After much hype on Twitter regarding an action against a “major marketer of consumer goods,” the Federal Trade Commission today announced that it has settled with Skechers USA, Inc. over allegedly deceptive claims that the company made concerning its Shape-ups and other “toning shoes.” The settlement was part of a broader agreement resolving a multi-state investigation led by Attorneys General in Ohio and Tennessee and comes roughly eight months after a similar FTC action against Reebok. For its part, Skechers denies the allegations made by the FTC and Attorneys General and states that it settled the claims to avoid protracted legal proceedings.

The amount of settlement is substantial: $40 million. (Compare this to the $25 million that Reebok paid.) The proceeds, which will likely be paid to consumers through one or more private class action lawsuits, are intended to provide redress for allegedly unsubstantiated claims that Skechers’ toning shoes would help consumers lose weight, build strength, and tone muscles. According to the FTC, Skechers lacked substantiation that its toning shoes provided more weight loss, strengthening, and muscle toning benefits than regular fitness shoes. Although Skechers ran an ad containing a chiropractor’s endorsement of its toning shoes, the FTC alleges that the endorser was married to a Skechers marketing executive and that Skechers paid the endorser to conduct the “independent” clinical study cited in the ad.

In addition to paying $40 million, Skechers agreed to stop making three categories of claims without “competent and reliable scientific evidence” substantiating that those claims are true: (1) strengthening claims, (2) weight loss claims, and (3) “other health or fitness-related claims.”

It is well-established that, before disseminating an ad, a marketer must have a reasonable basis for all express and implied claims contained in the ad. What constitutes a “reasonable basis,” however, is far from uniform. Where a claim relates to a product’s efficacy or its effect on a consumer’s health, the standard is “competent and reliable scientific evidence” (as specified in the FTC’s consent order). This vague standard is not the product of any federal rule or regulation, but rather one that has been developed over many years by agency enforcement precedent and guidance from the FTC. See Direct Marketing Concepts, Inc. v. FTC, 581 F. Supp. 2d 115, 118 (D. Mass. 2008).

To make matters worse, the standard is not only vague, it is also “flexible.” Id. How it applies in a particular case “calls for evaluation of a variety of factors . . . such as the type of product, the type of claim, the benefits of a truthful claim, the cost and feasibility of developing substantiation, the consequences of a false claim, and the amount of substantiation that experts in the field find reasonable.” Id. These abstract guidelines do little to help marketers answer the very practical questions that often underlie substantiation – e.g., whether a human clinical trial is required, whether a study must be double-blinded, and how many subjects are required?

The FTC’s consent order provides some interesting insight into what constitutes “competent and reliable scientific evidence,” but unfortunately it perpetuates rather than clears up the confusion posed by the standard’s vague and flexible nature. How does it do this? It provides three different standards of substantiation for each of the three categories of claims. Consider:

• For muscle-strengthening claims, the order requires “at least one adequate and well-controlled human clinical study . . . that conforms to acceptable designs and protocols [and] is of at least six-weeks duration”;
• For weight-loss claims, the order requires “at least two adequate and well-controlled human clinical studies . . . conducted by different researchers, independently of each other, that conform to acceptable designs and protocols” (without any mention of duration); and
• For “other health and fitness-related claims,” the order requires “competent and reliable scientific evidence” – i.e., “tests, analyses, research, or studies that have been conducted and evaluated in an objective manner by qualified persons and are generally accepted in the profession to yield accurate and reliable results.”

Although the niceties of the “reasonable basis” test are no clearer after the Skechers announcement than they were before it, there are several key points to take away from the settlement. First, the FTC’s efforts on claim substantiation are not just focused on nutritional supplements, weight loss products, and other “ingestibles.” The FTC is increasingly targeting consumer marketers making efficacy and health related claims in other contexts. Second, efficacy claims that reference specific percentages (e.g., increased “muscle activation” of up to 85%) seem particularly attractive to the FTC. Both the Skechers and Reebok cases featured very specific quantitative claims about the products at issue. Finally, the FTC continues to push for two clinical studies for certain types of claims even as it requires only a single clinical study for claims that are quite similar (i.e., weight loss and muscle strengthening). While this incongruous approach arguably calls into question the rationale for two studies, marketers can minimize their risk by relying on two clinical studies whenever possible.

Software entrepreneur Aaron Greenspan claims not only to have been the original inventor of Facebook. He also claims to have been the original author of the story of Facebook, via his memoire, Authoritas: One Student’s Harvard Admissions and the Founding of the Facebook Era.

However, yesterday Massachusetts Federal Magistrate Judge Robert Collings found that these claims were not sufficient to sustain a copyright lawsuit against Benjamin Mezrich, the author of The Accidental Billionaires: The Founding of Facebook, and the makers of the film, The Social Network, which was based on Mezrich’s book.

According to Greenspan, the story began when he was an undergraduate at Harvard and created a website called “The Facebook.” One of his classmates, Mark Zuckerberg, sought Greenspan’s advice and copied his ideas, which led to the founding of the phenomenally popular social networking site. Greenspan charges that, as early as 2005, Zuckerberg was already constructing a false narrative about the founding of Facebook. A narrative that excluded Greenspan.

In order to correct what he saw as an injustice, Greenspan did two things. First, he raised legal claims against Zuckerberg, which resulted in a confidential settlement in May 2009. Second, he wrote and published Autoritas, his own account of what actually happened.

In 2008, Mezrich asked Greenspan for his cooperation in writing a fictional account of the founding of Facebook. When Greenspan refused, Mezrich went ahead with his own book anyway, citing Autoritas as a secondary source. After Mezrich’s book and The Social Network became commercial successes, Greenspan brought copyright infringement claims against Mezrich, his publisher and the filmmakers.

Greenspan’s principal allegation was that Mezrich had copied Greenspan’s account of his own meeting with Harvard President Larry Summers in order to create a fictional account of a different meeting with President Summers (one that didn’t include Greenspan). Greenspan’s complaint contained about twenty statements about this meeting which he alleged were copied by Mezrich, ranging from a description of the office to his characterization of President Summers as “chubby."

In order to prove copying in a copyright case, a plaintiff (in lieu of evidence of actual copying) must show that the defendant had access to the work, and that the works are substantially similar. But unfortunately for Greenspan, the Judge found that the two works just weren’t that similar. Judge Collings first put aside many of the plaintiff’s alleged instances of copied expression, holding that much of it was not protectable original expression in the first place. For example, the statement, “the president will see you now” is simply a cliché to denote the start of a meeting; and fragmentary words and phrases, such as the word “chubby” to describe President Summers, or “African-American” to describe his assistant’s ethnicity, are not subject to copyright protection as original expression.

Once this unoriginal expression was removed from the equation, Judge Collings compared the protectable expression that was left (such as the description of President Summer’s unwelcoming manner) as a whole against the defendant’s work, and determined that any copying that may have occurred was not so extensive that an ordinary observer would find that the two works were substantially similar.

In addition to recommending the dismissal of Greenspan’s copyright claims, Judge Collings also recommended dismissal of his remaining claims, which included defamation and false advertising.

The firmament of copyright blog topics just got a little dimmer, and a lot better clothed. Last month, after eleven years, three Ninth Circuit opinions and 1,212 docket entries in the trial court, soft-porn multimedia company Perfect10, Inc. stipulated to the dismissal of its copyright infringement claims against Google (and others) in the Federal District Court for the Central District of California.

As blogged about here previously, the saga began in 2001, when Perfect10 sought to stop Google from including thumbnail versions of Perfect10 photographs in Google’s image search results. After Perfect10’s motion for a preliminary injunction was granted, the Ninth Circuit reversed and, in a landmark opinion, held that the thumbnails, although otherwise meeting the elements of direct infringement, were nonetheless highly transformative fair use.

After remand, Perfect10 sought to enjoin Chilling Effects, a non-profit educational website, from printing full-sized Perfect10 images in conjunction with scholarly articles about the lawsuit. This time, the trial court denied the motion and, last August, the Ninth Circuit affirmed.

After another remand, the parties engaged in nearly 6 months of discovery disputes, at the end of which the Court ordered Perfect10 to produce, among other things, a complete set of its financial records. The day after that order, Perfect10 stipulated to the dismissal of the case, with each party bearing its own costs and fees. Just like that, it was all over.

For those of you who admire Perfect10’s fearless approach to litigation or are sympathetic to its plight, its prolific efforts in court haven’t been all for naught. For example, last year, in a separate copyright infringement case brought against Megaupload (before that company became the international poster child for copyright infringement), Perfect10 successfully fended off a motion to dismiss and then negotiated a favorable (presumably) settlement. In addition, according to Pacer, Perfect10 still has several other active infringement claims in the California federal courts against other internet companies.

