Trademark, Copyright + Advertising

Even devoted comic book fans and other true believers might not know that the term “Comic-Con” is meant to refer to the king of comic conventions—the San Diego Comic Convention (“SDCC”)—not all comic conventions in general. Until now! In the recent San Diego Comic Convention v. Dan Farr Prods., No. 18-56221 (9th Cir. April 20, 2020) decision, the Ninth Circuit established that the last two syllables of “convention” are crucial for organizers who want to avoid being illustrated as the bad guy in a trademark dispute, even if those syllables make a convention’s title slightly longer and less snappy. The Court affirmed a district court’s holding that the defendant, Dan Farr Productions, failed to prove that “Comic-Con” is generic, and it also affirmed that SDCC did not exercise unclean hands in registering “Comic-Con” as a trademark. In addition, the Ninth Circuit affirmed the district court’s award of attorney fees against Dan Farr Productions for its infringing use of the term for the Salt Lake Comic Con. The Ninth circuit ruled that the district court properly granted summary judgment when it concluded that Dan Farr Productions’ evidence was insufficient to support its claim that the term “Comic-Con” was generic prior to SDCC’s first use. The district court denied Dan Farr Productions’ motion for summary judgment on its “generic ab initio” defense. Dan Farr Productions argued that “Comic-Con” was generic before SDCC used the wording as a trademark to the products at issue. The court denied this argument, and granted SDCC’s motion for summary judgment. The district court stated in its opinion that the Ninth Circuit has never recognized a “genericness ab initio” theory of defense, finding the argument irrelevant. Moreover, the court concluded that even if such a theory were available, Dan Farr Productions’ evidence was insufficient to support the argument that the term “Comic-Con” was generic prior to SDCC’s first use. As the record before the district court failed to demonstrate any genuine issue of material fact, the Ninth Circuit affirmed the district court’s grant of summary judgment in favor of SDCC. Fortunately for SDCC, the Ninth Circuit also found that district court did not abuse its discretion in denying Dan Farr Productions’ motion for judgment on the unclean hands defense. To show that SDCC had “unclean hands,” Dan Farr Productions was required to demonstrate SDCC’s super villain-like behavior, specifically, wrongfulness, willfulness, bad faith, or gross negligence. Such behavior must be proven by a standard of clear and convincing evidence. Dan Farr Productions claimed that SDCC had unclean hands by registering its various Comic-Con trademarks. The Ninth Circuit affirmed the district court’s denial of Dan Farr Productions’ motion for judgment on the unclean hands defense. According to the Ninth Circuit, Dan Farr Productions failed to prove on appeal that the district court abused its discretion by finding no evidence of unclean hands in SDCC’s registration of the contested marks. The Ninth Circuit affirmed the district court’s award of reasonable attorney fees to SDCC but vacated its award of non-taxable costs for expert witnesses. The Ninth Circuit explained that the Lanham Act authorizes district courts to award “reasonable attorney fees” for “exceptional cases” based on examining the “totality of the circumstances” and using a preponderance of the evidence standard. In doing so, district courts may consider a variety of nonexclusive factors, including objective unreasonableness, compensation, and deterrence, which were the factors on which the district court focused. According to the district court, Dan Farr Productions litigated its case in an “unreasonable manner.” This included such Joker-like behavior as their “failure to comply with court rules, persistent desire to re-litigate issues already decided, advocacy that veered into ‘gamesmanship,’ and unreasonable responses to the litigation.” In other words, Dan Farr Productions’ conduct had crossed the line from common villainy to super villainy. To compensate SDCC and deter future infringers, the district court decided that it was therefore necessary to deem the case “exceptional” and award reasonable attorney fees. The Ninth Circuit concluded that this was not an abuse of discretion. However, since the district court’s award of non-taxable costs for expert witnesses was not expressly authorized by the Lanham Act, the Ninth Circuit vacated that part of the award. Unless comic book fans care about Ninth Circuit trademark law as much as they care about collecting the latest issues of The Super Friends, The Unbeatable Squirrel Girl, and Betty and Veronica, there is a good chance that fans will still refer to all conventions as “Comic-Cons.” However, organizers who want to avoid a lawsuit should be mindful about how they name their conventions. Even so, like many current comics, the lessons provided by this decision are not simply black and white. There is also a lot of gray. In the end, Dan Farr Productions wasn’t SDCC’s nemesis because they failed to sufficiently prove that “Comic-Con” is generic, but that doesn’t mean it can’t be done. A different defendant with different counsel litigating their case in a more reasonable manner might become SDCC’s kryptonite if they can provide sufficient evidence to meet their burden. ‘Nuff said.

On March 26, 2020, the Chinese Supreme People’s Court (the “SPC”), the highest court in China and thus China’s equivalent to the United States Supreme Court, issued its re-trial decision, giving Michael Jordan an assist against Registration No. 6020578 for the mark “Qiaodan in Chinese characters & Design” in Class 25 owned by Qiaodan Sports Co., Ltd (“Qiaodan Sports”), a Chinese sportswear company based in Fujian Province of China. “Qiaodan” in Chinese characters is a commonly recognized phonetic translation for the name “Jordan” and the design in the mark is that of a basketball player in midair attempting a layup. China’s top court ruled in favor of Michael Jordan in the re-trial decision by recognizing the former National Basketball Association superstar’s prior rights in the name “Qiaodan in Chinese characters”, in which an established link to Michael Jordan was found by the SPC based on the evidence in the trial. Specifically, Qiaodan Sports had argued in the previous proceedings as well as in the re-trial that there was a lack of an exclusive link between Michael Jordan and “Qiaodan in Chinese characters” because (1) “Qiaodan in Chinese characters” has its own meaning -- “grass and trees of the south” in Chinese and (2) even if “Qiaodan in Chinese characters” can be regarded as the corresponding Chinese translation for the name “Jordan”, “Jordan” itself is merely an ordinary surname in English and an exclusive link to Michael Jordan had not been established based on the evidence in the trial. These arguments were not entertained by the SPC. In its re-trial decision, the SPC went through the evidence on the use and reputation of Michael Jordan in detail and took the view that the evidence established a link between “Qiaodan in Chinese characters” and Michael Jordan, which gave rise to the necessary name rights protection to Michael Jordan. Therefore, the SPC quashed the decisions of the lower courts and ordered the invalidation case to be returned to the China National Intellectual Property Administration for re-review (the CNIPA” has merged the previous PRC Trademark Review and Adjudication Board (“TRAB”)) . As such, it is almost a foregone conclusion that the CNIPA’s re-review decision will result in a victory for Michael Jordan. This case is the last of a series of high profile trademark invalidation actions that Michael Jordan had commenced in 2012 with the TRAB against Qiaodan Sports’ 78 objectionable trademark registrations for marks that the former NBA basketball player believed infringed his name rights, among other legal violations. These actions failed in the TRAB as well as in the subsequent appeal to the Beijing First Intermediate People’s Court and the further appeal to the Beijing High People’s Court in 2014 to 2015. In rejecting Michael Jordan’s claim for protection of his name rights, the Beijing High People’s Court held that there was insufficient evidence to establish an exclusive link between the mark “Qiaodan in Chinese characters” and Michael Jordan. Michael Jordan sought the SPC’s leave for a re-trial of the 78 cases. The SPC granted leave for re-trial in 10 cases and eventually ruled in favor of Michael Jordan in four of the re-trial decisions, including the present one. This means that Michael Jordan wins 4 of the 78 cases against Qiaodan Sports. It is reported that the main reason for the low success rate of Michael Jordan’s actions is the undue delay in the commencement of those actions because Chinese Trademark Law provides a five-year time bar on the invalidation of a trademark registration in China. Most of the 78 trademark registrations of Qiaodan Sports had been registered for more than five (5) years in 2012 when the actions were commenced. It can be seen from the re-trial decision that the SPC has shifted from the ”exclusive link” approach adopted by the Chinese courts in the past (such as by the Beijing High People’s Court in the further appeal of the present case) to a more relaxed “established link” approach. This is like an alley-oop to rights owners, as it sends out a message to the public that China will be less likely to tolerate the free-riding activities of trademark squatters who register famous names as trademarks. On April 8, 2020, Qiaodan Sports posted an announcement via its official Weibo account to its business partners that based on the company’s win in 74 of the 78 cases, including those relating to the company’s core registrations for the mark “Qiaodan in Chinese characters”, “Design” and “QIAODAN”, the present re-trial decision will not affect the company’s use of its existing trademarks and will not affect the company’s normal business operations. Qiaodan Sports’ announcement might not quite reflect the real situation. Here’s an instant replay: around the same time of the commencement of the 78 trademark invalidation actions in 2012, Michael Jordan also filed a civil lawsuit against Qiaodan Sports for infringement of his name rights and portrait rights with the Shanghai Second Intermediate People’s Court. This last minute civil action frustrated Qiaodan Sports’ first IPO in China, which had been scheduled for listing in March 2012. The civil action with the Shanghai Court is still pending. Qiaodan Sports came back with its second attempt of an IPO in April 2019 in China. Its IPO application has passed the preliminary review and is pending the second review at the China Securities Regulatory Committee. The SPC re-trial decision issued at this critical period has overshadowed Qiaodan Sports’ second IPO application and has brought uncertainty to its outcome. The decision will also provide great support to Michael Jordan’s civil action in Shanghai. We will likely see an increasingly stronger defensive strategy in the form of IP protection in China going forward. The best way forward for Qiaodan Sports is perhaps to pivot and re-brand away from the current infringing name. From a U.S. standpoint, this case demonstrates the importance of worldwide protection of trademarks and protection of the right of publicity, where applicable. As celebrities’ stars shine brighter, it is important to also think about the value and monetization of a personal brand, and to protect that brand by registering it with trademark offices in key jurisdictions where there are lots of fans and where goods and services are sold, licensed, and/or manufactured. In addition to the right of publicity protection that is available to celebrities in most U.S. states, federal trademark registration is possible in the U.S. for names and symbols used by celebrities to offer goods and services. It follows that international registration is also available for celebrities who sell and license products and services to consumers in other countries using their names and symbols. We at the TMCA have published numerous blog articles about celebrities protecting and enforcing their personal brands in the U.S. (some more successful than others), including Beyoncé, Lindsay Lohan, and even newborn Psalm West. Celebrities with international appeal should take heed of the Qiaodan Sports litigation saga as a case in point where acting early to protect global rights would have saved Michael Jordan from eight years of litigation and a Chinese doppelgänger brand clouding his image. Beyond the U.S. and a few other common law countries that allow for protection of unregistered names and symbols, it can be difficult to enforce trademark rights against an unauthorized user of a mark if they were first to file a trademark. Such “first to file” countries do have laws against bad faith squatters as well as special laws protecting famous marks. However, the evidentiary standards can create hurdles, especially in cases like the Qiaodan Sports case in China, where the mark might be subject to various translations and it may be difficult to show an “established link” let alone an “exclusive link” between the infringing mark and the celebrity based on the available evidence. This case is helpful for rights holders going forward in China, though filing early and often remains the best strategy for global branding. For previous articles written by Dorsey on this topic, please see: Protecting famous names and It’s all in the name: protect your own in China.

