Trademark, Copyright + Advertising

If you were a devoted listener of season one of Serial, you probably already know that last month the Maryland Court of Special Appeals decided that Adnan Syed deserves a new trial. What you may not know is that three days before, the Trademark Trial and Appeal Board quietly issued a precedential opinion holding that Sarah Koenig, Dana Chivvis, Ira Glass and team at Serial Podcast, LLC have no trademark rights in the term “serial” because it is a generic term free for all to use for ongoing audio programs. According to TTAB precedent, generic terms are common descriptive names of a class of goods or services and are not registrable because they are incapable of indicating source. In other words, generic terms are the “antithesis of trademarks, and can never attain trademark status.” So how does the Trademark Office determine that a term is generic? They ask if members of the relevant public, the general public in this case, understand the term to refer to the genus of goods or services in question, ongoing audio programs in this case rather than a particular, single source of the goods or services. If the evidence shows the former, the term is generic.  On the other hand, if everyone in your office thinks Serial is Serial the podcast and not a “serial,” the term might not be generic, depending on whether this understanding truly reflects single source significance, not just the popularity of one particular program. But the evidentiary record in this case didn’t include any consumer survey or even an unscientific office poll for that matter. The Examining Attorney, who had already found the term generic prior to the ex parte appeal, relied on current dictionary definitions and a long list of online articles using the term “serial” as both a noun and an adjective to generically denote episodic broadcasts or podcasts.  It should be noted that a number of the articles were references to older radio program dating as far back at the 1930s.  On the other hand, the podcast team relied on over 12,000 recent media stories referring to its podcast as Serial; a daily download audience as high as 1.4 million in the first season and 1.7 million in the second; and high profile parodies on Saturday Night Live and Sesame Street. In their defense, the podcasters also attacked the Examining Attorney’s evidence as “antiquated” and “archaic,” which should not be relied upon to determine the public’s current understanding of a term. From the title of this post, you should already know that the TTAB sided with the Examining Attorney.  The Board found that because current dictionaries contain a definition for “serial,” the understanding of the term is not confined to a bygone era.  Moreover, it found that the podcast’s evidence only amounted to de facto secondary meaning of a generic term, which essentially means nothing more than that the public recognizes Serial as the most well-known ongoing series currently being offered.  In leveling a last blow to the podcast team, the TTAB referenced a Federal Circuit opinion from 2006: While it is always distressing to contemplate a situation in which money has been invested in a promotion in the mistaken belief that trademark rights of value are being created, merchants act at their peril in attempting, by advertising, to convert common descriptive names, which belong to the public, to their own exclusive use. Even though they succeed in the creation of de facto secondary meaning, due to lack of competition or other  happenstance, the law respecting registration will not give it any effect. So what do you think? Does the term “serial” belong to the public or the public radio team of This American Life at WBEZ in Chicago? If the podcasters had submitted a consumer survey, would the case have turned out differently?  Maybe this Serial will follow in the footsteps of Adnan and go up on appeal once more.

We blogged last week about a recent National Advertising Division case involving a Kimberly-Clark ad campaign that illustrated the well-known NAD maxim: “an advertiser is responsible for all reasonable interpretations of its claims, not simply the messages it intended to convey.”  The decision also serves as a useful reminder of another frequent NAD principle of truthful advertising: “at all times there must exist a good fit between the claim made and the evidence offered in support of that claim.”  KC ran afoul of this principle when it advertised its Huggies diapers as “the fastest growing brand in hospitals” with a “super” disclaimer notice that stated “based on volume share growth.” There were number of problems with these ad claims.  As an initial matter, KC relied on data covering only its own products, and the NAD found this to be insufficient because a “fastest growing brand” claim is comparative in nature.  NAD reasoned that to make such a strong comparative claim, data on competitors is necessary.  KC argued that its substantiation was reasonable in this case because the market consists of two main players, Huggies and Pampers, so if the Huggies sales number are increasing, then it could assume that the Pampers numbers were decreasing. While admitting that perfect substantiation is not required, NAD found this type of “conjecture” and “assumptions” (KC’s word, not NAD’s) insufficient. As explained by challenger Procter & Gamble, sales and market share data for hospital products can be obtained through an independent third-party database operated by Global Healthcare Exchange. Over time, both KC and P&G had used the GHX database for the purpose of tracking hospital diaper sales and market share. Here, KC did not rely on GHX data, instead basing its advertising claim on its own internal product shipment data. NAD also faulted KC for not considering the entire market since 100% market data was available and the ad claim was not limited to “among leading brands.”  Notably, NAD allows advertisers to base claims on 85% of the market for comparative product performance claim because obtaining data from the entire market is impractical and expensive. But in this case, GHX data covered the full market and in fact showed that a smaller player had the fastest growth rate.  KC tried to argue that such reasoning was unfair because smaller players could attain a faster (or the fastest) growth rate from a modest increase in sales numbers, but the NAD rejected this reasoning. Based on past NAD precedent, P&G also argued against KC’s data on the basis that untracked, non-publicly available data is unsuitable as claim support because it is not reliable and verifiable based on sales and share data that can be vetted by a competitor. NAD agreed. Another major problem with KC’s ad campaign was the mismatch between the claim of “fastest growing brand” with data that showed only growth in sales volume, not the rate of growth. KC’s internal data demonstrated 18% growth in sales volume on a 52 week rolling basis, but “NAD questioned whether an increase in absolute shipments is an appropriate metric for support of a claim of faster volume share growth (as referenced in the super) than other competitors in the market. A ‘fastest growing brand’ claim requires concrete data demonstrating that Huggies grew sales or share at a faster rate than any other brand in hospitals” – data that KC lacked. NAD emphasized, however, that “given the evidence in the record concerning Huggies impressive growth in sales in the hospital channel, nothing in NAD’s decision precludes K-C from crafting a more narrowly tailored self-referential monadic claim concerning the increasing presence of Huggies in the hospital channel (i.e., growing more than ever before).” Several important takeaways can be gleaned from this NAD decision: Third-party data is the gold standard. If you choose to use internal data, it better be reliable and complete. Comparative sales claims should be supported by reliable data on the market as a whole, not just a substantial portion. If your company has a good story to tell about sales growth, sales ranking or rate of growth, you need to tell the story in the right way – the ad claim must match the supporting data

Winston Churchill famously commented in 1939 that Russia was “a riddle wrapped in a mystery inside an enigma.” The same could be said about Grand Duchess Anastasia Romanov, daughter of Russian Tsar Nicholas II, who was rumored to have survived the massacre of the Tsar’s family in 1918. The riddle wrapped in a mystery deepened in the following years, with various women, with varying degrees of psychological problems, claiming to be long-lost daughter Anastasia, presumably entitled to the Tsar’s fortunes hidden away in foreign banks. The history of these women’s efforts to convince the world and surviving relatives that they were in fact Anastasia Romanov spawned a number of dramatic works, most notably for purposes of this blog post, a fictionalized Play written in the 1940s by French author Marcelle Maurette (later adapted into English in 1952), and a musical version of the Anastasia story written by Terence McNally that opened on Broadway in April 2017. Both the Play and the Musical focused on one particular woman claiming to be Anastasia -- Anna Anderson -- who spent many years trying to convince the public and surviving members of the royal family of her identity. The rights holders in the Play sued McNally and commercial partner Anastasia Musical LLC for copyright infringement, alleging that the Musical had copied creative elements from the Play going beyond the historical record.  Jean-Etienne de Becdelievre et al. v. Anastasia Musical LLC, 16 Civ. 9471 (SDNY) (AKH). District Judge Hellerstein denied the defendants’ motion to dismiss in January 2017, holding that it was not possible to resolve the issues in dispute by making a “complicated comparison” of the two works and the historical record before answers were filed “and without guidance by experts.” The case proceeded into discovery, limited to the issue of how the Musical was created. The court also directed the plaintiffs to make a submission identifying what specific plot elements, characters, dialogue and scenes had been infringed. Defendants then filed a motion for summary judgment, which was denied by Opinion and Order dated April 2, 2018. The court began its analysis by articulating the mission to determine “whether the two works are substantially similar, extracting from the analysis any non-copyrightable historical facts.” Judge Hellerstein also confirmed that when a work contains both copyrightable and non-copyrightable material, as was the case here, the appropriate legal standard for judging substantial similarity is the “more discerning ordinary observer test.” The court further acknowledged that because substantial similarity “is customarily an extremely close question of fact, summary judgment has traditionally been frowned upon” in copyright litigation. Ultimately, after a detailed review of the historical record as well as the content of the Play and the Musical, the court concluded that material issues of disputed fact precluded summary judgment. The decision to deny summary judgment rested on a few “crucial elements” of both the Play and the Musical “that cannot be traced back to the historical record.” The court cited in particular “a much-anticipated meeting” between Anna/Anastasia and her supposed grandmother, the Dowager Empress, resulting in a very emotionally resonant scene in both works in which the Empress finally softens her resistance to believing Anna’s story and agrees to support her as a member of the family. No such meeting ever took place according to any historical evidence. Both works also featured a climactic scene in which  Anna/Anastasia was supposed to be presented to the world at a ceremony, but instead Anna/Anastasia “makes an off-stage decision to reject royalty and wealth, in favor of a simple life.” The court observed, “As with the meeting between Anastasia and the Empress, the presentation scene has no apparent basis in the historical record.” Defendants argued that the ideas embodied in these overlapping plot developments were scenes a faire that were not subject to copyright protection. The court disagreed, saying plaintiffs’ claim was “limited to a particular expression” of the scenes. The court also rejected defendants’ argument that the Play and Musical were different in “total concept and feel”, citing Second Circuit precedent in Castle Rock Entertainment Inc. v. Carol Publishing Group that “the total concept and feel test… is simply not helpful in analyzing works that, because of their different genres and media, must necessarily have a different concept and feel.” So a case involving competing dramatic presentations of the Anna Anderson story, and the riddle wrapped in a mystery inside an enigma about whether Anastasia Romanov survived the assassination of the Tsar’s family, will now – barring a settlement – proceed to trial.

