Intellectual Property Litigation

There is a widespread myth in this country that the First Amendment protects free speech in the workplace. Employees who loudly state controversial opinions often think the First Amendment protects them from being fired as a result. When Google fired James Damore last summer for posting what many described as an anti-diversity manifesto, social media exploded with comments like “what happened to free speech?” and “they can’t do that! It’s against the First Amendment!” This idea is back in the news after 50-year-old marketing executive Juli Briskman was fired for posting a picture of herself on social media giving the middle finger to President Trump’s motorcade. Unfortunately for Mr. Damore and Ms. Briskman, the First Amendment only limits the government’s ability to restrain speech, not private employers. But (and this being a legal issue, there is always a but), there are numerous other laws that can come into play when employers fire employees for expressing strong opinions on political or social issues. The First Amendment may not protect Mr. Damore’s statements regarding diversity in the workplace, but the National Labor Relations Act (NLRA) might. The NLRA protects unionizing activity and prohibits employers from retaliating against employees for engaging in so-called “protected concerted activity” regarding the terms and conditions of employment. Mr. Damore’s statements could arguably constitute a complaint about working conditions, which he shared with co-workers in an attempt to change those working conditions. Described this way, Mr. Damore’s statements could be protected by the NLRA. Likewise, the First Amendment may not protect Ms. Briskman’s one finger salute to the President, but anti-discrimination laws might. Prior to Ms. Briskman’s social media post, a male senior director at her company had responded to a discussion regarding Black Lives matter by posting “You’re a f------ Libtard a------[.]” Ms. Briskman herself flagged the director’s comment for review by senior management. Rather than fire this senior director, Briskman’s employer allowed him to remove the comment and keep his job. Why would Ms. Briskman be fired after this male executive was allowed to keep his job? If a jury concluded that it had to do with Ms. Briskman’s gender, her employer could face serious liability. Controversial statements in the workplace about social and political issues may not be protected by the First Amendment, but there are many other legal traps for unwary employers. If statements are shared among co-workers and relate to the terms and conditions of employment, they could be protected by the NLRA. And if employers selectively enforce rules regarding “inappropriate” speech, they could find themselves liable for discrimination claims.

We’ve blogged a few times about consumers’ rights to post negative reviews online, and what businesses should know about the Consumer Review Fairness Act (the “CRFA”), but what happens if you are lucky enough to receive so many glowing reviews that you’d like to advertise the accumulation of over 10,000 five star reviews?  The National Advertising Division (the “NAD”) recently decided a case involving this very issue. Based on this decision, prior NAD cases and some other resources, we put together a list of issues to consider when you are relying on crowd-sourced data to support your advertising claims: Here are a few substantiation guidelines: Online crowd-sourced data is treated no different from traditional survey data – the data must be reliable and representative. Lots of online consumer reviews are gathered and republished on other sites, so make sure not to double count any reviews. While astroturfing (the practice of covering the field with fake reviews) is frowned upon by regulators, it still happens.  Verified reviews are therefore the gold standard. As with other types of advertising claims, make sure your claim is narrowly tailored to the data If customers provide ratings based on overall satisfaction (quality of the product, price, shipping and customer experience), your advertising claim should speak to general satisfaction and not specific attributes of the product. If you rely on reviews from outside of the country in which you are making the ad claim, think about whether the location of the reviews should be disclosed Just because a review website (Yelp!, TripAdvisor, Amazon, etc.) allows you to advertise your star rating doesn’t mean that the above guidelines don’t apply or that the NAD, the FTC, the courts or any other regulator will give you a free pass And speaking of using consumer reviews in advertising, can you or should you quote from or reproduce Yelp! or other online reviews on your own website or in marketing materials? Yelp! provides some guidance on this question and suggests that you “don’t reuse photos with recognizable faces, as it infringes on personal privacy rights.”  But brands should also consider copyright and other privacy and right of publicity issues.  As Yelp! recommends, it is best to “get permission from the reviewer and provide attribution.”

We recently wrote about the decision in the federal district court for the Eastern District of Virginia, which overturned in part the Trademark Trial and Appeal Board’s decision that the mark “Booking.com” is not registrable because the mark is generic.  The route of the appeal of the refusal decision was unusual because Booking.com, B.V. did not appeal the refusal to the Court of Appeals for the Federal Circuit.  The end result was a determination of acquired distinctiveness for BOOKING.COM for hotel reservation services in Class 43 and the applications remain pending at the U.S. Patent and Trademark Office (“PTO”). But at what cost?  Well, at a minimum…$76,000.  The District Court awarded the fees to the PTO last week, based upon the Fourth Circuit’s interpretation of the “all expenses” language in the Lanham Act.  Because Booking.com pursued its appeal to a district court, it must pay the PTO’s expenses for the time its lawyers spent on the appeal.  And the obligation stands whether the PTO prevails on appeal. Does this result potentially limit the ability of a less opulent applicant to seek relief in the district court, where the outcome may be more just?  It was important for Booking.com to supplement the record by submitting a “Teflon survey” showing trademark distinctiveness, an option that would not have been available to it on appeal to the Federal Circuit. This relatively new interpretation of “all expenses” to include lawyer’s fees seems to function like a road block to the district courts.  While the district court option may strategically be most appropriate in some circumstances, the majority of applicants may not be in position to pursue the appeal route based on cost, even if the PTO has erred.  If the PTO has erred, shouldn’t it be responsible for its own fees?

It isn’t all that often that copyright decisions get handed down by the federal district court in the great state of Idaho, so the recent decision in James Castle Collection v. Scholastic, Inc. caught our attention.  The Court’s fair use analysis caught our attention too, particularly the first factor that analyzes the “purpose and character of the use” by the Defendant.  Before we get there, though, here’s a brief background of the relevant facts: James Castle was born in 1899.  He grew up and lived in Idaho until his death in 1977.  Castle was deaf from birth and never learned how to communicate orally or in writing.  Yet, he became a prolific (and self-taught) artist, renowned for creating his works from any number of resources such as discarded papers, soot, and saliva, to name just a few.  His works have been showcased at major museums, including the Philadelphia Museum of Art (of Rocky Balboa fame), the Museo Nacional in Madrid, and the Smithsonian American Art Museum.  Castle’s works are owned and maintained by the James Castle Collection and Archive. Enter Defendant Allen Say, an author and illustrator who wrote and illustrated a children’s book entitled “Silent Days, Silent Dreams.” Silent Days is story written from the perspective of Castle’s fictional nephew.  It contains copies of 28 of Castle’s original art works, and more than 100 other works created by Say that were intended to “mimic” Castle’s “unschooled style.” The James Castle Collection did not take kindly to Silent Days and sued to enjoin the release of the work.  The Court denied the TRO motion, finding at this early stage that fair use prevailed. The bulk of the Court’s analysis focused on the first factor, the “purpose and character of the use."  wThis factor was found to weigh “heavily” in favor of fair use due to the "transformative" nature of Defendant's use.  Why is that?  Because according to the Court, the author attempted to “see the young Castle’s silent world through his eyes.”  In this regard, the Court stated that “the book draws on facts but also included speculation based on reasonable inferences from facts (he was bullied by classmates for being deaf and mute) or just pure speculation (he was slapped by his father and locked in an attic by his parents).”  In sum, the Court found that the author “created a version of Castle as a self-taught artist who was isolated by his disabilities and driven by his artistic passion, ultimately finding salvation in his art from a harsh world.” The Court’s fair use analysis is a bit curious.  It relied pretty heavily on the Billy Graham Archives case where the 2nd Circuit found it was fair use to use “thumbnail images” of posters from Grateful Dead concerts in order to explain the significance of those posters in a much larger anthology on the history of the Grateful Dead.  But Silent Days appears to be largely a fictionalized version of James Castle’s life—an “imagined biography” as the Defendant Say called it.  And, the prominent use of 28 original sketches seems fundamentally different than using thumbnail images of posters for historical context.  The larger issue, though, is whether a fictionalized work of this type should be viewed as sufficiently “transformative” under the first fair use factor. If so, "imagined biographies" of Andy Warhol, Salvador Dali, and Pablo Picasso—complete with reproductions of their famous works—could be in the offing.  That would probably go over with the estates of these artists like a giant sack of famous potatoes.

A recent decision by the Trademark Trial and Appeal Board in Tidal Music AS v. The Rose Digital Entertainment LLC (Opp. No. 91232127) confirms the importance of ensuring proper use of a service mark before filing an allegation of use. The key take-away from the decision is that when filing an application based on use in commerce for services, it is not sufficient to advertise or promote the future offering of the service – the service must actually be rendered before use in commerce can be alleged in the application. The Rose is a tech startup with a business model built around curating digital entertainment content organized by days of the week, e.g., #MusicVideoMonday and #StandupSaturday. The plan for Tuesday was #TidalTuesday, in which content from the Tidal music streaming service would be promoted. The Rose filed a use-based application for the mark #TidalTuesday on June 6, 2016, claiming first use in commerce on the same day. The application covered a variety of advertising, marketing, and promotional services in Class 35. Tidal was apparently not a fan of the idea and opposed the application on the ground of likelihood of confusion with its prior TIDAL registration. In a hurry to argue that there could be no confusion, The Rose asserted in its answer that “[w]e do not currently promote Tidal content, or any content, using the hashtag” and that it “has never created or published content under #TidalTuesday, therefore registering the trademark has not caused any confusion with customers.” #Oops. Though the pro se applicant later made admirable arguments regarding nominative fair use, this inadvertent admission that the mark had not been used in commerce would prove fatal. Tidal moved for summary judgment, adding a claim that the application was void ab initio because The Rose had not made bona fide use its mark in connection with the subject use-based application. #Lawyered. The Rose argued that such use occurred when it registered the domain name tidaltuesday.com and used the mark on its website and social media accounts for “promoting the coming of the ‘#TidalTuesday’ product.” The TTAB sided with Tidal, finding that such use does not meet the requirements of the Trademark Act, which states that a service mark is used in commerce “when it is used or displayed in the sale or advertising of services and the services are rendered in commerce …” 15 U.S.C. § 1127 (emphasis added). As the Board explained, “Employment of a mark to promote a service not yet rendered is not use of a mark in commerce under the statute. In particular, the forward-looking nature of Applicant’s statements, e.g., ‘planning,’ ‘developing,’ and ‘coming soon,’ demonstrates that Applicant has yet to use the mark in connection with any services and is still planning and developing a strategy to use the mark.” Because The Rose had not used the mark in commerce within the meaning of the statute as of the date of filing, Tidal’s motion for summary judgment was granted and the #TidalTuesday application was refused registration. The law is clear that promotional use of a mark for a service the applicant intends to offer later is not sufficient to support a use-based application for registration. The Tidal Music decision is a good reminder of that foundational rule. We also note the decision was issued on a Friday (September 8, 2017) and think the Board really missed its chance to make a great joke about #FailFriday.

