The Cassels Brock ReportThe Cassels Brock Report - November 2010Published: 11/30/2010 By Leonard Glickman, John McKeown, Stephen I. Selznick In This Issue
Initial Interest ConfusionBy John McKeown A recent decision of the English High Court has found that a claim for initial interest confusion was actionable in an action claiming trademark infringement. The Facts The plaintiff alleged that the defendants had infringed two trade mark registrations and had committed passing off. The plaintiff relied on Article 9(1)(b) of the Community Trademark Law Directive. The article provides: 1. A community trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having its consent from using in the course of trade: (b) any sign where, because of its identity with or similarity to the Community trade mark and the identity or similarity of the goods or services covered by the Community trade mark and the sign, there exists a likelihood of confusion on the part of the public; the likelihood of confusion includes the likelihood of association between the sign and the trade mark. Initial Interest Confusion Counsel for the plaintiff submitted that this article extended to include what is known to trade mark lawyers as “initial interest confusion.” “Initial interest confusion” is a doctrine that has been developed in the US. It has been defined by the International Trademark Association as follows: Initial interest confusion is a doctrine that has been developing in US trade mark cases since the 1970s which allows for a finding of liability where a plaintiff can demonstrate that a consumer was confused by the defendant’s conduct at the time of interest in a product or service, even if that initial confusion is corrected by the time of purchase. A well known example of initial interest confusion relates to a misleading billboard advertisement. Suppose that a competitor of video rental business A were to put up a billboard on a highway stating that the video rental business A was located at exit 7 of the highway, where the competitor’s business was located, when video rental business A was really located exit 8. Customers of video rental business A would not find it at exit 7 but seeing the competitor’s business may simply rent there. Even customers who prefer video rental business A may find it not worth the trouble to continue the search when the competitors’ business is right there. Customers are not confused in the narrow sense: they are aware they are purchasing from the competitor and have no reason to believe that the competitor is related to or in any way sponsored by video rental business A. However the fact that there is only initial interest confusion does not alter the fact that the competitor is misappropriating video rental business A’s acquired goodwill. After having reviewed the application of the doctrine and its status in the various US circuits, the trial judge said that it was his impression that the doctrine was increasingly accepted in US law but remains both controversial in some quarters and uncertain as to its application and scope even where it is accepted. The trial judge referred to five previous decisions in England which had accepted initial interest confusion and concluded that this authority supported the conclusion that initial interest confusion is actionable under Article 9(1)(b). Confusion It remains to be seen whether a Canadian Court would apply the initial interest confusion doctrine under the Trade-marks Act since the definition of confusion contained in the Act contemplates confusion as to source. However, the doctrine could be applied in conjunction with a claim for passing off. The Transcendence of Famous MarksBy John McKeown A number of recent cases have considered the fame of a mark in the context of carrying out a confusion analysis under the Trade-marks Act. Confusing Trade Marks The Act provides that the use of a trade mark causes confusion with another trade mark if the use of both marks in the same area would be likely to lead to the inference that the wares associated with such trade marks are manufactured, sold, leased, hired or performed by the same person, whether or not such wares are of the same general class. The concluding phrase “whether or not such wares or services are of the same general class” clarifies that the general class of wares and services, while relevant, is not controlling. Famous Trade Marks As observed by the Supreme Court of Canada, where a trade mark has become famous by virtue of the goodwill associated with it, this fame may be capable of carrying the protection available to the mark across product lines, while lesser marks would be limited by the wares or services for which they are registered. The totality of the circumstances will dictate how each of the statutory factors should be treated. Fame is a “surrounding circumstance” of importance and differences in the wares and services will not always be the dominant consideration. A difference in the wares or the fame of the mark does not supersede or “trump” all other factors. Each situation must be judged in its full factual context. Not all famous marks will be able to make a jump across product lines, and the difference between the respective wares and services will continue to be a significant obstacle to overcome. The fame of a mark may be quite specific because