Retro Console War Part I of III - Atari Interactives Comes Out on Top Over Hyperkin Inc. In Trade Dress Battle Over their Iconic Controller Design
PART I of III - Background
Topic: Trade Dress - Video Game Controllers
I. INTRODUCTION
Plaintiff Atari Interactive, Inc. (“Atari Interactive”) filed this action against defendant Hyperkin Inc. (“Hyperkin”) on January 25, 2019. Atari Interactive asserts claims for: (1) false designation of origin, in violation of 15 U.S.C. § 1125(a); (2) common law unfair competition; and (3) trademark dilution, in violation of 15 U.S.C. § 1125(c). Hyperkin filed an answer on March 21, 2019. The gravamen of Atari Interactive's claims is that Hyperkin's videogame console and joystick controller infringe Atari Interactive's trade dress in Atari Interactive's own console and joystick controller.
Hyperkin filed a motion for summary judgment on June 1, 2020, and a statement of uncontroverted facts and conclusions of law on June 2, 2020. On June 15, 2020, Atari Interactive filed an opposition, , a statement of genuine disputed facts, and a statement of additional uncontroverted facts. On June 29, 2020, Hyperkin filed a reply, and an opposition to Atari Interactive's AUF.
The Court took Hypkerkin's motion under submission on July 17, 2020. Having carefully considered the parties' arguments, the Court finds and concludes as follows.
II. BACKGROUND
Unless otherwise noted, the Court references only those facts that are uncontroverted and as to which evidentiary objections have been overruled.
The Atari 2600 Game Console and Joystick Controller
Atari Inc., a well-known videogame company, was founded in California in 1972. In 1977, Atari Inc. began selling the Atari 2600 videogame console (“the 2600 Console”) and the Atari 2600 joystick controller (“the 2600 Joystick”). Users controlled the 2600 Console by using the 2600 Joystick. The 2600 Console and the 2600 Joystick are pictured below:
In 1980, the United States Patent and Trademark Office (“PTO”) issued two design patents, U.S. Patent Nos. D254,544 and D255,565, to Atari Inc. which covered the 2600 Joystick's ornamental design. The design patents contain the following illustrations depicting the 2600 Joystick's ornamental design:
The parties agree that Atari Inc.'s design patents covering the 2600 Joystick have expired.
The original 2600 Console featured “wood grain in order to match other home electronics from the 1970s.” By 1982, Atari Inc. discontinued using wood grain in its 2600 Console, releasing an all-black version nicknamed the “Darth Vader.” The 2600 Console subsequently “went through various iterations” including the “Atari 2600 Jr.” and the “Atari 2800.” These various iterations of the 2600 Console are pictured below:
Image 3 within Atari Interactive, Inc. v. Hyperkin Inc.
Some experts in the field have described the 2600 Console as “the most popular system of its day.”
Plaintiff Atari Interactive Acquires the Atari Brand
Corporate ownership of the Atari brand—and of the intellectual property rights regarding the 2600 Console and the 2600 Joystick—has changed over time. For example, on July 1, 1984, Atari Inc. entered into an asset purchase agreement with Tramel Technology, Ltd. (“Tramel Technology”). The agreement indicated that Atari Inc. had “been engaged primarily in the business of designing, manufacturing and selling home computers and related software, consumer video games and game program cartridges and coin-operated electronic video games.” The agreement further provided that “[t]he assets being sold to [Tramel Technology] consist of all of the assets, properties, rights and business of” Atari Inc. Tramel Technology thereafter changed its name to “Atari Corp.”
In 1986, Atari Corp. changed its name to “Atari Corporation.” Atari Corporation subsequently ceased selling the 2600 Console and the 2600 Joystick in 1992. Through a merger, JTS Corporation (“JTS”) thereafter acquired Atari Corporation in 1996.