Can a stock photography agency bring a copyright infringement lawsuit on behalf of individual photographers?  According to the Ninth Circuit, the answer is “maybe.”  A recent decision provides another example of what the Ninth Circuit referred to as “the now often litigated issue of whether a stock photography agency . . . has standing under the Copyright Act of 1976 to pursue infringement claims involving photographs from its collection.”  DRK Photo v. McGraw Hill Global Education Fund, 870 F.3d 978 (9th Cir. 2017).  Section 501(b) of the Copyright Act allows the “legal or beneficial owner of an exclusive right under a copyright” to sue for infringement.  In a set of three cases decided in the last dozen or so years, the Ninth Circuit has addressed standing when a copyright infringement claim has been assigned: In Silvers v. Sony Pictures Entertainment, 402 F.3d 881 (9th Cir. 2005, the Ninth Circuit rejected the “bare right to sue” rule, holding that assignment of an accrued cause of action – without other rights to the copyright – did not create standing. The plaintiff was no stranger to the copyrighted work; Silvers was the creator of the work pursuant to a work-for-hire contract, but the copyright was held by the employer.  Still, the Ninth Circuit held that Silvers lacked sufficient “legal or beneficial” ownership to support standing. The court came to the opposite conclusion three years ago in Minden Pictures, Inc. v. John Wiley & Sons, Inc., 795 F.3d 997, 1002 (9th Cir. 2015), ruling that a stock photography agency had standing to sue for copyright infringement, because it was the “exclusive licensee” of the copyright holders, even though the copyright holders retained some rights to use or license the works themselves. In the most recent of the three rulings, DRK Photo, the Ninth Circuit held last fall that another stock photography agency did not have standing to sue, because it was a non-exclusive licensee. The court compared the agreements at issue in Minden Pictures and DRK, noting that Minden was the “sole and exclusive agent,” giving it standing, while the DRK agreement did not prevent the photographers from entering an agreement with another stock photography company or agent. On April 13, 2018, the United States Supreme Court denied a petition for review of the DRK case, leaving this trio of cases untouched for now.  Given the “now often litigated issue” of standing for assignment of a copyright claim, we can expect to see the contours of this rule continue to develop in the coming years.

Almost every NAD case begins with the maxim: It is well-established that an advertiser is responsible for all reasonable interpretations of its claims, not simply the messages it intended to convey. It follows that advertisers must choose their words very, very carefully to avoid unsubstantiated claims.  As we’ve blogged about before, comparative advertising can be highly effective in touting the advantages of a company’s products against those of its competitor, but these types of claims often require more careful substantiation than non-comparative ones.  So what happens when an advertiser’s claim is not intended to be comparative on its face, but one of the reasonable interpretations of its claim is comparative in nature? The NAD will likely recommend that the advertiser choose a different word.  In a recent case, the NAD analyzed Kimberly-Clark’s advertising claim “More hospitals than ever are choosing Huggies.”  In connection with data presented to substantiate a related claim ("Huggies® diapers is the fastest growing brand in hospitals ('based on volume share growth')"), which we will blog about soon, the NAD found that Kimberly-Clark had provided reasonable substantiation to support the statement that “more hospitals than ever” were purchasing/using Huggies, but NAD was troubled by the use of the word “choosing.” The NAD found that the word choice: connotes a “selection” of one product over another, and that consumers could reasonably interpret this claim to mean that more hospitals than ever are choosing Huggies over [the main competitor] (or buying more Huggies diapers than [those of the main competitor])—a message that the evidence in the record does not support. So, was there a better word choice?  According to the NAD, Kimberly-Clark could have made the claim self-referential by saying "more hospitals than ever before are using Huggies," or that Huggies is finding its way into more hospitals than ever before."

In a wake-up call to businesses that offer non-compliant consumer warranties, last week the Federal Trade Commission announced that its staff had sent warning letters to six major companies that market and sell automobiles, cellular devices and video gaming systems. According to the FTC, the letters express concerns that the companies’ warranties may be prohibited by the Magnuson-Moss Warranty Act (which governs consumer product warranties) and the FTC Act because they “tie warranty coverage to the use of particular products or services.” The Magnuson-Moss Warranty Act provides in part that: No warrantor of a consumer product may condition his written or implied warranty of such product on the consumer’s using, in connection with such product, any article or service (other than article or service provided without charge under the terms of the warranty) which is identified by brand, trade, or corporate name. 15 U.S.C. § 2302(c). In addition to the exception for articles or services “provided without charge,” a company may apply for a waiver from the FTC if: (1) “the warranted product will function properly only if the article or service so identified is used in connection with the warranted product, and (2) the Commission finds that such a waiver is in the public interest.” 15 U.S.C. § 2302(c). The FTC staff determined that the following examples from the six companies’ warranties were problematic in light of 15 U.S.C. § 2302(c): The use of [the company’s parts] is required to keep your . . . manufacturer’s warranties and any extended warranties intact. This warranty shall not apply if this product . . . is used with products not sold or licensed by [company name]. This warranty does not apply if this product . . . had had the warranty seal on the [product] altered, defaced, or removed. The FTC Staff directed the six companies to review their warranty provisions and revise them if necessary, and informed the companies that the FTC Staff would be reviewing their written warranties and promotional materials after 30 days. Businesses that offer warranties covering consumer products would be well-advised to take a fresh look at their warranties. If those warranties are tied to use of a particular product or service, they may run afoul of the Magnuson-Moss Warranty Act unless the product or service is offered for free or the company has obtained a waiver from the FTC.

An interesting article by The Atlantic highlights the large number of classic works that are set to enter the public domain on January 1, 2019.  Hundreds of thousands of works, including old classics such as Noël Coward’s London Calling! musical and Charlie Chaplin’s film The Pilgrim, which were first published in 1923, are set to have their applicable copyright term expire.  This is a result of patchwork amendments to the Copyright Act, which retroactively extended copyright protection and, in particular, the Sonny Bono Act of 1998, which fixed a copyright term of 95 years (up from the prior extension of 75 years) to any work published between 1923 to 1977.

It’s finally the start of baseball season: you can almost feel the gentle spring breeze, smell the peanuts and popcorn, and hear the crack of the bat. You may also notice something more colorful, dotted, and perhaps camo-patterned wrapped around those bats: nope, it’s not an actual lizard, that’s Lizard Skins® bat grip tape. Lizard Skins registered several of its Lizard Skins® bat grip tape designs for a one-color camo pattern (U.S. Reg. No. 5249013); a two-color camo pattern (U.S. Reg. No. 5239869); and an embossed pattern featuring six staggered rows of ovals (U.S. Reg. No. 5389215). Lizard Skins asserted exclusive rights in these designs and alleged trademark and trade dress infringement against Hot Glove for selling competing camo and oval patterned bat grip tapes under the Mega Wrap brand. The lawsuit was filed in the U.S. District Court for the District of Utah, Central Division on March 1. Lizard Skins claims in the complaint that Hot Glove stole home plate by offering knockoff camo patterns and staggered oval indentations on its bat grip tapes. The following side-by-side comparison photographs are featured in the complaint:   Lizard Skins claims that Hot Glove stole the “look and feel” of its products, though interestingly, it does not allege copyright infringement in the designs. Lizard Skins further alleges that the embossed Mega Wrap name on the tape and the overall product packaging, which features a clear window to show the rolled up tape, also infringes its distinctive trade dress. Lizard Skins makes clear in its complaint that the protected design elements are for “aesthetic and identifying purposes” and not for functionality. This is an important distinction, as functional elements of trade dress cannot be ruled safe under trademark law. Specifically, 15 U.S.C. § 1052(e)(5) bars registration if the mark “comprises any matter that, as a whole, is functional.” The overall goal, at least according to some courts, is to avoid granting one party exclusive rights in an aspect of the product’s design that others need to compete effectively in the marketplace. Lizard Skins claims acquired distinctiveness in its registration for the oval design embossed pattern for bat grip tapes. Its claims to the one and two-color camo patterns are based on inherent distinctiveness of a “random marble camo pattern” as applied to baseball grip tapes. Because Lizard Skins has obtained federal registration protection for its alleged trade dress, the burden will be on Hot Glove to prove that the trade dress is functional if it wants to rely on a functionality defense. Hot Glove is now up at bat to defend itself against Lizard Skins’ claims. We’ll bring you more updates as this case, and our long-awaited baseball season, develops!

