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.
USA-Halal Chamber of Commerce certifies meat and poultry products that have been slaughtered and prepared in accordance with Islamic law—a process known as “halal”. USA-Halal holds an incontestable certification trademark which is a crescent moon and the letter H. For those who adhere to halal dietary laws, the certification mark is critical to their food purchasing choices. As a certifying body, USA-Halal enters into license agreements with food manufacturers. In exchange for adhering to USA-Halal’s food guidelines, the licensee can display the certification mark on its products.
USA-Halal entered into a certification license agreement with Best Choice Meats, Inc. As part of the license to use the certification on meats and poultry, Best Choice had to submit monthly production reports to USA-Halal. Three years into the license, Best Choice stopped submitting the reports. USA-Halal terminated the license. Best Choice told USA-Halal that it stopped using the certification mark. Technically, that may have been true. However, Best Choice started using a trademark that looked a lot like the USA-Halal trademark.
USA-Halal brought suit against Best Choice, alleging that Best Choice’s mark would create a likelihood of confusion with USA-Halal’s certification mark. The court granted USA-Halal’s motion for a preliminary injunction. The court rejected Best Choice’s arguments that the two marks were not similar and USA-Halal would not suffer irreparable harm if Best Choice kept using its trademark. The court held that the two marks were nearly indistinguishable. An average consumer wouldn’t notice the differences between the two trademarks. So, allowing Best Choice to use the similar trademark would put USA-Halal’s reputation at risk of continuing harm. The court also found that there was a risk of public harm in letting consumers be confused about whether or not Best Choice was certified by USA-Halal. The court then balanced the equities. The court didn’t order a recall of the uncertified meat because that would cause undue hardship to Best Choice. And the court allowed Best Choice to sell off any meat that had already been packaged with the trademark prior to the entry of the order.
WHY YOU SHOULD KNOW THIS. A certification mark is a great way to protect a system. It can be used for anything from food preparation to education methods to veterinary services to theatrical trade specialties and so on. Famous certification marks like the Woolmark logo and the Underwriter’s Lab logo, bolster the products they certify for the benefit of their licensees. But as Best Choice learned, the benefits of the certification mark do not continue after the certification license ends. On another note, if an organization is thinking about developing a certification mark, qualifying for a certification mark takes some preparation. There are also ongoing obligations to make sure that certification mark licensees comply with the terms of being certified.
TiVo is a television digital recording device (“DVR”). TiVo has search functions that allow the user to search broadcast and streaming television programs and schedule recordings for later viewing. TiVo acquired another company that it spun off as a subsidiary named Veveo. Through the acquisition, Veveo picked up a series of patents, one of which was a digital search system. The patent described the invention as a system for associating characters entered into a search bar with numerical identifiers and linking search targets, such as digital files, with digital combinations. You don’t have to know what that means. Just know that robust search capabilities would allow TiVo to surpass competitors like Comcast.
The problem arose when Veveo sued Comcast for infringing on the search system. The proceeding took place in an inter partes proceeding before the Patent Trial and Appeal Board (“PTAB”). Comcast argued that the Veveo invention was obvious and so the patent should be invalidated. PTAB found in Comcast’s favor. PTAB held that Veveo’s invention was really a combination of prior art (already known inventions). The combination would be obvious to anyone practicing in the field. Veveo appealed to the Federal Circuit Court of Appeals. Before the Federal Circuit, Veveo argued that the prior art didn’t have the same mapping capabilities so it wouldn’t have been obvious. The Federal Circuit was not convinced and affirmed the PTAB.
WHY YOU SHOULD KNOW THIS. Patents have to be new, useful and non-obvious. This case focused on the “obviousness” prong. Obviousness doesn’t mean obvious to everyone. It means obvious to anyone who has ordinary skills in the area. On another note, the patent in question was based on a combination of already known inventions. You can get a patent for combining prior art in a way to create something no one ever thought of before. A famous example of this is the Crocs shoe. There were other clog like shoes with heel straps before Crocs. But Crocs was the first to add foam to the shoe’s heel straps. By adding the foam, Crocs solved a problem of uncomfortable heel straps. No comment on the cultural divide between those who like Crocs and those who hate them.
