The Political Parody Problem

In a bid to win the hearts and minds of voters, lately political candidates have touted, among other things, their musical predilections. In at least two recent cases, candidates have sanctioned the alteration of the lyrics, but not the tune, of some of their favorite music to shore up political support. The musicians who own the copyrights in those songs weren’t exactly thrilled.

All They Want To Do Is Campaign

In April 2009, various musicians, including Don Henley, sued Charles DeVore, who unsuccessfully sought the Republican nomination for a U.S. Senate seat currently held by Senator Barbara Boxer, for, among other things, infringing the musicians’ copyrights. The musicians alleged (PDF) that DeVore produced videos reworking the lyrics of the musicians’ songs “The Boys of Summer” and “All She Wants to Do Is Dance” into songs titled “The Hope of November” and “All She Wants To Do Is Tax,” which poked fun at President Obama, his supporters, and Senator Boxer. DeVore asserted that “The Hope of November” and “All She Wants To Do Is Tax,” constituted parodies, and were thus protected by the fair use doctrine. Specifically, DeVore maintained that the altered songs commented on political views conveyed in the songs. On cross-motions for summary judgment, the court disagreed (PDF), reasoning in large part that DeVore’s videos did not target Henley’s political views so much as they targeted views that may have been held by Henley (the court noted that Henley disputed DeVore’s assumption that he held liberal-leaning views, but explained that its inquiry focused on whether a work’s parodic character could reasonably be perceived).   DeVore recently apologized for using the musicians’ work without their permission and settled the matter for an undisclosed amount.

In another case this past January, Peter Paterno, an attorney for Joe Walsh, a guitarist for the Eagles, wrote to Joe Walsh (PDF), a Republican candidate for Congress, about the unlicensed use of his client’s song, “Walk Away,” in which the narrator ostensibly recounts his unsuccessful efforts to mend his relationship with an uninterested partner, to compose “Lead the Way,” which extolls Joe Walsh’s ability to “lead the way” in battle against Democratic policies and positions.  In the bitingly sarcastic letter, Paterno demanded that the candidate discontinue his unlicensed use of Walsh’s song.  Walsh refused, claiming that “Lead the Way” was a “parody song of the political process.” However, a “parody of the political process” standing by itself is insufficient to demonstrate the parodic nature of the work for purposes of a copyright infringement; rather, Walsh had to show that “Lead the Way” lampooned or commented on “Walk Away.” Perhaps having realized that his song had very little, if anything, to do with trying to fix a broken relationship, Walsh ultimately decided to take “Lead the Way” down from his website.

Fair Use Funny?

For purposes of a copyright infringement action, a work qualifies as a parody if it uses aspects of a copyrighted work to create a new work that comments on the underlying copyrighted work.

Owing to the limitation that a parody comment on an underlying copyrighted work, parodies enjoy a somewhat favored status under the fair use doctrine. This is because the four factors used to determine whether the fair use doctrine protects a putative parody—the purpose and character of the use, the nature of a copyrighted work, the amount copied, and the effect upon the potential market—typically weigh in favor of finding that an alleged parody constitutes a fair use since a parody by its very nature is transformative and expressive, requires significant borrowing from the underlying work, and the author of a copyrighted work will not likely license a work criticizing the author’s own work.

In contrast, satirical works, which use another’s work to comment on something other than the underlying work, do not necessarily fare as well under these factors because satirical works typically require greater justification for appropriating a copyrighted material. For this reason, would-be satirists often try to stretch the meaning or message ascribable to a copyrighted work in order to assert a parody-based fair use defense and avoid the heavier burden typically applied to satires.

Aren’t There Different Rules For Politicians Political Speech?

The fine distinction between satire and parody exists in a certain amount of tension with the relatively strong protections afforded political speech under the First Amendment.   Although copyright law does not proscribe the substance or ideas behind political messages, it does potentially entitle an author to enjoin the form in which a political message may be delivered.

As the DeVore and Walsh cases demonstrate, parody will rarely, if ever, serve as a viable defense in a copyright infringement action where the allegedly infringing work fixates on a political view rather than the underlying work itself. To stave off claims of copyright infringement, political satirists would thus do well to take aim at works with overtly political tones or otherwise limit their commentary to the works from which they borrow.  

Get Out of Jail(breaking) Free -- At Least As Far As Copyright Is Concerned

 In the past few years, the Apple iPhone and its "smartphone" brethren have seen widespread adoption throughout the United States. Combining the features of computers and traditional mobile phones, along with additional features like movement detection, GPS capabilities, and over-the-air videoconferencing, smartphones have, for many people, become indispensible tools for both work and pleasure.

Sometimes, however, users find the native functionality of certain smartphones to be limited. Some smartphones incorporate operating systems that restrict or eliminate features otherwise built in to the hardware, provide limited software functionality, or restrict the ability of the end user to use the phone in connection with "unauthorized" programs or media. For instance, among other things, the iPhone is "locked" and will only work with AT&T's wireless network, its operating system requires that "apps" -- which are approved by Apple beforehand -- be downloaded only from the Apple iTunes App Store, and its interface has very limited customizability features. So, while users enjoy the advanced hardware of smartphones, they often find the installed software to be stifling.

Many smartphone users with this problem turn to "jailbreaking" -- removing the software restrictions of the operating software. To jailbreak the iPhone, for instance -- that is, to relieve it of its Apple-imposed limitations -- requires the user to download and run a program or a series of programs that install custom software, and which modify the existing operating software. A jailbroken iPhone can then access unofficial "app stores" such as Cydia and Installer to download non-Apple-sanctioned third-party software and enable previously locked features and functionality.

Because jailbreaking requires users to "hack" their phones, there is a legitimate copyright concern. This is because the Digital Millennium Copy Act (DMCA), 17 U.S.C. sec. 1201 et seq. (PDF), which was designed to address copyright issues in the digital age, prohibits the act of circumventing measures that control access to copyrighted works -- in other words, hacking. Because jailbreaking a smartphone requires users to hack the phone to remove certain software protections, it was likely that -- absent other considerations such as fair use exceptions -- such an action violated the DMCA's anti-circumvention provisions.

The questionable legality of jailbreaking prompted the Electronic Frontier Foundation to seek clarification from the U.S. Copyright Office as part of the Copyright Office's "Triennial Rulemaking" under the DMCA, which requires that every three years the Copyright Office conduct a process for designating exemptions -- that is, certain classes of works that for one reason or another may be "hacked" legally for certain purposes. See 17 U.S.C. Sec. 1201(a)(1)(C) and (D) (PDF).   As part of the rulemaking process, the U.S. Copyright Office questioned Apple on various issues related to jailbreaking. In its response to these questions (PDF), Apple maintained that, among other things, jailbreaking constitutes copyright infringement and the creation of infringing derivative works, violates the software license agreement covering the iPhone software, and diminishes the integrity and security of the iPhone software and the data network infrastructure generally.

In its ruling announced on July 26, 2010 and effective July 27, 2010 (PDF), the Copyright Office adopted six exemptions to the DMCA anticircumvention prohibitions, including:

Computer programs that enable wireless telephone handsets to execute software applications, where circumvention is accomplished for the sole purpose of enabling interoperability of such applications, when they have been lawfully obtained, with computer programs on the telephone handset.

Analogizing jailbreaking to the existing DMCA statutory exemption for reverse engineering for the purpose of making computer programs interoperable, see 17 U.S.C. sec. 1201(f), the Copyright Office explained that:

On balance, the Register concludes that when one jailbreaks a smartphone in
order to make the operating system on that phone interoperable with an independently created application that has not been approved by the maker of the smartphone or the maker of its operating system, the modifications that are made purely for the purpose of such interoperability are fair uses.

And so the jailbreaking exemption was adopted. A separate exemption was adopted for "unlocking" the phone to work with any compatible voice and data carrier.

