America is in the midst of an epidemic of frivolous trademark litigation. If you have followed the news over the past several months, there have been numerous fantastic examples: Hard Rock Hotel’s absurd case against Rock Star Hotels, which is not a hotel chain at all, but rather, a hotel booking service. FyreTV – a pornography company – suing Amazon over Amazon Fire TV. Yep, I’m sure people were accidentally signing up for Amazon Fire while looking for pornography. Today’s case provides an example of (basically) frivolous trade dress litigation (trade dress being a type of trademark claim). At issue: Boat manufacturer Yellowfin Yachts sued Barker Boatworks, principally for trade dress infringement. The central allegation in Yellowfin’s case: Yellowfin boats have a sleek design with a “sheer line”. Everybody recognizes a Yellowfin. You might be scratching your head and thinking, “Come on. Yellowfin must have had more than that!”. If so, you are sadly mistaken. In my opinion, the case was trash from the jump. But as often happens, companies with a bit of money are always able to find a big law firm willing to bill them, say, between $500,000 to $1 million for litigating a trademark claim that’s a sure loser. In the instant case, none other than the venerable Greenberg Traurig led the charge in the trial court, resulting in an unmitigated disaster. GT apparently reprised its role on appeal where the Eleventh Circuit basically laughed Yellowfin out of court. Spectacular. Let’s take a look:
Background Facts
Yellowfin Yachts makes high-end fishing bats. Since 2000, Yellowfin has predominantly been engaged in the manufacture and sale of fishing boats ranging from twenty-one to forty-two feet in length. According to Yellowfin, its boats are unique because they contain a “swept sheer line”. In other words, the line at the top of the boat is not straight, but instead is a gentle “s” shaped curve. In 2006, Yellowfin hired Kevin Barker as a vice president of sales. In 2014, Barker left Yellowfin and launched a competing company called Barker Boatworks. Barker never signed any employment agreement. He was not subject to any non-compete or non-solicitation restrictions. On his last day at Yellowfin, Barker downloaded hundreds of files from Yellowfin’s servers. Barker then proceeded to design and manufacture his own line of boats.
Yellowfin’s Lawsuit: Trade Dress Trash
In April 2015, Yellowfin sued Barker in the United States District Court for the Middle District of Florida. In its complaint, Yellowfin alleged trade dress infringement and false designation of origin under Section 43(a) of the Lanham Act, common law unfair competition, common trade dress infringement, and violations of Florida’s Uniform Trade Secrets Act. The District Court ultimately granted summary judgment in favor of Barker on all claims.
Yellowfin Loses Badly in the MDFL
With respect to the trade dress claims, the District Court made the following three holdings: (1) Yellowfin’s design is not unique or distinctive. (2) The “sheer line” at issue is functional, and functional aspects of design are not protectable. (3) No reasonable jury could conclude that potential buyers were likely to confuse a Yellowfin boat with a Barker boat. Because the District Court held there was no likelihood of consumer confusion, the District Court also disposed of the false designation claim. Finally, the Court found that Yellowfin had failed to identify a protectable trade secret, and, regardless, that Yellowfin did not demonstrate reasonable efforts to protect the alleged trade secrets at issue. Unwilling to accept defeat and read the writing on the wall, Yellowfin appealed. Exactly two groups of people in the entire world thought this was a good idea: Yellowfin and its attorneys.
Yellowfin Loses Badly (Again!) on Appeal
Any attorney with the most basic understanding of the Lanham Act could predict how the appeal of the trade dress claim would turn out for Yellowfin: Not good. And, indeed, that prediction came true. The Eleventh Circuit affirmed the District Court’s ruling in a thorough decision that suggests the Court was rather underwhelmed with Yellowfin’s case. Some highlights:
In resolving the trade dress issue, the Eleventh Circuit noted that Yellowfin had essentially zero evidence of any protectable trade dress. The best Yellowfin could do was cite to articles from boating magazines that said things like this: “You’ll never have difficulty discerning a Yellowfin. From the proud bow to the sweeping sheer, a Yellowfin is unmistakable.” Beyond that, Yellowfin pointed to its own self-serving declaration, which basically says that Yellowfin set out to create unique looking boats and that Yellowfin’s customers “comment on and identify” the Yellowfin sheer line. Madness! This is sheer madness!
Let’s take a step back and make sure that all of us are clear about what trade dress actually is. Trade dress is a recognizable non-functional design that consumers immediately associate with a brand. You want an example of a company that has a protectable trade dress? Red Bull. Red Bull’s design is non-functional, unique, and immediately associates with the brand. That’s a legitimate trade dress. Addidas. Coke. Now here is a Yellowfin boat:
According to Yellowfin, the top line of this boat is uniquely associated with the Yellowfin brand. Again, madness! Nonsense! The Eleventh Circuit made short work of the trade dress issue and reiterated the trial court’s holding. A couple highlights:
- Yellowfin presented little meaningful evidence of having any real trade dress.