of a very specific association with a type of product. But a famous mark which is widely used may be able to transcend product line differences. In this context, a mistaken inference can only be drawn if a link or association is likely to arise in the consumer’s mind between the source of the famous product and the source of the less well known product. If there is no likelihood of a link, there can be no likelihood of a mistaken inference, and therefore no confusion within the meaning of the Act. The Cases In the first case, an application was filed for the trade mark WRANGLER in association with brewed alcohol beverages. The owner of the WRANGLER trade mark, which was well-known for use in association with jeans and apparel, opposed the application. The Trade-mark Opposition Board dismissed the opposition since there were at least fifteen trade mark applications or registrations for the word WRANGLER alone or that included the word which did not belong to the opponent. In addition, while it was accepted that the opponent’s WRANGLER trade mark was famous for use in association with jeans and apparel, the assertion that it transcended these wares was not accepted. This decision was upheld on appeal to the Federal Court. Two more recent decisions of the Trade-mark Opposition Board have accepted arguments relating to the transcendence of famous trade marks. The cases which are apparently unrelated involved the propensity of the applicant to attempt to register well-known marks belonging to others in association with wares different from the wares associated with those trade marks. In the first of these cases, the application related to the trade mark, L’OREAL PARIS for proposed use in association with vitamin, mineral and herbal supplements and aloe vera drinks. In the second case, the application related to the trade mark CHANEL based on proposed use in association with candles, vitamins, minerals and medicinal herbal supplements. To some degree, the decisions in these cases were influenced by the audacity of the applicant. However, in the Chanel case, the hearing officer found the reputation of the CHANEL trade mark transcended the wares with which it was normally associated and dismissed the application on this basis. A similar result was arrived at in the L’Oreal case, although the conclusion was expressed that it was not necessary for the parties to operate in the same general field or industry for there be a likelihood of confusion and that the wares need not be of the same general class for the use of a trade mark to cause confusion with another mark. Conclusion Whether an alleged famous mark can transcend the wares that it is registered in association with must be determined in the factual context of each case. The nature of the mark itself is particularly important. A mark like VIRGIN, because of the way in which it is used may be able to transcend. However, many other famous marks will not be able to make the jump since they are associated in the minds of consumers with specific types of products. What's in a Title?The intersection of trade-mark law and the film and television industries raises a number of important issues for consideration by intellectual property lawyers and entertainment lawyers. This article will focus on trade-mark rights in titles. Future articles will deal with trade-mark rights in character names, trade-mark rights in catch phrases and product placement in film and television productions. It is a generally accepted principle that titles are not protected by copyright as they are generally not substantial or original enough to be protected. Producers of film and television programs therefore often look to statutory and common law trade-mark rights to protect their titles. Whether they will be successful depends, in part, on whether the title is the title of a single production or a series of productions. In Canada and the United States, the title of a single movie or television program is generally not protectable. The USPTO, CIPO and courts on both sides of the border treat single titles as inherently descriptive. Section 1202.08 of the US Trademark Manual of Examining Procedure unequivocally states: “The title of a single creative work is not registrable on the Principal Register or the Supplemental Register.” To date, the majority of the cases on registrability of titles emanate from the United States and that will be reflected in this article. Although a title may not be registrable in association with a single movie or television program, applications can be filed in other categories for ancillary goods and services such as toys, clothing and other merchandise. The cases are consistent with the edict of the USPTO regarding titles of single creative works. In the US, courts generally resist giving trade-mark protection to the title of a creative single work even if the title is unique: In re Hal Leonard Publishing Corp., 15 USPQ2d 1574 (TTAB 1990) ("a settled principle that the title of a book cannot be registered as a trademark"). In another decision of the US Trademark Trial and Appeal Board, the mark CHOOSE TO BE RICH for audio tapes featuring financial information in Class 9 was held by the USPTO to be the title of a single creative work and therefore unregistrable. The USPTO’s decision was upheld by the TTAB: In re Cashflow Technologies