Unfair Competition

March 13, 2014

Indiana Court of Appeals Finds Noncompetition Agreement Overly Broad and Unenforceable

Indianapolis, Indiana – The Court of Appeals of Indiana has affirmed the decision of the Marion Superior Court to deny injunctive relief to Clark’s Sales & Service, Inc. (“Clark’s”) of Indianapolis, Indiana in its suit against John D. Smith (“Smith”) of Indiana and Ferguson Enterprises, Inc. (“Ferguson”) of Newport News, Virginia.

In 1998, Smith began working for Clark’s, a company that sells and services appliances in the builder-distributor market in Indiana. In 2004, after one of Clark’s high-level managers left for a competitive position at another company, Clark’s had Smith and various other employees sign a written employment agreement containing both a confidentiality clause and a noncompetition agreement.

Smith resigned his position at Clark’s on April 13, 2012 but, before doing so, he took copies of Clark’s sales records from 2010 and 2011, including customer and builder contact information, the price of materials sold and the costs and profit margins of Clark’s. On April 18, 2012, he accepted an offer of employment with Ferguson, a nearby competitor. In his new position, he solicited business from various customers of Clark’s.

Indiana attorneys for Clark’s sued to enforce the confidentiality and noncompetition provisions of the agreement entered into with Smith. The trial court concluded that the restrictive covenant that Clark’s drafted was overly broad and unreasonable, and denied Clark’s motion for a preliminary injunction. From that order, this interlocutory appeal was brought.

On appeal, Clark’s challenged the trial court’s ruling, calling it clearly erroneous. It claimed that the noncompetition agreement was not unreasonable and unenforceable. Clark’s also argued that, even if the noncompetition agreement were unreasonable and unenforceable as written, the court should apply the “blue-pencil doctrine” to make whatever modifications were necessary to render the covenant reasonable and enforceable.

The Indiana appellate court first discussed whether Clark’s had a legitimate and protectable interest, defined as “some reason why it would be unfair to allow the employee to compete with the former employer.” Indiana courts have held that “the advantageous familiarity and personal contact which employees derive from dealing with an employer’s customers are elements of an employer’s ‘good will’ and are a protectible interest which may justify a restraint.” The appellate court held that, while the trial court had not explicitly stated that it had found such a protectable interest, such a finding was implicit in its ruling. The appellate court ruled that the trial court had not erred by determining that Clark’s had established this element.

The Indiana appellate court then evaluated the reasonableness of the restrictions. Both parties agreed that the two-year limit was reasonable and valid. They disagreed, however, regarding the reasonableness of the noncompetition agreement as to the scope of activities and geographic area restricted.

The appellate court held that the one type of activities prohibited – Clark’s restrictions against contact with any of its past or prospective customers – was vague and too broad. The agreement also prohibited not merely those activities which Smith had engaged in during his tenure at Clark’s, but also prohibited him from providing any services competitive to “those offered by” Clark’s. That provision was held to be “overly broad, onerous, and an undue restriction on Smith’s economic freedom” and, thus, unenforceable.

The restrictions placed on the geographic area in which Smith could work were also evaluated. Those restrictions included working “in any state in which Gregg [Smith’s previous employer] does business, as well as working for any other entity providing services competitive to Clark’s in Marion County, any county contiguous to Marion County, any county in Indiana in which Clark’s has at least one customer, the State of Indiana, or within a fifty-mile radius of Smith’s principal office with Clark’s, which was in Castleton.” The appellate court held that it was “unquestionable that the expansive geographic scope . . . is unreasonable as written.”

Finally, the court addressed the “blue-pencil doctrine.” This doctrine allows a court to strike unreasonable restrictions in a covenant not to compete, provided that they are divisible. However, this doctrine does not extend to allow a court to create a reasonable restriction, as this would subject the parties to an agreement that they have not made.

The court held that blue pencil doctrine was inapplicable, as the terms that Clark’s proposed be stricken had been written as merely a small part of an indiscrete whole. Moreover, it held that, even if it were to strike the text that Clark’s had proposed be stricken, the restrictions would still be overly broad and in excess of what would be required to protect Clark’s legitimate business interest.

The Indiana appellate court affirmed the trial court, holding that its judgment was not clearly erroneous.

Practice Tip #1: To demonstrate the reasonableness of a noncompetition agreement, the employer must first show that it has a legitimate interest to be protected by the agreement. The employer also bears the burden of showing that the agreement is reasonable in terms of the time, activities, and geographic area restricted.

Practice Tip #2: Covenants not to compete are in restraint of trade and are not favored by the law. If a court applying Indiana law finds that portions of a noncompetition agreement are unreasonable, it may not modify the restrictions to make them reasonable. Doing so would subject the parties to an agreement they had not made. The court may, however, employ the “blue pencil” rule to “cross out” portions deemed unreasonable while leaving any separable and reasonable portions intact.

