Last week, Abercrombie & Fitch CEO Mike Jeffries admitted he didn’t make A&F clothes in larger sizes. His reasoning: beautiful thin people attract other beautiful people to wear A&F’s clothing; and unattractive fat people detract from his stores. Then came the immediate firestorm of fury on social media sites like Twitter and Facebook, encouraging people never to shop there. One consumer even bought A&F merchandise and handed it out to the homeless (his idea of a brand readjustment).

For A&F’s part, it remained silent. No doubt Mr. Jeffries got a tongue lashing lecture on tact from his board of directors, but nary an official comment came from HQ, and Mr. Jeffries is now noticeably out of the press. Regardless of what can be gleaned from the company’s silence, it probably did the right thing. A brand owner’s response to its detractors can become part of the brand if not deftly handled. Worse, attacking the messengers, no matter how unfair the criticism, is liable to bring out the worst in all of us. Amy’s Baking Company learned that lesson this week.

Like thousands of people across the country, many at this law firm were riveted this week by the story of Amy and Samy Bouzaglo, whose bizarre television appearance and on-camera behavior on Gordon Ramsay’s Kitchen Nightmares catapulted them to infamy overnight. Although the buzz on the couple has not died down, and the lessons learned are still trickling in, one thing is sure: in the social media age, more than ever, a brand embodies the personality of those at the helm, and social media magnifies their warts and, thereby, those of the brand. How you respond in a digital world is as important as the product you put out.

Amy and Samy Bourzaglo appeared on an episode of Kitchen Nightmares, asking for help from television chef and restaurant turnaround king, Gordon Ramsey, to rejuvenate their failing restaurant. At the outset, the couple believed all their problems stemmed from some unfair and vicious reviews on Yelp! It didn’t take long, however, for the cameras and Ramsey to light on the real problem: poorly prepared – and often bizarre – food, a painfully slow kitchen, abusive owners who admit to stealing tips from the wait staff and serving store-bought food, and who verbally abuse and eject customers who complain about undercooked pizza or long wait times.

Watching the married restaurateurs make one public relations blunder after another on national television, in newscasts, and on social media sites made most of us wince and laugh at the same time. No doubt, the Bourzaglos episode will be among the highest rated. Yet, it’s not likely the couple or their brand will recover from it, largely because in the face of harsh criticism it chose to lash out. Here’s what their gaffes can teach us.

Social Media Is Difficult To Control: Companies cannot always control the messages of consumers and should not try.

Numerous websites and news organizations have covered what has now become known at “The Meltdown, ” in which Samy and Amy, owners of Amy’s Baking Company, lash out at Facebook users’ messages that take issue with them for bad food and stealing their servers’ tips. In response, Samy and Amy hurl vitriol at their users, calling them losers, haters, morons, and liars, hurling epithets, and using profanity and shouting (through the use of ALL CAPS) to punctuate their points.

When it became clear they were on the losing end of a media battle, the couple removed their vitriolic postings (which also removed the 10,000-plus comments), and claimed their page had been hacked. This significantly slowed down the hate-traffic on Facebook, but it did something worse, it moved people to Yelp!, where Samy and Amy could not manually remove the posts.

While Facebook has some tools that allow internal management of one’s online presence, other sites, such as Twitter (in which individual users can aggregate tweets using hashtags) do not allow for interference from third parties. Companies should recognize the potential damage that can be caused to a brand before trying to quash bad press with censorship attempts. In the end, it could leave them playing “whack-a-mole” with other, less controllable sites. And leave them explaining not only their comments, but their attempts at censorship.

The Dog Catcher Shouldn’t Call the Vet a “Hairball:” People will stop at nothing to undermine your message if you undermine them, so don’t.

When Abercrombie’s CEO dipped his foot in the holier-than-thou water of beauty, he probably realized people would call out his own lack of attractiveness, but people dug deeper still to hurt the brand that hurt them. For example, former employees responded by revealing A&F’s policy to intentionally damage clothes with scissors rather than make them a available for donation to the poor.

Similarly, when Amy Bourzaglo began a flame-throwing digital tirade against the criticism she received for stealing her employees’ tips, calling online fans fakes, morons, frauds, and thieves, they struck back with a vengeance. It didn’t take long for the public to learn she was the fraud. The deep-digging public was quick to disclose Amy (her real name, Amanda) was convicted of using a fake social security number and sentenced to 14 months in prison. Soon after that revelation, likely in response to Amy’s continuing sound-off,, one concerned member of the public started an online petition to have the federal government investigate her for illegally taking the tips of her waitstaff. Query whether a simple apology from Amy for her objectively bad behavior rather than an attack might have left her in a better position.

Perhaps Amy should have taken a page from the PriceChopper book. In 2010, a shopper at Price Chopper sent out a negative tweet and photo when she saw a pile of garbage in one of the aisles. The PriceChopper social media employee might have replied to the tweet with an apology about the store’s condition, but instead, in a move that makes one wonder whether Amy was at PriceChopper at the time, called the tweeter’s employer and demanded disciplinary action. Unthinkable. Finding itself in the midst of a customer relations nightmare entirely of its own making, the company got wise and issued an apology, going so far as to agree to participate in a social media conference to discuss how the situation escalated. Amy has yet to have such a revelation and make any attempt to make up for her objectively inappropriate actions.

The digital age, the easy availability of decidedly personal and embarrassing information, all coupled with the ability to disseminate the information through social media should be warning enough that defending oneself online by attacking the messenger is a bad idea.

Whoever is at the Helm is at the Heart: Social Media Means Every Action Affects the Brand.

There was a time when a comment from a spokesperson might be isolated to a tiny news story that only a handful of people saw. The scuttlebutt about “last night’s comments” would end at the water cooler, and at worst, the company could issue a statement distancing itself from whatever embarrassment happened the day before. In all likelihood both would go unnoticed.

Today, a company spokesperson IS the brand and the likelihood than anyone will not have heard whatever faux pas he or she uttered is zero. Moreover, because social media has the tendency to amplify a statement, perhaps beyond its original intent, a brand can quickly go from riches to rags over the smallest infraction.

Consider the 2010 case of the Susan G. Komen Foundation, in which Karen Handel became the face of the organization after she announced the Foundation’s decision to defund Planned Parenthood. Although it was a decision she was not solely responsible for making, she became the brand identity overnight. Against a stream of bad press, Handel was forced to resign in order to offer the brand any hope of rehabilitation. 20 years ago, her comments might have been a blip on the radar. Social Media has changed the intensity of the spotlight.

Mike Jeffries’ recent statements are not likely to destroy the Abercrombie brand, largely because his brazen manner and off-the-cuff remarks are not foreign to consumers and Abercrombie has not fanned the social media flames to push consumers away. Some might argue his comments which were global in nature and not personal attacks are even consistent with a brand whose goal is to remain patrician and elite. Amy and Samy may not be so lucky. Amy’s Baking Company – through its owners’ words and actions – is now synonymous with deceit at best and mental illness at worst, forcing would-be restaurant patrons to consider whether a visit is worth the predicted abuse. If the company is to come back from the disaster the coupled fomented, their contrition should come quickly.

The World Loves a Comeback: Social Media Can Be a Brand’s Salvation.

Contrition goes a long way. Just ask Gilbert Gottfried who got a second chance after a heartfelt apology for making insensitive jokes about the Japanese after its horrific earthquake. While AFLAC quickly terminated his duck-spokesperson contract after the incident, his apologies got his fan base to urge the insurance company to bring him back.

Similarly, when a rogue tweet made the Red Cross appear as if its volunteers were drinking on a disaster site, the Red Cross took quick action. The company’s quick response (which included a humble note that it had confiscated the keys) was so heartfelt and human, the guffaw went from a PR nightmare to a compassionate call to action, with consumers using social media to call for and collect donations to support the nonprofit’s mission.