When you play the video game Grand Theft Auto 5 (“GTA 5”), the last thing you want to see is a reflection of yourself.  GTA 5 is an action-adventure game that rewards the player for stealing cars and speeding away from cops. Part of the fun is that law abiding citizens can revel in digital mayhem and interact with gang members, drug dealers, and other poor decision makers without real world consequences. But when actress Lindsay Lohan saw certain GTA 5 images, she concluded that some of those poor decision makers looked a little too much like her. Ms. Lohan is a talented and accomplished performer who has been featured in TV, films, and music, as well as such litigations as Lindsay Lohan v. Armando Christian Perez (also known as Pitbull), et al. and a frivolous case filed by a Montana prison inmate serial complainant against Ms. Lohan, the Kardashian sisters, and Lamar Odom. Seeing a character resembling herself, strutting around the virtual, gritty streets of GTA 5 did not inspire Ms. Lohan to embark on a journey of soul searching and redemption, but instead sparked her inner Mean Girl to file a complaint in New York state court. That litigation came to an end on March 29, 2018, when the highest court of New York, the Court of Appeals, affirmed the dismissal of Ms. Lohan’s amended complaint in the case of Lohan v. Take-Two Interactive Software, Inc. The defendant, Take Two Interactive Software, Inc., develops, sells, markets, and distributes video games, including GTA 5. Ms. Lohan maintained that Take Two used her likeness without permission in three instances. In one scene, the player meets a female character named Lacey Jonas, who is trying to escape from paparazzi by hiding in an alley. The character describes herself as “an actress slash singer” and “really famous.” The second and third instances are static images used as transition screens between scenes in the game and also on the packaging, game discs, and promotional materials. One image features a young blonde woman wearing a red bikini at the beach, and the other features a young blonde woman wearing jean shorts, a white t-shirt, sunglasses and a fedora, who appears to be getting arrested by a female police officer. Ms. Lohan claims that Take Two misappropriated both her appearance and her voice to create the Jonas character, and that the two static images contain her “[i]mages, portrait[,] and persona.” To prevail on her right of privacy claim under New York law and survive dismissal of her amended complaint, Ms. Lohan needed to prove that her name, portrait, picture or voice was used for advertising or trade purposes without consent within the State of New York. The Court first concluded that an “avatar” such as a character or image in a video game, may constitute a “portrait.” Next, the Court considered whether Ms. Lohan was capable of being identified from the avatars alone based on the “quantity and quality of the identifiable characteristics” in the avatars. The Court concluded that both the Jonas character and the two images were not recognizable as Ms. Lohan. The Court explained that the Jonas character was simply “a generic artistic depiction of a ‘twenty-something’ woman without any particular identifying physical characteristics,” and the static images were “indistinct, satirical representations of the style, look, and persona of a modern, beach-going young woman.” In light of the Court’s ruling as to the portrait element, it did not address the other elements. This comes as a disappointment to some in the film and gaming industries who hoped that the Court would hold that New York’s right of publicity statute does not prohibit the use of real people in video games, as it does for other fictional works. Given how little the accused images resemble Ms. Lohan, this might not have been the right case to address that issue. We may have to wait until Take Two releases GTA 6 for a resolution.

A New York federal district court has certified for appeal its recent decision in a pending case involving the unauthorized use of a photographer’s photo by a number of media outlets, maintaining the spotlight on the issue of whether the online practice of embedding violates copyright law. Goldman v. Breitbart News et al. (SDNY Feb. 15, 2018, ruling certified Mar. 19, 2018). In 2016, plaintiff Justin Goldman snapped a photo of New England Patriots quarterback Tom Brady, while walking down the street in East Hampton with the Boston Celtics’ general manager (the “Brady Photo”). Goldman then uploaded it to his Snapchat account. The Brady Photo was newsworthy because Brady was in East Hampton to help the Celtics recruit basketball player Kevin Durant, who was staying nearby. The Brady Photo was scraped from Goldman’s Snapchat account, and posted to Reddit and then Twitter by a number of users, and the tweets were later embedded in a number of online posts reporting on the story, all without Goldman’s authorization. Goldman sued a number of the news outlets that had posted the Brady Photo, alleging that the embedding of his photo as part of their news stories violated his copyright rights in the photo. The news outlets filed a motion for partial summary judgment on the issue of whether their embedding of the Tweet displaying Goldman’s photo on their websites violated Goldman’s copyright in his photo and, specifically, the right to display it. The court in Goldman explained the technical process of embedding and, more specifically, the fact that the HTML source code of a webpage can either retrieve the photo to be displayed from the webpage’s own server or from a third-party server, with the latter referring to embedding. Here, the news outlets and blog did not host the Brady Photo, but rather embedded the photo as hosted on Twitter. This method is widely used and, to date, had been legally acceptable based on what is referred to as the “Server Test.” Under the Server Test, which has been upheld by the Ninth Circuit, websites that display copyrighted images without authorization are not liable if that image is retrieved from a third-party server and not hosted by the website’s own server. In Goldman, Judge Forrest rejected the application of that test, finding that it has not been widely adopted by all courts. Further, the court found that each defendant “took active steps” to embed the Brady Photo on their website, rendering it irrelevant where it was hosted, since the actions had the effect of transmitting an image to the public, regardless of the technological process (invisible to the viewer) for achieving that display. The court did not accept the defendants’ arguments that finding liability for any website that embedded content from another website would “cause a tremendous chilling effect on the core functionality of the web.” The court left open whether Goldman had in fact authorized the public use of his photo by posting it on Snapchat account (for example, under Snapchat’s terms of use), and whether defenses to copyright infringement such as a “very serious and strong fair use defense” and/or whether limitations on damages may exist. The defendant media outlets immediately moved to certify the ruling against them. Judge Forrest, noting that her opinion “has created tremendous uncertainty for online publishers” and the “frequency with which embedded images are ‘retweeted’”, agreed to this request on March 19th. The case will now go to the U.S. Court of Appeals for the Second Circuit. We will post further updates on this case as material developments occur. Jeremy Elman recently launched his own blog called Law of Technology.  The blog focuses on the intersection of technology and law, and explores how dramatic advances in technology change the legal system, and how the legal system both advances and inhibits that change. We encourage you to check it out!

We previously posted about a four year legal battle that arose from a refusal by Iowa State University to let its school logos be used on t-shirts by an on-campus pro-cannabis group, and the free speech implications of this refusal. In that case, ISU was found at both the district court and appellate levels to run afoul of the First Amendment because its refusal violated free speech rights of the students involved. By way of update, the State of Iowa has now been ordered by a federal district judge in the Southern District of Iowa to pay nearly $1 million in damages based on ISU's actions regarding its school logos. The state had already agreed to pay $150,000 to the individual plaintiffs in that case, as well as $193,000 for the plaintiffs' legal fees on appeal. The recent order addresses the award of the plaintiffs' legal fees at the district court level, setting these at $598,00. The high financial penalty faced by the State of Iowa reflects the special considerations surrounding cannabis branding as well as state agency trademarks. The decision on appeal can be found here.

The United States Patent and Trademark Office rejects trademark applications when it determines that the use of the mark is unlawful under the Controlled Substances Act. See In re Brown, 119 USPQ.2d 1350 (TTAB 2016) In the Weeds Between Federal and State Law: Brand Name for Legal Marijuana Sales Denied Federal Registration. No statutory support for these rejections can be found in the Lanham Act, nor does any court appear to have sanctioned them. In this author’s view, these rejections are unlawful, regardless of the “unlawfulness” of the conduct. The Lanham Act defines commerce as “all commerce which may lawfully be regulated by Congress.” 15 U.S.C. § 1127. The definition doesn’t say that the underlying commerce must be lawful – it just specifies that Congress’ regulation must be lawful. The definition makes sense in that the Commerce Clause is the constitutional basis of the Lanham Act, and the plain meaning of the definition is that the jurisdiction of the Lanham Act is as broad as Congress’ power to regulate commerce, regardless of whether Congress has chosen to criminalize the commerce. In Gonzales v. Raich, 545 U.S. 1 (2005), the Supreme Court upheld Congress’ power to regulate marijuana under the Commerce Clause, even as to its local cultivation and use. That Congress can lawfully regulate marijuana cultivation, use, and sale is therefore beyond dispute. The Board in In re Brown observed that it has “consistently held that, to qualify for a federal service mark registration, the use of a mark in commerce must be ‘lawful.’” While that may be its consistent position, the Board did not explain in Brown how such a requirement comports with the plain meaning of the Lanham Act, which imposes no such requirement. Nor did it explain how its apparent transformation of the Lanham Act’s definition of commerce complies with the Board’s limited jurisdiction (of which it often reminds those who appear before it). The Trademark Manual of Examining Procedure section embodying In re Brown, TMEP 907, adds little substantive analysis. In addition to a plethora of TTAB decisions along the lines of In re Brown, it cites a single federal court case that purportedly supports the PTO’s position that that it should determine if an applicant’s use of a mark is lawful before issuing a registration. In Gray v. Daffy Dan's Bargaintown, 823 F.2d 522 (Fed. Cir. 1987), the court considered the 15 U.S.C. § 1052(d) requirement of “concurrent lawful use in commerce,” and the timing of such lawful use. The Court opined in dicta that a mark must be in “lawful use in commerce” to obtain a valid registration, but the Court based that determination by relying on the portion of Lanham Act Section 2(d) that only applies to the unusual situation of concurrent use registrations, and not to the general and more common circumstance of non-concurrent use registrations. As a matter of statutory construction, the Lanham Act’s reference to “lawful use in commerce” in connection with concurrent use registration (and in a few other specific situations) should be read to mean that Congress knew how to specify “lawful use in commerce” as a requirement for registration when it wanted, and Congress chose not to include that as a general requirement. It should be noted that 37 CFR § 2.69 authorizes the PTO to inquire as to the lawfulness of commerce recited in an application. That regulation is vague in that it doesn’t explicitly provide any basis for the PTO to reject an application based on the response to the inquiry, although a rejection could be appropriate in connection with a concurrent use registration and perhaps in other unusual circumstances. And perhaps most directly, a regulation cannot supplant a law enacted by Congress, and here the law provides no general basis to reject applications merely because the PTO considers the use to be unlawful. In the present era when the executive branch may choose not to enforce or to selectively enforce various areas of federal law, it makes little sense for the PTO to apply a “lawfulness” requirement that isn’t in the Lanham Act, to the detriment not only of trademark applicants, but also to the public that relies upon trademarks to avoid confusion.

