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

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No. 07-202

IN THE

FILED

OCT 31 2007

OFFICE OF THE CLERK

SUPREME COURT, U.S.

Supreme Court of the Gnited States

M2 SOFTWARE, INC.,

Petitioner,

Vv.

VIACOM, INC.; VIACOM INTERNATIONAL, INC.;

MTV NETWORKS COMPANY,

Respondents.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Ninth Circuit

REPLY FOR PETITIONER

JEFFREY A. LAMKEN

Counsel of Record

BAKER Botts L.L.P.

1299 Pennsylvania Ave., NW

Washington, D.C. 20004-2400

(202) 639-7700

Counsel for Petitioner

Cian ARERR RSL oT SOL A RMI = NORE TI AREER OER AERO AIOE REE AUER IR OE ESE OE NUE

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 -— WasninGcTon, D.C. 20001

TABLE OF CONTENTS

I. The Courts Of Appeals Are Divided On

Whether Willfulness Is An Across-The-

Board Prerequisite To An Award Of An

SNE We Be a scciscentvctniniorniasidaadpesdiescecerscnvese 2

II. Respondents Err In Asserting That The

Ninth Circuit Had “Discretion” To Apply A

TEI TIENT. Siciivingaiscisctacistebseinnckogripsalasreupesainmacict 10

(i)

ii

TABLE OF AUTHORITIES

Page

CASES

Babbit Electronics, Inc. v. Dynascan

Corp., 38 F.3d 1161 (11th Cir. 1994)................ 4

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

FO Es ITED wecniecienntivecicovbistinrtternrcssvensevceoes 9

Blau v. YMI Jeanswear, Inc., No. CV 02-

09551 FMC (SHSx), 2004 WL 5313967

CET EF. GAs PUNEs Bee BED wetectenvccscccscssoccsscoveceveocees 6

Brookfield Comme’ns, Inc. v. W. Coast

Entm't Corp., 174 F.3d 1036 (9th Cir.

a cconieunetesennriete 8,9

Burger King Corp. v. Mason, 855 F.2d

AE A Es FT sekassenisvecvncchesseevcesevezcoorcecoveres 4

Cache la Poudre Feeds, LLC v. Land O’

Lakes, Inc., 438 F. Supp. 2d 1288 (D.

SN I ilsteds ics despdscmscnacnabedaisetersoneseveceesones 6

Champion Spark Plug v. Sanders, 331

a staneennvonengen 10

Collegenet, Inc. v. XAP Corp., 483 F.

Supp. 2d 1058 (D. Ore. 2007) ...........ccccsceseseeeees 6

Malletier v. Dooney & Bourke, Inc., 500

F. Supp. 2d 276 (S.D.N.Y. 2007) ..........scereesees 6,7

McLean v. Fleming, 96 U.S. (6 Otto) 245

hha cee irks ceecidahncpiecbiecineeotovesvecess 10

Pebble Beach Co. v. Tour 18 Ltd., 155

F.3d 526 (5th Cir. 1998).........ccccccccserscssesesereeseee 3

Quick Techs., Inc. v. Sage Group PLC,

313 F.3d 338 (Sth Cir. 2002).......ccccccscscssrcecsecess 9

TABLE OF AUTHORITIES—Continued

Page

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

(7th Cir. 1989), cert. denied, 493 U.S.

EE Ce itticdciptechisntitsiniitiiaieceimmicnoinnenennes 4

Sands, Taylor & Wood Co. v. Quaker

Oats Co., 34 F.3d 1340 (7th Cir. 1994)............. 4

Saxhelhner v. Siegel-Cooper Co., 179 US.

STATUTES

The Lanham Trademark Act of 1946,

codified as amended 15 U.S.C. §§ 1051,

MISCELLANEOUS

D. Conway-Jones, Remedying Trademark

Infringement: The Role of Bad Faith in

Awarding an Accounting of Defendant’s

Profits, 42 Santa Clara L. Rev. 863

++ SAPS RORRranD Bite Nes na Ue eo Enis ciadidsintinestossaes 2

J. Koelemay, A Practical Guide to

Monetary Relief in Trademark

Infringement Cases, 85 Trademark Rep.

