The TMCA

“Writing is thinking and thinking is hard work.” – Lewis Black Image from Debby Wong / Shutterstock.com Over his highly successful career, comedian Lewis Black has certainly done his share of hard work writing jokes. He also has copyrighted them. Now he and a host of other famous comedians are seeking compensation for the use of those jokes by streaming giant Pandora Media, LLC. Lawsuits by Black and George Lopez recently were added to the consolidated copyright infringement lawsuit in the United States District Court for the Central District of California titled In re Pandora Media, LLC Copyright Litigation, 2:22-cv-00809-MCS-MAR. Black and Lopez join other copyright holders of the comedic material created by Bill Engvall, George Carlin, Ron White, Robin Williams, Andrew Dice Clay, Nick Di Paolo, and Bill Hicks. Together, the comedians challenge Pandora’s practice of making available through their digital broadcast radio and interactive streaming services the copyrighted works of these comedians without the proper licenses. Image from Everett Collection / Shutterstock.com The suit calls into question Pandora’s entire business model for providing spoken word comedy content, and provides a useful backdrop for introducing the various copyright and licensing issues at play (pun intended) in the context of broadcasting and streaming comedy and literary works, as opposed to music. The claims center on the plaintiffs’ copyrights in their spoken word compositions recorded on various comedy albums; in other words, their jokes and other comedic material. Anyone wishing to perform these albums, or portions thereof, needs a public performance license from the rights holders of the underlying material. In the music industry, the required public performance licenses are typically obtained from organizations like BMI and ASCAP, which streamline the licensing process. Historically, there was no analog to BMI or ASCAP for literary works (more on this below), so Pandora obtained no public performance licenses for any of its comedic content. Plaintiffs allege this failure violates their copyrights both when Pandora broadcasts that content on its digital radio service, and makes it available through interactive streaming. For streaming, the comedians also fault Pandora for not obtaining a mechanical license to stream the underlying comedic works. They note that the mechanical license is required regardless of whether Pandora has obtained a license to stream the sound recording of the plaintiffs’ comedy albums, the copyright to which is typically owned by the record label, and not the artist. The plaintiffs argue that Pandora has long been aware that its practices in the comedy space are illegal. They cite to Pandora’s SEC filings from 2011-2017, in which it disclosed that it performs spoken-word comedy content “absent a specific license from any . . . performing rights organization” and has never obtained a license for the underlying compositions for the sound recordings that it streams.  Pandora also acknowledged that it could be subject to significant liability for copyright infringement arising out of its providing spoken-word comedy content. That “significant liability” is potentially over $60 million in statutory damages for the 475 copyrighted comedic works at issue for the plaintiffs (not counting the works of Black and Lopez). For its part, Pandora claims that the comedians are compensated through licensing fees paid to the owners of the copyrights in the sound recordings, which are then shared with the comedians, and by pointing out that the comedians have historically accepted this arrangement. Up until now, no comedian has ever licensed separately the rights to their copyrighted jokes, and that, except for what Pandora calls the “dysfunctional music licensing market,” all other copyright-intensive industries have relied on the creators of the final product like record labels to secure and pass along the required rights. Pandora also notes that comedians earn valuable publicity and exposure from their works being made available by Pandora, such that the current system is fair. Pandora also has gone on the offensive, asserting antitrust counterclaims against the comedians and Word Collections—which markets itself as the ASCAP and BMI for spoken word instead of music. According to Pandora, Word Collections is a “cartel leader” that seeks to consolidate naturally competing rights into a “monopolistic portfolio” to fix the price of the only license available for the rights in the comedic works. Both the comedians and Word Collections moved to dismiss the counterclaims.  At the same time the court was adding Black and Lopez to the case, it also conducted a hearing on those motions, but has not yet issued a decision. The court also has given the parties approximately a year to engage in fact discovery. The case has the potential to change the entire system by which non-musical content is broadcasted and streamed over the internet, so the TMCA will be closely watching.

What additional value does a copyright registration confer on a run-of-the-mill neighborhood social media post? Not a lot, it appears. Earlier this year, the First Circuit affirmed the dismissal of a lawsuit brought by one neighbor against another. From 2002-2017, neighbors in the Davis Square area of the 80,000-person Massachusetts city of Somerville used the Russian-owned social networking platform LiveJournal to host a neighborhood online forum. Starting around 2010, anonymous users posted comments accusing the Plaintiff Jonathan Monsarrat of unsavory things. Monserrat made his own social media post, quoting the forum’s “abuse policy” and threatening to report anyone who had not removed the posts. Monsarrat then filed for copyright protection of his social media post. In 2017, LiveJournal changed its user terms related to censorship – consistent with Russian law – and the then-moderator, Defendant Ron Newman, decided to move the group to a different social media platform. Newman copied all existing LiveJournal threads in whole onto the new platform, including Monsarrat’s copyrighted post and the anonymous posts. Monsarrat sued Newman, alleging defamation, with respect to the anonymous posts, and copyright infringement, with respect to Monsarrat’s post. The federal district court in Massachusetts dismissed the case at the Rule 12 motion-to-dismiss phase, without any discovery. The court dismissed the defamation claims because Newman was within an exemption for re-published information within the Communications Decency Act. The district court also ruled that the publication was fair use “as a matter of law” and the case could be dismissed without discovery. The First Circuit agreed, noting “[W]e can see no plausible argument that Newman has not established fair use.” As many of you know, the fair-use test set forth in the Copyright Act has four factors: (1) the purpose of the use, (2) the nature of the work, (3) the amount of the work used, and (4) the effect of use on the potential market. The First Circuit put it bluntly: “Monsarrat cannot claim with a straight face that Newman’s copying – seven years later and on a different platform – was aimed at the same purpose.” Monsarrat’s purpose was to “encourage users in 2010 to immediately stop harassing him.” While the Court noted the district court had “overreached” by finding that Newman’s purpose was “solely for historical and preservationist purposes,” it noted that Newman’s copying was “at least minimally” transformative and was non-commercial, and therefore the first factor favored Newman. The second factor also favored Newman, because the post’s “brief workaday prose” threatening action “lies much more on the factual and informational side of the line than near the ‘core’ of copyright protection.” And although Newman copied the entire copyrighted work, which would usually tip the scales in favor of the copyright holder on this factor, the court decided this factor favored neither party, because “it would have made scant sense for Newman to take just part of the copyrighted post” and “would have misrepresented what Monsarrat wrote.” The fourth factor – the effect on the market – also favored Newman. The First Circuit agreed with the district court that “there is no plausible market for the copyrighted post,” and Monsarrat did not dispute this point. The court rejected Monsarrat’s argument that the copyright registration itself demonstrated the post’s value. The court logically reasoned that the fact of copyright registration “would be present in every case, and thus be largely beside the point in differentiating one case from another.” The outcome of this case is no surprise, but the procedural disposition is interesting. The court’s opinion was more fact-intensive than most at the Rule 12 stage – an outcome that may not be repeated in a case with less stark facts. And, at the end of the day, Monsarrat’s quest to suppress the harmful comments about him had the reverse effect: they were published nationwide. Be careful what you wish for.

We reported here last summer the outcome of Coca-Cola Company’s petitions to cancel the registrations for the above-captioned marks owned by Meenaxi Enterprise, Inc. Meenaxi appealed the TTAB’s decision to cancel the registrations to the U.S. Court of Appeals for the Federal Circuit. The basis for the appeal was that Coca-Cola did not establish a statutory cause of action based on lost sales or reputational injury as required under Section 14(3) of the Trademark Act. Coca-Cola needed to establish its entitlement to a “statutory cause of action under the Lanham Act” by “demonstrating (1) an interest falling within the zone of interests protected by the Lanham Act and (2) an injury proximately caused by a violation of the Act.” In an opinion issued on June 29, the Federal Circuit held that the TTAB erred in its reliance on evidence that was speculative regarding the claim of damages, and reversed the cancellation of the registrations owned by Meenaxi. There does not seem to be any real question here that Meenaxi’s adoption of the identical trademarks owned by Coca-Cola in India was copycat activity. Nor is there any real question that Coca-Cola’s rights in the THUMS UP and LIMCA trademarks in India and elsewhere outside of the U.S. rise to the level of “famous” trademarks. The primary question is whether the reputation or fame of the marks extended from outside of the U.S. to U.S. consumers such that sales by Meenaxi were presumably riding the coattails of the reputation of Coca-Cola’s marks and thus causing damage to Coca-Cola’s rights. The case did not address the territoriality tension of rights in trademarks owned outside of the U.S. with no established rights in the U.S. and whether such marks are entitled to protection from reputational injury in the U.S. through the Lanham Act. With respect to the evidenciary issue, the TTAB relied upon the affidavits of two Coca-Cola executives that speculated that Indian-Americans would know of the THUMS UP and LIMCA branded products because of an interest in the goods in the United States by Indian grocers, restaurants and other retail outlets. While third parties imported and sold the THUMS UP and LIMCA branded products in the U.S., Coca-Cola did not make any direct sales of its products except for de minimis sales of its THUMS UP product in Atlanta and Orlando. Additional evidence, such as a consumer survey, would have been helpful, but Coca-Cola also did not rely on a famous-marks exception. “It maintains only that it experienced reputational injury in the United States because (1) members of the Indian-American community in the United States were aware of the THUMS UP and LIMCA marks and (2) Meenaxi traded on Coca-Cola’s goodwill with Indian-American consumers in those marks by misleading them into thinking that Meenaxi’s beverages were the same as those sold by Coca-Cola in India.” It appears that Coca-Cola was not directly making more than de minimis sales of the THUMS UP branded product in the U.S. and that it did not own registered trademark rights in either mark in the U.S. at the time it filed petitions to cancel the registrations for the marks owned by Meenaxi. Notably, Coca-Cola has since filed trademark applications for the marks in the U.S. Because Coca-Cola did not provide any evidence that U.S. consumers were aware of the brands and could not demonstrate reputational harm or economic injury, the Federal Circuit did not answer the territoriality vs. confusion questions raised in this case. The majority opinion merely stated that “it remains unclear the extent to which territoriality principle applies” to false designation of origin or misrepresentation of source claims, which do not require U.S. trademark rights to bring. The court’s discussion of its decision in the Person’s Co. v. Christman case (Person’s was a well-known retailer in Japan and its attempt to stop a U.S. citizen from producing goods under its marks in the U.S. was unsuccessful because U.S. consumers were not aware of the mark or its underlying products) seems to indicate that even if Coca-Cola had submitted relevant evidence of consumer awareness in the U.S., without established trademark rights in the U.S., the court might not consider canceling a U.S. registration based on reputational damage to foreign marks due to the territoriality doctrine. Coca-Cola’s pending applications for the THUMS UP and LIMCA marks at the USPTO remain suspended pending the outcome of the cancellation proceedings. Presumably, once the cancellation proceedings are resolved in the TTAB in favor of Meenaxi, these pending applications will be refused registration based upon a likelihood of confusion. How will Coca-Cola respond to the refusal of its applications? Will it instead focus on boxing in Meenaxi’s use and registration of the marks to the U.S. only?

Who owns the creations of an artificial intelligence? From ownership in general to copyright and patent law, the answer is unclear. However, the question has taken on a new sense of urgency: inventors are creating increasingly advanced AI systems which can paint Rembrandt-style works of art, generate paragraphs of text from a single sentence, design original memes, and even generate their own music and compete in rap battles against human beatboxers. Rap aficionados may have had some complaints about the quality of the music, but when beatboxer Reeps One performed in a battle against an AI in 2018, it was still quite an accomplishment for the world of artificial intelligence. But can these AIs own their own creations, or even apply for intellectual property protections? Several inventors argue that the AI’s creations rightfully belong to the machine itself, and have applied for patent or copyright registration on its behalf. We previously discussed a notable example where the inventors of the Device for Autonomous Bootstrapping of Unified Sentience (aka “DABUS”) tried to have the AI’s creation—a unique plastic container—patented, with DABUS itself listed as the inventor. The inventors filed the application to see how far patent offices were willing to go, and how much protection they would give to an AI. The answer? Not much. Patent applications are ongoing in several countries, but the USPTO denied the application, stating unequivocally that the plain language of patent laws limits patent applications to naming only human persons as inventors. While the case is currently on appeal to the Federal Circuit, the judges have seemed skeptical of the inventor’s position, with one asking how an AI could be considered an individual. To date, the DABUS system has been awarded only one patent in its own name, from the patent office of South Africa. The US Copyright Office has adopted similar standards, most notably a “human authorship” requirement for creative works pursuant to the Copyright Act. Most recently in 2019, an inventor who tried to copyright a work of art produced by his AI (which supposedly created a visual simulation of a near-death experience), saw his application rejected by the Office. The USCO used lower court precedent—including one case we previously discussed in which the USCO ruled that a monkey could not sue for copyright infringement—to rule that the work was ineligible for protections due to its lack of a human author. A three-person board denied his request for reconsideration in February. Until and unless AIs are recognized as legal persons, they are unlikely to receive copyright protections for their creative endeavors. "The Next Rembrandt," which bears striking artistic resemblance to a real Rembrandt, is of uncertain copyright status. The question likely turns on the amount of creative input the human inventors put into the painting; did they make a substantial contribution to the outcome, or was the AI the one making the creative decisions, with the humans functioning only in a training or programming role? If the human inventors had minimal control of the creative or inventive process, the work will likely fall under the public domain, being ineligible for IP protections. Here, while the creative team did train the AI to recognize and mimic Rembrandt’s particular artistic style, a great deal of the creative decision-making was left up to the algorithm itself. As AI algorithms become more advanced and more fully integrated into everyday life, the problems surrounding them will only become more complex. Already, the USPTO has voiced concerns about human-authorship requirements stifling invention, and asked for public comment on the issue when ruling on the DABUS application. Other commentators have raised concerns about public disclosures: some inventors may attempt to hide an AI’s involvement in a new invention in order to qualify for patent protections. On the other side, some commentators worry about the consequences of giving AI inventions the same protections as those made by humans; namely, the further humanization of AI systems. Given the stance of the USCO and USPTO and the significant areas of ambiguity when it comes to AI-produced inventions, these concerns are likely to continue.