Tis the season for banana costumes. In 2017, Rasta Imposta sued Kmart for copyright infringement because Kmart was selling a virtually identical banana costume (See Blawg Post dated 10/31/2017). The parties settled. Then Rasta Imposta’s competitor, Kangaroo Manufacturing Inc. started selling a substantially similar banana costume. The founder of Kangaroo had once worked for Rasta Imposta and knew that Rasta Imposta had registered the copyright in the banana costume. But Kangaroo manufactured and sold the banana costume anyway.
Rasta Imposta sued Kangaroo for trade dress infringement and unfair competition. Rasta Imposta obtained a preliminary injunction. Kangaroo filed an interlocutory appeal to the Third Circuit Court of Appeals.
Kangaroo argued that Rasta Imposta’s copyright was invalid because the costume was a useful article and not eligible for copyright protection. But a useful article can have design features that are eligible for copyright. The design element has to be identified and imagined apart from the useful article so it would qualify as a pictorial, graphic, or sculptural work either on its own or when fixed in some other tangible medium. This is called the separatability analysis. So the court asked two questions: (1) Can the artistic feature of the useful article’s design be perceived as a two- or three-dimensional work of art separate from the useful article? and (2) Would the feature qualify as a protectable pictorial, graphic, or sculptural work either on its own or in some other medium if imagined separately from the useful article? For the first question, the court rejected Kangaroo’s argument that the banana costume is just a depiction of a banana and there’s nothing creative about a banana. The court held that a depiction of fruit can be creative. And there are elements of the costume that can be separated from a banana. So the answer to the first question was “yes”. For the second question, the court rejected Kangaroo’s argument that everyone would need to use those non-utilitarian elements of a banana in a banana costume or as copyright lawyers call it, scenes a faire. In other words, there’s only one way to create a banana costume that looks like a banana. The court held there are different ways to fashion a banana costume and elements stand on their own and apart from the banana itself. In conclusion, the court held: “Because Rasta established a reasonable likelihood that it could prove entitlement to protection for the veritable fruits of its intellectual labor, we will affirm.”
WHY YOU SHOULD KNOW THIS. The Rasta Imposta decision gives us an in depth analysis of what it takes to create protectable elements in a Halloween costume; or any useful article for that matter. If you decide to dress up as a banana this Halloween, Rasta Imposta is ready to fulfill your desire. But, without disparaging the creative efforts of Rasta Imposta, the most popular adult costume this Halloween is Hot Mr. Rogers.
Bradley Summers was a technical service representative for Bemis Company, Inc., a packaging manufacturer. Bradley’s job was to perform customer audits and film trials. Bradley had signed a non-disclosure agreement with Bemis.
According to Bemis, the following happened when Bradley decided to leave:
Bradley planned his departure long before he gave notice. During the planning stage, Bradley uploaded confidential information from Bemis’ system to a non-Bemis cloud-based storage provider. Bradley also began removing materials from his work computer and uploading them onto a personal external storage drive. When Bradley resigned, he told Bemis that he and his wife planned to go into real estate. Then Bradley removed even more confidential and proprietary documents that contained trade secrets. Unbeknownst to Bemis, Bradley wasn’t going into real estate. He had accepted a position with Bemis’ competitor, Winpak. Once Bemis figured out that Bradley was working for a competitor, Bemis did a forensic analysis of Bradley’s computers and found out about Bradley’s pre-resignation activities.
Bemis filed suit against Bradley alleging misappropriation of trade secrets and breach of contract. Trade secrets have 3 major elements. First, they have to be not generally known or readily ascertainable. Second, the owner of the trade secrets gets economic value from them because they’re not generally known. Third, they have to be the subject of reasonable measures of protection from disclosure. Bemis successfully alleged these elements. Bemis obtained an ex parte temporary restraining order and rule to show cause why a preliminary injunction shouldn’t be entered barring Bradley from using Bemis’ trade secrets until a final trial. The parties then entered into a stipulation requiring Bradley to return any trade secrets in his possession, an inspection of all of Bradley’s personal devices and an inspection of any devices he’s using in his employment with Winpak.
WHY YOU SHOULD KNOW THIS. Bemis obtained an ex parte order without notice to Bradley. Ex parte orders are especially important when trade secrets are being misappropriated. The longer the misappropriation goes on, the less likely it is that a plaintiff is going to be able to support allegations that it took reasonable measures to protect the trade secrets from disclosure.
