• Not So Boring Insurance News

    Tuesday, 20 June 2017

    My advertising injury may not be your advertising injury. Many general business insurance policies cover defense of claims for ‘advertising injury.’ But what does that mean exactly? This comes up when the insured is sued for IP infringement and tenders the defense to the insurance company. Then the insurance company refuses to defend the claim because it doesn’t fit into the definition of advertising injury. In recent cases, the courts were able to give some guidance on how to analyze the duty to defend "advertising injury". Here are a few examples. In Diamond State Insurance v. 21 Century, the court held that defendant’s false and misleading statements in telephone calls to its competitor’s customers fell within the definition of advertising injury. In Sentry Insurance v. Provide Commerce Inc., the court held that the defendant’s use of Google search terms to redirect users to a competitor’s website could conceivably fall within the definition of advertising injury. In Mid-Continent Cas. Co. v. Kipp Flores Architects LLC, the court held that claims for copyright infringement stemming from an advertising idea were covered. In Sentinel Insurance Co. Ltd. v. ITD, the court held that claims of trade secret misappropriation do not fall within the definition of advertising injury.

    WHY YOU SHOULD KNOW THIS. Insurance policies are written to "giveth" and then "taketh away". They give coverage and then list exclusions from coverage. All insurance policies should be carefully reviewed. If the extent of coverage is unclear, an insurance professional or counsel familiar with insurance coverage should be consulted. If potential litigation isn’t covered, the business owner should inquire about the costs of a rider for additional coverage. It wouldn’t hurt to also ask whether opinions of counsel or changes in business methods can help reduce premiums. IP litigation is costly and time consuming. So the premiums might be worth the additional coverage.

  • Home Sweet Copyright

    Tuesday, 13 June 2017

    Copyright only protects the non-standard elements of an architectural plan. Architectural plans, by their nature, incorporate elements that have been in the public domain for centuries, such as doors, windows and types of rooms in a house. Copyright Law calls those standard elements “scènes à faire”. Home developers use a combination of standard elements to create floor plans. Sometimes, the developer comes up with a unique feature. When that happens, the developer has a copyright in the unique feature. The plaintiff in Design Basics LLC v. Lexington Homes, Inc., publishes home floor plans and licenses them on a retail basis. Design Basics sued Lexington Homes for copyright infringement of its floor plans. The 7th Circuit Court of Appeals affirmed summary judgment in Lexington Homes’ favor. The Court agreed with the District Court that a jury could not find that Lexington Homes’ plans were substantially similar to Design Basics’ plans. The graphic to the left illustrates the point by juxta positioning a Design Basics floor plan with a Lexington Homes floor plan. If you take the scènes à faire out of the equation, Design Basics seems to have very little protectable elements. But there’s more. The Court, in dicta, discussed Design Basics' litigation history and used the opportunity to criticize Intellectual Property trolls. As of April 2017, Design Basics had brought over 100 copyright infringement lawsuits. Design Basics trawled the Internet and paid employees to find "infringers". The Court expressed distaste for this type of wholesale litigation. The Court reproached plaintiffs, i.e. Intellectual Property trolls, who misuse the legal system by filing dubious lawsuits for the purpose of prompting settlements to avoid costly litigation.

    WHY YOU SHOULD KNOW THIS. There are two lessons here. First, if you are in the business of producing works that have minimal copyright protection, the chances are that you are going to have little success in bringing infringement suits. Second, the Intellectual Property troll phenomenon is on the radar of many courts. The Design Basics opinion referenced scholarly articles, news media coverage and recent opinions deploring the abuse of the court system by Intellectual Property trolls. The best way to deal with Intellectual Property trolls is to stand up to them. It may be costly but settling with Intellectual Property trolls only encourages them.

  • Audit: The 4-Letter Word with 5-Letters

    Tuesday, 06 June 2017

    The USPTO’s audit procedure sets up a ‘use it or lose it’ proposition. The owner of a registered trademark has to file a declaration of use between the 5th and 6th year after registration and then on every 10th anniversary of registration. The USPTO will conduct random audits of about 10% of the filed declarations of use. The USPTO’s audit system will maintain the integrity of the trademark registration system by insuring that a trademark is actually being used for the registered goods and services. If the trademark owner cannot provide sufficient specimens of use, the goods or services will be deleted from the trademark registration.

