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European harmonization in the field of copyright has always been challenging because the balance between authors’ rights and public interest is struck fairly differently from one country to another. The challenges of “the digital age” and how copyright should evolve considering the new possibilities offered by the internet only adds fuel to this fire.

The new Copyright Directive in the Digital Single Market is an attempt from the European Union to better allocate the revenues derived from the internet by creating new obligations for internet platforms to prevent copyright infringements and requiring them to pay for linking to articles or using snippets. Obviously, this is not without controversy within the European Union institutions and the various stakeholders, in particular “internet platforms” and internet users, whether based in Europe or not. The internet is full of articles claiming that the Directive will end the internet as we know it or, for example, that this Directive is the product of a people – the Europeans – who don’t like to have fun! More seriously, a statement against the new right that publishers of press publications would get, was recently signed by 169 European Academics.

The importance of this controversy was once again confirmed on Thursday, July 5, 2018. The EU Parliament rejected the draft Directive in its current form and decided that its content will be debated before Parliament in September.

This is a setback for the Directive promoters but not the end of the battle. What it means is that the draft will face further debate and amendments from the Parliament rather than being fast-tracked via the so-called “Trilogue Legislative Process.” For the opponents of the Directive, it means that they get another chance to convince the Members of the European Parliament to change the content of the Directive.

The most controversial provisions that led to the vote on Thursday and that will probably be the most hotly debated in September are articles 11 and 13.

Article 11: Creation of a New IP Right for Publishers of Press Publications

Article 11 refers to two categories of players: on the one hand, the publishers of press publications established in the EU and, on the other hand, internet service providers such as internet platforms.

The title of article 11 is “protection of press publications concerning online uses” and it is easy to guess that the goal here is to give publishers the possibility to get compensation when their content is used on the internet. This would be achieved by creating a new intellectual property right, similar to copyright but different, a new “neighboring” right. This new right would last for 20 years.

As a result, people who previously “used” content without paying any fee, would now have to pay, which obviously is not going to please them.

The controversy has focused on hyperlinks and snippets (short summaries of articles). The proposed Directive does not expressly mention snippets or hyperlinks but considering that the proposed neighboring right is not subject to a requirement of investment (contrary to databases) or originality (contrary to copyright), it could allow publishers to prevent the use of snippets or hyperlinks, which would limit freedom of expression and access to information.

Note that there is also a controversy in Europe about whether hyperlinks can infringe copyright, which we commented on this blog.

Press publishers usually do not like these snippets and hyperlinks because readers may get the information they were seeking without having to read the full article. As a result, the number of clicks and the advertising revenues derived therefrom are not as high as they could be. On the other hand, the Directive’s detractors are arguing that hyperlinks that include snippets are in fact advertising press articles because users are more likely to click on the link and be redirected to the press publishers’ websites.

Article 13: Internet Platforms’ Obligation to Get Licenses Or Prevent Infringements

This article is even more controversial. Those who are targeted here are a narrower category of providers, the “online content sharing service providers”, i.e. internet platforms such as YouTube. Article 13 would impose fairly heavy new obligations on these entities by requiring them affirmatively to obtain the right holders’ authorization and, if no such authorization has been obtained, to take effective and proportionate measures to prevent those works from being made available, including by way of “effective technologies” (i.e. recognition algorithms).

Here again, one can understand why internet platforms complain: these new obligations mean more costs.

And here again, many arguments are raised against this provision. First, from a legal point of view, some argue that the new provision is inconsistent with other European provisions, in particular the E-commerce Directive or the European Union Charter of Fundamental Rights. From a technical point of view, others doubt whether it is feasible to conclude licensing agreements with all the right holders or to create such “effective technologies” in relation to all sorts of creations.

On the internet, the controversy focuses on “memes.” Memes are pictures or photos of well-known characters protected by copyright with comments of a humoristic or political nature. Some argue that the “effective technologies” that should be implemented could block memes because these technologies would be unable to differentiate between actual infringements and uses that should qualify as legitimate parody, for example:

The Directive is expected to be subject to a final vote by the European Parliament at the end of 2018 or the beginning of 2019. Then, each Member State will have to implement it into its national law, which will give rise to even more controversies. Additionally, since the rules set out in the Directive are often not very detailed, ‎national rules may end up being quite different from one Member State to another.

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Beer and wine are related goods for trademark purposes. Right? We’ve seen that truism announced by the Trademark Trial and Appeal Board (TTAB) time and time again. So, do you really have to prove it from scratch in every trademark proceeding?

Yes, you do. Sure, it may seem obvious that consumers expect beer and wine to emanate from the same source. After all, they are both beverages, they both serve similar societal purposes, they are often made by the same companies, they are sold in the same places, they are often advertised the same way, and they are subject to similar regulatory regimes.

However, even if all of that makes the similarity of beer and wine an obvious fact to you, the key word here is “fact.” Facts are subject to proof; they are not assumed as a matter of law. That means, according to the TTAB’s recent decision in Justin Vineyards Winery LLC v. Crooked Stave, LLC, that you have to meet your evidentiary burden of relatedness every time.

Background

Crooked Stave is a Colorado company that produces a range of artisan beverages, including beer, wine, spirits and non-alcoholic Kombucha. In 2015, the company applied to register the HOP SAVANT mark for beer (with HOP disclaimed). The application was opposed by Justin Vineyards, owner of the registered SAVANT mark for wine, which it affixes to an upscale Cabernet/Syrah blend. Justin Vineyards argued that there was a likelihood of confusion between HOP SAVANT for beer and SAVANT for wine.

The TTAB issued its decision last week. It held that many of the DuPont factors supported Justin Vineyards’ assertion that there was a likelihood of confusion: the SAVANT mark for wine was conceptually and commercially strong; the parties’ marks were similar; the channels of trade (restaurants, convenience stores, bars, etc…) were similar; and both goods were subject to impulse buys as opposed to careful purchases. In fact, by the TTAB’s count, six of the eight factors favored likelihood of confusion, and a seventh (evidence of actual confusion) was more or less neutral.

