The Intellectual Property Year in Review – Trademarks

Erik M. Pelton | Erik M. Pelton & Associates, PLLC

The last year has been another busy one in the work of trademark law. In
just a few weeks, the Supreme Court will hear the In re Brunetti case to
determine whether bar on obscene marks in 2(a) of the Lanham Act violates
the First Amendment. Other interesting recent cases include issues on
standing at the TTAB, acquired distinctiveness, and fictional restaurants.
This paper summarizes some of the more newsworthy and interesting
trademark cases in the last 12 months.

Royal Crown Co., Inc., et al. v. The Coca-Cola Co.,

No. 2016-2375, slip op. at 9, 16 (Fed. Cir. June 20, 2018)

Issue(s): Whether the term ZERO in Coca-Cola’s mark, if not generic, is at

least highly descriptive and thus ineligible of trademark registration.

Holding: The Federal Circuit reversed the decision of the Trademark Trial
and Appeal Board (the “Board”), holding that the Board committed multiple
errors when analyzing whether Coca-Cola’s use of the term ZERO in 17
trademark applications was generic or highly descriptive and remanded the
case.

Case Summary: Both the Royal Crown Company and Coca-Cola compete in
the beverage market by manufacturing and distributing various brands of
beverages. Both companies also manufacture and distribute beverages that
use ZERO as an element in their marks. Coca-Cola filed 17 trademark
applications for marks including the term ZERO, with the USPTO. In each
application, the USPTO issued an office action, requiring Coca-Cola to
disclaim the term ZERO because it “merely describes a feature of applicant’s
goods, namely, calorie or carbohydrate content of the goods.” Coca-Cola
claimed that each of its mark containing the term ZERO had acquired
distinctiveness under Section 2(f) of the Lanham Act, as part of a “family of
marks” and refused to disclaim the term. Royal Crown filed oppositions
against these marks, arguing that (1) the marks were merely descriptive
and had not achieved sufficient acquired distinctiveness to indicate the
source of Coca-Cola’s goods, and (2) the term ZERO is generic when applied
to particular beverage products and thus cannot indicate the source of
goods.
The Federal Circuit began its analysis by stating that Coca-Cola has
“conceded that ZERO is not inherently distinctive in association with the
genus of goods at issue – soft drinks, energy drinks, and sports drinks”
because it sought registration under Section 2(f) and thus is, to some
extent, descriptive. The Circuit found that the Board erred in its legal
framing of the genericness inquiry because “it failed to examine whether
ZERO identified a key aspect of the genus at issue and it failed to examine
how the relevant pubic understood the brand name at issue when used with
the descriptive term ZERO.” Per In re Cordua Restaurants, 823 F.3d 594
(Fed. Cir. 2016), the second prong of the genericness test examines not only
whether the public would use the term to mean the genus, but also whether
it would understand the term to refer to the genus, in whole or in part. The
court found that the Board, by considering only evidence that ZERO referred
to the entire genus of soft drinks, neglected to deliberate whether the term
generically addressed “zero calorie beverages as a sub-group.” Therefore,
the Federal Circuit remanded on this issue.

The opinion further noted that the Board committed error in failing to apply
a “sliding-scale” approach to the balancing of the alleged descriptiveness of
the ZERO mark against Coca-Cola’s evidence of acquired distinctiveness. The
Board did not make any findings as to the degree of descriptiveness
conveyed by the term ZERO in the marks, and thus the Board failed to
assess Coca-Cola’s evidence through an exacting lens. Thus, the Federal
Circuit remanded stating that “the Board must make an express finding
regarding the degree of the mark’s descriptiveness on the scale ranging from
generic to merely descriptive, and it must explain how its assessment of the
evidentiary record reflects that finding.”

The opinion also criticizes the Board for relying on Coca-Cola’s survey from
five years before the close of testimony, noting both its age and that it
sought only to determine if consumers “associated” ZERO with one or more
companies’ products, which “does not imply that a consumer would be
confused by seeing a ZERO branded product under a different label, nor
does it address what meaning consumers attach to the term ZERO.”
 Adidas America, Inc. v. Skechers USA, Inc.,
890 F.3d 747 (9th Cir. 2018)

Issue: Whether the district court correctly issued a preliminary injunction,

prohibiting Sketchers from selling shoes that allegedly infringed and diluted
adidas’ Stan Smith trade dress and the Three-Stripe trademark.

