The Companies

D2 Holdings (D2) is a Massachusetts entertainment goods and services company . MRC 11 Distribution Company (MRCII), is the brand behind the Netflix hit political thriller House of Cards.

The Case

On March 3, 2016 D2 filed a trademark infringement claim against MRC 11, stating it has held the trademark for House of Cards for “entertainment goods and services” since 2009, MRC 11 has tried several times to file a trademark for the phrase, which was rejected but still has proceeded to use the name, to great success with the popularity of the show. Indeed, to such success that the name has been licensed to a producer of gaming machines who now uses that mark on slot machines. D2 also filed suit against IGT, the manufacturer of the slot machines at issue.

The Conclusion

The lawsuit is pending ruling. The verdict of the lawsuit will be based on the law on infringement of intellectual property. The complaint seeks an injunction ordering MRC II and IGT to cease all use of the “HOUSE OF CARDS” name. Given the commercial success of the program, MRC II (and Netflix) do not want to lose the right to use “HOUSE OF CARDS”. Therefore, the case will invariably settle with a significant windfall to D2 via a license agreement allowing use of HOUSE OF CARDS by defendants.

“If D2 Holding proves ownership of the trademark, then it is its responsibility to prove that MRC violated the infringement rights by sharing the trademark with other entities without a license or authorization by D2 Holdings”

Key Takeaways

If the court finds sufficient evidence that MRC violated infringement rights by sharing licensed trademark “House of Cards” with other entities, and rules in favor of D2 Holdings, compensation for damages could be huge.

The “HOUSE OF CARDS” situation illustrates two important points

• Trademark laws provide the initial user of a trademark with two significant rights and remedies, namely, the right to preclude others from using a mark and the ability to seek a court order requiring a party to cease use of a trademark.
• The risk of drawing a challenge to use of a mark can be lowered through thorough pre-adoption trademark searching. Through comprehensive searching significant risks – such as another party already using an identical mark for identical services – can be uncovered, understood and potentially averted.

IP Nuggets

Trademarks are vitally important to business. Among the rights a first user of a trademark has against others is the ability to seek injunctive relief, requesting a second user to stop all use of a trademark. This could stop a product launch dead in its tracks or result in significant re-branding costs if a product or service is already in the market. Because of this, businesses should carefully consider trademarks before adopting or using them. It is crucial that all businesses engage in trademark searching before use of a mark.

The Companies

Romag sells magnetic snap fasteners for use in leather goods . Part of the American Fossil Group’s business is their line of clothing accessories including handbags. Fossil designs, markets, and distributes a wide range of fashion accessories.

The Case

In 2002 , the two companies, signed an agreement allowing Fossil to use Romag’s fasteners in Fossil’s handbags and other products. Initially, both sides seemed content with the arrangement. In time, Romag discovered that the factories Fossil hired in China, to make its products were using counterfeit Romag fasteners—and that Fossil was doing little to guard against the practice. Romag sues Fossil, alleging that Fossil had infringed its trademark and falsely represented that its fasteners came from Romag. Romag sought (among other things) an order requiring Fossil to hand over the profits it had earned thanks to its trademark violation.

The Conclusion

After a trial, the jury agreed with Romag citing that Fossil had acted “in callous disregard” of Romag’s rights. The jury determined that Fossil had infringed Romag’s trademark, but rejected Romag’s claim that the infringement was “willful”. Nevertheless, the jury awarded Romag damages based on Fossil’s profits. In a highly split decision the US Court of Appeals Second Circuit pointed out that a plaintiff seeking an award of the defendant’s profits must show willful infringement, failing which the court struck the jury’s award of profits to Romag.

“The jury determined that Fossil had infringed Romag’s trademark, but rejected Romag’s claim that the infringement was “willful”…”

Key Takeaways

The possibility of obtaining profits from an infringing party will definitely set in motion a series of events in the very near future.

• Increase in trademark infringement lawsuits – As a result of this ruling, it is now easier to obtain an infringer’s profits in trademark infringement lawsuits. This may lead to an increase in trademark infringement lawsuits as it may incentivize companies to initiate
• Payment demand in addition to cease and desist letters – Previously, before considering litigation, many businesses first attempt to resolve trademarks through cease and desist letters. Now that it’s easier to obtain a defendant’s profits, in a lawsuit, it is very likely that infringers may start receiving cease and desist letters that require payment from the infringer in order to resolve disputes.
• “Willful infringement” will be easier to prove-Conducting thorough trademark clearance searches before adopting a mark is even more critical. If a business adopts a third party’s mark, without the proper trademark clearance, the third party does not have to prove “willfulness” to recover an award of profits.

IP Nuggets

Now, businesses will have to closely monitor their supply chains and institute robust quality control standards to prevent counterfeit materials from being used in their businesses. Businesses should conduct thorough due diligence of the suppliers that they are contracting with to ensure that the materials provided are not counterfeit.