But Justin Vineyards’ opposition was dismissed anyway.  Why?

Similarity of the Goods

The problem for Justin Vineyards was the second DuPont factor, the similarity of the goods. As proof of what it considered the obvious point that beer and wine are similar goods, Justin Vineyards pointed to a quarter-century of prior TTAB and federal court decisions finding precisely that, i.e., that beer and wine were similar or related goods. Based on these legal citations, Justin Vineyards argued that “there is no question that the goods at issue (wine and beer) are related.”

Turns out, there was still a question – a question of fact. The likelihood of confusion analysis is a question of law, but it is based on underlying facts, and the party with the burden must prove those facts. Here, Justin Vineyards, as the opposing party arguing likelihood of confusion, had the burden to prove the facts necessary for that analysis to take place. Instead, Justin Vineyards relied only on other cases where the burden was met by other parties, and put forward in the present case “no evidence supporting a conclusion that beer and wine are sufficiently related that consumers expect them to emanate from the same source under the same mark.”

No big deal, right? Most of the other factors supported the likelihood of confusion argument, so you might think that the TTAB would find a likelihood of confusion anyway. Nope.  The TTAB argued that the second DuPont factor is one of the two “key” factors, and then cited the Federal Circuit for the proposition that “a single DuPont factor may be dispositive in any particular case.” With that legal backdrop, the TTAB dismissed Justin Vineyard’s opposition altogether.

The Lesson: Restate the Obvious

At the risk of stating the obvious, the lesson of course is to restate the obvious.  Every time you advance a likelihood of confusion argument, you have to meet your burden to prove as a factual matter that the goods in question are similar or related. There are various ways to do this, including by:

  • Introducing in evidence third party registrations in which the same mark is registered for both beer and wine;
  • Pointing to advertisements containing both goods being marketed together;
  • Finding news articles demonstrating that the goods are used together by the same purchasers; and
  • Coaxing admissions from your opponent (especially where your opponent, like Crooked Stave, actually sells both types of goods);
  • Offering web pages showing that other companies make and sell both types of goods.
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If you needed another reason to take action against a third party using your trademark – and you shouldn’t need another reason – consider the Red Hen restaurant.  Which Red Hen?  That’s the point.

As everyone by now knows, White House press secretary Sarah Huckabee Sanders posted a tweet over the weekend stating:

Last night I was told by the owner of Red Hen in Lexington, VA to leave because I work for @POTUS and I politely left. Her actions say far more about her than about me. I always do my best to treat people, including those I disagree with, respectfully and will continue to do so.

To say that this incident touched off a firestorm would be a massive understatement.  Many were outraged by what they perceived as a completely unjustified act of exclusion, and contacted the Red Hen restaurant to express their views in the form of harassing calls, fake orders, death threats and also (one would hope) expressions of displeasure delivered in a courteous manner.  Unfortunately, these critics did not always contact the right Red Hen.

For example, complaints started pouring in at the Red Hen restaurant in Swedesboro, New Jersey, even though it was hundreds of miles away.  Angry comments were delivered by phone, by Yelp, and on the restaurant’s Facebook page.  In desperation, the New Jersey restaurant posted this message on Facebook:

THE RED HEN IN SWEDESBORO, NEW JERSEY IS IN NO WAY AFFILIATED WITH THE RED HEN IN VIRGINIA.

We are an independent, family owned business who happens to share the same name.

Kindly check your facts before you erroneously defame an innocent business on Facebook in an attempt to destroy their business where they welcome all, irrespective of their race, religion, views or opinions.

Wishing all a safe and happy weekend!

You would think that such a message would discourage further Facebook posts . . . but you would be wrong.  Apparently, fired up internet users don’t always read the fine print, and the angry posts continued.  Elizabeth Pope, Operating Manager of the Red Hen in Swedesboro, told NJ.com, “People have no idea. They’ve dropped our rating from a 4.8 stars to three-point-something. People need to check the facts and do research before they make comments and try to ruin a small business.”

What is the lesson for trademark owners?  Be on the lookout for unauthorized uses of your trademark and shut them down wherever possible.  If someone has the same or a confusingly similar trade name as you and you let it go, the public may believe (mistakenly) that you are affiliated with them or responsible for their actions.

Of course, this is easier said than done.  Your options will depend on whether you are the senior or junior user, as well as the geographic scope of your rights.  While a deep dive into these topics is beyond the scope of this blog post, here are some practical tips:

  1. Pick a unique mark. A made-up word, or an unexpected combination of words, is best.  This is the single most important thing you can do to protect yourself against the possibility that someone else will adopt the same mark and destroy your goodwill.  Before you adopt a mark, it is definitely worth doing a trademark search or at the very least spending 5 minutes on Google to make sure no one else is using it.
  1. Apply for a federal registration. If you are providing goods or services across state lines, you can apply for a federal trademark registration, which will give you nationwide priority as of the application date.  Although you may not be able to immediately enforce your trademark rights against a later comer in a geographic region that is remote from yours, that party is on “borrowed time” and must cease using its mark when you are ready to enter that market with your registered mark.  Simply pointing this out in a demand letter often yields a positive result.
  1. Know when you can, and when you can’t, enforce your rights. As a general matter, you cannot enforce your rights against a party who started using the trademark before your own priority date.  That is why picking a unique mark in the first place is so important (see #1 above).  In enforcing against junior users, you need to consider whether your mark is protectable, whether there is a likelihood of confusion, and whether your rights extend into that geographic area.  Here, a federal registration is a powerful tool (see #2 above).

In short, a skilled trademark attorney can help you design an enforcement strategy that is commensurate with your rights, your business needs, and your budget.

The odds of your being the next Red Hen are admittedly small, but do you really want to take that chance?

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I usually don’t write a whole blog post just to disagree with a sitting federal judge, even when it’s about copyright law’s most notorious disagreement-generating machine: fair use.

