Trademark, Copyright + Advertising

This post was written by Korean Law experts, Sue Su-Yeon CHUN and Clare Ryeojin PARK of the law firm Kim & Chang and republished with permission from Kim & Chang.  For more information about Kim & Chang and their attorneys, please visit: https://www.kimchang.com/en/main.kc. For more insights on intellectual property from Kim & Chang, please visit: https://www.ip.kimchang.com/en/insights/index.kc. On December 27, 2024, the Korean National Assembly passed a proposed amendment to the Trademark Act ("Amendment") which will be enacted six months following the date of promulgation. Under the Amendment, (1) the trademark opposition period will be shortened to 30 days; and (2) the limit on punitive damages for intentional trademark infringement will be raised. Details are set out below. Opposition period to be shortened from 2 months to 30 days Under the current law, anyone can file an opposition with the Korean Intellectual Property Office ("KIPO") against a trademark application within 2 months of the date of its publication. However, many people file trademark applications at the time of launching the relevant product or with respect to trademarks that are already in use, and in addition, only about 1% of all published applications encounter oppositions. Recognition of the above, led to the consensus that the opposition period should be shortened so that trademarks can be registered more quickly. For applicants, this amendment will expedite the overall registration process. Potential opposers will have to keep a very close eye on publications given the very short opposition period. As is the case now, however, it will remain possible, to first file a simple notice of opposition before the end of the opposition period and submit a detailed opposition petition within a 30 day period (extendible for national applications) after the opposition period expires. In addition, an information brief can be filed with KIPO to preemptively block the registration of a trademark before the mark is published. The Amendment will only apply to trademarks that are published after the date of enactment. Punitive damages limit to be increased from 3 times to 5 times Under the current law, trademark owners are entitled to claim damage compensation from an infringer based on the infringer's profits gained from the infringement, the trademark owner's lost profits due to the infringement, or reasonable royalties. However, trademark owners are frequently hindered from recovering an adequate amount of damages, as there are practical difficulties in substantiating the damages actually incurred. To address this, an earlier amendment to the Trademark Act (amendment of October 2020) introduced the concept of punitive damages and currently, punitive damages of up to 3 times the amount of actual damages can be sought for intentional acts of infringement. The Amendment reinforces the punitive damages provision by increasing the limit to 5 times the amount of actual damages. By doing so, further pressure will be placed on potential infringers preemptively, while entitling trademark owners to a more realistic remedy for damages incurred. The Amendment will apply to acts which occur after the date of its enactment.

How many years must pass before a grisly murder can support a marketing effort? Apparently, something less than the 132 years since Lizzie Borden’s father and stepmother were axe murdered in Fall River, Massachusetts. (Yes, the passive voice is intentional—a jury acquitted prime suspect Lizzie, and the murders remain unsolved.) Fall River is city of about 100,000 people that abuts the Rhode Island state line. It was once home to numerous textile mills and now hosts a collection of World War II-era naval vessels at Battleship Cove. Portions of the music video for Aerosmith’s 1993 hit Cryin’ (perhaps NSFW, if your boss won’t appreciate 90s-era rock’s visual themes) were filmed in Fall River. The city’s top attraction, however, is the 1800s-era house that was the scene of the double murder. Today, US Ghost Adventures, LLC owns the Lizzie Borden House and offers ghost tours; overnight stays; and a collection of tasteful merchandise, like the “Bloody Axe in Head Play Headband.” Ghost Adventures owns several federal trademark registrations, including U.S. Trademark Reg. Nos. 2,070,882, for the word mark LIZZIE BORDEN and 4,397,555, for a hatchet logo, both for restaurant and hotel services. The hatchet logo features a notch along the bottom edge and, unlike the “bloody axe” merch, is not bloody. The Lizzie Borden House has operated as a tourist attraction since the 1990s, and Ghost Adventures’ federal registrations are incontestable. In 2023, Miss Lizzie’s Coffee LLC opened a coffee shop in the building adjacent to the Lizzie Borden House. A small grass strip and driveway separate the two buildings, which face a courthouse across the street (although not the courthouse where the jury weighed Lizzie’s fate). Miss Lizzie’s Coffee calls itself “The Most Haunted Coffee Shop in the World!” The original sign for Miss Lizzie’s Coffee featured letters made to look written with blood, and a stylized hatchet spewing blood. (Miss Lizzie’s Coffee’s website now reflects a sign with a coffee cup set against an appetizing blood splatter background.) Ghost Adventures was not thrilled with its new neighbor and sued the coffee shop shortly after it opened. Ghost Adventures alleged that several visitors, and at least one city official, incorrectly assumed that the coffee shop was related to Ghost Adventures’ business. Ghost Adventures asserted, among other things, trademark infringement under the U.S. Lanham Act and sought an injunction against Miss Lizzie’s Coffee. The U.S. District Court for the District of Massachusetts denied the injunction request, and Ghost Adventures appealed to the U.S. Court of Appeals for the First Circuit. The First Circuit affirmed the district court’s decision, agreeing that Ghost Adventures had not shown a sufficient likelihood of confusion to support its claim. Similar to courts around the country, the First Circuit applies an eight-factor likelihood-of-confusion test, which requires courts to weigh: “(1) the similarity of the marks; (2) the similarity of the goods; (3) the relationship between the parties’ channels of trade; (4) the relationship between the parties’ advertising; (5) the classes of prospective purchasers; (6) evidence of actual confusion; (7) the defendant’s intent in adopting its mark; and (8) the strength of the plaintiff’s mark.” Here, the court concluded that the marks were not similar, given that the trademarked hatchet has a “spotless,” notched blade, while Miss Lizzie’s hatchet is not notched, spews blood, and has a handle. The court observed that “Miss Lizzie’s” is incidentally similar to LIZZIE BORDEN, but noted that Ghost Adventures had not shown that its mark had displaced the story of Lizzie Borden in the minds of consumers—that is, there was no evidence that a consumer who hears of LIZZIE BORDEN thinks of the business instead of the murder. The court then weighed the market similarity factors, that is “the similarity of the parties’ goods, the relationship between their channels of trade, the relationship between their advertising, and the classes of prospective purchasers.” Ghost Adventures sought to portray both businesses as sharing the category of “hospitality services,” but the court rejected this characterization as merely a “broad economic sector,” insufficient to support likely confusion. The court found the businesses were better characterized as serving different groups—Ghost Adventures targets “sophisticated tourists who purchase tickets in advance and travel to Fall River to visit the historical site of the Lizzie Borden House, whereas Miss Lizzie’s attracts passersby hoping for a caffeine kick or a bite to eat.” Although both businesses rely on the Lizzie Borden story, confusion due to proximity or common reference to historical lore was not the type of confusion that Ghost Adventures was entitled to prevent. As the district court explained, “Ghost Adventures has not demonstrated that its mark bears the strength which might give it the ‘secondary meaning’ reach that, for example, ‘Sam Adams Beer’ might claim regarding the historical figure Sam Adams.” As such, Ghost Adventures could not use its LIZZIE BORDEN mark to prevent other hospitality businesses from opening in the vicinity of the crime and marketing themselves by using the Lizzie Borden story. The court also rejected Ghost Adventures’ reliance on consumer confusion evidence. The court decided there was insufficient evidence that any confusion was caused by an infringing mark, as opposed to confusion due to nontrademarked similarities between businesses or products. As the court explained, “if two outdoor Saturday farmers’ markets opened on the same block, causing wandering shoppers to think that they were affiliated, their proximity and similar business models, without more, would not be suggestive of trademark infringement.” This tussle over the use of the Lizzie Borden legacy shows the limits businesses face when they seek to market off historical sites and events. Had Lizzie Borden been the product of Ghost Adventures’ imagination and the Lizzie Borden House devoid of historical significance, there would be little doubt that Miss Lizzie’s Coffee would be deemed an infringer. But someone did “whack” Borden’s father and stepmother, although perhaps not 40-41 times, and her story became infamous. Given that historical reality, a business seeking to build its brand would need that brand to eclipse the story itself to demonstrate the strength needed for trademark enforcement. Until then, Ghost Adventures’ tours, hospitality, and merchandise may have to coexist with Miss Lizzie’s food and beverage, each invoking Fall River’s most notorious resident. For their part, the two businesses don’t quite seem ready to bury the hatchet—they filed papers in the district court on December 20, 2024, stating their intent to proceed with discovery in the litigation. Should they continue, Massachusetts may end up the scene of the most famous trial involving Lizzie Borden since 1892.

The United States Patent and Trademark Office (“USPTO”) recently issued a final rule adjusting certain trademark fees for United States trademark applications and registrations. Most aspects of the rule go into effect January 18, 2025, so practitioners and rights holders should be ready for the change and plan ahead to avoid unnecessary costs if possible. Fee Changes Unlike the across-the-board 7.5% fee increase issued on the patent side of the USPTO, the trademark fee increases are a bit more surgical, with different changes to 28 individual actions. Notable changes include: Introduction of a single base application While applicants previously had the option to file a TEAS Plus or TEAS Standard application, the new system provides a single base application option for applications filed under Sections 1 (based on use or intent to use) and 44 (based on foreign registration).  Depending on the complexity and completeness of applications, applicants may see additional fees. Additional fees for use of free-form text With the removal of the TEAS Standard application, applicants must now pay an additional $200 per class to use a free-form text box for goods and services for Section 1 and 44 applications. Essentially, filing for any goods or services that cannot be found in the Trademark ID Manual will come with an automatic $200/class fee, covering up to 1,000 text characters per class. Additional fees for lengthy goods/services descriptions Using the free-form text box for goods/services that exceed 1,000 text characters per class will now come with a $200 surcharge per additional 1,000 characters. For example, a goods description reaching 2,500 characters will now come with an additional $400 surcharge.  This character limit does not apply when using standard goods/services from the Trademark ID Manual. Notably Section 66 (WIPO) applications are not subject to the same types of surcharges for lengthy goods/services descriptions.  Rather, the USPTO has merely increased the filing fee by $100 per class.  This change for WIPO applications goes into effect slightly later, on February 18, 2025. Practical Implications The main messaging from these changes is efficiency, efficiency, efficiency. Given the addition of various extra fees for lengthy or non-standard filing descriptions, applications missing basic information, and extra classes in general, applicants may be encouraged to “tighten up” filing strategies. One way in which practitioners may be more economical long term is by using the USPTO’s TMID Manual entry suggestion tool. The USPTO accepts suggestions for entries into the Manual by emailing tmidsuggest@uspto.gov. For applicants who may re-use goods/services descriptions that do not appear in the TMID Manual, this may be an effective tool for avoiding the free-form text fee discussed above. Summary of Important Changes Fee Description Current Fee Fee as of 1/18/25 Fee Change Notes Trademark Application Fees Base application (Sections 1 and 44) N/A $350, per class New fee TEAS Plus and TEAS Standard application filing options merged to single “base application” filing option. Insufficient information in application (Sections 1 and 44) N/A $100, per class New fee Surcharge will apply if Section 1 or 44 application fails to satisfy any of the requirements under 37 CFR § 2.22(a)(1) - (19). These requirements are identical to the requirements for a valid TEAS Plus application under the current TEAS system, and the fee rate for the insufficient information surcharge is identical to the processing fee for failing to meet the requirements of a TEAS Plus application. Use of free-form identification of goods/services (Sections 1 and 44) N/A $200, per class New fee The Free-Form Text for Goods/Services Surcharge will apply for each class where the free-form text box is used instead of the ID Manual function within the electronic application. FREE-FORM TEXT IDs ONLY Each additional group of 1,000 characters after the first 1,000 N/A $200, per class New fee Applicants using the ID Manual function within the electronic application will not incur this surcharge. ·       The USPTO defines characters as including punctuation and spaces. ·       This fee will not be applied to amended identifications that exceed the character limit in a response to an Office Action. ·       Example: if the identification language in a single class is 2,001 characters, then a $400 surcharge is applied. WIPO application/subsequent designation (Section 66(a)) *(Effective February 18, 2025) $500, per class $600, per class ↑$100, per class Goes into effect February 18, 2025. TEAS Standard application $350, per class N/A Discontinued TEAS Standard application filing option discontinued. TEAS Plus application $250, per class N/A Discontinued TEAS Plus application filing option discontinued. Failing to meet TEAS Plus requirements $100, per class N/A Discontinued TEAS Plus application filing option discontinued. Statements of Use/Amendments to Allege Use Amendment to Allege Use (AAU) $100, per class $150, per class ↑$50, per class Statement of Use (SOU) $100, per class $150, per class ↑$50, per class Post Registration Maintenance/Renewal Renewal (Section 9) $300, per class $325, per class ↑$25, per class Declaration of Use (Sections 8 or 71) $225, per class $325, per class ↑$100, per class Affidavit of Incontestability (Section 15) $200, per class $250, per class ↑$50, per class Renewal fee filed at WIPO *(Effective February 18, 2025) $300 $325 ↑$25 Goes into effect February 18, 2025. Miscellaneous Fees Letters of Protest $50 $150 ↑$100 Petitions to the Director $250 $400 ↑$150 Petitions to Revive $150 $250 ↑$100 *This chart is for informational purposes only.

“Enjoy your reign while you may, Superman. For surely as night follows day, there comes a time when even gods must die.”      – Lex Luthor, Superman: Doomsday Last month, the creators of beloved characters like “Superman” and “Spider-Man” declined to come to their own rescue when their SUPER HERO and SUPER HEROES registrations were cancelled by a default judgment from the U.S. Patent and Trademark Office’s Trademark Trial and Appeal Board (the “Board”). Marvel and DC have reigned as the titans of the comic book industry for decades. Although, it is possible that some of this success can be attributed to the rivals’ joint ownership of the SUPER HERO and SUPER HEROES registrations, the earliest of which registered in the United States in 1967. This saga began when Marvel and DC opposed an effort by a London-based artist and his company, Superbabies Limited (“The Super Babies”), to register the mark SUPER BABIES—the name for a comic book series featuring superpowered infants. But The Super Babies fought back by filing a cancellation petition that alleged Marvel and DC were using a strategy “ripped straight from their own supervillains’ playbook” by using their trademark rights to “stifle competition and exclude others from the marketplace,” rather than to “prevent confusion.” Ironically, the petition cites an old Spider-Man comic where the recurring villain Kingpin “registered Spider-Man as a trademark, and used threats of litigation and financial ruin to pressure Spider-Man into letting Kingpin operate without SUPER HERO interference.” In particular, the petition attacked Marvel and DC’s ownership of the SUPER HERO marks on genericness and abandonment grounds. A mark becomes “generic” when it no longer distinguishes one product or service from another, but rather, is commonly used to refer to an entire category of products or services. Because the term “SUPER HERO” is widely used to refer to an entire genre or character archetype, The Super Babies argued that the mark was no longer distinctive and should be cancelled under 15 U.S.C. § 1064(3). In addition to the mark becoming genericized, The Super Babies also alleged that the SUPER HERO mark had been abandoned by Marvel and DC in three ways: (1) by allowing each other—as fierce competitors—to use the SUPER HERO mark; (2) by allowing the general public to use the SUPER HERO mark as the name of an entire genre; and (3) by themselves using the SUPER HERO mark as a generic label instead of as a source identifier. The petition highlighted how unusual it is for industry competitors to jointly own a trademark and argued that this arrangement was “antithetical to the foundational purpose of trademarks.” The Super Babies argued that, as competitors, the Lanham Act prohibits Marvel and DC from jointly owning a single mark, since the mark cannot not identify a single source of goods and services in these circumstances. After Marvel and DC failed to file a response, the Board issued an order cancelling the registrations. While DC and Marvel have the option to file a motion seeking to set aside the default judgment for good cause, they would face an uphill battle. At the time of this post, no further motions have been filed, though the TMCA will continue to monitor the case. The epic fight between The Super Babies, Marvel, and DC demonstrates the delicate balance between protecting one’s intellectual property assets without overly restricting creation or innovation. With great power—i.e., the exclusive ownership of a trademark—comes great responsibility—including to stop generic use of your mark. However, in an attempt to shoulder this responsibility by opposing The Super Babies’ applications, Marvel and DC landed themselves in a greater web of trouble. The Super Babies’ victory also serves as a warning to owners of trademark registrations that may be vulnerable to cancellation. In general, registrants’ spidey senses should be tingling when they attempt to enforce rights in arguably abandoned and/or genericized marks. Indeed, even incontestable registrations are vulnerable to generic attacks, nor is there a time bar for attempting to cancel generic registrations. But now that the SUPER HERO mark has been unmasked and returned to the public domain, the saying that “anyone can be a [super] hero” may finally ring true. Well, at least anyone can be a super hero . . . without fear of a lawsuit.