D. Long, Unfair Competition and the

Lanham Act, § 7.11.3.3 (1998).........sscescessesseres 2

K. Stolte, Remedying Judicial Limitations

on Trademark Remedies: An

Accounting of Profits Should Not

iv

TABLE OF AUTHORITIES—Continued

| Page

Require a Finding of Bad Faith, 87

Trademark Rep. 271 (1997) ............cccssssseresseees 10

5 J. Thomas McCarthy, McCarthy on

Trademarks and Unfair Competition

© Fe CI OE FO ei sieisicecssntctsensstivicriennsnsece 3

IN THE

Supreme Court of the United States

No. 07-202

M2 SOFTWARE, INC.,

Petitioner,

Vz

VIACOM, INC.; VIACOM INTERNATIONAL, INC.;

MTV NETWORKS COMPANY,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

REPLY FOR PETITIONER

Respondents urge that the courts of appeals are not

divided on when an award of profits is permissible under

the Lanham Act. In particular, they claim that, until

1999, the courts of appeals “almost uniformly” held that

an award of infringer’s profits is impermissible “absent

‘willful’” infringement. Br. in Opp. 18. They claim that,

after 1999, the courts (with equal uniformity) adopted

precisely the opposite view—rejecting the per se willful-

ness requirement—in light of the 1999 amendments to

the Act. Jd. at 17. And respondents urge that this case

does not present a recurring issue because it is governed

by the pre-1999 version of the Lanham Act.

Each of those contentions is incorrect. The division in

court of appeals authority is longstanding and well

recognized; respondents simply ignore the conflicting

authorities as well as myriad sources expressly recog-

nizing the conflict. Respondents likewise fail to explain

2

why the 1999 amendments, which made no substantive

change to the law, should make a difference. And this

case is not governed by the pre-1999 version of the

Lanham Act. To the contrary, while respondents claim

that all of the relevant conduct terminated “before the

1999 Amendment became effective August 5, 1999,” Br.

in Opp. 13, the district court specifically rejected that

assertion. The petition thus presents a square conflict in

circuit authority that warrants this Court’s review.

I. The Courts Of Appeals Are Divided On Whether

Willfulness Is An Across-The-Board Prerequisite

To An Award Of An Infringer’s Profits

A. Respondents first argue that the courts of appeals

have never been divided on whether a finding of

willfulness is a prerequisite to an award of some or all of

the infringer’s profits traceable to the infringement.

According to respondents, until Congress amended the

Lanham Act effective August 5, 1999, “the Circuit Courts

almost uniformly followed [a] per se rule that an account-_

ing for trademark profits cannot be awarded absent

‘willful’ or ‘bad faith’ infringement.” Br. in Opp. 13-14.

Respondents, however, nowhere explain why every single

authority to have examined the issue has come to pre-

cisely the opposite review. See Pet. 19-20. Commentator

after commentator has recognized that, contrary to

respondents’ claims, “[t]here is an established split in the

circuits regarding the type of proof necessary to obtain

an accounting of the defendant’s profits.” D. Long, Un-

fair Competition and the Lanham Act § 7.11.3.3 (1993).

“On the key issue of scienter, a clear split has developed

among the Circuits *** .” J. Koelemay, A Practical

Guide to Monetary Relief in Trademark Infringement

Cases, 85 Trademark Rep. 263, 263 (1995); see D.

Conway-Jones, Remedying Trademark Infringement:

The Role of Bad Faith in Awarding an Accounting of

Defendant’s Profits, 42 Santa Clara L. Rev. 863, 864

3

(2002) (“[N Jearly five decades of circuit court and district

court decisions have resulted in a schizophrenic view

*** _”). As Professor McCarthy explains, by 2005, “a

split of authority developed such that while most circuits

required some showing of willfulness” others “held that

while relevant, wiilfulness was not essential or indispen-

sable to a recovery of profits.” 5 J. Thomas McCarthy,

McCarthy on Trademarks and Unfair Competition

§ 30:62, at 30-142 to 30-143 (4th ed. 2007); see Pet. 19-20

(additional cites). Respondents do not address those

authorities—all cited in the petition—much less identify

any to support their opposing view.

