On June 14, 2018, a federal trial court in New York issued a decision relating to a restaurant owner’s claim that the restaurant manager was using the owner’s trademarks on social media in violation of the federal trademark law known as the Lanham Act. The trial court denied the owner’s claim, in a ruling that provides some useful lessons to anyone who licenses a trademark. (Thousand Island Park Corp. v. Welser, 5:18-CV-117 (N.D.N.Y. June 14, 2018 (2018 WL 29803231)).)The case
This case began when the restaurant owner hired a manager to operate a restaurant on Wellesley Island, New York, during the 2017 summer tourist season. The agreement had a 3-year term, but expressly provided that the partied would re-negotiate the terms of the arrangement after the first year. The agreement permitted the manager to operate the facility that would be “known and advertised” as The Guzzle, and required the manager to operate the restaurant on certain dates and times, to maintain the cleanliness of the restaurant, and to pay all gas and electricity bills during the 2017 summer tourist season. The agreement permitted the owner to terminate in its sole discretion if the manager committed an “egregious unremedied misstep,” created an uncured nuisance, or failed to cure any violation of the owner’s rules or regulations after notice.
Less than a month into the summer season, the owner began receiving complaints from customers about cleanliness of the restaurant and other complaints, including a sexual harassment complaint from a former employee. The owner also claimed that the manager refused for pay for electricity or cleaning services for the restaurant.
After the summer season, the parties’ attorneys exchanged correspondence regarding the alleged breaches of the agreement. On December 16, the manager wrote on his personal social media page a “thank you” to the patrons, accompanied by a collage of photos taken during the summer 2017 season. He added, “We look forward to seeing you next year.”
On December 22, the owner’s attorney sent a letter terminating the agreement, effective as of January 3, 2018.
On December 25, the manager posted on the restaurant’s social media page a lengthy message, including an offer to sell a poster of the photo collage of customers’ signatures during the 2017 season, as well as shirts, glasses, sunglasses, and other “commemorative 2017 merchandise” bearing the restaurant’s name and/or logo.
On January 5, 2018, the owner’s attorney sent a letter accusing the manager of infringing the restaurant’s trade name by offering merchandise for sale bearing the restaurant’s name. The letter demanded that the manager cease and desist use of the trademark and provide written confirmation within 5 days. When the manager did not comply, the owner filed a lawsuit in federal court, claiming violations of the federal Lanham Act for unauthorized use of the restaurant’s [unregistered] name and logo, as well as breach of contract.
The court dismissed the Lanham Act claim, finding that the owner’s claim was simply a “garden-variety contract dispute.”
The court began its analysis by pointing out that both social media posts pre-dated the termination date stated in the owner’s notice. The court found “it is implausible that reasonably prudent consumers were likely to be confused” by the social media posts. The December 16 post “is at best backward-looking” because it thanked the customers for the 2017 season. With respect to the “looking forward to seeing you next year” comment, the court stated that permitting that comment to form the basis of a Lanham Act claim “risks transforming a whole range of hopeful comments made during failed business negotiations into Lanham Act claims.”
In contrast, the December 25 post “presents a closer question.” The court found that the owner provided no factual basis that any merchandise sales occurred after the January 3 termination date—or, indeed, that any sales ever occurred.
Lessons for Trademark Licensors
This case provides some lessons for licensors in future trademark license agreements:
In any agreement that permits use of your mark, consider including restrictions on the time, place, form, and extent of any use of the marks.
Consider requiring a review of any of the licensee’s advertising or marketing material before permitting any use of your mark. You may want to include samples of permitted or not permitted uses to speed the review process.
Bolster items 1 and 2 with the ability to audit the licensee’s use of your mark.
Include a quick termination clause or an injunctive relief clause in the event of any unpermitted use of your mark.
A good license agreement can help keep the parties out of court.
We had previously covered the March 22, 2017 U.S. Supreme Court copyright ruling on designs on cheerleader uniforms. In Star Athletica, L.L.C. v. Varsity Brands Inc., a majority of the U.S. Supreme Court ruled that the two-dimensional designs on cheerleaders uniforms were at least in theory eligible for copyright protection. On August 10, 2017, seven years after this case was originally initiated, the trial court refused to send the case into overtime and dismissed Star’s complaint with prejudice in a way that serves as a reminder that, although a plaintiff can control when to bring a case, the plaintiff case lose control over when that case should be withdrawn. (Varsity Brands, Inc. v. Star Athletica, LLC, Case No. 10-02508 (W.D. Tenn. Aug. 10, 2017 & June 20, 2018).Facts
Varsity Brands designs, manufactures, and sells cheerleading uniforms, and has registered more than 200 U.S. copyrights for the two-dimensional designs appeared on this uniforms. These registered copyrights include combinations and arrangements of lines, curves, chevrons, angles, and shapes. Varsity Brands sued Star Athletica, a competitor, for infringing the following five of Varsity Brands’ registered copyrights.