On another note, the scenario of a departing employee methodically copying and removing trade secrets is not unusual. In this case, according to Bemis’ complaint, there are a few strikes against Bradley going into this litigation. First, he signed a non-disclosure agreement. Second, he told Bemis that he was going into real estate when actually he had accepted a position with a competitor. No matter what, the wrong thing to do is to methodically copy and store an employer’s confidential information and trade secrets to use in a new job.
[Caution: This blog may contain bad puns; But it’s how Eye Roll.]
In two recent cases, trademark holders learned that it was a huge Missed-Steak to sue when puns were involved.
In the first case, Beyoncé Knowles-Carter and BGK Trademark Holdings, LLC sued Feyonce LLC’s. Beyoncé alleged that Feyonce’s branded merchandise for people who are engaged to be married caused a likelihood of confusion with her trademarked merchandise. Beyoncé’s motion for partial summary judgment got a Chile reception from the court. In denying the motion, the court identified the critical question was whether a rational consumer would believe that Feyonce’s products were sponsored by Beyoncé or affiliated with her company. The court held that the pun on Beyoncé’s name was sufficient to dispel a likelihood of confusion among the consuming public. The court acknowledged that the two trademarks had similar text, font and pronunciation. However, the Feyonce mark has the additional connotation of sounding like the word “fiancé” which is directly related to Feyonce’s merchandise. Since the suit didn’t go how Beyoncé Oregano-ly planned, she dismissed the case.
The second case, involved another Farce to be reckoned with. LTTB LLC is an online apparel company. LTTB credits a large part of its success to public fascination with products featuring the phrase “Lettuce Turnip the Beet”. Redbubble, Inc. is an online marketplace that sells merchandise created by independent artists. When Redbubble artists started using the turnip pun on merchandise, LTTB sued Redbubble for trademark infringement. Redbubble Romained calm and brought a motion for summary judgment. In granting the motion, the court felt that LTTB didn’t have a case against Redbubble. The court granted summary judgment for Redbubble on the basis of the “aesthetic functionality doctrine”. This means that if goods are bought for their aesthetic value, their features are purely functional and not trademark use. The court held that no trier of fact would conclude that consumers bought the merchandise because of LTTB’s reputation.
WHY YOU SHOULD KNOW THIS. These two cases show some of the limits of trademark protection. In the Beyoncé case, the pun had enough to do with the type of merchandise being sold to avoid a likelihood of confusion. In the LTTB case, the pun, and not the brand, was why people bought the merchandise. Note that the “aesthetic functionality doctrine” is the subject of some controversy. It is not evenly applied by the courts. So it may not always Turnip in a victory for the punster.
Premier Comp Solutions LLC develops customized panel listings of healthcare providers for workers’ compensation claims. The technology allows employers to contain workers’ compensation costs by ensuring that a chosen healthcare provider complies with local workers’ compensation laws with respect to qualifications, licensing and quality of care. The beauty of the system is that it can be localized by the state where the employee is located. The system was protected as a trade secret.
Sounds great for an employer with lots of employees in different states who have lots of workers’ compensation claims, right?
Premier Comp alleged that its competitors, UPMC Benefit Management Services, Inc. and MCMC, LLC, thought it was great too. So, Premier Comp says, they conspired to misappropriate Premier Comp’s trade secrets. Premier Comp sued UPMC and MCMC for trade secret misappropriation and for antitrust violations. Antitrust laws protect trade and consumers from companies who work together on anti-competitive practices such as price-fixing, restraints on trade, price discrimination and monopolies. A plaintiff must prove: (1) concerted action by the defendants in furtherance of restraint of trade; (2) that concerted action produced anti-competitive effects within the relevant product and geographic markets; (3) that the concerted action was illegal; and (4) that the plaintiff was injured as a proximate result of the concerted action.
The district court granted the defendants’ motion to dismiss the antitrust claims. The court rejected Premier Comp’s argument that UPMC and MCMC working together created a per se antitrust violation. The misappropriation may have violated trade secrets laws. But circumstantial evidence that the defendants worked together doesn’t automatically create an antitrust violation. The court didn’t reject the idea of using antitrust in a trade secret misappropriation case; just that Premier Comp didn’t have enough facts to prove it. Premier Comp failed to demonstrate that: (1) it is a competitor of the defendants; (2) its injury stems from a competition-reducing aspect or effect of the defendants' behavior; (3) it was shut out of the relevant market; and (4) there was harm to competition in the relevant market.