Of course, as Apple correctly points out, copyright is hardly the only relevant legal issue -- among other things, jailbreaking an iPhone might violate Apple's iPhone license agreement and render void the iPhone warranty. However, because it is a reasonably simple process to reload a clean version of the iPhone operating system -- with nary a trace of the jailbreak -- this is probably not a significant deterrent for would-be escapees. Further, as discussed in my post regarding the first-sale doctrine and enforceability of end-user license agreements, perhaps challenges could be raised to Apple's insistence that its customers are not owners of the operating software, but only licensees (indeed, in its ruling, the Copyright Office noted that it "cannot clearly determine whether the various versions of the iPhone contracts with consumers constituted a sale or license").

Is this the end of the jailbreaking copyright inquiry? Might Apple or other smartphone manufacturers challenge the Copyright Office's exemption determination, or will they more aggressively lock down software to deter potential jailbreakers? We will probably not have to wait too long to find out.

Sports Franchise Marks and Logos: One Owner, or Many?

In American Needle, Inc. v. National Football League, the U.S. Supreme Court held that the National Football League was subject to suit under the Sherman Antitrust Act regarding its practices in licensing team trademarks to merchandisers. Between 1963 and 2000, the IP licensing entity set up by the league, NFL Properties, had “granted nonexclusive licenses to a number of vendors,” including American Needle, “permitting them to manufacture and sell apparel bearing team insignias.” In 2000, however, an exclusive license was granted to Reebok. American Needle, having lost out on the deal, responded with an antitrust suit in the Northern District of Illinois, which made it to the Supreme Court eight years later.

The question posed in the case was whether the NFL teams are separate decision-making entities for purposes of this analysis, or whether NFL Properties should be viewed as a single entity. If the latter, there can be no potential liability for antitrust violations, as it takes two to tango and a single entity cannot “conspire with itself.” Disagreeing with both the district court judge and the Seventh Circuit Court of Appeals, the Supreme Court held unanimously that NFL Properties should not be treated as a single entity, but merely as a joint venture of separately managed competitors, each owning its own intellectual property rights and fully capable of conspiring to violate the antitrust laws. Thus, summary judgment in favor of the NFL was reversed, and the suit allowed to proceed.

Are sports franchises really independent actors with regard to their trademark rights? On the one hand, it’s certainly true that each individual team owns its marks, as searching the Patent and Trademark Office database of trademark registrations will show. Yet those with experience in the sports business know that virtually all intellectual property issues of the various leagues are centrally managed – from collection and ownership of copyrighted historical footage, to enforcement against unauthorized merchandisers, to promotion of web sites and internet broadcasting rights. One well-publicized example involves the dispute earlier this year concerning the “Who Dat” slogan of the NFL champion New Orleans Saints: the controversial cease and desist action against manufacturers of T-Shirts bearing the popular slogan came not from the team, but from the league. 

It’s interesting to contrast the Supreme Court’s vision of teams as independent owners of trademark rights with the picture that emerges from a different suit filed in 2007 and settled last year. In Madison Square Garden, L.P. v. National Hockey League, the owners of the New York Rangers sued the National Hockey League to gain control of their own website, newyorkrangers.com, after the league voted (over the objection of Rangers owners) to run all team websites on a league-controlled format through a league server. The complaint accused the NHL of “seizing the Rangers website” and stated, “The NHL began as a legitimate joint venture producing a product – major league men’s professional ice hockey competition – that no one club can produce alone . . . But by seeking to control the competitive activities of independent businesses . . . the NHL has become an illegal cartel.”

The NHL counterclaimed that the Rangers were violating the league’s constitution and by-laws by even bringing the suit, and pointed out, as noted by the district court judge, that in 1994 “the Member Clubs, with the Rangers’ vote, granted the League exclusive worldwide rights to use or license team trademarks for various marketing purposes, such as advertising and the sale and distribution of ‘products and services . . . of any nature.’” The district court found that the Rangers failed to show a likelihood of success on the merits given this broad assignment of rights. The suit was later settled and dismissed.

Thus, the Rangers, though nominal owners of the registered mark, not only lacked the ability to run their own website utilizing their mark, but had arguably contracted away their right to even go to court to contest the issue. In light of this, can we truly say that sports franchises are independent actors pursuing their own interests in their marks? Perhaps the further development of the American Needle case on remand will shed more light on the issue.

Can You Be A Little More Specific? General Knowledge of Copyright Infringement Not Sufficient to Forfeit DMCA Safe Harbor Protection: Viacom International, Inc. v. YouTube, Inc.

Almost since the founding of YouTube in 2005, the on-line video service has been labeled by commentators as a top virtual destination for copyright-infringing material. According to a lawsuit brought by Viacom International, Inc., YouTube was aware of this alleged infringement as a general matter, and through advertising revenues profited handsomely from it. Nevertheless, a federal judge has held that YouTube’s general knowledge alone, without information about specific instances of infringement, was not enough to forfeit the protection of the Digital Millennium Copyright Act (“DMCA”).

The DMCA, as codified at 17 U.S.C. § 512(c), provides an internet service provider (“ISP”) with “safe harbor” protection against copyright infringement suits under certain conditions. If somebody uses the ISP’s service to store infringing material, the ISP is protected if it does not have actual or constructive knowledge of the infringement, and if it acts quickly to remove such material once it does have knowledge of it. Also, the ISP must not receive a financial benefit directly attributable to infringing activity that it has the “right and ability to control.”

When YouTube did receive notice of specific infringing material, it acted quickly. In February 2007, Viacom sent a mammoth take-down notice to YouTube, naming about 100,000 specific clips. Those clips were removed nearly overnight. However, Viacom alleged that YouTube did little, if anything, to locate and remove potentially infringing material on its own, even though it generally knew that such material existed. In March 2007, Viacom sued YouTube, claiming that this general knowledge gave rise to liability for copyright infringement. YouTube moved for summary judgment, asserting entitlement to safe harbor under the DMCA.

On June 23, 2010 Judge Louis L. Stanton, federal District Court Judge for the Southern District of New York, issued an opinion and order agreeing with YouTube. It was not enough that YouTube was generally aware of, and even welcomed, copyright-infringing material on its website. Rather, in order to lose safe harbor protection, YouTube had to have had knowledge of specific infringing materials, and sufficient information (such as the URL address) to locate and take down those materials. Additionally, Judge Stanton held that, even if YouTube directly profited, it could not be charged with “the right and ability to control” the infringing activity until it had that specific knowledge.

Consistent with the language of 17 U.S.C. § 512(m), Judge Stanton’s ruling puts the burden of on-line policing squarely, and solely, on the copyright holder. An ISP, by contrast, has essentially no duty to determine the copyright ownership of the material it is storing, no matter how prevalent infringement may be, and no matter how much money is gained from that infringement.

Viacom plans to appeal to the Second Circuit which, interestingly enough, recently encountered similar policing issues, albeit unrelated to the DMCA, in Tiffany (NJ), Inc. v. eBay Inc. In that case, in a decision that may foreshadow an appellate defeat for Viacom, the Court held that even though eBay may have known in a very general sense that its website facilitated sales of counterfeit Tiffany products, such general knowledge alone was not sufficient to establish trademark infringement.

gTLD Update: New Draft Applicant Guidebook Released and Open for Public Comment

The new generic top-level domain names (gTLDs) are closer than ever. As previously discussed, ICANN's Draft Applicant Guidebook Version 4 (DAG4) has been released. The guidebook, a comprehensive manual for potential gTLD applicants, explains the gTLD application process from filing to delegation (activation of the new domain), and outlines the various rights-protection mechanisms (RPMs) required to be implemented by registries for brand owners (initially discussed here). As expected, the DAG4 adds detailed provisions for the trademark clearinghouse -- a comprehensive database of trademarks and owners that is intended to aid in rights protection -- as well as the Uniform Rapid Suspension (URS) system, a dispute resolution system intended to combat clear cybersquatting efficiently and cost-effectively. The DAG4 also contains significant revisions to existing guidebook sections, including the provision for the Post-Delegation Dispute Resolution Procedure (PDDRP), a mechanism for dealing with gTLD registries that intentionally take advantage of brands or engage in patterns of bad faith behavior.