The cases likewise belie respondents’ claim of harmo-

nious consistency. Respondents correctly note that many

courts of appeals (like the Second, Sixth, Eighth, and

Tenth Circuits, joined by the Ninth Circuit below) have

adopted a per se requirement of bad faith. Br. in Opp. 13-

14, But myriad courts have long rejected that approach.

Thus, while respondents claim that the Fifth Circuit

“expressly required willfulness or bad faith as a condition

to an award of profits,” Br. in Opp. 14, the very Fifth

Circuit case they cite disclaims any such requirement:

“{T}his Court has not required a particular factor to be

present * ** .” Pebble Beach Co. v. Tour 18 I Lid., 155

F.3d 526, 554 (5th Cir. 1998) (emphasis added). To the

contrary, Pebble Beach explains that district courts must

look to a range of “relevant factors,” including not just

“intent” but also “diverted sales,” “adequacy of other

remedies,” “unreasonable delay by the plaintiff,” and

_ “the public interest.” Ibid.’

‘ Respondents’ description of Pebble Beach in a parenthetical (Br. in

Opp. 15) thus is incorrect. After denying that any particular factor is

a prerequisite, and listing “relevant” factors, the court merely

concluded that, in light-of the relevant factors, the district court had

not “abused its discretion” in denying profits “in th[{at] case” because

willfulness was absent, no injury was imposed, and injunctive relief

4

Respondents, moreover, do not attempt to distinguish

the Eleventh Circuit’s decision in Burger King Corp. v.

Mason, 855 F.2d 779 (1988), cited Pet. 18. That case’s

holding is clear: “Nor is an award of profits ***

dependent upon a higher showing of culpability on the

part of the defendant *** .” Jd. at 781; see id. at 783

(“[N]o hard and fast rules dictate the form or quantum of

relief”). And respondents wholly ignore the Seventh

Circuit’s decision in Sands, Taylor & Wood v. Quaker

Oats Co., 34 F.3d 1840, 1849 (1994) (Sands IJ), which .

unambiguously holds that, “{o]ther than general equita-

ble considerations, there is no express requirement that

*** the infringer wilfully infringe *** to justify an

award of profits.” Thus, while respondents labor to dis-

miss Roulo v. Russ Berrie & Co., 886 F.2d 931, 941 (7th

Cir. 1989), cert. denied, 493 U.S. 1075 (1990), as dictum,

see Br. in Opp. 15, the petition relies on Sands II, not

Roulo. See Pet. 13-14. Ignoring contrary precedents like

Burger King and Sands IT does not make them go away.

was otherwise sufficient. 155 F.3d at 555. Here, no court has found

that an injunction, entered after years of infringement and litigation,

is sufficient recompense; nor has any court found that respondents

were not unjustly enriched by their infringement. To the contrary,

respondents appropriated M2 Software’s protected mark to promote

their product for years on end precisely because it was, in their view,

better than the non-infringing alternatives. Pet. 7. In any event, far

from supporting a per se bad faith prerequisite, Pebble Beach

rejected that approach, requiring district courts to exercise their

discretion in light of a variety of factors.

* Although respondents cite Appendix A to Babbit Electronics, Inc.

v. Dynascan Corp., 38 F 3d 1161 (11th Cir. 1994), as contrary author-

ity, the district court decision reproduced with approval by the

Eleventh Circuit there merely heid willfulness was a sufficient basis

for an award of profits: “Where the defendant’s infringement is

deliberate and willful, as in this case, an accounting for profits is

proper ***.” Jd. at 1182. It nowhere suggests (contrary to Burger

King) that willfulness is a necessary condition to an award of profits.

5

Respondents also decline to engage the merits—and

with reason: The approach adopted by the Fifth, Sev-

enth, and Eleventh Circuits is correct. As the petition

explains (and respondents do not dispute), the Lanham

Act expressly distinguishes among the mental states re-

quired for various types of relief. For example, 15 U.S.C.

