Trademarks for the Humor Impaired

    Beverly A. Berneman

    Louis Vuitton found nothing funny about “My Other Bag is a Louis Vuitton”. My Other Bag (“MOB”) manufactured and sold canvas bags that replicate pictures of famous and expensive brands. One of its bags replicated the Louis Vuitton bag. If you look at the picture of the bag, you can see that no one would mistake this for a real Louis Vuitton bag. The bag is meant to parody high priced leather goods and that not everyone can afford them. However, Louis Vuitton did not appreciate the humor. So it sued MOB for trademark infringement, dilution by blurring and copyright infringement. The District Court granted summary judgment to MOB stating that this was an obvious attempt at humor and is not likely to cause confusion. The Second Circuit agreed and affirmed the judgment. The Second Circuit noted that “A parody must convey two simultaneous – and contradictory – messages: that it is the original, but also that it is not the original and is instead a parody”.

    WHY YOU SHOULD KNOW THIS. Parody can be the sincerest form of flattery. In fact, in the MOB case, the district court reasoned that the parody was likely to reinforce and enhance the distinctiveness and notoriety of the original brand. Understanding that parody requires a reference back to the original, how can one avoid a claim of infringement? It all boils down to the point of the use of the trademark. For instance, in Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., a competitor was prohibited from using the name Charbucks for its coffee brand in order to compete with the Starbucks coffee brand. The point of Wolfe’s Borough Coffee’s Charbucks name was to compete with Starbucks. In MOB, the point was to make fun of Louis Vuitton’s luxury image.


    Don’t Hurt Your Fans

    Beverly A. Berneman

    If you have a powerful brand, don’t use your power to alienate your fans. Last year, CBS and Paramount Studios sued Axanar Productions for copyright infringement. Using a 20 minute short film, Axanar had raised over $1 million through Kickstarter and Indiegogo to finance a full length fan fiction film (https://www.youtube.com/watch?v=1W1_8IV8uhA). The proposed film was to follow the story of Captain Kirk’s hero, Garth of Izar. CBS/Paramount, who own Star Trek, had a problem with it. This wasn’t the first fan fiction spinoff and CBS/Paramount usually encouraged it. Fan films can enlarge the universe, attract new fans and build loyalty among the current fan base. But Axanar got too close. Commentators speculate that the Axanar’s production values were too good and would have commercial potential. Star Trek fans were appalled at CBS/Paramount’s aggressive tactics. Even J.J. Abrams and Justin Lin, directors of the most recent Star Trek films, supported Axanar. CBS/Paramount tried to calm some of the bad press by coming out with guidelines for producing fan films (http://www.startrek.com/fan-films). Meanwhile, CBS/Paramount continued its lawsuit against Axanar. Last week, CBS/Paramount and Axanar announced that they have settled the dispute. In exchange for CBS/Paramount dropping the suit, Axanar has agreed to follow the fan films guidelines which include a restriction on the length of the films, requiring the use of official merchandise and keeping them family friendly.

    WHY YOU SHOULD KNOW THIS. This is not the only instance of the perils of attacking the fans. For example, Warner Bros. tried to crack down on Harry Potter fan sites that were written primarily by children. Bowing to the bad press of picking on kids, Warner Bros. withdrew their cease and desist letters. Every content owner should be able to protect its brand and copyrights. But when pursuing protection, the content owner must be cognizant of the message it sends to its fan and consumer base and not become an IP bully.


    Preliminary Injunction Backfire

    Beverly A. Berneman

    If you don’t own it, asking for a preliminary injunction is the wrong strategy. VitaVet Labs, Inc. sells horse vitamins. Its website was old and clunky. VitaVet hired Integrated Software Solutions, Inc. to update the site. According to the terms of the agreement, VitaVet owned the source code and had an absolute right to access it. VitaVita was to pay Integrated on an incremental basis upon receipt of deliverables. From almost the beginning, things went wrong. Integrated didn’t reach its project development goals. VitaVet paid some of the installments but VitaVet was not pleased with Integrated’s work. Meanwhile, VitaVet’s website was getting clunkier and harder to use. Integrated asserted that the software was finished but VitaVet didn’t agree. So VitaVet refused to pay the remaining installments. Integrated filed suit and sought a preliminary injunction. VitaVet countersued for a preliminary injunction seeking turnover of the source code. Usually, a preliminary injunction just maintains the status quo. The status quo was that Integrated had the source code and wouldn’t have to turn it over to VitaVet. But in this case, the trial court entered a preliminary injunction order that changed the status quo and ordered Integrated to turnover the source code to VitaVet. In affirming the decision, the California Appellate Court reasoned that the balance of equities favored disturbing the status quo in VitaVet’s favor. VitaVet owned the source code and VitaVet had a dire need to upgrade its website. So much for Integrated’s aggressive strategy against VitaVet.

