Fortres Grand Corp. v. Warner Bros. Entm't Inc.

• Decision Date: 14 August 2014
• Docket Number: No. 13–2337.,13–2337.
• Citation: 763 F.3d 696
• Parties: FORTRES GRAND CORPORATION, Plaintiff–Appellant, v. WARNER BROS. ENTERTAINMENT INC., Defendant–Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

763 F.3d 696

FORTRES GRAND CORPORATION, Plaintiff–Appellant,

v.WARNER BROS. ENTERTAINMENT INC., Defendant–Appellee.

No. 13–2337.

United States Court of Appeals, Seventh Circuit.

Argued Dec. 10, 2013.

Decided Aug. 14, 2014.

Phillip Barengolts, Attorney, Pattishall, McAuliffe, Newbury, Hilliard & Geraldson, Chicago, IL, Christopher R. Putt, Attorney, May, Oberfell & Lorber, Mishawaka, IN, for Plaintiff–Appellant.

Andrew H. Bart, Attorney, Jenner & Block LLP, New York, NY, Keith V. Porapaiboon, Attorney, Jenner & Block LLP, Chicago, IL, for Defendant–Appellee.

Before MANION, ROVNER, and HAMILTON, Circuit Judges.

MANION, Circuit Judge.

Fortres Grand Corporation develops and sells a desktop management program called “Clean Slate.” When Warner Bros. Entertainment used the words “the clean slate” to describe a hacking program in the movie, The Dark Knight Rises, Fortres Grand noticed a precipitous drop in sales of its software. Believing Warner Bros.' use of the words “clean slate” infringed its trademark and caused the decrease in sales, Fortres Grand brought this suit. Fortres Grand alleged that Warner Bros.' use of the words “clean slate” could cause consumers to be confused about the source of Warner Bros.' movie (“traditional confusion”) and to be confused about the source of Fortres Grand's software (“reverse confusion”). The district court held that Fortres Grand failed to state a claim under either theory, and that Warner Bros.' use of the words “clean slate” was protected by the First Amendment. Fortres Grand appeals, arguing only its reverse confusion theory, and we affirm without reaching the constitutional question.

I. Factual Background

Fortres Grand develops and sells a security software program known as “Clean Slate.” It also holds a federally registered trademark for use of that name to identify the source of “[c]omputer software used to protect public access computers by scouring the computer drive back to its original configuration upon reboot.” Trademark Reg. No. 2,514,853. As the description in the trademark registrations suggests, the program wipes away any user changes to a shared computer (wiping the slate clean, so to speak). It is the kind of program that might be used at schools, libraries, hotels, etc., to keep public computers functioning properly and free of private data. Because a desktop management program is security software, its single most important characteristic is its trustworthiness. Fortres Grand had been able to establish its Clean Slate software in the marketplace as a trustworthy program.

In July 2012, Warner Bros. released The Dark Knight Rises, the third and final installment in a film depiction of the comicbook hero Batman. The film was an immense commercial success. In the film, Batman and his allies battle a shadowy organization hell-bent on the destruction of Gotham City, Batman's home town. One of Batman's allies, the antihero Selina Kyle (Catwoman), begins the story as an unwitting pawn of the shadowy organization. In exchange for her unique services as a cat burglar, the organization agrees to give her a software program known as “the clean slate,” which was developed by “Rykin Data Corporation” and enables an individual to erase all traces of her criminal past from every database on earth so that she may lead a normal life (that is, to wipe her slate clean).¹ But after Kyle completes her task, she is betrayed and told that the program, “the clean slate,” does not exist. When she becomes aware of the extent of the shadowy organization's plans—to detonate a nuclear device in Gotham City—she aids Batman in neutralizing the threat. Near the climax of the movie, the destruction of the city appears imminent. But Batman assembles a team, including Selina Kyle, to try to save the city. Batman's alter ego—the billionaire, industrialist, and philanthropist Bruce Wayne—had secretly acquired and hid the clean slate program. Batman gives “the clean slate” program to Selina Kyle in exchange for her aid. After rendering the agreed aid and obtaining the means to a clean slate and escape, she nonetheless stays to continue combating the nuclear threat. (*Spoiler Alert*) Batman and his allies are able to save Gotham City and, in the closing scene of the movie, we see that Selina Kyle has apparently used the program to erase her criminal past and that she is leading a “normal” life with Bruce Wayne (to the extent dining at a Florentine café with the billionaire alter ego of the Caped Crusader is normal).