The Court Opinions
Demonstrating the “widespread disagreement,” this case began in 2010 with a federal trial court ruling in favor of Star Athletica, on the grounds that the five registered designs did not qualify for copyright protection. That court ruled, on summary judgment, that the designs served the useful function of identifying the garments as cheerleading uniforms.
In contrast, the Sixth Circuit Court of Appeals reversed, holding that the graphic designs were “separately identifiable” and therefore capable of existing independently.
A majority of the U.S. Supreme Court agreed with the appeals court that the graphic designs were eligible for copyright protection. The Supreme Court then remanded the case back to the original trial court. On August 10, 2017, the trial court—over the objection of Star Athletica–dismissed the case with prejudice.
The August 10, 2017 Dismissal
Initially, Varsity brought claims of copyright infringement. Soon after, Star brought several counterclaims, including copyright misuse and fraud on the Copyright Office. During the initial trial court proceeding, that court dismissed most of the counterclaims and opined that the copyright misuse and fraud on the Copyright Office claims were probably affirmative defenses, rather than counterclaims Having been victorious at the U.S. Supreme Court, Varsity Brands entered into a settlement agreement with Star’s insurance carrier, whereby the carrier would pay an amount to Varsity Brands and the case would be dismissed with prejudice. Unfortunately, Star did not agree, and asked the court for a declaratory judgment on some copyright-related issues, specifically Star’s claims that Varsity had misused its copyright and/or had committed fraud on the Copyright Office.
In the U.S., a plaintiff can usually voluntarily dismiss its case (Federal Rule of Civil Procedure 41(a)(1)), but here, the defendant (Star) had already filed an answer and refused to stipulate to a dismissal. Pursuant to the Rule, under these circumstances, the case could only be dismissed by a court order. Specifically, the Federal Rules state that, once a defendant pleaded a counterclaim prior to being served with the motion to dismiss, the court may dismiss the case over the defendant’s objection “only if the counterclaim can remain pending for independent adjudication.” Federal Rule of Civil Procedure 41(a)(1)(B).
The question then became whether the Star’s claims of copyright misuse and fraud on the Copyright Office could remain pending for “independent adjudication.” Consistent with its earlier ruling, the trial court once again ruled, that they were affirmative defenses rather than counterclaims—and even if they were counterclaims, the trial court exercised its discretion to decline to exercise jurisdiction over those claims. Using the five-factor test the U.S. Supreme Court set out in Wilton v. Seven Falls Co., the court focused on the first two factors: (1) that exercising jurisdiction over the counterclaims would “reanimate an otherwise completed litigation” and (2) rather than clarifying any legal issues, exercising jurisdiction would simply raise the same issues. Consequently, the court dismissed the case with prejudice, but retained jurisdiction over enforcement of the settlement agreement between Varsity Brands and the insurer.
The June 20, 2018 Denial of Motions to Amend
As a result of the 2017 dismissal, both parties filed motions with the court. The defendant requested reconsideration/amendment of the judgment and the plaintiff sought to amend the judgment to include an award of attorneys’ fees. The judge denied both parties’ motions.
With respect to the plaintiff’s motion, the settlement agreement was a voluntary dismissal without a legal finding as to the merits, so the court’s final judgment did not confer “prevailing party” status on the defendant. Therefore, the request for attorneys’ fees was denied.
The defendant sought reconsideration of several elements of the 2017 ruling, including a request that the court clarify the legal relations of the parties. The court denied the motion, stating in part: “This case has continued for eight years. During this time, the Supreme Court, the Sixth Circuit, and this court have all provided clarification of the legal relations of the parties. Few cases receive such extensive court guidance.”
This case serves as a reminder that a plaintiff does not control all aspects of case filings. Once a defendant files an answer and counterclaims, the defendant has taken some procedural control. It could become much more difficult for a plaintiff to dismiss its claims and end what could continue as a prolonged and expensive affair.
