Background
From May 1999 to September 2003, AMS, a field marketing organization offering sales and marketing support to insurance marketing entities, hired Gagnon at-will as an independent contractor to assist with its information technology needs. Gagnon was asked to develop six custom software programs for AMS. Over the course of the companies’ four year relationship, AMS paid Gagnon over $2 million for this development. However, no agreement was agreed to governing rights in the intellectual property for the developed software programs.

When AMS terminated Gagnon’s services in June 2003, it offered Gagnon an employment position, but he declined. In back and forth written communications, Gagnon demanded payment from AMS for its right to continue to use the programs and for Gagnon’s agreement not to sell the programs to AMS’ competitors. Gagnon eventually ordered AMS to remove “all original and derivative source code” and related program files. In response, AMS refused to cooperate with any of Gagnon’s orders, demanded copies of the source code for all software developed by and on behalf of it, and asserted that Gagnon was not authorized to utilize the software that AMS believed it owned. A week prior to his termination, Gagnon registered the copyright for the six programs with the United States Copyright Office, and this action incited AMS to take legal action.

AMS filed a complaint in California Superior Court against Gagnon alleging misappropriation of trade secrets and conversion. In turn, Gagnon removed the case to federal court and then filed numerous counterclaims alleging, among other claims, copyright infringement for the six programs, trade secret misappropriation, and unfair competition. The District Court remanded AMS’ claims back to the state court, and AMS filed the remanded claims as counter-counterclaims in order to maintain all related claims in federal court.

The District Court granted AMS’ motion for summary judgment as to Gagnon’s counterclaims. Specifically, the District Court found that Gagnon had granted AMS an implied nonexclusive license to use, modify, and retain the source code of the programs. Gagnon’s trade secret misappropriation claim was, therefore, also defeated. Further, because no trade secret agreement existed as between Gagnon and AMS with respect to the source code, Gagnon’s unfair competition claims were deemed invalid under California law. Gagnon’s remaining state law claims also failed for these reasons. Next, Gagnon filed a motion for reconsideration, which was denied. The case was then reassigned to a new judge, and Gagnon appealed the grant of summary judgment. Upon successful limited remand, the District Court denied the motion for reconsideration and returned the case to the Ninth Circuit Court of Appeals.

Court of Appeals for the Ninth Circuit
On appeal, the Ninth Circuit first noted that although exclusive licenses must be in writing, 17 U.S.C. § 204 grants of nonexclusive license need not be in writing and may be granted orally or by implication. The Ninth Circuit has held that an implied license is granted when “(1) a person (the licensee) requests the creation of a work, (2) the creator (the licensor) makes that particular work and delivers it to the licensee who requested it, and (3) the licensor intends that the licensee-requestor copy and distribute his work.” I.A.E., Inc. v. Shaver, 74 F.3d 768, 776 (7th Cir. 1996). For example, in Effects Assocs., Inc. v. Cohen, 908 F.2d 555-56 (9th Cir. 1990), a movie producer hired Effects Associates to create certain special effects for a movie. Though the film footage containing the special effects was used without the producer’s obtaining a written license from Effects Associates, the Ninth Circuit found that an implied license had been granted because the footage was created at the producer’s request with the intent that it be used in the film with no warning that use of the footage would constitute infringement. Id. at 558-59 & n.6. The Ninth Circuit applied the same analysis used in Effects to implied licenses for computer programs.

As to the first factor, Gagnon argued that AMS never specifically requested that he create the programs, but “rather relayed its needs to Mr. Gagnon and he satisfied them by providing either computer hardware or computer software at his discretion.” The Ninth Circuit found this interpretation of “request” to be strained. Gagnon did not create the programs on his own initiative and market them to AMS; rather, he created them in response to AMS’ requests. Also, after prototype software was developed, he made changes to the programs in response to AMS’ requests.

As to the second factor, it was undisputed that Gagnon created the programs for AMS. However, the remaining question was whether Gagnon delivered the programs to AMS. The Ninth Circuit agreed with the District Court that Gagnon delivered them when he installed them onto the AMS computers and stored the source code on-site at AMS. Gagnon had argued that even if he had installed the programs onto the AMS computers, he never delivered the source code so that AMS could modify the code. Gagnon further argued that if, in fact, AMS did not have the right to modify the code, AMS may have infringed Gagnon’s copyright by exceeding the scope of its license. However, the Ninth Circuit noted that "Gagnon's conduct manifested an objective intent to give AMS an unlimited license at the time of creation; thus, when he stored the source code at AMS, the code was delivered." Therefore, the Ninth Circuit held that the scope of the license necessarily included the unlimited license to modify the source code as well as use the executable object code.

As to the third factor, the Ninth Circuit concluded that Gagnon’s conduct did manifest an intent to grant a license. Specifically, the Ninth Circuit noted that the relevant intent is the licensor’s objective intent at the time of the creation and delivery of the software as manifested by the parties’ conduct. See Effects, 908 F.2d at 559 n.6; see also John G. Danielson, Inc. v. Winchester-Conant Props., Inc., 322 F.3d 26, 42 (1st Cir. 2003), I.A.E., 74 F.3d at 777. Gagnon and AMS had an ongoing service relationship in which Gagnon provided technical support for all computer-related problems at AMS, and he created certain custom software applications at AMS’ request. The parties’ relationship indicated neither an intent to grant nor deny a license without Gagnon’s future involvement.

Moreover, the Ninth Circuit held that courts have looked to contracts, even if unexecuted, as evidence of the intent of the party submitting the contract. In the instant case, there were several documents that reflected the parties’ objective intent: a Technical Services Agreement (TSA), an Outside Vendor Agreement (OVA) submitted by Gagnon, and Gagnon’s letter objecting to AMS’ proposed changes to the OVA. The TSA that both parties signed in May 2000 stated only that Gagnon “[would] provide” AMS “specific add-on products.” Nothing in the TSA indicated Gagnon’s understanding or intent that continued use of the custom application programming undertaken by Gagnon would be prohibited after the TSA terminated, nor did the TSA mention anything about a license. Also, Gagnon was well paid for his services. It is highly unlikely that AMS would have paid Gagnon for his programming services if AMS could not have used the programs without further payment pursuant to a separate licensing arrangement that was never mentioned in the TSA and never otherwise requested at the time. Moreover, the TSA was not renewed beyond its April 30, 2001 expiration although the relationship continued. Moreover, the Ninth Circuit noted that custom software is far less valuable without the ability to modify it, and because the TSA was set to expire in one year, one would expect some indication of the need for future licensing if the custom programs were to become unusable after the TSA expired. Thus, the TSA, while silent as to the intellectual property rights, was evidence that the right to use and modify the software programs after termination of the TSA.

The parties additionally attempted to draft an Outside Vendor Agreement (OVA) but were unable to agree upon a version, and it was never executed. The Ninth Circuit found that the unexecuted OVA submitted to Gagnon did not evidence any intent by Gagnon to limit AMS’ use of the programs.

Lastly, the Ninth Circuit noted that Gagnon and AMS did not discuss a licensing agreement until their relationship was ending. Gagnon delivered the software without any caveats or limitations on AMS’ use of the programs. The first time that Gagnon expressed a contrary intent was in a letter to AMS, sent after AMS had decided to terminate Gagnon’s services. Gagnon had to express an intent to retain control over the programs and limit AMS’ license if he intended to do so. A belated statement that the programs could not be used after Gagnon’s departure, made after the termination decision and well after the creation and delivery of the programs, for which substantial sums were paid, was not sufficient to negate all other objective manifestations of intent to grant AMS an unlimited license. For these reasons, the Ninth Circuit held that Gagnon granted AMS an unlimited, nonexclusive license to retain, use, and modify the software, and because AMS paid consideration, this license was irrevocable. The Court of Appeals, therefore, affirmed the District Court’s grant of summary judgment in favor of AMS on the copyright infringement claim.

