Opposition Brief — M2 Software, Inc. v. Viacom, Inc. (No. 07-202)

(2) FILED

No. 07-202 OCT 17 2007

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—

OFFICE OF THE C

|_ SUPREME COURT US

gn The

Supreme Court of the Gnited States

S

M2 SOFTWARE, INC.,

Petitioner,

V.

VIACOM, INC., VIACOM INTERNATIONAL, INC.,

AND MTV NETWORKS COMPANY,

Respondents.

¢

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

+

BRIEF IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

S

LARRY W. MCFARLAND, Esq.

Counsel of Record

DAVID K. CAPLAN, Esq.

KEATS MCFARLAND & WILSON LLP

9720 Wilshire Blvd., Penthouse Suite

Beverly Hills, California 90212

Tel (310) 248-3830

Attorney for Respondents

COCKLE LAW BRIEF PRINTING CO (800) 225-6964

OR CALL COLLECT (402) 342-2831

i

CORPORATE DISCLOSURE STATEMENT

PURSUANT TO SUPREME COURT RULE 29.6

Respondent Viacom Inc. is a publicly held com-

pany listed on the New York Stock Exchange. Viacom

Inc. has no parent, and no publicly held company

owns 10% or more of its stock. Respondent Viacom

International Inc. is a wholly owned subsidiary of

Viacom Inc. Respondent MTV Networks (improperly

designated as MTV Networks Company) is a division

of Viacom International Inc.

il

TABLE OF CONTENTS

Page

CORPORATE DISCLOSURE STATEMENT

PURSUANT TO SUPREME COURT RULE

FE ihnainsiniaiariabrietiniinnnvitienmiciirainsinantentsnaineidedipsaeien i

EE EEE hicttcticcisninannectettssetinntivimned ii

TABLE OF AUTHORITIEG...........ccssrssescsessescosscseees iii

STATEMENT OF THE CASE 6............sssscssessssssseees 1

LASER EY OP EMDR SIUEE ccccesccensecsseneccscoosenveverceeses 8

REASONS FOR DENYING THE WRIT................ 12

I. Because Petitioner’s Claim For An Award

Of Respondent’s Alleged Profits Is Based

Upon Conduct Occurring Only Prior To

The 1999 Amendment, There Is No Sub-

stantial And Recurring Conflict Between

Coreeehe Cee GBI ne vscpcesnscrsenesceceectnccasen 12

II. Petitioner Has Not Shown An Actual Or

Potential Conflict Among Appellate Court

Opinions Applying The 1999 Amendment... 16

Ili. The Discretionary Decision Of The Ninth

Circuit To Apply A Per Se Rule In This

Case Followed Established Supreme Court

PI sncincliciinsicghsnenubateiicieaiinsinnniaascinanindians 20

Se actcncccsovinsinsaneeiinnceshebeinisatianetiiesinuda 22

iil

TABLE OF AUTHORITIES

Page

CASES

ALPO Petfoods, Inc. v. Ralston Purina Co., 913

ee a Aas BIPUID ckictvencestivciccieventnicpeivevescovcsis 14

Babbit Elec., Inc. v. Dynascan Corp., 38 F.3d

EE ETA, BUMPED iinicinsuntinn dicisaeeshasecasemoenaaeseccntvins 15

Banjo Buddies, Inc. v Renosky, 399 F.3d 168

IES RSTSE PER AS ee yest ree 11, 18, 19

Bishop v. Equinox Int’l Corp., 154 F.3d 1220

I oa cadelslitinddeokotmicabin 14

Braxton v. U.S., 500 U.S. 344 (1991)................... ee 17

Champion Spark Plug Co. v. Sanders, 331 U.S.

ERI iaiiidiathicnicaliecessbhi ihc iadaiteitiaseubtlsedatdannlesininconied 9

Contessa Premium Foods, Inc. v. Berdex

Seafood, Inc., 546 U.S. 957 (2005) ............ssccseeeseees 16

eBay Inc. v. MercExchange, LLC, 126 S. Ct.

Ee eit nicciinciaticataddneiiiciaiihiindidanmmbsduocoaniatecia 10

Int'l Star Class Yacht Racing Ass’n v. Tommy

Hilfiger, U.S.A., Inc., 80 F.3d 749 (2d Cir.

Se eiliitistsshresthenjctenaliauiiinlebaadadacckadicinkeiaiibiiesdintinibiiaastiduimial 13

Kassbaum v. Steppenwolfe Productions, Inc.,

236 F.3d 487 (Oth Cir. 2000)..........ccccccscvcccscscees 19, 20

Layne & Bowler Corp. v. W. Well Works, 261

SN I IEEE sishik sicnscthinieceiunivisabacdnicimnatinneciiboss 13, 16

Lindy Pen Co. v. Bic Pen Corp., 982 F.2d 1400

ED aididainiceuenccsthddiiaonsinéselbiiinicsnatienedéius 7,14

McLean v. Fleming, 96 U.S. 245 (1878)............. 8,9, 21

iv

TABLE OF AUTHORITIES — Continued

Page

Minn. Pet Breeders, Inc. v. Schell & Kampeter,

dne., 41 F.3d 1242 (Sth Cir. TOGS) 0. cccccscccsccccccecccces 14

Nalpac, Lid. v. Corning Glass Works, 784 F.2d

Nee cnn, inc vccahaneehebcecebandositnes 14

Nike, Inc. v. Top Brand Co., Ltd., 2005 WL

1654859 (S.D.N.Y. July 13, 2005) ..........ccccccccscccess 19

Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d 526

EERE GERIATR ER aN OS RE Ta 14, 15

Quick Tech., Inc. v. Sage Group PLC, 313 F.3d

EN IN II on ion wvescuvceusksnesuediersinenoavs 11, 17, 18

R&R Partners, Inc. v. Tovar, 2007 WL

1202802 (D. Nev. April 23, 2007) ................ccccseeees 19

Ruolo v. Russ Berrie & Co., Inc., 886 F.2d 931

a oo. | cas cacenccbuehenennoanivane 15

Saxlehner v. Siegel-Cooper Co., 179 U.S. 42

ee ca cnndeunbceiens 8, 9, 21

SecuraComm Consulting Inc. v. Securacom

Inc., 166 F.3d 182 (Sd Cir. 1909) .............ccccccsescceees 14

Synergistic Int'l, LLC v. Korman, 470 F.3d 162

AREER Oe nC OR 11, 18, 19

Western Diversified Services, Inc. v. Hyundai

Motor America, Inc., 427 F.3d 1269 (10th Cir.

Wildlife Research Center, Inc. v. Robinson

Outdoors, Inc., 409 F. Supp. 2d 1131 (D. Minn.

Vv

TABLE OF AUTHORITIES -— Continued

Page

STATUTES

EEE RE ee a Se 9

EL EEE SI 4

I cestciosrmnentiionan passim

EEL a 10, 11, 18

RULES

Federal Rule of Civil Procedure 77(d) ...............ceeeeeeees 6

ESSELTE a a 22

TREATISES

J.M. Koelemay, “Monetary Relief for Trade-

mark Infringement Under the Lanham Act,”

72 Trademark Rep. 458 (1982).............cccccssseecseseceees 8

1

BRIEF FOR THE RESPONDENTS

STATEMENT OF THE CASE

Petitioner M2 Software, Inc. (“Petitioner”) is a

one-man corporation that developed and licenses a

record industry royalty database software system

using the federally registered trademark “M2.” App.

at 38a.” Using the M2 mark, Petitioner also briefly

created and distributed a commercially unsuccessful

line of interactive video products on CD-ROM. 7d. at

39a.

Respondents Viacom Inc., Viacom International

Inc. and MTV Networks (collectively, “Respondents”)

are all part of the Viacom family of entertainment-

related businesses. Jd. at 39a-40a. In August 1981,

Respondent MTV Networks launched MTV: MUSIC

TELEVISION (“MTV”), a television network featur-

ing music-based programming and _ distributed

primarily through cable and satellite television

providers. Jd. at 40a. MTV was, and at all times since

1981 has been, identified and promoted using its now

famous federally registered mark and the associated

iconic MTV logo depicted below (the “MTV Logo”).°

' United States Trademark Registration Number 1,931,182.

* As used herein, the Appendix to the Petition is referred to

as “App.”; and the Appendix to this Opposition is referred to as

“Supp. App.”

* Respondent owns numerous trademark registrations in

the United States relating to MTV: MUSIC TELEVISION and

MTV, including the original MTV Logo, identified as United

(Continued on following page)

In August 1996, 15 years after MTV’s launch,

Respondents launched a companion network — M2:

MUSIC TELEVISION. Jd. at 40a. Underscoring the

link to MTV and as depicted below, the original logo

for M2: MUSIC TELEVISION was the flip-side, or

exact reverse, of the MTV: MUSIC TELEVISION

mark with the number “2” set inside it. Supp. App. at

19a n.1.

