Trademark, Copyright + Advertising

A new means for fighting back against copycats in the fashion industry is on the rise: online call-outs. Brands can take their grievances directly to the public on social media to draw attention to design imitations (and in the process educate consumers about authenticity). Posts like these are gaining significant traction in the fashion world, which is awash with intellectual property rights violations. Ironically, a fashion brand that vigorously polices infringements has become the namesake of one of the most visible online outlets for highlighting copycat fashion designs. The Instagram account @Diet_Prada (also tied to dietprada.com) airs the dirty laundry of fashion brands to its almost 600,000 followers by displaying side-by-side photos of copycat designs and similar originals, generating passionate comments from consumers and designers alike, and bringing bad press to the copycat design creators. In some cases, the implicated designers comment directly by issuing clarifying statements. The two fashion insiders who have now been identified as running the account – Tony Liu and Lindsey Schuyler – refer to themselves as “knockoff detectives.” In an interesting turn of events, on June 28, 2018, Diet Prada shared a photo of a shirt sold by Dolce & Gabbana (whose co-founder is an outspoken detractor of Diet Prada), which displayed the same hashtag as that used on a shirt sold by Diet Prada itself as merchandise with the caption “When ur merch gets knocked off by @dolceandgabbana for 12x the price lol. #pleasesaysorrytous”. Even where photos of copycat fashion designs are not flagged on Diet Prada’s accounts, Diet Prada has found itself in the middle of designer disputes. For example, in January 2018, the founder of active wear brand Outdoor Voices, Tyler Haney, accused another high-end active wear company, Bandier, of ripping off her designs. She pointed out the design similarities on her Instagram Stories, claiming: “Each new style in @bandier’s ‘new’ line is a rip of an Outdoor Voices style. . . . Embarrassed for you. People should boycott everything about you.” Some Outdoor Voices fans called for the Instagram account @Diet_Prada to step in and help. Fans also directly confronted Bandier on its social channels. When Bandier posted a photo of its new collection on Instagram, Outdoor Voices fans shamed the brand through their comments. One particularly irate fan even commented that “OV is coming to end you bandier”. The popularity of the Diet Prada platform shows that posting photos of a “ripped off” fashion design may be one potential PR strategy for fashion brands to take a stand against copycats. And in some cases, it could serve as a first attempt to shame a copycat infringer into pulling a product before embarking on costly and time-consuming legal action.

A recent NAD decision about salad spinners illustrates several principles generally applicable to product testing used to substantiate superiority claims: (1) the test conditions need to be relevant to how the product performs in a typical consumer context; (2) the test results must be statistically significant; and (3) marketplace superiority claims must be supported by comparative testing on a broad range of competitive products. The advertising claims at issue were made by a company named DKB Household USA Corp. for its Zyliss SwiftDry Salad Spinner. DKB touted that the SwiftDry spinner “Removes 25% More Water” with an asterisked footnote stating “*Average test results versus leading competitors.” Challenger OXO International Ltd. raised several deficiencies in the testing offered by DKB as substantiation for the ad claim. A significant problem was the use of sponges and absorbent cloth in lieu of lettuce or other forms of produce for purposes of measuring water extraction. In addition, DKB’s testing only involved five trials of the product brands tested, and the data generated were quite variable. Finally, DKB only tested its SwiftDry spinner against two competitive brands — market leader OXO and Chef’n. NAD’s holding that the ad claim of superior water removal was not properly substantiated was no spin job. First, NAD found that DKB did not adequately explain why it could not test the products on lettuce leaves or other representative produce, and concluded that “lettuce leaves would better approximate results that a consumer would experience.... NAD has consistently held that the most reliable measure of a product’s performance is demonstrated by tests designed to test the products in the same manner the product is directed to be used by consumers.” Second, DKB’s testing with a small sample size and wide variation in data did not yield statistically significant results. As NAD emphasized, “For claims that promise a quantified level of performance” it is particularly important to have statistically significant results “as the claim itself quantifies the benefit provided and testing should demonstrate that consumers will experience the claimed benefit.” Finally, NAD held that “in order to support a broad superiority claim such as the one at issue here, an advertiser must test a variety of competing products that comprise all or a substantial portion of competitive products [in] the market.” DKB testing of just the OXO and Chef’n brands did not meet that standard. In the past, NAD has noted that 85% of the market is sufficient, but it didn’t cite any specific number this time around. What’s the “spin” on this decision? To substantiate product superiority ad claims, advertisers must conduct product testing under consumer and product-relevant conditions; quantified performance claims must be statistically significant; and the ad claim must be tailored to the range of products tested — if only two competitive products are tested, say so in the ad. If a company wants to make a broad marketplace superiority claim, it must conduct tests on “all or a substantial portion” of competitive products.

There is a little-known, even lesser-enforced, section of the United States Code that actually prohibits the printing of the American flag on paper napkins and other disposable products like paper plates, cups and boxes.  The United States Flag Code, as it is known, also expressly states that “[t]he flag should never be used for advertising purposes in any manner whatsoever.”  4 U.S.C. § 8(i).  The Code was originally enacted in 1942 and the last amendment was made in 2009.  Based on our online search there have been fewer than a dozen cases since 2001 that cite the United States Flag Code generally (4 U.S.C. § 1 et seq.), and none of those cases cite to subsection (i) of section 8 that addresses paper napkins and advertising.  Yet most of us have been to a July 4th BBQ with American flag napkins—they’re readily available for purchase by anyone with an Internet connection.  And we’ve all seen the flag used in a TV commercial (haven’t we?).  What about those American flag cakes – do you think the United States Flag Code was meant to prohibit us from lining up blueberries and strawberries on vanilla frosting? Just some food for thought for you, dear readers. We hope you all enjoy your Fourth of July celebrations, and if you are barbecuing, maybe take a pause to think before grabbing for that flag napkin.

Coffee addicts and meme fanatics are slightly less caffeinated and slightly less entertained after a California federal district court recently ruled that Grenade Beverage, LLC infringed the intellectual property rights of viral meme sensation Grumpy Cat, when Grenade Beverage sold ground coffee using her name and image in violation of its license agreement with Grumpy Cat’s owners. The case began back in 2012 when Tardar Sauce was just a newborn kitten with an underbite and feline dwarfism that caused her to look perpetually grumpy. Thanks to the internet’s obsession with all things “cat,” Tardar Sauce found herself at the center of a meme storm after one of her photos appeared on Reddit. Thereafter, Grumpy Cat was born, and the world started to learn about the many things she dislikes: being awake, neighbors and intellectual property infringement being just a few examples. Grumpy Cat Limited, started by Miss Sauce’s owners, seeks to promote the Grumpy Cat brand and owns several trademarks and copyrights related to the Grumpy Cat name and image, with over 1,000 products for sale on the website www.grumpycats.com. Notably, the company has collaborated with television and movie behemoths like Fox Broadcasting and Lifetime Television to exploit this valuable intellectual property. However, not all collaborations have come to a happy conclusion. In 2013, Grenade Beverage entered into a license agreement with Grumpy Cat Limited for the exclusive rights to use Grumpy Cat’s name and image on a line of coffee products. The line started with iced coffee products, but when Grenade Beverage expanded into ground coffee, Grumpy Cat Limited sued for copyright and trademark infringement. The case had a complicated procedural history: a jury trial was held in January 2018, but in accordance with a Final Pretrial Conference Order in December 2017, the parties agreed that the court would decide Grumpy Cat Limited’s cybersquatting and accounting claims and Grenade Beverage’s counterclaims for declaratory relief of non-infringement of copyright and trademark rights. Also prior to the jury trial, the court had held at the summary judgment stage that there was an issue of fact for the jury to decide as to whether, based on the intent of the parties, a “line of … coffee products’ included or excluded coffee products other than iced coffee.” After a four-day trial, the jury found that the scope of “a line of Grumpy Cat-branded coffee products” was limited to iced coffee and awarded over $700,000 in favor of Grumpy Cat Limited. Grenade Beverage then sought a declaratory judgment that a licensor cannot sue a licensee for infringement under an exclusive license or, alternatively, that Grumpy Cat Limited could only sue for breach of contract, not infringement. The court held that an exclusive licensee cannot infringe upon the copyrights licensed under the contract, but that it can infringe upon copyrights that fall outside the scope of the exclusive license. To decide what products fell within or outside the scope of the license granted, the court needed to determine whether Grenade Beverage had breached a covenant or condition of the contract. Covenants are promises to do or refrain from doing a specific act. Under California contract law, breach of a covenant will only support a claim for contract damages. On the other hand, conditions limit the scope of an agreed-upon right, and breach of a condition places the licensee outside the scope of that right. This in turn constitutes infringement of the licensor’s reserved rights and supports an infringement claim on top of contract damages. In this case, the jury had determined that the sale of coffee products other than iced coffee went beyond the scope of the exclusive license for a “line of Grumpy Cat-branded coffee products.” However, the court then needed to decide whether the phrase “additional products within the Product Category … that may, upon the Parties’ mutual approval, be marketed hereunder” is a covenant or condition. To answer that question, the court reviewed the “four corners” of the agreement to ascertain the mutual intention of the parties. In particular, the court placed weight on the parties’ use of the word “in” instead of “to.” Under the contract, Grenade Beverage had the right to use the licensed intellectual property “in” the specified product category as opposed to the right “to” the product category. According to the court, the use of “in” suggested a limited right, whereas “to” would have suggested an all-encompassing right. Therefore, “additional products” was a condition that excluded products other than iced coffee from the scope of the license grant absent mutual approval, which Grenade Beverage had not obtained for ground coffee. While this case turned on a close reading of the preposition used in one provision in one particular license agreement, California law governs many licensing agreements, so the potential impact of the general holding is broader. This should serve as a strong reminder to those in the licensing field that precise language matters. Grumpy Cat Limited and Grenade Beverage may not have intended to accord product definitional significance to the choice of the word “in” instead of “to.” But that word selection persuaded the court that the parties’ mutual intention was clear from the “four corners” of the agreement, when in fact it might not have reflected Grenade Beverage’s true desire and understanding. As it turns out, the risk of utilizing one preposition instead of another cost Grenade Beverage over $700,000. As of June 25, Grumpy Cat Limited filed a motion for an award of approximately $320,000 in attorneys’ fees based on their successful lawsuit against Grenade Beverage. The TCMA will continue to update you on any significant developments in the case.

The organization tasked with managing the Internet’s domain names is struggling to come to terms with Europe’s new data privacy law.  On June 18, 2018, the Internet Corporation for Assigned Names and Numbers (“ICANN”) published for discussion the draft Framework Elements for a Unified Access Model for Continued Access to Full WHOIS Data.  The Framework hopes to answer the question of how ICANN and its contracting parties can legally provide third parties with access to non-public data about the people and businesses behind registered domain names.  That access, provided via ICANN’s WHOIS platform, is vital for intellectual property rights holders and trademark lawyers, not to mention law enforcement cybercrime investigations and countless others.  The rub, however, is that the European Union’s General Data Protection Regulation imposes a number of limitations on data collection and access. ICANN’s Framework hopes to navigate those limitations.  The Framework proposes a tiered-access model, wherein prospective users must apply for accreditation from government bodies before gaining access to full WHOIS data, which includes personal, private data. The Framework leaves open for discussion whether accreditation should permit total access to WHOIS data, or whether the credentialed user should be given access to limited data fields pertaining to the user’s stated purpose.  The Framework makes additional proposals towards responsible data management, such as requiring credentialed users and registrants to agree to specific codes of conduct that would limit data use based on their role. Still, ICANN’s Framework faces an uphill battle.  The Framework includes several tough-to-swallow proposals, and seeks cooperation from entities who have already expressed reluctance to participate.  For example, ICANN wants registrars—those entities who manage the reservation of domain names for ICANN—to log every single WHOIS search and make those logs available to ICANN.  The Framework also contemplates fees for accreditation and, thereafter, additional fees for access to private data.  And ICANN wants members of the European Economic Area’s Governmental Advisory Committee to assist in the accreditation process.  That Committee however, already stated in March that it “does not envision an operational role in designing and implementing the proposed accreditation programs.” Questions about ICANN’s Framework proposal are not the only challenges facing the organization’s WHOIS platform.  On May 25, 2018, the day GDPR took effect, ICANN filed a legal action against one of its registrars in Germany.  ICANN insisted the registrar was required to collect full, or “thick,” WHOIS data and transfer that data to a specified registry database.  The registrar, however, argued that most of the data was unnecessarily duplicative and therefore the registrar would be violating GDPR’s requirement that it collect and process as little personal data as necessary.  The German court rejected ICANN’s request for an order requiring the registrar to collect and transfer that data, although ICANN has several opportunities to appeal that decision. ICANN faces pressure to manage the Internet’s domain names in a manner that allows businesses to defend their websites and law enforcement to investigate cybercrimes.   It also must comply with the GDPR and responsibly manage the personal, private data with which it is entrusted.  The proposed Framework works towards meeting those dual objectives, but must overcome several hurdles along the way.