It is hard to imagine that any one person could initiate separate lawsuits resulting in decisions of substantial importance to the entire U.S. entertainment industry.  And when that person is iconic actress Olivia de Havilland – best known for her roles in “Gone With the Wind,” “The Heiress” and dozens of other films from Hollywood’s golden age – and the time between those two decisions spans more than seventy years, the scenario seems even more farfetched.  But Ms. de Havilland is indeed the plaintiff whose 1944 lawsuit against Warner Brothers resulted in the decision that effectively broke the control movie studios then exercised over their talent, and she is also the plaintiff whose 2017 lawsuit against the FX Networks cable channel has now resulted in a decision that confirms the wide-ranging ability of filmmakers to depict real people like de Havilland in entertainment properties like the miniseries “Feud.” Television producer Ryan Murphy created “Feud:  Bette and Joan” as the first installment in a series of television docudramas dedicated to chronicling famous real-life feuds.  Airing in 2017, this first installment, starring Susan Sarandon and Jessica Lange, portrayed the bitter rivalry between film stars Bette Davis and Joan Crawford, and how that rivalry was the product of the way Hollywood studios, dominated by men, treated women – especially older actresses. De Havilland was a longtime friend of Davis and a fellow actress with her at Warner Brothers in the 1930s and 1940s.  In “Feud,” de Havilland, portrayed by the actress Catherine Zeta Jones, appears in a fictitious interview conducted at the 1978 Academy Awards ceremony, in which she comments on the rivalry between Davis and Crawford, and the problems women in Hollywood encountered during their era.  (Kathy Bates, portraying the late actress Joan Blondell, also appears in a similar, fictitious interview.)  In addition, “Feud” shows Davis and de Havilland together in the past, including at the 1964 Academy Awards ceremony and during the making of the film “Hush … Hush, Sweet Charlotte,” in which de Havilland replaced Crawford as Davis’ co-star.  Over eight episodes of “Feud,” the de Havilland character appears in only seventeen minutes of screen time – 4.2% of the series as a whole. Notwithstanding the brevity of her portrayal, de Havilland, now age 101 and a longtime resident of Paris, France, sued FX and related defendants for violations of her rights of publicity and privacy, as well as false light, arguing that no one has the right to portray her in a film or otherwise without her permission, such that the mere inclusion of her in a fictionalized docudrama like “Feud” violated her rights.  She also argued that she was presented in “Feud” as a person who spread malicious gossip, and who used the word “bitch” to describe her sister, the equally iconic actress Joan Fontaine.  (While the relationship between de Havilland and Fontaine could itself be the subject of a whole other installment of “Feud,” Murphy has announced that the next airing will be entitled “Feud:  Charles and Diana”). FX and the other defendants immediately moved to strike de Havilland’s complaint under California’s anti-SLAPP statute, relying heavily on the First Amendment and the argument that filmmakers and the authors of creative works have the right to depict actual persons in docudramas like “Feud,” but their motion was denied.  The trial court held that the realistic portrayal of de Havilland was insufficiently transformative, such that no First Amendment defense to de Havilland’s right of publicity claim was available under California law.  The trial court also held that a reasonable jury could conclude that de Havilland’s portrayal in “Feud” cast her in a false light with respect to her use of vulgar terms like “bitch” to describe Fontaine, and the repeating of gossip (specifically, about the drinking habits of Frank Sinatra). Working under an expedited appeal schedule due to de Havilland’s advanced age, three California court of appeal judges rejected the trial court’s findings, holding that the First Amendment protects FX’s portrayal of de Havilland in a docudrama without her permission.  The court held that the right of publicity cannot be used to control a celebrity’s image by censoring disagreeable portrayals consistent with First Amendment and free speech considerations.  The court also held that de Havilland’s portrayal in “Feud” was transformative, particularly her appearance in the interview “framing device” that articulates the series’ broader concerns about the treatment of aging women, especially in Hollywood.  Finally, the court rejected de Havilland’s false light claim, finding that, with one possible exception, she was portrayed more favorably than any other person appearing in “Feud.” The court also held that de Havilland’s claims of damage resulting from her alleged portrayal as a gossip who used inappropriate language were not cognizable, in light of prior interviews de Havilland had given over many decades recounting lighthearted stories about the peccadillos of others, including her co-stars, and her documented use of the words “dragon lady” to describe her sister. So what’s next?  Under California’s anti-SLAPP law, the defendants can recover attorneys’ fees and costs from de Havilland, but she has vowed to appeal further.  In addition, her lawyers have characterized the appellate court’s ruling as an “industry decision” written by a judge who used to work for NBC and the firm representing FX.  So it seems that there will be yet another episode of “Feud: de Havilland v. FX” coming soon to this blog.  Stay tuned!

Deceptive “Made in USA” advertising and labeling claims have received a lot of attention from the FTC in recent years, reflecting the agency’s recognition that USA-origin claims are a persuasive selling point and should not be false and misleading. Many of the FTC’s enforcement actions have emphasized that “Made in USA” should not be used unless “all or virtually all” of the ingredients or components of the product are made and sourced in the United States. The same standard applies to words that are considered equivalent to “made” such as manufactured, built or produced. But what about “Assembled in the USA”? A mattress company using the ad claim “Designed and Assembled in the USA” ran afoul of FTC substantiation requirements when it turned out that the mattresses were imported from China already completed, with no assembly operations performed in the United States at all. See Complaint in In the Matter of Nectar Brand LLC. It is not surprising, then, that this ad claim was found to be deceptive. However, the Decision and proposed Consent Order provides helpful guidance about when it is appropriate to represent that a product is “Assembled in the USA.” According to the Consent Order, such a claim is substantiated if “the product is last substantially transformed in the United States, the product’s principal assembly takes place in the United States, and United States assembly operations are substantial.” (emphasis added). This is very clear guidance for companies using “Assembled in the USA” or closely analogous ad claims. As the FTC commented in its own blog post announcing the Complaint and Order, “Claims like Made in USA or Assembled in USA are more than just marketing talk to slap on a webpage or label…..Given how important USA claims are to many consumers, companies have an obligation to comply with the law. That starts with one simple principle: Tell the truth.” Definitely words to live by.

Last month in our Olympics edition, we provided a glimpse into the arcane world of licensing of musical works under the U.S. Copyright system.  It’s actually crazier still.  Who knew that the legislative reaction to the introduction of player pianos at the turn of the last century would continue to govern the royalty scheme for satellite radio and digital streaming services?  In large part it’s true!  However, U.S. Representatives Doug Collins (R-Ga.) and Hakeem Jeffries (D-N.Y.) have introduced legislation in the form of the “Music Modernization Act” (MMA) avowedly to bring the royalty determination formula for digital music services into the 21st Century.  In truth, the MMA is a modest step, but a step nonetheless. As a refresher, recall that there are two separate, primary expressions of music subject to copyright: 1) the song composition (i.e., the words and music, for example, embodied in sheet music); and 2) the sound recording, i.e., the performance of a song by an artist you hear on the radio or (for some of us Luddites) on the CD that you buy. Strangely, the ability to collect a royalty for the use of these two forms of the same song is different under the Copyright Act and it further differs when the sound recording is in a digital form. A license to reproduce the composition (for example, on a record or CD, or in a digital file) is called a “mechanical right.”  In the early 1900’s, songwriters railed against the introduction of the player piano, fearing a loss of revenue in the sale of sheet music.  A court sided against the songwriters, stating that the royalty provisions in the Copyright Act at the time did not address anything other than copies of sheet music.  Significant lobbying prompted Congress to amend the Copyright Act to include a “mechanical license” and related royalties.  The lore is that “mechanical” referred to the machinery of the player piano using paper rolls to substitute for a human being reading sheet music to play a tune. As recording mediums evolved beyond a paper roll into phonographs, cassette tapes, compact discs, and now digital files, the mechanical royalty has been applied to each new medium such that the songwriter receives a royalty for copies made.  If copies of the song are sold even once, then anyone else can record and sell their sound recording of the song, without any negotiation over terms, as long as they pay the mechanical license royalty.  Mechanical license royalties are paid to and distributed by a collective society of the songwriters and music publishers called the Harry Fox Agency (HFA) authorized by the Act.  Compensation for the rights in particular sound recordings come in the form of a percentage of the actual record sales paid to the recording artist per contract with the record distributor. Any public performance of a musical composition (which includes broadcast radio) is subject to a compulsory license fee to the songwriter.  Typically a license is taken from one or more of the big three performance rights organizations (ASCAP, BMI, SESAC).  The fees per performance are standardized and set by a panel of administrative judges.  These clearinghouses keep databases of songs and songwriters, manage the performance royalties, and send appropriate payments to the songwriters according to the statutory fees. Strangely, however, the performing artists that make the sound recordings you hear on the radio do not receive any compensation for the performance.  Up until the Copyright Act of 1976, there were no rights in sound recordings.  In the lead-up to the 1976 Act, terrestrial broadcasters (radio stations) argued that the performing artists did not need compensation for airplay because they received free publicity through airplay of the songs and received adequate compensation through record sales.  This argument won and an exemption still resides in the Copyright Act today for terrestrial radio, music clubs, restaurants and live performances. But not with respect to digital performances.  Think streaming internet radio (Pandora) and interactive streaming services (Spotify).  In 1995, the exemption for royalties for sound recordings was removed with respect to the digital delivery of music performances by the Digital Performance in Sound Recording Act (DPRA).  A new agency called SoundExchange was created by the DPRA to collect and distribute sound recording royalties implemented by the act.  Mechanical royalties were left to administration under the historical structure with the HFA.  However, because they are not broadcast services, interactive streaming services fall under a different mechanical royalty scheme and do not receive the benefit of a blanket license with the HFA.  (The explanation why is worthy of another article.)  Thus, the streaming services sometimes must seek out individual songwriters and publishers, who often may be difficult to find, or at least provide public notice at the Copyright Office.  Failure to provide such notice can lead to hefty statutory penalties. With all of this stratification, one might think that proposed MMA legislation would offer a comprehensive solution.  In actuality, the MMA, at over 100 pages long, really only accomplishes three narrow objectives related to mechanical licenses for digital music delivery.  First, the MMA sets up yet another rights clearinghouse called the “Mechanical Licensing Collective” (MLC) with a mandate to grant blanket mechanical licenses for streaming and interactive digital music delivery services and to remove the penalty for failure of notice to songwriters.  The MLC database would be public and any songwriter could claim rights in a song on the platform if not previously identified.  Second, the MMA would remove restrictions on consideration of market conditions in the setting of statutory royalty rates by the Royalty Board Judges.  (Curiously, this is not presently the case.)  Third, the MMA removes a limitation on single courts and judges having jurisdiction over rate challenges and instead provides for the random assignment of judges from the judicial district in which the case is properly brought, just as in all other civil cases. The MMA does not address the third rail of payments to performing artists for public performance of sound recordings (i.e., radio airplay).  Nor does it propose to consolidate the various collectives and agencies that manage mechanical and performance royalties.  In fact, it adds yet another agency into the mix.  The MMA thus appears to be merely another patch on top of the original player piano rules. There is no guarantee that the MMA will be enacted—this is the U.S. Congress we are talking about here.  However, there is strong industry support from all sides—music publishers, performance rights organizations, broadcasters, and digital media companies—so it may just have a chance.  We will be monitoring progress of the MMA over the coming year and will update you if any significant actions occur.