Practice Tip #3: This is at least the second time that the Indiana Court of Appeals has heard an interlocutory appeal on this non-compete litigation. In a prior appeal, the Court of Appeals reversed the trial court, which had improperly concluded that the noncompetition agreement failed for lack of consideration. We blogged about that appeal here.

Practice Tip #4: While Appellant-Plaintiff here argued that broad drafting was permissible and simply a “good faith effort to provide itself the greatest level of protection allowed by law,” the Indiana appellate court did not agree. Instead, it called the practice “unsavory” and reminded Clark’s that “Indiana law strongly discourages employers’ attempts to draft unreasonably broad and oppressive covenants.”

March 7, 2014

Supreme Court Grants Review for Four Intellectual Property Lawsuits

By Overhauser Law Offices, LLC

Washington, D.C. – The Supreme Court of the United States agreed to review the judgments of several Courts of Appeals in four intellectual property disputes. The cases included two patent cases (regarding joint-infringement liability and indefiniteness invalidity), a copyright case (concerning public performances), and a case which may have implications under trademark law (whether a Lanham Act claim is barred by the Food Drug and Cosmetic Act).

Limelight Networks, Inc. v. Akamai Technologies, Inc., Docket No. 12-786, is a patent case involving technology for managing web images and video. Appellate attorneys for Limelight Networks brought the case to the Court after the U.S. Court of Appeals for the Federal Circuit held that, in the case of method patents, multiple parties could be found to jointly infringe on a patent. The Federal Circuit, sitting en banc, held by a 6-5 vote that “all the steps of a claimed method must be performed in order to find induced infringement, but that it is not necessary to prove that all the steps were committed by a single entity.”

The question raised for review by the Supreme Court is whether a defendant may be liable for inducing patent infringement under 35 U.S.C. § 271(b) even if none has committed direct infringement under § 271(a). Patent attorneys for technology companies including Google Inc., Cisco Systems, Inc., Oracle Corporation, Red Hat, Inc., and SAP America, Inc. filed a brief in support of Limelight.

February 21, 2014

Rieth-Riley Sues Superior Asphalt for Cybersquatting

By Overhauser Law Offices, LLC

South Bend, Indiana – An Indiana trademark attorney for Rieth-Riley Construction Co., Inc. of Goshen, Indiana (“Rieth-Riley”) sued in the Northern District of Indiana alleging that Jeffrey Kresnak and Superior Asphalt, Inc. (“Superior”), both of Michigan, infringed the RIETH-RILEY trademark, Trademark Registration No. 1,659,123, which has been issued by the U.S. Trademark Office.

Rieth-Riley, founded in 1916, provides many services under the Rieth-Riley brand, including highway construction, asphalt and concrete paving, site preparation and excavation, bridge construction, underground utilities and drainage construction, asphalt and concrete recycling, curb and sidewalk construction, mining and aggregate processing, and providing sand, gravel and other aggregates for construction projects.

Superior, in business for over 30 years, is in the asphalt manufacturing, supplying, paving and maintenance business. It provides its services to residential, commercial, manufacturing and municipal customers. Defendant Kresnak owns Superior. Rieth-Riley indicates that it considers Superior to be a competitor.

Both companies maintain websites to promote their companies. Rieth-Riley operates its website at www.riethriley.com. Superior operates its site at www.superiorasphalt.com/. Rieth-Riley contends that Superior also purchased and began operating “rieth-riley.net” in violation of Rieth-Riley’s intellectual property rights in the trademarked name; it further indicates that this accused domain name resolves to Superior’s website. Rieth-Riley states that it attempted to reach an agreement with Defendants to cease using the accused website but that, in response, Defendants indicated that they would do so for $10,000.

Rieth-Riley contends that Defendants are unlawfully profiting through their use of the Rieth-Riley trademark. Specifically, Superior is accused of using the rieth-riley.net domain name with a bad-faith intent to profit by redirecting Internet traffic intended for the Rieth-Riley website to Superior’s website.

Rieth-Riley also states that Defendants’ unauthorized use of the Domain Name is likely to cause confusion or mistake or to deceive the consuming public as to the affiliation, connection, association or sponsorship of Superior with Rieth-Riley or the Rieth-Riley Mark, or as to the origin, sponsorship, or approval of Superior’s goods, services or activities by Rieth-Riley or the Rieth-Riley brand.

Finally, Rieth-Riley asserts that this use was with notice and actual knowledge of Rieth-Riley’s prior rights and, as a result, Superior’s acts constitute knowing and willful violations of the Lanham Act.

