1
Cuban trademark protected
under NY law
The Cuban embargo, formally known as the Cuban Assets Control
Regulations (“CACR”), 31 CFR § 515 et seq., has restricted com-
mercial, financial and economic trade between the United States and
Cuba for nearly half a century. The embargo generally prohibits
transactions in the United States involving Cuban-owned property
unless the transaction is authorized by the Treasury Department’s
Office of Foreign Asset Control (“OFAC”). The embargo precludes
holders of Cuban trademarks from using those marks in commerce
in the United States. But a recent decision involving COHIBA brand
cigars protects these marks under the New York state law of misap-
propriation despite the fact that the Cuban cigars cannot legally be
sold in the United States.
U.S. trademark rights to COHIBA cigars have been litigated for over
10 years by Empresa Cubana del Tabaco (“Cubatabaco”), a Cuban
company, and General Cigar, an American company. Cubatabaco
has sold COHIBA cigars outside of Cuba since 1982, but because of
the United States embargo against Cuban goods, imposed in 1963,
Cubatabaco has never sold COHIBA cigars in the United States.
General Cigar obtained a registration for the COHIBA mark in the
United States in 1981 and sold COHIBA cigars in the United States
from 1978 until late 1987. In 1992, after Cigar Aficionado magazine
declared COHIBA cigars to be among the best in the world, General
Cigar registered a stylized version of the trademark. General Cigars
has sold COHIBA cigars under that mark in the United States since
1997.
In 1997, Cubatabaco applied to register COHIBA and brought an
injunction action against General Cigar’s use of the COHIBA mark
and a cancellation petition against General Cigar’s U.S. registra-
tions. In 2004, the U.S. District Court for the Southern District of
New York held that Cubatabaco owned the COHIBA trademark in
the United States under the “well known marks” doctrine, finding
that the Cuban COHIBA was well-known at the time that General
Cigar used and registered the mark in 1992. General Cigar’s use of
CUBA Continued on Page 2
A r n s t e i n & L e h r i n t e ll e c t u al P r o p e r t y n e w s l e t t e r
Fines for patent false marking are
awarded for each marked product
Section 292 of the Patent Act provides that it is an offense punish-
able by a fine of not more than $500 to mark upon, affix to or use
in advertising the word “patent” in connection with any unpatented
article, “for the purpose of deceiving the public.” The U.S. Court of
Appeals for the Federal Circuit has now interpreted § 292 to mean
that a fine should be imposed for every article falsely marked, not
merely for the single decision to falsely mark.
The Forest Group, Inc. (“Forest”) owns U.S. Patent No. 5,645,515
(the “patent”) for a type of stilt commonly used in construction. The
independent claims of the patent required a “resiliently lined yoke”
that was used in connection with a strap for attaching the leg support
portion of the stilt to a user’s leg. The two named inventors on the
patent, William Armstrong and Joe Lin, each created companies to
sell the stilts covered by the patent. Lin formed Forest and Arm-
strong formed Southland Supply Company, licensed by Forest to sell
the stilts. One of Southland’s customers, Bon Tool, stopped buying
stilts from Southland and started buying them from a foreign supplier
that made unauthorized identical replicas.
Forest sued Bon Tool for infringing the patent and Bon Tool coun-
terclaimed that Forest and Southland’s stilts were falsely marked
with the patent number because they were not covered by the patent
claims. In particular, Bon Tool argued that the stilts did not contain
the claimed “resiliently lined yoke.” The U.S. District Court for the
Southern District of Texas concluded that the patent claims required
a lining that was distinct from the yoke itself, which the Forest and
Southland stilts did not possess. Because Bon Tool’s foreign-made
stilts were copied directly from Southland’s stilts, they also did not
possess the claimed yoke. Accordingly, the court determined that
Bon Tool did not infringe the patent. A similar ruling was later made
in Forest’s Minnesota suit against Warner Manufacturing.
The Texas court concluded that Forest knew as of the date of the
Warner decision that the Forest and Southland stilts were not covered
FALSE MARKING Continued on Page 4
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CUBA Continued from Page 1
COHIBA was enjoined and its second registration was cancelled.
The court dismissed Cubatabaco’s New York state common law un-
fair competition claim of misappropriation because Cubatabaco had
failed to show that General Cigar acted in bad faith. However, the
U.S. Court of Appeals for the Second Circuit reversed the infringe-
ment decision, concluding that the embargo’s prohibition against
sale of the Cuban cigars in the U.S. prevented Cubatabaco from
acquiring trademark rights other than by registration.
In 2008, based on a change in New York law, the district court
reconsidered and held that Cubatabaco established a misappropria-
tion claim against General Cigar because it had deliberately copied
the mark used by a foreign owner and the consumers of the goods
or services provided under that mark primarily associated the mark
