I. Patents

A. Infringement; Acts for the United States

Riles v. Amerada Hess Corp., 999 F.Supp. 938, 47 U.S.P.Q.2d 1372 (S.D.Tex. 1998); Judge Kent

Riles was the inventor and owner of U.S. Patent 4,669,918 claiming a method of installing an offshore platform onto a pre-installed piling foundation positioned on the ocean floor.  Amerada was awarded offshore leases by the United States for oil and gas exploration.  Accordingly, Amerada submitted operational plans, under applicable regulations, to the United States Department of Interior Minerals Management Service (MMS) for the design, fabrication, and installation of its offshore platform.  After the plans were approved by the MMS, Riles filed a declaratory judgment action alleging Amerada’s proposed installation of the offshore platform would infringe the ‘918 patent.  Amerada moved to dismiss the action under 28 U.S.C. §1498(a), which states, in part:

            Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without a license of the owner thereof or lawful right to use or manufacture the same, the owner’s remedy shall be by action against the United States in the Claims Court for the recovery of his reasonable and entire compensation for such use and manufacture.

* * *

            For purposes of this section, the use or manufacture of an invention described in and covered by a patent of this United States by a contractor, a subcontractor, or any person, firm or corporation for the Government and with authorization or consent of the Government, shall be construed as use or manufacture for the United States.

The court found that Section 1498(a) relieves contractors and subcontractors of liability where the contractor or subcontractor uses or manufactures an infringing invention for the United States.  The district court noted that for Amerada to prevail, the court must find (1) Amerada used the invention for the Government’s benefit; and, (2) the Government gave authorization or consent for such use.

 Amerada argued that its actions were conducted for the Government because the Government received a benefit from the leases in the form of royalty payments and because Amerada would use Riles’ method in connection with the leases.  The court disagreed, holding when a lessor drills on Government land and the Government receives royalties, the lessee does not undertake drilling operations for the Government.  The court also stated that when the Government authorizes action by a third party, such as Amerada, the Government does not become liable for any infringement Amerada may choose to undertake within the sphere of the authorized activity.  The court denied Amerada’s motion, concluding that the drilling was not done for the United States, and thus, Section 1498(a) did not bar Riles’ suit.
 
B. Reexamination; Invalidity

Hockerson-Halberstadt, Inc. v. Nike, Inc., 4 F.Supp.2d 573 (E.D.La. 1998); Judge Fallon

In 1991, Hockerson-Halberstadt, Inc. (HHI) brought an action against Nike, Inc., Reebok International, Ltd., Converse, Inc. and several other shoe manufacturers for infringement of U.S. Patent 4,322,895 (“the ‘895 patent”).  The ‘895 patent was directed to a shoe comprised of a sole having a midsole, an upper mounted on the sole, and a support band carried on the upper rim of the midsole and secured about the sidewalls of a heel cup of the upper.  Claim 1 of the ‘895 patent required that “the support band inclines upwardly from the lower rim of the heel portion to the heel cup midspan.”

While the infringement suit was pending, Reebok requested that the United States Patent and Trademark Office reexamine the ‘895 patent.  Accordingly, the court stayed HHI’s civil action pending reexamination.  During reexamination, the portion of claim 1 at issue was amended to read “the midsole and support band having walls means which inclines upwardly from the lower rim of the heel portion means to the heel cup midspan.”

After reexamination was completed, Converse moved for summary judgment, claiming the reexamined ‘895 patent was invalid because the claims were enlarged during reexamination in violation of 35 U.S.C. §305.  The court agreed, finding that reexamined claim 1 no longer required the support band to extend from the lower rim.  Instead, as noted by the court, claim 1 required that the wall means, formed by both the support band and the midsole, was required to incline upward.  The reexamined claims were broader because they could encompass a shoe with a support band spaced above the lower rim, whereas the original claims could not.  Furthermore, the reexamined claims allowed the sloping structure to be comprised of the support band and midsole, whereas the original claims allowed the sloping structure to be comprised only of the support band.  Based upon its findings, the court concluded that the reexamined claims were invalid because they were broadened in violation of 35 U.S.C. §305.

C. On Sale; Public Use; Preliminary Injunction

Welsh v. Rockmaster Equipment Mfg., Inc., 4 F.Supp.2d 659 (E.D.Tex. 1998); Judge Cobb

Welsh mined rocks for use on secondary roads and as a base for primary roads.  In an effort to increase his production, Welsh contacted Scott Hydraulics.  In attempting to locate a machine that could meet Welsh’s needs, Scott Hydraulics found a used machine, known as the Twin Header.  Welsh used the Twin Header, but it did not perform as Welsh would have liked.

Welsh claimed he invented a machine that would fit his needs.  The machine, known as the Rockmaster, included a crushing component for crushing a wall of rock.  The crushing component comprised a rotating drum with rows of teeth on the surface, removably secured to an articulating boom on a track hoe.  Welsh contacted Scott Hydraulics regarding manufacture of the Rockmaster.  Welsh and Scott Hydraulics agreed that Welsh would provide all financing for the construction and design of the Rockmaster and that Scott Hydraulics would provide the time, materials and labor.  In the agreement, Scott Hydraulics expressly acknowledged that Welsh owned all intellectual property relating to the Rockmaster, including patent rights.

Based upon Welsh’s rudimentary sketches, Scott Hydraulics designed and constructed the first Rockmaster.  Welsh first tested the Rockmaster in spring of 1991 at Welsh’s rock quarry.  Welsh found the first design to be inadequate and requested modifications.  Scott Hydraulics made the modifications and delivered the modified Rockmaster to Welsh in May 1991.  Over the next year, Welsh repeatedly modified the Rockmaster to meet his needs.