The US Supreme Court has granted certiorari to review a decision by the Second Circuit Court of Appeals, which reversed a District Court’s refusal to quash a warrant issued by the Department of Justice to Microsoft that would have required it to produce information housed in an overseas server. The case underscores the increasingly challenging nature of our digital world in the context of “searches” and “seizures”.  Until recently, the law was straightforward: a warrant could require the recipient to produce to law enforcement anything in its possession responsive to the scope of the warrant, e.g., paper documents stored in its files.  All of that changed with the advent of digitized information.  Would the recipient have to produce information stored on a server located at the facility where the warrant was served?  Of course.   What about a server located outside of the jurisdiction of the court issuing the warrant, but which it could easily access?  Technically, that information would still be within the “custody and control” of the recipient, and probably would have to be produced. What about information stored overseas??  Now that’s getting a bit more tricky.  Arguably it’s still within the custody and control of the recipient.  But.  What if the jurisdiction in which it is located has other limitations on whether it should be produced, and under what circumstances?  Now turn the situation around.  Does information about US citizens, or even foreign nationals, located in US servers have to be produced in response to a subpoena issued overseas by a foreign government?  What if it’s North Korea or Iran seeking information on dissidents? Plainly there are many significant policy issues at play, and it’s not clear whether our system for obtaining search warrants adequately reflects the nuances of a digital age.  This will be a very closely-watched case, and one hopes the US Supreme Court will shed some light on this increasingly shadowy area of the law.

We have previously blogged about claims brought by Lions Gate Entertainment against a TD Ameritrade ad campaign featuring the tagline “Nobody puts your old 401K in a corner.” This was an obvious and humorous allusion to the iconic line from Dirty Dancing  that “Nobody puts Baby in a corner,” heightened by the ad’s depiction of a man lifting a piggy bank over his head after the piggy bank jumped into the man’s arms. The case was filed in 2015, leading to a hotly contested motion to dismiss. In March 2016, the court issued an Order dismissing Lions Gates’ trademark infringement and unfair competition claims as preempted by the Copyright Act and barred by the Supreme Court’s holding in Dastar Corp. v. Twentieth Century Fox Film Corp. The Supreme Court’s 2003 decision in Dastar had held that the Lanham Act’s prohibition on false designations of origin of goods “does not refer to the author of any idea, concept or communication embodied in” the goods. Rather a false designation of origin claim relates to the identity of the producer of tangible products sold in the marketplace. Tempers have apparently cooled between Lions Gate and Ameritrade, with the parties entering into a settlement agreement. Notwithstanding the settlement, Lions Gate did not want the March 2016 Order dismissing its trademark claims to remain on the books. Contending that the settlement would preclude an appeal of the district court’s interlocutory dismissal order, Lions Gate filed a motion to vacate the order with respect to the trademark claims. Interestingly, as part of the settlement agreement, TD Ameritrade agreed not to oppose the motion. The lack of an opposition brief did not assist Lions Gate’s efforts, as the district court has now issued a further Order denying the vacatur motion. According to the district court, its March 2016 Order properly applied Dastar in holding that Lions Gates’ trademark and unfair competition claims based on a false designation of origin theory could not be maintained where there is no likely confusion as to the producer of a tangible product sold in the marketplace. TD Ameritrade was not selling merchandise bearing NOBODY PUTS BABY IN A CORNER, but rather was advertising financial services clearly identified as originating with TD Ameritrade. There was no attempt to pass off products or services of TD Ameritrade as coming from Lions Gate or vice versa. Moreover, Lions Gates’ claims were preempted because the allegations concerned false designation of origin of a “communicative product” – the ad campaign. The court rejected Lions Gates’ contention that its March 2016 dismissal order had been based on an over-expansive application of Dastar. As the court explained, its dismissal order had properly acknowledged that there may be instances where a “communicative good” could be protected under both copyright and trademark principles, but in this case, the trademark claims asserted against the TD Ameritrade ad campaign were “barred under Dastar, as they do not protect rights in a communicative product that are distinct from those already protected by the Copyright Act.” As Baby’s father says in the movie, “When I’m wrong, I say I’m wrong” – but the court in Lions Gate didn’t think it was wrong. So this may be the end of the drama for Lions Gate. While the terms of the settlement agreement are not publicly known, its experience in court has not been the time of its life.

24 years after Tag Team’s hit song “Whoomp! (There It Is)” topped the charts, a long and ugly dispute regarding ownership rights to the song and related copyright infringement damages has been settled in bankruptcy court. The dispute and its resolution showcase a not uncommon end for large IP judgments: the judgment debtor files for bankruptcy and the judgment creditor is left to recover against the bankruptcy estate’s assets. In 1993, Tag Team, which is comprised of artists Cecil Glenn and Steven Gibson, entered into a recording agreement with Bellmark Records governing the ownership in the composition, recording, performance, and royalty rights to the song. Under the recording agreement, Tag Team assigned half of its copyright interest in the song to Bellmark. In 1997, Bellmark filed for bankruptcy. As part of Bellmark’s bankruptcy proceedings, DM Records, Inc. purchased substantially all of Bellmark’s assets for $166,000. DM was a music content company that licensed 90’s chart toppers like “Whoomp!” and “Macarena” for use in movies, television shows, video games, and ads. Following the sale, DM exploited the recording, performance, and composition rights to “Whoomp!” In 2002, the former president of Bellmark, Alvertis Bell, sued DM for copyright infringement, regarding the composition rights to “Whoomp!” Bell contended the composition rights to the song were not among the assets DM purchased from Bellmark’s bankruptcy estate. Rather, Bell contended those rights were assigned to Alvert Music, a third party affiliated with Bellmark, prior to Bellmark’s bankruptcy filing. DM’s ownership of the recording and performance rights to “Whoomp!” was undisputed. In 2012, the Eastern District of Texas determined that Alvert owned the “Whoomp!” composition rights, and a jury awarded Bell over $2.2 million as damages for copyright infringement. Notably, the judgment represents 100% of copyright damages, even though Bell owned only 50% of the copyright. The judgment was affirmed by the Fifth Circuit in an opinion indicating that Tag Team could seek its share of the royalties from Alvert. Bell’s claim to about $1.3 million in attorney’s fees under the Copyright Act, on top of the judgment, was pending in November 2015, when the district court proceedings were halted by DM’s filing of a chapter 11 bankruptcy case in the Southern District of Florida. Initially, DM sought to reorganize its liabilities under chapter 11of the Bankruptcy Code. However, in 2016, DM’s chapter 11 bankruptcy reorganization case was converted to a chapter 7 liquidation case because, among other reasons, DM was not generating enough revenue to continue operating in chapter 11. Shortly thereafter, the chapter 7 trustee sued Tag Team seeking quiet title over “Whoomp!” because Tag Team asserted ownership over the recording and performance copyrights, although Tag Team did not file a claim in the bankruptcy case. The trustee’s complaint conceded that DM may have owed Tag Team royalties under the Bellmark recording agreement, which was an asset of DM’s estate. In June 2017, the chapter 7 trustee struck a deal with Alvert and Tag Team to resolve the parties’ disputes. The global settlement approved by the bankruptcy court on September 28, 2017, provides for Alvert to receive all of DM’s assets, other than certain specifically excluded property. DM’s rights to “Whoomp!” are among the assets Alvert received as part of the settlement. Tag Team will receive a portion of the income derived from exploitation and any future sale of the rights to “Whoomp!” and may recover performance royalties from third parties. Certain assets were transferred to Mark and David Watson, the founders of DM. These notably include the rights to any malpractice claim DM filed against its former counsel (we presume a claim exists regarding DM’s misunderstanding that it purchased the composition rights to “Whoomp!” from the Bellmark bankruptcy estate), and songs written, recorded or produced by the Watsons, as well as songs “recorded by the artist known as Prince by whatever name, names or symbols he is known.” The settlement also sets forth a process for the chapter 7 trustee and the Watsons to sort through master recordings in storage and turn them over to the proper party under the settlement. There are several lessons to be learned by industry and legal professionals from the events and cases regarding the rights to “Whoomp!” First, anyone who purchases property from a bankruptcy estate, should conduct careful diligence regarding the assets being purchased to determine what is being purchased and what intellectual property rights are being obtained as a result of the sale. A properly run bankruptcy sale process should provide sufficient time for potential purchasers to perform the necessary review. Anyone interested in purchasing property from a bankruptcy estate should retain experienced bankruptcy counsel, and other professionals if necessary, to assist in the due diligence and the sale process. Copyright ownership rights in musical recordings can be particularly complex, with multiple entities owning separate strands of rights (performance, composition, music vs. lyrics etc.). Accordingly, guidance from someone knowledgeable about copyright ownership in the recording industry context would be essential. Second, anyone seeking significant IP infringement damages against an entity must be aware of the “end game.” A favorable judgment after an expensive and time consuming litigation battle may result in just a pyrrhic victory for the judgment creditor. If a party is just looking to recover monetary damages, that party should understand the costs of litigation and whether the judgment debtor will be able to pay the judgment. While it is always possible for a judgment creditor to recover in full, in cash, the likelihood of recovering a fraction of the judgment amount is greater, and there is also a chance of having to accept a full or partial non-cash distribution, i.e. assets in a liquidation or equity interests in a reorganization. Finally, the bankruptcy court is a forum in which it is usually better for litigants to settle than to continue fighting.