WHY YOU SHOULD KNOW THIS. Antitrust violations can result in treble damage and an award of attorneys’ fees. So Premier Comp understandably wanted to increase the potential recovery for UPMC and MCMC’s behavior. But, Premier Comp didn’t have facts to support its antitrust claims.
Happy Anniversary to IP News for Business. Today’s blog marks the 5th anniversary of this blog. Thank you to all who have read, enjoyed and maybe learned something from this blog over the years.
That’s not a typo. The subject of today’s blog is THE. THE Ohio State University filed an application to register THE for wearing apparel. According to news sources, Ohio State demands to be called “THE Ohio State University”. Ohio State argues that THE is part of its name. Sports and journalists have often commented on Ohio State’s branding insistence calling it stupid, ridiculous, pompous and arrogant. Ohio State responds to these negative comments saying that it has every right to protect its brand.
The USPTO refused registration of THE. The Office Action refusing registration had some interesting information. Ohio State wasn’t the first one to try to register THE as a trademark. The clothing and accessory designer/manufacturer, Marc Jacobs, had already filed an application to register THE for accessories and clothing. The USPTO refused Marc Jacobs’ application as well. The Marc Jacobs’ Office Action cited two primary problems. First, the mark drawing and the specimen didn’t match. The mark drawing was just the word THE. But the specimens show THE with other words like “The Backpack Marc Jacobs” and “The Velveteen Jean Jacket by Marc Jacobs.” Second, THE fails to function as a trademark. In other words, THE doesn’t act as a source of Marc Jacobs’ products.
Now back to THE Ohio State’s Office. The Office Action contained a prior advisory of the suspending of the Ohio State application pending the outcome of Marc Jacobs’ application. And then it went deeper into why THE doesn’t function as a trademark for Ohio State. The mark, as it appears on the clothing, is merely ornamental. It just appears on the clothing but does not distinguish Ohio State’s clothing from clothing of others.
Both Marc Jacobs and Ohio State have some time to respond to these Office Actions. So the THE saga may continue.
WHY YOU SHOULD KNOW THIS. Neither Office Action touched on a point that seems obvious. If either applicant gets a registration for THE, how will that affect the ability of others to develop clothing lines that use THE? Both applicants seem to want to corner the market on a word that is one of the most common words in the English language. Aside from that, there is a difference between a slogan or words that appear on clothing versus a mark that is used to identify a product. See the comparison in the graphics. The top graphic shows the mark being used in an ornamental way. If that’s the only way the owner uses it, the USPTO would probably refuse registration. The bottom one shows the mark being used as a source and product identifier. If that’s the way the owner uses it, the USPTO will probably allow registration.
An application to register tells the Copyright Office about you, your work and why you’re entitled to register a copyright. To further this goal, the Copyright Act requires that you include only accurate information in your copyright application. Gold Value International Textile d/b/a Fiesta Fabrics learned the consequences of not following this rule the hard way.
Fiesta registered the copyright for a group of textile designs. Fiesta had distributed samples of some of the fabric designs to get production contracts. Then it sold about 190 yards of one fabric with the design. In its copyright application, Fiesta claimed the designs were unpublished.
Fiesta sued Sanctuary Clothing, Inc. and others for allegedly selling a blouse with an infringing textile design. Sanctuary counterclaimed seeking invalidation of Fiesta’s copyright. Sanctuary argued that Fiesta included previously published designs in its application to register an unpublished collection. Fiesta further argued that this inaccurate information regarding publication required invalidation of the registration. Fiesta argued that it didn’t consider the sample distribution and small sale of the design to be “publication”. But that argument was rejected. The District Court couldn’t get a clear handle on whether Fiesta’s inaccurate information was enough to invalidate the registration. Congress passed a law in 2008 that only invalidates the copyright if: (1) the applicant knew that the information was inaccurate; and (2) the inaccurate information would have caused the Register of Copyrights to refuse registration. So the District Court submitted an inquiry to the Register of Copyrights. The Register of Copyrights responded that she would have refused registration because a copyright registration cannot contain a mix of published and unpublished works. And if the Register had known that the application was trying to register a mix of published and unpublished works, she would have refused registration.
