The issue arose in December 2012 when Tiffany contacted Costco regarding Costco’s sale of diamond engagement rings that were identified by in-store signs containing the word “Tiffany.” Though Costco allegedly removed all use of the word upon receiving Tiffany’s letter, Tiffany filed suit just 2 months later; citing dilution, counterfeiting, unfair competition, false and deceptive business practices, and false advertising, in violation of the Lanham Act and New York law.

Tiffany claimed that Costco’s use of its trademarked word, “Tiffany,” in connection with the sale of engagement rings, caused confusion among consumers and violated the Lanham Act as a matter of law. However, Costco argued that its use of the word did not constitute infringement and instead qualified as “fair use,” alleging the word “Tiffany” has become a generic term widely recognized as a descriptor for a particular type of ring setting. As part of its counterclaim, Costco sought to have Tiffany’s federal trademark invalidated on the same basis.

In support of its case, Costco argued that it only used the word “Tiffany” on signs for rings that had the “Tiffany setting” (a diamond solitaire situated among six prongs). Costco went on to highlight that it sold many other styles of diamond engagement rings identified by similar point-of-sale signs, each of which displayed the name of the corresponding ring’s setting (such as Channel and Pave); none of which used the word “Tiffany.”

In 2017, the district dismissed Costco’s counterclaim and defenses and granted Tiffany’s summary judgment motion. The judge held that “no rational finder of fact could conclude that Costco acted in good faith in adopting the Tiffany mark,” that Costco’s fair use defense failed as a matter of law, and Costco was liable for trademark infringement and counterfeiting. Tiffany was awarded damages in an excess of $21M. Costco appealed.

On appeal, the circuit court found several errors with the lower court’s ruling and determined that, among other issues, “the district court overlooked substantial evidence that Costco did not attempt to sow confusion among its customers.” Since the circuit court determined that there was a genuine issue of material fact (specifically, whether actual confusion occurred among consumers), rather than being awarded summary judgment, the case should have proceeded to trial before a jury. As such, the case has been remanded; and, barring a settlement, should proceed to trial.

As always, stay tuned to this space for updates. For more information on the this case and what it means for intellectual property rights holders, please email us.

On Friday, the Department of Homeland Security (DHS) released a report (Report) pursuant to President Trump’s April 3, 2019, Memorandum on Combatting Trafficking in Counterfeit and Pirated Goods. The Report – the first of its kind – outlines a series of recommendations and actions that should be taken by both the federal government and industry players in order to combat the counterfeit goods epidemic that has swept the US product industry. While Amazon is not directly named, it is clear from the practices and examples detailing how e-commerce sites have made it easy for counterfeit goods to reach the masses, that Amazon was most certainly the basis for much of the Report.

One of the critical determinations of the Report is that the US government needs to “ensure entities with financial interests in imports bear responsibility.” As such, companies such as Amazon will have to take steps to actively prevent counterfeits from reaching consumers, such as working more closely with US Customs and Border Patrol, as well as thoroughly vetting sellers on the platform.

The report provides the following list of “Best Practices” for e-commerce platforms and third-party marketplaces:

1. Comprehensive Terms of Service Agreements
2. Significantly Enhanced Vetting of Third-Party Sellers
3. Limitations on high risk products
4. Efficient Notice and Takedown Procedures
5. Enhanced Post-Discovery Actions
6. Indemnity Requirements for Foreign Sellers
7. Clear Transactions Through Banks that Comply with U.S. Enforcement Requests
8. Pre-Sale Identification of Third-Party Sellers
9. Establish Marketplace Seller IDs
10. Clearly Identifiable Country of Origin Disclosures

Additionally, and quite significantly, the Report recommends that the Department of Commerce consider changing contributory and/or vicarious infringement standards so that e-commerce platforms can be held liable for contributory trademark infringement. This would be a colossal change from the status quo, as numerous intellectual property owners have unsuccessfully sued Amazon for trademark infringement due to its role in counterfeit product distribution.

Moreover, the groundbreaking Report goes on to suggest the development of a national awareness campaign that “should involve platforms, rights holders, and the applicable government agencies to provide education for consumers regarding the risks of counterfeits as well as the various ways consumers can use to spot counterfeit products.”

