Dear Trademark Owners, Don't Wait 4 Years to Assert Your Unfair Competition Claims

Franchisor Western Sizzlin had a franchisee in Kissimmee from 1995 through 2004.  The location was taken over by Pinnacle Business Partners ("PBP").  While PBP did make royalty payments to Western Sizzlin in 2005, the parties were unable to come to an agreement, and PBP declined to sign a franchise agreement.  Western Sizzlin demanded PBP remove its "Sizzlin Grill" signs at that time due to their similarity to Western Sizzlin's "Western Sizzlin" trademarks.  

Four years later, in November 2009, Western Sizzlin visited the Kissimmee location and saw the signs and decor were the same.  Western Sizzlin demanded royalties and that PBP cease its usage.  Western Sizzlin then sued for trademark infringement as well as unfair competition, unjust enrichment, and violation of the Florida Deceptive and Unfair Trade Practices Act.  PBP sought summary judgment of the unfair competition, unjust enrichment, and FDUTPA claims as time barred.  Specifically, each of those claims has a four-year statute of limitations, and Western Sizzlin did not sue until 2010 -- five years after it knew of the alleged violations.  Western Sizzlin responded by arguing that there was a dispute as to how much knowledge Western Sizzlin had as to PBP's alleged violations in 2006.  But Western Sizzlin did not offer evidence to support this argument.

As its second argument, Western Sizzlin explained that a PBP representative previously assured Western Sizzlin that PBP would change the signage, but Western Sizzlin did not discover until November 2009 that PBP hadn't.  Thus, PBP should be equitably estopped from asserting the statute of limitations.  The Court did not agree:

Under Florida law, equitable estoppel arises when one party lulls another party into a disadvantageous legal position.  Major League Baseball v. Morsani, 790 So. 2d 1071, 1076 (Fla.2001).  “Equitable estoppel presupposes a legal shortcoming in a party’s case that is directly attributable to the opposing party’s misconduct. The doctrine bars the wrongdoer from asserting that shortcoming and profiting from his or her own misconduct. Equitable estoppel thus functions as a shield, not a sword, and operates against the wrongdoer, not the victim.”  Id.

In this case, the “shortcoming” is that the Plaintiff waited more than four years after learning of the alleged violations before filing suit.  A simple assurance that the sign would be changed could in theory “lull” a party into delaying the filing of suit for the length of time needed to change – or at least remove – the sign, perhaps a few weeks in this scenario.  It would not be enough to lull a party into delaying for more than forty-eight months.  And there is no suggestion that the Defendant somehow prevented the Plaintiff from visiting the restaurant, or even just driving by it, to see if the sign had been changed.  WSC has failed to establish any grounds for the application of equitable estoppel here.

Motion for Summary Judgment granted.

Western Sizzlin Corp. v. Pinnacle Business Partners, LLC, slip op., Case No. 6:10-cv-1452 (M.D. Fla. Nov. 23, 2011) (J. Presnell)

Groupon's daily deals offer only a single price, and thus do not infringe a "plurality of customized price schedules" claim

I've written previously about the eWinWin v. Groupon patent infringement case pending in the Middle District. Essentially, eWinWin's patents (3 of them have been asserted) relate to volume pricing systems and methods in which the price of an item decreases as demand increases.  In other words, as the quantity of an item purchased increases, the price offered to all who have agreed to buy it decreases.  Exemplary of this system is Claim 1 from one of eWinWin's asserted patents (U.S. Patent No. 7,181,419):

A business transaction method, comprising:
     maintaining buyer profiles in a data storage device;
     deriving a plurality of customized price schedules for a product based on at least one buyer profile, each of the plurality of customized price schedules varying in accordance with a quantity of the product ordered from a plurality of deal rooms;
     electronically offering the product for sale in at least one of the plurality of deal rooms, the product being offered in each deal room in accordance with at least one of the plurality of price schedules; and
     displaying a listing of at least one of the plurality of deal rooms in which the product is offered when at least a subset of criteria indicated for a product search matches criteria describing the product.

The Court previously construed the underlined language to mean: 

creating two or more price schedules for a product based on information contained in at least one buyer's profile, each price schedule consisting of a list of two or more prices for the product that vary based on a quantity of the product ordered from two or more deal rooms.

