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

We all know that Louis Vuitton is very aggressive in protecting their intellectual property.  We noted that they were successful in obtaining a large judgment from the operators of a San Antonio flea market for contributory infringement.

They have continued their protective efforts unabated and two recent decisions provided them with mixed (although perhaps justified) results.

First the victory.  Louis Vuitton had filed a case against in Federal District Court in Nevada against 182 websites and 1,000 "John Does" for infringement of Vuitton's rights by manufacture, advertising and sale of Vuitton knock offs.  The Court granted Vuitton a temporary restraining order against a number of the defendants, finding a strong likelihood of success at trial by Vuitton and that immediate and irreparable harm would accrue to Vuitton without the TRO.  Louis Vuitton Malletier, S.A. v. 1854louisvuitton.com, et al., 2012 WL 2576216, (D.Nev., July 3, 2012)

Now the loss.  In Louis Vuitton Malletier S.A. v. Warner Brothers Entertainment Inc., 2012 WL 2248593 (S.D.N.Y. 2012) a New York court ruled that Vuitton's reach had exceeded its grasp when it sued Warner Bros. for referring to a knock off in The Hangover II, even though Zack Galifianakis referred to it as a "Lewis" Vuitton and it was on the screen for less than 30 seconds.  The Court found that the use in this case was protected by the first amendment and was unlikely to cause any confusion.

By the way, "malletier" is french for luggage maker.  I had no idea.

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Eisenhauer Road Flea Market is a large indoor flea market in San Antonio, Texas.  Some of the tenants of booths there sold fake Louis Vuitton products. 

Louis Vuitton notified the owner/landlords of the flea market and asked them to stop renting to people who sold such knock offs.  The landlords said that it was not their responsibility to do Louis Vuitton's work of policing the use of their brands. 

Louis Vuitton sued the landlords alleging that the landlords engaged in contributory infringement.  A jury agreed after the judge gave a jury instruction that a landlord/tenant relationship could lead to contributory infringement. 

The jury returned a verdict for $3.6 million dollars and the court issued a far reaching injunction.  The injunction provided that the defendants were prohibited from (i) engaging in further acts of contributory infringement; (ii) leasing to tenants who the landlords knew, had reason to know or have been presented with credible evidence about their dealing in counterfeit Louis Vuitton items; (iii) manufacturing or dealing in counterfeit Louis Vuitton products; or (iv) engaging in conduct that contributes, directly or indirectly to counterfeiting by a tenant.

In addition, the defendants are required to : (i) periodically inspect the booths for evidence of counterfeiting; (ii) promptly terminate the lease of anyone they find engaging in counterfeiting or if they are presented with credible evidence of such counterfeiting; (iii) include a provision in their leases prohibiting such counterfeiting; (iv) put warning signs at all entrances indicating that counterfeit material can not be sold on the premises; and (v) allow representatives of the plaintiffs to make periodic inspections for counterfeit material.

We have not yet had the opportunity to review the transcript of the case, but this seems to indicate either a case of run away jury or of egregious behavior by the defendants that does not appear in the order. This is a case of first impression in Texas and should give all landlords reason to reassess their situations. 

It is also not a large step to find internet service providers, web designers and operators or others involved, directly or indirectly, in the on-line sale of counterfeit merchandise to be in the same situation.  We had reported on one before but if this decision stands, it is likely that we will see more cases of this sort, at least in the Western District of Texas.

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PissedConsumer.com is a website that encourages consumers to complain about companies and products.  When a complaint is lodged, PissedConsumer creates subdomains and metatags using the name of the product or company complained about in the name, e.g. productname.com/titleofpostedcomplaint.html.  PissedConsumer then uses a third party to post advertisements on the complaint pages for competitors of the product or company complained about.  Opinion Corp. is the company that owns and manages PissedConsumer.com.  As an additional service, Opinion Corp. offers to help remedy the negative impact of the complaints in a number of ways and for a substantial amount of money.

Ascentive, LLC (software company) and Classic Brands, LLC (mattress manufacturers) were the victims of negative comments on PissedConsumer.com and separately brought suit against Opinion Corp. and some of its officers individually.  Their suits were consolidated for the purpose of this action.

The plaintiffs (Ascentive and Classic Brands) alleged a number of causes of action, including a request for a preliminary injunction to disable the offending pages, counts under the Lanham Act and counts under the Racketeer Influenced and Corrupt Organizations Act ("RICO"). 

The counts under the Lanham Act centered around the plaintiffs' claims that the use of their trademarks in the subdomains and in metatags constituted trademark infringement, unfair competition and false designation of origin.

For the RICO allegations, they allege that the defendant's "Reputation Management Services", which allow companies (for a large fee) to respond to the reviews and alter the format in which the reviews appear were tantamount to bribery and extortion prohibited by the RICO Act.

The Court applied the preliminary injunction standard, which requires that such an injunction issue only if the plaintiffs have demonstrated a likelihood of success on the merits.