This is an exception. A recent decision by the Eastern District of Virginia may cause some individuals and non-profits to believe that it’s permissible to copy and use “publicly available” photos from the internet, as long as they don’t know whether or not the photos are protected by copyright.

The purpose of this blog post is to dispel any such belief. Despite what you might have read in Brammer v. Violent Hues, LLC, you cannot just use photos you find on the internet, even if you are genuinely unaware of their copyright status. Why should you believe me and not a federal judge? Because, as I argue below, the other federal judges are on my side.

Brammer v. Violent Hues Productions, LLC

Back in 2011, Photographer Russell Brammer took a time-lapse night time image of the Adams Morgan neighborhood of Washington, D.C., and uploaded it to his Flickr account. Flickr allows photographers to choose from among about ten different copyright settings, including the reservation of all rights, dedication to the public domain, and various Creative Commons licenses. Brammer chose to reserve all rights so, when the photo was uploaded, it was accompanied by the copyright notice: “© All Rights Reserved.”

Violent Hues Productions runs the Northern Virginia Film Festival. In 2016, festival employee Fernando Mico found Brammer’s photo online and copied it for use on the festival website. Mico used a cropped version of Brammer’s photo to illustrate one of the “things to do” in the general area of the festival. Mico admitted that he found the photograph on Flickr through a Google search, but claimed “that he saw no indication that the photo was copyrighted and believed he was making use of a publically available photograph.” (By the way, “publically” is apparently a permissible albeit less common spelling of “publicly”).

Brammer sued in the Eastern District of Virginia. Violent Hues advanced a fair use defense and, on June 11, 2018, the judge granted summary judgment for the defendant.

The Court’s Fair Use Analysis

The Court held that every fair use factor codified at 17 U.S.C. § 107 favored fair use. As to the first factor, the purpose and character of the use, the Court held that the defendant’s use of the photo was transformative and also non-commercial (both of these conclusions have flaws, the discussion of which is beyond the scope of this post). The Court also held that:

In addition to being transformative and non-commercial, Violent Hues’ use of the photo was also in good faith. The record indicates that Mr. Mico, Violent Hues’ owner, found the photo online and saw no indication that it was copyrighted. Mr. Mico attests that he thus believed the photo was publically available. This good faith is further confirmed by the fact that as soon as Violent Hues learned that the photo may potentially be copyrighted, it removed the photo from its website.

Let’s talk about “good faith.” As an initial matter, one might question how the Judge could have found that there was no genuine issue of fact here for the jury. The plaintiff produced documentary evidence of a copyright notice (you can see it in the lower right hand corner of the Flickr exhibit). By contrast, the defendant’s evidence consisted of an affidavit from Mico claiming, not that the copyright notice wasn’t there, but only that he didn’t see it. Additionally, what relevance does the “publicly available” nature of a work indicate? There are many things that are “publicly available,” some of which are copyrighted and some of which are not. You can’t just use them all for your website. Did the Court mean to use the term “public domain”?

“Good Faith” and “Innocent Intent”

But the above discussion about the merits of the judge’s “good faith” determination is moot, because good faith is not relevant to the fair use analysis in the first place. Why did the judge think it was relevant? Let’s turn to the case law he cited on this issue. What’s that … he cited no case law? Ok, then let’s see what the defendant cited in its brief for this proposition. Wow, nothing there either.

Here is the law. In Harper & Row v. Nation Enterprises (which we wrote about in detail here), the Supreme Court indicated that a defendant’s “bad faith” could be taken into account in a fair use analysis. So, for example, if you break into someone’s office and steal a photo, and then publish it, the fact that you committed a crime to get the photo will be figured into the fair use analysis. This is because, as Justice O’Connor put it, “fair use presupposes good faith,” and evidence of bad faith rebuts that presupposition.

However, that does not mean that evidence of good faith can be affirmatively introduced to prove fair use. In the recent copyright case of Google v. Oracle (which we covered here), the Federal Circuit cited to Ninth Circuit law and to Professor Nimmer’s treatise (which in turn cited to lots of other cases) and stated:

[W]hile bad faith may weigh against fair use, a copyist’s good faith cannot weigh in favor of fair use [because] the innocent intent of the defendant constitutes no defense to liability.

To be clear, innocent intent is not completely irrelevant to copyright law. Among other things, it can impact the amount of statutory damages, it can determine whether a party is liable for contributory infringement, and it is important to certain aspects of the notice and takedown procedure under the Digital Millennium Copyright Act.

But when it comes to infringement, protestations of “good faith” and “innocent intent” are not admissible as affirmative evidence of non-infringement or fair use, or at least they are not supposed to be. If they were, every fair use analysis would devolve into a contest to see how well the defendant could make sad puppy dog eyes while insisting that no infringement was intended (and even if sad puppy dog eyes were relevant, surely they would be a jury question, not something to be evaluated on summary judgment).

Brammer is an Outlier even in the Fourth Circuit

So why did the judge take a different approach here? Maybe the law on this is different in the Fourth Circuit?

Actually, it’s not. For example, in Richard Anderson Photography v. Brown, where a college mistakenly believed that its permission to use certain photographs extended for a longer period than it actually did, the Western District of Virginia rejected the defense of “innocent infringement” as a matter of law. Similarly, multiple decisions of the District of South Carolina have held that:

As between two innocent parties (i.e., the copyright owner and the innocent infringer) it is the latter who should suffer since he, unlike the copyright owner, [] has an opportunity to guard against the infringement by diligent inquiry.

The same holds true even in the Eastern District of Virginia, where a different judge in Phoenix Renovation v. Rodriguez wrote:

Defendants argue that their use of the [copyrighted work] constituted an innocent infringement. While the defense of innocent infringement can impact the remedies available against a defendant for copyright infringement, it will not constitute a defense to a finding of liability. As [Plaintiff] only seeks summary judgment on the issue of liability, the Court will not consider this defense in the present context.

In other words, Brammer is an outlier even in the Fourth Circuit … even in its own district.