A temporary restraining order (“TRO”) followed by a preliminary injunction is often essential for a company to maintain the trade secrets status of its information that is being misappropriated. Typically, once the information is widely disseminated it will lose its trade secret status, even if such dissemination was done by unlawful means. Thus, acting fast to “keep the genie in the bottle” is essential when a company learns that its trade secret information may have been misappropriated. A recent TRO victory for biotech startup Trilobio, Inc. (“Trilobio”) demonstrates the importance of acting quickly, and with credible evidence, to protect confidential information and thwart trade secret misappropriation efforts. On September 9, 2024, Trilobio filed suit against Keoni Gandall (“Gandall”), a former Trilobio employee, claiming, inter alia, that he breached his confidentiality agreement with the company and misappropriated highly-valuable trade secret information to launch his own biotech startup in violation of, inter alia, the Defend Trade Secrets Act (18 U.S.C. §§ 1836, et seq.) and California Uniform Trade Secrets Act (Cal. Civ. Code § 3426.1). In the Complaint, Trilobio stated it fired Gandall in February 2023 for poor performance. Prior to Gandall’s termination, Trilobio alleged Gandall accessed the company’s computer systems and data, without permission, and copied large amounts of confidential research, code and trade secrets to his personal devices. The trade secrets at issue concerned Trilobio’s proprietary methods of using robotics and machine learning in synthetic biology to decrease the cost of synthesizing sequences of genetic material for medical research, and improve the processes involved in genetic engineering with automation. Trilobio claimed Gandall then disclosed its confidential information to third parties and marketed its trade secret inventions as his own through his new startup company, Nanala LLC (“Nanala”). Less than three weeks after filing its Complaint, Trilobio filed a Motion for Temporary Restraining Order (the “Motion”) seeking to prohibit Gandall from, inter alia, using or disclosing Trilobio’s confidential information and trade secrets, and prohibiting Gandall from destroying, deleting or concealing evidence of such. The Motion also sought to conduct expedited discovery. On October 17, 2024, U.S. District Court Judge Jon S. Tigar entered an Order granting, in relevant part, Trilobio’s request for a TRO, effectively prohibiting Gandall (and Nanala) from using, disclosing or destroying Trilobio’s confidential information and trade secrets. The Order also required Gandall to identify any individuals or entities to whom he may have disclosed, transferred or otherwise marketed Trilobio’s confidential information. In granting the TRO, Judge Tigar found Trilobio had established a strong likelihood “to succeed on the merits” of its trade secret misappropriation claim, one of the legal standards litigants must satisfy for a TRO to issue. Judge Tigar stated: “The evidence shows that Gandall took confidential, trade secret information from Trilobio after his termination and has continued to use the information for Nanala’s benefit, despite Gandall having signed a confidentiality agreement while employed at Trilobio.” Trilobio’s use of a forensic expert to examine Gandall’s work-issued computer was key in demonstrating Trilobio could succeed on the merits of its trade secret misappropriation claim – a necessary element of which is demonstrating the improper acquisition, use or disclose of the trade secret(s) at issue. In the Motion, Trilobio stated its forensic expert analyzed the Trilobio desktop computer issued to Gandall, and found that shortly after Gandall was notified he was terminated, Gandall accessed: (1) Trilobio’s proprietary GitHub source code repositories, (2) Trilobio’s investor update slide decks; (3) Gandall’s Trilobio Google email account and Google drive; and (4) the Trilobio Google email and Google Drive of CEO Roya Amini-Naieni (including Gandall’s own performance review). The forensic expert further determined Gandall created a “backdoor” on his company-issued computer to remotely copy all Trilobio’s source code and documents to Gandall’s encrypted personal storage device, and he wrote a program to automatically upload confidential Trilobio investor and financial information to the same device. Judge Tigar noted Gandall admitted he downloaded Trilobio’s proprietary information onto his own computer, and found Gandall’s arguments that Trilobio’s CEO consented to this download prior to his termination “simply…not credible.” Judge Tigar also disposed of Gandall’s other arguments opposing the TRO. In response to the Motion, Gandall argued Trilobio’s procedures for combinatorial assembly of DNA using oligo pools, one of the trade secrets at issue, were, inter alia, well known and had no commercial value. Thus, Gandall contended they are not trade secrets since an element of a trade secret is that the information is valuable because it is not generally known. Judge Tigar held these arguments were not supported by the evidence. First, the articles Gandall submitted in support of his argument that Trilobio’s DNA procedures were well known did not discuss or reveal Trilobio’s proprietary methodologies or its source code, thus demonstrating the information was not well known. Second, “Gandall’s contention that the information has no commercial value is belied by his attempts to start a company using that same technology.” In addition to granting Trilobio TRO relief, Judge Tigar also granted its request for expedited discovery under Federal Rule of Civil Procedure 26(d)(1). The Order stated Trilobio “established ‘good cause’ to seek discovery before a Rule 26(f) conference” in order to protect Trilobio’s trade secrets from further disclosure and aid in the discovery of facts for the preliminary injunction briefing. Following the issuance of a TRO, expedited discovery is often essential in a trade secret dispute to support the basis for a preliminary injunction at the preliminary injunction hearing that follows the issuance of a TRO. Thus, trade secret plaintiffs should typically seek to move for expedited discovery in conjunction with a TRO motion to avoid being ‘behind the eight ball’ for the preliminary injunction hearing. Judge Tigar’s ruling is a good reminder that injunctive relief is an important tool for maintaining trade secret status of information. If a company does not move quickly after learning of misappropriation, the information may lose that legal status. In those circumstances courts may also reject a later request for injunctive relief, and instead limit the remedies to damages for the trade secret misappropriation. However, when moving quickly to seek a TRO, it’s important to present credible evidence to support claims of trade secret misappropriation. Trilobio’s presentation of compelling forensic evidence substantiating misappropriation was key in securing its TRO against Gandall.

In a potential shakeup for corporate liability, the Supreme Court will hear oral argument this year on whether a real estate developer’s corporate affiliates should be responsible for a $46.6 million trademark infringement judgment—despite not being defendants in the case. Plaintiff Dewberry Engineers Inc. and defendant Dewberry Group, Inc. and first clashed in 2006 over the parties’ use of the DEWBERRY mark in connection with real estate development services. That dispute settled and defendant agreed to restrict use of its mark, including to not use DEWBERRY in the state of Virginia. However, defendant later purchased a hotel in Charlottesville, Virginia, and created a number of sub-brands (operated by its corporate affiliates) incorporating DEWBERRY. As part of its advertising efforts, defendant also distributed marketing materials bearing the mark to its affiliates. Objecting to this renewed use of the mark, the plaintiff brought suit in 2020 in the Eastern District of Virginia. The District Court later ruled that the defendant had willfully engaged in trademark infringement and awarded the plaintiff $46.6 million in damages, which the Fourth Circuit upheld on appeal. Notably, the court referred to the bulk of the award as “disgorgement,” but this term commonly refers to the payment of profits gained from a defendant’s infringing activities—which, according to the defendant’s tax returns, was $0. Instead, the court ordered defendant’s affiliates to foot the bill, treating the defendant and its affiliates “as a single corporate entity for the purpose of calculating revenues and profits.” The court primarily based its decision on the companies’ common ownership, in addition to the profits of defendant’s infringing activities appearing “on [its] affiliates’ balance sheets.” Furthermore, in the Fourth Circuit’s judgment, the Lanham Act presumably permitted such an award by allowing courts the discretion to adjust damage awards if it finds “the amount of the recovery based on profits [] inadequate.” 15 U.S.C. § 1117(a). The defendant unsurprisingly petitioned the Supreme Court to review the decision, arguing that the Fourth Circuit permitted the plaintiff to improperly pierce the corporate veil, and the Court granted the petition in June 2024. A number of intellectual property lawyer groups such as the The International Trademark Association and American Intellectual Property Law Association have similarly objected to the ruling, filing amici briefs in support of neither party but urging the justices to reverse the appellate court’s ruling. The Supreme Court is scheduled to hear oral arguments on the case on December 11, 2024. Although the question as presented by both plaintiff and defendant center squarely on the Lanham Act and trademark infringement, the Court’s decision in the case has the potential to significantly affect the scope of profits disgorgement, and, accordingly, corporate considerations when structuring businesses.

In Snap, Inc. v. Vidal, the Central District of California found the Trademark Trial and Appeal Board (“TTAB”) was wrong in finding that SnapChat’s SPECTACLES mark is generic for smart glasses. The district court’s opinion highlights the advantages of seeking de novo review of TTAB decisions in a district court and delves into the complexities of determining whether a mark is generic. In 2016, Snap Inc., the owner of SnapChat, began selling smart glasses under the name SPECTACLES. Snap’s SPECTACLES glasses contain cameras allowing the user to capture images or videos and newer versions contain augmented reality displays powered by software to display images on the lenses of the smart glasses. Snap filed two applications to register the mark SPECTACLES in both plain text and stylized form for various hardware and software related goods including “wearable computer hardware” and “computer software for accessing and transmitting data and content among consumer electronic devices and displays.” The United States Patent and Trademark Office (“USPTO”) refused registration of the SPECTACLES marks and that refusal was affirmed by TTAB. In its decision, the TTAB found that “spectacles” is a generic product name for “smart glasses” and therefore is not registrable. Undeterred, Snap sought review of the TTAB’s decision in the U.S. District Court for the Central District of California. On September 27, 2024, nearly eight years after Snap filed its applications, the Court issued an Opinion and Order, in which it found that “spectacles” is not generic and that Snap is entitled to registration of the marks on the Supplemental Register. There are generally two steps to determining whether a mark is generic: (1) determining and defining the genus of goods sought to be registered; and (2) determining whether the relevant public primarily uses or understands the mark to refer to the genus. The TTAB and Central District came to different conclusions at each step. The TTAB found that the relevant genus was “hardware and peripherals that are wearable as glasses.” This determination was tied to the language in Snap’s applications. At the TTAB, the record consisted primarily of dictionary definitions for terms like “spectacles” and “eyeglasses,” examples of Snap’s use of the Spectacles mark, and examples of third-party use of the term spectacles from publicly available articles and technical publications. When examining this evidence, the TTAB noted that several articles and publications referred to augmented reality glasses marketed by Apple, Google, and other third parties as spectacles. It also noted that the media often refers to glasses and sunglasses as spectacles. Accordingly, it found the term “spectacles” is generic for hardware and peripherals that are wearable as glasses. The Central District’s analysis differed from the TTAB’s at both steps of the test. First, the parties stipulated that the relevant genus is “smart glasses.” The Court accepted this stipulation but clarified that it encompasses both the “smart computing elements and its glasses form factor.” Second, the Court analyzed several expert reports submitted by both parties that were not considered at the TTAB. Snap submitted opinions from a linguistics experts and a consumer survey expert, both of which opined that based on their expertise and research, spectacles is not generic for smart glasses. Ultimately, the Court found that the dictionary definition, media, and publications considered by the TTAB only showed that “spectacles” is descriptive of the glasses aspect of “smart glasses.” This is because nearly all of the references use another descriptor for the “smart” portion of the genus—such as “AR spectacles” or “smart spectacles”—rather than relying on “spectacles” alone to convey the products are smart glasses. The Court also relied on Snap’s linguistic expert who opined that English-language speakers understand “spectacles” to mean “eyewear,” which the Court found credible in part, because it is “unsurprisingly unremarkable.” This case highlights the importance of choosing the proper avenue for review of a TTAB decision. Parties have two options when dissatisfied by a TTAB decision: (1) an appeal to the Court of Appeals for the Federal Circuit; or (2) de novo review in a U.S. District Court. In an appeal to the Federal Circuit, the record is closed and the parties may not introduce any new evidence. At the district court, parties may supplement the record with additional evidence and the Court reviews the case anew in view of the new evidence. In this case, Snap correctly chose de novo review in the District Court. The opportunity to present new evidence allowed Snap to present its expert reports and stipulate that “smart glasses” is the proper genus. Snap may not have fared so well in an appeal to the Federal Circuit.

Two years ago, the Colorado State Fair’s annual art competition sparked controversy after awarding a blue ribbon to a work generated in part by A.I. Jason Allen, the artist responsible for the work, said at the time, “I won, and I didn’t break any rules.” The judges agreed, despite outrage from some that the work lacked artistic merit. While the fairground judges saw fit to credit Allen as author of the work, it remains to be seen whether the federal judiciary will do the same. The U.S. Copyright Office refused to register Allen’s work for copyright based on lack of human authorship, and Allen has recently filed suit in Colorado federal district court to reverse the Copyright Office’s decision. Allen’s case centers on the question of whether human authorship is present in A.I.-generated images where human input is limited to the textual prompts given to guide the A.I.’s work. Allen’s work, entitled “Théâtre D’opéra Spatial,” depicts Victorian performers looking out from a stage towards an otherworldly portal in a surreal synthesis of past and future. To create the work, Allen used Midjourney (an A.I.-driven text-to-image software) to generate an iterative series of images refined over the course of 624 prompting sessions undertaken by Allen. Allen then upscaled the resolution of the final image using Gigapixel AI and added additional elements using Adobe Photoshop. The Copyright Office has thus far taken a dim view of A.I-generated images. Last February, it partially canceled a copyright registration for a graphic novel upon learning that the novel’s images were produced by Midjourney. Although the text and arrangement of the images in the graphic novel were human authored, the Copyright Office concluded that the individual images themselves were not, and thus they could not be encompassed by the scope of the resulting copyright registration. Further guidance issued by the Copyright Office last March has reinforced this position. Applicants are now instructed to “disclose the inclusion of AI-generated content in a work.” Further, under this guidance, “AI-generated content that is more than de minimis should be explicitly excluded from the application.” The Copyright Office relied on its prior precedent in rejecting Allen’s application, which insisted upon copyright protection for his entire work—not just the elements he added manually to the base image via Photoshop. In Allen’s view, A.I. image generation is merely the latest technological innovation that artists can leverage to realize their creative visions. Just as human authorship exists in photographs captured by cameras and musical albums crafted in digital audio workstations, argues Allen, so too should human input be recognized as authorship in the generation of A.I.-assisted artworks using third-party tools. Although the Copyright Office has not yet answered Allen’s complaint, its rejection letter provides a framework for its likely defense. In that letter, the Copyright Office quoted Midjourney’s website disclosure in asserting that “Midjourney does not interpret prompts as specific instructions to create a particular expressive result, because Midjourney does not understand grammar, sentence structure, or words like humans.” Relying on this understanding of Midjourney’s processing of prompts, the Copyright Office reasoned that, “when an AI technology receives solely a prompt from a human and produces complex written, visual, or musical works in response, the ‘traditional elements of authorship’ are determined and executed by the technology—not the human user.” Thus, the Copyright Office concluded, the traditional elements of authorship in Théâtre D’opéra Spatial were determined by Midjourney, not Allen. While it remains to be seen whether the Copyright Office’s position will prevail in federal district court (Allen also posits in his complaint that the court should approach the question “with a fresh set of eyes” post-Loper Bright, the recent case where the U.S. Supreme Court overturned the judicial rule of interpretation that directs courts to defer to agency interpretations of statutes), other countries have already begun grappling with the issue. For example, last year, the Beijing Internet Court ruled that an A.I.-generated image was copyrightable, holding that a picture generated by using over 100 textual prompts met China’s copyright requirements that a work be original and demonstrate “intellectual achievement.” And in the UK, where “computer-generated works” are protected and authorship is granted to “the person by whom the arrangements necessary for the creation of the work are undertaken,” A.I.-generated images could presumably achieve copyright protection (although determination of ownership in such cases may be complicated). Allen’s complaint raises important questions about the role of A.I. image generation and the human inputs and/or manipulation involved in the creative process. Who actually forms the image that results from the prompting process? Are there elements of authorship that A.I. solely controls, which other technologies—such as cameras—do not? And if there is a line between human- and A.I.-authored works, where should it lie? As software tools like Midjourney evolve and become more widely accessible, the practical need to delineate between the roles of humans and machines in the creative process will only increase. Yet as these tools likewise become more responsive to human input, this line-drawing may become even harder. We’ll report further as this case progresses.