For many years, consumers have relied on certification marks like the Good Housekeeping Seal of Approval and the UL logo as an assurance of product quality. Administered by independent organizations, consumers reasonably expect that the certification is not biased by a financial or ownership stake in the companies whose products are being certified. A different type of certification mark has recently become more common, referred to as a “selfie” certification mark by Leslie Fair, Senior Attorney at the FTC’s Bureau of Consumer Protection and author of the FTC’s Business Blog. These are seals of quality or approval created and used by the companies selling the products being certified - like athletes giving themselves their own gold medal.  From the FTC’s perspective, these “selfie” certification marks are problematic because consumers are likely to be misled into believing that the seal has been awarded by an independent, unbiased organization. In several recent enforcement actions, the FTC has cracked down on this practice because it violates FTC guidelines requiring the disclosure of material connections related to product endorsements. In June, we blogged about a trampoline company that used a Trampoline Safety of America logo and accolades by the Bureau of Trampoline Review to promote the company’s products. Although these endorsements were both represented as originating with independent organizations, in fact, they were just a front for the two brothers who owned the company. A month later, the FTC published a Complaint and proposed Consent Order against Benjamin Moore & Co. for using a “Green Promise” certification mark to indicate that its paints were environmentally-friendly. And in late September, the agency published a Complaint and proposed Consent Order against Moonlight Slumber, LLC for selling baby mattresses that were not only misrepresented as “organic” and “natural” but also marketed with the use of a “Green Safety” Shield logo created by Moonlight Slumber to promote the environmentally-friendly nature of its mattresses. In all of these cases, the self-certifying companies were found to have violated the FTC’s Endorsement Guidelines by failing to disclose the material connection between the certification and the company featuring it to promote its products. The FTC’s press release announcing the enforcement action against Moonlight Slumber confirmed its disapproval of “seals or certifications that companies award themselves without clearly explaining that to consumers.” The press release further confirmed that this issue will be a particular focus when misleading certifications “appear to give an independent authoritative A-OK for health, safety, or environmental claims that consumers can’t evaluate for themselves. If your ad features seals or certifications of your own designation, make that abundantly clear to consumers.” During last week’s ASRC advertising law conference in New York City, Leslie Fair highlighted the issue, expressing the concern that, absent full disclosure, consumers are not otherwise in a position to know the origin of the certification. In the Moonlight Slumber matter, the proposed Consent Order provides that Moonlight Slumber must not make any express or implied representation about a certification or endorsement of a product without clearly and conspicuously disclosing “any unexpected material connection” between the endorser and the company’s product or service. An “unexpected material connection” is defined as “any relationship that might materially affect the weight or credibility” of the certification and that would not reasonably be expected by consumers. To put it even more directly, the proposed Order affirms: “Any certification that is awarded by the Respondent to its own product creates an ‘unexpected material connection.’” This recent spate of regulatory action against "selfie" certification marks should put marketers on notice – if a company gives itself an award of its own creation, the material connection to the certification or endorsement must be clearly and prominently disclosed.

In trademark infringement cases, consumer survey evidence can be a powerful tool.  It can also badly malfunction, as Black & Decker recently experienced.  In Black & Decker v. Positec USA, the trial court demolished a $54 million jury verdict because Plaintiff’s case was  constructed upon a hopelessly flawed consumer survey.  The trial court’s post-trial ruling should act as a cautionary tale to trial counsel and consumer survey experts alike: If you venture from survey designs that are tried & true, you may be feeling black & blue. This was a garden variety trademark and trade dress infringement dispute.   Black & Decker (B&D) sued Positec for selling power tools and accessories that used B&D’s “yellow and black” trade dress.  As is customary in these types of disputes, B&D retained an expert to conduct consumer surveys, including a “likelihood of confusion” survey that was considered by the jury.  The survey participants were shown a photograph of two rows of boxed power tools, which according to Plaintiffs, was taken at Home Depot.  All of the products depicted in the photo were Plaintiff's DeWalt products, except one, which was a Rockwell product sold by Defendants.  Participants were asked if they believed that all the products were put out by the same company.  47% answered that question in the affirmative.  This was the only “evidence” of confusion offered by Plaintiff at trial, which apparently was effective as the jury returned a verdict of $54 million in favor of B&D. The Defendant moved for a new trial and the trial court granted it due to the significant flaws in the survey.  Here is what doomed the survey and, ultimately, the verdict: Lack of causation.  A properly-designed likelihood of confusion survey tests whether the the trademark or trade dress at issue causes confusion.  Curiously, B&D’s expert said his survey was not designed to test “causality.”  Rather, it was “observational.”  As the expert explained, his survey showed, “[t]he confusion [that] was caused by the tendency to overlook the obvious”—in other words, the “idea of putting the same packages together and somebody just thinking that they’re the same without looking carefully at them.”  It is not clear (at least not to me) what distinction the expert was making here.  Regardless, an expert needs to be able to testify that the allegedly infringing trademark or trade dress has caused confusion.  That's the whole point of why consumer surveys are offered in the first place. The expert did not replicate marketplace conditions.  In any survey, it is important to show the respondents the goods in a manner that bears some relationship to how consumers would encounter them in the marketplace.  The survey expert did not do so here.  Instead, he “staged” the placement of these tools together in the photograph without being able to establish that the consumer would encounter them in this side-by-side manner.  The survey stimulus is a central aspect of a survey’s validity. The expert and counsel need to nail this down and make sure the selection of the stimulus is as close to bulletproof as possible. No other evidence of actual confusion.  B&D’s only evidence of confusion was the expert's survey.  Because that was thrown out, and there was no other evidence of actual confusion, the court found that “there is a high probability that [the expert's] flawed testimony unfairly influenced the jury’s verdict.” This case is a good reminder of a few bedrock principles regarding consumer surveys in Lanham Act cases.  First, counsel needs to drill down with the expert and make sure that he or she understands that a survey tests causality relative to the claims at issue in the case.  Second, don’t build your survey on sand.  The expert should follow established methodologies that have been approved and blessed by the courts.  Finally, make sure that careful attention is paid to the survey stimulus.  The expert needs to be very clear on why the stimulus was chosen and how it represents a reasonable approximation (under the circumstances) of marketplace conditions. Survey design choices aren’t always black & white, but straying too far from established methods could leave counsel, expert, and client feeling rather blue.

Well-known perfume marketer Coty Inc. had a big win in New York federal district court, obtaining injunctive relief and $6.5 million dollars in an accounting of profits from copycat perfume seller Excell Brands, LLC. In an eighty-two page opinion (with product pictures helpfully included), Southern District Judge Furman rejected Excell’s arguments of nominative fair use and good faith intent to compete rather than bad faith intent to deceive and ruled for Coty on its claims for trademark infringement, unfair competition and dilution. The court also held that Excell had misleadingly communicated that its perfumes were of similar or equivalent quality to Coty’s brand name products. It likely did not help Excell’s case that several of Excell’s principals and employees had been indicted on charges of money laundering for the benefit of certain Latin American drug cartels. As a result, several Excell witnesses invoked their privilege against self-incrimination and refused to answer substantive questions during discovery and at trial. Putting that aside, what was the case about? As the saying goes, a picture is worth a thousand words.  Two examples of Excell’s copycat perfumes line are pictured below:            As the court recounted, Excell’s business model involved selecting well-known brand or celebrity fragrances and marketing imitations with similar evocative names (such as SERENITY instead of ETERNITY and POSSESSION instead of OBSESSION) and “nearly identical” trade dress. On the front of each package, Excell included a legend that the fragrance was “Our Version of” the brand name perfume, but the brand name was depicted more prominently than other wording and in imitative type font. On the back of the packages, Excell included a disclaimer that the product “is not associated with the maker of” the brand name product. An example of this packaging approach is set out below:      Particularly in light of the prominence of the name brands relative to the disclaimer language, the court did not accept Excell’s argument that it would be “clear” from the packaging that the products were not associated with Coty. Nominative Fair Use Rejected The court considered and rejected Excell’s argument that it was making “nominative fair use” of Coty’s marks. In accordance with recent Second Circuit precedent in Int’l Info. Sys. Sec. Certification Consortium Inc. v. Sec. Univ., LLC, 823 F. 3d 153 (2d Cir. 2016), the fair use argument was considered as additional factors in the “Polaroid” analysis of likely confusion, not as an affirmative defense. The court held that Excell’s nominative fair use argument “misses the mark” because “Excell sought to mirror Coty’s fragrances’ appearance in nearly every way possible”:  the fragrances were not sold in generic bottles and cartons but rather with imitative trade dress, the names chosen were related to Coty’s and Coty’s brands were prominently displayed on product packaging in the purported disclaimer statements. Survey Evidence on Two Products Deemed Relevant to Other Products in the Excell Line Coty faced a dilemma common to plaintiffs that assert claims against a varied product line with similar infringing elements but don’t want to have to present survey evidence of confusion about each and every variant product.  Coty ended up presenting survey evidence pertaining to two of the products at issue in the Excell line, which generated an average of 54% confusion, although the level for the two products varied. In response to Excell’s contention that the survey evidence should only be considered relevant to the two products actually tested, the court held: “No doubt the surveys are more compelling with respect to the fragrances tested than they are with respect to the other fragrances at issue in this litigation. Additionally, the survey itself provides reason to believe that the levels of consumer confusion would vary among the fragrances…But [the] results are still relevant, albeit in a more attenuated manner, to the other fragrances given that they share ‘common and prominent features’ with the tested fragrances.” Accordingly, the court found the survey to be “circumstantial evidence that each of Excell’s fragrances at issue here is likely to cause at least some level of confusion as to source in the minds of fragrance shoppers.” False Advertising of Product Equivalence Marketers of copycat products hope to convey the impression that “if you like” the brand name “you’ll love” their imitation product, or that “our version of” means the imitation will be very similar in nature and quality to the original. In this case, Coty argued that the use of the phrase “our version of” by Excell was false and misleading due to material differences in the quality of the fragrances. Without deciding whether the words were “literally false” the court found that Coty’s survey evidence helped establish that “our version of” communicated the implied message that the products “are similar if not equivalent” when that was not the case. Rather, the evidence showed that Excell “did not make any meaningful effort to replicate the scent of Coty’s products,” did not have first-hand knowledge of the chemical composition of the products and had no meaningful quality assurance program. Remedies As noted above, Coty was awarded an accounting of more than $6.5 million in Excell’s profits from the violative products. But Coty did not get everything it asked for. The court declined to grant an enhanced monetary award for counterfeit products, holding that more than “mere similarity” or “colorable imitation” is necessary for counterfeiting remedies. In addition, the court did not award attorneys’ fees to Coty, even though it had determined that Excell had acted in bad faith. The opinion noted that courts have “broad discretion” in the area of attorneys’ fee awards under the “exceptional case” language of the Lanham Act and that Coty had not presented material evidence that it had suffered “ascertainable damage” from Excell’s conduct. ******** Judge Furman began his opinion with the oft-quoted aphorism that “imitation may well be the sincerest form of flattery,” while adding that “if taken too far it can also be costly.” He closed with a paean to Justice Frankfurter’s opinion in Mishawaka Rubber & Woolen Mfg. Co. that described trademark protection as “the law’s recognition of the psychological function of symbols”  and held that if “another poaches upon the commercial magnetism of the symbol he has created, the owner can obtain legal redress.” Judge Furman concluded that Excell’s “knockoff fragrances poach upon the commercial magnetism of Coty’s fragrances,” entitling Coty to the injunctive and monetary relief granted.

