The TMCA

On 12 September 2018, the EU Parliament adopted a revised draft of the directive on Copyright in the Digital Market. The proposed legislation includes some significant changes to the copyright regime and a couple of surprise additions introduced in the last minute by the EU Parliament. These issues will spark much debate in the months to come, particularly surrounding the likely impact of these reforms on the way content is shared, used, disseminated and published on the internet. Though this is a significant step in the legislation process, there is yet a long way forward. Firstly, the draft legislation itself now must be considered by the European Council representing each of the member states of the European Union. This may result in many further changes to the text, possibly significant ones, before the legislation is passed into law. Then, once the directive becomes law, it will have to be implemented through domestic legislation in each member states of the EU. Only then will the full practical impact of the provisions become apparent. The proposed legislation covers several different issues. It introduces modifications to the list of exceptions to copyright protection particularly in the areas of education and research and also creates special new exceptions to copyright protection to allow for data mining activity premised on access to large amounts of copyright materials. But the main emphasis in the draft directive is on reinforcing copyright and helping rightholders protect their works against unauthorised exploitation, particularly in the digital space. Some argue (particularly in the context of Article 13 that deals with the prevention of infringements by content sharing platforms) that this will translate into forcing technology platforms to apply filters and censorship in order to proactively prevent infringing content being shared by their users, which internet activists argue would stifle free speech. However, the legislation is much more nuanced than that and clearly seeks to put in place safeguards against over-protection. Further, the text sets out high-level ideas that will have to be broken down into practical legal rules. This will only happen when the directive is implemented by EU member states. It is very difficult at this stage to predict how some of the principles laid out in the draft directive will be implemented and what impact they will have on the way content is used on the internet. The draft directive also seeks to create new rightholders. Publishers will have their own independent rights equivalent to those of authors, for a limited protection period of 5 years. This is intended to ensure that publishers can claim a fair share of the benefit from the dissemination of their publications by third parties through the internet. The revised text emphasises in this context that copyright protection will not prevent the free use of hyperlinks that lead to protected content published online. However, the new rights of publishers may force search engines and other digital players to pay royalties, for example, when published content comes up in search results. The draft legislation, however, is not all good news for publishers. It introduces radical ideas for the protection of authors who grant exclusive licences to publishers. According to the proposal, authors who license their works to publishers will have statutory rights to receive annual detailed reports regarding the exploitation of their works and will have the right to revoke exclusive licences granted to publishers if the work is not properly exploited. Very similar ideas were recently adopted into law in Germany. The proposal was added only very recently to the draft directive by the EU Parliament. It was not included in the original draft directive published in 2016 by the EU Commission. Query whether other EU member states will agree to adopt a similar protective approach across the EU. The publishing industry, which is set to enjoy the creation of a special copyright protection for publishers, will surely balk at the idea of facing new onerous reporting requirements and potential disruption to their portfolios of works with many of their licences set to become revocable overnight. Another surprise addition in the text of the directive is the novel idea that organisers of sports events will enjoy copyright protection for those events. Sports events do not generally attract copyright protection, although organisers of those events generate significant revenues from selling broadcasting rights (which they can do largely by controlling access to the events). It is not entirely clear why the EU Parliament decided that the sports industry requires additional protection by creating a special type of copyright for sporting events. The draft legislation offers no clue as to what that right might consist of. The new draft Copyright in the Digital Market directive opens up many questions and may indicate significant reforms to come. The legislation, however, is still a long way from being the final product.  Stay tuned to the TMCA for more updates.

Did you know that there are likely billions of unprotected IP works in nearly every consumer electronic sitting on your desk or held in your hand? Today, it seems like every electronics device maker is announcing there are something like seven billion transistors on a single “chip” that measures just a few nanometers, just small enough to easily fit onto your thumb (and intended to be used in a light weight smartphone or similar device).  These new chips have central processing units (CPUs to run the device), graphics processing units (for the visual aspects), and now additional units for machine learning and AI. Technology like this has rendered the little-remembered “mask work” IP right essentially obsolete, which was a new right created by the Semiconductor Chip Protection Act of 1984 to protect the fabrication process for chips through the use of a “mask”.  Back in the old days (of technology), the 1970s, there were only a small amount of “chips” powering these electronic devices, which took years to create, making their creators want some IP protection for all of that money and creativity spent on such designs. At that time, some companies were trying to knock off the “mask” designs of these chips by reverse engineering them, and then selling them at a fraction of the price.  This infringement fell outside the realm of patent law because these pirated designs were not protectable inventions, but rather designs etched onto the chips of already patented devices. But the designs also fell outside the scope of traditional copyright protection, because they were functional and not aesthetic. And trade secret protection failed as well once the design was introduced to the public. After much lobbying by the semiconductor industry, Congress settled on creating a new type of copyright for a “mask work” for these semiconductor designs. In 1984, Congress passed the Semiconductor Chip Protection Act (“SCPA”) and created an entirely new IP right, the first new IP right in 100 years. See 17 USC, Chapter 900. Yet, according to a study from 2012, there were only a little over 1000 mask works registered with the Copyright Office between 2008 and 2012, a fraction of the other types of IP works registered or granted during that time. (See “Copyright Registrations: Who, What, When, Where and Why”, Oliar, Patterson, Powell, Texas Law Review, Vol. 92:1225). Only one federal case, Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555 (Fed. Cir. 1992), ever analyzed the statute in detail and found a violation. Brooktree did upheld a substantial jury verdict under the SCPA, but only where there was a clear ability to compare the protected work and the infringing chip. Mask works have, in practice, proven to be a footnote to copyright law. Technology simply moved too fast to make the SCPA relevant.  Modern smartphones are a demonstration of why this IP right is obsolete.  It would be technically impossible to reverse engineer the “mask” of a smartphone “system on a chip” containing seven billion transistors that fit on your thumb in the time necessary to merit an SCPA violation, which would be similar for virtually all of the chips in electronics these days.  And even pirating a small portion of the design would be useless because the chips are so specialized to be used for a specific company or product that such a design would not be commercially viable.  For that reason, the SCPA never quite found its audience. Chip designers, however, are not without recourse under the IP laws. Many aspects of chips’ designs remain protected by patents, and have been litigated extensively over the years. And any piracy that concerned the industry would probably fall under trade secret law, given that most companies choose to keep designs and aspects of their processes secret. Relatedly, companies do not typically disclose their designs to the public under the SCPA, which is why there are so few mask work registrations. The SCPA appears to be destined for the dustbin of history.

If you have encountered any issues accessing WHOIS information, the International Trademark Association (“INTA”) wants to hear from you. Due to changes in privacy law brought on by the European Union’s General Data Protection Regulation (“GDPR”), it is becoming more difficult or impossible to access once-commonly available public WHOIS information, which consists of registrant information for domain names. We have written on this topic in more detail here and here. Here’s the short story: because providing WHOIS information risks violating GDPR, which could result in the imposition of potentially catastrophic fines, some domain name registrars are opting not to provide WHOIS information, despite requirements by the Internet Corporation for Assigned Names (“ICANN”) that registrars provide the information. As a result, it is becoming more difficult for rights holders to identify and take action against owners of domain names containing infringing materials. To help track and catalogue these issues, INTA has created a dedicated email account at whoischallenges@inta.org. Those encountering WHOIS problems are encouraged to send the following information to INTA: Where the problem is occurring (country, location, or jurisdiction). What the nature of the problem or case is (a procedure, a piece of evidence, or a venue). Anonymous descriptions of the actors or people involved (provide industry and/or non-specific information about the actors involved). INTA plans to use this information as part of its advocacy efforts. So if you have encountered any issues, be sure to alert INTA. It is worth noting that it is still possible to file arbitration proceedings against infringing domain names, using the Uniform Domain Name Dispute Resolution Policy (“UDRP”) or Uniform Rapid Suspension System (“URS”), even if the WHOIS information for the domain names is not available. According to the World Intellectual Property Organization (“WIPO”), a complainant should simply list the registrant information exactly as it appears in the WHOIS report, even if that information consists only of the word “Redacted.” Once alerted of a UDRP or URS proceeding, ICANN-compliant registrars are required to give the arbitration provider the full, unmasked registration data for the domain name(s) covered by the complaint. The complainant typically would receive this information and then, if necessary, may amend or withdraw its complaint based on the information revealed.

Last Friday, the 9th Circuit Court of Appeals finally put to bed a copyright dispute that many viewed as nothing short of bananas.   Naruto v. Slater—dubbed the “Monkey Selfie” case—raised the novel (if not bizarre) question of whether a non-human primate has standing to sue for infringement under the U.S. Constitution and the Copyright Act. In case you have been monkeying around and have not kept up on this case, here is a quick snapshot of what happened and how we got here:  Naruto is a “crested macaque,” which as near as I can tell means Naruto is a monkey.  At all times relevant hereto, Naruto lived in a wildlife reserve in Indonesia.  Back in 2011, Wildlife photographer David Slater—with camera in hand—visited Naruto’s island habitat.  Slater left his camera unattended.  It was then snatched up by Naruto who ended up taking a number of “selfies.”  Slater returned to the U.K. and published a book containing the Naruto selfies. We eventually come to find out that Slater did not obtain a copyright assignment or even a license from Naruto! PETA catches wind of this and, as a “next friend” of Naruto, sues Slater on Naruto’s behalf for copyright infringement in the U.S. District Court for the Northern District of California.   Naruto sought injunctive relief, disgorgement of profits, actual damages, and attorneys’ fees.  (Side note:  Naruto was overreaching a bit on the request for attorneys’ fees because he did not register his selfies before the act of alleged infringement by Slater). The trial court found the copyright claim to be too far of a walk in the wild, and dismissed the case.  The 9th Circuit affirmed.  The majority analyzed three issues: (1) whether PETA had standing to bring the case on behalf of Naruto (answer: “no”); (2) whether Naruto himself had Article III standing (answer: “yes”); and (3) whether Naruto had statutory standing under the Copyright Act to bring the claim (answer: “no”).  In addressing this final issue of standing under the Copyright Act, the majority noted there were “several provisions” of the Act regarding copyright transfers from the “author” to “children” that suggested that animals don’t have standing.  There are arguably several other provisions the majority could have cited.  For example, each copyright application needs to be “certified” by the claimant. See 17 U.S.C. § 409.  How exactly would Naruto go about making such a certification?  Moreover, a copyright plaintiff (in certain circumstances) is entitled to elect between statutory damages and actual damages.  See 17 U.S.C. § 504(c). How would we know if Naruto made such an election? In any event, the concurring opinion argued that the whole case was nothing short of a circus and because PETA had no “next friend” standing the case was frivolous and should have been dismissed without any further discussion or analysis. That might have been the end of the matter for the 9th Circuit, but an “unnamed Ninth Circuit judge” requested a rehearing en banc, which was ultimately denied on Friday by a vote of the entire Court.  With that final act, it is now safe to say that “monkey see, monkey sue,” simply will not do at least in the 9th Circuit.   But as George Carlin once said, “Just because you got the monkey off your back doesn’t mean the circus has left town.”  For all we know, the circus just might be headed to Washington D.C.

