IP Law 2012: A Look Ahead . . . .

Coming off a year that included the Smith-Leahy “America Invents Act,” 2012 portends to have some significant developments in IP law.

Decisions for IP practitioners and industry to watch for include:

  • the Supreme Court’s decision in Caraco Pharm. Labs. Ltd. v. Novo Nordisk A/S, regarding “use codes” and section viii carve-outs under the Hatch-Waxman Act;
  • the Supreme Court’s decision in Mayo v. Prometheus, regarding patentable subject matter, post-Bilski; and
  • the Federal Circuit’s upcoming en banc decisions in McKesson and Akamai, regarding joint infringement liability.

In the trademark realm, the 2d Circuit’s decision in Louboutin, regarding trademarking colors.

Locally, the New Jersey Trade Secrets Act is expected to be signed into law, which will codify the State’s common law practice regarding trade secrets. Also, implementation of the Southern District of New York’s 18-month pilot program on conducting complex litigations will be underway.

On the national level, the launch of the Intellectual Property Exchange International (“IPXI”), an exchange for commoditizing patents and other IP assets is expected in June.

And finally, just as on-going developments with and implementation of the Smith-Leahy America Invents Act progresses, Congress will continue to address the Stop Online Piracy Act.

Gibbons, with offices in Newark, Trenton, New York City, Wilmington and Philadelphia will continue to remain at the forefront of these, and all other IP law developments.


Ralph A. Dengler is Counsel to the Gibbons Intellectual Property Department. Jillian A. Centanni, an Apprentice in the Intellectual Property Department, co-authored this post.

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.

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.

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.

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.

Revisions to Federal Rule of Civil Procedure 26 - New Untested Protections for Testifying Experts

On December 1, 2010, the latest version of the Federal Rules of Civil Procedure went into effect. As part of the new rules, significant changes were made to Rule 26 regarding the discovery of information from experts retained to provide testimony. As of Wednesday, witnesses who were not previously required to provide a written report must now provide a summary disclosure of their opinion. In addition, draft expert reports and some communications between expert witnesses and counsel will no longer be discoverable, and expert reports will now only need to contain information regarding “facts or data considered by the witness in forming” an opinion.

Of special interest are the last two changes to Rule 26. Specifically, Fed. R. Civ. P. 26(a)(2)(B)(ii)  will now limit expert reports to “facts or data” rather than having previously required the disclosure of “data or other information” considered by the witness. As explained in the notes of the Advisory Committee, the facts or data limitation is meant to keep these disclosures to those which are factual in nature and will now exclude the discovery of counsel’s theories or mental impressions.

Similarly, draft expert reports and communications between expert witnesses and counsel will no longer be discoverable. Rather, the Advisory Committee explained that Fed. R. Civ. P. 26(b)(4) will now provide work-product protection against the discovery of “draft reports and disclosures or attorney-expert communications.” However, there will be three exceptions to the protection of attorney-expert communications, namely, those involving an expert’s compensation; facts or data provided by the attorney to an expert that were used in forming the opinion; and any assumptions that counsel provided to the expert and were relied upon to form the opinion.

Because these amendments are new and their bounds untested, counsel and clients should remain careful when communicating with testifying experts in connection with a litigation.

Supreme Court Denies Certiorari in Tiffany v. eBay Appeal

Earlier today, the Supreme Court denied certiorari in the Tiffany v. eBay action, permitting a ruling to stand that places the burden on trademark owners to police infringements taking place on on-line auction sites. The Supreme Court’s denial of cert was without comment.

Critical to the underlying decisions of the Second Circuit Court of Appeals and the U.S. District Court for the Southern District of New York was that eBay was not itself the seller of the infringing goods, and that it acted promptly to take down auctions when it received notice that the goods were not legitimate. eBay reportedly has made investments of up to $20 million per year to stop fraud and infringements occurring via its site.

This action, which has been pending since 2004, has been carefully watched by brand owners and on-line retailers alike, since it examines the modern question of how responsibility for infringement should be allocated when third parties sell goods via an on-line marketplace. Given the Supreme Court’s denial of certiorari, the brunt of that burden currently remains on trademark owners.


Catherine M. Clayton is a Director in the Gibbons Intellectual Property Department.

Farouk Systems Wins $300 Million Damages Award Against On-Line Chinese Counterfeiting Ring

On October 14, 2010, the U.S. District Court for the Southern District of Texas granted what is reportedly the largest judgment ever awarded in an action involving on-line counterfeiting. In Farouk Systems, Inc. v. Eyou Int’l Trading Co., Judge Kenneth M. Hoyt entered a default judgment and permanent injunction against more than seventy defendants, who were operating an Internet counterfeiting ring out of China. The judgment required that each of the defendants pay Farouk statutory damages of $4 million, resulting in an award of approximately $300 million. In addition to being significant because of the amount of the damages awarded, this decision is noteworthy for the pragmatic approach that the Court took to ensure that the relief awarded to the plaintiff would be meaningful.