4

NOIss¥33T BIZ

This companion network operated under the

name M2: MUSIC TELEVISION for less than three

years — from the August 1996 launch through March

1999, when respondent changed the name of the

network to MTV2. Jd. at 6a. During this time, the

companion network never made a profit and had no

States Trademark Registration Numbers 1,310,411; 1,373,948;

1,373,884; 1,373,885; 1,374,812; 1,373,690; 1,374,710; 1,373,804;

1,374,783; 1,372,705; 1,372,615; 1,580,650; 1,400,277; 1,401,139;

1,401,140; 1,818,179; 2,259,143; 2,472,785; and 2,418,808.

3

meaningful revenues. App. at 40a. M2: MUSIC

TELEVISION was provided to cable and satellite

operators for free, and Respondents received no

advertising income attributable to it. Id.

On October 28, 1998, Petitioner commenced this

action in the United States District Court for the

Central District of California. Jd. at 36a-37a. Peti-

tioner alleged that Respondents’ use of the M2: MU-

SIC TELEVISION name and logo infringed on and

was otherwise inconsistent with Petitioner’s rights in

the M2 mark. Jd. Petitioner asserted several trade-

mark-related causes of action under the Lanham Act

and California state law. Jd. Petitioner demanded

monetary damages, including actual damages and an

accounting of Respondents’ profits. Jd. Petitioner also

sought a preliminary and a permanent injunction

prohibiting Respondents’ use of the M2: MUSIC

TELEVISION name and logo. Jd. The District Court

denied Petitioner’s motion for a preliminary injunc-

tion in January 1999. Id. at 37a.

As indicated above, in March 1999, Respondents

voluntarily changed the name of the MTV companion

music channel from M2: MUSIC TELEVISION to

MTV2. Id. at 82a. Respondents also abandoned all

use of the M2: MUSIC TELEVISION name and logo.

Id. Instead, to identify and promote MTV2, Respon-

dents used only a new logo comprised of the famous

MTV Logo juxtaposed with the numeral “2.”~/d.

Although the new MTV2 logo was displayed in

slightly varying sizes, orientations and colors depend-

ing upon the background against which it appeared,

4

the new logo always consisted of the famous MTV

Logo and the number “2” separated by a line, as

demonstrated below. Jd., Ex. 1; Supp. App. at 19a n.1.

Fi |2

MUBEC TELEVISION *

On July 27, 2000, the District Court granted

summary judgment for Respondent, dismissing all of

Petitioner’s claims based upon its finding that there

was no likelihood of confusion. App. at 9a. On Janu-

ary 30, 2002, the Ninth Circuit reversed the District

Court’s dismissal, but only as to one of Petitioner’s

claims. Id. at 9a, 32a-35a.

The Ninth Circuit held that the District Court

had erroneously dismissed Petitioner’s federal

trademark infringement claim for “reverse confusion”

based upon Respondents’ brief use of the M2: MUSIC

TELEVISION name and logo because, in deciding the

likelihood of confusion issue, the District Court did

not specifically consider Petitioner’s use of the M2

mark in connection with Petitioners’ distribution of

interactive CD-ROMs. Id. at 33a-35a. No other claim

was revived. Id.

On September 5, 2002, the Ninth Circuit issued a

second opinion “clarifying” its initial decision. Supp.

App. at la. This second opinion made clear that the

January 20, 2002 decision revived only Petitioner’s

claim for federal trademark infringement based upon

5

Respondents’ use of the M2: MUSIC TELEVISION

name and logo because no other claims had been

raised on appeal, and “thus any other claims were

waived.” Id.

After remand, the case was fully resolved in

three rulings. First, on March 15, 2004, the District

Court granted summary adjudication in favor of

Respondent with respect to all monetary damage

claims. App. at 30a. The Court ruled that Petitioner’s

“actual damage” claims failed because Petitioner did

not adduce any evidence to support its claim that it

was damaged as a result of the alleged infringement.

Id. at 22a-26a. The Court rejected Petitioner’s “rea-

sonable royalty” claims as “improperly speculative”

and unreasonable. Jd. at 26a-27a. And the Court

ruled that, because Respondents’ allegedly infringing

use of the M2: MUSIC TELEVISION name and logo

from August 1996 through March 1999 was neither

“willful” nor “in bad faith,” Petitioner’s claim for an

award of Respondents’ alleged profits on a theory of

unjust enrichment was precluded as a matter of iaw,

citing Ninth Circuit case law. Id. at 27a-29a.

Second, on August 9, 2004, the District Court

granted summary adjudication against Petitioner

with respect to its claim that the MTV2 logo also

infringed on its M2 mark. Supp. App. at 26a-27a. The

District Court ruled that this claim was waived

because, in its July 27, 2000 decision, the District

Court specifically ruled that there was no likelihood

of confusion between the M2 mark and the MTV2

6

logo, and Petitioner did not raise this issue in its

appeal of that decision. Jd. at 21a.

Finally, on September 8, 2004, the District Court

entered its final dispositive ruling. App. at 8a-12a.

Adopting the terms of an injunction that Respondents

proposed “as a compromise in an effort to resolve

[the] matter, ... without admitting any liability,” the

District Court permanently enjoined Respondents

from “using the specific marks M2 or M2: MUSIC

TELEVISION to identify any of [Respondents’] pro-

gramming services or to identify any of [Respon-

dents] interactive multimedia products.” Jd. at 10a-

lla. Disposing of all other claims, the Court entered a

final judgment, as required under Federal Rule of

Civil Procedure 77(d), adopting and incorporating its

earlier orders granting summary adjudication against

Petitioner. Jd. at 8a.

On February 28, 2007, the Ninth Circuit affirmed

the District Court’s permanent injunction and final

judgment in all respects material to the Petition.* App.

la-7a. The Ninth Circuit affirmed the dismissal of all

federal trademark infringement claims pertaining to

* Because it was not sufficiently clear “whether [the]

permanent injunction extended to [Respondents’] future use of

the original [M2: MUSIC TELEVISION] logo,” the Ninth Circuit

remanded the case to the District Court to “clarify” the matter.

App. at 6a-7a. On October-1, 2007, the District Court entered its

Minute Order clarifying that, indeed, the permanent injunction

does extend to the original M2: MUSIC TELEVISION logo.

Supp. App. at 28a-29a.

7

the MTV2 logo, agreeing with the District Court that

Petitioner “waived any challenge to the MTV2 logos

by failing to raise the issue in its first appeal.” Jd. at

5a. Agreeing that “[nlo reasonable factfinder could

conclude that [Petitioner] was entitled to any actual

damages,” the Ninth Circuit affirmed the District

Court’s dismissal of Petitioner’s actual damage claim

on the ground that Petitioner “has not produced any

evidence of confusion between its [M2] mark and

[Respondents’] mark.” Jd. at 2a-3a. The Ninth Circuit

also affirmed the dismissal of Petitioner’s claim for

“reasonable royalties,” finding that the claim “hinged

upon,” and thus had no merit independent of, Peti-

tioner’s claim for an award of profits based upon its

theory of unjust enrichment. Jd. at 4a.

Affirming the dismissal of Petitioner’s claim for

an award of profits, the Ninth Circuit made two

significant rulings. First, the Ninth Circuit held that

an award of profits could not be made because there

was no evidence “from which a reasonable factfinder

could conclude that [Respendents] willfully infringed

[Petitioner’s] trademark” and that, absent proof of

willfulness or bad faith, an award of profit claim is

precluded by the per se “equitable limitation upon the

granting of monetary awards” for infringement

described in Lindy Pen Co. v. Bic Pen Corp., 982 F.2d

1400 (9th Cir. 1993). Id. at 3a-4a. In addition, the

Ninth Circuit rejected Petitioner’s claim that the

1999 amendment to 15 U.S.C. §1117(a) required a

contrary holding. Jd. at 4a-5a. Rather, the Ninth

Court held that the 1999 amendment was irrelevant

8

to its ruling because all of the allegedly infringing

acts in issue occurred prior to the effective date of the

1999 amendment and must be governed by the law

applicable before the amendment. Id.

LEGISLATIVE HISTORY

Before Congressional enactment of trademark

laws, trademark rights were enforced in equity under

the common law. Applying long-settled common-law

principles of equity, this Court consistently held that,

although infringement of a mark may be enjoined

regardless of the infringer’s intent, “an account

of gains and profits” for infringement may not be

required absent willful or “fraudulent” intent. See

Saxlehner v. Siegel-Cooper Co., 179 U.S. 42, 42-43

(1900); McLean v. Fleming, 96 U.S. 245, 258 (1878).

Federal statutory protection of trademark rights

first occurred when Congress passed the Trade-Mark

Act of 1905 (the “1905 Act”). The 1905 Act provided

basic legislation under which technical trademarks

were registered and protected. Although the 1905 Act

did not specify the intent required to obtain an award

of actual damages or profits for infringement, see J.M.

Koelemay, “Monetary Relief for Trademark Infringe-

ment Under the Lanham Act,” 72 Trademark Rep.

458, 460 n.6 (1982), this Court continued to adhere to

the common law rule that injunctive relief satisfies

the equities of the case when “there has been no

showing of fraud or palming off” and the likelihood of

9

actual damage or profit “seems slight.” Champion

Spark Plug Co. v. Sanders, 331 U.S. 125, 131 (1947).

