The grandkids didn’t play nice when it came to a famous restaurant trademark. The nationally famous Palm steakhouse was founded in New York City in 1926 by John Ganzi and Pio Bozzi. The Palm enhances their patrons’ steak eating experience by decorating the walls with caricatures of famous people contributed by cartoonists who often exchanged their cartoons for meals. Eventually, the grandchildren took over management. One set of grandchildren became the majority shareholders and the other set of grandchildren were relegated to the ignominious status of minority shareholders. In 2012, the minority filed suit against the majority for breach of fiduciary duty based upon gross mismanagement and self-dealing with restaurants that were owned and operated solely by the majority. The chief issue was the sweetheart trademark license deal the majority’s restaurants were getting. Even though Palm was a national brand with almost 100 years of fame, the majority’s restaurants only paid a flat license fee of $6,000 a year for decades. The court agreed with the minority and entered judgment in their favor. In assessing the damages, the court accepted the minority’s expert damage witnesses’ conclusions that the majority’s restaurants should have paid a reasonable royalty of 5% of gross sales. The court concluded that the undervalued license agreements were self-dealing by the majority and an example of textbook fiduciary misconduct. Even though the statute of limitations limited the damages to six years of royalties, the royalty damages were over $68 million. Additional damages for other breaches of fiduciary duty were also awarded, along with interest and attorney fees, which increase the total judgment to over $120 million.
WHY YOU SHOULD KNOW THIS. From a corporate governance standpoint, majority shareholders don’t get a free pass to do whatever they like. They have a fiduciary responsibility to act in the best interests of the company. When any one of the majority shareholders breaches that duty, minority shareholders can fight back. Trademark-wise, it’s not unusual for a company to have an Intellectual Property holding company that licenses the trademark to related companies. But the license fee should be at or near market rate. Otherwise, as the majority shareholders in the Palm learned, they’re going to end up paying that and more in the end.
Welcome to the Third Annual IP Hall of Fame. In past years, we have awarded Crippys to those who achieved infamy by committing Intellectual Property crimes during the previous year. This year we add the Hippy for an IP hero whose good deeds are an antidote for those with nefarious intent. Click here to see the winners.
The Inaugural Hippy Goes to The United States Navy:The US Navy announced that for the first time, it is transferring royalties collected from the use of the Navy’s logos to the Navy’s Morale, Welfare and Recreation program. The program is devoted to enhancing the quality of life for sailors and their families. The revenues are estimated at $3 million. The US Navy joins other branches of the military that support their military welfare programs using royalties collected from their branded products.
The 2018 Crippy is a Three-Way Tie. In 2018, trade secret theft reached new heights. Each of these trade secret thieves used different methods but deserve equal infamy. In no particular order, our Crippy winners are:
Jerry Jindong Xu. Jerry worked for DuPont and then its spin off company Chemours. Jerry plead guilty to stealing trade secrets related to Chemours’ sodium cyanide business and selling them to Chinese investors. He was sentenced to one year in prison with credit for time served.
Sinovel Wind Group Co. Ltd. A jury convicted Sinovel for various crimes related to the theft of trade secrets related to wind turbine production. Sinovel had partnered with AMSC, a company that developed software to control turbines. Taking advantage of this business relationship, Sinovel secretly downloaded AMSC’s source code and used it to run their turbine engines. AMSC lost over $1 billion in shareholder equity and about 700 jobs due to the theft. Sinovel has to pay restitution of more than $57 million, the maximum statutory fine in the amount of $1.5 million, and $850,000 to other victims of the trade secret theft.
Tao Li and Ye Xue. Tao and Ye plead guilty to conspiracy to steal trade secrets. These two scientists stole documents from GlaxoSmithKline PLC, their former employer. The documents related to the research and development of drugs. Ye emailed the documents from her GSK email to her personal email account and then forwarded it to Tao for the benefit of his Chinese company. The prosecuting U.S. Attorney, William McSwain, said in a press release: "The lifeblood of companies like GSK is its intellectual property, and when that property is stolen and transferred to a foreign country, it threatens thousands of jobs here in America. Not only is this a serious crime, but it is literally a form of economic warfare against American interests.” No word on sentencing yet but Tao and Ye face up to 10 years in prison, a $250,000 fine plus having to pay restitution that could add up to $2 billion.
I’m Dreaming of a White ...
