The TMCA

A long-running battle between Deckers Outdoor Corp., the makers of UGG boots, and Australian Leather PTY Ltd. may finally be over after a May 7 ruling by the United States Court of Appeals for the Federal Circuit. The battle began in 2016 in the Northern District of Illinois when Deckers sued Australian Leather for trademark infringement based on its sale of boots in the U.S. bearing Deckers’ UGG trademark that looked quite similar to Deckers’ UGG boots. Australian Leather makes sheepskin boots in Australia that contain “ugg” in the name, which in Australia is a generic term for sheepskin. In the U.S., however, Deckers owns the trademark for UGG in connection with its popular sheepskin boots. When Australian Leather began selling its ugg boots in the U.S.—and it only sold twelve pairs—Deckers filed suit, seeking both an injunction and damages. In response, Australian Leather filed several counterclaims and claimed that ugg was not worthy of trademark protection in the U.S. because it was generic. The parties battled over the generic issue (as well as others) in cross-motions for summary judgment filed in 2018. Australian Leather argued that ugg was a generic term in Australia and should be treated as one in the U.S., relying in large part on the “foreign equivalents” doctrine to support its argument. Under the foreign equivalents doctrine, “one cannot obtain a trademark over a foreign generic word if the trademark designation ‘would prevent competitors from designating a product as what it is in the foreign language their customers know best.’” Deckers Outdoor Corp. v. Australian Leather Pty. Ltd., 340 F. Supp. 3d 706, 709 (N.D. Ill. 2018) (quoting Otokoyama Co. Ltd. v. Wine of Japan Import, Inc., 175 F.3d 266, 271 (2d Cir. 1999)). In its summary judgment opinion, the district court rejected Australian Leather’s genericness defense, including its application of the foreign equivalents doctrine. Relying on expert testimony and survey results from Deckers, the court found that ugg was not generic in the U.S., even if it was in Australia. In particular, based on the fact that 98% of consumers interviewed in Deckers’ survey thought ugg was a brand, the court concluded that “no reasonable factfinder could conclude that ugg is or ever was a generic word for sheepskin boots in the U.S.” The court also declined to apply the foreign equivalents doctrine, finding that it was not a good fit where, as here, it involves a translation from “English to English”. In its summary judgment opinion, the court also rejected several other defenses lodged by Australian Leather, and set the parties on a course for trial. After a four-day jury trial, the jury found that Australian Leather willfully infringed Deckers’ UGG trademark based on its sale in the U.S. of similar boots containing the ugg name and awarded Deckers $450,000 in damages. After receiving the verdict, and a bench trial on separate issues, Australian Leather appealed to the Federal Circuit. Two of the three issues in Australian Leather’s appeal concerned genericness issues, including the application of the foreign equivalents doctrine: “[w]hether the District Court erred when it held that the trademark doctrine of foreign equivalents did not apply to generic words in a foreign country where the primary language is English.” The Federal Circuit heard oral argument on Australian Leather’s appeal on May 5, 2021 and denied it in a short order two days later, on May 7, 2021, without supplying any reasoning. While we do not know whether Australian Leather will file a cert petition with the Supreme Court, we’ll be watching and let you know if and when it does. For now, at least, the battle seems to have ended.

Earlier this month, the U.S. Court of Appeals for the Federal Circuit reversed a $66 million dollar judgment against beauty industry giant L’Oréal for patent infringement, trade secret misappropriation, and a related breach of a non-disclosure agreement. While the Court remanded for a trial on patent infringement and damages on the patent infringement claim, it dismissed the trade secret misappropriation and breach of non‑disclosure agreement (“NDA”) claims in full, ruling that no reasonable juror could have found either trade secret misappropriation or breach of contract, and thus that the trial court should have granted L’Oréal’s motion for judgment as a matter of law (“JMOL”). The Federal Circuit’s ruling provides some useful reminders on important tenets of trade secret law. The underlying dispute involved plaintiff Olaplex’s discovery of the protective benefit of maleic acid during hair-bleaching treatments. In May 2015, Olaplex claimed that it met with L’Oréal to discuss a potential acquisition of Olaplex and to provide confidential information and documents pursuant to an NDA, including Olaplex’s then-unpublished patent application of the maleic acid invention. Then, instead of proceeding with the acquisition, Olaplex claimed that L’Oréal opted for “Plan B” of copying Olaplex’s patented method and launching competitor maleic acid products in August 2016. Olaplex filed suit in 2017 alleging claims of patent infringement, trade secret misappropriation, and breach of contract. After a lengthy and embattled litigation, including multiple intervening PTAB proceedings and Federal Circuit appeals, the Court made a determination of patent infringement on summary judgment, and the jury found for plaintiffs on patent-validity issues and the trade secret and breach of contract claims. The trial court then adjusted the damages award to avoid inconsistencies and prevent double recovery, and also award exemplary damages, attorney’s fees, and prejudgment interest, amounting to a total judgment of $66,167,843. On appeal, the Federal Circuit closely scrutinized the four groups of trade secrets asserted by Olaplex, which were generally described as: (1) information in an “unpublished patent” application; (2) “business information”; (3) “testing and know how” and (4) “dead ends and trials and errors” and found that as to each, the jury could not reasonably find sufficient proof of the elements of liability. With respect to the information in the unpublished patent application, Olaplex contended that the trade secret was “using maleic acid during bleaching.” The Federal Circuit found that Olaplex failed to establish that the information in the unpublished patent application was not readily ascertainable through proper means, a requirement that is expressly included in the definition of a trade secret. In so finding, the Court reasoned that L’Oréal put forth numerous prior-art references and expert testimony establishing that the prior-art references disclosed the alleged trade secret before the May 2015 exchange. The Court noted that information in published patents or patent applications is readily ascertainable by proper means, and went on to cite a number of cases establishing the general principle that disclosure of a trade secret in a published patent or patent application extinguishes the trade secret. The Court also noted that Olaplex’s own expert admitted that L’Oréal was using maleic acid in a method of bleaching as a pH adjuster before the alleged May 2015 information exchange, but ultimately decided it was not necessary to get into L’Oréal’s evidence of its own internal consideration of using maleic acid before it received the unpublished patent application to arrive at the Court’s conclusion that the claimed trade secret was not, in fact, a trade secret at the time of misappropriation. With respect to the second category of “business information,” which constituted Olaplex’s “financials,” the Court found that Olaplex failed to prove that the use of that information was without express or implied consent. Olaplex asserted that the business information provided insight into whether it was more cost effective for L’Oréal to acquire Olaplex or launch its own products (i.e. a “Build v. Buy analysis”). However, the Federal Circuit found that the parties’ NDA explicitly gave L’Oréal authorization to use the information in that way, as the very purpose of the agreement was to allow L’Oréal to evaluate a possible acquisition. As a result, L’Oréal’s use of the business information trade secret was not improper since it was consented to by Olaplex. With respect to the third and fourth trade secret categories of “testing and know how” and “dead ends and trials and errors,” the Federal Circuit found that there was an utter lack of proof that L’Oréal misappropriated anything secret within these groups. The Court reasoned that Olaplex described the categories with a high level of generality and never identified with specificity any particular information about testing, know how, dead ends or trial and error processes and evidence showing that L’Oréal made use of that information, let alone evidence of why that use was improper. Indeed, the Court noted that Olaplex addressed this information in a single sentence which indicated that these items yielded a dramatic change in L’Oréal maleic acid research. And, even the evidence relied upon for this assertion did not establish that L’Oréal misappropriated these buckets of “trade secrets” as opposed to the information contained in the unpublished patent application discussed above. The Court also found that, in part due to the absence of particularity provided by Olaplex describing these categories of purported trade secrets, the Court could not say that the evidence allowed a reasonable finding that the information was even a trade secret. The Court examined the expert testimony on these trade secret categories and found that “testing and know how” and “dead ends and trials and errors,” were not identified sufficiently to provide a concrete basis for finding that they were not readily ascertainable by proper means, including through prior literature on the topic. The Court finished its discussion of the third and fourth trade secret categories by articulating the general rule that a person claiming rights in a trade secret bears the burden of defining the information for which protection is sought with sufficient definiteness to permit a court to apply the criteria for protection and determine the fact of appropriation. As the Court explained, the requirement of reasonable particularity matters because a trade secret described in general terms will usually be widely known or readily ascertainable by proper means, and thus not a trade secret. Further, without particularity, there is an inadequate basis for a fair adjudication of what information was actually used by the defendants. And, courts and juries require precision because, especially where a trade secrets claim involves a sophisticated and highly complex system, the trier of fact will not have the requisite expertise to define what the plaintiff leaves abstract. The Court then concluded that Olaplex had failed to provide such particularity as yet another basis why Olaplex’s claim failed. Accordingly, the Federal Circuit concluded that the trial court should have granted L’Oréal’s JMOL motion. The Court also found that, in light of its trade secrets rulings, the breach of contract claim also could not survive because it was based on the same information that was purportedly given to L’Oréal under the NDA. Following the Federal Circuit’s decision, the parties shortly thereafter announced that they had settled the litigation on undisclosed terms. The Federal Circuit’s decision provides a useful reminder of several key principles of trade secret law. First, the Court points to a key tension in determining the method for protecting intellectual property, in that once a published patent application or patent discloses trade secret information, it generally extinguishes the information’s trade secret status. Thus, the decision of how best to protect trade secret information that is potentially patentable should be evaluated carefully. Second, although it seems obvious, misappropriation does not occur when the alleged infringer has express or implied consent to use the information in the manner in which it has used the information that is the subject of alleged infringement. Finally, to be successful in litigation, a trade secret needs to be disclosed with reasonable particularity. In fact, in trade secret litigation in certain jurisdictions, a particularized disclosure of the trade secret is a prerequisite to obtaining discovery of the adversary’s confidential proprietary information pertaining to the alleged infringement.

Earlier this month, the U.S. Court of Appeals for the Federal Circuit reversed a $66 million dollar judgment against beauty industry giant L’Oréal for patent infringement, trade secret misappropriation, and a related breach of a non-disclosure agreement. While the Court remanded for a trial on patent infringement and damages on the patent infringement claim, it dismissed the trade secret misappropriation and breach of non‑disclosure agreement (“NDA”) claims in full, ruling that no reasonable juror could have found either trade secret misappropriation or breach of contract, and thus that the trial court should have granted L’Oréal’s motion for judgment as a matter of law (“JMOL”). The Federal Circuit’s ruling provides some useful reminders on important tenets of trade secret law. The underlying dispute involved plaintiff Olaplex’s discovery of the protective benefit of maleic acid during hair-bleaching treatments. In May 2015, Olaplex claimed that it met with L’Oréal to discuss a potential acquisition of Olaplex and to provide confidential information and documents pursuant to an NDA, including Olaplex’s then-unpublished patent application of the maleic acid invention. Then, instead of proceeding with the acquisition, Olaplex claimed that L’Oréal opted for “Plan B” of copying Olaplex’s patented method and launching competitor maleic acid products in August 2016. Olaplex filed suit in 2017 alleging claims of patent infringement, trade secret misappropriation, and breach of contract. After a lengthy and embattled litigation, including multiple intervening PTAB proceedings and Federal Circuit appeals, the Court made a determination of patent infringement on summary judgment, and the jury found for plaintiffs on patent-validity issues and the trade secret and breach of contract claims. The trial court then adjusted the damages award to avoid inconsistencies and prevent double recovery, and also award exemplary damages, attorney’s fees, and prejudgment interest, amounting to a total judgment of $66,167,843. On appeal, the Federal Circuit closely scrutinized the four groups of trade secrets asserted by Olaplex, which were generally described as: (1) information in an “unpublished patent” application; (2) “business information”; (3) “testing and know how” and (4) “dead ends and trials and errors” and found that as to each, the jury could not reasonably find sufficient proof of the elements of liability. With respect to the information in the unpublished patent application, Olaplex contended that the trade secret was “using maleic acid during bleaching.” The Federal Circuit found that Olaplex failed to establish that the information in the unpublished patent application was not readily ascertainable through proper means, a requirement that is expressly included in the definition of a trade secret. In so finding, the Court reasoned that L’Oréal put forth numerous prior-art references and expert testimony establishing that the prior-art references disclosed the alleged trade secret before the May 2015 exchange. The Court noted that information in published patents or patent applications is readily ascertainable by proper means, and went on to cite a number of cases establishing the general principle that disclosure of a trade secret in a published patent or patent application extinguishes the trade secret. The Court also noted that Olaplex’s own expert admitted that L’Oréal was using maleic acid in a method of bleaching as a pH adjuster before the alleged May 2015 information exchange, but ultimately decided it was not necessary to get into L’Oréal’s evidence of its own internal consideration of using maleic acid before it received the unpublished patent application to arrive at the Court’s conclusion that the claimed trade secret was not, in fact, a trade secret at the time of misappropriation. With respect to the second category of “business information,” which constituted Olaplex’s “financials,” the Court found that Olaplex failed to prove that the use of that information was without express or implied consent. Olaplex asserted that the business information provided insight into whether it was more cost effective for L’Oréal to acquire Olaplex or launch its own products (i.e. a “Build v. Buy analysis”). However, the Federal Circuit found that the parties’ NDA explicitly gave L’Oréal authorization to use the information in that way, as the very purpose of the agreement was to allow L’Oréal to evaluate a possible acquisition. As a result, L’Oréal’s use of the business information trade secret was not improper since it was consented to by Olaplex. With respect to the third and fourth trade secret categories of “testing and know how” and “dead ends and trials and errors,” the Federal Circuit found that there was an utter lack of proof that L’Oréal misappropriated anything secret within these groups. The Court reasoned that Olaplex described the categories with a high level of generality and never identified with specificity any particular information about testing, know how, dead ends or trial and error processes and evidence showing that L’Oréal made use of that information, let alone evidence of why that use was improper. Indeed, the Court noted that Olaplex addressed this information in a single sentence which indicated that these items yielded a dramatic change in L’Oréal maleic acid research. And, even the evidence relied upon for this assertion did not establish that L’Oréal misappropriated these buckets of “trade secrets” as opposed to the information contained in the unpublished patent application discussed above. The Court also found that, in part due to the absence of particularity provided by Olaplex describing these categories of purported trade secrets, the Court could not say that the evidence allowed a reasonable finding that the information was even a trade secret. The Court examined the expert testimony on these trade secret categories and found that “testing and know how” and “dead ends and trials and errors,” were not identified sufficiently to provide a concrete basis for finding that they were not readily ascertainable by proper means, including through prior literature on the topic. The Court finished its discussion of the third and fourth trade secret categories by articulating the general rule that a person claiming rights in a trade secret bears the burden of defining the information for which protection is sought with sufficient definiteness to permit a court to apply the criteria for protection and determine the fact of appropriation. As the Court explained, the requirement of reasonable particularity matters because a trade secret described in general terms will usually be widely known or readily ascertainable by proper means, and thus not a trade secret. Further, without particularity, there is an inadequate basis for a fair adjudication of what information was actually used by the defendants. And, courts and juries require precision because, especially where a trade secrets claim involves a sophisticated and highly complex system, the trier of fact will not have the requisite expertise to define what the plaintiff leaves abstract. The Court then concluded that Olaplex had failed to provide such particularity as yet another basis why Olaplex’s claim failed. Accordingly, the Federal Circuit concluded that the trial court should have granted L’Oréal’s JMOL motion. The Court also found that, in light of its trade secrets rulings, the breach of contract claim also could not survive because it was based on the same information that was purportedly given to L’Oréal under the NDA. The Federal Circuit’s decision provides a useful reminder of several key principles of trade secret law. First, the Court points to a key tension in determining the method for protecting intellectual property, in that once a published patent application or patent discloses trade secret information, it generally extinguishes the information’s trade secret status. Thus, the decision of how best to protect trade secret information that is potentially patentable should be evaluated carefully. Second, although it seems obvious, misappropriation does not occur when the alleged infringer has express or implied consent to use the information in the manner in which it has used the information that is the subject of alleged infringement. Finally, to be successful in litigation, a trade secret needs to be disclosed with reasonable particularity. In fact, in trade secret litigation in certain jurisdictions, a particularized disclosure of the trade secret is a prerequisite to obtaining discovery of the adversary’s confidential proprietary information pertaining to the alleged infringement.