On February 23, 1998, HIAC XI Corp. (“HIAC”), a subsidiary of Hasbro, Inc. (“Hasbro”), acquired the Atari brand from JTS. The purchase agreement included “[a]ll right, title, and interest in and to the Seller's Products” as well as “[a]ll Intellectual Property associated with the Seller's Products[.]” The agreement further defined “Intellectual Property” as: “any or all of the following and all statutory and/or common law rights throughout the world in, arising out of, or associated therewith: (i) all patents and applications[;] ... (v) all trade names, logos, trademarks and service marks, trademark and service mark registrations and applications together with the good will of the business symbolized by the names and the marks: ... and (x) all goodwill associated with any of the foregoing.”
HIAC subsequently changed its name to Atari Interactive, Inc., on May 7, 1998. Infogrames Entertainment SA, a French company, purchased Hasbro Interactive and its subsidiaries in 2000, gaining a controlling interest in Atari Interactive. Infogrames began using the name “Atari Interactive, Inc.” in 2003.
Atari Interactive's Commercial Activities Since the Early 2000s
Between 1996 to 2004, neither JTS, HIAC, Infogrames, nor Atari Interactive designed, manufactured, released, or sold any standalone videogame console systems or any videogame console products. Atari Interactive's Director of Licensing, Casandra Brown, attests, however, that in 2002, “Atari Interactive partnered with a prominent toy and consumer products company, Jakks Pacific, to develop and promote a ‘Plug and Play’ joystick modeled off the original 2600 joystick design.”
“The Plug and Play is a joystick that can be plugged into a television and plays well-known Atari games without the need for an accompanying console.” The Plug and Play “has continued to be promoted, offered for sale, and sold nationwide from 2002 to the present, including through major online and brick-and-mortar retailers such as Walmart, Target, Costco, Kohl's, and Amazon[.]” The Plug and Play and examples of its packing are pictured below:
In 2005, Atari Interactive began licensing the “Atari Flashback” series of consoles and joysticks which are modeled off of the 2600 Console and the 2600 Joystick. “The Atari Flashback console and joystick enable[a] users to play a library of classic Atari games all through one device and without the need for separate cartridges or discs.” Atari Interactive's Flashback series has been “promoted, offered for sale, and sold nationwide ... through major online and brick-and-mortar retailers such as Walmart, Target, Costco, Kohl's, and Amazon[.]” The Atari Flashback 2 and its packaging are pictured below:
Since the Atari Flashback 2's release, Atari Interactive has continually updated the Flashback series, “which is now up to its tenth edition.”
In addition to licensing retro-style consoles and joysticks modeled after the 2600 Console and the 2600 Joystick, Atari Interactive has marketed and promoted the 2600 Console and the 2600 Joystick in other ways. For example, “Atari Interactive has also licensed and promoted its games for use on other popular gaming systems.” “In several instances. Atari Interactive has featured the 2600 joystick design on the cover of or in promotional materials related to Atari games.” Examples of the covers of Atari games that Atari Interactive has licensed for use on the Nintendo Switch, Sony PlayStation 4, and Microsoft Xbox One videogame systems are pictured below:
Moreover, “[f]or over a decade, Atari Interactive has licensed products such as apparel and consumer products that depict or incorporate the 2600 joystick design.” Atari Interactive promotes and sells these products through multiple channels, including through its own website, through third-party websites, and at industry trade shows. Examples of these products are pictured below:
Atari Interactive Declares Chapter 11 Bankruptcy in 2013
Atari Interactive declared Chapter 11 bankruptcy in 2013. The parties dispute whether Atari Interactive did in fact—or was legally required to—list its purported trade dress rights in the 2600 Console and the 2600 Joystick in its bankruptcy asset schedules during its bankruptcy proceedings. Hyperkin contends Atari Interactive “failed to identify any trade dress rights” in “the bankruptcy asset schedules[.]”
Atari Interactive's Chief Executive Officer, Frederic Chesnais, asserts, however, that “Atari Interactive's bankruptcy schedules did list a variety of games that either depicted or incorporated the 2600 joystick trade dress, and any failure to specifically separate the joystick trade dress from other related intellectual property rights certainly did not reflect any intent to waive such rights, nor any understanding that Atari Interactive did not hold such rights.” Chesnais states that “[a]fter the 2013 reorganization, [he] led an initiative to return Atari Interactive and its affiliates back to profitability and growth.” According to Chesnais, “[t]hat initiative has succeeded, and the Atari Group is now profitable and has been engaged in a variety of new and exciting projects for several years.”