In this Indiana trademark litigation, the following counts are asserted:

• Count I: Federal Trademark Infringement
• Count II: Unfair Competition
• Count III: Cyberpiracy

Rieth-Riley asks the court for:

• preliminary and permanent injunctions enjoining the infringement of the Rieth-Riley trademark;
• preliminary and permanent injunctions enjoining Defendants from engaging in acts of false designation of origin and false description, pursuant to 15 U.S.C. §1125;
• preliminary and permanent injunctions enjoining conduct which causes, or is likely to cause, confusion, mistake, deception, or misunderstanding as to the source, affiliation, connection or association of Defendants’ products or services;
• preliminary and permanent injunctions enjoining the operation of any web site utilizing the accused domain name or the Rieth-Riley trademark;
• a judgment against Defendants for statutory damages;
• a judgment against Defendants for (1) all profits attributable to Defendants’ unauthorized use of the accused domain name, (2) damages sustained by Rieth-Riley on account of Defendants’ unlawful activities, and (3) treble damages;
• an order transferring the accused domain name to Plaintiff;
• an order for the destruction of any infringing items bearing the Rieth-Riley trademark; and
• costs and attorneys’ fees.

Practice Tip:

Plaintiff indicates that it attempted to obtain an agreement from Defendants to cease using the accused domain name. Despite this effort, Plaintiff contends that Defendants continued to use the allegedly infringing website name. This lawsuit for trademark infringement, unfair competition and cyberpiracy followed.

Another approach available to a plaintiff in such a situation is to seek a transfer the domain name under the Uniform Domain-Name Dispute-Resolution Policy (“UDRP”). This policy was established to resolve “The Trademark Dilemma” inherent in the largely unpoliced sales of domain names — the registration of a trademark without the consent of the trademark owner.

As part of the process of registering a domain name, registrants must, among other things, 1) “represent and warrant” that registering the name “will not infringe upon or otherwise violate the rights of any third party” and 2) agree to have the matter heard as an UDRP proceeding if any third party asserts that the domain name violates its trademark rights.

The UDRP is an administrative procedure. A UDRP limits itself to matters concerning abusive registrations and will not intervene in genuine disputes over trademark rights. To prevail in a UDRP proceeding, the complainant must establish three elements:

1) The domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights;
2) The registrant does not have any rights or legitimate interests in the domain name; and
3) The registrant registered the domain name and is using it in “bad faith.”

February 19, 2014

Maker of SNOWTIME anytime! Indoor Snowballs Sues for Trade Dress Infringement

By Overhauser Law Offices, LLC

Indianapolis, Indiana – An Indiana trademark attorney for KM Innovations, LLC of New Castle, Indiana (“KM”) filed a lawsuit in the Southern District of Indiana alleging that Opportunities, Inc. of Colo, Iowa competed unfairly and infringed the trade dress of KM’s “SNOWTIME anytime!” indoor snowballs.

The SNOWTIME anytime! concept was conceived in December 2012. At a party, several parents realized that a market might exist for “indoor snowballs,” which would enable children to have a “snowball fight” but without the usual requirements of snow or being outside. KM later introduced a product based on this idea. KM also indicates that it is pursuing a patent on its indoor snowballs.

In this lawsuit for trade dress infringement, which also includes allegations of unfair competition, KM asserts that Opportunities imports, sells and/or is offering to sell polyester-based indoor snowballs and that Opportunities’ indoor snowballs are low-quality knockoffs of KM’s famous product. KM also contends that Opportunities has deliberately copied the distinctive features of KM’s trade dress in an attempt to trade upon the goodwill associated with that trade dress.

To support its contentions of trade dress infringement, KM states that, inter alia, its SNOWTIME anytime! snowballs come in a clear package that includes a label on the front that depicts a mountainous background set in a blue and white theme. At the top of the package, the term “SNOWTIME” appears in a blue that is darker than the lighter blues used elsewhere in the label. The upper part of the lettering is covered with “snow,” giving the commercial impression of fresh snow. Also shown are a blue and white snowball with wording inside and people in snowsuits having fun playing with KM’s indoor-snowball product outdoors.

KM lists several similarities that it contends support a finding of trade dress infringement. It indicates that Opportunities’ packaging includes, among other features: a partially clear exterior that depicts a mountainous background set in a blue and white theme; an illustration of fresh snow covering the words “Snowball Fun” with letters that are a darker blue than the other blues on the package; a generally blue and white snowball with wording inside; and a depiction of people dressed in snowsuits playing outside with the product.

In the complaint, filed by an Indiana trademark lawyer, one count, “Trade Dress Infringement and Unfair Competition” is alleged. KM asks the court for:

• a judgment that Opportunities’ accused packaging infringes KM’s trade dress rights;
• a judgment that Opportunities committed unfair competition by offering its product in the accused packaging;
• damages, including treble damages for willful and deliberate infringement of KM’s trade dress rights and acts of unfair competition;
• a permanent injunction; and
• an award to KM of its attorneys’ fees, costs and expenses.

