Beverly A. Berneman
In Brief: Trade dress protects the “look”. The “look” has to be non-functional and create a connection with the consumer. When the “look” is purely functional or for manufacturing convenience, like the design of a cookie, it’s not protectable as trade dress.
Pocky is a cookie stick that comes in several flavors including chocolate or strawberry. The cookie was first produced in Japan in 1966. Pocky’s manufacturer, Ezaki Glico Co., Ltd. can boast of world-wide popularity for its cookie sticks.
Lotte International America Co., decided to get into the cookie stick game. It came out with its own version called Pepero. There’s no question that the Pepero cookie stick is identical to the Pocky cookie stick.
Ezaki Glico sued Lotte International for trade dress infringement in New Jersey district court.
The Third Circuit Court of Appeals ruled that the cookie sticks were not protectable as trade dress. U.S. Circuit Judge Stephanos Bibas, writing for the panel stated that: "Trade dress is limited to features that identify a product's source.” The Court held that the shape of the cookie stemmed from a utilitarian advantage; not from an attempt to serve as distinctive trademark. "The claimed features are not arbitrary or ornamental flourishes that serve only to identify Ezaki Glico as the source," "The design makes Pocky more useful as a snack, and its advantages make Pocky more appealing to consumers."
Ezaki Glico argued that invalid trade dress should be limited to essential product designs. The court rejected this argument. "So long as the design improves cost, quality, or the like, it cannot be protected as trade dress.”
WHY YOU SHOULD KNOW THIS. Goldfish crackers are protected trade dress. You can’t really separate the shape of the crackers from the cracker itself. So why wouldn’t the same philosophy apply to Pocky cookies? The key is in whether the design is essential to the function of the product. A goldfish design is not essential to a cracker. But the design of the cookie sticks can only be in the shape of a stick.
Beverly A. Berneman
In Brief: In past years, we have awarded Crippys to those who achieved infamy by committing Intellectual Property crimes over the last year. Here are the winners of the 2020 Crippys.
SECOND RUNNER UP CRIPPY: Goes to Anthony Levandowski. Anthony co-founded Google’s self-driving car program. He left Google and founded his own business that was later acquired by Uber. Google accused Anthony and Uber of stealing its trade secrets. Google accused Anthony of downloading confidential Google files that detailed the self-driving car program. Uber fired Anthony when he refused to cooperate with Uber’s internal investigation. Uber and Google settled. But the civil suit sparked an investigation that resulted in a 33 count grand jury indictment against Anthony. Anthony pled guilty to one count of trade secret theft. Considering the massive billion dollar scale of the crime, the judge sentenced Anthony to 18 months in prison and ordered Anthony to pay of $700,000 in restitution. From this we learn that a civil suit can launch a federal criminal indictment.
FIRST RUNNER UP CRIPPY: Goes to Hao Zhang, a professor at China’s Tianjin University. Zhang and five other people were charged with economic espionage, theft of trade secrets and conspiracy for attempting to steal trade secrets related to wireless technology for a film bulk acoustic resonator. Zhang and his co-conspirators engaged in a complex conspiracy to bring the trade secrets to China. After a four-day bench trial, Zhang was found guilty and sentenced to 18 months in jail and a fine of $476,835.00. From this we learn that being a professor doesn’t mean that you are too smart to avoid criminal prosecution.
GRAND PRIZE CRIPPY: Goes to the group of cyber-criminals who are exploiting the Coronavirus outbreak. These tireless hackers are using vulnerabilities in IT systems that have been stressed by massive remote working and learning. They have caused a spike in data security breaches that has put IT professionals on high alert. These intrepid criminals send millions of phishing emails posing as the Centers for Disease Control and Prevention and the World Health Organization to get people to click on links for more information about the Coronavirus. Then they steal private information and spread computer viruses and ransomware. Nothing like exploiting pandemic stress for nefarious purposes. Strangely, no one is stepping up to accept this award.
WHY YOU SHOULD KNOW THIS: As we look forward to a better year than the last one, extra vigilance is going to be needed to keep IP criminals at bay.
Beverly A. Berneman
The Jersey Boys is a Broadway musical (the “Play”) about the musical quartet, The Four Seasons (the “Band”). It debuted in 2005 and ran for over 10 years, toured the country repeatedly and was adapted into a movie in 2014.
In the late 1980s, Band member, Tommy DeVito wrote an autobiographical “tell all" book about the Band. The book was ghost-written by Rex Woodard (“the Work”). The Work was completed before the Play had been written and produced.
DeVito’s widow, Donna Corbello, sued Frankie Valli (the Band’s lead singer) and a lot of other people for copyright infringement alleging that the Play was an unauthorized derivative of the Work.
After long and arduous years of procedural history, including summary judgment orders and one previous appeal, the case was presented to a jury who found that infringement had occurred. The district court granted the defendants’ motion for judgment as a matter of law. The court overrode the jury’s findings and held that the similar elements in the Work and the Play were facts and not protected by copyright.
Donna appealed. The Ninth Circuit Court of Appeals affirmed the judgment. The Ninth Circuit rested its decision on the "unremarkable proposition" that facts, in and of themselves, may not form the basis for a copyright claims. Historical facts, common phrases and scenes-a-faire (scenes that are indispensable, or at least standard, in the treatment of a given idea) are unprotected by copyright.
The interesting twist is that Donna tried to transform a non-fiction work into a fictional work. She claimed that certain facts were really embellishments. So they should be treated as fiction. The Ninth Circuit didn’t buy it. Under the doctrine of copyright estoppel (which the Ninth Circuit renamed “the asserted truths doctrine”), “elements of a work presented as fact are treated as fact, even if the party claiming infringement contends that the elements are actually fictional.” If the author claims a written work is historically accurate, he or she “cannot later claim, in litigation, that aspects of the work were actually made up and so are entitled to full copyright protection.” “Copyright protects the creative labor of authors; it does not protect authors’ post-completion representations about the lack of veracity of their own avowedly truthful work.”
WHY YOU SHOULD KNOW THIS. This case illustrates that the author of a non-fiction work can’t hang a “fiction” sign on it and claim copyright infringement. The foundation for copyright protection appears in the US Constitution (Art. I, Sec. 8. C. 8). Congress is empowered to make laws to “promote the Progress of Science and the Useful Arts”. But, copyright does not give an author a monopoly on facts.
Beverly A. Berneman
In 2012, Veronica Morales registered the trademark, BLUE IVY, for her event planning company. Four years later, Beyoncé Knowles-Carter’s company, BGK Trademark Holdings, LLC filed a trademark application to protect, BLUE IVY CARTER, (named after Beyoncé’s daughter) for entertainment services.
That’s when the fight began.
Veronica filed an opposition to BGK’s trademark application with the Trademark Trial and Appeal Board (the “Board”).
Veronica had a lot of arguments for opposing BGK’s application. Unfortunately, the Board rejected each of Veronica’s arguments and dismissed the opposition.
Veronica argued that BGK never intended to use the name as a trademark. Veronica based this assertion on an interview that Beyoncé’s husband, Jay-Z gave to Vanity Fair. In the interview, Jay-Z said that he and Beyoncé applied to register Blue Ivy’s name as a trademark not because they wanted to do anything with it, but to prevent others from benefitting from the name. The Board rejected this evidence as hearsay within hearsay.
