HiQ uses an automated application to look at publicly available data on social media and provide analytics to its customers. This is called “data scraping”. Businesses use the data for all sorts of things designed to increase revenue.
HiQ scraped data from LinkedIn. LinkedIn’s Terms of Sale (TOS) prohibits use of automated scraping tools like the ones used by HiQ. LinkedIn will block any IP addresses that engage in scraping. Technically, most of the data on LinkedIn isn’t really LinkedIn’s data. Users post their own data and make it available to anyone who visits LinkedIn. So, HiQ determined that it could scrape publically available LinkedIn data.
LinkedIn sent a cease and desist letter to HiQ based on HiQ’s violation of LinkedIn’s TOS and the Computer Fraud and Abuse Act (CFAA). The CFAA was enacted in the early history of the Internet to stop hacking. The key to the CFAA is the unauthorized use of permission to access a website. LinkedIn thought CFAA and its interpreting case law gave it a strong case.
HiQ filed a declaratory judgment action seeing a ruling that its data scraping practices were ok. The district court granted LinkedIn’s motion for preliminary injunction. HiQ appealed. The Ninth Circuit Court of Appeals affirmed the preliminary injunction and remanded the case back to the district court for a final adjudication.
While HiQ may have lost this battle, the Ninth Circuit’s opinion seems to open the door to HiQ ultimately winning the war. The Ninth Circuit felt that HiQ raised some serious questions about the reference to access “without authorization” under the CFAA. The CFAA “contemplates the existence of three kinds of computer information: (1) information for which access is open to the general public and permission is not required, (2) information for which authorization is required and has been given, and (3) information for which authorization is required but has not been given (or, in the case of the prohibition on exceeding authorized access, has not been given for the part of the system accessed).” The Ninth Circuit believed that HiQ has an argument that public LinkedIn profiles, available to anyone with an Internet connection, fall into the first category. Therefore, using that public information would not violate the CFAA.
WHY YOU SHOULD KNOW THIS. The Ninth Circuit appears to be ok with data scraping in the context of freedom of competition and information. What might save HiQ is the fact that it is only scraping public data. There’s an open question as to whether HiQ is still violating LinkedIn’s TOS. So both HiQ and LinkedIn have some battles to fight before the war ends.
On June 30, 2020, the Supreme Court of the U.S. ended the long battle between Booking.com and the United States Patent and Trademark Office (USPTO).
Booking.com is a popular website that allows customers to book anything travel related online. Booking.com’s Netherland based operator tried to register several different versions of the trademark in the U.S. The USPTO rejected the applications. The USPTO determined that the trademarks were generic. A generic name isn’t eligible for trademark registration because it’s the name of the class of goods and services rather than a source or product identifier.
Booking.com appealed to the district court who reversed the USPTO. The district court held that the name isn’t generic. But, in a twist of fate, the district court also awarded attorneys’ fees to the USPTO. Both Booking.com and the USPTO appealed. The Appellate Court for the Fourth Circuit affirmed the district court’s ruling. The USPTO petitioned for a writ of certiorari to the Supreme Court which was granted.
The Supreme Court held that Booking.com was not generic. Justice Ruth Bader Ginsburg wrote the opinion for the majority. Justice Ginsburg described the mark as a compound of two generic terms, “booking” and “.com”. Then Justice Ginsburg viewed the mark from the consumer’s point of view. If the consumer doesn’t see the compound word as generic, then it isn’t. Apparently, Booking.com’s owner was able to show that consumers didn’t think that Booking.com was a basic way to describe other travel related websites like Travelocity. The USPTO tried to argue that two generic words create a generic compound word. But the opinion pointed out that even the USPTO doesn’t follow that rule.
One of the USPTO’s most interesting arguments was that allowing protection for Booking.com would give the mark owner undue control over similar terms. Justice Ginsburg believed the danger of this was overblown because the usual limitations of a likelihood of confusion would still apply.
WHY YOU SHOULD KNOW THIS. It all comes down to how to choose a trademark. Fanciful, arbitrary and suggestive marks are more protectable. Some descriptive terms are capable of being registered if they bring something more to the table like being used long enough for consumers to connect the descriptive mark with the owner’s goods and services. But merely descriptive terms are not capable of being registered. And generic terms aren’t protectable at all. They’re just what you call the goods or services, like “soap” for “soap”. The wrinkle in this case was that two generic terms were “mashed up” to create a registerable trademark. But care should be taken when trying to duplicate Booking.com’s success.
VIP Products LLP sells a series of dog toys called “Silly Squeakers”. The toys are often fashioned to look like well-known beverage containers. One of the toys is called “Bad Spaniels”. It looks like a Jack Daniel’s whiskey bottle but with alterations. Of course, the name was changed from Jack Daniel’s to Bad Spaniels. But it didn’t stop there. Instead of “Old No. 7”, it said “Old No. 2 on your Tennessee Carpet” (which should resonate with dog owners). The alcohol description read 42% POO BY VOL” and “100% SMELLY” (again something instantly recognized by dog owners).
Jack Daniel’s Properties, Inc. didn’t think it was funny. So they sent a cease and desist letter to VIP. VIP responded by filing suit for a declaratory judgment seeking a judgment that there was no infringement of the Jack Daniel’s brand. After losing in the district court, VIP appealed to the Ninth Circuit Court of Appeals. The Ninth Circuit affirmed the district court’s ruling that the Jack Daniel’s bottle was protectable trade dress. However, the Ninth Circuit reversed the other district court findings that VIP’s use of the Jack Daniel’s brand caused dilution and trademark infringement. The Ninth Circuit held that the “Bad Spaniels” toy was an expressive work entitled to First Amendment Protection.
This case was not unlike a 2007 involving Louis Vuitton and a dog toy named “Chewy Vitton”. Sort of the same thing happened. Haute Diggety Dog, LLC manufactured and sold parody dog toys. One of them was designed to look like a Louis Vuitton hand bag. The Fourth Circuit Court of Appeals held that the toy was a parody of the original. And as a humorous expressive work, it’s protected by the First Amendment. The Fourth Circuit called it “permissive fair use”.
WHY YOU SHOULD KNOW THIS. Parody can be a strong branding strategy for the right product. However, parody creates a tension between a trademark owner’s need to protect their brand and their ability to stop anything that references their brand. The line between going along with the joke and accusations of trademark infringement can be treacherous to navigate. But, in this case, Jack Daniel’s was given the proverbial newspaper on the nose by the Ninth Circuit.
Alex Cruz was on his way to visit his girlfriend in the Tribeca neighborhood of New York City. He heard a commotion, took out his iPhone and took a snap shot. He thought he was just taking a photo of the police subduing a crazy person. What he really caught was a picture of law enforcement taking down a suspected terrorist. Alex shared the photo with a friend who then posted the photo on Instagram.
Cox Media, Inc. published the photo without Alex’s permission. Alex sued Cox Media for copyright infringement.
Cox Media came up with some defenses.