A recent decision of the Southern District of New York shields digital publishers from copyright infringement when embedding public Instagram posts in news pieces posted online. In the case, Stephanie Sinclair, a Pulitzer-Prize winning photojournalist focusing on gender and human rights topics, sued the online publisher and entertainment platform Mashable in 2018 for using her image of a mother and child in Guatemala without permission in a piece that Mashable ran on female photographers featuring Sinclair’s photo along with the photos of others. Masahable approached Sinclair for a license to use the photo. When she refused, Mashable embedded a public Instagram post of Sinclair’s featuring the photo instead. Embedding refers to the incorporation of content, such as a photo, into digital media, whereby the photo is stored on a remote server (here, Instagram’s) while being displayed elsewhere (here, Mashable’s website). Unhappy with Masahable’s embedded post that resulted in her photo still being displayed, Sinclair sued for copyright infringement. Analyzing Instagram’s terms of use, Justice Wood held that Sinclair’s display of her photo on her public Instagram account gave Instagram the right, under those terms, to validly sublicense the photo to third parties such as Mashable to display on their sites through embedding. As noted by Justice Wood, Instagram uses an “application programming interface” (or API) to let third parties access and share content posted by other users whose accounts are set to ‘public’ mode, and Instagram’s terms expressly state that “[a]ll content that users upload and designate as ‘public’ is searchable by the public and subject to use by others via Instagram’s API.” Since Instagram’s API enables its users to embed publicly-posted content in their websites, by agreeing to these terms, Sinclair gave third parties the right to use the API to embed her public Instagram posts in their websites, which is exactly what Mashable did in this case. Sinclair argued, among other things, such as the complexity and interconnectedness of Instagram’s policies, that it was unfair for Instagram to force her to choose between using Instagram in private mode only and letting her works be used for free. Although Justice Wood expressed sympathy for Sinclair’s dilemma, she held that she could not release Sinclair from the Instagram terms that she had adhered to: “[Sinclair] argues that it is unfair for Instagram to force a professional photographer like [her] to choose between 'remain[ing] in "private mode" on one of the most popular public photo sharing platforms in the world,' and granting Instagram a right to sub-license her photographs to users like Mashable. Unquestionably, Instagram’s dominance of photograph- and video-sharing social media, coupled with the expansive transfer of rights that Instagram demands from its users, means that Plaintiff’s dilemma is a real one. But by posting the Photograph to her public Instagram account, Plaintiff made her choice. This Court cannot release her from the agreement she made." Since news outlets frequently use embeds of Instagram photos to illustrate or build stories, the case provides some comfort that they can continue such practice, so long as the photos involved are posted in public mode. The decision can be viewed as a departure from a 2018 decision of the Southern District of New York, Goldman v. Breitbart News Network, which held that embedding an image is still a “display” that is capable of infringing copyright in an image. However, because Justice Wood dismissed Sinclair’s action solely based on the license contained in Instagram’s terms, her decision does not address that specific question as raised in Goldman and still unsettled in the Second Circuit.

In a 5-4 decision with the majority opinion delivered by Chief Justice Roberts, the Supreme Court held that copyright protection does not extend to annotations in Georgia’s official annotated code. The Code Revision Committee of the State of Georgia (the “Commission”) had sued a company called Public.Resource.Org for posting a digital version of the annotated Georgia code for free on its website. The Commission prevailed in District Court, but the decision was reversed by the Eleventh Circuit, thus setting the stage for the Supreme Court’s decision. The Commission, which is funded with public tax money, compiles the Georgia code along with annotations that include summaries of relevant judicial decisions, summaries of state attorney general opinions, and other reference materials, such as law review articles. The annotations were drafted by Matthew Bender & Co, which is a division of LexisNexis, pursuant to a work for hire agreement that vests any copyright in the State of Georgia. The Court’s holding is rooted in the government edicts doctrine, which states that “officials empowered to speak with the force of law cannot be the authors of—and therefore cannot copyright—the works they create in the course of their official duties.” The basis for this doctrine is that no one party should be able to own the law and arises out of a trio of 19th century Supreme Court decisions that together establish that judges who are carrying out their duty of making and interpreting law cannot be considered the authors of their opinions, including head notes and syllabi, for purposes of copyright ownership. The Court applied a two part test to determine whether the Commission can claim copyright protection in the annotations to the Georgia code: (1) whether the author qualifies as a legislator; and (2) whether the annotations were created in the discharge of legislative duties. The first question was answered in the affirmative, because the Commission serves as an extension of the Georgia legislature. The second question was likewise answered in the affirmative, because the Commission authors the annotations as part of its legislative responsibilities. Justice Thomas dissented, noting that the “ruling will come as a shock to the 25 other jurisdictions” who produce annotated codes in a similar manner as Georgia. In his view, allowing copyright protection for annotations does not violate the government edicts doctrine, because: (1) the annotations are not in and of themselves law; (2) the creators of annotations (e.g., Lexis) are incentivized by copyright law to produce quality work product that can earn them a profit; and (3) the annotations are not required for fair notice of the law. Justice Thomas also asserted that the majority’s rule is difficult to administer, because the first prong (whether the author qualifies as a legislator) is difficult to define. For example, if a body similar to the Commission is made up of legislators and non-legislators, how many legislators must there be for it to become a legislative adjunct? Justice Ginsburg also dissented. While she appeared to accept the majority’s test for application of the government edicts doctrine, she offered three reasons why the annotations do not constitute part of Georgia’s lawmaking process (the second prong of the majority’s test): (1) the annotations are not contemporaneously created and comment on statutes already enacted; (2) the annotations summarize writings in which other parties opine on a given statute; and (3) the annotations are to inform the public and are not addressed to those seated in the legislature. Notwithstanding the dissenting opinions, the key takeaway from the majority opinion is that authorship matters. If legislators produce work product (either on their own or by virtue of a work for hire agreement that deems the legislators or another state entity to be the author) when acting within their legislative capacity, then the government edicts doctrine applies, and there is no copyright protection for that work product. But if a private party produces the work product, then the government edicts doctrine does not apply, and copyright protection is available. Perhaps those 25 other jurisdictions Justice Thomas cites will now look for a way to contract with companies such as Lexis so that Lexis remains the author but still offers the same benefits, such as making a lower-cost version of the annotations available. The majority’s holding does not disturb the fact that works prepared by non-lawmaking officials employed by public universities, libraries, and tourism offices, for example, can still benefit from copyright protection.

Yesterday the U.S. Supreme Court overturned the Second Circuit, and ruled that infringer’s profits can be awarded even without a showing of willful infringement. A jury had ruled that Fossil acted in “callous disregard” of Romag’s trademark rights when Fossil’s Chinese manufacturers used counterfeit Romag fasteners. To recap the case posture, described in a prior blog post, Romag v. Fossil: Is Willfulness the “principle of equity” or the “big kahuna,” or is this all “much ado about nothing” , the question was whether statutory language allowing recovery of infringer’s profits consistent with “principles of equity” means that infringement must be willful. As will come as no surprise to those who track the judicial philosophy of Supreme Court justices, Justice Gorsuch took a textualist approach. No, “principles of equity” does not equal a requirement of “willfulness,” particularly when the drafters of the statute used the term “willful” repeatedly in other portions of this section. The short but vigorous opinion took several opportunities to slam Fossil’s position. As the opinion muses: “So how exactly does Fossil seek to conjure a willfulness requirement out of §1117(a)?” Fossil argued that “principles of equity,” in the context of trademark infringement at the time of the statute’s passage, required willfulness and Congress implicitly adopted that standard into the new law. Justice Gorsuch was not impressed, calling it a “curious suggestion.” In addition to attacking its merit from a textualist approach, Justice Gorsuch took issue with the underlying point – that an award of the infringer’s profits required willfulness – and cited to several cases identified by Romag as showing the opposite. So, then, willfulness is not the “principle of equity.” Fossil’s fallback argument fared little better. Fossil had argued that, even if not required, willfulness was key, calling it the “big kahuna.” The majority opinion expressed no emphasis on willfulness, leaving equity up to the district court’s discretion, although Justice Gorsuch observed that a defendant’s mental state would be “an important consideration” in deciding whether an accounting of profits is an appropriate remedy. In a concurring opinion, Justice Sotomayor (who practiced in the field of intellectual property law when she was in private practice prior to ascending to the bench), expressed her view that although willfulness was not a necessity, some wrongful state of mind – for example, recklessness – should exist before infringer’s profits are awarded. Following Romag v. Fossil, trademark plaintiffs have a greater opportunity to recover infringer’s profits, making some trademark suits by small players against big defendants more economically palatable.

As the collective consciousness coalesces around coronavirus fears, scammers are capitalizing on the opportunity to exploit the concerned. In recent months, the Federal Trade Commission (“FTC”) has noted the emergence of scams related to the coronavirus, including Medicare scams, scams around relief payments, scams implicating goods that are never delivered, and scams collecting money in the name of fake charities, among others. In an effort to thwart this fraudulent behavior, the FTC has developed a webpage designed to protect consumers from predatory behavior related to the coronavirus. The FTC is not merely providing information; it is also taking action. In March, the FTC teamed up with the Food and Drug Administration (“FDA”) to begin sending warning letters to companies they allege to be engaged in selling unapproved products that potentially violate laws against making deceptive, or otherwise scientifically unsubstantiated, claims regarding their efficacy in treating COVID-19. Although the recipient companies offer products—including essential oils, teas, and colloidal silver—that they claim can treat or prevent coronavirus, the FDA states that there does not yet exist any approved methodology (such as products, drugs, or vaccines) to treat or prevent transmission of the virus. Thus, stating that claims made by the companies related to the treatment and prevention of coronavirus are unsubstantiated, and may run afoul of the FTC Act (15 U.S.C. 41 et seq.), the FTC has sent letters to companies advising them to immediately cease making any such representations. According to the FTC’s letters (see here for a current list of warning letters), failure to discontinue the propagation of false claims may impel the FTC to seek a federal court injunction and an order obligating the recipient companies to refund money to consumers. Recipient companies were finally instructed to notify the FTC of the specific remedial actions they intended to take within 48 hours. Both the FTC and the FDA plan to not only follow up with those companies failing to institute corrective actions, but also to monitor complaints, online marketplaces, and social media to catch companies trying to market offending products on a different website or under a different name (see press release). The FTC has since indicated that the seven original companies to which it delivered letters have worked to remove unsubstantiated claims from their advertising. However, a review of the FTC website indicates that the FTC and the FDA continue to issue warning letters to new companies. In addition to the fraudulent advertising claims noted above, the FTC is also tackling robocalls related to coronavirus. At the end of March, the FTC sent letters to nine companies, including Voice over Internet Protocol (VoIP) service providers, warning them that it is against the law to “assist[] and facilitate[]” illegal robocalls or telemarketing in relation to the coronavirus. The FTC has indicated that it may pursue legal action against companies that assist telemarketers or sellers that they either know, or “consciously avoid[] knowing,” are violating the Telemarketing Sales Rule (occasioned by such conduct as misrepresentations of governmental agency affiliations, and declarations of misleading or false statements for the purposes of inducing consumers to make purchases or donate to charities, among other offenses) (see, for example, here). To address Telemarketing Sales Rule violations, the FTC can seek court injunctions, civil penalties, and money to refund injured consumers. Companies that want to avoid running afoul of the FTC and FDA should be careful to ensure that their practices comply with the regulatory requirements of both agencies, paying attention to the representations being made on their labels, websites, and in their promotions, for example. Companies must not misbrand their products, or represent them for coronavirus uses for which they have not been approved. Companies must also ensure that their advertising claims are supported by substantiating scientific evidence, and make efforts to avoid assisting and facilitating illegal conduct in the robocall arena.

On April 8, 2020, the Court of Appeals for the Federal Circuit issued a decision on an appeal from the refusal of registration of a color trademark by the Trademark Trial and Appeal Board. In this case, the applicant, Forney Industries, Inc., a maker of welding and machining tools and accessories, filed a trademark application in the U.S. Patent and Trademark Office based on use in commerce of the color mark shown above, which Forney features on its product packaging. The Examining Attorney rejected the application on the ground that the mark was not inherently distinctive – and so not immediately eligible for registration - and only registrable on the Supplemental Register (the secondary register of the USPTO for marks potentially capable of acquiring distinctiveness), or on the Principal Register with adequate evidence of acquired distinctiveness. On appeal of the Examiner’s decision by Forney, the TTAB affirmed the refusal of registration, rejecting Forney’s argument that its proposed mark was inherently distinctive product packaging trade dress that was registrable without further proof. Forney subsequently appealed the Board’s decision to the CAFC. The CAFC vacated the TTAB’s determination that the color trademark as applied for was not inherently distinctive, and remanded the case to the TTAB for further consideration. The question the TTAB must now answer is whether, as used on product packaging, a mark consisting of a combination of colors, and the design those colors create, is sufficiently indicative of the source of the goods contained in that packaging, and thus inherently distinctive. The CAFC looked to three Supreme Court decisions that are seminal to the analysis of trademark protection for trade dress, color trademarks, product design, and product packaging, and reflect the long and complicated history in this area of U.S. trademark law: Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763 (1992) -- Holding that product packaging, i.e., trade dress, is inherently distinctive under the Lanham Act, although the case is silent on how to assess whether such inherent distinctiveness exists. Qualitex Co. v. Jacobson Prod. Co., 514 U.S. 159 (1995) -- Holding that color trademarks used as part of product design can meet the legal requirements for trademark registration provided that the color marks have acquired secondary meaning in the minds of consumers. Wal-Mart Stores, Inc. v. Samara Bros., 529 U.S. 205 (2000) -- Holding that product design can never be inherently distinctive because consumers do not typically associate a product design with its source, and confirming its prior ruling in Qualitex that a color trademark, whether applied to a product or its packaging, cannot be inherently distinctive. The CAFC concluded that the TTAB had erred in two ways: 1) by concluding that color-based product packaging marks (as opposed to color-based product design marks) can never be inherently distinctive marks; and 2) by suggesting that a multi-color mark must be associated with a well-defined peripheral shape or color in order to be inherently distinctive. Using these cases as guideposts, the CAFC found that the Supreme Court had not gone so far as the TTAB had with respect to the treatment of a color mark on product packaging (as distinct from use on product design). Rather, the CAFC held that color marks (and particularly multi-color product packaging marks) can in fact be inherently distinctive when used on product packaging, depending upon the character of the color design. To support its holding, the CAFC pointed to a 2016 decision of the 10th Circuit, which also involved Forney, for its finding that “the use of color in product packaging can be inherently distinctive in appropriate circumstances.” The TTAB’s job now is to assess whether Forney’s product packaging can be viewed as inherently distinctive, and thus source identifying, applying certain factors laid out in a 1977 federal case holding, Seabrook Foods, Inc. v. Bar-Well Foods Ltd., 568 F.2d 1342 (C.C.P.A. 1977). These factors are: 1) whether the trade dress is a “common” basic shape or design; 2) whether it is unique or unusual in the particular field; 3) whether it is a mere refinement of a commonly-adopted and well-known form of ornamentation for a particular class of goods viewed by the public as a dress or ornamentation for the goods; and, 4) whether it is capable of creating a commercial impression distinct from the accompanying words (note: this factor is not applicable in this case). Other cases also support the proposition that the overall combination of elements will determine whether product packaging identifies the products as originating with a known source, and that a color combination used in conjunction with a particular geometric pattern can be a valid trademark. Will Forney’s color trademark on it product packaging ultimately be found to be inherently distinctive? We will keep you informed of the TTAB’s final holding.

