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No Harm, No Foul: No False Advertisement Where Trade Association Failed to Show Injury

by | Jun 30, 2022 |

The US Court of Appeals for the Tenth Circuit affirmed a district court’s grant of summary judgment in favor of a home inspector association on a false advertising claim brought by a competitor, finding no evidence of injury or harm and explaining that harm could not be presumed merely from the fact that the parties compete for members. Am. Soc’y of Home Inspectors, Inc. v. Int’l Ass’n of Certified Home Inspectors, Case No. 21-1087 (10th Cir. June 14, 2022) (Tymkovich, C.J.; Carson, Rossman, JJ.)

The International Association for Certified Home Inspectors (InterNACHI) and the American Society of Home Inspectors (ASHI) are competing national organizations that offer memberships with benefits such as advertising, online education and logo design to independent home inspectors. InterNACHI brought a false advertisement claim under the Lanham Act against ASHI, its sole national competitor, for featuring the slogan “American Society of Home Inspectors. Educated. Tested. Verified. Certified.” on its website. InterNACHI alleged that ASHI’s tagline was misleading because ASHI’s membership includes “novice” inspectors who are not trained or certified. These “novice” inspectors are promoted on ASHI’s online “find-an-inspector” tool, where home buyers can find a local inspector and view their contact information, qualifications and membership level (associate, inspector or certified inspector). According to InterNACHI, ASHI’s misleading slogan coupled with its public promotion of novice members as inspectors caused InterNACHI to lose potential members. The parties filed cross motions for summary judgment. The district court granted summary judgment in favor of ASHI, concluding that InterNACHI failed to show that it was injured by the tagline as required under the Lanham Act. InterNACHI appealed.

InterNACHI argued that the district court incorrectly concluded that no reasonable jury could find that InterNACHI was harmed by the slogan and improperly refused to presume harm from the parties’ relationship as direct competitors. The Tenth Circuit disagreed, explaining that a plaintiff claiming false advertising under the Lanham Act must plead “an injury to a commercial interest in sales or business reputation proximately caused by the defendant’s misrepresentations.” In support of its claim, InterNACHI offered the following:

  • A survey showing that consumers may be deceived by the slogan
  • Data showing an increase in ASHI associate membership following implementation of the slogan
  • A declaration by InterNACHI’s founder attesting to the harm caused to InterNACHI as a result of ASHI’s slogan.

The Tenth Circuit reasoned that consumer confusion does not bear on whether home inspectors are more likely to join ASHI instead of InterNACHI because of the slogan. The Court also declined to infer harm from ASHI’s increase in associate membership, which was likely attributable to other factors, such as the institution of reduced student membership fees or the closure of another national association for home inspectors around the time the slogan was introduced. The Court further noted that inspectors can join both organizations and that InterNACHI had not shown that its own membership levels decreased because of ASHI’s slogan. With respect to the declaration by InterNACHI’s founder that “use of th[e] slogan in connection [...]

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Game Reset: Extrinsic Evidence Can’t Limit Claim Scope Beyond Scope Based on Unambiguous Intrinsic Evidence

by | Apr 7, 2022 |

The US Court of Appeals for the Federal Circuit reversed a district court’s grant of summary judgment of noninfringement after concluding that the district court erred by relying on expert testimony to construe a claim term in a manner not contemplated by the intrinsic evidence. Genuine Enabling Tech. LLC v. Nintendo Co., Ltd., et al., Case No. 20-2167 (Fed. Cir. Apr. 1, 2022) (Newman, Reyna, Stoll, JJ.)

Genuine owns a patent directed to a user interface device (UID) that, in the process of synchronizing and merging data streams into a combined data stream, directly receives microphone speech input and transmits speech output via a speaker. During prosecution, the inventor distinguished “slow varying” physiological response signals discussed in a prior art reference from the “signals containing audio or higher frequencies” in his invention, arguing that the latter posed a signal “collision” problem that his invention solved. In distinguishing the prior art, the inventor explained that his invention “describes, in its representative embodiments, how to combine the data from a UID (mouse) and from a high-frequency signal, via a framer, which is unique and novel.”

