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Exploring the latest in intellectual property law
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Remedies as Big as Your Bamba

by | Aug 10, 2023 |

Following the district court’s finding of trademark infringement on summary judgment, the US Court of Appeals for the Sixth Circuit affirmed the district court’s subsequent award of profits, costs and attorneys’ fees in favor of the trademark holder. La Bamba Licensing, LLC v. La Bamba Authentic Mexican Cuisine, Inc., nka La Villa Rica Mexican Cuisine, Inc., Case No. 22-5853 (Gilman, Larsen, Nalbandian, JJ.)

La Bamba Licensing operates a series of Mexican restaurants in the Midwest under the name “La Bamba.” It obtained various federal trademark registrations in 1998. Almost 20 years later, La Bamba Authentic Mexican Cuisine (now known as La Villa Rica) opened a Mexican restaurant under the name “La Bamba Authentic Mexican Cuisine” with a single location in Lebanon, Kentucky. Shortly after learning of the La Villa Rica restaurant, La Bamba Licensing sent a cease-and-desist letter to La Villa Rica demanding that La Villa Rica cease use of the LA BAMBA mark. La Villa Rica responded but refused to alter its conduct because it did “not see any basis for [La Bamba Licensing’s] demands.” Three months after sending the cease-and-desist letter, La Bamba Licensing filed suit in the Western District of Kentucky alleging trademark infringement and unfair competition. More than one year later, La Villa Rica changed the name of its restaurant to “La Villa Rica Authentic Mexican Cuisine, Inc.”

The district court ultimately granted summary judgment in favor of La Bamba Licensing on all pending claims and permanently enjoined La Villa Rica from using the LA BAMBA mark. La Bamba Licensing subsequently filed a motion seeking profits, costs associated with bringing the action and attorneys’ fees. Following an evidentiary hearing, the district court granted La Bamba Licensing’s motion and awarded all three forms of relief. La Villa Rica appealed the district court’s decision to award profits and attorneys’ fees but did not appeal the award of costs or the district court’s calculation of either profits or attorneys’ fees.

The Sixth Circuit started its analysis of the profits award by identifying the factors courts should consider, including the defendant’s intent to deceive, whether sales were diverted, the adequacy of other remedies, any unreasonable delay by the plaintiff in asserting its rights, public interest in making the misconduct unprofitable and “palming off” (i.e., whether the defendant used its infringement of the plaintiff’s mark to sell its own products to the public through misrepresentation). The Sixth Circuit noted that the district court relied on two factors—the defendant’s intent and public interest in making the misconduct unprofitable—plus the defendant’s “willfulness” in determining that an award of profits was appropriate. The Sixth Circuit credited the district court’s reasoning, noting that “[e]ven after La Villa Rica received a cease-and-desist letter containing notice of La Bamba’s registered mark, and ‘in the face of [its] attorney’s advice that [it] might have a problem,’ La Villa Rica continued to use the LA BAMBA mark for a year and a half and ‘offered no legally sufficient explanation or support for its actions.’”

La Villa Rica argued that [...]

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Off the Charts: Derivative Work Copyright Registers All Material in Derivative Work

by and | Jul 27, 2023 |

In a matter of first impression, the US Court of Appeals for the Ninth Circuit reversed the district court’s partial grant of summary judgment in favor of the defendants, vacated a jury verdict and an award of attorneys’ fees, and remanded an action alleging infringement of copyright in two charts depicting organizational change. The Court agreed with other circuits that by registering a derivative work, an author registers all the material included in the derivative work, including any unregistered original works. Enterprise Management Limited, Inc. v. Construx Software Builders Inc., Case No. 22-35345 (9th Cir. July 17, 2023) (Fletcher, Clifton, Ikuta, JJ.)

Mary Lippitt and her company Enterprise Management filed a lawsuit against Steve McConnell and his company Construx for copyright infringement. Lippitt has built a career around advising companies on organizational change. To this end, she created charts and materials, including one titled “Managing Complex Change,” to demonstrate how an organization can fail by missing key transitional elements. According to Lippitt, the “Managing Complex Change” chart was registered with the US Copyright Office in 1987 as part of a presentation called “Transition: Accomplishing Organization Change.” The Copyright Office subsequently destroyed the deposit copy of the registration as part of its routine practice. In 2000, an updated presentation with an updated version of the chart was registered with the Copyright Office. In 2003, the updated chart, “Aligning for Success,” was registered individually.

