California resident Heather Peters recently made waves with her $9,857.19 small claims court victory against Honda for allegedly overstating the Civic Hybrid’s fuel economy. Claims that the car could achieve up to 50 miles per gallon were false, she alleged. Honda, which plans to appeal the ruling, disagreed with the judge’s finding that advertising EPA fuel economy estimates is misleading without some disclosure about the effect of driving the way most hybrid owners do – e.g., over the speed limit, running the air conditioner, braking sharply, with a trunk full of organic produce from the local farmers market.

Unrelated to the Honda suit, Hyundai recently announced that it was dropping from a pricey Superbowl spot a similar “40 mile per gallon” claim regarding its Elantra. Although EPA-certified tests conducted by Hyundai reported fuel economy of 40 MPG in highway driving and 33 MPG in combined city and highway driving, a consumer watchdog group reported that independent testing achieved only 29 MPG in combined driving, 12% lower than reported. (For the record, Hyundai denied that it was dropping the claim based on the consumer watchdog’s findings.)

So what’s a green car buyer to believe? As car makers tout the ever increasing distances that can be driven on a single gallon of gas (“up to” 40, 50, or even 60 MPG), how achievable are the results that are claimed? On the other hand, if it is possible to drive up to 50 MPG on a single tank, shouldn’t a car maker be able to make the claim – even if the spartan driving habits required to achieve those results are not typical? So long as at least one driver is able to achieve the result, it is not false, right?

Not so fast! In the world of advertising, even truthful statements can be misleading. Truthful claims that a consumer can achieve “up to” a specified result are often found to be misleading. The Federal Trade Commission has held that savings claims involving the phrase “up to” require that “the maximum level of performance claimed can be achieved by an appreciable number of consumers under circumstances normally and expectably encountered by consumers.” What’s an “appreciable number of consumers”? Ten percent is a good rule-of-thumb. The National Advertising Division, a self-regulatory association administered by the Better Business Bureau, borrowed the FTC’s rule in a dispute between Priceline.com and Expedia over the latter’s claim that consumers could save “up to 50% off hotels.” The FTC ruled that Expedia’s claims were not misleading because it offered 50% savings on at least 10% of its inventory. Although the FTC’s rule relates to claims about savings (“save up to 40% off everyday prices”), the analysis is a good fit for fuel efficiency claims.”

But should the 10% rule be necessary at all if car makers’ claims are based on EPA estimates? As noted in a NAD decision regarding fuel efficiency claims by the “Tornado Fuel Saver,” the EPA readily admits that fuel economy is not a fixed number; “it varies significantly based upon where you drive, how you drive, and other factors. Thus it is impossible for one set of estimates to predict fuel economy precisely for all drivers in all environments.” Isn’t this inherently communicated in fuel efficiency “estimates”, particularly dual estimates that show sometimes marked differences between city and highway driving?

Not surprisingly, Honda is standing behind its claims. Not only were the ads substantiated by EPA estimates, but they noted that actual mileage would vary. While it is possible that NAD or the FTC might require more detailed disclosures in the future, it seems unlikely that advertisers would be prohibited from making claims based on EPA estimates, even in the absence of studies showing that those estimates apply to an “appreciable number of consumers.”

So, what’s a green car buyer to do? First, take those EPA estimates with a grain of salt. Then slow down, open the windows, ease into stops, and buy less at the farmer’s market.

Photo courtesy of Bill S.

In a ruling that may restrict the future viability of false advertising class actions, the Ninth Circuit recently overturned a lower court decision certifying nationwide class status to individuals who purchased or leased an Acura vehicle equipped with an optional “collision mitigation braking system” between August 2005 and December 2008. See Mazza v. American Honda Motor Company – opinion here. According to plaintiffs, advertisements for the $4,000 system were misleading in that they failed to disclose certain important facts, including that the system did not work in inclement weather (when collisions have been known to occur).

As certified, the class consisted of individuals who purchased their Acura vehicle in one of 44 states. Plaintiffs filed suit in federal court in California and sought false advertising relief solely under California’s consumer protection law. Plaintiffs argued that California law should apply to all class members’ claims, regardless of the point of actual purchase, because the defendant is headquartered in California and because the consumer protection law of that state is not materially different from the consumer protection laws of the other 43 states in which class members purchased the collision mitigation system.

The Ninth Circuit disagreed, holding that material differences existed in the states’ consumer protection laws and that, consequently, the lower court erred in certifying a nationwide class. The appeals court noted, by way of examples, that California law does not require a plaintiff to prove scienter – intentional or reckless wrongdoing – and does require plaintiffs to prove that they actually relied on the allegedly misleading ads. Other states require scienter (e.g., Colorado, New Jersey, and Pennsylvania) or do not require reliance (e.g., Florida and New York).

The opinion strikes a states’ rights note that is something of an oddity in a false advertising opinion, reflecting the view that states’ consumer protection laws reflect judgments about business protection as well as consumer protection:

In our federal system, states may permissibly differ on the extent to which they will tolerate a degree of lessened protection for consumers to create a more favorable business climate for the companies that the state seeks to attract to do business in the state. In concluding that no foreign state has “an interest in denying its citizens recovery under California’s potentially more comprehensive consumer protection laws,” the district court erred by discounting or not recognizing each state’s valid interest in shielding out-of-state businesses from what the state may consider to be excessive litigation.

