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.

Letter from AmeriKat: Green light for Red or Green Chile?

The AmeriKat is planning a much-needed vacation to her homeland in the next couple of weeks. Travelling from the high mountains of northern New Mexico (Santa Fe, Taos, Albuquerque) south on I-25 you will pass a sign about 40 miles north of where the AmeriKat was born for "Hatch". Hatch, New Mexico, a small community in the heart of chile pepper country, is known as the "Chile Capital of the World". Chile is the lifeblood of New Mexicans - you start eating chiles almost as soon as you are out of the womb and it very quickly becomes an addiction. One of our universities, New Mexico State University, even has a Chile Pepper Institute and our State Question is "Red or Green?". The AmeriKat could go on forever about the utter joys of smelling roasting chiles in mid-September, the thick succulence of stuffed chile rellenos, mopping up excess chile with tortillas.....drool. What is also universal amongst the New Mexican chile-loving public, is that no self respecting New Mexican or chile connoisseur would really enjoy eating chile from anywhere else than New Mexico; anything else is frankly just an embarrassment. (picture, left - the AmeriKat getting her cruising face on for her trip down I-25)

Hands off our Chile

This sentiment has been translated to a new state law - the New Mexico Chile Advertising Act - that aims to protect New Mexico green chile and its heritage by preventing cheaper foreign peppers from countries such as Peru, China and Mexico being labelled as New Mexico-grown. Geographic indications, as protected under Article 22 of TRIPS, have been a source of contention for many food and beverage producers. In the UK we have seen issues of geographic indications arising in a line of extended passing off actions starting with the first "Champagne case" in 1961 and in Europe with Budweiser/Budějovický Budvar case. The same headaches faced in Europe are also faced by producers on the other side of the pond. Like champagne, which describes the grape but most importantly the region where the vines are grown and thus the geographical indication of the goods in question, the New Mexican chile pepper faces similar issues. There is no such thing as a "New Mexican" or "Hatch" chile pepper but instead the sign denotes the region where the peppers are grown. Just as the Champagne region's environment produces unique qualities in the growing and production of champagne, New Mexico's high altitude, long hot seasons, sunlight and cold desert nights produce the unique flavor that denotes the New Mexican chile pepper (picture, right - Hatch green chile).

Stephanie Walker of the Chile Pepper Institute told NPR that:

"As with other crops in other parts of the country - we all know about the Vidalia onion, we know about other crops that really have their brand identity in place. New Mexico has that, but it's never been protected the way other crops and other parts of the country has."

In the EU under Council Regulation No 5110/2006 there is a three-tier system of protection of geographic indications: (1)Protected Designation of Origin (PDO) which protects agricultural products and foodstuffs that are produced in a given geographical area using recognized know-how (2) Protected Geographical Indication (PGI) which protects agricultural products closely linked to the geographical area; and (3) Traditional Speciality Guaranteed (TSG) which highlights traditional character in the composition or production of the product. There are also special regimes for wines and spirits (search here for champagne, cognac, rhum, etc). Aceto Balsamico di Modena is a registered PGI for Italy, Stilton cheese (picture, left) is a registered PDO for the UK, and a PDO is registered for Roquefort cheese by France. A few days ago a PGI was registered by the UK for the Cornish Pasty (see here).

The US does not have such a robust quasi suis generis system for geographic origins/indications (of which was a matter of contention for the US in 2005 - see here). The protection instead takes the form of registered trade marks, collective marks or certification marks (compliant with TRIPS? a discussion for another time). The US's system uses the same procedural and administrative structures for geographical indications as it does for trade marks. Section 1054 of the Lanham Act provides that geographic names or signs which would otherwise be considered geographically descriptive, and thus unregisterable without showing acquired distinctiveness, can be registered as certification marks. Certification marks differ from trade marks because the owner of the certification mark does not use it - they only allow others who meet the certification standards to use it. Further, certification marks do not denote a source of commercial undertaking- they only identify that the nature and quality of the goods have met certain standards.