Additionally, as part of the marketing of the movie, two websites were created purporting to be affiliated with the fictional Rykin Data Corporation. ² The websites contained descriptions of the clean slate hacking tool and its operation and an image of a fictional patent. Nothing was available for purchase or download from the websites—they were purely an informational extension of the fictional Gotham City universe.³

After the film was released, Fortres Grand noticed a significant decline in sales of its Clean Slate software. It believes that this decline in sales was due to potential customers mistakenly believing that its Clean Slate software is illicit or phony on account of Warner Bros.' use of the name “the clean slate” in The Dark Knight Rises. Accordingly, Fortres Grand filed suit alleging that Warner Bros.' use of the words “clean slate” in reference to the software in its movie infringed Fortres Grand's trademark in violation of Lanham Act §§ 32, 43 (codified at 15 U.S.C. §§ 1114, 1125 respectively), and Indiana unfair competition law. But, on Warner Bros.' motion, the district court dismissed Fortres Grand's complaint under Rule 12(b)(6) for failing to state a claim. The district court concluded that Fortres Grand had not alleged a plausible theory of consumer confusion, upon which all of its claims depend, and that Warner Bros.' use of the words “the clean slate” was protected by the First Amendment. Fortres Grand appeals.

II. Discussion

“We review the granting of a motion to dismiss de novo and affirm if the complaint does not include facts that state a plausible claim for relief.” Active Disposal, Inc. v. City of Darien, 635 F.3d 883, 886 (7th Cir.2011) (citing Justice v. Town of Cicero, 577 F.3d 768, 771 (7th Cir.2009)). “Our analysis rests on the complaint, and we construe it in the light most favorable to the plaintiffs, accepting as true all well-pleaded facts alleged and drawing all permissible inferences in their favor.” Id. Allegations of consumer confusion in a trademark suit, just like any other allegations in any other suit, cannot save a claim if they are implausible. See Eastland Music Grp., LLC v. Lionsgate Entm't, Inc., 707 F.3d 869, 871 (7th Cir.2013) (citing Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)), cert. denied, ––– U.S. ––––, 134 S.Ct. 204, 187 L.Ed.2d 46 (2013).

All three of Fortres Grand's claims depend on plausibly alleging that Warner Bros.' use of the words “clean slate” is “likely to cause confusion.” Lanham Act § 32, 15 U.S.C. § 1114(1)(a) (infringement of registered trademarks); Lanham Act § 43, 15 U.S.C. § 1125(a)(1) (infringement of unregistered trademarks and other unfair competition); see Dwyer Instruments, Inc. v. Sensocon, Inc., 873 F.Supp.2d 1015, 1040 (N.D.Ind.2012) ( “The analysis under the Lanham Act for unfair competition also applies to claims for unfair competition under Indiana common law.”).⁴ But general confusion “in the air” is not actionable. Rather, only confusion about “origin, sponsorship, or approval of ... goods” supports a trademark claim. 15 U.S.C. § 1125; see also4 McCarthy on Trademarks and Unfair Competition § 24:6 (4th ed.) (describing the various semantic formulations of the actionable objects of confusion, which are the same under §§ 1114 and 1125); Custom Vehicles, Inc. v. Forest River, Inc., 476 F.3d 481, 484 (7th Cir.2007) (using the phrase “emanates from, is connected to, or is sponsored by” partially drawn from “affiliation, connection, or association” in § 1125 to communicate the same concept). Further, “goods” means “the tangible product sold in the marketplace.” ' Eastland Music, 707 F.3d 869, 872 (quoting Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 31, 123 S.Ct. 2041, 156 L.Ed.2d 18 (2003)). For convenience, we generally use the word “origin” as shorthand for “origin, sponsorship, or approval.”

In a traditional trademark action, the confusion of origin is mistaking a junior user's product as originating from a senior user. (“Senior user” meaning the first, and protected, user of the mark and “junior” user meaning a later, and potentially infringing, user of the mark.) Initially, Fortres Grand argued that consumers could be confused into thinking that the movie was sponsored by Fortres Grand by virtue of the appearance of “clean slate” software. It has since abandoned those arguments on appeal.

Instead, Fortres Grand argues that it has stated a claim via “reverse confusion,” a theory that we have recognized. See Peaceable Planet, Inc. v. Ty, Inc., 362 F.3d 986, 987 (7th Cir.2004) (citing Sands, Taylor & Wood Co. v. Quaker Oats Co., 978 F.2d 947, 957–58 (7th Cir.1992)); see also4 McCarthy §§ 23:10, 25:6 n.1 (distinguishing between “reverse passing off” and “reverse confusion”). In reverse confusion, the senior user's products are mistaken as originating from (or being affiliated with or sponsored by) the junior user. This situation often occurs when the junior user is a well-known brand which can quickly swamp the marketplace and overwhelm a small senior user. Quaker Oats Co., 978 F.2d at 950 (junior user was the manufacturer of Gatorade); see also4 McCarthy § 23:10 (discussing examples of reverse confusion cases against junior users like Goodyear, Maytag, and Mattel). The harm from this kind of confusion is that “the senior user loses the value of...