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H-D U.S.A., LLC v. Sunfrog, LLC

United States District Court, E.D. Wisconsin

April 12, 2018

H-D U.S.A., LLC and HARLEY-DAVIDSON MOTOR COMPANY GROUP, LLC, Plaintiffs,
v.
SUNFROG, LLC d/b/a SUNFROG SHIRTS and JOHN DOES, Defendants.

          ORDER

          J. P. Stadtmueller, U.S. District Judge

         This is a trademark and copyright infringement case brought by Plaintiffs, collectively referred to as “Harley-Davidson, ” against Defendants, collectively referred to as “SunFrog.” SunFrog runs a website where third parties can upload designs and logos, place them onto clothing, hats, mugs, or other items, and sell them. SunFrog handles printing the goods and shipping them, and it takes the majority of the profits from the sales. Harley-Davidson noticed that SunFrog advertised and sold many items bearing its trademarks, including both word-marks and logos, and it filed this lawsuit as a result. Before the Court is Harley-Davidson's motion for partial summary judgment. For the reasons stated below, it will largely be granted.

         1. LEGAL STANDARD

         Federal Rule of Civil Procedure 56 provides that the court “shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Boss v. Castro, 816 F.3d 910, 916 (7th Cir. 2016). A fact is “material” if it “might affect the outcome of the suit” under the applicable substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute of fact is “genuine” if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.

         The court construes all facts and reasonable inferences in the light most favorable to the non-movant. Bridge v. New Holland Logansport, Inc., 815 F.3d 356, 360 (7th Cir. 2016). The court must not weigh the evidence presented or determine credibility of witnesses; the Seventh Circuit instructs that “we leave those tasks to factfinders.” Berry v. Chicago Transit Auth., 618 F.3d 688, 691 (7th Cir. 2010). The party opposing summary judgment “need not match the movant witness for witness, nor persuade the court that [its] case is convincing, [it] need only come forward with appropriate evidence demonstrating that there is a pending dispute of material fact.” Waldridge v. Am. Hoechst Corp., 24 F.3d 918, 921 (7th Cir. 1994).

         To meet its burden, the non-movant “must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co, Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). “It is well-settled that speculation may not be used to manufacture a genuine issue of fact.” Amadio v. Ford Motor Co., 238 F.3d 919, 927 (7th Cir. 2001); McDonald v. Vill. of Winnetka, 371 F.3d 992, 1001 (7th Cir. 2004); Palucki v. Sears, Roebuck & Co., 879 F.2d 1568, 1572 (7th Cir. 1989) (“A party to a lawsuit cannot ward off summary judgment with an affidavit or deposition based on rumor or conjecture” but must instead rest on the witness' personal knowledge). The Seventh Circuit has repeatedly emphasized that summary judgment “is the put up or shut up moment in a lawsuit, when a party must show what evidence it has that would convince a trier of fact to accept its version of the events.” Hammel v. Eau Galle Cheese Factory, 407 F.3d 852, 859 (7th Cir. 2005).

         2. RELEVANT FACTS

         2.1 Harley-Davidson and Its Marks

         Harley-Davidson is the largest manufacturer of motorcycles in the United States and has long been one of the world's most recognized motorcycle companies. For more than 110 years, it has continuously manufactured, promoted, and sold motorcycles and related products.[1]

         Harley-Davidson owns several marks relevant to this litigation. They include the word marks HARLEY-DAVIDSON, HARLEY, H-D, HD, FAT BOY, and SPORTSTER, as well as Harley-Davidson's Bar & Shield logo, Willie G. Skull logo, and Number 1 logo trademarks shown below.

         (Image Omitted)

         Harley-Davidson has used each of these marks, which will be referred to collectively as the “H-D Marks, ” for many years in connection with motorcycles, motorcycle parts and accessories, and various other products and services, including apparel, mugs, and posters. The H-D Marks are part of premium brands and Harley-Davidson has a reputation for providing a wide variety of high-quality merchandise under those brands itself and through its dealers and licensees.[2]

         Given the incredible commercial success of Harley-Davidson's motorcycle business over the years and its status as an iconic brand, there has long been a strong demand from motorcycle enthusiasts as well as the general public for other products bearing the H-D Marks, so they can show their affinity for Harley-Davidson. To satisfy this demand and to further build awareness of the H-D Marks, Harley-Davidson has for decades engaged in an extensive program of licensing the H-D Marks for use on a wide range of products, including apparel, mugs, and posters, among others.

