Dear Mr. Olson,

We are in receipt of your letter (below) in which you demand that we cease or you will sue.

We are a law firm; and we are reporting news in our blog. Clearly is that stated under the category on ‘News’ as you acknowledge in paragraph two of your letter.

We acknowledge that your client has trademark rights. However, protection for trademark rights under the Lanham Act is limited to protection against another’s use of a designation to identify its business, or in marketing its goods or services in a way that causes a likelihood of confusion. Such trademark rights do not override First Amendment rights.

Wilcox v. Career Step (D. Utah 12/1/10)

Wilcox is the author of a medical coding course, and claims that Career Step (CS) is infringing Wilcox’s copyright. Career Step licenses the disputed medical coding course to various schools and colleges; and, in each instance Career Step requires that each student sign a contract that specifies that jurisdiction will be in Utah.

The court faced two motions one for lack of personal jurisdiction and another for a motion to dismiss on grounds of sovereign immunity from two of the schools which were also named as defendants.

The court granted the motion to dismiss for lack of personal jurisdiction stating that both WVS and Laramie knew the fact that CS was based in Utah. The agreement itself established several connections to Utah. First, the governing law of the contract was Utah law and the agreement arguably selected Utah as the venue of any suit involving the contract. Second, CS administered the Wilcox course from Utah. Third, the court concluded that Wilcox, a third-party to the relationship between CS and the moving defendants, could hale those defendants into a Utah court to litigate whether they violated Wilcox’s copyright in the course at issue. WVS and Laramie transacted business in Utah with CS and allegedly caused Wilcox injury in Utah. The moving defendants, two schools, reached into Utah to obtain the right to use the Wilcox course, which they knew was subject to claims of copyright and other intellectual property protection. Wilcox’s asserted harm related directly to defendants’ intentional choice of contracting with a Utah company to purportedly obtain a license to use the course. While the moving defendants may not have intentionally directed their activities toward Wilcox in Utah, they did intentionally make contact with Utah involving the Wilcox course. For these reasons, the court denied the motion to dismiss for lack of personal jurisdiction.

With regard to the state school’s motion to dismiss based on sovereign immunity, the court detailed the history of the law of sovereign immunity and then applied the facts of the case focusing particularly that the school is a state school with one hundred percent of that school’s funding coming from the state coffers. The court held that the 11th amendment doctrine of sovereign immunity applies in this case barring the copyright action against the school.

Leslie Nielsen died last week at 84. He has been for thirty (30) years the single most reliable bellwether of a derivative work being found to be a fair use of the underlying work. When clients really wanted to go the extra mile to ensure that their use would be found to be ‘fair use’, they would ask, what can we do? The answer was go hire Leslie Nielsen.

Of course, no one ever took that advice, but it was a sure bet. If Leslie’s dead panned face was beaming out of the work, you could be sure that fair use was going to be found.

The EverReady Bunny in the Duracell ad point and counterpoint ad series that morphed into a Coors beer parody of both, the Demi Moore’s pregnant portrait … and well, so much more. There were only about four cases, but in each one, the judge or the jury was immediately assured that the derivative work was one that was bent on humor. This Canadian was one fella who spent the last thirty years cueing the viewing public to know that if that saw Leslie’s deadpan persona, that something worthy of a good wholesome laugh was afoot.

We need a whole community of such characters. People whose face immediately communicates that humor is afoot. Such a jester class would be a most welcome sector.

On December 2, 2010, Facebook released its new updated Promotions Guidelines. These are significant changes to the original guidelines and will likely affect all promotions offered on Facebook. The new guidelines may be found here.

As with Facebook’s prior release of promotions guidelines, sponsors must use third party approved promotions providers, but the guidelines have gotten more stringent. Currently, entrants make only enter on the canvas page of the promotions application or a tabbed application “box” on the wall of a sponsor’s Facebook page.

Facebook is also requiring a more conspicuous notice relating to sponsorship, including a blatant disclosure adjacent to the promotion and within the rules that This promotion is in no way sponsored, endorsed or administered by, or associated with, Facebook. You are providing your information to [list discloses] and not to Facebook. The information you provide will only be used for [disclose any and all uses]. In addition, Facebook now requires that all promotion rules include a release of liability to Facebook.