Trademark law aficianados have followed the progress of Romag Fasteners v. Fossil from District Court to the Federal Circuit to the Supreme Court and back again. We previously blogged about the Supreme Court decision here. In the latest installment, the Connecticut District Court refused to enter a $6.7 million advisory jury award, instead awarding a mere $90,000 to Romag Fasteners for this multi-year litigation. The District Court’s opinion is a primer in damages law, with a cautionary tale of what-not-to-do if you want to avoid a court’s ire. The District Court started by laying out the damages theories: an advisory jury verdict of $90,000 of unjust enrichment, based on allocating just 1% of Fossil’s profits to the Romag magnetic fastener, and an advisory jury verdict of $6.7 million based on a deterrence theory. Romag Fasteners had declined to pursue statutory damages, instead seeking the more speculative and much more judical-resource-intensive theory of lost profits. And following the Supreme Court’s decision – holding that lost profits may be available even without willful trademark infringement, though mens rea remains critically important – the District Court had latitude to award damages of $90,000, over seven hundred times $90,000 ($6.7 million), or something in between. The District Court’s disillusionment with Romag’s litigation conduct and aggressiveness disproportionate to its harm was apparent. In evaluating the equitable factors in setting an award, the Court determined that almost all of them favored Fossil. The Court emphasized Romag’s behavior at the beginning of the litigation: from filing a lawsuit immediately prior to the lucrative holiday shopping season, submitting a false affidavit to obtain a TRO, and damaging Fossil due to the strategic timing of its lawsuit. “Plaintiff carefully timed this suit to take advantage of the imminent holiday shopping season to be able to exercise the most leverage over Defendants in an attempt to extract a quick and profitable settlement, as it had done twice before in the past three years.” By contrast, the Court determined that Fossil had acted negligently, at worst, and the relative balance of the behaviors favored a judgment of approximately $90,000 for trademark infringement, which when added to prior patent damages, would total approximately $133,000. In a strange coda to such a long-running and hard-fought case, both parties submitted requests to amend the judgment by remarkably small amounts. Romag Fasteners asked the Court to amend the judgment to reflect the correct value of the patent judgment, for a total judgment of $142,000 plus interest. And Fossil, not to be outdone, submitted a response agreeing with the total of $142,000, but disagreeing as to the date on which interest would apply. So, is this the end of this long-running dispute? Only time will tell.

Any fan of Nintendo games and consoles can tell you that the company’s most iconic virtual villain is King Bowser Koopa, generally referred to as simply “Bowser.” In a strange instance of life imitating art, Nintendo filed a copyright infringement complaint on April 16, 2021, against a real-life Bowser—i.e., Gary Bowser. While King Koopa’s villainy primarily involves harassing Mario and his friends and kidnapping princesses, according to Nintendo’s complaint, Gary Bowser has harmed Nintendo by selling devices aimed at circumventing copyright protections for Nintendo’s popular Switch and Switch Lite gaming consoles. More specifically, Nintendo’s complaint alleges that Gary Bowser is “one of the leaders of Team Xecuter, a pirate operation that unlawfully manufactures and traffics in an unauthorized operating system called the ‘SX OS,’ and accompanying piracy tools which install it… for commercial gain.” When a customer of Team Xecuter uses the purchased piracy tools to run SX OS on a Nintendo Switch, the customer is able to run pirated versions of games on the hacked Switch for free by bypassing technological measures meant to thwart such conduct. Of the three counts in Nintendo’s complaint, Counts One and Two relate to the Digital Millennium Copyright Act (“DMCA”) (i.e., unauthorized trafficking in circumvention devices). Count Three is a copyright infringement claim based on Team Xecuter’s unauthorized display on its website of images taken from Nintendo Switch games. This litigation represents a new stage in Nintendo’s ongoing campaign against accused infringers. Whereas prior cases focused on copyright infringement, trademark infringement, and unfair competition claims, Nintendo’s case against Gary Bowser is primarily based on the DMCA. In the past, Nintendo filed complaints against websites that Nintendo accused of infringing its copyrights directly through reproduction and distribution of “ROM” files, as opposed to entities, like Team Xecuter, that enable customers to circumvent copyright protection. In the video game context, a “ROM” refers to the software code necessary to play a particular game. Once a user obtains a ROM, the user can play it on a PC, smart phone, or other device using an emulator—an application that emulates one or more gaming consoles. So, if the user has, for example, a ROM for a game originally released on the Nintendo Entertainment System plus a Nintendo Entertainment System emulator installed on a PC, that user can play the game on the PC. While ROMs can be obtained through various, often unlawful, sources, such as eBay or from an original game cartridge, users used to commonly obtain both the ROMs and emulators from websites that allowed users to download the files for free or for a membership fee. Nintendo’s litigation against ROM websites have been successful. For example, in 2018, a court approved a settlement and awarded Nintendo $12.23 million in damages, and granted a permanent injunction, against a married couple based in Arizona who provided free game downloads from two websites, LoveROMS.com and LoveRetro.com, to over 17 million monthly visitors. In 2019, Nintendo filed a complaint against, Matthew Storman, the owner of RomUniverse.com, which had been online more than ten years. RomUniverse.com provided free ROM downloads but also charged a $30/year membership fee to download unlimited ROMs at a higher speed. While that litigation is still pending, Mr. Storman has already taken RomUniverse offline. Other ROM sites have also gone offline to avoid being Nintendo’s next target. It’s too early to tell whether Gary Bowser will be found liable, whether Nintendo will be awarded damages, or whether Nintendo would be able to collect such damages. However, the Team Xecuter website is already down, thus preventing future infringement. Moreover, this lawsuit will likely send a warning to other individuals and entities that Nintendo is now prepared to use the DMCA to protect its IP rights.

A new post-mortem right of publicity bill that was signed into law by Governor Cuomo on November 30, 2020, will soon take effect on May 29, 2021. The new law recognizes post-mortem rights of publicity in New York for the first time. Broadly speaking, no right of publicity exists at the federal level and so those rights must be gained through state statutes and/or common law. Under the present regime, New York protects living people against the unauthorized use of their personality (i.e., their name, portrait, picture and voice) through its right of privacy statute, Sections 50 and 51 of New York’s Civil Rights Law - Article 5. This is actually the longest standing right of publicity law for the living in the U.S., having been originally passed in 1903. But the rights conferred in New York have, until now, disappeared at death, similar to many other U.S. states. Under the new law these rights will finally be granted in New York through the passing of a new provision in Section 50 of New York’s Civil Rights Law - Section 50-F. This new section adds two types of rights – a more traditional post-mortem right of publicity granted to deceased personalities, and a second, more unusual provision related to digital replicas (such as holograms) applicable to deceased performers. Who qualifies for post-mortem rights?  Two types of deceased individuals (not corporations) – a “deceased personality” and a “deceased performer”- qualify for post-mortem protection under the new law. A “deceased personality” is a natural person who is domiciled in New York at the time of their death and whose name, voice, signature, photograph, or likeness has commercial value either at the time of their death or because of their death. So a deceased personality need not have commercialized their personality or identity prior to their death in order to qualify for protection if the way in which they die makes them famous. A “deceased performer” is also a natural person who dies domiciled in New York but who, at the time of death was regularly engaged in acting, singing, dancing or playing a musical instrument. Athletes would not fall under the definition of “deceased performer,” and it’s unclear whether retired or amateur performers would qualify. For both categories, only those who pass away after the new statute takes effect in May 2021 are protected. What rights do they get? Under the new law, a deceased personality can protect their name, voice, signature, photograph or likeness against the use of these on or in products, merchandise or goods (or for purposes of advertising or selling, or soliciting purchases of these or services), without prior consent. This right is akin to protection against false endorsement, and is viewed as narrower than that given to the living, who are protected against uses of their persona for “for advertising purposes or for the purposes of trade” more broadly. Based on this, advertising or trade uses other than those specifically listed, such as uses in creative works, are likely allowed. Deceased performers are protected against the unauthorized use of their digital replica in a scripted audiovisual work as a fictional character (such as a movie), or in live musical performances (such as a concert), without consent, if the public is likely to be misled into thinking it was an authorized use. But a conspicuous disclaimer in the credits of a scripted audiovisual work and making clear that the use of the digital replica was unauthorized will avoid liability. How long do the new post-mortem rights last? The length of protection is 40 years after death. This is less than states such as California, which provides protection for 70 years, but more than other states such as Tennessee, which has an initial 10 year term. Free speech considerations A major obstacle to passing rights of publicity laws are First Amendment concerns. The new law robustly addresses free speech concerns by permitting a number of fair uses such as parodies, satires, criticism or commentary, news, and historical works. It also permits uses in literary and other artistic works, and works that are newsworthy, educational or in the public interest. It also excludes uses in sports programs among other uses. Some exceptions to these exceptions apply. What else? Transferability, Descendibility and Registration The new law also makes explicit that the post-mortem publicity rights granted are freely transferable and descendible. It also provides a mechanism for owners of a deceased person’s rights to register their claim with the New York Secretary of State in order to be able to bring a claim. Looking ahead This new law is viewed favorably by celebrities, unions such as SAG-AFTRA and others who have advocated for years for New York to come into line with other states, and to prescribe by statute rights not otherwise recognized under New York common law. As the law goes into effect, it may result in a narrower expansion of rights than anticipated, given its various limitations as written. So it remains to be seen how meaningful the law is in practice and whether other legal avenues commonly relied upon to protect celebrities after death, such as trademark protection under the Lanham Act, confer stronger and broader rights overall.

On April 5, 2021, the Supreme Court issued its decision in Google v. Oracle, ruling 6-2 in Google’s favor on the issue of fair use. So ends a decade-plus battle between two tech giants that many viewed as having the potential to reshape how computer programs are written and licensed across the software industry. Google’s win—which is plainly indebted to the amici curiae who persuaded the Court of the policy rationale for a finding of fair use—thrilled those who saw a potential win by Oracle as an existential threat to settled norms in the software industry. Others have received the decision with skepticism, questioning how the Court could have blessed Google’s verbatim copying of Oracle’s code and struggling to reconcile the result with the plain text of the Copyright Act and established fair use precedent. Now, as the dust settles, those looking to Google v. Oracle for guidance on what they can and can’t do with proprietary software they don’t own must decide what, if anything, they can draw from its holding. The answer may prove elusive, and expensive. We’ve followed this story since the Court first granted certiorari in 2019, with posts laying out the questions before the Justices, analyzing copyrightability and fair use, and summarizing oral argument. (For those new to the subject matter, these earlier posts will help you get up to speed on this complex case.) Now, in our final post in this series, we turn to the result. Holding Noting that Google v. Oracle does not “overturn or modify” earlier cases involving fair use, the Court held that Google’s re-implementation of a “user interface” (i.e., 11,500 lines of declaring code from 37 Java API libraries) owned by Oracle was a fair use of that material as a matter of law. Justice Breyer wrote the majority opinion, joined by Justices Roberts, Sotomayor, Kagan, Gorsuch, and Kavanaugh. Justice Thomas dissented, joined by Justice Alito. Justice Barrett took no part in the decision. The Majority Opinion Although there were two questions before the Court, the majority ignored the first, making no express ruling on whether the declaring code at issue is copyrightable. As discussed below, this omission drew sharp criticism from the dissent, and is likely to exacerbate uncertainty over how the holding in Google v. Oracle should be applied. That said, the Court implicitly sided with Oracle on this question as fair use only comes into play if the underlying work is subject to copyright; the majority also acknowledged in several places that computer programs, including the declaring code at issue here, are “subjects of copyright.” This acknowledgement, however, only makes the majority’s silence on the first question before it more conspicuous and puzzling. Instead of addressing copyrightability under 17 U.S.C. §§ 101 and 102, the majority devotes its opinion to an analysis of the fair use factors enumerated under 17 U.S.C. § 107, ultimately ruling that each one favors Google. Factor 2: “The Nature of the Copyright Work.” Although this factor is actually the second fair use factor, for “expository purposes” the majority considered it first. Under this factor, the majority compared declaring code and implementing code, and identified the attributes of declaring code that distinguish it from implementing code and—per the majority—weaken its protection under the Copyright Act. For example: declaring code is “inextricably bound together” with the division of computing tasks that “no one claims is a proper subject of copyright;” declaring code is “inextricably bound up” with the idea of organizing tasks in a manner that is not copyrightable; declaring code is “inextricably bound up” with the use of commands, i.e., method calls, that Oracle did not claim were copyrightable; and declaring code is “inextricably bound up” with implementing code, which Google did not copy from Oracle. Although these observations were all made in the context of fair use, they track the arguments Google raised in objecting to the copyrightability of declaring code under the first issue before the Court. This, again, puts a spotlight on the majority’s decision to ignore the first issue before it, and invites the question of why it didn’t simply make these observations in that context. (More on that in our discussion of the dissent.) Further elaborating on the distinction between declaring code and implementing code, the majority concludes that declaring code “embodies a different kind of creativity” in that Oracle’s code was written to attract programmers by making it easy to remember and use. Putting these ideas together, the majority observed that although both declaring code and implementing code are “functional in nature,” declaring code is “inherently bound together” with (1) uncopyrightable ideas (task division and organization) and (2) others’ new creative expressions, like Google’s Android implementing code. The majority thus ruled that the nature of declaring code weighs in favor of fair use. Factor 1: “The Purpose and Character of the Use.” Here the majority considered whether Google’s use added “something new, with a further purpose or different character,” altering Oracle’s declaring code. First addressing traditional concepts derived from precedent to consider whether the use was “transformative” under this factor, the majority acknowledged that Google precisely copied the code at issue, and used it “in part” for the same purpose as Oracle. This would typically cut against Google, but the majority added that, in the context of computer programs, those cannot be reasons to rule against fair use because it would improperly limit the doctrine of fair use. Thus, the majority decided that Google’s purpose was to use declaring code created for use in desktop and laptop computers and apply it to smartphones. Although the majority stopped short of ruling that all such re-implementation of declaring code will weigh in favor of fair use under this factor, it observed that the record demonstrates that re-implementing declaring code in this manner “can further the development of computer programs.” In advancing this view, the majority cited the contributions of amici supporting Google, referencing briefs submitted by Copyright Scholars, Microsoft, Computer Scientists, R Street Institute, and American Antitrust Institute. The amici convinced the majority that Google’s use was transformative under this factor. The majority also considered the commerciality and good faith of Google’s use, finding that Google’s commercial use was not dispositive in light of its “inherently transformative” use, and expressed skepticism regarding the role Google’s alleged bad faith should play in the analysis, choosing to give it no weight. The majority found this factor weighed in Google’s favor. Factor 3: “The Amount and Substantiality of the Portion Used.” Google copied the declaring code for 37 packages of the Sun Java API, totaling approximately 11,500 lines of code. If considered in isolation, the majority acknowledged that would be a lot of copying. But the majority declined to consider it in isolation, and instead took into account the several million lines that Google did not copy in ruling that this factor weighed in Google’s favor. Factor 4: “Market Effects.” Here, the majority declined to consider the market effects of Google’s copying by looking at the revenue Oracle lost as a result. Instead, the majority stressed Oracle’s poor position for success in the smartphone market, and weighed it against Oracle’s claim that Google’s copying harmed it. The majority also took into account whether Google’s copying produced “public benefits” related to the Copyright Act’s concern for the “creative production of new expression.” Significantly, the majority noted that a weighing of public benefit may not always be relevant, “not even in the world of computer programs.” But it nonetheless decided to weigh them here in determining the likely market effects of Google’s re-implementation. Somewhat confusingly, in ruling against Oracle on this factor the majority reasoned that the success of a computer program may initially be attributable to its expressive qualities, but that over time it can instead become valuable “because users, including programmers, are just used to it.” Oracle had previously warned that a ruling in Google’s favor would effectively punish it for Java’s success. And although that may be a reductive summary of the decision overall, the majority’s reasoning here raises questions as to when the success of a copyrighted work shifts from its expressive qualities to the inertia arising from wide adoption, and why that should reduce its protection under the Copyright Act. Those wondering will find little comfort in the majority’s conclusion that “given programmers’ investment in learning the Sun Java API, to allow enforcement of Oracle’s copyright here would risk harm to the public.” The Dissent The dissent wasted no time before taking the majority to task for its failure to address the first question before the Court, i.e., whether declaring code is copyrightable. Noting that the majority “purports to assume, without deciding, that the code is protected,” the dissent concluded that the majority’s fair use analysis is “wholly inconsistent with the substantial protection Congress gave to computer code.” The implication here is that the majority sidestepped the first question because, had it fleshed out its position, the reasoning would have made its fair use analysis untenable. Per the dissent, “the majority purports to save for another day the question whether declaring code is copyrightable” because it “cannot square its fundamentally flawed fair-use analysis with a finding that declaring code is copyrightable.” As to the nature of the work, the dissent rejected the majority’s attempt to distinguish implementing code from declaring code, noting that each observation made by the majority about implementing code is equally true of declaring code. The dissent added that “it makes no difference” that the value of declaring code depends on how much time third parties invest in learning it because “[m]any other copyrighted works depend on the same.” The dissent illustrates this point by analogy, explaining that although a Broadway musical script needs actors and singers to invest time learning and rehearsing it “a theater cannot copy a script—the rights to which are held by a smaller theater—simply because it wants to entice actors to switch theaters and because copying the script is more efficient than requiring the actors to learn a new one.” The dissent also took a sharply different view of the market effects of Google’s copying, noting that whether or not Oracle could have built a smartphone on its own is only “half the picture” because Oracle could have licensed its software for use in Android. According to the dissent, Google’s copying destroyed that market for Oracle: “By copying Oracle’s work, Google decimated Oracle’s market and created a mobile operating system now in over 2.5 billion actively used devices, earning tens of billions of dollars every year. If these effects on Oracle’s potential market favor Google, something is very wrong with our fair use analysis.” On the nature of Google’s use, the dissent accused the majority of conflating transformative use with derivative use, stressing that by the majority’s logic a movie studio’s unlicensed creation of a film based on a book would be transformative. Finally, the dissent would find Google’s use substantial because it could serve as a “market substitute” for the original. At bottom, the dissent rejects the majority’s view that there is a sufficient difference between implementing code and declaring code to render the former more protectable than the latter. The result of the Court’s ruling, per the dissent, is that it is now “difficult to imagine any circumstance in which declaring code will remain protected by copyright.” Standard of Review Many observers were surprised when, in 2018, the Federal Circuit reversed the jury’s 2016 finding of fair use, and Google argued that the appellate court applied the wrong standard of review by failing to give appropriate deference to the jury’s findings of fact. Google went so far as to argue that the Federal Circuit violated the Seventh Amendment’s right to a trial by jury, which raised eyebrows when it spurred a request for supplemental briefing from the Court. But on these procedural questions, both the majority and dissent agreed with Oracle that the Federal Circuit applied the correct standard when it treated fair use as a mixed question fact of law. The Court held that appellate courts should defer to the jury on findings of underlying fact, and then consider de novo whether those facts support fair use. Although it made no difference to the outcome here, the Court’s ruling on these questions injects more uncertainty into future litigation by making appeals from a jury’s findings on fair use more viable than they would be had the Court sided with Google on this issue. Where Do We Go From Here? It is tempting to view the Court’s ruling as a clear win for software developers who want to re-implement portions of proprietary computer programs without a license—i.e., much of the software industry. But the holding may prove narrower and more uncertain than it appears. That’s because any fair use analysis necessarily mixes questions of fact and law, and is often—by design—uncertain. Indeed, the majority in Google v. Oracle stressed the doctrine’s “flexible” approach to the “sometimes conflicting” aims of copyright law, and that “its application may well vary depending upon context.” With the above in mind, consider the meandering path Google’s fair use defense took in this case. During the first trial in 2012, the jury deadlocked on fair use. In 2016, after a second trial on fair use, the jury found for Google. Then, in a rare move, the Federal Circuit reversed the jury’s finding and ruled that only one of four factors favored Google, with two of the four strongly or heavily favoring Oracle. Now, in 2021, the Supreme Court has ruled that the 2016 jury got it right, not only reversing the Federal Circuit but holding that every single fair use factor favored Google. The dissent, examining the same facts, found only one factor favored Google. In addition, as illustrated in the chart below, the many amici who weighed in were split across factors. 39 amici addressed at least one fair use factor, but very few of the 39 addressed each of the four factors. The first factor was the most addressed factor, with 31 amici offering arguments relating to the purpose of the use, followed by the fourth factor with 26 amici addressing market effects. Although more amici argued in favor of Oracle for each of the fair use factors, the amici who argued for Google generally provided a deeper analysis of the issues relevant to fair use. This is because most Oracle-supporting amici who addressed fair use also addressed copyrightability, whereas many Google-supporting amici who addressed fair use devoted their entire briefs to fair use. Google-supporting amici also tended to focus on fewer factors, often just one or two factors, whereas Oracle-supporting amici tended to address three, if not all four, of the fair use factors. And the majority was clearly persuaded by Google-supporting amici, as it cited several of their briefs in its opinion. Now imagine you’re a software developer who must decide whether Google v. Oracle clears the way for you to use another company’s proprietary code. How do you determine whether the code at issue is more like implementing code, which the Court did not include in its ruling on fair use, or declaring code? And assuming you can determine that the code is like the declaring code here, do you look at the result—the Court ultimately found fair use, and resoundingly so—and find comfort to proceed without a license? Or does the expensive and uncertain path of a fair use defense make you hesitant to take on that risk? After all, like Google, you may prevail, but the victory may cost more in legal fees than a license would have. Or, you might lose outright because the highly factual analysis cuts against you. For example, a court might find that your use of the code did not result in a sufficiently successful product to warrant a finding of fair use under Google v. Oracle, or that the code’s owner is better placed to compete in your market than Oracle was to compete in the smartphone market, and rule against you on that basis. Moreover, it should not be lost on anyone that Google spent many millions in legal fees, and the collective investment by the amici who filed briefs in support of Google was also significant. Query whether the same result would have been possible for a litigant without such resources to spare. At best, in situations where the code in question is closely analogous to the declaring code at issue in Google v. Oracle, the Court’s ruling may support an efficient resolution finding fair use. But the line between implementing code and declaring code in Java—not to mention its analogues in other programming languages—may prove difficult to draw. And in those situations, Google v. Oracle is unlikely to provide the sort of certainty that can lead to efficient resolutions of copyright disputes. Conclusion The Court ruled that, under the doctrine of fair use, Google was free to use 11,500 lines of code from 37 Java API libraries owned by Oracle when Google programmed its Android platform. For Google, this means it will not be liable for potentially billions of dollars in damages. What it means for everyone else remains to be seen, and in light of the fact-intensive and context-specific premises behind the Court's ruling Google v. Oracle may prove narrower than it first appears.

