By Anjani Mandavia

The question of what does or does not constitute “fair use” is probably one of the grayest areas of copyright law. But it is an area of heightened interest to those artists who practice what has come to be known as “appropriation art,” that is, art – mainly visual art – that incorporates and utilizes found images and photographs, which are often themselves the subject of copyright. Practitioners of “appropriation art” include sculptor Jeff Koons, graphic artist Barbara Kruger, and, of course, pop artist Andy Warhol. The grand daddy of them all was Marcel Duchamp, who, in the period following World War I, pioneered the concept of “readymades” or “found art.”  Koons, Kruger and Warhol all found themselves on the wrong end of copyright infringement lawsuits for their use of other artists’ copyrighted images in their art work. And if Leonardo Da Vinci had been born a few hundred years later, maybe Duchamp too would have found himself having to defend appropriating Da Vinci’s most famous work – the Mona Lisa – by drawing a mustache and a vulgarity on it, and calling it his own.

When bumping up against the strictures of the Copyright Act, appropriation artists turn to the doctrine of “fair use” as a defense, sometimes successfully, (see Blanch v. Koons 467 F.3d 249 (2d. Cir. 2006)), and other times not (see Rogers v. Koons 960 F.2d 301 (2d. Cir. 1992)). The defense itself is codified in the Copyright Act at Section 107, which sets forth four factors that courts should consider in determining if something is a “fair use” of a copyrighted work, and therefore not subject to an infringement claim: (1) the purpose and character of the use; (2) the nature of the copyrighted work; (3) the amount and substantiality of the use; and (4) the effect on the potential market for the copyrighted work. Although the court’s inquiry is not required to be limited to these four factors, as a practical matter most fair use cases are analyzed within this structure.

In recent years the first statutory factor – the “purpose and character of the use” – has taken on increasing importance, and the inquiry on that topic has been described by the Supreme Court as

whether the new work merely “supersedes the objects” of the original creation, or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message[,]. . . in other words, whether and to what extent the new work is transformative. . .

Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (1994). Indeed, this so-called “transformative use” analysis often eclipses the other stated factors, so that if a use is found to be “transformative,” it is almost always found to be fair use.

But the transformative use analysis is, by its very nature, subjective and amorphous, often leading courts – despite Justice Holmes’ famous warning over a century ago regarding jurists being ill-suited to be art critics[1] – to nonetheless attempt their own version of art analysis to assess the “character, meaning, expression and message” of the challenged works. The results of these analyses, because they are subjective, generally fail to give clear guidance on where the lines between infringement and fair use should be drawn for works that are not then before the court. Accordingly, the art world was awaiting with great anticipation the Second Circuit’s ruling in Cariou v. Prince, in the hope that the decision would offer practical guidance and an objective roadmap for artists to navigate their way to the fair use safe harbor – particularly in the context of appropriation art. 

In that case, photographer Patrick Cariou sued artist Richard Prince – along with Prince’s dealer and gallery – for using without permission a number of photographs Cariou had taken of Rastafarians in Jamaica, and published in a book entitled Yes, Rasta. The book had enjoyed limited commercial success, and except for a few sales to friends and acquaintances, Cariou had not sold or licensed the photographs contained in Yes Rasta.

Prince is a very successful artist, represented by a powerhouse New York dealer and gallery. His work is in the permanent collections of several museums, is routinely purchased by celebrities and collectors, and often fetches into the seven-figures for a single canvas. Prince used a number of images from Yes Rasta – which he enlarged, cut up, and painted over – in the creation of thirty works of art comprising a series called Canal Zone. Prince’s dealer exhibited the Canal Zone series at his gallery, and  sold eight of the works for a total of over $10 million.

Upon learning of Prince’s exhibition, Cariou sued for copyright infringement for the unauthorized use of his photographs. He won on summary judgment at the district court level, and obtained a permanent injunction compelling Prince to turn over all of the unsold Canal Zone works for sale, disposal or destruction. In its ruling, the United States District Court for the Southern District of New York held that Prince’s works did not qualify as a “fair use” because, among other things, they were not transformative in that they did not “comment on” Cariou’s photographs or the subjects of the photographs, and Prince himself did not articulate any transformative intent in connection with the use of the images.

Prince appealed, and the Second Circuit reversed, rejecting the District Court’s requirement of either “commentary” or transformative “intent,” and focused instead on how the works could reasonably be perceived:

What is critical is how the work in question appears to the reasonable observer, not simply what an artist might say about a particular piece or body of work. Prince’s work could be transformative even without commenting on Cariou’s work or on culture, and even without Prince’s stated intention to do so. Rather than confining our inquiry to Prince’s explanations of his artworks, we instead examine how the artworks may “reasonably be perceived” in order to assess their transformative nature.

It was indeed beneficial for the Court to clarify that commentary on the original work was not a necessary component of transformative use, and that an artist was not required to articulate a transformative intent for one to be found. However, in turning to how Prince’s artworks may be perceived by the reasonable observer, the Court plunged feet-first in to art criticism and commentary:

Here, our observation of Prince’s artworks themselves convinces us of the transformative nature of all but five. . . These twenty-five of Prince’s artworks manifest an entirely different aesthetic from Cariou’s photographs. Where Cariou’s serene and deliberately composed portraits and landscape photographs depict the natural beauty of Rastafarians and their surrounding environs, Prince’s crude and jarring works, on the other hand, are hectic and provocative.

The Court found these twenty-five works to be transformative as a matter of law, and subject to the protection of the fair use doctrine. With respect to the remaining five, however, the Court stated that “although the minimal alterations that Prince made in those instances moved the work in a different direction from Cariou’s classical portraiture and landscape photos, we cannot say with certainty at this point whether those artworks present a ‘new expression, meaning or message.’” Accordingly, they were sent back to the District Court for a determination as to their fair use status.

Unfortunately, the Second Circuit – while pointing out critical differences between the five works remaining at issue and the underlying photographs which they utilized – did not provide any further guidance on how the District Court – or perhaps even a jury – should assess those differences. Indeed, it could readily be said (and has been said by a number of commentators) that these remaining five works are every bit as “transformative” as the twenty-five protected works, particularly when you look at the critical aspects of context and purpose, and not just at visual changes.

So while Cariou v. Prince can rightly be considered a victory for appropriation art to some extent, what it is not is a victory for clarity, guidance and certainty in the very murky area of fair use and “transformativeness.”   

By Audrey Millemann

Zombies have become part of our lives. We are fascinated with vampires, but we are obsessed with zombies.   

Our obsession is best evidenced by the tremendous success of AMC’s television series “The Walking Dead,” about the zombie apocalypse. The show first aired on Halloween night in 2010 and was watched by 5.35 million viewers. It premiered worldwide the same week, in 120 countries. The premier was preceded by a zombie invasion (orchestrated by AMC and Fox) on October 26, 2010 in 26 cities throughout the world, including Hong Kong, Taipei, and Los Angeles.  The show is now going strong in its fourth season.

Movies about zombies are also alive and well. Since 1980, zombie movies have brought in almost $1 billion. The highest grossing zombie movie was Sony’s 2009 “Zombieland,” bringing in $75 million since it opened.  “Warm Bodies,” one of several zom-rom-coms (as this genre is now called) has grossed $65 million since it opened three months ago. Other favorites include the “Resident Evil” and “Night of the Living Dead” series, and “Shaun of the Dead.”