While there is still work to be done -- for instance, some RPMs lack sufficient detail, and it is not at all clear that the URS, which is intended to be fast and efficient, is actually an improvement over the UDRP in this regard -- the general impression in the domain name community is that the Draft Applicant Guidebook is close to its final form. This, of course, means that the new generic top-level domain names are coming sometime in the not-too-distant future.

In the meantime, the public still has a chance to influence ICANN -- the DAG4 is open for public comment until July 21, 2010. Various intellectual property and trademark bar associations are reviewing the DAG4 and submitting comments aimed to improve and augment the various proposed RPMs. Anyone, however, may submit comments, and you may wish to do so on your own behalf or on behalf of your clients. The full version of the DAG4, individual sections, and redline comparisons to the previous version -- as well as instructions for comment submission -- are available at the ICANN website.

We will closely follow the new gTLD implementation process as it nears this apparent "home stretch."

Parallel Imports: Trademarks, Copyrights, and the Supreme Court

A pending Supreme Court case may affect prevention of parallel imports, which is an important concern for trademark owners who wish to maintain their right to control the sale of goods developed for use in a particular market. Parallel imports, also known as “gray market” goods, are goods bearing a trademark protected in the United States that have been purchased through legal channels abroad and imported for unauthorized sale into the United States.   These goods often can be sold by the unauthorized importer for a profit and, at times, a lower price than the trademarked goods authorized for sale in the United States because of international pricing differences. 

It is common for trademark owners to manufacture goods differently for the various global markets in which they sell them, often to satisfy local consumer taste or regulatory requirements. For example, a soft drink sold under the same trademark in the United States and Europe may be made with less sweetener for the European Market to satisfy local taste and without high fructose corn syrup because of regulations against its use. The owner of the soft drink trademark in the United States may wish to prevent beverages manufactured for the European consumer from being sold in the U.S. without authorization. 

The good news is that a U.S. trademark owner has tools at their disposal to prevent parallel importation. For example, under U.S. customs regulations, if goods bearing a U.S. registered trademark are brought to the U.S. and are materially different than the U.S. product (such as the less sweet soft drink) the U.S. trademark owner can prevent them from being granted clearance by customs. The bad news, however, is that the unauthorized importer may circumvent the exclusion of the product if they affix a disclaimer to the product warning consumers that their sale is not authorized by the U.S. trademark owner. (See 19 C.F.R. §§ 133.2 to 133.27, available at GPO Access.)

Some trademark owners have found another way to protect themselves from parallel importation – Unites States copyright law. The first sale doctrine of the Copyright Act, 17 U.S.C. §109(a), provides U.S. copyright holders a means to prevent unauthorized sale in the United States of copyrighted material manufactured and first sold abroad. Generally, the owner of a copyright may exercise control over how copies lawfully made under the protection of the Copyright Act may be sold. However, after an authorized sale, the first sale doctrine then allows the subsequent owner of the copyrighted product to sell or dispose of it free from the copyright owner’s control or interference, so long as no unauthorized copies are made. 

But how does the owner of a trademarked good like a soft drink use copyright law to avoid parallel imports? By use of a copyrighted design on their product. The Copyright Act, which we think of as protecting things like books, music recordings, movies and television programs, also can protect original designs.   If an original design protected by copyright, such as a logo, is affixed to a commercial product, then the product bearing the design will receive the same protections under the law as the design itself. Importantly, the first sale doctrine of the Copyright Act does not allow for a parallel importer to use a disclaimer in the manner allowed by customs regulations. If copyrighted goods have been manufactured abroad and heretofore only sold abroad, the first sale doctrine of the Copyright Act acts as an absolute bar to unauthorized, parallel importation, at least for now.    

On April 19, 2010 the Supreme Court granted certiorari in the case of Costco Wholesale Corporation v. Omega, S.A., No. 08-1423. In this case, the justices will consider whether the first sale doctrine of the Copyright Act should be interpreted to provide a defense for parallel importers bringing into the U.S. copyrighted material manufactured and first sold abroad. If the Court rules that such a defense should be allowed, the means by which copyright owners prevent parallel imports would disappear. 

In the lower court case, Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir. 2008), the Ninth Circuit held that Costco infringed upon Omega’s copyright by selling, without authorization, watches bearing Omega’s copyrighted design which had been manufactured in Switzerland and first sold by authorized distributors outside the United States. The Ninth Circuit ruled that the Copyright Act could not extend beyond United States borders to cover goods manufactured abroad and that a U.S. copyright holder reserved their rights to control the first sale of these goods taking place after domestic importation. 

Costco, citing the Supreme Court case Quality King Distributors, Inc. v. L’anza Research International Inc., 523 U.S. 135 (1998), had argued that recognizing the occurrence of sales abroad for the purposes of addressing copyright disputes does not itself raise the issue of extraterritorial application of U.S. law. In Quality King  the Court determined that hair care products bearing a U.S. copyrighted design manufactured in the U.S. and then first sold abroad had received their “first sale” under copyright law and, therefore, the U.S. copyright owner could not prevent their subsequent parallel importation back into the U.S. The important distinction between these two cases is where the goods were manufactured. In Quality King, manufacture took place in the U.S. and in Costco, manufacture took place in Switzerland. Costco wants this distinction to disappear. 

Costco had argued that the Supreme Court’s Quality King decision stood for the proposition that recognition of first sales abroad does not raise issues of extraterritorial application of U.S. law. The Ninth Circuit disagreed, holding that while recognition of a foreign sale for the purposes of a factual analysis may not raise extraterritorial issues, applying the Copyright Act to goods manufactured outside the U.S., and therefore outside the reach of the statute, does. In essence, it held that the “first sale” which could be governed by U.S. law, and therefore controlled by the copyright holder, was the importation into the U.S.

Justice Ruth Bader Ginsburg, in her concurrence in Quality King, stated that the Court was contemplating “round-trip” importation of goods made in the U.S., sold abroad, and then brought back to the U.S. She specifically stated that the Court was not considering how the first sale doctrine applied to copyrighted goods first manufactured and sold abroad.   The time, however, has come to consider this very question, and copyright holders who use the first sale doctrine to prevent parallel imports have a lot riding on the answer.   

 

So You Think You Own That Software?

Many of us have, at one point or another, found ourselves overwhelmed by the amount of stuff lying around our homes, and have taken the opportunity to clean up (and make a bit of spending money in the process) by selling used books, CDs, DVDs, or VHS tapes at a yard sale, or at a pawn shop, or on an Internet site like Ebay or Craigslist. Even though these items are typically subject to copyright protection, we are allowed to sell them -- or otherwise dispose of them as we see fit -- because of the "first-sale doctrine," a limitation on copyright articulated by the U.S. Supreme Court in the landmark decision of Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908), and subsequently codified in the Copyright Act of 1976, 17 U.S.C. sec. 109. In short, the first-sale doctrine allows a purchaser of a lawfully made copy of a work -- for instance, a book -- to sell that book without the permission of the copyright holder -- in other words, the copyright holder's rights to control that particular copy of the book end once that book is first sold. The first-sale doctrine applies to all copyrighted works, though certain exclusions have been made for rental, lease and lending of computer software and phonorecords, which require authorization of the copyright owner.

Because the first-sale doctrine essentially creates a secondary market for copyrighted works (arguably resulting in fewer profits for some copyright owners), and because digital works are easily copied and manipulated, certain software and music publishers have attempted to sidestep the doctrine by attempting to control, via contract, the actions of purchasers. For instance, some copies of software contain so-called "shrink wrap" licenses, also called End-User License Agreements (EULAs), which purport to bind the purchaser upon opening the software package or installing the software. EULAs vary, but typically define the relationship between the end-user and the copyrighted work as a "license" arrangement -- that is, the user has not purchased a copy of the software, but only purchased the license to use the software under certain conditions defined by the copyright owner. Of course, many EULAs prohibit the transfer of that "license" to third parties, among other various restrictions.

