The Madrid Protocol Concerning the International Registration of Trademarks (the “Protocol”) provides a simple, unified, cost-effective means for citizens of member countries (including the United States) to register their marks in other member countries.  By using the Protocol, trademark owners can obtain a single “International Registration” designating some or all of the member countries, instead of filing separate national applications in each country.  If none of the member countries objects to the International Registration, the trademark owners will not have to hire attorneys in each country to assist them with the registration process.  This typically results in significant cost-savings.  Moreover, an International Registration can be maintained, renewed and assigned through a single filing with the World Intellectual Property Organization (WIPO), resulting in further cost-savings throughout the life of the Registration.

A complete list of the Protocol members may be found here.  At present, there are 89 members, including the US, the European Union, China and Japan. Last year, Mexico, New Zealand and the Philippines joined.  This year, India will join, its membership taking effect on July 8, 2013, bringing the total number of Protocol members to 90.

The accession of India is particularly gratifying, since India’s national trademark office is notoriously overburdened and slow-moving.  Under the Protocol, however, a country is typically required to examine a registration request within 12-18 months.  If the country does not raise any objections within this period, the mark is deemed registered in its territory.  In other words, the Protocol provides an incentive for timely examination, and creates a situation in which national inertia is on the side of the applicant.

The Protocol continues to expand its membership.  In 2015, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar and Thailand are scheduled to join.  It is also expected that Canada will ultimately join, although its accession has not yet been scheduled for a specific date.  Keep reviewing this blog for further updates and information.

Image Courtesy of McKay Savage

In an industry where technology is constantly evolving and racing to keep up with consumer habits, a recent court ruling came down to one basic component: antennas.

Last Monday the Second Circuit ruled in favor of Aereo, Inc., a television streaming service, in a lawsuit filed by a consortium of network broadcasters who argued that Aereo’s services constitute a public performance that violates their copyrighted material.  The Court affirmed an order of the District Court denying the broadcasters’ motion for a preliminary injunction.  The Court ruled that since Aereo assigns each of its subscribers an individual antenna, and makes each of them an individual copy of the network programming to stream or record, the potential audience for each viewing is one person, resulting in a private performance that would not infringe the plaintiffs’ copyright.  The court therefore refused to terminate Aereo’s operations and held that the broadcast networks were unlikely to prevail on the merits of their claims.

The Second Circuit panel majority’s approach, if widely followed, has the potential to alter the television industry as we know it.  Normally, networks are able to extract large retransmission fees from cable providers, fees that make up a significant chunk of their operational costs.  Aereo, in contrast, pays no royalties.  While Aereo is currently only available in New York markets, the Court has certainly opened the door for the company’s expansion, and for similar services to join the fray.

Broadcasters will no doubt continue to pursue every legal avenue at their disposal, and may even lobby Congress for favorable changes in governing copyright law, but they may also choose to consider fail-safe measures.  Consumer preferences in this field have continued to evolve well beyond the purported threat of the Betamax.  The DVR inspired networks to invent new ways to sell ad space, and a current trend in “binge viewing” has led to expedited DVD releases and more on-demand services.  If courts continue to rule in favor of Aereo and services like it, networks may wish to consider plans that will allow them to heed consumer demand for better on-the-go and online streaming services while remaining financially viable.

The networks are not without hope under the current law, however.  In a strongly worded dissent, U.S. Circuit Judge Denny Chin called Aereo’s individual antenna model a “sham” engineered solely for the purpose of circumventing the law and complying with previous Second Circuit decisions in this area.  As an example, Judge Chin highlighted the fact that Aereo has not expanded to the neighboring state of New Jersey, implying that the company will only enter territories where its services are demonstrably legal.  “Aereo is engaging in copyright infringement in clear violation of the Copyright Act,” he reasoned, because its transmissions are “very much public performances.”  This issue seems ripe for further judicial review and could lead to inconsistencies among the circuits down the line.  In fact, a judge in the Central District of California recently granted TV networks an injunction against a very similar service.  It will be interesting to see whether this decision is affirmed by the Ninth Circuit in addition to whether or not the networks will seek an en banc rehearing in the Aereo case given the strength of Judge Chin’s dissent.

