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Internet and Intellectual Property Alert

Manhattan Jury Hits Costco With $8.25 Million in Punitive Damages

In September, a jury awarded Tiffany & Co. $5.5 million in compensatory damages as a result of Costco’s sale of counterfeit engagement rings using Tiffany’s trademark. In October, the jury ordered Costco to pay an additional $8.25 million in punitive damages for a total award of $13.75 million.

This case arose in 2012 when a customer shopping at the Huntington Beach, California, Costco store complained to Tiffany that she was disappointed to see that Costco was selling Tiffany diamond engagement rings. Costco sold these rings with labels describing them as “Platinum Tiffany” and their clerks referred to them as “Tiffany rings.” Tiffany sued for trademark infringement, dilution, counterfeiting and false designation of origin. Costco filed a counterclaim, contending that the word “Tiffany” is descriptive for a type of ring setting and cannot function as a trademark because it is generic. Last year, the Court granted summary judgment in favor of Tiffany for trademark infringement and counterfeiting, noting that it could seek punitive damages under New York unfair competition laws because there is sufficient evidence that Costco’s conduct was willful and wanton. Tiffany’s trademark registrations showed that the mark was valid and there was evidence of both actual confusion and a likelihood of confusion.

Tiffany aggressively polices its mark to maintain its reputation for the highest quality jewelry. That Costco jewelry buyers sent e-mails to vendors asking them to copy Tiffany designs likely played a part in the huge punitive damages award.

Tiffany & Co. v. Costco Wholesale Corp. (S.D.N.Y. Oct. 5, 2016).

 

Ninth Circuit Adopts More Liberal Approach to Attorneys’ Fees in Trademark Cases

The Ninth Circuit has long required a plaintiff to show that a defendant engaged in malicious, fraudulent, deliberate or willful infringement to obtain attorneys’ fees under the Lanham Act. It now joins a majority of circuits in rejecting such a rigid test in favor of the standard announced by the Supreme Court in Octane Fitness, LLC v. ICON Health & Fitness, Inc. Octane Fitness held that a court should look to the “totality of the circumstances” to determine if the infringement is exceptional. It explained that an exceptional case is simply one that stands out from others with respect to the strength of a party’s litigation position or the unreasonable manner in which the case was litigated. While Octane Fitness analyzed fees under the Patent Act, the Ninth Circuit has now joined the Third, Fourth, Fifth and Sixth Circuits in applying this more flexible standard to the Lanham Act. Only the Second and Seventh Circuits have applied earlier case law to Lanham Act fee disputes without mentioning Octane Fitness. The Ninth Circuit also changed the standard of review of a district court’s decision on fees awarded under the Lanham Act to the more lenient abuse of discretion standard.

SunEarth, Inc. v. Sun Earth Solar Power Co., Ltd., 2016 WL 6156039 (9th Cir. Oct. 24, 2016).

 

FyreTV Failed to Stoke the Flames

Plaintiff owns registered trademarks for “FyreTV” and “FyreTV.com” and has used them since 2007 to stream hardcore pornography. It describes its FyreTV service as the “Netflix of Porn.” While its streaming service was initially only available through its website, it subsequently developed an App to enable streaming over third-party devices. Amazon began using the mark “Fire” for its “Kindle Fire” tablets and decided to use the “Fire” brand for new generation tablets, on a phone and a set top box dubbed “Amazon Fire TV,” which launched in April 2014. Amazon was aware of the FyreTV mark when it launched its own Fire TV but did not contact plaintiff.

Two weeks after the launch of Fire TV, plaintiff sued Amazon for treble damages and injunctive relief under the Lanham Act but did not actually move for a preliminary injunction until late September 2014. The Court denied its request for an injunction because it waited over five months to seek it, explaining that a preliminary injunction is an extraordinary and drastic remedy and requires imminent harm. A party’s failure to act with speed or urgency undermines such a finding. In affirming the denial, the Eleventh Circuit emphasized that plaintiff pursued its preliminary injunction motion “with the urgency of someone out on a meandering evening stroll rather than someone in a race against time.”

Wreal, LLC v. Amazon.com, Inc., 2016 WL 6310784 (11th Cir. Oct. 28, 2016).

 

Lanham Act Reaches Infringement in Canada

Trader Joe’s describes itself as a well-known American grocery store that sells specialty goods at reasonable prices and uses a South Pacific theme. Defendant Hallatt bought branded Trader Joe’s products at a store near the Canadian border and resold them at inflated prices at his copycat store Pirate Joe’s in Vancouver, Canada. His store mimicked the look of a Trader Joe’s. Trader Joe’s filed suit for trademark and trade dress infringement in federal court in Washington but the court dismissed the suit for lack of subject matter jurisdiction, holding that the Lanham Act does not apply to conduct outside the United States.