Veronica argued that BGK was a serial filer of bad faith trademark applications. The Board rejected this argument because BGK had only filed one previous application that was voluntarily abandoned.
On the issue of likelihood of confusion between the two marks, the Board analyzed the factors and came out on BGK’s side. The two marks were almost identical in look and sound. But their services were different. BGK was not in the business of providing event planning. Veronica’s event planning might involve finding entertainment, but it wasn’t focused on entertainment services. Both Veronica and BGK provided branding and marketing. But the Board didn’t see that a customer would be confused about the services they provided. The Board also held that Veronica failed to present any evidence showing that the parties’ goods and services were “provided in the same trade channels or to the same classes of purchasers.”
There was also a discovery side note. Apparently, Veronica complained that BGK didn’t comply with discovery but Veronica failed to follow through on ways to force compliance. BGK complained that Veronica had weaponized the discovery process to “pry into” Beyoncé’s personal life and “threaten and intimidate her.” The Board ruled that both parties were at fault and so any discovery disputes won’t affect the ruling.
WHY YOU SHOULD KNOW THIS. Two trademarks can look and sound the same and still not cause a likelihood of confusion. The consumer’s prospective is the deciding factor. If the goods or services are sufficiently different, the customer won’t be confused between the two. While we would be thrilled to have Beyoncé’s company handle our weddings, christenings, bar/bat mitzvahs, etc., it’s unlikely that we would be confused with Veronica’s Blue Ivy event planning services.
Beverly A. Berneman
Discussing confidential or trade secret information through video conferencing platforms can be hazardous to the health of trade secrets.
Smash Franchise Partners, LLC and Smash My Trash LLC operate a mobile trash compaction business. Smash’s trucks compact trash in the customer’s dumpster. This allows the customer to fill the dumpster with more trash and save on waste management fees. Smash sells franchises to entrepreneurs who want to run Smash branded franchises.
Todd Perri, a serial entrepreneur, was interested in becoming a Smash franchisee. Smash sent Todd some information and invited him to watch Smash’s YouTube videos. Then there were Zoom meetings called “unit economics calls”. Smash sent Todd an Excel worksheet that contained franchise economic data. All of this was preliminary. Once Todd decided to commit, Smash asked him to sign a non-disclosure agreement which he did. Then Todd attended weekly “Franchise Forum” calls on Zoom where Todd was supposed to learn the “secret sauce” of operating a Smash franchise.
Todd decided that with his engineering background and entrepreneurial experience, he didn’t need to purchase a franchise. He could just set up a competing business.
Smash sued Todd and his company, Kanda Holdings, Inc. for misappropriation of trade secrets, conversion, unfair competition, and breach of a non-disclosure agreement.
The court denied Smash’s motion for preliminary injunction to bar Todd from using Smash’s alleged trade secrets.
The court held that Smash was not reasonably likely to succeed on the merits of its trade secret claims because, even assuming trade secrets existed, Smash failed to take reasonable measures to protect them. The court listed the ways in which Smash went wrong:
Smash freely gave out information in the Franchise Forum calls to anyone who expressed an
Smash could have, but didn’t, require participants to enter a password to join the forum;
Smash could have, but didn’t, put people in a waiting room before allowing them to attend
the call so that Smash could make sure only authorized people were on the Zoom call;
Smash didn’t follow its own procedures which required taking a “roll call” to make sure
only authorized people were attending the Zoom call; and
Todd was able to show that at least 20 unidentified people attended the Zoom meetings
Based on this, the court determined that Smash would not be able to prove at trial that it took reasonable measures to protect its trade secrets and confidential information from being disclosed.
WHY YOU SHOULD KNOW THIS. Trade secrets have two primary components. First, they are used in trade. Second, they are subject to reasonable measures to prevent disclosure. Trade secrets and confidential information are fragile beings. Their value is destroyed once everyone knows them. Zoom offered Smash a lot of tools to protect the information that was being shared. Smash didn’t use them. Smash’s outcome has other implications as well. With employees working remotely and using video conferencing, every business should have set policies and enforcement procedures about sharing trade secrets and confidential information while working remotely.
Beverly A. Berneman
Some of you may recall the argument you used with your parents that went something like “Everyone else gets to go” or “Everyone else’s parents let them [fill in the blank]”. Chances are that these arguments were unsuccessful.
Elie Tahari Ltd. learned that “Everybody does it” doesn’t work in a copyright infringement case either.
The Tahari fashion brand is famous for high end sleek and trendy clothes.
Mark Iantosca, a Brooklyn-based photographer, snapped a picture of the digital content creator and stylist, Lin Niller Huynh, wearing a Tahari outfit. Tahari posted the photo on its social media, complementing Lin’s style and crediting Mark as the photographer.
The problem is that Mark didn’t grant Tahari a license to post the photo. So he sued Tahari for copyright infringement.
In granting Mark’s motion for partial summary judgment on the issue of liability, the district court rejected each of Tahari’s defenses. And there were quite a few. The most unusual one was the “Everybody does it defense”. Tahari argued that its use of the photo was “di minimus” and simply reposting a picture in social media is commonplace and trivial. The court held that there’s “nothing ‘trivial’ about a business utilizing a professional photographer’s work to promote its products”.
There were other unsuccessful defenses too. Tahari challenged whether Mark had registered the copyright before filing suit. The court held that Mark held a valid copyright since he identified the registration number in the complaint. Tahari argued that the infringed photo may not be the one deposited with the Copyright Office in connection with the registration. The court, sua sponte, ordered up a copy of the deposit from the Copyright Office and verified that the photo and the registration matched. Tahari argued that the posts were “fair use”. This one was a hard sell because there was nothing transformative about reposting a photo for commercial purposes. So, the court held that each fair use factor weighed in Mark’s favor and against Tahari. Finally, Tahari argued that it gave Mark credit for the photo. The court held that attribution is not a defenses to copyright infringement.
The parties were ordered to appear at a conference to discuss damages.
WHY YOU SHOULD KNOW THIS. The free exchange of content over social media platforms creates all too many opportunities to post someone else’s works without permission. When the sharing of content is used to promote products or services without permission, infringement can become a costly proposition. Note also that that giving attribution is not a defense to copyright infringement.
Beverly A. Berneman
In 2017, I awarded the grand prize for IP criminals to the disgraced Prenda Law Firm. This stain on the legal profession had created honey pot porn websites and then sued people who downloaded their content for copyright infringement. The lesson of creating your own porn to entice illegal downloads seems to have resonated. But wholesale copyright infringement cases are still out there.
Wholesale copyright infringement cases usually work like this. The owner of the content (doesn’t have to be porn) has a list of IP addresses that show alleged illegal downloads. The content owner files suit naming a number of “John Does” using a boilerplate complaint. Then the lawyers file a motion for expedited discovery to figure out who holds the accounts for the IP addresses. Once they get the names and addresses, they send out demand letters. The amount in the demand is usually low enough to make it more expensive to hire a lawyer then to defend the case. A certain number of low hanging fruit John Does agree to pay the demand. When the plaintiffs reach a saturation point, they dismiss the case.
Over the years, some courts have denied expedited discovery based on a boilerplate complaint. The courts have held that the IP address is not enough and that the complaints have to contain facts that demonstrate that the subscriber of the IP addresses actually infringed. But, there are other courts who are perfectly fine with these wholesale, bare bones complaints.
