Posted On: September 22, 2011

Court Denies Fallout Video Game Temporary Restraining Order Against Masthead Studios

Copyright-video-game-trademark-temporary-restraining-order-fallout-bethesda-masthead.jpgBethesda Softworks and Interplay Entertainment have waged a long-running, real world copyright and trademark battle over the virtual-world Fallout video game. The Bethesda v. Interplay Maryland lawsuit apparently arose over an ambiguity in the scope of a license back to Interplay in developing future Fallout video games. In 2007, Bethesda and Interplay entered into an asset purchase agreement that assigned all rights in the Fallout trademarks and copyrights to Bethesda. And, in a simultaneously executed trademark license agreement, Bethesda granted a license back to Interplay that provides:

Subject to the terms and conditions set forth in this Agreement, Bethesda grants to Interplay an exclusive, non-transferable license an right to use the Licensed Marks on and in connection with Interplay’s FALLOUT-branded [Massively Multiplayer Online Game] MMOG (the “FALLOUT MMOG” or “Licensed Product”) and for no other purpose. The conditional license herein does not grant Interplay any right to sublicense any of the licensed rights without Bethesda’s prior written approval.

In its initial filings, Bethesda claimed that Interplay failed to meet other contractual requirements, including securing required financing and complying with commercial launch deadlines. Later, Bethesda claimed that the trademark license applied only to the Fallout mark and not to any of the elements or characters in the game. Interplay countered that Bethesda’s interpretation cannot be harmonized with the rest of the agreement that provides for Interplay’s right to use “non-FALLOUT MMOG, inter alia, any or all locations, graphic representations, creatures, monsters, names, likenesses, [etc.]” should the agreement terminate prior to commercial launch. The Maryland court appears to have initially agreed with Interplay’s interpretation by denying, without much analysis, Bethesda’s motion for preliminary injunction.

Undeterred, and possibly seeking a change of scenery, Bethesda has filed a new copyright infringement lawsuit against Masthead Studios in Los Angeles. Bethesda alleges that Interplay has, in violation of the trademark license, entered into a product development agreement with Masthead for the development of a Fallout video game called Project V:13 by improperly sublicensing Bethesda’s intellectual property. This time, Bethesda wastes no time in alleging that under the Interplay trademark license, in “plain, clear and unambiguous” terms, Bethesda “granted Interplay a conditional license to use only the ‘FALLOUT’ trademark and nothing more relative to a Fallout-branded MMOG. Bethesda did not provide Interplay with any license to use any copyrighted materials relating to Fallout -- all copyrighted materials were retained exclusively by Bethesda.” Bethesda claims that Masthead’s performance of its duties under the Interplay agreement is both a direct and contributory infringement of its copyrights and filed for a temporary restraining order.

The Hon. John F. Walter, without even the benefit of an opposition from Masthead, denied Bethesda’s ex parte application for a temporary restraining order:

Plaintiff has not demonstrated that it will be irreparably prejudiced if the requested ex parte relief is not granted, or that it is without fault in creating the crisis that requires ex parte relief. Indeed, Plaintiff was aware as early as February 2011 that Masthead was potentially infringing its copyrights. . . . Bethesda Softworks LLC v. Interplay Entertainment Corp., Case No. 09 CV 2357, D. Maryland, Memorandum in Support of Plaintiff’s Motion for Preliminary Injunction at p. 7 (“According to Interplay, pursuant to this purported development agreement, Masthead Studios is assisting Interplay in developing its Fallout MMOG using the copyrighted Fallout works.”). Yet, Plaintiff waited seven months to apply for ex parte relief. The Court finds that Plaintiff unreasonably delayed in seeking relief, and that the emergency that allegedly justifies a TRO is self-created. Accordingly, Plaintiff’s Ex Parte Application for Temporary Restraining Order and Order to Show Cause Re: Preliminary Injunction is DENIED. If Plaintiff wishes to pursue its request for injunctive relief, it may do so by way of regularly noticed motion after complying with Local Rule 7-3.

