J.T. Colby & Company, Inc. et al v. Apple, Inc.

Filing 138

DECLARATION of Robert T. Scherer in Opposition re: 83 MOTION in Limine to Exclude any Testimony, Argument or Evidence Regarding the Expert Reports and Opinions of Robert T. Scherer.. Document filed by Ipicturebooks LLC, J.Boyston & Company, J.T. Colby & Company, Inc., Publishers LLC. (Attachments: # 1 Exhibit A, # 2 Exhibit B Part 1, # 3 Exhibit B Part 2, # 4 Exhibit C, # 5 Exhibit D)(Chattoraj, Partha)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

J.T. COLBY & COMPANY, INC. d/b/a/
BRICKTOWER PRESS, J. BOYLSTON &
COMPANY, PUBLISHERS LLC and
WICTUREBOOKSLLC,
Plaintiffs,
-againstAPPLE INC.,
Defendant.

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Case No. 11 Civ. 4060 (DLC)

DECLARATION OF
ROBERT T. SCHERER

ROBERT T. SCHERER hereby declares, under penalty of perjury, pursuant to 28
U.S.C. § 1746, as follows:
1.

I was retained by Plaintiffs' counsel to provide my expert analysis and opinions

concerning various matters in the above-captioned litigation. I am over the age of 18 and not a
·party to this action. I make this declaration, based on my own personal knowledge, in opposition
to the motion of Defendant Apple Inc. ("Apple") to exclude any testimony, arguments or ·
evidence regarding my expert reports and opinions in this matter (''the Motion").
2.

I make this declaration in order to provide evidentiary details for the opinions I

have expressed in my reports and my deposition testimony in this matter.
3.

Attached as Exhibit A is a true and correct copy of my curriculum vitae.

4.

Attached hereto as Exhibit B is a true and correct copy of the expert report that I

prepared in this action, dated September 17, 2012 ("Report").

5.

Attached hereto as Exhibit C is a true and correct copy of the rebuttal expert

report that I prepared in this action, dated October 26, 2012 ("Rebuttal Report").

6.

Attached hereto as Exhibit Dare true and correct copies of certain pages from the

transcript of my deposition, taken in this action on November 16, 2012, to which I refer in this
Declaration.
7.

While addressing my December 2005 retirement from Time Warner in the

Motion, Apple claims that "in the rapidly evolving field at issue in this case, seven years is a
lifetime." I am surprised by this statement because as anyone familiar with trademark law and
practice knows, major developments in intellectual property law, especially trademark law, move
with glacial speed. The subjects discussed in my Report, specifically search and clearance
procedures, trademark assignment protocol, application filing and prosecution, registration
maintenance and renewal and the standards of practice before the PTO have changed little, if at
all, since my retirement. As noted in my Report (at 1), since my retirement I have also continued
to monitor developments in the trademark field. During my deposition, I testified that I was first
retained as an expert in an earlier trademark lawsuit on behalf of Crayola and began consulting
on behalf of Plaintiffs in this lawsuit in June 2011. (Scherer Dep. 115:4-118:4) Although I had
retired from Time Warner, I did not stop working in the trademark field altogether.
8.

Apple has questioned my qualifications as an expert witness in this matter

because I have "not taught a trademark law class, published scholarly articles or delivered 'any
public speeches about trademark law." In reality, during my 22-year career at Time Warner, I
regularly taught and lectured on trademark law and practice and authored the Time Inc.
trademark manual. Just because these activities were targeted within the company, as is typical
for in-house counsel, rather than to law students or bar association members, does not make me
any less of an expert in trademark law. In either case, I developed the same expertise "on the
job" over the 33 years of my career.

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9.

I am well aware that there is no legal duty to conduct a trademark clearance

search prior to adopting a new or expanded trademark. In my Report (at 7), I wrote that "it is
imperative that the trademark attorney conduct the necessary searches and, if appropriate,
follow-up investigations to determine whether the proposed mark is available for the intended
use." In this context, I used the word "imperative" to stress the importance and prudence of
performing an appropriate clearance search, not to indicate that such a search is legally required.
It was my intention to convey the same meaning as Apple's own trademark attorney, Glenn
Gundersen, when he stated in his treatise that "A trademark search is the critical step in the
process of selecting a new mark ... "
10.

