• IP BLAWG

    Fair Use Gets Transformed

    Beverly A. Berneman
    4/6/21

    In Brief:   Andy Warhol’s art was innovative. But it may not have been transformative when it comes to fair use.

    Here’s What Happened. In my blog post of 8/6/2019 titled “Purple, I Mean, Orange Rain”, I looked at the meaning of transformative use as it relates to fair use. The suit involved well-known photographer, Lynn Goldsmith, and The Andy Warhol Foundation for the Visual Arts, Inc. Lynn had taken some photos of the music artist, Prince. Vanity Fair magazine had licensed one of Lynn’s photos and commissioned Andy Warhol to create paintings from it for an article. Warhol then went a step further and used Lynn’s other photographs as the foundation for series of Prince paintings.  Years later, Vanity Fair published an article using Warhol’s paintings. This was when Lynn learned about Warhol’s additional paintings. Lynn threatened to sue for copyright infringement. The Warhol Foundation brought a suit for declaratory judgment that the additional paintings were fair use. The district court held that Warhol’s treatment of Lynn’s photographs was transformative and therefore fair use.

    Lynn appealed. The Ninth Circuit Court of Appeals reversed and remanded the case to the district court with instructions.

    Fair use is supposed to strike a balance between an author’s rights in the work and the ability of others to express themselves referencing the work. The first factor of fair use is the purposes of the use. Transformative often comes into play when evaluating the first factor. It means that the second user creates a new expression, meaning or message based on the original work. According to the Ninth Circuit, transformative use is more than the secondary user imposing his style on the original work. The Ninth Circuit rejected the district court’s determination that Warhol imposed his painting style on Lynn’s photographs was transformative because Warhol intended to show how vulnerable Prince was. The Ninth Circuit stated that “whether a work is transformative cannot turn merely on the stated or perceived intent of the artist or the meaning or impression that a critic—or for that matter, a judge—draws from the work.” The Ninth Circuit was worried that finding fair use here may recognize any alteration as transformative. The court went on to state that a secondary user can’t claim fair use if the original work remains recognizable and retains its essential elements. Since Warhol’s version retained Lynn’s essential elements and just added his style on top of hers, the Warhol works are not protected by fair use. The Ninth Circuit rejected the Warhol Foundation’s argument that the paintings were fair use because they were “Warhol’s”. With a note of sarcasm, the court stated that fair use doesn’t allow “celebrity-plagiarist privilege”. 

    WHY YOU SHOULD KNOW THIS. Does this opinion gives us more insight into what transformative use really is? Not really. Warhol’s versions of Lynn’s photographs weren’t just copied and washed with paint. According to the Warhol Foundation’s witness, Warhol had a process to create his works that went beyond merely copying and splashing paint on the copy. The idea that the secondary work can’t retain recognizable and essential elements of the original fails to recognize bastions of fair use such as parody and criticism. This might not be the end of the story.

  • IP BLAWG

    Menu Patent is Invalid No Matter How You Slice It

    Beverly A. Berneman
    3/30/21

    In Brief:  Pursuing questionable patent claims can result in paying the other side’s attorney’s fees.

    Here’s What Happened.  Ameranth, Inc. sued numerous pizza chains and delivery companies for patent infringement relating to its patents for menus. But it met its match with Domino’s Pizza Inc.

    In one of Ameranth’s first cases, after 3 years of litigation, the jury returned a verdict of non-infringement and found that Ameranth’s patent claims were invalid. Ameranth appealed and settled with one of the defendants. Over the objections of the other defendants, the court vacated the findings that the claims were invalid.

    Then Ameranth went on a patent infringement suit frenzy, suing Pizza Hut and a lot of other fast food restaurants, including, Domino’s, and food delivery companies. Five of the defendants in these lawsuits filed petitions with the Patent Trial and Appeal Board to invalidate Ameranth’s patent claims. Only one of Ameranth’s patent claims survived the challenge. 

    Pizza Hut filed a motion for summary judgment on the issue of the patentability of Amaranth’s sole remaining claim. Ameranth settled with Pizza Hut. But Domino’s and several other defendants were allowed to join the motion for summary judgment over Ameranth’s objections. The court found that Ameranth’s remaining patent claim was invalid too. Ameranth appealed to the Federal Circuit but the judgment was affirmed. The US Supreme Court refused to hear the case.

    The Domino’s defendants brought a motion for costs and fees incurred in defending against Ameranth’s infringement claim. The Patent Act permits a prevailing party to recover costs and fees in “exceptional circumstances.” The test for exceptional circumstances is clear and convincing evidence that a party’s position is frivolous or objectively unreasonable. In other words, the party knew or willfully ignored evidence that their assertions of infringement are baseless. Ameranth’s litigation conduct included taking inconsistent positions about the construction of its patent claims. The Domino’s defendants had pointed out to Ameranth that a key element of Ameranth’s remaining menu claim didn’t exist in their menu systems. Ameranth ignored that problem and kept on litigating. The court agreed with the Domino’s defendants. The court cited to the fact that Amaranth had limited success with its infringement actions. Ameranth avoided final adjudications by settlement or appeal. The judge said "Considering this pattern of continued bullishness in the face of numerous defeats, and the totality of the circumstances discussed above, the court finds this is an exceptional case.”

    The motion for fees was continued solely to give Amaranth a chance to dispute whether the fees requested by the Domino’s defendants are reasonable.

    WHY YOU SHOULD KNOW THIS.  There’s a difference between aggressively protecting IP rights and aggressively litigating a case with very little foundation. All IP statutes and unfair competition statutes have fee shifting provisions for a prevailing party. Most require the kind of exceptional circumstance described in this case. Plaintiffs should always do due diligence to make sure their cases are based in law and fact. Defendants should always document any communications and history that shows the plaintiff knew or should have known that its claims of infringement were baseless.

  • IP BLAWG

    Goodwill Clucking

    Beverly A. Berneman
    3/23/21

    In Brief: Assigning goodwill along with the assignment of a trademark isn’t form over substance.

    Here’s What Happened.  For the Mother Cluckers trademark saga, we need a little background about goodwill. A trademark establishes a connection between the owner’s goods and services and the consumer. That connection is the goodwill in the trademark. In order to be effective, a trademark assignment requires the assignment of the goodwill attached to it. 

    And now for the Mother Cluckers trademark saga. The procedural history is a little complicated. Pass Restaurant Group operated a Mother Cluckers Restaurant in Mississippi. Pass registered the trademark. About 3 years later, Nextbite Brands LLC filed an application to register Mother Clucker (without the “s”). Nextbite also filed a cancellation proceeding against Pass alleging that Pass is no longer using the trademark. A few days later, Pass assigned the Mother Cluckers registered trademark to Hot ‘N Sweet Concepts LLC. Hot ‘N Sweet then filed a trademark infringement suit against Nextbite. Hot ‘N Sweet and Nextbite settled almost immediately.

    The problem with Hot ‘N Sweet’s trademark is whether Pass actually assigned the goodwill in the trademark to Hot ‘N Sweet. Here are the facts that might make that a problem: (1) Pass’ logo is completely different from Hot ‘N Sweet’s (see picture); (2) Their menus are completely different; (3) Pass’ restaurant was located over 800 miles away from Hot ‘N Sweet’s Missouri location and even was even further away from Hot ‘N Sweet’s Oklahoma City location; (4) The appearance of the restaurants was completely different; and (5) If Nextbite’s allegations were true and Pass was no longer operating, there was no goodwill for Pass to assign to Hot ‘N Sweet.

    Why You Should Know This:  Goodwill is not just a perfunctory trademark side issue. So, let’s dig a little deeper on why Hot ‘N Sweet may not be able to rely on the assignment of Pass’ goodwill. If the logos, menus and restaurants look different, the consumer wouldn’t be able to connect Pass’ goods and services to Hot ‘N Sweet’s goods and services. The restaurants being so far from each other means that each restaurant isn’t targeting and serving the same group of consumers. And, the final issue would be the fatal blow. If Pass wasn’t operating, then Hot ‘N Sweet got a trademark ‘in gross’ which means ‘a nothing.’ Because the case was settled, these issues weren’t fully adjudicated.