So if you are an individual or a non-profit, and you heard about this great new copyright case, here is the bottom line: Brammer is NOT a coupon for free photos for your website. I ran non-profit film festivals for nearly ten years before becoming a lawyer, so I sympathize with your plight. But unless you happen to be in the Eastern District of Virginia and happen to get assigned one particular judge, you will not be able to make sad puppy dog eyes and claim you didn’t see the copyright notice.  It will not work with other judges … it likely will not even work on this judge again if the plaintiff bothers to appeal.

Author’s Note: As noted above, there are many other aspects of this opinion with which I take issue, but they are beyond the scope of this blog post. Suffice to say, if you are relying on Brammer for anything, best of luck with that.

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All you trademark lawyers better sit down, because this may come as a shock: You are not “intellectual property” lawyers . . . at least not according to Section 11 U.S.C. § 101(35A) of the Bankruptcy Code, which intentionally omits trademarks from the definition of “intellectual property.”

Owing in part to this omission, there is an ongoing circuit split as to the rights of a trademark licensee when a licensor declares bankruptcy. Can the licensee keep using the licensed mark even if the debtor-in-possession of the bankrupt estate rejects the license? The Seventh Circuit says yes. The First Circuit says no.

But this split could be resolved soon. Last week, a petition for writ of certiorari to the Supreme Court was filed in Mission Products Holdings, Inc. v. Tempnology, LLC.

The Statutory Framework: Why Trademarks are not Intellectual Property

When a company files for protection under the Bankruptcy Code, the debtor-in-possession or trustee has the right to “assume” or “reject” contracts (see 11 U.S.C. § 365(a)).  Rejection allows the debtor to purge itself of contractual obligations that will hinder reorganization. The rejected contract is considered breached, but the breaching party cannot be forced to perform the contract. So, for example, say Party A agrees to supply Party B with widgets, but then Party A files for bankruptcy, seeking to reorganize in such a way that it rids itself of its widget-making obligations. The Court may allow the Party A to “reject” that widget contract. Party B would have a claim for damages for breach of the widget contract (a claim that may or may not be worth anything), but Party B would not be able to compel Party A’s estate to make more widgets.

Prior to 1988, this power to “reject” contracts led to some harsh results. For instance, a company could enter into a long-term license for the use of a patented process, build its business in reliance on that license, and lose the entire enterprise practically overnight if the licensor declared bankruptcy and rejected the license.

In 1988, Congress sought to avoid some of these harsh results by adding an exception to the Bankruptcy Code. This exception, codified at 11 U.S.C. § 365(n), provides that if the debtor rejects an intellectual property license, the licensee may treat the contract as terminated and sue for breach or, in the alternative, elect to “retain its rights” for the duration of the contract, including any rights of exclusivity.  In exchange, the licensee must continue to perform under the license. The Bankruptcy Code’s definition of the “intellectual property” covered by this exception includes patents, patent applications, copyrights, trade secrets, plant varieties, and even “mask work,” that obscure category of semiconductor chip IP buried in Chapter 9 of the Copyright Act.

But not trademarks. Why? We don’t know for sure, but a 1988 Senate Report noted that trademark licensing relationships rely to a large extent on the notion that the licensor has supervision or control over the quality of the products sold by the licensee under the mark. What happens to that important quality-control function when the licensor is no longer in the picture . . .  or no longer even exists? The Senate Report indicated that Congress would postpone action on the issue of trademark licenses to allow for “more study” and “the development of equitable treatment of this situation by bankruptcy courts.”

Ok, so the trademark licensee, unlike a patent or copyright licensee, is not expressly provided with the option to “retain its rights” under the rejected license. But what does that mean as a practical matter? More to the point, does the trademark licensee have to stop using the mark? The answer to that question depends on the circuit.

The Seventh Circuit Approach: Sunbeam. v. Chicago American

Lakewood Engineering sold box fans, but it was losing money on each fan. Chicago American Manufacturing thought it could make the fans at a profit using Lakewood’s intellectual property, so the two companies entered into an agreement whereby Lakewood supplied the fan motors and licensed the LAKEWOOD mark to Chicago American. Only a few months into the contract, Lakewood’s creditors forced it into involuntary bankruptcy. Sunbeam Products purchased the Lakewood assets, and then rejected the agreement with Chicago American. Despite the rejection, Chicago American kept making the fans, and kept using the LAKEWOOD mark.

Sunbeam argued that, because the Bankruptcy Code did not give the licensee the option to “retain its rights” in a trademark license, that meant that Chicago American had to stop using the LAKEWOOD mark.  In 2011, a bankruptcy judge in the Northern District of Illinois disagreed and, apparently relying on the 1988 Senate Report’s reference to “equitable treatment,” ruled that Chicago American could keep using the Lakewood marks on “equitable grounds.”

On appeal, the Seventh Circuit rejected the bankruptcy judge’s application of equity, but affirmed on other grounds. The Court held that, since Chapter 11 did not mention trademarks in its definition of “intellectual property,” it had nothing to say about trademark licenses either way (as Judge Easterbrook put it, “an omission is just an omission”). Just because a license is rejected in bankruptcy, that doesn’t mean that the licensee’s rights have been “vaporized.” Rather, all it means is that the contract has been breached by licensor.

And what happens when a trademark license is breached by the licensor? According to the Seventh Circuit, that breach does not automatically “terminate a licensee’s right to use intellectual property.” For example, what would have happened if, before the bankruptcy, Lakewood had breached the contract by failing to supply the fan motors to Chicago American? Chicago American’s rights to use the LAKEWOOD mark would not have automatically disappeared. According to the Court, Chicago American could have purchased fan motors elsewhere, made the fans using the LAKEWOOD trademark, and then sued Lakewood for the cost of the replacement motors. The Seventh Circuit held that the result should be the same in the bankruptcy context. Therefore, Chicago American could continue to use the LAKEWOOD mark.