In sad news for celebrities and Instagram influencers across Australia, the introduction of the so-called ‘fame tax’ as part of a raft of integrity measures announced in the 2018/19 budget means that they could end up paying higher taxes on the income and non-cash benefits earned through the commercial exploitation of their image rights.
In this article, we explore the impact of the changes on individuals who currently use a separate entity to cash in on their image rights.
Social media and the rise of #sponcon
aving celebrities such as actors and sportspeople lend their famous names, beautiful faces and sculpted bodies to the promotion of a brand or product is nothing new. However, with the ever-increasing importance of social media to many business’ bottom lines, brand collaborations with big-name celebrities and #sponsored endorsements by ‘influencers’ are on the rise (a trend that carries other advertising and compliance implications, as we’ve previously discussed here). Along with the more traditional brand of celebrities, an increasing number of ‘Insta-famous’ bloggers and influencers are now making money by spruiking a wide range of (sometimes questionable) products to their legions of impressionable followers.
While some people may dismiss influencers as the worst type of celebrities – ‘famous for being famous’ – they’re laughing all the way to the bank. Adelaide-based fitness sensation Kayla Itsines boasts a shared wealth of AU$63 million (according to the AFR’s 2017 Young Rich List) thanks in large part to her 9.7-million strong Instagram following, and fashion blogger Chiara Ferragni’s social media empire is so successful it has become a case study at Harvard Business School.
How celebrities can cash in on their image rights
As the law currently stands in Australia, high profile individuals are able to licence their image rights to another entity, such as a company or a trust, for the purpose of ‘commercial exploitation’. If the individual (or at least their accountant!) is tax-savvy enough to set up this type of arrangement, any income derived from the use of their image or fame goes to that entity, rather than to the individual.
According to the Budget papers, “this creates opportunities to take advantage of different tax treatments and facilitates misreporting and incorrect tax outcomes”.
For example, the entity licensing the image rights from the famous individual can claim losses on the investment, and only pays the corporate tax rate of 30 per cent on any profits resulting from the commercial exploitation of these image rights. Especially for individuals whose personal income puts them into the highest income tax bracket, this differing tax treatment could mean a difference of tens or even hundreds of thousands of dollars. And that’s not even taking into account non-cash benefits, which can have a substantial value. Companies regularly provide celebrities and influencers with gifts of designer clothing, car loans and lavish holidays, in the hope that they will post about them on their social media and generate publicity for the brand.
Impact of the ‘fame tax’
All this is about to change, and it is bad news for any Insta-famous celebs hoping that their freebies won’t be counted as part of their income tax. From 1 July 2019 onwards, all income (including all non-cash benefits) will be treated as part of the individual’s assessable income and will be taxed accordingly. It is likely that, at least for the majority of celebrities impacted by the change, the result will be an increase in both the amount to be taxed and the tax rate. However, due to the current inability to measure the extent of this type of income, the Government considers that the exact revenue implications of this change are “unquantifiable”.
The Government has not yet released further details on how the ‘fame tax’ will work in practice. For example, it remains to be seen whether the changes will impact the commercial exploitation of registered trade marks such as names and signatures (a topic we’ve previously considered in greater detail here) which are owned by a company rather than an individual.
Draft provisions for implementing the changes will likely be released, followed by a consultation period where stakeholders can comment on the proposed changes in advance of the 1 July 2019 introduction. For parties likely to be affected by the change – watch this space!
If your business discovered that its revenue covered only 60% of its costs, it would be time for a re-examination of operations. According to the U.S. Copyright Office’s notice in the May 24, 2018 Federal Register (83 Fed. Reg. 24054), historically, the fees collected by the Copyright Office covered only 60% of its costs. It has proposed for public comment a new fee schedule, which includes many higher fees and some new fees.
The fee familiar to most – the fee to apply for copyright registration for a written, visual, or musical work –would increase from $55 to $75 for an electronic application. For applicants who file the most common types of applications via paper, the fee would increase from $85 to $125.
The Copyright Office has also created some new fees. For example, with respect to supplemental registrations, the new fee for electronic filings would be $100 (the existing fee for paper filings would increase from $130 to $150). In addition, the Copyright Office has proposed new fees for voluntary cancellation of a registration, which would be $150, and for matching an unidentified deposit to its deposit ticket ($40). There is also a proposed new fee for a litigation statement, in the amount of $100.