Applying this standard to the facts, this Court found that there was no likelihood of confusion as any reasonable user would understand that this was a gripe site and not a competing site and that the use of plaintiffs' marks as described did not result in such confusion.  In addition, the defendant plead that they were insulated from liability under Section 230 of the Communications Decency Act because they were an "interactive computer service" and therefore not liable for the defamatory comments of their users.  The Court agreed.

Consequently, the Court found that the plaintiffs had not demonstrated a likelihood of success and denied the motion for preliminary injunction even though the Court expressed some uneasiness about the defendant's business practices and ethics, e.g. eliciting (some say creating) complaints, advertising such complaints, engaging in search engine optimization to cause the complaints to appear higher in the search rankings and then charging fees to cure the situation they had created.  "Ethical obligations that exist but cannot be enforced are ghosts that are seen in the law but that are elusive to the grasp."  Lyrical, but little consolation to the plaintiffs.

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Here is a couple of technology law related things that happened this week and they are only marginally connected.

1.  Facebook sued a site called Faceporn in a federal court in California.  They are aggressive about this.  See here and here.  Faceporn is in Norway but uses a .com website.  They also have 250 users in California and 1000 users in the U.S.  Faceporm failed to file an answer and Facebook moved for default judgment.  The Court denied the motion, finding that it did not have personal jurisdiction over Faceporn in that personal jurisdiction requires more than "simply registering someone else's trademark as a domain name and posting a web site on the internet".  Hence, no default judgment.

2.  In a recent  case in Massachusetts involving the claim of copyright infringement for an adult film, the judge wondered aloud in a Footnote 2 whether there was actually any copyright protection available for a pornographic product.  A couple of cases had refused to provide such protection (beginning in the early days of Broadway, see Martinetti v. Maquire, 1867) but basically on the grounds that scant dialog and nude women were not a dramatic composition and therefore not entitled to copyright protection.  A 1979 case allowed for such protection because found that the concept of decency and pornography is constantly changing and "denying copyright protection to works adjudged obscene by the standards of one era would frequently result in lack of copyright protection (and thus lack of financial incentive to create) for works that later generations might consider to be not only non-obscene but even of great literary merit".  It seems incongruous that porn is not entitled to any copyright protection but cases as late as 1998 found that hard core porn that was "bereft of any plot and with very little dialog" was not entitled to injunctive relief against copyright infringement.

So, lack of personal jurisdiction just because you have a .com domain and a question raised about copyright protection for pornography.  How do these affect technology and law?  Well, the internet issue for personal jurisdiction will continue to develop over the years, copyright issues for any medium is a hot item in technology protection and any mention of porn lights up the search engines and gets us more readers.  Reasons enough?

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We have chronicled the saga of the Winklevoss twins in these pages before (see here, here, here and here) and frankly, we're a little embarrassed we have spent so much time on this.  As you will remember, the twins succeeded beyond most mere mortals wildest expectations when they settled their claim against mighty Mark for a portion of Facebook now estimated to be worth more than 9 figures.  That definitely made them a member of the one percent.  They then decided that they had been scammed and tried a number of times to set the settlement aside.  As indicated in the posts described above, they have been singularly unsuccessful in that endeavor.

They engaged the firm of Quinn Emanuel to pursue the initial law suit against Facebook.  The arrangement with Quinn Emanuel provided for a contingency fee based on the amount ultimately recovered through suit or settlement.  They signed an engagement letter that they had reviewed by independent counsel.  After the settlement with Facebook, the twins decided not to pay Quinn Emanuel the $13 million in legal fees that Quinn Emanuel claimed under the engagement letter.  Quinn Emanuel instituted arbitration in accordance with the engagement letter.  The twins sought a court order enjoining the arbitration proceeding.  That was denied.  An arbitration panel awarded Quinn Emanuel the $13 million dollars.  The twins appealed again to the New York Supreme Court seeking to set aside the award because of the law firm's alleged malpractice.  Denied again.

The Winklevoss twins entered into a settlement that made them even wealthier than they already were.  They then decided that they didn't like what they had agreed to and have set out to avoid anything relating to that settlement.  They are zero for career in that category.  I wonder if the law firm representing them in the matter against Quinn Emanuel asked for up front payment.  They would be guilty of malpractice on their own behalf if they didn't.

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What do South Park's Butters parody of "What What (In The Butt)", Mike Tyson's facial tattoo and Muhammad Ali's catch phrase have in common?  They all serve to illustrate some aspect of intellectual property law.