Wait, can I sing that without paying a royalty? These days, we start hearing Christmas songs right after Halloween. Some holiday songs are in the public domain; while others are still protected by copyright. If the song is protected by copyright, it earns a royalty. How can you tell which songs are “free” and which are not? Copyright Law protects works of authorship for a limited number of years namely life in being of the author plus 70 years. After that, the works fall into the public domain. Still can’t tell? You better not shout, you better not cry, IP News for Business will give you a non-exhaustive guide:
In the public domain: Come all Ye Faithful; Deck the Halls; Hark, the Herald Angles Sing; Jingle Bells; Joy to the World; O Little Town of Bethlehem; Silent Night; The First Noel; The Twelve Days of Christmas; Toyland; We Wish You a Merry Christmas.
Not in the public domain: A Holly Jolly Christmas; Frosty the Snowman; Have Yourself a Merry Little Christmas; I’ll Be Home for Christmas; Jingle Bell Rock; Let it Snow, Let it Snow, Let it Snow; Little Drummer Boy; Rudolph the Red Nosed Reindeer; Santa Clause is Coming to Town; Silver Bells; Sleigh Ride; Winter Wonderland; White Christmas.
WHY YOU SHOULD KNOW THIS. Have a joyful and music filled holiday season.
Sometimes the long road of Intellectual Property infringement ends up in Bankruptcy Court. Then the normal rules can change. Tech Pharmacy Services, who owned patents for pharmaceutical dispensing machines sued Provider Meds LLC and its affiliated companies for patent infringement. The parties ended up settling. As part of the settlement, Tech Pharmacy licensed the patents to Provider Meds. The Provider Meds' companies filed Chapter 11 bankruptcy reorganization cases. The cases were later converted to Chapter 7 liquidation cases and a Chapter 7 trustee was appointed. But, Provider Meds somehow managed to not list the patent license on their bankruptcy schedules. The Chapter 7 trustee had 60 days from the date of conversion of the cases to assume the licenses. Since the trustee didn’t know about the licenses, the trustee didn’t assume them. Since they weren’t assumed, they were deemed rejected by operation of law. Rejection means that Tech Pharmacy would no longer have to honor the license agreements. The Chapter 7 trustee sold Provider Meds’ assets to RPD Holdings. Imagine RPD’s surprise when it realized the sale didn’t include assignment of the Tech Pharmacy patent licenses. RPD appealed. The Fifth Circuit Court of Appeals affirmed the lower court rulings that the rejected licenses couldn’t be resurrected.
WHY YOU SHOULD KNOW THIS. Here lies a cautionary tale. Whenever a transaction involves a party who is a debtor in bankruptcy, land mines abound. This case went wrong in a number of ways. First of all, the bankruptcy petitions omitted material information about their patent licenses. Second, the Chapter 7 trustee was kept in the dark and ended up involuntarily rejecting valuable patent licenses. Third, RPD erroneously assumed it was getting the licenses along with the other assets thereby violating the 11th Commandment, “Thou Shalt Not Assume.”
Updating a trademark can be risky if someone else gets in ahead of you. Inn at St. Johns, LLC registered its name “5ive Restaurant” in logo form. So far so good. Eleven years later, St. Johns decided to update its trademark to 5ive Steakhouse in logo form. But St. Johns got derailed. Three years after St. Johns registered its first trademark, OTG Management Inc. registered 5Steak. (All 3 mark drawings appear to the left). The United States Patent and Trademark Office (“USPTO”) refused registration of St. Johns’ 5ive Steakhouse due to a likelihood of confusion with the OTG’s 5Steak registration. The Trademark Trial and Appeal Board affirmed the refusal.
WHY YOU SHOULD KNOW THIS. What, if anything, could St. Johns have done to avoid this outcome? First, St. Johns could have monitored the USPTO to see if any applications were being filed to register similar trademarks and then oppose the registrations. There are services that will monitor the records for you. Some can be costly; others not so much. Second, St. Johns could have set up an alert on a search engine to let it know if anyone is using a similar mark on a common law basis. This could have given St. Johns a heads up about 5Steak in time to do something about it. Third, before applying to register the updated trademark, St. Johns could have conducted due diligence, discovered 5Steak and perhaps, worked something out with them.
