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Fines for patent false marking are awarded for each marked product

Cuban trademark protected under NY law

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Section 292 of the Patent Act provides that it is an offense punish-able by a fine of not more than $500 to mark upon, affix to or use in advertising the word “patent” in connection with any unpatented article, “for the purpose of deceiving the public.” The U.S. Court of Appeals for the Federal Circuit has now interpreted § 292 to mean that a fine should be imposed for every article falsely marked, not merely for the single decision to falsely mark.

The Forest Group, Inc. (“Forest”) owns U.S. Patent No. 5,645,515 (the “patent”) for a type of stilt commonly used in construction. The independent claims of the patent required a “resiliently lined yoke” that was used in connection with a strap for attaching the leg support portion of the stilt to a user’s leg. The two named inventors on the patent, William Armstrong and Joe Lin, each created companies to sell the stilts covered by the patent. Lin formed Forest and Arm-strong formed Southland Supply Company, licensed by Forest to sell the stilts. One of Southland’s customers, Bon Tool, stopped buying stilts from Southland and started buying them from a foreign supplier that made unauthorized identical replicas.

Forest sued Bon Tool for infringing the patent and Bon Tool coun-terclaimed that Forest and Southland’s stilts were falsely marked with the patent number because they were not covered by the patent claims. In particular, Bon Tool argued that the stilts did not contain the claimed “resiliently lined yoke.” The U.S. District Court for the Southern District of Texas concluded that the patent claims required a lining that was distinct from the yoke itself, which the Forest and Southland stilts did not possess. Because Bon Tool’s foreign-made stilts were copied directly from Southland’s stilts, they also did not possess the claimed yoke. Accordingly, the court determined that Bon Tool did not infringe the patent. A similar ruling was later made in Forest’s Minnesota suit against Warner Manufacturing.

The Texas court concluded that Forest knew as of the date of the Warner decision that the Forest and Southland stilts were not covered

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The Cuban embargo, formally known as the Cuban Assets Control Regulations (“CACR”), 31 CFR § 515 et seq., has restricted com-mercial, financial and economic trade between the United States and Cuba for nearly half a century. The embargo generally prohibits transactions in the United States involving Cuban-owned property unless the transaction is authorized by the Treasury Department’s Office of Foreign Asset Control (“OFAC”). The embargo precludes holders of Cuban trademarks from using those marks in commerce in the United States. But a recent decision involving COHIBA brand cigars protects these marks under the New York state law of misap-propriation despite the fact that the Cuban cigars cannot legally be sold in the United States.

U.S. trademark rights to COHIBA cigars have been litigated for over 10 years by Empresa Cubana del Tabaco (“Cubatabaco”), a Cuban company, and General Cigar, an American company. Cubatabaco has sold COHIBA cigars outside of Cuba since 1982, but because of the United States embargo against Cuban goods, imposed in 1963, Cubatabaco has never sold COHIBA cigars in the United States. General Cigar obtained a registration for the COHIBA mark in the United States in 1981 and sold COHIBA cigars in the United States from 1978 until late 1987. In 1992, after Cigar Aficionado magazine declared COHIBA cigars to be among the best in the world, General Cigar registered a stylized version of the trademark. General Cigars has sold COHIBA cigars under that mark in the United States since 1997.

In 1997, Cubatabaco applied to register COHIBA and brought an injunction action against General Cigar’s use of the COHIBA mark and a cancellation petition against General Cigar’s U.S. registra-tions. In 2004, the U.S. District Court for the Southern District of New York held that Cubatabaco owned the COHIBA trademark in the United States under the “well known marks” doctrine, finding that the Cuban COHIBA was well-known at the time that General Cigar used and registered the mark in 1992. General Cigar’s use of

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COHIBA was enjoined and its second registration was cancelled. The court dismissed Cubatabaco’s New York state common law un-fair competition claim of misappropriation because Cubatabaco had failed to show that General Cigar acted in bad faith. However, the U.S. Court of Appeals for the Second Circuit reversed the infringe-ment decision, concluding that the embargo’s prohibition against sale of the Cuban cigars in the U.S. prevented Cubatabaco from acquiring trademark rights other than by registration.