    WHY YOU SHOULD KNOW THIS. VitaVet did a lot of things right in this case. It made sure that it owned what Integrated was developing for it. When challenged, VitaVet did a great job of showing that it was entitled to extraordinary relief. On the other hand, Integrated might have done well to think things through before going after VitaVet in the first place.


    2016 IP Criminals Hall of Fame

    Beverly A. Berneman

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

    Second Runner Up: Alanzo Knowles. Alanzo pleaded guilty in May 2016 to copyright infringement and identity theft charges. Originally from the Bahamas, Alanzo flew to New York City to sell 15 scripts and celebrity personal information for $80,000. Unfortunately for him, his buyer was a law enforcement agent. In jailhouse writings, Alanzo boasted that he was going to write a book to “shake up Hollywood”, presumably admitting that he was going to continue his nefarious activities. The judge was not amused. In doubling Alanzo’s sentence, Judge Paul A. Engelmayer stated “So far, the criminal justice system has totally failed to get your attention”.

    First Runners Up: Artashes Darbinyan and Orbel Hakobyan. Artashes and Orbel pleaded guilty in a mass-mailing scam that targeted owners of U.S. trademark applications. The men admitted to stealing approximately $1.66 million from registrants and applicants of U.S. trademarks. They are part of a growing number of scam artists who set up companies to dupe the unwary trademark owner. Using the USPTO public records, they send out official looking documents that demand anywhere from $750 to $4,500 to “protect the trademark”. In fact, these companies don’t do anything but collect the money. The USPTO has tried to address these non-USPTO solicitations for years by giving numerous warnings to trademark applicants and registrants. But the number of these scam artists continues to grow. Lucky, Artashes and Orbel are among the first scammers to be caught and convicted. For more information, visit https://www.uspto.gov/trademarks-getting-started/non-uspto-solicitations.

    Grand Prize: Paul Hansmeier and John Steele of the Prenda Law Firm. Paul and John were attorneys with the now-defunct Prenda Law Firm. They have been arrested and charged in an 18-count indictment that includes fraud, perjury, and money laundering counts.* According to the allegations, the Prenda attorneys created a ‘honey pot’ of porn movies that invited illegal downloads. When the downloads occurred, the firm filed copyright infringement suits. The plaintiffs were actually owned or controlled by Prenda. The suits named hundreds of defendants as John Does and listed their IP addresses. Using subpoenas served on the ISPs, the Prenda attorneys discovered the identity of the John Doe defendants. Once they discovered the identity of the defendants, the firm sent cease and desist letters demanding $4,000 or the firm would reveal in court papers the embarrassing fact that the defendant downloaded porn. The vast majority of the defendants paid the $4,000. No one knows exactly how much the Prenda Law Firm raked in, but estimates are anywhere from $1.9 million to $15 million. It all came crashing down when some of the defendants refused to pay the demand and hired lawyers to defend them. The lawyers discovered the scheme. There’s much more to the story including court ordered civil sanctions, perjured deposition testimony, the untimely death of one of the Prenda attorneys, and lost law licenses. For more on this story, visit http://arstechnica.com/tech-policy/2016/12/breaking-prenda-law-copyright-trolls-steele-and-hansmeier-arrested/.

    WHY YOU SHOULD KNOW THIS. Our Hall of Famers, each in their own way, tried to game the system. They used Intellectual Property protections for greed and exploitation. Here’s hoping that in the coming year, would-be IP criminals turn their considerable energy to making the world a better place for us all.

    • Note that for those who have been indicted, the Hall of Fame Award is not meant to make it appear that they have been convicted.
  • Benefits Bulletin

    Breaking Up Is Hard To Do

    Andrew S. Williams

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

    Both of these concerns are very real. First, after payment of transaction costs and taxes, the possible investment of the net proceeds of the sale of the business very well may result in a reduced cash flow to the entrepreneur and family. And, unless there’s a family member who is capable – and interested – in taking over the business, the entrepreneur justifiably feels that the legacy business may have to be surrendered. Both of these factors make it hard to let go - or even to think about letting go.