         Consistent with its image as a premium brand, Harley-Davidson positions its licensed merchandise as high-quality, sold at a premium price point sold through select channels of trade. The retail prices of Harley-Davidson's licensed products typically range between $25 and $80 for apparel, between $20 and $45 for hats, and between $9 and $23 for mugs.

         To ensure and maintain the high-quality reputation of licensed merchandise sold under the H-D Marks, Harley-Davidson requires its licensees to comply with stringent quality standards, including that: (1) licensees must first submit product concepts and artwork for Harley-Davidson's prior written approval; (2) once the concept and artwork is approved, licensees must submit a pre-production product sample for Harley-Davidson's prior written approval; and (3) once the pre-production product sample is approved, licensees must submit for Harley-Davidson's prior written approval a production sample of the actual product that will be sold to the public. Licensees cannot promote or advertise any licensed products without completing all of these steps. As part of this quality-control review process, Harley-Davidson carefully reviews the licensed products in numerous respects, including the materials used, the quality of the craftsmanship and construction, the design, style, and appearance of the products, and their overall quality.[3]

         According to its trademark counsel, Harley-Davidson's trademark license agreements typically contain a provision that the licensee may not use the marks “in any manner that would disparage, tarnish, or dilute the distinctive quality of the Licensed Marks or the reputation and goodwill represented by the Licensed Marks or which would reflect adversely on the Licensed Marks, [Harley-Davidson], or any of [its] products or services, ” to be determined in Harley-Davidson's sole discretion. (Docket #47 ¶ 3). In addition, Harley-Davidson has various guidelines in place for reviewing the artwork and other content on licensed products, including prohibitions against:

• depictions of religious symbols or language from any religion;
• vulgar, crude, or offensive content;
• satanic or excessively violent depictions of skulls;
• display of guns or the word “gun, ” except in rare instances (e.g., military motorcycles);
• displaying certain of Harley-Davidson's trademarks on licensed products, including the “corporate” Bar & Shield Logo with the text “HARLEY-DAVIDSON MOTOR COMPANY” that is reserved for corporate use; and
• any modified or mutilated versions of any of the H-D Marks.

Id. ¶ 4.

         Harley-Davidson has achieved significant commercial success in the motorcycle business, which includes the sales and servicing of motorcycles and the sales of motorcycle parts, accessories, and riding gear. Harley-Davidson and its authorized dealers have sold many billions of dollars of such products and services over the years. Harley-Davidson's licensed products business has also been wildly successful, with Harley-Davidson's royalty revenues from licensing exceeding $400 million during 2005-2016 alone, which translates into billions of dollars of sales of licensed products at retail.

         Apparel is a significant part of Harley-Davidson's business and has been for many years. The majority of Harley-Davidson's licensing royalty revenues are from its apparel licensees. Harley-Davidson currently has approximately ten apparel licensees and has had a similar number of apparel licensees or more for many years. For decades, Harley-Davidson has offered and sold, itself and through its dealers and licensees, riding gear and apparel bearing the H-D Marks, including t-shirts, shirts, sweatshirts, sweaters, pants, vests, jackets, and hats. During this same time, Harley-Davidson has offered and sold through its licensees a wide range of merchandise bearing the H-D Marks, including licensees for mugs and posters.

         The H-D Marks have been extensively promoted nationwide across Harley-Davidson's many product lines. Harley-Davidson markets and sells motorcycles, motorcycle parts and accessories, and riding gear, including apparel, under the H-D Marks through a network of more than 690 authorized dealers located throughout the country, and through numerous other authorized Harley-Davidson retail outlets, including high-profile and high-traffic outlets (e.g., stores located at popular airports). Harley- Davidson's apparel products are also sold online through harley-davidson.com and the websites of Harley-Davidson's authorized dealers and licensees.

