The Lanham Act (Title 15, USC), the Federal Copyright Act (Title 15, USC) and the Patent Act (Title 35, USC) are all familiar territory for intellectual property practitioners. Often forgotten, however, are the multitude of state laws that are available for use in "federal" intellectual property cases. Also often overlooked is how those state laws oftentimes fill some of the gaps left by the various federal acts. A number of recent cases, including most notably Spike Lee v. Viacom, Inc. et al, which many unfamiliar with the available New York State laws dismissed out of hand, serve as an effective reminder of the power of the various state laws.
Patent Cases in State Court?
It is well-established that the federal court system has exclusive jurisdiction over actions "arising under" Title 35, USC. This does not, however, mean that state laws have no relevance in patent cases. In fact, notwithstanding the perception that patent issues are the exclusive province of the federal court system and that the U.S. Court of Appeals for the Federal Circuit is the exclusive circuit court of appeals to hear patent issues, it is possible that, in the near future, state courts may be hearing patent issues, and other regional courts of appeal will also be considering such questions.
A threshold question in litigation is where the case will be heard. In cases involving issues of patent law, the traditional perception, since the formation of the Court of Appeals for the Federal Circuit, is that while the various district courts may differ in terms of local practice, procedural rules, and timing, there was a single appellate court to consider these issues, and thus a uniform body of law would result. In Holmes Group, Inc. v. Vornado Air Circulation Sys., Inc., the U.S. Supreme Court threw a monkey wrench into the works when it opened the door to the possibility that circuit courts of appeal other than the Federal Circuit may review issues of patent law, if the cases arise in the appropriate way. 2002 U.S. Lexis 4022, 122 S. Ct. 1889 (2002). Even more interesting, this decision also has opened the door to the possibility that state courts may hear cases involving issues of patent law.
In June of last year, the Supreme Court of Indiana decided the case of Green v. Hendrickson Publishers, Inc., 770 N.E.2d 784 (Ind. 2002). In Green, the Supreme Court of Indiana rejected the argument that a claim arising under the Copyright Act was exclusively within the jurisdiction of the federal courts, when the claim arose as a counterclaim in a state court action. In 1999, Hendrickson Publishers sued Mary and Jay Green, Sr. in Indiana state court seeking monies due for book sales post termination of a publishing agreement. The Greens counterclaimed, charging that Hendrickson infringed their copyright by continuing to print and sell their books after the termination of their agreement. The Greens removed the action to federal court, arguing that there was exclusive federal court jurisdiction over the copyright claims. The district court remanded, concluding that basing a counterclaim on federal law does not confer federal court jurisdiction, which requires that the basis for removal must appear on the face of the plaintiff's complaint.
After remand, the Greens amended their counterclaim, raising claims that Hendrickson argued were preempted under the Copyright Act. The trial court agreed that the claims were preempted, and issued summary judgment in favor of Hendrickson. On interlocutory appeal, the Indiana Court of Appeals reversed, holding that the copyright issues merely were tangential to what was more substantively a breach of contract claim, and remanded with instructions to the trial court to take jurisdiction over and hear the counterclaim. The Supreme Court of Indiana took the case on transfer. The Supreme Court first considered whether the counterclaim sounded in state law breach of contract, or federally preempted copyright infringement claims. After analyzing the details of the claim, the court held that the possible breach of a mere promise not to infringe a copyright does not remove a case over breach of the promise from the realm of copyright law. As such, since the potential breach was the continued reproduction of the work, the federal copyright law preempted this cause of action.
The court then turned to the more interesting issue: "Does a counterclaim give rise to a 'civil action' subject to exclusive federal jurisdiction under 28 USC §1338?" Relying on Holmes, the court held that it did not. In fact, after analyzing the text of §1338, the wellpleaded complaint rule, and the text of 28 USC §1331, the Supreme Court of Indiana held:
Accordingly, we think that Holmes requires us to reject the federal authorities stating or implying that a state court may not entertain a counterclaim under patent or copyright law.
Based on this reasoning, it is thus possible that issues of patent infringement, validity and enforceability could be heard in state courts. For example, if party A filed a state court action charging trade libel as a result of comments by party B to customers that party A is infringing a patent, Party B could counterclaim for infringement of the subject patent. Since the complaint would not give rise to federal jurisdiction, following the reasoning of Green, the patent case, including any reply claims/affirmative defenses of invalidity and unenforceability, could stay in the state court system. While this may ultimately defeat one of the purposes of 28 USC §1331, and the stated reason for the creation of the Court of Appeals for the Federal Circuit, namely establishing uniformity in the administration of the nation's patent laws, as the Green court points out:
Holmes teaches that what Congress said – not what it intended – is controlling here: 'Our task is not to determine what would further Congress's goal of ensuring patent-law uniformity, but to determine what the words of the statute must fairly be understood to mean.' 122 S.Ct at 1895.