On April 1, 2020, JaM Cellars filed a trademark infringement lawsuit against The Wine Group, makers of the popular Franzia brand boxed wine. Plaintiff JaM Cellars is the owner of trademarks relating to the word JAM used in wine products (U.S. Trademark Registration Nos. 3,787,229 and 3,855,785). According to the complaint, since being introduced in 2009, wine using the JAM marks has received several awards, and JaM Cellars has expended millions of dollars in advertising the wine using the JAM marks. JaM Cellars filed the complaint in the U.S. Federal Court in the Northern District of California. In addition to allegations of trademark infringement, the complaint also includes unfair competition claims under federal and state law. The dispute between the parties arose out of the sale and advertising of Franzia’s “Bold and Jammy” brand of Cabernet Sauvignon. According to the suit, Franzia has undertaken the “first major marketing campaign in thirty-five years for [the] Franzia brand, which includes a full packaging revamp, as well as new products and line extensions.” One of the results of the marketing campaign has been the BOLD & JAMMY wine, sold in packaging JaM Cellars alleges is distinctive from Franzia’s usual design for other wines in the Franzia line. The complaint alleges that Franzia’s use of BOLD & JAMMY infringes the JAM marks and that Franzia’s packaging has imitated certain unregistered trade dress elements of JaM Cellar’s packaging. The parties have a contentious history, and this suit is the latest salvo in a series of disputes between the parties dating back to 2017. JaM Cellars is also the owner of marks relating to the use of the word BUTTER in Chardonnay wines and had previously settled a lawsuit with The Wine Group for its use of the word BUTTERKISSED in wines. In April of 2019, JaM Cellars filed another lawsuit over The Wine Group’s use of the phrase RICH & BUTTERY on the packaging of Franzia’s Chardonnay wines, which is still pending. It will be interesting to see how this dispute plays out if it isn’t resolved through a private settlement. JaM Cellars will likely focus on any evidence of improper motivation and inspiration behind the rebranding redesign as well as why Franzia departed from other packaging presentations in its line of wines. Franzia, for its part, can rely on the distinguishing role of its well-known FRANZIA trademark in making confusion unlikely to occur. It could also attempt to show that certain colors, font styles and graphic designs are common packaging elements in the field of alcoholic beverages and that JaM Cellars does not own any registered trade dress rights. From a consumer perspective, the question of whether word JAM has any specific meaning or common use in the wine industry will also come under scrutiny. Evidence of actual confusion in the marketplace (or lack thereof) or in the form of survey evidence could also play a role. The TMCA will monitor further developments and provide updates once the case is resolved. If there is a private settlement, it can also be possible to discern the likely terms of resolution if a re-designed Franzia packaging surfaces in the marketplace (or not).

In a recent decision, Judge John R. Padova of the federal court for the Eastern District of Pennsylvania dismissed seven out of eight of the claims brought by musician Leo Pellegrino alleging that Epic Games unlawfully copied his “Signature Move” in its massively popular online video game, “Fortnite.” Although Pellegrino’s false endorsement claims survives, this was a significant victory for Epic, since the remainder of Pellegrino’s right of publicity, privacy, unfair competition, unjust enrichment, and trademark claims were dismissed with prejudice. Like several other recent decisions, this decision provides guidance to video game companies seeking to incorporate elements of reality into their games. Leo Pellegrino is a professional saxophone player and member of the “brass house” band, “Too Many Zooz.” According to Pellegrino’s complaint, “[u]sing [Pellegrino’s] unique anatomy—specifically his externally rotatable feet—Pellegrino was able to create the Signature Move, a series of movements that express his own unique dancing style” while playing a saxophone. The complaint further alleges that “[b]y executing the Signature Move in concert and festival performances in front of hundreds of thousands of people and in online videos with millions of views, his Signature Move has grown in popularity and has become inextricably linked to his identity.” For those of you who, like me, aren’t particularly hip to the brass house music scene, Pellegrino’s Signature Move looks like this. It’s kind of like a hyperactive version of the dance professional wrestler Junkyard Dog used to do with kids after wrestling matches, but with more foot twisting and a saxophone. Although the Court’s reference to Pellegrino’s “unique anatomy” suggests that a particular anatomy is required to do the dance, having externally rotated feet appears to be somewhat common. Epic’s Fortnite is a multiplayer online battle royale game in which players work competitively and collaboratively with others to be the last person or team standing, after dispatching all other players with weapons and other violence. Fortnite is free to download and play, but Epic generates revenue by selling things to players in the game, such as “emotes.” An emote allows a player to perform particular dance moves with their character, or avatar. Here is a side-by-side video comparing Pellegrino executing his Signature Move and a Fortnite avatar performing the emote at issue, which is called “Phone It In.” Assuming that this is not the only way to dance while holding a saxophone, Phone It In’s resemblance to the Signature Move seems more than coincidental, but Pellegrino and the Fortnite avatar look completely different. Pellegrino’s Counts I-III were right of publicity and privacy claims. Epic moved to dismiss them on First Amendment grounds since video games are protected by the First Amendment as an expressive work. In the Third Circuit, courts balance First Amendment protections and publicity and privacy rights using the Transformative Use Test. As the Court explained, under the Transformative Use Test, First Amendment protections outweigh a celebrity’s interest in their “likeness if the likeness is so transformed that it has become primarily the defendant’s own expression rather than the celebrity’s likeness.” The Court noted that in a previous video game case, Hart v. Elec. Arts, Inc., 717 F.3d 141 (3d Cir. 2013), which involved the use of college football player Ryan Hart’s likeness in a NCAA Football series of games, the Third Circuit applied the Transformative Use Test by first considering whether Hart’s “identity,” defined as including both his appearance and biographical information, was sufficiently transformed. Second, the Third Circuit considered “the manner in which Hart’s identity was ‘incorporated into and transformed by’ the expressive work” by looking at the context of the digital avatar and querying whether that avatar “did in the game what Hart did in real life.” Applying these considerations, Judge Padova concluded that Phone It In passed the Transformative Use Test because the complaint demonstrated that Fortnite’s heavily customizable avatars do not share Pellegrino’s appearance or biographical information, and the avatars execute the Signature Move only in the context of a battle royale competition, not in the context of a musical performance, like Pellegrino would do. Accordingly, the Court dismissed Pellegrino’s publicity and privacy claims. The Court also dismissed Pellegrino’s unjust enrichment claims because the complaint did not allege a contractual or quasi-contractual relationship in which Pellegrino conferred benefits on Epic. In addition, the Court dismissed Pellegrino’s unfair competition claim because it did not accept Pellegrino’s contention that he, a musician, and Epic, a video game company, are competitors “in the field of selling dance performances.” Under Count VI, Pellegrino asserted both false designation of origin and false endorsement claims. The Court dismissed Count VI with respect to the false designation of origin because it was barred by Dastar Corp. v. 20th Century Fox Film Corp., 539 U.S. 23 (2003). In Dastar, the U.S. Supreme Court held that false endorsement claims cover the origin of the good itself (e.g., the Fortnite video game) not the “idea, concept, or communication embodied in those goods” (e.g., Pellegrino’s Signature Move), which would fall under copyright law. However, the Court denied Epic’s motion to dismiss with respect to Pellegrino’s false endorsement claim. The Court based its decision on the complaint’s allegations that Pellegrino created the Signature Move, was identified with it due to his performances and online videos, Fortnite players’ immediate recognition that Phone It In embodied Pellegrino’s signature move, and Epic intentionally mimicking the Signature Move and naming it Phone It In to allude to a 2017 Google Pixel 2 phone commercial featuring Pellegrino. According to the Court, these allegations were sufficient to plausibly claim that Epic had created the false impression that Pellegrino had endorsed Fortnite. Pellegrino also asserted state trademark infringement and federal trademark dilution claims. The Court held that the state trademark claim was directed to the Signature Move, which is a dance, and choreographic works are specifically covered by 17 U.S.C. § 102(a)(4) of the Copyright Act. Since Pellegrino’s state trademark claim was equivalent to a copyright claim, the Court dismissed it as being preempted by the Copyright Act. The Court also dismissed Pellegrino’s trademark dilution claim because the complaint did not allege that Epic’s use of the Signature Move was intended to be a trademark for Fortnite, as required by the dilution provisions of the Lanham Act. In other words, Epic might use the Signature Move in its game, but the key missing allegation is that Epic uses the Signature Move as a trademark to identify Fortnite. Usually, when a court dismisses a plaintiff’s claims for the first time, it will allow the plaintiff leave to amend the complaint unless there is, or would be, undue delay, bad faith, dilatory motive, prejudice, or futility. Here, the Court found that amending the dismissed claims would be futile, and it therefore denied Pellegrino’s motion for leave to amend his complaint and dismissed those claims with prejudice. Under the rationale of this case, video game companies can copy a celebrity’s dance move, and perhaps other actions, without running afoul of publicity and privacy rights as long as the copying is done in a transformative way. Putting a celebrity musician’s likeness and signature dance in a game about musical performances probably won’t fly, but giving the same sweet moves to a character that looks nothing like the celebrity and putting them in a completely different context, as was done here, would be less risky. Even so, if a signature move is strongly identified with a celebrity, or the game company names it in a way that alludes to the celebrity, the game company might have to litigate a false endorsement claim beyond the pleading stage. How the parties and Court ultimately resolve the false endorsement claim could provide some more interesting case law about the limits of incorporating dance moves into a video game. This decision also indicates that future plaintiffs should consider adding copyright claims to their complaints if copyrightable content has been copied, since some of Pellegrino’s trademark claims were dismissed for being preempted by copyright law. We will see if Pellegrino tries to add copyright infringement claims to his current complaint or files a new complaint for copyright infringement.