Last month we blogged about Falkner v. General Motors Co.—a federal court action filed earlier this year that may decide whether graffiti artists can enforce their copyrights in graffiti appearing on publicly-viewable buildings when photographed and distributed without their consent. As we detailed in our post, this issue raises novel and complex legal questions. On August 27, 2018, Judge Wilson of the Central District of California heard oral arguments on GM’s motion for summary judgment. As we wait for the court to rule, we bring you up to speed on the current state of play. The parties’ summary judgment briefing highlighted a key ambiguity at the center of the dispute: neither the Architectural Works Copyright Protection Act (“AWCPA”) nor the Ninth Circuit decision interpreting it clearly resolve whether pictorial, graphic, or sculptural (“PSG”) elements can be freely photographed after they are incorporated into architectural works. Consistent with that ambiguity, the court’s questions at oral argument were primarily directed to Leicester v. Warner Bros.—the Ninth Circuit opinion that both Falkner and GM cite for competing propositions regarding the status of PSG elements like the graffiti at issue. In fact, the court stated that “it’s somewhat difficult to discern what the holding is from the case” before openly grappling with whether or not it resulted in binding precedent. The court struggled with the same issue that emerged as unresolved in the parties’ briefing: did the doctrine of conceptual separability survive the 1990 enactment of the AWCPA and, if so, is it relevant here? GM’s counsel attempted to resolve the issue by arguing that regardless of Leicester’s holding, conceptual separability is irrelevant because the graffiti in question cannot be separated from the building. Instead, he focused on the AWCPA’s intent, characterizing the statute’s exemption allowing photographs of architectural works and any incorporated PSG elements as a “rule of practicability.” He thus hinged GM’s position on what amounts to a policy argument, insisting that “the person taking the picture shouldn’t need a copyright expert standing next to them to decide whether they can do that.” GM’s counsel maintained that the AWCPA and Leicester require the court to grant GM’s motion for summary judgment as a matter of law and policy, and implied that all photographs of buildings that depict PSG elements are exempt from copyright infringement suits because it would be impracticable to find otherwise. But when the court pressed GM’s counsel on the AWCPA’s impact on pre-AWCPA copyright protections and Leicester’s failure to clearly resolve whether conceptual separability survived the statute’s enactment, GM’s counsel softened his position. Instead of arguing that a bright-line rule exempts all photographs of architectural works without exception, he proposed a novel interpretation by arguing that conceptual separability survives “only to the point that if you can find a way to isolate the mural and take a picture of the mural, then Mr. Falkner can get his copyright, and he can be protected against people just selling copies of the mural by themselves.” The court appeared skeptical of this interpretation, noting its absence from the Ninth Circuit’s analysis in Leicester: “I mean, why didn’t they just say what you said and call it a day?” Undeterred, GM’s counsel argued that “two of them did,” adding that “it’s not our position that conceptual separability is dead” if graffiti can “literally” be separated from the architectural work. GM’s counsel did not offer a framework for putting this proposal into practice, and his efforts to ground it in Leicester only served to underscore that decision’s ambiguity. Further advancing the view that Leicester may be too ambiguous on the question of conceptual separability to act as binding precedent, Falkner’s counsel agreed that Leicester may be binding on the court, only to argue that its holding is the opposite of the one identified by GM’s counsel. In short, neither the parties’ arguments nor the court’s questions suggest which way the court will rule on GM’s pending motion for summary judgment. The only thing that is clear at this point is that Leicester’s status as binding precedent on the question of conceptual separability is in doubt. And regardless of the outcome, the court’s ruling in Falkner v. General Motors Co. may well give the Ninth Circuit a chance to clarify the scope of the AWCPA’s photography exemption as it applies to separately copyrightable works embedded in architectural works.

A recent Second Circuit decision in a case involving two companies using the ROGUE mark for apparel sets the record straight on what it means to have common law priority of rights in a mark for a category of goods in different trade channels. Excelled Sheepskin & Leather Coat Corp. v. Oregon Brewing Company (2d Circ. July 27, 2018). The opinion confirms that a senior user of a mark for a category of products has protectable prior rights across a wide range of trade channels even if it was not the first user of a mark in each and every marketing channel. Oregon Brewing Company (“OBC”) was founded in 1988 and first sold ROGUE-branded clothing, including t-shirts, hats, sweatshirts and aprons, in about 1989, as an adjunct to its primary beer and brewing business. The apparel items were sold through the United States in its pubs, brewery, bed and breakfasts and hop farm. Starting in the mid-1990s and continuing through the early 2000s, OBC expanded its trade channels to beer festivals throughout the country, mail order nationwide and to retailers like Fred Meyer, Cost Plus and Whole Foods. In 2011, OBC began selling its ROGUE clothing through department and “clothing-only” stores such as Urban Outfitters, Nordstrom and Sears. Excelled, a company founded in 1927, first began selling leather clothing under the ROGUE brand in 2000. Following the 2008 recession, it expanded its product line to include more non-leather products, and began selling a variety of clothing and footwear items bearing the ROGUE mark in department and clothing-only stores like Nordstrom, Saks and Macy’s as well as through websites, including its own. Both Excelled and OBC applied to register the ROGUE mark for clothing in 2004 and 2005, respectively. Ultimately, the two parties entered into a consent agreement that enabled OBC to secure a registration of ROGUE for all clothing “excluding jackets, coats and skirts” with a further narrowing requested by the USPTO to specify “sold primarily in the trademark owner’s brewpubs and website.” OBC consented to Excelled’s registration of ROGUE for “jackets, coats and skirts” based on Excelled’s agreement to delete shirts, pants and vests from its pending application. Excelled’s ROGUE mark ultimately registered for “clothing, namely, coats, jackets, vests, shirts and pants” -- without the deletions to which it had allegedly agreed with OBC. In 2012, Excelled sued OBC for trademark infringement arising from OBC’s sale of ROGUE-branded apparel in department and clothing-only stores beginning in 2011. OBC asserted counterclaims for infringement based on Excelled’s sale of t-shirts, sweatshirts and hats beginning in 2009 and for cancellation of four of Excelled’s federal trademark registrations on the ground of fraud. On cross-motions for summary judgment, the district court granted judgment in favor of Excelled on its trademark infringement claims, dismissed OBC’s counterclaims, awarded damages and fees and entered an injunction against OBC’s sale of ROGUE apparel except where its branded beer is sold as a complement to its brewing and beverage business. The essential premise of the district court’s ruling was that Excelled had priority of rights in the ROGUE mark in department and clothing-only stores, since Excelled had exploited that sales channel first, even though Excelled was not the prior user of the ROGUE mark on clothing in other channels. The district court further concluded that OBC’s rights in the ROGUE mark for clothing were limited to “sales as complements to and for promotion of its beer business.” The Second Circuit held that the district court had gotten the rules of trademark priority all wrong. As the court explained, OBC had been continuously selling ROGUE-branded clothing throughout the United States since 1989. “Even if those uses were intended primarily to support OBC’s ROGUE trademark for beer, they were nonetheless bona fide continuous nationwide sales in significant quantities and were sufficient to establish a protectable priority in use of the mark for the sale of such goods.” Even more importantly, while OBC’s first use of the ROGUE mark for clothing did not give it exclusive rights to expand into unrelated good or services, OBC’s rights were not limited to the types of stores in which it had exploited the mark: “The law does not limit the owner’s trademark rights to the types of stores in which it has sold, leaving the mark up for grabs in any other types of stores.” The fact that OBC did not sell its ROGUE clothing prior to 2011 in department and clothing-only stores “does not mean that a new user was free to usurp OBC’s priority in such stores.” As the court emphasized, the dispute at hand did not involve OBC undertaking to use the ROGUE mark on goods for which Excelled had established priority. “OBC maintained its senior common law rights against Excelled’s intervening junior use of the mark for the same items of ROGUE-branded clothing that OBC had sold continuously since 1989.” Finally, the appellate court underscored that Excelled’s federal registrations did not change the analysis. The district court “reasoned incorrectly” that Excelled’s federal registration conferred any substantive trademark rights against infringement beyond the common law rights acquired through use of the mark. Accordingly, Excelled’s registrations did not confer priority over OBC’s prior common law use rights. The reversal of fortune for Excelled was wide-ranging: the Second Circuit reversed the grant of summary judgment to Excelled on its infringement claims, the award of an injunction and damages and fees against OBC. The court further reversed the district’s dismissal of OBC’s counterclaims for infringement and cancellation of Excelled’s trademark registrations and remanded those claims for trial. The decision is interesting not only for its clarification of the rules of common law trademark priority, but also for the court’s robust interpretation of OBC’s rights in the ROGUE mark for apparel based on nationwide use in expanded trade channels, even though the use of the mark on clothing items had originated as a promotional vehicle for OBC’s primary beer and brewing business.

In what could be a harbinger of things to come for business models negatively impacted by the throttling of data flow under the European Union’s General Data Protection Regulation (“GDPR”), Nielsen Holdings was named in a putative class action Complaint on August 22, 2018, for allegedly misrepresenting the anticipated effects of GDPR on Nielsen’s business model.  Importantly, the class action takes aim not at Nielsen’s ability to comply with GDPR, but rather the effects of GDPR on the big data platforms used by Nielsen.  Nielsen provides consumer market analytics, particularly regarding digital media and e-commerce.  When big data platforms and associated analytic providers began restricting access to consumer data in order to comply with GDPR, it apparently negatively impacted Nielsen’s business model.  Those effects surfaced in Nielsen’s latest Q2 financial report, causing its stock to drop by more than 25 percent, and giving rise to the class action claims. The claims are based on Nielsen’s downplaying of anticipated changes in the privacy space, as initially provided by the company’s CEO, who stated, “For measurement, we still have the access to all the data that we need for our measurement products including our relationship with Facebook.”  When Nielsen released its Q2 report, however, the company conceded, “Our results are significantly below our expectations as revenues were impacted by GDPR and changes to the consumer data privacy landscape.  We have several hundred clients and data partners in this space and market changes have been disruptive.”  In the Q2 report itself, Nielsen acknowledged it had missed its targets, and downgraded its EBITDA margin growth, net income, and free cash flow. The claims are hardly a slam dunk.  Beyond the traditional challenge of linking the difference in anticipated versus actual performance to a specific event like the ripple effects of GDPR, the plaintiff class will have to prove that Nielsen and its CEO knew—at the time it issued its public statements—that Nielsen likely would in fact be materially and negatively impacted by the GDPR’s effect on the big data ecosystem, particularly the availability of data necessary for Nielsen’s model.  Critical to this inquiry will be the actual analysis conducted by or on behalf of Nielsen as to the impacts of GDPR on Facebook and others, and on which Nielsen and its CEO may have relied in earlier statements designed to reassure investors. The important take-away from these claims, certainly for publicly traded analytical services companies likely to be affected by changes in the privacy space but perhaps even others as well, will be to consider carefully any public statements about the impacts of GDPR and similar privacy initiatives in the US and abroad.  Establishing that Nielsen knew its data sources were restricting access in a manner that would affect Nielsen’s business model, and that Nielsen failed to reflect that knowledge in its public statements will be required to prove claims for violations of Sections 10(b) and 20(b) of the Exchange Act (the latter against Nielsen’s individually named CEO and CFO), as well as Rule 10b-5 violations. Many companies, including those squarely in the wheelhouse of new privacy requirements, rolled out new privacy policies and practices only moments before GDPR took effect, or are still in the process of doing so.  Analysts are asking more informed and challenging questions about the impact of GDPR.  While ‘I honestly don’t know’ may be an accurate response and avoid liability for wrongly predicting the financial fallout from GDPR and similar initiatives, it may not be much comfort to investors.

In three separate opinions, a panel of the Ninth Circuit revived a pro se plaintiff’s claim that defendants’ television series “Empire” infringed upon his copyrighted “treatment” for a television series entitled “King Solomon.”  A treatment is a brief, written work that embodies the writer’s ideas for a show.  The district court dismissed plaintiff’s complaint concluding he had failed to allege facts showing Empire had copied protectable elements of his treatment for King Solomon. While the majority of the Ninth Circuit agreed that plaintiff had failed to allege facts showing coping of protected elements of the treatment, it concluded the district court erred by not granting leave to amend.  The majority concluded leave to amend was necessary because plaintiff could have alleged facts showing a striking or substantial similarity between the two works, and additional facts establishing a “plausible chain of events” whereby defendant had access and opportunity to copy plaintiff’s work. In a concurring opinion, Judge Wardlaw also focused on the substantial similarity element of an infringement claim, and argued that it was “virtually unheard of” to dismiss a complaint for lack of substantial similarity at the pleading stage before any discovery.  Judge Wardlaw also wrote that judges are not “trained in the process of developing a short treatment into a fully developed television show,” and suggested that “[d]iscovery and the expertise of persons who understand the landscape of television at the time King Solomon was written would have greatly informed the decision as to substantial similarity.”  Judge Wardlaw also opined that leave to amend was appropriate. By contrast, in her dissent, Judge Nguyen acknowledged that plaintiff could potentially amend to allege copying, but argued that copying alone is not enough.  Instead, a plaintiff must also allege facts establishing “unlawful appropriation,” or copying of protectable elements.  Judge Nguyen opined that whether an element of a work is “protectable” is a question of law for the court, and that while expert testimony and discovery could be useful for establishing what similarities exist between two works, the court alone decides what elements of the work are protectable.  The district court’s role, in the first instance, was to "filter out" the unprotectable components from the protectable, and then decide whether there were any similarities between the protectible expression and the allegedly infringing work.  Both works were before the district court and the Ninth Circuit, and Judge Nguyen argued that when the unprotectible ideas were disregarded, there were simply no similarities between the two works as a matter of law. It will be interesting to see where this case goes next.  It is somewhat unusual to have three separate opinions from a three judge panel.  Moreover, the concurring opinion and dissenting opinion are like ships passing in the night.  The concurring opinion contends discovery and expert opinion is relevant to whether plaintiff can establish copying, but does not address whether such additional information is necessary if there are no protectable similarities between the two works.  Similarly, the dissent fails to acknowledge that after a court differentiates the protectable from the non-protectable, a fact question could still exist regarding whether any protectable ideas are strikingly or substantially similar, and whether it would be useful to have expert opinion or discovery on this issue.  The dissension at the Ninth Circuit makes this case potentially ripe for en banc review.  The defendants have filed a request for an extension of time to seek en banc review, which request has already been granted.  