A significant forum shopping opportunity now exists – and should become part of the practitioner's arsenal in determining where best a dispute should be heard. Along with this possibility, even in the federal court system, state law issues frequently arise in patent cases. These issues usually relate to disputes over proper inventorship, and related contractand tort-based causes of action, trade secret issues, and other general unfair competition matters. Understanding these causes of action may make a critical difference in the availability of interlocutory relief, various categories of damages, and even attorney's fees.
For example, while punitive or "exemplary" damages are not available in patent cases, they are available under many state statutes. For example, in University of Colorado Foundation, Inc. v. American Cyanamid Company, No. 02-1587 (Fed. Cir. Sept. 3, 2003), the court affirmed the award of compensatory damages of $53.1 million and exemplary damages of $1 million to two individual plaintiffs based on a theory of unjust enrichment under Colorado law. While this case started as one for conversion and seeking correction of inventorship under the Patent Act, over its eight-plus-year history, it raised a series of state issues including equitable title claims, fraudulent non-disclosure claims, and the unjust enrichment claim of the latest opinion. The damages awarded would not have been available had the action solely sought correction of inventorship. It was only through the state law claims that the plaintiffs were able to receive damages for the time when they were not properly named as inventors of the subject patent.
Trademark Cases
State causes of action can have an equally significant impact in cases arising under the trademark laws. In March of this year, the Supreme Court issued a unanimous decision interpreting the Federal Trademark Dilution Act (FTDA). In determining that the FTDA requires a showing of actual dilution, rather than a likelihood of dilution, the decision in Moseley v. V Secret Catalogue, Inc. sets a fairly high evidentiary bar for parties asserting dilution. 537 U.S. 418, 123 S.Ct. 1115, 155 L.Ed.2d 1 (2003). However, while limiting the federal relief available to famous trademark owners, Moseley – involving the use of names similar to Victoria's Secret – also serves as a reminder of the parallel state trademark/ unfair competition system. In fact, in many circumstances, obtaining stateenforced relief can effectuate relief nationwide, even when relief under one of the federal acts is not available. As illustrated by several recent cases, these state laws, among others, can play a vital role in the enforcement of intellectual property rights.
As many pop-culture enthusiasts now know, on April 15, Viacom, Inc. issued a press release announcing a new network that it intended to call "Spike TV." The announcement troubled Spike Lee, a well-known filmmaker and actor. The result was Lee v. Viacom et al., Index No. 110080/2003, a case filed in the Supreme Court of the State of New York asserting, among other claims, violations of §§50, 51 and 133 of New York General Business Law.
Section 133, the New York State deceptive trade law, provides that it is a misdemeanor if those "with intent to deceive or mislead the public, assume, adopt or use . . . any name, designation or style . . . which may deceive or mislead the public . . ." The statute further provides that if it shall appear that the defendant is or is about to in fact assume, adopt or use such name, "and that the assumption, adoption or use of such name may deceive or mislead the public, an injunction may be issued by said court . . . without requiring proof that any person has in fact been deceived or misled thereby." As such, it is in some ways narrower than the Lanham Act, under which intent to deceive is a helpful factor, but not one required by statute.
Nevertheless, in some instances, including those instances when a plaintiff does not own a federal trademark registration, use of this state statute may empower a plaintiff to preclude exploitation of its trade name where a federal cause of action may not be available.
Spike Lee thus relied on §133, as well as §§50 and 51, to seek a preliminary injunction preventing Viacom from adopting the "Spike TV" moniker to advertise its new "unapologetically male" network. Mr. Lee based his argument on the premise that Viacom was using the name "Spike" in an attempt to deceive the public into believing that Spike Lee was associated with or sponsored the new network. To evidence this claim, Mr. Lee pointed to, among other events, Viacom's admission that Spike Lee was one of the role models for the network name "Spike TV." Given, among other things, Mr. Lee's lack of a federal registration for "Spike," initial public reaction at his likelihood of success was skeptical.
