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Fourth Circuit

Quack, Waddle and Duck: Order That Grants Injunctive Relief Is an Injunction

by Kavya Rallabhandi | Jun 15, 2023 | Trademarks

The US Court of Appeals for the Fourth Circuit vacated and remanded a district court ruling, finding that the district court failed to properly apply the Federal Rules of Civil Procedure (FRCP) in granting injunctive relief. Wudi Industrial (Shanghai) Co., Ltd. v. Wong et al., Case Nos. 22-1495; -1662 (4th Cir. June 5, 2023) (Gregory, King, JJ.) (Rushing, J., dissenting). The dissent argued that the district court simply entered a permissible order enforcing a settlement agreement between the parties.

The FRCP outlines the necessary criteria and steps for courts to grant injunctive relief. FRCP 52(a)(2) requires courts to state the findings and conclusions that support their actions. FRCP 65(d) requires courts to state the reasons why the injunction was issued, state the injunction’s terms specifically or describe the restrained/required act(s) in detail. Per the Supreme Court’s Ebay test, a party seeking injunctive relief must demonstrate the following:

It has suffered an irreparable injury.
Remedies available at law, such as monetary damages, are inadequate to compensate for that injury.
Considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted.
The public interest would not be disserved by an injunction.

Wudi Industrial competes with Wai L. Wong and his business entity GT Omega Racing (collectively, GTOR) in marketing video gaming chairs and other products. GTOR challenged Wudi’s GTRACING trademark registration in a cancellation proceeding at the Trademark Trial & Appeal Board, alleging that the mark encroached on GTOR’s earlier use of GT OMEGA RACING. The Board ruled in favor of GTOR, and Wudi initiated a first appeal at the district court. The parties subsequently entered into a concurrent-use agreement that assigned to Wudi the right to use the GTRACING word mark in all global markets except within a European carve-out of 53 named countries in exchange for a $4.5 million payment to GTOR. Under the agreement, Wudi was barred from purchasing ad words from search engines and shopping sites or using any social media platforms to promote GTRACING in the European carve-out countries.

In May 2022, GTOR filed a motion for enforcement in the district court, alleging breach because some of Wudi’s marketing and promotional content in the European carve-out contained the GTRACING mark. The district court granted GTOR’s motion and issued a first order. Under threat of contempt for noncompliance, Wudi was ordered to cease impermissible conduct and take down all posts accessible in the European carve-out containing GTRACING within seven days. In June 2022, the district court issued a second order stating that the first order was a grant of specific performance, not a preliminary injunction. Wudi appealed both orders.

The Fourth Circuit vacated and remanded the district court’s first and second orders because of procedural errors amounting to abuses of discretion, despite the dissent’s argument that the orders merely enforced the parties’ agreement. The Court concluded that the first order constituted a preliminary injunction, later made permanent by the second order, because “if it walks like a duck, quacks like a [...]

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The Fondues and Don’ts of Certification Marks

by Sarah Bro | Mar 16, 2023 | Trademarks

The US Court of Appeals for the Fourth Circuit affirmed a summary judgment grant in favor of the opposers of a certification mark application for the trademark GRUYERE to designate cheese that originates in the Gruyère region of Switzerland and France. The Court found that the term “gruyere” is generic because consumers of cheese understand the term to refer to a category of cheese that can come “from anywhere.” Interprofession du Gruyere; Syndicat Interprofessionnel du Gruyere. v. U.S. Dairy Export Council; Atalanta Corporation; Intercibus, Inc., Case No. 22-1041 (4th Cir. March 3, 2023) (Gregory, Thacker, Rushing, JJ.)

In the United States, a certification mark is a type of trademark used to show consumers that particular goods or services, or their providers, have met certain standards. Unlike a typical trademark, a certification mark is not used by the owner of the mark (the certifier) but instead controls how others use the mark.

In an approach similar to the preceding certifiers of ROQUEFORT® and REGGIANO®, the Swiss Consortium Interprofession du Gruyère (IDG) and French consortium Syndicat Interprofessionnel du Gruyère believed that the term “gruyere” should only be used to label cheese produced in the Gruyère region of Switzerland and France. In 2010, IDG applied to the US Patent & Trademark Office (PTO) to register LE GRUYERE as a certification mark but was refused registration on grounds that “gruyere is a generic designation for cheese.” In 2013, the PTO granted IDG a certification mark registration for LE GRUYERE in a specific design form, paired with the word “Switzerland,” the letters “AOC” and a stylized Swiss cross. IDG undertook efforts to enforce the mark and sent letters to several US cheese retailers and manufacturers demanding that they cease labeling their non-Swiss cheeses as gruyere.