The District Court held that Fiesta knowingly included inaccurate information in its copyright application that required invalidation. Not only did the District Court invalidate the copyright, it found that Sanctuary was a prevailing party and entered a judgment for attorneys’ fees in Sanctuary’s favor.
Fiesta appealed to the Ninth Circuit Court of Appeals who affirmed the District Court’s judgment.
WHY YOU SHOULD KNOW THIS. Copyright registration isn’t a perquisite to copyright ownership. But, your copyright has to be registered before you can sue for infringement. So, of course, you have to be careful when you fill out the application to register a copyright. If you discover an error, you can file an application for supplementary registration to correct the error. And this is better done sooner rather than later.
Matt Furie describes his popular Internet character “Pepe the Frog”, as a “cool, chill frog dude”. Celebrities like Katy Perry and Nicki Minaj have published Pepe the Frog memes.* Online message boards posts fan art featuring Pepe the Frog and calling them “rare Pepes”. Pepe the Frog’s Internet popularity turned into a financial windfall for Matt.
But then unsavory Internet posts started using Pepe the Frog. That’s when the cool, chill frog dude lost his chill. Pepe was co-opted by white nationalists and the alt-right movement to pursue hate filled agendas in blog posts, memes and other promotions. It got so bad that the Anti-Defamation League, an American organization opposed to antisemitism, included Pepe the Frog in its hate symbol database. Matt went after the infringers who used Pepe the Frog as a symbol of hate. Everyone caved – except InfoWars, Inc. InfoWars is the notorious website run by Alex Jones. Mr. Jones is a far-right conspiracy theorist who is currently being sued by some parents of the victims of the Sandy Hook Elementary School shooting because he claims the tragedy was a hoax to support gun control.
In the lawsuit brought by Matt, Mr. Jones took a shot gun (pun intended) approach to defending his unauthorized use of Pepe the Frog. The defenses included claiming Matt’s work was not original to Matt and claiming Matt lied to the Copyright Office in his application to register Pepe’s copyright. But one of the defenses was unique. Mr. Jones argued Pepe’s ubiquitous appearance in Internet memes nullifies Matt’s copyright in the character. In denying Mr. Jones’ motion for summary judgment, the District Court for the Central District of California noted that "Defendants have not pointed to any authority for the proposition that 'meme-ification' of an image or character destroys or diminishes the original author's copyright interest." The parties ended up settling for $15,000 and a permanent injunction.
WHY YOU SHOULD KNOW THIS. As the Court pointed out, Mr. Jones’ meme-ification argument was unsupportable. Copyright Law does not nullify a copyright because of prevalent uses of a copyrighted work, whether authorized or not. While it would have been great for Pepe the Frog to have his day in court at a trial, the District Court’s summary judgment opinion gives us cited authority that “meme-ification” is not a defense to copyright infringement.
- Memes are images, videos, pieces of text, etc., that are copied (often with slight variations) and spread rapidly by Internet users.
Acacia Communications got tired of paying a license fee to Viasat, Inc. for trade secret protected technology. So Acacia supposedly created replacement technology. The problem? Acacia used Viasat’s trade secrets.
Viasat sued Acacia for trade secret misappropriation. During the litigation, Acacia’s defenses shifted. Acacia started out denying any copying. But, through discovery, Viasat found a slew of emails between Acacia’s co-founders, Christian Rasmussen and Mehrdad Givehchi, sent via their personal email addresses. They discussed how to give a new Acacia engineer a white paper on the technology. They ultimately decided to give him a USB drive containing Viasat’s trade secrets. In one email, Rasmussen wrote, "... I don't want to mail it from the company account, just in case silly things should happen down the road." Well, $49.3 million of silly things happened. The jury found that Acacia acted willfully and maliciously and awarded the huge judgment to Viasat.
In a twist of irony, on a counterclaim by Acacia, the jury found that Viasat misappropriated Acacia's trade secrets, but that it was not done willfully. The jury awarded Acacia just $1.
WHY YOU SHOULD KNOW THIS. Acacia’s solution to getting out of paying license fees was not ideal. In fact, it was exactly the wrong thing to do. To make matters worse, the co-founders heavily ‘papered’ their scheme. Hiding behind personal email accounts only supported the jury’s determination that Acacia’s co-founders acted willfully and maliciously. The end result was a ‘break your company’ judgment (less $1).