The fee for expedited handling (called a “special handling fee for a claim” by the Copyright Office) would increase from $800 to $1,000.
Of particular interest to readers who have registered their web sites for copyright protection and who have elected to use the copyright law’s “safe harbor” for notice of infringement claims by designating an agent to receive those claims, the fee for recordation of a designated agent remains unchanged from the current rate of $6.
For those who maintain a deposit account in order to pay fees to the Copyright Office, make sure you pay with a check that’s good. The proposed fee for a replenishment check that is dishonored (returned for insufficient funds) would increase from $100 to $500.
The notice also includes proposed changes to several other fees.
Comments on the new fees are due by Monday, July 23, 2018.
Today, social media influencers are a key resource used by businesses to engage with consumers. Influencers include celebrities, bloggers or simply popular social media users in speciality areas like beauty or travel. Social media influencers’ posts can attract thousands, and sometimes millions, of views and likes. Such exposure allows businesses to instantly engage with a huge audience. So, with over 70% of Australians now on social media, it is no surprise that Australian organisations are spending more and more on digital and social advertising.
Influencers can earn thousands of dollars per post and sometimes more – a single Instagram post by Beyoncé allegedly has an advertising value of one million US dollars. The value add and engagement that businesses can achieve from social media influencers is undeniable but, with the introduction of new regulatory guidelines in Australia, businesses should carefully consider how to optimise social media as a platform for promoting their brands, products and services.
The commercial benefits of engaging social media influencers
The success of influencer marketing is driven by a strategy that relies on targeting consumers on their phones and computer screens, somewhere that consumers are near on guaranteed to look. Instead of pushing advertising where it may or may not be seen by the target audience, companies can now engage with digital consumers directly. The benefits of influencer marketing can include:
creating authentic content to drive engagement with a brand;
cost effectiveness compared to traditional media spend; and
reaching younger audiences who are less trusting of traditional advertising.
A recent US study found that over 90% of marketers who used influencer marketing found it to be effective and over 35% of marketers planned to increase their influencer budget in 2018.
The risks of engaging social media influencers
Despite the benefits of influencer marketing campaigns, recent scandals have exposed the risks associated with choosing to partner with a social media star. In 2012 Oprah Winfrey, partnered with Microsoft to promote their new Surface tablet. In a tweet, she expressed her “love” for the Surface product but, in an oversight, sent the tweet via her iPad. In doing so, she failed to realise that the tweet included information on the device she had used to publish the post.
Businesses should also be aware of the threat of ‘instafraud’ (the use of bots to create fake social media accounts which are used to build a following) to ensure they are not paying to reach fake followers. Although buying followers, likes and comments violates the community guidelines of most social media platforms, in the past, companies have been tricked into paying for posts with no genuine following.
The law in Australia
While there are no specific consumer laws or rules in place for social media, consumer protection laws that apply to conventional marketing and sales channels, apply in the same way to social media.
The Australian Competition and Consumer Commission (ACCC) recently issued new guidelines for businesses on the use of social media. The guidelines repeatedly emphasise that, as far as the Regulator is concerned, organisations have the same responsibilities in relation to social media as they have for all other marketing channels. This means that consumer protection laws, like the prohibition on conduct that is misleading or deceptive, is just as applicable to a Facebook post as it is to a television advertisement. We have written more generally on the guidelines in the past.
Various organisations have come under scrutiny for paying Instagrammers for endorsements, without disclosing that those endorsements have been paid for. The Australian Association of National Advertisers (AANA) has updated its guidelines and the AANA Code of Ethics to require that “advertising or marketing communication must be clearly distinguishable as such to the relevant audience“. The AANA’s Code of Ethics applies to advertising and marketing communications where the marketer has a reasonable degree of control over the material and the material draws the attention of the public in a manner calculated to promote a product or service.
Breaching the AANA’s Code of Ethics is unlikely to result in a large penalty, but a breach of Australian Consumer Law, for misleading or deceptive conduct or for making misrepresentations, is a serious offence and can result in significant financial penalties. To date, there have been no cases made against social media influencers in Australia, but it is well established that testimonials have to be accurate and true. In ACCC v Advanced Medical Institute Pty Ltd, Ian Turpie, who hosted The New Price is Right, gave a testimonial in an advertisement that an erectile dysfunction spray had restored his sexual potency. The ACCC brought an action against Mr Turpie, the brand (AMI) and the advertising agency on the basis the advertisement was misleading and deceptive because Mr Turpie had not suffered from impotence and had not been treated by AMI.