Rambus had participated in the JEDEC in developing the standard, but had withdrawn prior to finalization of the standard. The rules of the JEDEC required participating members to disclose intellectual property encompassing the standards being developed. During this participation, Rambus did not disclose the existence of various patent applications related to the standard under discussion as the claims at the time of participation did not cover the standard. However, after withdrawal, Rambus presented new claims in the pending application which did encompass the standard. After the standard was finalized, Rambus asserted that compliance with the SDRAM standard would infringe its patent rights relating to the undisclosed inventions.

The FTC filed a complaint under § 5(b) of the FTC Act, 15 U.S.C. § 45(b), charging that Rambus engaged in unfair methods of competition and unfair or deceptive acts or practices in violation of the Act. See 15 U.S.C. § 45 45(a). Specifically, the FTC alleged that Rambus' failure to disclose its intellectual property violated the JEDEC disclosure requirements, and resulted in Rambus' ability to monopolize the SDRAM market through unfair means. Rambus had contended that it had complied with the specific JEDEC rules in regards to what intellectual property was required to be disclosed and, therefore, did not engage in the type of deceptive behavior needed to show unfair competition under 15 U.S.C. § 45(b).

After conducting a trial before an administrative law judge (ALJ), the ALJ issued an Initial Decision agreeing with Rambus. Specifically, the ALJ found that any failure to disclose was due to the specific JEDEC policies not requiring such disclosure and therefore Rambus' non-disclosure was not in violation of the JEDEC policies. However, after appealing to the Commission, the Initial Decision was reversed and Rambus was found to have engaged in deceptive behavior. Specifically, the Commission found that the JEDEC policies and rules, while not a model of clarity, at least impliedly required the disclosure and such was presumed by the members. Moreover, the deceptive intent provided for the monopolization because, had JEDEC been aware of the patent applications, JEDEC either would have excluded the patented technologies from the standard or at least required Rambus provide assurances of “reasonable and nondiscriminatory” license fees. As a remedy, the Commission ordered that the patented technology be made available for license at a preset license rate, depending on the type of JEDEC compliant DRAM involved.

On appeal, Rambus challenged the finding that the JEDEC rules required disclosure of the patent applications in question. Also, Rambus challenged that there was an antitrust violation because there was insufficient evidence that the JEDEC either would have excluded the patented technologies from the standard or at least required Rambus provide assurances of “reasonable and nondiscriminatory” license fees. In regards to the license fees, Rambus argued that the required license would not have been an antitrust violation, and there was insufficient evidence that JEDEC would have simply excluded the patented technology.

The D.C. Circuit noted that not all monopolies are illegal as only those acquired by unlawful means are considered anticompetitive. In defining what constitutes unlawful acquisition of a monopoly, the DC Circuit relied upon its prior decision in United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) (en banc) (per curiam) in defining the test. Under this test, there needs to be a finding on the following:

First, “to be condemned as exclusionary, a monopolist’s act must have ‘anticompetitive effect.’ That is, it must harm the competitive process and thereby harm consumers. In contrast, harm to one or more competitors will not suffice.” Microsoft, 253 F.3d at 58; see also Trinko, 540 U.S. at 407; Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 224 (1993); Covad Commc’ns. Co. v. Bell Atlantic Corp., 398 F.3d 666, 672 (D.C. Cir. 2005). Second, it is the antitrust plaintiff—including the Government as plaintiff—that bears the burden of proving the anticompetitive effect of the monopolist’s conduct.

The D.C. Circuit then found that, whereas in the Microsoft case there was evidence of an effect caused by Microsoft's deceptive intent (i.e., tricking developers in working on proprietary Java applications when the developers were intending to work on platform independent Java applications), the only competitive harm resulting from Rambus' deceptive actions was a raise in prices. However, relying on NYNEX Corp. v. Discon, Inc., 525 U.S. 128 (1998), the D.C. Circuit found that the mere raising of prices was not an anticompetitive effect. Specifically, even assuming Rambus had disclosed the patents, this disclosure would also have resulted in a price increase such that there was no discernable injury. As such, the D.C. Circuit vacated the Commission's ruling due to the failure to find evidence of an anticompetitive effect due to Rambus' failure to disclose the patent applications in question.

11th Circuit Finds Use of Trademarks in Metatags is an Infringing Use in Commerce, but the Grant of a Preliminary Injunction Requires Evidence of Harm Which Cannot be Presumed

Background
NAM designs and manufactures physiotherapeutic spinal devices used to treat lower back pain, which are commonly known as traction devices. NAM owns and uses registered trademarks for “Accu-Spina” and “IDD Therapy.” Axiom competes with NAM and manufactures a physiotherapeutic device known as the DRX 9000.

NAM alleged that Axiom infringed NAM’s trademarks by using the “Accu-Spina” and “IDD Therapy” marks on Axiom’s website within meta tags. Meta tags are words or phrases included in a website’s code intended to describe the contents of the website with which the meta tags are associated. Such included meta tags are often used by internet search engines to associate a user’s search terms with relevant websites but are not displayed thereon. NAM further alleged that Axiom made false statements about the DRX 9000 in stating (1) that Axiom and NASA or the DRX 9000 and NASA were affiliated and (2) that the DRX 9000 was FDA approved.

District Court for the Northern District of Georgia
The District Court granted NAM’s request for a preliminary injunction thereby enjoining Axiom from using NAM’s trademarks within meta tags on Axiom’s websites and from making the challenged statements about the DRX 9000. Further, the District Court found that Axiom’s use of NAM’s trademarks created a likelihood of confusion among consumers and that Axiom’s statements about the DRX 9000 were literally false and material to consumers’ purchasing decisions.

Eleventh Circuit
Under Eleventh Circuit precedent, a preliminary injunction may be granted only if NAM established “(1) a substantial likelihood of success on the merits of the underlying case, (2) [NAM] will suffer irreparable harm in the absence of an injunction, (3) the harm suffered by [NAM] in the absence of an injunction would exceed the harm suffered by [Axiom] if the injunction issued, and (4) an injunction would not disserve the public interest.” Johnson & Johnson Vision Care, Inc. v. 1-800 Contacts, Inc., F.3d 1242, 1246 (11th Cir. 2002). On appeal, Axiom argued that NAM failed to establish a likelihood of success on the merits of either the trademark infringement or the false advertising claims and, assuming arguendo that NAM had established such likelihood of success, that the District Court erred in presuming that any plaintiff with a viable unfair competition claim will always suffer irreparable harm if a preliminary injunction is not issued.

Likelihood of Success: Trademark Infringement
In order to prevail on a claim of trademark infringement under the Lanham Act, the Eleventh Circuit required that NAM establishe: “(1) that [NAM] possess[es] a valid mark, (2) that the [Axiom] used the mark, (3) that the [Axiom’s] use of the mark occurred “in commerce,” (4) that the [Axiom] used the mark “in connection with the sale… or advertising of any goods,” and (5) that [Axiom] used the mark in a manner likely to confuse consumers.” Slip op. at 7, citing 1-800 Contacts, Inc., v. WhenU.com, Inc., 414 F.3d 400, 406-07 (2d Cir. 2005).