It remains to be seen whether other federal appeals courts will go the way of the Ninth Circuit in restricting nationwide false advertising class actions. The decision currently applies only to federal district courts in the Ninth Circuit (western United States). If not, the issue may one day require the Supreme Court’s attention. If so, expect plaintiffs’ counsel to seek to retain the power of the class action by bundling claimants based on an analysis of each state’s consumer protection law – e.g., separate classes for claimants from states requiring: (1) scienter and reliance, (2) scienter but no reliance, (3) no scienter but reliance, and (4) no scienter and no reliance. Of course, the Ninth Circuit left open the door for other material differences, so these combinations may prove too broad. Time will tell. In the meantime, the viability of false advertising class actions in the Ninth Circuit has taken a significant hit.

Photo courtesy of Brad Allenick.

The dispute arose when Louboutin filed suit against Yves St. Laurent in April, 2010, asserting that several monochrome shoes featured in YSL’s Cruise 2011 collection infringed and diluted Louboutin’s trademark for red lacquered outsoles for high-end designer footwear.

YSL counterclaimed seeking cancellation of Louboutin’s mark on the ground that the mark was functional, invoking the doctrine of aesthetic functionality. This complex doctrine (which perhaps seems less so only in the minds of law professors who weighed in as amici) prevents a would-be trademark holder from laying claim to a mark whose aesthetic features confer a non-reputational benefit that cannot be duplicated by alternative designs.

According to the district court, laying claim to a single color for a fashion item effectively forecloses other designers from using that color in the claimed way. The court likened extending trademark protection under those circumstances to giving Picasso the right to enjoin Monet from painting images of water in the blue hue that is the hallmark of Picasso’s Blue Period. Such a result, the court reasoned, was as unacceptable in the fashion industry as it would be in the art context since “the greatest range for creative outlet exists…where every painter and designer in producing artful works enjoys equal freedom to pick and choose color from every streak of the rainbow.”

Among the many issues raised on appeal by Louboutin and YSL, (not to mention amici Tiffany & Co. and International Trademark Association, the most interesting is whether the aesthetic functionality doctrine bars a single color from ever serving as a mark for a fashion item. Louboutin and INTA point out, for example, that the red tab has been recognized as a source indicator for Levi’s apparel. However, that tab is a label affixed to the goods and is not an inextricable part of the goods themselves. It is interesting to consider whether courts would draw a distinction between color as used on a label and a color that is applied to the apparel itself, and whether it makes a difference if the color dominates the item in question.

Regardless of the outcome, current and future mark holders may be rewarded for Louboutin digging in his heels: Reports about oral argument suggest that the panel seems skeptical about the breadth of the district court’s ruling. If the ruling is upheld, it seems likely to be on narrower grounds.

 Along with January’s hot activity in the race for the Republican Presidential nomination, we also saw the emergence of two more stories about the intersection of intellectual property and political ads.

One issue is “déjà vu all over again”: political fair use. We are once again confronted with the question of to what extent the fair use doctrine (http://www.copyright.gov/fls/fl102.html) allows for the use of copyrighted news clips in political advertisements. We’ve previously written about this issue here, here, and here.

This time, it’s Mitt v. NBC. On-again off-again front runner Mitt Romney has issued an attack ad against latest rival Newt Gingrich. The ad, entitled “History Lesson”, is little more than a short clip of a 1997 episode of NBC’s Nightly News, reporting that Gingrich was found guilty of ethics violations. Along the bottom, just under Tom Brokaw’s tie, are the words “Paid for by Romney for President, Inc. Approved by Mitt Romney.”

Upon seeing the ad, NBC’s vice president of media law, David N. Sternlicht, shot off a missive to the Romney campaign, demanding that NBC’s copyrighted material be taken out of the ad. The Romney campaign says that it intends to keep running the ad (unlike the last time, when it backed down after a similar demand from CNN of an anti-Perry ad).

This time, the story also has a twist. NBC is claiming that, in addition to the copyright violations, the ad falsely implies that NBC or Tom Brokaw have endorsed its content. Mr. Sternlicht wrote that “[a]side from the obvious copyright issues, this use of the voice of Mr. Brokaw and the NBC News name exploits him and the journalistic credibility of NBC News.” Tom Brokaw issued a similar statement, reported in the Washington Post: “I am extremely uncomfortable with the extended use of my personal image in this political ad.” In other words, NBC and Brokaw are asserting that, in addition to infringing on their copyright, the ad is also a violation of their “Right of Publicity” or perhaps a False Designation of Origin under the Lanham Act.

Neither NBC nor Brokaw have filed suit yet but, in a similar case, candidate Ron Paul has done just that. On January 4, 2012, an anonymous YouTube user named “NHLiberty4Paul” uploaded a vicious advertisement, subtitled “The Manchurian Candidate,” which alleged that then-candidate John Huntsman was beholden to Chinese interests. The ad ends with the text “VOTE RON PAUL.”