What happens if two-thirds of the U.S. Supreme Court justices have a conflict of interest in a case presented before the Court? The speculative possibilities are abundant in such a situation—do all of the affected Justices have to agree to recuse? What if only some, but not all, recuse? Can the case just be decided by the three unaffected Justices? While it is not a circumstance the Supreme Court has ever faced before, it may have to in the upcoming term. The potential scenario stems from a lawsuit filed by four large book publishing companies against a non-profit digital library alleging copyright infringement of printed books owned by the co-plaintiff book publishers. Six of the nine justices have previously published books or have signed book deals with three of the co-plaintiff book publishers, including Justices Barrett, Gorsuch, Jackson, Kavanaugh, Sotomayor, and Thomas. The Second Circuit issued a decision in this case in September. If that decision is appealed by the December 7th deadline, and the Supreme Court grants certiorari, six of the nine justices will have a professional relationship with some of the co-plaintiffs, which raises a host of conflict of issue questions. Founded in 1996, the defendant, Internet Archive, is a San Francisco-based non-profit digital library that offers the public free access to digitized versions of printed materials, software applications, music, and audiovisual content. To date, Internet Archive has digitized millions of printed books, and subsequently provides copies to its users for free. But while millions of the source printed books are in the public domain and not currently protected by intellectual property rights, roughly 3.6 million of the source books are subject to current copyright protection. Of these books, about 33,000 books and the subject copyrights belong to four prominent book publishers. For years, Internet Archive would limit its lending practices to one digital “checkout” for each physical book it held in storage. However, during the COVID-19 pandemic when libraries around the world were closed indefinitely, Internet Archive expanded its lending policies by lifting limitations on how many people could borrow a single digitized book at a time, allowing checkouts by up to 10,000 users at a single time. In 2020, the book publishers sued Internet Archive over the non-profit’s lending of, in particular, 127 books, including titles by Malcolm Gladwell, Toni Morrison, and C.S. Lewis. The book publishers’ case centered on the argument that while Internet Archive has the right to loan out copies of printed books that it has lawfully acquired, it does not have the legal right to digitize those books and lend out the scanned copies en masse. Internet Archive argues its practices are protected by copyright fair use laws because its digitalization of the books was “transformative” as it made the process of lending out the books more convenient, and served the greater public interest by promoting “access to knowledge.” Both the District Court for the Southern District of New York and the Second Circuit of Appeals agreed with the book publishers—Internet Archive had merely digitized verbatim the original books, instead of transforming them into something new, a requirement under the fair use doctrine. In its affirmation of the lower court’s decision, the Second Circuit’s rationale was that making books available for free not only injured the co-plaintiff book publishers as valid copyright owners, but it would also negatively impacted the public at large by removing the incentive for consumers and libraries to pay for books, and in turn, for authors to create new works in the first place. Internet Archive decried the Second Circuit’s ruling, claiming that it harms individuals who do not live near or have access to the public library system, and thus, cannot readily access this “valuable knowledge.” While the underlying case is interesting from a broader copyright perspective, the real conundrum arises if Internet Archive files such a writ with the U.S. Supreme Court, and if the Supreme Court decides to hear the case. By all objective standards, six of the nine Justices have conflicts of interest in the case, as those Justices have either published or have current book deals with three of the four co-plaintiff book publishers. As such, there is little question they have financial ties to parties in the case. While the Justices’ published books were not subjects of Internet Archive’s digitalization, the Justices have a professional relationship with the co-plaintiffs, which, under the “Code of Conduct for Justices of the Supreme Court of the United States,” may constitute an ethics violation. For instance, Canon 1(b) of the Code of Conduct states “[a] Justice should not allow family, social, political, financial, or other relationships to influence judicial conduct or judgment,” and a Justice should not “knowingly lend the prestige of the judicial office to advance the private interests of the Justice.” However, this language is relatively vague, and there is no enforcement mechanism or requirement that Justices recuse themselves if they may be subject to a “financial relationship” or a “private interest.” As other questions surrounding the Justices’ personal interests in cases in front of the Supreme Court abound, the general consensus appears to be that the decision to recuse is left up to the individual Justices. Some may feel their private, financial relationship with the respective co-plaintiff book publishers renders them unable to act impartially, while others may not view it as a concern. But if one Justice recuses, should all six? Must the decision be made as a collective unit of the conflicted justices? Currently, a quorum of six Justices is required to decide a case, which would still leave three conflicted Justices hearing the Internet Archive case. The Code of Conduct is silent as to this issue, so we won’t know unless and until a case reaches the Supreme Court that requires the Court to resolve it. It could be the Internet Archive case, or it could be another in the future. But given the possibility of such a stalemate occurring in the near future, it might be prudent to shore up Supreme Court Justice recusal requirements now - before the issue comes up on a granted writ of certiorari.

Artist Rights in Unauthorized Exhibitions Recent unauthorized Banksy exhibits highlight the ongoing struggle of what obligations society owes to artists. While intellectual property laws primarily provide artists with economic protections and redress, what of artists who are less concerned with economic remedies and more concerned with the integrity of their works? The unauthorized use of Banksy’s works raises such questions and highlights the dilemma and limits of legal protections. Banksy is a street artist who has built a career on covertness and intrigue. With a hidden identity, Banksy began producing street art in the 1990s in England, which has since extended to locations worldwide. Works like “Love is in the Air,” “Girl with Balloon” and “Bomb Hugger” are replete with social commentary and activism. Banksy has mastered the visual oxymoron—juxtaposing two images to make a statement. “Love is in the Air,” for example, depicts a masked man winding up to throw a flower bouquet where one might expect to see a grenade or Molotov cocktail. This subversion of visual and emotional norms has attracted much viewership and notoriety. Banksy has sold prints at very democratic prices throughout his career. He has further lampooned the sky-high prices fetched on the secondary market for his works, famously causing a print of his iconic “Girl with Balloon” to shred upon purchase at auction. An act that, ironically, increased the value of the new work, retitled “Love is in the Bin”. Banksy has also exhibited his works in bombastic shows like the chaotic 2003 London exhibit “Turf War,” which featured real painted animals, stencils on walls and originals in various media, all of which were displayed eclectically. The exhibit was held at a secret location, revealed shortly prior to opening, and closed early after the police responded to complaints. The exhibit also overcame at least some of Banksy’s anti-consumerism sentiment as it teamed with Puma for collaborative merchandise and sponsorship. Despite allegedly viewing copyright as part of the capitalist system his art mocks, Banksy appears to care about fakes and, unsurprisingly, commercial use of his work. He created Pest Control to issue certificates for authentic works. The Pest Control website cheekily states: Please do not use Banksy’s images for any commercial purpose, including launching a range of merchandise or tricking people into thinking something is made or endorsed by the artist when it isn’t. Saying “Banksy wrote copyright is for losers in his book” doesn’t give you free rein to misrepresent the artist and commit fraud. Numerous groups have sought to bring Banksy’s work to more people. Some exhibitions feature only genuine Banksy pieces. Others, such as “The Art of Banksy: Without Limits,” consist primarily of unauthorized reproductions, many of which include modified versions of Banksy originals, and, of course, end in a gift shop. The Without Limits exhibit advertises itself as an “unauthorized exhibition” but also indicates that it features his art. Reports indicate that only about 34 of the 150 works on display are original, and the originals are not readily identifiable. The modified works included in the Without Limits exhibit exchange the textured, colored city walls of Banksy’s originals for screen-printed or painted canvases. The exhibit’s works lack the texture and context of the buildings and city in which Banksy originally placed them, or the eclectic mix of one of his shows. The exhibit has also adapted works, for instance showing a depiction of “Love is in the Air” as a white sculpture holding red roses and sporting a black baseball cap. Additionally, it appears many works have been scaled down, colors have been changed, and duplicates of art have been lined in rows with minor color variations. Does Banksy have recourse for decontextualizing his works and turning them into a curated and commercial experience? Can Banksy prevent modifications of his art in a fashion that eliminates key attributes of the original works? Banksy has decried the exhibit as a fake but has not yet taken legal action against unauthorized exhibits like Without Limits. One might expect moral rights to offer some relief. The United States codified certain moral rights in the Visual Artists Rights Act (VARA) of 1990, trailing many other countries in recognizing such rights. VARA gives artists rights of attribution – allowing an artist to claim, or deny, ownership of their work – and rights of integrity – allowing artists to prevent others from distorting or destroying a work. Such rights are reserved to works of a certain caliber of art such as paintings, drawings, and sculptures. Banksy’s works would almost certainly be protected as we have reported, graffiti is protected art. VARA protection, however, reaches only to original works or certain limited editions. Congress expressly excluded reproductions, depictions, and other portrayals from VARA claims. Thus, while defacing a Banksy mural would violate VARA, creating modified reproductions of his works and displaying them without permission does not, at least under US law. Other branches of intellectual property law provide a host of other claims though. Copyright law gives authors control over who reproduces, displays, and distributes protected works. Perhaps more importantly, copyright allows authors the right to grant or withhold permission to create derivative works of – or to modify – an original. The right to prohibit modifications can be seen as an additional means to protect the integrity of an author’s works. As copyright infringement requires only that the infringer have access to the original work – admitted in the Without Limits case – and that one of the restricted actions be taken, it is clear the Without Limits exhibit has infringed Banksy’s rights. The Without Limits exhibit may argue the fair use doctrine excuses their infringing reproductions, displays, distributions, and derivative works. Fair use protects certain unauthorized uses of works to protect free expression. To determine whether fair use applies, courts consider four factors: 1. The purpose and character of the use; 2. The nature of the copyrighted work; 3. How much of the copyrighted work is used; and 4. The effect of the use on the market or value of the copyrighted work. The purpose and character factor is generally the most important. In the recent Warhol decision, the Supreme Court provided a two-part test to analyze whether the purpose and character of use is fair. First, how is the purpose and character of an unauthorized use different from the purpose of the original? Second, is the unauthorized use commercial or non-commercial? Where the unauthorized and original purposes are the same or quite similar and the unauthorized use is commercial, the first factor likely will weigh in favor of the copyright owner. The Without Limits exhibits are unquestionably commercial, so the purpose and character would be paramount. Without Limits has publicly commented their exhibits serve to make the scope of Banksy’s works available to the public, who would otherwise need to travel hundreds of miles to see the works. Their exhibits also educate the public about Banksy’s works and provide commentary on such works. Such arguments would likely hold sway for the exhibit as a whole. Further, exhibiting original works is protected under the first sale doctrine, which allows the owner of a tangible copy of a copyrighted work the ability to, among other things, display the work. Such arguments lose power when applied to the individual reproductions and modified works displayed in the exhibit and sold in the gift shop though. Those unauthorized works provide little to no commentary on Banksy or alternative purpose to the originals, other than to turn a profit. Accordingly, the first factor would favor Banksy as to the unauthorized reproductions. The three remaining factors all likely favor Banksy too. Street art and pop art, as noted above, are generally valued, so the nature of the works would lend to protection. The Without Limits exhibits, and individual works, use the whole of many Banksy works and directly compete with Banksy’s exhibits and authorized sales, harming the market and value of his originals. Accordingly, it seems unlikely Without Limits would be able to excuse all copyright infringements as fair use. And what of Without Limits calling the exhibit “The Art of Banksy” when most of the art is not actually his? Similar to copyright law, some unauthorized use is excused as “fair.” A mechanic can identify the brand of car on which services are performed, for instance. Fair use only applies to authentic products though. It does not excuse counterfeits. Further, causing consumer confusion is the exact harm trademark laws seek to prevent and redress. Reviews of Without Limits exhibits in the United States question whether the works shown are real or fake, indicating at least some level of actual confusion. It should, therefore, be possible for Banksy, or Pest Control, which owns trademark registrations in the United States for BANKSY and images of several of his works, to make successful claims for trademark infringement against the exhibition as well as the gift shop items. Indeed, the exhibit appears ripe for false advertising and misrepresentation claims as well. So why hasn’t Banksy taken any legal action? Most accounts conclude he has refrained from pursuing litigation to remain anonymous. In the United States, however, it may be possible to bring copyright claims under the Banksy pseudonym if the court decides the need for anonymity outweighs the public’s interest in identifying him. It is also possible Pest Control could bring copyright claims as the beneficial owner. Further, trademark rights are based on use, and Pest Control, as the owner of the registrations, could pursue claims. Accordingly, a desire for anonymity fails to explain his lack of action. Perhaps Banksy shirks the relief these laws offer as a rejection of the economic concerns the laws primarily protect. The laws, however, also offer injunctive relief – stopping the unauthorized or misrepresentative uses – which may appeal more to the principles Banksy purports to uphold. Or maybe he sees limiting exposure to his art (or interpretations of it) as antithetical to the messages he seeks to convey through the work.