Practice Tip:

The United States Supreme Court addressed the elements required for trade dress to be protected in Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763 (1992). In Two Pesos, the Court held that, to establish a cause of action for trade dress infringement, a plaintiff must establish that (a) the design is non-functional; (b) the design is inherently distinctive or distinctive by virtue of having acquired secondary meaning; and (c) there is a likelihood of confusion.

This product was conceived barely a year ago. While SNOWTIME anytime! may have won first place at the Christmas Gift and Hobby Show in Indianapolis, that victory clearly did not take place in November 2012, as was stated in the complaint, as the product did not yet exist.

As a result of the product’s short time in the marketplace, one of the primary hurdles for Plaintiff may be timing. Specifically, if Plaintiff fails to prove that the trade dress in question is inherently distinctive, it could be difficult to prove that secondary meaning has been established in the minds of the consuming public in the time that the product has been available for purchase.

February 12, 2014

Sprint Weighs in with Civil Suit Against Defendants in Criminal Phone-Trafficking Scheme

By Overhauser Law Offices, LLC

Indianapolis, Indiana – In a 42-page complaint for damages and injunctive relief, trademark attorneys for Sprint Solutions, Inc. of Reston, Virginia; Sprint Communications Company L.P. and Boost Worldwide, Inc., the latter two of Overland Park, Kansas (collectively, “Sprint”), sued in the Southern District of Indiana alleging that Reginald Aldridge and Arrice Aldridge, both of Park Forest, Illinois, and Damion Transou of Humboldt, Tennessee infringed certain Sprint trademarks. These trademarks include the following Sprint marks: Registration Nos. 1,104,943, 1,573,863, 1,712,259, 1,839,302, 2,833,134, 2,836,616, and 3,046,207. They have been registered with the U.S. Trademark Office.

Sprint sells wireless handsets (“Phones”) under the brands Sprint, Boost Mobile, Virgin Mobile, payLo and Assurance Wireless for use on Sprint’s wireless network at prices significantly below the wholesale prices of the Phones so that they will be more widely accessible to consumers. Sprint states that it subsidizes the cost of the new Phones for the benefit of its “legitimate” customers. Sprint asserts that it spent more than $6.6 billion on handset subsidies in 2012.

Defendants, along with their alleged co-conspirators are accused of perpetrating an unlawful scheme of bulk handset theft and trafficking to profit from the illegal acquisition and resale of new Phones for their own profit and to the detriment of Sprint. As part of this purportedly fraudulent scheme, Sprint Phones are purchased and resold multiple times. During that process, the Phones are “unlocked” so that they may be used with any service provider, including non-Sprint providers. Sprint contends that, ultimately, these Phones end up in the hands of someone other than the Sprint customer whom Sprint intended to benefit. Sprint contends that the Phones often are sold overseas, where it does not provide service. As a result, Sprint states, Defendants are profiting from this scheme by appropriating the subsidies that Sprint provides to its customers.

Defendants are also accused of unlawfully accessing Sprint’s protected computer systems and wireless network, trafficking in Sprint’s protected and confidential computer passwords, and/or stealing legitimate customer upgrades. It is asserted that Defendants fraudulently placed at least 65 orders on more than 17 corporate accounts to which they had no legal right of access for the purpose of ordering more than 288 items valued at over $100,000.

Finally, Sprint contends that Defendants’ behavior violates the Terms and Conditions to which the sales of Phones are subject as well as willfully infringes Sprint’s trademark rights.

Defendants Arrice Aldridge and Damion Transou were indicted, in part for the activities described in the complaint.

In the complaint, filed by an Indiana trademark lawyer, in conjunction with trademark attorneys from Florida and Georgia, the following counts are asserted:

• Count I: Unfair Competition
• Count II: Tortious Interference with Business Relationships and Prospective Advantage
• Count III: Civil Conspiracy
• Count IV: Unjust Enrichment
• Count V: Conspiracy to Induce Breach of Contract
• Count VI: Common Law Fraud
• Count VII: Fraudulent Misrepresentation
• Count VIII: Trafficking in Computer Passwords – 18 U.S.C. §1030(a)(6)
• Count IX: Unauthorized Access – 18 U.S.C. §1030(a)(5)(C)
• Count X: Unauthorized Access with Intent to Defraud – 18 U.S.C. §1030(a)(4)
• Count XI: Federal Trademark Infringement – 15 U.S.C. §1114
• Count XII: Federal Common Law Trademark Infringement and False Advertising – 15 U.S.C. §1125(a)(1)(A)
• Count XIII: Contributory Trademark Infringement
• Count XIV: Conversion

Plaintiffs ask the court for damages, including exemplary damages; attorneys’ fees and costs; a permanent injunction prohibiting the practices described in the complaint; and the delivery to Plaintiffs of the Defendants’ inventory of accused Phones.