A trade secret isn’t really a secret without proper measures of protection. Kevin Barker, a vice president of Yellowfin Yachts, left the company to start a competing company, Barker Boatworks. Yellowfin sued Kevin and his new company for trade dress infringement and for trade secret misappropriation. Yellowfin alleged that Kevin downloaded hundreds of files with customer specifications, and drawings. The Eleventh Circuit Court of Appeals affirmed summary judgment in Kevin and Barker’s favor. First, the court disposed of Yellowfin’s trade dress claims because it couldn’t prove any customer confusion between its designs and Barker’s designs. In addressing the trade secret misappropriation claim, the court affirmed the lower court’s ruling that the customer information wasn’t a trade secret because boat owners have to register with the State of Florida. Then the court focused on Yellowfin’s measures of secrecy and found them wanting. While the information was password protected and only certain employees had access, the Eleventh Circuit concluded that “Yellowfin effectively abandoned all oversight in the security” of the information at issue because Yellowfin: (1) encouraged Kevin to store the information on his personal devices and didn’t ask him to delete the information when he left the company; (2) didn’t ask Kevin to use security measures for the information on his personal devices; (3) allowed Kevin access to the information even though he refused to sign a confidentiality agreement; and (4) none of the information was marked ‘confidential’.
WHY YOU SHOULD KNOW THIS. Trade secrets have two primary attributes. First, they are not generally known or easily ascertainable. Second, they are subject of reasonable measures to keep the information from becoming publically available. It’s the second attribute that tanked Yellowfin’s trade secret misappropriation claims. Yellowfin has learned that reasonable measures of secrecy require procedures that are tailored to the function of the business and require vigilant enforcement. The best way to avoid Yellowfin’s mistakes is to have a written trade secret protection program tailored to your business, prohibit the storage of trade secrets on personal devices, and make sure that departing personnel are cutoff from access to the trade secrets.
Trade show materials may be a patent buster. Trade shows are a way to showcase products and innovations in an industry. Materials distributed at a trade show are usually promotional and are designed to get more sales and establish a beacon in the marketplace. But, trade materials that identify inventions could bust a patent. The US Patent Trial and Appeal Board (the “Board”), in an inter parties review (“IPR”) between Nobel Biocare Services AG v. Instradent USA, Inc., held that certain claims in Nobel’s patent for a dental implant screw were not patentable because they were anticipated. “Anticipated” is similar to “prior art” which means that the claimed invention isn’t new. Instradent, the IPR petitioner, argued that Nobel’s invention for a dental implant screw had already been disclosed in a product catalogue from Alpha-Bio Tech Ltd. (“ABT”). Instradent proved that ABT disclosed the product in a catalogue it distributed at a 2003 dental trade show in Cologne, Germany. ABT had a rather small booth at the show and not much of a presence. But people at the trade show had seen the catalogue. So it was considered publication of the prior art. On appeal, the Federal Circuit affirmed the Board’s determination that the ABT catalogue was prior art and so some of Nobel’s claims in the patent were not patentable.
WHY YOU SHOULD KNOW THIS. Patent protection is limited to inventions that are new, useful and non-obvious. Patents give the patent owner a monopoly on practicing the invention for 20 years. So, the U.S. Patent Office has to determine if claims are really new in order to issue a patent. The Instradent case shows that an invention is not new if there’s publication of prior art; even small publications with a limited distribution at a trade show outside the U.S. are published prior art so inventors should always conduct a prior art search before going through the time and expense of filing a patent application. And, for that matter, inventors should always be careful about disclosing their inventions at a trade show before they file the application.
Captain America, Thor and Iron Man can’t save your party guests without a license. Characters for Hire, LLC (“CFH”) advertises premium entertainment for parties and private events by booking actors dressed like popular characters. CFH offers hero characters and famous characters from popular scifi/fantasy movies. Understanding that Disney, Marvel and LucasFilm own the rights to characters that fall into those categories, CFH used generic names like "Big Green Guy" (Hulk) and “The Dark Lord” (Darth Vader). Similarly, CFH advertised themed parties that referenced Plaintiffs’ movies, such as “Frozen Themed” (Frozen), “Avenging Team” (The Avengers), and “Star Battles” (Star Wars). But CFH used the original images of the characters in its ads (see picture). After CFH ignored several cease and desist letters, Disney, Marvel and LucasFilm sued. The court entered summary judgment against the plaintiffs on trademark infringement. The court appeared to put a lot of weight on the fact that the plaintiffs couldn’t show actual confusion and there was enough notice that CFH was not affiliated with the plaintiffs. But the court will proceed on the other counts of unfair competition, dilution and copyright infringement. So CFH can’t breathe a sigh of relief yet.
WHY YOU SHOULD KNOW THIS. A themed party is a popular way to entertain at a child’s birthday party, a corporate event or even a brand awareness meeting. Character themed apparel is even more common. The problem arises when one wants to use protected characters and doesn’t have the permission to do so. CFH’s experience on the trademark infringement count is not typical. Whenever contemplating the use of protected characters for any reason, be sure to get the right permissions. And, always respond to a cease and desist letter.
Even Halloween can’t escape copyright.