- Yellowfin admitted that other boat manufacturers used similar designs.
- The claimed trade dress is functional. Functional trade dress is not protectable.
- Yellowfin boats and Barker boats each prominently display their own respective logos.
- Consumers buying boats are discerning enough not to be confused.
- Yellowfin produced zero evidence of actual consumer confusion.
After disposing of the trade dress claims, the Eleventh Circuit made relatively short work of the trade secret claim. According to Yellowfin, there were two types of trade secrets at issue: “source information” and “customer information”. Yellowfin’s explanation of its “source information” trade secret is mind-blowing:
“In the course of building Yellowfin’s boats, the company requires and incorporates into its boats materials and components from various sources. Yellowfin considers its sources, the contracts it has with those sources and the terms and conditions of those contracts as trade secrets.”
Not surprisingly, this argument failed in the District Court for several reasons. First, Yellowfin’s suppliers – and indeed, the suppliers in the industry generally – are well known. Their identities cannot be a trade secret. Second, the pricing Yellowfin obtained from those suppliers was not a trade secret. Yellowfin’s own expert testified that Barker – as a much smaller company – could never get the same (volume) deals as the much larger Yellowfin. Third, the Court held that historical vendor, pricing and discount information would be of no economic value to a new, much smaller, market entrant like Barker. Fourth, and perhaps most significantly, the Court held that Yellowfin gave Barker access to all of this information when he was employed there. Barker never had a non-compete, non-solicitation or confidentiality agreement. As such, there was no misappropriation. Barker learned all of the foregoing information in the ordinary course of his employment with Yellowfin. The Eleventh Circuit affirmed this reasoning.
As for its “customer information”, the Eleventh Circuit was equally unimpressed. The District Court rejected the customer information trade secret for two key reasons. First, everybody in Florida who owns a boat is required to register their boat with the state. So that information is hardly a secret. Second, Yellowfin gave Barker access to all of its customer information without ever requiring him to keep it confidential. Not only that, Yellowfin encouraged Barker to store the information on his personal laptop and cell phone without any security measures. And after Barker left the Company, Yellowfin never asked him to delete that information.
In the appellate court, Yellowfin argued the customer information trade secret extensively. The heart of Yellowfin’s argument: The Company kept its information in a password protected computer system and only a handful of employees had access to that system. Those employees, including Barker, had an implicit understanding that the customer information was confidential and not to be disclosed. Now there may be some legs to this argument. After all, employees owe their employers fiduciary duties. And some courts have found a fiduciary duty to keep certain information confidential, even in the absence of a written confidentiality agreement. But the Eleventh Circuit just wasn’t buying it. The Court held that Yellowfin’s failure to obtain a confidentiality agreement and encouraging Barker to put the customer information on his personal devices – without any protection – was fatal to its trade secret claim. Per the Court, “Yellowfin effectively abandoned all oversight in the security of the Customer Information.” And with that, the Eleventh Circuit affirmed the District Court’s ruling in its entirety.
The Takeaway:
- Frivolous Trademark Lawsuits: Many companies and corporate lawyers swear by aggressive trademark enforcement. I’m sure you’ve seen the practice guides written by big firms. They basically say, “It is imperative to sue anyone who comes within a million miles of your trademark because otherwise puppies will die and the world will explode tomorrow.” Not surprisingly, firms push this mantra because it makes them tons of money. Lots of in-house lawyers, especially at smaller companies, are generalists who do not understand trademark law. So they hire BIGLAW. And 9 times out of 10, BIGLAW says sue & protect your brand. Call me crazy, but in my view, filing frivolous trademark lawsuits and getting the snot beaten out of you doesn’t make you look tough and doesn’t protect your brand. It wastes money and makes you look like an idiot. Sure, police the market. Protect your brand when its actually necessary. And hire counsel who aren’t yes
- Nobody Gets Trade Dress: Trade dress is poorly understood. You don’t have a protectable trade dress unless your design/brand is distinct, everybody recognizes it and associates it with your brand, and it’s non-functional. Even then, a trade dress claim still gets evaluated under the familiar likelihood of confusion test. And when it comes to big, expensive purchases (like boats), buyers probably aren’t likely to get confused about what they’re purchasing absent something like outright counterfeiting.
The case is Yellowfin Yachts v. Barker Boatworks, 2018 WL 3734344 (11th Cir. Aug. 7, 2018).
– JP
Jonathan Pollard is a competition lawyer who has experience litigating complex non-compete, trade secret, trademark, and unfair competition cases throughout Florida and beyond. Pollard has appeared on or in the New York Times, Bloomberg, the Wall Street Journal, PBS News Hour, Digital Guardian, Fund Fire, Inc. Magazine and more. For more information, please call 954-332-2380.