As you know, South Park is a cartoon featuring a group of foul mouthed kids and in which, no subject is taboo or sacred.  A rapper named Samwell did a video that went viral called "What What (In The Butt)". (Warning: Not exactly safe for work) The central group of foul mouthed kids in South Park convinced  Butters to do a version of that video to see if it would also go viral.  It did.  Samwell sued, alleging copyright infringement.  The court in Brownmark Films, LLC, v. Comedy Partners, 2011 U.S. Dist. LEXIS 72684 (E.D. Wis. July 6, 2011)  using a method deemed "irregular" (court's own words), considered an affirmative defense as a basis for a motion to dismiss for failure to state a cause of action.  Usually, affirmative defenses are considered only after the plaintiff have proved they have a viable case.  The court then found that "The South Park “take” on the WWITB video is truly transformative, in that it takes the original work and uses parts of the video to not only poke fun at the original, but also to comment on a bizarre social trend, solidifying the work as a classic parody."  The court also found that that "...South Park’s parody of the WWITB video falls squarely within the fair use protections afforded by the Copyright Act."  Therefore, fair use and a dismissal with prejudice.

We've all seen the offensive and extremely funny movies, Hangover and Hangover II.  Mike Tyson, former heavy weight champion of the world and famous pigeon lover was in both.  The tattoo on his face was featured prominently and in Hangover II, one of the actors ends up with an almost identical tattoo and this is shone on some of the advertisements for the movies.  The tattoo design was originated by a tattoo artist in Missouri and the artist retained all rights in the design.  He brought suit for damages for copyright infringement and for an injunction to stop the release of the film.  In a preliminary hearing, the judge found that the artist had a likelihood of success in the trial and stated that a copyright could exist in the medium of expression here (Mike Tyson's face).  The judge declined to issue an injunction against the release of the film by finding that damages would be sufficient remedy.  This ruling induced the parties to settle and while the settlement is confidential it is likely that as part of the settlement,  the movie company will alter the advertisements to obscure the similarities in the tattoos.

Muhammad Ali famously coined the phrase "Float like a butterfly, sting like a bee."  The smart people advising him got a trademark on the phrase.  Kobo, Inc. has been using the phrase as a part of its advertising for its electronic reader and using it prominently in several print advertisements.  Ali's licensing company has filed suit, alleging that this improperly suggests that Ali endorses the product and since he apparently has not been paid to do so, it is apparent that he doesn't endorse it.  This suit has been recently filed and its progress will be interesting.  Maybe not as interesting as the "Thrilla in Manila" or the "Rumble In the Jungle" but nonetheless interesting to us IP nerds.

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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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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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This blog has been in sort of a TMZish mode regarding the unfolding drama of the Winklevoss twins vs. Zuckerberg.  See here, here and here.  Apparently the era of easy blog posts is coming to an end as the twins have announced through a filing that they will not pursue an appeal to the U.S. Supreme Court.

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We had written a couple of times (here and here) about the on-going battle among Apple, Microsoft and Amazon about the use of the term "App Store" as a trademark. 

Now, Microsoft, Nokia, Sony, HTC and Amazon have all registered opposition to Apple's exclusive use of such term in Europe.  Most of these companies announced yesterday that they have filed or will file opposition to Apple with the Office of Harmonization in the Internal Market, the body responsible for trademarks in the European Union.

Apple has already obtained a mark for App Store with the OHIM but this new gang of opponents are seeking to have this reversed on the grounds that such term is generic and has been used by everybody for a long time.

If Apple is able to hold on to the right of exclusive use of this mark, it would be huge.  The price of poker just went up.

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A few comments and updates:

1.  The Ninth Circuit recently held in U.S. v Nosal (9th Circuit No. 10-10038) that exceeding your employer's computer use restrictions could be criminal under the Computer Fraud and Abuse Act, 18 U.S.C. 1030 et seq.  Sec. 1030 (a) (4) states: "Whoever... knowingly and with intent to defraud, accesses a protected computer without authorization, or exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of value.." violates this statute.  The Defendant had authority to access the computer in question but exceeded his employer's written use policy and obtained some confidential information.  The Court reasoned that this satisfied the statutory requirement of "exceeds authorized access" and if coupled with furthering fraud and obtaining something of value that was sufficient to avoid dismissal.  Was the headline about accessing Facebook at work being criminal hyperbole?  Yeah, a little, but it caused you to look, didn't it?  A lesson to be learned from this is that a well crafted computer use policy will be another tool for employers to use to protect their trade secrets.  Employees' rights groups are not thrilled.

2.  We noted recently that continuing to provide certain services after actual knowledge of infringing activity could lead to liability for contributory infringement but that prior received notices were not necessarily actual knowledge. This principle was confirmed in Wolk v. Kodak Imaging Network Inc., Southern District of New York, March 17, 2011.  The Court in Wolk held that previous takedown notices from the same artist did not give rise to actual or apparent knowledge nor the obligation to police the site for infringement.

3.  Suits relating to use of competitor's trademarks as search terms continue to show up.  We had discussed a couple here and here.  In InternetShopsInc.com v. Six C Consulting, Inc. the defendants conceded liability but the Court failed to award any damages because they could not find a single sale that resulted from the infringement.  The Court did enjoin the defendant from using the trademark as a search term going forward.