Further, the Court denied Bethesda’s ex parte application for substituted service on Masthead, a Bulgarian software company.

The case is Bethesda Softworks, LLC v Masthead Studio, Ltd., CV11-7534 JFW (C.D. Cal. 2011).

Posted On: September 13, 2011

Skechers Sues Steven Madden For Patent and Trade Dress Infringement Over Twinkle Toes Shoes

design-patent-shoes-trade-dress-steven-madden-skechers.jpgSkechers is suing Steven Madden for allegedly copying Skechers’ Twinkle Toes shoe designs. The U.S. Patent & Trademark Office granted U.S. Patent No. D571,095 to Skechers covering its Twinkle Toes toe cap design for shoes. In addition to patent protection, Skechers claims that it is the owner of an inherently distinctive trade dress in its Twinkle Toes footwear designs. Skechers defines its trade dress as the combination of the following design elements: “a vulcanized canvass sneaker; a toe cap adorned with crystals, rhinestones, sequins or a plurality of other similar shiny elements; and, canvass uppers distinguished by colorful art designs or patterns.” For trade dress to be protectable, it must be non-functional. And Skechers asserts that the Twinkle Toes design is non-functional and simply conveys a distinctive appearance that is a source indicator.

Skechers further alleges that it has expended many millions of dollars promoting and advertising its trade dress and, based on extensive, frequent, and ongoing advertising, marketing, sales and distribution, the trade dress has acquired distinctiveness, which indicates that the shoes emanate from a single source. In other words, consumers recognize and associate the shoe design with Skechers.

Steve Madden’s “Stevies” brand shoes are accused of including “a vulcanized canvas sneaker, a toe cap adorned with crystal, rhinestones, sequins or a plurality of other similar shiny elements, and canvas uppers distinguished by colorful art designs or patterns” that infringe the subject patent. Further, Skechers contends that the Stevies footwear line so closely resembles the Twinkle toes trade dress that it is likely to cause confusion, mistake, and deception as to an affiliation, connection, or association of Steve Maddens’ footwear with Skechers. Skechers also contends that “Defendants have acted willfully, in bad faith and with the intent to confuse and mislead the public and unfairly trade on the substantial and valuable goodwill associated with Skechers' Twinkle Toes® Trade Dress and to capitalize on Skechers' highly respected reputation as a stylish, high quality footwear company.”

Design patents provide the owner with several competitive advantages. For example, design patents, during their fourteen year lifespan, can be used to legally prevent competing products from entering the market while the owner also establishes trade dress rights by attaining secondary meaning. Trade dress rights can then be used to perpetually protect the product configuration for as long as the trade dress is being used as a source identifier. Also, unlike utility patents, 35 USC § 289 allows a disgorgement of the defendants’ profits from any infringing sales. Design patents provide fashion designers protection for their clothing and shoe designs, which are considered useful articles that are not protectable by copyrights. Indeed, Steve Madden was recently sued by Jeffrey Campbell for design patent and trade dress infringement for allegedly copying the Lita shoe.

Additionally, a patented design may be infringed regardless of distinguishing trademarks or labels applied to the product that can defeat a trade dress claim. In L.A. Gear, Inc. v. Thom McAn Shoe Co., 988 F.2d 1117 (Fed. Cir. 1993), the Federal Circuit affirmed the finding of design patent infringement but reversed the trade dress infringement claim because defendants’ conspicuous labels and trademarks applied to the shoes made confusion among consumers unlikely. Although the Lanham Act also provides for disgorgement of the infringer’s profits, a double recovery is not allowed for infringement of the same design patent and trade dress. See, e.g., Contour Chair Lounge Co. v. True-Fit Chair, Inc., 648 F. Supp. 704, 719, 1 U.S.P.Q.2D (BNA) 1353, 1364 (E.D. Mo. 1986) ("Plaintiff is also entitled to lost profits for [trade dress infringement]; however, plaintiff has already recovered these damages under its patent claim.").

The case is Skechers U.S.A., Inc. v. Steven Madden, Ltd. et al., CV11-07295 PA (C.D. Cal. 2011).