Marilyn Monroe was perhaps the more clever of Hollywood’s famous dumb blondes. While doubtless no rocket scientist, she nonetheless continues to exploit her carefully honed image to great effect even today. However, 1940’s screen siren Hedy Lamarr, herself a rare beauty, may have been the vixen with the truly beautiful mind. Indeed, she had the intellectual property to back it up -- in 1942, several months after the U.S. entered World War II, she received a patent for inventing a secret communication system that she hoped would make radio guided torpedoes harder for enemies of the U.S. to jam. This invention was an early iteration of frequency hopping technology that most of us now exploit in our daily lives in the form of WiFi internet connections. Ms. Lamarr apparently never made much financial exploitation of her IP, but perhaps she didn’t know what so many other celebrities have come to learn. Patents and even copyrights provide rights which are limited in time -- but trademarks, like diamonds, can last forever. Lamarr need only have asked Monroe for some advice, and she might have learned that trademarks are a girl’s best friend.

Unlike its intellectual property cousins, trademarks are not granted by the government for a time certain but, rather, accrue their value by their association in the minds of the consuming public with a source of goods or services. As long as the mark continues to serve that function, it can last indefinitely. This is something that Ms. Monroe or, more to the point, her estate now knows very well. Marilyn was the third highest earning dead celebrity last year according to Forbes, earning some $27 million. This was in large part due to Ms. Monroe’s estate having been acquired by Authentic Brands Group LLC early last year. Since then, we’ve seen Marilyn pop up in an ad for Dior’s J’Adore perfume, MAC will be launching a limited release of Marilyn Monroe cosmetics later this year, and we may soon see a chain of Marilyn Monroe cafes. Almost fifty years after the legendary actress’ death, brand Marilyn is riding a wave of success bolstered by a recent Academy Award-nominated biopic and the fictional Marilyn Monroe musical at the heart of the TV hit Smash.

Ms. Monroe is in good company. The second highest earning dead celebrity was Elvis Presley who, nearly 35 years after his death, sees his name used as a brand for myriad products --  from key chains to wine. The highest earning dead celebrity last year was Michael Jackson, who earned an astounding $170 million. This is more than most powerful living celebrities earned. It seems the Gloved One’s estate knew all too well the grim truth about an artist’s economic value -- it often goes up after a visit from the grim reaper. This perhaps explains why, a mere two months after Mr. Jackson passed away in 2009, his estate filed a number of applications for federal trademark registrations in the late singer’s name. The Lanham Act does not preclude such posthumous registration protection provided that the applications are filed by the late celebrity’s estate or heir(s). If someone other than the owner of the celebrity’s post mortem rights attempts to register the celebrity’s name or image as a trademark, they should be barred from doing so under Section 2(a). But popular celebrities who wish to protect their branding rights in perpetuity take heed -- be certain to bequeath these rights as part of your legacy. As Maria Callas learned, it ain’t over until the fat lady sings, or, in her case, until the slender diva signs her will. Having found no evidence that La Divina had passed her intellectual property rights along to her estate, the Trademark Trial and Appeal Board, in 2008, determined that the Patent and Trademark Office had no basis to refuse registration to one other than her estate for a MARIA CALLAS trademark used in connection with jewelry. Notoriety can serve as a solid base upon which to build a brand, but some attention to detail is required to ensure a celebrity’s brand won’t be usurped after they have taken one last bow.

And remember, while being a celebrity who has entered into the great beyond may seem to have some financial advantages, it doesn’t come without bumps along the way. Just ask Humphrey Bogart, whose current corporate beneficiary was recently sued by Burberry in a declaratory judgment of trademark non-infringement action. I’m guessing that is not what his Maltese Falcon character Sam Spade was talking about when he spoke of “the stuff that dreams are made of.”

Next time on Celebrity Trademark Watch: Madonna, who is about to launch a mammoth world tour and who once paid famous homage to Marilyn Monroe in her Material Girl video, helps us understand why a title or a moniker is not the same as a trademark.

Andy Duann, a student photographer at the University of Colorado, had the opposite problem: too big a market. Duann served as a staff photographer for the University’s on-line student newspaper, the CU Independent. Last month, he came upon the following scene. A 200-pound male black bear had wandered on to campus and up a tree. While Duann snapped away, Colorado Parks and Wildlife officers placed a large cushion underneath the bear, shot it with two tranquilizer darts and then . . . splat. Duann agreed to sell the photographs to the Boulder Daily Camera and the Associated Press picked up the story. Internet viral gold.

Here’s the problem. As reported by the Daily Camera, shortly after the photographs went viral, the CU Independent stepped in and claimed that Duann had no authority to distribute his images because, per school policy, it was the University -- not the student -- that owned the copyright in CU Independent staff photographs. In fact, each CU Independent photographer had been required to sign a contract assigning his or her copyrights to the school. Upon learning this, the Associated Press issued a “photo elimination” order and prepared to pull the photographs from circulation.

So why are the photographs still out there? Because, like the bear, Duann’s copyright assignment contract wasn’t where it was supposed to be. Duann had joined the CU Independent in the middle of the semester, and because of this the University never got around to making him sign the copyright contract. Woops. On Monday, the University finally admitted that Duann owns the copyright, and school officials have promised to “be more stringent” in the future when it comes to making student photographers sign the contract.

And, by the way, the bear is fine too.

When patent prosecutors file applications with the United States Patent and Trademark Office (PTO), they are required by law to include “all information material to patentability,” which typically includes copies of scientific articles that may disclose relevant prior art. But are they required to get the copyright holder’s permission before submitting these articles? If they don’t, is it copyright infringement?

The American Institute of Physics (AIP) thinks so. Alongside publisher and co-plaintiff John Wiley & Sons, Ltd., the AIP has just completed filing a series of four lawsuits against patent prosecution law firms in Illinois, Kansas, Minnesota and Texas. Each complaint alleges that the law firm in question infringed AIP’s copyrights by (1) submitting copies of copyrighted articles to the PTO on behalf of clients; and (2) making copies of the articles for internal use by the law firm during the patent prosecution process.

So what should the defendants do? A quick-strike motion to dismiss, perhaps? Surely, there must be some little-used but devastating doctrine, lurking among the pages of Nimmer on Copyright, which precludes infringement claims against copying that is required by law? Actually, there is no such doctrine. Rather, as the law stands now, it appears that either a license or a fair use analysis (something that can be very difficult to vindicate before summary judgment) is required before submitting copyrighted materials to the government, even if that submission is legally required.

Although there are no cases on point, the closest analogy is in the litigation context, where a party may seek to introduce (and thereby make available to the public) material evidence that happens to be copyrighted. For example, in Jartech, Inc. v. Clancy, 666 F.2d 403 (9th Cir. 1982), likely the first case addressing this issue, the Santa Ana City Council sent an agent to surreptitiously record a pornographic film for use in a public nuisance proceeding against an adult theater. Rather than quickly disposing of the issue, for example by establishing a litigation “privilege,” the Ninth Circuit conducted a full blown fair use analysis, and determined that the City Council’s use was fair, since its “purpose and character” was so different than the film’s “intrinsic use,” and since it was so unlikely to upset the film’s intrinsic market.

Nevertheless, the need to conduct an individualized fair use analysis in each case, while burdensome for potential defendants, has not as a practical matter brightened the prospects for plaintiffs. In fact, this context has given rise to what Professor Nimmer describes as “[t]wo of the weakest infringement claims of all time.” (See Nimmer on Copyright at § 13.05(D)(2)). The first is Healthcare Advocates, Inc. v. Harding, Earley, Follmer & Frailey, 497 F. Supp. 2d 627 (E.D. Pa. 2007), in which a law firm defending a trademark infringement suit viewed and printed archived pages from the plaintiff’s website for use in defending its client. This caused the trademark plaintiff to sue the law firm directly for copyright infringement. The Court conducted a fair use analysis and, notably, did determine that the defendant law firm’s use was “commercial.” However, it also concluded that it “would be an absurd result if an attorney defending a client against charges of trademark and copyright infringement was not allowed to view and copy publicly available material, especially material that his client was alleged to have infringed.”

As “absurd” as that claim may have been, the hands-down winner is the child-custody matter of Bond v. Blum, 317 F. 3d 385 (4th Cir. 2003). In that case, after a Maryland couple with three children got divorced, the ex-wife announced her plans to move in with William C. Bond, who had written a non-fiction manuscript about how he had once murdered a family member and gotten away with it. When the ex-husband introduced a copy of the manuscript as evidence that Bond might not be the ideal custodial step-father for his children, Bond sued for copyright infringement. After conducting a full fair use analysis, the Court predictably affirmed the District Court’s fair use holding, as well as an award of attorneys’ fees to the defendant.

The PTO, in part citing the cases discussed above, has already staked out a position firmly in the defendants’ camp. In a position statement issued on January 19, 2012, the PTO asserted that the submission of copyrighted scientific articles along with patent applications (as well as most copying the PTO may perform in its own review of such applications) is fair use.