with the foreign owner. The district court found that General Cigar
“intentionally copied” the COHIBA mark in part to capitalize on
the success of the Cuban COHIBA brand and that the Cuban CO-
HIBA mark had acquired recognition consistent with “secondary
meaning” in the United States.
Because the court’s judgment order did not provide remedies, the
parties agreed to seek an amended order and General Cigar took
that opportunity to contest the permanent injunction sought by
Cubatabaco. It argued that Cubatabaco failed to meet its burden
of proof because it had not shown injury from General Cigar’s use
of the COHIBA mark in the United States as Cubatabaco cannot
sell its cigars in the United States due to the Cuban embargo. In
order to obtain a permanent injunction, a party must demonstrate,
among other factors, that it suffered an irreparable injury. The
district court held that, despite the fact that Cubatabaco cannot sell
its cigars in the United States, it nonetheless demonstrated that
General Cigar’s continuing misappropriation of the goodwill as-
sociated with the COHIBA mark, which resulted in the devaluation
of Cubatabaco’s product, is a wrongful act that entitles Cubatabaco
to relief, despite the lack of an infringement remedy.
General Cigar has filed an expedited appeal to the U.S. Court of
Appeals for the Second Circuit. The district court has stayed the
injunction against General Cigar pending the results of the ap-
peal. Interestingly, in granting the stay, the district court found that
General Cigar had a “substantial possibility of success” on appeal,
due to other court decisions that New York misappropriation law
requires a finding of bad faith and the fact that the district court’s
interpretation of the embargo regulations is a matter of first impres-
sion.
General Cigar renewed its first registration for COHIBA in 2003
and renewed its second registration in 2006. Cubatabaco’s applica-
tion to register COHIBA has been suspended since 1999.
The Cuban trade embargo was similarly at issue in the more than
decade-long case between Bacardi and Pernod Ricard over the
U.S. rights to the HAVANA CLUB trademark for rum. HAVANA
CLUB was created in Cuba in the 1930s by the Arechabala family,
which registered the trademark in the United States in 1935 and
sold its rum under that trademark in the United States for the next
20 years. In 1960 the Arechabala family’s manufacturing plant and
w w w. a r n s t e i n . c o m
trademark were
seized by the Cu-
ban government
and the Cuban
government (as
Cuba Export)
began produc-
ing rum under
the HAVANA
CLUB name. In
1976, after the
U.S HAVANA
CLUB trademark registration expired, Cuba Export registered the
HAVANA CLUB trademark in the United States through a loophole
in the trade embargo regulations. French liquor producer, Pernod
Ricard, partnered with the Cuban government to sell Cuba’s HA-
VANA CLUB internationally, including in the United States. The
Arechabala family, the original HAVANA CLUB trademark own-
ers, did not have a means to produce their famous rum; however,
they always intended to resume producing and marketing HAVANA
CLUB rum once they had the means and opportunity to do so. In
furtherance of their desire, the Arechabalas partnered with Bacardi
to sell rum again under the HAVANA CLUB name.
Pernod Ricard filed suit against Bacardi for trademark infringement
and Bacardi filed an action with the U.S. Patent and Trademark
Office to cancel Pernod Ricard’s registration of HAVANA CLUB.
Pernod Ricard lost its infringement claim and subsequent appeals
and Bacardi lost its cancellation case. In the interim, Pernod Ricard
had difficulty renewing its registration because of the CACR,
which made it difficult for Cuba Export to hire U.S. attorneys to
pay the U.S. Trademark Office’s renewal fee.
The CACR contains a general license that permits transactions
related to trademark registration applications or renewals by Cuban
nationals. 31 CFR § 515.527(a). However, in 1998, Congress
exempted from the general license any marks or trade names
that were “used in connection with a business or assets that were
confiscated…unless the original owner of the mark, trade name,
or commercial name, or the bona fide successor-in-interest, has
consented.”
Because Pernod Ricard was unsure whether 31 CFR § 515.527(a)
applied to the trademark that had been seized from the Arechabalas
from the Cuban government, it applied for a license from OFAC to
engage in the necessary transactions to renew its U.S. registration.
OFAC denied the license application and Pernod Ricard sought
review of that denial in federal district court. The United States
District Court for the District of Columbia granted OFAC’s mo-
tion for summary judgment, holding that the granting of licenses
under the CACR was solely a decision of OFAC and not subject to
judicial review.
Bacardi’s trademark application for the HAVANA CLUB mark is
still pending before the Trademark Office. This case illustrates the
difficulty encountered in registering, renewing and enforcing trade-
marks by Cuban holders of marks that were seized by the Cuban
government. Critics argue that the decision further strains Cuban-
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United States relationships, especially in the realm of intellectual