In fact, Mr. Lee's argument of deceptive trade practices under §133 was unavailing. In his decision, Judge Walter B. Tolub held that Mr. Lee failed to present evidence of the requisite intent to deceive. However, as recognized by Mr. Lee's counsel, other New York State causes of action were available to effectuate the same relief, and Judge Tolub issued an injunction against Viacom's use of the name "Spike TV" based on New York GBL §§50 and 51.
Sections 50 and 51 pertain solely to use of the name (or portrait or picture) of any living person without having first obtained the written consent of that individual. As such, while not necessarily available in many trademark cases, awareness of this statute may be outcome determinative when dealing with a personal name, even when the plaintiff may not be able to claim trademark rights in his or her name.
Further, while Mr. Lee relied on New York state law to obtain injunctive relief from a New York state court, he obtained the same effective relief as if he had made a federal claim in federal court. Specifically, Judge Tolub enjoined Viacom from utilizing the name "Spike" in connection with any television network. Thus clearly demonstrating how effective state court relief can have the same power as relief under a federal statute.
Shortly after Judge Tolub's decision in Lee v. Viacom, and guaranteeing just as much publicity, Fox News Network, LLC (Fox News) filed suit against Penguin Group and Al Franken to enjoin distribution of a new book by Mr. Franken published by Penguin entitled "Lies and the Lying Liars Who Tell Them: A Fair and Balanced Look at the Right." Fox v. Penguin et al., Index No. 602514/2003. On Aug. 8, 2003, Fox News sued Mr. Franken in New York state court, relying in large part on its federal trademark registration for the mark "Fair & Balanced." In particular, Fox News claimed that Mr. Franken's use of the phrase "Fair & Balanced" in the title of his new book both infringed and diluted its trademark rights under federal and New York state laws. Fox News also objected to Mr. Franken's use of photographs of Fox News commentator Bill O'Reilly on the book cover's jacket.
Similarly to Spike Lee, Fox News relied on §133 to assert infringement of its trademark rights in the mark "Fair & Balanced." In doing so, Fox News identified its federal trademark registration for the mark "Fair & Balanced," which registration covers "entertainment services in the nature of production and distribution of television news programs." Fox News also relied on General Business Law §360-l, claiming dilution of its trademark under New York state law. Section 360-1 requires a trademark owner demonstrate only a likelihood of dilution of its famous trademark. Thus, in the wake of the Supreme Court's decision in V Secret Catalogue, the New York state statute with its requirement of mere likelihood of dilution offered Fox News the broadest scope of protection, and a respite from having to prove actual dilution of Fox News' trademark by Mr. Franken's book. While the state causes of action remained, Mr. Franken had this case removed to federal court.
Despite Fox News' creative pleading, U.S. District Judge Denny Chin refused to enjoin distribution of Mr. Franken's book with the original cover. On Aug. 22, addressing the parties during oral argument, Judge Chin called it an "easy case" protected by the First Amendment. On Aug. 26, Fox News dropped its case against Mr. Franken proving once again the strength of a judgment in a single market.
The cases discussed above reflect a nascent trend – reliance on state claims to supplant or overcome those hurdles often presented by the federal statutes pertaining to trademark rights. Certainly the Supreme Court's decision in V Secret Catalogue encourages trademark owners to reconsider reliance solely on federal statutes. For while any injunctions issued pursuant to these state statutes may be limited in jurisdiction, an injunction against use of a network name or distribution of a book in the State of New York would provide substantial relief to the subject plaintiffs.
Finally, while the above cases focus on New York state statutes, statutes throughout the country echo the disparate standards between federal and state trademark laws. For example, in Advantage Rent-A-Car, Inc. v. Enterprise Rent-A-Car, Co., the U.S. Court of Appeals for the Fifth Circuit held that Enterprise's slogan "We'll Pick You Up" did not meet the threshold "fame" required under the FTDA. 238 F.3d 378 (5th Cir. 2001).
Nevertheless, the court recognized that both Texas and Louisiana retain antidilution statutes which require only distinctiveness of a mark for applicability, rather than fame, and remanded the case to the district court to consider the same. Were the plaintiff in this case able to secure an injunction in any state against a national advertising campaign, the net effect would be the same as relief under the federal act, thus once again demonstrating that state causes of action may provide protection where federal causes of action may not. As such, when considering enforcement of its trademark rights, a trademark owner would be well-advised to consider all causes of action, including claims under applicable state law.
This article is reprinted with permission from the October 20, 2003 edition of the NEW YORK LAW JOURNAL. © 2003 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited. For information, contact American Lawyer Media, Reprint Department at 800-888-8300 x6111. #070-10-03-0033