Intellectual Property Litigation

The dispute over the bitcoin named Alibabacoin is apparently over. Last year, Chinese tech giant Alibaba sued Belarus- and Dubai-based ABBC Block Chain IT Solutions LLC in New York federal court for trademark infringement based on ABBC’s Alibabacoin bitcoin. Several sources have reported that the parties announced a settlement, and the parties filed a stipulation of dismissal of the lawsuit in the Southern District of New York. Even before the stipulation was filed, on March 12, the Second Circuit dismissed ABBC’s appeal because it failed to file its appellate brief due March 4. This case raised several unique issues, including whether the two foreign adversaries disputing a world-wide product had a sufficient connection to New York to proceed in the court. After issuing a temporary restraining order in March 2018, Judge Oetken dissolved the injunction on April 30, given the court’s uncertainty that it could exercise personal jurisdiction over ABBC. The court noted that the motion could be renewed and the injunction later reinstated, and in early June—after the parties had done some jurisdictional discovery—the court prompted the parties to file renewed briefing regarding a preliminary injunction. The court reinstated the preliminary injunction in October 2018, finding that Alibaba had demonstrated a likelihood that the court had personal jurisdiction. First, the court rejected ABBC’s argument that Alibaba did not properly effect service when it served the complaint by email and FedEx. The court noted that Alibaba served ABBC in the manner directed by the court, which in itself was sufficient for service of process, since it did not contradict any international treaty. The court also noted that ABBC’s attorneys appeared shortly after the service, and thus service must have been effective. This ruling places defendants in a bind: if they fail to appear, they risk a default judgment; if they do appear, the appearance is used as proof that service was sufficient. Second, the court concluded that the presence of a single purchaser who appears to be a New York citizen was sufficient for jurisdiction. The court rejected ABBC’s argument that the sale occurred in the location of the server (Belarus), explaining: When an individual uses her debit card to make an online purchase from an out-of-state vendor, for example, it would strain common usage to say that the transaction occurs at the potentially remote location of the servers that process the buyer’s banking activities and not at the location where the buyer clicks the button that commits her to the terms of sale. Then, on November 7, 2018, Judge J. Paul Oetken issued a 3-page order denying the motion to dismiss, incorporating the reasoning of the preliminary injunction order. Though ABBC appealed the preliminary injunction order, and also attempted to appeal the order denying the motion to dismiss, the dismissal of the appeal and announcement of a settlement end the case, without the Second Circuit weighing in on the district court’s ruling on jurisdiction.

Recently, the Court of Appeals for the Federal Circuit vacated and remanded to the Trademark Trial and Appeal Board a decision on an ex parte appeal regarding a likelihood of confusion between the applicant’s mark GUILD MORTGAGE COMPANY & Design for mortgage banking services and a registration for GUILD INVESTMENT MANAGEMENT for mortgage investment advisory services. The TTAB’s ruling denying registration of the GUILD MORTGAGE COMPANY & Design mark did not take into consideration the evidence of long-standing co-existence in the marketplace of the applicant and the registrant. During the prosecution phase, the applicant submitted a Declaration from its President and CEO that applicant was not aware of any instances of actual confusion with the GUILD INVESTMENT MANAGEMENT mark during more than 40 years of co-existence in the marketplace of the two trademark owners. The Examiner rejected this argument in a final office action, and on appeal to the TTAB, the Board did not even address the applicant’s Declaration when it affirmed the refusal of registration. The Federal Circuit vacated the Board’s decision, holding that the Board had failed to consider relevant argument and evidence on the issue of likelihood of confusion. As the appellate court explained, in a likelihood of confusion analysis, the TTAB is supposed to consider thirteen potentially relevant factors enunciated in In re E.I. Du Pont De Nemours & Co., 476 F.2d 1357 (CCPA 1973), some of which are more persuasive than others. For example, Factors 1 and 2 (the similarity of the marks and the similarity of the goods/services) generally play a very significant role in the overall assessment of likely confusion. Factor 8 is “The length of time during and the conditions under which there has been concurrent use without evidence of actual confusion.” In its decision on the registrability of the GUILD MORTGAGE COMPANY & Design mark, the TTAB analyzed four DuPont factors pertaining to the similarity of marks, the overlap of goods/services, the sophistication of the consumers, and the number and nature of similar marks in use on similar goods/services. But it wholly ignored the 8th factor in its opinion, notwithstanding the evidence in the record in the form of the Declaration attesting to the absence of actual confusion over a 40 year period of co-existence. On appeal to the Federal Circuit, the PTO contended that the Board did not have to credit the applicant’s Declaration in an ex parte registration proceeding because it was an “uncorroborated statement,” “irrelevant” and outweighed by other factors favoring a finding of likely confusion. The Federal Circuit disagreed, faulting the Board’s analysis because there was “no indication that it considered DuPont factor 8, for which there was argument and evidence. The Board’s opinion does not mention factor 8 let alone address [applicant’s] argument and evidence directed to that factor.” And because the evidence of long term co-existence without likelihood of confusion would have weighed in favor of a finding of no likelihood of confusion, the Board’s error could not be considered “harmless.” As the court stated, “We make no assessment as to the evidentiary weight that should be given to Guild’s CEO’s declaration and simply hold that it was error to not consider it. We leave it to the Board to reconsider its likelihood of confusion determination in the first instance in light of all the evidence.” On remand, will the TTAB’s further focus on the 8th factor be enough to change its prior decision affirming the refusal of registration?  Given the overall analysis and weighing of the DuPont factors, the TTAB may not change its position.  But it will be required to finish its assessment of all of the DuPont factors on which there was evidence and argument. On its face, it could be that the TTAB just wrote an incomplete opinion.  If so, the CAFC’s remand of the decision to the TTAB could be little more than a parent making a child more thoroughly complete a homework assignment, but with the same end result. How might this have been approached differently? First, where there are no instances of actual confusion and a longstanding co-existence in the marketplace, an applicant could seek a Letter of Consent from the registrant for submission to the PTO, particularly if the applicant had priority of use vs. the registrant and some leverage for requesting the consent. It is not part of the public record, but it is possible that the applicant did seek consent and the registrant refused. Second, why did the applicant wait such a long period of time to seek registration of its mark at the PTO?  If use commenced over 40 years ago, it would have been a good idea to file an application for the mark at the PTO as soon as interstate commerce commenced, or to file on an intent-to-use basis at a minimum.  Applicant instead was left to deal with an intervening registration at the PTO and a registration effort that turned into a complicated and certainly expensive endeavor.  The applicant still has common law rights in the mark (provided it remains in use), but that’s what it started with when it began the registration process. Trademark Filing Tips File trademark applications at the PTO as soon as practicable. Obtaining presumptive nationwide registration rights for a trademark is highly valuable, particularly for a growing company. Conduct trademark searches before filing to identify any obvious obstacles to use or registration of a trademark. Seek consent from a prior registrant if possible, or consider buying rights in the registrant’s mark to remove an obstacle to registration at the PTO. Keep an eye on valuable trademark rights by subscribing to trademark watching services so that action can be taken to stop others from using identical or confusingly similar trademarks as early as possible.

On March 4, 2019, the Supreme Court agreed to hear Iancu v. NantKwest, Inc., which will determine whether unsuccessful applicants before the United States Patent and Trademark Office who elect to challenge adverse decisions before the district court must—win or lose—pay the PTO’s attorney’s fees. Unsuccessful patent and trademark applicants are free to challenge the PTO’s decisions. If the PTO denies a patent application, an applicant can either appeal directly to the Federal Circuit, or the applicant can bring an action in district court. The latter option—which is less commonly used—allows the applicant to present additional evidence. If the applicant elects to appeal to the district court, however, 35 U.S.C. § 145 requires the applicant to pay “[a]ll the expenses of the proceedings.” Trademark applicants can pursue similar recourse under the Lanham Act, which also includes an “all the expenses of the proceedings” provision under 15 U.S.C. § 1071(b)(3). Crucially, whatever is encompassed within “expenses” is paid regardless of outcome—i.e., even a successful challenge puts the applicant on the hook for expenses. The hundred thousand dollar question is whether the PTO’s attorney’s fees are “expenses” under both statutes. In 2018, a divided Federal Circuit ruled en banc in NantKwest, Inc. v. Iancu that the reference in § 145 to “[a]ll the expenses of the proceedings” does not encompass attorney’s fees, and affirmed the district court’s order denying the PTO’s motion seeking $78,592.50 in attorney’s fees. In contrast, in 2015 a divided Fourth Circuit in Shammas v. Focarino, interpreting § 1071(b)(3), ruled that attorney’s fees are “expenses.” Notably, although an “[a]ll the expenses of the proceedings” provision has existed in some form since 1839, the PTO itself did not interpret it to cover attorney’s fees until 2013. In light of this history, the PTO’s position that it is entitled to its attorney’s fees even when the applicant successfully prevails at the district court is sure to raise eyebrows. The Supreme Court must now decide whether the PTO’s interpretation is sound.

The Supreme Court was busy yesterday issuing opinions involving copyright law (see the TMCA’s post yesterday on Fourth Estate vs. Wallstreet.com concerning the need to obtain a copyright registration before initiating an infringement suit). In a second important decision, Rimini Street, Inc. v. Oracle, Inc., the Court resolved a circuit split over the definition of “full costs” in Section 505 of the Copyright Act.  Some lower courts  interpreted that provision as only including costs that are available under 28 U.S.C. §§ 1821 and 1920 (such as filing fees, deposition transcription costs, and the like).  Other Courts (like the 9th Circuit in Rimini Street) interpreted "full costs" to mean all costs incurred in the suit, including e-discovery costs, expert witness fees, and other big ticket items that are routinely incurred in copyright cases. In an opinion written by Justice Kavanaugh, the Court reversed the 9th Circuit, holding that litigation costs in copyright cases are limited to the six categories specified in §§ 1821 and 1920.  He further stated that Congress may authorize awards of expenses beyond these categories and expressly provide for fees, such as attorneys’ fees, which § 505 does, but it does not allow a court to award litigation costs generally beyond those in the six specific categories. Justice Kavanaugh dismissed Oracle’s arguments that the use of the phrase “full costs” was meant to modify the types of costs that could be awarded because other statutes use only the word “costs."  He stated that the word “full” in §§ 1821 and 1920 means exactly “as it operates in other common phrases,” and does not modify the word “costs."  Since §§ 1821 and 1920 govern the award of costs in any civil cases, a prevailing party in a copyright matter may only receive the “full” amount of the defined “costs” that are allowed by §§ 1821 and 1920.  A subject-matter specific statute, such as costs under §§ 505 of the Copyright Act, does not modify what a cost is merely because the words “full” and “costs” are used together.  Justice Kavanaugh, perhaps intentionally alluding to his prior controversial purchase of Washington Nationals season tickets, said that the word “full” simply means “full” as it would be used commonly, and cannot change any other term, using examples such as a “full season ticket plan” meaning tickets, not hot dogs, and that a “full moon” means the moon, not Mars.  After reciting some historical background on the use of the term “full costs” (and disagreeing that historically or in prior cases that it was clear that anything beyond defined costs could be allowed), the Court held that the award must still fall under the definition of “full” in §§ 1821 and 1920, which only has 6 categories and applies unless expressly stated in a statute allowing for such costs. The Supreme Court therefore has laid out a clear rule – “A statute awarding ‘costs’ will not be construed as authorizing an award of litigation expenses beyond the six categories listed in §§1821 and 1920, absent an explicit statutory instruction to that effect.” The decision could have a deterrent effect on the initiation of copyright suits likely to involve expert testimony and extensive e-discovery expenses, when brought by plaintiffs who lack the means to cover them. These expenses will not be reimbursed, even if such a plaintiff were to prevail.  Indeed, absent amendment of the Copyright Act, defendants found liable for copyright infringement will no longer have to reimburse plaintiffs for expert witness and e-discovery fees.

