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.

Letter from AmeriKat: Patent reform, pretty things, pancakes and politics

The AmeriKat is having difficulty concentrating, today. She awoke early this morning with her phone vibrating off her bedside table with the first of many text messages, phone calls, and e-mails that would help turn her planned legato day into mainly staccato. She had great plans to write lengthy pieces about the complicated politics of patent reform legislation, the Federal Circuit defining the narrow parameters where the equitable doctrine of patent misuse could be employed as a defence, and other such interesting tails. But every time she put paws to keyboard, a new alert would steal her attention away for hours at a time, never to return to whence it came. So with the AmeriKat's mind on other matters, be it a new kitten shortly entering her family's pack (the AmeriKat may be Aunt AmeriKat at any time), or invitations of exciting travel, she was only able to put together some fun bits 'n bobs from the past week in US IP news. (picture, right- the AmeriKat with her soon to be kitten niece or nephew)

Will the lame-duck session bring the Patent Reform Act 2009 back from the dead? - Last Wednesday, a bi-partisan group of 25 senators wrote a letter to Senate Majority leader Harry Reid (D-Nevada) asking him to bring the amended patent reform bill to the floor for a vote as soon as possible. The merry band of 25 consists of 14 Democrats, 10 Republicans and the now Independent, Senator Joe Lieberman. The group also includes the Patent Reform Act 2009's sponsor, Senator Patrick Leahy (D-Vermont) and chairman of the Senate Judiciary Committee, Senator Jeff Sessions (R-Alabama). After being reported out by the Senate Judiciary Committee in April 2009, the bill was amended last March. The amended bill would authorize the USPTO to adjust patent and trade mark fees and would award patents to the first to file instead of the first to invent. Another welcome provision to those on the receiving end of patent suits would be provisions that required US courts to consider only relevant "methodologies and factors" in determining damages and to only multiply damages awards after the point that the infringement became wilful. With a quarter of the senate signing the letter, this may indicate a concerted effort, between Democrats and Republicans alike, to make this bill happen. But with other bills concerning the economy and tax taking the front row of the Senate's attention it is unlikely that a bill about patent reform will take much notice until after the upcoming November elections. Philip Johnson, chief IP counsel for Johnson & Johnson stated that the lame-duck session after the November elections would be an ideal time for this bill to pass because it is a "bipartisan bill that's directed to helping the economy." So, perhaps the lame-duck session will bring a Patent Reform Act to our Thanksgiving turkey tables, after all. For more information see this report in the National Law Journal and the Wall Street Journal.

Tiffany suffers another blow from Judge Sullivan in fight against eBay - Last week Judge Richard Sullivan threw out Tiffany's last remaining claim against eBay following the 2nd Circuit Appeals Court ruling in favor of eBay in the trade mark infringement claim last April (see previous AmeriKat reports here and here). The remaining false advertising claim under section 43(a) of the Lanham Act saw Tiffany argue that because eBay advertised the sale of Tiffany goods on its website and that many of those goods were counterfeit, eBay should be liable for false advertising. However, Tiffany was unable to establish that eBay intentionally set out to deceive the public or was of such an "egregious nature sufficient to create a presumption that consumers were being deceived." As predicted by the AmeriKat, Judge Sullivan held that Tiffany was unable to adduce evidence that demonstrated that eBay's ads mislead customers or implied that the Tiffany products sold on their website were all genuine. Michelle Fang, eBay's associate general counsel, stated that the ruling was "an unequivocal validation of eBay's business practices." For more information see these articles in Reuters and Wall Street Journal.

Would you like a side of "prayer" with your pancakes? - Readers of the AmeriKat know that nothing makes her happier than food related IP stories, and this one is no different. The International House of Pancakes, better known as IHOP filed a trade mark infringement lawsuit earlier in the month against a church group called the International House of Prayer who also refer to themselves as IHOP. For those non-American readers, IHOP is a nationwide pancake chain, frequented by senior citizens, hungover university students, and a few in between. It would not be an exaggeration that most Americans know of and have probably been to an IHOP. According to IHOP's website they also serve 700 million pancakes per year. The church has yet to respond to the court filings. Given the strength of the pancake house's reputation, the AmeriKat thinks that only an act of God will be able to help the church group in this trade mark battle. For more information, see these articles in CNN and Time.