On Monday this week, a sports psychologist named Keith Bell sued King’s College in Pennsylvania and its football coach, Jeffery Knarr, for retweeting a photo of a page of Dr. Bell’s book “Winning Isn’t Normal.” In his complaint, Dr. Bell alleged copyright infringement, trademark infringement and violations of Pennsylvania common law.  Interestingly, Dr. Bell complains that there was no attribution of his work. We here at The TMCA wonder if this complaint would have been filed if attribution was given even though it is not legally material to the copyright claim? According to the complaint, the original tweet came from the Northeastern State University Baseball Twitter account.  It is unclear whether Dr. Bell will also be suing Northeastern State. However, the complaint does allege that after Dr. Bell sent the university a cease and desist letter, it removed the original post, thereby removing all retweets, including those of the defendants. The original post was apparently retweeted at least 206 times, but we don’t have any information about whether any of those other individuals are also being sued by Dr. Bell.  We will keep watching this case for any interesting developments and report them to you, our faithful readers.  In the meantime, be careful what you retweet – you never know if the original post was authorized. p.s. feel free to retweet our Twitter posts – we just love the free publicity.

Last month we reported on the Federal Circuit decision in Earnhardt v. Earnhardt, vacating and remanding the TTAB’s dismissal of the opposition by Teresa Earnhardt (widow of Dale Earnhardt) to the “Earnhardt Collection” trademark application filed by her stepson Kerry Earnhardt.  On remand, the Court required the Board to determine the primary significance of both “Earnhardt” and “Collection” together in its determination of whether the additional term “Collection” makes the mark EARNHARDT COLLECTION registrable (even though “Earnhardt” standing by itself is a surname that is typically not registrable).  On August 28, 2017, the PTO issued updated trademark examination guidelines clarifying the policies and procedures for examining marks containing merely descriptive or generic wording in addition to a surname.  These guidelines will be incorporated in the October 2017 revision of the TMEP. TMEP §1211.01(b)(vi) states that when merely descriptive wording is combined with a surname, the mark is not considered primarily merely a surname under §2(e)(4) of the Lanham Act because merely descriptive wording is capable of functioning as a mark.  This rule surprisingly did not facilitate easy registration of surname marks.  Under the new PTO guidelines, in cases where none of the additional matter combined with a surname is inherently distinctive or has acquired distinctiveness (it is merely descriptive or generic), refusal of the entire mark as being primarily merely a surname based on §2(e)(4) will be appropriate in most circumstances. The PTO’s decision to update the trademark examination guidelines was driven by the Board’s observation that the old guidance contradicts the Federal Circuit’s directive, which requires a mark to be considered in its entirety and is not limited to whether the additional matter can function as a mark.  In In Re Hutchinson Technology Incorporated, 852 F.2d 552 (Fed. Cir. 1988), the Federal Circuit stated that “[t]he test for determining whether a mark is primarily merely a surname is the primary significance of the mark as a whole to the purchasing public.”  The Court in Hutchinson determined that the Board made two errors in its analysis that HUTCHINSON TECHNOLOGY is primarily merely a surname for etched metal electronic components, flexible circuits and other goods in Class 9: (1) the Board incorrectly considered the mark as two separate parts “Hutchinson” and “technology” and analyzed the registrability of each word separately rather than considering what the purchasing public would think when confronted with the mark as a whole; (2) the evidence did not establish that “technology” was generic or merely descriptive of the identified goods.  The Court reversed the refusal to register. The Hutchinson test was applied by the Board in Azeka Bldg. Corp. v. Azeka, 122 USPQ2d 1477, 1492 n.9 (TTAB 2017), which noted “the assessment of a composite mark containing a surname is not limited to the inquiry of whether the additional term is capable of functioning as a mark or not….  Rather …  we must consider the meaning of the mark as a whole.”  The Board found the addition of the term RIBS did not alter the meaning of the mark AZEKA’S RIBS for “barbeque sauce” as a whole to displace the primary surname significance of AZEKA, and sustained the opposition on the ground that Opposer has established that AZEKA’S RIBS is primarily merely a surname and not registrable on the Principal Register absent a finding of acquired distinctiveness. In the Earnhardt v. Earnhardt decision issued on July 27, 2017, the Federal Circuit clarified that the meaning of a mark must be evaluated as a whole by considering whether the additional term(s) are generic or merely descriptive.  Further, the meaning of the mark as a whole must be assessed to determine whether adding the additional term to the surname alters the primary significance of the mark as a whole. In conclusion, the new rules should help harmonize the PTO’s examination of surname-based marks combined with additional terms in their entirety, rather than considering the mark as separate terms.  Further, the mark should be analyzed for both genericness and descriptiveness in the overall impression of the mark.  However, to avoid a refusal under §2(e)(4) altogether, applicants should seek registration for a mark composed of a surname and a suggestive (or stronger term), settle for obtaining a Supplemental Registration, at least initially (see TMEP § 1211), or avoid surnames altogether as a brand identity.

On Wednesday afternoon, the FTC hosted a live Q&A Twitter chat on influencer advertising.  In case you missed it, we took some notes on the most helpful tweets. The Q&A covered topics such as Facebook likes, social media platform disclosure tools (the FTC Staff said they don't find these effective!), disclosures in videos, foreign-based influencers, disclosures on Pinterest and a few of our favorite hashtags.                        

As we blogged about earlier this month, the FTC seems to have spent much of its summer checking out influencer advertising and focusing its attention on those who fail to make the necessary disclosures of material connections to the products and services they endorse.  This resulted in the first-ever complaint against an individual influencer and a round of follow-up warning letters to various influencers. The third piece of the FTC efforts is the 2017 update to the Endorsement Guide FAQs.  While the FTC’s Endorsement Guides, written back in 2009 continue to serve as well-reasoned regulatory guidance for brands and influencers alike, the FAQs provide helpful insights from the FTC staff into real-world, specific examples dealing with influencers and beyond.  We encourage you read the FAQs in full, but we thought we would give our readers a quick cheat sheet on the new update: WHEN – When are disclosures necessary?  Charitable Donations as a Material Benefit for Product Reviews - If your company makes a donation to charity anytime someone reviews your product, there should likely be a disclosure of that benefit, as it would be viewed as an incentivized content motivated by the reviewer’s desire to see more money donated to charity. Free Merchandise With No Requirement to Post Reviews – If a company provides a product for free to a blogger without any requirement that a review will be posted, the free merchandise needs to be disclosed. Whether or not the blogger feels obligated to say something positive about the product, the reader will want to know that the product was received for free. Liking and Linking – Social media users like to “like” products and content or share links with their social network. Nothing wrong with that, except if the liking and linking is being done as part of a sponsored campaign or the user is being compensated by a product discount or being entered into a sweepstake for a significant prize, disclosure of that material benefit is in order. But Facebook “Likes” Don’t Allow for Disclosures – The FTC seems to recognize this limitation, but advises that advertisers “shouldn’t encourage endorsements using features that don’t allow for clear and conspicuous disclosures."  Whether the agency would take enforcement action in this circumstance will depend on the overall impression of the endorsement and whether the “likes” would play a material role in the decision to buy a product or service. The FTC further warns that the buying of fake “likes” from non-existent people or non-users of a product would be viewed as deceptive and subject to enforcement action. It’s Just a Part-Time Gig – If you work for a brand and are paid for a specific number of posts, do you need to make disclosures when you are off the clock? The answer is maybe – if you are responding to questions about posts you made with proper disclosures, probably not.  If you are feeling generous and really like the brand and decide to make a few extra posts about how much you love the products, you should probably make a disclosure on those posts too. I’m just Posting a Photo or a Photo with a Tag – If you have a relationship with the advertiser, a photo (or a brand tag on a photo) is likely going to be viewed as an endorsement, so you should probably drop a #ad or #sponsored (not #spon) into the first few lines of the post. I’ll Review Yours if You Review Mine – According to the staff “there doesn’t have to be a monetary payment” for a material connection to exist.  If you are part of a club of authors who agree to review each other’s work, that’s something a reader would want to know when they read your review.  Friendships, family relationships or even strangers who make deals can all represent material connections. Can a Company Solicit Endorsements? -  It’s OK to ask your customers their opinions about your products and feature their comments in advertising (with permission). If the customers have no reason to expect compensation or other benefit before they provide their comments, no disclosure of material connections is required.  However, if a company gives customers a reason to except a benefit, including just the fact that their comment may be featured in an ad, that should be disclosed in an ad, such as “Customers were told in advance they might be featured in an ad.” HOW – How are disclosures supposed to be made? Brand Ambassadors – Congratulations, your brand just launched a brand ambassador program.  First rule of brand ambassador programs is that #ambassador is confusing and unclear. Make sure you instruct all your ambassadors to use something like “#[BRAND]-ambassador” or the good old #ad is just fine too. Disclosure of Client/Consultant/Advisor Connections – It’s probably NOT enough to use the hashtags #client, #advisor or #consultant to indicate that a blogger works for the company whose products or services are being endorsed. The FTC says it would be better to spell out “I’m a paid consultant to ABC” or I work with XYZ”. However, the agency also said a shorter message like “ABC-Consultant” or “XYZ-Advisor” might work. Disclosing an Employment Connection – If a company allows their employees to use social media to communicate about the company’s products, the employment relationship needs to be disclosed clearly. The FTC comments that consumers “may be confused by #employee” and that “#XYZ-Employee” will more likely be understood. Nevertheless, a company name by itself might not be enough of a disclosure if consumers won’t reasonably understand the relationship between the company name and the product being endorsed. In those cases, the FTC says it would be clearer to use the words “my company” or  “my employer” in the body of the message. Write Detailed Personalized Thank You Notes – While it is always polite to thank someone for free stuff, that’s not a disclosure of a material connection unless you are specific.  The staff guidance indicates that “thank you [brand]” is not enough, but “thank you [brand] for the free shoes” would likely be sufficient. Full Disclosure – How much do influencers need to say about compensation received from a brand? In true FTC-style, one size does not fit all. The staff suggests that using #paid is enough regardless of the amount (unless the amount is so small that no disclosure is necessary), but you’ll need a different type of disclosure if you are a brand employee or owner of the company. When you received a payment and a free product – the staff suggests that you don’t just disclose the free product because that could suggest you did not get anything more, so mention the payment too. WHERE – Where should we put these disclosure to make them clear and conspicuous? Social Media Platforms That Have Built-in Disclosure Features – The FTC Staff isn’t willing to go so far as to put all its trust in the social media platform of the day and neither should your brand.  While a given platform’s feature MAY be sufficient to comply with the FTC Act, your brand should consider whether the disclosure feature allows for clear and conspicuous disclosures that fit the situation at hand.  For example, the staff guidance suggests that a disclosure placed above a photo may not grab a user’s attention. In the end, advertisers and influencers are responsible for proper disclosure, so it is better to evaluate whether you need to make your own disclosures rather than simply relying on a platform. Snapchat, Instagram Stories and other Short Videos – The FTC knows we all love watching those short videos on social media, so the staff wants to make sure that you know just how to make a clear and conspicuous disclosure when your influencers post their stories – they suggest superimposing the words over the images.  Make sure your chosen words are easy to read (think font size, color and placement) and on-screen long enough to be read. No one turns up the volume to listen to Instagram stories, so don’t think about exclusively relying on an audio disclosure here. ******** Definitely a lot to think about! But given the FTC's focus on the issue, the enforcement action already initiated and the volume of inquiry letters sent to advertisers and influencers, marketers have been put on notice that failure to comply with disclosure requirements in endorsements and influencer ad campaigns can bring unwanted regulatory scrutiny.

