Friday, September 9, 2011

Defendant not liable for trademark infringement where plaintiff has no enforceable rights in the mark

Knights Armament Company and Optical Systems Technology, Inc. worked together for a period of time to sell night vision scopes to the U.S. government.  OSTI had the manufacturing capabilities, but needed Knights' marketing skills.  The harmonious relationship lasted for some time, but a dispute arose as to who owned the technology behind the scopes.  Knights filed an intent-to-use federal trademark application for the marks "Universal Night Sight" and "UNS."  OSTI sought cancellation and its own registrations for those same marks (which Knights opposed).  Those proceedings were stayed at the U.S. Patent and Trademark Office while the parties litigated the issues in federal court.

OSTI accused Knights of misappropriating its trade secrets and infringing its trademarks.  OSTI lost both of these issues at the trial level, and asked the Eleventh Circuit for review.

Trade Secret Statute of Limitations

The statute of limitations to bring a claim for misappropriation of a trade secret is 3 years under Florida's law.  See Fla. Stat. § 688.007.  OSTI filed its counterclaim asserting such misappropriation on December 21, 2007.  Thus, OSTI needed to learn of the misappropriation no earlier than December 21, 2004 -- otherwise the claim is time barred.  Problem is, OSTI offered the following in response to an interrogatory:
OSTI first became aware of [Knights'] intent to misappropriate OSTI's confidential information and trade secrets when [Knights] stated in a meeting that [Knights] and OSTI shared the UNS™ technology and [Maxin] stated that Knight was incorrect and that OSTI alone owned the technology.  OSTI learned through the April 21, 2003 letter from [the government] to [Knights], a copy of which . . . was emailed to OSTI on May 28, 2003[,] that [Knights] had attempted to misappropriate OSTI’s UNS™ drawings.
Further record evidence showed that OSTI had enough information that it should have been concerned, but didn't press the issue far enough.  Here is how the Court described the situation:

During 2003 and 2004, Maxin testified that OSTI had heard rumors in the marketplace (and even received anonymous tips) that [Knights] was developing a competing night vision device.  Yet OSTI or Maxin did nothing.  They did not do their due diligence.  It is incredible that, through discovery, they damningly admit, on the record, that they knew or suspected [Knights'] alleged misappropriation as early as March 2003.  In so doing, they lose on this issue.

OSTI's trade secret claim was therefore time barred, and the district court was correct to grant summary judgment to Knights on this issue.

Trademark Protection for the mark "Universal Night Sight"

Two issues needed to be addressed to resolve this issue.  First, the parties disputed ownership of the mark.  Second, Knights denied infringement.  OSTI won the battle here, but lost the war.

Ownership of a trademark goes to the senior user.  So whoever used the mark first will be considered the owner.   But prior to delving into the timing of usage, distinctiveness needed to be addressed.  Trademark protection is available to distinctive marks, which serve the purpose of identifying the source of goods or services.  The four categories of distinctiveness, in descending order of strength, are: (1) fanciful or arbitrary (i.e. Exxon for gas); (2) suggestive (i.e. drizzler for rain jackets); (3) descriptive (i.e. Tomapple for tomato-apple juice); and (4) generic (i.e. restaurant for a restaurant).  Generic marks do not get trademark protection, and descriptive marks are not protectable without establishing secondary meaning.

Here, OSTI was found to be the senior user (and thus the owner), but the mark was determined to be descriptive.  So OSTI needed to rely on secondary meaning -- the Court laid out the standard:
“A name has acquired secondary meaning when the primary significance of the term in the minds of the [consuming] public is not the product but the producer.”    Welding Servs., Inc., 509 F.3d at 1358.  The determination of whether a mark has acquired secondary meaning depends on “the length and nature of the name’s use, the nature and extent of advertising and promotion of the name, the efforts of the proprietor to promote a conscious connection between the name and the business, and the degree of actual recognition by the public that the name designates the proprietor’s product or service.”  Id.  The existence of a secondary meaning is a question of fact.  See Coach House Rest., Inc., 934 F.2d at 1560. 
OSTI first used the marks in 1999 and 2000.  Knights first used the marks in 2003.  But in the interim, 1999-2003, the products weren't clearly marked to indicate that OSTI was the producer.  In other words, consumers had no reason to associate the "Universal Night Sight" mark with OSTI's product.  Thus, it was impossible for the mark to have acquired secondary meaning in this time.  So, when Knights used the mark in 2003, it was simply using a descriptive mark that was not entitled to protection.

Decision affirmed.

Knights Armament Co. v. Optical Systems Technology, Inc., Case No. 09-14480 (11th Cir. Sept. 2, 2011)

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