Technology is changing, but is copyright law keeping up? Stephen Thaler clearly believes it is not and has sued the U.S. Copyright Office over its refusal to register artwork created by his artificial intelligence software. You may remember Thaler from a previous TMCA article discussing his bid to obtain a patent for an AI-generated invention, which the U.S. Patent and Trademark Office rejected on the ground inventorship requires a “natural person.” In November 2018, Thaler filed a copyright application for the artwork shown above, listing the author of the work as the “Creativity Machine” (which is an AI program created by Thaler that autonomously created the work). The Copyright Office refused to register the work based on the (at least current) axiom that human authorship is necessary to support a copyright claim. The Copyright Review Board upheld the refusal in February 2022, stating it “is compelled to follow Supreme Court precedent, which makes human authorship an essential element of copyright protection.” Last month, Thaler filed a federal lawsuit challenging the Copyright Office’s decision under the Administrative Procedure Act. The main thrust of his position is that the Copyright Act affords protection to “original works of authorship” and makes no specific reference to “human authorship.” Thaler points to the fact that corporations and other “non-human entities” have been considered authors under the Copyright Act for over a century, and the extension to AI is consistent with this principal. He also contends no case has directly ruled on the issue of AI-generated works, which is significant because AI is capable of “producing creative output that, at least functionally, is equivalent to ‘the fruits of intellectual labor’ that ‘are founded in the creative powers of the mind.’” Thaler also advances a number of property-based theories, including based on accession, first possession, and the work-made-for-hire doctrine. Given the current state of the case law, Thaler likely faces an uphill battle. Courts, including the Supreme Court, have uniformly interpreted the Copyright Act to require human authorship, citing to Burrow-Giles Lithographic Co. v. Sarony, 111 U.S. 53, 56 (1884) as the origins of the concept, where the Court referred to authors as human. Since then, the Court has cited to Burrow-Giles in ways that seem to require human authorship, such as in Mazer v. Stein, 347 U.S. 201, 214 (1954), where it concluded a work “must be original, that is, the author’s tangible expression of his ideas.” 347 U.S. 201, 214 (1954) (emphasis added). In Goldstein v. California (again citing to Burrow-Giles), the Court also held that, “[w]hile an ‘author’ may be viewed as an individual who writes an original composition, the term in its constitutional sense, has been construed to mean an ‘originator,’ ‘he to whom anything owes its origin.’” 412 U.S. 546, 561 (1973) (emphasis added). Lower courts have also applied the human requirement to copyright authorship. For example, materials allegedly “‘authored’ by non-human spiritual beings” are not entitled to copyright protection without “human selection and arrangement of the revelations,” Urantia Found. v. Kristen Maaherra, 114 F.3d 955 (9th Cir. 1997), and a monkey is not entitled to claim copyright protection for a selfie because “humanity excludes animals,” Naruto v. Slater, 888 F.3d 418, 426 (9th Cir. 2018). But, despite the challenges, this case is an important one. AI is becoming increasingly present in our everyday lives, extending far beyond the scientific realm. As shown here, AI machines can now produce creative works, including music, inventions, and artwork. The human-authorship requirement could have negative implications for the growth and advancement of this relatively nascent technology. Why dedicate resources to creative AI when the work product will not receive copyright protection and can be exploited by others without remedy? Time will tell but, for now, the current landscape leaves AI creations in a less than picture-perfect world. The TMCA will continue to track this developing issue, including another forthcoming article more broadly discussing AI authorship.      

After two years of groundwork, the Copyright Office’s new forum for hearing small copyright claims is finally here. The Copyright Claims Board (CCB) began accepting claims on June 16 and seeks to provide a streamlined alternative to resolving copyright disputes in federal court. It is unclear how successful the CCB will be. The CCB’s inability to decide cases without the voluntary participation of all parties raises questions about how many disputes it will actually resolve. Add in a lack of injunctive relief, a narrow appeal pathway, and even an annual limit on the number of cases an attorney can bring, and the CCB could raise more hurdles for litigants than it eliminates. The CCB was created through the Copyright Alternative in Small-Claims Enforcement Act of 2020 (CASE Act) and consists of a three-member tribunal based in the Copyright Office. Claimants must pay $40 to file, plus an additional $60 if the respondent does not opt out and the claim becomes “active.” If successful, the claimant can recover statutory damages up to $30,000 ($15,000 per work) for registered works and up to $15,000 ($7,500 per work) for works not yet registered. Injunctive relief is not available. Since federal courts only award statutory damages for registered works, the CCB opens a unique door to statutory recovery for claimants who have started—but not yet completed—the copyright registration process. The CCB shares some procedural similarities with federal courts. For example, corporations, partnerships, and unincorporated associations can register a dedicated service agent through the CCB’s website. After providing contact information, listing additional trade names, and paying a $6 fee, the entity’s agent will appear in the CCB’s online directory of agents. Any subsequent claims brought against the entity must then be served on the agent via certified mail (or by email, if the entity has consented to receive electronic service). The CCB agent directory shares no overlap with the DMCA agent directory, so an agent registered in one directory will not automatically appear in the other. Yet, the CCB also deviates from federal courts in some procedures. Filings are submitted electronically though the CCB’s website, and all hearings are conducted remotely. Additionally, the CCB does not follow the Federal Rules of Civil Procedure or Evidence and instead uses a streamlined—but somewhat analogous—set of rules contained in Title 37 of the Code of Federal Regulations. These rules limit discovery to standard interrogatories and requests for document production in an attempt to simplify the fact-building process for pro se litigants. What may ultimately come to define the CCB, though, is that participation is optional: any party to a CCB claim can opt out by notifying the CCB within 60 days after being served notice of a claim. This automatically terminates the proceeding, and the plaintiff must bring the case again in federal court to pursue the matter further. A special provision also allows libraries and archives preemptively to opt out of any CCB claims against them. All other respondents, however, must opt out on a case-by-case basis by completing an opt-out notification form. The inability to force parties to litigate their claims in front of the CCB could stifle its effectiveness, but voluntary participation from all parties is necessary to avoid the constitutional concerns that arise when the legislative branch seeks to perform a judicial role. The CCB rules state that, by not opting out, parties lose the opportunity to have an Article III court decide the case and waive their rights to a jury trial. Because the only way to waive these rights is to make participation optional, the CCB is forced to give parties the choice to opt-out. If parties do agree to litigate in front of the CCB, they can only appeal its decision to a federal court on narrow grounds. The first line of appeal is to request that the panel reconsider its decision for a clear error of law, a clear error of material fact, or a technical mistake. Next, a party can ask the Register of Copyrights to review the panel’s decision for abuse of discretion. Getting external review is harder—the only path to review by a federal district court is by alleging fraud, corruption, misrepresentation, or misconduct. This high hurdle may make it difficult to correct erroneous findings that could have been avoided with more thorough discovery and briefings. To address concerns of copyright trolls flooding the system, the CCB contains some defensive measures to combat unmeritorious claims. First, a CCB attorney must pre-approve all claims before they can be served, throwing out any that clearly do not state a claim upon which relief can be granted. Additionally, bad faith conduct is punishable with fines up to $5,000 (including attorneys’ fees), and repeated instances of such conduct can trigger a bar on bringing future claims before the CCB. Bad faith conduct is not the only limitation on bringing claims, however. The CCB rules place limits on the number of cases anyone can bring over a 12-month period. Individuals and corporations can bring up to 30 claims, while this limit is raised to 40 for solo practitioners and 80 for law firms (opt-outs still count towards the limit). Will these limits ultimately serve the CCB’s objectives of discouraging trolls and increasing access to justice? The caps could be simultaneously too high to keep out all frivolous claims, but too low to incentivize lawyers and firms to specialize in CCB-claims. Time will tell how large the CCB’s docket may ultimately grow (there were 36 open cases as of June 30, 2022), but there are plenty of questions to ask as the program gets underway. Will defendants choose to proceed in the CCB when they have the ability simply to opt-out? Will plaintiffs find it worthwhile to wait 60 days for defendants to decide to participate, knowing there is no prospect of injunctive relief? Will attorneys bother focusing on the CCB when they face fewer restrictions in federal court? More fundamentally, will the CCB actually simplify anything? The streamlined rules of procedure and evidence adopted by the CCB are designed to facilitate litigation by pro se parties. But the Copyright Office admits it “must allow for some degree of complexity in those situations where complexity is inherent in the factual context.” And the CCB has the authority to dismiss cases it thinks are unsuited to its administrative capacity or expertise. Will the CCB overcomplicate proceedings or punt on cases it does not want to hear? These unanswered questions suggest it will be some time before the true advantages and shortcomings of the CCB become apparent.

A federal court judge in the U.S. District Court for the Southern District of New York recently denied the prevailing Defendants’ motion for $11.6 million in attorneys’ fees in a trade secret misappropriation case between two large competitors providing translation services. Despite the Court indicating that the lawsuit had not been filed and pursued in good faith, and also finding the Plaintiff’s overall litigation conduct to be “unsavory business,” the Court nevertheless ruled that the Defendants failed to meet the requisite standard of bad faith necessary to receive an award of fees under the Defend Trade Secrets Act (“DTSA”). The Court’s ruling is a useful illustration of the high bar that courts may set for establishing bad faith under the DTSA. The dispute goes back to August 2015 when the Delaware Court of Chancery ordered a court-supervised auction for the sale of Plaintiff TransPerfect Global, Inc. (“TransPerfect”), so that one of its co-founders could dissolve her relationship with TransPerfect and sell her ownership interest. Defendant H.I.G. Middle Market, LLC (“H.I.G.”), which acquired TransPerfect’s largest competitor—Lionbridge Technologies, Inc. (“Lionbridge”), a second defendant in the case—in February 2017, was one of the participants in the auction. As such, H.I.G. was given access to TransPerfect’s confidential information. TransPerfect claimed that H.I.G. was never a legitimate bidder in the auction, but instead used the auction to gain access to TransPerfect’s trade secrets and confidential information, including documents that a court-appointed TransPerfect Custodian erred in uploading in unredacted form, and then unfairly competed with TransPerfect. TransPerfect also alleged that Lionbridge changed its sales strategy, offered products and pricing to mirror those of TransPerfect, and used TransPerfect’s trade secrets to poach its clients. Accordingly, TransPerfect filed suit in 2019 against Lionbridge and H.I.G. alleging, among other claims, misappropriation of trade secrets under the DTSA and state law. TransPerfect sought injunctive relief and damages. Approximately two years later, and after significant discovery, Defendants moved for summary judgment on all of TransPerfect’s claims. The Court granted the motion, finding that TransPerfect had failed to show sufficient evidence to support its claims. In analyzing the trade secret misappropriation claims, the Court found that TransPerfect failed to show evidence that a majority of the documents identified by TransPerfect as allegedly containing trade secrets that were misappropriated by Defendants, were either accessed by Defendants or actually contained trade secrets. However, the Court confirmed that two categories of information that were accessed by H.I.G.—TransPerfect’s average payment to its freelance linguists in cents per word and its 2014 and 2015 revenues per customer—constituted trade secrets. But the open question before the Court was whether these trade secrets had been acquired by improper means so as to constitute misappropriation. The Court ruled that TransPerfect had failed to establish misappropriation. The Court reasoned that the parties had a confidentiality agreement explicitly permitting H.I.G. and its representatives to access information about TransPerfect to conduct due diligence and evaluate a potential acquisition of TransPerfect, and that the court-appointed TransPerfect Custodian’s error in uploading unredacted documents that included the trade secrets at issue was not in fact misappropriation by Defendants. The Court also stressed that TransPerfect had not requested the return or destruction of that information. Finally, the Court found that the confidentiality agreement permitted Defendants to use information about TransPerfect in connection with the auction and that TransPerfect has failed to demonstrate that its trade secrets were used for any other purpose. Having prevailed on their motion for summary judgment, H.I.G. and Lionbridge filed a motion for attorneys’ fees exceeding $11.6 million. In support of their motion, Defendants argued that TransPerfect had initiated the lawsuit solely to seek revenge against, and to harass Lionbridge, its largest competitor, and H.I.G., Lionbridge’s private equity sponsor, for their participation in the auction of TransPerfect, even though there was no supporting evidence for TransPerfect’s allegations. Under the DTSA, a court can award reasonable attorneys’ fees to the prevailing party when a claim of misappropriation is made in bad faith, which can be established by circumstantial evidence. Courts also have inherent power to award attorneys’ fees for bad faith, which requires the movant to show that the challenged claim lacks any legal or factual basis and was brought in bad faith, i.e., was motivated by improper purposes such as harassment or delay. A finding of improper purposes can be inferred when an action is so completely without merit so as to necessitate the conclusion that the action must have been undertaken for some improper purpose. In light of the summary judgment ruling, Defendants were clearly the prevailing party. Accordingly, the Court analyzed whether Defendants had demonstrated that TransPerfect filed the misappropriation claim in bad faith. First, the Court indicated that TransPerfect did not have a good faith basis to file the lawsuit initially, seemed to be conducting a search for a viable claim after commencing suit, and then continued to pursue its claims even after it became clear that it had not suffered any damages. Second, the Court looked at the conduct of TransPerfect’s CEO in other lawsuits against almost every other entity connected to the auction, in what was alleged to be an orchestrated campaign to undermine the auction, which the Delaware Supreme Court described as “reprehensible.” The Court stated that, “this is unsavory business” but the question remained whether Defendants had established TransPerfect’s “bad faith to the degree demanded by law.” The Court ultimately concluded that Defendants had made a strong showing of TransPerfect’s bad faith but had failed to reach the required standard, and thus denied their motion for fees. As this case demonstrates, the expense of trade secrets litigation can be very significant. Yet, prevailing defendants may nonetheless be left holding the bag for their fees, as establishing the bad faith required for fee shifting to occur under the DTSA may require extraordinary circumstances.  

