From the final conclusion of the Louboutin/YSL red shoe spat, to the creation of the Trademarks Clearinghouse for new gTLDs, trademark law was in the news in 2013. This article highlights what we have learned from five key cases and developments in 2013.
The Supreme Court unanimously held that Nike’s unilateral covenant not to sue divested the district court of jurisdiction over Already’s counterclaim for invalidity. Nike had filed a trademark infringement claim alleging that two specific designs infringed Nike’s trade dress. Already filed a counterclaim seeking to cancel the registered mark. Nike then issued a covenant not to sue in which it promised that it would not sue Already for infringement with respect to its two lines of shoes or for any future colorable imitations. Based on this broadly drafted convenant, Nike voluntarily dismissed its claims with prejudice and asked the court to dismiss the case for lack of jurisdiction. Rejecting Already’s argument that there was an actual case and controversy based on its counterclaim, the court dismissed the litigation and the 2nd Circuit affirmed.
In affirming the decisions below, the Supreme Court applied the “voluntary-cessation doctrine” — whether a defendant may moot a claim through voluntary compliance. The Court assessed the terms of the covenant and determined that Nike’s allegedly wrongful behavior (i.e. suing to enforce its trade dress) could not be reasonably expected to occur. The Court also placed great weight on the fact that Already had never said that it intended to create a new shoe that would fall outside the covenant yet could possibly infringe. If there was such evidence, then there could have been an actual case in controversy.
Takeaways: The case clarifies the burden-shifting framework applied under the voluntary-cessation doctrine, and demonstrates that any covenant not to sue must be drafted broadly and carefully to satisfy this procedural requirement. Nike also appears to give the green light to a trademark holder to extract itself from a litigation that takes a turn south via a covenant not to sue. However, as the majority points out, if a trademark owner uses this tactic frequently — essentially giving carte blanche to an infringer — it risks weakening the scope of protection afforded to its mark.
The Trademark Trial and Appeal Board (TTAB) found that there was a likelihood of confusion between the two marks at issue and denied registration. B&B Hardware then filed an infringement suit in federal court; however, the court refused to admit the TTAB’s decision into evidence and further refused to give the TTAB’s finding preclusive effect. A jury went on to find that there was no likelihood of confusion. The 8th Circuit panel affirmed the district court’s ruling on the grounds that the TTAB is not an Article III court so its decision should not be given preclusive effect. The Court also found that the test for confusion in the Circuit materially differed from the factors applied by the TTAB.
A Supreme Court decision on whether a TTAB decision should preclude a party from re-litigating a TTAB determination will impact how trademark cases are litigated. If the Court rules that federal district courts are precluded from re-litigating likelihood of confusion if the TTAB has already made a determination, brand owners may be forced to opt for the more costly route of litigation as an initial step, rather than a TTAB proceeding, in order to introduce a broader range of evidence. On the other hand, a brand owner who succeeds before the TTAB has a higher likelihood of success on the merits in federal court.
3. New gTLDs
The International Corporation for Assigned Names and Numbers (ICANN) has approved the first wave of generic top-level domains (gTLDs) for release. In an effort to protect brand owners, ICANN has mandated that new registries include certain “rights-protection mechanisms” (RPMs) and sanctioned the Trademarks Clearinghouse (for a fee, a brand owner can register its trademark and receive the benefits of the RPMs.) Each registry must have a “sunrise period,” which is a 30-day period during which a rights holder in the Clearinghouse can register a domain name that includes the trademark before the general public. Upon the launch of a new gTLD, and following the sunrise, a 90-day notice period begins. Any third party who attempts to register a trademark that is part of the Clearinghouse will be notified that the trademark is subject to registration and that the third party should proceed only if it has a right to use the mark. The trademark owner will also be notified that a third party has registered a domain that includes its trademark.
ICANN has received criticism for not mandating that the notice period last for the lifetime of the registry. Under the current framework, a cybersquatter can wait until the 90-day period has expired before seeking to register a domain that incorporates another’s trademark. Registries have the liberty to institute additional RPMs to protect brand owners so it remains to be seen whether more protections will be available.
4. Presumption of irreparable harm rejected
Joining the 11th and 6th Circuit Courts of Appeal, the 9th Circuit has held that trademark owners no longer enjoy a presumption of irreparable harm when seeking a preliminary injunction. In 2006, the Supreme Court had held that it was error to apply a “general rule” in patent cases that permanent injunctions should issue once validity and infringement had been determined. Two years later, the Court held that a party seeking an injunction in a non-patent case must show that irreparable harm is “likely” not merely “possible.” These two decisions called into question whether the presumption could be applied in trademark cases, an issue squarely addressed in Herb Reed Enter. LLC v. Florida Enterm’t Management (PDF). The plaintiff in Herb Reed had obtained a preliminary injunction prohibiting the use of THE PLATTERS in connection with any vocal group and the defendant appealed. The 9th Circuit determined that the district court erred in presuming irreparable harm noting that the decision was “cursory and conclusory rather than being grounded in any evidence”. In a footnote, the circuit reminded litigants that the rules of evidence do not apply strictly at the preliminary injunction stage, and hearsay evidence may be offered to support a finding of irreparable harm.
Takeaways: It is likely that other circuits will also require a plaintiff to present solid evidence demonstrating that it will likely suffer irreparable harm absent preliminary relief. Such evidence, however, is difficult in the trademark context because damage to a company’s goodwill and reputation is hard to quantify.
5. Evidence of a bonafide intent
Consistent with recent decisions, the TTAB granted summary judgment refusing registration on the sole ground that the applicant had no evidence of a genuine intent to use the mark in commerce at the time he filed his ITU application. In PRL USA Holdings, Inc. v. Young (PDF), Ralph Lauren challenged an application to register a design mark. During discovery, applicant produced no documents regarding any agreements, proposals or negotiations to manufacture, sell or license any products under the mark and identified no marketing plans or research development. The TTAB determined that the failure to produce documentary evidence of an intent to use as of the filing date establishes a prima face case of no bona fide intent.
Takeaways: This decision serves as a reminder of the importance of well-crafted discovery in TTAB proceedings. Establishing a lack of bona fide intent on summary judgment is a more cost effective option than litigating an opposition through trial. If the applicant fails to produce evidence of intent, the opposer can amend the notice of opposition to add a claim of lack of bona fide intent and simultaneously move for summary judgment.