Unfair Competition – Attorney Evan Brown

December 18, 2024 Trademarks, Unfair Competition

When does a neighborhood name become a trademark?

neighborhood trademark
Stephanie Reveron sued multiple companies, including Zumiez, New Balance, Amazon, Etsy, Zazzle, and Redbubble, for trademark infringement. Plaintiff claimed that her trademarks, such as LES NYC and LOWER EAST SIDE were being improperly used on clothing and other products. She argued that defendants’ use of these marks created consumer confusion and amounted to unfair competition.

Defendants moved to dismiss the claims. They argued that their use of the words “Lower East Side,” “LES,” and similar phrases was protected under the “fair use” doctrine of trademark law. Specifically, defendants claimed they were using these terms descriptively to refer to the well-known geographic location in New York City, not as trademarks to identify the source of the goods.

The court dismissed certain claims but let others proceed. For certain defendants, such as New Balance, Etsy (partially), and Zazzle, the court found that the use of “Lower East Side” and similar terms clearly referred to the neighborhood, not to plaintiff’s brand. This use was descriptive, in line with the fair use defense, and did not infringe plaintiff’s rights. For others, such as Amazon and Redbubble, the court found that the use of the phrases—especially when stylized or prominently displayed—could plausibly be interpreted as trademarks, making dismissal inappropriate at this stage.

Why did the court reach this decision?

The court considered the fair use defense, which allows the use of trademark-protected words in a descriptive sense if done in good faith. The court reasoned that the phrases “Lower East Side” and “LES” are commonly understood as referring to the geographic location—a neighborhood in New York City. For most defendants, this descriptive use was clear, especially when the words appeared alongside other terms or images referencing the neighborhood. The court also noted that fair use often turns on context: when words appear on a product without clear descriptive meaning, the line between fair use and trademark infringement becomes less certain.

For defendants such as Amazon and Redbubble, the court found that more analysis was needed. In some cases, the terms “LES” or “Lower East Side” were stylized or prominently displayed in a way that might suggest they were being used as a brand identifier rather than in a purely descriptive sense. As a result, the court allowed those claims to move forward.

In short:

The court dismissed claims against most defendants because their use of the words “Lower East Side” and “LES” was descriptive and protected under the fair use defense. However, for some defendants, such as Amazon and Redbubble, the court allowed the claims to proceed because the use of the phrases could plausibly be seen as a trademark rather than a description of a location.

Three reasons why this case matters:

Clarifies Fair Use: The case highlights how courts apply the fair use defense when trademarks overlap with descriptive geographic terms.
E-Commerce Accountability: It raises questions about the role of online platforms, such as Amazon and Etsy, when third-party sellers offer potentially infringing products.
Balancing Trademark Rights: The case underscores the challenge of balancing trademark protections with the public’s right to use common words, such as neighborhood names, in a descriptive way

Reveron v. Zumiez, Inc. et al., 2024 WL 5131627 (S.D.N.Y. Dec. 17, 2024)

December 10, 2024 Defamation, Unfair Competition

Alex Jones gets partial win in Connecticut lawsuit over unfair trade practices

Erica Lafferty, William Sherlach, and other family members of victims of the Sandy Hook Elementary School shooting sued Alex Jones, Free Speech Systems, LLC, and related entities. Plaintiffs sought damages for defamation, invasion of privacy, emotional distress, and violations of the Connecticut Unfair Trade Practices Act (CUTPA). Plaintiffs argued that defendants’ conspiracy theories about the Sandy Hook shooting violated CUTPA because defendants spread lies to attract audiences and sell products such as dietary supplements and survival gear. Plaintiffs asked the court to hold defendants liable for using false statements as a deceptive trade practice tied to their business interests.

The trial court ruling

The trial court sided with plaintiffs and allowed the CUTPA claim to proceed. It found that defendants’ false statements about the shooting being a hoax were tied to the sale of products advertised on their media platforms. According to the lower court, defendants’ spreading of falsehoods to increase product sales qualified as an unfair trade practice under CUTPA. The jury awarded plaintiffs substantial damages, including compensation for the CUTPA violation.

The appellate court reversal

Defendants appealed, and the appellate court reversed the trial court’s ruling on the CUTPA claim. The appellate court concluded that defendants’ defamatory statements were not directly tied to the sale of goods or services in a way that CUTPA covers. While defendants monetized their platforms, the court reasoned that the alleged lies about Sandy Hook were not themselves commercial conduct. The court ruled that the connection between the false statements and product sales was too weak to support a CUTPA violation. As a result, the appellate court directed the trial court to adjust the judgment by removing the damages associated with the CUTPA claim.

