Monday, August 30, 2010
shareholders and managers of SSB.
The first issue involved Adams Foods, Inc. and others ("Adams") who sold food products under the Adams mark until 1999, at which time it sold the mark to SSB. SSB gave a note to Adams secured by the trademark and its goodwill. In 2006 SSB defaulted on the note and Adams obtained a judgment against SSB giving it back full rights to the Adams mark.
At about the same time in 2006, SSB defaulted on its debts with Regions Bank. In 2007, Regions sold the SSB loans to Brown Bark II, the plaintiff. Shortly after that, one of the defendants locked SSB out of the SSB plant forcing a shutdown of the production and marketing of its products. SSB could not pay the loans Brown Bark had purchased so Brown Bark obtained a judgment that led to its acquisition of the SSB marks at a public sale.
Meanwhile the former SSB folks started a new company, Dixie Mills, LLC. They offered Brown Bark $300,000 for the old SSB trademarks and Brown Bark declined the offer. Dixie Mills then went ahead and started marketing products with similar names and packaging as the old SSB products (The SSB products were Dixie Lily, Alabama King, Arnett's and Pine Mountain; the new Dixie Mills products were Dixie Mills, Alabama, Donald Arnett, and Stone Mountain). Then Adams started selling products under the Adams mark again. Brown Bark sued the SSB group and the Adams group for trademark and trade dress infringement.
The court found that the Adams group owned the Adams mark due to the judgment in Alabama, because even though Brown Bark was not a party to the judgment, it got the trademark from Regions Bank who was in privity with SSB, against whom the judgment was made. However, the court also ruled that Brown Bark could not enforce the Adams mark because it had acquired the mark through an assignment in gross. An assignment in gross occurs when a trademark is transferred without the accompanying goodwill. Thus, a trademark cannot be sold separately from the business assets used to make the product or service that the trademark identifies. The theory is that if the trademark is traded but the assets underlying it are not, the public is misled about the origin of the product associated with the mark.
As for the former SSB group, the court made short work of the claims against them, finding that the old SSB marks were descriptive and therefore had to have secondary meaning. The court held that even though these marks, one of which dated back to 1933, might well have secondary meaning, there was no evidence that the mark had secondary meaning identifying Brown Bark as the source of any products. The court cited no authority for this proposition. However, all of the defendants won summary judgment on the case. Thus, it appears that Brown Bark made a big mistake when it refused to sell the marks for $300,000 because it turns out that, absent reversal on appeal, the marks were worth nothing.
Friday, August 13, 2010
In this case, the facts revealed that Baby Buddies started business in 1987 after a woman designed her own pacifier holder because she could not find a good one on the market. Her design was registered in 1987. A design firm was hired to make a new design and that was registered in 1991. In 1997, Toys R Us, aka Babies R Us, began selling the Baby Buddies pacifier holder. Sales were excellent. In 1999, Toys R Us decided to produce and maket its own pacifier holder. Initially, Toys R Us attempted to buy the Baby Buddies pacifier holder design on the open market. That effort failed, after which Toys R Us hired a consultant to design several holders including a teddy bear holder. The consultant hired a subcontractor. At some point, the consultant sent the subcontractor a copy of the Baby Buddies pacifier holder and a note saying in part, "I need a new animal design. The buyer likes this bear but I do not want to produce the same exact thing. Can you work on a similar design?" The subcontractor designed pacifier holders of many kinds, including an angel, a duck, a rabbit, and a teddy bear. Toys R Us sold both pacifiers for a while but discontinued selling the Baby Buddies holder in 2003. Baby Buddies sued shortly after that.
Baby Buddies argued that summary judgment is usually inappropriate in copyright cases because the ultimate issue of infringement turns on a jury's comparison of the works in question. However, the court noted that Eleventh Circuit law holds that summary judgment in a copyright case is appropriate in two instances, (1) where the similarity between the two works concerns only non-copyrightable elements of the work, or (2) because no reasonable jury could find the two works to be substantially similar. In making its determination the court focused on a comparison of the two plastic teddy bears. In doing so it held that the copyright protection only would apply to the particularized expression of the bear, not the the general idea of including certain features on a bear, such as a head, paws, torso and the like. In its opinion, the expressive elements of the two bears were not substantially similar as a matter of law. It held that "Baby Buddies is trying to invoke the protection of the copyright laws to prevent a competitor from using the idea of putting a sculpted teddy bear and a color-coordinated bow on a ribbon tether to create an aesthetically pleasing pacifier holder." The court stated that this type of creative competition does not violate copyright law. "Baby Buddies has the right to prevent others from copying its creative expression, but not from expressing similar ideas differently." Thus, the summary judgment against Baby Buddies was affirmed.