Thus, to survive summary judgment, eWinWin had to offer evidence that Groupon's system created two or more price schedules for a product, and each price schedule had at least two prices.  

eWinWin looked to combine Groupon's daily deal with its Groupon Bucks to satisfy this limitation.  Groupon's daily deal provides a single discounted price for an item if a sufficient number of users sign up for the deal.  Groupon's Groupon Bucks provide users an incentive for referring new users to the Groupon system.  For instance, if you refer a user to Groupon, and that new user buys a Groupon deal, you may get 10 Groupon Bucks.  You could then use those Groupon Bucks to purchase a Groupon deal (including, perhaps, the same deal you referred your friend to).  eWinWin argued that this created 2 prices for the deal: the price your friend paid, and the price you paid (including the discount of your Groupon Bucks).  The Court was not convinced.  The price of the deal never changed -- only the method of payment did.  Furthermore, to the extent there was any price difference (which the Court concludes there was not), the difference was not related to an increase in the quantity of goods sold.  Had your friend purchased the deal without being referred by you, the same quantity of goods would have been sold, and you would have been charged the same amount as your friend.

Summary Judgment granted to Groupon on its non-infringement positions.  Only 1 claim remains -- Groupon's counterclaim that eWinWin infringes one of Groupon's patents.

eWinWin v. Groupon, slip op., Case No. 8:10-cv-2678 (M.D. Fla. Nov. 23, 2011) (J. Bucklew)

Noerr-Pennington Immunity and Trademark Registrations

PODS sued ABF Freight Systems on a number of trademark infringement theories.  PODS owns trademark registrations for the term "PODS", the PODS logo, and "PODS PORTABLE ON DEMAND."  In advertising its competing storage solutions, ABF uses the term "pods" throughout its website.  Additionally, ABF has purchased the "pods" keyword for advertising purposes with Google and other search engines.  In defense, ABF filed a number of counterclaims and affirmative defenses.   At issue here are some of ABF's counterclaims, and one affirmative defense.


Common Law Unfair Competition


ABF asserted as a counterclaim that PODS' lawsuit was unfair competition because PODS "has no objective or subjective basis for believing ... that consumers are likely to be confused by ABF's use of the term 'pod' or 'pods.'"  ABF relied on Ohio law for the proposition that "lawsuits implemented with the design to gain an unfair advantage over a competing business are a basis for a common law suit for unfair competition."  Problem is, as the Court recognized, Florida law requires an unfair competition claim to include two elements:
(1) deceptive or fraudulent conduct of a competitor; and
(2) likelihood of consumer confusion

ABF's reliance on Ohio law didn't cut it, so the Court dismissed this counterclaim (without prejudice, should ABF be able to assert the elements of a Florida common law unfair competition claim).

Sherman Act Violation & Noerr-Pennington Immunity


Next, ABF accused PODS of attempted monopolization in violation of the Sherman Act by registering trademarks for the "generic term" "pods" and asserting those trademarks against competitors.  PODS responded by relying on Noerr-Pennington immunity.

Generally, the First Amendment immunizes a party from liability for petitioning the governement for redress from an injury.  ThisNoerr-Pennington immunity (named after the two cases from which it derives) extends to litigation: "Engaging in litigation to seek an anticompetitive outcome from a court is First Amendment activity that is immune from antitrust liability."  Like most things in the law, there is an exception.  Namely, a sham pleading.  You are immune from liability if you file a lawsuit, except if that lawsuit is a sham pleading.  The test for whether the lawsuit is a sham pleading considers: (1) whether the pleading is objectively baseless; and (2) whether the plaintiff brought the lawsuit did so with a subjective motivation to interfere directly with the business relations of a competitor.

ABF's argument under the sham exception is generally that PODS should know the 'pods' mark is generic, and thus it shouldn't assert its registrations.  The law, however, does not see things that way.  The 'pods' trademark registrations themselves are evidence that the marks are not generic.  ABF may be able to come forward evidence that they have become generic, but until they, they are presumed otherwise.  Indeed, ABF is seeking to cancel PODS's registrations.  Until then, the lawsuit and cease-and-desist letters are not shams.  So Noerr-Pennington immunity applies, and the counterclaim must be dismissed.