Frankenstein: This year is the 200th anniversary of the first edition of Mary Shelley’s Frankenstein which means it’s in the public domain. Here are some other non-copyright fun facts. Mary Shelly’s mother, Mary Wollstonecraft, was a writer, philosopher and is credited as being the first feminist. Mary Shelley was just 17 years old when she wrote Frankenstein. The name “Frankenstein” refers to the creator of the monster and not the monster itself. In the original story, the monster is 8 ft. tall, had beautiful black hair, white teeth, yellow skin and, apparently, was really buff (see picture).
Movie Characters: Your favorite horror characters, Freddy, Jason, Pinhead, etc. have been copyrighted by their various studios.
Halloween Costumes: Most costumes are considered “clothes” and are not subject to copyright. However, a costume that has a creative element unrelated to its function as clothing is copyrightable. See IP News for Business Blawg post Spooky Halloween Banana, http://gct.law/blog/113.
Halloween Masks: Masks are copyrightable because they aren’t considered useful articles.
Shameless Plug: I highly recommend Remy Bumppo Theater’s production of Frankenstein. It’s Jeff Recommended and has gotten rave reviews. Now playing until November 17, 2018. Visit https://www.remybumppo.org/ for more info.
WHY YOU SHOULD KNOW THIS. Happy Halloween.
A weak trademark is hard to enforce. IAC Search U Media Inc. owns the “Ask” trademark for a search engine. IAC brought a petition to cancel the trademark “ASKBOT” for question and answer software. IAC argued that it had priority of the use of the word “ask” with respect to search engines and that ASKBOT is likely to cause confusion with its “Ask” trademark. In the proceeding before the Trademark Trial and Appeal Board, ASKBOT produced ninety-seven news articles from the Lexis/Nexis database for the term “askcom”, third-party registrations of marks using the word “ask”, and excerpts from an unrelated opposition in which IAC opposed registration of the mark ASKVILLE. The Board held that, yes, the two marks were similar, involved the same or similar services and they each were reaching for a similar customer base. But here’s where it went sideways for IAC. The Board held that one must 'ask' a question in order to get an answer. So, the Ask mark is merely suggestive of the services provided and is a weak mark entitled to the barest minimum of protection. Since customers have to pay for IAC’s service and ASKBOT is free, customers will be able to tell the difference between the two and there is little likelihood of confusion. The Board denied the petition to cancel.
WHY YOU SHOULD KNOW THIS. Choosing a trademark can be really tough. You want to choose something that is easily relatable to your product or service. And yet, in order for it to be protectable, your trademark has to be distinctive. In this case, IAC chose a trademark that really just described an attribute of its services. As ASKBOT demonstrated, a lot of other companies are using “ask” for similar services. So the Board didn’t want to give IAC a total ‘lock’ on the word.
Those pesky on-line terms and conditions strike again. James May listed his vacation rental property on HomeAway, an online marketplace for vacation rentals. Originally HomeAway only charged the owner and not the traveler. In 2016, HomeAway, which was acquired by Expedia, changed its policy to charge both the owner and the traveler. In 2016, James renewed the HomeAway subscription. Actually he renewed it in his wife’s name and not his own name. Then James brought a class action suit against HomeAway/Expedia for breach of contract, fraud, fraudulent concealment, and Oregon and Texas state law claims based on HomeAway’s imposition of a “traveler fee” and its negative effect on owners who used HomeAway to rent properties. The terms and conditions of the on-line agreement required arbitration for all disputes. So HomeAway/Expedia brought a motion to compel arbitration. James opposed the motion arguing that because he renewed in his wife’s name, he wasn’t bound by the arbitration clause in the terms and conditions. The magistrate judge hearing the case quickly disposed of this argument. First, the terms and conditions didn’t allow assignment of the agreement without HomeAway/Expedia’s permission. Second, the magistrate held that James had notice of the terms and conditions and so he was bound by them. The magistrate judge made a recommendation to the district court judge to enter an order granting the motion to compel arbitration.
WHY YOU SHOULD KNOW THIS. Online terms and conditions are enforceable as long as the party enforcing them can show consent by the other party. In this case, HomeAway/Expedia showed consent with two things. First, James renewed. Second, James booked a property through HomeAway/Expedia. James initiated the class action lawsuit with both hands tied behind his back. One hand was tied by his failed attempt to get around the terms and conditions. The other hand was tied by the enforceability of online terms and conditions.
