Oculus vs. Oculu: Begun the IP War Has

Posted by Eric Greenbaum on February 12, 2014 · 1 Comment 

The Internet is buzzing with news of the first shots fired in the IP battle between Oculus VR Inc., and Oculu LLC.  According to the most up to date information currently at hand, OCULU an online video streaming company is suing Oculus VR, the maker of the Oculus Rift brand VR head mounted display for 1) Trademark Infringement, 2)Trademark Dilution, 3) False Designation of Origin, and 4) Unfair Business Practices.

Currently, the complaint is not available on the Courts’ system for retrieval but I will upload it as soon as I can get it.  I have included a description of these causes of action below but I thought it might be interesting to examine some of the choices Oculus VR will face as a result of this case.

The most pressing choice Oculus VR will face is whether to fight or settle.  Based on my understanding of the (admittedly limited) facts of the case that have come to light, it seems like Oculus VR would be coming from a pretty strong position if they choose to fight.  The OCULU trademark is probably not a “famous” mark within the meaning of the Trademark Dilution Statute and therefore recovery on that cause of action is unlikely.  There are also strong arguments for why customers would not be confused by the concurrent use of both the OCULU and OCULUS marks, many of which have been elegantly expressed in the Reddit and Ars Technica comments accompanying the story.

That being said, the question remains on whether Oculus VR would want to spend the substantial sums of money necessary to litigate this lawsuit.  Defending this type of litigation through trial could easily accrue $250-750k in legal fees.  Therefore if a settlement could be reached for substantially less money, it may make financial sense for Oculus VR to settle.  Litigation can also be a huge distraction for a new company whose attention would be better focused on refining and releasing their product.

The bottom line is not the only consideration.  Oculus VR may want to send a message to other potential plaintiffs waiting in the wings.  An early, easy settlement may mark Oculus VR as an easy… well… mark.  Therefore it may make sense for them to vigorously fight the case.  It’s worth noting that OCULU will have to spend substantial sums to prosecute the case, also racking up legal bills in the $250k range.  Oculus VR is currently working with somewhere approaching $100 million in funding.  I don’t think OCULU has that kind of cash on hand.

It will be interesting to see how this case plays out for Oculus VR.  Whether they decide to settle or fight, the outcome of this case may have serious repercussions for the company.  I will track this story and update this post as I learn more.

Trademark Infringement: 

The elements of Trademark Infringement are fairly well established under both federal and state law.  In order to be successful the plaintiff must prove that the defendant’s use of the mark creates a “likelihood of confusion” about the origin of defendants goods or services.  The factors courts use to assess whether a likelihood of confusion exists include:

1. The similarity in the overall impression created by the two marks
2. The similarities of the goods and services involved
3. The strength of the plaintiff’s mark
4. Evidence of actual customer confusion
5. Defendant’s intent in adopting the mark
6. Physical proximity of goods in a retail marketplace
7. The degree of care likely to be exercised by the consumer, and
8. The likelihood of expansion of the product lines

Trademark Dilution:

The Federal Trademark Dilution Act of 1995 protects famous marks from uses that dilute their distinctiveness.  Interestingly, proving a likelihood of confusion is not necessary.  Under this law, a dilution claim can only be successful if the mark claiming dilution is “famous.”  According to the statute, a mark is “famous” when it is widely recognized by the general public as a designation of source of the goods or services of the mark’s owner.  The determining factors of whether a mark is “famous” include:

1. The degree of distinctiveness of the mark
2. The duration and extent of use
3. Amounts of advertising and publicity of the mark
4. Geographic reach of the mark
5. Channels of trade
6. Degree of recognition in trading areas
7. Similar marks by third parties
8. Whether the mark is registered

Kodak, Xerox and Exxon are examples of “famous” marks.  In other words, in order for OCULU to be successful against Oculus VR, they will need to establish that their mark, is “famous” within the meaning of the statute.

Once that prerequisite is satisfied, the case can proceed either through “blurring” or “tarnishment” theories of the case.  In “blurring”, the power of the mark is weakened through its identification with dissimilar goods (for example Exxon brand refrigerators).   In “tarnishment” the mark is cast in an unflattering light either by association with inferior products or “unseemly” products (for example, Toys R Us was successful in a tarnishment case against Adults R Us, an adult website.)

False Designation of Origin:

False Designation of Origin occurs when a “word, term, name, symbol, or device” is used in commerce which is likely to cause confusion as to the origin of the goods or services.

Unfair Competition:

Different categories of Unfair Competition exist under federal law including “passing off” and “false advertising.” With regards to “passing off,” which is likely to be the controlling concept in this case, the Lanham Act prohibits a person from using “false or misleading” statements in commerce, which are likely to cause confusion, mistake, or to deceive as to as to the origin, sponsorship, or approval of his or her goods, services.

Under California state law, Unfair Competition is defined as encompassing any one of the following five types of business “wrongs”: (1) an “unlawful” business act or practice; (2) an “unfair” business act or practice; (3) a “fraudulent” business act or practice; (4) “unfair, deceptive, untrue or misleading advertising”; and (5) any act prohibited by Sections 17500-17577.5.

Filed under IP, IP News, Trademarks, Virtual Reality · Tagged with Litigation, Trademarks, Virtual Reality