A trademark will be deemed abandoned under Section 1127 of the Lanham Act when the mark’s use has been discontinued “with intent not to resume such use.” Proof of non-use for three consecutive years will give rise to a presumption of abandonment, which can be rebutted by evidence of plans to resume use of the mark. What constitutes sufficient evidence of an intent to resume use of a trademark?     In a recent decision by the Court of Appeals for the Fifth Circuit, the owner of the trademark COWBOY LITTLE BARREL for bourbon was unsuccessful in overturning a jury verdict of abandonment due to insufficient evidence concerning the reasons for the lack of use and plans to resume use. Allied Lomar, Inc. v. Lone Star Distillery, LLC. According to U.S. Patent and Trademark Office records, Allied claimed first use of COWBOY LITTLE BARREL in August 1995. It obtained a registration in 2003 and filed maintenance documents in 2009 and in 2013, alleging current use of the mark in commerce at those times. In 2015, Lone Star Distillery, LLC (now doing business as Garrison Brothers Distillery), filed a cancellation proceeding against Allied’s registration at the Trademark Trial and Appeal Board, triggered by a refusal of its COWBOY BOURBON trademark application. Lone Star contended that Allied had not sold bourbon under the COWBOY LITTLE BARREL trademark since 2009 and that at least one of its maintenance filings constituted fraud on the PTO. Allied then filed suit in the Western District of Texas, asserting claims of trademark infringement, false advertising, false designation of origin and unfair competition against Garrison Brothers and its sales of liquor under its COWBOY BOURBON mark. At trial, Allied’s president testified that it had not sold product under the mark because the company specializes in old, rare and expensive whiskeys and that a lack of sales was due to a bourbon shortage. Garrison Brothers presented evidence disputing Allied’s contention, highlighting inconsistent testimony concerning Allied’s price lists. The end result was a jury verdict in favor of Garrison Brothers. Ultimately, the Fifth Circuit upheld the jury verdict because Allied’s evidence amounted to “a vague, subjective intent to resume use of a mark at some unspecified future date.” What would suffice as evidence of an intention to resume use of a mark?  A 2010 decision of the Court of Appeals for the Federal Circuit addressing a similar issue comes to mind: The Crash Dummy Movie, LLC v. Mattel, Inc. Mattel challenged an application to register CRASH DUMMIES for a line of games and playthings filed by The Crash Dummy Movie, LLC (“CDM”). Mattel based its challenge upon its common law trademark rights obtained through its predecessor-in-interest, Tyco Industries, Inc. Tyco owned several trademark registrations for CRASH DUMMIES trademarks for a variety of products, which the PTO cancelled in 2000 for failure to make required maintenance filings. Tyco sold toys under the CRASH DUMMIES marks through at least 1994 and entered into several licenses for the use of the marks for a broad range of products. In 1995, CDM entered into an option agreement with Tyco to produce a motion picture based on the toys sold under the CRASH DUMMIES marks. That option expired in 1996 and Tyco declined to enter into another option agreement with CDM. Tyco subsequently experienced financial difficulties and began negotiations with Mattel for an acquisition. In 1997, Tyco assigned its trademark portfolio, including the CRASH DUMMIES marks, to Mattel. Due to the size of the acquisition, the two businesses did not fully integrate until late 2004 or early 2005. Beginning in 1998, Mattel worked on developing a new line of toys under the CRASH DUMMIES marks, including researching, developing, and testing the new toys as early as 2001. It ultimately reintroduced the toys into the market in December 2003. In March 2003, CDM filed an application for CRASH DUMMIES for games and playthings, which Mattel opposed. The only issue was whether Mattel had common law trademark rights in the CRASH DUMMIES marks sufficient to challenge CDM’s application. The TTAB concluded that Mattel had rebutted the presumption of abandonment of its common law trademark rights by showing “reasonable grounds for the suspension and plans to resume use in the reasonably foreseeable future when conditions requiring suspension abate.” Mattel was able to rebut the presumption of abandonment arising from the period of non-use through the testimony of its marketing manager and business records that demonstrated product development activities in an effort to actively retool the CRASH DUMMIES toy line. Practical business applications: Keep careful and specific business records about market research, product development plans and relevant business negotiations pertaining to an intent to resume use of a mark if there are periods of non-use of a trademark. Make no public statements about the permanent cessation of use of any trademark unless there is an absolute intent to abandon trademark rights. If plans are uncertain or there is a possibility of resumption, better to characterize any public announcement of the discontinuance of product sales as a hiatus or otherwise temporary or interim.

Is graffiti protectable under the Copyright Act? In principle, yes because it is a graphic art. But graffiti tends to appear on buildings that are visible from a public place, and photographs of such buildings are exempt from copyright infringement suits. So what happens if someone photographs a building that features graffiti, and the graffiti ends up in a marketing campaign—can the graffiti artist bring a claim for copyright infringement? On August 27, 2018, Judge Stephen V. Wilson of the federal district court for the Central District of California will hear oral arguments on GM’s motion for summary judgment in Falkner v. General Motors Co.  His decision is expected to impact graffiti artists’ ability to protect their works under the Copyright Act. Facts Although Falkner v. GM’s policy and legal questions are novel and complex, the underlying facts are straightforward. Falkner—known in the art world as Smash137—is a graffiti artist. Although Falkner has exhibited in museums and galleries around the world, he is known for his outdoor paintings. One such painting is a large mural covering two perpendicular walls of a public parking garage in downtown Detroit, Michigan. Alex Bernstein, an independent photographer, photographed a Cadillac while the vehicle was parked at the same Detroit public parking garage in which Falkner’s mural appears. Part of Falkner’s mural is visible in the background of Bernstein’s photograph. Bernstein submitted the photograph of the Cadillac featuring part of Falkner’s mural to GM, which then used the photograph in an online marketing campaign. Falkner brought two causes of action against GM: copyright infringement and a violation of the Digital Millennium Copyright Act for the falsification, removal, or alteration of copyright management information. GM then moved for summary judgment. We focus on the copyright infringement cause of action here. Legal and Policy Background   Falkner v. GM tests the boundaries of the Architectural Works Copyright Protection Act (“AWCPA”). Enacted in 1990, the AWCPA granted independent copyright protection to architectural works, applicable to buildings created after December 1, 1990. The AWCPA, however, also created an exemption that allows anyone to photograph protected architectural works—and any pictorial, graphic, or sculptural (“PSG”) elements incorporated into them—without liability for copyright infringement. The AWCPA thus avoided turning tourists or photographers into unwitting copyright infringers when they take pictures that include protected architectural works that are publicly viewable. But whether that same exemption also had the effect of eliminating separate copyright protection for independent, creative contributions to larger architectural works (e.g., graffiti) is a question Falkner v. GM may now decide. At first blush, it may seem odd to treat graffiti—which typically appears without input or consent from the building’s architect—as equivalent to a design element that was made in connection with the building itself. But whether that distinction is relevant under the AWCPA remains uncertain. Indeed, per GM, graffiti is no different from any other design element. In support of this view, GM primarily relies on Leicester v. Warner Bros., a Ninth Circuit opinion from 2000 that found photographs of a courtyard and adjacent towers were exempt from copyright infringement under the AWCPA. The majority held that the pictorial representation exemption was intended to be broadly construed to cover all elements of an architectural work “so that publicly visible buildings could freely be photographed.” Leicester, however, offers uncertain guidance: the panel split three ways into majority, concurring, and dissenting opinions. And, as discussed in more detail below, Leicester fails to clearly answer whether the AWCPA eliminated or retained copyright protection for conceptually-separable PSG elements attached to architectural works. GM nonetheless relies on Leicester to argue that Falkner’s copyright claim is barred, contending in its reply brief that allowing photographers to freely photograph buildings was an objective of the AWCPA: “Joe Public should not be required to research the history of the building and hire architectural experts before he snaps a photograph.” Because the exemption is intended to protect the public from unwittingly infringing copyrights while taking pictures of building that are viewable in public space, GM argues that it must be interpreted to allow photographs of embedded PSG elements regardless of whether or not they are separate from the architectural work. A competing policy question is whether graffiti—or any other independent PSG element—should retain copyright protection after it is made part of an architectural work. Falkner points out that pictorial works such as his mural have always been protectable under copyright law, and argues that the AWCPA was not intended to remove that protection where the artist did not collaborate with the architect, and where the mural plays no functional or architectural role. Falkner argues that if GM’s view prevails, all graffiti that exists on a building—that is, most graffiti—will lose copyright protection from infringing photographs. Falkner’s argument thus echoes Leicester’s dissent, which noted that the AWCPA was not designed to eliminate copyright protection for independent, creative contributions to architectural work. Legal Issues Whether or not the pictorial representation exemption bars Falkner’s copyright claim against GM hinges on two questions: Is a public parking garage an “architectural work”? Did Leicester hold that the pictorial representation exemption applies to all PSG elements of an architectural work, including those that are “conceptually separable”? Is A Public Garage An “Architectural Work”? A threshold question for the Court to decide is whether the parking garage in the photograph is an architectural work. If it is not, then the AWCPA does not apply and the statute’s pictorial representation exemption would not bar Falkner’s copyright infringement claim. Falkner insists that the garage is not an architectural work because it is a utilitarian structure that contains no protectable creative elements. Falkner cites statutory language, legislative history, and case law to argue that covered “architectural works” are limited to “buildings,” and the definition of “buildings” excludes non-habitable utilitarian structures such as bridges, walkways, tents, recreational vehicles, mobile homes, and boats. Thus, under Falkner’s view, the pictorial representation exemption does not apply because the structure on which the mural is painted is not an architectural work. In support of this argument, Falkner relies on Gaylord v. United States, which affirmed a lower-court’s finding that the Korean War memorial is not an architectural work, at least in part because it is not intended for occupancy. See 595 F.3d 1364, 1371 (Fed. Cir. 2010). GM counters that the statute’s definition of protected “architectural works” uses the word “building,” which is undefined. Turning to the legislative history, GM argues that the term building also covers structures that are used, but not inhabited, by human beings—e.g., churches, gazebos, and garden pavilions. GM chose not to address Gaylord v. United States in its reply, and cites no authority to support its view that a parking garage is an architectural work. That said, at least one court has considered this question before. In Moser Pilon Nelson Architects, LLC v. HNTB Corp., the court found a parking garage to be a building within the meaning of the AWCPA, noting that it is “surely a permanent and stationary structure as much designed for human occupancy as a gazebo or a garden pavilion.” 2006 U.S. Dist. LEXIS 58334, *17-18, 80 U.S.P.Q.2D (BNA) 1085, 1091, Copy. L. Rep. (CCH) P29, 235. Is “Conceptual Separability” Relevant? PSG elements incorporated into a building are subject to the same pictorial representation exemption as the underlying architectural work. But whether the exemption applies if the PSG element is “conceptually separable” from the architectural work remains unsettled. The doctrine of conceptual separability predates the AWCPA, and refers to copyright protections retained by PSG elements that were embedded in buildings which were themselves not protected under the copyright laws at the time. Both Falkner and GM rely on Leicester to reach opposing conclusions regarding the relevance of conceptual separability following enactment of the AWCPA. GM argues that Leicester decided that the conceptual separability doctrine does not apply to PSG elements embedded in architectural works. Specifically, GM argues that although the Leicester majority found that the PSG element in that case was not conceptually separable from the architectural work in which it appeared, the concurring opinion went further and stated that conceptual separability does not apply to the AWCPA’s pictorial representation exemption. (Somewhat confusingly, GM argues that the majority agreed with the concurring opinion’s view on this point.) In effect, GM argues that the majority and concurrence agreed that the AWCPA extinguished any independent copyright protection covering PSG elements embedded in buildings, regardless of whether or not the PSG element in question is conceptually separate from the building itself. Falkner disputes GM’s interpretation of Leicester and its contention that the AWCPA extinguished copyright protections for conceptually separate PSG elements. Like the dissent in Leicester, Falkner contends that there’s no indication that Congress intended the AWCPA to extinguish rights that existed before its enactment. Falkner thus argues that even if the parking garage is an architectural work, photographs of his mural are not covered by the pictorial representation exemption because the mural is conceptually separate from the parking garage. Conclusion On August 27, 2018, Judge Wilson will have the opportunity to decide whether graffiti artists can bring copyright infringement claims against those who photograph their work when it appears on buildings. We’ll report on the decision as soon as it becomes available.