Do your research. Review the chosen influencer’s previous posts, follower audience, previous campaigns and successes, and consider hiring an expert to determine whether the profiles are genuine;
Ensure influencer agreements include termination provisions (to ensure that promotional partnerships can be ended quickly, if necessary), non-compete provisions (to ensure the influencer will not promote a competing brand for a specific period of time), and provisions which allow for the monitoring and amending of posts during the course of the influencer’s engagement;
Be clear and open in your use of online influencers, and ensure your chosen influencer distinguishes sponsored content by using #ad and #sponsored or similar;
Despite the differences, treat influencer marketing as you would any other form of marketing and ensure provisions are in place to minimise the risk of publishing false, misleading or deceptive content; and
Be prepared to react immediately, at least within 12 hours, if issues arise with posts published by chosen social media influencers.
 Australian Competition & Consumer Commission v Advanced Medical Institute Pty Ltd (No 3) (2006) 69 IPR 462
With the Royal wedding of Prince Harry and Hollywood star Meghan Markle fast approaching, companies may be looking at leveraging the glamour of this event in their advertising and products and capitalising on the ‘Royal effect’.
Off with their heads?
The UK Royal family take protection of their intellectual property rights seriously. The UK Trade Marks Act 1994 specifically provides for Royal emblems; prohibiting use of Royal Arms in a way that implies authorisation by the Royal family. Such misuse is a criminal offence. The Act also prohibits use of any device, title or emblem in a way which implies that entity supplies the Royal family.
These provisions could capture certain use of Royal symbolism but this would not extend to use outside of the UK or to use inside the UK which, whilst it played-off the Royal family, might not actually imply a connection. For example, a clearly tongue-in-cheek advertising campaign or product line.
However, it must also be kept in mind that the Royal family itself has registered trade marks in the UK and other jurisdictions. As with the use of any ‘brand’, it would be advisable to check the relevant trade mark register before using any sign with Royal connotations. In the UK, the law prohibits use of signs which are identical or similar to a registered trade mark and where they take unfair advantage of, or are detrimental to, the distinctive character or repute of that trade mark. Accordingly, use of Royal symbolism which is too close to a trade mark belonging to the Royal family may be an infringement, whether it be tongue-in-cheek, deferential or otherwise, and regardless of whether the use actually implies any authorisation by or official connection with the Royal family.
In terms of advertising, the Advertising Standards Authority (which regulates advertising in the UK) has specific guidance on the use of Royal symbolism in advertising. The Authority advises that members of the Royal family should not normally be shown in marketing communications without prior permission. However, very general references to Royal events may be acceptable, provided they do not stray into implying endorsement or affiliation with the Royal family.
So will I be sued?
There is some light here. The Royal family has previously implemented a ‘temporary relaxation’ of the rules relating to use of their intellectual property in the lead up to a Royal wedding, and the same has been done for the upcoming Royal wedding. The Lord Chamberlain’s office has released official guidelines on how Royal insignia and photographs can be used:
Good taste: Souvenirs must be in good taste, free from any form of advertisement and carry no implication of Royal custom or approval.
Types of use: Royal insignia must not be used on textiles, including clothing, tea towels and aprons (with the exception of carpets, cushions, wall hangings and headscarves).
Photos: Royal photographs used on containers or packaging must be approved photographs of Prince Harry or Meghan Markle, and copyright of the official engagement photographs of the couple is held by the Royal family and cannot be used (i.e. copyrighted images may not be used).
It is also worth mentioning that whilst there are no ‘image rights’ as such in the UK, there are such rights in other jurisdictions such as the State of California. Therefore, reference to Ms Markle in particular may carry additional risks.
What should you bear in mind?
Whilst companies should consider the usual IP rules relating to copyright, passing off, image rights and trade marks when producing Royal wedding themed advertising and products, it appears that the young couple Prince Harry and Meghan Markle do not want to impose overly restrictive rules causing companies to lose out entirely on Royal wedding fever. Just don’t put them on a tea towel!
A recent decision of the Federal Court of Australia, Career Step, LLC v TalentMed Pty Ltd (No 2)  FCA 132 (Career Step) provides a useful reminder of the principles that apply when determining whether a new copyright work is the result of joint authorship.
