Category Archives: Unfair Competition

Co-founder liable for sending company’s social media followers to new competing company’s Facebook page

2261434057_87ddea278a_zThe owners of an LLC successfully published a magazine for several years, but the business declined and the company eventually filed bankruptcy. While the bankruptcy proceedings were still underway, one of the owners started up a new magazine publishing the same subject matter. He essentially took over the old company’s website to promote the new magazine. And he posted to the LLC’s Facebook page on three separate occasions, “reminding” those who liked the page to instead like his new company’s Facebook page.

The bankruptcy trustee began an adversary proceeding against the owner asserting, among other things, breach of fiduciary duty, unfair trade practices, and copyright infringement. The bankruptcy court held a trial on these claims and found the owner liable.

On the breach of fiduciary duty claim, the court equated the “reminding” of Facebook users to visit and like the new company’s Facebook page was equivalent to using the company’s confidential information. Similarly, as for the unfair trade practices claim (under the Louisiana Unfair Trade Practices Act), the court found that social media is “an important marketing tool,” and held that “taking away followers of [the old company] and diverting them to [the Facebook page of the new company]” was an unfair trade practice.

On the copyright infringement claim, the court found that the images and articles on the website belonged to the old company under the work made for hire doctrine and that the owner had not obtained consent nor paid compensation for their use in connection with the new enterprise.

In re Thundervision, L.L.C., 2014 WL 468224 (Bkrtcy.E.D.La. February 5, 2014)

Photo credit: Flickr user 1lenore under this Creative Commons license.

No copyright protection for two word phrase

quipIn a final pretrial order, plaintiff stated that “to this day [defendant] persists in using [plaintiff's] copyrighted ‘usurpassed performance’ language on its packages.” Defendant filed a motion in limine (a motion to exclude evidence) to preclude plaintiff from introducing evidence or putting on testimony that would infer or suggest the phrase “unsurpassed performance” has been registered as a copyright.

The court granted the motion.

Under the Copyright Act, “[w]ords and short phrases such as names, titles, and slogans” are not subject to copyright. 37 C.F.R. § 202.1(a). The court looked to a number of cases in which short phrases had been denied copyright protection. For example, other courts had held that “Where Words Come Alive,” “Earth Protector,” “Chipper,” and “Retail Plus” were not copyrightable material.

One wonders whether plaintiff was really trying to assert some form of unfair competition or trademark infringement. The notion is worth entertaining for but a brief moment, till one realizes that laudatory phrases such as “unsurpassed performance” find no protection under trademark law either.

Predator International, Inc. v. Gamo Outdoor USA, Inc., 2014 WL 321069 (D.Colo. January 29, 2014)

When do you need a nondisclosure agreement?

I wrote a blog post for Tech Cocktail called 5 Reasons You May Need an NDA. I hope you’ll click on over and give it a read.

Here are the 5 reasons I came up with. Can you think of others?:

  1. Your discussions turn from “what” to “how.”
  2. You are dealing with someone other than an investor.
  3. You have made substantial investment in your innovation.
  4. You will be sharing documents or data.
  5. You want to save on legal fees.

Leave your comments below. I know there are many other reasons — pro and con — concerning NDAs.

Use of trademark in gripe site subdomain was not likely to cause confusion

Ascentive, LLC v. Opinion Corp., 2001 WL 6181452 (E.D.N.Y. December 13, 2011)

Plaintiffs sued gripe site pissedconsumer.com for trademark infringement and other forms of unfair competition. The court denied plaintiffs’ motion for preliminary injunction. It found, among other things, that defendants’ use of plaintiffs’ trademarks as subdomains (e.g., ascentive.pissedconsumer.com) was not likely to cause confusion.

The court looked to other cases where gripe site operators chose negative words to use in conjunction with the company being criticized. Over the years, gripe site operators have commonly chosen to add the word “sucks” to the target brand. For example, in Taubman Co. v. Webfeats, 319 F.3d 770 (6th Cir. 2003), the court held there was no trademark violation by the site taubmansucks.com.