California employers have navigated the ever-changing privacy landscape when it comes to employee and personnel personal information (“human resources data”). For years, California employers’ obligations were narrow in scope compared to covered businesses’ broader obligations to consumers under the California Consumer Privacy Act (“CCPA”). The California Privacy Rights Act (the “CPRA”) expanded these obligations and set a deadline for employer compliance by January 1, 2023. Now, with two pending privacy bills on the horizon, California employers may need to meet additional obligations in 2023 and beyond. As previously shared, employers already have existing obligations under the CCPA regarding human resources data – the personal information of a job applicant, employee, owner, director, officer, medical staff member, or contractor of a covered business collected and used (1) in the context of the covered business’s relationship with the employee or personnel, (2) to maintain emergency contact information on file, or (3) to administer benefits. Under the CCPA, California employers must provide a notice to employees and personnel describing the categories of human resources data to be collected and the purposes for which the categories shall be used. By the time the CPRA goes into effect on January 1, 2023, California employers will need to have revised the notice to meet three broader obligations. First, the notice must disclose whether the employer sold the human resources data. California employers should keep in mind that CPRA broadly defines “sale” – if a California employer receives monetary or “other valuable consideration” for “selling, renting, disclosing, disseminating, making available, or otherwise communicating” human resources to a third party, the notice must disclose this as action as a sale. Second, the notice must describe the retention period that applies to the human resources data. California employers can meet this obligation by describing either (a) “the length of time the business intends to retain each category of personal information, including sensitive personal information,” or (b) “the criteria used to determine that period” provided that the human resources data is not retained for longer than is necessary for the disclosed purpose. Third, the notice must disclose categories of “sensitive personal information” as a separate category if the information is collected or processed with “the purpose of inferring characteristics” about the employee or personnel. “Sensitive personal data” includes, among other things, a Social Security, driver’s license, state identification card, or passport number; an account log-in, financial account, debit card, or credit card number in combination with credentials needed for access to the account or cards; precise geolocation; racial or ethnic origin, religious or philosophical beliefs, or union membership; mail, email, or text messages contents unless the business is the intended recipient; and, genetic data (this would likely mean that the notice should disclose that certain sensitive personal information is submitted to the Department of Fair Employment and Housing should Senate Bill 1162 pass). California employers can meet the broader CPRA obligations by January 1, 2023 by taking steps now. Aside from broadened obligations under the CCPA and the CPRA, California employers may need to account for two privacy bills when collecting and processing human resources data should the bills become law. Assembly Bill 1651 (“AB 1651”), coined as the “Workplace Technology Accountability Act,” seeks to build upon the CCPA and CPRA regarding human resources data. Introduced by Assembly Member Ash Kalra, AB 1651 seeks to “impose various duties on employers and their vendors regarding the ability to collect and use worker data, as defined.” The proposed definition of “worker data” includes “any information that identifies, relates to, describes, is reasonably capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular worker.” “Worker data” includes some categories of data already covered by the CCPA and CPRA, such as biometric information, but also includes “human resources information” such as a personnel file or performance evaluation. Like the CCPA and CPRA, AB 1651 would require California employers to provide a notice “at or before the point of collection” that informs workers about the specific categories of worker data to be collected, the specific purpose for which the specific categories of worker data are collected or used, and whether and how the data is related to the worker’s essential job functions. However, the AB 1651 enlarges the CCPA and CPRA by generally prohibiting “audio-visual monitoring of a workplace in a worker’s residence, a worker’s personal vehicle, or property owned or leased by a worker” unless that audio-visual monitoring is strictly necessary to accomplish compelling purposes. The bill also generally prohibits electronic monitoring systems that incorporate facial recognition, gait, or emotion recognition technology. AB 1651 further requires employers or vendors to submit to the labor agency a summary of its uses of algorithms, also referred to as “automated decision systems,” and to complete an algorithmic impact assessment before using the system to make or assist an employment-related decision. The bill has been met with criticism from several groups, including the California Chamber of Commerce. AB 1651 was referred to the California State Assembly Committee on Privacy and Consumer Protection last month, but was later withdrawn from consideration prior to a hearing in the Assembly’s Committee on Labor and Employment. The bill currently sits with the Committee on Privacy and Consumer Protection. California employers may have additional obligations under Senate Bill 1189 (“SB 1189”), which also seeks to build upon the CPRA by further refining obligations for biometric information. Introduced by Senator Bob Wieckowski, SB 1189 seeks to require private entities in possession of biometric information, as defined, to develop and make available to the public a written policy. The proposed definition of “biometric information” includes a “faceprint, fingerprint, voiceprint, retina or iris image, or any other biological characteristic that can be used to authenticate the individual’s identity.” Human biological samples used for valid scientific testing or screening and information captured by a health care provider under the federal Health Insurance Portability and Accountability Act are not covered by the proposed bill. Similar to the CPRA, SB 1189 would require California employers to develop a retention schedule and guidelines for destroying biometric information by earliest of (a) the date on which the initial purpose for collecting or obtaining the biometric information is satisfied; (b) one year after the individual’s last intentional interaction with the private entity; or (c) within 30 days after the private entity receives a verified request to delete the biometric information submitted by the individual or the individual’s representative. Should the bill pass, California employers would need to develop this policy by September 1, 2023. SB 1189 was referred to California Senate Appropriations Committee last month. At the May 19, 2022 Appropriations Hearing, the bill was taken under submission. Will California employers have more obligations beyond the CCPA and CPRA if AB 1651 and SB 1189 pass? Yes. In addition to supplementing the CCPA/CPRA required notice, California employers will need to expand the notice to include worker data as defined by AB 1651 and to assess workplace monitoring systems and any use of algorithms. California employers will also need to revise retention schedules to set clear guidelines for destroying biometric information. For now, California employers will need to wait and see if these bills become law. In the meantime, the CCPA/CPRA-required notices should be revised in preparation for January 1, 2023. Additionally, other states have introduced similar legislation. National employers should monitor pending legislation in Minnesota, New York, Washington, and Virginia.

A trademark infringement lawsuit filed in Minnesota by Taco John’s against Minnesota Mexican restaurant Taco Chon Mexican Grill is heating up in federal court and the court of public opinion. Taco John’s is a large restaurant franchise founded in the late 1960s, with more than 300 locations centered in the mid-western United States. Taco Chon is a restaurant founded in 2019 with two locations in Minnesota. Both entities sell similar dishes, like tacos, quesadillas, and burritos, and have similar prices. Claiming consumers are likely to confuse the restaurants, Taco John’s sued Taco Chon in Minnesota federal court in late April. After Taco John’s served its lawsuit, Taco Chon has attempted to capture the public narrative by casting the dispute as a David and Goliath battle between a corporate fast food powerhouse and a local family restaurant. Taco Chon also fired back with a counterclaim for abuse of process. The dust-up highlights the potential public relations blow back when a large brand owner attempts to enforce its rights against a smaller and potentially sympathetic defendant. Taco John’s calls itself “one of the largest Mexican quick-service restaurant brands in America” and traces its roots to a taco stand in Cheyenne, Wyoming that opened in 1968. Taco John’s signature dish is the Potato Olé, a bite-sized, fried and seasoned round potato snack. Taco John’s holds numerous trademark registrations through its trademark licensing entity, Spicy Seasonings, LLC, including a registration for TACO TUESDAY, a Tuesday tradition Taco John’s claims to have launched. Despite its trademark holdings, Taco John’s does not appear to be a frequent trademark litigant—a search of federal court records revealed no other trademark lawsuits in the last ten years. Taco John’s complaint alleges that it first learned of Taco Chon in early 2022. Taco John’s asserts infringement of its TACO JOHN’S marks, citing U.S. Trademark Registration Nos. 1,088,950, 1,617,184, and 1,627,389. Taco John’s alleges that the Taco Chon name is “an attempt to trade on the goodwill and commercial magnetism that Taco John’s has built up in the [TACO JOHN’S trademark] and to free-ride on Taco John’s fame as a preeminent Mexican restaurant brand.” The complaint points out that both Taco Chon locations are located within five miles of Taco John’s stores and that both entities use “the exact same trade channel … quick service Mexican restaurants.” Taco John’s brought claims for federal trademark infringement, dilution, and unfair competition, as well as related state law claims. The Savage, Minnesota, Taco John’s location identified in Taco John’s complaint as 4 miles from the Taco Chon location in Burnsville, Minnesota. Taco Chon was founded in Minnesota in 2019 and opened its first location in a suburb of Minneapolis. It opened a second location in St. Cloud, Minnesota, in late 2021. Taco Chon’s owner (and co-defendant) Juan Ramos attributes the name to his father and has said his family operated a restaurant of the same name in Mexico. Ramos has told the media that he didn’t think about the Taco John’s brand when naming his restaurant because “I never thought it was going to be related because we are Taco Chon, not Taco John’s, you know?” One of two Taco Chon locations, this one located in Burnsville, Minnesota, a suburb of Minneapolis. Taco Chon struck back on social media and attracted regional media coverage of the dispute. Taco Chon characterizes the lawsuit as trademark bullying and denies that consumers are likely to confuse the two entities. Taco John’s has kept a lower profile, but has cast itself as a reluctant litigant, telling the media “We take no joy in enforcing our trademark rights in court against a small business owner and only do so after other options have been exhausted.” The lawsuit has attracted significant media coverage, including from Minneapolis’s CBS and Fox affiliates. Media reports also indicate that Taco Chon intends to fight back. Taco Chon’s social media accounts have numerous references to the lawsuit and generally cast Taco Chon as a victim unable to defend itself against the larger entity. Taco Chon launched a crowd funding page seeking donations to pay for legal counsel, which has attracted modest financial support. In a statement released on Taco Chon’s Facebook page, Taco Chon’s defense counsel characterized the lawsuit as “trademark bullying … that is reminiscent of a schoolyard showdown between the classic bully and his easy target.” The statement went to say that the lawsuit “raises questions of cultural appropriation” because “Taco John’s menu is not Mexican food but features burritos, nachos, and other foods not originating from Mexican cuisine.” Taco Chon filed its answer and counterclaim with the court on May 16, alleging themes similar to its media narrative. Taco Chon characterized the lawsuit as an attempt to “bully a small business owner … to destroy their American dream.” Taco Chon asserts that its “authentic Mexican cuisine” cannot be confused with Taco John’s “Mexican-inspired fast food, which it calls ‘West-Mex.’” Taco Chon’s counterclaim for abuse of process asserts that Taco John’s brought suit “with an ulterior motive of intimidating, embarrassing and harming [Taco Chon]’s reputation.” Just as Taco John’s will need to prove the allegations in its complaint, Taco Chon will need to prove the allegations in its counterclaim through the court process. This lawsuit is not the first time a large brand owner has been accused of trademark bullying after suing a smaller entity. Trademark owners must actively police their marks, or those marks can be weakened through non-enforcement. Still, brand holders must strike a balance between aggressive, appropriate enforcement and an over-zealous approach that creates more public relations blowback than additional brand value. Some choose PR-friendly, whimsical tactics for cease-and-desist letters; others choose less humorous approaches. Another option is a “wait and see” approach—if an infringing user is small (and may not last in business), a trademark owner might consider simply monitoring to see if the infringer’s use expands. This can be cost effective, although it does create the risks that the infringer may be less inclined to change its mark the longer it has been in use and that courts might be less sympathetic to a trademark plaintiff that waited to enforce its rights. The Taco John’s-Taco Chon battle is off and running in the court of public opinion, but the court process is just beginning. Only after the strength of Taco John’s claims is evaluated in court will it be possible to assess whether Taco John’s overreached to bully a small business owner, or whether Taco Chon’s is unfairly trading off of Taco John’s name. Disclosure: Dorsey & Whitney LLP was involved in assigning one of the trademark registrations asserted in Taco John’s lawsuit in the 1980s.

Image from ArifinArt / Shutterstock.com Typically, Godzilla and other kaiju (Japanese for “strange beast” and also referring to a genre of fiction involving giant monsters) use their armored skin, massive size, and superpowers to protect themselves against almost anything, including human armies, natural disasters, and other kaiju. Perhaps the most powerful non-physical weapon/defense in a kaiju’s arsenal is copyright law. The Honorable Percy Anderson of the Central District of California recently confirmed that copyright can protect even kaiju who are monstrous mountains in Summit Kaiju LLC v. Legend Pictures, LLC, CV 21-9779 PA (ASx) (C.D. Cal. Apr. 12, 2022). Summit Kaiju (“Summit”) hired an artist to create concepts for new kaiju that would live within Godzilla’s fictional universe. One such kaiju is named “Batholith,” which is “a living mountain kaiju made in part of stone.” Summit registered its copyright in Batholith’s “Character Design” with the U.S. Copyright Office on July 7, 2017. That same month, Summit announced Batholith at the Annual Godzilla Festival and began publicizing Batholith through social media. In 2014, three years before Batholith’s public unveiling, Legend Pictures (“Legend”) began developing a film titled “Godzilla: King of the Monsters” as well as a novelization of the film. Legend originally planned to license an assortment of Kaiju from Toho Co. Ltd., the Japanese film company best known for creating Godzilla. Unfortunately, Legend discovered that it could not afford Toho’s terms. Realizing that the show must go on, Legend resolved to find its kaiju elsewhere. Thus, on or about July 2018, Legend either created a new kaiju – Titanus Methuselah (“Methuselah”). Or, according to Summit, Legend simply copied Batholith and renamed it as Methuselah. Despite the fact that development of Legend’s film began before Batholith was created, there does not currently appear to be any suggestion that Batholith was created after Titanus was created. Summit filed a Complaint for direct and indirect copyright infringement that includes images of kaiju allegedly showing “not only substantial, but also striking” similarities resulting in public confusion. This confusion allegedly caused Summit to have problems developing merchandise and media for Batholith. Summit contended that Legend’s designers had access to Batholith through at least the 2017 Godzilla Conference and Summit’s Batholith blitz on various social media accounts, some of which were followed by Legend’s designers. Legend moved to dismiss the Complaint for failure to state a claim for copyright infringement, arguing that Summit cannot establish that Batholith is protected by copyright or that Methuselah is substantially similar to Batholith. To prevail on a copyright infringement claim, the plaintiff must establish (1) ownership of a valid copyright and (2) copying of original elements of the copyrighted work. Legend argued that Summit could not meet either requirement because Batholith could not be protected by copyright and the two monsters are not substantially similar. Analyzing the first requirement, Judge Anderson recognized that characters cannot be protected by copyright per se, because the Copyright Act does not specifically list them as copyrightable subject matter. Summit’s copyright in Batholith was, therefore, limited to the artistic rendition of Batholith in a visual form, rather than the concept of such a character. However, there is a long history of extending copyright protection to graphically-depicted characters if a character is particularly distinctive. Under DC Comics v. Towle, 802 F.3d 1012, 1019 (9th Cir. 2015), courts in the Ninth Circuit permit copyright protection of a character if (1) the character has physical as well as conceptual qualities, (2) it is sufficiently delineated to be recognizable as the same character whenever it appears and displays consistent, identifiable character traits and attributes, and (3) the character is especially distinctive and contains unique elements of expression. Applying the Towle test to Batholith, Judge Anderson first found that Summit sufficiently alleged that Batholith has physical as well as conceptual qualities – i.e., the images of Batholith combined with a succinct explanation that Batholith is “a living mountain kaiju made in part of stone” suffice to meet this requirement. Second, the Court found that Batholith was recognizable wherever it appears and has consistent, identifiable character traits and attributes. Specifically, Batholith “consistently presents as a rampaging mountain kaiju made in part of stone and set in the Godzilla universe,” and images of Batholith consistently show it as a giant quadrupedal mountain monster with a tail. Third, Judge Anderson determined that Batholith is especially distinctive and contains unique elements of expression because it is not merely a stock character. It is a four-legged living mountain made partly of stone within the Godzilla universe, it has a distinctive name, and it also has its own stories. Accordingly, Summit plausibly alleged ownership of a valid copyright. The second requirement of a copyright claim, substantial similarity, has two components: (1) copying and (2) unlawful appropriation. The Court found that there were enough similarities between Basolith and Methuselah for reasonable minds to differ as to whether those similarities are substantial. Summit alleged more than trivial similarities, and those differences could be further analyzed and developed by experts. Thus, Summit alleged sufficient similarities between the two monsters to survive a motion to dismiss. Since Legend’s motion to dismiss Summit’s direct and indirect infringement claims were based on the same arguments, Judge Anderson denied the motion to dismiss in its entirety. It is certainly easier to survive a motion to dismiss than to prevail at trial or on summary judgment. The Court’s opinion here was reserved and even-handed. Clearly Judge Anderson thinks that Summit’s case is strong enough to move beyond the pleading stage. However, nothing in his opinion suggests that victory for Summit is a foregone conclusion. Based on the content of the Complaint and the evidence mentioned in Legend’s motion to dismiss, Summit might have a difficult time proving infringement. Assuming that Summit meant to put its best foot forward when it filed its Complaint, the comparative pictures of Batholith and Methuselah show, to my lay person’s eye (full disclosure, while not a kaiju expert, I have seen and enjoyed several Godzilla movies), vague, but not substantial similarities. Here is an image of Batholith from the Complaint: For comparison, here is the first picture of Methuselah in the Complaint (blue circle): The similarities between the two kaiju are hazy at best. If not for the text of the Complaint and the blue circle, I would have guessed pile of rubble before living mountain kaiju. None of the images of Methuselah used in the Complaint show more than blurry, ambiguous details. This is because, as Legend’s motion to dismiss explains, “Methuselah appears in the Film for approximately twenty seconds and is never seen clearly.” Unless Summit is able to find better images of Methuselah during discovery, proving substantial similarity will be a challenge.