         Harley-Davidson and its authorized dealers and licensees have spent many millions of dollars promoting the H-D Marks through virtually every medium. For example, Harley-Davidson has promoted its products and marks through dealer promotions, customer events, catalogs, direct mailings, national television, print, and radio advertisements, and the internet. For many years, Harley-Davidson and its dealers have sponsored sports teams and major sporting events, including prominent use of the H-D Marks on advertisements or promotions at such events. Harley-Davidson and the H-D Marks have also received intense unsolicited media attention for decades. Harley-Davidson's products and services have been featured and identified under the H-D Marks in numerous national television programs, books, national newspapers and magazines, and popular online publications and websites.

         The Harley-Davidson brand has been ranked annually for the past decade among the top 100 most valuable brands in the world by Interbrand, a leading independent branding firm. In 2015, Interbrand estimated the value of the Harley-Davidson brand at $5.46 billion. In 2016, Tenet Partners ranked the Harley-Davidson brand as the 11th Most Powerful Brand in its Top 100 Most Powerful Brands report of 2016.

         2.2 SunFrog and Its Business

         SunFrog is in the business of marketing, printing, and selling apparel, including t-shirts, sweatshirts, hoodies, leggings, and other products such as mugs, on its website. The website includes an online retail marketplace where consumers can purchase the products advertised thereon. But the key feature of the site, and the source of much of SunFrog's success, is that it also provides a “user-friendly, ” “simple” online platform where: (a) “artists” can upload designs or artwork to SunFrog's “All SunFrog Art Online Database” (“All Art database”) for application to products by the artists and by others; and (b) individuals or businesses can open accounts as “sellers” and create new products bearing their own designs they upload to advertise and sell on SunFrog's website, and where they can advertise and sell products using designs created by others. See (Docket #57 ¶ 6). SunFrog itself creates no designs, graphics, or images for use on products, though when one user wishes to share his design with others, SunFrog is the intermediary and makes that design available through its website.

         SunFrog's users can create online profiles and choose their own usernames. The sellers can, if they wish, be effectively anonymous to the public because they are identified on SunFrog's website only by account names or numerical codes that may not reveal their real names or contact information. For example, SunFrog's sellers include “harley davidson” and “HD, ” neither of which are Harley-Davidson itself, as well as “LOKI, ” “POKA, ” “81088, ” and “75237, ” among many others. Nevertheless, any user must submit and verify an email address before opening an account. Further, to receive any payments from SunFrog, a user must have a valid email address tied to a financial service provider like PayPal or provide routing and account numbers for a bank account. Thus, SunFrog can to some extent identify individual users.

         SunFrog's sellers create new products by selecting “blank” products (e.g., a t-shirt bearing no images, designs, or text) made available by SunFrog and then adding logos, images, or text to be printed on the products. Using SunFrog's online software, artists generate mockups of the finished product bearing their images or designs. As noted above, artists can share their mockups with other SunFrog users. If an artist shares his mockup and another user sees it and likes it, she may purchase from SunFrog a product bearing the desired design. In addition to printing the products as designed, SunFrog affixes its own trademarks and logos onto the products themselves, the products' tags, or both.[4]

         SunFrog then advertises and offers these finished products on its website. For example, sellers have opened accounts, selected a blank t-shirt, and added designs displaying one or more of the H-D Marks in just a few minutes.[5]

         When consumers purchase products on SunFrog's website, SunFrog handles the payment transaction and then prints and ships the products to the consumers. SunFrog's printers are “highly automated” and print on-demand when a user submits a design for printing. (Docket #57 ¶ 4). However, live employees do all the other work of the business, including servicing and running the printers, feeding the printers with raw materials sourced by SunFrog, handling and shipping finished products, and processing payments. Id. ¶ 10. Because all products are produced on-demand, SunFrog does not keep any inventory of finished products.[6]

         In addition to creating and uploading new designs, sellers can also sell existing designs created by others that SunFrog makes available to all sellers in its All Art database. Pursuant to SunFrog's terms of service, SunFrog automatically obtains a license from an artist that gives it the right to use and permit others to use the artist's design and to make those designs available to all sellers on its website. The All Art database is searchable by keyword and categories (e.g., “Automotive”). Relevant here, the All Art database has made available to sellers numerous designs and artwork containing one or more of the H-D Marks that the sellers can immediately apply to numerous blank products of various styles, colors, and sizes, and offered for sale with just a few keystrokes. SunFrog's searchable database, moreover, made it easy for sellers to locate such designs, as they were instantly accessible by searching for the H-D Marks of interest.