A few months’ back, the TMCA wrote about a copyright dispute between the campaign committee of former Iowa Congressman Steve King and Laney Griner, the owner of the photograph used in the popular “Success Kid” meme. The Eighth Circuit Court of Appeals has since affirmed the jury’s finding that the campaign was liable for copyright infringement for using the meme in a fundraising message for King’s unsuccessful reelection campaign. Of most interest, the Eight Circuit affirmed the jury’s rejection of the campaign’s fair use defense. The campaign had claimed that Griner, who took the photograph of her son, Sam, the “Success Kid,” should not be allowed to encourage use of the photograph generally but then also target the campaign’s commercial use of the photograph. They based their argument on the first, third, and fourth fair use factors. The Eighth Circuit’s analysis focused primarily on the first factor, the purpose and character of the use. This case marks the first time that the Eighth Circuit has applied the Supreme Court’s recent seminal fair use case, Andy Warhol Found. for the Visual Arts, Inc. v. Goldsmith, 598 U.S. 508, 143 S. Ct. 1258, 215 L. Ed. 2d 473 (2023). As discussed by the TMCA, after Warhol, courts assessing the first fair use factor must focus on: (i) whether and to what extent the challenged use has a purpose that is different from that of the original work; and (ii) whether the challenged use is commercial or non-commercial. The campaign argued that its use of “Success Kid” was like the billions of other uses of the photograph: the creation and dissemination of a meme. The Eighth Circuit was unpersuaded, however, largely because of the campaign’s admittedly commercial use of the meme for fundraising purposes. Quoting Warhol, the Court noted that “the ‘commercial nature of the use’—while ‘not dispositive’—‘is to be weighed against the degree to which the use has a further purpose or different character.’” The Court explicitly stated that fair use is more difficult to establish when memes are used for commercial purposes. In the Court’s own words: “Memes used commercially in advertising or fundraising are subject to stricter copyright standards than memes used noncommercially, which are often fair use.” This statement clarifies that memes are to be treated no differently than other uses. The campaign did not satisfy that stricter standard because its use was not transformative, so there was nothing to weigh against the commerciality of the use when assessing the first fair use factor. The Court rejected the campaign’s claim that their fundraising meme was transformative because the original purpose for Griner photographing her son had nothing to do with memes. The Eighth Circuit disagreed, focusing not on Griner’s original purpose for taking the photograph, but instead on her reason for asserting her copyright rights in the photograph: to control the commercial use of the photograph in memes. The Court thus found that the campaign’s use of the photograph in a meme did not add to or alter the purpose or character of the original work. The Court was also sure to note that, like other uses, memes are transformative to differing degrees, depending on the circumstances. But here, any evidence of transformativeness was lacking because the purpose of the use was the same as Griner’s use. As the Court noted: “The fact that everyone else is doing it is not a particularly compelling justification, especially considering the vast majority of these uses are non-commercial.” The Eighth Circuit also held that the third fair use factor—the amount and substantiality of the portion used in relation to the copyrighted work as a whole—favored Griner because the photograph of “Success Kid,” which was the heart of the template used to create memes, was used in the campaign’s meme. The fourth fair use factor was neutral. The effect of the campaign’s use on the market for the copyrighted photograph could not be determined. Griner had licensed the photograph to many well-known brands over the years, though licensing requests had decreased before the campaign’s use. There was no evidence that the campaign’s use increased the market for licensing the photograph, and a reasonable jury could have found that an association with King and his campaign could further dampen the licensing market. The Court also upheld the denial of attorneys’ fees to the campaign because it did not prevail, despite having made an offer of judgment for more than the statutory minimum of damages awarded to Griner. It also upheld the district court’s decision not to award attorneys’ fees to King himself, who did prevail on the merits below. The full text of the opinion can be found here.

Earlier this week we met up in lower Manhattan with friends, colleagues and many news faces at the 2024 National Advertising Division (“NAD”) conference. As always, it was great to see and hear from experienced practitioners, the NAD attorneys as well as representatives from the Federal Trade Commission on hot topics in advertising ranging from green washing to privacy and dark patterns to subscriptions. If you didn’t make it this year, we prepared a quick cheat sheet to keep you informed: Artificial Intelligence – AI is now part of daily life and so it is not shocking the NAD attorneys and the FTC representatives spent a good amount time discussing the legal implications of this emerging technology. If we learned nothing else from the conference this year, we learned that the FTC is spending time learning and thinking about AI. In particular, we heard that the FTC is looking into platform AI tools and we should expect to hear some statements on those in the coming months. FTC Commissioner Melissa Holyoak talked about targeted enforcement actions instead of sweeping rules as the agency grapples with the complexities of the technology and the many, many ways in which businesses are applying AI. The agency seems concerned that AI can and has been used to perpetrate fraud (we have already seen some FTC enforcement on this front). At the same time, it also knows that AI is here to stay and can be used in very beneficial ways (think how voice cloning helps those unable to speak). Samuel Levine, Director of the Bureau of Consumer Protection at the FTC also spoke about the enforcement action against Rite Aid, which concluded with a stipulated order prohibiting the company from using facial recognition technology for security or surveillance for five years to settle charges that the retailer failed to implement reasonable procedures to prevent harm to consumers in its use of AI technology in its stores. Consumers Reviews – Consumer reviews have been a hot topic at the NAD conference for a number of years now. You’d think it would cool off. Not that case this year because the FTC accounted its Final Rule Banning Fake Reviews and Testimonials just a few months ago. The rule is effective October 21, 2024. Violations of the rule will allow the FTC to seek civil penalties of up to $51,744 per violation as well as other relief. One of the most interesting parts of the rule relates to review suppression and how companies can legally withhold reviews based on certain criteria. Influencers – We got to hear from Emese Gormely, a real live content creator and podcast host. She told her tales from the front lines of Instagram and sponsored content. We also heard from a panel of legal experts on current trends in influencer marketing. The controversial topic of platform disclosure tools reared its head and we saw first-hand how some platforms have disclosures tools that may look clear and conspicuous on their own platforms, but when you share the content to other platforms, those disclosures disappear, rending the tools completely ineffective. Also, disclosures that leave us guessing at the sponsor’s identity are probably ineffective. In addition, the panel discussed how sometimes content paid for by brands featuring influencers still needs disclosure even it is shared on the brand’s social media feed. Until next time…

Cognac, which originates from a specific region of France and is named after the commune of Cognac, is far more popular outside its native country. Indeed, according to the industry group Bureau National Interprofessional du Cognac or BNIC, an astonishing 98% of cognac is exported. Cognac has a strong following in the African-American community, and is especially beloved by American rappers and hip-hop artists, many of whom serve as brand ambassadors or owners. As we previously covered, that connection includes a record label named “Cologne & Cognac Entertainment” and their U.S. trademark application for musical performances and services under this mark:     BNIC opposed the application on the grounds that COGNAC is a geographical indication and that Cognac producers own a common law certification mark for COGNAC. The Trademark Trial and Appeal Board, however, sided with applicants, holding that there was no likelihood of confusion because – at least according to the Board – the COGNAC certification mark was simply not famous enough. After BNIC appealed and the Federal Circuit held oral argument, we predicted that the Board’s decision appeared to be on shaky ground. That premonition turned out to be correct – on August 6, the Federal Circuit issued a decision vacating the Board’s dismissal of BNIC’s opposition and remanding to the Board for reconsideration. The Court began by explaining that unlike trademarks, “which indicate a single source of a product or service, certification marks are used by a person other than its owner with authorization from its owner.” Certification marks generally certify regional or other origin, material, quality, accuracy, and other characteristics. Notably, certification marks of regional origin are exempted from the Lanham Act’s general rule precluding “primarily geographically descriptive” marks. The Court then noted that although not registered with the PTO, it is undisputed that COGNAC is a common law certification mark. BNIC is an organization responsible for controlling and protecting the certification mark COGNAC for brandy manufactured in the Cognac region of France. The key issue on appeal was whether the use of the COGNAC mark for hip-hop music and production services was likely to cause confusion. The Board had held that confusion was not likely, in part because it concluded that the COGNAC mark was not strong or famous. It also dismissed BNIC’s dilution claim because, among other reasons, the Board did not think that BNIC had proven the fame element of dilution. The Federal Circuit first considered the issue of the COGNAC mark’s fame, the dominant factor in the In re E.I. DuPont DeNemours & Co., 476 F.2d 1357, 1361 (CCPA 1973) likelihood of confusion analysis. It held that the Board had erred in requiring that COGNAC be famous for its certification status. In the court’s view, a certification mark can be famous for many reasons, including geographic origin, and it does not need to be famous for its certification function. Thus, the Board’s failure to consider whether or not COGNAC was famous as an indicator of geographic origin was an error. The court also took issue with the Board’s holding that substantial sales and advertising of COGNAC certified products could not establish the mark’s fame because those products also bear brand names, such as HENNESSEY. Just because a certification mark is used with a brand name mark does not mean that the certification mark itself is not famous. As the court noted, certification marks are often present with a brand name mark because they can only be used on third-party products. The Board therefore should have determined whether a portion of the sales and advertising evidence could be attributed to the COGNAC mark (rather than just the brand name mark) such that the evidence was indicative of fame for the certification mark. The Federal Circuit also disagreed with the Board’s conclusion that the marks at issue are dissimilar. As the court explained, just because COGNAC informs consumers of the product’s geographic origin does not mean it cannot also “project an image of sophistication and elegance.” Indeed, the Cologne & Cognac Entertainment record label’s mark projects such an image precisely because of its use of the COGNAC mark. The Board also erred in its analysis of the similarity of both the goods and services and the trade channels. Instead of comparing BNIC’s services to those of the record label, the Board should have compared the goods, services, and trade channels of certified users of the COGNAC mark (e.g, HENNESSEY) to those of the record label. Finally, the court turned to BNIC’s dilution claim, which the Board had dismissed. Here, again, the court disagreed with the Board’s analysis. First, BNIC’s failure to explicitly plead that their certification mark was famous prior to Cologne & Cognac Entertainment’s constructive date of first use did not require dismissal of the dilution claim because the Notice of Opposition provided sufficient notice to meet the pleading standards (and the record label had failed to file a motion to dismiss). Second, as discussed above, the Board’s conclusions regarding the mark’s fame were erroneous and did not support a finding that COGNAC is not famous for purposes of dilution. It will be interesting to see how the Board responds to this slap-down from the Federal Circuit, and whether reconsideration changes its conclusion. But the Federal Circuit’s decision can only be helpful to owners of certification marks, particularly those indicative of geographic origin. We suspect there was much rejoicing among Cognac producers when this decision came out – and probably more than a few celebratory bottles of the fine French brandy consumed. Santé!

The Digital Millennium Copyright Act (DMCA) is a section in the US Copyright Act that provides a safe harbor for internet service providers so long as they comply with a notice and takedown system. The way the DMCA works is a company, such as an internet website host, a search engine, or a website operator, registers an agent with the United States Copyright Office. Then, any individual or entity who finds content it owns that is protected by copyright (whether or not registered) on a website hosted by the internet service provider can submit a takedown request to the service provider’s DMCA agent that contains the information required by the statute. The requestor should consider issues like fair use before filing the takedown notice. Assuming the complaint is compliant with the statute and legitimate, the service provider may then remove the content and send a notice to the alleged infringer about the removal to avoid a contributory infringement claim. The alleged infringer is then allowed to submit a counter-notification explaining why the takedown is not justified. The service provider then forwards the counter-notification to the original complaining party, which then has 10-14 days to file a lawsuit over the content. If no lawsuit is filed, the content will be reinstated by the service provider. If a lawsuit is filed, then the content remains disabled until the lawsuit is resolved. In April of 2023, Nexon Korea Corporation, owner of video game Persona 3 (P3), sued Ironmace Co. Limited, Ju-Hyun Choi, and Terence Seungha Park for copyright infringement and trade secret theft. Choi and Park were former employees of Nexon and founded Ironmace, another Korean corporation, in 2021. Together at Ironmace, Choi and Park created Dark and Darker, which, like P3, is a Dungeons and Dragons inspired role playing fantasy video game. After the game went live, Nexon filed a takedown notice under the DMCA with Valve Corporation, the platform that hosted the game in the United States. Valve removed Dark and Darker from their platform. Ironmace went on to file a counter notice saying its game did not violate any of Nexon’s US copyrights, and then Nexon filed its lawsuit in Washington State, where Valve is based. According to the DMCA, when Ironmace filed the counter notice, it consented to personal jurisdiction in Washington. However, Ironmace filed a motion to dismiss on the basis of forum non conveniens, arguing that the litigation should occur in South Korea, where both Nexon and Ironmace are based, despite the fact that the lawsuit involves US copyright law and the Dark and Darker was targeted to a US audience. Korea has different pre-trial discovery procedures, which Nexon called “inadequate” in its response. The lower court granted Ironmace’s motion to dismiss. In July 2024, the Ninth Circuit affirmed the lower court’s decision, stating that the DMCA does not categorically preclude forum non conveniens and that when Ironmace consented to personal jurisdiction, it did not consent to venue, which is a separate issue. The court emphasized that Choi and Park both signed employment agreements electing the Seoul District Court as the venue for any work-related intellectual property disputes. Notably, this is the first time a court has ruled that a DMCA related claim would be better suited to be litigated outside of the United States. Foreign entities with US copyrights often rely on the DMCA to enforce their rights in the United States and rely on United States law to govern. While courts are known to use the doctrine of forum non conveniens sparingly, they have noted that foreign plaintiffs do receive less deference to their choice of forum than domestic ones (see, e.g., Piper Aircraft, Co. v. Reyno, 454 U.S. 235 (1981)). However, courts in the past have looked at similar issues and decided the other way. For example, in DFSB Kollective Co. v. CJ E&M America, Inc., a California district court ruled the forum should not be changed to Korea when DFSB, a Korean corporation with a license to distribute K-pop music, sued a US entity under the DMCA for distributing the music in the Unites States. The case involved both Korean and US law, witnesses had to appear from Korea, documents and evidence needed to be translated from Korean into English, and a prior settlement agreement from a Korean court was disputed. Nonetheless, the California court rejected the American defendant’s motion to dismiss under forum non conveniens, stating that it is an “exceptional tool.” It will be interesting to see how the new ruling from the Ninth Circuit affects foreign entities who wish to file DMCA takedown requests to attempt to enforce their rights in the Unites States. Dorsey will continue to monitor the impacts, and we will report on any interesting new developments.

