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Forum Shopping in Trademark Litigation in the United States

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Forum Shopping in Trademark Litigation in the United States

by David J. Kera and Jonathan Hudis with research assistance by Kathleen Cooney-Porter^[1]

In 1984, Mr. Justice William Rehnquist, now Chief Justice, of the United States Supreme Court wrote that forum shopping is a "litigation strategy of countless plaintiffs who seek a forum with favorable substantive or procedural rules or sympathetic local populations Keeton v. Hustler Magazine, Inc. 465 US 770, 779 (1984).

Forum shopping, or, in less pejorative terms, choice of venue, is, in fact, an essential early consideration of litigation strategy in virtually every trademark lawsuit.

The United States has fifty-two court systems. Each of the fifty states and the District of Columbia has its own courts, which include at least a level of trial courts of general jurisdiction and an appellate court.

The Federal court system established under the constitution has a Supreme Court of nine justices, twelve geographically organized Courts of Appeal, sometimes referred to as Circuit Courts (including a Court of Appeals for the District of Columbia Circuit), the Court of Appeals for the Federal Circuit, which hears appeals in patent cases and other matters pursuant to statute, and District Courts, which are the trial courts. Each state has at least one Federal District Court.

Except for patent cases and other cases which are appealable only to the Federal Circuit an appeal known as judgment of a District Court is taken to the Court of Appeals for the circuit in which the District Court is located. For example, an appeal from a decision of a District Court in Connecticut, Vermont, or New York wold be taken to the Court of Appeals for the Second Circuit, which covers those three states.

The party which files the first complaint in a case makes the first choice of which court is to be the forum. This may be a state court or a Federal District Court. The defendant may try to move the case to a different court.

If the complaint is filed in a state court and alleges a cause of action which also arises under the United States Trademark Act (Lanham Act) of 1946 (as frequently amended), the defendant may remove the case to the Federal District Court for that state. If the plaintiff is a person or corporation with a domicile in one state and the defendant is domiciled in a different state, the defendant may remove the case to Federal District Court on the basis of diversity of citizenship.

A defendant may also move to transfer a case from one Federal District Court to a different Federal District Court on the ground of forum non conveniens, i.e., that the transferee court (the forum to which transfer is requested) is the move appropriate forum, of wich move will be discussed later.

The first forum question that a plaintiff considers is whether to seek relief in a District state court or in a Federal Court. Since the Trademark Act specifies causes of action for infringement, for counterfeit, for false designations of origin, false description, or false representation, none of wich require a plaintiff to possess a registered trademark; and for dilution, it is a very rare case where a plaintiff could not plead a cause of action under the Federal statute and thereby involve the jurisdiction of the geographically appropriate Federal District Court.

Among the few situations where Federal jurisdiction may not be available are one where the defendant’s activities may not affect interstate or foreign commerce (a very rare circumstance) or one where a claim of dilutions may be pleaded under state law, but not under Federal law (because of the language of the Federal Anti-Dilution law of the Trademark Act).

Federal Courts are empowered to adjudicate claims arising under state law when the Federal and state causes of action arose from the same operative facts, and state courts are not precluded from adjudicating claims arising under the Federal Trademark Act (state courts may not decide cases arising under the Patent Act or Copyright Act).

The choice between state and Federal Court is made after an evaluation of many factors: (1) is the state one where the plaintiff is located and favorably known in the community? (2) will a jury trial be requested, and if so, will the panel of prospective jurors be drawn from a narrow geographical area where the plaintiff is popular or from a wider area where the plaintiff may be unknown? (3) are the judges experienced in trademark and unfair competition cases? (4) is the court docket relatively current or in serious arrears? (5) what kind of interim relief may be expected? (6) what is the court’s past jurisprudence in deciding issues arising under other states’ laws? (7) what is the court’s past jurisprudence in deciding the issues of the plaintiff’s case?

The great majority of plaintiffs elect to file trademark and related unfair competition cases in the Federal Courts for a number of reasons. It is recognized that the Federal Courts, for historical reasons, have far more experience in adjudicating trademark cases than do the state courts. Plaintiffs frequently have to sue defendants in places where the defendants are located but where the plaintiffs have no local ties. The body of trademark law in the United States is largely developed in Federal cases and there is a greater chance of predicting a result especially in a Federal Circuit with a rich collection of precedents and experienced trial and appellate judges. Further, plaintiffs recognize that, even if they file complaints in state courts, the defendants may, and often will, remove them to Federal courts.