In a complete rewrite of federal trademark

legislation, the 1905 Act was superseded by the

Lanham Act, 15 U.S.C. §§1051 et seq. (the “Act”), in

1946. As originally adopted, the Act protected trade-

mark rights against only infringement (i.e., likely or

actual consumer confusion). The Act did not protect

against trademark dilution. In addition, the Act did

not expressly state the intent required to obtain an

award of profits. Nevertheless, the Act was not silent

as to the requisite intent. To the contrary, 15 U.S.C.

§1117(a) made clear that a trademark owner could

recover an infringer’s profits “subject to the principles

of equity,” id., and then-settled “principles of equity”

dictated that an award of profits required proof of

willful or “fraudulent” infringement. See Saxlehner,

179 U.S. at 42-43; McLean, 96 U.S. at 258; accord

Champion, 331 U.S. at 131.

For more than 50 years after enactment of the

Lanham Act, federal courts consistently applied the

long-established common-law “principle of equity”

that an account of gains and profits for trademark

infringement may not be awarded absent willful,

fraudulent, or bad faith misconduct. By making an

award of profits expressly “subject to the principles of

equity,” §1117(a) plainly required the application of

this per se rule. This interpretation also conforms to a

well-established rule of statutory construction. As

this Court recently reiterated, “a major departure

from the long history of equity practice should not be

10

lightly implied,” especially in the absence of statutory

proof that “Congress intended such a departure.”

eBay Inc. v. MercExchange, LLC, __ U.S. __, 126

S. Ct. 1837, 1839 (2006).

In 1995, Congress expanded a trademark owner’s

protection rights beyond claims of infringement.

Adopting the Federal Trademark Dilution Act (“the

FTDA”), Congress amended 15 U.S.C. §1125 to pro-

tect against, and provide enforcement and compensa-

tion for, the “dilution” of famous marks. 15 U.S.C.

§1125(c). Inasmuch as such rights did not exist under

the common law, the FTDA expressly provided that,

for statutory dilution claims, money damages could

not be awarded unless the infringer “willfully in-

tended to trade on the reputation of the famous

mark” or “willfully intended” to harm the mark’s

reputation. Jd.

Contrasting the FTDA’s express requirement of

“willful intent” with the Lanham Act’s silence regard-

ing the intent required to obtain award of profits for

trademark infringement, legal commentators began

to speculate that adoption of the FTDA evidenced

Congressional intent to dispel the existing per se rule

that a defendant’s profits could not be awarded

absent proof of intentional or bad faith infringement.

Despite these purely theoretical musings, federal

appellate courts decisions continued to adhere to

Supreme Court precedent holding that an award of

profits may not be awarded against innocent or good

faith infringers.

11

In 1999, the Lanham Act was amended again.

Although most of the changes focused upon the re-

quirements for proving a dilution claim under the

FTDA, §1117(a) was also amended (“the 1999 Amend-

ment”). Effective August 5, 1999, the 1999 Amend-

ment amended the first sentence of §1117(a) by

striking “a violation under section 1125(a) of this title

finfringement],” and inserting “a violation under

section 1125(a) of this title [infringement], or a willful

violation under section 1125(c) of this title [dilution].”

PL 106-43, 113 Stat. 218, 219 (Aug. 5, 1999).

Although an award of an infringer’s profits under

§1117(a) remains “subject to principles of equity,”

every federal appellate court to consider the effect of

the 1999 Amendment has held that it clearly evi-

dences the intent of Congress to permit an award of

profits for federal trademark infringement without

regard to the per se rule requiring willful or bad faith

infringement. See Quick Tech., Inc. v. Sage Group

PLC, 313 F.3d 338 (5th Cir. 2002); Banjo Buddies,

Inc. v Renosky, 399 F.3d 168 (3d Cir. 2005); Synergis-

tic Int'l, LLC v. Korman, 470 F.3d 162 (4th Cir. 2006)

(collectively, the “1999 Amendment Cases”).

4

12

REASONS FOR DENYING THE WRIT

I. Because Petitioner’s Claim For An Award

Of Respondent’s Alleged Profits Is Based

Upon Conduct Occurring Only Prior To

The 1999 Amendment, There Is No Sub-

stantial And Recurring Conflict Between

Circuit Court Opinions

The conflict between Circuit Court opinions

alleged in the Petition is largely illusory and certainly

not worthy of this Court’s consideration.

Effective August 5, 1999, the 1999 Amendment

modified the first sentence of §1117(a) to distinguish

between a monetary claim for trademark infringe-

ment, which requires only “a violation,” and a mone-

tary claim for dilution, which requires “a willful

violation.” Because this case concerns only infringing

acts allegedly occurring before August 5, 1999, the

Ninth Circuit correctly held that cases interpreting

the effect of the 1999 Amendment have no relevance

to this matter, and Petitioner has not sought review

from that particular determination. Instead, Peti-

tioner asks the Court to reconcile a split of Circuit

Court case law that supposedly predates the 1999

Amendment. Disregarding the 1999 Amendment

Cases, it is clear that no such substantial or recurring

conflict exists.

For more than one century, this Court has held

firm to its rule that a grant of a writ of certiorari

shall involve only matters “of importance to the

public, as distinguished from that of the parties,” or

13

“cases where there is a real and embarrassing conflict

of opinion and authority between the Circuit Courts

of Appeals.” Layne & Bowler Corp. v. W. Well Works,

261 U.S. 387, 393 (1923).

Petitioner attempts to create an inference that a

real and embarrassing conflict of opinion exists

among federal appellate court opinions deciding

whether willfulness is required to order an award of

profits under §1117(a) for trademark infringement. To

do so, Petitioner relies primarily upon the 1999

Amendment Cases, which uniformly held that the

1999 Amendment Cases, which uniformly held that

the 1999 Amendment altered the preexisting per se

rule that willfulness is required for an accounting of

an infringer’s profits in a trademark infringement

action. In this case, however, Respondents voluntarily

ended all use of the M2: MUSIC TELEVISION name

and logo in March 1999, before the 1999 Amendment

became effective August 5, 1999. Thus, as the Ninth

Circuit held, Respondents’ conduct must be consid-

ered based upon the case law applying §1117(a) before

the 1999 Amendment took effect.

In cases involving allegedly infringing conduct

occurring before August 5, 1999, the Circuit Courts

almost uniformly followed the per se rule that an

accounting for trademark profits cannot be awarded

absent “willful” or “bad faith” infringement. See, e.g.,

Int'l Star Class Yacht Racing Ass’n v. Tommy Hilfiger,

U.S.A., Inc., 80 F.3d 749 (2d Cir. 1996) (“In order to

recover an accounting or an infringer’s profits, a

plaintiff must prove that the infringer acted in bad

14

faith”); Nalpac, Ltd. v. Corning Glass Works, 784 F.2d

752, 755 (6th Cir. 1986) (“an accounting, the proper

remedy when bad faith is shown, is inappropriate

where ‘there has been no showing of fraud or palming

off’”); Minn. Pet Breeders, Inc. v. Schell & Kampeter,

Inc., 41 F.3d 1242 (8th Cir. 1994) (an award of defen-

dant’s profits requires “willful, deliberate infringe-

ment or deception”); Lindy Pen Co. v. Bic Pen Corp.,

982 F.2d 1400 (9th Cir. 1993) (award of profits re-

quires “willful infringement”); Bishop v. Equinox Int'l

Corp., 154 F.3d 1220 (10th Cir. 1998) (an award of

profits requires proof that “defendant’s actions were

willful or in bad faith”); ALPO Petfoods, Inc. v. Ral-

ston Purina Co., 913 F.2d 95, 202 (D.C. Cir. 1990) (“an

award based on a defendant’s profits requires proof

that the defendant acted willfully or in bad faith”).

Although Petitioner claims that the Third, Fifth

Seventh and Eleventh Circuits applied a different

rule, this conflict is manufactured. With respect to

infringing conduct occurring before the 1999 Amend-

ment took effect, the Third and Fifth Circuits ex-

pressly required willfulness or bad faith as a

condition to an award of profits for trademark in-

fringement, and the Eleventh Circuit appears to have

applied the same rule for an award of profits under a

theory of unjust enrichment, which is the particular

accounting-for-profits claim in this case. See Secura-

Comm Consulting Inc. v. Securacom Inc., 166 F.3d

182, 190 (3d Cir. 1999) (holding that “a plaintiff must

prove that an infringer acted willfully before the

infringer’s profits are recoverable”); Pebble Beach Co.

15

v. Tour 18 I Ltd., 155 F.3d 526, 555 (5th Cir. 1998)

(absent “an intent to confuse or deceive, injunctive

relief satisfies the equities” in a case for federal

trademark infringement); Babbdit Elec., Inc. v. Dynas-

can Corp., 38 F.3d 1161, 1182 (llth Cir. 1994)

(“Where the defendant’s infringement is deliberate

and willful ..., an accounting for profits is proper

under a theory of unjust enrichment”).