Hyperkin's CirKa A77 Joystick and Retron77 Console
Since its founding in 2007, Hyperkin has “developed various retro products to play games for products that can no longer be found on the market.” In 2016, “Hyperkin began advertising and selling a joystick modeled off the old Atari 2600 joystick[.]” Hyperkin sourced this joystick through a Chinese manufacturer, naming the product the “A77.” According to Hyperkin, its A77 Joystick is “marked with Hyperkin's trademark, “ ‘CirKa’ and packaged in highly distinctive packaging[.]” Hyperkin's A77 CirKa Joystick and packing are pictured below:
Hyperkin began marketing its Retron 77 console (“the Retron Console”) in 2017, offering it for sale in July 2018. Unlike “game systems that play some old Atari 2600 games” and which “include games preloaded into the system,” the Retron77 Console allows “people ... to play their old Atari 2600 cartridges, [sic] on a modem television.” According to Hyperkin, it “used its federally registered Hyperkin trademark and federally registered Retron trademark on the Retron77 packing to make sure customers knew that it was a Hyperkin product.”
Negotiations Between Atari Interactive and Hyperkin
The parties agree that in 2016 or 2017, Hyperkin approached Atari Interactive to try to obtain a license from Atari Interactive. The parties dispute, however, the potential license's scope. According to Atari Interactive, “Hyperkin approached Atari Interactive ... to try to obtain a license to sell its imitation Atari joystick and console.” Hyperkin contends, however, that “Hyperkin never asked [Atari Interactive] for any sort of license for the A77.” Instead, Hyperkin asserts that it “approached [Atari Interactive] about the possibility of making a console that could play original cartridges” and that Hyperkin “was interested in licensing games from [Atari Interactive] so that the consoles would ship with built-in games.” The parties ultimately did not come to an agreement.
On June 20, 2017, Atari Interactive's counsel sent Hyperkin a cease-and-desist letter. The letter indicated that Hyperkin “has developed, is promoting[,] ... and is ... offering for sale ... what appears to be a console platform compatible with legacy Atari cartridge games[.]” In addition, Atari Interactive accused Hyperkin of “prominently displaying registered trademarks and other intellectual properties owned by Atari, including without limitation the Atari ‘Fuji’ logo and the classic Atari joystick[.]” Id. Hyperkin's counsel responded to Atari Interactive's cease-and-desist letter on July 10, 2017, stating that Hyperkin “believes it has the right to sell products such as the CirKa A77 Joystick Controller.”
Atari Interactive's Future VCS Console
“Atari Interactive has been actively creating, promoting, and readying to launch a new gaming system that puts a 21st Century spin on the original 2600 designs” and which “include[s] a modernized version of the 2600 joystick design[.]” Atari Interactive's future console and joystick are pictured below:
DISCUSSION
Atari Interactive's false designation of origin, dilution, and unfair competition claims are based on Atari Interactive's alleged trade dress rights. “In addition to protecting registered marks, the Lanham Act, in § 43(a), gives a producer a cause of action for the use by any person of ‘any word, term, name, symbol, or device, or any combination thereof which is likely to cause confusion as to the origin, sponsorship, or approval of his or her goods.” Wal-Mart Stores, Inc. v. Samara Bros., 529 U.S. 205, 209 (2000) (citing 15 U.S.C. § 1125(a)) (internal alterations omitted). Accordingly, the Lanham Act's protections also extend “to the design of a product as a form of trade dress.” Moldex-Metric, Inc. v. McKeon Prod., Inc., 891 F.3d 878, 881 (9th Cir. 2018). “Trade dress is the ‘total image of a product,’ including features such as size, shape, color, texture, and graphics.” Id. (internal citation omitted). “Unregistered trade dress ... may be protected under the Lanham Act.” Id. “To sustain a claim for trade dress infringement,” a plaintiff must establish: “(1) that its claimed dress is nonfunctional; (2) that its claimed dress serves a source-identifying role either because it is inherently distinctive or has acquired secondary meaning; and (3) that the defendant's product or service creates a likelihood of consumer confusion. Clicks Billiards. Inc. v. Sixshooters, Inc., 251 F.3d 1252, 1258 (9th Cir. 2001).