Within less than 10 days, Paul initiated a lawsuit in the Northern District of California against the anonymous makers of the ad. Paul claims include False Designation of Origin under the Lanham act and common law defamation.

So far, things haven’t been going well for the Paul lawsuit. Paul sought immediate discovery from YouTube in order to discover the identity of NHLiberty4Paul, but Magistrate Judge Maria-Elena James denied the request without prejudice on the grounds that Paul’s motion had failed to address the legal standard for expedited discovery. Otherwise, the case appears to be proceeding in the normal course. We’ll keep you posted.

A version of this article, which was co-authored by Anthony E. Rufo, was reprinted in the World Trademark Review.

How can the owners of famous trademarks enforce their rights without being given the dreaded “trademark bully” label? The answer lies in knowing where to draw the line, and in exercising diplomacy in letting people know when the line has been crossed.

Many brand owners tolerate minor third party uses of their marks, including unauthorized parodies, fan clubs and the like, which are undertaken in good faith. But brand owners must act to protect their rights when third parties go too far. Potential red flags include actual confusion, complaints from customers, impact on sales, and formal trademark filings by third parties. In these circumstances, a line has been crossed and trademark owners can and should consider taking action. To protect themselves from bullying accusations, however, trademark owners would do well to emphasize in all of their communications the specific “over the line” factors that drove them to action.

North Face’s 2009 lawsuit against the “South Butt” defendants illustrates these principles. The defendants claimed that their use of THE SOUTH BUTT name and “arc” logo on clothing was a parody of THE NORTH FACE. A parody defense can put brand owners in a difficult position, because no one wants to be perceived as not getting the joke. In fact, a savvy brand owner knows that embracing those in the marketplace who are poking a little fun can often make for excellent public relations. So why was filing suit the right thing for North Face to do? Because the defendants repeatedly tried to register THE SOUTH BUTT as a trademark for clothing, which could have potentially curtailed North Face’s own rights and made future policing efforts against third parties more difficult.

In contrast, the Coca-Cola fan site on Facebook did not cross any obvious lines - it was created by two guys who just happened to love Coke. So what did Coca-Cola do about these individuals representing its brand to millions of social media subscribers? It decided to make the Facebook fan page the “real thing” and sponsor its creators, inviting them to meet with Coca-Cola executives in Atlanta and collaborate on marketing initiatives. This was a brilliant (and popular) strategy because the Facebook page posed no commercial threat, and Coca-Cola was able to support its biggest fans rather than shut down their Facebook site.

So what can you learn from these examples as a brand owner? If an infringer crosses the line and you have to enforce your rights, try to stay ahead of the spin and make sure the public knows you were left with little choice. If no line is crossed, consider whether a marketing-driven approach might be preferable to legal action. While you may not be able to escape the “trademark bully” label in all situations, careful line-drawing and tailored communications can help you manage the risks and, hopefully, portray your brand enforcement efforts in a positive light.

The stalling of SOPA and PIPA may make room for alternative anti-piracy legislation being advanced by Rep. Darrell Issa (R-CA) and Sen. Ron Wyden (D-OR). Dubbed the Online Protection and Enforcement of Digital Trade (“OPEN”) Act, the Issa/Wyden proposal omits some of the more controversial measures of SOPA and PIPA and concentrates enforcement powers in the International Trade Commission. Sen. Wyden introduced the OPEN Act as S. 2029 on December 17, 2011, and Rep. Issa officially introduced it as H.R. 3782 on January 18, during last Wednesday’s web blackout protests.

The tide may be changing in the controversy over SOPA and PROTECT IP (or “PIPA”), the anti-piracy bills that have been making their way through, respectively, the House and the Senate in recent months. Yesterday’s unprecedented 24-hour global blackout of the English Wikipedia site in protest of the legislation and the new enforcement powers it would create has acted as a lightning rod for public attention. In concert with Wikipedia, Google ran a “censored” version of its logo on its home page yesterday, with a plea to users to contact their legislators, and many other popular sites displayed blacked-out screens together with information about the bills. Wikipedia reports today that SOPA was featured in a quarter-million Tweets per hour during the blackout.

Yesterday’s high-profile online activism follows months of public debate about SOPA and PIPA, which critics fear could chill online speech and destabilize the architecture of the Internet. While the legislation still has many vocal supporters – the Motion Picture Association of America’s chairman, former senator Chris Dodd, called the blackouts “stunts that punish users” – the ranks of opponents seem to be growing, and now include such strange bedfellows as the ACLU and the Tea Party. Ars Technica reports that 18 senators, seven of whom are former co-sponsors of PIPA, announced their opposition to the bill yesterday.

The White House Speaks

The White House has also expressed reservations about the bills in the past week, explaining in a statement released January 14 that, “While we believe that online piracy by foreign websites is a serious problem that requires a serious legislative response, we will not support legislation that reduces freedom of expression, increases cybersecurity risk, or undermines the dynamic, innovative global internet.”

