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U.S. Intellectual Property and New Media Law Update NO LONGER IMMUNE Federal Express Corp. v. United States Postal Service (Sixth Cir. - July 31, 1998) WHOSE GOODS ARE THEY? Iberia Foods Corp. v. Rolando Romeo, Jr. (Third Cir. - July 30, 1998) PERSONAL INFORMATION DISCLOSURE Federal Trade Commission, In the matter of GeoCities Corporation (Released - August 13, 1998) STREET WALKER CAUSES RASH (OF SELLING) Biospherics, Inc. v. Forbes, Inc. et al. (Fourth Cir. - August 11, 1998) NO LONGER IMMUNE Federal Express Corp. v. United States Postal Service (Sixth Cir. - July 31, 1998) The Postal Service had an epiphany and started advertising but, like all converts, they may have been a little over zealous. Federal Express was less than charmed by the Postal Service's advertising pointing to certain alleged inferiorities in Federal Express' service as compared to the Postal Service. We need not enter into a discussion of the veracity of the advertisement, since this appeal hinged only on two related questions of law. First is the question of whether the Postal Service can be sued given sovereign immunity pursuant to 39 U.S.C. 101. Since 39 U.S.C. 401(1) provides that Postal Service can sue and be sued in its own name, the question would appear straight forward. The Postal Service, ever behind the times, relied on a series of older cases which found that such a waiver referred only to state actions since there was no specific mention of Federal torts. The Sixth Circuit pointed to Federal Deposit Insurance Corp. v. Meyer, 520 U.S. 471 (1994) which clearly overturned this doctrine and to several post-Meyer cases to indicate the inappropriateness of the Postal Service's position. The Postal Service also raised the defense that it was not a person under the Lanham Act, pointing to the definition in the Act. The Sixth Circuit Court looked at the same definition and found that a government agency engaged in a commercial enterprise is indistinguishable in kind from a private firm or association. Given this case and various other cases on the same issue, one would hope that it would dawn on the Postal Service that it is out there in the marketplace on an equal footing. The decision can be viewed at: http://www.law.emory.edu/6circuit/july98/98a0231p.06.html WHOSE GOODS ARE THEY? Iberia Foods Corp. v. Rolando Romeo, Jr. (Third Cir. - July 30, 1998) This is an appeal from a District Court decision granting summary judgment in favor of Plaintiff. Plaintiff, Iberia Foods, is a Brooklyn based wholesale distributor of grocery store products and owns the U.S. Trademark Registration to MISTOLIN for household cleaners. The products are manufactured exclusively in Puerto Rico by Mistolin Caribe, Inc. ("Caribe"). In addition to selling MISTOLIN for resale in the United States, Caribe markets MISTOLIN directly to distributors in Puerto Rico for resale in the Puerto Rican market. Although Iberia and Caribe sell MISTOLIN products, the two companies service entirely separate markets, Puerto Rico for one and the remainder of the United States for the other. The Defendant is a New Jersey based distributor of household cleaning products which purchases MISTOLIN products on the open market in Puerto Rico and sells the products in New York and New Jersey. It does not purchase directly from Caribe. Plaintiff sued for violation of its registered trademark in MISTOLIN. As seems to be coming almost common, at the end of discovery, both parties moved for summary judgment on the Federal trademark infringement counts. Plaintiff argued that by purchasing in Puerto Rico, the Defendant was circumventing the quality control measures enforced by Plaintiff on the MISTOLIN products it sold. Thus, the goods were not genuine and constituted an infringement of the trademark. The Defendant's view was that the transfer from Caribe to Plaintiff of the trademark rights in MISTOLIN covered all of the United States including Puerto Rico and, thus, Plaintiff failed to exercise control over its mark granting a naked license with de facto abandonment. Alternatively, the goods were genuine since they were consented to. The District Court found that the initial transfer from Caribe to Iberia was intended only to relate to the continental United States and not Puerto Rico and, thus, Defendants invalid license defenses must fail. The District Court further found that the gray market goods did not pass through Iberia's post-manufacture and quality controls and, therefore, found for Plaintiff. The Third Circuit, reversed. The Court of Appeals agreed with the District Court's findings that the only rights transferred in the mark were to the continental United States and that Plaintiff owned its trademark rights which reside in the United