Letter from AmeriKat: 8,000,000, 3, 1970s, 1, $3,340, #24 - US IP News in Numbers

For international travellers coming from the U.S., you will usually find yourself in one of the many Hudson News stores doting our nation's airports pacing the magazine rack for a selection of entertaining flight-fillers. The AmeriKat's favorite staples that are crammed into her already overstuffed Coach carryall, are The Economist, US Weekly (so bad, its good), National Geographic, Psychology Today, Rolling Stone and, front-seat pocket favorites - Time and Newsweek. These are usually the first magazines the AmeriKat starts devouring even before take-off and by the time the plane is taxing to the runway, she has made it to her favorite page - the page with that week's news expressed in numbers. Sadly the AmeriKat is busily stranded in London so the joy of airplane literature have escaped her this summer, but in a tribute to her favorite travel reading she has taken a glossy page out of US news magazines and has put this week's US IP news in figures. (picture, left - the AmeriKat snuggling under her airplane reading)

When IP news is a f(x) of n.....

8,000,000 - The number of patents issued by the USPTO on 16 August 2011 when it granted a patent to Second Sight Medical Products for a product called Argus II - a visual prosthesis apparatus that enhances visual perception for people who have become blind due to outer retinal degeneration. Argus II uses electrical retina stimulation to produce the visual perception of patterns of light. The Argus II is starting its clinical trials in the US and has obtained marketing approval in Europe. President and CEO of Second Sight, Robert Greenberg, stated that "This patent protection and significant federal support for innovation have already played key roles in creating nearly 100 US jobs at our company. Once the Argus II has FDA approval in the United States, we expect to create hundreds of more jobs over the next several years..." IP innovation and protection = economic stimulus, is plainly the message from the USPTO.

75 years - the number of years that it took the USPTO to reach 1 million granted patents in August 1911 when it issued to Francis H. Holton of Akron, Ohio a patent for his improvement in vehicle tires to make them more durable and puncture resistant.

6 years - the number of years that it took the USPTO to go from 7 million patents granted to 8 million patents. The 7 millionth patent was issued to John P. O'Brien for a strong, biodegradable polysaccharide fibers he invented for use in textile applications.

1 - The number of Abercrombie & Fitch articles of clothing the AmeriKat owns - which is far less than the cast of Jersey Shore. IPKat readers may have caught a glance at last week's story that frat-boy favorite apparel retailer, Abercrombie & Fitch, was reported to have offered to pay Michael "The Situation" Sorrentino of MTV reality show Jersey Shore to never where its clothes on air (see A&F press release here) as the "association is contrary to the aspirational nature of our brand, and may be distressing to many of our fans." Many are calling the press release a publicity stunt for a "slow day in August" right before the back-to-school buying begins. However, its interesting to note that a press release about an allegedly detrimental impact on brand reputation was created to increase just that - brand reputation....ahhh, the fickle world of brands!

$3,340 - The cost of the genetic test for breast cancer risk that was subject of Myriad Genetic's recent success in the US Court of Appeals for the Federal Circuit when the court upheld the company's patents on two human genes - BRCA1 and BRCA2 (picture, right - pink ribbon, (c) Science 2002). The sequencing of the genes tests for mutations that increase the risk of a woman getting breast and ovarian cancer. A recent New York Times article reports that despite its recent legal success some commentators are suggesting that the test has been surpassed by newer DNA sequencing techniques which are faster and cheaper. This, the article reports, may be a sign of trouble to come, notwithstanding that Myriad's main patents do not start expiring until 2014. However, Myriad has stated that the company has time to start adapting to the new technology before its patents expire and in the future will be relying more on trade secret protection than on patents. Myriad's CEO Peter D. Meldrum in January stated, in reply to a question about whether Myriad would begin enforcing their European patents, including for BCRA1 and BCRA2, against companies using the genes in tests, that "[i]f I had my druthers, I would not want to go into a new market in a heavy-handed fashion, trying to enforce patents." Instead, the company is reported to begin relying more on its "vastly superior information."

The patent system is premised on requiring public disclosure of inventions - you get to enjoy your monopoly, as long as the rest of us can see and build upon your scientific step for the betterment of society (as long as the use is non-infringing during the limited time you are enjoying your monopoly). Trade secrets, however, are all about keeping information out of the public domain for an indefinite time. Should information, such as the information Myriad has about which of the thousands of mutations in the two genes raise the risk of getting cancer, be kept out of the public domain? If companies with valuable medical information are relying on trade secrets rather than patents, this could have serious impact on the progress of science (Copyright Clause) and in this case, medical research. If this begins to be a trend, are we to blame failings in our patent systems and protections or the desire of companies to maintain a monopoly on proprietary information and technology for as long as possible? Or is this just the same question? Are there public policy arguments for demanding that such information be disclosed, and if so, how does that square with the Anglo-American philosophy of commoditizing property (and IP)for financial gain? Is it only right that a company should use whatever legal means it has to protect its investment and research, regardless of any public policy or ethical considerations? Similiar questions are posed by the New York Times article and by Dan Vorhaus in his blog the Genomics Law Report.

$353 million - the amount of money reported to have been generated by the breast cancer test which accounted for Myriad's $402 million revenue in the year ending June 2011.

