ENTERTAINMENT, SPORTS & MARKETING JOINT SECTION WEBINAR - Orange ...
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ORANGE COUNTY BAR ASSOCIATION
IP & TECHNOLOGY LAW and
ENTERTAINMENT, SPORTS & MARKETING
JOINT SECTION WEBINAR
A Case Study of Trademark Counterfeiting Claims:
The Ninth Circuit's Recent Decision in Arcona, Inc. v. Farmacy
Beauty, LLC, et al.
Monday, April 19, 2021
ACase Study for Litigating Trademark Counterfeiting Claims
Arcona, Inc. v. Farmacy Beauty, LLC, 976 F.3d 1074 (9th Cir. 2020)
This dispute between two beauty-product
companies over the use of the registered
trademark EYE DEW highlights:
• The differences between trademark counterfeiting and
infringement.
• The application of the likelihood of confusion test under
the Ninth Circuit’s Sleekcraft standard.
• Methods companies can use to avoid trademark
infringement claims involving their products.
• Strategies for defending against or prosecuting claims for
trademark infringement
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Arcona’s EYE DEW vs. Farmacy Beauty’s EYE DEW
Comes in “a tall, cylindrical, silver bottle Comes in “a short, wide, white jar, along with
encased in a slim, cardboard outer box. The a squarish outer box. The product features
product features the phrase ‘EYE DEW’ and the phrase “EYE DEW” and the Farmacy
the Arcona housemark on both its bottle and house mark on both its jar and outer box.”
outer box.” Arcona, 976 F.3d at 1076. Arcona, 976 F.3d at 1077.
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Arcona and Farmacy Beauty Independently Develop EYE DEW Products
2001 Arcona begins selling a line of eye cream called EYE DEW.
Nov. 2014 Farmacy Beauty develops an eye cream lined with a “farm-to-face” concept, which it
names EYE DEW based on recommendations of a copywriter. The copywriter advises
Farmacy Beauty that the name was available based on “an initial online search and
uspto.gov trademark lookup.” Arcona, 976 F.3d at 1077.
March 2015 Arcona registers the trademark EYE DEW for skincare products.
August 2016 Arcona sends Farmacy Beauty a cease and desist letter informing Farmacy of its EYE
DEW trademark and demanding that Farmacy Beauty stop selling its product. The
record shows Farmacy Beauty had never heard of Arcona or its EYE DEW product.
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Arcona Files Suit in C.D. Cal.
Assigned to Hon. Otis D. Wright
Arcona Asserts Claims For:
• Trademark Counterfeiting
• Trademark Infringement
• Unfair Competition under Section 43(a) of the Lanham
Act
• Unfair Competition under California Bus. & Prof. Code,
17200 et. seq.
• Unfair Competition under California Common Law
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The Common Sense Understanding of “Counterfeiting”
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The Common Sense Understanding of “Counterfeiting”
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“[C]ounterfeiting is the ‘hard core’ or ‘first degree’ of trademark
infringement that seeks to trick the consumer into believing he or
she is getting the genuine article, rather than a ‘colorable
imitation.’” Gucci Am., Inc. v. Guess?, Inc., 868 F. Supp. 2d 207, 242
(S.D.N.Y. 2012)
“[D]eceptively suggesting an erroneous origin; fake.’” Excelled
Sheepskin & Leather Coat Corp. v. Oregon Brewing Co., 2015 WL
4468083, *3 (S.D.N.Y. July 8, 2015)
Counterfeiting is “the act of producing or selling a product with a
sham trademark that is an intentional and calculated
reproduction of the genuine trademark.” Boost Beauty, LLC v.
Woo Signatures, LLC, 2018 WL 5099258, at *7 (C.D. Cal. Oct. 15,
2018).
“The essence of counterfeiting is that the use of the infringing
mark ‘seeks to trick the consumer into believing he or she is
getting the genuine article, rather than a ‘colorable imitation.’”
