal or immediate family use (the “Home Sewing Exception”) or shows the fashion design in an illustration or picture. Moreover, while typical copyright protection lasts for the life of the author plus 70 years, the proposed fashion design protection would only last for 3 years. As to enforcement, the proposed Act would require a design owner to provide written notice to an accused infringer 21 days prior to instituting an infringement action, and limit the design owner to prospective damages from the date that the action is instituted.

The bill will amend Title 17, the Copyright Act, Section 1301 of the United States Code. The companion bill in the House of Representatives is H.R. 2511.

Gibbons will continue to track this important development in the area of copyright protection for fashion designs.


Owen J. McKeon is a Director in the Gibbons Intellectual Property Department. Christopher H. Strate, an Associate in the Gibbons Intellectual Property Department, co-authored this post.
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Posted on November 16, 2011 by Catherine M. Clayton

In Defense of Color Trademarks: INTA Submits Amicus Brief in Christian Louboutin v. Yves Saint Laurent

On Monday, the International Trademark Association (“INTA”) filed an amicus curae brief  with the United States Court of Appeals for the Second Circuit in Christian Louboutin S.A. v. Yves Saint Laurent America Holding, Inc.. In that brief, INTA argued that the lower court’s decision should be vacated and remanded on the basis that the court did not properly evaluate Louboutin’s federally registered trademark, failed to accord that mark the legal presumption of validity to which it is entitled under federal law, and did not use the appropriate test for aesthetic functionality.

The matter pending before the Second Circuit is an appeal from the U.S. District Court for the Southern District of New York’s denial of Louboutin’s motion for a preliminary injunction to halt the sale by Yves Saint Laurent America Inc. and its affiliates (“YSL”) of shoes having red soles. In the lower court’s decision, Judge Victor Marrero denied Louboutin’s motion, finding that Louboutin was unlikely to be able to establish that ownership of a protectable mark, since color cannot serve as a trademark if it is functional. Louboutin then filed the instant appeal. Gibbons summarized the lower court’s decision in an earlier blog.

In its amicus brief, INTA argues that the Southern District did not give due deference to Louboutin’s federal registration and the presumption of validity it confers, and that the decision was not based on a finding that YSL had shown “by a preponderance of the evidence” that Louboutin’s mark was not entitled to protection, as the law requires. The brief also criticizes the Southern District’s decision on the basis that it misconstrued Louboutin’s asserted trademark rights as a broad claim to the color red as applied to shoes. However, INTA noted, the mark is limited to a lacquered red that is specifically placed on the sole of a shoe.

The INTA brief also includes a review of the “somewhat checkered history” of the doctrine of aesthetic functionality, which it contends the Southern District misapplied in its decision. That analysis requires a finding that “certain factors of the design are essential to effective competition,” and INTA criticized the court for failing to apply that test.

This litigation is significant because it has the potential to limit protectability of color trademarks, particularly in the field of fashion. INTA cautions that failure to vacate and correct the Southern District’s decision will both damage brand owners and increase the potential for consumer confusion.


 

Catherine M. Clayton is a Director in the Gibbons Intellectual Property Department.
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Posted on September 15, 2011 by Owen J. McKeon

Clock Ticking for Trademark Registrants Seeking to Block Registration of Their Marks on .XXX Domain

As has been widely reported by the mainstream press and most legal publications, the Internet Corporation for Assigned Names and Numbers (ICANN) has approved a new “.XXX” top-level domain expected to be utilized by the adult entertainment industry. Given the connotation of the .XXX domain, companies and individuals around the globe are considering how best to protect their trademarks from the potential harms of registry misuse, including cyber squatters targeting this new domain to register well known trademarks. Although the creation of the .XXX domain will be a boon to those in the adult entertainment industry and domain registrars, it raises serious threats of infringement, brand dilution or tarnishing for trademarks uninvolved in those industries. If they have not already, all trademark owners should be considering the potential impact of the .XXX domain to their marks and determining whether to take the necessary steps to “opt-out” of .XXX domain registration by the October 28, 2011 deadline for doing so.

ICM Registry LLC (“ICM”), the company responsible for operating the .XXX domain, is offering a potential solution to concerned trademark registrants by offering a period to “opt-out” of .XXX domain registrations. The option to “opt-out” is otherwise known as “Sunrise Period B” and will run from September 7, 2011 to October 28, 2011. Sunrise Period B will permit companies, licensees, assignees and individuals with trademarks that were formally registered as of Sept. 1, 2011, to apply to have their trademarks permanently blocked from the .XXX registry. To successfully do so, a registrant must present its trademark by way of an application to an accredited .XXX registrar. This process involves a one-time fee, typically in the range of $200 to $250 per domain name. Once blocked, the protected domain name will be removed from the ICM registration pool. Additionally, that domain name will simply resolve to an information page stating that the domain name is not available for .XXX registration.

