IP Law Daily, COPYRIGHT—N.D. Tex.: American Airlines’ contract claims against Skiplagged suffer hard landing, copyright claims arrive on time, (Aug 1, 2024)

By Justin Marcus Smith, J.D.

American waited a little too long to extinguish the “stench” of certain contract claims given that each ticket a flyer bought through Skiplagged was a new contract.

American Airlines, Inc. (American) was not entitled to summary judgment against proxy airline ticket buyer Skiplagged, Inc. (Skiplagged) on claims sounding in contract, held a federal district court in Fort Worth, Texas. American waited too long to bring the claims. Each ticket Skiplagged bought for a Skiplagged customer was a new contract. However, American was entitled to summary judgment with respect to copyright infringement of American’s flight symbol. The American symbol was exceedingly well known, so, at least on these facts, the certificate of registration would suffice to show ownership of the symbol. Fair use did not apply where Skiplagged availed itself of the American symbol and caused signficant harm to American’s profitability. The court said it could not award summary judgment to either party on American’s trademark infringement claim, based on the doctrine of laches, where there were just too many fact issues in need of resolution (American Airlines, Inc. v. Skiplagged, Inc., No. 4:23-cv-00860-P (N.D. Tex. July 31, 2024)).

Background. Following other airline industry giants, American Airlines sued Skiplagged in August 2023 for trademark and copyright infringement, breach of contract, tortious interference with contract, and unfair competition. Airlines like American have taken notice of Skiplagged due to its business model, which the court called a “Trojan Horse.” Specifically, Skiplagged acts as a proxy ticket buyer, posing as the flyer, to give the flyer discounted tickets through a loophole called “hidden-city” ticketing. The tactic uses layover cities as flyers’ ultimate destination.

After multiple discovery disputes, Skiplagged moved for summary judgment very recently, on July 1, 2024. American then filed a cross-motion for partial summary judgment on most claims and reserved on damages, fees, and injunctive relief for trial.

Contract breach. The court held Skiplagged was entitled to summary judgment on American’s claim for breach of contract. Skiplagged said the claim was not timely. American countered that Skiplagged breaches the American agreement every time a flyer uses the Skiplagged proxy platform to buy a ticket. Although Texas recognizes some instances where discrete independent breaches reset the limitations period, the court concluded this fact pattern did not qualify because it involved multiple independent contracts pertaining to each flyer. Serial breach liability theory just did not apply. The court concluded the statute of limitations ran when American first learned of Skiplagged’s conduct as early as 2016. Internal American records showed this. American had four years from that point, but it did not assert this breach claim until 2023. The court said it was “certainly disturbed” by Skiplagged’s “questionable business practices,” but the limitations period had run. Accordingly, the court said it must grant Skiplagged’s motion and deny American’s motion for summary judgment on the breach of contract claim.

For the same reasons, the court granted Skipplagged’s motion for summary judgment on American’s claim for breach of its conditions of carriage, which was another breach of contract claim, and American’s claim for tortious interference in that context.

Copyright infringement. The court held American was entitled to summary judgment on its claim for copyright infringement. Unlike the breach of contract claims, a single act of copyright infringement could reset the three-year limitations period here. American supplied evidence that Skiplagged used the American flight symbol on the Skiplagged platform as late as August 2023. This claim was timely.

As for the copyright itself, American said it was entitled to summary judgment because Skiplagged displayed it on its website for commercial purposes. Skiplagged countered that American did not own the copyright to the flight symbol; American could not prove Skiplagged copied it; and, any use was fair.

First, although Skiplagged was correct that a certificate of registration was not dispositive, the evidence of record “more than suffice[d]” to conclude that American owns the copyright to its own flight symbol. Second, the court found the symbol as Skiplagged displayed it was identical. The court said it did not need to see American’s official copyright deposit based on judicial notice of the ubiquity of the symbol taken together with the registration. The court said it did not fault Skiplagged for making a long-shot argument here.

Turning to Skiplagged’s defense of fair use, the court did not buy the argument that American still profited from the relevant ticket sales. The court said it did not need to delve deeply into fair use where American’s contract of carriage provided that only authorized agents of American could enter into flight contracts with American customers. Skiplagged was not one of those agents. The case law also showed it was patently not a fair use to resale another entity’s tickets while “brandishing” that entity’s logo and directing consumers to that entity’s information.

Last, although American arguably benefited, the court said courts “routinely” reject the fair-use defense under similar circumstances, not harmful per se, where it is really “beyond dispute” that Skiplagged’s business model “significantly undermined American’s profitability” even though it still profited. The court accordingly denied Skiplagged’s motion for summary judgment and granted American’s corresponding motion for summary judgment on the copyright infringement claim.

Trademark infringement. The court held summary judgment would be improper on American’s claims for trademark infringement and unfair competition. The main issue was whether Skiplagged was entitled to a laches defense. American said laches was unavailable because Skiplagged had unclean hands, it intentionally infringed on the American mark. The court declined to address all the argument wrinkles here because the underlying fact issues precluded summary judgment.

The Case is No. 4:23-cv-00860-P.

Judge: Pittman, M.

Attorneys: Dee J. Kelly, Jr (Kelly Hart & Hallman LLP) for American Airlines Inc. Jeffrey R. Gargano (K&L Gates LLP) for Skiplagged, Inc.

Companies: American Airlines Inc.; Skiplagged, Inc.

Cases: Copyright TechnologyInternet Trademark TexasNews