Trademark, Copyright + Advertising

This week, the FTC finalized an order settling a complaint alleging that an online fashion retailer blocked negative reviews of its products on its e-commerce site. The penalty: a $4.2 Million fine, 10 years of record keeping obligations and 20 years of compliance monitoring. The charge: the retailer automatically published four and five star reviews and put lower star reviews on hold. The Director of the FTC’s Bureau of Consumer Protection noted that “Fashion Nova is being held accountable for these practices, and other firms should take note.” So what should other online retailers be doing to avoid deceiving consumers? First, implement a fair customer review publishing policy that accurately reflects the views of all customers who submit reviews. The order gives a few tips for circumstances where it might be appropriate to hold back a review (and when it would not), but on the whole, relevant reviews must be published so consumer can get the full picture. The FTC has also released some tips for brands operating in this space: Soliciting and Paying for Online Reviews: A Guide for Marketers. And if your brand employs another company to help with its online reviews, make sure they are following the guidance in the FTC’s Featuring Online Customer Reviews: A Guide for Platforms. Ultimately, your company can be held responsible for actions undertaken by contractors you employ to help manage the publication of reviews for your brand.

A burger brouhaha involving the Lanham Act is well underway in the Wolverine state. Plaintiff In-N-Out Burgers operates hundreds of fast food joints in the West. Defendant Doll n’ Burger recently opened two locations in Michigan. In-N-Out filed suit in Michigan alleging that Doll n’ Burger is infringing In-N-Out’s registered and unregistered trade dress. Both sides retained consumer survey experts, both sides lobbed multiple critiques at their opponent’s surveys, and both sides sought to “Daubert” the other side’s expert. Doll n’ Burger requested a jury “for all jury-triable claims,” and so the Court might be expected to take a close look at alleged flaws in the respective surveys to avoid admitting evidence that is irrelevant to the issues at hand or that could be more prejudicial to the jury than the purported relevance. Instead, U.S. District Court Judge Robert Cleland criticized the approach taken in the competing exclusion motions, saying he viewed “both sides’ scattershot approach to discrediting the opposing expert with a degree of suspicion.” Reminding the parties that there is no such thing as a “perfect” survey and that most methodological flaws in a survey bear on the weight rather than the admissibility of the survey, Judge Cleland considered the “legion” of reasons raised by the parties for keeping the experts out, and found that these reasons amounted to a mere nothing burger. While neither side’s expert was shown the door, the myriad issues raised by the parties are worthy of a deeper dive. In this multi-part series, we discuss some of the more salient issues associated with both parties’ survey experts. We start with some of the major critiques leveled at In-N-Out’s secondary meaning survey. Not Testing Every Trade Dress Element. Doll n’ Burger challenged In-N-Out’s expert’s decision to include in the survey stimuli images of the trade dress that did not include all 9 elements of the Plaintiff’s trade dress. The Court rejected this claim because “Defendants cite no case law supporting their implicit proposition that a survey cannot test the ‘overall appearance’ of a retail establishment unless every possible element of the trade dress is visible in the test images.” Including Other “Indicator of Source” Elements. When testing for secondary meaning of trade dress, it is customary to obscure the “brand and company name and other source-identifying indicia” so that the expert can isolate the trade dress at issue and measure consumer reactions. Doll n’ Burger alleged Plaintiff violated this rule when she failed to remove certain elements in her test stimuli (such as the In-N-Out “Palm Trees”) that also act as an indicator of source. While the Court agreed with the criticism, it determined this methodological flaw would go to the “weight” of the survey and not its “admissibility.” Plaintiff's Expert's "test" stimulus that included palm trees—a source identifier that arguably should have been removed from the stimulus before testing A Close Call on Survey Universe. The composition of the survey’s universe is “one of the most important factors in assessing the validity of a survey as well as the weight it should receive.” Plaintiff’s expert limited her survey universe to respondents situated in the seven western states where In-N-Out operates. But the wrinkle here is that Plaintiff alleged claims for both registered and unregistered trade dress. Thus, Defendant argued, Plaintiff’s expert could not opine on secondary meaning when her survey respondents were only located in the western part of the U.S. The Court ultimately rejected that claim and concluded that: “Plaintiff has two routes to establishing an enforceable, common law trade dress based on acquired secondary meaning. Plaintiff can demonstrate that the look of In-N-Out's restaurants has ‘acquired secondary meaning among some substantial portion of consumers nationally’ or it can use a narrower survey to help establish secondary meaning in a more limited geographic region and still pursue a claim for infringement if it can show Defendants (1) had ‘knowledge of’ the trade dress and (2) ‘intentionally copied it.’” While none of these alleged flaws were beefy enough to keep Plaintiff’s consumer survey expert on the outside looking in, this decision nonetheless provides valuable insight and analysis on some of the key issues that should be considered when it comes to developing survey evidence in trade dress disputes. In our next installment, we will rustle up some more insights for you when we dive into Doll n’ Burger’s secondary meaning survey.

In our last post on extraterritorial injunctions, we examined a recent decision from Hong Kong and how a brand owner was able to successfully enjoin infringers in mainland China. We will now look at a recent case in the U.S. and how the brand owner was able to reach conduct in Europe. From U.S. to Europe The U.S. Court of Appeals for the Tenth Circuit most recently weighed in on extraterritorial rights to an injunction under the Lanham Act in Hetronic Internat’l, Inc. v. Hetronic Germany GmbH.  In Hetronic, the plaintiff sued its former European partners operating in Germany and Central Eastern Europe collecting damages in the amount of $113 million for infringing products sold abroad and diversion of sales from U.S. based customers. The Tenth Circuit more clearly defined the reach of the Lanham Act, adopting the framework of the First Circuit’s ruling in the case McBee v. Delica Co., 417 F.3d 107 (1st Cir. 2005), as follows: (i) If the defendant is a U.S. citizen, then a Lanham Act cause of action may be brought against the defendant based on their actions in a foreign country; or (ii) If the defendant is foreign, the Lanham Act applies if: (1) the infringement has a substantial effect on U.S. commerce (note this “substantial effect” requirement is not observed in all U.S. Circuits—see the Hetronic case for a rundown of which Circuit Courts require that the activities have a substantial effect and which merely require “some effect”); and (2) the action would not create a conflict with trademark rights established under the relevant foreign law. In Hetronic, the foreign defendants’ conduct was shown to have a substantial effect on U.S. commerce; however, the injunction was held improperly broad because it covered the world instead of being limited to where the plaintiff had marketed and sold its products. The case was remanded to more clearly define the scope of the injunction to include countries where the plaintiff had already penetrated the market. A Round-Up Across the Seas As we have outlined in this two part post, both Hong Kong and U.S. laws allow for some redress to obtain an extraterritorial injunction against overseas infringing activities. Note, however, that to exercise its discretion to grant such injunction, the Hong Kong court must have personal jurisdiction over the defendants (which is usually shown by the defendants being a Hong Kong resident or a company incorporated in Hong Kong). This is narrower than the U.S. position where it is possible to obtain an injunction under the U.S.’s Lanham Act against a foreign defendant finding personal jurisdiction under Federal Rule of Civil Procedure 4(k)(2), where serving a summons or filing a waiver of service establishes personal jurisdiction over a foreign defendant if (A) the defendant is not subject to jurisdiction in any state’s courts of general jurisdiction; and (B) exercising jurisdiction is consistent with the United States Constitution and laws. That being said, subject to future applications for extraterritorial injunction made before the Hong Kong court, the Court may further determine whether other factors such as the presence of an office or business operation in Hong Kong by the foreign defendant, or a substantial effect of the defendant’s infringing activities on the Plaintiff’s business in Hong Kong may establish the Court’s personal jurisdiction over foreign defendants.

Foreign brand owners whose brands are being infringed in other countries may have an avenue to pursue extraterritorial injunctions. In this two part post, we examine how two courts: one in Hong Kong and the other in the U.S. have recently ruled to enforce injunctions against trademark infringers in Mainland China and Europe, respectively. From Hong Kong to Mainland China The High Court of Hong Kong recently discussed whether the court has jurisdiction to grant an interlocutory injunction with extra-territorial effect in respect of infringement of IP rights. In BIOZEAL, LLC AND ANOTHER v. NATURE’S STORY CO LTD AND ANOTHER [2021] HKCFI 3137, the plaintiffs (which are based in the U.S.) sought injunctions to restrain the defendants (which are Hong Kong companies affiliated with the plaintiffs’ former distributor) from operating flagship stores on certain e-commerce platforms and marketing products to consumers in Mainland China by reference to the plaintiffs’ marks. In that case, Mr. Justice Lok, the judge in charge of the Intellectual Property List of the High Court of Hong Kong, clarifies that the “double actionability rule” (which has largely been abolished in English law) still applies under Hong Kong law in respect of infringement of IP rights. By this rule, the Court will hear an action involving an alleged infringement committed outside the jurisdiction if the infringement is actionable under both Hong Kong law and also the law of the country where the infringement took place. Mr. Justice Lok provided a useful summary of the relevant principles for global brand owners, including U.S. companies, to apply for injunctions to stop passing-off activities outside jurisdiction. Essentially, (i) In so far as a claim for infringement of intellectual property rights outside jurisdiction is concerned, the law is treating passing-off (and injurious falsehood) differently from other types of intellectual property rights such as patents and registered trademarks (where separate registration of the claimant’s right in that jurisdiction is required). (ii) To sue the defendant from committing passing-off outside jurisdiction, the court must have personal jurisdiction over the defendant (usually by showing that the defendant is a Hong Kong resident or a company incorporated in Hong Kong). (iii) The claimant can formulate the claim in either or both of the following manners: (a) the defendant is trying to export an instrument of deception (the most usual case being using Hong Kong “shadow” company with the name incorporating the claimant’s trademark to carry on business outside Hong Kong including granting licences to others to use the relevant trademark) with a view to deceive the public and consumers outside Hong Kong; (b) the defendant’s passing-off activities are also actionable in the foreign jurisdiction concerned. (iv) In the case of (b) above, the claimant would have to produce evidence of the relevant foreign law to prove that the defendant’s passing-off activities are also actionable under the law of that jurisdiction. Since the Hong Kong court has personal jurisdiction over the defendants in that case (due to the fact that the defendants are incorporated in Hong Kong) and the plaintiffs have established good arguable case that the defendants have committed passing-off actionable in Hong Kong and that the plaintiffs will probably suffer enormous irreparable damage caused by the continuous acts of the defendants, Mr. Justice Lok granted injunctions in that case restraining the defendants (but not the plaintiffs’ former distributor based in China that the Hong Kong court does not have personal jurisdiction) from committing the wrongful acts in Mainland China. The defendants have been granted leave to appeal the interlocutory injunctions to the Hong Kong Court of Appeal but their application to stay the execution of the interlocutory injunctions pending the appeal was dismissed. This is the first successful injunction in Hong Kong concerning a cross-border e-commerce platform based on the double actionability rule, allowing the Hong Kong court to take into consideration torts committed by the defendants outside of Hong Kong. It is quite common for infringers in China to use a front company in Hong Kong (i.e. “shadow companies” as discussed above) to facilitate illicit activities in China. This recent Hong Kong court decision should be welcomed by foreign brand owners as it is now clarified that it is possible to use the Hong Kong court as an avenue to pursue legal actions against infringing activities in Mainland China. Stayed tuned for the second part of this post where we will examine the extraterritorial reach of trademark injunctions from U.S. to Europe.