Three cases pending before the Ninth Circuit promise to shed some light on the enforceability of EULAs and similar contracts purporting to restrict the actions of end-users. The first, Autodesk v. Vernor, stems from a lawsuit by Vernor, a reseller of used copies of Autodesk's Autocad software on Ebay, who sought declaratory relief based on Autodesk's prior interference with his Ebay auctions. The United States District Court for the Western District of Washington held that the first-sale doctrine trumped any contractual agreement to not resell the product, and that subsequent sales did not constitute copyright violations. Vernor v. Autodesk, Inc., No. C07-1189RAJ (W.D. Wash September 30, 2009) (PDF).

The second case, UMG v. Augusto, involves Ebay sales of promotional CDs of UMG musicians that were originally handed out to music reviewers and found by Augusto at record stores. The CDs were labeled "PROMOTIONAL USE ONLY -- NOT FOR SALE," which UMG claimed constituted "label licenses." The court below, noting that the "only benefit to a license for UMG is to restrain transfer of its music," held that the "label license" did not create an agreement between UMG and the original recipients of the CDs, and granted Augusto's summary judgment motion as to UMG's copyright claim, holding that Augusto's sales of promotional CDs did not constitute copyright infringement.  UMG Recordings, Inc. v. Troy Augusto et al., No. CV-03106 SJO (AJWx) (C.D. Cal June 10, 2008) (PDF).

MDY v. Blizzard is a bit more complicated in that it doesn't deal with resale of copyrighted goods, but rather the end user's ability to interact with the software (and copy the software to a computer) in a manner ostensibly prohibited by the EULA. Blizzard is the creator of the well-known World of Warcraft computer program, a massively multiplayer online role-playing game (MMORPG) in which players, via player-created avatars, make friends, battle enemies, gain "experience points," and earn in-game money to spend on equipment and items for their avatars. MDY created a software program called Glider that enables users to play World of Warcraft on "autopilot," meaning that players could be away from their computers while their avatars would continue to operate in-game. Because the terms of the World of Warcraft EULA prohibited "bots," as such programs are typically called, Blizzard claimed that MDY was tortiously interfering with the EULA between Blizzard and end users, and that MDY was vicariously liable and otherwise contributing to the copyright infringement (e.g., copying of the game program into computer system memory outside of the scope of the limited license). The U.S. District Court for the District of Arizona granted summary judgment for, among other claims, Blizzard's claims of vicarious and contributory copyright infringement.  See MDY Industries, LLC v. Blizzard Entertainment, Inc. et al., No. CV-06-2555-PHX-DGC (D. Ariz. January 28, 2009) (PDF).

All three cases have been appealed to the Ninth Circuit.

So, who really owns "your" software, and to what extent are you allowed to modify it for personal use? What about "your" music CD? The Ninth Circuit's treatment of these cases promises to provide some clarity on the enforceability of EULAs and shrink wrap licenses on original purchasers, as well as the effect of such contracts on downstream consumers. Both copyright owners and consumers should pay close attention.

Do you own that software?  You'll just have to wait to find out.

Copyright Registration for Collective Works: Muench v. Houghton Mifflin

A recent decision from the Southern District of New York should be of interest to anyone responsible for registering the copyright in compilations or collective works. In Muench Photography, Inc. v. Houghton Mifflin, 09-CV-2669 (S.D.N.Y. May 4, 2010) (PDF), the court ruled that the plaintiff, which owned the copyright in certain photographs that defendant Houghton Mifflin had licensed through a stock photo company called Corbis, did not hold valid registrations and therefore had not fulfilled the 17 U.S.C. § 411 prerequisite to suit. Plaintiff MPI claimed that Corbis had registered the copyright in its photographs when it had registered an automated database containing images by many different photographers.

The court held that Corbis’s registration of its automated databases was insufficient to register the copyright in the individual photographs contained therein because it had failed to list the names of the individual authors as required by 17 U.S.C. § 409. Troublingly, however, the opinion also contains some broader statements that make the basis for the court’s holding somewhat unclear. In particular, the court stated that “the registration of a collective work reaches the individual works only when the author of the collective work authored each of the individual works.” Slip Op. at 20. If this statement is true, it would mean that Corbis could not have registered the copyright in the individual photographs even by listing all of their separate authors, since Corbis (the author of the collective work, i.e., the database) was the owner and claimant – but not the author – of the photographs.

The court and the parties looked primarily to two earlier cases as precedent. In Morris v. Business Concepts, Inc., 283 F.3d 502 (2nd Cir. 2002), the Second Circuit held that registration of a magazine issue did not cover an individual article included in the issue because the copyright claimant (publisher of the magazine) had obtained only some, not all, of the rights to the article at the time of registration. Conversely, the court suggested that if the publisher had obtained all rights, its registration would have covered the article. In Bean v. McDougal Littell, No. 07-8063-PCT-JAT (D. Ariz. July 28, 2008), the Arizona district court confronted facts nearly identical to those presented in Muench. Defendants argued that Corbis did not have all rights to the photographs in its database because it had obtained assignment of legal title solely for the purpose of registering the copyrights, and was required to reassign all rights to the original authors after registration. The court disagreed, however; it found the assignment sufficient to transfer all rights to Corbis and, relying on Morris, held that Corbis’s registration therefore covered the individual photographs.

The Muench court distinguished Morris by finding that “automated databases and serials are separate forms of copyrightable works and are thus subject to separate copyright regulations.” Slip Op. at 18. It therefore declined to follow Bean because Bean relied on Morris, and because the defendants Bean had not pursued an argument based on § 409. Interestingly, in Bean the plaintiff’s name had been included in the Corbis registration application, thereby fulfilling the § 409 requirement, but the Muench court did not distinguish the case before it on this fact.

The distinction the Muench court drew between serials and automated databases is somewhat problematic because both types of works are collective works, and both are subject to the requirements of § 409. Although the Muench court looked to Copyright Office Circulars as persuasive authority, it failed to acknowledge or address the fact that Circular 62 (PDF), covering serials and relied on by the Second Circuit in Morris, explicitly states that “it is not necessary to include the names of the contributors” in order to obtain copyright registration for the individual works included in a collective work.

Setting aside this disconnect, the clearest lesson of Muench is that copyright claimants seeking to protect a collective work and the individual works that constitute it should always play it safe by listing all authors of the constituent works on the registration application form. As noted, some language in the opinion suggests that even this will not be enough if the individual works were not authored by the author of the collective work. For this reason, it may be wise for companies commissioning contributions to a project to structure the contributions as works made for hire, so that the company is in fact the author of the entire project. Where this is not possible, Muench does create some uncertainty. However, given the court’s predominant emphasis on § 409, and the stark conflict with Morris (not to mention with longstanding copyright practice) that would be created by a holding that collective work registrations can never cover separately authored contributions, it seems reasonable to conclude that the court’s statement on this point is dicta and unlikely to be followed. In addition, copyright owners facing infringement of an individual work that was registered as part of a collective work might consider, if there is any question about the validity of the registration, taking the extra precaution of applying separately to register the individual work before bringing suit.

Finally, it is worth noting that an affiliate of the plaintiff in Muench had actually written to the Copyright Office and obtained a response blessing Corbis’s registration strategy as sufficient. The court declined to defer to the agency’s interpretation of the Copyright Act contained in that response because, the court concluded, it conflicted with a plain reading of § 409. Slip Op. at 14. At the end of its opinion, the court expressed regret for the harsh result faced by a plaintiff who had made every effort to comply with the Act under specific guidance from the Copyright Office, and noted that “[t]he fault in this case lies solely with the Copyright Office” and the “poor advice” it had offered the plaintiff. Slip Op. at 23-24. Registrants would do well to keep in mind that even specific approval from the Copyright Office itself is no guarantee that a particular approach to registration will ultimately be found sufficient under the statute.

