Trademark infringement occurs when a third party uses a mark in a way that infringes upon a trademark owner’s exclusive right and use of a trademark. Often, the third party will use a similar mark in a way that confuses consumers as to the source of the goods and services. For example, a fast food restaurant named “Wendi’s” would likely cause confusion with “Wendy’s.” Trademark infringement can occur only when it is likely that consumers will be confused as to the source of the goods. The purpose of this article is to examine the test and factors that courts use to determine if such infringement exists.

Many courts have developed a balancing test to determine if a mark infringes on another. This balancing test has largely grown from the seminal case Polaroid Corp. v. Polarad Elect. Corp., 287 F.2d 492 (2^nd Cir. 1961). In that case, the court identified several variables to consider when assessing if a mark is infringing on another mark. This balancing test seeks to determine if consumers would likely be confused as to the source of the marks. If the test favors that confusion would likely result, then the court will likely rule that infringement exists. On the other hand, if confusion is unlikely or minimal, the court will likely rule against infringement.

The first factor the court will look at is the strength of the marks in question. The strength of the marks is determined by distinctiveness of the mark. The more unique and distinct the mark, the more likely the mark will be protected against junior users. On the hand, the more descriptive and generic the mark, the less protection courts will provide to these marks. For example, the mark KODAK will receive more protection than a similar product that uses the mark FAST PHOTO.   

Another factor examined is the similarity between the marks. Similarity of marks is tested based on sight, sound and meaning. The marks will be considered in their entirety to determine any similarities. A mark that looks different from another but gives off a similar commercial impression might be considered similar and thus weigh in favor of confusion. For example, a trademark that consisted of the word MONEY might be confused with the mark $$$ because the marks have similar commercial impressions.

The courts will also look at the proximity of the goods in the marketplace. This test relates to the channels of trade used by the goods. The more related the goods the greater the likelihood that they would exist together in the marketplace. Similar marks that are also are related would likely cause confusion as to the source of those goods. Highly related goods are more likely to cause confusion compared to unrelated goods.

The above three factors weigh heavily in determining likelihood of confusion. A mark will not be found confusingly similar with another mark if the two are not found similar in one of these areas, and the complaining mark is considered a weak mark.

After reviewing these, the courts will examine the likelihood that the prior owner will “bridge the gap” in the marketplace. This factor addresses the possibility that a mark will expand into other product lines. The more likely expansion will occur, the more likely consumer confusion will exist.

Next the courts examine evidence of actual confusion. When a case is brought to trial, the evidence is usually in the form of consumer surveys done by the parties. Survey evidence of this nature is often critical in determining likelihood of confusion in infringement cases.

The courts will also look to the sophistication of the buyers of the goods or services to determine likelihood of confusion. Courts have found that sophisticated buyers, such as those who have expertise in a specific area, are less likely to be confused by similarities in marks. In addition, courts have held that consumers of goods and services that are expensive exercise a higher degree of care in making these expensive purchasers. For example, a consumer would exercise a higher degree of care when purchasing a car compared to when that consumer purchases a piece of candy.

The last factor courts examine in a trademark infringement case is the intent of the defendant. If the defendant copies an existing trademark in bad faith to capitalize on that trademark’s goodwill, the courts will lean in favor of finding infringement. The likelihood of confusion, however, is the main consideration in determining infringement regardless of intent. If an individual copies a mark that does not lead to consumer confusion, the courts will likely not find infringement.

The above are not a rigid set of factors used by the courts. Most jurisdictions use some form of the above factors to determine if a likelihood of confusion exists. Regardless of the different variations, courts ultimately are seeking to discover if marks, as they are used in commerce, cause consumer confusion and lead to trademark infringement.

There has been a lot of media attention over the new patent laws (the “America Invents Act”) adopted by Congress and signed by the President in September 2011, six years after being introduced. Commentators have called the Act the most significant change in 60 years (since the 1952 amendments). One of the Acts purposes is to reduce the backlog of pending patent applications (estimated at over 700,000) by expediting the examination and issuance of the patents. Another goal of the Act is to make United States law more consistent with foreign patent laws. 

First to File

The most important change makes the United States a “first-to-file” system instead of a “first-to-invent” system. The new system is more accurately called a “first-inventor-to-file” because the applicant must still be the true inventor. If two inventors invent the same thing, however, the relevant question is not when the invention was conceived, but when the application was filed. The applicant’s date of invention is no longer determinative. Thus, inventors will now be engaged in a race to file an application in the Patent and Trademark Office (“PTO”). 

This provision will go into effect in March 2013. 

Prior Art

The scope of the prior art for purposes of determining novelty (35 U.S.C. §102) and nonobviousness (35 U.S.C. §103) has been expanded. Section 102 now includes anything “otherwise available to the public” before the filing date of the application. In addition, public use, offers to sell, and sales are prior art not only if they occur in the United States, but may be anywhere in the world. 

The one-year grace period unique to the United States’ patent system has been cut back. Under the new laws, the grace period does not apply to all of the activities previously covered, but an inventor who disclosed the invention still has a one-year grace period in which to file a patent application, as does a person who obtained the invention from the inventor. 

Interference Proceedings

Under existing law, an interference proceeding was used to determine the rights to a patent if two persons had invented the same invention, based on a determination of the first to invent. Under the new laws, that process is eliminated. 

The new proceeding is a “derivative” proceeding. This proceeding will be used to determine whether the inventor who filed the first application (and is therefore presumed to have the patent rights) derived from the invention from the inventor who filed the second application. If the dispute is between two applicants or one applicant and one patent, the petitioner may file a request with the PTO, but it must be filed within a one-year period. If the dispute is between two patents, then either party may file a civil action within one year after the first patent issues.