    **WHY YOU SHOULD KNOW THIS. **Over time, a trademark owner may drop or develop new goods or services. When it comes time to file maintenance and renewal documents, the specimens of use will change too. A trademark owner can avoid audit problems by conducting a detailed review of their registrations before filing maintenance and renewal documents. If product lines or services are no longer being offered, the maintenance and renewal documents should reflect the changes.

  • Genericide Prevention

    Tuesday, 23 May 2017

    Google avoided the ignominious fate of losing its trademark due to genericide. Trademark protection extinguishes when the trademark becomes interchangeable with the name of the product or service. This process is called “genericide”. Some famous examples of genericide are aspirin for pain reliever, cellophane for plastic wrap and thermos for a vacuum flask. Two people filed a proceeding with the Trademark Trial and Appeal Board (TTAB) to cancel the Google trademark due to it having become a generic word for searching on the Internet. The TTAB denied the cancellation and the plaintiffs appealed to the Ninth Circuit Court of Appeals. The Court affirmed the TTAB. The Court’s opinion stated that even though the public might use the term as a verb, the Google mark could still serve as a source identifier.

    WHY YOU SHOULD KNOW THIS. When developing a brand, a company should set a policy for how a trademark will be used. Companies like Xerox and Kimberly-Clark zealously protect their brand names from genericide. Xerox’s policy requires references to “Xerox brand copiers”. Kimberly-Clark requires references to “Kleenex brand tissues”. Brand usage policies can also dictate consistent use of the color, size or content to make sure the brand sends a consistent message. No matter the size of the company or the fame of the brand, it’s never too early to set a branding policy.

  • Spooky Trademark Spirits

    Tuesday, 09 May 2017

    Dan Aykroyd’s Crystal Head Vodka gets to keep its dress. Crystal Head Vodka’s maker, Globefull, Inc. brought a trade dress suit against Elements Spirits Inc. for copying its distinctive Day of the Dead inspired packaging on Element’s Kah Tequila. And then the 7 year odyssey began. Globefull lost the first jury trial. It appealed the denial of its motion for a new trial. The Ninth Circuit agreed that the trial was unfair because defense counsel had referenced similar litigation in Mexico in closing argument. Back in district court, Globefull lost its motion for preliminary injunction. But Globefull persevered. During the second trial, the owner of the elements was caught in a lie. At the previous trial, she testified she never heard of Crystal Head Vodka when she was developing Kah Tequila. In the second trial, the testimony of other witnesses contradicted that statement. The jury found in favor of Globefull on liability. The amount of damages will be set at a later date.

    WHY YOU SHOULD KNOW THIS. Sometimes, litigation can feel like a never ending spiral of defeat. But, a party who is secure in its position and is willing to fight for it can win the day. Position security arises from preparation and follow through. For the preparation side, due diligence is a must so you don’t encounter unexpected surprises. On the follow through side, perseverance can win the day.

  • First Sale Doctrine Ran Out of Time

    Tuesday, 02 May 2017

    A repaired Rolex may not be a Rolex. In Trademark Law, the “First Sale Doctrine” allows a consumer who buys a trademarked item to resell it without having to pay a license fee. But there are limits. In Rolex Watch USA, Inc. v. Krishan Agarwal, the defendant refurbished Rolex watches and then resold under the trademarked name. When Rolex sued him for trademark infringement, Agarwal asserted the affirmative defense of the First Sale Doctrine. The court rejected the argument. The court examined the impact of the modifications on the original product. If the modifications create a new product, it can no longer be sold using the trademark. In this case, Agarwal replaced dials and bracelets that weren’t authentic Rolex items. Agarwal offered to include a disclaimer. But the court held that the disclaimer would be confusing because the refurbished watch was really a new product.

    WHY YOU SHOULD KNOW THIS. A business can thrive on providing aftermarket enhancements, refurbishments or changes. However, when dealing with branded goods, the changes can go too far and then resale can result in exposure to liability.

  • Abstract Doesn’t Equal A Patent

    Tuesday, 25 April 2017

    Abstracts are nice in visual arts but not in patents. Before Alice Corp. v. CLS Bank International, about 30% of software patent applications were invalidated. After Alice, the statistic is up to about 80%. Another one just went down. In Clarilogic, Inc. FormFree Holdings Corp., the Federal Circuit Court of Appeals affirmed summary judgment for the plaintiff to invalidate the defendant’s patent for credit reporting software. The Court ruled that the software "is directed to the abstract idea of gathering financial information of potential borrowers." The patent used computers to automate a fundamental financial information process without identifying any particular algorithm engine.