Inventor identification gets lost in the haze of a patent application for a cannabis delivery system. Michael Pappalardo met Samantha Stevins at a pharmaceutical products trade show. Michael told Samantha about his concept for a new product related to liquid and solid cannabis delivery systems. They agreed to work on it together. Samantha, who is an attorney, suggested that they apply for a patent. When Michael found out that Samantha had named herself as the sole inventor on the patent, he brought suit to add his name as an inventor. The Federal Circuit affirmed the district court’s dismissal of Michael’s case. The court held that there is no cause of action to challenge inventorship until a patent issues. So Michael will have to wait until then to file suit.
WHY YOU SHOULD KNOW THIS. If everything Michael says is true and he is the inventor or at least one of the inventors, then Samantha may have problems beyond cutting Michael out of the deal. Inventors have a duty of candor when filing a patent application. The duty of candor includes disclosing all inventors and anyone else who was substantively involved in developing the invention. The failure to make a full disclosure can compromise the ability to enforce the patent. So Samantha may be putting the viability of the future patent at risk.
Don’t wait too long to protect your trademark. Since the 1990s, Cosmetic Warriors Ltd. sells “Lush” brand personal products like soap, lotions and makeup. For a brief period, Cosmetic Warriors sold a small number of t-shirts. But for the most part, Cosmetic Warriors does not sell clothing. Pinkette Clothing, Inc. started selling clothing using the brand name “Lush” in 2003. In 2009, Pinkette applied to register the trademark and it was registered in 2010. Cosmetic Warriors didn’t contest the registration. Almost 5 years after the registration of Pinkette’s trademark, Cosmetic Warriors sued Pinkette for trademark infringement. Cosmetic Warriors said that it didn’t know about the registration to explain why it waited so long to bring suit. Cosmetic Warriors won the battle but not the war. A jury sided with Cosmetic Warriors on the infringement issue. But then the jury sided with Pinkette on Pinkette’s argument that Cosmetic Warriors was barred by laches because it waited too long to bring suit. The jury’s verdict was upheld on appeal.
WHY YOU SHOULD KNOW THIS. There are 3 important points to unpack here. First, Trademark Law allows the registrant of a trademark to have the mark deemed uncontestable 5 years after registration. Once it’s declared uncontestable, the registration can only be challenged on the limited grounds of a fraud in the application or abandonment. That brings us to the second important point. The court in this case held that this five year benchmark is not a statute of limitations. So a registrant who is defending a challenge can claim the laches defense; even if the challenge comes before the 5 year benchmark. That’s important because the U.S. Supreme Court has held in patent and copyright cases, that the laches defense is not available before the statute of limitations runs. Third, registration of a trademark is notice of the use of the trademark. So, Cosmetic Warrior couldn’t rely on its argument that it didn’t know about Pinkette’s trademark until it brought suit almost 5 years after Pinkette’s registration.
Trade dress protects non-functional attributes of a product like color. Moldex-Metric uses a bright green color for its foam earplugs. McKeon Products also uses bright green for foam earplugs. Moldex-Metric sued McKeon for infringement of unregistered trade dress, namely, the color of the earplugs. The trial court granted summary judgment for McKeon holding that the bright green color couldn’t be protected as trade dress because it served the function of making them easier to see during an inspection. The Ninth Circuit Court of Appeals reversed. The court held that the trial court failed to consider whether other colors would be just as visible. So the case is remanded back to the trial court to allow a jury to decide if the green color was not functional because of available alternatives.
WHY YOU SHOULD KNOW THIS. A distinctive color can be registered as protectable trade dress. Some famous trade dress colors are the Tiffany Blue and the UPS Brown. In each of these cases, the color has nothing to do with the function of the product or service. It just creates a distinctive look. Separating functionality from the look of a product or service isn’t always easy. In the Moldex-Metric case, the Ninth Circuit Court of Appeals gives a helpful test to determine color functionality. The availability of alternative colors to serve the same function could mean that color choice is non-functional and therefore protectable.
Trademark fair use can win the race. SportFuel, Inc. sued PepsiCo, Inc. for trademark infringement. SportFuel alleged that PepsiCo’s slogan “Gatorade The Sports Fuel Company” infringed on its trademark. The attached image shows SportFuel’s use of its trademark on the left and PepsiCo’s use of its slogan on the right. The court granted summary judgment to PepsiCo on the basis of trademark fair use. The court cited factors that weighed in favor of fair use. First, the Gatorade house mark appeared more prominently than the tag line which lessens the possibility that the tag line would be seen as an indicator of source. Second, the judge found that the words “sports fuel” were merely descriptive.