Thus, even though zombies have been walking (slowly) among us for hundreds (thousands?) of years, we have really just recently (as evidenced by our 33 years of TV and movies) noticed them. Zombies have been here all along. In fact, they are way ahead of us in the intellectual property world.

As far as we know, zombies began getting patents in the late 1800s, taking advantage of humans’ fear of being buried alive. At that time, medical technology had not advanced enough to confirm that a person was really dead. A lot of people were dying from very contagious diseases such as smallpox and cholera, so instead of leaving the bodies out for a few days and observing the decay (a sure sign of death), people buried the dead quickly.  While this practice was a positive step in preventing the diseases from spreading, it had the negative effect of fueling our fear of being buried alive. This fear was exacerbated by rumors and newspapers reporting instances of burying the living. 

Most of the zombie patents were for safety coffins (22 patents were issued from 1868-1925) and other devices to allow the living dead to escape.  The stated purpose of the safety coffins patents was to prevent “premature burial,” or, as one patent stated, to detect “the recurrence of life in persons that have been buried in a state of trance or apparent death.” These safety coffins had various devices to help the undead come back from the grave, including bells attached to ropes that the living corpse would pull to signal someone above, a spring-loaded lid, and a string attached to the corpse’s finger. Some of the safety coffins also had tubes to the outside to allow air into the coffin; others had glass lids to allow people on the outside to observe the dead coming back to life. One of the strangest safety coffins had a hammer above the corpse’s head that was triggered by the corpse’s movement. The hammer would break a glass window above the corpse’s face, resulting in the undead rejoining the living with a face full of glass and a bump on the head.  (Presumably, those injuries would not deter a zombie.)

Even though we now have accurate methods of determining death, there are still new patents being issued for inventions to help the undead escape. One such patent is U.S. patent no 4,367,461 issued on January 4, 1983 for a coffin-alarm system that utilizes a battery operated signal.

On the other side, our fear of the zombie apocalypse has spawned many inventions to help us fight off a zombie attack. These inventions include a zombie-proof house that turns itself into a fortress, complete with thick concrete walls, steel enclosures, and a drawbridge. There is also an armored zombie-proof car, a water filtration system and an aqua-farm system that we can use to prepare clean water and grow food, and many types of weapons (axes, slingshots, and others). There is even a special body-armor suit to protect us from zombie bites.

So far, it appears that the zombie side has won in the IP game – they have more patents to help them come after us than we have to ward them off. They may move slowly, but zombies are here to stay.

By Lisa Y. Wang

Back in the day when I used a VCR to record TV shows (one that forwarded through commercials by itself no less), it was impossible to imagine that something like TiVo and DVRs would be in over 50% of American homes. In May 2012, Dish Network took digital recording a step further. Its customers who subscribe to Hopper don't even have to manually fast forward through the commercials using their remote control. The "Auto Hop" feature of the Hopper automatically skips through the commercials of the all the broadcast network's prime time lineup by moving from segment to segment of the television show and skipping the ads. The AutoHop feature, coupled with Dish's "PrimeTime Anytime" feature, essentially allows consumers to concurrently record all prime-time broadcasting programming on all four networks without watching a single commercial without having to move a finger. With Dish Networks' $14 billion in annual revenue and 14 million subscribers, that's a lot of commercial revenue going down the drain. As a result, Dish Network has been sued by all four major networks for copyright infringement, and its Chief Executive Officer Charles Ergen has been dubbed by The Hollywood Reporter as "The Most Hated Man in Hollywood." 

In November 2012, Fox Broadcasting filed for a preliminary injunction claiming that Dish Network committed contributory and direct copyright infringement. The judge did not issue the injunction because Fox could not show irreparable harm and sided with Dish. Dish claimed the defense of fair use, which allows for the limited use of copyrighted works without having to obtain permission. Dish argued that it is the customers, not Dish, who are copying the prime-time network broadcasts, and that copying constitutes fair use, and the court agreed. In finding that Dish was not secondarily liable for copyright infringement for their "PrimeTime Anytime" feature, the court cited the Supreme Court case Sony v. University City Studios, 464 U.S. 417 (1984).  Sony held that the copying of television programs by consumers for time shifting was fair use. Since the consumers were not liable for copyright infringement, it was not possible for Dish to be liable for secondary infringement.  Likewise, Dish was not liable for direct infringement by offering "PrimeTime Anytime" to its consumers because the consumer is the one who directs its Hopper to create copies of the broadcasts and Dish merely passively provides the technology used for copying. 

Fox immediately filed an appeal which is currently up before Ninth Circuit Court of Appeals. A group of law professors have filed a brief supporting Dish, claiming that Fox is "launching an assault on private-noncommercial time-shifting of television programs" and that the lawsuit poses a threat to fair use. Fox countered stating that its appeal does not challenge DVRs and the viewer's ability to record programs for viewing later; instead, it is challenging Dish's "wholesale copying of Fox's copyrighted primetime programming in order to offer its subscribers an on-demand library of commercial-free programming, in violation of copyright law and its contractual obligations." Although Fox "lost" the first round, both sides are claiming victory. Fox is not discouraged by the ruling because the district court judge did find that Dish's quality assurance copying violated the parties' license agreement and other features could be construed as directly infringing Fox's copyrights with the determining factor being whether Dish exercises control over the copying feature. She noted that some features, such as Dish deciding when prime time recordings occur, could be interpreted as exercising a significant degree of control. 

In early 2013, both parties filed their briefs before the Ninth Circuit with Fox slamming Dish's "baseless accusations" that reversing the district court would imperil DVRs. Whoever the Ninth Circuit sides with, chances are both parties will appeal, so for now, no need to throw that Hopper away and enjoy prime time, any time, all the time, without a second of commercials. 

By Scott Hervey

What do Hooters, Twin Peaks, Canz, Tilted Kilt, and Mugs N Jugs have in common.  These are all “Breastaurants.” According to Wikipedia, a breastaurant is a “restaurant that has sexual undertones, most commonly in the form of large-breasted, skimpily dressed waitresses and barmaids.”    However, on October 23, 2012  the United States Patent and Trademark Office issued a trademark registration for the mark BREASTAURANT to Bikini Bar and Restaurant, LLC for bar and restaurant services on the Principal Register..  Even more interesting then someone having filed an application to register the mark BREASTAURANT, is that the USPTO allowed the mark to register on the Principal Register without challenging the mark as being merely descriptive.  

15 USC 1052 provides as follows:

No trademark by which the goods of the applicant may be distinguished from the goods of others shall be refused registration on the principal register on account of its nature unless it.... (e) Consists of a mark which, (1) when used on or in connection with the goods of the applicant is merely descriptive or deceptively misdescriptive of them....

Matter that “merely describes” the goods or services on or in connection with which it is used is not registrable on the Principal Register. As noted by the United States Court of Customs and Patent Appeal (the precursor to the Federal Circuit) in In re Abcor Dev. Corp):

The major reasons for not protecting such marks are: (1) to prevent the owner of a mark from inhibiting competition in the sale of particular goods; and (2) to maintain freedom of the public to use the language involved, thus avoiding the possibility of harassing infringement suits by the registrant against others who use the mark when advertising or describing their own products.

Marks that describe the intended purpose, function or use of the goods, desirable characteristics of the goods, the nature of the goods or the end effect upon the user are considered merely descriptive and are not registrable absent establishing secondary meaning.   The determination of whether a mark is merely descriptive must be made in relation to the manner in which the mark is encountered by consumers.  The examiner must consider the goods or services for which registration is sought, the context in which the mark is used or intended to be used in connection with those goods/services, and the possible significance that the mark would have to the average consumer in the respective marketplace.