Image from lev radin / Shutterstock.com Fly Havana and Fat Joe are heading “All the Way Up” to the Second Circuit for “Another Round.” Earlier this month Fly Havana appealed New York District Court Judge Naomi Reice Buchwald’s conclusion that Fly Havana had transferred all ownership rights to the song “All the Way Up” to Fat Joe. Fly Havana had sued Fat Joe and numerous other defendants for copyright infringement, claiming he was the author and co-owner of the song. Fat Joe claimed Fly Havana had transferred ownership rights in the song to Fat Joe at an IHOP in March 2016 when Fly Havana signed a “piece of paper,” gave the sole copy back to Fat Joe and took a check from Fat Joe for $5,000. Fly Havana did not dispute he signed the paper, and took the check. So far so simple—all Judge Buchwald had to do was read the “piece of paper” to determine the parties’ respective rights to the song. The hook—Fat Joe couldn’t find the “piece of paper,” or any copies. And this is where the gunners get “So Excited” because the case starts to look like a bar examination question. But this is not made up, “The Shit is Real.” Typically the “best evidence” rule requires that an original writing is required to prove its contents unless an exception applies. So, “Whatcha gon do” when you can’t find the original signed “piece of paper” that no one disputes existed? Judge Buchwald cut through the “Yellow Tape” and relied on two exceptions to the best evidence rule. First, under Federal Rule of Evidence 1003, a duplicate of the original is admissible unless there are genuine questions about the original’s authenticity or the circumstances make it unfair to admit the duplicate. Second, under Federal Rule of Evidence 1004, an original is not required and other evidence is admissible if all the originals are lost or destroyed. Here, Fat Joe and others, including his attorney, presented evidence that his attorney had sent him the draft of the “piece of paper” by email, that Fat Joe printed the email without making any changes and took it to IHOP for signature by Fly Havana. Fat Joe and others also presented substantial evidence about their inability to locate the original signed version, and about all the efforts they made to do so. Based on this evidence, which was apparently undisputed, Judge Buchwald concluded the draft of the “piece of paper” sent by Fat Joe’s attorney was admissible as a duplicate of the original under Rule 1003, and also admissible under Rule 1004 because the undisputed evidence established the original was lost or destroyed. Perhaps most interesting is that Judge Buchwald made these factual determinations in the context of a pre-discovery motion for summary judgment, which necessarily means she concluded that there was no genuine dispute that the requirements for Rules 1003 and 1004 were met, and also that discovery could not as a matter of law uncover any contrary evidence. These are not typically the type of factual determinations that are made in a pre-discovery motion for summary judgment, so it will be interesting to see what happens when the appeal gets “Cookin.” We will report back when the Second Circuit issues its opinion. Until then, “Lean Back.”

We previously reported on the Marcus Gray, et al. (“Gray”) v. Katheryn Hudson, et al. (“Perry”) case on  August 2nd and August 15th of 2019. When we initially reported the details of this case, Gray was awarded damages to the tune of $2.8 million on the basis that Perry’s “Dark Horse” song infringed upon Gray’s “Joyful Noise” song. Most specifically, a jury decided that a string of eight staccato notes or “ostinato” in Perry’s song infringed upon a riff in Gray’s song. Perry sought to overturn the jury’s verdict issued in Gray’s favor, and U.S. District Court Judge Christina A. Snyder did so in March 2020 upon review of the extrinsic evidence. Judge Snyder’s determination was based upon a review of the extrinsic evidence and also took into account a recent decision in the Skidmore v. Led Zeppelin case (discussed on the TMCA), and concluded that “the range of protectable expression in an 8-note pop music ostinato comprised of individually unoriginal elements is narrow,” and that “[t]he evidence in this case does not support a conclusion that the relevant ostinatos in “Dark Horse” and “Joyful Noise” are virtually identical.” On Appeal, Gray asserts that the trial judge was wrong in tossing the $2.8 million jury verdict. In a recent argument before a panel of judges for the 9th Circuit Court of Appeals, panelist Judge Milan D. Smith noted that the trial court “did not question the jury’s analysis of the intrinsic or factual evidence, but applied an extrinsic test in determining as a matter of law that the short combination of notes in Gray’s “Joyful Noise” are “too basic to be protectable.” Judge Smith further stated “[i]t seems to me that the case law says that we as judges are fully authorized and empowered and indeed required to examine the extrinsic evidence test ourselves, and we do not defer to the jury on that, it’s really a matter of law.” Interestingly, Perry explained under oath at trial that the ostinato (which she calls the chorus) is the most identifiable part of the song. Her counsel advised the 9th Circuit Court of Appeals panel that Perry was testifying as a pop star and not a musicologist. The ostinato was called “the hook” by Perry’s counsel during the recent hearing, which the panel deemed as potentially significant in terms of the importance of the ostinato. Is the importance of “the hook” enough to convince the panel that the ostinato infringes upon Gray’s copyright? Maybe. But Judge Richard R. Clifton on the panel told Gray’s counsel during the hearing that he simply could not hear what Gray wants him to hear – in listening to the songs, it took a while for him to figure out what the purported similarities were. At a minimum, there appears to be the possibility of a split panel decision. Will the case resolve in line with the Led Zeppelin decision? We will keep you apprised of developments in the case.

From the initial design plans, to the choice and fabrication of materials, to the finished project, there are many components of a construction or infrastructure project that can give rise to intellectual property (“IP”) issues for construction and design professionals. Believe it or not, IP plays a key role in any construction project and is therefore something that anyone involved in the construction industry should be mindful of. This article provides a high-level overview of the broader IP categories that could impact your construction project or company. Trademarks In short, a trademark is a source identifier. A trademark consists of words, symbols, logos or other designations used to identify the particular source of goods or services. Trademark rights can be acquired simply by using the trademark in commerce, but registering the mark with the U.S. Patent and Trademark Office (“PTO”) confers additional legal benefits and can make for a smoother enforcement process. In the construction industry, trademark issues primarily arise with respect to contractor or subcontractor business names, project names, or joint venture names causing a likelihood of confusion. Because construction businesses often include the last name of the original owner, it is important to know that a trademark, which is “primarily merely a surname”, is considered a generally weak trademark and additional proof may be required to register and/or enforce it. Trademark rights can also arise in the names of buildings (e.g., Empire State Building®) as applied to real estate services or other services or goods, leading to disputes. The litmus test and the key to avoiding or addressing infringement is whether there is a likelihood of confusing your trademark with that of another. Copyrights A copyright protects works of original authorship fixed in a tangible medium. This includes project drawings, blueprints, written materials, technical designs, photographs, and even the finished building or project design itself. Copyrights provide the owner the exclusive right to use, reproduce, and to derive other commercial benefit from the protected work for a specified period of time. Copyright rights arise upon creation of a work; but, when registered in the Copyright Office, the owner of the copyright is entitled to pursue an infringement claim and can collect statutory damages and attorneys’ fees if registration is pursued early. Copyright issues can arise surrounding the ownership and right to exploit a particular work. Take for instance the project blueprints and building plans. The copyright in those building plans is generally owned by the author of the plan drawings, which often is the architect. The project owner will not be considered the author or owner of the plans and may run into an infringement issue, unless (1) the plans fall within certain categories of works and are subject to a written agreement assigning ownership from the original author to the project owner, or (2) the plans were prepared in the scope of the author’s employment, as an employee of the project owner. The key takeaway for construction and design professionals with respect to copyright issues is to be mindful of who is creating the copyrighted materials and who will be the ultimate owner of those materials, and to then be sure to obtain the appropriate written agreements documenting the nature and details of the parties’ relationship. Trade Secrets Trade secrets protect the confidential aspects of a business, such as business methods or information. Trade secrets can cover virtually any type of information that is economically valuable to the owner, not generally known to the public, and is the subject of reasonable efforts by the owner to maintain its secrecy. Common items protected as trade secrets are client lists, marketing strategy, pricing strategy and policies, certain contracts, and competitively sensitive information. Trade secrets are not subject to any sort of registration process. Instead, the owner of the trade secret must use non-disclosure agreements or other confidentiality measures to make sure these aspects of their business stay secret. Until 2016, trade secret jurisprudence and claims of misappropriation were governed solely by state and common law. However, the passage of the Defend Trade Secret Act (“DTSA”), 18 U.S.C. 1836, et. seq. has created a federal cause of action for trade secret owners, has broadened the definition of a trade secret, and provides expansive remedies, such as treble damages, attorneys’ fees, and civil seizure. The key takeaway here: if as a construction and design professional, you believe you have sensitive information of value that you want to protect as a trade secret, make sure you at least have appropriate confidentiality agreements and/or non-disclosure agreements with each employee or entity who may have access to that secret information and limit the universe of folks who have access to that information. Once that information is publicly known, trade secret protection ceases and the value of the previously-protected information diminishes. Patents Patents provide the owner with a temporary monopoly in the United States (or other countries in which the patent registration is granted) to make, use, or sell a patented machine, article of manufacture, process, method or other patentable invention. Unlike copyrights and trademarks, the PTO must grant patents before rights can arise. There are two types of patents: (1) a utility patent, which protects a machine or process that is new, useful and nonobvious and (2) a design patent, which protects any new or original design of an object. As a construction or design professional, a utility patent would protect a newly invented construction process, equipment, material, or business method that gives you a competitive advantage. However, the key takeaway here is when your team comes up with new ideas or discovery, do your research to make sure what you have come up with is different than what has already been used or discovered. If you are not careful, patent infringement litigation can be very expensive from both an attorneys’ fees perspective and a potential damages perspective. Managing IP Risks on a Project So now, you are probably thinking, “how do I protect my project or the work I’ve done and mitigate these infringement risks?” One answer is proper documentation. This means keeping detailed and organized records of every stage of the construction and design process, with the bulk of this work being done before you ever break ground on the project. All project-related entities and workers should be subject to appropriate contracts that should contain provisions addressing IP (such as who owns it, how it can be used and transferred, and dispute resolution) and confidentiality or non-disclosure (particularly for trade secrets) provisions. If separate agreements or licenses are needed, these documents should detail the categories of IP that are protected, what can be used, and who can use them without fear of infringement. Registration of that IP should also be pursued early. Further, any research conducted, processes developed, the dates of key actions, and recordings or documentations of meetings should detail who, when, why, where, and what was discussed or developed (particularly for patents). For instance, if an engineer team discovers or develops a unique and useful building process, keep detailed records about the steps behind that process, key dates, key documents or other memorialized work product, and the roles and contributions of the individuals on that development team. If you have meetings with others inside or outside of the organization, keep organized records concerning who attended, what was discussed, the dates and times of those meetings. The commercial value of your construction project is not just in getting the project completed, but also in the control of the ownership and/or use of the IP and avoiding infringement. It is important for construction and design professionals to take the time to consider these risks and put the right documentation in place now to avoid costly and preventable IP disputes in the future.

China has been speeding up its legislative efforts in protecting trademark rights and improving its trademark administration. In 2021, China issued a number of new rules and regulations on trademark practice. Here is a quick summary of some important legal and practical updates from the past year that foreign brand owners and foreign trademark practitioners need to know: Detailed Rules Against Bad Faith Filings – The China National Intellectual Property Administration (the “CNIPA”) recently updated its Trademark Examination and Review Standards (the “New Standards”). Significant legal and practice changes have been introduced by the New Standards, which became effective on January 1, 2022. One of the most interesting changes is that the New Standards provide detailed rules and guidelines against bad faith filings not for purpose of genuine commercial use under Article 4 of the Chinese Trademark Law. These detailed rules and guidelines are very useful to the examiners the Chinese Trademark Office (“TMO”) in identifying and refusing bad faith filings in trademark examination, as well as to brand owners in combatting pirate trademark filings in oppositions and invalidations. We first blogged about this change to the law in 2019. Prior Use in China Requirement Relaxed – Another important change for foreign brand owners is that the New Standards no longer require that the “prior use” in relation to the opposition and invalidation grounds for protection of prior-used mark rights under Article 32 of the Chinese Trademark Law has to be “prior use in China”. The New Standards now only requires a brand owner to show that the influence of its prior use (which can be foreign use) has extended to China. Update Your Registrations Details or Face Cancellation – In late December 2021, the CNIPA issued its new Guidelines On Assessing General Violation of Trademarks. One of the important changes introduced by this new Guidelines is that failure to update/record the changes of the registration particulars, such as change of name and registered address of the registrant, among other things, will be deemed an act of “self-alteration” of trademark registration particulars which may attract administrative correction order. The New Standards mentioned above provides similar obligations on trademark registrants in keeping their registration particulars up-to-date. The New Standards further provides that if a registrant fails to comply with a correction order to update its trademark particulars, the relevant registration will be cancelled. Let’s Go Faster – Pursuant to a notice issued by the CNIPA in May 2021 which requires the examiners of the TMO and CNIPA to shorten the process of trademark prosecution, trademark practitioners have seen that by the end of 2021, the average time for trademark examination has been shortened to 4 months, and the average time required for completing a trademark registration has been reduced by 1 month from 8 months to 7 months accordingly. The time frame for assignment recordal, opposition, review of rejection and invalidation have also been shortened to 1.5 months, 12 months, 5.5 months and 9 months respectively. No More Paper – Starting January 1, 2022, the TMO would no longer issue registration certificates in paper form.