The First Circuit Approach: Mission Products Holdings, Inc. v. Tempnology

But the First Circuit, addressing a very similar set of facts earlier this year, disagreed. Tempnology, LLC, doing business under the DR. COOL and COOLCORE marks, made specialized sports accessories (e.g., towels and socks) that stayed cool during exercise. Tempnology licensed certain intellectual property to Mission Products, including trademark and patent rights, as well as exclusive distribution rights. After Tempnology filed for bankruptcy protection, the debtor-in-possession of the Tempnology estate rejected that license.

The First Circuit agreed that rejection of the license does not “vaporize” the licensee’s rights. However, that did not mean that the licensee could continue to use the marks; rather, the licensee’s right is converted into a pre-petition damages claim. The Court justified its interpretation of the statute in large part on policy grounds; it expressed concern that a licensee’s unfettered right to use a mark against the will of the licensor, where that licensor has filed for bankruptcy, would undercut the quality-control function of trademark law, place significant burdens on reorganization,  and deny the licensor the full protection of the bankruptcy process.

Judge Torruella, dissenting in part, pointed out that the Bankruptcy Code is meant to provide protection for creditors as well as debtors. To advance both sets of rights, Judge Torruella argued, courts should address the disposition of trademark licenses with equitable considerations in mind, just like the 1988 Senate Report advised.

Mission Products’ Cert. Petition

On June 11, 2018, Mission Products filed a petition for writ of certiorari. The petition urges the Supreme Court to follow the Seventh Circuit’s approach, and articulates the question presented as:

Whether, under §365 of the Bankruptcy Code, a debtor-licensor’s “rejection” of a license agreement— which “constitutes a breach of such contract,” 11 U.S.C. §365(g)—terminates rights of the licensee that would survive the licensor’s breach under applicable nonbankruptcy law.

A second issue on appeal concerns whether the exclusive distribution right granted to Mission Products is an “intellectual property right” under the Bankruptcy Code, where the subject matter of the distribution right is a patented invention. A response to the petition is due July 12, 2018.

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Cannabis trademarks. By now, most IP lawyers know two things about them.

First, even though cannabis is legal in an increasing number of states (9 allow recreational use; 29 allow medical use), the United States Patent and Trademark Office (USPTO) is refusing applications to federally register cannabis trademarks, no matter the home state of the applicant, until the substance gets reclassified by or removed from the Controlled Substances Act (which doesn’t seem to be on the immediate horizon).

Second, state trademark registrations are available for cannabis businesses (in states where cannabis is legal), but they are a grossly inadequate substitute for federal registration.

So what is the solution for cannabis business owners and trademark professionals? Should we wring our hands until a critical mass of public opinion forces the federal government to act? Or should we propose practical solutions that can be implemented even in the current political climate? Russell Jacobs, a lecturer at the University of Washington School of Law, has taken the latter approach in an article entitled: “Cannabis Trademarks: A State Registration Consortium Solution,” published in the Washington & Lee Legal Review.

The Problem with State Registrations

As Jacobs describes, state trademark registrations have several limitations when it comes to protecting cannabis brand owners. Let’s say a legitimate entrepreneur starts a promising marijuana business in State A and registers her mark in State A; before she really gets off the ground, a pirate residing over the border in State B intentionally copies the name, opens up shop, and registers the mark in State B.

There is not much our legitimate State A brand owner can do about it. First, most state laws require use within the state as a precondition for registration, so the legitimate State A brand owner was not able to defensively register a State B trademark to block the pirate. Second, the State A registration cannot serve as the basis for a lawsuit as to use or registration in State B. A common law unfair competition count can be equally unhelpful in this scenario, because the State A brand owner would have a hard time showing any goodwill in State B.

Moreover, Jacobs explains that some state trademark registrations create only the presumption of proper registration, not the presumption of exclusive rights in a particular geographic area. This means that our State A entrepreneur’s rights might not even extend throughout all of State A, let alone to State B.

The upshot of this and other state registration limitations: weak trademark laws make it easier for bad actors to trade off another company’s goodwill with impunity, and more difficult for good faith actors to avoid consumer confusion. Meanwhile, trademark law fails to fill its core purpose: to help consumers distinguish between different brands and choose the one they trust (which is especially important with regard to stuff you put in your body).

The Proposed Solution

As a semi-permanent solution to this problem, Jacobs proposes what he calls a “State Registration Consortium” among states where marijuana is legal. The legislation necessary to create this consortium would have the following features:

  1. A system to easily identify cannabis marks on the state registries, not by eliminating state use of the USPTO’s classification regime, but by adding an “M” to cannabis registration numbers, which will help marijuana businesses acting in good faith to identify conflicting marks and instead develop unique branding.
  2. Additional presumptions of validity, ownership and exclusive statewide rights for cannabis marks. This will allow marijuana business to invest in developing goodwill without fear of intrastate and interstate competitors using the same mark.
  3. Reciprocal recognition of state trademark registrations among participating states (similar to international reciprocity). A home-state registration would be valid in other participating states, and block the opportunistic adoption of marks by goodwill free riders.
  4. The combination of reciprocal recognition and presumptions of ownership and exclusive rights across states would require a means for the owners of prior rights in any “member” state to object to a “State Registration Consortium” registration, similar to an opposition proceeding brought before the TTAB. Jacobs suggests a voluntary arbitration system to fill that function.
  5. A “bad faith” provision preventing registrants in states inside the consortium from trying to benefit from the goodwill of business outside the consortium.
  6. A grandfather provision to protect common law rights developed before the existence of the consortium. This provision would in some cases permit multiple businesses to maintain concurrent rights to the same mark in different jurisdictions.

Jacobs acknowledges that his proposal would not address disputes between state cannabis marks and conflicting federal registrations for related goods. For example, in a dispute between a traditional bakery in a non-cannabis state and marijuana cookie maker in a cannabis state, the federal registration is going to win every time until there is a national solution to this issue. But while we wait for that solution, check out the full article, which you can download here.