In 2016, McConnell used Lippitt’s chart in a YouTube video presentation. McConnell titled the chart “Lippitt/Knoster Change Model,” added supplementary information and made stylistic changes. When Lippitt found out that McConnell used her chart, she sent cease-and-desist letters. After McConnell refused to stop using the chart, Lippitt sued.

Following discovery, McConnell moved for summary judgment, which the district court granted in part and denied in part. The district court ruled that Lippitt failed to show that she had registered the “Managing Complex Change” chart because she did not present evidence that the chart was included in the “Transition: Accomplishing Organization Change” material registered in 1987. The district court also denied the motion for summary judgment with respect to Lippitt’s claim that McConnell infringed the “Aligning for Success” chart because there was a genuine issue of material fact as to whether McConnell had copied it. Based on these rulings, the district court issued a pretrial order precluding Lippitt from basing any argument on her alleged ownership of the copyright in the “Managing Complex Change” chart, including any argument that McConnell infringed the “Aligning for Success” chart by copying elements from the “Managing Complex Change” chart. At trial, the jury returned a verdict for McConnell. The district court subsequently granted McConnell’s motion for attorneys’ fees. Lippitt appealed.

The Ninth Circuit first addressed whether Lippitt raised a genuine issue of material fact that she registered the “Managing Complex Change” chart by including it in the “Transition: Accomplishing Organization Change” materials. The Ninth Circuit explained that the district court’s ruling was partially based on the fact that the copyright for Lippitt’s original [...]

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The Game of Life: Winner Gets Everything Except Attorneys’ Fees

by | Jul 13, 2023 |

The US Court of Appeals for the First Circuit agreed with the trial court regarding the reasonableness of the plaintiff’s legal positions and found that the trial court did not abuse its discretion in denying the defendants, as the prevailing party, attorneys’ fees. The First Circuit determined that the positions advanced by the unsuccessful plaintiffs were not objectively unreasonable. Markham Concepts, Inc. v. Hasbro, Inc., Case Nos. 19-1927; 21-1957; -1958 (1st Cir. June 22, 2023) (Kayatta, Lipez, Thompson, JJ.)

The underlying case involved a copyright action concerning ownership rights to The Game of Life, a board game that has been widely popular since its launch in 1960. The Game of Life became the center of a long-standing dispute between its creators, Reuben Klamer and Bill Markham. Klamer, a toy developer, conceived the initial idea for the game and enlisted Markham to design and create the game prototype. Markham believed he deserved greater recognition for his contribution and felt the royalty he received was unfairly low.

In its previous ruling on the merits, the First Circuit affirmed the district court’s decision in favor of the Hasbro defendants (including Klamer). The Hasbro defendants then sought attorneys’ fees, which the district court denied. Hasbro appealed and moved for appellate attorneys’ fees.

Although both the district court and the First Circuit examined various factors, such as Markham’s motivations and the need for compensation or deterrence, the key factor for both courts in determining whether to award legal fees hinged on the reasonableness of Markham’s litigation arguments.

The merits of the underlying case revolved around the termination right provided by the Copyright Act of 1976 (1976 Act), which allows authors to terminate copyright grants after a certain period and thereby disentangle themselves from agreements made before the true value of their work became apparent. This right does not apply to works made for hire. In this instance, the issue of whether The Game of Life qualified as a work made for hire was determined under the Copyright Act of 1909 (1909 Act), as the game was created long before the 1976 Act took effect. Under the 1909 Act, Markham had to meet the “instance and expense” test, which treats contractors as employees of the party commissioning the work, thereby presuming copyright ownership in the latter. The district court held that The Game of Life was a work for hire because it was created at Klamer’s instance and expense.

Markham’s primary argument relied on the 1989 Supreme Court decision in Reid, which interpreted “employee” for purposes of the work-for-hire test as being defined according to “the general common law of agency.” Although Markham acknowledged that Reid was directed to the 1976 Act, he contended that the logic of Reid should extend to the 1909 Act, thereby nullifying the “instance and expense” test in favor of the general common law of agency.

