The TMCA

Get ready, large employers. After years of amendments exempting the personal information of employees and other personnel from the California Consumer Privacy Act (“CCPA”), covered employers now have a firm deadline by which to comply with the CCPA’s requirements in protecting employee and personnel personal information (“human resources data”). The deadline – January 1, 2023 – may appear far off, but certain provisions trigger obligations for 2022. Below are the steps large employers should take to comply with the CCPA. Step 1: Be familiar with the rights afforded to consumers under the CCPA. The CCPA was enacted on June 28, 2018, creating one of the most comprehensive frameworks for regulating digital privacy in the United Sates. The law currently grants California consumers the right to know what personal information is collected, used and processed by covered businesses; the right to access the personal information; the right to request that covered businesses delete the personal information; the right to know whether and to whom the personal information is sold or disclosed; the right to opt out of the sale of personal information; and, the right to the same quality of service as that provided to consumers who do not opt out. The CCPA’s effective date was January 1, 2020. Step 2: Determine if the CCPA applies to the employers’ business. The CCPA applies to for-profit companies that do business in California that either have an annual gross revenue of over $25 million; buy, sell, receive, or share the personal information of at least 50,000 California residents, households, or devices for commercial purposes; or derives at least fifty percent of their annual revenue from selling California residents’ personal information (“large employers”). Step 3: Understand the extent of the CCPA’s current “employee” exemption. Human resources data is largely exempt from the CCPA for the time being. Under the CCPA’s current “employee” exemption, the personal information of a job applicant, employee, owner, director, officer, medical staff member, or contractor of a covered business are exempt from the CCPA as long as the covered business collects and uses the personal information (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. Despite the employee exemption, employers should understand that there are existing obligations concerning human resources data. The CCPA requires employers to safeguard human resources data and to provide a notice to employees and personnel regarding the human resources data collected by the employer and how the information is used. Although no model notice has been provided under the CCPA, the notice must describe “the categories of personal information to be collected and the purposes for which the categories of personal information shall be used.” The CCPA privacy notice must be given to employees “at or before the point of collection” and provide a copy of, or link to, the employer’s privacy policy. Employers should also know that California residents can seek to recover statutory damages for certain data breaches, including those involving human resources data. Step 4: Understand the new obligations for human resource data under the CCPA. Human resources data was exempt from the CCPA’s requirements until January 1, 2021. With the approval of Assembly Bill 1281 on September 29, 2020, the January 1, 2021 deadline was extended to January 1, 2022. California voters approved the California Privacy Rights Act (the “CPRA”) on November 3, 2020, which amended the CCPA and extended the employee exemption to January 1, 2023, the effective date of the CPRA. The extra year is helpful for large employers, as the CPRA expands consumers’ rights. In addition to the CCPA rights, the CPRA grants California consumers the right to correct personal information; the right to limit the use and disclosure of sensitive personal information; and, the right to opt out of the sharing of personal information. Additionally, the CPRA has a 12-month “look-back” provision, meaning that employers should be tracking their collection, use, and disclosure of human resources data up to twelve months before the January 1, 2023 effective date. Thus, employers should be prepared to provide information going back to January 1, 2022. Enforcement of these additional rights lies with the ability of employees and personnel to seek to assert a private right of action for data breaches. The CPRA adds an additional enforcement mechanism by establishing the California Privacy Protection Agency, which administratively enforces the CCPA as amended by the CPRA. Step 5: Create an action plan to comply with the CCPA as amended by the CPRA. Although the January 1, 2023 deadline seems far away, large employers should take steps to ensure compliance with the CCPA and CPRA concerning human resources data. These steps include: engaging in data mapping of human resources data; continuing to provide CCPA privacy notices to employees and personnel; ensuring the accuracy of privacy policies; evaluating physical, technical, and administrative safeguards concerning human resources data (which includes evaluating contracts with vendors such as payroll providers and benefit administrators); and implementing a plan to ensure the tracking of human resources data from January 1, 2022 and onwards. These five steps provide a great starting point in working towards CCPA/CPRA compliance. Large employers should take advantage of the extra year granted under the CPRA to develop and implement California-compliant programs so that by January 1, 2023, employers can provide information about the collection, use, and disclosure of human resources data.   * A version of this blog post was originally published in the Orange County Business Journal on November 15, 2021.

Image from Kraft74 / Shutterstock.com In 1994, Firooz Zahedi was hired by Miramax to photograph the actress Uma Thurman as her character Mia Wallace in the film Pulp Fiction. Miramax paid Zahedi $10,000 for his work, used one of his photographs of Mia Wallace laying on a bed, legs crossed behind her, smoking a cigarette, in the iconic movie poster, and credited Zahedi as the owner of the photograph on the 1994 script for the movie. In 2003, Miramax obtained a copyright registration for the poster as a two-dimensional artwork, not a photograph. Over the years, Miramax used the image from the poster on everything from the covers of VHS tapes and laser disks (remember those?) to apparel, and, yes, the packing for a Mia Wallace action figure— which would end up playing a major role in Zahedi’s dispute with Miramax. Zahedi never earned any royalties from these activities. Twenty-five years later, after receiving a pair of socks emblazoned with the famous image of Ms. Thurman, Zahedi apparently decided that enough was enough, and registered the copyright in the photograph. Not long after, he sued Miramax (and 26 other defendants), claiming infringement based on the many uses of his photograph to promote and merchandise Pulp Fiction. Atypically for a copyright case, there was no dispute that Miramax was exploiting the photograph. Instead, the question was whether Zahedi even owned the copyright in the first place, and whether, in light the ownership dispute, Zahedi’s claims were timely. Judge Dolly M. Gee of the United States District Court for the Central District of California determined they were not. After bifurcating the case into ownership and damages phases, she granted summary judgment for Miramax. In the Ninth Circuit, infringement claims grounded in ownership disputes accrue only once: when the plaintiff learns of an express repudiation of their claimed ownership by a party with which it has a close relationship. Here, the close relationship requirement was satisfied because, although Miramax could not locate the work-for-hire agreement it claimed the parties had entered into (a claim disputed by Zahedi), they clearly had a business relationship relating to the photograph and its use to promote Pulp Fiction. After all, Zahedi was paid by Miramax to take the photographs and, at a minimum, granted Miramax an oral license to use the photograph in the iconic poster. The court was then left to determine when Zahedi had notice that Miramax denied his claimed ownership in the copyright, which brings us back to the Mia Wallace action figure. In 2015, almost five years before he filed suit, Zahedi received the toy as a gift. The Pulp Fiction poster image was prominently featured on the packaging, which also had a copyright mark for Miramax and did not credit Zahedi. His stepson posted a picture on Instagram of Zahedi holding the action figure, and included a caption mentioning that Zahedi never received royalties for the famous photograph. The court found that Zahedi’s receipt of that gift—time-stamped thanks to the Instagram post—provided actual notice to Zahedi that Miramax had repudiated his ownership in the photograph sufficient to start the clock on his infringement claim. Unfortunately for Zahedi, that clock ran out three years later, well before he finally filed suit. Had Zahedi never received the action figure or other merchandise using the photograph, his claims may have survived. The court expressed skepticism that the mere fact of Miramax having registered the copyright in the poster, or having asserted copyright in the action figure and other merchandise, would have been sufficient by itself to notify Zahedi of the repudiation and trigger the accrual of his claims. In the end, Zahedi is left to follow his own advice, which he posted on Instagram back in 2015 in response to his stepson’s post: “Sometimes it’s best to settle for the little things in life.”

Twelve years after the Federal Circuit’s landmark In re Bose decision on fraud, the U.S. Trademark Trial and Appeal Board (“TTAB”) has answered one of the questions not reached by Bose: whether reckless disregard of the truth or falsity of a material statement in a PTO filing satisfies the intent to deceive standard for fraud. In the precedential decision Chutter v. Great Management Group, LLC/Chutter v. Great Concepts, LLC, the TTAB answered “yes” to this question and cancelled the challenged registration based on fraud. Chutter involved a consolidated TTAB proceeding involving oppositions to two applications (DANTANNA’S for “spices and spice rubs” and DATANNA’S TAVERN for “restaurant and bar services” owned by defendant Great Management Group) and a cancellation against one registration (DANTANNA’S mark for “steak and seafood restaurant” by defendant Great Concepts, LLC). The defendants shared the same owner, who treated both entities interchangeably, filing the combined declaration for the DANTANNA’S mark owned by Great Concepts LLC in the name of Great Management Group. Because plaintiff’s common law use of its DAN TANA’S mark for a restaurant and marinara sauce long predated any use by defendants and the TTAB separately found a likelihood of confusion between the parties’ marks, the only way defendants could save their registration was to rely on its incontestable status. The material false statement at issue in Chutter was the statement from the declaration of incontestability for the DANTANNA’S registration that there were no pending proceedings against the registration. The statement was material because without it the registration would not have been entitled to the protection of incontestability. The statement was false because when the declaration was made the registration was the subject of both an earlier cancellation proceeding and federal court litigation. The Board found the signatory’s statement was made with reckless disregard of the truth or falsity based on these facts: At the time the declaration of incontestability was signed, the signatory knew that the registration was subject to challenge in the cancellation proceeding and court litigation At the time of his signature, the signatory did not know the requirements for a declaration of incontestability and did not read the language of the declaration that explained the requirements Upon learning the declaration was false, the defendants did not correct it The details behind these facts only worsened the defendants’ position. The signatory was not a business person, but defendants’ outside counsel. The outside counsel not only knew about the earlier cancellation proceeding, but was handling it. Once the declaration of incontestability had been filed, an employee from the signatory’s office called the PTO the day after the declaration was filed to check on the status of the cancelation proceeding. That same day the signatory’s paralegal sent the signatory a memo explaining what statements had been made in the filing and describing how to remedy any errors in the filing. While these facts demonstrated an awareness of the falsity, later facts showed that defendants had clear knowledge of the falsity. Plaintiff’s counsel described the falsity to defendants’ counsel during a phone call and then again when petitioning to cancel the registration. While their answer to the cancellation petition admitted the statement was false, Defendants still did not correct the false declaration of incontestability. The TTAB found the totality of these facts showed “willful blindness” amounting to “reckless disregard” of the truth or falsity of the statement. Having found reckless disregard, the TTAB next looked to case law to see if reckless disregard qualifies as willful intent and satisfies the intent to deceive standard for fraud required by In re Bose. The TTAB cited multiple cases from non-trademark contexts when the Supreme Court or federal appellate courts held that acting with reckless disregard for the consequences of an action satisfies the requirement for an intentional or willful act. The TTAB then concluded that “reckless disregard [was] . . . the legal equivalent of finding that [defendant] had the specific intent to deceive the [PTO]” and cancelled the DANTANNA’S registration on the ground of fraud. Chutter shows that the TTAB will not tolerate the combination of a false declaration of incontestability and reckless disregard of the truth or falsity of a material statement. The conduct described above can serve as guidance on what future plaintiffs should do and what future defendants should avoid. Certainly, correction of a prior false statement in a PTO filing should be undertaken promptly once the falsity becomes known to a signatory, even if such “correction” amounts to a withdrawal because it eliminates the registrant’s basis for the declaration of incontestability. Left unresolved, however, are issues such as whether Chutter’s precedential holding will be applied to non-attorney signatories who may have a lesser understanding of legal language and the potential consequences of a false statement, whether there can be a false declaration of incontestability without a corresponding finding of reckless disregard and what behavior constitutes reckless disregard in connection with declaration of use filings. Watch this space for discussions of future TTAB fraud cases to find out!