Allegations Against What-A-Burger #13 Whataburger has once again found itself in the news over a lawsuit it filed over naming rights against a long-standing East Coast burger establishment for its purported infringement of the WHATABURGER trademark. On June 11, 2024, Whatabrands LLC, the Texas-based burger establishment, sued What-A-Burger #13, Inc., a North Carolina-based burger establishment, based on its use of the mark “What-A-Burger #13.” According to Whataburger’s complaint, it was founded in 1950 in Corpus Christi, Texas as a single location hamburger stand, but has since expanded its operations to over 1,000 restaurants in 16 states, with its rate of expansion increasing significantly since 2020. But burgers is not all that Whataburger offers. It also sells condiments, sauces, and other food items under the WHATABURGER mark in more than 5,000 grocery stores across 25 states and Mexico. In other words, Whataburger alleges it has garnered significant goodwill in its WHATABURGER mark, for which it first obtained a federal registration in 1957. With respect to What-A-Burger #13, the complaint alleges that, since no earlier than 1969, the North Carolina burger establishment has offered goods and services under the name and trademark “What-A-Burger #13” that are identical to those Whataburger offers—namely, restaurant services and food products—in connection with two North Carolina locations and a food truck. Critically, Whataburger alleges that What-A-Burger #13’s use of the mark began more than a decade after Whataburger registered its mark. Whataburger often receives publicity about expansion into additional states and, since 2022, this publicity has included speculation about Whataburger expanding into North Carolina. While that has yet to officially occur, in April 2024 Whataburger publicly announced its plans to expand its restaurant footprint into North Carolina in 2025. Whataburger began plotting its expansion into North Carolina as early as 2022. Pursuant to this plan, Whataburger reached out to What-A-Burger #13 in October 2022 to discuss its anticipated expansion and a likelihood of confusion between the entities, which resulted in the parties entering into a coexistence agreement in May 2023. Under the coexistence agreement, What-A-Burger #13 was permitted to use the What-A-Burger #13 mark solely in connection with their existing locations and single food truck “in limited ways.” However, Whataburger alleges that days before the coexistence agreement was signed, What-A-Burger #13 secretly formed a separate LLC called WAB #13, LLC “to circumvent the purpose and intention of” the agreement. According to Whataburger, the formation of WAB #13, as well as What-A-Burger #13’s use of its food truck, constituted breaches of the agreement. Based on these alleged events, Whataburger filed suit against What-A-Burger #13, its related entities and affiliates, and its owner, Zeb Bost, alleging federal trademark infringement, federal and common law unfair competition, breach of contract, and unfair and deceptive trade practices. What-A-Burger #13’s Response Although What-A-Burger #13 has not yet filed an answer or otherwise formally responded to the complaint, the law firm representing it provided the following statement: What-A-Burger is a small family business that originally opened in in the 1950s in Kannapolis North Carolina. Now in its third generation of ownership by the Bost family, Zeb Bost, who is the grandchild of one of the founders operates two What-A-Burger restaurants in Stanly and Cabarrus Counties. Starting in 1970, the Bost family entered into an agreement with the then-owner of WhatABurger out of Texas that it would operate without interference in Stanly and Cabarrus Counties. The Texas company broke that agreement in 2022. Now, after being in business for seventy years, What-A-Burger’s future is being threatened by this large national retailer, and the Bost family is being victimized by big money interests. The law firm’s response raises two noteworthy legal issues and potential defenses for What-A-Burger #13: (1) the assertion that What-A-Burger #13 opened in the 1950s belies the allegations in the complaint and gives rise to a potential good faith carveout for use of the mark, and (2) the assertion that Whataburger and What-A-Burger #13 entered into an agreement in 1970 under which Whataburger would not interfere with What-A-Burger #13’s operations in Stanly and Cabarrus Counties gives rise to a potential breach of contract counterclaim. In fact, as to the first point, the Mooresville-South Iredell Chamber of Commerce’s website states that What-A-Burger #13 was founded in 1956—one year prior to Whataburger’s federal registration for the WHATABURGER mark. As What-A-Burger expanded, each new location was named sequentially. What-A-Burger opened its first location in 1956 and its thirteenth location, What-A-Burger #13, in 1969. It will be interesting to see how What-A-Burger #13 claims that the current entity is the successor in interest to the rights commencing in 1956 and how it accounts for the variation in numbering. Analysis of What-A-Burger #13’s Potential Defenses as a Junior User We have seen similar situations play out in the courts before. A national brand with a federally registered trademark discovers that a smaller company is operating under the same or a similar name in a limited geographic region and, in some fashion, aggressively asserts its rights under the Lanham Act. Indeed, Whataburger itself did this with another geographically remote burger establishment using the Whataburger name in Virginia more than two decades ago. When this situation arises though, it is important to focus on the purpose of trademark law: trademarks exist to aid consumers in identifying and differentiating between brands. They allow trademark owners to protect their goodwill through the exclusive control over the use of their unique mark. When someone uses a confusingly similar name without authorization it could lead to consumer confusion regarding the products or services offered by the junior user and the affiliation or sponsorship of the senior user with those products or services. This would allow the junior user to unjustly benefit from the goodwill established by the first user in association with the mark. Thus, courts assessing trademark infringement focus on the likelihood of consumer confusion. Notably, when two parties are using similar marks in geographically remote areas, concurrent use may be permissible under certain circumstances without the junior user being considered an infringer. One such circumstance arises where the use of the mark by the senior and junior users are confined to geographically separate markets, with no likelihood that the senior user will expand its use into the junior user’s markets, so that no consumer confusion is possible, then the subsequent user is permitted to continue use of the mark concurrently. This is known as the Dawn Donut rule and is still widely accepted, including in the Fourth Circuit, where the Middle District of North Carolina is located. Importantly, this rule only applies where the senior user is not likely to expand its use of the trademark into the geographic area in which the junior user is using the trademark because without operating in the same area, there is no likelihood of consumer confusion. Another circumstance under which a junior user will not be considered an infringer is where (1) the junior user adopted the trademark without knowledge of the senior user’s earlier use, and (2) the junior user (or those in privity with it) has continuously used the trademark since before the senior user registered the trademark. This defense is available under Section 1115(b)(5) of the Lanham Act, and only applies to the area in which the junior use proves its continuous prior use. Under the facts alleged by Whataburger, it is clear that the court would find that the Dawn Donut rule does not apply because of Whataburger’s planned expansion into North Carolina. Although currently Whataburger is not operating in North Carolina, making What-A-Burger #13 a geographically remote junior user, Whataburger has clear plans to expand into North Carolina based on its own announced plans, and the discussions it has had with What-A-Burger #13. Thus, Whataburger is highly likely to expand into What-A-Burger #13’s market and the Dawn Donut rule would not apply. Though the Dawn Donut rule would not apply, What-A-Burger #13 should or could have a strong argument that it is not infringing Whataburger’s mark under Section 1115(b)(5) of the Lanham Act. Whataburger has not alleged that What-A-Burger #13 knew of its use of the mark in Texas prior to its adoption of the mark and there is no indication that it did. Moreover, it appears that What-A-Burger #13 has been using the mark since before Whataburger registered it. While Whataburger alleges that it registered its mark in 1957 and What-A-Burger #13 has been using the mark since no earlier than 1969, What-A-Burger #13’s statement and the Mooresville-South Iredell Chamber of Commerce’s website indicate that the owners of What-A-Burger #13 opened their first location under the “What-A-Burger” name in 1956. Therefore, What-A-Burger #13 has a strong argument that it has been operating in North Carolina since prior to Whataburger’s trademark registration. Assuming What-A-Burger #13 has sufficient proof of its earlier operation, it would likely succeed in asserting a defense under Section 1115(b)(5). What-A-Burger #13’s Potential Counterclaim In addition to asserting a defense under Section 1115(b)(5), it is likely based on What-A-Burger #13’s statement that it could assert a counterclaim against Whataburger for breach of contract. Assuming that the parties did, in fact, enter into a contract in the 1970s under which Whataburger agreed not to interfere in North Carolina in Stanly and Cabarrus Counties, then What-A-Burger #13 may have a claim that Whataburger breached this agreement by planning to expand into North Carolina. Conclusion This case is still in its infancy and the facts still need significant development, but it does serve as a cautionary reminder to trademark registrants seeking to expand into new geographical areas that the mere fact that its mark is registered does not give it carte blanche to enjoin any and all uses of similar marks. It also serves as a reminder to junior users that there are important exceptions to trademark priority that may be applicable to them to protect any goodwill they have established. Ultimately, nationwide protection is only available to federal trademark registrants, but the law protects good faith junior users to the extent of their continuous use. Therefore, trademark registrants should be careful to investigate the facts surrounding a junior user’s use of a mark before aggressively asserting any infringement claims.

The company behind social media phenomenon, Poppi Soda (“Poppi”) may be in fizzy waters for its claims the beverage provides prebiotic benefits to consumers. In a recently-filed California suit, named plaintiff, Kristin Cobbs, initiated a class action lawsuit against the owner of Poppi, VNGR Beverage LLC (“VNGR”) claiming its advertisement and on-label representations of Poppi’s health benefits are unfounded and in violation of several California statutes. Founded in 2016, Poppi is marketed as a healthy alternative to traditional sodas whose popularity took off in 2018 after an appearance on the well-known TV show, Shark Tank. As stated by Cobbs, “[Poppi’s] success is largely owed to its ability to preserve the flavor and sweetness of traditional sodas while claiming to be ‘gut healthy’ due to its inclusion of ‘prebiotics’ – a specific type of dietary fiber commonly found in food like bananas and whole grains.” On each can of Poppi, consumers can see the company’s tagline “Be Gut Happy. Be Gut Healthy,” along with the claim that the soda contains “Prebiotics for a Healthy Gut.”[1] Each Poppi beverage contains the natural soluble fiber, inulin, which when processed in the large intestine, promotes the growth of healthy gut bacteria known as “probiotics”. Cobbs’ claim, however, centers on the fact that each Poppi beverage contains just two grams of prebiotic fiber — an amount which has apparently been shown to be “too low to cause meaningful gut health benefits for [a] consumer from just one can.” In fact, to see any health benefits from the prebiotic fiber, Cobbs claims the science shows a consumer would need to drink more than four cans of Poppi every day for twenty-one consecutive days. Notably, consuming this amount of the soda would also mean consuming a substantial amount of cane sugar, which would allegedly “offset most, if not all, of [the] purported health benefits.” Cobbs contends that these unsubstantiated claims are harmful to consumers who rely on beverage manufacturers to “accurately and honestly” advertise a product’s benefits. The Complaint as filed alleges violation of California’s False Advertising Law, California’s Consumer Legal Remedies Act, California’s Unfair Competition Law, and unjust enrichment as a result of these misrepresentations. To prevail on all of these claims, it will need to be proven that VNGR: Knew or should have known its advertisements for Poppi were untrue or misleading in violation of Cal. Bus. & Prof. Code § 17500; Represented that Poppi has “sponsorship, approval, characteristics ingredients, uses, benefits, or quantities which they do not” in violation of Civil Code § 1770(a)(5); Represented that Poppi beverages are “of a particular standard quality, or grade” when in fact they are of another in violation of Civil Code § 1770(a)(7); Advertised goods with the “intent not to sell them as advertised” in violation of Civil Code § 1770(a)(9); and Engaged in unlawful and fraudulent business practices as a result of these advertising claims in violation of Cal. Bus. & Prof. Code § 17200. In a day and age where consumers are increasingly seeking out healthier alternatives to their favorite products, food and beverage manufacturers may need to tread carefully when touting the medical benefits of these products, as it’s clear consumers (and California law) want the science to back up these claims. For those who may be fans of the beverage (author’s note: Orange is objectively the best flavor), the real outcome of this lawsuit may be whether we will all by humbled by our superiority complex that we only drink “healthy soda”. Keep an eye on the TMCA blog for further updates as this lawsuit progresses. [1] Since the time of the lawsuit’s filing, these taglines have been removed from the Poppi website.

In March 2019, Cologne & Cognac Entertainment of New Jersey filed a trademark application at the USPTO for recordings featuring music and artistic performances, music composition services, production of musical videos in the nature of live performances by musical artists, and providing related entertainment and information services, under the following mark: The Examining Attorney assigned to the application at the USPTO did not raise any issues with respect to the use of “COGNAC” as part of the mark, presumably due to the fact that the goods and services in the application do not cover wines and/or spirits. Nonetheless, the use of COGNAC in the application certainly caught the attention of the Bureau National Interprofessional du Cognac because COGNAC is a geographical indication for “appellations of controlled origin” (AOC) for alcoholic products that come from the Cognac region of France. BNIC opposed the application for the COLOGNE & COGNAC ENTERTAINMENT & Design mark to protect the interests of producers of COGNAC brandy in the Cognac region of France, enforcing its common law certification mark COGNAC for brandy. In a split decision (2-1) issued on August 25, 2022, the Trademark Trial and Appeal Board determined that: 1) BNIC has exclusive rights in COGNAC as a regional certification mark used by growers, producers, and merchants and has controlled its use by authorized users to represent to consumers that a distilled spirit bearing the COGNAC mark comes from a defined region of France (the Board has acknowledged this previously in Institut Nat’l des Appeallations d’Origine v. Brown-Forman Corp., 47 USPQ2d 1875, 1891 (TTAB 1998)); 2) BNIC has priority rights in COGNAC having been first exported into the U.S. in 1794 and sold continuously in the U.S. ever since; 3) The COGNAC certification mark may be famous, but that use of COGNAC on products does not make a particularly “strong impression on consumers for purposes of showing strength or even raising awareness as to Opposers’ certification mark.” As such, when COGNAC appears with a brand, the brand makes the strongest consumer impression; and, 4) In viewing the similarity of the marks COGNAC and COLOGNE & COGNAC ENTERTAINMENT & Design, the Board found that COLOGNE & COGNAC was the dominant element of the mark, creating an image of “a person wearing cologne and drinking brandy, projecting a certain lifestyle, such as one of leisure and high-living,” that is distinct in its own manner. BNIC submitted compelling evidence that “COGNAC certified product has an intimate and legendary history with music, particularly rap and hip hop music, in the United States,” showcased by brand owners of Cognac products partnering with various musical artists in the US, such as Snoop Dogg and 50 Cent. The Board found it unlikely that a consumer coming upon the COLOGNE & COGNAC ENTERTAINMENT & Design mark for musical/entertainment good and services would be confused that there may be an affiliation with BNIC or the beverage producers it works to protect. As a results, a likelihood of confusion under Section 2(d) of the Trademark Act was dismissed (Note: a dilution claim was also dismissed because it was not properly pleaded). A lengthy and compelling dissent by Administrative Trademark Judge Wolfson followed with respect to the dismissal of the Section 2(d) claim, wherein he laid out clear relatedness of the goods and services, overlapping channels of trade, and overlapping consumers, and a strong affiliation between Cognac and music industry icons, particularly in the black community, namely, Quavo, Pharrell Williams, Jay-Z, Ludacris, 50 Cent, Dr Dre, Snoop Dogg, and Erykah Badu. BNIC appealed the decision of the Board to the U.S. Court of Appeals for the Federal Circuit on October 27, 2022, and the CAFC heard oral arguments on June 4, 2024. Based on the Oral Argument, the TTAB decision appears unlikely to hold up. The contested finding from the Board’s majority was that the COGNAC certification mark was not famous enough on its own to prevent a company in a distinct industry from making use of COGNAC as part of a trademark. Should it be expected that a consumer would understand the certification process and impact? Other geographically specific trade groups, such as the Scotch Whisky Association and the Napa Valley Vintners, co-signed an amicus brief, stressing “owners of certification marks have never been required to show that consumers are aware of the mark’s status.” The three judges sitting on the panel for the CAFC have signaled that the Board’s decision will not hold up: Judge Clevenger: “The Board, seems to me, has said ‘Well, when the two travel together, there’ll be a presumption that the name brand dominates, unless there’s a showing to the contrary.’ That seems to me to be wrong.” Judge Hughes: “The Board has to sort out whether the fame [of COGNAC] is due to the name brand marks or to the ‘cognac’ mark, or maybe it’s famous for both, without applying a presumption or putting a thumb on the scale. But they didn’t do that.” Judge Clevenger: “There is a clear overlap in the consumers, between the consumers and the users in the hip-hop community, with makers of cognac. Every person who listens to hip-hop and hears about cognac and the quality of cognac and the performers…having themselves gone to France and produced cognac and put their own brand on it, along with the “cognac” certification, so the inner mixture between the rap music industry and the cognac industry is undeniable.” We will keep you apprised of the CAFC’s decision.