For example, NICE 'N SOFT® for bathroom tissue or PARK 'N FLY® for off-airport auto parking services are descriptive marks.  The same is true with respect to marks that identify the place in which the goods or services originate and therefore are geographically descriptive.   The major reasons for not protecting marks that are merely descriptive is to prevent the owner of a mark from inhibiting competition in the sale of particular goods and to maintain freedom of the public to use language which naturally describes the goods or services, thus avoiding the possibility of harassing infringement suits by the registrant against others who use the mark when advertising or describing their own product. 

When a mark is a compound word, in order for the mark to be merely descriptive the examining attorney must producing evidence that each of the words that make up the mark is descriptive, and that the separate words retain their descriptiveness when joined to form a compound word that has no additional meaning.    An example of a combined terms found to be merely descriptive are THE BREATHABLE MATTRESS for “beds, mattresses, box springs and pillows” and EXPRESSERVICE banking and trust services.

One step up from descriptive marks, but miles away as far as protectability goes, are suggestive marks.  Suggestive marks are registrable on the Principal Register without proof of secondary meaning.  Suggestive marks are those which, while not really descriptive of the product's qualities, nevertheless, suggest some benefit or property of the product.  An example involves ROACH MOTEL® for insect traps, in which this mark was enforced against an infringer using "Roach Inn."  The Court explained,

We do not find the mark ROACH MOTEL® to be a merely descriptive mark.  While roaches may live in some motels against the will of the owners, motels are surely not built for roaches to live in.  Hence, the mark is fanciful on conception.  Indeed its very incongruity is what catches one's attention.

The determination of whether a mark is merely descriptive (and therefore not registrable absent evidence of secondary meaning) or merely suggestive has always been a challenging task.  The Trademark Trial and Appeal Board has frequently stated that there is “a thin line of demarcation involved in making a determination as to whether a term or slogan is suggestive or merely descriptive and, apropos, thereto, when a term stops suggesting and begins to describe the goods in connection with which it is used, it is, at times, a difficult question to resolve.”  The Board has suggested that in determining whether a mark has crossed the threshold from suggestiveness to descriptiveness, the following factors should be analyzed:  (1) is the mark used in a trademark sense and not in a descriptive manner to describe the goods; (2) is the mark an expression that would be or is commonly used to describe the goods; (3) does the mark possess some degree of ingenuity in its phraseology; (4) does the mark say something at least a little different from what might be expected from a product, or say expected things in an unexpected way; and (5) does the mark possess more than a single meaning, namely, a double-entendre, which imparts to it a degree of ingenuity and successfully masks or somewhat obscures the intended commercial message.

So is “Breastaurant” merely descriptive?   While it is always a fine line between merely descriptive and highly suggestive, there are significant indicators that Breastaurant is a merely descriptive term.  First, the applicant’s own specimen shows the use of the mark within a website page which states as follows: “How America’s Only Sports Breastaurant got started.”  The proper use of a trademark means using the mark as an adjective, not as a noun or a verb.  .  Here it appears that the applicant has used the mark as a term for a specific type of restaurant and not in reference to the applicant’s own restaurant.  Next, the fact that Wikipedia and other online sources use the term to identify a certain type of restaurant whose female servers have certain attributes shows that the mark is an expression that is commonly used to describe a particular type of restaurant.  Although the mark possesses a degree of ingenuity in its phraseology, it does not obscure in any way the intended commercial message.

It will be interesting to see what steps, if any Bikini Bar and Restaurant will take to enforce its trademark rights.  Other operators of these types of restaurants do not seem to be using this term at all, but are more focused on growing their core brands.  One never knows though.  Bikini Bar and Restaurant garnered significant free publicity and press coverage with the announcement of the registration of its mark.  Imagine what press coverage a cancellation proceeding would garner. 

By  James Kachmar

The fair use doctrine is a defense that a defendant may raise in a copyright infringement action when an otherwise copyrighted work is used for purposes “such as criticism, comment, news reporting, teaching …, scholarship or research.”  (17 U.S.C. §107.)  Although Congress has listed four factors to guide courts in their analysis of the fair use doctrine, the Ninth Circuit has recognized that: “Many fair use cases still manage to approach `the metaphysics of the law, where the distinctions are or at least may be very subtle and refined and sometimes almost evanescent.’”  It is with that background that the Ninth Circuit recently considered the fair use doctrine as a defense to copyright infringement in the case, SOFA Entertainment, Inc. v. Dodger Productions, Inc.

SOFA owns the copyrights in a vast library of films and television shows which it allows others to use for a licensing fee.  SOFA’s library includes all of The Ed Sullivan Show episodes.

Dodger is the producer of the musical, Jersey Boys, which is about the history of The Four Seasons and its members.  At the end of the first act, the audience is shown a clip from the January 2, 1966 episode of The Ed Sullivan Show wherein Mr. Sullivan introduces the band The Four Seasons.  The clip lasts for approximately seven second and shows Mr. Sullivan in his “signature pose” as he introduces the band to his studio and television audiences.  

The Ninth Circuit began by recognizing that the Copyright Act exists “to stimulate artistic creativity for the general public good” by granting authors a “special reward” in the form of “a limited monopoly over their works.”   Despite this, Congress had codified the fair use doctrine to prevent “an overzealous monopolist [from using] his copyright to stamp out the very creativity that the [Copyright] Act seeks to ignite.”   The Ninth Circuit noted that there are four factors to guide the courts in their “fair use” analysis: (1) the purpose and character of the uses including whether such use is of a commercial nature; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the whole of the copyrighted work; and (4) any effect the use may have on the value or potential market for the copyright work.

In reviewing these four factors, the Ninth Circuit concluded that the trial court had properly determined that Dodgers’ use of The Ed Sullivan Show clip was protected under the fair use doctrine.  First, the Ninth Circuit recognized that the central inquiry under the first factor “is whether the new work is `transformative’”.  This means whether the new work “adds something new” to an existing work resulting in the protected work having a “new expression meaning or message” instead of just “superseding the objects of the original creation.”  The Ninth Circuit noted that the use of the clip in the Jersey Boys production was intended “to mark an important moment in the band’s career.”   It was intended to show how the Four Seasons were able to thrive despite the “British Invasion” that was occurring at the time and that by using it for this purpose, “Dodger put the clip to its own transformative ends.”  The Court noted that it was this historical reference that was its intended use and rejected SOFA’s argument that the use of the clip was for its “own entertainment value”.

The Court then turned to the second factor which recognizes that “creative works like fictional stories” tend to be more difficult for an alleged infringer to establish fair use.  However, the use of The Ed Sullivan Show clip was used only to convey historical information, i.e., who was about to perform, and therefore this factor also favored Dodger.

The third factor in the Court’s analysis was to examine “the quantitative amount and qualitative value of the original work used in relation to the defendant’s justification for the use.”  SOFA did not and could not contest that the use of only seven seconds of the clip was “quantitatively insignificant.”  It argued instead that Dodger was intending to capitalize on the “central and most beloved part of The Ed Sullivan Show, namely Ed Sullivan’s introduction of popular new rock and roll acts.”  The Ninth Circuit rejected this position.  First, it held that the seven-second introduction is hardly “qualitatively significant”.  The Ninth Circuit doubted that the clip standing on its own would otherwise qualify for copyright protection.  The Ninth Circuit likewise rejected SOFA’s apparent position that Mr. Sullivan’s “trademark” gesticulation and styling was “copyrightable.”  The court noted that “[c]opyright only attaches to an original work fixed in a tangible medium of expression, never in the underlying ideas or facts.”  While movement and innovation could be elements in an original performance, what SOFA was really arguing was “Sullivan’s charismatic personality” should be copyrightable.  The Ninth Circuit rejected this argument and found that the third factor also favored Dodger.

