Trademark Infringement

If anyone was still unsure, Kylie Jenner recently proved that a tweet or post from a social media influencer can have a profound impact. Accordingly, companies are increasingly collaborating with social media influencers to promote their brand. This partnership has become quite lucrative for both parties. For example, a recent Forbes article found that influencers could charge $3,000 to $5,000 per post, while some more sought-after influencers were commanding upwards of $25,000. Influencers could also charge anywhere from $20,000 to $300,000 for a campaign or partnership, depending on the number of followers and the social media platform used. Likewise, a 2015 survey by Tomoson found that, on average, “[b]usinesses are making $6.50 for every $1 spent on influencer marketing.” Influencer campaigns have even resulted in products immediately selling-out.

But what happens when an influencer’s post infringers on the intellectual property rights of another?

The relationship between influencers and a business can vary widely. In some instances, businesses oversee and orchestrate the social media posting, almost akin to directing a commercial. In other scenarios, businesses request final approval before the posting is made public. In still other scenarios, the influencer is not given concrete direction or required to get approval for the posting, i.e., the influencer is free to promote the brand as they wish. Business and influencers should be aware of different liability concerns in each scenario.

One of the first cases in this arena was a suit brought by Ultra Records against influencer Michelle Phan for allegedly using background music in her postings without prior permission. While the case eventually settled, it raised the real concern of copyright infringement concerns in influencer advertising and marketing campaigns. As this emerging avenue of advertising and marketing grows in scope and profitability so will the lawsuits. When contracting in any scenario, parties should make sure to address liability concerns for any potential IP infringement. Businesses and influencers should think twice before making their next post and make sure the works and rights of others are not being used without permission. Perhaps more importantly, the parties should take proactive steps to address who will be liable in the event infringement does occur.

A trademark may give a business the right to stop others from using these marks to sell similar goods or services or using marks that may be confusingly similar. However, federal trademark protection is out of reach for hundreds of businesses across the country.

The recent announcement that the DOJ was rescinding the Cole Memo reminded us of the friction that exists between Federal and State laws, at least when it comes to Marijuana. The Cole Memo was seen, by some, to provide a sort of “safe harbor” for businesses in the 29 states and the District of Columbia where marijuana has been legalized in some form. Regardless of the Cole Memo, marijuana remains illegal under Federal law and therefore the USPTO will not register marijuana-related marks.

Consequently, an established marijuana dispensary might not be able to stop a competitor from setting up a shop with the same or similar brand name. Similarly, a grower who wins an award for a newly developed strain might not be able to stop others from selling marijuana under the same name. Inevitably, consumers will be confused. Such confusion may result in loss of goodwill or brand image associated with the name or trademark as well as lost sales.

In order to address this problem, some businesses have sought to obtain federal trademarks on non-marijuana-related goods and services. For example, businesses can still trademark their name or logo for use with clothing, accessories, and other merchandise. The more closely related the good or service is to marijuana sales or use the more likely the future protection if such activity becomes legal at the federal level. This is due to a doctrine known as the zone of natural expansion, which allows a company to use a trademark in a new geographical area or product line when the use in the newly expanded area is a natural extension of the prior use. That is, marijuana sales may naturally extend from the sales of rolling papers or vaporizers. However, such merchandise runs the risk of being considered illegal drug paraphernalia and thus similarly banned from trademark protection. Conversely, a business may obtain a trademark related to the sales of t-shirts or other merchandise but marijuana sales may not naturally extend from such products. Also, in order to maintain the trademark, the business must continually use the mark and have actual sales of such products. If such products are not popular, this could result in the loss of the trademark. Unfortunately, even with these steps, there may not be much protection from others using the trademark strictly for marijuana sales.

Another option is to register the mark for state registration. This may provide protection within a particular state but may not be effective throughout the country. For example, if a business registers a trademark in Oregon, it may not afford protection from the use of the same mark in Washington, California, or Nevada – three bordering states where recreational use is legal. A business could expand protection to those states, but this would require additional registrations and actual use of the mark in each state protection was sought.

The rescinding of the Cole Memo indicates this rift between Federal and State law is not going anywhere soon. As more and more states continue to legalize marijuana and the industry continues to grow, conflicts will arise. It is possible the marijuana industry will be as non-confrontational as its users are known to be, but my bet is the effectiveness of these strategies will soon be tested.