3 - The number of grape growers that have successfully claimed that the US government can be joined to a patent invalidity claim. The three Californian grape growers have claimed that a California trade group, The California Table Grape Commission, licensed invalid patents from the US Department of Agriculture(USDA). The USDA owned three patents issued under the Plant Variety Protection Act for grapevines that produce table grapes - Sweet Scarlet, Scarlet Royal and Autumn King. The USDA licensed its rights in the three patents to the California Table Grape Commission, a California state agency. The Commission was established to promote the state's table-grape industry and is funded by a tax levied on each box of table grapes produced in California. The Commission sublicences the patents and under the licences is entitled to retain 60% of the royalties with the remaining 40% going to the USDA. The Commission authorized three nurseries to serve as the exclusive distributors of the patented varieties. The ultimate growers of the grapes have to sign a "Domestic Grower License Agreement" which requires the growers to pay a royalty, prohibits the growers from propagating the plants, and permits the Commission to order the destruction of the purchased plants if the Commission believes the growers are violating the license.

Three grape growers, who purchased the grapevines covered by the patents signed the licence agreement and paid the licensing fee. They then brought a claim for declaratory judgment challenging the patents for invalidity for lack of novelty and that the Sweet Scarlet (picture, left) patent is unenforceable because of alleged inequitable conduct during prosecution at the USPTO. The US Court of Appeals for the Federal Circuit issued a decision last Wednesday that the Administrative Procedures Act ("APA")enables the 3 grape growers to "pursue equitable relief against the USDA on its patent law claims." The 3-judge panel ruled that the USDA could be joined as a party to the claim because the licensing agreement between the USDA and the Commission did no transfer all the rights in the patents, as such the USDA was a necessary and proper party to the grape grower's patents claims. Judge William Bryson, giving the opinion of the Court, held that an amendment to section 702 of the APA "recognizes a right of judicial review for 'agency action'" in that it waives "sovereign immunity for actions seeking relief other than money damages against federal agencies, officers, or employees" - such as the equitable relief sought by the grape growers in their dedicatory judgment for patent invalidity. As such, the grape growers could join the USDA in their action. Allegedly invalid patents are also curse for the US government it seems....

#24 - The ranking given to Girl Talk's album, Feed the Animals, by Rolling Stone in 2008. Girl Talk, the one man band of Gregg Gillis, a former biomedical engineer turned musician, is known for weaving hundreds of samples of recorded music and sounds into frenetic tracks which he releases for free or a la Radiohead model. A recent article in the Huffington Post this week explains why Gillis uses this model when he releases his work under the Illegal Art label. Also this week, EMI won a partial victory in a copyright lawsuit against online music storage site MP3tunes who was found liable for contributory infringement when it failed to remove unauthorized songs from its website after being put on notice. District Judge William Pauley however refused to rule on whether MP3tunes employees were liable for copyright infringement in downloading 171 songs.

1970s - The decade when late sportscaster Myron Cope coined the term "The Terrible Towel" (watch the story here). The Terrible Towel, a yellow and black cloth which is swung about in the air by the Pittsburgh Steeler's (an American football team) fans is the subject of a trade mark infringement suit. The lawsuit brought by the Steelers and Allegheny Valley School (who owns the trade mark and is where Cope's autistic son lived) against Eugene Berry Enterprise alleges that that company filed a trade mark application in May for THE TERRIBLE TOWEL and has been selling shirts with the mark. Eugene Berry Enterprise has been asked to withdraw its application.

Letter from AmeriKat II: Is there some Omega v Costco-induced disquiet in the lower courts?

The Decision

Turning first to the statutory language, the Court focused on the meaning of the words "made" and "under". The word "made" was not a term of art in the Copyright Act and the word "under" was held in Kucana v Holder (2010) to be a "chameleon" form (picture, left) which the courts must draw its meaning from its context. Wiley, of course, interpreted "lawfully made under this title" to mean "lawfully made in the United States". Wiley submitted that this would be the logical consequence of the presumption against the extraterritorial application of statutes - a presumption that is explicitly applied to the copyright laws. To be made "lawfully under this title" means only, Wiley submitted, that the copyright works have to be physically made in the US.

The Court of Appeals stated that this was overly simplistic, especially because Title 17 takes into account activity occurring abroad. For example, section 104(b)(2) provides that the works are subject to provisions "under this title" if the works is published in the US or abroad (subject to the foreign country being a treaty party . It is possible, the Court of Appeals stated, to interpret section 109(a)'s "lawfully made under this title" to mean 'any work that is subject to the protection under this title." Indeed, had Congress intended that the first sale doctrine apply to only works made in the US, it could have easily written into the statute to say precisely that -but tellingly it did not.

That being said, the above argument in favor of the reverse interpretation of "lawfully made" does not automatically prevent Wiley's enjoyment of its argument as to its meaning; all it does is point to the fact that the relevant text is simply unclear. However, the Court of Appeals, in a quick sprint to finishing in line with Supreme Court dicta, held that section 602(a) would have no force in the vast majority of cases if the first sale doctrine was interpreted to apply to works manufactured abroad that was made subject to protection under Title 17.

"Accordingly, while perhaps a close call, we think that, in light of its necessary interplay with section 602(a)(1), section 109(a) is best interpreted as applying only to works manufactured domestically. . . In adopting this view, we are comforted by the fact that our interpretation of section 109(a) is one that the Justices appear to have had in mind when deciding Quality King. There the Court reasoned, admittedly in dicta, that section 602(a)(1) had a broader scope than section 109(a) because, at least in part, section 602(a)(1) "applies to a category of copies that are neither piratical nor 'lawfully made under this title'. That category encompasses copies that were 'lawfully made' not under the United States Copyright Act, but instead, under the law of some other country."

The Court of Appeals for the Second Circuit therefore concluded that the District Court correctly decided hat Kirtsaeng could not avail himself of the first sale doctrine under section 109(a) because the books in question were manufactured outside the U.S.