As we entered the first full day of the equinox yesterday, a split panel of the Ninth Circuit Court of Appeals handed the heirs of Marvin Gaye a decisive victory that will no doubt leave them with a spring in their steps.  The Court affirmed the jury verdict and multi-million dollar damage award in the Gayes’ copyright infringement suit against Pharrell Williams and Robin Thicke.   If you were hoping the Ninth Circuit would take this opportunity to wade deeply into the swirling waters of music copyright protection and infringement, the majority decision will leave you thirsting for more.  If you're looking for a fiery dissent that sings to a different tune, you will not be disappointed.  If you’re looking for a takeaway or two from this 80+ page decision, look no further than the rest of this blog post. Here are the key facts:  Marvin Gaye’s family owns the copyright in the song “Got to Give It Up.”  In 2012, Pharrell Williams and Robin Thicke (along with a cast of others) wrote and published the song “Blurred Lines,” which ended up being the best-selling single on the planet in 2013.  Gaye’s family claimed infringement, Thicke & Co. denied it, and litigation ensued.  The infringement issue was ultimately decided by the jury, and it sided with the Gayes.  The end result was a multi-million dollar damage award in their favor.  A mash-up/comparison of the two songs can be found here. On appeal, Williams and Thicke asked the Ninth Circuit to overturn the jury verdict arguing that as a matter of law, the similarities between the two songs do not constitute infringement.  Instead, they argued, the similarities simply related to the “style” or “genre” of the two songs, as opposed to any “protectable” expression owned by the Gayes.  Had the majority entertained the argument advanced by Thicke, it would have required the Court to grapple with the finer nuances of music copyright, which the majority refused to do.  Instead, it affirmed the jury’s verdict by concluding that the Gayes were entitled to “broad” protection for the work and that “there is no one magical combination of factors that will automatically substantiate a musical infringement suit.”   The majority essentially deferred to the jury’s findings and upheld the infringement verdict against Williams and Thicke. The dissenting opinion, authored by Judge Jacqueline Nguyen, is not just some waning coda at the end of the majority opinion—it’s a magnum opus copyright tour de force.  Her opening motif starts as follows: The majority allows the Gayes to accomplish what no one has before: copyright a musical style. “Blurred Lines” and “Got to Give It Up” are not objectively similar. They differ in melody, harmony, and rhythm. Yet by refusing to compare the two works, the majority establishes a dangerous precedent that strikes a devastating blow to future musicians and composers everywhere. Thereafter, this same theme is played in variations.  Judge Nguyen gives a masterclass on the law of music copyright.  She dives into the thicket of past precedent and a variety of musical concepts such as the signature phrase, pitch and rhythm, and discusses melismas, word painting, and parlandos.   After her exhaustive analysis, she ultimately concludes that the songs simply share a similar “groove,” which is not protected by copyright. It’s not clear what Williams and Thicke intend to do at this point.  With Judge Nguyen’s harmonious dissent playing so forcefully in the background, though, they do not "Got To Give It Up" just yet.  

Several musical artists, producers, publishers and songwriters, including the estate of the Notorious B.I.G and Rita Ora, are celebrating after a U.S. District judge for the Southern District of New York dismissed a copyright infringement lawsuit against them. In 1968, poet Abiodun Oyewole published the song “When the Revolution Comes.” The song warns of a coming revolution involving the black nationalist movement and ends with the lyrics: “But until then you know and I know n*****s will party and bulls*** and party and bulls*** and party and bulls*** and party and bulls*** and party…” In 2016, Oyewole filed a copyright infringement suit against several parties who performed, produced, published or wrote several songs that included the phrase “party and bulls***.” These songs included “Party and Bulls***” by The Notorious B.I.G. and “How We Do (Party)” by Rita Ora. Oyewole stated that he brought the suit because the songs contravened the meaning of the phrase “party and bulls***.” In response, most of the named defendants filed motions to dismiss alleging, among other things, that the alleged infringement constitutes fair use (two of the defendants filed a motion to dismiss for insufficient service of process). The court held that the defendants’ use of the phrase “party and bulls***” constituted fair use, focusing its analysis on “the purpose and character of the use” of Oyewole’s poem and the defendants’ songs. The court determined that Oyewole’s poem warned its listeners “to prepare for the revolution, appreciate its gravity, and commit themselves to it; [the poem] explain[s] that only things of substance will survive the revolution.” As such, the court found that Oyewole’s use of the phrase “party and bulls***” condemned the partying lifestyle since such a lifestyle does not prepare one for the revolution. Meanwhile, the defendants’ songs use the phrase “party and bulls***” to embrace the partying culture. The court accordingly found that the defendants’ use of the phrase “party and bulls***” transformed the phrase “from something shunned to something glorified.” The court also found that Oyewole’s complaint supported the court’s determination that the defendants’ use of the phrase “party and bulls***” constituted fair use. For example, the court stated that “Oyewole acknowledges that the B.I.G. and Rita Ora Defendants use the phrase ‘party and bulls***’ in contravention’ of Oyewole’s original purpose, which was to encourage people to NOT waste time with party and bulls***. Thus, even Oyewole recognized that Defendants’ songs change the meaning and purpose of the phrase party and bulls***.” (Internal quotations omitted). The court also quickly analyzed the other three factors of fair use (the nature of the copyrighted work, the amount and substantiality of the portion used in relation to the copyrighted work as a whole, and the effect of the use upon the potential market for or value of the copyrighted work). However, the court appeared to give significantly less weight to these three factors than the purpose and character of the use factor. This decision demonstrates that the purpose and character of the copyrighted work and the allegedly infringing material is a very important consideration in the fair use analysis. It also serves as a cautionary note to parties to be careful in drafting pleadings to avoid providing statements that support the opposing party’s position.

As many of our readers know, in 2011, ICANN, the organization that operates the internet domain name system, authorized the launch of the New gTLD Program - the largest expansion of the generic top-level domain name (“gTLD”) system on the Internet in history.  Prior to the launch of this program only 22 gTLDs had been approved and added to the Internet (e.g. .com, .net, .org).  With over 1930 applications for new gTLDs submitted in the program, ICANN has already delegated (introduced into the Internet) 1230 gTLDs as of the writing of this article. The much anticipated .app gTLD extension will soon launch.  Google paid $25 million for the gTLD extension at auction.  The gTLD was delegated in July 2015, and many companies have been waiting for registrations to begin.  Google’s minimal requirements for .app domain names include the following: (1) .app domain name registrations are secure namespaces; (2) all content must be served over HTTPS so that browsers can load .app websites; and (3) any registrant of a letter/letter two-character ASCII label represents that it will take steps to ensure against misrepresenting or falsely implying that the registrant or its business is affiliated with a government or country-code manager if such affiliation, sponsorship or endorsement does not exist. Below are key dates for the launch of the gTLD extension to keep in mind.  If possible, brand owners with interest in the .app extension should take advantage of the Sunrise Period to the extent they have registered relevant brands in the Trademark Clearinghouse and if not, make early submission if possible. Sunrise Period -- Mar 29 – April 30, 2018:  Trademark owners can register .app domains, ahead of the general public, for any marks they have registered in the Trademark Clearinghouse (TMCH) on a first-come, first-served basis; Early Access Period -- May 1 - May 8, 2018:  Anyone can register available .app domains for an extra fee; and General Availability Period -- May 8, 2018 and thereafter:  Anyone can register available .app domains. More information on the ICANN New gTLD Program, including statistics and lists of delegated and to be delegated gTLDS, can be found here.

