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U.S. Intellectual Property and New Media Law Update I AIN’T NO CYBER-SQUATTER Avery Dennison Corp. v. Jerry Sumpton, et al. (C. D. Cal. - March 19, 1998) PLEAD OR DIE Young v. AGB Corp. (Fed. Cir. - August 17, 1998) YOU CAN’T OUT BID SCIENTOLOGY In re Cult Awareness Network, Inc. and John M. Beal, et al. (Seventh Cir. - July 30, 1998) NO RARE BURGERS IN THE MCDONALD’S SYSTEM McDonald’s Corp. v. Robertson et al. (Eleventh Cir. -July 28, 1998) I AIN’T NO CYBER-SQUATTER Avery Dennison Corp. v. Jerry Sumpton, et al. (C. D. Cal. - March 19, 1998) This one is an oldy, but a goody!! Defendants registered over 12,000 ($1.2 million in NSI fees) Internet domain names. All 12,000 are common surnames. Defendants use the domain names to provide e-mail services to people with the same surname in combination with their first name before the @ symbol. Among the names were "Avery" and "Dennison." Plaintiffs own a number of federally registered trademarks used in marketing office products, including "Avery" and "Dennison." Plaintiffs sued under the Lanham Act and various state claims. The parties filed cross motions for summary judgment. The Court found that the Defendants were cyber-squatters since it considered the 12,000 Internet domain registrations were merely to prevent others from using those names without Defendant's consent and was intended to seek a financial return through letting others use the domain name. Based on the Federal dilution statute, the Court found that Avery and Dennison are famous marks and that Defendants had engaged in commercial use of the marks insofar as they were offering them for licenses as domain names. The Court specifically found that "a famous mark as used in the ordinary course of business" as required by the dilution act when (a) it is registered as a domain name by a registrant who is not otherwise identified by or associated with any of the commonly accepted meanings of the domain name and (b) is not used by the registrant as its own domain name, but rather is held by the registrant for sale or license to others. The Court dismissed the Defendants' argument that they were not using the domain names as marks, only as e-mail addresses. The Court, however, did find that Defendants were entitled to a payment by Plaintiffs of $300 for each name as a compensation for the Court's requirement that they relinquish the domain name registrations. We think the Court got the wrong end of the stick on this one. A cyber-squatter is one who takes a famous mark and turns it into a domain name for essentially black-mail purposes. The present situation is far different. Defendant provides a domain name for people having the same last name. Without this service, only one person could have DENNISON.NET. With the services, every Dennison who desires to have his own last name as a domain name, will have the opportunity to do so. The resulting address, for example, The decision can be viewed at: http://www.iplawyers.com/averydennison.htm PLEAD OR DIE Young v. AGB Corp. (Fed. Cir. - August 17, 1998) This case presents a rather unique situation. Plaintiff manufactures and sells to all comers, large fiberglass animal statues, including that of a giant bull. The statues are made in molds and, thus, each bull duplicates its brother in fiberglass. In 1970, Plaintiff sold one such bull to Angelo's Steak Pit. The statue quickly became known as "Big Gus" among the flesh eaters. This twenty foot statue has been heavily promoted by Angelo's Steak Pit. Plaintiff had sold duplicate statues to others including a sale to one of Angelo's direct competitors. Angelo has filed for registration of "Big Gus" in all its three-dimensional 20 ft. glory. When it came up for publication in the U.S. Patent and Trademark Office, the bull's artist opposed. While from the pleadings it was clear that Plaintiff was hurt and, thus, had standing to oppose, there was no statement as to the legal basis for the opposition. The opposition merely indicated that the registration would impede opposer's ability to sell further fiberglass bulls. The TTAB dismissed the Plaintiff's opposition for failing to state a claim and the Federal Circuit affirmed. The Federal Circuit found that in order to maintain an opposition you must clearly plead the grounds relied upon, i.e., facts relevant to a statutory ground negating the applicant's entitlement to registration. It would appear that if the opposer had plead that the bull was generic, and, hence, not registrable under Section 2, such would be sufficient pleading to support the opposition. Back to pleading under Queen Anne's Statute. For all of you who think that pleading an opposition or a cancellation is merely a pro forma