I also stated in my Report (at 10) that once a search has been undertaken, there is

"a duty to properly search and clear new marks or new uses of existing mark ...." This
statement does not imply a legal duty to search, but rather once a search is undertaken, as in this
case, there is a moral duty and responsibility to perform it in an appropriate manner so that the
rights of others are not disregarded. While there is no legal duty to conduct a search, the absence
of an appropriate comprehensive search may be evidence ofbad faith. Apple's statement in the
Motion that I "insisted" that "Apple had a legal duty to conduct a comprehensive trademark
search" is a misrepresentation of my Report.
11.

I practiced trademark law exclusively for 33 years and have conducted and

reviewed thousands of trademark searches. As I wrote in my Report (at 7-8), during that time
and continuing today, there have been three basic steps in conducting an appropriate trademark
search, specifically, (i) a preliminary/screening/knockout search, (ii) a comprehensive full search
and (iii) any necessary follow-up investigations. These long established searching basics remain
unchanged. While the use of computers in conducting both searches and investigations has

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greatly expanded over the past twenty years, I routinely used the U.S. Patent and Trademark
Office ("PTO") databases, Thomson Compumark's SAEGIS database and its online full search
software as well as other proprietary trademark databases to conduct searches, throughout those
years, prior to my retirement from active practice. I am very familiar with current searching
techniques, to include performing common law searches of relevant databases using several
different search engines.
12.

Apple's Motion again misrepresents my Report when it states that I have "no

understanding of the customary trademark and clearance searches followed by law firms today."
During my deposition, I was asked ifl was familiar with how Latham & Watkins and Kirkland &
Ellis conduct full searches. My answer was, of course, "No" (Scherer Dep. 81 :20-82:5),
because, not being a member or employee of those firms, I could not possibly know how they
conduct full searches. From this exchange, Defendant's counsel incorrectly extrapolates that I
have "no understanding" of how law firms conduct full searches today. This is a
mischaracterization of my testimony.
13.

In my Report (at 23-24) and my Rebuttal Report (at 3), I briefly discussed Family

Systems' U.S. Patent No. 6,411,993. Defendant's counsel points out that I am not a patent expert
(Scherer Dep. 162: 18-20), but I would submit that my tying this patent to Family Systems'
!BOOK product does not require patent expertise, because the one-paragraph patent abstract
quoted in its entirety in my Report (at 23) begins with the sentence, "An interactive Web book
('ibook') system is provided that allows material to be contributed to the World Wide Web" and
then continues to refer to the ''ibook" name eight more times. It is my view that the patent
provides compelling evidence of the nature ofFamily Systems' !BOOK software product.
14.

In discussing the purported assignment ofthe !BOOK mark from Family Systems

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to Apple in my Report (at 24-29), I referred to the fact that U.S. Patent No. 6,411,993 was not
assigned to Apple. I pointed out that this omission "raises questions" (Report at 23) regarding
the validity of the trademark assignment. I subsequently listed a variety of other tangible assets
which could have been transferred to Apple to effect the assignment of the goodwill associated
with the !BOOK mark, including trade secrets, customer lists, specialized equipment, physical
inventory, work in progress, inventory, packaging, advertising and promotional material and
sales records, among others (Report at 26). The patent was simply one of many assets which
could have been assigned to Apple. At no time did I imply, much less state, as claimed by
Defendant's counsel, that "one needs to acquire the patent associated with a trademarked
product" or that "the assignment of the patent was necessary to the assignment of the !BOOK
mark." During my deposition, I testified, "If Apple did not receive that patent in an assignment,
Apple couldn't use the mark on the same goods and services on which it had been used before ..
. " (Scherer Dep. 188:18-21) I did not say that the patent was a required asset, only that Apple
must have been using the mark on a different software product, one that did not incorporate the
inventions set forth in the Family Systems patent.
15.

Apple's Motion claims that I made "numerous factual errors" in rendering my

opinions, which I will address below:
a)

Neither in my Report (at 7-17) nor during my deposition testimony

(Scherer Dep. 80:3-13) did I ever state that there is a legal duty to conduct a
clearance search. Apple's statement to the contrary is based upon a
misrepresentation of my Report and deposition testimony.
b)

As I wrote in my Report (at 24-29), the assignment of the !BOOK mark

failed to include the requisite goodwill associated with the trademark. During the