Genuine subsequently filed a lawsuit against Nintendo, accusing Nintendo’s Wii Remote, Wii Remote Plus, Nunchuk, WiiU GamePad, Switch Joy-Con Controller and Switch Pro Controller of infringing the patent. During claim construction, the parties asked the district court to construe the term “input signal.” Genuine proposed the construction of the disputed claim term to be “a signal having an audio or higher frequency,” whereas Nintendo proposed the narrower construction of “[a] signal containing audio or higher frequencies.” Relying on expert testimony, Nintendo also argued that the inventor “disclaimed signals that are 500 [Hz] or less . . . generated from positional change information, user selection information, physiological response information, and other slow-varying information.”

The district court found that the inventor’s arguments amounted to a disclaimer. Crediting Nintendo’s expert testimony, the district court construed “input signal” as “signals above 500 Hz and excluding signals generated from positional change information, user selection information, physiological response information, and other slow-varying information.” The district court subsequently granted summary judgment of noninfringement, finding that the accused controllers produced the types of slow-varying signals that the inventor had disclaimed during prosecution. Genuine appealed.

Genuine argued that the district court erred in construing “input signal” by improperly relying on extrinsic evidence and improperly finding that the inventor disclaimed certain claim scope during prosecution. The Federal Circuit agreed, reiterating that although extrinsic evidence can be helpful in claim construction, “the intrinsic record ‘must be considered and where clear must be followed,’” such that “where the patent documents are unambiguous, expert testimony regarding the meaning of a claim is entitled to no weight.” In this case, although the parties agreed that the inventor had disavowed claim scope during prosecution, there was a dispute as to the scope of the disclaimer beyond signals below the audio frequency spectrum.

The Federal Circuit explained that for a statement made during prosecution to qualify as a disavowal of claim scope, it [...]

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Multiple Purchasing Options Overpower Use of “Quotation” in Finding Offer for Sale

by | Feb 24, 2022 |

The US Court of Appeals for the Federal Circuit reversed a district court’s summary judgment of no invalidity under the on-sale bar, finding that the completeness of relevant commercial sale terms, including multiple purchase options, was not an invitation to further negotiate but rather was multiple offers for sale. Junker v. Medical Components, Inc., Case No. 21-1649 (Fed. Cir. Feb. 10, 2022) (Dyk, Reyna, Stoll, JJ.)

Larry Junker designed a sheath that makes it easier for doctors to grasp the sheath during catheter insertion. After designing the sheath, Junker inquired about manufacturing and eventually began a business relationship with James Eddings and his company, Galt Medical, to manufacture the product. Eddings also started a new company, Xentek Medical, to help with the development, manufacture and sale of the product. In January 1999, Eddings, through Xentek, communicated with Boston Scientific Corporation about the sheath products and sent a letter detailing bulk pricing information for the products. The letter concluded by noting Eddings’ appreciation for “the opportunity to provide this quotation.” In February 2000, Junker filed a design patent directed to an “ornamental design for a handle for introducer sheath.”

Junker sued MedComp in 2013 for infringement of the claimed design. In response, MedComp asserted invalidity, unenforceability and noninfringement defenses, as well as counterclaims. The parties filed cross-motions for summary judgment for several issues, including invalidity under the on-sale bar. The primary dispute regarding the on-sale bar was whether the January 1999 letter to Boston Scientific was considered an offer for sale of a product embodying the claimed design. The district court found that it was not an offer for sale because it was a preliminary negotiation and not a definite offer. The district court reasoned that although the letter included many specific commercial terms, the repeated use of the word “quotation” and the invitation to discuss specifics rendered the letter a preliminary negotiation. The district court proceeded with a bench trial, ultimately finding in favor of Junker and awarding damages. MedComp appealed.

A patent claim is invalid under § 102(b) if the invention was on sale more than a year before the application date and the claimed invention was the subject of a commercial offer for sale and was ready for patenting. There was no dispute that the January 1999 letter was sent more than one year before the patent’s filing and that the claimed design was also ready for patenting. As a result, the only issue on appeal was whether the letter was a commercial offer for sale of the claimed design.