States while the rights in Puerto Rico reside with Caribe. To show that gray market goods are not genuine U.S. quality goods, one does not have to show actual differences in the quality as measurably higher than the uninspected goods, rather high inspection standards, in and of itself indicates quality difference. The test is whether the quality control procedures established by the trademark owner are likely to result in differences between the products, thus, the consumer confusion regarding the sponsorship of the product can injure the trademark owner's good will. The only inspection done by Plaintiff is looking for external self-evident problems. There is no written standard explaining when there is something wrong, simply a look and a smell to determine whether or not it is off. The Plaintiff had no actual knowledge as to how the products are manufactured. Everything has been determined by Caribe. Such quality inspections are insufficient to create a material difference between goods sold in the continental United States by Plaintiff and those sold in Puerto Rico. Because there is no material difference between the products, the Court found the goods genuine and, thus, there was no infringement. PERSONAL INFORMATION DISCLOSURE Federal Trade Commission, In the matter of GeoCities Corporation (Released - August 13, 1998) This case deals with the deceptive collecting of personal information on the Internet. GeoCities is a popular site on the world wide web. It operates the GeoCities web site as a virtual community which groups members' personal home pages divided into neighborhoods. Over 2,000,000 virtual people live there. It exists at www.geocities.com. As a resident of this virtual community you get free and fee based personal home pages and free e-mail services. As a result of this case, it is now safe to visit, or even move in. To move in you have to fill out a questionnaire which GeoCities converted into a valuable database with addresses, interest areas and demographics. It even operated a GeoKidz Club extracting similar information from children who visited, for example, the enchanted forest neighborhood. GeoCities indicated in its site that the information collected was only to provide members the specific advertising offers and products or services they requested and that the personal information would not be released to anyone without the members' permission. Despite these assurances, GeoCities sold the lists and information without consent. The FTC made charges against the site for this breach and a settlement has been reached. The settlement agreemenhttp://.ftc.gov/os/9808/geo-cmpl.htm. Under the agreement, GeoCities will post on its site a clear and prominent privacy notice telling consumers what information is being collected and for what purpose, to whom it will be disclosed and how consumers can access and remove the information. To ensure parental control, GeoCities will also have to obtain parental consent before extracting information from children 12 or under. This release can be viewed at: http://www.ftc.gov/opa/9808/geocitie.htm The Complaint can be viewed at: http://www.ftc.gov/os/9808/geo-cmpl.htm The Consent Agreement can be viewed at: http://www.ftc.gov/os/9808/geo-ord.htm STREET WALKER CAUSES RASH (OF SELLING) Biospherics, Inc. v. Forbes, Inc. et al. (Fourth Cir. - August 11, 1998) Before we get too far into this, we have to tell you that "Street Walker" is a column published in Forbes which advises on the buying and selling of securities. On January 13, 1997, the "Street Walker" column panned Biospherics, Inc.'s product and stock, saying it was overvalued. Six months later, Biospherics filed a defamation action, declaring that as a result of the publication, the value of its stock plummeted injuring its reputation and business claiming damages in excess of $15 million. Defendants moved to dismiss since the article is entitled to First Amendment protection. The District Court granted the motion and this case is the appeal to the Fourth Circuit. The Fourth Circuit noted that there is a distinction between facts and ideas. Both right and wrong opinions are protected by the First Amendment, false statements of fact are not. A review of the article shows that no fact finder could reasonably interpret any of it as stating or implying actual facts. The context and general tenor of the article was clearly opinion. There is a nice parsing of the various statements in the article. (I am delighted to find a use for parse other than in the context of our national preoccupation.) Accordingly, the Fourth Circuit affirmed the Court below and the First Amendment prevailed. The decision can be seen at: http://www.law.emory.edu/4circuit/aug98/981118.p.html |
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