    WHY YOU SHOULD KNOW THIS. A software developer should ask two questions before pursuing a patent. First, am I developing something that automates a task a human can do manually? Second, can any computer do what I’m automating without my software? If the answer is yes to both questions, then a patent will probably not be issued. Of course, to be safe, always get an opinion from a patent attorney whose area of emphasis is in the software patent space.

  • Hands Off My Negative Reviews

    Tuesday, 18 April 2017

    A new law prohibits blocking negative reviews. On March 14, 2017, the Consumer Review Fairness Act of 2016 went into effect. The Act prohibits a company from using a ‘form contract’ to prohibit or restrict a person from posting a review, performance assessment, or other similar analysis of a company’s goods, services, or conduct. The Act also prohibits a company from requiring an individual to transfer intellectual property rights in the review or feedback to the company. Any form contract containing the prohibited language is void and can subject the company to a penalty or fee imposed by the Federal Trade Commission. The Act also creates a private right of action that can be brought by a State’s attorney general on behalf of the residents of the State.

    WHY YOU SHOULD KNOW THIS. The Act was obviously designed to stop a growing trend by companies to squelch negative feedback by contract. This would be a good time to revisit your terms of use for your website and any form contracts, policies or other standardized terms referring to user-posted reviews or similar content. Any clause prohibited by the act should be removed or amended so it doesn’t violate the act.

  • Marathon Gets Frozen Out

    Tuesday, 04 April 2017

    The common law trademark rights of an Antarctic marathon organizer got a chilly reception from the TTAB. Beginning in 1995, Marathon Tours, Inc. (“MTI”) organized sporadic cold weather marathons using the name “Antarctic Marathon”. Richard Donovan started his Antarctic marathon tours in 2006. Unlike MTI, Donovan’s tours were an annual event and have been well publicized and attended. When Donovan sought to register “Antarctic Ice Marathon and 100 k” and it’s graphic design, MTI opposed registration before the Trademark Trial and Appeal Board (“TTAB”) claiming prior common law rights. Everyone agreed that “Antarctic” and “Marathon” were descriptive words. So, for MTI to prevail, it would have to show that its use of “Antarctic Marathon” had acquired distinctiveness through continued use. All MTI could show was its sales and advertising, without context for the numbers, and four unsolicited articles from the media right before some events. The TTAB concluded that MTI failed to meet the burden of showing acquired distinctiveness and dismissed the opposition.

    WHY YOU SHOULD KNOW THIS. A trademark owner can establish common law rights in a trademark by continued use in the market place. But when it comes to enforcing those common law rights against a registered trademark, the common law owner can experience an uphill battle. For any business that is not local in nature, federal trademark registration helps establish priority of use and protect the trademark owner from latecomers.

  • Spring 2017 Updates

    Tuesday, 28 March 2017

    In case you’re curious about what happened after, here’s an update from a previous post.

    IP Criminal Hall of Fame, Grand Prize Winner, the Prenda Law Firm (January 10, 2017). As you may recall, the Prenda Law Firm, created sham companies that invited illegal downloads of porn. Then they threatened expensive and embarrassing law suits if the infringers didn’t settle. John Steele, one of the masterminds of the disgraced Prenda Law Firm, and his partner, Paul Hansmeier were indicted in January 2017. On March 8, 2017, Steele pleaded guilty to all seven counts of conspiracy to commit mail fraud, wire fraud and money laundering. Court papers show that Steele and his co-defendant, Paul Hansmeier, made more than $6 million with their scheme. And, by the way, Steele and Hansmeier filmed some of their porn inventory themselves.

  • The Intrepid Heroes of Copyright, Photographers

    Tuesday, 21 March 2017

    No group of artists suffers copyright infringement more than photographers. Professional and amateur photographers post their photos on the Internet to proudly display their work. Photographers have a hard time reigning in unauthorized uses of their photos. It’s hard to track unauthorized downloads, hard to find the downloaders and the damages are usually not pursuing given the costs of litigation. That’s why VHT, Inc.’s $8.3 million judgment against Zillow Group, Inc. deserves acknowledgement. VHT licenses its photos of properties that are for sale to real estate agents. The real estate agents have a license to post the photos for marketing purposes. Zillow’s infringement resulted from use of the photos outside the scope of the license in two ways. First, it left the photos on its website even after the properties were sold. Second, Zillow posted the photos on its “Diggs” website which provides home design and improvement services.