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The Private Counterfeiting Police: Tiffany (NJ), Inc. v. eBay Inc.

There is something for trademark holders and service providers alike in the Second Circuit’s opinion in Tiffany (NJ), Inc. v. eBay Inc. (PDF). In that case, the court held, among other things, that eBay’s Herculean anti-counterfeiting measures precluded direct and contributory liability for trademark infringement. The court reasoned that under either theory of liability, the mere fact that a service provider, such as eBay, knows in a very general sense that its website contains counterfeit products will not, standing alone, suffice to establish infringement. In the court’s view, liability premised on a service provider’s inducement of infringing conduct requires, at a minimum, that the service provider know or have reason to know that specific listings involve the sale of counterfeit goods.

While the court ultimately held that eBay did not directly or indirectly infringe the Tiffany trademarks, the extent of eBay’s efforts to combat the sale of counterfeit goods on its website sets the bar high for other online marketplaces utilizing similar business models. To the extent trademark holders may reasonably hold other service providers to eBay’s high anti-counterfeiting standards, service providers may soon finding themselves expending considerable resources to establish or strengthen their own policing regimes to insulate them from claims of contributory infringement. In dictum, the court suggested that the failure to take adequate counterfeiting measures, together with reason to suspect that counterfeit goods were being sold on a service provider's website, could potentially support a contributory infringement claim grounded in a service provider’s willful blindness to infringing conduct. In those circumstances, a court may very well impute the requisite knowledge to the service provider.

Although eBay Inc. arguably imposes stringent anti-counterfeiting requirements on service providers, the opinion reaffirms a place for providers, such as eBay, in the secondary market for brand name goods.

The court did not let eBay entirely off the hook, however. Notwithstanding eBay’s efforts to combat the sale of counterfeit goods, the court held that eBay could be liable for false advertising insofar as eBay advertised the sale of Tiffany jewelry on its website knowing that some of the “Tiffany” products on its website were not authentic. In the absence of a carefully worded disclaimer, eBay’s advertisements representing that eBay sold Tiffany merchandise could have misled or confused consumers into believing that all products identified by eBay sellers as "Tiffany" goods were authentic. Because the district court did not consider consumer confusion, the court remanded the false advertising claim, thus warning service providers that general knowledge that a service provider may be providing a forum to counterfeiters may result in false advertising liability regardless of a service provider’s diligence in rooting out counterfeit goods.

The bottom line for resellers of branded goods is that they should adopt comprehensive policies to guard against the sale of counterfeit items, and, equally importantly, take appropriate steps to implement those policies and address any complaints in a timely manner. For their part, trademark holders should monitor whether counterfeits are being sold on resale sites, and bring any suspected counterfeits to the immediate attention of the reseller in accordance with the reseller's posted policies. Should those efforts be unsuccessful, trademark holders should be prepared to confer with counsel and explore what next steps might be necessary.

Has South Butt Really Had the Last Laugh in Trademark Parody Dispute?

As previously reported, North Face sued South Butt for trademark infringement and dilution for using the name THE SOUTH BUTT and an arc designed to evoke the well-known logo for THE NORTH FACE. On the eve of a preliminary injunction hearing, the parties reported that they had settled their claims.

The Court thereafter entered two consent injunctions - one against the South Butt defendants (PDF), and another against a store that sold the allegedly infringing products (PDF). South Butt thereafter abandoned its federal trademark application for THE SOUTH BUTT (PDF), which will result in judgment being entered against South Butt in the trademark opposition proceeding before the Trademark Trial and Appeal Board because North Face did not consent to the abandonment.

So it is all over for South Butt, right? Not so fast. Although the terms of the settlement are confidential, there are a number of red flags suggesting that things may not be what they seem.

First and foremost, South Butt is still selling clothing bearing the accused mark THE SOUTH BUTT through its website. In the absence of North Face's permission, this would constitute a clear violation of the April 12 consent injunction against the South Butt defendants and subject them to contempt of court proceedings. Given the posture of the case, it is clear that North Face is allowing South Butt to continue selling accused products through its website in this manner.

What should we make of this? It is possible that North Face is allowing South Butt to continue to sell merchandise bearing the mark THE SOUTH BUTT under license from North Face, most likely for a royalty. Alternatively, North Face may be allowing South Butt to run out its inventory of accused products, either with or without a license.

The fact that the disclaimers of affiliation with North Face, such as they were, no longer appear on the website would normally point in the direction of a license. In this unusual case, however, it is possible that the disclaimers were removed because North Face found them offensive and did not wish to draw any attention to its association with South Butt. (According to the Answer (PDF), South Butt's website carried the following disclaimer: "We are not in any fashion related to nor do we want to be confused with The North Face Apparel Corp. or its products sold under "The North Face" brand. If you are unable to discern the difference between a face and a butt, we encourage you to buy North Face products.")

Second, the consent injunctions are subject to an important qualifier: "without the express written permission of The North Face." Thus, the injunctions themselves contemplate that North Face may give written permission for the defendants to use THE SOUTH BUTT as a trademark going forward, and it appears that this has occurred.

Third, the consent injunction against the store provides that the injunction will become permanent "unless a final non-appealable judgment is entered against The North Face" finding that South Butt has not engaged in any trademark violations, and further provides that the injunction shall "immediately dissolve without further order of the Court upon on a voluntary dismissal by Plaintiff of this action against the remaining Defendants." This language would appear to contemplate that the case might resolve unfavorably to North Face, despite the fact that the parties have already reported the case as settled.

How can this be? As in the case of the dog that did not bark, the court papers contain a significant omission -- judgment has not been entered, and North Face's claims against the South Butt defendants have not been dismissed. Therefore, despite the entry of the consent injunctions, the case remains open and the dispute has not been fully and finally adjudicated. It is possible that the parties are attempting to resolve their claims through means of alternative dispute resolution and have agreed to forgo litigation in the interim. It is also possible that certain settlement terms are subject to time periods which have not yet run, and that a consent judgment or dismissal will be filed at later time as dictated by the settlement terms.

While South Butt may have won this round, it appears to have made some significant concessions to North Face. More importantly, the last chapter of this trademark saga may not have been written. While there is no telling how this dispute will ultimately play out, particularly now that it is out of the public spotlight, fans of South Butt products should probably get them while they can -- just in case.

"Fair Use" of Copyrighted Works Contributed $4.7 Trillion to U.S. Economy in 2007, Reports CCIA

 

This week, the Computer & Communications Industry Association (CCIA) released the report Fair Use in the U.S. Economy (.pdf) concluding that industries that rely on the "fair use" exception in copyright law contributed $4.7 trillion or 16% of the  U.S. gross domestic product in 2007, growing faster than the other sectors of the U.S. economy.  The report credits the fair use of copyrighted works for the success of search engines, software developers and a number of other "new economy" industries.

The Fair Use Doctrine is derived from Section 107 of the Copyright Act, which reads:

[T]he fair use of a copyrighted work . . . for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright.

The CCIA Report examines industries that benefit from the Fair Use Doctrine, particularly Internet search engines, software developers and the makers of music and media players, and concludes that "exceptions to copyright protection . . . promote innovation and are a major catalyst of U.S. economic growth."  The report cautions that these findings do not necessarily call for scaling back copyright protections:

Certainly, copyright protection provides an incentive for the production of creative works and these works have a positive impact on the U.S. economy.  The positive aspects of copyright protection should not, however, obscure that fair use is also a vital economic driver.

The CCIA report does not explain in detail what "fair use" helped drive the growth of MP3 players, but everyone should keep in mind that, as far as current caselaw is concerned, we still need to pay for songs downloaded from iTunes. 

.CO Domain Names Are Coming -- Should You Care?

