Has the 9th Circuit Really Eviscerated Internet Trademark Laches?
See yesterday's opinion Internet Specialties West, Inc. v. Milon-DiGirgio Enterprises, Inc.
There's a vigorous dissent from Justice Kleinfeld culminating in this prediction of the majority opinion's affect on trademark law, particularly as it effects internet marks:
The majority’s evisceration of laches means that a big company can lurk in the tall grass while its little prey gradually fattens itself by dint of great effort and expense. Then, when the small competitor has succeeded, the big company can shake it down for a cut of its hard-won success, or destroy the name under which it innocently did business for years. That is trademark law as protection racket, rather than trademark law as prevention of consumer confusion.
The ADR lesson? There's a story of fierce business competition here fought out between two internet providers (living in the 21st century) and decided by the narrowest margin based on rules (laches) forged before the industrial revolution.
Only the parties know whether the Plaintiff was aiming to "shake down" its competitor or had other motives to take the considerable risk of exposing its commercial future to the decision, first, of a federal court judge and then to a three-justice federal appeals court panel.
Though commercial enterprises badly need clear rules of law to guide their present activities and chart a profitable future, they should never forget Google exec Eric Schmidt's observation that litigation is just a "business negotiation being conducted in the Courts" -- the litigation simply one bargaining chip of many to be used in negotiating a commercial solution to a justice problem - one that will avoid - if possible - zero sum outcomes on technical legal issues of no genuine interest to business people.
Dissenters from that view?
Perhaps I am uniquely qualified to respond to this post: I wrote the (losing) brief in the case that established laches in Lanham Act in the 11th Cir. The case, Kason v. Component Hardware Group is here: http://tinyurl.com/dlq2j9.
Laches is no doubt a real legal argument, but if someone has to argue that it is not too late to bring a Lanham Act suit in this day and age, I would tend to agree that the suit is at its core likely an attempt to use the courts to inflict commercial pain on a competitor. That is, there is no reason in today's information age that a business should not know what their competitors are up to in the market place. And, if they fail to keep tabs on their competitors, the courts should not serve as a vehicle to do to a competitor what the plaintiff could not itself do to the competitor in the free market.
In my laches experience, the plaintiff was mad that my client was selling replacement parts at a lower price than its "authorized" parts. The plaintiff could not have protected the parts with patents because the parts were not unique enough to be patentable. Instead, the plaintiff used the federal courts to try to get my competitor's lower priced goods off of the market. Put simply, the plaintiff wasn't willing to let competition prevail but, instead, wanted the courts to put my client out of business so the plaintiff could reap a higher price. Laches came in because my client had been selling the replacement parts for 10 or more years, but the plaintiff did not see them as a threat until the plaintiff started losing market share to my client. The lawsuit was the plaintiff's way of holding onto its market share in the face of increasing competition.
The net result of the lawsuit was several years of expensive litigation. The plaintiff did prevail on some of its Lanham Act claims (the law allowed broader trade dress rights at that time), but neither company was happy in the end. Indeed, the only happy parties were the lawyers because we made lots of money on the case.
At the end of the day, this lawsuit was, as Eric Schmidt of Google indicates, a way to have the courts do what the parties would not be able to do in the free marketplace. Laches is a real legal concept, but it is not rational today.