In a recent unanimous decision, Forman v. Henkin, the New York Court of Appeals, New York’s highest court, removed the heightened requirement set by the lower courts for a party requesting the production of social media posts designated as “private” by the user.  Now, the rule in New York is consistent with federal practice in that general rules of discovery apply. The case involved a personal injury claim resulting from falling from the defendant’s horse, and the plaintiff, in opposing the defendant’s motion to compel, did not claim that the “private” portion of her Facebook page contained privileged information or information that should be shielded based on privacy grounds.  However, the lower court applied a standard in which the defendant must establish a factual predicate by identifying relevant information in the plaintiff’s “public” portion of her Facebook account that contradicts the plaintiff’s alleged “restrictions, disabilities, and losses, and other claims,” in order to access the “private” portion. Although the court noted that sites like Facebook now offer different levels of privacy the user can control to limit sharing information only with those of their choosing, it decided that New York’s discovery rules favoring liberal disclosure militate against a user’s ability to “unilaterally obstruct disclosure merely by manipulating privacy settings or curating the materials.” The court recognized that the proper standard for production should continue to be whether the information is “material and necessary to the prosecution of the defense of an action,” “i.e., relevant,” rather than whether the user has manipulated his or her privacy settings.  The court acknowledged that some materials on a Facebook account may be considered private, but observed there is heavy debate surrounding this characterization.  The court specifically noted that even “private materials may be subject to discovery if they are relevant.” “Private” social media posts are now subject to the same rules as the discovery of a personal diary.  Protective orders and redaction are tools that can be employed in the social media context, just as in any other, to prevent the disclosure of embarrassing information.  The court agreed that a party’s entire Facebook account is not necessarily discoverable upon the commencement of a personal injury action. Information from the following three categories continues to be protected from disclosure: privileged matter (absolutely immune) attorney work product (absolutely immune) trial preparation materials (subject to disclosure only on a showing of substantial need and undue hardship) The court stated that considerations such as the nature of the litigation, the injuries claimed, and any other information specific to the case, should govern whether relevant information is likely to be found on a party’s Facebook (or other social media) account.  The court also noted that the utility of the information sought should be balanced against privacy concerns, and that discovery should be tailored to the “particular controversy” while “avoiding disclosure of non-relevant materials.”  Potentially embarrassing materials of marginal relevance can also be exempted from disclosure.

Hello loyal TMCA readers – This is the first installment of what we hope to be an informative series of posts called Quirky Questions: TMCA Edition. Our labor and employment colleagues have a great blog, Quirky Questions, where they answer unanticipated questions regarding workforce issues. If you have employment questions (and we know many of you may do), we encourage you to check it out.  Over here at The TMCA we will be answering some quirky questions of our own, but in the areas of trademarks, copyrights and advertising. We hope you enjoy the series and feel free to send in your suggestions for future posts. ______________________________________________________________________________________________________________ Under U.S. trademark law, trademarks fall along the spectrum of distinctiveness. Word marks may be inherently distinctive (such as suggestive and coined or fanciful marks) or may acquire distinctiveness through use (descriptive words that have acquired secondary meaning and become protectable as a trademark).  The spectrum informs the scope of protection afforded to a mark – the higher a mark is on the spectrum, the stronger it is in terms of the owner’s ability to enforce its rights against 3rd party users of similar marks.  In short, good, strong trademarks should aim high on the level of distinctiveness. Laudatory Terms Laudatory terms are those that attribute quality or excellence to goods or services or are complimentary or superlative.  Although it may be possible to secure trademark rights in a laudatory term, laudatory trademarks are generally considered weak and entitled to a narrow scope of protection, even after a showing of secondary meaning.  The USPTO considers laudatory terms to be merely descriptive under the Trademark Act.  See Trademark Manual of Examining Procedure (TMEP) § 1209.03(k).  These terms may acquire secondary meaning over time through extensive use and promotion and become protectable as a mark.  The Court of Appeals for the Federal Circuit has stated, however, that “a phrase or slogan can be so highly laudatory and descriptive as to be incapable or acquiring distinctiveness as a trademark.”  See TMEP § 1209.01(c)(ii). The Federal Circuit or the USPTO has found these laudatory phrases to be merely descriptive: SNAP SIMPLY SAFER: cannulae, medical needles and syringes THE ULTIMATE BIKE RACK: bicycle racks and related accessories BEST PROTEIN: dietary and nutritional supplements DRIVE SAFELY: automobiles and parts THINK GREEN: waste disposal and treatment of waste WORLD’S HEALTHIEST GROCERY STORE: grocery store services There are other laudatory marks that do not actually describe a feature of the product, but instead generally suggest the product is of higher or better quality than other similar products.  They require some thought and perception to connect the mark to the goods or services.  For example, these marks have been registered on the Principal Register without disclaimers or claims of acquired distinctiveness: SUPER: vehicle lights PLUS: magazines and online magazines SELECT: automobile ignition parts GOLD MEDAL: pest control services Although these laudatory terms are registered on the Principal Register, they are widely used in many industries to describe products or services.  Thus, they are also weak and ultimately less valuable as trademarks. False Advertising Apart from being weak, another potential issue with laudatory terms is false advertising.  Use of laudatory trademarks can be considered advertising puffery if the attribute claim is general and subjective, such as “Greatest Pizza.”  However, a laudatory phrase that makes a more specific, verifiable claim could be subject to a false advertising challenge, such as “most powerful vacuum” because it could be objectively verified as true or not. At the end of the day, exercise caution in adopting laudatory terms as trademarks as they may not be accorded a worthwhile scope of exclusivity and are therefore less valuable.  Ideally, it is best to select a mark that is inherently distinctive like fanciful or arbitrary marks.  Unique and distinctive brand names have the greatest equity potential.

On February 26, in the wake of significant and far-reaching cybersecurity breaches (e.g., the Equifax Data Breach), the SEC published interpretive guidance to assist public companies in preparing disclosures about cybersecurity risks and incidents.  The SEC recognizes that cybersecurity threats present an “ongoing risk” to all public companies which can lead to “substantial costs and other negative consequences” including liability for stolen assets or information and repairs of system damage; increased cybersecurity protection costs, litigation and legal risks; increased insurance premiums; and damage to the company’s reputation, competitiveness, stock price and long-term shareholder value. The SEC’s new guidance reinforces and expands on its October 2011 guidance, emphasizing the importance of adopting sound cybersecurity policies and procedures and safeguards against insider trading in the event of a potentially material cybersecurity breach. Public Disclosure Requirements The SEC provides that “although no existing disclosure requirement explicitly refers to cybersecurity,” periodic reports, current reports and Securities Act and Exchange Act obligations all require public companies to disclose material risks and incidents including those related to cybersecurity. The SEC encourages companies to continue to use current report Form 8-K or Form 6-K to disclose material cybersecurity-related information promptly as this practice reduces the risk of selective disclosure. Beyond requirements explicitly found in SEC regulations, companies are also required to disclose material information and revisit previous disclosure, especially during a cybersecurity investigation, as may be necessary to ensure the company’s filings are not misleading.  Notably, companies “have a duty to correct prior disclosures that the company determines were untrue at the time it was made, or a duty to update a disclosure that becomes materially inaccurate after it is made.” The obligation to update prior disclosure is the subject of some debate, and perhaps will merit further guidance from the SEC.  According to a footnote in the guidance, the SEC bases this duty to update in Backman v. Polaroid Corp., 910 F.2d 10 (1st Cir. 1990), but acknowledges that other circuits have not found a duty to update.  Furthermore, the Private Securities Litigation Reform Act expressly disclaims any duty to update forward-looking statements.  15 U.S.C. §§ 77z-2(d) and 78u-5(d) ("Nothing in this section shall impose upon any person a duty to update a forward-looking statement.").  A duty to update prior disclosure, and the associated work and potential liability, may constrain future disclosure of cybersecurity risk. The SEC provides the following examples of factors companies should consider when evaluating their cybersecurity risk disclosure: 1) the occurrence of prior cybersecurity incidents, including their severity and frequency; 2) the aspects of the company’s business and operations that give rise to material cybersecurity risks and the potential costs and consequences of such risks; 3) the costs associated with maintaining cybersecurity protections, including, if applicable, insurance coverage relating to cybersecurity incidents or payments to service providers; and 4) existing or pending laws and regulations that may affect the requirements to which companies are subject relating to cybersecurity and the associated costs to companies. The SEC cautions that this guidance is not intended to suggest that a company should make detailed disclosures that could compromise its cybersecurity efforts.  There is no general requirement to expose potential system vulnerabilities in such a way that would make the company more susceptible to risk. However, the SEC expects that companies will provide disclosure that is tailored to their particular cybersecurity risks and incidents using company-specific, useful information as opposed to boilerplate language. The SEC guidance suggests companies adopt comprehensive policies and procedures related to cybersecurity and assess their compliance regularly.  Companies should have adequate disclosure controls and procedures in place to ensure that relevant cybersecurity information is processed and reported to the appropriate personnel to enable senior management to make disclosure decisions and certifications. These policies will not only allow the company to adhere to the SEC’s disclosure requirements but will also facilitate policies and procedures designed to prohibit directors, officers, and other corporate insiders from trading on the basis of material nonpublic information about cybersecurity risks and incidents. Insider Trading The SEC guidance provides that companies and their  corporate insiders should be mindful to adhere to the federal antifraud provisions as well as other applicable rules (such as codes of conduct required by exchanges) related to insider trading in connection with information about cybersecurity risks and incidents.  The SEC guidance advises companies in the midst of investigating significant cybersecurity incidents to consider implementing restrictions on insider trading in their securities to prevent corporate insiders from trading on the basis of material nonpublic information before the incident has been publicly disclosed, and to avoid the appearance of improper trading. Conclusion Companies are facing rapidly evolving cybersecurity threats.  It is increasingly important for companies to investigate and refine their own disclosure policies and procedures to ensure a momentary lapse in cybersecurity judgment does not culminate in unnecessary damages to the company or SEC enforcement actions.  The new SEC cybersecurity guidance can be found in its entirety here.