This morning, the Supreme Court resolved a longstanding circuit split about whether a copyright infringement plaintiff must first obtain a registration from the Copyright Office for the work upon which its claim is based before initiating an infringement lawsuit, or whether it need only file an application for registration of that work before filing suit.  The short answer is – yes, you need a registration.  In line with the Second and Eleventh Circuits, and rejecting the approach taken in the Ninth Circuit, the Court’s decision in Fourth Estate Public Benefit Corp. v. Wallstreet.com LLC  makes clear that the issuance of a registration for the work upon which an infringement claim is based must occur before a federal lawsuit is filed, absent the applicability of certain specific statutory exceptions, and that the mere filing of an application to register does not satisfy the Copyright Act’s requirement in Section 411 that suit may be initiated only when a “registration . . . has been made.” Today’s decision does not alter the state of the law in those circuits that already required the issuance of a registration for the allegedly infringed work as a prerequisite to the initiation of a claim for copyright infringement, but it will have some impact in those circuits that allowed such claims to be initiated based upon the mere filing of an application for registration.  However, because the Copyright Office allows for the expedited issuance of a registration upon the payment of additional fees when a lawsuit is contemplated – an alternative that can shave months off the standard time it takes for a copyright registration to issue – copyright plaintiffs with well-founded claims still have the ability to initiate legal action promptly, notwithstanding today’s holding.  And, they still have the ability to recover compensatory damages incurred before and after the registration issues.

If you know how to Floss and Milly Rock, then you are way more hip than most, including the author of this post. Both are popular dance moves, along with the Shoot, Running Man, and the Carlton, the latter made famous by Alfonso Ribeiro as Carlton in The Fresh Prince of Bel-Air. All of these dance moves have been made the subject of litigation recently, as the creators and artists behind these dances have all sued Epic Games, Inc. in the Central District of California and District of Maryland for alleged appropriation of the dances by avatars starring in the video game Fortnite Battle Royale.  Cases:  Ferguson v. Epic Games, Inc., No. 2:18-cv-10110 (C.D. Cal. Dec. 5, 2018); Ribeiro v. Epic Games, Inc., No. 2:18-cv-10412 (C.D. Cal. Dec. 17, 2018); Redd v. Epic Games, Inc., No. 2:18-cv-10444 (C.D. Cal. Dec. 17, 2018); Baker v. Epic Games, Inc., No. 2:19-cv-00505 (C.D. Cal. Jan. 23, 2019); Brantley et al. v. Epic Games, Inc., No. 8:19-cv-00594 (D. Md. Feb. 25, 2019). While it is free to play Fortnite, a player must pay very real US dollars to acquire Vinderbucks or “V-Bucks,” which is currency to buy special features for avatars, including fresh dance moves called “emotes.” Fortnite is premised upon being dropped into a world with other players where you survive by making weapons, collecting resources to survive, and shoot to kill until you or your crew are the last one(s) standing. In between the surviving and killing, avatars stop and engage in fun, including the allegedly misappropriated dance moves. For your reference, here is a chart of the dance moves by artist as accessible on YouTube.com, along with random Fortnite avatars performing the allegedly similar dance moves: Dance Move & Artist Fortnite Emote Milly Rock by Terrence Ferguson AKA 2 Milly https://www.youtube.com/watch?v=PMzDoFuVgRg (at 3:33) Swipe It https://www.youtube.com/watch?v=qwA40G5avrY The Carlton Dance by Alfonso Ribeiro AKA Carlton in The Fresh Prince of Bel-Air https://www.youtube.com/watch?v=ZwS14TiO7Pk (at 3:57) Fresh https://www.youtube.com/watch?v=rkW-Kv0AAWI Flossin Dance by Russell Horning AKA Backpack Kid https://www.youtube.com/watch?v=iGk5fR-t5AU (at 6:03) Floss https://www.youtube.com/watch?v=vzhZVhZLtZA Shoot by James Baker AKA Blocboy JB https://www.youtube.com/watch?v=NV-3s2wwC8c (at 2:06) Hype https://www.youtube.com/watch?v=drp8aRIKPQ8 Running Man by Jaylen Brantley and Jared Nickens https://www.youtube.com/watch?v=qM2qdfnALBM Running Man https://www.youtube.com/watch?v=9CoJEYkJyqM The main bases of the lawsuits are claims for copyright and trademark infringement, and right of publicity. Under copyright law, and specifically 17 U.S.C. § 102(a)(4), choreographic works are eligible subject matter for copyright protection. However, what constitutes a protectable choreographic work is fact-specific, and the originality and creativity must be more than de minimis. Run of the mill dance steps, social dances, and simple routines won’t cut the rug under Copyright Compendium Section 805.1. Section 805.4(D) of the Copyright Compendium goes even further, likening simple dance steps to words and short phrases: put together they are creative expression worthy of copyright, but on their own, they are just basic components of dance that anyone can use. Whether the dance moves in these cases can meet the more than de minimis standard is questionable. Aside from the “Flossin Dance,” none of the other dances have been registered to date. Further, Blocboy JB has amended his complaint to drop copyright claims altogether after being denied registration for the Shoot dance, relying solely on his trademark infringement and right of publicity claims. Epic Games notes in its motion to dismiss Ferguson’s Milly Rock suit that the Swipe It emote is not substantially similar, the crux of any copyright claim. Further, Epic Games argues that its use of the Swipe It dance is sufficiently transformative to overcome any trademark rights or right of publicity held by Ferguson under the precedent set by Rogers v. Grimaldi, 875 F2d 994 (2d Cir. 1989), a case that weighs First Amendment freedom of speech/expression against trademark rights and right of publicity, allowing artistic works that are transformative enough to survive the echoes of fame created by the original artists. It remains to be seen whether a case about Ginger Rogers and Fred Astaire should set precedent for 2 Milly, or whether those writing the Copyright Act of 1976 could anticipate how one dance move could catapult an artist to worldwide fame on YouTube. On the other hand, by 1976, Chubby Checker had already made famous the Twist, and everyone knew how to do Dee Dee Sharp’s Mashed Potato and Little Eva’s Loco-motion. Should these artists have been paid by everyone doing these dances on TV? Does your answer change if the dancers are avatars in a very profitable video game? All of us wallflowers will have to wait and see how the dance battles end between each of these artists and Epic Games.

On the heels of launching its expedited cancellation program to clear deadwood from the Trademark Register, the U.S. Patent and Trademark Office has now pivoted to a related area: deadwood prevention. The PTO has issued a Notice of Proposed Rulemaking that, with one exception, would require foreign-domiciled trademark applicants, registrants and parties to a Trademark Trial and Appeal Board proceeding to be represented by licensed U.S. attorneys. The PTO justified this proposal based on the growing number of applications filed by foreign individuals and entities with fraudulent or inaccurate information. In particular, the PTO called out both the submission of mocked-up or digitally-altered specimens to support false claims of use of the mark in the United States and the foreign advisors who promote such a practice. As the number of foreign applicants surges, especially foreign applicants without U.S. counsel of record, current rules give the PTO no effective means of preventing this misconduct. The PTO called the scale of the problem “massive” and estimated the number of “total tainted applications” to be in the “tens of thousands.” Such tainted applications drive up the cost of clearing and registering marks for other trademark owners, impede prosecution of legitimate applications and reduce the value of registered marks to consumers. The PTO hopes to improve the integrity of the Trademark Register by involving practitioners who are familiar with its requirements and who can be disciplined if they engage in tactics designed to circumvent such requirements. Perhaps to ward off charges of favoritism, the PTO pointed out that many countries, including Brazil, Chile, China, Israel, Japan, Jordan, Morocco, South Korea, and the European Union’s Intellectual Property Office, already impose a similar counsel requirement. For applications filed that do not comply with the rule, the PTO seeks comments on whether it should (1) defer examination until the applicant appoints U.S. counsel who can then review the application for conformity to U.S. law or (2) conduct a complete examination and include the requirement for U.S. counsel among other issues in the office action. The only exception to the U.S. representation rule would be for countries that have reached an official understanding with the PTO to allow substantially reciprocal privileges to U.S. practitioners representing U.S. entities in their trademark office. Currently only the United States and Canada have such an understanding. Should the new rulemaking be implemented, its practical impact would be to prevent Canadian patent agents from representing Canadian owners in new trademark matters at the PTO. However, Canadian trademark agents and attorneys could continue to do so. Canadian patent agents could also complete handling pending U.S. trademark matters. For Madrid applications, implementation of the rule may be delayed until such time as the system of the International Bureau of the World Intellectual Property Office, where such applications are first made, can be updated to allow U.S. attorneys to be designated. The PTO has issued a warning that foreign filers are already trying to circumvent the proposed rulemaking by sending email solicitations to U.S. attorneys offering to pay to use their contact information. The PTO may have to add security measures to its filing system to ensure that U.S. attorney information is not used fraudulently. The new rulemaking is one component of a larger effort by the PTO to ensure the accuracy of the Trademark Register. Besides the expedited cancellation pilot program mentioned above, other PTO initiatives include revisions to the language of the post-registration declaration of use forms to highlight the ongoing use requirement and the random audits of post-registration maintenance filings. The comment period is open until March 18, 2019. Watch the TMCA for updates regarding this rulemaking and related PTO deadwood-clearing initiatives.

Dorsey’s TMCA team has thoroughly covered the history of the dispute between the USPTO and Booking.com B.V., which started when the Trademark Trial and Appeals Board rejected the BOOKING.COM trademark as generic (covered here), and continued when the federal district court for the Eastern District of Virginia overturned the TTAB’s genericness determination, and found instead that the mark BOOKING.COM, taken as a whole, was descriptive and had acquired secondary meaning, thus entitling it to protection (covered here). The district court also concluded that while Booking.com was the prevailing party, it was required to pay the USPTO’s expenses – including the salaries of the USPTO attorneys and paralegals who worked on the action – because Booking.com had elected to file a de novo action in federal district court, rather than appeal the USPTO’s ruling to the Federal Circuit (covered here). The story does not end there, however. The USPTO subsequently appealed the district court’s conclusion that BOOKING.COM was descriptive (but did not appeal whether it had acquired secondary meaning), and Booking.com appealed the award of expenses. On February 4, 2019, the Fourth Circuit affirmed the district court’s decision. In doing so, the Fourth Circuit outlined some important points that drove its conclusion. First, the Fourth Circuit addressed an issue of first impression in the circuit: which party bears the burden of proving a mark is generic on appeal when registration of the mark is denied? Joining the Federal Circuit, the Fourth Circuit held that in registration proceedings, the USPTO “always bears the burden” of establishing that a proposed mark is generic. After outlining the framework for determining whether a mark is generic, the Fourth Circuit concluded that the district court, in weighing the evidence before it, did not err in finding that the USPTO failed to satisfy its burden of proving that the relevant public understood BOOKING.COM, taken as a whole, to refer to general online hotel reservation services rather than Booking.com (the company). The Fourth Circuit also rejected the USPTO’s claim that adding the top-level domain “.com” to a generic second-level domain like “booking” is necessarily generic. To make this argument, the USPTO reached waaaaay back to an 1888 Supreme Court decision that held the addition of generic commercial indicators (e.g., “company”) to generic terms that merely describe classes of goods could not be protected as a trademark (e.g. “Grain Company”). The Fourth Circuit rejected such a bright line rule, and concluded that adding “.com” to a generic second level domain may be a protectable descriptive mark. Finally, while the Fourth Circuit affirmed the district court’s grant of attorney fees to the USPTO, it did so reluctantly. 15 U.S.C. section 1071(b)(3) mandates that where an applicant appeals an adverse USPTO ruling by commencing a new action in federal district court (rather than appealing “on the record” to the Federal Circuit), the applicant must pay “all the expenses of the proceeding … whether the final decision is in favor of such party or not.” The Fourth Circuit had previously held in Shammas v. Focarino, 784 F.3d 219, 225 (4th Cir. 2015) that “all expenses” included attorney fees. Notwithstanding, the court identified a subsequent Federal Circuit decision criticizing Shammas, and a subsequent Supreme Court decision that concluded a statutory provision similar to the one at issue in Shammas did not include attorney fees. Despite recognizing this subsequent and contrary authority, the Fourth Circuit held that Shammas remained controlling law in the circuit and affirmed the award of attorney fees as “expenses.” In light of the conflicting subsequent authority, it will be interesting to see whether there is a request for en banc consideration of the attorney fees issue.