A federal magistrate judge in the United States District Court for the Southern District of Florida, in a trade secrets dispute involving CBD-based pain cream, recently granted summary judgment in favor of all but one defendant. The Court’s ruling is a useful illustration of why it is important to present actual (rather than speculative) evidence of misappropriation of a trade secret in order to prevail on such a claim. The ruling is also a good reminder that plaintiffs must be diligent in defining what is being claimed as trade secret(s) at the outset, rather than trying to have this definition evolve as the litigation develops. Background Plaintiff Healthcare Resources Management Group, LLC (“HRMG”) sued Defendants EcoNatura All Healthy World, LLC (“EcoNatura”), Medterra CBD, LLC (“Medterra”), Rejuvenol Laboratories, Inc. (“Rejuvenol”), and NoXeno Health Sciences, Inc. (“NoXeno”). HRMG, a producer of pharmaceutical-grade hemp products, cooperated with EcoNatura, a cosmetic health product developer and seller, to reformulate and manufacture a CBD-based pain cream for Medterra, a retailer introduced to EcoNatura by HRMG. The CBD-based pain cream was then manufactured by Rejuvenol, an owner and operator of a production facility through which EcoNatura manufactures its products. The CBD-based pain cream was created using one of EcoNatura’s creams as the base. After the relationship between HRMG and EcoNatura deteriorated and ultimately terminated, Medterra discontinued ordering the CBD-based pain cream from HRMG and purchased it from EcoNatura. HRMG alleged that it had entrusted the Defendants with highly sensitive confidential information – the formula for proprietary CBD cream – and that the Defendants misappropriated the formula by continuing to use it outside of their business relationship with HRMG and without HRMG’s consent. HRMG’s complaint alleged trade secret misappropriation by all of the Defendants under the Florida Uniform Trade Secrets Act (“FUTSA”) and the federal Defend Trade Secrets Act (“DTSA”), violations of the Florida Deceptive and Unfair Trade Practices Act by EcoNatura, Medterra, and NoXeno, as well as tortious interference with a business relationship by EcoNatura. In its complaint, HRMG identified its alleged trade secret as a CBD cream formula consisting of “the combination of specific ingredients”, “the relative percentages of each individual ingredient and the manner in which the specific amount of each ingredient gets blended with the remaining ingredients to form the finished product.” HRMG’s Belated Attempt to Redefine the Alleged Secret Formula The Defendants each moved for summary judgment on all claims asserted in the lawsuit, arguing, among other things, that HRMG had failed to identify its trade secret with reasonable particularity. In response, HRMG attempted to redefine the alleged formula as “a combination of precise concentrations of CBD, the manufacturing process for the CBD (time, temperature, mixing rate, and others), along with the complementary active ingredients at specific concentrations for pain relief (menthol, tea tree oil, and arnica).” The Court rejected HRMG’s attempt to make such a significant change to its trade secret definition so late in the proceeding, i.e., after discovery was closed and summary judgment had been filed against HRMG. Instead, the Court evaluated HRMG’s trade secret misappropriation claims solely based on the trade secret definition it set forth in the complaint. The Court’s Findings on Trade Secret Misappropriation The Court addressed the federal and state trade secrets claims (DTSA and FUTSA) together. The Court noted that, for both claims, misappropriation of a valid trade secret occurs when a person: (1) acquires the trade secret while knowing, or having reason to know, that he or she is doing so by improper means; (2) acquires or derives knowledge of the trade secret and discloses it without the owner's consent; or (3) acquires or derives knowledge of the trade secret and uses it without the owner's consent. In ruling in favor of Defendant Rejuvenol, the Court found that evidence in the record showed that HRMG did not know how the CBD-based pain cream was manufactured by Rejuvenol, that Rejuvenol did not receive any instructions or other information from HRMG concerning the formulation of this cream, and that Rejuvenol did not use the same process that HRMG claimed to be its trade secret. The Court concluded that there was no evidence that the alleged trade secret process had ever been conveyed to, or used by, Rejuvenol as required to properly support the DTSA and FUTSA claims. The Court likewise ruled in favor of Defendant Medterra. The Court found that while evidence demonstrated that HRMG shared with Medterra a list created by EcoNatura of the ingredients in descending order based on the percentages of the ingredients in the CBD-based pain cream and subsequently provided Medterra with the percentage of “key ingredients,” there was no evidence that Medterra knew any instructions or processes for manufacturing the cream in issue or that Medterra had deceived HRMG into disclosing its list of “key ingredients.” Accordingly, the Court held that HRMG could not establish that Medterra used, acquired, or disclosed HMRG’s alleged trade secret as required by both the DTSA and FUTSA. The Court also granted summary judgment in favor of NoXeno because there was no evidence that NoXeno had misappropriated the alleged trade secret. The Court’s analysis with respect to NoXeno was aided by the fact that HRMG failed to respond to any of the arguments in NoXeno’s summary judgment motion or oppose NoXeno’s statement of material facts, essentially leaving the motion unopposed. Finally, in contrast to the summary judgment holdings in favor of the other Defendants, the Court found that there was a genuine issue of material fact concerning alleged misappropriation by Defendant EcoNatura because there was evidence in the record that HRMG had sent a list of ingredients with their amounts to EcoNatura and that several calls took place between representatives of HRMG and EcoNatura during which HRMG explained how ingredients were heated and cooled during the manufacturing process. The Court deferred the factual issue of whether the manner in which the CBD cream’s ingredients blend to form the finished product is, in fact, HRMG’s trade secret, and whether it was misappropriated by EcoNatura, to determination at trial. HRMG’s Florida Deceptive and Unfair Trade Practices Act Claim Preempted by State Trade Secrets Claim In its decision, the Court also made clear that FUTSA can preempt certain conflicting state tort, restitutory, and other laws providing civil remedies for misappropriation of a trade secret, such as the Florida Deceptive and Unfair Practices Act (“FDUPTA”), if allegations of trade secret misappropriation alone comprise the underlying wrong. The Court found that the only unfair or deceptive practice alleged by HRMG against Medterra under the FDUPTA was the same trade secret misconduct that formed the basis for HRMG’s trade secret misappropriation claim. Finding no material distinction between the basis for HRMG’s trade secrets claim and FDUTPA claim, the Court granted Medterra’s motion for summary judgment as to the latter on grounds of preemption. As for HRMG’s FDUTPA claim against EcoNatura, the Court found that HRMG’s complaint contained separate trade secret allegations regarding a different CBD-based roll-on product or psoriasis cream. However, it also found that HRMG had failed to prove these separate allegations or to respond to EcoNatura’s arguments against these allegations, such that HRMG had effectively abandoned them. Since there were no material distinctions left between HRMG’s remaining allegations in support of its FDUTPA and trade secrets claims, the FDUTPA claim was likewise found to be preempted, and the Court granted summary judgment on this claim. Practice Points The Court’s decision provides a useful reminder on several important principles in trade secrets litigation. First, the Court’s varying summary judgment opinions on misappropriation illustrate how appropriately proving actual misappropriation of a trade secret is essential to prevailing on such a claim. Second, the Court’s decision to confine the Plaintiff HRMG to the definition of its trade secret in its complaint, rather than its eleventh-hour reformulation, demonstrates the importance of carefully formulating such a definition at the pleading stage. Finally, plaintiffs asserting trade secret claims along with additional non-trade secret claims, should consider the possibility of preemption of the latter, and whether separate and distinct allegations exist to support those claims in order to avoid preemption.

On October 8, 2021, the Personal Data (Privacy) (Amendment) Ordinance 2021 containing initiatives to combat doxxing acts became effective in Hong Kong. The anti-doxxing regime under the Amendment not only defines broad and encompassing offences coupled with hefty penalties but also confers new investigative and enforcement powers to the Privacy Commissioner that have extra-territorial effect. Platform providers, operators or users should adopt appropriate approaches to potentially doxxing messages and ensure compliance with the Amendment. Doxxing as an Offence “Doxxing” (sometimes spelled “doxing”) is a term used for the cyberbullying technique of gathering the personal data of a target person or related person(s) (such as family members, relatives or friends) through online search engines, social platforms, discussion forums, public registers, and other means, and disclosing such personal data on the internet, social media or other public platforms. This practice has become rampant in Hong Kong in recent years, and includes numerous cases of illicit disclosures including that of patient medical records from hospitals, as well as disclosure of personal data of police and judicial officers and their family members without their consent. Between June 2019 and 2021, the Privacy Commissioner handled over 5,800 doxxing complaint cases intrusive to personal data privacy. During that time, only about 70% of requests to online platforms by the Privacy Commissioner for removal of doxxing content were complied with. This created a need to amend the existing regime and to criminalize acts of non-consensual disclosure of personal data in order to protect the personal data privacy of the general public. Under the Amendment, section 64 of the Ordinance was revised to provide a new two-tier doxxing offences which criminalize the disclosure of personal data where the data was disclosed without consent of the data subject, and with an intent to cause specified harm to the data subject or their family, or being reckless to such harm happening. The definition of specified harm is broad and captures (i) harassment, molestation, pestering, threat or intimidation, (ii) bodily harm or psychological harm to a person, (iii) harm causing a person to be concerned for their safety or well-being, or (iv) damage to a person’s property. The penalty for such summary offence is a fine of HK$100,000 and up to two years’ imprisonment. An indictable offence is committed if a specified harm is caused to the data subject or a family member of the data subject due to the disclosure of personal data. The penalty for such indictable offence is a fine of up to HK$1,000,000 and up to five years’ imprisonment. The Commissioner’s Powers and its Extra-Territorial Effect The Privacy Commissioner is also conferred with new investigation and enforcement powers, including powers to request a person to provide materials and assistance to facilitate investigation into doxxing offences, to obtain search warrants, carry out specified investigation in premises and to seize and detain any evidence for purposes of the investigation. The Privacy Commissioner may also arrest, stop and search any person reasonably suspected of having committed doxxing offences, and may apply to the Hong Kong Court of First Instance for an injunction against a person who engaged, is engaging or is likely to engage in conduct which contravenes the doxxing offences. The Privacy Commissioner may serve a notice in the case of doxxing if the data subject is a Hong Kong resident or is present in Hong Kong regardless of whether the disclosure was made in Hong Kong. Cessation notices may also be served inside or outside of Hong Kong depending on whether the doxxer or the service provider is inside or outside of Hong Kong. The Amendment Ordinance equips the Privacy Commissioner with the flexibility necessary to take appropriate action given the global reach and vast nature of the internet. Any doxxer or service provider served with a cessation notice that either fails to comply or establish an appropriate defence may commit a criminal offence and be subject to penalties or imprisonment.   To read the original publication regarding this Amendment, please click here.

On September 27, 2021, the National Music Publishers’ Association (“NMPA”) issued a press release stating that it had settled its claims against video game company Roblox, bringing an end to the copyright infringement case its members filed against Roblox in the Central District of California on June 9, 2021. The plaintiffs in that litigation were multiple major and independent music publishers whose catalogs purportedly included artists such as Imagine Dragons, Ariana Grande, the Rolling Stones, and others. Defendant Roblox is an online platform and storefront where users can design their own games or play games designed by other users. The plaintiffs’ copyright claims were directed to Roblox’s alleged unlicensed library of music uploaded by its users. According to the plaintiffs, the use of unlicensed music was a major part of Roblox’s appeal as well as its in-game economy (i.e., users’ ability to buy and sell goods and services in the game). Roblox allegedly generated revenue by encouraging its users to upload unlicensed music to Roblox’s library. Every time a user uploaded a song, the user had to pay a certain amount of “Robux,” a virtual currency that users purchase for real money. A user could then incorporate the unlicensed music into the games they design, which would make their game more popular among other users. Users also had the option of advertising and charging others for virtual items, such as “Boomboxes” and “Game Passes,” to play the unlicensed music. The plaintiffs alleged that being able to listen to popular, unlicensed music attracted users to Roblox and then helped retain them. A lot of money was apparently at stake too. The plaintiffs claimed actual damages due to the alleged infringement of USD $200 million! After just a few months of litigation, the parties reached a mutually beneficial agreement that could set the tone for future gaming services incorporating popular music uploaded by users. The press release describes the agreement as “set[ting] the foundation for future partnerships with global publishers that will unlock new creative and commercial opportunities on [Roblox’s] platform.” The agreement, in a nutshell, …settles claims filed by NMPA members, offers an industry-wide opt-in open to all eligible NMPA publishers and opens a negotiation period for members to engage individually in new go-forward licensing deals with the Roblox global platform that brings millions of people together through shared experiences…The deal paves the way for innovative partnerships between Roblox and publishers that will offer songwriters new way to monetize their songs and catalogues. It is too early to tell how successful the agreement will be in “unlock[ing] new creative and commercial opportunities” for Roblox, publishers, and artists, but at least the parties seem optimistic. It could also be part of a trend, since the NMPA announced a similar agreement with Amazon.com’s livestreaming platform, Twitch, just a few days before announcing its settlement with Roblox. Although we do not know the exact terms of the agreements or how the two agreements differ, they could become a roadmap for other gaming services to legally use popular music. After all, publishers and artists generally want their works to be played, shared, and enjoyed by as many people as possible, but they also want to be fairly compensated. In theory, these sorts of agreements should be a win for everyone—game companies, music publishers, artists, and users.

photo by EQRoy / Shutterstock.com Earlier this summer, U.S. District Judge Amy Berman Jackson refused to buy plaintiff, Valancourt Books, LLC’s, claims that the Copyright Office of the United States unconstitutionally demanded books for free, when Judge Jackson granted summary judgment for the defendants Shira Perlmutter and Merrick Garland (acting in their respective official capacities as Register of Copyrights and Attorney General). The dispute arose when Valancourt brought suit, arguing the Copyright Act’s deposit requirement was unconstitutional under the First and Fifth Amendments as a burden on speech and an unconstitutional taking, respectively. In understanding the Court’s opinion, it is important to keep in mind the intricacies of the Copyright Act. The moment a work (e.g., a book) is created, it is protected by copyright. However, if the work is published, and unless it meets certain exceptions, to enforce those copyright rights under federal law, the work must be registered with the Copyright Office. Applicants have to submit two complete copies of the best edition of their published work to register it with the Copyright Office. 17 U.S.C. § 407(a). If applicants fail to comply, the Copyright Office can issue a demand letter and ultimately impose fines, ranging from $250 per registration, to $2,500 for willful or repeated failure to comply. Valancourt is an independent literary press, operating out of the owner’s home, that publishes rare, neglected, and out-of-print fiction on an “on-demand” basis. Valancourt did not apply to register its books with the Copyright Office, but it did include copyright notices in all its books, essentially availing itself of federal copyright law protections. The initial dispute arose when the Copyright Office issued a demand letter, requesting Valancourt provide deposit copies of all 341 books in its catalog. In a series of exchanges, Valancourt offered to sell the books “at cost” to the Copyright Office. The Copyright Office countered by requesting digital copies of the majority but not the entirety of Valancourt’s catalog. Judge Jackson’s opinion deftly outlines an unsurprising result, in terms of constitutional law. In short, the Copyright Act’s deposit requirement is constitutional. The Takings Clause of the Fifth Amendment prohibits the federal government from taking private property for a public purpose without just compensation. However, the Supreme Court has long held that statutory benefits can be conditioned upon the exchange of private property without violating the Fifth Amendment. In other words, the Copyright Act conveys the benefit of copyright protection and enforcement via federal law, in exchange for (1) filing fees and (2) deposit copies made available for public use in the Library of Congress. This exchange does not run afoul of the Fifth Amendment. Judge Jackson’s analysis on the First Amendment challenge is equally straightforward. The First Amendment protects free speech, not copyright enforcement. Valancourt can freely publish books without triggering the Copyright Office’s deposit copy requirement, so long as Valancourt does not claim federal copyright protection in each book. Judge Jackson took issue with Valancourt’s attempt to “have its cake and eat it too.” Essentially, Valancourt warned the public that its books were subject to copyright protection but argued it should not be bound by the requirements for that same protection. Reading between the lines, the real surprise of Judge Jackson’s opinion is that Valancourt did not apply for federal copyright protection, yet the small press suddenly faced the prospect of providing 682 books (two copies per book in the catalog) without remuneration. Though the Copyright Office ultimately relented, offering the possibility of digital book copies, the case still presents a cautionary tale. Owners of the copyright in published works should carefully consider any copyright notice placed on works and comply with the mandatory deposit requirements. In at least one district court, claiming federal copyright protection can trigger the Copyright Act’s deposit requirement and ultimately result in fines, without anyone ever seeking federal copyright protection. Perhaps the silver lining of this story is that if you find yourself on the wrong side of the deposit requirement, the Copyright Office may offer cost-sensitive alternatives (e.g., digital deposit copies), though this happy ending is far from certain.

Late last month, Dorsey led a panel at the inaugural Investing in Women Cannabis Pioneers – The Brand Builders investor conference put on by Roth. The panel was made up of female business leaders at Bhang, Leafly, Insa, Tilray and Hollister Biosciences discussing the topic of scaling cannabis brands nationally across state lines despite current legal and regulatory hurdles. As more and more states legalize cannabis (with New York now on the list), establishing a national cannabis brand has never been more important. But cannabis companies still face significant obstacles to doing so. Since cannabis in many forms remains federally illegal, cannabis companies are generally barred from selling product across state lines. Being forced to rely on cannabis grown within different states creates quality control issues, which makes giving consumers across the country the same product experience more difficult. Cannabis companies are also subject to state and/or local packaging and distribution requirements that differ from jurisdiction to jurisdiction and packaging regulations can be subject to change on a moment’s notice. On the advertising side, many outlets available to traditional consumer packaged goods are off limits. Use of social media platforms is severely restricted and other online tools such as advertising keywords are unavailable. Television, radio, billboard and print ads are generally prohibited unless at least 85% of the audience is reasonably expected to be 21 years of age or older. To overcome these hurdles, and to scale nationally, the panelists discussed the importance of creating a strong brand story that resonates with consumers and transcends state differences. The panel also discussed the importance of building brand awareness at the grassroots level, for example, by investing heavily in education at the dispensary or “budtender” level. Content creation through written editorial and educational materials for consumers was also very important. Because federal trademark registration generally remains unavailable for anything “plant touching,” the panelists reaffirmed existing trademark protection strategies of seeking federal registration for informational services, merchandising items and other non-plant goods and services. State trademark registration, which has gained importance for cannabis companies, even though the legal presumptions and other benefits conferred are arguably limited, was also mentioned, along with common law protection. The panelists generally remarked at the creativity and additional investment that was required to build successful brands, and how hard it is for cannabis companies to build trust with consumers. Finally, the panelists weighed in on the opportunities presented by recent adult use legalization in New York. 20,000 new jobs were anticipated to be created within the first 18 months of legalization and the projected market size is $4 billion, likely surpassing Canada and becoming the world’s second-largest legal market after California. One panelist described the New York market as being the largest illicit cannabis market in the world, with most product supplied currently coming from California. Legalization was viewed as eventually suffocating the black market that currently exists.