In 2015, IDG again attempted to register the term GRUYERE on its own as a certification mark. The U.S. Dairy Export Council, Atalanta Corporation and Intercibus melted together to throw a wedge in the process, opposing the application for the mark on grounds that “gruyere” was generic for cheese and, therefore, ineligible for protection as a certification mark. The Trademark Trial & Appeal Board (Board) found that the term “gruyere” was generic because cheese consumers understand it to be a designation for “a category within the genus of cheese that can come from anywhere.” IDG filed a complaint in the US District Court for the Eastern District of Virginia challenging the Board’s decision. Ultimately, the district court granted the opposers’ motion, finding that the factual record demonstrated that “gruyere” refers to a generic type of cheese without reference to the geographic region where the cheese is produced. IDG appealed.

The Fourth Circuit began by explaining that certification marks, like typical trademarks, include a bar on the registration of terms that are generic for the applied-for product or service category. The Court framed the genericness inquiry as whether “members of the relevant public primarily use or understand the term sought to be protected to refer to the genus of goods . [...]

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Message Received: US Courts Are Appropriate, More Convenient Venue to Adjudicate US IP Disputes

by Courtney Seams | Feb 23, 2023 | Copyrights, Trade Secrets, Trademarks

Addressing personal jurisdiction and forum non conveniens in a software licensing dispute, the US Court of Appeals for the Fourth Circuit upheld a district court’s exercise of personal jurisdiction over a Dutch entity and the court’s decision to not dismiss the case for forum non conveniens. dmarcian, Inc. v. dmarcian Europe BV, Case Nos. 21-1721; -2005 (4th Cir. Feb. 14, 2023) (Wilkinson, Heytens, Hudson, JJ.)

dmarcian is a North Carolina-based software company that developed software to help email users authenticate incoming emails. A Dutch businessman who owned Mailmerk contacted dmarcian to offer to market the software in Europe. While dmarcian was initially unreceptive to the offer, the two parties eventually reached an oral agreement for Mailmerk to rebrand as dmarcian Europe BV (dmarcian BV) and sell the dmarcian software in Europe and Africa.

A dispute arose when dmarcian BV claimed ownership of portions of the dmarcian source code. dmarcian BV filed suit in the Netherlands, eventually filing for and winning injunctive relief in the Netherlands when dmarcian terminated dmarcian BV’s license. dmarcian then filed suit in the Western District of North Carolina asking for a preliminary injunction against dmarcian BV, which dmarcian BV opposed with a motion to dismiss for forum non conveniens. The district court denied the motion to dismiss and entered a preliminary injunction that precluded dmarcian BV from operating outside of Europe and Africa and required dmarcian BV to stop using the registered “dmarcian” trademark without a disclaimer. The district court later found dmarcian BV in contempt for violating the preliminary injunction and ordered dmarcian BV to pay $335,000 in sanctions. dmarcian BV appealed the injunction and the sanctions.

dmarcian BV argued that the district court did not have personal jurisdiction. The Fourth Circuit rejected that argument, finding that the North Carolina long-arm statute authorized jurisdiction over dmarcian BV. The Court found that the application of the long-arm statute to dmarcian BV complied with due process because dmarcian BV worked closely with the dmarcian team in North Carolina (e.g., receiving sales leads, attending virtual meetings, coordinating software development), dmarcian BV sought out dmarcian to initiate business, and there was a strong interest in protecting intellectual property rights in North Carolina.

The Fourth Circuit also upheld the denial of the dismissal for forum non conveniens because the Dutch court was not an adequate alternative forum since Dutch courts cannot effectively adjudicate US trademark claims. The Fourth Circuit found that any judgment by the Dutch court would have little effect in the United States and would deny relief to dmarcian for the infringement of its rights.

The Fourth Circuit upheld the preliminary injunction grant, finding that the district court properly applied US and North Carolina law extraterritorially and that dmarcian was likely to succeed on all claims. The Court found that US laws properly applied and that dmarcian was likely to succeed on the following claims:

Copyright infringement, because there was a registered copyright, dmarcian BV reproduced elements of the source code outside of the licensing agreement, and [...]

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It’s PRUdent to Refrain from Cybersquatting: ACPA Applies to Domain Name Re-Registration

by Kavya Rallabhandi | Feb 9, 2023 | Technology, Trademarks

The US Court of Appeals for the Fourth Circuit joined the Third and Eleventh Circuits in ruling that the re-registration of an infringing domain name with a bad faith intent to profit violates the Anti-Cybersquatting Consumer Protection Act (ACPA). Prudential Ins. Co. of Am. v. Shenzhen Stone Network Info. Ltd., Case No. 21-1823 (4th Cir. Jan. 24, 2023) (Diaz, Thacker, Floyd, JJ.)

The ACPA, 15 U.S.C. § 1125(d), protects trademark owners from cybersquatters that register, traffic in, or use a domain name “identical or confusingly similar to or dilutive of” a distinctive or famous mark with the “bad faith intent to profit.” The ACPA jurisdictional requirement states that a trademark owner may either establish that a court has in personam jurisdiction over the defendant or, if personal jurisdiction cannot be established, bring an in rem action against the domain name.