Even though professional sports are on an indefinite and unprecedented hiatus due to the global outbreak of coronavirus, professional athletes are still making moves behind the scenes. In particular, NFL quarterback and six-time Super Bowl champion, Tom Brady (often referred to as “TB”), will be relocating from Boston to Tampa Bay for the upcoming NFL season. Brady began his NFL career with the New England Patriots and spent 20 seasons with the Patriots under the leadership of Coach Bill Belichick. Together, the two built a dynasty that spawned an impressive list of accomplishments, including the only undefeated 16-game regular season in NFL history, appearances in eight straight AFC Championship games (2011-2018), and six Super Bowl victories in nine appearances. At the age of 42, and after his longstanding history and unparalleled success with the Patriots, sports fan began to wonder what was next for TB. Will he retire? Or will Brady try his hand for the first time in a non-Patriots uniform? On March 20, 2020, these questions were answered. Brady ended his tenure with the Patriots and signed a two-year, $50 million contract with the Tampa Bay Buccaneers. Brady’s NFL contract wasn’t the only thing he signed that day. With “TB” now headed to “TB,” Brady seized the opportunity to capitalize on the play on words and filed a US trademark application for the mark TB X TB in connection with various clothing items in Class 25 (App. No. 88/841,801). Tampa Bay also took advantage of the TB connection and included “TB X TB” in a video announcing Brady’s arrival to the Bucs. Presumably, the parties have an agreement in place regarding shared use of the phrase, but the application was filed by Brady’s team. It seems Brady and the Bucs are not the only ones trying to score rights in “TB Squared.” On March 23, 2020, three days after Brady signed with the Bucs, an individual, Connor Patrick Hegarty, filed a US trademark application for a stylized version of TB2 (“TB Squared”) in connection with various clothing items in Class 25 (App. No. 88/844,457). The description of the mark indicates that it is “[i]ntended to be read as ‘TB Squared’,” and that the stylized letters and number signify the union between “Tom Brady” and “Tampa Bay.” The application does not contain a statement from Tom Brady providing his consent to register. There is nothing preventing Hegarty from using “TB” as an abbreviation for “Tampa Bay,” as this is a generic reference to a specific geographic place. However, Hegarty’s use of “TB” as an abbreviation for Tom Brady is more problematic. Although celebrities do not automatically enjoy trademark rights in their names, if the name (or nickname) achieves secondary meaning and is recognized as a source for particular goods or services, then the name can be a protectable trademark. Brady owns a number of pending trademark applications and existing registrations for the mark TB12 (both word marks and stylized marks) in connection with an array of goods and services, including clothing. Each registration includes the following statement: “The name, portrait, and/or signature shown in the mark identifies Tom Brady, whose consent to register is made of record.” The TB12 mark has been used in connection with clothing goods since at least as early as 2008, including the type of clothing items claimed in Hegarty’s application. Therefore, Brady’s initials, TB, have come to develop secondary meaning as an indicator of source, separate from reference to Tom Brady as an individual. Here, Hegarty specifically included “TB” in his TB2 trademark as a direct reference to Tom Brady. Such use of TB in connection with goods that Brady offers under the TB mark is likely to mislead consumers into believing that Hegarty’s goods are related to, sponsored by, or somehow affiliated with Brady. Moreover, not only does the inclusion of TB imply a (presumably) false association with Brady, the mark itself, TB2, is arguably similar to the TB12 and TB X TB marks, making confusion between the sources even more likely. Although it is too early to tell what the fate of Hegarty’s application will be in the eyes of the United States Patent and Trademark Office (“USPTO”), it would be surprising if Brady’s team didn’t “throw the flag” and challenge Hegarty’s application and any corresponding use of the mark. Incidentally, this is not the first time Brady has made headlines for his trademark filings. As previously reported in the TMCA Blog, the USPTO preliminarily refused Brady’s applications for TOM TERRIFIC after receiving a letter of protest claiming that “Tom Terrific” is actually the nickname for Tom Seaver, an MLB Hall of Fame Pitcher who played for the New York Mets. Brady had until February 22, 2020, to respond to the refusals but failed to do so. As such, the TOM TERRIFIC applications, as well as TB’s hopes for a nickname with perfect alliteration, are now dead.

In the midst of our national pandemic, the Acting Register of Copyrights has issued a notice related to the timing of registration of copyrights. Here’s an explanation of what you need to know and why this may be an important development for your company or clients. Section 710 of the Copyright Act authorizes the Register, on a temporary basis, to “toll, waive, adjust, or modify any timing provision . . . or procedural provision” in the Copyright Act if the Register determines that a national emergency declared by the President “generally disrupts or suspends the ordinary functioning of the copyright system . . . or any component thereof.” In light of this statutory authority, the acting Register, Ms. Maria Strong, issued an order on March 31 that affects timing requirements for registration of copyrights. Under section 412 of the Copyright Act, a copyright owner generally is eligible to be awarded statutory damages in an infringement action only if the work is registered prior to the infringement or within three months of the work’s first publication. The effective date of registration is the date when the Copyright Office receives the application, deposit, and fee. Due to myriad travel restrictions and “stay at home” orders, the Copyright Office noted that some copyright owners of published works may be prevented from completing and submitting copyright applications in a timely manner due to lack of access to physical documents, including deposit copies of copyrighted works, or the inability to deliver materials to a mail carrier. Consequently, the Register issued the following notice that can be accessed here: For copyright applications that can be submitted entirely in electronic form (i.e., those that do not require submission of a physical deposit), the timing provisions are unchanged. If an applicant can submit an application electronically but is unable to submit a required physical deposit, the applicant should upload, together with the application, a declaration or similar statement certifying, under penalty of perjury, that the applicant is unable to submit the physical deposit and would have done so but for the national emergency, and setting forth satisfactory evidence in support. If this requirement is met, and the three-month window for registration after the date of first publication was open as of March 13, 2020, the window will be extended such that the applicant will be eligible for the remedies under section 412, provided that the applicant submits the required deposit within thirty days after the date the disruption has ended, as stated in a public announcement by the Acting Register. Examples of satisfactory evidence include, but are not limited to: a statement that the applicant is subject to a stay-at-home order issued by a state or local government a statement that the applicant is unable to access required physical materials due to closure of the business where they are located If an applicant is unable to submit an application electronically or physically during the disruption, the applicant may submit an application after the Acting Register has announced the end of the disruption, and include a declaration or similar statement certifying, under penalty of perjury, that the applicant was unable to submit an application electronically or physically and would have done so but for the national emergency, and providing satisfactory evidence in support. If this requirement is met, the three-month window under section 412 will be tolled between March 13, 2020, and the date that the disruption has ended. For example, if a work was first published on February 13, 2020, the applicant would have two months following the end of the disruption to register the work in order be eligible for the remedies under section 412. Satisfactory evidence for purposes of this option includes, but is not limited to: a statement that the applicant did not have access to a computer and/or the internet a statement that the applicant was prevented from accessing or sending required physical materials for reasons such as those noted above Where the Acting Register finds satisfactory evidence that the applicant was affected by the national emergency, the Copyright Office will annotate the registration record to reflect that determination. *** The Register also issued an order regarding serving and recording notices of termination that can also be reviewed here. Finally, the Register invited members of the public to contact the Copyright Office directly about other disruptions that may inhibit the public’s “ability to participate in the copyright system.” Should you be confronted with such a situation, you can contact the Copyright Office through its website copyright.gov/help/ or by phone at 202-707-3000. We are wishing all of our readers the best during these difficult times!

Tattoos have been around since ancient times, all around the world, for over 5000 years. See article. Nonetheless, it’s probably fair to say that when Congress drafted each version of the Copyright Act, its members were thinking more about how to protect ink on the surface of paper rather than ink just below the surface of a living person’s skin. Accordingly, it is interesting to see how courts apply copyright law to tattoo-related matters, such as in the recent Solid Oak Sketches, LLC v. 2K Games, Inc., No. 16-CV-724-LTS-SDA (S.D.N.Y. March 26, 2020). In that opinion, Judge Laura Taylor Swain dismissed a copyright claim that would have prevented video game companies from creating realistic, virtual depictions of famous, tattooed athletes without first obtaining a license from the owners of those tattoos. This was a win for persons having a tattoo in a displayable area, as well as companies who create images of those persons. In Solid Oak, the plaintiff was not a tattoo artist or studio but a company that had exclusively licensed designs from tattoo artists that said tattoo artists had inked onto the bodies of NBA players Eric Bledsoe, LeBron James, and Kenyon Martin. Defendants 2K Games, Inc. and Take-Two Interactive Software depicted realistic digital representations of these players, complete with their tattoos, in their popular NBA 2K series of basketball simulation video games. Solid Oak filed suit alleging that these realistic digital depictions infringed their exclusive license to the copyrighted tattoos. The Defendants had already attempted to dismiss Solid Oak’s infringement claim twice—once in a motion to dismiss and again in a motion for judgment on the pleadings—but the Court denied both motions. The third time, a motion for summary judgment, turned out to be the charm. In a well-reasoned opinion, Judge Swain granted the motion and put an end to Solid Oak’s win streak for three reasons. First, the Defendants’ use of the tattoos was de minimis. The NBA 2K games have about 400 available players, and the tattoos in question appear on only three players. The average game is unlikely to include any of those players. Even when they do appear, their tattoos are only 4.4% to 10.96% of their actual size and are generally distorted due to movement, shading, camera angles, etc. Thus, Judge Swain concluded that no reasonable fact finder could find that the Defendants’ use of the tattoos was substantially similar to the copyrighted works. Second, the Defendants have an implied license to include the tattoos when showing the players’ likenesses. The Court explained that when the players’ requested the tattoos which were then designed by the artists and inked on to the players’ skin, the tattoo artists knew and understood that the tattoos would be copied and distributed as part of the players’ likenesses during public games, on TV, and in other media. The tattoo artists never attempted to limit these licenses, and they were granted before the tattoo copyrights were licensed to Solid Oak. Thus, when the players granted Defendants a right to include their likenesses in their games, this included the right to depict them with their tattoos. Third, Defendants’ use of the tattoos is protected by fair use. The Court noted that the tattoos were included in the games for the sole purpose of accurately depicting the players. Moreover, the tattoos appear only rarely in the game, and when they do they are small and very difficult to recognize, and at most incidental to the commercial value of the game. Moreover, none of the tattoo artists testified that the tattoos were unique or had particularly expressive features since they contained only common tattoo motifs or were copied from images that the artists did not create, such as a photograph of LeBron James’s son. Since the Court also found that Defendants’ use of the tattoos is unlikely to impact any market for the tattoos, all fair use factors weighed in Defendants’ favor. Although Judge Swain’s decision did not end with the sound of a buzzer, the season was over for Solid Oak. Thus, the Court averted a future where tattoo-concealing long-sleeve turtlenecks and tights became part of the standard NBA uniform. Some might consider this to be a niche decision given the subject matter, but remember that about 30% of Americans have at least one tattoo, and the NBA 2K series, which is just one of many video game sports series, has sold many tens of millions of copies. Moreover, this decision has implications beyond realistic depictions of tattooed people in video games. Not only does it potentially relate to any person who uses their likeness as an asset and needs to be able to control it (e.g., professional athletes, actors, Instagram influencers, etc.), it also relates to broadcasters, sports associations, and other media companies, etc. who want, or need, to be able to portray people as they are, ink and all.

In a case of first impression at the appellate level, the First Circuit recently issued a decision highlighting that U.S. copyright law authorizes implied, not merely express, sublicenses of copyrighted works. Photographic Illustrators Corporation v. Orgill, Inc., Case No. 19-452 (1st Cir. Mar. 13, 2020). The case involved photos. Not just any photos mind you, but photos of lightbulbs, numbering in the thousands. And not just any lightbulbs, but Sylvania lightbulbs. The photos were created not because their owner, plaintiff Photographic Illustrators Corporation (“PIC”), had some sort of blinding obsession with Sylvania lightbulbs, but because Sylvania hired PIC to take these photos for use in Sylvania’s marketing materials. Indeed, Sylvania took such a shine to PIC’s photos that it paid PIC roughly $3 million for a six-year license to use the photos for purposes of selling the bulbs to consumers. The license, which was in writing, included a clear provision that gave Sylvania “a non-exclusive, worldwide license in and to all the Images and the copyrights thereto to freely Use, sub-license Use, and permit Use, in its sole and absolute discretion, in perpetuity, anywhere in the world.” But, Sylvania was also required “to the extent reasonably possible and practical” to “include a copyright notice indicating PIC as the copyright owner and/or include proper attribution indicating [PIC’s principal] as the photographer.” The case arose because Sylvania made a glaring error: it gave the photos to defendant Orgill, Inc. (“Orgill”) so that Orgill could include them in lightbulb catalogs that were disseminated to Orgill’s network of dealers, but Sylvania forgot to tell Orgill about the attribution required by the PIC license. Incandescent at the absence of the required attributions, PIC initiated multiple lawsuits against Orgill dealers and Sylvania, most of which were consolidated and heard by an arbitrator. After hearing all of the evidence, the arbitrator ruled that the dealers were innocent of any wrongdoing, a decision that surely left them beaming, but the arbitrator cast Sylvania’s actions in a harsh light. Indeed, the arbitrator held that Sylvania had breached a covenant of the PIC license by failing to ensure that the attribution requirement was satisfied. As a consequence of running this legal red light, PIC was awarded approximately $8.5 million in damages from Sylvania. But what about Orgill? PIC’s claims against it were heard before a district court, and Orgill argued there that it had an implied sublicense from Sylvania to use PIC’s photos, such that it could not be liable for copyright infringement. Moving at the speed of light after the arbitration concluded, the district court agreed with Orgill and granted it summary judgment on its claim of an implied sublicense. On appeal, the First Circuit concluded that it was time to illuminate a murky area of copyright law – whether implied sublicenses are legally possible – because no circuit court had ever before addressed the issue. The court first considered PIC’s argument that copyright sublicenses had to be express, not implied, but it concluded that implied copyright sublicenses are cognizable as a matter of law, in the same way as implied copyright licenses. The First Circuit decision spotlights a number of cases from various appellate courts, including the First Circuit itself, that confirm the validity of implied copyright licenses. Given this crystal-clear authority, the First Circuit saw no reason not to recognize the existence of implied copyright sublicenses as well. The First Circuit also pointed out that the PIC-Sylvania license contained an express grant of sublicensing rights, without imposing any requirements that such sublicenses had to be express. In light of this, the court found that PIC had failed to require that such sublicenses be express, when it could have done so. As for PIC’s policy arguments that recognizing implied sublicenses would be contrary to the purposes of the Copyright Act, the First Circuit made light of them, holding that no policies underlying the statute would be undermined by recognizing the existence of implied copyright sublicenses. Next, the First Circuit considered PIC’s other argument: that the evidentiary record, viewed in the light most favorable to PIC, reflected genuine disputes of material fact as to the existence of an express or implied sublicense that should have precluded a grant of summary judgment. Once again, the First Circuit disagreed with PIC, holding that no reasonable factfinder could conclude that no implied or express sublicense existed. Indeed, the decision brings to light multiple aspects of the record showing the existence of such a sublicense, from the fact that Sylvania paid nearly $3 million for the photos and gave them to Orgill for purposes of marketing the lightbulbs they depicted, to Sylvania’s annual approval of the Orgill catalogs containing the photos, to the arbitrator’s decision awarding PIC nearly $8.5 million because Sylvania failed to ensure that Orgill properly credited PIC when using the photos. Based on all of this evidence, the First Circuit affirmed the grant of summary judgment to Orgill because the evidence showed that Sylvania had impliedly sublicensed Orgill to use the photos. What this decision shows is that if a copyright licensor wants to restrict any sublicensing rights granted to its licensee, the license had better reflect those restrictions in an unambiguous, bright-line manner.