The United States, by statute (Title 28 of the United States Code) and rule (the Federal Rules of Civil Procedure) and judicial precedents has well established law on both aspects of jurisdictions, subject matter jurisdiction and personal jurisdiction. Subject matter jurisdiction has been discussed. Personal jurisdiction, the power of a court to issue a judgment ordering a named defendant to do or not to do a specified act or to pay a money judgement, depends, in broad terms, on where a defendant resides or is incorporated, or does business, or caused the harm for which a plaintiff seeks relief.

Venue, the location of the court in which a case will be heard, is a different and separate question. More than one Federal District Court may have personal jurisdiction over a defendant, for example a corporation incorporated in Delaware, having a main office in New York, and committing trademark infringement in California. Venue, however, may be convenient in California but not in New York, if the witnesses and relevant documents are in California and if California’s state anti-dilution statute is the basis of a claim in the case.

Thus far, we have considered state court versus Federal Court, subject matter jurisdiction (which is essentially neutral because state and Federal courts have concurrent jurisdiction), venue, and personal jurisdiction are factors to be considered in choosing a court. A plaintiff’s assessment of a defendant’s likely reaction to the plaintiff’s choice of venue and the relief available to a defendant is another part of the calculus.

To a very large forum extent, a plaintiff’s choice of assuming there is a choice, is influenced by three factors, which will be discussed on the assumption that the plaintiff chooses Federal District Court as the forum: (1) what is the law of the Court of Appeals of the circuit in which suit will be filed? (2) are the judges of that District Court experienced or inexperienced in trademark and unfair competition cases? (3) can the plaintiff expect an unbiased and fair hearing by judge and jury? (4) do cases move quickly on the docket or are they seriously delayed?

On those issues on which the Supreme Court has rendered judgments which, under U.S. law, constitute binding precedents, in theory all of the Courts of Appeal and District Courts are bound. In practice, the lower Federal courts, particularly the Courts of Appeal, may and do distinguish particular cases so as not to follow Supreme Court precedent uniformly throughout the country or construe and interpret Supreme Court precedent in divergent ways.

There are many questions arising under the Trademark Act on which the Supreme court has not rules, which allows each Court of Appeals to write its own body of case law which is binding on the Federal District Courts within the geographical boundaries of a particular circuit but not on Courts of Appeal or District Courts outside of that circuit.

In 1961, to resolve a long-standing conflict within the Second Circuit on how to decide trademark infringement cases where the goods of the defendant were different from the goods of the plaintiff, the Court of Appeals for the Second Circuit wrote detailed dicta in a case decided on the ground of laches, or undue delay by the plaintiff in seeking relief. Polaroid Corporation v. Polarad Electronics Corporation, 287 F.2d 492 (2nd Cir. 1961). The dicta laid out a list of questions to be considered in deciding whether there had been a violation of a plaintiff’s rights justifying relief. The use of Polaroid factors was soon extended to cases where the parties’ goods were the same or closely related and have become the indispensable tool of the District Courts within the Second Circuit in trademark cases.

The majority of the other Federal Circuit Courts have also adopted lists of factors for trademark cases, but they are not identical with the Polaroid factors or with each other. Therefore, given a choice of District Courts in different circuits in which to bring suit, it behooves a plaintiff to review the infringement factors of each possible circuit and decide where the facts of the case will enable the plaintiff to present the strangest argument.

Examples of differences in the factor used by the different circuits are the Polaroid factors of the Second Circuit: the strength of the plaintiff’s mark, the degree of similarity between the parties respective marks, the proximity of the products, the likelihood that the plaintiff will bridge the gap, the existence of actual confusion, whether the defendant acted in good faith in adopting its mark, the quality of the defendant’s product, and the sophistication of the buyers; the similar but not identical factors of the Ninth Circuit (covering California and a number of other states), AMF Incorporated v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979); the strength of the mark, the proximity of the goods, similarity of the marks, evidence of actual confusion, marketing channels used, the type of goods and degree of care likely to be exercised by the purchaser, the defendant’s intent in selecting its mark, and likelihood of expansion of the product lines; the Seventh Circuit (covering Illinois, Indiana, and Wisconsin), the type of trademark in issue, the similarity of design, the similarity of products, identity of retail outlets and purchasers, identity of advertising media utilized, the defendant’s intent, and the existence of actual confusion.