A recent Uniform Domain Name Dispute Resolution Policy (“UDRP”) decision provided long-awaited guidance for challenging .SUCKS domain names. Sanofi v. Privacy Hero Inc./Honey Salt, ltd, which was decided by a three arbitrator panel of the World Intellectual Property Office (“WIPO”), was the first in a line of decisions to hold that use of the generic top-level domain (“gTLD”) .SUCKS in combination with another party’s trademark can be confusingly similar, and thus, can infringe the trademark holder’s rights. Given the unique circumstances of these cases, however, trademark owners should not count on future panels applying the results of these decisions broadly. Why It .Sucks to be Honey Salt. While the Respondent, Honey Salt, Inc. claimed its site was an open forum for the public to discuss complaints protected under the First Amendment, the Panel instead agreed with Complainant that because the complaints were anonymous and undated and did not mention Complainant by name, they were more likely to be a pretext for Respondent’s real purpose for the site than they were to be protected speech. Based on the existence of multiple links to third-party sites from the website and Respondent’s admission that the sanofi.sucks domain name was for sale, the Panel instead found Respondent’s real purpose for the site was to drive traffic to the site and raise the purchase price for the underlying domain name. Given these circumstances, the Panel ordered sanofi.sucks to be transferred to Complainant. To succeed in a UDRP, the Complainant must pass this three-pronged test: The manner in which the domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights; Why the respondent should be considered as having no rights or legitimate interests regarding the domain name subject of the complaint; and Why the domain name should be considered as having been registered and used in bad faith. For the first prong, the Respondent argued that the domain name was not identical or confusingly similar to the SANOFI trademark because “.sucks” is pejorative, clarifying that the website was not affiliated with the Complainant, but instead contained criticism protected by free speech. The panel rejected this argument, concluding the domain name incorporated the registered SANOFI trademark in its entirety and merely added to it the generic “.sucks” gTLD. The panel did not find this addition precluded a finding of confusing similarity. For the second prong, the Respondent asserted that it had rights or legitimate interests in the domain name because it was used to host a criticism website allowing users to exercise their free speech rights. After noting that the Respondent was a third party with no direct relationship with any person who might have a genuine gripe, the Panel accepted Complainant’s contention that the supposed complaints were unverified and general and likely a pretense to create the impression that the registration and use of the domain name were legitimate. The Panel also agreed with Complainant’s argument that the actual intent is more likely to increase the price it could receive from the sale of the disputed domain name. For the third and final prong, the Respondent denied that it used the domain name in bad faith because of the legitimate purpose of providing an open forum for the free exchange of criticism. Respondent added that allowing brand owners to claim bad faith merely because a domain name is not associated with the underlying brand would undermine the purpose of the .sucks gTLD for criticism and commentary. Here too the Panel agreed with the Complainant and ruled that the domain name was registered in bad faith because it was part of the Respondent’s intention to take unfair advantage of the Complainant’s trademark by increasing Internet traffic to the associated website and to other websites owned by the Respondent using the .SUCKS domain name. The Respondent admitted that it had put many domain names with .SUCKS domain names on the market. The Panel also noted that the Respondent’s pattern of abusive registrations supported a finding of bad faith. The Panel ordered that the domain name be transferred to the Complainant. Rubbing Salt in the Proverbial Wound. Since the decision was issued, WIPO has followed suit and has ordered domain name transfers or cancellations in thirteen other cases. See, e.g., Digicel Caribbean v. Domains By Proxy, LLC / Jamie Mcullan; Alsace Croisieres SA v. John Livingstone / Write Place Publications Inc.; and FirstMerit Corporation v. Registration Private, DomainsByProxy.com / Jon Murrell. All the domain names were owned by Honey Salt on behalf of Everything.Sucks for similar websites. Because of this, trademark owners may wish to determine if Honey Salt or other platforms with a similar business model have acquired their marks as part of .SUCKS domain names. Given the number of transfers, and pending cases for .SUCKS domain names, now may be a sweet time to rub more salt in the Honey Salt .SUCKS wound. Limits on How this Decision .Sucks. The Sanofi panel was careful to distinguish this case from prior decisions where the websites in question contained genuine criticism targeted at specific trademark owners and were not selling anything, including the domain name itself, or otherwise trying to achieve commercial gain. In such cases, panels have typically rejected complaints on the grounds they did not establish the second prong (no legitimate interest in the domain name) or the third prong (that the domain name was registered in bad faith) needed to prevail in a UDRP. The Sanofi decision does not call into question these precedents. Thus, while it .SUCKS to be Honey Salt, trademark owners should not count on future panels ruling that it .SUCKS to operate a genuine gripe site.

Earlier this week the FTC announced that it had sent more than 700 Notice of Penalty Offense letters to major advertisers, leading retailers, large consumer product companies and major ad agencies to put everyone on notice that fake consumer reviews and other misleading endorsements will not be tolerated. The letters also placed the recipients on notice that significant civil penalties will be imposed on those who use these deceptive tactics. In fact, the letters referenced the FTC’s power to impose fines up to $43,792 per violation. To be clear, just because a business received a letter does not mean the FTC suspects any wrong doing. The FTC suspects that fake reviews and other misleading endorsement are widespread, especially on social media. Fresh from the 2021 NAD conference, we did not find this announcement surprising at all. Readers of our blog will know that consumer reviews have been a focus of both the FTC and the NAD for many years. Whether your brand received one of these letters or not, the FTC wants you to know that it will not tolerate any of the following: falsely claiming an endorsement by a third party misrepresenting whether an endorser is an actual, current, or recent user continuing to use an endorsement without good reason to believe that the endorser continues to subscribe to the views presented misrepresenting that an endorsement represents the experience, views, or opinions of users or purported users using an endorsement to make deceptive performance claims failing to disclose an unexpected material connection with an endorser misrepresenting that the experience of endorsers represents consumers’ typical or ordinary experience The FTC also specifically stated that “positive consumer reviews are a type of endorsement, so such reviews can be unlawful, e.g., when they are fake or when a material connection is not adequately disclosed.” While much is unknown about what will happen in 2022, it is highly likely that we will be seeing an FTC crackdown on false and misleading reviews with the steep monetary penalties.

As of today, there have been twelve (yes, twelve!) movies released as part of the Friday the 13th series of horror films, as well as a television series. For those of you who have not seen any of these films, they are not for the faint of heart. The focus of the Friday the 13th oeuvre is a deranged, apparently immortal serial killer named Jason Voorhees. Jason, who was apparently drowned before the events of the first movie began, was revealed at the tail end of that first film to have survived. But his miraculous resurrection was evidently not a cause for celebration or gratitude on his part, as he has spent the last eleven movies stabbing, strangling, decapitating and otherwise murdering the vast majority of hapless individuals (mostly teenagers) who have strayed across his path. Jason has also been killed and resurrected several more times; dragged into Hell; and also cryogenically frozen, but that’s probably more than readers of this blog need to know. So what does any of this have to do with intellectual property? Well, while “intellectual” is not necessarily the first word that springs to mind when the Friday the 13th films come up, they are copyrightable works, and Jason therefore qualifies as intellectual property. A recent decision from the Second Circuit Court of Appeals has addressed the issue of who owns Jason or, more accurately, the screenplay for the first Friday the 13th film. That screenplay was written by Victor Miller, who received sole credit as the author of the screenplay when the first film was released. Miller wrote the screenplay pursuant to an “Employment Agreement” with Manny, Inc., a production company controlled by Miller’s friend and the first film’s director, Sean Cunningham, and Miller was paid $9,282 for his services. The film and screenplay for Friday the 13th, Part 1, were registered with the U.S. Copyright Office by the eventual producer of the film. As the eleven sequels confirm, the first Friday the 13thwas a smash hit, and the series has generated over $468 million worldwide since the first film was released in 1980, making it and/or the Halloween franchise the most financially successful horror films ever made. In 2016, Miller sent several notices of termination to Manny and other entities that held or had held rights in the screenplay to the first Friday the 13th film under Section 203(a) of the U.S. Copyright Act. That statutory provision allows authors and other grantors of rights in copyrightable works to reclaim their copyrights after the passage of (usually) thirty-five years from the date of the original grant. This right of termination is subject to a number of limitations and restrictions, one of which is that the termination right is inapplicable to works made for hire, in which ownership vests not in the work’s author, but the employer or other entity that commissioned the work. Manny and the other recipients of Miller’s notices disputed his right to terminate, arguing primarily that the Friday the 13th screenplay was a work for hire, such that Miller could not terminate his grant made in 1979. Both the District Court and Second Circuit disagreed, holding that based on the factors enumerated by the Supreme Court in Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989), the Friday the 13th screenplay did not qualify as a work for hire because Miller was not an employee of Manny. Both courts based their decisions that Miller was an independent contractor on factors such as Manny’s limited degree of control over Miller’s writing, Miller’s skill as a screenwriter, and the absence of any traditional employee benefits provided to Miller. In addition, both courts rejected the argument that Miller’s membership in the Writers’ Guild of America, East, Inc. and Manny’s participation in the producers’ collective bargaining agreement with the Guild in the same period established that Miller was an employee for purposes of the Copyright Act. In so holding, the Court held that copyright law, and specifically Reid and common law agency principles, controlled the question of whether Miller was or was not an employee of Manny, not the National Labor Relations Act or related principles of labor law. The Second Circuit’s decision appears to be the first to address the interplay between copyright and labor law for purposes of determining whether a particular work was made for hire. The decision is also notable because there are not a lot of decisions applying Section 203(a) and the validity of notices of termination. Most such cases appear to be resolved by settlement, short of formal adjudication. As to who owns Jason going forward, that’s not necessarily an issue that has been resolved. Miller did not write the eleven screenplays for the subsequent Friday the 13th films, and Section 203(a) states that a “derivative work prepared under authority of the grant before its termination may continue to be utilized under the terms of the grant after its termination.” So, Miller’s ability to profit from or interfere with the next eleven installments of the series would appear to be limited. But, that same subsection of Section 203(a) also states that the privilege to continue use of extant derivative works “does not extend to the preparation after the termination of other derivative works based upon the copyrighted work covered by the terminated grant.” So, it would seem that the Second Circuit’s ruling has done what no weapon, law enforcement officer, plucky camp counselor or technologically advanced future society could do: stop Jason from killing again in any new Friday the 13th movies, unless some sort of accommodation with Miller is reached.

At the end of September and beginning of October we spent some extra screen time attending the annual NAD Conference that once again was held virtually in New York. We heard from a number of great speakers, including the Hon. Rebecca Kelly Slaughter, Commissioner at the Federal Trade Commission, Mary Engel, EVP at BBB National Programs, Katherine Armstrong, the Deputy Director of NAD and in-house counsel from The Clorox Company, Campbell Soup Company and T-Mobile USA, Inc. If you could not spare the screen time, don’t worry – here’s a quick wrap-up of the highlights: Ad Claims for Political, Diversity and other Social Issues – Brands jumping in on social movements is nothing new, but in recent years and especially in the past 18 months, we’ve seen a rise in brands posting online and otherwise showing support for various social issues. In fact, a brand staying silent on certain issues can speak volumes these days. So for us advertising attorneys, the question becomes do you need to substantiate social media posts on a brand site that aren’t even selling products, but are showing support for a social movement? One example given was a simple Instagram post with the copy STOP ASIAN HATE. The panelists did a great job moving through a series of questions to assess if the brand in question actually stands with the Asian community – is it appropriate for the company to enter this conversation? What has the company done for the Asian community to date? Would a single monetary donation be enough? Should we look at the history of the company’s philanthropy? What about diversity hiring and retention practices? All great questions to ask if you are asked to review such a post for your brand. Another tip, if you are joining the conversation, make sure you prepare reactive messaging ahead of time in case questions are raised about the position taken by the company. A brand’s consumers may well put the brand to the test by asking what they have done and/or looking at the company’s history of actions or inaction. Consumer Reviews – In the past year, both the FTC and NAD have spent time and resources on ad claims related to consumer reviews. For example, in late 2020, the FTC settled with Sunday Riley, a cosmetics company, over allegations that its CEO directed employees to create fake profiles and post reviews for the company’s products on Sephora. While no monetary fines were imposed, the company agreed to twenty years of on-demand compliance monitoring. Earlier this year, NAD dealt with two consumer review cases addressing the quantification of reviews (e.g., “over 110,000 5-star product review!”) – the takeaway is to make sure you count properly and don’t double count. The panel also gave some tips about addressing unsubstantiated claims in reviews – consider responding on the review website, if that’s possible. Just make sure the response contains only substantiated statements. Influencers – This would not be an NAD conference if there wasn’t a lively discussion about influencers. In terms of new guidelines and rules, NAD released its own tips for influencer marketing earlier this year. Then, Instagram and TikTok each released branded content rules for their own platforms. Social media platforms are clearly trying to evolve past the FTC’s initial take that built-in tools are not an effective disclosure. Whether the FTC will agree in the next set of its guidelines is TBD. In any case, the guiding principles of influencer marketing remain: Truth. Substantiation. Disclosure. Health Claims – Health and safety has been a key focus for everyone since the pandemic started. The FTC and NAD are no different and in fact, both have put more resources into stopping and preventing unfair and deceptive health claims. This past year the FTC sent more than 400 warning letters for COVID-related claims. But not everything was COVID-related. We saw enforcement actions for CBD products, supplements and, last month, the FTC announced a set of cease and desist (as opposed to warning) letters that it issued along with the FDA, directed to companies making diabetic treatment claims without the necessary scientific substantiation. These letters were a bit unique in that they invoked a seldom-used authority of the FTC Act to impose civil penalties for future violations. This is an example of the FTC putting a bit more teeth behind its letters. Until next year...