WHY YOU SHOULD KNOW THIS. Descriptive marks have a hard time getting trademark protection. An unprotectable descriptive mark uses identifiers that others in the same industry will need to describe their products or services. Some descriptive marks can achieve trademark status when they are more suggestive than descriptive or they’ve been used long enough for the public to connect the descriptive mark with the goods or services. This case was a close call. The words “sports” and “fuel” do not appear together in any dictionary. Fuel is often used with vitamins and supplements but more often it’s used with either food consumption or energy sources for machinery. So the combination of the words may be more suggestive of vitamin supplements than merely descriptive. There’s no word on whether SportFuel intends to appeal the summary judgment.
Copyright infringement needs more than ‘sort of’ similarity. Experian Information Solutions, Inc. registered the copyright for a database containing consumer names and addresses. Experian’s employees made some selections in adding data, reconciling discrepancies, and discarding useless information. Experian licenses access to its database to companies for use in marketing campaigns. Nationwide Marketing Services Incorporated is Experian’s competitor. Nationwide is relatively new to the market and much smaller than Experian. Experian got an offer to purchase a Nationwide’s database of names of addresses. Experian tested Nationwide’s database against its own and came up with a 97% match rate. Experian brought suit for copyright infringement and trade secret misappropriation against Nationwide. The Ninth Circuit Court of Appeals affirmed the district court’s order for summary judgment in Nationwide’s favor on the copyright claim. The court held that the selection and arrangement process was sufficient to create minimal protection in Experian’s database. But, Experian did not prove infringement. Neither side could produce the databases as they appeared at the time of the alleged infringement. Experian could only show an 80% match rate between the current versions of the two databases. That wasn’t enough for copyright infringement. Experian’s trade secret misappropriation claim was remanded back to the district court.
WHY YOU SHOULD KNOW THIS. Facts are not copyrightable. However, the arrangement of facts or a compilation is copyrightable. A compilation of facts has only minimal copyright protection. That’s because no matter how you look at it, you can’t own the underlying facts. Copyright infringement occurs when the infringing work is substantially similar to the original work. Now we know that 80% similarity was not enough similarity for infringement. This case also points out that if you’re going to claim copyright infringement, be sure to preserve the copyrighted works as they appeared at the time of the alleged infringement. And be sure to tell your alleged infringer to preserve its version of the works.
Investing in tech companies with issues can be hazardous to your retirement funds. VirnetX, a publicly traded company, supposedly sells Internet connectivity and security software. By all reports, sales of its products don’t actually generate much revenue. Instead, VirnetX makes a lot of money suing other companies who allegedly infringe on its patents. Although it was successful in suits against Microsoft and Apple, VirnetX saw its heyday dwindle after the Supreme Court’s Alice Corp. v. CLS Bank International that invalidated a lot of software patents. For Dr. Poppell, an eye doctor in Florida, VirnetX’s woes proved to be the downfall in Dr. Poppell’s investment strategy. Despite warnings from financial managers, Dr. Poppell, who had no financial training or background, personally administrated the 401(k) plan for his employees. Using Internet research, Dr. Poppell invested over half of his employees’ 401(k) money in VirnetX. VirnetX stock fell precipitously. As a result, the plan participants lost about 53% of their 401(k) investments. When the good doctor’s employees complained about the large losses, he terminated the 401(k) plan. When they complained about that, he fired them. The plan participants sued Dr. Poppell and he settled for less than a third of the losses. Then the Department of Labor got involved and required Dr. Poppell to make the plan participants whole.
WHY YOU SHOULD KNOW THIS. Dr. Poppell is surely an example of what not to do when as the administrator of a 401(k) plan. But it all started with a high risk and heavy investment in a company that, by all reports, is a patent troll. A patent troll usually has no real inventions (or real inventions that don’t result in much revenue, are driven by lawyers rather than scientists, don’t develop, sell or license any real products, and assert weak patents to get settlements in cash or through licensing. These types of companies usually fly under the publically held stock radar. But for any publicly traded stock in the tech industry, be sure to check the company out thoroughly before making any type of investment.
Every photo doesn’t automatically have the veneer of copyrightability. Dr. Mitchell A. Pohl is a cosmetic dentist who is very proud of his work. He posted before and after pictures of one of his patients on his website. The photos showed the patient’s unfortunate ‘before’ smile (teeth, lips and small area around the mouth) and her ‘after’ beautiful healthy smile. Dr. Pohl registered the photos with the US Copyright Office. Then Dr. Pohl found seven websites that used his photos. He sued the alleged infringer, MH SubI, LLC d/b/a Offcite, for copyright infringement. While Dr. Pohl obviously does fantastic work, his photos didn’t bridge the gap into copyrightable subject matter. The District Court for the Northern District of Florida performed the judicial version of a root canal and granted Offcite’s motion for summary judgment. The court held that Dr. Phol’s self-serving affidavit was as convincing as “plaque on a molar” and no reasonable jury could find that the photos were creative enough for copyright protection. The court later performed another extraction by denying Dr. Pohl’s motion to reconsider.