Hyperkin moves for summary judgment as to each of Atari Interactive's claims, as well as for partial summary judgment as to the issues of likelihood of confusion, functionality, and fame. See Mot. The Court notes, however, that “[b]ecause of the factual nature of trademark disputes, summary judgment is disfavored in the trademark arena.” Levi Strauss & Co. v. GTFM, Inc., 196 F. Supp. 2d 971, 974 (N.D. Cal. 2002) (citing Interstellar Starship Servs., Ltd. v. Epix Inc., 184 F.3d 1107, 1109 (9th Cir. 1999). With these principles in mind, the Court addresses Hyperkin's arguments in turn.
A. Atari Interactive's Standing
Hyperkin argues that Atari Interactive “does not have standing to assert a trade dress infringement claim because it did not acquire any rights from [the predecessor] Atari Companies[.]” The Court does not find Hyperkin's argument availing.
Hyperkin argues that “[t]he party claiming ownership of an unregistered mark must have been the first to use the mark in the sale of goods.” Hyperkin further asserts that “it is indisputable that Atari Inc. was the first to use the claimed trade dress by selling the original 2600 Console and Joystick” and that Atari Interactive cannot “show a chain of assignments of unregistered, existing trade dress from Atari Inc., to Atari Corp., to JTS, to Hasbro, and then to [Atari Interactive] and that the trade dress was not abandoned.” The Court disagrees.
To the extent that Hyperkin challenges Atari Interactive's standing to enforce trade dress rights regarding the 2600 Console and the 2600 Joystick simply because Atari Inc., Atari Interactive's predecessor in interest, created the 2600 Console and the 2600 Joystick, Hyperkin's argument is unpersuasive. See, e.g., Comm. for Idaho's High Desert. Inc. v. Yost, 92 F.3d 814, 820 (9th Cir. 1996) (noting that party could enforce protected trade name “Committee for Idaho's High Desert” even where it was not “the first user of the name” and explaining that, “as a practical matter, CIHD appears to be the direct and immediate successor of any individuals who used the name between 1978 and 1981.”); Gen. Motors Corp. v. Let's Make A Deal, 223 F. Supp. 2d 1183, 1191 (D. Nev. 2002) (noting that “plaintiff and its predecessors have been using these marks and trade dress since 1981.”); Tamway Corp. v. Sunglass Hut Int'l, 173 F.3d 862 (9th Cir. 1999) (unpublished opinion) (“Tamway has standing to sue if it can establish that Metro, its purported predecessor in interest, assigned the MINIREADER trademark and trade dress rights to Tamway.”). Indeed, Atari Interactive submits documents detailing the chain of title of assets, including intellectual property rights, associated with the Atari brand from Atari Inc. to Atari Corp. to JTS to Hasbro and then to Infogrames. Nor does the Court find compelling Hyperkin's claim—for which it provides no authority—that Atari Interactive “itself failed to consider itself the owner of any trade dress rights” because it purportedly did not list these rights in the asset schedules it filed during its bankruptcy proceeding. See In re Electro-Motor, Inc., 390 B.R. 859, 869 (Bankr. E.D. Tex. 2008) (rejecting argument that debtor's failure to list intellectual property or trade secrets on debtor's schedule of assets during bankruptcy proceeding precluded debtor from suing to enforce intellectual property rights in subsequent adversary case, explaining “[t]hat assertion is also without merit.”).
Similarly, the disputed record precludes the grant of summary judgment to Hyperkin on the basis that any trade dress rights in the 2600 Console and the 2600 Joystick were “abandoned.” “Under the Lanham Act, a trade dress is not protectable if it has been abandoned.” Ferrari S.p.A. Esercizio Fabbriche Automobili E Corse v. McBurnie Coachcraft Inc., No. 86-cv-1812-B-IEG, 1988 WL 391519, at *4 (S.D. Cal. Aug. 31, 1988). Abandonment of a mark may occur in two ways. See 15 U.S.C. § 1127. First, abandonment of a mark occurs when “its use has been discontinued with intent not to resume such use.” 15 U.S.C. § 1127. “Intent not to resume may be inferred from circumstances,” and “[n]onuse for 3 consecutive years shall be prima facie evidence of abandonment.” Id. Second, abandonment occurs “[w]hen any course of conduct of the owner... causes the mark to ... lose its significance as a mark.” Id.