In 2008, based on a change in New York law, the district court reconsidered and held that Cubatabaco established a misappropria-tion claim against General Cigar because it had deliberately copied the mark used by a foreign owner and the consumers of the goods or services provided under that mark primarily associated the mark with the foreign owner. The district court found that General Cigar “intentionally copied” the COHIBA mark in part to capitalize on the success of the Cuban COHIBA brand and that the Cuban CO-HIBA mark had acquired recognition consistent with “secondary meaning” in the United States.

Because the court’s judgment order did not provide remedies, the parties agreed to seek an amended order and General Cigar took that opportunity to contest the permanent injunction sought by Cubatabaco. It argued that Cubatabaco failed to meet its burden of proof because it had not shown injury from General Cigar’s use of the COHIBA mark in the United States as Cubatabaco cannot sell its cigars in the United States due to the Cuban embargo. In order to obtain a permanent injunction, a party must demonstrate, among other factors, that it suffered an irreparable injury. The district court held that, despite the fact that Cubatabaco cannot sell its cigars in the United States, it nonetheless demonstrated that General Cigar’s continuing misappropriation of the goodwill as-sociated with the COHIBA mark, which resulted in the devaluation of Cubatabaco’s product, is a wrongful act that entitles Cubatabaco to relief, despite the lack of an infringement remedy.

General Cigar has filed an expedited appeal to the U.S. Court of Appeals for the Second Circuit. The district court has stayed the injunction against General Cigar pending the results of the ap-peal. Interestingly, in granting the stay, the district court found that General Cigar had a “substantial possibility of success” on appeal, due to other court decisions that New York misappropriation law requires a finding of bad faith and the fact that the district court’s interpretation of the embargo regulations is a matter of first impres-sion.

General Cigar renewed its first registration for COHIBA in 2003 and renewed its second registration in 2006. Cubatabaco’s applica-tion to register COHIBA has been suspended since 1999.

The Cuban trade embargo was similarly at issue in the more than decade-long case between Bacardi and Pernod Ricard over the U.S. rights to the HAVANA CLUB trademark for rum. HAVANA CLUB was created in Cuba in the 1930s by the Arechabala family, which registered the trademark in the United States in 1935 and sold its rum under that trademark in the United States for the next 20 years. In 1960 the Arechabala family’s manufacturing plant and

CUBA Continued from Page 1 trademark were seized by the Cu-ban government and the Cuban government (as Cuba Export) began produc-ing rum under the HAVANA CLUB name. In 1976, after the U.S HAVANA CLUB trademark registration expired, Cuba Export registered the HAVANA CLUB trademark in the United States through a loophole in the trade embargo regulations. French liquor producer, Pernod Ricard, partnered with the Cuban government to sell Cuba’s HA-VANA CLUB internationally, including in the United States. The Arechabala family, the original HAVANA CLUB trademark own-ers, did not have a means to produce their famous rum; however, they always intended to resume producing and marketing HAVANA CLUB rum once they had the means and opportunity to do so. In furtherance of their desire, the Arechabalas partnered with Bacardi to sell rum again under the HAVANA CLUB name.

Pernod Ricard filed suit against Bacardi for trademark infringement and Bacardi filed an action with the U.S. Patent and Trademark Office to cancel Pernod Ricard’s registration of HAVANA CLUB. Pernod Ricard lost its infringement claim and subsequent appeals and Bacardi lost its cancellation case. In the interim, Pernod Ricard had difficulty renewing its registration because of the CACR, which made it difficult for Cuba Export to hire U.S. attorneys to pay the U.S. Trademark Office’s renewal fee.

