Without fail, one of the first responses from companies accused by competitors of false advertising is that “we didn’t know,” and it may well be that the advertising information came from a reputable source. But is the “innocent mistake” defense viable in false advertising litigation? Although it seems only fair that a company taking reasonable steps to verify information in its advertisements would be in the clear, federal advertising law holds companies strictly liable for false advertising. In other words, there is no good faith or innocent mistake defense to underlying liability.
We recently found a “juicy” illustration of the point. Pom Wonderful, the leading marketer of pomegranate juice, had noticed one of its smaller competitors using Pom’s own studies to market competing juice. With this competitor on the radar, Pom also noticed that the company, California-based Purely Juice, was marketing “100% pomegranate juice,” with “no added sugar.” Pom’s testing proved that claim incorrect, and after negotiation failed, Pom sued in federal court.
Purely Juice, it turns out, had been using a broker to find juice suppliers. The broker vouched for its suppliers, but, despite those assurances, the juice Purely Juice received was adulterated, so that the “100% pomegranate” and “no sugar” claims were false. Purely Juice claimed it had no idea of the adulteration, and that it took the word of its broker about the reliability of the juice supply.
Was that approach successful? Just last week, a court of appeals affirmed a trial award against Purely Juice of approximately $1.2 million in damages, disgorgement of more than $300,000 in its profits, and attorney’s fees of more than $620,000. One of the legal principles that resulted in the award is that a company is liable for false advertising regardless of its knowledge. Not only that, an officer or director is personally liable for false advertising in which she participates or that she directs, so the president of Purely Juice, also a defendant, shared in the liability.
It did not help Purely Juice that the trial court also found it “knew or should have known” about the shaky credentials and processes of its suppliers and therefore, of the adulteration. In that market, the limited supply of pomegranate juice means that many suppliers mix in other juice, and add sugar. Had the company conducted and abided by its own testing, and done better due diligence, one wonders if it could have avoided the litigation entirely.
For our own marketing teams, the lesson is clear. The advertising “buck” stops at the company’s door, and assurances from third parties about the quality or characteristics of supplied products, even from trusted suppliers or business partners, will not insulate the company from liability for false advertising. Thorough internal due diligence is a must.
--Andrew Flake
Andrew B. Flake is a partner in the Litigation Group at Arnall Golden Gregory LLP (andrew.flake@agg.com). Our firm serves the business needs of growing public and private companies, helping clients turn legal challenges into business opportunities. We don't just tell you if something is possible, we show you how to make it happen. Please visit our website for more information, www.agg.com.
Showing posts with label intellectual property. Show all posts
Showing posts with label intellectual property. Show all posts
Wednesday, January 6, 2010
Friday, September 25, 2009
McProblem in Malaysia
Admit it. You have done it. Whether describing the “McMansion” recently purchased by a family member, dreaming of breaking the chains that bind you to your “McJob,” or bemoaning the “McWorld” we live in, we are guilty of tacking on the prefix “Mc” to regular words, for the sake of evoking associations with our favorite fast food restaurant chain. “McWords,” so dubbed by Wikipedia.com, have infiltrated our vernacular, and are now even common place on our favorite television shows – did you see McDreamy and McSteamy in last nights’ season premier of Grey’s Anatomy?
We owe this phenomenon to the outstanding marketing and promotion work done by the McDonald’s Corporation (“McDonald’s”) to build a brand and create a unifying concept that identifies products and services associated with its Company. McDonald’s has invested heavily in a significant portfolio of “Mc” trademarks used by the company to identify products, services and concepts within their organization. We encounter many of these “McTerms” all too often while scanning the menu in the drive-thru -- McNugget, McFlurry, McGriddle, McCafe’ and Big Mac, to name a few. Did you know, however, that McDonald’s has registered the term McMobile for a McDonald’s computer software program used in sales and marketing, McD for an all-purpose cleaning product, and McDTV for use on television programming offered by the company? Clearly, the company is committed to building its “McBrand” through the use of trademarks bearing the “Mc” prefix.
You may or may not know, but creating such a unifying concept has significant implications and potential benefits under trademark law in the United States. It provides a means for obtaining a broader scope of trademark protection than would ordinarily be afforded to a trademark owner. A recent legal decision from Malaysia underscores the significance of this broader scope of protection in the U.S., protections apparently not available to trademark owners in certain other destinations around the world.
