Seattle Trademark Lawyer

On November 22, Western District of Washington Judge Marsha Pechman granted a TRO against the Open Design Alliance, a Washington corporation, over ODA’s computer-aided design (“CAD”) software. In doing so, she found that plaintiff Autodesk, Inc., had demonstrated both a strong likelihood of success on the merits and the possibility of immediate, irreparable injury from ODA’s simulation of Autodesk’s “TrustedDWG” technology.

Autodesk alleged in its motion that its software uses a proprietary file format known as “DWG” for storing user design data files, similar to the “.doc” format used for Microsoft Word files. Its motion states that Autodesk introduced the TrustedDWG authentication mechanism into its AutoCAD program to help users identify the source of Autodesk’s DWG files by adding an identifying watermark and a code of string files. Autodesk alleged that this mechanism prompts its AutoCAD program to authenticate Autodesk data files and to display the message: “Audodesk DWG. This file is a Trusted DWG last saved by an Autodesk application or Autodesk licensed application.” Autodesk argued that ODA is marketing software libraries that simulate this authentication process and display the same message when users open files created by ODA’s libraries, amounting to infringement of Autodesk’s federally-registered trademark, AUTODESK, as well as false designation of origin.

ODA states that it is an independent, non-profit corporation with 3,000 members dedicated to making DWG an open standard format for storing drawing data. ODA responds in its opposition brief that its computer utility allows otherwise incompatible design programs to read from and write to computer drawings that are saved in the .dwg format. Its brief states that since 1998 independent companies have made programming tool kits for reading and writing DWG files. It argued that the “new twist” presented in the lawsuit is Autodesk’s introduction of its TrustedDWG Technology in its AutoCAD 2007 software, which generates a warning message whenever users open a DWG file that was created on any CAD program other than Autodesk. ODA argued that ”[t]his message falsely warns the user that the DWG file may be ‘unstable,’ which can be particularly worrisome to a designer who has spent dozens or hundreds of hours creating a design.” In September, ODA announced that its DWG libraries could support Autodesk’s TrustedDWG functionality. Since that time, ODA stated, “DWG files opened in Autodesk with ODA’s newest version of its conversion utility do not generate Autodesk’s false warning message regarding instability.”

The TRO temporarily enjoins ODA from “using or simulating Autodesk’s TrustedDWG technology, including but not limited to the Autodesk watermark and/or TrustedDWG code, without Autodesk’s authorization”; and “from distributing DWGdirect libraries that use, incorporate or simulate Autodesk’s TrustedDWG technology or that otherwise insert or mimic the unauthorized Autodesk watermark and/or TrustedDWG code.” The order also requires ODA to argue in January why the TRO should not be converted into a preliminary injunction.

The Seattle Post-Intelligencer reports that a former Washington resident who sold counterfeit-labeled Microsoft software was sentenced on November 29 to five years in jail and ordered to pay Microsoft $9.4 million in restitution. 

The plea agreement states that Scott Laney obtained Microsoft software that was labeled “Academic Edition,” “Not for Resale,” or otherwise; removed the labels; affixed counterfeit labels; and sold the counterfeit-labeled software for a profit. The plea agreement further states that Mr. Laney purchased Academic Edition versions of the software at a discount or obtained the software from Microsoft employees who had purchased them at a discount from the Microsoft Company Store or obtained them through a Microsoft program that enables employees to order software for business use for free. Mr. Laney admits in his plea agreement that he and his co-conspirators sold as much as $20 million worth of software from Microsoft and other companies. The agreement suggests that Mr. Laney’s scheme began to come undone in October 2000 when Mr. Laney’s company, Quest Computers, sold counterfeit-labeled software to a Microsoft undercover investigator. 

Mr. Laney pleaded guilty to “trafficking in counterfeit labels and computer program documentation” in violation of 18 U.S.C. Sec. 2318, among other offenses. Judge Franklin Burgess of the U.S. District Court for the Western District of Washington at Tacoma imposed the sentence.

Mr. Laney’s plea agreement identifies Tobias Grace as a co-conspirator. The P-I reports that Mr. Grace, a Vancouver, Washington, resident, is scheduled to be sentenced for his part on January 19.

Costco purchased shampoo bearing the trademark “TIGI” from its supplier, K&M Industries. Tigi USA notified Costco that the products were likely counterfeit.  In response, Costco pulled the shampoo from its shelves and demanded that K&M provide evidence of its authenticity. K&M failed to do so. Because the Lanham Act prohibits trafficking in counterfeit goods, Costco destroyed the products and sued K&M.  In an uncontested arbitration, Costco was awarded $2.4 million, including attorneys’ fees.

Presumably unable to collect its award, Costco then filed a complaint against Hartford Casualty Insurance Company, K&M’s insurer. On cross-motions for summary judgment, King County Superior Court Judge Michael Fox ruled that Hartford’s policy covered K&M for Costco’s loss.

The Washington State Court of Appeals reversed. It found that Costco’s loss was excluded under the policy’s exclusion for damage to “your product.” The exclusion provided that “This insurance does not apply to … ‘Property damage’ to ‘your product’ arising out of it or any part of it.” The policy defined “Your product” as “Any goods … distributed” by you. The Court of Appeals found that “The shampoo distributed by K&M falls unambiguously within that definition.” 

The Court concluded that “Costco’s property damage — its loss of use of the shampoo — arose out of the shampoo. Because the shampoo was counterfeit, Costco was unable to sell it or make any other use of it. When an insured becomes liable for damage to its own tangible product that occurs either by physical injury or loss of use, and such damage arises out of the product, the insured is not covered.” Therefore, the Court found that Hartford was not responsible for covering K&M’s liability to Costo. 

The published decision, National Clothing v. Hartford Casualty, 145 P.3d 394 (Wn. App. October 23, 2006), is available here.

Thank you for viewing the inaugural posts of Seattle Trademark Lawyer. It’s my hope that this blog will fit in well alongside the many other fine intellectual property law blogs, including the ones linked on the right side of this page. When possible, I will focus on local developments in trademark law, including updates from the Seattle media, Washington state and federal courts, and the Ninth Circuit. However, I plan on writing about other interesting and significant trademark happenings outside of the Seattle area as well. Please come again soon, and join the discussion!

Mike