However, all were not happy with this decision. District Judge J Garvan Murtha, who was sitting with the Court of Appeals, issued an 8-page dissenting opinion that boiled down to the fact that courts have split over the meaning of "lawfully made under this title" with some holding it means legally manufactured in the US and others holding that it means lawfully made as a function of US copyright law (i.e. under Title 17). The latter interpretation is, Judge Murtha argued, supported by the Copyright Act as a whole because Congress used the phrase "under this title" in multiple sections of the Act to describe the scope of the rights crated by the Act. Again, if Congress intended to limit section 109(a)'s scope to items "manufactured" in the US, it could have easily done so. Further, Judge Murtha stated:

"Economic justifications also support applicability of the first sale doctrine to foreign made copies. Granting a copyright holder unlimited power to control all commercial activities involving copies of her work would create high transaction costs and lead to uncertainty in the secondary market. An owner first would have to determine the origin of the copy --either domestic or foreign -- before she could sell it. If it were foreign made and the first sale doctrine does not apply to such copies, she would need to receive permission from the copyright holder. Such a result would provide greater protection to copies manufactured abroad than those manufactured domestically. . . .I do not believe Congress intended to provide an incentive for US copyright holders to manufacture copies of their work abroad."

It seems apparent to the AmeriKat, that affirming and dissenting opinions alike, the Court of Appeals is signalling their unease with the status of the statutory text in section 109(a) and may be, like the Supreme Court did in their 4-4 split, flagging to Congress that this provision desperately needs legislative clarification. Or, will we be lucky enough to have an appeal to the Supreme Court again to finally rule on this issue? The AmeriKat hopes so, because given the historical origins of section 109(a) and its statutory interpretation against the backdrop of other provisions under Title 17 these factors do not sit squarely with a reading that "lawfully made under this title" means "lawfully made in the U.S.". Justice Scalia, admittedly not the AmeriKat's favorite Justice, even questioned during oral arguments in Omega v Costco why Congress didn't say that if that is what it intended.

In the final paragraph of the Court of Appeals decision on the first doctrine issue the Court in fact invited Congress to correct their judgment

"If we have misunderstood Congressional purpose in enacting the first sale doctrine, or if our decision leads to policy consequences that were not foreseen by Congress or which Congress now finds unpalatable, Congress is of course able to correct our judgment."

Here Congress, Congress, Congress.....Congressional activism is equally likely and unlikely given the US economic climate, but perhaps one way to stimulate the economy is to allow retailers like Costco to start drumming up business in the grey goods market without the fear of legal action? Could such a change to the US grey goods market only be a matter of time? (picture, left - an Omega watch subject to the Costco dispute)

The AmeriKat would like to thank C E Petit for bringing this decision to the Kat's attention.

Letter from AmeriKat I: Is there some Omega v Costco-induced disquiet in the lower courts?

div>The AmeriKat walked down Bedford Row early last week, wrapping her coat tightly around her as the chilling wind whipped up auburn leaves around her paws. (picture, left) Later in the week, walking past Wildy & Sons, she was faced with having to discard said coat as the sun beamed down on the glistening fountain in Lincoln's Inn. Perhaps, she thought, there are some last few days of summer to be had? Wishful thinking, she concluded. The signs of the impending seasonal change have truly begun to weave its signature signs into the patchwork quilt that has been the London summer. During last year's weeks of seasonal transition, the AmeriKat was writing about the impending first sale doctrine US Supreme Court ruling in the Omega v Costco case. Now a year later she is again writing about the decision, but this time in relation to its after-effects being felt in the lower courts.

Is all still not well after Omega v Costco? Of course not....

Last Monday the Court of Appeals for the Second Circuit issued their decision in John Wiley & Sons, Inc v Supap Kirtsaeng which examined the status of the first sale doctrine following Omega v Costco. The Appeals Court upheld the interpretation under Quality King and last year's decision in Costco v Omega which held that copyright goods manufactured abroad were not goods "lawfully made under" Title 17 (US copyright law statute) and therefore were not subject to the first sale doctrine. That it is to say, copyright proprietors could control if and the manner in which their goods are imported and sold in the US as long as those goods were manufactured abroad. However, the Supreme Court's "decision", if one can even call it that, was a 4-4 per curiam split after Justice Kagan recused herself was considered a big setback for US retailers and inappropriately encouraged the foreign manufacture of goods.

The Parties

John Wiley & Sons is a publisher of academic, scientific and educational journals and books, including textbooks for sale in domestic and international markets. Wiley's wholly-owned subsidiary manufactures books for sale in foreign countries. The books are largely similar or identical, but can differ in design and content. The foreign editions are marked with a disclaimer stating that they are to be sold only in a particular country or geographic region. Supap Kirtsaeng moved to the US from Thailand in 1997 to study a degree in mathematics at Cornell University and later moved to California to pursue a doctoral degree.

To help subsidize his degree, Kirtsaeng's friends and family shipped him foreign edition textbooks printed by Wiley's subsidiary. He in turn sold them on eBay.com (where else?) and after reimbursing his friends/family for the costs kept the profit. In September 2008, Wiley filed copyright infringement, trade mark infringement and unfair competition actions against Kirtsaeng, but later dropped all but the copyright infringement claims. Kirtsaeng submitted proposed jury instructions charging that the first sale doctrine was a defense to copyright infringement. The District Court prohibited him from raising this defence holding that

"[t]here is no indication that the imported books at issue here were manufactured pursuant to the US Copyright Act. . . [and,][t]o the contrary, the textbooks introduced as evidence purport, on their face, to have been published outside of the United States."

