Trademark, Copyright + Advertising

We have previously written about the trademark dispute between Vortic—a watchmaker that restores antique pocket watches, and converts them into wrist watches—and the venerated Hamilton Watch Company, which produced its first watch in the 1890s and is still in business today. Vortic uses a restored movement (the internal mechanism), face and hands from pocket watches produced by Hamilton to create “The Lancaster” wristwatch, but the other parts are produced by Vortic and the ultimate product is also assembled by Vortic. We previously reported that Judge Alison Nathan of the Southern District of New York had denied Hamilton’s motion for summary judgment and motion for reconsideration, concluding disputes of fact persisted, and that the case at trial would turn on the issue of likelihood of consumer confusion. In addition to considering the standard Polaroid factors, because the alleged infringement related to refurbished goods, Judge Nathan applied a “crucial supplemental factor” from the Supreme Court’s decision in Champion Spark Plug Co. v. Sanders, 331 U.S. 125, 128-31 (1947), whether Vortic provided adequate disclosure of the nature of the watch being sold as a “modified genuine product.” Following a one-day bench trial, Judge Nathan found that Vortic had fully disclosed the watch’s restoration and lack of affiliation with Hamilton (the Champion factor), and then considered the relevant Polaroid factors in concluding there was no likelihood of confusion. Judge Nathan explained that under Champion, “full disclosure” of the identity of the restorer and the used nature of the product protects the seller of second-hand goods. Judge Nathan gave substantial weight to this supplemental “full disclosure” factor under Champion, and while she considered all of the Polaroid factors as well, she noted that only three such factors—actual confusion, defendant’s good faith and sophistication of the buyers—were “indisputably relevant,” and that each of these three factors weighed against finding likelihood of confusion. Hamilton appealed to the Second Circuit Court of Appeals, which affirmed Judge Nathan’s decision earlier this month. While Hamilton challenged the district court’s factual findings and legal analysis, the legal challenge is what is interesting about the appeal. The Second Circuit first agreed that the framework laid out by Champion applied to this dispute, despite Hamilton’s argument that Champion did not apply because the “reconditioning or repair” that went into The Lancaster was so extensive that it was a new watch containing Hamilton parts, not “a modified genuine Hamilton product.” The more interesting part of the Second Circuit’s opinion, however, addressed how the Champion framework interplays with the Polaroid factors. Hamilton argued the district court erred by failing to first determine the likelihood of confusion under the Polaroid factors before turning to the “full disclosure” analysis under Champion, and that similar to an affirmative defense, Vortic (the defendant) bears the burden of establishing the “full disclosure” standard was met. The Second Circuit disagreed, concluding that the district court did not err in declining to require Vortic to prove the effectiveness of its disclosures under Champion. While Vortic did present evidence that its disclosures were effective, the Second Circuit held that because a plaintiff in a trademark infringement action bears the burden of establishing likelihood of consumer confusion, the district court correctly looked to Champion and the disclosures made by Vortic to determine whether Hamilton (the plaintiff) met that burden. Finally, in a trademark case involving refurbished goods, the Second Circuit reaffirmed that courts must consider both Champion and Polaroid in determining whether a plaintiff has met its burden, but that there is no hard and fast order in which a court must undertake that analysis.

In a recent decision, the Ninth Circuit Court of Appeals found that an Australian cosmetic company is subject to the personal jurisdiction of a federal district court in California despite having no traditional “minimum contact” ties to the state of California. The decision relies on Federal Rule of Civil Procedure 4(k)(2), the rarely-invoked rule authorizing courts to exercise nationwide jurisdiction over foreign parties who would not otherwise be subject to jurisdiction in any individual state of the United States. Notably, the Ninth Circuit’s decision largely turned on the Australian company’s marketing on social media—directed to “USA BABES”—and use of U.S.-based influencers. Alya Skin Pty. Ltd. is an Australian beauty and skincare brand known for its “World Famous Pink Clay Mask” shown below. It uses ALYA and ALYA SKIN to market its clay mask and other pink skincare products to customers across the globe. Alya Skin began marketing its products in 2018. Ayla LLC is a California-based beauty brand and retail business. It markets a variety of specialized skin, body, and hair care products, including its own line of AYLA branded products. Ayla owns three U.S. trademark registrations for the mark AYLA covering, among other goods and services, “cosmetics” and “online retail store services in the field of cosmetics and beauty products.” Ayla began using the AYLA mark in 2011. In February 2019, Ayla filed a Complaint in the Northern District of California alleging that Alya Skin’s use of ALYA and ALYA SKIN to market its cosmetic products constitutes trademark infringement, false designation of origin, and unfair competition under federal and California law. Alya Skin responded by filing a motion to dismiss, arguing that it was not subject to personal jurisdiction in the Northern District of California. The district court agreed and dismissed the case. In its decision, the court quickly found that it does not have specific personal jurisdiction over Alya Skin under the traditional “minimum contacts” test of International Shoe and its progeny. There was no dispute that Alya Skin has no retail stores, offices, officers or employees, bank accounts, or property in the United States. The court found that although Alya Skin operates a website accessible in California, it is a “standard, modern website” and the fact that consumers in California could purchase goods from the website is not alone sufficient to confer jurisdiction in the absence of features that specifically target consumers in California. The district court further analyzed the possibility of exercising personal jurisdiction under the “nationwide jurisdiction” provision of Federal Rule 4(k)(2). This infrequently-used provision was added to the Federal Rules of Civil Procedure to allow for the exercise of personal jurisdiction when an action arises under federal law, the defendant is not subject to jurisdiction in any state’s courts of general jurisdiction, and the federal court’s exercise of jurisdiction comports with due process. The due process analysis looks to whether the defendant has sufficient contacts with the United States as a whole, rather than any individual state. The district court weighed Alya Skin’s contacts with the United States and held them to be insufficient, finding that Alya Skin targeted its marketing to an international market rather than to the U.S. On appeal, the Ninth Circuit re-weighed Alya Skin’s contacts with the U.S. Ayla was successful in convincing the appellate court that Alya Skin’s infringing conduct was expressly aimed at the United States, resulting in a reversal of the district court’s decision. According to the Ninth Circuit, the evidence of record showed significant contacts with the United States, including: (1) nearly 10% of Alya Skin’s sales are to U.S.-based customers, a volume the appellate court characterized as “substantial” in the country as a whole that were “regular and significant”; and (2) it uses a distributor in Idaho to fulfill some of its orders, demonstrating that Alya Skin contemplated significant shipments to U.S. customers even though it shipped its products worldwide as well. While these contacts may not alone be sufficient to confer jurisdiction, the Ninth Circuit further found that Alya Skin’s sales in the U.S. were not “random, isolated or fortuitous” or merely placed in the stream of international commerce. Rather, Alya Skin had made an “intentional, explicit appeal” directly to United States consumers, a finding based in large part on Alya Skin’s use of Instagram and Facebook marketing. Social media accounts managed by Alya Skin included information targeted specifically to Americans. The Ninth Circuit’s opinion references one Instagram post on Alya Skin’s account with the caption “Attention USA Babes we now accept afterpay.” And a November 2018 post on Alya Skin’s Facebook page advertising a Black Friday sale. Although Alya Skin presented evidence that “Black Friday is slowly catching on in Australia,” the court noted that Black Friday is an American invention and “remains America’s biggest shopping day.” Apart from these two posts on Alya Skin’s social media accounts, the appellate court further relied on Alya Skin’s use of social media influencers who are based in the U.S. and have a predominantly U.S.-based following to spread awareness of its products and Alya Skin’s advertisement that its products are available for two- to four-day shipping to the U.S. Alya Skin presented evidence that a vast majority of its social media marketing was not directed to the U.S. market. However, the Ninth Circuit found that even though “Alya Skin may have addressed much of its advertising to an international or Australian audience does not alter the jurisdictional effect of marketing targeted specifically to the United States.” Accordingly, the appellate court concluded that personal jurisdiction was proper under the “rarely exercised” Rule 4(k)(2) and reversed the district court’s dismissal of the case.

The minor hockey league ECHL iced a win over the San Diego Gulls hockey club earlier this month when a judge in the Central District of California granted ECHL’s motion for summary judgment dismissing all of the Gulls’ claims. The court found that because a 2015 agreement between the parties did not transfer any copyright in a gull-playing-hockey logo, ECHL was not on the hook for the Gulls’ legal fees and settlement payment in a separate action. Back in February 2015, ECHL assigned certain trademarks to the San Diego Gulls hockey team, including the word mark “Gulls,” any depiction of a seagull in the context of hockey or a hockey team, and a logo showing a sea gull waving a hockey stick (the issue of whether gulls actually play hockey was apparently not considered by the court). The trademarks and logo were defined in the agreement as the “Marks.” In addition to the trademarks, the 2015 agreement also assigned to the Gulls a list of social media names with the word “Gulls.” The Marks and the social media names were collectively defined as the “Intellectual Property.” As part of that agreement, ECHL represented that (1) it had the right, power, and authority to enter into the Agreement; and (2) the Mark was freely assignable and unencumbered by adverse claims. All seemed fine until a little over a year later, when an individual named Robert Barros filed a copyright infringement action against the Gulls, alleging that he owned artwork entitled “San Diego Gulls” (pictured below) and that he had registered this artwork with the United States Copyright Office. Unfortunately for the Gulls, Barros’ artwork appeared to be “birds-of-a-feather” with the logo they had purchased from ECHL and were using to promote their team. The copyright litigation with Barros proved painfully expensive for the Gulls. By the time it was over, they had racked up a whopping $750,000 in attorneys’ fees and paid $330,000 to Barros to settle the matter. Ouch. While the Gulls probably wanted to drop their gloves and challenge ECHL to an old-school hockey fight, they decided instead (presumably on the advice of their lawyers) to sue ECHL for breach of contract and intentional misrepresentation. The basis of both the Gulls’ claims was that ECHL had falsely represented that the assigned rights were free and clear of any claims, when in fact Barros had a colorable (and, for the Gulls, costly) copyright claim to the Gulls’ logo. The Gulls filed their complaint in September 2019, and ECHL filed a motion to dismiss two months later. Interestingly, ECHL only sought dismissal of the intentional misrepresentation claim, asserting that it was not pleaded with the requisite particularity. In January 2020, the court denied ECHL’s motion to dismiss and the parties engaged in discovery. Then, on March 19, 2021, ECHL filed their motion for summary judgment seeking dismissal of both claims. In its summary judgment decision, the court quickly identified the relevant issue, which was one of contractual interpretation rather than intellectual property law. As the court phrased it, the Gulls’ claims “rise and fall based on whether the 2015 Agreement transferred any copyright in the [gull-with-hockey-stick] Logo.” In other words, if the copyright in the Gulls’ logo was among the assets transferred in the 2015 assignment agreement, then ECHL shouldn’t have represented that the assets were free and clear of claims. If, however, copyright rights were not among the assets assigned, then ECHL did not breach the agreement or make any misrepresentations – despite the fact that Barros had a copyright claim to the Gulls’ logo. The court reviewed the applicable provisions of the 2015 agreement and concluded that that agreement “unambiguously defines the scope of the assets being transferred, which does not include copyright in the [Gulls’] Logo.” Specifically, according to the court, the Agreement transferred all of ECHL’s rights in the “Intellectual Property”, which in turn was expressly defined as including only the “Marks” and a list of social media names containing the word “Gulls.” As such, the court held that ECHL did not breach any provision of the assignment agreement or make any misrepresentation when it warranted that the intellectual property it was assigning to the Gulls was unencumbered by any adverse claims. Barros may have had a valid copyright claim but ECHL was under no obligation to disclose that because they weren’t assigning any copyright to the Gulls. A few takeaways from this decision: First, given that this decision appears to be based on nothing more than interpretation of an unambiguous contractual provision, one wonders why ECHL didn’t move to dismiss both claims on the contractual interpretation issue. Second, this case serves as another reminder that you need to do your own due diligence when you purchase IP assets (or any assets, for that matter). If the Gulls had discovered Barros’ copyright before entering into the 2015 agreement, they could have avoided two messy and expensive litigations – or at least made ECHL pay for the Barros litigation. Finally, it bears repeating that contracts mean what they say and only what they say. If you want copyright rights to be encompassed within the rights assigned under a contract, make sure you include them – and don’t expect a court to add them later if you don’t.

Like me, Judge Otis D. Wright of the Central District of California remembers KOOL. A once leading menthol cigarette label, KOOL brands and its owner ITG Brands, LLC sued Capna Intellectual claiming Capna’s Bloom Brands’ use of interlocking “OO”s in its marketing of packaged cannabis products infringes on and dilutes the KOOL marks. After a June 7 hearing in which Judge Wright urged the parties to come to an agreement regarding an appropriate preliminary injunction, on June 21 Judge Wright signed ITG’s revised proposed preliminary injunction, which was more limited and prohibited Bloom from using interlocking “OO”s and/or circles in its marketing and promotional materials. This ultimately led to a settlement and stipulated permanent injunction issued earlier this month. While the preliminary and stipulated permanent injunctions are relatively standard form, and are perhaps not noteworthy, a couple points from the parties’ briefing on the preliminary injunction and the hearing are interesting to consider. Based on my own review of the briefing and application of the Sleekcraft likelihood of confusion factors, this case was a close call, and I perhaps would not have issued a preliminary injunction. Bloom Brands’ most interesting argument did not fit neatly into any one of the eight Sleekcraft factors. Bloom Brands juxtaposed the fall of menthol cigarettes as a product, and the consequent falls of brands affiliated with that product, including KOOL, against the mass legalization and rise of cannabis products and brands across the majority of the United States. For example, Bloom argued that KOOL brands and its interlocking “OO”s may have had “a worldwide reputation for quality and authenticity” in the 1930s, but Bloom claimed that in 2021, KOOL’s “reputation is for peddling toxic addictive carcinogens to minorities.” Bloom also argued that on April 29, 2021 the FDA announced that it would ban menthol cigarettes nationwide. By contrast, Bloom claimed that much of the nation has moved toward legalization of cannabis. In short, Bloom made a persuasive argument that KOOL brands’ star had fallen, while Bloom Brands’ star was rising such that any confusion was not only unintentional (a Sleekcraft factor), but would actually hurt Bloom’s image (and benefit KOOL’s). This argument is persuasive and arguably spans numerous of the Sleekcraft factors, as it goes to the strength of marks, actual confusion, defendant’s intent in selecting the mark and likelihood of expansion into other markets. Perhaps KOOL’s best retort fits within the eighth Sleekcraft factor—likelihood of expansion into other markets—because even assuming menthol cigarettes are forever on their way out, after 88 years, KOOL should have the right to expand its use of the interlocking “OO”s to cannabis if it decides to do so in the future. Judge Wright picked up on a corollary to this potential retort during the June 7 hearing when he questioned whether ITG’s “goodwill could be harmed for the straight-laced among us who might now feel that KOOL has gone into the cannabis market and find that objectionable even in California?” From a purely theoretical standpoint, I would have liked to see how this dispute played out. Among geriatric Millennials and Generation X, KOOL is a strong mark and there is good reason to believe a strong likelihood of confusion exists. And as previewed by Judge Wright, that same demographic might be offended if it mistakenly believed KOOL had ventured into cannabis, which could damage KOOL’s goodwill. On the other hand, Bloom is not wrong that among the younger demographic, KOOL has very little, if any, brand strength largely as a result of the strict limitations placed on cigarette advertising since the late 1990s. And the so-called “straight-laced” from this younger demographic is also more likely to view menthol cigarettes as the evil, and cannabis as the good, such that any actual consumer confusion could actually benefit KOOL, and harm Bloom, among that demographic. One also cannot help but wonder whether an unwritten, ninth, non-Sleekcraft factor would have tipped the scale in favor of KOOL and against Bloom here. While the majority of the states have legalized cannabis in one form or another, the federal government has not. If he had been forced to decide whether to issue a preliminary injunction against Bloom on the original papers alone, curious whether Judge Wright would have leaned toward issuing the injunction simply because Bloom sells a federally illegal product. Regardless, Judge Wright did the parties a huge favor by forcing them to confer and find a business solution to share the pain equally, which ultimately led to a settlement. Judge Wright even commented that he was tired after every hearing of half of the people “going away pissed off,” and after he apprised the parties that if either side acted unreasonably he’d decide against the unreasonable party, he sent them off to figure it out and gave them time to do it. And they did. Both sides benefited from Judge Wright’s pragmatic approach, and, in the end, “cooler” heads prevailed. Kudos to all.

