Finnegan's monthly review of essential decisions, key developments, evolving trends in trademark law, and more.
October 2008 Issue
Civil Cases
Venture Tape Corp. v. McGills Glass Warehouse,
540 F.3d 56 (1st Cir. 2008)
ABSTRACT
In the latest metatag case, the defendant used the plaintiff's marks not only in its metatags but also as hidden white text in the white background of its website. The district court held that the defendant willfully infringed plaintiff's marks, and awarded plaintiff $230,000 in damages in the form of defendant's profits and $196,000 in attorney's fees and costs. On appeal, the First Circuit affirmed the district court's decision in its entirety.
CASE SUMMARY
FACTS
Plaintiff Venture Tape Corporation ("Venture") manufactured specialty adhesive tapes and foils used in the stained-glass industry under the federally registered marks VENTURE TAPE and VENTURE FOIL. Defendant McGills Glass Warehouse ("McGills") was an Internet-based retailer in direct competition with Venture. Beginning in 2000, McGills used Venture's marks in its website metatags and embedded as white text in its website's white background. McGills did not sell either Venture product, but "heard" that use of Venture's marks would attract people using Internet search engines to McGills's site. Venture discovered McGills's use of its marks in 2003 and sued for trademark infringement, unfair competition, false designation of origin, and dilution.
The district court granted Venture's motion for summary judgment on all four counts. It also requested Venture to submit a motion for damages, costs, and attorney's fees, and awarded $230,339 in McGills's estimated net profits from 2000-2003 based on the willful nature of McGills's infringement, $188,583 in attorney's fees, and $7,564 in costs.
ANALYSIS
On appeal, the First Circuit affirmed the district court's grant of summary judgment and award of profits and attorney's fees. Addressing the likelihood-of-confusion factors, the court found that "McGills effectively admitted seven of the eight [likelihood-of-confusion] elements [through] numerous admissions that metatags and invisible background text on [its] website incorporated Venture's exact marks." In particular, McGills admitted that the parties were direct competitors and each used websites to promote and market their products. McGills also admitted it used Venture's marks based on its strong reputation in the industry. The court viewed these admissions as demonstrating "the similarity (indeed, identity) of the marks used, the similarity of the goods, the close relationship between the channels of trade and advertising, and the similarity in the classes of prospective purchasers." Additionally, the court cited McGills's admissions as "support[ing] the conclusions that McGills acted with a subjective intent to trade on Venture's reputation and that Venture's mark is strong," leaving only the sixth factor of actual consumer confusion potentially in dispute.
McGills argued on appeal that summary judgment was improper based on a lack of evidence of actual consumer confusion because it "had no way of knowing whether or not [its] use of the Venture
marks . . . had been successful, i.e., whether the marks had actually lured any [I]nternet consumer to the website." The First Circuit found the absence of evidence of actual consumer confusion not dispositive because a trademark owner's burden is only to show likelihood of confusion, not actual confusion. It viewed McGills's admissions, especially that its "purpose in using the Venture marks was to lure customers to [its] site," as a sufficient basis to conclude that no genuine dispute existed regarding likelihood of confusion.
Turning to monetary relief, McGills first challenged the finding that its infringement was willful, arguing that willfulness was a prerequisite to an award of profits under Lanham Act Section 35(a). The court noted that it was not necessary to even determine whether willfulness was required by Section 35(a), because McGills had not shown that the district court's finding of willfulness was clearly erroneous. The appeals court stated that "the district court specifically noted that McGills had programmed [sic] its website so that Venture's marks were displayed in the same color as the webpage background, concealing them from view. We can find no clear error in the district court's conclusion that such intentional concealment provides strong circumstantial evidence of 'willfulness.'"
McGills also argued that the damages award overstated the harm to Venture because Venture did not even attempt to show any actual harm. The court disagreed, finding that "[w]hen a mark owner cannot prove actual damages attributable to the infringer's misconduct (e.g., specific instances of lost sales), its recovery of an equitable share of the infringer's profits serves . . . as a 'rough measure' of the likely harm that the mark owner incurred because of the infringement, while also preventing the infringer's unjust enrichment and deterring further infringement." Here, the district court expressly concluded that the amount awarded was "sufficiently substantial to serve these purposes without being unduly large or burdensome." McGills also argued that the profits award was overstated because its sales of the foils and tapes at issue were only one percent of its total sales. The court noted, however, that once Venture met its burden by producing evidence of McGills's gross sales over the relevant time period, the burden shifted to McGills to prove "all elements of cost or deductions claimed" under Section 35(a). Because McGills presented no mitigating evidence, the First Circuit found no clear error in the district court's profits award.
The First Circuit also rejected McGills's challenge of the award of attorney's fees as an abuse of discretion. Noting that attorney's fees can be awarded in "exceptional cases" if the infringer's actions are "malicious, fraudulent, deliberate, or willful," the district court did not abuse its discretion in finding the case exceptional based on its finding of willfulness.
CONCLUSION
Although at one time the use of metatags could significantly influence the ranking of search results, most search engine optimization experts agree that metatags for some years have had little or no effect on influencing search-result rankings. As a result, the award of $230,000+ in damages and $196,000+ in attorney's fees might arguably seem excessive. The court's award of monetary relief, however, was influenced by the defendant's "cloaking" activities, i.e., displaying plaintiff's marks in the same color as the background of defendant's website. The court characterized these activities as "intentional concealment."