A new frontier emerges in the shadow of Colorado’s majestic peaks – Colorado’s governor signed into law a first-of-its-kind comprehensive artificial intelligence (“AI”) law in May 2024. Senate Bill (“SB”) 24-205, commonly known as the “Colorado AI Act,” regulates the risk of algorithmic discrimination arising from the use of high-risk AI systems in the employment context. Effective February 1, 2026, the Colorado AI Act accomplishes what California is trying to do, and what other states and localities did in limited ways, in passing legislation addressing “algorithmic discrimination.” Algorithmic discrimination occurs when the use of an AI system results in or contributes to unjustified differential treatment or impact based on actual or perceived protected characteristics. California’s Bills Surpassed by Colorado AI Act The Colorado AI Act beat out California’s own proposed AI law impacting the workplace. California first introduced a bill, Assembly Bill (“AB”) 331, over one year ago targeting automated decision tools that failed earlier this year. Now, AB 2930, entitled “Automated Decision Tools,” seeks to prohibit the use of any “automated decision tools” – systems or services that use AI to make consequential decisions, such as those impacting employment – that result in discrimination. If passed, California’s AB 2930 will require developers and users of automated decision tools to provide an impact assessment to identify and eliminate “algorithmic discrimination.” Where a consequential decision is made solely based on the output of an automated decision tool, deployers of the automated decision tools will be required to accommodate a person’s request not to be subject to the tool. AB 2930 passed in the California House, and is now pending before the California Senate. NYC, Maryland, and Illinois Laws Already Passed, But Do Not Go as Far as the Colorado AI Act Besides Colorado, only New York City and two states (Maryland and Illinois) have passed laws addressing AI and automated decision tools in the employment context, but only in limited circumstances: New York City’s Local Law 144 requires employers and employment agencies that use an automated employment decision tool (“AEDT”) to provide notices, complete an annual bias audit, and to publicly share the results of the annual bias audit. Any discrimination claims involving AEDTs are referred to the NYC Commission on Human Rights, which enforces the New York City Human Rights Law. Local Law 144 imposes monetary penalties of no more than $500 for the first violation and between $500 and $1,500 for each subsequent violation. The other two laws addressing automated decision tools apply in the job requisition and interviewing context. Illinois’ Artificial Intelligence Video Interview Act prohibits employers from using AI to analyze video submissions from job applicants unless employers (1) provide notice to the applicants, before the interview, that AI may be used to assess the applicants, (2) explain how the AI system works, and (3) obtain the applicants’ consent to be assessed by AI. Maryland’s HB 1202 prohibits employers from using facial recognition technology in job interviews unless the applicant provides a written consent and waiver stating the applicant’s name, the date of the interview, that the applicant consents to the use of facial recognition during the interview, and that applicant read the waiver. This means that, for now, Colorado has the only state-wide law that regulates AI and algorithmic discrimination in the employment context. While California’s Bill Sits, Colorado AI Act Moves Ahead The Colorado AI Act steps into the lead on state legislation regulating AI in the employment context while California’s AB 2930 awaits passage. Like California’s bill, the focus of the Colorado AI Act is the classification of “high-risk AI systems,” which include systems that make a “consequential decision,” or a decision that has a material legal (or similarly significant) effect on providing or denying a consumer an opportunity, including employment opportunities. The Colorado AI Act requires deployers and developers to use reasonable care to avoid algorithmic discrimination arising from intended (and contracted) usage of high-risk AI systems. Specifically: The Colorado AI Act applies to developers and “deployers” – a person doing business in Colorado that deploys a high-risk artificial intelligence system. Commentators are construing the definition of “deployers” to include employers. Like California’s AB 2930, the Colorado AI Act defines “algorithmic discrimination” as “…any condition in which the use of an artificial intelligence system results in an unlawful differential treatment or impact that disfavors an individual or group of individuals on the basis of their actual or perceived” protected characteristics. If the Colorado Attorney General brings an enforcement action against a high-risk AI system deployer, the Colorado AI Act creates a rebuttable presumption that a deployer uses reasonable care if it is compliant with various measures, including impact assessments, notifications, and risk management policies and programs. A violation of the Colorado AI Act constitutes a deceptive trade practice under Colorado’s Consumer Protection Act, carrying up to a $20,000 civil penalty for each violation. What Employers Should Know California’s AB 2930 has not yet passed, and the Colorado AI Act does not take effect until February 2026. However, both California and Colorado employers can prepare for compliance by: Designing a governance and compliance program meeting the respective statute’s requirements. The Colorado AI Act refers to the “Artificial Intelligence Risk Management Framework” promulgated by the National Institute of Standards and Technology (NIST) as a benchmark for required risk management programs. However, the Colorado AI Act allows covered entities to refer to other comparable nationally or internationally recognized frameworks. Building processes and designating personnel to perform impact assessments, perform bias audits, and report any adverse findings from the assessments and audits. Establishing the infrastructure for documentation regarding notifications provided to job applicants, employees, and other personnel. The Colorado AI Act ushers in a new frontier for Colorado employers who use AI and automated decision tools, requiring employers to be mindful of the tools they may use in the job requisition and assessment processes. Should California’s AB 2930 pass, California employers will be required to meet requirements like those applicable to their Colorado counterparts. Dorsey’s Workplace Privacy team will continue to monitor pending state law, and provide updates as they come.

It has been a year since the Supreme Court issued its decision in the multiple-year legal battle between VIP Products LLC and Jack Daniel’s. We covered this dispute when it was back at the 9th Circuit. As a recap, VIP produced a squeaky dog toy in the shape of a Jack Daniel’s whiskey bottle called “Bad Spaniels” and claimed that its use of the recognizable marks was parody—free speech falling into the fair use exception. Jack Daniel’s contended that VIP infringed on a variety of trademarks, including the shape of the bottle, the decoration on the label and the shape of the name, and that by using these marks, VIP diluted the marks’ validity by associating them with something other than Jack Daniel’s whiskey. This type of free speech defense had usually been evaluated using the Rogers and fair use tests. The Rogers test requires dismissal unless the complainant can show one of two things: that the challenged use of a mark “has no artistic relevance to the underlying work” or that it “explicitly misleads as to the source or the content of the work”. Rather than apply the Rogers test, the Supreme Court came to a conclusion it characterized as “narrow” that the Rogers test does not apply when an alleged infringer uses a trademark as a designation of source for the infringer’s own goods. In the Court’s words, when the alleged infringer is “using the trademark as a trademark”. Jack Daniel’s Props. v. VIP Prods. LLC, 599 U.S. 140, 145 (2023). Once the Rogers test is off the table, trademark defendants are subject to the traditional likelihood of confusion analysis. Since VIP was using “Bad Spaniels” as a trademark—they had even applied for protection—they could not use the Rogers test.   As is often the case, the supposedly narrow holding from the Court has been applied more widely than expected due to the subjective nature of what constitutes a trademark, the broad range of infringers that are accused of using marks, and the lack of existing guidelines for lower courts to follow regarding whether an infringer has used a mark as a “trademark” or in another way. Historically, the Rogers defense was a helpful tool to trademark defendants. Now that the Court has introduced a new condition limiting use of the Rogers defense, its application has been narrowed significantly. Lower courts have applied the Jack Daniel’s ruling to a variety of fact patterns and have painted an inconsistent picture of when it should apply. For example, in Hermès International v. Rothschild, the District Court for the Southern District of New York upheld the jury’s finding that the creator of non-fungible tokens (“NFTs”) that he called “MetaBirkins” was an explicit attempt to use the Hermès name to confuse customers into assuming an association between these NFTs and the major fashion house. The court in Hermès International applied the Rogers test to determine whether the infringement was protected and thus whether the complaint should be dismissed. The defendant, Rothschild, argued that the use was protected by Rogers because it was being used in noncommercial speech, that the use had some artistic relevance and that the use did not explicitly mislead as to the source or content of the work. The Rogers test has two prongs: artistic relevance and explicit misleadingness. In Hermès International, the court noted that the artistic relevance prong is a threshold and will be satisfied unless the use has no artistic relevance to the underlying work whatsoever. However, the Court declined to resolve whether Rothschild’s use meets this low bar because of its clear violation of prong two. The amended complaint contained sufficient factual allegations that Rothschild intended to explicitly mislead consumers, and thus, prong two fails and the use is not clearly protected by Rogers. Based on this analysis, the Court declined to dismiss the complaint. Jack Daniel’s has also caused several cases originally decided under the Rogers test to be remanded for review in consideration of whether a trademark defendant “used the trademark as a trademark”. In Belin v. Starz Entertainment, LLC, Belin registered and used the trademark “BMF” (Building Money First) to market a variety of entertainment products. When Starz announced a new show using the name BMF (Black Mafia Family), Belin sent multiple cease-and-desist letters and eventually brought suit for infringement. The District Court for the Central District of California originally applied the Rogers test and held that the defendant’s use of the trademark name “BMF” was protected under the First Amendment. On appeal, the 9th Circuit remanded for the lower court to reconsider the case under the new Jack Daniel’s decision. The original Rogers decision dealt with the use of a title, but the application of Jack Daniels’s has even created confusion when it comes to that specific application. In Warner Bros. Discovery, Inc., the District Court for the District of Delaware declined to apply Rogers where the use of a title was directly at dispute. In Warner Bros., the defendant had a television show called “Ugliest House in America”, and the plaintiff had a family of trademarks related to ugly houses - such as “Ugliest House of the Year”. In an opinion by the Magistrate Judge, the Court focused on the “source-identifying” aspect of Jack Daniel’s, explaining that the opinion makes it clear that the Rogers application is not appropriate if the mark is source-identifying. The Court further held that the complaint contained plausible allegations that the mark is in fact source-identifying, thus precluding a Rogers application. The District Court Judge upheld the Magistrate’s decision and denied the Defendant’s motion to dismiss on Rogers grounds. Moving forward post-Jack Daniel’s, individuals and companies must assess their own use of potentially distinctive marks in a market where parody and “dupe” products are the norm. Something as simple as the shape of packaging or the orientation of words on a product could be considered using a mark “as a trademark”. The lower court decisions following Jack Daniel’s have shown that without the previously widespread Rogers defense, trademark defendants producing parody products are much less protected. For companies seeking to protect their trademarked marks, it will likely be much easier to attack use distinctive marks on parody products than it was before Jack Daniel’s.    

The Ninth Circuit issued two opinions in BBK Tobacco & Foods LLP v. Central Coast Agriculture, Inc. finding judicial power over pending trademark applications and an exception shielding trademark registrations for marks used with cannabis products. BBK Tobacco & Foods LLC (“BBK”) markets a variety of smoking accessories, including rolling paper, rolling machines, lighters, shredders, and grinders under the RAW brand, largely marketed to cannabis users. Central Coast Agriculture, Inc. (“CCA”) on the other hand markets cannabis concentrates and pre-rolled cannabis products under the RAW GARDEN brand. While BBK sued CCA for trademark infringement, unfair competition, and related claims, the interesting development in this case relates to each party’s attempt to cancel the other party’s trademarks. CCA filed four trademark applications for RAW GARDEN relating to various smoking accessories and products. Each application was filed on an intent to use basis under Section 1(b) of the Lanham Act. BBK sought to void the RAW GARDEN applications, alleging that CCA lacked the requisite bona fide intent to use the marks in commerce. CCA, for its part, lodged a counterclaim seeking to cancel BBK’s RAW trademark registrations, alleging that they are based on “unlawful use” because BBK’s products are “drug paraphernalia” marketed for use with cannabis. On appeal, the Ninth Circuit addressed these claims in two separate opinions. For BBK’s attempt to void CCA’s applications, the Ninth Circuit, for the first time, addressed whether federal district courts have the power to alter or void pending trademark applications. In a published opinion, the split Ninth Circuit panel said “yes.” The majority examined 15 U.S.C. § 1119, which provides that “in any action involving a registered mark the court may determine the right to registration. . . and otherwise rectify the register with respect to the registrations of any party to the action.” It found that the plain language of the statute grants a district court jurisdiction to consider challenges to a pending application, so long as the action involves a registered trademark, here BBK’s RAW registrations. This is because a challenge to an application “necessarily affects the applicant’s ‘right to a registration.’” Further, the parties and the Court have an interest in resolving all registration disputes in one action. The dissent disagreed. It read Section 1119 as permitting federal courts to cancel registrations only, not “to prematurely cancel pending trademark registration applications.” According to the dissent, the language of Section 1119 requires a completed registration—a Court cannot “determine the right to registration” or “rectify the register” absent an issued registration. The dissent also notes that the Trademark Trial and Appeal Board (“TTAB”) agrees, having previously found that district court authority under Section 1119 “concerns registrations” and that courts are “without authority to direct the USPTO to grant or deny pending applications.” Still, the majority opinion rules. In its appeal, CCA did not contest the district court’s finding that it lacked a bona fide intent to use the RAW GARDEN mark on the applied-for goods. As a result of the Ninth Circuit’s opinion, those applications are ordered to be voided. While the panel did not agree on the Section 1119 issue, all of the judges agreed that CCA’s counterclaim seeking to cancel BBK’s registrations is dead in the water. In an unpublished memorandum opinion, the Ninth Circuit found BBK’s RAW marks are not subject to cancellation for unlawful use. Only lawful use of a mark can be a basis for a trademark registration. Generally speaking, this means a party cannot obtain or maintain a trademark registration if the mark is used for illegal conduct, including the sale of illegal products. The Controlled Substances Act (“CSA”) prohibits the sale of controlled substances and “drug paraphernalia” including products designed to aid in preparing or inhaling controlled substances. While the legal status of cannabis has been in flux for some time, cannabis is still considered a controlled substance under federal law and is subject to the CSA. Luckily for BBK, the CSA includes a “tobacco exception” which excludes products that are “traditionally intended for use with tobacco products, including any pipe, paper, or accessory” from the CSA’s definition of “drug paraphernalia.” The court found that RAW rolling papers, rolling machines, shredders, grinders, and other smoking accessories are traditionally used with tobacco and shielded by the tobacco exception. The fact that BBK advertises its RAW products for use with cannabis was not sufficient to make BBK’s trademark use unlawful. Indeed, according to the Ninth Circuit, BBK’s subjective intent is wholly irrelevant to whether the tobacco exception applies. Finding RAW products fall within the exception, CCA’s counterclaim went up in smoke and the RAW trademarks remain valid. The unpublished memorandum gives some hope and guidance to cannabis companies seeking to protect their brands. But, they still face hurdles obtaining trademark registrations in the first place. The Trademark Manual of Examining Procedure (TMEP) is clear that “evidence indicating that the identified goods or services involve the sale or transport of a controlled substance or drug paraphernalia in violation of the [CSA]” is a basis for refusal of a trademark application. TMEP § 907. It even directly addresses cannabis stating: “regardless of state law, marijuana and marijuana extracts remain Schedule I controlled substances under federal law and are subject to the CSA’s prohibitions.” Id. As we reported previously, when applying these rules, the UPSTO has considered a party’s advertising and denied registration of marks that relate to cannabis. For example, in In Re Brown, the applicant sought to register HERBAL ACCESS for “retail store services featuring herbs.” As with the RAW marks, the claimed services encompass legal activity—the sale of legal herbs. Nonetheless, the USPTO examined the applicant’s website and determined that the mark also, perhaps primarily, encompasses unlawful activity—the sale of cannabis. The TTAB, reviewing this advertising, affirmed the refusal to register the HERBAL ACCESS mark. Still, if cannabis companies are able to obtain registrations for products traditionally used with tobacco, the Ninth Circuit’s opinion suggests those registrations will not be disturbed, regardless of how the products are marketed.