Colombia is known for its chief exports of coffee, petroleum and coal. It may also soon be known for its country code top-level domain name (ccTLD), .co. In many people's minds, the abbreviation "co." stands for "company," "corporation," or "commercial," and the .co registry, .CO Internet SAS, is heavily marketing this domain as a legitimate alternative to .com domains for businesses and individuals. If .CO Internet has its way, .co will be the new .com. Of course, whether the .co domain will catch on remains to be seen, but trademark owners should be aware of some preliminary steps they can take to secure .co domains before they become available to the general public.

First, the Local Sunrise period, which is active now until April 20, allows holders of Colombian trademarks registered on or before July 30, 2008 to apply for exact-match domain names. Second, the Global Sunrise period, which runs from April 26, 2010 to June 10, 2010, will allow trademark holders with national registrations in other countries to apply for exact-match domain names. In each of these phases, domain names claimed by multiple verified trademark owners with identical marks will be sold via auction. Soon after the Global Sunrise period, .co domain names will be available to the general public. Additional information is available at the .CO Internet launch website.

In addition, there are other rights-protection mechanisms (RPMs) in place to protect trademark owners, and the .co registry has drafted An Open Letter To Brand Owners explaining these safeguards. Like many other top-level domains, the .co domain will be subject to the Uniform Domain-Name Dispute-Resolution Policy (UDRP), and the .co registry intends to implement a Uniform Rapid Suspension system for cases of clear abuse. In many respects, the .co registry has implemented or intends to implement many of the RPMs that have been recommended for ICANN's upcoming gTLD expansion. Brand owners should keep this in mind in developing and implementing their domain name policing strategies.
 

Photographers and Visual Artists Sue Google over Google Books

A new wrinkle has recently appeared in the legal landscape surrounding Google’s Google Books project. While the parties to the authors’ and publishers’ lawsuit await a court decision on approval of their proposed settlement, a different group of plaintiffs has filed a new class action lawsuit against Google on behalf of photographers, visual artists, and other copyright owners whose pictorial works appear in the books and periodicals included in the Google Books project.

The named plaintiffs in the new case include the American Society of Media Photographers, the Graphic Artists Guild, the Picture Archive Council of America, the North American Nature Photography Association, and Professional Photographers of America, along with several individual photographers and illustrators whose works are included in books within the university library collections Google has scanned for inclusion in Google Books.

Many of the same plaintiffs previously moved to intervene in the main Google Books lawsuit, but Judge Denny Chin denied the motion as untimely. In an order issued November 4, 2009, denying the would-be intervenors’ motion to reconsider, the Court stated that intervention could upset “thousands of hours of discussion, compromise, and legal draftsmanship” underlying the proposed settlement and concluded that “[f]rom the perspectives of fairness and efficiency, it makes more sense for the movants to file their own lawsuit than to be permitted to delay this lawsuit.”

The visual artists have now done exactly that, filing their complaint in the Southern District of New York on April 7, 2010. The complaint alleges that Google Books represents “the most widespread, well-publicized, and uncompensated infringement of exclusive rights in images in the history of book and periodical publishing” and seeks monetary damages for willful infringement of copyright, a declaratory judgment, and preliminary and permanent injunctions. Google has yet to file an appearance of counsel in the suit.

The filing of a lawsuit relating to copyrights in visual works draws attention to the fact that the long-pending authors’ and publishers’ lawsuit, now apparently close to resolution, applies only to textual materials and excludes pictorial works. In Judge Chin’s view, “in the context of an online database that is searchable using keywords, it makes sense to prioritize the rights to word-based material.” Nevertheless, it now appears that even if the main Google Books settlement is approved, Google may find that it faces further hurdles before the legal status of the Google Books project is fully resolved.

Those interested in further details can read Judge Chin’s order denying intervention (PDF), the full text of the new class action complaint (PDF), and the press releases of the various associational plaintiffs, including the American Society of Media Photographers and the Graphic Artists Guild.

Likelihood of Confusion: Similar Suffixes Do Not Suffice

Proving that history repeats itself, the TTAB recently decided a case that is strongly reminiscent of a matter we handled several years ago. In 2005 we defeated a challenge by Missiontrek Ltd. Co. to the registration of the software mark ONFOLIO, owned by our client Onfolio, Inc. Missiontrek claimed that ONFOLIO was confusingly similar to its previously-registered software mark CARTAGIO. 

Instead of filing an answer to this challenge, we moved for summary judgment, claiming that the marks were so different that no facts developed in discovery or at trial could lead to a finding of confusing similarity. Although the TTAB rarely decides such issues without a factual record, it did so in this case, agreeing with us that “the dissimilarity of the marks in their entireties substantially outweighs any other relevant factors and is dispositive of the issue of likelihood of confusion.” Missiontrek Ltd. Co. v. Onfolio, Inc., 80 USPQ.2d 1381, 1383 (TTAB 2005) (PDF). The Board accepted our arguments that the only common element of the two marks was the suffix “IO,” that this is an ordinary English suffix found in numerous registered software marks, and that CARTAGIO and ONFOLIO were otherwise entirely different in appearance, sound and meaning. 

Missiontrek tried to support its case by submitting a “survey.” This was actually just a series of e-mails sent by the company’s president to 42 persons, only eight of whom responded. According to Missiontrek, two of these eight people said that the marks were confusingly similar, leading it to proclaim that “25%” of the survey respondents supported its position.  The Board quickly discounted this evidence, noting that the true percentage of respondents was two out of 42, and agreeing with our contentions that the survey was prepared and administered by a biased party, was not based on recognized survey techniques, and was not analyzed in a statistically meaningful way.

Moving ahead to 2010, we note that the Board has now decided the case of Bridgestone Firestone North American Tire, LLC and Bridgestone Corporation v. Federal Corporation, Opposition No. 91168556 (TTAB February 24, 2010) (PDF), finding no likelihood of confusion between Bridgestone’s tire marks POTENZA and TURANZA and the applicant’s tire mark MILANZA. As in Missiontrek, Bridgestone claimed that the marks at issue were confusingly similar because they shared the same suffix (in this case, “NZA”), and tried to support this claim with a survey. As in Missiontrek, the applicant argued that the suffix appeared in other registered marks.  As in Missiontrek, the Board rejected the likelihood of confusion claim, finding that “the dissimilarity of the marks simply outweighs all the other factors,” and also finding that Bridgestone’s survey was too flawed in its methodology to be probative. 

The one significant difference from Missiontrek is that Bridgestone claimed to own a family of marks ending in “NZA,” and that this alleged family made the suffix distinctive of its products. However, the Board held that Bridgestone had failed to prove the existence of an “NZA” family, since it had never emphasized the suffix in its advertising, and had always used the marks with the term BRIDGESTONE, which was the real focus of its marketing.

There are two lessons to be gleaned by comparing these cases. First, marks that share only a common suffix are unlikely to be deemed confusingly similar. Second, those who forget the past are doomed to repeat it.

Settlement of South Butt Case Unfortunate for Trademark Owners and Parodists Alike

In a lawsuit that has grabbed the attention of the trademark community, The North Face Apparel Corp. sued The South Butt, LLC, its founder (college student Jimmy Winkelmann), and a pharmacy that sold allegedly infringing goods for using the mark THE SOUTH BUTT on clothing that resembled the style of clothing sold under the well-known mark THE NORTH FACE. According to the Complaint (PDF), South Butt repeatedly attempted to register THE SOUTH BUTT as a trademark and offered to sell its business to North Face for $1 million. The Answer (PDF) describes Jimmy Winkelmann as a "cherubic teenager, budding entrepreneur and college freshman from the heartland of America" who "founded his company with parodic respect for Plaintiff." North Face moved for a preliminary injunction, and its motion was scheduled to be heard on April 12, 2010.

 

 

In a court filing (PDF) made on April 5, 2010, the pharmacy defendant advised the Court that all parties had reached a settlement of the case. While the terms of the settlement were not disclosed, it appears that SOUTH BUTT clothing continues to be sold on the South Butt website and is featured on the South Butt Facebook page.