The Federal Circuit determined that the letter was a commercial offer for sale. The Court found that the statement that Xentek was responding to a “request for quotation” signaled that the letter was more than just an unsolicited price quote and was instead a specific offer to take further action. The Court found that the letter contained many necessary terms typical in a commercial contract, including prices for bulk shipments, specific delivery conditions and payment terms. The Court [...]

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Magazine Reload: Claim Construction Error Requires Reversal and Remand

by | Jan 20, 2022 |

The US Court of Appeals for the Federal Circuit reversed a district court’s summary judgment ruling based on a claim construction error because nothing in the claims or specification of the asserted patent supported the district court’s overly narrow interpretation of the disputed claim term. Evolusion Concepts, Inc. v. HOC Events, Inc. d/b/a Supertool USA, Case No. 21-1963 (Fed. Cir. Jan. 14, 2021) (Prost, Taranto, Chen, JJ.); Evolusion Concepts, Inc. v. Juggernaut Tactical, Inc., Case No. 21-1987 (Fed. Cir. Jan. 14, 2021) (Fed. Cir. Jan. 14, 2021) (Prost, Taranto, Chen, JJ.).

Evolusion owns a patent directed to a device and method for converting a semi-automatic rifle with a detachable magazine to one with a fixed magazine. A detachable magazine allows a user to fire the weapon until the magazine is depleted, then release the magazine, insert a new magazine and resume firing. In contrast, a fixed magazine can be removed and replaced only by disassembling certain nonmagazine parts of the firearm, which slows the rate of fire. The specification states that firearms with detachable magazines are likely to face increased legal restrictions, noting that bills recently introduced in US Congress would have banned semi-automatic weapons with detachable magazines. The claims of the patents recite, among other limitations, a “magazine catch bar.”

Evolusion sued Juggernaut for infringement. Juggernaut asserted invalidity and noninfringement. The parties cross-moved for summary judgment relating to infringement of the device claims, agreeing that the question of infringement depended entirely on whether the claimed “magazine catch bar” included a factory-installed (OEM) magazine catch bar. The district court concluded that the term “magazine catch bar,” as used in the claims and specification, excluded an OEM magazine catch bar. The court’s conclusion was based primarily on the sentence in the specification that states: “The invention is a permanent fixture added to a semi-automatic firearm by removing the standard OEM magazine catch assembly and installing the invention.” The court reasoned that the “magazine catch bar” of the invention could not be an OEM magazine catch bar since the OEM magazine was one of the components removed to install the invention. Based on the construction, the court concluded that Juggernaut did not literally infringe the patent. The court also found that Juggernaut could not infringe under the doctrine of equivalence because Evolusion had dedicated a factory-installed magazine catch bar to the public by disclosing, but not claiming, this embodiment.

Evolusion also sued Supertool for infringement. When Supertool failed to respond to the complaint, the district court clerk entered a default under Rule 55(a) of the Federal Rules of Civil Procedure. With the requests for relief not yet adjudicated, Evolusion moved for a “default judgment” under Rule 55(b), but the court denied the motion. In its denial, the court, citing its ruling in the Juggernaut case, stated that Evolusion failed to state a viable claim for infringement against Supertool because its products also required reusing the factory-installed magazine catch bar. Evolusion appealed the Juggernaut and Supertool rulings.

The Federal Circuit reversed the noninfringement [...]

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Greek God or Continent? Defining “Confusing Similarity” under the Anti-Cybersquatting Consumer Protection Act

by | Sep 2, 2021 |

Examining whether a registered mark and a domain name were confusingly similar under the Anti-Cybersquatting Consumer Protection Act (ACPA), the US Court of Appeals for the 11th Circuit affirmed the district court’s grant of summary judgment in favor of the trademark owner because the mark and domains are nearly identical in sight, sound and meaning. Boigris v. EWC P&T, LLC, Case No. 20-11929 (11th Cir. Aug. 6, 2021) (Marcus, J.) (Newsom, J. dissenting). The registered trademark is “European Wax Center” and the domain names in issue are “europawaxcenter.com” and “euwaxcenter.com.”