The CACR contains a general license that permits transactions related to trademark registration applications or renewals by Cuban nationals. 31 CFR § 515.527(a). However, in 1998, Congress exempted from the general license any marks or trade names that were “used in connection with a business or assets that were confiscated…unless the original owner of the mark, trade name, or commercial name, or the bona fide successor-in-interest, has consented.”

Because Pernod Ricard was unsure whether 31 CFR § 515.527(a) applied to the trademark that had been seized from the Arechabalas from the Cuban government, it applied for a license from OFAC to engage in the necessary transactions to renew its U.S. registration. OFAC denied the license application and Pernod Ricard sought review of that denial in federal district court. The United States District Court for the District of Columbia granted OFAC’s mo-tion for summary judgment, holding that the granting of licenses under the CACR was solely a decision of OFAC and not subject to judicial review.

Bacardi’s trademark application for the HAVANA CLUB mark is still pending before the Trademark Office. This case illustrates the difficulty encountered in registering, renewing and enforcing trade-marks by Cuban holders of marks that were seized by the Cuban government. Critics argue that the decision further strains Cuban-

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party’s right to register and its anticipated use of its registered mark. The language of the release (“any and all claims” and “arise or may arise from”) is broadly interpreted under Massachusetts law. If room for doubt remains, a court should consider what in-terpretation would be reasonable to expect in the business context and what the parties intended to accomplish by their agreement. The Court concluded that the most likely aim was to allow the parties to use their registered marks for hair services and products, despite possible arguments each had about potential confusion that could arise. No evidence was provided that the parties intended an incomplete settlement that reserved to the future “the practical con-sequences of registration,” namely, use. More specific language was required to lead to such an outcome.

The Court also found that other provisions in the agreement indicated that the parties anticipated that the marks would be used as registered. Those provisions do not make sense unless Great Clips was entitled to use its mark without limitation. Those provi-sions show that the settlement was not just about the formalities of registration; rather, it aimed to bring about a workable solution that permitted the parties to use their respective marks.

Although the First Circuit interpreted the agreement in this case to reach a practical result, courts can differ as to what is practical and what the words mean in an agreement. As shown in the J.A. Apparel Corp. v. Joseph Abboud cases reported in our Winter 2009 issue and this issue, courts looking at the same agreement between the same parties can come to different conclusions about the mean-ing of particular provisions. No matter how precise the parties to an agreement believe they have been, it is difficult to predict how a court will interpret their language.

Source: Great Clips, Inc. v. Hair Cuttery of Greater Boston, L.L.C., U.S. Court of Appeals for the First Circuit, No. 09-1376, January 5, 2010

United States relationships, especially in the realm of intellectual property, and they contend that the Cuban government may retaliate against U.S. marks in Cuban commerce. The consent requirement was the subject of a 2002 decision adverse to the U.S. by the World Trade Organization, which held that it violated the TRIPS Agree-ment. However, Congress has not yet amended the embargo regula-tions to remove this provision.

Traditionally, the embargo also prevented Americans from send-ing money into Cuba, which complicated the transactions of U.S. holders of Cuban trademarks to register and renew marks in Cuba. In 1995, the regulations were amended to permit filing, prosecution and renewal of Cuban trademarks, receipt of Cuban trademark cer-tificates, prosecution and defense of oppositions and infringement proceedings and payment of fees to the Cuban government and Cuban attorneys for these actions. 31 CFR § 515.528.

Sources: Empresa Cubana Del Tabaco v. Culbro Corp., U.S. District Court for the Southern District of New York, No. 97 Civ. 8399, December 14, 2009; Empresa Cubana Exportadora de Alimentos y Productos Varios v. United States Dep’t of Treasury, 606 F. Supp. 2d 59 (D.D.C. 2009)

Trademark settlement agreement al-lows use as well as registration of markIn 1985, Great Clips, Inc. registered the mark GREAT CLIPS for hair cutting and styling services. In 1987, Dalan Corporation ap-plied to register the mark GREAT CUTS for hair cutting and hair treating services. Great Clips opposed that application and Dalan counterclaimed to cancel Great Clips’ registration. The parties settled their dispute in 1989 with an agreement that neither party would object to the registration of the other’s mark. In particular, Paragraph 4 of the agreement provided that “Each party releases the other from any and all claims that arise or may arise from the application and registration of its own respective mark(s) men-tioned in this agreement.” Dalan later transferred its rights to the GREAT CUTS mark to Great Cuts, Inc. and Hair Cuttery of Greater Boston, L.L.C. (collectively, “Great Cuts”).