The Ninth Circuit reversed, favoring extraterritorial reach of the Lanham Act because Trader Joe’s alleged that Hallatt’s conduct impacted American commerce. Based on the complaint, the court concluded that (1) Hallatt’s alleged activities harmed Trader Joe’s reputation and decreased the value of its American held trademarks, (2) Hallatt sold Trader Joe’s goods in Canada without using proper quality control measures, (3) Hallatt attempted to pass off Pirate Joe’s as an authorized Trader Joe’s retailer, which caused consumer confusion and (4) Hallatt often hired U.S. residents to assist him in his allegedly infringing scheme.

Trader Joe’s Co. v. Hallatt, 2016 WL 4488009 (9th Cir. Aug. 26, 2016).

 

Shots of Meat/Burgers Not Entitled to Copyright Protection

Plaintiff, a franchisor of Culver’s restaurants, developed its “Butcher Quality Beef” TV commercial, which highlights Culver’s Butterburger. Culver’s sued Steak ‘n Shake for willfully infringing its copyright in the commercial. It claimed that the “expression, images, dialogue and sequencing of the two ads are substantially similar.” Both feature a quintessential local butcher shop with an older butcher displaying three different cuts of well-marbled beef, patties are grilled and flattened with a spatula and the commercial ends with a close up of the completed Butterburger before Culver’s logo appears. Seven months later, Steak ‘n Shake began running “The Original Steakburger” commercial, which opens in a butcher shop. The butcher discusses three cuts of meat used in its Steakburger as the camera focuses on each cut. He cooks and assembles the burger, compressing the patty with a spatula. The ad concludes with a shot of the finished burger and Steak ‘n Shake’s logo.

Copyrights protect those elements that possess at least a minimal degree of originality and creativity. The Court dismissed the case holding:

  • There is nothing unique about grilling and assembling a burger;
  • Pressing down on patties with a spatula and flipping them is standard grilling practice and it is common to describe beef as “marbled”;
  • The butchers in the ads function as stock characters and the expression of Culver’s butcher is generic;
  • The components of Culver’s commercial are not arranged or combined in any appreciably unique way.

Culver Franchising System, Inc. v. Steak ‘n Shake, Inc., 2016 WL 4158957 (N.D. Ill. Aug. 2016).

 

Chess Tournament Sues to Block Misappropriation of Chess Moves

World Chess is the exclusive producer of the 2016 World Chess Championship Match, to take place throughout November in New York. As part of its promotion, subscribers will be able to view the match through a live webcast. The major selling point of the webcast is the real-time dissemination of the chess moves to a global audience. All subscribers must agree not to copy or communicate any information concerning the chess moves during the games.

World Chess just filed suit against two chess websites for hot news misappropriation, claiming they intend to free-ride on the reports of the games, and for breach of contract, since users of the webcast must agree not to redistribute the chess moves. In addition to seeking to block re-publication of the chess moves, it claims $4.5 million in damages. As the Complaint explains, chess is a purely intellectual sport and the reporting of chess moves conveys the playing of the game.

World Chess U.S., Inc. v. Chessgames Services LLC, et al., (Complaint filed Nov. 7, 2016, S.D.N.Y.).

 

Play’s Use of Who’s on First Routine Not Transformative

The Broadway play Hand to God is a dark comedy about an introverted student in religious small town Texas who finds a creative way to communicate through a hand puppet. The estates of Bud Abbott and Lou Costello sued the producers of the play for copyright infringement for using a portion of the iconic Abbott and Costello comedy routine Who’s on First? In the first act, Jason, the lead character, tries to impress the girl with whom he is smitten, Jessica, by using his sock puppet Tyrone to perform almost verbatim a little over a minute of Who’s on First? When Jessica asks him if he came up with that all by himself and Jason answers yes, the audience laughs at what it recognizes as a lie. Tyrone the puppet also calls Jason a liar and insults Jessica, telling her that she would know the routine’s origin if she “weren’t so stupid.”

The district court dismissed the claim, finding defendants’ use was highly transformative and thus qualified for the fair use defense. On appeal, the Second Circuit provides an extensive analysis of what makes a work transformative. The critical inquiry is whether the new work uses the copyrighted material for a purpose, or imbues it with a character, different from that from which it was created. The district court erred in finding that the use in Hand to God was transformative because the play is a darkly comedic critique of the social norms governing a small town in the Bible Belt. The Second Circuit explained that even if the play’s purpose is completely different from the vaudeville humor of Who’s on First?, that, by itself does not make it transformative. To qualify as fair use the new work must alter the original with a new expression, meaning or message. It concluded that defendants’ use of the routine, not briefly for dramatic effect, but extensively for its original comedic effect, cannot be deemed transformative.

TCA Television Corp. v. McCollum, 2016 WL 5899174 (2d Cir. Oct. 11, 2016).

If you have any questions concerning this bulletin or Tressler’s Intellectual Property Practice Group, please contact the editor: Jacqueline Criswell, 312.627.4003 |