4.  Louboutin is a luxury shoe retailer who started marketing shoes with red soles in 1992.  Yves Saint Laurent recently marketed shoes with the same color uppers and soles. One of these was red and therefore had a red sole.  Others were blue and green with correspondingly colored soles. Louboutin has filed an infringement action relating to the red soled variety in the Southern District of New York.  A pivotal issue in this case will be whether consumers will be confused.  Would you be confused if you were going to pay more than $1,000 for a pair of shoes?  I mean confused as to the identity, not the wisdom of paying that much for shoes.

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Companies hosting web sites and providing search engine optimization (SEO) services generally enjoy safe harbor protection from copyright infringement under the Digital Millennium Copyright Act and protection from liability for information provided by third parties under Section 230 of the Communications Decency Act, but does that protection extend to protection from contributory trademark infringement liability?  Courts increasingly have answered that question in the negative.

Let's examine one such instance.  Christopher Prince operated several websites, one of which was called "copycatclubs.com".  Through these websites (all of which resolved to a single online store), Mr. Prince sold golf equipment, accessories and apparel.  The online store was described as a "wholesaler" that was a "...one stop shop for the best copied and original golf equipment on the internet".  A shopper working for Roger Cleveland Golf Company, Inc. (Cleveland) ordered several clubs described as "Cleveland" clubs from the online store.  The shopper received the order and the clubs were branded as "Cleveland" clubs.  Cleveland determined that the clubs were counterfeit and brought suit against Mr. Prince and some of his affiliates.  During discovery, it was determined that Mr. Prince employed Bright Builders, Inc., a web site designer and SEO consultant to create and support the web sites and the business model.  Cleveland amended its complaint to include Bright Builders as a defendant and allege that Bright Builders had contributorily infringed Cleveland's trademarks.

Bright Builders moved for summary judgment with a one and one-half page motion with no supporting citations or reference to the record as is required by court rules.  The gist of Bright Builders' defense was that it was merely a "web hosting entity" and was not "...aware that Mr. Prince was engaged in illegal activities...".  Cleveland strongly disputed this and cited evidence in the record that Bright Builders created the website, assured Prince that he would make at least $300 a month from the online store, took $10,000 to provide coaching and mentoring services, provided a Project Advisor and had discussions with Prince about developing copycatclubs.com.  In fact, the Court said that the name (copycatclubs) should have alerted Bright Builders to possible infringement (even though copying is not necessarily illegal).  Bright Builders did not bother to reply to Cleveland's response.

Perhaps due in no small part to the nonchalant manner in which Bright Builders approached the lawsuit and the pleadings, the Court found that there was a genuine issue of material fact as to whether Bright Builders participated in Prince's business to such an extent that Bright Builders could be held liable for trademark infringement and denied the motion for summary judgment.  This was in December of 2010 and the case proceeded to trial.  On March 10, 2011 the jury found infringement by both Prince and Bright Builders and returned a much larger verdict against Bright Builders (the secondary infringer) than it did against Prince (the actual infringer).

So, here we are again in the Lessons Learned Department.  What steps should website developers and SEO consultants take (or not take) to minimize their exposure to a verdict for secondary liability?

Consider these principles:

1.  If the developer exerts sufficient control over the website and knows or had reason to know of infringement, the developer must not fail to take appropriate actions.  The developer does not have to reasonably anticipate that infringement will occur and generalized knowledge is not sufficient to impute knowledge of any and all instances of infringing activity.

2.  Demand letters and other notices from potential plaintiffs are not sufficient to establish a duty to act but when the developer has knowledge of specific infringing activities, it must not fail to take action to eliminate the infringing activities or it must cease to provide services to the infringer.

3.  The website hoster should have programs designed to detect possibilities of infringement and not fail to take defined steps to eliminate it when specifically found.

4.  Do not be "willfully blind" to infringement.  This means refusing to investigate when you fear the results of the investigation.  White heart and empty head is no defense.  Principles 1 through 4 above are discussed in great length and detail in Tiffany et al v. EBAY, Inc. 576 F. Supp. 463 (2008).

5.  You must not fail to do a better job of documenting your activities and responding to court pleadings than Bright Builders did.  While this might not be the developer's responsibility, the developer should be sure that it engages legal counsel knowledgeable in the area and that takes the potential liability seriously.

Therefore, the next time you are engaged to develop a website to sell Gucci bags and Louboutin shoes, do your due diligence to see if they are the real thing or you may end up taking a bigger hit than the actual culprit.  That's not optimization of any kind.

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You will remember that Apple has applied to the USPTO for registration of the mark "APP STORE".  Dedicated readers of this blog were informed in January that Microsoft was opposing the issuance of such mark for Apple.

Amazon.com is now allegedly using the term "APP STORE" to solicit software developers for future software development and distribution.  Apple is having none of that and has filed suit in the Northern District of California alleging that such use by Amazon.com constitutes trademark infringement and several other heinous sins.  The suit asks for injunctive relief, damages, a constructive trust and attorneys' fees.

