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

Entrepreneurs who work hard and build a business over decades realize that, at some point, they need to think about slowing down and stepping back. Frequently, planning and specific decisions about transition are put off. Entrepreneurs worry about two things that can make delay an attractive option. Number one is a concern about their standard of living if they sell their business. Number two is facing the prospect of disposing of the entrepreneur’s legacy business that may represent a lifetime of work and achievement.

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

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

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

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

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

As the Cubs neared their historic World Series win, opportunists saw a way to cash in. %CUT% Imagine if you will, it’s September 2016. Cubs are on their way to breaking a 108 year losing streak. The streets of Chicago are lined with euphoric fans. Tables full of Cubs merchandise are everywhere. Street vendors are encouraging fans (whether die hard or fair weather) to purchase logo branded merchandise to support the Cubs. But there’s a problem with this picture. Some of those vendors don’t have a license from the Cubs. So, their blue, red and white merchandise is counterfeit. The Cubs filed suit against 84 counterfeit vendors seeking an injunction. The suit was settled with a confidential settlement agreement and a permanent injunction. What isn’t confidential is that the vendors acknowledged that their products bear “substantially indistinguishable” or “confusingly similar” imitations of the Cubs’ marks. The vendors also admitted they have no legitimate right to use those marks.

If you don’t own the rights to your content, it could go places you don’t want it to go. %CUT% Actor and musician, Jared Leto’s production company, Sisyphus, hired Naeem Munaf to shoot a video of Leto’s band for promotional purposes. The parties didn’t have a written agreement. In the video, Leto made some disparaging remarks about Taylor Swift. Realizing that he had a celebrity dis gold mine, Munaf sold the offending video to TMZ.com for $2,000. Two days after TMZ.com posted the video, Sisyphus had Munaf sign a non-disclosure agreement. Sisyphus’s team then registered the video with the U.S. Copyright Office and sued Munaf for copyright infringement. The court granted summary judgment for Munaf.

Criminal copyright infringement can get you kicked out the U.S. %CUT% Raul Zaragoza-Vaquero has been in the U.S. for less than 5 years. Raul sold bootleg CDs. Raul’s business model got him convicted of criminal copyright infringement. But his troubles didn’t end there. The Immigration and Nationality Act allows the deportation of someone who engages in crimes involving moral turpitude. So immigration authorities started proceedings to deport Raul. Raul appealed to the U.S. Dept. of Justice’s Board of Immigration Appeals to allow him to stay in the U.S. He lost. Although there was little precedent for it to rely on, the Board ruled that copyright infringement is a crime involving moral turpitude. The Board relied heavily on precedent in criminal trademark infringement cases and other theft type cases. The Board also looked to the legislative intent that copyright infringement enforcement was an important priority.

If you use a phrase to describe your product, it probably isn’t a trademark. %CUT% Simone Kelly-Brown registered the phrase “Own Your Power” in a special form (see the first picture). When Oprah Winfrey’s “O” Magazine used the same phrase on its cover (second picture), Kelly-Brown sued for trademark infringement. The case took a tortured path up and down from trial court to appellate court to trial court and back to appellate court. In the end, the Second Circuit Court of Appeals affirmed summary judgment for Oprah and her publisher. The Court held that Kelly-Brown’s use of the phrase was merely descriptive of her products and services. Oprah demonstrated that the phrase had been in use since at least 1981. Oprah, herself, used the phrase in a 1993 commencement address which predated Kelly-Brown’s use of the phrase. Kelly-Brown tried to argue that the mark had acquired secondary meaning because the consuming public had come to identify the mark with her goods and services. But, the trial court held that Kelly-Brown didn’t have enough proof to support her position.

Translating a word incorrectly can put a trademark registration at risk. %CUT% Aachi Spices & Foods brought a proceeding before the TTAB to cancel Kalidos Raju’s trademark registration for “Aachi” for various food products. Aachi alleged that Raju’s registered trademark interfered with its prior rights in a mark using the same word. Raju defended the proceeding by claiming that Aachi Spices & Foods was guilty of “unclean hands”. “Unclean hands” is an equitable doctrine that prevents a party from relying on its registration if it made a false statement during the trademark application process. According to Raju, Aachi Spices & Foods translated the word “Aachi”, to mean ‘distinguished lady’. Raju said that the word really means ‘grandmother’. The TTAB found evidence that the word is translated in different ways including both of the proposed translations. Aachi Spices & Foods’ petition to cancel Raju’s registration was granted.