Holding: The Ninth Circuit affirmed the district court’s preliminary injunction
to the extent it prevents the sale of its Skechers’ Onix shoe, but not to the
extent it prevents the sale of Skechers’ Cross Court shoe. The decision was
2-1, with Judge Clifton concluding that he would have affirmed the
preliminary injunction in full.

Case Summary: The court first addressed the Onix shoe, and the claim that
it infringed adidas’ unregistered Stan Smith trade dress, noting that
Skechers challenged only two elements of adidas’s claim: (1) whether the
Stan Smith had acquired secondary meaning and (2) whether there was a
substantial likelihood of confusion between the Stan Smith and the Onix.
With respect to the first element, the court found that the Stan Smith shoe
design (adidas’s best-selling shoe of all time) had likely acquired secondary
meaning. Then, turning to the issue of likelihood of confusion, the court
expressed little doubt that the public would reasonably think that both shoes
came from the same source. Indeed, the court deduced that Skechers
intended to confuse consumers, noting that Skechers used metadata tags to
direct consumers who searched for “adidas stan smith” to the Onix web
page. Thus, the court concluded that the District Court had not erred in
finding that adidas was likely to succeed on its trade dress claim. Further, it
concluded that the Onix’s continued sale was likely to cause adidas
irreparable harm.

adidas Three-Stripe Shoe Sketchers’ Cross Court Shoe

The court reached a different conclusion regarding adidas’ efforts to obtain a
preliminary injunction on the Sketchers’ Cross Court shoe, finding that even
if adidas had established a likelihood of success on the merits, it had not
shown that it was likely to suffer irreparable harm. In particular, adidas did
not put forth evidence that Sktechers harmed its ability to control its brand
image because consumers would associate the allegedly lesser-quality Cross
Courts with adidas and its Three-Stripe mark. The court stated that even if
Sketcher made inferior quality products (or consumers believed that), there
was no evidence that consumers would associate Sketchers’ goods with
adidas, nor was there any evidence to conclude that any potential confusion
would cause adidas irreparable harm. Therefore, the court determined that
the District Court abused its discretion when it issued a preliminary
injunction for the Cross Court shoe because adidas failed to provide
“concrete evidence” as is required to obtain an injunction in a trademark.

Viacom Int’l v. IJR Capital Invs., L.L.C.,

891 F.3d 178 (5th Cir. 2018)

Issue(s): The Fifth Circuit addressed three issues: (1) whether Viacom
established ownership of the common law Krusty Krab mark through sales
and licensing; (2) whether Viacom’s mark has acquired distinctiveness; and
(3) whether IJR’s use of the mark creates a likelihood of confusion as to
source, affiliation, or sponsorship.

Holding: The Fifth Circuit affirmed the district court finding that IJR’s
attempt to open proposed Krusty Krab restaurants in California and Texas
infringed on Viacom’s trademark in the fictional Krusty Krab restaurant from
the television services “SpongeBob SquarePants.” Even though Viacom has
never used the Krusty Krab name in connection with restaurant services, the
court found that fictional elements are capable of trademark protection.
Case Summary: Viacom sued IJR for infringing on Viacom’s common law
trademark of The Krusty Krab, a fictional fast food restaurant in the popular
cartoon television series “SpongeBob SquarePants,” after IJR took steps to
open seafood restaurants using the same name. Viacom’s “SpongeBob
SquarePants” TV series revolves around a sea sponge of that name who
wears square shorts, lives in an underwater pineapple, and works at The
Krusty Krab restaurant, which played a prominent role in the series
(appearing in 166 of the 203 episodes). Although Viacom licensed The
Krusty Krab mark for a variety of products, it did not license it for
restaurants nor did it register the mark with the USPTO. In 2014, IJR’s
owner, Javier Ramos, decided to open seafood restaurants in California and
Texas. Ramos asserts that he was describing the crusted glaze applied to
cooked seafood when his friend Ivan Murilla suggested naming the
restaurant “Crusted Crab,” which quickly became “The Krusty Krab.” IJR filed
a trademark intent to use application for THE KRUSTY KRAB, which the
USPTO granted without opposition from Viacom. Viacom sent a cease-and-
desist letter demanding that IJR withdraw the trademark application and the
use of the mark. IJR refused, and Viacom sued for trademark infringement
and unfair competition under the Lanham Act, among other claims.