In a case where the subject matter (copyrights relating to footage of a salvaged pirate ship) is arguably more intriguing than the question presented, the Supreme Court held that a section of the Copyright Act allowing copyright lawsuits against States is unconstitutional. Under the statute in question—the Copyright Remedy Clarification Act of 1990 (“CRCA”)—a State “shall not be immune [under the Constitution] or any other doctrine of sovereign immunity from suit in Federal court” for copyright infringement. The statute further indicates that States can be held liable for infringement in the same manner, and to the same extent, as private parties. Based on this statute, a videographer named Frederick Allen sued the State of North Carolina for copyright infringement. The specific facts and background on the case can be found in our earlier post here. The Court acknowledges that its precedent allows a federal lawsuit against a State under two conditions: (1) Congress must have enacted unequivocal statutory language abrogating State immunity; and (2) Congress must have had authority to abrogate the State immunity. There is no question that the CRCA satisfies the first question due to its clear language. The second question is the source of the controversy. Allen argued that there are two constitutional provisions that provided Congress appropriate authority to abrogate State immunity for copyright infringement. First, Article I of the Constitution empowers Congress to provide copyright protection (“To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries”). Therefore, abrogation of immunity is perhaps the only way to secure a copyright owner’s exclusive rights against State intrusion. In other words, if a State is allowed to use a copyright without permission of the owner, then the owner no longer holds exclusive rights in the copyright. Allen’s second rationale is based on an argument that a copyright is a property right, and is thus subject to due process under the Fourteenth Amendment (“nor shall any state deprive any person of life, liberty, or property, without due process of law”). Writing the majority opinion for the Court, Justice Kagan indicates that the first question has already been answered by the Court’s earlier decision in Fla. Prepaid Postsecondary Educ. Expense Bd. v. Coll. Sav. Bank. In that case, the Court held that the Patent Remedy Act, which stripped the States of immunity for patent suits, was unconstitutional. And, therefore, given the similarity of copyrights and patents as well as the respective statutory provisions at issue, ruling in Allen’s favor would require overruling Florida Prepaid. As for the Fourteenth Amendment question, the Court indicates that for an abrogation statute to be appropriate, it must “be tailored to ‘remedy or prevent’ conduct infringing the Fourteenth Amendment’s substantive prohibitions.” The Court further holds that copyright infringement must “be intentional, or at least reckless” to come within reach of the due process clause. In Florida Prepaid, the Court found that Congress did not identify a pattern of such infringement. Likewise, looking to the legislative history of the CRCA, the Court found that Congress’s findings on copyright infringement were similarly lacking. The majority, however, leaves the door open for Congress by indicating that its holding does not prevent Congress from passing a “tailored statute [that] can effectively stop States from behaving as copyright pirates. Even while respecting constitutional limits, [Congress] can bring digital Blackbeards to justice.” (Justice Thomas concurs with the opinion of the majority, but not with respect to the suggestion to Congress, because “[w]e should not purport to advise Congress on how it might exercise its legislative authority, nor give our blessing to hypothetical statutes or legislative records not at issue here.”). So what does this all mean? As we wrote in our earlier post, without the protections of the CRCA, there is nothing to stop State governments or agencies from infringing the rights of copyright holders, because they can rely on sovereign immunity. That said, a copyright holder may still have a remedy against any private party who participates in a State’s infringement (e.g., an independent contractor or a website host). And, if States begin acting like copyright pirates in a manner deemed intentional or reckless, the Court’s decision here leaves open the door for Congress to enact another, more tailored, statute to address such action.

We have previously written several posts about this copyright dispute over the signature opening guitar riff in the classic Led Zeppelin song “Stairway to Heaven.” You may recall, the estate of musician Randy Craig Wolfe, guitarist for the band Spirit, which reached some popularity in the 1960’s-70’s, filed suit against Led Zeppelin claiming that Jimmy Page copied the Stairway riff from a Spirit instrumental recorded several years prior called Taurus. (Therefore, we are unable to juxtapose lyrics from both songs in pithy verse for this post.) In a rare turnabout in view of recent music copyright infringement rulings, the piper apparently led the full 9th Circuit to reason, overruling the prior appellate panel decision, which had reversed the jury finding of no infringement. “Sometimes all of our [or perhaps the panel’s] thoughts are misgiving.” Our first post covered the jury verdict in favor of the heavy metal balloon band. Our second post addressed the rationale for denial of attorney fees to the victorious defendants after trial. And, while I am an ardent music lover, I am not musically educated like my virtuoso colleague who deftly dissected the musical similarity issues in our most recent post. Thus, this final post (hopefully) in the series will comment on the issue of laches (or lack thereof) and address the en banc Court’s reversal of the “inverse ratio rule,” a long-standing legal doctrine in the “substantial similarity” analysis that is the basis for a determination of copyright infringement. Why, and how, you might ask, was this action brought almost 50 years after both of the songs in question were written? Mr. Wolfe (nicknamed “Randy California” by none other than Jimmi Hendrix) apparently was unconcerned by any similarity between Stairway and Taurus. However, a number of writers commented on the similarity over the years and particularly in obituaries upon his untimely death in a tragic drowning accident in 1997. Normally, the legal doctrine of laches, which precludes redress after undue delay in taking action and resulting prejudice to the opposing party, would have preclude an infringement suit so long after the infringing act first occurred. However, a U.S. Supreme Court decision in 2014 held that laches is not a defense in copyright cases where the copyright infringement is ongoing. With the ubiquitous airplay of Stairway to Heaven on classic rock radio, much less continuing album sales of Led Zeppelin IV, it is hard to argue that any alleged infringement had stopped. Soon after the laches decision, a trustee of a trust set up by the estate of Mr. Wolfe opportunistically filed suit. With the laches hurdle out of the way, the trust, as owner of a valid copyright, had to prove the defendants “copied protected aspects of the work” to achieve a judgment of copyright infringement. The 9th Circuit test for “copying” requires a determination of (a) “copying” [Hmm, you say, isn’t that redundant?]; and (b) “unlawful appropriation” [And where does this second part spring from?]. In the absence of explicit evidence of copying of a work, such can be proven by circumstantial evidence of access to the prior work and similarities in the works. Interestingly, Led Zeppelin opened for Spirit at a gig in Denver in 1968 and the bands appeared concurrently at several festival concerts the following year. More significantly, Jimmy Page admitted on the stand to owning the Spirit album on which Taurus was recorded (presumably before Stairway was written). Access proven; similarity for purposes of this part of the test was apparently not considered in question. With regard to the second component of the paramount copying test, the 9th Circuit proceeds to explain “the hallmark of “unlawful appropriation” is that the works share substantial similarities,” i.e., something more than the similarity required for the subordinate copying test. In this case, the jury rendered a verdict on the facts presented at trial that the two songs were not “substantially similar.” It is extremely difficult for a court to overrule a factual determination by a jury. However, the plaintiff argued (among other things) that the trial judge committed error by not instructing the jury on the “inverse ratio” rule. To make things even more circular, the Court describes this rule as follows: “substantial similarity is inextricably linked to the issue of access” [Wait, didn’t they court say earlier that access was a component of a different, first part of the copying test?] and therefore “a lower standard of proof of substantial similarity [is required] when a high degree of access is shown,” i.e., an inverse ratio of proof [But what about it needing to be substantial?]. This logic seems cause for the forests to echo with laughter. If your head is humming and this makes you wonder, it apparently made the present constitution of the 9th Circuit wonder as well. It noted in its discussion that all but one other circuit had already jettisoned the inverse ratio rule and many had never adopted it. The Court summarily had this to say on the way to its spring clean: “the inverse ratio rule, which is not part of the copyright statute, defies logic, and creates uncertainty for the courts and the parties. [W]e take this opportunity to abrogate the rule in the Ninth Circuit and overrule our prior cases to the contrary.” Substantial similarity between the original and accused works is now the primary factor in determining whether there is an appropriation which is unlawful. [We will leave what constitutes a “lawful” appropriation for another time.] It is a big step for a court to overrule its own precedent, so this decision is significant in the realm of copyright law, particularly for the Court that has jurisdiction over the highly creative hub of southern California. As a result of this change, plaintiffs may find it harder to prove their case regarding the second prong of substantial similarity. Access to almost all recorded music is ubiquitous in this digitally interconnected age. This fact did not escape notice by the Court, and this may be a more significant influence in its turnabout than expressed in the decision. As Robert Plant wrote, “Yes, there are two paths you can go by, But in the long run, There's still time to change the road you're on.” It appears this advice was well received by the full Court.