The new release of guidelines also affect promotions that are not administered through Facebook, but where the sponsor uses Facebook to advertise an offsite promotion. Up to this point, Sponsors could advertise their own promotions held on different sites through Facebook without having to abide by the Facebook guidelines.

A significant change to the Facebook guidelines is that you cannot give an entrant an automatic entry simply by having then “like” the sponsor page or by “checking in” at the sponsor location; the entrant must also affirmatively enter the sweepstakes or contest. Thus, while you can require that entrants “like” or “check-in” to your page before you provide them access to an entry, the entrant must actually take another step to enter.

Another key change to the Facebook guidelines is the winner notification process. Facebook now forbids sponsors from notifying winner using the Facebook

Facebook still allows sponsors to require someone “like” their Facebook fan page, but Facebook expressly provides that sponsors may not require any other action from entrants, such as posting a statement on the sponsor’s wall, or playing a game.

With the bad, comes some good. Facebook used to require advance consent of Facebook prior to launching a promotion. That requirement has been repealed, thus allowing sponsors to post promotions much more quickly.

Faulkner Press v. Class Notes, N.D. Fla 1:08cv49-SPM/GRJ

A copyright dispute arising from the university sector is always interesting and this one is no exception. Here we have a Dr. Michael Moulton who has assigned his two electronic textbooks on wildlife issue and biodiversity in the new millennium to Faulkner Press.

Faulkner Press has sued Class Notes, (formerly known as ‘Einstein’s Notes’, but that change was the result of a whole different dispute now resolved), which sells note packages to University of Florida students. There were eight counts of copyright infringement and DMCA copyright information management. The court dismissed three and a part of another; and allowed the remainder to go forward.

Specifically of interest are counts one, two and three which relate to the lecture outlines, exams and film study questions. The film study questions track information provided in the films that are shown during class. The questions are designed to demonstrate that the students were paying attention.

Class Notes sought to dismiss as the questions were merely calculated to generate ‘bare facts’ and ‘facts do not owe their origin to an act of authorship.’

The court held that ‘the film study questions complied by Dr. Moulton possess the minimum level of creativity required for copyright protection. Although the fact statements are taken from the various films Dr. Moulton showed in class and his questions track the sequence of the films, Dr. Moulton picked only a few facts from each film to include in his film study questions. There may be nothing innovating or surprising about his selection. His selection was possibly random and made solely to ensure that his students were paying attention to the films. Even so, the selection was original because it was not a mechanical or routine arrangement. Dr. Moulton’s selection was unique to him and unlikely to be duplicated by someone else tasked with compiling film study questions. Some creativity was involved. His selection therefore qualifies for copyright protection.’

We are living in a liminal time of copyright as we move from the non-networked world to the networked one. Big infringers are no longer sure they will be caught; little infringers worry that their small infractions will get hit with zillion dollar damages. The food chain is in flux; the metrics are dynamic by which the infringer worthy of copyright lawsuit is differentiated from the infringer not worth the effort. In this uncertain time, we are seeing a pattern of calculated risks taken. In this blog, we point to two ends of the spectrum which, in the end, come to the same place which means the two ends of this spectrum form a circle: copying content unencumbered by obligation or liability.

Project Gutenberg has declared many literary works from the 1940′s and ’50′s as being out of copyright, in the public domain. By declaring a work out of copyright, Project Gutenberg expands the works that it has available for the public to copy without consequence or monetary charge. In the opinion of many, these declarations of a work being out of copyright are based on erroneous and partial information. Project Gutenberg, through Dr. Greg Newby, CEO, has told people that it has amended its procedures for determining public domain status; and that it is putting on hold determinations of public domain status. These changes are not announced yet on the website.

In contrast, Houghton Mifflin Harcourt has a pattern of exceeding the agreed upon print run limits, sometimes by as much as a million copies in excess. One HMH executive, Donald Lankiwicz, said in a deposition that the publisher ignored print run limits in its photo licenses as meaningless numbers. In rejecting HMH’s motion to dismiss the Wood claim, the judge wrote: “The gist of Lankiewicz’s deposition testimony, in short, is that under his understanding of industry standards, a copyright license that specifies a print run of 40,000 copies simply does not limit publishers, which could reproduce over a million copies of the copyrighted work without seeking further permission from, or paying additional fees to, the copyright holder.”