Strike 3 Holdings LLC, an adult movie company that produces films under the names, Blacked, Tushy, and Vixen, was able to overturn two rulings that denied its motions for expedited discovery. Up until these two decisions, Strike 3’s motions were routinely denied making a huge dent in Strike 3’s copyright infringement litigation. That trend may now be reversed.
In one case, the lower court focused on Strike 3’s robust filing history to determine that Strike 3 didn’t know if any Doe defendant actually committed copyright infringement. So the lower court held that the complaint failed to state a claim for relief. On appeal, the court reversed finding that the complaint alleged enough at the pleading stage to warrant the expedited discovery.
In the second case, the lower court didn’t hide its disdain for Strike 3 while denying expedited discovery. The court described Strike 3's films as "aberrantly salacious" and assigned "great weight" to the privacy expectations of the John Does in a case involving "particularly prurient pornography". The appellate court reversed finding that the district court focused on the unsupported and negative inferences from Strike 3’s litigation strategy rather than on the legal aspects of stating a claim in the complaint.
Time will tell if these decisions will result in a surge of John Doe copyright infringement cases.
WHY YOU SHOULD KNOW THIS. Let’s focus on what this might mean for any unsuspecting business. Illegal downloads from the Internet are not confined to porn. Mainstream movies fight the battle of illegal downloads too. Then there’s other types of content like photos, graphics and music. Employees have been known to illegally download content during work hours for their personal use as well has on behalf of their employers. The opportunities for doing so have only heightened since the COVID-19 pandemic with more people working remotely. Then there are the opportunists who highjack signals and aggregate them to illegally download content in clusters. There are some measures that a business can take to reduce this exposure. First, create and enforce policies and procedures for employees’ use of company computers. Second, build in systems that block access to websites that are outside the scope of the business. Third, make sure that systems are safe and secure from cyberattacks. And fourth, obtain cyber insurance.
Beverly A. Berneman
Brooklyn Brewery (“Brewery”) has been around for more than 30 years. Brewery sells craft beers all over the country. Brooklyn Brew Shop (“Brew Shop”) was founded in 2009 and sells beer brewing kits.
In 2010, Brewery started receiving calls from customers trying to reach Brew Shop. So Brewery emailed Brew Shop about it and suggested that Brew Shop “keep an eye on it”.
Apparently, neither side was too worried about customer confusion at that time. Brewery and Brew Shop started collaborating on projects related to beer making, including co-branded beer-making kits, promotional events, books on beer making and educational beer making programs.
It was a match made in beer heaven. Until May 2015. That’s when Brewery found out that Brew Shop registered its trademarks in 2011 and had another application pending. Brewery launched an internal investigation into how Brew Shop’s business was impacting Brewery’s business. The results of Brewery’s investigation led it to oppose Brew Shop’s pending application and to file cancellation proceedings against the registered marks with the Trademark Trial and Appeal Board (“Board”).
Brew Shop defended the actions with arguments that were two sides of the same beer mug.
As to the opposition proceeding, Brew Shop said that Brewery’s opposition was barred by laches. Laches is an unreasonable delay to assert one’s rights that results in material prejudice to a party’s use of the trademark. Normally, laches isn’t available in an opposition proceeding because there’s a narrow 30 day window within which to bring an opposition proceeding. But in this case, the Board held that laches is available because Brew Shop had prior registered marks that are similar to the applied for mark. So the opposition proceeding was barred by laches.
As to the cancellation proceedings, the Board held that Brewery had both waited too long to act and acquiesced to Brew Shop’s marks. Acquiescence is when (1) the owner of the trademark receives assurances for the other that it was ok to use the mark; (2) the owner relied on the assurance; and (3) the owner would experience undue prejudice if it now had to cease use of the mark. Brewery knew about Brew Shop and even collaborated with it for years. During this time, Brew Shop built its business using those trademarks. So to stop Brew Shop now would cause extreme hardship to Brew Shop’s business. The Board held that Brewery’s participation in joint activities for over four years established acquiesce.
Brewery had some arguments for why it waited so long. Brewery argued that it thought Brew Shop was just a small, local company and didn’t know how big Brew Shop was until it discovered the trademark registrations and applications. This argument is called “progressive encroachment”. That means a trademark owner is not forced by the rule of laches to sue until the likelihood of confusion caused by the accused use presents a significant danger to the mark. The Board rejected this argument.
Brew Shop was allowed to keep its trademarks.
WHY YOU SHOULD KNOW THIS. Brewery’s problem was not having a cohesive branding plan. It saw a great opportunity for collaboration. But Brewery was aware of actual confusion and didn’t seem to mind while the collaboration was going well. Collaboration between like-minded businesses can strengthen both businesses. But, it shouldn’t stop either party from protecting their own brand. There might have been a better outcome if there had been a cross-licensing agreement. Then both sides would have known about the extent of the other side’s trademarks and they could have created an exit strategy that didn’t hurt either side when the collaboration ended.
Beverly A. Berneman
“Engirlneer” may be hard to pronounce. But once you know its message, it makes sense.
Shannon DeVivo, a professional environmental engineer, wanted to encourage women and girls to seek careers in the STEM fields (science, technology, engineering and math). So Shannon wrote a series of books titled “The Engirlneers”. The books also invite readers to visit www.engirlneer.com to “Learn how to become an Engirlneer”. The books and the website feature fictional female characters with interests in STEM-related fields.
After Shannon’s website went live and the books became available for purchase, Celeste Ortiz filed an intent to use application to register ENGIRLNEER as a trademark for sweatshirts and shirts, cups and mugs, and lanyards.
Shannon then filed two trademark applications to register the trademark for her books, advice services and educational website. She immediately filed an opposition with the Trademark Trial and Appeal Board (the “Board”) to block Celeste’s application.
The matter went to trial before the Board.
Celeste had two major arguments. First, she argued that Shannon lacked standing to oppose Celeste’s trademark because Shannon hadn’t applied to register the mark before Celeste did. The Board found that the dates of Shannon’s trademark applications don’t control whether or not she had standing. The date of first use of the trademark controlled. So Shannon had standing.
Celeste next argued that she wasn’t going to use the mark for a book or website so there’d be no likelihood of confusion with Shannon’s mark. The Board held that the marks are exactly the same and Celeste’s products tend to be the kind of collateral goods that a consumer would connect with Shannon’s works. So customers could be confused as to whether Shannon was the source of Celeste’s products.
The Board sustained the opposition.
WHY YOU SHOULD KNOW THIS. This case brings up two really important things to remember about trademarks. First, trademark rights are based on use. That’s why Shannon’s date of first use of her clever Engirlneer trademark was so important to her ability to oppose Celeste’s registration. Even if Shannon hadn’t filed applications to register the mark at all, there’s a good chance she would have won the day anyway. That’s because anyone who feels that the registration of a trademark will interfere with their rights can oppose the registration. But it’s better not to take a chance and file your trademark application as soon as possible. Second, trademark rights can sometimes extend beyond the goods and services identified by the owner. This happens when goods or services are related to the ones identified in the owner’s application. In this case, the Board pointed out the relatedness between books and a website and collateral goods (e.g. wearing apparel) that a consumer would connect with books and a website.