Practice Tip: Cases of cellular phone trafficking such as these, and there are more than a few of them, are an unusual combination of contract law, trademark law and criminal law. In at least one case similar to this one, 16 defendants were also convicted of terrorism charges when it was found that the proceeds from their phone trafficking and other illegal conduct was being funneled to the terrorist organization Hezbollah.

February 10, 2014

Swag Merchandising and Musical Group Devo Sue for Trademark Infringement

By Overhauser Law Offices, LLC

Indianapolis, Indiana – An Indiana trademark attorney for Swag Merchandising, Inc. and Devo Inc., both of California, sued in Hamilton Superior Court alleging that Your Fantasy Warehouse, Inc. d/b/a T.V. Store Online and Fred Hajjar, both of Commerce Township, Michigan, infringed Devo’s Trademarks, Registration Nos. 3161662 and 3167516, which have been registered by the U.S. Trademark Office. The case has been removed from Indiana state court to the Southern District of Indiana.

Swag claims that it owns the exclusive right to license the various trademarks, copyrights and individual and collective rights of publicity of the musical group Devo. The group is best known for the song “Whip It,” which hit number 14 on the Billboard chart in 1980. Swag indicates that it licenses the Devo intellectual property to third parties around the globe.

T.V. Store Online is in the business of manufacturing, marketing and distributing apparel and memorabilia featuring classic and current television programming, movies and/or music. T.V. Store Online and Hajjar have been accused of manufacturing, producing, marketing, advertising and/or retailing a product known as “Energy Dome Hats.” Plaintiffs assert that these Energy Dome Hats are commonly associated with Devo but have not been licensed by Plaintiffs to Defendants. Plaintiffs further claim that consumers coming into contact with Defendants’ product would “immediately recognize the same as being associated with, sponsored by and/or endorsed by” the ’80s group.

In the complaint, filed by an Indiana trademark attorney, Plaintiffs assert the following:

• I: Violation of 15 U.S.C. §1125(a) of the Lanham Act
• II: Trademark Infringement – 15 U.S.C. §1114 and Common Law
• III: Counterfeiting
• IV: Dilution – 15 U.S.C. §1125(c) and New York General Business Law §360-1
• V: Common Law Unfair Competition
• VI: Statutory Right of Publicity [NB: under Indiana law]
• VII: Right of Publicity Infringement Under California Civil Code §3344
• VIII: Common Law Right of Publicity
• IX: Conversion [NB: under Indiana law]
• X: Deception [NB: under Indiana law]
• XI: Indiana Crime Victims Act

Plaintiffs ask for an injunction; the surrender of infringing materials; damages, including treble damages; costs and fees. An Indiana intellectual property lawyer for Defendants removed the case to federal court, although he noted that the removal was not a concession that the Southern District of Indiana was the proper venue for the California Plaintiffs or the Michigan Defendants.

Practice Tip:

This is at least the third case filed by Theodore Minch about which we have blogged. In at least two prior cases, LeeWay Media Group, LLC v. Laurence Joachim et al. and Leon Isaac Kennedy v. GoDaddy et al., Mr. Minch has filed in an Indiana court despite none of the parties having any connection to Indiana.

It can be surmised that perhaps the choice of Indiana as a forum might have been driven by an attempt to increase damages. I.C. §§ 35-43-4-3 and 35-43-5-3(a)(6) are criminal statutes, claimed in the complaint in conjunction with an attempt to parlay the accusation into an award for damages, costs and attorneys’ fees. The Indiana Court of Appeals has discussed “theft” and “conversion” as they pertain to takings of intellectual property in several recent cases (see, for example, here and here) and has made it clear that criminal statutes often apply differently to an unlawful taking of intellectual property.

February 7, 2014

Licensor of “Tiki Tan” Mark Alleges Infringing Use by Solarium and Solarium Bittersweet

By Overhauser Law Offices, LLC

South Bend, Indiana – An Indiana trademark attorney for Al Reasonover of Elkhart, Indiana sued in the Northern District of Indiana alleging that Solarium LLC of South Bend, Indiana (“Solarium”) and Solarium Bittersweet LLC of Elkhart, Indiana (“Solarium Bittersweet”) committed trademark infringement of “Tiki Tan”, Trademark Reg. No. 2602388, which has been registered by the U.S. Patent and Trademark Office.

In this complaint for trademark infringement and unfair competition, Plaintiff Reasonover states that he operates tanning salons under the Tiki Tan Mark and that he also develops tanning salons operated by others to whom he licenses the use of the Mark for a fee. Among these licensees, claims Plaintiff, is Solarium.

Reasonover asserts that, instead of displaying the Tiki Tan Mark as licensed, Solarium displays a service mark at its website reading “Tiki Tan by Solarium”. Reasonover also claims that, while he and Solarium entered into a licensing agreement that permitted Solarium to use the Mark only within a five mile territory around 4542 Elkhart Road, Elkhart, Indiana, Defendants Solarium and/or Solarium Bittersweet are operating additional tanning salons under the name “Tiki Tan” at 306 N. Bittersweet Road, Mishawaka, Indiana; 1290 E. Ireland Road, South Bend, Indiana and 215 E. University Drive, Granger, Indiana.