While we may not see a decrease in counterfeits immediately, the DHS Report and subsequent actions to be taken are a major step in the right direction. For more information on the Report and what it means for intellectual property rights holders, please email us at DLG@DigitalLawGroup.com.

Steve Suddell, inventor of the “Neck Hammock,” raised just over $200k on Kickstarter. He was on cloud nine – for about a minute. A week later, he began receiving angry emails from backers stating that his product was being sold for 50% less on other websites. After some investigation, he found websites featuring all of his images, videos, and content, advertising the Neck Hammock at half the price. He was concerned that Kickstarter would take his project down (as was the case with another product campaign, C-Rest), because the listings violated their policy of “not being able to sell the product anywhere else as long as the campaign is active.” The problem was, his product was not being sold elsewhere; rather, it had been copied and counterfeited. This has become very common with Kickstarter projects, and while Kickstarter is aware of the problem, it has not taken any steps to help the creators/inventors on its platform.

Yekutiel Sherman also knows all too well what it’s like to become a victim of China’s lightning-speed copycats. After he launched his Kickstarter campaign (but prior to manufacturing his first unit) of the “Stikbox,” a smartphone case that turns into a selfie stick, a cheap knockoff version of the product was being sold on AliExpress at half the price.

Unfortunately, these experiences are not uncommon. Crowdfunding platforms, Amazon and sites like Taobao have become feeders for knock-off artists to source other people’s new gadgets. These companies are deep-pocketed, and can get a product manufactured and sold well before the inventor’s campaign is fully funded. This just goes to show that your brilliant idea – even if it is patented or trademarked – could be on sale through Chinese distributors or other bootleggers even before you’ve gotten your project funded.

If you are an inventor who is considering using a crowdfunding site to fund your new idea, be diligent in protecting your proprietary information. There are strategies you can employ that describe the features, advantages, benefits and objectives of your invention without disclosing key details that would enable someone else to rip you off. Consider scheduling a consultation with an experienced intellectual property attorney who can provide you with some affordable strategies to protect your product, such as working with U.S. Customs and Border Control.

Though not all are bad actors, many invention promotion companies (and consultants) have been accused of scamming individual inventors out of thousands of dollars; just ask those involved in a 2018 class action against InventHelp in the Southern District of New York (Zanotti et al v. Invention Submission Corporation et al).

The plaintiffs allege that InventHelp runs a “fraudulent invention promotion scam that has bilked thousands of aspiring inventors and entrepreneurs into paying millions of dollars” for services that were never intended to be provided. Specifically, named plaintiff Sherry Porter claims she paid InventHelp $9700 to market her LED pet collar. According to the lawsuit, InventHelp’s Pittsburgh headquarters contacted Porter and said a company called Abrams Gentile Entertainment was interested in licensing her invention. However, when investigators for Porter’s attorney went to the office of Abrams Gentile, it was vacant. The company didn’t exist.

Unfortunately for inventors, this is not the first promotion company to be accused of engaging in such fraudulent activity. In fact, due to prior lawsuits, the American Inventors Protection Act of 1999 (AIPA) was passed. This act requires that prior to signing an invention submission agreement with a promotion company, the firm must provide the following information:

1. The total number of inventions evaluated by the invention promoter for commercial potential in the past five years, as well as the number of those inventions that received positive evaluations, and the number of those inventions that received negative evaluations.

2. The total number of customers who have contracted with the invention promoter in the past five years, not including customers who have purchased trade show services, research, advertising, or other non-marketing services from the invention promoter, or who have defaulted in their payment to the invention promoter.

3. The total number of customers known by the invention promoter to have received a net financial profit as a direct result of the invention promotion services provided by such invention promoter.

4. The total number of customers known by the invention promoter to have received license agreements for their inventions as a direct result of the invention promotion services provided by such invention promoter.

5. The names and addresses of all previous invention promotion companies with which the invention promoter or its officers have collectively or individually been affiliated in the previous 10 years.

Upon reviewing these statistics from two companies, the numbers do not bode well for inventors. For example, promotion company Davison reported that the “total number of consumers in the last five years who made more money in royalties or sales proceeds than they paid to Davison, in total, under any and all agreements with Davison, is 15. This number includes people who first made a profit more than 5 years ago, if they continued to make additional profit during the past five years.”