    WHY YOU SHOULD KNOW THIS. A license has scope and parameters. The licensor has a right to limit the uses of a work. Going beyond the scope of the license creates liability for infringement.

  • NDA Judgment is Real Reality

    Tuesday, 14 March 2017

    When a virtual reality tech developer leaves, the real world intercedes. Zenimax, owned by programming guru John Carmack, worked with Palmer Luckey to improve his Oculus Rift virtual reality gaming device. Zenimax allowed Luckey access to its proprietary technology. Luckey signed a Non-Disclosure Agreement (NDA). Facebook bought Luckey’s company. Right after the sale, a group of Zenimax employees left to work with Luckey. Zenimax sued Luckey and his company seeking $4 billion for trade secret misappropriation, copyright infringement and trademark infringement. And, oh yes, breach of the NDA. After trial, the jury rejected all but the breach of the NDA claim and awarded $500 million to Zenimax.

    WHY YOU SHOULD KNOW THIS. The problems with protecting emerging technology may have played out in this case. Sometimes, the technology can’t be pigeonholed in a specific type of Intellectual Property. Zenimax didn’t take that risk and required a NDA. As Zenimax learned, the best time to anticipate protection is at the inception of the relationship. In other words, always have a written agreement with strong contractual provisions providing protection against the unauthorized sharing of information.

  • Danish Enzyme Bites Chinese Dragon

    Tuesday, 07 March 2017

    The conventional wisdom is that in a foreign company v. Chinese company patent suit, the Chinese company will always win. Maybe not. Danish company, Novozymes, had patented an enzyme for use in bioenergy and beverages. Novozymes sued two Chinese companies, Shandong Longda Bio Products and Jiangsu Boli Bioproducts for patent infringement. Novozymes brought the case in China. After six years of litigation, the Supreme People’s Court entered judgment against the Chinese companies. Two things make this victory even sweeter. First, certain types of biotechnology are harder to support under Chinese patent rules than patent rules in the U.S. and Europe. Second, the Chinese government devotes significant resources to Chinese companies’ research and development in the area of biotechnology.

    WHY YOU SHOULD KNOW THIS. This result is not typical. That’s why it’s newsworthy. High tech innovation is always vulnerable to patent infringers who want to get there faster without the expense of research and development. Patent enforcement can be hard in foreign, and sometimes hostile, jurisdictions. For a company, patent enforcement problems can be a critical element when looking to expand into extraterritorial markets. If the Supreme People’s Court has started a trend towards protecting the patents of non-Chinese companies, new market expansion evaluations may change.

  • Blood From Insolvent Turnips

    Tuesday, 28 February 2017

    When all else fails, file for Chapter 11. ATopTech Inc., a software developer and Hampshire Group, Ltd., a menswear supplier, have some things in common. First, they both filed Chapter 11 bankruptcy to sell their assets. Second, Intellectual Property played a significant part in their cases. Their road to Chapter 11 was different, though. ATopTech lost a copyright action brought by Synopsys, Inc. and was facing a $30.4 million it had no hopes of paying. Hampshire Group owed $15 million to its creditors which included $7.4 million to its secured creditor, Salus Capital Partners. Hampshire Group’s primary assets are its trademarks.

    **WHY YOU SHOULD KNOW THIS. **These cases show that bankruptcy can be an effective business tool when all else fails. For ATopTech, it’s a shield against the collection efforts of a judgment-creditor. For Hampshire Group, it’s a way to maximize its assets for the benefit of creditors. Intellectual Property is considered a general intangible for bankruptcy purposes. The value of general intangibles in a bankruptcy can fluctuate dramatically. The best test for value is what a willing buyer will pay for the assets. The bankruptcy sale process can help with maximizing the value.

  • Judge’s Campaign Wasn’t Very Judge-Like

    Tuesday, 21 February 2017

    False advertising in a judge’s election has consequences. West Virginia judge, Stephen Callaghan, thought it would be a great idea to literally paint a picture of his opponent partying while their county lost jobs. Callaghan Photoshopped a picture of his rival next to President Obama, gave the President a glass of beer and strewed party confetti in the background. Callaghan knew that nothing of the sort had ever happened. Turns out; using a false ad to keep your seat as a judge isn’t such a good idea. After winning the election by 220 votes, Callaghan had to face the wrath of the Supreme Court of Appeals of West Virginia. Upon hearing about Callaghan’s campaign ad, the Court suspended Callaghan without pay for 2 years and fined him $15,000. In a written opinion, the Court stated that the ad was “in every sense, materially false.” Callaghan argued that the ad was “substantially true”, hyperbole or parody. The Court didn’t accept any of his arguments. Callaghan has now filed suit contending that the disciplinary action violated his First Amendment rights.