Author Denise Shull lost her challenge to the Showtime television show Billions, which she claims copied the character bearing her name in Shull’s book Market Mind Games: A Radical Psychology of Investing, Trading and Risk. Shull alleges that she was never paid for the time she spent consulting with Billions writers and actors, and that the show committed copyright infringement in its portrayal of Dr. Rhoades, an in-house female psychological consultant who worked with traders to harness their emotions to be even more successful. The saying is that truth is stranger than fiction, but one question here was whether Shull’s book was truth or fiction. While one might think an author is most often claiming the book describes real facts, while others challenge its credibility, here the roles were reversed. Shull claimed that her book was a work of fiction, with the main character as a “fictionalized” version of herself. In other words, Shull claimed copyright infringement for Showtime’s alleged copying of Shull’s fictional version of herself. Defendants claimed the book was more like an academic work, and the same protections did not apply. The federal court for the Southern District of New York granted Defendants’ motion to dismiss and dismissed the case with prejudice. While many courts will grant an opportunity for leave to amend, Shull’s attorneys did not make such a request at the time of the motion to dismiss, either by separate motion or by mention in their opposition brief. The court granted a dismissal with prejudice, and denied Shull’s request for reconsideration or leave to amend as futile. On appeal, the Second Circuit affirmed the dismissal and ended Shull’s case. First, the Second Circuit agreed that the works were not substantially similar under the “more discerning observer” test, which examines “aspects such as total concept and feel, theme, characters, plot, sequence, pace and setting.” The court pointed to the difference between Shull’s “academic book that draws on fictional stories to illustrate Shull’s ideas,” and the “entirely fictional serial television drama…that lies in the age old trifecta of money, power and sex.” Second, the Court agreed that Shull failed to state a claim under the “quantitative and qualitative” approach, which requires the copying of more than a de minimis amount of expression – as distinct from copying of ideas, facts or non-protectible elements. The Court’s dim view of Shull’s case was made clear here: it found “no actionable copying, let alone copying that exceeds the de minimis threshold,” and noted that Plaintiff “cannot copyright the idea that one should eat, sleep, and exercise to perform well.” What are the takeaways for practicing attorneys? Well, for one, the Second Circuit remains open to dismissing copyright cases at the Rule 12 stage based on the merits of infringement. But the Shull opinion was released as non-precedential, and the impact of the ruling is yet to be seen. Finally, this opinion showcases how defendants enjoy the upper hand in situations where a plaintiff’s initial pleadings is lacking.

We previously blogged about Airwair Int’l v. Pull & Bear and how Doc Martens successfully challenged Defendant’s expert who opined on secondary meaning and likelihood of confusion. Now, the shoe is on the other foot. Doc Martens’ expert found himself in the hot seat for offering improper legal conclusions regarding Doc Martens’ trade dress rights. Take a load off and read on so you don’t find yourself getting cold feet the next time you are considering using experts in a trade dress dispute. Doc Martens is the purveyor of the wildly popular clunky-soled combat boots and shoes with yellow stitching simply known as “Docs.” As Rolling Stone magazine recently commented, those who have sported Docs over the years “runs the gamut from Eddie Vedder and Morrissey, to Rancid and Rihanna.” Doc Martens owns several trade dress registrations and sued Pull & Bear Espana SA for allegedly selling several styles of footwear that infringe on Doc Martens’ trade dress. Pull & Bear countersued, claiming that Doc Martens’ trade dress rights were invalid. Between the two sides, they retained a small squadron of experts for the purposes of opining, rebutting, and excluding. Doc Martens offered rebuttal expert testimony from a distinguished law professor who, among other things, opined that Doc Martens’ “registered trade dress is unambiguous, valid, and protectable.” He also opined that the registrations “comport with” certain requirements mandated by the USPTO. The Court excluded this rebuttal opinion because an “expert cannot testify to a matter amounting to a legal conclusion." Whether a given trade dress is “presumptively valid” or “enforceable” are ultimately calls for the court to make, not for an expert witness. Similarly, whether a registration comports with USPTO requirements is also a legal conclusion and not appropriate for expert testimony. In walking a mile in Doc Martens’ shoes, we can see where it was possibly headed with this proffered testimony. Federal Rule of Evidence 704 tells us that “[a]n opinion is not objectionable just because it embraces an ultimate issue.” After all, whether a given trade dress is valid and enforceable is certainly one of the “ultimate issues” in any trade dress infringement case. Thus, we could see how trial counsel could find it alluring to have a well-regarded law professor provide a rebuttal opinion on this important issue. Trial counsel must remember, though, that Federal Rule of Evidence 702 mandates that an expert’s testimony is only admissible in the first instance if it will “help the trier of fact to understand the evidence or to determine a fact in issue.” When an expert ventures into the realm of explaining what the law is or renders a legal opinion, that’s going to be a bridge too far. Just as it was here.

    Coca-Cola Company has a rich history and well-established global brand in its products originating in the U.S. It has also purchased and invested in the development of other brands and distribution of beverage products outside of the U.S., including in India. Coca-Cola entered the market in India through the acquisition of the marks THUMS UP and LIMCA, because when it initially expressed interest in selling its Coke-branded products in India, the Indian government required companies to disclose the full formula of the products. Instead, in the 1990s, Coca-Cola acquired the LIMCA (lemon-lime soda) and THUMS UP (cola) marks and logos featured above, along with the tagline, that had been introduced and made popular in India since the 1970s by a predecessor-in-interest. The THUMS UP product enjoys a significant market share in India and is one of the world’s best-selling beverages. The LIMCA soft drink is one of the best selling carbonated lemon-lime beverages in India. Both marks have achieved “well-known” status established through the high courts in India, and Coca-Cola owns trademark registrations for the marks in India and in other countries outside of the U.S. Third parties also import both products into the U.S. and focus sales of the products to Indian-American consumers. Coca-Cola was not directly making sales of the products in the U.S. and did not own registered rights in either mark in the U.S. at the time it filed petitions to cancel registrations owned by respondent Meenaxi Enterprise, Inc. (although Coca-Cola has since filed trademark applications for the marks in the U.S.). Meenaxi was founded in 2003 and is owned and operated by two Indian-American brothers who described their business as a “purveyor of and distributor of food products” that are “manufactured in India and distributed primarly to Indian grocers in the United States.” The company advertised its products in a monthly magazine focused on the “Indian Community.” Meenaxi obtained United States registrations for the LIMCA and THUMS UP trademarks, initially claiming during the cancellation proceeding that it came up with the names independently. One of the brothers later conceded in testimony that he had tasted the products in his college days in India and was aware of the brands. Coca-Cola filed petitions for cancellation of the registrations in the Trademark Trial and Appeal Board under Section 14(3) of the Trademark Act. This section provides that a registration is subject to cancellation if the mark “is being used by, or with the permission of, the registrant so as to misrepresent the source of the goods or services on or in connection with which the mark is used.” To state a claim under Section 14(3), it is not sufficient to allege the willful use of a confusingly similar mark. Rather, the alleged misrepresentation must involve the deliberate passing off of goods as those of another. It is a blatant misuse of the registered mark in a manner intended to trade on the goodwill and reputation of another. To prevail on a claim under Section 14(3), a petitioner must establish: The trademark originated with the Petitioner; That the origin of the trademark was falsely designated by the Registrant; That the false designation of origin was likely to cause consumer confusion; and That the Petitioner was harmed by the Registrant’s false designation of origin. The Coca-Cola case presented a factual scenario similar to Bayer Consumer Care AG v. Belmora LLC. In Bayer, an unauthorized entity in the U.S. registered and marketed products under Bayer’s FLANAX mark to Hispanic consumers because the mark and products were well-known to consumers in Mexico. Even though Bayer was not selling products under the FLANAX trademark in the U.S., the courts and the TTAB found that it had met the elements of a claim of misrepresentation, leading to the cancellation of Belmora’s registration (the final stages of which are currently before the TTAB). In that case, it was established that if a third party is using a trademark in the U.S. to misrepresent to U.S. consumers the source of the registrant’s products as originating with the petitioner, the petitioner suffers actionable harm and damage through the loss of the ability to control its reputation. The record in the Bayer case clearly established that the reputation of the Mexican FLANAX mark did not stop at the Mexican border. The outcome in the precedential decision from the TTAB involving Coca-Cola’s THUMS UP and LIMCA marks is consistent. Not only did Meenaxi adopt marks owned by Coca-Cola with explanations that were found lacking in credibility, it also adopted a tagline and logos that were identical or nearly identical to those owned by Coca-Cola for the beverage products. In addition, Meenaxi had a pattern of such behavior and in testimony revealed that it had adopted the marks of others from the marketplace in India at least four other times and sought registrations for those marks in the USPTO. With all of those factors in mind, the TTAB found it highly unlikely that Meenaxi’s adoption of all of these marks, logos, and taglines were an unintended coincidence. Rather, the evidence strongly suggested that Meenaxi sought the registrations of others in an effort to trade on the goodwill of the prior registrants. Meenaxi’s course of conduct belied its excuses that consumers in the U.S. were not aware of Coca-Cola’s LIMCA and THUMS UP marks, and established that it clearly sought to capitalize on the awareness of Indian-Americans of the well-known marks. The TTAB accordingly granted Coca-Cola’s petitions to cancel the registrations for the LIMCA and THUMS UP marks owned by Meenaxi. Takeaways Owners of trademarks outside of the U.S. are not required to sell products bearing the marks in the U.S. to have standing to petition to cancel the registered marks used by another party to misrepresent the source of the goods. Trademark owners should keep an international perspective on trademark enforcement strategies and take action against U.S. registrants exploiting the reputation of marks that have gained fame and renown in other countries.

Greenpeace, the well-known environmental campaign organization, recently prevailed over an electricity giant in the Australian case AGL Energy Limited v. Greenpeace Australia Pacific Limited. Australia’s parody and satire law is similar to the US and this case presents and interesting application of these standards. The dispute began in May 2021 when AGL Energy Ltd. (“AGL”) became the focus of efforts by Greenpeace Australia Pacific Ltd. (“Greenpeace”) to stop AGL’s harmful environmental practices. AGL powers around one-third of Australian households, mostly through the use of coal-fired power stations. In recent years, AGL has promoted itself as an “environmentally-friendly” company. Greenpeace labeled this marketing as “green-washing” of the company and in response, Greenpeace launched its own campaign to highlight AGL’s record as a major polluter and lobby for them to divest from coal-fired power. As part of its campaign, Greenpeace produced a report entitled “Coal-face: Exposing AGL as Australia’s biggest climate polluter.” The campaign also produced social media posts, billboards, posters, and placards. The report and the other campaign materials all used AGL’s logo accompanied by a slogan that played on AGL’s initials, “AGL- Australia’s Greatest Liability.” AGL brought claims of copyright and trademark infringement in the Federal Court of Australia for the use of its logo in the campaign. Greenpeace prevailed on both claims. Justice Stephen Burley considered whether the use of the logo by Greenpeace was an infringement of (1) AGL’s copyright or (2) AGL’s registered trademark. Copyright claim Greenpeace did not dispute that AGL owns copyright of the logo, however Greenpeace successfully argued it was not in breach of AGL’s copyright because the use fell within the defense of fair dealing for the purpose of parody or satire. Greenpeace also relied in part on the defense of fair dealing for the purpose of criticism or review; however, this was unsuccessful. Section 41A of the Copyright Act 1968 provides: 41A   Fair dealing for purpose of parody or satire A fair dealing with a literary, dramatic, musical or artistic work, or with an adaptation of a literary, dramatic or musical work, does not constitute an infringement of the copyright in the work if it is for the purpose of parody or satire. The Court held that § 41A provides an important exception to copyright infringement to promote free speech and critique. For Greenpeace to establish the defense, it had to prove that the use was a “fair dealing” that drew the audience’s attention to an object of ridicule or criticism through irony, humor, or sarcasm. AGL argued that Greenpeace intended for its use of the logo to create change, rather than parody or satire, but Justice Burley upheld existing Australian authority in finding that as long as satire was one of the purposes, the existence of another purpose for the use did not prevent Greenpeace from establishing the defense. The Court held that use of the logo in advertisements, street posters, and website fell squarely within the meaning of parody or satire. Justice Burley stated that by modifying the logo, “the ridicule potent in the message [was] likely to be perceived.” He noted that the modification to AGL’s logo was “darkly humorous” and the combined effect of the logo and message was “ridiculous” and that the messages in the social media posts and photographs called attention to the fact that AGL was not the creator of the work. AGL also argued that Greenpeace used the logo to brand the company as toxic, which would not fall within fair dealing. But the Court ruled that copyright protects an owner’s interest in his or her work but it does not protect brand reputation. Ultimately, although the Court generally accepted Greenpeace’s defense, some of the social media posts and placards that did not involve the clearly satirical tagline “Australia’s Greatest Liability” did not contain a sufficient element of parody or satire and therefore an injunction was granted in AGL’s favor in respect of this limited number of works. Trademark claim The Court held that the use of the logo did not constitute trademark infringement because the logo had not been “used” by Greenpeace as a trademark. The Court agreed with Greenpeace’s characterization of its use, and therefore AGL’s case did not proceed beyond the first hurdle. The Court considered that the general population would not readily perceive that Greenpeace was attempting to promote any goods or services by using the logo. What does this decision mean for your logo? The Court dismissed the claims for infringement of trademark and breach of copyright and did not award AGL monetary damages, only granting injunctive relief for the limited number of photographs and social media posts that did not fall within the parody or satire exception as described above. As a result, Greenpeace can use the logo along with the slogan in its campaign. This case sets an important precedent in Australia. It provides a model for other environmental and activist organizations to launch campaigns that satirize and parody large corporations with less fear of losing an IP litigation for the use of corporate logos. However, this case does highlight that activist organizations must be careful when creating their marketing materials to ensure that their satirical messaging is adjacent to the logo to ensure the general perception of the materials is satirical. It was relevant in this case that the slogan “Australian’s Greatest Liability” appeared next to the AGL logo, and that Greenpeace’s own logo was also prominently displayed on the materials. This Australian decision aligns with U.S. cases like SunTrust Bank v. Houghton Mifflin Co., in which the Court determined that a parody of Gone With the Wind was entitled to the fair use defense for copyright infringement. 286 F.3d 1257 (11th Cir. 2001). The derivative work used major plot lines and characters from the original book as a way to criticize the writing’s depiction of slavery in the United States. Like the use of AGL’s logo in the Greenpeace campaign, the use of the original work in SunTrust Bank was necessary for the critical message to be understood. This post was written with generous contributions and analysis from local counsel in Australia, Shelley Einfeld and Imogen Wurf, of the law firm of Maddocks. Dorsey & Whitney LLP Summer Associate, Tricia Archuleta co-authored this post.