The parties coexisted for nearly 20 years. However, in 2008, Great Clip began to expand its GREAT CLIPS business through fran-chises in Massachusetts and New Hampshire. Great Cuts objected to this expansion into the New England market and threatened to sue Great Clips for trademark infringement. Instead, Great Clips brought suit in the U.S. District Court for the District of Massa-chusetts, asking for a declaration that it was entitled to use its mark throughout the United States and that the settlement agreement prevented Great Cuts from objecting to such use in New England. The District Court agreed that the settlement agreement permitted Great Clips to use its mark without geographic limitation.

The U.S. Court of Appeals for the First Circuit upheld that inter-pretation. Although Par. 4 of the agreement only refers to applica-tion and registration and not to use of the GREAT CLIPS mark, Great Cuts did not introduce any evidence that the parties intended the mutual release to apply only to claims arising narrowly from the registration process in the U.S. Patent and Trademark Office. Trademarks, the Court observed, are registered in order to be used. In substance, each party consented in the agreement to the other

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District Court further interprets cloth-ing designer’s right to use his own name in competition with owner of trademark rightsIn our Winter 2009 issue, we discussed JA Apparel Corp. v. Joseph Abboud, in which the U.S. Court of Appeals for the Second Circuit found that the agreement between Abboud and the company that bought the rights to trademarks containing his name was ambigu-ous, and vacated the injunction against Abboud’s use of his name that had been entered by the U.S. District Court for the Southern District of New York. The Second Circuit sent the case back to the District Court, which had earlier ruled that the agreement prevented Abboud from using his name in connection with a new line of clothing marketed under the “jaz” trademark. After considering ad-ditional evidence presented by the parties concerning the meaning of the contract provisions, the District Court has now determined that Abboud has the right to use his name in advertising his “jaz” line, with certain limitations.

The parties presented the District Court judge with a large quantity of “extrinsic” evidence (evidence outside the text of the agree-ment) concerning their intentions and whether several of Abboud’s proposed advertisements for the “jaz” line containing his name constituted trademark “fair use.” The parties agreed that Abboud would not use his name on the jaz clothing or on labels or hang-tags for jaz clothing.

In a lengthy decision, the judge concluded that Abboud had only sold the use of his name as a trademark and not the exclusive right to use his name for all commercial purposes. That decision turned on the existence of extrinsic evidence discussing only the sale of the trademarks and the absence of extrinsic evidence concern-ing Abboud’s sale of his personal name for all other commercial purposes. Because Abboud had retained the right to use his name in ways other than as a trademark, the judge analyzed the proposed advertisements to determine whether Abboud’s use of his name was “fair use” or infringing trademark use.

The judge concluded that some of the proposed ads displayed the Abboud name as an indicator of the source or origin of the goods, which are trademark uses. Although there is no longer a “sacred right” to employ one’s own name in a business, the judge found that others of the proposed ads displayed the Abboud name in a purely descriptive manner constituting trademark “fair use.” Sec-tion 33(b)(4) of the Lanham Act (15 U.S.C. §1115(b)(4)) provides a fair use defense to trademark infringement where “the use of the name, term, or device charged to be an infringement is a use, otherwise than as a mark, . . . of a term or device which is descrip-tive of and used fairly and in good faith only to describe the goods and services of such party, or their geographic origin.” The judge approved the use of ads where (1) the Abboud name was not used in an “overly intrusive manner,” (2) the “jaz” mark was prominent, (3) the Abboud name was used in a complete sentence that was not the focal point of the ad nor positioned in a way to attract signifi-cant public attention, and (4) the Abboud name was in a different and smaller font than the “jaz” mark or the registered marks that

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by the patent because they lacked the claimed yoke. Nevertheless, after that date, Forest placed at least one further order to its stilt manufacturer for stilts marked with the patent number. The Texas court determined that the decision to order those falsely marked stilts constituted a single offense of false marking and fined Forest $500 for that single offense, rather than fining Forest for each stilt falsely marked after the Warner decision.