    Here’s something for the reluctant entrepreneur to consider: there is a way to defer or even avoid taxes on the sale of your business, to undertake a transaction without the aggravation and delay of dealing with pesky buyers, to sell your business in installments or a lump sum - and still not give up control!

    These results can be attained if the business is sold to its current employees through an employee stock ownership plan, or ESOP.

    Maybe the entrepreneur you know would be more willing to plan for a business transition if he or she were aware of these ESOP possibilities.

    The Takeaway: ESOPs can be more than just retirement plans and for many entrepreneurs, they offer the best succession solution.


    Hot Topic: Fake News

    Beverly A. Berneman

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

    WHY YOU SHOULD KNOW THIS. The first lesson is to always read terms and conditions before posting something on or downloading from a website. It may seem like boring reading but it’s never a waste of time to know your rights and liabilities. The second lesson is, even in the world of copyright, you can’t believe everything you see and hear. For instance, a few commentators on the DA/Hot Topic issue asserted that Hot Topic’s use of the fan art was “fair use” because it could be found on the Internet. This is a popular misconception about fair use. If Hot Topic used the fan art without the artist’s permission and for commercial purposes, it was not fair use. Thanks to art student, Tory Lieberman, for the heads up on this topic.


    Episode IV of Smartphone Wars: A New Hope

    Beverly A. Berneman

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

    WHY YOU SHOULD KNOW THIS. Samsung has had a dismal year considering that its fire hazard Galaxy 7 had to be taken off the market. This decision is a win for Samsung but with a lot of loose ends. Samsung will have to convince the trial court that the damages should be calculated by the component and not the whole product. Then Samsung will have to find valuation experts who can accurately trace the profits to just the interface. Certainly, Apple will find its own valuation experts to do the same analysis. Then it will come down to a battle of the experts. For any business facing an infringement suit, whether as plaintiff or defendant, the issue of damages can make or break the case. A party has to be clear about what is being valued. Then the party has to find a valuation expert who can give an opinion as to the object being valued.


    All's Fair When It Comes to Briefs

    Beverly A. Berneman

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

    WHY YOU SHOULD KNOW THIS. Generally attorneys don’t sue other attorneys for adopting their brilliant arguments. I’m sure Newegg was not pleased when Sutton took advantage of the time and attorneys’ fees involved in drafting its brief on appeal. It appears that the court was reacting to two things. First, there was a written agreement between the parties and Sutton had agreed not to copy Newegg’s brief. Second, Sutton didn’t adopt Newegg’s arguments in a way that is specifically provided in the Federal Rules of Appellate Procedure. Courts can get testy when litigants don’t follow rules; especially rules that save the court time in analyzing the arguments of the parties.


    Special Edition of IP News for Business

    Beverly A. Berneman

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

    IP News for Business:

    NEW: Trademark, copyright and patent laws can feel like murky waters for many businesses. Written by Golan Christie partner Beverly A. Berneman, this blog focuses on providing succinct examples of how businesses ran into intellectual property disputes and what the results were. One of our favorite elements is her pithy “Why You Should Know This” section at the bottom of most of her posts, which provides excellent context for how the specific IP outcomes could affect others.

    Thank you to all of subscribers and visitors.


    When Two is Enough

    Beverly A. Berneman

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

    WHY YOU SHOULD KNOW THIS. In every used based trademark application, the applicant has to state that the mark was used in interstate commerce at the time of the application. If that statement is not true, the registration is at risk of being cancelled. This case says that two sales that crossed state lines were enough for interstate commerce. It remains to be seen if this case will apply in every context. So when applying for a trademark registration, if there’s any doubt about use, the best course is to file an intent to use application until use can be firmly established.


    Go Cubs Swag Go

    Beverly A. Berneman

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

    WHY YOU SHOULD KNOW THIS. The zeal to support your team must always be tempered with good sense and a respect for the Intellectual Property of others.


    Did I Say That Out Loud?

    Beverly A. Berneman

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

    WHY YOU SHOULD KNOW THIS. Unfortunately, Sisyphus’s attempts to claim ownership of the video failed at every turn. Sisyphus didn’t own the video when it was created. Munaf, as the creator (or author) of the video, was the owner. Sisyphus couldn’t argue that the video was a work for hire because Munaf wasn’t an employee of Sisyphus. Having Munaf sign a non-disclosure agreement after the sale to TMZ.com was too little, too late. Munaf didn’t own the copyright at the time that he signed the agreement. Finally, registering the copyright didn’t help because Sisyphus never owned video. All of this could have easily been avoided if Sisyphus and Munaf had signed a written copyright assignment agreement at the time Munaf was hired.


