Seattle Trademark Lawyer

FreecycleSunnyvale belongs to The Freecycle Network, an organization that facilitates the recycling of goods.

FreecycleSunnyvale (FS) filed suit against The Freecycle Network (TFN) seeking a judgment of noninfringement arising from a trademark licensing dispute. It then moved for summary judgment on the issue of whether its defense that The Freecycle Network had engaged in a naked license enabled FreecycleSunnyvale to avoid infringing The Freecycle Network’s trademark as a matter of law.

The Northern District of California granted the motion and dismissed The Freecycle Network’s infringement claim.

On appeal, The Freecycle Network argued that it exercised control over its marks through a number of means, namely: (1) its “‘Keep it Free, Legal, and Appropriate for all Ages’ standard and TFN’s  incorporation of the Yahoo! Groups’ service terms; (2) the non-commercial services requirement [as expressed in an email between the parties]; (3) the etiquette guidelines listed on TFN’s website; and (4) TFN’s ‘Freecycle Ethos’ which, TFN contends, establishes policies and procedures for member groups, even if local member groups are permitted flexibility in how to apply those policies and procedures.

The Ninth Circuit rejected the sufficiency of those measures and affirmed the district court’s dismissal.

“First, we disagree with TFN’s contentions that the ‘Keep it Free, Legal, and Appropriate for all Ages’ standard and its incorporation of the Yahoo! Groups’ service terms constituted actual controls over its member groups. The undisputed evidence showed that TFN’s licensees were not required to adopt the ‘Keep it Free, Legal, and Appropriate for all Ages’ standard, nor was it uniformly applied or interpreted by the local groups. Similarly, FS was not required to use Yahoo! Groups and was not asked to agree to the Yahoo! Groups’ service terms as a condition of using TFN’s trademarks. Moreover, the Yahoo! Groups’ service terms, which regulate generic online activity like sending spam messages and prohibiting harassment, cannot be considered quality controls over TFN’s member groups’ services and use of the trademarks. The service terms apply to every Yahoo! Group, and do not control the quality of the freecycling services that TFN’s member groups provide. Thus, the ‘Keep it Free, Legal and Appropriate for All Ages’ standard and the Yahoo! Groups’ service terms were not quality controls over FS’s use of the trademarks.

“Second, we conclude that TFN’s non-commercial requirement says nothing about the quality of the services provided by member groups and therefore does not establish a control requiring member groups to maintain consistent quality. Thus, it is not an actual control in the trademark context. Third, because member groups may freely adopt and adapt TFN’s listed rules of etiquette and because of the voluntary and amorphous nature of these rules, they cannot be considered an actual control. For example, FS modified the etiquette that was listed on TFN’s website and TFN never required FS to conform to TFN’s rules of etiquette. Fourth, TFN admits that a central premise of its ‘Freecycle Ethos’ is local enforcement with local variation. By definition, this standard does not maintain consistency across member groups, so it is not an actual control.

“Even assuming that TFN’s asserted quality control standards actually relate to the quality of its member groups’ services, they were not adequate quality controls because they were not enforced and were not effective in maintaining the consistency of the trademarks. Indeed, TFN’s alleged quality controls fall short of the supervision and control deemed inadequate in other cases in which summary judgment on naked licensing has been granted to the licensee.”

Given these findings, the court found that TFN had engaged in naked licensing. Therefore, it found TFN had abandoned its trademark rights.

The obvious lesson here is if a licensor does not control the quality of the goods or services used in connection with the licensed mark, the license is considered to be a naked license. A licensor that engages in naked licensing abandons all rights to the licensed mark. So, licensors, you need not only to have the right to control your licensee’s quality — you need to exercise that right.

The case cite is FreecycleSunnyvale v. The Freecycle Network, __ F.3d. __, 2010 WL 4749044, No. 08-16382 (9th Cir. Nov. 24, 2010).

Plaintiff Preferred Nutrition, Inc., sells health supplements.

It hired defendant Lorna Vanderhaeghe, a Canadian citizen, as an independent consultant to help launch a new line of women’s supplements in Canada. Each supplement in the line ends with the suffix “Sense,” such as ESTROSENSE and MENOSENSE. Ms. Vanderhaeghe’s name and likeness appear on each supplement’s label.