Thank you, Fox News, you make my job easy - As if there was ever any question to whom Fox News paid their allegiance, i.e. the Republican party, this latest piece of news seems to help support that view. Missouri Democrat Robin Carnahan, who is running for the US Senate, is being sued by Fox News Network (another Murdoch spawn), for copyright infringement resulting from one of her TV ads. Carnahan's TV ads include clips form a January 2006 interview by Fox News journalist Christopher Wallace with Carnahan's opponent in the Senate race, Rep. Roy Blunt. The AmeriKat believes the use would fall under fair use, but with the Fox News network's conservative slant, it is unsurprising they had come down hard on a Democrat's use of the clip. Not particularly ground-breaking in the field of IP, but with the November elections around the corner, candidates' use of IP will be closely monitored for political strategy. This news item also raises the issue whether during an election, should IP rights really be enforced so stringently as to stifle free speech and prevent information getting out to the electorate? For more info on this news story see these reports in the AP, The Hollywood Reporter and The Washington Post.

Letter from AmeriKat II - Tiffany v eBay (False Advertising)

False Advertising

Under section 43(a) of the Lanham Act an individual is prohibited from

"in commercial advertising or promotion, misrepresenting the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services or commercial activities."

A claim of false advertising may be based on at at least one of two theories (Time Warner Cable v DIRECTV (2007)):

1. that the challenged ad is literally false


2. that the ad, while not literally false, is nevertheless likely to mislead or confuse consumers

The claimant must demonstrate that the false or misleading representation involved an inherent or material quality of the product and that the injuries to be redressed are the result of "public deception" (Johnson & Johnson v Smithkline Beecham (1992)). Where an ad is literally false, the court has the power enjoin the use without reference to the impact of the ad on the buying public (McNeil-PCC v Bristol-Myers Squibb)(1991)). For Tiffany to succeed in a likelihood-of-confusion case where the ad is not literally false, they have to prove that the ads tend to mislead or confuse consumers and demonstrate that "a statistically significant part of the commercial audience holds the false belief allegedly communicated by the challenged advertisement" (Johnson & Johnson (above)).

eBay advertised the sale of Tiffany goods on its website by providing hyper-links to "Tiffany", Tiffany & Co under $150", "Tiffany & Co.", Tiffany Rings" and "Tiffany &Co. under $50." They also purchased sponsored-link ads on various search engines to promote the availability of Tiffany items on its site, including ads that stated "Tiffany on eBay. Find Tiffany items at low prices..." Tiffany alleged that because eBay advertised the sale of Tiffany goods on its website and that many of those goods were counterfeit, eBay should be liable for false advertising. The district court rejected this argument because first, the ads were not literally false because authentic Tiffany merchandise was also sold on eBay's website, despite counterfeit products also being available for purchase. Second, they stated that the ads not misleading either for three reasons:

1. eBay's use of Tiffany's mark was protected, nominative fair use


2. Tiffany has not proved that eBay had specific knowledge as to the illicit nature of individual listings. This finding by the district court implied that specific knowledge was necessary to sustain a false advertising claim.


3. To the extent that the ad was false, that falsity was the result of and the responsibility of the vendors, not eBay.

The Court of Appeals agreed with the district court on only one issue - that the ads did not satisfy the first category of being literally false. On the second category of ads, the court must determine whether extrinsic evidence indicates that the ads were misleading or confusion. The appeals court stated that the district court's three step reasoning process did not seem to reflect this determination, taking each in turn:

1. Just because eBay's use may have been nominative fair use does not mean that the use was not also in a misleading ad.


2. eBay's knowledge of infringing activity does not have an relevance on whether the ads were misleading "in so far as they implied the genuineness of Tiffany goods on eBay's site."


3. eBay affirmatively advertised goods sold through its site as Tiffany merchandise by hyperlinks and purchases of sponsored ads. This is the case irrespective of the counterfeit goods being supplied by the vendors, not eBay.