The first defense was that the photo wasn’t creative enough to be protected by copyright. Cox Media argued that Alex didn’t make any creative choices when he took the photo. The court rejected this argument. Copyright law has long recognized rights based on a bare minimum of creativity. A photograph may be original in three respects: rendition, timing, and creation of the subject. This means that almost any photograph may claim the necessary originality to support a copyright. Alex’s photo met these criteria.
Cox Media next claimed that its publication of the photo was fair use. The court rejected the argument using four-factor test in the Copyright Act which are: (1) the purpose and character of the use; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market or value of the copyrighted work. The court didn’t have to go further than the first factor. The heart of the first factor is whether the use is “transformative”. Transformative use alters the meaning or message of the first work. In other words, does the potential infringer’s use add something new with a different purpose or nature of the work? Cox Media didn’t do anything to transform Alex’s photo. It just republished it without commentary. So the court held that Cox’s use was not transformative. The court felt that buying Cox Media’s fair use defense is “antithetical to the purposes of copyright protection to allow media companies to steal personal images and benefit from the fair use defense by simply inserting the photo in an article which only recites factual information—much of which can be gleaned from the photograph itself.”
Cox Media’s last defense was the First Amendment. The court rejected this too holding if fair use exists then First Amendment rights are protected too.
WHY YOU SHOULD KNOW THIS. This case has two takeaways. First, the amount of creativity needed for copyright protection is often misunderstood. All that is needed is a bare minimum of creativity. It doesn’t have to be novel. It doesn’t have to be on the Annie Leibowitz level of artistry. And it isn’t measured by “sweat of the brow”. Alex didn’t have to work hard to take his photo. But he got copyright protection anyway. Second, fair use is not a catch all even for media companies. Reporting on an incident in the news isn’t a blank check to use some else’s protectable content.
Sex predicting technology for bovines is an extremely lucrative business. The revenues are $200 million industry worldwide with about $50 million of that in the USA.
Inguran, Inc. d/b/a Sexing Technologies owns patents that sort bovine semen as it is prepared for artificial insemination. This helps breeders control how many bulls and how many cows will be born. Obviously, the technology is very valuable in the dairy industry and in the cattle breeding business.
ABS Global Inc. filed an antitrust suit against Sexing Technologies. ABS alleged that Sexing Technologies used anti-competitive contracts and acquired about 60 patents in order to corner the market on sexed bovine semen.
Sexing Technologies filed a counterclaim against Sexing Technologies for infringing on about 6 patents.
The matter went to trial in 2016. The jury returned a mixed verdict finding that Sexing Technologies did improperly corner the market but that ABS was not entitled to damages because it didn’t prove anti-competitive harm. The jury found in Sexing Technologies’ favor on the counterclaim and awarded it $2 million.
The decision was appealed. The Seventh Circuit Court of Appeals reversed the decision. The Seventh Circuit found the jury verdict “somewhat puzzling” and contradictory. The verdict had invalidated a claim that was dependent on a validated claim. So the Seventh Circuit remanded the matter back to the trial court for a new trial.
At the conclusion of the new trial, the jury found in Sexing Technologies’ favor again and also found that two other patents were infringed. The jury added another $8.5 million to the original judgment raising the total award to Sexing Technologies to almost $11 million.
WHY YOU SHOULD KNOW THIS. Patent infringement litigation can be long, arduous and expensive. Sometimes, there are rewards at the end. Sometimes there aren’t. The outcome of patent litigation is not as easy to predict as breeding livestock with sexed bovine semen. ABS took a huge risk when it pursued antitrust litigation. Patents, by their nature, are anti-competitive. A patent gives the owner a monopoly on the use of the invention for 20 years. The owner can use the invention pretty much any way they want during the life of a patent. That doesn’t mean that a patent forecloses antitrust litigation. It just means that the anti-completive activity has to be more than practicing the patent.
The Hard Rock Café’s operating company, JC Hospitality LLC, tried to register the trademark “The Joint” for its casino based music venues. The USPTO refused registration. On appeal, the TTAB affirmed. Hard Rock then appealed to the Federal Circuit Court of Appeals who also affirmed the refusal.
The most protectable types of trademarks are inherently distinctive. Inherently distinctive trademarks are arbitrary, fanciful or suggestive of the goods or services. Merely descriptive trademarks can eventually be registered as long as they acquired distinctiveness through use.
The Examining Attorney who reviewed the application thought the words “The Joint” were either merely descriptive or even possibly generic for a restaurant or entertainment space. So the Hard Rock Café argued that The Joint had acquired distinctiveness.
To determine whether a mark has acquired distinctiveness, the USPTO or a court may consider: (1) purchasers’ association of a mark with its owner (typically by means of consumer surveys); (2) the length, degree, and exclusivity of use; (3) the amount and manner of advertising; (4) sales and number of customers; (5) intentional copying; (6) unsolicited media coverage of the product or service bearing the mark.
In this case, the Examining Attorney had pointed to the fact that the dictionary defines the word exactly the way that Hard Rock used it. And there were a lot of third parties who used the same words in connection with other restaurants and entertainment venues. Hard Rock tried to argue that adding the word “the” to the word “joint”, distinguished it from other uses. Hard Rock pointed out that there are non-restaurant and entertainment uses for the word, such as another word for prison. So that made Hard Rock’s use more like a trademark. The Examining Attorney, the TABB and the Federal Circuit all rejected these arguments. The Federal Circuit’s opinion pointed out that although Hard Rock has spent millions for over 20 years promoting The Joint, there was no evidence of how much similar restaurant and entertainment venues spend on their promotion. Also, Hard Rock didn’t provide any evidence of unsolicited third party mentions.
So Hard Rock can’t register “The Joint” as a trademark.
WHY YOU SHOULD KNOW THIS. This opinion was rather harsh. In some ways, it set an impossible standard of proof for Hard Rock; and maybe others who try to prove acquired distinctiveness. Certainly, Hard Rock had longevity of use, a lot of advertising and a lot of money invested in advertising. But demanding proof of expenditures by other restaurant and entertainment venues? That kind of information isn’t public information. Imagine asking a competitor for that information. It would be unusual to even get a response. Unfortunately, this outcome may make it harder to prove a descriptive trademark acquired distinctiveness.
A motion trademark is generally considered a type of trademark called “trade dress”. Trade dress protects the visual appearance of a product. Some examples are: (1) the zoom-in view of a female statue at the beginning of every Columbia Pictures' movie (Reg. No. 1,975,999), (2) the "duck march" associated with PEABODY hotels (Reg. No. 2,710,415), and (3) the lighting effects that rotate around the microphone of Apple's SIRI personal assistant and knowledge navigator (Reg. No. 4,471,608).
But, trying to protect a motion as a trademark isn’t easy.
Take, for example, a tour bus operator in New York City, The Ride LLC. The Ride offers a twist on the usual sightseeing tour around Manhattan (when such things were done and will be again). At various times, when the bus stops, street performers break out into song and dance. The Ride has gotten a lot of good feedback on this fun sightseeing twist. So it tried to register the sightseeing twist as its trade dress.