While the overall impact of the Second Circuit’s decision on broadcast networks remains to be seen, the Aereo decision has certainly put the television industry on alert.  As litigation in this area of law continues to play out in the courts, you can bet that industry leaders and consumers alike will be tuning in.

Image courtesy of Stuart Miles

A U.S. federal court has held that the publication by a media monitoring service of excerpts from Associated Press news articles is copyright infringement for which the fair use defense is not available.  The Associated Press v. Meltwater U.S. Holdings, Inc. et al., 12 Civ. 1087 (March 21, 2013).  The case provides a victory for content owners in the ongoing legal war between creators and distributors of online content.

In granting summary judgment to The Associated Press (“AP”) on copyright infringement claims against the media monitoring service Meltwater News (“Meltwater”), a judge of the U.S. District Court for the Southern District of New York found that “Meltwater’s business model relies on the systematic copying of protected expression and the sale of collections of those copies in reports that compete directly with the copyright owner”.

Meltwater offers an online media monitoring service that provides reports to its clients of news articles published on selected topics, based on keywords selected by the client.  Meltwater’s service uses algorithms to scrape content from the Internet and then deliver a digest of relevant news excerpts to its clients.

As is well known, AP is a news-gathering organization that writes and distributes many news articles each day.  AP is owned by a group of more than 1,400 newspapers across the United States, and its articles regularly appear in those newspapers.  In addition to licensing articles to newspapers and magazines, AP also licenses digital versions of its content.  Significantly, AP also has licensing agreements that permit the distribution of excerpts of its articles; some of Meltwater’s competitors had entered into such licensing agreements with AP.

AP sued Meltwater for copyright infringement based on Meltwater’s publication of excerpts from thirty-three AP articles in reports delivered to Meltwater clients.  According to the court’s opinion, Meltwater’s reports always published the headline and the lead paragraph of the AP article and also some additional material, representing between 5% and 60% of each AP article.  Meltwater relied primarily on the fair use defense, although it also argued additional defenses of implied license, estoppel, laches and copyright misuse. Meltwater’s essential argument was that its publication of AP excerpts was transformative and therefore fair because it operated as an Internet search engine that provided limited amounts of copyrighted material in response to its client’s search queries.  The court analyzed the four statutory fair use factors as follows:

The Character of Meltwater’s Use was Commercial and Competitive.   

The court held that Meltwater’s use was commercial and not transformative, because Meltwater had republished significant portions of the AP articles in a service that competed with AP’s original services.  Meltwater marketed itself as a news service and was effectively free-riding on AP’s news reporting and research (particularly given that some of Meltwater’s competitors did pay licensing fees to AP).  The court emphasized that Meltwater had chosen not to offer comprehensive evidence on click-through rates that might have shown whether Meltwater in fact operates as a search engine (where one would expect that users would click through to the original article) as opposed to a news aggregator (where one would expect that users would just skim news excerpts).  The limited evidence indicated that customers clicked through to the thirty-three AP articles at issue in the suit 0.08% of the time, but Meltwater did not provide additional evidence to give context to that rate.

The court distinguished Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007)  and Kelly v. Arriba Soft Corp., 336 F.3d 811 (9th Cir. 2003), two cases that had found that search engine reproductions of thumbnail-sized copyright images in search results were fair use because the search engine’s use was highly transformative.  The court made the point that using search engine technology is not the same as operating as a search engine, and does not automatically entitle a defendant to a finding of fair use.  The amount of content reproduced and the manner of reproduction are also relevant, as the above cases involved reproduction of thumbnail images different in size and detail from the originals.  In this case, Meltwater had not shown that it took only the amount of content that was necessary for it to function as a search engine.  In addition, the search engines in the two 9^th Circuit cases were generally-available engines that searched a wide range of content, whereas Meltwater was a private subscription service that searched only selected sources.  Accordingly, the court found that the first fair use factor weighed heavily in favor of AP.

Non-Fiction Works, a Factor for Fair Use. 

