Trademark Laws

Blog (35 unread)

David v. Goliath: Songwriter Wins Coca Cola Case

Posted: July 20th, 2010, 4:33pm EDT

In Vergara Hermosilla v. Coca-Cola Co., 2010 WL 2232657 (S.D. Fla. 2010), a U.S. federal court in Florida required Coca-Cola to post a conspicuous notice indicating Rafael Vergara Hermosilla’s (“Vergara”) contribution to a song Coca-Cola intended to use in its advertising during the 2010 World Cup soccer games. Vergara had been asked to translate into Spanish a portion of the lyrics to the song “Wavin’ Flag” by the artist K’naan and to mix and produce a newly recorded Spanish vocal track for the final mix. Vergara penned the Spanish lyrics of the song, sent rough vocal tracks demonstrating how the vocals should be sung to Universal Music Group (“Universal”), who had the contractual relationship with Coca-Cola, added backing vocals to the rerecorded Spanish track, and mixed and produced the final song. However, before Universal paid the invoice, it asked Vergara to sign a document indicating the work he completed was a work-for-hire under the Copyright Act. Vergara responded that he would not have gone forward with the project had he known it would be considered a work-for-hire, and he insisted that he receive credit for the production work and that, for the Spanish version of the song, his name appear next to the composer(s) of the original English version. Universal did not agree to Vergara’s proposed terms. In May, 2010, Vergara filed an action for injunctive relief seeking an order requiring that Coca-Cola cease advertising with or distributing the Spanish version of the song and that Coca-Cola make a public acknowledgement of Vergara’s contribution to the song. Coca-Cola argued it secured an implied and non-exclusive license to use the song, that the work was a work-for-hire, and that Vergara failed to obtain a copyright registration prior to filing the action, barring him from filing suit. The court rejected all of these arguments and issued an injunction prohibiting Coca-Cola from distributing the work without proper credit given to Vergara. If you would like to license or obtain rights to music, you should consult counsel experienced in negotiating agreements to help prevent disputes like the one described above. If you have already become involved in such a dispute, you should contact counsel to discuss your options to resolve the issues between you and the other parties.

Legal Pitfalls in the Cloud: Windows Azure License Agreements

Posted: July 20th, 2010, 4:28pm EDT

Microsoft’s cloud offering, Windows Azure, is a cloud services platform designed for software development, hosting and web service management. The platform includes a cloud-based operating system with pre-configured developer tools and other options available. The license agreements are available online here and here. So, how does the Microsoft cloud licensing model stack up to our concerns regarding cloud computing? The basic Azure agreement consists of two parts: a service level agreement (“SLA”); and an online subscription agreement (“OSA”). The SLAs are written in clear, layperson-friendly language, but may not adequately protect the customer from certain types of service outages. Also, the responsibility to monitor service levels and report outages remains wholly on the customer (something many cloud customers may want to try to avoid). The OSA provides some protections against third-party intellectual property infringement claims, but it also severely limits recovery on claims arising from any legal action, including breach-of-contract and negligence claims. These service and liability limitations are typical in low-transaction-cost offerings, and they are likely unavoidable for a product sold online and across such a broad user base. Of greater concern, however, is the fact that neither agreement addresses compliance or liability arising from federal and state privacy and data security statutes, (such as HIPAA and the new Massachusetts Standards for the Protection of Personal Information). HIPAA, in particular, imposes significant responsibility on third party vendors (“business associates”, under the language of the statute), that may house or transmit protected health information (“PHI”). A company storing PHI on Microsoft Azure servers without an agreement contemplating that type of data storage could be in violation of the law and subject to liability. Further, there are no provisions concerning ownership, use, or transfer of customer-owned data upon termination of the agreement. As is evident by the low cost of cloud-based solutions, the platform is the commodity and the only real value is in the data. Without specific language identifying data ownership and transfer upon termination, a company may be risking too much relative to any perceived cost or operational benefits. Microsoft likely will have to address these concerns as the legal issues associated with cloud computing become better understood. In the meantime, careful analysis of intellectual property and data security compliance risks should be undertaken to avoid the unforeseen liabilities and hidden costs present in many cloud computing agreements.

Facebook and Mark Zuckerberg Face Lawsuit Headache

Posted: July 20th, 2010, 4:26pm EDT

On June 30, 2010, a New York web designer named Paul Ceglia filed a lawsuit against Facebook, Inc. and its founder, Mark Zuckerberg, that has the potential to become a significant distraction for the social networking giant. In the state-court complaint, Ceglia claims he signed into a contract in April 2003 with Zuckerberg, in which Zuckerberg agreed to grant Ceglia a 50% stake in the business to be derived from the expansion of “the project [Zuckerberg] has already initiated that is designed to offer the students of Harvard university [sic] access to a website similar to a live functioning yearbook with the working title of ‘The Face Book.’” Based on that and other language in the contract, and on the completion date for an earlier Zuckerberg-authored site at thefacebook.com, Ceglia claims that he now is entitled to an 84% interest in Facebook. It is unclear whether the social networking technology Zuckerberg was developing in April 2003 is the same or even related to the technology that was the predecessor to Facebook as we now know it. In addition, Ceglia’s long delay in asserting his claim raises potential statute-of-limitations issues that may result in the claim being tossed out of court. Regardless, though, Ceglia was successful in New York State court in obtaining an order temporarily keeping Facebook and Zuckerberg from transferring or selling of their assets, stocks or bonds, pending a hearing. Facebook then removed the matter to a U.S. District Court in the Western District of New York, where the case currently remains, in an effort to have the state court order dissolved. Regardless of the hurdles Ceglia may need to overcome in order to prevail on his claim, this case serves as a powerful reminder to developers of protectable, original content that they should carefully consider all of the effects of any agreements related to future ownership of business ventures. Sloppy drafting may cause unintended consequences and could result in expensive litigation to resolve questions of ownership related to the business venture. In light of the risks highlighted by the Ceglia lawsuit, developers considering that type of agreement should consult with knowledgeable counsel before proceeding.

The Sneaky Chef Loses Appeal

Posted: July 8th, 2010, 2:55pm EDT

In Lapine v. Seinfeld, 2010 WL 1688713 (N.Y.C.A. 2010), plaintiff Missy Chase Lapine and The Sneaky Chef, Inc. (“Lapine”) appealed from a summary judgment awarded to defendants Jessica Seinfeld and others on plaintiffs' claims of copyright infringement, trademark infringement, and trademark dilution. The district court determined that Seinfeld’s book Deceptively Delicious: Simple Secrets To Get Your Kids Eating Good Food, was not substantially similar to plaintiffs' cookbook, The Sneaky Chef: Simple Strategies for Hiding Healthy Foods in Kids' Favorite Meals, released four months earlier. The court affirmed the district court’s findings. Lapine contended the district court erred when it decided Seinfeld’s book was not substantially similar to Lapine’s book. Both cookbooks provide information related to tricking children into eating healthy foods by including pureed vegetables in other foods. Lapine claimed the two works are substantially similar in their unique and innovative expression of the idea of sneaking vegetables into children's food by means of a cookbook containing comprehensive instructions for making and storing a variety of vegetable purees in advance, and then using the purees in specially created recipes for children's favorite foods. The court determined that the standard test for substantial similarity between two items is whether an ordinary observer, unless he set out to detect the disparities, would be disposed to overlook them, and regard the aesthetic appeal as the same. When, as in this case, a work incorporates unprotected elements from the public domain, the court should apply a “more discerning observer” test, which requires substantial similarity between those elements, and only those elements, that provide copyrightability to the allegedly infringed work. The court stated that stockpiling vegetable purees for covert use in children's food is an idea that cannot be copyrighted. The Copyright Act does not protect ideas. It protects expressions of ideas. To the extent the two works have general and abstract similarities-including their vaguely similar titles and inclusion of illustrations of prepared dishes, health advice, personal narrative, descriptions of how to make purees, instructions for preparing dishes, and language about children's healthy eating-the district court correctly concluded that these elements do not raise a fact issue for trial because they are “scènes à faire,” or unprotectable elements that follow naturally from the work's theme rather than from the author's creativity. The two books lacked the substantial similarity required to support an inference of copyright infringement. Lapine also contended the district court erred by failing to apply an eight-factor test in Polaroid Corp. v. Polaroid Electronics Corp., 287 F.2d 492, 495 (2d Cir.1961) when it rejected Lapine’s trademark infringement claims. The court ruled that a district court need not slavishly recite the litany of all eight Polaroid factors in each and every case. The Court of Appeals considered the overall impression on a consumer and the context in which the competing marks are displayed and reached the same conclusion as the district court: the marks are not confusingly similar. Defendant’s cover art was much more detailed than plaintiff’s, though the two drawings incorporated similar themes. Additionally, Defendant Jessica Seinfeld’s use of the famous “Seinfeld” name reduces any likelihood of confusion with Lapine’s marks. The court affirmed the district court’s dismissal of Lapine’s trademark dilution claims for the same reasons. If you have been accused of copyright or trademark infringement, you should seek counsel experienced in resolving such disputes.