The jury ultimately found Kirtsaeng liable for willful copyright infringement of all eight works subject to the proceedings and imposed damages of $75,000 for each of the works.

The Question

The question before the Appeals Court was whether the District Court correctly determined that the phrase "lawfully made under this title" does not include copyrighted goods manufacutered abroad.

The Law

The Copyright Act of 1976 enacted 17 USC section 602(a)(1) which provides that

"Importation into the United States, without the authority of the owner of copyright under this title, of copies ... of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies or phonorecords under section 106, actionable under section 501"

However, section 109(a) - the codification of the first sale doctrine - provides that

"Notwithstanding the provisions of section 106(3) [of the Copyright Act], the owner of a particular copy...lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy."

The Court, in its footnotes, examined the origin of the first sale doctrine. The first sale doctrine was first endorsed in the Supreme Court case of Bobbs-Merrill Co v Straus (1908) where the Court held that

"The purchase of a book, once sold by authority of the owner of the copyright, may sell it again, although he could not publish a new edition of it. . . . In our view the copyright statutes, while protecting the owner of the copyright in his right to multiply and sell his production, do not create the right to impose, by notice, such as is disclosed in this case, a limitation at which the book shall be sold at retail by future purchasers, with whom there is no privity of contract."

Congress then codified the Bobbs-Merrill holding in the 1909 Copyright Act which became known as the first-sale doctrine. The current version of the doctrine codified in section 109(a) differs, the Court said, in two ways. First, under current copyright law the exclusive right to "vend" granted to copyright holders has been replaced by the exclusive right to "distribute" - but in Quality King it was noted that nothing turns on this alteration. The second change, is that the first sale doctrine no longer applies to "any copy of a copyrighted work" but only to any copy "lawfully made under this title." And this is where the trouble begins....(picture, left - the AmeriKat with a purchased book that has been "lawfully made under this title", or has it....?)

The Court recognized that there is tension between s.109(a) and s.602(a)(1) in that the latter seeks to give copyright holders broad control over the circumstances in which their copyright works may be imported into the US, and the former which limits the extent to which a copyright may control distribution following an initial sale.

The Supreme Court had their first occasion to consider the interplay of these two provisions in the Quality King Distributors, Inc v L'Anza Research International, Inc. (1998). In that case, L'Anza manufactured and sold shampoos, conditioners and other hair care products. (picture, right - the AmeriKat after her weekday morning shampoo) L'Anza sold its products domestically and internationally, but its prices to foreign distributors were 35% to 40% lower than the prices charged to its domestic distributors. L'anza sued Quality King Distributors after Quality King purchased L'anza's products from one of L'anza's foreign distributors and then reimported the products into the US for re-sale. The Supreme Court heard the case to decide the question of whether the first sale doctrine endorsed in section 109(a) is applicable to imported copies.

In an unanimous opinion, the Supreme Court held that section 109(a) limits the scope of section 602(a). However, the Quality King case was concerned with goods manufactured in the US, not goods manufactured abroad. Justice Ginsburg also noted that this distinction

"This case involves a 'round trip' journey, travel of copies in question from the United States to places abroad, then back again. I join the Court's opinion recognizing that we do not today resolve cases in which the allegedly infringing imports were manufactured abroad."

Although, as stated above, the Supreme court did not address the question whether section 109(a) can apply to items manufactured abroad, the decision did contain instructive dicta. For example, the Supreme Court "took pains" to explain the ways in which the two provisions overlap and suggested that copyrighted material manufactured abroad cannot be subject to the first sale doctrine contained in section 109(a) as shown by their example below:

"If the author of the work gave the exclusive U.S. distribution rights–enforceable under the Act–to the publisher of the U.S. edition and the exclusive British distribution rights to the publisher of the British edition, however, presumably only those made by the publisher of the U.S. edition would be “lawfully made under this title” within the meaning of §109(a). The first sale doctrine would not provide the publisher of the British edition who decided to sell in the American market with a defense to an action under §602(a) (or, for that matter, to an action under §106(3), if there was a distribution of the copies)."

In Omega v Costco the Supreme Court was poised to turn this dicta into a holding, but the case law was not advanced after the Supreme Court was split equally. Without any further guidance from the Supreme Court the Court of Appeals had to consider the extent to which section 109(a) applied to items manufacture red abroad.

Click here for Part II 's discussion on the Court of Appeals decision.

Update from AmeriKat: Louboutin sees red after injunction rejected against YSL

The AmeriKat has previously reported about the on-going battle between Christian Louboutin and Yves Saint Laurent over the use of a red sole on a pair of Yves Saint Laurent shoes. Louboutin's iconic footwear are identified on the street and red-carpet by their flash of red lacquer sole - a colored sole so famous that the shoe designer owns a US trade mark for red soles on the bottom of footwear. The USPTO granted the trade mark (Reg 3,361,597) on 1 January 2008 for "women's high fashion designer footwear" with the verbal description accompanying the visual depiction as follows

"The color(s) red is/are claimed as a feature of the mark. The mark consists of a lacquered red sole on footwear. The dotted lines are not part of the mark but are intended only to show placement of the mark."

Louboutin sued Yves Saint Laurent for trade mark infringement over the red sole and petitioned the court for an injunction to prohibit Yves Saint Laurent from selling the offending shoes, including YSL's models - Tribute, Tribtoo, Palais and Woodstock.

However, last week Judge Victor Marrero denied the injunction. He stated that

"Louboutin‟s claim would cast a red cloud over the whole industry, cramping what other designers could do, while allowing Louboutin to paint with a full palette."