Sponsors Tone Down Enforcement Powers to Move Bills Forward

Nevertheless, the bills’ lead sponsors are pressing on, albeit with some concessions to their critics. On January 13, House Judiciary Committee Chairman Lamar Smith (R-TX), a sponsor of SOPA, announced that he would remove the bill’s provisions requiring ISPs to block domain names of offending sites, which had been criticized as a threat to Internet stability and security. This week, he stated that markup hearings on the amended SOPA would continue in February.

In the Senate, PIPA’s lead sponsor, Sen. Patrick Leahy (D-VT) announced on January 12 that he was preparing an amendment to require that domain-name-blocking provisions be subjected to further study following passage of the bill, before they could take effect. Action on PIPA is likely to resume on January 24, when the Senate will hold a “test vote” on a motion for cloture, to lift a hold placed by Sen. Ron Wyden (D-OR) and begin debate on the bill.

Alternatives and Workarounds Spring Up

Rep. Darrell Issa (R-CA) and Sen. Wyden, the leading opponents of SOPA and PIPA, have introduced their own alternative legislation in both houses of Congress. The Online Protection & Enforcement of Digital Trade Act (or the “OPEN Act”) would give the International Trade Commission jurisdiction over challenges to allegedly infringing websites, and would target only payment processors and advertisers that support offending sites, not search results or domain name lookups.

And in another form of tech activism, the anonymous coders behind MAFIAA Fire, who originally created a browser plug-in to circumvent domain name seizures by the Department of Homeland Security, have come up with a new plug-in to address the domain-blocking measures of SOPA/PIPA. (As the MAFIAA Fire FAQs point out, such circumvention is legal at least until SOPA passes.) The MAFIAA Fire team also claims to have technical responses in the works to counteract other measures proposed in SOPA/PIPA.
 

Complication of U.S. copyright law aside, determining when a copyright was applicable has not been a complicated matter for those who wished to reproduce or perform works they did not create. Either the work was under copyright and you paid for the privilege (or otherwise got permission) or it had lapsed into the public domain and could be freely reproduced without cost or consent. Works that were in the public domain yesterday, or last year, or ten years ago, would stay in the public domain because they either never attained copyright protection or the protection had lapsed. That was, until the Supreme Court rendered its very recent decision in the case of Golan v. Holder. Things have now gotten a little more complicated.

For most of the history of U.S. copyright law, works of foreign authorship have been given substantially less protection than works created in the United States or, in many cases, no protection at all. The United States was a relative late-comer in joining the 1886 Berne Convention for the Protection of Literary and Artistic Works (Berne), having become a member only as recently as 1989. Then, in 1994, Congress enacted Section 514 of the Uruguay Round Agreement Act (URAA), which had the effect of granting U.S. copyright protection to previously unprotected works provided that they were also protected in their country of origin under Berne. This meant that great works of music by the likes of Prokofiev or Shostakovich, paintings by Picasso, and films by Hitchcock previously unavailing of U.S. copyright protection would suddenly be snatched back from the elysian fields of the public domain and reproducing or performing them was going to start costing.

Sensing the far reaching cultural implications of the URAA, Lawrence Golan, a professional conductor, challenged the legislation in court, claiming that it ran afoul of Article I, Section 8, Clause 8 of the Constitution, the so-called Copyright Clause, which empowers Congress “[t]o promote the progress of science and useful arts, by securing for limited times to authors . . . the exclusive rights to their respective writings.” Golan argued that granting sudden copyright protection to works already in the public domain did nothing to promote the creation of new works, but rather only granted a benefit for works already created. Additionally, Golan argued that the URAA contravened the principles of free speech and freedom of expression. Now, nearly two decades after the URAA was enacted, the Supreme Court has issued an opinion in the matter and, in a 6 to 2 decision written by Justice Ginsburg, does not agree with Golan -- the URAA passes constitutional muster, in respect to both the First Amendment and the Copyright Clause.

The Court’s decision applies principally to works first published outside the U.S. in Berne member countries between 1923 and 1989 and has a seemingly dramatic effect. It is estimated that millions of works are implicated. Sheet music publishers who could once freely publish certain master works of the 20th century will now require permission. Orchestras which once performed works such as Peter and the Wolf by Prokofiev without having to acquire or pay for a license will now have to do so. In regard to older more obscure works, the mere act of finding an author or his or her successor in interest to request copyright permission might prove to be a monumental or even impossible task. Electronic online databases containing volumes upon volumes of formerly public domain books now have to determine the effect of the URAA. Yet, despite these dramatic results, the High Court’s opinion is a mostly staid affair.

Drawing heavily from and building upon the Supreme Court’s decision in Eldred v. Ashcroft, 537 U.S. 186 (2003), which upheld Congress’s authority to extend then current copyright terms by 20 years, the Golan opinion takes an historical survey of Congress’s actions vis-à-vis copyright and finds no historical precedent, either congressional or judicial, which stands for the principle that Congress may not restore or grant for the first time copyright protection to works which were once in the public domain. Justice Ginsburg, additionally, is cognizant that there is another side to the URAA coin, the fact that U.S. authors benefit by reciprocal copyright treatment in Berne countries. She writes, “Congress determined that U.S. interests were best served by our full participation in the dominant system of international copyright protection.” Ultimately, the Court reasons, each act of Congress related to copyright need not in and of itself serve to promote creativity, but rather, need only contribute holistically to a copyright regime which, overall, has inspirational effect.

