Trademark Infringement

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The Coachella/Filmchella trademark infringement case, which we have previously covered here, here, and here, is headed to trial in California this October.  Last week, the federal judge assigned to the case denied Coachella’s partial summary judgment motion and ruled that a jury, not the judge, must ultimately decide whether the Filmchella founder committed trademark infringement by way of his movie festival.  The standard the judge had to apply was whether a reasonable juror could find that the two festivals are not similar enough to cause confusion, which is exactly what the judge determined.

As a result, the case will head to trial and will be decided by jury verdict.  Until then, the court’s preliminary injunction in favor of Coachella, which currently prohibits the use of Filmchella, remains in effect.

 

The General Data Protection Regulation, or GDPR, took effect May 25, 2018. As predicted, the GDPR has complicated access to WHOIS information (commonly used to look up the contact information for website domains for, among other things, stopping others from infringing IP rights) and given ICANN (the corporation that manages WHOIS data) a headache.

ICANN (Internet Corporation for Assigned Names and Numbers) continues to struggle to identify a proposal that bridges the gap between the requirements of the GDPR and access to WHOIS information. On the day the GDPR took effect, ICANN passed a Temporary Specification, which attempted to facilitate GDPR compliance while also preserving parts of the WHOIS system of domain name registration data. This temporary guideline states the registrar and registry operator must provide reasonable access to personal registration data to third parties for: (1) legitimate interests, except where those interests are overridden by the interests or fundamental rights and freedoms of the registrants or (2) when the specified request is deemed lawful by the European Data Protection Board (EDPB), a court having jurisdiction, or applicable legislation or regulation.

First, these temporary specifications have not prevented the brand enforcement problems I previously discussed. For example, some European domain name service registrars have decided to no longer collect WHOIS information. Furthermore, Brian Winterfeldt has reported that a California-based registrar has declined a data access request related to a specific enforcement effort of intellectual property rights and that other registrars are responding to such requests on a “case-by-case basis with no transparent or predictable criteria.” More alarming is the report that at least one global company has estimated its ability to enforce trademark rights against infringing domains may drop 24%.

Second, the EDPB still has problems with ICANN’s proposal. On July 5, 2018, the EDPB urged ICANN to develop new legal justifications for why it asks for the data that makes up the WHOIS database and provided further guidance in developing a GDPR-compliant WHOIS model. ICANN appears to be taking the EDPB’s guidance to heart and is hopeful they can create a GDPR-compliant-model that satisfies their purpose of providing WHOIS data to those who need it.

Unfortunately, only time will tell if a GDPR-compliant WHOIS database will emerge. In the meantime, it has become more difficult to determine who is in charge of websites infringing on intellectual property rights making brand enforcement more challenging.

When evaluating how to address what you believe constitutes infringement, false advertising, or unfair competition, the decision to send a cease and desist letter or to file a lawsuit becomes an important one.  Is there a right approach in each instance?  No.  There are pros and cons to each and, in a typical lawyer answer, the best approach “depends.”

On the one hand, sending a cease and desist letter has the potential of resolving the issue outside of court, with fewer legal fees and on a quicker timeline.  It also has the effect of placing the other party on notice of your claim and allowing you to make an argument for willfulness down the road (if the party continues the conduct despite the allegations).

On the other hand, filing a lawsuit shows the seriousness of the allegations and preserves your choice of venue—i.e. which court you want to be in.  Sending a cease and desist letter first would let the other party know that there is a potential of a lawsuit, which would allow that party to file a declaratory judgment action in its own choice of venue before you have the chance to do so.  As a reminder, under the Declaratory Judgment Act, a party who has been accused of illegal conduct like infringement, false advertising, or unfair competition can affirmatively file suit and ask that a court declare its conduct lawful.

Deciding which approach to take will depend on the situation and any prior history with the alleged infringer or advertiser.  Make sure to weigh all of your options and discuss with your legal counsel if necessary.

There are over 330 million domain names supporting over 1.8 billion websites having a unique hostname on the internet right now. But who owns each of these? There are many reasons one may want to identify the owner or operator of a particular domain or website. In addition to law enforcement and cyber security, owners of IP need to be able to enforce their rights against illegal use of their IP or bad faith domain name registration and use. For example, if your trademark is being infringed by its use on a particular website, you would want to be able to identify the owner, send a cease and desist, and/or sue. Somewhat similar to registering a home or motor vehicle, domains or websites are typically registered and information useful to identifying the individual responsible for the domain or website has, historically, been publically available.

WHOIS is a system established in the 1980s, as the modern internet was emerging. It is used to look up domain registrations in databases that store the registered users or assignees of, e.g., a domain name or IP address. Currently, the name, mailing address, phone number, and administrative and technical contacts of those owning or administering a domain name must be made publicly available through WHOIS, pursuant to the Internet Corporation for Assigned Names and Numbers, or ICANN. WHOIS is not an independent database, but rather relies on third-party accredited entities to manage data and registration. According to ICANN, it is “committed to implementing measures to maintain timely, unrestricted and public access to accurate and complete WHOIS information, subject to applicable laws.” Id.

Enter the General Data Protection Regulation, or GDPR, which is a European Union data protection regulation that will apply to any company that transacts with EU citizens, regardless of the location of the business. The GDPR requires any business that collects any personal data to request explicit permission from the subject before using that data. Personal data is defined as any information that can be used to directly or indirectly identify that person, e.g., a name, photo, email, computer IP address, etc. Under the GDPR, enterprises must limit access to personal data to only authorized individuals that specifically require access to that data. The penalties for violations are significant – up to 20 million Euros or more – and there are no exceptions for enterprise size or scope. Id. The GDPR goes into effect May 25, 2018.

ICANN has been struggling to identify a proposal that bridges the gap between the requirements of the GDPR and the access to WHOIS information. The proposals, thus far, do not do enough to assuage the fears of the third party entities that manage WHOIS data that their actions of publishing information to WHOIS are sufficient and justifiable. On the other hand, brand owners and other WHOIS users are concerned that the proposal takes an unjustifiably conservative approach. Thus, ICANN expects a WHOIS blackout period starting May 25, 2018. Going forward, there may be significantly less publicly available information to conduct enforcement investigations, send cease and desist letters, or prepare and file suit.

Online brand enforcement is about to become much more difficult if not, in some cases, nearly impossible.

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.