A link to another website might get you in trouble. %CUT%Many websites include links to other websites. It’s a useful way to build browser traffic to the website and to benefit the linked website. But what happens if clicking on the link sends your user to a website that’s infringing on someone’s copyright? In the U.S., most courts have held that linking isn’t contributory copyright infringement because there’s usually no way to control or stop the infringement on the linked website. Due to a recent case in Europe, the same may not be true in the E.U. The Court of Justice of the E.U. ruled in GS Media BV v. Sanoma, that linking to a website that contained infringing material was infringement. The E.U. court held that the defendant was liable because it knew or had reason to know that the link sent a user to a website with infringing material.

Copyright Law may be the key to who owns the design of a video game promotional item. %CUT% In the popular video game, the Sims, a green icon called a “PlumbBob” identifies the character in play. The game’s manufacturer, Electronic Arts, Inc. decided it would be a great idea to include a USB drive that looked like the PlumbBob as a promotional item to be sold with the games. EA hired Lithomania who hired Direct Tech to make up a prototype and eventually manufacture the item. Lithomania then sent the prototype to a Chinese company to manufacture the USB for less than what Direct Tech was going to charge. Lithomania didn’t tell Direct Tech. Instead, it strung Direct Tech along with a series of agreements including an agreement to assign the IP in the USB. Direct Tech didn’t realize it lost the sale when the PlumbBobs appeared in stores. Direct Tech sued Lithomania for breach of contract and they settled. Then Direct Tech sued EA for copyright infringement and trade secret misappropriation. The district court granted summary judgment to EA. The 9th Circuit Court of Appeals affirmed summary judgment on the trade secrets claim. But the Court reversed and remanded on the copyright claims. There were two issues of fact, namely: (1) whether the USB design was copyrightable because it was conceptually different from the utilitarian aspects of a USB; and (2) whether the USB design is a sufficiently original and non-trivial version of the original to be considered a derivative work.

AT&T announced a loyalty program called “AT&T Thanks”. Citibank had some problems with that. %CUT% Citibank thought the “AT&T Thanks” trademark would cause customer confusion with its loyalty program called “Thank You”. Citibank brought suit. Citibank argued that if anyone complains about AT&T’s rewards program, it would reflect badly on Citibank’s loyalty program. The court determined that the factors of customer confusion are either neutral or weigh against it. The court pointed out that customers seemed to be able to tell the difference among a wide variety of customer loyalty programs that use “Thank You” or some variation of it. So, they should be able to see the difference between a loyalty program for telecommunications services (AT&T) and one for financial services (Citibank). The judge denied Citibank’s motion for preliminary injunction.

Carpenters have a saying: "measure twice, cut once”. This opening line from a recent 7th Circuit Opinion says it all. %CUT% Final Call sold over a hundred copies of Jesus Ali’s portrait of Nation of Islam leader, Louis Farrakhan, without Ali’s permission. Ali sued Final Call for copyright infringement. The trial court relied on authority from the 7th Circuit that, through a typo, incorrectly shifted the burden of proof of an affirmative defense from the defendant to the plaintiff. While taking some responsibility for the error, the 7th Circuit reversed and remanded for assessment of damages.

The USPTO won’t register a trademark for the sale of marijuana. %CUT%Morgan Brown tried to register the name of his Washington State store, Herbal Access, as a trademark for the sale of “herbs”. Morgan’s specimen of use was a picture of the store with a neon green cross on it. For those not in the know, the green cross signals the location of a medical marijuana dispensary. Seeing that, the intrepid examining attorney visited Morgan’s website and, sure enough, Morgan sold marijuana. The examining attorney refused registration based upon an unlawful use of the trademark in commerce. While the State of Washington allows the sale of medical marijuana, federal law does not. Registration would be barred as long as it’s a federal offense to sell marijuana. The refusal was confirmed on appeal to the TTAB.

Liking something on a Facebook page is not a form of Intellectual Property. %CUT% Stacy Mattocks created an unofficial Facebook fan page for the television series, “The Game”. Black Entertainment Television LLC (“BET”) acquired the rights to the show. BET allowed Stacy to use the trademarks and content on her fan page. BET even directed users to “like" Stacy’s fan page. BET was going to hire Stacy for a full time position. Negotiations broke down and Stacey didn’t get the job. BET instructed Facebook to migrate the page to BET. Stacy sued BET for stealing the “likes” on her Facebook page. The court held that Facebook “likes” can’t be stolen because they’re not a form of Intellectual Property.