Defendants, including Scott Hydraulics, began marketing the Rockmaster as early as December 1991.  On separate occasions, Scott Hydraulics wrote third parties declaring, “[w]e now have two units in operation .   .   . we are now developing our marketing strategy” and that Scott Hydraulics had “developed the following Lease/Purchase program for our Rockmaster.”

In 1992, Paul Scott and Welsh created Rockmaster Equipment Manufacturing, Inc. (REM) to exploit the potential of the Rockmaster.  A patent application was filed on May 25, 1993, naming Paul Scott of Scott Hydraulics as the sole inventor.  The application issued as U.S. Patent 5,478,139 (“the ‘139 patent”).  Subsequently, Welsh entered into negotiations with a third party for manufacture of the Rockmaster.  Negotiations were ongoing when Paul Scott and Scott Hydraulics threatened the third party with patent infringement.  In the meantime, Scott and Scott Hydraulics, along with REM, continued to exploit the invention, including producing the Rockmaster for sale to Welsh’s competitors.

Alleging misappropriation of trade secrets, patent misuse, and unfair competition, Welsh sued Scott Hydraulics, REM, Paul Scott and others, seeking to have the ‘139 patent declared invalid and unenforceable.  Welsh also sought injunctive relief to prevent the defendants from making, using, or selling the invention disclosed in the ‘139 patent.

Welsh moved for a preliminary injunction, which the court granted.  The court found that the ‘139 patent was invalid and unenforceable because the Rockmaster, as claimed in the ‘139 patent, was “on sale” more than one year prior to the filing date of the patent application.  While not denying that the Rockmaster was sold or on sale before the critical date, the defendants asserted that any sales or uses before the critical date were for experimental purposes only.  The court disagreed, finding no evidence of experimental use.  Specifically, the court found that Welsh was under no secrecy obligation to defendants and that Welsh did not prepare any reports or data on his alleged experimentation.  Furthermore, Welsh allowed third parties to visit his rock quarry to view the Rockmaster well before the critical date.  Defendants themselves filmed the Rockmaster in operation and sent copies to potential buyers before the critical date.  Noting that the sales of the Rockmaster to Welsh were primarily for commercial purposes, and not experimental purposes, the court concluded that the claims of the ‘139 patent were invalid under 35 U.S.C. §102(b) because the invention was “on sale” and in public use more than one year before the filing date of the patent application.

The court concluded that Welsh met his burden for entry of a preliminary injunction and enjoined the defendants from: (1) attempting to enforce the ‘139 patent; (2) manufacturing, selling and offering to sell the Rockmaster; and (3) using the “ROCKMASTER” trademark.

D. Correction of Inventorship; Standing

J & J Mfg., Inc. v. Logan, 24 F.Supp.2d 692, 48 U.S.P.Q.2d 1412 (E.D.Tex. 1998); Judge Heartfield

J&J designed and manufactured of a variety of machines.  Logan approached J&J in search of a spiral meat slicer having hydraulic components.  J&J’s employees designed and developed the spiral meat slicer and assigned all rights in the invention to J&J.  J&J sold four slicers to Logan.  J&J alleged that Logan led them to believe that the parties were entering into an agreement whereby J&J would manufacture the meat slicers and Logan would market them.  Accordingly, J&J provided Logan with technical drawings and a written specification of the invention.  Thereafter, Logan and J&J ceased all communication with one another.

In 1989, Logan was granted U.S. Patent 4,821,635 (“’the 635 patent”) for the spiral meat slicer.  The ‘635 patent named Logan as the sole inventor.  J&J sued Logan to correct the inventorship on the ‘635 patent, infringement of the ‘635 patent, false designation of origin, fraud and conversion.  Logan moved to dismiss J&J’s suit under a variety of Rule 12 motions.  The court denied all of Logan’s motions.

In particular, Logan moved to dismiss J&J’s patent infringement count because J&J did not have standing to bring an action for patent infringement.  Logan claimed that J&J never had legal title to the ‘635 patent, and therefore, J&J could not assert patent infringement.  J&J argued the court could adjudge it an equitable title holder in the ‘635 patent and then award it relief under its equitable title.  The court framed the issue as whether the court had “jurisdiction over a claim of patent infringement by a party that has yet to be the equitable title holder to the patent.”  The court ruled that it did have the jurisdiction, holding that although J&J was not entitled to “at-law” relief for patent infringement because it was not the title holder of the ‘635 patent, J&J was nevertheless entitled to relief under the court’s equity powers.
 
As noted by the court, J&J petitioned the court to correct inventorship under 35 U.S.C. §256.  The court concluded that if it could correct inventorship, it must do so to save the patent from becoming invalid.  The court denied the motion to dismiss for lack of standing, ruling that if J&J acted without deceptive intent and if the court corrected the inventorship of the ‘635 patent, J&J would be entitled to damages for the infringement of the freshly corrected patent under the court’s equity powers.
 

II. Trademarks

A.  Infringement; Trade Dress; Injunction

Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d 526, 48 U.S.P.Q.2d 1065 (5th Cir. 1998); Judges Garza, King, and Benavides.