Last week, we blogged about Fiji Water being sued for posting a meme of the Fiji Water Girl and using cardboard cutouts of her image in advertising. Well, Fiji Water is splashing back – They filed a cross-complaint alleging breach of contract, promissory estoppel and false promise.  The facts alleged in the cross-complaint fill in some of the missing details and contradict the allegations from the complaint filed by Ms. Kelly Steinbach, aka the Fiji Water Girl.  In fact, the complaint reads much like a soap opera plot line.  Contrary to Steinbach’s complaint, Fiji Water alleges that it entered into a contract with Steinbach in which she granted Fiji Water the right to use her name, likeness and performance in connection with her acting as a Fiji Water Brand Ambassador.  The cross-complaint includes a screenshot of a post from Ms. Steinbach’s Instagram account with her standing next to one of the allegedly unauthorized cardboard cutouts and an Instagram story featuring another of the cutouts.  Of course, the post has since been deleted from Steinbach’s account and the story is no longer available.  What’s more, the not so “fake” consulting agreement that Fiji Water alleges Ms. Steinbach signed includes a restriction that Steinbach not authorize the use of her name or likeness in connection with advertising any other food or beverage products for one year. However, additional screen shots in the cross-complaint show Steinbach doing just that for a dog food brand and for another bottled water promoting the soap opera The Bold and the Beautiful.  On information and belief, Fiji Water alleges that Steinbach took the only copy of the signed consulting agreement from its offices and destroyed it! The cross-complaint is full of other dramatic allegations and is worth a read. We’ll be following this real live soap opera and will keep you updated.

Comparative advertising can be an effective marketing tool to tout product benefits vs. competitors, but consumers shouldn’t need to read confusing fine print disclaimers and whip out their calculators to understand the ad claims. This was the lesson of a recent decision involving competitive drinkable yogurt for kids, described by the court as “the latest in a series of culture wars between two of the biggest players in the market for yogurt” (get the pun?) Chobani had included an ad claim on the packaging of its new Gimmies Milkshakes yogurt that the product contained “33% less sugar than the leading kids drinkable yogurt.” SDNY Judge Colleen McMahon agreed with plaintiff Danone that Chobani’s comparative ad claim was misleading, but denied Danone’s motion for a preliminary injunction due to failure to prove irreparable harm. Chobani’s “33% less sugar” claim appeared in “readable typeface” without any qualifiers on the front and top of the overwrap for the Gimmies products, and there was no dispute that the “leading kids drinkable yogurt” referred to Dannon’s Danimals Smoothies. The ad claim also appeared on the back of the Gimmies packaging, with asterisks referring to two footnotes below the nutrition facts panel in typeface the court described as “so small that it is barely legible.” Here’s what the footnotes said: *Chobani® Gimmies™ Milkshakes: avg. 8g sugar; leading kids’ drinkable yogurt: avg. 12 g sugar, per 4 fl oz serving **Chobani® Gimmies™ Milkshakes: net 4 fl oz; leading kids’ drinkable yogurt: net 3.1 fl oz. Got that? Even if a consumer read the footnotes, it would be hard to decipher how Chobani arrived at its 33% less sugar claim, because it involved averaging sugar content across a line of Gimmies products sold in three flavors in 4 fluid ounce bottles, compared with the Danimals product line, which comes in eight flavors sold in 3.1 ounce bottles. Have I lost you yet? To make matters more complicated, until early January 2019, two of the Gimmies flavors contained 9 grams of sugar, while the third flavor contained 7 grams of sugar. All eight of the Danimals flavors contain 9 grams of sugar per bottle, but three of the flavors had 10 grams of sugar up until June 2018 when the sugar content was reduced to 9 grams, although Danone continued to sell these three flavors for many months in left-over packaging that listed 10 grams of sugar. According to the court, “On a per ounce basis, Chobani’s product had less sugar (by a gram or two) than did Dannon’s.” But substantiating Chobani’s claim in the way it appeared on packaging, was “anything but uncomplicated”, involving mathematical “contortions,” reading “barely legible footnotes” and knowledge the consumer likely did not have about the different flavors in Chobani’s product line and their varying levels of sugar content. Danone presented survey evidence on the motion showing that a substantial portion of consumers would misunderstand similar comparative labeling claims about the fat content of hypothetical ice cream products. Danone’s expert also testified that, based on academic literature, consumers would not likely focus on the disclaimers on Chobani’s packaging due to their location and would not understand the disclaimer language even if they did read them. The court determined that Chobani’s ad claim was not literally false because the language in the 33% less sugar claim was “ambiguous” and thus “susceptible of more than one meaning.” The court cited Danone’s own survey evidence showing different interpretations of a claim of this type. However, the claim was held to be impliedly false and thus misleading, because Chobani had offered “no persuasive evidence that a consumer would read the packaging in the manner needed to convey all the information that renders the 33% less claim true, or would understand in what sense the claim was true.” In support of this holding, Judge McMahon cited the recent Second Circuit decision in Mantikas v. Kellogg Co. (blogged about in The TMCA here), involving the labeling of Cheez-It packages with the prominent claim “MADE WITH WHOLE GRAIN”, in combination with fine print disclaimers and qualifying language. As the appellate court held in Mantikas, while a challenged advertisement must be considered “as a whole, including disclaimers and qualifying language,” consumers “should not be expected to look beyond misleading representations on the front of the box to discover the truth [regarding the advertisement] in small print on the side of the box.” Judge McMahon stated that “The same principle applies here. Reasonable purchasers of Gimmies who see ‘33% less sugar than the leading brand’ on the front of the box cannot be expected to study the back of the packaging in the detail necessary to discover the cryptic, microscopic footnoted disclosures explaining Chobani’s ‘33% less sugar’ claim – never mind figure out what needs to be ‘averaged’ with what and perform the multiple calculations needed to make sense of that claim.” There was a much easier way for Chobani to communicate that its Gimmies products had a lower sugar content than Dannon’s Danimals -- by comparing the amount of sugar per ounce in both products. Chobani did indeed transition to that form of comparative claim after the lawsuit was filed. The revised ad claim stated: ”30% less sugar”* with the asterisked footnote as follows: “*than the leading kids drinkable yogurt. Gimmies: 2g sugar per fl. oz; leading kids’ drinkable yogurt: 2.9g sugar per fl. oz.” The court commented in its decision that the redesigned packaging incorporated “easy-to-understand and literally true statements about the relative amount of sugar between Gimmies and Danimals….” While Danone established that it was likely to succeed on the merits of its advertising claims, the court ultimately denied preliminary injunctive relief due to failure to establish irreparable harm. According to the court, the evidence “strongly suggests that neither Danimals’ sales position nor its brand equity has suffered irreparably.” The fact that Danone continued to sell several of its flavors in packaging that overstated the amount of sugar after Danone had reformulated the flavors to lessen the sugar content was significant to the court: “Dannon was perfectly willing to sell Danimals in packaging that said the product inside had more sugar than it actually does – all to save money rather than to have to throw away incorrect packaging. That undermines any suggestion that Chobani’s packaging is working irreparable harm on its competitor.” While Danone did not obtain the preliminary injunction it sought, the opinion builds on the recent Mantikas decision about the perils of using fine print disclaimers on different parts of product packaging from the main claim. Further, companies should draw comparisons that are easily understood by consumers. If different product sizes or varying products in a line result in calculation difficulties, the best approach is to present the comparison in the clearest possible way that will be understood unambiguously by consumers.

Last week, we blogged about Gigi Hadid getting sued for reposing a photo of herself on Instagram and the post received a lot of interest. So we thought we’d also let you know about Fiji Water Company, LLC getting sued for posting a meme on its social media feeds featuring the “Fiji Water Girl.”  You remember the Fiji Water Girl, don’t you? She was that woman wearing a blue dress holding a tray of Fiji Water bottles in the background of what seemed like every red carpet photo from this year’s Gold Globe Awards on January 6.  Kelly Steinbach, or Kelleth Cuthbert as she is professionally known, went viral that night as photos from the red carpet and then memes started popping up all over social media.  According to the complaint filed by Ms. Steinbach’s attorneys in California Superior Court on January 31, she was hired by a staffing agency to model on the red carpet.  The complaint further alleges that the day following the Golden Globes, Fiji Water sought to capitalize on Steinbach’s popularity by creating a “worldwide cardboard cutout marketing campaign.”  The life-size cutouts of Steinbach appeared in stores in LA and other places around the world. Fiji Water also posted a few memes on their Instagram and Twitter account, but those posts have since been taken down. Fiji Water’s affiliate also filed two trademark applications for FIJI WATER GIRL on January 7. Steinbach alleges that all of this was done without her permission, despite Fiji’s efforts to have her sign an agreement in the days following the Globes. The complaint contains some strange details, including an allegation that “during Steinbach’s [January 9] visit to Fiji Water’s Los Angeles office, Fiji Water pressured Steinbach into video recording a fake signing of a fake document to simulate Steinbach signing on as a Fiji Water Ambassador for use in the event an agreement was reached between Steinbach and Fiji Water in the near future.”  Steinbach’s attorneys go on to note that “the fake document Steinbach fake signed in the potential future promotional video was not an agreement” and “the fake document was not signed by Fiji Water and was later destroyed by Steinbach.”  The complaint contains a claim for misappropriation of likeness and right of publicity under California Civil Code Section 3344 and common law. Steinbach’s damages claim asks for Fiji’s profits, unspecified punitive damages and compensatory damages. So how much is Steinbach thinking she’ll get?  Well, the complaint puts the value of the brand exposure at about $12 million for just January 6 and 7.  We’ll be watching this case and will keep you updated, but cases like this tend to settle for undisclosed amounts, leaving us with little to no case law on memes. Luckily, memes, when used on social media by brands like Fiji Water, aren’t all that innovative in the eyes of the law.  The ability to control the use of one’s name, likeness, voice, and other personal attributes is known as the right of publicity.  If you want to use someone’s image or likeness in advertising (and brand social media accounts are likely advertising), you will probably need to get their permission. Right of publicity is governed by state law, and California, New York and Tennessee (hi Elvis) have some of the most developed bodies of law in this area.  So before your brand starts posting the latest meme featuring the image or likeness of someone other than your brand ambassadors, you should think carefully (and creatively) about how to join the conversation without using a name, likeness, voice, or other personal attributes that might cost your brand unspecified damages in a lawsuit.

Back in July 2017, the United States Patent and Trademark Office proposed a Streamlined Cancellation Proceeding (“SCP”) to expedite cancellation proceedings for challenges to registrations of allegedly unused marks. Following public comments, the PTO shelved the SCP. Instead of the SCP, the Trademark Trial and Appeal Board will study the effectiveness of a future SCP through an expedited cancellation pilot program (“ECPP”) that combines the current cancellation process with existing Accelerated Case Resolution (“ACR”) procedures. We covered the SCP when it was first proposed by the PTO. The SCP would have: Only abandonment and nonuse as grounds; No counterclaims; A combined pleadings/evidence/briefing phase; Additional discovery limited to challenge to the petitioner’s standing; No depositions; One extension request per party; Suspensions only if there is similar district court litigation; No oral hearings. Public comments revealed that stakeholders such as the American Bar Association, the American Intellectual Property Law Association, and the International Trademark Association, generally applauded the PTO’s attempts to expedite processes and to improve the accuracy of the Register. Despite this interest, the comments generally requested clarification of the SCPs, particularly related to adequate evidence and the availability of partial cancellations. Commenters also expressed inquired whether an unsuccessful SCP would preclude later cancellation of the registration on the same or new grounds. One key critique of the SCP was whether such a new procedure was necessary when the registrant was likely to default. Stated differently, why would a petitioner elect the SCP, which requires it to submit evidence with its cancellation petition, when it could pursue the traditional cancellation path to a default judgment without submitting such evidence? Given these concerns, the PTO chose to delay the SCP’s launch and instead study how pre-existing ACR mechanisms can streamline cancellations via the pilot program. The ECPP will have: Only abandonment and nonuse as grounds; No counterclaims; Separate pleadings phase; Streamlined discovery phase through participation of a TTAB judge (who will not decide the merits of the case) and an interlocutory attorney at the discovery conference and encouragement to adopt ACR procedures for case; Streamlined briefing phase through encouragement of use of summary judgment to decide the case on the merits, which will be discussed at the discovery conference. While ACR is not mandatory, by adding a TTAB judge and an interlocutory attorney to the discovery conference and instructing the parties to come prepared to discuss ACR procedures, the PTO clearly hopes to persuade parties to agree to ACR. If ACR procedures are agreed upon, the TTAB will attempt to issue the final decision within 50 days from when the parties are ready to receive a decision — as it does with other inter partes proceedings using ACR procedures. While the TTAB has been identifying eligible cancellations since March 2018, interested parties who have recently filed cancellations on nonuse or abandonment grounds now can take advantage of the pilot. In these instances, interested parties must receive consent from their opponents to participate in an ACR case, and arrange a discovery conference with their Interlocutory Attorney and opponent. The PTO has not given a definitive duration for the ECPP, but has stated that it plans to offer this program until “sufficient information has been collected.” Once this happens, the PTO will share the results and likely request more feedback. Time will tell if certain ACR procedures prove to be so useful in the ECPP that the PTO is willing to require them in all similar proceedings. The ECPP is one component of a larger effort by the PTO to clear deadwood from the Trademark Register. Other actions include revisions to the language of the post-registration declaration of use forms to highlight the ongoing use requirement and the random audits of post-registration maintenance filings. Watch the TMCA for updates regarding the expedited cancellation pilot program and related PTO deadwood-clearing initiatives.