There are three types of certification marks: (1) regional or other origin; (2) methods, process or other characteristics of the goods/services; or (3) the work was performed by a member of a union or organization. For example, US Registration No. 571,798 for ROQUEFORT is used to denote that the cheese has been manufactured from sheep's milk and cured in the caves of Roquefort - thus fulfilling (1)and (2) of the categories of certification categories. Trade mark protection is also available under the normal rules - if NEW MEXICO CHILE has acquired a secondary meaning other than primarily denoting a geographic region then the sign is registrable. For example, if consumers see the mark NEW MEXICO CHILE and identify that the product was grown by the chile producers in New Mexico (and even specifically those in or around Hatch, NM) then the sign will have acquired a secondary meaning. Likewise, a collective trade mark could be registered on behalf of an association or "collective" such as the New Mexican Chile Association whose members in turn use it to identify their goods from non-members. US law has also protected geographic indications through common law trade mark law without need for a registration ( the "Cognac" case - Institut National Des Appellations v Brown-Forman Corp (TTAB 1998)).

However, when it comes to produce and products which are of such strong cultural and heritage state significance like the New Mexico chile, it is the state's government that usually applies for a certification mark. The owner of a certification mark is usually a governmental body, for example like a state's department of agriculture or a state sanctioned body to undertake the certification and policing activities. For example, in relation to Vidalia onions(grown in Georgia), the mark is owned by the Georgia Department of Agriculture. New Mexican lawmakers have consistently decided not to obtain federal certification or trade mark protection for the New Mexico chile pepper for reasons unknown to the AmeriKat.

However, she suspects its either due to lack of IP understanding or due to money (NM doesn't have much). The protection, which has been afforded to the likes of Florida oranges and Idaho potatoes would cost the New Mexico government money to register and to enforce. But as all IP lawyers know, investment in registration and protection pays off. A registration would enable New Mexico to take action in federal court against defendants who label chile as New Mexican grown as well as put US Customs on notice to stop the importation of chile with false geographic designations on it. (picture, left - a sign in Hatch, NM)

Although the New Mexico Chile Advertising Act makes it illegal to falsely advertise chile as being from New Mexico, because it is a state and not a federal law the extent of its protection is pretty minimal when compared to the protection afforded by a registered certification made at the USPTO. As one of the poorest states in the US, the AmeriKat urges her state government to get on with certification mark or collective trade mark protection. Although there may be initial expense in the registration process, the advertising value of "Brand Chile" should not be underestimated. It may not rival "Brand Champagne" or "Brand Florida Orange" but the value of "Chile" IP is worth protecting, as are the farmers and New Mexicans whose livelihoods depend on the protection.

The AmeriKat cannot help but think that if the New Mexican chile was growing in the UK or anywhere else in the EU there would already be a registered PGI for it. Should there be some sort of mechanism or assistance for state governments to easily and cheaply register their GI's at the USPTO in order to protect their heritage and local agricultural economies?

Letter from AmeriKat II - American Needle v NFL (Part 2 of 2)

The Court continued to state that the teams not only competed against each other on the playing field and for the attraction of fans, but they competed in the market for intellectual property:

"To a firm making hats, the Saints and the Colts are two potentially competing suppliers of valuable trademarks. When each NFL team licences its intellectual property, it is not pursing the 'common interests of the whole'league but is instead pursuing interests of each 'cooperation itself'...Decisions by NFL teams to licence their separately owned trademarks collectively and to only one vendor are decisions that 'depriv[e] the marketplace of independent centers of decisionmaking'."

The Court considered the argument advanced by the NFL that they had formed a single entity (the NFLP) and had marketed their NFL brands (picture, left - all 32 teams) through this single outlet for a long time meant that their conduct fell outside section 1. The Court did not find favor with that argument and stated that "an ongoing section 1 violation cannot evade section 1 scrutiny simply by giving the ongoing violation a name and label." Although at times the 32 teams may operate through NFLP, the teams remained "separately controlled, potential competitors with economic interests that are distinct from NFLP's financial well-being." Ouch.....The Court did recognize that professional sports organizations have to necessarily unite and cooperate for advancement of the league, but cooperation is not justification when that cooperation is so concerted as to fall foul of section 1 (page 14 of the decision).