Specifically, Axiom argued that the use of NAM’s trademarks within meta tags of Axiom’s websites does not constitute a “use in commerce” under the Lanham Act and, even if such use as meta tags is a “use in commerce,” that such use is not likely to confuse consumers. The Eleventh Circuit “readily conclude[d]” that Axiom’s use of NAM’s trademarks as meta tags was an infringing use as Axiom used the trademarks in an “effort to promote and advertise its products on the Internet.” Slip op. at 9. Further, Internet search results displayed NAM’s trademarks along with a description of Axiom’s website. The Eleventh Circuit distinguished 1-800 Contacts because there (1) the defendant used the plaintiff’s web address and not plaintiff’s protectable trademark, and (2) the defendant did not cause the plaintiff’s trademark to be displayed to the consumer. Here, Axiom used NAM’s registered trademarks in meta tags and the registered trademarks were displayed along with descriptions of Axiom’s website when searched using an Internet search engine. The Eleventh Circuit went on to substantially criticize the Second Circuit’s analysis in 1-800 Contacts as incorrectly analyzing the elements of trademark infringement, rendering the conclusions therein reached suspect. Specifically, the Second Circuit reasoned that because the defendant did not display the plaintiff’s trademark, there could be no possibility of confusion. The Eleventh Circuit disagrees in that the lack of display is worthy of consideration, but not dispositive of the likelihood of confusion analysis as the elements governing the confusion analysis are specifically separated and each deserves individual attention.With regard to likelihood of confusion, the Eleventh Circuit analyzes the following seven factors:

1.  the strength of [NAM’s] mark;
2.  the similarity between [NAM’s] mark and the allegedly infringing mark;
3.  the similarity of the products and services offered by [NAM] and [Axiom];
4.  the similarity of the sales methods;
5.  the similarity of advertising methods;
6.  [Axiom’s] intent; and
7.  actual confusion.

In Brookfield, the Ninth Circuit enjoined a defendant from including a competitor’s trademark for confusingly similar terms in the meta tags of the defendant’s website. There, the Ninth Circuit characterized the infringing use of a trademark in a meta tag as generating initial interest confusion, assuming that the allegedly infringing use was not actually displayed by the defendant. The Seventh Circuit faced similar facts in Promatek, which led to a similar conclusion of initial interest confusion sufficient to support a finding of likelihood of confusion.

However here, the Eleventh Circuit distinguishes Brookfield and Promatek as NAM has demonstrated a likelihood of actual source confusion, i.e., a consumer is likely to be confused as to whether Axiom and NAM are affiliated or whether Axiom’s and NAM’s products come from a same source. Because Internet search results displayed a description of Axiom’s website in which NAM’s trademarks were highlighted, the Eleventh Circuit found that Axiom’s use of NAM’s trademarks in meta tags caused a likelihood of actual consumer confusion as to source.

Further, Axiom argued that its use was no different than a store placing the store’s generic competing product next to a brand name product on the store’s shelf. However, because Axiom’s use of NAM’s trademarks as meta tags caused Internet search engines to suggest that the competing products had a same source, were affiliated, or were both sold by Axiom, the Eleventh Circuit concluded that Axiom’s use caused a likelihood of actual source confusion. Therefore, the Axiom’s analogy was misplaced.

Likelihood of Success: False Advertising
In order to prevail on a false advertising claim under the Lanham Act in the Eleventh Circuit, NAM must demonstrate: “(1) the ads of [Axiom] were false or misleading, (2) the ads deceived, or had the capacity to deceive, consumers, (3) the deception had a material effect on purchasing decisions, (4) the misrepresented product or service affects interstate commerce, and (5) [NAM] has been – or is likely to be – injured as a result of the false advertising.” Slip op. at 23, citing Johnson & Johnson, 299 F.3d at 1247.

The Eleventh Circuit held that the District Court did not clearly err when finding that Axiom’s claims of affiliation with NASA and the DRX 9000 being FDA approved were literally false and that the ads were material to consumers’ purchasing decisions. As such, the District Court did not clearly err in finding that NAM demonstrated a likelihood of success on the merits of the false advertising claims.

Presumptions of Irreparable Harm
The Eleventh Circuit vacated the District Court’s grant of preliminary injunction with respect to both the trademark infringement and false advertising claims, despite NAM’s demonstration of a likelihood of success on the merits, because the District Court improperly relied upon a presumption of irreparable harm for both the trademark infringement and false advertising claims.

In vacating the preliminary injunction with respect to NAM’s false advertising claims, the Eleventh Circuit notes that the District Court relied upon an incomplete recitation of the law. Specifically, proof of falsity of advertising is sufficient to sustain irreparable injury for purposes of a preliminary injunction when the challenged advertising makes a misleading comparison to a competitor’s product, but if the false advertising is non-comparative and makes no direct reference to a competitor’s product, irreparable harm is not presumed. Slip op. at 28, citing J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, Sec. 23.37 (4th e. 2003); Energy Four, Inc., v. Dornier Medical Systems, Inc., 765 F. Supp. 724, 734 (N.D. Ga. 1991) (internal quotations omitted). Below, the District Court incorrectly presumed irreparable harm despite Axiom’s false advertising being non-comparative and making no direct reference to NAM’s products. As such, the Eleventh Circuit vacated the preliminary injunction with respect to the false advertising claims and remanded for determination as to whether NAM will suffer irreparable harm in the absence of a preliminary injunction.

With regard to presuming irreparable harm on the trademark infringement claims, the Eleventh Circuit noted that it had previously acknowledged and extended a presumption of irreparable harm once a plaintiff has established a likelihood of success on the merits of a trademark infringement claim. However, the Eleventh Circuit relies on the recent Supreme Court decision in eBay to deny such extension in this case. See eBay Inc., v. MercExchange, L.L.C., 547 U.S. 388, 126 S.Ct. 1837 (2006).

In eBay, a district court refused to grant the plaintiff’s motion for permanent injunction after a jury had found that the defendant had infringed plaintiff’s patents. The Federal Circuit reversed the district court and articulated a categorical rule that permanent injunctions shall issue once infringement is established. The Supreme Court reversed the Federal Circuit and upheld the district court’s denial of permanent injunction. “The [Supreme] Court stressed that the Patent Act indicates that injunctive relief may issue only in accordance with the principles of equity.” Slip op. at 30, quoting eBay at 393 (internal quotes omitted).

The Eleventh Circuit extended the eBay patent ruling (with respect to a permanent injunction) to the current trademark claims (with respect to a preliminary injunction) by relying on the similarity between the language of the Lanham Act and the Patent Act. Because the language of the two acts is so similar and no obvious distinction between preliminary and permanent injunctive relief can be made, the principles of equity should prevail.

However, the Eleventh Circuit did not state that the District Court erred in extending the presumption of harm to NAM’s trademark infringement claims. The Eleventh Circuit only held that the Supreme Court’s ruling in eBay should apply to NAM’s trademark infringement claims. As such, the Eleventh Circuit vacated the preliminary injunction with respect to the trademark infringement claims, remanded for further development of the case with respect to the Supreme Court’s decision in eBay and stated that the District Court may very well reach the conclusion that a preliminary injunction is appropriate.

Defendant Heartland Sweeteners, LLC (“Heartland”) manufactures and packages a number of store-brand artificial sweetener products for retailers including Giant, Stop & Shop, Tops, Food Lion, Safeway, Albertson’s, and Wal-Mart. Giant, Stop & Shop, and Tops are all owned by Ahold, and the packages of the store-brand sucralose products sold by these stores (the “Ahold products”) are identical except that each packaging contains that respective store’s name and/or logo. The Ahold products come in 100 and 200 count sizes, with a yellow background and either blue or white lettering. The product name “Sweetener” appears at the top-center of the front of the boxes, in italicized blue font. The product name is outlined in white, but not by a cloud. On the lower-right corner is a photograph of a white cup of coffee and saucer, a glass of lemonade, and several fruits further off to the right side. There is a white rectangular border surrounding the front of the boxes. The store logo (regardless of the store name) appears just above the product name. The Ahold products are sold as granular sucralose in vertically-oriented bags. The front of the vertically oriented bags are exactly the same as the front of the boxes of the Ahold products, except that they display different physical props: a slice of cheesecake on a plate, a bowl of cereal with raspberries, and a white cup of coffee and saucer.