The AmeriKat has had not had time to fully consider Judge Marrero's decision on the merits of the injunction, but has set out some interesting passages below. By way of a reminder, however, to obtain a preliminary injunction, Louboutin must have established (1) irreparable harm and (2) either (a) likelihood of success on the merits, or (b) sufficiently serious questions going to the merits of its claims to make them fair ground for litigation, plus a balance of the hardships tipping decidedly in [its favor] (Monserrate v New York State Senate (2010)). It was the second part of the test that Judge Marrero's decision focused. As expected, Judge Marrero went through the case law on color and secondary meaning (see AmeriKat post here). He also illustrated the question before the court with an 'interesting' leap into the world of Impressionist and Cubist painters:

"The narrow question presented here is whether the Lanham Act extends protection to a trademark composed of a single color used as an expressive and defining quality of an article of wear produced in the fashion industry. In other words, the Court must decide whether there is something unique about the fashion world that militates against extending trademark protection to a single color, although such registrations have sometimes been upheld in other industries.

To answer this question, and recognizing the fanciful business from which this lawsuit arises, the Court begins with a fanciful hypothetical. Suppose that Monet (picture, right), having just painted his water lilies, encounters a legal challenge from Picasso, who seeks by injunction to bar display or sale of those works. In his complaint, Picasso alleges that Monet, in depicting the color of water, used a distinctive indigo that Picasso claims was the same or too close to the exquisite shade that Picasso declares is “the color of melancholy,” the hallmark of his Blue Period, and is the one Picasso applied in his images of water in paintings of that collection. By virtue of his longstanding prior use of that unique tinge of blue in context, affirmed by its registration by the trademark office, Picasso asserts exclusive ownership of the specific tone to portray that color of water in canvas painting.

Should a court grant Picasso relief?"

Uhh......The AmeriKat is pretty sure that her fellow female feline, Merpel, will have some things to say about this, but understands what Judge Marerro was trying to do in illustrating the similarities between designer and painter who

"strive to please patrons and markets by creating objects that not only serve a commercial purpose

but also possess ornamental beauty."

The illustration goes to show that one's use of color in a field commerce which inhabits the world of art and design can not (and should not) be easily protected. He stated:

"No one would argue that a painter should be barred from employing a color intended to convey a basic concept because another painter, while using that shade as an expressive feature of a similar work, also staked out a claim to it as a trademark in that context. If as a principle this proposition holds as applied to high art, it should extend with equal force to high fashion. The law should not countenance restraints that would interfere with creativity and stifle competition by one designer, while granting another a monopoly invested with the right to exclude use of an ornamental or functional medium necessary for freest and most productive artistic expression by all engaged in the same enterprise."

The AmeriKat understands the beauty of this philosophical and academic analogy, but the similarity between the two forms of art and commerce remain similar only in a vacuum. In the real world, fine art and fashion are treated differently in the eyes of the law. If fashion designs benefited from the level of protection afforded to their brothers in fine art by way of copyright, perhaps one could more easily extend this analogy - but the fact is that in the U.S. fashion designers have no protection for their design, save for the protection they can evoke by way of trade mark registration (such as Louboutin's registration) and use of copyright prints in their garments. But such a criticism from the AmeriKat of the analogy is more of a critique of the state of law in this area, not of the interpretation of the present laws.

Although Judge Marrero acknowledged that Louboutin had, in applying red colored lacquer to the soles of his shoes, created a product "so eccentric and striking that it is easily perceived and remembered", he nevertheless that

"Louboutin's claim to 'the color red' is, without some limitation, overly broad and inconsistent with the scheme of trade mark registration established by the Lanham Act. Awarding one participant in the designer shoe market a monopoly on the color red would impermissibly hinder competition among other participants. YSL has various reasons for seeking to use red on its outsoles -- for example, to reference traditional Chinese lacquer ware, to create a monochromatic shoe, and to create a cohesive look consisting of color-coordinating shoes and garments.

Presumably, if Louboutin were to succeed on its claim of trademark infringement, YSL and other designers would be prohibited from achieving those stylistic goals. In this respect, Louboutin's ownership claim to a red outsole would hinder competition not only in high fashion shoes, but potentially in the markets for other women‟s wear articles as well. Designers of dresses, coats, bags, hats and gloves who may conceive a red shade for those articles with matching monochromatic shoes would face the shadow or reality of litigation in choosing bands of red to give expression to their ideas.

The effects of this specter -- the uncertainty and apprehension it generates -- are especially acute in the fashion industry because of its grounding on the creative elements discussed above. "

David Bernstein, Yves Saint Laurent's lawyer (and yes it appears to be the very same from the Bacardi battle reported here), stated that

"This was a trademark that never should've been issued...YSL has been using red since the 1970s, other designers have used red on the soles of their shoes. They aren't doing so to confuse people, but because it is a design aesthetic."

However, according to CNN, Harley Lewin for Louboutin stated that he has never received such support from fellow attorneys, law professors and the fashion industry telling him

"This [verdict] is an abomination. Tell your client to appeal."

In two days time on 17 August, the parties will meet for a case management conference where it is reported Lewin will announce Louboutin's appeal of the decision.

The AmeriKat knew there was going to be trouble with granting an injunction in this case. Even had Louboutin managed to get past the first and second hurdles of the test (the court did not consider the first hurdle re irreparable harm because Louboutin did not demonstrate that its red sole mark merited protection) it would have been a pretty tall task to try and come up with a form of an injunction that prevented the alleged harm without being overly broad. Prohibiting the sale of any red-soled shoe ("red" being the subject of the trade mark registration) would have been too broad, i.e. what red? Louboutin argued that the Court draw a designated range above and below the borderlines of Pantone No. 18-1663 TP or "Chinese Red" and declare all stripes of red within that zone forbidden to competitors. Judge Marrero did not like that suggestion as it would have had the effect of Louboutin appropriating even more shades of red than the one at issue. What form of injunction could Judge Marrero have ever granted without it being overly broad?