As AP’s articles were non-fiction reports, a finding of fair use was more appropriate than in the case of copying a work of fiction, and so the court found that this factor weighed in favor of Meltwater.

Material Portions of AP’s Articles Copied. 

The evidence showed that Meltwater copied between 4.5% and 61% of the articles in question, and more importantly that the copying included the lead paragraph, which conveys the crux of the news item.  The court stated that search engines regularly display briefer segments of news articles than Meltwater did, and noted that Meltwater itself provided its customers with far shorter excerpts in markets outside the United States (in Canada, Meltwater provides only headlines, and in the UK its excerpts are far shorter than in the US).  On this basis, the court held that Meltwater had copied a significant portion of the articles and that this fair use factor weighed in favor of AP.

Significant Effect on AP’s Potential Market for the Copyrighted Work.   

The court found that this factor weighed heavily against Meltwater.  This was not a case where Meltwater’s work operated in a different market from AP’s original work.  Rather, AP had a considerable online presence and licensed its content to media monitoring services that competed with Meltwater.  Meltwater’s publication of the AP excerpts effectively replaced the AP articles and so deprived AP of licensing revenue.

Assessing all of these factors, the court found that Meltwater was a “classic news clipping service”, which was not a transformative use, and accordingly denied the fair use defense.  Meltwater issued a press release in response to the judgment which does not indicate definitively whether or not Meltwater will appeal.

Ever since the entertainment industry figured out how to use IP addresses to bring copyright infringement lawsuits against illegal downloaders, defendants and critics have been calling these plaintiffs “trolls”.  But name-calling wasn’t enough  for Dmitriy Shirokov.  He wanted payback, and brought a class action lawsuit against his persecutors.  However, according to an order issued earlier this week by Judge George O’Toole of the Federal District Court for Massachusetts, Mr. Shirokov will have to figure out another way to vindicate his rights.

The story is a familiar one.  The U.S. Copyright Group (“USCG”) got together with a film production company and acquired the IP addresses of bit torrent downloaders who had allegedly illegally downloaded the film Far Cry, a thriller based on the first-person shooter video game of the same name.  USCG then filed a copyright infringement lawsuit against 2,094 anonymous John Does connected to those IP addresses, and used the subpoena power of the court to obtain their identities from their internet service providers.  Upon obtaining the identities, USCG sent a demand letter to each downloader, demanding $1,500 to settle the claim, increasing to $2,500 if not paid promptly.  In the aggregate, the demands are high enough to make the lawsuit profitable, but each individual demand is low enough so that most defendants just pay up instead of going through the added expense of retaining counsel and fighting it.

But Shirokov did retain counsel, and not just to defend himself against the allegation of copyright infringement.  In November 2010, he initiated a class action lawsuit against USCG on behalf of a class of 4,577 individuals who had received such demand letters.  The complaint described the USCG’s actions as “settlement fraud,” and brought twenty-five counts including for conspiracy, extortion and violation of consumer protection laws.  Essentially, Shirokov argued that USCG committed fraud because it had no intention of ever litigating any of the copyright infringement suits. Rather, according to Shirokov, the whole scheme was just a stickup.

Unfortunately for Shirokov, however, on March 26, 2013, the court held that he had not properly identified a class.  Federal Rule of Civil Procedure 23(a) requires a plaintiff seeking class certification to establish that:

(1) the class is so numerous that joinder of all members is impracticable;

(2) there are questions of law or fact common to the class;

(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and

(4) the representative parties will fairly and adequately protect the interests of the class.

According to Judge O’Toole, the class proposed by Shirokov was numerous enough, but it did not fulfill the  rule’s other requirements because all of the class members did not suffer the same injury.  Some were allegedly injured when they paid the amount demanded by USCG, while other were allegedly injured by the legal expenses incurred in fighting the demand.  Thus, the court held that the commonality and typicality requirements were not satisfied.

No word yet on whether Shirokov will seek to amend his complaint in order to narrow the class.