Back in February, we covered the trademark dispute between the U.S. Army and the Las Vegas Golden Knights professional ice hockey team.  As we predicted, the Army and the Golden Knights have now settled that matter by executing a co-existence agreement allowing both parties to continue using their respective marks. Although that dispute is now resolved, and hockey stars are in the midst of their well-deserved off-season breaks, professional hockey continues to make trademark news this summer.  On July 23, the National Hockey League filed a federal lawsuit, accusing a group of Illinois-based companies and their owner of trademark infringement, false association, dilution, copyright infringement, and unfair competition.  According to the NHL’s complaint, defendants The Hockey Cup LLC, ABC Stein LLC, and A&R Collectibles, Inc. are all owned and managed by one Roger Dewey, who is also named as a defendant in the lawsuit.  The NHL alleges that the “unauthorized use of NHL intellectual property is the very foundation of Defendants’ businesses,” and that Defendants have “made extensive, unauthorized use of NHL and Member Club trademarks and trade dress when marketing and selling products to the public.”  The NHL takes particular exception to Defendants marketing and selling a plastic beer stein (which the complaint labels the “Infringing Stein”) that is a replica of the NHL’s famous Stanley Cup trophy.  The complaint includes the following depictions of the Stanley Cup and the “Infringing Stein”: [one_half]The STANLEY CUP Trophy [/one_half] [one_half_last]The Infringing Stein [/one_half_last] A cause of further distress to the NHL is the fact that Defendants allegedly market the Infringing Stein to create a false impression that the NHL is associated with Defendants and their products.  For example, the complaint claims that Defendants have called the Infringing Stein “The Stanley Stein” and “The Hockey Cup,” have paired images of the Infringing Stein with other NHL trademarks, and use packaging that imitates what the NHL calls the “well-known travel case for the actual Stanley Cup trophy” (depicted in the complaint with the below illustrations). [one_half]The STANLEY CUP Trophy Case [/one_half] [one_half_last]The Infringing Stein Case [/one_half_last] To make matters even worse (from the NHL’s perspective), the Infringing Stein is allegedly “poorly designed and made cheaply,” which the NHL contends causes additional damage to its goodwill and reputation.  Indeed, the complaint quotes Amazon.com reviews as stating that the Infringing Stein is “impossible to clean,” has “no beer flow,” and (gasp!) is “terribly difficult to fill and drink out of and results in flat bear [sic].”[1]  As hockey fans will know, drinking champagne from the Stanley Cup is a time-honored tradition for trophy winners (Alex Ovechkin was pictured in a Las Vegas club drinking champagne from Lord Stanley’s trophy after winning the Cup this spring).  We have yet to hear of a Stanley Cup winner complaining that the Cup is difficult to drink out of or that it “results in flat [champagne]”! As one might expect, the NHL’s lawsuit is not the opening volley in this battle.  Indeed, had Defendants simply gone about their business, quietly selling cheap plastic Stanley Cup replicas, it’s possible the NHL would have left them alone.  Instead, however, Defendants filed intent-to-use trademark applications in the PTO in 2017 for the following design marks to be used on mugs and beer cups: [one_half][/one_half] [one_half_last][/one_half_last] The NHL then filed an opposition to Defendants’ trademark applications, citing twelve NHL Stanley Cup-related trademark registrations and alleging Defendants’ marks would create a likelihood of confusion.  Defendants responded aggressively, to say the least – filing counterclaims in the PTO seeking cancellation of all twelve of the Stanley Cup registrations cited in the NHL’s opposition.  Apparently incensed by Defendants’ cheek, the NHL then commenced this lawsuit. Given their past conduct in the PTO, Defendants are not likely to fold easily.  Legally speaking, however, they may be on thin ice.  Notably, even though the NHL does not appear to currently sell beer mugs or steins in the shape of the Stanley Cup, it is not required to prove lost sales to prevail in this lawsuit.  Instead, the NHL need only show that there is a likelihood of confusion as to source, sponsorship, connection, or affiliation.  In other words, if a consumer goes online, sees the Infringing Stein, and is likely to think that the product or its manufacturer is affiliated with the NHL (not an unreasonable assumption), that is probably enough.  We will continue to follow the developments in this case but – as of now – the smart money seems to be on the NHL emerging victorious. [1] A review of Amazon.com reveals that the Infringing Stein is actually fairly popular – with a review score of 4.2 out of 5 – suggesting that the NHL may have cherry-picked some of the less enthusiastic reviews.

Many IP owners wonder what they need to do to ensure the continued protection of their EU trade marks and Community Registered Designs after Brexit. Some attorneys, since the referendum, encouraged clients to file in the UK to secure those rights. This would have been an expensive strategy. This week, the UK government gave some reassurance on this issue through a ministerial statement in Parliament that promised that these registered EU rights will become UK rights automatically and at no cost when the UK leaves the EU system. See the report on the CITMA website here. Contrary to most issues surrounding Brexit, this one does not depend on an agreement being reached between the UK and the EU. How to deal domestically with EU registered rights after Brexit is purely a matter for the UK. So this announcement is quite significant. The statement given in Parliament is not detailed but unsurprisingly the UK government wishes to ensure a smooth transition and as little administrative burden as possible which is best achieved by giving full effect in the UK to all EU registered rights, automatically. There are many technical questions that remain open and which may be answered, partially or fully, once legislation is published in this regard. First and foremost the question concerning EU applications that are pending on the cut-off date. Other legal issues include the rules on non-use and reputation, etc. in trade marks and issues such as the availability of prior designs in the market in connection with the novelty and individual character requirements for CRDs. I expect after Brexit the “naturalised” EU registrations will be treated as if they were always UK registrations and subject to normal rules under UK law that treat the UK territory as the relevant market. This seems to be the simplest solution. If so, some of those EUTMs (probably the vast majority of those more than 5 years old) that will convert automatically to UK rights may become vulnerable overnight to non-use challenges (if they were not put to use in the UK). There will also be some questions for the EU to resolve post Brexit, the most obvious one whether use of an EUTM in the UK before Brexit will be relevant for non-use challenges and for assessing reputation of an EU registration after Brexit. Hopefully, the EU will pass legislation in due course to clarify the position on these kind of issues. We will not have many more details for at least several more months, but this announcement puts to rest the key concerns regarding the effect of Brexit on registered EU rights.  

Hi, Readers!  It’s theTMCA.com here, checking in to see how we’re doing.  See, we try hard to make our posts on trademarks, copyrights, and advertising law entertaining and informative for you.  We know that there are a million places for you to get your legal updates, and we work hard to make you glad you chose to come here for yours. In 2017, you rewarded our hard work by landing theTMCA.com a spot on the Web 100, the American Bar Association Law Journal's list of the top law blogs, podcasts, and tweeters.  We were thrilled!  Let’s face it, almost all recognition is nice, but this recognition was extra nice because it resulted purely through the nominations made by YOU, our loyal readers.  That’s why we are secretly still beaming with pride. But do you still like us? Are we still satisfying your cravings for IP legal news delivered with a twist of humor? If the answer is “Yes!”, would you consider helping us make the list again by nominating us for the 2018 Web 100? If the answer is “Meh…”, please please please contact us and tell us what we can do better.  We do this for you, and we want to do it right. Thank you all so much for your support. Sincerely, Your TMCA.com Blogging Team

Earlier this month Brett Kavanaugh was nominated to be the next United States Supreme Court justice.  If confirmed, he will replace the retiring Justice Anthony Kennedy.  Politics aside, Kavanaugh has lodged a lengthy stint as judge on the U.S. Court of Appeals for the D.C. Circuit, and is no stranger to deciding tough trademark and copyright disputes. In the copyright arena, Kavanaugh weighed in on the following: In Soundexchange, Inc. v. Librarian of Congress, 571 F.3d 1220 (D.C. Cir. 2009), he joined the court in affirming the Copyright Royalty Board’s rates for songs played on satellite radio stations.  He also wrote a brief concurring opinion suggesting that the Board is unconstitutional because it is made up of “principal officers” of the government that should be confirmed by the Senate, not appointed by the Library of Congress alone. In Recording Indus. Ass’n of Am., Inc. v. Librarian of Cong., 608 F.3d 861 (D.C. Cir. 2010), Kavanaugh wrote a decision  upholding the Copyright Royalty Board’s rates for ringtones and late payments penalties, stating the Board adequately explained the reasoning behind setting both rates. Kavanaugh also authored the opinion in Indep. Producers Grp. v. Librarian of Cong., 792 F.3d 132 (D.C. Cir. 2015), affirming the Copyright Royalty Board’s rates for retransmitting cable broadcasts of sports programs.  But later in 2015, in Settling Devotional Claimants v. Copyright Royalty Bd., 797 F.3d 1106 (D.C. Cir. 2015), he joined the court in determining that the Board’s royalty rates for retransmitting religious and devotional programming was “quintessentially arbitrary and capricious.” And on the trademark side: In Estate of Coll-Monge v. Inner Peace Movement, 524 F.3d 1341 (D.C. Cir. 2008), he joined the court in reversing the determination that a non-profit corporation could not be a related company whose use of a trademark was controlled by a trademarks registrant, under the “related company” provision of the Lanham Act. In Empresa Cubana Exportadora de Alimentos y Productos Varios v. U.S. Dept. of Treasury, 638 F.3d 794 (D.C. Cir. 2011), cert. denied, 566 U.S. 986 (2012), in a 2-1 decision, Kavanaugh wrote the opinion ruling that a company owned by the Cuban government did not have a vested right to perpetual renewal of its trademark after the amendment to the Cuban Assets Control Regulations removed the trademark exception.  According to the opinion, the regulations stated that exceptions were revocable at any time, despite the assumption that U.S. trademark registrants acquire a perpetual right to renew their marks so long as they continue to be in commercial use when the marks are first registered. Kavanaugh’s views appear to support the administrative decision-making process, particularly that of the Copyright Royalty Board.  We will have to stay tuned to learn if these views also support the administrative powers of the U.S. Patent and Trademark Office.