Judge Marrero's decision on the color red here

Pantone's 175 new colors here

Trooping of the Color here

A Lack of Color here

Letter from AmeriKat II: When is Puerto Rican rum not Cuban rum?

The Court of Appeals

The three-judge Court of Appeals for the Third Circuit - Judges Jordan (picture left), Greenaway, Jr. (born in London, UK), and Weis - dismissed Pernod's appeal. Giving the Opinion of the Court, Judge Jordan stated that it was obvious that the false advertising dispute was a "proxy for the real fight the parties want to have" over the right to the exclusive use of the HAVANA CLUB mark. Due to the peculiar circumstances of the Cuban trade embargo and the OCAS refusal for continued registration, the only option Pernod had left was to turn to the false advertising provision in section 43(a)(1)(B) (previous post).

To establish a false advertising claim, Pernod must prove the following under Warner-Lambert v Breathasure (2000), that:

1. Bacardi made false or misleading statements as to his own product [or another's];
2. there is actual deception or at least a tendency to deceive a substantial portion of the intended audience;
3. the deception is material in that it is likely to influence purchasing decisions;
4. the advertised goods travel in interstate commerce; and
5. there is a likelihood of injury to the Pernod in terms of declining sales, loss of good will, etc.

Under the second element, actual deception or a tendency to deceive is presumed if the plaintiff proves that an advertisement is unambiguous and literally false (Novartis Consumer Health, Inc. v Johnson & Johnson-Merck Consumer Pharm Co. (2002)). If a message conveyed by an ad is literally true or ambiguous, the plaintiff must prove actual deception or a tendency to deceive and it may do so with properly conducted consumer evidence (Johnson & Johnson-Merck Consumer Pharm., Co. v Rhone-Poulenc Rorer Pharm (1994)).

Pernod thus submitted its consumer survey and contended that the District Court was required to consider it when determining if Bacardi's "Havana Club" label amounted to a misleading statement of geographic origin. Pernod argued that the determination of whether an ad implies an inaccurate message to a sufficient number of consumers "virtually demands survey research because it centers on consumer perception and memory." Bacardi stated that the first step in a false advertising claim is for the Court to determine what message is conveyed which can sometimes be done on the face of the ad itself. (picture, right - Judge Greenaway, Jr.)

The Court of Appeals recognized that the central question before them was whether language could ever be clear enough that its meaning is beyond reasonable dispute. The issue in false advertising cases is whether an ad implies an inaccurate message. The Court of Appeals stated, in an amazingly constructed passage, that the word 'implies'

"indicates that the words themselves have meaning beyond the subjective inferences of any individual reader of listener. Words, malleable though they may be over time, must still, of necessity, be repositories of commonly accepted meaning at any given point in time. Were it otherwise, ordinary discourse would be impossible...while they lack the precision of numbers, words must, as nearly as possible, be accorded an objectively reasonable meaning if law is to have any fair claim as an instrument of justice."

The Court of Appeals listed several examples throughout the law, from criminal law, to statutory interpretation, to defamation claims, where the law holds that there is and must be a point at which language is used plainly enough that the question ceases to be "what does this mean?" and instead becomes "It is clear what this means, what is the legal consequence?". To highlight this position, the Court referred to the Seventh Circuit decision of Mead Johnson v Abbot Laboratories (2000) where the Court considered whether the phrase "1st Choice of Doctors" could be misleading (picture, left - picture of the product with the blue ribbon in left hand corner). There the court held that in the context of false advertising cases, whether a claim is false or misleading is an issue of fact not law. It recognized that there was a common baseline meaning to some words that put them beyond any credible claim of misunderstanding. The Seventh Circuit stated that:

"never before has survey research been used to determine the meaning of words, or to set the standard to which objectively verifiable claims must be held."

Although not without recognizing that the Mead Johnson decision has flaws, the Court of Appeals agreed that there are circumstances where the meaning of a factually accurate and facially unambiguous statement is not open to attack through a consumer survey. Such a factually accurate and unambiguous statement is that of the geographic origin of Havana Club rum being from Puerto Rico - a fact that is stated on the front and back of Bacardi's bottle. No reasonable consumer could be misled by those statements and the rest of the label does not put those statements in any doubt.

If the words "Havana Club" were in isolation, the Court of Appeals stated they may have agreed with Pernod that those words are misleading as to the geographic origin of the rum (as was held in Corporacion Habanos, 88 USPQ 2d holding that the trade mark Havana Club on Cigars not made in Cuba was geographically deceptive and In re Bacardi 48 USPQ 2d in relation to trade marks Havana Select, Habana Clasico, Old Havana"). However, the words "Havana Rum" were not dealt with in isolation - this is a false advertising case not a trade mark case - so the words are dealt with in the context of the entire advertisement on the label of Bacardi's rum. A consumer who may have thought that the words "Havana Rum" indicated that the product's place of origin was Havana, Cuba would be corrected by the "plain and explicit statements of geographic origin on the label" stating that the product was from Puerto Rico. (picture, right - Pernod's Havana Club logo)

Under these circumstances a district court can properly disregard survey evidence as immaterial because Section 43(a)(1) does not forbid language that reasonable people would have to acknowledge is not false or misleading. Once the meaning of the words is beyond reasonable dispute, there is no longer a question of fact and the court may place such weight on survey evidence as it deems appropriate - even if that means that no weight is placed on the survey evidence at all.