WHY YOU SHOULD KNOW THIS. A work has to meet a minimum standard of creativity to be copyrighted. As the court noted in this case, “Meeting the standard for creativity is not like pulling teeth”. Dr. Pohl’s photos didn’t meet that minimum standard. The court noted that Dr. Pohl couldn’t identify any creative elements in the photos such as the type of camera used, decisions regarding the pose of the patient, lighting decisions, etc. Perhaps if Dr. Pohl could have described some creative decisions in taking the photos, the outcome would have been different.
A shout out to my friend, Matthew Scott Nelles, one of the fine attorneys at Berger Singerman LLP in Ft. Lauderdale, Florida, who represented Offcite in this case.
With smoldering eyes, the beautiful and brave romance writers defended their realm. Faleena Hopkins is a self-published romance author of steamy romances with titles like, “Cocky Soldier: A Military Romance” and “Cocky Roomie”. Faleena’s company, Hop Hop Productions, Inc., registered two trademarks for the word “cocky” in relation to a series of romance novels. Faleena sent out cease and desist letters to other romance writers advising them that “cocky” has found its one true love and no one else can use the word in their book titles. In response to this attempt to keep the word “cocky” from its other true loves, a group of romance writers published a collection of short stories titled “Cocktales: The Cocky Collective”. Faleena filed suit to stop the publication. The Author’s Guild and the Romance Writers of America, rescued one of the defendants, author Tara Crescent, by paying the past due taxes on the plantation, I mean, paying her legal bills. The court denied Faleena’s motions for a preliminary and temporary restraining order against the protest work. The court held that the “cocky” marks were weak and customers would not be likely to be confused between Faleena’s books and other books using the word in their titles. On another note, a proceeding to cancel Faleena’s trademarks is now pending before the Trademark Trial and Appeal Board. So there may be a sequel to this romantic tale of the word “cocky”.
WHY YOU SHOULD KNOW THIS. A weak mark may be meaningful but is common in usage. It usually describes the product or service. Faleena’s experience shows how hard it is to enforce a weak trademark. When choosing a trademark, try to stay away from descriptive, weak marks. Choose fanciful, arbitrary or suggestive words instead.
Great Minds don’t always think alike when it comes to copyright infringement. Great Minds is a company that publishes school books, including a math book. Great Minds licenses use of the book to schools for free as long as it is for strictly non-commercial use. Great Minds uses the Creative Commons non-commercial license for these deals. A school district in New York had FedEx make copies of the book instead of using the school’s copiers and staff. Great Minds sued FedEx for copyright infringement arguing that it licensed the work to the school district and not FedEx. Great Minds tried to distinguish between the school staff making copies and the school ‘jobbing’ out the project to FedEx. In affirming a ruling against Great Minds, the Second Circuit held that there really was no difference between school employees making copies and having FedEx’s copy service making copies. The Court identified FedEx as an agent of the school district. Under pure agency principals, the school district’s license to copy would extend to FedEx.
WHY YOU SHOULD KNOW THIS. Creative Commons is a non-profit organization that acts as a clearing house for copyright licenses. The licenses are standard forms that parties can use. However, there is no requirement that the parties accept the standard language. Parties can always add or delete anything that would better define their licensor/licensee relationship. In this case, the Creative Commons license was silent on whether the license extended to agents of the licensee. To avoid a problem like this, on the licensor side, it’s best to define authorized uses under the license. On the licensee side, it’s best to make sure that the license extends to employees and agents.
The Patent Office can invalidate a patent even if a court did not. Oils States Energy LLC won a patent infringement judgment against Green Energy Group LLC. But then, the Patent Trial and Appeal Board (“PTAB”) invalidated the patent leaving Oil States emptyhanded. Oil States appealed arguing that the PTAB, an Article III (of the US Constitution) administrative tribunal, couldn’t come out differently from an Article I court. The US Supreme Court decided against Oil States. SCOTUS held that patents are a “public right”. They are a public franchise granted by the government to the owner of the patent for a period of 20 years. So, the administrative body can determine patent validity without paying homage to a different decision by a federal court.
WHY YOU SHOULD KNOW THIS. This decision addresses the fundamental nature of a patent. Patents are different from other types of Intellectual Property. You own a copyright the minute you fix your work in a tangible means of expression. You own your trade secret as long as it’s not generally known and you take reasonable measures to keep it secret. You own a trademark as long as you use it as a source or product identifier. But a patent isn’t a patent until the US Patent Office issues the patent. So, you can win a patent infringement judgment in court and still have your patent invalidated by the PTAB.