Post-Issuance Review

The new laws establish three new PTO procedures for challenging the validity of issued patents: post-grant review, inter-partes review, and supplemental examination. 

The post-grant review is similar to opposition proceedings that are available in most foreign countries for third parties to challenge a patent. Post-grant review can be requested by any party other than the patent owner. The patent can be challenged on any grounds, which expands the grounds permitted in the existing reexamination proceedings. The request must be filed within nine months of the patent’s issue date. The PTO will grant the petition if either: (1) it is more likely than not that at least one claim in the patent is unpatentable, or (2) there is a novel or unsettled legal question. 

There are two important limitations on post-grant review, unlike the existing reexamination procedures. A party to a civil lawsuit involving the patent’s validity cannot request post-grant review, and a petitioner in a post-grant review proceeding cannot later assert the same grounds of invalidity in a civil lawsuit. Thus, a challenger must choose in advance whether to litigate validity in court or address it in the PTO. 

The second proceeding, inter-partes review, replaces the existing inter partes reexamination. The standard for granting a request is whether there is a reasonable likelihood that the requestor will prevail, which is a higher standard than the existing standard for inter partes reexamination. Like post-grant review, the challenger must choose either to litigate validity in court or address it in the PTO. For both post-grant review and inter partes review, the PTO has been authorized to create new rules for obtaining discovery similar to those applicable in civil litigation. 

Supplemental examination is a process by which a patent owner can reopen examination of their own patent. This will be granted in order to address a substantial new question of patentability. 

Third Party Submissions

The new laws permit a third party to file prior art in a pending patent application within specific time limits. This procedure will allow companies who follow the prosecution of their competitors’ patents to make sure that the examiner is aware of all relevant prior art. 

False Marking

The lucrative type of false marking lawsuits has been eliminated. The new laws permit only the United States to sue for a penalty. A third party can file a lawsuit only if they have suffered actual economic injury caused by the false marking and is limited to that amount in damages. The new laws also change the effect of marking a product with an expired patent number; that no longer constitutes false marking. In addition, a product can now be labeled with a website address if the website lists the status of the patent.

Business Method Challenge

Issued business method patents are subject to challenge by a new PTO process what will terminate in eight years. The proceeding is similar to the new post-grant review. A requestor must have either been accused of infringement or sued by the patent owner. The scope of the prior art that can be used to challenge the patent is broader than that available in the existing reexamination procedures. 

Who Can File An Application

Like most foreign patent systems, the new laws permit the assignee of the rights to an invention to file a patent application in the PTO. This will make it easier for companies to file applications where inventors are obligated to assign their inventions but are no longer employed or are unwilling to sign the application. Patents will now be issued in the name of the assignee, the real party in interest, not the inventor.

Effect of New Laws

Most patent practitioners believe that the new patent laws are confusing and ambiguous. Thus, instead of providing certainty, it appears that there may well be uncertainty until the Court of Appeals for the Federal Circuit weighs in.

By Nathan Geronimo

People are better connected with friends and family than ever before.  Social media sites such as Facebook and Twitter can be an excellent way to stay in touch with loved ones, and to get daily updates of people’s lives.  Similarly, through sites such as YouTube, people are able to share videos and information with others almost instantaneously.  While these sites can be great to disseminate images and information to a desired audience, they can also make information readily available to audiences that are less desirable to, and not contemplated by the poster.  There has been a great deal of buzz in recent years about employers using social media sites to perform “background checks” on prospective employees, and warning job applicants to be conscious of this fact when posting on social media sites.  In addition to this concern, recent cases illustrate a possible new concern for social media posters: use of social media posts in litigation.

In a recent decision in Louisiana, Boudwin v. General Ins. Co., Plaintiffs sued an individual and an insurance company based on alleged injuries arising out of a car accident.  In the lower Court, Plaintiff’s prevailed on the question of liability, but were unsatisfied with the jury awards of $25, 000 to the first Plaintiff, and $50,000 to the second Plaintiff.  On appeal, Plaintiffs argued that the jury erred in failing to award them any damages for physical disability or loss of enjoyment of life.  To recover based on a theory of detrimental lifestyle change, a court looks at both the severity of the injury, and Plaintiff’s lifestyle prior to the injury.

The second Plaintiff claimed at trial that before the accident, he played sports and stayed active, but since the accident had been less active due to experiencing a significant increase in pain after exercising or playing sports. On cross examination, however, Plaintiff acknowledged numerous Facebook posts where he posted that he was working out a lot, and playing basketball, softball, and tennis.  In one of the posts, Plaintiff reported playing in a softball tournament just two days prior to his final visit with the doctor who offered testimony on behalf of Plaintiff’s injury claims.

Based in part on Plaintiffs’ Facebook posts, the Court could not find that the jury was erroneous in refusing to award any physical disability or loss of enjoyment of life damages.  In essence, by forcing Plaintiffs to respond to their contrary assertions in Facebook posts, Defense counsel was able to successfully impeach Plaintiffs’ testimony regarding the extent of their injuries.

In another recent case, Ensign Yachts, Inc. v. Arrigoni, the jury returned a fraud verdict against third-party defendant James Ross and Plaintiff Ensign based on alleged misrepresentations regarding the sale of a yacht.  The dispute arose out of damages occurring during transport of the yacht, and whether a contract for sale of the yacht existed prior to transportation.  At trial, Ensign and Ross offered witnesses to testify that Ross had informed them that he had obtained a contract to sell the yacht.  Because of each witness’ connection to Ross, and the fact that their testimony was based on what Ross had represented to them, the credibility of their testimony was inherently linked to the jury’s perception of Ross’ credibility, which had been successfully impeached at trial.