The Ride submitted a drawing (see the picture) and described the mark as follows:
The mark consists of the live visual and motion elements of the trade dress of a guided bus tour in which as the bus approaches at least one predetermined location on the tour an entertainer who is dressed as a banker walks normally along the street and then performs a tap dance routine dancing act when the bus stops at the predetermined location as viewed from inside of the bus. The drawing shows two sequential freeze-frames of the mark, in which the top frame shows an entertainer dressed as a banker walking along the street on the side of the bus and in which the bottom frame shows the entertainer performing a tap dance routine at the predetermined location. Dotted lines in the drawing show placement of the mark and are not part of the mark.
The examining attorney refused registration and on appeal, the Trademark Trial and Appeal Board (TTAB) affirmed. There were basically 3 problems with the application.
First, the TTAB thought the description was incomplete. The description certainly had a lot of words in it. But the description didn’t include every permutation of the street performers’ costumes and their songs and dances. More importantly, the description failed to indicate whether the trade dress is a three-dimensional mark (the act of doing the things) or is a two-dimensional mark that can be interpreted as three dimensional (something animated).
Second, the specimens of use didn’t match the drawing. The specimens consisted of photographs of various performances inside and outside the bus. But none of them matched the drawing.
Third, the mark didn’t function as a trademark. The Ride submitted survey evidence from its former riders to show that consumers connect the street performances with The Ride’s services. The TTAB discounted the survey as self-serving. The Ride didn’t provide any evidence that the public at large saw the motion of the street performances as a source or product identifier for The Ride.
WHY YOU SHOULD KNOW THIS. This case shows the importance of the connection with the drawing of a trademark and the specimen of use. All 3 issues demonstrate the need to be careful as a trademark is being developed. Let’s focus on the second problem. The failure to match a drawing and a specimen of use happens more than you might think. To avoid this problem, owners should consider developing the specimen of use with an eye towards how the trademark will be featured on it. And, owners always consult with their trademark attorneys to help make the appropriate connection.
Kfir Moyal is a pop artist who has created commissioned pieces for celebrities like the Kardashians, Paris Hilton, Gloria Estefan, Flo Rida and Lil’ Kim. His signature style is to take a photograph and add a glittery sheen to it.
Douglas Kirkland is a Hollywood photographer with a long career who has photographed celebrities like Marilyn Monroe, Elizabeth Taylor and Marlene Dietrich.
In 2017, Kirkland sued Moyal for copyright infringement. Kirkland alleged that Moyal used some of his photographs, including one of Bridget Bardot. Moyal gave the photograph his classic treatment and titled his creation “Star Struck” (See picture). Moyal didn’t have a license from Kirkland to create the work. As the litigation went on, Moyal’s counsel withdrew from the case. Moyal didn’t appear after that and he didn’t retain substitute counsel. A default judgment was entered against him for $204,787.00 in damages along with a permanent injunction.
Kirkland discovered that Moyal was going to open an exhibit in a gallery in the Beverly Hills Sofitel hotel. The posters for the exhibit on Instagram and Twitter appeared to feature Star Struck. Since a permanent injunction against using Moyal's version of the photo was still in place, Kirkland went to court to enforce the permanent injunction.
Moyal says that he had no idea an injunction was entered. But that’s not going to help him.
WHY YOU SHOULD KNOW THIS. Kirkland’s original photograph was copyrighted in the 1970s. Moyal’s Star Struck was a derivative work of Kirkland’s original photograph. The ability to create derivative works is one of the bundle of rights included in copyright ownership. So, Moyal needed Kirkland’s permission to create the work. Let’s now focus on the injunction. Even though Moyal’s attorney withdraw from the first case, Moyal couldn’t just ignore it. Even if he didn’t know about the injunction, he knew that Kirkland was objecting to his use of the Bridget Bardot photograph. So, the second suit may have more dire consequences if Moyal’s knowledge of the infringement from the prior suit is considered willful infringement. There lies a cautionary tale in two ways. First, don’t use someone else’s content without either seeking permission for the use or getting an opinion of counsel that the use will be non-infringing or fair use. Second, never ignore litigation.
For about 20 years, Lucky Brand Dungarees, Inc. has been battling Marcel Fashions Group, Inc. over their trademarks. The US Supreme Court finally ended Lucky Brand’s struggle. At least for now.
Marcel received a trademark registration for “Get Lucky” for jeans. Lucky Brand received a trademark in “Lucky Brand”, also for jeans. Then the parties fought each other through three separate rounds of litigation over 20 years. The first round ended in a settlement in which Lucky Brand agreed not to use “Get Lucky” and Marcel released all claims. In the next round, when Marcel sued Lucky Brand, Lucky Brand brought up the settlement agreement in its pleadings but then didn’t address it again. Then there was the third round that ricocheted between the District Court and the Second Circuit Court of Appeals. At issue was whether Lucky Brand could assert the settlement agreement as a defense in the third round of litigation. The case ended up before the US Supreme Court. Justice Sonia Sotomayor, writing for the Court, held even though Lucky Brand didn’t litigate the defense in the second round, Lucky Brand could still use the defense in the third round.
The key to the decision was that Marcel was alleging different conduct in the second round than it did in the third round. Justice Sotomayor wrote, “[B]ecause the two suits here involved different marks and different conduct occurring at different times, they did not share a “common nucleus of operative facts.” However, if the third round of litigation involved the same nucleus of operative facts that had already been adjudicated Lucky Brand would not have been able to use the settlement agreement in its defense.
WHY YOU SHOULD KNOW THIS. When dealing with any type of lawsuit, a party can have a lot of different claims and defenses. Each of them should be addressed as completely as possible during the litigation. That’s because, generally, once an issue is raised and fully litigated, a party can’t try to re-litigate in a subsequent lawsuit. This is generally called “issue preclusion”. In the Lucky Brand case, the courts referred to it as “defense preclusion.” In the world of litigation, the effect would be the same. Lucky Brand wouldn’t be able to use the settlement agreement. But, if the same parties keep suing each other over different issues, claims and defenses may not be lost.
Two recent US Supreme Court cases give a loss for the State of Georgia and a win for the State of North Carolina.
State of Georgia’s Loss
The State of Georgia makes the simple text of its state statutes available to anyone who wants to look at them. Georgia hired a company to annotate the statutes featuring citations, an analysis of the statutes and opinions from the state’s attorney general. A company named Public.Resource.Org. Inc. copied and distributed the annotated version of Georgia’s statutes without paying for it. Georgia sued Public.Resource.Org for copyright infringement. The Supreme Court ruled that Georgia cannot sue for the copying and distribution of the annotated version of the state’s statutes. Chief Justice John Roberts wrote the opinion for the Court. Justice Roberts invoked the doctrine of “government edict” which means that public officials who create a governmental work cannot copyright their works. Justice Roberts pointed out that allowing a governmental unit to withhold access to government information would create a “first class” and an “economy class” of access to public information.
