A Tale of Two Activisions

By Gayle Denman and S. Gregory Boyd

    Most technology owners shudder at the thought of receiving a communication from a non-practicing entity (“NPE”), an entity which offers no products or services and instead exists solely to amass and enforce patent rights against accused infringers in order to collect licensing fees.  This unease is understandable given that in 2012, 2,500 patent cases were filed by patent trolls.  That is 62% of all patent cases filed in the US and the number of those cases has increased each year the past three years.   Many more cases don’t go to trial, with estimates placing between 60,000 and 100,000 patent troll threats made in 2012.  Patent trolls were paid more than 29 billion dollars in 2011 and the total wealth lost between 2007 and 2011 is estimated at 300 billion dollars. [1]    These technology owners usually have no choice but to agree to the demanded licensing arrangement or face litigation. 

In light of the foregoing statistics, few corporations expect to actually initiate communication with an NPE regarding infringement of intellectual property rights.  Further, they certainly do not expect any such dialogue to relate to trademark rather than patent rights.  However, electronic gaming titan Activision Publishing, Inc. (“Activision”) recently found itself in this surprising situation with respect to notorious patent troll Activision TV, Inc. (since re-named Activelight Inc. but referred to hereinafter as “Activision TV”).

Activision was founded in 1979 and is one of the world’s largest video game publishers, responsible for such commercially and critically successful game series as Call of Duty and Guitar Hero.  It extensively licenses its entertainment properties globally (and currently boasts more than 150 licensing partners including Nickelodeon, LucasArts and Rovio Entertainment).  Activision also owns more than 200 federal trademark registrations or pending applications for the marks associated with such properties and actively enforces its rights in such marks against third-party infringers.  Due to both its extensive trademark portfolio and its prolific publishing activity, the company is no stranger to trademark litigation, appearing on both sides of trademark infringement lawsuits in recent years (it sued Gameloft in 2007 for infringement of its GUITAR HERO mark and in 2012 was sued by NovaLogic for infringement arising from its use of the mark DELTA FORCE in Call of Duty). 

While Activision is globally renowned for its creation of original content, Activision TV is a notorious patent troll.  The company was founded in 2006 by current president David Gothard and owns four issued and seven pending patents for technology relating to flat panel display systems (used primarily for commercial and retail purposes) and digital media delivery systems (frequently used in hotel room entertainment systems).  Activision TV aggressively enforces its patent rights against other technology owners, filing more than two dozen lawsuits in 2013 alone alleging infringement of its patent rights and extracting significant licensing fees from countless other companies under the threat of litigation.[2] Activision TV was particularly litigious in 2013, suing major corporations in a wide range of industries including Mazda, Build-a-Bear Workshop and the fast food chain Wendy’s.

Given Activision and Activision TV’s respective histories and business practices, one would expect any legal dispute between the two entities to involve an allegation of patent infringement against the game publisher by the notorious troll.  How, then, did the two players recently find themselves embroiled in a hotly contested trademark litigation?  In its more than thirty years of operation, Activision has used the mark ACTIVISION and related logo (pictured below) continuously in commerce in connection with computer and video games and publishing and production thereof, as well as related merchandise and other goods.  As visible below, Activision’s logo includes the letters “T” and “V” depicted in a larger font and connected to each other (thus emphasizing the acronym “TV” and highlighting that consumers originally played the publisher’s games on their television sets). 

Activision also owns several federal trademark registrations for its ACTIVISION mark and logo in connection with such longstanding use. 

In 1999, Ad Media Displays, Inc. (the predecessor of Activision TV) sought to federally register the mark ACTIVISION in connection with digital advertising and display signs and the promotion of goods and services via such signs.  Despite the application by Ad Media Displays for an identical mark for potentially related goods and the arguable fame of Activision’s own ACTIVISION mark (which, under trademark law, could prevent use or registration of a very similar mark even for less closely related goods or services), Activision appears to have allowed Ad Media Displays’ mark to register in 2005 without objection.  (Activision’s decision not to object to registration of the mark is especially ironic in light of Activision TV’s aggressive enforcement of its own intellectual property rights.) 

In 2009 and 2010, Activision TV added to the foregoing registration by filing four applications to register ACTIVISION.TV for various goods and services including broadcasting services and display sets and screens.  This time, Activision took action, formally opposing registration of all four applications with the Trademark Office on the grounds that Activision TV’s use of ACTIVISION.TV was likely to cause confusion among consumers regarding the sources of the goods and services offered by the two entities.   Activision TV responded in its typically aggressive manner, not only refuting any likelihood of confusion between the marks but also seeking to cancel one of Activision’s trademark registrations.

Activision, however, refused to back down, and Activision TV experienced firsthand what it is like to defend against aggressive intellectual property enforcement.  In October of 2012, Activision filed a Complaint in federal district court in California against Activision TV, Gothard and a related company asserting trademark infringement, false designation of origin, trademark dilution and related claims under the federal Lanham Act.  Activision alleged that Activision TV’s use of ACTIVISION, ACTIVISION.TV and related marks constituted bad-faith, willful infringement of its ACTIVISION mark, arguing not only that consumers were likely to confuse the two parties’ marks but also that Activision TV intentionally sought to capitalize on Activision’s trademark rights by deliberately causing consumers to associate Activision TV’s products with Activision.  In short, Activision TV was using the name Activision to scare people into thinking they were receiving a patent letter from the game publisher. 