So, does all this mean that the AIP should pack it in prior to its inevitable ignominious defeat and an award of attorneys’ fees? Maybe and maybe not. Perhaps the plaintiffs will find a convincing way to distinguish their claims from those in the litigation context. And, in fairness, part of AIP’s claims involve not submissions to the patent office, but alleged copying by the law firms for internal purposes that may or may not have been related to patent submissions and that may have run afoul of the copying limitations expressed in American Geophysical Union v. Texaco, 60 F.3d 913 (2d Cir. 1994) (systematic copying of scientific articles by corporation for archival purposes not fair use). As to this last type of alleged internal copying by law firms, the case law is less clear, and even the PTO has taken no position.

As part our continuing coverage of ICANN’s New gTLD Program, we had planned a post regarding the close of the gTLD application window and the imminent unveiling of the new top-level domain applicants and their respective applications on April 30 -- colloquially known as “Reveal Day.” However, due to an unfortunate glitch in ICANN’s TLD Application System that reared its ugly head on April 12 -- the date the application window was scheduled to close -- that process has been temporarily interrupted. According to ICANN’s TAS Interruption FAQ, a “technical issue” in the TAS “allowed a limited number of users to view a limited number of other users' file names and user names in certain scenarios.” While ICANN is reasonably certain that the information revealed by the glitch is limited only to user names and file names, any confidential applicant data accidentally revealed by ICANN to third parties is of serious concern, and ICANN has taken the TAS offline pending troubleshooting and extended security testing. As of today, it is thought that the glitch has been fixed, but TAS is still offline as “ICANN continues to work diligently to test the fix” and “identify affected applicants.” While it is surely doing all it can to get the TAS back up and running glitch-free, the interruption isn’t doing ICANN any favors in the eyes of both TLD applicants and a world watching the New TLD Program with bated breath.

Further, the interruption has thrown a wrench into the TLD application timeline, which is already uncertain thanks to ICANN’s recently announced batching system, which will be implemented should ICANN receive significantly more than 500 TLD applications. The batching system, which will determine the order in which applications are processed by ICANN, is somewhat convoluted. First, applicants will determine their batch using a system ICANN has dubbed “digital archery,” where applicants will choose a “target time” and then try to log in to ICANN’s system at that exact time. The digital “arrows” closest to their targets will be batched in an earlier round -- that is, unless ICANN determines that the order should be shuffled in the interest of “geographic diversity.”  Understandably, applicants are frustrated at the lack of clarity here, most of whom have business plans at stake -- not to mention a hefty investment on the line.

Needless to say, the highly anticipated Reveal Day has been postponed. Once the TAS is reopened, it is likely that ICANN will extend the application window by a week or two. Assuming this happens soon, it will push Reveal Day well into the middle of May. Using my own brand of digital archery, this blogger is guessing June 1, 2012.

Earlier today, U.S. Customs and Border Protection (CBP) announced that it would disclose information to intellectual property owners regarding suspected counterfeit goods stopped at the border, in situations where CBP desires assistance from the IP owners to determine if the goods are genuine or counterfeit. According to the announcement, counterfeiting techniques have become so sophisticated that it is not always possible to tell the real from the fake. Without question, counterfeits can pose a grave danger to the health and safety of American consumers, as well as cause economic harm to legitimate businesses. In describing the purpose of its new disclosure policy, CBP shared a disturbing example of counterfeiting that is difficult to detect:

In particular, counterfeit integrated circuits and electronic components can find their way into critical manufacturing, military, infrastructure, and consumer product applications. In fact, inquiries conducted by Congress and the Department of Defense (DoD) have revealed that counterfeit electronic components, including counterfeit integrated circuits, have entered military and government supply chains, posing a serious threat to our military and government personnel and infrastructure.

The types of information that CBP may disclose to IP owners includes bar codes, serial numbers, dates of manufacture, lot codes, batch numbers, and the like.

The new regulation affords importers an opportunity to avoid disclosure by demonstrating to CBP within seven days that “the detained merchandise does not bear a counterfeit mark.” While this language may appear reasonable at first blush, CBP should not allow parallel importers to use this provision as a back-door mechanism to avoid the Lever Rule, which allows trademark owners to block the importation of gray market good that are physically and materially different than the goods authorized for sale in the United States. Gray market goods are products that are intended for sale in foreign countries, and enter the United States without the permission of the trademark owner. Gray market goods are often formulated for different consumer preferences, do not comply with United States standards and labeling laws, and lack a valid U.S. warranty. Gray market goods are typically imported by middlemen seeking to exploit price differences in different geographic regions, and many take advantage of consumers who do not realize or appreciate the differences between the goods. Parallel imports that are physically and materially different from their U.S. counterparts can be excluded under the Lever Rule, and the trademarks appearing on those products should not be considered “genuine” within the meaning of the CBP regulation. Information on using the Lever Rule to prevent parallel imports is available from the International Trademark Association, which has recently published the Trademark Owner’s Guide to Parallel Imports in the United States.

Anyone wishing to comment on the new regulation may do so by June 25, 2012 by following these instructions.

On our sister blog, Security, Privacy and the Law, our colleague Daniel Marx reports on a recent Second Circuit case addressing the limits of criminal liability for the theft of intellectual property. It turns out that criminal liability can turn on some rather technical details – such as whether the allegedly stolen source code was copied to a flash drive or disk actually owned by the employer. Marx notes:

If Aleynikov had copied data onto a Goldman disc, he would have violated the NSPA, but instead he uploaded it to a server, so he did not. That distinction makes the critical question of criminal liability turn on whether a defendant steals a five-cent CD, not a five-million-dollar computer program. That seems somewhat silly, as the Second Circuit acknowledged, noting ‘there is no doubt that in virtually every case involving proprietary computer code worth stealing, the value of the intangible code will vastly exceed the value of any physical item on which it might be stored.’ Read this way, the NSPA does a better job protecting thumb drives than the trade secrets stored on them.

Read the entire article here.

Just when you thought it was safe to bid on competitors’ trademarks as keywords -- provided you played it smart, and didn’t put trademarks in the actual text of your sponsored ad except under certain limited circumstances -- comes the Fourth Circuit’s decision in Rosetta Stone v. Google. In its opinion, the Fourth Circuit reverses, in significant part, the U.S. District Court for the Eastern District of Virginia for its apparently hasty summary judgment order in favor of Google, remanding the case for further analysis.

The AdWords Dispute

As the result of a typical Google search, you will normally see two types of results -- “natural” results, which are returned and ranked based on a proprietary (and secret!) algorithm Google uses to determine which sites are most relevant to your query, and “sponsored” results -- marked as “ads” and set apart from the natural results -- which are displayed because one or more advertisers have purchased “keywords” that, when searched for, yield their advertisements. By “bidding” on keywords via Google’s AdWords program, advertisers can control when, how often, and how prominently their advertisements spawn in response to a specific user inquiry.

Rosetta Stone has a problem with a specific aspect of the AdWords program -- namely, that Google (a) allows advertisers to bid on keywords that are also trademarks (including, if not especially, the trademarks of competitors), and (b) in fact recommends trademarks that would serve as relevant keywords. In 2009, Rosetta Stone brought suit, alleging that Google, via its AdWords program, aided third parties to mislead consumers and misappropriate its ROSETTA STONE trademarks, resulting in both likely and actual consumer confusion, some of which allegedly led to consumers accidentally purchasing counterfeit Rosetta Stone software. Specifically, Rosetta Stone brought counts of direct, contributory, and vicarious trademark infringement, trademark dilution, and unjust enrichment. The district court granted Google’s motion to dismiss the unjust enrichment claim, and granted Google’s motion for summary judgment on the remaining claims. Rosetta Stone appealed, and the Fourth Circuit reversed and remanded all but the vicarious infringement and unjust enrichment claims, some interesting points of which follow.

Direct Trademark Infringement

The Fourth Circuit explained that, while the district court did not err in its application of the traditional multi-factor likelihood of confusion test for trademark infringement, summary judgment was improper because “the district court did not properly apply the summary judgment standard of review but instead viewed the evidence much as it would during a bench trial.” Specifically, the district court did not properly view the available evidence and all reasonable inferences in a light most favorable to Rosetta Stone (the non-moving party), which would have led to the conclusion that a reasonable trier of fact could find that (a) Google intended to cause confusion, or knew that confusion was very likely to result from its use of the Rosetta Stone marks, and (b) the available evidence -- instances of actual confusion presented by Rosetta Stone, testimony from Google in-house attorneys, internal Google studies, and a consumer confusion survey produced by Rosetta Stone -- demonstrated actual confusion.