In sworn testimony, Ross had testified that he had seen a third-party, Fabrice Fontanez on only one occasion since the negotiations regarding the subject yacht, and that he had no business relationship with him.  At trial, opposing counsel introduced a YouTube video of Ross and Fontanez on a yacht in St. Tropez.  The video was a promotional video for “NuMarine,” and was used to establish that Ross and Fontanez had a business relationship, and had seen each other on at least one other occasion after the yacht negotiations.  Because the video established that Ross had misrepresented the truth, at least with regard to these two matters, it was successfully used in impeaching Ross’ credibility. 

In both of these cases, social media posts were used to contradict seemingly dishonest assertions by the parties, and made significant impacts on the cases.  Whether the posting parties assumed their posts would not be discovered by interested attorneys, or whether they simply forgot, it is difficult to say.  The lesson to take way from these cases, however, is clear.  Social media posts are largely public information, and can be accessed by virtually anybody.  Social media sites have clearly found an indelible place in modern society, and are finding their way into litigation as well.

By Zachary Wadlé

On Oct. 26, 2011, the Stop Online Piracy Act “SOPA” (H.R. 3261) was introduced in the United States House of Representatives. One of SOPA’s primary goals is to address the continuing problem of online digital piracy of counterfeit movie, music, and other copyrightable works engaged in through foreign websites. 

The 1998 Digital Millennium Copyright Act (DMCA) and the Copyright Act of 1976 are the primary existing U.S. laws that address copyright infringement, but both have limited ability to address foreign based websites that engage in digital piracy. SOPA attacks this problem by giving both government officials and copyright owners new powers to target foreign websites and infringers through the search engines, web hosts, and payment system providers that allow foreign websites to reach the U.S. market. 

For example, SOPA would give copyright owners new powers to issue “take-down notices” to payment system providers and internet advertising services that support foreign websites posting infringing content. In effect, these “take down notice” would prohibit these websites from linking to, advertising, and/or processing payments related to the foreign websites. The DMCA already provides copyright owners the ability to send a take-down notice to a domestic internet service provider that is hosting infringing content.  SOPA would expand that capability to cover the intermediary payment and/or advertising services that support both domestic and non-domestic websites. SOPA would also give the U.S. Justice Department power to seek court orders requiring U.S. search engines and Internet sites to block access to foreign websites posting pirated material.

While there is broad agreement that SOPA’s mission of stopping foreign website piracy of copyrighted material is a worthy one, the bills’ methods to accomplish that goal are highly contested by the interested parties. Detractors of SOPA include Internet heavyweights such as Google, Yahoo, EBay and Facebook, which say the proposed legislation threatens free speech, imposes an undue burden on their businesses, and will jeopardize the technological stability of the World Wide Web. Supporters include longstanding entertainment companies such as Warner Bros., 20th Century Fox, and Sony Music Entertainment which accuse the Internet companies of acting as facilitators to copyright infringement by collecting revenue from the foreign websites trafficking in pirated material.

The provision of SOPA which requires third-party sites such as search engines to redirect links or block foreign websites is particularly troublesome to Internet companies and online content providers.   The provision would require vigilant monitoring by Internet sites and potentially holds them liable for content regardless of who posts it.  This has serious implications for websites that run on user-generated content such as YouTube and Facebook, requiring them to monitor the huge amount of content uploaded by their third-party users. Opponents of SOPA argue that forcing Internet companies to pre-screen and monitor all of the content posted on their websites poses an enormous and unfair burden to their operations. They also suggest that if such requirements existed five or ten years ago, it’s unlikely that popular websites such as YouTube would exist today, and SOPA will stifle web innovation in the future. SOPA’s supporters have pushed back saying that stronger protection of online intellectual property rights is necessary despite these concerns, and will ultimately generate more revenue currently lost to piracy that will in turn help the American economy.

At this point it is difficult to say which side will win out. SOPA is in the early stages of the legislative process, and is currently being heard by the House Judiciary Subcommittee on Intellectual Property, Competition and the Internet. The mere introduction of SOPA, however, has spawned a fierce public relations and lobbying battle between Silicon Valley and Hollywood that will play out in the media and in the halls of Congress in the months to come, and will ultimately shape the direction of copyright law in the Internet age.

By Scott Plamondon

As social media networks become part of the lives and daily routines of more and more people, the use of social media networks in the workplace has begun to highlight a number of issues where an employee’s use of a social media network may interfere with the rights of their employer. A recent case pending before the United States District Court for the Northern District of California presents a familiar problem from the realm of trade secrets, but casts it in a new social media oriented setting. The case is PhoneDog v. Noah Kravitz (N.D., Case No. C11-03474-MEJ).

Noah Kravitz worked for PhoneDog.com where he periodically would offer his opinions concerning new mobile phones as they were released for sale to the public. In order to drive traffic to the PhoneDog website, PhoneDog and Mr. Kravitz employed the use of a Twitter account. Using the Twitter handle of @PhoneDog_noah, Mr. Kravitz was able to attract approximately 17,000 followers, each of whom received real-time updates from Mr. Kravitz regarding his thoughts on various mobile phones, as well as some of his personal opinions on other topics. Upon his departure from PhoneDog.com in October 2010, Mr. Kravitz changed his Twitter handle to @noahkravitz, but continued to use the same Twitter account, effectively taking all 17,000 followers with him when he left. Obviously unhappy with this action, PhoneDog filed a lawsuit against Mr. Kravitz asserting (among other things) a claim for misappropriation of trade secrets. According to PhoneDog’s complaint, Mr. Kravitz’s Twitter account had been developed and maintained for the sole purpose of driving internet traffic to the PhoneDog website, for the sole benefit of PhoneDog. Therefore, according to PhoneDog, Mr. Kravitz’s Twitter account, as well as the password to that account, constitute proprietary, confidential information belonging to PhoneDog. PhoneDog alleged that each of Mr. Kravitz’s 17,000 Twitter followers was worth $2.50 for each month that Mr. Kravitz used the Twitter account after his departure from PhoneDog. Having conjured this $2.50 per user value, PhoneDog alleged that it had suffered $340,000 of damages as a result of Mr. Kravitz’s use of the disputed Twitter account for the eight months following his departure from PhoneDog.