    As a side note, there appears to be a plethora of Mother Cluckers restaurants all over the US. They don’t all seem to be affiliated with each other. Obviously, this is a very popular name for a chicken restaurant.

  • IP BLAWG

    A Lot of Mine and Some of Yours

    Beverly A. Berneman
    3/16/21

    In Brief:  A work can be copyrighted even if it incorporates portions of someone else’s work.

    Here’s What Happened.  Hiller LLC provides plumbing, heating, cooling and electrical services to residential and commercial customers. Hiller was a member of Success Group International that offers management advice and customer service training. Success Group used licensed copyrighted training manuals owned by its predecessor, Clockwork IP LLC.

    Hiller decided to create its own training materials. It hired an independent contractor who conducted a series of workshops and researched Hiller’s business. The end product was an HVAC technicians Guide. The Guide had original illustrations, its own content and its own arrangement of the information. Small portions of the Guide incorporated information that had been contained the Success Group training manuals. The independent contractor assigned the copyright in the Guide to Hiller.

    About a month later, Success Group conduced a class called “Service Essentials” using a workbook presumably created and licensed by Clockwork. The workbook looked a lot like the Guide.

    Hiller ended its Success Group membership. Hiller registered the copyright in the Guide and sued Success Group and Clockwork for copyright infringement. A jury returned a verdict in favor of Hiller. Success Group/Clockwork appealed to the Sixth Circuit Court of Appeals.

    Success Group/Clockwork argued that the Guide lacked originality and couldn’t be copyrighted. To be copyrighted, the work has to be original to the author. The bar for copyright originality is pretty low. It means that the work has to be created by the author and has at least some minimal degree of creativity. The Sixth Circuit had no problem affirming that the Guide met the minimal requirements of creativity.

    But, the Guide had incorporated some of the Success Group/Clockwork training manuals. So Success Group/Clockwork argued that Hiller’s copyright in the whole work should be invalided. The Sixth Circuit rejected the argument and held that a work can contain the works of others and still be copyrighted. As long as the incorporation of other works isn’t “pervasive”, the copyright in the original portions of the Guide is valid.

    Why You Should Know This: Incorporating the works of others into an original work of authorship is tricky. Proceed with caution. There is no bright line about how much of an original work can be used before it would be considered pervasive. Perhaps one of the saving graces of the Guide is that training could have limited means of expression. When there’s only one or a limited number of ways to express an idea, the expression is said to merge with the idea and it can’t be protected by copyright.

  • IP BLAWG

    Bubble, Bubble, Toil and Seltzer

    Beverly A. Berneman
    3/9/21

    In Brief: Even when two product names sound similar, a likelihood of confusion isn’t automatic.

    Here’s What Happened. Molson Coors Beverage Company sells a hard seltzer called Vizzy. Future Proof Brands, LLC sells a hard seltzer called Brizzy. Future Proof sued Coors for trademark infringement alleging that Vizzy is likely to cause confusion with Brizzy.  

    Future Proof’s motion for preliminary injunction was denied. The district court looked at the well accepted “digits of confusion” factors which are: (1) the type of mark infringed, (2) the similarity between the marks, (3) the similarity of the products, (4) the identity of the retail outlets and purchasers, (5) the identity of the advertising media used, (6) the defendant’s intent, (7) evidence of actual confusion, and (8) the degree of care exercised by potential purchasers. The district court determined that although the third, fourth, and fifth digits of confusion favored granting the injunction, the remaining factors weighed against it. Since the “digits” taken together weighed against a likelihood of confusion, Future Proof was not entitled to a preliminary injunction.

    Future Proof appealed to the Fifth Circuit Court of Appeals. The Fifth Circuit disagreed with the district court’s analysis of the first digit. The district court had decided that the name “Brizzy” was merely descriptive and entitled to weak protection. The Appellate Court held that the name “Brizzy” is suggestive because it doesn’t convey an immediate idea about the characteristics of “hard seltzers.” Instead, the name requires consumers to make an inference—for example, that the fact that the brand rhymes with “fizzy” suggests carbonation. Thus, a consumer must “exercise the imagination” and infer that “brizzy” is a play on “fizzy,” The Fifth Circuit concluded that “Brizzy” is suggestive, and therefore inherently distinctive. And yet, the Fifth Circuit held that Brizzy is still a weak mark for the purposes of evaluating the first digit. The Fifth Circuit agreed with the district court on the other digits.

    The case has been remanded to the district court for further proceedings because Coors’ motion to dismiss had been denied. But Coors is not enjoined from selling Brizzy.

    Why You Should Know This: Trademarks have different levels of distinctiveness. Fanciful and arbitrary trademarks are inherently distinctive and so entitled to the highest level of protection. Suggestive marks like Brizzy are also considered inherently distinctive. Yet, Fifth Circuit still found that the mark was weak and not entitled to the highest degree of protection. It probably has something to do with the suffix of the name “izzy” (or even “izze”). The suffix is often used to refer to carbonation. So the prevalent use of the suffix in the beverage industry may have worked against Future Proof.

  • IP BLAWG

    Sometimes, It’s What You Don’t Say

    Beverly A. Berneman
    3/2/21

    In Brief:  The US Supreme Court has declined to hear some important IP cases.

    Here’s What Happened.  The US Supreme Court won’t be weighing in on some interesting cases in the world of IP. Here are just a few of them by topic:

    Copyrights in Fictional Characters: Denise Daniels, a child development specialist, sued Disney and Pixar over the characters in the animated film “Inside Out”. Denise claimed that the movie stole central characters from her "Moodsters," a series of anthropomorphized emotions. Disney/Pixar argued that character copyright would upend the law. Denise argued that other characters like James Bond and Godzilla had protection and so should her Moodsters. The Ninth Circuit disagreed with Denise and ruled in favor of Disney/Pixar. In her petition for writ of certiorari, Denise argued that the law of copyright protection for characters is in chaos and needs review. By rejecting Denise’s petition, copyright character chaos stands.

    Right to Challenge Patents: Twelve Federal Reserve Banks brought an action for declaratory judgment to determine that they weren’t infringing on Bozeman Finance LLC’s business method patent. Bozeman argued that the banks were an arm of government and couldn’t challenge the patents.  The trial court held that the banks weren’t arms of government and could challenge the patents. Bozeman appealed to the Federal Circuit Court of Appeals. The Federal Circuit affirmed. The US Supreme Court refused to hear Bozeman’s appeal. So the ruling stands.

    Trademarks: In the IP News for Business Post on 6/30/2020, we discussed the ruling that dog toys that humorously mimicked beverage containers like the Jack Daniel’s whiskey bottle were protected by the First Amendment as expressive works. Jack Daniels Properties, Inc. was not happy with the ruling, so it filed a petition for writ of certiorari to the US Supreme Court. The Supreme Court refused to hear the case. So commercial articles that parody other commercial articles will continue to receive heighted First Amendment protection.

    Why You Should Know This.  

    Copyrights: Denise had a point. Why do some characters get copyright protection and others don’t. Even the Batmobile gets protection (See IP News for Business post dated 3/1/16). For now, there appears to be little guidance as to the threshold of copyright protection is available to characters.

    Patents: Since the government is the sole authority for granting a patent, public policy reasons exist for not letting an arm of the government challenge a patent. The problem with the Bozeman case is that banks aren’t an arm of government, even if they’re Federal Reserve banks.

    Trademarks: While Jack Daniels may believe that dog chew toys tarnish its brand, others may find the toys funny and still drink Jack Daniel’s without thinking less of it.

