Tag Archives: Lanham Act

Dewberry Group: Structuring the Firm to Avoid Trademark Liability

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by Dennis Crouch

The U.S. Supreme Court has granted certiorari in Dewberry Group, Inc. v. Dewberry Engineers Inc., a trademark damages case focused on how corporate separateness principles apply to disgorgement remedies under the Lanham Act, 15 U.S.C. § 1117(a). The Fourth Circuit’s decision affirmed a $43 million disgorgement award against petitioner Dewberry Group (DG) for trademark infringement, an amount that included profits earned by DG’s “legally separate” corporate affiliates. Apparently, the affiliates were “single-purpose entities,” also privately owned by John Dewberry, whose sole function was to own commercial properties serviced by DG.

Pierce the Veil: In its literal sense, a veil is a delicate fabric that separates the visible from the concealed, a barrier that can be easily lifted or parted. However, the phrase has a history of extending beyond the material world, with a veil often serving as a boundary between the physical and spiritual realms in our universe. Many of us go through life, only occasionally glimpsing beyond this veil into the hidden spiritual dimensions that, according to story tellers, lie alongside our own. In the corporate world, the veil of corporate personhood serves to shield the owners from personal liability, creating a legal fiction that separates the actions of the company from those of its shareholders. This veil of protection is not impenetrable, however, and can be pierced by the courts in cases of serious misconduct or wrongdoing, exposing the owners to personal responsibility. Although the truth of owner identity may already be known, piercing the corporate veil removes the protection against responsibility  by attempting to holding accountable those who would misuse its protections. But, the legal doctrine of corporate separateness is quite strong and I might venture that it is easier to pierce the veil of our spiritual realms than the corporate analogue. (more…)

Trump Too Small: Supreme Court Upholds Lanham Act’s Restriction on Registering Marks With Living Individual’s Names Without Consent

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by Dennis Crouch

In an important trademark law and free speech decision, the Supreme Court held in Vidal v. Elster, 602 U.S. ___ (2024), that the Lanham Act’s “names clause” barring registration of a mark that “[c]onsists of or comprises a name . . . identifying a particular living individual except by his written consent”, 15 U.S.C. § 1052(c), does not violate the First Amendment. Writing for the Court, Justice Thomas distinguished this case from the Court’s prior decisions in Matal v. Tam, 582 U.S. 218 (2017) (disparaging marks) and Iancu v. Brunetti, 588 U.S. 388 (2019) (scandalous marks), which struck down other Lanham Act restrictions as unconstitutional viewpoint discrimination. Although content-based, the Court concluded that the names clause is viewpoint-neutral and consistent with the longstanding history and tradition of trademark law.

In the case, Steve Elster sought to register the trademark “TRUMP TOO SMALL” for use on t-shirts and other tchotchkes, referencing a comment made during a 2016 presidential primary debate. The USPTO refused the registration based on the Lanham Act’s “names clause,” which prohibits trademarks that consist of or comprise a name identifying a particular living individual without their consent.  Elster did not dispute that TRUMP referenced Donald Trump who was not directly involved in the case.

The Thomas opinion consists of Parts I-IV. However, part III was joined only by Justices Alito and Gorsuch, and so is not part of the majority opinion.  Chief Justice Roberts and Justice Kavanaugh joined I, II, and IV, and Justice Barrett joined Parts I, II-A, and II-B.  A key distinction among the justices is the role of history – with Justice Thomas indicating in Part III that history is dispositive. Justice Kavanaugh filed a concurring opinion, joined by Chief Justice Roberts, agreeing with upholding the names clause but suggesting a viewpoint-neutral provision could be constitutional even without such historical support. Justice Barrett filed an opinion concurring in part, joined by Justice Kagan, arguing the names clause is constitutional because it reasonably serves trademark’s source-identifying function, not based on history and tradition alone (Justices Sotomayor and Jackson joined parts of Justice Barrett’s opinion.)  Justice Sotomayor also filed an opinion concurring only in the judgment.

Lets look at the majority opinion: The Court first held the names clause is viewpoint-neutral because it applies regardless of the message conveyed and does not target particular views. This contrasts with the disparagement clause in Tam and immoral/scandalous bar in Brunetti, which the Court found impermissibly discriminated based on viewpoint.  However, the Court acknowledged the names clause is content-based since it turns on whether the mark contains a person’s name.

In my view, this aspect of the decision is in error — the use of an individual’s name (such as Trump) is at least as viewpoint based as the immoral/scandalous marks in Brunetti.  This is especially true if you recognize that an individual’s name is permitted to be registered – with permission.  But the problem here is that the court had found the restriction viewpoint based, it would have been hard pressed to find the names-restriction constitutional, which is the correct outcome.

Of course, even content-based speech restrictions are typically presumptively unconstitutional. Here though the court declined to apply strict scrutiny to this content-based. The court emphasized that trademark law has been content-based since the Founding without raising First Amendment concerns, reflecting the inherently source-identifying function of trademarks.