Plaintiffs, Pebble Beach Co., Resorts of Pinehurst, Inc. and Sea Pines Co., Inc., own golf resorts known as Pebble Beach, Pinehurst, and Harbour Town, respectively.  Tour 18 operated two daily-fee golf courses that replicated golf holes from sixteen different golf courses.  Tour 18 promoted itself as “America’s Greatest 18 Holes” throughout the United States in regional and national publications.  Among the holes Tour 18 copied were Hole No. 14 at Pebble Beach, Hole No. 3 at Pinehurst Course No. 2, and Hole No. 18 at Harbour Town, including the lighthouse appearing behind the 18th green.

 Plaintiffs sued Tour 18 for service mark infringement, trade dress infringement, false advertising, and additional state law claims, including unfair competition.  Pebble Beach also asserted copyright infringement claims, alleging Tour 18 used Pebble Beach’s copyrighted maps to construct the replica of the 14th Hole at Pebble Beach.  After a bench trial, the court entered judgment for Plaintiffs on their infringement, dilution, and unfair competition claims regarding the use of their names.  The court also found that the 18th Hole at Harbour Town was protectable under trade dress laws.  The district court denied Plaintiffs’ requests for damages and attorneys fees but issued an injunction requiring Tour 18 to (1) cease using the Pebble Beach and Pinehurst marks, except to inform the public of the golf holes Tour 18 copied; (2) cease all use of Sea Pines’ marks, including the lighthouse positioned behind the replica of 18th Hole at Harbour Town; (3) remove the lighthouse replicas; (4) include appropriate and prominent disclaimers on all promotional material; (5) maintain the disclaimers placed on the course; and (6) refrain from making any claims that original blueprints, maps or other data were used to construct the holes.

 On appeal, the Fifth Circuit reviewed the protectability of Plaintiffs’ golf hole trade dress.  With respect to Pinehurst and Pebble Beach, the court found that the holes copied by Tour 18 were non-functional.  Nevertheless, the Fifth Circuit ruled that the replica holes were not inherently distinctive because their configurations created “golf holes and nothing more.”  Therefore, the Pinehurst and Pebble Beach holes were not entitled to trade dress protection because they were generic.

 On the other hand, the Fifth Circuit concluded that Hole No. 18 at Harbour Town was not generic because it included a distinctive lighthouse in the background of the green that gave the hole an individual characteristic, separating it from golf holes in general.  The Fifth Circuit also concluded that the 18th Hole at Harbour Town had acquired secondary meaning and was entitled to trade dress protection.

 The Fifth Circuit affirmed the district court’s ruling that Tour 18’s use of Plaintiffs’ marks and use of Harbour Town’s 18th hole design caused a likelihood of confusion and infringed Plaintiffs’ marks and the trade dress of the 18th Hole at Harbour Town.  The court affirmed the district court’s injunction in almost all aspects.  The Fifth Circuit modified the injunction to allow Tour 18 to use Sea Pines’ marks to identify the hole it copied, similar to Tour 18’s allowed use of the Pinehurst and Pebble Beach marks.

B. Infringement; Parody Defense

Elvis Presley Enterprises, Inc. v. Capece, 141 F.3d 188, 46 U.S.P.Q.2d 1737 (5th Cir. 1998); Judges Garza, King and Benavides.

 Elvis Presley Enterprises (EPE) owned all of the trademarks, copyrights, and publicity rights of the Elvis Presley estate.  Defendants obtained a federal trademark registration for “THE VELVET ELVIS” for use in connection with restaurant and tavern services and used “THE VELVET ELVIS” as the name of their restaurant.  “THE VELVET ELVIS” restaurant also used other references to Elvis, including a frozen drink referred to as  “Love me Blenders.”  Defendants referred to Elvis in their advertising, using slogans such as “Elvis has not left the building” and “Viva la Elvis.”

EPE sued defendants for trademark infringement, trademark dilution, unfair competition, and state law rights of publicity violations.  After suit was filed, defendants discontinued using images and references to Elvis in their advertising.  After trial, the district court concluded that although the defendants’ discontinued advertising practices caused a likelihood of confusion, defendants’ continued use of “THE VELVET ELVIS” as the name of the restaurant did not infringe or dilute EPE’s trademark rights.  EPE appealed.

The Fifth Circuit reversed and remanded the case to the district court to enter an order enjoining defendants from using “THE VELVET ELVIS” mark.  The Fifth Circuit concluded that defendants’ advertising practices under “THE VELVET ELVIS” mark with an underlying meaning directly related to Elvis Presley infringed EPE’s trademark rights.  Because altering the context of the mark’s use could not erase this meaning, the Fifth Circuit concluded that defendants’ continued use of “THE VELVET ELVIS” mark would infringe EPE’s marks.  Defendants claimed that the use of “THE VELVET ELVIS” was only a parody, not an infringing use of EPE’s trademark rights.  The Fifth Circuit disagreed and rejected the parody defense because defendants were attempting to parody the faddish, eclectic bars of the 1960’s, not Elvis Presley himself.  The Fifth Circuit concluded that the defendants’ parody did not require the use of EPE’s trademarks.  Therefore, parody was irrelevant because it did not weigh in favor of or against likelihood of confusion.

C. Infringement; Counterfeiting; Contributory Infringement

Rolex Watch U.S.A., Inc. v. Meece, 158 F.3d 816, 48 U.S.P.Q.2d 1589 (5th Cir. 1998); Judges Jolly, Smith, and Barksdale.