Beverly A. Berneman
Registering the copyright in a work has a lot of advantages, including establishing ownership, access to federal courts for litigation and the ability to recover statutory damages and attorneys’ fees for infringement. So far so good. But to register a copyright, you have to fill out an application following Copyright Office rules.
Unicolors, Inc. creates, purchases and gets exclusive rights to a large inventory of graphic works that are printed on fabrics and sold to fashion brands. Unicolors filed suit against H&M, the low cost clothing store that originates out of Sweden. Unicolors complained that H&M was selling garments that used graphics substantially similar to those owned by Unicolors.
Unicolors is no stranger to copyright infringement cases. Unicolors has been accused of being a copyright troll because it has filed over 700 copyright infringement lawsuits over the last few years.
The district court entered judgment for Unicolors in the amount of $266,209.33 in damages, $508,709.20 in attorney’s fees, and $5,856.27 in costs. H&M appealed. The Ninth Circuit Court of Appeals reversed the judgment. The reversal had nothing to do with whether or not H&M committed copyright infringement. Instead, the Ninth Circuit found problems with Unicolors’ application to register its copyrights.
Unicolors had filed the registration for the work at issue as part of a “collection” that included 31 separate designs. In order to file as a “collection”, the works have to be published in a single unit. That definitely wasn’t the case with Unicolors’ fabric designs. In fact, some of the designs in the "collection" had never been made public. So Unicolors knew that the application was inaccurate.
Once a defendant alleges inaccuracies in a copyright application, the district court is supposed to submit a request to the Register of Copyrights “to advise the court whether the inaccurate information, if known, would have caused it to refuse registration.” So the Ninth Circuit sent the case back to the district court to follow through on the required process.
WHY YOU SHOULD KNOW THIS. This case demonstrates the importance of filing accurate copyright applications. Clawing in multiple works for a group application may save on the filing fees ($55.00 per work). But the cost savings comes at a cost (pun intended) when suing for infringement. Also, it’s interesting that the Ninth Circuit didn’t say that H&M had to prove an “intent to defraud” the Copyright Office. The inaccuracy in the application is enough.
The Copyright Office recognizes that filing applications in single units can be cost-prohibitive for some content creators. So, there are some works that can be filed in batches even if they weren’t originally published together. Up to 750 photographs can be registered in a group. However, published photos have to be registered separately from unpublished photos. There are also ways to register groups of non-photographic works which is kind of complicated. For more information you can consult the Copyright Office’s Circular No. 34.
Beverly A. Berneman
The US Supreme Court decision in Alice Corp. v. CLS Bank International held that abstract ideas cannot be patented. Electronic Communication Technologies, LLC (“ECT”) is the one of latest patent holders to feel a ghostly pinch from Alice.
ECT sued ShopeerChoice.com for patent infringement. ECT alleged that ShoppersChoice infringed on its patent for an “automated notification system” that gives someone information about the delivery of goods or services. The components of the system allows a party to initiate a session, provide authentication information and then the party gets access to particulars regarding a pick up, delivery or failure of delivery. Does this sound kind of familiar?
ShoppersChoice moved to dismiss the case because the claims were invalid as abstract ideas. The district court granted the motion and ECT appealed to the Federal Circuit Court of Appeals.
The Federal Circuit affirmed the decision. The Federal Circuit used Alice’s two part analysis to determine if the claims were invalid. First, the court must determine if a patent claim involves judicially-excluded patent subject matters like a law of nature, a natural phenomenon, or an abstract idea. If it does, the second step decides whether any element or combination of elements in the claim are sufficient to ensure that the claim amounts to significantly more than the excluded claims from the first step. Elements or combinations of elements that are well-understood, routine, and conventional are not enough to satisfy the second part of the analysis.
In this case, the Federal Circuit agreed with the lower court that the claims describe abstract ideas. And the described abstract ideas are business practices that have been around for decades, if not longer (which is why they probably sounded familiar). ECT argued that its authentication system was enough to satisfy the second part of the test. The Federal Circuit found that the features were described at too high a level and could mean just about anything. ECT argued that it had been open during the prosecution process and its application “sailed through”. The Federal Circuit didn’t find that very persuasive.
Coda: ShoppersChoice moved for reimbursement its attorneys’ fees. The Patent Act allows a prevailing party to seek attorneys’ fees in “exceptional circumstances”. Among the special circumstances cited by ShoppersChoice was ECT’s practice of sending standardized demand letters and filing hundreds of repeat patent infringement actions for the purpose of obtaining low-value license fees and forcing settlements. The district court denied ShoppersChioce’s motion. ShoppersChoice appealed and the matter was remanded back to the district court with instructions on the proper analysis for “exceptional circumstances”.
WHY YOU SHOULD KNOW THIS. Software patents are not necessarily dead after Alice. But, applications to patent software have to meet a pretty high threshold. Before Alice the vagueness of software patents led to a lot of cease and desist letters and low-value license fees or forced settlements. Those types of cease and desist letters are not completely gone. But they are much reduced.
Beverly A. Berneman
This blog recently discussed the inability to protect movement during a sightseeing tour as trade dress (“Emotionally Yours”, 6/2/2020). Other types of trade dress can also have problems.
Forney Industries wanted to register its colorful packaging for welding and machining tools and accessories as trade dress. Forney described the trade dress as “the colors red into yellow with a black banner located near the top as applied to packaging for the goods. The dotted lines merely depict placement of the mark on the packing backer card” (See picture). Forney started using this packaging in 2008.
The USPTO refused registration. The USPTO decided that the packaging wasn’t inherently distinctive without a showing of secondary meaning. Secondary meaning is when the consumer sees a connection with a descriptive mark and the goods or source of the goods. Forney argued that the colors on its packaging was inherently distinctive and not merely descriptive. So it doesn’t have to show that the trade dress acquired secondary meaning. The USPTO rejected this argument.
Forney appealed. The Trademark Trial and Appeal Board (“Board”) affirmed the USPTO. The Board held that packaging can be inherently distinctive. But a color mark applied to packaging cannot be inherently distinctive unless it’s applied to a specific shape.
Forney appealed to the Federal Circuit Court of Appeals. The Federal Circuit rejected the Board’s holding that color on packaging cannot be inherently distinctive. The Federal Circuit held the Board must review the relevant factors to determine whether “it is reasonable to assume that customers in the relevant market will perceive the trade dress as an indicator of source.” Those factors are whether the trade dress: (1) is a common, basic shape or design; (2) is unique or unusual in the particular field; (3) is a mere refinement of a commonly adopted and well-known form or ornamentation for a particular class of goods; or (4) is capable of creating a commercial impression distinct from any accompanying words.
Forney didn’t exactly win the day yet because the application has to go back to the Board for an evaluation of the factors.
WHY YOU SHOULD KNOW THIS. Inherent distinctiveness must always be viewed from the perspective of the consumer. The factors cited by the Federal Circuit give a handy set of consumer based factors. So when adopting trade dress as a source or product identifier, keep these factors in mind.
Beverly A. Berneman
Next time you look at a bottle of Listerine, think of it as a lesson in contract drafting.
It all started in 1881 when Dr. Joseph Lawrence sold the secret formula for his mouthwash to Jordan Lambert in exchange for royalties on sales as long as the mouthwash was manufactured. The transfer document granted royalty payments to Dr. Lawrence, “his heirs, executor and assigns”. The problem was that the royalty payments had no time limit.