Inc. S.N. 78965495. The applicant argued that the content of each tape was different and therefore acceptable to show use of the mark on a series of creative works. The examining attorney took the position that the series of cassettes was marketed as a single work and that view prevailed at the TTAB. In re Posthema, 45USPQ2d 2011, 2014 (TTAB 1998), the TTAB concluded that PHANTASM, as the title of a single live theatre production, was unregistrable because it did not function as a service mark. A single title can be protected on common law or unfair competition grounds if it has acquired secondary meaning. To achieve secondary meaning, a title must be broadly known. In appropriate circumstances, secondary meaning can be established by a few performances or significant pre-release publicity. In Jackson v. Universal International Pictures, Inc., 36 Cal.2d 116 (1950), secondary meaning was found in the title of a play where less than 4,000 people in New York and Philadelphia saw the play. In that case, the author of the play “Slightly Scandalous,” which ran for only two weeks in Philadelphia and closed after seven shows in New York, was able to successfully assert his rights in the title against Universal which produced a motion picture under the same title. Secondary meaning was established by advertising and publicity in addition to the actual shows. In another secondary meaning case, The Red Hot Chili Peppers (the “RHCP”) sued Showtime Networks and the creators of the show Californication, and filed a cause of action based on two dilution claims, two unfair competition claims and one unjust enrichment claim. The RHCP alleged that the title “Californication” had acquired secondary meaning on the basis of the commercial success of the album and song of the same name. Showtime moved to have the action dismissed, claiming its use of the word “Californication” was protected by the First Amendment. Showtime’s motion to dismiss was granted with respect to the two dilution claims, but was denied with respect to the two unfair competition claims and the unjust enrichment claim. Interestingly, Showtime succeeded on the dilution claims because non-commercial trade-mark uses are expressly exempt under the US Federal Trademark Dilution Act which protects famous marks from uses that dilute their distinctiveness. The court accepted Showtime’s argument that its use was sufficiently artistic and not purely commercial and thus entitled to full First Amendment protection. The case ultimately settled. In cases involving the use of a trade-mark in works of artistic expression, such as movies or songs, the public’s interest in being free from confusion in the marketplace must be balanced against the artist’s right to free expression. Rogers v. Grimaldi, 875 F. 2d 994, 997-98 (2d Cir. 1989). In Canada, the Federal Court of Canada recently released a decision consistent with the American approach to titles of single creative works. In Drolet v. Stiffung Gralsbotschaft 2009, FC 17, [2009] F.C.J. No. 38, the Court held that book titles are “inherently descriptive” and therefore not the subject of valid trade-marks. In his reasons, Mr. Justice de Montigny stated : “I am nevertheless of the opinion that the title of a literary work is inherently descriptive not because it conveys information on the content of the work but because it is the only way to identify the book in question. Thus the title cannot be dissociated from the work itself. Indeed, how could a publishing house identify a book it publishes other than by its title? At most, the owner of the title of a literary work can bring an action in unfair competition if he can establish that the use of the same title by someone else is likely to create confusion, provided of course that he can prove that the original title has acquired a secondary meaning. For the reasons given above, I find that the title of a book is inherently descriptive to the extent that it is the most certain way of identifying it. Therefore, the fact that a book may be considered a ware is not sufficient for its title to be considered a registrable trade-mark.” The title of a series of creative works is generally treated differently than the title of a single creative work. Titles of works that are part of an ongoing series such as Harry Potter or Twilight are generally registrable and protectable. Producing a sequel creates opportunity to obtain trade-mark registration for a title if the title serves to distinguish and identify the source of the goods. The rights for the series date back to the first work of the series only if the second work or sequel is released within a reasonable period of time with a requisite association in the public mind: Hebko Int’l. v. Kappa Books 64USPQ2nd1375 (TTAB 1970). In re Scholastic Inc. 23USPQ2d 1774, 1778 (TTAB 1992), the TTAB accepted THE MAGIC SCHOOL BUS as a registrable trade-mark: “Notwithstanding its appearance in the books’ titles, THE MAGIC SCHOOL BUS is recognized by purchasers who, when they see the term, know what they are getting – that is, another book in this series of books emanating from applicant.” However, if a title in a series merely identifies characters in the movies, the title does not function as a mark. The case cited to support this principle deals with “The Littles,” an animated TV series first broadcast