In the 1970s, William DuBay created the comic book character, Restin Dane, also known by his superhero alter ego, “The Rook.” Dane, a wealthy scientist and inventor residing in an Arizona house shaped like a rook chess piece, is a time traveler who “will go anywhere—any time—in search of adventure!” Similar to other famous superheroes, Dane is a “traditional comic book hero”—a handsome, masculine, and honorable man who battles villains for the greater good. The Rook first appeared in a horror and fantasy comic magazine called The Eerie in 1977, but by 1983, the character had an entire comic book series dedicated to his saga that sold more than five million copies. In a 2017 lawsuit, The Rook’s arch nemesis derives from Stephen King’s “magnum opus”: The Dark Tower series. The series is comprised of eight novels and a novella, published between 1982 and 2012, the first novel of which is The Gunslinger, which introduces The Dark Tower’s protagonist, Roland Deschain. Throughout the series, Deschain searches for an elusive structure that holds the secrets to the space-time continuum, the Dark Tower. Unlike the traditional superhero architype, Deschain is a brooding loner who places his own mission and self-interest above the lives of others. Between 2007 and 2017, Marvel Comics licensed the publication rights to graphic novels based on The Dark Tower novels, and Deschain’s battle with external and internal demons jumped from the page to the big screen in a 2017 motion picture adaptation. In March of 2017, Benjamin DuBay—William DuBay’s nephew and the assignee of William’s copyright in The Rook following William’s death in 2010—filed suit against King for copyright infringement, alleging the similarities between the superheroes were “shocking and extraordinary.” Such strong similarities could only be the result of King copying The Rook’s artistic expression, claimed DuBay’s nephew. King moved for summary judgment on DuBay’s copyright infringement claim, and ultimately, the U.S. District Court for the Middle District of Florida granted King’s motion for summary judgment, holding that the characters were not substantially similar. On appeal, the 11th Circuit Court of Appeals considered the “substantial similarity” standard, which plaintiffs must prove as part of their copyright infringement claim. Recognizing that substantial similarity exists “when an average lay observer would recognize the alleged copy as having been appropriated from the copyrighted work,” the Court of Appeals pitted The Rook against Deschain in a side-by-side battle of the similarities. Most of the perceived similarities—time-traveling capabilities, knightly heritages, and knife-wielding superhero bravado—were characterized as scènes à faire, a French term used to describe elements of a book or film that are obligatory for a book or film in that genre. These elements, like shootout scenes between cowboys and bank robbers in the American West, are not worthy of protection because they are “too general to merit copyright protection.” The appellate court then looked to more specific and unique elements of the superheroes’ stories for infringement-worthy similarities. However, while some components of The Rook and Deschain’s stories parallel each other—both characters have a bird companion, they each save of young boy from an alternate time, and each has an all-encompassing relationship with a mysterious, time-bending tower—the overall elements are portrayed in distinct ways, casting the subject heroes in different moral lights. As a whole, The Rook is a traditional comic book hero—a courageous, time-traveling gunslinger and honorable man trying to make the world a safer place by “doing the right thing.” Conversely, Deschain is “far more complex”—while equally skilled with a gun, he lacks the idealism and moral integrity common to most superheroes, and is consumed by his own self-interest. Any similarities, the Court of Appeals held, are “superficial,” and the grant of summary judgment in favor of King was affirmed. While the battle between The Rook and Deschain may be over for now, the 11th Circuit decision provides a roadmap for future heroes looking to avoid a copyright fight—superficial similarities are common amongst all superheroes, but it’s the details, nuances of characters, differences in narrative arc, and how all of these elements are combined in a holistic work, that could be a hero’s legal kryptonite or its greatest victory.

An important decision by the Second Circuit in The Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith, Case No. 19-2420-cv (2d Cir. Mar. 26, 2021), has, in important respects, upended how the defense of fair use is applied in copyright cases, with potentially major ramifications that transcend the “appropriation art” with which Warhol is concerned. Indeed, in many respects, the Warhol decision, in which a series of works created by the late artist Andy Warhol based on photographs of the late singer Prince were deemed not to be shielded by principles of fair use as a matter of law, is a repudiation in all but name of the same court’s decision in Cariou v. Prince, 714 F.3d 694 (2d Cir. 2013), in which most of a series of appropriation artworks created by the artist Richard Prince were deemed permissible fair uses of copyrighted, preexisting photographs taken by another artist. The facts of Warhol are not complicated, and The TMCA first covered the case here. In 1981, the photographer Lynn Goldsmith took the photo below of the iconic singer Prince as part of an assignment for Newsweek, back when news magazines were a thing. The record indicates that this particular photograph was never published. In 1984, Goldsmith licensed her photo to Vanity Fair magazine for use as an “artist reference,” i.e., as a basis for a new work an unnamed artist would create that Vanity Fair would publish. Warhol turned out to be the artist, and his new work was published later that year, as shown below. However, unbeknownst to Goldsmith, Warhol took Goldsmith’s photo and also used it to create a series of fourteen additional works, dubbed the “Prince Series,” some of which appear below. Following Warhol’s death, the works that embody the Prince Series were either sold to third parties or sent to the Warhol Museum in Pittsburgh for display, and the Warhol Foundation regularly licensed them for commercial use. In 2018, following Prince’s death, Goldsmith allegedly learned for the first time of the existence of the Prince Series and the Warhol Foundation’s licensing of the Prince Series without any credit to her underlying work, or payment for its use. After Goldsmith sent a letter asserting claims of copyright infringement, the Warhol Foundation filed an action in the Southern District of New York seeking a declaration of non-infringement based on fair use. Goldsmith counterclaimed for infringement. The district court granted summary judgment to the Foundation on its fair use defense, holding that all four factors set forth in 17 U.S.C. § 107 bearing on the issue of fair use favored the Foundation, in that the Prince Series was: (1) “transformative” because, while Goldsmith’s photo portrayed Prince as “not a comfortable person” and a “vulnerable human being,” the Prince Series portrayed Prince as an “iconic, larger-than-life figure”; (2) although Goldsmith’s photo was both creative and unpublished, which would traditionally weigh in Goldsmith’s favor, this was “of limited importance because the Prince Series works are transformative works”; (3) in creating the Prince Series, Warhol removed nearly all of the Goldsmith photo’s protectible elements; and (4) the Prince Series was not a market substitute that harmed or had the potential to harm Goldsmith. On appeal, the Second Circuit rejected all of these conclusions, held that the Prince Series was neither transformative nor a fair use as a matter of law, and also concluded that the Goldsmith photo and Prince Series were substantially similar as a matter of law. As a result, if the Second Circuit’s decision stands, it is hard to see how the Warhol Foundation has any remaining defenses left to Goldsmith’s claim of infringement. The core of the appellate decision is its conclusion that the Prince Series is not transformative. According to the court in Warhol, where a secondary work like the Prince Series “does not obviously comment on or relate back to the original or use the original for a purpose other than that for which it was created,” the bare assertion of a “higher or different artistic use,” is insufficient to render a work transformative. Instead, in order to be transformative, “the secondary work itself must reasonably be perceived as embodying an entirely distinct artistic purpose, one that conveys a ‘new meaning or message’ entirely separate from its source material.” Elaborating, the court held that “the secondary work’s transformative purpose and character must, at a bare minimum, comprise something more than the imposition of another artist’s style on the primary work such that the secondary work remains both recognizably deriving from, and retaining the essential elements of, its source material.” The Prince Series flunked this test. While acknowledging that the Prince Series embodied “the distinct aesthetic sensibility that many would immediately associate with Warhol’s signature style – the elements of which are absent from the Goldsmith photo,” the court concluded that the Prince Series retained the essential elements of the Goldsmith photo without significantly adding to or altering the elements that made Goldsmith’s work distinctive. “Warhol’s modifications serve chiefly to magnify some elements of [Goldsmith’s photo] and minimize others. While the cumulative effect of those alterations may change the Goldsmith Photograph in ways that give a different impression of its subject, the Goldsmith Photograph remains the recognizable foundation upon which the Prince Series is built.” And it is “entirely irrelevant,” according to the Second Circuit, that most people looking at the Prince Series would identify it as a work of Warhol. “Entertaining that logic would inevitably create a celebrity-plagiarist privilege; the more established the artist and the more distinct that artist’s style, the greater leeway that artist would have to pilfer the creative labors of others. But the law draws no such distinctions.” The Second Circuit’s conclusions in Warhol on the issue of whether the Prince Series is transformative stand in stark contrast to that court’s prior holding in Cariou, in which the work shown below on the left, from the artist Richard Prince, was deemed transformative of the photo on the right. Why Richard Prince’s addition in his work of a guitar and three blobs obscuring the face of the original photo’s subject was deemed to be transformative as a matter of law, but Warhol’s addition of colors, the removal of depth and contrast, and other changes made to Goldsmith’s photo were not transformative as a matter of law, is an issue the Warhol decision did not address specifically. But while it took pains in Warhol to state that “we remain bound by Cariou, and have no occasion or desire to question its correctness on its own facts,” the Second Circuit made clear in Warhol that the Cariou approach to whether a secondary work qualifies as transformative no longer applies. One other notable aspect of the Warhol decision is its treatment of the fourth fair use factor – the effect of the allegedly infringing use on the market for the original. While concluding that the primary markets for the original Prince Series and original Goldsmith photo (museums, art buyers) were different, the court found that the secondary licensing market for both works was the same, in that both parties’ works were of interest to magazines and other publications supplying content regarding Prince. This last fair use factor was characterized as “undoubtedly the single most important element of fair use” by the Supreme Court in Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 566 (1985), and the court’s conclusions on this factor in Warhol amplified its overall conclusion that the Prince Series was not shielded by principles of fair use. Indeed, the concurring opinion of Judge Sullivan in Warhol advocates a different approach to fair use, one that reduces the importance of whether a secondary work is transformative, in favor of an approach where the factor concerned with market effects is given greater attention. According to Judge Sullivan, such an approach would better serve the purposes of copyright and avoid the tendency of courts to collapse all four fair use factors into one inquiry: whether a secondary work is transformative. So what’s next? Well, given Warhol’s prolific use of photographs of celebrities such as Marilyn Monroe, Elizabeth Taylor, Michael Jackson and John Lennon as source material for secondary works that are, qualitatively, very similar to the Prince Series, it may see future copyright claims from the photographers who created those images. And for other litigants in the Second Circuit who seek to mount a fair use defense on the ground that their allegedly infringing works are transformative, and thereby shielded by principles of fair use, their burden on that issue is now materially higher.