EWC runs a nationwide beauty brand titled European Wax Center that offers hair removal services and beauty products and also holds a trademark under the same name. Since 2015, EWC sold cosmetics under the marks “reveal me,” “renew me” and “smooth me.” Bryan Boigris has no direct background related to the production of beauty products, but in April 2016, he claimed an intent to begin selling such products and attempted to register trademarks at the US Patent & Trademark Office (PTO) for “reveal me,” “renew me” and “smooth me,” none of which had been used in commerce before by Boigris. Boigris also registered 11 domain names including, “euwaxcenter.com” and “europawaxcenter.com.” Upon discovery of Boigris’s pending applications, EWC filed for its own trademark applications for “reveal me,” “renew me” and “smooth me” and filed an opposition to Boigris’s pending applications at the Trademark Trial and Appeal Board (TTAB). The TTAB sustained the oppositions.

Boigris elected to contest the TTAB’s decision in district court. Specifically, Boigris sought reversal of the TTAB’s decision and an affirmative declaration that he was entitled to register the disputed marks. EWC counterclaimed for an affirmation of the TTAB’s decision as well as declaratory judgment that it had priority rights in the disputed marks, that Boigris’s use constituted infringement under the Lanham Act, damages and an injunction under the ACPA against Boigris’s use of the two domains, “europawaxcenter.com” and “euwaxcenter.com.” EWC moved for summary judgment on all of its claims, which the district court granted. Boigris appealed the ACPA decision only.

Under the ACPA, a trademark holder must prove that: (1) its trademark was distinctive when the defendant registered the challenged domain name; (2) the domain name is identical or confusingly similar to the plaintiff’s trademark and (3) the defendant registered the domain name with a bad faith intent to profit. Boigris challenged the second element only and did not contest that EWC’s trademarks were distinctive or that he registered the domains in bad faith. Specifically, Boigris argued that the issue of whether or not the “European Wax Center” mark and the “europawaxcenter.com” and “euwaxcenter.com” domains are confusingly similar should have been a question for the jury.

The 11th Circuit affirmed the district court’s ruling, determining that no reasonable jury could conclude that Boigris’s domain names are not confusingly similar to EWC’s mark. The Court acknowledged the difference between the Lanham Act’s traditional multi-factor likelihood of confusion test for trademark infringement and the test for confusing similarity, noting [...]

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Don’t Be So Dramatic: True Crime Docudrama Doesn’t Violate Right of Privacy

by | Jul 29, 2021 |

Addressing the tension between the First Amendment and the right to privacy under New York law, the New York Supreme Court Appellate Division, Third Department, unanimously held that despite being partially fictionalized, a movie based on true events did not violate the privacy rights of the film’s subjects. Porco v. Lifetime Entertainment Services, LLC, Case No. 531681 NY Supr. Ct, Appellate Div. Third Judicial Dept, June 24, 2021) (Fitzgerald, J.)

Christopher Porco was tried and convicted for the murder of his father and attempted murder of his mother in 2011. Lifetime Entertainment created a movie inspired by the events titled, Romeo Killer: The Chris Porco Story. Porco and his mother sued to stop the broadcast, alleging that the film (and related promotional materials) violated their rights of privacy under New York law.

Both parties moved for summary judgment on liability, with Lifetime arguing that the movie did not violate the plaintiffs’ right to privacy “because it depicted newsworthy events to which the use of their names was reasonably related.” The New York Supreme Court denied both motions, finding that questions of fact remained as to whether the depiction of events was “so materially and substantially fictitious as to give rise to liability.” The parties cross-appealed.