While this may be one of the first, if not the first, lawsuits asking a court to determine the rightful owner of Twitter followers, it is unlikely to be the last. Because Twitter gives individuals the ability to communicate with a potentially large audience and influence their decisions, it is likely that disputes over the ownership of Twitter followers will become as common as the more familiar cases involving “rolodexes” or customer contact lists which have been before the courts for years. Ultimately, because the PhoneDog ruling was not based on the substance of PhoneDog’s claims, the court has provided no significant guidance for use under similar circumstances. Since the ruling, however, Mr. Kravitz has added nearly 5,000 followers to his Twitter account, demonstrating that the publicity created by this case ultimately may generate more Twitter followers than his mobile phone reviews.

With the launch of each new Top Level Domain (“TLD”), brand owners are always concerned about protecting their trademark rights and preventing individuals from cybersquatting. The .xxx TLDs are coming and brand owners have only a very short period of time left to take proactive steps to prevent their brands from being used in connection with an adult entertainment website.  If you are the owner of a registered trademark outside the adult entertainment industry, chances are you do not want to see your trademark used as an .xxx domain by an adult entertainment website. Such use can potentially harm your trademark rights or adversely affect the goodwill associated with your business or products. There are steps that you can take to prevent others from registering your trademark in connection with an .xxx domain name, but time is running out.

Owners of registered trademarks outside of the adult entertainment industry have the opportunity to “opt-out” or block .xxx domain names that match their trademarks through a “blocking program.” Mark owners do this by filing a blocking application with certain domain name registrars.  The time for this opt-out process begins on September 7, 2011 and ends on October 28, 2011.

By filing a blocking application, a registered trademark owner from outside the adult entertainment industry can block the registration of a .xxx domain name matching their existing registered trademark. Applications can be submitted to block a domain name corresponding to a particular registered trademark for either ten (10) years or for the life of the trademark.

The Blocking applications can be submitted through various approved domain name registrars, and the applicable one-time fee for each application varies from registrar to registrar. A successful application will not produce a conventional domain name. Instead, successful applications will result in a standard plain page indicating only that the domain is reserved from use through a rights protection program. The name of the company requesting the block will not be disclosed in the Whois database.

Blocking requests must be based on U.S. trademarks (registered as of September 1, 2011) on the “Principal Register,” or a foreign equivalent.  The domain name requested to be blocked must correspond exactly with the trademark reflected in the registration.   Requests to block a domain name that is comprised of a trademark but also includes generic of descriptive words will not be granted. 

The blocking application process may not work in all cases. If a member of the adult entertainment industry already owns the same registered trademark for adult entertainment goods or services, or already had an active domain name incorporating the trademark in another TLD, the adult entertainment company will be able to register in the .xxx TLD even if a another trademark owner submits a blocking application. 

Filing a blocking application is the best way to keep a brand out of the .xxx domain. At the conclusion of the blocking period, a .xxx domain name that has not been pre-registered by a member of the adult entertainment industry or blocked by a trademark owner will become available to the general public.

Filing a blocking application is not the only option. Once the registry opens to the general public on December 6, 2011, a mark owner could apply to register its brand name as a .xxx domain name and simply not use it. This is a risky proposition as the brand owner might not be the first to register the .xxx TLD. It also may be more expensive. Instead of paying a one-time fee for at least 10 years for a blocking application, an annual fee for the domain name registration would apply. And if the mark owner is forced to pursue a Uniform Domain Name Resolution Policy proceeding to recover the domain, the costs go up exceptionally. Therefore owners of registered trademarks are encouraged to take advantage of filing a blocking application. Failure to act could result in unwanted over-eXXXposure.

The long-held rule in the Ninth Circuit was that a plaintiff, in a copyright infringement claim, is presumed to have suffered irreparable harm upon a showing of likelihood of success. (Elvis Presley Enterprises, Inc. v. Passport Video, 249 F.3d 622, 627 (9th Cir. 2003).) Two Supreme Court decisions cast doubt on the continued liability of that precedent, a doubt that was lifted in August 2011 when the Ninth Circuit overruled its own long line of precedents – hence, the Court’s poignant observation that “Elvis has left the building.”[1]

The decision overruling the Elvis presumption of irreparable harm is Flexible Lifeline Systems, Inc. v. Precision Lift, Inc., et al., Ninth Circuit Case No. 6:10-CV-00044, filed August 22, 2011, 2011 U.S. App. LEXIS 17462. The plaintiff, Flexible Lifeline Systems, Inc. (“Flexible”) claimed sole ownership of technical drawings for the manufacturing of aircraft maintenance stands used to repair aircraft.[2] Defendant Precision Lift was a company that had sold Flexible’s aircraft maintenance stands for a number of years. In 2008, Flexible and Precision entered into a joint venture to design, manufacture, and sell aircraft maintenance stands to the United States Air Force. Flexible and Precision designed custom maintenance stands and submitted an initial proposal to the Air Force. For various reasons, the joint venture broke down and was terminated.  Precision found another joint venturer and utilized the design plans developed in conjunction with Flexible to continue with its proposal to the Air Force.

Precision appealed, arguing that the United States Supreme Court decisions in eBay v. Merc Exchange LLC, 547 U.S. 388 (2006) and Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008) had effectively overruled Elvis. The Ninth Circuit agreed.