Significantly, the following are not considered formally registered trademarks that qualify for Sunrise B eligibility: (1) trademarks or service marks for which an application for registration has been filed, but is not actually registered by the competent public authority or intergovernmental organization prior to Sept. 1, 2011; (2) trademarks or service marks for which an application has lapsed, been withdrawn, revoked, canceled, or otherwise is no longer in full force and effect; (3) unregistered trademarks or service marks (including common law); U.S. State trademarks or service marks; (4) international applications for the registration of trademarks, made through the Madrid system, unless these are based on or have resulted in a registered trademark of national effect; or (5) U.S. supplemental registrations; or any other rights in a sign or name, including domain names, trade names, and appellations of origin.

It is also worth noting that while an opt-out is the most prudent course of action for trademark owners, doing so will not preclude a third party challenge. Given the intended purpose of the creation of a .XXX domain, priority will be given to members of the adult entertainment industry who can establish ownership of a registered trademark or another top level domain. Conflicts between applicants from the adult entertainment industry and Sunrise B trademark owners outside the industry will be resolved by ICM.

Although it may be a nuisance for trademark owners to quickly consider and decide on a course of action, consulting with trademark counsel and acting quickly during the Sunrise Period B has the potential to save a great deal of time, inconvenience and aggravation in the long run. Indeed, trademark owners who wait until after October 28, 2011 to protect their marks will risk post-launch recovery costs, costs which often run into the thousands of dollars per domain name. In addition, and more critically, they run the risk of permanently harming their trademarks and brands. Gibbons P.C. is available to provide counsel on .XXX domains, as well as all other trademark and IP matters.

For access to all sunrise policies and eligibility requirements please see ICM’s homepage at: www.ICMregistry.XXX.


Owen J. McKeon is a Director in the Gibbons Intellectual Property Department. Todd M. Nosher, an Associate in the Gibbons Intellectual Property Department, co-authored this post.
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Posted on August 17, 2011 by Catherine M. Clayton

A Challenge to Color Trademarks in the Field of Fashion: Christian Louboutin v. Yves Saint Laurent America

The U.S. District Court for the Southern District of New York’s August 10, 2011 decision in Christian Louboutin S.A. v. Yves Saint Laurent America, Inc., questions whether a single color may serve as a trademark for fashion. That case arises from an action for trademark infringement brought by luxury shoe designer, Christian Louboutin, against Yves Saint Laurent America (“YSL”). Louboutin is well-known for his collection of high end women’s shoes, which have bright red glossy soles. He also owns U.S. Trademark Registration No. 3,361,597 for the following mark, which is described in the registration certificate as “a lacquered red sole on footwear:”

 

The action alleged, among other things, that YSL’s sale of four shoe designs that are entirely red, with a red sole, including YSL’s Trib Too shoe, were likely to confuse consumers as to the source of the YSL shoes, in violation of Louboutin’s trademark rights. In the August 10, 2011 decision, Judge Victor Marrero denied Louboutin’s motion for preliminary injunction, finding that Louboutin was unlikely to be able to establish that he had a protectable mark, since color cannot serve as a trademark if it is functional.

In its decision, the court recognized the cachet of Louboutin’s red soles, noting that “[w]hen Hollywood starlets cross red carpets and high fashion models strut down runways, and heads turn and eyes drop to the celebrities’ feet, lacquered red outsoles on high-heeled, black shoes flaunt a glamorous statement that pops out at once. For those in the know, cognitive bulbs instantly flash to associate: ‘Louboutin.’” Neither party disputed that Louboutin’s red soles were distinctive, or that they were associated with Louboutin’s high-end footwear brand. The court’s decision turned on its finding that a single color is unlikely to be protectable as applied to fashion.

Nonetheless, Louboutin’s assertion of trademark rights in a color is not a new or novel concept. The United States Supreme Court in Qualitex Co. v. Jacobson Products Co. held that a product’s color can become indicative of source and serve as a protectable trademark after the color obtains sufficient notoriety (or “secondary meaning”) among consumers. However, the law is clear that color cannot be protected as a trademark if its use is functional in nature, such as by being essential to the use or purpose of the product, or affecting the cost or quality of the product. Qualitex v. Jacobson, 514 U.S. 159, 165-66 (1995).

The courts and the Trademark Office have found a number of color marks to merit protection, including Burberry’s tartan for clothing and Tiffany’s robin’s egg blue for jewelry and other goods. However, federal trademark protection has been denied for numerous marks on the basis of functionality, including the color pink for surgical wound dressings, green for fishing rods, and white for cutlery handles. In Louboutin, the court opined that “there is something unique about the fashion world that militates against extending trademark protection to a single color, although such registrations have sometimes been upheld in other industries.” The court also listed a number of possible functions that Louboutin’s red heels arguably may serve, including to “attract men to the women who wear [the] shoes” and to coordinate with clothing colors.

