By Harold Berman, J.D.
A software servicing company—plaintiff Instant InfoSystems—could not be enjoined from using the name of a “computer enabled fax software” (RightFax) that was owned by defendant Open Text, even after a product servicing contract between the two companies had ended, a California appellate court has ruled. The appellate court concluded that the trial court had not erred in finding that Open Text was unlikely to succeed on the merits of its trademark infringement and related claims, or that the balance of harms favored InfoSystems. Because the support services provided by InfoSystems were not readily identifiable without naming the RightFax product, and because InfoSystems had used the RightFax mark only as reasonably necessary to identify its support services, the company could assert the affirmative defense of nominative fair use (Instant InfoSystems, Inc. v. Open Text, Inc., August 24, 2017, Landin, D.).
Terminated contract. Instant InfoSystems and Open Text had a contract under which Instant InfoSystems serviced a fax software product called RightFax, which belonged to Open Text. After Open Text terminated the contract in October 2015, Open Text allegedly informed its customers that Instant InfoSystems was not permitted to service RightFax, which Instant InfoSystems disputed. Open Text allegedly offered to Instant InfoSystem’s customers to take its place as support services. Instant InfoSystems then sued Open Text for intentional interference with a contractual relation and violation of California’s Unfair Competition Law. Open Text cross-complained, alleging trademark infringement, unfair competition, false advertising, and breach of contract.
Preliminary injunction. Open Text sought a preliminary injunction, asserting that Instant InfoSystems had breached its license agreement, which required InfoSystems to stop using Open Text’s trademark once the agreement ended, and that its continued use of the RightFax mark constituted trademark infringement and dilution. The state trial court denied Open Text’s motion, and Open Text appealed. The court of appeal affirmed the trial court’s denial of a preliminary injunction, holding that the lower court did not abuse its discretion by finding that Open Text could not demonstrate a likelihood of success on the merits, and that the balance of harms favored Instant InfoSystems.
Likelihood of success, infringement and dilution. The trial court did not abuse its discretion by finding that Open Text could not demonstrate a likelihood of success on the merits of its trademark infringement claim. Instant InfoSystems used the RightFax mark to refer to its support services for RightFax software, the appellate court explained, so InfoSystems could assert the affirmative defense of nominative fair use. The services that Instant InfoSystems provided to support RightFax were not readily identifiable without specifically naming RightFax. In addition, evidence submitted by Instant InfoSystems showed that the company’s use of the RightFax mark was limited to use that was reasonably necessary to identify its services, and the company’s web site made clear that InfoSystems was not endorsed or sponsored by Open Text. Finally, because substantial evidence supported the trial court’s finding that the nominative fair use defense was applicable, Open Text failed to show that success on the merits of its trademark dilution claim was likely.
Likelihood of success, false advertising. Open Text did not demonstrate a likelihood that it would prevail on the merits of its false advertising claim. The two companies submitted conflicting evidence on whether a consumer would be deceived by Instant InfoSystem’s use of the term “end of life” in describing certain RightFax products. Open Text submitted a declaration from RightFax’s product manager that Instant InfoSystem’s use of the term on its website and in customer emails was misleading and confusing because Open Text was not putting RightFax into “end of life,” and that Instant InfoSystem’s emails required Open Text to convince customers that RightFax would continue to be supported. However, Instant InfoSystems submitted a declaration that it had properly used the term “end of life” as it was understood in the industry and used by Open Text’s partners. The appellate court presumed that the trial court had properly resolved the conflicting evidence in favor of Instant InfoSystems, and concluded that substantial evidence supported the trial court’s finding.
Likelihood of success, breach of contract. Open Text was not likely to prevail on the merits of its breach of contract claim, according to the court. Even if a breach of contract claim existed, the competing declarations submitted by the two companies created a factual dispute on the issue of damages. Because substantial evidence supported the trial court’s implicit finding that no harm had occurred, the trial court did not abuse its discretion in finding that Open Text did not have a likelihood of success on the merits of its breach of contract claim.
Balance of harms. The trial court did not abuse its discretion through its implied finding that the balance of harms favored Instant InfoSystems. Although the trial court did not make an explicit finding regarding the balance of harms, the appellate court presumed that the trial court had made the necessary findings to support its order. The CEO of Instant InfoSystems had declared that, if a preliminary injunction were granted, his company’s harm would be the loss of business involving RightFax services, with which Instant InfoSystems had been engaged for over 15 years. Additionally, granting a preliminary injunction would change the status quo between the parties, which was the termination of the contract and several months of Instant InfoSystems using the RightFax trademark on its web site and in other communications. Finally, Open Text had delayed—for seven months after the agreement was terminated—its assertion of trademark infringement, trademark dilution, and breach of contract.
The case is No. B276691.
Attorneys: Allen Cooper (Ervin Cohen & Jessup) for Instant Infosystems, Inc. James V. Garvey (Vedder Price) for Open Text, Inc.
Companies: Instant Infosystems, Inc.; Open Text, Inc.
MainStory: TopStory Trademark CaliforniaNews
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