The Supreme Court’s decision in eBay involved a permanent injunction issued in a patent infringement case. The Supreme Court found that the general rule that a permanent injunction would be issued against patent infringement absent exceptional circumstances could not be “squared with the principles of equity established by Congress.” The Supreme Court made it clear that a permanent injunction could not be issued absent evidence of irreparable injury, even drawing a parallel analysis to the Copyright Act which contained similar language creating the right to preliminary and permanent injunctions. 

Flexible argued that eBay was distinguishable in that it involved a permanent injunction, not a preliminary injunction, and that the presumption of irreparable injury should prevail when seeking a preliminary injunction. The Ninth Circuit rejected that argument by relying on the Supreme Court’s decision in Winter v. Natural Resources, 55 U.S. 7 (2008), which involved a preliminary injunction issued to prohibit the United States Navy’s ability to conduct war readiness exercises off the coast of California. The Supreme Court, in Winter, overruled the Ninth Circuit precedent that a “possibility of irreparable harm” was sufficient to issue an injunction involving environmental damage. The Supreme Court found that preliminary injunctions are an extraordinary remedy never awarded as of right. Courts are required to balance competing claims of injury and must consider the effect in granting the requested relief. The Ninth Circuit’s precedent allowing a plaintiff to show a possibility of irreparable harm was found to be “too lenient.” The proper standard was likely to suffer irreparable harm.

The Flexible decision clearly holds that the well-established “four-factor test” is to be applied in all cases involving intellectual property rights. A presumption of irreparable harm is no longer permissible. The four-factor test requires a plaintiff to establish: (1) likelihood of success on the merits; (2) the plaintiff is likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in plaintiff’s favor; and (4) an injunction is in the public interest. (Citing Marlyn Nutraceuticals, Inc. v. Mucose Pharma GmvH & Co., 571 F.3d 873, 877 (9th Cir. 2009).) The Ninth Circuit remanded the case to district court for factual findings with respect to irreparable injury. 

Plaintiffs seeking preliminary injunctions must be careful to submit admissible evidence that they are likely to suffer irreparable harm in the event the injunctive relief is granted. In Flexible, the Ninth Circuit noted that the only reference to harm in the district court’s decision was an observation that Flexible failed to establish that it had ever submitted competing bids against Precision involving the copyrighted plans at issue. The Ninth Circuit noted that such a finding would actually weigh against a finding of irreparable injury. Admissible evidence establishing the nature and extent of the irreparable injury is essential and simple monetary damage may not be sufficient.

In a recent opinion, the Ninth Circuit clarified the defense of copyright misuse, finding the defense inapplicable in a dispute between Apple Inc. and Psystar Corp. Apple, one of the most prolific software producers in the world, sued Psystar for copyright infringement based on Psystar’s practice of copying Apple’s Mac OS X operating software for use in Psystar computers. Essentially, Psystar would make a master copy of the Mac OS X software, and install a copy on one of their computers. Psystar would then bundle the computer for sale with an unopened packaged version of MAC OSX that it would purchase from any number of retailers. Psystar would purchase these copies so it could assert that it had purchased the software to run on each computer it sold, when actually the computers would run on the pre-installed copied version of Mac OS X.
Prior to the Ninth Circuit appeal, the Northern District held that Psystar was infringing on Apple’s copyrights in Mac OS X. Psystar argued that the defense of copyright misuse made Apple’s Software License Agreement unenforceable.
 

Apple’s License Agreement reads in pertinent part: “This License allows you to install, use and run one (1) copy of the Apple Software on a single-Apple-labeled computer at a time. You agree not to install, use or run the Apple Software on any non-Apple labeled computer, or to enable others to do so.”

License agreements have become pervasive in the industry because of the first sale doctrine, which is codified in 17 U.S.C. section 109, and gives owners of copies of copyrighted works the unrestricted right to resell their copies. However, because the first sale doctrine does not apply to copies which are transferred through rental, lease, loan, or otherwise, it does not apply to licensees of copyrighted works. The defense of copyright misuse has seen resurgence with the increased use of licenses in the software industry.

In the Apple case, the Ninth Circuit held that a “software licensing agreement may reasonably restrict the use of software as long as it does not prevent development of competing products.” The Court found that Apple’s licensing agreement was valid as a license, and thus the first sale doctrine, which does not apply to licenses, did not apply. The Court further found that Apple’s license does not restrict competitors for developing their own software, and does not restrict Apple users from using non-Apple software on their Apple computers. Accordingly, Apple’s license is not an egregious anticompetitive restraint, and “represents the legitimate exercise of a copyright holder’s right to conditionally transfer works of authorship.” Now, the Court clarified, so long as a license agreement does not restrict development and use of competing products, the defense of copyright misuse in infringement actions is not going to fly.
 

The affirmative defense of copyright misuse is a court-created affirmative defense to copyright infringement which flows from a similar defense in patent litigation. In 1942, the U.S. Supreme Court in Morton Salt Co. v. GS Suppiger Co. recognized the affirmative defense of patent misuse where a patent holder attempted to maintain an infringement action by improperly tying the use of its patented product to one of its unpatented products. The Supreme Court held that this improper tying of a patented product to an unpatented product required that equity “withhold its assistance from such a use of the patent by declining to entertain a suit for infringement [until] the improper practice has been abandoned ...”.

In 1990, the Fourth Circuit Court of Appeal became the first federal appellate court to extend the patent misuse defense to copyrights. On September 28, 2011, the Ninth Circuit issued its opinion in Apple, Inc. v. Psystar Corporation which addressed the important issue regarding the application of the “copyright misuse” affirmative defense in the context of a software licensing agreement.
 

Apple sued Psystar for, among other things, copyright infringement. In November 2009, the district court granted summary judgment to Apple and found that (1) Psystar’s use of a copy of the Mac OS X operating system was not a fair use of Apple’s operating system; (2) Psystar infringed on Apple’s exclusive right to create derivative works; and (3) the licensing agreement for Apple’s operating system was not overly restrictive and thus did not constitute copyright misuse. On appeal, Psystar did not argue that the court erred in finding infringement but did argue that the court should have recognized its defense of copyright misuse.