Time will tell whether Amy and Samy will admit their mistakes – social media and otherwise – and seek forgiveness from their fan base. That the company claimed the horrific comments made on their Facebook page were the result of being hacked when clearly they were not does not bode well for their turnaround. That said, if they decide on brand rehab, the very tools that brought them down could make them stars.

Since its release in March, 2013, “.com Disclosures” is the new hot read among ad law geeks and insomniacs, but it should be on the desk of every mobile and digital marketing executive in America. The FTC is taking the hard line when it comes to disclosures on electronic and tiny screens, and failure to act could result in some one-on-one time with FTC.

Acknowledging digital advertising – particularly mobile advertising – often has space constraints, the FTC nevertheless is tightening the reigns on disclosures in them. Its new guidelines clearly suggest the FTC means to uphold the mandate of Section 5 of the FTC Act (the “Act”), regardless of the medium.

The new dot com guidelines are not a rewrite of the Act; the rules are the same. They are a clear acknowledgement, however, that digital advertising is not immune from the Act’s proscription on deceptive ads or practices, that digital advertising can be more deceptive than other forms of advertising, and that advertisers are going to have to take care not to ignore their obligations. Perhaps most importantly, the new guidelines serve as an advertising roadmap for how the FTC will review digital advertising pursuant to investigations relating to false advertising. As the advertising world balances space constraints and digital advantages of using certain media with its obligation to make disclosures and disclaimers clear and conspicuous, the new guidelines suggest the FTC is closely watching.

Online advertisers have long been engaged in the practice of placing disclosures and disclaimers below the initial window seen by a consumer, the area colloquially known as “below the fold.” While the new guidelines acknowledge practical considerations may require disclosures to be in inconvenient locations, it’s clear the FTC will be scrutinizing the distance between the claim and any disclaimer. Similarly, the FTC has taken into account flash technology, making clear it will examine whether other parts of an ad are designed to “distract attention for [from?] the disclosure,” even with the requisite information present.

The FTC understands the consuming public is no longer viewing digital content on the large screens on their desktops and laptops, but rather has migrated to handheld devices, such as tablets and smartphones. The guidelines make clear advertisers are required to consider the medium, eliminating an advertiser’s defense that its disclosure was present but designed for a bigger viewing screen.

When space constraints do not enable the advertiser to place the disclaimer or disclosure near the ad claim, the FTC will be looking for a conspicuous link in close proximity to the claim. The guidelines go on to identify that this link must convey the importance of the information contained in it, must be as close as possible to the relevant ad claim, and must be in a style that conveys it is an actual link to more information. In fact, the new guidelines specifically require that – no matter how it’s done – the disclosure must be displayed before the consumers makes a decision to buy. By example, it states “before they ‘add to shopping cart.’”

None of the foregoing should surprise advertisers, given the Act’s longstanding requirement that consumers have reasonable access to information they need to make an informed decision, but the FTC is going further, taking advantage of technology’s ability to provide advertisers with consumer behavior information: the guidelines require monitoring of any linked information to determine whether the placement is effective. We can infer from this new direction that the FTC’s tolerance for advertiser excuses is waning, and it will be looking to linked disclaimer feedback as a determinant of intent to deceive.

Closing the door on, “but judge, I had no choice but to leave out the disclaimer,” the new guidelines make clear that if an disclosure is needed to clarify the ad and it cannot be practically displayed, the ad should not run. Period.

The digital frontier is meeting the industrial age. Advertisers have long been able to take advantage of ambiguous loopholes as they related to the ad-technology space, but the door seems to be closing on defenses to misleading the public. Advertisers will continue to hawk their wares online, to be sure, but the arbitrage opportunity window is narrowing.

Nike sued competitor Already (dba Yums) in New York federal court for infringement of its registered trade dress in the super popular Air Force 1 footwear, an example of which is shown above. Yums filed counterclaims for declaratory relief that there was no infringement and that Nike’s Air Force 1 trade dress was invalid, seeking cancellation of the USPTO federal registration in the process. Upon conducting discovery, Nike determined that Yums’ conduct did not rise to the level of infringement and issued a fairly broad covenant not to sue — by which Nike agreed not to file any claim for trademark infringement or related claims “based on the appearance of any of [Yums'] current and/or previous footwear product designs, and any colorable imitations thereof, regardless of whether that footwear [was] produced, distributed, offered for sale, advertised, sold, or otherwise used in commerce before or after the Effective Date” of the covenant. The covenant also covered Yums’ distributors and customers.

Naturally, the court dismissed Nike’s claims and Nike subsequently sought to dismiss defendants’ counterclaims. In an aggressive move, Yums opposed, claiming it had the right to proceed with its request for cancellation of the Nike trade dress registration.

On January 9, 2013, the Supreme Court affirmed the Second Circuit’s dismissal of defendants’ counterclaim. The broad scope and breadth of the covenant not to sue removed any “case or controversy” between the parties, such that the court no longer had subject matter jurisdiction over the matter. Nevertheless, Yums could still pursue cancellation at the Trademark Trial and Appeal Board.

Practice Notes :

Setting aside the interesting procedural issues in this case, we believe Already v. Nike highlights the following practical considerations for trademarks owners and practitioners:

1. Seek trade dress registration when you can: regardless of the result in this particular case — and whether Yums successfully seeks to cancel Nike’s trade dress registration– companies sometimes overlook seeking proactive protection for their unique packaging or product design or the distinctive appearance and characteristics of their product or service offerings.

2. Refrain from pursuing a potential infringer unless you are reasonably certain your claims rely on strong, compelling senior rights and that any of your underlying registrations are not vulnerable to cancellation. Of course, it’s always possible certain facts will not be revealed until discovery is conducted, but it’s a good idea to slow down and carefully weigh all the facts available before throwing valuable corporate resources into a trademark dispute that could backfire.

3. When issuing a covenant not to sue, make it sufficiently broad in scope, as in this case. Also keep in mind Justice Kennedy’s dissent: covenants not to sue should not routinely be used in an effort to moot litigation that a trademark owner initiated.

The shape Nestlé’s iconic Kit Kar bar has been found to be distinctive, so says the appeal board at the Office for Harmonization in the Internal Market in the United Kingdom (“Office”). Denying Cadbury’s claim that the shape of the chocolate bar was not protectable on the grounds that it was too commonplace a shape, the Office opined that the “four bar” shape had been in such exclusive use for so many years in the UK, consumers had come to recognize it as being part of the Nestle family of marks.

Cadbury has, since 1935, sold the candy bar, Carmello, which also uses the 4-bar shape. Unfortunately, the English candy company does not sell the bar in the United Kingdom; only in other EU countries. Despite the fact that Cadbury provided evidence of its long-standing use of the “four-bar” shape outside the UK, such evidence did nothing to melt the Office’s chocolate heart. Cadbury is considering its options at this time, and may appeal that decision, which itself was an appeal from a lower decision finding Cadbury’s position that the “four-bar” shape was generic.

Practice Note: This case is important because it underscores two very important trademark principles. First, trademark rights are national in scope, and a company does not have a registration, it should have use. Although many courts will allow the introduction of evidence that a trademark is used in another country, it may not be determinative at the end of the day. The case also makes clear that trademark owners should consider all aspects of their product for trademark coverage. Companies often only look to the name and the packaging to determine whether trademark protection is warranted. The shape of the product may also provide some protection opportunities.

Summer has been a banner season for learning – or re-learning – what we thought everyone knew: the internet travels at warp speed; covering up mistakes is a brand’s E-ticket ride to the outhouse,; and timing is everything.