         According to SunFrog's published compensation schedule in effect when this lawsuit was filed and during the majority of this case, sellers receive 40% of the retail sales price for the products they sell, and an extra 5.5% if they also created and uploaded the design-i.e., they were the “artist” for the design. SunFrog earns the majority, 54.5%, of the retail sales price of products sold on its website. SunFrog's products bearing H-D Marks typically sell for about $23-$37 for t-shirts, $43-$53 for hoodies, $18- $20 for hats, and $18-$24 for mugs.

         SunFrog's user agreement in effect during the relevant period allows it to terminate the accounts of repeat infringers of another's intellectual property. However, the contract permits SunFrog to fulfill orders for infringing products even after a takedown notice is received. The contract also allows it to keep sellers' commissions for sales of products that were the subject of takedown notices. The agreement permits, but does not require, SunFrog to forward those commissions to a charity of its choosing. See (Docket #11 ¶¶ 19-20).

         SunFrog has long touted Facebook as a powerful marketing tool to advertise its products. SunFrog facilitates the advertisement of products on its website on social media sites, including Facebook, by providing its sellers with sales tracking tools and offering tutorials for social media marketing. For instance, SunFrog has offered Facebook marketing advice on a blog on its website since as early as 2015. It also has a dedicated Facebook page it created for its sellers. Further, SunFrog's “SunFrog Academy” has taught its sellers how to use Facebook for marketing since as early as January 2017.

         Because of SunFrog's focus on Facebook as its primary means to promote and sell products on its website, Facebook advertising is the source of the vast majority of SunFrog's sales. For example, in a June 16, 2017 interview with Payoneer, SunFrog's Affiliate Support official Tyler Deerfield stated, “at least 75% of SunFrog sales come from Facebook ad referrals. The Facebook ads platform pairs perfectly with SunFrog print technology.” (Docket #48 ¶ 11). The interview continues, “While artists and sellers can have some luck posting organically (without ads), it's unlikely to have a high degree of success without targeting.” Id.

         More recently, in an interview with Entrepreneur on August 2, 2017, SunFrog's founder and CEO Josh Kent (“Kent”) stated, “Nothing touches Facebook ads. . . . I'm telling you right now, nothing compares to Facebook ads. Focus your energy in on that. . .[, ] that's our secret sauce. . . . 95% of our sales, they're are coming through Facebook. Facebook is a force” and “[SunFrog] even [has] an academy. . .[where] we're going to show you how to set up [a] [Facebook] ad [and] target. . . .” Id. ¶ 8.

         Facebook ads that feature SunFrog products bearing H-D Marks attract wide exposure. For example, five separate Facebook ads for five different products bearing H-D Marks had a combined total of more than 116, 000 reactions (e.g., “likes”), more than 3, 300 comments, and more than 31, 000 shares. The ad for one such product had received 3, 800 reactions, had been shared 634 times, and had 60 comments as of July 2, 2017, four days after it was posted on June 29. As of July 13, 2017, the total reactions or likes increased from 3, 800 to 6, 100, the number of times the link was shared increased from 634 to 1, 079, and the number of comments increased from 60 to 118. The advertisement still had a direct link as of July 13, 2017 to the sales page for the product on SunFrog's website.