Finally, the Court looked at the market effect and focused on whether the defendant’s actions became “unrestricted and widespread”.  The Court noted that it was significant that “where the secondary use is not a substitute for the original and does not deprive the copyright holder of the derivative use, the fourth factor weighs in favor of fair use.”  The Ninth Circuit concluded that the Jersey Boys was not a substitute for The Ed Sullivan Show, especially since the clip was only seven seconds and appeared only once.  The Court also found it significant that Dodger did not reproduce Jersey Boys on video tape or DVD which would allow for otherwise repeated viewing.  Thus, there was no reasonable threat that Dodger’s use of the clip in the Jersey Boys posed any danger to SOFA’s business model.  Therefore, the fourth factor favored Dodger’s use of the clip.

After balancing the four factors, the Court was left with the conclusion: “Dodger’s use of the clip did not harm SOFA’s copyright in The Ed Sullivan Show and society’s enjoyment of Dodger’s creative endeavor is enhanced with this inclusion.  This case is a good example of why the ‘fair use doctrine exists.’”  

Next, turning to the issue of attorneys’ fees, the Ninth Circuit recognized that the Copyright Act gives discretion to trial courts to grant a prevailing party its reasonable attorney’s fees.  The most important factor to justify an award is whether an award will further the purposes of the [Copyright] Act.  The Court noted that SOFA had previously lost a similar infringement action, Elvis Presley Enterprises, Inc. v. Passport Video, 349 F.3d 622 (9^th Cir. 2003).”  Thus, SOFA should have known “from the outset that its chances of success in this case were slim to none.”   The Ninth Circuit agreed with the trial court that lawsuits of this nature posed the danger of having “a chilling effect on creativity insofar as they discourage the fair use of existing works and the creation of new ones.”  The Court concluded that “when a fee award encourages a defendant to litigate a meritorious fair use claim against an unreasonable claim of infringement, the policies of the Copyright Act are served” and thus, Dodger was entitled to its attorney’s fees.

The SOFA Entertainment case demonstrates the strength of the fair use doctrine as a defense to claims of copyright infringement.  However, given that the analysis is fact intensive, artists are cautioned that although they may eventually prevail on the affirmative defense of fair use, they are likely going to be subject to costly litigation to defend their “fair use” of another’s copyrighted work. 

Weintraub Tobin and the LAVA Digital Media Group will host a panel discussion: "How Has Digital Media Changed the Way We Interact with Food" on Tuesday, April 23.

Whether it's finding a place to eat, sharing recommendations on your favorite dishes or ordering food online, investors have been hungry (sorry for the terrible pun) to invest in web and mobile-based food applications and platforms - aka food tech.

Over the last year, almost $350 million has been invested in Food Tech and deal activity to the burgeoning sector grew over 37% vs the prior year.

Panelists include:

• Bruce Seidel, Digital Media Strategist, and former CEO, Electus' YouTube Food Channel.
• Corianda Dimes, New Media Strategist, Bullfrog and Baum
• Nik Bauman, cofounder of Foodzie.com and Tonx, Inc. Nik has focused his entire professional career on e-commerce and food
• Moderated by Scott Hervey, Shareholder, Weintraub Tobin

"How Has Digital Media Changed the Way We Interact with Food" takes place Tuesday, April 23 at ROC, 604 Arizona Street in Santa Monica. Enjoy a social hour from 6:30-7 p.m. followed by the panel discussion and a Q and A session. Register here.

Follow the event on Twitter: @weintraub_law

#wtdmg

By Audrey A. Millemann

Enablement is one of the requirements a patent application must satisfy in order for the patent to be granted. Enablement means that the specification (the written text and drawings) teaches a person skilled in the art how to make and use the invention. 35 U.S.C. §112, ¶1. The enablement requirement is satisfied if a person, after reading the specification, could make and use the invention without undue experimentation. 

In Cephalon, Inc. v. Watson Pharmaceuticals, Inc., 707 F.3d 1330, 2013 U.S.App. LEXIS 3203 (Fed. Cir., February 14, 2013), the Federal Circuit Court of Appeals held that experimentation is not “undue” even if it is “complicated and difficult.” 

Cephalon owned two patents covering a method of drug delivery, which used effervescent agents to increase the absorption of the drug. Cephalon sold the brand-name drug Fentora to treat breakthrough cancer pain, which utilized the patented method.

Cephalon then sued Watson for patent infringement in the district court for the District of Delaware. The case was tried to the court. The court held that Cephalon’s two patents were invalid for failure to meet the enablement requirement. The court also found that Watson had not infringed the patents. 

Cephalon appealed the court’s judgment on two grounds: (1) that Watson had not proved by clear and convincing evidence that Cephalon’s patents were invalid for lack of enablement; and (2) that Watson had literally infringed the patents.

The Court of Appeals for the Federal Circuit reversed the finding of invalidity and affirmed the finding of non-infringement.

The appellate court held that Watson had not proved by clear and convincing evidence that undue experimentation was necessary to practice the invention. The court explained that the existence of undue experimentation is determined by considering a number of factors, including the amount of experimentation needed, the guidance given, working examples, the nature of the invention, the prior art, the skill level of those in the art, the predictability of the field, and the breadth of the claims. (2013 U.S. App. LEXIS at *12, citing In re Wands,  858 F. 2d 731 (Fed. Cir. 1988).) These factors are not required, but are to be considered if they are relevant to the specific situation. The court stated that “[A] reasonable amount of routine experimentation required to practice a claimed invention does not violate the enablement requirement.” Id. at *12.

Cephalon argued that its expert testified that it would have been easy for a skilled person to calculate the amounts of the compounds needed to practice the claimed invention, which the district court had construed to require two dosage forms. Watson relied on its expert, who testified that it “would be very difficult…and complicated” to calculate the two dosage forms.

The district court had held that Watson had shown a prima facie case of lack of enablement, shifting the burden to Cephalon to rebut that evidence. The district court had then found that Cephalon had not rebutted Watson’s case, and held the patents invalid. In reviewing the district court’s holding, the appellate court emphasized that there is no burden shifting; the burden of proof is on the plaintiff challenging the patent to prove invalidity by clear and convincing evidence. 

The court found that Watson’s case was primarily based on its expert’s testimony and that the expert’s unsupported comments that the experimentation would be “difficult and complicated” did not constitute clear and convincing evidence. 

            “The question of undue experimentation is a matter of degree, and what is required is that the amount of experimentation not be ‘unduly extensive.’  In addition, extensive experimentation does not necessarily render the experiments unduly extensive where the experiments involve repetition of known or commonly used techniques.”

Id. at *19.

The court reviewed several prior cases and then summarized its holding, stating at *20:

“Likewise, we have held that the amount of experimentation would be undue where: (1) the specification lacks guidance by teaching away from the subject matter that was eventually claimed; and (2) there is evidence of the patentee’s own failures to make and use the later claimed invention at the time of the application. See, e.g., AK Steel Corp. v. Sollac, 344 F.3d 1234, 1244 (Fed. Cir. 2003). Hence, the mere potential need for clinical work, without more, is not dispositive in this case.”