A multi-year legal drama over the proper scope of certain sections of the U.S. Copyright Act, as applied to goods made and first sold outside the United States, has finally come to an end.  In a 6-3 decision issued yesterday, with dissents from Justices Ginsburg, Kennedy, and Scalia (strange bedfellows in many regards, judicially speaking), the Supreme Court, in the case of Kirtsaeng v. John Wiley & Sons, Inc., has embraced the concept of international exhaustion in relation to the copyright first-sale doctrine.  This decision has far-reaching implications for copyright and trademark owners alike.

First-Sale Doctrine

Under the first-sale doctrine, intellectual property owners are generally allowed to control how their protected products will first be sold.  The purchaser of such goods, having benefitted from the “first sale,” is then free to resell or otherwise dispose of them without further interference from the intellectual property owner.  The first-sale doctrine is often referred to as the exhaustion rule, because an intellectual property owner exhausts its rights upon the first sale.

National Exhaustion vs. International Exhaustion

Where the first sale of a copyrighted work takes place can make a difference.  In general, the national exhaustion rule, which is enforced in certain countries, requires that a sale take place in the local jurisdiction before the local intellectual property right is exhausted.  In regard to copyright in the United States, the interpretation of the law once leaned heavily in favor of national exhaustion.  Under this rule, if a U.S. copyright holder copied and sold a book overseas, it could prevent the purchaser from reselling it in the United States.  The Supreme Court has now reversed this trend and announced an interpretation of § 109 of the Copyright Act (which codifies the first-sale doctrine) that supports the international exhaustion rule.  According to the majority’s opinion, the purchaser of a copyrighted item “lawfully made under” the Copyright Act may now dispose of it without the authority of the copyright owner, even when the product was made and first sold outside the United States.

The Supreme Court’s Decision

The Supreme Court considered this same issue in the 2010 case of Costco v. Omega, but, as discussed previously on this blog here, a 4-4 split amongst the participating Justices left the issue undecided.  Kirtsaeng more than breaks the tie.

The Underlying Facts

Central to the Supreme Court’s decision was the interpretation of the phrase “lawfully made under” as applied to goods subject to the Copyright Act.  The facts of the underlying case were simple.  Kirtsaeng, a student from Thailand living in the United States, asked friends and family to purchase and send him English-language copies of textbooks printed and sold in Thailand with the permission of the copyright owner, John Wiley & Sons.  Kirtsaeng was then able to take advantage of international arbitrage, the phenomenon by which similar goods are often sold at different price points in different areas of the world, and sell the text books at a profit in the United States.  Goods sold by this process (importing and selling outside of authorized channels of commerce) are often referred to as parallel imports or gray market goods.

John Wiley & Sons sued for copyright infringement, arguing that the Copyright Act provided for national, rather than international, exhaustion in the United States.  Essentially, it claimed that Kirtsaeng was engaging in the impermissible parallel importation of its copyrighted foreign-made textbooks.  Kirtsaeng countered, arguing that the first-sale doctrine language of the Copyright Act was silent as to geography and urging that the international exhaustion rule be applied.  The federal district court and the Second Circuit Court of Appeals agreed with John Wiley & Sons.  The Supreme Court reversed.

The Supreme Court’s Holding

The Supreme Court’s majority opinion is focused mainly on the issue of statutory interpretation, seeking to divine Congress’s intent in adopting the language “lawfully made under” in relation to the Copyright Act.  Did this turn of phrase favor national exhaustion, such that goods “lawfully made under” the Copyright Act must be literally made in the United States?  Or did it favor international exhaustion, such that goods “lawfully made under” the Act could be made anywhere, if authorized by the copyright owner?  Suffice it to say that Kirtsaeng persuaded the majority that Congressional intent supported an international exhaustion interpretation.

To buoy this holding, the majority recited a “parade of horribles” (as described by the dissent) that might come to pass under a national exhaustion regime.  For example, the majority posited, libraries would be faced with the insurmountable task of getting permission from copyright holders to lend millions of books now residing in collections throughout the United States that were first printed and purchased abroad.  The first-sale doctrine allows not only for the resale but also for the display of a copyrighted work.  As such, the majority speculated, a U.S. resident who bought a poster while on vacation in Europe would infringe the U.S. copyright in the work by hanging it for display back at home.  The dissent criticized the majority for letting its imagination run wild, calling such hypothetical consequences absurd.