Other “suck” parts of the URL have risen above the trademark infringement fray. A case from over a decade ago found that the web address compupix.com/ballysucks would not create a likelihood of confusion because no reasonable visitor to the site would assume it to come from the same source or think it to be affiliated with, connected with, or sponsored by Bally’s. Bally Total Fitness v. Faber, 29 F.Supp.2d 1161 (C.D. Cal. 1998).

And it’s not just that these brands purport to suck. In Taylor Building Corp. v. Benfield, 507 F.Supp.2d 832 (S.D. Ohio 2007), the court found that taylorhomesripoff.com, used in connection with a forum for criticizing plaintiff, did not create any likelihood of confusion.

In this case, the notion of being “pissed” joins a lexicon of permissible gripe site nomenclature (depending on the circumstances, of course). So says the court: “Like the word ‘sucks,’ the word ‘pissed’ has entered the vernacular as a word instinct with criticism and negativity. Thus, no reasonable visitor to the [offending pages] would assume the sites to be affiliated with [plaintiffs], and PissedConsumer’s use of plaintiffs’ marks in the various domain names at issue is not likely to cause confusion as to source.”

Aside: Good lawyering by my friend Ron Coleman for the defendants in this case.

Customer reviews on social media provide important evidence in trademark dispute

Chipotle Mexican Grill, Inc. v. Chipotles Grill of Jonesboro, Inc., 2011 WL 2292357 (E.D. Ark. June 9, 2011)

The awesome burrito place Chipotle sued another restaurant that called itself Chipotles for trademark infringement. Plaintiff sought a preliminary injunction. The court granted the motion.

One of the most important factors in the court’s decision to grant injunctive relief was the plaintiff’s showing that it will likely succeed on the merits of the case. In a trademark infringement action, that analysis takes the form of the likelihood of confusion analysis.

Among the factors that a court should consider in determining whether there is a likelihood of confusion is whether there has been any actual confusion among members of the consuming public. In this case, the court found that the evidence plaintiff submitted of actual confusion was “substantial.”

In addition to a number of emails that customers had sent to plaintiff, the court looked to a couple of customer review sites — urbanspoon.com and Yahoo’s associatedcontent.com — each of which contained customer reviews that erroneously linked plaintiff and defendant. The court found this to constitute actual confusion, which could not be remedied even through reasonable care on the part of the consumers.

The case gives a good example of how companies (and their competitors) should be aware of how their brands appear in social media. Evidence of actual confusion is a powerful tool for a trademark plaintiff (and a potentially damning one for a trademark defendant). Smart companies will ensure they remain aware of how their marks and overall brand identity are being put forth, even off the beaten path on the web.

Evan Brown is a Chicago-based attorney practicing technology and intellectual property law. Send email to ebrown@internetcases.com, call (630) 362-7237, or follow on Twitter at @internetcases.

Court allows discovery of competitor’s keyword purchases

Scooter Store, Inc. v. Spinlife.com, LLC, 2011 WL 2160462 (S.D. Ohio June 1, 2011)

The Scooter Store and a related company sued a competitor for trademark infringement and other causes of action for unfair competition based in part on the competitor’s purchase of keywords such as “scooter store” and “your scooter store” to trigger sponsored advertisements on the web. Defendant moved for summary judgment and also moved for a protective order that would prevent it from having to turn over information to plaintiffs concerning defendant’s purchase of the keywords. The court denied the motion for protective order.

Defendant argued that it should not have to turn over the information because plaintiffs’ trademark claims based on those keywords were without merit, as the words are generic terms for the goods and services plaintiffs provide. Defendant also asserted a need to protect the commercially sensitive nature of information about its keyword purchases.