A recent decision out of the federal district court for the Eastern District of Virginia overturned in part the Trademark Trial and Appeal Board’s decision that the mark “Booking.com” is not registrable on the basis that the mark is generic.  Judge Brinkema presided over the case, and she determined that the mark BOOKING.COM had acquired secondary meaning for “hotel reservation services” in Class 43, but not for “travel agency services” in Class 39. This case is unusual because the trademark applicant, Booking.com, B.V., did not appeal the refusal decision to the Court of Appeals for the Federal Circuit, but instead filed a civil suit against the Director of the U.S. Patent and Trademark Office.  This allowed the Virginia federal court to review the record de novo and as the finder of fact.  An appeal to the CAFC would have been decided based upon the record before the PTO and the PTO’s factual findings would have been upheld if such facts were deemed to be supported by “substantial evidence.”  In the district court action, Booking.com supplemented the record by submitting a “Teflon survey.”  The ability to submit the additional evidence that measured consumer opinion regarding the genericness of BOOKING.COM likely prompted the path of a civil action, rather than the appeal to the CAFC. Judge Brinkema determined that the issue raised in this case was one of first impression in the 4th Circuit in which the Eastern District of Virginia resides, and decided that “.com” in combination with a descriptive word is capable of identifying source, upon a showing of acquired distinctiveness.  The PTO raised various policy arguments against recognizing “.com” as a source identifier, including that it would contravene the Lanham Act to find a generic term registrable simply by adding “.com.” Booking.com submitted its Teflon survey results, in which 74.8 percent of the respondents identified BOOKING.COM as a brand name, along with information regarding its advertising expenditures, sales records, unsolicited media coverage, and the length and exclusivity of the use of the BOOKING.COM mark.  With all of this evidence under consideration, the court disagreed with the PTO’s conclusion that the mark is generic as to both Class 39 and 43 services, holding instead that the mark was descriptive.  Then, as to the Class 43 hotel reservation services, the court concluded that Booking.com had made a sufficient showing of acquired distinctiveness, but not as to the Class 39 travel agency services.  As such, the court ordered the PTO to issue registrations for the BOOKING.COM mark for services in Class 43, but denied registration for services in Class 39. Takeaways As a strategy point, consider filing a civil action rather than an appeal to the CAFC under similar circumstances. Filing in district court for a de novo review will allow for the submission of additional evidence and a review of the facts de novo. Proving acquired distinctiveness in a descriptive term coupled with “.com” or other TLD may result in a registration on the Principal Register at the PTO, but consider enforceability of the mark.  If third parties can make use of “____________booking.com,” what have you really carved out in terms of valuable trademark rights? Looking Ahead Individuals David Elliott and Chris Gillespie tried to register hundreds of domain names incorporating the word “google,” arguing that the word is now generic.  The U.S. Court of Appeals for the Ninth Circuit determined that “google” is not a generic word.  Arguably, use of the mark as a verb (think historically of use of “Xeroxed” or “Fedexed”) could ultimately lessen trademark rights and lead to genericide if a campaign to correct such use is left in disregard.  Elliott and Gillespie have petitioned for certiorari before the U.S. Supreme Court.  We will see if the Supreme Court will take the case and issue an opinion on this related issue.

And just like that, it was over.  The U.S. Supreme Court’s decision in TC Heartland v. Kraft Foods Group sun-setted the reign of the U.S. District Court for the Eastern District of Texas as the country’s busiest (and arguably, friendliest) venue for patent plaintiffs.  But rumors of that district’s demise as a haven for IP holders may be greatly exaggerated, especially if a recent copyright decision involving TV celebrity Dr. Phil McGraw is any indication. This Lone Star State dispute stems from the actions of one Ms. Leah Rothman, a longtime segment director for the Dr. Phil show.  In 2015, Ms. Rothman sued Dr. Phil and his production company in California for various employment-related harms including intentional infliction of emotional distress, retaliation, and wrongful termination.  Apparently in an attempt to document evidence for her employment case, Ms. Rothman used her iPhone to record a nine-second video clip of Dr. McGraw from archived, unaired footage of the Dr. Phil show.  This was (arguably) done in violation of her employment agreement that required her to “keep confidential and never disclose…any statements or comments concerning Dr. Phil McGraw, the Dr. Phil Show, or any of his/its Confidential Information.”   After learning of Ms. Rothman’s surreptitious recording, Dr. Phil’s production company registered the unaired, nine-second video segment with the U.S. Copyright Office and sued Ms. Rothman in the EDTX for copyright infringement. Ms. Rothman moved to dismiss (and, alternatively, for summary judgment) claiming her actions constituted fair use under the Copyright Act.  The Hon. Rodney Gilstrap not only denied Ms. Rothman’s motion, but sua sponte granted summary judgment in favor of the good doctor’s production company.   Here’s a summary of how Judge Gilstrap sized up fair use:  Purpose and character of the Use.  Judge Gilstrap found that Ms. Rothman copied the clip for “a purely self-serving purpose,” that is, “to aid her pending lawsuit seeking money damages where she is the only plaintiff and sole potential beneficiary.”  Because she breached her employment contract in doing so, this weighed “strongly" against her under the first factor.   Further, the Court did not believe that simply using the clip in a judicial proceeding was sufficiently “transformative.”  Although the Court appeared tepidly persuaded by the lack of a “commercial use” of the video, Rothman's “clearly self-serving” use was too much for the Court to overlook. The Nature of the Copyright Work. This factor was considered “neutral.” The Amount Used.  The Court held that Defendant copied the “entire work,” but that conclusion is based  on the fact that Plaintiff only registered the nine-second clip that Ms. Rothman copied. Effect on the Market Value.  This factor (along with the first factor) is often consider the most important factor in fair use.  Interestingly enough, the Court found that Plaintiff failed to identify a market that it may someday exploit for video clips like this and, therefore, fair use weighed in favor of Rothman. There are several aspects of the Court's ruling that should give one pause.  First, the Court’s narrow interpretation of the first factor is questionable.  Any lawsuit could be considered “self serving” in that it will only directly benefit the named parties.  Moreover, the purpose of Ms. Rothman's use (to expose allegedly improper conduct of Dr. Phil through the judicial process) is obviously different than the purpose behind maintaining archival footage in the first instance.  Ms. Rothman's use was clearly transformative.  Second, the Court's analysis on factor three is also problematic.  A Plaintiff could always game fair use by registering exactly what was copied thereby ensuring the amount used was the “entire work” under the fair use rubric.  The Court should have looked at the underlying work as a whole (i.e., the unaired footage in the archives or at least some portion of the archives) instead of what the Plaintiff registered.  Finally, many copyright fair use cases turn on the effect on the market value of the original work.  The Court's decision is particularly noteworthy here because even though there was no evidence of market harm presented, the Plaintiff still prevailed on fair use. Unless this decision is reversed on appeal, it raises an intriguing question:  are we witnessing the dawn of EDTX 2.0, a (very) copyright friendly venue in a post TC Heartland world?

