The burden of showing fraud in a trademark filing is ever-evolving but always high. A similarly high standard applies when it comes to meeting the “exceptional case” requirement for an award of attorneys’ fees for the prevailing party. Nevertheless, some cases involve such obvious wrongdoing that the burdens can be met before discovery even opens. This is one of those cases.
The story begins in July 2007, when book publisher Melodrama Publishing, LLC (“Melodrama”) hired author Danielle Santiago to write two books, Cartier Cartel and Cartier Cartel – The Sequel, to be published under the pseudonym “Nisa Santiago.” When Santiago failed to deliver a complete manuscript – she delivered only two full chapters and a synopsis of stories and characters by the publishing deadline – Melodrama terminated the publishing agreement and demanded return of the half of the advance that had been paid to Santiago upon execution of the agreement. Santiago complied.
Several months later, Melodrama published a novel entitled Cartier Cartel under the pseudonym “Nisa Santiago.” Melodrama has since published six further books in the Cartier Cartel series, written by third party ghostwriters. Santiago claimed that her draft chapters and synopsis were used in the book series. However, an action for copyright infringement by Santiago was dismissed by the Southern District in 2011. She did not appeal the dismissal.
Instead, on the same day that Santiago’s copyright infringement action was dismissed, Santiago’s attorney filed an application on Santiago’s behalf with the U.S. Patent and Trademark Office (“PTO”) seeking registration of the mark “Nisa Santiago.” She proceeded with the application even though her agreement with Melodrama provided for Santiago to waive any right to any right in any “trademark, trade name, logo, imprint or other identification” used by Melodrama. The agreement further provided that Santiago not use any such identification “during the term of this agreement or thereafter.”
In addition to identifying Santiago as the owner of the mark, the application claimed “a series of books and written articles in the field of fiction” as the relevant goods and services sold under the mark – even though she had written just two chapters and some outlines. The application also stated that the earliest date of Santiago’s “first use anywhere” was in June 2007, around the time she was negotiating with Melodrama. Moreover, the application stated that Santiago’s “first use in commerce” was on April 28, 2009, the date upon which the first Cartier Cartel book was published by Melodrama – well after termination of the agreement. As a specimen, Santiago included the cover of Cartier Cartel with her application. Santiago’s attorney, who submitted the application, also included a declaration that, to the best of his knowledge, Santiago was the owner of the mark, that no other entity has the right to use the mark in commerce, and that all statements in the application were true and correct.
In September 2011, the PTO issued an Office Action regarding Santiago’s application, requesting that she provide evidence that the mark is used in commerce in connection with a fictional series rather than merely a single work. (In the United States, a single literary title is not entitled to receive a trademark registration unless it signifies a series of books or some other type of goods or services.) Santiago’s attorney submitted images of the covers of the first two Cartier Cartel books in response, which identify the author as “Nisa Santiago.” In May 1, 2012, the PTO approved Santiago’s application and issued a registration. Shortly thereafter, Santiago’s attorney began issuing cease and desist letters, including to Melodrama and several of the distributors of the Cartier Cartel series. In response, Amazon stopped selling Melodrama’s titles until resolution of the dispute.
In October 2012, Melodrama filed a complaint seeking, among other relief, a declaratory judgment cancelling Santiago’s federal trademark registration on four grounds: lack of use in commerce, lack of ownership, likelihood of confusion with a previously used mark, and fraud. Santiago’s answer to the complaint admitted certain crucial allegations, including that she has never used the mark “Nisa Santiago” in commerce – a necessary prerequisite to receiving a trademark registration from the PTO. Emboldened by this grave admission, Melodrama moved for judgment on the pleadings, as well as for damages and an award of attorneys’ fees. Finding that Santiago’s admissions were sufficient to find on not just one, but on all four grounds, Judge Rakoff of the Southern District granted Melodrama’s motion in its entirety.