The Food Lion store-brand 100 count-box of individual sucralose packets is oriented horizontally, with a yellow background and either blue or black lettering. The product name “Sweet Choice” appears on the bottom of the front of the box, in italicized blue font. The product name is not surrounded by a cloud, the front of the box contains a vertical design element that divides it into two portions, and the left portion includes the Food Lion logo (black) and store name (black) at the top.

The Safeway store-brand boxes of individual sucralose packets are oriented horizontally, come in 100 and 200-count sizes, have yellow backgrounds, and mostly blue lettering. The product name “Sucralose” appears on the bottom-left of the front of the boxes, in italicized blue font. The name is not surrounded by a cloud. The front of the box contains a white S-shaped Safeway logo that visually divides the front of the box into two portions.

On December 5, 2006, McNeil filed a seven-count complaint against Heartland under federal and state law, seeking relief for trade dress infringement and for trademark infringement of the slogan “Made from Sugar, Tastes Like Sugar.” On December 14, 2006, McNeil filed a motion for preliminary injunction. On May 21, 2007, the District Court denied the motion with respect to all of the allegedly infringing packages in a written memorandum and order. McNeil only appealed the trade dress infringement issue.

On appeal, the Third Circuit found that the District Court correctly found that Heartland’s Food Lion and Safeway store-brand boxes did not infringe the plaintiff’s trade dress packaging. However, the District Court erred in finding that Heartland’s Ahold products did not infringe the plaintiff’s trade dress packaging.

The Lanham Act, 15 U.S.C. §1125(a), establishes a cause of action for trade dress infringement. TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 28-29 (2001). Trade dress refers to the “design or packaging or a product which serves to identify the product’s source.” Shire U.S. Inc. v. Barr Labs. Inc., 329 F.3d 348, 353 (3d. Cir. 2003). It is “the total image or overall appearance of a product, and includes, but is not limited to, such features as size, shape, color or color combinations, texture, graphics, or even a particular sales technique.” Rose Art Indus., Inc. v. Swanson, 235 F.3d 165, 171 (3d Cir. 2000). To establish trade dress infringement under the Lanham Act, a plaintiff must prove that (1) the allegedly infringing design is non-functional; (2) the design is inherently distinctive or has acquired secondary meaning; and (3) consumers are likely to confuse the source of the plaintiff’s product with that of the defendant’s product. Shire US, 329 F.3d at 353.

The likelihood of confusion between two trade dresses is a question of fact. A & H Sportswear, Inc. v. Victoria’s Secret Stores, Inc., 166 F.3d 191, 194 (3d Cir. 1999). The Third Circuit applies and weighs the following 10 “Lapp” factors to determine whether there is a likelihood of confusion: (1) the degree of similarity between the plaintiff’s trade dress and the allegedly infringing trade dress; (2) the strength of the plaintiff’s trade dress; (3) the price of the goods and other factors indicative of the care and attention expected of consumers when making a purchase; (4) the length of time the defendant has used its trade dress without evidence of actual confusion arising; (5) the intent of the defendant in adopting its trade dress; (6) the evidence of actual confusion; (7) whether the goods, though not competing, are marketed through the same channels of trade and advertised through the same media; (8) the extent to which the targets of the parties’ sales efforts are the same; (9) the relationship of the goods in the minds of consumers because of the similarity of function; and (10) other facts suggesting that the consuming public might expect the plaintiff to manufacture a product in the defendant’s market, or that the plaintiff is likely to expand into that market. Interpace Corp. v. Lapp, Inc., 721 F.2d 460 (3d Cir. 1983); Freedom Card, Inc. v. JP Morgan Chase & Co., 432 F.3d 463, 471 (3d Cir. 2005).

On appeal were the District Court's findings in relation to the first, third, and sixth Lapp factors.

First Lapp Factor: Degree of Similarity Between McNeil’s Trade Dress and Heartland’s Various Trade Dresses

As noted again by the Third Circuit, “the single most important factor in determining likelihood of confusion is trade dress similarity.” A & H Sportswear, 237 F.3d at 216. Here, the Third Circuit did not find clear error in the District Court’s finding that the defendant Heartland’s Food Lion and Safeway products are not substantially similar enough to weigh the first Lapp factor in favor of McNeil. The court reasoned that “forceful and distinctive design features should be weighed more heavily because they are more likely to impact the overall impression.” The Third Circuit stated that the most important difference is that the trade name “Splenda” is not present on the Food Lion and Safeway packages, while the Food Lion and Safeway logos are present on the Food Lion and Safeway packages and are well-known to consumers.

Furthermore, the store designs are represented prominently on their respective packages. For example, in the Food Lion package, a vertical design element runs through the front of the package, visually dividing it between a dark yellow bar and a light yellow canvas, in a way found on other Food Lion store-based products. These features distinguish the Food Lion package from any feature present on the Splenda® package. Moreover, the Food Lion package contains the product name “Sweet Choice” instead of “Splenda” and the product name is not surrounded by a white cloud. The Safeway packages contain an “S”-shaped element that divides the entire front of the box, and its presence on other Safeway store-brand products renders it well-known as a store-specific signature. Also, the Safeway packages contain the name “Sucralose” instead of “Splenda,” the product name is not surrounded by a white cloud, and the circular element with the slogan “Made From Sugar, Tastes Like Sugar” is missing.

However, the Ahold products are substantially similar enough to McNeil’s trade dress to weigh the first factor in favor of McNeil with respect to the Ahold products. The store name and logo are not displayed prominently on the Ahold packaging. In this sense, the Food Lion and Safeway packages are much closer to the black and white diagonally-striped packages which prominently displayed the logo “Venture” in Conopco, Inc. v. May Department Stores Co., 46 F.3d 1556 (Fed. Cir. 1994) (in which the Federal Circuit held that the packages did not infringe a competitor’s trade dress) because a store-specific signature is prominently displayed on them. Second, the Ahold product name “Sweetener” is placed at the top of the front of the packaging, just like “Splenda,” rather than at the bottom.

McNeil further argued that the yellow packaging used by all of the allegedly infringing products weighed the first Lapp factor in favor of infringement for all of the allegedly infringing products. However, the District Court considered the yellow packaging in its analysis of the first Lapp factor, and correctly concluded that the yellow packaging alone did not outweigh the overall different impressions of the packages. The Third circuit further reasoned that just because a consumer sees yellow packaging in the sugar aisle does not mean that she believes McNeil or Splenda® to be the source, especially because consumers are generally aware of the use of pink and blue by manufacturers other than those of Sweet N’ Low and Equal, respectively.

Third Lapp Factor: Degree of Consumer Care

McNeil argued that the District Court erred in attributing a heightened level of care to consumers of no-calorie sweeteners. “Where the buyer class consistes of both professional buyers and consumers, the standard of care to be exercised by the reasonably prudent purchaser will be equal to that of the least sophisticated consumer.” Versa Products Co. v. Bifold Co., 50 F.3d 189, 204-05 (3d Cir. 1995). According to McNeil, since (1) the products at issue cost on average between $4.00 and $5.00, and (2) the least sophisticated consumer in the buying class is not buying sucralose for health reasons and thus is not likely to exercise heightened care and attention, the District Court should have weighed this factor in favor of McNeil. However, the Third Circuit held that the District Court did not err in defining the consumer class as consisting mostly of people who buy sucralose to improve their health. The District Court relied on evidence that the ordinary consumer class in this case consisted more of health-conscious people than non-health-conscious people. The reasonably prudent consumer in this case exercises some heightened care and attention when buying sucralose because her health considerations typically override the product's low cost.