image by fitzcrittle / Shutterstock.com There have been massive changes in American collegiate sports since this past summer: On June 30, 2021, the National Collegiate Athletic Association (“NCAA”) radically changed course and announced that it would no longer penalize student athletes who profit off of their name, image, and likeness (“NIL”). As the clock struck midnight on the day the change became official, high profile collegiate stars began announcing sponsorship deals and trademark filings, including debuting personal logos. “Amateurism” has long been the NCAA’s credo, and it spent decades fighting to ensure that student-athletes received nothing more than the cost of attending college. After a group of athletes sued the NCAA alleging antitrust violations, the Supreme Court ruled in June that the NCAA could not prevent student-athletes from receiving some education-related benefits and payments. Although the ruling in Alston was relatively modest, some saw the unanimous 9-0 decision and Justice Kavanaugh’s “blistering concurring opinion” (“[t]he NCAA is not above the law,” and its “business model would be flatly illegal in almost any industry in America”) as setting the stage for a much bigger fight to come regarding the NCAA’s monopoly power. Although the decision did not directly address payments for NIL, in light of the decision, years of increasing pressure, and a wave of new—and highly variable—state laws permitting payments for NIL, the NCAA adopted its interim NIL policy. The policy, which applies to Division I, Division II, and Division III schools, allowed athletes immediately to “benefit from their name, image and likeness” and provided that students could engage in NIL activities that are consistent with the law of the state where their school is located. Athletes attending school in a state without a specific NIL law are also allowed to engage in NIL activities without incurring NCAA violations. The policy still prohibits “pay-for-play” and “improper inducements” to attract athletes to a particular school. The interim policy also allows for athletes to receive professional representation in NIL deals. While the NCAA scrambles to craft a cohesive and permanent solution, schools and their compliance departments have been scrambling to craft their own NIL policies and programs in order to provide clear guidance to their athletes to help them avoid violations while also helping them maximize their potential earnings. A host of potential intellectual property rights issues could be brewing: for example, superstar University of Connecticut basketball player Paige “Buckets” Bueckers, who signed a watershed deal with Gatorade soon after the new policy went into effect, applied to register a trademark in her nickname PAIGE BUCKETS on July 13, 2021. How does her school promote her and avoid infringing on that trademark? Can they license the mark for their own use? If they do, would that qualify as pay-for-play? Do her sponsors risk infringement when using images of her in school apparel (especially if that includes the school’s sponsors’ logos), or vice versa? What if an athlete signs an endorsement deal that conflicts with a school’s official sponsor? Although highly marketable athletes like Bueckers are smart to move quickly to protect their NIL, athletes will need guidance to ensure they can take advantage of the policy without infringing on intellectual property rights, violating school or NCAA rules, or entering into unfavorable, even exploitative, deals. Especially for athletes making significant sums, education and guidance on tax and other financial planning will be critical as well. While some collegiate stars are cashing in and signing high profile, large-dollar deals, thus far, most deals thus far have been modest, allowing less well-known athletes to make modest sums by hosting clinics or endorsing local businesses. Though the stakes may be smaller, these athletes will also need guidance on how to protect their NIL while avoiding any potential IP rights violations. At least two schools are already under investigation for potentially violating the policy. BYU partnered with protein bar maker Built in a deal that provided compensation to each member of its football team, while the University of Miami partnered with a gym that would provide compensation to football team members. Navigating the variety of state laws and the sure-to-be frequently evolving school-specific rules and policies is bound to be complex. Practitioners advising schools and individual athletes should be sure to carefully monitor changing rules and laws, especially as Congress considers wading in, and to advise student athletes on the long-term ramifications of their deals, whether that be IP rights issues, unexpected tax consequences, or ensuring that athletes properly vet both the contracts they are signing and the companies they endorse.

Image from Ververidis Vasilis / Shutterstock.com We previously wrote about a series of trademark lawsuits filed by NBA MVP and now NBA champion Giannis Antetokounmpo over the use of his nickname “Greek Freak”. Those lawsuits all contained similar allegations: that the defendants sold merchandise online bearing Antetokounmpo’s name, nickname and/or likeness, including Antetokounmpo’s trademarked GREEK FREAK. While those cases all appear to have settled, one similar SDNY case that was filed after our prior blog post did not. In that case, Antetokounmpo v. Paleo Productions LLC et al. (No. 1:20-cv-6224), Antetokounmpo alleged that the defendants were selling their GREEK FREAK spice blend on the internet in violation of Antetokounmpo’s registered GREAK FREAK mark. After defendants failed to answer the complaint, Antetokounmpo obtained a default judgment and Judge Koeltl referred the case to Magistrate Judge Lehrburger for an inquest on damages. This is where things got interesting—at least for us trademark lawyers. Antetokounmpo sought statutory damages, legal fees and costs, as well as a permanent injunction against the defendants. After receiving submissions from Antetokounmpo, the Magistrate Judge found the defendants liable for trademark infringement, awarded Antetokounmpo his legal fees and costs, and issued a permanent injunction against the defendants. However, the Magistrate Judge denied Antetokounmpo’s request for statutory damages. Antetokounmpo appealed that ruling to Judge Koeltl, who reviewed the issues de novo. Unfortunately for Antetokounmpo, Judge Koeltl agreed with the Magistrate Judge and denied Antetokounmpo’s request for statutory damages. Under the Lanham Act, statutory damages are only available in cases “involving the use of a counterfeit mark.” A counterfeit mark is, essentially, a mark that suggests a fake origin. After an exhaustive analysis, the court found that this was not a case that involved the use of a counterfeit mark for two independent reasons. First, the court found it implausible that a reasonable consumer would think that the GREEK FREAK spice blend was from Antetokounmpo since he had never used his mark in connection with food, let alone spices. To qualify as a counterfeit, the mark must be used on the “same goods or services for which the trademark is registered.” Because Antetokounmpo had not previously used his GREEK FREAK mark in connection with spices, the court ruled against him. Second, the court found that the defendants had not even used GREEK FREAK as a “mark” under the Lanham Act because they did not use it to “communicate origin,” but instead to describe a flavor (the company who made the spices was clearly identified on the label). On that basis, the court held that the defendants’ use of GREAK FREEK “did not deceptively suggest an erroneous origin because it does not suggest an origin at all.” While Antetokounmpo’s winning streak continues both in court and on the court, his victory in the Paleo case was not a complete slam dunk.

Just in time for the holidays, the U.S. District Court for the Western District of Kentucky issued a decision steeped in two rich holiday traditions—family lore and alcohol. On December 16, 2021, the court entered a preliminary injunction against Log Still Distilling, LLC in a trademark infringement and unfair competition action brought earlier this year by Heaven Hill Distilleries, Inc., both manufacturers of bourbon. Heaven Hill is a large family-owned distillery founded in Louisville, Kentucky in 1935. Log Still was founded in 2018 as a new distillery, line of spirits, and tourist destination in Gethsmane, Kentucky. Bourbon is a distilled liquor made primarily from corn that Congress has designated a distinctive product of the United States. The story of how Heaven Hill and Log Still arrived in a trademark battle in federal court begins with Joseph Washington “J.W.” Dant, who first distilled bourbon as a teenager in 1836. J.W. Dant’s unique distilling method entailed running a copper pipe through a hollow poplar log, filling the pipe with fermented mash, and passing steam through the pipe. The resulting liquor became J.W. Dant-branded bourbon whiskey. Dant’s namesake distillery continued producing J.W. Dant whiskey after Dant’s death in 1902, and after Prohibition obtained two federally registered trademarks (U.S. Reg. Nos. 320,981 and 376,057): The distillery and the marks changed hands several times in the mid-20th century, ending in Heaven Hill buying the J.W. Dant brand (among others) in 1993. Today, J.W. Dant bourbon is available for $15 to $18 on the bottom shelf of liquor stores in most states. (J.W. Dant is also for sale on the Internet, where no one knows you’re a bottom shelf liquor.) Meanwhile in Gethsmane, J.W.’s great-great-great-grandson John Wallace “Wally” Dant III and some of his cousins founded Log Still to “revive” their family’s place in the bourbon business. Wally initially approached Heaven Hill about buying the J.W. Dant brand, but Heaven Hill declined. Undaunted, Log Still launched its Monk’s Road-branded bourbon and sought to infuse its promotion with the family’s history and, according to Log Still’s internal marketing documents, create “ties to the J.W. Dant name whether the brand can be used or not.” These ties begin with the Log Still Distilling name, which evokes J.W. Dant’s original method of distilling bourbon by pouring it through a hollowed log. Log Still went further—naming its distillery “Dant Crossing” and billing its brand as the “rebirth of the J.W. Dant legacy” among other homages to the family’s famous ancestor. In response to Log Still’s social media posts containing these themes, Heaven Hill sent cease-and-desist letters. Heaven Hill also opposed Log Still’s attempt to federally register a “Dant & Head” trademark, and ultimately filed suit. In granting Heaven Hill’s request for a preliminary injunction, the court found persuasive proof that Log Still had crossed from recounting family lore to build a new brand into impermissibly leveraging an old brand that Log Still did not own. In its 58-page decision, the court catalogued Log Still’s marketing strategies and advertising themes to conclude that this was “an affiliation case in which a newcomer is building a brand by intentionally tying itself to an old brand and story controlled by a competitor.” Throughout, Log Still’s marketing strategy invoked themes of “reviving a legacy,” “heritage revived,” and “reviving the Legacy one barrel at a time.” Log Still acquired the domain name JWDant.com and, for a time, directed traffic to Log Still’s website. That website described the “heritage” and “Dant Legacy” Log Still claimed to be reviving and that Log Still’s “story … begins with our forefather Joseph Washington Dant,” who “gave birth to the Dant family’s place in bourbon lore with a legacy all our own.” Log Still declared on social media that “we’re the Dant family … and we’re back in the bourbon business.” A few posts even featured old photos that included the trademarked J.W. Dant logo and bottles. As the court observed, this public story of revival is not accurate—the J.W. Dant brand had existed all along. And Log Still was keenly aware of the existing J.W. Dant brand. Log Still’s internal marketing plans described its strategy to “subtly” tie is branding to that of J.W. Dant. Log Still’s documents described J.W. Dant as one of Log Still’s “competitors,” and stated that there was “possible confusion” between the brands, which Log Still and its marketing team predicted could lead to “threats” such as “legal challenges” from Heaven Hill. Although not knock-offs, the court decided that Log Still’s logos appear influenced or inspired by the J.W. Dant marks. Log Still’s Monk’s Road bourbon displays the tagline “[t]his is a story of heritage & revival” and state that “Joseph Washington Dant started this tradition way back in 1836 when he felled a poplar tree.” Log Still’s label also featured a crest with an establishment date of 1836 that was definitely not applicable to Log Still’s founding. Log Still took a similar approach to branding its 350-acre campus by highlighting the land’s history to the Dant family. Visitors are greeted by a story board discusses the history of J.W. Dant and Log Still, and the tasting room is walled by barrels stenciled with “The Dant Distillery Company,” a common-law trademark registered to Heaven Hill. Even if some of these statements—when read narrowly—merely referred to J.W. Dant’s history and not the competing bourbon sold today, the court concluded that together, Log Still’s story “indicates that Log Still’s principal motivation is to sell its competing spirits and tourist offerings—not simply to reminisce about family history.” All of this led the court to conclude that Log Still was using the J.W. Dant name in a manner likely to cause consumers to be confused about the (lack of) a relationship between the two brands. The court began its analysis with two threshold issues: First, whether Heaven Hill had valid protectable rights. On this issue, Log Still argued that Heaven Hill had “allowed the quality and sales of J.W. Dant to fall so far that the brand has lost its associated goodwill, leaving nothing for other users to infringe.” This argument was rejected as lacking in in any legal basis, as the mark was not abandoned and did not have to be a thriving enterprise to be protected from infringement. Second, the court determined that Log Still was using the J.W. Dant marks and indicia of good will as a source identifier, brushing aside Log Still’s “descriptive use” defense. Log Still was not referencing the J.W. Dant name and legacy in an academic non-trademark manner; rather, it was drawing on the J.W. Dant legacy to sell commercial products. Log Still also failed another test for good-faith, non-trademark use—the court decided that the story Log Still was selling was not true. In particular, Log Still’s attempts to trace its history to 1836 merely co-opted the Dant Distillery Company’s story, a legacy the Dant family sold long ago and that Heaven Hill purchased in 1993. The court applied the familiar likelihood of confusion analysis following the Sixth Circuit’s Frisch’s test. Most difficult for Log Still’s defense was the evidence of actual confusion. Internet users commented in response to Log Still’s posts: “is that J W Dant I used to drink” and “What about JW Dant is that coming back?” A local news station broadcasted an interview with Wally (whom they introduced as “J.W.”) Dant while displaying a bottle of Heaven Hill’s J.W. Dant product and barrels labeled Dant Distillery. A distillery-focused blog reported on the opening of Log Still’s distillery with the headline “Log Still (formerly J.W. Dant).” The court also emphasized Log Still’s intent in selecting its competing branding. The court quoted from Log Still’s internal marketing documents which made “clear that Log Still aimed to steal J.W. Dant’s story—intentionally and in order to compete in the spirits marketplace.” As the court colorfully put it, the Marketing Plan was “legally damning” and “as close as many lawyers will ever come to a smoking gun”. Then the court added, “But wait, there’s more!” in recounting even further evidence of bad faith intent by Log Still to exploit another company’s goodwill. Given its conclusion that Heaven Hill was likely to prevail, the court wasted no time in enjoining Log Still’s continued infringement. The court applied the Trademark Modernization Act of 2020’s presumption of irreparable harm and determined that Log Still had not adequately rebutted this presumption by attempting to rely on lack of provable economic damage to Heaven Hill, concluding that irreparable harm could be established by loss of control over brand image and good will. The court ordered Log Still to take several actions to distinguish itself from the J.W. Dant brand. The court ordered Log Still to remove references to J.W. Dant, his story, and the year 1836 from its products, labels, and logos. The court also enjoined Log Still from using jwdant.com domain in connection with the spirits industry and required Log Still to remove any internet marketing that states or implies “that Log Still is reviving, preserving, or contributing to the legacy of J.W. Dant’s distilling and the company he founded and his descendants sold.” The court stopped short of ordering Log Still to remove all references to the history of J.W. Dant and his connection to Log Still’s owners from its marketing and distillery tours, but Log Still is required to display a conspicuous disclaimer disavowing a connection to the J.W. Dant brand. The court’s decision is a warning to distant descendants of the founders of famous brands about attempting to cash in on a family legacy that another entity owns. On the issue of whether an individual has an unqualified right to use his or her own name in marketing a product, the answer today is “no.” As the court pointed out, “A century ago,” Log Still’s principal J.W. (Wally) Dant “may have had a stronger case to sell bourbon by using his ancestor’s name or the initials they share. 19th century courts recognized a ‘sacred right’ to use one’s own name as a mark, even if someone else used the name first.” But this doctrine changed as courts eventually recognized “that names could confuse as easily as any other trademark.” But there is a broader lesson for those without a whiskey baron in the family tree. The evidence against Log Still that the court found most compelling was Log Still’s internal marketing documents confirming Log Still’s desire to “creat[e] direct ties to” Heaven Hill’s mark “whether the brand can be used or not.” The strategy described in these documents is exactly what trademark and unfair competition law is designed to prevent—a new brand capitalizing on an old one by tying the two in the consumer’s mind. Upstart brand builders should be mindful that trademark law bars more than copying a name, it protects the goodwill built in a brand’s identity. Efforts to trade on the goodwill of another, even “subtly,” can land the junior user in hot water.