Consumer surveys. Love ’em or hate ’em, they are an evidentiary staple in many Lanham Act disputes. A well designed and executed survey can bolster your case, or can act as a powerful antidote to counteract your opponent’s. Survey evidence is not, legally speaking, strictly necessary. That said, courts routinely—indeed, almost reflexively—treat the absence of a survey as outcome determinative, especially in cases where a party claims an ambiguous advertisement “deceives” consumers. Sometimes litigants want to avoid the time and expense of conducting a consumer survey and instead opt to have an expert fill in that evidentiary hole with an opinion on how he or she “believes” consumers would perceive an advertisement. That is often a bitter pill. A case in point: In re C2r Global Mfg. issued by the United States Bankruptcy Court for the Eastern District of Wisconsin. There, a competitor pursued a Lanham Act claim against a debtor for falsely advertising the effectiveness of its pharmaceutical drug disposal product. According to the Plaintiff, consumers were deceived by the ads in question and, as a result, purchased the debtor’s product instead of Plaintiff’s product. There is a well-developed playbook for proving up these types of garden variety false advertising claims. The proof often includes marketplace research gathered through a consumer survey.  But here, instead of proffering survey evidence to establish how consumers perceived the debtor’s “drug destroyer” ads, the Plaintiff designated an expert to provide his personal opinion on the effect the ads would have on consumers. He opined that, “because consumers read [debtor’s] capacity advertisements to indicate that RX Destroyer products deactivate medication at a lower price-per-pill than the [plaintiff’s] system, consumers choose to purchase [debtor’s products] rather than [plaintiff’s product].” The court correctly excluded this and similar opinions. The problem with this sort of opinion testimony is at least two-fold. First, this expert attempted to opine on how consumers perceived or interpreted the ads in question. That sort of opinion is not within the province of an expert unless he or she has survey data to support it, and Plaintiff had none. Second, the expert purported to opine on how consumers would react after viewing the ad in that they would be more inclined to purchase the debtor’s product than Plaintiff’s. This sort of opinion is something that should be supported by gathering data from actual consumers and testing whether the ads at issue would be “material” to the consumers’ purchasing decisions. This case tells a cautionary tale about the perils of proxy evidence. If you are trying to establish how consumers perceive an advertisement or how they will react to it, counsel and their experts should resist the urge to “go it alone.” Consider designing and implementing a consumer survey to help bridge the evidentiary gap. Otherwise, going rogue when it comes to survey evidence can have costly implications.

A recent Federal Trade Commission (“FTC”) settlement reinforces the need for companies to substantiate MADE IN THE USA product claims in advertisements. Gennex Media LLC and its owner, Akil Kurji, recently found themselves the subject of an FTC investigation regarding claims made on their Brandnex website, social media sites, and in a YouTube video that their customizable promotional products (including items such as wristbands, lanyards, temporary tattoos, and buttons) were “Made in USA,” “USA MADE,” and “Manufactured Right Here in America!” As it turns out, many of these products were not made in the United States and were actually wholly imported from China. As a result of these violations, which date back 2012, Gennex and Kurji were collectively ordered to pay the Commission a monetary judgment of $146,249. The proposed order prohibits Gennex and Kurji from making unqualified U.S.-origin claims for any product, unless (1) the final assembly or processing of the product occurs in the United States, all significant processing that goes into the product occurs in the United States, and all or virtually all ingredients or components of the product are made and sourced in the United States; or (2) a clear and conspicuous qualification appears immediately adjacent to the representation that accurately conveys the extent to which the product contains foreign parts, ingredients or components, and/or processing; or (3) for a claim that a product is assembled in the United States, the product is last substantially transformed in the United States, the product’s principal assembly takes place in the United States, and United States assembly operations are substantial. The order defines “Made in the United States” as any representation, express or implied, that a product or service, or a specified component thereof, is of U.S.-origin, including, but not limited to, a representation that such product or service is “made,” “manufactured,” “built,” “produced,” or “crafted” in the United States or in America, or any other U.S.- origin claim. This case is an important reminder for companies to ensure compliance with FTC guidelines regarding U.S. origin claims. Here are some best practices to keep in mind when making US origin claims, based on the FTC’s Made in the USA Policy: U.S. content must be disclosed on automobiles and textile, wool, and fur products. Disclosure is not required on most other products sold in the United States. The FTC’s Made in the USA policy applies to all products advertised or sold in the United States, except for those specifically subject to country-of-origin labeling by other laws. The FTC’s Made in the USA policy applies to all origin claims that appear on products and labeling, advertising, and other promotional materials, and also to all other forms of marketing, including digital or electronic mechanisms, such as internet or e-mail. Made in the USA claims can be express or implied, but the policy applies to both. Preapproval of Made in the USA claims is not required. Any manufacturer or market may make the claim, so long as it is truthful and substantiated. The standard for a product to be called Made in the USA without qualification is that the product must be “all or virtually all” made in the United States. The elusive phrase “all or virtually all” means that all significant parts and processing that go into the product must be of U.S. origin and should contain no (or negligible) foreign content. To substantiate a Made in the USA claim, a manufacturer or marketer needs competent and reliable evidence to back up the claim that its product is “all or virtually all” made in the United States. To determine whether a product is “all or virtually all” made in the United States, the product’s final assembly or processing must take place in the United States. Other factors, such as how much of the product’s total manufacturing costs can be assigned to U.S. parts and processing, and how far removed any foreign content is from the finished product, are also considered. A qualified Made in USA claim describes the extent, amount, or type of a product’s domestic content or processing but also indicates that the product is not entirely of domestic origin. Qualified Made in the USA claims are appropriate for products that include U.S. content or processing but do not meet the criteria for making an unqualified Made in USA claim. Because these claims can be misleading in terms of the amount of domestic content that exists, manufacturers and marketers should avoid qualified claims, unless the product has a significant amount of U.S. content or U.S. processing. Terms such as “produced,” “created” or “manufactured” in the United States should be avoided when referencing that a particular manufacturing or other process was performed in the United States, as these terms suggest a broader application than just a specific process and may be misleading. The FTC’s Enforcement Policy Statement can be found here: Enforcement Policy Statement on U.S. Origin Claims | Federal Trade Commission (ftc.gov).

China, like the United States, is a party to the Berne Convention for the Protection of Literary and Artistic Works. As such, in general any literary or artistic work created in the US will also be protected in China. Unlike trademark rights, which are based on use or registration (depending on the country of adoption and use), copyright rights are automatically generated once the creation of the relevant work has been completed and do not require any compulsory registration. Nonetheless, some Berne Convention countries, including China and the US, offer a system of voluntary copyright registration in order to provide a way for the copyright owners to record the particulars of the copyright in the works they created/own and other related transactions. Copyright registration in the US is also a prerequisite for filing a lawsuit for infringement, and depending on when registration occurs relative to the date when infringement began, copyright registration in the US, can provide enhanced statutory remedies once liability is established. This article provides an introduction to the voluntary copyright registration system in China and some key advantages in holding a copyright registration in China enforcement actions. Voluntary copyright registration in China Voluntary copyright registration in China is administered by the Copyright Protection Center of China (CPCC). The CPCC, after receiving an application for copyright registration, will only review the application documents to ensure that all the formality requirements for copyright registration are met before approving a registration. No substantive examination will be conducted by the CPCC in relation to the application by looking into the validity of the underlying copyright rights. The whole process will generally take a few months to complete. Obtaining a copyright registration in China is a relatively cost-efficient process since the CPCC does not require notarization and legalization of the application documents, except the certificate of good standing of the applicant pursuant to the recently-updated requirements of the CPCC. Once registered, a copyright registration certificate will be issued by the CPCC. The certificate will contain the important particulars relating to the work registered, such as the title of the work, the name of the author, the name of the copyright owner, the mode of creation, the date of completion and the place of creation, etc. A sample of the subject work as recognized by the CPCC will be attached to the certificate. Key advantages in holding a copyright registration in China If a US copyright owner wishes to initiate a copyright enforcement action in China, such as online takedowns, administrative raid, trademark opposition and invalidation, border interception at the Chinese Customs, and civil and criminal proceedings, it first has to prove that it owns the copyright in the subject work in question. A copyright registration certificate issued by the CPCC may serve as prima facie proof of the holder’s ownership of the copyright in the subject work. By contrast, if no copyright registration is obtained in China, a US copyright owner will be required to submit documents to prove its ownership of the copyright in the subject work, which is a notoriously difficult task and expensive exercise for foreign copyright owners. In China, a witness statement such as a declaration/affirmation of creation and ownership of a work alone will not be given much weight by the Chinese courts and government enforcement authorities, and will not be welcomed by the major trading platforms for takedown purposes either. In addition, even assuming a US copyright owner is able to produce the relevant documents required to prove its ownership in the subject work, those documents must first meet the formality requirement of notarization and legalization and must be translated into Chinese before they can be admitted as evidence in an enforcement action in China. This onerous formality requirement and its cost implication might simply deter a US copyright owner from taking enforcement action. A copyright registration in the US for the same work is normally not very helpful in serving as prima facie evidence of proof of the registrant’s ownership, primarily because it does not include an officially- recognized sample of the subject work attached to the registration certificate. Trademark opposition and invalidation actions in China – Conflict with prior copyright in an artistic work is a valid opposition/invalidation ground under Article 32 of the Chinese Trademark Law. The Chinese trademark authorities have been more willing to recognize the effect of a copyright registration in China in ascertaining and determining the issue of the opponent’s/petitioner’s ownership of copyright in the work in question, especially where the copyright registration certificate submitted by the opponent/petitioner predates the filing date of the disputed trademark filing, or there is some other favorable circumstance or evidence in the case, notwithstanding that the copyright registration is obtained without going through any substantive examination. Administrative Raid Action – The copyright administration authority requests that a copyright owner prove its copyright ownership as a pre-condition for accepting a complaint of copyright infringement filed by the rights owner. A copyright registration certificate as issued by the CPCC in Chinese will be good evidence to overcome this first hurdle in an administrative raid action on the complainant. Unless the infringer can provide conflicting evidence to successfully rebut the validity of the copyright registration in China, the copyright administration authority will officially accept the complaint for further investigation and review. Online takedowns – Online takedowns have become frequent enforcement actions taken by US copyright owners to protect their IP rights in China. To file a copyright takedown complaint with the major online trading platforms in China such as Taobao, Tmall and JD, a complainant is required to submit proof of its ownership of the copyright to the platform. In this situation, a copyright registration certificate in China will obviously be the most preferred prima facie evidence that those trading platforms would like to receive for verification, as a copyright registration certificate is an official certificate issued by a government body (i.e., the CPCC), which contains all the necessary particulars for the platforms’ verification. A copyright takedown request can only be filed with those online trading platforms after the platforms have completed their verification process and recognize the complainant’s copyright ownership. Enforcement via Chinese Customs – Customs/border interception of goods suspected to have infringed other’s trademark rights, copyrights or patent rights is also an important way to protect the owners’ rights and interest and enforce against infringers. In order to avail oneself of the Customs protection, an IP rights owner will normally need to record its IP rights with the Chinese Customs in advance. With regard to the recordal of copyright rights with the Chinese Customs, Section 7(2) of the Implementing Measures of the Regulations on Customs Protection of IP rights in China specifically provides that a copy of the copyright registration certificate, together with a sample of the work officially recognized by the CPCC in China, are acceptable proof of the applicant’s copyright ownership for purpose of recordal. Otherwise, a foreign copyright owner will need to go through the difficult and expensive exercise as mentioned above to prove its copyright ownership to the Chinese Customs.

The Ohio State Buckeyes may have lost the college football national championship to Alabama earlier this year but OSU can take some consolation from its recent victory in a trademark case before the Sixth Circuit Court of Appeals. In The Ohio State University v. Redbubble, Inc., Case No. 19-3388 (6th Cir. Feb. 25, 2021), the Sixth Circuit reversed a lower court’s grant of summary judgment in favor of defendant Redbubble, an Australian online retailer that OSU had sued for trademark infringement and related claims. In doing so, the Sixth Circuit grappled with an increasingly relevant issue in the digital age: whether e-commerce companies are liable for trademark infringement arising from products they sell in the online marketplace. Redbubble operates an online marketplace for print-on-demand products based on user-submitted artwork. Independent artists upload images to Redbubble’s interface and consumers can place an order for a customized item. Once a consumer makes a purchase, Redbubble contacts the artist and arranges the manufacturing and shipping of the product with independent third parties. The shipped products, however, are delivered in Redbubble packaging with Redbubble tags. Back in 2017, OSU discovered products on Redbubble’s marketplace that displayed OSU’s trademarked images without approval. Redbubble declined to remove the offending articles unless OSU complied with onerous demands for identification of the infringing articles, following which OSU sued it for trademark infringement, counterfeiting, and unfair competition (under both the Lanham Act and Ohio’s right-of-publicity law) in the Southern District of Ohio. The parties subsequently cross-moved for summary judgment, and the district court granted summary judgment for Redbubble, holding that “Redbubble did not ‘use’ OSU’s trademarked images in operating its business model under the Lanham Act because it only acted as a ‘transactional intermediary’ between buyers, sellers, manufacturers, and shippers. On appeal, the Sixth Circuit first addressed OSU’s argument that Redbubble was vicariously liable under the Lanham Act. The appellate court held that, while OSU might have a good argument for vicarious liability, it was barred from pursuing that claim because it had failed to raise the issue in the district court (litigators, don’t let this happen to you - make sure to raise every possible argument in the trial court or you risk being barred from pursuing even meritorious claims on appeal). The Sixth Circuit then moved on to the more interesting question: did Redbubble “use” OSU’s trademarks under the Lanham Act by marketing and selling infringing products? The Court first noted that online marketplaces, like eBay and Amazon, that merely facilitate sales for independent vendors generally escape Lanham Act liability. On the other hand, parties who design and print trademark-infringing goods typically violate the Lanham Act, as do direct sellers of offending products (whether brick-and-mortar stores or company websites). So, which is Redbubble? The Court distilled the question as follows: “What level of involvement and control must a defendant exercise over the creation, manufacture, or sale of offending goods to be considered akin to a ‘seller’ or ‘manufacturer’ to whom Lanham Act liability applies?” The Court stated that, based upon Sixth Circuit precedent, a key distinction between a direct seller who “uses” a trademark and a mere facilitator of sales is “the degree to which the party represents itself, rather than a third-party vendor, as the seller, or somehow identifies the goods as its own.” In this case, the evidence suggested that “products ordered on Redbubble’s website do not yet exist, come into being only when ordered through Redbubble, and are delivered in Redbubble packaging with Redbubble tags.” Thus, Redbubble is more than just a “passive facilitator” – it “brings trademark-infringing products into being by working with third-party seller to create new Redbubble products, not to sell the artists’ products.” In the mind of the Sixth Circuit, that “use” of OSU’s trademark was sufficient to preclude summary judgment in Redbubble’s favor. After discussing OSU’s Ohio right-of-publicity claim (again reversing the district court’s grant of summary judgment to Redbubble on this claim too), the Court considered whether OSU was entitled to summary judgment on its claims. On that issue, the Sixth Circuit concluded that there was insufficient record evidence and so remanded for additional fact-finding. According to the Court, the factual gaps include the precise nature of Redbubble’s contractual relationships with third-party manufacturers and shippers, the degree to which Redbubble is involved in selecting and imprinting trademark-infringing designs on its products, Redbubble’s involvement in product returns, and facts relating to potential defenses Redbubble might have. While the final outcome of this case is uncertain, OSU can certainly be pleased with the Sixth Circuit’s decision. More generally, this case contributes to an understanding of when and how online retailers may be liable for trademark infringement – at least in the Sixth Circuit. The general lesson? Unless an online retailer is clearly a passive facilitator of third-party sales like Amazon or eBay, it needs to be careful how involved it is in the product manufacturing and sales process or it runs the risk of being sued for trademark infringement. Also, lawyers: make sure you preserve issues for appeal!