In closing the Court recognized that while the NFL teams share an interest in making the league successful and profitable in areas like scheduling, but that it does not justify "treating them as a single entity for section 1 purposes when it comes to the marketing of the teams' individually owned owned intellectual property." The case is remanded back to the lower court for further proceedings. In light that NFL agreements are capable of violating section 1, the parties will now have to argue that the NFL-Reebok licence agreement itself is or is not an unreasonable restraint of trade.

The ruling is heralded as being great for the NFL's players. How so? Had the NFL won the case they may have been able to justify continuing to act as 'one business entity' in implementing players' and coaches' salaries collectively, rather than the current system of individual bargaining. (picture, right - Brian Urlacher of the NFL's Chicago Bears and of the AmeriKat's home state) Commentators are suggesting that the ruling could initiate the stalled labor extension talks between the National Football League Players Association (NFLPA) and NFL team owners. However, Peter King of Sports Illustrated stated that the decision may not be the champagne-popping moment for the NFLPA. For further interesting sports-centric view on the impact of the decision see this article from ESPN and Huffington Post (here).

By way of interest, the AmeriKat directs readers to compare the position of the NFL with that of the Major League Baseball (MLB) who benefit from a host of anti-trust law exemptions. God bless the American past-time!

The AmeriKat has to mention that reading Justice Stevens's clear, structured, and well-argued decision makes his upcoming retirement even more poignant. He will be much missed.

Letter from AmeriKat I - American Needle v NFL (Part 1 of 2)

This week the AmeriKat has yet again been battling further biblical drama at home. A few weeks ago she was swimming through her flat after a neighbor's pipe burst (flood). This week she is battling a troop of ants that have built a transport highway from her kitchen to the patio (swarm). Ants are not particularly fun for Kats to play with - they are too tiny and have a habit of becoming stuck in one's paw pads. (picture, left - the AmeriKat watching the Ants Marching in) Despite her distaste for ants inside the home, she still has respect for the tiny creatures in nature. Ants organize themselves in complex social structures each equipped with a predetermined role to help maintain the colony. Although a colony may be comprised of a plurality of thousands of ants, they only operate together as one entity - the colony. (Note - this post is split into two parts)

American Needle (9) - NFL (0) - Full Time

A plurality of teams that have been held by the Supreme Court as not operating as one entity is the National Football League (NFL) in this week's decision in American Needle v NFL (see previous reports here). Delivering the unanimous majority opinion the soon-to-be retiree, Justice Stevens, declared that despite common interests that ran through the NFL brand, the teams are "still separate, profit-maximizing entities, and their interests in licensing team trade marks are not necessarily aligned."

The NFL is an unincorporated association that includes 32 separately owned professional football teams, such as the Denver Broncos or Seattle Seahawks, each with their own team logo, colors, mascot and other IP. Prior to the formation of National Football League Properties (NFLP) in 1963, the teams entered into their own separate IP licences for team merchandise. After 1963, NFLP developed, licensed and marketed the teams IP itself. Up until 2000, NFLP granted non-exclusive licences to a number of companies to permit them to manufacture and sell apparel with NFL team logos, including to American Needle. However, in December 2000, the teams authorized NFLP to grant an exclusive licence to Reebok International for the right to manufacture and sell trade mark head wear for all 32 NFL teams for 10 years.

The previous non-exclusive licences were therefore not renewed prompting American Needle to file their claim in Illinois federal court alleging that NFLP violated sections 1 and 2 of the Sherman Act. The NFLP said that their actions fell outside these sections as they were a "single economic enterprise" and therefore fell foul of the plurality requirement. The Illinois District Court then granted summary judgment in favor of the NFL holding that that all 32 teams were a single entity because their operations were so integrated, more so than "joint ventures cooperating for a common purpose." The Court of Appeals for the Seventh Circuit affirmed the lower court's decision declaring that "NFL teams share a vital economic interest in collective promoting NFL football...[i]t thus follows that only one source of economic power controls the promotion of NFL football." American Needle then filed their writ of certiorari which was granted by the Supreme Court last year.