property, and they contend that the Cuban government may retaliate
against U.S. marks in Cuban commerce. The consent requirement
was the subject of a 2002 decision adverse to the U.S. by the World
Trade Organization, which held that it violated the TRIPS Agree-
ment. However, Congress has not yet amended the embargo regula-
tions to remove this provision.

Traditionally, the embargo also prevented Americans from send-

ing money into Cuba, which complicated the transactions of U.S.
holders of Cuban trademarks to register and renew marks in Cuba.
In 1995, the regulations were amended to permit filing, prosecution
and renewal of Cuban trademarks, receipt of Cuban trademark cer-
tificates, prosecution and defense of oppositions and infringement
proceedings and payment of fees to the Cuban government and
Cuban attorneys for these actions. 31 CFR § 515.528.

Sources: Empresa Cubana Del Tabaco v. Culbro Corp., U.S. District Court
for the Southern District of New York, No. 97 Civ. 8399, December 14, 2009;
Empresa Cubana Exportadora de Alimentos y Productos Varios v. United States
Dep’t of Treasury, 606 F. Supp. 2d 59 (D.D.C. 2009) party’s right to register and its anticipated use of its registered
Trademark settlement agreement al- mark. The language of the release (“any and all claims” and “arise
or may arise from”) is broadly interpreted under Massachusetts
lows use as well as registration of mark law. If room for doubt remains, a court should consider what in-
terpretation would be reasonable to expect in the business context
In 1985, Great Clips, Inc. registered the mark GREAT CLIPS for
and what the parties intended to accomplish by their agreement.
hair cutting and styling services. In 1987, Dalan Corporation ap-
The Court concluded that the most likely aim was to allow the
plied to register the mark GREAT CUTS for hair cutting and hair
parties to use their registered marks for hair services and products,
treating services. Great Clips opposed that application and Dalan
despite possible arguments each had about potential confusion that
counterclaimed to cancel Great Clips’ registration. The parties
could arise. No evidence was provided that the parties intended an
settled their dispute in 1989 with an agreement that neither party
incomplete settlement that reserved to the future “the practical con-
would object to the registration of the other’s mark. In particular,
sequences of registration,” namely, use. More specific language
Paragraph 4 of the agreement provided that “Each party releases
was required to lead to such an outcome.
the other from any and all claims that arise or may arise from the
application and registration of its own respective mark(s) men-
The Court also found that other provisions in the agreement
tioned in this agreement.” Dalan later transferred its rights to
indicated that the parties anticipated that the marks would be used
the GREAT CUTS mark to Great Cuts, Inc. and Hair Cuttery of
as registered. Those provisions do not make sense unless Great
Greater Boston, L.L.C. (collectively, “Great Cuts”).
Clips was entitled to use its mark without limitation. Those provi-
sions show that the settlement was not just about the formalities of
The parties coexisted for nearly 20 years. However, in 2008, Great
registration; rather, it aimed to bring about a workable solution that
Clip began to expand its GREAT CLIPS business through fran-
permitted the parties to use their respective marks.
chises in Massachusetts and New Hampshire. Great Cuts objected
to this expansion into the New England market and threatened to
Although the First Circuit interpreted the agreement in this case
sue Great Clips for trademark infringement. Instead, Great Clips
to reach a practical result, courts can differ as to what is practical
brought suit in the U.S. District Court for the District of Massa-
and what the words mean in an agreement. As shown in the J.A.
chusetts, asking for a declaration that it was entitled to use its mark
Apparel Corp. v. Joseph Abboud cases reported in our Winter 2009
throughout the United States and that the settlement agreement
issue and this issue, courts looking at the same agreement between
prevented Great Cuts from objecting to such use in New England.
the same parties can come to different conclusions about the mean-
The District Court agreed that the settlement agreement permitted
ing of particular provisions. No matter how precise the parties to
Great Clips to use its mark without geographic limitation.
an agreement believe they have been, it is difficult to predict how a
court will interpret their language.
The U.S. Court of Appeals for the First Circuit upheld that inter-
pretation. Although Par. 4 of the agreement only refers to applica- Source: Great Clips, Inc. v. Hair Cuttery of Greater Boston, L.L.C., U.S. Court
tion and registration and not to use of the GREAT CLIPS mark, of Appeals for the First Circuit, No. 09-1376, January 5, 2010
Great Cuts did not introduce any evidence that the parties intended
the mutual release to apply only to claims arising narrowly from
the registration process in the U.S. Patent and Trademark Office.
Trademarks, the Court observed, are registered in order to be used.
In substance, each party consented in the agreement to the other