For over 75 years, Lambert and his successors have had to pay Lawrence and his heirs. Even after the secret formula was published in the Journal of the American Medical Association in 1931. By 1956, the manufacture and sale of the Listerine was costing Warner Lambert about $1.5 million a year (that would be over $10 million in 2020 dollars). So it sued to end the payments. Warner Lambert argued that because the formula is no longer a trade secret, it shouldn’t have to keep paying royalties. The court ruled that the language in the contract had “no ambiguity or uncertainty in this language. Nor can I ascertain any alternative or hidden meanings lurking within it.” The royalty payments were not conditioned on the formula remaining secret. So Warner Lambert had to keep paying.
After 1956, shares in the royalties have been passed around and split. Owners of shares have included New York real estate broker, John J. Reynolds, the Roman Catholic Archdiocese of New York, The Salvation Army, the American Bible Society, Wellesley College and former New Jersey Governor, Chris Christie (who gets an annual income of about $24,000.00). The Royalty exchange (https://www.royaltyexchange.com/), which usually sells entertainment related royalties, recently sold some shares for $560,000.00. Caveat Emptor. It’s going to take about 18 years to break even at the current annual income of $32,000.00 for those shares.
WHY YOU SHOULD KNOW THIS. Unlike other types of Intellectual Property, trade secrets have an infinite life. That is, as long as the trade secret remains secret. To be fair to the drafter of the 1881 agreement, trade secret law was barely a blip on the Intellectual Property horizon at the time. They may not have realized that a perpetual royalty was going to last for 139 years and counting. Trade secret law emerged as a player in the latter half of the 20th Century. But, the lesson for us today is clear. Anticipating new and emerging technologies will always be a challenge for contract drafters.
Beverly A. Berneman
The US Patent Office (“USPTO”) has bad news for CP30, R2D2 Wall-E and all of their robot friends. They don’t qualify as an inventor of a patent.
Artificial Intelligence (“AI”) is the theory and development of computer systems to perform tasks that are normally performed by humans. Some computer programmers have found a way for their AI computer systems to create something new without human contribution.
In July 2019, a team of scientists at the University of Surrey ("the Surrey Team") created an AI system that created “Device for the Autonomous Bootstrapping of Unified Sentience ("DABUS")”. DABUS is a creativity machine that has the ability to generate inventions. It can also determine which inventions are most useful. The Surrey Team’s AI system created DABUS without any human contributions.
The Surrey Team filed two application with the USPTO for a patent. The applications named the AI system as the inventor.
The USPTO rejected the applications because “the plain language of the patent laws as passed by the Congress and as interpreted by the courts" limits patent applications to only naming natural persons as inventors. As part of its decision, the USPTO acknowledged several public policy arguments offered by the Surrey Team. The Surrey Team asserted that allowing an AI system to be listed as an inventor would (i) incentivize innovation; (ii) reduce the improper naming of inventors; and (iii) promote public notice of an invention's actual creator. These considerations, however, were insufficient to overcome the plain meaning of patent law that requires human inventor.
WHY YOU SHOULD KNOW THIS. So if an AI system can’t be an inventor, how do you protect IP created by AI? Is the solution to have more human intervention in the AI system’s process? Will that slow innovation? Does patent law need to be updated to keep up with the times? The USPTO realizes that these questions need to be answered because AI based patent applications are being filed at a record pace. In August 2019, the USPTO issued two rounds of public comment on the patenting of AI inventions. Among other things, the USPTO sought input on how to ensure that appropriate incentives were in place to encourage further AI-related innovation. Quite a few power house tech companies weighed in on the subject. They argue that enterprise ready AI services, applications and tooling have the possibility of adding tens of trillions of dollars into the global economy. So protection for these AI innovations is a key element of progress. There are no definitive answers yet. You can learn more about patent protection for AI created inventions on the USPTO’s website. https://www.uspto.gov/initiatives/artificial-intelligence.
Beverly A. Berneman
Kevin Huber worked for AFS as a full time sales engineer for Advanced Fluid Systems, a hydraulic systems manufacturer. The Virginia Commonwealth Space Authority awarded a contract to AFS to build, install and maintain a launch pad for a NASA facility. Under the contract, the Space Authority owned the plans created by AFS. The plans were marked as confidential and were considered trade secrets. Three years later, the Space Authority ran into financial difficulty and assigned the Agreement to Orbital Sciences Corporation. So now Orbital owned the trade secrets. But, AFS still had a right to possess them so that it could perform on the agreement.
Here’s where the twisted tale of betrayal begins.
Kevin reached out to a competitor of AFS, Livingston & Haven. He told them that Orbital was unhappy with AFS. Kevin then gave Livingston AFS’ confidential information and even arranged tours of the AFS facilities. Kevin helped Livingston win a bid for gripper arms. The problem was Kevin was also helping AFS bid for that contract. He inflated AFS’ contract price thereby assuring Orbital’s success.
Kevin didn’t stop there. He started his own company intending to compete with both AFS and Livingston. He downloaded 98 gigabytes of AFS’ proprietary information. Then, he tendered his notice.
Kevin continued to help Livingston by sharing more of AFS’ information for a cylinder contract. But, in the end, Orbital awarded a cylinder contract to Kevin’s company.
AFS eventually figured out what was going on. It sued Kevin, Kevin’s company, Livingston and two of Livingston’s employees for trade secrets misappropriation under the Pennsylvania Trade Secrets Act.
Kevin and his fellow defendants argued that the AFS didn’t own the trade secrets so it didn’t have standing to sue. The District Court rejected the argument holding that AFS had a right to possess the trade secrets and so it had a right to sue for misappropriation. Kevin and his fellow defendants appealed. The Third Circuit Court of Appeals affirmed the District Court. The Court of Appeals described the situation as a “sorry story of disloyalty and deception piled upon deception [that] resulted in verdicts against the wrongdoers. They’re not happy about that, but, when the tale is told, it’s clear that the result is entirely justified.” The Court of Appeals held that the Trade Secrets Act only requires a plaintiff to demonstrate lawful possession and not ownership in order to seek remedies for wrongful acquisition or improper use of a trade secret. The Court of Appeals cited other jurisdictions that came to the same conclusion.
WHY YOU SHOULD KNOW THIS. We may never know if Kevin started on the road to “disloyalty and deception” under the misconception that AFS couldn’t sue him without owning the trade secrets. But, it makes sense that one who has the right to use a trade secret would be harmed by its unauthorized disclosure. And so, of course, AFS, would have a right to sue. No matter how you look at it, the unauthorized use of someone else’s trade secrets can lead to dire consequences.
Beverly A. Berneman
Retired attorney, Richard Bell, had a cottage industry suing people for copyright infringement of a picture of the Indianapolis skyline. Richard alleged that he took the photo in March 2000 for his law firm’s website. He registered the copyright in 2011, after his former law firm stopped using the photo on its website.
The skyline photo (see picture) became a popular download. Bell sent out cease and desist letters demanding license fees and even filed about 100 lawsuits for copyright infringement.