in the 1980s based on the Littles characters in a series of children’s novels written by John Peterson. “While we do not dispute the fact that the applicant produces a series of books, we cannot agree that trademark usage is shown. The series concerns a fictional family called the Littles and each book involves a particular activity of the family. Hence use of THE LITTLES in the title of each book merely names the main characters of that book. It does not identify the source of the physical commodity, the book. Rather it identifies in whole or in part the reading material found between the covers of the book. That is not the function of a trademark”: In re Scholastic Inc. 223USPQ432 (TTAB 1984). In light of the foregoing restrictions with respect to the protection and registration of titles, what options are available to producers of films or other single work titles? In Canada, an applicant could apply on a proposed use basis for a series of works and stretch out the application process by extending the time frame for filing a declaration of use. In the interim, the applicant could produce and release a sequel thereby creating a series and removing obstacles to registration and enforceability. Even if a sequel is not produced and the application is abandoned, the producer can start to build secondary meaning in the title and attempt to enforce its rights in the title against third parties. When filing the application, the applicant must have a bona fide intent that it will produce a series of productions. Otherwise, the application or registration may be open to challenge under Section 30(i) of the Canadian Trade-marks Act. US commentators have suggested there is merit to registering single work titles under the state registration system. Although the registrations have little substantive value, they will be disclosed in title search reports and potentially deter a third party from adopting the title. Another method used to protect titles is to register proposed titles with the Motion Picture Association of America’s Title Registration Bureau, the members of which are the Hollywood studios and hundreds of independent production companies. Once a title is so registered, other members of the Bureau are bound by the Bureau’s rules which impose restrictions on their ability to adopt and use the same title or a confusingly similar title. Revisiting Recent Developments on the Scope of Patentable Subject MatterIn the July, 2010 issue of the Cassels Brock Report we discussed the decision of the US Supreme Court in Bilski v. Kappos.1 In Bilski, the Court provided direction on whether non-tangible business methods and processes constituted legitimate patentable subject matter entitling an inventor to a territorial monopoly on those methods and processes in the United States. By a small majority, the US Supreme Court declined to rule that all software or business method claims are inherently unpatentable, leaving the door ajar for digital age inventors to seek patent protection in the US for otherwise new and novel intangible business method or software processes. The US Supreme Court went further by rejecting the lower Court’s attempt to enunciate a single bright line objective test (the so called “machine or transformation test”) for determining eligible patentable subject matter. The so-called “machine or transformation test” required that a process or business method, in order to qualify as eligible patentable subject matter, either: (a) be tied to a particular machine or apparatus; or (b) transform a particular article into a different state or thing. While the US Supreme Court acknowledged that the machine or transformation test may be a useful and an important tool for consideration, it did not constitute the sole test for patent eligibility under the U.S. Patent Act. The U.S.S.C. decision in Bilski left us with a significant dilemma – at that juncture, Canada and the US, two major digital age trading partners, had adopted different approaches to the patentability of geographically borderless business methods. This dilemma has been mollified to a degree by the October 14th, 2010 decision of the Federal Court of Canada in the Amazon.com “one click” patent appeal case.2 In Amazon.com, the Federal Court of Canada, among other findings setting aside the Commissioner of Patents’ rejection of Amazon.com’s one click patent application and directing that the Commissioner reexamine that application on an expedited basis, held that there is no a priori statutory exclusion in Canada for business methods. Thus, business methods can form proper patentable subject matter in Canada when they have practical application and a commercially useful result. While the Federal Court reaffirmed the requirement that there be a practical application for an invention, thus distinguishing legitimate patentable subject matter from unpatentable mere schemes, abstract scientific theorem or disembodied ideas, the Court specifically rejected the Commissioner of Patents’ interpretation that an assessment of patentable “art” required an assessment of the physicality of an invention and its technological nature. The Court took an expansive approach, noting that the previous case law must not be interpreted to restrict the patentability of practical applications which might, in light of today’s technology, consist of a slightly less conventional “change in character”, or effect that change through a machine such as a computer. So, having had some time to reflect upon Bilski and Amazon.com, what are the three most significant take aways for our clients:
The story will undoubtedly continue to unfold. On November 15, 2010, The Attorney-General of Canada and the Commissioner of Patents filed Notice of Appeal to the Federal Court of Appeal in the Canadian Amazon.com case. We will report on significant developments as they occur. [1] Bilski et al v. Kappos 545 F.3d 943, 88 U.S.P.Q.2d 1385 (Fed. Cir. 2008) [2] Amazon.com, Inc. v. The Attorney General of Canada and The Commissioner of Patents 2010 FC 1011 (October 14, 2010) Quebec Modernizes its Consumer Protection ActIntroduction On December 2, 2009, the Québec National Assembly passed Bill 60 in an effort modernize the Québec Consumer Protection Act (the “CPA”). Bill 60, which came into force on June 30, 2010, imposes a number of new obligations on merchants operating in the province. General Overview of Bill 60 Bill 60 introduces significant changes to the CPA by prohibiting the insertion of certain clauses in consumer contracts and by regulating the sale of prepaid cards, the sale of additional manufacturers warranties and contracts involving sequential performance for a service provided at a distance, such as cellular phone contracts. Additionally, taking a page from the travel industry in Quebec, Bill 60 allows the Quebec Government to establish funds to indemnify consumers in certain industries as a result of shutdowns in such industries. Prohibited Stipulations in Consumer Contracts The amended CPA now limits the ability of merchants unilaterally to amend or terminate consumer contracts. As a result, merchants may only unilaterally amend a contract if (i) the contract clearly indicates the elements of the contract that may be amended, (ii) merchants have provided advance notice of the amendment and (iii) the contract allows consumers either to refuse the amendment or to terminate the contract. These have significant effects on a merchant’s ability to unilaterally amend its website terms of use when selling goods or services on-line. Sale of Prepaid Cards Bill 60 also regulates prepaid cards such as gift certificates or gift cards. Before finalizing the sale of a card, merchants must now inform consumers of any conditions applicable to the card, and explain to the consumer how to check the balance on the card. Further, a prepaid card cannot have an expiry date. Finally, consumers may not be charged for the issuance of a prepaid card, and may request a refund of any remaining balance under $5. Changes to Contracts for Additional Warranties The new legislation also impacts the sale of additional warranties offered by merchants in addition to existing warranties. Merchants must now, both orally and in writing, inform the consumer of the legal warranty provided under the CPA. Prior to the sale of an additional warranty, merchants must explain the nature and duration of the existing manufacturer’s warranty. Contracts Involving Sequential Performance for Service Provided at a Distance Bill 60 also provides a set of new rules specifically targeted at telecom, cable and internet service providers. Contracts with these providers must now be provided in writing, in a format specified by the Regulation, and include details such as:
Furthermore, such contracts, if they are longer than two months, cannot contain an automatic renewal stipulation, unless the renewal is for an indeterminate term. Additionally, consumers may, at any time, cancel a contract by sending written notice to the merchant. Bill 60 also imposes limits on penalties and cancellation indemnities that may be imposed by merchants. Finally, consumers cannot be made to pay for services of which they are deprived while the goods leased or sold to the consumer pursuant to the contract are under repair. This only applies where the goods are necessary for the service, such as cellular phones and where the goods are still under warranty. These new rules are forcing merchants to change their commercial practices. Businesses must bear in mind that some of these changes affect certain types of consumer contracts under the CPA while some affect all contracts. As a result, it is very important for businesses to review their current practices and contracts to ensure that they comply with these new requirements, especially merchants offering pre-paid cards and additional manufacturer’s warranties and telecom, cable and internet services providers. Should you have any questions regarding these new changes to the CPA, please contact us. Federal Court’s Jurisdiction is LimitedBy John McKeown A recent decision of the Federal Court illustrates that the Court’s jurisdiction can be limited. The Facts In an action alleging infringement of two patents, the plaintiff sought to amend the statement of claim to allege that the defendant had been unjustly enriched and sought a declaration that any profits made by the defendant were subject to a constructive trust. The Test The test for determining whether the Court has jurisdiction is relatively clear. Three conditions must be met for the Court to have jurisdiction to determine a cause of action:
There is no doubt that the Court has jurisdiction to entertain actions for patent, trade mark or copyright infringement, but common law causes of action that fail to satisfy the test are beyond the Court’s jurisdiction. The Federal Court is unlike the provincial superior courts which are assumed to have jurisdiction. While the Federal Court has equitable jurisdiction, including the ability to grant injunctive relief, this jurisdiction only allows the Court to apply the rules of equity in cases in which it otherwise has jurisdiction and does not give the Court any general or inherent jurisdiction to consider a civil action seeking equitable claims and remedies. The plaintiff asserted that its claims for unjust enrichment and constructive trust were made in the context of alleged breaches of the Competition Act. That act allows a plaintiff to bring an action for loss or damage suffered as a result of the breach of specified provisions of the Competition Act. In dismissing the motion seeking the proposed amendments, the Court said that the plaintiff had failed to allege actual loss and damage. The Competition Act does not provide for a claim for an equitable restitutionary remedy such as unjust enrichment. The remedies available are limited to the recovery of the plaintiff’s actual loss and damage. Conclusion While the nationwide jurisdiction of the Federal Court can be a significant benefit, care must be taken to ensure that the claim asserted is within the court’s jurisdiction. Technical Protection MeasuresBy John McKeown A recent decision of the High Court of Justice of England illustrates how copyright legislation dealing with technical protection measures (“TPMs”) can be applied. The Facts Nintendo’s TPMs Nintendo Company Limited is the designer/manufacturer and distributor of the Nintendo DS games console and the games that go with it. Nintendo has implemented a range of security measures designed to prevent the loading and playing of unlawful copies of its games. Those measures include:
The Defendants’ Activities The defendants imported and dealt in a number of different types of devices that enabled Nintendo DS users to play unlawful copies of Nintendo DS games which they downloaded using the Internet. The defendants imported these devices on a very large scale. More than 165,000 devices intended for the defendants were seized at customs. The devices contain circuitry, software and data (including a copy of the NLDF) which enable them to pass the tests performed by the Nintendo DS to verify the game inserted is genuine. In this way, the devices enable unlawful copies of Nintendo games to be successfully played on the Nintendo DS. The Claim Nintendo brought an action relying on the technical measures provisions of the Copyright, Designs and Patents Act 1988 (“CDPA”). The CDPA applies where effective technological measures have been applied to a copyright work and a person manufactures, imports, distributes or sells a device or product or provides a service that is promoted for the purposes of circumvention or is primarily designed, produced or performed for the purpose of enabling or facilitating the circumvention of the effective technological measures. A copyright owner has the same rights against a person who circumvents as they would if the person infringed copyright. The Motion for Summary Judgment Nintendo brought a motion for summary judgment. In its decision granting the motion, the Court noted that the relevant section of the CDPA creates a tort of strict liability. It is not a defence to show that the defendants did not know and had no reason to believe that the devices would be used to make infringing copies. It was found that the boot-up software, the NLDF and encryption and scrambling used by Nintendo clearly amounted to effective technological measures. It was also clear from the evidence that the defendants’ devices allowed the Nintendo DS game console to boot up and play unlawful copies of Nintendo games by successfully circumventing the effective technological measures. As a result, judgment was granted in favour of Nintendo. The Copyright Modernization Act (the “CMA”) As part of the CMA, which was introduced in Parliament in June 2010 to amend the Copyright Act, the Canadian government has included provisions relating to technological protection measures. The relevant section of the CMA provides that no person shall manufacture, import, distribute, offer for sale or rental or provide — including by selling or renting — any technology, device or component if:
The owner of the copyright in a work is, subject to the Copyright Act and any regulations made under the Act, entitled to all remedies — by way of injunction, damages, accounts, delivery up and otherwise — that are or may be conferred by law for the infringement of copyright against the person who contravenes the section. Comment The implementation of TPMs has been very controversial in Canada. The positions of content creators and users diverge widely. Creators wish to be able to control the manner in which their works are used as well as to control their business model and distribution. Some users, on the other hand, argue that it should only be a violation of the law to circumvent a TPM if the underlying purpose is to infringe copyright. In the next few months, hopefully we will see how this issue is resolved as the CMA proceeds before Parliament. |