Four years after the Supreme Court’s decision in Reid, however, the First Circuit applied the “instance and expense” test in Forward to a work covered [...]

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‘Show Me The Money’ Isn’t Enough: Disproportionate $1.7M Attorneys’ Fees Rejected

by and | Jun 22, 2023 |

The US Court of Appeals for the Ninth Circuit reversed and remanded a $1.7 million award of attorneys’ fees, finding the amount unreasonable compared to the benefit the plaintiffs received. Lowery v. Rhapsody International, Inc., Case No. 22-15162 (9th Cir. June 7, 2023) (Smith, Collins, Lee, JJ.)

Streaming music providers such as Apple Music, Spotify and Napster (formally Rhapsody International) have fundamentally changed the way we enjoy music. Gone are the days of the mixtape. But to bring these services, providers must license the copyrighted music and pay royalties to the owners. At the time this case was filed, the two main licensing paths available to streaming music providers required either direct negotiations with the owners or compulsory licensing by serving a notice of intent to each owner. These paths were unworkable and antiquated given the millions of songs that the providers were playing.

David Lowery and others sued Rhapsody in 2016 on behalf of a putative class of copyright owners. They claimed Rhapsody had infringed their copyrights by reproducing and distributing their musical compositions through its platform without a license. The parties eventually reached a settlement. Rhapsody agreed to pay a maximum of $20 million to the class members, but because an earlier argument effectively decimated the putative class, the actual payout to the class was just over $50,000.

Despite the low amount paid to the class, the plaintiffs’ counsel requested $6 million in attorneys’ fees. The request was based on a “lodestar” calculation, where the number of hours reasonably spent on the case is multiplied by a reasonable hourly rate, then adjusted up or down as called for by the peculiarities of the case. The plaintiffs’ counsel estimated its fees to be around $2.1 million, with a proposed 2.87 multiplier due to the “exceptional” results in a “complex” case.

The magistrate judge disagreed and recommended reducing the lodestar to $1.7 million because one-fifth of the hours spent were either unreasonable or improperly blocked billed. The judge also recommended further reducing the lodestar value with a negative multiplier in light of the limited benefit actually paid out. The district court took issue with the magistrate judge’s cross-checking of the lodestar value against the amount paid. The court noted that there was “no bright-line rule” to cross-check a lodestar value either against the claimed amount ($50,000 in this case) or the possible recovery ($20 million). However, the district court agreed with the magistrate judge’s lodestar calculation and awarded $1.7 million in attorneys’ fees. Rhapsody appealed.

The Ninth Circuit rejected the award, concluding that the $1.7 million award was unreasonable given the small benefit to the class members. The Court explained that the actual benefit to the class must be considered when assessing the value of a class action settlement. Here, the Court pointed out that the district court should have cross-checked any lodestar calculations to ensure that there was a reasonably proportional benefit to the class members. The district court also should have disregarded the $20 million settlement cap when [...]

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Lanham Act Liability May Apply to Copyrighted Material

by | Jun 8, 2023 | ,

The US Court of Appeals for the Ninth Circuit found that liability under the Copyright Act and liability under the Lanham Act are not mutually exclusive and that liability under the Copyright Act does not negate trade dress damages under the Lanham Act. Jason Scott Collection, Inc. v. Trendily Furniture, LLC, Case No. 21-16978 (9th Cir. May 30, 2023) (Wardlaw, Bumatay, Schreier (sitting by designation), JJ.)

Jason Scott Collection (JSC) and Trendily Furniture are high-end furniture manufacturers that sell their products in the Texas market. In 2016, Trendily intentionally copied three unique furniture designs by JSC and sold them to Texas retailers. Both collections featured heavy carved wood pieces with detailed embellishments and metal elements. The record showed that Trendily’s collection had been based on photographs of the preexisting JSC collection. The Trendily pieces were so similar that even JSC had initially mistaken the furniture as its own when confronted by a retailer. After JSC filed suit, the district court granted summary judgment to JSC on its copyright claim. Following a bench trial, the district court held Trendily liable on the trade dress claim. On that claim, the district court awarded almost $133,000 in prospective lost annual profits over a period of three years, which amounted to about six times the almost $20,000 in retrospective gross profits awarded on JSC’s copyright claim. Trendily appealed.