    WHY YOU SHOULD KNOW THIS. Callaghan’s Intellectual Property defense of fair use - - parody is thin at best. Parody can be a basis for copyright fair use. But when intersected with advertising, parody has its limits. For parody to work, it has to be clear that parody was intended. Callaghan’s ad painted his opponent in a false light in order to gain an advantage in the election. That is not fair use. Callaghan now has two years without pay to contemplate the consequences for creating a false ad in a glaring breach of ethics.

  • Hearts and Flowers and a Black Box

    Tuesday, 14 February 2017

    On Valentine’s Day, expressions of love do not belong in a black box. The FTD black box may be a nice way to receive an elegant flower arrangement but it’s not a trademark. FTD wanted to register the color black on its packaging as a trademark. The examining attorney refused registration because the color was functional and non-distinctive trade dress. In other words, the proposed mark comprises a feature of the packaging for the identified goods that serves a utilitarian purpose.

    WHY YOU SHOULD KNOW THIS. In the trademark world, something that is functional cannot be registered as a trademark. But trademark registration is available if the functional part of the trademark has a non-functional significance. Color is usually functional. But, some colors transcend the functional and are associated with the goods and services of the trademark owners. Here are some examples: UPS Brown (“Pullman Brown”); John Deer Green; Tiffany Blue; Louboutin Red (on the soles of shoes).

  • Trademarks for the Humor Impaired

    Tuesday, 31 January 2017

    Louis Vuitton found nothing funny about “My Other Bag is a Louis Vuitton”. My Other Bag (“MOB”) manufactured and sold canvas bags that replicate pictures of famous and expensive brands. One of its bags replicated the Louis Vuitton bag. If you look at the picture of the bag, you can see that no one would mistake this for a real Louis Vuitton bag. The bag is meant to parody high priced leather goods and that not everyone can afford them. However, Louis Vuitton did not appreciate the humor. So it sued MOB for trademark infringement, dilution by blurring and copyright infringement. The District Court granted summary judgment to MOB stating that this was an obvious attempt at humor and is not likely to cause confusion. The Second Circuit agreed and affirmed the judgment. The Second Circuit noted that “A parody must convey two simultaneous – and contradictory – messages: that it is the original, but also that it is not the original and is instead a parody”.

    WHY YOU SHOULD KNOW THIS. Parody can be the sincerest form of flattery. In fact, in the MOB case, the district court reasoned that the parody was likely to reinforce and enhance the distinctiveness and notoriety of the original brand. Understanding that parody requires a reference back to the original, how can one avoid a claim of infringement? It all boils down to the point of the use of the trademark. For instance, in Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., a competitor was prohibited from using the name Charbucks for its coffee brand in order to compete with the Starbucks coffee brand. The point of Wolfe’s Borough Coffee’s Charbucks name was to compete with Starbucks. In MOB, the point was to make fun of Louis Vuitton’s luxury image.

  • Don’t Hurt Your Fans

    Tuesday, 24 January 2017

    If you have a powerful brand, don’t use your power to alienate your fans. Last year, CBS and Paramount Studios sued Axanar Productions for copyright infringement. Using a 20 minute short film, Axanar had raised over $1 million through Kickstarter and Indiegogo to finance a full length fan fiction film (https://www.youtube.com/watch?v=1W1_8IV8uhA). The proposed film was to follow the story of Captain Kirk’s hero, Garth of Izar. CBS/Paramount, who own Star Trek, had a problem with it. This wasn’t the first fan fiction spinoff and CBS/Paramount usually encouraged it. Fan films can enlarge the universe, attract new fans and build loyalty among the current fan base. But Axanar got too close. Commentators speculate that the Axanar’s production values were too good and would have commercial potential. Star Trek fans were appalled at CBS/Paramount’s aggressive tactics. Even J.J. Abrams and Justin Lin, directors of the most recent Star Trek films, supported Axanar. CBS/Paramount tried to calm some of the bad press by coming out with guidelines for producing fan films (http://www.startrek.com/fan-films). Meanwhile, CBS/Paramount continued its lawsuit against Axanar. Last week, CBS/Paramount and Axanar announced that they have settled the dispute. In exchange for CBS/Paramount dropping the suit, Axanar has agreed to follow the fan films guidelines which include a restriction on the length of the films, requiring the use of official merchandise and keeping them family friendly.