  The 1970s were the heyday of the now-extinct television genre known as the variety show: a weekly extravaganza headlined by a well-known entertainer, generally accompanied by a supporting cast of singers, dancers and comedians, and featuring a weekly guest star to liven things up. Among the longest lasting of these weekly spectacles was The Sonny & Cher Comedy Hour, which premiered in 1971 and featured the eponymous 1960s singing duo. Sonny (born Salvatore Bono) and Cher (nee Cherilyn Sarkisian) met in 1962, when Cher, then 16 and a recent high school dropout, approached Sonny, then an up-and-coming songwriter, about breaking into the music business. Sonny helped Cher become a backup singer on many recordings helmed by legendary music producer (and later convicted murderer) Phil Spector, before transitioning to a lead performer with Sonny, performing as Sonny & Cher. The pair, by now dating and sharing a great mutual Love and Understanding, scored multiple hits in the 1960s, including their signature song I Got You Babe, and others like Bang Bang (My Baby Shot Me Down) and Baby Don’t Go, mostly written or co-written by Sonny, who had also written hits for a number of other artists. In 1971, the pair agreed to star in a variety show that would also help transition Cher to a successful solo career; she would top the charts in the early 70s with hits like Gypsies, Tramps and Thieves and Half Breed. The Sonny & Cher Comedy Hour featured lavish production numbers; bigtime guests like Carol Burnett, George Burns, Ronald Reagan, The Jackson 5, and Burt Reynolds; daring Bob Mackie gowns; and caustic banter between the two stars (mostly about Sonny’s short stature). For a time, the show was a hit, and it ran for three successful seasons. Unfortunately, The Sonny & Cher Comedy Hour came to an unfortunate end, coinciding with the end of the Sonny & Cher marriage. The couple had wed in 1969 after the birth of their only child, now known as Chaz Bono; Sonny had a daughter, Christine, by an earlier marriage. But enterprising television executives were not going to let a pesky divorce get in the way of a solid ratings hit. CBS simply rebranded its program as The Cher Show and the Beat Went On as if Sonny had never been a part of the program. For his part, Sonny nabbed his own show on ABC, The Sonny Comedy Revue, which was a ratings flop. And The Cher Show was not all that successful either – the American public wanted Sonny & Cher together, and that is what they got in 1976, when Sonny & Cher reunited for the third iteration of their CBS show, The Sonny & Cher Show. Unfortunately, the now divorced couple could not recapture the magic of the original program, for cutting quips about the loving foibles of a happily married couple now came across as (and up to a point, were) bitter putdowns of estranged exes. This third and last iteration of their show marked the end of the Sonny & Cher entertainment partnership. The two never performed again together except for a 1987 appearance on The David Letterman Show. Time went on. Cher Found Someone, remarrying (briefly) the rock star Greg Allman, and she had another child with him. She also rebuilt her successful solo music career, then transitioned to acting and scored multiple Oscar nominations, winning for Moonstruck in 1988. Her music career has been even more long-lasting, with one hit song after another running into the 2000s. For his part, Sonny pursued a reasonably successful acting career and likewise remarried, to Mary Whitaker, in 1986. The couple had two children of their own, Chesare and Chianna, while Sonny was transitioning to a most unexpected new career: politician. Sonny was elected Mayor of Palm Springs in 1988, and then was elected to the U.S. House of Representatives in 1994. But, sadly, Sonny was killed in a skiing accident in 1998. At his widow Mary’s request, Cher gave one of the principal eulogies at his funeral, delivering one of the most moving, heartfelt tributes you will ever hear. In his honor, the 1998 revision to the US Copyright Act was named the Sonny Bono Copyright Term Extension Act. It is the events after Sonny’s death that give rise to this blog post. For all of his many music, business and political accomplishments, Sonny botched his estate planning: there was none – he died without a will (oy!). Mary, who had succeeded Sonny in Congress, serving until 2013, was appointed administrator of his estate. Among the estate’s creditors was Cher, who asserted her rights under an August 10, 1978 Marriage Settlement Agreement (the “MSA”). The MSA was meant to resolve all of the financial aspects of the Sonny & Cher divorce, and consistent with California’s community property laws, it granted Cher “an undivided 50% interest” in two revenue sources. The first was record royalties – royalties payable to performers when physical or digital copies of the recordings on which they sang are sold or downloaded – payable to Sonny under various recording contracts he entered into between 1964 (when he started dating Cher) and 1971. The second were composition royalties – royalties payable to songwriters whenever their compositions are recorded, played, performed, streamed, or licensed. Composition royalties tend to be more lucrative (depending on the popularity of the song) than record royalties. Mary, as estate administrator, recognized Cher’s rights to these royalties under the MSA, and Cher received her percentages of both royalties for nearly two decades after Sonny’s death. Cher and Mary also cooperated, per the MSA, in agreeing to the appointment of an administrator to collect and disburse both types of royalties. That administrator was entitled to receive 10% of both types of royalties under the MSA in consideration for their work. The apparently harmonious relationship between Cher and Mary began to hit the skids in 2016, when Mary invoked Section 304(c) of the US Copyright Act. That provision of the statute authorizes a copyright owner or grantor (if they are living), or their statutory heirs (if they are not) to terminate prior copyright grants or licenses for works created before January 1, 1978 in certain circumstances, and on particular timetables, by sending a notice of termination to the grantees/licensees. By sending such a notice, the copyright owner or their heirs can recapture their rights and, potentially, monetize their copyrighted works on more favorable terms. Mary sent such termination notices to a number of music publishers, specifying effective termination dates between 2018 and 2026. Cher was not told about the issuance of these termination notices, nor were the MSA and the Sonny & Cher recording contracts mentioned in the notices. But in 2021, Cher learned not only that Mary had ceased paying her composition royalties, as the prior grants from Sonny to various music publishers began to terminate, but that Mary was taking the position that the MSA no longer applied, at least as to composition royalties, and that Cher would also cease to receive Sonny’s share of record royalties when/if Mary chose to terminate the 1964-71 recording contracts and renegotiate them. Cher could not Believe that Mary was taking such a position, accused Mary of being a Dark Lady, and claimed Mary was trying to Turn Back Time to the period before the Sonny & Cher divorce. Cher therefore sued Mary in the U.S. District Court for the Central District of California, accusing Mary of breaching the MSA and seeking a declaratory judgment that the MSA’s obligations remained binding, termination notices or not. For her part, Mary lodged counterclaims against Cher for breach of the MSA because Cher had refused to consent to the continued appointment of the royalty administrator, and had objected to Mary’s plan to create a new royalty administration entity that she and Sonny’s four children would own. (Mary had Sat Down With the Kids, including Chaz, and apparently worked this out.) Mary also wanted the Court to declare that Mary could negate Cher’s interest in the Sonny & Cher recording contracts if Mary chose to terminate and renegotiate them. One added wrinkle to this case: after it was filed, in January 2023, Cher sold all of her rights in her song catalog, including her rights in the MSA, to an unnamed third party for an unknown amount of money. Last week, after several years of litigation in which both sides were presumably on Needles and Pins, the Court resolved the dispute by largely siding with Cher. It rejected Mary’s argument that the termination/recapture provisions of Section 304(c) relieved Mary of her obligations under the MSA, largely for two reasons. First, the MSA was not a copyright grant that could be terminated under the statute, but a contract dividing revenue between Sonny & Cher. In other words, Sonny did not grant Cher an interest in his copyrights, but simply agreed to divide with her the revenue produced by those copyrights. Because there was no grant of any copyright interests to Cher, there was nothing Section 304(c) could terminate. Second, Section 304(c) authorizes termination of “the exclusive or nonexclusive grant of a transfer or license of the renewal copyright or any right under it, executed before January 1, 1978.” The MSA was executed on August 10, 1978, and the Court rejected Mary’s argument that it was the date of Sonny’s prior grants that mattered, as opposed to the MSA’s execution date. Mary did score a partial victory on the royalty-administrator issue, as the Court found that Mary had sole discretion to select the royalty administrator, even one she created, but Cher could object to the terms of the appointment, including on things like fees and the administrator’s qualifications. So is this the final chapter of the Sonny & Cher business partnership? Not yet – Cher’s 2023 sale of her interest in the MSA left the Court uncertain about who should be paid certain royalties accruing during the pendency of the lawsuit – Cher or her anonymous buyer. So that issue remains to be resolved, meaning that, for now, Cher & Mary will have to continue Living in a House Divided, until the case is finally resolved.

The 2010s were a heyday for bridal fashion. TLC’s “Say Yes to the Dress” reality series captivated viewers watching brides navigate family opinions and emotions while shopping for “the dress” at Kleinfeld’s Bridal in New York City. Instagram became a new medium for the engaged to search for bridal fashion and plan the big day. The @misshayleypaige Instagram account used by bridal fashion designer Hayley Paige Gutman was particularly successful, amassing over 1.1 million followers by the end of 2020. Gutman was employed by JLM Couture, Inc., which manufactures and markets bridal fashion collections, including under a number of brands under the name “Hayley Paige” or variations thereof. The Instagram account features posts relating to both Hayley Paige designs and Gutman’s personal life. But, Gutman’s employment agreement with JLM contained provisions regarding the use of the names “Hayley,” “Paige,” “Hayley Paige,” and even “Hayley Paige Gutman.” Starting in 2019 into 2020, JLM began to take issue with Gutman’s use of the Instagram account, as well as her creation and use of a misshayleypage TikTok account. JLM accused Gutman of seizing control over the Instagram account and using “misshayleypage” handles to promote third party goods like olive oil, beer, and nutritional supplements without JLM’s approval. Things came to a head in late 2020, when JLM’s CEO confronted Gutman during a meeting at Kleinfeld’s, of all places. In December 2020, JLM sued Gutman in the Southern District of New York, alleging claims of trademark dilution, false designation of origin, unfair competition, and breach of Gutman’s employment agreement, among others. As The TMCA previously reported, JLM won a temporary restraining order that prohibited Gutman from using social media accounts bearing the misshayleypage name. Following the TRO ruling, Gutman resigned from JLM and took to Instagram on a new account tearfully describing the legal dispute and explaining that she was avoiding use her own name. In the years since then, the SDNY granted JLM a preliminary injunction, and the dispute bounced back and forth between the SDNY and Second Circuit Court of Appeals. In October 2023, JLM filed for chapter 11 bankruptcy with just $151,000 cash on hand, citing damage to its brand caused by litigation with Gutman as a primary driver of its financial decline. Gutman filed a motion seeking to convert JLM’s case to a liquidation under chapter 7 of the U.S. Bankruptcy Code, arguing the harm caused by the litigation to JLM’s relationships with vendors is so severe that JLM cannot successfully reorganize. On May 17, 2024, JLM filed a motion seeking bankruptcy court approval of a settlement with Gutman. The parties’ settlement agreement provides that JLM will dismiss its suit against Gutman and transfer a number of “Hayley Paige”-related intellectual property rights to Gutman in exchange for a payment that is not publicly disclosed. The transferred IP rights will include trademarks, rights of publicity, social media accounts, and copyrights embodied in Gutman’s copyrightable works owned by JLM, among other things. The bankruptcy court orally approved the settlement during a hearing on May 23, observing that the settlement payment will facilitate JLM’s reorganization. The court entered an order approving the settlement on May 24. Gutman has already recommenced posting on @misshayleypaige. The JLM-Gutman dispute showcases the power of a social media following. JLM’s CEO testified at the settlement hearing that JLM’s finances were negatively impacted by Gutman’s resignation and harsh criticism of the company on social media. JLM’s financial condition deteriorated notwithstanding its victories against Gutman and control of @misshayleypaige social media accounts, to the point that selling the disputed IP rights to Gutman is necessary for the company to have a chance at surviving. The case surely is and will continue to be a beacon for other brand owners seeking to establish and control social media presence.

Though litigants routinely enter into stipulated protective orders in the course of discovery that may involve sensitive company information (or even trade secrets), a recent ruling is a cautionary tale on the potential consequences of failing to abide by a protective order. In Allstate Ins. Co. v. Cruz, Allstate filed suit against Cruz, a former Allstate agent, alleging he breached his exclusive agency agreement and appropriated customers to start his own insurance agency in violation of the federal Defend Trade Secrets Act, and the Colorado Uniform Trade Secrets Act. The district court granted Allstate summary judgment on Cruz’s counterclaims, and before trial on Allstate’s remaining claims, the parties dismissed the action. Less than a month later, Allstate filed a Motion to Reopen and for Order to Show Cause and Enjoin, seeking to initiate contempt proceedings against Cruz for violating the parties’ stipulated protective order. Allstate claimed that Cruz published seven deposition transcripts designated as “Confidential” on websites linking Allstate to criminal activity by selling customers’ personal information. The court granted Allstate’s Motion in part, permitting further proceedings to determine whether Cruz should be held in contempt for disclosing Allstate’s designated confidential information. Though Cruz “allude[d] to the fact that many of the documents at issue are publicly available on” the court’s docket, the court noted that the protective order specified that “[i]n the event Confidential Information is used in any court filing or proceeding in this action, it shall not lose its Confidential status as between the parties through such use.” The court ordered Cruz to show cause by May 15, 2024, why he should not be held in contempt. Litigants may enter into protective orders where, as in Allstate, discovery may implicate confidential, proprietary, or private information. This includes trade secrets litigation where parties need assurance that a trade secret will not become public simply because it becomes the subject of litigation. Otherwise, the trade secret would ordinarily lose its value (and trade secret protection) because of such public disclosure. A standard protective order explains that discovery may require production of materials warranting special protection from public disclosure and using the materials for purposes other than the instant litigation. Various state and federal courts offer model protective orders that outline the process for designating materials as confidential and challenging another party’s confidentiality designations. The Northern District of California has a “Model Protective Order for Litigation Involving Patents, Highly Sensitive Confidential Information and/or Trade Secrets.” This order enables parties to designate documents as not just confidential but “HIGHLY CONFIDENTIAL – ATTORNEYS’ EYES ONLY,” and even includes specific protections and procedures for source code review in litigation. Other federal courts with model protective orders include the Northern and Southern Districts of Texas, the Western District of Washington, and the District of Oregon, among others. Though protective orders may be part and parcel of business and IP litigation, parties should not take them lightly. The reopening ruling in Allstate is just one illustration of the consequences of violating a protective order. Courts have found violations of protective orders even when the disclosure of confidential materials was not to the public but a more limited audience. For example, in SIMO Holdings Inc. v. Hong Kong uCloudlink Network Tech. Ltd., a patent infringement action in the Southern District of New York, the court found that plaintiff SIMO violated the parties’ protective order by sharing defendant uCloudlink’s confidential documents with attorneys SIMO had retained to represent a non-party in separate Chinese patent litigation. No. 18-cv-5427 (S.D.N.Y. Dec. 7, 2020). As to attorneys, SIMO and uCloudlink’s protective order prohibited disclosure of confidential material except to “counsel retained specifically for this action,” and “retained by a party to serve as an expert witness or otherwise provide specialized advice to counsel in connection with this action.” The court found that SIMO disclosed uCloudlink’s confidential material from the S.D.N.Y. patent litigation to attorneys who were not “retained specifically for [the instant] action,” in “clear” violation of the protective order. The court imposed $40,000 in sanctions on SIMO for violating the protective order, (i.e., $10,000 for each of the four documents wrongly disclosed). Another example occurred in Hsin Lin v. Solta Medical, Inc., where defendant Solta filed a motion to retain confidentiality of documents disclosed in violation of the parties’ protective order. Plaintiff’s counsel in this Northern District of California action provided Solta’s confidential documents to plaintiff’s counsel in foreign litigation, who then provided the confidential documents to the foreign district court. The court reiterated that plaintiff failed to follow the order’s procedures for producing confidential materials when compelled in another litigation and following an unauthorized disclosure of protected material. The court also noted that the protective order prohibited “[m]ass, indiscriminate, or routinized designations,” so Solta, too, violated the protective order by designating every document it produced as confidential. The court granted Solta’s motion to retain confidentiality of its documents, as they “showed ongoing business processes, procedures, and strategies by showing how Solta investigates and assesses potential product failures,” including for products currently on the market. Solta also explained that it “closely guarded” these documents internally, and exposing these documents publicly would give competitors insight into its internal processes. The court found that particularized harm would result from disclosure to the public and granted Solta’s motion. No. 21-cv-05062-PJH, 2024 U.S. Dist. LEXIS 66863 (N.D. Cal. Apr. 11, 2024). These rulings, including the forthcoming show cause decision in Allstate, are a reminder to read and adhere to all of the terms of a protective order, including the parameters on disclosing confidential materials. We will be monitoring the court’s contempt proceedings in Allstate. Stay tuned for further updates.