In a dissenting opinion joined by Justice Alito, Justice Breyer sides firmly and resolutely with Golan and others who challenged the URAA. He unequivocally believes that the principal purpose of the Copyright Clause is to encourage new authorship. Likewise, he views the removal of works from the public domain as interfering with freedom of speech. Justice Kagan, who presumably had contact with the URAA in her former capacity as U.S. Solicitor General, recused herself.

For the average person this decision won’t have direct implications, although indirect effects may start to appear. Perhaps that book of French poetry you thought you once found online won’t be available the next time you check. Maybe the concert tickets for your local symphony orchestra will be just a bit more expensive next season, or maybe they won’t be putting on that evening of great works by Russian masters after all. However, for people who have been actively engaged in exploiting twentieth century works of foreign origin, it is always better to be safe than sorry - you should verify whether or not a valid copyright now applies.  

Anheuser-Busch InBev NV, owner of the U.S. “Budweiser” mark for beer, has recorded a small success in its longstanding efforts to establish worldwide exclusive rights to the Budweiser mark by purchasing the rights to Budweiser trademarks held by a small Czech brewery, Budejovicky Mestansky Pivovar.

However, this is a victory in a small skirmish in InBev’s much larger trademark war with another Czech brewer, state-owned Budejovicky Budvar NP. InBev (through Anheuser-Busch) and Budvar have been engaged in multiple disputes related to the Budweiser mark for many years. In one of the most recent decisions, the European Court of Justice ruled in 2011 that InBev and Budvar could both continue to sell beer in the UK under the Budweiser mark, because they had both been doing so for at least 30 years. “Although the names are identical, UK consumers are well aware of the difference between the beers of Budvar and those of Anheuser-Busch, since their tastes, prices and get-ups have always been different,” the court said.

The trademark dispute arises from the fact that, for many centuries, beer has been brewed in the Czech town of Ceske Budejovice, which is called Budweis in German. The mark Budweiser was, originally at least, a geographically descriptive mark, because Budweiser means “from Budweis.” Meanwhile, in the US, Anheuser-Bush adopted the trademark Budweiser because the mark was well known in Germany as a mark for beer. Because InBev owns the Budweiser mark in the US, Budvar’s beer is sold in the US under the mark “Czechvar.”

On its website, Budvar states that it is involved in 22 court disputes in 14 countries with Inbev, and that in the period of 2000-2009, 115 court disputes and administrative procedures before patent offices were finalized, 82 of which resulting in favour of Budweiser Budvar. Budvar claims that that “vast majority of court rulings have thus confirmed Budweiser Budvar's rights to its trademarks”. No doubt InBev takes a different view.

The St. Louis Post-Dispatch, in an article here, suggests that InBev may seek to buy a stake in Budvar if the Czech government sells the brewer. Given the multiplicity of disputes, it appears it would take a strategic move like that finally to resolve this dispute. Until that happens, we have not heard the last of the battle of the Buds.

Political primary season is upon us and, just like a bad hangover, one particular political speech question just keeps creating headaches. To what extent is the unauthorized use of copyrighted material in political campaign advertisements protected by the fair use doctrine? Can political ads borrow a clip from a presidential debate? From a televised sporting event? How about a photograph created by an opponent’s campaign?

We previously reported on copyright dustups over the “Miracle On Ice” ads by former U.S. Presidential candidate Tim Pawlenty, and attack ads against Canadian Liberal Party leader Michael Ignatieff. In both of these instances, political campaigns ads used copyrighted material from major news organizations. In each case, the news organizations made some noise about copyright infringement and then backed down before things got litigious.

Then, in October, as reported by Talking Points Memo’s Benjy Sarlin, Presidential candidate Mitt Romney’s campaign released the “Ready to Lead?” internet attack ad against Texas Governor Rick Perry. The ad questioned Perry’s general competence with clips of “brutal” reviews of his debate performances by television commentators from CNN, FOX and elsewhere. (In one clip, Fox News’ Britt Hume announces: “Perry really did throw up all over himself in the debate.”). CNN, claiming copyright infringement, demanded that Romney remove the video from the internet. This time, it was the candidate that backed down. Romney’s campaign vigorously claimed that it was protected by the fair use doctrine . . . but nonetheless took the video down only a few hours after it was posted.

So is anybody going to hang in there, to sue or be sued, so we can develop some modern case law on this issue?

The latest candidate for political fair use torch-bearer is Los Angeles County Deputy District Attorney Alan Jackson. In his bid to knock City Attorney Carmen Trutanich out of the race for Los Angeles District Attorney in 2012, Jackson released an attack ad inspired by “The Hangover” movie franchise, featuring various photographs of Trutanich instead of the movie characters.

So, who’s complaining? The producers of the “The Hangover”? Nope. The Trutanich campaign? Well, maybe. The Contra Costa times has reported that the photographs of Trutanich which were used in the ad were actually taken by a Trutanich campaign photographer in 2009. The photographer has retained counsel and sent a demand letter threatening a copyright infringement claim. Jackson’s campaign, for its part, has invoked the First Amendment, presaging a fair use defense.