The court held that Watson had not shown that the necessary experimentation would have been “excessive,” such as by being unreasonably time-consuming. Because Watson had not met its burden, the court reversed the district court’s ruling.

By Nathan H. Geronimo

A recent case in California’s Sixth District Court of Appeal, Winchester Mystery House, LLC v. Global Asylum, Inc., illustrates California’s treatment of trademark infringement with regard to claims involving artistic works.  Winchester Mystery House is a well-known tourist attraction in San Jose, California.  It is a large, Victorian-style mansion built and expanded by Sarah Winchester, the wife of William Winchester of Winchester Repeating Arms Co. fame.  Legend has it that after her husband’s death in 1881, Sarah Winchester became convinced that she and her family were haunted by the ghosts of those who fell to Winchester rifles.  To combat the haunting, Sarah Winchester bought a farmhouse in San Jose and began the unrelenting task of adding rooms and peculiar features to the house, such as stairways that lead to ceilings in an effort to confuse and thwart the ghosts.  Construction at the Winchester mansion continued constantly for 38 years until Sarah’s death in 1922.  By this time the mansion had swelled to 160 rooms.

The mansion was later bought and established as a museum, and is now controlled by Winchester Mystery House LLC (“Winchester”), which owns the “Winchester Mystery House” trademark and an architectural mark comprised of the three dimensional shape of the Winchester mansion.  In 2008, Winchester granted Imagination Design Works the exclusive right to film at the Winchester Mystery House as well as the rights to use Winchester’s marks and copyrights in association with a film about the house.  Defendant Global Asylum (“Global”) thereafter asked Winchester for permission to film at the mansion, at which time Winchester informed Global of its deal with Imagine Design Works.  Nonetheless, Global produced and distributed a film called, “Haunting of Winchester House.”  The film claims to be a true story about a family that moves into the 160 room mansion to act as caretakers and is haunted by Sarah Winchester and other ghosts.  Winchester sued Global for trademark infringement, alleging that Global’s use of the term “Winchester House” and images of a Victorian-style mansion exploited Winchester’s marks and lead the public to believe that the film was sponsored or otherwise sanctioned by Winchester. 

The federal trademark act, or the Lanham Act (15 U.S.C. sections 1051 et seq.), allows for registration of trademarks to distinguish a person’s goods from those produced by others, and provides for a cause of action where the use of a word, term, name, or symbol is likely to cause confusion as to the origin, sponsorship, or approval of a producer’s goods.  The First Amendment can provide a complete defense to Lanham Act claims regarding artistic works where the public interest in avoiding consumer confusion is outweighed by the public interest in free expression.  Global won on summary judgment and Winchester appealed.

On appeal, the Court applied the Second Circuit’s test for trademark infringement set forth in Rogers v. Grimaldi (the “Rogers test”).  In Rogers, Ginger Rogers sued over the title of a movie called “Ginger and Fred,” alleging that the public would be lead to believe she endorsed the film and that the film was about her and Fred Astaire.  The Rogers Court recognized films as artistic works, and held that with regard to their titles, the Lanham Act “would not apply unless the title has no artistic relevance to the underlying work whatsoever, or, if it has some artistic relevance, unless the title explicitly misleads as to the source of the content of the work.” 

The first prong of the Rogers test is whether the title has minimal artistic relevance to the content of the film. This is a low threshold, and is often easily met.  For instance, here, the Winchester Court found that the title “Haunting of Winchester House” and the picture of a mansion on the cover both have artistic relevance to the film about the haunted mansion.  The second prong of the test is whether the title and the cover explicitly mislead the public as to the source or content of the work.  As to this question, the Court found that because the DVD cover does not contain the phrase “Winchester Mystery House,” and states, “A Mark Atkins Film,” there was no suggestion that the film was authorized or endorsed by Winchester.  Accordingly, the film satisfied the second prong of the test.  The Court affirmed summary judgment.

The purpose of a trademark is to identify the source of a product so consumers know where a product comes from.  Similarly, trademark infringement law is designed to protect the public from consumer confusion.  This protection, however, must be balanced against the right of free speech and artistic expression.  After all, free speech is one of the fundamental tenets of American ideology, as is commercialism.  The Winchester case is a perfect example of these competing interests at play, and perhaps, the relative importance attributed to each.

By Anji Mandavia

The big news in copyright jurisprudence is, of course, last week’s landmark ruling in Kirtsaeng v. John Wiley & Sons, in which the Supreme Court, in a 6-3 decision, definitively ruled that the “first sale” doctrine -- which allows the owner of a copyrighted good to sell or dispose of that particular item without the permission of the copyright proprietor -- applies to all goods legitimately manufactured with the permission of the copyright owner, whether made in the United States or abroad. 

By this decision, the Supreme Court resolved a split in the Circuits: The Third Circuit had adopted a similar position, that the first sale doctrine applies to lawful foreign-made copyrighted works; the Second Circuit had adopted the contrary position, that the first sale doctrine applies only to copyrighted goods made in the United States, and does not apply to foreign-made goods even if they were lawfully made; and the Ninth Circuit had adopted a hybrid position, that the first sale doctrine applies to lawful foreign-made goods if they have first been imported into or sold in the United States with the permission of the copyright proprietor.

While the Court’s decision will have broad ramifications across a number of business sectors regarding the foreign manufacture, sale, and potential importation of copyrighted goods (over 20 amicus briefs were filed, most on behalf of multiple parties and business organizations), the majority opinion itself had a very narrow, semantic focus -- namely, what do the words “lawfully made under this title,” as used in section 109(a) of the Copyright Act, mean.

Kirtsaeng did this with a quantity of textbooks, reaping approximately $100,000 in profits. Wiley sued, claiming that Kirtsaeng’s actions violated Section 602(a)(1) of the Copyright Act, which prohibits the importation into the United States, without the permission of the copyrighted proprietor, of copyrighted works acquired outside the United States. Kirtsaeng countered with the defense of Section 109(a), which allows the owner of a particular copy of a copyrighted work “lawfully made under this title” to sell or dispose of that copy without the copyright proprietor’s permission.  Kirtsaeng lost at the District Court level, and was assessed $600,000 in damages. That judgment was confirmed by the Second Circuit, and the Supreme Court accepted the case for review.

As mentioned above, the principal issue before the Court was the meaning of the five words -- “lawfully made under this title” -- as used in Section 109(a). Did they mean, as Kirtsaeng contended, goods that were legitimately made with the copyright proprietor’s permission; i.e. were not counterfeit or pirated? Or did they include, as Wiley contended, a geographical limitation -- as the Copyright Act is geographically limited -- so that they only apply to goods lawfully manufactured in the United States?

The Court’s opinion is an exemplar of close statutory construction. Justice Breyer, writing for the majority, undertook a linguistic analysis of the language of the relevant sections and their predecessors, reviewed the history and context of the provisions, and considered the practical implications of the competing interpretations before landing on the ultimate holding in favor of Kirtsaeng. 

As a preliminary matter, the Court noted that Section 602(a) (the importation prohibition) is necessarily circumscribed by Section 109(a) (the first sale doctrine): A copyright owner’s exclusive distribution rights are granted under Section 106 of the Copyright Act, which is subject to the limitations set out in Sections 107 through 122, including Section 109. Section 602(a) (the importation prohibition), in turn expressly states that its violation is an infringement of a copyright proprietor’s Section 106 rights. Since the Section 106 rights themselves are limited by Section 109 (the first sale doctrine), the Court concluded that the prohibition on importation is also necessarily limited by Section 109.