Three Reasons Why This Case Matters:

It’s Sensational: Anything involving Alex Jones and the Sandy Hook Massacre are attention-getting.
Protects Defamation Framework: By separating defamation from trade practices, the court preserved traditional tort remedies for harmful speech without expanding CUTPA.
Addresses Modern Media Monetization: The case underscores how courts assess financial gain from speech in an era of monetized platforms.

Lafferty v. Jones, — A.3d —, 2024 WL 5036021 (App. Ct. Conn. December 10, 2024)

November 19, 2024 Litigation, Unfair Competition

Beauty products company wins preliminary injunction against online sellers

conterfeit

Plaintiff sued a group of unnamed individuals, corporations, and online sellers, alleging that they were selling counterfeit versions of plaintiff’s patented beauty products through various e-commerce platforms. Plaintiff requested a preliminary injunction to immediately stop these activities and freeze defendants’ financial accounts. The United States District Court for the Southern District of Florida granted the request, seeking to protect plaintiff’s intellectual property rights while the case continued.

Plaintiff argued that defendants had infringed on its utility and design patents by manufacturing, promoting, and selling counterfeit products that mimicked its patented designs and technology. Investigators hired by plaintiff purchased items from defendants’ online stores and determined they were unauthorized copies. Plaintiff claimed these actions caused irreparable harm to its brand reputation and financial well-being.

The court evaluated whether plaintiff met the legal standard for a preliminary injunction, which requires showing a likelihood of success on the merits, irreparable harm without relief, a balance of hardships favoring plaintiff, and alignment with the public interest. The court found that plaintiff provided strong evidence that defendants were selling counterfeit goods in violation of its patents. Defendants had no authorization to use plaintiff’s intellectual property, and their activities risked confusing consumers and damaging plaintiff’s reputation.

The court determined that the harm to plaintiff outweighed any potential harm to defendants, especially since defendants were engaging in illegal activities. The public interest also supported the injunction, as it protected consumers from being misled into buying counterfeit products. The court froze defendants’ financial accounts to prevent them from transferring funds out of the court’s jurisdiction.

Why This Case Matters:

Intellectual Property Protection: The ruling reaffirms the importance of enforcing patent rights against counterfeiters in the e-commerce space.
Consumer Protection: By halting counterfeit sales, the court safeguarded consumers from buying inferior and unauthorized products.
Digital Enforcement Tools: The decision highlights the role of injunctions and financial account freezes as tools to combat online intellectual property infringement.

Foreo Inc. v. The Individuals, Corporations, Limited Liability Companies, Partnerships, and Unincorporated Associations Identified on Schedule A, 2024 WL 4652093 (S.D. Fla. Nov. 1, 2024).

April 2, 2024 Cybersquatting, Trademarks, Unfair Competition

Redirecting URL was unlawful but did not cause damages

url redirect trademark

In the months leading up to the FDA shutting down plaintiff’s business, one of the co-owners of the business left and set up a competing enterprise. For a few weeks, the former co-owner set plaintiff’s domain name to forward to the new company’s website.

Plaintiff sued and the court held that redirecting the URL was a violation of the Lanham Act (the federal law relating to trademarks and unfair competition). But plaintiff was not entitled to any damages because it failed to show that the redirection caused any lost sales. During that time, 133 users who tried to access plaintiff’s website were redirected to the new company’s website, and of those 133 visitors, only two submitted inquiries and neither customer who submitted an inquiry placed an order.

ABH Nature’s Products, Inc. v. Supplement Manufacturing Partner, Inc., 2024 WL 13452228 (E.D.N.Y., March 29, 2024)

Google did not “trespass” on websites by placing ads in mobile app

trespass to chattels

Google’s Search App in the Android environment worked much like any web browser. When a user typed in a web address, the app would connect to the host web server and deliver up a copy of the requested web page to be viewed in the app. Between 2018 and 2020, Google configured the app so that a frame at the bottom of the screen accompanied the requested page. A user could click to expand the frame to display larger advertising banners. Google did not pay the owners of the websites over which these banners were displayed. The ads were triggered automatically using algorithms, presumably based on the content of the requested website.