To obtain a judgment for trade dress infringement, a plaintiff must prove that the claimed trade dress is nonfunctional, the claimed trade dress serves a source-identifying role because it is either inherently distinctive or has acquired a secondary meaning and the defendant’s product creates a likelihood of confusion. Trendily argued that JSC had not adequately established a secondary meaning (for trade dress the parties stipulated was not inherently distinctive) or likelihood of confusion. The Ninth Circuit, however, found that the district court found adequate evidence of secondary meaning through copying and through confusion by retailers and consumers in the high-end furniture market. The Ninth Circuit also found that the district court had correctly found likelihood of confusion, putting special emphasis on Trendily’s intentional and precise copying of the JSC pieces leading to retailer confusion.

Turning to the damages award, Trendily argued that because copying is a commercially acceptable and necessary act in terms of competition, Trendily should only be held liable under the Copyright Act, rather than for trade dress infringement under the Lanham Act. However, the Ninth Circuit affirmed that liability under the Copyright Act and liability under the Lanham Act are not mutually exclusive and that liability under the Copyright Act did not negate the judgment against Trendily for trade dress damages under the Lanham Act. The Court then affirmed the trade dress damages award, finding that the prospective damages incurred when one of JSC’s business relationships fell apart because of Trendily’s copied furniture were reasonably foreseeable and had been “satisfactorily demonstrated.” The Court emphasized that the law only required “crude measures of damages in cases of intentional infringement.”

Finally, the Ninth Circuit affirmed [...]

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Well Runs Dry: Summary Judgment Denial Supports Non-Exceptional Case Finding

by | Jun 1, 2023 |

The US Court of Appeals for the Federal Circuit affirmed a district court’s denial of attorneys’ fees, explaining that when a district court denies summary judgment and allows a plaintiff’s case to proceed, the district court effectively determines that the position of the party opposing summary judgment is not objectively baseless. OneSubsea IP UK Limited v. FMC Techs, Inc., Case No. 22-1099 (Fed. Cir. May 23, 2023) (Moore, Clevenger, Dyk, JJ.)

OneSubsea and FMC compete in the subsea oil and gas exploration and extraction industry. In March 2015, OneSubsea filed a lawsuit against FMC alleging infringement of 95 claims across 10 OneSubsea patents. After the district court issued its claim construction ruling, FMC moved for summary judgment of noninfringement. OneSubsea opposed. While the summary judgment motion was pending, the Patent Trial & Appeal Board instituted inter partes review (IPR) proceedings on a subset of the asserted patents. FMC argued that while a stay of district court proceedings would be appropriate, it was unnecessary in light of its pending summary judgment motion. In August 2016, the district court denied summary judgment and stayed the case.

The case remained stayed for three years, during which time the Board invalidated 76 claims. In 2019, the district court lifted the stay. At a pre-trial hearing in 2020 discussing whether additional discovery was needed to address summary judgment, FMC doubted the need for more discovery and pointed to the 3,200 record pages illustrating differences between the designs of the accused device and the patented devices. In response, the district court stated, “And you really think I’m going to be able to grant summary judgment on that?” After the hearing, FMC renewed its summary judgment motion, which OneSubsea opposed. In reply, FMC moved to exclude the report of OneSubsea’s expert because he applied the wrong claim construction. Ultimately, the district court granted FMC’s motion to exclude and its motion for summary judgment.

In 2021, FMC moved for attorneys’ fees based on OneSubsea’s “substantively weak infringement claims” after the claim construction order was issued and “litigation misconduct.” After briefing was complete, the district court announced that the case had been reassigned to another judge following the retirement of the original assigned judge. The new judge rejected FMC’s view that OneSubsea’s case was objectively baseless and further rejected FMC’s claims of litigation misconduct. FMC appealed.