North Carolina’s Win
In 1996, a marine salvage company found the sunken slave ship, the Revenge. North Carolina commissioned a marine salvage company to resurrect the ship. The Revenge had been captured by the famous pirate Edward Teach (Blackbeard) and he had used the ship to conduct his piratical activities for about a year. The ship ran aground off the coast of North Carolina in 1718. The salvage company hired Frederick Allen to record videos and take pictures of the operation. Frederick registered the copyright in the works. North Carolina published some of the videos and photos. Frederick sued North Carolina for copyright infringement. The US Supreme Court affirmed the dismissal of Frederick’s lawsuit on appeal. Justice Elaina Kagan, writing for the Court, explained that under the doctrine of sovereign immunity, a state cannot be sued without its permission. Frederick tried to rely on the Copyright Remedy Clarification Act of 1990 (CRCA) which was supposed to remove a state’s sovereign immunity from copyright infringement cases. But a prior case decision had held that Congress didn’t have the constitutional authority to abrogate sovereign immunity. It’s interesting to note that Justice Kagan believed that an abrogation statute, if properly drafted, could have created a right of action against a state for copyright infringement.
WHY YOU SHOULD KNOW THIS. These two cases show parameters of copyright protection when dealing with a governmental unit. In the Georgia case, if a private company had owned the annotated statutes, it would have had the right to enforce the copyright. But Georgia owned the annotated statutes so it had to make them available to the public. In the North Carolina case, the problem was a poorly worded statute. Nonetheless, the holding stands. States don’t have to pay to use copyrighted works.
Zazzle, Inc. is an on-line marketplace for imprinted merchandise. Zazzle will then imprint the image on things like coffee mugs, t-shirts and, these days, face masks. Zazzle uses stock images but it also allows someone to upload their artwork or a graphic.
Greg Young Publishing Inc. (“GYPI”) is the licensing agent for various artists. GYPI sued Zazzle for using images belonging to its clients. Zazzle’s defense was that it relies on the user certification process so it shouldn’t be held liable. GYPI gave Zazzle a catalog of GYPI’s images and Zazzle kept on using the images anyway. Obviously, the user certification process didn’t work. A jury found that Zazzle’s infringement was willful and returned a verdict in favor GYPI in the amount of $460,800. The trial court reversed the jury’s holding that GYPI didn’t present sufficient evidence that Zazzle acted willfully. The damages were reduced to $351,000. The trial court also denied GYPI’s request for attorneys’ fees despite the fact that GYPI was the prevailing party. The trial court believed that Zazzle’s defense was objectively reasonable.
The Ninth Circuit Court of Appeals reversed the trial court on the issue of willfulness. The Ninth Circuit held that a reasonable jury could have found that Zazzle acted recklessly by knowingly relying on obviously insufficient oversight mechanisms. The Ninth Circuit did not reverse the trial court’s denial of attorneys’ fees but reserved the issue to be revisited considering the finding of willfulness.
WHY YOU SHOULD KNOW THIS. The U.S. follows the “American Rule” when it comes to fee shifting in a law suit. The aptly named American Rule means that parties to a lawsuit pay their own attorneys’ fees unless a statute or contract provides otherwise. The Copyright Act allows the recovery of attorneys’ fees by the prevailing party. Fee shifting in a copyright infringement case can vastly change the economic dynamic of bringing or defending a suit. Exposure to attorneys’ fees can have a chilling effect on vigorous advocacy. So, the courts have developed a standard for fee shifting. A claim or defense has to be “objectively reasonable”. In other words, do you have a good faith basis to argue your position? If you don’t and the other side is the prevailing party, you pay their attorneys’ fees. This leaves room for parties to come up with novel and innovative arguments without fearing an attorneys’ fees burden. In Zazzle’s case, just relying on someone else saying, “Yes, own this”, wasn’t objectively reasonable.
If the words “reply all” sound familiar to you, then you probably use email to communicate with others for various and sundry reasons. Despite their widespread use, these two words became the subject of trademark litigation.
In 2012, Reply All Corp. started to sell software to let users create and share conversations.
In 2014, Spotify’s Gimlet Media began producing a podcast named “Reply All”. The hosts, PJ Vogt and Alex Goldman talk about strange stories and trending topics.
Would you confuse Reply All’s software with the “Reply All” podcast? Gimlet Media was convinced that customers would be.
Gimlet Media sued Reply All for trademark infringement. After about 5 years of litigation, a judge ruled that almost every factor of a likelihood of confusion weighed against Gimlet Media and in favor of Reply All. The court found that the mark was fairly weak. Gimlet didn’t have a record of sales or marketing expenditures to show commercial strength. And the court acknowledged that the term “reply all” is a common term which is recognized by anyone who uses email. The names might be the same but the logos are different (see the graphic) and the products are different. They don’t compete in the same customer space. The court pointed out that Gimlet Media had no evidence of actual confusion. Note that you don’t have to prove actual confusion; it’s just one factor to look at. In this case, the court thought it was a significant factor.
WHY YOU SHOULD KNOW THIS. For registration purposes, most countries, including the US have adopted an international scheme of classes of goods and services. There are 45 of them. It is almost impossible for someone to register a trademark in all 45 classes. The class distinction is helpful when evaluating a likelihood of confusion between trademarks. If someone uses a word for the wholesale distribution of auto parts (Class 035), consumers are unlikely to be confused if someone used the same word for graphic t-shirts (Class 025). In the Reply All case, the words are the same but they were used for totally different goods and services. One caveat though. Some trademarks are so famous that even if the goods and services don’t compete directly, the owner of the famous mark (like Barbie, Rolex, Nike and Jack Daniels) can shut down the use of the trademark even if someone is using it in a different class of goods or services. This is called dilution.
Thru Inc. sued Dropbox for trademark infringement claiming to own the “DropBox” trademark. After a lot of litigation and some really good discovery, Dropbox was able to show that Thru may have had some bare rights to the “DropBox” mark but it never actually used the mark. Thru then sat back and watched as DropBox branded itself and became a household name for shareable file storage. Then Thru continued to drag its heels in litigation to cash in on DropBox’s initial public offering in 2018. DropBox discovered emails from Thru’s CEO which unabashedly chronicled Thru’s strategy. In the end, DropBox obtained a $2.3 million judgment that included attorney’s fees and costs.
So what was Thru to do? It filed for relief under Chapter 11 of the Bankruptcy Code. It proposed a plan to pay the entire judgment with interest in six years. The plan was confirmed over DropBox’s objections. DropBox appealed. The district court affirmed the bankruptcy court’s confirmation of the plan. Then DropBox appealed to the Sixth Circuit Court of Appeals. Dropbox argued the Chapter 11 plan was just a sham and indicative of Thru’s conduct in the underlying case. The appeal was dismissed due to mootness. The problem was that DropBox hadn’t sought any orders to stay the enforcement of the bankruptcy plan. DropBox argued that the concept of “equitable mootness” is antiquated and shouldn’t have any bearing on the appeal. The Sixth Circuit disagreed. By the time the appeal was heard in the Sixth Circuit, the plan had already been in place for some time and some payments had already been made. Therefore, at this late stage, it would cause undue hardship to unwind the plan.