The Seventh Circuit decisions predating the 1999

Amendment also do not evidence a “real or embar-

rassing conflict” of appellate case law. The Seventh

Circuit decision that supposedly rejected the per se

rule of willfulness is Huolo v. Russ Berrie & Co., Inc.,

886 F.2d 931 (7th Cir. 1989). In that case, the Seventh

Circuit stated that “there is no express requirement

[in the Lanham Act] ... that the infringer willfully

infringe ... to justify an award of profits” Jd. at 941.

Nevertheless, that statement was purely dicta, as the

Seventh Circuit in Ruolo noted that the defendant

was an intentional infringer and that plaintiff

claimed damages based upon its “actual losses rather

than on defendant’s profits.” Jd. Indeed, nothing in

Ruolo justifies dispensing with the per se rule that an

award of profits for federal trademark infringement

must be based upon willful or bad faith misconduct.

Likewise, considering every case repeating Ruolo’s

dicta, none of them affirms an award of an infringer’s

profits against a non-willful or bad faith infringer.

Because all of Respondents’ allegedly infringing

conduct occurred prior to the 1999 Amendment, the

bere

he b

16

Petition should be denied for the additional reason

that Petitioner cannot show a potentially recurring

conflict. Decisions whether to award an infringer’s

profits based upon infringing conduct occurring after

the 1999 Amendment necessarily must consider the

effect of the 1999 Amendment. Assuming, arguendo,

that a conflict of appellate court opinions did exist

prior to the 1999 Amendment, that conflict effects, at

most, only a few pending federal court cases in which

the defendant’s alleged infringement occurred prior to

the 1999 Amendment. That certainly does not impli-

cate a matter of “public importance,” distinct from the

parties, as would merit granting a writ.’ Layne, 261

U.S. at 393.

II. Petitioner Has Not Shown An Actual Or

Potential Conflict Among Appellate Court

Opinions Applying The 1999 Amendment.

A principal purpose for which this Court uses its

certiorari jurisdiction “is to resolve conflicts among

° Just two terms ago, the Court was presented with essen-

tially the same question arising from the same Circuit Court. In

Contessa Premium Foods, Inc. v. Berdex Seafood, Inc., No. 04-

1693, the plaintiff-petitioner sought for review of the Ninth

Circuit’s decision in that case applying the per se rule prohibit-

ing an award of the defendant’s profits based upon infringing

acts occurring prior to the 1999 Amendment. The Contessa

petitioner argued that a writ was necessary to resolve a conflict

of appellate court decisions applying §1117(a) to claims for

infringer profits in federal trademark cases. The Court denied

the petition. 546 U.S. 957 (2005). It should do the same in this

case.

17

the United States courts of appeals. ... concerning

the meaning of provisions of federal law.” Braxton v.

U.S., 500 U.S. 344, 347-349 (1991). However, “Con-

gress itself can eliminate a conflict concerning a

statutory provision by making a clarifying amend-

ment to the statute,” and where subsequent Congres-

sional acts have been undertaken “that will eliminate

circuit conflict,” a writ of certiorari should not be

granted. Id.

In this case, the 1999 Amendment is Congres-

sional action that appears to have eliminated any

alleged conflict among appellate court opinions. With

respect to infringing acts allegedly occurring after the

1999 Amendment, every reported federal appellate

court opinion that has considered the effect of the

1999 Amendment has held that the 1999 Amendment

evidences Congressional intent to dispense with the

per se rule that “willfulness” or “bad faith” is required

for an award of profits under §1117(a).

In Quick Technologies, Inc. v. Sage Group PLC,

313 F.3d 338 (5th Cir. 2002), the Fifth Circuit decided

the matter first. Relying upon the Congressional

intent that it found to be evidenced by the 1999

Amendment, the Fifth Circuit “decline[d] to adopt a

bright-line rule in which a showing of willful in-

fringement is a prerequisite to an accounting of

profits” in favor of a “factor-based approach” under

which “willful infringement is an important factor

which must be considered when determining whether

an accounting of profits is appropriate” for trademark

infringement. 7d. at 349. Notably, the Fifth Circuit

18

cautioned that, because “there were no references to

the term ‘willful’ in §1117(a)” before the 1999

Amendment, federal court appellate opinions apply-

ing §1117(a) to infringements occurring before the

1999 Amendments are of “limited utility” in deter-

mining whether an accounting of profits for a trade-

mark violation currently requires a willful or bad

faith infringement. Jd. at 348.

In Banjo Buddies, Inc. v Renosky, 399 F.3d 168

(3d Cir. 2005), the Third Circuit adopted the Fifth

Circuit’s “factor-based approach” for determining

“whether an accounting of profits is appropriate” for

trademark infringement. Jd. at 175. As did the Fifth

Circuit, the Third Circuit held that “[bly adding th[e]

word [willful] to the statute in 1999, but limiting it

to [§1125(c)] [dilution] violations, Congress effectively

superseded the willfulness requirement applied to

(§1125(a)] [trademark infringement violations].” Id.

at 174.

Finally, in Synergistic International LLC uv.

Korman, 470 F.3d 162 (4th Cir. 2006), the Fourth

Circuit joined the Third and Fifth Circuits in holding

that, “although willfulness is a proper and important

factor in an assessment of whether to make a dam-

ages award [under §1117(a)], it is not an essential

predicate thereto.” Jd. at 175. As the Fourth Circuit

explained, “[iJn light of ... [the 1999 Amendment],

. willfulness is not an essential prerequisite for

a damages award” for a trademark infringement

19

violation, although “it remains a highly pertinent

factor.” Id. at 175 n.13.

Likewise, the other cases cited in the Petition fail

to evidence a serious or real conflict of Circuit Court

opinions. Most of the decisions cited by Petitioner

were decided before the enactment of the 1999

Amendment, and those cannot establish a current

conflict. Moreover, the two cases that were decided

after the 1999 Amendment — Western Diversified

Services, Inc. v. Hyundai Motor America, Inc., 427

F.3d 1269 (10th Cir. 2005), and Kassbaum uv. Step-

penwolfe Productions, Inc., 236 F.3d 487 (9th Cir.

* Recent federal district court opinions follow the above

rulings and further show that a substantial conflict among

federal case law does not currently exist. This includes decisions

of District Courts in the Second, Eighth and Ninth Circuits. See,

e.g., Nike, Inc. v. Top Brand Co., Ltd., 2005 WL 1654859, *10

(S.D.N.Y. July 13, 2005) (“Without reason to believe that the

Congress intended to preserve the Second Circuit rule that

preceded the 1999 [A]mendment,” finding that “the plain

language of the statute should govern” and that a showing of

“bad faith or intentional misconduct” is not required “to recover

profits for [trademark] infringement”); Wildlife Research Center,

Inc. v. Robinson Outdoors, Inc., 409 F. Supp. 2d 1131, 1136 (D.

Minn. 2005) (despite Eighth Circuit precedent requiring “will-

fulness” for an accounting of profits for trademark violations,

agreeing with the Third and Fifth Circuit decisions that the

1999 Amendment “removes any willfulness requirement for

claims based on false or misleading advertising”), R & R Part-

ners, Inc. v. Tovar, 2007 WL 1202802, *1(D. Nev. April 23, 2007)

(agreeing with the Third Circuit in Banjo Buddies that the

“plain language” of the 1999 Amendment “effectively superseded

the willfulness requirement” for trademark infringement

claims).

20

2000) — concern only infringing conduct occurring

before the 1999 Amendment. See Western Diversified,

427 F.3d at 1271; Kassbaum, 236 F.3d at 490. Be-

cause no current conflict exists among opinions of the

federal appellate courts on the issue framed by Peti-

tioner, the writ should be denied.

Iil. The Discretionary Decision Of The Ninth

Circuit To Apply A Per Se Rule In This

Case Followed Established Supreme Court

Precedent.

Even assuming, arguendo, that the Ninth Cir-

cuit’s decision in this case evidences a conflict of

Circuit Court decisions deciding when an accounting

for profits may be awarded for allegedly infringing

conduct cccurring before the 1999 Amendment, the

circumstances of this case do not warrant review.

Regardless of dicta appearing in any other Circuit

Court opinion, the Ninth Circuit’s decision to reject

Petitioner’s claims for Respondent’s alleged profits

merely adheres to this Court’s precedent.

Since its adoption in 1946, the Lanham Act has

provided, pursuant to §1117(a), that an accounting

of defendant’s profits for trademark infringement

will be awarded upon proof of defendant’s infringe-

ment “subject to the principles of equity.” 15 U.S.C.

§1117(a). Although the Lanham Act does not define

these “principles of equity,” decisions of this Court do.

One such principle recognized by this Court is the

per se rule that an award of profits for trademark

21

infringement requires proof of willful or bad faith

misconduct. In McLean v. Fleming, 96 U.S. 245

(1878), applying federal common law equitable prin-

ciples, this Court held that, absent fraudulent intent,

“an account of gains and profits [for trademark in-

fringement] ... is constantly refused” “even where

the right of the party to an injunction is acknowl-

edged because of an infringement,” or when “the facts

proved render it proper to grant an injunction to

prevent future infringement.” Jd. at 258. Likewise, in

Saxlehner v. Siegel-Cooper Co., 179 U.S. 42 (1900),

this Court held that, under federal common law, an

“innocent” or “good faith” trademark infringer may be

enjoined from further infringement, but “not be

required to account for gains and profits.” Jd. at 42-

43.