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FALSE MARKING Continued from Page 1 District Court further interprets cloth-
by the patent because they lacked the claimed yoke. Nevertheless, ing designer’s right to use his own
after that date, Forest placed at least one further order to its stilt
manufacturer for stilts marked with the patent number. The Texas name in competition with owner of
court determined that the decision to order those falsely marked trademark rights
stilts constituted a single offense of false marking and fined Forest
In our Winter 2009 issue, we discussed JA Apparel Corp. v. Joseph
$500 for that single offense, rather than fining Forest for each stilt
Abboud, in which the U.S. Court of Appeals for the Second Circuit
falsely marked after the Warner decision.
found that the agreement between Abboud and the company that
bought the rights to trademarks containing his name was ambigu-
On appeal, the Federal Circuit overturned that judgment, conclud-
ous, and vacated the injunction against Abboud’s use of his name
ing that § 292 requires that the fine be based on each incidence of
that had been entered by the U.S. District Court for the Southern
false marking, noting that the plain language of § 292 “requires
District of New York. The Second Circuit sent the case back to the
the fine to be imposed on a per article basis,” as it prohibits the
District Court, which had earlier ruled that the agreement prevented
false making of any unpatented article and imposes the fine for
Abboud from using his name in connection with a new line of
every such offense. Therefore, each item that is falsely marked
clothing marketed under the “jaz” trademark. After considering ad-
with intent to deceive constitutes a separate offense. Although the
ditional evidence presented by the parties concerning the meaning
100-year-old decision by the U.S. Court of Appeals for the First
of the contract provisions, the District Court has now determined
Circuit in London v. Everett H. Dunbar Corp. 179 F. 506 (1st Cir.
that Abboud has the right to use his name in advertising his “jaz”
1910) found that a single fine could be imposed for continuous
line, with certain limitations.
false marking of multiple items, the Patent Act read differently
then. Today, a single $500 fine for false marking is not supported
The parties presented the District Court judge with a large quantity
by the statute and does not further the public policy considerations
of “extrinsic” evidence (evidence outside the text of the agree-
behind § 292.
ment) concerning their intentions and whether several of Abboud’s
proposed advertisements for the “jaz” line containing his name
Moreover, there is a provision in § 292 under which any person
constituted trademark “fair use.” The parties agreed that Abboud
may sue for the penalty in a qui tam action, where half the recovery
would not use his name on the jaz clothing or on labels or hang-
goes to the person suing and half to the United States. Even though
tags for jaz clothing.
this provision encourages suits by so-called “marking trolls,”
who bring such litigation for their own gain, Congress expressly
In a lengthy decision, the judge concluded that Abboud had only
authorized those suits. A total fine of $500, to be split with the
sold the use of his name as a trademark and not the exclusive right
government, would not provide a financial motivation to bring such
to use his name for all commercial purposes. That decision turned
actions. Where small, inexpensive, mass-produced items are falsely
on the existence of extrinsic evidence discussing only the sale of
marked, the Court found that a court can balance enforcement of
the trademarks and the absence of extrinsic evidence concern-
this important public policy against imposing disproportionately
ing Abboud’s sale of his personal name for all other commercial
large penalties by setting the fine at fraction of a penny on each
purposes. Because Abboud had retained the right to use his name
item. The Court sent the case back to the district court to determine
in ways other than as a trademark, the judge analyzed the proposed
how many stilts were sold, and the amount of the penalty to be
advertisements to determine whether Abboud’s use of his name was
imposed for each sale.
“fair use” or infringing trademark use.
Remember that a product can also be falsely marked when the
The judge concluded that some of the proposed ads displayed the
manufacturer does not remove an otherwise proper patent notice
Abboud name as an indicator of the source or origin of the goods,
after the patent expires or marks a product with “patent pending”
which are trademark uses. Although there is no longer a “sacred
when there is no patent application pending in the U.S. Patent and
right” to employ one’s own name in a business, the judge found
Trademark Office. The Federal Circuit has interpreted the require-
that others of the proposed ads displayed the Abboud name in a
ment that the marking be made with intent to deceive the public to
purely descriptive manner constituting trademark “fair use.” Sec-
mean that the party had no reasonable belief that the goods were
tion 33(b)(4) of the Lanham Act (15 U.S.C. §1115(b)(4)) provides
properly marked; that is, they are not covered by at least one claim
a fair use defense to trademark infringement where “the use of
of an existing patent. Clontech Labs. v. Invitrogen Corp., 406 F.3d
the name, term, or device charged to be an infringement is a use,
1347 (Fed. Cir. 2005).
otherwise than as a mark, . . . of a term or device which is descrip-
Source: The Forest Group, Inc. v. Bon Tool Company, U.S. Court of Appeals for tive of and used fairly and in good faith only to describe the goods
the Federal Circuit, No. 2009-1044, December 28, 2009 and services of such party, or their geographic origin.” The judge
approved the use of ads where (1) the Abboud name was not used
in an “overly intrusive manner,” (2) the “jaz” mark was prominent,
(3) the Abboud name was used in a complete sentence that was not
the focal point of the ad nor positioned in a way to attract signifi-
cant public attention, and (4) the Abboud name was in a different
and smaller font than the “jaz” mark or the registered marks that