The behavior which Activision TV was accused of is particularly egregious.  According to Activision, the patent troll marketed, advertised and purported to sell its products relating to the digital transmission of entertainment content (including video and computer games) under various ACTIVISION marks in order to capitalize on the public good will associated with Activision’s mark.  As part of such efforts, Activision TV purposefully advertised on its website that its system could be used to play games produced and distributed by Activision or Activision affiliates and used internet keywords and metatags to attract Activision’s customers.  It also planned to place the “ActivisionTV” name directly on television screens from which members of the public could purchase games and other entertainment products.  Further, in a plan which mirrored its regular business practice of extorting licensing fees from third parties in the patent arena, Activision TV even suggested that the foregoing actions could help coerce Activision into agreeing to a licensing arrangement pursuant to which Activision could offer its games via Activision TV’s system. 

In addition to the above bad-faith, willful infringement, Activision also alleged that Activision TV fraudulently obtained its 2005 federal trademark registration for ACTIVISION.  More specifically, Activision maintained that Ad Media Displays did not (and never intended to) actually use the word “Activision” alone in connection with the goods and services covered by the registration.  Such allegation highlights the often very thin line between Activision TV’s legal but morally questionable business activities and its truly fraudulent practices.  Further, it suggests that the troll may have intended for several years prior to the commencement of Activision’s lawsuit (and perhaps as far back as 1999, when it first filed its application to register ACTIVISION) to exploit the game publisher’s trademark rights. 

In late September 2013, Activision and Activision TV reached a settlement agreement under which the Court dismissed Activision’s claims in exchange for the permanent enjoinment of Activision TV’s use of ACTIVISION or any confusingly similar mark (i) in connection with any product or service, (ii) to advertise or promote Activision TV or any product or service offered by Activision TV or (iii) as part of any corporate or business name.  Pursuant to this agreement, in early 2014 Activision TV changed its corporate name to “Activelight Inc.”  Activision TV also agreed to abandon its four pending trademark applications for the mark ACTIVISION.TV (as of May 12, 2014, these applications were not yet abandoned). 

While the dispute between the parties may be resolved, the conditions which prompted Activision TV’s actions with respect to Activision’s trademarks remain.  In recent years, NPEs have been increasingly recognized as major deterrents to technological innovation and public antipathy to their trolling activities has continued to grow.  The America Invents Act of 2011 (the “AIA”) took a first step toward combating NPEs by creating several new means by which to attack the validity of patents (thus providing alleged infringers with additional tools with which to respond to trolls’ enforcement efforts).  This step proved insufficient, however, and in August of 2013 President Obama publicly urged the legislature to stop trolls such as Activision TV from “extort[ing]” innovators and “hijack[ing[” others’ inventions.  As a result of the public backlash against NPEs, federal legislators continue to propose a variety of measures aiming to implement the anti-trolling principles imbedded in the AIA, and the Federal Trade Commission even is considering conducting an investigation which eventually could trigger antitrust action against some NPEs.

Moreover, in the continued absence of federal legislation remedying the problem, state governments appear to be (often successfully) coordinating their efforts to combat NPEs.  In May of 2013, Vermont argued that the actions of NPEs violate state consumer protection laws and subsequently passed a law prohibiting patent trolling.  In August, the patent troll MPHJ Technology Investments agreed to “cease its patent enforcement campaign” in Minnesota and not resume such activities without the state Attorney General’s consent.  And in late 2013, the Attorney General of the state of Nebraska issued an order seeking to prevent Activision TV from sending cease and desist letters to Nebraska businesses (after a federal judge found the Attorney General’s action unconstitutional, the Attorney General ultimately withdrew the order).  Thus, Activision TV’s willful infringement of Activision’s trademark rights appears to have reflected its growing recognition of the shifting political climate with respect to patent trolls and its subsequent need to develop new, creative methods of exploiting the intellectual property of others (or risk losing its business model entirely). 

As the future of patent trolls remains in question, Activision’s lawsuit against Activision TV highlights the potential shift of NPEs’ focus away from patents and toward other areas of intellectual property exploitation.  While the need for legislation addressing patent trolls is dire, we must recognize that disputes such as those between Activision and Activision TV also are crucial battles in the war against NPEs.  Thus, the outcome of Activision’s lawsuit against Activision TV represents one small victory in the fight to prevent NPEs from transitioning to new methods of exploiting the intellectual property of others and maintaining their parasitic hold on genuine innovation.  

[1] President’s Council of Economic Advisers, the National Economic Council and the Office of Science & Technology Policy, Patent Assertion and U.S. Innovation 9 (June 2013), available at http://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf.

[2] Shook Hardy & Bacon LLP, Federal Court Enjoins Nebraska AG From Enforcing Cease and Desist Order in Patent-Infringement Litigation 66 Life Sciences & Biotechnology Legal Bull. 1, 2 (October 2013), available at http://www.shb.com/newsletters/blb/blb66.pdf.