The review of the merits was a relatively straightforward affair. First, Santiago had admitted that she had failed to use the mark in commerce. While a “use in commerce” must be “sufficiently public to identity or distinguish the marked goods in an appropriate segment of the public mind as those of the adopter of the mark,” Santiago’s alleged “uses” – in contract negotiations and chapter drafts – never reached a single end consumer. Second, her contract and own admissions established that she did not own the mark. Third, the mark was confusingly similar (and in fact identical) to Melodrama’s mark, which was used in conjunction with the same type of goods (novels). Given that novels are a relatively inexpensive impulse buy, the court held that the public could easily mistakenly assume that the goods originate from the same source or are associated with each other.
Finally, the court held that cancellation was valid on grounds of fraud. Santiago protested that mere negligence is not enough to establish fraud, but the court found enough wrongful acts at the pleading stage to find the necessary bad intent. As evidence, the court cited to Santiago’s application affirming that she first used the mark in commerce in 2009 (despite subsequently admitting that she never did), her representation that she owned the mark, her knowledge that Melodrama had contractual right to use the mark (and failure to mention this to the PTO) and, most damningly, her submission of covers of Melodrama’s books as supposed examples of her own use of the mark.
Having held that Melodrama should prevail not merely on cancellation but on the right to receive damages under section 38 of the Lanham Act, the court referred the determination of the amount of damages to the Magistrate Judge. It also issued a permanent injunction requiring Santiago to cease and desist from using the “Nisa Santiago” mark, based on Santiago’s previous fraudulent trademark registration and sending of threatening letters to Melodrama and its distributors. The court stated that Santiago’s “fraud, baseless threats of vexatious litigation, and unlawful interference with Melodrama’s business relationships” were more than sufficient to justify granting an injunction, in addition to damages resulting from the fraud and attorneys’ fees.
A Few Take-Home Lessons
From Nancy Drew and The Hardy Boys to Sweet Valley High and Gossip Girl, there is a tradition within the publishing industry of hiring ghostwriters to write novels in book series under another author’s name or a pseudonym. As publishing becomes increasingly “brand” based and publishers seek to find the next Fifty Shades of Grey or Tom Clancy to leverage across platforms and consumer products lines, the temptation to hire writers on a work-for-hire basis will become increasingly strong. The Melodrama decision should serve as a cautionary tale for publishers and writers alike, as it demonstrates the importance of executing strong contracts and securing trademarks.
In this instance, the publisher Melodrama was protected by its robust work-for-hire contract (through which Santiago surrendered all rights to trademarks in the series), its timely use in commerce of the Cartier Cartel name and, to a large degree, Santiago’s naiveté and fraudulent behavior. With the modification of some facts, however, it is easy to imagine a nightmare scenario for Melodrama. If Santiago had not signed the contract, or had self-published her manuscript online before Melodrama hit the market, Melodrama may have found itself in a trickier situation, one possibly involving factual questions about priority and ownership of any trademark rights.
The Melodrama decision is unclear on whether Melodrama itself had registered the “Nisa Santiago” trademark. Publishers can protect themselves by ensuring that all relevant trademarks are properly registered early on, thus protecting themselves against authors who subsequently claim ownership over a mark (for more on the benefits of early registration, see part one of our “Trademark Basics” series).
Here, Melodrama was able to prevail in part because two of its books were already “in commerce” at the time of Santiago’s filing. However, Melodrama would ideally have registered its Cartier Cartel trademark as a series of books before publishing the first book. If a publisher believes that a book has the potential to become a series, it can register the series with the PTO under “intent to use.” This gives the publisher 3-4 years to prove use in commerce, enough time to release further books (particularly given the ease of publishing electronically) and gauge whether the publisher has a hit on its hand. The registration will issue when the publisher can show there’s a series, and the publisher will get the priority date back to the date of first filing. Those looking to create the next Twilight, Game of Thrones or Mortal Instruments should take note.