Plaintiff indicates that the licensing agreement neither permits Solarium to alter the Mark nor to use the Mark outside of the five mile territory around 4542 Elkhart Road, Elkhart, Indiana. He also claims that Solarium’s modification of the Mark to include its own name in connection with the promotion, sale and distribution of tanning salon services infringes on Plaintiff’s rights in his federally registered trademark, in violation of 15 U.S.C. Sec. 1114. Reasonover further alleges that Defendants’ actions are intended to cause, have caused, and are likely to continue to cause, confusion, mistake, deception among consumers, the public, and the industry as to whether Defendants’ services originate from, are affiliated with, sponsored by or endorsed by Plaintiff.

Finally, Defendants are accused of infringing the Mark intentionally, deliberately and willfully. The complaint, filed by an Indiana trademark lawyer, lists the following counts:

• Count I – Trademark Infringement – Injunctive Relief
• Count II – Trademark Infringement – Damages
• Count III – Common Law Trademark Infringement
• Count IV – Common Law Unfair Competition

Reasonover asks the court for:

• a finding that Defendants have violated 15 U.S.C. Sec. 1114; that Defendants have engaged in trademark infringement and unfair competition under the common law of Indiana; and that such conduct has damaged Plaintiff monetarily and in ways not adequately remedied by monetary damages alone;
• an injunction, preliminarily and permanently restraining Defendants from altering the registered Mark, “Tiki Tan,” in any way including but not limited to including the words “by Solarium” with the Mark; operating tanning salons at 306 N. Bittersweet Road, Mishawaka, Indiana; 1290 E. Ireland Road, South Bend, Indiana; or 215 E. University Drive, Granger, Indiana under the name “Tiki Tan”; engaging in any other activity constituting unfair competition with Plaintiff; and engaging in any other activity constituting trademark infringement or which deceives consumers or the public about the origin of services associated with Plaintiff;
• an order for corrective advertising;
• statutory damages or, alternatively, the disgorgement of all profits realized as a result of Defendants’ wrongful acts and also awarding Plaintiff its actual damages;
• a trebling of damages under 15 U.S.C. Sec. 1117;
• Plaintiff’s costs, attorney fees, investigatory fees, and expenses under 15 U.S.C. Sec. 1117; and
• pre-judgment interest on any monetary award.

Practice Tip: A trademark license may be granted by a licensor to a licensee to permit the licensee to use a trademark in a way that would otherwise infringe upon the licensor’s intellectual property rights. A license to use a trademark typically includes various restrictions. Those restrictions may include, among other things, limits on territory, term and manner of use.

December 11, 2013

Project Management Academy Sues Former Instructor for Misappropriation of Trade Secrets

By Overhauser Law Offices, LLC

Indianapolis, Indiana – eCity Market, Inc. d/b/a Project Management Academy (“PMA”) of Lafayette, Indiana has sued Vaughn Scott Burch (“Burch”) and Graywood Consulting Group, Inc. d/b/a Graywood Training Solutions of Leesburg, Virginia (collectively, “Graywood”) alleging infringement of its Project Management Professional examination and certification training. This suit was initially filed in Delaware County Circuit Court No. 4 but was removed to the Southern District of Indiana.

PMA offers preparation courses for the Project Management Institute’s Project Management Professional (“PMP”) examination and certification process. PMA states that Burch was one of its most-trusted PMP course instructors in the Washington, D.C. area and that, in connection with that position, PMA provided him with access to its proprietary manner of conducting its PMP-examination preparation courses. Moreover, PMA claims that it commissioned Burch and Graywood, Burch’s company, to draft and prepare as a “work for hire” certain training modules that would be for PMA’s exclusive use.

PMA alleges that Burch and Graywood are now teaching PMP courses that are in direct competition with PMA. It also contends that Defendants have stolen PMA’s confidential, proprietary and copyrighted materials to further their own course offerings. PMA further indicates that Defendants are violating the non-competition covenants by reproducing PMA’s copyrighted materials and are passing them off as their own. Finally, PMA contends that Defendants are attempting to engage in unfair competition with PMA by publishing student testimonials as if they were from Defendants’ students when, PMA states, the testimonials were actually given by the students of PMA.

An intellectual property lawyer for PMA filed a complaint alleging the following:

• Count I – Breach of Contract
• Count II – Breach of Duty of Loyalty
• Count III – Misappropriation of Trade Secrets
• Count IV – Theft/Conversion
• Count V – Tortious Interference with Prospective Business Relationship and Advantage
• Count VI – Lanham Act Violations
• Count VII – Unfair Competition

PMA asks for preliminary and permanent injunctions; an order requiring the return of all PMA materials; judgment in favor of PMA on the seven counts listed; damages, including treble and punitive damages; attorney’s fees and costs; and interest.