    Bootleg CDs Have a Lot of Kick

    Beverly A. Berneman

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

    WHY YOU SHOULD KNOW THIS. Copyright infringement has both a civil and a criminal aspect. In criminal copyright infringement, the offender knew that he or she was committing a crime such as selling bootleg CDs or DVDs. Civil copyright infringement is a strict liability cause of action which means that intent is not necessary. The penalties for civil infringement won’t send you to jail but the potential infringement damages can be staggeringly high. Of course, it’s best not to commit copyright infringement at all.


    The Perils of the Merely Descriptive Trademark

    Beverly A. Berneman

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

    WHY YOU SHOULD KNOW THIS. Descriptive words do not a trademark make. But, when descriptive words acquire secondary meaning, they can be registered as a trademark. A descriptive mark acquires secondary meaning when consumers have come to identify a trademark with a certain product over time. This means that the primary significance of the descriptive mark is to connect the product or service with the owner of the mark. It’s easy to fall into the trap of adopting a descriptive mark because it, well, describes the goods and services. As Kelly-Brown learned after years of litigation, a descriptive mark can be difficult, if not impossible to protect.


    Only Clean Hands Need Apply

    Beverly A. Berneman

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

    WHY YOU SHOULD KNOW THIS. When applying to register a trademark, an applicant has to attest that all of the information given on the application is true and correct. If it isn’t, any future registration could be cancelled. When using a foreign word in trademark, the translation is important because an examining attorney will research prior uses of the English translation of the word to determine if there’s a likelihood of confusion with prior pending applications and registrations. In this case, both the petitioner and the respondent had different translations for a foreign word. The TTAB found that neither of the proposed translations would be understood by those speaking the language. That will not always be the case. So, for anyone seeking to register a trademark that includes a foreign word, it’s better to include all possible translations of a foreign word in a trademark application.


    Link Separation Anxiety

    Beverly A. Berneman

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

    WHY YOU SHOULD KNOW THIS. In the U.S., we have three types of copyright infringement: (1) direct; (2) contributory; and (3) induced. The law surrounding the different levels of infringement is well developed. In each type, the element of intent plays an important role. If the originator intended to infringe or help another to infringe, then the originator is liable for copyright infringement. The GS Media decision goes beyond intent and rests on “knew or should have known”. Of course, to know or should know something and then go ahead can rise to the level of intent. But, it’s not always evident if a linked website contains infringing material. The most troubling is the “should have known” prong. Exactly what does “should have known” entail? It’s a slippery standard to try to prove and defend. Hopefully, U.S. courts will not adopt this standard. (Photo Courtesy of www.onewaystock.com)


    Copyright Law Levels the Sims' PlumbBob

    Beverly A. Berneman

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

    WHY YOU SHOULD KNOW THIS. The answers to the two questions remain to be seen. But let’s do a post-mortem on the actions of the parties. When EA retained Lithomania, their agreement should have been clear about ownership of the Intellectual Property rights to the promotional item. To further protect EA, it should have required Lithomania to get its approval on any agreements with subcontractors and agents. As to Lithomania, what can one say about its opportunism at the expense of everyone else? For Direct Tech, it’s more a matter of 20/20 hindsight. How was Direct Tech to know that Lithomania was not being candid with it? At least Direct Tech has an opportunity to recoup its lost profits using its copyright claims.


    An Early Thanksgiving for AT&T

    Beverly A. Berneman

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

    WHY YOU SHOULD KNOW THIS. Citibank, AT&T and a substantial number of other businesses want to thank their customers by offering loyalty incentives. But how many different ways can you say “Thank You”? Not many. Citibank learned it couldn’t "corner the market" on a frequently used phrased.


    Typos Hapne

    Beverly A. Berneman

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

    WHY YOU SHOULD KNOW THIS. All legal drafting creates a breeding ground for potential ambiguities, misdirection and opposite meanings. Leaving off a little word like “not” or using “and” instead of “or” can completely change the meaning of a contract, a statute or a legal opinion. When a court opinion makes a critical mistake, parties can be burdened with incorrect precedent. Luckily, the 7th Circuit recognized its mistake in this case thereby assuring correct legal authority for future copyright infringement plaintiffs.