w w w. a r n s t e i n . c o m

Abboud sold to JA Apparel. In addition, the judge approved the use
of a disclaimer of association or affiliation of Joseph Abboud with
JA Apparel Corp.
The judge therefore modified the injunction to provide that Abboud
may only use his name in promotional and advertising materials if
it “is used descriptively, in the context of a complete sentence or
descriptive phrase, and it must be no larger or more distinct than
the surrounding words in that sentence or phrase.” In addition, the
“jaz” mark or some other mark must be “prominently displayed” in
any ad containing Abboud’s personal name and, in certain cases, he
must include a disclaimer of affiliation with JA Apparel and prod-
ucts sold under the Joseph Abboud trademarks. That disclaimer
cannot be smaller than the text where the Abboud name appears.
Shortly before this decision issued, the U.S. Court of Appeals for
the Sixth Circuit held that ProPride, Inc., a company selling trailer
hitches designed by Jim Hensley, could use his name in a descrip-
tive, “fair use” sense in competition with Hensley Manufactur-
ing, the company that owned the trademark HENSLEY for trailer
hitches. ProPride’s advertising materials identified Jim Hensley as
the designer of ProPride’s hitches and included a disclaimer that
Jim Hensley was “no longer affiliated with Hensley Mfg., Inc.”
ProPride’s web site also included information describing Hensley’s
background, design contributions and relationship to Hensley Man-
ufacturing and ProPride. The names of ProPride’s hitches did not
contain “Hensley” or any term remotely similar and were marketed
with ProPride clearly identified as the source. The Court noted
that the risk of some consumer confusion was assumed by Hensley
Manufacturing when they trademarked Jim Hensley’s personal last
name. Hensley Manufacturing, Incorporated v. ProPride, Incor-
porated, U.S. Court of Appeals for the Sixth Circuit, No. 08-1834,
September 3, 2009.
These cases provide roadmaps for avoiding trademark infringement
when using a personal name that is also a trademark owned by
another party.
Source: JA Apparel Corp. v. Joseph Abboud, U.S. District Court for the Southern
District of New York, No. 07 Civ. 7787, January 12, 2010
World Wide Video appeal against Yoko
Ono dismissed as untimely
In our Summer 2009 issue, we reported Yoko Ono’s victory over
World Wide Video concerning ownership of stolen video tapes
containing footage of John Lennon, Ms. Ono and their family. In
our Winter 2009 issue, we reported that World Wide Video had
appealed that decision to the U.S. Court of Appeals for the First
Circuit. That appeal was dismissed because it was filed nearly
three months late, based on the July 2009 date of the partial sum-
mary judgment entered by the U.S. District Court for the District of
Massachusetts.
Source: World Wide Video, LLC v. Yoko Ono Lennon, United States Court of
Appeals for the First Circuit, No. 09-2521, January 13, 2010
A r n s t e i n & L e h r i n t e ll e c t u al P r o p e r t y n e w s l e t t e r
5
Second Circuit clarifies trademark
dilution test
Starbucks, the renowned coffee company, has approximately 60
U.S. trademark registrations. Black Bear, a small, family-owned
local coffee company in Tuftonboro, New Hampshire, mainly
does business locally or over the Internet. Black Bear sells certain