On May 31, 2017, President Trump tweeted a half-formed message with a mystifying final word: “Despite the constant negative press covfefe”. The Twitterverse and other social media platforms went wild with re-tweets, memes and assorted guesses about what “covfefe” meant or what actual word or message was intended. Jumping on the trending hashtag, an enterprising trademark applicant named John E. Gillard also swooped into action by filing an application later the same day to register #COVFEFE for various items of apparel based on intent to use in commerce. The application was later amended to allege commercial use, with specimens submitted showing use of the mark on clothing items. These efforts to advance the application towards registration came to naught, however, as the Trademark Trial and Appeal Board in In re Gillard  affirmed the Examiner’s refusal to register the mark on the ground that #COVFEFE does not function as a trademark for the apparel items identified in the application. Failure to function as a trademark as a ground of registration refusal is different from a concern that a mark might be descriptive or generic. It is a recognition, as the Board observed, that “The Trademark Act is not an act to register mere words, but rather to register trademarks.” The key to determining whether a word or designation functions as a trademark is to evaluate whether the relevant public would perceive the mark as an indicator of the source of the goods, even if the name of the source is unknown. Since long before COVFEFE became a thing, the USPTO has refused registration under a variety of circumstances where a word or designation fails to function as a mark. In fact, as the Board pointed out in Gillard, Section 1202 of the Trademark Manual of Examining Procedure lists fifteen grounds for refusal of registration under the general failure-to-function rubric. Common examples are marks that are merely informational slogans or “common laudatory phrases” widely used in a particular industry, such as DRIVE SAFELY; NO MORE RINOs! (for No More Republicans in Name Only) and ONCE A MARINE ALWAYS A MARINE. Applications to register #METOO have also been refused on failure to function grounds, and just last week, in a precedential opinion in In re DePorter, the Board affirmed the refusal of registration of #MAGICNUMBER108 for apparel because the evidence showed consumer perception of the designation as informational about the Chicago Cubs, rather than being an indicator of source. The TTAB in Gillard conducted a thorough review of evidence regarding the history and use of the word “covfefe”, not only in the media but also on merchandise from different sources such as t-shirts, mugs, beach balls, bath soap, door mats and keychains. After looking at all the evidence, the Board conceded that “COVFEFE” was a “sui generis nonsense word that does not fit neatly” into one of the more typical categories of failure-to-function marks. But the record showed that it was “frequently and commonly used as a social, political, or similarly informational message in support or disapproval of President Trump.” So while there is “no true meaning of the word”, it did not follow that #COVFEFE functions as a trademark for the applicant’s goods. The hashtag in #COVFEFE was found to be “particularly probative” of the public’s understanding of Gillard’s mark. As the Board explained, “The fact that the applied-for mark is a hashtag does not preclude its registration,” but “because hashtags are commonly employed to facilitate categorization and searching of topics of public discussion, and the record makes it clear that #COVFEFE has served that purpose in promoting discussion of the mystery word in the President’s tweet, the public will not understand #COVFEFE to identify one, and only one, source of clothing, and to recognize Applicant as that source, when it appears on Applicant’s goods.” Further, the record showed that the public is accustomed to seeing many items of clothing, from many different sources” bearing the word COVFEFE, such that consumers will not perceive #COVFEFE as a source indicator pointing uniquely to applicant’s goods. Finally, the Board reviewed pictures of the specimens of use submitted by Gillard showing the #COVFEFE mark displayed on various clothing items. While the mark was in fact used “in ways befitting a trademark”, that conventional manner of use was not dispositive of the issue, and did not override the other evidence of the non-source identifying nature of the word COVFEFE. So while it was a nice try at fast-filing a trademark application in the hope of commercially exploiting a viral internet phenomenon, the Board’s ruling is entirely consistent with other cases in which a rush to register popular words or slogans has foundered on failure-to-function grounds. As Mr. Gillard might be heard to say, “Oh COVFEFE!”

Earlier this week, a company called Xclusive-Lee, Inc. filed a complaint in federal court against the fashion model Gigi Hadid (real name Jelena Noura Hadid) alleging willful copyright infringement when Gigi reposted a photo of herself on her own Instagram account.  According to the complaint, Xclusive is the copyright owner of the photo and claims that Gigi should have known better than to post copyrighted photos to her social accounts because she’s been sued for this before. The complaint further alleges that Gigi’s Instagram feed is full of similarly “uncredited photographs” that were posted without a license or permission from the copyright holders. Although the photo in question has been removed from her feed, the exhibits to the complaint show that the post garnered more than 1.6 million likes. The plaintiff also threw in a claim for contributory copyright infringement based on Gigi’s 43 million Instagram followers, who presumably (?) went on to copy and redistribute the photo themselves. The complaint doesn’t really make it clear. What is clear is that Gigi is not alone.  As readers of this blog know, other celebrities have been sued for this exact same reason, including P. Diddy. Brands, influencers and other advertisers can also easily find themselves in hot water by reposting unlicensed photos on their Instagram accounts, whether they are photos of themselves, others or even photos with no people at all.  Copyright law is pretty clear that copyright holders retain the exclusive right to reproduce and display their works.  The concept of “fair use” that everyone talks about is narrower than you might think  -- it’s a complex analysis of multiple factors that may not excuse social media posts made for commercial benefit. Despite the suggestion in Xclusive’s complaint, attribution or credit won’t solve the problem either. So make sure you have permission before posting. Formal written licenses are not always necessary, a quick DM chat with the copyright owner providing consent works just as well.

The U.S. Supreme Court’s blockbuster rulings in Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal represented a major shift in federal pleading standards. Resolution of motions to dismiss frequently turns on whether a complaint meets Twombly’s so-called “plausibility” standard. In the context of a motion to dismiss a petition for cancellation of a trademark registration, however, not much appears to have changed since Twombly and Iqbal, at least in the context of a claim of abandonment. Late last year, in Lewis Silkin LLP v. Firebrand LLC, the Trademark Trial and Appeal Board denied a motion to dismiss, holding that an allegation that a trademark owner is not using a mark with its goods and services, and has no intent to resume use, is legally sufficient to plead an abandonment claim. Notably, the Board reiterated its position that the “the same pleading standard for abandonment claims has been in effect since the 1989 implementation of the [Trademark Law Revision Act of 1988].” Is the Board simply ignoring Twombly? And can it really do that? The answer to the latter is certainly no – indeed, the Board noted that it follows the “federal standard of notice pleading,” including the plausibility standard articulated in Twombly and Iqbal. Whether the Board is properly applying Twombly is a closer question, one that probably will not be definitively answered until the Court of Appeals for the Federal Circuit weighs in on the pleading standard for cancellation claims. In the Lewis Silkin proceeding, Respondent Firebrand moved to dismiss a petition for cancellation of its registration for the mark FIREBRAND for a “newsletter dealing with brand and product development” and “business consultation services.” The cancellation petition pleads merely that “[o]n information and belief, Respondent is not using Respondent’s Mark on or in connection with Respondent’s Goods and Services with no intent to resume such use.” Under the Lanham Act, a mark is deemed to be “abandoned” when its use has been discontinued with intent not to resume such use. Applying that statutory definition, the Board held that “an abandonment claim must plead nonuse, which is use that has been discontinued, plus ‘intent not to resume such use.’” Firebrand argued that Lewis Silkin’s mere recitation of the statutory elements is insufficient to meet the Iqbal/Twombly standard for pleadings. That standard requires that a complaint “state a claim to relief that is plausible on its face,” and cautions that “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” While Firebrand seems to have a point, the Board did not agree. Rather, it observed that the “much-quoted reference to ‘threadbare’ recitals does not establish a per se pleading standard” and, quoting Iqbal, stated that “[d]etermining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” In other words, “while the Iqbal/Twombly standard applies to all civil complaints, the Supreme Court makes clear that there is flexibility in application of the standard.” The Board then noted that, while the Federal Circuit has not applied the Iqbal/Twombly standard to abandonment claims, its application of that standard to pleadings of patent infringement is “instructive,” as the Federal Circuit has repeatedly denied motions to dismiss that seek overly-detailed pleading. The Board also referenced three previous cases in which it had occasion to apply the Iqbal/Twombly standard to abandonment claims. In each of those cases, the Board held that the Iqbal/Twombly standard did not require more than the traditional pleading of nonuse plus intent not to resume. Finally, the Board distinguished its pre-Iqbal decision in Otto Int’l Inc. v. Otto Kern Gmbh because in that case, the petition to cancel, among other things, failed to allege that the respondent had discontinued use of its mark with an intent not to resume use. By contrast, in Lewis Silkin, the Petitioner’s “abandonment claim is not merely a formulaic recitation of the elements of the claim, because . . . the allegations of nonuse plus intent serve both to describe the claim and to describe the necessary facts to support the claim.” The Board did provide some clues as to the policy rationale for its arguably questionable application of the Iqbal/Twombly standard to cancellation claims. Specifically, the Board stated that it saw no purpose in requiring detailed pleading requirements for an abandonment claim, particularly in light of the fact that there is no list of activities that always show trademark use, and actual intent not to resume use “also must relate to the use in commerce of the mark.” The Board was also “reluctant to see pleadings devolve into wrangling over whether specific factual allegations offered to demonstrate nonuse and intent not to resume use are sufficient to support the abandonment claim,” as “matters addressing what activities constitute use in commerce under the Trademark Act are best, and traditionally, left to trial.” The Board further remarked that any concerns about an increase in unwarranted abandonment claims could be addressed by participation in discovery conferences, the imposition of sanctions, and the issuance of precedential orders. Although not explicitly touched on by the Board, a less stringent pleading standard for abandonment claims makes some sense in view of the fact that evidence of lack of intent to resume use will generally only be in the possession of the mark owner. As such, it would be unrealistic to expect a petitioner for cancellation to know and plead all the facts necessary to prevail on an abandonment claim. Perhaps this is what the Board was getting it when it noted that Iqbal requires “the reviewing court to draw on its judicial experience and common sense” in applying the Iqbal/Twombly standard. Whether the Board is ultimately right – and whether its standard for cancellation claims passes muster under Iqbal and Twombly – will have to await a decision by the Federal Circuit or, better yet, the Supreme Court. Until that happens, however, cancellation petitioners need only plead that a trademark owner is not using a mark with its goods and services, and has no intent to resume use to survive a motion to dismiss.