Why You Should Know This. Filing bankruptcy is a legitimate strategy after a huge judgment. As is usually the case, Thru’s pre-bankruptcy petition conduct is irrelevant. Bankruptcy allows a debtor to reorganize and pay off at least some debt. In this case, as long as Thru continues to be in business, DropBox is probably getting more than it would have gotten if Thru closed its doors. As to DropBox’s failure to get a stay of enforcement of the plan pending appeals, bankruptcy courts are reluctant to do that. It basically hurts the other creditors waiting to be paid while a single creditor pursues at grudge.
ON ANOTHER NOTE: On February 19, 2020, the Small Business Reorganization Act went into effect. Small companies whose debts are less than $2.7 million can file a streamlined Chapter 11. It is both less expensive and faster than normal Chapter 11s. The attorneys at Golan Christie Taglia have already filed a number of these. So if you have any questions, please feel free to reach out.
For your stay at home pleasure, 2020 has granted us with a whole inventory of content that is now in 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, 2020, any works created from 1924 went into the public domain.
Those works include (this list is by means exhaustive):
o Douglas Fairbank’s, Thief of Bagdad;
o Clark Gable’s film debut, White Man;
o Buster Keaton’s, Sherlock Jr.; and
o The first screen adaptations of Peter Pan and The Age of Innocence.
o George Gershwin’s, Rhapsody in Blue;
o Giacomo Puccini’s opera, Turnadot;
o Everybody Loves My Baby;
o It Had to be You; and
o I’ll See You in My Dreams.
o Edgar Rice Burroughs’, The Land That Time Forgot and Tarzan and the Ant Men;
o Agatha Christie’s, The Man in the Brown Suit and Poirot Investigates;
o W. E. B. Du Bois’, The Gift of Black Folk;
o E. M. Forster’s, A Passage to India;
o Emma Goldman’s, My Further Disillusionment in Russia;
o Herman Melville’s, posthumously published Billy Budd;
o A. A. Milne’s, When We Were Very Young; and
o Mark Twain’s, Autobiography (posthumous).
o Bertolt Brecht’s, The Life of Edward II of England, adapted from Marlowe;
o Noël Coward’s, Hay Fever and Easy Virtue; and
o Eugene O’Neill’s, Desire Under the Elms.
o Edward Hopper’s, New York Pavements;
o Paul Klee’s, Asiatic God, Carnival in the Mountains, Flower Garden;
o Joan Miró’s, the Head of a Catalan Peasant (first work in sequence); and
o Diego Rivera’s fresco, Day of the Dead.
WHY YOU SHOULD KNOW THIS. When a work falls into the public domain, it is available for copying, preparing derivative works, distribution, display and performance without having to pay royalties or a license fee. But, be careful, some works may have their own derivative works that haven’t fallen into the public domain. For instance, in a recent case involving the Sherlock Holmes books, the court held that if the characters or situations were created before 1923, they were in the public domain and could be used. But new characters or situations that Arthur Conan Doyle published after 1923 are still protected by copyright.
IN CASE YOU WERE WONDERING: No doubt you noticed that IP News for Business has been gone for a little over a month. Not to worry. Everything’s ok. I had knee replacement surgery in the first week of March. Things are going well and I’m “back in the saddle”.
In the U.S., each side usually pays their own attorney’s fees. This is called the American Rule. Until about six years ago, that rule applied to appeals from USPTO decisions. So, if an applicant appealed the USPTO’s decision not to issue a patent or register a trademark, the applicant paid the applicant’s attorney’s fees and the USPTO paid its staff attorneys their salaries. Then about 6 years ago, the USPTO decided anyone who appealed an adverse ruling should have to pay the USPTO’s attorneys’ fees as well as their own.
It all started when the USPTO filed a request for an award of more than $36,000 in attorney's fees in a little-known trademark appeal filed by a man named Milo Shammas. The USPTO justified this request by pointing to language in the statute that applicants who file an appeal to the district court have to pay the USPTO “expenses”. The USPTO argued that “expenses” includes attorneys’ fees. To the horror of the Intellectual Property bar, the request was granted. Then the sluices opened and the USPTO started demanding attorney’s fees left and right.
This state of affairs lasted just this last December 2019 when the U.S. Supreme Court ruled against the USPTO. In Peter v. Nanktwest, Inc., the applicant appealed the USPTO’s rejection of a patent application for a method of treading cancer. The district court denied the USPTO’s motion to recover its legal fees as expenses but granted the request for recovery of expert fees. The Deputy Director of the USPTO appealed to the Federal Circuit Court of Appeals. Federal Circuit affirmed. So the Deputy Director appealed to the U.S. Supreme Court.
Justice Sotomayor, writing of the Court, didn’t pull any punches. Justice Sotomayor called the “American Rule” the bedrock principal that each party pays its own attorney’s fees, win or lose. The only exceptions are when a contract or statute provides otherwise. Statutes that provide for an award of attorney’s fees say so explicitly. Nothing in the Patent Act suggests that the USPTO can send an attorney’s fee bill to an opposing appellant. As a factual matter, history was on the appellant’s side as well. Up until 2013, the USPTO never paid its personnel from sums collected from adverse parties. So the USPTO has to pay its own attorney’s fees.
WHY YOU SHOULD KNOW THIS. Certainly, this is a victory for patent and trademark applicants. The process of protecting these types of Intellectual Property can be quite costly. The added burden of the USPTO’s attorney’s fees would have changed the value proposition for rejected applications and damaged the rights of the applicant/appellants. But there’s something else to note here. Often, when parties are gearing up for a dispute, the client asks the attorney, “Can I make the other guy pay your fees”. The answer is spelled out in Justice Sotomayor’s opinion. The answer is “yes” if a statute or contract has a fee shifting clause. But, even then, how the clause is phrased can taketh away from anything that had been giveth. For instance, in a statute, the attorney’s fees recovery may only be available only in “exceptional cases”. In a contract, attorney’s fees recovery may only be available to the “prevailing party”. So devil is in the attorney’s fees clause details.
We’ve covered denial of insurance coverage for trade secret misappropriation and affirming insurance coverage for copyright infringement. Now we turn our attention to the newer kid on the insurance block, cyber insurance.
AIG Commercial Insurance Co. offered a “Specialty Risk Protector” insurance policy. Larger companies could bundle a number of coverages in one policy such as coverage for specialty errors and omissions, network security and privacy, event management, crisis fund, network interruption, cyber extortion, media for publishers and broadcasters, media content, and employed lawyers’ professional liability.
SS&C Technologies Holdings, provides business process services fund administration to the financial industry all over the world. SS&C had a Specialty Risk Protector insurance policy from AIG. While providing fund managing services to one its clients, Tillage Commodities Fund LP, SS&C received six instructions to transfer Tillage’s funds totaling $5.9 million to bank accounts in Hong Kong. The problem? SS&C was the victim of spoofing. That’s where nefarious persons or entities mimic an email address and even the look of an email to fool someone into transferring money or property that evaporates into the pocket of the nefarious.
A few days after the transfers, SS&C discovered that it had been the victim of a spoofing. It immediately notified Hong Kong’s police and its insurer, AIG, of a potential lawsuit.