Rolex is the exclusive distributor in the United States of watches and products sold under the “ROLEX” trademarks.  Meece sold parts designed for Rolex and other name-brand watches and sold new Rolex watches to which he added non-genuine parts, such as diamonds.  Meece’s customers were jewelry retailers, not the public at large.  Meece was not affiliated with Rolex nor were his actions authorized by Rolex.  In his advertising, Meece indicated that his replacement parts were not genuine Rolex parts; that he was not affiliated with Rolex; and that the addition of his non-genuine parts voided the Rolex warranty.

In 1994, Meece began offering to convert stainless steel Rolex watches into gold watches using non-genuine parts.  In these advertisements, Meece used Rolex trademarks to identify non-genuine parts and pictured his own imitation crown design on several non-genuine parts, including bracelets, in the same location Rolex places its trademarked crown design.  Additionally, Meece sold non-genuine bracelets on which he installed the customer’s original Rolex bracelet clasp bearing the Rolex crown design.

 Rolex sued Meece for trademark infringement, trademark counterfeiting, false designation of origin, unfair competition, and trademark dilution.  After a bench trial, the district court found that portions of Meece’s activities constituted trademark infringement.  The district court enjoined Meece from injecting into commerce any watch that was reconstructed within non-genuine parts which simulates a Rolex watch.  The district court also enjoined Meece from selling bracelets with the customer’s original clasps bearing the Rolex marks.  The district court found that Meece’s replacement of individual parts did not pose the same potential for confusion and did not enjoin this conduct.  The district court found that Meece was not liable for contributory trademark infringement because there was insufficient evidence to find that Meece’s buyers were constructing simulated Rolex watches that would infringe Rolex’s marks.  Furthermore, the evidence did not establish that Meece was inducing others to infringe or that he knew that he was selling replacement parts to persons who were using the parts to make infringing watches.  Finally, the district court held that Rolex was not entitled to an award of Meece’s profits because Meece’s profits derived from the sale of infringing watches were de minimis.  The district court did not award attorneys’ fees because it found that Meece’s conduct was not deliberate.

 On appeal, Rolex argued that the district court erred by finding Meece’s profits to be de minimis, by failing to address whether Meece’s activities constituted trademark counterfeiting within the meaning of 15 U.S.C. §1117(b), by failing to award it attorneys’ fees and treble damages for Meece’s trademark counterfeiting activities, and by failing to award it profits and attorneys’ fees under 15 U.S.C. §1117(a) because Meece’s activities constituted deliberated trademark infringement.

The Fifth Circuit vacated the district court’s judgment regarding the findings that Meece’s profits were de minimis, that Meece’s mark placed on the bracelets was not sufficiently similar to the Rolex crown so as to cause confusion and that Rolex was not entitled to recover attorneys’ fees and profits.  In all other respects, the district court’s judgment was affirmed.

The Fifth Circuit also remanded the case to the district court for a determination of whether Meece’s activities and use of the Rolex marks resulted in counterfeit products within the meaning of 15 U.S.C. §1116(d) and §1127, and if they were, whether an award of attorneys’ fees and treble damages would be appropriate.  The Fifth Circuit remanded the case because the district court did not address, even by implication, whether Meece’s activities constituted trademark counterfeiting, and therefore did not consider whether Rolex was entitled to the remedies under §1117(b).  The Fifth Circuit speculated about the outcome of the district court’s eventual ruling when it stated, “[t]here is considerable evidence that Meece’s activities with respect to the items in issue constitute trademark counterfeiting.”

The Fifth Circuit also found that the district erred in failing to consider and weigh all of the likelihood of confusion factors in assessing whether Meece’s crown on his non-genuine bracelets was confusingly similar to the Rolex trademarked crown.  Accordingly, the Fifth Circuit remanded the case for such consideration.

The Fifth Circuit affirmed the district court’s finding that Meece did not deliberately infringe Rolex’s marks and as a result, the district court did not err in refusing to award profits and attorneys’ fees under §1117(a).  The Fifth Circuit found that Meece did not palm off his products to jewelry retailers or to the ultimate customers as Rolex products.  Meece advertised only to jewelry retailers and made efforts to disclose to these retailers that he was not affiliated with Rolex and that addition of his parts voided the Rolex warranties.

D. Infringement; Preliminary Injunction; Likelihood of Confusion

Sugar Busters, L.L.C. v. Brennan, 48 U.S.P.Q.2d 1511 (E.D.La. 1998); Judge Lemmon
 
Sugar Busters, L.L.C. owned a U.S. Trademark Registration for “SUGARBUSTERS” through an assignment from SugarBusters, Inc.  Sugar Busters, L.L.C. had also used the “SUGARBUSTERS” mark since at least as early as 1995 in connection with “publications, namely, books and pamphlets about diet, nutrition, health medicine, ingredients of foods, and recipes.”  See U.S. Trademark Application Serial No. 75-469812 filed by Sugar Busters, L.L.C. on April 17, 1998.  Sugar Busters, L.L.C. published a nutritional book under the “SUGARBUSTERS” mark aimed at the renowned “Sugar Busters” diet.  The cover of the book was red, white, and blue and had a tilted cube inside a universal prohibition symbol, Ø.  Brennan independently authored and published a book entitled “Sugar Bust For Life.”  The book contained recipes based upon the principles of the “Sugar Busters” diet.  Brennan’s book also had a red, white, and blue cover and featured a tilted white square.

 Sugar Busters, L.L.C. sued Brennan for trademark infringement, unfair competition, trademark dilution, and trade dress infringement and moved for a preliminary injunction, which the court granted.  In granting the injunction, the court examined the four-factor test to determine if Sugar Busters, L.L.C. was entitled to an injunction:  (1) a substantial likelihood of success on the merits; (2) a substantial threat that the movant will suffer irreparable injury if the injunction is denied; (3) the threatened injury outweighs any damage that the injunction might cause the defendant; and, (4) the injunction will not disserve the public interests.