Inasmuch as the Ninth Circuit merely followed

established Supreme Court precedent to decide which

“principles of equity” govern a §1117(a) request for

profits in trademark infringement case, no “compel-

ling reason” for review is shown. By its terms,

§1117(a) conveys discretion upon the federal courts to

decide when to award profits for trademark infringe-

ment. In this case, the Ninth Circuit was certainly

well within its discretion to enforce a per se rule

limiting an award of profits to cases in which the

allegedly infringing acts were willful or in bad faith.

The per se rule applied by the Ninth Circuit in this

case is the very same per se rule that this Court

uniformly applied when deciding trademark in-

fringement cases in equity under the common law.

22

It is also the same per se rule applied almost uni-

formly in Circuit Court opinions deciding whether a

defendant’s profits could be awarded under §1117(a)

for allegedly infringing acts occurring before the 1999

Amendment took effect. And as a matter of federal

court discretion, the Ninth Circuit’s decision to apply

a per se rule in this case is clearly not one in which

the Circuit Court “has so far departed from the ac-

cepted and usual course of judicial proceedings ... as

to call for an exercise of this Court’s supervisory

power.” S. Ct. R. 10(a). Under the circumstances of

this case, no compelling reason warrants granting a

WIrl*.

*

CONCLUSION

For the reasons stated, the petition for a writ of

certiorari should be denied.

Respectfully submitted,

LARRY W. MCFARLAND, Esq.

Counsel of Record

DaviIpD K. CAPLAN, Esq.

KEATS MCFARLAND & WILSON LLP

9720 Wilshire Blvd., Penthouse Suite

Beverly Hills, California 90212

Tel (310) 248-3830

Attorney for Respondents

la

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

M2 SOFTWARE INC., | No. 00-56426

a corporation, D.C. No. CV-98-08734-RAP

Plaintiff-Appellant, Central District of

uf California, Los Angeles

VIACOM INC., ORDER

a corporation, et al., (Filed Sep. 5, 2002)

Defendants-Appellees.

Before: PREGERSON, REINHARDT and SILVERMAN,

Circuit Judges.

We GRANT the parties’ joint request for clarifica-

tion of the court’s January 30, 2002 memorandum

disposition as follows: We reversed the grant of

summary judgment only on M2 Software’s federal

trademark infringement claim. No other claims were

specifically and distinctly argued in M2 Software's

opening brief, and thus any other claims were

waived. See Miller v. Fairchild Industries, Inc., 797

F.2d 727, 738 (9th Cir. 1986). The motion to withdraw

the mandate is DENIED.

2a

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

M2 SOFTWARE, INC., ) CASE NO.

Plaintiff, ) CV 98-8734 AHM (Mcx)

) ORDER GRANTING

DEFENDANTS’ MOTION

VIACOM, INC., et al., ) FOR SUMMARY ADJU-

Defendants, _) DICATION RE “MTV2”

) (Filed Aug. 9, 2004)

ve

This matter is before the Court on Defendants’

“Motion for Summary Adjudication With Respect to

the MTV2 Mark and Logo and For an Award of Attor-

neys’ Fees.” Defendants base their motion on five

main arguments: (1) that Plaintiff waived its claim

regarding MTV2 by encouraging Defendants to use

that mark and by failing raise the issue on appeal; (2)

that the MTV2 logo predates Plaintiff’s mark accord-

ing to the doctrine of tacking; (3) that the addition of

the number “2” to Defendants’ MTV mark is merely

descriptive; (4) that MTV2 constitutes classic fair use;

and :5) that there is no likelihood of confusion be-

tween the MTV2 logo and Plaintiff’s M2 mark. The

Court agrees with Defendants on their waiver and

estoppel by acquiescence arguments and finds it

unnecessary to address the remaining possible

grounds for summary adjudication. For the reasons

discussed below, the Court GRANTS Defendants’

Motion for Summary Adjudication.

3a

PROCEDURAL HISTORY

In July 2000, Judge Richard Paez granted sum-

mary judgment to Defendants, holding that Plain-

tiff’s “RLMS system [Record Label Management

System] is not related to defendants’ M2: Music

Television, there is no likelihood of confusion between

[sic] the source of the twe products ... [and] defen-

dants did not infringe plaintiff’s M2 trademark and

no reasonable jury could conclude otherwise.” M2

Software, Inc. v. Viacom, Inc., 119 F. Supp. 2d 1061,

1072 (CD. Cal. 2000) (“Judge Paez’s Order”).

In an unpublished memorandum disposition, the

Ninth Circuit reversed Judge Paez’s Order and re-

manded the case for trial. M2 Software, Inc. v. Via-

com, Inc., 30 Fed. Appx. 710 (9th Cir. 2002). The

Ninth Circuit held that Plaintiff’s trademark encom-

passed several CD-ROMs in addition to the RMLS

system and that “M2 Software has brought forth

sufficient evidence that ‘would permit a rational

factfinder to find a likelihood of confusion’... [be-

tween M2 Software’s music-industry products and]

Viacom’s M2: Music Television and [its] use of the M2

mark in connection with Intel’s Intercast Technology.”

Id. at 712.

The Ninth Circuit later clarified its memoran-

dum, stating that it was only addressing the federal

trademark infringement claim because that was the

only portion of Judge Paez’s Order that Plaintiff had

raised on appeal. Joint Status Report Re Ninth

Circuit’s Order (Sept. 24, 2002), Exh. A. Thus, the

4a

only remaining cause of action is the Lanham Act

claim for trademark infringement on a theory of

reverse confusion. 15 U.S.C. § 1114.

On March 12, 2004, this Court granted Defen-

dants’ Motion for Summary Adjudication of Issues as

to Damages and Attorneys’ Fees, but denied Defen-

dants’ Motion for Summary Judgment because in-

junctive relief was not moot. The Court’s Order only

addressed Defendants’ use of “M2: Music Television”

and did not find it necessary to rule on the availabil-

ity of relief regarding Defendants’ current MTV2 logo.

Order Denying Defs.’ Mot. for Summ. J. and Granting

Partial Summ. Adjudication (Mar. 12, 2004), 6 n.3.

At the Court’s suggestion, the parties attempted

to enter into a stipulated permanent injunction

regarding Defendants’ use of M2: Music Television.

Defendants proposed a permanent injunction provid-

ing, in relevant part:

4. Solely as a compromise in an effort to re-

solve this matter, Defendants agree, without

admitting any liability, not to use the specific

marks M2 or M2: MUSIC TELEVISION to

identify any of Defendants’ programming

services or to identify any of Defendants’ in-

teractive multimedia products; and

5. Defendants expressly reserve the right to

use any and all other names, marks, and

logos including, but not limited to, MTV,

MTV2, MTV: MUSIC TELEVISION and

MTV2: MUSIC TELEVISION, including,

without limitation, the MTV2 logo attached

5a

as Exhibit 1. Defendants further reserve the

right to change the name of their program-

ming service at any time to any name other

than M2: MUSIC TELEVISION.

Decl. of Larry W. McFarland in Supp. of Defs.’ Mot. to

Resubmit Their Previously Acted Upon Mot. for

Summ. J. or, in the Alternative, Mot. for Reconsidera-

tion Re Summ. J; Exh. 1. Plaintiff would not sign this

proposed injunction because “if agreed to by Plaintiff,

[it] would constitute Plaintiff's complete and conclu-

sive abandonment of all issues concerning the ‘M,,2’

logo currently being used by Viacom.” Pl.’s Opp’n to

Mot. to Resubmit Mot. for Summ. J., 4:8-16. Defen-

dants’ “Motion to Resubmit Their Previously Acted

Upon Motion for Summary Judgment or, in the Alter-

native, Motion for Reconsideration Re: Summary

Judgment,” essentially sought rulings that injunctive

relief regarding M2: Music Television is moot in light

of the proposed permanent injunction and that Plain-

tiff has no claim regarding MTV2 (arguing waiver,

tacking, descriptive use, and fair use). The Court

denied Defendants’ motion on June 16, 2004, instead

inviting Defendants to file a separate summary adju-

dication motion regarding MTV2 so that the parties

and Court would have a complete record on the issue.

FACTUAL BACKGROUND

The Court and the parties are already familiar

with the facts of this case based on Plaintiff’s De-

cember 1998 motion for a preliminary injunction and

the two previous summary judgment motions and the

6a

Court need not recount them except as they may bear

upon the analysis of this motion.

Defendants changed their logo from M2: Music

Television to MTV2 in March 1999 after Judge Paez

denied M2’s motion for a preliminary injunction.