Image from Mario Breda / Shutterstock.com Non-Fungible Tokens (NFTs) have made another court appearance, with Miramax, LLC filing a complaint in the Central District of California in an attempt to stop Quentin Tarantino from auctioning off seven Pulp Fiction-based NFTs. At the center of the dispute is whether the content Tarantino wants to sell as represented by the NFTs is encompassed by rights that Tarantino reserved when he assigned the bulk of his rights in Pulp Fiction to Miramax. According to the complaint filed by Miramax, each of the NFTs forming part of Tarantino’s collection will include “one-of-a-kind” Pulp Fiction content, such as Tarantino’s original handwritten screenplay pages for a single scene, personalized audio commentary by Tarantino, and a drawing that will be inspired by some element from the scene. As we summarized in our previous post on NFTs, an NFT is basically a unique digital certificate representing ownership of a unique thing. So, while the unique content represented by the NFTs is linked to separately, the NFT token or certificate will serve as the record of ownership of that content. Per the Tarantino NFT website, the owner of the NFT could choose to keep the secret content unlocked through the NFT to themselves for all eternity, share the secrets with a few trusted loved ones, or share the secrets with the world. The fact that the sale of each Tarantino NFT is an individualized, one-time sale, is at the heart of the dispute. According to Tarantino, selling NFTs representing screenplay pages for particular scenes falls under his right to “screenplay publication,” one of the rights he reserved in his 1993 assignment to Miramax. Miramax argues that since the sale is a one-time transaction, it does not constitute publication (i.e., the distribution of copies to the public) and thus is a right belonging to Miramax, not Tarantino. Miramax also objects to Tarantino’s use of Pulp Fiction branding to sell the NFTs, also asserting claims copyright infringement, trademark infringement, and unfair competition along with its breach of contract claim. This isn’t the first TCMA blog-post on NFTs, and it won’t be the last, as the minting and auctioning of NFTs is proving to be a lucrative business. In its complaint, Miramax concedes that the case is important in the precedent it sets for others, noting that Tarantino’s sale “could mislead others into believing they have the rights to pursue similar deals or offerings, when in fact Miramax holds the rights needed to develop, market, and sell NFTs relating to its deep film library.” At the end of the day, the resolution of this case will come down to the court’s interpretation of what the parties intended by the right of “screenplay publication” that was retained in the 1993 assignment between Tarantino and Miramax, when NFTs were nowhere on the horizon. Now that they’re here, parties need to consider who should have the right to exploit this new form of digital content and ensure that it’s expressly addressed in any copyright transactions.

Attention trademark practitioners: the finalized rules implementing the 2020 Trademark Modernization Act (“TMA”) go into effect this weekend, on December 18, 2021. Significantly, this marks the availability of three new mechanisms for eliminating “deadwood” registrations: petitions for reexamination, petitions for expungement, and a new nonuse (expungement) cancellation ground. We previously wrote in detail about these three changes here. The PTO will begin accepting petitions for reexamination and expungement starting December 27, 2021, but the new nonuse cancellation ground will presumably be available as of the 18th. The chart below compares these new procedures. Starting in about a year (on December 1, 2022), the office action response period for most trademark applications will shrink to three months from the current six-month response period. But a three-month extension may be requested for a fee of $125, and the response period for Madrid Protocol applications will remain six months. The TMCA will continue to monitor and provide updates on the impacts of the TMA.  

There are two sure-fire ways to maximize the chances that a consumer survey gets bounced out of federal court: (1) surveying the wrong people; and (2) leading them to a desired “correct” answer. Both of these survey maladies were on display in a dispute pending before the U.S. District Court for the Northern District of California in Kudos Inc. v. Kudoboard, LLC. The Court’s recent Daubert order tells a cautionary tale that trial counsel and their experts should be mindful of as they work together in designing a consumer survey for use in a Lanham Act case. The Dispute Plaintiff operates an internet-based software communication platform that enables users to exchange feedback and recognition with other users and owns registered trademarks for “Kudos” that cover these services. Defendant operates an online greeting card company where consumers can create and send digital or printed greeting cards. Defendant’s service is branded “Kudoboard,” for which Defendant also owns a registered mark covering “a website allowing users to create customized online group greeting cards.” Plaintiff sued for infringement; Defendant asserted a number of affirmative defenses. The Survey Plaintiff offered a consumer survey to show that consumers are likely to be confused by Defendant’s use of “Kudoboard.” But Plaintiff’s survey contained two fatal flaws, both of which independently supported the Court’s decision to exclude the survey from evidence. For starters, Plaintiff selected an “under-inclusive” universe of potential survey respondents. Because Plaintiff alleged claims for forward confusion premised on the theory that consumers of Defendant’s services will believe the services originate with or are affiliated in some way with Plaintiff (as opposed to reverse confusion), the proper survey universe is the purchasers of the Defendant’s services (the junior user in the dispute). Here, Plaintiff’s expert surveyed the wrong respondents. Instead of focusing on purchasers of Defendant’s e-greeting card services, the survey universe (or population) was composed “exclusively” of “current users of employee recognition software” – a universe that focused on the Plaintiff’s customer base. While some of these individuals may have also used Defendant’s e-greeting card services, large swaths of potential users were excluded, including “educators, community groups, and casual users.” Thus, as the Court observed, the survey universe was “under-inclusive in that it excluded otherwise qualified consumers, arguably some of the most likely consumers to have knowledge of the products at issue.” For this reason alone, the Court ruled the survey was inadmissible. Further, according to the Court, the survey deployed some “leading” language before respondents were shown the various webpage stimuli (which included Defendant’s website). After being shown Plaintiff’s website (with the Kudos mark), participants were shown three other websites (one of which was Defendant’s), each with text categorizing the products as “employee recognition software products” or “employee engagement software.” The Court said this “statement constitutes a lead-in that departs from simulated market conditions by substantively describing the products that followed.” For this independent reason, the Court excluded the survey. The Conclusion Here are three key take-aways from this decision: While some flaws in a consumer survey go to the “weight” of that evidence, an improperly defined survey universe or a leading survey instrument can affect the survey’s admissibility in the first instance. Selecting the correct survey universe is an absolute must. Trial counsel and their experts need to lock in on this issue and make sure they are on the same page in terms of whose opinions are relevant based on the legal claims at issue. Any survey stimuli should be presented to respondents without any additional frills or superfluous information that might bias or prime them. There is a meaningful difference between providing respondents with information to help them complete a survey (for example, indicating that they can “zoom in” to make a stimulus larger on the screen), and providing them with substantive information that “plants a seed” as to how they should answer a question or how they should “perceive” the services at issue. If you want the Court (and your client!) to give your survey kudos, make sure you avoid these rather sizable pitfalls along the way.