Additionally, the district court erred in its conclusion that trademark keywords are per se “functional” when entered into Google’s AdWords program because they “have an essential indexing function because they enable Google to readily identify in its databases relevant information in response to a web user’s query” and “also serve an advertising function that benefits consumers who expend the time and energy to locate particular information, goods, or services, and to compare prices.” The Fourth Circuit, noting that the functionality doctrine “simply does not apply in these circumstances,” explained that this analysis incorrectly focused on whether “Rosetta Stone’s mark made Google’s product more useful, neglecting to consider whether the mark was functional as Rosetta Stone used it.” Since the answer to the latter question was clearly “no,” it was “irrelevant whether Google’s computer program functions better by use of Rosetta Stone’s nonfunctional mark.”

Contributory Trademark Infringement

Contributory trademark infringement occurs when an entity induces another to infringe a trademark, or if it supplies products or services to those whom it knows or has reason to know are engaging in trademark infringement. General knowledge is not enough; instead, the defendant must supply its product or service to "identified individuals" that it knows or has reason to know are engaging in trademark infringement. The most relevant evidence presented by Rosetta Stone in the district court proceeding was evidence of Google’s purported allowance of known infringers and counterfeiters to bid on the Rosetta Stone trademarks as keywords. Further, Rosetta Stone itself submitted nearly 200 notices to Google regarding keyword-generated sponsored links advertising counterfeit Rosetta Stone products. Basing its conclusion on the Second Circuit’s decision in Tiffany (NJ) Inc. v. eBay Inc., the district court had determined that Rosetta Stone failed to establish that Google knew or should have known of the infringing activity, and therefore had “not met the burden of showing that summary judgment is proper as to its contributory trademark infringement claim.” Wait a minute, said the Fourth Circuit, explaining that the district court misapplied -- reversed, actually -- the standard of review applied to a non-moving party on a summary judgment motion. Indeed, “while it may very well be that Rosetta Stone was not entitled to summary judgment, that issue is not before us. The only question in this appeal is whether, viewing the evidence and drawing all reasonable inferences from that evidence in a light most favorable to Rosetta Stone, a reasonable trier of fact could find in favor of Rosetta Stone, the nonmoving party.” The Fourth Circuit answered that question in the affirmative, and vacated the district court’s summary judgment order with respect to the contributory infringement claim.

What Does It Mean?

Legally, possibly not as much as Rosetta Stone would like to believe. Although the Fourth Circuit, clearly displeased with the district court’s analysis, reversed and remanded the core infringement and dilution claims, giving Rosetta Stone a second bite at the apple, little in the opinion suggests that the ultimate disposition of these claims will be significantly different the second time around (though the second time around may take a good deal longer). As a practical matter, the opinion injects a bit of uncertainty back into the keyword game that will last for years to come. While this will likely have little effect on the risks associated trademark keyword purchasing or the analyses involved in a potential challenge thereto, no doubt the opinion will bring some players, heretofore standing on the sidelines, back into the fray to challenge Google’s keyword practices -- which, in any event, are unlikely to change as a result of this opinion. One suspects that entities with the most to lose -- that is, other companies that can show widespread counterfeit sales linked to ads generated by trademark keywords -- are the most likely challengers.
 

The Second Circuit has ruled that the summary judgment granted last year in favor of YouTube in a copyright suit brought by Viacom and other content owners was premature. The District Court had found that YouTube was protected by one of the Digital Millennium Copyright Act’s (“DMCA”) safe harbor provisions, namely, 17 U.S.C. § 512(c), which shields online service providers from liability for infringing content posted by users. Although it agreed with some of the District Court’s central reasoning, the appellate court has sent the case back for reconsideration on a number of issues.

“Red Flag” Knowledge Applies to Specific, Identifiable Infringement

The Second Circuit affirmed the District Court’s decision on the main legal question at issue, holding that two different circumstances that can defeat the statutory safe harbor protections – when the defendant has actual knowledge of infringement and when the defendant is “aware of facts and circumstances from which infringing activity is apparent” – both require knowledge or awareness of specific and identifiable instances of infringement. In other words, a defendant can still claim safe harbor even if it is aware of “red flags” suggesting that, in general, its web site likely contains infringing user-posted material. Rather, the Second Circuit explained that “[t]he difference between actual and red flag knowledge is . . . not between specific and generalized knowledge, but instead between a subjective and an objective standard.”

YouTube May Have Been Aware of Specific Infringement

Despite upholding the District Court’s legal conclusion on this point, the Second Circuit has remanded for additional fact-finding because evidence submitted by the plaintiffs on summary judgment might enable a jury to find that YouTube executives did have actual or “red flag” knowledge of specific and identifiable infringement. On remand, the District Court will need to conduct a more “detailed examination of the extensive record on summary judgment,” including determining whether the clips of which YouTube may have had knowledge are among those that are the subject of the plaintiffs’ lawsuits.

Willful Blindness, Right to Control, and Syndication

The Second Circuit also ruled on several related questions. First, it held that the DMCA limited but did not abrogate the common-law “willful blindness” doctrine, so that the District Court on remand should consider whether YouTube deliberately avoided learning of infringing content.

The appellate court also held that the DMCA provision that defeats safe harbor if the defendant benefits financially from infringement and has the “right and ability to control” it requires something more than the ability to block access to infringing material, but does not require knowledge of specific infringing activity, as the District Court had held. Therefore, the District Court on remand must consider whether plaintiffs have presented evidence that YouTube had the “something more” that would constitute the right and ability to control infringing activity.

Finally, while the Second Circuit agreed with defendants and the District Court that most of YouTube’s software processing activities fall within the statutory provisions covering content posted by users, it questioned whether YouTube’s selection of certain videos for syndication to third party business partners qualified, and it instructed the District Court on remand to determine whether any of the videos in suit were syndicated.

What Does This Mean for the Parties?

As the Wall Street Journal reports, both sides have spun the opinion as a victory: Viacom’s statement points out that “intentionally ignoring theft is not protected by the law,” while YouTube asserts that “[n]othing in this decision impacts the way YouTube is operating.” In analyzing the safe harbor question, the Second Circuit cited various e-mails exchanged among YouTube’s founders and executives in the service’s early days suggesting that they may have been aware of specific infringing content and chosen not to take it down. If YouTube’s statement is accurate, perhaps its approach to copyright has evolved since its infancy and YouTube’s current practice would meet the standards set by the Second Circuit. In that sense, although $1 billion in damages are still at stake for alleged past infringement, Viacom’s suit may already have served at least part of the plaintiffs’ purpose.

What Does This Mean for Everyone Else?

The Second Circuit’s ruling confirms that the DMCA safe harbors are viable, but that they do not mean online content hosts can wash their hands of all responsibility for combating infringement. In particular, service providers cannot simply sit back and wait for a copyright owner to learn of infringement and request that it be removed. Rather, if the service provider has knowledge of an identifiable infringement – even if that knowledge was developed internally rather than from a takedown notice – the provider should remove the content in order to maintain its safe harbor protection.

The ruling also clarifies that, while the statute says safe harbor is not conditioned on a service provider’s monitoring its service or actively seeking out infringement, providers cannot with impunity “bury their heads in the sand” to avoid obtaining knowledge of specific infringements. The District Court’s factual analysis of the willful blindness issue on remand may provide some helpful guidance as to where content hosts can draw the line between simply not monitoring and deliberately avoiding learning of specific infringements.

In an ad run initially during the post-game show of the 2010 Super Bowl, Hyundai encouraged viewers to re-think “luxury” and as a result consider buying a Sonata. The ad, which can be viewed on YouTube here, juxtaposed images of “luxury” with everyday settings: policemen eating caviar, middle class houses with giant yachts parked next door, and -- in what turned out to be a step too far -- men playing basketball on an inner-city court, with a ball that bore designs very closely resembling Louis Vuitton’s “toile monogram.” This long-registered and famous LV mark consists of “a repeating pattern design of the letters LV and flower-like symbols on a chestnut-brown background.”

LV sued Hyundai in the Southern District of New York, and, in a recent summary judgment ruling by the district court, won a complete victory. Not only did the court grant summary judgment in LV’s favor on its claim for dilution by blurring and deny Hyundai’s motion on LV’s infringement claim, but it found as a matter of law that Hyundai had diluted LV’s mark willfully -- thereby exposing Hyundai to all the damages available under 15 U.S.C. § 1117(a), including the possibility of multiple damages and/or a deterrence-based award.

LV had survey evidence showing that a modest percentage of respondents “associated” the image of the basketball with LV, but that itself does not carry the day in a dilution case. Why did LV win summary judgment in its favor? The answer lies in very damaging admissions made by Hyundai’s witnesses. Clearly they had to admit that the pattern on the basketball was intended to evoke LV in viewers’ minds: otherwise the attention-grabbing juxtaposition would not work. But they also admitted that they wanted to “reframe the way people looked at Hyundai, the brand” by associating it with luxury marks like LV’s. Another witness -- a former (perhaps disgruntled?) marketing employee -- agreed with the proposition that Hyundai “used LV-like marks in order to raise the image of the Hyundai brand in the mind of the consumers,” and stated, “I believe it was a brown basketball as you’d expect with some gold emblems on it to represent luxury definitely laddering and borrowing equity from Louis Vuitton.” E-mails and other evidence also showed that Hyundai’s outside advertising agency asked permission from several companies, including LV, to reference their marks in the commercial, but did not obtain it. The final nail in the coffin was Hyundai’s decision to keep running the ad well after receiving a cease-and-desist letter from LV’s counsel.