Unclean Hands Affirmative Defense


PODS also asked the Court to strike ABF's affirmative defense of unclean hands.  The Court's reasoning for doing so:

In trademark infringement suits, the doctrine of unclean hands requires allegations "specifically related to the trademark which is at issue and not collateral to the trademark itself."  Immuno Vital, Inc. v. Golden Sun, Inc., 49 F. Supp. 2d 1344, 1361 (S.D. Fla. 1997); see also Coca-Cola Co. v. Howard Johnson Co., 386 F. Supp. 330, 335 (N.D. Ga. 1974) (a court in equity may "deny the enforcement of a trademark to one who has used the trademark, itself, as the vehicle of unlawful antitrust activities").  "Merely because a plaintiff has violated the antitrust laws ... does not result in 'unclean hands' on plaintiff's part."  Coca-Cola, 386 F. Supp. at 337
Taken as a whole, ABF's allegations in support of its affirmative defense of unclean hands are intertwined with the allegations in its counterclaims -- that PODS engaged in trademark misuse and violated unfair competition and antitrust laws by sending cease-and-desist letters and filing suit.  Because those activities are not specifically related to the trademark itself, ABF has not properly asserted an unclean hands defense.

Additionally, Noerr-Pennington immunity protected PODS against this affirmative defense.

Motion to dismiss counterclaims and strike affirmative defense granted.

PODS Enterprises, Inc. v. ABF Freight Systems, Inc., Case No. 8:11-cv-84 (M.D. Fla. Oct. 17, 2011) (J. Covington)

Vague Trade Dress Allegations Don't Survive Motion to Dismiss

Best of Everything of Southwest Florida ("BOE") claims Simply the Best ("STB") is knocking off its retail stores.  As one of its eight claims of violations of the Lanham Act, BOE accuses STB of violating BOE's trade dress.  STB sought dismissal of this count, arguing that BOE didn't adequately disclose what trade dress was being knocked off.  Plaintiff described its trade dress as follows:

Plaintiff's Trade Dress includes, but is not limited to the commercial impression, and overall look and feel of Plaintiff's stores, the unique and highly distinctive combination of separate aspects of the same, the presentation of Plaintiff's goods and the placement of its trade dress in such a a manner which creates a remarkably memorable and commercially pleasing shopping experience for Plaintiff's customers, its prospective customers and the consuming public.

The Court agreed with Defendant, finding this allegation "long on vague descriptions and short on facts."   This count was dismissed without prejudice.  Plaintiff has since filed an amended complaint with more details on the trade dress as reproduced below:

Plaintiff’s Trade Dress includes various combinations of the following features and  is presented so as to be a designation of origin and source identifier unique to  Plaintiff; specialized customer shopping boxes at a specially placed location in the store which are also displayed in such a way as to create a further visual effect; a ceiling to floor design and configuration which incorporates and is consistent with the other visual elements of the proprietary store; a certain musical arrangement collection and/or pattern played from a layout of sources that are proprietary; distinctively colored and patterned carpeting; strategically placed and shaped tables situated throughout the store in a proprietary pattern which takes into account Plaintiff’s innovative consumer purchasing data and Plaintiff’s proprietary collection of said data; textile table covers of a certain nonfunctional pattern and texture which are also used in an innovative relationship to the goods so displayed; the arrangement and layout of the goods; the unique contrast of fabric textures and colors used to cast display backgrounds through the store; a unique pattern of mirror displays and shapes; a specific and nonfunctional use of botantical presentations combined into various goods displays;  sign color, sign shapes, and location of signs and designations throughout and on the store, as well as in advertising and related displays; various color schemes; a color scheme of certain blue pantones throughout the store and in signage and advertising; and sales and inventory techniques which are believed by Plaintiff to be unique and which combine with the visual features as a part of the overall customer experience and impression. 

Defendant has answered that amended complaint.

Defendant also sought dismissal of the claim against an individually named defendant.  That allegation was based in part on a facebook posting which stated:

Simply the Best is modeled after a store called The Best of Everything where Weinzimmer and the Slottjes had spent time shopping while vacationing in Florida.  Upon returning to New York, they decided to open a similar store, even though Weinzimmer admits "we really didn't know much about the jewelry business," she says.

Recognizing that "an individual may be held liable for Lanham Act violations if she has actively caused the infringement as a moving, conscious force," the Court refused to dismiss this claim, as the discovery process would reveal whether or not she was a moving, conscious force behind the alleged infringement.

Motion to dismiss, granted in part.
Best of Everything of Southwest Florida, Inc. v. Simply the Best, LLC, Case No. 8:11-cv-1090 (Oct. 6, 2011) (J. Bucklew)