The judge wrote off Lankiewicz’s testimony as “facially implausible and self-serving claims” and “perhaps even nonsense” on his way to ruling that no jury could dispute the meaning of a license limit of 40,000 copies.

The result was that the small amount of money for the agreed upon print run became a basis for an unlimited print run in practice. HMH has recently amended its licensing agreement to make explicit what had become implicit, namely that there is no print run limit. Once a license for any amount is made with HMH, HMH may print as may copies as it wants and there is no following obligation or payment.

That ruling quoted above was in 2008 in the Ted Wood v HMH case, and now there are over thirty (30) lawsuits that have been filed in federal courts in numerous states including Alaska, Florida, Pennsylvania, Massachusetts, New York, Arizona.

The news last week of Ireland’s bailout may impact this gaggle of cases. HMH was created by a series of mergers orchestrated by Barry O’Callaghan, who was a part of the ‘Irish Golden Circle’ that made loans to an Irish bank, backed by stock on the same bank. The people of Ireland and the EU now own that bank, or what’s left of it. The loans haven’t been paid back; perhaps the print overrun practice is consistent in that strategy of nonpayment.

Project Gutenberg’s aggressive reading of a work being out of copyright, and Houghton Mifflin Harcourt’s position of ‘one and done’ for unlimited print runs come to the same conclusion that content is commodity.

Oracle USA, Inc. v. Sap AG et al., No. 07-CV-01658 PJH (EDL) (N.D. Ca. 24)

An eight person jury in Oakland California awarded Oracle the largest copyright infringement judgement of 1.8 Billion Dollars, in U.S. history. This judgement exceeds even the largest patent infringement award of $1.67 billion in the 2009 patent case against Abbott Laboratories.

The jury was given the choice of making an award based upon a fair market value license or lost profits. If the jury had looked at lost profits then it is difficult to conceive how they could have awarded anything approaching this amount.

This case is related to the Rimini case that we reported here in the Cobalt News blog last week. SAP acquired TomorrowNow which was a third party support and maintenance service company, in 2007, as a way to attract business customers at companies acquired by Oracle, including others, to SAP. TomorrowNow is now out of business, but one of the goals when it was operational was to use software robotics to get the requisite information needed to perform third party support and maintenance on Oracle systems. Oracle objected to TomorrowNow getting that information on behalf of Oracle Licensees and claimed that the downloading itself as well as the means of accessing the information and copyrighted content constituted copyright infringement.

While some industry analysts are stating that this opinion will not impact the third party service provider market, we are less optimistic. This case is an emphatic effort by Oracle to preserve its most profitable part of its business. In 2010, Oracle in SEC filings reported that the profit margin on that service and maintenance sector of its business is over 80%.

An appeal is likely given the size of this award.

Softech Worldwide v. Internet Tech, (ED Va. 11/8/10)

Softech develops specialized software that facilitates streaming video onto the internet; and Softech accepted a sub-sub-subcontractor contract from Internet Tech (IT) which was a sub-subcontractor to Fedstore, a primary contractor to the U. S. Department of Veteran Affairs (VA). The project was to design and implement a platform for scaling electronic media to various electronic devices. Softech allegedly achieved its assigned goals and stood ready to continue; however, after Softech delivered relevant software, including source code, to IT, IT ceased payment to Softech.

After learning that the VA was continuing to use the Softech copyrighted code, Softech sued both IT and Fedstore for copyright infringement. Softech sued Fedstore as both a contributory and as a vicarious copyright infringer. Fedstore moved to dismiss itself as not a proper defendant under either theory of secondary liability.

After reviewing all the papers in support of the motion to dismiss, the trial court granted the motion as to Fedstore as a contributory infringer, and denied the motion to dismiss Fedstore as a vicarious infringer. The court’s analysis focused on knowledge and participation after reading the Complaint as a whole, and taking all the facts asserted as true.

With regard to granting dismissal of the contributory infringer theory, the court finds that Fedstore was without knowledge of Softech’s copyright ownership as IT claimed to the public that IT owned the copyright; and that, as IT was a rogue subcontractor, that Fedstore lacked the requisite participation to be a contributory infringer.