Practice Tip: There has also been a growing trend, perhaps fueled in part by states’ difficulties in paying increasing unemployment benefits, to limit via legislation the enforceability of non-compete agreements. Indiana considers non-compete agreements to be in restraint of trade and, thus, construes them narrowly. Among the states that have considered such limitations are Maryland, New Jersey, Minnesota, Massachusetts and Virginia. However, even in those cases where a non-compete agreement is found to be unenforceable, such a finding will not prevent a party from suing to protect its other rights, such as the intellectual property rights granted under copyright law.

December 2, 2013

Wounded Warrior Project Sues Help Indiana Vets for False Advertising, Defamation and Unfair Competition

By Overhauser Law Offices, LLC

Indianapolis, Indiana – Wounded Warrior Project, Inc. (“WWP”) of Jacksonville, Florida has sued in the Southern District of Indiana alleging that Dean M. Graham and Help Indiana Vets, Inc. (“HIVI”), both of Acton, Indiana, defamed WWP. The lawsuit also asserts that HIVI engaged in false advertising and unfair competition. While this suit did not allege trademark infringement, it included references to WWP’s trademark, U.S. Trademark Registration No. 30014447, which has been registered by the U.S. Trademark Office.

WWP is a Virginia nonprofit corporation, which has been registered with the Internal Revenue Service (“IRS”) as a 501(c)(3) nonprofit organization. It was founded in 2003 as a small nonprofit corporation to provide comfort items to service members injured in combat after September 11, 2001. In the years which followed, WWP grew into a complete rehabilitative effort to assist service members injured in combat with both visible and invisible injuries (such as post-traumatic stress disorder, combat and operational stress, and depression) as they recover and transition back to civilian life.

HIVI is believed to be an Indiana nonprofit corporation. WWP indicates that HIVI was founded in April 2013 by Graham. WWP asserts that HIVI’s business is to offer financial help to Indiana veterans through donor support as a nonprofit. As such, WWP contends, HIVI is a direct competitor of WWP.

WWP asserts that, over the last decade, it has invested substantial time and resources to develop the WWP mark through national direct-mail campaigns, marketing, corporate product promotions and press releases. WWP indicates that it has received substantial national and local press coverage for its efforts. It claims that its success is due in no small part to the support of the media and celebrities who support WWP. Finally, WWP indicates that, over the last decade, it has received approximately 30 billion media impressions with an estimated publicity value of $500 million. WWP claims that, due to its efforts, the WWP mark has become famous.

This suit is founded upon, inter alia, WWP’s contentions that HIVI published false and misleading statements of fact regarding WWP. The assertions allegedly made by HIVI included that Wounded Warrior Project is a fraud and that it is pulling the biggest “Oke Doke” ever pulled on the American public. WWP contends that, on the page containing the purportedly false and misleading statements about WWP, a PayPal link is included so that users of the HIVI site may make charitable donations to HIVI.

WWP further alleges that HIVI has contacted numerous government entities and officials, as well as multiple media outlets, claiming that WWP is a fraud.

Trademark attorneys for WWP assert the following in their complaint against Graham and HIVI:

• Count I: False Advertising – Lanham Act
• Count II: Criminal Deception – Indiana Crime Victims Act
• Count III: Defamation – Indiana Common Law
• Count IV: Unfair Competition – Indiana Common Law
• Count V: Tortious Interference with Business Relationships – Indiana Common Law
• Count VI: Unjust Enrichment – Indiana Common Law

WWP asks the court for a permanent injunction; treble damages under the Indiana Crime Victims Act; an order compelling Defendants to disgorge all financial benefits realized as a result of the alleged wrongful conduct; and an award of costs and attorneys’ fees.

Practice Tip: Paul Overhauser was interviewed regarding this unusual lawsuit between nonprofit entities. See here.

November 25, 2013

Eli Lilly Sues Singpet for Trademark Infringement

By Overhauser Law Offices, LLC

Indianapolis, Indiana – Eli Lilly and Company of Indianapolis, Indiana has filed a trademark infringement lawsuit in the Southern District of Indiana alleging that Sebastian Wiradharma a/k/a Sebastian Singh (“Singh”) and Singpet Pte. Ltd., both of Singapore, infringed the trademark COMFORTIS, Registration Number 3,370,168, which has been registered by the U.S. Trademark Office.

Lilly, through its Elanco Animal Health Division, manufactures, markets and sells pet medicines, including flea-control preparations and treatments for parasitic infestations. It contends that it has made long and continuous of the name and mark “Elanco” in connection with veterinary preparations. It also asserts that it has long used the “Comfortis” mark, which was registered by the U.S. Trademark Office in 2008. Lilly claims that it has sold tens of millions of dollars’ worth of veterinary preparations, pet medicines and related goods and services under the Elanco and Comfortis marks.