Prudential Insurance Company of America’s trademark portfolio includes the term PRU and other PRU-formative marks. Shenzhen Stone Network Information (SSN) acquired the domain name PRU.COM from an online domain name marketplace, which leads to a parked page containing advertisements displaying Prudential’s trademarks and the marks of Prudential’s competitors. Prudential attempted to acquire the PRU.COM domain name twice—once through a domain name brokerage service and once after filing a Uniform Domain Name Dispute Resolution Policy (UDRP) administrative action with the World Intellectual Property Organization (WIPO). SSN rejected both offers. SSN claimed that it planned to develop the website into a foreign exchange and economic news platform, but it never substantively altered the parked page. Prudential subsequently dismissed the UDRP action and filed suit in the Eastern District of Virginia alleging cybersquatting and infringement against the CEO of SSN, Zhang (in personam), and PRU.COM (in rem). Zhang moved to dismiss the action or transfer it to the District of Arizona for lack of personal jurisdiction and in rem jurisdiction. The district court held that although it lacked personal jurisdiction over Zhang, in rem jurisdiction was appropriate at the time the complaint was filed. The district court then dismissed Prudential’s trademark infringement claim as moot, granted summary judgment to Prudential on its cybersquatting claim and ordered SSN to transfer the PRU.COM domain name. SSN timely appealed to the Fourth Circuit.

The Fourth Circuit, reviewing the district court ruling de novo, affirmed. As an initial matter, the Court held that the district court had proper in rem jurisdiction over the PRU.COM domain name because Zhang, as a corporate officer of SSN, lacked standing to defend SSN’s property interests and the domain name registry was located in Virginia. Moreover, in rem jurisdiction is assessed at the time the complaint is filed and cannot be destroyed during the pendency of the case if a proper defendant is later revealed.

Regarding the ACPA claim, SSN argued that since the initial domain name registrant registered PRU.COM in good faith, SSN, as a re-registrant, is not subject to the ACPA. The Fourth Circuit joined the Third and Eleventh Circuits in holding that the term “registration” in the ACPA is [...]

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Lost and “Found”: Fourth Circuit Interpretation of Discovery in Support of Foreign Litigation Opens Circuit Split

by Christopher M. Bruno | Jun 23, 2022 | Patents

The US Court of Appeals for the Fourth Circuit held that a corporation that is not physically present in a district is not “found” in the district for purposes of the federal statute that authorizes courts to order discovery for use in a foreign tribunal. In re Eli Lilly and Co., Case No. 22-1094 (4th Cir. 2022) (Niemeyer, Diaz, JJ.; Floyd, Sr. J.) The Court rejected the approach of the Second Circuit, which previously had held that a district court’s power to order discovery under 28 USC § 1782 was coextensive with the minimum contacts inquiry of specific jurisdiction.

After acquiring a patent portfolio related to the psoriasis drug Taltz, Novartis AG sued Eli Lilly for patent infringement in several European courts. Eli Lilly requested discovery from Novartis in the Eastern District of Virginia under § 1782, which authorizes a district court “of the district in which a person resides or is found” to “order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal.” Novartis is based in Switzerland and has no offices or employees in the Eastern District of Virginia.

Following a magistrate judge’s grant of Eli Lilly’s ex parte application for a discovery subpoena, the district court vacated that order. The Fourth Circuit affirmed, substantially echoing the district court’s reasoning.

There was no dispute that Novartis did not “reside” in the district; the only issue was whether Novartis could be “found” there. The Fourth Circuit considered the plain meaning of “found,” Supreme Court precedent interpreting similar statutory language, and the legislative history of the statute, and held “that a corporation is found where it is physically present by its officers and agents carrying on the corporation’s business.”

The Fourth Circuit rejected Eli Lilly’s counterargument that the satisfaction of specific jurisdiction requirements was sufficient for a corporation to be “found” in a district, including Eli Lilly’s reliance on the 2019 Second Circuit decision in In re del Valle Ruiz, which held that a corporation was “found” wherever it could be subject to specific jurisdiction. The Fourth Circuit concluded that In re del Valle Ruiz failed to give “found” its plain meaning, incorrectly ignored Supreme Court precedent and did not give appropriate weight to the legislative history of § 1782.

Even if the Fourth Circuit had disagreed with the district court’s interpretation of § 1782, the Court would still have affirmed based on the deferential abuse-of-discretion standard. Because § 1782 permits, but does not require, an order of discovery, the Court found that the district court’s determination that to “request[ ] [ ] a substantial volume of data and materials located abroad [to] be brought into the United States for subsequent use in proceedings abroad, [would be] a nonsensical result” was well reasoned.

With this decision, the Fourth Circuit broke with the Second Circuit and created a circuit split in the interpretation of § 1782.

Ian Howard, a summer associate in the Washington, DC, office, also contributed [...]

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