What first started as a meme featuring a fluffy dog with poor grammar has now resulted in a trademark fight over the ownership of an estimated $80 billion brand. If the progression of this Internet sensation has left your head spinning, you are certainly not alone. Its history is as much a rollercoaster as its cryptocurrency value. Back in 2013, the now infamous meme, featuring a lovable Shiba Inu dog named Kabosu whose inner monologue was riddled with grammatical and spelling errors, went viral and even won “top meme” of the year. Numerous iterations of the “Doge” meme—aptly named after the misspelling of “dog”— have since circulated the Internet, showing the dog in various situations and expressing a typically comical inner monologue replete with contradictions, self-deprecating humor, or other pop-culture references, coupled with the now familiar “doge” style of grammatical faults. Because living in meme-infamy was not enough, in December 2013, software engineers Billy Markus and Jackson Palmer created a new cryptocurrency called “Dogecoin” as a joke in order to poke fun at the wild speculation of other cryptocurrencies. Although intended to be worthless, Dogecoin was designed as a peer-to-peer digital currency that could appeal to a broader demographic than the much larger Bitcoin. When Dogecoin first hit the trading market, it was valued at $0.00026 per coin, but in just 72 hours following its launch, its value jumped nearly 300% to $0.00095 per coin. While the coin’s value fluctuated over the years, much like its cryptocurrency counterparts, it absolutely skyrocketed in January and February of 2021 following encouraging tweets from Tesla-billionaire Elon Musk. In only 24 hours, the coin erupted 800% and was valued at $0.07 per coin. But its unexpected growth only continued throughout the spring of 2021 when the cryptocurrency hit $0.45 per coin on April 16. At the time, the cryptocurrency originally created as a joke was worth nearly $70 billion, making it the fifth-highest valued cryptocurrency. In early May 2021, Dogecoin hit a peak of $0.711 per coin, topping $80 billion. And with this monumental value increase has come the monumental fight over who actually owns the “Dogecoin” brand, and thus, the exclusive rights to use it. Dogecoin’s creators formed a Colorado non-profit in 2014, fittingly named the Dogecoin Foundation, as the owner of the cryptocurrency. However, the Foundation did not file an application for DOGECOIN with the Trademark Office until August 2021. Unfortunately for them, by then nearly half a dozen other applications for DOGECOIN marks were pending with the Trademark Office, each of which is now contending for the rights to exclusively use the DOGECOIN trademark. These applications cover the expected “virtual currency financial services” (U.S. Serial No. 90/686,038) or “cryptocurrency services” (U.S. Serial No. 90/906,631), but also include alleged use with “costumes for use in role-playing games” (U.S. Serial No. 90/720,528) and “covers for smartphones” (U.S. Serial No. 90/625,748). A Dogecoin Foundation board member lamented that, back in 2014, Dogecoin was always intended to be a joke, so they believed it was not worth registering with the USPTO. But with its meteoric rise, others saw an opportunity to monetize the brand beyond cryptocurrency trading. Now the question becomes—who actually owns rights in the trademark? First are the issues of priority and abandonment. The Dogecoin Foundation went defunct for several years following its founding in 2014, and only recently relaunched in August 2021. Whether this is abandonment under the Lanham Act will depend on whether use was discontinued with an intent not to resume such use. But the Foundation has an uphill battle because three years of non-use is prima facie evidence of abandonment. And during the that period of non-use, Cook Islands-based company Moon Rabbit AngoZaibatsu LLC applied for DOGECOIN covering blockchain software goods in Class 9, and virtual currency services in Classes 36, 39, and 42 on an intent-to-use basis. Moon Rabbit’s founder claimed that, because the Dogecoin Foundation had gone dormant, it abandoned its use of the DOGECOIN trademark, and thus, Moon Rabbit’s open-source DOGECOIN code had rights to the mark. But the Dogecoin Foundation claims Moon Rabbit is “attempting to profit unfairly off of the goodwill Dogecoin has built,” to the Foundation’s economic detriment. In addition to Moon Rabbit, the Foundation is seeking to enforce its rights through cease and desist letters against numerous other entities, including Dogecoin 2.0, claiming priority to the trademark. The real legal fights over priority and who can prove exclusive and continuous rights in the trademark will occur when, and if, any of the DOGECOIN applications reach publication or maybe even in federal court. But speaking of publication, it is unclear if any of these applications will reach that stage because the USPTO’s initial take is that DOGECOIN is descriptive. Many of the more recent applications have not yet been assigned to an examining attorney, but the first-filed application, dated February 3, 2021 for the DOGECOIN DEPOT mark, U.S. Serial No. 90/507,747, owned by a Colorado-based individual, may present as both an obstacle to and a warning case for all subsequently-filed applications. On September 2, 2021, the USPTO issued an Office Action requiring a disclaimer of the term DOGECOIN as it applies to financial services, stating that “purchasers who encounter the word DOGECOIN in connection with the identified services would immediately understand that applicant’s credit union services feature borrowing or repaying loans in cryptocurrency.” We will be watching to see if the applicant accepts the disclaimer or tries to fight against it, which could have far reaching implications for the rest of the Dogcoin pack regardless of how the applicant proceeds. In any case, the DOGECOIN DEPOT mark includes the additional term “DEPOT,” which was not part of the disclaimer requirement, so it will likely still be published for registration on the Principal Register, assuming the owner responds to the Office Action. At that point, we will not be surprised to see an opposition filed by the Foundation. What started off as a joke has grown into a very real $80 billion dispute. And while it will likely take quite some time to sort out rights in the trademark, one thing is for sure: this dogfight will certainly provide excellent content for years of doge memes to come.

We have previously written about the trademark dispute between Vortic—a watchmaker that restores antique pocket watches, and converts them into wrist watches—and the venerated Hamilton Watch Company, which produced its first watch in the 1890s and is still in business today. Vortic uses a restored movement (the internal mechanism), face and hands from pocket watches produced by Hamilton to create “The Lancaster” wristwatch, but the other parts are produced by Vortic and the ultimate product is also assembled by Vortic. We previously reported that Judge Alison Nathan of the Southern District of New York had denied Hamilton’s motion for summary judgment and motion for reconsideration, concluding disputes of fact persisted, and that the case at trial would turn on the issue of likelihood of consumer confusion. In addition to considering the standard Polaroid factors, because the alleged infringement related to refurbished goods, Judge Nathan applied a “crucial supplemental factor” from the Supreme Court’s decision in Champion Spark Plug Co. v. Sanders, 331 U.S. 125, 128-31 (1947), whether Vortic provided adequate disclosure of the nature of the watch being sold as a “modified genuine product.” Following a one-day bench trial, Judge Nathan found that Vortic had fully disclosed the watch’s restoration and lack of affiliation with Hamilton (the Champion factor), and then considered the relevant Polaroid factors in concluding there was no likelihood of confusion. Judge Nathan explained that under Champion, “full disclosure” of the identity of the restorer and the used nature of the product protects the seller of second-hand goods. Judge Nathan gave substantial weight to this supplemental “full disclosure” factor under Champion, and while she considered all of the Polaroid factors as well, she noted that only three such factors—actual confusion, defendant’s good faith and sophistication of the buyers—were “indisputably relevant,” and that each of these three factors weighed against finding likelihood of confusion. Hamilton appealed to the Second Circuit Court of Appeals, which affirmed Judge Nathan’s decision earlier this month. While Hamilton challenged the district court’s factual findings and legal analysis, the legal challenge is what is interesting about the appeal. The Second Circuit first agreed that the framework laid out by Champion applied to this dispute, despite Hamilton’s argument that Champion did not apply because the “reconditioning or repair” that went into The Lancaster was so extensive that it was a new watch containing Hamilton parts, not “a modified genuine Hamilton product.” The more interesting part of the Second Circuit’s opinion, however, addressed how the Champion framework interplays with the Polaroid factors. Hamilton argued the district court erred by failing to first determine the likelihood of confusion under the Polaroid factors before turning to the “full disclosure” analysis under Champion, and that similar to an affirmative defense, Vortic (the defendant) bears the burden of establishing the “full disclosure” standard was met. The Second Circuit disagreed, concluding that the district court did not err in declining to require Vortic to prove the effectiveness of its disclosures under Champion. While Vortic did present evidence that its disclosures were effective, the Second Circuit held that because a plaintiff in a trademark infringement action bears the burden of establishing likelihood of consumer confusion, the district court correctly looked to Champion and the disclosures made by Vortic to determine whether Hamilton (the plaintiff) met that burden. Finally, in a trademark case involving refurbished goods, the Second Circuit reaffirmed that courts must consider both Champion and Polaroid in determining whether a plaintiff has met its burden, but that there is no hard and fast order in which a court must undertake that analysis.

In a recent decision, the Ninth Circuit Court of Appeals found that an Australian cosmetic company is subject to the personal jurisdiction of a federal district court in California despite having no traditional “minimum contact” ties to the state of California. The decision relies on Federal Rule of Civil Procedure 4(k)(2), the rarely-invoked rule authorizing courts to exercise nationwide jurisdiction over foreign parties who would not otherwise be subject to jurisdiction in any individual state of the United States. Notably, the Ninth Circuit’s decision largely turned on the Australian company’s marketing on social media—directed to “USA BABES”—and use of U.S.-based influencers. Alya Skin Pty. Ltd. is an Australian beauty and skincare brand known for its “World Famous Pink Clay Mask” shown below. It uses ALYA and ALYA SKIN to market its clay mask and other pink skincare products to customers across the globe. Alya Skin began marketing its products in 2018. Ayla LLC is a California-based beauty brand and retail business. It markets a variety of specialized skin, body, and hair care products, including its own line of AYLA branded products. Ayla owns three U.S. trademark registrations for the mark AYLA covering, among other goods and services, “cosmetics” and “online retail store services in the field of cosmetics and beauty products.” Ayla began using the AYLA mark in 2011. In February 2019, Ayla filed a Complaint in the Northern District of California alleging that Alya Skin’s use of ALYA and ALYA SKIN to market its cosmetic products constitutes trademark infringement, false designation of origin, and unfair competition under federal and California law. Alya Skin responded by filing a motion to dismiss, arguing that it was not subject to personal jurisdiction in the Northern District of California. The district court agreed and dismissed the case. In its decision, the court quickly found that it does not have specific personal jurisdiction over Alya Skin under the traditional “minimum contacts” test of International Shoe and its progeny. There was no dispute that Alya Skin has no retail stores, offices, officers or employees, bank accounts, or property in the United States. The court found that although Alya Skin operates a website accessible in California, it is a “standard, modern website” and the fact that consumers in California could purchase goods from the website is not alone sufficient to confer jurisdiction in the absence of features that specifically target consumers in California. The district court further analyzed the possibility of exercising personal jurisdiction under the “nationwide jurisdiction” provision of Federal Rule 4(k)(2). This infrequently-used provision was added to the Federal Rules of Civil Procedure to allow for the exercise of personal jurisdiction when an action arises under federal law, the defendant is not subject to jurisdiction in any state’s courts of general jurisdiction, and the federal court’s exercise of jurisdiction comports with due process. The due process analysis looks to whether the defendant has sufficient contacts with the United States as a whole, rather than any individual state. The district court weighed Alya Skin’s contacts with the United States and held them to be insufficient, finding that Alya Skin targeted its marketing to an international market rather than to the U.S. On appeal, the Ninth Circuit re-weighed Alya Skin’s contacts with the U.S. Ayla was successful in convincing the appellate court that Alya Skin’s infringing conduct was expressly aimed at the United States, resulting in a reversal of the district court’s decision. According to the Ninth Circuit, the evidence of record showed significant contacts with the United States, including: (1) nearly 10% of Alya Skin’s sales are to U.S.-based customers, a volume the appellate court characterized as “substantial” in the country as a whole that were “regular and significant”; and (2) it uses a distributor in Idaho to fulfill some of its orders, demonstrating that Alya Skin contemplated significant shipments to U.S. customers even though it shipped its products worldwide as well. While these contacts may not alone be sufficient to confer jurisdiction, the Ninth Circuit further found that Alya Skin’s sales in the U.S. were not “random, isolated or fortuitous” or merely placed in the stream of international commerce. Rather, Alya Skin had made an “intentional, explicit appeal” directly to United States consumers, a finding based in large part on Alya Skin’s use of Instagram and Facebook marketing. Social media accounts managed by Alya Skin included information targeted specifically to Americans. The Ninth Circuit’s opinion references one Instagram post on Alya Skin’s account with the caption “Attention USA Babes we now accept afterpay.” And a November 2018 post on Alya Skin’s Facebook page advertising a Black Friday sale. Although Alya Skin presented evidence that “Black Friday is slowly catching on in Australia,” the court noted that Black Friday is an American invention and “remains America’s biggest shopping day.” Apart from these two posts on Alya Skin’s social media accounts, the appellate court further relied on Alya Skin’s use of social media influencers who are based in the U.S. and have a predominantly U.S.-based following to spread awareness of its products and Alya Skin’s advertisement that its products are available for two- to four-day shipping to the U.S. Alya Skin presented evidence that a vast majority of its social media marketing was not directed to the U.S. market. However, the Ninth Circuit found that even though “Alya Skin may have addressed much of its advertising to an international or Australian audience does not alter the jurisdictional effect of marketing targeted specifically to the United States.” Accordingly, the appellate court concluded that personal jurisdiction was proper under the “rarely exercised” Rule 4(k)(2) and reversed the district court’s dismissal of the case.

The minor hockey league ECHL iced a win over the San Diego Gulls hockey club earlier this month when a judge in the Central District of California granted ECHL’s motion for summary judgment dismissing all of the Gulls’ claims. The court found that because a 2015 agreement between the parties did not transfer any copyright in a gull-playing-hockey logo, ECHL was not on the hook for the Gulls’ legal fees and settlement payment in a separate action. Back in February 2015, ECHL assigned certain trademarks to the San Diego Gulls hockey team, including the word mark “Gulls,” any depiction of a seagull in the context of hockey or a hockey team, and a logo showing a sea gull waving a hockey stick (the issue of whether gulls actually play hockey was apparently not considered by the court). The trademarks and logo were defined in the agreement as the “Marks.” In addition to the trademarks, the 2015 agreement also assigned to the Gulls a list of social media names with the word “Gulls.” The Marks and the social media names were collectively defined as the “Intellectual Property.” As part of that agreement, ECHL represented that (1) it had the right, power, and authority to enter into the Agreement; and (2) the Mark was freely assignable and unencumbered by adverse claims. All seemed fine until a little over a year later, when an individual named Robert Barros filed a copyright infringement action against the Gulls, alleging that he owned artwork entitled “San Diego Gulls” (pictured below) and that he had registered this artwork with the United States Copyright Office. Unfortunately for the Gulls, Barros’ artwork appeared to be “birds-of-a-feather” with the logo they had purchased from ECHL and were using to promote their team. The copyright litigation with Barros proved painfully expensive for the Gulls. By the time it was over, they had racked up a whopping $750,000 in attorneys’ fees and paid $330,000 to Barros to settle the matter. Ouch. While the Gulls probably wanted to drop their gloves and challenge ECHL to an old-school hockey fight, they decided instead (presumably on the advice of their lawyers) to sue ECHL for breach of contract and intentional misrepresentation. The basis of both the Gulls’ claims was that ECHL had falsely represented that the assigned rights were free and clear of any claims, when in fact Barros had a colorable (and, for the Gulls, costly) copyright claim to the Gulls’ logo. The Gulls filed their complaint in September 2019, and ECHL filed a motion to dismiss two months later. Interestingly, ECHL only sought dismissal of the intentional misrepresentation claim, asserting that it was not pleaded with the requisite particularity. In January 2020, the court denied ECHL’s motion to dismiss and the parties engaged in discovery. Then, on March 19, 2021, ECHL filed their motion for summary judgment seeking dismissal of both claims. In its summary judgment decision, the court quickly identified the relevant issue, which was one of contractual interpretation rather than intellectual property law. As the court phrased it, the Gulls’ claims “rise and fall based on whether the 2015 Agreement transferred any copyright in the [gull-with-hockey-stick] Logo.” In other words, if the copyright in the Gulls’ logo was among the assets transferred in the 2015 assignment agreement, then ECHL shouldn’t have represented that the assets were free and clear of claims. If, however, copyright rights were not among the assets assigned, then ECHL did not breach the agreement or make any misrepresentations – despite the fact that Barros had a copyright claim to the Gulls’ logo. The court reviewed the applicable provisions of the 2015 agreement and concluded that that agreement “unambiguously defines the scope of the assets being transferred, which does not include copyright in the [Gulls’] Logo.” Specifically, according to the court, the Agreement transferred all of ECHL’s rights in the “Intellectual Property”, which in turn was expressly defined as including only the “Marks” and a list of social media names containing the word “Gulls.” As such, the court held that ECHL did not breach any provision of the assignment agreement or make any misrepresentation when it warranted that the intellectual property it was assigning to the Gulls was unencumbered by any adverse claims. Barros may have had a valid copyright claim but ECHL was under no obligation to disclose that because they weren’t assigning any copyright to the Gulls. A few takeaways from this decision: First, given that this decision appears to be based on nothing more than interpretation of an unambiguous contractual provision, one wonders why ECHL didn’t move to dismiss both claims on the contractual interpretation issue. Second, this case serves as another reminder that you need to do your own due diligence when you purchase IP assets (or any assets, for that matter). If the Gulls had discovered Barros’ copyright before entering into the 2015 agreement, they could have avoided two messy and expensive litigations – or at least made ECHL pay for the Barros litigation. Finally, it bears repeating that contracts mean what they say and only what they say. If you want copyright rights to be encompassed within the rights assigned under a contract, make sure you include them – and don’t expect a court to add them later if you don’t.