We’ve discussed a number of cases lately where flimsy consumer surveys were tossed out as unreliable under Daubert. This latest installment presents a slightly different twist. It discusses a recent case where the Defendant’s expert opined on the issue of secondary meaning and consumer confusion without a survey at all. As it turns out, Plaintiff’s expert successfully booted this proffered evidence. Read on so that you don’t end up kicking yourself when faced with a similar situation. Today’s case involves Doc Martens, the British footwear brand known for its chunky-soled combat boots that are routinely sported by the likes of Kendall Jenner, Gigi and Bella Hadid, and other Hollywood denizens. Doc Martens owns a number of U.S. trade dress registrations for its boots, and it was none too happy when a company by the name of ITX allegedly sauntered into the marketplace with its own clunky-looking imposters. Doc Martens sued for trade dress infringement, ITX lobbed counterclaims of trade dress invalidity, and the parties were officially off to the races. ITX retained a footwear industry expert to rebut Doc Martens’ infringement claims. Specifically, ITX’s expert offered an opinion that the Doc Martens at issue lacked secondary meaning and that consumers were not likely to be confused by ITX’s boots in any event. In opining on the lack of secondary meaning, ITX’s expert asserted that the Doc Martens footwear designs “are so common in the footwear industry that no one manufacturer has the exclusive right to use the elements.” As the Court noted, though, secondary meaning is based on a number of factors, including exclusivity, length of use, sales, consumer recognition, and other factors. ITX’s expert only offered an opinion on “exclusivity” and was, therefore, based on “mere conjecture.” In opining that consumers would not be confused, ITX’s expert cobbled together a “side-by-side” comparison of the various boots and pointed out the differences among them. The Court rightfully observed that “a side-by-side comparison is improper if that is not the way consumers encounter the product in the market.” Because there was no evidence that these dueling boots were encountered together by consumers in the real marketplace, ITX’s expert opinion got the boot on this issue as well. The moral of this saga is this: if you are attempting to offer evidence of secondary meaning, make sure you consider all the legal elements associated with that endeavor. Moreover, if you are trying to establish a lack of confusion in the marketplace, run—don’t walk—to a competent consumer survey expert for a proper assessment. Fail to heed either of these and you may be kicking yourself.

In the much-anticipated Hasbro Inc. v. EUIPO (T-663/19) decision, the General Court of the European Union announced a new approach to evaluating bad faith in trademark filings and signaled a more aggressive stance toward the practice of “evergreening.” The dispute centered on Hasbro’s registered EU trademark (“EUTM”) for the word mark MONOPOLY. Hasbro registered this mark in 2011 in classes 9, 16, 28, and 41, while at the same time owning three existing EUTMs filed in 1998, 2009, and 2010 for the MONOPOLY mark in classes 9, 16, 25, 28, and 41. Because the 2011 registration listed additional goods and services falling within the same classes as the existing registrations, Hasbro was able to extend its existing protections while avoiding the cost and administrative burden of showing genuine use outside the initial five-year grace period available for all EUTMs as protection against non-use cancellation actions. This re-filing strategy, known as “evergreening,” has long been controversial. While the court in Hasbro did not make an outright determination on the permissibility of evergreening, it fired a warning shot that should cause trademark owners to re-evaluate their filing strategy, lest they end up in Hasbro’s position with an invalidated mark after costly litigation. The Court found Hasbro’s use of evergreening for the sake of administrative convenience to be evidence of a bad faith subversion of the principle of undistorted competition at the heart of the EUTM system. In addressing Hasbro’s evergreening of the MONOPOLY mark, the Court looked to EU Regulations governing the EUTM regime, which treats registrations filed in bad faith as invalid. Recent EU case law has provided greater clarity on the meaning and required proof of bad faith in the EUTM context, but the Hasbro decision breaks new ground of its own. First, the Court in Hasbro found that the factors cited in the earlier Court of Justice decision Chocoladefabriken Lindt & Sprüngli (C-529/07) were neither exhaustive nor necessary evidence of bad faith. Instead, it reasoned that the Chocoladefabriken factors were merely exemplary and that the determination of bad faith rests on objective record evidence of the subjective motivations of the trademark applicant and a departure from accepted principles of honest commercial practices. In Hasbro this standard was met because a Hasbro employee gave testimony that a partial motivation for the company’s filing strategy was to mitigate the administrative burden of showing genuine use of the prior marks. The Court found that this was evidence of intent to undermine the EUTM regime’s objective of ensuring undistorted competition and that it was sufficient to establish Hasbro’s bad faith in filing for the 2011 mark. The definition of bad faith in this decision makes evergreening a riskier strategy for EU trademark filers by expanding its scope and creating greater uncertainty. Second, the Hasbro decision also shakes up the role of bad faith for EU trademark applicants by appearing to lower the burden of rebutting a presumption of good faith. While the Court is careful to reaffirm the general presumption that applications for trademark registration are filed in good faith, its finding of bad faith on the apparently sole basis of testimony from a single employee that administrative ease was a motivating factor in filing suggests that the evidentiary requirements to rebut the good faith presumption may be lower than previously suggested by the case law. Indeed, future filers should take steps to prepare affirmative evidence of good faith, including evidence establishing genuine use of existing registrations and a clear scope of goods and services covered in new applications. Hasbro does not prohibit repeat filing of a mark, but it does make the practice of evergreening trademarks riskier, as it significantly increases the possibility that a re-filer may face a bad faith challenge, resulting in the inability to re-file or renew the proposed mark. What still remains unclear, however, is just how much the successful bad faith challenge to the MONOPOLY mark in Hasbro was dependent on case-specific facts. Whether an applicant pursuing invalidation can prevail on a claim of bad faith in the absence of direct testimony from a company officer conceding that it was intentionally pursuing a re-filing strategy for improper reasons is an open question. As this area of the law develops, EU trademark owners should consider revising their filing strategy to guard against bad faith challenges or take on other owners who may be acting in bad faith.

Roc-A-Fella Records (“RAF”) owners Jay-Z and Damon Dash are clashing over Dash’s plans to sell an NFT (“nun-fungible token”) representing either a 1/3 share of the copyright to Jay-Z’s album Reasonable Doubt (if you believe RAF and Jay-Z) or a 1/3 ownership interest in RAF as a whole (if you believe Dash). If you’re wondering what an NFT is, auction house Christie’s (which brokered a staggering $69 million sale of an NFT created by artist Beeple in March 2021) has a great in-depth article. To summarize (a lot), an NFT is basically a unique digital certificate representing ownership of a unique thing (e.g., a song, work of art, etc.) that is stored, verified, and transferred using blockchain technology. NFTs are created (or “minted”) using tamper-proof, self-executing contracts tied to a specific blockchain set, like Etherium. In late June, Jay-Z (through RAF) obtained a temporary restraining order barring Dash from auctioning an NFT for Reasonable Doubt or doing anything else that could impact ownership rights in the album. In its complaint, RAF claims that Dash was working with a platform called SuperFarm Foundation to auction an NFT, which according to a SuperFarm memo attached to the complaint, would represent “Damon’s [1/3] ownership of the copyright to Jay-Z’s first album.” The problem, according to RAF, is that Dash does not actually own any copyright interest in the album. Rather, RAF owns the entire copyright to the album per Jay-Z’s 1995 agreement with RAF (the entirety of which is actually appended to the complaint—interesting reading). Although RAF convinced SuperFarm to stop the auction by the time it filed the complaint, RAF claims that Dash had already minted an NFT for the album would surely try to sell it elsewhere. For his part, Dash actually agrees with RAF and Jay-Z on the copyright ownership point. In his response opposing the restraining order, Dash freely admits that RAF owns the album entirely. However, he claims the SuperFarm memo (and, thus, RAF’s complaint) misstates the intended nature of the NFT auction. Dash says he never minted an NFT but that the NFT he planned to create was supposed to be for his entire 1/3 ownership of the RAF entity and not for the specific copyright interest in Reasonable Doubt. Any ownership of the album would merely result from owning a share of RAF. The lawsuit, according to Dash, is all part of Jay-Z’s ploy to prevent Dash from sell his shares in RAF (which the initial temporary restraining order arguably accomplished). Dash further argues that the firm Quinn Emmanuel, which filed the lawsuit on behalf of RAF, should be disqualified due to an ethical conflict. The firm, he alleges, represents Jay-Z individually in matters involving RAF corporate governance and now represents RAF in a lawsuit against another RAF shareholder, namely, Dash. Dash also alleges that Jay-Z lacked authority to even retain Quinn Emmanuel on behalf of RAF because Dash is the only person authorized to enter into contracts or retain counsel on behalf of RAF, causing a further conflict of interest. On July 2, the parties participated in a show-cause hearing. Dash was successful in convincing RAF and the court to limit the restraining order. The parties and court agreed to include language stating that the order does not “prevent Dash from selling, assigning, pledging, encumbering, contracting with regard to, or in any way disposing of his one-third (1/3rd) ownership interest in RAF, Inc. to the extent it may otherwise be transferred in compliance with applicable laws”. In a transcript of the hearing attached to RAF’s post-hearing filing, the court also rejected Dash’s arguments that Quinn Emmanuel should be disqualified, finding that there was no evidence Quinn Emmanuel had privileged information concerning Dash and that Jay-Z and RAF’s interests were aligned in the proceeding. Addressing the apparent heart of the dispute, the court asked RAF what other evidence it has that Dash was trying to sell a copyright interest in the album as opposed to his shares in RAF. During the hearing and in its post-hearing filing, RAF argued that Dash is under extreme financial pressure due to multiple liens and that he likely saw an opportunity to profit from the 25th anniversary of Reasonable Doubt. The filing also includes orders from past cases in which courts found Dash not to be credible or disruptive to those proceedings. Dash also responded by filing his own lawsuit against Jay-Z in New York state court, claiming that Jay-Z has impermissibly transferred streaming rights to Reasonable Doubt to his personal LLC (summons available here – link to ). To make things more complicated, Dash’s suit also lists RAF as a plaintiff. So, RAF is now suing both Dash and Jay-Z in their personal capacities as individual owners of RAF. Although the case is only in its earliest stages, it highlights some interesting legal issues in the emerging NFT space. First, despite all the talk of copyright, RAF’s complaint does not actually make a copyright infringement claim against Dash. The claims are essentially all property based (with the exception of breach of fiduciary duty and unjust enrichment claims). Based on a quick search of the Copyright Office website, the copyright to Reasonable Doubt appears to be registered, so RAF would presumably have grounds to file a copyright lawsuit if it wanted to. So why didn’t RAF include a copyright claim? It’s hard to know for sure, but one potential issue is that Dash may not have copied Reasonable Doubt, even assuming he already minted an NFT for the album (a fact he disputes). An NFT does not typically contain a copy of the actual work to which it relates. Rather, the underlying work is stored somewhere else and/or the NFT simply references the work. Thus, even if Dash had minted an NFT representing a copyright interest in the album, he would not have necessarily made any copies of the album and may not ever need to make any copies. Second, assuming Dash does intend to sell his ownership share of RAF as an NFT, as opposed to the copyright to Reasonable Doubt, this might create unintended consequences for Dash. An offer to sell shares of a highly valuable company via an NFT to essentially anyone in the world would likely be considered a securities offering, which could subject him to numerous disclosure and reporting requirements. At this point, the U.S. Securities and Exchange Commission’s public search system EDGAR does not appear to show any filings by Dash or SuperFarm related to any such sale. Third, the dueling lawsuits are certain to raise some interesting issues related to corporate authority given that both Dash and Jay-Z have sued one another on behalf of RAF. This might also press the conflicts issues previously raised by Dash, potentially for both sets of attorneys, who now each claim to represent RAF as an entity and the individual owners of RAF in disputes between RAF and those owners. The TMCA will be monitoring the case.

Certain Colorado companies and others targeting Coloradans will soon be subject to the newly enacted Colorado Privacy Act (“CPA”), signed into law by Gov. Jared Polis on July 8, 2021. Colorado joins California and Virginia as the third state to enact its own comprehensive consumer data privacy legislation. Who must comply with the new CPA rules? Starting on July 31, 2023, businesses will be subject to the CPA if they are located in Colorado or intentionally target Colorado consumers, and either: (1) control or process personal data of more than 100,000 Colorado consumers per calendar year; or (2) derive revenue from the sale of personal data and control or processes the personal data of at least 25,000 Colorado consumers, unless they meet one of several exemptions. The law applies directly to both “controllers” and “processors,” meaning that the law may apply directly to some out of state service providers that agree to handle data subject to the CPA. However, the CPA does include broad exemptions for companies and data that are subject to specific state and federal laws, such as HIPAA, GLBA, the FCRA, COPPA, and FERPA, as well as data processed in connection with employment and in business-to-business contexts. To what data does the CPA apply? The CPA applies to “personal data,” which is defined broadly as information that is linked or reasonably linkable to an identified or identifiable individual. As with other recent privacy laws, there are also specific requirements for sensitive data, such as data relating to biometrics, race, ethnic origin, religious beliefs, mental/physical health, sex life/sexual orientation, or citizenship status. The law exempts from its requirements data that is de-identified, and defines specific criteria that must be met in order for data to be considered de-identified. Uniquely, the CPA also has specific requirements relating to the handling of ‘pseudonymized’ data, which was sometimes unclear under other state privacy laws. The CPA also exempts certain publicly available data that has either been made available through government records, or that the consumer made available to the public. What rights does the CPA give consumers? Although the CPA does provide consumers with many of the same rights available under the California and Virginia privacy laws, there are some important differences, which will require the implementation of new procedures. Colorado’s consumer rights fall into five main categories, described below. As in other states, these rights may be enforced by the individual directly, or through an agent: 1. Opt out. Consumers can opt out of the processing of their personal data for purposes of: a. targeted advertising; b. the sale of personal data (defined broadly to include most exchanges of personal data for monetary gain or other valuable consideration), or c. profiling in furtherance of decisions that produce legal or similarly significant effects concerning a consumer. 2. Access rights. Consumers may obtain a copy of  personal data and confirm if a company is using or otherwise processing their data. 3. Correction. Consumers can correct inaccuracies in their personal data. 4. Deletion. Consumers may request the deletion of their personal data. 5. Portability. Consumers have the right to obtain a copy of their personal data in a portable and, to the extent technically feasible, readily usable format. What are companies’ duties and obligations? The CPA’s requirements are broadly similar to the rights under CCPA/CPRA, and GDPR. Generally, the CPA includes the following core requirements: Transparency. Provide a transparent, clear, and meaningful privacy notice to ensure that it is easy to understand, meaningful to consumers, and in compliance with the CPA. Purpose Specification. Limit processing to what is necessary and appropriate for the specified purpose. Minimization. Only collect data that is adequate, relevant, and limited to what is necessary for the specified purpose. Consent to Secondary Use. Avoid using personal data beyond what was disclosed to the customer, except with prior consent. Care. Implement reasonable measures to protect against unauthorized acquisition. Nondiscrimination. Duty not to unlawfully discriminate. Impact Assessments. Companies must conduct data protection assessments prior to engaging in targeted advertising, profiling, and when processing presents high risks to consumers. Vendor Management. Companies must enter into data processing contracts with subcontractors, requiring them to protect personal data, assist in data rights compliance, and process personal data only for specified purposes. How could this impact my business? If your company is subject to the CPA, you must be sure that you understand all of the personal data collected or otherwise processed by your company, where it is throughout its lifecycle, who has access to it for what purpose, and which vendors may interact with the data. You may need to implement new procedures to respond to consumer data rights requests (typically within 45 days). Companies will likely need to update their privacy notices, as well as their contracts with service providers and others, and implement opt-out mechanisms and related notices, as needed. Companies who run afoul of the CPA may be fined up to $20,000 per violation. Who can enforce this new law? The CPA does not allow for a private right of action. Only the Colorado Attorney General and District Attorneys may bring enforcement actions. Additionally, the CPA authorizes the attorney general to promulgate rules relating to certain aspects of the CPA. Giving a nod to how difficult a pivot to compliance may be in Colorado, companies will have a 60-day time period to cure a violation of the CPA until January 1, 2025. However, the cure period expires on January 1, 2025.