Sixth Lapp Factor: Evidence of Actual Confusion

McNeil argued that the District Court erred in holding that McNeil failed to produce any evidence of actual consumer confusion because McNeil produced testimony of Ms. Grossman about her actual confusion in purchasing Splenda®. However, the District Court considered Ms. Grossman’s own admissions, including that she is a speed “surgical strike” shopper, that she is not a comparison shopper, that her yearly household income exceeds $300,000, that she did not look at the prices on the day she made her inadvertent purchase, and that she was not wearing her reading glasses that day, and correctly concluded that Grossman was not representative of the kind of shopper ordinarily purchasing sucralose. Further, McNeil failed to produce any other evidence of actual confusion.

The District Court Clearly Erred in Not Finding a Likelihood of Confusion as to the Packages for Which It Weighed the First Lapp Factor in McNeil’s Favor

While affirming the District Court's decision in relation to Food Lion and Safeway, the Third Circuit found that the District Court committed clear error by not finding a likelihood of confusion regarding the Ahold products because the District Court found the first, second, seventh, eighth, and ninth Lapp factors in favor of McNeil with respect to the Ahold products (and found the third, fourth, and tenth factors in favor of neither party). The District Court did not adequately heed the Third Circuit’s oft-repeated statement that “[t]he single most important factor in determining likelihood of confusion is [degree of] similarity.” The District Court incorrectly reasoned that producers of store-brand products would effectively acquire per se immunity as long as the store brand’s name or logo appears somewhere on the allegedly infringing package, even when the name or logo is tiny. Here, the Ahold products did not prominently display the names of stores on the packaging. As such, the Third Circuit affirmed the District Court’s denial of preliminary injunctive relief as to the Food Lion and Safeway products, but reversed the denial as to the Ahold products. McNeil demonstrated a likelihood of success on the merits for purposes of preliminary injunctive relief with respect to the third element of trade dress infringement, i.e., a likelihood of confusion. The Third circuit remanded the case to the District Court to consider whether McNeil can establish a likelihood of success on the remaining elements of trade dress infringement under the Lanham Act, as well as the remaining factors for preliminary injunctive relief.

On the issue of direct infringement, the Ninth Circuit affirmed that framing infringing content did not constitute direct copyright infringement under 17 U.S.C. § 106 using the "server test." On the issue of contributory infringement, the Ninth Circuit remanded on the issue of contributory infringement to determine if Google knew it was making infringing material available. On the issue of contributory infringement, the Ninth Circuit affirmed that Google was unlikely to be found liable under vicarious infringement, because there was no evidence that Google directly profited from the infringement or that Google had a right to stop it.

Facts

Perfect 10 operates a website that provides subscribers with access to photographic images of nude models. Subscribers to the website are provided with a username and password to gain access to the images on the website. Perfect 10 has also entered into a licensing agreement to provide thumbnail images obtainable by consumer cell phones for a fee.

Google provides an internet search service to locate images. To facilitate its service, Google indexes website images and stores a smaller-size, lower-resolution image of the full-size image (“a thumbnail”) on Google’s server. When a user submits a search query to the Google image database, the thumbnail images of the results are retrieved from the Google server and presented to the user. When a user selects a thumbnail, Google provides HTML code (textual coding instructions) to a user’s computer.

The HTML code instructs the computer to display a new window to the user comprised of two parts: a top part and a bottom part. The HTML instructions for the top part of the screen contain data and links to the Google website and frames the bottom part of the screen. The HTML instructions for the bottom part of the screen refer the user’s browser to the location where the full image is located. The appearance of the two-part window could be construed by the user that Google is responsible for the entire content.

While Google does not index or make searchable images located in the area of Perfect 10’s website designated for subscribers, Google does index and make searchable images published by other websites that are or may be infringing.

Perfect 10 claims that Google infringes on their copyright images in several ways: Directly, by displaying infringing thumbnails and displaying full images framed to users that appear to come from or be endorsed by Google, and indirectly, through secondary infringement via contributory infringement and vicarious infringement by directing users to infringing content.

Preliminary Injunction Standard and Burden
Preliminary Injunctive relief is available when a party shows either “(1) a combination of probable success on the merits and the possibility of irreparable harm; or (2) serious questions are raised and the balance of hardships tips in its favor” The Ninth Circuit held that, to resolve the inquiry regarding “probable success on the merits,” the moving party must not only show its prima facie case, but also “demonstrate it will overcome defenses raised by the non-moving party.” As such, Perfect 10 need to show that, not only was the material infringing, but also that the fair use defense will be overcome.

The “Server Test” for direct copyright infringement
The Ninth Circuit acknowledged that the display of the thumbnails stored on Google servers likely constituted direct infringement. However, to determine whether Perfect 10 would likely succeed in regards to whether the inline linking to the full sized images stored on other servers, the Ninth Circuit affirmed the District court’s use of the “Server Test” to determine whether an online provider violated a copyright holder’s exclusive right to display or distribute. Under the server test, “a computer owner that stores an image as electronic information and serves that electronic information directly to the user is displaying the electronic information in violation of a copyright holder’s exclusive display right,” and “the owner of a computer that does not store and serve the electronic information to a user is not displaying that information, even if such owner in-line links to or frames the electronic information.” As such, a display right is violated when an image (or other copyright material) is directly supplied by a server (i.e. the image file resides on the server), but not when the server provides the location of the image, even if the image will be displayed as though it resided on that server (e.g. HTML code that directs a browser to the location of an image file).

The Ninth Circuit found that the Server Test is derived from the Section 106(5) of the Copyright Act. Section 106(5) provides a display right to display a copy of the material. A copy of the material exists when a tangible form of the material is fixed in a medium of expression. A copy is fixed when it is recorded in a manner that is “sufficiently permanent or stable to permit it be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.” An image file on a computer is a fixed, tangible form, and thus a display of the stored image is a violation of the display right.

While storing a copy of the full sized image on the computer providing the direct display is a violation of the display right, a reference or pointer to such an image file does not violate the display right because it is (1) text, not directly an image, and (2) the text itself does not cause the image to appear (e.g. not only must the user’s computer follow the reference, but the requested image must be provided by the third party server). Thus, the mere in line linking through HTML code to the full size image copy was not an act of direct infringement of the display right.

While acknowledging the possibility of facilitation of infringement such references may allow in the context of “contributory liability issues,” the Ninth Circuit acknowledged that, by adopting the server test and holding that framing full-size infringing images was not direct infringement, it did not preclude a theory of liability based on contributory infringement.

The Ninth Circuit similarly applied this analysis to the display right to apply to the distribution right, reasoning that distribution requires actual dissemination of a copyrighted work. There can be no actual dissemination if the server does not itself distribute the copies. Unlike Napster (where there was dissemination), Google does not satisfy “deemed distribution” because Google merely stores thumbnails of the images, and does not have a collection of the full-size images. Nor are the full size images made available directly through the Google service. While Google provides HTML that directs a user’s computer, Google does not provide the actual mechanism for retrieving the files and does not . As such, there was similarly no infringement for the distribution of the full sized work.