Following up on my blog post last month related to the Coachella/Filmchella trademark infringement case pending in the Central District of California, the court held this week that the organizer of the Filmchella music festival cannot use the name Filmchilla now either.  The court had previously issued a preliminary injunction in favor of the organizers of the Coachella music festival enjoining the defendant’s use of Filmchella, but following the parties’ flurry of motions, the court extended its ruling to enjoin the use of Filmchilla as well.  The court was apparently persuaded that Filmchella and Filmchilla sound very similar to each other and are both similar enough to Coachella to warrant injunctive relief.

The Coachella/Filmchella trademark infringement case continues to heat up.  Last month, my colleague Megan Center wrote a blog post about the preliminary injunction granted by the Central District of California to the organizers of the Coachella music festival related to another party’s use of Filmchella to refer to a film festival.  Interestingly, the plaintiff attempted to seek expedited proceedings but the Filmchella festival had already occurred by the time of the court’s order.

Subsequently, the parties have filed a flurry of motions.  The plaintiffs first filed an ex parte motion asking the court to hold the defendant in contempt for violating the preliminary injunction order, but the court found no basis for emergency relief and instead required the parties to argue their positions by regular motion.  The plaintiffs then filed a new motion for an order to show cause as to why the defendant should not be held in contempt, and both parties moved for reconsideration and clarification of the court’s preliminary injunction order.

The plaintiffs contend that the defendant has continued to use terms prohibited by the order, that there is new evidence supporting the issuance of the injunction, and that the court should clarify the scope of the injunction, including deeming it both retrospective and prospective.  The defendant argues that the court’s order is unclear and insufficiently detailed, that the court should clarify the time to comply and the acts to be restrained (including whether use of a related term, Filmchilla, is prohibited), and that there is new evidence disproving damage to the plaintiffs.  These motions will be heard by the court in the next few weeks, but for now, it’s safe to say that there is no end in sight for this ongoing trademark battle.

Earlier this week, Under Armour filed a declaratory judgment action in Maryland federal court against Battle Fashions Inc. and Kelsey Battle seeking an order that Under Armour is not infringing any of Battle Fashion’s trademark rights.  In its complaint, Under Armour describes multiple communications the defendants sent to Under Armour demanding that it cease and desist all uses of the phrases “I Can Do All Things” and “I Can. I Will.” as infringing upon the defendants’ “ICAN” trademark, or otherwise be subject to legal action and an injunction.  In addition, Under Armour alleges that the defendants sent communications to its advertising agency, NBA player Steph Curry, and his agent asserting that Under Armour is infringing the defendants’ “ICAN” trademark.  That trademark was obtained by Kelsey Battle doing business as Battle Fashions in 2006.

According to its complaint, Under Armour uses the phrase “I Can Do All Things” on a line of apparel associated with Steph Curry as a reference to his favorite bible verse: “I can do all things through Christ who strengthens me.”  Likewise, Under Armour uses the phrase “I Can. I Will” on various of its apparel products.  Under Armour asserts that, prior to initiating this action, it told the defendants that it “was using ‘I Can’ as part of formative and descriptive phrases, such as ‘I Can Do All Things,’ that the use was a fair use, that numerous third parties use similar descriptive phrases that begin with ‘I Can,’ and that confusion was unlikely.”  But Under Armour asserts that it did not receive any concession from the defendants and thus it decided to initiate a declaratory judgment action.

Under the Declaratory Judgment Act, 28 U.S.C. § 2201-2202, a party may affirmatory file a lawsuit seeking a declaration or order regarding its legal rights.  In this context, as a result of Battle Fashion’s demands, Under Armour seeks an order that it is not infringing, has not infringed, and is not liable for any infringement of the defendants’ trademark rights under either the federal Lanham Act or any state trademark or unfair competition laws.  In its complaint, Under Armour explains that, without an order from the court, it believes it cannot know with certainty whether it is exposing itself to liability through its uses of the phrases “I Can Do All Things” and “I Can. I Will.” on its products.  The defendants have not yet answered the complaint.

The attendance of a multi-day concert/festival in the desert seems to be a right of passage for millennials with events popping up all over the country. However, are you permitted to utilize the goodwill associated with those events to create your own event? The U.S. District Court for the Central District of California (Court) held that a company could not do so in granting a preliminary injunction in Coachella Music Festival, LLC and Goldenvoice, LLC v. Robert Trevor Simms.

Robert Trevor Simms (Simms) purported to create a film festival known as FILMCHELLA. Prior to filing for the injunction, Coachella Music Festival, LLC and Goldenvoice, LLC (collectively, Coachella) sent numerous cease and desist letters to Simms demanding that Simms change its name with no success. As such, Coachella was forced to file for a preliminary injunction to prevent Simms from using the terms, “Filmchella”, “Coachella for Movies” and “Coachella Film Festival” due to alleged trademark infringement. Coachella argued that Simms’ use of these terms will cause consumer confusion, dilution of its marks and other irreparable harm.