blends of coffee,“Charbucks Blend” and “Mister Charbucks,” as
“dark roasted” in packaging with a picture of a black bear above
the words “BLACK BEAR MICRO ROASTERY.” Although Star-
bucks objected to the “Charbucks” marks, Black Bear kept selling
the products. Starbucks filed suit against Black Bear in 2001. At
trial, Starbucks’ expert testified that consumers he surveyed had
“many negative associations” with the Charbucks name and coffee,
including the image of bitter and over-roasted coffee.
In 2004, the U.S. District Court for the Southern District of New
York held that Starbucks failed to demonstrate entitlement to relief
on its (1) federal trademark infringement, dilution, and unfair
competition claims; (2) New York state trademark dilution claims;
and (3) New York common law unfair competition claim. The
U.S. Court of Appeals for the Second Circuit sent the case back to
the district court to reconsider whether Starbucks demonstrated a
likelihood of dilution by “blurring” under the federal Trademark
Dilution Revision Act of 2005 (“TDRA”). In 2005 the district
court again dismissed Starbuck’s dilution claim but the Second
Circuit has again restored it.
The focus of the second appeal was on dilution by “blurring,”
which is an “association arising from the similarity between a
mark or trade name and a famous mark that impairs the distinctive-
ness of the famous mark.” 15 U.S.C. § 1125(c)(2)(B). Dilution by
blurring may be found “regardless of the presence or absence of
actual or likely confusion, of competition, or of actual economic
injury.” 15 U.S.C § 1125(c)(1). Such dilution is illustrated by the
hypothetical cases of Buick aspirin, Schlitz varnish, Kodak pianos
and the like. The other form of dilution is by “tarnishment;” an “as-
sociation arising from the similarity between a mark or trade name
and a famous mark that harms the reputation of the famous mark.”
15 U.S.C. § 1125(c)(2)(C). Generally tarnishment occurs when a
mark is linked to products of inferior quality or if the mark loses
its ability to serve as a wholesome identifier of plaintiff’s product.
The Court of Appeals determined that the District Court did not err
in rejecting Starbucks’ tarnishment claim because (1) the Char-
bucks coffee was marketed as very high quality and (2) the survey
showing a negative consumer impression of the name “Charbucks”
did not also show that consumers had a negative reaction to Star-
bucks’ coffee as a result of the Charbucks name.
The Second Circuit noted that, to determine if there is dilution by
blurring, federal law applies six non-exhaustive factors. The factor
the district court focused on was the degree of similarity between
the mark and the famous mark. Prior to the TDRA, federal dilution
claims required “substantial” similarity between the two marks,
which the district court improperly required in this case. The
TDRA does not require “substantial” similarity but only looks at
DILUTION Continued on Page 7
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Illinois Supreme Court interprets Consumer Fraud Act advertising requirements

In considering a class action case involving the advertising of a
withdrawn prescription drug, the Illinois Supreme Court has pro-
vided answers to several open questions about the Illinois Consum-
er Fraud and Deceptive Business Practices Act (“CFA”).