On June 28, 2018, the California Legislature unanimously passed, and the Governor immediately signed, a sweeping expansion of data privacy protections for residents of California.  Assembly Bill No. 375, entitled the “California Consumer Privacy Act of 2018” (the “CCPA”) goes far beyond current U.S. privacy protections, and in many respects emulates elements contained in the European Union’s General Data Protection Regulation, including the ability of a consumer to require that personal information be deleted by a covered business. The CCPA is effective on January 1, 2020.  This post summarizes some of its operative provisions, including new consumer rights, industry coverage considerations and implementation concerns. The CCPA is complex, and changes by the legislature (though likely not significant) and interpretation by the California Attorney General will be forthcoming.  Further, the provisions of the CCPA specifically authorize any business or third party to request guidance from the California Attorney General on compliance.  A more detailed discussion of the CCPA’s provisions and history can be found here. Consumer’s Privacy Rights Under the CCPA The CCPA establishes several privacy rights for California consumers (i.e., California residents): The right to know what personal information is being collected; The right to know whether personal information is sold or disclosed and to whom; The right to say “no” to the sale of personal information; The right to access personal information; and The right to equal service and price, even if any privacy rights created by the CCPA are exercised. Coverage Businesses will have to assess whether they must comply with the CCPA.  The CCPA applies to any sole proprietorship or corporate entity of any type (including affiliated entities based upon a 50% ownership or control factor) that: (i) collects consumers’ personal information, whether alone or jointly with others; (ii) does business in the State of California, and (iii) satisfies one or more of the following thresholds: The business has annual gross revenues in excess of $25,000,000; Alone or in combination with others, the business annually buys, receives for the business’s commercial purposes, sells, or shares for commercial purposes, alone or in combination, the personal information of 50,000 or more consumers, households, or devices; or The business derives 50% or more of its annual revenues from selling consumers’ personal information. Compliance Procedures Required by Covered Businesses To implement the new consumer privacy rights, the CCPA imposes several complex compliance and implementation requirements on covered businesses. These requirements must be completed within the next 18 months, and include: Modification of disclosures and websites to educate consumers on their privacy rights and allow consumers to exercise those rights. Train a team and establish processes to substantively respond within 45 days to consumers’ requests about the business’s use of personal information. Businesses will be obliged to deliver the requested personal information twice a year. Systems design to establish robust information governance policies and procedures, including: (a) mapping current data collection processes, data repositories and transfer protocols; (b) updating privacy policies; (c) developing and adopting policies, procedures and technologies to comply with the CCPA’s covered business obligations; (d) testing and verification; and (e) training and monitoring. Comments The scope of the CCPA potentially encompasses any company that does internet business with a California resident, as well as all retail and commercial activity that includes the collection of data relating to a California resident and retained, sold or transferred by a covered business. Given its provisions, significant proactive diligence by covered businesses will be needed to allow for compliance with the CCPA by January 1, 2020.  Thus, as early as possible, businesses should commence the process of evaluating coverage under the CCPA, as well as designing and implementing an effective compliance program. As both U.S. and international businesses begin to understand the scope of the CCPA, the reality of dealing with compliance dictates of the CCPA, the GDPR and the laws of other U.S state jurisdictions may bring new urgency to considering a federal privacy law that preempts laws such as the CCPA. Whether that resembles the new EU privacy protections of the GDPR, which are already experiencing significant growing pains, or some other improved but less proscriptive approach, remains to be seen. In any event, California is widely regarded as the bellwether of state innovation, and other states are sure to follow many, if not most, of the privacy protections now contained in the CCPA. Stay tuned for further updates on the CCPA, as “clean up” legislation and California Attorney General interpretations and regulations will be forthcoming.

TheTMCA.com blog has had a busy first half of 2018 with a total of 62 posts so far this year. Thank you to our loyal readership, which keeps growing. In case you missed them, here are our top 8 posts of 2018 so far, with topics including the new GDPR privacy law, the Trump brand loss in a trademark license battle, music copyright issues and the large number of works entering the public domain next year. What's up with WHOIS? The GDPR May Limit or Prevent Access to Domain Name Registration Info Trump Brand Loses Trademark Licensing Dispute – Rules of Contract Law Prevail "Sleevey Wonders" are "Arm Tight" in California Lawsuit Tune Up: Initial Lessons from Gibson's Most Recent Trade Dress Lawsuit Adnan Syed Won a New Trial (Again), But the Serial Podcast Lost its Own Appeal Large Number of Works Set to Enter the Public Domain in 2019 Extra Foam, Please: Common Sense Prevails and Court Finds that Starbucks Lattes Contain Foam Did The 9th Circuit "Blur the Lines" in its Latest Music Copyright Case?

A new means for fighting back against copycats in the fashion industry is on the rise: online call-outs. Brands can take their grievances directly to the public on social media to draw attention to design imitations (and in the process educate consumers about authenticity). Posts like these are gaining significant traction in the fashion world, which is awash with intellectual property rights violations. Ironically, a fashion brand that vigorously polices infringements has become the namesake of one of the most visible online outlets for highlighting copycat fashion designs. The Instagram account @Diet_Prada (also tied to dietprada.com) airs the dirty laundry of fashion brands to its almost 600,000 followers by displaying side-by-side photos of copycat designs and similar originals, generating passionate comments from consumers and designers alike, and bringing bad press to the copycat design creators. In some cases, the implicated designers comment directly by issuing clarifying statements. The two fashion insiders who have now been identified as running the account – Tony Liu and Lindsey Schuyler – refer to themselves as “knockoff detectives.” In an interesting turn of events, on June 28, 2018, Diet Prada shared a photo of a shirt sold by Dolce & Gabbana (whose co-founder is an outspoken detractor of Diet Prada), which displayed the same hashtag as that used on a shirt sold by Diet Prada itself as merchandise with the caption “When ur merch gets knocked off by @dolceandgabbana for 12x the price lol. #pleasesaysorrytous”. Even where photos of copycat fashion designs are not flagged on Diet Prada’s accounts, Diet Prada has found itself in the middle of designer disputes. For example, in January 2018, the founder of active wear brand Outdoor Voices, Tyler Haney, accused another high-end active wear company, Bandier, of ripping off her designs. She pointed out the design similarities on her Instagram Stories, claiming: “Each new style in @bandier’s ‘new’ line is a rip of an Outdoor Voices style. . . . Embarrassed for you. People should boycott everything about you.” Some Outdoor Voices fans called for the Instagram account @Diet_Prada to step in and help. Fans also directly confronted Bandier on its social channels. When Bandier posted a photo of its new collection on Instagram, Outdoor Voices fans shamed the brand through their comments. One particularly irate fan even commented that “OV is coming to end you bandier”. The popularity of the Diet Prada platform shows that posting photos of a “ripped off” fashion design may be one potential PR strategy for fashion brands to take a stand against copycats. And in some cases, it could serve as a first attempt to shame a copycat infringer into pulling a product before embarking on costly and time-consuming legal action.

A recent NAD decision about salad spinners illustrates several principles generally applicable to product testing used to substantiate superiority claims: (1) the test conditions need to be relevant to how the product performs in a typical consumer context; (2) the test results must be statistically significant; and (3) marketplace superiority claims must be supported by comparative testing on a broad range of competitive products. The advertising claims at issue were made by a company named DKB Household USA Corp. for its Zyliss SwiftDry Salad Spinner. DKB touted that the SwiftDry spinner “Removes 25% More Water” with an asterisked footnote stating “*Average test results versus leading competitors.” Challenger OXO International Ltd. raised several deficiencies in the testing offered by DKB as substantiation for the ad claim. A significant problem was the use of sponges and absorbent cloth in lieu of lettuce or other forms of produce for purposes of measuring water extraction. In addition, DKB’s testing only involved five trials of the product brands tested, and the data generated were quite variable. Finally, DKB only tested its SwiftDry spinner against two competitive brands — market leader OXO and Chef’n. NAD’s holding that the ad claim of superior water removal was not properly substantiated was no spin job. First, NAD found that DKB did not adequately explain why it could not test the products on lettuce leaves or other representative produce, and concluded that “lettuce leaves would better approximate results that a consumer would experience.... NAD has consistently held that the most reliable measure of a product’s performance is demonstrated by tests designed to test the products in the same manner the product is directed to be used by consumers.” Second, DKB’s testing with a small sample size and wide variation in data did not yield statistically significant results. As NAD emphasized, “For claims that promise a quantified level of performance” it is particularly important to have statistically significant results “as the claim itself quantifies the benefit provided and testing should demonstrate that consumers will experience the claimed benefit.” Finally, NAD held that “in order to support a broad superiority claim such as the one at issue here, an advertiser must test a variety of competing products that comprise all or a substantial portion of competitive products [in] the market.” DKB testing of just the OXO and Chef’n brands did not meet that standard. In the past, NAD has noted that 85% of the market is sufficient, but it didn’t cite any specific number this time around. What’s the “spin” on this decision? To substantiate product superiority ad claims, advertisers must conduct product testing under consumer and product-relevant conditions; quantified performance claims must be statistically significant; and the ad claim must be tailored to the range of products tested — if only two competitive products are tested, say so in the ad. If a company wants to make a broad marketplace superiority claim, it must conduct tests on “all or a substantial portion” of competitive products.

There is a little-known, even lesser-enforced, section of the United States Code that actually prohibits the printing of the American flag on paper napkins and other disposable products like paper plates, cups and boxes.  The United States Flag Code, as it is known, also expressly states that “[t]he flag should never be used for advertising purposes in any manner whatsoever.”  4 U.S.C. § 8(i).  The Code was originally enacted in 1942 and the last amendment was made in 2009.  Based on our online search there have been fewer than a dozen cases since 2001 that cite the United States Flag Code generally (4 U.S.C. § 1 et seq.), and none of those cases cite to subsection (i) of section 8 that addresses paper napkins and advertising.  Yet most of us have been to a July 4th BBQ with American flag napkins—they’re readily available for purchase by anyone with an Internet connection.  And we’ve all seen the flag used in a TV commercial (haven’t we?).  What about those American flag cakes – do you think the United States Flag Code was meant to prohibit us from lining up blueberries and strawberries on vanilla frosting? Just some food for thought for you, dear readers. We hope you all enjoy your Fourth of July celebrations, and if you are barbecuing, maybe take a pause to think before grabbing for that flag napkin.

Coffee addicts and meme fanatics are slightly less caffeinated and slightly less entertained after a California federal district court recently ruled that Grenade Beverage, LLC infringed the intellectual property rights of viral meme sensation Grumpy Cat, when Grenade Beverage sold ground coffee using her name and image in violation of its license agreement with Grumpy Cat’s owners. The case began back in 2012 when Tardar Sauce was just a newborn kitten with an underbite and feline dwarfism that caused her to look perpetually grumpy. Thanks to the internet’s obsession with all things “cat,” Tardar Sauce found herself at the center of a meme storm after one of her photos appeared on Reddit. Thereafter, Grumpy Cat was born, and the world started to learn about the many things she dislikes: being awake, neighbors and intellectual property infringement being just a few examples. Grumpy Cat Limited, started by Miss Sauce’s owners, seeks to promote the Grumpy Cat brand and owns several trademarks and copyrights related to the Grumpy Cat name and image, with over 1,000 products for sale on the website www.grumpycats.com. Notably, the company has collaborated with television and movie behemoths like Fox Broadcasting and Lifetime Television to exploit this valuable intellectual property. However, not all collaborations have come to a happy conclusion. In 2013, Grenade Beverage entered into a license agreement with Grumpy Cat Limited for the exclusive rights to use Grumpy Cat’s name and image on a line of coffee products. The line started with iced coffee products, but when Grenade Beverage expanded into ground coffee, Grumpy Cat Limited sued for copyright and trademark infringement. The case had a complicated procedural history: a jury trial was held in January 2018, but in accordance with a Final Pretrial Conference Order in December 2017, the parties agreed that the court would decide Grumpy Cat Limited’s cybersquatting and accounting claims and Grenade Beverage’s counterclaims for declaratory relief of non-infringement of copyright and trademark rights. Also prior to the jury trial, the court had held at the summary judgment stage that there was an issue of fact for the jury to decide as to whether, based on the intent of the parties, a “line of … coffee products’ included or excluded coffee products other than iced coffee.” After a four-day trial, the jury found that the scope of “a line of Grumpy Cat-branded coffee products” was limited to iced coffee and awarded over $700,000 in favor of Grumpy Cat Limited. Grenade Beverage then sought a declaratory judgment that a licensor cannot sue a licensee for infringement under an exclusive license or, alternatively, that Grumpy Cat Limited could only sue for breach of contract, not infringement. The court held that an exclusive licensee cannot infringe upon the copyrights licensed under the contract, but that it can infringe upon copyrights that fall outside the scope of the exclusive license. To decide what products fell within or outside the scope of the license granted, the court needed to determine whether Grenade Beverage had breached a covenant or condition of the contract. Covenants are promises to do or refrain from doing a specific act. Under California contract law, breach of a covenant will only support a claim for contract damages. On the other hand, conditions limit the scope of an agreed-upon right, and breach of a condition places the licensee outside the scope of that right. This in turn constitutes infringement of the licensor’s reserved rights and supports an infringement claim on top of contract damages. In this case, the jury had determined that the sale of coffee products other than iced coffee went beyond the scope of the exclusive license for a “line of Grumpy Cat-branded coffee products.” However, the court then needed to decide whether the phrase “additional products within the Product Category … that may, upon the Parties’ mutual approval, be marketed hereunder” is a covenant or condition. To answer that question, the court reviewed the “four corners” of the agreement to ascertain the mutual intention of the parties. In particular, the court placed weight on the parties’ use of the word “in” instead of “to.” Under the contract, Grenade Beverage had the right to use the licensed intellectual property “in” the specified product category as opposed to the right “to” the product category. According to the court, the use of “in” suggested a limited right, whereas “to” would have suggested an all-encompassing right. Therefore, “additional products” was a condition that excluded products other than iced coffee from the scope of the license grant absent mutual approval, which Grenade Beverage had not obtained for ground coffee. While this case turned on a close reading of the preposition used in one provision in one particular license agreement, California law governs many licensing agreements, so the potential impact of the general holding is broader. This should serve as a strong reminder to those in the licensing field that precise language matters. Grumpy Cat Limited and Grenade Beverage may not have intended to accord product definitional significance to the choice of the word “in” instead of “to.” But that word selection persuaded the court that the parties’ mutual intention was clear from the “four corners” of the agreement, when in fact it might not have reflected Grenade Beverage’s true desire and understanding. As it turns out, the risk of utilizing one preposition instead of another cost Grenade Beverage over $700,000. As of June 25, Grumpy Cat Limited filed a motion for an award of approximately $320,000 in attorneys’ fees based on their successful lawsuit against Grenade Beverage. The TCMA will continue to update you on any significant developments in the case.

