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2 recent cases in federal court showcase trademark treachery

December 16, 2015
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(Photo/court record)

A steel giant’s trade name was used to misrepresent business deals with the intent to procure millions of dollars worth of machinery and financing, and an Amish-country spice maker alleges a local rival is ripping off its registered trademark.

These two recent cases in the U.S. District Court for the Northern District of Indiana illustrate the difficulties in policing registered marks on intellectual property, but the cases also show the means of recovery at rights holders’ disposal when their IP marks are violated.

“It’s just a constant battle brand owners have to face,” said Mark Janis, director of the Center for Intellectual Property Research at Indiana University Maurer School of Law. “The law, I think, largely does expect parties are going to act in good faith, but when someone doesn’t act in good faith, the law provides remedies.”

Stealing from Big Steel?

The Burns Harbor steel plant operated by ArcelorMittal USA, an affiliate of the world’s largest steelmaker, was a victim of bad faith and more, Chief Judge Philip Simon ruled last month. Simon ordered default judgment in the steel giant’s favor in a claim against Albert Arillotta and his affiliated Massachusetts-based companies.

focus-steel-pic-15col.jpg Foundry workers are shown at the ArcelorMittal steel plant in Burns Harbor. The company was a victim of misrepresentations made by Massachusetts-based companies. (Photo/ArcelorMittal USA)

“Defendants failed to respond to or participate in this litigation in any way,” Simon wrote. “I will order that ArcelorMittal produce its legal bills for my in camera review to determine its attorney fee award.” The steelmaker previously asserted legal fees of more than $46,000. ArcelorMittal had not filed a revised claim for fees at IL deadline.

The steelmaker claimed, and Simon accepted as true because of the default posture of the case, that Arillotta made numerous misrepresentations to another company, Economy Industrial Corp., about business dealings with ArcelorMittal. According to the record, Arillotta claimed the steelmaker contracted with one of his companies, NMC Metals Corp., to install a pig iron casting machine at the Burns Harbor plant. He persuaded Economy Industrial to help design and manufacture the machine.

“This was untrue,” Simon wrote of the purported contracts between Arillotta and the steelmaker. “To support the lie, Arillotta created a false contract between NMC and ArcelorMittal,” co-opting the company name and forging the names of executives. When Arillotta didn’t pay Economy, that firm made demands on the steelmaker.

“The misrepresentations didn’t end there,” Simon noted. Arillotta fabricated purchase orders and invoices for the purchase of pig iron by the steelmaker. He also used a fake contract for another of his companies, claiming the steelmaker would pay $7.5 million for demolition of a power plant in Cleveland, according to the record. These documents were then provided to creditors in an attempt to secure financing. In all, Arillotta created fake documents in an effort to procure at least $10 million in financing or machinery, the record shows.

Along with state claims of deception and forgery, ArcelorMittal filed counts alleging false designation or origin and false endorsement under the Lanham Act; tarnishment and dilution of famous marks under the Lanham Act; and willful deceptive trade practices.

The award of attorney fees is permitted in “exceptional” cases, a determination Simon made based on the uncontested allegations of deliberate misrepresentation.

“The court really saw this as a straight-up case of fraud,” Janis said. “The plaintiff gets an injunction which they certainly want, and they have an order to have attorney fees paid, but they have to go out and enforce that, and that’s not easy to do.”

Chicago attorney Joseph Kincaid, who represented ArcelorMittal, did not respond to messages seeking comment. Arillotta, who is unrepresented in the matter, could not be reached and did not respond to messages seeking comment. The case is ArcelorMittal USA LLC v. Arillotta, et al., 2:15-CV-239.

Not so ‘Happy Salt’

Another Northern District case filed last month claims Shipshewana in the heart of northern Indiana’s Amish country just isn’t big enough for two peddlers of “Happy Salt.”

Shipshewana Spice Co. says its claims against defendants doing business as Shipshewana’s Best Spice Co. likewise constitute an exceptional case that qualifies for payment of attorney fees for defending against alleged counterfeiting. The company also charges trademark infringement, false description, trademark dilution and unfair competition.

Shipshewana Spice obtained a registered trademark for “Happy Salt” in 2012. The company discovered the defendant selling “Happy Salt Seasoning” at markets and online. Plaintiffs sent cease and desist letters, but the rival products remained on the market, at which point the company sued, according to the complaint.

“Both plaintiff’s and defendant’s spices are sold in containers of identical size and shape. The product contained therein is visibly similar,” the complaint alleges. Both labels carry their respective company names and depict Amish-inspired horse-and-buggy illustrations.

“Defendant has routinely been and continues to be fraudulently passing off Accused Products in an effort to interfere with and deceptively lure business away from Plaintiff,” the suit says.

Named defendant Bob Wilson of Millersburg could not be reached for comment, and no attorney has entered an appearance for defendants at IL deadline. Plaintiffs’ attorney Garrick Lankford declined to comment. The case before District Judge Joseph Van Bokkelen is Kevin Horn, D.B.A. Shipshewana Spice Co. v. Bob Wilson, D.B.A. Amish Farms and Shipshewana’s Best Spice Co., 3:15-CV-524.

“In these scenarios, intent certainly is a factor whether there is ultimate liability, but the key question is whether consumers likely would be confused” by the similar products, Janis said. “In a case like the Happy Salt case, I think they would be unless ‘happy salt’ had been used by these parties for years and years and by all kinds of consumers.”

Janis said because the Happy Salt name was registered, makers should have used the ® symbol instead of the TM symbol after the name on the product label. While both provide some measure of protection and notice to would-be counterfeiters, the registration symbol indicates there is a presumption the trademark is owned and that the owner potentially has access to receipt of attorney fees if the owner prevails in a case deemed extraordinary.

In cases like these, Janis said there’s little cutting-edge law involved, but practitioners and law students need to know the wide range of remedies clients are entitled to, from injunctions to damages and attorney fees in extraordinary cases.

While courts rule blatant IP violation cases extraordinary, Janis said they’re fairly common: “You can see that fire a long way away.

“I’m not so sure there’s too much you can do to prevent this,” he said of IP rights violators. “You can make sure your IP rights are secured and prepare to adopt an aggressive litigation posture after these things arise, and hope word gets around and people won’t mess with you.”•

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