Then Bell came up against Carmen Commercial Real Estate Services. Carmen used the photo in a 2004 blog post. In 2016, Bell contacted Carmen alleging copyright infringement. Carmen refused to pay Bell the $5,000.00 he demanded to settle the matter. So, litigation ensued.
Carmen had two primary defenses. First, Carmen asserted that Bell didn’t take the photo. Bell said he took the photo in March 2000. But the photo shows green grass, a working fountain and the trees full of leaves. Bell said that he also took a night time photo the same day. Apparently, Indianapolis doesn’t green up until after March; so the daytime photo couldn’t have been taken in March. And the daytime photo was contradicted by the night time photo which showed bare trees. Oops.
The second defense was that Bell created the photo as part of his duties with this former law firm. So, his photo was a work made for hire and belonged to his employer and not him.
The jury sided with Carmen and determined that Bell hadn’t proved that he took the photo and owned the copyright. Bell is asking for a new trial. Carmen is seeking reimbursement of its attorney’s fees in the amount of $160,000.00.
WHY YOU SHOULD KNOW THIS. You’ll notice that Bell asked Carmen to pay $5,000.00 to settle the case. Asking for a small amount for settlement is not unusual. The idea is to make it cheaper for the case to go away than to defend it. But, Carmen didn’t look at the cost benefit analysis that way. By investigating the matter and realizing that it had some good defenses, Carmen decided not to back down. This case also demonstrates that if you’re going to say you own a copyrighted work, you had better make sure you really do. This lesson was also discussed in my blog post “Happy Birthday to All of Us” (10/20/2015).
Beverly A. Berneman
Alex Cruz was on his way to visit his girlfriend in the Tribeca neighborhood of New York City. He heard a commotion, took out his iPhone and took a snap shot. He thought he was just taking a photo of the police subduing a crazy person. What he really caught was a picture of law enforcement taking down a suspected terrorist. Alex shared the photo with a friend who then posted the photo on Instagram.
Cox Media, Inc. published the photo without Alex’s permission. Alex sued Cox Media for copyright infringement.
Cox Media came up with some defenses.
The first defense was that the photo wasn’t creative enough to be protected by copyright. Cox Media argued that Alex didn’t make any creative choices when he took the photo. The court rejected this argument. Copyright law has long recognized rights based on a bare minimum of creativity. A photograph may be original in three respects: rendition, timing, and creation of the subject. This means that almost any photograph may claim the necessary originality to support a copyright. Alex’s photo met these criteria.
Cox Media next claimed that its publication of the photo was fair use. The court rejected the argument using four-factor test in the Copyright Act which are: (1) the purpose and character of the use; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market or value of the copyrighted work. The court didn’t have to go further than the first factor. The heart of the first factor is whether the use is “transformative”. Transformative use alters the meaning or message of the first work. In other words, does the potential infringer’s use add something new with a different purpose or nature of the work? Cox Media didn’t do anything to transform Alex’s photo. It just republished it without commentary. So the court held that Cox’s use was not transformative. The court felt that buying Cox Media’s fair use defense is “antithetical to the purposes of copyright protection to allow media companies to steal personal images and benefit from the fair use defense by simply inserting the photo in an article which only recites factual information—much of which can be gleaned from the photograph itself.”
Cox Media’s last defense was the First Amendment. The court rejected this too holding if fair use exists then First Amendment rights are protected too.
WHY YOU SHOULD KNOW THIS. This case has two takeaways. First, the amount of creativity needed for copyright protection is often misunderstood. All that is needed is a bare minimum of creativity. It doesn’t have to be novel. It doesn’t have to be on the Annie Leibowitz level of artistry. And it isn’t measured by “sweat of the brow”. Alex didn’t have to work hard to take his photo. But he got copyright protection anyway. Second, fair use is not a catch all even for media companies. Reporting on an incident in the news isn’t a blank check to use some else’s protectable content.
Beverly A. Berneman
Sex predicting technology for bovines is an extremely lucrative business. The revenues are $200 million industry worldwide with about $50 million of that in the USA.
Inguran, Inc. d/b/a Sexing Technologies owns patents that sort bovine semen as it is prepared for artificial insemination. This helps breeders control how many bulls and how many cows will be born. Obviously, the technology is very valuable in the dairy industry and in the cattle breeding business.
ABS Global Inc. filed an antitrust suit against Sexing Technologies. ABS alleged that Sexing Technologies used anti-competitive contracts and acquired about 60 patents in order to corner the market on sexed bovine semen.
Sexing Technologies filed a counterclaim against Sexing Technologies for infringing on about 6 patents.
The matter went to trial in 2016. The jury returned a mixed verdict finding that Sexing Technologies did improperly corner the market but that ABS was not entitled to damages because it didn’t prove anti-competitive harm. The jury found in Sexing Technologies’ favor on the counterclaim and awarded it $2 million.
The decision was appealed. The Seventh Circuit Court of Appeals reversed the decision. The Seventh Circuit found the jury verdict “somewhat puzzling” and contradictory. The verdict had invalidated a claim that was dependent on a validated claim. So the Seventh Circuit remanded the matter back to the trial court for a new trial.
At the conclusion of the new trial, the jury found in Sexing Technologies’ favor again and also found that two other patents were infringed. The jury added another $8.5 million to the original judgment raising the total award to Sexing Technologies to almost $11 million.
WHY YOU SHOULD KNOW THIS. Patent infringement litigation can be long, arduous and expensive. Sometimes, there are rewards at the end. Sometimes there aren’t. The outcome of patent litigation is not as easy to predict as breeding livestock with sexed bovine semen. ABS took a huge risk when it pursued antitrust litigation. Patents, by their nature, are anti-competitive. A patent gives the owner a monopoly on the use of the invention for 20 years. The owner can use the invention pretty much any way they want during the life of a patent. That doesn’t mean that a patent forecloses antitrust litigation. It just means that the anti-completive activity has to be more than practicing the patent.
Beverly A. Berneman
The Hard Rock Café’s operating company, JC Hospitality LLC, tried to register the trademark “The Joint” for its casino based music venues. The USPTO refused registration. On appeal, the TTAB affirmed. Hard Rock then appealed to the Federal Circuit Court of Appeals who also affirmed the refusal.
The most protectable types of trademarks are inherently distinctive. Inherently distinctive trademarks are arbitrary, fanciful or suggestive of the goods or services. Merely descriptive trademarks can eventually be registered as long as they acquired distinctiveness through use.
The Examining Attorney who reviewed the application thought the words “The Joint” were either merely descriptive or even possibly generic for a restaurant or entertainment space. So the Hard Rock Café argued that The Joint had acquired distinctiveness.
To determine whether a mark has acquired distinctiveness, the USPTO or a court may consider: (1) purchasers’ association of a mark with its owner (typically by means of consumer surveys); (2) the length, degree, and exclusivity of use; (3) the amount and manner of advertising; (4) sales and number of customers; (5) intentional copying; (6) unsolicited media coverage of the product or service bearing the mark.
In this case, the Examining Attorney had pointed to the fact that the dictionary defines the word exactly the way that Hard Rock used it. And there were a lot of third parties who used the same words in connection with other restaurants and entertainment venues. Hard Rock tried to argue that adding the word “the” to the word “joint”, distinguished it from other uses. Hard Rock pointed out that there are non-restaurant and entertainment uses for the word, such as another word for prison. So that made Hard Rock’s use more like a trademark. The Examining Attorney, the TABB and the Federal Circuit all rejected these arguments. The Federal Circuit’s opinion pointed out that although Hard Rock has spent millions for over 20 years promoting The Joint, there was no evidence of how much similar restaurant and entertainment venues spend on their promotion. Also, Hard Rock didn’t provide any evidence of unsolicited third party mentions.