         2.3 SunFrog's Commercial Success

         SunFrog's business has been highly successful. Regarding revenues, in his interview with Entrepreneur on August 2, 2017, Kent stated that “[w]e launched this website and in our first year we did about a million dollars. In our second year, we did just shy of $100 million. We had some incredibly explosive growth.” (Docket #48 ¶ 8). Further, according to a July 9, 2017 Crain's Detroit Business article based on an interview with Kent, SunFrog's projected sales are “up to $150 million [in 2017]”; SunFrog's sales were “$100 million [in 2016]”; and “SunFrog is now the largest maker of printed t-shirts in the U.S.” Id. ¶ 9. A June 30, 2017 Forbes article stated that “SunFrog is a three-year-old company with revenue of more than 100 million per year.” Id. ¶ 10[7]

         Regarding unit sales, in a June 7, 2017 interview with Crain's, Kent stated, “Our initial goal was to sell 100 shirts a day, and if we could do that then we could be in a position to focus on it more. That 100 shirts a day quickly became 10, 000 a day and kept going. It was bigger than I had planned or hoped for.” Id. ¶ 12. In a July 11, 2016 interview with MyNorth, Kent said, “Our goal was to make 100 shirts a day. Now sometimes we're up to 20, 000 shirts a day. We want SunFrog to be to t-shirts what Amazon was (originally) to books.” Id. ¶ 13.

         Regarding website traffic, SunFrog's website was popular and highly trafficked during the period relevant to this suit. In the interview with Entrepreneur on August 2, 2017, Kent reported that “within just a few short years we [have] become one of the world's highest trafficked sites. I think we hit about two something, 200 or 300 on the Alexa ranking. . . . We passed Nike, Under Armor, Victoria's Secret, sky rocket up. . . . We live in a day and time where you can build a dream and you can compete head to head, like we do. . .with brick and mortar J.C. Penney's and these other companies and you can do it in almost no time at all and you can do it leveraging social media.” Id. ¶ 8. Although its estimates vary, SunFrog often claims that its website is among the top 500 most popular websites in the United States and in the top 2, 000 in the world.

         2.4 The Infringing Products

         Harley-Davidson has identified twelve different types of products sold by SunFrog that bear designs that infringe its trademarks, including ladies' t-shirts, men's' t-shirts, youth t-shirts, ladies' V-neck t-shirts, men's' V-neck t-shirts, long-sleeve shirts, tank tops, sweatshirts, hoodies, leggings, mugs, and hats. SunFrog lists each of these twelve types of goods separately on pages and drop-down menus in its website. Not every H-D Mark appeared on every type of good, although the majority did. See (Docket #51 ¶ 55). Further, Harley-Davidson's infringement analysis, reflected in voluminous charts appended to its submissions, shows only one particular infringing design used on each of the twelve types of products. However, most of the product types have been offered with multiple, distinct infringing designs, many of which bear two or more H-D Marks.[8]

         In March and April of 2017 alone, SunFrog's website featured more than 100 different infringing designs on thousands of products. That represents more than 1, 325 different individual counterfeit products and more than 2, 575 unauthorized uses of the H-D Marks. Of course, as SunFrog's corporate counsel notes, the designs appearing on the website do not translate into products unless someone actually orders a product. According to counsel, the vast majority of mockups never result in a single sale.[9]

         None of these products were subject to Harley-Davidson's quality control standards and procedures. In addition, a number of them would not have been approved as licensed products because they violate Harley-Davidson's guidelines for objectionable content, including the inclusion of religious symbols, vulgar, crude, or offensive language, satanic or excessively violent depictions of skulls, and the word “gun.” Other products display the text “Harley-Davidson Motor Company, ” which Harley-Davidson only uses for corporate purposes and would not approve for use on licensed products. Still others display H-D Marks in modified or mutilated form, as would not be permitted in licensed products.

         Harley-Davidson obtained several infringing products through test purchases or as a result of seizures by government officials. In each case, products were shipped from SunFrog's factory in Gaylord, Michigan. Several of the products have a printed neck label or other label with the SunFrog trademark on it, which Harley-Davidson suggests shows a co-branding or licensing relationship between SunFrog and Harley-Davidson where none exists. SunFrog denies such a relationship exists, too, and that any such suggestion arises from the labels.