In denying the motion to dismiss the vicarious infringement theory, Fedstore is found by the court to have possessed the right and the ability to better supervise the subcontractor IT; and, that Fedstore financially benefited from IT’s alleged infringement.

The case goes forward and Fedstore remains in the case. Doubtless, there is an indemnification conversation happening between IT and Fedstore.

Sellify, Inc. v. Amazon.com, Inc., (SDNY 11/3/10)

Sellify, aka ‘One Quality’, went in and out of business minimally while buying and re-selling used electronics on eBay.

Cutting Edge Design (CED), an Amazon associate, purchased the keyword “onequality.com” and several close variants from Google, Inc. When a Google user searched for these keywords, the search results were accompanied by an ad stating “Don’t Buy from Scammers” or “Beware the SCAM Artists” and linking to Amazon’s website. CED alone and without the knowledge of Amazon designed, implemented and purchased these ads. After a second demand letter from Sellify, Amazon terminated CED’s account.

Sellify sued both CED and Amazon for false advertisement. Amazon moved for a dismissal of Amazon from the suit as it had neither direct or secondary liability. Amazon pointed to an absence of all knowledge plus demonstrated that there was no agency between CED and Amazon.

The court granted Amazon’s motion to dismiss finding no direct or secondary liability. The court noted that the mere act of allowing another to link to one’s website, even if undertaken for commercial gain, could not support a finding of apparent authority.

Forest River, Inc. v. Heartland Recreational, USDC Northern Indiana 3:10-CV-11-TS

Competitors in the travel trailer industry, Forest sued after Heartland copied the Forest floor-plan and did two separate things with the plans. First, Heartland used the Forest floor-plans to create Heartland travel trailers allegedly in violation of the Architectural Works Copyright Protection Act (AWCPA); and second, that Heartland copied into a Heartland advertisement the Forest floor-plan in violation of Section 106 rights (which Heartland defends as protected by the fair use doctrine).

With regard to the first copyright claim, the Court noted both that travel trailers are useful articles and that AWCPA explicitly excludes recreational vehicles from the definition of architectural works. 37 C.F.R. § 202.11(d). Moreover, the Regulations implementing the Copyright Act, as amended by the AWCPA, define the term “building” as “humanly habitable structures that are intended to be both permanent and stationary, such as houses.” 37 C.F.R. § 202.11(b)(2).

“The legal issue before the Court is whether a copyright in a technical drawing of a non-architectural useful article precludes another party from using copies of that drawing to construct the useful article.”

In dismissing the claim, the court held:

“The Court could locate no post-AWCPA decision that recognized the distinction the Plaintiff requests when referring to useful articles depicted in drawings protected under § 102(a)(5) as technical drawings. To the extent the Plaintiff’s Amended Complaint attempts to assert a claim for copyright infringement on the basis that the Defendant manufactured travel trailers using copies of its Floor Plan, that claim fails as a matter of law. The Defendant was entitled to manufacture and market its own travel trailer, even one with the same layout as the Plaintiff’s.”

While the court dismissed the first copyright claim, the second copyright claim, “Use of the Floor Plan in Comparative Advertising” is allowed to go forward toward trial. This travel trailer case is moving on down the road. Discovery and a fair use analysis will be just around the corner. Stay tuned.

Oracle v. Rimini Street, USDC D. Nevada 2:10-CV-00106-LRH-PAL

Oracle sued Rimini, a third party support and maintenance service provider, for having illegally downloaded Oracle’s software and support materials by logging on to Oracle’s password protected web-database using an Oracle customer’s individual login credentials, and downloading support materials in excess of that customer’s authorized license agreement. Rimini is owned by Seth Ravin, who is a top executive at TomorrowNow, another cut-rate provider of Oracle support services, until SAP acquired the company in 2007.

The much bigger issue here is whether the decades-old enterprise software model can hold up against the forces of upstart competition and price arbitrage; and, of course, copyright is the first beachhead in resolving that controversy. Really what has Oracle riled up is the challenge that Rimini and others (SAP for one) are threatening to eat the 80 plus percent profit margin that Oracle has in those yearly maintenance and support fees.