    WHY YOU SHOULD KNOW THIS. This is not the only instance of the perils of attacking the fans. For example, Warner Bros. tried to crack down on Harry Potter fan sites that were written primarily by children. Bowing to the bad press of picking on kids, Warner Bros. withdrew their cease and desist letters. Every content owner should be able to protect its brand and copyrights. But when pursuing protection, the content owner must be cognizant of the message it sends to its fan and consumer base and not become an IP bully.

  • Preliminary Injunction Backfire

    Tuesday, 17 January 2017

    If you don’t own it, asking for a preliminary injunction is the wrong strategy. VitaVet Labs, Inc. sells horse vitamins. Its website was old and clunky. VitaVet hired Integrated Software Solutions, Inc. to update the site. According to the terms of the agreement, VitaVet owned the source code and had an absolute right to access it. VitaVita was to pay Integrated on an incremental basis upon receipt of deliverables. From almost the beginning, things went wrong. Integrated didn’t reach its project development goals. VitaVet paid some of the installments but VitaVet was not pleased with Integrated’s work. Meanwhile, VitaVet’s website was getting clunkier and harder to use. Integrated asserted that the software was finished but VitaVet didn’t agree. So VitaVet refused to pay the remaining installments. Integrated filed suit and sought a preliminary injunction. VitaVet countersued for a preliminary injunction seeking turnover of the source code. Usually, a preliminary injunction just maintains the status quo. The status quo was that Integrated had the source code and wouldn’t have to turn it over to VitaVet. But in this case, the trial court entered a preliminary injunction order that changed the status quo and ordered Integrated to turnover the source code to VitaVet. In affirming the decision, the California Appellate Court reasoned that the balance of equities favored disturbing the status quo in VitaVet’s favor. VitaVet owned the source code and VitaVet had a dire need to upgrade its website. So much for Integrated’s aggressive strategy against VitaVet.

    WHY YOU SHOULD KNOW THIS. VitaVet did a lot of things right in this case. It made sure that it owned what Integrated was developing for it. When challenged, VitaVet did a great job of showing that it was entitled to extraordinary relief. On the other hand, Integrated might have done well to think things through before going after VitaVet in the first place.

  • 2016 IP Criminals Hall of Fame

    Tuesday, 10 January 2017

    The year 2016 had its share of notable people who got the attention of federal criminal authorities. Here are the winners. As we enter awards season, we recognize those who put considerable time and effort into criminal activity involving Intellectual Property. The awards go to:

    Second Runner Up: Alanzo Knowles. Alanzo pleaded guilty in May 2016 to copyright infringement and identity theft charges. Originally from the Bahamas, Alanzo flew to New York City to sell 15 scripts and celebrity personal information for $80,000. Unfortunately for him, his buyer was a law enforcement agent. In jailhouse writings, Alanzo boasted that he was going to write a book to “shake up Hollywood”, presumably admitting that he was going to continue his nefarious activities. The judge was not amused. In doubling Alanzo’s sentence, Judge Paul A. Engelmayer stated “So far, the criminal justice system has totally failed to get your attention”.

    First Runners Up: Artashes Darbinyan and Orbel Hakobyan. Artashes and Orbel pleaded guilty in a mass-mailing scam that targeted owners of U.S. trademark applications. The men admitted to stealing approximately $1.66 million from registrants and applicants of U.S. trademarks. They are part of a growing number of scam artists who set up companies to dupe the unwary trademark owner. Using the USPTO public records, they send out official looking documents that demand anywhere from $750 to $4,500 to “protect the trademark”. In fact, these companies don’t do anything but collect the money. The USPTO has tried to address these non-USPTO solicitations for years by giving numerous warnings to trademark applicants and registrants. But the number of these scam artists continues to grow. Lucky, Artashes and Orbel are among the first scammers to be caught and convicted. For more information, visit https://www.uspto.gov/trademarks-getting-started/non-uspto-solicitations.

