The good news is that the parties settled their trade secret litigation. The bad news is the release language in the settlement agreement. %CUT% Security Camera Warehouse, Inc. sued Bowman, one of its former owners, for trade secret misappropriation. During the settlement negotiations, unbeknownst to Security Camera, Bowman still had access to Security Camera’s servers and downloaded Security Camera’s trade secrets. After the parties signed a settlement agreement, Bowman set up a new company and competed with Security Camera using the information he took during settlement negotiations. Security Camera brought a second suit against Bowman for trade secret misappropriation. The court held that Security Camera’s claims were barred by the release in the settlement agreement from the first case. The language specifically released Bowman from any claims that Security Camera may have in the future based on events that occurred before the execution of the settlement agreement.

A Star Trek and Dr. Seuss mashup will Live Long and Prosper. %CUT% Comics legend, Ty Templeton, and Star Trek’s “Trouble with Tribbles Episode” writer, David Gerrold, collaborated on a comic called “Oh, The Places You'll Boldly Go.” The comic mashed Dr. Seuss-like drawings and dialogue with Star Trek characters. The Dr. Seuss Estate sent Templeton and Gerrold a cease and desist letter citing trademark and copyright infringement. This resulted in Kickstarter shutting down the campaign to fund the development of the comic. Litigation ensued. Victory goes to Templeton and Gerrold. A California court ruled against Dr. Seuss on the trademark claim. The court held that Templeton and Gerrold’s use of the Dr. Seuss trademarks was ‘nominative fair use’. Although the court didn’t rule yet on the copyright claims, the court indicated that the use of Dr. Seuss’ copyrighted works was sufficiently transformative to be fair use.

My advertising injury may not be your advertising injury. %CUT% 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.

Copyright only protects the non-standard elements of an architectural plan. %CUT% 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.

The USPTO’s audit procedure sets up a ‘use it or lose it’ proposition. %CUT% 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.

Google avoided the ignominious fate of losing its trademark due to genericide. %CUT% 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.

You’re a successful business owner and you’d like to plan ahead. Professionals are urging you to prepare a “succession plan” – but you look at it as a retirement plan. Getting out of the daily grind might be nice, but giving up your life’s work and your legacy business? Maybe not so nice. No matter how they sugar coat it, “succession planning” looks like you’re calling it quits.

Dan Aykroyd’s Crystal Head Vodka gets to keep its dress. %CUT% 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.

A repaired Rolex may not be a Rolex. %CUT% 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.

Abstracts are nice in visual arts but not in patents. %CUT% 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.

A new law prohibits blocking negative reviews. %CUT% 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.

The common law trademark rights of an Antarctic marathon organizer got a chilly reception from the TTAB. %CUT% 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.

If your organization sponsors a 401(k) or other retirement plan, you or someone in your organization is a fiduciary to that plan. You may have hired a service provider to administer the plan (a third party administrator, or “TPA”), but the buck stops with your organization. This is because the fine print in your TPA’s service agreement says the official “Plan Administrator” is the employer, not the TPA. This means the employer has the ultimate responsibility for the plan’s ERISA compliance.

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

No group of artists suffers copyright infringement more than photographers. %CUT% 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.

When a virtual reality tech developer leaves, the real world intercedes. %CUT% 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.

The conventional wisdom is that in a foreign company v. Chinese company patent suit, the Chinese company will always win. Maybe not. %CUT% 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.

Many 401(k) plan sponsors have wisely selected investment professionals to assist in selecting the plan’s investment menu, typically a listing of various mutual funds. Other plan sponsors may allocate this duty to company officers and other key employees. In either case, the resident plan fiduciaries (the company officers and key employees who act on behalf of the sponsor as plan administrator or trustee) have a legal duty to “select and monitor” plan investments and, in the case of sponsors who have hired investment professionals – to monitor not only investment performance but also the performance of the investment professionals.

When all else fails, file for Chapter 11. %CUT% 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.

False advertising in a judge’s election has consequences. %CUT% 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.

On Valentine’s Day, expressions of love do not belong in a black box. %CUT% 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.

The Affordable Care Act (ACA) has tied the hands of employers who would like to reimburse employees for the cost of their individual health insurance coverage. Under the ACA, tax-free reimbursement of employee health insurance costs was not permitted through a health reimbursement arrangement (HRA) unless it was “integrated” with an employer-provided group health plan. Stand-alone HRAs were prohibited even for small employers that were not subject to the ACA mandate to offer group health coverage.

Louis Vuitton found nothing funny about “My Other Bag is a Louis Vuitton”. %CUT% 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”.

If you have a powerful brand, don’t use your power to alienate your fans. %CUT% 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.

If you don’t own it, asking for a preliminary injunction is the wrong strategy. %CUT%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.