Implications for Copyright and Trademark Owners

Direct Effect on Copyright Owners

The Kirtsaeng decision carries with it far-reaching implications, not only for copyright owners, but for trademark owners as well.  Obviously, copyright owners can no longer rely on the national exhaustion rule to exclude the U.S. resale of copyrighted items such as books, CDs, or DVDs made and sold abroad at prices below U.S. market value.  But there are other products that do not traditionally come to mind that can be afforded copyright protection.  For instance, shampoo with a copyrighted design on the label, or a watch with a copyrighted design stamped on the back, were once considered infringing if sold in the United States without consent, after being manufactured and first sold abroad.  This is now no longer the case.

Indirect Effect on Trademark Owners

How might this decision affect a trademark owner?  Because copyright protection and trademark protection are codified under different statutes (the Copyright Act and the Lanham Act, respectively) and based upon different common-law doctrines, it is unlikely that Kirtsaeng will have any direct effect on how courts enforce parallel import exclusion under trademark law.  Nonetheless, options once available to trademark owners, at least as a back-up measure, now no longer exist.

The exhaustion rule for trademarks is neither national, nor international, but a hybrid rule based upon the likelihood of consumer confusion.  Under trademark law, if a branded product is manufactured and first sold abroad, it can be freely resold in the United States without permission of the trademark owner, provided there are no material and/or physical differences between the imported goods and the goods authorized for sale in the United States.  Because the traditional function of a trademark is to act as an indicator of source and quality, a U.S. brand owner can exclude from U.S. commerce any parallel imports that are sufficiently different from the U.S. product (e.g., different formulation;  lack of English instructions; dosage information in metric units).

Long-standing case law indicates that U.S. consumers have an expectation of quality associated with branded goods; and the sale of differing, extra-jurisdictional goods can cause, at a minimum, consumer confusion and disappointment.  Consumers can even be put at risk of physical harm by parallel imports, for example when medications or electronics are sufficiently different.  Kirtsaeng does not speak to this legal issue.

However, before the Kirtsaeng decision, a brand owner could leverage copyright national exhaustion.  If branded goods manufactured and sold abroad were not materially different, the owner could affix a copyrighted image to the product or packaging and prevent parallel importation under copyright law.  At least one district court has taken the position that this practice can constitute copyright misuse; however, that case is currently on appeal to the Ninth Circuit and has not yet been resolved.  In any event, under Kirtsaeng, it would seem that this will no longer be possible.  Now, perhaps, copyright owners such as John Wiley & Sons will turn to trademark law.  U.S. copyright owners might now have to rely on material differences that exist in copyright-protected products made overseas, so that trademark law will fill the exhaustion void created by Kirtsaeng.

Nearly thirteen years after issuing guidelines governing online advertising, the Federal Trade Commission (“FTC”) recently updated its so-called Dot Com Disclosures to take account of the many changes to the online world that have occurred over those intervening years.  Whereas most digital advertising thirteen years ago was popping up or scrolling across our computer screens, today’s digital advertising is far more integrated into our online culture—whether as email offers to invitation-only flash sales (“50% off; today only!”), sponsored Twitter feeds, solicited blog reviews, or advertisements dressed up to look like news (“THIS JUST IN:  Scientists have discovered a revolutionary breakthrough in weight loss.”).  Into this Wild West of digital advertising, the FTC has ridden with some updated guidelines to help marketers avoid running afoul of false advertising law.

The FTC’s new guidelines, issued on March 12, are intended to provide guidance to ensure that digital advertising is truthful, fair, and not misleading.  The guidelines are focused primarily on the issue of disclosure—i.e., words necessary to limit, qualify, or explain a claim.

As with any FTC guidelines, the revised Dot Com Disclosures are staff interpretations of laws administered by the FTC (so following them is a good idea), but they do not have the force and effect of law.  This means that if the FTC were to pursue a marketer for failing to follow the guidelines, it would have the burden of proving that the marketer’s ads were actually unfair or deceptive.