Since the Supreme Court’s 2014 decision in Octane Fitness, LLC v. ICON Health & Fitness, Inc., district courts have had expanded discretion to award prevailing party attorney’s fees in “exceptional cases” under the Patent Act, pursuant to 35 U.S.C. § 285. Section 35 of the Lanham Act (15 U.S.C. § 1117) also permits attorney’s fees awards in exceptional cases, and so courts have increasingly applied the Octane standard to Lanham Act litigation. This month, the U.S. Court of Appeals for the Tenth Circuit became the latest to follow this approach, in Derma Pen, LLC v. 4EverYoung Limited. The appellate court also described the ongoing role of older judicial tests for finding exceptional cases under the Lanham Act, holding district courts are still permitted to look to those tests, so long as they remain cognizant of their broad discretion under Octane. Courts have used various tests for exceptionality over the years, typically focusing on the merits of the losing party’s claims and that party’s conduct in the litigation. By 2014, the test courts used to define exceptional cases in patent law had (in the U.S. Supreme Court’s view) become “unduly rigid” such that it impermissibly encumbered district courts’ statutory discretion. That year, in Octane, the Court reset the test and held that an exceptional case is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Although emphasizing discretion, this test lacks the more specific guidance that earlier, circuit-level cases provided. In Derma Pen, the Tenth Circuit focused its analysis on whether the district court was correct to rely on Octane, instead of King v. PA Consulting Group, Inc., a 2007 Tenth Circuit decision describing the standard for exceptional case attorney’s fees under the Lanham Act. This question—which several circuit courts have faced—has two levels: (1) should the same “exceptional cases” phrase in the Patent Act and Lanham Act be interpreted the same way (all circuit courts to date have said yes), and (2) if so, what becomes of older circuit-level Lanham Act precedents that pre-date Octane? King, for example, held that “[a]lthough no one factor is dispositive, a case may be deemed exceptional because of ‘(1) its lack of any foundation, (2) the plaintiff’s bad faith in bringing the suit, (3) the unusually vexatious and oppressive manner in which it is prosecuted, or (4) perhaps for other reasons as well.’” King summarized this test as looking “to both the objective strength of a plaintiff’s Lanham Act claim and the plaintiff’s subjective motivations.” Is this test reconcilable with Octane? (Spoiler alert—yes it is.) The Tenth Circuit’s decision in Derma Pen is the latest chapter in a long-running dispute. Plaintiff Derma Pen, LLC sold micro needling and skin treatment products. In pure layperson terms, informed only by the author watching an online demo video, Derma Pen’s product seems to repeatedly and quickly jab a rotating array of tiny needles into a patient’s facial skin in connection with dermatological treatments. In 2013, Derma Pen brought trademark infringement and other claims against its one-time business partner 4EverYoung Limited, 4EverYoung’s principal Stene Marshall, and two other business entities he had formed. In May 2017, after multiple law firms withdrew from representing 4EverYoung, citing (you guessed it) 4EverYoung’s failure to pay attorney’s fees, the U.S. District Court for the District of Utah entered a default judgment in favor of Derma Pen. The judgment awarded damages and entered an injunction against 4EverYoung, Stene Marshall, as well as “anyone in active concert or participation with, aiding, assisting or enabling” the named defendants. Among other things, the injunction barred infringement of Derma Pen’s DERMAPEN mark. In November 2017, Derma Pen moved the court to hold Stene Marshall—as well as non-parties Joel and Sasha Marshall and DP Derm, LLC—in contempt for violating the injunction. Joel and Sasha Marshall are Stene Marshall’s brother and sister-in-law, and they own DP Derm. DP Derm told the district court that it sold skin creams, not devices. After eighteen more months of litigation, the district court held Stene Marshall in contempt, but denied Derma Pen’s motion as to Joel and Sasha Marshall and DP Derm. Derma Pen’s case appears to have unraveled during the contempt litigation. The district court observed that Derma Pen had violated its discovery obligations, including by failing to produce a qualified corporate representative for a deposition. The court concluded that Derma Pen had produced no evidence of damages, and that Derma Pen’s evidence “was not clear; it was muddled,” “not convincing,” and “unpersuasive.” After defeating the contempt motion, Joel, Shasha, and DP Derm successfully moved for an award of attorney’s fees. Applying Octane (not King), the district court held that Joel, Shasha, and DP Derm were entitled to exceptional case attorney’s fees. The district court based its decision on the totality of five factors: (1) Derma Pen’s failure to prove damages, (2) evidence showing Derma Pen did not have the right to enforce the injunction because it no longer held rights in the DERMAPEN mark, (3) evidence showing the DERMAPEN mark had been abandoned, (4) Derma Pen’s discovery misconduct, and (5) Derma Pen’s failure to obtain any relief against Joel, Shasha, and DP Derm. The court ordered Derma Pen to pay $190,328 in attorney’s fees to Joel, Shasha, and DP Derm. Derma Pen appealed, asserting the district court abused its discretion. Dashing Derma Pen’s hopes of prevailing on appeal, the Tenth Circuit had no trouble concluding that the district court’s decision satisfied the test under King. The court rejected what it saw as Derma Pen’s “attempt to dissect the factors the district court cited in support of its decision,” given that the district court had made clear it was ruling based on the “totality of the circumstances.” The district court was in the best position to assess those circumstances and make the fee determination after overseeing more than six years of contentious litigation. The Tenth Circuit then turned its analysis to whether Octane or King supplied the correct standard of decision to identify exceptional cases in Lanham Act litigation. Joining every other circuit that has addressed the issue, the Tenth Circuit held that the Octane standard applies to fee-shifting disputes under the Lanham Act. The Tenth Circuit described the decisions in King and Octane as “twin sons of different mothers,” citing the 1978 album of the same name by Dan Fogelberg and Tim Weisberg. (Disclosure: The author listened to the album while writing this post and found the jazz flute a little overpowering, although the court should be commended for avoiding the obvious musical reference in a case involving a party named “4EverYoung.”) Musical tastes aside, the Tenth Circuit is right that King and Octane imbue district courts with the same discretionary authority over identifying exceptional cases warranting awards of attorney’s fees. King, however, is slightly more specific than Octane’s “one that stands out from others” standard. Perhaps for that reason, the Tenth Circuit made clear that it was not overturning its earlier decision in King and that the factors identified in King continue to provide worthwhile considerations in determining when a case is “exceptional” under the Lanham Act. Given that, prevailing parties remain free to rely on totality of the circumstances tests for exceptionality and the various factors courts have used to analyze those circumstances, so long as they avoid “unduly rigid” approaches that place too much weight on any single factor. So how does a trademark litigant avoid being on the losing end of an attorney fee motion? It helps to bear in mind the two areas of focus under King—the strength of a litigant’s case and the way that litigant behaves in litigation. Having at least a fair case and fighting in a fair manner will go a long way towards avoiding losing twice—once on the merits and again by paying the other side’s fees.

Survey evidence in Lanham Act cases can often times be pretty revealing. If you develop it correctly, survey evidence can be a key ingredient to a successful outcome. But if you develop it incorrectly it will show flaws that you and your expert wont want the world to see. This blog post tells the tale of the latter type of survey evidence that contained improper stimuli, a lack of control, and misguided questions. Read on as we discuss the problems that were laid bare in a recent Daubert order issued by the U.S. District Court for the District of Colorado. It all started when a Denver-based strip club, Dandy Dan’s, allegedly used pictures of several women in social media posts to advertise its “gentlemen’s club” establishment. There was only one, small problem with this advertising blitz: none of the women pictured were employed by or otherwise associated with Dandy Dan’s. Oh Dan. These women were models, actresses, and social media stars in their own right, and they did not think what Dan did was all that dandy. In fact, they sued for false endorsement and false advertising under Section 43(a) of the Lanham Act. In order to prove up their claims, Plaintiffs hired an expert to establish that Dandy Dan’s use of the photos “caused or is likely to cause consumer confusion” that the Plaintiffs endorse, sponsor, or are otherwise affiliated with Dandy Dan’s. In doing so, Plaintiffs’ expert went on a bit of a frolic in a number of respects. First, the survey stimuli he used were wholly improper. He started by showing respondents a collection of the ads at issue. Inexplicably, some of the photographs of the women used were not even plaintiffs in the case and included the likes of Carmen Electra, Claudia Sampedro, and Megan Iglesias. He then tried to draw a number of conclusions from the data he gathered from irrelevant stimuli. Injecting irrelevant stimuli into a survey is not going to give any court warm and fuzzy feelings about the proffered evidence. Strike One. Second, the expert did not use a control. The expert’s stated rationale for not doing so was that his research was not testing a “causal proposition.” Practice pointer: In any Lanham Act matter where you are attempting to show the ads in question cause deception, you are testing a causal proposition. In those circumstances, the expert must use a control. The expert’s loosey-goosey approach was not going to cut it. Strike Two. Third, the expert engaged in rather promiscuous use of irrelevant questions. Respondents were asked things such as whether the use of the photos made respondents “more interested in defendant’s club.” Their degree of interest (or non-interest) in Dandy Dan’s is irrelevant as to whether respondents believed the plaintiffs endorsed it. The expert also asked such things as how the ads made respondents “feel” and “what is the first thing that comes to mind” when respondents saw the ads. These touchy feely questions did not get the job done as they were simply irrelevant to the issue at hand. Strike Three. Not surprisingly, the court found these flaws “serious enough and pervasive enough” to warrant the exclusion of the expert’s proffered testimony. The takeaway here is that if your expert provides extra-judicial stimuli, lacks control, and gets too touchy feely, things aren’t headed in the right direction. It may be time to make a course correction lest you find yourself on the receiving end of a Daubert Dandy.

This season the Toronto Raptors missed the NBA playoffs for the first time since 2013. But this year has not been a total bust for the 2019 NBA Champions, because last month the Trademark Trial & Appeal Board dismissed claims against Maple Leaf, Inc. (owner of the Raptors’ IP) by Monster Energy Drinks, finding that various design marks created as part of the Raptors’ re-branding were not likely to cause confusion with, or dilution of, Monster’s various claw-themed design marks. The decision resolved a years-long feud between the companies triggered by Monster’s opposition to all 18 trademark applications first made in 2014 by Maple Leaf. The Board focused its analysis on what it called Monster’s “M-Claw Mark,” and the Raptors’ “Secondary Ball Mark,” holding they were sufficiently different in appearance alone to preclude a likelihood of confusion as a matter of law. Acknowledging that a side-by-side comparison of the marks is not the proper test for likelihood of confusion, the Board still relied primarily on a visual inspection because the design marks cannot be spoken. That inspection showed the significance of the differences in the marks, including that the Raptors’ marks were primarily basketballs with less-significant claw elements, and that the claw marks were made in different directions. These differences also doomed Monster’s dilution claim, along with the Board’s finding that Monster’s marks were not famous for dilution purposes. Though the Raptors won the game, Monster did manage to score a few points that could be useful in its later enforcement efforts, especially for establishing the commercial strength of the M-Claw Mark. The Board accepted expert survey evidence showing that the M-Claw Mark had achieved secondary meaning. It also relied on that survey evidence in finding that the M-Claw Mark is famous—but only for energy drinks (and not for non-beverage merchandise) and only in the likelihood of confusion context, not for purposes of a dilution claim. The Board also made several evidentiary findings that provide useful reminders for parties on both sides of opposition proceedings. First, the Board struck from the record decisions from non-U.S. jurisdictions offered by the Raptors that weighed in on the same dispute—all of which presumably found in favor of the Raptors. The Board reiterated that such decisions are irrelevant to questions of U.S. trademark law. Second, the Raptors submitted a proposal made by Monster to become the official energy product sponsor for the Raptors as evidence that Monster knew there was no likelihood of confusion. The Board struck the proposal from evidence because it was made as part of inadmissible settlement discussions. This serves as a good reminder that if a discussion between adversaries has even a partial settlement purpose in addition to a commercial intent, the content will be deemed inadmissible in evidence but may become publicly disclosed. Finally, the Board agreed to admit various point-of-sale catalogs, which Monster had submitted as evidence of its common law rights. The Raptors had argued that catalogs alone do not establish common law rights, relying on the general prohibition against using catalogs as specimens of use in a trademark application. But the Board admitted the catalogs, finding that their probative value on the extent of common law rights went to weight, and not admissibility. In the end, this evidence either could not overcome (or was not needed to show) the significant differences in the appearances of the marks, so the Raptors emerged victorious.

