Austin Technology Law Blog : Texas Technology Lawyers & Attorneys for Copyright, Trademarks & Software Licensing in Houston, Dallas & Austin TX

The first Austin Start Up Week will be held September 6 through 10.  The website and more information may be found here.  The organizers have as their stated goals: "...learn, mix and mingle with your peers, meet some new people and make awesome things happen". 

Included in the agenda are kayak rides, pub crawls, Office Space quote-a-longs ("So I was sitting in my cubicle today, and I realized, ever since I started working, every single day of my life has been worse than the day before it. So that means that every single day that you see me, that's on the worst day of my life") and some educational stuff also.

This sounds like a whole lot more fun than working (even if you have a job), so you should check it out.  We hope to see you there.

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We have previously discussed an opinion issued by the Ninth Circuit, which found that the "Betty Boop" character was a "functional aesthetic component" of a product upon which it was printed and therefore, like embossed designs on toilet paper and red soled shoes, was not subject to trademark protection.  We found the ruling and the method of getting to the ruling to be unusual and proposed that the Court could have reached the same result by addressing other issues actually before the Court and not caused heart attacks in the offices of companies that license logos.

We were not the only ones that found the ruling to be troubling and last week the three judge panel in the Ninth Circuit took the unusual approach of withdrawing the original opinion and superseding it with a new opinion.  The new opinion makes no mention of whether the panel thought they erred in the original opinion nor of any of the firestorm of criticism that the opinion evoked.  They merely took our suggestion (I'm pretty sure this blog was the driving force in causing this to happen) and found chain of ownership issues and other issues sufficient to allow them to remand for further hearings.

So, for the present, it is as though the original opinion never existed.  The Betty Boop trademark issue is not solved for the litigants but logo licensors are temporarily happier.

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Recently we reported that the shoe of choice for fashionistas, Louboutin, had filed an infringement action against a competitor because the competitor was selling shoes with red soles. Louboutin had obtained a trademark for such red soles.  In an opinion denying Louboutin's request for a  preliminary injunction, the Court held that no injunction would issue because it was unlikely that Louboutin would be successful in the trial on its merits because the red soles were "functional".  The Court found this in part because Christian Louboutin, himself, testified (perhaps unwisely) that the red soles provided "energy", and were "engaging" and "sexy".  This, the Court found, was not designed to identify the shoes but provided "function" and therefore was not subject to trademark.  So, red soles, along with designs on toilet paper and Betty Boop are functional.

The Court also based its decision upon the thought that chaos would result if a single color was granted as a trademark in the fashion industry.  Since Louboutin's registered trademark is for a "red' sole, the Court wondered just how red would red have to be to be infringing and would other designers race to trademark all the other colors.

Louboutin's trademark is therefore likely to be cancelled, depending on Louboutin's next legal move.  I think you might be seeing some red soled Low Bootawns in Walmart soon.

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This has often happened to me, particularly when negotiating with a large company.  Here's the scenario.  You have been working for some time (days, weeks or longer) and the parties in the room have finally struck a deal.  Your team has done some real soul searching and has stretched your position about as far as it will go.  Even at that, you are relieved that a deal is imminent.  Then, the other side says something like, "This has to be approved by [an executive, a committee, a computer or a Ouija board, etc.] in accordance with our corporate policies."  They assure you that it is merely a formality and should be a perfunctory task.  This is a little disconcerting because this had not been mentioned before, but you have few options because the deal can't be done without this approval.

So, they go off to get this perfunctory approval.  This not unlike the car salesman going into the back room to discuss your offer with the perhaps fictional sales manager.  Then, they come back with additional demands from the unseen executive, committee, computer or Ouija board and the word is that the deal will not be approved without such additional concessions.  Often, the concessions requested are not huge, but probably more than you had planned to give.  This is always very disappointing because you were already in the done deal mode and now you have to reengage.  Also, what happens if the new demands take the deal outside of the realm of reasonableness (at least from your perspective)?

To avoid this, these are the questions you should ask at the beginning of the negotiation: (1) Are all the decision makers in the room here? and (2) Will this have to be approved by any other entity?  Get a unequivocal answer.  If the answer is that someone else has to approve or some of the issues are too large for the authority of the people in the room, you can proceed accordingly.

Even taking these steps may not prevent this from happening but if you have been promised that no additional approval is required and then it is, you can engage in some righteous indignation and sometimes that's enough.

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You know our friends at Zediva, the entrepreneurs that used DVD players in a data center and DVDs they had bought to rent the DVDs and the players to individuals and stream movies over the internet to subscribers.  We chronicled their launch and subsequent encounter with the legal system here and here.  Zediva had thought their arrangement would be legally equivalent to renting a DVD and player to an individual in their home, a situation that is legally acceptable.  They reasoned that the only difference was a little longer cord, i.e. the distance through the cloud from Santa Ana, California to the respective user.

The Federal District Court, Central Division, of California recently disagreed.  In a decision that has been roundly criticized by some and lauded by others (no surprise there), the Court granted a preliminary injunction, which effectively shut down the Zediva enterprise.  Their website now shows the following:

The Court reasoned that the Zediva service constituted a public performance and that the method of providing the movies constituted a transmission, both violations of the exclusive rights of a copyright holder.  Consequently, the Court found that the plaintiff had shown a likelihood of success on the merits, a requisite of the granting of an injunction.  Another requisite is the showing of irreparable injury.  The Court solved this by reasoning that the provision of the movies by the unlicensed provider deprived plaintiff of its ability to control the use and transmission of their copyrighted works and deprived the plaintiff of revenue (the crux of the matter).  The Court also decided in a rather conclusory manner that the balance of hardships weighs sharply in favor of the plaintiffs and the public interest is best served by the issuance of the injunction.