In a recent case brought in a California court, the professional networking service LinkedIn asserted its right to protect its users’ privacy expectations against a third party interloper that claims the right to collect their “public” data.  Commercial interests are mixed in this case together with compliance requirements, highlighting the growing tension between free market values and concerns for privacy in cyberspace. The case in question was brought by data analysis business hiQ Labs, whose activities involve scraping publicly-available profile data of LinkedIn users and analyzing it for its customers (employers and potential employers).  LinkedIn wanted to revoke its permission to hiQ to access its open website (which is accessible without registration or password) in order to enforce its terms of use that prohibit data-scraping activities. LinkedIn also wanted to put in place technical measures to prevent data scraping, citing its members’ privacy interests as its reason. HiQ sought an injunction to prevent LinkedIn from blocking its access to the service which it claimed would put it out of business. It asserted various legal theories in support of its case, including alleged violations of California constitutional free speech principles and California competition law. Both parties recruited high profile U.S. counsel – Donald Verrilli for LinkedIn and Laurence Tribe as an advisor to hiQ. Among other points, LinkedIn argued that hiQ’s operations jeopardized its users’ privacy interests. LinkedIn users often update their profile data or change their privacy settings and – it was argued - would not want third-parties such as hiQ to use their old data without regard to their privacy choices. LinkedIn argued that its own services are designed to respect its users’ privacy preferences. It provided some statistics showing that millions of LinkedIn users choose not to notify their contacts when they update their profile – suggesting that the users prefer the change to remain unnoticed (with the old profile data being quietly forgotten). The court (at this stage only on a temporary injunction application) ruled in favor of hiQ. On the limited evidence presented at the preliminary stage, the court found more merit in hiQ’s accusations of anti-competitive behavior on the part of LinkedIn than in the latter’s concerns for the users’ privacy interest. The court stated in this context that the “actual privacy interests of LinkedIn users in their public data are at best uncertain”. The statement reflects an approach that once information is put in the public domain it is no longer confidential and therefore no longer private.  However, this is no longer the approach taken by modern privacy laws in many countries. The court’s decision did not reference compliance concerns, but it is fair to assume that LinkedIn’s decision to block hiQ was at least influenced by its legal duties. Like many others in the digital space, the networking site is undoubtedly aware of the looming requirements of the General Data Protection Regulation (“GDPR”), the EU’s overhaul of its privacy legislation which comes into effect in the middle of 2018. One of the requirements of GDPR concerns the so-called ‘right to be forgotten’, or the right of individuals to require their old data to be erased. Similar rules have been introduced in other countries. Under GDPR, operators of social networks (in most cases) will have to respect users’ requests to erase or update their old data. GDPR will also require the operator to notify third-party recipients of the data of user requests to update, correct, or erase the data, and it would need to maintain corporate policies and technology measures to protect the data against unauthorized access, corruption, or loss. As a global service, LinkedIn needs to take account of developments in privacy protection around the world.  It is not clear yet whether compliance with GDPR will require social network operators to prevent unauthorized data scraping by third parties, nor whether LinkedIn would be under an obligation to notify third parties such as hiQ of requests by its users to update or erase their public profiles.  However, it is clear that social network operators will have to assume a greater degree of control over the way data flows through and around its network.  They may not be able to stop every third party from scraping or using its users’ data, but they will need to demonstrate that they are doing as much as they reasonably can to protect the privacy interests of their users. The result of the temporary injunction application in the hiQ case is probably not of lasting importance. But privacy concerns will continue to arise as digital technologies take an ever growing significance in everyday life. The digital industry can expect to come under closer scrutiny and regulation requiring companies that collect and use data to pay closer attention to the protection of individuals’ privacy interests. For the full article published on CFO Magazine, see here.

We blogged last week about the FTC's triple play against deceptive influencer advertising. In one prong of the initiative, the FTC announced that its staff had sent 21 follow-up warning letters to influencers, asking them to respond to the agency as to whether the influencers had material connections to the products or companies featured in specific posts. In a second part of the effort, the  FTC issued a Decision and Order in In the Matter of CSGLotto, Inc., Trevor Martin and Thomas Cassell, an enforcement action involving online social media influencers who failed to disclose their material connections to the company they were endorsing. The facts in CSGLotto come under the heading of "what were they thinking"? Martin and Cassell, known on their popular YouTube channels as TmarTn and Syndicate, were the owners of GSGLotto, a company that puts out Counter-Strike: Global Offensive (or CS:GO), an online shooter game in which players can earn "Skins" that can be bought, sold or traded for real money and used as virtual currency on certain online gambling sites, including CSGOLotto.com. Now knowing that Martin and Cassell own CSGGLotto, some of their posts touting CS:GO seem almost comical. In one, Martin says, "We found this new site called CSGO Lotto" and then goes on to say how great it is. Really? How hard is it to find a site that you own? And then Martin says, "I ended up like following them on Twitter and stuff" - again, how surprising! Cassell similarly promoted CSGO Lotto in videos that were seen more than 5 million times, bragging about his winnings:  "Bruh ..I've won like $8,000 worth of CS:GO Skins today on @CSGOLotto. I cannot even believe it!" The FTC’s own blog post about this matter spoke their language, saying "Well, Bruhs, while we're on the subject of things we cannot even believe, did either of you like consider clearly disclosing that you like owned the company- a material connection required under FTC law?" The FTC also challenged how Martin and Cassell ran their own influencer program for CSGO Lotto, paying other gamers thousands of dollars in cash or Skins to post positive content about the game. The influencer contract barred the influencers from saying negative things about CSGO, but did not require them to disclose the payments in their social media posts. Interestingly, the proposed Consent Order does not call for the payment of a monetary fine. But it does require the company and its owners to engage in a detailed and multi-step monitoring program with its influencers to make sure necessary disclosures of material connections are made. The Order also calls for ten years of compliance reporting to the FTC, along with required record keeping, an administrative obligation that will burden the company for the long term and will keep them in the agency's cross-hairs. This enforcement action is surely a warning shot about deceptive influencer advertising campaigns, and the next victim of the FTC may not be so lucky in escaping a monetary penalty. Stay tuned for The TMCA's post about the third part of the FTC's effort to crack down on deceptive influencer advertising: updated guidance for influencers and marketers in the FTC's Endorsement Guides, with more than 20 new questions relevant to this increasingly popular form of advertising and promotion on social media.

Back in the Spring, we posted about a set of 90 warning letters the FTC sent to influencers and brands about the disclosure of material connections on Instagram. While you may have spent your summer trying to unplug, the FTC staff was busy perusing Instagram.  Just yesterday, the FTC announced that the staff sent another 21 follow-up warning letters to influencers. The letters cite to specific posts and request responses from the influencers by the end of September. We’ll have to wait and see the FTC’s next move. They are not releasing the names of the influencers for the time being, but the sample letter, which repeats some of the same guidance from the prior letters, contains a few points that are, accord to the FTC, worth repeating: a simple “thank you” is probably inadequate to inform consumers of a material connection because it does not sufficiently explain the nature of your relationship; consumers could understand “thank you” simply to mean that you are a satisfied customer consumers viewing posts in their Instagram streams on mobile devices typically see only the first three lines of a longer post unless they click “more,” and many consumers may not click “more.” Therefore, you should disclose any material connection above the “more” button In addition to these follow-up warning letters, the FTC also announced yesterday a newly updated version of The FTC’s Endorsement Guides: What People Are Asking.  The commission revised its Endorsement Guides in 2009, and followed up in 2010 with explanatory FAQs and other guidance about endorsements, testimonials and disclosure requirements in the social media context. The FAQs were last updated in 2015. The 2017 update includes more than 20 new questions and answers advising social media influencers and marketers about how to disclose material connections in their posts. We will be blogging about the updated guide soon, so stay tuned. But wait, there’s more! The FTC announced its first-ever complaint against an individual social media influencer, which we will also be blogging about in the coming days.  In the meantime, we will leave you with this helpful Do’s and Don’ts graphic released by the FTC.

In Star Athletica v. Varsity Brands, the U.S. Supreme Court clarified the proper test for determining when a useful article is subject to copyright protection.  That new standard was recently brought to bear in JetMax Limited v. Big Lots, Inc., a copyright dispute over a “tear drop” light design.  Neither party is exactly cheering about the court’s decision.  Read on if you would like further illumination. JetMax manufactures strings of ornamental lights with covers shaped like tear drops.  Each tear drop has eight grooves, an iridescent color, and is surrounded by a wire frame.  They aren’t exactly high art, but they were sufficiently original for the Copyright Office to grant a copyright registration to JetMax.  Dark clouds formed for JetMax when Big Lots launched its own set of tear drop decorative lights that also contained grooves and a wire frame.  (A side-by-side comparison of the parties' lights can be seen here.) JetMax sued for willful copyright infringement and both parties moved for summary judgment.  Just in case the copyright light bulb has not turned on yet, the key issue at summary judgment was whether JetMax’s tear drop design was subject to copyright protection in light of the decision in Star Athletica. The trial court noted that “pictorial, graphic, or sculptural features” of a useful article are subject to copyright protection only if those features “can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article.”  In assessing this issue in light of Star Athletica, the court noted that copyright protection exists if: (1) the features can be perceived as two or three dimensional works of art separate from the useful article; and (2) the features would qualify as protectable works either on their own or fixed in some other medium if they were “imagined separately” from the useful article into which they are incorporated. Applying this test, the trial court held the decorative tear drops have sculptural qualities that can be readily identified. And, these sculptural qualities of the tear drops can exist independently of the lights that they cover.  Thus, plaintiff’s tear drops passed the Star Athletica test, which left defendant in a weepy state. Then why, you ask, does the title to this post indicate that that plaintiff was also left distraught by the court’s decision?  Because even though plaintiff zig-zagged past Star Athletica, that does not mean plaintiff’s utilitarian design is sufficiently original for purposes of copyright protection in the first instance (Justice Thomas told us as much in Star Athletica).  On this issue, the trial court observed that although it appears plaintiff’s design is “likely original,” there are genuine disputes of material fact that need to be reserved for trial.  The court did not explain what those disputes were, so we are all in the dark until the bright lights of the courtroom shine down on the parties at trial.  May the best team win!      

A recent decision from the federal court of the Southern District of New York serves as a reminder of the broad rights enjoyed by a joint author under the Copyright Act, including the right to create and license derivative works without the knowledge or consent of the other joint authors. Authored by Judge Kimba Wood, the recent decision in BMG Rights Management, LLC, et al., v. Atlantic Recording Corp., et al., considers whether a group of artists who authored an original work can sue another group who allegedly authored, released and distributed a work that was derivative of the original work if at least one individual co-authored both the original and derivative work. Plaintiffs are co-owners, along with rhythm and blues artist Chris Brown of the song “Came to Do.” After creating “Came to Do” with Plaintiffs, Brown co-authored a song called “Post to Be,” which Plaintiffs alleged was derivative of “Came to Do.” Plaintiffs sued the co-authors of “Post to Be,” as well as those involved with releasing and distributing the work, seeking an injunction forbidding further copyright infringement, damages, recovery of profits, and a declaratory judgment setting royalties due to Plaintiffs from the exploitation of “Came to Do.” All but one of the Defendants moved to dismiss, arguing they could not be liable for copyright infringement because Brown was a joint author and joint owner of both songs. Judge Wood agreed. The court first concluded that Brown could not be held liable for copyright infringement because as a joint owner and author of the original work “Came to Do,” Brown had an unrestricted right to use the song as he pleased, including to distribute, perform and display the song, or create a derivative work. Consequently, Brown could not be liable for any derivative work he created, or for any license (implied or otherwise) that he granted to others. The Court then concluded that Brown’s collaborators could also not be held liable for copyright infringement. The death knell to Plaintiffs’ copyright infringement claim against Defendants was Plaintiffs’ acknowledgement that Brown was also a co-author of the allegedly derivative work “Post to Be.” The court concluded that as a co-author of the original work, Brown was entitled to exploit the work as he wished, including by co-writing the alleged derivative “Post to Be” with Defendants and allowing them to release, distribute and manage it. As a result, Plaintiffs’ claim for copyright infringement was not viable. The case continues, however, because the Court also concluded that if Plaintiffs can prove that “Post to Be” is actually derivative of “Came to Do,” then the joint owners of “Post to Be” will have to account for the profits they generate from, and Plaintiffs will be entitled to some royalty from the use of, the derivative work. The court set discovery on the issue of whether “Post to Be” is actually derivative of “Came to Do.” Judge Wood’s decision is a great reminder of the broad umbrella of rights afforded to a joint author of a copyrightable work, and how those rights can be used to protect those who collaborate with a joint author to create a derivative work.