The Court traced the history of trademark law from English common law through the first American trademark statutes to the Lanham Act, showing restrictions have always been based on a mark’s content.  This history, in the Court’s view, establishes that content-based trademark rules have long coexisted with the First Amendment, so heightened scrutiny is unwarranted.

Turning to the names clause specifically, the Court found it has “deep roots in our legal tradition”, with restrictions on trademarking names “grounded in the notion that a person has ownership over his own name.”  See, Brown Chemical Co. v. Meyer, 139 U.S. 540, 542 (1891).  The Court also found no evidence the common law  or speech rights allowed using another living person’s name as a trademark without consent.  It explained this rule reflects trademark’s goals of identifying a product’s source and safeguarding the markholder’s goodwill and reputation.  A person “has no First Amendment right to piggyback off the goodwill another entity has built in its name.” San Francisco Arts & Athletics, Inc. v. U.S. Olympic Comm., 483 U.S. 522 (1987)).  Based on this history and tradition, the Court concluded the names clause comports with the First Amendment.  Although the limitations found in Brunetti and Tam were also longstanding, those are distinguishable by the court because they were deemed viewpoint based rather than viewpoint neutral.

In his concurring opinion, Justice Kavanaugh, joined by Chief Justice Roberts, agreed the names clause is constitutional based on the historical evidence, but suggested a viewpoint-neutral provision could satisfy the First Amendment even without such history.

Justice Barrett, in an opinion concurring in part joined by Justice Kagan, argued the focus on history was misplaced and the Court should have evaluated the names clause under a generally applicable First Amendment framework.  She contended content-based trademark rules are constitutional if they reasonably relate to trademark’s source-identifying purpose and preventing consumer confusion.  In her view, the names clause is constitutional under that standard because it helps ensure marks identify source and safeguards markholder goodwill. Justices Sotomayor and Jackson joined this portion of Justice Barrett’s opinion.

In a separate concurring opinion, Justice Sotomayor maintained the Court should have resolved the case based on its precedents rather than an ill-defined history-and-tradition test.  Drawing on cases involving limited public forums and government subsidies (where, IMO, speech rights are more tenuous), she argued viewpoint-neutral trademark criteria are constitutional if reasonable in light of trademark’s purpose.  The names clause satisfies that standard, in her view, because it facilitates source identification and prevents consumer confusion.

Elster provides important guidance on the constitutionality of content-based trademark registration restrictions, and also provides an indication that the Court is unlikely to further dismantle trademark law based upon free-speech grounds. The decision suggests provisions that have long been part of U.S. trademark law are likely valid, even if content-based, so long as they are viewpoint-neutral. However, the splintered reasoning leaves uncertainty about the proper framework for evaluating provisions without such historical pedigree.

False Patent Marking as False Advertising: Overcoming Dastar

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by Dennis Crouch

The Federal Circuit is set to consider the use of terms like “patented,” “proprietary,” and “exclusive” in commercial advertising can be actionable under § 43(a)(1)(B) of the Lanham Act when their use is not entirely accurate. The key issue on appeal is whether the district court erred in granting summary judgment for Crocs on Double Diamond Distribution and U.S.A. Dawgs’ (“Dawgs”) counterclaim for false advertising under the Lanham Act.

This case began back in 2006 (more…)

Generative AI and Copyright

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A few days ago I wrote an essay about the ongoing economic war between the leaders of the US and those of China, with a focus on the impact US attorneys representing Chinese clients. For the article, I used an AI tool to create some art for my publication. The image above shows the resulting four images. I chose the bottom right and had the AI enhance the image for publication by pushing a single button. I then did a cut and paste before publishing.

Although I didn’t contribute any of the expression seen in the work, after these actions and then publishing it, I actually feel some gut level of ownership. And, that I might be upset if someone else used _my_ image without permission.

My questions for you:

  • Do I deserve to “own” this image?
  • Should I be able to claim authorship?
  • Should I disclose my AI creation methodology when I use the image in published works?

Comment on LinkedIn: https://www.linkedin.com/posts/patentlyo_ai-publishing-art-activity-7059984906633842688-eGgf

 

Abitron v. Hetronic: Extraterritorial Application of U.S. Trademark Law

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by Dennis Crouch

The Supreme Court held oral arguments on March 21, 2023 in the international trademark case of Abitron Austria GmbH v. Hetronic International, Inc. and will be holding arguments on March 22, 2023 in the whisky dog toy trademark case of Jack  Daniel’s Property v. VIP Products.

Abitron was formerly the international distributor for Hetronic radio-remote-control products used largely for heavy machinery.  Hetronic products have a distinctive yellow-black coloring pattern.  At some point, Abitron began selling a competing product using the same pattern and same product names.  (Image above).  Hetronic sued and won a $90 million judgment based upon willful  trademark infringement and goodwill injury.  Hetronic also won on a contract claim, but contract law would not support this disgorgement remedy.

The $90 million award reflected the entire gross revenue of Abitron’s knockoff sales, 97% of those sales were outside of the USA.  As Abitron wrote in it its brief: these “were sales in foreign countries, by foreign sellers, to foreign customers, for use in foreign countries, that never reached the United States or confused U.S. consumers.”  Of course, this foreign anaphora omits a key domestic conclusion: the harm was directed to the USA and felt in the USA by the TM owner.  Of course, the leading justifications for TM law are tied to customer harm, and we only assign rights to the business unit because it quickly solves a collective action problem.  In that framework, any harm caused by Abitron is also felt abroad — with confusion of its non-us customers.