As a threshold matter, FMC argued that the Federal Circuit should apply de novo review instead of an abuse-of-discretion standard because the new judge only briefly “lived with the case” and should be disqualified from exercising discretion in deciding FMC’s attorneys’ fees motion. The Court rejected FMC’s invitation to change the standard of review, citing the substantial body of law in which appellate courts have consistently reviewed successor judges’ decisions on discretionary issues for abuse of discretion.

Turning to the merits, the Federal Circuit found that FMC’s exceptional case argument lacked merit. The Court explained that the argument disregarded the district court’s observation that FMC’s demand for a prompt favorable noninfringement judgment based [...]

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Allegations in Complaint Prevail over Statements in Exhibit

by | Apr 20, 2023 |

The US Court of Appeals for the Federal Circuit, prioritizing specific allegations in the complaint over disclosures in exhibits to the complaint, reversed and remanded a district court decision dismissing an original complaint, denying leave to file an amended complaint. Healthier Choices Management Corp. v. Philip Morris USA, Inc.; Philip Morris Products S.A., Case Nos. 22-1268; -1563 (Fed. Cir. Apr. 12, 2023) (Taranto, Cunningham, Stoll, JJ.)

Healthier Choices Management (HCM) filed a complaint for patent infringement against two Philip Morris defendants in the Northern District of Georgia. The infringement allegation involved a patent for a nicotine delivery device. The relevant language from the claims focused on a heating element in the device “initiating . . . a combustion reaction . . . [with] the combustion reaction at least partially combusting the combustible material.” In its complaint, HCM alleged that the heating in the accused product resulted in at least partial combustion.

Philip Morris defended the claim by arguing that its accused product aerosolized the nicotine at a low temperature and, therefore, never combusted the tobacco. Philip Morris filed a motion under Fed. R. Civ. Pro. 12(b)(6) against HCM arguing that an exhibit to the complaint “conclusively demonstrated” that the accused product did not initiate a combustion reaction. The district court agreed and granted the motion to dismiss, prompting HCM to file a motion for leave to amend its complaint to more definitively allege infringement. The district court denied the motion and granted Philip Morris’s subsequent motion for attorneys’ fees under 35 U.S.C. § 285. HCM appealed.

Since the issues raised were not unique to patent law, the Federal Circuit addressed HCM’s appeal under the law of the relevant regional circuit, the Eleventh Circuit. The Court noted that in the Eleventh Circuit, exhibits attached to a complaint can be considered and the exhibit controls in the event of any conflict with allegations pertaining to the exhibit. However, when an exhibit is alleged to be factually false in some way and the allegations in a complaint are specific and well pleaded, then the allegations in the complaint control. The exhibit regarding the accused product in this case was alleged to be incorrect, as far as it stated that there was no combustion initiated by the “heat-not-burn” method described in the exhibit. HCM contended that combustion occurred despite the assertions in that document. Relying on several cases disavowing the truth of the exhibit, the Federal Circuit found Eleventh Circuit law to be both clear and in alignment with HCM. The Court concluded that in light of the detailed allegations as to the basis underlying HCM’s disagreement with the facts asserted in the exhibit, the complaint should not have been dismissed based on the exhibit.

The Federal Circuit next turned to HCM’s amended complaint. Noting that the amended complaint “superseded” the earlier complaint, the Court found that the amended complaint removed the offending exhibit and any references to the offending exhibit and included a declaration of a technical expert to further support HCM’s allegations. [...]

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No Standing to Invalidate Trademark without Threat of Infringement Suit

by | Feb 23, 2023 |

The US Court of Appeals for the Ninth Circuit concluded that when a party obtains a declaratory relief finding that it does not infringe a trademark, it no longer has Article III standing to pursue invalidation of the mark. San Diego County Credit Union v. Citizens Equity First Credit Union, Case Nos. 21-55642; -55662; -56095; -56389 (9th Cir. Feb. 10, 2023) (Bea, Ikuta, Christen, JJ.)