On appeal, the Federal Circuit overturned that judgment, conclud-ing that § 292 requires that the fine be based on each incidence of false marking, noting that the plain language of § 292 “requires the fine to be imposed on a per article basis,” as it prohibits the false making of any unpatented article and imposes the fine for every such offense. Therefore, each item that is falsely marked with intent to deceive constitutes a separate offense. Although the 100-year-old decision by the U.S. Court of Appeals for the First Circuit in London v. Everett H. Dunbar Corp. 179 F. 506 (1st Cir. 1910) found that a single fine could be imposed for continuous false marking of multiple items, the Patent Act read differently then. Today, a single $500 fine for false marking is not supported by the statute and does not further the public policy considerations behind § 292.

Moreover, there is a provision in § 292 under which any person may sue for the penalty in a qui tam action, where half the recovery goes to the person suing and half to the United States. Even though this provision encourages suits by so-called “marking trolls,” who bring such litigation for their own gain, Congress expressly authorized those suits. A total fine of $500, to be split with the government, would not provide a financial motivation to bring such actions. Where small, inexpensive, mass-produced items are falsely marked, the Court found that a court can balance enforcement of this important public policy against imposing disproportionately large penalties by setting the fine at fraction of a penny on each item. The Court sent the case back to the district court to determine how many stilts were sold, and the amount of the penalty to be imposed for each sale.

Remember that a product can also be falsely marked when the manufacturer does not remove an otherwise proper patent notice after the patent expires or marks a product with “patent pending” when there is no patent application pending in the U.S. Patent and Trademark Office. The Federal Circuit has interpreted the require-ment that the marking be made with intent to deceive the public to mean that the party had no reasonable belief that the goods were properly marked; that is, they are not covered by at least one claim of an existing patent. Clontech Labs. v. Invitrogen Corp., 406 F.3d 1347 (Fed. Cir. 2005).

Source: The Forest Group, Inc. v. Bon Tool Company, U.S. Court of Appeals for the Federal Circuit, No. 2009-1044, December 28, 2009

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Second Circuit clarifies trademark dilution testStarbucks, the renowned coffee company, has approximately 60 U.S. trademark registrations. Black Bear, a small, family-owned local coffee company in Tuftonboro, New Hampshire, mainly does business locally or over the Internet. Black Bear sells certain blends of coffee,“Charbucks Blend” and “Mister Charbucks,” as “dark roasted” in packaging with a picture of a black bear above the words “BLACK BEAR MICRO ROASTERY.” Although Star-bucks objected to the “Charbucks” marks, Black Bear kept selling the products. Starbucks filed suit against Black Bear in 2001. At trial, Starbucks’ expert testified that consumers he surveyed had “many negative associations” with the Charbucks name and coffee, including the image of bitter and over-roasted coffee.

In 2004, the U.S. District Court for the Southern District of New York held that Starbucks failed to demonstrate entitlement to relief on its (1) federal trademark infringement, dilution, and unfair competition claims; (2) New York state trademark dilution claims; and (3) New York common law unfair competition claim. The U.S. Court of Appeals for the Second Circuit sent the case back to the district court to reconsider whether Starbucks demonstrated a likelihood of dilution by “blurring” under the federal Trademark Dilution Revision Act of 2005 (“TDRA”). In 2005 the district court again dismissed Starbuck’s dilution claim but the Second Circuit has again restored it.