The court of appeals stated that the law prohibits an ad that implies that all of the goods offered on eBay's site are genuine, when in fact, as is the case with Tiffany's goods, a "sizeable proportion of them are not." This does not stop service providers like eBay from advertising goods. The court stated that a disclaimer citing that that not all of the goods on the site are genuine Tiffany products might suffice. They decided to remand the case back to the district court to reconsider the claim in light of what Circuit Court of Appeals said about the district court's 3-issue determination.

Tiffany will still have a difficult time in providing sufficient evidence that indicates that the ads were misleading or confusing to consumers. Readers may recall that the other survey evidence produced by Tiffany during the summary judgment stage that indicated at about 71% of 'Tiffany' goods on eBay were counterfeit. This survey evidence was "methodologically flawed and of questionable value" and "provided limited evidence as to the total percentage of counterfeit goods available on eBay." Tiffany will have a massively high hurdle to surmount in ensuring that their evidence produced regarding the misleading or confusion nature of the ads does not fail where their other survey evidence did. Additionally how many consumers would really be mislead into thinking that an eBay ad stating "Tiffany on eBay (one such potential consumer - picture right). Find Tiffany items at low prices..." means that "all goods purporting to be Tiffany on eBay are genuine"? And how would Tiffany go about producing evidence that shows that which are not methodologically flawed? How could you phrase a question to a consumer that showed could show this evidence? Any statisticians out there with any thoughts?

Tiffany's CEO Michael J Kowalski said in a statement that Tiffany is "disappointed" with the ruling and may appeal to the US Supreme Court.

The AmeriKat thanks the IPKat's friend and esteemed trade mark blogger, Martin Schwimmer for alerting the Kat to the ruling.

Letter from AmeriKat I - Tiffany v eBay (Trade Mark Infringement)

The AmeriKat is on Kat duties this weekend and so to that end she has been dosing herself up on caffeine ready for any breaking IP news. In days gone by, the Easter weekend would present the AmeriKat with opportunities to dye eggs a variety of pastel shades (picture right) and eat copious amounts of chocolate while watching Fred and Judy in Easter Parade. The "Holy Grail" of the AmeriKat's kittenhood Easter basket was the almighty peanut-butter chocolate bunny. One bite of an ear off this bunny meant one's weekly calorie intake was satisfied. Nowadays, however, the AmeriKat has grander Easter basket present illusions. Something like this little 18K gold and diamond sparkling egg from Tiffany & Co would do quite nicely - and with far fewer calories than the bunny!

E-Bay may continue breakfasting on Tiffanys, rules 2nd Circuit Court of Appeals

Tiffany & Co may be feeling less sparkling than their pendant this week following the Court of Appeals for the 2nd Circuit ruling in the eBay case. In 2004 Tiffany issued proceedings against eBay for facilitating and advertising sale of counterfeit Tiffany goods and therefore such acts constituted trade mark infringement, dilution and false advertising. In July 2008, District Judge Sullivan concluded at summary judgment that eBay did not engage in trade mark infringement, false advertising or trade mark dilution despite counterfeit Tiffany merchandise being sold through its site. Tiffany appealed and this past week the Circuit Court of Appeals affirmed the ruling in relation to trade mark infringement and dilution but remanded the case for further determination in respect of Tiffany's claim of false advertising. For convenience the AmeriKat has divided the case between two posts: one dealing with the trade mark infringement aspects and one dealing with the false advertising claim.

Direct Trade Mark Infringement

Tiffany alleged that eBay used Tiffany's mark when purchasing sponsored links and selling products under Tiffany's mark on their website. However, Judge Sullivan found that the doctrine of nominative fair use protected eBay's use of Tiffany's mark. The doctrine allows eBay to use Tiffany's mark to identify their goods as long as there is no likelihood of confusion about the source of the product (Merk & Co. v Mediplan Health (2006)). The use has to be reasonably necessary to identify the product and eBay's use must do nothing that would suggest sponsorship or endorsement by Tiffany (New Kids on the Block v News Am Publishing (1992)). The 2nd Circuit Court of Appeals agreed with the district court that eBay used the mark to describe accurately the genuine Tiffany goods offered for sale on its website and its uses of the mark did not suggest an affiliation of Tiffany with eBay or endorse the sale of its products on the site.