The Court then turned to the relevant language of Section 109(a) --  “Notwithstanding the provisions of section 106(3), the owner of a particular copy ... lawfully made under this title ... is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy....” -- and rejected Wiley’s argument that the emphasized language limited the first sale doctrine to goods made “where the Copyright Act is applicable,” i.e., the United States and its territories.

First, the Court stated that the language of the statute itself, read literally, favors a non-geographical interpretation, namely that “lawfully made under this title” means “in accordance with” or “in compliance with” the Copyright Act, and that nothing in the language itself suggests an intended geographical application.  Second, the Court determined that both the historical and contemporary statutory context support the conclusion that Congress did not have geography in mind when writing and enacting Section 109(a). Third, the Court found that the relevant canon of statutory interpretation favored a non-geographical reading. And finally, the Court found very persuasive the argument of Kirtsaeng and numerous amici that a geographical interpretation would unleash a potential “parade of horribles” -- where libraries would not be able to lend out books published overseas; where used book sellers would be precluded from selling foreign editions of books; where art museums could not display works of foreign artists; and where many items in common and extensive use, that are made overseas and include copyrighted software, such as cars, phones and computers, could not be resold. The Court also found that it would be an anomalous result to have copyright owners be able to exercise perpetual downstream control of copies manufactured overseas when they had no such right of control over the same or similar copies manufactured in this country.

The Court recognized that its ruling would make it difficult for publishers and other copyright holders to divide foreign and domestic markets as they had long been accustomed to doing. However, it stated that potential damage to the publishers’ business model was not a relevant consideration in interpreting the statute.

Now that the proper application of the first sale doctrine has finally been settled by the Supreme Court, it will be interesting to see in the coming years how the Kirtsaeng decision shapes the business models and decisions of publishers, software developers, motion picture companies and the like, and whether the floodgates will now be open to a influx of foreign-manufactured copyrighted goods.

Weintraub Tobin and the LAVA Digital Media Group will host a panel discussion: "The Role of Digital Media in Influencing Public Perception and Behavior" on Tuesday, March 26.

Digital Media plays a significant role in creating and defining cultural norms and influencing individual behavior. Join our panel of experts in a discussion about how digital media shapes public perception, influences individual beliefs and triggers events in the physical world.

This evening event is designed to bring together entrepreneurs, start-ups, accelerators, venture capitalists, and businessmen and women alike to discuss the role of digital media and the way it shapes our culture. Enjoy a social hour from 6:30-7 p.m. followed by the panel discussion and a Q&A session.

Panelists include:

•     Anton Vuljaj, Analytical Lead, Google Elections and Issue Advocacy
•     Joe Mathews, California editor, Zocalo Public Square (zocalopublicsquare.org) fellow
•     Joel Fox, Editor-In-Chief of FoxAndHoundsDaily.com
•     Bryan Merica, founder and president of ID Media
•     Gary Brown, President of Political Data (politicaldata.com)
•     Moderated by Scott Hervey, Shareholder, Weintraub Tobin

"The Role of Digital Media in Influencing Public Perception and Behavior" takes place Tuesday, March 26th at ROC, 604 Arizona Street in Santa Monica. Register here.

Follow the event on Twitter: @weintraub_law
#wtdmg

By Scott M. Plamondon

On February 27, 2013, Congress proposed the “Saving High Tech Innovators from Egregious Legal Disputes (SHIELD) Act.” This bill is designed to stem the tide of patent litigation initiated by non-practicing entities, also known as “patent trolls.” A non-practicing entity (“NPE”) generally operates by forming a shell corporation to acquire and hold patents, then litigating against anyone who uses the covered technology without a license. The NPE’s goal is to monetize its patent portfolio through license revenues obtained in connection with patent infringement settlement agreements. According to President Obama, the NPE business model is designed to “leverage and hijack somebody else’s idea and see if [the NPEs] can extort some money out of them.” 

Business is booming. Numerous NPEs have come into existence in recent years, initiating hundreds of patent infringement lawsuits. Estimates from 2011 show that NPEs received as much as $29 billion from U.S. companies. At the heart of the NPE business model is the stark reality that defending a patent infringement lawsuit costs hundreds of thousands, and often millions of dollars. Some patent trolls therefore assert dubious claims against accused infringers knowing that most defendants will settle by executing a patent license rather than risk the costs and uncertainty of patent litigation. The SHIELD Act is designed to address this issue by shifting risk back to the NPEs. Its authors hope that shifting enough risk to NPEs who instigate frivolous patent infringement lawsuits will discourage and reduce such meritless lawsuits.

Although the pejorative term “patent troll” has been applied to NPEs with an attitude of righteous indignation, many NPEs have done nothing unlawful and are simply exploiting a business opportunity created by the exclusive nature of the patent grant. Although obtaining a patent only to remove it from public use defeats the purpose of the patent system's goal of advancing innovation by placing inventions into the hands of the public, an NPE’s enforcement of exclusive patent rights is clearly permitted, and not all NPE-initiated litigation is frivolous. Yet the SHIELD Act could potentially operate under the assumption that patent litigation by any NPE is frivolous.

Would anyone buy a patent license if the intellectual property owner never enforced its rights against unlicensed parties? Of course not. The SHIELD Act, however, would potentially elevate risk for businesses who have elected to monetize a portfolio of intellectual property by licensing it to others in lieu of actually manufacturing products. The authors of the SHIELD Act and its proponents should consider the proposition that, while all patent trolls are NPEs, not all NPEs are patent trolls.  

By Lisa Y. Wang

One usually thinks of a librarian as a calm and lawsuit-free job. However, a librarian in Canada is facing a $3.5-million lawsuit over a personal blog post he wrote three years ago. Dale Askey, an associate librarian at McMaster University, is being sued by Edwin Mellen Press Ltd., an international academic publishing company, who filed two lawsuits last June.

Mellen Press alleges that Askey accused them of “accepting second class authors” and urging “university libraries not to buy (their) titles because they are of poor quality and poor scholarship.” While this lawsuit will be heard in Canadian court under Canadian law, bloggers have been threatened with lawsuits in the US for articles they’ve written and opinions they’ve expressed. This brings up a whole slew of First Amendment issues and the SLAPP statute. 

If this lawsuit were filed in the United States, it might be considered a “SLAPP” (Strategic Lawsuit Against Public Participation) lawsuit. SLAPP refers to a lawsuit or legal threat intended to censor, intimidate, and silence critics by burdening them with the cost of a legal defense until they abandon their criticism or opposition. Typically SLAPP lawsuits target ordinary citizens who cannot afford to pay the hefty legal fees it takes to defend such a lawsuit. They are a method used to intimate others from participating in debate and free speech and can be a strong method of silencing critics. SLAPP lawsuits often come in the form of a lawsuit claiming defamation or libel. The defining characteristic of a SLAPP lawsuit is that the plaintiff usually loses the case. However, a typical SLAPP lawsuit does not get to the trial phase as it is method used to chill the speech of citizens.

Whenever a lawsuit involves free speech, one of the first things the lawyer does is see if it falls under the anti-SLAPP statutes that seek to protect first amendment rights. Indeed, to prevail on an anti-SLAPP motion, the defendant must first show that the lawsuit is based on claims related to constitutionally protected activities, such as the First Amendment right to free speech. 