The court found that Sugar Busters, L.L.C. was likely to succeed on the merits after reviewing the likelihood of confusion factors for determining trademark infringement:  (1) the type of mark allegedly infringed; (2) the similarity between the two marks; (3) the similarity of the products or services; (4) the identity of the retail outlets and purchasers; (5) the identity of the advertising media used; (6) the defendant’s intent; and, (7) any evidence of actual confusion.

In particular, the court found that the mark “SUGARBUSTERS” was a strong mark due to its use in connection with Sugar Busters, L.L.C.’s best-selling book.  The court found that the marks and the goods and services associated with the marks were similar.  In addition, Sugar Busters, L.L.C. was able to show actual confusion because two national book retail outlets, Barnes and Noble and Books-a-Million, ordered Brennan’s book believing it to emanate from Sugar Busters, L.L.C.  The court concluded that Sugar Busters, L.L.C. met its burden of proving the other three factors necessary to entitle it to a preliminary injunction.  The court enjoined Brennan from engaging in the sale and distribution of her book, “Sugar Bust For Life.”

Note:  It is interesting to note that the court apparently found that the “SUGARBUSTERS” registered mark was incontestable because it had been registered for more than five years.  At the time this paper was written, the United States Patent and Trademark Office (“USPTO”) records, available on the USPTO website, do not indicate that either a Section 8 affidavit or a Section 15 affidavit had been filed for the mark.  If so, the court should not have deemed the registered mark incontestable.  See 15 U.S.C. §1065.

E. Infringement; Parody

Lyons Partnership v. Giannoulas, 14 F.Supp.2d 947, 48 U.S.P.Q.2d 1759 (N.D.Tex. 1998); Judge McBryde

Lyons created and owned Barney, the well-known large purple dinosaur character.  Lyons also owned a number of trademark and service mark registrations in and to the Barney character and several copyrights for Barney performances.  Giannoulas owned TFC, Inc., through which he promoted and booked his performances as “The Famous Chicken” a/k/a “The San Diego Chicken.”  The Chicken appears at numerous sporting events, performing a variety of slapstick comedy routines.

Among these routines was a comedy skit wherein defendants used a large purple dragon costume to conjure up an image of Barney.  During the routine, the putative Barney would prance into the arena where The Chicken was dancing to disco music.  Putative Barney would then begin to dance, eventually outdancing The Chicken, who falls to his knees and pays homage to putative Barney.  The Chicken then offers to hug putative Barney, but putative Barney pushes The Chicken to the ground and skips away.  The Chicken then chases and tackles putative Barney.  The Chicken pins putative Barney to the ground and stands over putative Barney flexing his wings.  The two walk off the arena floor together until they reach an obstacle, such as a dugout railing, where The Chicken flips putative Barney over the railing.  Defendants only perform the Barney skit at baseball, basketball and hockey games, usually held at night.  Other than the Barney skit, defendants do not use any portion of Lyons copyrighted materials or marks in selling their services or merchandise.

Lyons sued the defendants for trademark infringement, false description, unfair competition, trademark dilution, and copyright infringement.  Both parties moved for summary judgment.  The court granted defendants’ motion and denied plaintiff’s motion, dismissing plaintiff’s case with prejudice.  Regarding the trademark infringement claims, the court found no likelihood of confusion because the Barney skit did not imply sponsorship or endorsement.  Rather, defendants’ use of the putative Barney was fair because it was a parody.  The court concluded that defendants’ use of putative Barney in the Barney skit was not an effort to confuse consumers; rather, it was an effort to amuse patrons at the event.  Defendants’ parody did not use the putative Barney in a humorous fashion but targeted Barney itself.  As noted by the court, “[c]ontrary to what plaintiff urges again and again, any other character, such as Mickey Mouse, could not be substituted in defendants’ act to achieve the same effect.”

The court also concluded that defendants’ use of the putative Barney did not rise to the level of trademark dilution and would not create a likelihood of trademark dilution, through either blurring or tarnishment.  Blurring was inapplicable because the defendants did not use putative Barney to identify any of its goods or services.  Likewise, tarnishment was inapplicable because defendants’ use of the putative Barney did not link the real Barney to products of shoddy quality or portray Barney in an unwholesome fashion such that the public would associate the lack of quality or lack of prestige in defendants’ goods with plaintiff’s unrelated goods.

Defendants claimed their use of the putative Barney was a non-infringing fair use of Lyons’ copyrighted material for the purpose of parodying Barney.  In assessing defendants’ fair use claim, the court assessed the following factors: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as whole; and (4) the effect of the use upon the potential market for, or value of, the copyrighted work.  In particular, the court concluded that the purpose and character of the use of Barney was to create a parody of Barney.  Defendants did not appear to use a substantial portion of the work because defendants’ Barney skits simply conjured up enough of the original Barney to make the audience recognize the purple dragon character.  Finally, the court concluded that defendants’ parody did not affect Lyons’ market because Lyons could show no evidence of lost revenue or sales.  Considering the factors, the court held that defendants’ parody was fair use of Lyons copyrighted material.

III. Copyrights and Trade Secrets

A. Infringement; Licensing; Attorneys’ fees; Trade Secrets

Hogan Systems, Inc. v. Cybresource Int’l, Inc., 158 F.3d 319, 48 U.S.P.Q.2d 1668 (5th Cir. 1998);  Judges Stewart, Duhe, and Benavides.