The Supreme Court has now issued its awaited opinion in Warner v. Nealy, ruling that plaintiffs can recover damages for copyright infringement that is more than three years old, at least under the discovery accrual rule. We covered this case when the Court granted cert and heard oral arguments. Factual Background The plaintiff in the case, Sherman Nealy, sued for infringement that began roughly ten years previously. Nealy argued that he only learned of the infringement recently, as he was in and out of prison until roughly three years before filing suit. The District Court ruled that Nealy could sue for the older infringement, but could only recover damages for the instances of infringement that occurred in the three year period leading up to his suit. The Eleventh Circuit, ruling on an interlocutory appeal, found differently and held that Nealy could recover damages for older infringement, as long as his claim was otherwise timely filed. The defendant, Warner Chappel Music, Inc., then filed a cert petition, which the Court granted. Question Presented The Court took up this case to settle a growing divide among the Circuit courts on how to apply the discovery rule to copyright infringement claims. Specifically, the Court addressed the question of whether the discovery rule allows plaintiffs to recover damages for infringement that occurred more than three years before a lawsuit was filed. The Copyright Act’s statute of limitations requires that infringement claims must be brought within three years of their accrual. See 17 U.S.C. § 507(b). An antecedent question, one the Court expressly sidesteps, is how to decide when the claim accrues. One theory is the claim accrues when the infringement occurs. Another theory, one the Court assumes applies in the Warner v. Nealy case, is that the claim accrues when the plaintiff discovers, or should have discovered, the infringement. This is the discovery rule. Majority Opinion Justice Kagan wrote for the majority and was joined by Chief Justice Roberts and Justices Sotomayor, Kavanaugh, Barrett, and Jackson. The majority held that if the claim itself is otherwise timely under the discovery rule, plaintiffs can seek damages for infringement without further time limitations. Justice Kagan quickly clarified that there is no three-year damages bar in the text of the Copyright Act. The statute of limitations does not distinguish between a timely claim and timely sought damages, nor do the statute’s remedial provisions impose any time limit on monetary recovery. The Court clarified its prior opinion in Patrella v. Metro-Goldwyn-Mayer, the last case in which the Court examined the Copyright Act’s statute of limitations. In Patrella, the Court determined that the defense of laches cannot bar a claim for damages within the three-year limitation period. Justice Kagan distinguished Patrella, explaining that the plaintiff in Patrella had not relied on the discovery rule per se. The plaintiff in Patrella had long known about the infringement and therefore could not rely on the discovery rule. In other words, the Patrella plaintiff could only sue for infringement that occurred within the last three years and therefore could only recover damages for infringement that occurred within those three years. Dissenting Opinion Justice Gorsuch, writing in dissent and joined by Justices Thomas and Alito, raised a much broader issue, one Justice Kagan relegated to footnotes. Oral argument, and most of Warner’s briefing, centered on whether the discovery rule should apply at all to the Copyright Act. Justice Gorsuch argued the Court should not have addressed how to apply the discovery rule because the rule has no place in copyright cases. The dissent would instead be content to dismiss the present case as improvidently granted, taking up the merits of the discovery rule when properly presented to the Court. Copyright plaintiffs may rejoice with the clarity that Justice Kagan’s opinion brings because it allows plaintiffs to recover damages for timely claims. However, the majority painstakingly lays out a narrow decision, still leaving open the door for petitions to challenge whether the discovery rule should apply at all to copyright claims. Justice Gorsuch’s dissent all but invites petitioners to do so, hinting that the merits of the discovery rule should be put before the Court. If and when the issue gets presented to the Court, it is likely that at least three Justices (those joining in dissent), would hold that the discovery rule has no application to copyright claims. 

Tattoos and copyright law have once again crossed paths, as an Ohio jury recently concluded that the creators of the NBA 2K series had an implied license to use an artist’s designs that he tattooed on LeBron James. Even before reaching the jury, however, the artist may have doomed his case simply by not properly registering the copyrights in his tattoo designs. The popular video game series NBA 2K features realistic simulations of basketball, with a user directing on-court strategy and taking control of individual players. Though its original 1999 release included representations of stars such Allen Iverson that are pixelated by today’s standards, recent installments in the series include highly detailed character models that speak, perspire, and show players’ real-life tattoos. In late 2017, artist James Hayden filed a complaint against game publishers 2K Games Inc. and Take-Two Interactive Software Inc., asserting the publishers had improperly incorporated six tattoos he had inked on James and fellow players Danny Green and Tristan Thompson. In response, the publishers argued that Hayden failed to properly register the designs with the U.S. Copyright Office prior to filing the complaint. Although artists and creators do not need to register a copyrighted work to own rights in it, federal registration is a requirement to assert copyrights in federal court. See our earlier post on this issue. Furthermore, owners must properly exclude any material from their application for which they cannot claim ownership, such as preexisting works and material already in the public domain. In Hayden’s case, four of the asserted copyrights incorporated material belonging to third parties or the public domain, such as the image depicted on Thompson’s back of two fingertips touching in the style of Michelangelo’s “The Creation of Adam.” Hayden attempted to correct these mistakes by filing supplementary copyright registrations, but only after two years from initially filing the complaint. He also did not update his complaint accordingly. As a result, the court excluded these tattoos from the case, leaving only two designs sported by James. Evaluating the remaining designs, a jury later concluded that 2K Games Inc. and Take-Two Interactive Software Inc. had an implied license to use James’ tattoos in the video game. In rendering the verdict, the jury appears to have followed the court’s prior statement that Hayden had licensed to James the right to use and display the tattoos on his body simply by placing them on him, and James had licensed the right to use his likeness (including the tattoos) to the game publishers via the NBA and its Players Association. It is unclear whether the jury would have ruled differently on the four excluded designs, but the game publishers’ deft argumentation highlights not only the value of experienced IP trial counsel, but also the importance of shrewd filing strategy.

As the federal government continues to take action in response to events impacting the healthcare landscape, stakeholders must ensure that they are staying up-to-date with health information privacy and security developments in the healthcare industry. This blog post summarizes two recent significant actions: a new HIPAA final rule and proposed federal cybersecurity legislation. New HIPAA Final Rule The U.S. Department of Health and Human Services (“HHS”) has expressed concern about patient trust in the privacy of health care information since the U.S. Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization in 2022. Most recently, on April 22, 2024, HHS’s Office for Civil Rights (“OCR”) issued a new final regulation under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) Privacy Rule: HIPAA Privacy Rule to Support Reproductive Health Care Privacy. The final rule strengthens privacy protections for sensitive information about reproductive health care by: Prohibiting covered entities and their business associates from using or disclosing protected health information (“PHI”) for the purpose of an investigation into or proceeding against an individual or entity who seeks, obtains, provides, or facilitates lawful reproductive health care, which includes providing information on or paying for any such services. This prohibition does not apply in situations of suspected abuse, neglect, or endangerment. Prohibiting covered entities and their business associates from identifying any individual or entity for the purpose of any such investigation or proceeding. Requiring covered entities and their business associates to obtain a signed attestation when they receive a request for PHI potentially related to reproductive health care for the purpose of health oversight activities, judicial or administrative proceedings, law enforcement, or coroner or medical examiner disclosures. The attestation must include the individual or class of individuals whose PHI is requested, the covered entity or business associate, the requestor, a statement that the PHI will not be used or disclosed for any prohibited purpose, and a statement acknowledging the criminal penalties for any violation of the Privacy Rule. Prohibiting a provider from refusing to treat a person as the personal representative of a patient merely because they provided or facilitated reproductive health care for a patient. Requiring covered entities to revise their Notice of Privacy Practices. The final rule is scheduled for publication in the Federal Register on April 26, 2024. It will become effective 60 days after publication, with compliance to occur by February 16, 2026 for the Notice of Privacy Practices requirement and within 240 days after publication for all other requirements. As the compliance dates quickly approach, covered entities and business associates must ensure alignment of their policies, practices, and Notices of Privacy Practices with this new final rule. Covered entities and business associates may also need to revise their business associate agreements, to the extent that such agreements would permit a business associate’s use or disclosure of PHI that is prohibited under the new rule. Proposed Federal Cybersecurity Legislation The healthcare industry has seen a recent increase in cybersecurity incidents. According to OCR, over the past few years, the number of large breaches reported and the number of individuals affected by those breaches have doubled. Now, following the Change Healthcare breach, Congress is considering new legislation: Health Care Cybersecurity Improvement Act of 2024 (S.B. 4054). On March 22, 2024, Senator Mark R. Warner (D-VA), introduced the proposed federal legislation, which has been referred to the Senate Committee on Finance. Sen. Warner, who is a member of the Committee on Finance and co-founder and co-chair of the Senate Cybersecurity Caucus, is a well-known advocate of enhanced cybersecurity in the healthcare industry. The proposed legislation charges the Secretary of HHS with setting minimum cybersecurity standards for Medicare’s Accelerated Payment Program and Advance Payments Program. During the COVID-19 public health emergency, the Centers for Medicare and Medicaid Services offered accelerated and advance payments to assist in disruptions to claims payments due to the public health emergency. Under the Health Care Cybersecurity Improvement Act of 2024, if a participating Part A hospital or one of its intermediaries does not meet the set standards, the hospital will not receive accelerated payments under the Accelerated Payment Program where a cybersecurity incident caused the disrupted operations or cash flow problems. Similarly, if a participating Part B provider or one of its intermediaries does not meet the set standards, the provider will not receive advance payments under the Advance Payments Program where a cybersecurity incident caused the delayed claims payments by health insurance companies. Notably, the accelerated and advance payments are only for Medicare Part A and Part B claims payments. Currently, the bill is still in the early stages of the legislative process, and, if the law were enacted, enforcement would not occur until two years after its enactment. However, given the continuing prevalence of cybersecurity incidents in the healthcare industry, additional detailed HIPAA Security Rule cybersecurity guidance, as well as emerging state agency activity (such as New York’s proposed cybersecurity regulations for hospitals), now is the time for healthcare providers and other covered entities and business associates to focus on HIPAA Security Rule compliance to protect against hacking, ransomware and other cybersecurity attacks, and the resulting disruptions to clinical care. If you have any questions about the HIPAA Privacy Rule or Security Rule, proposed cybersecurity legislation, or their potential impact on you or your organization, please contact the authors or your regular Dorsey attorney.

The Supreme Court heard oral argument in February in Warner Chappell Music, Inc. v. Nealy, a case that promised to resolve a split among the U.S. Courts of Appeal relating to the scope of damages available to copyright holders. This post is the second in our series on the Warner v. Nealy case. We previewed the case when the Supreme Court granted cert, and we now share highlights of the oral argument that has taken place. The music industry has hoped this case would provide a clear, geographically consistent answer on the issue of whether a party can recover damages for copyright infringement that went undiscovered for more than three years before a lawsuit is filed. The Second, Ninth and Eleventh Circuits all apply some form of a discovery accrual rule, which dictates that a claim arises when a party learns, or a reasonable person should have learned, that another party violated its rights. All three Circuits allow plaintiffs to sue for infringement that occurred more than three years ago, as long as the plaintiff sues within three years of discovering the suit. However, these Circuit courts differ on how the rule impacts a party’s entitlement to a damages award. The Second Circuit will not allow plaintiffs to recover damages for infringement that is older than three years. The Ninth and Eleventh Circuits will allow plaintiffs to recover damages for acts of infringement that occurred more than three years ago. Plaintiffs will presumably favor the Ninth and Eleventh Circuits, whereas defendants would favor the Second. Before diving into the oral argument, let’s recap the facts briefly. Factual Background The plaintiffs Sherman Nealy and Music Specialists Inc. (MSI) filed a Complaint against, among others, Warner Chappell Music, Inc. in December 2018. The plaintiffs sought injunctive relief and damages, claiming Warner had infringed copyrights in several songs, starting in 2008. Nealy did not discover the infringement until early 2016. Through a number of stipulations, the Eleventh Circuit concluded the only remaining question in the case was whether Nealy could recover damages for infringement more than three years old. After the Eleventh Circuit concluded Nealy could seek relief for older damages, Warner filed the petition for a writ of certiorari. Question Presented If the question presented seems narrow, that is because it is. Warner petitioned the Court to answer whether the Copyright Act’s statute of limitations (specifically 17 U.S.C. 507(b)) “precludes retrospective relief for acts that occurred more than three years before the filing of a lawsuit.” Warner’s question did not mention the discovery accrual rule. The Court granted cert “limited to” whether plaintiffs can recover damages for acts more than three years old under the statute of limitations and “under the discovery accrual rule applied by the circuit courts.” In other words, the Court arguably instructed the parties to assume the discovery rule applied. Oral Argument Warner spent surprisingly little time presenting its position on how to apply the discovery accrual rule. Instead, Warner urged the Court to address whether the discovery accrual rule should exist at all. Justices Barrett, Jackson, and Sotomayor were reluctant to address this broader issue, one they deliberately took off the table when the Court granted cert and rephrased the question presented. Justice Sotomayor questioned Warner’s strategy of merely hinting at this broader question in a footnote, and redirected Warner to the narrower question of how the rule should be applied. In response to questioning, Warner acknowledged that there is no Circuit split on the validity of the discovery accrual rule, conceding that all Circuits apply it in some form, but still urged the Court to consider this broader question. Justices Alito and Gorsuch appeared to entertain Warner’s broader plea. Justice Alito asked what would happen, hypothetically, if the Court merely dismissed the case and instead waited for a cert petition on this broader issue. He questioned the logic of deciding the scope of application of a rule that may or may not exist itself. Justice Gorsuch added on to this, reminding Nealy and MSI that the Court had cast doubt on the discovery accrual rule in previous opinions. Nealy and MSI, who did not brief the discovery accrual rule’s broader validity, urged the Court to answer the narrower question presented. However, they did acknowledge that the Court’s dismissal of the case altogether, as improvidently granted, would also be a win for them. They then reminded the Court that there is no Circuit split on the discovery accrual rule’s existence, only on how it applies to the Copyright Act’s statute of limitations. The Solicitor General, supporting Nealy and MSI, urged the Court to stick to the question presented and sided with the Eleventh and Ninth Circuits, but ultimately did not argue a viewpoint on the existence of the discovery accrual rule. Nor did the Solicitor General state a preference between dismissing the case as improvidently granted or affirming the Eleventh Circuit’s ruling. The Justices may have already made up their minds on the question presented before oral argument began. Existential questions raised about the cert granted and the validity of the discovery accrual rule loomed over the question of how to apply the rule to the Copyright Act. Stay tuned to the TMCA for an update when the Supreme Court issues their opinion.