Psystar argued that Apple committed copyright misuse by requiring that licensees of its Mac OS X program run their copies only on Apple computers. Psystar argued that this improperly extended the reach of Apple’s copyright and constituted copyright misuse. In finding that the district court correctly held that there was no copyright misuse, the Ninth Circuit began by examining the history of software licensing agreements. Traditionally, a copyright owner would sell a copyrighted work which gave rise to the “first sale doctrine.” This doctrine allows owners of copies of copyright works to re-sell their copies without restriction. However, U.S. Copyright law expressly states that the first sale doctrine does not apply where a copy of a copyright work is transferred through “rental, lease, loan or otherwise;” such as in connection with a license. Thus, a software user is considered to be a licensee rather than an owner of copyrighted software where the copyright owner “(1) specifies that the user is granted a license; (2) significantly restricts the user’s ability to transfer the software; and (3) imposes notable use restrictions.” As the Ninth Circuit recognized, “it is this distinction between sales and licenses that has caused the use of software licensing agreements to flourish and become the preferred form of software transactions.”

As mentioned above, the affirmative defense of copyright misuse arose out of a similar doctrine in patent law. In 1990, the Fourth Circuit applied the misuse defense to copyrights for the first time. In Lasercomb Am., Inc. v. Reynolds, the Fourth Circuit held that a software manufacturer engaged in copyright misuse when it required its customers to agree to a licensing agreement “that barred the licensee from creating any competing software.” The Ninth Circuit addressed the issue of copyright misuses doctrine on several occasions from 1997 to 2005. However, the Ninth Circuit has applied the doctrine sparingly describing “the purpose of the defense as preventing holders of copyrights ‘from leveraging their limited monopoly to allow them control of areas outside the monopoly.’” For instance, in Practice Management Info. Corp. v. American Medical Association (9th Cir. 1997) 121 F.3d 516, the Ninth Circuit upheld a copyright misuse defense because “the copyright licensor in that case prevented the licensee from using any other competing product.”

In turning to the case at bar, the Ninth Circuit rejected Psystar’s argument that Apple was improperly trying to control the use of its operating software after it had been sold. The Court recognized that Apple did not transfer ownership of the Mac OS X software when it sold is DVDs, but rather as clearly explained in the software licensing agreement “the DVD purchasers were licensees not owners of the software.” The Ninth Circuit found that this was consistent with the long history of copyright law which provides that “copyright owners may choose to simply exclude others from the work, i.e., not to transfer their rights ... courts have long held that copyright holders may also use their limited monopoly to leverage the right to use their work on the acceptance of specific conditions.” The only prohibition on the ability to control the use of copyright material is that copyright holders cannot use “the conditions to stifle competition.”

The Ninth Circuit held that Apple’s software licensing agreement did not restrict a competitor’s ability to develop their own software, nor does it preclude customers from using non-Apple components with Apple computers. Rather, Apple “merely restricted the use of Apple’s own software to its own hardware.” The Court continued by recognizing that Psystar manufactured its own computer hardware and found that Apple’s software licensing agreement left Psystar “free to develop its own computer software.” Thus, the Ninth Circuit found that the district court properly rejected Psystar’s copyright misuse defense.

The Ninth Circuit has reaffirmed the notion that defendants in copyright infringement claims face an uphill battle in establishing the affirmative defense of copyright misuse.
 

By Zachary Wadlé

Satoru "Miles" Kobayashi opened a new jazz club and restaurant in Manhattan in April 2010. Kobayashi named his establishment the “Miles Café” and used the “Silhouette Profile” of jazz icon Miles Davis as part of his logo. The heirs of Miles Davis felt “Kind of Blue” about this development and sued Kobayashi in federal court claiming trademark dilution, false advertising, and various violations of the Lanham Act. Davis' heirs say Kobayashi changed his first name to Miles, claimed the real Miles Davis appeared to him in a dream and suddenly inspired him to open a restaurant bearing his name. They allege “[Kobayashi is] intentionally free-riding off the goodwill associated with the Miles Davis marks by using them to promote a jazz club entitled Miles’ Cafe in a way that is likely to mislead the public.” Davis’ heirs seek injunctive relief and the destruction of all of the "confusingly similar" Miles Café advertising and merchandise.

Davis’ heirs’ complaint relies on trademarks they own for the name “Miles Davis.” But you may ask how can Miles Davis’ heirs have exclusive rights over the “Miles Davis” name? Surely there are other people named Miles Davis that have just as much right to use their name as the jazz legend.  This is the reason why trademarking a personal name is difficult under trademark law. In particular, you have to demonstrate “secondary meaning” to qualify for trademark protection. Miles Davis won eight Grammys. His 1959 album "Kind of Blue" has sold more than 4 million copies. He was inducted into the Rock & Roll Hall of Fame in 2006 and was declared a national treasure' by the U.S. House of Representatives in 2009. These kind of laurels helped prove the requisite “secondary meaning” of Miles Davis’ name, and allowed his heirs to assert trademark rights against Mr. Kobayashi.

To demonstrate that personal names (actual names and nicknames) can function as marks only if they identify and distinguish the services and not just the person, the Trademark Manual of Examination Procedure cites a few holdings where trademark protection was denied. They include: In re Mancino, 219 USPQ 1047 (TTAB 1983) (holding that BOOM BOOM would be viewed by the public solely as applicant’s professional boxing nickname and not as an identifier of the service of conducting professional boxing exhibitions); In re Lee Trevino Enterprises, Inc., 182 USPQ 253 (TTAB 1974) (LEE TREVINO used merely to identify a famous professional golfer rather than as a mark to identify and distinguish any services rendered by him); In re Generation Gap Products, Inc., 170 USPQ 423 (TTAB 1971) (GORDON ROSE used only to identify a particular individual and not as a service mark to identify the services of a singing group). In each case, the proposed trademark was not entitled to registration, because the public did not associate a particular service with the name. Instead, the proposed trademark merely brought to mind the identity of the person with the name.