The French Data Protection Authority, CNIL, has fined Google $50 Million Euros for Google’s alleged failure to comply with the EU’s sweeping General Data Protection Regulation (GDPR).  The enforcement action is significant for a number of reasons: Jurisdictionally, CNIL ignored Google’s attempt to be regulated by Ireland’s Data Protection Authority, generally assumed to be somewhat more sympathetic to Google in light of Google’s significant connections to and investments in Ireland. CNIL observed that Google’s decision-making location with respect to privacy issues remained in the United States, rather than Ireland, so CNIL was not obligated to respect Google’s attempt to select Ireland’s DPA as its jurisdiction of choice. CNIL went on to assert that Google’s process for obtaining consent was neither specific or unambiguous because the user was required to navigate what CNIL apparently viewed as too many successive steps when first opening their account to exercise opt-out rights regarding collection and processing of personal data. CNIL was particularly critical of Google’s ‘pre-ticked’ box for ad personalization, which CNIL considered insufficient to meet the ‘voluntary’ requirement for consent. In what may be the most challenging aspect of the ruling for companies hoping to avoid what consumers may view as off-putting sequences of consents, CNIL also found fault with Google’s ‘single-click’ approach to consents to both its Terms of Service and Privacy Policy, asserting that consumers should be allowed to pick and choose whether they wish to consent to each of the various processing functions that Google performs, which in turn would require much more detailed disclosures of exactly what processing Google actually does. Google’s past differences with EU regulators on various privacy matters obviously placed it in the cross-hairs of the EU’s DPAs (the recent decision regarding the jurisdictional limits on Google’s obligations regarding the right to be forgotten likely was not wildly applauded by DPAs), so it should come as no surprise that CNIL chose Google for one its first test cases on exactly how the ‘fine print’ of GDPR is to be applied.  The potential precedent, and frankly compliance headache, associated with a more disaggregated and nuanced consent process, however, applies not just to Google, but other companies which have tried to streamline their disclosure and consent procedures by requiring only single clicks to approve Terms of Service and Privacy Policies.  Privacy advocates will applaud the ruling as confirmation of the sweeping changes many have hoped for with the passage of GDPR, particularly with regard to the opaque world of targeted advertising.  Those companies having to rethink the adequacy of their disclosures and consents – many of which are likely to be fairly similar to those found lacking by CNIL – may feel otherwise. It remains to be seen how the average consumer might react to the practical implications of the ruling,  Those more interested in ease and efficiency of access than sorting through a series of mandatory individual consents for each processing function being performed – and we have not even touched on the potential implications for third party processing by the data analytic companies  – may have mixed reactions.  And the touchy subject of whether consumers prefer a blizzard of unstructured advertising, or the ‘creep out’ of targeted advertising, may become even more problematic if CNIL’s enforcement approach is widely adopted by other DPAs.

When the European Union Intellectual Property Office (EUIPO) last week revoked the EU trade mark registration for the mark ‘BIG MAC’, following a challenge brought by an Irish fast-food chain, SUPERMAC’S, it was hailed by the media as a triumph for a small business in its dispute with a much stronger rival, the well-known McDonald’s burger chain. But the decision in this non-use revocation case had nothing to do with the applicant’s business. It was entirely down to the evidence of use filed by McDonald’s in defence of its registration. According to the EUIPO, it was simply insufficient to establish genuine use of ‘BIG MAC’ in the EU. The Cancellation Division’s decision suggests that a fair amount of evidence of use was in fact filed by the trade mark owner. The decision mentions three affidavits signed by McDonald’s representatives in the UK, France and Germany, providing sales figures of ‘Big Mac’ burgers in the relevant countries over the period in question. It also mentions a range of documentary evidence including samples of packaging materials, promotional brochures and menus displaying the mark, print-outs from McDonald’s national websites from across the EU, and print-outs from Wikipedia. It is important to emphasise that the non-use challenge in this case did not focus on any of the finer aspects of the use of the BIG MAC mark. The decision did not examine the issue whether the evidence showed use of the word mark at issue as opposed to any device marks; nor did it go into much detail as to the food products (in classes 29 and 30) and restaurant franchise services (in class 42) for which the mark was registered  – the registration was revoked for all goods and services, even for burger sandwiches (and despite the applicant’s own concession that the evidence was sufficient in relation to that class of goods); nor did the decision focus on the question of the geographical extent of the use of the mark across the EU – sales figures, after all, were provided for the largest three markets in the EU, which normally ought to be sufficient. The Cancellation Division found the evidence to be lacking essentially because it took the materials with a great pinch of salt. The evidence of the affiants which provided figures of sales was heavily discounted as evidence of company representatives who are treated by the EUIPO as not independent witnesses whose evidence is inherently unreliable. In the documentary or physical evidence, the EUIPO found little (at least not enough) to indicate the time, place and extent of the use of the mark. Although at least some of the evidence appears to have been dated and the websites were national sites of EU member states, there was not enough according to the EUIPO to establish the scope and extent of use. The decision points out that the evidence contained “no confirmation of any commercial transactions, either online, or via brick-and-mortar operations”. In relation to online sources, it states that print-outs from websites showed no proof that the sites had any visitors which could establish the connection between the websites and the number of items (BIG MACs) sold.  “The mere presence of a trade mark on a website is, of itself, insufficient to prove genuine use unless the website also shows the place, time and extent of use”.  In relation to Wikipedia, the decision dismissed the site as unreliable. The decision proclaims that the result was due “not to an excessively high standard of proof, but to the fact that the EUTM proprietor chose to restrict the evidence submitted”. Be that as it may, whether or not this case survives an appeal, it should serve as a warning sign. As shown repeatedly over the past few years, the EUIPO is prepared to closely scrutinise evidence of use in revocation cases as well as in cases of acquired distinctiveness. Proprietors who are required to produce evidence of genuine use have to ensure their evidence is comprehensive and persuasive and based on independent documentary materials. There are no set rules as to the type of evidence that can be used to establish genuine use of a mark in the EU. Sales figures can be provided through a witness evidence, but it has to be supported by independent documentary evidence, such as samples of receipts or purchase orders, audited accounts, or independent third party market share reports (in each case, related to the mark in question). Evidence from online sources and social media channels can be valuable but should be supplemented by independent reports showing volumes of visits, hits and search engine searches. Website and app ranking tables can also be relevant. It is important in each case to demonstrate that the evidence relates to the relevant period and to the relevant geographical area and of course that it relates to the relevant goods and services for which the mark is registered. Putting together this kind of comprehensive evidence requires an effort. Defending a mark against a non-use challenge can be burdensome. Losing a registration, however, can cause real damage to a business. A trade mark proprietor who is unprepared to muster up the necessary evidence to protect its registration could very well end up finding itself penny-wise and pound-foolish.

In the magical land of the U.S. Patent and Trademark Office, a new chapter has been added to the trademark fairytale: consumers may have a real interest in preventing the exclusive appropriation of merely descriptive or generic terms by trademark owners. The Trademark Trial and Appeal Board recently ruled that Suffolk University Law Professor Rebecca Curtin, as a consumer who asserted that she “participates amongst other consumers in the marketplace for dolls and toy figures of fairytale characters, including Rapunzel”, has standing to oppose an application for “Rapunzel” for dolls and toy figures. The Board rejected the applicant’s argument that only competitors have standing to oppose an application. The Board determined that “[c]consumers, like competitors, may have a real interest in keeping merely descriptive or generic words in the public domain, to prevent the owner of a mark from inhibiting competition in the sale of particular goods and to maintain freedom of the public to use the language involved.” This decision has less to do with Curtain’s commercial interests, but is anchored in the principle that an applied-for mark that is merely descriptive of or generic for a class of goods or services cannot be protected as a trademark, and may cause damage to consumers (not just competitors) who are prospective purchasers of goods bearing a descriptive or generic mark. In an attempt to convince the TTAB that Curtin lacked a “real interest” or a personal stake in the outcome of its registration, applicant United Trademark Holdings argued that Curtin needed to have a specific interest in using the term “Rapunzel” in her “business” or in any fashion beyond her mere status as a consumer of Rapunzel brand dolls. But the Board determined that this is too narrow an interpretation of the issue of standing. An opposer is “not required to allege that she is a competitor” to support her claims that the applied-for mark fails to function as a trademark because it is descriptive or generic. To initiate an opposition or cancellation proceeding before the Board, an opposer must show that she has a “real interest” in the registration of the mark, and a “reasonable basis” to believe she would be damaged by the grant of a trademark registration. Curtin’s “real interest” in the registration of “Rapunzel” is as a consumer of dolls and toy figures of fairytale characters that she has purchased and will continue to purchase. Her “reasonable basis” to oppose this application, the board determined, is because registration would “constrain the marketplace of such goods sold under the name ‘Rapunzel,’ raise prices of ‘Rapunzel’ dolls and toy figures, and deny consumers [ ] the ability to purchase ‘Rapunzel’ dolls offered by other manufacturers.” Though the TTAB, protector of the trademark realm, has merely refused to dismiss Curtain’s case, this case presents an interesting point: will extending standing to include any consumers open the floodgates for intermeddlers to oppose and petition to cancel any and all marks, adding to the Board’s docket and jeopardizing applicants and trademark holders? A reasonable guess is that this concern will not come to pass. The Board did not do away with the safeguards of having a “real interest,” a reasonable basis for damage, and a viable claim as to why a mark is not entitled to registration. Mere consumers will likely not get far in TTAB proceedings without articulating a sound basis for questioning a mark that is fanciful just because it will prevent her from using the term in other ways. The Board did dismiss Curtin’s claim that the mark was “functional” as inapplicable to the Rapunzel word mark. We will keep our eye on this dispute to see whether Curtin can get her happily ever after based on the surviving claims.

Andy Warhol once famously commented that “In the future everybody will be world famous for fifteen minutes."  For trademarks, fifteen minutes of fame is not sufficient to assert a trademark dilution claim. The timing of when a mark first became famous and how long that fame must endure was the subject of a recent decision by the Trademark Trial and Appeal Board in TiVo Brands LLC v. Tivoli, LLC.  In a precedential opinion, the Board held that to prevail on a dilution claim in an opposition proceeding, the opposer’s mark must have become famous before applicant’s first use of its mark and the mark must continue to be famous at the time of trial in the proceeding. The TiVo case involved applications by Tivoli to register the marks TIVOTAPE and TIVOBAR for lighting fixture products, alleging a date of first use of May 2010 for TIVOTAPE and September 2015 for TIVOBAR. TiVo opposed registration on the grounds of both dilution by blurring and likelihood of confusion, relying on registrations for its TIVO mark for DVR products and related services and merchandise, as well as two TIVO composite marks. Analyzing the dilution claim in detail, the Board confirmed established precedent that TiVo was required to prove its mark had become famous before Tivoli’s first use of TIVOTAPE in May 2010. This was amply demonstrated by revenues generated and advertising and publicity disseminated by the company for TiVo products and services over many years. The Board put significant emphasis on unsolicited media attention for the TIVO mark, holding that “it is this third-party recognition of the mark that tips the balance in favor of our finding that Opposer’s TIVO mark is famous for dilution purposes.” The evidence included clips of Hillary Clinton on The Late Show with David Letterman in 2008 stating that” the #6 reason she loves America is TIVO”; Anderson Cooper on Ellen in 2007 saying “Forget the Internet, for me TIVO is the greatest technological revolution;” and Oprah in 2006 giving everyone in the audience a TIVO DVR. Based on all of the evidence and factors bearing on fame of the mark, the Board held that “public recognition of the mark from at least as early as 2002 was widespread” and by 2010, TIVO had become a “household term” with which almost everyone was familiar. But the Board did not stop there. It then considered “whether a plaintiff alleging dilution must further show that its mark is still famous at trial, when defendant’s rights are being determined.” Perhaps accounting for why the opinion was designated “precedential”, the Board stated it had encountered no precedent, and the parties had not cited any, addressing this additional inquiry. It ultimately determined that such an additional requirement exists, it looked to the statutory language on dilution claims in Section 43(c) of the Lanham Act, noting that a plaintiff must show that its mark “is”  famous (emphasis in original).  In addition, the statue permits only the “owner of a famous mark that is distinctive, inherently or through acquired distinctiveness” to bring a dilution claim. “Accordingly, unless the plaintiff owns a famous mark at the time it brings the claim, and by extension, retains its fame through trial, this provision of the statute cannot be satisfied …. To find otherwise would allow a mark that has lost its fame to continue to enjoy the widest penumbra of protection available accorded by the extraordinary protection of the dilution statute. This approach also accounts for any significant changes in the marketplace between the date of Applicant’s first use of its mark and trial.” The Board concluded that the TIVO mark remained famous and inherently distinctive and was sufficiently similar to TIVOTAPE and TIVOBAR such that applicant’s marks would impair the distinctiveness of the TIVO mark. Because the Board sustained TiVo’s opposition on the ground of dilution, it did not reach the merits of the likelihood of confusion claim. As a practice tip, if your company’s brand has well-established and continuing fame, it’s helpful to remember to introduce evidence of such fame through the time of trial. Conversely, if your company is defending against a dilution claim based on a brand that has declined in popularity, it may be fruitful to argue that fame has not continued to exist through trial. In a fast-paced brand and media culture where brands might live a short life and die quickly, it could be a productive strategy.

