Social Tech Rushes To Market And Loses MEMOJI Lawsuit Against Apple – Intellectual Property

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:

The Facts

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

The Claims

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).

The Decision 

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.

This alert provides general coverage of its subject area. We
provide it with the understanding that Frankfurt Kurnit Klein &
Selz is not engaged herein in rendering legal advice, and shall not
be liable for any damages resulting from any error, inaccuracy, or
omission. Our attorneys practice law only in jurisdictions in which
they are properly authorized to do so. We do not seek to represent
clients in other jurisdictions.

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