On the other hand, following the guidelines will not necessarily inoculate a marketer from a false advertising claim.  While it certainly minimizes the risk associated with disclosures, there are other guidelines and rules that apply to online ads, and failing to follow these could result in a problem.  For example, great disclosures in an ad making unsubstantiated claims will not cure the untruthful and deceptive nature of the ad.

The updated guidelines provide detailed examples focusing on modern-day technology and modes of advertising, but the underlying principles are well-established and can be summed up in three bullet points.

• When Disclosures Are Required:  If an ad makes express or implied claims that are likely to be misleading without qualifying information, a disclosure is required.  For example, if an ad offers “3/4 ct. diamond earrings” at a price, and the actual weights of the diamonds sold at that price range from .72 carats to .78 carats, a disclosure is necessary.

• How Disclosures Must Appear:  Disclosures must be clear and conspicuous.  In general, this means that a consumer must be able to see and understand the disclosure quickly, without much effort.  Disclosures are clear and conspicuous when they: (a) are placed close to the claim they are qualifying, (b) appear prominently in the ad, (c) are repeated as necessary to avoid being overlooked, (d) are made prior to purchase, (e) are written in language that is easy to understand, and (f) in the case of audio disclosures, are at a volume and cadence that can be readily heard and understood.

• When Even a Clear and Conspicuous Disclosure Is Ineffective:  Disclosures can never cure a false claim.  If a disclosure provides information that contradicts a material claim, the disclosure will be ineffective to prevent deception. 

The value in the revised guidelines is the application of these well-established principles to specific examples of digital advertising.  Here, capturing the essence of revisions in bullet form is a bit more challenging, but some of the more interesting points are summarized below.

• Hyperlinking to a Disclosure:  While hyperlinks are often helpful in space-constrained ads, or where the disclosure would otherwise need to be repeated, it is easy to violate the “proximity” requirement when using hyperlinks.  Accordingly, hyperlinks should not be used where the disclosure can be easily made in the text of the ad.  If you do use hyperlinks to make disclosures, make sure that: (a) it is clear to consumers that they can click on the hyperlink to get more information, (b) the hyperlink is easy to find and conveys the importance of the information to which it leads, and (c) the hyperlink is compatible with the various programs and devices on which consumers might access the ad.

• Pop-up, Scrolling, and Other Non-Stationary Forms of Disclosure:  As a rule, fixed and static disclosures are more likely to be clear and conspicuous than those that appear, and then disappear, on a screen (even though the latter category may be more likely to capture a consumer’s attention).  The reason for this is largely technical – i.e., some browsers or devices do not support techniques for displaying non-stationary disclosures, or, in the case of pop-up disclosures, other software may prevent their use.  If you do use non-stationary forms of disclosure, be sure that the disclosures are actually reaching the consumer.

• Space-Constrained Ads (a.k.a. Sponsored Tweets):  Marketers cannot circumvent disclosure requirements simply because ads are made in a space-constrained medium.  Even in the world of Twitter, where a marketer is limited to 140 characters, the FTC expects ads to comply with its disclosure guidelines.  Marketers must disclose that a space-constrained ad is sponsored and, if applicable, that it is a paid endorsement.  In addition, if the ad makes claims that that are likely to be misleading without qualifying information, the marketer must at the very least include a link to such information, and must relay in the ad that the link contains important qualifying information.   Whether this can be done in 140 characters is questionable.  If it cannot, then the marketer should avoid running the ad.

Any company engaged in digital advertising should quickly familiarize itself with the FTC’s revised guidelines.  Online advertising is an area of intense focus at the moment, and flouting the FTC’s guidelines is a risky proposition.  While failing to adhere to the guidelines is not a per se violation of the false advertising laws, it does create a risk of an FTC investigation or enforcement action.  And marketers should not be tempted to play the odds.  Just because the FTC has not historically focused on your industry does not mean that it will not do so in the future.  In addition, virtually every state has its own set of regulators looking at potential false advertising claims, and state regulators often borrow from FTC guidelines in assessing the truthfulness of advertising claims.