Image from tanuha2001 / Shutterstock.com To end the harm following Russia’s invasion of Ukraine on February 24, 2022, numerous forms of sanctions were imposed against the Russian government and economy. Many Western governments limited access to financial systems, denied entry of Russian nationals into their countries, and prohibited the import and export of certain Russian commodities. Even some Western-based companies imposed their own forms of sanctions, including ceasing all business from or within Russia, shuttering franchised restaurants, and even suspending the release of movies and products in the country, in order to reflect their stance against the war. But Russia has issued its own response, and one of its first surprising targets is the loveable pink cartoon pig, Peppa. Peppa Pig is a British animated television series about Peppa, a female piglet, her family, and friends of varying animal species. It first aired in May 2004, and has since been broadcast in nearly 180 countries and translated into over forty languages. In light of her worldwide popularity, undoubtedly because of her adorable demeanor, Peppa’s brand value has soared. In December 2019, Hasbro, Inc. acquired Entertainment One, the television studio that owns rights to the Peppa Pig franchise, for $3.8 billion, and renewed the series for additional seasons until 2027. Peppa has theme parks, videos games and feature films based on her adventures, and the series has won numerous awards and accolades, including the praise of British Prime Minister Boris Johnson, who watches the series with his children. But with fame comes those attempting to take advantage. In September 2021, Entertainment One sued a Russian entrepreneur, Ivan Kozhevnikov, for copyright infringement based on his unauthorized versions of the Peppa character and her friends. The compensation for copyright infringement was minimal compared to Peppa Pig’s value—just 40,000 rubles, or about $400 at the time—but Entertainment One had had prior success in enforcing its rights in the cartoon in Russia. But in a shock to intellectual property owners everywhere, Judge Andrei Slavinsky subsequently dismissed the case in March 2022, citing the “unfriendly actions of the United States of America and affiliated foreign countries.” Slavinsky noted that Russians were free to use the Peppa Pig characters as they pleased. This ruling came on the heels of an official decree from the Kremlin, which opens the gates for willful intellectual property infringement. The decree states that Russian businesses are under no obligation to pay for their unauthorized use of patented inventions, industrial designs, and utility models from “unfriendly countries” such as the U.S. and the U.K. The list of “unfriendly countries” is expansive and also includes the Ukraine, all members of the European Union, Canada, Australia, Japan, and South Korea. The ruling in Entertainment One’s suit is alarming for many reasons, and opens up the door to rampant abuse of others’ intellectual property rights, including trademark and copyright rights. Some companies even fear that local operators will be allowed to run shuttered Western-branded restaurants and stores left behind when companies exited the country. But as the impact of the war is felt, we will keep you updated on how companies are navigating the current restrictions on their ability to enforce rights, and what steps can be taken to mitigate harm.

Image from Evan El-Amin / Shutterstock.com During the 2016 presidential primaries, then presidential candidates Donald Trump and Senator Marco Rubio exchanged insults, with Trump calling Rubio “Little Marco” and Rubio commenting on the size of Trumps hands. Recently, this exchange was the basis for a Federal Circuit decision reversing a refusal to register the trademark TRUMP TOO SMALL as an unconstitutional restriction of speech under the First Amendment. In 2018, Steve Elster applied to register the mark for use on T-shirts and related apparel. As the Federal Circuit recounts, “According to Elster’s registration request, the phrase he sought to trademark invokes a memorable exchange between President Trump and Senator Marco Rubio . . . and ‘aims to ‘convey[] that some features of President Trump and his policies are diminutive.’” The Examining Attorney at the United States Patent and Trademark Office denied Mr. Elster’s application under Sections 2(a) and 2(c) of the Lanham Act. On appeal to the Trademark Trial and Appeal Board (“TTAB”), the TTAB affirmed the refusal of the application, relying solely on Section 2(c) of the Lanham Act. Section 2(c) of the Lanham Act prohibits registration of a trademark that: “Consists of or comprises a name, portrait or signature identifying a particular living individual except by his written consent.” 15 U.S.C. § 1052(c). Section 2(c) does not prohibit all uses of an individual’s name in a trademark. Rather, it applies only when: (1) the public would reasonably assume that the goods associated with the mark are connected with the particular individual due to the individual’s fame or recognition; or (2) the individual is publicly connected with the business in which the mark is, or will be, used. There was no dispute that President Trump is sufficiently famous to fall within the protection of Section 2(c) “not only because of his political office but also because of his prior celebrity.” Elster argued that refusing to register the TRUMP TOO SMALL trademark violated his right to free speech under the First Amendment. The TTAB noted that as an administrative tribunal, it does not have the authority to strike down any statute as unconstitutional, but noted that a constitutional challenge may involve “many threshold questions . . . to which the [agency] can apply its expertise”, and went on to find that the refusal to register TRUMP TOO SMALL was not unconstitutional. The TTAB first opined that Section 2(c), like all of Section 2 of the Lanham Act, merely sets forth criteria for obtaining a federal trademark registration. It does not control the use of the trademark. Indeed, one can use a trademark in commerce without obtaining a registration and Elster could do so here even if the registration is denied. Second, the TTAB found that Section 2(c) does not restrict any particular type of speech, but applies in “an objective, straightforward way to any proposed mark that consists of or comprises the name of a particular living individual, regardless of the viewpoint conveyed by the proposed mark.” Accordingly, the TTAB affirmed the Examiner’s refusal to register TRUMP TOO SMALL. On appeal, the Federal Circuit reversed the TTAB, finding that Section 2(c) is unconstitutional as applied to the TRUMP TOO SMALL trademark, while deferring any decision on whether it is unconstitutional in all cases. The Court noted that trademarks can be protected speech and that denying registration, while not prohibiting use of the trademark, “chills speech” by stripping the mark of the many advantages associated with federal registration. Accordingly, there must be a substantial government interest to justify restricting speech by denying a registration. The purpose of the Section 2(c) is to protect state law rights of privacy and publicity that individuals have in their names, appearance, and likeness. The Court quickly found that a right of privacy cannot shield a public official from comment or criticism. The Court also questioned whether a political figure maintains a right of publicity at all. At the very least, the political figure’s right of publicity would not permit a prohibition on the distribution of posters, buttons, apparel, or other materials that express support for or disagreement with the political figure. In short, “[a]s a result of the President’s status as a public official and because Elster’s mark communicates his disagreement with and criticism of the then-President’s approach to governance, the government has no interest in disadvantaging Elster’s speech.” As we reported previously, the Supreme Court has found that portions of Section 2(a) of the Lanham Act, which prohibit the registration of “immoral, deceptive, or scandalous” trademarks and trademarks “which may disparage . . . any persons, living or dead” are unconstitutional. While this opinion expands the Supreme Court’s reasoning to Section 2(c), whether its reasoning applies to trademarks that do not involve political figures or that do not criticize famous individuals remains to be seen. The Federal Circuit noted that it was only asked to analyze Section 2(c) as applied to Elster’s mark. But it did go on to note that Section 2(c) may be “impermissibly overbroad” because it does not leave the USPTO discretion to permit registration for marks that advance First Amendment interests.

Hyperbolic descriptions of the supposed importance of cases dealing with intellectual property rights are as numerous as they are unfounded, but that is not true when it comes to The Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith, Case No. 21-869, in which the U.S. Supreme Court just granted certiorari. It is no exaggeration to characterize Warhol Foundation as the most important fair use case to come before the Supreme Court since 1994, and more than reasonable to posit that Warhol Foundation is the most important fair use case ever. Why? Because this case is likely to settle two of the most vexing copyright issues that has bedeviled courts all over the country for decades: to what extent can an author take a prior copyrighted work and incorporate elements of that prior work into a new work under the doctrine of fair use, and what makes that use fair? In particular, courts have struggled to apply the fair use doctrine in cases where there are arguments that the new work is “transformative,” and therefore fair. If Warhol Foundation articulates a clear standard for what makes a new work transformative, as seems likely, then the decision to come will be a true game changer. The TMCA has covered Warhol Foundation before, and the facts are not in dispute. In 1981, the photographer Lynn Goldsmith took the then-unpublished photo below of the iconic singer Prince. In 1984, Goldsmith licensed her photo to Vanity Fair magazine for use as an “artist reference,” that an unnamed artist would create for Vanity Fair to publish. Warhol turned out to be the artist, and his new work was published later that year, as shown below. However, unbeknownst to Goldsmith, Warhol took Goldsmith’s photo and also used it to create a series of fourteen additional works, dubbed the “Prince Series,” some of which appear below. Following Warhol’s death in 1987, the works that embody the Prince Series were either sold to third parties or sent to the Warhol Museum in Pittsburgh for display, and the Warhol Foundation regularly licensed them for commercial use. In 2018, following Prince’s death, Goldsmith allegedly learned for the first time of the existence of the Prince Series and the Warhol Foundation’s licensing of the Prince Series without any credit to her underlying work, or payment for its use. After Goldsmith sent a letter asserting claims of copyright infringement, the Warhol Foundation filed an action in the Southern District of New York seeking a declaration of non-infringement based on fair use. Goldsmith counterclaimed for infringement. The district court granted summary judgment to the Foundation on its fair use defense, holding that all four factors set forth in 17 U.S.C. § 107 bearing on the issue of fair use favored the Foundation, in that the Prince Series was: (1) “transformative” because, while Goldsmith’s photo portrayed Prince as “not a comfortable person” and a “vulnerable human being,” the Prince Series portrayed Prince as an “iconic, larger-than-life figure”; (2) although Goldsmith’s photo was both creative and unpublished, which would traditionally weigh in Goldsmith’s favor, this was “of limited importance because the Prince Series works are transformative works”; (3) in creating the Prince Series, Warhol removed nearly all of the Goldsmith photo’s protectable elements; and (4) the Prince Series was not a market substitute that harmed or had the potential to harm Goldsmith. On appeal, the Second Circuit reversed – twice – holding that the Prince Series was neither transformative nor a fair use as a matter of law, and also concluding that the Goldsmith photo and Prince Series were substantially similar as a matter of law. Even after the Supreme Court’s decision in Google LLC v. Oracle America, Inc., 141 S. Ct. 1183 (2021), reaffirmed the principle that a new work is transformative if it “adds something new . . . [by] altering the copyrighted work ‘with new expression, meaning or message’” (quoting Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (!994)), the Second Circuit stuck to its guns and held that the Prince Series of works were not transformative. Following the Second Circuit’s ruling, the Warhol Foundation filed a petition for certiorari that the Supreme Court has now granted, focusing primarily on the question of what makes a work transformative. To the Second Circuit, where a secondary work like the Prince Series “does not obviously comment on or relate back to the original or use the original for a purpose other than that for which it was created,” the bare assertion of a “higher or different artistic use,” is insufficient to render a work transformative. Instead, in order to be transformative, “the secondary work itself must reasonably be perceived as embodying an entirely distinct artistic purpose, one that conveys a ‘new meaning or message’ entirely separate from its source material.” Elaborating, the court held that “the secondary work’s transformative purpose and character must, at a bare minimum, comprise something more than the imposition of another artist’s style on the primary work such that the secondary work remains both recognizably deriving from, and retaining the essential elements of, its source material.” The Prince Series did not pass muster as to Goldsmith’s photo because, even though the Second Circuit agreed that the meaning and message of the two works were different, a point Goldsmith herself conceded, the two sets of works served the same function, the Prince Series remained “a recognizable depiction of Prince,” and Goldsmith’s photo remained the “recognizable function upon which the Prince Series is built.” In sum, Warhol needed to add more, or make more changes, to Goldsmith’s photo to make it transformative. In its cert. petition, the Warhol Foundation vigorously contested this analysis. To the Foundation, the issue is not whether the underlying work remains recognizable, or how many changes get made to it, but whether the new work adds something new that has the effect of altering the original with new expression, meaning or message, a la Campbell and Google. The Second Circuit’s decision, according to the Foundation, precludes any consideration of the message behind the new work, in a manner wholly at odds with Campbell and Google, and also the holdings of most other circuit courts. Far from deriding judicial inquiry into the meaning of the two works at issue as an effort to turn courts into “art critics,” as the Second Circuit did, the Foundation argued that an essential element of the inquiry into what makes a new work transformative is whether the new work alters the meaning of the prior work. The Foundation’s petition also argued that the real-world ramifications of the Second Circuit’s decision on other artists, museums and galleries to create or display works derived from prior works were severe. Both the Foundation and a series of amici argued that limiting the application of the fair use doctrine in a manner like the approach adopted by the Second Circuit would stifle artistic expression, compromise First Amendment rights and result in unwarranted litigation not just against appropriation artists, but the owners of the locations where such works are displayed. Even the ability of purchasers of art appropriated from prior works to resell what they had bought was at risk, according to the Foundation. Evidently, those arguments found a receptive ear among some members of the Court, given that the petition was granted and the case will be heard next term. What makes Warhol Foundation arguably the most important fair use case of all time is that the holdings of Campbell and Google have been characterized as being limited to parody and software, respectively, and sometimes not applied in other contexts. But Warhol Foundation is a case in which one artist made alterations to the work of another to create a new work with a concededly different message. If that new work is deemed to be a fair use of the prior work as a matter of law, then the fair use defense is likely to be broadened significantly across a wide range of artistic categories and fact patterns.