A press release doesn’t always amount to trademark use. In the 1980s, Toni Basil had a one hit wonder “Mickey” that included the lyrics, “You’re so fine you blow my mind, Hey Mickey”. She sold the copyright to the recording of the song. When Disney Co., Kohl’s and Forever 21 started using the song in their advertising, they issued press releases and mentioned Toni’s name in connection with the song. Toni sued for various types of Intellectual Property infringement including trademark infringement based on the press releases. Toni argued that the use of her name violated trademark law based on false designation of origin. The judge disagreed and dismissed the trademark claim holding that the use of her name in the press releases as nominative fair use.
WHY YOU SHOULD KNOW THIS. Not every use of someone else’s trademark is trademark infringement. This case is a good example. A press release is an official statement that is issued to give general information to the news media. A press release isn’t considered trademark use because its primary purpose is to provide information for news purposes. The press releases didn’t use Toni’s name in the trademark sense so she couldn’t maintain a cause of action for infringement.
A better way to build a data center can be protected as a trade secret. BladeRoom developed a technique that allowed it to build data centers. BladeRoom’s system used prefabricated subassemblies that continued systems for air management, fire detection, security and lighting. Under a non-disclosure agreement, BladeRoom disclosed the system to Emerson Electric Co. and Facebook who were about to build a huge data center in Sweden. Emerson and Facebook took a pass on retaining BladeRoom. According to BladeRoom, Emerson and Facebook went ahead and built the data facility using BladeRoom’s system. BladeRoom sued for trade secret misappropriation. Facebook settled but Emerson went to trial and lost. Determining the misappropriation was a substantial factor in causing financial harm to BladeRoom, the jury awarded BladeRoom $10 million in lost profits and $20 million due to Emerson’s “unjust enrichment.” Emerson vows to appeal the verdict.
WHY YOU SHOULD KNOW THIS. Massive data centers are becoming a huge industry (pun intended). Anyone who can find a way to build them faster has major market potential. BladeRoom did the right things in having Emerson and Facebook sign non-disclosure agreements. They must have also identified their trade secrets and taken reasonable measures to keep them secret. Although it took four years of expensive litigation, BladeRoom got a big payoff.
The last word sometimes isn’t really the last word. Here’s what happened after some previous posts:
3/21/17 – The Intrepid Heroes of Copyright, Photographers. VHT, Inc.’s obtained an $8.3 million judgment against Zillow Group, Inc. for using photos without a license. On appeal the judgment was cut almost in half. The court determined that there was insufficient evidence that anyone actually saw the vast majority of the photos. Still, $4.3 million is a lot of money.
6/27/17 – Horton Hears a Vulcan. The lower court’s decision that fair use permitted a comic mash up between Dr. Seuss like drawings and Star Trek in “Oh the Places You’ll Boldly Go” was reversed on appeal. The appellate court determined that at least three of the four factors of fair use weighed in favor of the Dr. Seuss estate and against the creators of the parody comic book. In other words, parody is not a golden ticket for fair use.
10/31/17 – Spooky Banana Halloween. After settling with Kmart for allegedly infringing on its banana costume, Rasta Imposta sued Kangaroo Mfg. Inc. for copyright infringement involving the same banana costume. The court granted a preliminary injunction holding that although the costume is a useful article, it does have some elements that give rise to minimal copyright protection. It appears that Rasta Imposta has peeled off another competitor.
An implied copyright license doesn’t need to be in writing. In Intellitech Corp., v. The Institute of Electric & Electronics Engineers, Inc. a/k/a IEEE, IEEE is a non-profit organization that was trying to set standards for electrical engineers. Intellitech contributed to the “Test Access Architecture for Three-Dimensional Stacked Integrated Circuits.” Intellitech sued IEEE for copyright infringement when IEEE tried to use Intellitech’s contributions. The court denied Intellitech’s motion for summary judgment. The court held that even if Intellitech owned the copyright in the work, IEEE had a non-exclusive implied license to use it because the parties always intended that result.
WHY YOU SHOULD KNOW THIS. It’s always best not to rely on an implied anything, no less an implied copyright license. A written license agreement or work for hire agreement is not only preferable, it’s a must. The documents should be drafted and signed every time someone creates a work for another. In this case, the IEEE had written policies about IEEE's ability to use contributions to the standards. So Intellitech knew from the beginning that its contributions were going to be used by IEEE in its documentation.