The software engineer who first coded the popular “John Madden Football” (now Madden NFL) computer video game has asked the U.S. Supreme Court to allow expert witness testimony to support his software copyright claim, over 25 years after the original work was completed and published.  This lengthy stoppage in play resulted in a problem of proof for the petitioner, at least according to the trial court and the 9th Circuit Court of Appeals—apparently neither party still has a copy of the original source code for the software in question. Petitioner Robin Antonick developed the John Madden Football game for the Apple II computer in 1988 under a contract with Electronic Arts, Inc. (EA).  It was released to popular success and present versions of Madden NFL are still huge sellers.  Antonick began coding versions of the game for Commodore 64, IMB, Sega, and Nintendo platforms soon after the Apple II release.  However, in 1990 EA hired another firm to code versions of the game for Nintendo and Sega Genesis systems and terminated Antonick’s contract.  Antonick alleges that he is due royalties on sales of these later versions of the Madden game, sold between 1992 and 1996, pursuant to his contract with EA.  Antonick was originally told that the firm EA hired had started from scratch.  However, he later came to believe that EA actually used his original code as the playbook for the early 90’s Nintendo/Sega versions and filed suit in 2011. (As part of the trial, it was determined that the statute of limitations did not bar the claims and this finding was not challenged on appeal.) In his petition, Antonick alleges the contract provided for royalties from the sale of any derivative work.  The U.S. Copyright Act defines a “derivative work” as: a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted.  A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a ‘derivative work’.” 17 U.S.C. § 101. Antonick argues that EA used his original Apple II work as the basis for the early ’90s Nintendo and Sega works.  He bases this claim solely on the testimony of an expert witness.  As the 9th Circuit noted in its opinion, “Neither the source code for Apple II Madden…nor the source code of any allegedly infringing works were introduced into evidence.  Nor were images of the games at issue introduced.”  Apparently, only a partial draft version of the Apple II Madden code was found and decompiling code from the different versions of the games does not render the source code as it was originally written. Without the ability to actually compare code, Antonick’s expert testified as to substantial similarities between the Apple II and Nintendo/Sega versions that suggested copying.  These similarities included formations, plays, play numberings, player ratings, field design, variable names, and identical misspellings in variable names.  The expert also compared the portions of binary code found for the Apple II version with sections of assembly code found for the first Sega version.  The jury found this to be adequate proof of copying to create a derivative work and found in favor of Antonick.  The trial court then threw a penalty flag on the play. EA moved for a verdict as a matter of law asserting there was insufficient evidence for the jury to have reached its conclusion.  The trial court agreed, basing its decision on 9th Circuit precedent in Krofft vs. McDonald’s, a case in which the creators of the H.R. Pufnstuf television characters alleged copyright infringement by McDonald’s “McDonaldland” commercial characters, particularly “Mayor McCheese”.  In that case, the 9th Circuit found that it was improper to introduce expert testimony to prove infringement under the second prong of its two part test, i.e., whether any copying rises to the level of an “unlawful appropriation”.  The court characterizes this as an “intrinsic” test and has held that judgment must be made by an ordinary lay observer without expert guidance. Antonick argues that the 9th Circuit test is out of date, or at least inapplicable when it comes to determining copying of software code.  He argues that it is likely crucial to have an expert witness in a software case, as lay witnesses would be unable to determine whether two versions of software code are similar.  He analogizes the argument to translation of a novel into a different language—clearly the translation is a derivative work, but unless the lay person is fluent in both languages, they would be unable to determine whether there is substantial similarity between two works without assistance from a language expert.  Software copying is no different.  In support, he cites cases from the 4th Circuit that allow expert testimony in software cases to prove infringement because, as one court noted in Dawson v. Hinshaw Music Inc., 905 F.2d. 731, 737 (4th Cir. 1990): Only a reckless indifference to common sense would lead a court to embrace a doctrine that requires a copyright case to turn on the opinion of someone who is ignorant of the relevant differences and similarities between the two works. Antonick argues that the difference in treatment of software cases among the circuits compels the Supreme Court to come onto the field of play to referee the rest of this match. An interesting side note is that David Nimmer, a law professor who writes arguably the most respected legal treatise on U.S. copyright law, is quarterbacking the Supreme Court appeal for Antonick, while the 9th Circuit quoted his treatise in support of its decision.  Nimmer’s father, Melville Nimmer, the original author of the treatise, argued on behalf of H.R. Pufnstuf in 1977 and lost the argument for acceptance of expert testimony.  Perhaps his son will win in this contest and vindicate the earlier loss.

On July 27, 2017, the Federal Circuit decided Earnhardt v. Earnhardt, a trademark collision between two relatives of the famous race car driver, Dale Earnhardt.  The case involved an appeal from a TTAB decision between Teresa Earnhardt, widow of Dale Earnhardt, who holds a portfolio of “Dale Earnhardt” and “Earnhardt” marks, and her stepson Kerry Earnhardt, a race car driver who sought to register “Earnhardt Collection” for furniture in Class 20 and “custom construction of homes” in Class 37.  The TTAB dismissed Teresa’s opposition to the “Earnhardt Collection” application, but the Federal Circuit waved a “yellow flag” and vacated and remanded the decision. The Federal Circuit’s opinion states that while “Earnhardt” is a surname that is typically not registrable, the addition of the term “Collection” makes it registrable if the combination of the two terms considered as a whole makes the surname not the “primary significance” of the mark.  A key element in such a determination is whether the non-surname term, Collection, is “merely descriptive” of the applicant’s goods and services.  If the term "Collection" was merely descriptive, then Kerry’s application would fail.  On the other hand, if "Collection" altered the primary significance of the mark such that consumers would not view it as primarily a surname, then the mark would be registerable.  The Federal Circuit found that the TTAB’s decision lacked clarity as to what exactly was decided: [I]t is unclear whether the Board engaged in a merely descriptive inquiry for the term “collection” or if the Board improperly constricted its analysis to only a genericness inquiry. On one hand, the Board’s decision could be understood as finding that “collection” is neither generic nor merely descriptive of [Kerry’s] goods and services, and adding “collection” to “Earnhardt” alters the surname significance of Earnhardt in the mark as a whole, such that the purchasing public would not consider the mark as a whole to be primarily a merely surname. On remand, the TTAB  must consider (1) whether the term “Collection” is merely descriptive of Kerry Earnhardt's furniture and custom home construction services, and (2) the primary significance of the mark as a whole to the purchasing public.  The Federal Circuit was particularly concerned that the TTAB had not made an affirmative finding so that the Court could make an evaluation of the distinctiveness of the disputed mark as a whole. Of particular interest here is that the Federal Circuit held that the TTAB stated that the mark was neither generic nor merely descriptive, but did not make the affirmative finding of genericness or descriptiveness that the Federal Circuit has deemed important.  The Court distinguished from its holding in In re Hutchinson Technology Inc., 852 F.2d 552, 554 (Fed. Cir. 1988), where the Court held that the TTAB’s finding that “technology” was merely descriptive was incorrect and reversed.  In the instant matter, the Federal Circuit remanded so that the TTAB could explain itself as to whether it had made a finding on the distinctiveness scale. The Federal Circuit also emphasized that it is important to evaluate the mark as a whole by considering whether the term “Collection” is generic or descriptive when considered as part of the “Earnhardt Collection” mark.  The Court included the example of the mark “Sugar & Spice” for bakery products where each word itself was descriptive, but in combination they were suggestive.  On remand, the Court required the Board to determine the primary significance of both “Earnhardt” and “Collection” together in its determination. We will keep you posted on which Earnhardt ultimately hits the “checkered flag.”

On July 19, 2017, the CLASSICS Act (H.R. 3301 - Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society Act) was introduced into the House, the purpose of which is to provide copyright protection for sound recordings fixed before February 15, 1972.  The bill is widely supported by stakeholders in the music industry such as the Recording Industry Association of America, American Federation of Musicians, SAG-AFTRA, and the Recording Academy (the Grammys) as a way to ensure payment to artists and labels of royalties on digital transmissions of their sound recordings.  Presently, the law provides for payment of royalties to songwriters and publishers only. The bill is intended as an addition to the Fair Play Fair Pay Act (H.R. 1836) bill re-introduced in March 2017 aimed at establishing performance rights at terrestrial radio. Under current U.S. law, radio stations are allowed to broadcast music without payment of royalties to artists and labels.   Among those in the music industry, the United States is regarded as lagging far behind other countries in its failure to pay royalties to artists to broadcast their songs. Many broadcasters, including the National Association of Broadcasters, remain opposed to the bills, believing that artists and labels receive fair treatment based on the free promotion when the song is broadcast and resulting purchase of albums, merchandise and concert tickets.  Smaller, independent stations likewise fear the fees could create serious financial concerns.  Opponents also believe the bill may ultimately result in less airtime for newer or emerging artists, ensuring labels make more money, while new artists disappear. This is not the first time a bill has been introduced seeking to rectify inequality in the treatment of broadcast and digital performance of pre-1972 sound recordings.  In 2015, the first Fair Play Fair Pay Act was introduced (H.R. 1733) but ultimately did not pass the House.   In addition, in 2009, Rep. Mel Watt (D-N.C.) and others introduced the Performance Rights Act (H.R. 848), which would have mandated royalties for artists and labels for radio play.  Though the 2009 bill cleared the House Judiciary Committee it never reached a floor vote amid pushback from the broadcast industry.  It remains to be seen whether these bills will fare better. In the meantime, at least one company in the broadcast industry has begun entering into private deals for payment of royalties in exchange for favorable rates for online streaming.  In 2013, Clear Channel Communications struck a deal with the Warner Music Group (the smallest of the major labels) that allows the label and its acts to collect royalties when their songs are played on Clear Channel’s 850 broadcast stations. In exchange, Clear Channel receives a favorable rate in the expensive world of online streaming.  Clear Channel has also  struck a similar deal with Taylor Swift’s label, Big Machine. It remains to be seen whether other broadcasters will similarly begin striking private deals while these bills make their way through the legislative process, with the hope that the bills do not encounter the same fate as their  predecessors.  Stay tuned for more updates.

