SUMMER 2012
IN THIS ISSUE
Court Holds Competitor Has No Standing Under Virginia Consumer Protection Act
BLACKBERRY Cracks Back in Successful Dilution Claim
Court Holds Competitor Has No Standing Under Virginia Consumer Protection Act
In a recent case involving an unregistered service mark and an implied service mark license, the U.S. District Court for the Eastern District of Virginia ruled that the Virginia Consumer Protection Act does not give a competitor standing to seek relief for allegedly unfair business practices. Diamonds Direct USA, Inc. v. BFJ Holdings, Inc., 2012 WL 2505282, No. 3:12-CV-00303-HEH (E.D. Va. June 28, 2012).
Diamonds Direct USA, Inc. (DD), a North Carolina corporation, claims to have over 700 customers in Virginia and to have provided goods and services to those customers for over 16 years. DD also claims that through its long and continuous use of the term DIAMONDS DIRECT to brand its goods and services, DD has acquired service mark rights in DIAMONDS DIRECT.
In its complaint DD alleged that Diamonds Direct USA of Richmond, LLC (DD of Richmond) is a wholly owned subsidiary of DD. DD further alleged that when defendant BFJ Holdings, Inc., doing business as Capri Jewelers (Capri), learned in January 2012 of DD’s plans to open a business location in Richmond, Virginia, Capri, as a defensive measure, began using the service mark DIAMONDS DIRECT and registered the mark with the Virginia State Corporation Commission.
Seeking compensatory damages and injunctive relief, DD sued Capri on four counts: I, service mark infringement; II, unfair competition; III, false advertising; and IV, violation of the Virginia Consumer Protection Act (VCPA), Va. Code Ann. § 59.1-200. Capri moved to dismiss the suit under Federal Rule of Civil Procedure 12(b)(6) on the grounds that DD had failed to state an actionable claim. Such a motion merely tests the sufficiency of a complaint; it does not resolve any disputes about the facts of the case or the merits of claims or defenses.
Capri argued that because DD did not allege ownership of a federal registration for DIAMONDS DIRECT or a course of dealing that would give rise to common-law service mark rights in Virginia, Counts I, II, and III were fatally deficient. The court agreed with Capri that “the existence of a valid mark is an indispensable element in an infringement claim.” However, the court said DD’s allegations to have service mark rights in DIAMONDS DIRECT and over 700 customers in Virginia were enough “to plead a plausible claim that [DD] has a valid mark.”
Although there was no written license between DD and DD of Richmond, DD argued that its Virginia subsidiary has an “implied license to use its service mark.” The court said that an important factor in its analysis of this issue was whether there was “a special interlocking relationship between entities.” Because DD and DD of Richmond are affiliates, the court held that DD had pleaded a plausible claim of an implied license.
The court said that in its motion Capri “devote[d] minimal attention to the false advertising claim in Count III” but that the count appeared to be based on alleged consumer confusion resulting from both sides’ use of DIAMONDS DIRECT. Accordingly, the court said, it would view Count III as “closely allied” with Count I, the sufficiently pleaded infringement allegation. Because the court found that DD had pleaded Counts I, II, III adequately to state plausible claims, the court denied Capri’s motion to dismiss those claims.
Turning to the issue of DD’s claim for relief under the VCPA, the court noted that “the Supreme Court of Virginia has never squarely addressed the issue.” However, the court said that the language of the statute and relevant federal cases appeared to support Capri’s position that the VCPA does not give a competitor grounds for relief, only consumers.
The court focused on the VPCA’s references to “the consuming public,” “consumer transactions,” and “goods or services to be used primarily for personal, family, or household purposes.” Va. Code Ann. §§ 59.1-197, -198 (2006 & Supp. 2012). Those references, the court said, prove that the VPCA “is designed to provide members of the consuming public, not commercial competitors, with a statutory remedy” (citing H.D. Oliver Funeral Apartments, Inc. v. Dignity Funeral Servs., Inc., 964 F. Supp. 1033, 1038-40 (E.D. Va. 1997)) (other citation omitted). Thus, the court granted Capri’s motion to dismiss with respect to Count IV.
Diamonds Direct shows that a business cannot rely on the VPCA to seek relief from a competitor’s trademark infringement, unfair competition, and false advertising. The case also shows that although a plaintiff without a registered trademark or a formal trademark license may be able to withstand a defendant’s motion for summary judgment, the issue is fact-specific and such a motion might succeed in some instances. Thus, absent some compelling—and probably very rare—reason to the contrary, a business should seek to register its marks with the U.S. Patent and Trademark Office (or, at a minimum, at the state level) and should enter into written license agreements for the use of its mark.
BLACKBERRY Cracks Back in Successful Dilution Claim
Timothy J. Lockhart
As appeared in the June 1, 2012, issue of the “INTA Bulletin.”