Ultimately, the court found that Louboutin was unlikely to prevail in establishing that he has a valid, protectable trademark, and denied the motion for preliminary injunction. This holding has the potential to impact not only the fashion industry, but any industry where the color of a product would be considered to contribute “expressive, ornamental and aesthetic” functions. Developments in this case will continue to be closely watched.


Catherine M. Clayton is a Director in the Gibbons Intellectual Property Department. Christopher H. Strate, an Associate in the Gibbons Intellectual Property Department, co-authored this post.
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Posted on August 15, 2011 by Gibbons P.C.

Gibbons Director Catherine Clayton to Host Roundtable on Internet Privacy and Emerging Issues Relating to Online and New Media Enforcement

Gibbons is pleased to announce that Catherine M. Clayton, a Director in the firm's Intellectual Property Department, will host a roundtable on Internet privacy and emerging issues relating to on-line and new media enforcement on September 22, 2011 at 12:00 pm. This program is part of the International Trademark Association’s (INTA) roundtable series, and will take place at the firm’s Newark office.

The roundtable will examine a host of emerging issues, including the impact of Internet privacy issues on brand owners; taking action against Internet scams; protesting infringement on social media sites; and the upcoming roll-out of new generic top level domains (gTLDs) for brand names, generic terms and locations. To register, please visit INTA’s website.

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Posted on June 13, 2011 by Owen J. McKeon

District Court Awards Tory Burch $164 Million in Anti-Counterfeiting Litigation

Tory Burch LLC (“Tory Burch”), the makers of women’s apparel, designer shoes and fashion accessories, recently obtained a $164 million damages award against forty-one defendants accused of selling counterfeit versions of its products through numerous websites. This decision confers the largest award ever granted to a fashion company in a counterfeiting action.

In December 2010, Tory Burch brought this action before the United States District Court for the Southern District of New York, after conducting a lengthy investigation of China-based counterfeiters offering counterfeit TORY BURCH branded shoes, clothing and accessories for sale on-line to American consumers. Many of the websites used in this infringement scheme were posted at domain names that included the TORY BURCH mark, or marks of other luxury fashion brands. Among the numerous accused domain names were ToryBurchOutlets.com, DiscountToryBurch.com, CheapToryBurchs.com, Tory-Burch.us, ChristianLouboutinMy.com, The HouseofGucci.com and NikeJordanCenter.com.

The complaint included causes of action for trademark infringement, counterfeiting and cybersquatting and sought both monetary damages and permanent injunctive relief. At the time of filing, the company also sought and was granted a temporary restraining order enjoining the defendants from offering the counterfeit goods. In direct violation of the court-ordered temporary restraints, the defendants continued to operate by offering and selling the counterfeit Tory Burch goods as the lawsuit proceeded.

On May 13, 2011, the district court granted the company’s motion for a declaratory judgment against all forty-one defendants after none appeared in court to offer a defense. In doing so, the court held that all were liable and awarded Tory Burch money damages and a permanent injunction. The court also ordered that the defendants’ websites utilizing the Tory Burch mark in the domain name be shut down and transferred to the company. In addition, the court provided the Tory Burch LLC with an order permitting the company to shut down any other websites the defendants create in the future without having file a subsequent lawsuit.

The historic award of damages was calculated based on each of the forty-one defendants’ willful counterfeiting of the TORY BURCH® word mark and logo, awarding the maximum statutory damages of $2 million per mark for a total of $4 million per defendant. In an effort to assist the company to collect the award, the court ordered that funds in defendants’ PayPal accounts, among other accounts, be turned over to Tory Burch in partial payment of the damages awarded. The court also ordered that all of the domain names used for the infringing sites (including those containing third party trademarks) be transferred to Tory Burch, and it enjoined Internet Service Providers, domain name registrars and third party selling platforms from providing services to any Defendant for use in connection with its infringement of Tory Burch’s rights.

Like the Farouk decision handed down by the U.S. District Court for the Southern District of Texas last year, this decision is part of an increasing trend by U.S. courts to grant plaintiffs relief from counterfeiting by forcing third parties to shut down the defendants’ on-line sales and to turn over defendants’ assets located in the United States as partial payment of damages awards. This trend is particularly helpful to trademark owners dealing with on-line counterfeiting rings, since it can be very difficult to determine the true identity of the counterfeiters, and even more difficult to get the counterfeiters to take action directly, or to collect damages from them pursuant to a U.S. court’s order.


Owen J. McKeon is a Director in the Gibbons Intellectual Property Department. Catherine M. Clayton, a Director in the Gibbons Intellectual Property Department, co-authored this post.

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