Like me, Judge Otis D. Wright of the Central District of California remembers KOOL. A once leading menthol cigarette label, KOOL brands and its owner ITG Brands, LLC sued Capna Intellectual claiming Capna’s Bloom Brands’ use of interlocking “OO”s in its marketing of packaged cannabis products infringes on and dilutes the KOOL marks. After a June 7 hearing in which Judge Wright urged the parties to come to an agreement regarding an appropriate preliminary injunction, on June 21 Judge Wright signed ITG’s revised proposed preliminary injunction, which was more limited and prohibited Bloom from using interlocking “OO”s and/or circles in its marketing and promotional materials. This ultimately led to a settlement and stipulated permanent injunction issued earlier this month. While the preliminary and stipulated permanent injunctions are relatively standard form, and are perhaps not noteworthy, a couple points from the parties’ briefing on the preliminary injunction and the hearing are interesting to consider. Based on my own review of the briefing and application of the Sleekcraft likelihood of confusion factors, this case was a close call, and I perhaps would not have issued a preliminary injunction. Bloom Brands’ most interesting argument did not fit neatly into any one of the eight Sleekcraft factors. Bloom Brands juxtaposed the fall of menthol cigarettes as a product, and the consequent falls of brands affiliated with that product, including KOOL, against the mass legalization and rise of cannabis products and brands across the majority of the United States. For example, Bloom argued that KOOL brands and its interlocking “OO”s may have had “a worldwide reputation for quality and authenticity” in the 1930s, but Bloom claimed that in 2021, KOOL’s “reputation is for peddling toxic addictive carcinogens to minorities.” Bloom also argued that on April 29, 2021 the FDA announced that it would ban menthol cigarettes nationwide. By contrast, Bloom claimed that much of the nation has moved toward legalization of cannabis. In short, Bloom made a persuasive argument that KOOL brands’ star had fallen, while Bloom Brands’ star was rising such that any confusion was not only unintentional (a Sleekcraft factor), but would actually hurt Bloom’s image (and benefit KOOL’s). This argument is persuasive and arguably spans numerous of the Sleekcraft factors, as it goes to the strength of marks, actual confusion, defendant’s intent in selecting the mark and likelihood of expansion into other markets. Perhaps KOOL’s best retort fits within the eighth Sleekcraft factor—likelihood of expansion into other markets—because even assuming menthol cigarettes are forever on their way out, after 88 years, KOOL should have the right to expand its use of the interlocking “OO”s to cannabis if it decides to do so in the future. Judge Wright picked up on a corollary to this potential retort during the June 7 hearing when he questioned whether ITG’s “goodwill could be harmed for the straight-laced among us who might now feel that KOOL has gone into the cannabis market and find that objectionable even in California?” From a purely theoretical standpoint, I would have liked to see how this dispute played out. Among geriatric Millennials and Generation X, KOOL is a strong mark and there is good reason to believe a strong likelihood of confusion exists. And as previewed by Judge Wright, that same demographic might be offended if it mistakenly believed KOOL had ventured into cannabis, which could damage KOOL’s goodwill. On the other hand, Bloom is not wrong that among the younger demographic, KOOL has very little, if any, brand strength largely as a result of the strict limitations placed on cigarette advertising since the late 1990s. And the so-called “straight-laced” from this younger demographic is also more likely to view menthol cigarettes as the evil, and cannabis as the good, such that any actual consumer confusion could actually benefit KOOL, and harm Bloom, among that demographic. One also cannot help but wonder whether an unwritten, ninth, non-Sleekcraft factor would have tipped the scale in favor of KOOL and against Bloom here. While the majority of the states have legalized cannabis in one form or another, the federal government has not. If he had been forced to decide whether to issue a preliminary injunction against Bloom on the original papers alone, curious whether Judge Wright would have leaned toward issuing the injunction simply because Bloom sells a federally illegal product. Regardless, Judge Wright did the parties a huge favor by forcing them to confer and find a business solution to share the pain equally, which ultimately led to a settlement. Judge Wright even commented that he was tired after every hearing of half of the people “going away pissed off,” and after he apprised the parties that if either side acted unreasonably he’d decide against the unreasonable party, he sent them off to figure it out and gave them time to do it. And they did. Both sides benefited from Judge Wright’s pragmatic approach, and, in the end, “cooler” heads prevailed. Kudos to all.

Author Denise Shull lost her challenge to the Showtime television show Billions, which she claims copied the character bearing her name in Shull’s book Market Mind Games: A Radical Psychology of Investing, Trading and Risk. Shull alleges that she was never paid for the time she spent consulting with Billions writers and actors, and that the show committed copyright infringement in its portrayal of Dr. Rhoades, an in-house female psychological consultant who worked with traders to harness their emotions to be even more successful. The saying is that truth is stranger than fiction, but one question here was whether Shull’s book was truth or fiction. While one might think an author is most often claiming the book describes real facts, while others challenge its credibility, here the roles were reversed. Shull claimed that her book was a work of fiction, with the main character as a “fictionalized” version of herself. In other words, Shull claimed copyright infringement for Showtime’s alleged copying of Shull’s fictional version of herself. Defendants claimed the book was more like an academic work, and the same protections did not apply. The federal court for the Southern District of New York granted Defendants’ motion to dismiss and dismissed the case with prejudice. While many courts will grant an opportunity for leave to amend, Shull’s attorneys did not make such a request at the time of the motion to dismiss, either by separate motion or by mention in their opposition brief. The court granted a dismissal with prejudice, and denied Shull’s request for reconsideration or leave to amend as futile. On appeal, the Second Circuit affirmed the dismissal and ended Shull’s case. First, the Second Circuit agreed that the works were not substantially similar under the “more discerning observer” test, which examines “aspects such as total concept and feel, theme, characters, plot, sequence, pace and setting.” The court pointed to the difference between Shull’s “academic book that draws on fictional stories to illustrate Shull’s ideas,” and the “entirely fictional serial television drama…that lies in the age old trifecta of money, power and sex.” Second, the Court agreed that Shull failed to state a claim under the “quantitative and qualitative” approach, which requires the copying of more than a de minimis amount of expression – as distinct from copying of ideas, facts or non-protectible elements. The Court’s dim view of Shull’s case was made clear here: it found “no actionable copying, let alone copying that exceeds the de minimis threshold,” and noted that Plaintiff “cannot copyright the idea that one should eat, sleep, and exercise to perform well.” What are the takeaways for practicing attorneys? Well, for one, the Second Circuit remains open to dismissing copyright cases at the Rule 12 stage based on the merits of infringement. But the Shull opinion was released as non-precedential, and the impact of the ruling is yet to be seen. Finally, this opinion showcases how defendants enjoy the upper hand in situations where a plaintiff’s initial pleadings is lacking.

We previously blogged about Airwair Int’l v. Pull & Bear and how Doc Martens successfully challenged Defendant’s expert who opined on secondary meaning and likelihood of confusion. Now, the shoe is on the other foot. Doc Martens’ expert found himself in the hot seat for offering improper legal conclusions regarding Doc Martens’ trade dress rights. Take a load off and read on so you don’t find yourself getting cold feet the next time you are considering using experts in a trade dress dispute. Doc Martens is the purveyor of the wildly popular clunky-soled combat boots and shoes with yellow stitching simply known as “Docs.” As Rolling Stone magazine recently commented, those who have sported Docs over the years “runs the gamut from Eddie Vedder and Morrissey, to Rancid and Rihanna.” Doc Martens owns several trade dress registrations and sued Pull & Bear Espana SA for allegedly selling several styles of footwear that infringe on Doc Martens’ trade dress. Pull & Bear countersued, claiming that Doc Martens’ trade dress rights were invalid. Between the two sides, they retained a small squadron of experts for the purposes of opining, rebutting, and excluding. Doc Martens offered rebuttal expert testimony from a distinguished law professor who, among other things, opined that Doc Martens’ “registered trade dress is unambiguous, valid, and protectable.” He also opined that the registrations “comport with” certain requirements mandated by the USPTO. The Court excluded this rebuttal opinion because an “expert cannot testify to a matter amounting to a legal conclusion." Whether a given trade dress is “presumptively valid” or “enforceable” are ultimately calls for the court to make, not for an expert witness. Similarly, whether a registration comports with USPTO requirements is also a legal conclusion and not appropriate for expert testimony. In walking a mile in Doc Martens’ shoes, we can see where it was possibly headed with this proffered testimony. Federal Rule of Evidence 704 tells us that “[a]n opinion is not objectionable just because it embraces an ultimate issue.” After all, whether a given trade dress is valid and enforceable is certainly one of the “ultimate issues” in any trade dress infringement case. Thus, we could see how trial counsel could find it alluring to have a well-regarded law professor provide a rebuttal opinion on this important issue. Trial counsel must remember, though, that Federal Rule of Evidence 702 mandates that an expert’s testimony is only admissible in the first instance if it will “help the trier of fact to understand the evidence or to determine a fact in issue.” When an expert ventures into the realm of explaining what the law is or renders a legal opinion, that’s going to be a bridge too far. Just as it was here.

    Coca-Cola Company has a rich history and well-established global brand in its products originating in the U.S. It has also purchased and invested in the development of other brands and distribution of beverage products outside of the U.S., including in India. Coca-Cola entered the market in India through the acquisition of the marks THUMS UP and LIMCA, because when it initially expressed interest in selling its Coke-branded products in India, the Indian government required companies to disclose the full formula of the products. Instead, in the 1990s, Coca-Cola acquired the LIMCA (lemon-lime soda) and THUMS UP (cola) marks and logos featured above, along with the tagline, that had been introduced and made popular in India since the 1970s by a predecessor-in-interest. The THUMS UP product enjoys a significant market share in India and is one of the world’s best-selling beverages. The LIMCA soft drink is one of the best selling carbonated lemon-lime beverages in India. Both marks have achieved “well-known” status established through the high courts in India, and Coca-Cola owns trademark registrations for the marks in India and in other countries outside of the U.S. Third parties also import both products into the U.S. and focus sales of the products to Indian-American consumers. Coca-Cola was not directly making sales of the products in the U.S. and did not own registered rights in either mark in the U.S. at the time it filed petitions to cancel registrations owned by respondent Meenaxi Enterprise, Inc. (although Coca-Cola has since filed trademark applications for the marks in the U.S.). Meenaxi was founded in 2003 and is owned and operated by two Indian-American brothers who described their business as a “purveyor of and distributor of food products” that are “manufactured in India and distributed primarly to Indian grocers in the United States.” The company advertised its products in a monthly magazine focused on the “Indian Community.” Meenaxi obtained United States registrations for the LIMCA and THUMS UP trademarks, initially claiming during the cancellation proceeding that it came up with the names independently. One of the brothers later conceded in testimony that he had tasted the products in his college days in India and was aware of the brands. Coca-Cola filed petitions for cancellation of the registrations in the Trademark Trial and Appeal Board under Section 14(3) of the Trademark Act. This section provides that a registration is subject to cancellation if the mark “is being used by, or with the permission of, the registrant so as to misrepresent the source of the goods or services on or in connection with which the mark is used.” To state a claim under Section 14(3), it is not sufficient to allege the willful use of a confusingly similar mark. Rather, the alleged misrepresentation must involve the deliberate passing off of goods as those of another. It is a blatant misuse of the registered mark in a manner intended to trade on the goodwill and reputation of another. To prevail on a claim under Section 14(3), a petitioner must establish: The trademark originated with the Petitioner; That the origin of the trademark was falsely designated by the Registrant; That the false designation of origin was likely to cause consumer confusion; and That the Petitioner was harmed by the Registrant’s false designation of origin. The Coca-Cola case presented a factual scenario similar to Bayer Consumer Care AG v. Belmora LLC. In Bayer, an unauthorized entity in the U.S. registered and marketed products under Bayer’s FLANAX mark to Hispanic consumers because the mark and products were well-known to consumers in Mexico. Even though Bayer was not selling products under the FLANAX trademark in the U.S., the courts and the TTAB found that it had met the elements of a claim of misrepresentation, leading to the cancellation of Belmora’s registration (the final stages of which are currently before the TTAB). In that case, it was established that if a third party is using a trademark in the U.S. to misrepresent to U.S. consumers the source of the registrant’s products as originating with the petitioner, the petitioner suffers actionable harm and damage through the loss of the ability to control its reputation. The record in the Bayer case clearly established that the reputation of the Mexican FLANAX mark did not stop at the Mexican border. The outcome in the precedential decision from the TTAB involving Coca-Cola’s THUMS UP and LIMCA marks is consistent. Not only did Meenaxi adopt marks owned by Coca-Cola with explanations that were found lacking in credibility, it also adopted a tagline and logos that were identical or nearly identical to those owned by Coca-Cola for the beverage products. In addition, Meenaxi had a pattern of such behavior and in testimony revealed that it had adopted the marks of others from the marketplace in India at least four other times and sought registrations for those marks in the USPTO. With all of those factors in mind, the TTAB found it highly unlikely that Meenaxi’s adoption of all of these marks, logos, and taglines were an unintended coincidence. Rather, the evidence strongly suggested that Meenaxi sought the registrations of others in an effort to trade on the goodwill of the prior registrants. Meenaxi’s course of conduct belied its excuses that consumers in the U.S. were not aware of Coca-Cola’s LIMCA and THUMS UP marks, and established that it clearly sought to capitalize on the awareness of Indian-Americans of the well-known marks. The TTAB accordingly granted Coca-Cola’s petitions to cancel the registrations for the LIMCA and THUMS UP marks owned by Meenaxi. Takeaways Owners of trademarks outside of the U.S. are not required to sell products bearing the marks in the U.S. to have standing to petition to cancel the registered marks used by another party to misrepresent the source of the goods. Trademark owners should keep an international perspective on trademark enforcement strategies and take action against U.S. registrants exploiting the reputation of marks that have gained fame and renown in other countries.