Welcome to the final chapter of our Burger War Trilogy. In our earlier installments, Part I and Part II, we discussed the secondary meaning surveys proffered by both parties in this trade dress dispute. We now turn to In-N-Out’s likelihood of confusion study in this case as it provides the perfect opportunity to discuss a decision that trial counsel and their consumer survey experts routinely grapple with: To Squirt, or Not to Squirt, that is the question. Before discussing that question in the context of this dispute, a slight detour is in order. Broadly speaking, there are two types of generally accepted consumer survey formats when testing for “likelihood of confusion” in trade dress and trademark cases. There is the “Eveready” format, and the “Squirt” format. The Eveready format has been referred to as the “gold standard” when the senior user’s trade dress or trademark is a commercially strong mark. In an Eveready survey design, the senior user’s mark or trade dress is not shown to survey respondents as part of the survey and is assumed to be known to most of the relevant consumers and thus already in mind. Instead, respondents are just shown the (allegedly) offending trademark or trade dress and asked a series of questions regarding who they believe makes or puts out the product or service at issue or who the product or service might be affiliated with. By contrast, the Squirt design shows both parties’ trademarks (either juxtaposed together at once or separately seriatim) and asks a series of questions as to whether the survey respondents believe there is an affiliation or connection between the products or the companies that put them out. Neither format is necessarily a panacea in all cases. Some courts criticize the use of the Eveready format in cases where the senior user’s mark is not commercially strong because it artificially deflates confusion on the theory that not enough respondents are familiar with the senior user’s mark to draw a connection with the junior user’s mark. See e.g., Vineyard House, LLC v. Constellation Brands United States Operations, Inc., 515 F. Supp. 3d 1061, 1072 (N.D. Cal. 2021) (noting the “[w]here the query concerns marks for everyday products, used by vast majority of consumers, such as Apple, Coca-Cola, or EverReady, the short simple survey can provide some insights. That is not, and never was, this case.”); but see Hal Poret’s study in the Trademark Reporter where he concludes that “the research described herein empirically demonstrates that Eveready surveys may be appropriate for senior marks that are not top-of-mind.” The Squirt format can create “demand effects” by suggesting to consumers that there must be a connection between the two companies whose products they have just been shown. A number of courts have suggested that unless the two products are actually sold or marketed in close proximity in the marketplace, a Squirt design should not be used. See e.g., Down the Hatch: Jägermeister Douses Impaired Survey Evidence in Trademark Victory. In the present case, In-N-Out’s expert used the Squirt design in which images of the In-N-Out and Doll N’ Burger restaurants were shown seriatim, and her survey took a bit of grilling from the opposing party for doing so. The primary argument advanced by Doll N’ Burger’s expert (who used an Eveready format for his own defensive likelihood of confusion survey) is that the parties’ goods are not sold in the same geographic markets. Thus, because consumers are not likely to encounter them in close proximity in the marketplace, the Squirt design should not be used, or so went the argument. Notwithstanding these and other alleged deficiencies, the Court ultimately ruled that Plaintiff’s expert’s decision to use Squirt was a “judgment call” and that the wisdom of that call is for the fact finder. Also, the Court observed that Doll N’ Burger’s expert had used a similar Squirt design in a recent case where the two companies “d[id] not serve the same geographic regions.” In non-judicial parlance, what’s good for the goose is good for the gander. Here are some final thoughts on this burger bonanza: Use of either the Squirt or Eveready survey designs should be carefully considered by trial counsel and their experts and the pluses and minuses of both designs should weighed and assessed based on the marketplace context of the dispute. Trial counsel should be mindful of statements being advanced by an expert in your case vs. what the expert may have said or survey designs chosen by the expert in prior cases. Having a thorough, detailed discussion of the rebuttal points being advanced by the expert will be important. Don’t rule out reviewing prior reports and declarations of the expert - although it could be a bit time consuming, it could prove to be illuminating and prepare the expert for anticipated cross-examination or critiques. Lastly, the Court’s decision is a whopper of a Daubert order. The discussion of survey evidence was over 30 pages long. We did not cover all of the issues set forth in the decision in this three-part series. If you are dealing with survey evidence in a trade dress dispute, you should spend a bit of time devouring this decision along with our prior blog posts. You will leave satisfied!

Most lawyers are familiar with the well-known legal maxim that “ignorance of the law is no excuse.” In a 6-3 opinion issued on February 24, 2022, in a copyright case, the Supreme Court nonetheless held that ignorance of the law is a valid excuse in certain circumstances. Let’s take a look at the decision to see why. Unicolors, Inc. v. H&M Hennes & Mauritz, L.P. involved allegations by Unicolors, a fabric designer, that the multinational Swedish fashion company H&M Had infringed Unicolors’ copyrights. After a California jury found in Unicolors’ favor, H&M sought a determination that those copyrights were invalid because Unicolors included inaccurate information on its registration application, rendering the registration invalid. Specifically, H&M claimed that Unicolors had improperly filed a single application seeking registration for 31 separate works, even though Unicolors had at different times sold some designs separately to different customers. As such, the Copyright Office’s “single unit of publication” requirement (which provides that a single registration can cover multiple works only if those works were “included in the same unit of publication”) barred Unicolors from filing a single application. The district court denied H&M’s motion, holding that under Section 411(b) of the Copyright Act, a copyright registration that contains inaccurate information is valid, unless the inaccurate information was included with knowledge that it was inaccurate. The district court reasoned that because Unicolors did not know that it failed to satisfy the “single unit of publication” requirement, the inaccuracy did not invalidate its copyright. Unhappy with that result, H&M appealed to the Ninth Circuit, which reversed the district court. The Ninth Circuit held that it didn’t matter if Unicolors knew it failed to satisfy the “single unit of publication” requirement. In the Ninth Circuit’s view, the statute only excused good-faith mistakes of fact, not law. Since Unicolors had known the relevant facts – but not the law – it could not rely on the Copyright Act’s safe harbor. It was now Unicolors’ turn to be unhappy, and it appealed to the Supreme Court. In an opinion written by Justice Breyer, the Supreme Court held that Section 411(b) of the Copyright Act does not distinguish between a mistake of law and a mistake of fact. As such, lack of knowledge of either fact or law can excuse inaccuracy in a copyright registration. Justice Breyer – apparently an avid bird-watcher – began with, well, a bird analogy. Here’s how it went: If someone mistakes a scarlet tanager (red with black wings) for a cardinal (all red) because they didn’t see the bird’s black wings, that’s a mistake of fact. If, on the other hand, the person saw the black wings but didn’t know that scarlet tanagers – but not cardinals – have black wings, that would be a “labeling mistake.” Justice Breyer likened the bird labeling mistake to Unicolors’ mistake – Unicolors had the facts right, it just didn’t know the proper scope of the label “single unit of publication.” (Keep an “eagle” eye peeled for further bird analogies from Justice Breyer as he prepares to retire from the Court.) The opinion then proceeded to explain the bases for its holding that mistakes of law, and not just those of fact, are covered by the Copyright Act’s safe harbor for good-faith errors. First, the statute itself states that the inaccurate information must be included on the application “with knowledge that it was inaccurate” in order to invalidate the copyright registration. Knowledge, however, is equally applicable to both facts and law. Moreover, according to the Supreme Court, other statutory provisions in the Copyright Act make clear that “knowledge” means “actual, subjective awareness of both the facts and the law.” While using legislative history as a guide has fallen out of fashion of late, Justice Breyer also diplomatically noted that “those who consider legislative history will find that history persuasive here.” The legislative history here indicates that Congress enacted the safe harbor provision of Section 411(b) to make it easier, not more difficult, for non-lawyers to obtain valid copyright registrations. If that is true, it makes little sense to excuse mistakes of fact, but not those of law (i.e., the type of mistakes one would expect non-lawyers to make more often). The Supreme Court also considered and rejected two arguments that H&M made. First, the Supreme Court did not think that H&M’s interpretation of the statute would make it too easy for copyright holders to avoid the consequences of inaccurate applications, as circumstantial evidence may lead to a conclusion of actual awareness or willful blindness, neither of which is protected under the safe harbor. Second, the maxim “ignorance of the law is no excuse” applies to criminal cases, not to a civil case concerning the scope of a safe harbor provision. One interesting thing to ponder is whether this decision will only affect the interpretation of Section 411(b)’s safe harbor provision or whether litigants and courts will apply the Supreme Court’s reasoning in other contexts. We know that lack of knowledge of the law is generally not a defense in criminal actions, but might it be a defense in certain civil cases where “knowledge” is a necessary element? We shall see.

Last week we introduced our readers to the imbroglio featuring the burger behemoth In-N-Out, who accused upstart Doll N’ Burgers of infringing In-N-Out’s registered and unregistered trade dress. Typical of these sorts of savory squabbles, both sides retained consumer survey experts, both experts took broadsides from the opposing party, and the Court was left to assess the damage. In our previous post, we discussed how the Court’s analysis of Plaintiff’s secondary meaning survey provides some useful sustenance. This week’s special features a discussion of Defendant’s secondary meaning survey and how the claimed deficiencies left the Court asking Plaintiff, “Where’s the Beef?” Here’s how the Court disposed of the issues raised regarding Defendant’s secondary meaning survey: No Trade Dress Secondary Meaning Experience. Plaintiff first alleged the Court should bounce Defendant’s expert because he only had experience designing surveys in trademark disputes, not trade dress disputes. The Court quickly (and correctly) rejected this claim because “[w]hile trade dress involves some unique factors, the legal standards utilized are closely aligned, and the consumer survey methodology used for trademark and trade dress are largely interchangeable.” Excluding Other “Indicator of Source” Elements. As we observed in our previous post, when testing for secondary meaning of trade dress, it is customary to obscure the “brand and company name and other source-identifying indicia” so that the expert can isolate the trade dress at issue and measure consumer reactions to it. Accordingly, Defendant’s expert used various pictures of In-N-Out joints, but removed the “source-identifying indicia” from them, including the trademarked palm trees, the In-N-Out logo, and the fluorescent yellow sign. The Court was not persuaded that this was a fundamental flaw (or even a flaw of any kind). It indicated that this design choice was a “judgment call” and that Plaintiff was free to criticize this approach at trial if it desired to do so. Control Images Were Not “Blatantly Improper.” Plaintiff also took aim at Defendant’s expert’s decision regarding the control stimulus. For the control design, Defendant’s expert simply used the same test stimulus images, but swapped in a “blue and grey” color scheme instead of the red and white color scheme of Plaintiff’s alleged trade dress. The Plaintiff argued that the expert’s control images were “so distinctive” that it pushed survey respondents in a totally different direction towards a rival burger joint altogether, White Castle. While the Court questioned whether Defendant’s expert used a control that would “lean towards” Defendant’s desired outcome, it ultimately concluded that the expert’s decision was not “blatantly improper.” No “Freeloader” Phenomenon in the Survey Universe. Lastly, Plaintiff claimed Defendant’s expert’s survey universe was faulty. In defining who qualified for the survey, Defendant’s expert required respondents to be adults who had recently "personally purchased" a burger from a fast-food restaurant. Plaintiff claimed this universe was too narrow because it excluded “freeloaders” (the Court’s word) who would have dined at a burger joint but on someone else’s dime. In rejecting this argument, the Court observed that it was “highly skeptical that the inclusion of the word ‘personally’ caused any material change in the survey's population or led to bias in its results.” All in all, none of these alleged flaws were sufficient to keep Defendant’s expert out. So now you know “the rest of the story” with regards to the secondary meaning surveys in this case. Stay tuned for our final installment where we discuss both parties’ likelihood of confusion studies and whether they will be In-N-Then-Out of Court. One of Defendant’s Expert's "test" stimuli photos that excluded palm trees (from the cup and the fries holder) because they were other “source-identifying indicia.” Two of Defendant’s Expert's "control" stimuli photos that used a “blue and grey” color scheme. While expressing some skepticism over this design choice, the Court noted the decision was not “blatantly improper.”

This week, the FTC finalized an order settling a complaint alleging that an online fashion retailer blocked negative reviews of its products on its e-commerce site. The penalty: a $4.2 Million fine, 10 years of record keeping obligations and 20 years of compliance monitoring. The charge: the retailer automatically published four and five star reviews and put lower star reviews on hold. The Director of the FTC’s Bureau of Consumer Protection noted that “Fashion Nova is being held accountable for these practices, and other firms should take note.” So what should other online retailers be doing to avoid deceiving consumers? First, implement a fair customer review publishing policy that accurately reflects the views of all customers who submit reviews. The order gives a few tips for circumstances where it might be appropriate to hold back a review (and when it would not), but on the whole, relevant reviews must be published so consumer can get the full picture. The FTC has also released some tips for brands operating in this space: Soliciting and Paying for Online Reviews: A Guide for Marketers. And if your brand employs another company to help with its online reviews, make sure they are following the guidance in the FTC’s Featuring Online Customer Reviews: A Guide for Platforms. Ultimately, your company can be held responsible for actions undertaken by contractors you employ to help manage the publication of reviews for your brand.