Joint Authorship – what does the law say?
The question of authorship is fundamental and often of critical importance because the general rule under Australian copyright law is that the author of a work is the first owner of any copyright subsisting in that work (subject of course to certain exceptions, such as that the first owner of a work created by an employee is their employer).
The Australian Copyright Act 1968 (Cth) defines a “work of joint authorship” as “a work that has been produced by the collaboration of two or more authors and in which the contribution of each author is not separate from the contribution of the other author or the contributions of the other authors.”
Previous case law on the question of joint authorship has suggested that the test for establishing joint authorship involves an assessment of:
the extent to which two or more people collaborate in the creation of a single copyright work – a question of sufficiency; and
the type of skill and labour that each contributed – a qualitative question.
There has also been reference to whether there was a “common design” between the relevant collaborators. If the various contributions of collaborators are in fact separate and distinct, case law suggests that the collaborators will not be joint authors for copyright law purposes.
Career Step case
The Career Step case involved a dispute about an online educational course for students wishing to become medical transcriptionists. The question of establishing joint authorship was of critical importance for Career Step because the authorship of the materials was a key ground on which the respondents contested Career Step’s copyright infringement claims. In particular, the respondents sought to challenge the existence of a single copyright work by reference to the circumstances of authorship of the materials in question.
Justice Robertson noted in Career Step that the respondents’ claims in relation to joint authorship would stand or fall depending on whether the identified work as a whole was considered a single literary work or whether each of the modules was considered a single work.
This decision of the Federal Court highlights a number of important questions to be considered when making an assessment as to whether a copyright work is the product of joint authorship. It focuses on the definition of the copyright work in question (which is directly relevant to identifying the author of the work) and the possibility of identifying separate contributions of different authors. In particular, the Federal Court appears to have been persuaded by Career Step’s evidence of collaboration during the creative process.
The Federal Court found that the work in question was a single work and was created by joint authors for copyright purposes. Its reasoning appears to have been based on the following considerations:
a work that consists of modules can still comprise one whole literary work for copyright law purposes (and did in fact constitute one single literary work in these circumstances);
it is sufficient for joint authorship purposes to identify the relevant authors who as members of a group had the common purpose of creating the single work. This seems to shift the focus from the sufficiency and qualitative questions posed in previous case law. Justice Robertson appears to find that “the identification of the persons who wrote the material establishes joint authorship” without considering whether the contributions were in each case the type of contribution that attracts copyright – ie whether there was sufficient effort of a literary nature for the collaborator to be considered an author of the work. It is possible that sufficient evidence was adduced in the case to establish that the subject matter experts in question had expended sufficient qualitative effort so that this was not in issue, but in any event Justice Robertson does not appear to make this assessment in the decision;
there is no requirement for joint authorship that there was one contributor with input into all aspects of a copyright work – there is no condition of “authorial collaboration in the entirety of the work”;
if there is no evidence of collaboration between the relevant authors, there will be no joint authorship – joint authorship is not relevant if the copyright work in question comprises separate and distinct works;
joint authorship will be found if it is not possible to separate the individual contributions of the persons involved in creating the relevant copyright work – the Federal Court was persuaded by the detailed evidence of the creative process that was produced by Career Step and which demonstrated the requisite inseparability; and
on the other hand, a work is unlikely to be the result of joint authorship if it is clearly the result of independent intellectual effort.
Take away messages from the case.
This case serves as a useful reminder that when a new work is being created collaboratively:
the question of whether or not a work is jointly authored is complex and depends on the circumstances. There is no black and white answer, and the factors that persuade a court in its decision-making may differ depending in different situations;
it may not be possible to identify at the outset of a creative process whether or not a resulting work is going to be the result of joint authorship, and this will turn on the creative process and the nature and extent of the collaboration between contributing persons in practice;
it is generally preferable to execute a written agreement between the parties involved, outlining the agreed intellectual property ownership schematic and incorporating effective assignment clauses and moral rights consent clauses. Where third parties are involved, these provisions should also include procurement obligations. Do not rely on the possibility of claiming or refuting joint authorship under copyright law, as this will inevitably result in uncertainty and ambiguity;
genuine collaboration needs to occur between authors for a work to be considered one of joint authorship rather than the result of separate and individual contributions. If it is possible to separate the contributions of each author, joint authorship is unlikely to be found; and
detailed and accurate records should be kept throughout the creative process of all of the authors who contribute to a work and the nature of their specific contributions. If third parties are involved, obligations to keep such records should be included in the relevant agreement between the parties. These records should be carefully preserved, as they may prove invaluable in the event that the created rights have to be enforced.