Dave & Buster’s Busted

Posted: July 8th, 2010, 2:54pm EDT

The FTC recently approved a settlement with Dave & Buster’s, Inc., a restaurant and arcade chain, for the largest recorded data breach of private credit card information. The hackers responsible for stealing credit card data from Dave & Buster’s gained access through an unsecured wireless Internet router, or wireless access point (WAP). The hackers had sought out businesses with no Internet security password and, after gaining access to the networks, had obtained credit card numbers and customer data in real time as the cards were swiped. There is a growing trend for the FTC to seek civil damages for lax Internet security in order to encourage businesses to provide additional protective measures for online data, including wireless Internet routers. In addition to the monetary damages Dave & Buster’s will pay to settle the claim related to this data breach, the company will be required to maintain an information security program and to have its security systems professionally audited semi-annually. Basic information security guidelines can help to prevent this type of breach. It is important to secure passwords, to enable firewall protection, and to institute additional, appropriate security safeguards to protect consumer information. This is especially important when dealing with sensitive financial data.

Microsoft v. Salesforce.com – Taking the Fight to the Cloud

Posted: July 8th, 2010, 2:52pm EDT

On June 24, 2010, Salesforce.com filed suit against Microsoft in a Delaware Federal court claiming Microsoft willfully infringed five Salesforce.com cloud computing-related patents. This is an apparent counter to a May 18th suit filed by Microsoft accusing Salesforce.com of patent infringement. Though Salesforce.com and Microsoft promote slightly different cloud computing models, each company claimed the patents infringed were significant components to their platforms, signifying that the fight over cloud market controls is ramping up. While the choice between pursuing a pure (Salesforce.com) versus hybrid (Microsoft) cloud computing platform certainly requires a thoughtful business decision, a choice in either direction involves identical legal issues. For instance, data security regulations must be addressed in either case. Companies in the healthcare industry are by now quite familiar with these requirements and with related demands on their third-party vendors, but data security regulations such as the recently enacted Massachusetts privacy law are implicating companies and industries that have not had the pleasure of interpreting statutory data security requirements. As a result, many of these companies may be unaware of the extent to which cloud computing agreements must address and protect the company with respect to all data-related regulatory requirements. Cloud computing platform agreements also must meet the needs of companies to locate, preserve and cull data to meet electronic discovery requirements. As more companies adopt cloud computing platforms to house not only e-mail, but other business records, courts increasingly will require companies to implement litigation holds and production from cloud sources in a manner identical to that which companies currently perform on their internal networks. When evaluating a cloud computing platform, take time to carefully review the agreement in as much detail as your business and IT decision-makers do when looking at software functionality. A cloud platform that is technically sound and functional remains a serious liability if the service agreement does not address these and other critical legal issues associated with cloud computing. When in doubt, seek the advice of an attorney who is knowledgeable regarding legal issues surrounding IT service providers.

Supreme Court’s Opinion in Bilski Leaves Questions

Posted: July 8th, 2010, 2:51pm EDT

On June 28, 2010, the U.S. Supreme Court issued its long-anticipated opinion in the case of Bilski v. Kappos, which, it was hoped, would at long last provide much-needed guidance for the U.S. Patent & Trademark Office and for practitioners on the subject of the patentability of business methods and other processes. However, other than rejecting the process-patentability test that had been proposed by the U.S. Court of Appeals for the Federal Circuit, the overall effect of the opinion is to re-introduce uncertainty into the question of what constitutes a patentable process and what does not. In its en banc opinion in this case, the Federal Circuit previously had affirmed the exclusive applicability of the so-called “machine or transformation test” to determine whether a process qualifies for patent protection under U.S. law. Under that test, “[a] claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” In re Bilski, 545 F.3d 943, 954 (C.A. Fed. 2008). The Supreme Court expressly rejected the machine or transformation test as the sole means to assess process patentability. However, other than identifying the test as a useful tool to make that assessment, the Court did not express any test or set of factors to provide any additional guidance on the subject. The Court, in fact, very clearly and expressly affirmed the unsettled nature of the law in this area, holding: It is important to emphasize that the Court today is not commenting on the patentability of any particular invention, let alone holding that any of the above-mentioned technologies from the Information Age should or should not receive patent protection. This Age puts the possibility of innovation in the hands of more people and raises new difficulties for the patent law. With ever more people trying to innovate and thus seeking patent protections for their inventions, the patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles. Nothing in this opinion should be read to take a position on where that balance ought to be struck. While it also rejected the argument that methods of conducting business are categorically un-patentable, the Court nevertheless affirmed the rejection of the business-method patent application that was the subject of the case on the grounds that it was an improper attempt to patent what is merely an abstract idea. The Supreme Court’s opinion in Bilski likely will do nothing to help clarify the place of innovation in fields such as software development with respect to U.S. patent law, and it leaves the door open for enterprising patent collectors to perpetuate the same kinds of claims abuses that many had hoped Bilski would help to eliminate. Therefore, for the foreseeable future, software firms will need to continue to be prepared to recognize patent exposure as a cost of doing business in their industry, and they must be ready to work closely with knowledgeable counsel to evaluate the integrity of any patents they hold as well as the validity of any patent claims with which they are presented.

Sports Equipment Retailer Loses Trademark Dispute

Posted: June 15th, 2010, 6:38pm EDT

In New York City Triathlon, LLC v. NYC Triathlon Club, Inc., 2010 WL 808885 (S.D.N.Y. 2010), the court granted plaintiff’s request for an injunction against defendant barring defendant from using versions of “NYC Triathlon” in its name. New York City Triathlon, LLC (“NYC Triathlon”) sent a cease and desist letter to NYC Triathlon Club, Inc. (the “Club”) after the Club changed its name from SBR Multisports, Inc. to NYC Triathlon Club. The Club did not respond to the letter, and NYC Triathlon then filed its request for injunctive relief seeking relief to protect its trademark and goodwill pursuant to the U.S. Lanham Act and to the common and statutory laws of New York. The New York City Triathlon is a grueling and popular Olympic-distance triathlon offered every summer in New York, New York. Last year, 20,000 applicants vied for 5,600 race spots, and an estimated 250,000 spectators attend the event. The triathlon is sanctioned by USA Triathlon, the independent organization that governs triathlon racing in the United States. Numerous news and media outlets cover the race and it has received local coverage in nearly every U.S. State. Media outlets in Australia, India, and Great Britain also cover the triathlon. The Club is a retail outlet that sells triathlon equipment, and it was among the triathlon’s sponsors from 2005-2008. The court found that NYC Triathlon’s marks had acquired secondary meaning because they signified NYC Triathlon as the exclusive source of the services at issue to an appreciable number of consumers. “NYC Triathlon Club” was also confusingly similar to “NYC Triathlon,” “New York City Triathlon,” and “NYC Tri.” The court analyzed the proximity of the goods and services provided by the two entities and determined that NYC Triathlon and the Club operated in the same channels of trade and that consumers may mistakenly assume a common source of the goods and services. NYC Triathlon also was able to demonstrate actual consumer confusion by submitting emails it received indicating individuals assumed the two organizations were the same. The court found that the Club’s bad faith in using the NYC Triathlon’s marks was evident from its decision to change its name rather than pay NYC Triathlon a sponsorship fee, from its failure to respond to NYC Triathlon’s cease and desist letter, and from its history of attempting to trade on the goodwill of other sporting events, namely, the Ironman Triathlon, by creating what it called the “Iron Race.” The court also found that the Club‘s quality of products and services was inferior to those provided by NYC Triathlon. Though the consumers in the relevant market may be sophisticated, 56% of the race’s registrants identified themselves as first-time triathletes and may be confused by the similar names. The court therefore granted NYC Triathlon’s motion for an order enjoining the Club’s ongoing trademark and trade name infringement and other claims related to dilution, cybersquatting, unfair competition, and deceptive trade practices. If you suspect your mark is being misused or if you are concerned your mark may infringe another mark, you should contact counsel experienced with trademark and brand management.

Video Professor Learns Costly Lesson

Posted: June 15th, 2010, 6:33pm EDT

Many companies that market their products or services through distribution channels give their distributors licenses to use company trademarks and logos in order to facilitate marketing efforts. However, it is important for those companies to remain vigilant against overbroad license terms that may give the distributors rights in excess of what those companies may believe is reasonable or necessary to accomplish those ends. This consideration is doubly important when the distributor has substantially greater bargaining power than the manufacturer. Video Professor, Inc., the manufacturer of a collection of heavily advertised, self-paced, computer education videos, may have learned this lesson the hard way in forming a relationship with Amazon.com to market its videos online. At the outset of the relationship, Video Professor agreed to the terms of Amazon’s Vendor Manual. The Vendor Manual Video Professor signed included a license giving Amazon the right to use Video Professor’s trademarks, including its core, registered VIDEO PROFESSOR® mark. However, the terms of that license were surprisingly broad: Vendor [VPI] hereby grants to Amazon.com a non-exclusive, worldwide, perpetual, and royalty-free license to ... (c) use all trademarks and trade names included in the Product Information. Almost shockingly, the Vendor Manual also included language specifying that the license grant “will survive the termination of any or all of this Vendor Manual.” Video Professor terminated its agreement with Amazon in September 2008. However, from December 2003 through April 2009, Amazon placed bids with Google for paid advertisements linked to the “video professor” keyword, and Video Professor subsequently determined that links from some of those ads went not to Video Professor’s products, but rather to those of its competitors. Video Professor filed suit against Amazon in the Colorado U.S. District Court for damages related to infringement of its trademark. However, without reaching the substance of Video Professor’s trademark claims, the court granted Amazon’s motion for summary based on the license terms, holding that the “scope of the license in the Vendor Manual is plain and unambiguous, and Amazon's use of the mark “video professor” was within the scope of the license.” When a company gives any other party a license to use its trademarks or any other intellectual property, it is vital that the parties’ agreement specify that the license is revocable by the IP owner or that the license terminates upon termination of the agreement, if not sooner. It is equally vital that the scope of permissible uses of the subject IP be limited to the furtherance of the relationship contemplated by the agreement. Ideally, the agreement also will give the IP owner the right to injunctive relief to stop any misuse of the subject IP notwithstanding any other dispute resolution provisions in the agreement. A company’s intellectual property often is among its most valuable and important assets. Overbroad license terms can seriously diminish that value and may make it difficult to enforce the company’s IP rights in the event of misappropriation. When considering an IP license grant in favor of any party, a company should consult with counsel to ensure that the terms of that license do not run counter to the company’s plans and expectations.