Recent Legal Decision in Malaysia
Specifically, McDonald’s recently lost a legal dispute with a restaurant owner in Malaysia who named his restaurant “McCurry.” As the name implies, the restaurant owner adopted a western-style fast-food ambience to serve traditional Indian and Malaysian dishes to its customers. McDonald’s, in an effort to protect their brand, sued the restaurant owner in 2001, and an eight-year battle ensued. In 2006, McDonald’s won its case in the lower court, but the restaurant owner appealed. In April of this year, Malaysia’s highest court overturned the lower court decision. (For more information on McDonald’s Malaysian legal battle, see online.wsj.com/article/SB125240245264591953.html). This decision appears to open the McDonald’s brand to attack, by allowing other companies to utilize the “Mc” prefix on their goods and services in Malaysia. This result demonstrates the importance of the doctrine of a “family of marks” in the United States, and the protection that doctrine provides to business owners and trademark holders alike.
Protection of the McFamily of Marks
In trademark parlance, a portfolio of trademarks that utilize a unifying prefix or common term is known as a “family of marks.” A “family of marks” is a group of marks having a recognizable common characteristic, wherein the marks are composed and used in such a way that the public associates not only the individual marks, but the common characteristic of the family, with the trademark owner. The “family of marks rule” recognizes that a family of marks may have a synergistic quality that is greater than the sum of each mark, considered on an individual basis. Because the consuming public associates the recognizable common characteristic of the family with the trademark user, the trademark user has established secondary meaning in the common feature of its multiple marks, in its respective channels of trade. Thus, they may have the ability to preclude others from using this feature, even if the trademark used by that third party is not otherwise confusingly similar to the trademark owner’s mark. It is this additional scope of protection, in the common feature, only enjoyed by owners of a family of trademarks.
In the case of McDonald’s, courts have recognized, acknowledged and enforced the “McFamily” of marks against others who have attempted to usurp the goodwill and brand recognition built by the company. McDonald’s has successfully opposed registration and use of the trademarks “McPretzel” and “McDugal’s McPretzels” by a company in the business of selling frozen pretzel products, and they have obtained a judgment for trademark infringement and an injunction against a restaurant going by the name “McBagel.” J & J Snack Foods Corp. v. McDonald’s Corp., 932 F.2d 1460 (Fed. Cir. 1991); McDonald’s Corp. v. McBagels, Inc., 649 F.Supp. 1268 (S.D.N.Y. 1986). Even on non-food items and services, in wholly unrelated channels of trade, McDonald’s has successfully protected their family of marks. McDonald’s obtained an injunction preventing a dentist’s use of the term “McDental” for his practice, and they successfully defended a case whereby a large hotel conglomerate sought a declaratory judgment stating that the use of the term “McSleep Inn” for a hotel chain did not constitute trademark infringement. McDonald’s Corp. v. Druck and Gerner, D.D.S., P.C., 814 F. Supp. 1127 (N.D.N.Y 1993); Quality Inns International, Inc. v. McDonald’s Corp., 695 F.Supp. 198 (D. Mar. 1988). Trademarks such as “McDental” and “McSleep” were not necessarily similar to any mark registered by McDonald’s, but the court nonetheless held that use of these marks constituted trademark infringement on account of their use of the well-known “Mc” prefix.
While these cases make it clear that McDonald’s enjoys a significant scope of trademark protection in the United States, beyond the protections enjoyed on each individual mark, the recent Malaysia outcome demonstrates that this does not appear to be the case in other parts of the world.
What this Means for Trademark Holders
If you or your company is building a portfolio of trademarks, and is considering the adoption of additional marks, it may be beneficial to consider use of a unifying characteristic for each and every one of your marks. Successful use of a common characteristic could lead to the development of a “family of marks,” thereby providing an increased scope of trademark protection in the marketplace, not necessarily enjoyed by your competitors. And, you may just become the next household phenomenon in the process.
- Devin Gordon, devin.gordon@agg.com
Arnall Golden Gregory LLP serves the business needs of growing public and private companies, helping clients turn legal challenges into business opportunities. We don't just tell you if something is possible, we show you how to make it happen. Please visit our website for more information, http://www.agg.com/.
Friday, July 17, 2009
TTAB ENDS FENDER’S BID TO REGISTER TRADEMARKS FOR ITS GUITAR SHAPES
In a recent decision, the Trademark Trial and Appeal Board (TTAB) ended Fender’s five-year fight to obtain federal trademark registrations for the shape of its Stratocaster, Telecaster, and Precision Bass guitars (pictured below). The TTAB determined that Fender did not show that the two-dimensional outlines of its guitars, standing alone, served to indicate source.
This case illustrates the importance more and more companies are placing on so-called “nonconventional” trademarks, and also the difficulty associated with obtaining a federal registration for such marks.