Under U.S. Copyright Law, copyright protection affixes to “original works of authorship fixed in any tangible medium of expression.”  While copyright registration is not required to claim copyright rights, Section 411(a) of the Copyright Act requires registration prior to commencement of a federal copyright lawsuit.  The registration requirement has not been interpreted consistently across the federal circuit courts. We have previously reported about the Eleventh Circuit’s decision in Fourth Estate Public Corporation v. Wall-Street.com, LLC.  There, the court adopted the so-called “registration approach,” which means that a plaintiff must be in possession of a registration certificate issued by the United States Copyright Office before bringing suit.  Accordingly, the Eleventh Circuit dismissed the plaintiff’s claims because it had not registered the works at issue before it filed its lawsuit. In addition to the Eleventh Circuit, the Tenth Circuit is on record as adhering to the “registration approach.” Other circuit courts, such as the Fifth Circuit and Ninth Circuit, have followed the “application approach,” which means that a plaintiff must only have filed its application for copyright registration with the Copyright Office. The remaining circuit courts have either not yet adopted a position or have not been consistent in interpreting the meaning of “registration” under Section 411 of the Copyright Act. The Copyright Office, in its amicus brief to the Supreme Court, has backed the registration approach, stating that the “text, structure, and history of the Copyright Act confirm that the Register [of Copyrights] must have acted on an application for copyright registration—either by approving or refusing registration—before the copyright owner may institute a copyright-infringement suit.”  The Copyright Office further states that “registration” must be read as meaning official recording of an accepted copyright claim and that following the application approach renders portions of Section 411(a) superfluous. On June 28, 2018, the United States Supreme Court agreed to take up the issue by granting review of the Fourth Estate case. For what it’s worth, the Supreme Court may have already signaled its position on the issue in the “Raging Bull” decision a few years ago, stating: “Although registration is “permissive,” both the certificate and the original work must be on file with the Copyright Office before a copyright owner can sue for infringement.”  (emphasis added) Here at The TMCA, we will keep you apprised of all meaningful developments in this important copyright case.

Social media is an important marketing channel for many organisations. It is also a convenient way by which marketers can learn about customers, through data collected when they use social media channels. A recent case before the Court of Justice of the EU (“CJEU”) highlights the potential liability of account holders for the data collection activities carried out by platform operators. Even though the case was decided on the basis of the old Directive, it may indicate the direction of things to come under GDPR and the risks arising to organisations and businesses that use social media to market themselves. The case was brought by Unabhängiges Landeszentrum für Datenschutz Schleswig-Holstein, the state data protection regulator in Schleswig-Holstein, one of the states of the German Federation.  The regulator (“ULD”) ordered a German educational services provider (Wirtschaftsakademie Schleswig-Holstein GmbH or “Wirtschafts Academy”) to deactivate its social media account. According to the case report, the platform operator collected data from users using cookies that remained active for two years. The reference from the German court indicated that “neither Wirtschaftsakademie nor [the operator of the platform] notified [users of] the storage and functioning of the cookie or the subsequent processing of the data, at least during the material period for the main proceedings”. The questions that were brought before the CJEU were: (a) whether it was appropriate for ULD to make an order against Wirtschafts Academy, given that the data collection was undertaken by the platform operator, not the account holder, and (b) whether ULD had jurisdiction over the platform operator, given that the data collection was undertaken by an entity in Ireland, not by a German undertaking. The CJEU answered both questions positively. The decision points to a broad approach to questions of jurisdiction across territories and towards liability across different parties in the supply chain. In regard to whether it was appropriate to issue an order against Wirtschafts Academy (effectively, whether the account holder was liable to the data collection activity) the question turned on whether it was to be treated as a “joint controller” of the data, alongside the platform operator. Those already initiated in the language of GDPR would be familiar with the dichotomy between “data controllers” and “data processors”. The distinction proved critical, for example, when proceedings were brought against Google Spain some years ago where a person asserted his ‘right to be forgotten’ seeking an order against Google to block links on its search engine to some old articles published about the individual. The EU court in that case rejected Google’s defence that it was a ‘mere processor’ and therefore not required to comply with such requests. The CJEU held that Google was a data controller in relation to the listings produced by its search engine and as such is required by law to respect a person’s request for the deletion of their data (if the request is based on valid grounds). In the case of Wirtschafts Academy, the CJEU held that the account holder was “joint controller” of the data collected by the platform operator. The Court relied on the papers before it and found that the placing of cookies and collection of data from users was performed by the platform operator across its platform (making it a “controller” of the data). However, it explained, Wirtschafts Academy and others who set up their own pages on the social media platform give the operator “the opportunity to place cookies on the computer or other device of a person visiting its fan page” and further, according to the findings of the referring court, the administrator can define certain parameters when creating the pages “depending inter alia on the target audience and the objectives of managing and promoting its activities” which, the Court stated, “has an influence on the processing of personal data for the purpose of producing statistics based on visits to the fan page”. The Court also relied on the fact that the platform operator’s offering included data analytics and that the account holder was able to request certain user data from the platform operator. Even though no investigation was carried out as to whether any such requests were in fact made by Wirtschafts Academy, the Court found the above sufficient to treat Wirtschafts Academy as a joint controller of the data collected from users. The ruling suggests that a party can become exposed to liability under GDPR due to the processing of data by someone else, for instance in the context of service relationships between them, at least where there is some degree of involvement with the data. Specifically, it establishes that in many cases account holders on social media services can potentially be held jointly liable to violations of GDPR by the platform operators  in relation to data collected from users on the account holder’s pages, for instance because their account settings impact on the way data is collected from users who visit their pages. It is difficult to predict in what other circumstances the court might reach this result, for example, if a customer is given access to data collected by a platform provider, could it be treated as a joint controller of the data? If so, would it be liable if the data was collected by the platform operator in violation of the law? It is also unclear to what extent “joint controllers” are liable to each other’s actions. The Data Protection Directive, which was the basis for the decision in the Wirtschafts Academy case, barely mentions the existence of joint controllers (the definition of “controller” in the Directive mentioned that there could be one controller or several joint controllers, but there were no provisions to allocate liabilities between them). Article 26 GDPR is much more detailed. It requires joint controllers to enter into an agreement between them in relation to their duties to data subjects and to advise data subjects of the essence of the agreement. It also provides that data subjects can exercise their legal rights against each of the joint controllers, regardless of the mutual arrangements between them. The decision in the Wirtschafts Academy case confirms that under the Directive an enforcement order could be addressed to a joint controller in relation to data collection activities by another controller. A similar approach could be taken under GDPR. This does not necessarily mean that a joint controller is jointly liable for violations of the law by the other. The second issue considered by the CJEU concerned territorial jurisdiction. Although the question focused on issues of jurisdiction as between different EU member states, the broad approach adopted by the Court could reflect on its approach in the future to similar issues arising in relation to the international jurisdiction of GDPR. The court in Wirtschafts Academy examined the provisions of Art. 4 of the Directive which defined the territorial jurisdiction of each EU Member State on issues of data protection. Each Member State under the Directive had jurisdiction over the data processing activities carried out “in the context of the activities of an establishment” in that Member State. The Court held that ULD, the German regulator, had jurisdiction over the matter because the data collection undertaken by an entity in Ireland had a sufficient nexus to the commercial activities of its affiliates in Germany (essentially, selling advertising to German customers). GDPR defines its own international scope mainly by reference to the processing of the data being undertaken “in the context of the activities of an establishment of the controller or the processor” in the EU. The decision in Wirtschafts Academy suggests that even if the collection and processing of data are carried out entirely outside the EU, the activities could still be held to fall within the jurisdiction of GDPR if there is an EU undertaking that is sufficiently related to the activity. It should be borne in mind that GDPR jurisdiction can also be established on the basis that the data is processed in connection with the offering of goods or services to individuals in the EU or collected in the course of monitoring their behaviour.

Stop us if you’ve heard this one—Conan the Barbarian and a Romulan walk into the Krusty Krab.  SpongeBob looks at Conan and says, “I know you, but where’s he from?”  In the latest chapter of a case we’ve blogged about before, the U.S. Court of Appeals for the Fifth Circuit upheld a lower court decision that “The Krusty Krab” was a source-identifying mark, like “Conan the Barbarian” (and not like “Romulan”). The Fifth Circuit’s decision is the latest installment (and probably the series finale) of a courtroom drama starring media conglomerate Viacom International and IJR Capital Investments.  In 2014, IJR decided to open Cajun seafood restaurants called “The Krusty Krab” in California and Texas.  Viacom filed suit in Texas federal court after IJR pressed forward with its plans despite Viacom’s cease and desist demand.  The Texas court granted Viacom summary judgment on its common law trademark infringement and Lanham Act unfair competition claims, and IJR appealed. The Fifth Circuit began its analysis by weighing whether Viacom actually uses The Krusty Krab to identify the source of a good or service.  The threshold question was whether specific elements within a television show—as opposed to the show’s title—can receive trademark protection.  The court decided they could because extending trademark protection to these elements would protect the goodwill of the elements’ owners and protect consumers from confusion. Still, not all elements of a television show are trademarks.  The appropriate focus is on whether the element of the show creates a distinct commercial impression separate from the show itself.  The court cited decisions holding Conan the Barbarian, The General Lee, and The Daily Planet to be protectable marks and held that trademark protection exists when elements are recognizable of themselves as an indication of the origin of goods or services.  When elements have a “central” or “critical” role in, are “integral” to, or are a “staple” of a television show, those elements can be trademarks. The court contrasted these marks with the word Romulan, which the TTAB found not to be a trademark because there was no evidence that the owner of Star Trek used the word to distinguish its services.  Although the Romulan mark was featured in television episodes, movies, and licensed products, it was “only” used “from time to time” and so did not attain trademark status.  (The Court was quick to acknowledge that “Star Trek fans may vehemently disagree with this analysis as a factual matter.”) The court cited several facts to conclude that The Krusty Krab was a source identifier.  It described how The Krusty Krab is integral to SpongeBob SquarePants because it appears in more than 80% of episodes and in the film and musical adaptations of the show, and is featured online, in video games, and in licensed merchandise.  Viacom had extensively licensed The Krusty Krab mark and the mark appears on a variety of consumer products, from stickers and apparel to games and playsets.  The mark is featured prominently on these products and helps identify the goods.  Viacom has reaped millions from this licensing.  From this, the court concluded The Krusty Krab was a source identifier because it created “immediate recognition” of the source for goods or services. Where does this leave entrepreneurs hoping to boost their ventures with allusions to popular culture?  They might get away with copying lesser known elements of entertainment enterprises.  But it would probably be wise to steer clear of a show’s better-known elements, particularly if the show’s owner has separately licensed that element.  Otherwise, entrepreneurs may find themselves in court claiming to be Romulans but found to be (Conan the) Barbarians.