Teresa De Bouse brought suit against Bayer AG as a proposed

representative of a class of consumers who had used Bayer’s
cholesterol-lowering drug Baycol. The drug was withdrawn from
the market when it was associated with a muscle-affecting medical
condition. Although De Bouse admitted that she had not suf-
fered any side effects from the drug and had not heard of it prior
to having it prescribed by her doctor, she claimed that Bayer had
been able to inflate the prices for Baycol because it had deceptively
omitted to tell doctors and consumers about the potential side ef-
fects. Bayer asked the St. Clair County Circuit Court for summary
judgment because De Bouse could not prove that she had been de-
ceived by any act or omission by Bayer. Although the court denied
Bayer’s request, it certified three legal questions to be answered by
the Illinois Appellate Court before proceeding with the case. The
questions were:
(1) Whether an Illinois consumer who purchases a pharmaceutical
product, later withdrawn from the market because it was deemed
unsafe, can maintain an action under the CFA even though the phar-
maceutical company did not engage in direct communication with
or advertising to the consumer?
(2) Whether the offering of a product for sale in Illinois is a rep-
resentation to prospective customers that the product is reasonably
safe for its intended purpose such that the seller’s failure to disclose
to consumers the safety risks associated with that product is a viola-
tion of the CFA?
(3) Whether fraudulent statements or omissions made by a defen-
dant to third parties but detrimentally relied on by the consumer can
support an action under the CFA if made with the intent that they
(a) reach the consumer and (b) influence the consumer’s actions?
The Illinois Appellate Court answered the first and third questions
affirmatively and refused to answer the second question because it
involved facts not appropriate for a certified question. The Illinois
Supreme Court instructed the Appellate Court to reconsider its
judgment in light of Barbara’s Sales, Inc. v. Intel Corp., 227 Ill.2d
45 (2007), but the Appellate Court then entered the same judgment.
On further appeal, the Illinois Supreme Court answered the first
and second questions negatively and the third question affirma-
tively. The Court also entered summary judgment in Bayer’s favor
because DeBouse did not claim that her doctor was deceived.
The Court observed that a CFA claim requires (a) a deceptive act
or practice by the defendant, (b) defendant’s intent that the plaintiff
rely on the deception, (c) occurrence of the deception in a course of
conduct involving trade or commerce and (d) actual damage to the
plaintiff that (e) results from the deception. The plaintiff must show
that the deceptive act caused the damage.
w w w. a r n s t e i n . c o m
De Bouse maintained that she was not required to have received
any direct communication from Bayer to maintain her CFA action
because her claim was based on an omission and concealment
by Bayer that allowed Bayer to inflate the cost of its product.
However, the Court relied on several cases where such a “market
theory” of causation was rejected. The Court also held that every
member of the class must have actually seen and been deceived by
the statement or omission. Where a consumer does not receive any
communication or advertising from a defendant, whether direct or
indirect, the consumer cannot prove that he or she was damaged
by a statement or omission by the defendant.
As to the second question, because prescription drugs might be
“unavoidably unsafe” for their intended and ordinary use due to
harmful side effects that could occur in some patients and not
others, a drug manufacturer cannot ever say with certainty that
its product, when used as intended, will be reasonably safe for all
patients. Accordingly, the mere sale of a prescription drug cannot
constitute a misrepresentation.
On the third question, the Court determined that an actionable
deception did not have to be made directly to the party bringing
the suit. It could be made indirectly with the intention that it reach
the consumer and influence his or her actions, if the consumer
actually receives the deceptive statement, relies on it and is dam-
aged. Because De Bouse did not claim that her doctor was actu-
ally deceived by Bayer’s advertisements or statements, she was not
entitled to rely on a claim that she was indirectly deceived.
In addition to state statutes, § 43(a) of the Lanham Act (15 U.S.C.
§ 1125(a)) provides a federal cause of action for false or mislead-
ing advertising. False or misleading affirmative statements and
material omissions can be actionable. A competitor can bring an
action under § 43(a) by alleging that a statement was false or mis-
leading, that the statement was material (in that it misrepresented
an inherent quality or characteristic of the product and consumers
would rely on it to make purchasing decisions and that consumers
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DILUTION Continued from Page 5 CONSUMER Continued from Page 6