InventHelp reported that “from 2015-2017, we signed Submission Agreements with 6,564 clients. As a result of our services, 166 clients have received license agreements for their products, and 49 clients have received more money than they paid us for these services.” For those doing the math, 0.7% of InventHelp clients made more money than they paid to InventHelp. The question also remains, how much more money did these inventors make to justify using such as service at such low odds of success?

There are also a host of consultants that charge monthly fees to participate in their inventing schools or to be coached through the inventing process. Some of these entities do not fit the definition of an invention promoter, and thus they are able to operate in a gray area that is not regulated by the AIPA.

Despite periodic enforcement activities and occasional legislation, the AIPA and the U.S. government do not do enough to protect independent inventors from fraud, misrepresentation and misleading statements about the success rate of so-called invention help companies.

If you are an inventor, do yourself a favor and contact an IP attorney about your invention, and instruct them to run a patent search to determine the novelty of your idea. A reputable IP attorney will not try to sell you monthly subscription fees or con you out of thousands of dollars for an idea that may not be patentable. You will be in a much better position to determine how you should proceed with your idea (and your money).

Please email us if you have any questions or if you would like to receive a copy of the complaint against InventHelp.

Cybersecurity firm, RiskIQ, reported that Black Friday scams have been on the rise significantly since 2016. Not only do consumers and product marketers need to be wary of the usual suspects (i.e. Amazon, Alibaba, eBay), but fake mobile applications are also a serious concern. According to tests run by RiskIQ, a search of popular retail brand names in conjunction with the term “Black Friday,” resulted in over 200 malicious apps. The firm’s full assessment revealed over 6,600 mobile apps were illegitimate; offering holiday shopping deals that were in reality, a scam.

Additionally, last year nearly a quarter of counterfeits purchased by millennials were done via social media sites such as Facebook and Instagram; thus, monitoring these platforms is essential to brand protection and a successful holiday shopping season.

Whether you are a shopper or a seller, here are some keys to identifying counterfeits online:

Deep discounts. A deal that is too good to be true is likely just that. If you can purchase a big    brand product like MAC lipstick or BEATS by DRE at a deep discount, the product is likely a fake.

Shipping from China. Products shipping directly from China can be a red flag, as most (not all) legitimate U.S. products are shipped from U.S. distribution/fulfillment centers.

Unverified third-party sellers. Most reputable online sellers also have their own product websites (e.g. snuggiestore.com). Do a web search prior to purchase to find out whether the seller is the same as the one listed on Amazon, and whether there is a major price difference in the products.

Typically, you won’t know if you purchased a fake until you have received your shipment. Signs to look for are:

Packaging that is flimsy or has misspelled words.

Electronics that do not have the UL (Underwriters Laboratory). This is particularly concerning as counterfeit electronics can be a safety hazard.

No country of origin or manufacturer contact information on either the packaging or the product itself.

Policing the sale of goods online can be a daunting and time-consuming task for product marketers – especially if a product is being heavily counterfeited. It also doesn’t help that each marketplace has a different system (some more user-friendly than others) for reporting and ultimately removing counterfeit goods and storefronts.

Ensure that you can take advantage of this season’s millennial impulse buying extravaganza by making certain consumers are purchasing authentic products from you or your authorized distributors, so that buyers and product owners, not counterfeiters and scammers, can benefit from holiday season spending.

Due to China’s classification under the UPU, the U.S. is forced to subsidize shipping costs for Chinese imports – including counterfeit products – to the tune of approximately $300 million annually. As such, it oftentimes costs Chinese manufacturers and counterfeiters less to manufacture and ship products to the U.S. than it does for American companies to ship products within the U.S. This has become an increasingly troubling matter for American businesses over the past few years as consumer shopping has largely moved from brick and mortar stores to e-commerce platforms such as Amazon. Specifically, Chinese counterfeiters are able to severely undercut the price of authentic goods on Amazon (and eBay, etc.); making the counterfeit a significantly more appealing option to the unaware consumer.

This concern was echoed by President Trump’s trade advisor, Peter Navarro, who stated in a recent op-ed that this pricing “inequity puts American small businesses and manufacturers at a severe competitive disadvantage.” Navarro went on to detail how U.S. businesses and manufacturers pay between $19 and $23 to ship a 4.4lb package while China post only pays $5. It does not take an economist to see how such a disproportion is harming U.S. businesses.