On 21 June 2018, the legal affairs committee of the EU Parliament approved the much debated Copyright In the Digital Single Market Directive. It is a short step now before the Parliament itself approves the directive, which will then need to be implemented into the domestic laws of EU member states. The Directive aims to bring copyright law in Europe up to date in respect of the digital use and distribution of copyright materials. The directive covers different issues, including introducing some new (limited) exceptions to copyright protection to allow greater freedom for research organisations to engage in text and data mining (albeit only for scientific purposes), to allow use of digital content for teaching and illustration purposes and to allow reproduction by “cultural heritage institutions” for preservation purposes. Most of the attention, however, and a fair amount of heated debate, have been directed at Article 13 of the Directive, which introduces changes in the responsibility of online platforms in relation to infringing content posted by users. There has been widespread alarm that this proposal will have the effect of censoring the internet. Such concerns may be exaggerated, but the provision will certainly shift the balance in favour of authors and rightholders and will place a more direct burden on operators of online platforms that host large amounts of user-contributed content to ensure that content that infringes copyright is blocked. The digital industry objects to these changes, which are designed to reduce online piracy and prevent online operators from passively sharing the spoils of the distribution of pirated materials on their platforms (mainly through advertising revenue) and to force them to  make an effort to clean their stables. At the same time the changes are not as far reaching as some would suggest. The current law (not only in the EU but also in the US, under the Digital Millennium Copyright Act) requires online platforms to act “expeditiously” to “remove or disable access” to infringing content when alerted of any suspected infringements by rightholders. To meet this requirement, online platforms already have in place extensive screening technologies that regularly block or remove infringing content from the platforms. The change in the law proposed in the EU Directive would only slightly shift the balance of power in favour of authors and publishers to ensure that the anti-piracy systems used by online operators are effective. Article 13 does not impose a general obligation to screen platforms for infringing content. It requires relevant operators to “take measures” to prevent infringements where they have agreements with rightholders or where rightholders identify specific works they wish the platform operators to police. Accordingly, platform operators will still only be required to take action at the rightholders’ initiative. Over time, it is possible that this change in law might lead to a reduction in the level of availability of unlicensed (or pirated) copyright content online. At the end of the day, however, the manner and extent to which infringements are policed on the internet will depend (as it depends today) on platform operators and rightholders. The two sides have been fighting over the issue for many years. Both know that there can be no perfect solution. Rightholders cannot expect all unauthorised materials to disappear. They also know that excessive protection could harm creators and publishers as well as outright pirates. Online platforms on the other hand know that they cannot act with impunity in providing a marketplace for unlawful content. There is also an area of uncertainty as to what amounts to infringement and what type of content that uses copyright material might enjoy the protection of the law. Clearly any system for policing infringements would need to take account of these issues. Hopefully, the new law might contribute to putting a little order into the online systems. It is unlikely to mark the end of free speech in the digital sphere.

On June 13th, we hosted a “Meet the Regulators Breakfast” with Clark Russell, Deputy Bureau Chief of the Bureau of Internet and Technology of the NY State Office of the Attorney General, along with Dorsey’s privacy lawyer Bob Cattanach, which was sponsored by the Association of National Advertisers.  For those of you who missed out on this event, never fear—the TMCA has you covered with a recap of a few of the highlights. Operation Child Tracker: The Children's Online Privacy Protection Act (COPPA) first went into effect in 2000 and is designed to protect the online privacy of children under 13.  COPPA doesn’t just cover operators whose websites or online services directly collect personal information from children—it also covers those whose sites and services integrate third party services (such as plug-ins or advertising networks) that collect personal information from underage visitors.  And COPPA imposes strict liability on violators, so even if operators aren’t aware that third party advertisers have installed tracking technologies that violate COPPA, the operators themselves are still liable.  Deputy Bureau Chief Russell talked about Operation Child Tracker, a two-year, first-of-its-kind investigation by the AG’s office, which ended in a number of settlements totaling $835,000 with some of the nation’s most popular kids’ toy and media companies whose websites were home to third-party technologies that enabled the tracking of children’s online activity in violation of COPPA. Data Breaches:  We couldn’t have breakfast with the Deputy Bureau Chief of the Bureau of Internet and Technology without discussing data breaches!  Deputy Bureau Chief Russell led us through the AG’s 2017 report documenting the record number of data breach notices filed with the NY A.G.’s office in 2017.  There were a total of 1,583 data breaches reported, exposing the personal records of 9.2 million New Yorkers, which is four times the number of those reported impacted in 2016. The report shows that in 2017, employee negligence (which encompasses inadvertent exposure of records, insider wrongdoing, and the loss of a device or media) accounted for 25% of reported breaches. Operation Clean Turf: Deputy Bureau Chief Russell also discussed Operation Clean Turf and the AG’s recent investigation into fake social media accounts.  Operation Clean Turf was a year-long undercover investigation into the reputation management industry, astroturfing (i.e., masking the true sponsor of a message to make it appear as though it originates from and is supported by a grassroots participant) and false endorsements.  Operation Clean Turf specifically targeted the widespread practice of companies being paid to generate fake consumer reviews on websites such as Yelp and Google Local.  During the course of the investigation, representatives from the AG’s office, posing as an independent frozen yogurt shop in Brooklyn, called various search engine optimization (SEO) companies to request help with negative reviews of the yogurt shop on consumer-review websites.  Many of the SEO companies offered to write fake positive reviews and post them on consumer-review websites as part of their standard reputation management services.  These companies use advanced techniques to hide their identities and bypass consumer-review websites’ filtering and fake review detection, even going so far as to pay freelancers in the Philippines, Bangladesh and Eastern Europe $1 to $10 per fake review posted.  Operation Clean Turf resulted in 19 companies paying more than $350,000 in penalties and agreeing to cease their practice of writing fake online reviews for businesses. But fake reviews aren’t the only issue: companies are also using techniques to encourage would-be positive reviewers to post reviews, while filtering would-be negative reviewers away from review sites.  Deputy Bureau Chief Russell pointed to one example in which a pre-Uber New York car service business asked users whether they had a positive or negative experience with the business.  Those that clicked a button indicating they had a positive experience were redirected to a consumer review website, where they were offered a $10 discount on a future ride to post a positive review. Those that clicked the button indicating they had a negative experience were redirected to the business’ website where they could provide direct feedback to the company, and were not asked to write a review.  As Deputy Bureau Chief Russell pointed out, incentivizing customers to provide favorable reviews without disclosing such payments is a form of false advertising and a deceptive trade practice that violates New York Executive Law § 63(12), New York General Business Law §§ 349 and 350, and the FTC Endorsement Guidelines. In an era where consumers increasingly rely on consumer review sites, it is worrying to think that we may not be able to trust the authenticity of every review that we see—and, as companies adopt increasingly advanced techniques, we may not even be able to distinguish the genuine reviews from fake or paid ones.  Thankfully, the AG’s office is focused on this type of online consumer protection and continues to investigate such deceptive practices as a consumer protection measure.

This post is about Hamilton. Well, sort of. It’s actually about copyright law. But keep reading! Most people who have attempted to buy a highly sought-after ticket—like, say, a ticket for Hamilton—have experienced the frustration of being beaten to the punch by armies of bots that purchase large quantities of tickets only to resell them at a profit on the secondary market. In fact, Ticketmaster estimates that for some shows 30-40% of all Hamilton tickets are purchased by such bots. Sellers have struggled with how best to respond. Ticketmaster L.L.C. v. Prestige Entm’t, Inc., a recent federal court decision out of the Central District of California, suggests that the Copyright Act may prove to be a useful tool to curb the practice. What’d I Miss? Ticketmaster accused several companies, individuals, and unnamed “Doe” defendants of—among other things—copyright infringement. The district court considered defendants’ motion to dismiss four categories of claims brought by Ticketmaster in its First Amended Complaint: (a) three claims under the Copyright Act, (b) Digital Millennium Copyright Act, (c) Computer Fraud and Abuse Act, and (d) California Computer Data Access and Fraud Act. We focus here only on Ticketmaster’s copyright claims. In short, Ticketmaster alleged that two of the Doe defendants (the “Bot Developers”), in the course of developing the bots later used by the other named defendants to purchase tickets, downloaded and stored the pages and code associated with Ticketmaster’s website and mobile app. Per Ticketmaster, this use of its code violated the Copyright Act. Taking a step back, this wasn’t Ticketmaster’s first attempt to use the Copyright Act to stop bots from purchasing tickets. The court had previously granted defendants’ motion to dismiss Ticketmaster’s copyright claims as pled in its original Complaint. Ticketmaster’s initial copyright infringement theory relied on its allegation that defendants’ use of bots to purchase tickets violated several enumerated conditions in Ticketmaster’s Terms of Use (“TOU”), and thus caused defendants’ continued use of Ticketmaster’s platform to infringe Ticketmaster’s copyrights. Although rejected by the court, the copyright claims in Ticketmaster’s original Complaint had some support in law. In the Ninth Circuit, a copyright owner who grants a nonexclusive, limited license ordinarily waives the right to sue licensees for copyright infringement, and it may sue only for breach of contract. If the licensee acts outside the scope of the license, however, the licensor may sue for copyright infringement. A claim for copyright infringement can only be made where the licensee’s actions (1) exceed the license’s scope (2) in a manner that implicates one of the licensor’s exclusive statutory rights. For a licensee’s violation of a contract to constitute copyright infringement, there must also be a nexus between the breached condition and the licensor’s exclusive rights. Otherwise, a copyright holder could designate any disfavored conduct by the licensee as copyright infringement. Ticketmaster’s original copyright claim thus hinged on the distinction between conditions and covenants—i.e., contractual terms that limit a license’s scope are conditions, while all other license terms are covenants. Because breaches of conditions can result in copyright infringement, while breaches of covenants are only actionable under contract law, the court’s finding that Ticketmaster’s terms were covenants and not conditions doomed its copyright claim. Indeed, the court Said No to Ticketmaster’s original Complaint by dismissing it without leave to amend to the extent that Ticketmaster’s copyright claim was based on defendants’ use of bots to exceed the TOU limitations on the number of page refreshes or ticket requests, or to place a large load on Ticketmaster’s servers. Ticketmaster wasn’t Helpless and found a way to Stay Alive by pleading its copyright claim in a way that went beyond merely alleging that defendants’ unauthorized use of its platform violated its TOU. Copyright Claims Will Be Back The court dismissed Ticketmaster’s original Complaint because it ultimately traced its copyright claims to defendants’ alleged violations of Ticketmaster’s TOU. In contrast, the First Amended Complaint relies on a more complex set of allegations. Namely, Ticketmaster alleges direct copyright infringement against the Bot Developers who built the programs used to purchase tickets, and secondary infringement against the other defendants who induced the Bot Developers’ infringing actions. Are Websites Protectable Under the Copyright Act? A threshold question addressed by the court was whether Ticketmaster’s website is protectable under the Copyright Act. The court found it is, because—like computer software generally—websites contain three distinct layers of content: literal elements (e.g., source code), individual non-literal elements (e.g., screen displays), and dynamic non-literal elements (e.g., interactive elements generated specifically for a user in real-time). Each content layer is subject to the Copyright Act. Direct Infringement The act of downloading and storing the pages and code of a website qualifies as making a “copy” under the Copyright Act. In its First Amended Complaint, Ticketmaster alleges that the Bot Developers have directly infringed Ticketmaster’s reproduction rights by doing just that. The court found Ticketmaster met its burden despite failing to allege with particularity details related to defendants’ actual copying of its code. Typically, in the absence of direct evidence it is sufficient for a copyright plaintiff to allege that (1) the defendant had access to the plaintiff’s work prior to the alleged copying and (2) the defendant’s work and the plaintiff’s work are substantially similar. The twist in Ticketmaster’s complaint is a similar but distinct formulation: Ticketmaster alleges that (1) the Bot Developers developed bots adept at purchasing large quantities of tickets, and (2) Ticketmaster’s website and mobile app are complex platforms that each contain several layers of protection and security measures. Ticketmaster’s claim, at the pleading stage, thus depended on its assertion that developing such capable bots would necessarily require deep study of Ticketmaster’s website and source code, which in turn means that the Bot Developers must have downloaded and stored literal or non-literal elements of Ticketmaster’s website and mobile app. The court found Ticketmaster’s theory about the compatibility of defendants’ bots with its platforms to be a “compelling variation” on the substantial similarity test for circumstantial proof of copyright infringement. Secondary Infringement To bring a copyright claim against the remaining defendants, Ticketmaster accuses them of secondary copyright infringement by inducing, causing, or materially contributing to the Bot Developers’ creation of bots, with knowledge that the Bot Developers would have to infringe Ticketmaster’s copyrights to create the bots. Ticketmaster alleges that the Bot Developers created the bots, and that the other defendants then used those bots to purchase large quantities of tickets. The court found these facts sufficient to indicate a relationship between defendants and the Bot Developers of mutual benefit to both parties, and found it reasonable to infer that defendants contributed to the Bot Developers’ infringement as part of this relationship. The court found that Ticketmaster has stated a claim for defendants’ contributory infringement based on the Bot Developers’ direct infringement. License Defense The court rejected defendants’ license defense based on the argument that Ticketmaster’s TOU provides users a license to copy Ticketmaster’s website. This reinforces the value of Ticketmaster’s creative approach to its copyright claim. Recall that in granting defendants’ motion to dismiss Ticketmaster’s original Complaint, the court devoted considerable attention to whether the provisions of Ticketmaster’s TOU were conditions or covenants. In seeking to dismiss the First Amended Complaint, defendants reiterated that, under the court’s first order, the provisions of the TOU are covenants and that the violation of a covenant gives rise only to a contract claim. The court found that this renewed argument misconstrued the court’s earlier order, the relevant Ninth Circuit authority, and the underlying copyright laws—i.e., a violation of a provision of a TOU is copyright infringement if the violation implicates one of the copyright holder’s exclusive rights, regardless of whether the violated provision is a covenant or a condition. Satisfied One reason Ticketmaster’s First Amended Complaint survived is that it avoided the public policy concerns raised in its original Complaint. The court explained that grounding copyright claims in simple breaches of contract could allow software copyright holders to designate any disfavored conduct during software use as copyright infringement. But the court found this concern is not implicated by Ticketmaster’s First Amended Complaint because Ticketmaster alleges direct infringement by a small number of sophisticated software developers and marketers and thus “will not expose masses of Ticketmaster users to copyright liability merely because they violated Ticketmaster’s own house rules.” What Comes Next? Ticketmaster L.L.C. v. Prestige Entm’t, Inc. shows the Copyright Act’s potential to combat bot-driven online purchases of tickets. More generally, it affirms that—especially in unsettled areas of law—a thoughtfully pled complaint can overcome unfavorable precedent. The TMCA will continue to monitor the case and will report again on significant developments.