Civil Cases
Venture Tape Corp. v. McGills Glass Warehouse,
540 F.3d 56 (1st Cir. 2008)
ABSTRACT
In the latest metatag case, the defendant used the plaintiff's marks not only in its metatags but also as hidden white text in the white background of its website. The district court held that the defendant willfully infringed plaintiff's marks, and awarded plaintiff $230,000 in damages in the form of defendant's profits and $196,000 in attorney's fees and costs. On appeal, the First Circuit affirmed the district court's decision in its entirety.
CASE SUMMARY
FACTS
Plaintiff Venture Tape Corporation ("Venture") manufactured specialty adhesive tapes and foils used in the stained-glass industry under the federally registered marks VENTURE TAPE and VENTURE FOIL. Defendant McGills Glass Warehouse ("McGills") was an Internet-based retailer in direct competition with Venture. Beginning in 2000, McGills used Venture's marks in its website metatags and embedded as white text in its website's white background. McGills did not sell either Venture product, but "heard" that use of Venture's marks would attract people using Internet search engines to McGills's site. Venture discovered McGills's use of its marks in 2003 and sued for trademark infringement, unfair competition, false designation of origin, and dilution.
The district court granted Venture's motion for summary judgment on all four counts. It also requested Venture to submit a motion for damages, costs, and attorney's fees, and awarded $230,339 in McGills's estimated net profits from 2000-2003 based on the willful nature of McGills's infringement, $188,583 in attorney's fees, and $7,564 in costs.
ANALYSIS
On appeal, the First Circuit affirmed the district court's grant of summary judgment and award of profits and attorney's fees. Addressing the likelihood-of-confusion factors, the court found that "McGills effectively admitted seven of the eight [likelihood-of-confusion] elements [through] numerous admissions that metatags and invisible background text on [its] website incorporated Venture's exact marks." In particular, McGills admitted that the parties were direct competitors and each used websites to promote and market their products. McGills also admitted it used Venture's marks based on its strong reputation in the industry. The court viewed these admissions as demonstrating "the similarity (indeed, identity) of the marks used, the similarity of the goods, the close relationship between the channels of trade and advertising, and the similarity in the classes of prospective purchasers." Additionally, the court cited McGills's admissions as "support[ing] the conclusions that McGills acted with a subjective intent to trade on Venture's reputation and that Venture's mark is strong," leaving only the sixth factor of actual consumer confusion potentially in dispute.
McGills argued on appeal that summary judgment was improper based on a lack of evidence of actual consumer confusion because it "had no way of knowing whether or not [its] use of the Venture
marks . . . had been successful, i.e., whether the marks had actually lured any [I]nternet consumer to the website." The First Circuit found the absence of evidence of actual consumer confusion not dispositive because a trademark owner's burden is only to show likelihood of confusion, not actual confusion. It viewed McGills's admissions, especially that its "purpose in using the Venture marks was to lure customers to [its] site," as a sufficient basis to conclude that no genuine dispute existed regarding likelihood of confusion.
Turning to monetary relief, McGills first challenged the finding that its infringement was willful, arguing that willfulness was a prerequisite to an award of profits under Lanham Act Section 35(a). The court noted that it was not necessary to even determine whether willfulness was required by Section 35(a), because McGills had not shown that the district court's finding of willfulness was clearly erroneous. The appeals court stated that "the district court specifically noted that McGills had programmed [sic] its website so that Venture's marks were displayed in the same color as the webpage background, concealing them from view. We can find no clear error in the district court's conclusion that such intentional concealment provides strong circumstantial evidence of 'willfulness.'"
McGills also argued that the damages award overstated the harm to Venture because Venture did not even attempt to show any actual harm. The court disagreed, finding that "[w]hen a mark owner cannot prove actual damages attributable to the infringer's misconduct (e.g., specific instances of lost sales), its recovery of an equitable share of the infringer's profits serves . . . as a 'rough measure' of the likely harm that the mark owner incurred because of the infringement, while also preventing the infringer's unjust enrichment and deterring further infringement." Here, the district court expressly concluded that the amount awarded was "sufficiently substantial to serve these purposes without being unduly large or burdensome." McGills also argued that the profits award was overstated because its sales of the foils and tapes at issue were only one percent of its total sales. The court noted, however, that once Venture met its burden by producing evidence of McGills's gross sales over the relevant time period, the burden shifted to McGills to prove "all elements of cost or deductions claimed" under Section 35(a). Because McGills presented no mitigating evidence, the First Circuit found no clear error in the district court's profits award.
The First Circuit also rejected McGills's challenge of the award of attorney's fees as an abuse of discretion. Noting that attorney's fees can be awarded in "exceptional cases" if the infringer's actions are "malicious, fraudulent, deliberate, or willful," the district court did not abuse its discretion in finding the case exceptional based on its finding of willfulness.
CONCLUSION
Although at one time the use of metatags could significantly influence the ranking of search results, most search engine optimization experts agree that metatags for some years have had little or no effect on influencing search-result rankings. As a result, the award of $230,000+ in damages and $196,000+ in attorney's fees might arguably seem excessive. The court's award of monetary relief, however, was influenced by the defendant's "cloaking" activities, i.e., displaying plaintiff's marks in the same color as the background of defendant's website. The court characterized these activities as "intentional concealment."