The FTC recently reached deals with six CBD companies after it issued formal complaints against them in December 2020 over concerns about deceptive practices. The initial complaints (found here: In re Bionatrol Health, LLC, In re Epichouse, LLC, In re CBD Meds, Inc., In re Easybutter, LLC, In re Reef Industries, Inc., and In re Steves Distributing, LLC) brought various counts against the companies, including allegedly making a wide range of claims about their ability to treat serious health conditions, including cancer, heart disease, hypertension, Alzheimer’s disease, and other diseases. Some complaints also include deceptive pricing allegations. The FTC approved final consent orders resolving all the complaints. Those orders (found here: In re Bionatrol Health, LLC, In re Epichouse, LLC, In re CBD Meds, Inc., In re Easybutter, LLC, In re Reef Industries, Inc., In re Steves Distributing, LLC) obligate the companies to take and avoid various actions, including refraining from making misleading statements about the health benefits of CBD (including that such products prevent Alzheimer’s disease, autoimmune diseases, arthritis, cancer, diabetes, heart disease, seizures, skin cancer or other diseases), refraining from deceptive pricing tactics, notifying customers of the FTC’s lawsuit, and paying fines ranging from $20,000 to $85,000. These orders come on the heels of two years of relatively aggressive enforcement efforts against CBD companies by both the FDA (which we wrote about here) and the FTC. The FDA has already written two more warning letters to CBD companies in 2021, which you can find here. As shown on that same page, the FDA sent 21 letters to CBD companies in 2020 and, in 2019, sent another 22 letters. Sometimes these letters were jointly signed by the FTC, and the FTC has sent other letters to CBD companies over the past years (such as those discussed here). While the FDA continues to consider further regulations governing more widespread use of CBD products, these orders and letters will continue to act as de facto guidance for CBD companies. Dorsey will continue to monitor the FTC's and FDA’s actions in this area.

In December 2020, Taylor Swift released her ninth studio album, Evermore. The album came as somewhat of a surprise, following the release of her eighth album, Folklore, by only 5 months. Evermore sold over 1 million copies in its first week, helped propel Swift to being the most streamed artist on Apple Music in 2020, and was met with critical success. It was also met with a lawsuit. On February 2, 2021, Evermore Park, LLC sued Taylor Swift in the U.S. District Court for the District of Utah. In its Complaint, Evermore Park alleged that Evermore infringes several EVERMORE trademarks that Evermore Park has owned since 2015. Evermore Park also sued TAS Rights Management, LLC (“TAS”), the entity that owns and manages Taylor Swift’s intellectual property rights, and Taylor Nation, LLC, the entity that operates Swift’s websites among other things. Evermore Park is an “ancient township” built “upon a body of mysterious energy” that opened in 2018. According to its website, doorways to other lands, worlds and dimensional planes once open at Evermore Park were sealed for centuries until keys to unlocking the magic of these gateways were rediscovered and the portals were unsealed. Now guests can experience the magic emanating from the portals at the Park’s Axe Throwing Field, Elven Archery Range, or Crooked Lantern Tavern. Like many theme parks, Evermore Park sells merchandise at the Park and through its online store, such as bags, t-shirts, and ornaments. Evermore Park also has live musical performances at the park and plays songs upon request, including Taylor Swift’s songs. Evermore Park owns several trademarks for EVERMORE for use on these goods and services, namely several types of apparel and “live visual and audio performances by an actor.” Evermore Park is alleging that Taylor Swift is already marketing Evermore merchandise that infringes its trademarks and is likely to begin offering “live visual and audio performances,” presumably in the form of concerts or a tour, using the EVERMORE trademark. In addition, Evermore Park claims that because it has created two original music scores Evermore Park Vol. 1 and Evermore Park Vol. 2, Swift’s Evermore album itself is likely to cause confusion in the marketplace. Evermore Park claims that Swift’s alleged infringement is causing it irreparable harm, and has filed a Motion for Preliminary Injunction, seeking to stop Swift’s sale of Evermore merchandise or offering “live entertainment services” under the Evermore brand during the pendency of the case. Swift’s team has not responded to Evermore Park’s Complaint or Motion for Preliminary Injunction. But in a letter exchanged before Evermore Park filed the Complaint, Swift’s attorneys made clear that “there is no basis” for Evermore Park’s claims of trademark infringement. And, if anything, rather than causing harm, the Evermore album has created marketing opportunities for Evermore Park. Curiously, the Park confirmed this in its Complaint, noting that it experienced a 330% increase in traffic to its website in the days following the release of Evermore. Swift’s counsel ended the letter warning that “the asserted claims are frivolous and irresponsible and, if pursued further, will be defended vigorously.” As they say, the most vigorous defense is a good offense. Taylor Swift, through TAS, filed her own Complaint in the U.S. District Court for the Middle District of Tennessee on February 22, 2021. TAS alleges that Evermore Park has infringed several of Swift’s copyright protected works, including some of her most well-known songs: Bad Blood, You Belong With Me, and Love Story. According to TAS, Broadcast Music, Inc. (“BMI”) protects and enforces Swift’s rights in the songs and has been attempting to get Evermore Park to license the music since at least August 2019. Despite repeated follow ups, Evermore Park “blatantly ignored” BMI—until TAS threatened to file this lawsuit. The Complaint alleges that once this lawsuit became imminent, Evermore Park contacted BMI to request a retroactive license for live performances of Swift’s songs from 2018 to present. However, Evermore Park is not out the woods yet. TAS alleges that by seeking the retroactive license, Evermore was trying to cover its tracks and has all but admitted infringement in the process.

The European Union (“EU”) has shaped and developed Intellectual property (“IP”) policy extensively over the years. IP law in EU member states is today largely a matter of EU law. Key areas of IP are dominated by EU rights and institutions. Separating the United Kingdom (“UK”) out of those systems can be a complicated matter. As in many other areas, the UK and the EU handled the separation in very different ways.  In principle, the implications of Britain’s withdrawal from the EU in relation to IP are pretty obvious and unequivocal. The UK ceases to be part of the EU trademark and design systems (managed by the EUIPO) which means that from now on trademark and design registrations have to be secured locally. More generally, EU law and the decisions of the EU courts no longer apply in the UK and in the future the UK can develop and revise its laws independently. Those are the simple facts. Where there is much more room for nuance is in relation to IP separation issues and transitional arrangements. For Britain, “Project Brexit” was all about smoothing out the transition, ensuring continuity, where possible, and minimising disruption. By contrast, the EU was never going to go out of its way to ensure an easy transition. Politically, the main message the EU wanted to send out was that there is a heavy price for leaving the bloc, so that other member states are not tempted to follow in Britain’s footsteps. In terms of IP, the EU’s main policy seems to have been to let things lie where they fall. Continuity of Law In broad terms, to ensure continuity of law, the UK adopted all EU legislation existing on 31 December 2020 into its domestic law.  The same applies to IP laws. The EU has legislated in most areas of IP and EU law, harmonising and modernising the law across the EU and introducing many new policies. Apart from the fact that the UK has withdrawn from the EU trademark and design systems, this EU legislation generally continues to apply in the UK with very few modifications and the UK courts will continue to follow the case law of the Court of Justice of the EU (up to and including 31 December 2020) subject to future changes in domestic UK law. There are some important exceptions. The new and controversial Copyright in the Digital Single Market directive which has not yet been implemented into UK law will not be adopted. The UK has also announced that it will not participate in the EU unitary patent scheme. The implementation of the EU unitary patent and the corresponding agreement on the Unified Patent Court have been delayed since 2016 following the Brexit referendum decision. Most EU member states are yet to ratify the agreement which is a pre-condition for the EU unitary patent to come into effect. Following Brexit, it is unclear whether these initiatives will ever be implemented by the EU.  EU Trademarks and EU Designs The UK’s exit from the EU meant that it could no longer participate in the EU trademarks and design systems. However, from the UK point of view, it was a priority to ensure continuity and to minimise disruption. Further, the owners of registered EU trademarks and registered designs had vested property rights in the UK based on these EU registrations. It was out of the question to allow those IP owners to lose their property rights in the UK as a result of Britain’s withdrawal from the EU. So it was clear that the UK will have to continue to protect those EU trademarks and designs after Brexit.  Still, the UK had different options how to manage the transition. At the end of the day it chose a solution that ensures maximum continuity and requires no intervention on the part of right holders. The UK adopted legislation to automatically extend protection in the UK to all EU trademarks and designs registered as at 31 December 2020, without any fee or notification requirements. By creating cloned UK registrations for each EU trademark and design registration, the UK effectively created new domestic independent UK registrations to replace the legacy EU rights, with the new rights having the same priority and renewal dates as their legacy rights.  In the same way, for each international trademark registered under the Madrid Protocol and protected in the EU on 31 December 2020, the UK automatically created a new domestic independent registration in the UK, without requiring right holders to apply for such protection. The same arrangement applies to registered designs registered at WIPO under the Hague Agreement Concerning the International Deposit of Industrial Designs. Applications for EU trademarks and EU registered designs which were still pending before the EUIPO on 31 December 2020 are treated differently. They were not replicated as UK applications, but applicants can file new applications in the UK, which can have the benefit of the priority date of the legacy EU application if filed within 9 months.  Owners of international registrations designating the EU, unless the registration was already protected in the EU on 31 December 2020, will have to re-designate their international registrations to include the UK if they wish their international registration to be protected in the UK.  Transitional Arrangements The extraction of the UK from the EU trademark and design systems opens up a number of practical legal questions. For example, in the context of for EU proceedings, whether the use of a mark in the in the UK before 31 December 2020 should be taken into account when considering issues such as acquired distinctiveness, non-use, reputation and likelihood of confusion, or similar questions in the context of UK proceedings with regard to the use or repute of a mark gained in the EU before Brexit. Many such questions will remain relevant for years to come in contentious proceedings both in the UK and in the EU. In this context, the UK and the EU adopted quite distinct approaches. The UK introduced comprehensive new legislation to deal with those kind of separation and transitional issues. The legislation lays down a new rule book which provide a nuanced approach to those issues and will enable right holders and practitioners to plan ahead and for the courts and the UKIPO to resolve disputes.  By contrast, no legislation at all has been introduced by the EU to deal with similar questions that will inevitably arise in EU proceedings. The EUIPO issued guidance to right holders and representatives regarding the implications of Brexit. The guidance, which has no legal effect, explains how the EUIPO would deal with issues relating to the UK. Essentially, the EUIPO interprets the existing law and concludes, in almost every respect, that UK prior rights or the use or reputation of a right in the UK (including reputation or use before 1 January 2021) will be ignored by the EUIPO. The one exception is that use of an EU mark before 1 January 2021 can still be relied on as part of a defence to a non-use challenge. The guidance is useful as far as it goes, but it is not legislation. Parties to disputes may seek to test the law and courts in member states will have to decide themselves how to interpret the law in view of Brexit. It is likely that some uncertainty will surround those issues within the EU for some time to come. 

Have you ever been to an indoor cycling class? If so, you most likely have heard the term “spin class,” or referred to the act itself as “spinning.” Mad Dogg Athletics, Inc. would take offense, however, calling such uses infringement unless the studio is an authorized licensee of its marks. Mad Dogg Athletics has owned numerous trademark registrations for SPIN and SPINNING for a number of goods and services, including exercise equipment and fitness instruction, since the early 1990s. It’s been a heck of a ride for Mad Dogg, though Peloton Interactive Inc. recently upped resistance by filing petitions in the U.S. Trademark Trial and Appeal Board to cancel Mad Dogg’s exclusive rights in both marks for exercise equipment and fitness instruction.  According to Peloton, Mad Dogg Athletics has lost exclusive rights in the SPIN and SPINNING marks for indoor cycling equipment and fitness instruction due to genericide. Genericide is nothing new: ESCALATOR, LINOLEUM, and DRY ICE are just a few examples of terms that were once the subject of trademark protection that are now known as common nouns for those same items. Genericide is not up to a brand owner – it occurs when the relevant public understands the primary significance of the mark as referring to the name for the goods or services. See 15 U.S.C. §1064(3). In essence, companies can fall victim to their own success in the marketplace when the brand name they create and promote becomes what their goods/services actually are called or how they are referred to generally instead of functioning as a source indicator. Brand owners can contribute to genericide by using their trademarks as verbs or nouns, which effectively turns the mark into an everyday term instead of a source indicator. The relevant public is the primary decider, however, of which marks have become generic, and consumer survey evidence often plays a critical role in the inquiry into whether a term has become generic. Successful brand owners understand the need to break away from genericide by actively policing the marketplace, enforcing against descriptive uses of their marks by competitors, informing the press, and educating their customers and licensees on how to properly refer to the brand as a source indicator. For example, the owners and attorneys who represent Velcro® fasteners made the hilarious viral video "Don't Say Velcro" to educate the public that Velcro® is a registered trademark for hook and loop fasteners. Mad Dogg Athletics has tried similar tactics, allegedly sending numerous demand letters to competitors and even writing to the Deputy Commissioner of the U.S. Patent and Trademark Office in 2012, requesting that Examining Attorneys refuse marks that include SPIN and SPINNING for goods/services related to health and fitness, particularly indoor cycling and group fitness instruction; stop treating the terms “spin” and “spinning” as merely descriptive for goods/services related to indoor cycling; and stop permitting third parties to include “spin” or “spinning” relating to indoor cycles or indoor cycling instructions. Whether such efforts have succeeded is a question that Mad Dogg Athletics will have to address in the TTAB proceeding. Peloton obviously has the resources to go the distance in this trademark dispute and to commission consumer survey evidence to support its position. Ultimately, though, whether Mad Dogg’s marks have become generic will shift down to what the relevant public understands the terms “spin” and “spinning” to mean.

The Northern District of California concluded last week that Constellation Brands has the exclusive right to use the TO KALON and TO KALON VINEYARD marks on wine, and that The Vineyard House, LLC (TVH) “cannot use the term in any way, shape or form.” At issue was Constellation’s claim that TVH was improperly selling wine using Constellation’s validly registered “To Kalon” mark. TVH claimed that because it grew its grapes on land owned by the original “To Kalon” wine maker, it used the phrase “To Kalon” on its label and in its marketing, not as a trademark, but instead as a vineyard designation. To determine whether TVH could appropriately use the To Kalon mark as a geographic source identifier, the court had to unwind the tangled vines covering the history of the To Kalon marks. The History of the Mark The term “To Kalon,” a Greek phrase meaning “Highest Good” or “Highest Beauty,” has a complex history with and relationship to wine that extends back over 130 years to a vigneron named Hamilton Walker Crabb. Between 1868 and 1879, Mr. Crabb purchased approximately 360 acres of land in the Napa Valley, and he harvested and sold grapes from this land. In 1889, Mr. Crabb bought another 168.5 acre, non-continuous parcel – the Baldridge Parcel – which was largely hilly and wooded. Relying on Mr. Crabb’s probate records, which the court found was the best evidence, the court concluded that Mr. Crabb never used the Baldridge Parcel to grow wine grapes, but instead its value was comprised of water rights, piping, and timber. Though he initially cultivated grapes and sold wine under the name “Hermosa Vineyards,” in 1886 Mr. Crabb renamed his winery as the To-Kalon Winery Company, and thereafter won numerous domestic and European wine awards, spoke at conferences, wrote prolifically and shared his expertise and knowledge about viticulture. In short, he promoted the To Kalon name. Mr. Crabb continued growing grapes on the non-Baldridge Parcel land and selling wine under the To Kalon name until 1899 when he passed away, and the winery operations continued under the To Kalon name until 1939 when a fire closed the operations. After a multi-decade hiatus, Robert Mondavi Wines (RMW), Constellation’s predecessor trademark owner, picked up the To Kalon torch. RMW was awarded trademark registrations in TO KALON on May 24, 1988, and both the TO KALON and TO KALON VINEYARDS marks had achieved incontestability. Mr. Mondavi himself then worked to make the To Kalon marks famous by repeatedly retelling the (nonfictional) story of the original significance of Mr. Crabb’s land, and the (fictional) story of how after buying grapes from the To Kalon land for years, he ultimately purchased 325 acres of the To Kalon land in 1958. The Court Finds TVH Infringed Based on this background, the court concluded that sophisticated wine consumers, merchants, and professionals immersed in the Northern California wine industry have a current understanding of To Kalon, but that this understanding did not exist prior to 1988. The court therefore held TVH committed trademark infringement because Constellation owned a valid, protectable mark, TVH used the mark on wine without Constellation’s consent, and after applying the Sleekcraft factors, that such use was likely to cause confusion among ordinary consumers of such wine. The court also ruled against TVH on each affirmative defense, but its analysis of the fair use and cancellation affirmative defenses are what is noteworthy. TVH claimed fair use in referencing To Kalon on its wine bottles because Mr. Crabb owned the Baldridge Parcel for at least ten years before he died, and, according to TVH, Mr. Crabb produced wine from grapes grown on the Baldridge Parcel. Though typically the fair use doctrine requires a party show the use by the alleged infringing party is “otherwise than as a mark,” in some circumstances, a junior user can use another’s registered trademark so long as it is in a non-trademark, geographical sense. Producers of goods that are located in a specific place have a limited right to tell purchasers their location. TVH claimed, therefore, that because it grew grapes used to make and sell wine sourced from one of Mr. Crabb’s parcels—the Baldridge Parcel—it should be permitted to use To Kalon as a geographic source identifier. The court rejected this argument because the evidence suggested that Mr. Crabb had never actually used the hilly and wooded Baldridge Parcel to grow grapes for the To Kalon wine, and TVH’s own expert conceded that the wine industry did not consider the reference to “To Kalon” to include hillside vineyards, such as the Baldridge Parcel. Based on this, the court concluded that not only was TVH’s reference to Kalon not fair use, but also that “such a representation on its wine would itself mislead the wine consuming public.” The court next turned to TVH’s claim that Constellation’s To Kalon marks should be cancelled because in his response to an Office Action from the USPTO, RMW had misrepresented (according to TVH) that “TO KALON” had “no present meaning or significance” in wine though “[p]rior to the turn of the 20th Century, there was a winery in the Napa Valley which used the name ‘Tokalon’.” This statement is largely true, but also incomplete, including because it arguably understated the prior notoriety of the To Kalon mark, stated that the name had no present meaning or significance and incorrectly stated that its use was only “prior to the turn of the 20th Century” when its use continued to until the 1939 fire. But the court took a ‘close enough’ approach noting that “while RMW could have been more complete in its response,” the missing or incorrect information is “not the type of material information which is determinative of whether the ‘primary significance’ of a term is geographic,” especially in light of the substantial evidence showing that Mr. Crabb himself used To Kalon as both a brand and a reference to his vineyard. The Real Winner(s) Constellation vindicated its exclusive right to use the To Kalon mark in court, but the lawsuit, and, perhaps more importantly, the coverage of the lawsuit should provide some consolation to TVH. Drawing a distinct line between Constellation’s To Kalon and TVH’s Baldridge Parcel grapes may just lead to an increase in sales. I, for one, look forward to purchasing and opening a bottle from each to determine which is the true winner. I suspect I won’t be alone.