On appeal from the district court’s grant of summary judgment to Viacom,

the Fifth Circuit considered three issues. First, it addressed whether Viacom
used The Krusty Krab as a source identifier. While Viacom has never
registered The Krusty Krab mark, the Supreme Court has held that the
Lanham Act “protects qualifying unregistered marks.” The Circuit, therefore,
decided that it is appropriate to extend trademark protection to the specific
elements of a television show and found The Krusty Krab “analogous to
protected marks like the Daily Planet, General Lee, and Conan the
Barbarian.” Next, the court considered whether The Krusty Krab mark would
be recognized, by itself, as identifying a source. Finding that The Krusty Krab
appeared in over 80% of its episodes (also in films, the musical, and
featured online in video games), and played a “central role” in SpongeBob
SquarePants, and also noting that Viacom had extensively licensed the
mark, the court concluded that there was “immediate recognition” of the
mark “as an identifier of the source for goods and services.”

Next, the court addressed whether, based on seven specific factors, The
Krusty Krab had acquired distinctiveness through secondary meaning — i.e.,
whether the public has come to associate the mark with only Viacom. The
court found that the first four factors (the length and manner of the mark’s
use, the volume of sales, the amount and manner of advertising, and the
nature of use of the mark in newspapers and magazines) all supported
Viacom as the Krusty Krab has “continually been depicted in the advertising
and promotion of the franchise over the past eighteen years, and it is used
in the sale of products.” Accordingly, while it found there was no evidence
regarding the fifth and sixth factors (consumer-survey evidence and direct-
purchaser testimony), and that the evidence regarding the seventh factor
(the defendant’s intent in copying the plaintiff’s mark) was inconclusive, the
court concluded that “The Krusty Krab identifies the source of the products,
which is Viacom, the creator of the ‘SpongeBob SquarePants’ fictional
universe.”

Finally, the court addressed the third issue—whether IJR’s use of The Krusty
Krab created a likelihood of confusion based on the “so-called ‘digits’ of
confusion.’” The court found that most of the digits supported Viacom—
specifically, the first (the strength of the mark infringed), second (the
similarity of the marks), third (the similarity of products or services), and
seventh (evidence of actual confusion). As to actual confusion, the court held
that there was anecdotal evidence of actual confusion based on a survey
which revealed that 30 percent of respondents believed The Krusty Krab was
“operated by, affiliated or connected with, or approved or sponsored by
Viacom” and that “35 percent of respondents associated such a restaurant
with Viacom.” Accordingly, based on the above-mentioned four digits, the
Fifth Circuit affirmed the district court’s decision to grant summary that IJR’s
use of The Krusty Krab name infringed Viacom’s trademark.

Disney Enters., Inc. v. Sarelli,

322 F. Supp. 3d 413 (S.D.N.Y. 2018)

Issue on Summary Judgment: Whether there is trademark infringement

where a company offers themed entertainment party services that feature a
wide variety of costumed characters, which allude to well-known registered
characters, but consumers are not actually confused regarding the source of
the services?

Holding: On August 9, 2018, Judge Daniels of the Southern District of New

York held that a company that provides party services featuring a wide
variety of costumed characters for entertainment purposes, but does not
confuse its customers regarding the source of its costumed characters, is not
liable for trademark infringement—and granted summary judgment to the
Defendants on that single claim, while denying summary judgment
regarding Plaintiffs’ trademark dilution and copyright infringement claims,
allowing them to proceed.