Experimenting with new media necessarily gives rise to mistakes and unintended consequences of brand messaging. Tolerating a certain number of judgment errors is the cost of learning how to capitalize on new media and spread around information about the brand. Companies can, however, hedge their bets by learning from the mistakes of others and remembering a few simple rules as they push out their branding communications.

Be Yourself
Since advertising began, companies have tried to connect with consumers by establishing themselves as the preferred brand among people “just like you.”

Sony was one of the first to be hoisted on its own hip-hop petard, when it introduced its latest version of the PSP, which it hoped to push during the Christmas season. Not wanting to wait for actual reviews by edgy gamers of its new PSP, Sony planted fake blog posts, purported to be from a local rapper-style gamer. Within hours, the origin of the fake posts were discovered and Sony was ridiculed as a stodgy company vying for credentials it never had.

Fortunately for Sony, it didn’t make a bad situation worse by trying to cover it up. Instead, in the place of the blog post it wrote:

Busted. Nailed. Snagged. As many of you have figured out (maybe our speech was a little too funky fresh???), Peter isn’t a real hip-hop maven ad this site was actually developed by Sony. Guess we were trying to be just a little too clever.

The company added it would stick to making games in the future, and has kept that promise since 2006.

Be yourself: a simple concept, but one that has been lost in the marketing departments of too many companies. Indeed, phony online endorsements are so frequent that the FTC had to clarify its false advertising standards in 2009, making clear that any relationship between a company and a party online must be disclosed to consumers, or the company could face liability for false and misleading advertising.

Honda was recently embarrassed when it was discovered its director of product planning posted his love for a new Honda vehicle as if he were a curious car-shopper rather than an employee. The action not only opens up Honda to FTC scrutiny, but made Honda look silly.

In the wake of The Jim Henson company pulling its toys from the Chick-Fil-A chain last week, Chick-Fil-A has recently been accused of putting up a fake Facebook fan to bolster the company’s claims about why it no longer carries Muppet toys. Well-meaning fan or company plant, such posts have reduced the credibility in the eyes of consumers.

The quickest road to credibility is to be who you are in the online space. Deviating from your corporate persona is sure to be discovered and likely to cause problems. Don’t be tempted.

Know What You’re Saying
There’s nothing worse than using Twitter to deliver up-to-the-minute information, only to discover your communication is inaccurate, old, or divisive. In June, CNN sent instant texts and tweets out that the Supreme Court had overturned Obamacare only to discover it had gotten the story wrong, and had to issue a subsequent message. Such an error from a news organization is embarrassing, but under many circumstances can be forgiven. Some companies, however, may not be so lucky.

Last week, in the wake of one of the biggest shooting massacres in Colorado history, a women’s clothing company in the UK sent out a link to its site using the following tweet: “Aurora is trending, clearly about Kim K inspired Aurora dress. ;-) Shop”[.] The online merchant later admitted it had not taken the time to determine if the tweet was accurate. While the company removed the insensitive tweet and apologized for the mishap, it may have inadvertently tanked sales on the dress.

The consequences of even truthful tweets can raise unintended issues. Recently, Mitt Romney tweeted his respect for Sally Ride and touted her as a personal inspiration and among the greatest of pioneers. The tweet was admirable, and in all likelihood accurate, but it nevertheless caused a stir among gay rights activists. The tweet called into the public eye Mr. Romney’s stated position on gay marriage, and caused a social media hornets’ nest that his campaign might have avoided had it though twice about the comment.

Never Attack the Messenger
Companies frequently take great pains to train their customer service representatives to handle angry or disgruntled callers with kid gloves, but often fail to make the connection between customer service and online communications. The nature of social media is to drive and support interactivity between the customer and the brand. Yet most companies fail to provide even the most modest training in decorum to their employees responsible for social media monitoring.

Price Chopper got national attention for its unpolitic reaction to a consumer’s tweet. The consumer tweeted a photo of a disheveled grocery aisle along with the comment: “Every time I go to @PriceChopperNY I realize why they r not @wegmans.” Angry at the insinuation that Price Chopper was beneath the level of a competitive brand, the public relations specialist at Price Chopper not only sent the customer nasty comments from her personal Twitter account, but also contacted the customer’s employer, saying his tweets were negative and destructive.

The firestorm that erupted from customers made the rogue Tweeter’s comments seem tame. Word travelled fast, and Price Chopper found itself at the wrong end of a PR nightmare.

When customers got on the online offensive, brand owners should take the same position they do with their phone calls. Listen and then investigate. Penalizing the consumer is only going to increase the likelihood the story – and the problem – will never go away.

Nestle’s Kit-Kat division picked the wrong era to start a war with consumers. Nestle thumbed its nose at consumer requests for it to change its palm oil supplier to one that was not harming the rainforests. Angry at being rebuffed, activists changed the KIT-KAT packaging to read KILLER, causing Nestle to launch a trademark infringement offensive, which resulted in the activists creating horrible videos in which Kit-Kat bars appeared to be made from Orangutan fingers.

At the end of the campaign, Nestle agreed to change palm oil carriers, but not before serious damage had been inflicted on the brand. Had Nestle used social media to engage its consumer, it might have bought itself some time and a reputation for being responsive.

Edgy is not Always Appropriate
Any comedian will tell you: timing is everything. Whether something is funny or offensive is partially related to who the audience is, but when a tragic event is too recent in the minds of the consumer, jokes and edgy marketing campaigns can backfire.

Consider Kenneth Cole’s 2011 tweet about the Cairo uprising: “Millions are in uproar in #Cairo. Rumor is they heard our new spring collection is now available online . . .” The communication did not go over well with followers who were quick to point out that Kenneth Cole’s making light of people dying in the streets to sell fashion was in poor taste.

In the wake of flaming Twitter attacks, the shoe company tweeted it didn’t mean to make light of the matter, but history suggests it meant to do exactly that. Earlier the company executed a print media campaign that equated abortion rights with a handbag choice. The ad, posted on billboards, displayed a woman carrying a handbag, with the words: “Should it be a woman’s right to choose if she’s the one carrying it?” Consumers didn’t buy it, or the lukewarm apology Kenneth Cole sent out.

After the Japan Tsumani disaster , comic Gilbert Godfried tweeted “I just broke up with my girlfriend, but as the Japanese say, ‘They’ll be another one floating by any minute now.’” AFLAC was quick to pull his spokesman contract after consumers decried the insensitivity of his comments.

Being on the cutting edge of an issue or joke displays a certain level of intellectual savvy that many companies – particularly those going after the 30-something-with-money crowd want to showcase. The line between funny and offensive or insensitive is thinnest when issues are most current. Breathe, watch, and take a moment to think.

Admit Your Mistakes
The practice of denying involvement in an embarrassing gaffe might have worked prior to Watergate, but the Internet makes sleuthing out the truth faster and easier — just ask Congressman Weiner. The ever-growing list of companies and people who’ve inadvertently “messed up and stepped back in it” has made clear: the quickest way to a firestorm is to downplay your involvement. The fastest way to clear it up is to apologize and correct the problem.

Apologies can come in different forms, but what consumers seem to be looking for is an acknowledgement of the problem and a sense of humor. Anything short of that is not going to be effective.

Bob Parson of GoDaddy knows the sting of the defensive position. Already teetering on the edge of a misogynistic public image, the Internet CEO tweeted “Just back from hunting problem elephant in Zimbabwe. Here’s my vacation video.”

In response to GoDaddy followers suggesting his actions were barbaric, he defended his killing of the endangered animal. As a result, a campaign was started to move domains from the GoDaddy platform. A simple removal of the offending tweet and an apology might have kept the matter from affecting his brand.

Earlier this year, Susan G. Komen executive Karen Handel was forced to resign after taking a defensive stance on her decision to cut funding to Planned Parenthood. A quick apology and restoration of the funds might have saved face for Komen and a job for Handel.