It is evident that "APP STORE" has become part of the popular lexicon and if one party is entitled to use it to the exclusion of others, it is a very valuable property.  The holy trinity (Apple, Microsoft and Amazon.com) will continue to duke it out over this issue and the birds will just get angrier.

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Syracuse University once were known as the "Orangemen".  This arose from a hoax in the student newspaper about the fictional remains of an Indian chief being found during the excavation of a university building.  Because of the racist stereotype, Orangemen was eventually changed to "Orange" and the mascot now is a rotund citrus fruit known as Otto.  Now, Syracuse has moved to trademark the "Orange" .  After all, the Fifth Circuit has held that a color scheme can be part of a identifying mark if likely to cause confusion.  Other universities that embrace orange as a team color and use the term orange as part of their identifying marks and slogans have objected, including Tennessee and Auburn but surprisingly not Texas.  Maybe burnt orange is sufficiently different so as to not cause confusion.  After all, school buses, road cones, citrus fruit and pumpkins are different colors, right?

In Google's quest to rule the world, it entered into agreements with several large libraries to scan books, include "snippets" of such books in a database and allow searches of such scans.  In 2005, Google predictably was sued for copyright infringement and just as predictably raised fair use as a principal defense.  The suit was in the nature of a class action and Google had entered into a settlement of this case, which would have allowed Google to continue the scanning with the payment of certain fees.  The settlement was subject to approval by the courts but the District Court Southern District of New York said "not so fast" and rejected the settlement.  The reasons stated by the Court include that the settlement "...would grant Google significant rights to exploit entire books, without permission of the copyright owners. Indeed, the [settlement agreement] would give Google a significant advantage over competitors, rewarding it for engaging in wholesale copying of copyrighted works without permission, while releasing claims well beyond those presented in the case."

Back to the drawing board.

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We recently reported on a case where competing law firms were involved in a tussle over the use by one of the law firms of the other law firm's name as a Google AdWord.  The California court in that case found trademark infringement.

Now, another case from the Ninth Circuit comes along where one software company bought the name of the other company's product as a Google AdWord.  Advanced System Concepts licensed a product under the registered trademark "ActiveBatch".  Network Automation (whose own product is called "AutoMate")  bought ActiveBatch as a Google AdWord (doesn't anyone own a space bar?).  Advanced System Concepts brought suit against Network Automation and was granted a preliminary injunction prohibiting the use of ActiveBatch in this way by Network Automation.  Network Automation appealed to the Ninth Circuit.

The District Court applied the Sleekcraft test first espoused in AMF Inc. v. Sleekcraft Boats,
599 F.2d 341 (9th Cir. 1979), which set out eight factors in determining infringement.  The District Court held that the three most important factors in the Sleekcraft test in cases relating to the internet were: (1) the similarity of the marks; (2) the relatedness of the goods; and (3) the marketing channel used.

The Ninth Circuit held: "Mindful that the sine qua non of trademark infringement is consumer confusion, and that the Sleekcraft factors are but a nonexhaustive list of factors relevant to determining the likelihood of consumer confusion, we conclude that Systems’ showing of a likelihood of confusion was insufficient to support injunctive relief."  (Emphasis added)

The Court then went on to say:

"Given the nature of the alleged infringement here, the most relevant factors to the analysis of the likelihood of confusion are: (1) the strength of the mark; (2) the evidence of actual confusion; (3) the  type of goods and degree of care likely to be exercised by the purchaser; and (4) the labeling and appearance of the advertisements and the surrounding context on the screen displaying the results page.
The district court did not weigh the Sleekcraft factors flexibly to match the specific facts of this case. It relied on the Internet “troika,” which is highly illuminating in the context of domain names, but which fails to discern whether there is a likelihood of confusion in a keywords case. Because the linchpin of trademark infringement is consumer confusion, the district court abused its discretion in issuing the injunction."

It's important to note that the Court did not say that there was no infringement here, merely that the factors to be considered were not limited to those in the Sleekcraft case and they had to be applied in a flexible manner and therefore, the Ninth Circuit remanded for further consideration in line with these factors.

In my conversations with communications and advertising people, it is apparent that purchasing competitor's trademarks and names as SEO enhancers is a common and accepted practice.  Therefore, this emerging area of the law will be developing for several years.  So, as usual, stay tuned.

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Normal people who are not intellectual property lawyers (assumes that some normal people are intellectual property attorneys, a hypothesis not yet proven) would read the title of this post essentially as follows:  Blah, blah, blah, Betty Boop, blah, blah, blah, blah.

However, what it means in its simplest form is that the Ninth Circuit Court of Appeals in California held that a t-shirt, purse, or handbag containing the image of Betty Boop (a cartoon pinup with "a large round baby face with big eyes and a nose like a button, framed in a somewhat careful coiffure, with a very small body"), was utilized as a "functional product" as opposed to a trademark, and therefore would not be subject to a claim of trademark infringement.  