As such, and in keeping with his America first policy, President Trump formally moved last week to withdraw from the UPU; an effort that is widely supported by U.S. shipping companies and manufacturers. Withdrawing from the UPU is a yearlong process, and if finalized in 2019, the U.S. will lose access to internationally recognized barcodes that allow parcels to be shipped throughout the UPU member countries. However, because it does take so long to formally withdraw, it gives the Trump administration ample time to renegotiate the rules and rates with the UPU and then rescind its notice of withdrawal. This is the most likely outcome, and one that will benefit U.S. product inventors, owners and distributors considerably.

Until this matter with the UPU is resolved, it is essential for product marketers to monitor third party sales of their products online to ensure counterfeits are not being offered at a lower price (and quality). Federally registering product trademarks and copyrights, as well as utilizing tools such as Amazon’s Brand Registry can help combat these counterfeiters and more effectively remove unauthorized product listings.

The copyright is so overlooked that even product attorneys forget what a powerful member of the IP protection league it is. For example, patent rights enforcement tends to be technical and complex, often requiring long, costly legal battles with Tony Stark caliber experts to prove infringement. However, copyrights, which protect property such as images, illustrations, infomercials, and product packaging, are pretty easy to eyeball, even for an untrained juror.

Copyright is also the most affordable IP protection to secure. Moreover, copyright infringement triggers statutory damage awards that can soar to up to $30,000 per occurrence; plus, recovery of attorney’s fees. As such, trial attorneys are more willing to take on a (properly registered) copyright infringement case on a contingency basis. Of course, statutory damages are merely a fallback, with many product owners seeking actual damages (i.e., lost profits), which is an entirely different hulk of a task.

Additionally, the copyright is the only member of the IP protection league that successfully combats counterfeit sales on platforms such as Amazon; trademark registration alone will not suffice to remove counterfeits on Amazon. To be sure, the counterfeit seller merely has to allege that it is selling a legitimate product, and then there is no infringement thanks to the First Sale Doctrine (you bought it, you own it, you can resell it and call it what it is). In some instances, the infringer changes the name of the product, which effectively shields it from a trademark infringement claim altogether. However, the right to resell a product does not give rise to the right to display copyrighted images for the purpose of that sale. This is another reason why the copyright is so powerful.

While patents and trademarks are formidable tools for many reasons other than defending against knock-offs and counterfeits, with the copyright being such a low-cost titan in the IP universe, it’s a wonder more businesses do not utilize its armor. For maximum protection, copyrights need to be registered in a flash, so be sure to summon an intellectual property attorney prior to your product rollout.

In its Request for Consultations, the U.S. alleged that China violates the TRIPS Agreement insofar as it “denies foreign patent holders the ability to enforce their patent rights against a Chinese joint-venture party after a technology transfer contract ends. China also imposes mandatory adverse contract terms that discriminate against and are less favorable for imported foreign technology.”

For example, the Regulations of the People’s Republic of China on the Administration of the Import and Export of Technologies prohibits a U.S. patent-related technology license contract from restricting a Chinese party from improving the technology or from using the improved technology. Those same regulations go on to say that any improvements in imported technology belong to the party making the improvement. Therefore, a U.S. patent holder cannot stop a Chinese entity with which it is working from modifying or “improving” a patent, even ever so slightly. Then, that improved patent automatically belongs to the Chinese entity, which now has unfettered rights to license and distribute.

In April 2018, the Ukraine, Japan, Saudi Arabia, Chinese Taipei (Taiwan), and the European Union (EU), all formally requested to join the Consultations requested by the United States, generally citing substantial interests in the interpretation of the relevant provisions of the TRIPS Agreement.

In addition to requesting to join the U.S., the EU filed its own Request for Consultations on June 1, echoing and expanding upon the concerns of the United States. The E.U. Request goes on to say that “China’s measures appear to adversely affect exports to China of technology, including intellectual property rights, by European Union undertakings and also appear to nullify or impair the benefits accruing to the European Union and its Member States.” (emphasis added)

China’s Ministry of Commerce responded to the EU’s Request stating, in part, “The Chinese government has always attached great importance to the protection of intellectual property rights and adopted many strong measures to protect the legitimate rights and interests of domestic and foreign intellectual property rights holders.”