The U.S. Supreme Court recently granted certiorari to tackle a technical copyright registration question: when a defendant alleges knowing inaccuracies in a copyright registration, does 17 U.S.C. § 411 require referral to the Copyright Office where there is no indicia of fraud or material error as to the work at issue in the subject copyright registration? A copyright registration is a precondition to bringing an action for copyright infringement; thus, a finding that such a registration is void is fatal to an infringement suit. Under 17 U.S.C. § 411(b), a certificate of registration can serve as a basis of an infringement lawsuit, “regardless of whether the certificate contains any inaccurate information,” unless the inaccurate information was included by the registrant with knowledge it was inaccurate, and the inaccurate information, if known, would have caused the Register of Copyrights to refuse the registration. If such inaccurate information is alleged by a defendant, 17 U.S.C. § 411(b)(2) instructs a court to request the Register of Copyrights to advise on whether such information would have caused it to refuse the registration. At issue in Unicolors, Inc. v. H&M Hennes & Mauritz, L.P. is whether a court must find that the registrant acted with intent to defraud the U.S. Copyright Office before referring the matter to the Register of Copyrights. Unicolors, Inc., a fabric designer, first sued fashion-giant H&M Hennes & Mauritz, L.P. in the Central District of California in April 2016, alleging that H&M had infringed its copyright-protected design. A jury returned a verdict in favor of Unicolors, awarding it $846,720 in disgorgement and lost profits. H&M then renewed its motion for judgment as a matter of law, or, in the alternative, a new trial, arguing in part that Unicolors’ copyright registration was invalid because it contained knowingly false information. Specifically, H&M argued that although Unicolors registered the design at issue as part of a “single unit” registration with a publication date of January 15, 2011, not all of the artworks registered as part of the single unit registration were published on that same date. The district court rejected this argument, finding that H&M had not shown that the copyright registration included inaccuracies which would have caused the Register of Copyrights to refuse registration, and that H&M had no evidence that Unicolors had intended to defraud the Copyright Office. The district court did conditionally grant H&M’s request for a new trial on the issue of damages, but Unicolors instead agreed to a reduction of its damages award. After Unicolors was awarded more than $500,000 in attorneys’ fees and costs, H&M appealed the decision to the Ninth Circuit. On appeal, a three-judge Ninth Circuit panel reversed and remanded, finding both that the district court erred in concluding that the copyright registration did not contain inaccuracies, and in imposing an “intent-to-defraud requirement” before referring the copyright registration to the Register of Copyrights. On the first point, the appellate court conceded that “several opinions from this Court have implied that there is an intent-to-defraud requirement for registration invalidation”, but then firmly stated that “we recently clarified that there is no such intent-to-defraud requirement.” On the second point, the Ninth Circuit held that the plain meaning of the Copyright Act requires that when an applicant seeks a “single unit” registration, all works in the unit must have been published on the same date “as part of some singular bundled collection.” Thus, it was inaccurate for Unicolors to register a collection of works as a single unit publication when the works were not published in a singular published collection on the same date. Further, the “undisputed evidence adduced at trial” showed that “Unicolors included the inaccurate information ‘with knowledge that it was inaccurate.’” The court stated that just because there were known inaccuracies in Unicolors’ application does not mean that H&M was entitled to judgment as a matter of law. But the district court was required to request the Register of Copyright to advise the court on whether the inaccurate information, if known, would have caused the Register to refuse registration. After the case was remanded, on September 4, 2020, the district court did just that - the Register of Copyrights has yet to respond to the court’s inquiry. Following the Ninth Circuit’s decision, Unicolors appealed to the Supreme Court, arguing, in part, that the Ninth Circuit’s rejection of an intent-to-defraud requirement under 17 U.S.C. § 411(b) created a circuit split which the Supreme Court should resolve. According to Unicolors’ petition, the Prioritizing Resources and Organization for Intellectual Property Act of 2008, which added the language in 17 U.S.C. § 411(b), was meant to stop courts from invalidating copyright registrations based on immaterial registration errors, but the Ninth Circuit panel instead did the opposite – by “ruling that the PRO-IP Act did not require the long-applied fraud or bad faith standard… [it] consequently made it easier for courts to invalidate copyright owner’s registrations.” If the Supreme Court finds there is no intent-to-defraud standard in 17 U.S.C. § 411, we should expect to see more defendants coming up with copyright registration inaccuracies and more of those inaccuracies being referred to the Register of Copyrights – something copyright registrants would do well to bear in mind before submitting their application for registration.

On March 2, 2021, stationery and gift retailer Paper Source filed for chapter 11 bankruptcy, stating in court filings that effects of the COVID-19 pandemic damaged its finances and operations. Paper Source stated that in bankruptcy, it sought to sell its assets, reevaluate and renegotiate leases, and continue operations, while minimizing adverse impact on trade partners and other stakeholders. Shortly thereafter, however, card makers identifying themselves as vendors to Paper Source hit social media and the press decrying debts Paper Source racked up just before its bankruptcy for which they did not receive payment. According to some card makers, Paper Source placed orders up to four times larger than usual in January and February 2021. This left vendors who had already shipped goods to Paper Source on generous payment terms with relatively large (in the context of the vendors’ businesses) unsecured, prepetition claims when Paper Source entered bankruptcy. Some Paper Source vendors have received limited relief. In its bankruptcy case, Paper Source immediately sought and obtained an order authorizing it to pay up to an aggregate of $2 million on prepetition claims of vendors critical to its business operations, referred to as “critical vendors,” in full or in part, provided vendors agree to supply goods on continued customary or other favorable trade terms. Prepetition claims are the claims for amounts Paper Source owed as of the date it filed for bankruptcy. The same court order authorizes Paper Source to pay such critical vendors in the ordinary course of business if it cannot strike a deal on trade terms and Paper Source believes failure to pay will result in irreparable harm to its business. Paper Source states it determined which of its vendors are critical for the purposes of the critical vendor relief pursuant to a number of considerations, like the volume of goods supplied, existence of alternative vendors, and vendors’ trade terms. The “critical vendor” motion Paper Source filed to obtain this relief indicates the retailer typically pays for goods ordered via purchase order within 30 to 60 days after receiving products. It also indicates that the $2 million sought will cover less than 20% of its outstanding trade payables as of the date it filed for bankruptcy. Thus, not all vendors are deemed critical, and even critical vendors cannot count on a full and immediate recovery on their prepetition claims under the critical vendor relief. According to media reports, some critical vendors are seeing as little as 10% recoveries of their prepetition claims pursuant to the critical vendor relief. The experience Paper Source vendors report highlights the surprise, frustration, and uncertainty that may confront vendors when a customer files for chapter 11 bankruptcy. The impact can be particularly profound for vendors who are small businesses or essentially captive to the customer, as appears to be the case for some of Paper Source’s vendors. The early effects of Paper Source’s bankruptcy on its vendors and its limited critical vendor relief have garnered public reactions and attention. But there are other procedures in chapter 11 bankruptcy that can affect (and aid) vendors and the payment of their claims against debtors. Administrative Expense Claims. In some cases, vendors may be entitled to assert administrative expense claims—which are paid ahead of any payment to unsecured creditors— for at least part of their claims against a debtor. For example, section 503(b)(9) of the Bankruptcy Code provides for an administrative expense claim for the value of goods provided to the debtor within 20 days of the date the bankruptcy case was filed, provided that such goods were sold to the debtor in the ordinary course of the debtor’s business. Notably, it is unclear if a situation where the debtor ordered significantly more product than usual prior to the bankruptcy filing—as asserted regarding Paper Source—would be considered to be “in the ordinary course” of a debtor’s business. Additionally, a vendor may be entitled to assert an administrative expense claim under section 503(b)(1) of the Bankruptcy Code for goods provided to the debtor after the commencement of the bankruptcy case, if the debtor has not paid for those goods in the ordinary course of business. Administrative expense claims are preferable to general unsecured claims because they have priority in payment. But vendors should note that even if they have an allowed administrative expense claim, it does not mean they will necessarily be paid immediately. Administrative expense claims may not be paid until the case is resolved, which can take months or years. Reclamation of Goods. In some instances, a vendor may prefer to recover goods provided to the debtor rather than wait for payment through the bankruptcy process. Section 546(c) of the Bankruptcy Code provides a mechanism for vendors to enforce rights to reclaim goods provided to the debtor within 45 days of the bankruptcy filing. If a vendor wishes to pursue this option it must act quickly by providing a written demand for reclamation to the debtor no later than (a) 45 days after the receipt of goods by the debtor, or (b) not later than 20 days of commencement of the bankruptcy case, if the 45-day period expires after commencement of the case. The vendor must establish, among other things, that it has a common law right of reclamation, meaning that the goods that are the subject of the demand are in the debtor’s possession and are identifiable. Notably, however, a bankruptcy court may determine that a secured creditor’s “blanket lien” supersedes reclamation rights. Cure Claims. In certain cases, a vendor may have an executory contract with a debtor, which may be assumed or rejected by the debtor in its bankruptcy case. If the debtor wishes to continue its contractual relationship with the vendor and assume the contract, it will be required to cure any past due amounts owing under the contract prior to assumption. The amount required to cure defaults is a “cure claim.” For many vendors—like those in Paper Source—that operate solely on purchase orders, there is no executory contract subject to assumption, and therefore there is no requirement that the debtors cure their outstanding obligations. Claims on Prepetition Claim. If a vendor’s claim does not qualify for or is not satisfied by critical vendor relief, any of the above options, or otherwise, the vendor can file a proof of claim on account of its prepetition claim. Recoveries on vendor claims, which are typically general unsecured claims, and other claims are governed by a chapter 11 plan. In cases where an official committee of unsecured creditors is formed, the committee will often negotiate recoveries on behalf of all unsecured creditors. Such creditors’ committees are typically comprised of a variety of unsecured creditors. For example, the committee in Paper Source’s case is comprised of two product vendors, two landlords, and one service vendor. The existence, availability, and extent of relief available to vendors in a particular bankruptcy case, including the payment options set forth above, will vary from case to case. Many factors affect potential recoveries by vendors in a bankruptcy case, including the identity of the debtor, its circumstances, the purpose of the bankruptcy filing, events that transpire during the bankruptcy case, and the ultimate result of the bankruptcy case. Therefore, vendors should seek the advice of bankruptcy counsel to ensure they protect their rights and optimize their recoveries. As more retailers file for chapter 11 bankruptcy protection as a result of the COVID-19 pandemic, more vendors will be faced with situations like those in Paper Source. Vendors should be prepared to navigate the bankruptcy process, and potentially retain bankruptcy counsel, to protect their interests in the event that a customer files for bankruptcy.

A long-running battle between Deckers Outdoor Corp., the makers of UGG boots, and Australian Leather PTY Ltd. may finally be over after a May 7 ruling by the United States Court of Appeals for the Federal Circuit. The battle began in 2016 in the Northern District of Illinois when Deckers sued Australian Leather for trademark infringement based on its sale of boots in the U.S. bearing Deckers’ UGG trademark that looked quite similar to Deckers’ UGG boots. Australian Leather makes sheepskin boots in Australia that contain “ugg” in the name, which in Australia is a generic term for sheepskin. In the U.S., however, Deckers owns the trademark for UGG in connection with its popular sheepskin boots. When Australian Leather began selling its ugg boots in the U.S.—and it only sold twelve pairs—Deckers filed suit, seeking both an injunction and damages. In response, Australian Leather filed several counterclaims and claimed that ugg was not worthy of trademark protection in the U.S. because it was generic. The parties battled over the generic issue (as well as others) in cross-motions for summary judgment filed in 2018. Australian Leather argued that ugg was a generic term in Australia and should be treated as one in the U.S., relying in large part on the “foreign equivalents” doctrine to support its argument. Under the foreign equivalents doctrine, “one cannot obtain a trademark over a foreign generic word if the trademark designation ‘would prevent competitors from designating a product as what it is in the foreign language their customers know best.’” Deckers Outdoor Corp. v. Australian Leather Pty. Ltd., 340 F. Supp. 3d 706, 709 (N.D. Ill. 2018) (quoting Otokoyama Co. Ltd. v. Wine of Japan Import, Inc., 175 F.3d 266, 271 (2d Cir. 1999)). In its summary judgment opinion, the district court rejected Australian Leather’s genericness defense, including its application of the foreign equivalents doctrine. Relying on expert testimony and survey results from Deckers, the court found that ugg was not generic in the U.S., even if it was in Australia. In particular, based on the fact that 98% of consumers interviewed in Deckers’ survey thought ugg was a brand, the court concluded that “no reasonable factfinder could conclude that ugg is or ever was a generic word for sheepskin boots in the U.S.” The court also declined to apply the foreign equivalents doctrine, finding that it was not a good fit where, as here, it involves a translation from “English to English”. In its summary judgment opinion, the court also rejected several other defenses lodged by Australian Leather, and set the parties on a course for trial. After a four-day jury trial, the jury found that Australian Leather willfully infringed Deckers’ UGG trademark based on its sale in the U.S. of similar boots containing the ugg name and awarded Deckers $450,000 in damages. After receiving the verdict, and a bench trial on separate issues, Australian Leather appealed to the Federal Circuit. Two of the three issues in Australian Leather’s appeal concerned genericness issues, including the application of the foreign equivalents doctrine: “[w]hether the District Court erred when it held that the trademark doctrine of foreign equivalents did not apply to generic words in a foreign country where the primary language is English.” The Federal Circuit heard oral argument on Australian Leather’s appeal on May 5, 2021 and denied it in a short order two days later, on May 7, 2021, without supplying any reasoning. While we do not know whether Australian Leather will file a cert petition with the Supreme Court, we’ll be watching and let you know if and when it does. For now, at least, the battle seems to have ended.