Thereafter, Preferred Nutrition and the Everett, Wash.-based plaintiff Natural Factors Nutritional Products, Inc., began working with Ms. Vanderhaeghe to launch a similar line of products in the United States. From 2003 to 2008, the parties collaborated to sell eight SENSE products in the U.S., which did not feature Ms. Vanderhaeghe’s name or likeness.

In 2008, Natural Factors approached Ms. Vanderhaeghe about using her name and likeness on the American SENSE line. In 2009, it revised its labels to include Ms. Vanderhaeghe’s name and likeness, but later removed references to her. Around the same time, Preferred Nutrition likewise removed Ms. Vanderhaeghe’s name and likeness from its products in Canada.

By January 2010, both Preferred Nutrition and Natural Factors ended their relationship with Ms. Vanderhaeghe, who had made it known she intended to start a competing line of supplements.

In the spring of 2010, Ms. Vanderhaeghe launched a line of women’s supplements in Canada. Each was branded with a name ending in the suffix “Smart,” including ESTROSMART and MENOSMART — the same prefixes used from the SENSE line of products. She also prepared to launch a similar line in the United States.

The only way Americans can purchase Ms. Vanderhaeghe’s SMART products is to travel to Canada or to purchase them from a Canadian online retailer who sells to Americans. Ms. Vanderhaeghe does not sell any products directly from her Web site.

Preferred Nutrition and Natural Factors sued Ms. Vanderhaeghe in the Western District for trademark and trade dress infringement, and moved for a preliminary injunction. The injunction, the court noted, “would prevent Ms. Vanderhaeghe from doing anything to promote her SMART products in the United States or Canada, including the SMART names and the trade dress of the SMART products. It would also require her to refrain from ‘engaging in any acts of unfair competition against [Preferred Nutrition] or [Natural Factors].’ It would force her to stop seeking United States trademark registrations for her products, and to ‘immediately cancel or withdraw’ all pending state and federal trademark registrations.”

Western District Judge Richard Jones denied the motion. 

“The court declines to enjoin Ms. Vanderhaeghe’s indirect sales to Americans. The sole claim for which Plaintiffs have established a likelihood of success on the merits is their claim for trade dress infringement. The court does not find a strong likelihood of success even on that claim. Plaintiffs have proven irreparable harm only because they enjoy a presumption of irreparable harm. The balance of hardships, however, strongly favors Ms. Vanderhaeghe. Ms. Vanderhaeghe should not be forced to forego lawful foreign product sales merely to permit Plaintiffs to cut off an unknown volume of sales to Americans.”

The court also noted it “does not have jurisdiction over Ms. Vanderhaeghe’s sales of her products to Canadians. That is a matter for the Canadian court system” and found that Ms. Vanderhaeghe’s plans to enter the U.S. market by selling her products directly to Americans was “too indefinite to support an injunction.”

The case cite is Preferred Nutrition, Inc. v. Vanderhaeghe, No. 10-907 (W.D. Wash. Nov. 22, 2010) (Jones, J.).

Even if Hostess’ statement was untrue, a consumer had no standing
to assert a false advertising claim because he wasn’t a competitor.

Plaintiff Victor Guttmann filed a putative class action in the Central District of California against defendant Hostess Brands, Inc., alleging false advertising.

His complaint stated that Hostess makes false and misleading statements to market six varieties of baked goods under the label “Hostess 100 Calorie Packs.” In particular, he claimed that Hostess markets Hostess 100 Calorie Packs as containing “0 Grams of Trans Fat,” even though such products contain partially hydrogenated oils.

He sought restitution and damages on behalf of all persons “who purchased, on or after January 1, 2007, one or more of the Hostess 100 Calorie Packs in the United States for their own use rather than resale or distribution,” and an injunction.

Hostess moved to dismiss plaintiff’s claims on standing grounds, among other things. It argued that because Mr. Guttmann is a consumer, and not a competitor, he can’t maintain a false advertising claim.

The court agreed.

“To establish standing under the ‘false advertising’ prong of the Lanham Act,” the court found, “‘a plaintiff must show: (1) a commercial injury based upon a misrepresentation about a product; and (2) that the injury is ‘competitive,’ or harmful to the plaintiff’s ability to compete with the defendant.’ Thus, ‘[f]or a plaintiff to have standing, the parties must be competitors in the sense that they ‘vie for the same dollars from the same consumer group,’ and the alleged misrepresentation must at least theoretically effect a diversion of business from the plaintiff to the defendant.’”