The organization tasked with managing the Internet’s domain names is struggling to come to terms with Europe’s new data privacy law.  On June 18, 2018, the Internet Corporation for Assigned Names and Numbers (“ICANN”) published for discussion the draft Framework Elements for a Unified Access Model for Continued Access to Full WHOIS Data.  The Framework hopes to answer the question of how ICANN and its contracting parties can legally provide third parties with access to non-public data about the people and businesses behind registered domain names.  That access, provided via ICANN’s WHOIS platform, is vital for intellectual property rights holders and trademark lawyers, not to mention law enforcement cybercrime investigations and countless others.  The rub, however, is that the European Union’s General Data Protection Regulation imposes a number of limitations on data collection and access. ICANN’s Framework hopes to navigate those limitations.  The Framework proposes a tiered-access model, wherein prospective users must apply for accreditation from government bodies before gaining access to full WHOIS data, which includes personal, private data. The Framework leaves open for discussion whether accreditation should permit total access to WHOIS data, or whether the credentialed user should be given access to limited data fields pertaining to the user’s stated purpose.  The Framework makes additional proposals towards responsible data management, such as requiring credentialed users and registrants to agree to specific codes of conduct that would limit data use based on their role. Still, ICANN’s Framework faces an uphill battle.  The Framework includes several tough-to-swallow proposals, and seeks cooperation from entities who have already expressed reluctance to participate.  For example, ICANN wants registrars—those entities who manage the reservation of domain names for ICANN—to log every single WHOIS search and make those logs available to ICANN.  The Framework also contemplates fees for accreditation and, thereafter, additional fees for access to private data.  And ICANN wants members of the European Economic Area’s Governmental Advisory Committee to assist in the accreditation process.  That Committee however, already stated in March that it “does not envision an operational role in designing and implementing the proposed accreditation programs.” Questions about ICANN’s Framework proposal are not the only challenges facing the organization’s WHOIS platform.  On May 25, 2018, the day GDPR took effect, ICANN filed a legal action against one of its registrars in Germany.  ICANN insisted the registrar was required to collect full, or “thick,” WHOIS data and transfer that data to a specified registry database.  The registrar, however, argued that most of the data was unnecessarily duplicative and therefore the registrar would be violating GDPR’s requirement that it collect and process as little personal data as necessary.  The German court rejected ICANN’s request for an order requiring the registrar to collect and transfer that data, although ICANN has several opportunities to appeal that decision. ICANN faces pressure to manage the Internet’s domain names in a manner that allows businesses to defend their websites and law enforcement to investigate cybercrimes.   It also must comply with the GDPR and responsibly manage the personal, private data with which it is entrusted.  The proposed Framework works towards meeting those dual objectives, but must overcome several hurdles along the way.

Under U.S. Copyright Law, copyright protection affixes to “original works of authorship fixed in any tangible medium of expression.”  While copyright registration is not required to claim copyright rights, Section 411(a) of the Copyright Act requires registration prior to commencement of a federal copyright lawsuit.  The registration requirement has not been interpreted consistently across the federal circuit courts. We have previously reported about the Eleventh Circuit’s decision in Fourth Estate Public Corporation v. Wall-Street.com, LLC.  There, the court adopted the so-called “registration approach,” which means that a plaintiff must be in possession of a registration certificate issued by the United States Copyright Office before bringing suit.  Accordingly, the Eleventh Circuit dismissed the plaintiff’s claims because it had not registered the works at issue before it filed its lawsuit. In addition to the Eleventh Circuit, the Tenth Circuit is on record as adhering to the “registration approach.” Other circuit courts, such as the Fifth Circuit and Ninth Circuit, have followed the “application approach,” which means that a plaintiff must only have filed its application for copyright registration with the Copyright Office. The remaining circuit courts have either not yet adopted a position or have not been consistent in interpreting the meaning of “registration” under Section 411 of the Copyright Act. The Copyright Office, in its amicus brief to the Supreme Court, has backed the registration approach, stating that the “text, structure, and history of the Copyright Act confirm that the Register [of Copyrights] must have acted on an application for copyright registration—either by approving or refusing registration—before the copyright owner may institute a copyright-infringement suit.”  The Copyright Office further states that “registration” must be read as meaning official recording of an accepted copyright claim and that following the application approach renders portions of Section 411(a) superfluous. On June 28, 2018, the United States Supreme Court agreed to take up the issue by granting review of the Fourth Estate case. For what it’s worth, the Supreme Court may have already signaled its position on the issue in the “Raging Bull” decision a few years ago, stating: “Although registration is “permissive,” both the certificate and the original work must be on file with the Copyright Office before a copyright owner can sue for infringement.”  (emphasis added) Here at The TMCA, we will keep you apprised of all meaningful developments in this important copyright case.

Social media is an important marketing channel for many organisations. It is also a convenient way by which marketers can learn about customers, through data collected when they use social media channels. A recent case before the Court of Justice of the EU (“CJEU”) highlights the potential liability of account holders for the data collection activities carried out by platform operators. Even though the case was decided on the basis of the old Directive, it may indicate the direction of things to come under GDPR and the risks arising to organisations and businesses that use social media to market themselves. The case was brought by Unabhängiges Landeszentrum für Datenschutz Schleswig-Holstein, the state data protection regulator in Schleswig-Holstein, one of the states of the German Federation.  The regulator (“ULD”) ordered a German educational services provider (Wirtschaftsakademie Schleswig-Holstein GmbH or “Wirtschafts Academy”) to deactivate its social media account. According to the case report, the platform operator collected data from users using cookies that remained active for two years. The reference from the German court indicated that “neither Wirtschaftsakademie nor [the operator of the platform] notified [users of] the storage and functioning of the cookie or the subsequent processing of the data, at least during the material period for the main proceedings”. The questions that were brought before the CJEU were: (a) whether it was appropriate for ULD to make an order against Wirtschafts Academy, given that the data collection was undertaken by the platform operator, not the account holder, and (b) whether ULD had jurisdiction over the platform operator, given that the data collection was undertaken by an entity in Ireland, not by a German undertaking. The CJEU answered both questions positively. The decision points to a broad approach to questions of jurisdiction across territories and towards liability across different parties in the supply chain. In regard to whether it was appropriate to issue an order against Wirtschafts Academy (effectively, whether the account holder was liable to the data collection activity) the question turned on whether it was to be treated as a “joint controller” of the data, alongside the platform operator. Those already initiated in the language of GDPR would be familiar with the dichotomy between “data controllers” and “data processors”. The distinction proved critical, for example, when proceedings were brought against Google Spain some years ago where a person asserted his ‘right to be forgotten’ seeking an order against Google to block links on its search engine to some old articles published about the individual. The EU court in that case rejected Google’s defence that it was a ‘mere processor’ and therefore not required to comply with such requests. The CJEU held that Google was a data controller in relation to the listings produced by its search engine and as such is required by law to respect a person’s request for the deletion of their data (if the request is based on valid grounds). In the case of Wirtschafts Academy, the CJEU held that the account holder was “joint controller” of the data collected by the platform operator. The Court relied on the papers before it and found that the placing of cookies and collection of data from users was performed by the platform operator across its platform (making it a “controller” of the data). However, it explained, Wirtschafts Academy and others who set up their own pages on the social media platform give the operator “the opportunity to place cookies on the computer or other device of a person visiting its fan page” and further, according to the findings of the referring court, the administrator can define certain parameters when creating the pages “depending inter alia on the target audience and the objectives of managing and promoting its activities” which, the Court stated, “has an influence on the processing of personal data for the purpose of producing statistics based on visits to the fan page”. The Court also relied on the fact that the platform operator’s offering included data analytics and that the account holder was able to request certain user data from the platform operator. Even though no investigation was carried out as to whether any such requests were in fact made by Wirtschafts Academy, the Court found the above sufficient to treat Wirtschafts Academy as a joint controller of the data collected from users. The ruling suggests that a party can become exposed to liability under GDPR due to the processing of data by someone else, for instance in the context of service relationships between them, at least where there is some degree of involvement with the data. Specifically, it establishes that in many cases account holders on social media services can potentially be held jointly liable to violations of GDPR by the platform operators  in relation to data collected from users on the account holder’s pages, for instance because their account settings impact on the way data is collected from users who visit their pages. It is difficult to predict in what other circumstances the court might reach this result, for example, if a customer is given access to data collected by a platform provider, could it be treated as a joint controller of the data? If so, would it be liable if the data was collected by the platform operator in violation of the law? It is also unclear to what extent “joint controllers” are liable to each other’s actions. The Data Protection Directive, which was the basis for the decision in the Wirtschafts Academy case, barely mentions the existence of joint controllers (the definition of “controller” in the Directive mentioned that there could be one controller or several joint controllers, but there were no provisions to allocate liabilities between them). Article 26 GDPR is much more detailed. It requires joint controllers to enter into an agreement between them in relation to their duties to data subjects and to advise data subjects of the essence of the agreement. It also provides that data subjects can exercise their legal rights against each of the joint controllers, regardless of the mutual arrangements between them. The decision in the Wirtschafts Academy case confirms that under the Directive an enforcement order could be addressed to a joint controller in relation to data collection activities by another controller. A similar approach could be taken under GDPR. This does not necessarily mean that a joint controller is jointly liable for violations of the law by the other. The second issue considered by the CJEU concerned territorial jurisdiction. Although the question focused on issues of jurisdiction as between different EU member states, the broad approach adopted by the Court could reflect on its approach in the future to similar issues arising in relation to the international jurisdiction of GDPR. The court in Wirtschafts Academy examined the provisions of Art. 4 of the Directive which defined the territorial jurisdiction of each EU Member State on issues of data protection. Each Member State under the Directive had jurisdiction over the data processing activities carried out “in the context of the activities of an establishment” in that Member State. The Court held that ULD, the German regulator, had jurisdiction over the matter because the data collection undertaken by an entity in Ireland had a sufficient nexus to the commercial activities of its affiliates in Germany (essentially, selling advertising to German customers). GDPR defines its own international scope mainly by reference to the processing of the data being undertaken “in the context of the activities of an establishment of the controller or the processor” in the EU. The decision in Wirtschafts Academy suggests that even if the collection and processing of data are carried out entirely outside the EU, the activities could still be held to fall within the jurisdiction of GDPR if there is an EU undertaking that is sufficiently related to the activity. It should be borne in mind that GDPR jurisdiction can also be established on the basis that the data is processed in connection with the offering of goods or services to individuals in the EU or collected in the course of monitoring their behaviour.