The question the Supreme Court had to decide was this: Whether the alleged activity by the NFL "must be viewed as that of a single enterprise for purposes of section 1 of the Sherman Act." Section 1 provides that

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.

Section 1 only applies to concerted action that restrains trade. Section 2 apples to both concerted and independent action if that action monopolizes or threatens to monopolize trade. Section 1 behavior is treated more strictly because concerted behavior, without independent action, is more at risk of being anti-competitive. Justice Stevens reiterated that in considering whether conduct is concerted the Court is not merely concerned with whether the parties are formally legally distinct entities, but instead examine the functions of how the parties operate- the "substance over form" distinction.(Copperweld Corp v Independence Tube Corp (1984)). The question therefore is whether there is a "contract, combination.., or conspiracy" amongst "separate economic actors pursuing separate economic interests" such that the agreement "deprives the market place of independent centers of decision-making and therefore of "diversity of entrepreneurial interests" and potential and actual competition.

Applying this criteria the Supreme Court held that

"The NFL teams do not possess either the unitary decisionmaking quality of the single aggregation of economic power characteristic of independent action. Each of the teams is a substantial, independently owned, and independently managed business. '[T]heir general corporate actions are guided or determined' by 'separate corporate consciousnesses' and '[t]heir objectives are' not 'common'" (Copperweld; North American Soccer League v NFL (1982))

........continued in Part II..........

Medinol, Bose and the "standard of fraud"

This Kat has come across news from the US Federal Circuit court that might excite those of our readers that manage trade mark portfolios that include US trade mark registrations. These readers will be familiar with the strict fraud standard established by the US Trademark Trial and Appeal Board in the (in-)famous Medinol v. Neuro Vasx case (67 U.S.P.Q. 2d 1205 [TTAB 2003]) concerning overly broad trade mark specifications.

The cat on the left finally sees a way of escaping the strict Medinol cage


It appears that the US Federal Circuit sees things slightly differently. In its decision in "Re Bose Corp." (Fed. Cir., No. 2008-148) the US Federal Circuit court now took the view the board in Medinol had "... erroneously lowered the fraud standard to a simple negligence standard." The court further clarified that "a trademark is obtained fraudulently under the Lanham Act only if the applicant or registrant knowingly makes a false, material representation with the intent to deceive the PTO."

What had happened? Bose Corp., the well known maker of audio equipment, had filed a Section 8 & 9 declaration of continued use and renewal of its US trade mark registration WAVE mark in 2001. In support of the renewal Bose had, inter alia, claimed that the WAVE mark had been in use in commerce on audio tape recorders and players, even though Bose had stopped producing these sometime around 1996 or 1997. However, Bose had still conducted repair works on these products until 2001 and the declarant, Bose's counsel, had erroneously believed that this was enough to constitute use under Section 8 & 9 Lanham Act.

The court ruled that "...absent the requisite intent to mislead the PTO, even a material misrepresentation would not qualify as fraud under the Lanham Act warranting cancellation..." and as such, the court appears to have abandoned the "know or should have known" standard established by the US Trademark Trial and Appeal Board in Medinol: "...there is no fraud if a false misrepresentation is occasioned by an honest misunderstanding or inadvertence without a willful intent to deceive." Fraud, so the court, required "clear and convincing evidence" to support an assumption of deceptive intent. Bose's counsel's belief (who had signed the declaration) that the repair work constituted use was not unreasonable and was considered to lack the "willful intent to deceive".

But note warns Merpel, this decision does not appear to per se allow an overly broad specification of goods and services if the proprietor does not use the mark on these. The Court also decided that the US Trademark Trial and Appeal Board may limit Bose's specification since "... the registration needs to be restricted to reflect commercial reality."

This Kat is no expert on US trade mark law but believes that there are some questions that remain unanswered, despite the excitement this decision appears to have generated. For example: what is the standard of proof regarding fraudulent intent? Is it enough to plead ignorance when signing the section 8 & 9 declaration? Plus, what will be the likely effect of the Bose decision on pending cases? All comments welcome!

The Federal Circuit decision can be found here.