IP Law Daily, COPYRIGHT—D. Ariz.: Competitor of custom auto decal designer defeats most claims, (Oct 19, 2022)
By George Basharis, J.D.
Lanham Act, common law tort, and alter ego claims were not supported by adequate factual allegations, although claims of copyright infringement survived competitor’s motion for judgment on the pleadings.
Claims by a designer of custom “vehicle wraps” that a competitor copied its designs and stole its customers were mostly dismissed by a federal court in Arizona. Although the district court determined that not all of the designer’s copyright infringement claims were time-barred, it found the designer failed to allege its competitor was liable under the Lanham Act, provide enough factual detail regarding contracts or business expectancies to support its claim of tortious interference, or demonstrate how the competitor intended to pass off its own wraps as those of the designer (Wolf Designs LLC v. Five 18 Designs LLC, October 18, 2022, Silver, R.).
Background. Wolf Designs LLC designs and installs vinyl vehicle wraps, large vinyl graphics or decals that are applied to car, truck, or trailer bodies. Five 18 Designs LLC is a direct competitor. In 2020, Nash Powersports commissioned Wolf to design and apply a custom vinyl wrap on one of its tractor trailers. Nash later asked Wolf to design a vinyl wrap for one of its trucks and box trailers using the same theme as the wrap previously created. Wolf sent Nash a mockup of the box trailer design, and the vinyl wrap was applied to Nash’s vehicle. The mockup included Wolf’s logo and a copyright notice. In 2021, Wolf received a copyright registration for a group of unpublished works it created for Nash.
Nash later sent Wolf’s mockup to Five 18 and commissioned Five 18 to design and install a vehicle wrap on another Nash truck allegedly using the same Wolf design. Five 18 installed the wrap on Nash’s truck and posted a photo of the completed work on its owner’s Instagram account.
In 2017, Wolf designed and installed a vehicle wrap on a customer’s utility terrain vehicle (UTV). The mockup of the UTV wrap, which included Wolf’s logo, was first published in 2016 and received copyright registration in 2021. Wolf claimed that in 2018 Five 18 misappropriated Wolf’s UTV design and posted a photograph of it on its Instagram account.
Finally, Wolf alleged that Five 18 used one of Wolf’s protected designs on a Toyota Prius operated by Simon Med. A mockup of the Prius design was allegedly published by Wolf in 2015 and registered in 2021.
In October 2021, Wolf filed a lawsuit against Five 18 claiming copyright infringement, violation of the Lanham Act, tortious interference with business relations, and unfair competition. Wolf also asserted a claim for piercing the corporate veil premised on Five 18’s owner posting photographs of vehicle wraps on his private Instagram account. Five 18 filed a motion for partial judgment on the pleadings.
Copyright infringement. Five 18 argued that Wolf’s copyright infringement claim based on Five 18’s use of the UTV wrap design was time-barred. According to the complaint, Wolf learned that Five 18 used the UTV design in 2018 but waited until 2021 to file the lawsuit, which was beyond the three-year limitations period for copyright infringement. Wolf tried to argue that its complaint did not allege discrete counts of infringement, even though it sought damages for each of the three instances of alleged infringement. The court was not persuaded and found that Wolf’s “single count” of infringement did not change the “distinct nature of each instance” of infringement. In other words, Wolf’s single claim consisted of three entirely independent instances of alleged infringement, and Wolf admittedly knew of the UTV infringement more than three years prior to filing suit. Consequently, the claim was time-barred.
Five 18 also argued that Wolf was not entitled to statutory damages or attorney fees because the alleged infringements predated the effective dates of Wolf’s copyrights. Wolf maintained that its group registration of the Nash designs saved at least one of its claims for damages. Five 18 countered that the group registrations were invalid because Wolf claimed in its copyright application that the copyrights were unpublished when in fact they had already been published at the time of the application.
The court noted that the Copyright Act requires registration as a prerequisite to civil infringement actions and statutory damages, and regulations implementing the statute authorize group copyright registration for unpublished works. The court declined to rule on the validity of Wolf’s group registration, but assuming the registration was valid, the court held that Wolf was not barred from seeking statutory damages and attorney fees for its remaining infringement claims.
Lanham Act. Wolf’s complaint did not specify which section of the Lanham Act Five 18 allegedly violated. Wolf appeared to concede that Five 18 was not liable under the Act’s “passing off” provision because there was no confusion as to who produced Five 18’s vehicle wraps. However, Wolf argued that Five 18 was liable for misrepresenting the origin of its wraps by claiming in an Instagram post that a vehicle wrap was “only available from Five 18 Designs.” But the phrase was not attached to the image of the allegedly infringing vehicle wrap. The caption was attached to different post made the following day. Thus, the court dismissed Wolf’s Lanham Act claim.
Tortious interference. Wolf alleged that it had contracts with Nash, the owner of the UTV, and Simon Med and that Five 18 knowingly interfered in those business relationships by replicating and installing Wolf’s copyrighted work for them. The court first determined that the claim was time-barred as to the UTV owner by the applicable two-year statute of limitations.
The court rejected Five 18 argument that the remaining claims were preempted by federal copyright law. The court noted that the Ninth Circuit has held the Copyright Act does not preempt a tortious inference claim because contractual rights are not equivalent to exclusive rights under the Copyright Act. Nonetheless, Wolf failed to establish an essential element of the common law claim: the breach of an existing contractual relationship or business expectancy that was caused by Five 18. Wolf’s claims that Five 18 offered to install vinyl wraps using Wolf designs on Wolf customers supported only a copyright claim, not a claim for tortious interference, the court ruled.
Unfair competition. Wolf claimed Five 18 interfered with its business relationship though unfair competition by copying Wolf’s registered designs and selling them as its own custom works. The court rejected Five 18’s argument that the claim was preempted by copyright law because a claim for common law unfair competition includes an “extra element”— “palming off” or “passing off”—that makes it qualitatively different than a claim asserted under the Copyright Act.
However, even assuming the claim wasn’t one for preempted “misappropriation,” Wolf failed to establish that Five 18 wanted its customers to believe its vehicle wraps were Wolf’s wraps. Wolf’s claim that Five 18 copied Wolf’s registered designs and then advertised them as its own custom works to customers was merely a restatement of Wolf’s copyright violation claim, according to the court.
Alter ego. Finally, the court determined that Wolf’s allegations in support of its piercing the corporate veil claim were conclusory. Wolf’s primary allegation in support of the claim was that Five 18’s owner posted images of vehicle wraps completed by Five 18 on his private Instagram account. Other allegations, including that Five 18 was a “sham,” the owner used the company as his alter ego, and the company failed to maintain an arms-length relationship with its owner were unsupported by facts.
The case is No. 2:21-cv-01789-ROS.
Attorneys: Alexandra Mijares Nash (Rutila, Seibt & Nash PLLC) for Wolf Designs LLC. Bert Daniel Millett (Orangewood Law Group, PLC) for Five 18 Designs LLC.
Companies: Wolf Designs LLC; Five 18 Designs LLC
Cases: Copyright Trademark TechnologyInternet ArizonaNews