In these circumstances, the six-factor test for dilution by blurring was rather easily met. Hyundai, however, sought protection under the fair use provision of the Trademark Dilution Revision Act. This protects use “of a famous mark by a person other than as a designation of source for the person’s own goods or services, including use in connection with . . . identifying and parodying, criticizing, or commenting upon the famous mark owner.” The problem with Hyundai’s statutory argument, as the district court held, was that regardless of whether its commercial could be viewed as “parody” or “criticism,” it was admittedly not directed specifically at LV, but rather at luxury in general. Thus, it failed the test of being directed at the “famous mark owner.”

Topics to be discussed include:

• Current gTLDs and anticipated changes.
• Application/Registration process.
• Who should be involved in the decision?
• Trademark challenges in enforcement, infringement and counterfeiting.
• Registering brands as second level domain names in the new gTLDs?
• Watch notices.
• Rights protection mechanisms for brand owners.

At this Roundtable you will share experiences and perspectives from brand owners who are contemplating future registration of a gTLD to those that may have already filed an application -- and what this may mean for brand owners with respect to trademark clearance, prosecution, enforcement and litigation.

For more information or to register, visit the INTA website here.

Yesterday the University of Pennsylvania Law School’s Penn Intellectual Property Group (PIPG) held its annual symposium, which this year focused on fashion law. David Nimmer, of copyright treatise fame, delivered the keynote, entitled “Copyright and the Fall Line.” However, despite the light-hearted topic and big-name headliner, the event was probably most notable for the apparent absence of a late-invited guest, Michael Pantalony, in-house counsel at Louis Vuitton.

Pantalony set the blogosphere atwitter a few weeks ago by sending a sternly-worded cease and desist letter to the law school’s dean complaining about the artwork on the poster advertising the event, which consisted of the well-known Louis Vuitton logo print transformed to incorporate trademark and copyright symbols. Pantalony called the poster “a serious willful infringement,” asserted that the law school group should have “known better,” and demanded that PIPG stop using it.

In response, Robert Firestone of Penn’s general counsel’s office wrote to Pantalony asserting that the disputed artwork was a parody and fair use and was not likely to cause confusion as to sponsorship of the conference or dilution of Louis Vuitton’s marks. Firestone said he would advise PIPG that it could continue to use the poster – which it did – and he invited Pantalony to attend the conference and participate in “[e]ducating our students about both the rights of, and the defenses against, intellectual property owners.”

As far as we can ascertain, Pantalony did not attend yesterday’s symposium. As for the poster, it remains live on PIPG’s web site, and likely proved to be a far more successful publicity tool than its designers could have originally hoped. It appears that PIPG did make one small change to the poster sub silentio, however: as reported on Above the Law, the current version is missing the logo of Finnegan (which reportedly represents Louis Vuitton) among the list of law firm sponsors, where it appeared in the original version attached to Pantalony’s letter.

From Now On I Will Call You Lead Plaintiff. OK?

Apple has promoted the iPhone 4S in several television and web-based ads showing Siri performing useful functions for its users. In one such ad, a ubiquitous thirty-second spot entitled “Road Trip,” a young couple on a cross-country road trip is shown using Siri to help navigate their journey, asking questions like: “What’s the best way to Santa Cruz, California?” “Where’s the best barbecue in Kansas City?” and “Is there a rodeo in Amarillo today?” In another commercial, “Rock God,” Siri is depicted facilitating a rock-obsessed teenage boy’s transformation from musical neophyte to lead guitarist in a garage band, responding along the way to verbal commands like “How do I play ‘London Calling?’”, “Tell Julie and Kate that our band is playing at the garage tonight”, “Add Migraine Headaches to my list of band names,” and, ultimately, “Call me Rock God.” In each of the ads, Siri is depicted as “understanding” the user’s speech and replying promptly with content that is on point – e.g., “From Now On I Will Call You Rock God. OK?”

False Advertising Allegations

According to Mr. Fazio, these ads and others like them are misleading and deceptive because they show Siri performing tasks with ease and without error. A user’s real-world experience, he contends, is materially different from that depicted in the ads. In his own case, Siri often did not understand what Mr. Fazio was asking and took a long time to respond. Mr. Fazio alleges that his experience with Siri is not unique and that Apple was aware of Siri’s alleged shortcomings when it began to market the iPhone 4S (as evidenced by Apple’s description of the product as “beta” on its website). He seeks to represent a potentially massive class consisting of everyone in the United States who has purchased an Apple iPhone 4S other than for re-sale.

Assuming that other Siri users are having the same issues as Mr. Fazio, could Apple really be held liable for false advertising? It’s possible, but it would likely require a showing that the issues of which Mr. Fazio complains are not isolated to particular users (e.g., those with heavy accents) or particularly challenging tasks (e.g., “How do I play ‘Ana Ng’”), but are widespread among users and tasks.

When is a Product Demonstration Misleading?

The Federal Trade Commission and National Advertising Division (“NAD”), a self-regulatory program administered by the Better Business Bureau, have held that while a product demonstration in advertising must be truthful and accurate, such demonstrations are permissible provided that the demonstrations: (1) accurately reflect how the advertised product works, (2) do not materially distort the characteristics of the product, and (3) do not use undisclosed mock-ups or potentially embellishing devices to create in the mind of the consumer attributes that the product does not have. See, e.g., FTC v. Colgate-Palmolive Co., 380 U.S. 374 (1965), International Home Foods, NAD Case Report No. 3487 (9/1/98).

Challenges to product demonstrations depicted in advertisements often turn on whether a particular result depicted in the ad is achievable by a consumer in an independent test. In an NAD case involving a much different product, the Hormel Foods Corporation challenged commercials that referred to Dennison’s chili as “The Stand Up Chili” and depicted a fork standing up in a bowl of Dennison’s chili. International Home Foods, NAD Case Report No. 3487 (9/1/98). Hormel alleged that Dennison’s claims were misleading because “in every case attempted by [Hormel], the fork toppled over, and failed to stand up.” At both parties’ urging, NAD conducted its own tests and independently determined that a fork does indeed stand up in Dennison’s chili for the duration depicted in the challenged commercials. Based on its own assessment, NAD found that Dennison’s claims were adequately substantiated.

Does Mr. Fazio’s False Advertising Claim Stand Up to the Test?

Were Mr. Fazio’s claim subject to the same standard, it may well fail because achieving the same results depicted in the iPhone 4S commercials noted above is not difficult to do. (Note: there is no rodeo in Amarillo today, and Oklahoma Joe’s BBQ & Catering is apparently has the best barbecue in Kansas City.) However, Mr. Fazio’s claims are brought under California state law, so the general principles of false advertising law may take a back seat to the particular elements of the unfair competition claims under California law. Even under a less-stringent standard, however, Mr. Fazio would have the burden of proving that Apple’s demonstration of Siri was false or misleading, and to do that, Mr. Fazio will likely have to come forward with evidence that Siri fails to work as smoothly as depicted for a large number of iPhone 4S users.

Lessons for Advertisers

It will be interesting to see whether Mr. Fazio’s case survives a motion to dismiss and, if so, what type of evidence he marshals to prove his claims. In the meantime, advertisers should take heed of the legal requirements for product demonstrations in advertisements. In a nutshell, demonstrations must: (1) accurately reflect how the advertised product works, (2) avoid distorting the characteristics of the product, and (3) refrain from using potentially embellishing devices that suggest the product has attributes that it does not in fact have.

Allegedly, a German company (“Achte”), which owns the film Far Cry, teamed up with its US counsel (“DGW”) to “monetize copyright infringement allegations.” The defendants, which also included another German company that tracked IP addresses of downloads, filed motions to dismiss on numerous grounds. The motions were assigned to a U.S. Magistrate Judge Jennifer Boal for a report and recommendation, which just issued on March 1.

The court aptly summarized the alleged scheme:

Shirokov claims that the defendants conspired to attempt to extort money out of individuals who may have infringed upon Achte’s copyright. He alleges that Achte, through DGW, knowingly and intentionally made false representations to the Copyright Office in order to obtain a copyright registration. Then, based on the fraudulently procured copyright registration, DGW filed a [John Doe] copyright infringement claim and obtained a subpoena to obtain Shirokov and other Class members’ identifying information. Using that information, DGW sent [form letters] to Shirokov and other Class members in an effort to get Shirokov and other Class members to pay to settle the claims of the threat of statutory damages to which they knew Achte was not entitled.