Trademarking a name is commonplace for celebrities and athletes because the primary hurdle to registration is easier to meet - people already know who they are.   All that’s left for the celebrity or athlete is to pick a service and start developing public recognition of the service they provide. Think Michael Jordan for basketball shoe endorsements. But if your name is Joe Jones from Sacramento, California the process can be much more difficult and can take years to accomplish. For instance, if Joe Jones wanted to trademark JOE JONES for his restaurant, he would have to acquire a high level of distinctiveness and provide evidence that the public readily associates his name with restaurant services. This requires a well-known enterprise that achieves widespread attention and notoriety before trademark protection is ever granted. In the case of personal name trademarks, success of the underlying individual and business is a prerequisite to trademark registration. The trademark is really used to protect the goodwill already built up with the name, instead of preemptively reserving use of the name to the exclusion of competitors. 

By David Muradyan

“South Park” is an animated sitcom that airs on Comedy Central, and centers on the happenings of four foul-mouthed fourth graders in a small mountain town in Colorado. As the District Court in Brownmark Films, LLC v. Comedy Partners stated, in the nearly 15 years that South Park has been on the air, “the four central characters have, amongst other adventures, battled space aliens, hunted Osama Bin Ladin in the wake of 9/11 ala Elmer Fudd and Bugs Bunny, and have, more recently, resolved the nation’s economic woes by charging the nation’s consumer debts on one of the character’s credit card.” Brownmark Films, LLC, v. Comedy Partners, 2011 U.S. Dist. LEXIS 72684 (E.D. Wis. July 6, 2011) (“Brownmark”). 

The entities involved in the production of South Park found themselves in the middle of a copyright infringement suit because of a South Park episode entitled “Canada on Strike,” which allegedly infringed on Plaintiff Brownmark Films, LLC’s (“Plaintiff” or “Brownmark”) copyright in WWITB (defined below).  In that episode, the naïve “Butters Stotch” (one of the South Park characters) is coaxed by his fellow classmates to record an internet video in the hopes of making money on the Internet. The Internet video replicates parts of the “What What (In the Butt)” (“WWITB”) video, which was a copyrighted video. The Court described the WWITB music video as “a nearly four minute ditty regarding the derriere of the singer of the underlying work.” The Court further explained: “The music video begins with an array of bizarre imagery—from a burning cross to a floating pink zeppelin—and only gets stranger from there. The heart of the video features an adult African American male ensconced in a bright red, half-buttoned, silk shirt, dancing, grinning creepily at the camera, and repeatedly singing the same cryptic phrases: ‘I said, what what, in the butt.’ And “you want to do it in my butt, in my butt.’” Brownmark, the purported co-owner of a copyright in the WWITB music video, filed suit against various entities involved in the production of South Park, alleging copyright infringement. According to Brownmark, the “Canada on Strike” episode has an internet video—which lasts for 58 seconds of the approximately 25 minute episode—replicating parts of the WWITB video, with the 9 year old Butters “singing the central lines of the original video, while dressed as a teddy bear, an astronaut, and even as a daisy.” As the Court noted, “[i]n the episode, Butters’ video, much like the original WWITB video, goes ‘viral,’ with millions watching the clip. However, after their attempts to collect ‘internet money’ prove fruitless, the South Park fourth graders learn that their video, much like other inane viral YouTube clips, have very little value to those who create the work.” The defendants justified their use by claiming “fair use,” which is an affirmative defense to copyright infringement.

Section 107 of the Copyright Act states that the “fair use” of a copyrighted work for purposes such ascriticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. 17 U.S.C. § 107 (emphasis added). Thus, “fair use” is an affirmative defense to copyright infringement. Perfect 10, Inc., 508 F.3d at 1163. In determining whether the use was a “fair use,” the following factors shall be considered: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. 17 U.S.C. § 107. As the Court noted, the “rationale behind the [fair use] doctrine is that unauthorized uses of a copyright are permissible when they ‘advance the underlying constitutional purpose of copyright law: to promote broad public availability of literature, music, and other forms of creative arts.’” (Brownmark, quoting Bruce P. Keller and Jeffrey P. Cunard, Copyright Law: A Practitioner’s Guide § 8.3 (2010)). Section 107 expressly provides that the “fair use of a copyrighted work” for such purposes as “criticism” and “comment” “is not an infringement of a copyright.”

Applying the statutory factors from Section 107 of the Copyright Act and the principles behind the fair use doctrine, the Court concluded that defendants’ use of the music video in the South Park episode “Canada on Strike” was “fair.” The Court focused primarily on the “purpose and character” of defendants’ use. The U.S. Supreme Court has stated that “[t]he central purpose of this [factor] is to see . . . 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; it asks, 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) (citations and quotation marks omitted).  Indeed, with respect to the “purpose and character” prong, the Court stated that the South Park episode “transforms” the original piece “by doing the seemingly impossible—making the WWITB video even more absurd by replacing the African American male singer with a naïve and innocent nine-year old boy dressed in adorable outfits.” The Court further noted that the “episode then showcases the inanity of the ‘viral video’ craze, by having the South Park fourth graders’ version of the WWITB video ‘go viral,’ seemingly the natural consequence of merely posting a video on the internet.” In summarizing the “purpose and character prong,” the Court concluded: “More broadly, the South Park episode, with its use of the WWITB video, becomes a means to comment on the ultimate value of viral YouTube clips, as the main characters discover that while society is willing to watch absurd video clips on the internet, our society simultaneous[ly] assigns little monetary value to such works. The South Park ‘take’ on the WWITB video is truly transformative, in that it take the original work and uses parts of the video to not only poke fun at the original, but also to comment on a bizarre social trend, solidifying the work as a classic parody.”  Also factoring in the Court’s decision was the fact that the use of the copyrighted work in the South Park episode was relatively insubstantial. Notably, the defendants’ work was a cartoon of a nine year old boy repeating just enough lines from the WWITB video to conjure up the original work, and the WWITB snippet in the South Park episode was less than a third of the length of the original work. Finally, the Court also noted that there was little risk that derivative work in question would somehow usurp the market demand for the original. In conclusion, the Court concluded that South Park’s parody of the WWITB video “falls squarely within the fair use protections afforded by the Copyright Act.”