Three recent cases demonstrate that data privacy enforcement is on the rise in the United Kingdom. These and similar cases signal a new direction in enforcement action suggesting higher penalties, more frequent prosecutions and the casting of a wider net to hold individual and organisations liable for data offences and breaches. In the first ever class action to arise in the UK from a data breach, the High Court held that supermarket chain Morrisons was liable to pay compensation for distress caused to employees whose personal information was published online by a disgruntled worker. Andrew Skelton, a senior internal auditor at the company, was jailed for eight years in 2015 for deliberately leaking payroll information containing the names, addresses and bank account details of almost 100,000 employees. Skelton took that extraordinary step in retaliation for disciplinary action taken against him by Morrisons. The court held that whilst Morrisons was not at fault for the way in which it stored and protected its employees’ personal data, it was still vicariously liable for Skelton’s unlawful actions. The decision was reached notwithstanding the fact that none of the employees’ is thought to have suffered financial loss as a result of the breach, and that Morrisons took immediate action to secure the breach. This case highlights the importance of taking steps to mitigate the risk of breaches by members of staff and other ‘insiders’ (not just external fraudsters and hackers), such as by limiting access to databases strictly to those persons who actually need such access, effective anonymisation of data and regular destruction of data once it is no longer required. Morrisons is appealing the decision against it. Carphone Warehouse, a large UK brick and mortar mobile phone retailer, has been fined £400,000 by the Information Commissioner’s Office (ICO) following a cyber-attack in which hackers were able to gain access to data belonging to more than three million customers and 1,000 employees. A specialist report found a number of technical and security deficiencies, which the ICO found to be unacceptable for an organisation of Carphone Warehouse’s nature and size. It determined that insufficient measures were in place to ensure that software updates and patches were regularly installed, and security was lacking in a number of areas including detection of unauthorised use of login details, conducting vulnerability scans and monitoring and filtering traffic from the company’s web applications. It was found that anti-virus protection was not installed on the compromised servers. The ICO noted that the company’s system contained large amounts of historic transactional data which was not sufficiently encrypted and, in any event, should have long been deleted. The fine imposed on Carphone Warehouse is close to the maximum amount (£500,000) that the ICO can impose under current law. That ceiling will be raised significantly when the General Data Protection Regulation (“GDPR”) comes into force in May 2018, when the maximum penalty will be 4% of the affected organisation’s annual revenue or EUR 20 million (whichever is higher). In another recent case, the Maidstone Crown Court convicted loss adjustment firm Woodgate & Clark together with one of its directors and a senior loss adjustor on two counts of unlawfully disclosing personal data. The director was also convicted of unlawfully obtaining personal data. The firm was fined £50,000 and the director received a fine of £75,000. The defendants were ordered to pay £20,000 in costs. The case concerned an investigation carried out by a private investigator on behalf of Woodgate & Clark in connection with an insurance claim for fire damage brought by an individual policyholder. In the course of the investigation, personal financial information including records of banking transactions of the policyholder were unlawfully obtained. The loss adjustors and their officers were convicted for disclosing the information received from the investigators to their client, the insurer. The director was convicted of unlawfully obtaining the information. The investigators themselves were also convicted and fined. The case illustrates that the ICO – notwithstanding its limited resources - is prepared to pursue serious cases and to bring prosecutions before the criminal courts against organisations and individuals responsible for offences under the privacy laws. The case also highlights that anyone receiving personal data from a third party must exercise caution and judgment and have adequate systems in place to ensure that data obtained unlawfully is not used or disclosed to third parties. For many years, data protection laws were poorly enforced in the UK. This is clearly changing and prosecutions as well as administrative investigations and penalties regularly take place today. Data breaches and spamming offences continue to represent the majority of enforcement action, although the ICO is also engaged in regular auditing of public sector bodies which often results in the issuing of recommendations or directions for taking steps to comply with privacy and data protection laws. It is likely that the introduction of wider investigation and enforcement powers under GDPR would lead to a closer scrutiny of the handling of personal data among private sector organisations, not only in cases of serious breaches.

Pop artist Taylor Swift shook off a copyright infringement lawsuit filed by Sean Hall and Nathan Butler in the U.S. District for the Central District of California, Sean Hall d.b.a. Gimme Some Hot Sauce Music, et al. v. Taylor Swift, et al. Plaintiffs composed the song Playas Gon’ Play, which was recorded by the all-girl group 3LW that gained popularity in the early 2000s, and released in May 2001. The song peaked at number 81 on Billboard’s Hot 100 chart and the album it appeared on sold more than 1 million units. Plaintiffs claimed that Swift’s Shake it Off copied two brief phrases from the lyrics of the chorus of their song: “Playas, they gonna play / And haters, they gonna hate /.” No musical elements were alleged to be copied by Swift and her collaborators. Plaintiffs acknowledged that the concepts of players and their playing were well-established in pop culture when their song was released, but alleged that the “combination of playas/players playing along with hatas/haters hating … was completely original and unique” when the song was released in 2001. Shake it Off, which was written in 2014 by Swift, Karl Martin Sandberg and Karl Johan Schuster and released in August 2014, debuted at number 1 on Billboard’s Hot 100 chart and has sold more than 9 million copies. The chorus of Shake it Off contains these lyrics: “Cause the players gonna play, play, play, play, play / And the haters gonna hate, hate, hate, hate, hate /.” The key issue in the case was whether the lyrics “Playas, they gonna play / And haters, they gonna hate” are sufficiently original and creative to warrant copyright protection. Short phrases and slogans are generally not protected under federal copyright law, although there are exceptions if they are sufficiently creative – such as a catchy one-liner from a film or play. On January 3, 2018, Swift filed a motion to dismiss, arguing that the phrase “Playas, they gonna play/And haters, they gonna hate” is not entitled to copyright protection on this basis. Given that American culture in the early 2000s was heavily steeped with the concepts of players and player haters and “playas, they gonna play” and “haters, they gonna hate” were well-known short phrases, not surprisingly, the Court ruled on February 13, 2018 that the lyrics were not sufficiently creative to warrant copyright protection. The combination of these two unprotecable elements intertwined could not establish copyright protection. If you want to create a protectable copyright work from preexisting elements that will not be shaken off, you will need to convert them from merely well-known banal or trivial elements into an original and creative whole.

With the lifting of the International Skating Union ban on the use of music with lyrics, the Olympics in Pyeongchang is the first in which singles and pairs ice skaters can compete to music with lyrics (Ice Dancers have been able to skate to vocals since the 1990s).  While this adjustment may be the catalyst to inspired and energetic performances, it has also led to an interesting question regarding the types of licenses needed to use such music in live and re-broadcast skating performances. The answer to this question can be as complicated as a triple Axel and requires a bit of background regarding the copyrights present in music.  There are two distinct copyrights in music: (1) the copyright in the sound recording, which results from the fixation of a series of musical, spoken or other sounds (e.g. on CD, digital file, etc.); and (2) the copyright in the composition, encompassing the words and music embodied in the sheet music, sound recording, etc.  Each usually has a different owner and require distinct licenses for their use. Typically, the sound recording (or “master”) copyright is owned by the record label.  The copyright in the composition is typically owned by the songwriter(s) or music publisher. Under the U.S. Copyright Act, the exclusive rights of the owner of copyright in a sound recording are limited to specific rights and do not include any right of performance (unlike the exclusive rights in compositions, which do include the right of performance).  Rather, in the case of sound recordings, there exists the exclusive right to perform the copyrighted work publicly by means of a digital audio transmission.  Thus, for a live skating event there is no license required to use the sound recording.  However, if the performance is reproduced in the future, such as a best of the Olympics feature or compilation of highlighted performances, the situation changes.  In this case, NBC would be required to obtain a master use license for the reproduction of the sound recording. On the other hand, the public performance of the composition requires a license. The type of license and where it is obtained depends on whether the performance is dramatic (also called “grand rights”) or nondramatic.  The answer is further complicated by the fact that the Copyright Act does not define the terms “dramatic” or “nondramatic.”  In the U.S., three organizations negotiate license arrangements for non-dramatic performances and distribute fees back to the writers and publishers whose music and lyrics are being performed – ASCAP, BMI and SESAC.  License rights for dramatic performances, where a work is performed, for example, as part of a musical, opera, ballet, etc., are obtained directly from the copyright owner.  In the case of ice skating, the performance is non-dramatic and likely considered underscore (by ASCAP standards) and background (by BMI standards).  That is, the performance of the work used as a dramatic underscore to a scene where the music is not the focus of audience attention yet nonetheless is used to set the mood of the scene. NBC likely has a blanket license through one or more of the performance rights organizations, ASCAP, BMI or SESAC, which covers the use of the songs in the performances. In the end, NBC certainly trained for this event and had its gold medal team working to ensure the right licenses are in place for the broadcast of the Olympics.  With the proper licenses in hand, the rest of us get to sit back and judge whether a song choice rocks a performance or flops.