The Ninth Circuit's opinion has caused some head scratching and criticism.  The lower Court denied the Plaintiff's (the purported owner of the Betty Boop character) claims based on a determination that the Plaintiff had failed to show proper chain of title to the copyright ownership of the character and failed to meet its burden of proof of the existence of a federally registered trademark.

The Plaintiff appealed on these issues.  The Ninth Circuit could have disposed of this case by deciding any number of issues, e.g. whether cartoon characters are protectable as trademarks, whether Plaintiff owns a registered trademark in Betty Boop’s image and name, whether Plaintiff owns a common law trademark in “Betty Boop”, whether the fractured ownership of the Betty Boop copyright precludes Plaintiff from asserting a trademark claim or whether Defendants infringed Plaintiff's marks.  However, the Court opted to not take the common approach of deciding the issues before them and stated: "...all of these arguments are mooted by controlling precedent that neither party cited: International Order of Job’s Daughters v. Lindeburg & Co.633 F.2d 912 (9th Cir. 1980)." pg. 2778 (Emphasis added)

The Court held that none of the issues mentioned above is as important as the proposition in the Job's Daughters case and held: “The name and [Betty Boop image] were functional aesthetic
components of the product, not trademarks. There could be, therefore, no infringement”.

The fact that the Betty Boop character was readily visible, was not held out as officially licensed, and no evidence of actual confusion was provided led the Court to conclude that the character was what the buyer really wanted and therefore was a functional aesthetic component.

A strict application of this case could lead one to conclude that an outline of a Longhorn steer plainly visible (is there any other way?) on a tee shirt, that's not held out as officially licensed would not be infringing on a trademark.  This would threaten the collegiate and professional licensing schemes that abound and would cause the University of Texas (and many other institutions) a great deal of heartburn.

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Binder & Binder is a national law firm devoted almost exclusively to the representation of persons seeking Social Security benefits.  Disability Group, Inc. is a competing law firm involved in the pursuit of the same clients.  In 2006, Disability Group purchased the words "Binder and Binder" as a Google AdWord.  As a result, some Google searches for the law firm Binder and Binder resulted in having Disability Group appear high in the sponsored search rankings.  Binder and Binder had registered trademarks for the use of their name.  Binder and Binder brought suit against Disability Group alleging: (i) infringement of a registered trademark; (ii) false advertising; and (iii) unfair competition.

On January 25, 2011, the U.S. District Court for the Central District of California (Case No. 07-2760-GHK), found that the actions of Disability Group did in fact constitute trademark infringement.

The Court found that: (i) there was no dispute that the defendants used plaintiff's mark in their GoogleAd campaign; (ii) that plaintiffs were, in fact, the owners of the mark despite some reorganization from partnership to LLP and several assignments of the mark; (iii) according to the Sleekcraft test, there was a strong likelihood of confusion and also found actual confusion;  and (iv) plaintiffs had not given consent to such use of their mark.

Using testimony about plaintiffs average profit on a case and the number of clicks on defendant's site and some other algorithms, the Court assessed damages for lost profits in the amount of $146,117.60. 

The plaintiffs also requested an award for corrective advertising.  The standard for this is to allow the plaintiff to recover the cost of advertising undertaken to restore the value that plaintiff's trademark has lost due to the infringement.  While the Court was of the opinion that defendant's actions would have given rise to this kind of damages, they declined to award any such damages because of the limited period of infringements (a few months) and the passage of substantial time since the infringement (2006).

The Court then found that the infringement was willful and under the treble damages provisions of the Lanham Act "enhanced" the damages to double the damages for lost profits.

The Court also found that attorney's fees and costs should be awarded to plaintiff because the infringement was "exceptional", i.e. willful, deliberate, knowing or malicious.  The Court declined to award punitive damages because punitives are not available under the Lanham Act and the Court found the double damages already awarded to be sufficient.

Defendants raised several defenses including one that said basically if the plaintiffs had just put the trademark notice (the R in the circle) on their name, Google would not have let the defendants do what they wanted to do and we wouldn't have had this problem.  Basically, "if you had told on me, mommy wouldn't have let me misbehave".  The Court didn't give this much weight.

So, when lawyers litigate with each other, the rest of the world just bemusedly views it as karmic justice but this case provides good instruction about the use of trademarks as search terms.  Other cases may not be this blatant, but look for other litigation on this emerging area of the law.

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Apple filed a trademark application for the term "App Store" in 2008.  Microsoft is opposing such application and has filed a motion for summary judgment with the USPTO alleging, among other things, that the term is generic.  As you know, if a term or word merely describes what it is, then it is generic and will usually not be granted trademark protection.  Examples of generic phrases that were turned down as marks are cited in Microsoft's brief in support of their summary judgment motion and include "The Computer Store", "Shoe Warehouse" and "Discount Auto Parts Warehouse".