Get ready, large employers. After years of amendments exempting the personal information of employees and other personnel from the California Consumer Privacy Act (“CCPA”), covered employers now have a firm deadline by which to comply with the CCPA’s requirements in protecting employee and personnel personal information (“human resources data”). The deadline – January 1, 2023 – may appear far off, but certain provisions trigger obligations for 2022. Below are the steps large employers should take to comply with the CCPA. Step 1: Be familiar with the rights afforded to consumers under the CCPA. The CCPA was enacted on June 28, 2018, creating one of the most comprehensive frameworks for regulating digital privacy in the United Sates. The law currently grants California consumers the right to know what personal information is collected, used and processed by covered businesses; the right to access the personal information; the right to request that covered businesses delete the personal information; the right to know whether and to whom the personal information is sold or disclosed; the right to opt out of the sale of personal information; and, the right to the same quality of service as that provided to consumers who do not opt out. The CCPA’s effective date was January 1, 2020. Step 2: Determine if the CCPA applies to the employers’ business. The CCPA applies to for-profit companies that do business in California that either have an annual gross revenue of over $25 million; buy, sell, receive, or share the personal information of at least 50,000 California residents, households, or devices for commercial purposes; or derives at least fifty percent of their annual revenue from selling California residents’ personal information (“large employers”). Step 3: Understand the extent of the CCPA’s current “employee” exemption. Human resources data is largely exempt from the CCPA for the time being. Under the CCPA’s current “employee” exemption, the personal information of a job applicant, employee, owner, director, officer, medical staff member, or contractor of a covered business are exempt from the CCPA as long as the covered business collects and uses the personal information (1) in the context of the covered business’s relationship with the employee or personnel, (2) to maintain emergency contact information on file, or (3) to administer benefits. Despite the employee exemption, employers should understand that there are existing obligations concerning human resources data. The CCPA requires employers to safeguard human resources data and to provide a notice to employees and personnel regarding the human resources data collected by the employer and how the information is used. Although no model notice has been provided under the CCPA, the notice must describe “the categories of personal information to be collected and the purposes for which the categories of personal information shall be used.” The CCPA privacy notice must be given to employees “at or before the point of collection” and provide a copy of, or link to, the employer’s privacy policy. Employers should also know that California residents can seek to recover statutory damages for certain data breaches, including those involving human resources data. Step 4: Understand the new obligations for human resource data under the CCPA. Human resources data was exempt from the CCPA’s requirements until January 1, 2021. With the approval of Assembly Bill 1281 on September 29, 2020, the January 1, 2021 deadline was extended to January 1, 2022. California voters approved the California Privacy Rights Act (the “CPRA”) on November 3, 2020, which amended the CCPA and extended the employee exemption to January 1, 2023, the effective date of the CPRA. The extra year is helpful for large employers, as the CPRA expands consumers’ rights. In addition to the CCPA rights, the CPRA grants California consumers the right to correct personal information; the right to limit the use and disclosure of sensitive personal information; and, the right to opt out of the sharing of personal information. Additionally, the CPRA has a 12-month “look-back” provision, meaning that employers should be tracking their collection, use, and disclosure of human resources data up to twelve months before the January 1, 2023 effective date. Thus, employers should be prepared to provide information going back to January 1, 2022. Enforcement of these additional rights lies with the ability of employees and personnel to seek to assert a private right of action for data breaches. The CPRA adds an additional enforcement mechanism by establishing the California Privacy Protection Agency, which administratively enforces the CCPA as amended by the CPRA. Step 5: Create an action plan to comply with the CCPA as amended by the CPRA. Although the January 1, 2023 deadline seems far away, large employers should take steps to ensure compliance with the CCPA and CPRA concerning human resources data. These steps include: engaging in data mapping of human resources data; continuing to provide CCPA privacy notices to employees and personnel; ensuring the accuracy of privacy policies; evaluating physical, technical, and administrative safeguards concerning human resources data (which includes evaluating contracts with vendors such as payroll providers and benefit administrators); and implementing a plan to ensure the tracking of human resources data from January 1, 2022 and onwards. These five steps provide a great starting point in working towards CCPA/CPRA compliance. Large employers should take advantage of the extra year granted under the CPRA to develop and implement California-compliant programs so that by January 1, 2023, employers can provide information about the collection, use, and disclosure of human resources data.   * A version of this blog post was originally published in the Orange County Business Journal on November 15, 2021.

Image from Kraft74 / Shutterstock.com In 1994, Firooz Zahedi was hired by Miramax to photograph the actress Uma Thurman as her character Mia Wallace in the film Pulp Fiction. Miramax paid Zahedi $10,000 for his work, used one of his photographs of Mia Wallace laying on a bed, legs crossed behind her, smoking a cigarette, in the iconic movie poster, and credited Zahedi as the owner of the photograph on the 1994 script for the movie. In 2003, Miramax obtained a copyright registration for the poster as a two-dimensional artwork, not a photograph. Over the years, Miramax used the image from the poster on everything from the covers of VHS tapes and laser disks (remember those?) to apparel, and, yes, the packing for a Mia Wallace action figure— which would end up playing a major role in Zahedi’s dispute with Miramax. Zahedi never earned any royalties from these activities. Twenty-five years later, after receiving a pair of socks emblazoned with the famous image of Ms. Thurman, Zahedi apparently decided that enough was enough, and registered the copyright in the photograph. Not long after, he sued Miramax (and 26 other defendants), claiming infringement based on the many uses of his photograph to promote and merchandise Pulp Fiction. Atypically for a copyright case, there was no dispute that Miramax was exploiting the photograph. Instead, the question was whether Zahedi even owned the copyright in the first place, and whether, in light the ownership dispute, Zahedi’s claims were timely. Judge Dolly M. Gee of the United States District Court for the Central District of California determined they were not. After bifurcating the case into ownership and damages phases, she granted summary judgment for Miramax. In the Ninth Circuit, infringement claims grounded in ownership disputes accrue only once: when the plaintiff learns of an express repudiation of their claimed ownership by a party with which it has a close relationship. Here, the close relationship requirement was satisfied because, although Miramax could not locate the work-for-hire agreement it claimed the parties had entered into (a claim disputed by Zahedi), they clearly had a business relationship relating to the photograph and its use to promote Pulp Fiction. After all, Zahedi was paid by Miramax to take the photographs and, at a minimum, granted Miramax an oral license to use the photograph in the iconic poster. The court was then left to determine when Zahedi had notice that Miramax denied his claimed ownership in the copyright, which brings us back to the Mia Wallace action figure. In 2015, almost five years before he filed suit, Zahedi received the toy as a gift. The Pulp Fiction poster image was prominently featured on the packaging, which also had a copyright mark for Miramax and did not credit Zahedi. His stepson posted a picture on Instagram of Zahedi holding the action figure, and included a caption mentioning that Zahedi never received royalties for the famous photograph. The court found that Zahedi’s receipt of that gift—time-stamped thanks to the Instagram post—provided actual notice to Zahedi that Miramax had repudiated his ownership in the photograph sufficient to start the clock on his infringement claim. Unfortunately for Zahedi, that clock ran out three years later, well before he finally filed suit. Had Zahedi never received the action figure or other merchandise using the photograph, his claims may have survived. The court expressed skepticism that the mere fact of Miramax having registered the copyright in the poster, or having asserted copyright in the action figure and other merchandise, would have been sufficient by itself to notify Zahedi of the repudiation and trigger the accrual of his claims. In the end, Zahedi is left to follow his own advice, which he posted on Instagram back in 2015 in response to his stepson’s post: “Sometimes it’s best to settle for the little things in life.”

Twelve years after the Federal Circuit’s landmark In re Bose decision on fraud, the U.S. Trademark Trial and Appeal Board (“TTAB”) has answered one of the questions not reached by Bose: whether reckless disregard of the truth or falsity of a material statement in a PTO filing satisfies the intent to deceive standard for fraud. In the precedential decision Chutter v. Great Management Group, LLC/Chutter v. Great Concepts, LLC, the TTAB answered “yes” to this question and cancelled the challenged registration based on fraud. Chutter involved a consolidated TTAB proceeding involving oppositions to two applications (DANTANNA’S for “spices and spice rubs” and DATANNA’S TAVERN for “restaurant and bar services” owned by defendant Great Management Group) and a cancellation against one registration (DANTANNA’S mark for “steak and seafood restaurant” by defendant Great Concepts, LLC). The defendants shared the same owner, who treated both entities interchangeably, filing the combined declaration for the DANTANNA’S mark owned by Great Concepts LLC in the name of Great Management Group. Because plaintiff’s common law use of its DAN TANA’S mark for a restaurant and marinara sauce long predated any use by defendants and the TTAB separately found a likelihood of confusion between the parties’ marks, the only way defendants could save their registration was to rely on its incontestable status. The material false statement at issue in Chutter was the statement from the declaration of incontestability for the DANTANNA’S registration that there were no pending proceedings against the registration. The statement was material because without it the registration would not have been entitled to the protection of incontestability. The statement was false because when the declaration was made the registration was the subject of both an earlier cancellation proceeding and federal court litigation. The Board found the signatory’s statement was made with reckless disregard of the truth or falsity based on these facts: At the time the declaration of incontestability was signed, the signatory knew that the registration was subject to challenge in the cancellation proceeding and court litigation At the time of his signature, the signatory did not know the requirements for a declaration of incontestability and did not read the language of the declaration that explained the requirements Upon learning the declaration was false, the defendants did not correct it The details behind these facts only worsened the defendants’ position. The signatory was not a business person, but defendants’ outside counsel. The outside counsel not only knew about the earlier cancellation proceeding, but was handling it. Once the declaration of incontestability had been filed, an employee from the signatory’s office called the PTO the day after the declaration was filed to check on the status of the cancelation proceeding. That same day the signatory’s paralegal sent the signatory a memo explaining what statements had been made in the filing and describing how to remedy any errors in the filing. While these facts demonstrated an awareness of the falsity, later facts showed that defendants had clear knowledge of the falsity. Plaintiff’s counsel described the falsity to defendants’ counsel during a phone call and then again when petitioning to cancel the registration. While their answer to the cancellation petition admitted the statement was false, Defendants still did not correct the false declaration of incontestability. The TTAB found the totality of these facts showed “willful blindness” amounting to “reckless disregard” of the truth or falsity of the statement. Having found reckless disregard, the TTAB next looked to case law to see if reckless disregard qualifies as willful intent and satisfies the intent to deceive standard for fraud required by In re Bose. The TTAB cited multiple cases from non-trademark contexts when the Supreme Court or federal appellate courts held that acting with reckless disregard for the consequences of an action satisfies the requirement for an intentional or willful act. The TTAB then concluded that “reckless disregard [was] . . . the legal equivalent of finding that [defendant] had the specific intent to deceive the [PTO]” and cancelled the DANTANNA’S registration on the ground of fraud. Chutter shows that the TTAB will not tolerate the combination of a false declaration of incontestability and reckless disregard of the truth or falsity of a material statement. The conduct described above can serve as guidance on what future plaintiffs should do and what future defendants should avoid. Certainly, correction of a prior false statement in a PTO filing should be undertaken promptly once the falsity becomes known to a signatory, even if such “correction” amounts to a withdrawal because it eliminates the registrant’s basis for the declaration of incontestability. Left unresolved, however, are issues such as whether Chutter’s precedential holding will be applied to non-attorney signatories who may have a lesser understanding of legal language and the potential consequences of a false statement, whether there can be a false declaration of incontestability without a corresponding finding of reckless disregard and what behavior constitutes reckless disregard in connection with declaration of use filings. Watch this space for discussions of future TTAB fraud cases to find out!