Earlier this month, the U.S. Court of Appeals for the Federal Circuit reversed a $66 million dollar judgment against beauty industry giant L’Oréal for patent infringement, trade secret misappropriation, and a related breach of a non-disclosure agreement. While the Court remanded for a trial on patent infringement and damages on the patent infringement claim, it dismissed the trade secret misappropriation and breach of non‑disclosure agreement (“NDA”) claims in full, ruling that no reasonable juror could have found either trade secret misappropriation or breach of contract, and thus that the trial court should have granted L’Oréal’s motion for judgment as a matter of law (“JMOL”). The Federal Circuit’s ruling provides some useful reminders on important tenets of trade secret law. The underlying dispute involved plaintiff Olaplex’s discovery of the protective benefit of maleic acid during hair-bleaching treatments. In May 2015, Olaplex claimed that it met with L’Oréal to discuss a potential acquisition of Olaplex and to provide confidential information and documents pursuant to an NDA, including Olaplex’s then-unpublished patent application of the maleic acid invention. Then, instead of proceeding with the acquisition, Olaplex claimed that L’Oréal opted for “Plan B” of copying Olaplex’s patented method and launching competitor maleic acid products in August 2016. Olaplex filed suit in 2017 alleging claims of patent infringement, trade secret misappropriation, and breach of contract. After a lengthy and embattled litigation, including multiple intervening PTAB proceedings and Federal Circuit appeals, the Court made a determination of patent infringement on summary judgment, and the jury found for plaintiffs on patent-validity issues and the trade secret and breach of contract claims. The trial court then adjusted the damages award to avoid inconsistencies and prevent double recovery, and also award exemplary damages, attorney’s fees, and prejudgment interest, amounting to a total judgment of $66,167,843. On appeal, the Federal Circuit closely scrutinized the four groups of trade secrets asserted by Olaplex, which were generally described as: (1) information in an “unpublished patent” application; (2) “business information”; (3) “testing and know how” and (4) “dead ends and trials and errors” and found that as to each, the jury could not reasonably find sufficient proof of the elements of liability. With respect to the information in the unpublished patent application, Olaplex contended that the trade secret was “using maleic acid during bleaching.” The Federal Circuit found that Olaplex failed to establish that the information in the unpublished patent application was not readily ascertainable through proper means, a requirement that is expressly included in the definition of a trade secret. In so finding, the Court reasoned that L’Oréal put forth numerous prior-art references and expert testimony establishing that the prior-art references disclosed the alleged trade secret before the May 2015 exchange. The Court noted that information in published patents or patent applications is readily ascertainable by proper means, and went on to cite a number of cases establishing the general principle that disclosure of a trade secret in a published patent or patent application extinguishes the trade secret. The Court also noted that Olaplex’s own expert admitted that L’Oréal was using maleic acid in a method of bleaching as a pH adjuster before the alleged May 2015 information exchange, but ultimately decided it was not necessary to get into L’Oréal’s evidence of its own internal consideration of using maleic acid before it received the unpublished patent application to arrive at the Court’s conclusion that the claimed trade secret was not, in fact, a trade secret at the time of misappropriation. With respect to the second category of “business information,” which constituted Olaplex’s “financials,” the Court found that Olaplex failed to prove that the use of that information was without express or implied consent. Olaplex asserted that the business information provided insight into whether it was more cost effective for L’Oréal to acquire Olaplex or launch its own products (i.e. a “Build v. Buy analysis”). However, the Federal Circuit found that the parties’ NDA explicitly gave L’Oréal authorization to use the information in that way, as the very purpose of the agreement was to allow L’Oréal to evaluate a possible acquisition. As a result, L’Oréal’s use of the business information trade secret was not improper since it was consented to by Olaplex. With respect to the third and fourth trade secret categories of “testing and know how” and “dead ends and trials and errors,” the Federal Circuit found that there was an utter lack of proof that L’Oréal misappropriated anything secret within these groups. The Court reasoned that Olaplex described the categories with a high level of generality and never identified with specificity any particular information about testing, know how, dead ends or trial and error processes and evidence showing that L’Oréal made use of that information, let alone evidence of why that use was improper. Indeed, the Court noted that Olaplex addressed this information in a single sentence which indicated that these items yielded a dramatic change in L’Oréal maleic acid research. And, even the evidence relied upon for this assertion did not establish that L’Oréal misappropriated these buckets of “trade secrets” as opposed to the information contained in the unpublished patent application discussed above. The Court also found that, in part due to the absence of particularity provided by Olaplex describing these categories of purported trade secrets, the Court could not say that the evidence allowed a reasonable finding that the information was even a trade secret. The Court examined the expert testimony on these trade secret categories and found that “testing and know how” and “dead ends and trials and errors,” were not identified sufficiently to provide a concrete basis for finding that they were not readily ascertainable by proper means, including through prior literature on the topic. The Court finished its discussion of the third and fourth trade secret categories by articulating the general rule that a person claiming rights in a trade secret bears the burden of defining the information for which protection is sought with sufficient definiteness to permit a court to apply the criteria for protection and determine the fact of appropriation. As the Court explained, the requirement of reasonable particularity matters because a trade secret described in general terms will usually be widely known or readily ascertainable by proper means, and thus not a trade secret. Further, without particularity, there is an inadequate basis for a fair adjudication of what information was actually used by the defendants. And, courts and juries require precision because, especially where a trade secrets claim involves a sophisticated and highly complex system, the trier of fact will not have the requisite expertise to define what the plaintiff leaves abstract. The Court then concluded that Olaplex had failed to provide such particularity as yet another basis why Olaplex’s claim failed. Accordingly, the Federal Circuit concluded that the trial court should have granted L’Oréal’s JMOL motion. The Court also found that, in light of its trade secrets rulings, the breach of contract claim also could not survive because it was based on the same information that was purportedly given to L’Oréal under the NDA. Following the Federal Circuit’s decision, the parties shortly thereafter announced that they had settled the litigation on undisclosed terms. The Federal Circuit’s decision provides a useful reminder of several key principles of trade secret law. First, the Court points to a key tension in determining the method for protecting intellectual property, in that once a published patent application or patent discloses trade secret information, it generally extinguishes the information’s trade secret status. Thus, the decision of how best to protect trade secret information that is potentially patentable should be evaluated carefully. Second, although it seems obvious, misappropriation does not occur when the alleged infringer has express or implied consent to use the information in the manner in which it has used the information that is the subject of alleged infringement. Finally, to be successful in litigation, a trade secret needs to be disclosed with reasonable particularity. In fact, in trade secret litigation in certain jurisdictions, a particularized disclosure of the trade secret is a prerequisite to obtaining discovery of the adversary’s confidential proprietary information pertaining to the alleged infringement.

Earlier this month, the U.S. Court of Appeals for the Federal Circuit reversed a $66 million dollar judgment against beauty industry giant L’Oréal for patent infringement, trade secret misappropriation, and a related breach of a non-disclosure agreement. While the Court remanded for a trial on patent infringement and damages on the patent infringement claim, it dismissed the trade secret misappropriation and breach of non‑disclosure agreement (“NDA”) claims in full, ruling that no reasonable juror could have found either trade secret misappropriation or breach of contract, and thus that the trial court should have granted L’Oréal’s motion for judgment as a matter of law (“JMOL”). The Federal Circuit’s ruling provides some useful reminders on important tenets of trade secret law. The underlying dispute involved plaintiff Olaplex’s discovery of the protective benefit of maleic acid during hair-bleaching treatments. In May 2015, Olaplex claimed that it met with L’Oréal to discuss a potential acquisition of Olaplex and to provide confidential information and documents pursuant to an NDA, including Olaplex’s then-unpublished patent application of the maleic acid invention. Then, instead of proceeding with the acquisition, Olaplex claimed that L’Oréal opted for “Plan B” of copying Olaplex’s patented method and launching competitor maleic acid products in August 2016. Olaplex filed suit in 2017 alleging claims of patent infringement, trade secret misappropriation, and breach of contract. After a lengthy and embattled litigation, including multiple intervening PTAB proceedings and Federal Circuit appeals, the Court made a determination of patent infringement on summary judgment, and the jury found for plaintiffs on patent-validity issues and the trade secret and breach of contract claims. The trial court then adjusted the damages award to avoid inconsistencies and prevent double recovery, and also award exemplary damages, attorney’s fees, and prejudgment interest, amounting to a total judgment of $66,167,843. On appeal, the Federal Circuit closely scrutinized the four groups of trade secrets asserted by Olaplex, which were generally described as: (1) information in an “unpublished patent” application; (2) “business information”; (3) “testing and know how” and (4) “dead ends and trials and errors” and found that as to each, the jury could not reasonably find sufficient proof of the elements of liability. With respect to the information in the unpublished patent application, Olaplex contended that the trade secret was “using maleic acid during bleaching.” The Federal Circuit found that Olaplex failed to establish that the information in the unpublished patent application was not readily ascertainable through proper means, a requirement that is expressly included in the definition of a trade secret. In so finding, the Court reasoned that L’Oréal put forth numerous prior-art references and expert testimony establishing that the prior-art references disclosed the alleged trade secret before the May 2015 exchange. The Court noted that information in published patents or patent applications is readily ascertainable by proper means, and went on to cite a number of cases establishing the general principle that disclosure of a trade secret in a published patent or patent application extinguishes the trade secret. The Court also noted that Olaplex’s own expert admitted that L’Oréal was using maleic acid in a method of bleaching as a pH adjuster before the alleged May 2015 information exchange, but ultimately decided it was not necessary to get into L’Oréal’s evidence of its own internal consideration of using maleic acid before it received the unpublished patent application to arrive at the Court’s conclusion that the claimed trade secret was not, in fact, a trade secret at the time of misappropriation. With respect to the second category of “business information,” which constituted Olaplex’s “financials,” the Court found that Olaplex failed to prove that the use of that information was without express or implied consent. Olaplex asserted that the business information provided insight into whether it was more cost effective for L’Oréal to acquire Olaplex or launch its own products (i.e. a “Build v. Buy analysis”). However, the Federal Circuit found that the parties’ NDA explicitly gave L’Oréal authorization to use the information in that way, as the very purpose of the agreement was to allow L’Oréal to evaluate a possible acquisition. As a result, L’Oréal’s use of the business information trade secret was not improper since it was consented to by Olaplex. With respect to the third and fourth trade secret categories of “testing and know how” and “dead ends and trials and errors,” the Federal Circuit found that there was an utter lack of proof that L’Oréal misappropriated anything secret within these groups. The Court reasoned that Olaplex described the categories with a high level of generality and never identified with specificity any particular information about testing, know how, dead ends or trial and error processes and evidence showing that L’Oréal made use of that information, let alone evidence of why that use was improper. Indeed, the Court noted that Olaplex addressed this information in a single sentence which indicated that these items yielded a dramatic change in L’Oréal maleic acid research. And, even the evidence relied upon for this assertion did not establish that L’Oréal misappropriated these buckets of “trade secrets” as opposed to the information contained in the unpublished patent application discussed above. The Court also found that, in part due to the absence of particularity provided by Olaplex describing these categories of purported trade secrets, the Court could not say that the evidence allowed a reasonable finding that the information was even a trade secret. The Court examined the expert testimony on these trade secret categories and found that “testing and know how” and “dead ends and trials and errors,” were not identified sufficiently to provide a concrete basis for finding that they were not readily ascertainable by proper means, including through prior literature on the topic. The Court finished its discussion of the third and fourth trade secret categories by articulating the general rule that a person claiming rights in a trade secret bears the burden of defining the information for which protection is sought with sufficient definiteness to permit a court to apply the criteria for protection and determine the fact of appropriation. As the Court explained, the requirement of reasonable particularity matters because a trade secret described in general terms will usually be widely known or readily ascertainable by proper means, and thus not a trade secret. Further, without particularity, there is an inadequate basis for a fair adjudication of what information was actually used by the defendants. And, courts and juries require precision because, especially where a trade secrets claim involves a sophisticated and highly complex system, the trier of fact will not have the requisite expertise to define what the plaintiff leaves abstract. The Court then concluded that Olaplex had failed to provide such particularity as yet another basis why Olaplex’s claim failed. Accordingly, the Federal Circuit concluded that the trial court should have granted L’Oréal’s JMOL motion. The Court also found that, in light of its trade secrets rulings, the breach of contract claim also could not survive because it was based on the same information that was purportedly given to L’Oréal under the NDA. The Federal Circuit’s decision provides a useful reminder of several key principles of trade secret law. First, the Court points to a key tension in determining the method for protecting intellectual property, in that once a published patent application or patent discloses trade secret information, it generally extinguishes the information’s trade secret status. Thus, the decision of how best to protect trade secret information that is potentially patentable should be evaluated carefully. Second, although it seems obvious, misappropriation does not occur when the alleged infringer has express or implied consent to use the information in the manner in which it has used the information that is the subject of alleged infringement. Finally, to be successful in litigation, a trade secret needs to be disclosed with reasonable particularity. In fact, in trade secret litigation in certain jurisdictions, a particularized disclosure of the trade secret is a prerequisite to obtaining discovery of the adversary’s confidential proprietary information pertaining to the alleged infringement.

Trademark law aficianados have followed the progress of Romag Fasteners v. Fossil from District Court to the Federal Circuit to the Supreme Court and back again. We previously blogged about the Supreme Court decision here. In the latest installment, the Connecticut District Court refused to enter a $6.7 million advisory jury award, instead awarding a mere $90,000 to Romag Fasteners for this multi-year litigation. The District Court’s opinion is a primer in damages law, with a cautionary tale of what-not-to-do if you want to avoid a court’s ire. The District Court started by laying out the damages theories: an advisory jury verdict of $90,000 of unjust enrichment, based on allocating just 1% of Fossil’s profits to the Romag magnetic fastener, and an advisory jury verdict of $6.7 million based on a deterrence theory. Romag Fasteners had declined to pursue statutory damages, instead seeking the more speculative and much more judical-resource-intensive theory of lost profits. And following the Supreme Court’s decision – holding that lost profits may be available even without willful trademark infringement, though mens rea remains critically important – the District Court had latitude to award damages of $90,000, over seven hundred times $90,000 ($6.7 million), or something in between. The District Court’s disillusionment with Romag’s litigation conduct and aggressiveness disproportionate to its harm was apparent. In evaluating the equitable factors in setting an award, the Court determined that almost all of them favored Fossil. The Court emphasized Romag’s behavior at the beginning of the litigation: from filing a lawsuit immediately prior to the lucrative holiday shopping season, submitting a false affidavit to obtain a TRO, and damaging Fossil due to the strategic timing of its lawsuit. “Plaintiff carefully timed this suit to take advantage of the imminent holiday shopping season to be able to exercise the most leverage over Defendants in an attempt to extract a quick and profitable settlement, as it had done twice before in the past three years.” By contrast, the Court determined that Fossil had acted negligently, at worst, and the relative balance of the behaviors favored a judgment of approximately $90,000 for trademark infringement, which when added to prior patent damages, would total approximately $133,000. In a strange coda to such a long-running and hard-fought case, both parties submitted requests to amend the judgment by remarkably small amounts. Romag Fasteners asked the Court to amend the judgment to reflect the correct value of the patent judgment, for a total judgment of $142,000 plus interest. And Fossil, not to be outdone, submitted a response agreeing with the total of $142,000, but disagreeing as to the date on which interest would apply. So, is this the end of this long-running dispute? Only time will tell.

Any fan of Nintendo games and consoles can tell you that the company’s most iconic virtual villain is King Bowser Koopa, generally referred to as simply “Bowser.” In a strange instance of life imitating art, Nintendo filed a copyright infringement complaint on April 16, 2021, against a real-life Bowser—i.e., Gary Bowser. While King Koopa’s villainy primarily involves harassing Mario and his friends and kidnapping princesses, according to Nintendo’s complaint, Gary Bowser has harmed Nintendo by selling devices aimed at circumventing copyright protections for Nintendo’s popular Switch and Switch Lite gaming consoles. More specifically, Nintendo’s complaint alleges that Gary Bowser is “one of the leaders of Team Xecuter, a pirate operation that unlawfully manufactures and traffics in an unauthorized operating system called the ‘SX OS,’ and accompanying piracy tools which install it… for commercial gain.” When a customer of Team Xecuter uses the purchased piracy tools to run SX OS on a Nintendo Switch, the customer is able to run pirated versions of games on the hacked Switch for free by bypassing technological measures meant to thwart such conduct. Of the three counts in Nintendo’s complaint, Counts One and Two relate to the Digital Millennium Copyright Act (“DMCA”) (i.e., unauthorized trafficking in circumvention devices). Count Three is a copyright infringement claim based on Team Xecuter’s unauthorized display on its website of images taken from Nintendo Switch games. This litigation represents a new stage in Nintendo’s ongoing campaign against accused infringers. Whereas prior cases focused on copyright infringement, trademark infringement, and unfair competition claims, Nintendo’s case against Gary Bowser is primarily based on the DMCA. In the past, Nintendo filed complaints against websites that Nintendo accused of infringing its copyrights directly through reproduction and distribution of “ROM” files, as opposed to entities, like Team Xecuter, that enable customers to circumvent copyright protection. In the video game context, a “ROM” refers to the software code necessary to play a particular game. Once a user obtains a ROM, the user can play it on a PC, smart phone, or other device using an emulator—an application that emulates one or more gaming consoles. So, if the user has, for example, a ROM for a game originally released on the Nintendo Entertainment System plus a Nintendo Entertainment System emulator installed on a PC, that user can play the game on the PC. While ROMs can be obtained through various, often unlawful, sources, such as eBay or from an original game cartridge, users used to commonly obtain both the ROMs and emulators from websites that allowed users to download the files for free or for a membership fee. Nintendo’s litigation against ROM websites have been successful. For example, in 2018, a court approved a settlement and awarded Nintendo $12.23 million in damages, and granted a permanent injunction, against a married couple based in Arizona who provided free game downloads from two websites, LoveROMS.com and LoveRetro.com, to over 17 million monthly visitors. In 2019, Nintendo filed a complaint against, Matthew Storman, the owner of RomUniverse.com, which had been online more than ten years. RomUniverse.com provided free ROM downloads but also charged a $30/year membership fee to download unlimited ROMs at a higher speed. While that litigation is still pending, Mr. Storman has already taken RomUniverse offline. Other ROM sites have also gone offline to avoid being Nintendo’s next target. It’s too early to tell whether Gary Bowser will be found liable, whether Nintendo will be awarded damages, or whether Nintendo would be able to collect such damages. However, the Team Xecuter website is already down, thus preventing future infringement. Moreover, this lawsuit will likely send a warning to other individuals and entities that Nintendo is now prepared to use the DMCA to protect its IP rights.