§ 1114(1) has long precluded monetary relief for viola-

tions of Section 1114(1)(b)—but not Section 1114(1)(a)—

absent proof of “knowledge” that the imitation was “in-

tended to be used to cause confusion, or to cause mistake,

or to deceive.” Pet. 5, 21-22. More important for present

purposes, for more than a decade the Lanham Act pro-

visions addressing dilution, 15 U.S.C. §1125(c), have

specified that no monetary relief for dilution is available

unless the defendant “willfully intended to trade” on the

plaintiff’s reputation or “willfully intended to harm” the

mark’s reputation. 15 U.S.C. § 1125(c) (emphasis added);

see Pet. 14-15, 20-21. By contrast, Congress included no

willfulness requirement for other Lanham Act claims,

such as those at issue here. The deliberate inclusion of a

willfulness requirement for dilution under Section

1125(c), but not for other claims, speaks volumes about

Congress’s intent. Simply put, where Congress wanted

willfulness to be an absolute prerequisite for certain

types of relief, it said so expressly. Pet. 15, 20-21. Re-

spondents again offer no answer—because none exists.

B. Alternatively, respondents urge that review is un-

warranted because a 1999 amendment to the Act “ap-

pears to have eliminated any alleged conflict among

appellate court opinions.” Br. in Opp. 17. But respon-

dents do not claim that their view has been confirmed.

Instead, respondents assert that the 1999 amendment

has caused the courts universally to reject the per se

willfulness requirement to adopt M2 Software’s position

that no such requirement exists.

6

As an initial matter, that claim is difficult to reconcile

with the Ninth Circuit’s decision below, which rejected

the assertion that the 1999 amendments “expand[ed] the

remedies available for violations of § 1114 by negating

the willfulness requirement” as resting on a “shaky

assumption.” Pet. App. 4a. It is also hard to reconcile

with myriad cases—cited in the petition (at 18-19 n.10)

but ignored by respondents—which continue to apply a

per se willfulness requirement despite the 1999 amend-

ments.’ And the rampant confusion continues to this day,

with still more cases applying the per se willfulness re-

quirement despite respondents’ claim of settled uniform-

ity. See, e.g., Malletier v. Dooney & Bourke, Inc., 500 F.

Supp. 2d 276, 279-281 (S.D.N.Y. 2007) (holding that, “in

order to justify an award of profits, a plaintiff must

establish that the defendant engaged in willful decep-

tion,” and declaring that “the 1999 Amendment” to the

Janham Act “did not alter” or seek to “overturn the

weight of authority” on that issue).

Nor do respondents anywhere explain why the 1999

amendment to the Lanham Act can be read to change the

Act’s meaning. As the petition explains (at 24-25), that

amendment changed the language of 15 U.S.C. § 1116

(addressing injunctions) and §1117 (addressing mone-

tary relief) to incorporate the standards for relief

already set forth for dilution claims under 15 U.S.C.

§ 1125(c). Given that the 1999 amendment made no sub-

stantive changes to the law—and merely repeated in Sec-

* See, e.g., Collegenet, Inc. v. XAP Corp., 483 F. Supp. 2d 1058, 1065

(D. Ore. 2007) (plaintiff must establish “willful misconduct” to

recover profits); Cache la Poudre Feeds, LLC v. Land O’ Lakes, Inc.,

438 F’. Supp. 2d 1288, 1291 (D. Colo. 2006) (Tenth Circuit precedent

“require[s] a showing that Defendant{’s] actions were willful”); Blau

v. YMI Jeanswear, Inc., No. CV 02-09551 FMC (SHSx), 2004 WL

5313967, at *6 (C.D. Cal. Jen. 2, 2004) (profits available only when

infringement is “willfully calculated”).