A federal magistrate judge in the United States District Court for the Southern District of Florida, in a trade secrets dispute involving CBD-based pain cream, recently granted summary judgment in favor of all but one defendant. The Court’s ruling is a useful illustration of why it is important to present actual (rather than speculative) evidence of misappropriation of a trade secret in order to prevail on such a claim. The ruling is also a good reminder that plaintiffs must be diligent in defining what is being claimed as trade secret(s) at the outset, rather than trying to have this definition evolve as the litigation develops. Background Plaintiff Healthcare Resources Management Group, LLC (“HRMG”) sued Defendants EcoNatura All Healthy World, LLC (“EcoNatura”), Medterra CBD, LLC (“Medterra”), Rejuvenol Laboratories, Inc. (“Rejuvenol”), and NoXeno Health Sciences, Inc. (“NoXeno”). HRMG, a producer of pharmaceutical-grade hemp products, cooperated with EcoNatura, a cosmetic health product developer and seller, to reformulate and manufacture a CBD-based pain cream for Medterra, a retailer introduced to EcoNatura by HRMG. The CBD-based pain cream was then manufactured by Rejuvenol, an owner and operator of a production facility through which EcoNatura manufactures its products. The CBD-based pain cream was created using one of EcoNatura’s creams as the base. After the relationship between HRMG and EcoNatura deteriorated and ultimately terminated, Medterra discontinued ordering the CBD-based pain cream from HRMG and purchased it from EcoNatura. HRMG alleged that it had entrusted the Defendants with highly sensitive confidential information – the formula for proprietary CBD cream – and that the Defendants misappropriated the formula by continuing to use it outside of their business relationship with HRMG and without HRMG’s consent. HRMG’s complaint alleged trade secret misappropriation by all of the Defendants under the Florida Uniform Trade Secrets Act (“FUTSA”) and the federal Defend Trade Secrets Act (“DTSA”), violations of the Florida Deceptive and Unfair Trade Practices Act by EcoNatura, Medterra, and NoXeno, as well as tortious interference with a business relationship by EcoNatura. In its complaint, HRMG identified its alleged trade secret as a CBD cream formula consisting of “the combination of specific ingredients”, “the relative percentages of each individual ingredient and the manner in which the specific amount of each ingredient gets blended with the remaining ingredients to form the finished product.” HRMG’s Belated Attempt to Redefine the Alleged Secret Formula The Defendants each moved for summary judgment on all claims asserted in the lawsuit, arguing, among other things, that HRMG had failed to identify its trade secret with reasonable particularity. In response, HRMG attempted to redefine the alleged formula as “a combination of precise concentrations of CBD, the manufacturing process for the CBD (time, temperature, mixing rate, and others), along with the complementary active ingredients at specific concentrations for pain relief (menthol, tea tree oil, and arnica).” The Court rejected HRMG’s attempt to make such a significant change to its trade secret definition so late in the proceeding, i.e., after discovery was closed and summary judgment had been filed against HRMG. Instead, the Court evaluated HRMG’s trade secret misappropriation claims solely based on the trade secret definition it set forth in the complaint. The Court’s Findings on Trade Secret Misappropriation The Court addressed the federal and state trade secrets claims (DTSA and FUTSA) together. The Court noted that, for both claims, misappropriation of a valid trade secret occurs when a person: (1) acquires the trade secret while knowing, or having reason to know, that he or she is doing so by improper means; (2) acquires or derives knowledge of the trade secret and discloses it without the owner's consent; or (3) acquires or derives knowledge of the trade secret and uses it without the owner's consent. In ruling in favor of Defendant Rejuvenol, the Court found that evidence in the record showed that HRMG did not know how the CBD-based pain cream was manufactured by Rejuvenol, that Rejuvenol did not receive any instructions or other information from HRMG concerning the formulation of this cream, and that Rejuvenol did not use the same process that HRMG claimed to be its trade secret. The Court concluded that there was no evidence that the alleged trade secret process had ever been conveyed to, or used by, Rejuvenol as required to properly support the DTSA and FUTSA claims. The Court likewise ruled in favor of Defendant Medterra. The Court found that while evidence demonstrated that HRMG shared with Medterra a list created by EcoNatura of the ingredients in descending order based on the percentages of the ingredients in the CBD-based pain cream and subsequently provided Medterra with the percentage of “key ingredients,” there was no evidence that Medterra knew any instructions or processes for manufacturing the cream in issue or that Medterra had deceived HRMG into disclosing its list of “key ingredients.” Accordingly, the Court held that HRMG could not establish that Medterra used, acquired, or disclosed HMRG’s alleged trade secret as required by both the DTSA and FUTSA. The Court also granted summary judgment in favor of NoXeno because there was no evidence that NoXeno had misappropriated the alleged trade secret. The Court’s analysis with respect to NoXeno was aided by the fact that HRMG failed to respond to any of the arguments in NoXeno’s summary judgment motion or oppose NoXeno’s statement of material facts, essentially leaving the motion unopposed. Finally, in contrast to the summary judgment holdings in favor of the other Defendants, the Court found that there was a genuine issue of material fact concerning alleged misappropriation by Defendant EcoNatura because there was evidence in the record that HRMG had sent a list of ingredients with their amounts to EcoNatura and that several calls took place between representatives of HRMG and EcoNatura during which HRMG explained how ingredients were heated and cooled during the manufacturing process. The Court deferred the factual issue of whether the manner in which the CBD cream’s ingredients blend to form the finished product is, in fact, HRMG’s trade secret, and whether it was misappropriated by EcoNatura, to determination at trial. HRMG’s Florida Deceptive and Unfair Trade Practices Act Claim Preempted by State Trade Secrets Claim In its decision, the Court also made clear that FUTSA can preempt certain conflicting state tort, restitutory, and other laws providing civil remedies for misappropriation of a trade secret, such as the Florida Deceptive and Unfair Practices Act (“FDUPTA”), if allegations of trade secret misappropriation alone comprise the underlying wrong. The Court found that the only unfair or deceptive practice alleged by HRMG against Medterra under the FDUPTA was the same trade secret misconduct that formed the basis for HRMG’s trade secret misappropriation claim. Finding no material distinction between the basis for HRMG’s trade secrets claim and FDUTPA claim, the Court granted Medterra’s motion for summary judgment as to the latter on grounds of preemption. As for HRMG’s FDUTPA claim against EcoNatura, the Court found that HRMG’s complaint contained separate trade secret allegations regarding a different CBD-based roll-on product or psoriasis cream. However, it also found that HRMG had failed to prove these separate allegations or to respond to EcoNatura’s arguments against these allegations, such that HRMG had effectively abandoned them. Since there were no material distinctions left between HRMG’s remaining allegations in support of its FDUTPA and trade secrets claims, the FDUTPA claim was likewise found to be preempted, and the Court granted summary judgment on this claim. Practice Points The Court’s decision provides a useful reminder on several important principles in trade secrets litigation. First, the Court’s varying summary judgment opinions on misappropriation illustrate how appropriately proving actual misappropriation of a trade secret is essential to prevailing on such a claim. Second, the Court’s decision to confine the Plaintiff HRMG to the definition of its trade secret in its complaint, rather than its eleventh-hour reformulation, demonstrates the importance of carefully formulating such a definition at the pleading stage. Finally, plaintiffs asserting trade secret claims along with additional non-trade secret claims, should consider the possibility of preemption of the latter, and whether separate and distinct allegations exist to support those claims in order to avoid preemption.

On October 8, 2021, the Personal Data (Privacy) (Amendment) Ordinance 2021 containing initiatives to combat doxxing acts became effective in Hong Kong. The anti-doxxing regime under the Amendment not only defines broad and encompassing offences coupled with hefty penalties but also confers new investigative and enforcement powers to the Privacy Commissioner that have extra-territorial effect. Platform providers, operators or users should adopt appropriate approaches to potentially doxxing messages and ensure compliance with the Amendment. Doxxing as an Offence “Doxxing” (sometimes spelled “doxing”) is a term used for the cyberbullying technique of gathering the personal data of a target person or related person(s) (such as family members, relatives or friends) through online search engines, social platforms, discussion forums, public registers, and other means, and disclosing such personal data on the internet, social media or other public platforms. This practice has become rampant in Hong Kong in recent years, and includes numerous cases of illicit disclosures including that of patient medical records from hospitals, as well as disclosure of personal data of police and judicial officers and their family members without their consent. Between June 2019 and 2021, the Privacy Commissioner handled over 5,800 doxxing complaint cases intrusive to personal data privacy. During that time, only about 70% of requests to online platforms by the Privacy Commissioner for removal of doxxing content were complied with. This created a need to amend the existing regime and to criminalize acts of non-consensual disclosure of personal data in order to protect the personal data privacy of the general public. Under the Amendment, section 64 of the Ordinance was revised to provide a new two-tier doxxing offences which criminalize the disclosure of personal data where the data was disclosed without consent of the data subject, and with an intent to cause specified harm to the data subject or their family, or being reckless to such harm happening. The definition of specified harm is broad and captures (i) harassment, molestation, pestering, threat or intimidation, (ii) bodily harm or psychological harm to a person, (iii) harm causing a person to be concerned for their safety or well-being, or (iv) damage to a person’s property. The penalty for such summary offence is a fine of HK$100,000 and up to two years’ imprisonment. An indictable offence is committed if a specified harm is caused to the data subject or a family member of the data subject due to the disclosure of personal data. The penalty for such indictable offence is a fine of up to HK$1,000,000 and up to five years’ imprisonment. The Commissioner’s Powers and its Extra-Territorial Effect The Privacy Commissioner is also conferred with new investigation and enforcement powers, including powers to request a person to provide materials and assistance to facilitate investigation into doxxing offences, to obtain search warrants, carry out specified investigation in premises and to seize and detain any evidence for purposes of the investigation. The Privacy Commissioner may also arrest, stop and search any person reasonably suspected of having committed doxxing offences, and may apply to the Hong Kong Court of First Instance for an injunction against a person who engaged, is engaging or is likely to engage in conduct which contravenes the doxxing offences. The Privacy Commissioner may serve a notice in the case of doxxing if the data subject is a Hong Kong resident or is present in Hong Kong regardless of whether the disclosure was made in Hong Kong. Cessation notices may also be served inside or outside of Hong Kong depending on whether the doxxer or the service provider is inside or outside of Hong Kong. The Amendment Ordinance equips the Privacy Commissioner with the flexibility necessary to take appropriate action given the global reach and vast nature of the internet. Any doxxer or service provider served with a cessation notice that either fails to comply or establish an appropriate defence may commit a criminal offence and be subject to penalties or imprisonment.   To read the original publication regarding this Amendment, please click here.

On September 27, 2021, the National Music Publishers’ Association (“NMPA”) issued a press release stating that it had settled its claims against video game company Roblox, bringing an end to the copyright infringement case its members filed against Roblox in the Central District of California on June 9, 2021. The plaintiffs in that litigation were multiple major and independent music publishers whose catalogs purportedly included artists such as Imagine Dragons, Ariana Grande, the Rolling Stones, and others. Defendant Roblox is an online platform and storefront where users can design their own games or play games designed by other users. The plaintiffs’ copyright claims were directed to Roblox’s alleged unlicensed library of music uploaded by its users. According to the plaintiffs, the use of unlicensed music was a major part of Roblox’s appeal as well as its in-game economy (i.e., users’ ability to buy and sell goods and services in the game). Roblox allegedly generated revenue by encouraging its users to upload unlicensed music to Roblox’s library. Every time a user uploaded a song, the user had to pay a certain amount of “Robux,” a virtual currency that users purchase for real money. A user could then incorporate the unlicensed music into the games they design, which would make their game more popular among other users. Users also had the option of advertising and charging others for virtual items, such as “Boomboxes” and “Game Passes,” to play the unlicensed music. The plaintiffs alleged that being able to listen to popular, unlicensed music attracted users to Roblox and then helped retain them. A lot of money was apparently at stake too. The plaintiffs claimed actual damages due to the alleged infringement of USD $200 million! After just a few months of litigation, the parties reached a mutually beneficial agreement that could set the tone for future gaming services incorporating popular music uploaded by users. The press release describes the agreement as “set[ting] the foundation for future partnerships with global publishers that will unlock new creative and commercial opportunities on [Roblox’s] platform.” The agreement, in a nutshell, …settles claims filed by NMPA members, offers an industry-wide opt-in open to all eligible NMPA publishers and opens a negotiation period for members to engage individually in new go-forward licensing deals with the Roblox global platform that brings millions of people together through shared experiences…The deal paves the way for innovative partnerships between Roblox and publishers that will offer songwriters new way to monetize their songs and catalogues. It is too early to tell how successful the agreement will be in “unlock[ing] new creative and commercial opportunities” for Roblox, publishers, and artists, but at least the parties seem optimistic. It could also be part of a trend, since the NMPA announced a similar agreement with Amazon.com’s livestreaming platform, Twitch, just a few days before announcing its settlement with Roblox. Although we do not know the exact terms of the agreements or how the two agreements differ, they could become a roadmap for other gaming services to legally use popular music. After all, publishers and artists generally want their works to be played, shared, and enjoyed by as many people as possible, but they also want to be fairly compensated. In theory, these sorts of agreements should be a win for everyone—game companies, music publishers, artists, and users.