 Hogan Systems, Inc. was the owner and developer of copyrighted software and trade secrets relating to that software.  Hogan required all its employees to sign confidentiality agreements to prevent them from disclosing or using the software and trade secrets.  But these agreements did not encompass the employee’s general skill, knowledge, and experience.  Hogan did not sell its software to customers; instead, Hogan required its customers to license the software and sign agreements to maintain the confidentiality of the software and the trade secrets.

 In 1980, Hogan entered into a software license with Norwest whereby Norwest licensed Hogan’s software and agreed not to distribute or disclose the software to third parties.

 In 1995 and 1996, four of Hogan’s employees quit.  One of the employees later formed Cybresource International Inc. and hired the other three employees.  Subsequently, Cybresource signed a professional services agreement with Hogan in which Cybresource allegedly stipulated to the trade secrets status of the software and proprietary information disclosed by Hogan during the term of the agreement.  The agreement also allegedly contained confidentiality obligations that survived termination of the agreement.  Cybresource allegedly agreed that it would not copy or use the information without express authorization from Hogan.

 Thereafter, Cybresource contracted with Norwest to provide software support services without obtaining Hogan’s authorization.  Hogan objected to the Cybresource-Norwest agreement because: (1) it characterized Cybresource as an independent contractor; (2) allowed Cybresource to possibly access Hogan’s software; and, (3) required Cybresource to obtain Hogan’s consent to perform services on the software.  Cybresource asserted that Norwest did not violate its agreement with Hogan by allowing access to the software to third parties where those third parties were on the licensee’s premises for the purpose of modifying or customizing the software to meet Norwest’s business needs.
 
Hogan filed suit seeking injunctive and monetary relief for copyright infringement, breach of contract, trade secret misappropriation, unfair competition, and tortious interference against Cybresource and named the four former employees as individual defendants.  Hogan claimed the defendants were infringing its copyrights and misappropriating its trade secrets by using the copyrighted software and related trade secrets to perform the support services for Norwest.  Hogan also alleged the former employees violated their confidentiality agreements with Hogan by performing the services for Cybresource under the Norwest service agreement.

 Cybresource and the individual defendants moved for summary judgment.  The district court granted summary judgment on all claims and awarded defendants their attorneys’ fees under 17 U.S.C. §505 as the prevailing party.

 The Fifth Circuit affirmed.  The Fifth Circuit found that Hogan’s copyright infringement claims were sheltered under Hogan’s software license with Norwest because the software license authorized third-party contractors to provide consulting services on Hogan’s software when those persons “are on [Norwest’s] premises for purposes specifically relating to [Norwest’s] authorized use of the licensed program.”  Hogan first argued to the district court that this provision was directed to janitorial and temporary clerical staff.  But on appeal, Hogan argued that the clause was limited to independent hardware personnel who might see screen displays.  The Fifth Circuit rejected both arguments, concluding that defendants were on Norwest’s premises for purposes specifically relating the Norwest’s authorized use of the software.  The Fifth Circuit added that if Hogan intended to exclude independent software contractors, the software licenses should have so stated.

 The Fifth Circuit affirmed the district court’s grant of summary judgment on the trade secret and breach of contract claims because the trade secrets at issue were not trade secrets.  Rather, the information was general knowledge, skill, and experience gained by the individual defendants while working for Hogan and was specifically excluded from the confidentiality agreements.  Hogan argued that the defendants had acquired specialized knowledge about the software while employed by Hogan.  Unfortunately, Hogan stipulated that many individuals obtain comparable ability and expertise without being employed by Hogan.  As such, the information was either generally known or readily ascertainable and not subject to trade secret protection.

 Hogan also appealed the award of attorneys’ fees to defendants.  Finding no error in the district court’s decision, the Fifth Circuit reaffirmed its prior ruling in McGaughey v. Twentieth Century Fox Television, 12 F.3d 62, 65, 29 U.S.P.Q.2d 115, (5th Cir. 1994), that under 17 U.S.C. §505, “although attorneys’ fees are awarded in the trial court’s discretion, they are the rule rather than the exception and should be awarded routinely.”  Because this practice is discretionary, there is no conflict between this Fifth Circuit practice and the Supreme Court’s holding in Fogerty v. Fantasy, Inc. 510 U.S. 517, 114 S.Ct. 1023, 29 U.S.P.Q.2d 1881, (1994) rejecting the British rule of mandating the award of attorneys’ fees.

 B.  Sovereign Immunity

Chavez v. Arte Publico Press, --- F.3d ---, 48 U.S.P.Q.2d 1481(5th Cir. 1998); Judges Wisdom, Garza and Jones.

Chavez, a nationally renowned author and playwright, contracted with Arte Publico Press for publication of several of her works in a book.  Arte Publico Press (APP) is a component part of the University of Houston, which is owned by the State of Texas.  APP published the book, and the copyrights in the book were registered in Chavez’s name.  Subsequently, the parties entered into contracts for the publication of additional books.  In late 1991, Chavez became dissatisfied with APP because APP refused to correct errors found in the earlier editions of her book.  Chavez refused to allow APP to print any more books than called for in the original contract.  Asserting that the contract did not limit the number of copies that it could publish, APP informed Chavez that it would publish an additional 5,000 copies of the book.  During this same time period, APP also published an anthology of plays, naming Chavez as the selector of the plays without her permission.