Be careful what you text because you may end up a party to contract. %CUT% A court in Massachusetts held that the texts between two real estate sales agents resulted in a binding contract. In most states, contracts for the sale of real estate have to be in writing. This is called the Statute of Frauds. The writing has to be signed by both parties and contain sufficiently complete terms and an intention to be bound by those terms. The court held that the e-mails and texts between the agents filled all of the requirements of a binding written contract.

The NOBLE HOUSE trademark got lost in a corporate muddle. %CUT% Floorco Enterprises LLC claimed that it was using the NOBLE HOUSE trademark for furniture since 2010. The problem? Floorco wasn’t really using the mark. Its parent company, Furnco International Corp. was. And even then, Furnco was only using it sporadically. Noble House Home Furnishings filed a cancellation proceeding. The reason is simple . . . well, not quite. A parent company’s use of a mark can inure to the benefit of its subsidiary. But a subsidiary’s use does not inure to the benefit of the parent. Since, Floorco wasn’t using the mark, it was deemed abandoned. The TTAB canceled Floorco’ s trademark.

SCOTUS tells the Federal Circuit to back off of patent damages rules. %CUT% Under the Patent Act, a court may increase the damages up to three times of a judgment. Last year, in two decisions, the Federal Circuit Court of Appeals imposed strict limits on the plaintiffs’ ability to get enhanced damages. The Federal Circuit required a plaintiff to show two things: (1) that there was a high likelihood that the infringer’s actions constituted infringement; (2) that the infringer knew the risk. Under this standard, any defense by an accused infringer that was not frivolous would get them off the hook. SCOTUS reversed the Federal Circuit recognizing that the Patent Act left enhanced damages to the discretion of the trial court. SCOTUS acknowledged that Federal Circuit’s test was trying to keep enhanced damages for egregious cases only. But the test was too rigid. Justice Roberts wrote: “[The] threshold requirement excludes from discretionary punishment many of the most culpable offenders, such as the “wanton and malicious pirate” who intentionally infringes another's patent—with no doubts about its validity or any notion of a defense—for no purpose other than to steal the patentee's business.” The two cases will go back to the trial courts to determine the availability of enhanced damages using a less rigid and more neutral test.

Sometimes, the last word isn’t really the last word. %CUT% Here are some updates for previous posts:

Just in time for summer, Mister Softee gets its just desserts courtesy of a federal judge. %CUT% The war started when Dimitrio Tsirkos decided to rebrand his “Mister Softee” trucks as “Master Softee”, including mimicking the graphic of the delicious ice cream cone. Tsirkos was a former vendor of the venerated purveyor of the taste of summer. As a vendor, Tsirkos had to pay royalties. As a non-vendor, he got out of having to pay Mister Softee. Mister Softee sued and obtained an injunction permanently enjoining Tsirkos from operating his rogue ice cream trucks using confusingly similar branding. Tsirkos refused to surrender. He continued to operate his Master Softee trucks despite the injunction. A federal court judge held Tsirkos in contempt repeatedly and ordered him to pay $329,000.00 in damages. When he still wouldn’t stop, the court entered another order adding $287,258.00 in attorney’s fees and $52,605.00 in costs.

A phantom trademark can be exorcised. %CUT%A 'phantom trademark' is in which an integral portion of the mark is represented by a blank or missing information. The USPTO will refuse registration of a phantom mark because it would be hard for someone to identify and distinguish the goods and services covered by the mark. Enterprise Holdings, Inc. got caught in the vortex of phantom marks when it tried to register this trademark for vehicle dealerships, fleet management services and vehicle rental services. The examining attorney refused registration on the basis that the mark was missing information. Part of the problem was that the specimens of use each separately showed the mark with added words “car sales”, “commercial trucks” and “fleet management” in the bottom white space. The examining attorney called this ‘mutilation’ of the mark. Enterprise Holdings, Inc. wouldn’t take no for an answer and appealed to the TTAB. The TTAB reversed the refusal. The TTAB held that the added terms were generic descriptions and could not function as a trademark alone. The added terms can be deleted from the mark without changing the commercial impression.

It looks pretty; but how protectable is it? %CUT% Two recent cases highlight how different types of IP law protect the structure of a product. In one case, In DeVinci Editrice S.r.l. v. Ziko Games LLC, a court held that the structure of the “Bang!” card game cannot be protected by copyright. While the plaintiff could copyright the artwork on the cards, the game structure, mechanics and rules are not protectable. Millennium Laboratories, Inc. v. Ameritox, Ltd., a court held that the structure of medical test reports can be protected as trade dress as long as the structure isn’t functional. In this case, the owner chose the structure because it didn’t look like any of its competitors’ reports.