Audemars Piguet Holding S.A. v. Swiss Watch Int’l, Inc., 2015 WL
150756, *2 (S.D.N.Y. Jan 12, 2015).
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The Legal Standard for Counterfeiting
Section 1114 of the Lanham Act establishes the trademark counterfeiting
cause of action. 15 U.S.C. § 1114.
“(1) Any person who shall, without the consent of the registrant
(a) use for sale, distribution, or advertising of any goods or services on or in connection with which such
use is likely to cause confusion, or to cause mistake, or to deceive; or
(b) reproduce, counterfeit, copy, or colorably imitate a registered mark and apply such reproduction,
counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or
advertisements intended to be used in commerce upon or in connection with the sale, offering for sale,
distribution, or advertising of goods or services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive,
shall be liable in a civil action by the registrant for the remedies hereinafter provided. Under subsection (b)
hereof, the registrant shall not be entitled to recover profits or damages unless the acts have been committed
with knowledge that such imitation is intended to be used to cause confusion, or to cause mistake, or to
deceive.”
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9The Legal Standard for Counterfeiting
Section 1127 of the Lanham Act defines the term “counterfeit.” 15
U.S.C. § 1127.
“A ‘counterfeit’ is a spurious mark which is identical with,
or substantially indistinguishable from, a registered mark.”
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10The Legal Standard for Counterfeiting
Thus, counterfeiting has three elements:
1. The use of a “spurious” mark,
2. that is “identical or substantially indistinguishable from” the
registered mark, and
3. is “likely to cause confusion, mistake, or deception.”
The standard arises from the civil action for counterfeiting in 15 USC § 1114(1)(a)
and in the definition of counterfeit in § 1127.
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11The Enhanced Damages for Counterfeiting Claims
Treble Damages & Attorney’s Fees: “[I]n a case involving use of a counterfeit mark . . .
the court shall . . . enter judgment for three times such profits or damages, whichever
amount is greater, together with a reasonable attorney’s fee, if the violation consists of—(1)
intentionally using a mark . . . knowing such mark . . . is a counterfeit . . .” 15 U.S.C. §
1117(b).
Statutory Damages: “In a case involving the use of a counterfeit mark . . . the plaintiff may
elect . . . to recover . . . an award of statutory damages . . . (1) not less than $1,000 or more
than $200,000 per counterfeit mark per type of goods or services sold, offered for sale, or
distributed, as the court considers just; or (2) if the court finds that the use of the counterfeit
mark was willful, not more than $2,000,000 per counterfeit mark per type of goods or
services sold, offered for sale, or distributed, as the court considers just.” 15 U.S.C. §
1117(c).
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12The Sleekcraft Test
The Ninth Circuit established a non-exclusive, multi-factor test for determining the likelihood of
confusion in AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-349 (9th Cir. 1979).
“In determining whether confusion between related goods is likely, the following factors are relevant:
1. strength of the mark;
2. proximity of the goods;
3. similarity of the marks;
4. evidence of actual confusion;
5. marketing channels used;
6. type of goods and the degree of care likely to be exercised by the purchaser;
7. defendant's intent in selecting the mark; and
8. likelihood of expansion of the product lines.”
Key Takeaway: Every factor focuses on encountering the product in the marketplace
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13Arcona’s Theory of Counterfeiting
• Arcona attempts to establish counterfeiting by cropping two words from Farmacy
Beauty’s product and analyzing the marks in isolation, not as they would appear in the
marketplace
• Arcona relies on two statues that establish remedies for counterfeiting that do not mention
“likelihood of confusion”
• 15 U.S.C. § 1116(d) allows ex parte relief to seize counterfeit goods.
• 15 U.S.C. § 1117 authorizes statutory and treble damages for counterfeiting.
• This would re-write counterfeiting’s first element (spuriousness) and presume existence of
the third element (confusion).