Greenpeace, the well-known environmental campaign organization, recently prevailed over an electricity giant in the Australian case AGL Energy Limited v. Greenpeace Australia Pacific Limited. Australia’s parody and satire law is similar to the US and this case presents and interesting application of these standards. The dispute began in May 2021 when AGL Energy Ltd. (“AGL”) became the focus of efforts by Greenpeace Australia Pacific Ltd. (“Greenpeace”) to stop AGL’s harmful environmental practices. AGL powers around one-third of Australian households, mostly through the use of coal-fired power stations. In recent years, AGL has promoted itself as an “environmentally-friendly” company. Greenpeace labeled this marketing as “green-washing” of the company and in response, Greenpeace launched its own campaign to highlight AGL’s record as a major polluter and lobby for them to divest from coal-fired power. As part of its campaign, Greenpeace produced a report entitled “Coal-face: Exposing AGL as Australia’s biggest climate polluter.” The campaign also produced social media posts, billboards, posters, and placards. The report and the other campaign materials all used AGL’s logo accompanied by a slogan that played on AGL’s initials, “AGL- Australia’s Greatest Liability.” AGL brought claims of copyright and trademark infringement in the Federal Court of Australia for the use of its logo in the campaign. Greenpeace prevailed on both claims. Justice Stephen Burley considered whether the use of the logo by Greenpeace was an infringement of (1) AGL’s copyright or (2) AGL’s registered trademark. Copyright claim Greenpeace did not dispute that AGL owns copyright of the logo, however Greenpeace successfully argued it was not in breach of AGL’s copyright because the use fell within the defense of fair dealing for the purpose of parody or satire. Greenpeace also relied in part on the defense of fair dealing for the purpose of criticism or review; however, this was unsuccessful. Section 41A of the Copyright Act 1968 provides: 41A   Fair dealing for purpose of parody or satire A fair dealing with a literary, dramatic, musical or artistic work, or with an adaptation of a literary, dramatic or musical work, does not constitute an infringement of the copyright in the work if it is for the purpose of parody or satire. The Court held that § 41A provides an important exception to copyright infringement to promote free speech and critique. For Greenpeace to establish the defense, it had to prove that the use was a “fair dealing” that drew the audience’s attention to an object of ridicule or criticism through irony, humor, or sarcasm. AGL argued that Greenpeace intended for its use of the logo to create change, rather than parody or satire, but Justice Burley upheld existing Australian authority in finding that as long as satire was one of the purposes, the existence of another purpose for the use did not prevent Greenpeace from establishing the defense. The Court held that use of the logo in advertisements, street posters, and website fell squarely within the meaning of parody or satire. Justice Burley stated that by modifying the logo, “the ridicule potent in the message [was] likely to be perceived.” He noted that the modification to AGL’s logo was “darkly humorous” and the combined effect of the logo and message was “ridiculous” and that the messages in the social media posts and photographs called attention to the fact that AGL was not the creator of the work. AGL also argued that Greenpeace used the logo to brand the company as toxic, which would not fall within fair dealing. But the Court ruled that copyright protects an owner’s interest in his or her work but it does not protect brand reputation. Ultimately, although the Court generally accepted Greenpeace’s defense, some of the social media posts and placards that did not involve the clearly satirical tagline “Australia’s Greatest Liability” did not contain a sufficient element of parody or satire and therefore an injunction was granted in AGL’s favor in respect of this limited number of works. Trademark claim The Court held that the use of the logo did not constitute trademark infringement because the logo had not been “used” by Greenpeace as a trademark. The Court agreed with Greenpeace’s characterization of its use, and therefore AGL’s case did not proceed beyond the first hurdle. The Court considered that the general population would not readily perceive that Greenpeace was attempting to promote any goods or services by using the logo. What does this decision mean for your logo? The Court dismissed the claims for infringement of trademark and breach of copyright and did not award AGL monetary damages, only granting injunctive relief for the limited number of photographs and social media posts that did not fall within the parody or satire exception as described above. As a result, Greenpeace can use the logo along with the slogan in its campaign. This case sets an important precedent in Australia. It provides a model for other environmental and activist organizations to launch campaigns that satirize and parody large corporations with less fear of losing an IP litigation for the use of corporate logos. However, this case does highlight that activist organizations must be careful when creating their marketing materials to ensure that their satirical messaging is adjacent to the logo to ensure the general perception of the materials is satirical. It was relevant in this case that the slogan “Australian’s Greatest Liability” appeared next to the AGL logo, and that Greenpeace’s own logo was also prominently displayed on the materials. This Australian decision aligns with U.S. cases like SunTrust Bank v. Houghton Mifflin Co., in which the Court determined that a parody of Gone With the Wind was entitled to the fair use defense for copyright infringement. 286 F.3d 1257 (11th Cir. 2001). The derivative work used major plot lines and characters from the original book as a way to criticize the writing’s depiction of slavery in the United States. Like the use of AGL’s logo in the Greenpeace campaign, the use of the original work in SunTrust Bank was necessary for the critical message to be understood. This post was written with generous contributions and analysis from local counsel in Australia, Shelley Einfeld and Imogen Wurf, of the law firm of Maddocks. Dorsey & Whitney LLP Summer Associate, Tricia Archuleta co-authored this post.

We’ve discussed a number of cases lately where flimsy consumer surveys were tossed out as unreliable under Daubert. This latest installment presents a slightly different twist. It discusses a recent case where the Defendant’s expert opined on the issue of secondary meaning and consumer confusion without a survey at all. As it turns out, Plaintiff’s expert successfully booted this proffered evidence. Read on so that you don’t end up kicking yourself when faced with a similar situation. Today’s case involves Doc Martens, the British footwear brand known for its chunky-soled combat boots that are routinely sported by the likes of Kendall Jenner, Gigi and Bella Hadid, and other Hollywood denizens. Doc Martens owns a number of U.S. trade dress registrations for its boots, and it was none too happy when a company by the name of ITX allegedly sauntered into the marketplace with its own clunky-looking imposters. Doc Martens sued for trade dress infringement, ITX lobbed counterclaims of trade dress invalidity, and the parties were officially off to the races. ITX retained a footwear industry expert to rebut Doc Martens’ infringement claims. Specifically, ITX’s expert offered an opinion that the Doc Martens at issue lacked secondary meaning and that consumers were not likely to be confused by ITX’s boots in any event. In opining on the lack of secondary meaning, ITX’s expert asserted that the Doc Martens footwear designs “are so common in the footwear industry that no one manufacturer has the exclusive right to use the elements.” As the Court noted, though, secondary meaning is based on a number of factors, including exclusivity, length of use, sales, consumer recognition, and other factors. ITX’s expert only offered an opinion on “exclusivity” and was, therefore, based on “mere conjecture.” In opining that consumers would not be confused, ITX’s expert cobbled together a “side-by-side” comparison of the various boots and pointed out the differences among them. The Court rightfully observed that “a side-by-side comparison is improper if that is not the way consumers encounter the product in the market.” Because there was no evidence that these dueling boots were encountered together by consumers in the real marketplace, ITX’s expert opinion got the boot on this issue as well. The moral of this saga is this: if you are attempting to offer evidence of secondary meaning, make sure you consider all the legal elements associated with that endeavor. Moreover, if you are trying to establish a lack of confusion in the marketplace, run—don’t walk—to a competent consumer survey expert for a proper assessment. Fail to heed either of these and you may be kicking yourself.

In the much-anticipated Hasbro Inc. v. EUIPO (T-663/19) decision, the General Court of the European Union announced a new approach to evaluating bad faith in trademark filings and signaled a more aggressive stance toward the practice of “evergreening.” The dispute centered on Hasbro’s registered EU trademark (“EUTM”) for the word mark MONOPOLY. Hasbro registered this mark in 2011 in classes 9, 16, 28, and 41, while at the same time owning three existing EUTMs filed in 1998, 2009, and 2010 for the MONOPOLY mark in classes 9, 16, 25, 28, and 41. Because the 2011 registration listed additional goods and services falling within the same classes as the existing registrations, Hasbro was able to extend its existing protections while avoiding the cost and administrative burden of showing genuine use outside the initial five-year grace period available for all EUTMs as protection against non-use cancellation actions. This re-filing strategy, known as “evergreening,” has long been controversial. While the court in Hasbro did not make an outright determination on the permissibility of evergreening, it fired a warning shot that should cause trademark owners to re-evaluate their filing strategy, lest they end up in Hasbro’s position with an invalidated mark after costly litigation. The Court found Hasbro’s use of evergreening for the sake of administrative convenience to be evidence of a bad faith subversion of the principle of undistorted competition at the heart of the EUTM system. In addressing Hasbro’s evergreening of the MONOPOLY mark, the Court looked to EU Regulations governing the EUTM regime, which treats registrations filed in bad faith as invalid. Recent EU case law has provided greater clarity on the meaning and required proof of bad faith in the EUTM context, but the Hasbro decision breaks new ground of its own. First, the Court in Hasbro found that the factors cited in the earlier Court of Justice decision Chocoladefabriken Lindt & Sprüngli (C-529/07) were neither exhaustive nor necessary evidence of bad faith. Instead, it reasoned that the Chocoladefabriken factors were merely exemplary and that the determination of bad faith rests on objective record evidence of the subjective motivations of the trademark applicant and a departure from accepted principles of honest commercial practices. In Hasbro this standard was met because a Hasbro employee gave testimony that a partial motivation for the company’s filing strategy was to mitigate the administrative burden of showing genuine use of the prior marks. The Court found that this was evidence of intent to undermine the EUTM regime’s objective of ensuring undistorted competition and that it was sufficient to establish Hasbro’s bad faith in filing for the 2011 mark. The definition of bad faith in this decision makes evergreening a riskier strategy for EU trademark filers by expanding its scope and creating greater uncertainty. Second, the Hasbro decision also shakes up the role of bad faith for EU trademark applicants by appearing to lower the burden of rebutting a presumption of good faith. While the Court is careful to reaffirm the general presumption that applications for trademark registration are filed in good faith, its finding of bad faith on the apparently sole basis of testimony from a single employee that administrative ease was a motivating factor in filing suggests that the evidentiary requirements to rebut the good faith presumption may be lower than previously suggested by the case law. Indeed, future filers should take steps to prepare affirmative evidence of good faith, including evidence establishing genuine use of existing registrations and a clear scope of goods and services covered in new applications. Hasbro does not prohibit repeat filing of a mark, but it does make the practice of evergreening trademarks riskier, as it significantly increases the possibility that a re-filer may face a bad faith challenge, resulting in the inability to re-file or renew the proposed mark. What still remains unclear, however, is just how much the successful bad faith challenge to the MONOPOLY mark in Hasbro was dependent on case-specific facts. Whether an applicant pursuing invalidation can prevail on a claim of bad faith in the absence of direct testimony from a company officer conceding that it was intentionally pursuing a re-filing strategy for improper reasons is an open question. As this area of the law develops, EU trademark owners should consider revising their filing strategy to guard against bad faith challenges or take on other owners who may be acting in bad faith.

Roc-A-Fella Records (“RAF”) owners Jay-Z and Damon Dash are clashing over Dash’s plans to sell an NFT (“nun-fungible token”) representing either a 1/3 share of the copyright to Jay-Z’s album Reasonable Doubt (if you believe RAF and Jay-Z) or a 1/3 ownership interest in RAF as a whole (if you believe Dash). If you’re wondering what an NFT is, auction house Christie’s (which brokered a staggering $69 million sale of an NFT created by artist Beeple in March 2021) has a great in-depth article. To summarize (a lot), an NFT is basically a unique digital certificate representing ownership of a unique thing (e.g., a song, work of art, etc.) that is stored, verified, and transferred using blockchain technology. NFTs are created (or “minted”) using tamper-proof, self-executing contracts tied to a specific blockchain set, like Etherium. In late June, Jay-Z (through RAF) obtained a temporary restraining order barring Dash from auctioning an NFT for Reasonable Doubt or doing anything else that could impact ownership rights in the album. In its complaint, RAF claims that Dash was working with a platform called SuperFarm Foundation to auction an NFT, which according to a SuperFarm memo attached to the complaint, would represent “Damon’s [1/3] ownership of the copyright to Jay-Z’s first album.” The problem, according to RAF, is that Dash does not actually own any copyright interest in the album. Rather, RAF owns the entire copyright to the album per Jay-Z’s 1995 agreement with RAF (the entirety of which is actually appended to the complaint—interesting reading). Although RAF convinced SuperFarm to stop the auction by the time it filed the complaint, RAF claims that Dash had already minted an NFT for the album would surely try to sell it elsewhere. For his part, Dash actually agrees with RAF and Jay-Z on the copyright ownership point. In his response opposing the restraining order, Dash freely admits that RAF owns the album entirely. However, he claims the SuperFarm memo (and, thus, RAF’s complaint) misstates the intended nature of the NFT auction. Dash says he never minted an NFT but that the NFT he planned to create was supposed to be for his entire 1/3 ownership of the RAF entity and not for the specific copyright interest in Reasonable Doubt. Any ownership of the album would merely result from owning a share of RAF. The lawsuit, according to Dash, is all part of Jay-Z’s ploy to prevent Dash from sell his shares in RAF (which the initial temporary restraining order arguably accomplished). Dash further argues that the firm Quinn Emmanuel, which filed the lawsuit on behalf of RAF, should be disqualified due to an ethical conflict. The firm, he alleges, represents Jay-Z individually in matters involving RAF corporate governance and now represents RAF in a lawsuit against another RAF shareholder, namely, Dash. Dash also alleges that Jay-Z lacked authority to even retain Quinn Emmanuel on behalf of RAF because Dash is the only person authorized to enter into contracts or retain counsel on behalf of RAF, causing a further conflict of interest. On July 2, the parties participated in a show-cause hearing. Dash was successful in convincing RAF and the court to limit the restraining order. The parties and court agreed to include language stating that the order does not “prevent Dash from selling, assigning, pledging, encumbering, contracting with regard to, or in any way disposing of his one-third (1/3rd) ownership interest in RAF, Inc. to the extent it may otherwise be transferred in compliance with applicable laws”. In a transcript of the hearing attached to RAF’s post-hearing filing, the court also rejected Dash’s arguments that Quinn Emmanuel should be disqualified, finding that there was no evidence Quinn Emmanuel had privileged information concerning Dash and that Jay-Z and RAF’s interests were aligned in the proceeding. Addressing the apparent heart of the dispute, the court asked RAF what other evidence it has that Dash was trying to sell a copyright interest in the album as opposed to his shares in RAF. During the hearing and in its post-hearing filing, RAF argued that Dash is under extreme financial pressure due to multiple liens and that he likely saw an opportunity to profit from the 25th anniversary of Reasonable Doubt. The filing also includes orders from past cases in which courts found Dash not to be credible or disruptive to those proceedings. Dash also responded by filing his own lawsuit against Jay-Z in New York state court, claiming that Jay-Z has impermissibly transferred streaming rights to Reasonable Doubt to his personal LLC (summons available here – link to ). To make things more complicated, Dash’s suit also lists RAF as a plaintiff. So, RAF is now suing both Dash and Jay-Z in their personal capacities as individual owners of RAF. Although the case is only in its earliest stages, it highlights some interesting legal issues in the emerging NFT space. First, despite all the talk of copyright, RAF’s complaint does not actually make a copyright infringement claim against Dash. The claims are essentially all property based (with the exception of breach of fiduciary duty and unjust enrichment claims). Based on a quick search of the Copyright Office website, the copyright to Reasonable Doubt appears to be registered, so RAF would presumably have grounds to file a copyright lawsuit if it wanted to. So why didn’t RAF include a copyright claim? It’s hard to know for sure, but one potential issue is that Dash may not have copied Reasonable Doubt, even assuming he already minted an NFT for the album (a fact he disputes). An NFT does not typically contain a copy of the actual work to which it relates. Rather, the underlying work is stored somewhere else and/or the NFT simply references the work. Thus, even if Dash had minted an NFT representing a copyright interest in the album, he would not have necessarily made any copies of the album and may not ever need to make any copies. Second, assuming Dash does intend to sell his ownership share of RAF as an NFT, as opposed to the copyright to Reasonable Doubt, this might create unintended consequences for Dash. An offer to sell shares of a highly valuable company via an NFT to essentially anyone in the world would likely be considered a securities offering, which could subject him to numerous disclosure and reporting requirements. At this point, the U.S. Securities and Exchange Commission’s public search system EDGAR does not appear to show any filings by Dash or SuperFarm related to any such sale. Third, the dueling lawsuits are certain to raise some interesting issues related to corporate authority given that both Dash and Jay-Z have sued one another on behalf of RAF. This might also press the conflicts issues previously raised by Dash, potentially for both sets of attorneys, who now each claim to represent RAF as an entity and the individual owners of RAF in disputes between RAF and those owners. The TMCA will be monitoring the case.