We can take a page from the Red Cross book. Last year, an employee – believing he was on his personal account – tweeted the following using the Red Cross Twitter name: “Ryan found two more 4 bottle packs of Dogfish Head’s Midas Touch beer…. When we drink we do it right. #gettingslizzered.”

As soon as comments came in questioning whether it was appropriate to be drinking when saving lives, the culprit quickly acknowledged his ineptitude, using his own account, and Red Cross tweeted: “We’ve deleted the rogue tweet but rest assured the Red Cross is sober and we’ve confiscated the keys.”

Drinkers of Dogfish head beer (including Dogfish itself) started a donation campaign for the Red Cross “because they handled that @dogfish / #gettingslizzered tweet so well.” Properly handled, the mistake became a money-maker for the Red Cross, and while not everyone can turn a gaffe into an opportunity, the result makes clear the public is willing to forgive under the right circumstances.

Brands can benefit tremendously from the viral nature of social media campaigns. Companies on the cutting edge of technology will surely find ways to use various online tools, such as Twitter and Facebook, to promote their brands, and the further they push the envelope, the more likely unintended consequences will occur. We cannot know what major guffaw will grace our feed tomorrow, but we can at least learn from what happened yesterday.

The TTAB recently released a non-precedential opinion cancelling registration of this mark,

and rejecting registrant’s parody defense. Where will this opinion fall in the lineup of parody cases?

The opinion arose out of Polo Ralph Lauren Corporation’s cancellation proceeding against Thread Pit, Inc.’s registration of the above-referenced mark in connection with t-shirts and collared polo shirts. Thread Pit sells $5 t-shirts on line. Based on the facts supporting fame in the opinion, I think you know what Ralph Lauren sells. Ralph Lauren alleged likelihood of confusion and dilution and that its mark:

is famous.

The Board’s opinion gave short shrift to Respondent’s argument, “[i]f Petitioner’s Polo Player mark is so famous and recognized, it is unlikely that consumers would believe goods bearing Registrant’s mark came from the same source.” The Board referred to this argument as academic hogwash and failed to even footnote Chewy Vuiton, a 4th Circuit case; in fact, the Board went out of its way to mention its reviewing court, which as we all know, is not the 4th Circuit. The Board stated: “Respondent’s argument . . . is counter to legal precedent of the Board and the Board’s primary reviewing court, the Court of Appeals for the Federal Circuit. As stated by the Federal Circuit: While scholars might debate as a factual proposition whether fame heightens or dulls the public’s awareness of variances in marks, the legal proposition is beyond debate. The driving designs and origins of the Lanham Act demand the standard consistently applied by this court – namely, more protection against confusion for famous marks.”

After an analysis of the parties’ goods (identical), channels of trade (same), classes of purchasers (same), and similarity of marks (similar in commercial impression), the Board returned to the parody defense. Ralph Lauren’s pony definitely came out ahead.

“Parody is not a defense if the marks are otherwise confusingly similar” the Board wrote, quoting Boston Red Sox Baseball Club LP v. Sherman, 88 USPQ2d, 1581, 1592 (TTAB 2008). This argument seems reasonable and even supported by statute: parody is a defense as long as your parodying mark is not a source indicator says the Lanham Act. In that way, the Lanham Act allows traditional trademark principals such as likelihood of confusion, prior use, and restraints on trade to trump first amendment concerns. But the Board didn’t go that far in explaining its reasoning. Instead, the Board relied more fully on a different basis. Basically, the Board did not believe Respondent was parodying Ralph Lauren’s pony but was instead parodying “a lifestyle.” Indeed, Respondent argued it was parodying the “social elite as embodied by the sport of polo, which is perceived to be a sport reserved for the elite. The rider falling off the horse is the parody of that elite, luxury lifestyle. And of the humor in seeing someone fall off a horse, somewhat like slapstick comedy.” Where Respondent lost its way was in its failure to connect the POLO brand, a symbol of that “elite lifestyle,” to the rest of its argument. Isn’t the Ralph Lauren polo player emblazoned on an $85 polo shirt a symbol of the “elite lifestyle” Respondent is parodying? And wasn’t that the target of Respondent’s parody? Failing to take the argument one step further left the field open for the Board to say, “parodying a lifestyle is not a parody of a trademark” and rely on Elvis Presley, a case with a substantially dissimilar parody versus trademark set of facts.

Even if Respondent had connected those dots, would the Board have been able to rely on the recent TTAB decision in Crackberry to reject the parody argument? In Crackberry, full opinion here, the parody defense didn’t work because the applicant’s services, “online retail store services featuring consumer electronics and telecommunications products,” were found to be “closely related” to the opposer’s handheld devices. As such, the opposer’s goods were not a “juxtaposition of the similar and dissimilar.” In other words, you can’t parody a product when you provide support services for it—that would be akin to making fun of the popular kids while simultaneously ironing their cheerleading uniforms. The Crackberry Board, the Board cited Chewy Vuiton where a $10 dog chew toy was found to be a legitimate parody of Louis Vuitton’s $1190 handbags.

Would Respondent’s $5 t-shirt have been a sufficient “juxtaposition of the similar and dissimilar” when compared to Ralph Lauren’s $85 polo shirt?

Practice pointer: Parody is tough to argue successfully. You better make the judges laugh, and you better have an actual paradoxical product or service, otherwise, you’re just infringing. Cobalt thinks a good tag line making your point clear wouldn’t hurt either:

Watch the 1% Fall

Recently, news of California medical marijuana dispensaries selling a strain called “Linsanity” set loose Jeremy Lin’s lawyers—demand letters a flurry allegedly seeking apologies. This isn’t the first time a celebrity name has been used in connection with medical marijuana—does Tom Cruise Purple, aka Purple Cruise ring a bell?

Lin’s trademark attorney, Pamela Deese, commented to the media that, “You can’t file a trademark when there’s a clear connection to someone else’s name . . . [i]n this case, Jeremy Lin has the right to his name and related names and marks, as well as his signature, voice and likeness. That’s all part of his intellectual property.” See here

Certainly using a famous name without permission on any product, much less medical marijuana, is sure to raise some eyebrows. There are several bases on which to form a claim. To put an end to LINSANITY brand medical marijuana, Ms. Deese could assert Mr. Lin’s protected right of publicity. In California, the right of publicity protects the unknown and well-known from impermissible uses of their name or likeness. Although the claim does not have to be based on use of an actual name or picture, the alleged impermissible use must at least identify the plaintiff.
Nicknames, cars, even robot likenesses have been found to satisfy the requirements. Is Linsanity a nickname for Mr. Lin or a reference to his explosion onto the basketball scene? Does it make a difference?

Ms. Deese’s assertions also might be referring to a claim for false endorsement under the Lanham Act, which does not require a trademark as the basis of the claim. A claim under the Lanham Act may be based on the “celebrity” of the plaintiff. No one wants to insult Mr. Lin by suggesting he isn’t famous enough to raise this cause of action . . .

Ms. Deese also might be referring to garden-variety trademark infringement based on Mr. Lin’s pending application to register the mark LINSANITY for various goods including, duffel bags, cups, mugs, clothing, action figures, sporting goods, and sports drinks. Likelihood of confusion with medical marijuana? How about tarnishment of Mr. Lin’s famous mark? Things are getting personal again.

Practice Note: Cobalt has been talking about this issue for some time; in fact, we’ve dedicated two different Cobalt Academy sessions to copyright and trademark issues related to medical marijuana. March 2011 Academy.

What do we think? For starters, don’t use a famous name without permission. And don’t think that trademark protection isn’t a viable strategy in the world of medical marijuana—for instance, we’ve proposed measures such as seeking state registrations and ensuring that your brand strategy is law-abiding. In unchartered waters, treading legally is the best step toward protecting yourself and your customers’ best interest.