Facebook Ruling - Social Media and e-Discovery

Posted: June 15th, 2010, 6:22pm EDT

On May 26, 2010, in the case of Crispin v. Christian Audigier, Inc. (C.D. Cal. Case No. No. CV 09-09509), Judge Margaret Morrow of the U.S. District Court of Central California issued a ruling in a copyright suit concerning, in part, the discoverability of private messages sent between users on MySpace and Facebook. This decision marks one of the first examinations of the applicability of federal e-discovery rules to social media site content. In her decision, the judge reversed a magistrate judge’s finding that private messages sent between users over social networking sites are public communications and quashed subpoenas that had been issued in an attempt to obtain copies of those messages. Elaborating on the differences among the various messaging options offered by social networking sites, Judge Morrow found that messages sent between users via Facebook and MySpace private messaging systems are no different than e-mail under the Stored Communications Act. Under the Act, a third-party company storing private electronic data is not required to turn over the private information unless presented with a federal criminal law warrant. However, the judge limited her decision to private messages sent on social media sites and left unanswered other questions, such as the issue of discoverability, through subpoena, of semi-private postings on user walls visible only to a select few. Increasingly, courts will be asked to interpret outdated discovery rules against new technologies and heightened public concern over online privacy. Following the recent furor over Facebook privacy settings in the press, we expect to see a court take on the task of a comprehensive examination of social media privacy concerns with respect to electronic discovery, similar to Judge Shira Scheindlin’s Zubulake opinion on general e-discovery issues, before the Supreme Court and Congress undertake revisions to the Federal Rules.

Take Action Against Domain Names that Infringe Your Trademarks

Posted: May 24th, 2010, 5:44pm EDT

U.S. businesses facing the misappropriation of their trademarks in the form of Internet domain names registered by third parties have a quiver-full of powerful remedies to obtain relief from such practices. In addition to “traditional” trademark actions in cases where the third party is using a confusingly similar domain name in connection with products or services similar to those offered by a trademark owner, U.S. law also offers significant ammunition against third parties who register names and then “squat” on them, without ever using the names in connection with the offering of any goods or services. Under the Anticybersquatting Consumer Protection Act (ACPA), trademark owners may sue such third parties in federal court to obtain both an injunction requiring the transfer or cancellation of the infringing domain name or names as well as actual damages or, at the mark owner’s election, statutory damages up to $100,000 per name, in the court’s discretion. However, in many cases the registrant of an infringing domain name may be located in a foreign country and not subject to the personal jurisdiction of a U.S. district court in an ACPA proceeding. Under those circumstances, the ACPA provides for proceedings in rem, which are, in effect, lawsuits against the domain names themselves. In that type of proceeding, the trademark owner files suit in the U.S. judicial district where either the domain name registrar (e.g., GoDaddy.com or Network Solutions) or the domain registry (e.g., VeriSign for .COM and .NET domains) is located. Following notice to the registrant and to the registrar or registry, the court then makes a determination as to whether the domain name infringes the trademark owner’s rights and, if the mark owner prevails, issues an order compelling the registrar or registry to cancel or transfer the name. In addition, the 9th Circuit Court of Appeals recently confirmed what appears to be the plain language of the ACPA by affirming that in rem actions pertaining to .COM and .NET addresses (which often are the top-level domains most frequently the subject of ACPA suits) may be brought in the Northern District of California, where VeriSign is located. This decision makes it easier for many trademark owners to consolidate their domain recovery efforts in one venue, rather than filing suit in districts where individual registrars may be located. If your business has discovered infringing uses of its trademarks in third-party domain names, you should consult with knowledgeable intellectual property counsel to determine whether one or more ACPA actions may be appropriate as part of a comprehensive IP enforcement strategy.

Three Critical Legal Protections for New Businesses

Posted: May 24th, 2010, 5:44pm EDT

If you have started a business and have not already formed an organizational entity or protected your business name, you should swiftly move to protect yourself and your business from unforeseen liability or loss of intellectual property. New business owners should form a legal structure to add additional protection against personal liability. Establishing a partnership, professional corporation, limited liability company, or corporation will add additional layers or protection against claims related to your business. Business of all types – retail, general services, medical, financial, technology, and media, to name a few – should form legal identities at the early stages of their existence. Compared to defending a claim against you or your business, setting up a legal entity is generally affordable and straightforward. A good rule of thumb is: If you have customers or clients, you could have a lawsuit. Don’t risk your business or your personal assets. Protect yourself. In addition, registering your core trademarks is something every entrepreneur should investigate. A trademark registered with the U.S. Patent & Trademark Office will establish your claim of right to a particular brand and will provide you with a stronger position when asserting or defending against infringement claims if another business contends you are improperly using their brand. Additionally, a registered trademark will enable you to pursue infringers with more confidence in achieving a successful result. A cease and desist letter accompanied with proof of a federal trademark registration is oftentimes all it takes to dissuade a would-be infringer from using your business name or a name similar to your business name. Preventing others from operating under business names similar to yours also will help you differentiate your business as a leader in your field and will ensure consumers do not confuse your products and services with those provided by business that may be offering inferior products and services. Finally, obtaining copyright registrations at the U.S. Copyright Office for any original content, whether written or electronic, that you own will provide you with a stronger claim of right over those materials. As with trademark registrations, copyright registrations also will prevent other business from taking your words and pictures and using them for their business. Obtaining a copyright registration for a website is often the first step a business takes in protecting its content. It also represents a strategic first copyright, because websites often include both textual descriptions of the business and images related to the business’ products and services. Obtaining a website copyright is advisable because it can protect a large amount of original material with one legal tool.

Second Circuit: No Unbundled Copyright Damages for Music Compilations

Posted: May 24th, 2010, 5:43pm EDT

The Second Circuit Court of Appeals recently made what may have been the first U.S. federal appellate decision finding an album of music recordings to be a single work under the damages provision of the Copyright Act of 1976. In Bryant v. Media Right Productions, Inc., the court agreed with the lower court that an album is to be considered a “compilation” under the Act and, therefore, that a plaintiff is only entitled to statutory damages on a per-album basis. Specifically, the court says: Based on a plain reading of the statute, therefore, infringement of an album should result in only one statutory damage award. The fact that each song may have received a separate copyright is irrelevant to this analysis. The plaintiffs in this case argued that each copyrighted song constitutes a “work” under the 1972 Act, and therefore demanded statutory damages for each song contained on the two albums in the complaint. To make their argument, the plaintiffs relied heavily on decisions where other Circuits applied an “independent economic value” test to determine whether each work contained within a compilation qualifies for separate statutory damages. Here, the Second Circuit specifically rejected the “independent economic value” test and instead relied on a plain reading of the statute along with accompanying legislative commentary to hold that an album compiled by the songwriters constitutes a single work. The Second Circuit’s reading of the compilation language of the 1976 Act may significantly reduce the value placed on album-infringement disputes by copyright holders. Whether this ruling could reach beyond the music industry to influence other decisions regarding assembling preexisting copyrighted materials into a compilation—such as bundled software packages in software copyright disputes—is an interesting question that could have broad ramifications.

Timely Registration is Critical to Copyright Protection

Posted: May 24th, 2010, 5:41pm EDT

Protecting copyrighted materials should be a core concern among people and businesses that develop original creative works, regardless of whether those works are published or unpublished. Timely registration with the U.S. Copyright Office is critical to protecting a copyright and to being able to obtain the full measure of legal remedies against infringers. The requirements for registering copyrightable material, such as company brochures, advertisements, software, or other original works, are set forth in Chapter 4 of the U.S. Copyright Act. After those materials are created, the copyright applicant generally must submit an application for registration, a sample deposit of the work, and the appropriate fee to the Copyright Office to begin the registration process. Chapter 4 of the Copyright Act also provides that failure to take the steps necessary to obtain the registration may result in potential infringement actions being dismissed. In addition, even if the copyright in a work has been registered prior to filing suit, it is important to keep in mind that Chapter 4 further requires that a copyright be registered within 3 months after the initial publication date in order for the owner to be able to obtain statutory damages in litigation under the Copyright Act. Therefore, seeking an expedited registration for an infringed work may allow the plaintiff into court, but if the copyright registration date is more than 3 months after the date the subject work was published, that plaintiff will be deprived of the statutory damages remedy and forced to spend additional resources in an effort to prove actual damages, which, in many cases, may be negligible. All owners should register their copyrights with the U.S. Copyright Office within the timeline provided under the Copyright Act in order to help safeguard the ability to effectively enforce those copyrights.