Even if your brand is sitting on the sidelines like the U.S. Men’s Team in the World Cup over the next month, there is no time like the present to consider the risks involved in ambush marketing because Wimbledon, the X Games, the U.S. Open, the World Series and even the 2019 Women’s World Cup (fingers crossed for the US. Team!) are just around the corner.  As we’ve blogged about before (a few times), large sporting events are great opportunities for brands to produce creative campaigns or promotions, but advertisers need to be aware of the trademark, copyright and right of publicity risks that routinely come up for these types of events year after year.  If you are interested in reading more about these risks, checkout my article on the Little Black Book (LBBonline), a place to celebrate global creativity in advertising, across all parts of the business and from all corners of the world - - Don’t Get Caught Offside With Your World Cup Marketing Promotions.

On November 4, 2017, the Amended Anti-Unfair Competition Law was passed by the Standing Committee of the Chinese People’s Congress and promulgated on the same day. The new law became effective on January 1, 2018. The new law has brought some significant changes relevant to trademark lawyers, including amendments to the definitions of acts to mislead or confuse and acts of false or misleading commercial representations.  The TMCA presents highlights of these changes: Acts to mislead or confuse (Article 6 of the new law) – This new provision, which replaces Article 5 of the old law, gives a more detailed definition of acts of unfair competition that intend to mislead or confuse others into believing the existence of an association/connection between goods/services, similar to the concept of “passing off” under common law.  Specifically, Unauthorized use of trade indicia such as a product/service name, packaging or trade dress that is identical or similar to that of another party which has gained a certain degree of influence. The word “famous” used under the old law has been replaced by the phrase “certain degree of influence, which may indicate a lower burden on IP rights owners to prove the reputation of their products and services; Unauthorized use of another’s enterprise name (including an abbreviation or trade name), another’s organization name (including an abbreviation), natural name (including a pseudonym/pen name, stage name, corresponding Chinese/English name, etc.) which has gained a certain degree of influence. This new definition identifies more specific types of names to be protected, as compared with the old law, which only mentioned the enterprise name and natural name; Unauthorized use of the distinctive part of another’s domain name, website name or webpage which has gained a certain degree of influence. This is a new provision under the new law. Acts of counterfeiting are excluded from Article 6 since it should be and has been governed by the PRC Trademark Law; Acts of making various false representations as to the quality, certification, place of origin, etc. of goods or services are excluded from Article 6 and incorporated into new Article 8 of the new law (see 5 below); A “catch-all” provision is added to Article 6 of the new law to encompass other “acts to mislead or confuse” that do not fall within the above specific provisions. Acts of false or misleading commercial representations as to the use, function, quality, sales, customer feedback and awards, etc. of goods/services and acts of creating false transactions to aid others’ false or misleading commercial representations (Article 8 of the new law). The first clause replaces the corresponding part of Article 9 of the old law as well as “acts of false representations” under Article 5 of the old law (see 3 above). It removes the reference of “by way of advertisement or other means” under the old law by which the false or misleading commercial representation had to be made. The second clause is new, and aims to tackle acts of unfair competition such as click farming. In addition to the changes highlighted above, the new law also introduces changes to: (a) prohibit business operators from abusing their technology to commit acts of unfair competition by interfering with or sabotaging the normal operations of internet sites that are legally providing goods or services by such acts as inserting a link or forcing a URL redirection in an online product or service; misleading or forcing users to shut down or uninstall an online product or service; or creating incompatibility with an online product or service in bad faith (Article 12 of the new law); (b) give more powers to the relevant governmental bodies to investigate unfair competition complaints; and (c) increase the maximum amount of statutory damages that can be awarded by a Chinese court to RMB 3M (~US$460K) .  The amount of administrative fines or penalties that can be imposed under the new law is also significantly higher than under the old law.

The Federal Circuit’s ongoing effort to implement TC Heartland—the Supreme Court’s landmark 2017 patent venue decision—took another step forward in May with In re BigCommerce, Inc., which vacated and remanded two decisions out of the Eastern District of Texas after defendants sought mandamus relief following denial of their motions to dismiss and transfer for improper venue. At issue were two narrow and related questions: Does a domestic corporation incorporated in a state having multiple judicial districts “reside” for purposes of the patent-specific venue statute, 28 U.S,C, § 1400(b), in each and every judicial district in that state? And, if not, in which district does a domestic corporation reside? The appellate court left no room for doubt when it invoked the statute’s “language, history, purpose, and precedent” and held that for purposes of determining venue in a state having multiple judicial districts, a corporate defendant shall be considered to “reside” only in the single judicial district within that state where it maintains a principal place of business. Alternatively, if the corporation does not maintain its principal place of business within the state in which it is incorporated, then venue is proper in the judicial district in which its registered office is located. The laser-focus of the Federal Circuit’s decision belies the impact years of contrary interpretation of the patent venue statute have had on U.S. patent litigation. For example, before TC Heartland, the number of patent suits filed in the (very rural) Eastern District of Texas famously outstripped that of any other venue in the U.S., despite being sparsely populated and far from most major technology hubs. According to Lex Machina, in 2015 approximately 45% of new patent cases were filed in the Eastern District of Texas. In fact, the Eastern District’s reputation for being the preferred venue for patent plaintiffs achieved sufficient notoriety to enter popular culture. See e.g., “When Patents Attack!” This American Life, July 22, 2011. The Eastern District’s run as the go-to venue for patent litigants was largely made possible by an expansive and—per TC Heartland—incorrect reading of the patent venue statute, which allowed plaintiffs to claim venue was proper in any district in which defendants were subject to personal jurisdiction. Following TC Heartland, which limited venue to districts in which the defendant resides or has committed an infringing act and has a regular and established place of business, the share of new patent cases in the Eastern District of Texas has dropped to approximately 13%. As a practical matter, In re BigCommerce, Inc. resolves ambiguity as to which district in a multi-district state is proper for patent litigation. More broadly, the decision is yet another measure of TC Heartland’s ground-shifting impact on patent litigation. A harder question is whether In re BigCommerce, Inc. will help spur (pun intended) changes to years of unique local practice in the Eastern District of Texas. On May 29, 2018, Judge Gilstrap followed other recent Federal Circuit precedent to find that the venue statute did not compel transfer. That said, he nonetheless transferred the case based on convenience factors. Although it’s too early to say which way the Eastern District of Texas is heading, this recent opinion from one of its most closely watched patent judges tentatively points in a new direction.

In light of ongoing litigation over an applicant’s effort to register the mark FUCT for wearing apparel, the USPTO recently issued an Examination Guide concerning the review of trademark applications under Section 2(a) of the Lanham Act, which bars registration of marks that consist of or comprise immoral or scandalous matter. The constitutionality of this “scandalousness” provision was put into play after the United States Supreme Court ruled in June 2017 in Matal v. Tam that the statutory bar on registering “disparaging” marks constituted an improper discriminatory “viewpoint” restriction under the First Amendment. Tam established the right of a rock band with Asian-American members to obtain a federal trademark registration for the name The Slants, which the band contended should be viewed not as a derogatory name for Asian-Americans, but rather as a term “reclaimed” by them to “drain its denigrating force.” When Tam was decided, many trademark experts predicted that the scandalousness prohibition in Section 2(a) would likely suffer the same fate as the disparagement provision. That indeed occurred on the circuit court level in December 2017, when the Court of Appeals for the Federal Circuit held in In re Brunetti that the scandalousness provision, relied on by the USPTO to refuse registration of the FUCT mark, violates the First Amendment. We blogged about the Brunetti decision late last year, in which the court analyzed whether immoral and scandalous marks are different from disparaging marks because the concept of disparagement necessarily involves a viewpoint analysis, whereas the prohibition on immoral and scandalous marks could be viewed as a viewpoint neutral restriction on commercial speech. The majority opinion in Brunetti held that the scandalousness provision (interpreted to include vulgar terms) “impermissibly discriminates” based on content in violation of the First Amendment. One judge on the appellate panel issued a concurring opinion that would have upheld the scandalouness provision of Section 2(a) for marks that are obscene and therefore not protected under the First Amendment. Rehearing was denied in Brunetti on April 12, 2018, and the period in which to petition for a writ of certiorari expires on July 11, 2018. In this procedural context, the USPTO Examination Guide advises that in accordance with its “broad discretion to manage its own docket,” the USPTO will continue to examine applications for compliance with the scandalousness provision while the constitutionality of the provision remains subject to potential U.S. Supreme Court review. If an examining attorney believes that a mark will violate the scandalousness provision, an advisory refusal will be issued, in addition to any other issues that may be raised by the application. If the asserted scandalousness is the only issue barring registration, the examining attorney will suspend action on the application. The suspension of the application will remain in place “until either: (a) the time for filing a petition for certiorari in Brunetti (including any extensions granted ) expires, with no petition being filed; of (b) if a petition for certiorari is filed, the later of (1) denial of certiorari or (2) termination of U.S. Supreme Court proceedings in the case.” So stay tuned for developments after July 11, 2018!