There are specific anti-SLAPP statutes that give certain rights to defendants who may find themselves on the wrong end of a SLAPP lawsuit. Over 28 states (and the District of Columbia and Guam) have enacted statutes that protect its citizens from SLAPP lawsuits. There is no federal anti-SLAPP law. 

California tends to have the most amount of SLAPP lawsuits compared to the rest of the country. California’s Anti-SLAPP statute provides and relatively quick and inexpensive defense for defendants and special legal procedures in hopes of discouraging SLAPP lawsuits. For example, after being served with the complaint, a defendant can almost immediately move to strike the complaint if the complaint is based on certain conduct that arises free speech such as speech in a public forum about an issue of public interest, speech conduct about an issue of public interest, or actions that arise from commercial speech or conduct. With so many bloggers and blog readers, it could be argued that almost all bloggers would be covered under the anti-SLAPP statutes, particularly the unlucky librarian. More importantly, the filing of an anti-SLAPP motion stays all discovery, typically the most expensive aspect of litigation. As a result, the cost of litigation for the anti-SLAPP defendant is greatly reduced and prevents the plaintiff from receiving information that may be critical to their claims. Defendants who succeed on an anti-SLAPP motion are entitled to a mandatory award of reasonable attorney’s fees, which lawmakers hope will further chill SLAPP lawsuits. Successful SLAPP defendants can even recover damages from SLAPP plaintiffs and their attorneys through a SLAPPback action (essentially a malicious prosecution action) and recover damages. 

As the amount of blogs and bloggers increase daily, these anti-SLAPP statutes become more and more important, and are a way to protect the First Amendment and free speech rights. Hopefully Dale Askey will be able to take advantage of Canada’s equivalent of the anti-SLAPP statute. 

By Scott Hervey

This isn’t the first time a songwriter has used a celebrity’s name in a song, but it may be the first time a celebrity sued over such use. Musical writer and performer Armando Perez, well known by his rap name Pitbull, wrote and recorded the song “Give me Everything.” Approximately one third of the way through the song, Lohan’s name is used as follows: “So, I’m tiptoen’, to keep floin’ / I got it locked up like Lindsay Lohan”. Lohan, who did not grant consent to the use of her name in the song, sued Pitbull and his record label, Sony Music Entertainment, for violating Sections 50 and 51 of the New York Civil Rights Law, for unjust enrichment and for intentional infliction of emotional distress. The court dismissed Lohan’s complaint on the grounds that it fails to state a claim. While most are chalking this up as another legal loss for the challenged Lindsay Lohan, this case is an interesting commentary on the reach of New York’s right of publicity statutes.

Although New York does not recognize a common-law right of privacy, the State sought to provide a limited statutory right of privacy when it enacted Sections 50 and 51 of the New York Civil rights Law. Section 50 makes it a misdemeanor for any person to “use... for advertising purposes, or for the purposes of trade, the name, portrait or picture of any living person without first having obtained the written consent of such person.” Section 50 provides:

Any person whose name, portrait, picture or voice is used within this state for advertising purposes or for the purposes of trade without the written consent first obtained as provided [in Section 50] may maintain an equitable action in the supreme court of this state against the person, firm or corporation so using his name, portrait, picture or voice, to prevent and restrain the use thereof; and may also sue and recover damages for any injuries sustained by reason of such use and if the defendant shall have knowingly used such person’s name, portrait, picture or voice in such manner as is forbidden or declared to be unlawful by section fifty of this article, the jury, in its discretion, may award exemplary damages.

The prohibitions set forth in these sections are to be strictly limited to non-consensual commercial appropriation of the name, portrait or picture of a living person” and prohibit such use “for advertising purposes or for the purposes of trade only, and nothing more. In order to prevail on a statutory right of privacy claim, a plaintiff must prove (1) the use of plaintiff’s name, portrait, picture or voice (2) for advertising purposes or for the purposes of trade (3) without consent and (4) within the state of New York.

In ruling on the defendant’s motion to dismiss, the court considered whether the plaintiff’s name was used in the song “for advertising or trade purposes” within the meaning of the statute. Even though the song was created and distributed for the purposes of making a profit does not mean that the plaintiff’s name was used for “advertising” or “purposes of trade”, the court said. The defendant’s argued that the plaintiff’s name was not used to promote a product or service or to seek solicitation or patronage, and because Lohan’s name was not used in the song’s title or refrain, her name is not being used to promote the song itself.

Even if the plaintiff had sufficiently alleged that her name was used in the song for the purpose of advertising or trade, the court held that the isolated use of Lohan’s name is fatal to her claim. A claim under Sections 50 and 51 of the New York Civil Rights Law does not apply to incidental uses of a person’s name or image. Whether a use is incidental is determined by the role that person’s name or likeness plays in the main purpose or subject of the work at issue. The court found because Lohan’s name was used in the song only once, that it was not used in the title or the refrain and is directly related to the theme of the song, the use of her name was incidental and not actionable under the New York Civil Rights Law.
In their motion to dismiss, the defendants also asserted that the First Amendment presents a complete defense to Lohan’s claim in that the statute does not apply to works of art. The court noted that prior case law interpreting the New York Civil Rights Law have concluded that “pure First Amendment speech in the form of artistic expression...deserves full protection, even against a statutorily-protected privacy interest. In New York it is well established that music is pure First Amended speech. Because pure First Amendment speech that makes use of an individual’s name or likeness without consent is absolutely protected from claims under the New York Civil Rights Law, the court found that the defendant’s use of Lohan’s name in the song is protected First Amendment speech and as such, Lohan’s claim fails.

The First Amendment defense to a right of publicity claim is different in California. Here, First Amendment speech is not automatically entitled to an absolute protection against publicity claims. Rather, the First Amendment defense it is subject to a balancing test. The defendant must show that the work has transformed to become primarily his or her own artistic expression rather than just a reproduction of the celebrities likeness. This “transformative use” test was articulated by the California Supreme Court in 2001 in Comedy III Productions, Inc. v Gary Saderup. In analyzing a First Amendment defense the inquiry is whether the celebrities likeness is one of the “raw elements” from which the original work is synthesized, or whether the depiction or imitation of the celebrity is the very sum and substance of the work in question. Where the value of the work does not derive primarily from the celebrity’s fame, the transformative test is satisfied and the defendant will prevail on its First Amendment defense.

By James Kachmar

Under the California trade secret statute, the court may award attorneys’ fees where there has been a willful and malicious misappropriation of plaintiff’s trade secrets or when a trade secret misappropriation claim is brought in bad faith.  (See Civil Code §3426.4.)  In Weco Supply Company, Inc. v. Sherwin-Williams Company, 2013 U.S. Dist. LEXIS 1572 (January 3, 2013), a district court in the Eastern District of California, revisited the issue of what constitutes “bad faith” for purposes of awarding attorneys’ fees in trade secret cases.

Weco and Sherwin-Williams had entered into a “jobber” agreement by which Weco would distribute Sherwin-Williams paint products.  Weco alleged that Sherwin-Williams breached the jobber agreement by discontinuing certain of its product lines and then dealt directly with some of Weco’s end customers.  In addition to breach of contract claims, Weco asserted a claim for trade secret misappropriation against Sherwin-Williams.  Weco argued that its pricing arrangements with its end users were trade secret and were misappropriated by Sherwin-Williams to deal directly with these customers.  The court eventually granted Sherwin-Williams summary judgment against Weco as to its trade secret misappropriation claim and found that “the undisputed facts showed that Weco’s pricing to end users and cost of acquisition were not trade secrets” under California law.  Thus, the court found there was no misappropriation and dismissed Weco’s trade secret misappropriation claim.