If an issue in a case is a claim of a violation of trademark rights in the appearance of a tangible article, which is also known as a product configuration trade dress violation, the choice of forum could be critical to the outcome. Different Circuit Courts have different tests for determining whether trade dress is inherently protectable, that is, protectable from its first appearance in the market.

The Third Circuit which covers Delaware, New Jersey, and Pennsylvania uses the test announced in Duraco Products, Inc. v. Joy Plastic Enterprises, Ltd., 40 F.3d 1431 (3d Cir. 1994): inherently distinctive trade dress for a product configuration must be (a) unusual and memorable (b) conceptually separable from the product, and (c) like to serve primarily as a designator of the origin of the product.

Other Circuit Courts use the test propounded by the Court of Customs and Patent Appeals (one of the predecessor courts of the Court of Appeals for the Federal Circuit) Seabrook Foods, Inc. v. Bar-Well Foods Ltd. 568, F.2d 1342, 1344 (CCPA 1977). In Seabrook the court looked to whether the trade dress at issue was a common basic shape or design, whether it was unique or unusual in a particular field, whether it was a mere refinement of a commonly adopted and well-known form of ornamentation for a particular class of goods viewed by the public as a dress or ornamentation for the goods, and whether it was capable of creating a commercial impression distinct from the accompanying words.

In the Second Circuit, product configuration trade dress is viewed as inherently distinctive in the Second Circuit only if it is "likely to serve primarily as a designator of the origin of the product." See, Knitwaves, Inc. v. Lollytogs Ltd., 71 F.3d 996 (2d Cir. 1995); Fun-Damental Too, Ltd. v. Gemmy Industries Corp., 111 F.3d 993 (2d Cir. 1997); and Landscape Forms, Inc. v. Columbia Cascade Company, 113 F.3d 373 (2d Cir. 1997).

There are marked differences among the Federal Circuit Courts in their interpretation of the Supreme Court’s construction of the effect of making the exclusive right to use a registered mark incontestable in Park ‘N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189 (1985), which stated that "the language of the Lanham Act... refutes any conclusion that an incontestable mark may be challenged as merely descriptive".

The Eleventh Circuit Court of Appeals, in Dieter v. B & H Industries, 880 F.2d 322 (11th Cir. 1989), cert. denied, 498 U.S. 950 (1990) held that "because [the plaintiff’s] mark is incontestable, then it is presumed to be at least descriptive with secondary meaning and therefore a relatively strong mark." The Sixth Circuit Court of Appeals has taken a similar position. Wynn Oil Co. v. American Way Serv. Corp., 943 F.2d 595 (6th Cir. 1991) (court equates strength with incontestability).

However, the Ninth Circuit Court of Appeals found that the incontestability of a mark for validity purposes did not foreclose an inquiry into whether the mark is "strong" or "weak" for likelihood of confusion purposes. Miss World (UK) Limited v. Mrs. America Pageants, Inc., 856 F.2d 1445 (9th Cir. 1988) (the court held that the strength of a mark does not follow as a conclusion from an incontestable registration. Rather, the court independently used the "imagination of the consumer test" and the "need of competitors test" to independently determine the strength of the mark).

This type of analysis was similarly followed by the Fourth Circuit Court of Appeals in Petro Stopping Centers L.P. v. James River Petroleum, Inc., 130 F.3d 88, 92 (4th Cir. 1997) (criticizing the plaintiff for confusing a trademark’s validity with a separate inquiry into a mark’s strength). The court stated that "the strength of a mark ultimately depends on the degree to which the designation [or mark] is associated by prospective purchasers with a particular source."