exercise, it is not. The decision can be viewed at: http://www.ll.georgetown.edu/Fed-Ct/Circuit/fed/opinions/98-1055.html YOU CAN’T OUT BID SCIENTOLOGY In re Cult Awareness Network, Inc. and John M. Beal, et al. (Seventh Cir. - July 30, 1998) On the grounds of standing, this case side-steps an issue which needs further exploration, the transfer of a trademark by auction in a Chapter 7 bankruptcy. The case was brought by the Cult Awareness Network, which is a non-profit corporation, which engages in public information, anti-cult advocacy and cult victim support. It objects to the Trustee's sale of its trade name to a purchaser who, it believes, will use the name to promote cults. When the assets were put up for auction, the mark and trade name were included, but the mailing list, telephone records and financial records, folders on cults and other information deemed confidential by the Trustee was not. The bidding at the auction for the name had two bidders. On one side was a person affiliated with the Church of Scientology and on the other side was the Executive Director of the Cult Awareness Network. After the Church won, the Cult Awareness Network objected to the sale, complaining, in part, that the trade name had been sold in gross, separate from the attending good will and, accordingly, was in violation of the Lanham Act. The Bankruptcy Court ruled that the Cult Awareness Network had no standing to object because it lacked a pecuniary interest in the outcome of the sale. The Seventh Circuit confirms the Bankruptcy Court's finding, noting that standing in bankruptcy cases is narrower than that under Article 3. This decision can be seen at: http://www.kentlaw.edu/7circuit/1998/jul/97-3002.html NO RARE BURGERS IN THE MCDONALD’S SYSTEM McDonald’s Corp. v. Robertson et al. (Eleventh Cir. -July 28, 1998) This appeal arises out of a District Court's entry without an evidentiary hearing of a Preliminary Injunction enjoining the Defendants from continuing to run a McDonald's restaurant previously franchised to them by Plaintiff. It also argued that the District Court erred in entering the Preliminary Injunction because McDonald's did not demonstrate it had a right to terminate their franchise agreement. Under the licensing agreement, Defendants had to operate in "the system", i.e., in accordance with the quality, safety and cleanliness standards prescribed by the agreement and by McDonald's business and policy manuals. McDonald's had the right to inspect at all reasonable times for compliance with these standards and had a right to terminate for failure to meet them. Defendants' sin was undercooking meat patties that showed pink or red interiors of an average temperature below the internal temperature required by McDonald's to reduce the risk of bacteria. This now answers a Zen question that I have been pondering for years, "Where are the rare McDonald's burgers?" I have also had questions about the shaping machines, refrigeration temperature and other miscellaneous kitchen operations. The failure persisted over time and over renewed inspections and McDonald's delivered a Notice of Default with regard to failure to meet these standards and thereafter terminated the license. Defendants did not argue against the accuracy of the inspection findings, but alleged that the violations were not serious and that they served as a pretext for McDonald's real reason for ending the franchise agreement - that McDonald's wanted the restaurant to occupy different and better space at the end of the block. The Court found that the Lanham Act required that a franchiser demonstrate that unauthorized trademark use occurred to prevail on the merits of a trademark infringement claim and, thus, there must be some kind of showing that the franchiser properly terminated the contract. The Court also found that McDonald's had made a substantial showing of a likelihood of success on the merits of its claim. The fact that there was no evidentiary hearing before the granting of an injunction and the fact that the injunction was, accordingly, based on the written materials, does not invalidate the Preliminary Injunction. A preliminary evidentiary hearings is only required when the injunction turns on the resolution of a bitterly disputed fact. Here, the material facts are not in dispute, or the disputed facts are not material to the preliminary injunction sought and, accordingly, a hearing was not required. In a concurrent opinion, Judge Carnes argued that the Court's comments on the necessity for the Plaintiff to show proper termination is merely dicta and, accordingly, not binding. The decision can be seen at: http://www.law.emory.edu/11circuit/july98/97-3308.opn.html |
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