New York’s statutory right of privacy (Civil Rights Law §§ 50 and 51) prohibits the unauthorized use of “a living person’s name, portrait or picture . . . for advertising or trade purposes.” On appeal, the Court recognized the tension with the First Amendment, as the right of privacy does not prohibit reporting on “newsworthy events or matters of public interest, even if the reports were produced with profit in mind.” This “newsworthiness exception” is inapplicable, however, in situations where the “newsworthy or public interest aspect . . . is merely incidental to its commercial purpose” or “where the purported aim of the work is to provide biographical information of obvious public interest, but the content is substantially fictionalized.”

Porco argued that the film, a docudrama, fell within the latter category. The New York Supreme Court noted that the events depicted were “indisputably” newsworthy, but Porco contended that the movie was an “invented biography” that had “no purpose at all beyond the actionable one of exploiting their names and likenesses for profits.” The Court held that the film did not violate Porco’s rights of privacy, despite containing some fictionalizations, for two reasons. First, based on a review of materials such as the real police and media interviews with Porco and excerpts from his criminal trial, the Court concluded that the film was “broadly accurate.” Second, the film did not mislead viewers or present itself as wholly truthful, because it included the statement “based on a true story” at the beginning of the film and stated at the end that it was a “dramatization in which some names have been changed, some characters are composites and certain other characters and events have been fictionalized.” Accordingly, the Court reversed the lower court’s denial of Lifetime’s motion for [...]

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Don’t Count Your Lamborghinis Before Your Trademark is in Use

by | Jul 22, 2021 |

The US Court of Appeals for the Ninth Circuit affirmed a grant of summary judgment, finding that a trademark registrant had alleged infringement of its trademark without having engaged in bona fide use of the trademark in commerce, as required by the Lanham Act. The Court found no material issue of fact as to whether the registrant had used the mark in commerce in a manner to properly secure registration, and the alleged infringer therefore was entitled to cancellation of the registration. Social Technologies LLC v. Apple Inc., Case No. 320-15241 (9th Cir. July 13, 2021) (Restani, J., sitting by designation)

This dispute traces back to a 2016 intent-to-use US trademark application filed by Social Technologies for the mark MEMOJI in connection with a mobile phone software application. After filing its application, Social Technologies engaged in some early-stage activities to develop a business plan and seek investors. On June 4, 2018, Apple announced its own MEMOJI software, acquired from a third party, that allowed users to transform images of themselves into emoji-style characters. At that date, Social Technologies had not yet written any code for its own app and had engaged only in promotional activities for the planned software.

Apple’s MEMOJI announcement triggered Social Technologies to rush to develop its MEMOJI app, which it launched three weeks later (although system bugs caused the app to be removed promptly from the Google Play Store). Social Technologies then used that app launch to submit a statement of use for its trademark application in order to secure registration of the MEMOJI trademark. The record also showed that over the course of those three weeks, Social Technologies’ co-founder and president sent several internal emails urging acceleration of the software development in preparation to file a trademark infringement lawsuit against Apple, writing to the company’s developers that it was “[t]ime to get paid, gentlemen,” and to “[g]et your Lamborghini picked out!”

By September 2018, Apple had initiated a petition before the Trademark Trial & Appeal Board to cancel Social Technologies’ MEMOJI registration. Social Technologies responded by filing a lawsuit for trademark infringement and seeking a declaratory judgment of non-infringement and validity of its MEMOJI registration. When both parties moved for summary judgement, the district court determined that Social Technologies had not engaged in bona fide use of the MEMOJI trademark and held that Apple was entitled to cancellation of Social Technologies’ registration. Social Technologies appealed.

Reviewing the district court’s grant of summary judgment de novo, the Ninth Circuit framed its analysis under the Lanham Act’s use in commerce requirement, which requires bona fide use of a mark in the ordinary course of trade and “not merely to reserve a right” in the mark. The issue on appeal was whether Social Technologies used the MEMOJI mark in commerce in such a manner to render its trademark registration valid.

The Ninth Circuit then explained the Lanham Act’s use in commerce requirement, which requires “use of a genuine character” determined by the totality of the circumstances (including “non-sales [...]