On August 3, 2017, the shoe manufacturer Adidas scored important legal victories in its long-running trademark dispute with the shoemaker Skechers.  Adidas America, Inc. et al. v. Skechers USA, Inc. (D. Or. 2017) involved trademark infringement allegations by Adidas related to its iconic three-stripe logo, the trade dress of its “Stan Smith” shoe design and its Supernova word mark.  In a thorough 63-page opinion, Judge Marco A. Hernandez of the District of Oregon denied Skechers’ motion for summary judgment on Adidas’ trademark infringement claims and granted Adidas’ cross-motion for summary judgment on Skechers’ affirmative defenses of genericness, functionality and fair use. Adidas commenced the action in September 2015, alleging that: (1) Skechers’ Onix shoe infringed Adidas’ Stan Smith trade dress; (2) Skechers’ Cross Court shoe infringed Adidas’ well-known three-stripe mark; and (3) Skechers infringed Adidas’ Supernova word mark by selling a shoe also named Supernova.  In February 2016, Judge Hernandez granted Adidas’ motion for a preliminary injunction prohibiting Skechers from selling its Onix and Cross Court shoes and from using the word “Supernova.” Adidas’ Stan Smith Trade Dress and Skechers’ Onix Shoe The court noted that Adidas’ “Stan Smith shoe was commonly worn by tennis players in the 1970s and gained its namesake from Stan Smith, who wore the shoe when he won Wimbledon in 1972.”  The Stan Smith shoe has enjoyed considerable success, with total worldwide sales running to 40 million pairs and advertising expenditures in the tens of millions of dollars.  In 2014, Skechers began designing its Onix shoe which, as the pictures below illustrate, shares many of the same design features with the Stan Smith shoe. A Rule 30(b)(6) witness testified that the Skechers CEO gave orders to produce a knock-off of the Stan Smith shoe, and the company used code words to mask its activities such as “Stan Smi$h.” In support of its motion for summary judgment, Skechers argued that the Stan Smith trade dress:  (1) is generic on the grounds that it is indefinite, overbroad and so common to the industry that it does not identify a particular source; and (2) is not distinctive because Adidas cannot establish secondary meaning. The court rejected Skechers’ “divide and conquer” approach of dissecting individual elements of the Stan Smith trade dress, instead taking a “holistic” approach that led to a finding that Skechers had failed to meet its burden that the trade dress was either indefinite or in common use as a whole in the industry.  Applying the six-factor test for secondary meaning set forth in Adidas-Salomon AG v. Target Corp., 228 F. Supp. 2d 1192, 1207 (D. Or. 2002), the court further held that, notwithstanding the lack of consumer survey evidence proffered by Adidas, the Stan Smith shoe had acquired distinctiveness through secondary meaning, in part due to Adidas’ significant marketing efforts.  The court acknowledged 9th Circuit precedent holding that survey evidence can provide the most persuasive evidence of secondary meaning, but held that Adidas had otherwise “produced strong circumstantial evidence” that purchasers associated the Stan Smith trade dress with a single source.  Further, the evidence of Skechers’ “meticulous efforts to copy the Stan Smith shoe” weighed in favor of a finding of secondary meaning. Finally, the court granted Adidas’ motion for summary judgment on Skechers’ functionality defense, again rejecting Skechers’ “divide and conquer” approach. The court held  that Skechers failed to show the Stan Smith design as a whole (and not just individual parts) was functional.  Interestingly, Adidas also took the position that while the Stan Smith shoe design might have been considered a “performance” tennis shoe when it was first created in 1972, “times have changed over the course of forty-five years” such that the shoe design no longer yielded any utilitarian advantage.  In other words, even if the features were functional at inception, they no longer remained so and instead performed a source-identifying function. The Three-Stripe Mark and the Cross Court Shoe The court then turned to Skechers’ motion for summary judgment with respect to Adidas’ infringement allegations based on its three-stripe mark.  Adidas has used its famous (and actively enforced) three-stripe mark on shoes, storefronts, packaging, and advertisements since at least 1952.  In the court’s words, “[the three-stripe mark] is widely recognized and consumers strongly associate the [it] with adidas.”  Over the past twenty years, Adidas has sued Skechers multiple times for infringing the mark; each time, the parties reached a settlement in which Skechers agreed to stop selling the allegedly infringing footwear.  In 2015, Adidas learned that Skechers was producing a Cross Court shoe featuring an “E” shaped design that Adidas claimed is confusingly similar to the three-stripe mark (see comparison photos below). Skechers Relaxed Fit Cross Court TR Adidas Ultra Boost with the Three-Stripe Mark Denying Skechers’ motion for summary judgment on Adidas’ three-stripe mark infringement claims, the court concluded that at least some of the factors in the multi-part likelihood of confusion analysis favored Adidas, such as the strength of the three-stripe mark and the relatedness of the products.  Adidas did not present any survey evidence of actual confusion, and argued that none was necessary to prove a likelihood of confusion.  Skechers conducted its own survey, purportedly showing a low level of 6.1% post-sale confusion. Adidas attacked Skechers’ survey as flawed on several grounds.  On this record, the court determined that the actual confusion factor in the likelihood of confusion analysis favored Skechers, as Adidas did not present its own survey and its criticisms of the Skechers survey did “not relieve it of its own burden under this factor of producing evidence of actual confusion.”  Turning to the dilution claim, the court likewise concluded that since at least some of the relevant factors favored Adidas, summary judgment was not appropriate. The Supernova Mark Adidas has produced, sold, and promoted footwear bearing the Supernova mark since the late 1990’s. It alleged that Skechers infringed Adidas’ mark by selling a shoe also named Supernova.  Skechers asserted a descriptive fair use affirmative defense, contending that it used the Supernova mark to describe the shoe’s “cosmic” color scheme. It also argued that the word only appeared in small lettering on the shoebox UPC sticker labels and in website listings and that its prominent use of source-identifying trademarks minimized the risk that Supernova would be understood in a trademark sense. The court granted Adidas’ motion for summary judgment on the fair use affirmative defense, holding that Skechers had used the term Supernova as the shoe’s name and therefore as a trademark. Skechers also offered no evidence showing that consumers understood Supernova to describe the shoe rather than as the name of the shoe. The court then addressed certain remedy-related summary judgment motions, granting two of Adidas’ motions (one in part), reserving ruling on another, and denying Skechers’ motion. In sum, Adidas was a clear winner in this decision - just as it was at the preliminary injunction stage in 2016.  As any seasoned litigator will tell you, however, litigation is a marathon and not a sprint – this case is far from over.  We at The TMCA will continue to monitor this action and keep you updated.

Since March 1, 1989, the United States has been a member of an international copyright treaty named the Berne Convention (formally called the “International Union for the Protection of Literary and Artistic Works”).  This treaty was established on September 8, 1886 in, of course, Berne, Switzerland.  The World Intellectual Property Organization, located in Geneva, Switzerland, is charged with administration of the treaty and, at present, there are 174 contracting nations. The Berne Convention guarantees that works shall be protected in countries other than the author’s country of origin to the same degree the foreign country protects works of its own national authors.  Moreover, “[t]he enjoyment and the exercise of these rights shall not be subject to any formality; such enjoyment and such exercise shall be independent of the existence of protection in the country of origin of the work.”  Berne Convention art. 5(2) (Paris text).  The United States took a long time to join the Berne Convention because of the formalities required by U.S. Copyright Law, including use of proper copyright notice and registration as a prerequisite to bringing legal action. The no-formalities protocol of the Berne Convention does not mean, however, that contracting parties cannot impose additional requirements under their national laws, either for domestic copyright owners or to take advantage of certain additional remedies under national law.  So when it joined the Berne Convention, the United States decided to maintain certain formalities for domestic works, while dispensing with formalities for foreign-based works.  For example, Section 411(a) of the Copyright Act was amended to read:  “no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made” (emphasis added).  Accordingly, owners of foreign works may bring an action for copyright infringement in U.S. courts without having obtained a registration from the U.S. Copyright Office, whereas U.S. citizens must still obtain a registration to bring a lawsuit. Most notably, however, and the purpose of this post is to highlight the fact that a foreign copyright owner who brings suit in the United States without a corresponding United States copyright registration can likely only obtain an injunction, actual damages, and/or an infringer’s profits as a remedy.  Statutory damages, which Congress included in the Copyright Act as an incentive for timely registration of works, and which a copyright plaintiff can elect instead of having to prove actual damages and profits, are not available to foreign copyright owners who have not registered their works with the U.S. Copyright Office. Statutory damages are a powerful tool for a copyright plaintiff.  To qualify for statutory damages, a work generally must either be registered within three months after first publication of the work or before the date the infringement occurs.  At present, the range of statutory damages a court can award range from $750 to $30,000, though a court can increase the award to $150,000 in cases of willful infringement. Courts have affirmed that although the Copyright Act does not require registration of foreign works to bring an infringement lawsuit, the Act does not exempt registration with respect to statutory damages.  See, e.g., Football Association Premier League Ltd. v. YouTube Inc., 633 F. Supp. 2d 159, 162-63 (S.D.N.Y. 2009).  Further, both the House and Senate Reports on the implementation of the Berne Convention specifically note that the imposition of a registration requirement to qualify for statutory damages is not inconsistent with the no-formalities requirements of the Berne Convention. The takeaway is that owners of foreign copyrights that qualify for protection in the United States under the Berne Convention should obtain U.S. copyright registrations for their most important works, as doing so preserves the ability to claim statutory damages in a lawsuit.  Otherwise, foreign copyright owners could find themselves faced with the time-consuming and expensive effort of proving actual damages and profits in infringement actions.