From March 1999 through the present, Defendants

have changed their MTV2 logo three times. The three

iterations, which the Court will refer to as logos I, II,

and III, are as follows:

¢ Logol

¢ Logo Il

¢ Logo III

The following time line sets forth the significant

events relating to Defendants’ use of the MTV2 mark:

DATE EVENT CITE

3/28/98 | Plaintiff's counsel sends De-| Statement of Un-

fendants a cease and desist/disnuted Facts

letter regarding Defendants’ and Conclusions

use of the M2: Music Televi-|of Law (“SUF”),

sion mark. The letter states:|] 4

“M2 Software is prepared to

allow MTV a commercially

reasonable time to effect a

transition to a different mark

— MTV2 makes obvious

sense and would not cause

the same harm — but MTV

must start taking steps now.”

Ta

10/28/98

Plaintiff files Complaint

implying that “MTV2”

would not infringe: “Plain-

tiff M2 again assumed

that Viacom was instead

formulating a new name,

such as the ‘MTV2’ name

which Plaintiff's legal

counsel had suggested to

Viacom in Plaintiffs sec-

ond letter.”

Compl. J 23;

SUF ] 7.

1/4/99

At the hearing on Plain-

tiffs motion for a prelimi-

nary injunction, Plaintiffs

counsel states, “what’s

going to happen is they’re

going to change the name

over to what people would

normally expected, the

MTV 2, or whatever other

name.”

SUF {8

1/27/99

Judge Paez denies Plain-

tiffs motion for prelimi-

nary injunction, holding

that while Plaintiff had

shown a likelihood of

success on the merits, it

unnecessarily delayed in

seeking injunctive relief,

thereby rebutting any

presumption of irrepara-

ble harm.

Docket

8a

3/18/99 |Defendants change name|Caplan Decl.,

of their programming from|Exh. 7, 87:10-

M2: Music Television to|88:7

MTV2

5/99 Plaintiff's President|Escamilla Decl.,

testified that on this date|] 17

he first became aware of

MTV2 logo I

5/4/99 Plaintiff's counsel sends|SUF 49

Defendants a letter stating:

“While we are pleased that

defendants have decided to

transition away from using

M2 and toward using

MTV2 (a recommendation

that plaintiff made to your

clients long before this

litigation ensued), we do

not believe that we can

bring an end to the litiga-

tion unless and until de-

fendants compensate M2

Software, Inc. for its dam-

ages.”

5?/999 |Defendants change to a|Defs.’ Mot., 7:10

different MTV2 logo,

although it is not clear

whether it is logo II or

logo III.

9a

9/22/99

Plaintiff takes depositions

of six of Defendants’ rep-

resentatives, asking ques-

tions regarding the new

MTV2 logo, among other

topics. For example, in the

deposition of Eric Sher-

man, director of opera-

tions for-MTV2, Plaintiff’s

counsel asks:

Q: Would you agree with

me that the number 2 is

perhaps twice as large as

the letters T and V?

A: Yes.

SUF 4 12-13;

Caplan Decl.,

Exh. 7 (Sher-

man Depo.),

91:10-17.

10/4/99

Plaintiff files Opposition

to Defendants’ first motion

for Summary Judgment

before Judge Paez (“Paez

Opp’n”), analyzing’ the

Sleekcraft factors.

SUF § 15

In Plaintiff’s discussion of

the fourth factor, actual

confusion, Plaintiff argues

that a Stanford student

was confused even after

Defendants changed to

MTV2: “Defendants seek

to diminish the import of

Yaconelli’s confusion by

claiming that the

advertisement ran after

Paez Opp’n, 16

n.21

10a

they allegedly changed the

name of their channel from

M2 to MTV2. If anything,

this demonstrates the

magnitude and success of

Defendants’ advertising

efforts. Even months after

they have allegedly aban-

doned the M2 mark, the

public still associates the

mark with Defendants.”

In Plaintiff’s discussion of

the seventh factor, Defen-

dants’ intent, Plaintiff

argues that Defendant

should have chosen to use

MTV2, “the non-infringing

alternative,” from the

beginning.

Paez Opp’n,

19:22-26

In Plaintiff's discussion of

the eighth factor likelihood

of expansion of the product

lines, Plaintiff argues for

the first time in a footnote:

“ ... the new MTV2 logo,

particularly with its domi-

nant features of ‘M’ and ‘2’

(and subordinate feature

‘tv’) still causes a likelihood

of confusion, especially

following on the heels of

two-and-a-half years of

infringement of Plaintiff's

M2® mark.”

SUF 97 15; Paez

Opp’n, 20 n.26.

lla

5/00

Plaintiff's President

testified that on this date

he first became aware of

MTV2 logo II

Escamilla Dec.,

q 18

7/27/00

Judge Paez grants sum-

mary judgment to Defen-

dants, holding that no

reasonable jury could find

a likelihood of confusion

between Plaintiff's mark

and M2: Music Television.

The order does not discuss

MTV2; the introduction

merely states that

“[flollowing the denial of

the preliminary injunc-

tion, defendants changed

the logo of their new

programming service from

‘M2: Music Television’ to

‘MTV 2.”

M2 __ Software,

Inc., v. Viacom,

me TS: #.

Supp. 2d 1061

(C.D. Cal. 2000)

1/10/01

Plaintiff files Opening

Brief with the Ninth

Circuit concerning M2:

Music Television. Plaintiff

does not raise the MTV2

issue. In the _ portion

discussing the eighth

Sleekcraft factor (likeli-

hood of expansion of

product lines), Plaintiff

states: “The District Court

gave no_- consideration

SUF 4 17

12a

whatsoever to this factor,

saying that it considered

it, ‘moot, because [Viacom

has] stopped using the M2

mark in its programming

service. But, there still

existed the issue of

whether Viacom had ever

in the past infringed the

M2® mark by attaching

an identical ‘M2’ mark to a

product falling squarely

within M2’s ‘natural zone

of expansion.’ This ques-

tion was left unanswered

by the District Court.”

6/01 Plaintiff's President testified) Escamilla

that on this date he first|Decl., J 19

became aware of MTV2

logo III

11/5/01 |In oral argument before|/SUF 7 18.

the Ninth Circuit, when

asked what the remedy

would be for infringement,

Plaintiff's counsel an-

swered: “ ... actual dam-

age is one component,

defendants’ profits are

another component of it

... we are also entitled to

reasonable royalty that we

can prove through a pre-

ponderance of the evidence

l3a

for the use of the mark

during this period of time

from August 1, 1996

through the time that

they abandoned it in uh

beginning of 1999 um that

there was an infringement

period.” Plaintiff does not

argue that Defendants’

use of “MTV2” continues

to infringe.

1/30/02

Ninth Circuit reverses

Judge Paez, holding that

he should have considered

Plaintiffs CD-ROMs and

that “M2 Software has

brought forth sufficient

evidence that ‘would

permit a rational fact-

finder to find a likelihood

of confusion’... {between

M2 Software’s music-

industry products and]

Viacom’s M2: Music Tele-

vision and [its] use of the

M2 mark) in connection

with Intel’s Intercast

' Technology.”

M2 _ Software,

Inc., v. Viacom,

Inc., 30 Fed.

Appx. 710, 712

(9th Cir. 2002)

9/5/02

Ninth Circuit provides

clarification of its 1/30/02

Order, stating: “We re-

versed the grant of sum-

mary judgment only on

Joint Status

Report Re

Ninth Circuit's

Order (Sept.,

24, 2002), Exh.

A

l4a

M2 Software’s_ federal

trademark infringement

claim. No other claims

were specifically and

distinctly argued in M2

Software’s opening brief,

and thus any other claims

were waived. See Miller v.

Fairchild Industries, Inc.,

797 F.2d 727, 738 (9th Cir.

1986).”

SUMMARY JUDGMENT STANDARD

Federal Rule of Civil Procedure 56(c) provides for

summary judgment when “the pleadings, depositions,

answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is

no genuine issue as to any material fact and that the

moving party is entitled to judgment as a matter of

law.” The moving party bears the initial burden of

demonstrating the absence of a “genuine issue of

material fact for trial.” Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 256 (1986). A fact is material if it

could affect the outcome of the suit under the govern-

ing substantive law. Jd. at 248. The burden then

shifts to the nonmoving party to establish, beyond the

pleadings, that there is a genuine issue for trial.

Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).

“When the party moving for summary judgment

would bear the burden of proof at trial, it must come

forward with evidence which would entitle it to a

15a

directed verdict if the evidence went uncontroverted

at trial. In such a case, the moving party has the

initial burden of establishing the absence of a genu-

ine issue of fact on each issue material to its case.”

C.A.R. Transp. Brokerage Co., Inc. v. Darden Rest,

Inc., 213 F.3d 474, 480 (9th Cir. 2000) (citations

omitted). In contrast, when the nonmoving party

bears the burden of proving the claim or defense, the

moving party can meet its burden by pointing out the

absence of evidence from the nonmoving party. The

moving party need not disprove the other party’s

case. See Celotex, 477 U.S. at 325. Thus, “[s}ummary

judgment for a defendant is appropriate when the

plaintiff ‘fails to make a showing sufficient to estab-

lish the existence of an element essential to [his] case,

and on which [he] will bear the burden of proof at

trial.’” Cleveland v. Policy Mgmt. Sys. Corp., 526 U.S.

795, 805-06 (1999) (citing Celotex, 477 U.S. at 322).

