Applied Underwriters, Inc. v. Larry Lichtenegger
913 F.3d 884
| 9th Cir. | 2019Background
- Applied Underwriters (AU) owns registered trademarks "Applied Underwriters" and "EquityComp" used for a workers’ compensation insurance program; AU alleges defendants used those marks in a webcast title and promotional email to critique AU’s program.
- Providence Publications (publisher of Workers’ Comp Executive), Lichtenegger, and Debber produced a seminar/DVD titled “Applied Underwriters’ EquityComp® Program…” and advertised it under the WCE banner; AU sued for trademark infringement, dilution, false designation, and unfair competition under the Lanham Act.
- District court granted defendants’ 12(b)(6) motion, holding the use was nominative fair use, but also granted AU leave to amend. AU did not amend; the court later issued a minute order dismissing the case and, on clarification, stated it dismissed under Rule 41(b) as a sanction for failure to comply.
- On appeal the Ninth Circuit concluded the district court abused its discretion in invoking Rule 41(b) because the order had merely granted leave to amend (not ordered amendment), so dismissal as a Rule 41(b) sanction was inappropriate.
- The Ninth Circuit nevertheless affirmed dismissal on the alternative ground that defendants’ use qualified as nominative fair use under New Kids on the Block: (1) the product/service is identifiable only by the mark; (2) only so much of the mark was used as necessary; (3) the use did not suggest sponsorship/endorsement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether dismissal under Rule 41(b) was proper | AU: dismissal proper for failure to file amended complaint | Defs: dismissal appropriate after leave to amend not taken | Court: Reversed as an abuse of discretion—leave to amend is not an order to amend, so Rule 41(b) sanction improper |
| Whether dismissal should nonetheless be affirmed on 12(b)(6) | AU: complaint sufficiently alleges likelihood of confusion and sponsorship | Defs: use is nominative fair use; no likelihood of confusion | Court: Affirmed—nominative fair use applies; claims fail as a matter of law |
| Whether New Kids factor 1 (necessity) is met | AU: could have used generic/descriptive language instead of marks | Defs: seminar specifically critiqued AU and EquityComp, so marks were necessary to identify subject | Court: Factor 1 satisfied — marks necessary to identify the specific product/company discussed |
| Whether New Kids factor 3 (sponsorship/confusion) is met | AU: promotional materials and use of ® could imply endorsement causing confusion | Defs: content was critical, WCE branding and disclaimers negate endorsement; no pleaded facts of actual confusion | Court: Factor 3 satisfied — materials indicate critique under WCE, disclaimers and content negate plausible endorsement/confusion |
Key Cases Cited
- New Kids on the Block v. News Am. Publ’g, 971 F.2d 302 (9th Cir. 1992) (establishes three-factor nominative fair use test)
- Playboy Enters., Inc. v. Welles, 279 F.3d 796 (9th Cir. 2002) (applies nominative fair use and limits use of stylized marks/abbreviations)
- Toyota Motor Sales, U.S.A., Inc. v. Tabari, 610 F.3d 1171 (9th Cir. 2010) (nominative use can justify domain/branding that includes a competitor mark when necessary)
- Yourish v. Cal. Amplifier, 191 F.3d 983 (9th Cir. 1999) (factors for dismissal under Rule 41(b))
- Ferdik v. Bonzelet, 963 F.2d 1258 (9th Cir. 1992) (dismissal as sanction where court ordered filing of amended complaint)
- SEC v. Chenery Corp., 318 U.S. 80 (1943) (appellate court may affirm on any correct ground supported by the record)
- Williams v. Gerber Prods. Co., 552 F.3d 934 (9th Cir. 2008) (likelihood-of-confusion analysis is fact-intensive but dismissal possible when pleadings and attached materials refute confusion)
- Harris v. Mangum, 863 F.3d 1133 (9th Cir. 2017) (failure to amend after leave may be treated as failure to comply with court order in some contexts)