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course ofthat discussion, I stated that Apple purchased the !BOOK mark on the
same day as it received an e-mail from John Colby informing them of Plaintiff's
rights in the ibooks mark. Report at 24. As I explained during my deposition
(Scherer Dep.151:7-153:23), I focused on the single-page U.S. assignment
document dated January 29, 2010, rather than the assignment agreement, which I
understand is dated January 27, 2010. I am aware that Apple's negotiations to
acquire the !BOOK mark from Family Systems actually began prior to its receipt
ofMr. Colby's January 29, 2010 e-mail. I also believe that Apple did not actually
pay the purchase price to Family Systems until after January 29, 2010. In any
case, these dates do not alter the opinions expressed in my Report and Rebuttal
Report.
c)

In my Report (at 28), I wrote that Apple "appears to have made no attempt

to purchase Family Systems' !BOOK mark in these other [Japan and the EU]
jurisdictions." As I testified during my deposition (Scherer Dep. 151:7-153 :23), I
subsequently learned that two foreign registrations [Japan and Jamaica] for the
!BOOK mark were assigned to Apple and that the EU registration had expired.
Although these two foreign registrations do indicate that Apple wished to acquire
Family Systems' !BOOK mark in other jurisdictions, this is a very common
provision of such trademark assignments, and the two registrations are, in my
opinion, of minor significance to the overall transaction. Thus, this correction
does not materially change the opinions expressed in my Report and Rebuttal
Report.
d)

Defendant's counsel claims that my statements concerning Apple's filings

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in connection with the iBooks '634 registration (Report at 29-32) are in error
because I misinterpreted the specimens filed with Apple's combined declaration.
As I thought I made abundantly clear in my Report (at 31) as well as my Rebuttal
Report (at 2-6), my opinion was not based on the specimens. I focused on the
statement under oath of Apple's representative that "the mark is in use in
commerce on or in connection with all of the goods and services listed in the
existing registration." I continue to believe, based on my analysis of the
documents and based on my experience with the PTO that this statement is false,
for the reasons set forth in my Report and Rebuttal Report.
e)

Defendant's counsel challenges my opinion that Apple's purchase of

Family Systems' !BOOK mark was an attempt to gain priority over Plaintiffs.
Report at 24-25. I continue to believe that this was the primary motivation for
acquiring the !BOOK mark. I understand that Family Systems offered to sell the
!BOOK trademark to Apple in 2008, and Apple declined. I understand that Apple
was already aware ofPlaintiffs' predecessor's abandoned applications to register
the ibooks and ibooksinc.com marks based upon a search conducted on January
12, 2010. Apple's claim in its Motion to Exclude (at 16) that it acquired the
!BOOK mark for the "goodwill in the mark" does not seem credible to me, based
on my experience, because Apple failed to acquire any of the indicia of goodwill
and did not continue the Family Systems business.
16.

Apple claims that my opinion that Plaintiffs' ibooks mark is suggestive (Report at

35-36) is "unreliable." In my Report (at 32-34), I outlined some ofthe various criteria used in
my field to measure the distinctiveness of a trademark. As I testified during my deposition

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(Scherer Dep. 273:20-276: 14), I believe that the letter "i" in Plaintiff's ibooks mark is a reference
to the word "idea," as demonstrated by its use in combination with a light bulb logo. I also
pointed out (at 35) that the Trademark Examiner reviewing Plaintiff's predecessor's ibooks
application in 1999 did not refuse registration on the grounds of descriptiveness.
17.

Defendant's counsel points out that, until after I prepared my Report, I was

unaware ofthe Trademark Manual of Examining Procedure ("TMEP") provision which states
that "the prefix 'I' or 'I' would be understood by purchasers to signify Internet." I note, however,
that this language merely instructs the Trademark Examiner to refuse registration of such a mark
in the first Office Action, a refusal which may subsequently be overcome by argument, as well as
proof of secondary meaning. This TMEP provision is therefore not the final determiner of the
descriptiveness ofthe mark.
18.

In my Report (at 35), I set forth my opinion that Plaintiffs' substantially exclusive

and continuous use of the mark for more than five years along with extensive sales and
advertising was evidence that its ibooks mark has acquired secondary meaning. Apple's counsel
argues that this statement is unsubstantiated because I referred to facts set forth in a 2002
response in Plaintiffs' predecessor's earlier application to register the ibooks mark. But Apple's
counsel ignores that my Report also states (at 35) that I relied on the deposition testimony of
John Colby wherein he stated that total ibooks sales to distributors for the years 2003-2011
exceeded $20,000,000. Based on my experience with the assessment of allegedly descriptive
marks, I believe this is strong evidence of secondary meaning. Defendant then recites six factors
to be considered in determining whether a mark has acquired secondary meaning and states that I
"ignored nearly all of those factors" in my Report. I would draw Defendant's attention to the
fact that I discussed several of the listed factors in my Report (at 35).