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Fourth Estate Registration Requirement Defeats Pro Se Copyright Infringement Plaintiff

by | Apr 29, 2021 |

The US Court of Appeals for the First Circuit affirmed dismissal of a copyright infringement claim for failure to register the copyright, and affirmed summary judgment against plaintiff on related state law claims where the plaintiff was deemed to have admitted statements that undermined its claims. Foss v. Marvic Inc., Case No. 20-1008 (1st Cir. Apr. 12, 2021) (Lynch, J.)

In 2006, sunroom purveyor Marvic contracted with graphic designer Foss to create a marketing brochure. Foss presented a $3,000 estimate, which Marvic paid, and Marvic began using the brochure soon after. In 2018, Foss (pro se) filed suit, demanding $264,000 for alleged copyright infringement on the basis that in 2016, she discovered that Marvic had been using a modified version of the brochure in print and online without asking for or receiving her permission. Foss alleged inaccurately that she had “applied for official U.S. Copyright Registrations” for the brochure.

Marvic moved to dismiss, and Foss filed an amended complaint stating six causes of action, including copyright infringement and five state-law claims. Foss alleged that she had registered the brochure with the US Copyright Office, but in fact she had only applied (after filing the original complaint) for registration. Marvic moved to dismiss the copyright and breach of contract claims. Foss did not oppose, and the district court dismissed the case. Foss then moved to reopen the case, a motion that the district court granted. Foss filed an opposition to Marvic’s earlier motion to dismiss and retained counsel, who first appeared on the day the district court heard Marvic’s motions.

In support of dismissal, Marvic argued that Foss had not established registration of her copyright, noting the then-existing circuit split as to whether mere application or successful registration was required to support a claim of infringement in federal court. The First Circuit stayed the case pending the Supreme Court’s decision in Fourth Estate. After the Supreme Court held that successful registration is required, the district court lifted the stay and dismissed the copyright claim but not the breach of contract claim.

Later, Marvic served a request for admissions, to which Foss’s counsel failed to respond. Marvic moved that the statements in its request be deemed admitted. The district court granted the motion. Two weeks later, Foss’s counsel moved to withdraw, having been suspended from the practice of law.

Foss, pro se again, moved for reconsideration and for more time to respond to the request for admissions, but the district court denied the motions. Marvic moved for summary judgment on the state law claims, which the district court granted, largely relying on Foss’s deemed admissions. Foss appealed.

The First Circuit held that it was not error to dismiss Foss’s copyright claim under Fourth Estate. The Court rejected as waived Foss’s argument that the district court should have stayed the case pending registration since Foss had not sought such relief below. The Court also rejected Foss’s argument that dismissal became improper when the failure to register was cured since the [...]

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Doctrine of Equivalents Analysis Should Not Be Simple Binary Comparison

by | Mar 17, 2021 |

The US Court of Appeals for the Federal Circuit remanded a district court’s claim construction and grant of a defendant’s summary judgment motion of non-infringement under the doctrine of equivalents, finding that a reasonable juror could find that the accused products performed substantially the same function in substantially the same way to achieve substantially the same result as the claimed invention. Edgewell Personal Care Brands, LLC v. Munchkin, Inc., Case No. 20-1203 (Fed. Cir. Mar. 9, 2021) (Moore, J.)

Edgewell manufactures and sells the “Diaper Genie,” a diaper pail system with a replaceable cassette placed inside the pail for soiled diaper collection, forming a wrapper around the diapers. Munchkin marketed a refill cassette as compatible with Edgewell’s pails. Edgewell’s two patents at issue relate to improvements in the cassette. After claim construction, Edgewell asserted literal infringement of one patent and infringement under the doctrine of equivalents of the other patent. The district court granted Munchkin’s summary judgment motion of non-infringement against both patents. Edgewell appealed.

Edgewell’s first patent is directed to a cassette with a clearance at its bottom portion. The claim construction dispute turned on whether the claims required a clearance space after the cassette was installed. The district court construed the claim to require a space and to require that the claimed “clearance” cannot be filled by an unclaimed interfering member. The district court granted Munchkin summary judgment because Munchkin’s refill cassette had no space after the cassette was installed. The Federal Circuit reversed, explaining that an “apparatus claim is generally to be construed according to what the apparatus is, not what the apparatus does.” The Court found that without an express limitation, “clearance” should be construed to cover all uses of the claimed cassette. The Court determined that the specification and purpose of the “clearance” supported the notion that the claim does not require a clearance after insertion.