Following the granting of summary judgment, Sherwin-Williams moved for an award of attorneys’ fees claiming that Weco’s trade secret misappropriation claim had been brought in bad faith.  The court began by recognizing that a party seeking an award of attorneys’ fees under Civil Code section 3426.4 must satisfy two elements:  “(1) the objective speciousness of the opposing party’s claim and (2) the subjective bad faith of the opposing party in bringing or maintaining the action that is an improper purpose.”  The court reasoned that “objective speciousness exists where the action superficially appears to have merit but there is a complete lack of evidence to support the claim.”  As to the second prong, “subjective bad faith may be inferred by evidence that [a party bringing an action for trade secret infringement] intended to cause unnecessary delay filed the action to harass [the opposing party] or harbor improper motive.”

The court agreed with Sherwin-Williams that it satisfied the first element by showing that Weco’s trade secret misappropriation claim was objectively specious because of plaintiff’s failure to produce evidence in opposition to Sherwin-William’s motion for summary judgment.  This demonstrated that it lacked evidentiary support.

However, the court found that “bad faith” under California’s trade secret misappropriation law “means more than the simple inability to provide the necessary elements of a cause of action.  The second prong of the test requires a showing of subjective bad faith.”  Sherwin-Williams pointed to evidence in the deposition of Weco’s principal that he was “mad” at Sherwin-Williams and refused to pay Sherwin-Williams for paint purchases because he “was going to use that money to sue [Sherwin-Williams].”  Weco’s principal also testified that he “was trying to hurt [Sherwin-Williams] by sending letters to Sherwin-Williams’ customers informing them of the pricing Sherwin-Williams was offering to their competitors.  The court concluded that while this deposition testimony showed that “there was no love lost between [Weco’s principal] and Sherwin-Williams, it does not support a finding that Weco brought the trade secret claim in bad faith.”  The court stated that civil litigation “is frequently engendered by animosity.  That is not the same as bad faith.”  The court found that the anger of Weco’s principal towards Sherwin-Williams was not sufficient to establish that Weco brought its trade secret claim to cause delay or harassment or was due to an improper motive.

While the defendant in the Weco case did not prevail on its attorneys’ fees motion, litigants in a trade secret misappropriation claim must continue to be aware of the penalties for bringing a trade secret claim in bad faith.  It is quite possible that a different court hearing the same evidence presented by Sherwin-Williams would have concluded that the owner’s “anger” at Sherwin-Williams was sufficient to constitute subjective bad faith and allow an award of attorneys’ fees.  Litigants are also reminded that they should seek to develop such evidence during discovery so that they can bring an attorneys’ fees motion should they prevail at the summary judgment stage.

By Audrey A. Millemann

There is an inherent conflict between the antitrust laws and the patent laws.  The antitrust laws protect competition and benefit consumers, in part, by prohibiting monopolies.  The patent laws promote innovation and reward inventors, in part, by awarding the patent owner a limited monopoly which inhibits competition.

Sometimes the antitrust laws and the patent laws intersect.  A defendant in a patent infringement suit may assert an antitrust claim as an affirmative defense or as a counterclaim.  One particular type of antitrust claim asserted by a patent owner’s competitors is a “Walker Process claim.”  This is a claim for monopolization under §2 of the Sherman Act based on the patent owner’s fraudulent procurement of a patent.  The claim arises from the Supreme Court’s decision in Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965), in which the Court held that a plaintiff could state a claim for antitrust liability if the plaintiff could show that: (1) the defendant procured a patent by knowing and willful fraud on the United States Patent and Trademark Office (or by maintaining and enforcing a patent knowing of the fraudulent manner in which it was obtained); and (2) the elements required for a claim under §2 of the Sherman Act were met.

In Ritz Camera & Image, LLC v. SanDisk Corporation, 700 F.3d 503 (Fed. Cir. 2012), the Federal Circuit Court of Appeals addressed the issue of whether a direct purchaser of a patented product had standing to bring a Walker Process claim against the patent owner even though the purchaser had no standing under the patent laws to sue for a declaratory judgment of patent invalidity or unenforceability.  The court’s answer was that the direct purchaser did have standing.

The plaintiff, Ritz Camera, was a retailer who purchased products, including digital cameras, from the defendant, SanDisk, for resale to consumers.  The products Ritz purchased from SanDisk contained SanDisk’s patented NAND flash memory devices.

Ritz sued SanDisk for violation of §2 of the Sherman Act (unlawful monopolization) in the Northern District of California.  Ritz alleged that SanDisk controlled 75% of the market for NAND flash memory, and that SanDisk had unlawfully obtained its monopoly by enforcing two fraudulently procured patents against its competitors.  Ritz further alleged that SanDisk’s conduct resulted in higher prices to the retailers.

SanDisk moved to dismiss the Walker Process claim on the grounds that Ritz did not have standing to bring a Walker Process claim because it had not been threatened with patent infringement by SanDisk and had no standing to bring a declaratory judgment action for invalidity of the patents.  Ritz responded that its claim was an antitrust claim, not a claim under the patent laws.  The district court denied SanDisk’s motion.  The Federal Circuit affirmed.

The appellate court reviewed the Supreme Court’s Walker Process decision and noted that the Supreme Court had held that the rules for determining standing to challenge a patent’s validity should not be applied to an antitrust claim.  According to the Supreme Court, a Walker Process claim was not a claim under patent law, and there was no basis for limiting antitrust plaintiffs to those who could sue to invalidate a patent.  In fact, as the appellate court explained, under antitrust law, direct purchasers are a “preferred” class of plaintiffs.

The appellate court pointed out that several courts had already addressed the issue of standing for a Walker Process claim.  The Federal Circuit itself, and the Courts of Appeal for the Second Circuit and the District of Columbia had all decided cases in which the plaintiffs were permitted to bring a Walker Process claim despite not having standing to bring a claim for patent invalidity.

The court rejected SanDisk’s argument that if direct purchasers could bring Walker Process claims, this would result in the ability of a party to challenge a patent under the Sherman Act even though they could not do so under patent law.  The court stated that a Walker Process claim is fundamentally an antitrust claim whose remedy is not the invalidation of a patent. 

SanDisk also argued that if the court permitted direct purchasers to file Walker Process claims, the volume of litigation would increase and innovation would decrease.  The court disagreed, noting that the Supreme Court had emphasized that “the interest in protecting patentees from ‘innumerable vexatious suits’ [cannot] be used to frustrate the assertion of rights conferred by the antitrust laws,” quoting Walker Process, 382 U.S. at 176.

The court left no doubt that standing to bring an antitrust claim based on fraudulent procurement of a patent is separate from standing to invalidate a patent, in stating, at 508:

“Walker Process recognizes a clear distinction between claims that arise under the antitrust laws and those that arise under the patent laws.  Because direct purchasers are generally permitted to bring antitrust actions, and because the Walker Process decision did not preclude purchasers from brining this particular type of antitrust claim, we hold that Ritz’s status as a direct purchaser gives it standing to pursue its Walker Process claim even if it could not have sought a declaratory judgment of patent invalidity or unenforceability.”