photo by EQRoy / Shutterstock.com Earlier this summer, U.S. District Judge Amy Berman Jackson refused to buy plaintiff, Valancourt Books, LLC’s, claims that the Copyright Office of the United States unconstitutionally demanded books for free, when Judge Jackson granted summary judgment for the defendants Shira Perlmutter and Merrick Garland (acting in their respective official capacities as Register of Copyrights and Attorney General). The dispute arose when Valancourt brought suit, arguing the Copyright Act’s deposit requirement was unconstitutional under the First and Fifth Amendments as a burden on speech and an unconstitutional taking, respectively. In understanding the Court’s opinion, it is important to keep in mind the intricacies of the Copyright Act. The moment a work (e.g., a book) is created, it is protected by copyright. However, if the work is published, and unless it meets certain exceptions, to enforce those copyright rights under federal law, the work must be registered with the Copyright Office. Applicants have to submit two complete copies of the best edition of their published work to register it with the Copyright Office. 17 U.S.C. § 407(a). If applicants fail to comply, the Copyright Office can issue a demand letter and ultimately impose fines, ranging from $250 per registration, to $2,500 for willful or repeated failure to comply. Valancourt is an independent literary press, operating out of the owner’s home, that publishes rare, neglected, and out-of-print fiction on an “on-demand” basis. Valancourt did not apply to register its books with the Copyright Office, but it did include copyright notices in all its books, essentially availing itself of federal copyright law protections. The initial dispute arose when the Copyright Office issued a demand letter, requesting Valancourt provide deposit copies of all 341 books in its catalog. In a series of exchanges, Valancourt offered to sell the books “at cost” to the Copyright Office. The Copyright Office countered by requesting digital copies of the majority but not the entirety of Valancourt’s catalog. Judge Jackson’s opinion deftly outlines an unsurprising result, in terms of constitutional law. In short, the Copyright Act’s deposit requirement is constitutional. The Takings Clause of the Fifth Amendment prohibits the federal government from taking private property for a public purpose without just compensation. However, the Supreme Court has long held that statutory benefits can be conditioned upon the exchange of private property without violating the Fifth Amendment. In other words, the Copyright Act conveys the benefit of copyright protection and enforcement via federal law, in exchange for (1) filing fees and (2) deposit copies made available for public use in the Library of Congress. This exchange does not run afoul of the Fifth Amendment. Judge Jackson’s analysis on the First Amendment challenge is equally straightforward. The First Amendment protects free speech, not copyright enforcement. Valancourt can freely publish books without triggering the Copyright Office’s deposit copy requirement, so long as Valancourt does not claim federal copyright protection in each book. Judge Jackson took issue with Valancourt’s attempt to “have its cake and eat it too.” Essentially, Valancourt warned the public that its books were subject to copyright protection but argued it should not be bound by the requirements for that same protection. Reading between the lines, the real surprise of Judge Jackson’s opinion is that Valancourt did not apply for federal copyright protection, yet the small press suddenly faced the prospect of providing 682 books (two copies per book in the catalog) without remuneration. Though the Copyright Office ultimately relented, offering the possibility of digital book copies, the case still presents a cautionary tale. Owners of the copyright in published works should carefully consider any copyright notice placed on works and comply with the mandatory deposit requirements. In at least one district court, claiming federal copyright protection can trigger the Copyright Act’s deposit requirement and ultimately result in fines, without anyone ever seeking federal copyright protection. Perhaps the silver lining of this story is that if you find yourself on the wrong side of the deposit requirement, the Copyright Office may offer cost-sensitive alternatives (e.g., digital deposit copies), though this happy ending is far from certain.

Late last month, Dorsey led a panel at the inaugural Investing in Women Cannabis Pioneers – The Brand Builders investor conference put on by Roth. The panel was made up of female business leaders at Bhang, Leafly, Insa, Tilray and Hollister Biosciences discussing the topic of scaling cannabis brands nationally across state lines despite current legal and regulatory hurdles. As more and more states legalize cannabis (with New York now on the list), establishing a national cannabis brand has never been more important. But cannabis companies still face significant obstacles to doing so. Since cannabis in many forms remains federally illegal, cannabis companies are generally barred from selling product across state lines. Being forced to rely on cannabis grown within different states creates quality control issues, which makes giving consumers across the country the same product experience more difficult. Cannabis companies are also subject to state and/or local packaging and distribution requirements that differ from jurisdiction to jurisdiction and packaging regulations can be subject to change on a moment’s notice. On the advertising side, many outlets available to traditional consumer packaged goods are off limits. Use of social media platforms is severely restricted and other online tools such as advertising keywords are unavailable. Television, radio, billboard and print ads are generally prohibited unless at least 85% of the audience is reasonably expected to be 21 years of age or older. To overcome these hurdles, and to scale nationally, the panelists discussed the importance of creating a strong brand story that resonates with consumers and transcends state differences. The panel also discussed the importance of building brand awareness at the grassroots level, for example, by investing heavily in education at the dispensary or “budtender” level. Content creation through written editorial and educational materials for consumers was also very important. Because federal trademark registration generally remains unavailable for anything “plant touching,” the panelists reaffirmed existing trademark protection strategies of seeking federal registration for informational services, merchandising items and other non-plant goods and services. State trademark registration, which has gained importance for cannabis companies, even though the legal presumptions and other benefits conferred are arguably limited, was also mentioned, along with common law protection. The panelists generally remarked at the creativity and additional investment that was required to build successful brands, and how hard it is for cannabis companies to build trust with consumers. Finally, the panelists weighed in on the opportunities presented by recent adult use legalization in New York. 20,000 new jobs were anticipated to be created within the first 18 months of legalization and the projected market size is $4 billion, likely surpassing Canada and becoming the world’s second-largest legal market after California. One panelist described the New York market as being the largest illicit cannabis market in the world, with most product supplied currently coming from California. Legalization was viewed as eventually suffocating the black market that currently exists.

A recent Uniform Domain Name Dispute Resolution Policy (“UDRP”) decision provided long-awaited guidance for challenging .SUCKS domain names. Sanofi v. Privacy Hero Inc./Honey Salt, ltd, which was decided by a three arbitrator panel of the World Intellectual Property Office (“WIPO”), was the first in a line of decisions to hold that use of the generic top-level domain (“gTLD”) .SUCKS in combination with another party’s trademark can be confusingly similar, and thus, can infringe the trademark holder’s rights. Given the unique circumstances of these cases, however, trademark owners should not count on future panels applying the results of these decisions broadly. Why It .Sucks to be Honey Salt. While the Respondent, Honey Salt, Inc. claimed its site was an open forum for the public to discuss complaints protected under the First Amendment, the Panel instead agreed with Complainant that because the complaints were anonymous and undated and did not mention Complainant by name, they were more likely to be a pretext for Respondent’s real purpose for the site than they were to be protected speech. Based on the existence of multiple links to third-party sites from the website and Respondent’s admission that the sanofi.sucks domain name was for sale, the Panel instead found Respondent’s real purpose for the site was to drive traffic to the site and raise the purchase price for the underlying domain name. Given these circumstances, the Panel ordered sanofi.sucks to be transferred to Complainant. To succeed in a UDRP, the Complainant must pass this three-pronged test: The manner in which the domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights; Why the respondent should be considered as having no rights or legitimate interests regarding the domain name subject of the complaint; and Why the domain name should be considered as having been registered and used in bad faith. For the first prong, the Respondent argued that the domain name was not identical or confusingly similar to the SANOFI trademark because “.sucks” is pejorative, clarifying that the website was not affiliated with the Complainant, but instead contained criticism protected by free speech. The panel rejected this argument, concluding the domain name incorporated the registered SANOFI trademark in its entirety and merely added to it the generic “.sucks” gTLD. The panel did not find this addition precluded a finding of confusing similarity. For the second prong, the Respondent asserted that it had rights or legitimate interests in the domain name because it was used to host a criticism website allowing users to exercise their free speech rights. After noting that the Respondent was a third party with no direct relationship with any person who might have a genuine gripe, the Panel accepted Complainant’s contention that the supposed complaints were unverified and general and likely a pretense to create the impression that the registration and use of the domain name were legitimate. The Panel also agreed with Complainant’s argument that the actual intent is more likely to increase the price it could receive from the sale of the disputed domain name. For the third and final prong, the Respondent denied that it used the domain name in bad faith because of the legitimate purpose of providing an open forum for the free exchange of criticism. Respondent added that allowing brand owners to claim bad faith merely because a domain name is not associated with the underlying brand would undermine the purpose of the .sucks gTLD for criticism and commentary. Here too the Panel agreed with the Complainant and ruled that the domain name was registered in bad faith because it was part of the Respondent’s intention to take unfair advantage of the Complainant’s trademark by increasing Internet traffic to the associated website and to other websites owned by the Respondent using the .SUCKS domain name. The Respondent admitted that it had put many domain names with .SUCKS domain names on the market. The Panel also noted that the Respondent’s pattern of abusive registrations supported a finding of bad faith. The Panel ordered that the domain name be transferred to the Complainant. Rubbing Salt in the Proverbial Wound. Since the decision was issued, WIPO has followed suit and has ordered domain name transfers or cancellations in thirteen other cases. See, e.g., Digicel Caribbean v. Domains By Proxy, LLC / Jamie Mcullan; Alsace Croisieres SA v. John Livingstone / Write Place Publications Inc.; and FirstMerit Corporation v. Registration Private, DomainsByProxy.com / Jon Murrell. All the domain names were owned by Honey Salt on behalf of Everything.Sucks for similar websites. Because of this, trademark owners may wish to determine if Honey Salt or other platforms with a similar business model have acquired their marks as part of .SUCKS domain names. Given the number of transfers, and pending cases for .SUCKS domain names, now may be a sweet time to rub more salt in the Honey Salt .SUCKS wound. Limits on How this Decision .Sucks. The Sanofi panel was careful to distinguish this case from prior decisions where the websites in question contained genuine criticism targeted at specific trademark owners and were not selling anything, including the domain name itself, or otherwise trying to achieve commercial gain. In such cases, panels have typically rejected complaints on the grounds they did not establish the second prong (no legitimate interest in the domain name) or the third prong (that the domain name was registered in bad faith) needed to prevail in a UDRP. The Sanofi decision does not call into question these precedents. Thus, while it .SUCKS to be Honey Salt, trademark owners should not count on future panels ruling that it .SUCKS to operate a genuine gripe site.

Earlier this week the FTC announced that it had sent more than 700 Notice of Penalty Offense letters to major advertisers, leading retailers, large consumer product companies and major ad agencies to put everyone on notice that fake consumer reviews and other misleading endorsements will not be tolerated. The letters also placed the recipients on notice that significant civil penalties will be imposed on those who use these deceptive tactics. In fact, the letters referenced the FTC’s power to impose fines up to $43,792 per violation. To be clear, just because a business received a letter does not mean the FTC suspects any wrong doing. The FTC suspects that fake reviews and other misleading endorsement are widespread, especially on social media. Fresh from the 2021 NAD conference, we did not find this announcement surprising at all. Readers of our blog will know that consumer reviews have been a focus of both the FTC and the NAD for many years. Whether your brand received one of these letters or not, the FTC wants you to know that it will not tolerate any of the following: falsely claiming an endorsement by a third party misrepresenting whether an endorser is an actual, current, or recent user continuing to use an endorsement without good reason to believe that the endorser continues to subscribe to the views presented misrepresenting that an endorsement represents the experience, views, or opinions of users or purported users using an endorsement to make deceptive performance claims failing to disclose an unexpected material connection with an endorser misrepresenting that the experience of endorsers represents consumers’ typical or ordinary experience The FTC also specifically stated that “positive consumer reviews are a type of endorsement, so such reviews can be unlawful, e.g., when they are fake or when a material connection is not adequately disclosed.” While much is unknown about what will happen in 2022, it is highly likely that we will be seeing an FTC crackdown on false and misleading reviews with the steep monetary penalties.

