TLJ News from November 21-25, 2007

11th Circuit Rules in False Designation of Origin Case

11/21. The U.S. Court of Appeals (11thCir) issued its opinion [22 pages in PDF] in Custom Manufacturing and Engineering v. Midway Services, a Lanham Act Section 43(a) case, affirming the judgment of the District Court for the infringer.

The Court of Appeals held that there was no likelihood of confusion when one printed circuit board maker made printed circuit boards with the trade name of another printed circuit board maker on them. The Court of Appeals declined to apply the 11th Circuit's seven part test for analyzing the likelihood of confusion in trademark cases, and instead relied on the argument that few people read what is on components inside of boxes.

Companies that make components that are installed inside of information technology and communications equipment might be concerned about this opinion.

Background. Custom Manufacturing & Engineering, Inc. is the appellant in this case, and the plaintiff below. The Court of Appeals described it as a "technology company that provides research and development, engineering, software, and manufacturing services to the government and industrial markets". What is pertinent to this case is that it makes printed circuit boards for water meter reading systems.

NTU Electronics, Inc., one of the appellees and defendants below in this case, also makes printed circuit boards for water meter reading systems. It made circuit boards with Custom's name on them, without permission from Custom.

The other appellees are Midways Services, Inc. (the general contractor on the project for which the water meter reading systems were installed), Automated Engineering Corporation (AEC), and MDCO, Inc., (both electronics manufacturers).

Custom filed a complaint in U.S. District Court (MDFl) against alleging violation of Section 43(a) of the Lanham Act by all appellees, violation of the Florida Deceptive and Unfair Trade Practices Act (FDUTRA) by all appellees, and tortious interference with a business relationship by AEC. (This article only covers the Lanham Act claim.)

The District Court granted summary judgment for the appellees, on the basis that there was no likelihood of confusion. This appeal followed. The Court of Appeals affirmed.

Statute. Section 43(a) of the Lanham Act, which is codified at 15 U.S.C. ß 1125(a)(1)(A), provides that "(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which (A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person ... shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act."

Court of Appeals Opinion. The 11th Circuit has a seven part test for determining whether a likelihood of confusion exists. See, Frehling Enters., Inc. v. Intíl Select Group, Inc., 192 F.3d 1330 (1999). However, neither the District Court nor the Court of Appeals applied it.

Had the Courts applied the Frehling test, they would have found that most of the Frehling factors weighed in favor of Custom. The Court of Appeals wrote that it must "take into account the unique facts of each case".

The Court of Appeals offered an analysis of likelihood of confusion. It also offered some circumstances not related to likelihood of confusion that might have affected its decision. First, it noted that "this trademark infringement case surfaced during the litigation of a contract action". Its assessment of the merits of the other action, or the mere fact that there was another action, might have colored its analysis in the present action.

It also noted that the number of falsely designated circuit boards was only "approximately 6000 or 7000 in total". It also wrote that "None of the defendants noticed" the false designation of origin. However, the Court of Appeals did not expressly hold that there is a de minimus exception to, or mens rea element in, this statutory cause of action.

The Court of Appeals also wrote that few will see the false designation of origin, because the circuit boards are placed into of boxes which are placed in attics of residential units. It could have used this argument to limit the amount of damages awarded. Rather, it seized upon this to conclude that there was no likelihood of confusion.

The Court of Appeals also based its analysis on a very narrow interpretation of whose confusion is relevant to the likelihood of confusion analysis. It rejected Custom's arguments that repair technicians, fire marshals, and other inspectors would be confused as to the origin of the circuit boards on the basis that they cannot "properly be regarded as the customers". (The Court of Appeals also rejected this argument for lack of evidence in the record.)

The Court of Appeals also wrote that Midway (the general contractor on the project) was not confused. The Court wrote, without explanation, that the "water meter reading systems were initially installed and maintained by Midway technicians who would not be confused as to the subject circuit boards' origin."

This case is Custom Manufacturing & Engineering, Inc. v. Midway Services, Inc., et al., U.S. Court of Appeals for the 11th Circuit, App. Ct. No. 05-12906, an appeal from the U.S. District Court for the Middle District of Florida, D.C. No. 03-02671-CV-T-30MAP.