  • IP BLAWG

    A Useful Chalk Holder

    Beverly A. Berneman
    2/23/21

    In Brief:  Copyright does not protect “useful articles” and design patents don’t always protect against infringement.

    Here’s What Happened. Sidewalk chalk has been around a long time. Lanard Toys Ltd. designed chalk holders that looked like No. 2 pencils. Lanard sold the chalk holders to distributors and toy store chains like Toys R Us.  Lanard sought and obtained both a registered copyright and a design patent.

    In 2012, Ja-Ru Inc. designed its own No. 2 pencil-lookalike chalk holder. As the illustration in this post shows, there’s little doubt that Ja-Ru copied Lanard’s chalk holder. In fact, Ja-Ru admitted that it used Lanard’s product as a reference. In 2013, Lanard’s customers started ordering from Ja-Ru instead of Lanard.

    Lanard sued Ja-Ru and Toys R Us for copyright infringement, design patent infringement, trade dress infringement and unfair competition.

    The defendants’ motion for summary judgment was granted and affirmed on appeal. The court held that Lanard didn’t have a valid copyright and the defendants didn’t infringe on the design patent.

    On the copyright issue, the chalk holders are useful articles and can’t be protected by copyright. In Star Athletica, L.L.C. v. Varsity Brands, Inc., the US Supreme Court held that only ornamental, non-functional elements of a useful article can be protected by copyright. In this case, the chalk holder didn’t have sufficient ornamental elements for copyright protection.  Lanard argued that its product design should be protected as a sculptural work. The court rejected this argument, finding that "the pencil design does not merely encase or disguise the chalk holder, it is the chalk holder." 

    Lanard’s design patent held up but victory eluded Lanard. The court used the “ordinary observer test” to construe the claims in the patent. The analysis focused on the design aspects of the chalk holder, including the eraser’s shape, the grooves in the ferrule, the taper of the point, and the proportionate sizes of those elements. Since Ja-Ru’s product was proportioned differently from the design in Lanard’s patent, no infringement had occurred.

    Why You Should Know This.   Lanard experienced a common Intellectual Property black hole. The design and the utilitarian function of the chalk holder could not be separated for copyright protection. As for the design patent, the protection stopped at the literal design of the chalk holder. The slight changes that Ja-Ru made were enough to avoid infringement. So, what’s the best way to protect a useful article? Start at the design level. Include non-utilitarian ornamental aspects that can be separated from the article’s utilitarian function.

  • IP BLAWG

    Fruit Bowl Battle

    Beverly A. Berneman
    2/16/21

    In Brief:  Apple Inc. (the electronics behemoth) settled with PrePear (a food preparation app) over fruit logos.

    Here’s What Happened.  Most people are familiar with Apple Inc. and its apple logo. Apple Inc. and its products are ubiquitous and pervasive. At any time, a person can be wearing one of their watches, talking on one of their phones and watching a video on one of their tablets.

    PrePear is a new app that allows the user to save and organize recipes, create meal plans, shop efficiently for food and prepare healthy foods. PrePear adopted a pear logo, which makes sense considering the pun in the name. When PrePear sought to register its pear logo as a trademark, USPTO’s Examining Attorney didn’t see a likelihood of confusion between the pear logo and any other logo. The Examining Attorney cleared the application for publication.

    Then, Apple filed an opposition.

    In the notice of opposition, Apple claimed that the PrePear’s pear logo was too close to Apple’s logo. Although a different fruit was involved, Apple argued that the minimalist design of the pear logo with a single leaf was too similar to the apple logo with a single leaf. Apple argued that because the logos were similar, PrePear’s logo was likely to create confusion. Given how famous Apple’s logo is, Apple felt that consumers are going to be believe that Apple is the source of PrePear’s services. Essentially, Apple’s argument is that even though they aren’t direct competitors, the PrePear logo will dilute the effectiveness of the Apple logo.

    The owners of PrePear’s parent company, Russell and Natalie Monson, responded to the opposition saying that they are a small company with 5 employees. They then took to social media describing the terrifying experience of a giant company disputing their trademark. They started a petition to save their company that amassed over 25,000 signatures. Apple found itself the subject of a lot of bad press about its trademark actions.

    In the end, PrePear agreed to alter its logo somewhat by using a half leaf instead of a full leaf and everyone appears to be happy.

    Why You Should Know This.  A logo is an important part of a company’s identity. It creates brand awareness in the blink of an eye. Apple is within its rights to protect against dilution. Dilution is when the owner of a famous trademark can forbid others from using the trademark in a way that would lessen its uniqueness. Dilution of famous marks as its limits. When you see Apple’s logo you think, “Electronics”. You don’t think, “Food Preparation”.  Apple might have avoided a lot of bad press if it had been a little wiser about choosing its battles. Apple may now realize that it doesn’t own the entire fruit bowl.

  • Benefits Bulletin

    401(k) Cyber Theft - Who Is Responsible?

    Andrew S. Williams
    2/11/21

    Cyber theft of participant 401(k) accounts is a reality (see HERE).

    Courts are now sorting out who is responsible when an impostor diverts a participant's retirement funds with fraudulent distribution requests.

    Can the employer, as the plan sponsor, be held responsible when an outside service provider honors a suspicious distribution request?

    One federal court recently dismissed such a case against the employer because the plan's website provider was alleged to have processed and authorized a fraudulent online distribution request without adequate participant confirmation (that's Bartnett v. Abbott Laboratories, N.D. Illinois). However, employers are plan fiduciaries with a duty to select and monitor the performance of plan service providers. This opens the door to potential claims against employers for their alleged failure to pick service providers with adequate cyber security practices - even if the employer's own data systems are secure and well maintained.

    What should an employer do about this? First, of course, is to make sure your own house is in order by observing appropriate cyber security practices including employee education on avoiding fraudulent information disclosures by means such as phishing. With employees more likely to be working from remote locations during the COVID-19 pandemic, this threat may be significantly increased.

    Also important is to verify that plan service providers adequately protect participant account information with secure systems and practices to stop unauthorized distributions by generating security alerts (and participant notices) when there are changes in account information such as new passwords and access devices - as well as distribution requests.

    TAKEAWAYS

    Every 401(k) provider service agreement should require the service provider to observe appropriate cyber security protocols with respect to participant account information. Employers would be further protected if they are also indemnified by the service provider for damages cause by its failure to properly secure such information. As to the employer's own responsibility, consider maintaining fiduciary insurance to cover any security breach that allegedly results from the employer's conduct as the plan sponsor or designated "plan administrator."

  • IP BLAWG

    Trade Secret Food Fight

    Beverly A. Berneman
    2/9/21

    In Brief:  Always investigate when a new hire says they own proprietary information.

    AGroFresh Solutions Inc. is a global leader in preserving produce freshness. AGroFresh hired a consultant to help develop “SmartFresh”, a product that preserves harvested produce by releasing gas to delay ripening. AGroFresh protected the development of SmartFresh as a trade secret. While still under contract with AGroFresh, the consultant began working with an Indian company, Decco US Post-Harvest, to develop a near identical product called “TruPick”.

    Decco knew that the consultant was under contract with AGroFresh. The consultant told Decco that he owned proprietary information that he was using to develop TruPick so he wasn’t in breach of his contract with AGroFresh. Actually all of the information the consultant was using were AGroFresh’s trade secrets. Decco didn’t ask to review the consultant’s AGroFresh contract. Decco didn’t take any other steps to verify the consultant’s analysis of whether he was in breach of the contract with AGroFresh. In fact, Decco engaged in a bunch of dubious acts such as actively concealing its ongoing relationship with the consultant.

    AGroFresh sued Decco for trade secret misappropriation under the Federal Defend Trade Secret Act (DTSA) and Pennsylvania Uniform Trade Secrets Act (PUTSA). AGroFresh pointed to Decco’s refusal to review the contract or conduct a “meaningful investigation” into the consultant’s contractual obligations to AGroFresh as evidence of willful misappropriation.