Citizens Equity First Credit Union (CEFCU) registered a trademark for the term “CEFCU. NOT A BANK. BETTER,” and further claimed to own a nearly identical common-law trademark for “NOT A BANK. BETTER.” In 2014, San Diego County Credit Union (SDCCU) obtained a registration for “IT’S NOT BIG BANK BANKING. IT’S BETTER.” CEFCU petitioned the Trademark Trial & Appeal Board to cancel SDCCU’s registration, claiming that it covered a mark that was confusingly similar to CEFCU’s registered and alleged common-law marks.

SDCCU sought declaratory relief in the district court seeking a noninfringement finding of CEFCU’s registered and common-law marks, an invalidity finding of CEFCU’s registered and common-law marks, and a finding that CEFCU falsely or fraudulently registered its mark. CEFCU unsuccessfully filed motions to dismiss for lack of personal and subject matter jurisdiction. SDCCU persuaded the district court that during the course of the cancellation proceedings, it became apprehensive that CEFCU would sue SDCCU for trademark infringement. The district court granted SDCCU’s motion for summary judgment on noninfringement and CEFCU’s motion for summary judgment on SDCCU’s fraudulent registration claim. The parties agreed to dismiss the claim that CEFCU’s registered mark was invalid. The only issue remaining was SDCCU’s count seeking declaratory relief to invalidate CEFCU’s common-law mark. After a bench trial, the district court determined that CEFCU’s common-law mark was invalid, entered final judgment and awarded SDCCU attorneys’ fees. CEFCU appealed.

In an appeal that raised a “bevy of issues,” the Ninth Circuit concluded that the district court lacked Article III jurisdiction to invalidate CEFCU’s common-law mark following the grant of summary judgment in favor of SDCCU on its noninfringement claims. Citing the Supreme Court’s 2007 decision in MedImmune v. Genentech and Ninth Circuit precedent, the Ninth Circuit applied the “reasonable apprehension” test to determine whether a controversy exists in a declaratory judgment action regarding trademark infringement. Under this test, a party has standing to seek declaratory relief of noninfringement if the party demonstrates “a real and reasonable apprehension that [the party] will be subject to liability” if the party’s course of conduct continues. Concrete threats of a trademark infringement suit are not required to create live controversy to provide standing to seek declaratory relief action.

The Ninth Circuit concluded that justiciable controversy existed at the pleading stage, pointing to CEFCU’s cancellation petition, CEFCU’s testimony that it was just a “matter of time” before actual confusion occurred in California, and CEFCU’s affirmative refusal to stipulate that SDCCU was not infringing CEFCU’s marks. However, once the district court rendered its declaratory judgment of noninfringement, the record lacked any evidence that an ongoing threat of liability was causing [...]

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Words Matter: Court Sides with Translation Company in Insurance Coverage Dispute

by | Dec 8, 2022 |

The US Court of Appeals for the First Circuit concluded that a company’s general liability insurer was obligated to provide coverage for legal fees incurred in fending off a trade secret and defamation lawsuit brought by a competitor. Lionbridge Tech., LLC v. Valley Forge Ins. Co., Case No. 21-1698 (1st Cir. Nov. 21, 2022) (Kayatta, Selya, Thompson, JJ.)

Lionbridge and TransPerfect are competitors in the language-translation industry. TransPerfect sued Lionbridge for misappropriation of trade secrets and defamation. TransPerfect alleged that Lionbridge concocted a scheme through its corporate owner to feign interest in acquiring TransPerfect and, through this scheme, improperly gained access to TransPerfect’s trade secrets, which could be used to poach TransPerfect’s customers and otherwise undermine TransPerfect’s business.

Shortly after the lawsuit was filed, Lionbridge informed its liability insurance carrier, Valley Forge, about the litigation. Valley Forge initially indicated that it would provide Lionbridge with coverage for legal costs associated with the litigation. Valley Forge subsequently disputed the requested coverage based on both the reasonableness of the fees incurred and the nature of the suit. Lionbridge filed suit against Valley Forge seeking full coverage from Valley Forge for its defense costs. The dispute centered on whether the fees incurred could be considered injury arising out of “[o]ral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organizations goods, products, or services,” as provided by Lionbridge’s insurance policy. The district court granted summary judgment in favor of Valley Forge, finding that Valley Forge did not owe Lionbridge a duty to defend under the relevant policy provisions and exclusions. Lionbridge appealed.