One of the areas where expectations might be more effectively shaped proactively is when someone in the nonprofit arena authors content. Often, the fact that the nonprofit, not the employee own the resulting copyright in the work eludes the employee’s understanding. This case from last week is such a circumstance.

Kamanou v. Executive Secretary (SDNY Jan. 19, 2012)

Kamanou sued the Executive Secretary of the Commission of the Economic Community of West African States (ECOWAS) for copyright infringement claiming that work she had done while an employee of ECOWAS was ‘unlawfully claimed’ as owned by ECOWAS and then sublicensed to the United Nations.

Kamanou, a citizen of Cameroon, with a PhD in Applied Statistics from U.C. Berkeley, is a well-known international expert on poverty statistics. Kamanou acknowledges that the work at issue was created within the time that she was an employee within her official duties, but states that her job description did not specifically call out the particular work. Moreover, Kamanou asserts that the work can not be a work made for hire as she ‘had no choice but to work on it due to her contractual obligations, and as there was no volitional choice that the work could not qualify for a work made for hire.

The court, in dismissing the action, held that the copyright is owned by ECOWAS who was authorized to license the work to the United Nations. The court explained that Kamanou does not own any copyright in the work. “The obligation to complete the work pursuant to an employment contract is precisely what makes the work a ‘work made for hire’.”

In a 6-2 majority decision written by Ruth Bader Ginsburg, the Supreme Court ruled today that Congress has the authority to restore copyrights in this country that had had lapsed. Relying heavily upon the 2003 decision of Eldred v. Ashcroft:

“Our decision in Eldred is largely dispositive of petitioners’ limited-time argument. There we addressed the question whether Congress violated the Copyright Clause when it extended, by 20 years, the terms of existing copyrights. 537 U. S., at 192–193 (upholding Copyright Term Extension Act (CTEA)). Ruling that Congress acted within constitutional bounds, we declined to infer from the text of the Copyright Clause “the command that a time prescription, once set, becomes forever ‘fixed’ or ‘inalterable.’” Id., at 199. “The word ‘limited,’ ” we observed, “does not convey a meaning so constricted.” Ibid. Rather, the term is best understood to mean “confine[d] within certain bounds,” “restrain[ed],” or “circumscribed.” Ibid. (internal quotation marks omitted). The construction petitioners tender closely resembles the definition rejected in Eldred and is similarly infirm.”

By this ruling, the court extends U.S. copyright protection to books, musical compositions and other works by foreign artists that had been available without paying royalties:

“In accord with the judgment of the Tenth Circuit, we conclude that §514 does not transgress constitutional limitations on Congress’ authority. Neither the Copyright and Patent Clause nor the First Amendment, we hold, makes the public domain, in any and all cases, a territory that works may never exit.”

This opinion ends one of the longest, continuously pending copyright disputes in the history of the United States. First filed in 2001, this case challenged the 1994 federal law passed to implement global agreements worked out in trade negotiations called the ‘Uruguay Round Agreement’. The challenge, however, failed on all points as held in today’s opinion: the law does not violate the Constitution’s Copyright Clause, it does not violate the First Amendment rights of anyone who previously had free access to creative works, and it does not deviate from any long-standing historical practice or perception, according to the decision.

After 4 long years in litigation, Plaintiffs have finally settled their lawsuit with NBC over premium text messaging charges. Having likely spent millions in legal fees, the settlement fairly well recites the law any first year associate could have noted: a free method of entry does not save a pay-to-play entry where you are paying for a chance to win. The California courts did not actually rule on this issues, but the terms of the settlement make clear that things were headed in that direction and – at least for the time being – companies should not charge consumers to enter using their mobile phones, even if there is an alternate method of entry.

Under terms of the settlement, consumers who paid 99 cents to enter a sweepstakes via their mobile phone (the free method of entry was using the computer), may submit a claim for a refund. The Plaintiffs will also receive $5.2 million. Finally, the defendants agreed to a 5 year injunction from offering a promotion where people who enter using the Premium text messaging method will not receive something of value. Presumably, NBC figures the law will change by then. We’re not so sure.

Practice Note: This case follows on the heels of a line of cases known as the “phone card” cases wherein people were given a chance to win a large cash prize if they bought a calling card (there was also a free method of entry). The problem was, the price for the calling card was outrageously high for the number of minutes a consumer received, making it clear people were merely buying a lottery ticket. Clients should be advised that the pay-to-play method of entry must confer something of reasonable value to the consumer.

As we have blogged before, many companies are currently taking advantage of Sunrise Period B (which expires on October 28, 2011) to block .xxx domains containing their registered trademarks. People for Ethical Treatment of Animals (PETA) has taken a dramatically different tactic that is worth noting to spread the word about their message.

Taking advantage of Sunrise A Period for companies who wish to register, not merely block, .xxx domains, PETA has registered the PETA.XXX domain name. In doing so, PETA, known for its “I’d Rather Go Naked Than Wear Fur” anti-fur advertising campaigns featuring tastefully covered nude celebrities, stated its intent to launch a nudity and erotic-based website in the name of animal rights. PETA reportedly intends to launch its own .xxx website in order to appeal to a new audience it normally does not reach and shock them with graphic images of animal cruelty – images these individuals did not expect to see when accessing a .xxx website. In addition to pornographic content, PETA adds that the site will be interspersed with undercover photos and footage of animals being mistreated, as well as vegetarian and vegan recipes. The foregoing strategy may not be an entirely surprising move for PETA. The organization has never been shy about using images or methods with shock value to create publicity –both positive and negative — to emphasize their message in favor of humane animal treatment.

The tactic is novel and worth noting as an example of how companies may use the domain name reservation process for marketing and publicity purposes. That said, it is also interesting to note that Sunrise Period A was uniquely designed for adult-industry trademark owners, not mainstream entities. As a result of PETA’s potential misuse of the process, issues will likely arise regarding reserving domain names. For example, as the .xxx domain name process is currently set up, a legitimate adult-industry trademark owner will have priority over a Sunrise Period B should the two companies register for an identical domain, regardless of who filed first. In addition, if a conflict arises between two trademark owners who have reserved the same domain during Sunrise Period A, the domain name will be auctioned among all qualified Sunrise A applicants. Accordingly, if other mainstream companies follow PETA’s example, it will be interesting to see how the Registry, as well as legitimate adult-industry trademark owners, will handle those demands and potential conflicts.
Practice Tip: Needless to say, PETA’s registration of an .xxx domain name may not necessarily be appropriate for other organizations. Many companies may not welcome the additional expense (about $300-400 per domain) or the perceived negative attention of not merely blocking but actually registering an .xxx domain. One might be concerned that PETA’s move will lead other companies and nonprofits to consider registering .xxx domains when the more appropriate action would be to simply block the domains. It is judicious to counsel clients about all the options available and their respective pros and cons with respect to the .xxx domain registration process, removed from the hype surrounding PETA’s move.

Procedures are moving forward to trial in August, 2012 in the seven-year old case Authors Guild, et al. v. Google Inc., No. 05-Civ-8136, after Southern District of New York Judge Denny Chin rejected the parties’ proposed settlement in March. A September 15th status conference in front of Judge Chin provided a clearer picture as to the current status of the case. The parties, and ultimately Judge Chin, agreed to a newly extended schedule on pretrial proceedings, including restarting discovery, as only a small amount of document production has been conducted since 2006.