Fair Use Defense
The Ninth Circuit also found that Google was likely to prevail on its fair use defense. The District Court had found no fair use, and distinguished a similar situation occurring in Kelly v. Arriba Soft Corp., 336 F3d 811, 67 USPQ2d 1297 (9th Cir. 2003). In Kelly, a photographer brought a suit against a search engine operator who provided thumbnail versions of the images. The use of thumbnail images was fair use because of its transformative nature and benefit to the public. The primary difference between Kelly and Perfect 10 is that Perfect 10 has a market for the images in its licensing agreement to sell thumbnail images to cell phones. The Ninth Circuit resolved this issue by applying the statutory four factors as follows:

1. The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes. The Ninth Circuit found that the purpose and character of the use was “highly transformative” because it served a different purpose and puts them “in a different context” which “transform[s] them into a new creation” (to help users identify the images they are seeking) and does not supersede the use of the original (users will still be interested in seeing the full image). While Google does derive some commercial benefit (from its advertising software which may include sponsors selling infringing copyright material or other competing interests) and it may impede the market for cell phone users, there was no finding by the district court that the commercial element was significant and thereby unable to properly make a finding that it overcame the substantial transformative nature of the thumbnails. As such, this factor was in favor of Google.
2. The nature of the copyrighted work. The Ninth Circuit found this factor is slightly in favor of Perfect 10, because the right to first publication has already been exercised and the images were not due any lesser or greater extent of protection due to the subject matter.
3. The amount and substantiality of the portion used in relation to the copyrighted work as a whole. Like occurred in Kelly, the Ninth Circuit found that the entire image was being used. However, even though the entire image is used, the Ninth Circuit found the use is reasonable because users need an entire image to identify and determine an image’s usefulness. As such, this factor was also resolved in favor of neither party.
4. The effect of the use upon the potential market for or value of the copyrighted work. The Ninth Circuit found that this factor favors neither party. There was no showing of actual economic impact upon Perfect 10’s ability to sell thumbnail images to cell phone users and thumbnails were not considered a substitute for the full-size images. The court mentioned that the more transformative the nature of the work, the less readily market harm will be inferred. Weighing the significant transformative use and the unproven impact on the original target market, the Ninth Circuit found the fair use defense was likely to apply and reversed the District Court on this issue.

On the issue of vicarious liability, the Ninth Circuit applied the test for vicarious liability set forth by the Supreme Court in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 929-30, 75 USPQ2d 1001 (2005). Under Grokster, vicarious infringement occurs when a person profits from direct infringement while "declining to exercise a right to stop or limit it.” Grokster, 545 U.S. at 930. Thus, there needs to be evidence of control over the direct infringement in as much as the person has “right and ability to supervise the direct infringer.” As applied by the Ninth Circuit, the court found no evidence that Google had a direct financial benefit from the images, nor was Google able to limit or control the websites because Google cannot terminate or block a third party’s ability to host a website. Moreover, Google also lacks the practical ability to even identify (and hence police) third party infringing material. Therefore, the Ninth Circuit agreed with the Ninth Circuit that the preliminary injunction was properly denied on the grounds of vicarious infringement.

On a trip to a golf trade show, Mr. Gillig, the owner of Triple Tee, noticed that Nike's new CPR Woods bore a resemblance to his confidential design which he has submitted to Tom Stites. Later, Mr. Gillig also found similar uses of his confidential design in Nike's Slingshot Irons, and OZ T-100 putter. Thus, Triple Tee brought suit against Tom Stites and Nike for misappropriation of trade secrets due to the new clubs.

During trial, Triple Tee requested that Nike provide information about any patent applications which reflect the design, and Nike indicated that no patent applications included the design. As such, Triple Tee was only able to point to the CPR Woods, Slingshot Irons, and OZ T-100 putter as possibly incorporating confidential aspects of the design shown to Mr. Stites. The District Court determined that Nike's clubs did not include the confidential aspects of the design actually shown by Triple Tee such that the CPR Woods, Slingshot Irons, and OZ T-100 putter were not the product of a theft of trade secrets since they were not adjustable in the same way that the confidential designs showed adjustable clubs. Since there remained no other allegation of trade secret theft, the case was dismissed on summary judgment.

Subsequently, Triple Tee discovered that Nike had filed two patent applications, naming Tom Stites as the inventor, which related to adjustable golf clubs and seemed to reflect the design shown to Mr. Stites. Nike had not produced either patent application during discovery and Triple Tee had not been previously aware of the two patent applications. As such, Triple Tee filed a Motion for Relief of Summary Judgment in order to proceed to trial due to a theft of trade secrets, which were used in the patent applications and which also showed that Nike was possibly planning to use the confidential design in new clubs. The district court denied the Motion since, while the patent applications should have been produced in discovery, the patent applications were not included in the specific trade secret theft allegations brought by Triple Tee, which only related to the CPR Woods, Slingshot Irons, and OZ T-100 putter.

On appeal, the Fifth Circuit reversed. On the issue of the summary judgment, the Fifth Circuit held that Triple Tee had produced enough evidence to sustain a theft of trade secret claim for the CPR Woods, Slingshot Irons, and OZ T-100 putter, but limited the number of clubs to only two. As such, the Fifth Circuit reversed the grant of summary judgment as there remained material facts in dispute.

On the issue of whether the Motion should have been granted, the Fifth Circuit noted that the district court's denial of the Motion was based upon the narrowing of the issues to only the known clubs during discovery: CPR Woods, Slingshot Irons, and OZ T-100 putter after the end of discovery. However, the original complaint related to any theft of trade secrets used by Mr. Stites or Nike, and included the use of the confidential designs in any patent applications or plans for new clubs. As such, had the patent applications been known during discovery, the scope of the trade secret complaint would not have been narrowed to exclude a trade secret theft occurring through the filing of these patent applications. As such, the Fifth Circuit allowed Triple Tee to proceed with its allegation of misappropriation of trade secrets through the filing of the patent applications since such filing represented an unauthorized use of the confidential designs.

In 1997, Lanard Toys sold “The Corps! ATK” toy vehicle, which resembled AM General’s “Humvee”, and General Motors’ “Hummer.” While originally designed by AM General for use by the military under the Humvee name. AM General later created the Hummer as a civilian version of the Humvee. The brands were ultimately transferred to GM. As part of the brand, GM owned a trademark for the distinctive grille design of the Humvee/Hummer.

In a related 1992 dispute regarding a different toy depicting the Humvee, Lanard had agreed to stop using the “Humvee” name on its packaging. After a series of communications between GM and Lanard and AM General and Lanard regarding cessation of production of the newer toys using the trademarked grille design, GM filed suit for trademark infringement, trade dress infringement, dilution and common law trademark infringement regarding the toy vehicle and its use of the trademarked grille design. Lanard sought a declaratory judgment on the right to use the term “Humvee” and the grille design for toys. Both parties moved for summary judgment at the district court level. The district court granted summary judgment for GM.

Likelihood of Confusion
On appeal, the Sixth Circuit held that, to show trademark infringement, plaintiffs must apply the “likelihood of confusion” test, as laid out in 15 U.S.C. §1114, which can be determined by looking at the eight “Frisch factors.” Lanard contested the District Court's summary judgment since these factors were not explicitly analyzed in holding that Lanard's toy infringed the Hummer Nose Design, Trademark No. 1,959,544. The Sixth Circuit court engaged in de novo review, holding that the weight of the factors favored General Motors regarding the likelihood of confusion and affirmed the district court’s ruling of summary judgment for GM, despite the failure to discuss the factors.

The Sixth Circuit reviewed the record in light of the Frisch factors. The eight Frisch factors are “(1) strength of the plaintiff's mark, (2) relatedness of the goods or services, (3) similarity of the marks, (4) evidence of actual confusion, (5) marketing channels used, (6) likely degree of purchaser care, (7) the defendant's intent in selecting its mark, and (8) likelihood of expansion of the product lines.” Gibson Guitar Corp. v. Paul Reed Smith Guitars, LP, 423 F.3d 539, 548, 76 U.S.P.Q. 2d 1372 (6th Cir. 2005) (citing Frisch's Rests., Inc. v. Elby's Big Boy of Steubenville, Inc., 670 F.2d 642, 648, 214 USPQ 15 (6th Cir. 1982), cert. denied, 459 U.S. 916 (1982)).