Editor’s Note: In addition to lecturing at the University of Washington, Russell Jacobs is also Director, Corporate Counsel for Starbucks Coffee Company, a Foley Hoag client. The views in his article, and by extension this blog post, obviously do not necessarily represent the views of Starbucks.

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Are automobile interior designs eligible for copyright protection? Last month, we wrote about the Copyright Office Review Board’s (CORB’s) allowance of the registration of a three-dimensional pattern for an automotive floor mat. Does this mean that every little feature of your car is now eligible for copyright protection?

Not according to CORB, which recently released its opinion in the matter of Novem Car Interiors.

Background

The works in question are four two-dimensional pattern swatches for the interior of luxury cars, the copyright in which Novem GmbH applied to register in 2015. Two of the swatches consist of what is essentially a herringbone pattern, one silver and the other black. A third design features black rectangles, and the fourth is a smooth wood veneer with translucent stripes.

A Copyright Office registration specialist rejected Novem’s applications on the ground that they did not “contain a minimum amount of creative pictorial, graphic or sculptural authorship.” On Novem’s request, the Copyright Office reevaluated the applications in 2017, and again rejected them, concluding that “standard designs, figures and geometric shapes” such as these were not sufficiently creative to merit copyright protection.

Novem appealed to CORB pursuant to 37 C.F.R. § 202.5(c). CORB affirmed.

The Thin Dull Line

The basis for the affirmance was the originality requirement found in 17 U.S.C. § 102, which has been interpreted to consist of two elements: (1) that the work is independently created; and (2) that the work is sufficiently creative.

Here, the battle was over the second element. Sufficient creativity is a low bar: anything more than a de minimis quantum will do. But in policing the boundary between sufficient and de minimis creativity (I call it the “thin dull line”), the Copyright Office is particularly wary of items like names, titles, familiar symbols, and slight variations on typical ornamentation. That’s basically what Novem’s designs were: “familiar symbols or designs” like lines, boxes and stripes that were no more than “minor variations on commons shapes.”

Selection and Arrangement

Although common shapes are not copyrightable, a combination of common shapes and/or other unprotectable elements might be, but only if the selection and arrangement of those elements is sufficiently creative.  The Ninth Circuit has stated that such combinations are protectable “only if [the non-protectable] elements are numerous enough and their selection and arrangement original enough that their combination constitutes an original work of authorship.”

Section 906.1 of the Compendium of U.S. Copyright Office Practices offers an illustrated example of this distinction.  Say you take a bunch of white circles (common shapes) and space them out evenly (a common arrangement) on a purple background (a common color). This design is not protectable because everything about it is too common. Now take the same unprotectable circles, vary their size and color, add a few other basic shapes, and make the pattern less predictable. The individual elements of the design are still not copyrightable, but your minimally creative combination may be.

Here, CORB found that the combination of elements in Novem’s auto interior designs fell on the decidedly uncreative end of the spectrum. They contained rows of simple shapes, spaced at even intervals, with no variation in color or size. There was “simply not enough creative authorship … to warrant copyright protection.”

Production Process

Even though Novem’s designs were dull (according to the Copyright Office), some its arguments were quite creative. First, Novem introduced evidence of its design production process to show how many independent authorial decisions went into the selection and arrangement of the designs.

In presenting this evidence, Novem was expressly invoking the Eleventh Circuit’s opinion in Home Legend v. Mannington Mills, which we wrote about here. In that case, the Court held that it would consider evidence about the process through which a party created certain floor patterns (designed to resemble natural wood). However, the Court’s consideration of this evidence went only to the element of independent creation (the first element of originality). Specifically, the process evidence was introduced to show that the appearance of the flooring really was created by a human author, and not just found in the forest. Put another way, the evidence went only to whether the pattern was created, not whether it was creative.

By contrast, in the case of Novem’s car interior designs, the first element of independent creation was already conceded by CORB. All that mattered was the second element: whether the appearance of the designs, on their face, exhibited sufficient creativity. CORB held that the production process was irrelevant to that question.

Texture

Novem’s second creative argument involved texture. Novem argued that, even though it was seeking protection only for the two-dimensional patterns, the three-dimensional feel and texture of the designs should be considered by CORB as additional evidence of creativity. However, as CORB observed, none of the three cases proffered by Novem for this proposition were apt. Two discussed the importance of texture in the context of three-dimensional sculptural objects, and the third made only a passing reference to texture in dicta.

Color Copies

Finally, CORB also noted that, even if all the other obstacles had been overcome, Novem still would not be entitled to register both of its herringbone designs, because they were “identical except for their shading.” Section 906.3 of the Compendium provides that “merly adding or changing one or relatively few colors in a work, or combining expected or familiar pairs or sets of colors is not copyrightable, regardless of whether the changes are made by hand, computer, or some other process.”

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What does the generalist in-house counsel need to know about protecting designs? Designs occupy a unique space in intellectual property. In the U.S., designs are protected under the patent laws, while in Europe, designs are typically protected under industrial design law. Overlapping protection for designs also exists in the U.S. and Europe through copyright law and through trademark law as it applies to trade dress.

Foley Hoag LLP presents a webinar offering guidance for in-house counsel regarding the basics of design protection from U.S. and European perspectives, as well as strategies for protecting designs effectively and economically.

Topics Discussed
  • Why protect designs?
  • The interplay of design and utility patents
  • The interplay of design patent law and copyright and trademark law
  • European Industrial design law basics and its interplay with copyright and trademark law
  • The interplay of design patent law and industrial design law as it relates to priority
  • Recent important design patent decisions
Speakers

If you are in-house counsel and would like to receive a copy of the written materials containing talking points to accompany these slides, please contact us.

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This year, the great city of Seattle, Washington is the location of both the International Trademark Association Annual Meeting (May 19-23) and the American Intellectual Property Law Association Spring Meeting (May 15-17). If you are one of the many lawyers attending these events and you want a Seattle trademark experience, you could do the obvious and visit locations associated with the city’s famous modern brands. Alternatively, you could go back in time a bit further.