In our prior post, we introduced the controversy at the center of “the copyright lawsuit of the decade” between Google and Oracle. Since then, both parties and 61 amici have submitted their briefs to the Supreme Court. This post focuses on the first question before the Court: whether copyright protection extends to the software interfaces underlying the Java coding language. New to this dispute? Don’t worry, we’ll explain what this means! Terminology and Overview Let’s begin with the terminology used by the parties, as the parties’ disagreement over what this dispute is about can help frame the issue. Oracle characterizes the dispute as one re-hashing the well-settled law that software is protected by copyright. Google characterizes the dispute as one asking a novel question: whether discrete portions of software called "declaring code" are protected by copyright. Recall from our last post that the declaring code is the portion of the Java API (application programming interface) that calls upon pre-programmed implementing code to perform certain functions, which allows programmers to bypass the need to program each function from scratch. When Google made the Android platform, it programmed its own implementing code, but used the same declaring code that Oracle uses in the Java platform. The copied declaring code in Google's Android platform ultimately performs the same function as in other Java applications, albeit through different implementing code. Google refers to the declaring code as a “software interface” to distinguish it from software generally; Oracle responds that the term software interface is something Google made up for this lawsuit. Google relies on two limitations on the scope of copyright law to argue that the declaring code is not protected by copyright: (1) the declaring code is a method of operation, and (2) under the merger doctrine, the expression of the declaring code merges with the function of the declaring code. Oracle responds by relying on Congressional intent and judicial precedent that have reaffirmed that software can have copyright protection even though all computer code inherently serves some purpose. Each party also invokes several policy arguments, which are highlighted below. Method of Operation Under 17 U.S.C. § 102(a), copyright protection extends to original works of authorship, including software generally. But, per § 102(b), copyright does not extend to “any idea, procedure, process, system, method of operation, concept, principle or discovery” embodied in the work. This is commonly referred to as the idea/expression dichotomy. In short, a copyright only protects the particular expression of an idea and not the underlying idea itself. Google argues that the declaring code serves the purpose of calling upon the pre-written implementing code. In other words, declaring code is not an artistic expression under § 102(a), but is a functional tool for causing a program to perform a certain, known function under § 102(b). As Google puts it, the declaring code and implementing code “create an interface as an exclusively matched set: a key and an unpickable lock.” If Oracle has exclusive rights to the key, then Android developers cannot open the lock to Google’s implementing code. Oracle stresses that although the declaring code and implementing code work together to perform a function, “Google, or anyone else could write different code in Java—including different declaring code—to perform that exact same function.” Thus, Oracle insists that it is not claiming copyright in the function (the idea), just the exact code (the expression) that Oracle used for that function when designing the Java platform. Even if the Court were to find the declaring code expressive, however, Google argues that it is not protectable under the merger doctrine. The Merger Doctrine The merger doctrine is an application of the idea/expression dichotomy: if an idea can only be expressed in one (or very few) ways, then the expression of the idea “merges” with the idea and cannot be the subject of copyright protection. The merger doctrine is intended to prevent one entity from claiming ownership over an idea merely because it was the first to discover the only way to express it. Google has three primary arguments for why Oracle’s declaring code merges with the function performed by the declaring code, thus making it ineligible for copyright protection. First, Oracle has not identified any Java instructions other than the declaring code that can call upon corresponding implementing code; therefore, per Google, the declaring code must be the only way to achieve the function of implementing a pre-programmed function. Oracle is quick to point out, however, that there are no other ways to call upon implementing code because Oracle chose to use the specific declaring code sequences that Google ultimately copied. According to Oracle, a proper inquiry must consider whether the senior user (i.e., Oracle) had more than very few ways to express the work at the time of creation, not whether a junior user (e.g., Google) has but one way to use the senior user’s work. When initially designing Java, Oracle argues that its predecessor Sun Microsystems had “unlimited options in writing the declaring code” and the final declaring codes that Google reused are the expression chosen by Sun’s programmers. Second, Google argues that it reused the declaring code because it was the only way developers would know how to call upon Google’s pre-programmed functions. In essence, Google argues that it had no choice but to use the declaring code if it wanted downstream developers to know how to write programs for Android. Usually, the merger doctrine would allow a junior user (Google) to use an element of the senior user’s (Oracle) work if there were no other way for the junior user to achieve the same goal or purpose as the senior user. Google’s argument, however, is that Android programmers (i.e., not Google itself, but Google’s customers) would not know how to use Android if Google were not able to reuse Oracle’s declaring code. Oracle responds to this by noting that nothing prevented Google from drafting its own declaring code in the same way that Google drafted its own implementing code—in fact, Oracle stresses that both Microsoft and Apple developed smartphone platforms without copying Oracle’s declaring code. According to Oracle, the only reason Google needed to copy Oracle’s declaring code was to capitalize on the Java platform’s popularity: “Once Google decided to copy parts of Java SE that developers already knew, Google ‘had no other choice’ but to copy Oracle’s declaring code.” Third, Google argues that if Oracle were to write the instructions contained in the declaring code in sentence form, there is no doubt that the function described by the instructions would not be protected by copyright. In other words, the declaring code is not creative or expressive, but is instead a rote set of instructions needed to implement a function. Oracle responds by reiterating that it is not attempting to claim copyright in the function at all. Rather, Oracle is claiming copyright in the declaring code’s “fully realized expression.” Policy Considerations Apart from the legal arguments raised above, the copyrightability issue implicates policy questions that could drastically impact the software industry. Appropriately, given the parties’ looming presence in Silicon Valley, each side accuses the other of the region’s gravest possible transgression: stifling innovation. Google argues that if copyright protection extends to declaring code, software developers will be dissuaded from releasing code as open source or otherwise allowing others to build upon their developments. Freely building upon existing software is common practice in the software industry and it will be more difficult for innovators to build upon the state of the art if copyright protection extends to discrete, functional portions of software programs. According to Google, this will stifle innovation. Oracle responds that if copyright protection does not extend to declaring code, software developers will be dissuaded from innovating their own operating systems and coding languages. Rather, they will copy and paste from existing, popular languages. This result we be particularly damaging to startups and small companies because, if anyone is free to copy software, “monopolists and corporate giants” will be able to flood the market with superseding versions of any software that achieves some success. According to Oracle, this will—you guessed it—stifle innovation. Could it really be that no matter how the Court rules it will stifle innovation? Likely not. Nonetheless, the sheer number and quality of amici this dispute has drawn out suggests that even if the parties are engaged in some measure of hyperbole, the stakes are indeed very high. What the Amici Are Saying 61 amici have submitted briefs in connection with this case. Of those 61, 44 go to whether copyright protection extends to the software interfaces underlying the Java coding language. Of those 44, 21 support Google and 23 support Oracle. Most of the major companies weighing in on the copyrightability issue—such as IBM and Red Hat Inc.—support Google. Also supporting Google are several legal scholars and organizations, such as a group of 72 Intellectual Property Scholars and the American Antitrust Institute. Oracle’s supporters mostly comprise policy makers, legal scholars, and industry groups. For example, Oracle is supported by a group of Former Congressmen and Ten Creators' Rights Organizations. The United States also supports Oracle’s position that software interfaces, including declaring code, are protected by copyright. It is difficult to draw conclusions as to whether Google or Oracle has the better position based on the support of their respective amici. But the sheer number of amici briefs filed shows that the decision in this case is likely to have significant impact on the software industry and copyright law. *          *          * Oral arguments were scheduled to occur on March 24, 2020, however, the Supreme Court announced on March 16, 2020, that all oral arguments in the March term have been postponed “in keeping with public health precautions recommended in response to COVID-19.” Oral arguments will be rescheduled in due course. In the meantime, be on the lookout for our next update, which will focus on the second issue presented: whether Google’s use of Oracle’s declaring code when creating the Android platform constitutes fair use.

A bong distributor with a reputation as a serial trademark plaintiff managed to persuade a Florida federal court that it should not be on the hook for the prevailing party’s attorney’s fees. In Sream Inc. et al. v. CIJ Enterprises Inc., Plaintiffs Roor, a German “water pipe” maker and its U.S. licensee, Sream, alleged that defendant CIJ infringed Plaintiffs’ trademark by selling a bong at its convenience store that bore the Roor mark. After CIJ prevailed at trial, it moved for attorney’s fees. On March 3, however, Judge Reinhart of the Southern District of Florida issued an order denying the motion on the grounds that CIJ had failed to establish that the case was exceptional under the Lanham Act. Judge Reinhart began with a brief overview of the applicable law regarding what constitutes an exceptional case. As another Southern District of Florida court noted, courts may consider whether there was purposeful, intentional or willful conduct that went beyond "mere negligence” in assessing whether a case is exceptional. An attorney’s fees award may also be justified when a plaintiff has brought an "obviously weak" Lanham Act claim and the evidence shows that the plaintiff acted in bad faith and with an "improper motive.” The policy reason for this doctrine is clear:  to, ahem, weed out frivolous claims. As this case demonstrates, however, it is no easy feat to recoup attorney's fees under the exceptional case doctrine. In this case, CIJ made three principal arguments in support of its position that this was an exceptional case justifying an award of attorney’s fees. CIJ first argued that Plaintiffs were on notice of the weakness of their case, as a judgment had been entered against them in a similar case, Sream, Inc. v. Smokers Edge, LLC, just nine months earlier. Notably, in Smokers Edge, the court had ruled it was an exceptional case meriting an award of attorney’s fees. Next, CIJ claimed that Plaintiffs’ “apparent business model” is to file trademark infringement lawsuits against “smaller, stand-alone, independent stores” and obtain settlements before trial an (oh no, not again) chronic litigant, if you will. According to CIJ, Plaintiffs likely earn more revenue from these settlements than from sales of their water pipes. Finally, CIJ contended that Plaintiffs’ attempt to obtain damages for allegedly infringing the mark of what it deemed an unlawful product made this an exceptional case. CIJ noted that Plaintiffs’ bongs had competed in the Cannabis Cup (the horror!) and that it had asserted the affirmative defense of illegality. Apparently, CIJ failed to see the irony in raising this argument given that its own presence in the bong market is what led to the suit to begin with. Judge Reinhart found CIJ’s Smokers Edge argument to be its strongest. In that case, the same plaintiffs had raised identical claims against a smoke shop that sold a counterfeit Roor water pipe. Nevertheless, Judge Reinhart found several reasons to distinguish the two cases. First, while the Smokers Edge court found that the bongs at issue were not “remotely similar in design, construction or quality,” the CIJ court found that a consumer seeing the two bongs next to each other could reasonably conclude that both came from the same source. Second, the defendant in Smokers Edge had twice made settlement offers that the plaintiffs rejected; in this case, however, there was no evidence that CIJ had offered to settle and been rebuffed (perhaps CIJ should have—please make it stop—tried to hash it out with Plaintiffs before trial?). Third, in Smokers Edge, despite the fact that the plaintiffs knew the identity of the distributor who sold the counterfeit bong to the defendant, they had never investigated the distributor nor sought to add them as a party, suggesting that the infringement was not actually causing Plaintiffs the harm they claimed. By contrast, in CIJ, there was nothing in the record regarding the distributor’s identity. Fourth, Judge Reinhart was also unpersuaded by CIJ’s argument that Plaintiffs did not actually care about the alleged infringement and only brought these actions to achieve settlement payments. As the court noted, there was no evidence Plaintiffs’ settlement proceeds exceeded their sales revenues (as CIJ had speculated), and Plaintiffs had a reasonable basis for bringing an infringement action, despite the fact they ultimately failed to prevail. Finally, the court rejected CIJ’s claim that the case was exceptional due to the alleged illegality of the water pipes. CIJ’s affirmative defenses did not include a claim that Plaintiffs had fraudulently procured their trademark by misrepresenting the nature of their water pipes. And, at least according to testimony from Plaintiffs’ corporate representative, Plaintiffs “advertise and market their water pipes only for tobacco use.” One suspects, of course, that most consumers of Roor bongs employ them for marijuana use. Absent evidence of misrepresentations to the USPTO, however, the fact that most consumers likely use Plaintiffs’ bongs to smoke an unlawful product does not make this case exceptional. It’s not at all surprising that winning trademark defendants are anxious to have their attorney’s fees paid—particularly when it appears to them that the plaintiff is in the trademark infringement litigation business. Judge Reinhart’s opinion reminds us once again that, absent truly exceptional cases, the expectation of an attorney’s fees award under the Lanham Act is generally nothing but … a pipe dream.

Fleet Feet, Inc. is a national running equipment retail store chain and owner of the trademarks CHANGE EVERYTHING and RUNNING CHANGES EVERYTHING for retail sporting goods stores and athletic apparel and related goods and services. According to the company website, the company espouses the core belief that “running changes lives,” and thus transforms everything else. Nike, Inc. adopted “Sport Changes Everything” in its 2019 advertising campaign highlighting youth, athletes with miraculous physical abilities in spite of obstacles, and the difference that sports can make in transforming lives. There was even a “Sport Changes Everything, Chicago-Style” commercial featuring grit, determination and, of course, mustard-only hot dogs. For Nike, it was a tearjerker campaign that resonated with many. Fleet Feet took notice of Nike’s campaign and filed a trademark infringement lawsuit seeking damages and an injunction, based in large part on a theory of reverse likelihood of confusion. Reverse confusion occurs when consumers believe that a prior user of a mark is somehow connected to a later user, even though the later user is the interloper. In contrast, plain vanilla “forward” likelihood of confusion occurs when a later user’s good or services are confused as originating with or somehow connected to the prior user. Reverse confusion can seem especially egregious because it causes a lesser-known prior user to become mixed up with a well-known later user of a mark simply because the later user’s reputation and resources eclipse that of the lesser-known prior user. In this instance, Fleet Feet asserted that even though its marks had been in use exclusively since 2013, Nike’s brand power and 2019 advertising campaign overpowered its use and would make consumers believe that Fleet Feet is somehow affiliated with Nike, when it is not. The U.S. District Court for the Middle District of North Carolina concluded that the marks were quite similar, and in light of Nike’s advertising power, its use could, and indeed already had, eclipsed that of Fleet Feet’s use of its marks such that there was a strong likelihood of reverse confusion and sufficient irreparable harm to warrant an injunction. Nike recently appealed the decision to the Fourth Circuit on the basis that the injunction was a restraint on free speech. Nike asserts that its use of “Sport Changes Everything” was not as a trademark or tagline, but was merely descriptive, and thus a fair use. As contended in Nike’s appeal, fair use of a trademark was established in the First Amendment to the Constitution, which in part prohibits Congress from making any law abridging the freedom of speech. In its fair use defense, Nike must prove that it used the phrase descriptively and in good faith. 15 U.S.C. § 1115(b)(4). Nike also asserted that advertising taglines are frequently short lived and therefore not always intended to become source indicating, though the relevant legal question is whether consumers thought the “Sport Changes Everything” phrase was source indicating—and if they did, were they likely to be confused as between Fleet Feet or Nike as the source of the products and services. We’ll continue to keep you posted, as this appeal could change everything.