Sure, enough, Tillage filed suit against SS&C. AIG agreed to defend the suit but reserved the right to deny coverage and the cost of defense if the loss resulted from one of the insurance policy’s exclusions, including a “fraud” exclusion. The “fraud” exclusion flag had been raised because Tillage alleged in its complaint that an employee of SS&C had participated in the spoofing scheme. After the case was settled without an admissions, AIG denied coverage.
SS&C sued AIG for breach of contract and breach of the implied covenant of good faith hand fair dealing (a/k/a “bad faith”). The court denied AIG’s motion to dismiss. AIG’s chief argument was that it could deny coverage when fraud is involved, whether or not the insured committed the fraud. The court rejected that argument. Moving on the lack of good faith count, the court used the policy’s language and AIG’s reservation of rights letter against it. It was clear that AIG could only deny coverage if there was an adjudication that an employee had been involved in the fraud. Since the case was settled without admissions, AIG could tie a SS&C employee to the Tillage loss. So denying coverage could be considered bad faith.
WHY YOU SHOULD KNOW THIS. The court was able to interpret the policy exclusions in favor of the policy holder. That makes sense. SS&C had a reasonable expectation of coverage a fraud was committed by a third party. The bottom line is that an insurance policy is a contract. It should be interpreted like any other contract. Insurance companies who contort policy language to deny coverage can find themselves defending a bad faith claim.
Last week’s blog covered a situation where an insurance company wasn’t required to cover the costs of defending a misappropriation of trade secrets case. This week’s blog covers a situation where the insurance company was required to cover the cost of defense of an Intellectual Property dispute.
Photographers and stock photo owners filed 35 separate copyright suits against McGraw-Hill Education Inc. McGraw-Hill had paid for the right to use the images in textbooks and other publications. But the plaintiffs alleged that the images were used “in ways not completed by the parties”. McGraw-Hill settled 27 suits and 8 are still pending. McGraw-Hill’s attorney’s fees up to this point are estimated to be over $45 million.
McGraw-Hill tendered the defense of these claims to its insurer, Illinois National Insurance, an AIG subsidiary. AIG covered claims for about 3 years and then denied coverage on a going forward basis. McGraw-Hill brought a declaratory judgment action asking the court to affirm that AIG had to defend the cases.
The trial court denied both McGraw-Hill and AIG’s motion for summary judgment. On appeal, the denial of McGraw-Hill’s motion for summary was overturned. The Appellate Court looked at the relevant policy provision regarding copyright infringement. The policy barred coverage only where it is “judicially determined” that copyright infringement was intentional and was carried out by a senior vice president, or someone more senior. AIG hadn’t sought or obtained the required judicial determination. AIG tried to use the “fortuity doctrine” to deny coverage. According to AIG, the “fortuity doctrine” allows an insurance company to deny coverage for “losses that the policyholder knows of, planned, intended, or is aware are substantially certain to occur”. The Appellate Court rejected AIG’s defense holding that it would render the insurance policy illusory.
So, for now, AIG must cover McGraw-Hill’s hefty copyright infringement defense bills.
WHY YOU SHOULD KNOW THIS. An illusory contract is one where the promise of performance by one party is so insubstantial that it really isn’t a promise of performance at all. Exclusions in insurance policies are common. But exclusions that basically deny coverage for everything, don’t give the insured anything and so are illusory. Most courts will strictly interpret exclusions. And, usually, this ends up in the insurance company’s favor. However, in this case, AIG went a little too far in trying to exclude coverage.
This is all well and good. But what happens when you have cyber-insurance and there’s a multi-million loss? We’ll see in my next blog post.
If you like Sour Jacks and/or Welch’s Fruit Snacks, a lot goes on behind the scenes for your sugar pleasure. Promotion In Motion, Inc. or PIM holds the formulas and manufacturing process for the sugary snacks as trade secrets. PIM also owns the design of the packaging. Ferrara Pan Candy Co. manufactured and sold the sugar bombs for PIM from 1990 to 2014 pursuant to a confidentiality agreement and license.
In 2014, Ferrara merged with another company and formed the current iteration of Ferrara. The new Ferrara signed a new confidentiality agreement with PIM for the formulas and manufacturing process of the sugar delivery systems.
In connection with the merger, Ferrara cancelled its primary insurance policy with Liberty Mutual Fire Insurance Company, and its umbrella general liability insurance with Liberty Insurance Corp.
In 2015, PIM sued Ferrara alleging that Ferrara had stolen trade secrets to produce and market competing sugar fix enablers named Market Pantry, Black Forest and Sour Buddies. PIM also alleged that Ferrara’s packaging infringed on PIM’s trade dress. Ferrara tendered its defense to Liberty. Liberty agreed to take on the defense with a reservation of rights. Liberty brought a declaratory judgment action to determine if Liberty was obligated to cover the defense.
Then Ferrara came down from its insurance coverage sugar high. First, after discovery closed, Liberty withdrew from the defense of all but the trade dress infringement count. Liberty argued that trade secret misappropriation and breach of a confidentiality agreement weren’t covered by insurance. Then, Liberty obtained a judgment that it wasn’t obligated to cover the trade dress infringement count. The judgment was affirmed on appeal. The appellate court held that the alleged infringing acts took place post-merger. And there was no coverage post-merger because Ferrara had cancelled the policies. Ferrara now has to pay back all of the fees Liberty paid in defense of the PIM litigation.
WHY YOU SHOULD KNOW THIS. Most business insurance policies will cover claims for advertising injury. Advertising injury is very limited. Trade secret misappropriation is not an advertising injury. Breach of a confidentiality agreement is not advertising injury either. So Liberty didn’t have to cover the defense of those claims. Trade dress infringement can fall into the category of advertising injury. But Ferrara cancelled the policies. Was this an oversight during the merger process? Could be. But, the bottom line is that by cancelling the policies after the merger and not obtaining new insurance, Ferrara lost the ability to reach into the insurance sugar bowl for the defense of PIM’s claims.
Back in November 2016, this blog covered the case of the trademark, ADD A ZERO, for wearing apparel. The trademark is owned by Christian Faith Fellowship Church (“CFFC”). Adidas, the international sportswear powerhouse, sought to cancel CFFC’s trademark for various reasons. Adidas took on the cause because the USPTO refused registration of Adidas’s trademark, ADIZERO, due to a likelihood of confusion. Adidas argued that CFFC wasn’t using the trademark in commerce because CFFC only sold two items. The Federal Circuit Court of Appeals held that there is no ‘de minimis’ sale rule and so two sales were enough.
Not one to give up, Adidas continued to challenge CFFC’s trademark. Adidas complained that since the Federal Circuit ruling, CFFC is still only selling one or two items a year which isn’t enough for use in commerce. This argument was rejected, again.