Rimini defended claiming that Oracle is using its existing software copyrights to unlawfully leverage a monopoly in its uncopyrightable after-market support services. Specifically, Rimini Street claims that Oracle prohibits the use of automated tools which effectively prevents customers from accessing large volumes of Oracle’s support materials which are integral to the licensee having the ability to make changes related to the technical design.

The court evaluated Rimini’s defense of copyright misuse; a powerful defense when effective as it halts the plaintiff’s case against that defendant. The equitable defense of copyright misuse “forbids a copyright holder from securing an exclusive right or limited monopoly not granted by the Copyright Office” by preventing “copyright holders from leveraging their limited monopoly to allow them control of areas outside the monopoly.”

Breaking the defendant’s claim into two parts, the court identified the two specific aspects of the alleged copyright misuse to be:

1) Oracle imposed limits on download, specifically the technical design of the Oracle website that licensees must access to get information, prohibits the licensee from accessing and differentiating the additional support information that is needed from that which is superfluous; and,

2) Oracle prohibits and literally stops any use of automated tools (bots) on its website with the result that customers are prevented from downloading large volumes of Oracle’s support material and collecting copyrighted content.

As to both aspects that Rimini claims comprised copyright misuse, the court “finds that the licensing restrictions alleged by Rimini Street are well within Oracle’s statutory rights as a copyright holder and therefore do not constitute copyright misuse.”

Stagecraft Costuming v. Househaunters Limited, Case No. 1:10-cv-197, Southern District of Ohio

Halloween is increasingly a national holiday of mega-proportions…. and here’s a case to prove that where there is a fabulous success, there also will be the flattery of imitation.

Stagecraft Costuming of Cincinnati Ohio took umbrage when it discovered that Househaunters, a competitor in the illusion costume market, had copied the most successful Stagecraft costume, “The Man in the Cage”. Stagecraft created the winning costume in 1985 and only registered it with the U.S. Copyright Office in 2010 after unsuccessfully persuading Househaunters to cease and desist their sales of the knock-off that rolled off the Househaunter’s design floor in 2008. Not surprisingly, Househaunters claims that the Stagecraft copyright registration is invalid as the costume is unprotectable under Section 102(b) of the Copyright Act as a useful article. The complaint includes counts of trade dress as well as copyright.

The motion for summary judgment that Househaunters filed in June appears to be still awaiting the judge’s ruling; and in the meantime, we were all free to wear our costumes of choice this past weekend.

Sandi Zimnicki v. General Foam Plastics Corp., USDC N.D. Illinois, October 4, 2010.

Sandi Zimnicki is an artist and a technical consultant for movies including “Home Alone 2″. She has a following of people who collect her holiday miniatures, including deer. Upon finding evidence that defendant, General Foam Plastics, was knocking off her deer designs in China, Zimnicki sued in Illinois.

General Foam noting that the infringement took place in China moved for summary judgement on the grounds that there was no subject matter jurisdiction.

The trial court ruled that “there is no indication that Congress intended extraterritorial limitations on the scope of the Copyright Act to limit the subject matter jurisdiction of the federal courts.” After finding that General Foam, a U.S. corporation domiciled in Virginia, is properly a party, the court ruled that the issue of where the infringement happened does not trigger jurisdiction issues but is to be a part of the infringement claim evidence. The court went on to explain that “It appears that the sale and delivery to the United States occurred in one seamless transaction – or a series of such transactions. Either way, we are not persuaded that we should parse the transaction in the technical way that Nixan has asked us to do. To rule otherwise would encourage gamesmanship.”

Doctor’s Associates Inc., V. Vinnie’s Smokehouse/Meat Specialty, LLC & Vincent Batiste, Civil Action No. 10-XXXX, D.C. Eastern District of Louisiana

It is surprising how proprietary restaurant interior designs are. Above, from the court record, is the plaintiff’s design which they describe as a uniquely identifiable subway-themed wallpaper, a brick-design wall paper, a mural of vegetables, menu boards, clocks with subway-themed art, and signs featuring the “Subway” logo”; and Plaintiff holds a copyright registration allegedly covering that composite. Plaintiff is Doctor’s Associates Inc (DAI), the owner of the SUBWAY sandwich franchise.