In a relatively rare opposition case involving a successful dilution claim, the Trademark Trial and Appeal Board (TTAB) held that the mark CRACKBERRY was likely to cause confusion with BLACKBERRY as well as dilute the distinctiveness of that famous trademark. Research in Motion Ltd. v. Defining Presence Marketing Group, Inc. & Axel Ltd. Co., Opposition Nos. 91178668, 91179490, 91181076 (T.T.A.B. Feb. 27, 2012) (precedential).
In 2006 and 2007, Defining Presence Marketing Group filed four intent-to-use applications to register the mark CRACKBERRY for clothing items and marketing, computer and communications services. Axel obtained the applications by assignment in 2007, and, after Research in Motion (RIM) opposed them later that year, the TTAB joined Axel as a defendant.
RIM claimed the mark CRACKBERRY would be likely to cause confusion with the trademark BLACKBERRY, as used and registered by RIM for “handheld devices including smart phones and related goods and services as well as promotional and collateral goods.” RIM also claimed CRACKBERRY would dilute the distinctive quality of its allegedly famous mark.
The defendants argued that their mark was a parody of BLACKBERRY, and the TTAB acknowledged that some court cases indicated that “a successful parody seems to make confusion less likely.” The Board also noted that when courts deal with trademark issues, the First Amendment’s “protective penumbra of free speech” may make a finding of infringement less likely.
However, the TTAB said the question of an applicant’s right to registration under Section 2(d) of the Lanham Act is a “narrower” one, so in that context “the First Amendment claim is not as strong as with issues of restraint on use.” Thus, if the du Pont factors for determining likelihood of confusion point to a similarity between the parties’ respective goods or services and the relevant channels of trade such that consumers might believe those goods or services have a common source, “the likelihood of confusion will usually trump any First Amendment concerns.”
Before applying the du Pont factors, the TTAB considered whether BLACKBERRY was a famous mark. The Board noted that RIM had sold billions of dollars’ worth of BLACKBERRY products to millions of consumers and spent tens of millions of dollars advertising and promoting the mark. It also noted that the media have extensively covered the BLACKBERRY brand and that BLACKBERRY consistently appears on the lists of the most famous and valuable trademarks in the world. Thus, the TTAB concluded, BLACKBERRY was a famous mark and therefore was entitled to a “wide latitude of legal protection.”
Given the marks’ similarities in sight and sound and the fact that the public began using the nickname “Crackberry” to refer to “addictive” BLACKBERRY devices before the defendants applied to register the CRACKBERRY mark, the TTAB readily found that the du Pont factors pointed to a likelihood of confusion. It further found that the du Pont factors supported RIM’s position that its goods and services and the defendants’ services were closely related.
The TTAB also determined that there was a “large overlap” in the parties’ channels of trade, given that “applicants’ prospective customers are by design substantially all prior customers of opposer.” Accordingly, it found a likelihood of confusion with respect to the applicants’ three applications to register the mark CRACKBERRY for services. (Because of a lack of relevant evidence of record, the TTAB did not agree that RIM’s alleged common-law rights in BLACKBERRY supported its position regarding the defendants’ application for clothing.)
Turning to the issue of dilution under Section 43(c) of the Lanham Act, the TTAB found that the BLACKBERRY trademark was sufficiently famous to meet the higher standard for fame required in the dilution context. It found, moreover, that BLACKBERRY was famous before the application filing dates.
The TTAB then considered whether, under the statutory factors, the CRACKBERRY mark was likely to dilute, by blurring, the distinctiveness of the trademark BLACKBERRY. Noting that in their parody defense the applicants had conceded some similarity between the marks, the Board found “a high degree of similarity.” It further found that BLACKBERRY was a distinctive and widely recognized mark and that RIM was engaged in substantially exclusive use of the mark.
Finally, the TTAB found that the applicants intended to, and did, choose a mark that the public would associate with the BLACKBERRY trademark. The Board therefore concluded that all six statutory factors supported RIM’s contention that CRACKBERRY was likely to dilute BLACKBERRY.
The TTAB considered at some length whether the applicants were entitled to the statutory “fair use” defense of parody under Section 43(c). It observed that the parody defense was available to an entity only if the parody was not used to designate the source of that entity’s goods or services. The Board noted that “Crackberry” was a popular nickname for BLACKBERRY devices and that the applied-for services were, for the most part, closely related to RIM’s goods and services. Accordingly, the TTAB sustained RIM’s opposition to all four applications on the ground of dilution.
Although every effort has been made to verify the accuracy of items in the INTA Bulletin, readers are urged to check independently on matters of specific concern or interest.
Click here to read the longer version of this article that appeared in the June/July issue of “Virginia Lawyer.”