9th Circuit Vacates in Freecycle Trademark Case

September 26, 2007. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in Freecycle Network v. Oey, vacating the judgment of the District Court, and remanding.

Summary. The District Court granted a preliminary injunction to an applicant for a trademark registration that bars an opponent of the registration from disparaging the possible trademark. The defendant merely expressed opinions that the mark was in the public domain, encouraged others to use it in a generic sense, and argued that it should not be registered by the USPTO.

While this case is a victory for free speech regarding agency proceedings, and on the internet, the Court of Appeals decided the case solely on statutory grounds. That is, it held that the Lanham Act does not permit trademark applicants to suppress speech that constitutes opposition to registration and encourages generic use.

The Court of Appeals also held that there is no claim for "trademark disparagement" under Section 1125.

The Court of Appeals did not rule on the merits of TFN's trademark application, but held that it is not a violation of the Lanham Act to use a trademarked term in its generic sense. Nor is encouraging others to use a mark in a generic sense actionable, unless there is also infringement, false designation of origin, false advertising, or dilution.

Facts. The Freecycle Network (TFN) is nonprofit Arizona corporation that states that it is dedicated to encouraging and coordinating the reusing, recycling, and gifting of goods. It filed a trademark registration application for the mark "freecycle" with the U.S. Patent and Trademark Office (USPTO) in 2004. The USPTO has not registered the mark.

Tim Oey is a former member of TFN who opposes registration of the mark. He published statements on the internet in which he asserted that TFN lacks trademark rights in the mark because it is a generic term. He also encouraged others to use the term in its generic sense and to write letters to the USPTO opposing registration.

District Court. TFN filed a complaint in U.S. District Court (DAriz) against Oey alleging that Oey’s statements constituted contributory trademark infringement and trademark disparagement under section 43(a) of the Lanham Act, which is codified at 15 U.S.C. § 1125(a), as well as state law claims of injurious falsehood, defamation, and intentional interference with a business relationship. TFN sought injunctive relief and damages.

The District Court granted a preliminary injunction (PI) based TFN's § 1125(a) claims. The Court of Appeals wrote that the District Court apparently conflated TFN's allegations of contributory trademark infringement and "trademark disparagement".

The PI enjoins Oey "from making any comments that could be construed as to disparage upon" TFN's "possible trademark and logo". It also requires that he "remove all postings from the internet and any other public forums that he has previously made that disparage" TFN's "possible trademark and logo."

Court of Appeals. Oey brought the present appeal. The Court of Appeals vacated and remanded.

The Court of Appeals applied the usual four part test for requests for a PI -- strong likelihood of success on the merits, possibility of irreparable injury to plaintiff if a PI is not granted, balance of hardships favoring the plaintiff, and advancement of the public interest.

The Court of Appeals focused on the likelihood of success.

The Court of Appeals first analyzed the trademark infringement claim. It wrote that "To be liable for trademark infringement under § 1125(a), a person must (1) use in commerce (2) any word, false designation of origin, false or misleading description, or representation of fact, which (3) is likely to cause confusion or misrepresents the characteristics of his or another person’s goods or services." It continued, quoting from Abercrombie & Fitch v. Moose Creek, 486 F.3d 629, that "The core element of trademark infringement is the likelihood of confusion, i.e., whether the similarity of the marks is likely to confuse customers about the source of the products."

The Court of Appeals concluded that "Contrary to the district court’s conclusion, these facts -- even if true --simply do not demonstrate that TFN has a likelihood of success on its § 1125(a) infringement claim."

First, it concluded that since "Oey simply expressed an opinion that TFN lacked trademark rights in the term ``freecycle´´ and encouraged likeminded individuals to continue to use the term in its generic sense and to inform the PTO of their opinions", his statements were not "in commerce" within the meaning of Section 1125.

Second, it concluded that since "his statements neither mention any competing service or product, nor claim any affiliation with TFN" his statements were not likely to cause confusion within the meaning of Section 1125.

Third, it concluded that Oey's statements did not satisfy the requirements for false advertising, misrepresentation, or unfair competition.

The Court of Appeals next analyzed the "trademark disparagement" under Section 1125 claim in the complaint. The Court of Appeals wrote simply that "no such claim exists" under Section 1125.

It wrote that "Trademark disparagement is not a valid cause of action under section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and, even if it were, Oey’s actions do not satisfy the elements alleged by TFN because he made no false statements."

Finally, the Court of Appeals addressed the concept of genericide. It wrote that "the crux of TFN’s complaint is that Oey should be prevented from using (or encouraging the use of) TFN’s claimed mark FREECYCLE in its generic sense. However, TFN’s asserted mark -- like all marks -- is always at risk of becoming generic and thereby losing its ability to identify the trademark holder’s goods or services." (Parentheses in original.)

It noted that "Genericide has spelled the end for countless formerly trademarked terms, including ``aspirin,´´ ``escalator,´´ ``brassiere,´´ and ``cellophane.´´"

However, it held that "The Lanham Act itself, however, contains no provision preventing the use of a trademarked term in its generic sense. ... Nor does the Act prevent an individual from expressing an opinion that a mark should be considered generic or from encouraging others to use the mark in its generic sense. Rather, the use of a mark in its generic sense is actionable under the Lanham Act only when such use also satisfies the elements of a specified cause of action -- e.g., infringement, false designation of origin, false advertising, or dilution. TFN's mere disagreement with Oey’s opinion and frustration with his activities cannot render Oey liable under the Lanham Act."

The Court of Appeals did not address the First Amendment issue, or any of the state law claims. The case is remanded to the District Court. Hypothetically, TFN could still proceed on the state law claims, if the District Court does not decline to exercise jurisdiction.

This case is The Freecycle Network, Inc. v. Tim Oey and Jane Doe Oey, U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 06-16219, an appeal from the U.S. District Court for the District of Arizona, D.C. No. CV-06-00173-RCC, Judge Raner Collins presiding. Judge Michael Hawkins wrote the opinion of the Court of Appeals, in which Judges Diarmuid O'Scannlain and Kim Wardlaw joined.