The Ninth Circuit breathed new life, for now, into a trademark infringement suit brought by Eat Right Foods Ltd.’s (“ERF”) against Whole Foods Market, Inc.  The district court had granted summary judgment for Whole Foods after concluding ERF’s claims were barred by the doctrines of laches and acquiescence.  But the Ninth Circuit reversed, concluding there were disputed facts material to both defenses, and remanded for further proceedings. From 2004 to 2013, ERF sold gluten-free cookies to Whole Foods that featured ERF’s “EATRIGHT” and “EAT RIGHT” marks.  In late 2009, Whole Foods contracted with a third party to use its food scoring system designed to communicate the nutritional value of foods to consumers.  Whole Foods launched the scoring system in early 2010, and was required to display an “Eat Right America” mark used by the third party.  ERF learned of Whole Foods’ use of the “Eat Right America” mark in connection with the food scoring system sometime between March and November 2010. Over three years later, in December 2013, ERF sued Whole Foods for infringement.  Whole Foods answered that by waiting over three years before filing suit, ERF had slept on its rights, and that, as a result, the claims were barred by the doctrines of laches and acquiescence.  The district court agreed and granted Whole Foods’ request for summary judgment on both grounds. The Ninth Circuit reversed and remanded as to both defenses. First, the Ninth Circuit concluded that because ERF had knowledge of the alleged infringement more than three years prior to when it filed suit in December 2013 – beyond the applicable three year statute of limitations – there was a strong, but rebuttable presumption that laches barred ERF’s claims. ERF argued the delay was reasonable because ERF was trying to settle its claims against Whole Foods without litigation.  Whole Foods countered that ERF was not actually attempting to settle, but instead was trying to “cash in on [its] trademark registrations and sell its brand to a larger company.” The district court agreed with Whole Foods, and concluded the delay was unreasonable.  But the Ninth Circuit disagreed, pointing both to evidence that ERF was trying to settle its claims, and potentially conflicting evidence that ERF was merely trying to sell its brand to Whole Foods.  At summary judgment, such factual disputes must be resolved in favor of the nonmoving party, ERF here, rendering summary judgment in favor of Whole Foods inappropriate. The Ninth Circuit also remanded for further analysis of prejudice.  Delay alone will not support a finding of laches; instead, a party must also show the delay caused prejudice.  Only prejudice suffered during the delay – i.e. expenses incurred after plaintiff knew or should have known about the claim – is relevant to an analysis of expectation-based prejudice.  Because the district court’s analysis did not distinguish between all expenses incurred, and expenses incurred only during the delay, the Ninth Circuit remanded for further analysis of prejudice. Lastly, the Ninth Circuit asked the district court to revisit the acquiescence defense to determine whether Whole Foods actually and reasonably relied on an affirmative act by ERF. The defense requires a showing that (1) plaintiff actively represented it would not assert a claim, (2) an inexcusable delay between the active representation and assertion of the claim, and (3) undue prejudice caused by such delay.  The district court concluded ERF’s acts constituted affirmative conduct and delay, the first and second elements, and that Whole Foods was prejudiced.  But the district court failed to make factual findings regarding the extent and reasonableness of Whole Foods’ reliance on ERF’s acts.  Was ERF’s conduct the actual and reasonable cause of Whole Foods’ prejudice?  The Ninth Circuit remanded with a reminder that prejudice does not equal reliance, and that factual findings for each are required. While the Ninth Circuit saved ERF’s claims for now, it’s not clear for how long.  The Ninth Circuit’s order focuses largely on defects with the district court’s findings, so it’s possible that on remand the district court will make additional findings to shore up the problems with its order, but ultimately come to the same conclusion.

By Eco84 - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=17846929 We previously posted about an advisory jury verdict rendered in the 5Pointz litigation (Cohen et al v. G&M Realty LP et al.), a case involving the whitewashing of the famous exterior aerosol (or “graffiti”) art in the space commonly known as 5Pointz. In November, the advisory jury panel found that the developer’s actions violated the Visual Artists Rights Act of 1990 (“VARA”). On Monday, the presiding judge agreed, ruling that the developer’s whitewashing of the works of art, without giving statutorily-prescribed notice and an opportunity to salvage the works, did indeed violate the artists’ rights under VARA by intentionally destroying their works of “recognized stature” with respect to 45 of the 49 works of graffiti art at issue in the case. In determining damages, the court agreed with the developer’s appraisal expert that because of the unique challenges and costs of selling artworks at 5Pointz—which were the size of a building wall—the works did not have a provable market value. As a result, the court did not award actual damages. The court proceeded, however, to award statutory damages. Pursuant to 17 U.S.C. § 504(c), statutory damages may be no less than $750 and not more than $30,000 for each work, as the court considers just. If the plaintiff proves that the violation was willful, statutory damages may be up to $150,000 for each work. In determining the appropriate measure of statutory damages, the court found that the artists sustained their burden to prove that the violations were willful. The court then undertook a multi-factor analysis to determine the appropriate measure of damages, including consideration of, among other factors, the infringer’s state of mind, the deterrent effect on the infringer and third parties, and the conduct and attitude of the parties. During the trial, the developer left a distinct impression with the court that he was “singularly unrepentant. He was given multiple opportunities to admit the whitewashing was a mistake, show remorse, or suggest he would do things differently if he had another chance. He denied them all.” This undoubtedly played an important role in the court’s ultimate determination to award the $150,000 maximum amount of statutory damages for each of the 45 distinct works, totaling $6.75 Million in total damages awarded to 21 different artists. The court closed its decision on a somber note, stating “[t]he shame of it all is that since 5Pointz was a prominent tourist attraction the public would undoubtedly have thronged to say its goodbyes during those 10 months and gaze at the formidable works of aerosol art for the last time. It would have been a wonderful tribute for the artists that they richly deserved.” The court’s thorough 51 page opinion provides useful guidance on artists’ rights under VARA, and the meaning of “recognized stature” of a work that entitles it to protection under VARA. Due to the dearth of authority on the meaning of “recognized stature,” and the substantial award to the artists, it is likely that the decision will be appealed to the Second Circuit. The TMCA will continue to monitor this case and keep you updated with any interesting developments.

A recent out-of-court settlement following an 8th Circuit decision in Gerlich v. Leath highlights some of the unique legal issues that surround the branding of products in the cannabis space. In 2012, two students at Iowa State University (ISU), Paul Gerlich and Erin Furleigh, secured approval from ISU’s trademark licensing office to use the ISU school mascot, "Cy the Cardinal," and other identifying marks and logos of the school on t-shirts that the students planned to print and sell.  The students were the leaders of the ISU chapter of the National Organization for the Reform of Marijuana Laws (NORML), an advocacy group that promotes the legalization of marijuana for responsible use by adults.  The ISU chapter of NORML was an officially-recognized student group and the t-shirts were designed to raise awareness of NORML.  The t-shirts displayed the school mascot as part of the NORML acronym, along with a marijuana leaf and the slogan “Freedom is NORML at ISU.”   The students started selling their shirts and placed a re-order.  But the school revoked its trademark licensing approval after a front page article in a local newspaper about the school's approval of the t-shirts prompted an angry reaction from state lawmakers and public officials.  The Trademark Office of the school also swiftly rewrote its trademark guidelines to ban the use of school logos on shirts that promote dangerous, illegal, or unhealthy products and illegal drugs. After subsequent versions of their t-shirts did not receive ISU approval, Gerlich and Furleigh sued four ISU administrators, including the then-president and director of trademark licensing, in the federal district court for the Southern District of Iowa on First Amendment and other grounds, claiming that the administrators took specific action at the students and subjected the students to scrutiny that wasn’t placed on other student groups.  The district court ruled that the administrators at ISU ran afoul of the First Amendment because their trademark decisions violated the students’ right to free speech. On appeal, the 8th Circuit agreed and confirmed that denying the students access to the school’s trademarks – such as Cy the Cardinal mascot - as members of NORML discriminated against them based on their pro-cannabis viewpoint.  The 8th Circuit maintained its holding after a rare grant of rehearing. Last month, the State of Iowa agreed to pay $150K to Gerlich and Furleigh and $193K in legal bills to the two firms representing them in order to settle the students’ claims.  The settlement deal covers damages and legal fees at the appellate level, but further payments may still have to be made for the trial phase of the case. Because ISU is a state university, the case involved complex issues of viewpoint discrimination under First Amendment case precedent that might not apply in a private context. However, the case illustrates that, along with the complex and uncertain regulatory scheme currently governing the commercialization of cannabis in the U.S., other considerations such as trademark policies that take into account free speech considerations may come into play in a trademark licensing context when state action is involved.