The Court seemed to think that some kind of physical act on the part of the user, such as recording on a DVR or physically inserting the DVD in a player owned by the user on the user's premises, was required to remove the transaction from the "public performance" and transmission arenas.  Zediva maintained that this was a distinction without a difference.

This area of the law continues to evolve, although more slowly than the technology driving it.  Although it looks like it probably will not happen, it would be helpful if Zediva were to proceed to trial on this so that we could get a more complete consideration of all the issues and some judicial instruction in this cloudy area (pun intended).

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The American Bar Association is in the process of selecting their Top 100 Law Blogs (Blawgs).  We are not above groveling and therefore we humbly request that you take a few minutes from your busy day and go here or here: http://goo.gl/7oUE5 and tell them what you think about us.  So, until you are better paid, thank you.

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In the technical arena, we routinely deal with trademarks and their validity.  A basic tenet of trademark law is that if the thing that is being trademarked is "functional", i.e. useful for the product to function, it can not be the subject of a trademark.  We recently wrote about a case with which we disagreed that found that the image of Betty Boop on a purse was functional and therefore could be used on the purse without infringing.

Another case involving functionality in a trademark setting was recently decided by the Seventh Circuit and this case involved toilet paper.  The initial line in Georgia-Pacific Consumer Products LP v. Kimberly-Clark Corporation et al (Seventh Circuit Court of Appeals, No. 10-3519, Decided July 28, 2011) states: "Toilet paper. This case is about toilet paper. Are there many other things most people use every day but think very little about? We doubt it."

The case is a decision on a summary judgment motion filed by Kimberly-Clark that, inter alia, alleged that the "Quilted Diamond Design" on Georgia-Pacific's Quilted Northern was functional and therefore, Georgia-Pacific couldn't enforce an infringement action against Kimberly-Clark using a similar design on their Cottonelle product, even though the quilted design was the subject of a registered trademark.

The decision rested in large part on the fact that Georgia-Pacific had several utility patents on the design and the Court found that this was "strong evidence" that the design was functional, particularly if the "central advance" claimed in the utility patent matches the "essential feature" of the trademark.

The Court also engaged in what passes for ribald humor in an opinion.  In addition to their explosive first line described above, the puns flowed freely in the opinion: e.g. "Georgia-Pacific unrolled this suit against Kimberly-Clark", "...despite the fact that the judge dutifully plied her opinion, we now wipe the slate clean...", "[this] claim...does not hold water" and the "...judge was spot-on".  Riotous humor for a judicial opinion.

In the end [see what I did with that?] the Court held that "...if a design is functional the owner cannot trademark the design and block innovation. Georgia-Pacific, whether intentionally or not, patented their Quilted Diamond Design and claimed it to be functional. They must now live with that choice and can benefit only under the protection of a patent, not that of a trademark."

So the Court got to the bottom of the matter, flushed Georgia-Pacific's trademark claim and dispensed a double roll of justice.  

Please, may I be excused for this?

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In this series of negotiating tips, this one may be the most obvious.  

A very basic fact in deal-doing is that, if you are unprepared to completely walk away from the deal at any time, you face a distinct disadvantage.  We discussed the desirability of establishing a BATNA in the last post: the Best Alternative To a Negotiated Agreement.  If you don't have a BATNA, i.e. if you have to have the deal, you are left with a Scarlett O'Hara solution: Depending on the kindness of strangers. The other side will know if you are desperate and your effectiveness in negotiating will be impacted negatively.  The knowledge that you are in a financial bind and the deal will bail you out or it's the last week of the quarter and you need the deal to make your numbers are all information the other party is likely to have. 

Sometimes the best deals are the ones that you don't make.  This could be due to the possibility that the relationship that you are signing up for will turn out to be problematic over the long haul.  If you are unsure about whether the deal is a good one and the other party is a real problem to deal with in the negotiations, then it is pretty certain that their style will be the same through out the term of the deal. 

Sometimes you have to look outside your own goals and needs to determine whether you can walk away.  This is the case in the debt limit negotiations that are going on as I write this.  The majority of people involved on both sides seemed to share the view that the U.S. should not be allowed to reach its debt limit.  Therefore, failure to reach a negotiated agreement could redound to the detriment of an entire financial system.  So, the pressure was great to reach a compromise, even if it didn't feel good to either side.  Time will tell whether either side got what the public really needed out of this deal.

Time for another war story from an old guy.  During one deal for some real estate and mineral interests, I represented a buyer who planned to buy up coal residue, refine it into large briquette-like lumps and ship it abroad for home heating purposes.  We had arrived earlier at a price for these interests and I arrived at the closing with a cashier's check for the amount.  At the closing, the seller reneged on its earlier price and stated that they knew they had agreed on a price, but now the price had gone up (this was in spite of a signed agreement).  Although the seller probably didn't know it, the raised price was well within the price that my client had said they were willing to pay.  However, I proceeded to pound the table, call off the closing and storm out.  A couple of days later, the sellers capitulated to the price they had agreed to before (yes, obviously a very principled bunch).  We closed, my client failed to start the mining recover process on time and forfeited all they had paid up to that point and then proceeded to stiff me on my fees.  This was one that I should have walked away from and never gone back.

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