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Ninth Circuit:
OpenAI Likely Has Protected Ownership Interest in Name
Majority Says Preliminary Injunction Barring Use of ‘Open AI,’ With Space Between Words, Is Proper As Name Has Become Synonymous With Company; Collins Dissents, Citing ‘Confusing’ Order
By Kimber Cooley, associate editor
The Ninth U.S. Circuit Court of Appeals, in a 2-1 decision, held yesterday that a preliminary injunction was properly entered in a trademark-infringement case initiated by the artificial intelligence giant OpenAI—the Microsoft-backed company responsible for the popular chatbot ChatGPT and image generator DALL-E—against a corporation that uses the mark “Open AI” with a space between the words.
An otherwise non-distinctive mark can receive trademark protection if it has acquired a “secondary meaning” by becoming associated with the company or its products in the minds of consumers; a plaintiff must show its mark achieved secondary meaning before a defendant first used the mark.
Finding that the mark “OpenAI” has likely become synonymous with the company’s products since the July 2022 rollout of the second version of DALL-E (“DALL-E 2”)—which is used by more than 1.5 million users to create over 2 million images per day—the court concluded that the plaintiff is likely to succeed on the merits of its claims
Appealing the order granting preliminary injunctive relief was Open Artificial Intelligence Inc. and its founder Guy Ravine, alleging that their use of the mark “Open AI” precedes the plaintiff’s use of “OpenAI.”
Both Ravine and OpenAI Inc. unsuccessfully filed for registration of their marks with the U.S. Patent and Trademark Office (“USPTO”)—Ravine filed his application for protection of “Open AI” on Dec. 11, 2015, the same day OpenAI publicly announced its founding, and the plaintiff’s attempts to register “OpenAI” were rejected on Sept. 21, 2016 and again on Jan. 26, 2023.
USPTO denied OpenAI’s applications due to findings that the mark is “merely descriptive.”
Ravine purchased the domain Open.ai on March 26, 2015. The website was inoperative—only reflecting a “coming soon” message with the mark “Open AI”—until Nov. 16, 2022, when it was updated to host a third-party plugin for a text-to-image generator called “Stable Diffusion” which competes with OpenAI’s Dall-E program.
Allegations in Complaint
Open AI’s complaint, filed Aug. 4, 2023, alleges:
“Defendants’ motives are transparent. The day OpenAI announced its founding, which received widespread coverage in national and international news media, Ravine filed an application with the United States Patent and Trademark Office (‘USPTO’) for the Infringing Mark. The USPTO refused to register the mark, noting that the initial submission had not shown the Infringing Mark being used in commerce. Undeterred, Defendants manufactured evidence related to their website to mislead the USPTO into believing their mark was being used in commerce even though Defendants had never used the Infringing Mark in connection with any goods or services it offered in interstate commerce—i.e., as a trademark. Indeed, during four years of its existence, the domain associated with Defendants’ trademark application redirected visitors to OpenAI’s website.”
District Court Judge Yvonne Gonzalez Rogers of the Northern District of California found that the “plaintiff has presented credible evidence that defendants did not use their mark in commerce, if at all, until recently” and opined that, since the time of the second denial of registration by USPTO, “the landscape has changed” such that OpenAI has become a “household name” due to the launch of ChatGPT and DALL E 2.
Rogers granted the preliminary injunction prohibiting the defendants from using the “Open AI” and “Open.ai” marks for commercial purposes, concluding that the plaintiff was likely to succeed on the merits and would suffer irreparable harm without relief.
Senior Circuit Judge Sidney R. Thomas and Circuit Judge John B. Owens signed the memorandum opinion affirming the order. Circuit Judge Daniel P. Collins dissented, saying “the district court’s orders supporting its grant of a preliminary injunction failed to identify and apply the correct legal standards and made confusing and insufficiently explained findings.”
Majority Opinion
Thomas and Owens explained that “[a] plaintiff must show its mark achieved secondary meaning before a defendant first used the mark” and wrote:
“The district court’s conclusion that Plaintiff likely acquired secondary meaning in the mark by September 2022, before Defendants first used the mark in commerce, is not clearly erroneous. In July 2022, over one million users had registered for early access to DALL-E 2, and, as of September 2022, more than 1.5 million users were creating over 2 million images per day with DALL-E. The number of people driven to Plaintiff’s website supports an inference that ‘a substantial segment of consumers and potential consumers’ associated the mark with ‘a single source.’….The district court further found that Plaintiff advertised the mark ‘in association with its goods and services…on its website, social media, and marketing,’ and that it has consistently and exclusively used the mark in association with publicly available artificial intelligence…tools since 2016.”
They continued:
“Defendants allege that in November 2022, they released their own AI ‘Image Generator,’ but Plaintiff’s evidence suggests this Generator may never have existed. As the district court found, ‘Open.ai…was only hosting the third-party Stable Diffusion in November of 2022.’ And while Defendants criticize the district court for not deferring to the Patent and Trademark Office…, ‘[d]eference to the PTO’s classification decision is sensible,’ but ‘absent legal error we owe great deference to a district court’s factual decision on whether a mark is distinctive.’ ”
Concluding that the defendants have not been able to overcome the presumption of irreparable harm that attaches when a plaintiff is likely to succeed on an infringement claim, the court affirmed the preliminary injunction.
Collins’ View
Collins said:
“[B]oth sides agree that, in order for Plaintiff…to demonstrate a likelihood of success on the merits, it ‘must establish that its mark had acquired secondary meaning before the first infringing use by’ Defendants Open Artificial Intelligence, Inc. and Guy Ravine…The district court’s orders never squarely identified this controlling legal rule, and it consequently failed to make clear factual findings sufficient to support a conclusion that a preliminary injunction was warranted under that standard.”
He remarked:
“In its original order, the district court did not make any express finding as to when Plaintiff’s mark had acquired secondary meaning. Moreover, that order had assumed that, when the [USPTO] had rejected Plaintiff’s application to register its mark on ‘January 3, 2022,’ the mark was not yet ‘distinct enough to guarantee [P]laintiff its exclusive use,’ but that the subsequent launches of ‘two products, ChatGPT and DALL E 2,’ in November 2022 and September 2022 had made Plaintiff’s mark ‘a household name.’ ”
Noting that the date of the USPTO denial was January 2023 not 2022, Collins said that Rogers acknowledged the error in an order following a motion for reconsideration but failed to give the mistake the weight it deserved. He wrote:
“[T]he original order seemed clearly to assume that, as of the time of the USPTO’s denial of Plaintiff’s application, secondary meaning had not been established, but when Defendants pointed out that the date of the denial was actually January 2023 rather than January 2022, the district court, without adequate explanation, shifted to using the date of the application to the USPTO rather than the date of the USPTO’s denial. Furthermore, the reconsideration order’s explanation for that new secondary meaning finding generically refers to the fact that, ‘as of September and November of 2022,…[P]laintiff released DALL-E and ChatGPT to the public with the…mark.’ But ChatGPT was released on November 30, 2022, and it therefore cannot be used to establish secondary meaning as of November 16, 2022.”
The jurist concluded that “[b]ecause the district court did not apply the correct standards and made confusing, internally inconsistent, and inadequately explained findings, it abused its discretion in granting the preliminary injunction.”
The case is OpenAI Inc. v. Open Artificial Intelligence Inc., 24-1963.
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