    The jury awarded AGroFresh a $31 million judgment against Decco. The jury went one step further with a finding that the misappropriation was willful and malicious under both the DTSA and the PUTSA. Both statutes permit the addition of exemplary damages at the discretion of the court and attorneys’ fees with a finding of willful and malicious trade secrets misappropriation. 

    The judge held that the jury was reasonable in finding willful and malicious misappropriation. But the judge declined to award exemplary damages because the judgment was already excessive and because Decco recalled TruPick immediately upon the ruling that the consultant didn’t own proprietary information.

    WHY YOU SHOULD KNOW THIS. This is the type of situation where Employment Law and Intellectual Property Law collide. When hiring a consultant or employee who will be working on Intellectual Property, the first step has to be whether that new hire is bound by a non-disclosure agreement.  There’s a lot that Decco could have done but didn’t. Obviously, Decco should have asked to see the consultant’s contract with AGroFresh. Once it discovered that the relationship between the consultant and AGroFresh was still ongoing, it should have declined to employ the consultant. If it had decided to go ahead anyway, Decco should have investigated the consultant’s claims of owning the proprietary information.  You’ll note that the consultant wasn’t involved in this particular judgment. But the consultant had some major liability too since it appears that he’s the one who actually stole the trade secrets.

  • IP BLAWG

    Oh the Places You Can’t Boldly Go

    Beverly A. Berneman
    1/26/21

    In Brief:   A mash up of Dr. Seuss and Star Trek is not fair use.

    For almost four years, comics’ legend, Ty Templeton, and Star Trek’s “Trouble with Tribbles Episode” writer, David Gerrold and their company, ComicMix, have been in litigation with the Dr. Seuss Estate. ComicMix is trying to publish a graphic comic called “Oh, The Places You'll Boldly Go.” The comic mashed Dr. Seuss’ “Oh The Places You’ll Go” with Star Trek characters. ComicMix said it was fair use. The Dr. Seuss Estate said no.

    The procedural history is basically sometimes the courts said it was fair use and sometimes they said it wasn’t. The Ninth Circuit Court of Appeals may have ended ComicMix’s foray into the final frontier.

    The Ninth Circuit reversed summary judgment in favor of ComicMix and remanded the case back to the District Court. The Ninth Circuit held that all four factors of fair use weigh in favor of Dr. Seuss. The first factor (purpose and character of the use) weighed in favor of Dr. Seuss because Boldly wasn’t a parody of the original; it just evoked the original. The second factor (nature of the copyrighted work) weighed in favor of Dr. Seuss because the original was a creative fictional work. The third factor (amount and substantiality of the use) weighed in favor of Dr. Seuss because there was an extensive copying of the original work. The fourth factor (effect on potential market) weighed in favor of Dr. Seuss because it was able to show that Dr. Seuss makes money by authorizing collaborations. 

    The case is now going back to the trial court where it will be very hard for ComicMix to continue asserting fair use.

    WHY YOU SHOULD KNOW THIS.  Even the courts don’t see eye to eye when it comes to fair use. In this case, the courts at different levels volleyed back and forth with whether Boldly was fair use. Critics of the decision have some valid tribbles, I mean, quibbles. The analysis of the first factor seems to use a narrow definition of parody. The foundation of parody has to call back to the original so the reader or viewer can connect the two. And the definition of parody can be fluid. The analysis of the final factor could have been viewed another way. Simply ask the question: Would I buy Boldly instead of the original?  If the answer is “no”, then this factor should weigh in favor of fair use.

  • IP BLAWG

    Copyright Public Domain Class of 2021

    Beverly A. Berneman
    1/19/21

    In Brief:  On January 1, 2021, a large inventory of vintage content went into the public domain.

    In 1976, the Copyright Act was completely overhauled. The system of protecting copyrights changed giving longer protection and making it easier to claim a copyright. But pretty much all of the pre-1976 works were going to be treated differently. So the Copyright Act grandfathered in and extended the protection for these pre-1976 works. Originally, works created in 1923 or before were still in the public domain. On January 1, 2021, any works created from 1925 went into the public domain.

    Those works include (this list is by means exhaustive):

    Literary Works:

    · F. Scott Fitzgerald, The Great Gatsby
    · Theodore Dreiser, An American Tragedy
    · Alain Locke, The New Negro (collecting works from writers including W.E.B. du Bois, Countee
    Cullen, Langston Hughes, Zora Neale Hurston, Claude McKay, Jean Toomer, and Eric Walrond)
    · Aldous Huxley, Those Barren Leaves
    · W. Somerset Maugham, The Painted Veil
    · Dorothy Scarborough, On the Trail of Negro Folk-Songs
    · Edith Wharton, The Writing of Fiction

    Music:

    · “Always,” by Irving Berlin
    · “Sweet Georgia Brown,” by Ben Bernie, Maceo Pinkard and Kenneth Casey
    · Works by Gertrude “Ma” Rainey, the “Mother of the Blues,” including “Army Camp Harmony Blues”
    (with Hooks Tilford) and “Shave ‘Em Dry” (with William Jackson)
    · “Looking for a Boy,” by George and Ira Gershwin (from the musical Tip-Toes)
    · “Manhattan,” by Lorenz Hart and Richard Rodgers
    · “Yes Sir, That’s My Baby,” by Gus Kahn and Walter Donaldson
    · Works by “Jelly Roll” Morton, including “Shreveport Stomp” and “Milenberg Joys” (with Paul
    Mares, Walter Melrose and Leon Roppolo)
    · Works by Duke Ellington, including “Jig Walk” and “With You” (both with Joseph “Jo” Trent)
    · Works by “Fats” Waller, including “Anybody Here Want To Try My Cabbage” (with Andy Razaf),
    “Ball and Chain Blues” (with Andy Razaf), and “Campmeetin’ Stomp**”**

    Film:

    · Harold Lloyd’s The Freshman
    · The Merry Widow
    · Stella Dallas (silent version)
    · Buster Keaton’s Go West
    · Lovers in Quarantine
    · Pretty Ladies

    WHY YOU SHOULD KNOW THIS.  You can now enjoy and use these works without having to pay a license fee.

  • IP BLAWG

    That’s the Way the Pocky Crumbles

    Beverly A. Berneman
    1/12/21

    In Brief:   Trade dress protects the “look”. The “look” has to be non-functional and create a connection with the consumer. When the “look” is purely functional or for manufacturing convenience, like the design of a cookie, it’s not protectable as trade dress.

    Pocky is a cookie stick that comes in several flavors including chocolate or strawberry. The cookie was first produced in Japan in 1966. Pocky’s manufacturer, Ezaki Glico Co., Ltd. can boast of world-wide popularity for its cookie sticks.

    Lotte International America Co., decided to get into the cookie stick game. It came out with its own version called Pepero. There’s no question that the Pepero cookie stick is identical to the Pocky cookie stick.

    Ezaki Glico sued Lotte International for trade dress infringement in New Jersey district court. 

    The Third Circuit Court of Appeals ruled that the cookie sticks were not protectable as trade dress. U.S. Circuit Judge Stephanos Bibas, writing for the panel stated that: "Trade dress is limited to features that identify a product's source.” The Court held that the shape of the cookie stemmed from a utilitarian advantage; not from an attempt to serve as distinctive trademark. "The claimed features are not arbitrary or ornamental flourishes that serve only to identify Ezaki Glico as the source," "The design makes Pocky more useful as a snack, and its advantages make Pocky more appealing to consumers."

    Ezaki Glico argued that invalid trade dress should be limited to essential product designs. The court rejected this argument.  "So long as the design improves cost, quality, or the like, it cannot be protected as trade dress.”