Certain Colorado companies and others targeting Coloradans will soon be subject to the newly enacted Colorado Privacy Act (“CPA”), signed into law by Gov. Jared Polis on July 8, 2021. Colorado joins California and Virginia as the third state to enact its own comprehensive consumer data privacy legislation. Who must comply with the new CPA rules? Starting on July 31, 2023, businesses will be subject to the CPA if they are located in Colorado or intentionally target Colorado consumers, and either: (1) control or process personal data of more than 100,000 Colorado consumers per calendar year; or (2) derive revenue from the sale of personal data and control or processes the personal data of at least 25,000 Colorado consumers, unless they meet one of several exemptions. The law applies directly to both “controllers” and “processors,” meaning that the law may apply directly to some out of state service providers that agree to handle data subject to the CPA. However, the CPA does include broad exemptions for companies and data that are subject to specific state and federal laws, such as HIPAA, GLBA, the FCRA, COPPA, and FERPA, as well as data processed in connection with employment and in business-to-business contexts. To what data does the CPA apply? The CPA applies to “personal data,” which is defined broadly as information that is linked or reasonably linkable to an identified or identifiable individual. As with other recent privacy laws, there are also specific requirements for sensitive data, such as data relating to biometrics, race, ethnic origin, religious beliefs, mental/physical health, sex life/sexual orientation, or citizenship status. The law exempts from its requirements data that is de-identified, and defines specific criteria that must be met in order for data to be considered de-identified. Uniquely, the CPA also has specific requirements relating to the handling of ‘pseudonymized’ data, which was sometimes unclear under other state privacy laws. The CPA also exempts certain publicly available data that has either been made available through government records, or that the consumer made available to the public. What rights does the CPA give consumers? Although the CPA does provide consumers with many of the same rights available under the California and Virginia privacy laws, there are some important differences, which will require the implementation of new procedures. Colorado’s consumer rights fall into five main categories, described below. As in other states, these rights may be enforced by the individual directly, or through an agent: 1. Opt out. Consumers can opt out of the processing of their personal data for purposes of: a. targeted advertising; b. the sale of personal data (defined broadly to include most exchanges of personal data for monetary gain or other valuable consideration), or c. profiling in furtherance of decisions that produce legal or similarly significant effects concerning a consumer. 2. Access rights. Consumers may obtain a copy of  personal data and confirm if a company is using or otherwise processing their data. 3. Correction. Consumers can correct inaccuracies in their personal data. 4. Deletion. Consumers may request the deletion of their personal data. 5. Portability. Consumers have the right to obtain a copy of their personal data in a portable and, to the extent technically feasible, readily usable format. What are companies’ duties and obligations? The CPA’s requirements are broadly similar to the rights under CCPA/CPRA, and GDPR. Generally, the CPA includes the following core requirements: Transparency. Provide a transparent, clear, and meaningful privacy notice to ensure that it is easy to understand, meaningful to consumers, and in compliance with the CPA. Purpose Specification. Limit processing to what is necessary and appropriate for the specified purpose. Minimization. Only collect data that is adequate, relevant, and limited to what is necessary for the specified purpose. Consent to Secondary Use. Avoid using personal data beyond what was disclosed to the customer, except with prior consent. Care. Implement reasonable measures to protect against unauthorized acquisition. Nondiscrimination. Duty not to unlawfully discriminate. Impact Assessments. Companies must conduct data protection assessments prior to engaging in targeted advertising, profiling, and when processing presents high risks to consumers. Vendor Management. Companies must enter into data processing contracts with subcontractors, requiring them to protect personal data, assist in data rights compliance, and process personal data only for specified purposes. How could this impact my business? If your company is subject to the CPA, you must be sure that you understand all of the personal data collected or otherwise processed by your company, where it is throughout its lifecycle, who has access to it for what purpose, and which vendors may interact with the data. You may need to implement new procedures to respond to consumer data rights requests (typically within 45 days). Companies will likely need to update their privacy notices, as well as their contracts with service providers and others, and implement opt-out mechanisms and related notices, as needed. Companies who run afoul of the CPA may be fined up to $20,000 per violation. Who can enforce this new law? The CPA does not allow for a private right of action. Only the Colorado Attorney General and District Attorneys may bring enforcement actions. Additionally, the CPA authorizes the attorney general to promulgate rules relating to certain aspects of the CPA. Giving a nod to how difficult a pivot to compliance may be in Colorado, companies will have a 60-day time period to cure a violation of the CPA until January 1, 2025. However, the cure period expires on January 1, 2025.

Since the Supreme Court’s 2014 decision in Octane Fitness, LLC v. ICON Health & Fitness, Inc., district courts have had expanded discretion to award prevailing party attorney’s fees in “exceptional cases” under the Patent Act, pursuant to 35 U.S.C. § 285. Section 35 of the Lanham Act (15 U.S.C. § 1117) also permits attorney’s fees awards in exceptional cases, and so courts have increasingly applied the Octane standard to Lanham Act litigation. This month, the U.S. Court of Appeals for the Tenth Circuit became the latest to follow this approach, in Derma Pen, LLC v. 4EverYoung Limited. The appellate court also described the ongoing role of older judicial tests for finding exceptional cases under the Lanham Act, holding district courts are still permitted to look to those tests, so long as they remain cognizant of their broad discretion under Octane. Courts have used various tests for exceptionality over the years, typically focusing on the merits of the losing party’s claims and that party’s conduct in the litigation. By 2014, the test courts used to define exceptional cases in patent law had (in the U.S. Supreme Court’s view) become “unduly rigid” such that it impermissibly encumbered district courts’ statutory discretion. That year, in Octane, the Court reset the test and held that an exceptional case is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Although emphasizing discretion, this test lacks the more specific guidance that earlier, circuit-level cases provided. In Derma Pen, the Tenth Circuit focused its analysis on whether the district court was correct to rely on Octane, instead of King v. PA Consulting Group, Inc., a 2007 Tenth Circuit decision describing the standard for exceptional case attorney’s fees under the Lanham Act. This question—which several circuit courts have faced—has two levels: (1) should the same “exceptional cases” phrase in the Patent Act and Lanham Act be interpreted the same way (all circuit courts to date have said yes), and (2) if so, what becomes of older circuit-level Lanham Act precedents that pre-date Octane? King, for example, held that “[a]lthough no one factor is dispositive, a case may be deemed exceptional because of ‘(1) its lack of any foundation, (2) the plaintiff’s bad faith in bringing the suit, (3) the unusually vexatious and oppressive manner in which it is prosecuted, or (4) perhaps for other reasons as well.’” King summarized this test as looking “to both the objective strength of a plaintiff’s Lanham Act claim and the plaintiff’s subjective motivations.” Is this test reconcilable with Octane? (Spoiler alert—yes it is.) The Tenth Circuit’s decision in Derma Pen is the latest chapter in a long-running dispute. Plaintiff Derma Pen, LLC sold micro needling and skin treatment products. In pure layperson terms, informed only by the author watching an online demo video, Derma Pen’s product seems to repeatedly and quickly jab a rotating array of tiny needles into a patient’s facial skin in connection with dermatological treatments. In 2013, Derma Pen brought trademark infringement and other claims against its one-time business partner 4EverYoung Limited, 4EverYoung’s principal Stene Marshall, and two other business entities he had formed. In May 2017, after multiple law firms withdrew from representing 4EverYoung, citing (you guessed it) 4EverYoung’s failure to pay attorney’s fees, the U.S. District Court for the District of Utah entered a default judgment in favor of Derma Pen. The judgment awarded damages and entered an injunction against 4EverYoung, Stene Marshall, as well as “anyone in active concert or participation with, aiding, assisting or enabling” the named defendants. Among other things, the injunction barred infringement of Derma Pen’s DERMAPEN mark. In November 2017, Derma Pen moved the court to hold Stene Marshall—as well as non-parties Joel and Sasha Marshall and DP Derm, LLC—in contempt for violating the injunction. Joel and Sasha Marshall are Stene Marshall’s brother and sister-in-law, and they own DP Derm. DP Derm told the district court that it sold skin creams, not devices. After eighteen more months of litigation, the district court held Stene Marshall in contempt, but denied Derma Pen’s motion as to Joel and Sasha Marshall and DP Derm. Derma Pen’s case appears to have unraveled during the contempt litigation. The district court observed that Derma Pen had violated its discovery obligations, including by failing to produce a qualified corporate representative for a deposition. The court concluded that Derma Pen had produced no evidence of damages, and that Derma Pen’s evidence “was not clear; it was muddled,” “not convincing,” and “unpersuasive.” After defeating the contempt motion, Joel, Shasha, and DP Derm successfully moved for an award of attorney’s fees. Applying Octane (not King), the district court held that Joel, Shasha, and DP Derm were entitled to exceptional case attorney’s fees. The district court based its decision on the totality of five factors: (1) Derma Pen’s failure to prove damages, (2) evidence showing Derma Pen did not have the right to enforce the injunction because it no longer held rights in the DERMAPEN mark, (3) evidence showing the DERMAPEN mark had been abandoned, (4) Derma Pen’s discovery misconduct, and (5) Derma Pen’s failure to obtain any relief against Joel, Shasha, and DP Derm. The court ordered Derma Pen to pay $190,328 in attorney’s fees to Joel, Shasha, and DP Derm. Derma Pen appealed, asserting the district court abused its discretion. Dashing Derma Pen’s hopes of prevailing on appeal, the Tenth Circuit had no trouble concluding that the district court’s decision satisfied the test under King. The court rejected what it saw as Derma Pen’s “attempt to dissect the factors the district court cited in support of its decision,” given that the district court had made clear it was ruling based on the “totality of the circumstances.” The district court was in the best position to assess those circumstances and make the fee determination after overseeing more than six years of contentious litigation. The Tenth Circuit then turned its analysis to whether Octane or King supplied the correct standard of decision to identify exceptional cases in Lanham Act litigation. Joining every other circuit that has addressed the issue, the Tenth Circuit held that the Octane standard applies to fee-shifting disputes under the Lanham Act. The Tenth Circuit described the decisions in King and Octane as “twin sons of different mothers,” citing the 1978 album of the same name by Dan Fogelberg and Tim Weisberg. (Disclosure: The author listened to the album while writing this post and found the jazz flute a little overpowering, although the court should be commended for avoiding the obvious musical reference in a case involving a party named “4EverYoung.”) Musical tastes aside, the Tenth Circuit is right that King and Octane imbue district courts with the same discretionary authority over identifying exceptional cases warranting awards of attorney’s fees. King, however, is slightly more specific than Octane’s “one that stands out from others” standard. Perhaps for that reason, the Tenth Circuit made clear that it was not overturning its earlier decision in King and that the factors identified in King continue to provide worthwhile considerations in determining when a case is “exceptional” under the Lanham Act. Given that, prevailing parties remain free to rely on totality of the circumstances tests for exceptionality and the various factors courts have used to analyze those circumstances, so long as they avoid “unduly rigid” approaches that place too much weight on any single factor. So how does a trademark litigant avoid being on the losing end of an attorney fee motion? It helps to bear in mind the two areas of focus under King—the strength of a litigant’s case and the way that litigant behaves in litigation. Having at least a fair case and fighting in a fair manner will go a long way towards avoiding losing twice—once on the merits and again by paying the other side’s fees.