When Your Brand is Attacked Online, The Author May Be the Only Liable Party

Posted: May 13th, 2010, 5:25pm EDT

The United States District Court of New Jersey recently issued an opinion in a defamation action regarding an author’s post to a USENET group. The plaintiff, Charles Novins, an attorney in New Jersey, sent a letter to the defendant, Kevin Cannon, in early 2009 demanding Cannon retract his post to a USENET group in which Cannon accused Novins of, among other things, hiring drug addicts at his firm. After apparently not receiving the relief requested in his letter, Novins filed suit against Cannon along with a host of other defendants. The defendants moved to dismiss under the argument that the U.S. Communications Decency Act (“CDA”) immunizes everyone involved in content delivery with the exception of the “information content provider,” who was, in this case, the post’s author. The court agreed and dismissed the lawsuit. The CDA often is applied to Internet service providers, but it has also been used by individuals who operate websites and web-based forums. The CDA even has been used to protect individuals who knowingly allow content to be posted to a website under their control. Although the New Jersey case involved an antiquated forum (USENET can be properly characterized as Web 0.1), the rule generally applies to Web 2.0 as well, from Twitter to Facebook to, likely, whatever comes next. Courts continue to find that the CDA immunizes publishers from liability for defamatory comments posted to their websites. In many cases, filing suit against anyone other than the author of arguably defamatory content is likely to produce no advantage for the complainant. A better approach to dealing with attacks on your online brand may be to utilize other methods, such as drowning the negative comments with positive publicity. An attorney knowledgeable regarding Internet marketing and brand protection efforts can assist you to formulate an appropriate strategy in response defamatory, third-party activities.

ACTA May Bring DMCA-style Website Takedowns to the World

Posted: May 13th, 2010, 5:23pm EDT

After years of negotiations, several leaks regarding the text of the treaty, and resulting public pressure to soften what have been perceived by many to be some of its more excessively pro-industry components, on April 20, 2010, the countries negotiating the Anti-Counterfeiting Trade Agreement (“ACTA”) released a draft of the document for public review. That draft is available here. The intent of ACTA’s drafters is to establish international standards on the enforcement of intellectual-property rights in the participating countries. (ACTA’s current drafters include Australia, Canada, the European Commission, Japan, Jordan, Mexico, Morocco, New Zealand, North Korea, Singapore, Switzerland, the United Arab Emirates, and the USA.) ACTA includes a number of provisions that indeed may have a significant impact on the enforcement of IP rights worldwide. One of the more interesting of those provisions is a proposed grant of safe harbor to Internet service providers (“ISPs”) hosting infringing content due to the actions of the ISPs’ customers, provided that the ISPs take action to remove that content following their receipt of notice that it is present on their servers. Such a provision could end up being similar to Section 512 of the U.S. Digital Millennium Copyright Act (“DMCA”), under which a content owner can send a notice to an ISP regarding the presence of infringing content on the ISP’s servers, in response to which the ISP must take action in order to maintain its safe harbor status. At this stage, ACTA remains a rough draft in which the safe harbor options have yet to be confirmed. In addition, ACTA does not include steps as detailed as those under the DMCA to guide the form and substance of take-down notices, instead leaving those steps to the discretion of the member countries, within certain bounds. However, the overall outline of safe harbor under ACTA could be fairly similar to that under the DMCA, with safe harbor being conditioned under one option as follows (text in brackets remains unresolved): an online service provider expeditiously removing or disabling access to material or [activity][alleged infringement], upon receipt [of legally sufficient notice of alleged infringement,][of an order from a competent authority] and in the absence of a legally sufficient response from the relevant subscriber of the online service provider indicating that the notice was the result of mistake or misidentification. It will be very interesting to see how the ACTA negotiators resolve the issue of ISP liability and safe harbor. Businesses that have encountered infringing, third-party content hosted by U.S. ISPs have for several years been able to take advantage of Section 512 notices under the DMCA to cause the removal of that content in an efficient and cost-effective manner. However, foreign ISPs often do not have much to gain by compliance with U.S. copyright law, so the same procedures generally have been less effective against content hosted outside the U.S. An effective safe harbor provision under ACTA may change that.

Qualcomm Judge Drops Sanctions Against Lawyers

Posted: April 20th, 2010, 3:11pm EDT

On January 7, 2008, the United States Magistrate Judge Barbara Major issued a sanctions order against Qualcomm and certain in-house and outside counsel for discovery misconduct. Specifically, the Court ordered that Qualcomm pay $8.5 million in opposing counsel’s fees for withholding critical documents during discovery, and Qualcomm’s attorneys further were referred to the California State Bar for an appropriate investigation. On March 5, 2008, United States District Judge Rudi M. Brewster vacated the sanctions against the attorneys and remanded to Judge Major to investigate. Roughly fifteen months later, at untold cost to the attorneys involved, a massive discovery effort came to a close. On April 2, 2010, Judge Major issued an order declining to impose sanctions against the attorneys. In her order, the Judge states that although there was a “massive discovery failure” resulting from “significant mistakes, oversights, and miscommunication,” the attorneys made significant attempts to comply with their discovery obligations. Judge Major enumerates the errors that gave rise to the discovery failures, indicating that an “incredible breakdown in communication” was the fundamental problem. No attorneys, in-house or otherwise, ever met in person with the Qualcomm employees who were likely to be important witnesses. Nor did outside counsel make any attempts to understand how and where data was stored on Qualcomm’s computer network. Finally, there was no single attorney responsible for discovery, resulting in the finger-pointing that occurred among the legal counsel when it came time to defend the discovery process. In the end, the Judge reasoned that these failures were exacerbated by the lack of candor on the part of Qualcomm employees to such a degree as to foil any good faith attempts by the attorneys to meet their discovery obligations. And although the attorney sanctions were dropped, the cost in time and money for all parties involved should serve as a warning to all in-house counsel, corporate leadership and litigators: effective communication is fundamental to any discovery process. Without it, millions of dollars, thousands of hours, and whole careers are at risk.

Court Grants Preliminary Injunction in Trademark Infringement Case

Posted: April 20th, 2010, 3:09pm EDT

In Lettuce Entertain You Enterprises, Inc. v. Leila Sophia AR, LLC d/b/a Lettuce Mix, No. 09 CV 2582, Slip Op. (N. D. Ill. 2010), Lettuce Entertain You Enterprises, Inc. (“LEYE”) obtained a preliminary injunction against Leila Sophia AR, LLC d/b/a Lettuce Mix (“Sophia”). LEYE owns a group of federally registered marks for restaurant services utilizing the word “lettuce.” Sophia opened a restaurant named “Lettuce Mix” several blocks away from one of LEYE’s restaurants. In March, 2009, LEYE sent a cease and desist letter to Sophia requesting that Sophia remove the sign. Sophia, through counsel, refused to remove the sign and defended its use of the name. In April, 2009, LEYE filed a complaint alleging, among other things, federal and common law infringement of LEYE’s marks. Sophia thereafter covered its “Lettuce mix” sign with a banner that read “Let us be” with “Name pending…” below in a smaller font. Images of lettuce heads appeared on the banner. A preliminary injunction is an exercise of potentially very far-reaching power. To obtain a preliminary injunction, a plaintiff typically must demonstrate (1) that its case has some likelihood of success on the merits; (2) that no adequate remedy at law exists; and (3) that it will suffer irreparable harm if the injunction is not granted. The movant must show that it has a “better than negligible” chance of success on the merits. The court will adopt a sliding scale approach and take into consideration the irreparable harm an injunction would cause the nonmoving party and any consequences to the public from denying or granting the injunction. The court determined the word “lettuce,” as used by LEYE, was not generic because it refers to the types of services LEYE provides and that LEYE would have a better than negligible chance of showing that its group of marks is protectable. Sophia’s use of the word “lettuce” in “Lettuce mix” is substantially similar to LEYE’s use of “lettuce” in its marks because both are being used in connection with providing restaurant services and because “Lettuce mix” appropriates the salient feature of LEYE’s family of marks: the use of “lettuce” as a pun for “let us.” The court therefore found that the two marks are substantially similar. Further analyzing the factors, the court found that LEYE established a likelihood of success on the merits. Sophia raised a fair use defense that the court struck down. To prevail on its fair use defense, Sophia had to show (1) that it is not using Lettuce mix” as a service mark; (2) that it is using the mark in good faith merely to describe their services, and (3) that the mark is in fact descriptive of its services. The court did not find that Sophia’s use of the mark qualified as a fair use. Concluding its analysis, the court determined that LEYE had no adequate remedy at law, that the balance of the harms weighed in favor of LEYE, and that the public interest was served by enjoining Sophia’s use of the mark to prevent a likelihood of confusion among consumers. If you think someone is improperly using your brand or trademark, you should contact counsel experienced with protection of intellectual property.

Supreme Court Paves Way for More Class Action Lawsuits

Posted: April 2nd, 2010, 4:25pm EDT

In a decision released on March 31, 2010, the Supreme Court ruled that claims under New York law that could not have been brought as a class action in state court would not be barred if brought in federal court against Allstate Insurance Co, organized under the laws of another state, on behalf of a class of New York residents. Shady Grove Orthopedic Assoc. P.A. v. Allstate Ins. Co., No. 08-1008. Shady Grove’s individual claim was valued at approximately $500. (Shady Grove had claimed that Allstate routinely delayed payment to medical providers and refused to pay interest on those delayed claims.) The value of the case and the cost to defend it as a class action all the way to the Supreme Court likely cost Allstate hundreds of thousands if not a million dollars, and Allstate was on the losing end of the case in Washington, D.C. The Supreme Court majority held that the while the state class action rule would have barred Shady Grove from litigating anything other than its $500.00 claim, this had no bearing on the Federal Class Action Rule, Fed R. Civ P. 23, which did not by its terms bar the purely state law claims from being brought in federal court as a putative class action. Class action suits are protracted, complex and expensive. The case has been sent back to the federal courts in New York for further proceedings. In light of this decision, companies with out-of-state customers should evaluate their business practices with counsel experienced in class action litigation to take steps to avoid the situation in which Allstate now finds itself.