Stop us if you’ve heard this one—Conan the Barbarian and a Romulan walk into the Krusty Krab.  SpongeBob looks at Conan and says, “I know you, but where’s he from?”  In the latest chapter of a case we’ve blogged about before, the U.S. Court of Appeals for the Fifth Circuit upheld a lower court decision that “The Krusty Krab” was a source-identifying mark, like “Conan the Barbarian” (and not like “Romulan”). The Fifth Circuit’s decision is the latest installment (and probably the series finale) of a courtroom drama starring media conglomerate Viacom International and IJR Capital Investments.  In 2014, IJR decided to open Cajun seafood restaurants called “The Krusty Krab” in California and Texas.  Viacom filed suit in Texas federal court after IJR pressed forward with its plans despite Viacom’s cease and desist demand.  The Texas court granted Viacom summary judgment on its common law trademark infringement and Lanham Act unfair competition claims, and IJR appealed. The Fifth Circuit began its analysis by weighing whether Viacom actually uses The Krusty Krab to identify the source of a good or service.  The threshold question was whether specific elements within a television show—as opposed to the show’s title—can receive trademark protection.  The court decided they could because extending trademark protection to these elements would protect the goodwill of the elements’ owners and protect consumers from confusion. Still, not all elements of a television show are trademarks.  The appropriate focus is on whether the element of the show creates a distinct commercial impression separate from the show itself.  The court cited decisions holding Conan the Barbarian, The General Lee, and The Daily Planet to be protectable marks and held that trademark protection exists when elements are recognizable of themselves as an indication of the origin of goods or services.  When elements have a “central” or “critical” role in, are “integral” to, or are a “staple” of a television show, those elements can be trademarks. The court contrasted these marks with the word Romulan, which the TTAB found not to be a trademark because there was no evidence that the owner of Star Trek used the word to distinguish its services.  Although the Romulan mark was featured in television episodes, movies, and licensed products, it was “only” used “from time to time” and so did not attain trademark status.  (The Court was quick to acknowledge that “Star Trek fans may vehemently disagree with this analysis as a factual matter.”) The court cited several facts to conclude that The Krusty Krab was a source identifier.  It described how The Krusty Krab is integral to SpongeBob SquarePants because it appears in more than 80% of episodes and in the film and musical adaptations of the show, and is featured online, in video games, and in licensed merchandise.  Viacom had extensively licensed The Krusty Krab mark and the mark appears on a variety of consumer products, from stickers and apparel to games and playsets.  The mark is featured prominently on these products and helps identify the goods.  Viacom has reaped millions from this licensing.  From this, the court concluded The Krusty Krab was a source identifier because it created “immediate recognition” of the source for goods or services. Where does this leave entrepreneurs hoping to boost their ventures with allusions to popular culture?  They might get away with copying lesser known elements of entertainment enterprises.  But it would probably be wise to steer clear of a show’s better-known elements, particularly if the show’s owner has separately licensed that element.  Otherwise, entrepreneurs may find themselves in court claiming to be Romulans but found to be (Conan the) Barbarians.

On 21 June 2018, the legal affairs committee of the EU Parliament approved the much debated Copyright In the Digital Single Market Directive. It is a short step now before the Parliament itself approves the directive, which will then need to be implemented into the domestic laws of EU member states. The Directive aims to bring copyright law in Europe up to date in respect of the digital use and distribution of copyright materials. The directive covers different issues, including introducing some new (limited) exceptions to copyright protection to allow greater freedom for research organisations to engage in text and data mining (albeit only for scientific purposes), to allow use of digital content for teaching and illustration purposes and to allow reproduction by “cultural heritage institutions” for preservation purposes. Most of the attention, however, and a fair amount of heated debate, have been directed at Article 13 of the Directive, which introduces changes in the responsibility of online platforms in relation to infringing content posted by users. There has been widespread alarm that this proposal will have the effect of censoring the internet. Such concerns may be exaggerated, but the provision will certainly shift the balance in favour of authors and rightholders and will place a more direct burden on operators of online platforms that host large amounts of user-contributed content to ensure that content that infringes copyright is blocked. The digital industry objects to these changes, which are designed to reduce online piracy and prevent online operators from passively sharing the spoils of the distribution of pirated materials on their platforms (mainly through advertising revenue) and to force them to  make an effort to clean their stables. At the same time the changes are not as far reaching as some would suggest. The current law (not only in the EU but also in the US, under the Digital Millennium Copyright Act) requires online platforms to act “expeditiously” to “remove or disable access” to infringing content when alerted of any suspected infringements by rightholders. To meet this requirement, online platforms already have in place extensive screening technologies that regularly block or remove infringing content from the platforms. The change in the law proposed in the EU Directive would only slightly shift the balance of power in favour of authors and publishers to ensure that the anti-piracy systems used by online operators are effective. Article 13 does not impose a general obligation to screen platforms for infringing content. It requires relevant operators to “take measures” to prevent infringements where they have agreements with rightholders or where rightholders identify specific works they wish the platform operators to police. Accordingly, platform operators will still only be required to take action at the rightholders’ initiative. Over time, it is possible that this change in law might lead to a reduction in the level of availability of unlicensed (or pirated) copyright content online. At the end of the day, however, the manner and extent to which infringements are policed on the internet will depend (as it depends today) on platform operators and rightholders. The two sides have been fighting over the issue for many years. Both know that there can be no perfect solution. Rightholders cannot expect all unauthorised materials to disappear. They also know that excessive protection could harm creators and publishers as well as outright pirates. Online platforms on the other hand know that they cannot act with impunity in providing a marketplace for unlawful content. There is also an area of uncertainty as to what amounts to infringement and what type of content that uses copyright material might enjoy the protection of the law. Clearly any system for policing infringements would need to take account of these issues. Hopefully, the new law might contribute to putting a little order into the online systems. It is unlikely to mark the end of free speech in the digital sphere.

On June 13th, we hosted a “Meet the Regulators Breakfast” with Clark Russell, Deputy Bureau Chief of the Bureau of Internet and Technology of the NY State Office of the Attorney General, along with Dorsey’s privacy lawyer Bob Cattanach, which was sponsored by the Association of National Advertisers.  For those of you who missed out on this event, never fear—the TMCA has you covered with a recap of a few of the highlights. Operation Child Tracker: The Children's Online Privacy Protection Act (COPPA) first went into effect in 2000 and is designed to protect the online privacy of children under 13.  COPPA doesn’t just cover operators whose websites or online services directly collect personal information from children—it also covers those whose sites and services integrate third party services (such as plug-ins or advertising networks) that collect personal information from underage visitors.  And COPPA imposes strict liability on violators, so even if operators aren’t aware that third party advertisers have installed tracking technologies that violate COPPA, the operators themselves are still liable.  Deputy Bureau Chief Russell talked about Operation Child Tracker, a two-year, first-of-its-kind investigation by the AG’s office, which ended in a number of settlements totaling $835,000 with some of the nation’s most popular kids’ toy and media companies whose websites were home to third-party technologies that enabled the tracking of children’s online activity in violation of COPPA. Data Breaches:  We couldn’t have breakfast with the Deputy Bureau Chief of the Bureau of Internet and Technology without discussing data breaches!  Deputy Bureau Chief Russell led us through the AG’s 2017 report documenting the record number of data breach notices filed with the NY A.G.’s office in 2017.  There were a total of 1,583 data breaches reported, exposing the personal records of 9.2 million New Yorkers, which is four times the number of those reported impacted in 2016. The report shows that in 2017, employee negligence (which encompasses inadvertent exposure of records, insider wrongdoing, and the loss of a device or media) accounted for 25% of reported breaches. Operation Clean Turf: Deputy Bureau Chief Russell also discussed Operation Clean Turf and the AG’s recent investigation into fake social media accounts.  Operation Clean Turf was a year-long undercover investigation into the reputation management industry, astroturfing (i.e., masking the true sponsor of a message to make it appear as though it originates from and is supported by a grassroots participant) and false endorsements.  Operation Clean Turf specifically targeted the widespread practice of companies being paid to generate fake consumer reviews on websites such as Yelp and Google Local.  During the course of the investigation, representatives from the AG’s office, posing as an independent frozen yogurt shop in Brooklyn, called various search engine optimization (SEO) companies to request help with negative reviews of the yogurt shop on consumer-review websites.  Many of the SEO companies offered to write fake positive reviews and post them on consumer-review websites as part of their standard reputation management services.  These companies use advanced techniques to hide their identities and bypass consumer-review websites’ filtering and fake review detection, even going so far as to pay freelancers in the Philippines, Bangladesh and Eastern Europe $1 to $10 per fake review posted.  Operation Clean Turf resulted in 19 companies paying more than $350,000 in penalties and agreeing to cease their practice of writing fake online reviews for businesses. But fake reviews aren’t the only issue: companies are also using techniques to encourage would-be positive reviewers to post reviews, while filtering would-be negative reviewers away from review sites.  Deputy Bureau Chief Russell pointed to one example in which a pre-Uber New York car service business asked users whether they had a positive or negative experience with the business.  Those that clicked a button indicating they had a positive experience were redirected to a consumer review website, where they were offered a $10 discount on a future ride to post a positive review. Those that clicked the button indicating they had a negative experience were redirected to the business’ website where they could provide direct feedback to the company, and were not asked to write a review.  As Deputy Bureau Chief Russell pointed out, incentivizing customers to provide favorable reviews without disclosing such payments is a form of false advertising and a deceptive trade practice that violates New York Executive Law § 63(12), New York General Business Law §§ 349 and 350, and the FTC Endorsement Guidelines. In an era where consumers increasingly rely on consumer review sites, it is worrying to think that we may not be able to trust the authenticity of every review that we see—and, as companies adopt increasingly advanced techniques, we may not even be able to distinguish the genuine reviews from fake or paid ones.  Thankfully, the AG’s office is focused on this type of online consumer protection and continues to investigate such deceptive practices as a consumer protection measure.