As of today, there have been twelve (yes, twelve!) movies released as part of the Friday the 13th series of horror films, as well as a television series. For those of you who have not seen any of these films, they are not for the faint of heart. The focus of the Friday the 13th oeuvre is a deranged, apparently immortal serial killer named Jason Voorhees. Jason, who was apparently drowned before the events of the first movie began, was revealed at the tail end of that first film to have survived. But his miraculous resurrection was evidently not a cause for celebration or gratitude on his part, as he has spent the last eleven movies stabbing, strangling, decapitating and otherwise murdering the vast majority of hapless individuals (mostly teenagers) who have strayed across his path. Jason has also been killed and resurrected several more times; dragged into Hell; and also cryogenically frozen, but that’s probably more than readers of this blog need to know. So what does any of this have to do with intellectual property? Well, while “intellectual” is not necessarily the first word that springs to mind when the Friday the 13th films come up, they are copyrightable works, and Jason therefore qualifies as intellectual property. A recent decision from the Second Circuit Court of Appeals has addressed the issue of who owns Jason or, more accurately, the screenplay for the first Friday the 13th film. That screenplay was written by Victor Miller, who received sole credit as the author of the screenplay when the first film was released. Miller wrote the screenplay pursuant to an “Employment Agreement” with Manny, Inc., a production company controlled by Miller’s friend and the first film’s director, Sean Cunningham, and Miller was paid $9,282 for his services. The film and screenplay for Friday the 13th, Part 1, were registered with the U.S. Copyright Office by the eventual producer of the film. As the eleven sequels confirm, the first Friday the 13thwas a smash hit, and the series has generated over $468 million worldwide since the first film was released in 1980, making it and/or the Halloween franchise the most financially successful horror films ever made. In 2016, Miller sent several notices of termination to Manny and other entities that held or had held rights in the screenplay to the first Friday the 13th film under Section 203(a) of the U.S. Copyright Act. That statutory provision allows authors and other grantors of rights in copyrightable works to reclaim their copyrights after the passage of (usually) thirty-five years from the date of the original grant. This right of termination is subject to a number of limitations and restrictions, one of which is that the termination right is inapplicable to works made for hire, in which ownership vests not in the work’s author, but the employer or other entity that commissioned the work. Manny and the other recipients of Miller’s notices disputed his right to terminate, arguing primarily that the Friday the 13th screenplay was a work for hire, such that Miller could not terminate his grant made in 1979. Both the District Court and Second Circuit disagreed, holding that based on the factors enumerated by the Supreme Court in Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989), the Friday the 13th screenplay did not qualify as a work for hire because Miller was not an employee of Manny. Both courts based their decisions that Miller was an independent contractor on factors such as Manny’s limited degree of control over Miller’s writing, Miller’s skill as a screenwriter, and the absence of any traditional employee benefits provided to Miller. In addition, both courts rejected the argument that Miller’s membership in the Writers’ Guild of America, East, Inc. and Manny’s participation in the producers’ collective bargaining agreement with the Guild in the same period established that Miller was an employee for purposes of the Copyright Act. In so holding, the Court held that copyright law, and specifically Reid and common law agency principles, controlled the question of whether Miller was or was not an employee of Manny, not the National Labor Relations Act or related principles of labor law. The Second Circuit’s decision appears to be the first to address the interplay between copyright and labor law for purposes of determining whether a particular work was made for hire. The decision is also notable because there are not a lot of decisions applying Section 203(a) and the validity of notices of termination. Most such cases appear to be resolved by settlement, short of formal adjudication. As to who owns Jason going forward, that’s not necessarily an issue that has been resolved. Miller did not write the eleven screenplays for the subsequent Friday the 13th films, and Section 203(a) states that a “derivative work prepared under authority of the grant before its termination may continue to be utilized under the terms of the grant after its termination.” So, Miller’s ability to profit from or interfere with the next eleven installments of the series would appear to be limited. But, that same subsection of Section 203(a) also states that the privilege to continue use of extant derivative works “does not extend to the preparation after the termination of other derivative works based upon the copyrighted work covered by the terminated grant.” So, it would seem that the Second Circuit’s ruling has done what no weapon, law enforcement officer, plucky camp counselor or technologically advanced future society could do: stop Jason from killing again in any new Friday the 13th movies, unless some sort of accommodation with Miller is reached.

At the end of September and beginning of October we spent some extra screen time attending the annual NAD Conference that once again was held virtually in New York. We heard from a number of great speakers, including the Hon. Rebecca Kelly Slaughter, Commissioner at the Federal Trade Commission, Mary Engel, EVP at BBB National Programs, Katherine Armstrong, the Deputy Director of NAD and in-house counsel from The Clorox Company, Campbell Soup Company and T-Mobile USA, Inc. If you could not spare the screen time, don’t worry – here’s a quick wrap-up of the highlights: Ad Claims for Political, Diversity and other Social Issues – Brands jumping in on social movements is nothing new, but in recent years and especially in the past 18 months, we’ve seen a rise in brands posting online and otherwise showing support for various social issues. In fact, a brand staying silent on certain issues can speak volumes these days. So for us advertising attorneys, the question becomes do you need to substantiate social media posts on a brand site that aren’t even selling products, but are showing support for a social movement? One example given was a simple Instagram post with the copy STOP ASIAN HATE. The panelists did a great job moving through a series of questions to assess if the brand in question actually stands with the Asian community – is it appropriate for the company to enter this conversation? What has the company done for the Asian community to date? Would a single monetary donation be enough? Should we look at the history of the company’s philanthropy? What about diversity hiring and retention practices? All great questions to ask if you are asked to review such a post for your brand. Another tip, if you are joining the conversation, make sure you prepare reactive messaging ahead of time in case questions are raised about the position taken by the company. A brand’s consumers may well put the brand to the test by asking what they have done and/or looking at the company’s history of actions or inaction. Consumer Reviews – In the past year, both the FTC and NAD have spent time and resources on ad claims related to consumer reviews. For example, in late 2020, the FTC settled with Sunday Riley, a cosmetics company, over allegations that its CEO directed employees to create fake profiles and post reviews for the company’s products on Sephora. While no monetary fines were imposed, the company agreed to twenty years of on-demand compliance monitoring. Earlier this year, NAD dealt with two consumer review cases addressing the quantification of reviews (e.g., “over 110,000 5-star product review!”) – the takeaway is to make sure you count properly and don’t double count. The panel also gave some tips about addressing unsubstantiated claims in reviews – consider responding on the review website, if that’s possible. Just make sure the response contains only substantiated statements. Influencers – This would not be an NAD conference if there wasn’t a lively discussion about influencers. In terms of new guidelines and rules, NAD released its own tips for influencer marketing earlier this year. Then, Instagram and TikTok each released branded content rules for their own platforms. Social media platforms are clearly trying to evolve past the FTC’s initial take that built-in tools are not an effective disclosure. Whether the FTC will agree in the next set of its guidelines is TBD. In any case, the guiding principles of influencer marketing remain: Truth. Substantiation. Disclosure. Health Claims – Health and safety has been a key focus for everyone since the pandemic started. The FTC and NAD are no different and in fact, both have put more resources into stopping and preventing unfair and deceptive health claims. This past year the FTC sent more than 400 warning letters for COVID-related claims. But not everything was COVID-related. We saw enforcement actions for CBD products, supplements and, last month, the FTC announced a set of cease and desist (as opposed to warning) letters that it issued along with the FDA, directed to companies making diabetic treatment claims without the necessary scientific substantiation. These letters were a bit unique in that they invoked a seldom-used authority of the FTC Act to impose civil penalties for future violations. This is an example of the FTC putting a bit more teeth behind its letters. Until next year...

What first started as a meme featuring a fluffy dog with poor grammar has now resulted in a trademark fight over the ownership of an estimated $80 billion brand. If the progression of this Internet sensation has left your head spinning, you are certainly not alone. Its history is as much a rollercoaster as its cryptocurrency value. Back in 2013, the now infamous meme, featuring a lovable Shiba Inu dog named Kabosu whose inner monologue was riddled with grammatical and spelling errors, went viral and even won “top meme” of the year. Numerous iterations of the “Doge” meme—aptly named after the misspelling of “dog”— have since circulated the Internet, showing the dog in various situations and expressing a typically comical inner monologue replete with contradictions, self-deprecating humor, or other pop-culture references, coupled with the now familiar “doge” style of grammatical faults. Because living in meme-infamy was not enough, in December 2013, software engineers Billy Markus and Jackson Palmer created a new cryptocurrency called “Dogecoin” as a joke in order to poke fun at the wild speculation of other cryptocurrencies. Although intended to be worthless, Dogecoin was designed as a peer-to-peer digital currency that could appeal to a broader demographic than the much larger Bitcoin. When Dogecoin first hit the trading market, it was valued at $0.00026 per coin, but in just 72 hours following its launch, its value jumped nearly 300% to $0.00095 per coin. While the coin’s value fluctuated over the years, much like its cryptocurrency counterparts, it absolutely skyrocketed in January and February of 2021 following encouraging tweets from Tesla-billionaire Elon Musk. In only 24 hours, the coin erupted 800% and was valued at $0.07 per coin. But its unexpected growth only continued throughout the spring of 2021 when the cryptocurrency hit $0.45 per coin on April 16. At the time, the cryptocurrency originally created as a joke was worth nearly $70 billion, making it the fifth-highest valued cryptocurrency. In early May 2021, Dogecoin hit a peak of $0.711 per coin, topping $80 billion. And with this monumental value increase has come the monumental fight over who actually owns the “Dogecoin” brand, and thus, the exclusive rights to use it. Dogecoin’s creators formed a Colorado non-profit in 2014, fittingly named the Dogecoin Foundation, as the owner of the cryptocurrency. However, the Foundation did not file an application for DOGECOIN with the Trademark Office until August 2021. Unfortunately for them, by then nearly half a dozen other applications for DOGECOIN marks were pending with the Trademark Office, each of which is now contending for the rights to exclusively use the DOGECOIN trademark. These applications cover the expected “virtual currency financial services” (U.S. Serial No. 90/686,038) or “cryptocurrency services” (U.S. Serial No. 90/906,631), but also include alleged use with “costumes for use in role-playing games” (U.S. Serial No. 90/720,528) and “covers for smartphones” (U.S. Serial No. 90/625,748). A Dogecoin Foundation board member lamented that, back in 2014, Dogecoin was always intended to be a joke, so they believed it was not worth registering with the USPTO. But with its meteoric rise, others saw an opportunity to monetize the brand beyond cryptocurrency trading. Now the question becomes—who actually owns rights in the trademark? First are the issues of priority and abandonment. The Dogecoin Foundation went defunct for several years following its founding in 2014, and only recently relaunched in August 2021. Whether this is abandonment under the Lanham Act will depend on whether use was discontinued with an intent not to resume such use. But the Foundation has an uphill battle because three years of non-use is prima facie evidence of abandonment. And during the that period of non-use, Cook Islands-based company Moon Rabbit AngoZaibatsu LLC applied for DOGECOIN covering blockchain software goods in Class 9, and virtual currency services in Classes 36, 39, and 42 on an intent-to-use basis. Moon Rabbit’s founder claimed that, because the Dogecoin Foundation had gone dormant, it abandoned its use of the DOGECOIN trademark, and thus, Moon Rabbit’s open-source DOGECOIN code had rights to the mark. But the Dogecoin Foundation claims Moon Rabbit is “attempting to profit unfairly off of the goodwill Dogecoin has built,” to the Foundation’s economic detriment. In addition to Moon Rabbit, the Foundation is seeking to enforce its rights through cease and desist letters against numerous other entities, including Dogecoin 2.0, claiming priority to the trademark. The real legal fights over priority and who can prove exclusive and continuous rights in the trademark will occur when, and if, any of the DOGECOIN applications reach publication or maybe even in federal court. But speaking of publication, it is unclear if any of these applications will reach that stage because the USPTO’s initial take is that DOGECOIN is descriptive. Many of the more recent applications have not yet been assigned to an examining attorney, but the first-filed application, dated February 3, 2021 for the DOGECOIN DEPOT mark, U.S. Serial No. 90/507,747, owned by a Colorado-based individual, may present as both an obstacle to and a warning case for all subsequently-filed applications. On September 2, 2021, the USPTO issued an Office Action requiring a disclaimer of the term DOGECOIN as it applies to financial services, stating that “purchasers who encounter the word DOGECOIN in connection with the identified services would immediately understand that applicant’s credit union services feature borrowing or repaying loans in cryptocurrency.” We will be watching to see if the applicant accepts the disclaimer or tries to fight against it, which could have far reaching implications for the rest of the Dogcoin pack regardless of how the applicant proceeds. In any case, the DOGECOIN DEPOT mark includes the additional term “DEPOT,” which was not part of the disclaimer requirement, so it will likely still be published for registration on the Principal Register, assuming the owner responds to the Office Action. At that point, we will not be surprised to see an opposition filed by the Foundation. What started off as a joke has grown into a very real $80 billion dispute. And while it will likely take quite some time to sort out rights in the trademark, one thing is for sure: this dogfight will certainly provide excellent content for years of doge memes to come.