Case Summary: Plaintiffs Disney, Marvel, and LucasFilm own the rights to
numerous fictional characters, including the Hulk and Darth Vader, while
Defendant Sarelli and his company, Characters for Hire, LLC (“CFH”),
operate a business that supplies costumed actors to portray characters at
private parties and corporate events. Rather than using Plaintiffs’ registered
trademarks, however, CFH identifies them with generic names like “Big
Green Guy” (Hulk) and “The Dark Lord” (Darth Vader). Similarly, CFH
advertised themed parties that referenced Plaintiffs’ movies, such as
“Avenging Team” (The Avengers), and “Star Battles” (Star Wars). When CFH
did use Plaintiffs’ registered trademarks, it typically used different fonts,
styles, and colors, and CFH disclaimed (in customer contracts, for instance)
any similarity between its characters’ costumes and Plaintiffs’ characters. In
claiming consumer confusion, Plaintiffs referred to the reviews on CFH’s
website, where customers referenced Plaintiffs’ characters by their
trademarked names. The Plaintiffs also relied on both Better Business
Bureau complaints about CFH and unfavorable Yelp reviews in alleging
customer confusion.

The District Court held that under the eight-factor Polaroid test, there is no
likelihood of confusion, and thus granted CFH summary judgment on the
claims of trademark infringement, unfair competition, and false designation.
The court noted that the Polaroid test is “not mechanical,” but instead
focuses “on the ultimate question of whether, looking at the products in their
totality, consumers are likely to be confused.” Accordingly, while the court
analyzed each factor separately—finding that two favored Plaintiffs, while the
rest favored CFH—it ultimately concluded that the balance of factors favored
CFH. The court appeared most persuaded by the Plaintiffs’ inability to show
any actual consumer confusion or bad faith on CFH’s part in adopting
Plaintiffs’ marks. For instance, the court found that while some negative
reviews on CFH’s website referenced the trademarked names of Plaintiffs’
characters, none of these reviews (and no other evidence) showed any sign
of confusion as to the origin or source of CFH’s services. Similarly, the court
found it immaterial that children may be confused as to the source of CFH’s
services because CFH’s actual customers are adults. Further, while Plaintiffs
had argued that disclaimers in CFH’s event contracts, the use of slightly
altered character names, and CFH’s removal of Plaintiffs’ trademarked
names from its online customer reviews all evidenced CFH’s bad faith, the
court disagreed. Instead, it found that these actions were more likely to put
customers on notice that CFH’s services were not sponsored by or affiliated
with Plaintiffs and, in fact, support a finding that CFH actively sought to
avoid deceiving customers.

The court found the record before it insufficient to justify granting either
party summary judgment on Plaintiffs’ trademark dilution and copyright
infringement claims. With respect to trademark dilution, the court found that
a reasonable jury could conclude that Plaintiffs’ marks would suffer from
negative association formed as a result of CFH’s conduct.

Rebecca Curtin v. United Trademark Holdings, Inc.,

Opposition No. 91241083
Disclaimer: EMP&A is counsel for Applicant

Issue: Whether a law school professor, as a general consumer, has standing

to oppose the mark RAPUNZEL for dolls and toy figures.

Holding: Consumers, like competitors, may have a real interest in keeping

merely descriptive or generic words in the public domain, (1) to prevent the
owner of a mark from inhibiting competition in the sale of particular goods,
and (2) to maintain freedom of the public to use the language involved, thus
avoiding the possibility of harassing infringement suits by the registrant
against others who use the mark when advertising or describing their own
products. Therefore, members of the consuming public have standing to
oppose on merely descriptive or generic grounds.
Case Summary: Opposer Rebecca Curtin (“Curtin”), a trademark law
professor at Suffolk University Law School (“SULS”) filed a Notice of
Opposition through the intellectual property clinic at SULS. Curtin’s Amended
Notice of Opposition, featuring evidence of an online petition attempted to
demonstrate that the community would be harmed if UTH’s RAPUNZEL mark
is registered on the Principal Register. The Amended Notice alleged four
claims: (1) RAPUNZEL is merely descriptive of dolls and toy figures; (2)
RAPUNZEL is generic and incapable of identifying a source of goods; (3)
RAPUNZEL is functional under Section 2(e)(5) of the Trademark Act; and (4)
UTH has committed fraud. UTH filed an Amended Motion to Dismiss,
claiming that Curtin does not have standing to oppose its mark on
descriptiveness and genericness grounds and that its mark is not functional
as it is a standard character mark.