Judge Chen ordered a discovery and motion schedule that will have the case going to trial in August of 2012. Settlement discussions are expected to continue between the parties during this time. While Google attested to significant progress in the settlement discussions with the Publisher Class, talks with the Author Class are reportedly stalled. Attorneys for the authors expressed less optimism about settlement, even suggesting that Judge Chin appoint a magistrate judge or mediator to assist with negotiations. Google’s attorney rejected the offer. Interestingly, in the status conference, Judge Chin specifically inquired whether plaintiffs (including the Authors’ Guild) wished to expand their complaint beyond Google’s online display of only snippets of books. Plaintiffs accepted the offer and confirmed that their case went beyond online display of snippets, and included copying, scanning, storing and displaying the works as well. An amended complaint will be soon filed.

In a dramatic twist, three days prior to this Google Books status conference, the Authors’ Guild (together with an Australian Society of Authors, the Quebec Writers’ Union and eight individual authors) filed a new lawsuit, this time, against the HathiTrust Digital Library, the University of Michigan, the University of California, the University of Wisconsin, Indiana University, and Cornell University.

By way of background, the HathiTrust, a library partnership created in 2008 by the University of Michigan, receives digital scans of books from libraries following the works being scanned. HathiTrust then creates multiple copies of the scanned files, not simply to back up the books, but with the additional intent to offer public bibliographic information about the books and a full-text search. Unlike Google Books Search, the HathiTrust does not provide full textual results. In response to a search request, HathiTrust merely displays the page numbers where a user can find the searched terms. Should a book be in the public domain or deemed an “orphan work,” HathiTrust will allow users (including students and faculty members) to read the book online and member Universities to download the book.

The complaint alleges copyright infringement against the institutions resulting from scans made as part of the Google Books project and pooled by the Defendant Universities into the HathiTrust. The plaintiffs are seeking an injunction to prevent the HathiTrust from continuing to scan, duplicate and distribute digitized books and to impound the files already scanned (on estimated 7 million books). In addition to the injunctive relief, the plaintiffs are seeking a declaration that the HathiTrust’s scanning, duplicating and distribution of books violates copyright law.

Most interestingly, the complaint against the HathiTrust specifically targets the Orphan Works Project. Orphan works are works that are subject to copyright but for which copyright holders cannot be identified or located after a reasonable search. According to the Authors’ Guild, a simple search (including queries of standard copyright-related databases and phone calls) revealed that 4 out of 166 books identified by the HathiTrust as “orphan” were not. Accordingly, the Authors’ Guild claims that serious issues exist in the process being used by the HathiTrust to identify orphan works.

The saga is far from over. It will be interesting to see how the HathiTrust case (or the “Orphan Wars” as some have called it) plays out parallel to the Google Books case and whether Congress will finally be inclined to resume its efforts toward an orphan works bill.

Lucasfilm Ltd., et al. v. Ainsworth, et al., 2011 UKSC 39

Lucasfilm Ltd. (“Lucasfilm”) sued artist Andrew Ainsworth alleging that defendant infringed upon its copyright in the Star Wars Imperial Stormtrooper helmets by selling replicas of the famous helmets used in the film Star Wars Episode IV – A New Hope. The British Supreme Court unanimously upheld the ruling of the Court of Appeals in favor of Ainsworth under UK law.

The facts were as follows: Between 1974 and 1976, George Lucas worked with artists, including Ainsworth, to develop the visual concept of the Imperial Stormtrooper characters in the film, including their intimidating “fascist white armored suits” and helmets. Ainsworth produced several prototype vacuum-molded helmets for the Stormtrooper characters and, after Lucas’s approval, created 50 helmets for use in the film. Following the enormous success of the films around the world, Lucasfilm continued to earn income stemming from licensing agreements relating to Star Wars, including from licensing models of the Stormtroopers. In 2004, Ainsworth began recreating the helmets and armors from his original tools selling them to the public. Ainsworth sold between $8,000 and $30,000 of goods in the United States. Lucas sued in the U.S. and obtained a $20M judgment. Lucasfilm then commenced proceedings in the English Courts alleging claims under English and U.S. law.

Even though English law also follows a common law system of copyright, it is interesting that that the reasoning of the English court was quite different from the analysis we are familiar with under U.S. copyright law. The issue turned on whether the helmets were “sculptures” or “works of artistic craftsmanship.” Indeed, under English law, only “artistic works” (which include sculptures) are protectable under the Copyright Designs and Patents Act of 1988 regardless of artistic quality. Should the Court determine that the helmet was a “sculpture,” Ainsworth would have infringed upon Lucasfilm’s drawings by the mere fact of producing the helmets.

The High Court concluded, and the Supreme Court agreed, that the helmet was not a sculpture and that Ainsworth did not infringe upon the English copyright. The Supreme Court reviewed the legislative history of the definition of “sculpture” and found that, as opined in prior cases by the Court, not every three-dimensional representation of a concept qualified as “sculpture.” Lucasfilm argued that the helmet had no practical function and served as an artistic piece to make an impression on the filmgoer. The Court disagreed, viewing the helmet as a blend of costume and movie prop expressing the design of a character, which was a purely utilitarian expression. Rather, Court said, it is the film itself, and not the individual props, that is the work of art. Therefore, no copyright was found under English law in the iteration of the Imperial Stormtrooper helmet.

Furthermore, the Court ruled that claims under U.S. copyright laws were valid and Ainsworth infringed under U.S. copyright. The Supreme Court concluded that, should it have in personam jurisdiction over Ainsworth, then a UK court did maintain jurisdiction to try a claim for the U.S. copyright infringement.

Practice Note: This case reminds clients that international considerations are not to be neglected in protecting and enforcing copyright assets. Different strategies may work in different countries. Approaching a client’s IP portfolio with an international perspective is a prudent approach to avoid chattered expectations.

After filing over 275 lawsuits in almost 18 months, it seems as though Righthaven, LLC (“Righthaven”) may have run out of steam.

Righthaven, a Nevada holding company, was founded in early 2010, for the sole purpose of filing copyright lawsuits on behalf of its clients, news content owners (such as Stephens Media).  Its methods involved Righthaven scouring the Internet for republication of news articles and photos, suing the website hosting the infringing content (seeking monetary damages and the transfer of the infringer’s domain name), and then extending a settlement offer. Lawsuits filed by Righthaven have been brought against a wide variety of online publishers, including bloggers, political campaigns, nonprofits, and website operators — almost always without notice or DMCA takedown. Many cases settled swiftly, totaling an estimated $400,000 in aggregate settlement payment.  Righthaven’s founders claim they created the company in order to fight and deter “copyright theft” by bloggers and news aggregators online. Their aggressive enforcement strategies, including suing noncommercial bloggers and nonprofits who cannot afford to litigate, have also garnered much criticism, particularly from the Electronic Frontier Foundation. The critics have described the company as a “copyright troll” and a “settlement factory.”

In the past few months, Righthaven has suffered serious setbacks in the courts. In Righthaven v. Realty One Group, Inc. (D. Nev. Oct. 19, 2010), Righthaven sued a blogger for republication of 8 sentences from a 30-sentence Las Vegas Review-Journal article.  In a rare decision, the court granted the blogger’s fair use defense on a motion to dismiss.  The court noted that the blogger quoted a small percentage of the source article and his “use of the copyrighted material was likely to have little to no effect on the market for the copyrighted news article.” Another example is Righthaven v. DiBiase (D. Nev. April 15, 2011) in which Righthaven sought to have DiBiase’s domain name transferred to them.  In this case, the Court rejected transfer of the domain name stating that “Congress has never expressly granted plaintiffs in copyright infringement cases the right to seize control over the defendant’s website domain.”

Most notably, Righthaven suffered a particularly hard blow recently in Righthaven v. Democratic Underground (D. Nev. June 14, 2011).  In that case, the agreement between Righthaven and its clients, called a “Strategy Alliance Agreement,” was unsealed.  The agreement purported to assign copyrights to Righthaven for the purpose of filing infringement lawsuits, while exclusively licensing back all rights to the client, with Righthaven maintaining no rights, except the right to use. The judge dismissed the lawsuit on the ground that Righthaven had no standing to sue, stating that a “copyright owner cannot assign a bare right to sue,” essentially rejecting Righthaven’s business model. Over three-dozen other cases filed by Righthaven are being held up on appeal over the same issue.