A burger brouhaha involving the Lanham Act is well underway in the Wolverine state. Plaintiff In-N-Out Burgers operates hundreds of fast food joints in the West. Defendant Doll n’ Burger recently opened two locations in Michigan. In-N-Out filed suit in Michigan alleging that Doll n’ Burger is infringing In-N-Out’s registered and unregistered trade dress. Both sides retained consumer survey experts, both sides lobbed multiple critiques at their opponent’s surveys, and both sides sought to “Daubert” the other side’s expert. Doll n’ Burger requested a jury “for all jury-triable claims,” and so the Court might be expected to take a close look at alleged flaws in the respective surveys to avoid admitting evidence that is irrelevant to the issues at hand or that could be more prejudicial to the jury than the purported relevance. Instead, U.S. District Court Judge Robert Cleland criticized the approach taken in the competing exclusion motions, saying he viewed “both sides’ scattershot approach to discrediting the opposing expert with a degree of suspicion.” Reminding the parties that there is no such thing as a “perfect” survey and that most methodological flaws in a survey bear on the weight rather than the admissibility of the survey, Judge Cleland considered the “legion” of reasons raised by the parties for keeping the experts out, and found that these reasons amounted to a mere nothing burger. While neither side’s expert was shown the door, the myriad issues raised by the parties are worthy of a deeper dive. In this multi-part series, we discuss some of the more salient issues associated with both parties’ survey experts. We start with some of the major critiques leveled at In-N-Out’s secondary meaning survey. Not Testing Every Trade Dress Element. Doll n’ Burger challenged In-N-Out’s expert’s decision to include in the survey stimuli images of the trade dress that did not include all 9 elements of the Plaintiff’s trade dress. The Court rejected this claim because “Defendants cite no case law supporting their implicit proposition that a survey cannot test the ‘overall appearance’ of a retail establishment unless every possible element of the trade dress is visible in the test images.” Including Other “Indicator of Source” Elements. When testing for secondary meaning of trade dress, it is customary to obscure the “brand and company name and other source-identifying indicia” so that the expert can isolate the trade dress at issue and measure consumer reactions. Doll n’ Burger alleged Plaintiff violated this rule when she failed to remove certain elements in her test stimuli (such as the In-N-Out “Palm Trees”) that also act as an indicator of source. While the Court agreed with the criticism, it determined this methodological flaw would go to the “weight” of the survey and not its “admissibility.” Plaintiff's Expert's "test" stimulus that included palm trees—a source identifier that arguably should have been removed from the stimulus before testing A Close Call on Survey Universe. The composition of the survey’s universe is “one of the most important factors in assessing the validity of a survey as well as the weight it should receive.” Plaintiff’s expert limited her survey universe to respondents situated in the seven western states where In-N-Out operates. But the wrinkle here is that Plaintiff alleged claims for both registered and unregistered trade dress. Thus, Defendant argued, Plaintiff’s expert could not opine on secondary meaning when her survey respondents were only located in the western part of the U.S. The Court ultimately rejected that claim and concluded that: “Plaintiff has two routes to establishing an enforceable, common law trade dress based on acquired secondary meaning. Plaintiff can demonstrate that the look of In-N-Out's restaurants has ‘acquired secondary meaning among some substantial portion of consumers nationally’ or it can use a narrower survey to help establish secondary meaning in a more limited geographic region and still pursue a claim for infringement if it can show Defendants (1) had ‘knowledge of’ the trade dress and (2) ‘intentionally copied it.’” While none of these alleged flaws were beefy enough to keep Plaintiff’s consumer survey expert on the outside looking in, this decision nonetheless provides valuable insight and analysis on some of the key issues that should be considered when it comes to developing survey evidence in trade dress disputes. In our next installment, we will rustle up some more insights for you when we dive into Doll n’ Burger’s secondary meaning survey.

In our last post on extraterritorial injunctions, we examined a recent decision from Hong Kong and how a brand owner was able to successfully enjoin infringers in mainland China. We will now look at a recent case in the U.S. and how the brand owner was able to reach conduct in Europe. From U.S. to Europe The U.S. Court of Appeals for the Tenth Circuit most recently weighed in on extraterritorial rights to an injunction under the Lanham Act in Hetronic Internat’l, Inc. v. Hetronic Germany GmbH.  In Hetronic, the plaintiff sued its former European partners operating in Germany and Central Eastern Europe collecting damages in the amount of $113 million for infringing products sold abroad and diversion of sales from U.S. based customers. The Tenth Circuit more clearly defined the reach of the Lanham Act, adopting the framework of the First Circuit’s ruling in the case McBee v. Delica Co., 417 F.3d 107 (1st Cir. 2005), as follows: (i) If the defendant is a U.S. citizen, then a Lanham Act cause of action may be brought against the defendant based on their actions in a foreign country; or (ii) If the defendant is foreign, the Lanham Act applies if: (1) the infringement has a substantial effect on U.S. commerce (note this “substantial effect” requirement is not observed in all U.S. Circuits—see the Hetronic case for a rundown of which Circuit Courts require that the activities have a substantial effect and which merely require “some effect”); and (2) the action would not create a conflict with trademark rights established under the relevant foreign law. In Hetronic, the foreign defendants’ conduct was shown to have a substantial effect on U.S. commerce; however, the injunction was held improperly broad because it covered the world instead of being limited to where the plaintiff had marketed and sold its products. The case was remanded to more clearly define the scope of the injunction to include countries where the plaintiff had already penetrated the market. A Round-Up Across the Seas As we have outlined in this two part post, both Hong Kong and U.S. laws allow for some redress to obtain an extraterritorial injunction against overseas infringing activities. Note, however, that to exercise its discretion to grant such injunction, the Hong Kong court must have personal jurisdiction over the defendants (which is usually shown by the defendants being a Hong Kong resident or a company incorporated in Hong Kong). This is narrower than the U.S. position where it is possible to obtain an injunction under the U.S.’s Lanham Act against a foreign defendant finding personal jurisdiction under Federal Rule of Civil Procedure 4(k)(2), where serving a summons or filing a waiver of service establishes personal jurisdiction over a foreign defendant if (A) the defendant is not subject to jurisdiction in any state’s courts of general jurisdiction; and (B) exercising jurisdiction is consistent with the United States Constitution and laws. That being said, subject to future applications for extraterritorial injunction made before the Hong Kong court, the Court may further determine whether other factors such as the presence of an office or business operation in Hong Kong by the foreign defendant, or a substantial effect of the defendant’s infringing activities on the Plaintiff’s business in Hong Kong may establish the Court’s personal jurisdiction over foreign defendants.

Foreign brand owners whose brands are being infringed in other countries may have an avenue to pursue extraterritorial injunctions. In this two part post, we examine how two courts: one in Hong Kong and the other in the U.S. have recently ruled to enforce injunctions against trademark infringers in Mainland China and Europe, respectively. From Hong Kong to Mainland China The High Court of Hong Kong recently discussed whether the court has jurisdiction to grant an interlocutory injunction with extra-territorial effect in respect of infringement of IP rights. In BIOZEAL, LLC AND ANOTHER v. NATURE’S STORY CO LTD AND ANOTHER [2021] HKCFI 3137, the plaintiffs (which are based in the U.S.) sought injunctions to restrain the defendants (which are Hong Kong companies affiliated with the plaintiffs’ former distributor) from operating flagship stores on certain e-commerce platforms and marketing products to consumers in Mainland China by reference to the plaintiffs’ marks. In that case, Mr. Justice Lok, the judge in charge of the Intellectual Property List of the High Court of Hong Kong, clarifies that the “double actionability rule” (which has largely been abolished in English law) still applies under Hong Kong law in respect of infringement of IP rights. By this rule, the Court will hear an action involving an alleged infringement committed outside the jurisdiction if the infringement is actionable under both Hong Kong law and also the law of the country where the infringement took place. Mr. Justice Lok provided a useful summary of the relevant principles for global brand owners, including U.S. companies, to apply for injunctions to stop passing-off activities outside jurisdiction. Essentially, (i) In so far as a claim for infringement of intellectual property rights outside jurisdiction is concerned, the law is treating passing-off (and injurious falsehood) differently from other types of intellectual property rights such as patents and registered trademarks (where separate registration of the claimant’s right in that jurisdiction is required). (ii) To sue the defendant from committing passing-off outside jurisdiction, the court must have personal jurisdiction over the defendant (usually by showing that the defendant is a Hong Kong resident or a company incorporated in Hong Kong). (iii) The claimant can formulate the claim in either or both of the following manners: (a) the defendant is trying to export an instrument of deception (the most usual case being using Hong Kong “shadow” company with the name incorporating the claimant’s trademark to carry on business outside Hong Kong including granting licences to others to use the relevant trademark) with a view to deceive the public and consumers outside Hong Kong; (b) the defendant’s passing-off activities are also actionable in the foreign jurisdiction concerned. (iv) In the case of (b) above, the claimant would have to produce evidence of the relevant foreign law to prove that the defendant’s passing-off activities are also actionable under the law of that jurisdiction. Since the Hong Kong court has personal jurisdiction over the defendants in that case (due to the fact that the defendants are incorporated in Hong Kong) and the plaintiffs have established good arguable case that the defendants have committed passing-off actionable in Hong Kong and that the plaintiffs will probably suffer enormous irreparable damage caused by the continuous acts of the defendants, Mr. Justice Lok granted injunctions in that case restraining the defendants (but not the plaintiffs’ former distributor based in China that the Hong Kong court does not have personal jurisdiction) from committing the wrongful acts in Mainland China. The defendants have been granted leave to appeal the interlocutory injunctions to the Hong Kong Court of Appeal but their application to stay the execution of the interlocutory injunctions pending the appeal was dismissed. This is the first successful injunction in Hong Kong concerning a cross-border e-commerce platform based on the double actionability rule, allowing the Hong Kong court to take into consideration torts committed by the defendants outside of Hong Kong. It is quite common for infringers in China to use a front company in Hong Kong (i.e. “shadow companies” as discussed above) to facilitate illicit activities in China. This recent Hong Kong court decision should be welcomed by foreign brand owners as it is now clarified that it is possible to use the Hong Kong court as an avenue to pursue legal actions against infringing activities in Mainland China. Stayed tuned for the second part of this post where we will examine the extraterritorial reach of trademark injunctions from U.S. to Europe.

Image from lev radin / Shutterstock.com Fly Havana and Fat Joe are heading “All the Way Up” to the Second Circuit for “Another Round.” Earlier this month Fly Havana appealed New York District Court Judge Naomi Reice Buchwald’s conclusion that Fly Havana had transferred all ownership rights to the song “All the Way Up” to Fat Joe. Fly Havana had sued Fat Joe and numerous other defendants for copyright infringement, claiming he was the author and co-owner of the song. Fat Joe claimed Fly Havana had transferred ownership rights in the song to Fat Joe at an IHOP in March 2016 when Fly Havana signed a “piece of paper,” gave the sole copy back to Fat Joe and took a check from Fat Joe for $5,000. Fly Havana did not dispute he signed the paper, and took the check. So far so simple—all Judge Buchwald had to do was read the “piece of paper” to determine the parties’ respective rights to the song. The hook—Fat Joe couldn’t find the “piece of paper,” or any copies. And this is where the gunners get “So Excited” because the case starts to look like a bar examination question. But this is not made up, “The Shit is Real.” Typically the “best evidence” rule requires that an original writing is required to prove its contents unless an exception applies. So, “Whatcha gon do” when you can’t find the original signed “piece of paper” that no one disputes existed? Judge Buchwald cut through the “Yellow Tape” and relied on two exceptions to the best evidence rule. First, under Federal Rule of Evidence 1003, a duplicate of the original is admissible unless there are genuine questions about the original’s authenticity or the circumstances make it unfair to admit the duplicate. Second, under Federal Rule of Evidence 1004, an original is not required and other evidence is admissible if all the originals are lost or destroyed. Here, Fat Joe and others, including his attorney, presented evidence that his attorney had sent him the draft of the “piece of paper” by email, that Fat Joe printed the email without making any changes and took it to IHOP for signature by Fly Havana. Fat Joe and others also presented substantial evidence about their inability to locate the original signed version, and about all the efforts they made to do so. Based on this evidence, which was apparently undisputed, Judge Buchwald concluded the draft of the “piece of paper” sent by Fat Joe’s attorney was admissible as a duplicate of the original under Rule 1003, and also admissible under Rule 1004 because the undisputed evidence established the original was lost or destroyed. Perhaps most interesting is that Judge Buchwald made these factual determinations in the context of a pre-discovery motion for summary judgment, which necessarily means she concluded that there was no genuine dispute that the requirements for Rules 1003 and 1004 were met, and also that discovery could not as a matter of law uncover any contrary evidence. These are not typically the type of factual determinations that are made in a pre-discovery motion for summary judgment, so it will be interesting to see what happens when the appeal gets “Cookin.” We will report back when the Second Circuit issues its opinion. Until then, “Lean Back.”

We previously reported on the Marcus Gray, et al. (“Gray”) v. Katheryn Hudson, et al. (“Perry”) case on  August 2nd and August 15th of 2019. When we initially reported the details of this case, Gray was awarded damages to the tune of $2.8 million on the basis that Perry’s “Dark Horse” song infringed upon Gray’s “Joyful Noise” song. Most specifically, a jury decided that a string of eight staccato notes or “ostinato” in Perry’s song infringed upon a riff in Gray’s song. Perry sought to overturn the jury’s verdict issued in Gray’s favor, and U.S. District Court Judge Christina A. Snyder did so in March 2020 upon review of the extrinsic evidence. Judge Snyder’s determination was based upon a review of the extrinsic evidence and also took into account a recent decision in the Skidmore v. Led Zeppelin case (discussed on the TMCA), and concluded that “the range of protectable expression in an 8-note pop music ostinato comprised of individually unoriginal elements is narrow,” and that “[t]he evidence in this case does not support a conclusion that the relevant ostinatos in “Dark Horse” and “Joyful Noise” are virtually identical.” On Appeal, Gray asserts that the trial judge was wrong in tossing the $2.8 million jury verdict. In a recent argument before a panel of judges for the 9th Circuit Court of Appeals, panelist Judge Milan D. Smith noted that the trial court “did not question the jury’s analysis of the intrinsic or factual evidence, but applied an extrinsic test in determining as a matter of law that the short combination of notes in Gray’s “Joyful Noise” are “too basic to be protectable.” Judge Smith further stated “[i]t seems to me that the case law says that we as judges are fully authorized and empowered and indeed required to examine the extrinsic evidence test ourselves, and we do not defer to the jury on that, it’s really a matter of law.” Interestingly, Perry explained under oath at trial that the ostinato (which she calls the chorus) is the most identifiable part of the song. Her counsel advised the 9th Circuit Court of Appeals panel that Perry was testifying as a pop star and not a musicologist. The ostinato was called “the hook” by Perry’s counsel during the recent hearing, which the panel deemed as potentially significant in terms of the importance of the ostinato. Is the importance of “the hook” enough to convince the panel that the ostinato infringes upon Gray’s copyright? Maybe. But Judge Richard R. Clifton on the panel told Gray’s counsel during the hearing that he simply could not hear what Gray wants him to hear – in listening to the songs, it took a while for him to figure out what the purported similarities were. At a minimum, there appears to be the possibility of a split panel decision. Will the case resolve in line with the Led Zeppelin decision? We will keep you apprised of developments in the case.

