It’s a tale as old as time (and, one that has been “scientifically” proven IRL): slow and steady wins the race. Conversely, as in the recent case of Social Technologies v. Apple, rushing a product to market, ostensibly only to bring a trademark lawsuit against Apple and—in Social Tech’s words—“get PAID” (emphasis in original), does not win the day. Here, it resulted in a loss at district court, affirmed by the Ninth Circuit, and cancellation of Social Tech’s federal registration for MEMOJI. Here’s what you need to know:
In April 2016, Social Tech filed an application to register the trademark MEMOJI, based on its bona fide intent to use the mark on mobile phone software. Once the application was approved by the Trademark Office, Social Tech had up to three years (or until approximately June 2021) to use the mark and to file a statement of bona fide use in commerce and obtain a registration.
Between April 2016 and June 2018, Social Tech created a business plan, promotional materials, and an investor presentation for the app; started a website; obtained a single investor; and talked to a developer. Importantly, the developer did not write any code before June 2018, and Social Tech did not engage in any public-facing activities under the MEMOJI mark.
Enter Apple, which announced its acquisition of the rights in MEMOJI from a third party on June 4, 2018, and released a publicly available beta version of its app on June 25, 2018. Public beta testing of software is sufficient to constitute bona fide use of a mark in commerce, giving Apple rights in MEMOJI at least as of June 25, 2018. (Had the case taken a different turn, then we might be discussing whether the rights Apple acquired from the third party gave it priority over Social Tech, but the Ninth Circuit declined to reach that issue.)
Upon learning of Apple’s intentions for MEMOJI, Social Tech kicked development of its app into high gear, ultimately releasing a bug-infested app three week later, on June 28, 2018. The app was downloaded 100 times within a month of release, and 5,000 times within the first year. On June 30, 2018, Social Tech filed a statement of use with the Trademark Office, swearing that it had bona fide use of the mark in commerce. Its registration issued shortly thereafter, giving it constructive priority as of April 2016, when it filed the underlying application.
Armed with a trademark registration, actual use as of June 28, 2018 and constructive use as of April 2016, Social Tech sued Apple for trademark infringement and unfair competition. Apple filed a counterclaim to cancel Social Tech’s registration, arguing that Social Tech was not entitled to a registration because it never had bona fide use of the mark. Instead, Social Tech rushed its app to market solely to reserve its rights in the mark, sue Apple, and ostensibly, coax a large settlement payment. In support, Apple entered a number of emails, with statements such as “[t]ime to get paid, gentlemen,” “[i]n other news . . . the initial letter has been sent to Apple. The process has begun. Peace and wealth!,” and “[w]e are lining up all of our information, in preparation for a nice lawsuit against Apple, Inc! We are looking REALLY good. Get your Lamborghini picked out!” (emphasis in original).
Both the district court and the Ninth Circuit agreed with Apple, finding that summary judgment on its cancellation claim appropriate because there was “no material issue of fact as to whether Social Tech engaged in bona fide use of the MEMOJI mark in commerce”. In short, there was is no dispute that Social Tech did not use the mark before Apple’s announcement. Its pre-sales activity “created no association among customers between the mark and the mark’s owner” and so “they were not sufficiently public to entitle Social Tech to trademark protection for the MEMOJI mark.”
As to the constructive priority arising from Social Tech’s registration, the Ninth Circuit agreed that Social Tech did not have bona fide use of the mark in commerce and, therefore, was not entitled to a registration. Indeed, Social Tech’s use was “made merely to reserve a right in the mark,” and not for “genuine commercial reasons warranting trademark protection.” The Ninth Circuit was careful to clarify that “rushing to develop a product or releasing a product of low quality” are not necessarily “sufficient to preclude a finding of bona fide use in commerce.” But, here, the rush after Apple’s announcement combined with the co-founder’s emails urging release to file a lawsuit, left no triable issue of fact as to whether Social Tech’s use was bona fide. Instead, it was merely to reserve rights in the mark and form the basis of a lawsuit against Apple.
As a result, the Ninth Circuit upheld the district court’s decision to cancel Social Tech’s registration, clearing the way for Apple to obtain its own registration and rendering Social Tech’s infringement lawsuit null and void.
One wonders, though, if Social Tech had truly intended to develop the Memoji app, and if had allowed the tortoise’s philosophy, staying its course and taking the time required to develop a well-functioning app—even the full three years allotted by the Trademark Office—could it have established bona fide use of the mark and held on to its registration? Perhaps. It certainly could have changed the narrative to a question about whether Apple properly acquired priority in the MEMOJI mark from a third party.
“While at the time of its original intent-to-use filing, Social Tech may have had some commercial intent to develop the Memoji application, at the time it filed its Statement of Use, its use of the MEMOJI mark was ‘made merely to reserve a right in the mark.’”