    WHY YOU SHOULD KNOW THIS. Goldfish crackers are protected trade dress. You can’t really separate the shape of the crackers from the cracker itself. So why wouldn’t the same philosophy apply to Pocky cookies? The key is in whether the design is essential to the function of the product. A goldfish design is not essential to a cracker. But the design of the cookie sticks can only be in the shape of a stick.

  • IP BLAWG

    The 2020 Crippys – The IP Criminals Hall of Fame

    Beverly A. Berneman
    1/5/21

    In Brief:  In past years, we have awarded Crippys to those who achieved infamy by committing Intellectual Property crimes over the last year. Here are the winners of the 2020 Crippys.

    SECOND RUNNER UP CRIPPY: Goes to Anthony Levandowski. Anthony co-founded Google’s self-driving car program. He left Google and founded his own business that was later acquired by Uber. Google accused Anthony and Uber of stealing its trade secrets. Google accused Anthony of downloading confidential Google files that detailed the self-driving car program. Uber fired Anthony when he refused to cooperate with Uber’s internal investigation. Uber and Google settled. But the civil suit sparked an investigation that resulted in a 33 count grand jury indictment against Anthony. Anthony pled guilty to one count of trade secret theft. Considering the massive billion dollar scale of the crime, the judge sentenced Anthony to 18 months in prison and ordered Anthony to pay of $700,000 in restitution. From this we learn that a civil suit can launch a federal criminal indictment.

    FIRST RUNNER UP CRIPPY: Goes to Hao Zhang, a professor at China’s Tianjin University. Zhang and five other people were charged with economic espionage, theft of trade secrets and conspiracy for attempting to steal trade secrets related to wireless technology for a film bulk acoustic resonator. Zhang and his co-conspirators engaged in a complex conspiracy to bring the trade secrets to China. After a four-day bench trial, Zhang was found guilty and sentenced to 18 months in jail and a fine of $476,835.00. From this we learn that being a professor doesn’t mean that you are too smart to avoid criminal prosecution.

    GRAND PRIZE CRIPPY: Goes to the group of cyber-criminals who are exploiting the Coronavirus outbreak. These tireless hackers are using vulnerabilities in IT systems that have been stressed by massive remote working and learning. They have caused a spike in data security breaches that has put IT professionals on high alert. These intrepid criminals send millions of phishing emails posing as the Centers for Disease Control and Prevention and the World Health Organization to get people to click on links for more information about the Coronavirus. Then they steal private information and spread computer viruses and ransomware. Nothing like exploiting pandemic stress for nefarious purposes. Strangely, no one is stepping up to accept this award.

    WHY YOU SHOULD KNOW THIS:  As we look forward to a better year than the last one, extra vigilance is going to be needed to keep IP criminals at bay.

  • Benefits Bulletin

    Cybercriminals May Be Stalking Your 401(k) Plan

    Andrew S. Williams
    1/5/21

    CYBERCRIMINALS MAY BE STALKING YOUR 401(K) PLAN

    At least two pending federal cases deal with attacks on individual 401(k) plan accounts. The fact patterns are similar: a participant submits an electronic benefit withdrawal request to the employer or the plan's record keeper. The request is passed on to the plan's custodian for implementation.

    The custodian, as holder of the plan assets, then transfers the requested funds to the participant's bank account This is a routine transaction and the distribution has been implemented as intended.

    SO WHAT IS THE PROBLEM

    What follows is not routine because a cybercriminal has fraudulently obtained a copy of the withdrawal request and the participant's associated personal information. The fraudster then poses as the participant and submits an additional electronic withdrawal request. This request is processed and paid on behalf of the plan; however, the funds are transferred to an account designated by the impostor. Additional unauthorized withdrawals may follow.

    THE TWO PENDING CASES

    In Leventhal v. The Marblestone Group LLC et al., a Pennsylvania case, the participant, a lawyer and a principal in a law firm that sponsored the 401(k) plan, incurred an uninsured loss of over $400,000 in a series of unauthorized withdrawals resulting from an "unknown method of cyber-fraud." The lawyer filed an action against the plan's record keeper and custodian alleging breaches of their ERISA fiduciary duties.

    **The case survived a motion to dismiss as the trial court determined **that the allegations of fiduciary status and fiduciary misconduct of both plan service providers were adequate as a matter of law.

    **Note: The Leventhal case may be unique in that the law firm sponsoring the plan **was not sued for its role in the unauthorized account withdrawals. Because Leventhal was a principal in the law firm sponsor of the plan, suing the firm would be tantamount to suing himself! Any non-owner participant would likely join the employer-sponsor as a co-defendant.

    **Berman v. Estee Lauder Inc., a pending California case, illustrates a more likely approach. **The participant in Berman sued both the employer and the record keeper for processing a series of fraudulent transactions that depleted her 401(k) account. The alleged misconduct included:

    • failure to confirm distribution authorizations,

    • failure to provide timely notices of distributions by telephone or email, and

    • failure to recognize suspicious distribution requests (which, in this case, included multiple distribution requests involving transfers to different banks).

    WHAT CAN YOU DO TO SAFEGUARD YOURSELF

    The assets of 401(k) and other retirement plans represent a significant financial asset and present an inviting target for cybercriminals. Information openly available in the public record identifies these plans, their sponsors, and related information that may be useful to cyber-thieves.

    **Employers who sponsor these plans are almost always plan fiduciaries and likely targets of suits **over unauthorized plan withdrawals. Plan sponsors should consider their own cybersecurity protective measures and make sure that plan service providers have taken appropriate steps to secure the confidentiality of participants' personal information.  

    Plan service providers may want to implement additional steps in processing plan withdrawal requests. Implementing an additional verification step could not only prevent cybercrime but also could establish a better defense based on the provider's claim of non-fiduciary status.

  • IP BLAWG

    Big Girls Don’t Cry Over Fact or Fiction

    Beverly A. Berneman
    12/8/20

    The Jersey Boys is a Broadway musical (the “Play”) about the musical quartet, The Four Seasons (the “Band”). It debuted in 2005 and ran for over 10 years, toured the country repeatedly and was adapted into a movie in 2014.

    In the late 1980s, Band member, Tommy DeVito wrote an autobiographical “tell all" book about the Band. The book was ghost-written by Rex Woodard (“the Work”).  The Work was completed before the Play had been written and produced.

    DeVito’s widow, Donna Corbello, sued Frankie Valli (the Band’s lead singer) and a lot of other people for copyright infringement alleging that the Play was an unauthorized derivative of the Work.

    After long and arduous years of procedural history, including summary judgment orders and one previous appeal, the case was presented to a jury who found that infringement had occurred. The district court granted the defendants’ motion for judgment as a matter of law. The court overrode the jury’s findings and held that the similar elements in the Work and the Play were facts and not protected by copyright.

    Donna appealed. The Ninth Circuit Court of Appeals affirmed the judgment. The Ninth Circuit rested its decision on the "unremarkable proposition" that facts, in and of themselves, may not form the basis for a copyright claims. Historical facts, common phrases and scenes-a-faire (scenes that are indispensable, or at least standard, in the treatment of a given idea) are unprotected by copyright.

    The interesting twist is that Donna tried to transform a non-fiction work into a fictional work. She claimed that certain facts were really embellishments. So they should be treated as fiction. The Ninth Circuit didn’t buy it. Under the doctrine of copyright estoppel (which the Ninth Circuit renamed “the asserted truths doctrine”), “elements of a work presented as fact are treated as fact, even if the party claiming infringement contends that the elements are actually fictional.” If the author claims a written work is historically accurate, he or she “cannot later claim, in litigation, that aspects of the work were actually made up and so are entitled to full copyright protection.”  “Copyright protects the creative labor of authors; it does not protect authors’ post-completion representations about the lack of veracity of their own avowedly truthful work.”

    WHY YOU SHOULD KNOW THIS. This case illustrates that the author of a non-fiction work can’t hang a “fiction” sign on it and claim copyright infringement. The foundation for copyright protection appears in the US Constitution (Art. I, Sec. 8. C. 8). Congress is empowered to make laws to “promote the Progress of Science and the Useful Arts”. But, copyright does not give an author a monopoly on facts.