In Farouk, the Court found the defendants guilty of operating an on-line counterfeiting ring that distributed spurious CHI® and FAROUK® branded hair care products, including straightening irons and hairdryers. Judge Hoyt noted that the defendants had gone to “great lengths to conceal and/or move themselves and their ill-gotten proceeds from Plaintiff’s and [the] Court’s detection and reach, including by using multiple false identities and addresses associated with their operations and purposely-deceptive contact information.” To give teeth to the decision, Judge Hoyt required that PayPal, Inc. release money in the defendants’ PayPal accounts to Farouk, in partial payment of the judgment. He also enjoined a broad array of third parties from providing services that would assist any defendant with its infringing activities. Among those enjoined are Internet Service Providers, sponsored search engine and ad word providers, banks, payment processing services, and entities such as Alibaba.com and DIYtrade.com, which provide on-line B2B (business to business) selling platforms.

Judge Hoyt also ordered that twenty-five domain names incorporating the CHI mark be transferred to Farouk. There were another ten domain names used by the counterfeit ring that did not include any of Farouk’s trademarks. Nonetheless, the Court ordered that those domain names be immediately disabled by their respective registrars, and ultimately transferred to Farouk.

This decision illustrates the benefits of creatively constructing requests for relief. When dealing with on-line counterfeit rings, the defendants’ true identities are typically hidden through a web of false company and personal names. Consequently, plaintiffs who win monetary damages are often unable to collect them. In addition to seeking traditional forms of relief, any plaintiff in an on-line counterfeiting dispute should also consider requesting the types of relief awarded in Farouk, which create obligations for -- and seize assets held by -- third parties that are within the court’s grasp.


Catherine M. Clayton is a Director in the Gibbons Intellectual Property Department.

Supreme Court Denies Certiorari in Trademark Challenge to Washington Redskins Name

On November 16, 2009, the Supreme Court denied a petition for certiorari in the case of Harjo v. Pro-Football, Inc. The underlying action was brought by Native American activists (“Harjo”) who challenged the Washington Redskins’ right to register its team name and logos on the basis that they are scandalous, disparaging and may bring Native Americans into disrepute or contempt. Marks that do any of those things are not entitled to registration, as provided by Section 2(a) of the Lanham Act, 15 U.S.C. § 1052(a). The sole issue submitted for the Supreme Court’s review, however, was whether the activists’ claim was barred by laches, as found by the U.S. Court of Appeals for the D.C. Circuit.

Under the Lanham Act, the grounds on which a trademark registration may be cancelled become limited once the registration has existed for five years. For example, after that point, no challenge may be brought on the basis that the mark is merely descriptive. However, the Lanham Act specifies that certain claims may be brought “at any time,” including that a mark is disparaging, that it has been abandoned, or has become generic. 15 U.S.C. § 1064(3).

The issue submitted for the Supreme Court’s review arose out of a Trademark Trial and Appeal Board (“TTAB”) proceeding in which Harjo sought cancellation of a number of the Redskins’ registrations on the basis that the marks are disparaging and scandalous. On April 2, 1999, the TTAB ruled for Harjo on the issue of disparagement and ordered that the registrations be cancelled. Harjo, 50 U.S.P.Q.2d 1705 (TTAB 1999). The Washington Redskins then appealed that decision to the U.S. District Court for the District of Columbia, and that court held that the activists’ claim was barred under the doctrine of laches, i.e. that the activists had waited too long to bring the claim. Pro-Football v. Harjo, 284 F. Supp.2d 96, (D.D.C. 2003). The activists then appealed that decision. The gist of their argument was that laches may not bar a claim that the law explicitly states may be brought “at any time.” The U.S. Court of Appeals for the District of Columbia did not agree, and it affirmed the lower court’s decision on May 15, 2009. Pro-Football, 565 F.3d 880 (D.C. Cir. 2009). The activists then petitioned the Supreme Court for certiorari.

That the Supreme Court has refused to hear this action does not mean that the Redskins’ registrations will stand indefinitely. Another challenge, Blackhorse v. Pro-Football, Inc., is pending before the TTAB, brought by a group of Native Americans who had only recently reached the age of majority (i.e. the age at which the laches clock starts ticking for individuals) at the time their complaint was filed. That proceeding was suspended pending outcome of the Harjo action, and is expected to move forward in view of the Supreme Court’s decision to deny certiorari. So, while the Washington Redskins may have prevailed in Harjo, it remains to be seen how the challenge to the nature of its marks will be resolved.


Catherine M. Clayton is a Director in the Gibbons Intellectual Property Department.