Chavez filed suit against APP and an individual who acted on behalf of APP, alleging copyright infringement, Lanham Act violations for misrepresenting the sponsorship of the anthology of plays, and violating her state rights of publicity.  Plaintiff also sought a declaratory judgment securing her rights under the contracts.  Defendants moved to dismiss the action claiming the suit was barred under the Eleventh Amendment.   The district court denied the motion, and defendants filed an interlocutory appeal.

The Fifth Circuit affirmed (Chavez I, 59 F.3d 539, 35 U.S.P.Q.2d 1609 (5th Cir. 1995)), finding that APP impliedly waived its Eleventh Amendment immunity by contracting with Chavez and using Chavez’s name after Congress had imposed statutory waivers under the Copyright and Lanham Act.  The Fifth Circuit’s conclusion was based in part on the theory of implied waiver of sovereign immunity set forth in Parden v. Terminal Ry. of Ala. State Docks Dept., 377 U.S. 184, 84 S.Ct. 1207 (1964).

Defendants appealed the Fifth Circuit’s decision.  The Supreme Court remanded for reconsideration of its decision in light of Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 116 S.Ct. 1114 (1996).

On remand (Chavez II), the Fifth Circuit, in a split decision, reversed the district court and remanded for further consideration.  The majority held that states may not be sued in federal court for copyright infringement or violations of the Lanham Act.  The majority held that the amendments to the Copyright and Lanham Acts attempting to abrogate the Eleventh Amendment immunity were not a valid exercise of Congress’s power under Section 5 of the Fourteenth Amendment.  The majority also rejected its prior holding that the Plaintiff’s suit could proceed under the theory of implied consent.

Chavez claimed a property interest in her copyrights and in not having her name misappropriated under the Lanham Act.  Chavez also claimed that the defendants deprived her of her property without compensation and without due process of law.  Chavez argued that Congress’s express abrogation of sovereign immunity were valid exercises of Congress’s power under Section 5 of the Fourteenth Amendment because Congress was attempting to ensure that persons were not deprived of their property without due process of law.  Chavez further argued that Seminole Tribe reaffirmed Congress’ power to abrogate sovereign immunity when acting pursuant to Section 5 of the Fourteenth Amendment.  As such, Congress was within its power when it abrogated the states’ Eleventh Amendment immunity under the Lanham and Copyright Acts.

  The majority found that while Chavez’s right to protect her name was assured by the Lanham Act, it was not a property right protected by the Fourteenth Amendment citing Paul v. Davis, 424 U.S. 693, 96 S.Ct. 1155 (1976) (“the interest in reputation alone .  .  . is quite different from the ‘liberty’ or ‘property’” recognized in prior court decisions).   The majority reached the same conclusion regarding the copyrights, finding that Plaintiff’s copyrights were also unprotected “property” in the context of Section 5 of the Fourteenth Amendment.  In particular, the majority found that if copyrights were property protected by the Due Process Clause, the result would be an end-run around Seminole Tribe’s holding that Article I powers may not be employed to avoid the Eleventh Amendment.

In a fierce dissent, Judge Wisdom concluded that Congress indeed had the authority under Section 5 of the Fourteenth Amendment to abrogate the states’ sovereign immunity in copyright and trademark infringement cases.  Judge Wisdom’s dissent paralleled the Federal Circuit’s decision in College Savings Bank v. Florida Prepaid Postsecondary Expense Bd., 148 F.3d 1343, 47 U.S.P.Q.2d 1161 (Fed.Cir. 1998), which criticized Chavez II, holding that an amendment to the Patent Act explicitly abrogating the states’ Eleventh Amendment immunity from patent infringement suits was appropriate under Section 5 of the Fourteenth Amendment.

 Rodriguez v. Texas Commission on the Arts, 992 F.Supp. 876, 45 U.S.P.Q.2d 1955 (N.D.Tex. 1998); Judge Cummings

 Rodriguez owned a copyrighted license plate design.  In November 1994, Rodriguez submitted his license plate design to the Texas Department of Transportation for possible use as a license plate.  Subsequently, Texas created a new “Texas Commission on the Arts” license plate which incorporated the Texas state flag, bearing a striking resemblance to the copyrighted design Rodriguez submitted the Texas Department of Transportation.

Rodriguez sued the Texas Commission on the Arts for copyright infringement.  The Commission, as an arm of the State of Texas, moved to dismiss the suit for lack of subject matter jurisdiction claiming that the Eleventh Amendment barred Rodriguez’s suit.  The district court granted the motion.  In granting the motion, the court noted that in light of the Supreme Court’s decision to vacate Chavez I (see above), Seminole Tribe was controlling law.  Under Seminole Tribe, the district court concluded that Congress could not validly abrogate the states’ Eleventh Amendment immunity because the Copyright Act was enacted pursuant to the Copyright Clause in Article I of the Constitution.  As such, Congress could not use its Article I powers to abrogate the states’ Eleventh Amendment immunity.

Note:  Chavez II and Rodriguez potentially give the states unlimited immunity for copyright infringement, at least within the Fifth Circuit.  The Chavez II majority found that copyrights were not protectable property within the meaning of Section 5 of the Fourteenth Amendment.  Therefore, due process claims would be unavailable against the states in federal court.  If Chavez II and Rodriguez indeed prevent copyright suits against states in federal court, plaintiffs are left without any remedies against states who commit copyright infringement because copyright actions cannot be brought in state court.  Copyright actions fall exclusively within the jurisdiction of the federal courts.  See 28 U.S.C. §1338(a).