    Grand Prize: Paul Hansmeier and John Steele of the Prenda Law Firm. Paul and John were attorneys with the now-defunct Prenda Law Firm. They have been arrested and charged in an 18-count indictment that includes fraud, perjury, and money laundering counts.* According to the allegations, the Prenda attorneys created a ‘honey pot’ of porn movies that invited illegal downloads. When the downloads occurred, the firm filed copyright infringement suits. The plaintiffs were actually owned or controlled by Prenda. The suits named hundreds of defendants as John Does and listed their IP addresses. Using subpoenas served on the ISPs, the Prenda attorneys discovered the identity of the John Doe defendants. Once they discovered the identity of the defendants, the firm sent cease and desist letters demanding $4,000 or the firm would reveal in court papers the embarrassing fact that the defendant downloaded porn. The vast majority of the defendants paid the $4,000. No one knows exactly how much the Prenda Law Firm raked in, but estimates are anywhere from $1.9 million to $15 million. It all came crashing down when some of the defendants refused to pay the demand and hired lawyers to defend them. The lawyers discovered the scheme. There’s much more to the story including court ordered civil sanctions, perjured deposition testimony, the untimely death of one of the Prenda attorneys, and lost law licenses. For more on this story, visit http://arstechnica.com/tech-policy/2016/12/breaking-prenda-law-copyright-trolls-steele-and-hansmeier-arrested/.

    WHY YOU SHOULD KNOW THIS. Our Hall of Famers, each in their own way, tried to game the system. They used Intellectual Property protections for greed and exploitation. Here’s hoping that in the coming year, would-be IP criminals turn their considerable energy to making the world a better place for us all.

    • Note that for those who have been indicted, the Hall of Fame Award is not meant to make it appear that they have been convicted.
  • Hot Topic: Fake News

    Tuesday, 20 December 2016

    Extra. Extra. Popular art posting website steals an artist’s works and sells it to Hot Topic. Actually that didn’t happen. DeviantArt (“DA”) operates a website that features the works of visual artists. The artist submits a picture or photograph and DA posts it for the entire world to see. Under DA’s terms and conditions, the artist agrees to give DA a world-wide, non-exclusive license to publish, resize, make collages and use the work for DA marketing and promotion. The terms and conditions specifically state that the artist retains the copyright in the work and no one can use it without the artist’s permission. What could go wrong? A DA user discovered that his Adventure Time fan art (see the picture) appeared on a t-shirt sold by Hot Topic. A flurry of anguished and angry social media postings accused DA of selling the art to Hot Topic. DA denied selling the art to Hot Topic. DA pointed to its terms and conditions where it said that no one can download and use the art for commercial purposes without permission from the copyright owner. So the artist will have to follow up directly with Hot Topic.

    WHY YOU SHOULD KNOW THIS. The first lesson is to always read terms and conditions before posting something on or downloading from a website. It may seem like boring reading but it’s never a waste of time to know your rights and liabilities. The second lesson is, even in the world of copyright, you can’t believe everything you see and hear. For instance, a few commentators on the DA/Hot Topic issue asserted that Hot Topic’s use of the fan art was “fair use” because it could be found on the Internet. This is a popular misconception about fair use. If Hot Topic used the fan art without the artist’s permission and for commercial purposes, it was not fair use. Thanks to art student, Tory Lieberman, for the heads up on this topic.

  • Episode IV of Smartphone Wars: A New Hope

    Tuesday, 13 December 2016

    These are not the Apple damages that you are looking for. On December 6, 2016, a unanimous U.S. Supreme Court reversed a Federal Circuit ruling that Samsung had to pay Apple $399 million for infringing on Apple’s smartphone design patent for its interface. The judgment was calculated using Samsung’s profit on its entire phone and not just the profit related to the interface. At issue was how to interpret 120 year old design patent case. In the older case, the court held that a design patent infringer who applies any “article of manufacture” would be liable to the owner for its total profit. SCOTUS clarified this holding. In the case of a multicomponent product, the relevant “article of manufacture” for arriving at damages award, could be the end product. It could also be only a component of that product. SCOTUS refused to articulate a bright light test for determining whether the entire product or just the interface should be the basis for damages. The case has been remanded to determine the damages issue.

