United States: Not Only Alive And Well — But Full Of Energy

Last Updated: September 24 2014
Article by Scott J. Slavick

Safe distance rule in force after new ruling in 5-Hour Energy case. 'Sucks' to be N2G.

In a surprisingly large number of trademark infringement cases, defendants enjoined from use of an infringing trademark make only de minimis changes to the infringing product to present the appearance of compliance with a court's order.

For example, more than 60 years ago, the owner of the ESKAY mark, Eskay Drugs, Inc., obtained a consent decree that enjoined defendant Smith, Kline & French Labs, from using the ESKAY trademark or any colorable imitation of it. When the latter decided to use ENKAY as an alternative, the 5th Circuit disallowed the move, holding Smith, Kline & French in contempt of its injunction and stating that the defendant "must do more than see how close they can come with safety to that which they were enjoined from doing."

As trademark owners know, however, the same challenges keep coming back to the courts.

In 2008, Innovation Ventures, owner of the well-known 5-Hour Energy marks, sued N2G over its sale of an allegedly infringing energy drink product, including the then-named 6 Hour Energy Shot. Innovation Ventures (IV) quickly obtained a preliminary injunction against the sale of N2G's products while the case unfolded. In the end, a jury ultimately found most of N2G's products infringed IV's 5-Hour marks, hit the infringer with $1.75 million in damages, and issued a permanent injunction barring N2G from selling energy shot products that were confusingly similar to Innovation's products.

Innovation Ventures had hoped its problems with N2G were over. But as it turned out, N2G was still drinking its own Koolaid — and clearly was primed for more action. In 2012, a trial court held N2G in contempt after Innovation Ventures showed that its competitor was still selling modified versions of the enjoined products. And recently, Innovation Ventures brought yet another contempt motion against N2G, arguing that the latter was still trying to sell modified versions of the previously enjoined products.

The trial court agreed. Deciding that N2G's energetic activities again constituted infringement, the court held N2G in contempt in part under the "safe distance rule," which allows courts broader discretion to hold defendants in contempt of injunctions — even for selling new products that would not necessarily have infringed the plaintiff's mark on their own. The idea is to prevent defendants from making tiny tweaks to repeatedly circumvent injunctions and to remedy confusion by forcing defendants to adopt entirely new marks.

In support of the safe distance rule, many courts have recited the concept that a defendant previously found guilty must keep a safe distance away from what might be considered the common-sense margin line of infringement, instead of adopting the practice of getting as close as it can come to that which it has been enjoined from doing. In general, courts have shown themselves ready to keep a defendant previously found guilty from doing something that others might not have received censure for. Such a penalty might even involve a handicap compared with those who have not disqualified themselves.

Said differently, courts clearly share the view that once caught, an infringer should expect some fencing in — even if that fence presents a tighter constraint on its actions than a court would enforce on others. That infringer should expect to have its conduct carefully scrutinized in future uses of marks, and should not expect to be allowed to receive the same leniency accorded a user who commences in good faith to use a mark, for example, to which an enjoined defendant may have shifted.

Otherwise, in the thinking of the courts, a defendant enjoined from using a certain mark could simply make a tiny change to it, just as in the Eskay case in 1951, and start a new trademark contest all over again. The 7th Circuit, for example, has explicitly stated that it is fine if the court requires the defendant previously found guilty to choose a distinctively different mark rather than to hew so close to the line that the parties must return to court interminably, to haggle about every mark.

In this case, though, N2G just couldn't get off the litigation treadmill, appealing the trial court's contempt finding to the 6th Circuit. Rather surprisingly, its lawyers argued that the 6th Circuit had previously shown itself as not liking to rely on the safe distance rule, instead relying primarily on its own opinion in The Taubman Co. v. Webfeats, et al.

The Taubman case involved a defendant's using a plaintiff's trademarks in conjunction with the word "sucks" in the domain name of several "complaint" sites, as well as in the domain name of a non-commercial "fan" site. So the 6th Circuit disagreed with N2G's argument that the earlier ruling pertained to its own case. In distinguishing theTaubmancase, the 6th Circuit explained that it was an appeal from a preliminary injunction, whereas N2G was appealing a contempt holding after violating a permanent injunction.

The 6th Circuit further distinguished Taubman by explaining that the earlier decision did not involve a commercial dispute at all but rather addressed whether a business could use the Lanham Act to shut down public debate about its commercial activities. The court explained that the safe distance rule had had no place in Taubman,but that it was particularly applicable in N2G's case — in which the 6th Circuit felt that N2G was trying to skirt a permanent injunction for its own commercial gain.

N2G had also raised a novel argument that the safe distance rule should not apply to trade dress cases because those types of cases were too subjective. The 6th Circuit disagreed with that argument also, holding that N2G produced no authority to suggest that it should not, and explained that many courts have done what the district court did here — apply the safe distance rule to insure that a serial infringer respects protected trade dress.

So, in sum, it's safe to say the safe distance rule is alive and well. But what does this recent case mean for future plaintiffs and defendants?

The most interesting aspect of the safe distance rule, which remains an open issue after this case, is whether a trademark owner can successfully use it against a potential infringer who has not been previously adjudged to have infringed the trademark owner's mark, but who has agreed to change one of its marks at the trademark owner's demand in the past to get the alleged infringer to change another mark.

Can the owner use that previous change to argue that the alleged infringer must select a mark that is farther away from the trademark owner's own mark, than the mark that an innocent third-party user could select? The outer reaches of the safe distance rule are what savvy trademark owners need to analyze and potentially use to their advantage. Trademark attorneys and the courts may have to expend some energy of their own to figure this one out.

Originally published by Inside Counsel Magazine.

This article is intended to provide information of general interest to the public and is not intended to offer legal advice about specific situations or problems. Brinks Gilson & Lione does not intend to create an attorney-client relationship by offering this information and review of the information shall not be deemed to create such a relationship. You should consult a lawyer if you have a legal matter requiring attention. For further information, please contact a Brinks Gilson & Lione lawyer.

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