If you needed a crown or root canal lately, your dentist may have used a fancy wand to scan and send a picture of your mouth to the dental lab. Chances are that the scanner was the Itero Element scanner, a computer scanning system that is manufactured by Align Technologies. The Itero scanner requires a disposable sleeve for the wand. One of Align’s competitors, Strauss Diamond Technologies, began selling a competing sleeve, called “MagicSleeve”. In its advertisements, Strauss used Align’s trademarks in hashtags, product descriptions and product images.
Align brought suit against Strauss and sought a preliminary injunction to stop Strauss from using its trademarks. Strauss argued that its use of the Align trademarks was “nominative fair use”. The nominative fair use defense has 3 parts: (1) the trademark is the only word available to accurately describe the product; (2) the mark is used only as is “reasonably necessary” to identify the product; and (3) the user does nothing that would suggest endorsement by the trademark owner. Putting aside the fact that the first and second elements are contradictory, the court determined that Strauss’ defense was full of cavities. Strauss’ various uses of Align’s trademarks failed at least two out of three of the nominative fair use test. Align’s motion for preliminary injunction was granted.
WHY YOU SHOULD KNOW THIS. Nominative fair use can be a useful tool in a competitive industry. Sometimes you have to refer to your competitor’s products in order to differentiate yourself in the market. Deciding what crosses the line can be tricky. One thing we know is that Strauss crossed that line.
In 1981 the well-known photographer, Lynn Goldsmith, took a series of photographs of the pop star, Prince. Goldsmith interpreted the photographs as describing a vulnerable and uncomfortable person. In 1987, Vanity Fair magazine commissioned Andy Warhol to create illustrations from the Goldsmith photos for their article titled “Purple Fame”. Warhol created “The Prince Series” consisting of 19 paintings of Prince, some of which used an orange wash of color.
After Prince died, Vanity Fair again published copies of the Warhol works. Goldsmith says that that’s when she learned about the "Prince Series" for the first time. Goldsmith sued the Warhol Foundation, the owner of the works, for copyright infringement. A New York District court entered summary judgment for the Foundation on the basis of fair use. The court described the Warhol paintings as having removed the protectable elements of the photographs to turn Prince into an iconic, larger than life figure.
WHY YOU SHOULD KNOW THIS. The court used the transformative nature of Warhol’s orange take on the Purple One to find fair use. Although, in this case it might take an art critic’s eye to see the court’s argument.
You may recall the scene in the Ghostbusters movie where, Rick Moranis’ character begs diners in a swanky Central Park restaurant to save him from a Terror Dog. That restaurant is the famous “Tavern on the Green” that has been owned by New York City since 1934. The Tavern’s trademark has a bit of a complicated history. NYC leased the restaurant to Tavern on the Green LP (TOTG). NYC decided not to renew TOTG’s lease in 2009. That’s when NYC discovered that TOTG registered the trademark in 1978. NYC sued TOTG to cancel the registration because NYC was the owner of the trademark and not TOTG. TOTG and NYC entered into a settlement agreement that allowed TOTG to use the name outside of NYC as long as TOTG didn’t use the words “Central Park”. TOTG went ahead and used the Tavern trademark along with the words “Central Park” thereby breaching the agreement. NYC sued again. And won.
WHY YOU SHOULD KNOW THIS. When an applicant fills out a trademark application, the applicant has to state under oath that it is the bona fide owner of the trademark. If that isn’t true, the applicant has committed a fraud in the application process. The USPTO will cancel a registration obtained by fraud. TOTG didn’t have the right to register the trademark. And even after getting the right to use the name “Tavern on the Green”, TOTG used the words “Central Park” in breach of the settlement agreement. TOTG couldn’t escape the trademark Terror Dog of its own creation.
CMI Roadbuilding, Inc. is in the business of manufacturing road construction equipment and replacement parts. Through a series of acquisitions and mergers, CMI acquired trade secrets included in engineering documents. CMI sent its engineering documents to vendors without confidentiality notices. Iowa Parts, Inc. is in the business of manufacturing the same kind of replacement parts that CMI manufactured. Over the years, Iowa Parts hired various employees who had worked for companies acquired by CMI. Iowa Parts also reached out to vendors who had CMI’s engineering drawings. In 2002, Iowa Parts began manufacturing competing replacements parts.