We would like to acknowledge the contribution of Amanda Cooper in preparing this blog.
For the first time since 2012, Canada has once again been named to the “Priority” Watch List in the 2018 Special 301 Report on Intellectual Property Rights, put out by the Office of the United States Trade Representative (USTR).
This downgrade is in part due to Canada’s “poor border enforcement” relating to counterfeit goods. Concerns over Canada’s protections for intellectual property had abated somewhat – if not entirely – in 2013, with strengthening of Canada’s copyright laws and the passing of legislation specifically designed and intended to combat counterfeiting. However, the lack of criminal enforcement and effective border enforcement, along with exceptions which allow for counterfeit goods to be transshipped through Canada into the United States, have placed Canada back on the priority list, on the same level as China, India, Russia and other countries with traditionally weaker protection for intellectual property rights.
This news comes on the heels of the release of USTR’s 2017 “Notorious Markets” report late last year, which for the first time named a physical Canadian location – Pacific Mall located in the Toronto area – as a haven for the sale of counterfeit goods, alongside markets such as the notorious “Silk Market” in Beijing. Pacific Mall is a predominantly Chinese-Canadian shopping centre, which the report notes is “a well-known market for the sale of counterfeit and pirated goods for over a decade”, where vendors “appear to operate largely with impunity” and “requests for assistance from local law enforcement [go] unanswered”.
Dealing in counterfeit goods hurts the Canadian and global economies and has proven ties to organized crime and the funding of terrorism. It is a criminal offence – and should be treated as one – but holes in Canadian legislation, and lack of allocation of resources, has left enforcement against counterfeit goods largely in the hands of the right holders instead of law enforcement, sometimes even in cases where the goods pose a safety risk to the public.
Stronger legislation, including better and simplified border provisions, and greater public education to encourage increased allocation of law enforcement resources, are seen as key to improving enforcement and protecting the public in Canada. Our Vancouver office was recently involved in a Crime Stoppers media release with those goals in mind: https://globalnews.ca/news/4163571/counterfeit-goods-economy/.
The trade mark consists of “the colour red (Pantone 18 1663TP) applied to the sole of a shoe as shown (the contour of the shoe is not part of the trade mark but is intended to show the positioning of the mark”)
Following a reference from The Netherlands (District Court of The Hague) considering the validity of Louboutin’s red sole shoe trade mark (as part of an appeal against a preliminary injunction in infringement proceedings brought by Louboutin against a Dutch footwear brand), the Attorney General (AG) has unusually been required to provide a second opinion following the Chamber of the Court of Justice of the European Union’s reference of the matter to the Grand Chamber. Under EU law (Article 3(1)(e)(iii) of the Trade Marks Directive 2008) signs (trade marks) that consist ‘exclusively of the shape that gives substantial value to the goods’ are prohibited from registration. The rationale for this prohibition is (and was) to ensure that certain trade marks remain available to use and do not result in anti-competitive restrictions.
The question referred to the AG was whether the notion of ‘shape’ in this context included non-3D properties such as colour, as well as the 3D properties such as contours, i.e. would a hybrid mark be caught by this prohibition?
The AG, confirming his first opinion, maintained that the trade mark in question cannot be classified as a colour mark, as he doubted that the colour could identify the proprietor when used separately from the shape of the sole of the shoe, and that Article 3(1)(e)(iii) of the Trade Marks Directive 2008 is capable of applying to a sign consisting of a shape (‘or another characteristic’*) of the goods and which seeks protection for a certain colour.
*Note here that ‘shape, or another characteristic’), will be expressly covered by the prohibition when the Trade Marks Directive 2015/2436 is transposed into the national laws of individual EU member states on or before January 2019. The AG considers that the additional language merely clarifies what are already established principles of law under the current directive. Furthermore, ‘position marks’ will also fall for scrutiny under the prohibition.