The court noted that although Achte and DGW had identified 4,437 infringers through their John Doe action in the District of Columbia -- and sent out a raft of aggressive demand letters threatening statutory damages -- they ultimately sued only one individual in that action and eight individuals in other courts.

The Magistrate Judge here in Boston found that the allegations concerning this scheme were sufficiently plausible and specific to proceed on several theories: conspiracy, aiding and abetting, fraud, negligent misrepresentation, fraud on the copyright office, and the state statute prohibiting deceptive business practices (M.G.L. c. 93A). She recommended dismissal of several other claims, including civil RICO liability. Along the way, she recommended denial of defendant’s arguments that the case was barred by lack of standing, the Noerr-Pennington doctrine, and the Massachusetts litigation privilege. Finally, she recommended dismissal of the co-defendant, the German tracking company, based on lack of personal jurisdiction.

There are many interesting aspects of this lengthy ruling, but two stand out. First, the attorney defendants argued that many of the counts -- including fraud, negligent misrepresentation, and unfair business practices -- were invalid because they were counsel acting on behalf of their client, and could not be liable to an adversary to whom they owed no duty. The court rejected these arguments, noting that the complaint alleged that the lawyers were the “designers” of the scheme, and that they could be found to have “crossed from traditional representation into active participation in trade and commerce.”

Second, in the dispute regarding personal jurisdiction over the German tracking company, both parties cited the Zippo “sliding scale” interactivity analysis (applied in the D.Mass. in Sportschannel New England Ltd. Partnership v. Fancaster, Inc., 2010 WL 3895177). The court agreed that this analysis was “useful” and employed it even though the case did not involve a website. The case might point to future expansion of the Zippo/Sportschannel analytical model.

Assuming one or both sides objects to the recommended ruling, Judge George O’Toole will have the last word on the motions to dismiss. However, it is relatively rare for a district court judge to disagree with a magistrate judge’s recommendation, and the odds are that the case will proceed onward toward class certification and discovery.

In a world where Facebook isn’t a social network but The Social Network, it’s difficult for a new social networking site to gain traction. Since there’s already someone out there doing it bigger, the alternative has to be better -- at least in some respect. Enter Pinterest, the latest social networking site on the block. If you haven’t heard of it, you will soon. And chances are you’ll be hearing “Pinterest” and “copyright” frequently mentioned in the same breath.

What Is Pinterest?

From the horse’s mouth, Pinterest is a “virtual pinboard” that “lets you organize and share all the beautiful things you find on the web.” At its core, it’s a relatively basic social photo-sharing website. It’s sort of like virtual scrap-booking: first, you add the “Pin It” applet for your browser. Then, when you see a photo or picture you like (a “pin”) anywhere on the web, you click the “Pin It” button in your browser and add the desired pin to your virtual pinboard. You can create virtual pinboards by topics or object of interest, such as “cats and dogs,” “wedding ideas,” “products I love,” or “yummy desserts.” Other Pinterest users can “follow” you and see your pinboards, and vice-versa.

As of December 2011, Pinterest entered the top 10 social networks in terms of Hitwise data, with 11 million visits per week. Now it’s number 4, and drives more referral traffic to retailers than LinkedIn, YouTube, and Google+. In terms of traffic among all websites, Pinterest is currently number 16 in the U.S. Pinterest is popular, especially among “moderately educated women under the age of 35.” The site’s users are predominantly female, and 97% of the site’s Facebook “likes” are made by women. Pinterest’s popularity among women is creating significant ripples in the world of social marketing.

What’s the Copyright Issue?

Simply put, Pinterest’s sole function is to provide a network of virtual pinboards and a means for its users to “pin” photos to them. Unlike Facebook, YouTube, and Twitter (which together make up about 84% of the social network visitor share), Pinterest isn’t about user-generated content. Beyond the ability for users to comment on their pins, Pinterest is about one thing -- aggregation of third-party content. When a Pinterest user euphemistically “pins” a “pin” on a “pinboard,” she’s really “copying” a “full-size photograph” to “Pinterest’s servers.” Needless to say, the bright spotlight of copyright law is harshly shining on Pinterest: even a cursory stroll through Pinterest’s various user pinboards reveals that the vast majority of pins are copyrighted works, not in the public domain, and not licensed under Creative Commons or a similar free-to-distribute regime.

Most social networking site operators -- most site operators, period -- happily rely on the “safe harbor” afforded them by the Digital Millennium Copyright Act (DMCA). Under the DMCA, “online service providers” are shielded from liability based on the infringing behavior of their users so long as they:

1.            Don’t have actual knowledge of the infringement, are not aware of facts or circumstances from which infringing activity is apparent, and act expeditiously to remove or disable infringing content;

2.            Don’t make money directly attributable to the infringing activity;

3.            Have a designated agent to deal with copyright complaints; and

4.            Have a complying copyright policy and properly communicate the policy to users.

So, the DMCA requires that website operators implement certain procedures, keep at arm’s length from the infringing activities of their users, and act quickly to remedy infringement. How does Pinterest fare?

Pinterest’s Difficult Position

At first glance, Pinterest appears to have its procedural ducks in a row. It has a designated copyright agent, displays the DMCA notice and take-down procedure, and has a clear copyright policy. But one lawyer points out some critical issues, including the following two problems. First, Pinterest’s implementation of the DMCA take-down procedure contains the following curious language:

Upon receipt of the Notice as described below, Pinterest will take whatever action, in its sole discretion, it deems appropriate, including removal of the challenged material from the Site.

Of course, the DMCA requires that an online service provider remove or disable access to infringing content upon receipt of a proper DMCA notice. Online service providers don’t have the “discretion” to evaluate “appropriate” actions. Second, Pinterest’s Terms of Use don’t include a repeat infringer policy -- a cornerstone of the DMCA safe harbor.  While Pinterest might be following proper DMCA protocol in practice, the facts that its published DMCA and copyright policies fall short of the statutory requirements raises caution flags.

But even assuming Pinterest remedies these issues and implements (or already implements in practice) rock-solid DMCA procedures, significant issues remain. Let’s assume that Pinterest acts expeditiously to remove or disable infringing “pins” upon receipt of a take-down notice. At the same time, one could argue that Pinterest actively promotes culling third-party websites for content, and Pinterest users do just that. On one hand, Pinterest says most of the right things -- its Terms of Use require users to acknowledge ownership and/or the rights to use all uploaded content, and that uploading of such content does not infringe any intellectual property rights of third parties. Failure to comply with the Terms of Use can result in account cancellation. Pinterest’s “Pin Etiquette” guide also encourages attribution.

On the other hand, looking through Pinterest’s pinboard community reveals two things: first, the majority of the user-copied content appears to consist of protected works, and second, while pins link back to source pages, rarely do Pinterest users bother to provide attribution to the copyright owner, which suggests that they surely haven’t sought and obtained permission to copy the works. One wonders whether it would be a tough sell for Pinterest, on the stand in a copyright infringement proceeding, to claim that it wasn’t “aware of facts or circumstances from which infringing activity [was] apparent.”

One piece of the infringement puzzle currently in Pinterest’s favor is that it’s not making money from the widespread unauthorized copying -- at least, not yet. Pinterest is currently funded by “entrepreneurs and venture capitalists,” but “might also try adding advertisements,” and in any event “making money” is “a long term goal.” [http://pinterest.com/about/help/] One suspects that, once there is a clear nexus between user infringement and advertising revenue, it will become more difficult for Pinterest to walk the safe harbor line.

What’s Next?

Anticipating that copyright matters are about to become its biggest concern, Pinterest has taken additional steps to preclude copyright infringement. Pinterest has developed a “nopin” meta tag, which site owners can use to disable the Pin It applet on their websites, thus preventing Pinterest users from easily pinning photos from that site to their pinboards.  Flickr, the popular Yahoo!-owned photography website, implemented the “nopin” tag on February 24, 2012, allowing individual Flickr users to choose whether their photos can be “pinned.” This is surely a step in the right direction, but is hardly a fix: while some of the most obvious photo sources -- especially those that make their money licensing the right to use those photos -- are likely to implement the nopin option site-wide or otherwise make it available to users, the onus is on copyright owners to implement, or even be aware of, this tool. More importantly, the vast majority of photographs on the Internet are likely to remain available for the picking.

So what is next for Pinterest? Is its sudden popularity merely the flashpoint for copyright woes that will sink the site (and send its generous entrepreneurs and venture capitalists scrambling) as quickly as it appeared? Can it find a way to allow its users to retain the freedom to pin and simultaneously appease copyright owners? Or does Pinterest represent something else entirely -- a new breed of social networking heralding an era of “relaxed” copyright protection? As with so many of the cutting-edge legal issues discussed on our blog, time will tell.

It seems that a trademark owner cannot file a trademark application without subjecting itself to a frenzied barrage of unwanted solicitations by companies seeking the payment of fees in exchange for various trademark-related services, such as publication in the company’s private database or registry, trademark monitoring services, or recordation of the trademark with customs authorities. In some cases, the solicitations resemble invoices and appear to be issued by a government entity.