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14Gucci America, Inc. v. Guess?, Inc., 868 F. Supp. 2d 207 (S.D.N.Y. 2012)
• The court found a likelihood of confusion because, “[w]hen rendered in brown/beige colorways on
a two-tone canvas background, and with shading inside the G’s, the Quattro G Pattern is more
similar to the Diamond Motif Trade Dress than to the Repeating GG Pattern. I conclude that when
these circumstances coincide, this factor weighs strongly in Gucci’s favor.”
• But the court rejected the counterfeiting claim because “courts have uniformly restricted
trademark counterfeiting claims to those situations where entire products have been copied stitch-
for-stitch. I decline to expand this restriction, and conclude that Gucci's counterfeiting claim is
more appropriately addressed under traditional infringement principles”
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15Fujifilm N. Am. Corp. v. PLR IP Holdings, LLC, 2019 WL 274967 (S.D.N.Y. 2019)
• “Fujifilm’s motion to dismiss Polaroid’s counterclaim of counterfeiting is granted in part and
denied in part. The claim survives insofar as it alleges that Fujifilm’s Instax Square film itself
bears a counterfeit mark; however, it is dismissed with prejudice to the extent that it alleges
counterfeiting on Fujifilm’s product packaging.”
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16JFJ Toys, Inc. v. Sears Holdings Corp., 237 F. Supp. 3d 311 (D. Md. Feb. 21, 2017)
• “[A] reasonable factfinder could find that the marks, color patterns, and designs on the
Stomp Rocket and the Banzai Stomp Rocket, while risking confusion, are not identical or
indistinguishable for purposes of proving the counterfeiting claim.”
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17Colgate-Palmolive Co. v. J.M.D. all-Star Import and Export Inc., 486 F. Supp. 2d 286 (S.D.N.Y. 2007)
• “‘Colddate’ and ‘Colgate’ are comprised of different letters, not of the
same letters . . . . There is little chance the word ‘Colddate’ would be
perceived as actually being ‘Colgate.’ Their similarity is not equivalent
to identity. The Colddate mark contains a double ‘dd’ whereas plaintiff's
contains a single ‘g’. Those marks are conspicuously printed in large
type on the front of the boxes.”
• “The largest graphical element is also different. The Colddate box has a
globe design where a ribbon swirl design appears on the Colgate box.
The Colddate box also has a yellow stripe on the upper left corner, while
the Colgate box has an ADA symbol on the lower left corner.”
• “The smaller texts are non-trivially different, e.g., ‘Great Regular Flavor’
is visually different from ‘Great Original Taste’ and ‘FRESH
BREATH—STRONG WHITE TEETH’ is added to the Colddate box
where only the weight is printed on the Colgate box.”
• “Taken together, it may fairly be said that the boxes are quite similar, but
not that they are ‘substantially indistinguishable.’”
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18The Trial Court Results
• C.D. Cal. grants summary judgment for Farmacy on
counterfeiting
• It finds that the only similarity between the two products
was the phrase “EYE DEW.”
• Arcona “present[ed] no evidence that the Farmacy house
mark on the product, the dissimilar packaging, and the
product itself [did] not nullify [Arcona]’s counterfeiting
claim.”
• It is “implausible that a consumer viewing [Farmacy's]
EYE DEW product would be tricked into believing that
product is actually one of [Arcona's] EYE DEW
products.”
• Arcona appeals to the Ninth Circuit and dismisses its
other claims for trademark infringement and unfair
competition, which offer far less opportunity for recovery.
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19The Ninth Circuit Recognizes
Counterfeiting Requires a Likelihood of
Confusion
“Here, 15 U.S.C. § 1114 establishes the cause of action for,
among other things, counterfeiting and states that “[a]ny
person who ... use[s] in commerce any reproduction,
counterfeit, copy, or colorable imitation of a registered mark ...
which such use is likely to cause confusion, or to cause
mistake, or to deceive ... shall be liable in a civil action by the
registrant for the remedies hereinafter provided.” 15 U.S.C. §
1114(1)(a) (emphasis added).” 976 F.3d at 1078.