What is the BSA’s Definition of Software Piracy?

Posted: March 4th, 2010, 4:58pm EST

“Software piracy” is a favorite catch-phrase used by the Business Software Alliance (BSA) and the software companies it represents. Most people understand software piracy to involve the intentional copying and, in many cases, distribution of copyrighted software to third parties without permission of the copyright owner. Understandably, the term has extremely negative connotations, and most businesses will go to great lengths to avoid behavior that could reasonably be branded as “piracy.” Unfortunately, the BSA’s definition of software piracy is considerably more broad than the common understanding and may be confusing to companies audited by the BSA who have never knowingly copied unlicensed software. During a BSA-initiated software audit, the BSA requires the businesses it targets to provide dated proofs of purchase for each software product installed on their computers. There are specific types of documentation the BSA accepts, and it usually rejects purchases from E-bay, Amazon, or similar Internet-based re-sellers. Therefore, if a company unknowingly purchases software from an unauthorized retailer or simply is unable to find receipts for products it purchased, the BSA will penalize the company as though it intentionally violated copyright law and “pirated” the software. Worse, typically after an audit the BSA will enter into settlement agreements with the companies it accuses of copyright infringement. Unless a provision for confidentiality is included in a settlement agreement (usually only in return for a significant additional amount to be paid at settlement), there is nothing to prevent the BSA from publishing a press release identifying the targeted company, the software products involved, and the settlement amount, and otherwise making express or implied statements that the company is guilty of “software piracy.” As a general rule, companies should keep all receipts from software purchases indefinitely, and they should purchase software only from authorized dealers. Additionally, recipients of letters from the BSA should seek experienced legal counsel to assist with the audit and to help negotiate a resolution that may prevent the unnecessarily negative publicity that can result from the BSA’s overzealous application of the “pirate” label.

BSA Ramping Up Piracy Campaign

Posted: August 6th, 2008, 9:31am EDT

The Business Software Alliance (“BSA”), a trade association representing a number of software publishers, is launching a new campaign to attract would-be informants to its reward program. The BSA’s new Know it / Report it / Reward it campaign will attempt to attract a larger number of informants through a coordinated effort involving online advertisements, radio advertisements, research reports, and other tools. The program continues the BSA’s practice of offering rewards of up to one million dollars for qualifying reports of software piracy. Individuals allegedly possessing knowledge about a business’ software compliance practices report information to the BSA which may become the basis of a legal engagement. Issuance of a Software Policy can also provide the education and training employees need to help the business maintain compliance. Management should clearly delineate the company’s software asset philosophy and process to ensure compliance across the organization. Companies that receive audit letters from the BSA should contact experienced counsel for assistance. View the BSA press release here.

In Copyright Litigation, Availability of Attorney’s Fees Awards Can Cut Both Ways

Posted: August 6th, 2008, 9:29am EDT

A recent opinion written by Judge Richard Posner for the 7th Circuit highlights the importance of carefully considering some of the risks of loss for plaintiffs in proceeding with a copyright infringement lawsuit. In Eagle Services Corp. v. H2O Industrial Services, Inc., the plaintiff, Eagle, filed suit after several of its employees, who left to form H2O, used copies of Eagle’s safety manual in operations at the new business. The manual in question consisted largely, if not entirely, of quotations from OSHA regulations, making the scope of the copyright limited to the compilation as a whole. Instead of pursuing an award of statutory damages under the Copyright Act, Eagle argued that it should be awarded all the profits that H2O made in its business before it created its own manual, because, according to Eagle, without a manual H2O could not have provided any services in its industry without violating OSHA regulations. Though the trial court allowed Eagle to present its case to the jury, at the close of its evidence, H2O moved for judgment in its favor as a matter of law, which the court granted, based on Eagle’s failure to prove that OSHA requires the companies it regulates to maintain a safety manual. However, the trial court refused to award H2O, as the prevailing party, its reasonable attorney’s fees on the ground that the suit was not frivolous and had not been filed in bad faith. H2O appealed the denial of attorney’s fees. The 7th Circuit reversed the trial court’s decision. In his opinion, Judge Posner noted that the suit “could not have been brought in good faith,” because Eagle never had any reasonable basis to believe that the state would have shut down H2O’s operations for want of a safety manual, especially in light of the fact that, even if a manual were required, the applicable regulations would have given H2O an opportunity to procure one. Judge Posner further noted, colorfully: So we have a suit brought almost certainly in bad faith, a frivolous suit, a suit against a newer and probably smaller and weaker firm. Under any standard we know for shifting attorney's fees from a losing plaintiff to a winning defendant, H2O (and the individuals joined as defendants along with it) would be entitled to an award of attorney's fees. Judge Posner also noted that in copyright cases, prevailing defendants are not required to prove that the plaintiffs’ suit was frivolous in order to prove their entitlement to an award of attorney’s fees. According to Judge Posner, if there is any asymmetry in the analysis regarding whether to award attorney’s fees in copyright cases, that asymmetry actually tips in favor of prevailing defendants: The successful assertion of a copyright confirms the plaintiff's possession of an exclusive, and sometimes very valuable, right, and thus gives it an incentive to spend heavily on litigation. In contrast, a successful defense against a copyright claim, when it throws the copyrighted work into the public domain, benefits all users of the public domain, not just the defendant; he obtains no exclusive right and so his incentive to spend on defense is reduced and he may be forced into an unfavorable settlement. Though H2O’s success in this case did not result in the enlargement of the public domain, that fact did not rebut the basic presumption affirmed by Judge Posner that, in most cases, awards of attorney’s fees to prevailing parties are presumed to be appropriate. This case serves as a useful reminder to businesses considering whether to file suit over infringement of its copyrighted works. The costs of federal litigation are always high, and a loss at trial could mean that the plaintiff would be out not only its own attorney’s fees, but also those of its adversary.

For Trademark Infringement Claims, Success May Hinge on Commercial Use

Posted: August 6th, 2008, 9:28am EDT

It is natural for the owner of a trademark want to seek some sort of redress when another person or entity uses that mark in the URL or the content of a web site, especially when that site competes with or criticizes the owner. However, relief from such use may be unavailable under the Lanham Act when it is not possible to show commercial intent behind the use, and a recent 10th Circuit opinion suggests that the standard to prove commercial intent may be higher than some would expect. In Utah Lighthouse Ministry (UTLM) v. Foundation for Apologetic Information and Research (FAIR), the plaintiff, UTLM, filed suit against FAIR based on a web site published by FAIR’s vice president and webmaster, a co-defendant, which parodied the content of UTLM’s site. UTLM is an organization that publishes critiques of the Mormon Church. FAIR, on the other hand, is a volunteer organization that responds to such critiques. The description in the opinion indicates that the parody site bore many similarities to the UTLM site: The design elements are similar, including the image of a lighthouse with black and white barbershop stripes. However, the words “Destroy, Mislead, and Deceive” are written across the stripes on the Wyatt website. Prominent text on the Wyatt website consists of a slight modification of the language located in the same position on the UTLM website. For example, the UTLM website states: “Welcome to the Official Website of the Utah Lighthouse Ministry, founded by Jerald and Sandra Tanner.” In comparison, the Wyatt website states: “Welcome to an official website about the Utah Lighthouse Ministry, which was founded by Jerald and Sandra Tanner.” (emphasis added.) The Wyatt website does not have any kind of disclaimer that it is not associated with UTLM. The opinion also indicates that FAIR’s webmaster, through his company, also registered ten domain names, which were “combinations of ‘Utah Lighthouse Ministry,’ ‘Sandra Tanner,’ ‘Gerald Tanner,’ ‘Jerald Tanner,’ and ‘.com’ and ‘.org.’” UTLM alleged that FAIR’s parody site and its webmaster’s registration of the domain names at issue constituted trademark infringement, unfair competition, and cybersquatting. The trial court disagreed with UTLM and granted the defendants’ motion for summary judgment as to all UTLM claims. UTLM then appealed the trial court’s decision to the 10th Circuit. In upholding the trial court’s grant of summary judgment, the 10th Circuit relied, in large part, on the fact that UTLM was able to prove no commercial intent behind the parody site or FAIR’s webmaster’s registration of the domain names. FAIR’s webmaster neither promoted nor sold any products or services at the parody site. UTLM argued that the parody site linked to FAIR’s web site, where FAIR sold books, some of which also were available through the UTLM site. However, the Court found that any connection between the parody site and the commercial activities at the FAIR site was too attenuated to support a finding of commercial intent. In reaching that conclusion, which was the 10th Circuit’s first time to analyze an argument for commercial intent based on this type of fact pattern, the Court cited to a 9th Circuit opinion in which no commercial intent was found where a parody site linked to another site operated by the same defendant, which in turn linked to a newsgroup containing advertisements for the plaintiff’s competitors. Though the “distance” between the parody site in this case and the FAIR site’s commercial activities was not as great as in the 9th Circuit case, the 10th Circuit held that the trial court had used an analysis similar to that employed by the 9th Circuit, which it believed to be appropriate. UTLM also argued that the parody site interfered with “the ability of users to reach the goods and services offered on the UTLM website.” The 10th Circuit disagreed, stating: In our view, the defendant in a trademark infringement and unfair competition case must use the mark in connection with the goods or services of a competing producer, not merely to make a comment on the trademark owner's goods or services. The Lanham Act addresses the specific problem of consumer confusion about the source of goods and services created by the unauthorized use of trademarks. Unless there is a competing good or service labeled or associated with the plaintiff's trademark, the concerns of the Lanham Act are not invoked. (quotations omitted) UTLM raised a third argument regarding the general commercial nature of the Internet, but this too was denied by the Court. The Court also found that there was no likelihood of confusion between the sites at issue, especially in light of the fact that the defendants’ site was a parody site, and that UTLM had failed to prove any bad faith intent by FAIR or its webmaster to profit on the domain names that had been registered, thereby supporting the denial of UTLM’s cybersquatting claims. Especially for businesses in the 10th Circuit, this case appears to present a significant challenge for claims of Internet-based trademark infringement where commercial intent is difficult to prove. Business considering lawsuits based on such claims should consult closely with counsel to determine whether the costs of litigation are worth the risk of loss.

