February 14, 2018

Lit Alerts—February 2018

A Publication of the Litigation Practice Group

Intellectual Property: Ninth Circuit Affirms Lower Court Ruling that Fox's Empire Does Not Infringe Record Label's EMPIRE Mark

Empire Distribution is a hip-hop record label founded in 2010. Empire is a popular television show on Fox about the internal goings-on at a fictional music label called "Empire Enterprises." In 2015, Empire Distribution sent a demand letter to Fox alleging that Fox's use of "Empire" violated Empire Distribution's trademark rights in its name. Fox responded by filing suit, seeking a declaratory judgment that its use of "Empire" was non-infringing, and Empire Distribution counterclaimed for trademark infringement, unfair competition, and dilution. In 2016, Fox won summary judgment on all claims and counterclaims.

In affirming summary judgment, the Ninth Circuit explained that where an allegedly infringing use of a mark is the title of an expressive work, or part of the work itself, the use is protected by the First Amendment "unless the [use] has no artistic relevance to the underlying work whatsoever, or, if it has some artistic relevance, unless the title explicitly misleads as to the source or the content of the work."

The Ninth Circuit found that Fox's use of "Empire" was related to the underlying content of the show and was not misleading. The court of appeals explained that the show is set in New York and features a business conglomerate that is a "figurative empire." Nor did the show "explicitly mislead" viewers, because the show did not expressly indicate or claim association with Empire Distribution.

White Collar: Second Circuit Introduces New Test for Determining Standing Under RICO

Recently, in Bascuñan v. Elsaca, the Second Circuit adopted a new test for domestic injuries alleged under the Racketeer Influenced and Corrupt Organizations Act (RICO) when the plaintiff is a foreign litigant. The Second Circuit reversed the district court's dismissal, thereby reviving the civil RICO suit by a Chilean national alleging theft of specifically identifiable property valued at $64 million that was located in the United States when stolen.

This case is the first to tackle the question of how to determine whether an injury under RICO is "domestic" after the Supreme Court's ruling in RJR Nabisco v. European Community. In RJR Nabisco, the Court held that a private right of action under RICO does not apply extraterritorially, but did not specifically set forth a test for determining whether an injury is domestic. Shortly after the RJR Nabisco decision, the district court in Bascuñan dismissed the plaintiff's complaint, applying a residency-based test. The court of appeals ultimately rejected the district court's residency test, noting that under such test, "a plaintiff who is a foreign resident may nevertheless allege a civil RICO injury that is domestic." Furthermore, the court stated that "[a]t a minimum, when a foreign plaintiff maintains tangible property in the United States, the misappropriation of that property constitutes a domestic injury."

While the court acknowledged that a plaintiff's residence may often be relevant in determining whether certain types of business injuries constitute a domestic injury, when it comes to the property injury alleged here (i.e., misappropriation of the plaintiff's trust funds from a specific bank account located in the United States), the location of the property and not the residence of the plaintiff is the dispositive factor.

Additionally, the Second Circuit highlighted that under the district court's decision, no foreign plaintiff could bring a RICO case, noting that "[f]ew things could be more destructive to the comity underlying the international system than legal rules that penalize international economic cooperation and deter foreign investment simply because such activity involves 'foreign' counterparties."

Intellectual Property: Fed. Cir. Finds TC Heartland Changed Venue Law for Purposes of Waiver

In In re: Micron Technology, Inc., the Federal Circuit addressed how waiver rules should apply to venue defenses raised in the wake of the Supreme Court's recent decision in T.C. Heartland LLC v. Kraft Foods Group Brands LLC. In TC Heartland, the Supreme Court reversed years of Federal Circuit precedent and held that 'residence' in the patent venue statute has a narrower meaning than it does in later iterations of the general venue statute.

After TC Heartland, defendants throughout the country sought to dismiss or transfer their cases for alleged improper venue pursuant to Fed. R. Civ. P. 12(b)(3). But under Rule 12(h)(1)(A), a defense of improper venue is waived if it is "available" and not made at the time of a motion to dismiss. Most courts agreed that this 'availability' turned on whether TC Heartland was a change in the law, but they disagreed on whether it was.

In Micron, the Federal Circuit granted a petition for a writ of mandamus and held that TC Heartland was a change in law. It also held that Micron's failure to raise a venue defense in its pre-Heartland Rule 12(b) motion did not waive the defense under Rule 12(h)(1)(A) because the controlling precedent "would plainly have barred the district court from adopting a venue objection." The Federal Circuit nonetheless held that "Rule 12(h)(1) is not the sole basis" for waiver, and observed that general waiver principles might still apply. The Court, however, did not articulate a specific waiver standard that should apply.

© Arnold & Porter Kaye Scholer LLP 2018 All Rights Reserved. NOTICE: ADVERTISING MATERIAL. Results depend upon a variety of factors unique to each matter. Prior results do not guarantee or predict a similar results in any future matter undertaken by the lawyer.

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