Want to know what the odds are that the USPTO is apt to axe "App Store"?  There should be an app for that.

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"Pop quiz, hotshot!" (Gratuitous and completely unnecessary "Speed" reference).  What do Netflix, Omega watches and used software programs on CD-ROMs have in common?

Answer: They are all affected substantially by the "First Sale Doctrine".  Those of you that routinely devour the content of this blog will no doubt remember our earlier discussion of such doctrine as it related to the right to resell a disc containing a software program.  For a quick refresher, the First Sale Doctrine is used as an exception to copyright protection and it provides that when the first sale of a copyrighted item occurs, subsequent sales, gifts or loans are not restricted by the rights of the copyright owner.  This doctrine enables libraries, used book and music stores and art galleries to function.

So, how are Netflix, Omega watches and used CD-ROMs impacted by this rule?

Netflix's brilliance was the enabling of prompt delivery by mail of DVDs.  Netflix would buy a large number of DVDs of a particular title from the distributor, usually at at discounted price and mail them out to subscribers.  Netflix could do this free of any copyright claims because of the First Sale Doctrine.  Netflix also was quick to recognize the utility and convenience of providing such material in the form of streaming video through Roku, XBox and other platforms.  The problem arises in that streaming video is not subject to the First Sale Doctrine because there is no "sale".  Therefore, Netflix must license the streaming rights from the studios and this may turn out to be very expensive.  Reports are that some studios are asking as much as $16 million per title for a two year license.  There is no indication whether these are new titles only or how this will shake out in the market place in the long run as Netflix seeks to dominate the streaming market.  The only sure thing is that it is a markedly different business model for Netflix.  They can avoid the postage costs and some of the costs of maintaining mailing centers as users transition to streaming.  However, the costs of licensing may negate that.  This could prove to be interesting.

In the case of Omega watches, Costco bought a bunch of Omega watches outside the U.S. at a discount, imported them and began selling them at a price lower than Omega sells them domestically.  Omega sued Costco alleging copyright infringement.  Costco replied that they were not copyrightable and even if they were, the First Sale Doctrine applied.  Omega said, "Not so fast, Costco" (or words to that effect), "there is an image of a globe on the back of each watch that is half a centimeter in diameter and that gives us copyright rights".  Costco, in a haughty rejoinder, said "Well, so's your Mom and we can do this because of the First Sale Doctrine" (I made up the Mom part).  Omega then pointed out that the Copyright Law states in pertinent part that the First Sale Doctrine set out in the copyright act applies only to copies "lawfully made under this title" [Section 109(a)].  Omega said since the watches were made outside the U.S. they were not "made under this title" and hence no First Sale Doctrine.  The Ninth Circuit agreed and an appeal was taken to the U.S. Supreme Court.  Justice Kagan recused herself because she had filed an amicus brief in the lower court in her role as Solicitor General and the remaining Supremes split 4 to 4, which lets the lower court ruling stand, i.e. Omega wins for now.

As we pointed out in the earlier post referenced above, a court held that if a CD-ROM contained a software program that was licensed and not sold, then the First Sale Doctrine also does not apply and resale of the used discs can be prevented under the copyright provisions.  The case was Vernor vs. Autodesk and is discussed here.  The result: You can't sell a used disc if the contents are licensed and not sold.

So, you may not be able to get inexpensive streaming movies, buy a cheaper "gray market" watch or resell that disc you bought at the garage sale down the street.  All this because our friend, the First Sale Doctrine, is not available in these situations.

It is probable that these are not the last words in any of these situations, so as we usually do to wind up these posts, we just say: "Stay tuned."

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This notice did not appear on our site (yet), thankfully, but about 70 sites were hit with this over the holiday weekend.

We recently posted on the pending legislation called COICA and noted that the forces that be were quickly drawing lines in the sand and standing rather firmly on their side of the line.  Interestingly, Homeland Security and Immigration and Immigration and Customs Enforcement supposedly obtained warrants and seized the domain names of these sites that they alleged are infringing, either by committing copyright infringement or selling counterfeit items.  As noted by this article in Techdirt, the seizure was only of the domain names and not of the equipment or other assets so some of the sites merely changed their high level domains (e.g. .com to .info), put out the word on Twitter and continued business.

Some people are worried by the apparent lack of due process in this matter and the potential for abuse.  Others are worried by the level of infringement and counterfeiting and the loss of revenue as a result.  This would call into question the need for COICA if HSA and ICE already possess these powers.  There should be a serious discussion of this whole process as the COICA legislation progresses.

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It didn't take long.  You will recall that we discussed Lamebook's filing against Facebook here in an Austin court last Friday.  Yesterday Facebook struck back with a suit in the Northern District of California. 

Facebook will hope to get Lamebook's declaratory judgment action dismissed here and then proceed with their suit in California.  There will be much maneuvering and it will rapidly get expensive, particularly for Lamebook. 