Trademark Law and the Naked Cowboy

Posted: August 6th, 2008, 9:13am EDT

The Naked Cowboy (a/k/a Robert Burck), a New York icon, is usually in the news for his well-known antics as a street performer. But the Naked Cowboy recently made some trademark law in a battle with Mars, Inc. and its Blue M & M. In Burck v. Mars, Inc., 2008 WL 2485524 (S.D.N.Y. 2008), the court recognized Burck’s trademark rights in the name and likeness of “The Naked Cowboy” but also allowed Mars to raise a defense of parody even though the parody was being used in part for advertising purposes. The U.S. District Court for the Southern District of New York described Burck as follows: “a ‘street entertainer’ who performs in New York City’s Times Square as The Naked Cowboy, wearing only a white cowboy hat, cowboy boots, and underpants, and carrying a guitar strategically placed to give the illusion of nudity.” Burck owns registered U.S. trademarks in the Naked Cowboy name and likeness. Starting in April 2007, Mars began running an animated cartoon advertisement on two oversized video billboards in Times Square featuring a blue M & M dressed “exactly like The Naked Cowboy, wearing only a white cowboy hat, cowboy boots, and underpants, and carrying a guitar.” The court illustrated these facts with the following picture:

Burck sued Mars for compensatory and punitive damages asserting violations of New York’s right to publicity laws and trademark infringement. The court dismissed Burck’s right to privacy claim but held that Burck could proceed with his false endorsement claim under the Lanham Act because consumers might mistakenly conclude that the Blue M & M advertisements were endorsements of Mars’ products by Burck. The court, however, denied Burck’s motion to strike Mars’ affirmative defense of parody. According to the court, parody is a form of fair use that is protected under the First Amendment. This protection applies even where the parody is used in part for advertising purposes. Specifically, the court held that “because a parody may be of a hybrid nature, combining artistic expression and commercial promotion, it is valid to plead a parody defense even where the parody is used in part for advertising purposes.” The dispute between the Naked Cowboy and the Blue M & M will therefore continue.

Digital Reproduction May not Violate Copyright

Posted: August 6th, 2008, 9:10am EDT

The Eleventh Circuit has held that a digital reproduction of a copyrighted image may, under certain circumstances, be a privileged revision of the work that does not violate the creator’s copyright. In an en banc decision, the sharply divided court in Greenberg v. National Geographic Society, 2008 WL 2571333 (11th Cir. 2008) (en banc), rejected a claim by a photographer that a digital reproduction of his work that had previously appeared in print did not, in and of itself, constitute infringement where the digital reproduction merely reproduced the original print version. Jerry Greenberg is a freelance photographer who had some of his photographs published in four issues of the National Geographic Magazine. For decades, the National Geographic Society has been reproducing its back issues in bound volumes, microfiche, and microfilm. In 1997, National Geographic produced “The Complete National Geographic,” a thirty-disc CD-ROM set containing every monthly issue of the magazine since 1888. The CD-ROMS contained each magazine as it was originally published, reproducing each page. The CD-ROMS also included a short opening montage and a program that allowed users to search, zoom into particular pages, and print. Greenberg sued National Geographic, alleging that it infringed his copyrights by reproducing the print magazine issues that included his photographs. The district court granted summary judgment in favor of National Geographic, holding that because the CD-ROMS constituted a revision of the print issues of the magazine, the reproduction was privileged under 17 U.S.C. section 201(c) of the Copyright Act and therefore did not constitute infringement. A panel of the Eleventh Circuit disagreed and reversed that decision. After a second appeal, the Eleventh Circuit granted rehearing en banc to address the question of whether National Geographic’s use of the photographs was a privileged revision. By a 7-5 majority vote, the Eleventh Circuit held that National Geographic’s reproduction of Greenberg’s photographs was privileged under section 201(c). Section 201(c) provides that ”copyright in each separate contribution to a collective work is distinct from copyright in the collective work as a whole, and vests initially in the author of the contribution. In the absence of an express transfer of the copyright or of any rights under it, the owner of copyright in the collective work is presumed to have acquired only the privilege of reproducing and distributing the contribution as part of that particular collective work, any revision of that collective work, and any later collective work in the same series.” A magazine is considered to be such a collective work. According to the court, section 201(c) is intended primarily to prevent publishers from revising the contribution of the author or including it in a new anthology or an entirely different magazine or other collective work without the author’s consent. Greenberg claimed that the CD-ROMS constituted an entirely new collective work, such that section 201(c) did not apply. The court, however, concluded that the digital reproduction of the magazines was nothing more than a revision of the collective work. The court noted that the Supreme Court had previously recognized that reproducing a magazine on microfilm was privileged under section 201(c). By analogy, a digital reproduction is similarly privileged. The court rejected the notion that adding a computer program that allowed users to search and access individual pages somehow altered the collective works, concluding that “the revision of a magazine by reproducing it in its original context in a new ‘distinct form’ – i.e., a digital version – is not a difference that would undo a publisher's privilege under § 201(c).” The dissenters strongly disagreed with the majority’s conclusion, concluding that the CD-ROMS did constitute a new collective work to which the privilege of section 201(c) did not apply. [www.ca11.uscourts.gov]

Personal Names as Trademarks

Posted: June 18th, 2008, 3:40pm EDT

A recent federal court decision highlights the difficulties that may arise when a personal name becomes a trademark that identifies a business’s products. In particular, difficult issues can come up after the right to use the name is sold. In JA Apparel Corp. v. Abboud, 2008 WL 2329533 (S.D.N.Y. 2008), the court rejected an attempt by a trademark’s namesake to invoke the fair use doctrine as a basis for continuing to use his personal name to promote products he had designed. In 1987, fashion designer Joseph Abboud launched his first menswear line under the “Joseph Abboud” label. At this time, he also registered his personal name “Joseph Abboud” as a trademark with the U.S. Patent and Trademark Office. In 1988, Abboud entered into a joint venture with another company to manufacture, market, and sell various products under the Joseph Abboud label. The joint venture was named JA Apparel, and during the joint venture, Abboud licensed the “Joseph Abboud” trademark to JA Apparel. In 2000, Abboud signed an agreement under which he conveyed all trademarks and licenses, including the mark “Joseph Abboud” to JA Apparel. Abboud also signed a noncompete agreement that was to run until 2007. Several disputes subsequently arose between Abboud and the owners of JA Apparel. In the Spring of 2005, Abboud left the business. A few weeks after the noncompete agreement expired, JA Apparel learned that Abboud intended to debut a new menswear collection under the name of “jaz” and intended to promote the new label with taglines such as “a new composition by designer Joseph Abboud” and “by the award-winning designer Joseph Abboud.” JA Apparel filed suit against Abboud to prevent him from using his name in connection with goods and services. The court described the issue presented as follows: “whether and how an individual, whose name and reputation have become clearly identified with a business and line of products, and which serve as its trademarks, can continue to use his name after he sells the business, its trademarks, and his name, for a considerable amount of money.” Abboud contended that his use of his own name constituted fair use under the Lanham Act. The court, however, disagreed. While the court acknowledged that Abboud was not seeking to use his name as a tradename, the court concluded that Abboud’s use of his name did more than describe the products being sold – the name was being used to promote the products. Indeed, at trial, Abboud acknowledged that he wanted consumers to know that “jaz” was his brand. The court also disagreed with Abboud’s contention that consumers would not be confused by his proposed use of his personal name to refer to himself as the designer of the “jaz” product line. According to the court, advertising the “jaz” menswear collection as being designed by Joseph Abboud would result in a likelihood of confusion with JA Apparel’s trademarks. The court noted the close proximity of the goods and services at issue, the strength of the marks, and at least some instances of actual confusion that had been identified at trial. The court issued a permanent injunction preventing Abboud from using his personal name to promote products.