    Marijuana Trademark Gets Busted

    Beverly A. Berneman

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

    WHY YOU SHOULD KNOW THIS. Morgan’s experience points to the little known list of matters that can’t be trademarked. In addition to illegal matters, they include: (1) immoral, deceptive or scandalous matter; (2) the flag of any nation and any US state or municipality; (3) the name, likeness etc. of a living individual without their consent and of a deceased president during the lifetime of their surviving spouse; and (4) a geographically misdescriptive name in connection with wine and spirits. Getting back to Morgan, there are a few unanswered questions. Could Morgan have done anything different to at least get registration for the other "herbs" he sells? Maybe. Could he have submitted a specimen that was related to legal herbs only? It would have been worth the try. At least he might have gotten a registration for the legal parts of his business. Could Morgan have tried to register the trademark with the Washington State Trademark Office? Probably. It could have given him protection for use of the name in connection with marijuana within the State of Washington.


    Liking Something Isn't Like Owning Something

    Beverly A. Berneman

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

    WHY YOU SHOULD KNOW THIS. Intellectual Property isn’t a catchall for rights protection. Sometimes, a company generates information or data that can be protected even if it doesn’t fall squarely into one of the Intellectual Property categories of patents, copyrights, trademarks and trade secrets. For instance, the Illinois Supreme Court held that the data compiled by Dow Jones is protectable because Dow Jones only gives the information to authorized licensees. Likes on a Facebook page don’t reach that kind of protectability. Even though Stacy lost this one, we have to give her credit for asserting a novel theory.


    OMG! Your Text Messages Could Be a Contract

    Beverly A. Berneman

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

    WHY YOU SHOULD KNOW THIS. Not all contracts come under the strict requirements of the Statute of Frauds. Our technology driven society facilitates an ease of communications that the creators of the Statute of Frauds never envisioned. So a string of e-mails and text messages can have unintended consequences of creating a contract. Then the parties could end up in litigation over the formation and enforceability of a contract.


    A Noble Battle Comes to an End

    Beverly A. Berneman

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

    WHY YOU SHOULD KNOW THIS. It’s all about control. The parent controls the subsidiary. But the subsidiary doesn’t control the parent. Trademark use is also about control. You can’t allow someone to use your trademark without control over how they use it. Floorco had the registration but no control over Furnco. Assuming that Furnco’ s sporadic use was enough to preserve the trademark, a license agreement between Floorco and Furnco might have avoided the cancellation.


    A Serious Dent in a Patent Pirate's Treasure

    Beverly A. Berneman

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

    WHY YOU SHOULD KNOW THIS. This decision demonstrates a tension between a trial court and an appellate court. The trial court hears the evidence and decides the facts while applying the laws. The appellate court is supposed to determine whether the court below decided the facts according to the law. In these cases, SCOTUS decided that the appellate court had overreached and encroached on something that should be left to the trial court. The Patent Act recognizes that in certain egregious situations, the willful infringer should pay not only actual damages but enhanced damages to punish the infringer and further compensate the plaintiff. The Federal Circuit’s rigid test wasn’t warranted by the Patent Act and interfered with the trial court’s ability to award enhanced damages.


    Summer 2016 Update

    Beverly A. Berneman

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

    Browsing Isn’t a Virtual Handshake Deal (November 17, 2015). Since this post, another court has spoken on the unenforceability of on-line agreements. The Seventh Circuit Court of Appeals affirmed dismissal of a demand for arbitration based upon an alleged on-line click wrap agreement in Sgouros v. TransUnion Corp. The Court analyzed the user experience and determined that on-line customers were not sufficiently notified that their purchases were subject to a Services Agreement that included an arbitration clause “buried on page 8”.

    Apple v. FBI (February 23, 2016). Since this post, a third party came forward and helped the FBI unlock the IPhone. Keep in mind that the IPhone in question is an older model. Newer models of the IPhone have different encryption and security software.

    Fear the Walking Trademark Zombies (March 22, 2016). Since this post, Macy’s Department Stores has brought a motion for sanctions and damages against Strategic Marks. Macy’s alleges that the principal of Strategic Marks violated a confidentiality clause in the settlement agreement by announcing “We won”. The moral of this story is (1) if you settle, you don’t win or lose; and (2) Don’t breach a confidentiality clause no matter how tempting.