    WHY YOU SHOULD KNOW THIS. Samsung has had a dismal year considering that its fire hazard Galaxy 7 had to be taken off the market. This decision is a win for Samsung but with a lot of loose ends. Samsung will have to convince the trial court that the damages should be calculated by the component and not the whole product. Then Samsung will have to find valuation experts who can accurately trace the profits to just the interface. Certainly, Apple will find its own valuation experts to do the same analysis. Then it will come down to a battle of the experts. For any business facing an infringement suit, whether as plaintiff or defendant, the issue of damages can make or break the case. A party has to be clear about what is being valued. Then the party has to find a valuation expert who can give an opinion as to the object being valued.

  • All's Fair When It Comes to Briefs

    Tuesday, 06 December 2016

    A legal brief can be protected by copyright. Ezra Sutton represented Sakar International in a patent infringement case in Texas. Sakar and its co-defendant, Newegg, Inc. won at the trial level. They brought a motion for attorney’s fees which was denied. They separately appealed the denial to the Federal Circuit Court of Appeals. As time approached for filing their opening appellate briefs, Newegg agreed to provide Sutton a draft of its brief only if Sutton agreed in writing that he would only use it for reference purposes and not copy any excerpts. On the day before Newegg filed its brief, Sutton filed a brief on behalf of Sakar that was virtually identical to Newegg’s draft brief. Newegg sued Sutton for copyright infringement. Newegg brought a motion for partial summary judgment that Sutton couldn’t use fair use as a defense. The court granting summary judgment by analyzing the four fair use factors. (1) The purpose and character of the use weighed in favor of Newegg because Sutton’s brief was identical to Newegg’s brief. (2) The nature of the copyrighted work weighed in favor of Sutton because the briefs were functional presentations of law and fact. (3) The amount and substantiality of the copyrighted work used weighed in favor of Newegg because Sutton used the entire work and not just what was needed for a specific purpose. (4) The degree of harm to the potential market, weighed in favor of Sutton because Newegg couldn’t identify a market for its brief. The court tipped the balance with its own factor. Sutton could have used federal appellate rules that allow a party to either join in or adopt by reference a part of a co-party’s brief.

    WHY YOU SHOULD KNOW THIS. Generally attorneys don’t sue other attorneys for adopting their brilliant arguments. I’m sure Newegg was not pleased when Sutton took advantage of the time and attorneys’ fees involved in drafting its brief on appeal. It appears that the court was reacting to two things. First, there was a written agreement between the parties and Sutton had agreed not to copy Newegg’s brief. Second, Sutton didn’t adopt Newegg’s arguments in a way that is specifically provided in the Federal Rules of Appellate Procedure. Courts can get testy when litigants don’t follow rules; especially rules that save the court time in analyzing the arguments of the parties.

  • Special Edition of IP News for Business

    Friday, 02 December 2016

    SPECIAL EDITION - IP News for Business has been honored by the ABA Journal as one of 100 best legal blogs. Here’s what the Journal had to say:

    IP News for Business:

    NEW: Trademark, copyright and patent laws can feel like murky waters for many businesses. Written by Golan Christie partner Beverly A. Berneman, this blog focuses on providing succinct examples of how businesses ran into intellectual property disputes and what the results were. One of our favorite elements is her pithy “Why You Should Know This” section at the bottom of most of her posts, which provides excellent context for how the specific IP outcomes could affect others.

    Thank you to all of subscribers and visitors.

  • When Two is Enough

    Tuesday, 29 November 2016

    One is nice. Two is better. You may not have to get to three. Christian Faith Fellowship Church in Zion, Illinois registered the name and design mark “ADDAZERO” for its fundraising campaign. Adidas, the international sportswear powerhouse, tried to register “ADIZERO” for clothing. The USPTO refused registration based on a likelihood of confusion with the Church’s trademark. Adidas thought it found a chink in the Church’s registration because the Church had only sold two hats to out-of-state residents. So Adidas brought a cancellation proceeding before the Trademark Trial and Appeal Board. The TTAB held that two sales were not enough and cancelled the trademark. On appeal, the Federal Circuit Court of Appeals reversed the TTAB. The Court held that trademark law only requires use in commerce that is an activity regulated by commerce. The two sales to out-of-state residents were enough.

    WHY YOU SHOULD KNOW THIS. In every used based trademark application, the applicant has to state that the mark was used in interstate commerce at the time of the application. If that statement is not true, the registration is at risk of being cancelled. This case says that two sales that crossed state lines were enough for interstate commerce. It remains to be seen if this case will apply in every context. So when applying for a trademark registration, if there’s any doubt about use, the best course is to file an intent to use application until use can be firmly established.