  • IP BLAWG

    My Blue Ivy is Not the Same as Your Blue Ivy

    Beverly A. Berneman
    12/1/20

    In 2012, Veronica Morales registered the trademark, BLUE IVY, for her event planning company. Four years later, Beyoncé Knowles-Carter’s company, BGK Trademark Holdings, LLC filed a trademark application to protect, BLUE IVY CARTER, (named after Beyoncé’s daughter) for entertainment services.

    That’s when the fight began.

    Veronica filed an opposition to BGK’s trademark application with the Trademark Trial and Appeal Board (the “Board”).

    Veronica had a lot of arguments for opposing BGK’s application. Unfortunately, the Board rejected each of Veronica’s arguments and dismissed the opposition.

    Veronica argued that BGK never intended to use the name as a trademark. Veronica based this assertion on an interview that Beyoncé’s husband, Jay-Z gave to Vanity Fair. In the interview, Jay-Z said that he and Beyoncé applied to register Blue Ivy’s name as a trademark not because they wanted to do anything with it, but to prevent others from benefitting from the name. The Board rejected this evidence as hearsay within hearsay. 

    Veronica argued that BGK was a serial filer of bad faith trademark applications. The Board rejected this argument because BGK had only filed one previous application that was voluntarily abandoned.

    On the issue of likelihood of confusion between the two marks, the Board analyzed the factors and came out on BGK’s side. The two marks were almost identical in look and sound. But their services were different. BGK was not in the business of providing event planning. Veronica’s event planning might involve finding entertainment, but it wasn’t focused on entertainment services. Both Veronica and BGK provided branding and marketing. But the Board didn’t see that a customer would be confused about the services they provided. The Board also held that Veronica failed to present any evidence showing that the parties’ goods and services were “provided in the same trade channels or to the same classes of purchasers.”

    There was also a discovery side note. Apparently, Veronica complained that BGK didn’t comply with discovery but Veronica failed to follow through on ways to force compliance. BGK complained that Veronica had weaponized the discovery process to “pry into” Beyoncé’s personal life and “threaten and intimidate her.” The Board ruled that both parties were at fault and so any discovery disputes won’t affect the ruling. 

    WHY YOU SHOULD KNOW THIS. Two trademarks can look and sound the same and still not cause a likelihood of confusion. The consumer’s prospective is the deciding factor. If the goods or services are sufficiently different, the customer won’t be confused between the two. While we would be thrilled to have Beyoncé’s company handle our weddings, christenings, bar/bat mitzvahs, etc., it’s unlikely that we would be confused with Veronica’s Blue Ivy event planning services.

  • Benefits Bulletin

    Is Your 401(k) Plan Too Complicated?

    Andrew S. Williams
    11/18/20

    DOES YOUR 401(K) PLAN OFFER TOO MANY INVESTMENT OPTIONS?

    Recent cases against university-sponsored retirement plans include allegations that these plans are complicating the investment decisions of participants because the plans offer too many investment choices.

    As alleged in one complaint, the plans provide so many options that participants are left with a "virtually impossible burden" of deciding where to invest their retirement funds.

    HOW DOES YOUR 401(K) PLAN STACK UP?

    The university plans involved in litigation that may go to the U.S. Supreme Court offered hundreds of investment options (240 in one plan and 180 in another). While other issues are involved, including allegations of poor performance and excessive fees, the lower courts have been reluctant to resolve the issue of how many options might too many.

    However, there are cases (Hecker and Renfro in the Seventh Circuit) which hold that plans with 26 and 73 investment options do not violate applicable ERISA requirements.

    SO, WHAT IS THE SWEET SPOT?

    Notably, Northwestern University, a defendant in litigation that may be accepted for review by the U.S. Supreme Court, reduced its retirement plan investment options to "about 40" after plaintiffs filed suit. The stated purposes of this reduction included enabling "simpler decision-making by participants."

    So, it probably makes sense to keep the number of plan investment options well below one hundred even though record keepers may offer the availability of several hundred investment funds.

    IS THERE A BETTER NUMBER FOR YOUR PLAN?

    Plan administrators might want to put themselves in the shoes of their typical 401(k) participant and conclude that fewer investment options would be better. You may determine that your sweet spot is somewhere between ten and forty mutual funds (plans with a "brokerage window" option are a different animal and necessarily offer direct investment in thousands of stocks and bonds).

    TAKEAWAYS

    Regardless of how many investment options are provided in your 401(k) plan, make sure that its investment array includes low-cost index funds. As one court observed, "the average investor will do better investing in low-cost index funds than attempting to select individual stocks or actively-managed mutual funds." Such an investment option also provides a defense to any claim that your plan is providing high-risk mutual funds that charge excessive administrative fees (see here for details).

    And bear in mind that courts have determined that low-cost index funds are prudent retirement plan investments—as a matter of law.

    Andrew S. Williams | Benefits Bulletin
    aswilliams@gct.law
    312.696.1373

  • IP BLAWG

    Zoom Smashes Trade Secrets

    Beverly A. Berneman
    11/17/20

    Discussing confidential or trade secret information through video conferencing platforms can be hazardous to the health of trade secrets. 

    Smash Franchise Partners, LLC and Smash My Trash LLC operate a mobile trash compaction business. Smash’s trucks compact trash in the customer’s dumpster. This allows the customer to fill the dumpster with more trash and save on waste management fees. Smash sells franchises to entrepreneurs who want to run Smash branded franchises.

    Todd Perri, a serial entrepreneur, was interested in becoming a Smash franchisee. Smash sent Todd some information and invited him to watch Smash’s YouTube videos. Then there were Zoom meetings called “unit economics calls”. Smash sent Todd an Excel worksheet that contained franchise economic data. All of this was preliminary. Once Todd decided to commit, Smash asked him to sign a non-disclosure agreement which he did. Then Todd attended weekly “Franchise Forum” calls on Zoom where Todd was supposed to learn the “secret sauce” of operating a Smash franchise.

    Todd decided that with his engineering background and entrepreneurial experience, he didn’t need to purchase a franchise. He could just set up a competing business.

    Smash sued Todd and his company, Kanda Holdings, Inc. for misappropriation of trade secrets, conversion, unfair competition, and breach of a non-disclosure agreement.

    The court denied Smash’s motion for preliminary injunction to bar Todd from using Smash’s alleged trade secrets.

    The court held that Smash was not reasonably likely to succeed on the merits of its trade secret claims because, even assuming trade secrets existed, Smash failed to take reasonable measures to protect them. The court listed the ways in which Smash went wrong:

    • Smash freely gave out information in the Franchise Forum calls to anyone who expressed an
      interest;

    • Smash could have, but didn’t, require participants to enter a password to join the forum;

    • Smash could have, but didn’t, put people in a waiting room before allowing them to attend
      the call so that Smash could make sure only authorized people were on the Zoom call;

    • Smash didn’t follow its own procedures which required taking a “roll call” to make sure
      only authorized people were attending the Zoom call; and

    • Todd was able to show that at least 20 unidentified people attended the Zoom meetings
      without NDAs.

    Based on this, the court determined that Smash would not be able to prove at trial that it took reasonable measures to protect its trade secrets and confidential information from being disclosed.

    WHY YOU SHOULD KNOW THIS. Trade secrets have two primary components. First, they are used in trade. Second, they are subject to reasonable measures to prevent disclosure. Trade secrets and confidential information are fragile beings. Their value is destroyed once everyone knows them. Zoom offered Smash a lot of tools to protect the information that was being shared. Smash didn’t use them. Smash’s outcome has other implications as well. With employees working remotely and using video conferencing, every business should have set policies and enforcement procedures about sharing trade secrets and confidential information while working remotely.