         2.5 Harley-Davidson's Takedown Notices and SunFrog's Response

         Since October 2016, SunFrog marketed, promoted, advertised, and sold products bearing H-D Marks-primarily apparel-on its website. Harley-Davidson placed SunFrog on notice of its trademark rights by submitting at least seventy objections, starting in October 2016 and continuing to May 2017, encompassing well over 800 items. SunFrog responded by removing the challenged designs.[10] Yet infringement continued, as new infringing designs would rapidly replace those that had been removed, and all the while SunFrog continued to market, promote, advertise, and sell such products on its website. For a significant period of time, SunFrog's conduct showed that it expected it would have to do no more than respond to takedown notices in order to adequately address the intellectual property rights of third parties.

         Despite Harley-Davidson providing SunFrog with a link to each accused product on the website, SunFrog typically took at least two days and as long as seven days to deactivate the product listing. For example, of the 548 products for which Harley-Davidson submitted takedown complaints that were the subject of the declaration of Abel Low, a Harley-Davidson Brand Protection Manager, (Docket #10), SunFrog took three or more days to remove 78% of those products and 4-7 days for 35% of them.

         In addition to the time it took SunFrog to remove products identified by Harley-Davidson in its takedown notices, SunFrog continued to display many of the products even after they were “removed.” SunFrog continued to display such products in search results on its website. Further, it continued to use image URLs, product URLs, and sales-tracking URLs for “removed” products to drive traffic to its website. SunFrog's URLs are widely distributed on social media and other websites, and persons clicking on those URLs for a “removed” product would be linked to SunFrog's website and receive either a page advertising other SunFrog products or a message inviting the consumer to “start over” and conduct a search for products. In some cases, when a user would encounter an infringing product in a search result page and click on it, he would be redirected to a page selling a non-infringing product. SunFrog's removal of the sales pages of some infringing products during March and April 2017 did not stop SunFrog or its sellers from advertising and offering new infringing products bearing identical H-D Marks or even identical infringing designs that SunFrog earlier acknowledged and “removed” in its responses to H-D's prior complaints.

         Despite Harley-Davidson's numerous and repeated complaints, SunFrog continued up to the filing of this lawsuit on May 19, 2017 (and beyond) to advertise, offer for sale, and sell numerous infringing products. First, SunFrog continued to advertise and sell numerous infringing products in April and May 2017 bearing the identical H-D Marks cited in Harley-Davidson's prior takedown complaints in March and April of that year. Second, SunFrog continued to allow the same anonymous sellers that were repeat infringers of the H-D Marks and identified in Harley-Davidson's prior takedown complaints-such as “BW999” and “Bomman”-to offer and sell hundreds of infringing products.

         Third, SunFrog continued to advertise and sell infringing products bearing designs identical to those identified in Harley-Davidson's prior takedown complaints. On March 31, 2017, Harley-Davidson objected to many such products, including three that SunFrog stated it had “removed” in response to the takedown complaints. Shortly after these “removals, ” dozens of new infringing products bearing these same three designs were posted on the website and were still available for purchase as of May 15, 2017.

         Finally, when Harley-Davidson first submitted takedown complaints to SunFrog in October 2016, SunFrog's products consisted of apparel for adults. SunFrog later expanded its offerings to include leggings (November 2016), youth t-shirts (January 2017), and mugs (February 2017). Despite Harley-Davidson's objections to hundreds of other infringing products, many designs within these new types of products soon bore H-D Marks that were the subject of the earlier takedown complaints.

         SunFrog counters by noting the volume of user-generated designs and takedown notices. At its peak, SunFrog had roughly 150, 000 user-generated designs uploaded to its website every day. Further, “during a relatively brief period, Plaintiffs' [sic] submitted at least [810] takedown requests that SunFrog responded to by removing the allegedly infringing designs.” (Docket #51 ¶¶ 77-81). SunFrog believes its practices with respect to its notice and takedown tool are in accord with industry norms, and as will be detailed below, it has continued to develop new anti-piracy tools. See infra Part 2.7.