The focus of the second appeal was on dilution by “blurring,” which is an “association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctive-ness of the famous mark.” 15 U.S.C. § 1125(c)(2)(B). Dilution by blurring may be found “regardless of the presence or absence of actual or likely confusion, of competition, or of actual economic injury.” 15 U.S.C § 1125(c)(1). Such dilution is illustrated by the hypothetical cases of Buick aspirin, Schlitz varnish, Kodak pianos and the like. The other form of dilution is by “tarnishment;” an “as-sociation arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark.” 15 U.S.C. § 1125(c)(2)(C). Generally tarnishment occurs when a mark is linked to products of inferior quality or if the mark loses its ability to serve as a wholesome identifier of plaintiff’s product. The Court of Appeals determined that the District Court did not err in rejecting Starbucks’ tarnishment claim because (1) the Char-bucks coffee was marketed as very high quality and (2) the survey showing a negative consumer impression of the name “Charbucks” did not also show that consumers had a negative reaction to Star-bucks’ coffee as a result of the Charbucks name.

The Second Circuit noted that, to determine if there is dilution by blurring, federal law applies six non-exhaustive factors. The factor the district court focused on was the degree of similarity between the mark and the famous mark. Prior to the TDRA, federal dilution claims required “substantial” similarity between the two marks, which the district court improperly required in this case. The TDRA does not require “substantial” similarity but only looks at

Abboud sold to JA Apparel. In addition, the judge approved the use of a disclaimer of association or affiliation of Joseph Abboud with JA Apparel Corp.

The judge therefore modified the injunction to provide that Abboud may only use his name in promotional and advertising materials if it “is used descriptively, in the context of a complete sentence or descriptive phrase, and it must be no larger or more distinct than the surrounding words in that sentence or phrase.” In addition, the “jaz” mark or some other mark must be “prominently displayed” in any ad containing Abboud’s personal name and, in certain cases, he must include a disclaimer of affiliation with JA Apparel and prod-ucts sold under the Joseph Abboud trademarks. That disclaimer cannot be smaller than the text where the Abboud name appears.

Shortly before this decision issued, the U.S. Court of Appeals for the Sixth Circuit held that ProPride, Inc., a company selling trailer hitches designed by Jim Hensley, could use his name in a descrip-tive, “fair use” sense in competition with Hensley Manufactur-ing, the company that owned the trademark HENSLEY for trailer hitches. ProPride’s advertising materials identified Jim Hensley as the designer of ProPride’s hitches and included a disclaimer that Jim Hensley was “no longer affiliated with Hensley Mfg., Inc.” ProPride’s web site also included information describing Hensley’s background, design contributions and relationship to Hensley Man-ufacturing and ProPride. The names of ProPride’s hitches did not contain “Hensley” or any term remotely similar and were marketed with ProPride clearly identified as the source. The Court noted that the risk of some consumer confusion was assumed by Hensley Manufacturing when they trademarked Jim Hensley’s personal last name. Hensley Manufacturing, Incorporated v. ProPride, Incor-porated, U.S. Court of Appeals for the Sixth Circuit, No. 08-1834, September 3, 2009.

These cases provide roadmaps for avoiding trademark infringement when using a personal name that is also a trademark owned by another party.

Source: JA Apparel Corp. v. Joseph Abboud, U.S. District Court for the Southern District of New York, No. 07 Civ. 7787, January 12, 2010

World Wide Video appeal against Yoko Ono dismissed as untimely

In our Summer 2009 issue, we reported Yoko Ono’s victory over World Wide Video concerning ownership of stolen video tapes containing footage of John Lennon, Ms. Ono and their family. In our Winter 2009 issue, we reported that World Wide Video had appealed that decision to the U.S. Court of Appeals for the First Circuit. That appeal was dismissed because it was filed nearly three months late, based on the July 2009 date of the partial sum-mary judgment entered by the U.S. District Court for the District of Massachusetts.