The NFL playoffs are underway and teams and their fans are riding high: eight teams still have a chance of making the Super Bowl. Now could be the perfect time to protect the team slogan or motto that fans will love for years to come. But seven out of the eight teams will not win the Super Bowl this year. If they file a trademark application, it could set them up for ridicule. During last year’s playoffs in January of 2018, the Minnesota Vikings, riding a wave of fervor after a last-minute win over the New Orleans Saints, applied to register the phrase "Bring It Home" to describe their attempted push to the Super Bowl. But when an embarrassing loss to the Eagles ended the Vikings' playoff run a few weeks later, the Vikings faced ridicule for rushing to grab a now-tarnished slogan. The New England Patriots found themselves in a similar situation in 2008, when they applied to register the trademark “19-0,” a reference to the perfect season they would’ve had if they’d won the Super Bowl. The application was rejected. Even worse, the Patriots lost to the New York Giants a few weeks later. The loss prompted the New York Post to file snarky trademark application for “18-1,” and merchandise mocking the Patriots’ aspirational slogan sprung up across the web. On the other hand, a good idea can be worth protecting, even if initially attempting to register it can be a little awkward. NBA Lakers coach Pat Riley registered the term "three-peat.” Unfortunately, the Lakers never quite managed to rise to the term. But the Chicago Bulls did, and made good use of the term. Riley pocketed approximately $300,000 in royalties for its use. “Three-peat” or no, Riley will be laughing all the way to the bank. For companies beyond the gridiron, filing a trademark application at the right time is essential to protecting their company's valuable brand assets, but it is still wise to anticipate how the public may react. In 2015, Zodiac Seats France filed a patent for an awkward new aircraft seat design that switched the middle seat to face away from the front of the plane in order to pack more seats onto the plane. Passengers would awkwardly face one-another in the cramped quarters of an aircraft’s economy cabin. When the patent was roundly ridiculed, Zodiac found itself in a position only slightly less awkward than having to suffer a flight in one of its newly-designed middle-seats. Ultimately, when it comes to publicly-available IP filings, teams and companies must be aware of the publicity—good or bad—that the filings may generate. And who knows... maybe someday the Vikings will Bring It Home after all.

If you were shopping for snack crackers and saw Cheez-It packages that looked like the ones shown here, how much whole grain content would you think the crackers contain – a little, a lot, all of it?            The Second Circuit recently considered this question in Mantikas v. Kellogg Company, holding that the plaintiffs had “plausibly alleged that a reasonable consumer would be misled by Defendant’s whole grain labels to believe that the grain in whole grain Cheez-It crackers was predominantly whole grain.” On the package shown above at left, the words “WHOLE GRAIN” were featured in large print on the front panel, and “made with 5g of whole grains per serving" appeared in smaller print on the bottom. The second version on the right displayed the words “MADE WITH WHOLE GRAIN” in large print on the front panel, with "made with 8g of whole grain per serving” in smaller print on the bottom. Both versions contained a “Nutrition Facts” section on the side panel of the cracker package, revealing in small print that a serving size of the crackers was 29 grams, and an ingredients list in which the first-listed ingredient was “enriched white flour.” Whole wheat flour was also listed as either the second or third ingredient, included in order of ingredient predominance as required by federal regulation. Plaintiffs asserted claims for false advertising and deceptive business practices under state consumer protection laws, based on the theory that they were misled into believing that the Cheez-It crackers were made “predominantly” from whole grain. On Kellogg’s motion to dismiss, the district court dismissed the claims, holding that neither version of the Cheez-It packages would mislead a reasonable consumer because both “WHOLE GRAIN” and “MADE WITH WHOLE GRAIN” were true statements, qualified by further accurate language about the number of whole grain grams per serving. The Second Circuit vacated the decision and remanded the case for further proceedings. The appellate court began its analysis with the oft-cited principle in false advertising cases that “context is crucial.” Here, that meant a consideration of the Cheez-It packaging as a whole, including disclaimers and qualifying language. The court determined that while disclosures on the front of the box accurately stated the amount of whole grain per serving, “they are nonetheless misleading because they falsely imply that the grain content is entirely or at least predominantly whole grain, whereas in fact, the grain component consisting of enriched white flour substantially exceeds the whole grain portion.” Moreover, the information conveyed in the Nutrition Facts and ingredient lists for the products did not cure the deceptive aspects of the packaging. As the court explained, “reasonable consumers expect that the ingredient list contains more detailed information about the product that confirms other representations on the packaging” (emphasis in original). Consumers “should not be expected to consult the Nutrition Facts panel on the side of the box to correct misleading information set forth in bold type on the front of the box.” The court distinguished a case cited by Kellogg in which crackers labeled as “made with real vegetables” was held to be not misleading because most reasonable consumers would know that crackers are not composed primarily of fresh vegetables. In contrast with respect to the Cheez-It crackers, reasonable consumers would likely understand that crackers are in fact typically made predominantly with grain, and would therefore look to the “bold assertions” on the front of the packaging “to discern what type of grain” the crackers contain. In concluding its analysis, the Second Circuit rejected the general proposition that it is acceptable to state that a product is made with a specific ingredient so long as that ingredient is in fact present in the product. According to the court, that would “validate highly deceptive advertising and labeling” and permit a marketer to advertise the presence of an ingredient in product labeling so long as there was “an iota” of that ingredient in the product. The TMCA will continue to follow and report on any significant new developments in the decision. For now, if you’re a product marketer, be careful of relying on fine print and side panel explanations to avoid false and misleading impressions created by prominent labeling claims, especially where the fine print is inconsistent with bold claims featured on the front panel of product packaging.

On Friday, while some of us may have been muttering a few bad words as we slogged through our post-holiday inboxes, the Supreme Court was toying with a naughty word of its own:  FUCT.  That’s right.  Late last week the Court agreed to hear a case involving a rejected trademark application for the word “FUCT” for use on clothing.  It’s an interesting case and one that we will be keeping a close eye on in 2019. Here’s the basic gist of the dispute:  Erik Brunetti is an L.A. based artist and clothing designer who launched a streetwear apparel brand under the rather colorful name “FUCT.”  He attempted to register the trademark with the USPTO.  The examiner rejected the application and cited the Lanham Act prohibition regarding registration of “scandalous” trademarks under Section 2(a).  The applicant appealed to the U.S. Court of Appeals for the Federal Circuit.  To virtually no one’s surprise, the Federal Circuit held the “scandalous” prohibition violated the First Amendment under Federal Circuit and Supreme Court precedent, including the unanimous 2017 Supreme Court decision Matal v. Tam that struck down the “disparagement” prohibition also contained in Section 2(a).   The USPTO petitioned for the U.S. Supreme Court to review the decision, and the Court obliged.  WTF?   We will soon find out why the Court is jumping back into the fray of Section 2(a), but we offer a few musings for your consideration: This could signal that the Court wants to clarify or modify the constitutional analysis it previously set forth in Matal v. Tam. Or, it could be that the Supreme Court sees a principled difference between the “disparaging” and “scandalous” provisions within the same statutory section.  Neither possibility seems likely, though.  Matal v. Tam was a unanimous decision from 2017, so it wouldn’t seem as though the Court would be all that interested in examining its decision anew given that the ink is barely dry on it.  Further, many scholars and Lanham Act pundits see no meaningful difference between the two provisions of the Lanham Act.  If one falls, they both fall. If the Court upholds the Federal Circuit decision, we may see a glut of profane and sexually explicit trademark applications filed at the USPTO, which is what the government appears to be concerned about and why it wants the Federal Circuit’s decision reversed. The government’s position seems to be a bit like a solution in search of a problem.  Yes, there may be some that will file vulgar trademark applications.  But trademarks are registerable only if they are used to sell goods or services in commerce.  While vulgar and/or sexually explicit trademarks may appeal to a slice of the overall consuming population, it seems unlikely that such trademarks are going to catch fire and live in mainstream commerce. The government further argues that “international bodies” (such as foreign countries) will look askance at the U.S. for it allowing “scandalous images and terms” being registered as trademarks. Given the current state of play of our geopolitics, offending foreign countries about what’s happening at our U.S. Trademark Office should probably rank pretty far down on the government’s priority list. We will be keeping our eyes (and especially our ears) open.

A lesser-known feature of selecting a TRUMP-branded property as a wedding venue is that the President himself may decide to crash your wedding. It also may end up leading to a substantial copyright law development, specifically regarding the fair use doctrine and photographs posted to social media. Trump’s crash at the Trump National Golf Club in New Jersey in June of 2017, was exposed by wedding attendee Jonathon Otto via his amateur iPhone photograph of the newsworthy moment. Otto took a photo of Trump and the bride and then texted his photo to one friend. The next day his photo appeared in articles across the country, including on outlets such as TMZ, CNN, the Washington Post, the Daily Mail, and Esquire. The publications swiped the photo from another wedding attendee’s personal Instagram account. Having indicated to a friend that he “wanted [his] cut” from the attention garnered by his photo, Otto registered the photo with the Copyright Office and brought infringement suits against five media companies who published his photo without permission. Four media companies have since settled with Otto. Otto’s suit against Hearst Communications, Inc., owner of Esquire Magazine, is ongoing in the Southern District of New York, but a recent ruling may be a substantial new development in U.S. Copyright law. U.S. District Judge Gregory H. Woods entered an Opinion and Order granting summary judgment in Otto’s favor on the issues of infringement and fair use. The court’s infringement analysis was over in a flash. The court concluded that Otto has a valid, registered copyright in the photo. Hearst did not dispute actual copying or substantial similarity of the photos. Thus, the court easily concluded Hearst infringed Otto’s copyright. The court then addressed Hearst’s defense of fair use, and on cross motions for summary judgment, the court again sided with Otto. Fair use is an affirmative defense to copyright infringement that permits the unauthorized use of a protected work for certain purposes. Notably, “news reporting” is one of a number of statutorily-enumerated purposes. However, according to Judge Woods, an entity’s status as a news publication “does not render that entity immune from liability under intellectual property laws.” To determine whether the use of another’s copyrighted work is fair use, courts look to four statutory factors: (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 for or value of the copyrighted work. In this case, the court concluded that factors one, three, and four weighed in favor of Otto, while only factor two, the nature of the copyrighted work, favored Hearst. According to the court, Hearst’s use of Otto’s photo was commercial. Online readers could view the photo (and corresponding article “President Trump is the Ultimate Wedding Crasher”) online at Esquire for free, but Hearst earned revenue from advertisements displayed with the article. Further, the court did not consider Hearst’s use of Otto’s photo to be transformative because the photo is merely used as an “illustrative aid” and “depicted the subjects described in the articles.” As the court stated, “[s]tealing a copyrighted photograph to illustrate a news article, without adding new understanding or meaning to the work, does not transform its purpose—regardless of whether that photograph was created for commercial or personal use.” Favoring Hearst, the court determined that the photo was factual in nature, not expressive or creative. The law recognizes a greater need to disseminate facts than to disseminate fantasy. However, Hearst essentially used the entire photo, and Hearst’s publication potentially harmed Otto’s reasonable financial opportunities in the market for licensing the photo for publication and use in derivative works. The court noted that a creator “should not be precluded from future profits should they lack the marketing prowess to capitalize on the work at the time of creation.” Hearst’s publication of the viral photo essentially destroyed the primary market. Finally, the court explained that allowing a publisher to poach an image from an individual’s social media account for an article that does little more than describe the setting of the image does not promote “the Progress of science and the useful Arts,” one of the bases of the fair use defense in furthering the mission of copyright law. According to the court, if Hearst was permitted to use Otto’s photo without authorization by relying on the fair use defense, “amateur photographers would be discouraged from creating works and there would be no incentive for publishers to create their own content to illustrate articles: why pay to create or license photographs if all personal images posted on social media are free grist for use by media companies, as Hearst argues here?” In concluding its fair use discussion, the court emphasized the “fact-driven nature” of the fair use inquiry. This cautious language highlights the uncertain impact of this opinion upon other similar cases “involving personal photographs used by the media[.]” Whether this ruling will be upheld by appellate courts or applied in other circuits also remains to be seen. A jury will ultimately decide whether Hearst acted willfully in infringing on Otto’s copyright (the trial date has not yet been set). Otto’s willfulness arguments are based on the media conglomerate’s long history of photography licensing and previous charges of copyright infringement. While the court found that a reasonable jury could differ on the issue of willfulness, and thus denied summary judgment on the issue, the court also cautioned that “it is not clear to this Court that an entity’s status as a media publisher alone can establish a reckless disregard for the copyright holder’s rights.” The TMCA will continue to update you with the latest developments in the case and the effects this decision has on future reliance on the fair use defense.