         2.6 The Infringement Continues

         Harley-Davidson filed this action on May 19, 2017. (Docket #1). The complaint recites claims for: (1) trademark counterfeiting under 15 U.S.C. § 1114(1); (2) trademark infringement under 15 U.S.C. § 1114(1); (3) trademark infringement, false designation of origin, and unfair competition under 15 U.S.C. § 1125(a)(1)(A); (4) trademark dilution under 15 U.S.C. § 1125(c); (5) copyright infringement under 17 U.S.C. § 101 et seq.; (6) trademark infringement under Wis.Stat. § 132 et seq.; and (7) common law trademark infringement, unfair competition, and misappropriation. Id. at 38-45.

         Shortly after it filed the complaint, on May 30, 2017, Harley-Davidson moved for a preliminary injunction. (Docket #5). On June 21, 2017, SunFrog filed a brief in opposition, claiming it had implemented “non-monetary relief” that “fully resolve[d]” Harley-Davidson's concerns and that the motion was moot because SunFrog was: (1) no longer using or displaying any of the H-D Marks on its website; (2) no longer using or displaying any images with the H-D Marks on its website (i.e., no infringing designs or products); (3) no longer selling infringing products after removal; and (4) no longer allowing repeat infringers to sell any infringing products. See (Docket #16).

         Despite these representations, infringement continued. First, SunFrog continued to advertise and offer to sell numerous infringing products bearing the same H-D Marks cited in Harley-Davidson's prior takedown notices, and SunFrog continued to display numerous infringing designs on its website which Harley-Davidson had identified in its motion. The motion identified 115 different infringing designs available during May 2017, and 93 of those were still available on June 22, 2017. More than 40 of these 93 designs displayed one of the H-D Marks in the product title or description.

         Second, SunFrog continued to allow some of the same prolific sellers to continue selling infringing products. Third, SunFrog advertised and offered for sale infringing products created before and after May 30, 2017. Fourth, SunFrog expanded the types of products it offered from shirts, leggings, and mugs bearing the H-D Marks to also include hats. Fifth, SunFrog continued to include infringing products in search results on its website. Searches on the site on July 3, 2017 for HARLEY-DAVIDSON, HD, H-D, and FATBOY continued to return results for infringing products bearing those marks. Sixth, SunFrog continued to allow infringing designs to be present in the All Art database. Seventh, SunFrog continued to allow sellers to create new infringing designs, apply them to blank products, and sell them.

         Even after Harley-Davidson's July 5, 2017 reply brief reported these continuing violations, SunFrog persisted. At the scheduling conference on July 14, 2017, SunFrog again represented that the motion for preliminary injunction was moot because it had resolved all of Harley-Davidson's concerns. In response, Harley-Davidson provided evidence at that conference of SunFrog's continuing infringement up to the time of the conference. See (Docket #24, #25). As in prior submissions, Harley-Davidson proffered evidence that SunFrog continued to sell previously identified infringing products, allowed the creation of new products using previously identified infringing designs, and included infringing products in search results. Furthermore, SunFrog continued to use URLs for infringing products.

         As the Court observed in its order granting the motion for preliminary injunction, “even after SunFrog filed its brief in opposition to the motion for preliminary injunction (and even as of the day of the Court's Rule 16 scheduling conference a month later), most of the infringing products Harley-Davidson identified initially were still advertised on SunFrog's website and available for sale.” (Docket #33 at 6).[11] Even after the Court issued that order on July 31, 2017-more than two months after this lawsuit was filed -SunFrog continued its infringement. It continued to offer and sell new infringing products, continued to allow repeat offenders to sell infringing products, including sellers identified in prior takedown complaints, continued to display images of infringing products on its website, continued to use URLs containing an H-D Mark, continued to offer infringing designs in the All Art database, and advertised and sold infringing products on Amazon. These constituted violations of the Court's order. Harley-Davidson's counsel sent SunFrog's counsel emails on August 7, 11, 15, and 18, October 25, and November 15, 2017 documenting in exacting detail SunFrog's violations of that order. It does not appear from the record that SunFrog has received any notices of continuing violations since November 2017. See (Docket #50 at 13).