Washington became the 42nd state in 1889, the same year the Great Seattle Fire destroyed much of the city. A combination of new railroad lines and post-fire construction led to a boom in population and commercial activity. On July 17, 1897, this already-promising economic climate went into hyper-drive when the S.S. Portland arrived from Alaska, heralding the beginning of the Klondike gold rush. The trademark disputes that arose from this economic activity started working their way into the published opinions of the Ninth Circuit and the newly christened Washington Supreme Court in the first decades of the twentieth century.

We took a look at the first ten trademark disputes involving the city of Seattle (which date from the turn of the century up to the start of World War I). To our delight, we found them riddled with connections to celebrities, shootouts, world politics and the multicultural fabric of migration in the American west. So, if you need something to do in Seattle, why not review our ten part Seattle Trademark History series. You can even create your own Seattle Trademark History Tour by consulting our handy map (also reprinted at the end of this post) and visiting one of the locations that gave rise to these disputes. This is Part 10. You can find the other nine parts of the series (once they are published) by clicking here.

Behaving Badly at the St Francis Since 1907

In 1905, the Hotel St. Francis opened for business at 816 Union Street. Likely named after the much more famous St. Francis Hotel in San Francisco (which opened the previous year), Seattle’s Hotel St. Francis was a modest wooden structure of forty-eight rooms and a dining room, where families could stay for about $3.50 a week.

St. Francis Hotel at 5th Avenue and Madison

In January 1907, the brand new swanky St. Francis Hotel opened for business a mere four blocks away, at the corner of 9th Avenue and Madison Street. The new St. Francis Hotel was made of brick and cement, had seventy-eight rooms and all the modern conveniences, including private baths, a barbershop, a billiard room, and even its own telephone exchange. Guests were charged $4.50 a night.

Actual confusion ensued.  The old Hotel St. Francis started receiving phone calls, deliveries, luggage, and even an emergency medical visit intended for the new St. Francis Hotel. The owner of the old Hotel St. Francis got fed up and sold the property to W. Martell in May 1907. Martell marched right into court and asked for an injunction against the new St. Francis Hotel’s use of the name.

But King County Superior Court Judge Robert Brooke Albertson dismissed the case. As grounds for dismissal, Judge Albertson noted that (1) the defendant didn’t know about the plaintiff’s hotel when it opened the new St. Francis Hotel, and thus there was no fraudulent intent; (2) the plaintiff Martell was aware of the defendant’s new hotel when he purchased the old hotel in May 1907 from the previous owners, so he knew what he was getting into; and (3) the defendant’s new hotel was much fancier and unlikely to attract the sort of riff-raff that was staying in the plaintiff’s old dive.

Justice Wallace Mount, writing for the Washington Supreme Court in Martell v. St. Francis Hotel Co., 51 Wash. 375, 98 P. 1116 (Wash. January 05, 1909), disagreed. As to the defendant’s argument that its new establishment was of a higher class, Justice Mount held:

They are both hotels, and necessarily in competition with each other. . . If the right to adopt a name already used by a hotel depends upon the size of the building, or the rates charged, or the number of servants employed or capital invested, then, as remarked by the appellants in their brief, this rule would permit another company with more money than the defendant to establish a larger better and more exclusive hotel across the street from the defendant’s hotel under the same name, and its business could be thus injured or event ruined without redress. Of course, that is not the rule.

The bottom line here was that were two hotels in the same Seattle neighborhood with confusingly similar monikers. The St. Francis Hotel would have to change its name.  It later became known as “The Madison.”

Vito’s at The Madison

In 1953, The Madison came to house one of Seattle’s most colorful watering holes, Vito’s, the slogan of which is “Behaving badly since 1953.” For nearly six decades, Vito’s became a haunt for politicians, teamsters, lawyers, gangsters and police. Even the F.B.I. stopped by once in a while to plant a bug, and Senator Warren Magnuson’s wake reportedly took place in the back room. Guests used to wander in from the Hotel Sorrento across the street (Justice Mount was right – a “larger, better and more exclusive” hotel was built just a cross the street only months after his opinion issued). Dan Aykroyd and Snoop Dogg even showed up together one night after attending the opening of the Experience Music Project (now Seattle’s Museum of Pop Culture). But the fun came to a stop on November 23, 2008, when Nathaniel Thomas, an alleged member of the Hoovers gang, was shot dead on the premises by the member of a rival club.

In 2010, new owners took over and reincarnated the old St. Francis Hotel location as Vito’s jazz club and restaurant. It’s still there, just a four block walk from the Washington State Convention Center. And if you happen to be at the Washington State Convention Center while reading this, you are standing just about on top of the old Hotel St. Francis location at 816 Union Street. What would have been the 800 block of Union Street is just next to the loading dock entrance and the tunnel to the I-5.

Special thanks to the following excellent sources, all of which were consulted for this blog series: Gary Flynn’s Brewerygems.com; Historylink.org, a free online encyclopedia of Washington state history; Blackpast.org, an online reference guide to African American History; librarian Alan Michelson’s Pacific Coast Architecture Database; the University of Washington library digital collection; the Orbis Cascade Alliance’s Archive West; Lost Restaurants of Seattle by Chuck Flood; the Pacific Shellfish Institute website; Historian Rob Ketcherside’s ba-kground blog; the Capitol Hill Seattle Blog; the DorpatSharrardLomont blog Seattle Now & Then Series; the Seattle Times; the Seattle Department of Neighborhoods website; and Seattle-Tacoma radio station KNKX.

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This year, the great city of Seattle, Washington is the location of both the International Trademark Association Annual Meeting (May 19-23) and the American Intellectual Property Law Association Spring Meeting (May 15-17). If you are one of the many lawyers attending these events and you want a Seattle trademark experience, you could do the obvious and visit locations associated with the city’s famous modern brands. Alternatively, you could go back in time a bit further.

