Laches in the Age of the Internet: Jackie Hutter Replies
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Thanks to Jackie Hutter of the IP Asset Maximizer for her unique perspective on the Ninth Circuit's recent laches decision
"Perhaps I am uniquely qualified to respond to this post," writes Jackie.
I wrote the (losing) brief in the case that established laches in Lanham Act in the 11th Cir. The case is Kason v. Component Hardware Group.
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.
See Jackie's recent thoughts about IP management in the economic downturn in Business Week: "Readers at the Whiteboard" here.
Yesterday, I had the distinct pleasure of enjoying lunch with Jackie Hutter. She told me about her comments here and invited me to chime in. Besides her unpretentious, fun-loving personality, Jackie is excellent in her strategic analysis of IP issues (as well as her culinary analysis of Cuban food)!
I agree with Jackie that this type of ruling may open the courtroom doors even wider (or perhaps longer given the issue of delay at hand) to competitors seeking to sue one another. What is amazing to me about the Internet Specialties (IS) case is that there is virtually no attention paid to the question of when the Plaintiff's mark could possibly have acquired secondary meaning. This question of when did a Plaintiff acquire its purported trademark rights may serve as a "doorstop" to such cases and arguably should have served to stop IS's claims. The marks in the IS case appear to be descriptive of the types of services being provided (e.g. IS or ISP) and the geographic regions (e.g. West) in which the services are being provided. Apparently, it was assumed incorrectly that trademark rights attached to these weak marks upon being registered as domain names. Yet, there is no discussion as to distinctiveness or secondary meaning ever being acquired for these marks. With the Defendant beginning its use only 2 years after Plaintiff's use began (and in a related field that both parties admit was naturally expanding into an identical field of use), there was neither the time nor the amount of exclusivity of use for the Plaintiff's mark to acquire distinctiveness in the minds of consumers prior to Defendant's use of a very similar market.
In this regard, the IS facts contrast with the Kason case that Jackie and I had some years back. Kason had at least a couple of decades of prior use of the trade dress before CHG adopted the same dress. Because of its long and exclusive use, unlike IS's 2 years, Kason could show that its dress had acquired distinctiveness among relevant consumers prior to CHG's adoption of a similar dress.
On the other hand, if a Plaintiff does not have trademark rights, then there cannot be confusion - at least of the type that is actionable under the Lanham Act. In the IS case, it is difficult to see how IS's mark ever acquired distinctiveness. There was not enough length of use by IS before MED began use, and after MED began use, IS's use was not exclusive. Moreover, because IS knew of MED in 1998 and knew that DSL was a natural field of expansion, IS's knowing delay should work to prejudice its ability to sue MED whose adoption and continued use of a similar mark should be viewed as innocent and non-infringing in the absence of IS having any trademark rights.
To me, there are 2 "take aways" to be learned from the IS and the Kason cases. First, in applying laches under the Lanham Act, courts should keep the horse (trademark rights) before the cart (infringement) to appropriately weigh the prejudice or harm the decision will have to the parties. Second, the real value in these complex IP cases may be that they present great vehicles for building professional relationships among colleagues, clients, and even adversaries that last long after the cases are decided!
Mike,
Nice!
Thanks SO MUCH for sharing your analysis with our readers. This is the kind of collaboration that is going to result in the law's development far more quickly and efficiently than is now the case.
I say this with certainty only because I can see that the law is not keeping up with technological development.
SOMETHING is going to have to shift, and shift soon.
Best,
Vickie