In considering the issue of ‘substantial value’ the AG discussed whether an element of aestheticism dependent on external factors such as fashion trends and public perception could form part of ‘substantial value’. The AG stressed that a trade mark’s reputation should be left out of the equation. “The fact that the characteristics giving substantial value to the goods are, in part, determined by the public’s perception does not, in my view, mean that account may be taken of the reputation of the trade mark or its proprietor as part of the assessment to determine whether the shape at issue gives ‘substantial value’ to the goods”. That must be determined through an assessment of the “intrinsic value of the shape” alone. The deciding factor with regard to the public’s perception is not the distinction between shape, colour or position, but the identification of the origin of the goods based on the overall impression of the sign.
In a case like Louboutin, the question to ask would be: is the red sole a sign which gives substantial to the shoe, or is it rather the reputation of the trade mark represented by that particular sign that confers such value? We now await the Grand Chamber’s direction – will it agree with the AG’s opinion? – and ultimately the ruling of The Netherlands’ court. A ruling that the mark is invalid, will not only be a loss to Louboutin, but will likely create a greater barrier for the registration of less conventional and hybrid trade marks.
We had previously written about a September 1, 2016 ruling from a New York State appeals court relating to New York’s right of publicity and claims brought by celebrities Lindsay Lohan and Karen Gravano against the creator and distributor of the video game “Grand Theft Auto V.” On March 29, 2018, New York’s highest court weighed in on the question, upholding the appellate court, but on narrower grounds. Lohan v. Take-Two Interactive Software, Inc. et al., Nos. 23 & 24 (N.Y. Mar. 29, 2018).
Most of our readers are probably familiar with “Grand Theft Auto V” – the latest installment of the wildly popular video game franchise. The game – which takes place in a fictional American city – involves approximately 80 main story “missions” and optional random events, including encounters with other characters (avatars).
In their cases, the two celebrities, Lindsay Lohan and Karen Gravano (from TV’s “Mob Wives”) claimed that avatars in the games violated their rights to privacy by misappropriating their likenesses in violation of New York Civil Rights Law § 51. Although that law contains some exceptions, the law generally states that: “Any person whose name, portrait, picture or voice is used within this state for advertising purposes or for the purposes of trade without the written consent first obtained as above provided may maintain an equitable action . . . and may also sue and recover damages for any injuries sustained by reason of such use . . .”
Ms. Gravano alleged that the character “Andrea Bottino” in the game incorporated her image, portrait, voice and likeness, as well as several events from her life. Ms. Lohan claimed a violation of § 51 by alleging that
defendants used a look-alike model to evoke Lohan’s persona and image. Further, Lohan argues that defendants purposefully used Lohan’s bikini, shoulder-length blonde hair, jewelry, cell phone, and “signature peace sign’ pose” in one image, and used Lohan’s likeness in another image by appropriating facial features, body type, physical appearance, hair, hat, sunglasses, jean shorts, and loose white top. Finally, Lohan argues that defendants used her portraits and voice impersonation in a character that is introduced to the player in a “side mission.”
The trial court denied defendants’ motions to dismiss, but the appellate court dismissed both plaintiffs’ complaints. The appeals court found that the plaintiffs did not meet the requirements of § 51 because the game and the defendants never referred to either plaintiff by name, never used their actual names in the game, never used either woman as an actor for the game, and never used a photograph of either plaintiff. In short, there was no use of either plaintiff’s name, portrait or picture, as listed in § 51.
The appeals court also found that the video game, as a work of fiction, was not within the statutory definitions of “advertising” or “trade.” Instead, First Amendment protections (also discussed in the post on the Kanye West video) prevailed.
Finally, the appellate court also dismissed Ms. Lohan’s claim that her image was used in advertising materials for the game. As was the case with the game itself, the advertising materials used the game’s avatar, rather than images of Ms. Lohan, so the § 51 claim could not proceed.
On appeal, New York’s highest court affirmed, but decided the issue more narrowly than did the appellate court. This court focused on the term “portrait” in new York Civil Rights Law § 51 and concluded “that an avatar (that is, a graphical representation of a person, in a video game or like media) may constitute a ‘portrait’ within the meaning of article 5 of the Civil Rights Law.” Unlike the appellate court, this court did not reach the First Amendment issue.
With respect to Ms. Lohan’s claim, the court agreed with the appellate court that the game did not refer to her, did not user her name or her photograph. But this court ruled that the character “simply is not recognizable as plaintiff inasmuch as it merely is a generic artistic depiction of a ‘twenty something’ woman without any particular identifying physical characteristics.” In other words, “the ambiguous representations in question are nothing more than cultural comment that is not recognizable as plaintiff and therefore is not actionable.”