Survey evidence in Lanham Act cases can often times be pretty revealing. If you develop it correctly, survey evidence can be a key ingredient to a successful outcome. But if you develop it incorrectly it will show flaws that you and your expert wont want the world to see. This blog post tells the tale of the latter type of survey evidence that contained improper stimuli, a lack of control, and misguided questions. Read on as we discuss the problems that were laid bare in a recent Daubert order issued by the U.S. District Court for the District of Colorado. It all started when a Denver-based strip club, Dandy Dan’s, allegedly used pictures of several women in social media posts to advertise its “gentlemen’s club” establishment. There was only one, small problem with this advertising blitz: none of the women pictured were employed by or otherwise associated with Dandy Dan’s. Oh Dan. These women were models, actresses, and social media stars in their own right, and they did not think what Dan did was all that dandy. In fact, they sued for false endorsement and false advertising under Section 43(a) of the Lanham Act. In order to prove up their claims, Plaintiffs hired an expert to establish that Dandy Dan’s use of the photos “caused or is likely to cause consumer confusion” that the Plaintiffs endorse, sponsor, or are otherwise affiliated with Dandy Dan’s. In doing so, Plaintiffs’ expert went on a bit of a frolic in a number of respects. First, the survey stimuli he used were wholly improper. He started by showing respondents a collection of the ads at issue. Inexplicably, some of the photographs of the women used were not even plaintiffs in the case and included the likes of Carmen Electra, Claudia Sampedro, and Megan Iglesias. He then tried to draw a number of conclusions from the data he gathered from irrelevant stimuli. Injecting irrelevant stimuli into a survey is not going to give any court warm and fuzzy feelings about the proffered evidence. Strike One. Second, the expert did not use a control. The expert’s stated rationale for not doing so was that his research was not testing a “causal proposition.” Practice pointer: In any Lanham Act matter where you are attempting to show the ads in question cause deception, you are testing a causal proposition. In those circumstances, the expert must use a control. The expert’s loosey-goosey approach was not going to cut it. Strike Two. Third, the expert engaged in rather promiscuous use of irrelevant questions. Respondents were asked things such as whether the use of the photos made respondents “more interested in defendant’s club.” Their degree of interest (or non-interest) in Dandy Dan’s is irrelevant as to whether respondents believed the plaintiffs endorsed it. The expert also asked such things as how the ads made respondents “feel” and “what is the first thing that comes to mind” when respondents saw the ads. These touchy feely questions did not get the job done as they were simply irrelevant to the issue at hand. Strike Three. Not surprisingly, the court found these flaws “serious enough and pervasive enough” to warrant the exclusion of the expert’s proffered testimony. The takeaway here is that if your expert provides extra-judicial stimuli, lacks control, and gets too touchy feely, things aren’t headed in the right direction. It may be time to make a course correction lest you find yourself on the receiving end of a Daubert Dandy.

This season the Toronto Raptors missed the NBA playoffs for the first time since 2013. But this year has not been a total bust for the 2019 NBA Champions, because last month the Trademark Trial & Appeal Board dismissed claims against Maple Leaf, Inc. (owner of the Raptors’ IP) by Monster Energy Drinks, finding that various design marks created as part of the Raptors’ re-branding were not likely to cause confusion with, or dilution of, Monster’s various claw-themed design marks. The decision resolved a years-long feud between the companies triggered by Monster’s opposition to all 18 trademark applications first made in 2014 by Maple Leaf. The Board focused its analysis on what it called Monster’s “M-Claw Mark,” and the Raptors’ “Secondary Ball Mark,” holding they were sufficiently different in appearance alone to preclude a likelihood of confusion as a matter of law. Acknowledging that a side-by-side comparison of the marks is not the proper test for likelihood of confusion, the Board still relied primarily on a visual inspection because the design marks cannot be spoken. That inspection showed the significance of the differences in the marks, including that the Raptors’ marks were primarily basketballs with less-significant claw elements, and that the claw marks were made in different directions. These differences also doomed Monster’s dilution claim, along with the Board’s finding that Monster’s marks were not famous for dilution purposes. Though the Raptors won the game, Monster did manage to score a few points that could be useful in its later enforcement efforts, especially for establishing the commercial strength of the M-Claw Mark. The Board accepted expert survey evidence showing that the M-Claw Mark had achieved secondary meaning. It also relied on that survey evidence in finding that the M-Claw Mark is famous—but only for energy drinks (and not for non-beverage merchandise) and only in the likelihood of confusion context, not for purposes of a dilution claim. The Board also made several evidentiary findings that provide useful reminders for parties on both sides of opposition proceedings. First, the Board struck from the record decisions from non-U.S. jurisdictions offered by the Raptors that weighed in on the same dispute—all of which presumably found in favor of the Raptors. The Board reiterated that such decisions are irrelevant to questions of U.S. trademark law. Second, the Raptors submitted a proposal made by Monster to become the official energy product sponsor for the Raptors as evidence that Monster knew there was no likelihood of confusion. The Board struck the proposal from evidence because it was made as part of inadmissible settlement discussions. This serves as a good reminder that if a discussion between adversaries has even a partial settlement purpose in addition to a commercial intent, the content will be deemed inadmissible in evidence but may become publicly disclosed. Finally, the Board agreed to admit various point-of-sale catalogs, which Monster had submitted as evidence of its common law rights. The Raptors had argued that catalogs alone do not establish common law rights, relying on the general prohibition against using catalogs as specimens of use in a trademark application. But the Board admitted the catalogs, finding that their probative value on the extent of common law rights went to weight, and not admissibility. In the end, this evidence either could not overcome (or was not needed to show) the significant differences in the appearances of the marks, so the Raptors emerged victorious.

The U.S. Supreme Court recently granted certiorari to tackle a technical copyright registration question: when a defendant alleges knowing inaccuracies in a copyright registration, does 17 U.S.C. § 411 require referral to the Copyright Office where there is no indicia of fraud or material error as to the work at issue in the subject copyright registration? A copyright registration is a precondition to bringing an action for copyright infringement; thus, a finding that such a registration is void is fatal to an infringement suit. Under 17 U.S.C. § 411(b), a certificate of registration can serve as a basis of an infringement lawsuit, “regardless of whether the certificate contains any inaccurate information,” unless the inaccurate information was included by the registrant with knowledge it was inaccurate, and the inaccurate information, if known, would have caused the Register of Copyrights to refuse the registration. If such inaccurate information is alleged by a defendant, 17 U.S.C. § 411(b)(2) instructs a court to request the Register of Copyrights to advise on whether such information would have caused it to refuse the registration. At issue in Unicolors, Inc. v. H&M Hennes & Mauritz, L.P. is whether a court must find that the registrant acted with intent to defraud the U.S. Copyright Office before referring the matter to the Register of Copyrights. Unicolors, Inc., a fabric designer, first sued fashion-giant H&M Hennes & Mauritz, L.P. in the Central District of California in April 2016, alleging that H&M had infringed its copyright-protected design. A jury returned a verdict in favor of Unicolors, awarding it $846,720 in disgorgement and lost profits. H&M then renewed its motion for judgment as a matter of law, or, in the alternative, a new trial, arguing in part that Unicolors’ copyright registration was invalid because it contained knowingly false information. Specifically, H&M argued that although Unicolors registered the design at issue as part of a “single unit” registration with a publication date of January 15, 2011, not all of the artworks registered as part of the single unit registration were published on that same date. The district court rejected this argument, finding that H&M had not shown that the copyright registration included inaccuracies which would have caused the Register of Copyrights to refuse registration, and that H&M had no evidence that Unicolors had intended to defraud the Copyright Office. The district court did conditionally grant H&M’s request for a new trial on the issue of damages, but Unicolors instead agreed to a reduction of its damages award. After Unicolors was awarded more than $500,000 in attorneys’ fees and costs, H&M appealed the decision to the Ninth Circuit. On appeal, a three-judge Ninth Circuit panel reversed and remanded, finding both that the district court erred in concluding that the copyright registration did not contain inaccuracies, and in imposing an “intent-to-defraud requirement” before referring the copyright registration to the Register of Copyrights. On the first point, the appellate court conceded that “several opinions from this Court have implied that there is an intent-to-defraud requirement for registration invalidation”, but then firmly stated that “we recently clarified that there is no such intent-to-defraud requirement.” On the second point, the Ninth Circuit held that the plain meaning of the Copyright Act requires that when an applicant seeks a “single unit” registration, all works in the unit must have been published on the same date “as part of some singular bundled collection.” Thus, it was inaccurate for Unicolors to register a collection of works as a single unit publication when the works were not published in a singular published collection on the same date. Further, the “undisputed evidence adduced at trial” showed that “Unicolors included the inaccurate information ‘with knowledge that it was inaccurate.’” The court stated that just because there were known inaccuracies in Unicolors’ application does not mean that H&M was entitled to judgment as a matter of law. But the district court was required to request the Register of Copyright to advise the court on whether the inaccurate information, if known, would have caused the Register to refuse registration. After the case was remanded, on September 4, 2020, the district court did just that - the Register of Copyrights has yet to respond to the court’s inquiry. Following the Ninth Circuit’s decision, Unicolors appealed to the Supreme Court, arguing, in part, that the Ninth Circuit’s rejection of an intent-to-defraud requirement under 17 U.S.C. § 411(b) created a circuit split which the Supreme Court should resolve. According to Unicolors’ petition, the Prioritizing Resources and Organization for Intellectual Property Act of 2008, which added the language in 17 U.S.C. § 411(b), was meant to stop courts from invalidating copyright registrations based on immaterial registration errors, but the Ninth Circuit panel instead did the opposite – by “ruling that the PRO-IP Act did not require the long-applied fraud or bad faith standard… [it] consequently made it easier for courts to invalidate copyright owner’s registrations.” If the Supreme Court finds there is no intent-to-defraud standard in 17 U.S.C. § 411, we should expect to see more defendants coming up with copyright registration inaccuracies and more of those inaccuracies being referred to the Register of Copyrights – something copyright registrants would do well to bear in mind before submitting their application for registration.

On March 2, 2021, stationery and gift retailer Paper Source filed for chapter 11 bankruptcy, stating in court filings that effects of the COVID-19 pandemic damaged its finances and operations. Paper Source stated that in bankruptcy, it sought to sell its assets, reevaluate and renegotiate leases, and continue operations, while minimizing adverse impact on trade partners and other stakeholders. Shortly thereafter, however, card makers identifying themselves as vendors to Paper Source hit social media and the press decrying debts Paper Source racked up just before its bankruptcy for which they did not receive payment. According to some card makers, Paper Source placed orders up to four times larger than usual in January and February 2021. This left vendors who had already shipped goods to Paper Source on generous payment terms with relatively large (in the context of the vendors’ businesses) unsecured, prepetition claims when Paper Source entered bankruptcy. Some Paper Source vendors have received limited relief. In its bankruptcy case, Paper Source immediately sought and obtained an order authorizing it to pay up to an aggregate of $2 million on prepetition claims of vendors critical to its business operations, referred to as “critical vendors,” in full or in part, provided vendors agree to supply goods on continued customary or other favorable trade terms. Prepetition claims are the claims for amounts Paper Source owed as of the date it filed for bankruptcy. The same court order authorizes Paper Source to pay such critical vendors in the ordinary course of business if it cannot strike a deal on trade terms and Paper Source believes failure to pay will result in irreparable harm to its business. Paper Source states it determined which of its vendors are critical for the purposes of the critical vendor relief pursuant to a number of considerations, like the volume of goods supplied, existence of alternative vendors, and vendors’ trade terms. The “critical vendor” motion Paper Source filed to obtain this relief indicates the retailer typically pays for goods ordered via purchase order within 30 to 60 days after receiving products. It also indicates that the $2 million sought will cover less than 20% of its outstanding trade payables as of the date it filed for bankruptcy. Thus, not all vendors are deemed critical, and even critical vendors cannot count on a full and immediate recovery on their prepetition claims under the critical vendor relief. According to media reports, some critical vendors are seeing as little as 10% recoveries of their prepetition claims pursuant to the critical vendor relief. The experience Paper Source vendors report highlights the surprise, frustration, and uncertainty that may confront vendors when a customer files for chapter 11 bankruptcy. The impact can be particularly profound for vendors who are small businesses or essentially captive to the customer, as appears to be the case for some of Paper Source’s vendors. The early effects of Paper Source’s bankruptcy on its vendors and its limited critical vendor relief have garnered public reactions and attention. But there are other procedures in chapter 11 bankruptcy that can affect (and aid) vendors and the payment of their claims against debtors. Administrative Expense Claims. In some cases, vendors may be entitled to assert administrative expense claims—which are paid ahead of any payment to unsecured creditors— for at least part of their claims against a debtor. For example, section 503(b)(9) of the Bankruptcy Code provides for an administrative expense claim for the value of goods provided to the debtor within 20 days of the date the bankruptcy case was filed, provided that such goods were sold to the debtor in the ordinary course of the debtor’s business. Notably, it is unclear if a situation where the debtor ordered significantly more product than usual prior to the bankruptcy filing—as asserted regarding Paper Source—would be considered to be “in the ordinary course” of a debtor’s business. Additionally, a vendor may be entitled to assert an administrative expense claim under section 503(b)(1) of the Bankruptcy Code for goods provided to the debtor after the commencement of the bankruptcy case, if the debtor has not paid for those goods in the ordinary course of business. Administrative expense claims are preferable to general unsecured claims because they have priority in payment. But vendors should note that even if they have an allowed administrative expense claim, it does not mean they will necessarily be paid immediately. Administrative expense claims may not be paid until the case is resolved, which can take months or years. Reclamation of Goods. In some instances, a vendor may prefer to recover goods provided to the debtor rather than wait for payment through the bankruptcy process. Section 546(c) of the Bankruptcy Code provides a mechanism for vendors to enforce rights to reclaim goods provided to the debtor within 45 days of the bankruptcy filing. If a vendor wishes to pursue this option it must act quickly by providing a written demand for reclamation to the debtor no later than (a) 45 days after the receipt of goods by the debtor, or (b) not later than 20 days of commencement of the bankruptcy case, if the 45-day period expires after commencement of the case. The vendor must establish, among other things, that it has a common law right of reclamation, meaning that the goods that are the subject of the demand are in the debtor’s possession and are identifiable. Notably, however, a bankruptcy court may determine that a secured creditor’s “blanket lien” supersedes reclamation rights. Cure Claims. In certain cases, a vendor may have an executory contract with a debtor, which may be assumed or rejected by the debtor in its bankruptcy case. If the debtor wishes to continue its contractual relationship with the vendor and assume the contract, it will be required to cure any past due amounts owing under the contract prior to assumption. The amount required to cure defaults is a “cure claim.” For many vendors—like those in Paper Source—that operate solely on purchase orders, there is no executory contract subject to assumption, and therefore there is no requirement that the debtors cure their outstanding obligations. Claims on Prepetition Claim. If a vendor’s claim does not qualify for or is not satisfied by critical vendor relief, any of the above options, or otherwise, the vendor can file a proof of claim on account of its prepetition claim. Recoveries on vendor claims, which are typically general unsecured claims, and other claims are governed by a chapter 11 plan. In cases where an official committee of unsecured creditors is formed, the committee will often negotiate recoveries on behalf of all unsecured creditors. Such creditors’ committees are typically comprised of a variety of unsecured creditors. For example, the committee in Paper Source’s case is comprised of two product vendors, two landlords, and one service vendor. The existence, availability, and extent of relief available to vendors in a particular bankruptcy case, including the payment options set forth above, will vary from case to case. Many factors affect potential recoveries by vendors in a bankruptcy case, including the identity of the debtor, its circumstances, the purpose of the bankruptcy filing, events that transpire during the bankruptcy case, and the ultimate result of the bankruptcy case. Therefore, vendors should seek the advice of bankruptcy counsel to ensure they protect their rights and optimize their recoveries. As more retailers file for chapter 11 bankruptcy protection as a result of the COVID-19 pandemic, more vendors will be faced with situations like those in Paper Source. Vendors should be prepared to navigate the bankruptcy process, and potentially retain bankruptcy counsel, to protect their interests in the event that a customer files for bankruptcy.