In closing the Court of Appeals issued two cautions - one to litigants and one to judges. To potential litigants, the court warned that cases involving truly plain language, such as this case, should not be worth the time and expense of contesting in court - although it was the "unusual political baggage and branding potential involved" in this case that made the dispute see the light of day in the court room. To judges, the court warned that its decision was not carte blanche to rule out survey evidence from the initial determination. The court stated that

"Before a defendant or a district judge decides that an advertisement could not mislead a reasonable person, serious care must be exercised to avoid the temptation of thinking, "my way of seeing this is naturally the only reasonable way." Thoughtful reflection on potential ambiguities in an advertisement, which can be revealed by surveys and will certainly be pointed out by the plaintiffs, will regularly make it the wisest course to consider survey evidence."

The Court was also careful to state that its conclusion in the case said nothing of whether the words HAVANA CLUB are eligible fore registration as a trade mark.

The lesson from the Court is that where the meaning of the disputed language subject to a false advertising claim is clear, it is not necessary to place much or any weight on admitted survey evidence. However, it is only when the disputed language is plainly clear that this process of determination is reasonable; the majority of cases which make it to court will hopefully necessarily not have plainly clear language and so survey evidence will be of assistance to the Court.

Patricia Neal, a spokeswoman for Bacardi stated that:

"Bacardi applauds the appellate court's decision which reaffirms that Bacardi has accurately portrayed both the geographic origin an Cuban heritage of our Havana Club rum."

David Bernstein, a lawyer from Debevoise & Plimpton representing Pernod Ricard told Bloomberg that Pernod was disappointed with the decision and may consider an appeal. He also stated that

"The Court seems to be substituting its own view over that of consumers."

Spanish readers of the IPKat will of course recognize that the parties in this dispute were subject to a Spanish Supreme Court recent decision this past February. Bacardi had sued Pernod stating that they were the rightful proprietor of the mark HAVANA CLUB. The Spanish Supreme Court ruled that Bacardi had no rights in the trademark HAVANA CLUB because Bacardi had no claim to the mark in Spain following from the Arechabala's family neglect of its rights, including allowing its trade marks in the name to expire. (picture, right - the Spanish Tribunal Supremo)

Taking language from the decision, in isolation, the AmeriKat understands and agrees with the reasoning of the court. However, it is impossible to view the decision of the Third Circuit without the historical context of the Cuban Revolution, section 211 and the revocation of Pernod's trade mark for HAVANA RUM. It is for this context, that the AmeriKat considers that it will be likely that Pernod will appeal the decision and continue the fight. As stated by General Counsel for Pernod Ricard Ian FitzSimons following the Third Circuit's decision,

"We are determined to continue to fight for fair competition in the United States market where ownership of the ‘Havana Club' trademark dates back to 1976.”

And so the fight goes on....

Letter from AmeriKat I: When is Puerto Rican rum not Cuban rum?

The AmeriKat's dream of escaping to the land of the free, home of the brave, customer service, and green chiles has been put momentarily on hold until Thanksgiving. In the meantime, she has been prowling London's streets during a couple of days of respite. One could have seen her furry profile looming over Italian literature in Daunt, eating fresh bread at The Riding House Cafe (picture, left), purchasing kitten clothes for her niece at Peter Jones, and meandering to and from Fitzrovia for a morning's stroll. On the way to Fitzrovia one passes the famous Dorchester Hotel - where in 1944 Ernest Hemingway took a room to write articles about the RAF for Collier's Weekly magazine and where Hemingway, as John Walsh writing for the Independent states, "held court as the Great American Writer and went to parties receiving compliments on his beardy, macho wonderfulness." Many, when they think of Hemingway, will think of two things: writer and rum. Hemingway lived in and around Cuba for almost 30 years, and although fond of gin and "the steering liquor" tequila, he was most famously a fan of rum from the country. His home bar held a bottle of Bacardi rum and daiquiris - a drink he paid tribute to in Islands in the Stream - and mojitos were amongst his favorite rum-based drinks (and the AmeriKat's).

When is a bottle of Puerto Rican rum not Cuban rum? When it says it isn't....

Rum is distilled from sugarcane (picture right) by-products such as molasses or directly from sugarcane juice. By a process of fermentation and distillation a clear liquid is obtained that is then aged in oak barrels. The white or dark rum has been a subject of literature and legend for centuries, becoming associated with the English privateers and pirates, which was further bolstered by Treasure Island. Rum production occurs throughout the Caribbean and Latin America, but it has been Cuban rum that has been the subject of decades'-long dispute, and two weeks ago, the subject a Court of Appeals for the Third Circuit decision in Pernod Ricard USA LLC v Bacardi USA, Inc.

The History

For many years there has been a protracted war between Pernod Ricard USA and Bacardi USA over the right to use the words HAVANA CLUB to sell rum in the U.S. The battle's origins stem all the way back before the start of the Cuban Revolution in 1953. Prior to the Revolution, the Arechabala family produced "Havana Club" brand rum in Cuba, sold it locally and exported it for sale in the U.S. Following the Revolution, the Cuban government expropriated the Arechabalas' business without compensation. Three years later in 1963, the US started its trade embargo against Cuba which still continues to this date. The trade embargo, administered by the Office of Foreign Assets Control (OFAC), prevents the importation of Cuban goods into the US. However, the embargo did not prevent the Cuban government in 1976 registering at the USPTO, through a government-owned company called "Cubaexport", the words HAVANA CLUB for use in connection with rum.