Most people are familiar with “traditional” trademarks, such as words, logos, or symbols. However, trademarks can take just about any form. Increasingly, providers of goods and services are claiming protection for nonconventional trademarks. Nonconventional trademarks can include sounds, shapes, textures, smells, movements, and even tastes.
Specific examples of nonconventional trademarks registered with the United States Patent and Trademark Office (USPTO) include the following:
O The sound of a roaring lion for use in connection with motion pictures (Metro-Goldwyn Meyer Lion Corp., U.S. Reg. No. 1,395,550).
O The scent of an apple for use in connection with office supplies (The Smead Manufacturing Company, U.S. Reg. No. 3,140,701).
O Velvet textured covering on the surface of a bottle of wine (American Wholesale Wine & Spirits, Inc., U.S. Reg. No. 3,155,702).
O The shape of an eight-sided competition mat for use in connection with multi-disciplined fighting competitions (Zuffa, Inc., U.S. Reg. No. 2,098,577).
O The motion in which the door of a vehicle is opened (Lamborghini, U.S. Reg. No. 2793439, “The doors move parallel to the body of the vehicle but are gradually raised above the vehicle to a parallel position”).
The key to obtaining trademark rights to a nonconventional mark is establishing that the mark is capable of functioning as a source indicator, meaning that consumers are able to identify the mark as being associated with the maker or provider of a product or service.
Demonstrating this source-identifying function tends to be more difficult with non-traditional marks, and many have tried, but failed, to register a nonconventional mark with the USPTO. In addition to Fender, other notable failures include Harley-Davidson’s attempt to obtain federal trademark rights to the exhaust sound of its motorcycles and drug manufacturer Organon’s attempt to register an orange flavor for its anti-depressant medication.
As competition for customers becomes more and more fierce, and as marketers become more and more creative, providers of goods and services are likely to continue their efforts to establish brand recognition through nonconventional marks.
- Tucker Barr
Tucker Barr is an associate in the Litigation Group and Intellectual Property Team at Arnall Golden Gregory LLP (tucker.barr@agg.com). Our firm serves the business needs of growing public and private companies, helping clients turn legal challenges into business opportunities. We don't just tell you if something is possible, we show you how to make it happen. Please visit our website for more information, http://www.agg.com/.
This case illustrates the importance more and more companies are placing on so-called “nonconventional” trademarks, and also the difficulty associated with obtaining a federal registration for such marks.
Most people are familiar with “traditional” trademarks, such as words, logos, or symbols. However, trademarks can take just about any form. Increasingly, providers of goods and services are claiming protection for nonconventional trademarks. Nonconventional trademarks can include sounds, shapes, textures, smells, movements, and even tastes.
Specific examples of nonconventional trademarks registered with the United States Patent and Trademark Office (USPTO) include the following:
O The sound of a roaring lion for use in connection with motion pictures (Metro-Goldwyn Meyer Lion Corp., U.S. Reg. No. 1,395,550).
O The scent of an apple for use in connection with office supplies (The Smead Manufacturing Company, U.S. Reg. No. 3,140,701).
O Velvet textured covering on the surface of a bottle of wine (American Wholesale Wine & Spirits, Inc., U.S. Reg. No. 3,155,702).
O The shape of an eight-sided competition mat for use in connection with multi-disciplined fighting competitions (Zuffa, Inc., U.S. Reg. No. 2,098,577).
O The motion in which the door of a vehicle is opened (Lamborghini, U.S. Reg. No. 2793439, “The doors move parallel to the body of the vehicle but are gradually raised above the vehicle to a parallel position”).
The key to obtaining trademark rights to a nonconventional mark is establishing that the mark is capable of functioning as a source indicator, meaning that consumers are able to identify the mark as being associated with the maker or provider of a product or service.
Demonstrating this source-identifying function tends to be more difficult with non-traditional marks, and many have tried, but failed, to register a nonconventional mark with the USPTO. In addition to Fender, other notable failures include Harley-Davidson’s attempt to obtain federal trademark rights to the exhaust sound of its motorcycles and drug manufacturer Organon’s attempt to register an orange flavor for its anti-depressant medication.
As competition for customers becomes more and more fierce, and as marketers become more and more creative, providers of goods and services are likely to continue their efforts to establish brand recognition through nonconventional marks.
- Tucker Barr
Tucker Barr is an associate in the Litigation Group and Intellectual Property Team at Arnall Golden Gregory LLP (tucker.barr@agg.com). Our firm serves the business needs of growing public and private companies, helping clients turn legal challenges into business opportunities. We don't just tell you if something is possible, we show you how to make it happen. Please visit our website for more information, http://www.agg.com/.