If you didn’t make it to the 2018 Annual Meeting of the International Trademark Association in Seattle, or if you were there but were out enjoying the spectacular weather or spending time with colleagues and friends, the Dorsey trademark team is here to provide  a brief overview of some interesting seminars we attended and tidbits scooped up during the Meeting: Federal Registrations for Cannabis: In a lively debate, panelists Shabnam Malek (an attorney in the cannabis industry) and Robert A. Mikos (a professor at Vanderbilt Law School) discussed whether the U.S. Patent and Trademark Office should grant federal trademark registrations for cannabis brands.  The PTO’s current position is that federal registrations may not be granted for substances or activities illegal under federal law because they cannot be used lawfully in commerce.  In favor of federal registration, Malek contended that the wording “lawful use in commerce” in the federal trademark law is at least ambiguous and that, under the Administrative Procedures Act, the PTO should exercise its power to interpret the wording to encompass use that is lawful under state law, namely, the sale of cannabis.  She also contends that consumers face serious risks if the same brand is operating in multiple states with different products.  For example, a product with a smaller dosage sold in one state could be sold under the same name in another state with a higher dosage, thereby subjecting consumers to potentially dangerous, or at least different, effects than anticipated.Malek countered that the federal law is not ambiguous and clearly prohibits registration of cannabis while the current state-based system offers enough protection for brands and consumers.  Brands may obtain state trademark registrations where cannabis is legal and labelling requirements in states ensure that consumers understand what is in the product they are purchasing.  Additionally, he worried that granting cannabis registrations would open the door to registrations for other types of federally illegal drugs, such as meth.After a final poll of the room, it was clear that most in the audience favored granting federal registrations for cannabis.  This debate will most certainly continue as more and more states allow the sale of cannabis for medical and recreational purposes and the global market for cannabis, which is expected to hit $57 billion by 2027 according to Forbes, continues to boom.  The TMCA has written on this topic and will continue to follow developments in this industry. Product Placement: While product placement is often thought of as a static one-time and one-brand opportunity (think Reese’s Pieces in E.T.), panelists discussed the ways in which technology has paved the way for new and exciting opportunities.  Using retroactive product placement, it is now possible to seamlessly insert new products into already-existing content.  For example, an older movie poster in the show “How I Met Your Mother” can be digitally altered so that reruns now feature a poster for a 2018 release.  A show or movie can feature different types of cars in otherwise identical scenes in different markets.Social media influencers also remain a top priority for many consumer-facing brands.  Panelists cited statistics estimating that each $1 spent on social media marketing yields approximately $6 in revenue.  And nearly 60% of YouTube subscribers watch an influencer video before making purchases.  The TMCA has posted numerous times on developments in the landscape of influencer advertising. Food For Thought: In a seminar featuring in-house counsel from Amazon, Walmart, General Mills, Restaurant Brands International, and Jelly Belly, some of the largest players in the food industry discussed the challenges of food branding.  One theme for all companies was ensuring consistency of branding across many platforms, especially mobile devices.  Companies need to ensure that branding translates to the smaller screens many consumers are now using to interface with their brands.  In connection with this consistency, the companies discussed the concept of website trade dress and the extent to which the look of a company’s site is entitled to trademark protection.  The short answer: the more distinctive and consistent the better.Another point of concern expressed both by panelists and attendees is their interaction with third-party delivery platforms (e., GrubHub, DoorDash, etc.) and food boxes (i.e., Blue Apron, Plated, etc.) and to what extent these platforms may use a company’s trademark.  Regardless of fair use considerations, most panelists agreed that, at a minimum, contractual control is a crucial component to ensure brand owners have some way to control or limit the way delivery companies use their marks.  This enables companies to retain control over their brands and also ensures that consumers understand the relationship between the parties so that they can appropriately assign expectations (and blame, if necessary). Morality Clauses: In several seminars, panelists reiterated the importance of brand owners including morality clauses in agreements with licensees or promoters. This facilitates a swift exit should a brand wish to sever ties after an embarrassing, illegal, or scandalous action turning public opinion against the licensee or promoter.  With increased scrutiny now facing brands that support individuals or companies falling out of public favor, it is important to have this type of contractual ripcord. The Slants: Rock Stars of the Trademark World and Beyond: Dorsey was proud to present at its reception the talented and U.S. Supreme Court precedent-establishing band The Slants – if you missed their performance, check out their website. We look forward to seeing what happens at next year’s Annual Meeting in Boston (May 18 – 22, 2019) – see you then!

Trademark licensing disputes can present thorny issues at the intersection of contract and trademark law. And when the dispute involves the Trump brand for residential buildings, the adjudication of rights and obligations under a trademark license agreement can become national news. The decision in Residential Committee of the Board of Managers of 200 Riverside Boulevard at Trump Place Condominium v. DJT Holdings LLC was no bed of roses for DJT, as the court held that the 200 Riverside Building was not required to use the Trump name on the façade of the Building. As recounted by the court, the 200 Riverside Building, consisting of 377 residential and four commercial units, was constructed around 1998, at which time the words “Trump Place” were “installed with large brass-finish characters in two locations on the Building’s façade.” In March 2000, Trump and the condominium board of the Building (the “Condo Board”) entered into a royalty-free license agreement, which granted a “nonexclusive, nontransferable right for the Building to use the Identification ‘Trump’ on its façade” in exchange for $1 and “other good and valuable consideration.” In February 2017, the Condo Board conducted a straw poll among residential unit owners, and of the 253 unit owners who responded, 63% favored removal of the Trump signage. A month later, the Condo Board received what the court characterized as a “Threatening Letter” from DJT, stating that removal of the Trump Identifications from the Building “would constitute a flagrant and material breach of the License Agreement.” The Condo Board did not wait around to see if it would be sued, instead commencing an action for declaratory judgment that its License Agreement with DJT did not require the building to use the Trump signage. The Condo Board then moved for summary judgment. The Trump team raised several arguments in response: first, the Condo board lacked standing; second, there was no controversy for the court to decide (at least yet); and third, under the License Agreement, the Condo Board either did not have the right to remove the Trump signage or it did not take the proper steps to do so. The court rejected each of these arguments. DJT contended that standing was lacking because the “full” Condo Board did not vote to authorize the lawsuit. The court easily dispensed with this argument, noting that the two Board seats that did not vote were vacant, and had not voted in Board matters in several years. More importantly, the Condo Board’s rules required a quorum, which it had during the meeting at which the vote occurred. Next, DJT argued that there was no “justiciable controversy,” meaning that there was no dispute for the court to resolve— only a precursor to a dispute. The court rejected this argument, finding that there was in fact a dispute the court could resolve. In particular, DJT argued that there was no dispute yet because the Condo Board had not taken any actual steps to remove the Trump signage on the façade. The court disagreed, as both a factual and legal matter. Factually, the court relied heavily on the “Threatening Letter” asserting that removal of the signage would be a material breach of the License Agreement. The court also noted, ironically, that DJT “complains that [the Condo Board] has not taken the very steps [DJT] threatened it and coerced it not to take.” DJT’s legal argument fared no better, as the court held that the judicial interpretation of the License Agreement would (and ultimately did) resolve the dispute. Specifically, if the court found that the License Agreement prevented the Condo Board from removing the signage, then the Condo Board would not remove it and the dispute would be over. Likewise, if the court found that the License Agreement did not prohibit removal, the Condo Board would do so and the dispute would be resolved. The court then turned to the interpretation of the License Agreement to determine whether removal of the signage was permitted. When the language of a contract is clear, as the court found for the License Agreement, a court must enforce that agreement based on the plain meaning of its terms. When such an agreement is commercial, and negotiated at arm’s length by sophisticated parties—all of which the court found present here—a court is to apply these principles with “even greater force.” Applying these principles, the court’s straightforward analysis turned on the express language of the “very brief, 4-page (including the signature page) License Agreement.” The court agreed with the Condo Board’s argument that there are “no obligations or requirements for the building to carry the name ‘Trump’ on it in perpetuity.” Specifically, Section 1(a) of the license provides that licensor: “… hereby grants to Licensee a nonexclusive, non-assignable, nontransferable right, without the right to grant sublicenses, to use the Identifications, on a royalty-free basis, solely for the purpose of identifying the Building at its above-mentioned location and in advertising, promotional and publicity materials solely with respect to the promotion of the Building and its residential condominium units….” (emphasis added by court). According to the Condo Board, the words “right” and “grant” conferred a permitted right, privilege or favor, not an obligation. DJT argued in opposition that a “whereas” clause in the agreement was intended to memorialize that the Building would be named Trump Place until such time as a proper vote is conducted in favor of changing the name. The court disagreed with this interpretation of the “whereas” clause, which stated: “Since approximately March 25, 1999, Licensee has used the Identifications substantially in accordance with the terms and conditions of this Agreement, and Licensor and Licensee now desire to set forth, in writing, the terms and conditions for Licensee’s continued use of the Identifications to identify the Building.” The court held this clause merely reflected the parties’ intention to continue use of the Trump name as had been the case since 1999, but did not impose a requirement that use of the Trump name continue forever. DJT’s next argument — that the Condo Board had not taken the requisite steps to change the name to comply with applicable condominium bylaws — was found to constitute a “fatal” concession. As the court observed, if DJT believed that there was a proper mechanism to vote on removing the Trump name from the building, there must be a right to do so. The final argument raised by DJT centered on the quality control provision of the License Agreement, which stated: “Licensor shall have the absolute right of prior approval of any and all uses of the identifications of Licensee. Licensee shall submit all such proposed uses to Licensor in writing....” According to DJT, this provision required affirmative consent before any change in use of the Trump name--including a change to non-use — could be made. The court gave this interpretation short shrift, holding that the provision “simply does not say what [DJT] contends it does.” According to the court, “a plain reading of the License Agreement states only that affirmative use of the identifications requires consent.” The court therefore concluded that the License Agreement was clear and unambiguous and that the Condo Board was not required under the terms of the agreement to use the Trump name on the Building. So for those of you driving up the West Side Highway, there may only be limited time left to see the Trump Place signage before it comes down. Sad!