In 1994, the Cuban government assigned its claimed interests in the Arechabala family's old business, including the USPTO HAVANA CLUB mark, to joint venture of which Pernod Ricard S.A. (Pernod's parent company) is a member. OFAC approved the transfer of the trade mark in 1995, but then retroactively revoked its permission for the transfer in 1997. The mark remained registered to Cubaexport until July 2006 at which point the registration expired after OFAC denied permission to renew the mark.

In 1994, Bacardi filed a federal trade mark application for the use HAVANA CLUB mark on rum in the U.S. and in the following year Bacardi importated rum from the Bahamas and sold it in the US under the mark for a small amount of time. The joint venture sued Bacardi in the Southern District of New York. While that action was pending, Bacardi purchased from the Arechabala family any remaining rights they might had to the HAVANA CLUB mark, related goodwill in the business, and any rum business assets the family owned. Following the OFAC's revocation of its permission, the suit against Bacardi in New York was dropped.

Bacardi's Havana Club rum

Only days after Cubaexport's federal trade mark registration of HAVANA CLUB expired, Bacardi begun selling in Florida rum made in Puerto Rico using the Arechabala family recipe under the brand name HAVANA CLUB (picture, left - Bacardi's Havana Club rum). According to a member of the Arechabala family, the rum was "almost identical" to the original Havana Club rub made by the family in Cuba. The front of the bottle of Bacardi's rum has the phrase "Havana Club TM" in large stylized letters, followed by the word "Brand" in smaller letters. Below the brand name, in prominent lettering the words "Puerto Rican Rum" appear. The mark HAVANA CLUB appear in other locations on the label, around the neck of the bottle and it is again stated that it is produced in San Juan, Puerto Rico. The back of the bottle contains a printed statement stating that the rum is

"distilled and crafted in Puerto Rico using the original Arechabala family recipe. Developed in Cuba circa 1930..."

In 2006, after Bacardi began its sales of the Puerto Rican Havana Club rum, Pernod filed a false advertising suit under Section 43(a)(1)(B) of the Lanham Act (codified as section 1125(a)(1)(B)) - the false designation of goods provision. Section 43(a)(1)(B) states:

"Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act."

The District Court's Decision

Pernod alleged that the words "Havana Club" misleads consumers to believe that the rum is produced in Cuba. During the three-day bench trial before the District Court, Pernod presented unrebutted survey evidence that approximately 18% of consumers who looked at Bacardi's bottle were left thinking that the rum was made in Cuba or from Cuban ingredients. However, the District Court ruled in favor of Bacardi finding that the use of the Havana Club brand name reflected the Cuban heritage of the rum's recipe and that Bacardi had "a First Amendment right to accurately portray where the product was historically made". The District Court also held that the Havana Club label clearly and truthfully provided the origin of its rum as being from Puerto Rico and was therefore not deceptive. (picture, right - the famous mojito)

The District Court had admitted Pernod's survey evidence, but decided during the initial step of its determination under section 43(a)(1)(B), that no false or misleading statement was made by the label, so there was no need to "analyze actual (or likely) consumer deception" and therefore skipped over Pernod's survey evidence because

"[a] court is permitted to find, as a matter of law, that no reasonable consumer could be misled by the challenged advertising."

The Court stated that "Havana Club" was not the same as "Made in Havana" or "Havana Rum". Even if "Havana Club" constituted an actionable statement, the question was then whether 'geographic origin' was more akin to 'heritage' or to the 'source of production'. The District Court drew a distinction between section 43(a)(1)(A) which is the preceding section that is focused on trade marks and unfair competition, and (B) which deals with false advertising. Section (A) prohibits false and misleading representation that may deceive consumers about the "origins" of goods and services, whereas (B) prohibits false or misleading representations as to the "geographic origin" of goods and services." In considering the meaning of the addition of the word "geographic" to the word origin in subsection (B) the District Court considered that the authorities dealing with subsection (A) would not be instructive on the meaning of 'geographical origin'. However, the District Court did acknowledge that the Supreme Court in Dastar Corp. v Twentieth Century Fox Film Corp (2003) ( a subsection section (A) case) held that 'origin' refers to

"the producer of the tangible goods that are offered for sale, and not the author of any idea, concept or communication embodied in those goods."

Applying this to 'geographical origin' the District Court held that the meaning of the words would "implicate the place of manufacture, rather than the source of that product's recipe or its heritage", but acknowledged that in the false advertising context the term may be broad enough to embody a product's heritage, including its history and recipe.

Nevertheless, if one took 'geographic origin' to mean origin, Bacardi's label clearly and truthfully informed the consumer that the rum was made in Puerto Rico, not in Cuba. If one took 'geographic origin' to mean heritage, Bacardi's "Havana Club rum" has a Cuban heritage and therefore depicting such heritage is not deceptive. The District Court held that "survey research does not determine the meaning of words or 'set the standard to which objectively verifiable claims must be held.'" (picture, right - the flag of Puerto Rico).

[Note: The Court of Appeals criticized the District Court for endeavouring to use the modifier 'geographic' to expand the meaning of 'origin' into the realm of history, heritage and culture. The Court of Appeals referred again to the Supreme Court's decision in Dastar which observed that a claim for false advertising relating to the authenticity of a good would fall under the "misrepresents the nature, characters [or] qualities' provision of section 43(a)(1)(B). The Court of Appeals stated that applying the Supreme Court's interpretation of the word 'origin' from Dastar may lead more naturally to an understanding of 'geographic origin' as implicating the place of a product's manufacture, not a broad inquiry into the product's background.]

Pernod appealed on the sole ground that the Court failed to consider the survey evidence presented by Pernod.

Click here for discussion of the Court of Appeals decision in Part II.