In reviewing the factors, the Sixth Circuit found that the first factor (“strength of mark”) was in favor of GM since the mark was registered and heavily promoted. The second factor (“relatedness of goods and services,) favored GM since the toy car directly related to actual vehicle. For the third factor (“similarity of the marks”) and the seventh factor (“defendant’s intent in selecting the mark”), the Sixth Circuit found these factors favored GM since Lanard copied the design directly. The sixth factor (“likely degree of purchaser care”) also favored GM since a purchaser of the toy would not necessarily know whether the toy was made by GM or by another, but would make the purchase based on recognition of the trademarked grille.

The remaining factors, (“marketing channels used”, “likelihood of expansion of product lines” and “evidence of actual confusion”) did not favor either party from the evidence of record. As such, the Sixth Circuit found that the balance of the Frisch factors favored GM and upheld the District Court's finding of infringement.

Trade Dress
Trade dress refers to the secondary meaning associated with the design/packaging of a product, enabling one to identify the product’s manufacturer or source. The Sixth Circuit held that GMs' identification of the vehicle’s exterior appearance and styling, as well as specific reference to the grille, hood, windshield, doors and edges sufficiently fulfilled the “discrete elements” requirement for trade dress claims and overcame any issues of vagueness with respect to mention of mere appearance.

Lanard also challenged the non-functionality determination of the district court. Lack of trade dress functionality is a requisite element a plaintiff must show by preponderance of the evidence, to prevail on an infringement claim. Lanard had claimed that the trade dress at issue was functional and thus ineligible for protection. Despite the district court’s error in stating that Lanard had the burden of proving functionality, the Sixth Circuit relied on testimony of a product development executive for AM General, that the Humvee’s appearance was not essential to the use/purpose of the vehicle, and allowed General Motors to prevail on the functionality issue.

Secondary Meaning
Citing application of the seven-factor test to ascertain secondary meaning, from Marketing Displays, Inc. v. TrafFix Devices, Inc., 200F.3d 929, 937 (6th Cir. 2000), the Court affirmed the district court’s summary judgment ruling. Test elements include: 1) direct consumer testimony, 2) consumer surveys, 3) exclusivity, length and manner of use, 4) amount and manner of advertising, 5) amount of sales/number of customers, 6) established place in the market and 7) proof of intentional copying. The Sixth Circuit focused on GMs' use of consumer surveys and proof of Lanard’s intentional copying of the grille design to aid its analysis. Although such surveys should ideally be conducted pre-infringement (not post-infringement as in this case) to show acquired secondary meaning, the Sixth Circuit considered the strength of brand recognition given the elapsed time between the surveys and the alleged infringement. '

These surveys indicated about 96% brand recognition of Hummer and 77% secondary meaning for trade dress. In addition, Lanard failed to present any contrary evidence on any of the seven factors. Thus, Sixth Circuit found that there was evidence that the trade dress of the Humvee had acquired secondary meaning and that the District Court's granting of summary judgment on this issue was proper.

Tillamook County Creamery Association (TCCA) is a long standing dairy cooperative which began using the “Tillamook” mark as early as 1918, and registered the mark in 1921 and 1950. In 1975, a member of TCCA approached TCCA’s General Manager concerning his intention to start a processed meat company to operate under the mark “Tillamook Country Smoker.” The General Manager did not object, and Tillamook Country Smoker (TCS) was born.

From 1976 on, TCS used the “Tillamook Country Smoker” mark with no objection from TCCA. In fact, TCCA offered TCS products for sale in its store and catalogs. TCS attempted to register the “Tillamook Country Smoker” mark but was rejected by the USPTO as “confusingly similar” to TCCA’s mark. However, TCCA itself did not comment on the application though it was notified. In 1995, TCS was successful in registering a combined word and design mark consisting of the words “Tillamook Country Smoker” on a ribbon design. Again, TCCA did not comment.

TCS grew throughout the late 90s, helped by a rebranding and a huge expansion in direct sales to grocery stores and warehouses. Subsequently, TCS again tried to register the “Tillamook Country Smoker” mark; this time the PTO approved, and TCCA lodged its opposition. TCCA also tried to cancel the ribbon mark. The PTO later rejected a “Tillamook Jerky” mark as highly similar to TCCA’s “Tillamook” mark.

In 2005 TCCA submitted a cease-and-desist letter to TCS. TCS then brought suit seeking declaratory judgments 1) declaring TCS the owner of the “Tillamook Country Smoker” and finding it non-infringing; 2) declaring the ribbon mark to be valid; and 3) entitling TCS to the registration of the “Tillamook Country Smoker” mark. TCCA asserted counterclaims 1) seeking an injunction preventing TCS’s use of the name “Tillamook” or any other likely confusing mark and 2) seeking an order declaring that use of “Tillamook Country Smoker,” “Tillamook Jerky,” and “TillamookJerky.com” infringed on TCCA’s registered mark.

Trademark Infringement Claim Fails
The Ninth Circuit affirmed the grant of partial summary judgment to TCS on the use of the “Tillamook Country Smoker” mark. The court found that the limitations period for laches started in 1975, when TCCA first had notice of the possibility of confusion, not 1998 when TCS began to expand into supermarket sales. TCCA had a protectable interest in 1975, and while at that point they may not have operated in identical commercial channels, their similar marks, complementary products, and similar geographic region should have put TCCA on notice of the possibility of confusion.

Presumption in favor of laches defense
Neither party disputed the district court finding that the most analogous causes of action would have had their statutes of limitation run after either 2 or 10 years. Since 25 years had passed since the date on which the court held that TCCA had notice, there was a strong presumption favoring TCS’s laches defense.

Progressive encroachment not found
TCCA claimed that the doctrine of “progressive encroachment” excuses their absence of enforcement for most of TCS’s history. Under this doctrine, a trademark owner need not sue for de minimus infringement but may wait until the junior user moves into direct competition and causing actual market confusions.

The court found that the district court did not abuse its discretion in rejecting TCCA’s progressive encroachment claim. The district court reasonably found that TCS’s use of the “Tillamook Country Smoker” mark had been constant over the entire period, and the rebranding (font, design, and color) did not make the mark more similar to TCCA’s products. Neither did the district court abuse its discretion in finding that TCS’s expansion of supermarket sales represented normal business growth, not progressive encroachment, since the product being sold was still the same, and it was being sold in the same region.

“Good faith” found
Bad faith actions negate a laches defense, but the district court found good faith on the part of TCS. The court emphasized the permission-seeking meeting between TCS and TCCA at the formation of TCS, as well as the fact that TCCA had sold TCS items in its own magazine for years. Both facts were clear evidence of good faith on TCS’s part.

No Injunction Based On “Inevitable Confusion”
A otherwise successful laches defense may be defeated if doing so is in the public interest. However, this is a narrow exception and will only be used when the confusing product is “harmful or otherwise a threat to public safety and well-being.” Since TCCA did not claim that TCS’s products are harmful in any way, the district court was correct in denying TCCA’s claim for injunctive relief based on inevitable confusion. In fact, TCCA is at least partly responsible for any confusion by selling the TCS products in its catalog.