Generally, a claimant must fulfill the four-pronged test to allow a court to grant a preliminary injunction in its favor. Specifically, the moving party must establish that: (1) it has a likelihood of success on the merits of the underlying case, (2) it is likely to suffer irreparable harm if no action is taken, (3) the balance of inequities shifts in the favor of the moving party, and (4) an injunction is in the public interest. Here, the Court took a slightly different approach and used a sliding scale approach.

In granting the preliminary injunction, the Court noted that even if a moving party cannot fulfill the first prong of the test, a Court may decide that the moving party has sustained its burden if the moving party can show the balance of hardships shifts sharply in its favor of the moving party and the remaining two prongs of the test also weigh in its favor.

In examining whether Coachella had sustained its burden to obtain a preliminary injunction, the Court first examined the merits of the trademark infringement claim. Here, the Court determined that a protectable interest existed through Coachella’s trademark registrations for COACHELLA and CHELLA. Second, the Court held that the likelihood of confusion inquiry weighed in Coachella’s favor because both events are designed to be artistic, multi-day festivals; Coachella’s marks are widely known and strong; and using the suffix CHELLA is likely to confuse consumers as to the affiliation with Coachella. However, Coachella failed to demonstrate that it is likely to succeed on the merits of the underlying claim because the two events are focused on different mediums of entertainment; the marks look and sound different; no actual confusion has been demonstrated; Coachella failed to submit concrete evidence that the two events compete with one another; and Simms’ lacked the intent to confuse consumers. As such, Coachella is required to demonstrate that it fulfills the “shifts sharply” rule in its favor.

In this case, the Court held that Coachella sustained its burden. First, Simms’ event occurred prior to the issuance of this order so the potential injury to Simms is greatly decreased. Further, the issuance of this order does not prohibit Simms’ from conducting other film festivals under a different name. Additionally, Simms’ continued use of the potentially infringing mark is likely to cause serious, irreparable harm to Coachella with respect to potential damage to its reputation and dilution of its trademarks. Lastly, it is in the public interest to grant this injunction to prevent potential customer confusion. As such, the Court held that Coachella sustained its burden and granted the preliminary injunction.

What this decision demonstrates is a court’s willingness to grant a preliminary injunction despite a moving party failing to show a likelihood of success on the merits of the underlying claim. This is a big win for large companies seeking to protect their brands. It’s a hit to the little guys trying to make a name for themselves. Time will tell how far future courts will take this ruling, and what facts will support a determination that the balance of hardships “shifts sharply” in favor of the moving party.

Trademark infringement disputes are not limited to those between for-profit companies.  Indeed, charities also own trademarks and they can and do enforce their trademarks against other organizations (charitable or not) through cease and desist letters, lawsuits, etc.

volunteers with donation
Copyright: wavebreakmediamicro / 123RF Stock Photo

Case in point:  Last week, Mothers Against Drunk Driving (“MADD”), a non-profit founded in 1980, sued the founders of a relatively new charity, Mothers Of Drunk Drivers (“MODD”), for trademark infringement and dilution of MADD’s trademarks and service marks.  MADD’s complaint, filed in the District of South Carolina, claims that MODD’s use of the marks MOTHERS OF DRUNK DRIVERS and MODD is confusingly similar to MADD’s federally-registered MOTHERS AGAINST DRUNK DRIVING and MADD marks and that the MADD and MOTHERS AGAINST DRUNK DRIVING marks are famous in South Carolina and throughout the United States.  Among other claims, MADD’s complaint also asserts a cybersquatting claim based upon MODD’s use of the domain name mothersofdrunkdrivers.org.

MADD claims that MODD’s actions have injured MADD’s fundraising efforts and goodwill and that any money MODD’s founders have raised due to their use of confusingly similar marks is money that could have gone to MADD to support MADD’s mission.  MODD’s gofundme.com page, attached as an exhibit to MADD’s complaint and available online, indicates that MODD has raised $555 in 5 months.  In terms of damages, MADD seeks to recover all revenues and charitable contributions raised by MODD’s founders as a result of their claimed unlawful conduct.  In addition to damages, MADD seeks an order enjoining MODD’s founders from using the MOTHERS OF DRUNK DRIVERS and MODD marks, requiring the destruction of any marketing materials containing such marks, and ordering the cancellation or transfer of the mothersofdrunkdrivers.org domain name.