  • IP BLAWG

    Everybody Does It Fails as a Defense

    Beverly A. Berneman
    11/10/20

    Some of you may recall the argument you used with your parents that went something like “Everyone else gets to go” or “Everyone else’s parents let them [fill in the blank]”. Chances are that these arguments were unsuccessful.

    Elie Tahari Ltd. learned that “Everybody does it” doesn’t work in a copyright infringement case either.

    The Tahari fashion brand is famous for high end sleek and trendy clothes.

    Mark Iantosca, a Brooklyn-based photographer, snapped a picture of the digital content creator and stylist, Lin Niller Huynh, wearing a Tahari outfit. Tahari posted the photo on its social media, complementing Lin’s style and crediting Mark as the photographer.

    The problem is that Mark didn’t grant Tahari a license to post the photo. So he sued Tahari for copyright infringement.

    In granting Mark’s motion for partial summary judgment on the issue of liability, the district court rejected each of Tahari’s defenses. And there were quite a few. The most unusual one was the “Everybody does it defense”. Tahari argued that its use of the photo was “di minimus” and simply reposting a picture in social media is commonplace and trivial. The court held that there’s “nothing ‘trivial’ about a business utilizing a professional photographer’s work to promote its products”.

    There were other unsuccessful defenses too. Tahari challenged whether Mark had registered the copyright before filing suit. The court held that Mark held a valid copyright since he identified the registration number in the complaint. Tahari argued that the infringed photo may not be the one deposited with the Copyright Office in connection with the registration. The court, sua sponte, ordered up a copy of the deposit from the Copyright Office and verified that the photo and the registration matched. Tahari argued that the posts were “fair use”. This one was a hard sell because there was nothing transformative about reposting a photo for commercial purposes. So, the court held that each fair use factor weighed in Mark’s favor and against Tahari. Finally, Tahari argued that it gave Mark credit for the photo. The court held that attribution is not a defenses to copyright infringement.

    The parties were ordered to appear at a conference to discuss damages.

    WHY YOU SHOULD KNOW THIS. The free exchange of content over social media platforms creates all too many opportunities to post someone else’s works without permission. When the sharing of content is used to promote products or services without permission, infringement can become a costly proposition. Note also that that giving attribution is not a defense to copyright infringement.

  • IP BLAWG

    Copyright Trolling Hasn’t Died

    Beverly A. Berneman
    11/3/20

    In 2017, I awarded the grand prize for IP criminals to the disgraced Prenda Law Firm. This stain on the legal profession had created honey pot porn websites and then sued people who downloaded their content for copyright infringement. The lesson of creating your own porn to entice illegal downloads seems to have resonated. But wholesale copyright infringement cases are still out there.

    Wholesale copyright infringement cases usually work like this. The owner of the content (doesn’t have to be porn) has a list of IP addresses that show alleged illegal downloads. The content owner files suit naming a number of “John Does” using a boilerplate complaint. Then the lawyers file a motion for expedited discovery to figure out who holds the accounts for the IP addresses. Once they get the names and addresses, they send out demand letters. The amount in the demand is usually low enough to make it more expensive to hire a lawyer then to defend the case. A certain number of low hanging fruit John Does agree to pay the demand. When the plaintiffs reach a saturation point, they dismiss the case.

    Over the years, some courts have denied expedited discovery based on a boilerplate complaint. The courts have held that the IP address is not enough and that the complaints have to contain facts that demonstrate that the subscriber of the IP addresses actually infringed. But, there are other courts who are perfectly fine with these wholesale, bare bones complaints.

    Strike 3 Holdings LLC, an adult movie company that produces films under the names, Blacked, Tushy, and Vixen, was able to overturn two rulings that denied its motions for expedited discovery. Up until these two decisions, Strike 3’s motions were routinely denied making a huge dent in Strike 3’s copyright infringement litigation. That trend may now be reversed.

    In one case, the lower court focused on Strike 3’s robust filing history to determine that Strike 3 didn’t know if any Doe defendant actually committed copyright infringement. So the lower court held that the complaint failed to state a claim for relief. On appeal, the court reversed finding that the complaint alleged enough at the pleading stage to warrant the expedited discovery.

    In the second case, the lower court didn’t hide its disdain for Strike 3 while denying expedited discovery. The court described Strike 3's films as "aberrantly salacious" and assigned "great weight" to the privacy expectations of the John Does in a case involving "particularly prurient pornography". The appellate court reversed finding that the district court focused on the unsupported and negative inferences from Strike 3’s litigation strategy rather than on the legal aspects of stating a claim in the complaint.

    Time will tell if these decisions will result in a surge of John Doe copyright infringement cases.

    WHY YOU SHOULD KNOW THIS. Let’s focus on what this might mean for any unsuspecting business. Illegal downloads from the Internet are not confined to porn. Mainstream movies fight the battle of illegal downloads too. Then there’s other types of content like photos, graphics and music. Employees have been known to illegally download content during work hours for their personal use as well has on behalf of their employers. The opportunities for doing so have only heightened since the COVID-19 pandemic with more people working remotely. Then there are the opportunists who highjack signals and aggregate them to illegally download content in clusters. There are some measures that a business can take to reduce this exposure. First, create and enforce policies and procedures for employees’ use of company computers. Second, build in systems that block access to websites that are outside the scope of the business. Third, make sure that systems are safe and secure from cyberattacks. And fourth, obtain cyber insurance.

  • IP BLAWG

    Dueling Embedding Decisions

    Beverly A. Berneman
    10/27/20

    Embedding is a technical process that allows one website to link to and incorporate content from a second website. So when the user visits the first website, they see the content on the second website even though the content is actually still on the second’s website. 

    In the past couple of years, there have been two decisions about whether or not embedding is copyright infringement.

    First up, Justin Goldman sued Breitbart News Network (among others) for using his photo of Tom Brady. The photo went viral. It was posted on Twitter, Reddit and other websites such as Breitbart. All of this viral posting happened without Justin’s permission. Breitbart filed a motion for summary judgment. In its motion, Breitbart argued that embedding an image is not copying the image. The court denied Breitbart’s motion. The court held that embedding an image on a website can be considered copyright infringement. So the matter needs to go to trial.

    Then there’s Stephanie Sinclair’s suit against Ziff Davis LLC and Mashable. Stephanie is a professional photographer. She displays her works on her website and on Instagram. She uploaded one of her photos titled “Child, Bride, Mother/Child Marriage in Guatemala” onto her Instagram account. Mashable, a media and entertainment platform, asked Stephanie for permission to use the photo for an article on female photographers. Stephanie said no. Mashable published the article and used an embedded version of the photo from Stephanie’s Instagram account. The court held that embedding the photo from Instagram was not copyright infringement, in this case. The court relied on Instagram’s Terms of Use in which Stephanie granted Instagram the right to sublicense the use of content that she uploaded onto Instagram. Instagram sublicensed the use of the photo to Mashable for embedded use. The court didn’t directly address whether embedding content would have been infringement without Instagram’s Terms of Use.

    WHY YOU SHOULD KNOW THIS. Copyright infringement occurs when someone copies the work of another without permission. But is the technological act of embedding content really making a copy? The current version of the Copyright Act was written in the 1970s before the digital revolution. The Act didn’t contemplate emerging technologies and how a simple thing like “copying” may operate differently from the then current technology. Unless and until there’s a better understanding of whether embedding is infringement, look before you embed. Pay attention to whether there’s a license to embed the content.

    On another note, Mashable asked for permission and was turned down. Although Mashable was saved by Instagram’s terms of use, that might not always happen. So don’t go ahead and use someone else’s content after they turn you down. It might be considered willful infringement. And no one wants to go there.

  • IP BLAWG

    When a Friendly Beer Turns Unfriendly

    Beverly A. Berneman
    10/13/20

    Brooklyn Brewery (“Brewery”) has been around for more than 30 years. Brewery sells craft beers all over the country. Brooklyn Brew Shop (“Brew Shop”) was founded in 2009 and sells beer brewing kits.