We previously posted about an Oregon federal district court’s summary judgment rulings, favorable to Adidas, in the storied battle between heavyweights Adidas and Skechers. (Adidas America, Inc. v. Skechers USA, Inc. (D. Or. 2017)). Earlier in the case, the district court entered a preliminary injunction prohibiting the sale and marketing of Skechers’ Onix and Cross Court shoes, based on claims that the Onix infringes on the trade dress of Adidas’ Stan Smith shoe, and the Cross Court infringes and dilutes Adidas’ Three-Stripe trademark. This month, the Ninth Circuit reversed, in part, the preliminary injunction order, holding that the district court abused its discretion in issuing a preliminary injunction with respect to the Cross Court because Adidas did not show it would be irreparably harmed from the sale of this model shoe. In contrast, the Ninth Circuit affirmed the district court’s ruling with respect to the Stan Smith, holding that the district court did not clearly err in finding a likelihood of irreparable harm based on the record evidence. The Ninth Circuit’s ruling underscores that the presumption of irreparable harm in trademark infringement cases is long gone, even where likelihood of success on the merits is established; instead, a party must submit credible evidence to show that irreparable harm is likely. The district court’s preliminary injunction order entered in February 2016 found that Adidas had produced sufficient evidence of irreparable harm to warrant injunctive relief. It reasoned that: (a) Skechers’ infringement undermines Adidas’ substantial investment in building its brand and reputation of its trademarks and trade dress; and (b) Skechers’ attempt to “piggy back” off of Adidas’ efforts by copying or closely imitating Adidas’ marks means Adidas loses control over its trademarks, reputation, and goodwill—“a quintessential irreparable injury.” The district court order relied on evidence presented by Adidas that: (1) it had spent tens of millions promoting the Stan Smith, and nearly forty million annually on goods bearing the Three-Stripe mark; (2) it spent significant time and money in building and maintaining its perception among consumers as a premium sports brand, whereas consumers perceive Skechers as a “lower end value brand”, based on testimony from its marketing executive; and (3) consumer survey evidence that approximately 20% of surveyed consumers believed that Onix was made by, approved by, or affiliated with Adidas, indicating that Adidas’ carefully constructed brand image is likely to be confused with or associated with Skechers’ value brand. The district court thus concluded that “Adidas had produced evidence that Skechers’ continued sale of its Onix and other contested shoes will harm Adidas’ reputation and goodwill—harm that is not compensable by money damages.” The district court also found that Adidas had produced evidence that Skechers’ infringing footwear will diminish Adidas’ ability to create scarcity and drive demand for the Stan Smith -- a strategy Adidas had employed in 2013 in advance of its “reintroduction campaign.” Finally, the district court noted that Adidas’ Director of Sports Style Brand Marketing testified that the Stan Smith is one of Adidas’ most coveted shoes, and it works to control every aspect of the shoe that it can (materials, price, seller, who is seen wearing it, etc.). The district court reasoned that Skechers’ infringing shoes are likely to irreparably harm Adidas’ ability to control the quality of goods bearing Adidas marks or trade dress. In affirming in part, and reversing in part, the Ninth Circuit’s likelihood of irreparable harm analysis largely hinged on its prior decision in Herb Reed Enterprises, LLC v. Florida Entertainment Management, Inc., 736 F.3d 1239, 1250 (9th Cir. 2013), in which the Court held that “[e]vidence of loss of control over business reputation and damage to goodwill [can] constitute irreparable harm,” so long as there is concrete evidence in the record of those things. With respect to the Stan Smith, the Ninth Circuit was persuaded that there was sufficient evidence from which the district court could conclude that Adidas was likely to suffer irreparable harm to its brand reputation and goodwill if the preliminary injunction did not issue. The Court relied on evidence in the record of significant investment in promoting the Stan Smith through specified and controlled avenues, significant media from various sources that was not initiated by Adidas, and evidence of Adidas’ efforts to carefully control the supply of Stan Smith and the damage that would occur if the market were flooded, in addition to the above-discussed consumer survey. In finding that the district court’s irreparable harm ruling was not clearly erroneous, the Ninth Circuit reasoned that “[t]he extensive and targeted advertising and unsolicited media, along with tight control of the supply of Stan Smiths, demonstrate that [A]didas has built a specific reputation. And, the customer surveys demonstrate that intangible benefits will be harmed if the Onix stays on the market because consumers will be confused about the source of the shoes.” In contrast, the Court found that there was no evidence in the record that could support a finding of irreparable harm with respect to the allegedly-infringing Cross Court. The Court noted that Adidas advanced a narrow argument of irreparable harm as to the Cross Court: that Skechers harmed Adidas’ ability to control its brand image because consumers who see others wearing Cross Court shoes will associate the allegedly lesser-quality Cross Courts with Adidas and its Three-Stripe Mark (i.e. post-sale confusion). The Court first reasoned that Adidas’ theory relies on the notion that Adidas is viewed by consumers as a premium brand, while Skechers is viewed as a lower-quality, discount brand; and that Adidas did not set forth probative evidence of Skechers’ less favorable reputation. According to the Court, the only evidence in the record on this point was from Adidas employees, and Adidas did not provide sufficient specificity regarding consumer perception. The Court thus concluded that that the district court’s ruling that Skechers is viewed as a “value brand” is unsupported and conclusory, not grounded in evidence offered by Adidas. The Court also found that Adidas’ theory of post-sale confusion conflicted with its theory on the merits, and counterintuitive, begging the question: “[h]ow would consumers who confused Cross Courts for Adidas shoes be able to surmise, from afar, that those shoes were of low quality? If the ‘misled’ consumers could not asses the quality of the shoe from afar, why would they think any different about Adidas’ products? In which case, how could Adidas’ premium brand possibly be hurt by any confusion?” Accordingly, the Court found that even if Skechers does make inferior products (or even if consumers tend to think so), there is no evidence that Adidas’ theory of post-sale confusion would cause consumers to associate such lesser-quality products with Adidas. And, even if consumers were likely to be confused as to the maker of the shoe, the Court cannot simply assume that such confusion will cause irreparable harm, where Adidas failed to provide concrete evidence that it will. The Court contrasted the more specific evidence presented by Adidas that its reputation and goodwill were likely to be irreparable harmed by the Onix based on Adidas’ extensive marketing efforts of the Stan Smith and its careful control of the supply. Circuit Judge Clifton wrote a strongly-worded dissent chiding the majority’s Cross Court ruling on irreparable harm. Judge Clifton argued that the theory of post-sale confusion proffered by Adidas was not as narrow as the majority made it out to be, and quite consistent with a common theory of post-sale confusion in the trademark context. He explained that post-sale confusion could divert potential customers who believe they can obtain the prestige of Adidas’ goods without paying its normal prices. He mentioned his time in private practice thirty years ago defending Louis Vuitton against the sale of cheaper imitations. He was persuaded in those cases of the harm that could be caused (as Professor McCarthy described it) “if the prestige of carrying a bag with the Louis Vuitton trademark could be obtained at a fraction of the price, and if viewers could not tell the difference, the value of the trademark would be in jeopardy. And, if someone did confuse the cheap imitation for the real thing, the lesser quality of the imitator could further imperil the perceived value of the Louis Vuitton products and trademark.” He argued that a similar harm would occur to Adidas as a result of Skechers’ shoes imitating the Three Stripes mark. Judge Clifton also vehemently disagreed with the majority’s ruling that there was no evidence in the record to support Adidas’ claim of irreparable injury. He argued that Adidas provided ample evidence of harm, including sworn declarations and live testimony by several Adidas employees supporting Adidas’ contention that it has established a reputation as a premium sports brand, whereas Skechers’ brand perception is a “value brand” or “lower-end brand.” Judge Clifton argued that the majority improperly elected to discount that evidence, by applying its own skepticism toward employee testimony, despite the fact that the district court found the evidence to be credible. He contended that the notion that the appellate court can decide for itself that evidence relied upon by the district court should be ignored because it was provided by an employee of a party is unsupported and badly misguided. Judge Clifton concluded that the district court was well within its discretion to infer that confusion between Skechers’ “lower-end” footwear and Adidas’ footwear was likely to harm Adidas’ reputation and goodwill as a premium shoe brand—which is precisely the type of harm that is “irreparable.” Judge Clifton also reasoned that the district court’s determination did not even depend on establishing Skechers’ reputation as a lower quality brand; instead, the loss by Adidas of its control over its mark was by itself irreparably harmful. He argued that there was substantial evidence in the record regarding the value of Adidas’ mark and its management of the mark through investment and quality control over its product, evidence which the majority ignored. The Ninth Circuit’s decision highlights the significant burden now imposed on parties seeking a preliminary injunction in trademark cases, a substantial departure from the presumption of irreparable harm that was applied once-upon-a-time ago. It also highlights a hurdle for the senior user that wants to obtain injunctive relief for infringement without delay, but now may be required to support its contention of irreparable harm with evidence extending beyond its own ranks, such as by commissioning a consumer survey, an undertaking that can delay the ability to seek immediate injunctive relief. In short, a trademark holder seeking to fully protect its mark from infringement must not only act quickly, it must also make a significant showing of irreparable harm at the preliminary injunction stage.

In 2015, we wrote about the District of New Hampshire Bankruptcy Court’s decision in In re Tempnology, LLC.  That decision was significant because it bucked a recent trend in bankruptcy jurisprudence to permit trademark licensees to retain their trademark rights even after debtor trademark licensors reject their licenses under Section 365(a) of the Bankruptcy Code.  Despite the trend, the court held that because the Bankruptcy Code did not expressly permit trademark rights to continue post-rejection, as it did expressly for other intellectual property rights, the licensee’s trademark rights were extinguished upon rejection. Then, in 2017, we wrote about the Bankruptcy Appellate Panel (“BAP”) for the First Circuit’s reversal of that decision, keeping with the trend in other circuits to allow trademark rights to continue post-rejection.  In January 2018, the First Circuit Court of Appeals reversed the BAP and reinstated the Bankruptcy Court’s decision, creating a circuit split that the Supreme Court may take up—that is, if Congress doesn’t fix the problem first (which it created and can easily fix). Under Section 365(a) of the Bankruptcy Code, a debtor has the right to reject executory contracts, meaning that the parties to any rejected contract are relieved of their obligations to perform.  However, Congress included an exception for “intellectual property” licenses in Section 365(n), which allows licensees to continue using the licensed intellectual property through the end of the term of the license even if the debtor rejected that license under Section 365(a). Under the Bankruptcy Code, “intellectual property” is a defined term, which includes both copyrights and patents, but it does not include trademarks. The circuit split is largely due to a Senate report issued when Section 365(n) was enacted, which stated that trademark rights were intentionally excluded from Section 365(n) because they were different from other intellectual property rights.  As a result, before including trademark rights in Section 365(n), the issue required “more extensive study” and until then, Congress would “allow [for] the development of equitable treatment of this situation by bankruptcy courts.” In the First Circuit’s Tempnology decision, the court relied heavily on the language of 365(n), the definition of intellectual property, and Congress’s “principal aim in providing for rejection” to support its conclusion that trademark rights do not continue when an executory contract is rejected by the debtor.  The court found that Congress’s “principal aim”—i.e., to “release the debtor from burdensome obligations”—could not be accomplished because of a trademark owner’s obligations to exercise quality control over the mark. Saddling a debtor trademark licensor with those obligations would force it to “choose between performing executory obligations arising from the continuance of the license or risking the permanent loss of its trademarks, thereby diminishing their value to Debtor [or a successor].” The First Circuit rejected the BAP’s reasoning—which followed the recent trend in other circuits—to allow trademark licensees to continue using their licensed marks based in large part upon the Senate report’s language regarding equitable treatment by the bankruptcy courts.  In particular, the First Circuit accused other circuits, as well as the dissent in this case, of giving far too much weight to the Senate report, especially because the provision at issue contains no ambiguity.  Moreover, the court found that allowing trademark rights to continue post-rejection does not result in equitable treatment; rather, in addition to the burden upon the debtor, it would result in increased uncertainty, inconsistent rulings and hair-splitting, and higher costs on parties.  Given these considerations, the court found in favor of a “categorical approach” of excluding trademark rights from protection under the Bankruptcy Code. The dissent, to no surprise, disfavored the categorical approach, and instead advocated for equitable treatment, essentially on a case by case basis, consistent with the Senate report.  It argued that the majority’s approach was not only too harsh, but inconsistent with “congressional intent.” Although the Supreme Court recently extended the time for the trademark licensee from the Tempnology case to file a Petition for Writ of Certiorari, this is an issue that Congress can (and should) solve quickly and easily.  Section 365(n) was enacted in 1988; 30 years is enough time for “more extensive study.”  And because bankruptcy courts cannot agree on what constitutes equitable treatment—or even whether equitable treatment is entitled—the “let the courts figure it out” approach has not been particularly successful.  To provide clear guidance and an understanding of rights and remedies to trademark licensors, licensees, as well as purchasers of assets or companies in bankruptcy, Congress should decide whether trademark rights continue post-rejection or not. It seems unfair for the fate of a trademark license to be subject to the jurisdiction in which the licensor files for bankruptcy protection.

From time to time, we publish updates on changes to trademark laws that may impact our readers and their IP registration and enforcement strategies.  Once again, Mexico is making changes to its trademark system (recall Mexico added an opposition system in 2016). The proposed amendments are extensive and contain provisions related to new protection for non-traditional trademarks, nullity and opposition procedure, and amendments to provisions on well-known and famous brands, as well as many others.  The following are a few notable amendments that may immediately impact use, filing and maintenance strategy: For all trademark registrations granted from the effective date, trademark owners must file a declaration of use within three months from the third anniversary of the registration. No extensions will be available and failure to file will result in cancellation of the registration. Registrants filing renewal applications will be required to file a declaration of real and effective use of the mark in Mexico in connection with at least one of the products or services covered by the registration. Trademark applicants will be required to identify a date of first use of the trademark in Mexico.  Failure to identify a date of first use will be deemed as a voluntary declaration of no earlier use in Mexico.  This requirement will exist regardless of the fact that use is not required to prosecute the application or achieve a registration in Mexico.  It is possible the failure to identify a date for a mark in use in Mexico (deemed voluntary declaration of no earlier use) could impact defense and enforcement proceedings. The Mexican Senate passed the amendment to the Industrial Property Law in April 2018 and it is likely to become effective sometime in the next several months.