As we previously reported on our blog, the doors to the public domain will open in the United States for the first time since 1998.  On January 1, 2019, any works published in the United States in 1923 or prior are freed from the shackles of copyright protection and can be copied, remixed, distributed, etc. without authorization from the copyright owner. According to some brief internet research, 1923 saw the following cultural highlights, to name just a few: Louis Armstrong made his first studio recording Two iconic sports stadiums opened: the original Yankee Stadium in New York and the original Wembley Stadium in the United Kingdom The Hollywood Sign in California was inaugurated The Walt Disney Company was formed The film “The Ten Commandments” was released (** Cecil B. DeMille’s silent film version, not the version starring Charlton Heston that was released in 1956) Robert Frost’s “New Hampshire” poetry collection was published, which includes “Stopping By Woods on a Snowy Evening” William Carlos Williams published the poetry collection “Spring and All,” which includes “The Red Wheelbarrow” So, why has the public domain been effectively sealed in the United States for over 20 years? When the 1976 Copyright Act became effective on January 1, 1978, the term of copyright was set at life of the author plus 50 years.  The term for works created before January 1, 1978, was 75 years (though the blogger notes that calculating the term of protection for pre-1978 works can be complicated and not all works benefited from such a lengthy term based on a number of circumstances, the discussion of which is beyond the scope of this post).  Hence, as the late 1990s drew near, key players in the United States entertainment industry (including Disney, Time Warner, Universal, and Viacom) started recognizing that works created in the 1920s would soon lose copyright protection.  A notable oft-cited example in copyright lore is Walt Disney’s “Steamboat Willie” cartoon that was copyrighted in 1928 and would have entered the public domain on January 1, 2004. These industry giants convinced Congress to extend the term of copyright protection for an additional 20 years.  This extension is known as the “Sonny Bono Copyright Term Extension Act,” named after Sonny Bono, because he was one of the original sponsors of similar legislation and passed away nine months before the bill was signed into law by President Clinton on October 27, 1998.  The effect of the term extension is generally as follows: For works created on or after January 1, 1978, the term is life of the author plus 70 years. For works made for hire and anonymous or pseudonymous works, the term is 95 years from publication or 120 years from creation, whichever comes first. For works created prior to January 1, 1978, and still under protection, the term is 95 years from the original copyright date. This means the first depiction of Mickey Mouse in a sound cartoon enters the public domain on January 1, 2024.  Will we see lobbying efforts to keep Mickey locked safely away in the “Disney Vault” for an additional term of protection?  Only time will tell, but if it happens, you can rest assured that we will be writing about it here at The TMCA.

In a decision issued on December 12, 2018, the Second Circuit refused to recognize application of the first sale doctrine to a service that had been established as a marketplace for resale of digital music files.  Under the first sale doctrine (set forth in Section 109(a) of the Copyright Act), owners of legally-obtained copies of copyrighted works can resell those copies without violating the rights of the copyright holder.  This is the reason we have stores and websites that focus on the sale of secondhand books, CDs, and other physical media. The Second Circuit’s case involved ReDigi, which was an internet platform established in 2009 to allow the resale of digital music files that had been lawfully purchased on iTunes.  The ReDigi platform featured a mechanism for effecting transfer of a seller’s digital music file so that once the file was transferred to ReDigi’s server, it would be deleted from the uploader’s device.  According to ReDigi, its software ensured that there was never a complete version of the digital music file in two places at the same time.  The process would then be replicated to transfer the file from ReDigi’s server to a buyer’s device.  ReDigi’s software also continuously monitored an uploader’s computer and connected devices to detect duplicate files.  If duplicate files were found, ReDigi could suspend a user’s account. Capitol Records, Capitol Christian Music Group, and Virgin Records sued ReDigi for copyright infringement in 2012.  The district court for the Southern District of New York found in favor of the plaintiffs and awarded $3.5 million in damages.  In affirming the judgment, the Second Circuit concluded that ReDigi’s service violated the copyright owners’ exclusive rights of reproduction under the Copyright Act. In an opinion authored by Judge Pierre Leval, the Second Circuit acknowledged that ReDigi was acting in good faith in developing its platform, and was “not making efforts in the shadows to infringe on copyrights.”  The key problem for the court is that the first sale doctrine as codified in the Copyright Act relates to distribution of copyrighted works and not to reproduction of those works.  Accordingly, because the Second Circuit determined that the ReDigi platform creates a reproduction of the music file, the first sale doctrine was inapplicable.  Despite ReDigi’s argument that its technology ensured the complete music file never existed in two places simultaneously, the court concluded that “each transfer of a digital music file to ReDigi’s server and each new purchaser’s download of a digital music file to his device creates new [copies].”  The court also seemed particularly concerned that there would be no way to ensure the seller of a music file did not retain a copy.  For example, if a user had copied the file to an external hard drive prior to uploading the file to ReDigi’s server and the user never again attached the external hard drive to the user’s computer, ReDigi would not find the duplicate copy. The Second Circuit did not, however, shut the door completely on application of the first sale doctrine in the digital context, acknowledging that “other technology may exist or be developed that could lawfully effect a first sale.”  The court posits that a person could place digital song files on a thumb drive and sell the thumb drive and it also cites William Patry’s copyright treatise for the observation that the first sale doctrine would permit sale of an iPod that contains lawfully made digital music files.  (In the author’s opinion, neither of these options addresses the court’s key holding that the first sale doctrine is inapplicable when reproduction of the digital music files is involved.  In fact, both of the examples given by the court most likely involve a reproduction of the file before the sale occurs.  In the thumb drive example, unless the owner originally downloaded the song files directly to the thumb drive, the act of placing the songs on the thumb drive before selling the songs requires reproduction of the song files.  Likewise, the typical manner in which users transfer songs to their iPods (or now, more likely, their iPhones) is to download the songs from iTunes onto their computer or an external hard drive and then to upload them onto the iPod.  Hence, the digital sound files residing on the iPod to be sold may very well be reproductions of the originally-purchased file.  If either the flash drive or the iPod were to be sold containing these reproductions, then the first sale doctrine cannot be applied.  However, if the original song owner were to sell his or her hard drive where the songs all were originally downloaded, this sale would presumably be within the first sale doctrine under the court’s reasoning.) Turning back to the Second Circuit’s analysis, the court also held that ReDigi’s actions did not amount to fair use under test set forth in Section 107 of the Copyright Act, because the copying of the files was not transformative and essentially replaced the copyright owner’s marketplace for selling digital music files. Finally, in closing the opinion, Judge Leval issues the time-honored sentiment that can be found in federal court opinions throughout history and across all areas of law:  If you have persuasive arguments to support a change in the law, then lobby Congress to codify those changes in statute, because the court cannot “substitute our judgment for that of Congress.”

American Airlines recently scored a major win by convincing the Copyright Office to reverse its refusal of an application to register the “American Airlines Flight Symbol.” American Airlines reached its final destination after overcoming myriad delays.  The Copyright Office rejected American Airlines’ copyright application three times on the ground it did not contain a sufficient amount of original and creative artistic or graphic authorship to support a copyright registration.  According to the Copyright Office, it receives half a million applications annually, but only declines to register less than 20,000 on this basis.  First, a Copyright Office Registration Specialist refused registration; second, an Attorney-Advisor for the Copyright Office denied American Airlines’ First Request for Reconsideration; and third, the Copyright Office Review Board denied American Airlines’ Second Request for Reconsideration.  In fact, the Review Board noted that “the Work falls just below the threshold for creativity required by the Copyright Act.”  With no other options left, American Airlines filed a lawsuit seeking judicial review of the decision under the Administrative Procedures Act (“APA”).  The complaint referenced widespread disapproval of the decision amongst copyright practitioners, including an informal poll during a June 2018 meeting of the Copyright Society of the USA.  In a presentation by Karyn Temple, the Acting Register of Copyrights, she asked an audience whether anyone agreed with the refusal.  Apparently, no one raised their hand and then, according to the complaint, Ms. Temple conceded, “I think the main drafter of that one actually even kind of regrets that decision.”  Only one month after it filed the complaint, American Airlines dismissed the suit, reporting that the Copyright Office had agreed to again review its refusal of the work. After conducting an additional review of the design, the Copyright Office has now reversed its three prior refusals of the application finding that the work does indeed contain the requisite level of creativity.  So, why the change?  The decision purportedly hinges on American Airlines’ submission of a higher-quality image of the work showing “additional detail that had not been clear from the original deposits.”  With this new version of the design, the Copyright Office Review Board found a number of elements showing sufficient creativity, including an “aircraft tail element [that] is oriented on an angle,” a “bird-head element [that] hovers just below the center of the aircraft tail element” with a “three-dimensional appearance that causes the bird-head element to appear to be above and separated from the aircraft tail,” and multiple colors with different gradients and shading “further heightening the illusion of depth.”  Notably, the Board limited American Airlines’ level of protection by stating that “the resulting protection is thin, protecting only the Work’s original and creative elements ‘against only virtually identical copying.’”  Interestingly, at least to our eyes, the original deposit copy of the work is not all that different than the higher-quality version that apparently swayed the Copyright Office.  The shading, gradients, and bird-head elements are all visible. The Board also took pains to indicate that “there are no third requests for reconsideration,” despite the upgrade it afforded American Airlines.  It also stressed that all decisions by the Copyright Office are made on a case-by-case basis and other applicants should not expect the Board to conduct such additional screening when applications are rejected. So what can your brand learn from this victory in the sky? Submit the highest quality images you have when applying to register logos with the Copyright Office. When you have a two-dimensional logo that contains shading and features that give the work depth, make sure to point that out on a First Request for Reconsideration. If your logo consists of a combination of geometric shapes and suggestive elements that may not be readily discernable, explain those elements to the Copyright Office in a First Request for Reconsideration. While the Copyright Office claims, that “the symbolic meaning or impression that a work conveys is irrelevant to whether a Work contains a sufficient amount of creativity,” this decision suggests otherwise. The Copyright Office is not interested in a work’s public reception or the author’s intent, so don’t expend resources providing evidence of these points to the Office. In the decision, the Copyright Office also included a reminder that “the Office does not consider the time and effort used in creating a design, its novelty, aesthetic appeal, or commercial value.” It remains to be seen if others will try to leverage similar outcomes by seeking review under the APA, especially in light of what appears to be a recent trend of the Copyright Office refusing company logos on the ground they lack creativity.  In the meantime, American Airlines will be sipping champagne in first class by itself.