A group of website operators sued Google in federal court, seeking to make the case into a class action. Plaintiffs asserted a number of claims under California law, including trespass to chattels and unjust enrichment. Google filed a motion to dismiss the case for failure to state a claim upon which relief could be granted. The lower court denied the motion to dismiss. Usually, a party who loses a motion to dismiss does not yet have the opportunity to appeal such a decision (that right is normally reserved for final decisions of a court). In this case, however, the court permitted Google to seek review of the denial of the motion to dismiss. On appeal, the Ninth Circuit reversed the lower court’s decision and ordered that the case be dismissed.

No trespass to chattels

Trespass to chattels is a tort that enables a party to recover when another has interfered with possession of personal property. It is in the nature of theft (what in civil proceedings would be called “conversion”) but “not sufficiently important to be classified as conversion”. Plaintiffs’ theory essentially was that when Google placed ads on top of their web pages, Google was messing with plaintiffs’ possessory interest in plaintiffs’ web pages. The “chattels” at issue were the copies of the web pages.

The court held that plaintiffs’ trespass to chattels claim failed because they did not allege a sufficient possessory interest in the copies of their web pages, nor did they allege an appropriate property interest in the pages.

As for the lack of possessory interest, the court observed that (1) the pages were created when a user visited the website using the Search App, (2) the copy existed on the user’s device, and (3) the page was deleted when the user left the page. Because the purported possessory interest was “entirely dependent” on the actions taken by individual users, plaintiffs could not claim ownership of such interest.

And as for the lack of property interest, the court held that the lower court erred in focusing the property-ownership analysis on the website itself, rather than the website copies that appeared on the user’s mobile device. It then applied a three-part test set out in Kremen v. Cohen, 37 F.3d 1024 (9th Cir. 2003) to determine that (1) a website copy is not “capable of precise definition” because there is no single way to display a website copy, (2) a website copy is not “capable of exclusive possession or control” because the user is the one who dispenses with the page in his or her local environment, and (3) there is no “legitimate claim to exclusivity” over website copies, making them different than other types of tangible property recognized as being subject to trespass.

Unjust enrichment claim preempted by federal copyright law

The court used a two-part test to assess whether plaintiffs’ state-law claim for unjust enrichment conflicted with the federal Copyright Act. The first step of the test examined the nature of how plaintiffs’ websites were presented, and led the court to determine that the websites involved the subject matter covered by federal copyright law.

In the second step, the panel compared the rights claimed by plaintiffs under their unjust enrichment claim to see whether they were equivalent to those rights protected by federal copyright law. The court held that it was appropriate to focus on the rights asserted by plaintiffs. It found that the described action of placing ads over the websites resulted in the creation of a derivative work – a right enumerated in the Copyright Act.

Additionally, the court found that plaintiffs’ state-law claim did not include any additional elements that would distinguish it from a typical federal copyright claim. This lack of an “extra element” was a key factor in the panel’s conclusion. As a result, the panel determined that plaintiffs’ state-law claim was indeed preempted by federal copyright law, aligning the state claim with the broader protections offered at the federal level.

What the case means for business

The ruling holds significant implications for digital enterprises, particularly concerning advertisement placement and risk management. This case underscores the legal complexities of embedding advertisements on digital platforms, highlighting the importance of legal compliance and awareness of intellectual property laws. Additionally, it emphasizes the need for diligent risk management in the company’s operations. This case serves as an important reminder of the potential legal risks associated with digital content and advertising practices, making it imperative for companies to maintain a proactive approach to legal compliance and risk mitigation in these areas.

Best Carpet Values, Inc. v. Google, LLC, 2024 WL 119670 (9th Cir., January 11, 2024)

cPanel gets injunction to shut down sophisticated counterfeiting enterprise

The purveyor of cPanel – the well-known hosting automation software – has successfully obtained an injunction against an overseas enterprise accused of engaging in an elaborate scheme to sell unauthorized access to the cPanel software. A federal court in Oregon has issued a wide-ranging injunction against the defendants’ unauthorized activities.

The sophistication of defendants’ actions

Plaintiff’s evidence showed that defendants – under the brand “Licenseman” – changed the cPanel software in several ways. Defendants allegedly made it so that any requests for licensing or technical help from cPanel went to Licenseman’s servers instead. The modified software hid messages about trial licenses expiring and would delete itself if cPanel’s tech team tried to access a server with this altered software. The changes involved “wrapped binaries” in the software, which tricked the system into using licenses meant for other cPanel systems. This meant many people could use the same cPanel license illegally.

cPanel’s legal claims

cPanel sued for:

copyright infringement;
the trafficking of circumvention devices in violation of the DMCA, 17 U.S.C. § 1201(a)(2);
trademark infringement and unfair competition under 15 U.S.C. § 1114, 1125(a);
trademark counterfeiting under 15 U.S.C. § 1114; and
cybersquatting under ACPA, 15 U.S.C. § 1125(d).

cPanel asked the court to enter a preliminary injunction to stop the unlawful activity. The court granted the motion. In reaching its decision, it found that plaintiff was likely to succeed on all five of its claims, in light of the overwhelming evidence indicating that defendants were behind the actions of the Licenseman entity.