When the moving party meets its burden, the

“adverse party may not rest upon the mere allega-

tions or denials of the adverse party’s pleadings, but

the adverse party’s response, by affidavits or as

otherwise provided in this rule, must set forth specific

facts showing that there is a genuine issue for trial.”

Fed. R. Civ. P. 56(e). Summary judgment will be

entered against the nonmoving party if that party

does not present such specific facts. Jd. Only admissi-

ble evidence may be considered in deciding a motion

for summary judgment. /d.; Beyene v. Coleman Sec.

Serv., Inc., 854 F.2d 1179, 1181 (9th Cir.1988).

16a

“(In ruling on a motion for summary judgment,

the nonmoving party’s evidence ‘is to be believed, and

all justifiable inferences are to be drawn in [that

party’s] favor.’” Hunt v. Cromartie, 526 U.S. 541, 552

(1999) (quoting Anderson, 477 U.S. at 255). But the

nonmoving party must come forward with more than

“the mere existence of a scintilla of evidence.” Ander-

son, 477 U.S. at 252. Thus, “[w]Jhere the record taken

as a whole could not lead a rational trier of fact to

find for the nonmoving party, there is no genuine

issue for trial.” Matsushita Elec. Indus. Co., Ltd. v.

Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citation

omitted).

DISCUSSION

I. Waiver of Issues

Defendants argue that Plaintiff’s counsel’s May

4, 1999 letter waived any arguments it may have had

regarding MTV2, which was reinforced by Plaintiff’s

failure to raise the MTV2 issues on appeal to the

Ninth Circuit. Plaintiff, on the other hand, contends

that it did not waive its right to challenge Defen-

dants’ use of MTV2 because the Ninth Circuit re-

versed Judge Paez’s order granting summary

judgment as to Plaintiff’s trademark claim. Pl.’s

Opp’n, 13:17-14:9.

A. Appellate Waiver

Generally, an issue will be considered on appeal

only if it was properly preserved for appeal in the

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district court and if the issue is “specifically and

distinctly” raised anc! argued in the opening appellate

brief. Singleton v. Wulff, 428 U.S. 106, 120 (1976);

Indep. Towers of Wash. v. Wash., 350 F.3d 925, 929-30

(9th Cir. 2003) (““7TOW”) (citations omitted); Fed. R.

App. P. 28(a)(9)(A). Any issue that the appellant fails

to argue on appeal is waived. Arpin v. Santa Clara

Valley Transp. Agency, 261 F.3d 912, 919 (9th Cir.

2001). If the appellant is challenging the district

court’s grant of summary judgment and the opening

“brief attacks only one of several bases of [the] dis-

trict court decision, appellant is deemed to have

waived the right to challenge the alternative bases of

the decision.” Goelz & Watts, Rutter Group Practice

Guide: Federal Ninth Circuit Civil Appellate Practice

§ 8:315 (The Rutter Group 2003); see, e.g., MacKay uv.

Pfeil, 827 F.2d 540, 542 (9th Cir. 1987).

B. Application to This Case

1. Proceedings Before Judge Paez

On October 4, 1999, Plaintiff filed a brief oppos-

ing summary judgment, arguing that Judge Paez

should not grant summary judgment to Defendants

because a reasonable jury could find a likelihood of

confusion between M2 and M2: Music Television. In

its Sleekcraft analysis, Plaintiff explained that even

though Defendants had changed their logo to MTV2,

actual confusion still existed:

Defendants seek to diminish the import of

Yaconelli’s confusion by claiming that the...

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advertisement ran after they allegedly

changed the name of their channel from M2

to MTV2. If anything this demonstrates the

magnitude and success of Defendants’ adver-

tising efforts. Even months after they have

allegedly abandoned the M2 mark, the public

still associates the mark with Defendants.

Paez Opp’n, 16 n.21. This language could reasonably

be construed to show that Plaintiff’s focus was on

“M2: Music Television.” To be sure, however, Plaintiff

also argued that the likelihood of expansion factor

weighed in its favor, explaining that:

... the new MTV2 logo particularly with its

dominant features of “M” and “2” (and sub-

ordinate feature “tv”) still causes a likelihood

of confusion especially following on the heels

of two-and-a-half years of infringement of

Plaintiff’s M2® mark.

Id. at 20 n.26.

Judge Paez did not expressly address these

arguments regarding MTV2, but he did grant sum-

mary judgment to Defendants, holding that no rea-

sonable jury could find a likelihood of confusion

between the parties’ marks. Judge Paez found that

five out of the eight Sleekcraft factors weighed in

favor of Defendants, including actual confusion and

the likelihood of expansion, the two factors in relation

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to which Plaintiff made the MTV2 arguments. See M2

Software, 119 F. Supp. 2d at 1070.’

2. Proceedings on Appeal

Although Plaintiff arguably raised the MTV2

issue at the district court level, Plaintiff subsequently

waived the issue by failing to “specifically and dis-

tinctly” raise it in its Opening Brief before the Ninth

Circuit. JTOW, 350 F.3d at 929. On appeal, Plaintiff

argued that Judge Paez should not have granted

summary judgment because the M2 trademark

’ Plaintiff suggests that Judge Paez’s ruling could not have

encompassed the MTV2 issues because the parties and Judge

Paez did not know of MTV2 logos II and III. Pl.’s Opp’n, 13:22-

26. There is no support for this contention. First, even if it were

true that only logo I was known at the time, Plaintiff's consumer

confusion/dominant M and 2” argument regarding logo I is the

same argument it now makes in relation to MTV2 logo III. See

Pl.’s Opp’n, 6:12-15, 9:13-21. Second, there is little difference

between the three MTV2 logos — all contain the MTV logo with a

block numeral 2 of approximately equal size to the MTV logo.

The main differences between the logos are whether the MTV

and numeral two are arranged vertically or horizontally,

whether the MTV logo is encompassed in a circle, and whether

the MTV is black or white. Third, there is simply no support for

Plaintiffs argument that it only knew of logo I at the time of

Judge Paez’s summary judgment. During Plaintiffs August 3,

1999 deposition of Eric Sherman, MTV2 director of operations,

counsel asked questions regarding “what we believe to be the

new MTV2 logo.” Caplan Decl., Exh. 7 (Sherman Depo.), 90:13-

15. It is clear that Plaintiff's counsel was referring to either logo

II or logo III because counsel refers to a vertical line separating

the MTV logo and the numeral 2, not a horizontal line like logo I

used. Id. at 90:13-91:9.

20a

applies to its CD-ROMs in addition to its RMLS

software and because “Viacom’s use of the M2 mark

created a likelihood of confusion.” M2 Software, 30

Fed. Appx. at 712. It is not clear what specific argu-

ments Plaintiff made in favor of overturning Judge

Paez’s Sleekcraft analysis or whether it may have

simply been premised on his failure to include the

CD-ROMs in that analysis. The Ninth Circuit’s

Memorandum never refers to the “MTV2” logo; it only

speaks of the “M2: Music Television” logo. Plaintiff

did not argue on appeal that Judge Paez’s likelihood

of confusion analysis was erroneous because it failed

to address Plaintiff’s arguments regarding actual

confusion or a likelihood of expansion based on De-

fendants’ use of the MTV2 logo. In fact, Defendants

have demonstrated that Plaintiff me rely argued that

Judge Paez erred only in the following manner:

The District Court gave no consideration

whatsoever to [the likelihood of expansion]

factor, saying that it considered it, ‘moot, be-

cause [Viacom has] stopped using the M2

mark in its programming service.’ But, there

still existed the issue of whether Viacom had

ever in the past infringed the M2® mark by

attaching an identical ‘M2’ mark to a product

falling squarely within M2’s ‘natural zone of

expansion.’ This question was left unan-

swered by the District Court.

SUF 417 (emphasis added). Plaintiff argued that

Judge Paez should have found that Defendants had

used the “M2: Music Television” mark on a product

within Plaintiff’s zone of expansion, not that Judge

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Paez should have also found that the infringement

was ongoing through Defendants’ use of the “MTV2”

logo. Thus, Plaintiff waived its arguments here

regarding MTV2 by failing to raise them as an alter-

native basis for reversing Judge Paez’s grant of

summary judgment.’ See MacKay, 827 F.2d at 542; see

also Joint Status Report Re Ninth Circuit’s Order

(Sept. 24, 2002), Exh. A (Ninth Circuit clarification)

(claims not “specifically and distinctly argued” are

waived).

3. Conclusion

Plaintiff’s failure to raise its arguments regard-

ing MTV2 on appeal is sufficient on its own to man-

date summary adjudication for Defendants.

Nonetheless, the Court will address Defendants’

contentions regarding acquiescence to provide guid-

ance to the parties and facilitate resolution of this

case.

* The Court’s conclusion that Plaintiff waived its arguments

regarding “MTV2” is also supported by the Ninth Circuit oral

arguments. Plaintiff referred to Defendants’ pre-1999 logo as the

basis for damages. SUF 9 18. Plaintiff now argues that this

remark is taken out of context and the MTV2 infringement issue

was still alive since Plaintiff only referred to the pre-1999

conduct as “an infringement period.” (emphasis added). State-

ment of Genuine Issues (“SGI”) J 18. Plaintiff does not, however,

provide any other portions of the oral appellate argument that

put that statement in context or that show Plaintiff did raise the

MTV2 issue.