From the initial design plans, to the choice and fabrication of materials, to the finished project, there are many components of a construction or infrastructure project that can give rise to intellectual property (“IP”) issues for construction and design professionals. Believe it or not, IP plays a key role in any construction project and is therefore something that anyone involved in the construction industry should be mindful of. This article provides a high-level overview of the broader IP categories that could impact your construction project or company. Trademarks In short, a trademark is a source identifier. A trademark consists of words, symbols, logos or other designations used to identify the particular source of goods or services. Trademark rights can be acquired simply by using the trademark in commerce, but registering the mark with the U.S. Patent and Trademark Office (“PTO”) confers additional legal benefits and can make for a smoother enforcement process. In the construction industry, trademark issues primarily arise with respect to contractor or subcontractor business names, project names, or joint venture names causing a likelihood of confusion. Because construction businesses often include the last name of the original owner, it is important to know that a trademark, which is “primarily merely a surname”, is considered a generally weak trademark and additional proof may be required to register and/or enforce it. Trademark rights can also arise in the names of buildings (e.g., Empire State Building®) as applied to real estate services or other services or goods, leading to disputes. The litmus test and the key to avoiding or addressing infringement is whether there is a likelihood of confusing your trademark with that of another. Copyrights A copyright protects works of original authorship fixed in a tangible medium. This includes project drawings, blueprints, written materials, technical designs, photographs, and even the finished building or project design itself. Copyrights provide the owner the exclusive right to use, reproduce, and to derive other commercial benefit from the protected work for a specified period of time. Copyright rights arise upon creation of a work; but, when registered in the Copyright Office, the owner of the copyright is entitled to pursue an infringement claim and can collect statutory damages and attorneys’ fees if registration is pursued early. Copyright issues can arise surrounding the ownership and right to exploit a particular work. Take for instance the project blueprints and building plans. The copyright in those building plans is generally owned by the author of the plan drawings, which often is the architect. The project owner will not be considered the author or owner of the plans and may run into an infringement issue, unless (1) the plans fall within certain categories of works and are subject to a written agreement assigning ownership from the original author to the project owner, or (2) the plans were prepared in the scope of the author’s employment, as an employee of the project owner. The key takeaway for construction and design professionals with respect to copyright issues is to be mindful of who is creating the copyrighted materials and who will be the ultimate owner of those materials, and to then be sure to obtain the appropriate written agreements documenting the nature and details of the parties’ relationship. Trade Secrets Trade secrets protect the confidential aspects of a business, such as business methods or information. Trade secrets can cover virtually any type of information that is economically valuable to the owner, not generally known to the public, and is the subject of reasonable efforts by the owner to maintain its secrecy. Common items protected as trade secrets are client lists, marketing strategy, pricing strategy and policies, certain contracts, and competitively sensitive information. Trade secrets are not subject to any sort of registration process. Instead, the owner of the trade secret must use non-disclosure agreements or other confidentiality measures to make sure these aspects of their business stay secret. Until 2016, trade secret jurisprudence and claims of misappropriation were governed solely by state and common law. However, the passage of the Defend Trade Secret Act (“DTSA”), 18 U.S.C. 1836, et. seq. has created a federal cause of action for trade secret owners, has broadened the definition of a trade secret, and provides expansive remedies, such as treble damages, attorneys’ fees, and civil seizure. The key takeaway here: if as a construction and design professional, you believe you have sensitive information of value that you want to protect as a trade secret, make sure you at least have appropriate confidentiality agreements and/or non-disclosure agreements with each employee or entity who may have access to that secret information and limit the universe of folks who have access to that information. Once that information is publicly known, trade secret protection ceases and the value of the previously-protected information diminishes. Patents Patents provide the owner with a temporary monopoly in the United States (or other countries in which the patent registration is granted) to make, use, or sell a patented machine, article of manufacture, process, method or other patentable invention. Unlike copyrights and trademarks, the PTO must grant patents before rights can arise. There are two types of patents: (1) a utility patent, which protects a machine or process that is new, useful and nonobvious and (2) a design patent, which protects any new or original design of an object. As a construction or design professional, a utility patent would protect a newly invented construction process, equipment, material, or business method that gives you a competitive advantage. However, the key takeaway here is when your team comes up with new ideas or discovery, do your research to make sure what you have come up with is different than what has already been used or discovered. If you are not careful, patent infringement litigation can be very expensive from both an attorneys’ fees perspective and a potential damages perspective. Managing IP Risks on a Project So now, you are probably thinking, “how do I protect my project or the work I’ve done and mitigate these infringement risks?” One answer is proper documentation. This means keeping detailed and organized records of every stage of the construction and design process, with the bulk of this work being done before you ever break ground on the project. All project-related entities and workers should be subject to appropriate contracts that should contain provisions addressing IP (such as who owns it, how it can be used and transferred, and dispute resolution) and confidentiality or non-disclosure (particularly for trade secrets) provisions. If separate agreements or licenses are needed, these documents should detail the categories of IP that are protected, what can be used, and who can use them without fear of infringement. Registration of that IP should also be pursued early. Further, any research conducted, processes developed, the dates of key actions, and recordings or documentations of meetings should detail who, when, why, where, and what was discussed or developed (particularly for patents). For instance, if an engineer team discovers or develops a unique and useful building process, keep detailed records about the steps behind that process, key dates, key documents or other memorialized work product, and the roles and contributions of the individuals on that development team. If you have meetings with others inside or outside of the organization, keep organized records concerning who attended, what was discussed, the dates and times of those meetings. The commercial value of your construction project is not just in getting the project completed, but also in the control of the ownership and/or use of the IP and avoiding infringement. It is important for construction and design professionals to take the time to consider these risks and put the right documentation in place now to avoid costly and preventable IP disputes in the future.

China has been speeding up its legislative efforts in protecting trademark rights and improving its trademark administration. In 2021, China issued a number of new rules and regulations on trademark practice. Here is a quick summary of some important legal and practical updates from the past year that foreign brand owners and foreign trademark practitioners need to know: Detailed Rules Against Bad Faith Filings – The China National Intellectual Property Administration (the “CNIPA”) recently updated its Trademark Examination and Review Standards (the “New Standards”). Significant legal and practice changes have been introduced by the New Standards, which became effective on January 1, 2022. One of the most interesting changes is that the New Standards provide detailed rules and guidelines against bad faith filings not for purpose of genuine commercial use under Article 4 of the Chinese Trademark Law. These detailed rules and guidelines are very useful to the examiners the Chinese Trademark Office (“TMO”) in identifying and refusing bad faith filings in trademark examination, as well as to brand owners in combatting pirate trademark filings in oppositions and invalidations. We first blogged about this change to the law in 2019. Prior Use in China Requirement Relaxed – Another important change for foreign brand owners is that the New Standards no longer require that the “prior use” in relation to the opposition and invalidation grounds for protection of prior-used mark rights under Article 32 of the Chinese Trademark Law has to be “prior use in China”. The New Standards now only requires a brand owner to show that the influence of its prior use (which can be foreign use) has extended to China. Update Your Registrations Details or Face Cancellation – In late December 2021, the CNIPA issued its new Guidelines On Assessing General Violation of Trademarks. One of the important changes introduced by this new Guidelines is that failure to update/record the changes of the registration particulars, such as change of name and registered address of the registrant, among other things, will be deemed an act of “self-alteration” of trademark registration particulars which may attract administrative correction order. The New Standards mentioned above provides similar obligations on trademark registrants in keeping their registration particulars up-to-date. The New Standards further provides that if a registrant fails to comply with a correction order to update its trademark particulars, the relevant registration will be cancelled. Let’s Go Faster – Pursuant to a notice issued by the CNIPA in May 2021 which requires the examiners of the TMO and CNIPA to shorten the process of trademark prosecution, trademark practitioners have seen that by the end of 2021, the average time for trademark examination has been shortened to 4 months, and the average time required for completing a trademark registration has been reduced by 1 month from 8 months to 7 months accordingly. The time frame for assignment recordal, opposition, review of rejection and invalidation have also been shortened to 1.5 months, 12 months, 5.5 months and 9 months respectively. No More Paper – Starting January 1, 2022, the TMO would no longer issue registration certificates in paper form.

image by fitzcrittle / Shutterstock.com There have been massive changes in American collegiate sports since this past summer: On June 30, 2021, the National Collegiate Athletic Association (“NCAA”) radically changed course and announced that it would no longer penalize student athletes who profit off of their name, image, and likeness (“NIL”). As the clock struck midnight on the day the change became official, high profile collegiate stars began announcing sponsorship deals and trademark filings, including debuting personal logos. “Amateurism” has long been the NCAA’s credo, and it spent decades fighting to ensure that student-athletes received nothing more than the cost of attending college. After a group of athletes sued the NCAA alleging antitrust violations, the Supreme Court ruled in June that the NCAA could not prevent student-athletes from receiving some education-related benefits and payments. Although the ruling in Alston was relatively modest, some saw the unanimous 9-0 decision and Justice Kavanaugh’s “blistering concurring opinion” (“[t]he NCAA is not above the law,” and its “business model would be flatly illegal in almost any industry in America”) as setting the stage for a much bigger fight to come regarding the NCAA’s monopoly power. Although the decision did not directly address payments for NIL, in light of the decision, years of increasing pressure, and a wave of new—and highly variable—state laws permitting payments for NIL, the NCAA adopted its interim NIL policy. The policy, which applies to Division I, Division II, and Division III schools, allowed athletes immediately to “benefit from their name, image and likeness” and provided that students could engage in NIL activities that are consistent with the law of the state where their school is located. Athletes attending school in a state without a specific NIL law are also allowed to engage in NIL activities without incurring NCAA violations. The policy still prohibits “pay-for-play” and “improper inducements” to attract athletes to a particular school. The interim policy also allows for athletes to receive professional representation in NIL deals. While the NCAA scrambles to craft a cohesive and permanent solution, schools and their compliance departments have been scrambling to craft their own NIL policies and programs in order to provide clear guidance to their athletes to help them avoid violations while also helping them maximize their potential earnings. A host of potential intellectual property rights issues could be brewing: for example, superstar University of Connecticut basketball player Paige “Buckets” Bueckers, who signed a watershed deal with Gatorade soon after the new policy went into effect, applied to register a trademark in her nickname PAIGE BUCKETS on July 13, 2021. How does her school promote her and avoid infringing on that trademark? Can they license the mark for their own use? If they do, would that qualify as pay-for-play? Do her sponsors risk infringement when using images of her in school apparel (especially if that includes the school’s sponsors’ logos), or vice versa? What if an athlete signs an endorsement deal that conflicts with a school’s official sponsor? Although highly marketable athletes like Bueckers are smart to move quickly to protect their NIL, athletes will need guidance to ensure they can take advantage of the policy without infringing on intellectual property rights, violating school or NCAA rules, or entering into unfavorable, even exploitative, deals. Especially for athletes making significant sums, education and guidance on tax and other financial planning will be critical as well. While some collegiate stars are cashing in and signing high profile, large-dollar deals, thus far, most deals thus far have been modest, allowing less well-known athletes to make modest sums by hosting clinics or endorsing local businesses. Though the stakes may be smaller, these athletes will also need guidance on how to protect their NIL while avoiding any potential IP rights violations. At least two schools are already under investigation for potentially violating the policy. BYU partnered with protein bar maker Built in a deal that provided compensation to each member of its football team, while the University of Miami partnered with a gym that would provide compensation to football team members. Navigating the variety of state laws and the sure-to-be frequently evolving school-specific rules and policies is bound to be complex. Practitioners advising schools and individual athletes should be sure to carefully monitor changing rules and laws, especially as Congress considers wading in, and to advise student athletes on the long-term ramifications of their deals, whether that be IP rights issues, unexpected tax consequences, or ensuring that athletes properly vet both the contracts they are signing and the companies they endorse.

Image from Ververidis Vasilis / Shutterstock.com We previously wrote about a series of trademark lawsuits filed by NBA MVP and now NBA champion Giannis Antetokounmpo over the use of his nickname “Greek Freak”. Those lawsuits all contained similar allegations: that the defendants sold merchandise online bearing Antetokounmpo’s name, nickname and/or likeness, including Antetokounmpo’s trademarked GREEK FREAK. While those cases all appear to have settled, one similar SDNY case that was filed after our prior blog post did not. In that case, Antetokounmpo v. Paleo Productions LLC et al. (No. 1:20-cv-6224), Antetokounmpo alleged that the defendants were selling their GREEK FREAK spice blend on the internet in violation of Antetokounmpo’s registered GREAK FREAK mark. After defendants failed to answer the complaint, Antetokounmpo obtained a default judgment and Judge Koeltl referred the case to Magistrate Judge Lehrburger for an inquest on damages. This is where things got interesting—at least for us trademark lawyers. Antetokounmpo sought statutory damages, legal fees and costs, as well as a permanent injunction against the defendants. After receiving submissions from Antetokounmpo, the Magistrate Judge found the defendants liable for trademark infringement, awarded Antetokounmpo his legal fees and costs, and issued a permanent injunction against the defendants. However, the Magistrate Judge denied Antetokounmpo’s request for statutory damages. Antetokounmpo appealed that ruling to Judge Koeltl, who reviewed the issues de novo. Unfortunately for Antetokounmpo, Judge Koeltl agreed with the Magistrate Judge and denied Antetokounmpo’s request for statutory damages. Under the Lanham Act, statutory damages are only available in cases “involving the use of a counterfeit mark.” A counterfeit mark is, essentially, a mark that suggests a fake origin. After an exhaustive analysis, the court found that this was not a case that involved the use of a counterfeit mark for two independent reasons. First, the court found it implausible that a reasonable consumer would think that the GREEK FREAK spice blend was from Antetokounmpo since he had never used his mark in connection with food, let alone spices. To qualify as a counterfeit, the mark must be used on the “same goods or services for which the trademark is registered.” Because Antetokounmpo had not previously used his GREEK FREAK mark in connection with spices, the court ruled against him. Second, the court found that the defendants had not even used GREEK FREAK as a “mark” under the Lanham Act because they did not use it to “communicate origin,” but instead to describe a flavor (the company who made the spices was clearly identified on the label). On that basis, the court held that the defendants’ use of GREAK FREEK “did not deceptively suggest an erroneous origin because it does not suggest an origin at all.” While Antetokounmpo’s winning streak continues both in court and on the court, his victory in the Paleo case was not a complete slam dunk.