CMI knew (or should have known) that Iowa Parts was manufacturing competing replacement parts. Iowa Parts made no secret of it (pun intended). Then in 2016, Iowa Parts lowered its prices and cut deep into CMI’s revenues. That’s when CMI sued for misappropriation of trade secrets under the Defend Trade Secrets Act (“DTSA”). The Eighth Circuit Court of Appeals affirmed summary judgment in favor of Iowa Parts. The DTSA has a 3 year statute of limitations. CMI waited too long to defend its trade secrets.
WHY YOU SHOULD KNOW THIS. Trade secrets have two primary attributes. They are (1) something that’s not generally known or readily ascertainable; and (2) subject to reasonable measures of secrecy. Allowing someone to use your trade secrets for over 14 years is not a reasonable measure of secrecy. If a trade secret is being misappropriated, the owner has to be aggressive and take action immediately. Otherwise, the trade secret is lost forever.
After the Chicago Cubs won the World Series in 2016 (breaking a 108 year losing streak), Ronald Mark Huber filed an intent to use trademark application for the word “Cubnoxious”. The Chicago Cubs Baseball Club LLC opposed the application. The Cubs were able to establish that Ronald had no real intent to use the trademark in commerce. All he had was one sheet of paper showing potential imprints on t-shirts. He submitted a conclusory statement that he intended to use it in no specific geographic area and not specifically to target Cubs fans. He had no business plan, no marketing plan, no established business experience and no experience in the sports industry. It could have ended there but the Cubs also opposed the application on the basis of a likelihood of confusion. That’s where the Trademark Trial and Appeal Board’s decision in favor of the Cubs got fun.
The Board examined the numerous ways that the Cubs use their Cubs trademarks in conjunction with other words. Then the Board found that Cubs fans could perceive “Cubnoxious” as coming from the Cubs and not some other source. The Board conceded that calling fans “obnoxious” isn’t very flattering. But the Cubs submitted compelling evidence that “sports teams or their fans may seek to provoke opposing teams and their fans, thereby embracing an offensive, or obnoxious reputation”. The Cubs argued that Cubs fans are notorious for their undying allegiance to the team and might see being called “obnoxious” as a badge of honor.
WHY YOU SHOULD KNOW THIS. Putting aside the fun of the likelihood of confusion arguments, Ronald’s loss teaches a valuable lesson about what an ‘intent to use’ trademark application really is. A bona fide intent to use has to be something more than “at some point I’d like to use this trademark” which is all that Ronald proved. Ronald’s evidence (or lack thereof) worked against his alleged bona fide intent to use the trademark. Keep in mind that many intent to use applications are not tested as heavily as Ronald’s was. However, before filing an intent to use application, it’s a good idea to have at least sketched a plan of how the trademark is going to be used.
TKC Aerospace, Inc. was justifiably upset when its vice president, Charles Muhs, left and began working closely with Phoenix Heliparts, Inc., a competitor. Then TKC found even more reason to be upset. TKC lost a Department of State contract to Heliparts who used TKC’s trade secrets. TKC sued Heliparts in Arizona. After a 40 day trial, TKC got a $30 million judgment against Heliparts. TKC sued Charles in a concurrent case in Alaska. Based on the Arizona judgment, the district court granted TKC’s motion for summary judgment against Charles in the amount of $20 million. Then Charles filed a Chapter 7 bankruptcy case.
In the bankruptcy case, TKC used the Alaska judgment to have the $20 million debt held non-dischargeable on summary judgment. Charles appealed to the district court and lost. But the Fourth Circuit Court of Appeals reversed and remanded the case for further hearing. The Fourth Circuit held that a trade secret misappropriation judgment can be held non-dischargeable under the Bankruptcy Code only if the misappropriation is both willful and malicious. The Arizona judgment didn’t make those findings against Charles. The Alaska judgment didn’t make those findings either. So neither the Arizona judgment nor the Alaska judgment could be used to determine if the trade secret misappropriation debt was non-dischargeable.
WHY YOU SHOULD KNOW THIS. TKC thought it had a slam dunk. It had two judgments for trade secret misappropriation. But, bankruptcy is a whole new world. Bankruptcy is designed to give a debtor a fresh start. So non-dischargeability of a debt is strictly construed. TKC’s result can be avoided. A plaintiff can lay the groundwork for non-dischargeability if the defendant happens to file bankruptcy.