The court concluded: “Here, Plaintiff alleges that he ‘purchased the [Hostess 100 Calorie Packs] for personal, family or household purposes.’ He also seeks injunctive relief on behalf of class members who purchase Hostess 100 Calorie Packs ‘for their own use rather than resale or distribution.’ Plaintiff, by his own admission, is a consumer, not a competitor. Because Plaintiff alleges neither commercial nor competitive injury, he is precluded from asserting a false advertising claim under the Lanham Act. The Court therefore dismisses Plaintiff’s Lanham Act claim with prejudice due to lack of standing.”

Peviani v. Hostess Brands, Inc., __ F.Supp.2d __, 2010 WL 4553510, No. 10-2303 (C.D. Calif. Nov. 3, 2010).

Trademarks for sale!! Come and get ‘em!

This is bizarre.

Bob Cumbow sent me a link to a Web site advertising a “brand name auction.”

The site states: “Buy a priceless Trademark, including its Domain Name, and reinvent its commercial success. Never in the history of marketing and advertising has there been this unique investment opportunity.”

It goes on to say: “The initial purchase is a royalty free, fully paid, exclusive license, including the right to sub license, that you can turn into full ownership when you file the Statement of Use and it is accepted by the Patent and Trademark Office.”

What?

If these include abandoned marks, they’re in the public domain, and anyone can adopt them without paying anyone, simply by using them.

The mention of a “statement of use” suggests at least some of the marks would be registered on an intent-to-use basis, meaning the applicant may have no vested right in the mark.

Indeed, I looked up one of the marks to be auctioned, GENERAL CINEMA. The Patent and Trademark Office lists two “dead” registrations and one “live” intent-to-use application. The live application — for “movie projectors” and “movie theater services,” among other things — was filed in 2004. It was published for opposition and allowed in 2008. The deadline for filing the statement of use has been extended five times. The file states the application is owned by a company called “200 Kelsey Associates, LLC,” of New Rochelle, NY.

I checked PTO records for two other marks offered — POM POMS and HANDI-WRAP. 200 Kelsey Associates owns an ITU application for POM POMS (for candy) and a registration for HANDI-WRAP (for plastic wrap and plastic film for household purposes).

The ad also mentions a license. Since I’m playing along, I’ve got to ask, will the licensor exercise quality control over goods sold in connection with the mark? If not, it’ll be a naked license and the licensor will be deemed to have abandoned its rights in the mark.

And if the auction contemplates an assignment, will the “purchase” include the marks’ associated goodwill? If not, the seller again will be deemed to have abandoned its rights.

In a sporting twist, the ad states: “Auction shall be conducted via High Bidder’s Choice. You win the bid, you pick the mark(s).”

You best bid high!

Or not at all.

Either way, the auction is scheduled for Dec. 8 at NYC’s Waldorf Astoria.

I woke up to this story on NPR.

It’s a “Marketplace” piece talking about why consumers are so loyal to their favorite brands.

Host Steve Chiotakis kicks around the idea with USC marketing professor Joe Priester.

CHIOTAKIS: “I’ve got to tell you, I love Frosted Flakes. I’ve eaten them since I was a kid. Why did I become enamored with that particular brand?”

PRIESTER: “My guess is that it’s meshed with a lot of other experiences and memories. You not only like Frosted Flakes, but you consider it a part of yourself, you probably think about it unprompted.”

CHIOTAKIS: “I can remember when I was a poor college student, and Mom and Dad didn’t have the money to buy my Frosted Flakes anymore. And I saved a couple bucks by buying the generic brand.”

PRIESTER: “And then when you had money again, did you stick with the generic?”

CHIOTAKIS: “I started buying the brand again.”

PRIESTER: “Jut like the thought of losing or not having our good friends around can sort of lead to this emotion distress, what’s interesting is that brands can prompt exactly the same kind of thing.”

This is great stuff. The conversation only goes another minute or so, along the same sort of path.

It’s all about brand loyalty.

And apparently, we’re loyal because our favorite products are part of our identity.