With respect to standing, the Board found that Curtin “has sufficiently
alleged that she has a direct and personal stake in the outcome of the
proceeding and that her belief of damage has a reasonable basis in fact,”
and thus she has standing. The Board was not persuaded by UTH’s
argument that Curtin is not a competitor and has not differentiated herself
from any other potential consumer of dolls; instead, it held that because she
purchases goods identified by fairytale characters, she has a real interest in
the registration of UTH’s mark. Further, the Board stated that “Opposer is
not required to allege that she is a competitor in the doll and toy figure
industry to support her claims that the applied-for mark fails to function as a
trademark, or is merely descriptive of or generic for the identified goods.”
Therefore, the Board concluded, “members of the consuming public may
have a real interest in preventing exclusive appropriation of merely
descriptive or generic terms by trademark owners.” As such, Curtin had
sufficiently shown standing with respect to her descriptiveness claim.

The Board agreed with UTH that Curtin’s claim under Section 2(e)(5) of the
Trademark Act is not proper and dismissed the claim with prejudice.
“Trademark Act Section 2(e)(5) has no bearing on an application to register
a word mark.”

Impact: General, ordinary consumers have standing to oppose a USPTO

trademark application before the Board, at least with respect to
descriptiveness and genericness claims.

In re Brunetti,
877 F.3d 1330 (Fed. Cir. 2017)
Issue: Whether the Board erred in concluding that Brunetti’s FUCT mark
comprises “immortal” or “scandalous” matter under Section 2(a) of the
Lanham Act.

Holding: The Federal Circuit found that Section 2(a)’s bar on registering
immortal or scandalous marks is an unconstitutional restriction of free
speech.

Case Summary: Erik Brunetti, founder of the lifestyle and clothing brand
FUCT, first sought to register the FUCT mark in 2011, but the USPTO denied
his registration because the mark is a “vulgar term.” Section 2(a), 15 U.S.C.
§ 1052(a), holds that “immortal” or “scandalous” matter cannot be
registered as a trademark. Brunetti appealed to the Board, but the Board
affirmed the Examining Attorney’s decision. Brunetti then appealed the
Board’s decision to the Federal Circuit. 1

First, the Federal Circuit addressed whether the mark FUCT is vulgar and
therefore scandalous. Substantial evidence undisputedly pointed that the
word “fuck” is vulgar, such as dictionary definitions, and therefore found the
Board did not err in finding the mark barred from registration under Section
2(a).

With respect to the constitutionality of Section 2(a)’s immoral and

scandalous provision, the Federal Circuit requested additional briefing after
the Supreme Court’s Tam decision. The Circuit rejects the government’s
argument that trademark registration implicates Congress’ power to spend
funds, stating that because the only exchange of funds flows from the
applicant to the USPTO, “Congress’ authority to direct funds is [] not
implicated by either the operating expenses necessary to examine a
proposed mark or the PTO’s ultimate grant of trademark registration.”
Similarly, the Federal Circuit rejects the argument that trademark
registration is a subsidy equivalent, claiming that benefits are not analogous
to Congress’ grant of federal funds.

The Federal Circuit further found that trademark registration is not a limited
public forum, “[t]hat registered marks also appear on the government’s
principal register does not transform trademark registration into a limited
public forum.” Simply put, the Federal Circuit found that the trademark

1
While Brunetti's Federal Circuit appeal was pending, the Supreme Court decided
Matal v. Tam, 137 S. Ct. 1744 (2017), which involved a related section of
trademark law barring registration of “disparaging” marks. The Supreme Court
found that prohibiting registration of “disparaging” marks violated the First
Amendment's Free Speech Clause.
register is just a database of marks that are used in commerce, with no
other true function, and thus it would be unconstitutional to restrain speech
in the form of trademark registration.