Long ago (by internet standards), a spoof of Discovery Channel-style nature videos went viral. “The Crazy Nastyass Honey Badger” is a three-minute montage of wild honey badgers running across the desert, hunting prey, and, perhaps most disgusting, eating a snake, all set to classical music. The narrator, Christopher Gordon, describes the honey badgers’ activities without resorting to “science-y” language, saying things like “watch it run in slow motion”; “watch it dig, look at that digging,” and “it doesn’t care about being stung by bees, nothing can stop the honey badger when it’s hungry.” Gordon’s patter drove the video to more than 89 million views on YouTube. Gordon repeatedly tells the viewer “honey badger don’t care,” “honey badger don’t give a s- - -,” and more vulgar variations. After the internet-consuming public went nuts for honey badgers, Gordon obtained federal trademark registrations for “Honey Badger Don’t Care” for audio books, greeting cards, mugs, clothing, Christmas products, and similar goods. Gordon licensed the mark for honey badger costumes, toys, apparel, posters, and other products. Gordon also licensed the phrase for greeting cards, leading to heartfelt birthday greetings like, “Honey Badger Don’t Care About Your Birthday.” (Gordon never registered “honey badger don’t give a s- - -”). Around the same time, Drape Creative, Inc. and Papyrus-Recycled Greetings, Inc. started developing their own honey-badger themed greeting cards. Their products doubled down on the “honey badger don’t give a s- - -” phrase, featuring it on Election Day, birthday, and Halloween cards. Drape Creative’s president drafted the cards. He later testified that he did not recall what inspired his designs and that he had never heard of a video involving a honey badger. Gordon sued in 2015, alleging trademark infringement under the Lanham Act and other claims. The district court entered summary judgment for the defendants, concluding the First Amendment protected their products. Gordon appealed, and the Ninth Circuit reversed. The appellate court applied Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989), which modifies the two-element likelihood of confusion test for trademark infringement claims to protect freedom of expression. Usually, a trademark plaintiff only need prove that it has a valid, protectable mark and that the defendant’s use of the mark is likely to cause confusion. Under Rogers, the Lanham Act applies to an expressive work only if a defendant’s use of a protected mark (1) is not artistically relevant to the work, or (2) explicitly misleads consumers as to the source or content of the work. To invoke the Rogers test, a defendant must make a threshold showing that its allegedly infringing use is part of an expressive work protected by the First Amendment. The plaintiff must then prove at least one of the Rogers criteria in addition to the two Lanham Act elements. The Ninth Circuit easily concluded that Gordon had failed to prove the first Rogers criterion—the honey badger phrases used in the greeting cards were the punchlines on which the cards’ humor turned. The second Rogers criterion gave the court pause. In all of its previous decisions applying Rogers, the court had held that the First Amendment protected the accused use. The court decided, however, that this case demonstrated Rogers’ “outer limits.” The court sought to clarify the “explicitly mislead” requirement, while ensuring it remained harder to satisfy than the usual likelihood-of-confusion element of a Lanham Act claim. The court held that an affirmative misleading statement of the mark holder’s sponsorship or endorsement it not required to run afoul of the Rogers test. But, the court continued, use of a mark alone might explicitly mislead a consumer if consumers would ordinarily identify the source of the product by the mark itself, and the junior use was sufficiently similar to the senior use of the mark to create confusion. The court contrasted the honey badger cards with earlier works found to be protected by the First Amendment. Those included the song “Barbie Girl” by the Danish band Aqua, a 1997 pop hit that parodied values the songwriter associated with Barbie dolls. (Despite pre-dating YouTube, “Barbie Girl” is vastly more popular than the honey badger video, garnering more than 568 million views.) The court also distinguished the use of a name similar to that of a trademark-protected name for a club in East Los Angles in the video game Grand Theft Auto: San Andreas. The court said these junior users utilized the marks in different ways than the senior user—no one would think Mattel produced the “Barbie Girl” song, nor would anyone think a sophisticated video game originated from a small Los Angeles club. The appellate court decided there was a jury question as to whether use of the phrase “honey badger don’t give a s- - -” was explicitly misleading. Defendants’ use of the phrase without other text and evidence that consumers rely on marks inside of cards to identify their source both suggested the explicitly misleading criterion was satisfied. A jury could conclude defendants used the phrase in the same way Gordon did on his greeting cards and added minimal artistic expression, leading to liability. On the other hand, the court noted that the defendants used slight variations on the phrase and included their website on the back of the cards, which could lead a jury to find in their favor. The case now goes back to the trial court. Absent settlement or a loss on other grounds, one federal jury will be lucky enough to enjoy (or endure) an amusing take on wild honey badgers, their athletic and eating habits, and what it all means for the sale of greeting cards.

Avid readers or this blog know that the FTC spends as much time on Instagram and other social platforms as your favorite millennial, but who knew that the SEC also spends it’s working hours perusing posts on popular social media sites looking at influencer advertising? Now, you do. Late last month, the Securities and Exchange Commission announced a settlement with DJ Khaled and Floyd Mayweather Jr. for failing to disclose payments they received for promoting Initial Coin Offerings, known as ICOs, on their social media accounts. Mayweather was paid some $300,000 by three separate ICO issuers to promote the crypto currencies, while DJ Khaled was paid $50,000 by a single issuer.  The pair made Instagram, Twitter, Facebook and YouTube posts promoting the ICOs to their millions of followers, but failed to make any mention of their status as paid influencers.  As we’ve told our loyal readers over the years, the FTC Endorsement Guides are pretty straightforward on this subject: if there is a ‘material connection’ between an endorser and the marketer of a product – in other words, a connection that might affect the weight or credibility that consumers give the endorsement – that connection should be clearly and conspicuously disclosed, unless the connection is already clear from the context of the communication containing the endorsement. Material connections could consist of a business or family relationship, monetary payment, or the provision of free products to the endorser. Section 17(b) of the Securities Act also requires such disclosures, but the SEC takes it a bit further.  In particular, the Act makes it unlawful to promote the sale of any securities "without fully disclosing the receipt, whether past or prospective, of [any received] consideration and the amount thereof." (emphasis added). SEC Enforcement Division Co-Director Stephanie Avakian noted that “with no disclosure about the payments, Mayweather and Khaled's ICO promotions may have appeared to be unbiased, rather than paid endorsements.” Enforcement Division Co-Director Steven Peikin also noted that “investors should be skeptical of investment advice posted to social media platforms, and should not make decisions based on celebrity endorsements.” Mayweather agreed to pay $300,000 in disgorgement, a $300,000 penalty and $14,775 in prejudgment interest, while DJ Khaled agreed to pay $50,000 in disgorgement, a $100,000 penalty and $2,725 in prejudgment interest. They also agreed not to promote any securities on social media or otherwise for a few years.  And you thought the FTC’s settlement agreements for failing to disclose material connections were tough! So what can you take away from these settlements? Brands and influencers are responsible for making sure that material connections, including payments to influencers, are properly disclosed.  If the product is a security, check the Securities Act – your disclosure obligations go a bit further than #Ad and require full disclosure of the amount of money involved.

On January 14, 2019, the Supreme Court is set to hear oral argument in the copyright dispute Oracle USA Inc. v. Rimini Street, Inc.  The Court will provide guidance on the proper definition of "full costs" under the Copyright Act.  While this may not be the juiciest of copyright issues the Court has grappled with as of late, it is one that calls for clarification given the circuit split on the issue. In a copyright case, there are potentially two "costs" statutes in play.  There is the general "taxable costs" statute embodied in 28 U.S.C. § 1920.  It authorizes the trial court to award costs to the prevailing party related to such things as clerk fees, deposition transcription fees, and similar administrative expenditures incurred during the litigation.  The Copyright Act has its own provision related to costs embodied in 17 U.S.C. § 505.  It provides, in relevant part, that "[i]n any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof” (emphasis supplied).  Some courts have interpreted "full costs" under the Copyright Act to simply mean "taxable costs" under 28 U.S.C. § 1920.  Other courts have held that "full costs" under the Copyright Act means essentially all costs incurred during the litigation by the prevailing party, which brings us to the case that the Supreme Court will review. In Oracle v. Rimini, the trial court imposed a hefty damage award against Rimini for its infringement of Oracle's copyrights.  The trial court also awarded Oracle approximately $12 million in "full costs" under 17 U.S.C. § 505. This included expert witness fees, consultant fees, e-discovery costs and other various expenses, none of which are recoverable under the general "taxable costs" statute.  The 9th Circuit affirmed the trial court's decision.  This sets up a circuit split over the definition of "full costs” as the 8th and 11th Circuits have previously ruled that "full costs" simply means taxable costs and other expenses expressly allowed for under federal law. It is interesting that the Supreme Court took this narrow issue, but it could have large implications for the strength of a copyright plaintiff’s enforcement campaign.  If a plaintiff can recover its “full costs” for litigating, it may increase the pursuit of copyright infringers by also threatening to recover costs, along with experts who specialize in the field and e-discovery vendors.  Of course, § 505 would still be moderated by a court’s discretion (as Oracle argues), but plaintiffs who feel that their case is strong may be more willing to litigate heavily.  This also likely means that willful copyright infringers may have even more to fear than they did before. It will be interesting to hear how the Court considers large requests for expert witness fees, e-discovery, etc., and whether the justices comment on the expense of modern-day copyright infringement litigation.

One of the philosophies of the world-famous Palm restaurant is to treat guests like family. That philosophy may need to be re-examined in light of a recent decision by the New York Supreme Court in Ganzi v. Ganzi, a case involving the families behind the renowned restaurant empire (for those of you not from the Empire State, the Supreme Court in New York is the trial-level court). Following a non-jury trial, Justice Andrea Masley of the Commercial Division found that Walter Ganzi, Jr. (Wally) and Bruce Bozzi, Sr.—grandchildren of the Palm’s founders—breached their fiduciary duties to two family-held corporations in part by issuing below-market license agreements for use of the Palm IP to restaurants and other entities owned by Wally and Bruce. The court awarded damages exceeding $73 million, which could balloon to over $120 million after accounting for interest and attorneys’ fees. The first Palm restaurant was opened in New York City in 1926 by Pio Bozzi and John Ganzi. The Palm IP includes various trademarks and service marks, as well as design and décor elements of the restaurant, including the display of photographs and caricatures. That IP has been put to great use by Wally and Bruce, who have an interest in other Palm restaurants that have opened around the world for the past 45-plus years. Wally and Bruce have built an empire through these “New Palms,” which collectively grossed $1.5 billion from 2006-2017. As revealed through the lawsuit, however, this empire was built in part on improper self-dealing by Wally and Bruce for which Wally’s cousins have now held them to account. The original Palm restaurant was owned by Just One More Restaurant Corp. (JOMR), which also owns the Palm IP. The land on which the original Palm was located was owned by Just One More Holding Corp. (JOMH). Over the years, majority ownership in JOMR and JOMH passed down to Wally and Bruce. Wally’s cousins Gary Ganzi, Claire Breen, and the estate of Charles Cook (another of Wally’s cousins) all hold minority shares in both JOMR and JOMH. After learning that JOMR actually owned the valuable Palm IP, and that it had been licensed for next-to-nothing, they sued Wally and Bruce in 2012 on behalf of themselves and derivatively on behalf of JOMR and JOMH. The trial involved three derivative claims for breach of fiduciary duty and one claim for diversion of corporate opportunity, all arising from three distinct courses of self-dealing by Bruce and Wally. First, JOMR entered into 54 license agreements in 2007 and 2011 with the New Palms through which the Palm IP was licensed for a mere $6,000 per year—the same price at which the Palm IP had been licensed for the first New Palm in Washington D.C. in 1972. Second, for $12,000 a year, JOMR entered into a license agreement with a management company owned by Wally and Bruce, permitting that company to sub-license the Palm IP to third parties, which it did at market rates. Those sub-licenses resulted in the establishment of a Palm restaurant at JFK airport, the creation of Palm-branded household goods for retail stores, and millions in sub-licensing fees for the management company. Third, JOMH leased the real estate where the original Palm was located to JOMR at below market rates. All of these actions were taken without the knowledge of Wally’s cousins, the minority shareholders. In fact, little to no corporate formalities had been observed since the 1970s. As the court put it, Wally and Bruce “treated JOMR as their own without any regard to the other shareholders.” In finding in favor of JOMR on the first claim for breach of fiduciary duty, the court noted that the 54 license agreements constituted a “textbook example of fiduciary misconduct” because those agreements “grossly” favored the New Palms (and thus Wally and Bruce), over JOMR, and deprived JOMR of fair market value for the Palm IP. The fair market value should have been based upon the revenues of the New Palms, and the court credited expert testimony that a royalty rate of five percent was appropriate, entitling JOMR to more than $68 million, plus interest. The court also declared all 54 of the licenses between JOMR and the New Palms as void, and enjoined Wally and Bruce from further harming JOMR through below-market licensing of the Palm IP. The second claim for breach fiduciary duty and the claim for diversion of corporate opportunity both arose out of the license agreement with Wally’s and Bruce’s management company. The court held that the license agreement was a “plainly self-interested transaction,” and noted that “[a] more obvious example of the breach of a fiduciary’s duty of loyalty is difficult to envision.” The court ruled that JOMR was entitled to $3,146,995 for these claims, which it calculated by subtracting the $12,000 per year that JOMR received from the management company from the sub-licensing revenues it earned through its deals pertaining to the JFK airport Palm and the branded household goods. The court also found in favor of JOMH based on Wally and Bruce undervaluing the real estate at which the original Palm was located. JOMH had charged JOMR $63,233 annually in rent for a property that should have commanded $223,000 in annual rent as of late 2006. JOMH was thus entitled to $1,742,000 in damages. Finally, the plaintiffs were awarded their attorneys’ fees under N.Y. B.C.L § 626(e). Counsel to Wally and Bruce has indicated that they intend to appeal the decision. It is notable to remember that, because this was a derivative action, although the damages award is sizeable, the damages are owed not directly to the plaintiff cousins, but instead to JOMR and JOMH, in which Wally and Bruce are still the majority shareholders. Nevertheless, following the award and the voiding of the license agreements, JOMR—and the cousins’ minority positions in JOMR—will increase in value significantly. Putting the family dynamics aside, the most interesting result of this case from an IP perspective is the court’s adoption of a five percent royalty rate as fair market value for IP licenses in the context of the hospitality industry. Licensors and licenses of similar business both should be aware of this precedent when determining fair market value for such IP.