Other examples of differing judicial treatment of important trademark issues are the applications of the Federal Trademark Dilution Act of 1995, Section 43(c) of the Lanham Act [15, U.S.C. § 1125(c)] and different decisions on whether a defendant’s Internet website’s use of an allegedly infringing domain name or mark within a website is sufficient for personal jurisdiction over that defendant within the plaintiff’s home judicial district.

In some Federal circuits, but not in all of them, if the infringing use arises from a defendant’s website, the chores of court may determine whether personal jurisdiction will be exercised over the defendant in the court chosen by the plaintiff or may be exercised only where the defendant is physically located or is otherwise doing business beyond having a website.

Within the Federal court system, the plaintiff’s choice of venue, the location of the trial, which also chooses the body of applicable law, is most often determinative. However, a defendant may seek a change of venue by moving to transfer the case to a different District Court. The judicial code, specifically 28 U.S.C. § 1404(a) governs the discretionary transfer of an action:

"for the convenience of parties and witnesses, in the interest of justice, the district court may transfer any civil action to any other district or division where it might have been brought."

There are any number of convenience factors considered by the courts in weighing convenience under § 1404(a). Most courts consider the three factors set forth in the statute and the "individualized, case-by-case of convenience and fairness." Coffey v. Van Dorn Iron Works, 796 F.2d 217, 219 (7^th Cir. 1986).

Many United States courts recognize that a defendant who seeks to transfer an action from one court to another bears the burden of showing that the transferee forum best serves the interests stated in the transfer statute. The Northern District of Illinois favors the plaintiff’s choice of forum. However, this is not absolute and the plaintiff’s choice will not defeat a well-founded motion to transfer. Espino v. Top Draw Freight System, Inc., 713 F. Supp. 1243 (N.D. Ill. 1989). The factors the court weighs are the convenience of the parties and witnesses, the interest of justice, the efficient administration of the court system (rather than private consideration of the litigants), the applicable law in a diversity case, the events underlying the suit and their connection to the state, conservation of judicial resources and early resolution of trial in the transferee forum.

In the Court of Appeals for the Fifth Circuit, a motion to transfer venue is at the discretion of the trial court and will not be reversed on appeal absent an abuse of discretion. This Court recognizes that the plaintiff is generally entitled to its choice of forum. Peteet v. Dow Chemical Co., 868 F.2d 1428 (5^th Cir. 1989). The trial court must consider "all relevant factors to determine whether or not, on balance, litigation would more conveniently proceed and the interests of justice be better served by transfer to a different forum. In the Court of Appeals for the Ninth Circuit, the factors the court balances in exercising its discretion whether to order a change of venue include the convenience of the parties, the convenience of the witnesses, and the interests of justice, such as judicial economy. Hatch v. Reliance Insurance Co., 758 F.2d 409 (9^th Cir. 1995).

Another consideration in determining venue questions involves the time taken from the filing of the lawsuit to the disposition of the case. For instance, "rocket docket" jurisdictions, such as the Eastern District of Virginia and the District of Colorado, have a history of faster disposition of cases than do the District Courts in New York, Miami, and Chicago. [Source: Judicial Business of the United States Courts, 1996 Report.]

This article has been written primarily from the point of view of a plaintiff complaining about a violation of its trademark rights. In the United States, it is also possible for a potential defendant to launch litigation by filing an action for a declaratory judgment. This type of action may be filed when a defendant reasonably believes itself to be threatened by an imminent lawsuit, not yet filed, and there is a dispute ripe for judicial determinating for example, whether the use of a word constitutes trademark infringement.

When a declaratory judgment action is filed, the substantive defendant is the nominal plaintiff and has the first choice of venue. Many judicial battles have been fought over whether a declaratory judgment action has been filed prematurely, whether it should take precedence over an infringement action filed in a different court, or whether the declaratory judgment action should be consolidated with the infringement action in the Court selected by the substantively complaining party.

The choice of the forum court is not litigation garnesmanship. It is a critical decision which can have a dispositive effect on the outcome of litigation and should be the result of careful legal analysis and planning.

[1] Messrs. Kera and Hudis are partners and Ms. Cooney-Porter is an associate in the Arlington, Virginia law firm of Oblon, Spivak, McClelland, Maier & Neustadt, P.C. in its trademark and copyright practice group.