People and Appointments

11/21. President Bush announced his intent to nominate Douglas Shulman to be Commissioner of Internal Revenue. See, White House release.

More Court Opinions

11/21. The U.S. Court of Appeals (6thCir) issued its opinion [16 pages in PDF] in Popovich v. Sony Music Entertainment, a contract dispute regarding distribution of songs recorded by Michael Aday, including by internet download. Aday, who is also known as "Meat Loaf", recorded several albums, including one titled "Bat Out of Hell". Popovich prevailed in the District Court on a claim that Sony failed to put Popovich's record company logo on four albums, and was awarded over $5 Million in damages. However, the agreement at issue only covered "all forms and configurations ... manufactured" by Sony. The District Court held that this did not cover internet downloads. The Court of Appeals affirmed; internet downloads are not "manufactured". This case is Stephen Popovich v. Sony Music Entertainment, Inc., U.S. Court of Appeals for the 6th Circuit, App. Ct. No. 06-3463 and 06-3464, appeals from the U.S. District Court for the Northern District of Ohio, at Cleveland, D.C. No. No. 02-00359, Judge Solomon Oliver presiding. Judge Boyce Martin wrote the opinion of the Court of Appeals, in which Judges Guy and Clay joined.

11/21. The U.S. Court of Appeals (9thCir) issued its opinion [5 pages in PDF] in J&J Celcom v. AT&T Wireless Services, a contract dispute, in which federal jurisdiction is based upon diversity of citizenship, regarding the sale of interests in partnerships involving cellular telephone businesses. The Court of Appeals disposed of most appeal issues in its December 26, 2006, opinion, which is reported at 481 F.3d 1138. However, the Court of Appeals certified one issue to the Supreme Court of the State of Washington: "Does a controlling partner violate the duty of loyalty to the partnership or to dissenting minority partners where the controlling partner causes the partnership to sell all its assets to an affiliated party at a price determined by a third-party appraisal, when the appraisal and the parties to the transaction are disclosed and the partnership agreement allows for sale of assets upon majority or supermajority vote, but the partnership agreement is silent on the subject of sale to a related party?" The Washington Supreme Court responded in the negative, and hence, the Court of Appeals affirmed the judgment of the District Court. This disposes of the final appeal issue in this case. This case is J&J Celcom, et al. v. AT&T Wireless Services, Inc., et al., U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 05-35567, an appeal from the U.S. District Court for the Western District of Washington, D.C. No. CV-03-02629-MJP, Judge Marsha Pechman presiding.

11/21. The U.S. Court of Appeals (2ndCir) issued an opinion [23 pages in PDF] in Motorola v. Uzan affirming the District Court's award of $1 Billion in punitive damages from Kemal Uzan and other defendants. See also, stories titled "2nd Circuit Dismisses Uzan Appeal" in TLJ Daily E-Mail Alert No. 1,228, October 6, 2005; "Supreme Court Denies Certiorari in Uzan v. Motorola" in TLJ Daily E-Mail Alert No. 1,137, May 17, 2005; "2nd Circuit Rules in Motorola v. Uzan" in TLJ Daily E-Mail Alert No. 1,008, November 1, 2004; "Judge Awards Motorola $4,265,793,811.32 From Turkish Telecom Deadbeats" in TLJ Daily E-Mail Alert No. 709, August 1, 2003; and "Motorola & Nokia Sue Turkish Cellular Company for RICO Violations and Computer Hacking" in TLJ Daily E-Mail Alert No. 357, January 30, 2002. This case is Motorola Credit Corporation and Nokia Corporation v. Kemal Uzan, et al., U.S. Court of Appeals for the 2nd Circuit, App. Ct. No. 06-1222-cv, an appeal from the U.S. District Court for the Southern District of New York.

More News

11/21. The National Aeronautics and Space Administration (NASA) published a notice in the Federal Register in which it announces that it has amended its regulations to remove the NASA's Foreign Patent Licensing Regulations. The notice adds that the NASA "no longer follows these regulations, but issues licenses based on Government-wide licensing regulations promulgated by the Department of Commerce that take precedence over individual agency licensing regulations." See, Federal Register, November 21, 2007, Vol. 72, No. 224, at Pages 65451-65452.

Go to News from November 16-20, 2007.