In the past few years, retrogaming – collecting and playing video games from past generation consoles – has become incredibly popular. However, retrogaming raises some interesting copyright issues for both IP owners and gamers. One such issue is the gaming world concept of “abandonware.” This is the idea that, if an IP owner is no longer selling, using, supporting, etc. its video game, it has, in some sense, “abandoned” its game. But does an IP owner actually “abandon” any of its rights just because its game is out of print? More specifically, does a company’s failure to actively use its IP allow a gamer to download and play an unauthorized copy of the game without paying the IP owner? Another issue, which sometimes relates to abandonware, is whether a gamer can legally download a digital version of a game ripped from an original disc cartridge – called a “ROM” – for free and play it on a PC, tablet, or other device using emulation software. Some argue that doing so falls under the archival exception to copyright infringement for software as long as the user owns an original disc or cartridge of the game, but does this argument hold water? I recently had the opportunity to discuss these video game ownership issues, as well as video game preservation, on an episode of the popular YouTube gaming industry series, Extra Credits, which you can view here. It was a great honor and a lot of fun working with the Extra Credits crew. I especially appreciate the excellent job they did creating an animated version of me.

In an apparent win for musicians seeking to sample other’s works, on February 3, 2020, the Second Circuit declined to revive a copyright lawsuit against hip-hop musician Drake for his sampling of a 1980s spoken-word jazz recording, allowing the district court’s ruling to stand. Back in April of 2014, the estate of musician Jimmy Smith sued Drake for copyright infringement, alleging Drake’s 2013 hit “Pound Cake” improperly incorporated a 35-second sound clip from Jimmy’s spoken-word jazz track, “Jimmy Smith Rap.” The key line from each song is:                 Jimmy Smith’s Rap: “Jazz is the only real music that’s gonna last. All that other bullshit is here today and gone tomorrow. But jazz was, is and always will be.                 Pound Cake: “Only real music’s gonna last. All that other bullshit is here today and gone tomorrow.” The district court ruled in Drake’s favor, finding his sampling constitutes fair use. Most notable is why—i.e., the district court found fair use by comparing the underlying messages contained in the musical numbers, and found Drake’s version transformed the character of the original by adding a new meaning. Specifically, the district court found Jimmy Smith’s lyric touts the supremacy of jazz to the derogation of all other musical genres, while Drake’s makes a countervailing point that jazz is not king, and instead, “real music” reigns supreme, regardless of genre. Therefore, the district court found that the purpose of Drake’s song is “sharply different” from that of Jimmy Smith’s. And as a result, Drake’s use “adds something new, with a further purpose or different character, altering the first work with new expression, meaning, and message.” Jimmy Smith’s estate nonetheless argued “Pound Cake” could not be fair use because Drake’s fans and other listeners would not be able to recognize Jimmy Smith’s sample in Drake’s version, and thus, these listeners would not immediately identify the criticism or commentary. But the district court dismissed this argument, noting that, while the average observer needs to identify the target of mockery for parody cases, that is not a universal prerequisite for determining transformative use. The critical question remains how the work in question appears to the reasonable observer, not the quality or accessibility of the commentary. Although Drake had attempted to fully clear his right to use the “Jimmy Smith Rap,” he was only able to secure a copyright license to the sound recording, but not one for the written music. Importantly, the license for the written music proved problematic because Jimmy Smith’s estate refused to grant it, claiming Jimmy “wasn’t a fan of hip hop.” The district court noted that this refusal to grant the license reinforced Jimmy Smith’s bias against hip-hop, and further justifying Drake’s fair use. Rather ironically, based on the district court’s ruling, this anti-hip hop bias seems to be one of the reasons hip-hop artist Drake was found to be justified in using the sample for his own message.

The FTC recently announced a regulatory review of its Endorsement Guides, which provide guidance to marketers to ensure that endorsements and testimonials for products and services are not misleading, particularly as to whether there is a “material connection” between the endorser and the marketer. The Guides interpret laws the FTC administers, and are therefore advisory in nature, but the FTC can take action under the FTC Act if an endorsement or testimonial is inconsistent with the Guides. The Guides were last revised in 2009 and have gotten quite a workout in the past decade due to the rise of influencer marketing and the increasing role of consumer reviews in the advertisement and promotion of goods and services. In 2017, the FTC staff issued a helpful set of FAQ’s that addressed many of the technological advances that took hold of the marketing world in the prior ten years. In the Request for Public Comment on the Guides, the FTC is seeking input on a wide range of issues including: Whether changes in technology or the economy require changes to the Guides Have consumer perceptions regarding endorsements changed since the Guides were last revised and, if so, do these changes warrant revising the Guides What disclosures of material connections currently being used in social media are likely not understood by consumers Whether incentives in the form of free and discounted products bias consumer reviews, even when a favorable review is not required to receive the incentive Whether composite ratings that include reviews based on incentives are misleading, even when reviewers disclose incentives in the underlying reviews Whether children are capable of understanding disclosures of material connections Are there alternatives, such as individual enforcement actions under the FTC Act, which would be more effective or equally effective in addressing those practices? Do the Endorsement Guides describe any practices that are not deceptive or unfair, and if so, which practices and why are they not deceptive or unfair? While the Request for Public Comment also asks whether there is a continuing need for the Endorsement Guides and whether changes should be made to reduce the burdens or costs imposed on businesses or endorsers, the Endorsement Guides will likely endure, even if there are more specific examples given or tweaks about how disclosures should be made. The mention of disclosure of material connections when children are involved is interesting - the Request indicates that “the FTC has received complaints that young children may not understand disclosures of material connections.” This may indicate that more specific guidance or rules may be issued when endorsements or reviews are used to market goods and services to minors. Similarly, the requests regarding alternatives, including individual enforcement actions, and whether any covered practices are not deceptive are both interesting questions that could yield some lively response from cutting edge marketers. The TMCA will be following continuing developments at the FTC on the Endorsement Guides – stay tuned!

A federal district court has eliminated a cannabis company’s affirmative defense to federal trademark infringement claims based on the company’s prior use of a trademark that was legal under state law but not federal law. The Court concluded that, although use of the mark may have been legal under California law, “[c]annabis is illegal under federal law [and] the Lanham Act preempts the state law.” As the TMCA discussed previously, Kiva Health Brands (a national health food and supplements company) and Kiva Brands (a company selling cannabis-infused edibles) are locked in a dispute over the trademark KIVA. The parties cross-filed motions for summary judgment in late 2019 related to Kiva Brands’ various affirmative defenses to Kiva Health Brands’ infringement claim, including defenses based on prior use, laches, acquiescence, waiver, and estoppel. The Northern District Court of California ruled on the motions last Friday, eliminating Kiva Brands’ prior use defense but preserving its other equitable defenses. With respect to the prior use defense, the Court looked to its previous rulings in the case and reiterated that “while [Kiva Brands’] product is legal under California law, its illegality under federal law means that [Kiva Brands] cannot have trademark priority.” The opposite conclusion, it reasoned, would “put the government in the anomalous position of extending the benefits of trademark protection to a seller based upon actions the seller took in violation of that government’s own laws.” The Court rejected Kiva Brands’ argument that Section 1065 of the Lanham Act requires consideration of state trademark rights. This section applies only when a plaintiff has asserted incontestable trademark rights, on which Kiva Health Brands does not rely. The Court went a step further, indicating that even if it were required to consider state trademark rights under the Lanham Act, a federally-illegal use of a trademark simply cannot “support a prior use defense to a federal trademark” and any state law that would allow Kiva Brands to obtain common law (unregistered) trademarks rights would encroach upon and are thus preempted by Kiva Health Brands’ federal trademark rights. Notably, Kiva Brands’ counterclaim based on its common law rights under California law is still pending. However, the preemption aspect of this decision certainly leaves questions about the viability of that counterclaim. The TMCA will continue to monitor the progress of this case, which continues to provide helpful insights into trademark disputes involving cannabis, especially the potential limitations of common law trademark rights for such products.

I used to love pocket watches. My Wyatt Earp Halloween costume was not complete until I had a gold pocket watch hanging from my black vest. It’s no surprise then that reading the court’s decision on a motion for summary judgment in Hamilton Int’l Ltd. v. Vortic LLC piqued my interest. Vortic—a watchmaker that restores antique pocket watches, and converts them into wrist watches—is about to present its defense at trial in the Southern District of New York on claims that one of its converted watches infringes trademarks owned by the venerated Hamilton Watch Company, which produced its first watch in the 1890s and is still in business today. The Vortic watch style at issue is called “The Lancaster.” It uses a restored movement (i.e. the internal mechanism), face and hands from pocket watches produced by Hamilton, but the other parts of the wristwatch are produced by Vortic and the ultimate product is also assembled by Vortic. The Hamilton mark is visible on both the front and back of the watch. In order to produce The Lancaster, Vortic modifies the movement mechanism and, in some cases, must use parts from multiple Hamilton pocket watches. Denying Hamilton’s motion for summary judgment, Judge Alison Nathan held that the case at trial will turn on facts bearing on the issue of likelihood of consumer confusion, including the “crucial supplemental factor” of whether Vortic provided adequate disclosure of the nature of the watch being sold as a “modified genuine product.” While there is no dispute that Vortic uses Hamilton’s marks in commerce without Hamilton’s consent, Judge Nathan’s summary judgment opinion relied on the Supreme Court’s decision in Champion Spark Plug Co. v. Sanders, 331 U.S. 125 (1947) in concluding that a reasonable fact finder could determine the uses were unlikely to cause consumer confusion because Vortic had disclosed on its website and packaging that it had used Hamilton parts in creating the wrist watch. Just as in Champion, where the Court found there was no infringement when a defendant sold repaired and reconditioned spark plugs conspicuously labelled as such, the disclosures on Vortic’s packaging and website disclosed that the various parts of its rebuilt wristwatch “‘started out their life in a … pocket watch made by [Hamilton].’” Because consumers would expect that used or repaired second hand goods would not be in original condition or were otherwise inferior, a conspicuous label on the advertisements or packaging may constitute full disclosure for trademark purposes. Judge Nathan also analyzed the Second Circuit’s Polaroid factors that are applied when determining the likelihood of consumer confusion in trademark cases (not involving reconditioned or modified goods), and concluded that five of the eight factors were not relevant and would not be part of the analysis. On the remaining three factors—actual confusion, defendant’s good faith and sophistication of the buyers—Judge Nathan concluded there was no evidence of actual confusion and there was a genuine dispute of fact regarding Vortic’s good faith. Further, because the watches were expensive, the relevant consumers would likely be more discerning than usual in making a purchasing decision. Accordingly, these factors counseled against granting summary judgment to Hamilton. In its motion for reconsideration, Hamilton complained that Judge Nathan had improperly considered only three of the eight Polaroid factors in denying summary judgment. Judge Nathan denied the motion, holding that while it was incumbent upon the court to engage in a review of each factor, the court need not apply every factor in every trademark infringement case if a factor is deemed inapplicable and the court explains why, as was the case here. Judge Nathan set a bench trial to commence February 19, assuming the case does not settle beforehand. In denying both Hamilton’s motion for summary judgment, and its motion for reconsideration, Judge Nathan previewed her views on many of the issues that she will ultimately decide. Unless Hamilton produces additional evidence of actual confusion at trial, it appears the die is cast against it. Regardless, the case will be interesting to watch.