Then Adidas asserted that the CFFC trademark didn’t function as a source or product identifier. Now before the Trademark Trial and Appeal Board (“Board”), Adidas argued that “Add A Zero” had been used by CFFC solely to inform its members of fundraising efforts. To support this argument, Adidas submitted numerous news articles, webpages and blog posts showing that many third parties used “add a zero” to denote their own fundraising efforts. The Board agreed that “the slogan ‘add a zero’ is informational and would be understood as such by the relevant public.” However, the Board did not cancel CFFC’s mark. The Board held that the design of the trademark was enough to transform the words from a slogan into a trademark. The Board reasoned, “[n]otwithstanding the informational nature of the wording, the specific combination, placement and shading of the wording and design elements of this special form mark create an integrated whole with a single and distinct three-dimensional commercial impression; that is, the mark is unitary.”
WHY YOU SHOULD KNOW THIS. The “unitary mark” is a unique creature in the world of trademarks. The USPTO’s Trademark Manual of Examining Procedure says that a mark is “unitary” when “it creates a commercial impression separate and apart from any unregistrable component.” The test for unitariness asks whether the elements of a mark are so integrated or merged together that they cannot be regarded as separable. The inseparable nature of the elements of the mark create an independent commercial impression. Creating a unitary mark may not be so easy. For example, just applying a different color or font to a phrase will not be enough. There has to be something else that creates a commercial impression. What’s the line between enough and not enough? An experienced trademark attorney can help with that analysis.
Apparently, some companies have an “ignorance is bliss” policy when it comes to reading patents. The belief is that if you don’t read it, you can’t be accused of knowing about it. And if you don’t know about it, you can’t be accused of willfully infringing on the patent. Willful patent infringement can increase or enhance the damages recoverable by a plaintiff. So a lack of willfulness can change the value proposition of prosecuting or defending an infringement suit. But is an ignorance policy a good idea?
By way of background, researching existing patents and patent applications is part of due diligence to make sure that: (1) what you have is really new enough to be patented; and (2) you aren’t infringing on an existing patent. A recent survey by Stanford Law School professor Lisa Larrimore Ouellette reported that 37% of researchers in the electronics and software space were instructed not to research other patents. Considering that there are hundreds of thousands of patents in this space, this might be a way of dealing with limited time and resources. It’s just not feasible to look through all of them while developing new inventions. So weighing the risks, companies make a strategic and business decision not to do any due diligence at all.
One company just learned the hard way that ignorance may not be so blissful.
Motiva Patents LLC brought an infringement action against HTC Corp. Motiva alleged that HTC was willfully blind to Motiva’s patents by having a policy of not reviewing patents belonging to others. Motiva also alleged that HTC went one step further, claiming that HTC allegedly performed specific acts to implement and enforce the policy. HTC filed a motion to dismiss arguing that Motiva failed to sufficiently allege HTC’s knowledge of Motiva’s patents. The court denied the motion to dismiss. The court held that a policy of not reviewing other patents is a deliberate action to avoid learning of potential infringement and could be construed as willful infringement.
The complaint stands and the case will now proceed to see if Motiva can prove its allegations.
WHY YOU SHOULD KNOW THIS. If HTC acted as alleged in Motiva’s complaint, HTC may have implemented the policy as a matter of self-preservation. It would have decided to take the risk of being accused of infringement for short-term cost and time-savings. Unfortunately, the Motiva v. HTC decision says “you’re damned if you do and you’re damned if you don’t”. So implementing an “ignorance is bliss” policy should be done after evaluating the pros and cons.
Bet you thought influencers are something new? Influencers are individuals who have authority, knowledge, a position or a relationship that gives them the power to affect purchase decisions of others. Using social media like YouTube, Twitter, Instagram, TikTok and others, influencers will post pictures or videos using a product or service. The goal is to encourage the influencer’s followers to use the same product or service. And if they do, the manufacturer, seller or service provider sees a boost in sales. So those companies compensate the influencer. Despite what you may think, various members of the Kardashian and Jenner families weren’t the first influencers. Actually, one of the first modern influencers was Irene Castle. She and her husband, Vernon, were popular dancers in the early Twentieth Century. They were so popular that Irene became a fashion trendsetter. She was responsible for shorter, fuller skirts and loose, elasticized corsets (goodbye whalebone stays!). She is also credited with introducing American women in 1913 or 1914 to the bob – the short, boyish hairstyle favored by flappers in the 1920s.
Given the relationship between the number of an influencer’s followers and the influencer’s value, it’s no surprise that an enterprising entrepreneur could help influencers increase the number of their followers. Enter Devumi, LLC (“Devumi”) and its owner and CEO, German Calas, Jr. Devumi and Calas used their websites Devumi.com, TwitterBoost.com, Buyview.com, and Buyplans.com to sell fake indicators of social media influence, including fake followers, subscribers, views, and likes to users of social media platforms, including LinkedIn, Twitter, YouTube, Pinterest, Vine, and SoundCloud. Devumi and Calas allegedly sold more than 58,000 Twitter followers, 4,000 YouTube subscribers, 32,000 YouTube views, and 800 LinkedIn followers. The problem, of course, is if the followers are fake, then the influencer’s value proposition is also fake. This ultimately harms the companies that pay influencers as well as consumers.
The Federal Trade Commission (“FTC”) sued Devumi and Calas. The FTC obtained a $2.5 million judgment. Devumi is now out of businesses. The FTC settled with Calas and agreed not to pursue the judgment against him as long as he pays $250,000.00 and never does this again.
WHY YOU SHOULD KNOW THIS. The Devumi and Calas FTC judgment is a cautionary tale for both influencers and the companies that use them. Influencers should carefully vet anyone who promises to increase the number of their followers. Companies using influencers should carefully vet the influencers and insure that they came by their followers in an appropriate way.
As the holiday season ramps up, a question arises. Can someone own a holiday trademark? Many have tried with various levels of success. The successful registrations don’t try to corner the market on holiday greetings. Here are some examples.
Trademarks Using a Foreign Language: (As far as the USPTO is concerned, the foreign language version is treated the same as the English Translation).
FELIZ NAVIDAD: Registered in 1997 for coffee beans and coffee drinks.
JOYEUX NOEL: Registered in 2010 for candles and wicks for lighting scented candles.
Connected to the Holiday:
MERRY CHRISTMAS FROM HEAVEN: Registered in 2009 for jewelry and Christmas tree ornaments and decorations.
MERRY CHRISTMAS - - IF APPLICABLE: Registered in 2010 for a website featuring personal greetings about Christmas.
MERRY CHRISTMAS YA FILTHY ANIMAL: Registered in 2016 for Christmas tree ornaments and Christmas decorations.
MERRY X(CROSS) MASS (See Logo): Registered in 2014 for beer mugs, coffee cups and coffee mugs.
HAPPY HANUKAH SHALOM (See Logo): Registered in 2012 for chocolate candy bars.
Completely Unrelated Goods and Services:
KWANZAA: Registered in 1994 for coffee.
MEOWY CHRISTMAS: Registered in 2016 for t-shirts, sweaters, baby bodysuits and tank tops.
MERRY CHRISTMAS YA LITTLE JERK: Registered in 2016 for shirts and sweaters.
MERRY CHRISTMAS BITCHES: Registered in 2017 for clothing.
KWANZAA KLAUS: Registered in 2018 for children’s toys.