A new post-mortem right of publicity bill that was signed into law by Governor Cuomo on November 30, 2020, will soon take effect on May 29, 2021. The new law recognizes post-mortem rights of publicity in New York for the first time. Broadly speaking, no right of publicity exists at the federal level and so those rights must be gained through state statutes and/or common law. Under the present regime, New York protects living people against the unauthorized use of their personality (i.e., their name, portrait, picture and voice) through its right of privacy statute, Sections 50 and 51 of New York’s Civil Rights Law - Article 5. This is actually the longest standing right of publicity law for the living in the U.S., having been originally passed in 1903. But the rights conferred in New York have, until now, disappeared at death, similar to many other U.S. states. Under the new law these rights will finally be granted in New York through the passing of a new provision in Section 50 of New York’s Civil Rights Law - Section 50-F. This new section adds two types of rights – a more traditional post-mortem right of publicity granted to deceased personalities, and a second, more unusual provision related to digital replicas (such as holograms) applicable to deceased performers. Who qualifies for post-mortem rights?  Two types of deceased individuals (not corporations) – a “deceased personality” and a “deceased performer”- qualify for post-mortem protection under the new law. A “deceased personality” is a natural person who is domiciled in New York at the time of their death and whose name, voice, signature, photograph, or likeness has commercial value either at the time of their death or because of their death. So a deceased personality need not have commercialized their personality or identity prior to their death in order to qualify for protection if the way in which they die makes them famous. A “deceased performer” is also a natural person who dies domiciled in New York but who, at the time of death was regularly engaged in acting, singing, dancing or playing a musical instrument. Athletes would not fall under the definition of “deceased performer,” and it’s unclear whether retired or amateur performers would qualify. For both categories, only those who pass away after the new statute takes effect in May 2021 are protected. What rights do they get? Under the new law, a deceased personality can protect their name, voice, signature, photograph or likeness against the use of these on or in products, merchandise or goods (or for purposes of advertising or selling, or soliciting purchases of these or services), without prior consent. This right is akin to protection against false endorsement, and is viewed as narrower than that given to the living, who are protected against uses of their persona for “for advertising purposes or for the purposes of trade” more broadly. Based on this, advertising or trade uses other than those specifically listed, such as uses in creative works, are likely allowed. Deceased performers are protected against the unauthorized use of their digital replica in a scripted audiovisual work as a fictional character (such as a movie), or in live musical performances (such as a concert), without consent, if the public is likely to be misled into thinking it was an authorized use. But a conspicuous disclaimer in the credits of a scripted audiovisual work and making clear that the use of the digital replica was unauthorized will avoid liability. How long do the new post-mortem rights last? The length of protection is 40 years after death. This is less than states such as California, which provides protection for 70 years, but more than other states such as Tennessee, which has an initial 10 year term. Free speech considerations A major obstacle to passing rights of publicity laws are First Amendment concerns. The new law robustly addresses free speech concerns by permitting a number of fair uses such as parodies, satires, criticism or commentary, news, and historical works. It also permits uses in literary and other artistic works, and works that are newsworthy, educational or in the public interest. It also excludes uses in sports programs among other uses. Some exceptions to these exceptions apply. What else? Transferability, Descendibility and Registration The new law also makes explicit that the post-mortem publicity rights granted are freely transferable and descendible. It also provides a mechanism for owners of a deceased person’s rights to register their claim with the New York Secretary of State in order to be able to bring a claim. Looking ahead This new law is viewed favorably by celebrities, unions such as SAG-AFTRA and others who have advocated for years for New York to come into line with other states, and to prescribe by statute rights not otherwise recognized under New York common law. As the law goes into effect, it may result in a narrower expansion of rights than anticipated, given its various limitations as written. So it remains to be seen how meaningful the law is in practice and whether other legal avenues commonly relied upon to protect celebrities after death, such as trademark protection under the Lanham Act, confer stronger and broader rights overall.

On April 5, 2021, the Supreme Court issued its decision in Google v. Oracle, ruling 6-2 in Google’s favor on the issue of fair use. So ends a decade-plus battle between two tech giants that many viewed as having the potential to reshape how computer programs are written and licensed across the software industry. Google’s win—which is plainly indebted to the amici curiae who persuaded the Court of the policy rationale for a finding of fair use—thrilled those who saw a potential win by Oracle as an existential threat to settled norms in the software industry. Others have received the decision with skepticism, questioning how the Court could have blessed Google’s verbatim copying of Oracle’s code and struggling to reconcile the result with the plain text of the Copyright Act and established fair use precedent. Now, as the dust settles, those looking to Google v. Oracle for guidance on what they can and can’t do with proprietary software they don’t own must decide what, if anything, they can draw from its holding. The answer may prove elusive, and expensive. We’ve followed this story since the Court first granted certiorari in 2019, with posts laying out the questions before the Justices, analyzing copyrightability and fair use, and summarizing oral argument. (For those new to the subject matter, these earlier posts will help you get up to speed on this complex case.) Now, in our final post in this series, we turn to the result. Holding Noting that Google v. Oracle does not “overturn or modify” earlier cases involving fair use, the Court held that Google’s re-implementation of a “user interface” (i.e., 11,500 lines of declaring code from 37 Java API libraries) owned by Oracle was a fair use of that material as a matter of law. Justice Breyer wrote the majority opinion, joined by Justices Roberts, Sotomayor, Kagan, Gorsuch, and Kavanaugh. Justice Thomas dissented, joined by Justice Alito. Justice Barrett took no part in the decision. The Majority Opinion Although there were two questions before the Court, the majority ignored the first, making no express ruling on whether the declaring code at issue is copyrightable. As discussed below, this omission drew sharp criticism from the dissent, and is likely to exacerbate uncertainty over how the holding in Google v. Oracle should be applied. That said, the Court implicitly sided with Oracle on this question as fair use only comes into play if the underlying work is subject to copyright; the majority also acknowledged in several places that computer programs, including the declaring code at issue here, are “subjects of copyright.” This acknowledgement, however, only makes the majority’s silence on the first question before it more conspicuous and puzzling. Instead of addressing copyrightability under 17 U.S.C. §§ 101 and 102, the majority devotes its opinion to an analysis of the fair use factors enumerated under 17 U.S.C. § 107, ultimately ruling that each one favors Google. Factor 2: “The Nature of the Copyright Work.” Although this factor is actually the second fair use factor, for “expository purposes” the majority considered it first. Under this factor, the majority compared declaring code and implementing code, and identified the attributes of declaring code that distinguish it from implementing code and—per the majority—weaken its protection under the Copyright Act. For example: declaring code is “inextricably bound together” with the division of computing tasks that “no one claims is a proper subject of copyright;” declaring code is “inextricably bound up” with the idea of organizing tasks in a manner that is not copyrightable; declaring code is “inextricably bound up” with the use of commands, i.e., method calls, that Oracle did not claim were copyrightable; and declaring code is “inextricably bound up” with implementing code, which Google did not copy from Oracle. Although these observations were all made in the context of fair use, they track the arguments Google raised in objecting to the copyrightability of declaring code under the first issue before the Court. This, again, puts a spotlight on the majority’s decision to ignore the first issue before it, and invites the question of why it didn’t simply make these observations in that context. (More on that in our discussion of the dissent.) Further elaborating on the distinction between declaring code and implementing code, the majority concludes that declaring code “embodies a different kind of creativity” in that Oracle’s code was written to attract programmers by making it easy to remember and use. Putting these ideas together, the majority observed that although both declaring code and implementing code are “functional in nature,” declaring code is “inherently bound together” with (1) uncopyrightable ideas (task division and organization) and (2) others’ new creative expressions, like Google’s Android implementing code. The majority thus ruled that the nature of declaring code weighs in favor of fair use. Factor 1: “The Purpose and Character of the Use.” Here the majority considered whether Google’s use added “something new, with a further purpose or different character,” altering Oracle’s declaring code. First addressing traditional concepts derived from precedent to consider whether the use was “transformative” under this factor, the majority acknowledged that Google precisely copied the code at issue, and used it “in part” for the same purpose as Oracle. This would typically cut against Google, but the majority added that, in the context of computer programs, those cannot be reasons to rule against fair use because it would improperly limit the doctrine of fair use. Thus, the majority decided that Google’s purpose was to use declaring code created for use in desktop and laptop computers and apply it to smartphones. Although the majority stopped short of ruling that all such re-implementation of declaring code will weigh in favor of fair use under this factor, it observed that the record demonstrates that re-implementing declaring code in this manner “can further the development of computer programs.” In advancing this view, the majority cited the contributions of amici supporting Google, referencing briefs submitted by Copyright Scholars, Microsoft, Computer Scientists, R Street Institute, and American Antitrust Institute. The amici convinced the majority that Google’s use was transformative under this factor. The majority also considered the commerciality and good faith of Google’s use, finding that Google’s commercial use was not dispositive in light of its “inherently transformative” use, and expressed skepticism regarding the role Google’s alleged bad faith should play in the analysis, choosing to give it no weight. The majority found this factor weighed in Google’s favor. Factor 3: “The Amount and Substantiality of the Portion Used.” Google copied the declaring code for 37 packages of the Sun Java API, totaling approximately 11,500 lines of code. If considered in isolation, the majority acknowledged that would be a lot of copying. But the majority declined to consider it in isolation, and instead took into account the several million lines that Google did not copy in ruling that this factor weighed in Google’s favor. Factor 4: “Market Effects.” Here, the majority declined to consider the market effects of Google’s copying by looking at the revenue Oracle lost as a result. Instead, the majority stressed Oracle’s poor position for success in the smartphone market, and weighed it against Oracle’s claim that Google’s copying harmed it. The majority also took into account whether Google’s copying produced “public benefits” related to the Copyright Act’s concern for the “creative production of new expression.” Significantly, the majority noted that a weighing of public benefit may not always be relevant, “not even in the world of computer programs.” But it nonetheless decided to weigh them here in determining the likely market effects of Google’s re-implementation. Somewhat confusingly, in ruling against Oracle on this factor the majority reasoned that the success of a computer program may initially be attributable to its expressive qualities, but that over time it can instead become valuable “because users, including programmers, are just used to it.” Oracle had previously warned that a ruling in Google’s favor would effectively punish it for Java’s success. And although that may be a reductive summary of the decision overall, the majority’s reasoning here raises questions as to when the success of a copyrighted work shifts from its expressive qualities to the inertia arising from wide adoption, and why that should reduce its protection under the Copyright Act. Those wondering will find little comfort in the majority’s conclusion that “given programmers’ investment in learning the Sun Java API, to allow enforcement of Oracle’s copyright here would risk harm to the public.” The Dissent The dissent wasted no time before taking the majority to task for its failure to address the first question before the Court, i.e., whether declaring code is copyrightable. Noting that the majority “purports to assume, without deciding, that the code is protected,” the dissent concluded that the majority’s fair use analysis is “wholly inconsistent with the substantial protection Congress gave to computer code.” The implication here is that the majority sidestepped the first question because, had it fleshed out its position, the reasoning would have made its fair use analysis untenable. Per the dissent, “the majority purports to save for another day the question whether declaring code is copyrightable” because it “cannot square its fundamentally flawed fair-use analysis with a finding that declaring code is copyrightable.” As to the nature of the work, the dissent rejected the majority’s attempt to distinguish implementing code from declaring code, noting that each observation made by the majority about implementing code is equally true of declaring code. The dissent added that “it makes no difference” that the value of declaring code depends on how much time third parties invest in learning it because “[m]any other copyrighted works depend on the same.” The dissent illustrates this point by analogy, explaining that although a Broadway musical script needs actors and singers to invest time learning and rehearsing it “a theater cannot copy a script—the rights to which are held by a smaller theater—simply because it wants to entice actors to switch theaters and because copying the script is more efficient than requiring the actors to learn a new one.” The dissent also took a sharply different view of the market effects of Google’s copying, noting that whether or not Oracle could have built a smartphone on its own is only “half the picture” because Oracle could have licensed its software for use in Android. According to the dissent, Google’s copying destroyed that market for Oracle: “By copying Oracle’s work, Google decimated Oracle’s market and created a mobile operating system now in over 2.5 billion actively used devices, earning tens of billions of dollars every year. If these effects on Oracle’s potential market favor Google, something is very wrong with our fair use analysis.” On the nature of Google’s use, the dissent accused the majority of conflating transformative use with derivative use, stressing that by the majority’s logic a movie studio’s unlicensed creation of a film based on a book would be transformative. Finally, the dissent would find Google’s use substantial because it could serve as a “market substitute” for the original. At bottom, the dissent rejects the majority’s view that there is a sufficient difference between implementing code and declaring code to render the former more protectable than the latter. The result of the Court’s ruling, per the dissent, is that it is now “difficult to imagine any circumstance in which declaring code will remain protected by copyright.” Standard of Review Many observers were surprised when, in 2018, the Federal Circuit reversed the jury’s 2016 finding of fair use, and Google argued that the appellate court applied the wrong standard of review by failing to give appropriate deference to the jury’s findings of fact. Google went so far as to argue that the Federal Circuit violated the Seventh Amendment’s right to a trial by jury, which raised eyebrows when it spurred a request for supplemental briefing from the Court. But on these procedural questions, both the majority and dissent agreed with Oracle that the Federal Circuit applied the correct standard when it treated fair use as a mixed question fact of law. The Court held that appellate courts should defer to the jury on findings of underlying fact, and then consider de novo whether those facts support fair use. Although it made no difference to the outcome here, the Court’s ruling on these questions injects more uncertainty into future litigation by making appeals from a jury’s findings on fair use more viable than they would be had the Court sided with Google on this issue. Where Do We Go From Here? It is tempting to view the Court’s ruling as a clear win for software developers who want to re-implement portions of proprietary computer programs without a license—i.e., much of the software industry. But the holding may prove narrower and more uncertain than it appears. That’s because any fair use analysis necessarily mixes questions of fact and law, and is often—by design—uncertain. Indeed, the majority in Google v. Oracle stressed the doctrine’s “flexible” approach to the “sometimes conflicting” aims of copyright law, and that “its application may well vary depending upon context.” With the above in mind, consider the meandering path Google’s fair use defense took in this case. During the first trial in 2012, the jury deadlocked on fair use. In 2016, after a second trial on fair use, the jury found for Google. Then, in a rare move, the Federal Circuit reversed the jury’s finding and ruled that only one of four factors favored Google, with two of the four strongly or heavily favoring Oracle. Now, in 2021, the Supreme Court has ruled that the 2016 jury got it right, not only reversing the Federal Circuit but holding that every single fair use factor favored Google. The dissent, examining the same facts, found only one factor favored Google. In addition, as illustrated in the chart below, the many amici who weighed in were split across factors. 39 amici addressed at least one fair use factor, but very few of the 39 addressed each of the four factors. The first factor was the most addressed factor, with 31 amici offering arguments relating to the purpose of the use, followed by the fourth factor with 26 amici addressing market effects. Although more amici argued in favor of Oracle for each of the fair use factors, the amici who argued for Google generally provided a deeper analysis of the issues relevant to fair use. This is because most Oracle-supporting amici who addressed fair use also addressed copyrightability, whereas many Google-supporting amici who addressed fair use devoted their entire briefs to fair use. Google-supporting amici also tended to focus on fewer factors, often just one or two factors, whereas Oracle-supporting amici tended to address three, if not all four, of the fair use factors. And the majority was clearly persuaded by Google-supporting amici, as it cited several of their briefs in its opinion. Now imagine you’re a software developer who must decide whether Google v. Oracle clears the way for you to use another company’s proprietary code. How do you determine whether the code at issue is more like implementing code, which the Court did not include in its ruling on fair use, or declaring code? And assuming you can determine that the code is like the declaring code here, do you look at the result—the Court ultimately found fair use, and resoundingly so—and find comfort to proceed without a license? Or does the expensive and uncertain path of a fair use defense make you hesitant to take on that risk? After all, like Google, you may prevail, but the victory may cost more in legal fees than a license would have. Or, you might lose outright because the highly factual analysis cuts against you. For example, a court might find that your use of the code did not result in a sufficiently successful product to warrant a finding of fair use under Google v. Oracle, or that the code’s owner is better placed to compete in your market than Oracle was to compete in the smartphone market, and rule against you on that basis. Moreover, it should not be lost on anyone that Google spent many millions in legal fees, and the collective investment by the amici who filed briefs in support of Google was also significant. Query whether the same result would have been possible for a litigant without such resources to spare. At best, in situations where the code in question is closely analogous to the declaring code at issue in Google v. Oracle, the Court’s ruling may support an efficient resolution finding fair use. But the line between implementing code and declaring code in Java—not to mention its analogues in other programming languages—may prove difficult to draw. And in those situations, Google v. Oracle is unlikely to provide the sort of certainty that can lead to efficient resolutions of copyright disputes. Conclusion The Court ruled that, under the doctrine of fair use, Google was free to use 11,500 lines of code from 37 Java API libraries owned by Oracle when Google programmed its Android platform. For Google, this means it will not be liable for potentially billions of dollars in damages. What it means for everyone else remains to be seen, and in light of the fact-intensive and context-specific premises behind the Court's ruling Google v. Oracle may prove narrower than it first appears.