Regardless of the settlement terms, the fact that the case was settled without a judicial decision as to the underlying parody issue represents a lost opportunity for trademark owners and parodists alike. In 2006, the Trademark Dilution Revision Act (TDRA) articulated for the first time the requirements for parody as "fair use" of a famous mark, explicitly stating that the use must be "other than as a designation of source for the person's own goods or services." 15 U.S.C. Section 1125(c)(3)(A).

Courts have not adopted a consistent approach to parody of famous marks under the TDRA. In one of the early parody cases construing the TDRA, the Fourth Circuit held that dog chew toys bearing the name CHEWY VUITON did not dilute the famous LOUIS VUITTON mark. Louis Vuitton Malletier S.A. v. Haute Diggity Dog, LLC, 507 F.3d 252 (4th Cir. 2007) (PDF). While the Court acknowledged that the defendant used CHEWY VUITON as a designation of source for its dog toys, and that the statutory fair use language therefore did not apply, it proceeded to find that the defendant was engaged in a successful parody because under the dilution factors it intended to create a parody and that is how the association would be perceived. Id. at 266-67.

This stands in contrast to the recent CHARBUCKS case, in which the Second Circuit found that the use of the CHARBUCKS mark on coffee could not escape liability for diluting the famous STARBUCKS mark based on a parody defense because CHARBUCKS was used as a source identifier and was too subtle to constitute a parody. Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., 588 F.3d 97 (2d Cir. 2009) (PDF).



The North Face v. South Butt case presented an opportunity for the Eight Circuit to address the differing approaches to parody head-on. Assuming that the settlement is consummated, that opportunity will be lost, and the case law in this area will remain inconsistent. The owners of famous brands and their parodists will have to wait until another day for the courts to further articulate the requirements for parody under the TDRA.

Song Author Prevails on Summary Judgment in Rap Music War

Cleveland area radio personality and early rap artist Orrin Lynn Tolliver, Jr. is on a roll in the Southern District of New York. After finding out in 2005 that a song he recorded in 1983 had been sampled in the multi-platinum hit “My Humps” by the Black Eyed Peas (iTunes sample available here), Tolliver sued his former collaborator who licensed the composition without his permission, and won on liability at the summary judgment stage (originally in March, 2009 - here). The district court judge later allowed the defendant to add a new affirmative defense (acquiescence), but then a few months ago proceeded to throw out that defense and order that the case proceed to trial on damages only. A copy of the recent ruling is available here. The next status conference in the case is set for June 2, 2010.

Defenses based on laches, estoppel, acquiescence, and related theories are common in copyright and trademark cases. They arise because intellectual property owners often tolerate infringement until real damage occurs. (Here, for example, Tolliver appears to have been aware that the defendant was improperly licensing the composition at issue to parties other than the Black Eyed Peas five years earlier, in 2000.) Defendants cry foul, claiming that the owner could and should have asserted its claims sooner, but the law imposes a fairly high standard for this defense: the defendant must prove actual prejudice caused by the owner’s delay or implied acquiescence.

In this case, the defendant was doomed by his own shifting responses to Tolliver’s claims. None of these were particularly consistent with the defendant’s position that he had licensed the composition in reliance on his understanding that Tolliver had acquiesced. As the Court wrote, "If Defendant believed that Plaintiff assented to his infringing conduct, he would have no reason to contest ownership of the Composition, claim to be in possession of a written assignment granting him ownership rights to the Composition, deny issuing licenses for exploitation of the Composition, accuse Plaintiff of identify theft . . . , claim to have written another song called ‘I Need a Freak’ separate from the Composition at issue, and so on."

In addition to ending the case on liability (at least pending any appeal), the opinion does not bode well for the defendant in terms of damages. Many of the statutorily available damages are discretionary, and a defendant who is seen as having presented contradictory and baseless defenses usually does not receive the benefit of the doubt. (Here in Boston, the IP community is still discussing the case of the graduate student who was ordered by a jury in federal district court to pay $675,000 for improperly downloading 30 songs – which could have been purchased on iTunes for $29.70.)

New gTLDs Still On Track Despite Trademark Concerns

For some time now, the Internet Corporation for Assigned Names and Numbers (ICANN) -- the governing body of many of the inner workings of the Internet -- has planned to expand the domain name space. Currently, domain names are limited to 27 generic top-level domains (gTLDs) -- including the popular .com, .net., and .org -- and a number of country code top-level domains (ccTLDs). ICANN's proposed expansion would allow for the introduction of unlimited new gTLD registries -- for instance, .lawyers, .film, or .baseball. Presumably, a majority of these new registries will be open to the public for registration of "second-level" domain names -- for example, an organization might purchase and operate the .lawyers gTLD registry, and then sell second-level domain names (e.g., foleyhoag.lawyers) to the public.

Rollout of the new gTLD process has been stalled -- again and again -- in part due to concerns over inadequate rights-protection mechanisms (RPMs) for trademark owners. Brand owners, already up to their ears in dealing with cybersquatting and trademark infringement stemming from a mere handful of gTLDs and ccTLDs, are understandably concerned that the addition of new gTLDs will exacerbate an already costly problem, and those brand owners and related advocacy groups have loudly protested ICANN's expansion plans. Among other concerns, brand owners are worried that "defensive" registrations will be required in the first instance -- for the gTLDs themselves as well as second-level domains thereof -- and that traditional Internet trademark policing will become overwhelming once the new domain name registries are up and running.

The new gTLDs are projected to be costly. ICANN will charge an application fee currently projected at $185,000, in addition to significant annual maintenance fees. Further, applicants must demonstrate the ability to run -- from logistical and technical standpoints -- a domain name registry, and will be responsible for all costs associated therewith. This provides some comfort to brand owners in that there is unlikely to be "casual" cybersquatting on new gTLDs.  However -- despite this barrier to entry to gTLDs themselves -- second-level domain registrations, as with registrations of domains in the current gTLD structure, are likely to be available at little cost.

Although dispute resolution procedures will be available allowing brand owners to object to new gTLD applications and second-level domains thereof (the details of which have yet to be finalized), this is a narrow remedy. In order to address trademark concerns (and in response to significant public outcry), ICANN commissioned a team to recommend specific trademark protection measures. In May 2009, the team proposed 5 measures:

1. A trademark "clearinghouse" of protected names that would streamline rights protection, including enhanced protection for "globally protected marks"

2. A Uniform Rapid Suspension (URS) system for cases of clear infringement or abuse that would be more straightforward and less costly than current dispute resolution procedures for domain names (such as the UDRP)

3. Improved dispute resolution systems for new gTLD registries (e.g., for dealing with infringement and abuse regarding second-level domains)

4. A "thick" WHOIS requirement for all new domains (comprehensive registry-level ownership information)

5. Adoption of an expanded algorithm to allow non-infringing gTLD applications to move forward more quickly

In Version 3 of its Draft Applicant Guidebook (PDF), ICANN adopted provisions for the thick WHOIS and the improved post-delegation dispute resolution system, and somewhat limited versions of the clearinghouse and URS are expected to be included in Version 4, which should be released shortly.

Unfortunately, the fine details of the proposed RPMs -- and, consequently, whether they will adequately protect trademark owners in a system already plagued with cybersquatting and infringement -- are unknown. What is clear is that ICANN is determined to move forward with the new gTLD applications sooner or later, so trademark owners should be prepared. We will be following this issue closely over the coming months, so check back for updates.

Google Books Update

The content production and delivery world continues to wait with bated breath for a decision as to the legality of the Google Books project. Several years ago, Google announced that it was partnering with major libraries – including, among many others, the Harvard University Library, the New York Public Library, and Oxford University’s Bodleian Library – to scan the full text of books in their collections. Google’s ultimate aim is to make book text searchable online and, where possible, to allow users to access entire books online.