The court rejected defendant’s arguments, ordering that the discovery be allowed. It held that “whether or not [p]laintiffs’ claims involving these terms survive summary judgment [] has no bearing on whether the discovery [p]laintiffs seek is relevant, particularly viewed in light of a party’s broad rights to discovery under Rule 26.” As for protecting the sensitivity of the information, the court found that such interests could be protected through the process of designating the information confidential, and handled accordingly by the receiving party.

Blog post violated nonsolicitation clause in Amway agreement

Amway Global v. Woodward, 2010 WL 3927661 (E.D.Mich. September 30, 2010)

Amway Global went after some of its former distributors in arbitration for, among other things, violating the “Rules of Conduct” which serve as an agreement as to how the distributors (formally known as Independent Business Owners or “IBOs”) operate. Amway claimed that the IBOs violated the Rules of Conduct by soliciting others to leave Amway and join competing enterprises.

The arbitrator found in Amway’s favor, and Amway filed a motion with the court to confirm the award. The court granted the motion.

One of the factual questions was whether one of the IBOs violated the rules against solicitation by blogging about his decision to leave Amway and join another company. One of his posts said “[i]f you knew what I knew, you would do what I do.”

The IBOs argued that this statement did not constitute actionable solicitation because the communication was passive and untargeted, and because there was no evidence that anyone responded to the solicitation by leaving Amway.

The court rejected these arguments. As to the “passive and untargeted” argument, the court observed that:

[C]ommon sense dictates that it is the substance of the message conveyed, and not the medium through which it is transmitted, that determines whether a communication qualifies as a solicitation. The [statement] is readily characterized as an invitation for the reader to follow his lead and join [Amway's competitor], and this is true despite the diffuse and uncertain readership of the site.

As to the argument based on the fact that no one responded, the court found that the express language of the nonsolicitation clause which prohibited “encourag[ing], solicit[ing], or otherwise attempt[ing] to recruit or persuade any other IBO to compete with” Amway did not turn on the success of those prohibited efforts.

Results of Internet searches helpful in earthworm trademark case

Cascade Mfg. Sales, Inc. v. Providnet Co. Trust, 2008 WL 4889716 (W.D. Wash. November 12, 2008)

Cascade Manufacturing makes and sells composting bins in which earthworms “enhance and accelerate the composting process.” Cascade owns a federal trademark registration for WORM FACTORY. It sued its competitor Providnet Co. for trademark infringement over Providnet’s use of the mark GUSANITO WORM FACTORY. Cascade moved for a preliminary injunction against Providnet’s use of its “worm factory” mark. The court granted the motion.

Worms enhance and accelerate composting

Worms enhance and accelerate composting

One of Providnet’s arguments against the injunction was that “worm factory” is a generic term for the types of products being sold under the respective marks. To refute this contention, Cascade introduced evidence of Internet searches supporting its claim that the products at issue are referred to as “worm bins,” and that “worm factory” refers to Cascade’s particular product. The court found this evidence to be instructive.

Earthworm picture courtesy Flickr user Rick Harris under this Creative Commons license. Redistributed here under the same license.

Pop-ups don’t amount to unfair competition in Utah case

Nor do they give rise to tortious interference.

Overstock.com, Inc. v. SmartBargains, Inc., — P.3d —-, 2008 WL 3835094 (Utah August 19, 2008)

In 2004, Overstock.com sued its competitor SmartBargains in Utah state court for violations of the state’s anti-spyware statute [Utah Code sections 13-40-101 et seq.], unfair competition and tortious interference with prospective business relations. Overstock accused SmartBargains’ of using a technology to cause SmartBargains pop-up ads to appear when one visited Overstock.com. The lower court granted summary judgment in favor of SmartBargains, holding the anti-spyware statute unconstitutional, and finding that Overstock had not presented a genuine issue of material fact on its unfair competition and tortious interference claims.

Overstock sought review of the lower court’s decision on the unfair competition and tortious interference claims with the Utah Supreme Court. On appeal, the court affirmed the grant of summary judgment.