Is it the end of Righthaven?  Most signs point to yes.  In the past two months, Righthaven has stopped filing new lawsuits, let cases lapse due to procedural defects and laid off a number of employees. Steve Gibson, CEO of Righthaven, stated they are awaiting the outcome of numerous appellate rulings in the Ninth Circuit Court of Appeals before resuming their efforts.

Regardless of what happens to Righthaven, this line of cases is particularly instructive in at least three ways:  first, they have allowed the emergence of blog-specific copyright cases and an expansion of the fair use doctrine, which Righthaven intentionally helped create (See Cobalt’s prior post on the topic: The Emerging Blog Specific Copyright Cases). Second, these cases are illustrative of how copyright owners from the traditional news world are continuing to struggle over how to best protect and monetize their content. Finally, the cases raise particularly interesting questions of copyright law relating to standing to sue and the validity of copyright assignments, for which we are awaiting clarification from the Ninth Circuit

Last March, ICANN voted to approve .XXX as a new Sponsored Top Level Domain (sTLD) for the adult industry. The registry responsible for operating and managing the new sTLD is ICM Registry.

During the Sunrise Period (known as “Sunrise B”), which will be open from September 7 to October 28, 2011, owners of registered marks in current use can apply to opt-out of the .XXX process and reserve names in order to ensure that those names are not registered as .XXX domain names by others. At the close of the Sunrise Period, if no conflicting application by an adult-industry applicant has been made, the reserved name(s) will be removed from the pool of domain names available for registration. The opt-out fee is approximately $400.

Sunrise Period B is the only opportunity for trademark owners to proactively block .XXX domains containing their marks and we recommend clients consider it. It’s an easy and relatively inexpensive process that could save your company much hassle and legal fees in the long run, particularly if your trademark is well-known and attractive to cyber-squatters.

In a decision handed down by the Court of Justice of the European Union on July 12, 2011, eBay has been found to be potentially jointly liable for trademark infringement along with individuals selling infringing goods on the eBay auction site because it had prior knowledge of the infringement.  Paris-based cosmetics company L’Oréal brought the complaint against eBay arguing that it is liable for trademark infringement because it is involved in the pre-sale, sale and after-sale processes of selling infringing products.  The Court agreed and held that an operator of an electronic marketplace that has provided active assistance in the sale of products rather than just taking a neutral position between the buyer and seller cannot be protected by the European Union’s e-commerce law exemption which applies only to parties playing a neutral online role.

eBay purchased keywords from online advertising services, such as Google Adwords, that included registered trademarks in order to direct potential customers seeking to purchase those goods to its website.   However, the goods being sold included both legitimate goods as well as counterfeit and unpackaged goods from non-European Economic Area (EEA) countries thereby infringing upon L’Oréal’s trademarks.  eBay implemented its own precautions against infringement by incorporating a take-down notification system and operating a Verified Rights Owner Program (VERO), however L’Oréal was not a member of the VERO program and rather turned directly to eBay for assistance with handling the infringing goods.  However, unsatisfied with eBay’s response, L’Oréal pursued its action before the High Court of England and Wales which referred several questions to the European Court.

In addition to joint liability, the Court considered the extent of injunctive relief that intellectual property owners could obtain against online intermediary websites, such as eBay, whose services are used as tools to infringe upon the IP of others.  The Court found that it could impose injunctions against online marketplaces requiring them to suspend accounts of those utilizing the site to sell fraudulently-marked goods or to employ measures which would make it easier to identify infringers.  However, the injunction would not require the website to actively monitor all activity of the website or prevent the sale of all goods bearing a particular trademark.

By finding eBay liable for joint liability, the European court differs from cases upheld in the United States.

In the Tiffany (NJ) Inc. v. eBay, Inc., cases in the federal district courts in New York, the federal courts rejected Tiffany’s argument that an intermediary website may have secondary liability thrust upon it if it has “generalized” information that its website was being used to sell infringing merchandise.  The court deduced in Tiffany that even though eBay had general knowledge of infringement by various sellers, it did not require eBay to prevent the same sellers from selling goods via their eBay accounts because general knowledge of infringement is insufficient to determine that actual infringement occurred.  eBay would have been liable, based upon Inwood Labs., Inc. v. Ives Labs., Inc. 456 U.S. 844 (1982) if it continued offering its services to sellers it knew or had reason to know were infringing on the mark’s holder’s marks.

Practical Considerations

What does this decision mean for clients who operate websites used or accessed from the European Union?

This decision suggests that, in the E.U., website owners might consider taking a more active role in addressing and preventing infringement upon learning of potential infringement from a trademark holder.  Indeed,  although an exemption from liability exists under the European E-Commerce Directive, any active role by the website owner in promoting items for sale by users may negate this exemption.

Warner Bros. v. X One X Production, 2011 U.S. App. LEXIS 13646 (8th Cir. Mo. July 5, 2011) This is a case that will make game and movie companies add a new level of analysis and scrutiny to every new creation that has a basis in a work that has entered the public domain. The Eighth Circuit restricted the reproducibility of certain film/cartoon images extracted from publicity materials that had passed into the public domain.

The facts are straightforward. The dispute focuses on promotional pictures that the studios used to promote movies that were adaptations from the out-of-copyright books including ‘Gone with the Wind’, ‘Tom and Jerry’ and ‘The Wizard of Oz’. Art & Vintage Entertainment Licensing Agency (AVELA) got hold of movie posters, “lobby cards”, and the like that bore the images and used them as the basis for things like t-shirts, lunch boxes, and action figures. The studios sued AVELA for a permanent injunction and got one. The publicity images were not taken from film footage, but were created independently. The publicity materials, as distributed, did not comply with the 1909 Copyright Act’s notice requirements. Consequently, the materials fell into the public domain.

The Eighth Circuit reversed and affirmed. The basis of the reversal, in part, was based on the images identical to the ones on the old posters, cards, press books, and other items had that had become public domain material couldn’t provide the basis for an infringement claim.

The Eighth Circuit panel affirmed the injunction to the extent it barred AVELA from using more than just the images themselves. Adding a catch phrase, turning a two-dimensional picture into a three-dimensional figurine, and making other changes or additions, the court held, infringed the copyrights in the characters they depicted:

In essence, the panel of justices finds that the features of film characters can be copyrighted even if these characters were based on prior work. According to the decision:

“We agree with the district court’s conclusion that Dorothy, Tin Man, Cowardly Lion, and Scarecrow from The Wizard of Oz, Scarlett O’Hara and Rhett Butler from Gone with the Wind, and Tom and Jerry each exhibit “consistent, widely identifiable traits” in the films, that are sufficiently distinctive to merit character protection under the respective film copyrights…. Put more simply, there is no evidence that one would be able to visualize the distinctive details of, for example, Clark Gable’s performance before watching the movie Gone with the Wind, even if one had read the book beforehand. At the very least, the scope of the film copyrights covers all visual depictions of the film characters at issue, except for any aspects of the characters that were injected into the public domain by the publicity materials.”

Elly May is the role played over two hundred and sixty-four times by Donna Douglas in 1960′s series, The Beverly Hillbillies; and, Douglas has sued Mattel in Louisiana for making the “Elly May” doll in the Barbie Doll line. While Mattel claims to have obtained all necessary licenses to make the product under necessary channels, Douglas asserts that she was never consulted and that the infringement creates the false public impression that Ms Douglas has endorsed the doll. Douglas claims that she still makes an income from appearances; and, that the 264 episodes are in syndication and still being broadcast throughout the world.