For Most U.S. Residents, Internet E-mail Likely is Safe from Civil Legal Discovery by Third Parties

Posted: June 18th, 2008, 3:38pm EDT

A federal court recently issued an opinion indicating that, at least for U.S. residents, public, third-party-hosted and Internet-based e-mail may be the virtual world’s equivalent of a Swiss bank account for personal information. In In re Subpoena Duces Tecum to AOL, LLC, the U.S. District Court for the Eastern District of Virginia considered a subpoena issued by lawyers for State Farm to AOL, requesting copies of e-mails from the accounts of two non-party witnesses in litigation pending in a different jurisdiction. The Virginia magistrate judge granted the witnesses’ motion to quash the subpoena, and in its opinion, the court upheld the magistrate’s decision, citing the U.S. Electronic Communications Privacy Act (ECPA). Among other things, the ECPA prohibits providers of “electronic communication services” from “knowingly [divulging] to any person or entity the contents of a communication while in electronic storage by that service.” The ECPA also includes a number of exceptions, most notably including several directed to governmental and law enforcement authorities. State Farm argued that the terms of one exception were broad enough to include within their scope court orders issued pursuant to discovery requests in civil litigation, but the district court, citing to prior precedent, disagreed and allowed the magistrate’s order to stand. This case and others indicate that one consequence of the ECPA has been to provide an incentive to opt, whenever feasible, for third-party hosted e-mail, rather than privately hosted e-mail, which is not included within the scope of the ECPA’s protections. Potentially restrictive terms of service and third-party account control may outweigh other considerations, but where it is important, for whatever reason, to avoid discovery of electronic communications through legal discovery, publicly hosted e-mail appears to include certain advantages.

Will ACTA Mean the Establishment of the International IP Police?

Posted: June 18th, 2008, 3:36pm EDT

Trade negotiators from some of the world’s wealthiest industrialized nations are in the process of negotiating a pact that could lead to the establishment of a new kind of international IP rights enforcement. The U.S. is a leading proponent of the Anti-Counterfeiting Trade Agreement (“ACTA”), which would aim to establish international standards and legal frameworks for the protection and enforcement of IP rights and, if early information is to be believed, would entail surprising new legal reforms. Late last month, a “Discussion Paper on a Possible Anti-Counterfeiting Trade Agreement” was leaked to the operators of the Wikileaks.org web site. Although there are not many details, if the paper accurately depicts the agreement, the proposed deal points include: • “[criminal penalties for] significant willful infringements without motivation for financial gain to such an extent as to prejudicially affect the copyright owner” (likely having the effect of chilling the activities of some non-profit media sites like Wikileaks.org) • “ex officio authority for customs authorities to suspend import, export and trans-shipment of suspected [IP rights] infringing goods” and “[border] measures to ensure the seizure and destruction of [IP rights] infringing goods” (potentially giving customs officials the authority to inspect media content (e.g., music, software) for authenticity) • “[civil] authority to order ex parte searches and other preliminary measures” (notwithstanding the constitutional objections, making the term “IP Police” more descriptive than may be comfortable) To the extent that the trade negotiators working on the pact allow information from their proceedings to be made public (which seems somewhat unlikely), it will be very interesting to see the form that the final agreement takes by the time it is drafted and signed. It will also be very interesting to see how well it plays in the U.S., where some of the stronger measures of the recent “PRO-IP” copyright reforms had to be eliminated before the House passed the legislation on to the Senate. The working paper remains available on the Wikileaks.org site here.

ValueClick agrees to Settle with FTC for $2.9 Million

Posted: June 18th, 2008, 3:18pm EDT

In a record settlement, ValueClick recently agreed to pay the Federal Trade Commission (“FTC”) $2.9 million to settle claims that ValueClick violated federal law and used deceptive advertising. The FTC alleged that ValueClick failed to protect consumer information and misled consumers with advertising that did not clearly disclose the cost of products. ValueClick, through its wholly owned subsidiary, E-Babylon, sold printer ink and printer accessories through a variety of websites that utilized an on-line credit and debit card payment processing system. Consumers purchasing products on these websites were required to provide personal information including name, address, phone number, credit card number, and credit card expiration date. The website also required consumers to provide the three-digit credit card verification code ("CVV2 code") printed on the back of credit cards. CVV2 codes are particularly sensitive because they are intended to protect consumers against fraudulent internet and telephone purchases in which a sales associate can not physically verify that the card belongs to the card-holder. If stolen, possession of the CVV2 code in conjunction with the consumer's personal information would make it easy for information thieves to make fraudulent purchases with stolen information. The FTC also alleged that ValueClick and its subsidiaries distributed or caused to be distributed privacy policies that claimed to protect consumers' personal information by encrypting data collected for the purpose of delivering products and services to consumers. The privacy policies claimed to use "industry standard" security measures to protect consumers' personal information. ValueClick and its subsidiaries used either no or limited encryption in its database systems. One of the defendant's systems used a simple alphabetic substitution system that was not consistent with industry standards. Furthermore, the E-Babylon sites were subject to Structured Query Language (SQL) injection attacks. In SQL injection attacks, the attacker manipulates the address in the internet browser's address bar to gain access to information in the database supporting the website. These databases contained consumers' personal information and credit card information. The FTC alleged that SQL attacks were a well-known and well-publicized form of hacking and that solutions were both available and inexpensive. In addition to the monetary penalties, ValueClick agreed to clearly disclose in its ads and web pages that consumers must spend money to qualify for “free” merchandise. Additionally, ValueClick and its subsidiaries must refrain from making misrepresentations about the use of encryption to protect consumers’ data. Finally, ValueClick agreed to independent third-party assessments of its programs for 20 years.

Promptly Register Your Copyrights or Lose

Posted: June 18th, 2008, 3:10pm EDT

Companies and individuals with copyrighted materials should make certain to register their copyrights with the U.S. Copyright Office as soon as practical after the material has been published. If an application for registration is not made within three months of publication, the copyright owner will lose the right to recover statutory damages and attorney’s fees. The recent decision in Thomas M. Gilbert Architects, P.C. v. Accent Builders and Decelopers, LLC, 2008 WL 2329709 (E.D. Va. 2008), demonstrates the wisdom of promptly registering a copyright. Thomas M. Gilbert Architects, P.C., an architecture firm in Richmond, Virginia filed suit against Accent Builders, a developer of townhome projects. Gilbert authored plans for the townhome project and registered those plans with the U.S. Copyright Office on August 16, 2007. The Certificate of Registration lists July 17, 2003 as the date of first publication of the plans. In November of 2007, Gilbert sued Accent claiming that Accent had infringed on Gilbert’s copyrights by copying and modifying the plans, distributing copies of the modified plans to subcontractors, and using the modified plans to construct additional townhomes. In its complaint, Gilbert sought statutory damages. The court granted summary judgment in favor of Accent on Gilbert’s claim for statutory damages. Under the Copyright Act, the owner of a copyright may seek two types of damages – (1) actual damages and infringement profits or (2) statutory damages. But statutory damages are not available to every owner of a copyright. Specifically, under 17 U.S.C. § 412(2), statutory damages may not be awarded for any infringement that began after the first publication of a work and before the effective date of its registration unless the work is registered within three months of its initial publication. Even if acts of infringement occur after the work is registered, the result is the same. For purposes of section 412, infringement commences “when the first act in a series of acts constituting continuing infringement occurs.” The court noted that Accent began infringing Gilbert’s copyrights before May 2006, and Gilbert did not register its copyrights under August of 2007. Accordingly, Gilbert was barred as a matter of law from seeking statutory damages. It should be noted that section 412 also applies to an award of attorney’s fees under 17 U.S.C. § 505, although the court in Gilbert did not rule out an award of fees on that grounds.

New Jersey Court Determines Internet Users Have a Constitutional Right to Privacy

Posted: May 29th, 2008, 3:17pm EDT

The Supreme Court of New Jersey recently became one of the first courts in the nation to determine that Internet users have a Constitutional right to privacy under Article I of the New Jersey Constitution. Because of the ruling, a grand jury warrant will be required before law enforcement officials can access personal information about the Internet users. The Court considered the issue after Shirley Reid was charged with second-degree theft for allegedly hacking into her employer’s computer system from her home computer. When her employer asked Comcast for the identity of the person who accessed the employer’s computer network, Comcast refused to do so without a subpoena. Investigators then obtained a municipal court subpoena and served it on Comcast. Comcast complied with the subpoena and identified Reid as the person who accessed the employer’s network. A New Jersey superior court suppressed the evidence based on the fact that investigators did not obtain a grand jury subpoena. A state appellate court agreed, and the Cape May County Prosecutor’s Office appealed to the New Jersey Supreme Court, which unanimously upheld the decision. The Prosecutor’s Office has indicated that it intends to continue pursuing the case by requesting the appropriate grand jury subpoena. Although the United States Supreme Court concluded that there is no federal Constitutional right to privacy on the Internet, the New Jersey law will take precedent in New Jersey cases involving Internet privacy.