The volume of complaints regarding these solicitations has become so loud that the official trademark offices have begun to warn applicants about them.

The United States Patent and Trademark Office (USPTO) has posted a general warning about what “some of the more unscrupulous companies” are doing, such as using names that resemble the USPTO’s name.

The World Intellectual Property Organization (WIPO), which processes international trademark applications pursuant to the Madrid Protocol, has gone one step further by issuing a letter warning of “fraudulent schemes” accompanied by a list of specific companies known to engage in the “unscrupulous practice” of soliciting for fees that are not part of the WIPO registration process.

Given the proliferation of solicitations, many of which resemble official government invoices, what is a trademark owner to do?

HEED THE WARNINGS

Trademark offices throughout the world have posted warnings, some of which name specific companies and provide examples of solicitations that they view as misleading. Private industry groups and individual trademark attorneys have also posted their own warnings, and are sharing information on an ongoing basis. Trademark owners would do well to heed these warnings. The following publicly available resources may be particularly helpful.

Warnings By U.S. Trademark Office

The United States Patent and Trademark Office (USPTO) warns trademark owners on its website about solicitations from “private companies not associated with the United States Patent and Trademark Office” and characterizes the solicitations as “deceptive” and “misleading.” While the warning does not give specific examples, it includes the official correspondence address and email domain for the USPTO to ensure that trademark owners are armed with the information they need when reviewing unsolicited trademark communications.

The USPTO encourages trademark owners to file complaints about trademark solicitations with the Federal Trade Commission, and even offers a link to the FTC’s online complaint website. The USPTO also invites aggrieved trademark owners to contact the USPTO directly, particularly if the recipient of the solicitation thought it was an official USPTO communication or if the recipient mistakenly paid the requested fees.

Warnings by Non-U.S. Patent and Trademark Offices

The World Intellectual Property Organization (WIPO) has taken a particularly active role in trying to stop fee-requesting solicitations, in relation to both trademark and patent applications. Its website warning page features a list of international companies that have sent “invitations to pay fees,” along with links to these companies’ invoices, a document with sample text for attorneys to use to notify applicants and inventors, and a circular letter addressed by WIPO Director General, Francis Gurry, to all PCT Contracting States and Regional Organizations. Its warning page also notes that some invoices are mailed in envelopes that appear to bear the WIPO logo, and gives a list of countries where payment addresses for the invoices tend to be.

It’s easy to understand the confusion. Companies on the WIPO list as of the date of this article include Central Patent & Trademark Database (CPTD), International Register for Trademark & Patent (IRTP), and Globex World Organisation Intellectual Property (WOIP).

The WIPO list concludes with links to the warnings posted on the government websites of other countries, including Australia, Austria, France, Germany, Israel, Japan, Switzerland, and the United Kingdom.

The Office of Harmonization in the Internal Market (OHIM), which processes trademark applications for the European Union, also maintains a robust list of companies that have made “misleading requests for payment for trade mark and design services such as publication, registration or entry in business directories,” together with sample notices.

Warnings by the International Trademark Association

The International Trademark Association (INTA) has issued its own warning on its website stating that “some companies try to trick trademark filers into paying fees for unnecessary services.” Its posting includes a short list of entities reported to have engaged in this type of activity, noting that because these entities constantly change their names and addresses, its list is not comprehensive. Companies on the INTA list as of the date of this article include the official-sounding United States Trademark Protection Agency (of Seattle, Washington) and Trademark Renewal Service (of Washington, DC).

FOLLOW THESE TIPS

If you receive an unsolicited notice regarding your trademark application or registration, follow these steps to avoid paying unnecessary fees:

1. Read the company name and address carefully. All official correspondence from the USPTO will be from the “United States Patent and Trademark Office” in Alexandria, VA, and if by email, specifically from the domain “@uspto.gov.” If it isn’t the official PTO name and address, it isn’t official PTO correspondence.

 

2. Check for a seal. The seals of the USPTO and WIPO are depicted below. While some of the more unscrupulous companies have used logos that resemble these official seals, few if any of them will copy the government seals exactly. If it’s not from the official PTO, then it’s not official trademark correspondence. 

    

    

 

3. Be aware that official PTO correspondence will not request additional payment to publish your trademark – this is all part of the trademark process.

 

4. Contact your attorney. Always show your attorney any fee-requesting solicitations before acting on them.

 

5. Alert your Accounting team about the existence of fee-requesting solicitations and give them tips for spotting fraudulent trademark schemes.

LEARN HOW TO RECOGNIZE THE MORE COMMON SOLICITATIONS

Having seen a steep increase in fee-requesting solicitations in recent months, we decided to take a closer look at the solicitations that our clients -- and in some cases our law firm directly -- receive, to better understand how to help unsuspecting trademark owners avoid the pitfalls of these solicitations.

Case Study: Unsolicited Notice from “United States Trademark Registration Office”

Marked “IMPORTANT NOTIFICATION REGARDING YOUR FEDERAL TRADEMARK” and set up as an invoice, the double-sided official government-looking correspondence lists all sorts of information related to the owner’s trademark application with the USPTO. The mark, serial number, filing date, class, owner name – it’s all right there. If they have all of this information about my trademark, then the “United States Trademark Registration Office” MUST be affiliated with the USPTO, right? Unfortunately, no. All information included on a trademark application filed with the USPTO is public record. That means that anyone can gather this information and use it to contact the trademark owner, and that appears to be exactly what United States Trademark Registration Office has done.

The name itself, United States Trademark Registration Office, is close enough to the name of the United States Patent and Trademark Office (USPTO) that someone less familiar with USPTO correspondence might be easily deceived. The bold text, the underlining, the ALL CAPS, the arrows, together with the barcodes, make it look like an official document requiring your immediate attention.

Upon closer inspection of the invoice, it states that “THIS IS NOT A BILL. THIS IS A SOLICITATION.” It goes on to say that you aren’t obligated to pay the $375 unless you accept the offer. What is the offer? To record your trademark registration with the U.S. Customs and Border Protection (CBP) as well as several monitoring services.

Of course, if you had any questions about the offer, good luck contacting the United States Trademark Registration Office, as nowhere on the correspondence is there a phone number, email, or website to be found. The only contact information is a business address in LA, which is actually a business center with virtual offices rented by the hour.

More Common Examples

The “United States Trademark Registration Office” is not alone in its attempts to solicit trademark owners. We have also received invoices from companies across the globe offering our clients various services, which usually include at least one of the following: publication in the company’s private database or registry; trademark monitoring services; recordation of the trademark with the U.S. Customs and Border Protection; and renewal of trademark registration (documents only). Here are some examples of the more common solicitations we have seen:

• Worldwide Database of Trademarks and Patents (WDTP) offers “a year-long registration of your international trademark application in our internet database of the international trademark applications published in [their website address]”. Why omit the actual URL? Because our antivirus software blocked access to it, indicating that the risk level is ‘dangerous’ and that the site has been verified as a fraud page or threat source. This offer costs the trademark owner $2,327.

 

• Register of International Patents and Trademarks (RIPT) offers to “include your Trademark in our private International Service and Trademark Directory” for $2,738.

 

• Patent Trademark Register - Register of International Patents and Trademarks (yes, looks like the same as above, but it’s actually a different address and website) offers “the registration of your Patent dates in our private Database” for $2,805.50.

CONSIDER SIGNING THE ONLINE PETITION

On February 22, 2012, Erik Pelton, a trademark attorney and former USPTO Trademark Examiner in Arlington, Virginia, started a petition “request[ing] that the USPTO, with assistance from the Trademark Public Advisory Committee (‘TPAC’), renew and strengthen efforts to combat the ongoing epidemic of trademark related scams targeting trademark applicants and registrants.” The petition names several companies that have made such offers, stating that the “solicitations lack any true value, confuse those who receive them, collect money in return for a service of little or no benefit, and damage the integrity of the trademark registration system.” Any trademark owner who has been inconvenienced by unwanted solicitations, or indeed anyone at all, can electronically sign the petition.

CONSIDER A LAWSUIT (NOT FOR THE FAINT OF HEART)

Finally, every now and then someone will go so far as to file a lawsuit. On January 25, 2012, Leason Ellis LLP, an intellectual property firm, filed a Complaint in the Southern District of New York (7:12-cv-00620-ER) against USA Trademark Enterprises, alleging federal unfair competition, false advertising, and a host of state law claims. The Complaint accuses USA Trademark of “unlawful and deceptive acts and practices which result in a likelihood of confusion and deception of the public” (Compl., ¶ 81) and calls the company’s publication, TM Selection, “nothing more than a scam” (Compl., ¶ 35). USA Trademark has not yet answered the Complaint, and the case is currently pending.