Douglas asks for $75,000 in damages against Mattel.

Other celebrities have won such cases based on a clause of the Trademark Act of 1946 stating that it is illegal to use an image or likeness to make it appear the person in endorsing a product. Such celebrities include Vanna White, the wheel turner in ‘Jeopardy’ as well as Tom Waits and Bette Midler for sound-alikes. Waits sued Frito-Lay Inc. in 1992 and Midler sued Ford Motor Co. in 1988. The latter two differ in that both companies had asked the respective singer to do a song for a commercial, and when the singer refused, the company proceeded to hire a sound-alike performer.

Below are photos from the packaging. The front package alone might not trigger liability but the two side panels and backsides of the package clearly identify Douglas. Liability becomes more likely as the connection gets stronger. In her suit, Douglas says that she “continues to make public appearances in association with” her character. Mattel introduced the “Elly May” Barbie doll in December 2010, and even uses Douglas name in promotional materials for the doll. A settlement in the Elly May case looks to be prudent, especially given the amount demanded.

Lady Gaga, on the other hand, has conditioned that any photographer who asks for a press pass to Lady Gaga’s performances agree that copyright in all photographs taken during the performance shall be owned by Madonna. Here is the agreement. http://images.tbd.com/entertainment/gaga-release.pdf Not only is copyright in photographs not yet taken (expectancies) transferred, but the photographer agrees to take down from websites after four months.

This automatic transfer of copyrights is a theme in the medical arena as well. Some doctors are conditioning their providing of services upon the patient agreeing that any commentary that the patient writes is assigned to the doctor. This facilitates a speedy take down of any review that a doctor does not agree with… which some believe is unenforceable; and others believe is effectively a gag-order. The Santa Clara University High Tech Law Institute and The Samuelson Law, Technology & Public Policy Clinic at the University of California Berkeley School of Law have begun a website to address this practice: http://doctoredreviews.com/

While fair use in copyright keeps expanding, the pressure both for control of copyright content and for commercial activities using copyright content to pay full freight is stepping up.

The California State Senate votes today on the passage of SB761, introduced by State Senator Alan Lowenthal (D-Long Beach), that would require the state attorney general to adopt regulations allowing users to opt-out of programs that track online information and identifying user behavior on computers, smartphones, tablet computers, and any other device that accesses the Internet.  Under SB761, any Internet user can send a message to a website doing business in California requesting that their online activity not be monitored.  The bill would allow consumers or the state attorney general to file a civil lawsuit against a company or website that ignores or violates this law. This law would be the first one of its kind nationwide and is based upon a similar federal bill introduced into Congress by Rep. Jackie Speier (D-CA).

Specifically, the proposed law prohibits any software to be copied onto a computer, without the prior approval of the user, and using the software to:

1. take control of the computer;
2. modify certain settings relating to the computer’s access to or use of the Internet;
3. collect, through intentionally deceptive means, personally identifiable information;
4. prevent, without authorization, an authorized user’s reasonable efforts to block the installation of or disabling of software;
5. intentionally misrepresent that the software will be uninstalled or disabled by an authorized user’s action; or
6. through intentionally deceptive means, remove, disable, or render inoperative security, antispyware, or antivirus software installed on the computer.

Although, at first glance, this proposed bill seems to benefit all Internet users, there lies the risk that this is the first step towards a user-fee-based Internet.  The business model of many of today’s websites is based upon advertising sales and the sale of personal data collected from users accessing their sites.  Advertisers seek this personal data in order to better understand the behaviors of their target audience resulting in enhanced access to their potential consumer base through a more strategic placement of ads.  Without the sale of this collected data as well as reduced advertising sales, websites will begin to see a decline in revenue and will require a new method of generating funds in order to replace these financial losses.  Therefore, we anticipate that websites will begin require users to pay a fee for the privilege of accessing websites and information that they were accustomed to access for free and, in exchange, websites would not collect or disseminate any user data.  This type of behavior will result in a “digital divide” in which those who have the financial means to pay for access will have better choices for an enhanced ad-free and tracking-free online experience.  Those without will have no choice but to give-up personal data in order to access lower quality websites or potentially not be allowed to access these websites at all.  By limiting Internet access to those that have the financial means to pay for services, there lies the question of whether Internet access is an inalienable right thereby allowing this type of digital divide without violation of any federal law.

On the flipside, without the passage of SB761, websites will continue to track user behavior and collect highly-invasive psychographic data resulting in an invasion or privacy.  As seen by the recent fury directed at Apple for tracking and storing the location of iPhone users, consumers need to have some type of protection against websites or option to restrict data collection from websites that will take advantage of unwitting Internet users without some type of restriction.  Therefore the passage of the law is the appropriate first step towards providing online users with appropriate options.

Practice Tips

While the public is rightfully concerned about online data collection and the sale of information to advertisers, companies need to be able to protect themselves and continue to generate revenue while still balancing the needs of the online consumer.  Companies with an online presence, especially start-up companies, need to determine the types of safeguards needed to be incorporated to protect themselves and their users and still succeed in generating revenue.  If companies engage in tracking practices and behavior, it is important to determine how to incorporate such practices and divulge this information in the privacy policies.  Disclosure is key but the ramifications of not being tracked needs to be divulged as well.

Section 512 includes a recital of the various safe harbors from liability and is also collectively referred to as OCILLA (Online Copyright Infringement Liability Limitation Act). Section 512(f) is intended to be a deterrent to those making false claims of infringement; this subsection of OCCILLA makes the person who is asserting the false claim of infringement liable for damages suffered by those who were harmed by the false take-down plus attorney fees. The recent two cases demonstrate that this is a specialty tool to be specifically and narrowly applied against those who assert specious take-downs to ISPs and (f) is not just a blunt retaliation instrument.

1. Rock River Communications, Inc. v. Universal Music Group, Inc., 2011 WL 1598916 (C.D.Cal. April 27, 2011)

We’ve had the DMCA for a little over a decade now, and the case law reflects that we are beginning to chart the navigational paths through its topography. In this case, a remixer, the plaintiff, took a license from someone who purported to be the authorized licensee of the specific Bob Marley music at issue.

The defendants claim they are the correct licensor of that particular Bob Marley music; and, defendants succeeded in getting the allegedly infringing remixes removed from the market.

This case is one brought by one of those driven out of the market as retaliation for the newly remixed pieces being removed by use of Section 512. In short, the plaintiff is asserting that Section 512(f) is being incorrectly applied. The court agreed holding that (f) did not apply because the recipient of defendant’s take-down was not an ISP, but was a retailer. Section 512(f) did not apply both because iTunes wasn’t performing the functions contemplated by 512(c) and because iTunes has a financial interest, as such, the C&D letter isn’t the functional equivalent of a 512(c)(3) take-down notice.

2. Amaretto Ranch Breedables, LLC v. Ozimals, Inc., 3:10-cv-05696-CRB (N.D. Cal. April 22, 2011)

In this case of the dueling take-down letters, two virtual animal vendors on Second Life sent numerous take-down demands regarding the alleged infringement of their respective bunnies and horses. In an unorthodox procedural play, the horse vendor asked the court to enjoin Second Life from acting on the bunny vendor’s take-downs. The court threw out the predictable Section 512(f) retaliatory claim brought by the horse vendor, in this the most recent episode of this ongoing saga.

The court held that because Second Life forbore from acting on the bunny vendor’s take-down there was no standing for a Section 512(f) action. While the horse vendor may be pragmatically correct that the sending of the specious take-down should be the only condition precedent to (f) eligibility, the court read the statute literally and ruled that there is a further second condition precedent to getting standing to file the (f) action is that the recipient of the take-down actually have taken it down.