Ultimately, the Federal Circuit held that Section 2(a)’s immorality and
scandalousness provision regulates the expressive speech components of a
trademark, such that the constitutionality of the provision is subject to strict
scrutiny. Under the strict scrutiny standard, the Court found “[t]here is no
dispute that Section 2(a)’s bar on the registration of immoral and scandalous
marks is unconstitutional.” Further, the Court ruled that Section 2(a)’s bar
on immoral and scandalous marks is unconstitutional, even if it was treated
as a regulation of purely commercial speech under an intermediate scrutiny
framework. The Court concluded that “the government does not have a
substantial interest in protecting the public from scandalousness and
profanities,” among other things, and thus stated that there is no
“reasonable definition” of the statutory terms “scandalous” or “immoral” that
would preserve constitutionality.

Issue Before SCOTUS: Whether the bar on registration of “immortal” and

“scandalous” trademarks is an unconstitutional violation of the Free Speech
Clause of the First Amendment.

Hearing Scheduled for Monday, April 15, 2019 at 10:00am.

In re DePorter,
Serial No. 87229711 (T.T.A.B. Jan. 29, 2019) [precedential]

Issue: Whether the standard character mark #MAGICNUMBER108 is merely

informational matter that fails to function as a trademark to indicate the
source of Applicant’s clothing goods under Sections 1, 2 and 45 of the
Trademark Act.

Holding: The Board affirmed the USPTO’s refusal to register the mark.

Case Summary: The Examining Attorney refused registration of the

applied-for mark on the basis that the public will not perceive the term as a
trademark that identifies the source of Applicant’s goods, but rather only as
conveying an informational message. For a proposed mark to receive
registration, it must function as an identifier of the source of applicant’s
goods or services. 15 U.S.C. §§ 1051, 1052, 1127. The Examining Attorney
submitted evidence of several third-parties using #MAGICNUMBER108 as
part of messages posted on social media sites, including Instagram and
Twitter, during and after the 2016 World Series. The Examining Attorney
found that the third-party use evidence demonstrated users “expressing
support for the Chicago Cubs and their World Series win.” Below are some
examples of social media captions.

Joe Woschitz: “#FlyTheW And 108 years later the Chicago

Cubs are World Series Champions again! #MagicNumber108
#GoCubsGo #LetsGo #WorldSeries.” Office Action, 2/16/2017,
TSDR at 18 (Examining Attorney: “Here, the hashtag
#magicnumber108 would be viewed as a reference to the Cubs’
World Series win, for the first time in 108 years, as stated in the
text of the tweet.”).

Lili Mirojnick: “I have tears in my eyes. And I’m a @Yankees

fan. Congrats Chi-Town...#MagicNumber108.” Office Action,
2/16/2017, TSDR at 19 (Examining Attorney: “Here, again, the
hashtag #magicnumber108 would be viewed as a reference to
the Cubs’ World Series win.”).

Specimen from Application Serial No. 87229711 filed November

8, 2016

The Examining Attorney also put into evidence social media posts from
entities associated with Applicant that similarly indicate information about
the Chicago Cub’s World Series victory. Further, the Examiner submitted
evidence of the significance of the number 108 in baseball and to the
Chicago team specifically: “[A]pplicant compiled a list of appearances of the
number 108 in baseball in general (such as 108 stitches on a baseball) and
in relation to the Chicago Cubs baseball team in particular (such as the
distance to foul poles in Wrigley field in meters) to predict that the Chicago
Cubs baseball team would win the 2016 World Series, 108 years after their
previous World Series win.”

Persuaded by the evidence of record, the Board found that “Applicant’s

proposed mark #MAGICNUMBER108 has been used extensively as a hashtag
to identify the Chicago Cubs’ World Series appearance and win.” However,
the Board highlighted that “not every combination of a hash mark and word
or phrase is or will be a hashtag,” and thus not all hash marks are
informational.

Impact: Although Applicant may have been the first to use the
#MAGICNUMBER108 phrase and/or hashtag, the message of the phrase has
been extensively been used to informationally convey a reference to the
Cubs’ victory in the 2016 World Series, and thus is not registrable.