Among Lilly’s products is Trifexis, a once-monthly veterinary medication, which contains the veterinary chemicals spinosad and milbemycin oxime. Trifexis is for the prevention of heartworms, fleas and intestinal worms. It is sold in the United States with what Lilly contends to be an inherently distinctive and non-functional trade dress. Trifexis is available only by prescription through licensed veterinarians. Lilly sells a similar product in Australia, with similar trade dress, under the name “Panoramis.”

Defendant Singh, who is allegedly the principal of Singpet, and Singpet do business over the Internet, including via websites at www.singpet.com, www.petcorporate.com, www.fleastuff.com and http://www.ourpetworld.net/home.asp, among others.

Defendants are accused of marketing and selling European and Australian versions of Elanco- and Comfortis-branded pet medicines to customers in the United States. Specifically, Lilly contends that Defendants market “Panoramis (Triflexis)” [sic] on their websites. While the Defendants are apparently based in Singapore, this marketing is allegedly directed at consumers in the United States. Lilly asserts that units designed for sale in markets such as Europe and Australia are neither intended nor authorized for sale in the United States.

Lilly further objects to the Defendants’ purported advertisement of units designed for the Australian and European markets as identical to or interchangeable with the units designed for sale in the United States. It states that that the Elanco-branded “Panoramis” pet medicines are materially different from its Elanco-branded “Trifexis” pet medicines sold in the United States.

Lilly contends that the Elanco- and Comfortis-branded pet medicines are tailored to meet the requirements of different geographic regions and countries to reflect the differences in language, climate, government regulations, units of measure, local addresses and telephone numbers, among other things.

Trademark attorneys for Lilly assert that Defendants are not authorized to use Lilly’s Elanco or Comfortis names and trade dress in connection with the sale of once-monthly spinosad and milbemycin oxime pet medicines outside of Australia. Lilly has sued Defendants, asserting willful infringement of its trademarks. It asserts the following in its complaint:

• First Claim for Relief: Trademark Infringement in Violation of Section 32 of the Lanham Act
• Second Claim for Relief: Unfair Competition in Violation of Section 43(a) of the Lanham Act
• Third Claim for Relief: False Advertising in Violation of Section 43(a) of the Lanham Act
• Fourth Claim for Relief: Unfair Competition in Violation of Indiana Common Law

Lilly asks for preliminary and permanent injunctions; damages, including treble damages; the Defendants to be required to notify all purchasers of the accused products, request the return of the products and refund the price paid; pre- and post-judgment interest and costs of the suit.

Practice Tip:

Lilly is objecting to the so-called “grey market” for its veterinary pharmaceuticals. Prices for drugs can vary considerably between countries, often as a result of government intervention in the market. As a result, a “grey market” – selling a drug intended for use in one country to consumers in another country – can emerge. In this complaint, Lilly has framed its objection to a grey market for its pet-care pharmaceuticals as an intellectual property dispute.

Intellectual property law requires a balancing of competing interests. On the one hand, innovation will be discouraged if inventors, authors and other creators of intellectual property are not allowed to benefit from their labors. Such a problem arises if others are allowed to use creators’ ideas without compensating them (the “free-rider problem”). On the other hand, the public good is promoted by encouraging free competition in the marketplace and easy alienability of property.

Under the first-sale defense to infringement, once a copy of an item protected by intellectual property laws has been sold to a purchaser, the creator of the intellectual property generally may not prevent that purchaser from reselling or otherwise disposing of the item. In patent and copyright law, the first-sale rule in most cases provides an absolute defense against infringement. In patent law, this is also referred to as “patent exhaustion.” As a result, the purchaser of a copy of the work and the owner of the intellectual property rights to that work may become competitors in the marketplace if the purchaser goes to resell a copy of the work.

The first-sale defense is not as broad in a trademark context. Enunciated in 1924 by the U.S. Supreme Court, the general rule for the resale of a trademark item provides that, after a trademark owner has sold a trademarked product, the buyer ordinarily may resell that product under the original mark without incurring any trademark liability. See Prestonettes, Inc. v. Coty, 264 U.S. 359 (1924). However, unlike patent or copyright law, trademark law has as one of its primary goals preventing confusion among potential purchasers. Typically, but not always, such confusion will not exist where a genuine article bearing an authentic trademark is sold. While there is a split among the circuits concerning the extent to which consumer confusion is a relevant factor, some hold that certain types of confusion about a product’s origin cause the first-sale defense to be inapplicable to the resale of a trademarked good. See Au-Tomotive Gold Inc. v. Volkswagen of America, Inc., 603 F.3d 1133, 1134 (9th Cir. 2010).