This post is about Hamilton. Well, sort of. It’s actually about copyright law. But keep reading! Most people who have attempted to buy a highly sought-after ticket—like, say, a ticket for Hamilton—have experienced the frustration of being beaten to the punch by armies of bots that purchase large quantities of tickets only to resell them at a profit on the secondary market. In fact, Ticketmaster estimates that for some shows 30-40% of all Hamilton tickets are purchased by such bots. Sellers have struggled with how best to respond. Ticketmaster L.L.C. v. Prestige Entm’t, Inc., a recent federal court decision out of the Central District of California, suggests that the Copyright Act may prove to be a useful tool to curb the practice. What’d I Miss? Ticketmaster accused several companies, individuals, and unnamed “Doe” defendants of—among other things—copyright infringement. The district court considered defendants’ motion to dismiss four categories of claims brought by Ticketmaster in its First Amended Complaint: (a) three claims under the Copyright Act, (b) Digital Millennium Copyright Act, (c) Computer Fraud and Abuse Act, and (d) California Computer Data Access and Fraud Act. We focus here only on Ticketmaster’s copyright claims. In short, Ticketmaster alleged that two of the Doe defendants (the “Bot Developers”), in the course of developing the bots later used by the other named defendants to purchase tickets, downloaded and stored the pages and code associated with Ticketmaster’s website and mobile app. Per Ticketmaster, this use of its code violated the Copyright Act. Taking a step back, this wasn’t Ticketmaster’s first attempt to use the Copyright Act to stop bots from purchasing tickets. The court had previously granted defendants’ motion to dismiss Ticketmaster’s copyright claims as pled in its original Complaint. Ticketmaster’s initial copyright infringement theory relied on its allegation that defendants’ use of bots to purchase tickets violated several enumerated conditions in Ticketmaster’s Terms of Use (“TOU”), and thus caused defendants’ continued use of Ticketmaster’s platform to infringe Ticketmaster’s copyrights. Although rejected by the court, the copyright claims in Ticketmaster’s original Complaint had some support in law. In the Ninth Circuit, a copyright owner who grants a nonexclusive, limited license ordinarily waives the right to sue licensees for copyright infringement, and it may sue only for breach of contract. If the licensee acts outside the scope of the license, however, the licensor may sue for copyright infringement. A claim for copyright infringement can only be made where the licensee’s actions (1) exceed the license’s scope (2) in a manner that implicates one of the licensor’s exclusive statutory rights. For a licensee’s violation of a contract to constitute copyright infringement, there must also be a nexus between the breached condition and the licensor’s exclusive rights. Otherwise, a copyright holder could designate any disfavored conduct by the licensee as copyright infringement. Ticketmaster’s original copyright claim thus hinged on the distinction between conditions and covenants—i.e., contractual terms that limit a license’s scope are conditions, while all other license terms are covenants. Because breaches of conditions can result in copyright infringement, while breaches of covenants are only actionable under contract law, the court’s finding that Ticketmaster’s terms were covenants and not conditions doomed its copyright claim. Indeed, the court Said No to Ticketmaster’s original Complaint by dismissing it without leave to amend to the extent that Ticketmaster’s copyright claim was based on defendants’ use of bots to exceed the TOU limitations on the number of page refreshes or ticket requests, or to place a large load on Ticketmaster’s servers. Ticketmaster wasn’t Helpless and found a way to Stay Alive by pleading its copyright claim in a way that went beyond merely alleging that defendants’ unauthorized use of its platform violated its TOU. Copyright Claims Will Be Back The court dismissed Ticketmaster’s original Complaint because it ultimately traced its copyright claims to defendants’ alleged violations of Ticketmaster’s TOU. In contrast, the First Amended Complaint relies on a more complex set of allegations. Namely, Ticketmaster alleges direct copyright infringement against the Bot Developers who built the programs used to purchase tickets, and secondary infringement against the other defendants who induced the Bot Developers’ infringing actions. Are Websites Protectable Under the Copyright Act? A threshold question addressed by the court was whether Ticketmaster’s website is protectable under the Copyright Act. The court found it is, because—like computer software generally—websites contain three distinct layers of content: literal elements (e.g., source code), individual non-literal elements (e.g., screen displays), and dynamic non-literal elements (e.g., interactive elements generated specifically for a user in real-time). Each content layer is subject to the Copyright Act. Direct Infringement The act of downloading and storing the pages and code of a website qualifies as making a “copy” under the Copyright Act. In its First Amended Complaint, Ticketmaster alleges that the Bot Developers have directly infringed Ticketmaster’s reproduction rights by doing just that. The court found Ticketmaster met its burden despite failing to allege with particularity details related to defendants’ actual copying of its code. Typically, in the absence of direct evidence it is sufficient for a copyright plaintiff to allege that (1) the defendant had access to the plaintiff’s work prior to the alleged copying and (2) the defendant’s work and the plaintiff’s work are substantially similar. The twist in Ticketmaster’s complaint is a similar but distinct formulation: Ticketmaster alleges that (1) the Bot Developers developed bots adept at purchasing large quantities of tickets, and (2) Ticketmaster’s website and mobile app are complex platforms that each contain several layers of protection and security measures. Ticketmaster’s claim, at the pleading stage, thus depended on its assertion that developing such capable bots would necessarily require deep study of Ticketmaster’s website and source code, which in turn means that the Bot Developers must have downloaded and stored literal or non-literal elements of Ticketmaster’s website and mobile app. The court found Ticketmaster’s theory about the compatibility of defendants’ bots with its platforms to be a “compelling variation” on the substantial similarity test for circumstantial proof of copyright infringement. Secondary Infringement To bring a copyright claim against the remaining defendants, Ticketmaster accuses them of secondary copyright infringement by inducing, causing, or materially contributing to the Bot Developers’ creation of bots, with knowledge that the Bot Developers would have to infringe Ticketmaster’s copyrights to create the bots. Ticketmaster alleges that the Bot Developers created the bots, and that the other defendants then used those bots to purchase large quantities of tickets. The court found these facts sufficient to indicate a relationship between defendants and the Bot Developers of mutual benefit to both parties, and found it reasonable to infer that defendants contributed to the Bot Developers’ infringement as part of this relationship. The court found that Ticketmaster has stated a claim for defendants’ contributory infringement based on the Bot Developers’ direct infringement. License Defense The court rejected defendants’ license defense based on the argument that Ticketmaster’s TOU provides users a license to copy Ticketmaster’s website. This reinforces the value of Ticketmaster’s creative approach to its copyright claim. Recall that in granting defendants’ motion to dismiss Ticketmaster’s original Complaint, the court devoted considerable attention to whether the provisions of Ticketmaster’s TOU were conditions or covenants. In seeking to dismiss the First Amended Complaint, defendants reiterated that, under the court’s first order, the provisions of the TOU are covenants and that the violation of a covenant gives rise only to a contract claim. The court found that this renewed argument misconstrued the court’s earlier order, the relevant Ninth Circuit authority, and the underlying copyright laws—i.e., a violation of a provision of a TOU is copyright infringement if the violation implicates one of the copyright holder’s exclusive rights, regardless of whether the violated provision is a covenant or a condition. Satisfied One reason Ticketmaster’s First Amended Complaint survived is that it avoided the public policy concerns raised in its original Complaint. The court explained that grounding copyright claims in simple breaches of contract could allow software copyright holders to designate any disfavored conduct during software use as copyright infringement. But the court found this concern is not implicated by Ticketmaster’s First Amended Complaint because Ticketmaster alleges direct infringement by a small number of sophisticated software developers and marketers and thus “will not expose masses of Ticketmaster users to copyright liability merely because they violated Ticketmaster’s own house rules.” What Comes Next? Ticketmaster L.L.C. v. Prestige Entm’t, Inc. shows the Copyright Act’s potential to combat bot-driven online purchases of tickets. More generally, it affirms that—especially in unsettled areas of law—a thoughtfully pled complaint can overcome unfavorable precedent. The TMCA will continue to monitor the case and will report again on significant developments.

Even if your brand is sitting on the sidelines like the U.S. Men’s Team in the World Cup over the next month, there is no time like the present to consider the risks involved in ambush marketing because Wimbledon, the X Games, the U.S. Open, the World Series and even the 2019 Women’s World Cup (fingers crossed for the US. Team!) are just around the corner.  As we’ve blogged about before (a few times), large sporting events are great opportunities for brands to produce creative campaigns or promotions, but advertisers need to be aware of the trademark, copyright and right of publicity risks that routinely come up for these types of events year after year.  If you are interested in reading more about these risks, checkout my article on the Little Black Book (LBBonline), a place to celebrate global creativity in advertising, across all parts of the business and from all corners of the world - - Don’t Get Caught Offside With Your World Cup Marketing Promotions.

On November 4, 2017, the Amended Anti-Unfair Competition Law was passed by the Standing Committee of the Chinese People’s Congress and promulgated on the same day. The new law became effective on January 1, 2018. The new law has brought some significant changes relevant to trademark lawyers, including amendments to the definitions of acts to mislead or confuse and acts of false or misleading commercial representations.  The TMCA presents highlights of these changes: Acts to mislead or confuse (Article 6 of the new law) – This new provision, which replaces Article 5 of the old law, gives a more detailed definition of acts of unfair competition that intend to mislead or confuse others into believing the existence of an association/connection between goods/services, similar to the concept of “passing off” under common law.  Specifically, Unauthorized use of trade indicia such as a product/service name, packaging or trade dress that is identical or similar to that of another party which has gained a certain degree of influence. The word “famous” used under the old law has been replaced by the phrase “certain degree of influence, which may indicate a lower burden on IP rights owners to prove the reputation of their products and services; Unauthorized use of another’s enterprise name (including an abbreviation or trade name), another’s organization name (including an abbreviation), natural name (including a pseudonym/pen name, stage name, corresponding Chinese/English name, etc.) which has gained a certain degree of influence. This new definition identifies more specific types of names to be protected, as compared with the old law, which only mentioned the enterprise name and natural name; Unauthorized use of the distinctive part of another’s domain name, website name or webpage which has gained a certain degree of influence. This is a new provision under the new law. Acts of counterfeiting are excluded from Article 6 since it should be and has been governed by the PRC Trademark Law; Acts of making various false representations as to the quality, certification, place of origin, etc. of goods or services are excluded from Article 6 and incorporated into new Article 8 of the new law (see 5 below); A “catch-all” provision is added to Article 6 of the new law to encompass other “acts to mislead or confuse” that do not fall within the above specific provisions. Acts of false or misleading commercial representations as to the use, function, quality, sales, customer feedback and awards, etc. of goods/services and acts of creating false transactions to aid others’ false or misleading commercial representations (Article 8 of the new law). The first clause replaces the corresponding part of Article 9 of the old law as well as “acts of false representations” under Article 5 of the old law (see 3 above). It removes the reference of “by way of advertisement or other means” under the old law by which the false or misleading commercial representation had to be made. The second clause is new, and aims to tackle acts of unfair competition such as click farming. In addition to the changes highlighted above, the new law also introduces changes to: (a) prohibit business operators from abusing their technology to commit acts of unfair competition by interfering with or sabotaging the normal operations of internet sites that are legally providing goods or services by such acts as inserting a link or forcing a URL redirection in an online product or service; misleading or forcing users to shut down or uninstall an online product or service; or creating incompatibility with an online product or service in bad faith (Article 12 of the new law); (b) give more powers to the relevant governmental bodies to investigate unfair competition complaints; and (c) increase the maximum amount of statutory damages that can be awarded by a Chinese court to RMB 3M (~US$460K) .  The amount of administrative fines or penalties that can be imposed under the new law is also significantly higher than under the old law.

The Federal Circuit’s ongoing effort to implement TC Heartland—the Supreme Court’s landmark 2017 patent venue decision—took another step forward in May with In re BigCommerce, Inc., which vacated and remanded two decisions out of the Eastern District of Texas after defendants sought mandamus relief following denial of their motions to dismiss and transfer for improper venue. At issue were two narrow and related questions: Does a domestic corporation incorporated in a state having multiple judicial districts “reside” for purposes of the patent-specific venue statute, 28 U.S,C, § 1400(b), in each and every judicial district in that state? And, if not, in which district does a domestic corporation reside? The appellate court left no room for doubt when it invoked the statute’s “language, history, purpose, and precedent” and held that for purposes of determining venue in a state having multiple judicial districts, a corporate defendant shall be considered to “reside” only in the single judicial district within that state where it maintains a principal place of business. Alternatively, if the corporation does not maintain its principal place of business within the state in which it is incorporated, then venue is proper in the judicial district in which its registered office is located. The laser-focus of the Federal Circuit’s decision belies the impact years of contrary interpretation of the patent venue statute have had on U.S. patent litigation. For example, before TC Heartland, the number of patent suits filed in the (very rural) Eastern District of Texas famously outstripped that of any other venue in the U.S., despite being sparsely populated and far from most major technology hubs. According to Lex Machina, in 2015 approximately 45% of new patent cases were filed in the Eastern District of Texas. In fact, the Eastern District’s reputation for being the preferred venue for patent plaintiffs achieved sufficient notoriety to enter popular culture. See e.g., “When Patents Attack!” This American Life, July 22, 2011. The Eastern District’s run as the go-to venue for patent litigants was largely made possible by an expansive and—per TC Heartland—incorrect reading of the patent venue statute, which allowed plaintiffs to claim venue was proper in any district in which defendants were subject to personal jurisdiction. Following TC Heartland, which limited venue to districts in which the defendant resides or has committed an infringing act and has a regular and established place of business, the share of new patent cases in the Eastern District of Texas has dropped to approximately 13%. As a practical matter, In re BigCommerce, Inc. resolves ambiguity as to which district in a multi-district state is proper for patent litigation. More broadly, the decision is yet another measure of TC Heartland’s ground-shifting impact on patent litigation. A harder question is whether In re BigCommerce, Inc. will help spur (pun intended) changes to years of unique local practice in the Eastern District of Texas. On May 29, 2018, Judge Gilstrap followed other recent Federal Circuit precedent to find that the venue statute did not compel transfer. That said, he nonetheless transferred the case based on convenience factors. Although it’s too early to say which way the Eastern District of Texas is heading, this recent opinion from one of its most closely watched patent judges tentatively points in a new direction.