The First Circuit reversed, explaining that an insurer’s duty to defend depends on whether the allegations in the underlying litigation are reasonably susceptible to an interpretation that the policy provisions apply. The focus of the inquiry is the source of the injury, not any specific theories of liability set forth in the underlying complaint. The Court explained that this inquiry required a comparison of the allegation made in the underlying litigation against the insurance policy provisions.

After analyzing the underlying complaint against the insurance policy, the First Circuit determined that the policy provisions applied because the allegations “roughly sketch[ed]” an injury arising from a defamation claim. TransPerfect’s claims were rooted in alleged reputational harm to its business, which fit within the relevant provision. The Court noted that complete overlap between the policy provisions and the claims was not required.

The First Circuit next considered whether any policy coverage exclusions applied to preclude coverage. The relevant exclusions fell into two buckets:

  • Injuries caused by an insured with direct knowledge that its actions would inflict injury, or injuries arising out of an oral or written publication that the insured knows is false
  • Trade secret misappropriation.

Valley Forge carried the burden of proving that either or both categories of exclusions applied. The Court concluded that the first category did not apply because Valley Forge failed to show that all allegations [...]

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Functionality Dooms Alleged Trade Dress Protection

by | Nov 29, 2022 |

The US Court of Appeals for the Eighth Circuit affirmed summary judgment of noninfringement in a trade dress suit, finding that the trade dress was functional and the attorneys’ fee award—as diminished by the district court—was appropriate. Pocket Plus, LLC v. Pike Brands, LLC, Case No. 21-3414 (8th Cir. Nov. 15, 2022) (Gruender, Melloy, Erickson, JJ.)

Since 2009, Pocket Plus has sold vertically oriented pouches that attach to waistbands or belts to carry water bottles, cell phones and other small objects. Pike Brands, d/b/a Running Buddy, began selling similar pouches in 2012 and introduced a vertical version in 2015. In 2021, Pocket Plus sent cease and desist letters to Running Buddy, then sued for trade dress infringement under Iowa common law and the Lanham Act. Running Buddy moved for summary judgment, arguing that Pocket Plus’s trade dress was unprotectable. Running Buddy also threatened Rule 11 sanctions because of the weakness of the case. After winning summary judgment, Running Buddy moved to recover attorneys’ fees, which the district court partially granted. Both parties appealed, with Pocket Plus challenging the summary judgment grant and both parties challenging the amount of the attorneys’ fee award.

The Eighth Circuit began by noting that the issue of validity was complicated by Pocket Plus’s shifting explanation of what its trade dress was, explaining that its “definition evolved throughout the litigation,” becoming increasingly detailed. Eventually, the Court reasoned that regardless of which definition prevailed, the result was the same.

Addressing the noninfringement finding, the Eighth Circuit recited the relevant legal principles, explaining that to prove infringement, a plaintiff must show that its trade dress is nonfunctional and distinctive and that a lack of protection may confuse customers. The Court explained that it must consider trade dress in its entirety—not as individual elements—and determine whether features are protectable “arbitrary embellishment” or simply essential to product use. In this case, Pocket Plus never registered its trade dress so it did not benefit from a presumption of nonfunctionality. Pocket Plus argued that its vertical orientation and over-the-hip design were nonfunctional elements since competitors made pouches differently and that packaging illustrations likewise made the trade dress nonfunctional. The Court was not persuaded, finding that each feature the plaintiff pointed to was designed to “affect [the pouch’s] suitability for carrying objects,” making each feature essential to purpose and therefore functional. Because the Court found functionality, it affirmed noninfringement without addressing the other requirements.

The Eighth Circuit next considered the attorneys’ fees. Under the Lanham Act, a court may, in its discretion, grant attorneys’ fees to the winning party but only in “exceptional cases” after “considering the totality of the circumstances.” Pocket Plus argued that this case was not “exceptional” while Running Buddy argued that the district court abused its discretion in awarding only a portion of the attorneys’ fees.

The Eighth Circuit addressed both exceptionality and the amount awarded, in turn. To be “exceptional,” a case must be objectively unreasonable, motivated by ill will or frivolous. The Court noted Pocket Plus’s weak [...]

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