Is this one going to go the distance? Will the photographer really bring suit and force Jackson to defend on the basis of fair use, perhaps resulting in a big fat juicy Ninth Circuit opinion? Or, as the Jackson campaign has implied, is the threatened lawsuit nothing more than a concoction of the Trutanich campaign, designed to evaporate once the requisite political points are scored? If history is any judge, it will probably be the latter, and we’ll be left to nurse our political fair use headaches once again.

Stating that the antidilution law should be used as “a scalpel, not a battle axe,” Judge Laura Taylor Swain of the Southern District of New York once again found that Starbucks failed to prove that the famous STARBUCKS trademark was likely to be diluted by the use of the marks CHARBUCKS BLEND, MR. CHARBUCKS, and MISTER CHARBUCKS on dark roasted coffee. In her December 23 opinion, she ordered that judgment be entered in favor of the defendant, Wolfe’s Borough Coffee, Inc., and that the long-running case be closed.

This is the third ruling that Judge Swain has made against Starbucks. It may not be the final word, however, as Starbucks may appeal yet again.

The dispute began in 1997, when Wolfe’s Borough Coffee, which does business as Black Bear Micro Roastery, started selling coffee under the names CHARBUCKS BLEND, MR. CHARBUCKS, and MISTER CHARBUCKS from a retail outlet called “The Den” in New Hampshire. Starbucks sent Wolfe’s a demand letter, but Wolfe’s refused to accede because “basically this was a large corporation coming at me and telling us what to do.” Starbucks then brought suit in the Southern District of New York.

After a two-day trial in 2005, Judge Swain ruled against Starbucks on all of its claims. While the case was on appeal in 2006, Congress enacted the Trademark Dilution Revision Act, which provided that a plaintiff need only show a likelihood of dilution, not actual dilution, to prevail. The Second Circuit remanded so that the lower court could reconsider the evidence in light of the new law.

On remand, Judge Swain accepted additional briefs but no new evidence. Once again, she ruled against Starbucks on all of its claims. In her 2008 opinion, Judge Swain held that the two marks must be “very or substantially similar” in order for dilution to occur, and that the use of MR. before CHARBUCKS alone defeats Starbuck’s dilution claim.

Starbucks appealed (again), and the Second Circuit remanded (again), this time on the basis that the prior requirement of “substantially similar” marks no longer applied in dilution cases. The Second Circuit’s 2009 opinion also noted that Wolfe's' admitted intention to associate its mark with Starbucks weighed in favor of Starbucks’ position, and that the statutory defense of fair use through parody did not apply to Wolfe’s because it was using the disputed name as a designation for Wolfe’s own products.

The case was once again remanded to Judge Swain, who accepted additional briefs on the issues identified by the Second Circuit. On December 23, 2011, six years from the date of her initial ruling, Judge Swain issued her opinion and ruled - you guessed it - against Starbucks on all remaining claims. Judge Swain acknowledged that four of the six dilution factors weighed in favor of Starbucks, namely, the distinctiveness of the STARBUCKS mark, Starbucks’ exclusivity of use, the high degree of recognition of the STARBUCKS mark, and Wolfe's' intent to associate its mark with the STARBUCKS mark. But Judge Swain found that the similarity between the marks was minimal, and therefore that factor favored Wolfe’s, and that the actual association factor weighed only minimally in Starbucks’ favor.

Judge Swain evaluated the similarity of the marks as they actually appeared in the context in which the parties’ products were offered, and noted that Wolfe’s did not use CHARBUCKS alone, but rather in combination with the words BLEND, MR. or MISTER. Judge Swain further noted that the parties used different colors and fonts on their packaging, and that Wolfe's'  packaging identified Wolfe’s as a “Micro Roastery” located in New Hampshire. On this basis, Judge Swain found that there was not “an association, arising from the similarity of the relevant marks, that impairs the distinctiveness of the famous mark,” and that Starbucks’ dilution claim must therefore fail.

It will be interesting to see whether Starbucks will appeal and, if so, whether the Second Circuit will conclude that Judge Swain finally got it right or whether she simply did an end-run around the “substantially similar” issue. As of this date, it appears that Wolfe’s is still selling CHARBUCKS BLEND on its website. Stay tuned.

Here’s something you probably don’t want fixed in a tangible medium of expression: revenge porn. 

Twenty-five-year-old Hunter Moore (pictured, above right) is the creator of the website Is Anyone Up (www.isanyoneup.com). In essence, here’s how revenge porn works: Remember those naked pictures you took of yourself and sent to a very close friend with the explicit instruction or implicit assumption that the images would remain private? Well, just make sure you don’t give your friend cause to become a former friend. If you did, your former friend may already have sent those pictures anonymously to Mr. Moore. Upon receipt, Mr. Moore will post them on his increasingly popular website, along with a helpful link to your actual Facebook page, just in case there was any doubt the pictures were of you.

For Mr. Moore’s troubles, he has received numerous death threats, one actual attempt on his life and, most recently, a very angry letter from Facebook’s lawyers. He has also reaped an estimated $13,000 per month in ad revenue and a great deal of media attention.