Stop me if you’ve heard this one before: an OB-GYN you probably don’t know named Dr. Drai applies to register his name as a trademark and ends up in a dispute with famous rapper Dr. Dre because the rapper fears there will be confusion between the names. A three-judge administrative panel decides “DR. DRAI” looks and sounds like “DR. DRE,” and agrees that Dr. Dre is really famous and that his brand is strong and distinct, but ultimately rules that there’s no risk of confusion. This might sound like an elaborate setup to a geeky joke, but on May 3, 2018, the Trademark Trial and Appeal Board decided a case with just those facts, holding that Dr. Drai was entitled to register his trademarks. See Andre Young v. Draion M. Burch DO. News of the TTAB decision caused some head-scratching on social media, wondering, what was Dr. Dre thinking? Why did Dre—a famous rapper and headphone mogul—believe that consumers would confuse his brand with that of an OB-GYN? The answer likely lies in the goods and services covered by Dr. Drai’s trademark applications (one for the DR. DRAI word mark and the other for the logo form of his mark). Although Dr. Drai provides obstetrics and gynecological medical services, he’s also a motivational speaker, and uses his brand to promote books, make television and radio appearances, conduct Twitter chats, and participate in speaking engagements and online videos, all relating to women’s health and transgender health topics. In the broadest sense, this makes Dr. Drai—like Dr. Dre—an entertainer. In fact, the challenged Dr. Drai applications covered Classes 9 (Computers, Software, Electronic instruments, & Scientific appliances) and 41 (Education, Amusement, Entertainment, Reproduction)—two classes in which Dr. Dre’s marks are also registered. So, contrary to some of the biting online commentary that followed the TTAB’s decision, Dr. Dre’s action was not, on its face, totally surprising. Dr. Dre opposed the Dr. Drai applications on three grounds: confusion, dilution, and false suggestion of a connection to him as an individual, but the dilution claim was affirmatively waived prior to final hearing. The Board ultimately ruled against Dr. Dre on both the confusion and false connection claims. Likelihood of Confusion Analysis What’s striking about the TTAB’s analysis of the confusion claim is that only one of the 13 du Pont factors of likely confusion favored Dr. Drai. In contrast, Dr. Dre prevailed on six factors, with five found neutral and one ignored by the Board. Indeed, the decision is filled with findings favorable to Dr. Dre: (a) Dr. Drai’s marks look and sound like Dr. Dre’s marks; (b) Dr. Dre’s mark is inherently distinctive; (c) Dr. Dre’s mark has “achieved a degree of renown” and “is strong”; (d) the parties’ trade channels “generally overlap”; (e) some of Dr. Dre’s and Dr. Drai’s less sophisticated consumers may exercise “less care” in their purchases, making “confusion more likely”; and (f) Dr. Dre’s mark is used in connection with “collateral or promotional items,” making it more likely that relevant consumers will be confused. Nonetheless, the TTAB declined to find a likelihood of confusion because the factors favoring Dr. Dre were outweighed by the differences in their respective goods and services. More specifically, the Board found that although both Dr. Dre’s and Dr. Drai’s services fall under the general category of “entertainment services,” Dr. Dre failed to submit evidence showing that Dr. Drai’s “motivational and educational” speaker services were sufficiently similar to Dr. Dre’s “musical composition and production” services. Evidentiary issues played a significant role in Dr. Dre’s lack of success on the confusion claim. The TTAB found that “many of the facts asserted by [Dr. Dre] in his brief have no evidentiary support.” Notably, Dr. Dre provided no evidence of the volume of his sales or advertising expenditures in connection with musical sound recordings or production services. Moreover, the TTAB refused to give weight to much of the evidence submitted by Dr. Dre, finding that it failed to satisfy any exception to the rule against hearsay. Hearsay exceptions can be quite arcane in application, so it might surprise a lay reader to learn that the TTAB can treat “newspaper story submissions dated 1997 or earlier” as admissible, while refusing to admit more recent—and relevant—stories from popular websites such as grammy.com (Dr. Dre awards list), billboard.com (Dr. Dre chart history) and staticbrain.com (Dr. Dre album sales statistics), Genius (genius.com), IMDB (IMDB.com), Biography (biography.com), and All Music (allmusic.com). As a result, Dr. Dre was unable to establish facts relevant to his receipt of Grammy awards, record sales, and rank on the Billboard Hot 100. Under the circumstances, the TTAB concluded that the evidence of record did not support a finding that the mark DR. DRE had achieved a degree of fame such that it fell on the “very strong” end of the spectrum of commercial strength. False Connection Analysis The analysis of the ground of opposition under Section 2(a) of the Lanham Act for false suggestion of a connection also seemed to go well for Dr. Dre, at least initially. The TTAB found that the first three factors in the four factor test favored Dr. Dre: (1) the DR. DRAI marks were found to be a close approximation of Dr. Dre’s name or identity; (2) the evidence showed that Dr. Dre has come to be associated with the name DR. DRE and that name uniquely and unmistakably refers to him; and (3) it is undisputed that Dr. Dre has no connection with the goods and services that Dr. Drai intends to offer under the applied-for marks. Dr. Dre’s Section 2(a) claim foundered, however, on the fourth factor: whether the fame or reputation of Dr. Dre is such that a connection with Dr. Dre would be presumed when the DR. DRAI marks are used in connection with the goods and services covered by the opposed applications. According to the TTAB, the key inquiry for this factor is whether there is something about the motivational and educational speaking services on the topics of obstetrics, gynecology and health, as identified in the opposed applications, that would cause the DR. DRAI marks to be associated with Dr. Dre. In undertaking this analysis, it was not necessary for Dr. Dre to prove that his name was famous in the health or medical field or that he offer goods or services in these areas. But it was not enough to argue that Dr. Dre’s reputation as a musician and producer is of such a nature that consumers would make that association just because celebrities in general license their name for a wide array of merchandise and services. As the TTAB commented, “Here, there is no evidence that it is commonplace for celebrities to sell or license the sale of goods or services of the type provided by [Dr. Drai].” In contrast, other cases where registration was barred under Section 2(a) included an application to register WESTPOINT for shotguns and rifles, which were goods of a type that customers would associate with a military post and an application to register TWIGGY for clothing, which would be associated with the well-known fashion model. Further, although intent to trade on the goodwill generated by a famous person’s name is not a required element of a Section 2(a) claim, such evidence can be considered as relevant. But here, Dr. Drai testified that he is a “gay gynecologist” with “a lot of transgender … [and] lesbian” patients. He further characterized Dr. Dre as being “known for his misogyny and homophobi[a],” adding that “being an OB-GYN, I cannot be associated with anyone that has any kind of misogynistic speech because it’s a bad reflection one me as a doctor.” The TTAB appears to have credited this testimony, finding that Dr. Drai had no intent to trade on Dr. Dre’s name. It is unknown why Dr. Dre decided not to pursue a dilution claim, which might have been more successful. Dr. Dre definitely is a famous name among wide swaths of the general public and there would have been no need to show likelihood of confusion or that the goods and services of the parties were related. However, it might have been difficult to establish, through survey evidence or otherwise, that consumers were likely to associate the DR. DRAI marks and services with Dr. Dre in a manner that would impair the distinctiveness of the DR. DRE mark. Takeaways from the Case The fame and renown of a celebrity name may only go so far in a trademark dispute if the goods and services are widely disparate It is not always true that a less famous trademark user will want to benefit from the particular reputation of the celebrity Being famous and proving that your mark is famous are not always the same things — evidentiary challenges abound

Starting this weekend, roughly 10,000 legal professionals from across the globe will begin converging on the great City of Seattle for the 2018 Annual Meeting of the International Trademark Association.  There are so many fun, interesting, and exciting things to do in the Pacific Northwest.  But let’s face it, unless you have boundless energy and lots of extra time on your hands, you probably won’t be able to take in most of what the Emerald City and its surrounding environs have to offer.   So, we’ve compiled a list of of our Top 10 favorite close by attractions that you might want to check out—all of which are accessible within a short walk from the Convention Center or after a brief journey using your favorite ridesharing service. #10.  Fugetaboutit.  Sure, other metropolitan areas are far better known for Italian fare than Seattle, but Vito’s is an Italian gem in the Emerald City.  It’s been open since the 1950s (yes some of that décor looks like it could be the original).  Excellent musical acts play nightly starting Wednesday through Sunday.   Vito’s is just a few blocks south of the Convention Center.   Email reservations@vitosseattle.com or call 206-397-4053. #9.  Pike Place Market.  This is Seattle’s original farmers market established in 1907.  It’s about a 6 block walk from the Convention Center.  It is ground zero for shops, fresh seafood, and iconic restaurants.  While there, check out a couple of our favorite spots including Beecher’s Hand Made Cheese Café,   and the Original Starbucks, which opened its doors in 1971. #8.  Books & Architecture?  If you are a bibliophile and a connoisseur of interesting architecture, take a short stroll down to Seattle’s downtown Central Library. It was designed by Dutch architect Rem Koolhaas in a joint venture with Seattle-based LMN Architects.  It opens at 10:00 am daily (12:00 p.m. on Sundays). # 7. Skyview Observatory.  If you haven’t experienced Seattle from 902 feet above the ground, head down to Seattle’s tallest building—the Columbia Center—and head up to floor 73 for 360 degree sweeping views of Seattle, Bellevue, Mt. Rainier, the Puget Sound, and much more.  The Skyview Observatory is the highest observatory in the Northwest and well worth the 10 minute walk from the Convention Center.  It’s open daily from 10 am-8 p.m. # 6.  Smith Tower.  If tall modern buildings like the Columbia Center give you vertigo, perhaps you want to check out the Smith Tower just down the street.  It is after all Seattle’s first skyscraper and, at one time, was the tallest building west of the mighty Mississippi River.  Head up to the observatory and take in the sights at the speakeasy-inspired bar on the 35th floor.  Weekday happy hour from 4-6 p.m. and late happy hour from 9-11 p.m. #5. Pioneer Square.  If you make your way to Smith Tower, you will officially be in Pioneer Square, Seattle’s Original Neighborhood founded in 1852.  Dozens of shops, restaurants, and other attractions await you.  Check out this helpful map on things to do and see while you are in the Square.  One of our particular favorite dining spots is the recently “re-opened” 13 Coins.  Great food, live entertainment on weekends, and, hey, its conveniently opened 24 hours a day for all of you INTA early birds and night owls. #4.  The Underground Tour.  Ok, it may sound weird, but go spend 75 minutes on this guided walking tour of entombed storefronts and sidewalks from when Seattle was rebuilt on top of itself after the great fire of 1889.  Call 206-682-4646, visit the ticket counter at 614 First Avenue in Pioneer Place Park, Pioneer Square, or click here for ordering tickets online. #3.  The Seattle Great Wheel.  From Pioneer Square you can walk down to the waterfront and take a spin on Seattle’s Ferris wheel.  Maybe it’s not quite the London Eye, but it is a fun, touristy place to go on Seattle’s waterfront.  It’s open until 10 pm Sunday-Thursday, and until 12 am on Fridays and Saturdays. #2.  Elliot’s Oyster House and the Edgewater Hotel.  If you’ve worked up an appetite after being whirled about on the Great Wheel, you are steps away from two restaurant staples on the waterfront.  Elliot’s Oyster House is a great place for seafood, and the aptly-named Edgewater Hotel (the only hotel on Seattle’s waterfront), offers great lounge and dining options as well. #1.  Seattle Center.  This is your stop for all sorts of entertainment and diversion in Seattle.  From the world famous (and highly recommended) Museum of Pop Culture (MoPOP), to the Space Needle built for the 1962 World’s Fair, there is plenty to see and do @ the Center.  For quick, easy access to the Seattle Center, you can hop on the Seattle Monorail, which is just a few blocks away from the Convention Center. Safe travels and enjoy INTA 2018!    

May 7 was no day at the beach for Multi-Media Tech. Ventures, Ltd., whose registrations for the mark GIDGET were cancelled in a precedential opinion by the Trademark Trial and Appeal Board. Yazhong Investing, Ltd. v. Multi-Media Tech. Ventures, Ltd. It is unclear whether there is any connection between registrant Multi-Media and the 1959 movie starring Sandra Dee or the follow-on 1960s era TV series made famous by Sally Field, but the specimens of use submitted in connection with one of the registrations at issue in the proceeding showed that Multi-Media was promoting a GIDGET “lifestyle brand” for surfing and other products and activities for girls and young women associated with the 1959 movie. The challenges in establishing such a commercial enterprise are reflected in the difficulties the registrant encountered in proving actual commercial use of its marks for the goods and services registered, particularly because the registrations at issue covered dozens of different goods and services. We think a few takeaways are almost as interesting as the true origins of the word “Cowabunga.” Petitioner, Yazhong sought cancellation of four of Multi-Media’s GIDGET registrations on the grounds of abandonment and fraud after the USPTO refused intent to use applications filed by Yazhong based on a likelihood of confusion with Multi-Media’s marks. The registrations at issue  a broad variety of goods and services including apparel, cosmetics, bicycles, stationery, books, home goods, and entertainment in the nature of theater and musical productions. While the TTAB’s decision does not break new ground on the legal standard for proving abandonment, it articulates the types of evidence that can cause or avoid a wipe out. Yazhong succeeded in satisfying the well-established standard for abandonment, a showing of nonuse for at least three consecutive years, from 2008 to 2012, which shifted the burden to Multi-Media to rebut the presumption of abandonment. Yazhong’s evidence consisted mostly of discovery responses as well as testimony and declarations from officers of a predecessor in interest to Multi-Media. This evidence showed an absence of sales figures; product samples but no commercially manufactured or marketed products during the time period under review; efforts to seek licensing partners; an advance against future revenues and a mistaken understanding about what was legally necessary to file a statement of use in connection with intent to use applications covering multiple products and services. Multi-Media also submitted a declaration by a board member stating that Multi-Media never intended to abandon the mark, but in line with prior precedent, the TTAB rejected this argument, focusing on the need to establish actual use of a mark or an intent to resume use in the reasonably foreseeable future, rather than a lack of intent to abandon. Its decision states: “the owner must do more than simply assert a vague, unsubstantiated intent to make use of the mark at some unspecified time in the future.” While “reasonably foreseeable future” might mean years down the road for some products, like movies, the TTAB felt that production of consumer goods covered by the registrations “may be effected much more easily.” Multi-Media’s lack of evidence regarding annual sales of units bearing the GIDGET mark had a particularly negative effect on its case. The TTAB expected to see such information as operating budgets and licenses demonstrating a “specific and consistent plan” to resume use of the mark, assuming the mark had ever been used commercially at all. The TTAB was unmoved by Multi-Media’s evidence that the mark had been used in connection with marketing activities, including advertising, participation at trade shows, and seeking licensing partners: “Simply put, there is no credible evidence that Respondent or its predecessors made any use of the GIDGET mark apart from a few sporadic promotions of surfing events in the subject registrations….” Having found that Multi-Media failed to overcome the presumption of abandonment, the Board held that it did not need to reach the additional ground of cancellation based on allegations of fraud.