Source: World Wide Video, LLC v. Yoko Ono Lennon, United States Court of Appeals for the First Circuit, No. 09-2521, January 13, 2010

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In considering a class action case involving the advertising of a withdrawn prescription drug, the Illinois Supreme Court has pro-vided answers to several open questions about the Illinois Consum-er Fraud and Deceptive Business Practices Act (“CFA”).

Teresa De Bouse brought suit against Bayer AG as a proposed representative of a class of consumers who had used Bayer’s cholesterol-lowering drug Baycol. The drug was withdrawn from the market when it was associated with a muscle-affecting medical condition. Although De Bouse admitted that she had not suf-fered any side effects from the drug and had not heard of it prior to having it prescribed by her doctor, she claimed that Bayer had been able to inflate the prices for Baycol because it had deceptively omitted to tell doctors and consumers about the potential side ef-fects. Bayer asked the St. Clair County Circuit Court for summary judgment because De Bouse could not prove that she had been de-ceived by any act or omission by Bayer. Although the court denied Bayer’s request, it certified three legal questions to be answered by the Illinois Appellate Court before proceeding with the case. The questions were:

(1) Whether an Illinois consumer who purchases a pharmaceutical product, later withdrawn from the market because it was deemed unsafe, can maintain an action under the CFA even though the phar-maceutical company did not engage in direct communication with or advertising to the consumer?

(2) Whether the offering of a product for sale in Illinois is a rep-resentation to prospective customers that the product is reasonably safe for its intended purpose such that the seller’s failure to disclose to consumers the safety risks associated with that product is a viola-tion of the CFA?

(3) Whether fraudulent statements or omissions made by a defen-dant to third parties but detrimentally relied on by the consumer can support an action under the CFA if made with the intent that they (a) reach the consumer and (b) influence the consumer’s actions?

The Illinois Appellate Court answered the first and third questions affirmatively and refused to answer the second question because it involved facts not appropriate for a certified question. The Illinois Supreme Court instructed the Appellate Court to reconsider its judgment in light of Barbara’s Sales, Inc. v. Intel Corp., 227 Ill.2d 45 (2007), but the Appellate Court then entered the same judgment.

On further appeal, the Illinois Supreme Court answered the first and second questions negatively and the third question affirma-tively. The Court also entered summary judgment in Bayer’s favor because DeBouse did not claim that her doctor was deceived.

The Court observed that a CFA claim requires (a) a deceptive act or practice by the defendant, (b) defendant’s intent that the plaintiff rely on the deception, (c) occurrence of the deception in a course of conduct involving trade or commerce and (d) actual damage to the plaintiff that (e) results from the deception. The plaintiff must show that the deceptive act caused the damage.

Illinois Supreme Court interprets Consumer Fraud Act advertising requirements

De Bouse maintained that she was not required to have received any direct communication from Bayer to maintain her CFA action because her claim was based on an omission and concealment by Bayer that allowed Bayer to inflate the cost of its product. However, the Court relied on several cases where such a “market theory” of causation was rejected. The Court also held that every member of the class must have actually seen and been deceived by the statement or omission. Where a consumer does not receive any communication or advertising from a defendant, whether direct or indirect, the consumer cannot prove that he or she was damaged by a statement or omission by the defendant.

As to the second question, because prescription drugs might be “unavoidably unsafe” for their intended and ordinary use due to harmful side effects that could occur in some patients and not others, a drug manufacturer cannot ever say with certainty that its product, when used as intended, will be reasonably safe for all patients. Accordingly, the mere sale of a prescription drug cannot constitute a misrepresentation.

On the third question, the Court determined that an actionable deception did not have to be made directly to the party bringing the suit. It could be made indirectly with the intention that it reach the consumer and influence his or her actions, if the consumer actually receives the deceptive statement, relies on it and is dam-aged. Because De Bouse did not claim that her doctor was actu-ally deceived by Bayer’s advertisements or statements, she was not entitled to rely on a claim that she was indirectly deceived.