Jägermeister: it’s no longer for “pukey frat guys.” Or, at least according to Jägermeister’s recent adversary, that was the sordid reputation Jägermeister wanted to shed in a PR blitz launched in 2016. Instead of being associated with “Jägerbombs” and spring break ragers, Jäger sought a more sophisticated, hip, and “KÜHL” vibe. Billboards, commercials, and digital media were suddenly soaked with ads featuring phrases like “DRINK IT ICE KÜHL,” “ICE KÜHL,” and “RUN TO A KÜHL PLACE.” All was going well until Jäger got popped for alleged trademark infringement and dilution by Alfwear, a Utah-based rugged clothing manufacturer who claimed Jäger was piggy-backing on its wholesome reputation. Alfwear owns a federal registration for “KÜHL” and uses it in connection with a variety of products and on its website. The case proceeded through discovery, and the court ultimately awarded Jägermeister summary judgment due to a number of evidentiary shortcomings with Alfwear’s case. We focus here on the problems with Aflwear’s consumer survey evidence. Survey evidence needs to replicate marketplace conditions to be probative of a consumer’s state of mind. Alfwear’s proffered survey deviated from this principle. The expert’s report was filed under seal, so we don’t have access to the questionnaire and the stimuli. But we can glean what the problems were from the court’s opinion. To show confusion, Alfwear’s expert first showed respondents a screenshot of an Alfwear KÜHL ad on Facebook. The expert then showed respondents one of two Jäger KÜHL ads on Instagram “as each appeared individually side-by-side with the KÜHL Facebook ad.” Based on the data gathered, Alfwear’s expert concluded that Jäger’s ads created “net confusion” rates of over 30%. It appears the court correctly observed that this study design “does not prove actual confusion in the marketplace.” Just because two ads appear on social media platforms does not mean that consumers will view them in close succession or juxtaposed for any extended period of time. Having respondents focus on two ads that both contain the prominent use of “KÜHL” could bias them to draw connections and conclusions that they would not necessarily draw in a real-world context. When designing consumer surveys in Lanham Act cases, experts and their counsel need to avoid creating their own special concoctions. A survey will only be useful if it approximates marketplace conditions. This principle does not call for exactness down to the last detail of recreating the marketplace, but it does require careful attention and consideration. If products are not sold side-by-side in the marketplace, they should not be presented that way in a consumer survey. While a survey design with loose connections to the marketplace may gin up a more “favorable” result, that high will most certainly recede. In this regard, one should think of designing an improper survey as akin to having one too many Jägerbombs: they both may be pleasing in the moment, but may lead to foggy, hazy, and, ultimately, painful results.

As we wrote in Parts I and II in this series, the Trademark Modernization Act of 2020 (“TMA”) was signed into law on December 27, 2020, containing several significant amendments to the Lanham Act. This post will cover two of the legislative changes: (1) the formalization of procedures for Letters of Protest; and (2) the discretionary shortened timeframe to file a response to Office Actions. The formalization of procedures for Letters of Protest is not anticipated to require new regulations for implementation, and the newly-formalized procedures and fee for submissions went into effect on January 2, 2021. The new changes for shortened response times to Office Actions will take effect on December 27, 2021, though the implementing regulations and procedures, as well as the fees for these procedures, have not yet been set. Procedures for Letters of Protest Letters of Protest can be a useful tool for interested third parties to bring to the attention of an examining attorney the existence of prior pending applications or registrations alleged to be confusing similar, or other issues, such as the descriptive significance of the applied-for mark, that a third party believes create a bar to registration. A third party must follow the procedures set forth below. (For additional details, we suggest reviewing the procedures on the USPTO’s website.) These newly-formalized procedures may not be very different from what has been informal practice up until now, but it is helpful to have confirmation of what the USPTO requires: Letters of Protest must include a valid legal ground for a USPTO examining attorney to refuse registration. Evidence must be submitted by the party filing the Letter of Protest. Timing for filing a Letter of Protest and Evidentiary Requirements: If filed before the trademark application is published, the evidence must be relevant to the stated reason(s) for why registration should be refused. If filed after the trademark application has published, the evidence must establish a prima facie case for refusing registration. Letters of Protest must be filed electronically at the USPTO and a fee of $50 is required. The TMA adds the following changes to the procedures: A third party may submit for consideration for inclusion in the record of an application evidence relevant to a ground for refusal of registration. The submission shall identify the ground for refusal and include a concise description of each piece of evidence submitted in support of each identified ground for refusal. Not later than 2 months after the date on which the submission is filed, the Director shall determine whether the evidence shall be included in the record of the application. If the Director determines that the third party evidence should be included in the record of the application, only the evidence and the ground for refusal to which the evidence relates may be included. Any determination by the Director whether or not to include evidence in the record of an application shall be final and non-reviewable, and a determination to include or to not include evidence in the record shall not prejudice any party’s right to raise any issue and rely on any evidence in any other proceeding. The key takeaway here is that the USPTO now will have a set deadline to review evidence submitted in Letters of Protest and make a determination about whether the evidence will be included in the record of the application. Provision for Discretionary Shortened Response Deadline to Respond to Office Actions Under current USPTO procedures, an application will be reviewed by an examining attorney, who will either approve an application for publication for opposition, or issue an Office Action raising particular issues that must be addressed before the application can move forward. If an Office Action issues, an applicant has 6 months to respond. The TMA changes the current process by authorizing the issuance of Office Actions that require a response as early as 60 days after issuance, or within 6 months from issuance. The discretionary shortened response deadline is intended to be a tool for eliminating applications that will ultimately be abandoned and thus unclutter the register. If an applicant fails to reply, amend, or appeal within the relevant time period, including any extension available, the application shall be deemed abandoned, unless it can be shown to the satisfaction of the Director that the delay was unintentional, in which case the application may be revived and time may be extended. The Director may prescribe a fee to accompany any request to revive. The Director shall provide by regulation for extensions of time to respond to the examiner for any time period that is less than 6 months. The Director shall allow the applicant to obtain extensions of time to reply or amend for a period of time not exceeding 6 months from the date of notification of the issuance of the Office Action. However, the Director may set by regulation the time for individual periods of extension, and prescribe a fee, by regulation, for any extension request. Any request for extension shall be filed on or before the date on which a reply or amendment is due. It remains to be seen how it will be determined which issues might fall into the shortened “60-day deadline” or less than 6 months categories. While the USPTO suggests that the goal behind the implementation of the shortened deadline to respond to an Office Action is to cut dead wood from the register, it could have the effect of making the application process more expensive for applicants who may need additional time beyond a 60-day Response deadline to address what may seem to an examining attorney to be relatively minor issues. We will, of course, provide updates on the implementation of the TMA as updates become available over the course of 2021.

Graham Crackers—the ubiquitous, rectangular-shaped snack crackers with air holes and perforations—occupy a unique niche in American snack food lore. In the 1830s, the Rev. Sylvester Graham, a Presbyterian minister from Connecticut, became a ferocious advocate of healthy living. Among other things, he invented his “Graham Bread” made from coarsely ground unsifted wheat flour. Apparently, a staple diet of Graham Bread—coupled with vegetarianism and abstention from spirits and tobacco—would do wonders to suppress human carnal desires. Several decades later, NABISCO introduced its “Graham Crackers” to widespread acclaim. The morsel really took off in 1925 when NABISCO added a touch of honey and launched its “Honey Made” line. Today, multiple companies make their own versions of “graham cracker” and consumers are still clamoring for them. According to one estimate, in 2020 alone, more than $450 million dollars’ worth of graham crackers were sold by a handful of the top vendors in the United States. That’s a hell of a cracker. With such a long, storied history, graham crackers couldn’t possibly be the subject of a class action suit for false advertising in 2021, could they? Meet Chandra Campbell, who recently purchased a box of “Honey Graham Crackers” at Whole Foods. Despite the ingredient listed on the packaging, Ms. Campbell was allegedly shocked—shocked!—that her graham crackers were not made from healthy whole wheat “graham” flour. She also thought her crackers were sweetened with actual honey as opposed to some other sweetening agent. Channeling her inner Rev. Graham, she brought hellfire and brimstone. She sued Whole Foods in the U.S. District Court for the Southern District of New York for false advertising on her behalf and on behalf of all other similarly-situated aggrieved consumers. Whole Foods’ response? Pshaw! Whole Foods moved to dismiss the complaint arguing that no reasonable consumer could be deceived by its use of “Honey Graham Crackers.” Judge Gregory Woods denied the motion. He believed that Ms. Campbell had plausibly stated a claim that she and others were deceived. Importantly, he noted that whether a product package misleads consumers is generally not divined by judges. Instead, “[e]vidence such as a consumer survey, not merely judicial introspection, is needed to determine what consumers understand the phrase to mean in the context of this particular product and its packaging.” The important takeaway is that even when a food product has been around for many, many decades, that does not necessarily insulate it from false advertising claims—even if those claims seem implausible based upon the product’s success and longevity in the marketplace. Judge Woods’ decision underscores the importance of consumer surveys to separate the wheat from the chaff in these types of cases. Is Ms. Campbell’s claim legit or will it be a mere graham cracker caper? Consumer survey evidence may ultimately be the path to salvation for Ms. Campbell and the rest of her class action flock.

As we wrote in Part 1 of this series, the Trademark Modernization Act of 2020 (“TMA”) was signed into law on December 27, 2020, and contained several significant amendments to the Lanham Act. This post will cover three of the legislative changes, all pertaining to the elimination of “deadwood” marks that clutter the register and create needless impediments to registration of new marks: (1) ex parte expungement; (2) ex parte reexamination; and (3) non-use cancellation. These new vehicles for challenging unused marks will not take effect until December 27, 2021, and implementing regulations and procedures, as well as the fees for these procedures, have not yet been established. Ex Parte Expungement – For Marks That Have Never Been Used What for – As a well-known New Yorker cartoon asked – “How about never – is never good for you?” If the answer is a mark has never been used, then ex parte expungement is the procedure for you to consider. Section 16A is added to the Lanham Act to allow any person—including the Director of the USPTO on the Director’s own initiative—to file a petition to expunge a trademark registration on the ground that the mark has never been used in commerce on or in connection with some or all of the goods or services covered by the registration. Who can petition – The TMA provides that “any person” can file an expungement petition. So unless the implementing regulations specify a standing requirement or one is adapted from analogous opposition and cancellation proceedings through case law, it appears that anyone (plus the Director) can take advantage of this procedure. How to petition – A petition for expungement must identify the specific goods or services alleged never to have been used in commerce in association with the mark. Further, the petitioner must include a verified statement that sets forth the details of its reasonable investigation into whether the goods or services have been offered and additional facts that support the allegations. The TMA indicates that the Director is to promulgate regulations regarding what constitutes a reasonable investigation and the type of evidence that could support a prima facie case that a mark has never been used in commerce. How to respond – The TMA indicates that a registrant’s evidence of use in defense of an ex parte expungement proceeding is the type of evidence that is consistent with when a mark is deemed to be in use in commerce under Section 45 of the Lanham Act. The Director is also charged with establishing the procedures for ex parte expungement proceedings, including setting response times. What about U.S. Marks Registered Based on a Foreign Registration? – For a mark registered solely on foreign registration basis (Section 44(e)) or as an extension of protection via the Madrid Protocol (Section 66), a registrant can offer evidence of special circumstances that provide a basis for excusable nonuse. No duplicate proceedings – The TMA prohibits co-pending ex parte expungement proceedings against the same goods or services in a registration. Further, once ex parte expungement proceedings have been brought against a registration and the registration is upheld for the goods or services at issue, there is an estoppel provision in the Act providing that no later petitions with respect to those same goods or services can be filed, regardless of the identity of the petitioner. When you can petition – Until December 27, 2023, ex parte expungement petitions can be filed against any registration at any time after the third anniversary of the registration. Beginning December 28, 2023, petitions can only be filed between the third and tenth anniversary of a registration. Appeal Procedure – The TMA allows for appeal of decisions in ex parte expungement proceedings to the Trademark Trial and Appeal Board or to the Federal Circuit. Ex Parte Reexamination – For Marks Not in Use When Use Was Alleged What for – The TMA adds a new Section 16B to the Lanham Act to allow any party to petition for reexamination of a registration on the ground that the mark was not in use in commerce in connection with some or all of the goods covered by the registration on or before the “relevant date.” As used in the statute, “relevant date” means: (1) for use-based applications that did not have any change in basis after filing, the date the application was initially filed; or (2) for intent-to-use applications, the date on which an amendment to allege use was filed. What about U.S. Marks Registered Based on a Foreign Registration? – The ex parte reexamination procedure under Section 16B cannot be initiated against foreign-based registrations issued under Sections 44(e) or 66 of the Lanham Act. Who can petition – As with expungement petitions under Section 16A, there is no standing requirement – a reexamination petition can be filed by any person. How to petition and respond – Ex parte reexamination proceedings will share the following similarities with ex parte expungement proceedings: the Director can request ex parte reexamination on the Director’s own initiative; the petitioner must identify the challenged goods or services and include a verified statement that details the reasonable investigation into use the petitioner has conducted; the Director will establish the procedures for ex parte reexamination proceedings; the Director will identify the type of evidence that could support a prima facie case that a mark has never been used in commerce; a registrant’s evidence of use is the type of evidence that is consistent with when a mark is deemed to be in use in commerce under Section 45 of the Lanham Act; co-pending proceedings involving the same goods or services are not allowed; if a registration is upheld for certain goods or services, no further ex parte reexamination proceedings may be initiated against the registration for those goods or services; and decisions can be appealed to the Trademark Trial and Appeal Board or the Federal Circuit. When you can petition – Petitions for ex parte reexamination may be commenced at any time before the fifth anniversary of a registration, except for registrations on the Supplemental Register, which are vulnerable to petition for reexamination at any time. New Non-Use Cancellation Proceeding What for – Section 14 of the Lanham Act is amended to allow a petition for cancellation on the ground that the registered mark has never been used in commerce on or in connection with some or all of the goods covered by the registration. Who can petition – A party who believes it may be damaged by a trademark registration; thus, there is a standing requirement, as with other types of cancellation proceedings. When you can petition – This new non-use cancellation petition can only be filed after the third anniversary of the registration. How does this ground of cancellation for non-use differ from abandonment claims? This new ground for cancellation based on non-use appears to differ from a claim for abandonment because it applies to marks that have never been used, as opposed to marks that were in use for some time but then discontinued. It also does not involve any requirement for a petitioner to establish a lack of intent to resume use by the registrant, a factor that comes into play when a mark has been used for a period of time and then discontinued. *          *          * Look for Part 3 of our series on the TMA soon, which will discuss new Letter of Protest procedures and the discretion given to examining attorneys to set discretionary response deadlines.