7

tions 1116 and 1117 the standards for relief for dilution

claims already set forth in Section 1125‘—it is hard to see

how it could be said to have revolutionized the law in this

area. See Malletier, 500 F. Supp. 2d at 282 (finding the

argument that the 1999 amendment to Section 1117

changed anything “not persuasive” because, “at the time

of the 1999 Amendment, the language of section 1125(c)

explicitly required” proof of “willfulness in order to re-

cover monetary relief on a dilution claim”). Respondents

again offer no answer whatsoever.

C. In any event, if respondents were correct that the

1999 amendments clarify that there is no per se require-

ment, that would favor granting the petition (or summary

reversal). Although respondents claim that this case

must be decided “based upon the case law applying” the

Lanham Act “before the 1999 Amendment” because they

“voluntarily ended all use of the M2: MUSIC TELE-

VISION name and logo in March 1999,” Br. in Opp. 13,

those contentions are factually and legally unfounded.

First, the district court expressly rejected respon-

dents’ factual claim that their infringing conduct ended in

1999. See Pet. App. 20a. Seeking to convince the district

court that there was “no longer any need for or basis for

an injunction” in 2004, respondents made the very same

* Before 1999, Section 1116 did not state that injunctive relief was

available for dilution claims under Section 1125(c), even though

Section 1125(c) itself provided for that relief. Pet. 24-25. The 1999

amendments conformed Section 1116 to Section 1125(c) by adding

Section 1125(c) dilution claims to the list of claims for which

injunctive relief is available. Jbid. Likewise, in 1994, Section 1117

did not mention monetary relief for dilution claims. But even then

Section 1125(c) made it clear that monetary relief was available for

claims of willful dilution—and only claims of willful dilution. See Pet.

5 n.2, 24-25. Accordingly, the 1999 amendments merely modified

Section 1117 to conform it to the standards for monetary relief

already set forth in Section 1125(c). bid.

8

argument, urging that they had formally “change[d] the

name of their cable channel from ‘M2: MUSIC TELEVI-

SION’ to ‘MTV 2’” in “March of 1999.” Jd. at 19a, 20a.

But the district court rejected the formal name change as

insufficient. Jd. at 20a. It therefore denied respondents’

motion for summary judgment in March of 2004, noting

M2 Software’s argument “that the infringement [wa]s

actually ongoing” as of that date—more than four years

after the August 5, 1999 amendment’s effective date—

and citing the use of the “M2” mark in finance “press re-

leases” and use of that mark to “refer[] to [respondents’]

second network” on an NBC special. /d. at 20a. Because

“a reasonable jury could find that [respondents] in-

fringed M2 Software’s trademark,” the court held that

“any doubts about whether a permanent injunction would

be an appropriate remedy should be resolved in [M2

Software’s] favor.” Id. at 20a-2la.° When the district

court issued an injunction in September of 2004, more-

over, the court enjoined respondents’ use of the “M2”

mark, id. at 1la, precisely the ongoing infringement the

- court and M2 Software identified as ongoing in 2004.

Nowhere do respondents contend that the pre-1999 ver-

sion of the Lanham Act can apply to conduct that

extended into 2004.

Perhaps for that reason, respondents attempt to

recast the Ninth Circuit’s decision as holding that “all of

the allegedly infringing acts at issue occurred prior to the

® Even after the amendments, respondents infringed in other ways.

For example, respondents used the “M2” trademark as a metatag as

late as 2004 to draw consumers to their MTV.COM website. C.A.

E.R. 333-4, 50, 51; C.A. E.R. 294-254. Such use of infringing “meta-

tags” is considered ample evidence of infringement. See Brookfield

Comme’ns, Inc. v. W. Coast Entm’t Corp., 174 F.3d 1036, 1065 (9th

Cir. 1999) « | We conclude that the Lanham Act bars West Coast

from includ:.g in its metatags any term confusingly similar with

Brookfield’s mark.”).

9

effective date of the 1999 amendment.” Br. in Opp. 7-8

(citing Pet. App. 4a-5a). But the Ninth Circuit never said

that. The Ninth Circuit’s opinion states that “the 1999

amendments *** do not apply to this suit, which was

filed in October 1998.” Pet. App. 4a (emphasis added).