In addition to state statutes, § 43(a) of the Lanham Act (15 U.S.C. § 1125(a)) provides a federal cause of action for false or mislead-ing advertising. False or misleading affirmative statements and material omissions can be actionable. A competitor can bring an action under § 43(a) by alleging that a statement was false or mis-leading, that the statement was material (in that it misrepresented an inherent quality or characteristic of the product and consumers would rely on it to make purchasing decisions and that consumers

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did rely on the statement. In order to recover money damages, the competitor must show that it lost sales as a direct result of the false or misleading statement, had its goodwill or reputation harmed by the false advertising or spent money to correct the impression made by the false advertising.

The U.S. Court of Appeals for the Seventh Circuit also recently considered the Illinois CFA and held that a Florida resident could not sue an insurance company with a home office in Illinois under that statute or the Florida consumer fraud statute (FSA § 501.201) because (1) the circumstances relating to the disputed transaction did not occur primarily and substantially in Illinois and (2) the Florida statute bars suits against insurers. Crichton v. Golden Rule Insurance Company, U.S. Court of Appeals for the Seventh Circuit, No. 07-3333 (August 5, 2009).

Source: De Bouse v. Bayer AG, Supreme Court of Illinois, No. 107528, Decem-ber 17, 2010,

The Intellectual Property Practice Group counsels clients on matters related to the protection of trademarks, copyrights, domain names and trade secrets, including preparation and processing of trademark and copyright applications, unfair com-petition, rights of privacy and publicity, review of Web sites and advertising claims, and preparation and registration of contest and game promotion rules.

Ms. Grubner is a partner in the firm’s Chi-cago office. She concentrates her practice on intellectual property, specializing in trademarks, copyrights, domain names and sweepstakes, contests and game promotions. Ms. Grubner is a speaker

for the Chicago and Milwaukee Bar Associations, the Midwest Society of Professional Consultants and Society of Professional Journalists. In July 2009 Ms. Grubner was named to the list of Leading Lawyers in Advertising & Media Law by Leading Lawyers Network.

Mr. Rothman is a Florida Bar board certified Intellectual Property lawyer and a partner in the firm’s West Palm Beach office. Mr. Rothman represents individ-ual and corporate clients in intellectual property infringement litigation involv-

ing patents, trademarks, copyrights, trade secrets, trade libel and related commercial matters. His litigation practice also includes significant focus on electronic discovery issues such as e-discovery management and motion practice relating to e-discovery.

Judith L. Grubner312.876.7885jlgrubner@arnstein.com

Joel B. Rothman561.650.8480jrothman@arnstein.com

The editors acknowledge the contributions to this issue of Eric Seidmon.

CONSUMER Continued from Page 6the “degree of similarity” as the first of the six factors. Thus, the district court gave too much weight to the similarity factor and did not adequately determine whether Black Bear’s mark “impairs the distinctiveness of the famous mark.” The district court found that the Starbucks mark was famous and distinctive, that Starbucks was engaging in substantially exclusive use of the mark and that there was a high degree of recognition of the Starbucks mark. Although concluding that the district court was correct in finding that the marks were only “minimally similar,” the Second Circuit deter-mined that the dissimilarity alone should not have defeated the blurring claim as similarity is only one factor in the analysis. Bad faith and actual confusion were also not required.

In Levi Strauss & Co. v. Abercrombie & Fitch Trading Co., No. 09-16322, the U.S. Court of Appeals for the Ninth Circuit is consid-ering a similar issue in the context of stitching designs on the back pockets of jeans. The International Trademark Association has submitted an amicus curiae brief in that case to overcome the Ninth Circuit’s requirement that the marks be “identical or nearly identi-cal” to constitute dilution.

Source: Starbucks Corp. v .Wolfe’s Borough Coffee, Inc., U.S. Court of Appeals for the Second Circuit, No. 08-3331-cv, December 3, 2009

DILUTION Continued from Page 5

Misha Kerr is an intellectual property associate in the firm’s West Palm Beach office.

Misha J. Kerr561.650.8486mjkerr@arnstein.com

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