the “degree of similarity” as the first of the six factors. Thus, the
district court gave too much weight to the similarity factor and did
not adequately determine whether Black Bear’s mark “impairs the
distinctiveness of the famous mark.” The district court found that
the Starbucks mark was famous and distinctive, that Starbucks was
engaging in substantially exclusive use of the mark and that there
was a high degree of recognition of the Starbucks mark. Although
concluding that the district court was correct in finding that the
marks were only “minimally similar,” the Second Circuit deter-
mined that the dissimilarity alone should not have defeated the
blurring claim as similarity is only one factor in the analysis. Bad
faith and actual confusion were also not required.
In Levi Strauss & Co. v. Abercrombie & Fitch Trading Co., No.
09-16322, the U.S. Court of Appeals for the Ninth Circuit is consid-
ering a similar issue in the context of stitching designs on the back
pockets of jeans. The International Trademark Association has
submitted an amicus curiae brief in that case to overcome the Ninth
Circuit’s requirement that the marks be “identical or nearly identi-
cal” to constitute dilution.
did rely on the statement. In order to recover money damages, the
competitor must show that it lost sales as a direct result of the false
or misleading statement, had its goodwill or reputation harmed by
the false advertising or spent money to correct the impression made
by the false advertising.
The U.S. Court of Appeals for the Seventh Circuit also recently
considered the Illinois CFA and held that a Florida resident could
not sue an insurance company with a home office in Illinois under
that statute or the Florida consumer fraud statute (FSA § 501.201)
because (1) the circumstances relating to the disputed transaction
did not occur primarily and substantially in Illinois and (2) the
Florida statute bars suits against insurers. Crichton v. Golden Rule
Insurance Company, U.S. Court of Appeals for the Seventh Circuit,
No. 07-3333 (August 5, 2009).
Source: De Bouse v. Bayer AG, Supreme Court of Illinois, No. 107528, Decem-
ber 17, 2010,

Source: Starbucks Corp. v .Wolfe’s Borough Coffee, Inc., U.S. Court of Appeals
for the Second Circuit, No. 08-3331-cv, December 3, 2009

The Intellectual Property Practice Group counsels clients on matters related to the
protection of trademarks, copyrights, domain names and trade secrets, including
preparation and processing of trademark and copyright applications, unfair com-
petition, rights of privacy and publicity, review of Web sites and advertising claims,
and preparation and registration of contest and game promotion rules.

Judith L. Grubner Joel B. Rothman

312.876.7885
jlgrubner@arnstein.com
Ms. Grubner is a partner in the firm’s Chi-
cago office. She concentrates her practice
on intellectual property, specializing in
trademarks, copyrights, domain names
and sweepstakes, contests and game
promotions. Ms. Grubner is a speaker
for the Chicago and Milwaukee Bar Associations, the Midwest
Society of Professional Consultants and Society of Professional
Journalists. In July 2009 Ms. Grubner was named to the list
of Leading Lawyers in Advertising & Media Law by Leading
Lawyers Network.
561.650.8480
jrothman@arnstein.com
Mr. Rothman is a Florida Bar board
certified Intellectual Property lawyer and
a partner in the firm’s West Palm Beach
office. Mr. Rothman represents individ-
ual and corporate clients in intellectual
property infringement litigation involv-
ing patents, trademarks, copyrights, trade secrets, trade libel
and related commercial matters. His litigation practice also
includes significant focus on electronic discovery issues such
as e-discovery management and motion practice relating to
e-discovery.

Misha J. Kerr
561.650.8486
mjkerr@arnstein.com
Misha Kerr is an intellectual property
associate in the firm’s West Palm Beach
The editors acknowledge the contributions to this issue
office.
of Eric Seidmon.

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