In the 1970s, William DuBay created the comic book character, Restin Dane, also known by his superhero alter ego, “The Rook.” Dane, a wealthy scientist and inventor residing in an Arizona house shaped like a rook chess piece, is a time traveler who “will go anywhere—any time—in search of adventure!” Similar to other famous superheroes, Dane is a “traditional comic book hero”—a handsome, masculine, and honorable man who battles villains for the greater good. The Rook first appeared in a horror and fantasy comic magazine called The Eerie in 1977, but by 1983, the character had an entire comic book series dedicated to his saga that sold more than five million copies. In a 2017 lawsuit, The Rook’s arch nemesis derives from Stephen King’s “magnum opus”: The Dark Tower series. The series is comprised of eight novels and a novella, published between 1982 and 2012, the first novel of which is The Gunslinger, which introduces The Dark Tower’s protagonist, Roland Deschain. Throughout the series, Deschain searches for an elusive structure that holds the secrets to the space-time continuum, the Dark Tower. Unlike the traditional superhero architype, Deschain is a brooding loner who places his own mission and self-interest above the lives of others. Between 2007 and 2017, Marvel Comics licensed the publication rights to graphic novels based on The Dark Tower novels, and Deschain’s battle with external and internal demons jumped from the page to the big screen in a 2017 motion picture adaptation. In March of 2017, Benjamin DuBay—William DuBay’s nephew and the assignee of William’s copyright in The Rook following William’s death in 2010—filed suit against King for copyright infringement, alleging the similarities between the superheroes were “shocking and extraordinary.” Such strong similarities could only be the result of King copying The Rook’s artistic expression, claimed DuBay’s nephew. King moved for summary judgment on DuBay’s copyright infringement claim, and ultimately, the U.S. District Court for the Middle District of Florida granted King’s motion for summary judgment, holding that the characters were not substantially similar. On appeal, the 11th Circuit Court of Appeals considered the “substantial similarity” standard, which plaintiffs must prove as part of their copyright infringement claim. Recognizing that substantial similarity exists “when an average lay observer would recognize the alleged copy as having been appropriated from the copyrighted work,” the Court of Appeals pitted The Rook against Deschain in a side-by-side battle of the similarities. Most of the perceived similarities—time-traveling capabilities, knightly heritages, and knife-wielding superhero bravado—were characterized as scènes à faire, a French term used to describe elements of a book or film that are obligatory for a book or film in that genre. These elements, like shootout scenes between cowboys and bank robbers in the American West, are not worthy of protection because they are “too general to merit copyright protection.” The appellate court then looked to more specific and unique elements of the superheroes’ stories for infringement-worthy similarities. However, while some components of The Rook and Deschain’s stories parallel each other—both characters have a bird companion, they each save of young boy from an alternate time, and each has an all-encompassing relationship with a mysterious, time-bending tower—the overall elements are portrayed in distinct ways, casting the subject heroes in different moral lights. As a whole, The Rook is a traditional comic book hero—a courageous, time-traveling gunslinger and honorable man trying to make the world a safer place by “doing the right thing.” Conversely, Deschain is “far more complex”—while equally skilled with a gun, he lacks the idealism and moral integrity common to most superheroes, and is consumed by his own self-interest. Any similarities, the Court of Appeals held, are “superficial,” and the grant of summary judgment in favor of King was affirmed. While the battle between The Rook and Deschain may be over for now, the 11th Circuit decision provides a roadmap for future heroes looking to avoid a copyright fight—superficial similarities are common amongst all superheroes, but it’s the details, nuances of characters, differences in narrative arc, and how all of these elements are combined in a holistic work, that could be a hero’s legal kryptonite or its greatest victory.

An important decision by the Second Circuit in The Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith, Case No. 19-2420-cv (2d Cir. Mar. 26, 2021), has, in important respects, upended how the defense of fair use is applied in copyright cases, with potentially major ramifications that transcend the “appropriation art” with which Warhol is concerned. Indeed, in many respects, the Warhol decision, in which a series of works created by the late artist Andy Warhol based on photographs of the late singer Prince were deemed not to be shielded by principles of fair use as a matter of law, is a repudiation in all but name of the same court’s decision in Cariou v. Prince, 714 F.3d 694 (2d Cir. 2013), in which most of a series of appropriation artworks created by the artist Richard Prince were deemed permissible fair uses of copyrighted, preexisting photographs taken by another artist. The facts of Warhol are not complicated, and The TMCA first covered the case here. In 1981, the photographer Lynn Goldsmith took the photo below of the iconic singer Prince as part of an assignment for Newsweek, back when news magazines were a thing. The record indicates that this particular photograph was never published. In 1984, Goldsmith licensed her photo to Vanity Fair magazine for use as an “artist reference,” i.e., as a basis for a new work an unnamed artist would create that Vanity Fair would publish. Warhol turned out to be the artist, and his new work was published later that year, as shown below. However, unbeknownst to Goldsmith, Warhol took Goldsmith’s photo and also used it to create a series of fourteen additional works, dubbed the “Prince Series,” some of which appear below. Following Warhol’s death, the works that embody the Prince Series were either sold to third parties or sent to the Warhol Museum in Pittsburgh for display, and the Warhol Foundation regularly licensed them for commercial use. In 2018, following Prince’s death, Goldsmith allegedly learned for the first time of the existence of the Prince Series and the Warhol Foundation’s licensing of the Prince Series without any credit to her underlying work, or payment for its use. After Goldsmith sent a letter asserting claims of copyright infringement, the Warhol Foundation filed an action in the Southern District of New York seeking a declaration of non-infringement based on fair use. Goldsmith counterclaimed for infringement. The district court granted summary judgment to the Foundation on its fair use defense, holding that all four factors set forth in 17 U.S.C. § 107 bearing on the issue of fair use favored the Foundation, in that the Prince Series was: (1) “transformative” because, while Goldsmith’s photo portrayed Prince as “not a comfortable person” and a “vulnerable human being,” the Prince Series portrayed Prince as an “iconic, larger-than-life figure”; (2) although Goldsmith’s photo was both creative and unpublished, which would traditionally weigh in Goldsmith’s favor, this was “of limited importance because the Prince Series works are transformative works”; (3) in creating the Prince Series, Warhol removed nearly all of the Goldsmith photo’s protectible elements; and (4) the Prince Series was not a market substitute that harmed or had the potential to harm Goldsmith. On appeal, the Second Circuit rejected all of these conclusions, held that the Prince Series was neither transformative nor a fair use as a matter of law, and also concluded that the Goldsmith photo and Prince Series were substantially similar as a matter of law. As a result, if the Second Circuit’s decision stands, it is hard to see how the Warhol Foundation has any remaining defenses left to Goldsmith’s claim of infringement. The core of the appellate decision is its conclusion that the Prince Series is not transformative. According to the court in Warhol, where a secondary work like the Prince Series “does not obviously comment on or relate back to the original or use the original for a purpose other than that for which it was created,” the bare assertion of a “higher or different artistic use,” is insufficient to render a work transformative. Instead, in order to be transformative, “the secondary work itself must reasonably be perceived as embodying an entirely distinct artistic purpose, one that conveys a ‘new meaning or message’ entirely separate from its source material.” Elaborating, the court held that “the secondary work’s transformative purpose and character must, at a bare minimum, comprise something more than the imposition of another artist’s style on the primary work such that the secondary work remains both recognizably deriving from, and retaining the essential elements of, its source material.” The Prince Series flunked this test. While acknowledging that the Prince Series embodied “the distinct aesthetic sensibility that many would immediately associate with Warhol’s signature style – the elements of which are absent from the Goldsmith photo,” the court concluded that the Prince Series retained the essential elements of the Goldsmith photo without significantly adding to or altering the elements that made Goldsmith’s work distinctive. “Warhol’s modifications serve chiefly to magnify some elements of [Goldsmith’s photo] and minimize others. While the cumulative effect of those alterations may change the Goldsmith Photograph in ways that give a different impression of its subject, the Goldsmith Photograph remains the recognizable foundation upon which the Prince Series is built.” And it is “entirely irrelevant,” according to the Second Circuit, that most people looking at the Prince Series would identify it as a work of Warhol. “Entertaining that logic would inevitably create a celebrity-plagiarist privilege; the more established the artist and the more distinct that artist’s style, the greater leeway that artist would have to pilfer the creative labors of others. But the law draws no such distinctions.” The Second Circuit’s conclusions in Warhol on the issue of whether the Prince Series is transformative stand in stark contrast to that court’s prior holding in Cariou, in which the work shown below on the left, from the artist Richard Prince, was deemed transformative of the photo on the right. Why Richard Prince’s addition in his work of a guitar and three blobs obscuring the face of the original photo’s subject was deemed to be transformative as a matter of law, but Warhol’s addition of colors, the removal of depth and contrast, and other changes made to Goldsmith’s photo were not transformative as a matter of law, is an issue the Warhol decision did not address specifically. But while it took pains in Warhol to state that “we remain bound by Cariou, and have no occasion or desire to question its correctness on its own facts,” the Second Circuit made clear in Warhol that the Cariou approach to whether a secondary work qualifies as transformative no longer applies. One other notable aspect of the Warhol decision is its treatment of the fourth fair use factor – the effect of the allegedly infringing use on the market for the original. While concluding that the primary markets for the original Prince Series and original Goldsmith photo (museums, art buyers) were different, the court found that the secondary licensing market for both works was the same, in that both parties’ works were of interest to magazines and other publications supplying content regarding Prince. This last fair use factor was characterized as “undoubtedly the single most important element of fair use” by the Supreme Court in Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 566 (1985), and the court’s conclusions on this factor in Warhol amplified its overall conclusion that the Prince Series was not shielded by principles of fair use. Indeed, the concurring opinion of Judge Sullivan in Warhol advocates a different approach to fair use, one that reduces the importance of whether a secondary work is transformative, in favor of an approach where the factor concerned with market effects is given greater attention. According to Judge Sullivan, such an approach would better serve the purposes of copyright and avoid the tendency of courts to collapse all four fair use factors into one inquiry: whether a secondary work is transformative. So what’s next? Well, given Warhol’s prolific use of photographs of celebrities such as Marilyn Monroe, Elizabeth Taylor, Michael Jackson and John Lennon as source material for secondary works that are, qualitatively, very similar to the Prince Series, it may see future copyright claims from the photographers who created those images. And for other litigants in the Second Circuit who seek to mount a fair use defense on the ground that their allegedly infringing works are transformative, and thereby shielded by principles of fair use, their burden on that issue is now materially higher.

Consumer surveys. Love ’em or hate ’em, they are an evidentiary staple in many Lanham Act disputes. A well designed and executed survey can bolster your case, or can act as a powerful antidote to counteract your opponent’s. Survey evidence is not, legally speaking, strictly necessary. That said, courts routinely—indeed, almost reflexively—treat the absence of a survey as outcome determinative, especially in cases where a party claims an ambiguous advertisement “deceives” consumers. Sometimes litigants want to avoid the time and expense of conducting a consumer survey and instead opt to have an expert fill in that evidentiary hole with an opinion on how he or she “believes” consumers would perceive an advertisement. That is often a bitter pill. A case in point: In re C2r Global Mfg. issued by the United States Bankruptcy Court for the Eastern District of Wisconsin. There, a competitor pursued a Lanham Act claim against a debtor for falsely advertising the effectiveness of its pharmaceutical drug disposal product. According to the Plaintiff, consumers were deceived by the ads in question and, as a result, purchased the debtor’s product instead of Plaintiff’s product. There is a well-developed playbook for proving up these types of garden variety false advertising claims. The proof often includes marketplace research gathered through a consumer survey.  But here, instead of proffering survey evidence to establish how consumers perceived the debtor’s “drug destroyer” ads, the Plaintiff designated an expert to provide his personal opinion on the effect the ads would have on consumers. He opined that, “because consumers read [debtor’s] capacity advertisements to indicate that RX Destroyer products deactivate medication at a lower price-per-pill than the [plaintiff’s] system, consumers choose to purchase [debtor’s products] rather than [plaintiff’s product].” The court correctly excluded this and similar opinions. The problem with this sort of opinion testimony is at least two-fold. First, this expert attempted to opine on how consumers perceived or interpreted the ads in question. That sort of opinion is not within the province of an expert unless he or she has survey data to support it, and Plaintiff had none. Second, the expert purported to opine on how consumers would react after viewing the ad in that they would be more inclined to purchase the debtor’s product than Plaintiff’s. This sort of opinion is something that should be supported by gathering data from actual consumers and testing whether the ads at issue would be “material” to the consumers’ purchasing decisions. This case tells a cautionary tale about the perils of proxy evidence. If you are trying to establish how consumers perceive an advertisement or how they will react to it, counsel and their experts should resist the urge to “go it alone.” Consider designing and implementing a consumer survey to help bridge the evidentiary gap. Otherwise, going rogue when it comes to survey evidence can have costly implications.