Defendant, Vinnie’s Smokehouse, took up business in space recently vacated by a SUBWAY franchisee. It seems that Vinnie’s Smokehouse likes the restaurant decor that they thought was a part of the leased unit. Vinnie’s Smokehouse likes it so well that they are loath to change it.

This case, filed on October 18th, is one that DAI was probably compelled to file to police its intellectual property; but it is one which is going to be especially interesting to watch for the copyright count. There are other counts, trademark and false designation, but the copyright count is going to be especially gnarly. Vinnie’s Smokehouse has not done anything apart from take up occupancy in a retail space that came with the interior design already installed, in place and through nothing that Vinnie’s Smokehouse copied, distributed, or otherwise created. Whether this amounts to copyright infringement is interesting; and that DAI would put their copyright registration in the vulnerable position of a federal action is an interesting litigation strategy.

Express v. Forever 21 (C.D. Cal. Sept. 2, 2010).

In pursuing its claims of copyright infringement against Forever 21, Express admits in detail that its design process amounts to taking other garments in the marketplace and then ‘reengineering and redesigning’ until the Express product is ready. Specifically, in this case, Express filed copyright applications claiming specific plaid designs. In none of the copyright applications does Express acknowledge the underlying, pre-existing plaids; nor did Express amend their registrations in the course of the litigation to identify the pre-existing plaids.

The court, granting summary judgement in favor of the defendant, Forever 21, held “Accordingly, because it is undisputed that each Plaid was derived from at least one pre-existing source and Express cannot present any evidence distinguishing the Plaids from their pre-existing source material, the Court grants summary judgement.”

The burden of disclosing in copyright applications the pre-existing sources gets heavier and heavier …

This case is a layered mess of creative contribution. Zimmerman, an independent ad agency, submits his novel ad concept to the insurance company AFLAC in the theme of, “You Don’t Know Quack”. This is, from the court record, among the images that the little ad agency submitted:

AFLAC was interested, but wanted changes. Zimmerman calls another, independent creative, Frazier, and asks Frazier to contribute some more exploratory illustrations. Zimmerman sends images that include these (again from the court record):

Zimmerman likes Frazier’s work and asks what the prize would be to go forward. After Frazier says a quarter of a million dollars; Zimmerman counters at one hundred thousand; and the two reach no agreement. Zimmerman sends an email later saying that the ‘client has decided to go in a different direction.’

AFLAC and Zimmerman went forward in creating the ad campaign. Here are two the resulting ads that were shown in such places as Times Square New York and other high visibility locations:

Frazier sued for copyright infringement among other claims. Defendants moved for summary judgement on two grounds: first, that the Frazier work is derivative of the Zimmerman underlying work and therefore cannot be independently protectable as there was no additional independent creation; and, second, that the image of the duck is not protectable under copyright law. Citing every copyright defendant’s best chestnut in support of disposing of any claim in which something from reality is depicted, Satava v. Lowry, 323 F.3d 805 (9th Cir. 2003), defendants contend that a graphical representation of a duck is dictated by its natural appearance, and that there are no protectable elements in Frazier’s illustrations.

The judge, Sandra Brown Armstrong, in the Northern District of California, ruled on September 24, 2010 that this case is going forward as Frazier has stated sufficient grounds to sustain the action. This is going to be an interesting case to watch as these facts frame the issues particularly well for some clarity to result in the topic of derivative work and copyright-ability. This is a case to watch.

Brighton Collectibles v. Coldwater Creek, Southern District of California, Case No. 08-CV-2307-H(POR)

Brighton and Coldwater are competitors selling and women’s handbags and accessories into boutique and specialty stores. Brighton alleges in this case that Coldwater infringed the Brighton product line “Melanie” and “Laguna”.

In defense, Coldwater moved for summary judgement on the grounds that the Brighton copyright registration is unenforceable. Specifically, Coldwater demonstrated that the copyright registration on which Brighton’s lawsuit depended was on that the Copyright Office had rejected at least once before. Coldwater claimed that Brighton had a duty to tell the Copyright Office that the application had been rejected before; and that Brighton’s failure to disclose the prior rejection constituted ‘fraud on the Copyright Office’ with the result that the registration was unenforceable.