So Hard Rock can’t register “The Joint” as a trademark.
WHY YOU SHOULD KNOW THIS. This opinion was rather harsh. In some ways, it set an impossible standard of proof for Hard Rock; and maybe others who try to prove acquired distinctiveness. Certainly, Hard Rock had longevity of use, a lot of advertising and a lot of money invested in advertising. But demanding proof of expenditures by other restaurant and entertainment venues? That kind of information isn’t public information. Imagine asking a competitor for that information. It would be unusual to even get a response. Unfortunately, this outcome may make it harder to prove a descriptive trademark acquired distinctiveness.
Beverly A. Berneman
A motion trademark is generally considered a type of trademark called “trade dress”. Trade dress protects the visual appearance of a product. Some examples are: (1) the zoom-in view of a female statue at the beginning of every Columbia Pictures' movie (Reg. No. 1,975,999), (2) the "duck march" associated with PEABODY hotels (Reg. No. 2,710,415), and (3) the lighting effects that rotate around the microphone of Apple's SIRI personal assistant and knowledge navigator (Reg. No. 4,471,608).
But, trying to protect a motion as a trademark isn’t easy.
Take, for example, a tour bus operator in New York City, The Ride LLC. The Ride offers a twist on the usual sightseeing tour around Manhattan (when such things were done and will be again). At various times, when the bus stops, street performers break out into song and dance. The Ride has gotten a lot of good feedback on this fun sightseeing twist. So it tried to register the sightseeing twist as its trade dress.
The Ride submitted a drawing (see the picture) and described the mark as follows:
The mark consists of the live visual and motion elements of the trade dress of a guided bus tour in which as the bus approaches at least one predetermined location on the tour an entertainer who is dressed as a banker walks normally along the street and then performs a tap dance routine dancing act when the bus stops at the predetermined location as viewed from inside of the bus. The drawing shows two sequential freeze-frames of the mark, in which the top frame shows an entertainer dressed as a banker walking along the street on the side of the bus and in which the bottom frame shows the entertainer performing a tap dance routine at the predetermined location. Dotted lines in the drawing show placement of the mark and are not part of the mark.
The examining attorney refused registration and on appeal, the Trademark Trial and Appeal Board (TTAB) affirmed. There were basically 3 problems with the application.
First, the TTAB thought the description was incomplete. The description certainly had a lot of words in it. But the description didn’t include every permutation of the street performers’ costumes and their songs and dances. More importantly, the description failed to indicate whether the trade dress is a three-dimensional mark (the act of doing the things) or is a two-dimensional mark that can be interpreted as three dimensional (something animated).
Second, the specimens of use didn’t match the drawing. The specimens consisted of photographs of various performances inside and outside the bus. But none of them matched the drawing.
Third, the mark didn’t function as a trademark. The Ride submitted survey evidence from its former riders to show that consumers connect the street performances with The Ride’s services. The TTAB discounted the survey as self-serving. The Ride didn’t provide any evidence that the public at large saw the motion of the street performances as a source or product identifier for The Ride.
WHY YOU SHOULD KNOW THIS. This case shows the importance of the connection with the drawing of a trademark and the specimen of use. All 3 issues demonstrate the need to be careful as a trademark is being developed. Let’s focus on the second problem. The failure to match a drawing and a specimen of use happens more than you might think. To avoid this problem, owners should consider developing the specimen of use with an eye towards how the trademark will be featured on it. And, owners always consult with their trademark attorneys to help make the appropriate connection.
Beverly A. Berneman
Kfir Moyal is a pop artist who has created commissioned pieces for celebrities like the Kardashians, Paris Hilton, Gloria Estefan, Flo Rida and Lil’ Kim. His signature style is to take a photograph and add a glittery sheen to it.
Douglas Kirkland is a Hollywood photographer with a long career who has photographed celebrities like Marilyn Monroe, Elizabeth Taylor and Marlene Dietrich.
In 2017, Kirkland sued Moyal for copyright infringement. Kirkland alleged that Moyal used some of his photographs, including one of Bridget Bardot. Moyal gave the photograph his classic treatment and titled his creation “Star Struck” (See picture). Moyal didn’t have a license from Kirkland to create the work. As the litigation went on, Moyal’s counsel withdrew from the case. Moyal didn’t appear after that and he didn’t retain substitute counsel. A default judgment was entered against him for $204,787.00 in damages along with a permanent injunction.
Kirkland discovered that Moyal was going to open an exhibit in a gallery in the Beverly Hills Sofitel hotel. The posters for the exhibit on Instagram and Twitter appeared to feature Star Struck. Since a permanent injunction against using Moyal's version of the photo was still in place, Kirkland went to court to enforce the permanent injunction.
Moyal says that he had no idea an injunction was entered. But that’s not going to help him.
WHY YOU SHOULD KNOW THIS. Kirkland’s original photograph was copyrighted in the 1970s. Moyal’s Star Struck was a derivative work of Kirkland’s original photograph. The ability to create derivative works is one of the bundle of rights included in copyright ownership. So, Moyal needed Kirkland’s permission to create the work. Let’s now focus on the injunction. Even though Moyal’s attorney withdraw from the first case, Moyal couldn’t just ignore it. Even if he didn’t know about the injunction, he knew that Kirkland was objecting to his use of the Bridget Bardot photograph. So, the second suit may have more dire consequences if Moyal’s knowledge of the infringement from the prior suit is considered willful infringement. There lies a cautionary tale in two ways. First, don’t use someone else’s content without either seeking permission for the use or getting an opinion of counsel that the use will be non-infringing or fair use. Second, never ignore litigation.
Beverly A. Berneman
For about 20 years, Lucky Brand Dungarees, Inc. has been battling Marcel Fashions Group, Inc. over their trademarks. The US Supreme Court finally ended Lucky Brand’s struggle. At least for now.
Marcel received a trademark registration for “Get Lucky” for jeans. Lucky Brand received a trademark in “Lucky Brand”, also for jeans. Then the parties fought each other through three separate rounds of litigation over 20 years. The first round ended in a settlement in which Lucky Brand agreed not to use “Get Lucky” and Marcel released all claims. In the next round, when Marcel sued Lucky Brand, Lucky Brand brought up the settlement agreement in its pleadings but then didn’t address it again. Then there was the third round that ricocheted between the District Court and the Second Circuit Court of Appeals. At issue was whether Lucky Brand could assert the settlement agreement as a defense in the third round of litigation. The case ended up before the US Supreme Court. Justice Sonia Sotomayor, writing for the Court, held even though Lucky Brand didn’t litigate the defense in the second round, Lucky Brand could still use the defense in the third round.
The key to the decision was that Marcel was alleging different conduct in the second round than it did in the third round. Justice Sotomayor wrote, “[B]ecause the two suits here involved different marks and different conduct occurring at different times, they did not share a “common nucleus of operative facts.” However, if the third round of litigation involved the same nucleus of operative facts that had already been adjudicated Lucky Brand would not have been able to use the settlement agreement in its defense.