The court’s decision

On the copyright infringement claim, the court found that plaintiffs had shown ownership of the allegedly infringed material by presenting evidence of its registered copyright claims. Plaintiffs presented evidence that defendants had infringed on plaintiff’s exclusive right to prepare derivative works of the software by altering cPanel software to permit access via illicit licenses.

As for the DMCA circumvention claim, the court found that defendants sold re-engineered, illicit cPanel licenses that, as advertised, manipulated the binary of the cPanel software so that people could use the cPanel software without purchasing a subscription from plaintiff. And defendants trafficked—that is, sold—such licenses via their websites. Thus, every element of DMCA trafficking liability had been met.

Concerning trademark infringement and unfair competition, the court likewise found that plaintiff had established a likelihood of success on the merits of its claims. Plaintiff submitted evidence that it owns a registration for the CPANEL mark, which served as prima facie evidence of exclusive rights to use the mark. And defendant’s actions were “highly” likely to confuse customers. The fact that illicit license users had sought plaintiff’s customer service suggested that users had actually been confused and not exercised a great deal of care in pursuing cPanel licenses.

Finding that plaintiff had shown likelihood of success on its counterfeiting claim, the court noted that plaintiff’s CPANEL mark identifies computer software facilitating the management and configuration of internet web servers, and defendants were using that exact mark to sell illicit licenses to plaintiff’s software.

Finally, on the cybersquatting claim, the court found plaintiffs to be likely to succeed on the merits where the disputed domain names incorporated the CPANEL mark and were used to sell infringing items “which itself prove[d] bad faith.”

Because plaintiff also showed irreparable harm from the alleged activity, that defendants’ loss of business if enjoined was not an unfair tipping of the equities, and that the public interest would benefit from the prohibition of the alleged conduct, the court granted the injunction.

cPanel, LLC v. Asli, 2024 WL 35674 (D.Or. January 3, 2024)

NB: Great work on the case by Venkat and team.

June 6, 2023 Unfair Competition

False advertising – how much can a company get away with?

false advertising

A recent federal court decision gives some guidance on what kinds of statements about a competitor rise to the level of false advertising. The case serves as a reminder for companies to be careful when using objective terminology to talk about another company’s products.

Characterizing the competition

In Enigma Software Group USA, LLC v. Malwarebytes, Inc., the Ninth Circuit Court of Appeals held that a company successfully asserted a false advertising claim against its competitor. Both parties are purveyors of computer security software. When Enigma noticed that Malwarebytes was describing Enigma’s software as “malicious” and a “threat” to the security of a computer, Enigma sued. One of the claims it made was that Malwarebytes’ characterization of Enigma’s software was false advertising under the Lanham Act (at 15 U.S.C. 1125(a)).

The lower court dismissed Enigma’s false advertising claim, holding that the statements calling the software malicious or threatening were simply opinion, and not the kind of factual assertions that could be literally false or likely to mislead or confuse consumers (and thereby be false advertising).

Context matters

The Ninth Circuit, however, disagreed with the lower court’s decision. It found that Malwarebytes’ language employed terminology that was substantively meaningful and verifiable in the cybersecurity context. It noted that unlike non-actionable statements of puffery, which are “extremely unlikely to induce consumer reliance,” Malwarebytes’s designations of Enigma’s products made “a claim as to the specific or absolute characteristics of a product” and were accordingly actionable statements of fact under the Lanham Act.

The court emphasized that characterizations of software being a “threat” or “malicious” coming from a cybersecurity company hold a particular kind of value. In the court’s words: “Because whether software qualifies as malware is largely a question of objective fact, at least when that designation is given by a cybersecurity company in the business of identifying malware for its customers, Enigma plausibly alleged that Malwarebytes’s statements are factual assertions” (emphasis added). So, to help avoid a claim for false advertising, a company must remember the industry in which it participates, and anticipate whether hearers or readers of its words will interpret them as objective statements.