The library project has raised concern among authors and publishers, however, because it involves scanning – that is, making a copy – of copyright-protected books without permission. Displaying the scanned text online, of course, raises further copyright issues. Some of the books scanned are old enough that their copyright terms have expired; for these public domain works, Google is free to scan and display as much as it desires. For books that are still in copyright and in print, Google has partnered with many publishers to allow users to search their books online, view “snippets” of the text, and access links to buy or borrow the actual books. However, for books that are still in copyright but out of print, the situation is more complex, particularly for “orphan works” for which the copyright owners cannot be identified.

The controversy has led to a class-action lawsuit spearheaded by The Authors’ Guild and the Association of American Publishers. The plaintiffs have claimed that Google’s actions in scanning books and displaying them online constitute massive copyright infringement. Last year, the parties drafted their second settlement agreement in an attempt to put to rest the copyright holders’ claims.  The proposed settlement provides a $125 million settlement fund to be distributed as royalties to copyright holders whose works appear on Google Books. In addition, Google has promised to create a non-profit “Book Rights Registry” that will manage a database matching works to their copyright owners and will handle rights claims, in an attempt to make it easy for owners of “orphan works,” where they exist, to come forward and assert their rights.  Copyright owners would be able to prevent their works from appearing on Google Books by contacting Google to “opt out.” To facilitate opt-out, Google will refrain from posting any book deemed to be out of print until 60 days after such a designation is made; after that window, if there is no opt-out request, Google will make the book’s text available online.

Because the plaintiffs in the lawsuit represent a class of absent copyright owners, the court is required to determine whether the proposed settlement is fair, reasonable, and adequate. The case is pending before Judge Denny Chin in the Southern District of New York.  Judge Chin held a fairness hearing on the settlement proposal on February 18, 2010, during which he heard from about thirty interested parties, in addition to the plaintiffs, defendant Google, and the U.S. Department of Justice, which has raised a number of concerns about the settlement on procedural and antitrust grounds. Judge Chin has yet to issue a ruling, and observers are hopeful that he will be able to resolve the case before the Senate acts on his nomination to sit on the Second Circuit Court of Appeals.

For more on the legal arguments raised by opposers of the settlement, check back for future posts.  In the meantime, see Google’s own description of the project and the settlement agreement and take a look at what's available on the current version of Google Books.

Trademark Bullies, the Legislature and the Courts

Nobody likes a bully, and I think we can all agree that the world would be a better place without bullying. Yet bullying in the schoolyard is not the same as bullying in the courtroom, and the issues can be complex. Is it fair to apply the bully label to any intellectual property owner who seeks to enforce its rights against a smaller company or who ultimately loses the case? If not, how can one tell the difference between legitimate enforcement and so-called bullying? These tricky issues are raised in a recent trademark bill signed into law earlier this month.

On January 28, 2010, Senator Leahy of Vermont introduced the Trademark Technical and Conforming Amendment Act of 2010 (Senate Bill 2968). The primary purpose of the bill was to harmonize the procedures governing trademark registration with respect to applications filed in the U.S. directly and pursuant to the Madrid Protocol, such as to make the grace periods following missed deadlines consistent.These provisions were uncontroversial enough, and were indeed received favorably in the trademark community. But Senator Leahy tacked on a statement at the end of the bill requiring the Secretary of Commerce to “study and report to” Congress The extent to which small businesses may be harmed by litigation tactics [by corporations] attempting to enforce trademark rights beyond a reasonable interpretation of the scope of the rights granted to the trademark owner." S. 2968, Sec. 4(a)(1).

This section became known as the “trademark bullies” provision. It was reported that Senator Leahy included this provision because he was frustrated that Vermonster, a local brewery of beers and ales in his home state, was being targeted by Hansen Beverage Company, the producer of Monster Energy Drink. (Senator Leahy later agreed to remove the words “of corporations,” but the remainder of the language remains intact.)

The legislation was quickly passed by the House and Senate, and was signed into law by President Obama on March 17, 2010 (Pub. L. 111-146).

The notion of conducting a study to determine whether and to what extent brand owners are “attempting to enforce trademark rights beyond a reasonable interpretation of the scope of the rights granted to the trademark owner” is a controversial one. Unfortunately, the bill moved through the legislative process so quickly that the intellectual property community did not have time to comment.

In my view, the fundamental premise of the proposed study is deeply flawed. Trademark owners are entitled to enforce their rights, and doing so does not make them “bullies” even if they are ultimately unsuccessful or the defendants are small companies. It is the role of the courts to weed out unmeritorious cases pursuant to well-established legal standards. In appropriate cases, courts may exercise their discretion to award attorneys’ fees to the prevailing party under 15 U.S.C. §117(a) or Rule 11 of the Federal Rules of Civil Procedure. The Legislature should not second-guess whether the courts are doing their job. It is the role of the Legislature to make the law, not apply it.

In addition, the proposed “trademark bullies” study raises a host of practical questions and challenges. Who will conduct this study? What will its scope be? Most importantly, what standards will be applied to determine whether a particular litigant has crossed the line and gone “beyond a reasonable interpretation” of the trademark laws?

Finally, who will pay for this study and is it worth the cost? Americans on both sides of the aisle are concerned about the federal government’s budget deficit, and this does not seem to be a good time to “pile on” by commissioning a study of questionable value.

Microsoft No Longer Seeking DMCA Take-Down of Cryptome or Leaked Compliance Handbook

Last week, lawyers from Microsoft issued a demand under the Digital Millennium Copyright Act (DMCA) seeking the removal of leaked copies of Microsoft's "Global Criminal Compliance Handbook" that pulled website Cryptome.org from the Internet, at least temporarily.  The DMCA provides copyright owners with the ability to request that internet service providers remove infringing materials from websites.  Microsoft's DMCA demand to Cryptome's service provider, Network Solutions, apparently resulted in removing Cryptome from the Web entirely, until Microsoft attorneys sent an email withdrawing the DMCA takedown demand.

Microsoft made this public statement:

Like all service providers, Microsoft must respond to lawful requests from law enforcement agencies to provide information related to criminal investigations. We take our responsibility to protect our customers privacy very seriously, so have specific guidelines that we use when responding to law enforcement requests. In this case, we did not ask that this site be taken down, only that Microsoft copyrighted content be removed. We are requesting to have the site restored and are no longer seeking the document’s removal.

Cryptome advertises itself as a site that "welcomes documents for publication that are prohibited by governments worldwide."  The site also promises that "[d]ocuments are removed from this site only by order served directly by a US court having jurisdiction." 

The Microsoft Compliance Handbook, dated March 2008, is a guide for law enforcement officers seeking to investigate users of Microsoft services such as Hotmail email, IM, Windows Live and other services.  The Handbook outlines the data Microsoft keeps with respect to its users and provides law enforcement with instructions on what legal process is necessary for investigators to gain access to specific information.  In the Handbook, Microsoft offers to provide the following information to investigators in response to a subpoena:

Basic subscriber information includ[ing] name, address, length of service (start date), screen names, other email accounts, IP address/IP logs/Usage logs, billing information, content (other than e-mail, such as in Windows Live Spaces and MSN Groups) and e-mail content more than 180 days old . . . .

This provision contrasts with Microsoft's limits on access to other user data, such as recent email,  "e-mail address book, Messenger contact lists, . . . [and] internet usage logs."  According to the Handbook, Microsoft will release this data in response to a search warrant or court order which, unlike a subpoena, must be approved by a judge after the government presents sufficient evidence.

Posts at Cryptome, as well as CNet, Tom's Hardware, and The Register, describe the Handbook variously as a "spy guide" and "wiretap guide."  Cooperation with government agencies has been a touchy subject for privacy advocates and service providers in the wake of alleged abuses by some that occurred after the 2001 terrorist attacks.  However, the heart of the controversy generally has been the disclosure of customer information without any legal process or court involvement.  In this case, Microsoft's Handbook merely identifies what data is available in response to formal legal process, such as subpoenas, warrants and court orders.