Here’s why we’re interested: In a recent episode of NPR’s On the Media, Bob Garfield interviewed Moore, who explained why he believes he is immune to legal action. Part of the conversation went like this:

HUNTER MOORE: . . . And then also with the copyright issue, you know, a lot of people are sending me DMCA requests and –

BOB GARFIELD: They say, I own this photo, you have no right to display it; please take it down.

HUNTER MOORE: Yes, but when you take a picture of yourself in the mirror, it was intended for somebody else, so actually, the person you sent the picture to actually owns that picture because it was intended as a gift. So whatever the - that person does with the picture, you don’t even own the nude picture of yourself anymore.

Is that correct? No way. With a few exceptions with respect to works made for hire, the copyright in a photograph subsists with the person who takes the photograph. Once the photograph is distributed, copyright law makes a distinction between on the one hand the object itself (which the new owner can sell or give away under the first sale doctrine), and on the other hand the rights to further reproduce or publish that image (which rights generally can only be transferred in writing).

So, it is true that you probably can’t use copyright law to stop your former friend from giving, say, a printout of your nude self-portrait away, and as a practical matter it is very difficult to stop your former friend from emailing that picture around. However, you may be able to use copyright law to stop Mr. Moore from publishing that image on-line. At the risk of incurring the wrath of the revenge porn industry, Mr. Moore appears to have learned copyright law from the same place he learned to respect other people’s privacy.

While the Senate Committee members had seemed somewhat resigned to the gTLD rollout, gTLD opponents appeared to find a more sympathetic audience in the House Committee, whose members peppered Kurt Pritz with criticism and pointed questions. For instance, Congresswoman Doris Matsui (D-CA) criticized that, “at the beginning,” “ICANN had a certain mission” which has “gotten off track,” and that at present accountability and transparency simply are not apparent. She urged Mr. Pritz to implement some manner of “pilot program” for new gTLDs in the first instance. Congressman Cliff Stearns (R-FL) asked Mr. Pritz to explain, in detail, ICANN’s use of the expected gTLD surplus funds (projected to be enormous) and ICANN executive salaries (for the curious, Mr. Pritz expects to make about $395,000 this year including bonuses), insisting that gTLD registries should be made more affordable. Congressman Edward Markey (D-MA) explained his belief that ICANN has not sufficiently justified the expansion -- that it is a solution to a problem that doesn’t exist -- and that both business and consumers stand to lose out from its improper implementation. For his part, Mr. Pritz smoothly answered and evaded as necessary, claiming that ICANN is one of the most transparent and accountable organizations there is, and that the gTLD program is the end result of a "deliberate" seven-year process.

Of course, it seems unlikely that anything will come of this hearing so late in the game, especially with the NTIA (per Ms. Alexander) firmly committed to the multistakeholder model. My guess is that, barring a deus ex machina lawsuit resulting in a preliminary injunction, the gTLD rollout will move forward unhindered. Get your trademarks ready!

As you know, yesterday the U.S. Senate Committee on Commerce, Science and Transportation held a hearing to "examine the merits and implications of [the new gTLD] program and ICANN's continuing efforts to address concerns raised by the Internet community."

Witness Testimony

At the outset of the hearing, each witness read a written statement into the record.

Ms. Esther Dyson, the founding Chairman of ICANN from 1998-2000, testified as "a loving critic to improve ICANN, not to bury it." She explained that she used to be a "big fan of the concept of new TLDs." However, she has changed her mind because, among other reasons, the domain name "business overall has become one of sleazy marketing practices" where the "ease and lack of accountability with which someone can buy a domain name has led to a profusion of spam, phishing and other nefarious sites." "When you add, for example, .hotel, you are not creating new space; you are carving up the <hotel> space in people's heads into .com and .hotel ... In short, it's as if you owned a field, and you paid a border guard. Now the border guards want you to pay separately for each little chunk in your field; it's still the same field, but now it's carved into ever-smaller pieces," she added. In her conclusion, Ms. Dyson opined that "it is not the role of Congress to tell ICANN what to do." Rather, she recommended that ICANN rapidly re-launch its consultation process with much broader outreach" and "offer broader and easier protection to existing registrants, akin to what ICANN itself has and what the Red Cross is asking for."

Ms. Angela F. Williams, General Counsel for the YMCA of the USA, provided the Senate Committee with the point of view of non-profit entities. "ICANN's new gTLD program does not provide special or discounted protection measures for not-for-profit organizations to protect their brand and avoid the public confusion that results from their unauthorized use," explained Ms. Williams. Ultimately, Ms. Williams asked "that there continue to be input from stakeholders, and careful consideration of the impact of this program on the Internet, and particularly on not-for-profits." Ms. Williams testified to the financial burden the new gTLDs would place on nonprofits that seek to protect their marks. The YMCA could afford to buy YMCA.XXX, but could not afford a new .YMCA gTLD.