Two years ago, WIPO announced that it assisted the Florida Attorney General in the preparation of a civil lawsuit against the Federated Institute for Patent and Trademark Registry (FIPTR) and provided expert testimony at the trial, the outcome of which successfully stopped a “PCT billing scam” directed to patent applicants. The press release noted that, “The judgment in this case is a promising step toward curbing this deceptive practice, and WIPO will continue to cooperate with law‑enforcement authorities in states and countries which make efforts to curtail these practices.” Based on this press release and the information posted elsewhere on WIPO’s website, it appears that WIPO is willing to support government action against trademark companies whose solicitations are misleading.

BUYER BEWARE

As with any other kind of solicitation, use your best judgment and investigate a trademark invoice that is unexpected or appears suspicious. When in doubt, always contact your trademark attorney.

The author would like to thank her firm’s Trademark Administration Manager, Elizabeth Crawford Hella, for her assistance in preparing this article.
 

The backstage drama, from the classic 1950 film All About Eve to the new television hit Smash, is an oft employed narrative convention filled with juicy melodrama between show business colleagues set to the backdrop of a spectacular stage production. The copyright infringement lawsuit filed in late 2011 by internationally acclaimed theater and film director Julie Taymor against her former co-collaborators of the hit Broadway musical Spider-Man: Turn Off the Dark proves that the cliché has strong roots in reality. Taymor, famous for her Tony-award winning stage adaption of Disney’s The Lion King as well as her film directorial efforts (including her Academy Award-nominated film Frida), signed on to direct the Spider-Man musical in the early stages of its development. The show, yet another re-telling of Marvel Comics' famous web-slinging crime fighter’s origin, is set to the music of Paul David Hewson and David Howell Evans, more commonly known as Bono and The Edge of the legendary rock band U2. The production, rumored to have cost as much as $75 million to mount (the most ever for a Broadway show), was famously plagued by technical and creative troubles as well as a spate of injuries to cast members during its preview run, which began in late 2010. Taymor notoriously ceased working on the production in April 2011.

The complaint paints a scene of secretive, back-stabbing collaborators, furtively plotting to revise Taymor’s work without her permission. Not surprisingly, the defendants, producers of the production, allege a very different story. By their account, Taymor was uncompromising and uncooperative. They claim she was focused more on her desire to weave into the plot the tale of Arachne, culled from Greek mythology, than she was in telling the well-known legend of how Peter Parker was transformed by a radioactive spider bite. They go so far as to allege that she once exclaimed, “I don’t give a f#*! about audience reaction!”

For her part, Taymor authored and claims copyright in an early three-page treatment of the show’s story arc. She likewise claims copyright in the show’s original “book,” theatrical parlance for all of the non-musical aspects of the script including dialogue and notated stage directions. Taymor admits to having co-authored the original book, staged during the shows theatrical previews. But in her complaint she asserts personal retention of contractually guaranteed artistic control over the co-authored work. This is an important factor as, under copyright law, co-authors generally reserve a co-extensive right to further exploit their work, either alone or cooperatively. Her suit further alleges that the revised, new book, completed by Roberto Aguirre-Sacasa, a playwright and comic book author, infringes her rights in the original book as well as the early treatment. Taymor asserts that the book, in its current form, remains substantially her work. She further claims that contractual writer’s royalties, purportedly due her since the show began its official run, have not been paid.

Taymor is still credited by the production as the original director and book co-author. This perhaps begs the question, why not simply pay her the royalties she claims she is due -- which could clear up this whole matter? Well, Taymor’s complaint goes a step further. Asserting the contractual right to full artistic control of her work, she has asked the court to enter a permanent injunction barring the producers from mounting the Spider-Man musical in any venue other than on Broadway. Should this come to pass, the economic impact to the producers would likely be massive. Despite the problems and early crushing reviews it received, Spider-Man: Turn Off the Dark is now a runaway hit with the potential to generate millions of dollars in revenue in productions staged worldwide.

While the high stakes issues set forth in the early pleadings appear more directly related to contractual issues than to copyright, the intellectual property concerns may eventually take center stage. Should this dispute go to trial, it will become necessary to determine how much, if any, of Taymor’s work is still contained in the musical’s current book. This should prove to be an interesting analysis, as the defendants claim that Taymor’s contributions are dubious and based predominantly on previous Spider-Man comics and films as well as on public-domain Greek mythology. That would make Taymor’s alleged efforts intermediate, derivative works. The finder of fact will have to determine how much of her work was truly original in the first place before determining how much, if any, of that work still exists in the book’s current version. Work perhaps best left to journalist Peter Parker than to our friendly-neighborhood Spider-Man. We’ll have to wait and see.

Photo by Kevin Dooley.

Every now and then celebrities enjoy perks that you and I can only dream about. For the world’s newest music celebrity, Blue Ivy Carter, this is doubtless true as she has recently gotten some unusual white glove service from a government agency -- something we all wish we could get the next time we’re at the registry of motor vehicles. Nonetheless, the life of a celebrity is not all glamour and fancy parties. For every moment an actor or musician spends basking in the spotlight, she or he spends countless hours auditioning, rehearsing, touring, and, in the earlier days, struggling to establish a career (that is unless you happen to be a Kardashian). And once you’ve “made it,” a host of unanticipated time-intensive demands rush in to fill the void left by your now-departed anonymity -- agents, managers, interviews, security, executives, acolytes, and, of course, managing your growing trademark portfolio. Let’s not forget, after all, that in Show Business the term “business” is perhaps the more operative word. Celebrities, like all other business folk, offer goods and services to their fans/customers. So, just like any goods manufacturer or service provider, a famous singer needs to protect her brand by enforcing her intellectual property rights, including obtaining federal trademark registrations. How else is a relatively new artist like the very recent six-time Grammy Award winning Adele supposed to ensure someone else doesn’t start touring under the same name? Registering your stage name as a trademark is a good first step - and no need to worry, Adele’s application is currently pending at the Patent and Trademark Office. Which is a good thing, because when you’re famous it seems people often line up to get a piece of your action, including trying to beat you in the race to the PTO’s Principal Register. If you have any doubts, just ask the Carters.

On January 7, 2012, Mr. and Mrs. Shawn C. Carter celebrated the birth of their daughter, Blue Ivy, in New York City (pics of the happy family available here). Four days later an application for the mark BLUE IVY CARTER NYC for children’s clothing was filed with the PTO. Perhaps not so coincidentally, the application claimed January 9th as the date of first use. The Carters, more commonly known in international circles as Jay-Z and Beyoncé, were just getting to know their new little bundle of joy while the ink was still drying on the application filed by a gentleman in New Jersey. And before you could say “Destiny’s Child,” another application for BLUE IVY CARTER GLORY IV was filed by a company in New York for use in connection with fragrance and beauty products.

Anyone who has ever prosecuted a trademark application with the PTO knows that it is not the fastest process in the world. Generally months go by before the examining attorney assigned to your file evaluates the application and, in the best of circumstance where no refusals are issued, it can easily take over six months or more to obtain a registration. But a mere two weeks after the first BLUE IVY-formative trademark application was filed, the PTO issued an Office Action refusing registration for, among other reasons, false connection with a famous individual, the famous individual in question being the world’s (arguably) most famous musical couple’s newborn daughter. In relative terms, this is quicker than the Maître D’ will give your table away to George Clooney if he happens into the same trendy restaurant where you thought you had reservations to celebrate your anniversary -- and the PTO issued an Office Action citing false connection with a famous individual for the other BLUE IVY application about a week later.

Was this preferential treatment? Celebrities who can afford to live in the lap of luxury are accustomed to getting for free the things many people only dream of one day buying and as far as the unknown masses are concerned the only line they wait in is the one at the end of the red carpet. So does the PTO rush to serve celebrities first, too? According to recent comments given by a PTO representative to the World Trademark Review, trademarks may sometimes be reviewed outside of the normal first-come-first-served order to ensure “consistent handling of co-pending applications” and that “[f]requently current events trigger” filing trends which warrant this special consideration. Does that equal celebrity special treatment? I don’t know, but you can check with Adele and see what she thinks -- her application has been pending since May of 2011. Or you can check in with the owner of BGK Trademark Holdings, LLC, which filed an application to register the mark BLUE IVY CARTER on January 26th for use in connection with a number of goods and services encompassing fifteen different goods and service classifications. An Office Action similar to the others was issued less than two weeks later, but it is my guess that BGK’s sole owner, the normally mononymous Beyoncé Giselle Knowles, might manage to overcome the refusal. We’ll have to wait and see, but perhaps not too long.

I will be providing updates to this blog’s Celebrity Trademark Watch on a more or less monthly basis going forward. Tune in over the coming months for a look into the recently settled lawsuit that put into question whether Madonna rightfully owned the MATERIAL GIRL trademark used by her clothing line (despite having made the phrase famous over twenty-five years ago) and for a look at how some celebrities enforce their brands from the grave.

Beyonce photo courtesy of William J.