WHY YOU SHOULD KNOW THIS. When dealing with any type of lawsuit, a party can have a lot of different claims and defenses. Each of them should be addressed as completely as possible during the litigation. That’s because, generally, once an issue is raised and fully litigated, a party can’t try to re-litigate in a subsequent lawsuit. This is generally called “issue preclusion”. In the Lucky Brand case, the courts referred to it as “defense preclusion.” In the world of litigation, the effect would be the same. Lucky Brand wouldn’t be able to use the settlement agreement. But, if the same parties keep suing each other over different issues, claims and defenses may not be lost.
Beverly A. Berneman
Two recent US Supreme Court cases give a loss for the State of Georgia and a win for the State of North Carolina.
State of Georgia’s Loss
The State of Georgia makes the simple text of its state statutes available to anyone who wants to look at them. Georgia hired a company to annotate the statutes featuring citations, an analysis of the statutes and opinions from the state’s attorney general. A company named Public.Resource.Org. Inc. copied and distributed the annotated version of Georgia’s statutes without paying for it. Georgia sued Public.Resource.Org for copyright infringement. The Supreme Court ruled that Georgia cannot sue for the copying and distribution of the annotated version of the state’s statutes. Chief Justice John Roberts wrote the opinion for the Court. Justice Roberts invoked the doctrine of “government edict” which means that public officials who create a governmental work cannot copyright their works. Justice Roberts pointed out that allowing a governmental unit to withhold access to government information would create a “first class” and an “economy class” of access to public information.
North Carolina’s Win
In 1996, a marine salvage company found the sunken slave ship, the Revenge. North Carolina commissioned a marine salvage company to resurrect the ship. The Revenge had been captured by the famous pirate Edward Teach (Blackbeard) and he had used the ship to conduct his piratical activities for about a year. The ship ran aground off the coast of North Carolina in 1718. The salvage company hired Frederick Allen to record videos and take pictures of the operation. Frederick registered the copyright in the works. North Carolina published some of the videos and photos. Frederick sued North Carolina for copyright infringement. The US Supreme Court affirmed the dismissal of Frederick’s lawsuit on appeal. Justice Elaina Kagan, writing for the Court, explained that under the doctrine of sovereign immunity, a state cannot be sued without its permission. Frederick tried to rely on the Copyright Remedy Clarification Act of 1990 (CRCA) which was supposed to remove a state’s sovereign immunity from copyright infringement cases. But a prior case decision had held that Congress didn’t have the constitutional authority to abrogate sovereign immunity. It’s interesting to note that Justice Kagan believed that an abrogation statute, if properly drafted, could have created a right of action against a state for copyright infringement.
WHY YOU SHOULD KNOW THIS. These two cases show parameters of copyright protection when dealing with a governmental unit. In the Georgia case, if a private company had owned the annotated statutes, it would have had the right to enforce the copyright. But Georgia owned the annotated statutes so it had to make them available to the public. In the North Carolina case, the problem was a poorly worded statute. Nonetheless, the holding stands. States don’t have to pay to use copyrighted works.
Beverly A. Berneman
Zazzle, Inc. is an on-line marketplace for imprinted merchandise. Zazzle will then imprint the image on things like coffee mugs, t-shirts and, these days, face masks. Zazzle uses stock images but it also allows someone to upload their artwork or a graphic.
Greg Young Publishing Inc. (“GYPI”) is the licensing agent for various artists. GYPI sued Zazzle for using images belonging to its clients. Zazzle’s defense was that it relies on the user certification process so it shouldn’t be held liable. GYPI gave Zazzle a catalog of GYPI’s images and Zazzle kept on using the images anyway. Obviously, the user certification process didn’t work. A jury found that Zazzle’s infringement was willful and returned a verdict in favor GYPI in the amount of $460,800. The trial court reversed the jury’s holding that GYPI didn’t present sufficient evidence that Zazzle acted willfully. The damages were reduced to $351,000. The trial court also denied GYPI’s request for attorneys’ fees despite the fact that GYPI was the prevailing party. The trial court believed that Zazzle’s defense was objectively reasonable.
The Ninth Circuit Court of Appeals reversed the trial court on the issue of willfulness. The Ninth Circuit held that a reasonable jury could have found that Zazzle acted recklessly by knowingly relying on obviously insufficient oversight mechanisms. The Ninth Circuit did not reverse the trial court’s denial of attorneys’ fees but reserved the issue to be revisited considering the finding of willfulness.
WHY YOU SHOULD KNOW THIS. The U.S. follows the “American Rule” when it comes to fee shifting in a law suit. The aptly named American Rule means that parties to a lawsuit pay their own attorneys’ fees unless a statute or contract provides otherwise. The Copyright Act allows the recovery of attorneys’ fees by the prevailing party. Fee shifting in a copyright infringement case can vastly change the economic dynamic of bringing or defending a suit. Exposure to attorneys’ fees can have a chilling effect on vigorous advocacy. So, the courts have developed a standard for fee shifting. A claim or defense has to be “objectively reasonable”. In other words, do you have a good faith basis to argue your position? If you don’t and the other side is the prevailing party, you pay their attorneys’ fees. This leaves room for parties to come up with novel and innovative arguments without fearing an attorneys’ fees burden. In Zazzle’s case, just relying on someone else saying, “Yes, own this”, wasn’t objectively reasonable.
Beverly A. Berneman
If the words “reply all” sound familiar to you, then you probably use email to communicate with others for various and sundry reasons. Despite their widespread use, these two words became the subject of trademark litigation.
In 2012, Reply All Corp. started to sell software to let users create and share conversations.
In 2014, Spotify’s Gimlet Media began producing a podcast named “Reply All”. The hosts, PJ Vogt and Alex Goldman talk about strange stories and trending topics.
Would you confuse Reply All’s software with the “Reply All” podcast? Gimlet Media was convinced that customers would be.
Gimlet Media sued Reply All for trademark infringement. After about 5 years of litigation, a judge ruled that almost every factor of a likelihood of confusion weighed against Gimlet Media and in favor of Reply All. The court found that the mark was fairly weak. Gimlet didn’t have a record of sales or marketing expenditures to show commercial strength. And the court acknowledged that the term “reply all” is a common term which is recognized by anyone who uses email. The names might be the same but the logos are different (see the graphic) and the products are different. They don’t compete in the same customer space. The court pointed out that Gimlet Media had no evidence of actual confusion. Note that you don’t have to prove actual confusion; it’s just one factor to look at. In this case, the court thought it was a significant factor.
WHY YOU SHOULD KNOW THIS. For registration purposes, most countries, including the US have adopted an international scheme of classes of goods and services. There are 45 of them. It is almost impossible for someone to register a trademark in all 45 classes. The class distinction is helpful when evaluating a likelihood of confusion between trademarks. If someone uses a word for the wholesale distribution of auto parts (Class 035), consumers are unlikely to be confused if someone used the same word for graphic t-shirts (Class 025). In the Reply All case, the words are the same but they were used for totally different goods and services. One caveat though. Some trademarks are so famous that even if the goods and services don’t compete directly, the owner of the famous mark (like Barbie, Rolex, Nike and Jack Daniels) can shut down the use of the trademark even if someone is using it in a different class of goods or services. This is called dilution.