The lower court had looked to the various WhenU cases, which deal with pop-up advertising to determine there was no triable issue as to unfair competition. (1-800 Contacts, Inc. v. WhenU.com, Inc., 414 F.3d 400 (2d Cir.2005), Wells Fargo v. WhenU.com, Inc., 293 F.Supp.2d 734 (E.D.Mich.2003), and U-Haul Int’l, Inc. v. WhenU.com, Inc., 279 F.Supp.2d 723 (E.D.Va.2003)) But the Supreme Court found the cases to be of limited value, given that they interpreted federal statutory laws, not state common law.

The court declined to adopt a “per se rule holding that all pop-ups do not violate Utah unfair competition law.” Nonetheless, the court found that Overstock did not demonstrate specific facts beyond the pleadings showing that the pop-ups were deceptive, infringed a trademark or passed off SmartBargains’ goods as those of Overstock. After all, the pop-ups were labeled with SmartBargains’ logo and appeared in a separate window. Without something compelling like survey evidence, the court concluded there was no genuine issue for trial.

As for the tortious interference claim, the court similarly held that Overstock had not shown any evidence of improper purpose (competition was fully legitimate end) or improper means on the part of SmartBargains in causing the pop-ups to appear. Although the case doesn’t expressly say so, the dismissal of this claim was probably collateral damage to the unconstitutionality of the anti-spyware statute. Among the things included as “improper means” under Utah tortious interference law is violation of a statute. With no statue left to violate, no so-called improper means could subsist.

Mall owner uses Section 43(a) of Lanham Act to successfully challenge domain name registrations

A few days before the public groundbreaking ceremony for the shopping mall that would be known as Provo Towne Centre, Plaintiff Rasmussen, unaffiliated with the mall, registered the domain name provotownecentre.com. Claiming an intent to start an online shopping mall, he also registered the domain names provotownecentre.biz and provotownecentre.net.

In an arbitration proceeding brought by the owner of the Provo Towne Center mall before the World Intellectual Property Organization (“WIPO”) pursuant to the Uniform Domain Name Dispute Resolution Policy, Rasmussen was found to have registered the domain names in bad faith. As an “apparent appeal” of the WIPO decision, Rasmussen filed suit in a Utah federal court against the mall owner, General Growth Properties, Inc.

General Growth filed several counterclaims against Rasmussen, alleging, among other things, violation of Section 43(a) of the Lanham Act, 15 U.S.C. §1125(a). It then moved for summary judgment on that claim. (It is interesting to note that although the case had at its root the use of a domain name, the opinion makes no mention of the Anticybersquatting Consumer Protection Act, another portion of the Lanham Act specifically drafted to address a cybersquatting case like this one.)

The court granted General Growth’s motion for summary judgment, and ordered the domain names transferred.

In its opinion, the court considered two elements to find that no genuine issue of material fact remained in regard to the alleged violation of Section 43(a). First, the court found that although General Growth’s mark “Provo Towne Centre” was merely descriptive of the services that General Growth provided, there was “exhaustive, unrebutted evidence” to show the term had acquired secondary meaning. Thus, it was protectable as a trademark.

Secondly, the court considered whether the use of the domain name would create a likelihood of confusion with General Growth’s “Provo Towne Centre” mark. It found that confusion would likely occur. The court determined that the marks were virtually identical, and that the bad faith intent found by the WIPO panel had been confirmed in the record before the court. It found the similarities between the parties’ “use and manner of marketing the services” was “problematic,” comparing Rasmussen’s intended online shopping mall with General Growth’s establishment of a successful site promoting the Provo Towne Centre mall. The court also found that the lack of sophistication in the affected consumers and the strength of the Provo Towne Centre mark weighed in favor of a finding of likelihood of confusion.

Accordingly, because General Growth had a protectable mark, and because Rasmussen’s use of the domain name would likely cause confusion, the court held that no reasonable jury would find in Rasmussen’s favor under Section 43(a).

Rasmussen v. General Growth Properties, Inc., 2005 WL 3334752 (D. Utah, December 7, 2005).

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