On January 8, 1999, the Supreme Court agreed to review issues surrounding sovereign immunity regarding patent and trademark claims arising in the College Savings Bank v. Florida Prepaid Postsecondary Expense Bd. cases.  The Third Circuit held the Eleventh Amendment barred Lanham Act claims where a party misrepresents the quality of its own goods.  See College Savings Bank v. Florida Prepaid Postsecondary Expense Bd., 131 F.3d 353, 45 U.S.P.Q.2d 1001 (3rd Cir. 1997).  On the other hand, the Federal Circuit, addressing the patent infringement claims in the same suit, concluded that Congress did have the power to abrogate state immunity for patent infringement under Section 5 of the Fourteenth Amendment.  See College Savings Bank v. Florida Prepaid Postsecondary Expense Bd., 148 F.3d 1343, 47 U.S.P.Q.2d 1161 (Fed.Cir. 1998).  It will be interesting to see how, and to what extent, the Supreme Court’s ruling in College Savings Bank will impact the Fifth Circuit’s precedent in Chavez II and Rodriguez.

C. Infringement; Works made for Hire; Ownership

Quintanilla v. Texas Television, Inc., 139 F.3d 494, 46 U.S.P.Q.2d 1707 (5th Cir. 1998); Judges Reavley, Jones and Benavides.

Quintanilla, the father of the well-known deceased singer, Selena, contracted with Texas Television, Inc. d/b/a KIII-TV, to videotape a Selena concert.  Before the concert, KIII-TV sent a note to Quintanilla stating:  “As per our agreement, we will use the video on the Domingo Show and other news shows.  In turn, we will provide you with a master copy on ¾ to use for promotion purposes.”  After the concert, KIII-TV sent Quintanilla the tapes of the concert and enclosed the following note: “As we agreed, enclosed please find copies of the concert for your use.  In exchange, we will use the footage on the Domingo Show.”  Subsequently, Quintanilla allegedly obtained copyright registrations for the songwriters’ compositions performed at the concert.  Quintanilla also obtained a copyright registration for the KIII-TV videotape.  After Selena’s death, KIII-TV aired portions of the videotape on its programs.  Quintanilla, along with the songwriters whose compositions were performed at the concert, sued KIII-TV for copyright infringement, breach of contract, misappropriation of likeness, fraud, deceptive trade practices, and negligent misrepresentation.  Quintanilla contended that he was the sole owner of the copyright in the videotape and that KIII-TV received only a limited non-exclusive license to use the concert footage on a single show.  KIII-TV moved for summary judgment, which the district court granted.

 On appeal, the Fifth Circuit affirmed.  Quintanilla claimed that he was the owner of the copyrights in the videotape because the tape was a “work made for hire” under the theory that KIII-TV was Quintanilla’s employee preparing the video within the course and scope of employment.  In the alternative, Quintanilla alleged that the videotape was a “work made for hire” because it was specially ordered for use as part of an audiovisual work.  See 17 U.S.C. §101.  The Fifth Circuit disagreed and found that the videotape was not a work for hire because Quintanilla could not produce a written instrument showing an agreement whereby the videotape would be a work made for hire.  The Fifth Circuit also found that KIII-TV was not an employee of Quintanilla when it recorded the concert because the KIII-TV personnel sent to record the concert were not Quintanilla’s employees, nor were they controlled by Quintanilla.  Quintanilla argued that he had control over the concert, but the Fifth Circuit concluded that Quintanilla had no control over how KIII-TV’s employees taped the concert.  The Fifth Circuit also concluded that KIII-TV had ultimate authority over how it would film the concert.  Quintanilla attempted to argue that KIII-TV transferred its interest in the copyrights to the videotape, but the Fifth Circuit noted that Quintanilla had not produced a written instrument conveying ownership as required under the Copyright Act.  The Fifth Circuit also affirmed the summary judgment against the songwriters because they failed to offer any proof of copyright ownership at summary judgment.

D. Subject Matter Jurisdiction; Declaratory Judgment

Emme Bridal, Inc. v. Milady Bridals, Inc., --- F.Supp.2d ---, 46 U.S.P.Q.2d 1555 (S.D.Tex. 1998); Judge Harmon

 Milady owned copyrights in certain wedding gowns. Milady believed Impressions, Inc. was offering gowns under an “EMME” trademark, filed suit against Impression Bridal in New York in an unrelated action and obtained a preliminary injunction preventing Impression Bridal from infringing its copyrights.  Emme Bridal, Inc. was not a party to the New York suit.  Impression Bridal’s counsel later informed Milady that Emme Bridal was a separate corporate entity from Impression Bridal with no common ownership or control.  Thus, Milady’s attempts to enforce its copyrights against Impression Bridal were inappropriate.  During this time, Emme received no threats from Milady and learned of the Milady-Impression Bridal suit from Impression Bridal’s counsel, who also represented Emme Bridal.  Milady had not registered the copyrights upon which Emme sought the non-infringement declaration before Emme filed suit.

 Emme filed an action for declaratory judgment of noninfringement of copyrights.  Milady moved to dismiss for lack of subject matter claiming there was no case or controversy giving rise to declaratory judgment action.  The district court granted Milady’s motion.  The court concluded that although Milady had contacted Emme’s customers and threatened them with copyright infringement, Milady never threatened to sue Emme for copyright infringement.  The court found that Emme failed to show a real apprehension of imminent litigation, in part, because Milady had not yet registered its copyrights.  The court concluded that Milady was not in position to file an infringement suit because registration was a prerequisite to filing suit.  Therefore, Emme could not show a real apprehension of imminent litigation.