The court denied the motion for summary judgement, holding that “nothing precludes the filing of a copyright application a second time.” The court went on to say that if there is proof of intent to deceive that the evidence should come in as the case proceeds.

This issue of whether a party has an obligation to proactively disclose the prosecution history of the copyright application is beginning to be a chronic one. The defendant’s challenging of the validity of the plaintiff’s copyright registration is no longer a trend, but represents a fundamental part of any effective copyright defense.

A recent ruling by the Trademark Trial and Appeal Board (“TTAB”) serves as a good reminder of the importance of ensuring proper and sufficient trademark use on the goods and services for which a registration is sought. Albeit a seemingly simple concept, it threatens to be the achilles heel for many trademark owners who find their registrations canceled, refused, and/or in jeopardy due to inadequate or improper trademark use.

Take for instance, the case of In re Foster’s Wine Estates Americas Company. Serial No. 77018496 (June 16, 2010) [not precedential]. In support of its application to register the mark CELLAR 360 for wine, the company submitted as a specimen of use its retail catalog (which depicted applicant’s wine throughout) with the mark CELLAR 360 prominently displayed on front cover.

Rejecting applicant’s argument that the specimen served as a display associated with the goods, the TTAB refused registration of the mark. It found that the specimen showed use of the mark CELLAR 360 as a service mark for retail store services but not for wine.

Relying on the fundamental tenets of trademark law regarding what constitutes a trademark, the TTAB explained, the relevant issue is not simply whether applicant produced wine but rather whether consumers would recognize the mark CELLAR 360 as a source indicator for applicant’s wine (a trademark must identify the source of the goods).

Virtually sealing its own fate and guaranteeing a refusal of the registration, applicant did not use the mark on its wine bottles but rather on its retail catalog. This, the TTAB held, was insufficient to support a registration for wine (as the mark did not serve as a source identifier for wine). Accordingly, the board upheld the refusal to register the mark, finding that the specimen did not show use of the applied-for mark as a trademark for the goods.

Practice Note: Prior to seeking a trademark registration, clients should be counseled to carefully evaluate and consider the branding strategy that will be used in connection with the desired products/services and to, where possible, involve legal counsel in the marketing decisions regarding the manner in which the trademark will be used. Here applicant clearly intended to produce wine and was desirous of obtaining a registration for wine; however, in not using the mark on its wine labels, it failed to implement a branding strategy that would assure registration for wine. Problems such as these can often be avoided with careful planning, oversight and foresight.

The FTC and Nestle have come to an agreement: Nestle will stop making health claims about its BOOST probiotic product, and the FTC won’t fine the company for false advertising.

Nestle had previously claimed in its BOOST advertising, that the nutrition drink would boost children’s immune systems, prevent illness, and even speed up the recovery of certain symptoms, like diarrhea. The website, and advertising material now states, “Many countries worldwide have a tradition of introducing live active cultures (bacteria) to infants and children early in life, in fermented foods, such as yogurt. In adequate amounts [probiotics] provide specific health benefits to the host.”

This case marks the FTC’s first foray into health claims based upon probiotics and suggests this is a new area of concern for the regulatory agency.

Practice Note: While the US has only recently been looking at probiotic food claims, the European Food Safety Authority has been heavily regulating the industry for the better part of a year. According to published reports, the EFSA has rejected 80% of the advertising claims involving probiotics. Attorneys should advise clients to be careful about health benefit claims under the current administration.

Last week, according to the Promotions Marketing Association, state legislators in North Carolina ratified House Bill 80, which bans the “use of electronic machines and devices for sweepstakes purposes.”

The bill is intended to fully foreclose the use of video poker machines (and other gambling machines); the language contained in previously passed legislation presented a loophole: sponsors could still offer “sweepstakes” using the gambling machines (free method of entry), but still entice players to use a pay-to-play options for betting.

The bill specifically excludes consumer-owned electronic devices that could be used to enter sweepstakes, such as home computers, mobile smart phones, and mobile phones.

Practice Note: Video Poker is considered a “game of skill” in some states, and a “game of chance” in other states. Clients should seek careful legal analysis relating to online poker before setting out gaming machines or creating an interactive internet presence.

Click here for text of bill.