Ms. Fiona Alexander from the U.S. National Telecommunications and Information Administration (NTIA) confirmed that it "supports a [ICANN] multi-stakeholder approach to coordination of the domain name system to ensure the long-term viability of the Internet as a force for innovation and economic growth." And ultimately, the U.S. NTIA intends to rely on its Affirmation of Commitments with ICANN, a contract that "sets up continuous multi-stakeholder review teams to evaluate ICANN's performance, including a review of the new gTLD program" and the effectiveness of the trademark rights protection mechanisms put in place to mitigate abuse.

Mr. Dan Jaffe, Executive Vice President of the Association of National Advertisers, and spokesman for the Coalition for Responsible Internet Domain Oversight, provided a strident written statement explaining that its objections against the new gTLD program have "fallen on deaf ears" within ICANN. As Mr. Jaffe contended : (1) ICANN's justification for the new gTLD program is flawed; (2) the economic costs of the new gTLD program outweigh any benefits; (3) the ICANN policy development process is flawed; (4) new gTLDs threaten to injure brand owners and benefit registration interests; and (5) ICANN is plagued by conflicts of interests. In closing, Mr. Jaffe "reject[ed] the argument of those who say that it is too late for ICANN to step back and reevaluate or for the NTIA, the Governmental Advisory Committee and other key Internet participants to try to make one last major effort to forestall this potentially severely damaging initiative" because "[t]here is absolutely nothing sacred about the January 2012 implementation date."

Mr. Kurt Pritz, Senior Vice President of Stakeholder Relations for ICANN, highlighted provisions in the Guidebook relating to "new trademark protections" and "measures to mitigate malicious conduct." According to Mr. Pritz, the introduction of new gTLDs is one of ICANN's founding mandates, and the ICANN multi-stakeholder model works by engaging a community that includes national governments, law enforcement agencies and brand owners. Mr. Pritz's testimony states that "intellectual property owners / brandholder experts have been involved at every step."

Questions and Answers

After the written statements were read into the record, a panel of U.S. Senators on the Committee for Commerce, Science & Transportation posed specific questions to the witnesses.

We were able to confirm two key facts from the questions and answers yesterday.

First, as both Esther Dyson and Senator Klobuchar aptly recognized, there is little if anything that the U.S. Congress can do at this point to slow or stop the new gTLD program. Indeed, Senator Klobuchar was resigned to requesting that ICANN "listen to our concerns as you go forward."

Second, Ms. Esther Dyson provides a unique perspective on the new gTLD program. She informed the Senators that "the ICANN process of consulting with the public has failed," because "billions of Internet users, who stand to gain nothing from being confused, have not been heard in ICANN's consensus." Moreover, according to Ms. Dyson, "by creating a whole new set of redundant names, it will lead to the introduction of more individuals and entities intent on stealing from brands on the Internet."

Conclusion

After monitoring this hearing, we believe that it will not have any impact on launch of the new gTLD program, although ICANN should expect to hear more from Congress down the road.

The committee record will be left open for a short time so that the witnesses may submit further responses to the questions raised at the hearing.

It’s been clear for some time that the same principles now apply in copyright and trademark cases as well. The First Circuit, for instance, addressed eBay in the context of a trademark cases in the Voice of the Arab World decision, and several courts have applied the holding to copyright cases, such as the Second Circuit in the J.D. Salinger case.

What does this mean for plaintiffs in trademark and copyright cases? This is still unclear, and the question will be very case specific. In October, the Federal Circuit reversed a lower court’s denial of a permanent injunction in a patent case, implying that eBay shouldn’t be read too broadly. The court wrote this interesting summary:

Although eBay abolishes our general rule that an injunction normally will issue when a patent is found to have been valid and infringed, it does not swing the pendulum in the opposite direction. In other words, even though a successful patent infringement plaintiff can no longer rely on presumptions or other shortcuts . . . it does not follow that courts should entirely ignore the fundamental nature of patents as property rights granting the owner the right to exclude.

Some courts, though, appear not to share the Federal Circuit’s view that the "pendulum" is now neutral. Last month, a district court in Maryland, citing eBay, denied post-trial injunctive relief to a prevailing plaintiff in a copyright case. In that case, the plaintiff showed that the Baltimore Ravens NFL franchise had copied his drawing of a “Flying B Logo” without authority, and the Fourth Circuit had held that use of a similar logo (see below) in films and video clips was not fair use.

But on remand, the district court compelled the defendant Baltimore Ravens to pay “reasonable compensation,” which seems to constitute something other than statutory damages or wrongful profits, and then cited the adequacy of that compensation as a reason for denying the requested injunction. The eBay decision appears to have spawned at least one judicially created compulsory licensing scheme.

A similar measure was introduced in October as part of H.R. 3261, the “Stop Online Piracy Act” or “SOPA,” a bill aimed primarily at shutting down web sites that traffic in goods that infringe copyright or trademark rights. (See our earlier post for further information on SOPA.) The SOPA provision would clarify that § 2320 applies to drugs, but would only enhance the penalties in cases involving serious bodily harm, death, or counterfeit military goods or services.

Given the relatively controversial nature of some of SOPA’s other provisions, it is possible that the new, simpler legislation will prove to be a more efficient route to addressing this one aspect of the counterfeiting and piracy issue.