Washington became the 42nd state in 1889, the same year the Great Seattle Fire destroyed much of the city. A combination of new railroad lines and post-fire construction led to a boom in population and commercial activity. On July 17, 1897, this already-promising economic climate went into hyper-drive when the S.S. Portland arrived from Alaska, heralding the beginning of the Klondike gold rush. The trademark disputes that arose from this economic activity started working their way into the published opinions of the Ninth Circuit and the newly christened Washington Supreme Court in the first decades of the twentieth century.

We took a look at the first ten trademark disputes involving the city of Seattle (which date from the turn of the century up to the start of World War I). To our delight, we found them riddled with connections to celebrities, shootouts, world politics and the multicultural fabric of migration in the American west. So, if you need something to do in Seattle, why not review our ten part Seattle Trademark History series. You can even create your own Seattle Trademark History Tour by consulting our handy map (also reprinted at the end of this post) and visiting one of the locations that gave rise to these disputes. This is Part 9. You can find the other nine parts of the series (once they are published) by clicking here.

“The Milk from Contented Cows”

In 1899, North Carolinian Elbridge Amos Stuart founded the Pacific Coast Condensed Milk Company in Kent, Washington.  In 1901, he changed the name to the Carnation Evaporated Milk Company, and began selling CARNATION brand, the milk “from contented cows.” Because fresh milk was not universally available, the product filled a market need and flew off the shelves.

Just 19 miles up the road in Seattle, Charles Frye was packing meat. Frye had moved to Seattle from Iowa in 1885 and started a meat packing company, which boomed into a major food empire during the Klondike gold rush. Frye also opened retail markets, where he sold food under the WILD ROSE brand. Profits were so high that Frye took up art collecting as a hobby.

In 1915, Frye decided to add condensed milk to his array of WILD ROSE brand products. The label he adopted gave Elbridge Stuart fits. The words on the label were completely different than the CARNATION label, but the trade dress was similar. It was divided into two parts, one red and one white (just like the CARNATION label); it featured a cluster of three flowers placed on the border between the red and white sections (just like the CARNATION label); and was flanked by two scepters running vertically from the top to the bottom of the can (the CARNATION label had torches in the same place).

Frye’s label for other Wild Rose products was black and red with a single rose

Stuart filed suit against Frye for unfair competition and requested an injunction. Frye opposed, arguing that customers buy milk products based on their names, and the names here were not similar. Rather, the only thing that was similar was the color scheme. In addition, Frye presented six affidavits from retailers avowing to a total absence of confusion since WILD ROSE milk was introduced. Nevertheless, the lower court issued an injunction against Frye. Part of this decision was no doubt motivated by the fact that Frye’s other WILD ROSE products featured a black and red label with a single rose, while only the new condensed milk product veered into the trade dress territory previously occupied by the CARNATION brand.

On Appeal, the Washington Supreme Court agreed that trade dress could be protected by trademark law, and also agreed that color could be a protected element when considered in combination with other elements. However, Justice Overton Ellis, writing for the Court in Pacific Coast Condensed Milk Co. v. Frye & Co., 85 Wash. 133 (Wash. April 17, 1915), disagreed with the lower court on two grounds.

First, Justice Ellis noted that the labels bore prominent and clearly distinct brand names and manufacturer names, and held that this was sufficient to help a consumer of ordinary prudence distinguish the products. Anyone paying even a little bit of attention can see that the word marks CARNATION and WILD ROSE look and sound nothing alike. As to less careful consumers who may nevertheless have been confused, the Court held that the defendant had no duty to educate “the negligent or the indifferent,” and that the plaintiff had no right “to a monopoly of the trade of the careless.”

Second, Justice Ellis articulated an aesthetic functionality argument. The main element the labels clearly had in common was a color scheme, and “similarity in color alone is not sufficient to constitute an infringement.” The Court continued:

Primary colors are few, and … those suitable for light products, such as milk, are even more limited. To the allow them to be appropriated as distinguishing marks would foster monopoly by foreclosing the use by others of any tasty dress.

Moreover, such monopolization would quickly lead to a depletion of available colors for newcomers, thus stifling competition. On these grounds, the Washington Supreme Court reversed and dissolved the injunction. By the way, “tasty dress” is not a typo.  Judge Ellis appears to have invented the term to describe what courts back east were calling “trade dress.” His alternative term was adopted by a few west coast courts for a while, but faded into nonexistence by the 1950s.

Anyway, the adverse ruling didn’t do too much damage to the CARNATION brand, which has thrived ever since and was acquired by Nestle in 1985. The Frye business also continued to thrive. Charles Frye died in 1940, after which his extensive art collection was stored in the main Frye meat packing plant, a huge complex located at the corner of Walker and 8th Avenue, south of downtown and just north of Boeing Field.

On February 18, 1943, office workers in the Smith Tower (still the tallest building on the West Coast at the time) noticed an odd site – an airplane bigger than they had ever seen leaking smoke and dropping towards the ground. This is how Boeing’s B-29 Superfortress (until then a closely guarded military secret) was introduced to the world. The prototype bomber crashed into the meat packing plant, killing the test pilot (ironically a vegetarian) and about 30 meat packers. After the crash, Frye’s art was removed from the ruins and found its way to a new home: the Frye Art Museum (a/k/a “the Frye”), which first opened its doors in 1952, and remains one of Seattle’s premiere cultural institutions.

Read the rest of the Seattle Trademark History Tour Series:

Special thanks to the following excellent sources, all of which were consulted for this blog series: Gary Flynn’s Brewerygems.com; Historylink.org, a free online encyclopedia of Washington state history; Blackpast.org, an online reference guide to African American History; librarian Alan Michelson’s Pacific Coast Architecture Database; the University of Washington library digital collection; the Orbis Cascade Alliance’s Archive West; Lost Restaurants of Seattle by Chuck Flood; the Pacific Shellfish Institute website; Historian Rob Ketcherside’s ba-kground blog; the Capitol Hill Seattle Blog; the DorpatSharrardLomont blog Seattle Now & Then Series; the Seattle Times; the Seattle Department of Neighborhoods website; and Seattle-Tacoma radio station KNKX.

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