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Injunction against trademark "disparagement" reversed; no such claim under the Lanham Act
September 27, 2007
In a decision yesterday, the Ninth Circuit vacated a preliminary injunction preventing an individual from "making any comments that could be construed as to disparage" a possible trademark and logo. The court concluded that the injunction was improperly granted since the plaintiff failed to present a likelihood of success on the merits by failing to show a likelihood of confusion, and that no claim for "trademark disparagement" existed under the Lanham Act. More detail of Freecycle Network, Inc. v. Oey after the jump.The Freecycle Network ("TFN") promotes and coordinates product reuse and recycling by hosting a website allowing visitors to post goods they no longer want to allow others to reuse the goods for free, rather than disposing of them. TFN claims to have consistently used the marks FREECYCLE and THE FREECYCLE NETWORK as well as the logos since 2003. However, it was not until 2004 that a federal trademark registration application was filed. The proposed mark was published in the Official Gazette and an opposition was filed the next day by Oey, a former TFN employee. The mark has yet to be registered, as the opposition was stayed pending the outcome of another proceeding between the parties in district court.Oey claims that FREECYCLE is a generic term. He submitted letters to the USPTO opposing TFN's pending registration, in addition to encouraging members of the public to use the mark in a generic manner rather than referring to TFN or its services. Oey was quickly asked to leave the company due to his contentious views about the marks. However, Oey continued to challenge the validity of the marks and encourage others to use the term generically, prompting TFN's lawsuit. The district court granted TFN's request for a preliminary injunction based on § 1125(a) claims of contributory trademark infringement and trademark disparagement. Oey appealed the grant of the injunction. The Ninth Circuit reviews the injunction under an abuse of discretion standard. A district court abuses its discretion in granting an injunction if its decision is based on an "erroneous legal standard," which includes employing inappropriate legal standards or misapprehending the law with the underlying issues. District courts typically apply a four-factor test to determine whether a preliminary injunction should be granted. The party requesting an injunction must show: "(1) a strong likelihood of success on the merits; (2) the possibility of irreparable harm; (3) a balance of hardships favoring the plaintiff; and (4) advancement of the public interest." In the Ninth Circuit, there is also an alternative test, which requires the plaintiff to show the combination of either "probable success on the merits and the possibility of irreparable injury or that serious questions are raised and the balance of hardships tips sharply in [plaintiff's] favor." Under either test for granting an injunction, a plaintiff must show a likelihood of success for an injunction to be granted. The Ninth Circuit noted that the district court granted the preliminary injunction based on the Lanham Act alone, which provides a cause of action for trademark infringement but not trademark disparagement. Turning to the trademark infringement analysis, the court noted that the district court failed to analyze the various factors related to likelihood of confusion. The fact that Oey at one time supported the FREECYCLE mark and then began encouraging others to disparage it does not indicate a likelihood of success on a § 1125(a) infringement claim.Further, the court noted that Oey's actions did not constitute "use in commerce," as he was expressing an opinion and not seeking or gaining any commercial benefit, or using the mark with any goods or services. The court also concluded that the actions were not likely to cause confusion or deceive anyone, because Oey's statements do not mention a competing service and do not claim any affiliation with TFN. Finally, the court concluded that the statements did not constituted false advertising, misrepresentation, or unfair competition, since they were not commercial in nature. As a result, the court held the district court abused its discretion in granting the injunction, as TFN was not likely to succeed on the merits.In addition to the trademark infringement claims, TFN also asserted a claim for "trademark disparagement." The Ninth Circuit quickly dismissed this claim, as the Lanham Act does not protect against "false statement, with malice, about TFN's operations and the validity of its mark" as TFN claimed. Even if such a claim existed, however, the Ninth Circuit concluded that Oey's conduct did not satisfy TFN's stated elements for a claim of disparagement. Interestingly, the Ninth Circuit extended its analysis to include TFN's essential request of preventing a party from using a mark in a generic sense. TFN was at risk of having its mark become generic, and therefore lose its ability to distinguish its services. Unfortunately for TFN, the Lanham Act does not provide a means to prevent others from using a trademark in a generic sense or expressing one's opinion as to the strength of a mark, or encouraging others to do so. Therefore, Oey's actions and his encouraging of others to take action are not actionable under the Lanham Act. To read the full decision in Freecycle Network, Inc. v. Oey, click here.UCLA law Professor Eugene Volokh, a noted First Amendment scholar, has an interesting series of posts on this case; he helped represent Mr. Oey. The EFF also provides coverage, as well as the 43(b)log and IP Law Observer.
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