Court Awards MySpace 230 Million Dollar Verdict

Posted: May 29th, 2008, 3:14pm EDT

The judge in MySpace Inc. v. Wallace, et al, CV-07-1929-ABC-AGR (C.D. Cal. May 12, 2008) entered a default judgment against Sanford Wallace and Walter Rines for violations of the CAN-SPAM Act and ordered the defendants to pay MySpace over $230 million in statutory damages. The CAN-SPAM Act regulates the transmission of commercial email and various activities related to commercial email, such as prohibiting the use of false, misleading, or deceptive information, prohibiting the use of automated “bots” to create multiple email accounts, and requiring certain contact information in commercial electronic mail messages. MySpace, a social networking site, allows individuals to create unique user profiles containing personal and private information and to share their profile information with others. The networking site allows users to send each other messages within the MySpace network and to post comments on each other’s profile pages. MySpace alleged that Wallace and Rines created over 11,000 false profiles by circumventing MySpace’s security measures designed to prevent such actions. MySpace further asserted that Wallace and Rines sent nearly 400,000 commercial messages and posted 890,000 comments from 320,000 profiles defendants “hijacked” by luring users to a website designed to look like a MySpace page. The phony MySpace page then solicited MySpace users’ account credentials which defendants Wallace and Rines used to hijack user profiles and send messages. The court found that Wallace and Rines violated the CAN-SPAM Act and assessed damages as follows: - $157,390,200 against Wallace and $233,777,500 against Rines, for violations of the CAN-SPAM Act ($157,390,200 in joint and several liability and an additional $63,387,300 against Rines). - Statutory damages in the amount of $1,500,000 against both defendants for violations of California’s anti-phishing statute, Cal. Bus. & Prof. Code § 22948.2. - Attorneys’ fees in the amount of $4,709,140.00, as calculated pursuant to the formula prescribed by Local Rule 55-3 ($5,600 plus 2% of the amount over $100,000); plus costs of suit.

Controversial Copyright Legislation Moves Forward, but with Significant Changes

Posted: May 29th, 2008, 3:09pm EDT

By an overwhelming majority of 410-11, the U.S. House recently passed the Prioritizing Resources and Organization for Intellectual Property Act of 2007 (PRO-IP Act). The legislation has been controversial among many legal experts and consumer groups for proposing significant and, according to many, unnecessary changes to existing copyright law. The PRO-IP Act proposes new governmental powers and bureaucracies – including a “copyright czar” – with the stated goal of combating copyright infringement. The PRO-IP Act also provides for criminal and civil forfeiture of property used to commit copyright infringement, and it would allow courts in copyright litigation to order the seizure of property containing records documenting acts of infringement. However, perhaps the most controversial aspect of the legislation was removed prior to passage. As introduced in the House, the PRO-IP Act would have provided as follows: A copyright owner is entitled to recover statutory damages for each copyrighted work sued upon that is found to be infringed. The court may make either one or multiple awards of statutory damages with respect to infringement of a compilation, or of works that were lawfully included in a compilation, or a derivative work and any preexisting works upon which it is based. In making a decision on the awarding of such damages, the court may consider any facts it finds relevant relating to the infringed works and the infringing conduct, including whether the infringed works are distinct works having independent economic value. That change would have comprised a substantial departure from the analysis used to calculate statutory damages for copyright infringement. Currently (and, ostensibly, for the foreseeable future), the Copyright Act expressly provides that compilations are to be considered “one work” for the purpose of calculating statutory damages for their infringement. Industry groups had been strongly in favor of the legislation as it was originally drafted, because its passage would have increased the amount of copyright damages awards. The fact that the statutory damages language was stripped from the bill prior to passage is compelling evidence (to the extent that any was needed) that it was never the intent of Congress to allow for heightened damages awards for unauthorized copying of compilations, even when the constituent parts of those compilations are independently copyrighted and capable of “leading their own copyright life” apart from any suite in which they are included.

Trying to Remove a Case to Federal Court Does not Waive Arbitration Rights

Posted: May 29th, 2008, 3:05pm EDT

The Texas Supreme Court has indicated that a party’s conduct in removing a case from state to federal court and later attempting to transfer the case to a multidistrict litigation panel did not constitute a waiver of its right to arbitration. With its decision in In re Citigroup Global Markets, Inc., 2008 WL 2069835 (Tex. 2008), the court continues to explore the question of what constitutes a waiver of arbitration rights. The decision in Citigroup appears to allow a party additional leeway to pursue some litigation options before endangering its arbitration rights. Robert and Natalie Nickell had investment accounts with Citigroup and signed agreements to arbitrate any disputes concerning or arising from the accounts. The Nickells claim they lost more than $4 million invested in WorldCom, Inc. based on research reports prepared by a Citigroup analyst. The Nickells filed suit against Citigroup in Texas state court. Citigroup immediately removed the case to federal court on the ground that it related to WorldCom’s bankruptcy proceedings. While the Nickells moved to remand, Citigroup asked to have the case transferred to a federal multidistrict litigation court in New York that was managing similar WorldCom-related suits against Citigroup. Citigroup also asked to stay proceedings in the federal court pending a resolution of the issue by the multidistrict panel. In seeking a stay, Citigroup specifically reserved its defense that the Nickells were obligated to arbitrate their claims. In the multidistrict panel, the Nickells again moved to remand and Citigroup did not oppose the motion. After this seven-month process, the case returned to Texas state court. Citigroup filed an answer and moved to compel arbitration. The trial court denied the motion, and the court of appeals denied Citigroup’s petition for writ of mandamus on the ground that Citigroup had expressly waived arbitration by making statements in its motions to transfer suggesting that it was doing so for the purpose of litigating, not arbitrating. The Supreme Court disagreed. According to the court, “Citigroup never opposed arbitration, nor did it expressly waive its arbitration rights.” The statements in its moving papers “were required by statute to justify transfer to the MDL court.” The court disagreed that Citigroup’s attempts to transfer the case to the multidistrict panel were necessarily inconsistent with seeking arbitration, noting that “arbitration is possible for consolidated actions as well as individual ones.” Therefore, Citigroup’s actions in seeking to transfer the case did not indicate that it had abandoned arbitration. The court also concluded that Citigroup had not impliedly waived arbitration. While Citigroup’s actions in requesting transfer to the multidistrict panel were factors to be considered in a totality-of-the-circumstances analysis the court had announced in Perry Homes v. Cull, 2008 WL 1922978 (Tex. 2008), those actions were not determinative. Citigroup’s litigation conduct “was limited to jurisdictional transfers, not the merits.” Citigroup had not engaged in any discovery or filed any motions related to the merits before it sought arbitration. Because Citigroup had not waived its right to arbitration, the court granted its petition for writ of mandamus and directed the trial court to compel arbitration. Full opinion text: [www.supreme.courts.state.tx.us]

Don’t Ignore Copyright Infringement Allegations

Posted: May 29th, 2008, 3:00pm EDT

It’s never a good idea for a business or individual accused of copyright infringement to simply ignore the allegations, hoping they’ll go away. This is particularly true when the copyright holder files a lawsuit seeking damages, as the defendant in Broadcast Music, Inc. v. Spring Mount Area Bavarian Resort, LTD., 2008 WL 2152060 (E.D. Pa. 2008), recently learned. Indeed, a failure to respond to allegations of copyright infringement may result in a finding that the infringement was willful, leading to a larger damages award. BMI is a collection of music recording companies, licensing companies, and affiliated artists that own the copyrights to various popular songs. Spring Mount operates Crazy Carol’s Sports Bar located in Schwenksville, Pennsylvania. BMI alleged that Crazy Carol’s performs, or causes to be performed, songs whose copyrights are owned by BMI. Between August 2005 and May 2007, BMI sent numerous “cease and desist” letters to Spring Mount demanding that Spring Mount honor BMI’s copyrights and also placed nearly fifty telephone calls to Crazy Carol’s in an attempt to address the issue. BMI finally sent a representative to Crazy Carol’s to determine whether it was continuing to violate the copyrights. During a four-hour period, the representative documented extensive violations of the copyrights. Had Crazy Carol’s entered into a typical licensing agreement with BMI, licensing fees owed from August 2005 would have totaled approximately $10,000.00. Crazy Carol’s neither responded nor ceased the activity, and BMI filed suit against Spring Mount and an individual officer of Spring Mount for copyright infringement. BMI sought statutory damages, injunctive relief, costs, and attorney’s fees. Defendants did not answer the complaint or otherwise appear, and the clerk entered a default against Defendants. BMI then moved for default judgment, seeking statutory damages in the amount of $2,000.00 for each of eight violations, an injunction prohibiting further copyright infringement by Defendants, and more than $5,000.00 in attorney’s fees and costs. Because Defendants had not responded, the court accepted BMI’s allegations as true and found that Defendants were liable for eight instances of copyright infringement. The court also found that “Defendants’ default and their decision not to defend against these allegations are grounds for concluding that their actions were willful.” The court noted that this finding was also supported by evidence indicating that Defendants continued to infringe on the copyrights months after being notified. According to the court, “Plaintiffs provided Defendants with clear and unambiguous notice that they were infringing Plaintiff’s copyrights, and Defendants nonetheless persisted in their unlicensed use.” Defendants’ “intransigence prior to the initiation of this litigation,” coupled with their refusal to appear, “indicate a conscious decision to ignore this problem in the hope that it will simply go away.” That decision proved costly to Defendants. Under the Copyright Act, a court may increase the award of statutory damages up to $150,000.00 when it finds the infringement was committed willfully. The court concluded that the requested award of $2000.00 per infringement, although higher than the minimum statutory damages amount of $750.00, was just and appropriate under the circumstances. Similarly, the court found that it was appropriate to award attorney’s fees and costs and also allow interest on the damages, costs, and fees “as a further incentive to Defendants to promptly and finally resolve this matter.” The result in Broadcast Music is a clear reminder that it is rarely a good idea to ignore a copyright infringement allegation because the refusal to respond to an allegation may be used as evidence that infringement was willful, resulting in a higher damages award.

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