22a

II, Estoppel by Acquiescence

Defendants also argue that Plaintiff is estopped

from arguing that the MTV2 logo infringes its M2

mark because it actively encouraged Defendants to

use MTV2 and then delayed in asserting its claims

against MTV2. Plaintiff, on the other hand, contends

that it only encouraged Defendants to use an MTV2

logo with letters of equal size and that it did not delay

in asserting its rights once it became aware of Defen-

dants’ MTV2 logo that uses a dominant “M” and

dominant “2.”

A. Legal Standard

Estoppel by acquiescence is an equitable defense

to a claim of trademark infringement. E. & J. Gallo

Winery v. Gallo Cattle Co., 967 F.2d 1280, 1294 (9th

Cir. 1992). Acquiescence applies “in those cases where

the trademark owner, by affirmative word or deed,

conveys its implied consent to another.” 5 McCarthy

on Trademarks and Unfair Competition § 31:41 (4th

ed. 2004). The accused infringer must prove three

elements to establish estoppel by acquiescence: “(1)

the senior user actively represented that it would not

assert a right or claim; (2) the delay between the

active representation and assertion of the right or

claim was not excusable; and (3) the delay caused the

defendant undue prejudice.” SunAmerica Corp. v.

Sun Life Assurance Co. of Can., 77 F.3d 1325, 1334

(llth Cir. 1996). The first element is satisfied by

“conduct on the plaintiff’s part that amounts to an

23a

assurance to the defendant, express or implied, that

the plaintiff would not assert his trademark rights

against the defendant.” ProFitness Physical Therapy

Ctr. v. Pro-Fit Orthopedic and Sports Physical Ther-

apy P.C., 314 F.3d 62, 68 (2nd Cir. 2002) (quotes and

citations omitted). Acquiescence does not extend,

however, “to a use that has not yet materialized and

is not foreseeable.” Id. at 69.

B. Application to This Case

First, Plaintiff actively represented that it would

not assert a claim against Defendants’ use of MTV2

on at least four occasions before it waived the issue

on appeal. SUF 7 4 (Mar. 28, 1998 cease and desist

letter), | 7 (Compl. { 23), 1 8 (Jan. 4, 1999 prelimi-

nary injunction hearing), 19 (May 4, 1999 letter).

Plaintiff argues that it never suggested that Defen-

dants’ MTV2 logos were acceptable and that it merely

proposed that Defendants use ‘MTV2’ — all capitals

and all the same size.” Pl.’s Opp’n, 11:9-15. Essen-

tially, Plaintiff contends that it could not consent to

an MTV2 logo that it had not seen or anticipated.

None of Plaintiff’s representations, however, contains

any limitation regarding letter size and it was rea-

sonably foreseeable that the “MTV” portion of the

logo would look much like the MTV mark Defendants

had used since the 1980s on their original cable

television station. Cf. ProFitness, 314 F.3d at 69.

Moreover, Plaintiff’s counsel was aware of the actual

MTV2 logo Defendants were using when he sent the

May 4, 1999 letter stating:

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While we are pleased that defendants have

decided to transition away from using M2

and toward using MTV2 (a recommendation

that plaintiff made to your clients long before

this litigation ensued), we do not believe that

we can bring an end to the litigation unless

and until defendants compensate M2 Soft-

ware, Inc. for its damages.

SUF 9 9; see also Escamilla Decl., 9 17.° Plaintiff’s

repeated statements that MTV2 would be an accept-

able alternative for Defendants to use implied active

consent.

Second, Plaintiff waited until its October 1999

Opposition brief to assert, for the first time, that

Defendants’ MTV2 logo was unacceptable and contin-

ued to infringe upon its trademark. Plaintiff delayed

18 months from the March 1998 cease and desist

letter to assert its claim, delayed over six months

from the time Defendants began using the MTV2

logo, and delayed five months from the first date the

evidence shows that Plaintiff was aware of Defen-

dants’ MTV2 logo. Plaintiff offers no excuse for its

delay, except to say that it did not know that the new

“MTV2” logo would include a dominant “M” and “2,”

an argument that fails for the reasons explained in

the previous paragraph.

* For the reasons discussed in footnote 2, supra, it is

irrelevant whether Defendants were using MTV2 logo I, II, or II]

at the time of the May 4, 1999 letter.

25a

Third, the circumstances strongly suggest that

Defendants relied on Plaintiff’s representations that

MTV2 would be an acceptable logo when Defendants

changed their mark from M2: Music Television to

MTV2. While Defendants do not explicitly argue

reliance, it is implicit in the time line of events.

Defendants changed their logo to MTV2 in March

1999, within one year of Plaintiff’s repeated recom-

mendation that they use MTV2. The change also

came just a few months after Plaintiff argued during

the hearing on its motion for a preliminary injunction

that Defendants should change to MTV2. Moreover,

Defendants continued to use the MTV2 logo after

receiving Plaintiff's counsel’s May 4, 1999 letter

commending Defendants’ decision to change logos.

Thus, Defendants are also entitled to summary

adjudication regarding MTV2 on the basis of estoppel

by acquiescence.

III. Other Arguments Regarding MTV2

Defendants also argue that they are entitled to

summary adjudication regarding their use of MTV2

because it predates Plaintiff’s mark through the

doctrine of tacking, because the addition of the num-

ber “2” to Defendants’ MTV mark is merely descrip-

tive, because MTV2 constitutes classic fair use; and

because there is no likelihood of confusion between

the MTV2 logo and Plaintiffs M2 mark. The Court

declines to address these issues since the Court has

already found that Defendants are entitled to summary

26a

adjudication on the bases of waiver and estoppel by

acquiescence.

IV. Attorneys’ Fees

Defendants seek attorneys’ fees and costs related

to their lengthy defenses against Plaintiff’s MTV2

trademark infringement arguments. Defs.’ Mot.,

15:28-16:17. The Lanham Act gives courts the author-

ity to award reasonable attorneys’ fees to the prevail-

ing party in “exceptional circumstances.” 15 U.S.C.

§ 1117(a). Attorneys fees are warranted if “a plain-

tiff’s case is groundless, unreasonable, vexatious, or

pursued in bad faith ... ” Stephen W. Boney, Inc. v.

Boney Servs., Inc., 127 F.8d 821, 827 (9th Cir. 1997).

Defendants contend that “Plaintiff’s argument re-

garding MTV?2 is all of these things.” Defs.’ Mot., 16:2-

3. The Court denies Defendants’ request for attorneys’

fees because the Lanham Act commits attorneys’ fees

to the discretion of the court and Plaintiff has not met

its burden of showing that this is an “exceptional”

case. See Gracie v. Gracie, 217 F.3d 1060, 1071 (9th

Cir. 2000); Stephen W. Boney, 127 F.3d at 827.

CONCLUSION

For the foregoing reasons, the Court hereby

GRANTS Defendants’ Motion for Summary Adjudica-

tion With Respect to the MTV2 Mark and Logo and

DENIES Defendants’ Motion for an Award of Attorneys’

27a

Fees.‘ In light of this Order and the Court’s March 12,

2004 Order, the Court directs Defendants to lodge a

proposed consent judgment of permanent injunction

consistent with what they had previously proposed

and the Court will enter it.

This Order is not intended for publication.

IT IS SO ORDERED.

DATE: August 9, 2004 /s/ A. Howard Matz

A. Howard Matz

United States District Judge

* Docket No. 327.

28a

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES - GENERAL

Case

No. CV 98-8734-AHM (Mcx) Date September 28, 2007

Title M2 SOFTWARE, INC. v. VIACOM, INC., et al.

Present: The Honorable A. Howard Matz

Stephen Montes N/A

Deputy Clerk Court Report/Recorder Tape No.

Attorneys Present for Attorneys Present for

Plaintiffs: Defendants:

No Appearance No Appearance

Proceedings: In Chambers

On June 11, 2007, defendants represented that

they would serve a Rule 68 Offer of Judgment and in

a separate document filed that day plaintiff intimated

that it would accept such a basis for settlement. The

docket does not reflect that such an exchange has

occurred.

Accordingly, the Court now clarifies that the

Permanent Injunction and Final Judgment entered

on September 8, 2004 should be deemed to extend to

Viacom’s future use of the “M2: MUSIC TELEVI-

SION” logo, attached as exhibit 2 to that judgment.

Phrased another way, that logo does not fall within

the scope of paragraph 2 (on page 4) of the Perma-

nent Injunction and Final Judgment.

29a

The above clarification necessarily means that

this case may be closed, pursuant to the terms of the

September 7, 2004 Permanent Injunction and Final

Judgment, which is incorporated herein by reference.

That Judgment shall govern the parties’ rights and

obligations.

Initials of Preparer SM

THIS CONSTITUTES NOTICE OF ENTRY AS

REQUIRED BY FRP, RULE 77(d)