“The plain language of the statute thus shows that ‘likely to
cause confusion’ is a requirement for a counterfeiting claim.”
Id.
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20The Ninth Circuit Holds that Consumer
Confusion is NOT Presumed Where
Products are Identical
“[A] court must review the product as a whole
in determining whether an allegedly counterfeit
product will likely cause confusion.” Arcona,
976 F.3d at 1080.
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21The Ninth Circuit Always Uses The Marketplace Analysis
The Court called this approach an “axiom” of trademark analysis in
Entrepreneur Media, Inc. v. Smith, 279 F.3d 1135, 144 (9th Cir. 2002), where
it found the term “Entrepreneur Illustrated” not sufficiently similar to the
term “Entrepreneur” for trademark infringement.
In Lindy Pen Co. v. Bic Pen Corp., 725 F.2d 1240, 1245 (9th Cir. 1984), the
Ninth Circuit found no infringement where both parties used the same
word mark (Auditor’s) on the same goods (pens), stating: “the pens
dissimilar appearance, the dominance of the company marks and logos
on the pens themselves and on all packaging and promotional material,
and the dissimilar and distinctive packaging and advertisement designs
overcome the similarity of the marks considered in isolation.”
In M2 Software, Inc. v. Madacy Entm’t, 421 F.3d 1073, 1082 (9th Cir. 2005),
defendants’ use of the phrase “M2 Entertainment” did not infringe
plaintiff’s mark “M2,” in part because it recognized: “the trademark is
not judged by an examination of its parts,” but rather by considering
them “in their entirety and as they appear in the marketplace.”
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22The Ninth Circuit Holds A Reasonable
Consumer Could NOT Be Confused
“[A]ccording to Arcona, [the District Court] should have limited its analysis to
the identical marks (‘EYE DEW’) only — without looking at the entire product
— in assessing consumer confusion.” Arcona, 976 F.3d at 1080.
“[W]hile the products do compete in the same space and same geographic area,
there are significant differences between the two products, and the marks should
be ‘considered in their entirety and as they appear in the marketplace.’” Arcona,
976 F.3d at 1080.
This is consistent with prior district court decisions. In Gibson Brands Inc. v.
John Hornby Skewes & Co., Ltd., 2016 WL 7542437 (C.D. Cal. Dec. 29, 2016),
the court considered the presence of defendant’s house mark on allegedly
counterfeit guitars to find they weren’t counterfeit, stating: “if the purpose of a
trademark is to help consumers identify the source . . . it would be incongruous
to conclude [defendant] has counterfeited Gibson’s [product] by selling guitars
that are marked as originating from an entirely different source.” Id. at *3.
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23The Differences Between the Products
Noted by the Ninth Circuit
“[N]o reasonable consumer would be confused by these two products because the
packaging, size, color, shape, and all other attributes — other than the term ‘EYE DEW’
— are not remotely similar. For example, Farmacy's packaging looks distinct from
Arcona's because it features (i) multiple pictures of the Echinacea green envy plant used in
the product, (ii) a picture of the farmers, and (iii) a description of the company.” Arcona,
976 F.3d at 1080-1081.
“Further, it is implausible that a consumer would be deceived because the products had
their respective housemarks (‘Farmacy’ vs. ‘Arcona’) prominently on the packaging.”
Arcona, 976 F.3d at 1081.
“[O]ther companies use the phrase ‘EYE DEW’ in the beauty industry,” which
“underscores that the ‘EYE DEW’ mark is not so unique or strong,” further weighing
against any likelihood of confusion. Arcona, 9.76 F.3d at 1081.
“[T]there is no evidence that Farmacy's use of the mark “EYE DEW” was intentional.”
Rather, the evidence showed it “was meant to describe its product and was not an
intentional copying of Arcona's trademark.” Arcona, 9.76 F.3d at 1081.
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