Enigma Software Group USA, LLC v. Malwarebytes, Inc., 2023 WL 3769331 (9th Cir., June 2, 2023)

Old social media posts violated trade dress infringement injunction

The parties in the case of H.I.S.C., Inc. v. Franmar are competitors, each making garden broom products. In earlier litigation, the defendant filed a counterclaim against plaintiff for trade dress infringement, and successfully obtained an injunction against plaintiff, prohibiting plaintiff from advertising brooms designed in a certain way. Defendant asked the court to find plaintiff in contempt for, among other reasons, certain social media posts that plaintiff posted before the injunction, but that still remained after the injunction was entered. The court agreed that the continuing existence of such posts was improper and found plaintiff in contempt for having violated the injunction.

The court noted that the injunction prohibited “[a]dvertising, soliciting, marketing, selling, offering for sale or otherwise using in the United States the [applicable product trade dress] in connection with any garden broom products.” It observed that “[o]n the Internet and in social media, a post from days, weeks, months, or even years ago can still serve to advertise a product today.” The court cited to Ariix, LLC v. NutriSearch Corp., 985 F.3d 1107, 1116 n.5, in which that court noted that one prominent influencer receives $300,000 to $500,000 for a single Instagram post endorsing a company’s product – a sum surely including both the post itself and an agreement to continue allowing the post to be visible to consumers for a substantial duration of time. Interestingly, the court found that the nature of a social media post may be different from a television or radio advertisement that has a fixed air date and time. Accordingly, the court found that it was inappropriate for social media posts published before the injunction to stay online.

H.I.S.C., Inc. v. Franmar Int’l Importers, Ltd., 2022 WL 104730 (S.D. Cal. January 11, 2022)

See also:

July 27, 2021 Unfair Competition

Online retailer’s use of photo of products it did not sell was not an unfair or deceptive act

Defendant online guitar retailer used on its website a photo of premium guitar necks – products that the online retailer did not sell. Plaintiff – the purveyor of the premium guitars found in the photo – sued defendant under the New Hampshire consumer protection act which makes unfair or deceptive acts in trade or commerce unlawful. The case went to trial. The court found in favor of defendant.

website photo deceptive practices

The court found three of plaintiff’s key witnesses not credible. Each of them had some sort of personal relationship with the plaintiff that in the court’s view tainted their testimony. One of them testified in a questionable way – he testified remotely via videoconferencing software and was “clearly reading from notes or a script during his direct examination.” And “[r]ather than looking directly into the camera when he answered questions, he consistently fixed his gaze on the left portion of his computer screen each time he began his answer.”

The photo played a minor part in defendant’s website. It was relatively small in comparison to the rest of the material in which it appeared. It took up approximately a third of an online document’s width and was not much bigger than a thumbnail-sized image. The image quality was low – the guitar necks were blurry and it was difficult to tell whether anything was written on the them, such as a logo.

The court found that plaintiff failed to prove that consumers would have understood defendant’s use of the photo to assert an affiliation between defendant and plaintiff. In the court’s mind, even if defendant had proven the assertion of an affiliation, plaintiff failed to prove that defendant acted with the intent required for the applicable statutory violation.

D’Pergo Custom Guitars, Inc. v. Sweetwater Sound, Inc., 2021 WL 3038640 (D.N.H., July 19, 2021)

October 15, 2019 Fraud/Misrepresentation, Section 230, Unfair Competition

Intellectual property exception to CDA 230 immunity did not apply in case against Google

Plaintiff sued Google for false advertising and violations of New Jersey’s Consumer Fraud Act over Google’s provision of Adwords services for other defendants’ website, which plaintiff claimed sold counterfeit versions of plaintiff’s products. Google moved to dismiss these two claims and the court granted the motion.

On the false advertising issue, the court held that plaintiff had failed to allege the critical element that Google was the party that made the alleged misrepresentations concerning the counterfeit products.

As for the Consumer Fraud Act claim, the court held that Google enjoyed immunity from such a claim in accordance with the Communications Decency Act at 47 U.S.C. 230(c).

Specifically, the court found: (1) Google’s services made Google the provider of an interactive computer service, (2) the claim sought to hold Google liable for the publishing of the offending ads, and (3) the offending ads were published by a party other than Google, namely, the purveyor of the allegedly counterfeit goods. CDA immunity applied because all three of these elements were met.

The court rejected plaintiff’s argument that the New Jersey Consumer Fraud Act was an intellectual property statute and that therefore under Section 230(e)(2), CDA immunity did not apply. With immunity present, the court dismissed the consumer fraud claim.

InvenTel Products, LLC v. Li, No. 19-9190, 2019 WL 5078807 (D.N.J. October 10, 2019)

About the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown@internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.