Wednesday, July 8, 2009
Theft at Goldman Sachs: Even the Biggest Vulnerable to Trade Secret Loss
We just learned that Goldman Sachs, the venerable investment bank and one of the major movers in the U.S. financial markets, suffered a major security breach, one that teaches just how vulnerable companies are to rapid theft and potential devaluation of their trade secret information.
We know of the breach because the United States just lodged criminal charges against a former Goldman employee, a highly paid ($400K per year) programmer and vice-president for equity strategy tasked with developing one of the firm's most sophisticated trading programs. The facts are startling: the programmer, before he left to work for a Chicago firm, transferred computer code directly from Goldman's server to a London-registered computer server in Germany. Goldman makes it money, in part, using programs like this one to execute trades. This program delivered millions of dollars of value every year to the bank. So sophisticated was the program that the United States alleges in the criminal filings that it could be used to "manipulate markets."
The stolen program thus fits consummately the definition of a trade secret. With its theft disclosed, what are Goldman’s next steps?
An unnamed source reports that the investment bank say it has "secured its systems," http://tinyurl.com/m2gctg, but has the damage been done? We do not know where the actual code is now, or whether Goldman and/or the United States have foreclosed any possible future transfer. In the hands of another bank, with the right implementation, the program could be used to devastating effect. We wonder, too, whether Aleynikov (and his new firm if it employed him for any length of time) will be the subject of a civil lawsuit by Goldman to enjoin any work on similar trading models.
Another major question is how Goldman allowed Aleynikov to purloin a "crown jewel" application in the first place. The detection and response systems may have worked well, as one commentator observes in a New York Times piece, http://tinyurl.com/klnn28, but shouldn't an institution as large as Goldman have had controls to flag the export and data transfer of such commercially sensitive code?
For businesses trying to protect their own confidential business information, the story is a caution and reminder that trade secrets are only as valuable as the reasonable precautions taken to prevent their disclosure. For online data, that means, for example, restricted access, password protection, and it may mean, in addition to regular monitoring, firewall and other protocols to limit data transfer.
-Andrew Flake
Andrew B. Flake is a partner in the Litigation Group at Arnall Golden Gregory LLP (andrew.flake@agg.com). Our firm serves the business needs of growing public and private companies, helping clients turn legal challenges into business opportunities. We don't just tell you if something is possible, we show you how to make it happen. Please visit our website for more information, www.agg.com.
We know of the breach because the United States just lodged criminal charges against a former Goldman employee, a highly paid ($400K per year) programmer and vice-president for equity strategy tasked with developing one of the firm's most sophisticated trading programs. The facts are startling: the programmer, before he left to work for a Chicago firm, transferred computer code directly from Goldman's server to a London-registered computer server in Germany. Goldman makes it money, in part, using programs like this one to execute trades. This program delivered millions of dollars of value every year to the bank. So sophisticated was the program that the United States alleges in the criminal filings that it could be used to "manipulate markets."
The stolen program thus fits consummately the definition of a trade secret. With its theft disclosed, what are Goldman’s next steps?
An unnamed source reports that the investment bank say it has "secured its systems," http://tinyurl.com/m2gctg, but has the damage been done? We do not know where the actual code is now, or whether Goldman and/or the United States have foreclosed any possible future transfer. In the hands of another bank, with the right implementation, the program could be used to devastating effect. We wonder, too, whether Aleynikov (and his new firm if it employed him for any length of time) will be the subject of a civil lawsuit by Goldman to enjoin any work on similar trading models.
Another major question is how Goldman allowed Aleynikov to purloin a "crown jewel" application in the first place. The detection and response systems may have worked well, as one commentator observes in a New York Times piece, http://tinyurl.com/klnn28, but shouldn't an institution as large as Goldman have had controls to flag the export and data transfer of such commercially sensitive code?
For businesses trying to protect their own confidential business information, the story is a caution and reminder that trade secrets are only as valuable as the reasonable precautions taken to prevent their disclosure. For online data, that means, for example, restricted access, password protection, and it may mean, in addition to regular monitoring, firewall and other protocols to limit data transfer.
-Andrew Flake
Andrew B. Flake is a partner in the Litigation Group at Arnall Golden Gregory LLP (andrew.flake@agg.com). Our firm serves the business needs of growing public and private companies, helping clients turn legal challenges into business opportunities. We don't just tell you if something is possible, we show you how to make it happen. Please visit our website for more information, www.agg.com.
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