WHY YOU SHOULD KNOW THIS. The registration of these trademarks does not impede your ability to use holiday greetings as intended. Merry Christmas, Happy Hanukah, Happy Kwanzaa and a Joyous New Year to all.
Qualcomm is a leader in the market of wireless chip connectivity that every cell phone needs. Qualcomm holds patents related to 3G, 4G and 5G networking technology as well as other software. Qualcomm demanded a license fee for every device that connects to a cellular network. In other words, all cell phones. It forced its customers, like Apple, to enter into patent license agreements for Qualcomm’s technology; even if the customer was using a chip manufactured by someone else, like Intel.
Enter the Federal Trade Commission (FTC). The FTC investigated Qualcomm and concluded that it was violating antitrust law. Antitrust law prohibits anticompetitive trade practices, i.e. monopolies. The FTC asserted that Qualcomm violated antitrust laws by forcing its customers to enter into patent license agreements for Qualcomm’s technology in order to purchase its chips. After a bench trial, the court entered judgment in the FTC’s favor. The court held that Qualcomm had a “no license, no chip” policy. Because of this policy, Qualcomm charged excessively high royalties. Not to get too complicated, but when a software company owns and licenses a standard essential patent (SEP), there are reasonable terms for licensing the software or Fair, Reasonable and Non-Discriminatory (FRAND) terms. Qualcomm’s excessive license fees violated FRAND. This resulted in injury to the consumer by increasing the cost of cell phones. The court came down hard on Qualcomm. Among other things, it required Qualcomm to end the “no license, no chip” policy. Qualcomm has to renegotiate its licenses in accordance with FRAND terms. Qualcomm is going to have to submit to compliance and monitoring procedures for seven years.
WHY YOU SHOULD KNOW THIS. What Qualcomm did is often described as “tying”. Qualcomm tied the licensing of the software to purchase the hardware. And it looks like Qualcomm also tied its software to the hardware of its competitors. This is called “horizontal” tying. Most businesses are rarely going to be in Qualcomm’s position. But if a business has a “golden ticket” type of technology, it can’t lock customers in and cut out competitors by tying its technology. Most businesses are more likely to find themselves in the position of Qualcomm’s customers. When presented with a “tied” product and licensing situation, it’s best to seek advice of counsel.
Luxottica Group S.A. owns the trademark, Ray-Ban, and its subsidiary owns the trademark, Oakley, for sunglasses. The sunglasses are typically sold in malls, either in standalone stores or at kiosks. Yes Assets, LLC owns a mall in Georgia. It leases the mall to Airport Mini Mall LLC, which operates under the name “International Discount Mall”. The mall is an indoor space made up of about 130 booths for individual subtenants. A mall like this can be a good source of bargains for shoppers.
According to Luxottica, International Malls’ subtenants were selling counterfeit Ray-Bans and Oakleys. International Mall was subject to three raids by law enforcement to execute search warrants. Subtenants were arrested and counterfeit goods were seized. Luxottica sent two letters to Yes Assets and Airport Mini Mall notifying them that their subtenants were not authorized to sell Luxottica’s eyewear and “that any mark resembling Ray-Ban or Oakley marks would indicate that the glasses were counterfeit.” Despite the raids, letters, and meetings with law enforcement, the landlords took no steps to evict the infringing subtenants.
So, Luxottica sued the landlords for trademark infringement. The landlords defended the action asserting that they aren’t the infringers; their subtenants are. Luxottica won at the district court on the theory of contributory infringement. Luxottica made the case that the defendant-landlords had constructive knowledge of their subtenants’ infringing activities but willfully turned a blind eye to it. The subtenants relied on the services given to them by the defendant-landlords to continue their infringing activities. And the landlords could have exercised control over the subtenants’ infringing activities by evicting them. The jury verdict in the amount of $1.9 million dollars against the defendant-landlords was upheld on appeal.
WHY YOU SHOULD KNOW THIS. Mere ownership of a property where an infringing act takes place normally isn’t a basis for a contributory infringement action. There has to be something more. Knowledge of the infringing activities and turning a blind eye to let it go on is “something more”. What’s a retail landlord to do? Make sure that the leases contain some essential terms. First, the tenant must make a representation and warranty that it will not engage in any type of intellectual property infringement or sell counterfeit goods. Second, the lease should provide for termination and eviction if the tenant violates the representation and warranty. Third, the landlord should move swiftly once it has notice of a breach of the representation and warranty. There’s no way that a landlord can always know if violations have happened. But, certainly receiving written notice from the owner of a trademark, raids, arrests and seizures are good signs that something untoward has occurred.
The New Republic magazine published 44 film reviews written by famed film and theater critic, Stanley Kauffmann. The magazine didn’t hire Kauffmann to write the reviews. He wrote them, submitted them and the magazine printed them. The parties never really talked about who owned the articles. They never entered into a “work for hire” agreement. Over the course of the years after the reviews were published, the magazine and Kauffmann were pretty vague about copyright ownership. Kauffmann granted many licenses to a third party to publish the reviews. At one point, the magazine ‘transferred’ the copyright in some of the articles to Kauffmann. In 2004, long after the reviews were written, the magazine sent Kauffmann a letter agreement stating that both parties always knew the reviews were supposed to be “work for hire”.
After Kauffmann passed away, the Rochester Institute of Technology published an anthology of Kauffmann’s reviews edited by Robert J. “Bert” Cardullo. Kauffmann’s estate sued the Institute for copyright infringement. The Institute argued that Kauffmann’s estate didn’t own the copyrights. The district court entered summary judgment for the Institute. The Second Circuit Court of Appeals reversed and remanded the case for further hearing. The Court held that the 2004 letter agreement was not an enforceable “work for hire” agreement. A valid “work for hire” agreement has to be executed before the work is created. The 2004 letter was signed long after the works were created. And there were no other facts that showed the parties’ intent at the time that the magazine published the works.
In an interesting side note, it turns out that Cardullo had misrepresented to the Institute that Kauffmann’s estate granted him permission to publish the anthology. The court described Cardullo as “a serial plagiarist of writings by Kauffmann and others” who “went so far as to forge a letter purporting to be from counsel for the Estate”. Cardullo admitted everything to the attorneys in the case. He was named and remains a third-party defendant in the case.
WHY YOU SHOULD KNOW THIS. In the law (as in grammar), there are always exceptions to the rule. Ownership of the copyright in a work belongs to the author. The exceptions are when the creator of the work is an employee or the creator signs a “work for hire” agreement before the work is created. Sometimes a tardy “work for hire” agreement can be enforceable. Here’s an example. The widow of a deceased artist was sued by Playboy Enterprises over ownership of her late husband’s artwork. Playboy alleged that it owned the paintings as “work for hire”. The widow argued that she owned the works because there was no written agreement. Playboy won. Playboy proved that it ordered the paintings for the magazine and that all of the checks cashed by the artist had a legend above the endorsement stating that the artist “assigned all right, title and interest” in the works. But, don’t rely on a Playboy type of scenario. When hiring someone to create a copyrightable work, always sign a “work for hire” agreement at the beginning.