As we said before, stay tuned.

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We have been chronicling the "cyber-bullying" of Facebook (see here and here) in its quest to dominate western civilization.  Facebook has sued Teachbook and Faceporn and asked for damages and ownership of the domain names. 

Facebook has been making noises about doing the same thing to a local parody site, Lamebook.  Attorneys for Facebook and Lamebook have been discussing the issues for a while and when an apparent impasse was reached, Lamebook adopted the approach of another famous Texan and launced a preemptive strike.  It seemed evident to everyone that Facebook possessed weapons of mass distraction.  (Sorry. Should have, but couldn't resist.) 

Lamebook has filed for a declaratory judgment (a copy of the complaint and a good description in found here on TechCrunch) alleging that Lamebook is not a social site like Facebook and is a parody of Facebook and as such, is not infringing on Facebook's trademark.  For good measure, Lamebook throws in some First Amendment constitutional issues, claiming that it is engaging in protected free speech.  A declaratory judgment action just asks the court to rule (i.e. declare its position) on certain issues without necessarily providing any other remedies.

This seems like a pretty good move on the part of Lamebook.  It keeps the suit in a Texas court, at least for a while, it is great publicity for Lamebook and everybody loves a David vs. Goliath story.

If this works out well for Lamebook, look for Facebook to begin talking less and filing more suits.  Stay tuned.

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You may recall that we recently discussed that Facebook had unleashed the dogs of war on a website called Teachbook, a social network for teachers.  Messing with teachers is one thing, but now Facebook has stepped up their game a notch and has filed a similar action against something called Faceporn.  Until recently, Faceporn unpretentiously called itself "the number one socializing porn and sex network".  Now, it just calls itself down due to "unforeseen circumstances".  Like the suit against Teachbook, Facebook is asking for all of Faceporn's revenue and ownership of its domain name.  Faceporn says it is redesigning its site and will come back with the "best porn site the world has ever seen".  It's nice to know that Faceporn retains its humility through trying times.

Look for more of these suits from Facebook and maybe from others.  YouTube is yet to take on YouPorn, but that may just be a matter of time.   

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Once upon a time, most schools distributed annuals or pictures, names and some personal information about students so that other students could make connections. Then Mark Zuckerberg hacked into the Harvard computers and obtained private information of students and put that into a Hot or Not knockoff called “Facemash”.
Harvard threatened Zuckerberg with expulsion, charges for breach of security and copyright infringement. Harvard later backed off and the rest is history.
Fast forward to today and the behemoth that has now evolved from Facemash to Facebook is rigorously trying to keep anyone from using either “Face” or “Book” in their name if the entity is remotely associated with social media.
Facebook recently induced a site called Placebook to change its name to TripTrace and has now filed suit against a site called Teachbook, which is not even operable yet but purports to be an online information sharing vehicle for teachers (a large number of whom are prohibited from being on Facebook by school administrators).
Facebook is alleging in the suit against Teachbook that the term “Book” is highly distinctive and that most people associate it with social networking. Facebook throws in a claim of cybersquatting and wants the court to give it the domain name Teachbook. For good measure, they included counts of trademark infringement, unfair competition, and trademark dilution. Teachbook has only a couple of employees. Hello fly, meet cannon.
This indicates that Facebook will be aggressive against any online vehicle containing any variety of “Face” plus something or something plus “Book”.
No word yet on their stance on BookFace (actual trademark application made and abandoned several years before Facebook came around).
 

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Consider this abbreviated time line:

November 5, 2007 - Google, T-Mobile, HTC, Qualcomm and Motorola announce the release of Android and announce the creation of The Open Handset Alliance comprised of 34 companies that will free the mobile world of all restrictions (the last part is made up).  Nowhere in the announcement does Java get mentioned.

Same day (almost like they knew it was coming) - The Chairman and CEO of Sun (possessor of Java) heartily congratulates Google et al on the release of Android and hails the salutary effect it will have on the Java community.  The blog entry goes out of its way to call Android a "Java/Linux phone platform" and "a Java based platform".

April 20, 2009 - Oracle buys Sun.  In the press release announcing the sale, Oracle calls Java "the most important software Oracle has every acquired."

 August 12, 2010 - Oracle files suit against Google alleging "In developing Android, Google knowingly, directly and repeatedly infringed Oracle's Java-related intellectual property. This lawsuit seeks appropriate remedies for their infringement."

Now what happens?  Google will claim that they aren't using Java but built their own version of this platform called Dalvik using approved clean room methods and therefore haven't infringed on anything.  Google hasn't filed an answer yet and probably won't for some time.  Then the fun will start.  This has the potential to be a very visible and influential suit with ramifications for years to come.  Google is not likely to be the last company with Defendant after their name in this matter.  There are millions and millions of devices with Android running on them.  Plus it involves some heavyweights.

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