No Invalidation of TCS’s Registered Marks
The court upheld the district court’s finding that TCCA admitted during discovery that TCS’s use of the “Tillamook Country Smoker” and the ribbon mark did not create a likelihood of confusion. In response to a discovery request, TCCA admitted that TCS began to violate its trademark in the “latter part” of the time period between 1995 and 2000. The district court construed this as admitting that there was no infringement prior to 1997, and thus no likelihood of confusion. Since there was no likelihood of confusion, the marks were correctly granted to TCS. Thus, the court upheld the district court’s grant of summary judgment to TCS with respect to the registration claim.

Distributor Mid-State advertised “MQVP parts available” to its customers. Mid-State refused to license the use, continuing to use the service mark, MQVP®, while informing customers that it was not a participant in the program. Defendant brought Lanham Act claims of infringement (15 U.S.C. § 1125(a)(1)(A)) and false advertising (15 U.S.C. § 1125(a)(1)(B)) by Mid-State.

Although MQVP® is a service mark, rather than a trademark, the court, citing Frehling Enters, Inc. v. Int’l Select Group, Inc., 192 F.3d 1330, 1334 n.1 (11th Cir. 1999), stated that a service mark can also be used to describe products as long as it also described some associated services. Further, the court noted there was dispute as to whether MQVP used the mark to refer solely to products as opposed to services. The court also noted that despite defendant’s description and use of the mark which seemingly appeared as a certification mark, the actual registration was for a service mark and thus eligible for such protection. Indeed, defendant’s description of the mark included participants’ compliance with standards and use of the on-line software tracing system. Thus, the court concluded that the use of the mark and the nature of defendant’s services its use protected were disputed issues.

Lastly, Mid-State had argued that a Lanham analysis did not apply since Mid-State’s customers were repair shops, not the likely manufacturer/distributor customers of the defendant. The court did not allow this narrow interpretation, instead noting that the confusion element of Lanham applied to those in positions to influence purchasing or whose confusion presents a risk to sales of the trademark owner. The circuit court held that Mid-State’s unauthorized use of defendant’s mark was for the obvious purpose of confusing and deceiving end users into believing they were buying qualified/complying parts under the MQVP program. The case was remanded to the district court.

LawMode created a package of 576 individual Michigan legal form templates, which were marketed and sold under contract by Lexis Nexis for five years. After terminating the contract, Lexis Nexis offered its own package of 406 individual Michigan legal form templates. LawMode filed a seven-count complaint, all but two of which it voluntarily dismissed. Remaining for the consideration of the court was a copyright claim and a breach of contract claim.

The lower court dismissed the copyright claim, holding that, while LawMode’s selection of forms was copyrightable, the selection was not infringed, and that organization of the forms, look of the screen, and interrelationships of the form variables were not copyrightable.

The Sixth Circuit affirmed, holding that neither of the two copyrightable elements of LawMode’s product – the selection and categorization – were copied by Lexis Nexis. LawMode’s selection of 576 from a universe of over 700 forms is copyrightable even if the underlying forms are not themselves copyrightable. However, the court held that because Lexis Nexis only included 61% (350 of 576) of the same forms as LawMode’s product, this was not substantial verbatim copying and thus not copying under the strict standard set by the Supreme Court in Fiest Publications v. Rural Telephone Service Company. 499 U.S. 340 (indicating that facts can be used in a competing work so long as the competing work does not have the same selection).

Similarly, the court held that the form categories used in the two products were not similar enough to constitute infringement on Lexis Nexis’s part. Where they are similar, the court noted, was in headings and classifications that had previously existed on the state of Michigan website organizing its versions of the forms. Lexis Nexis did not copy any of the non-obvious and non-public use categories that LawMode had created.

Next, the court held that the appearance of dialog boxes used to input information on the forms were not sufficiently original to be copyrightable. The court noted that the reason both product’s dialog boxes look similar was because both relied on the same default setting in the commercial form-creating software use by both companies. Choosing the default setting was too trivial to be original, according to the court.

Likewise, the court held that the interrelation between the variables in the forms was not protectable by copyright. The court held that these relationships were non-creative because the relationships were compelled by the express terms of the underlying state-created forms. For example, permitting the form user to choose either the district or circuit court conveys no information beyond the pre-existing requirement that the form be filed in only one court. Since the interrelationships conveyed no information beyond that on the face of the form, the interrelationships themselves are not eligible for copyright.

While the Fourth Circuit affirmed the dismissal of LawMode’s copyright claims, it reversed the lower court’s dismissal of the contract claims under rule 12(c). The Fourth Circuit found that, assuming LawModes’s factual allegations were true (as rule 12(c) requires), LawMode had stated a claim for breach of contract. Therefore, the court remanded the case for further consideration of the breach of contract claim.

BondPro demonstrated to Siemens a particular method of bonding insulation to U-shaped slots that form part of Siemens’ generators, hoping to license the technique. Siemens, although told by BondPro that this technique was proprietary, later applied for a patent on a similar process. The Patent Office rejected the application and neither Siemens nor BondPro ever put the method into use. Yet BondPro sued for theft of a trade secret. The district court jury found for plaintiff BondPro, but the judge found for the defendant Siemens as a matter of law. BondPro appealed.

After resolving several jurisdictional issues that resulted largely from the sloppiness of the lawyers in this case, the court turned to the issue of if there is a case or controversy. Here, the court explained that to have a case or controversy, BondPro needs to showing that it has something tangible to gain from reinstating the jury’s verdict. Thus the court examined the claimed trade secret to see if it has value.

The court pointed out that in many cases applying for a patent on what was previously a trade secret will destroy that trade secret by making it public knowledge, even if no patent is granted, since the PTO publishes applications after 18 months. However, in this case, Siemens allegedly stole the secret method, and in these circumstances would be liable.

Liable for what? Judge Posner precluded money damages, noting that there was no evidence that the technique had any commercial value whatsoever. Yet he inquired further into injunctive relief. BondPro appeared to have taken the proper steps to protect its trade secret, avoiding invalidation by its own inaction.

It all comes down to, in the court's opinion, what the claimed trade secret is. The general process as described in the first claim of the Siemens application was arguably something known in the trade already, as it had been demonstrated at a year 2000 trade convention. But no further details of its secret process were provided by BondPro at trial. The court noted that usually one expects trade secrets to be highly detailed because general processes will most often be known to experts in the field. Since BondPro has not provided details that would distinguish its “trade secret” from publicly-known methods, the court concluded that there was no trade secret. Since there was no trade secret, BondPro has nothing to gain from reinstating the jury verdict; and thus there was no case or controversy as required by the Constitution. As such, the district court’s JNOV is affirmed.

Specifically, the Sixth Court found that the DMCA did not prevent SCC's creation and distribution of the chip since the chip did not prevent the unauthorized access of the Printer Engine Program resident on the printer. The Sixth Circuit also held that SCC's chip did not prevent the unauthorized of access of the Toner Loading Program since the Toner Loading Program was held to not be copyrightable. Therefore, even though the Toner Loading Program was copied onto SCC's chip and the algorithm designed to protect access to the Toner Loading Program was admittedly broken, the DMCA did not prevent this access. Lexmark Intern'l, Inc. v. Static Control Components, Inc., 387 F.3d 522; 72 U.S.P.Q.2D 1839 (6th Cir. 2004) reh'g denied, 2004 U.S. App. LEXIS 27422 (Dec. 29, 2004), reh'g en banc, denied, 2005 U.S. App. LEXIS 3330 (Feb. 15, 2005).

While the Sixth Circuit's decision merely remanded the case for further proceedings and has not yet been finalized, the Sixth Circuit succinctly pointed out the possible deficiencies in the DMCA as applied to printer products:

1. the work being protected by the technology measure needs to be copyrightable;
2. some technological protection must prevent access to the copyrighted work; and
3. the user alleged to be accessing the work must not be authorized (i.e., license must restrict right to access copyrighted work).