    In 2010, Brewery started receiving calls from customers trying to reach Brew Shop. So Brewery emailed Brew Shop about it and suggested that Brew Shop “keep an eye on it”.

    Apparently, neither side was too worried about customer confusion at that time. Brewery and Brew Shop started collaborating on projects related to beer making, including co-branded beer-making kits, promotional events, books on beer making and educational beer making programs.

    It was a match made in beer heaven. Until May 2015. That’s when Brewery found out that Brew Shop registered its trademarks in 2011 and had another application pending. Brewery launched an internal investigation into how Brew Shop’s business was impacting Brewery’s business. The results of Brewery’s investigation led it to oppose Brew Shop’s pending application and to file cancellation proceedings against the registered marks with the Trademark Trial and Appeal Board (“Board”).

    Brew Shop defended the actions with arguments that were two sides of the same beer mug.

    As to the opposition proceeding, Brew Shop said that Brewery’s opposition was barred by laches. Laches is an unreasonable delay to assert one’s rights that results in material prejudice to a party’s use of the trademark. Normally, laches isn’t available in an opposition proceeding because there’s a narrow 30 day window within which to bring an opposition proceeding. But in this case, the Board held that laches is available because Brew Shop had prior registered marks that are similar to the applied for mark. So the opposition proceeding was barred by laches.

    As to the cancellation proceedings, the Board held that Brewery had both waited too long to act and acquiesced to Brew Shop’s marks. Acquiescence is when (1) the owner of the trademark receives assurances for the other that it was ok to use the mark; (2) the owner relied on the assurance; and (3) the owner would experience undue prejudice if it now had to cease use of the mark. Brewery knew about Brew Shop and even collaborated with it for years. During this time, Brew Shop built its business using those trademarks. So to stop Brew Shop now would cause extreme hardship to Brew Shop’s business. The Board held that Brewery’s participation in joint activities for over four years established acquiesce.

    Brewery had some arguments for why it waited so long. Brewery argued that it thought Brew Shop was just a small, local company and didn’t know how big Brew Shop was until it discovered the trademark registrations and applications. This argument is called “progressive encroachment”. That means a trademark owner is not forced by the rule of laches to sue until the likelihood of confusion caused by the accused use presents a significant danger to the mark. The Board rejected this argument.

    Brew Shop was allowed to keep its trademarks.

    WHY YOU SHOULD KNOW THIS. Brewery’s problem was not having a cohesive branding plan. It saw a great opportunity for collaboration. But Brewery was aware of actual confusion and didn’t seem to mind while the collaboration was going well. Collaboration between like-minded businesses can strengthen both businesses. But, it shouldn’t stop either party from protecting their own brand. There might have been a better outcome if there had been a cross-licensing agreement. Then both sides would have known about the extent of the other side’s trademarks and they could have created an exit strategy that didn’t hurt either side when the collaboration ended.

  • IP BLAWG

    Booked that Title

    Beverly A. Berneman
    10/6/20

    “Engirlneer” may be hard to pronounce. But once you know its message, it makes sense.

    Shannon DeVivo, a professional environmental engineer, wanted to encourage women and girls to seek careers in the STEM fields (science, technology, engineering and math). So Shannon wrote a series of books titled “The Engirlneers”. The books also invite readers to visit www.engirlneer.com to “Learn how to become an Engirlneer”. The books and the website feature fictional female characters with interests in STEM-related fields.

    After Shannon’s website went live and the books became available for purchase, Celeste Ortiz filed an intent to use application to register ENGIRLNEER as a trademark for sweatshirts and shirts, cups and mugs, and lanyards.

    Shannon then filed two trademark applications to register the trademark for her books, advice services and educational website. She immediately filed an opposition with the Trademark Trial and Appeal Board (the “Board”) to block Celeste’s application.

    The matter went to trial before the Board.

    Celeste had two major arguments. First, she argued that Shannon lacked standing to oppose Celeste’s trademark because Shannon hadn’t applied to register the mark before Celeste did. The Board found that the dates of Shannon’s trademark applications don’t control whether or not she had standing. The date of first use of the trademark controlled. So Shannon had standing.

    Celeste next argued that she wasn’t going to use the mark for a book or website so there’d be no likelihood of confusion with Shannon’s mark. The Board held that the marks are exactly the same and Celeste’s products tend to be the kind of collateral goods that a consumer would connect with Shannon’s works. So customers could be confused as to whether Shannon was the source of Celeste’s products.

    The Board sustained the opposition.

    WHY YOU SHOULD KNOW THIS. This case brings up two really important things to remember about trademarks. First, trademark rights are based on use. That’s why Shannon’s date of first use of her clever Engirlneer trademark was so important to her ability to oppose Celeste’s registration. Even if Shannon hadn’t filed applications to register the mark at all, there’s a good chance she would have won the day anyway. That’s because anyone who feels that the registration of a trademark will interfere with their rights can oppose the registration. But it’s better not to take a chance and file your trademark application as soon as possible. Second, trademark rights can sometimes extend beyond the goods and services identified by the owner. This happens when goods or services are related to the ones identified in the owner’s application. In this case, the Board pointed out the relatedness between books and a website and collateral goods (e.g. wearing apparel) that a consumer would connect with books and a website.

  • IP BLAWG

    A Copyright Application is Just a Form. Or is it?

    Beverly A. Berneman
    9/29/20

    Registering the copyright in a work has a lot of advantages, including establishing ownership, access to federal courts for litigation and the ability to recover statutory damages and attorneys’ fees for infringement. So far so good. But to register a copyright, you have to fill out an application following Copyright Office rules.

    Unicolors, Inc. creates, purchases and gets exclusive rights to a large inventory of graphic works that are printed on fabrics and sold to fashion brands. Unicolors filed suit against H&M, the low cost clothing store that originates out of Sweden. Unicolors complained that H&M was selling garments that used graphics substantially similar to those owned by Unicolors.

    Unicolors is no stranger to copyright infringement cases. Unicolors has been accused of being a copyright troll because it has filed over 700 copyright infringement lawsuits over the last few years.

    The district court entered judgment for Unicolors in the amount of $266,209.33 in damages, $508,709.20 in attorney’s fees, and $5,856.27 in costs. H&M appealed. The Ninth Circuit Court of Appeals reversed the judgment. The reversal had nothing to do with whether or not H&M committed copyright infringement. Instead, the Ninth Circuit found problems with Unicolors’ application to register its copyrights.

    Unicolors had filed the registration for the work at issue as part of a “collection” that included 31 separate designs. In order to file as a “collection”, the works have to be published in a single unit. That definitely wasn’t the case with Unicolors’ fabric designs. In fact, some of the designs in the "collection" had never been made public. So Unicolors knew that the application was inaccurate.

    Once a defendant alleges inaccuracies in a copyright application, the district court is supposed to submit a request to the Register of Copyrights “to advise the court whether the inaccurate information, if known, would have caused it to refuse registration.” So the Ninth Circuit sent the case back to the district court to follow through on the required process.

    WHY YOU SHOULD KNOW THIS. This case demonstrates the importance of filing accurate copyright applications. Clawing in multiple works for a group application may save on the filing fees ($55.00 per work). But the cost savings comes at a cost (pun intended) when suing for infringement. Also, it’s interesting that the Ninth Circuit didn’t say that H&M had to prove an “intent to defraud” the Copyright Office. The inaccuracy in the application is enough.

    The Copyright Office recognizes that filing applications in single units can be cost-prohibitive for some content creators. So, there are some works that can be filed in batches even if they weren’t originally published together. Up to 750 photographs can be registered in a group. However, published photos have to be registered separately from unpublished photos. There are also ways to register groups of non-photographic works which is kind of complicated. For more information you can consult the Copyright Office’s Circular No. 34.