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19.

In my Report (at 6-7), I included a brief discussion of relevant trademark

principles to assist in the review of my Report, by explaining terminology and the background of
my opinions. It was not my intention to replace the Court or the jury by including the section,
only to make my Report more readable.
20.

Apple has repeatedly questioned my ability to distinguish between Family

Systems' IBOOK computer software product and Apple's iBooks e-reader product as discussed
in my Report (at 17-22) because I am neither a computer expert nor a computer software expert.
They have correctly pointed out that I am not familiar with the inner workings of computers or
computer software, and it is true that I said that their function was "magic" to me (which at the
time I thought was an obvious attempt at humor).
21.

My expertise is in trademark areas, not computers. In my analysis of the Family

Systems-Apple assignment, the key point is the difference that would be perceived by consumers
between the Family Systems and Apple products. I submit that a consumer does not need to
understand the technical basis for how these products operate in order to know that they are very
different in nature. A consumer can clearly distinguish between (a) a car and a motorcycle even
though both are modes of transportation with engines, (b) airplanes and helicopters even though
both fly and have motors, or (c) a refrigerator and a dishwasher even though both are used in the
kitchen and have motors, without knowing how they operate. Similarly, a consumer need not
know how Family Systems' and Apple's respective products work in order to recognize that they
are very different products. A consumer knows that Amazon's Kindle e-book reading application
or Barnes & Noble's e-book reading application serve the same purpose as Apple's iBooks ereading application when installed on a mobile device. However, it is my opinion that
consumers would not consider Family Systems' IBOOK software, based on the available

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evidence, to have the same use or purpose as Apple's iBooks application. It is my opinion that
the Family Systems software was marketed for a very different use and serves a very different
purpose, as set forth in detail in my Report.
22.

In my Rebuttal Report (at 1), I wrote that the validity ofthe assignment of the

ffiOOK mark from Family Systems to Apple "will be decided by the Court." This was not an
attempt to label this issue as a "question of law" specifically. It was simply intended as a
statement that the parties to the assignment would not be making the ultimate determination as to
its validity. In my view, this case involves a number of mixed questions of fact and law, and it
was never my intention to usurp the Court's authority in such matters, but rather to assist the
Court and jury in understanding some ofthe issues involved in this litigation.
23.

In its Motion, Defendant seeks to exclude any testimony regarding Apple's prior

trademark conflicts claiming that this information is irrelevant and prejudicial. In my Report (at
43-44), I referred to four trademark infringement claims made against Apple between 2007-

2011 (not including the subject ffiOOKS litigation) as well as several media reports noting that
this is a recurring problem for Apple. Based on my experience working at large companies like
PepsiCo and Time Inc., this volume oftrademark infringement claims within the indicated time
period seems unusually and egregiously high. Accordingly, I formed the opinion that these
problems show an ongoing and willful disregard for the trademark rights of others and is
evidence of Apple's continuing bad faith in adopting new trademarks.
24.

Apple's counsel moves to exclude my opinions regarding Apple's bad faith

because they were not previously disclosed in my reports. This argument ignores the fact that
both my Report and my Rebuttal Report recited examples of bad faith. Specifically, in my
Report (at 8,10,12,15-17), I noted that (i) Apple failed to conduct an appropriate clearance search

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and investigation prior to adopting the iBooks mark and thns disregarded the trademark rigbts of
others, (ii) the evidence indicates that Apple intentipnally filed false statements with the Pro in
renewing the '634 registration (Report at 31 ), (iii) Apple engaged in an assignment transaction
with Family Systems without actually intending to continue Family Systems' use of the ffiOOK
mark, and (iv) over a five-year period, Apple was subject to repeated third-party claims of
trademark infringement (Report at 43-44). In sum~ I believe the issue of bad faith was raised .in
both of my reports.
25.

In my Report, I referred to the International Classificatioo system which was

adopted by the PTO in 1973, and included the personal aside that the primary purpose of the

classification system was to generate additiooal filing fees, (my Rep. 9 n.2) My conunent was
intended as humor and has no bearing whatsoever on the merits of the subject case, which is why
it was included only as a footnote.
I d"eclare, ~under penalty of perjury, that the foregoing is true and correct.
Dated: Sunset, South Carolina
January 25, 2013

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