So, what happens next? According to the WTO Dispute Settlement System, the request for consultations formally initiates a dispute in the WTO. If the consultations fail to settle a dispute within 60 days after the date of receipt of the request for consultations, the complaining party may request adjudication by a panel. The findings of the panel will be adopted by the Dispute Settlement Body (DSB) of the WTO, unless a party appeals the finding or the DSB decides by consensus to not adopt the panel’s report.

As of June 7, a panel has not been requested as a result of the U.S.’s Request, even though the 60-day benchmark has come and gone, and the status remains “in consultations.” Stay tuned to this space for updates.

After speculation that it may be a ruse, on December 29th, General Mills officially announced the launch of its latest cereal, Lucky Charms Frosted Flakes.  Sugary cereal lovers everywhere rejoiced on social media as the news spread and the cereal began appearing on supermarket shelves.  Two classic childhood cereals combined…what’s not to love?  Well, we suspect Kellogg, Corp., the distributor of Frosted Flakes, is not feeling so GR-R-REAT about the latest breakfast sensation that is taking the internet by storm.

Frosted Flakes is probably one of the most iconic cereal brands in the US.  Most everyone can recognize the product from just a glance of the blue box baring the lovable Tony the Tiger, who first debuted back in 1952.  So, with such an established brand, how is it that General Mills can so blatantly use the name of a Kellogg product?  As it turns out, unlike “Kellogg’s Frosted Flakes,” “Frosted Flakes” is not a registered trademark in the cereal or breakfast food categories.  This is likely because the term “frosted flakes” is merely descriptive; that is to say, the words themselves describe exactly what the product is.  Descriptive names are generally not granted federal trademark protection.

Fortunately for Kellogg, it is not without some recourse should it wish to pursue legal action against General Mills.  Trade dress protects the appearance of a product or its packaging under federal and state unfair competition laws, even without formal registration (though registration is recommended).  In this case, rather than the traditional red Lucky Charms box, General Mills’ newest member of its cereal line is blue – strikingly similar to Kellogg’s Frosted Flakes box.   Kellogg therefore may have a good argument that consumers, seeing the words “frosted flakes” combined with the blue box, would be confused by the source of the product.

This is the second time in just a matter of months that Kellogg has been involved in some sort of cereal box controversy, and it will be interesting to see if and how it responds to General Mills’ actions.

If your company is launching a product or creating new ad content, be sure to hire counsel with experience with intellectual property protection laws.  Please email us if you have any questions or if you would like more information regarding the content above.

Essentially, companies are assigning their patents to tribes in order to take advantage of the tribes’ sovereign immunity, thus shielding them from the patent review process and potential patent invalidation.  The most recent targets of these lawsuits in the tech industry have been Apple, Amazon and Microsoft.

The method works something like this.  A company files for and is granted a patent.  That patent is assigned by the company to a Native American tribe, meaning the tribe is now the owner of the patent. The tribe then licenses the patent back to the company in exchange for a substantial royalty (last month pharmaceutical company Allergan agreed to pay the St Regis Mohawk Tribe $13.5 million up front and a royalty of $15 million annually for its now defunct Restasis patent).  Then, when instructed by the company, the tribe files a lawsuit against a third party (i.e. Apple) for patent infringement.

Normally at this stage (as previously discussed in our Battle of the Copper Pans article), the best course of action for the company being sued would be to attempt to invalidate the patent it is allegedly infringing upon through the USPTO’s inter partes review process (“IPR”).  The IPR occurs before the Patent Trial and Appeals Board (“PTAB”) rather than in the courts, and is therefore a much more time and cost-effective way to invalidate improperly issued patents.  However, if the owner of the patent is a Native American entity, it has sovereign immunity, and is not subject to the jurisdiction of the PTAB.  The company is therefore forced to litigate the infringement claims, which typically lasts over a year, and can result in the defendant companies being enjoined from selling their “infringing products” during such time.

Although defendants are crying foul at this tactic, it seems brilliant for owners who want to ensure their patents are not subject to invalidation proceedings.  However, this trend may not continue for long as we certainly expect to see the defendants of the lawsuits challenge these so-called “sham” transactions and the sovereign status of the tribes.

It is best to have a knowledgeable attorney during all stages of the patent process.  Please email us if you have any questions or if you would like more information regarding the content above.