It is undisputed that Atari Corporation ceased selling the 2600 Console and the 2600 Joystick in 1992. SUF No. 42. It is also undisputed that between 1996 to 2004, neither JTS, HIAC, Infogrames, nor Atari Interactive designed, manufactured, released or sold any standalone videogame console systems or any videogame console products. SUF Nos. 54– 55. However, “[a]bandonment is a question of fact.” Levi Strauss, 196 F. Supp. 2d at 976 (citing Rivard v. Linville, 133 F.3d 1446, 1449 (Fed. Cir.)). And, “[i]t is axiomatic in trademark law that the standard test of ownership is priority of use.” Halicki Films, LLC v. Sanderson Sales & Mktg., 547 F.3d 1213, 1226 (9th Cir. 2008) (internal citation omitted). Thus, “the first party to use an abandoned trademark in a commercially meaningful way, after its abandonment, is entitled to exclusive use and ownership of the trademark and trade dress.” California Cedar Prod. Co. v. Pine Mountain Corp., 724 F.2d 827, 828 (9th Cir. 1984); accord 3 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 17:2 (5th ed., June 2020 Update) (“Once abandoned, a mark may be seized immediately and the person so doing so may build up rights against the whole world.”). The finder of fact could reasonably determine, based on Atari Interactive's sale of the Plug and Play in 2002 and the Flashback 2 in 2005—both of which predated Hyperkin's sale of the CirKa A77 Joystick in 2016 and its sale of the Retron77 Console in 2017—that Atari Interactive resumed use of the trade dress, assuming arguendo that its trade dress in the 2600 Console and 2600 Joystick was abandoned.
Hyperkin further argues that Atari Interactive and its predecessors abandoned any trade dress in the 2600 Console and the 2600 Joystick because, according to Hyperkin, “every Atari company failed to stop numerous third-party sales of joysticks identical to the 2600 Joysticks.” However, the failure of an owner of a mark to prosecute infringers is “relevant to the strength of the mark, not abandonment.” adidas-Am., Inc. v. Payless Shoesource, Inc., 546 F. Supp. 2d 1029, 1078 (D. Or. 2008); accord J. Thomas McCarthy, 3 McCarthy on Trademarks and Unfair Competition § 17:17 (5th ed., June 2020 Update) (“In the typical trademark dispute, the relevance of failure to prosecute others is not ‘abandonment,’ but the ‘strength’ of the senior user's mark.”). Indeed, “[t]he owner of a mark is not required to police every conceivably related use thereby needlessly reducing non-competing commercial activity and encouraging litigation in order to protect a definable area of primary importance.” Playboy Enterprises, Inc. v. Chuckleberry Pub., Inc., 486 F. Supp. 414, 422-23 (S.D.N.Y. 1980). Moreover, the parties each submit conflicting evidence regarding whether Atari Interactive has enforced its alleged trade dress rights in the 2600 Console and the 2600 Joystick against other purported infringers. For example, Hyperkin indicates that it “searched online and on Amazon.com and found that there were many companies selling generic retro 2600 style joysticks.” On the other hand, Atari Interactive's Chief Executive Officer, Frederic Chesnais, attests that Atari Interactive has taken action against alleged infringers, including: (1) sending a cease-and-desist to Hyperkin; (2) bringing suit against “various companies selling products depicting the 2600 joystick” including “a case we settled with SunFrog, a case that resulted in a default judgment against RageOn, as well as pending cases against Redbubble, ooShirts, and Teespring”; and (3) sending cease-and-desist letters to “two other companies, Innex and Video Game Advantage[.]” These factual disputes preclude the Court from granting summary judgment on this issue.
CHECK BACK IN NEXT WEEK FOR PART II ON HYPERKIN'S FUNCTIONALITY AND DISTINCTIVENESS ARGUMENTS
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