The second patent is directed to a cassette with a cover that includes a “tear-off” section. The district court’s construction of an annular cover was of a single, ring-shaped cover. Munchkin’s cassettes each include a two-part cover, and the district court granted Munchkin’s motion for summary judgment of non-infringement. Although the Federal Circuit agreed with the claim constructions, the Court found that the district court erred in granting summary judgment to Munchkin under the doctrine of equivalents for claim element vitiation on the basis that “annular cover” and “tear-off” limitations §§would be rendered meaningless.

The vitiation doctrine ensures that applying the doctrine of equivalents “does not effectively eliminate a claim element in its entirety.” The Federal Circuit found that the district court erred in evaluating this element as a binary choice—single-component structure versus a multi-component structure. Instead, the Court explained that the district court should have evaluated the evidence to determine whether a reasonable juror could find that the accused products perform substantially the same function, in substantially the same way, achieving substantially the same result as the corresponding claim elements. Edgewell’s expert opined that Munchkin’s products performed the [...]

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Can’t Camouflage Express Trademark Contract Terms

by | Mar 17, 2021 |

Addressing a range of trademark licensing issues, including discretionary approval, exculpatory contract clauses and third party beneficiary standing, the US Court of Appeals for the Federal Circuit affirmed a lower court’s grant of summary judgment to the US Army, finding that the Army abided by the terms of a trademark licensing agreement with a brand management company that sold clothing bearing the Army logo. Authentic Apparel Grp., LLC v. United States, Case No. 20-1412 (Fed. Cir. Mar. 4, 2021) (Lourie, J.)

In a 2010 licensing agreement, the Army granted Authentic Apparel, a brand management company that licenses merchandise, a non-exclusive license to manufacture and sell clothing bearing the Army’s trademarks in exchange for royalties. The licensing agreement gave the Army sole and absolute discretion on whether to approve any products and marketing materials bearing the Army’s trademarks. The licensing agreement also included exculpatory clauses exempting the Army from liability for exercising this discretion. From 2011 to 2014, Authentic submitted 500 requests for product approval, and the Army disapproved of only 41. After a series of late or unpaid royalty payments, Authentic sent notice that it would not pay 2014 royalties. The Army then terminated the license to Authentic. In 2015, Authentic and its chairman, Ron Reuben, sued the US government for breach of contract of the licensing agreement. The alleged breaches included denial of the right to exploit the goodwill associated with the Army’s trademarks, refusal to permit Authentic to advertise its contribution to certain Army recreation programs, delay of approval for a financing agreement for a footwear line, and denial of approval for advertising featuring the actor Dwayne “The Rock” Johnson. The Court of Federal Claims granted summary judgment to the US government and dismissed Reuben as a co-plaintiff for lack of standing. Authentic appealed.

The two main issues on appeal were whether Authentic provided sufficient evidence to show there was a genuine dispute of material fact that the Army breached the terms of its contract or any implied duty of good faith, and whether Reuben was a third party beneficiary to have standing as a plaintiff to the suit.

As to the first issue, the Federal Circuit affirmed the lower court’s grant of summary judgment for the government because Authentic was unable to provide sufficient evidence that the Army breached the trademark licensing agreement. The Court found that:

The contracting parties contemplated the terms of the contract and voluntarily decided to include express language of broad discretionary approval and exculpatory clauses exempting liability for disapproval, and therefore they should be held to the express terms for which they bargained.

The Army did not act unreasonably or violate its duty of good faith and fair dealing in exercising its discretion because it did approve more than 90% of Authentic’s products.

Authentic’s argument that the Army’s discretion was too broad and restricted Authentic’s use of the trademarks to solely “decorative purposes” was without merit because (1) the Court was not evaluating the validity of the trademarks here, (2) Authentic still [...]

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