Just in time for the holidays, the U.S. District Court for the Western District of Kentucky issued a decision steeped in two rich holiday traditions—family lore and alcohol. On December 16, 2021, the court entered a preliminary injunction against Log Still Distilling, LLC in a trademark infringement and unfair competition action brought earlier this year by Heaven Hill Distilleries, Inc., both manufacturers of bourbon. Heaven Hill is a large family-owned distillery founded in Louisville, Kentucky in 1935. Log Still was founded in 2018 as a new distillery, line of spirits, and tourist destination in Gethsmane, Kentucky. Bourbon is a distilled liquor made primarily from corn that Congress has designated a distinctive product of the United States. The story of how Heaven Hill and Log Still arrived in a trademark battle in federal court begins with Joseph Washington “J.W.” Dant, who first distilled bourbon as a teenager in 1836. J.W. Dant’s unique distilling method entailed running a copper pipe through a hollow poplar log, filling the pipe with fermented mash, and passing steam through the pipe. The resulting liquor became J.W. Dant-branded bourbon whiskey. Dant’s namesake distillery continued producing J.W. Dant whiskey after Dant’s death in 1902, and after Prohibition obtained two federally registered trademarks (U.S. Reg. Nos. 320,981 and 376,057): The distillery and the marks changed hands several times in the mid-20th century, ending in Heaven Hill buying the J.W. Dant brand (among others) in 1993. Today, J.W. Dant bourbon is available for $15 to $18 on the bottom shelf of liquor stores in most states. (J.W. Dant is also for sale on the Internet, where no one knows you’re a bottom shelf liquor.) Meanwhile in Gethsmane, J.W.’s great-great-great-grandson John Wallace “Wally” Dant III and some of his cousins founded Log Still to “revive” their family’s place in the bourbon business. Wally initially approached Heaven Hill about buying the J.W. Dant brand, but Heaven Hill declined. Undaunted, Log Still launched its Monk’s Road-branded bourbon and sought to infuse its promotion with the family’s history and, according to Log Still’s internal marketing documents, create “ties to the J.W. Dant name whether the brand can be used or not.” These ties begin with the Log Still Distilling name, which evokes J.W. Dant’s original method of distilling bourbon by pouring it through a hollowed log. Log Still went further—naming its distillery “Dant Crossing” and billing its brand as the “rebirth of the J.W. Dant legacy” among other homages to the family’s famous ancestor. In response to Log Still’s social media posts containing these themes, Heaven Hill sent cease-and-desist letters. Heaven Hill also opposed Log Still’s attempt to federally register a “Dant & Head” trademark, and ultimately filed suit. In granting Heaven Hill’s request for a preliminary injunction, the court found persuasive proof that Log Still had crossed from recounting family lore to build a new brand into impermissibly leveraging an old brand that Log Still did not own. In its 58-page decision, the court catalogued Log Still’s marketing strategies and advertising themes to conclude that this was “an affiliation case in which a newcomer is building a brand by intentionally tying itself to an old brand and story controlled by a competitor.” Throughout, Log Still’s marketing strategy invoked themes of “reviving a legacy,” “heritage revived,” and “reviving the Legacy one barrel at a time.” Log Still acquired the domain name JWDant.com and, for a time, directed traffic to Log Still’s website. That website described the “heritage” and “Dant Legacy” Log Still claimed to be reviving and that Log Still’s “story … begins with our forefather Joseph Washington Dant,” who “gave birth to the Dant family’s place in bourbon lore with a legacy all our own.” Log Still declared on social media that “we’re the Dant family … and we’re back in the bourbon business.” A few posts even featured old photos that included the trademarked J.W. Dant logo and bottles. As the court observed, this public story of revival is not accurate—the J.W. Dant brand had existed all along. And Log Still was keenly aware of the existing J.W. Dant brand. Log Still’s internal marketing plans described its strategy to “subtly” tie is branding to that of J.W. Dant. Log Still’s documents described J.W. Dant as one of Log Still’s “competitors,” and stated that there was “possible confusion” between the brands, which Log Still and its marketing team predicted could lead to “threats” such as “legal challenges” from Heaven Hill. Although not knock-offs, the court decided that Log Still’s logos appear influenced or inspired by the J.W. Dant marks. Log Still’s Monk’s Road bourbon displays the tagline “[t]his is a story of heritage & revival” and state that “Joseph Washington Dant started this tradition way back in 1836 when he felled a poplar tree.” Log Still’s label also featured a crest with an establishment date of 1836 that was definitely not applicable to Log Still’s founding. Log Still took a similar approach to branding its 350-acre campus by highlighting the land’s history to the Dant family. Visitors are greeted by a story board discusses the history of J.W. Dant and Log Still, and the tasting room is walled by barrels stenciled with “The Dant Distillery Company,” a common-law trademark registered to Heaven Hill. Even if some of these statements—when read narrowly—merely referred to J.W. Dant’s history and not the competing bourbon sold today, the court concluded that together, Log Still’s story “indicates that Log Still’s principal motivation is to sell its competing spirits and tourist offerings—not simply to reminisce about family history.” All of this led the court to conclude that Log Still was using the J.W. Dant name in a manner likely to cause consumers to be confused about the (lack of) a relationship between the two brands. The court began its analysis with two threshold issues: First, whether Heaven Hill had valid protectable rights. On this issue, Log Still argued that Heaven Hill had “allowed the quality and sales of J.W. Dant to fall so far that the brand has lost its associated goodwill, leaving nothing for other users to infringe.” This argument was rejected as lacking in in any legal basis, as the mark was not abandoned and did not have to be a thriving enterprise to be protected from infringement. Second, the court determined that Log Still was using the J.W. Dant marks and indicia of good will as a source identifier, brushing aside Log Still’s “descriptive use” defense. Log Still was not referencing the J.W. Dant name and legacy in an academic non-trademark manner; rather, it was drawing on the J.W. Dant legacy to sell commercial products. Log Still also failed another test for good-faith, non-trademark use—the court decided that the story Log Still was selling was not true. In particular, Log Still’s attempts to trace its history to 1836 merely co-opted the Dant Distillery Company’s story, a legacy the Dant family sold long ago and that Heaven Hill purchased in 1993. The court applied the familiar likelihood of confusion analysis following the Sixth Circuit’s Frisch’s test. Most difficult for Log Still’s defense was the evidence of actual confusion. Internet users commented in response to Log Still’s posts: “is that J W Dant I used to drink” and “What about JW Dant is that coming back?” A local news station broadcasted an interview with Wally (whom they introduced as “J.W.”) Dant while displaying a bottle of Heaven Hill’s J.W. Dant product and barrels labeled Dant Distillery. A distillery-focused blog reported on the opening of Log Still’s distillery with the headline “Log Still (formerly J.W. Dant).” The court also emphasized Log Still’s intent in selecting its competing branding. The court quoted from Log Still’s internal marketing documents which made “clear that Log Still aimed to steal J.W. Dant’s story—intentionally and in order to compete in the spirits marketplace.” As the court colorfully put it, the Marketing Plan was “legally damning” and “as close as many lawyers will ever come to a smoking gun”. Then the court added, “But wait, there’s more!” in recounting even further evidence of bad faith intent by Log Still to exploit another company’s goodwill. Given its conclusion that Heaven Hill was likely to prevail, the court wasted no time in enjoining Log Still’s continued infringement. The court applied the Trademark Modernization Act of 2020’s presumption of irreparable harm and determined that Log Still had not adequately rebutted this presumption by attempting to rely on lack of provable economic damage to Heaven Hill, concluding that irreparable harm could be established by loss of control over brand image and good will. The court ordered Log Still to take several actions to distinguish itself from the J.W. Dant brand. The court ordered Log Still to remove references to J.W. Dant, his story, and the year 1836 from its products, labels, and logos. The court also enjoined Log Still from using jwdant.com domain in connection with the spirits industry and required Log Still to remove any internet marketing that states or implies “that Log Still is reviving, preserving, or contributing to the legacy of J.W. Dant’s distilling and the company he founded and his descendants sold.” The court stopped short of ordering Log Still to remove all references to the history of J.W. Dant and his connection to Log Still’s owners from its marketing and distillery tours, but Log Still is required to display a conspicuous disclaimer disavowing a connection to the J.W. Dant brand. The court’s decision is a warning to distant descendants of the founders of famous brands about attempting to cash in on a family legacy that another entity owns. On the issue of whether an individual has an unqualified right to use his or her own name in marketing a product, the answer today is “no.” As the court pointed out, “A century ago,” Log Still’s principal J.W. (Wally) Dant “may have had a stronger case to sell bourbon by using his ancestor’s name or the initials they share. 19th century courts recognized a ‘sacred right’ to use one’s own name as a mark, even if someone else used the name first.” But this doctrine changed as courts eventually recognized “that names could confuse as easily as any other trademark.” But there is a broader lesson for those without a whiskey baron in the family tree. The evidence against Log Still that the court found most compelling was Log Still’s internal marketing documents confirming Log Still’s desire to “creat[e] direct ties to” Heaven Hill’s mark “whether the brand can be used or not.” The strategy described in these documents is exactly what trademark and unfair competition law is designed to prevent—a new brand capitalizing on an old one by tying the two in the consumer’s mind. Upstart brand builders should be mindful that trademark law bars more than copying a name, it protects the goodwill built in a brand’s identity. Efforts to trade on the goodwill of another, even “subtly,” can land the junior user in hot water.

Image from Mario Breda / Shutterstock.com Non-Fungible Tokens (NFTs) have made another court appearance, with Miramax, LLC filing a complaint in the Central District of California in an attempt to stop Quentin Tarantino from auctioning off seven Pulp Fiction-based NFTs. At the center of the dispute is whether the content Tarantino wants to sell as represented by the NFTs is encompassed by rights that Tarantino reserved when he assigned the bulk of his rights in Pulp Fiction to Miramax. According to the complaint filed by Miramax, each of the NFTs forming part of Tarantino’s collection will include “one-of-a-kind” Pulp Fiction content, such as Tarantino’s original handwritten screenplay pages for a single scene, personalized audio commentary by Tarantino, and a drawing that will be inspired by some element from the scene. As we summarized in our previous post on NFTs, an NFT is basically a unique digital certificate representing ownership of a unique thing. So, while the unique content represented by the NFTs is linked to separately, the NFT token or certificate will serve as the record of ownership of that content. Per the Tarantino NFT website, the owner of the NFT could choose to keep the secret content unlocked through the NFT to themselves for all eternity, share the secrets with a few trusted loved ones, or share the secrets with the world. The fact that the sale of each Tarantino NFT is an individualized, one-time sale, is at the heart of the dispute. According to Tarantino, selling NFTs representing screenplay pages for particular scenes falls under his right to “screenplay publication,” one of the rights he reserved in his 1993 assignment to Miramax. Miramax argues that since the sale is a one-time transaction, it does not constitute publication (i.e., the distribution of copies to the public) and thus is a right belonging to Miramax, not Tarantino. Miramax also objects to Tarantino’s use of Pulp Fiction branding to sell the NFTs, also asserting claims copyright infringement, trademark infringement, and unfair competition along with its breach of contract claim. This isn’t the first TCMA blog-post on NFTs, and it won’t be the last, as the minting and auctioning of NFTs is proving to be a lucrative business. In its complaint, Miramax concedes that the case is important in the precedent it sets for others, noting that Tarantino’s sale “could mislead others into believing they have the rights to pursue similar deals or offerings, when in fact Miramax holds the rights needed to develop, market, and sell NFTs relating to its deep film library.” At the end of the day, the resolution of this case will come down to the court’s interpretation of what the parties intended by the right of “screenplay publication” that was retained in the 1993 assignment between Tarantino and Miramax, when NFTs were nowhere on the horizon. Now that they’re here, parties need to consider who should have the right to exploit this new form of digital content and ensure that it’s expressly addressed in any copyright transactions.

Attention trademark practitioners: the finalized rules implementing the 2020 Trademark Modernization Act (“TMA”) go into effect this weekend, on December 18, 2021. Significantly, this marks the availability of three new mechanisms for eliminating “deadwood” registrations: petitions for reexamination, petitions for expungement, and a new nonuse (expungement) cancellation ground. We previously wrote in detail about these three changes here. The PTO will begin accepting petitions for reexamination and expungement starting December 27, 2021, but the new nonuse cancellation ground will presumably be available as of the 18th. The chart below compares these new procedures. Starting in about a year (on December 1, 2022), the office action response period for most trademark applications will shrink to three months from the current six-month response period. But a three-month extension may be requested for a fee of $125, and the response period for Madrid Protocol applications will remain six months. The TMCA will continue to monitor and provide updates on the impacts of the TMA.  

There are two sure-fire ways to maximize the chances that a consumer survey gets bounced out of federal court: (1) surveying the wrong people; and (2) leading them to a desired “correct” answer. Both of these survey maladies were on display in a dispute pending before the U.S. District Court for the Northern District of California in Kudos Inc. v. Kudoboard, LLC. The Court’s recent Daubert order tells a cautionary tale that trial counsel and their experts should be mindful of as they work together in designing a consumer survey for use in a Lanham Act case. The Dispute Plaintiff operates an internet-based software communication platform that enables users to exchange feedback and recognition with other users and owns registered trademarks for “Kudos” that cover these services. Defendant operates an online greeting card company where consumers can create and send digital or printed greeting cards. Defendant’s service is branded “Kudoboard,” for which Defendant also owns a registered mark covering “a website allowing users to create customized online group greeting cards.” Plaintiff sued for infringement; Defendant asserted a number of affirmative defenses. The Survey Plaintiff offered a consumer survey to show that consumers are likely to be confused by Defendant’s use of “Kudoboard.” But Plaintiff’s survey contained two fatal flaws, both of which independently supported the Court’s decision to exclude the survey from evidence. For starters, Plaintiff selected an “under-inclusive” universe of potential survey respondents. Because Plaintiff alleged claims for forward confusion premised on the theory that consumers of Defendant’s services will believe the services originate with or are affiliated in some way with Plaintiff (as opposed to reverse confusion), the proper survey universe is the purchasers of the Defendant’s services (the junior user in the dispute). Here, Plaintiff’s expert surveyed the wrong respondents. Instead of focusing on purchasers of Defendant’s e-greeting card services, the survey universe (or population) was composed “exclusively” of “current users of employee recognition software” – a universe that focused on the Plaintiff’s customer base. While some of these individuals may have also used Defendant’s e-greeting card services, large swaths of potential users were excluded, including “educators, community groups, and casual users.” Thus, as the Court observed, the survey universe was “under-inclusive in that it excluded otherwise qualified consumers, arguably some of the most likely consumers to have knowledge of the products at issue.” For this reason alone, the Court ruled the survey was inadmissible. Further, according to the Court, the survey deployed some “leading” language before respondents were shown the various webpage stimuli (which included Defendant’s website). After being shown Plaintiff’s website (with the Kudos mark), participants were shown three other websites (one of which was Defendant’s), each with text categorizing the products as “employee recognition software products” or “employee engagement software.” The Court said this “statement constitutes a lead-in that departs from simulated market conditions by substantively describing the products that followed.” For this independent reason, the Court excluded the survey. The Conclusion Here are three key take-aways from this decision: While some flaws in a consumer survey go to the “weight” of that evidence, an improperly defined survey universe or a leading survey instrument can affect the survey’s admissibility in the first instance. Selecting the correct survey universe is an absolute must. Trial counsel and their experts need to lock in on this issue and make sure they are on the same page in terms of whose opinions are relevant based on the legal claims at issue. Any survey stimuli should be presented to respondents without any additional frills or superfluous information that might bias or prime them. There is a meaningful difference between providing respondents with information to help them complete a survey (for example, indicating that they can “zoom in” to make a stimulus larger on the screen), and providing them with substantive information that “plants a seed” as to how they should answer a question or how they should “perceive” the services at issue. If you want the Court (and your client!) to give your survey kudos, make sure you avoid these rather sizable pitfalls along the way.