         2.7 SunFrog's Anti-Infringement Efforts

         SunFrog's in-house counsel, Christopher Carol (“Carol”), provided a lengthy affidavit describing the company's growing pains as they relate to anti-infringement efforts. As might be expected, Harley-Davidson quarrels with his merciful view of his company's struggle to cope with intellectual property infringement. Those disputes will be discussed further below. For present purposes, it will better serve the narrative to set forth his averments while largely ignoring Harley-Davidson's disagreements. That said, it is important to appreciate that Carol gives almost no dates for the developments he describes, and thus it is difficult to fit his claims within the timeline of this case.

         Carol attests that because SunFrog grew rapidly as a company during the past three years, it faced “a number of challenges when scaling its services.” (Docket #57 ¶¶ 18-20).[12] One of SunFrog's most consistent problems involved “bad actors” uploading and selling designs that infringed upon the intellectual property rights of a third party. Id. Although SunFrog requires its users to affirmatively check a box that places SunFrog's intellectual property policy within a user's line of sight and requires him or her to agree never to use SunFrog's services to infringe on another party's intellectual property rights, SunFrog found itself struggling to stay ahead of a small minority of “sophisticated bad actors.” Id.

         Because it can be difficult to track users who deliberately obfuscate their identities online, SunFrog experimented when it decided to terminate a user's account because he or she had violated SunFrog's policies. Through long trial and error, SunFrog found that the most successful way to ban offenders after they were identified is to prohibit new accounts from using the same payment information associated with another account.

         SunFrog says that its business model relies on a concept called “affiliate marketing, ” whereby a user markets designs to others and receives a commission for their efforts. Affiliate marketing requires a degree of knowledge and sophistication in users and SunFrog provides educational materials to its users in effort to improve their experience in utilizing this technique. According to SunFrog, “[t]hese are well known[, ] authentic marketing techniques designed to draw in more users due to the customer service and quality of the platform.” Id. ¶ 23.

         As stated previously, at its peak, SunFrog's users uploaded more than 150, 000 new designs every day. Given the constancy with which this volume of new designs poured onto the various pages on its website, SunFrog contends that “it became easy for a small number of bad actors to upload and sell mockups made with infringing designs.” Id. ¶ 26. SunFrog has worked to develop tools that not only keep pace with the demand created by users wanting to design and share mockups, it has worked to develop tools to curb intellectual property infringement and give rights holders the ability to notify SunFrog of allegedly infringing mockups with ease, such as a streamlined notice and takedown procedure, which is an industry norm. SunFrog ensured that trained and dedicated employees evaluated notifications of allegedly infringing designs and, when appropriate, removed those designs as quickly as was practicable.

         As SunFrog continued to grow, it became more difficult to prevent even a small number of users from creating constant infringement problems. To proactively make SunFrog less attractive for such conduct, SunFrog began to implement keyword blocking to prevent designs described with words that it had learned over time had a high probability of being associated with intellectual property infringement from going live on SunFrog's website in the first place. While keyword blocking was and remains a “hugely successful” tool in SunFrog's arsenal, some repeat offenders realized that they could get around the control by hiding keywords in the visual designs they uploaded. Id. ¶ 31.

         SunFrog has worked with several rights holders to establish lists of keywords used to filter user-generated uploads in real time to prevent known infringing material from publishing on the website without blocking legitimate content. SunFrog has also provided certain rights holders with back-end access to its website to allow them to monitor its anti-infringement efforts and screen user uploads to flag infringing designs. Another tool developed by SunFrog to protect rights holders allows for the profits from allegedly infringing items to be diverted from the sellers' accounts into participating rights holders' accounts. Though often skeptical at first, Carol says that most rights holders with which SunFrog has dealt during the past year have been satisfied with the many steps SunFrog has taken to combat alleged intellectual property infringement.

         In response to this development and to protect rights holders with visual instead of textual trademarks, SunFrog expended a considerable amount of time, energy, and money researching potential solutions before partnering with a leading provider of OCR technology, which SunFrog now uses to screen new designs as users submit them in an attempt to identify and prevent the sharing of infringing designs. In addition to automating the screening process, SunFrog has implemented training on intellectual ...


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