The FTC announced an enforcement action last week that focused on two hot button issues – unsubstantiated health claims and failure to disclose material connections between endorsers and product marketers. In re Mikey & Momo, Inc. et al. The Complaint and Proposed Consent Order involve a business named Aromaflage, which markets sprays and candles advertised as DEET-free mosquito repellants containing essential oils and fragrance. Aromaflage advertised its products, which were sold at $30 for an 8 milliliter spray bottle and $40 for a 7.5 ounce candle, “as effective as 25% DEET over 2.5 hours.” More specifically, Aromaflage claimed that the products were “scientifically tested,”  “rigorously tested at one of the world’s leading Universities and found to be as effective at repelling mosquitos as the leading brand” and would repel mosquitos “that may carry Zika, Dengue, Chikungunya and Yellow Fever.” By expressly mentioning product testing, Aromaflage was required to meet a stringent standard for making what are called “establishment claims” – ad claims that specifically refer to tests having been conducted to support the advertising claims. Turns out that the testing had two significant problems – the test methodology was not scientifically rigorous and reliable and the results did not support the company’s positive claims. Here’s what bugged the FTC about the methodology: the testing did not include candles, even though the advertising claims were made for both sprays and candles; no human subjects were used, even though the products were intended to overcome mosquitoes’ attraction to human odors; and Aromaflage did not use more than one species of mosquito, even though other species can carry many of the diseases specifically mentioned in Aromaflage’s advertising material and could react differently to the same repellant. And the actual test results? Among other things, the data showed that at the 30 minute mark, more mosquitoes were in the Aromaflage-treated half of the testing chamber than in the untreated half and performed worse than water.  Unsurprisingly, the 25% DEET product performed better than the Aromaflage sprays for at least the first ninety minutes. Aromaflage compounded its regulatory problems as a result of glowing testimonials on Amazon that were posted as independent reviews when in fact they were written by one of the company’s officers, her mother and two of her aunts – without disclosing these material connections to Aromaflage. The FTC proposed consent order details an onerous 20-year compliance monitoring program that we are sure that defendants didn’t contemplate when they talked about their own “rigorous testing.” In fact, the order mandates that the defendants have “competent and reliable scientific evidence” to support their claims going forward – meaning: tests, analyses, research, or studies that (1) have been conducted and evaluated in an objective manner by experts in the field of insect repellency; (2) are generally accepted by such experts to yield accurate and reliable results; and (3) are human clinical testing of the covered product, when such experts would generally require such human clinical testing to substantiate that the representation is true. If that wasn’t enough, the order goes on to require that: when such tests or studies are human clinical testing, all underlying or supporting data and documents generally accepted by such experts as relevant to an assessment of such testing as set forth in the Provision entitled Preservation of Records Relating to Competent and Reliable Human Clinical Tests or Studies must be available for inspection and production to the Commission. While the order did not include a monetary judgment, it looks like defendants will be spending a pretty penny if they want to continue advertising their candles and sprays as beneficial. Takeaways: Making health-related advertising claims? – The FTC is watching and focused on protecting consumers from false or misleading claims relating to products advertised to prevent, treat or cure diseases from Alzheimer’s to Zika. If your ad says that your product was scientifically tested, that testing better be reliable and the methods should be well accepted in the relevant scientific community. On the subject of testing, make sure that your ad claims fit your testing – the claim should be designed based on what the testing shows and nothing more. The FTC isn’t saying your mom can’t go on Amazon and review your company’s products, but you’ll need to tell her that she’s going to have to tell everyone that she’s your mom when she writes her glowing review.

  Maybe you’ve applied to register a trademark. Maybe you already own a registered trademark. Maybe you’re using your mark but haven’t yet applied to register it. Maybe you don’t even know what a trademark is and how it differs from a copyright. Either way, you’re wondering: when can I use the ® symbol, and when should I use the ™ symbol instead? Background: The ® symbol vs. the TM Symbol At its simplest, the ® symbol gives notice to others that a mark is registered with the U.S. Patent & Trademark Office (USPTO). You can begin using the ® symbol only after the USPTO issues a registration certificate for your mark. The ™ symbol, on the other hand, is an unofficial way of telling the world that you are using a word or design as a trademark. Remember, trademark rights stem from use, not registration, so using the ™ symbol even when a mark is not registered can be useful for putting others on notice that you are claiming enforceable trademark rights in a mark. Thus, any time a mark is used in a trademark sense to designate source—regardless of whether you’ve applied to register the mark—you can use the ™ symbol (tip: the ™ symbol should be used when designating a mark for products; the equivalent SM, which stands for “service mark,” can be used when designating a mark for services, although the public tends to be less familiar with that designation). While you can legally use the ™ symbol next to a registered trademark, the more exclusive ® symbol demonstrates that rights have been recognized by the USPTO and provides notice of the registration status, which is a prerequisite to obtaining certain legal remedies. Now It Gets a Little More Complicated It’s not always so simple. For instance, what if you have a registration on the supplemental register rather than the principal register (for those that don’t know, the supplemental register is where marks that do not presently meet the distinctiveness requirements of registration but are capable of functioning as trademarks in the future, e.g., descriptive marks, are registered)? In that case, we have good news: your supplemental registration still entitles you to use the ® symbol, exactly the same as if your mark were registered on the principal register. Okay, so maybe that one is not all that complicated. Let’s try a different scenario: what happens if you have registered your mark abroad in countries that allow you to use the ® symbol, but it is not yet registered in the U.S.? The U.S. trademark statute only authorizes use of the ® symbol for marks registered in the USPTO, and improper use of the registration symbol can be considered fraud. While a mistaken or inadvertent use of the ® symbol in the U.S. without deceptive intent based on registration in a country that recognizes use of the ® symbol generally would not rise to the level of fraud, it is still prohibited under U.S. law, and so in the absence of a U.S. registration it’s best to steer clear of using the ® symbol within the U.S. In the reverse situation, where you have a U.S. registration but will be distributing products or services abroad, use of the ® symbol should be assessed on a case-by-case basis. Certain countries will impose sanctions for indicating a mark is registered when, in fact, it is not registered in that country. Some countries recognize registration elsewhere as a defense to such a misrepresentation, but others do not. In some instances, it may be possible to use the “tm” symbol on packaging distributed in more than one country where the registration status differs. For example, it would be acceptable to use the “tm” on packaging distributed in the U.S. and Canada where the mark is registered in the U.S. but not yet registered in Canada. However, this is not always the case and needs to be determined on a country-by-country basis, so, as a general rule, it is safest to tailor your international strategy, e.g., by using different packaging in different countries, to avoid running afoul of a particular country’s trademark laws. One More Caveat It’s also worth noting that obtaining a trademark registration doesn’t give you license to use the ® symbol any time you use your trademark without a second thought. Rather, you can only use the ® symbol when using your registered mark in connection with the goods and services specified in your trademark registration. When the mark is being used to designate other goods/services not covered by your existing registrations, you’ll need to revert back to using the ™ symbol (or no symbol). At the end of the day, use of the ® or the ™ symbols is essentially optional—it is not necessary to protect or enforce your trademarks, though it is helpful for providing notice to others of your trademark rights and preventing the loss of certain other rights (such as the right to profit recovery or damages in a trademark infringement suit). So as a general practice, it is better to use these symbols when you can—as long as you do so properly. So there you have it. Now go forth and use…or don’t! This post is part of a regular series called Quirky Questions: TMCA Edition.  Our labor and employment colleagues have a great blog, Quirky Questions, where they answer unanticipated questions regarding the workforce.  We liked the concept (and their blog) so much that we’ve started a series of quirky question posts here on The TMCA.  We hope you enjoy the series -- feel free to send in your suggestions for quirky questions about trademarks, copyrights and advertising.

A top favorite to win this weekend’s Kentucky Derby is a colt named Justify, whose parents were Stage Magic and Scat Daddy. Other contenders include Free Drop Billy, Firenze Fire, Lone Sailor, and Magnum Moon. The strange names are as much a part of Derby history as the big hats, but what’s the deal? The Jockey Club maintains a registry for US and Canadian Thoroughbred horses, known as the American Stud Book (apparently not about Zac Efron?). In order to register and thus participate in the race, owners and breeders must comply with a long list of naming rules established by the Club. The rules are in fact quite similar to the Lanham Act rules regarding the registrability of trademarks in the United States.  The similarities include the following prohibitions: Names ending with "filly," "colt," "stud," "mare," "stallion," or other horse-related terms. Compare to the Section 2(e) rule against trademarks consisting of merely descriptive terms. Names of living or deceased people (except with written consent). Compare to the Section 2(c) rule against marks featuring the names of particular living individuals (except with written consent). Names that are vulgar, obscene, or offensive. Compare to the Section 2(a) rule against marks containing “immoral, deceptive, or scandalous matter.” Names that are currently active in racing or breeding, including similar spellings and pronunciations. Compare to the Section 2(d) rule against marks likely to cause confusion with other earlier registered or used marks. Names of famous horses or winners of high-profile races in the last 25 years. Compare to Section 43(c), which provides extra protections for the owners of famous marks in order to prevent dilution. As with trademarks, the rules make it difficult to register common names – while unique and distinctive names are much more likely to get through. The full naming rules are available online at The Jockey Club’s website. Given the apparent similarities, should trademark lawyers be expanding their practice to include Derby horse naming issues? This author intends to at least thoroughly examine a mint julep over the weekend.

As we promised in our prior post, we have an update on the “Music Modernization Act” (MMA) that promises to advance copyright law governing digital transmissions of sound recordings into the 21st Century. In a rare act of bipartisanship, the U.S. House of Representatives approved the MMA (H.R. 5447) by a vote of 415-0 on Wednesday, April 25th.  The final legislation combined three separate bills that address three different issues concerning music copyright.  The issues addressed include the following: First, blanket licenses to music streaming services for all public performances would be provided through a newly created clearinghouse organization that would also collect and distribute royalties to copyright owners.  As we previously noted, presently such streaming services must seek permission from individual copyright owners to stream songs, which is a significant burden, especially when information about some copyright owners is not readily available. Second, royalty rights for owners of copyrights in pre-1972 recordings are provided.  To date, the Copyright Act has never provided rights for sound recordings made before February 15, 1972.  This is a significant change and benefit to untold numbers of recording artists, or at least their estates, as it is likely that many have long since passed. Third, the bill would provide royalties to sound engineers, mixers, and music producers, to the extent they were considered part of the creative process of producing the sound recording, for digital transmission performances of recordings on which they worked.  Provision of such royalty payments would be contingent on a written contract or other proof that the engineers/mixers/producers were entitled to such by an agreement with a record label, publisher, or otherwise that they should participate in the revenue generated from the public performance of the sound recording. The Senate Judiciary Committee presently has a hearing scheduled on the legislation later this spring.  Presuming the Senate similarly passes the legislation, long unfilled holes in the Copyright Act regarding compensation for musical performance rights will finally be filled.