The next time South Park mimics, parodies, or otherwise makes a mockery of a copyrighted music video, the copyright owner(s) should think twice before bringing a copyright infringement lawsuit since South Park’s infringing use may constitute “fair use.”

By Scott Plamondon

On September 8, 2011, the Senate voted 89-9 to pass the America Invents Act (the “Act”). Thereafter the bill was sent to President Obama, who is expected to sign it into law. While the provisions of the Act include more funding for the United States Patent and Trademark Office, the eventual elimination of interference proceedings, and the creation of a potentially more streamlined post-grant challenge process, the most noteworthy portion of the Act grants priority to a patent application based on the application’s filing date. This represents a significant departure from the longstanding United States patent law giving the first person to invent a device priority over all others.

The “first to file” provision of the Act will be met with mixed reactions. Individual inventors and small businesses claim that the “first to file” provision will create a race to the Patent Office, requiring them to expend significant amounts of money and other resources in order to quickly file patent applications ahead of other parties who may be working in a similar technological field. Larger businesses believe that the Act will be beneficial to the patent system by reducing the number of disputes relating to the priority of patent applications by creating an objective priority date. Of a more general concern is the possibility that the rush to file patent applications might result in a lower overall quality of the claims described in patents, potentially resulting in ambiguity and causing difficulty in interpreting those claims in the context of patent infringement litigation.

Ultimately only time will tell how the Act will alter the landscape of patent prosecution and litigation. In the meantime, inventors, and the attorneys that offer intellectual property advice to those inventors, should be mindful of the significant changes implemented by the America Invents Act, and should take steps to reduce the amount of time between perfecting an invention, and filing a patent application to cover that invention.

Scott Hervey is speaking at the INTA's TMA Conference on  October 2, 2011.  He is part of a panel discussion on the various IP issues that arise in the development, production and distribution of reality television.  He is joined by Beth Allegretti of Fox Entertainment Group.  For more information click on the picture above.

By Jeffrey Pietsch

The last decade has been tough for record companies. Record sales drastically fell with the advent of the internet and with the prevalence of unauthorized music downloading. Now, the record companies face a new foe in the Copyright Act of 1976 (“Copyright Act”). Under the Copyright Act, artists are able to exercise termination rights on grants made for copyrighted works which will allow artists to regain control of their work after 35 years from the date of such grant. This provision of the Copyright Act applies specifically to grants made on or after January 1, 1978. Because 2013 will be the first year an artist may exercise their termination rights, it is likely that record companies will resort to litigation to maintain their rights to such works. One example is the declaratory action filed recently by Scorpio Music and Can’t Stop Productions, Inc. against Victor Willis (aka the Cop or Naval Officer) of the Village People in an effort to prevent the exercise of termination rights for such popular songs as Y.M.C.A. and Macho Man.

Before examining the action filed against Victor Willis, it is instructive to first review and analyze the termination provision of the Copyright Act at issue. Section 203 of the Copyright Act provides for the termination of transfers and licenses granted by an author. Specifically, § 203 states: “In the case of any work other than a work made for hire, the exclusive or nonexclusive grant of a transfer or license of copyright or of any right under a copyright, executed by the author on or after January 1, 1978, otherwise than by will, is subject to termination.” The following conditions must be met for the termination:

(1)      the termination must be made by an authorized person

(2)      a 35-year period exists between the grant and the termination date; and

(3)      advance notice must be provided not less than two years and no more than ten years before the termination date.

Obtaining a majority of the Village People to consent to the group’s termination rights will likely not be a large hurdle to overcome. However, showing that the group’s songs were not “works made for hire” may be more difficult and will be the crux of most litigation related to termination rights. Section 203 specifically states that “works made for hire” are not subject to termination rights. Scorpio Music and Can’t Stop Productions argue that each employed Willis solely as a writer to translate certain songs and provide English lyrics for some foreign compositions. Scorpio Music and Can’t Stop Productions also claim that each supervised and controlled the manner and means by which Willis worked, including his location and time of work. Based on the significant control that these record companies claim to have exerted on Willis, they may have a strong argument. This is especially true considering that the members of the Village People were each selected by the record companies.

Although the “works made for hire” argument may resolve in favor of the record companies in this dispute, this argument will likely be unsuccessful for most other artists. The U.S. Supreme Court held that whether a work prepared under the Copyright Act is a “work made for hire” depends not on the language of the contract but on the “hiring party’s right to control the manner and means by which the product is accomplished.” Recording artists typically do not work under the control of the recording company. Traditionally, artists have paid for making their records themselves using advances (which are deducted from the royalties) provided by the record companies. Recording artists and their artistic products generally are created independent of the record company. Nonetheless, the Recording Industry Association of America, a lobbying group representing record labels, believes otherwise, which would mean that most works will not be subject to termination rights because they were “works made for hire.” Litigation on this issue will only intensify in the coming years, and this issue may ultimately be resolved only when it reaches the U.S. Supreme Court.