Rupp v. Courier-Journal, Inc. involves a dispute between the makers of DERBY-PIE®—a trademarked chocolate-nut pie—and a local newspaper that published two articles about other businesses creating other chocolate-nut desserts. Departing somewhat from its own ruling decades earlier in a separate case involving “Derby pie,” the Sixth Circuit doled out a loss to Rupp, affirming the district court’s holding that the defendant’s challenged use of the term “Derby pie” was a non-trademark use for which the newspaper was not liable. This is a case packed to the brim with sweet treats, racing horses, and a reminder that each race—er, litigation—is a fresh opportunity to win or lose. Plaintiff Alan Rupp, owner of the bakery and Kentucky institution Kern’s Kitchen, sued the Courier-Journal for its use of the phrase “Derby Pie.” The Kern family developed its secret recipe for this chocolate-walnut-vanilla pie in the 1950s and registered a trademark for DERBY-PIE® in 1969. Since at least the 1980s, Kern’s Kitchen has repeatedly sued restaurants and publishers who have used the term “Derby pie” to refer generically to a chocolate-nut pie. See, e.g., Kern’s Kitchen, Inc. v. Bon Appetit, Case Nos. 87-5852, 87-6152 (6th Cir. July 7, 1988). In past decades, this strategy seemed to work, even though defendants had claimed that the term “Derby pie” was a generic descriptor for a chocolate nut pie. For example, in the 1980s Kern’s sued the magazine Bon Appetit for its inclusion of an article for “Derby pie” in a cookbook. Although the district court granted summary judgment to Bon Appetit on the ground that “Derby pie” is a generic term, the Sixth Circuit reversed, holding that there was a genuine factual dispute. Id. But earlier this month, the Sixth Circuit determined that the newspaper’s use of the term “Derby pie” in two articles was merely descriptive. The first piece, titled “Bourbon makes this Derby pie a state original,” shared a recipe for a walnut-chocolate-bourbon pie from a different local restaurant, the Captain’s Quarters. The second piece was a review of an up-and-coming new bakery, and included a reference to a Derby-pie-flavored macaron. The Courier-Journal argued that it was simply using the popular phrase to describe chocolate-nut flavored baked goods, not as an indicator of the source of goods (Kern’s). Importantly, trademark law only applies if the mark is used in a way that designates the origin of goods. But Rupp tried to skip straight to the likelihood-of-confusion test, and the Sixth Circuit sent him back to the starting line. Rupp reminds trademark owners that before even contemplating whether a trademark use is actionable, including applying the eight-factor likelihood-of-confusion test, a court must find that the trademark was used in a legally-protected way. If a trademark is used in a non-trademark way—for example, in a descriptive way—trademark infringement laws simply don’t apply. The Sixth Circuit’s decision was based on all three factors of the test used to determine whether the use of a trademark constitutes a “non-trademark” use: The goods were “sufficiently different”: the newspaper Derby pie used bourbon and no vanilla, and there was no indication Kern’s had ever made any macarons. Both newspaper articles clearly identified the source: other local establishments. Without citing the earlier Sixth Circuit opinion in Kern’s v. Bon Appetit, the Sixth Circuit stated that “Derby Pie” was a common descriptive phrase to denote chocolate-nut flavored pie. The Court’s decision that a descriptive, non-trademark use is not actionable is a straightforward application of trademark law. But the Court’s implicit suggestion that “Derby pie” is a generic term—at odds with the 1988 Sixth Circuit opinion stating there is an issue of fact as to whether it is generic—is notable. Perhaps the mark lost its uniqueness in the intervening three decades, and now approaches generic status. Or perhaps, as the Sixth Circuit suggested, the evidence presented by Rupp defeated his own case. Indeed, the Sixth Circuit explained that the DERBY-PIE® sold by Kern’s could not be confused with the “Derby pie” referenced in the newspaper, because the latter lacked a key ingredient that make DERBY-PIE® famous (vanilla), and included an ingredient never found in DERBY-PIE® (bourbon). So, would a consumer confuse “Derby pie” with DERBY-PIE®? Perhaps, but Rupp confirms that we must first ask the “necessary preliminary question” of whether the mark was used in a non-trademark way. For brand owners, Rupp thus serves as a reminder to consider the broader context of how their marks are used by others when contemplating litigation.

One of the many reasons the year 2020 will be memorable is for the social justice movements and demonstrations that have inspired a flood of new trademark applications with the U.S. Patent and Trademark Office. A recent search of the USPTO database revealed that there are 77 pending or dead applications for trademarks that include the phrase “Black Lives Matter.” Since the murder of George Floyd in late May 2020, over 50 new applications were filed for marks such as “BLACK LIVES MATTER MOVEMENT,” “BLACK LIVES MATTER HAND SANITIZER,” and “BLACK LIVES MATTER MOSCATO.” This wave of “Black Lives Matter”-related trademark applications in 2020 is remarkable, given the USPTO’s previously articulated position regarding the registrability of trademarks using the phrase. Specifically, in 2018, the USPTO rejected the six applications containing the phrase “Black Lives Matter” that were filed by the originators of the movement. Founded by Alicia Garza, Patrisse Cullors, and Opal Tometi, three black women, #BlackLivesMatter was ignited in response to the acquittal of George Zimmerman who fatally shot Trayvon Martin. Since 2013, #BlackLivesMatter (or sometimes referred to as “BLM”) has utilized its platform to address racism across the nation, and seeks to affirm black humanity, to acknowledge of the contributions made in society by black men and women, and recognize the resilience of the black community in the face of oppression. Relying upon this history, the USPTO rejected the BLM founders’ the applications for three reasons. First, the USPTO determined that the “Black Lives Matter” a slogan or term that does not function as a trademark or indicate the source of applicant’s goods and/or services and to identify and distinguish them from others. Second, the phrase identifies an informational, social, political, religious, or similar kind of message that merely conveys support of, admiration for, or affiliation with the ideals conveyed by the message. Third, the phrase is not one the public would not perceive as source-identifying matter that identifies applicant alone as the source of the goods/services, but rather as an expression of support for anti-violence advocates and civil rights groups because potential consumers would simply access the publications and enlist or engage in applicant’s services because they want to support the cause that the slogan represents, not because they believe the slogan indicates the source of such goods and services. The USPTO gave no weight to the fact that the founders of the BLM movement lodged the application. The USPTO’s position is not surprising given that the purpose of a trademark registration is to identify a source. Trademarks help consumers identify the goods and services they wish to purchase, and those they want to avoid. The function of trademark is to designate the source of a particular good or service and to protect the good will of merchant supplying that good or service. Whether a term or phrase functions as a trademark or service mark depends on how it would be perceived by the public. The USPTO has determined that the more frequently a phase is used, the less likely that the public will use it to identify a source. In fact, the USPTO’s standard practice is to reject applications seeking to register marks that are merely informational, based on the nature and the context of the mark’s use in the marketplace, consumers would perceive it as merely conveying general information about the goods or services or an informational message, and not as a means to identify and distinguish the applicant’s goods/services from those of others. See Trademark Manual of Examining Procedure section 1202.04. Specifically, the USPTO instructs the examiners reviewing trademark applications to reject those seeking to register “widely used messages” or otherwise, slogans, terms, and phrases used by various parties to convey ordinary or familiar concepts or sentiments, as well as social, political, religious, or similar informational messages that are in common use or are otherwise generally understood. See 1202.04(b). The USPTO has recently rejected the first of Black Lives Matter applications that were filed in 2020. Like the applications filed by the BLM founders in 2018, the USPTO determined that the recently applied-for mark, “2020 BLACK LIVES MATTER,” fails to function as a trademark to indicate the source of the applicant’s goods and fails to identify and distinguish itself from other “Black Lives Matter” marks or the movement itself. However, a rejected application does not diminish the value and significance of the Black Lives Matter slogan or movement. Kevin Britton, a summer associate, co-wrote this with Tiana Towns.

Many industries were negatively impacted by the pandemic in 2020, but one industry that continues to grow is the influencer marketing industry. The influencer marketing model typically involves agreements between companies and influencers, where the influencer creates content promoting companies’ products for posts on social media and blog sites. Influencers have often built their brands, social media accounts, and blog sites under their own names, and companies want access to the loyal consumer fan base drawn to those names. However, as disputes shared on Instagram this year illustrate, it is not always clear as to which party owns the brand, social media accounts, or products bearing the influencer’s name. Moving into the New Year, both companies and influencers can learn lessons on clarity in IP and social media agreements when engaging in influencer marketing. Two weeks ago, popular wedding dress designer Hayley Paige Gutman (known as “Hayley Paige”) posted on Instagram about a legal dispute arising from an employment agreement between her and bridal house JLM Couture, Inc., her former employer. JLM recently filed suit against Hayley Paige in the Southern District of New York, asserting breach of contract, conversion, and trademark dilution, among other claims. The complaint alleges that an employment agreement between JLM Couture and Hayley Paige provides that Hayley Paige granted JLM “the exclusive world-wide right and license to use her name ‘Hayley’, ‘Paige’, ‘Hayley Paige Gutman’, ‘Hayley Gutman’, ‘Hayley Paige’ or any derivative thereof (collectively the ‘Designer’s Name’) in connection with the design, manufacture, marketing and/or sale of bridal clothing, bridal accessories and related bridal and wedding items, including and [sic] all good will associated therewith for the term of the Agreement, and for a period of two years thereafter”. The complaint also alleges that Hayley Paige irrevocably sold, assigned, and transferred all right, title, and interest to JLM to register her name as a trademark. JLM alleges that Hayley Paige covenanted that she would have no right to use her name during the term of the employment agreement or any time after without JLM’s consent. Based on these provisions, JLM alleges that it owns social media accounts bearing Hayley Paige’s name. The main social media account at issue – @misshayleypaige – features a mix of bridal and wedding-related content and personal images, and has more than 1 million followers. JLM alleges that the account was created as part of its marketing strategy, and thus the number of followers of the account is a direct result of JLM Couture’s advertising expenditures. JLM argues that Hayley Paige’s assistance in the collaborative maintenance of the account falls within the scope of her employment under the employment agreement. The federal court for the Southern District of New York granted JLM’s request for a temporary restraining order against Hayley Paige, prohibiting the designer from making any changes and postings to social media accounts bearing her name, including the @misshayleypaige Instagram, Pinterest, and TikTok accounts. The court also ordered Hayley Paige to deliver to JLM the login credentials for these social media accounts. In two videos with over 2 million views combined posted on a separate account, Hayley Paige stated she has resigned from JLM Couture after a year and a half long legal battle to negotiate a new contract with JLM. Hayley Paige stated that she always considered the @misshayleypaige Instagram account to be her own since the account was opened, and that the employment agreement makes no mention of social media accounts or management thereof. Hayley Paige stated that the @misshayleypaige Instagram account has always been used for her own personal photos, thoughtful quotes, and real relationships. In the meantime, Hayley Paige noted that she is no longer posting or engaging on the social media accounts bearing her name until the dispute is resolved in court. While the dispute between Hayley Paige and JLM Couture focuses on the scope of an employment agreement and the use of an employee’s name, companies and influencers can also learn from a business dispute involving the use of a vegan chef’s name. This past year, the winner of the television competition Cupcake Wars and vegan chef Chloe Coscarelli (known as “Chef Chloe”) recently posted on Instagram that she won a legal dispute with her business partner, ESquared Hospitality LLC (“ESquared”) in May. Chef Chloe rose to fame after she won the television competition Cupcake Wars, and has since authored cookbooks, made other television appearances, impacted the vegan culinary scene, and originated the concept for a fast casual vegan restaurant chain bearing her name – “by Chloe.” Chef Chloe wholly owns California limited liability company Chef Chloe LLC. Under her limited liability company, Chef Chloe filed a demand for arbitration against business partner ESquared, seeking a judgment declaring that Chef Chloe still owns 50% of the interests in “by Chloe” restaurants. Chef Chloe also sought a permanent injunction barring her business partner from selling any packaged food or beverages using the name “Chloe” or any variation thereof, including the trademark “by Chloe,” for projects other than fast casual vegan restaurants. The arbitration addressed terms of an operating agreement between Chef Chloe LLC and ESquared. One of the issues addressed in the arbitration was whether, under the operating agreement, the vegan restaurants had the unlimited right to expand their usage of the “by Chloe” trademark without obtaining consent from Chef Chloe because Chef Chloe LLC was terminated as a member. The arbitrator found that the operating agreement did not strip Chef Chloe of approval rights for future expansion of trademark usage as one of its penalties for termination as a member. The arbitrator stated that Chef Chloe must “abide by the deal that she made with the Company to continue to use her first name as the name of the fast casual vegan restaurant, but likewise [her business partner] must abide by the terms of the deal that it struck with Chef Chloe not to expand the use [of] the trademark beyond fast casual restaurants without getting her pre-approval.” The arbitrator also awarded full, undiluted 50 % interest in the restaurant chain. Thus, Chef Chloe retains approval rights for the usage of her name, even though she does not actually own the mark. Companies and influencers can also learn from a disagreement stemming from the control of an influencer’s blog-turned-apparel brand bearing the influencer’s name. This past June, influencer Julia Berolzheimer posted on Instagram that she would no longer use the name of the blog-turned-content creation business she originated following a disagreement with her business partner. Julia Berolzheimer is a successful influencer known all over the world with 1.4 million followers on Instagram. Julia began her brand, “Gal Meets Glam,” as a personal style blog. The blog was transformed into a content creation business, which then expanded into an apparel brand bearing the name of the blog – the Gal Meets Glam Collection. Despite the success of the brand, Julia Berolzheimer announced on her blog that the Gal Meets Glam Collection would be ending. Julia Berolzheimer stated that the decision to end the Gal Meets Glam Collection stemmed “from the lengthy disagreement between how we wanted to build Gal Meets Glam and how our business partner felt it should be run.” Julia informed her followers that her content would now fall under her own name, rather than the Gal Meets Glam name. These three disputes about individual names being used as trademarks involve different kinds of agreements in varying circumstances, but there are general lessons companies and influencers can apply when engaging in influencer marketing in the New Year. Agreements arising from influencer partnerships should clearly delineate social media accounts and blog sites, rather than extending intellectual property provisions in general broad terms to encompass these accounts. Ownership of the social media account (both during the term and after the expiration of the agreement), management of the social media account, the name of the account, and approval of content should be spelled out in the agreement and employment policies, where relevant. In this way, both the company and the influencer are clear as to the roles and expectations surrounding names functioning as trademarks for the New Year and beyond.

After a fair amount of end-of-year legislative drama, the Trademark Modernization Act of 2020 (“TMA”) was signed into law on December 27, 2020 as part of the Consolidated Appropriations Act for 2021, which also included needed funding for COVID-19 relief and support. The text of the Act from the House Report can be seen here. The TMA amends the Lanham Act in several different unrelated ways, all of which are important for trademark practitioners, whether litigating in federal court, prosecuting trademark applications in the USPTO or engaging in proceedings before the Trademark Trial and Appeal Board. Some parts of the TMA, such as the provisions for ex parte reexamination, become effective a year from signing, on December 27, 2021. Other provisions, such as the statutory amendment concerning the presumption of irreparable harm and the clarification of status of TTAB judges do not specify an effective date and may be left to the courts to decide. Our first post on The TMCA will cover the presumption of irreparable harm for obtaining injunctive relief under the Lanham Act and amendments to ensure that the independence of Trademark Trial and Appeal Board (“TTAB”) judges cannot be challenged under the Appointments Clause of the Constitution. In subsequent posts, we will address changes to Letter of Protest and office action response procedures during the application examination process and new procedural mechanisms for challenging the validity of registrations based on lack of commercial use of the registered mark. Clarification on Presumption of Irreparable Harm for Obtaining Injunctive Relief The TMA clarifies that when seeking injunctive relief on a claim for trademark infringement, a rebuttable presumption of irreparable harm is created upon a finding of trademark infringement at trial, or upon a showing of likelihood of success on the merits for preliminary injunctive relief or a temporary restraining order. The rebuttable presumption also applies to claims of unfair competition, false advertising, dilution or cyberpiracy under Section 43 of the Lanham Act. An amendment to the Lanham Act was needed due to a Circuit split regarding the standard for injunctive relief in trademark infringement cases following the U.S. Supreme Court’s ruling in eBay Inc. v. MercExchange, which eliminated a similar presumption of irreparable harm in patent cases. In trademark cases decided since eBay, Circuit courts have ruled inconsistently on whether the four equitable factors for obtaining an injunction should be weighed in each case, or whether irreparable harm should be presumed once there is a finding of infringement or a likelihood of success is shown for purposes of obtaining expedited relief. This split encouraged forum shopping and undermined the consumer protection purposes of the Lanham Act. The TMA now codifies in the Lanham Act a nationwide uniform standard that the presumption should be applied in trademark cases. Thus, the Act reduces the evidentiary burden on trademark owners for obtaining injunctive relief to protect their trademark rights and prevent consumer confusion. Protection of Administrative Law Judges Serving on the Trademark Trial and Appeal Board The TMA also contains a provision giving the Director of the U.S. Patent and Trademark Office considerably more power over the administrative law judges of the TTAB. The amendment to Section 18 of the TMA clarifies that “the authority of the Director under this section includes the authority to reconsider, and modify or set aside, a decision of the Trademark Trial and Appeal Board.” This provision should avoid the problem highlighted in the 2019 Arthrex v. Smith & Nephew decision of the Federal Circuit. The court in that case held that Patent Trial and Appeal Board judges were not subject to sufficient oversight and supervision by the USPTO Director to be considered inferior officers under the Appointments Clause, and thus were unconstitutionally appointed since they had not been nominated by the President and confirmed by the Senate. The TMA amendments confirm that TTAB judges are inferior officers, which should immunize them from any application of the Arthrex holding. Stay tuned for further TMCA posts on other important changes to the Lanham Act coming your way under the TMA.