In respect of goods that were being sold on eBay under the mark that were not genuine Tiffany argued that eBay was liable for direct trade mark infringement because they knew that there was "a substantial problem with the sale of counterfeit Tiffany silver jewellery." The Court of Appeals held that eBay's knowledge that counterfeit wares were offered on its website was only relevant to the issue of contributory trade mark infringement and to the issue of eBay's liability to false advertising, but it does not go to eBay's liability for direct trade mark infringement. In support, the court pointed to the fact that eBay removed listings that Tiffany pointed out were counterfeit and that to impose liability for direct infringement on eBay would "unduly inhibit the lawful resale of genuine Tiffany goods." The court referred to this quote from Poymer in support:

"As a general rule, trade mark law does not reach the sale of genuine goods bearing a true mark even though the sale is not authorized by the mark owner." (Polymer Tech Corp v Mimran (1992)).

Contributory Trade Mark Infringement

The more difficult issue the appeals court recognized was whether eBay was liable for contributory trade mark infringement for facilitating the infringing conduct of the counterfeiting vendors. Contributory trade mark infringement is a common law doctrine which tests a defendant's conduct by determining whether eBay intentionally induced vendors to infringe Tiffany's mark or knew or had reason to know that vendors were engaging in trade mark infringement but still allowed vendors to continue trading regardless (Inwood Laboratories v Ives Laboratories (1982)). The Inwood test applies to a service providers, like eBay, if he or she exercises sufficient control over the infringing conduct (Lockheed Martin Corp v Network Solutions (1999) and Polymer II (1994)). However, the appeals court recognized that the limited case law leaves the law of contributory trade mark infringement "ill-defined".

Tiffany did not argue the first strand of the Inwood test - that eBay induced the sale of counterfeit Tiffany goods on its website. It did, however, argue the second strand - that eBay continued to supply its services to sellers of counterfeit goods in circumstances where eBay knew or had reason to know that the vendors were selling counterfeit Tiffany products.

The district court rejected this argument because at the point of eBay knowing of a particular counterfeit listing, eBay promptly removed the content. The Circuit Court affirmed this decision in respect of the terminated listings. Tiffany however argued fervently that eBay knew or had reason to know that there were counterfeit Tiffany goods being sold ubiquitously on its website by virtue of their demand letters and other information provided about particular sellers of counterfeit goods. Tiffany argued that this evidence and information provided to eBay established eBay's knowledge of the widespread sale of counterfeit Tiffany products and therefore, in continuing to make its services available to infringing vendors was contributory liable. The district court rejected this argument because despite eBay having "generalized notice that some portion of the Tiffany goods sold on its website might by counterfeit" such generalized knowledge is insufficient under the Inwood test to impose such a substantial affirmative duty on eBay to police all vendors. This is because the Inwood test refers to a continued supply of services to 'one' whom it knows sells infringing products. Therefore to satisfy the test Tiffany would have to prove knowledge of particular instances of infringement, not general knowledge of infringement. Tiffany's broad interpretation of Inwood, said the Court of Appeals, was not supported by the Supreme Court's dicta of the test in Sony Corp. v Universal (1984). There the Supreme Court stated that the Inwood test was a "narrow standard" that required knowledge of "identified individuals" engaging in infringing conduct. The Court of Appeals thus found that eBay was not liable for contributory trade mark infringement.

Trade Mark Dilution

US federal and New York state law allow Tiffany, as an owner of a famous mark, to stop a person from using the Tiffany mark in commerce in a way that is likely to cause dilution by blurring or dilution by tarnishment of the mark. For a run-through of trade mark dilution see this Amerikat post. The district court rejected Tiffany's dilution by blurring argument because they found that eBay had never used the Tiffany mark in an

"effort to create an association with its own product, but instead, used the marks directly to advertise and identify the availability of authentic Tiffany merchandise" on its site.

For the same reasoning, the court found that the tarnishment claim failed. The Court of Appeals affirmed this decision:

"Tiffany argues that counterfeiting dilutes the value of its product. Perhaps. But insofar as eBay did not itself sell the goods at issue, it did not itself engage in dilution."