Erik Brunetti wanted to register the word “FUCT” as a trademark for clothing. The United States Patent and Trademark Office (“USPTO”) refused registration saying it was too “scandalous” because it was “extreme nihilism”, evidence of “anti-social behavior” and “extreme misogyny”. Erik appealed to the Trademark Trial and Appeal Board (“TTAB”), who affirmed the refusal. Erik didn’t give up and appealed to the Federal Circuit Court of Appeals who reversed the refusal (See IP Blawg Post Dated 1/16/18). The director of the USPTO, Andre Iancu, appealed to the U.S. Supreme Court who affirmed the Federal Circuit thus allowing the trademark to proceed to registration.
Justice Elena Kagan, writing for the majority, adopted the reasoning in Matal v. Tam which held that a disparaging trademark like “The Slants” for an Asian American band is protected free speech (See IP Blawg Post Dated 9/9/17). Like the now-prohibited ban on disparaging trademarks, the USPTO’s ban on scandalous marks was based on the view-point of the observer. Justice Kagan stated that the USPTO allows registration for trademarks that are consistent with society’s sense of rectitude and morality. But the USPTO discriminates against trademarks that, in its viewpoint, don’t fit into a standard of morality. The USPTO’s view-point analysis is not neutral. Therefore, the prohibition against the registration of scandalous trademarks is an unconstitutional violation of First Amendment Free Speech.
WHY YOU SHOULD KNOW THIS. Erik’s trademark projects a certain sensibility; one that Erik obviously believes his customers share. Trademarks that don’t fit into society norms may be fun, interesting and good marketing tools. But, a trademark reflects the values of the owner of the products or services. So when choosing a trademark, know your customer base and be careful about the impression your trademark makes.
Return Mail, Inc. obtained a patent for a computerized system of bar coding so that companies can track returned and undelivered mail. The U.S. Postal Service was interested in licensing the technology. Before they could ink a licensing agreement, the Postal Service walked away and developed its own system. And that’s when the litigation began.
The Postal Service tried to invalidate Return Mail’s patent before the Patent Trial and Appeal Board. The Board held that the patent was valid. Return Mail sued the Postal Service under the Federal Claims Act for using a patented process without a license. Using a proceeding that was created by the America Invents Act (“AIA”), the Postal Service got a ruling that invalidated the patent. Return Mail appealed. The case landed before the U.S. Supreme Court. Justice Sonya Sotomayor, writing for the 6 to 3 majority stated that the AIA proceeding is only available to a “person”. Governmental units such as the Postal Service were not included in the definition of a “person” under AIA. So the Postal Service can’t use the AIA to invalidate the patent.
WHY YOU SHOULD KNOW THIS. When faced with any dispute, don’t assume anything. In this case, Return Mail, Inc. questioned whether the Postal Service had standing to challenge its patent. Following the 11th Commandment, “Thou shall not assume”, Return Mail, Inc. won the day.
Violent Hues Productions published a tourism guide that used a stock photograph depicting the Adams Morgan neighborhood of Washington D.C. The problem is Violent Hues used it without the permission of the photographer, Russell Brammer.
Russell sued Violent Hues. The District Court originally sided with Violent Hues saying that Violent Hues didn’t infringe because the photograph was used for “informational” purposes. The Fourth Circuit Court of Appeals reversed the decision to the relief of photographers everywhere. The Fourth Circuit rejected all of the defenses brought up by Violent Hues including, some flimsy excuses like, it was an innocent mistake and its use didn’t stop the photographer from licensing it to others. Violent Hues’ fair use defenses didn’t get anywhere. Violent Hues tried to make the case for “transformative use” because it cropped and only used half of the photograph. That doesn’t fit into the definition of transformative use. The Fourth Circuit Court’s opinion was scathing in its rebuke of Violent Hues’ defenses by holding that “fair use is not designed to protect lazy appropriators”.
**WHY YOU SHOULD KNOW THIS. ** Finding a photograph on the Internet is easy. But using it can have harsh results. When using content from the Internet, the default should always be that the work belongs to someone and you need their permission to use it. If you need stock photographs, there are numerous stock photo websites that will license the use. The license fee is substantially less then expensive and time consuming copyright infringement litigation.