Just in time to steal ComicMix’s Christmas, the Ninth Circuit recently held that the bookmaker’s mashup story Oh, the Places You’ll Boldly Go! (which combines elements of the Dr. Seuss book Oh, the Places You’ll Go! with Star Trek) is not a defensible fair use under copyright law. The opinion reverses in part a summary judgment ruling by the District Court for the Southern District of California, which we wrote about here. Seuss Enterprises had sued ComicMix for copyright and trademark infringement over Boldly, which features Star Trek characters set in a Seussian world highly reminiscent (and in some instances directly copied from) Go! and other works by Dr. Seuss. The TMCA featured a Seuss-styled introduction to the case here. ComicMix was able to eliminate Seuss’s trademark and associated unfair competition claims on a motion to dismiss. Next, on summary judgment, the district court concluded that ComicMix’s work constituted fair use (and thus defeated Seuss’s copyright claim) because the book was a highly transformative “literary and pictorial ‘mash-up.’” Seuss appealed both decisions. Beginning with its own riff on a quote from Go! (“mash-ups can happen to you”), a unanimous Ninth Circuit panel concluded that none of the four fair use factors favored ComicMix and reversed the district court. Considering the all-important transformative-use factor, the court concluded that “[a]lthough ComicMix’s work need not boldly go where no one has gone before, its repackaging, copying, and lack of critique of Seuss, coupled with its commercial use of [Dr. Seuss’ work], do not result in a transformative use.” Next, the court found that the creative nature of Go! tilted in favor of Seuss. With respect to the amount and substantiality of the work copied, ComicMix “extensive[ly] and meticulous[ly]” copied Go!, and statements in the record showed that ComicMix could have created Boldly without this sort of “wholesale copying.” Finally, the court held that ComicMix’s book “targets and usurps” Seuss’s potential market, including because it intentionally aimed to capitalize on the same graduation market as Seuss. Although Seuss may have gotten its green eggs, it didn’t get its ham. The Ninth Circuit affirmed the district court’s denial of Seuss’s trademark claim. That analysis focused on whether the federal Lanham Act even applies given that the alleged infringing mark is the title of ComicMix’s Boldly. Under the Rogers test, a Lanham Act claim applies only if the allegedly infringing title of an artistic work is (1) not artistically relevant to the underlying work or (2) explicitly misleads consumers as to the source or content of the work. The test was not satisfied because the title helped to achieve ComicMix’s artistic purpose and did not explicitly mislead consumers. The question now is whether ComicMix will seek further review and, if so, whether the Supreme Court will take up the issue. Until then, we leave you with some further Seussian stylings: We wrote ’bout it before, so you’ll want to hear more, Of the rulings on mashups and smashups galore. So come round once again, and listen my friend, To a story that could be quite far from the end. Now, the first-level court, in its SJ report, Found a combo of works a sufficient retort To the claims of the Seuss shouting, “This ain’t fair use! A mashup, transformative? That’s far, far too loose!” Undeterred by a loss from that first-level boss, Seuss went back to work to perfect its next toss. De novo review, don’t you know that it’s true, Can provide quite a different result when it’s through. So appeal Seuss did file ’gainst the judgment reviled, In hopes to proceed to the coveted trial. The Ninth was enthused (and slightly amused), And its notions of fair use downright disabused. “A mashup you say? We don’t see it that way. You took all of their content, and that’s not okay. Your work doesn’t transform and quite far from the norm, In the mind of book buyers ’twill cause a s***storm.” “So go back to the start and take this to heart, Fair use isn’t accomplished by jamming some parts Of a couple of works with some relative quirk Together like some sort of drunk soda jerk.” ’Fore this wears to the bone and again you do groan, I believe that its time that we leave this alone. So, we’ll try to be curt yet remain quite alert, And we’ll see if the masher is granted its cert.

The impact of COVID-19 restrictions and precautions, combined with trending consumer preferences to shop online, is fueling bankruptcy filings of well-known brick-and-mortar brands. As customers bid farewell to fond strip mall haunts, savvy and imaginative purchasers reap the benefits by snapping up household names like RadioShack, Pier 1 Imports, and Toys “R” Us. The retail market is poised for a restructuring of its own kind—a shift of major brand names into exclusively ecommerce businesses. General Wireless Operations, Inc. dba RadioShack, Inc., which emerged from a bankruptcy in 2018, is a recent example. In November, Retail Ecommerce Ventures (“REV”) purchased the rights to use RadioShack’s brand, private label names, and website in the U.S. and certain other countries. REV has earned a reputation for acquiring distressed retail brands, like Pier 1 Imports, dressbarn, Modell’s Sporting Goods, and Linens ’n Things. Transformations from bankrupt brick-and-mortar to .com are often accomplished through the acquisition of a debtor retailer’s intellectual property from its bankruptcy estate. For instance: Last week, REV won a bankruptcy auction for the intellectual property, domain names, social media accounts, and other assets of Stein Mart with a $6 million bid. It announced plans to relaunch Stein Mart as online-only. Last year, Marquee Brands, purchased the ecommerce business, intellectual property, and other assets of Destination Maternity Corp., which includes the brands Motherhood Maternity and A Pea In The Pod, from Destination Maternity’s chapter 11 estate. Marquee partnered with liquidation specialists Gordon Brothers and Hilco Merchant Resources, on the winning $50 million bid, which included the rights to operate store-closing sales for all remaining physical locations. In 2018, lenders of Toys “R” Us acquired the intellectual property and other assets of the famed toy retailer after the assets were marketed in a bankruptcy sale process. With the exception of two shopping mall locations, Toys “R” Us now operates entirely online. In August, Hong Kong-based Newtimes Group purchased the assets of women’s clothing retailer and former bankruptcy debtor Coldwater Creek from the estate created by an assignment for the benefit of creditors. So-called “ABCs” are a state-law governed alternative to federal bankruptcy options. The Newtimes Group purchase agreement allocated over 93% of the $12.2 million purchase price toward intellectual property, with the remainder allocated toward inventory. As these sales illustrate, an insolvent, big-name retailer’s most prized asset is often its brand. Trademark-protected names, logos, patents, copyrights, trade secrets, and data have become more significant with the rise of ecommerce. The upside for purchasers who shell out millions for intellectual property and related assets includes generating income through licensing and royalty transactions, without the overhead associated with brick-and-mortar stores. Assets obtained through bankruptcy and other distress-type sales are often discounted, adding to the appeal of “brand shopping” for investors. Advantages specific to bankruptcy sales include the ability to acquire assets free and clear of most liabilities, the ability of the debtor to assign executory contracts (i.e., contracts where the parties have performance still outstanding) to a purchaser, a relatively quick sale process, and the protection of a federal bankruptcy court order. The sale process typically transpires in accordance with court-approved sale procedures, which contemplate marketing of the assets, a bid process, an auction, and approval of the sale through an order after a hearing, all with related deadlines. The bankruptcy court often approves sales of assets free and clear of liens, claims, and other encumbrances, provided that applicable non-bankruptcy laws permit such sales. The court’s order operates as an injunction that bars the debtor’s creditors from bringing claims against the purchaser. Bankruptcy debtors have the power to determine whether they will continue to perform and “assume” or refuse to perform and “reject” executory contracts. Assumed contracts can be assigned to third parties, even if—with some exceptions—those contracts contain non-assignability clauses. A debtor-seller’s assignment of assumed, favorable contracts to a purchaser facilitates the immediate continuation of operations and beneficial relationships upon closing of the sale. Conversely, bankruptcy debtor can reject an executory contract, which functions as a breach and leaves the counterparty with a claim it can file against the bankruptcy estate for damages arising from the breach. Notably, under the Bankruptcy Code and case law, most intellectual property licensees may continue using licensed IP for the duration of their license agreements, regardless of a debtor licensor’s rejection of the agreement. Prospective purchasers interested in capitalizing on brand sales in the wake of an online shopping surge, or otherwise considering purchasing assets from a distressed company or bankruptcy estate, should seek qualified counsel to navigate the sale process and negotiate and execute on their bids.

Last week we quickly pivoted from watching the 24/7 "Map Show" to spending our screen time learning at the ANA 2020 Marketing Law Conference. It was a great three days in Chicago in our pajamas of educational seminars. If you didn’t make it this year, don’t worry – here’s a quick wrap-up of the highlights: Influencers – This has been a hot topic at the law conference for many years now. So you may be asking, haven’t we already covered influencers from every possible angle? You might think so, but there are still lessons to be learned in influencer advertising and things in this area are always changing. But some things never change - the keywords for influencers and the advertisers who hire them are transparency and flexibility. Influencer contracts are highly recommended, the more specific the better, so that influencers understand very clearly what’s expected of them. Also, did you hear that #ad is back? It is transparent, simple and works in almost any situation, but influencers and brands have long shunned it, while lawyers loved it. Are we finally all going to agree on something? Consumer Reviews – With access to brick and mortar stores limited in 2020, online shopping and consumer reviews became increasingly important. For that reason we are often fielding questions from clients about using consumer reviews in advertising. The quick take from the conference is that advertisers should be careful about filtering or reordering reviews on their own sites. Original Content – How are media companies creating and promoting original content during the pandemic? In-house counsel from new and old media discussed. Production of film and television has mostly resumed, but with strict testing and physical distancing protocols. In many cases, studios are also using remote recording or asking talent to step into the role of videographer at home. To promote content, COVID-friendly solutions included sending influencer boxes (with proper posting guidelines, of course), creating virtual concert and art experiences, and drive-in viewings. Bottom line: creative people are finding creative solutions to the pandemic’s challenges. Promotions – Most promotions, sweepstakes, contests, and games have gone virtual, and yes, state laws around promotions still apply in addition to platform rules, so remember to check both to ensure compliance with all applicable laws. Remember the basic tenets of promotion law, which is to remove at least one of the following elements to avoid an illegal lottery: prize, chance, and consideration. Beware that even a giveaway or gift with purchase can potentially create the element of chance if supplies are limited. Product Claims and Labeling – Claim substantiation was a focal point this year, particularly concerning food, beverage, and nutritional supplement labeling, as many warning letters have been sent and lawsuits filed against companies that produce products with claims of mitigating the novel coronavirus and promoting additional health benefits or immunity from a number of ailments. Remember that implied claims are scrutinized along with express claims, so look to the context as well as the wording to make sure that you aren’t communicating anything about the product that is unsubstantiated. CBD and Alcohol Marketing – While the FDA continues to work on regulations governing CBD, uncertainty surrounding the marketing of CBD products remains. FDA has been taking enforcement action against sellers of products containing CBD making health, drug and/or false claims. However, it is generally tolerating sales of CBD products, such as tinctures, gummies and dietary supplements, where no such claims are being made, even if the products are technically unlawful under the Food, Drug and Cosmetic Act. In actions involving CBD product claims, courts are making inconsistent rulings on whether to stay those actions until the FDA’s regulations are issued. On the alcohol side, the impact of the pandemic on longstanding ways of doing business may end up having a beneficial effect in causing a reconsideration of the archaic U.S. regulatory structure for the sale and marketing of alcoholic beverages (i.e., the current three tier system of producers/distributors/retailers) as well as standards for the advertisement and marketing of alcoholic beverages. Looking Ahead to 2021 – Aren’t we all?! In 2021, we can expect that the FTC will be releasing an updated version of its Endorsement Guides to address the changes (especially in social media) since the last version released in 2009. Will we see aggressive enforcement following the release of the updated guides? Maybe, but it is clear that the FTC and other regulators are expanding their enforcement focus beyond just advertisers to others in the chain, such as influencers, ad agencies, PR agencies, publishers and even retailers. The NAD is also looking ahead to 2021 and we can likely expect to see NAD-initiated actions in new industries – potentially consumer electronics or appliances and other areas that we don’t often see in competitor challenges at the NAD. We hope to see everyone in person on November 15, 2021 in San Diego!

Does the Lanham Act require a plaintiff to show a likelihood of confusion to prevail on a counterfeiting claim? And if so, should the court simply compare the marks at issue, or look beyond them to the products themselves and other marketplace factors bearing on likely confusion? In the Ninth Circuit at least, the answer to both of these questions is now a clear yes. Except, as discussed below, when it isn’t. Summary Although the Ninth Circuit has previously held that Section 1114 requires a likelihood of confusion for a trademark infringement claim, it had never expressly held that a counterfeiting claim requires such a showing. That changed when the appellate court issued its recent decision in Arcona v. Farmacy Beauty. The Ninth Circuit also held that even assuming the marks at issue are identical, there is no presumption of confusion if the products at issue are not identical, before adding in a footnote that there “may be times the mark itself is so strong in the marketplace” that an identical mark could be confusing even if the products are different. Facts and Background The facts and procedural posture are straightforward. Arcona, Inc. sued Farmacy Beauty for trademark infringement and related causes of action based on its rights in the registered trademark “EYE DEW” for skincare products. The district court granted summary judgment for Farmacy, finding that a reasonable consumer would not confuse Farmacy’s skincare product with Arcona’s because their respective packaging featured different shapes, design schemes, text, and colors as well as distinguishing house marks. The Ninth Circuit affirmed, finding that the Lanham Act requires a likelihood of confusion based on a comparison of the products as a whole, and other marketplace factors such as third party use of the plaintiff’s mark, rather than confining the analysis to a comparison of the identical marks on their own. Practice Points Why does this decision matter? In short, the Lanham Act gives plaintiffs more leverage in trademark disputes when their allegations involve a counterfeiting claim because such claims allow plaintiffs to seek treble and statutory damages, as well as attorney’s fees. Counterfeiting claims often arise when there’s little factual dispute as to the similarity of the marks. As a result, defendants not only face greater exposure, they can have less room to maneuver. But by confirming that plaintiffs cannot take the likelihood of confusion element of their claim for granted even if the marks at issue are identical, the Ninth Circuit created more opportunities for factual disputes that can cut in defendants’ favor. This, in turn, can reduce the leverage plaintiffs benefit from in these situations. The Ninth Circuit also left breadcrumbs for defendants hoping to argue that their identical marks are not counterfeit. In a footnote, the appellate court noted that the district court’s grant of summary judgment appeared to be based in part on its finding that “EYE DEW” was not itself a counterfeit as that term is defined under Section 1127 of the Lanham Act. The district court appeared to construe Section 1127 to allow a court to look beyond the mark and examine the product as a whole in determining whether the “spurious mark” is “identical with, or substantially indistinguishable” from the registered mark. The Ninth Circuit declined to resolve this issue on appeal, but left open the possibility that accused infringers can dispute that a seemingly identical mark is a counterfeit if the product it is attached to cuts against such a finding. Taken together, the Ninth Circuit gave defendants two viable paths to defeat allegations of counterfeiting even when the marks are identical: (1) argue that the mark is not counterfeit, and (2) argue that even if it were, consumers are unlikely to be confused. Although not earth-shattering, the decision has the potential to shift leverage away from plaintiffs toward defendants in cases involving allegations of counterfeiting based only on the use of an identical mark. The Fine Print This may sound like a decision that unambiguously favors defendants, but the Ninth Circuit gave a little something to trademark owners as well. Despite rejecting the premise that confusion can be presumed and insisting that confusion must be assessed by examining the whole product at issue, the appellate court acknowledged in a footnote that there may be times the mark itself is so strong in the marketplace that “the use of an identical mark by itself may cause consumer confusion, even if other aspects of the products are different.” It remains to be seen how lower courts will interpret that guidance, but we can expect this footnote to receive a lot of attention from brand owners eager to avoid the consequences of the holding in this case.