Neither respondents nor the Ninth Circuit explain why

the 1999 amendments would be inapplicable simply

because the lawsuit was filed before 1999, when the

infringing conduct being challenged continued into 2004.

Indeed, the very cases respondents distinguish or

otherwise invoke as applying the post-1999 version of the

Lanham Act all involve lawsuits filed before the effective

date of the amendments. See, e.g., Banjo Buddies, 399 F.

3d 168, 172 (8d Cir. 2005) (applying 1999 amendments to

lawsuit filed in April 1999, 6 months before the August 5,

1999 effective date); Quick Techs., 313 F.3d 338, 342 (5th -

Cir. 2002) (applying 1999 amendments to all lawsuits in

consolidated action where first lawsuit was filed May 22,

1998). The different results in these otherwise identically

situated cases weigh in favor of further review.

Respondents’ claim that this Court must resolve this

decision “based upon the case law applying” the Lanham

Act as it existed “before the 1999 Amendment,” Br. in

Opp. 13 (emphasis added), is likewise unsupported. This

Court is hardly bound by the Ninth Circuit’s mistaken

construction of the Lanham Act. And, for the reasons

given above, this case squarely presents the proper

construction of the Act in its current form—it challenges

conduct that extended well past the 1999 amendments

(which did not alter substance in any event).°

® Respondents note (Br. in Opp. 16 n.5) that review was denied on a

similar issue in Contessa Premium Foods, Inc. v. Berdex Seafood,

Inc., No. 04-1693, despite amicus support from INTA. But the con-

duct in Contessa all predated the 1999 amendments, and the petition -

there failed to note that the 1999 amendments made no substantive

change to the Lanham Act. In any event, the fact that the judicial

ay

10

II. Respondents Err In Asserting That The Ninth Cir-

cuit Had “Discretion” To Apply A “Per Se Rule”

Finally, respondents assert that the Ninth Circuit was

“within its discretion to enforce a per se rule” here. Br.

in Opp. 20, 21. But it is hard to see what role “discretion”

has in that argument. Respondents appear to argue that

this Court’s cases require a per se approach. But the

cited cases do not support that rule;’ myriad courts of

appeals have held that no such per se rule exists, see Pet.

13-16; pp. 3-5, supra, and respondents themselves identi-

fy a trend away from that requirement, Br. in Opp. 17-19.

To the extent respondents thus contend that an in-

creasing number of courts are departing from this

Court’s precedents, that too weighs in favor of—not

against—granting the petition.

** et *€

For the foregoing reasons and those stated in the peti-

tion for a writ of certiorari, the petition should be

granted.

disarray persists two years after Contessa weighs strongly in favor

of review.

" McLean v. Fleming, 96 U.S. (6 Otto) 245 (1877), denied an award of

profits because “[a]equiescence of long standing” and “inexcusable

laches in seeking redress” were “proved.” /d. at 258. In dictwm, the

case mentions “want of fraudulent intent” as a ground for denying an

award of profits, but it nowhere establishes an across-the-board rule.

Likewise, Saalehner v. Siegel-Cooper Co., 179 U.S. 42 (1900), found

an award of profits unwarranted where the defendant not only acted

“in good faith,” but “the sales . . . were small.” /d at 43. But

respondents’ infringement here lasted for years, and continued

despite repeated notice from and demands by M2 Software. Finally,

to the extent respondents rely on Champion Spark Plug Co. v.

Sanders, 331 U.S. 125 (1947), see Br. in Opp. 9, their argument is

“simply an incorrect reading of Champion.” K. Stolte, Remedying

Judicial Limitations on Trademark Remedies: An Accounting of

Profits Should Not Require a Finding of Bad Faith, 87 Trademark

Rep. 271, 282 (1997).

Respectfully submitted.

JEFFREY A. LAMKEN

Counsel of Record

BAKER Botts L.L.P.

1299 Pennsylvania Ave., NW

Washington, D.C. 20004-2400

(202) 639-7700 ©

Counsel for Petitioner

OCTOBER 2007

2 Seal