Since the beginning of the year, industry leaders and counsel advising clients on data security issues have held their collective breath in anticipation of the tsunami of California Consumer Privacy Act (CCPA) lawsuits. The CPPA, ballyhooed over the past few years as the next big thing in consumer litigation, is now the law in California. The most comprehensive cybersecurity and information privacy statutory scheme in the nation, the CCPA creates an express private right of action for individuals whose data is breached by hackers and mandates that significant penalties be assessed against the company that violates cybersecurity standards. While no CCPA lawsuits were filed in January, a consumer privacy lawsuit filed February 3 in the U.S. District Court for the Northern District of California has garnered a great deal of attention. Touted by some as the “first” CCPA case, a closer reading of the Complaint filed in Barnes v. Hanna Anderson, LLC (No. 3:20-CV-00812) shows that the plaintiff does not assert a direct claim under the statute. There is a simple reason for this. The data breach alleged in Barnes occurred in 2019, before the effective date of the CCPA. Although the Complaint alleges acts or omissions in 2020 by stating that the retailer did not tell customers or the Attorneys General about this in January, the fact that the data breach occurred before the effective date of the CCPA would render a direct claim subject to a motion to dismiss. As the industry pivots from the compliance questions that dominated the pre-effective period and begins to focus on CPPA litigation, this lawsuit gives us a few insights into future CCPA claims coming to a California courthouse near you: The Reasonable Security Measures Standard. The Barnes Complaint illustrates the framing of the core issue in a CCPA data breach claim: whether the company utilized “reasonable security measures” under the statute—whatever that may mean. Recognizing that swiftly evolving technology in this area makes it unworkable to incorporate specific technical requirements in the statutory standard (although previous guidance by California’s then-Attorney General Kamala Harris gives us some clues), the California Legislature has opted for a qualitative standard. The statutory predicate for a civil cause of action illustrates this: “Any consumer whose nonencrypted and nonredacted personal information . . . is subject to an unauthorized access and exfiltration, theft, or disclosure as a result of the business’s violation of the duty to implement and maintain reasonable security procedures and practices appropriate to the nature of the information to protect the personal information may institute a civil action.” Cal. Civ. Code § 1798.150(a)(1) (emphasis added). Although this standard has the benefit of being adaptable to changing technology, it perpetuates a “hindsight” problem often encountered in data breach litigation: it is exceedingly easy for a plaintiff, with the benefit of hindsight, to persuasively argue that some further act would have been reasonable at the time and that the breach was foreseeable. The Complaint filed in Barnes contends that this standard was not met in a variety of ways and cites to another provision of the law which requires companies to “implement and maintain reasonable security procedures and practices appropriate to the nature of the information, to protect the personal information from unauthorized access, destruction, use, modification, or disclosure.” Cal. Civ. Code § 1798.81.5(b). Whether it will be inadmissible as a subsequent remedial measure, the Complaint even cites to a LinkedIn posting after the alleged data breach in which Hanna Andersson announced it was searching for a new “Director of Cyber Security,” suggesting that this position was not filled when the data was hacked. (Compl. ¶ 33.) The Complaint further alleges that the reasonable measures standard is informed by not only the CCPA but the Federal Trade Commission Act (“FTC Act”) (15 U.S.C. § 45(a)) and various other standards and FTC publications. (Compl. ¶ 33.) These are all paths to one destination—the core litigated issue in this case and every other CCPA lawsuit that will be filed—whether the plaintiff will be allowed to use hindsight to prove that the defendant breached these evolving standards of care in cybersecurity. Interplay Between CCPA and other Statutory and Common Law Remedies. In lieu of a direct claim for violation of the CCPA, the Barnes Complaint alleges a common law claim for negligence as well as a claim for violation of the California’s Unfair Competition Law (“UCL”) (Cal. Bus. & Prof. Code § 17200). The negligence claim is presumably included to provide a basis for claims by non-California residents based on the theory that defendants breached a duty of care to those class members. The inclusion of the UCL claim is a staple of any California consumer class action. That statute provides remedies for any business practice that is proven to be unfair, fraudulent or unlawful. It will be interesting to see how the courts address the interplay between the UCL and the CCPA since the latter provides that “[n]othing in this title shall be interpreted to serve as the basis for a private right of action under any other law.” Cal. Civ. Code § 1798.150(c). In response to future CCPA claims, defense counsel may argue that a direct claim under the CCPA is the exclusive remedy and a separate UCL claim predicated solely on the CCPA is not actionable by the plain language of the statute. Contribution and Indemnity Issues in Secondary Litigation. This lawsuit names both the retailer (Hanna Andersson, LLC) and the ecommerce vendor (Salesforce.com, Inc.) that supplied the platform. The inclusion of both defendants is a reminder that, like other consumer protection lawsuits, these claims may trigger a secondary category of cross-claims between businesses and their ecommerce and cybersecurity vendors, including claims for contribution and indemnity. This will often be the case regardless of whether the secondary party is also named directly by the consumer (as Salesforce was here). It advisable to review provisions in contract documents with third party vendors—including caps and limitations on damages—as such contract language will be paramount in secondary claims. These second-tier claims are in addition to insurance coverage questions and lawsuits that these cases will likely spawn. The Learning Curve for Courts. Even a cursory reading of the Complaint serves as a reminder that CCPA cases bring inherent challenges for litigants on both sides stemming from the fact that most individuals are unfamiliar with all but the most rudimentary aspects of cybersecurity. In theory, a trier of fact may have to address the reasonableness of the defendant’s cybersecurity measures and get ‘deep into the weeds’ of these technical issues. But as noted earlier, as a practical matter, juries, and perhaps even some judges, will be attracted to the hindsight argument of “how did the defendant not protect against this obvious vulnerability?” Effectively litigating these cases will require trial counsel experienced not only with an understanding of the technical aspects of cybersecurity and the requirements of the statutes and regulation, but also savvy enough to appreciate and dismantle the attractive “hindsight” arguments plaintiffs’ counsel are sure to appeal to, if not expressly espouse. The fact that there has only been one quasi-CCPA lawsuit in the first several weeks of 2020 is not an indication that the predictions of tidal wave of CCPA class actions were overblown. As the Barnes filing illustrates, there are thorny questions concerning the retroactive application of the CCPA to data breaches that occurred before January 1. It is likely that there will be a lag of a few months as plaintiff lawyers wait to find cleaner cases in which the data breach occurred after the effective date. As this and other lawsuits make their way through motion practice, trials and appeals, there will be greater clarity to these and other questions in this emerging sector of class action litigation.

When I was a kid, we anxiously awaited Christmas Eve, with the exception of traditional lutefisk dinner. If you too have ingested lutefisk, you may agree that it is unpalatable. My Dad’s now family-famous quip was “just put more melted butter on it.” That quip went through my head while reading the Federal Circuit’s decision in Columbia Sportswear North America. v. Seirus Innovative Accessories. Just like adding more melted butter, the ability to add a logo to overcome a design patent infringement claim, is not palatable to the design patent bar or to design patent owners. Columbia Sportswear filed suit against Seirus in the Southern District of California, where it received a $3 million summary judgment with respect to the infringement of its patent in the above-featured design. Columbia’s design patent consists of the ornamental design of heat reflective material—a wave pattern featured in its body gear and sleeping bag products. Seirus released a line of gloves and other products with the above-featured wave design. The district court held that “even the most discerning customer would be hard pressed to notice the differences between Seirus’s HeatWave design and Columbia’s patented design,” and further characterized the presence of Seirus’s Logo as a “minor difference.” In its decision, the district court relied upon precedent established in L.A. Gear, Inc. v. Thom McAn Shoe Co., which held that logos should be wholly disregarded in the design infringement analysis. In reversing the district court, the Federal Circuit acknowledged that the premise of L.A. Gear is that “a would-be infringer should not escape liability for design patent infringement if a design is copied but labeled with its name.” But the Federal Circuit narrowed the application of that decision, indicating that “L.A. Gear does not prohibit the fact finder from considering an ornamental logo, its placement, and its appearance as one among other potential differences between a patented design and an accused one.” The court leaned on the Supreme Court’s decision in Gorham Co. v. White, which explained that “if, in the eye of an ordinary observer, giving such attention as a purchaser usually gives, two designs are substantially the same, if the resemblance is such as to deceive such an observer, inducing him to purchase one supposing it to be the other, the first one patented is infringed by the other.” The Federal Circuit reasoned that “a fact finder is tasked with determining whether an ordinary observer would find the ‘effect of the whole design substantially the same,’” and thus it is not proper to ignore elements of the accused design entirely. It then reversed and remanded the district court’s grant of summary judgment. So why do we care? Because from the perspective of the design patent bar and design patent owners, several of whom filed amicus briefs in conjunction with Columbia’s petition for rehearing filed this month, this decision “will likely have far-reaching and unintended consequences for design patent law…it threatens the integrity and reliability of the design patent system and jeopardizes the value of millions of design patents.” From that perspective, if a design is the only focus of a patent, should it not stand that the analysis in an infringement claim should be limited to the design and not additional elements? If not, then “Slapping a Logo on It” creates a path to readily overcome a design patent infringement claim on an otherwise infringing product, undermining the value and protection of design patents. We will provide updates in this case as they develop.

Hong Kong is an attractive franchising market, as an entry point to China and other international markets. While franchising in Hong Kong is not specifically regulated by law, there are common law principles and legislation that are applicable when setting up or operating a franchise in Hong Kong. Unlike some other jurisdictions, the system allows for foreign franchisors to enter into franchise agreements without establishing a wholly-owned subsidiary or branch office in Hong Kong. In addition, franchise operations are not required to register with the Hong Kong government or any trade associations. However, as the Hong Kong government does not impose any formalities that the franchisor must comply with when setting up a franchise system, it is imperative to consider the implications of common law, contract law, and other applicable legislations to determine how best to define franchise relationships. The provisions in the franchise agreement and the particular facts of the arrangement will define any relationship and there are key provisions to consider in franchise agreements to ensure you are well protected. For example, the Competition Ordinance, which came into effect on 14 December 2015, prohibits restrictions on competition in Hong Kong and the rules of the Ordinance can be implicated by restrictions imposed by the franchisor that go beyond what is reasonably necessary to maintain and protect the franchisor's legitimate business interests. Such restrictions, if found in a franchise agreement, may be considered anti-competitive. Likewise, restrictive covenants found in franchise agreements which extend past expiration of the franchise arrangement may be unenforceable and must be crafted narrowly, without excessive obligation, and with only restrictions that are no more than reasonably necessary to protect the franchisor’s legitimate business interests. For further legal and commercial advice on key provisions and concepts to consider when setting up franchises in Hong Kong and drafting franchise agreements, please see this Hong Kong Franchising Q&A recently published by our team of expert lawyers in Hong Kong for Thomson Reuters’ Practical Law database. Reproduced from Practical Law with the permission of the publishers. For further information, visit us.practicallaw.com.

The Supreme Court oral argument in the trademark case Romag v. Fossil provided an entertaining view of what some may consider a dry topic: legislative intent for damages awards in a trademark infringement case. Not to be lulled into a monotone and perfunctory argument, the parties engaged in spirited debate that quoted sources from Shakespeare to Oliver Wendell Holmes and four times elicited laughter from the audience. But the question remains: must a trademark plaintiff prove the defendant acted with willfulness in order to recover the infringer’s profits? The parties argued two opposite approaches: Romag argued that willfulness is not required, reasoning that if Congress had intended to impose a willfulness requirement, it would have used the word “willful,” as it did in other parts of the statute, instead of saying that profits are allowed when consistent with “principles of equity.” This argument appeared to resonate with Justices Ginsburg and Gorsuch, who questioned “whether principles of equity might be an unusual way of saying willfulness” if Congress had intended to impose a willfulness requirement. Fossil argued that courts have consistently required willfulness and that “principles of equity,” in this context, should be interpreted to require willfulness. According to Fossil, the statutory text should be read in light of what Fossil described as a consistent body of caselaw requiring willfulness. (On the other hand, Romag’s lawyer argued “the law was a mess and it wasn’t that clear.”) According to Fossil, “even though equity is generally flexible, you’ve got to go through the gate” by showing willfulness. Justice Kagan was skeptical of this argument, commenting that “the courts do seem to be thinking of willfulness as a factor, a significant factor, but not a gateway requirement.” Justice Breyer wondered wither this was “much ado about nothing,” because courts have the discretion to adjust damages awards and could increase or reduce an award regardless of which gateway rule is applied. Fossil’s fall-back argument – which may carry the day – is that willfulness is the “big kahuna”: “if we were to lose this case on remand, you should make very clear that willfulness is a key factor, the big kahuna or something like that….” The justices may take him up on that offer: Justice Kagan mused that there may be an “intermediate position” between the two parties’ arguments, “which is that willfulness might not be…an absolute necessity but it certainly should be entitled to very significant weight.” So there you have it. Willfulness just might be the “big kahuna” when deciding whether to award infringer’s profits to a trademark plaintiff. We’ll have that answer sometime between now and next June.