On appeal, the 10th Circuit sided with Hetronic and confirmed the award.  The U.S. Supreme Court then granted certiorari on the following question:

Whether the court of appeals erred in applying the Lanham Act extraterritorially to petitioners’ foreign sales, including purely foreign sales that never reached the United States or confused U.S. consumers.

Petition.  At oral arguments, Lucas Walker (MoloLamken and former Gorsuch clerk) argued on behalf of the adjudged infringer; Matthew Hellman (Jenner & Block and former Souter clerk) argued on the other side; and Masha Hansford (SG’s office) largely sided with petitioner.

Although U.S. law is generally thought to not apply extraterritorially, trademark law has had a somewhat different path triggered by the Court’s decision in Steele v. Bulova Watch Co., 344 U.S. 280 (1952), which allowed for collection of damages for foreign infringement.  Petitioners here both distinguish Steele and suggest that it could be overruled.

In my view, this level of extraterritorial application creates a sovereignty conflict, with the USA extending its reach unduly into the realm covered by trademark and competition laws of other nations.  Sovereignty principles recognize the independence of each nation and are built upon principles of non-interference — that nations should not interfere with the internal affairs of other nations.  This is a situation that calls for the court to exercise comity and abstain from extending its reach absent a clear statement and authorization from Congress. Rather, if a trademark holder wants to sue for confusing sales made in Europe, Europe is the location where the parties should deal with the issue.

Models v. Strip Clubs and the Lanham Act

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by Dennis Crouch

Rights to use a person’s Name-Image-and-Likeness or NIL generally fall within two categories of intellectual property: rights of publicity and rights of privacy.

  • Rights of publicity protect commercial value that a person has developed in becoming a celebrity.  Rights of publicity can also protect against resulting false impressions created by a seeming endorsement.
  • Rights of privacy can also protect against misappropriation of NIL — typically under the guise of an invasion-of-privacy claim.

The pending case of Gibson v. RPS Holdings LLC, 5:21-cv-00416 (E.D.N.C. 2023) involves a set of thirteen different professional models whose images were allegedly used without their permission to advertise for the Capital Cabaret, a strip club halfway between Raleigh & Durham, North Carolina.  None of the models have any history with the club.  Apparently, the club obtained photos of the models; and then edited them into advertisements for pubilcation on Facebook, Instagram and other online media.

One difficulty for professional models such as the plaintiffs here is that copyright the photographic images is typically held by the photographers, not the models.  But, modeling agreements also regularly include limited licenses regarding how (and for how long) the images will be used.

In Gibson, the plaintiffs have sued under both the Lanham Act and N.C. state law:

  • Section 43 of the Lanham Act, 15 U.S.C. § 1125(a)(1) for misrepresentation of sponsorship (False Advertising + False Association).
  • N.C. common law right of privacy – misappropriation.
  • N.C. Unfair & Deceptive Trade Practices.
  • N.C. Defamation.
  • Etc.

The case is moving forward and is at the close of discovery (March 31, 2023) with summary judgment motions due at the end of April.

Most recently, plaintiffs filed a motion to quash a subpoena seeking information on exactly how the attorneys “discovered, came across, learned of, and/or otherwise became aware of” the advertisements.  The motion argues that this information is protected by attorney client privilege as well as work product.  The defense argues that this information is important for its laches defenses.

I mentioned the copyright difficulty above. A second difficulty for the models in this case is that most rights-of-rights of publicity doctrines require focus on celebrity; and ask whether that person’s NIL is identifiable to the consuming public.  I have to admit that I don’t really know anything about the modeling industry, but I don’t believe think that these models are household celebrities. The ads from the strip club were not intended to indicate that these particular models support the club; rather, the intent was to provide a provocative image.

Of course the misappropriation of a completely anonymous face could not form the basis for a false endorsement claim, because consumers would not infer that an unknown model was ‘endorsing’ a product as opposed to lending her image to a company for a fee.

Bondar v. LASplash Cosmetics, No. 12-cv-1417, 2012 WL 6150859, at *7 (S.D.N.Y. Dec. 11, 2012) quoted in Electra v. 59 Murray Enterprises, Inc., 987 F.3d 233, 258 (2d Cir. 2021), cert. denied, 211 L. Ed. 2d 352 (Nov. 22, 2021).   The Carmen Electra case was also a suit by models against strip clubs with the models represented by the same law firm. (The Casas Law Firm).  In their denied petition for certiorari, the plaintiffs asked:

Must an individual prove they have a commercial interest in their identity, or must a person prove they are recognizable, publicly prominent, or a celebrity, to bring and sustain a claim under 15 U.S.C. § 1125(a)?

Petition.   The Electra case was decided by the 2nd Circuit.  However, other circuits have rejected the celebrity requirement as improperly grafted-onto the statute.