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Intellectual Property Year in Review

With the new year underway, we take a look back at some of the intellectual property-related highlights of 2013. Not only did the federal copyright and trademark agencies face a full-blown government shutdown this past year, but also U.S. courts and administrative agencies decided a number of diverse cases involving issues ranging from the scope of the First Sale Doctrine to Johnny Football’s trademark battles.

COPYRIGHT LAW

Worldwide Application of the First Sale Doctrine

In a 6-3 decision, the U.S. Supreme Court issued its opinion in the case of Kirtsaeng v. John Wiley & Sons, holding that the First Sale Doctrine applies to copies of copyrighted works legally produced outside the United States. The Supreme Court’s decision resolved the long-standing dispute between the First Sale Doctrine and copyright law’s importation restriction.

The owner of a valid copyright has several exclusive rights, including the right to distribute his or her copyrighted work. The First Sale Doctrine, however, provides that a copyright holder controls a specific copy of his or her work only until that copy is first sold. The buyer of the copy, provided that such copy was lawfully made, may then resell, lease, donate, or otherwise dispose of it.

In this case, Supap Kirtsaeng, a student from Thailand studying in the United States, asked his friends and family abroad to buy and mail him foreign edition textbooks. He then resold the books in the United States for a profit. John Wiley & Sons, a textbook publisher, sued him, claiming that he had infringed on Wiley’s exclusive right to distribute. The Supreme Court disagreed with Wiley, citing language in the Copyright Act that suggested no geographic limitation on the First Sale Doctrine.

 Which Use is Fair Use?

Last year saw a handful of cases involving the well-known Fair Use Doctrine. Under that doctrine, a person may use a portion of someone else’s copyrighted work without permission, as long as the purpose of the use is considered “fair.” Typical examples of fair use include commenting on an excerpt of a work and copying a portion of someone else’s work for news, educational, or research purposes.

In Gaylord v. United States, Frank Gaylord, the sculptor of the Korean War Veterans Memorial, sued the U.S. Postal Service after an image of the Memorial was used on a commemorative stamp without his authorization. The U.S. Court of Appeals for the Federal Circuit concluded that the depiction of the sculpture on the stamp was not fair use because the Postal Service’s use was commercial and non-transformative. That is, the stamp was sold for profit and did not add value to or repurpose Gaylord’s underlying work. Moreover, the sculpture was considered a creative work entitled to a high level of copyright protection. In September, the Federal Circuit determined the damages in the case, awarding Gaylord 10 percent of the Postal Service’s profits from the sale of the stamp, which totaled more than $17 million.

In November, the U.S. District Court for the Southern District of New York dismissed the case Authors Guild v. Google, which challenged the legality of Google Books’ Library Project. The District Court held that the Google Books program constituted fair use because Google’s scanning and digitizing of books was transformative. Google did not display the books in their entirety. Rather, each book was available in verbatim “snippets” or as a searchable index. The District Court also found that the program provided significant public benefits. At the end of December, as anticipated, the Authors Guild appealed.

TRADEMARK LAW

Trademarks and the Internet

A 2013 case shed light on “keyword advertising,” the practice of paying a search engine, like Google, to display a sponsored link on a page of relevant search results. In 1-800 Contacts v. Lens.com, Lens.com purchased search terms from Google that were nearly identical to registered trademarks owned by its competitor, 1-800 Contacts. When a consumer typed one of these terms into a Google search, a paid advertisement for Lens.com appeared alongside the search results for 1-800 Contacts. 1-800 Contacts sued, claiming that Lens.com’s conduct infringed on its trademark rights. The Court of Appeals for the Tenth Circuit found in Lens.com’s favor, suggesting that using a competitor’s trademark to trigger a sponsored link probably does not infringe on the competitor’s trademark rights, so long as the competitor’s mark is not used in the text of the advertisement itself.

In addition, the U.S. Patent and Trademark Office updated its policy regarding generic Top-Level Domains (gTLDs), or domain names following the “dot” in a web address (e.g. “.com”). The Internet Corporation for Assigned Names and Numbers (ICANN) accepted applications for new gTLDs, such as “.bike” and “.clothing.” Historically, the USPTO has refused registration of gTLDs because they did not function as trademarks. With the introduction of these creative gTLDs, however, the USPTO issued new guidelines for examining trademark applications. Specifically, an applicant seeking to register a gTLD as a trademark must: (1) provide evidence that consumers will recognize the mark as an indicator of source; (2) enter into an ICANN Registry Agreement; and (3) show that its domain name registration services are legitimate services for the benefit of others.

Unconventional Trademarks

Many of the cases at the forefront of last year’s Trademark Trial and Appeal Board (TTAB) docket involved non-traditional marks, such as color and smell. Perhaps the applicants whose marks were at issue were attempting to follow in the red-soled footsteps of the Christian Louboutin Company (which, in a trademark infringement dispute with designer Yves Saint Laurent, maintained the exclusive right to use the color red on the bottom of its shoes). While registration of many of these marks was ultimately refused, the TTAB’s opinions raise interesting questions about functionality and acquired distinctiveness.

For instance, in In re Cook Medical Technologies, the TTAB refused registration of the color teal for use with medical devices because of a likelihood of confusion with a previously registered mark for the color blue in connection with catheters. In a somewhat unusual decision, the TTAB held that because the prior blue mark was not limited to a specific shade of blue, it covered all shades of blue, including teal. The TTAB noted that the applicant could have tried to restrict the prior registration through a cancellation proceeding under Section 18 of the Trademark Act.

In In re Pohl-Boskamp, the TTAB refused registration of the flavor and scent of peppermint for use in connection with medicine, in part because the peppermint flavor and scent served a functional, rather than trademark, purpose. Granting Pohl-Boskamp the exclusive right to use the flavor and scent of peppermint thus would put competitors at a significant disadvantage.

Cases in the Headlines

There were a couple big-name trademark cases in 2013, including one involving Texas A&M football player and Heisman Trophy winner Johnny Manziel. Manziel filed a trademark infringement claim against Eric Vaughan, a T-shirt maker who printed shirts with a slogan containing Manziel’s nickname, “Johnny Football.” Manziel and Vaughan settled the case in November. Manziel also filed an application to register the mark JOHNNY FOOTBALL, in an attempt to own and control the use of his nickname. The Trademark Office initially refused the application for several reasons, including the fact that a handful of identical and similar marks, such as JUANITO FUTBAL, already existed.

In January, the U.S. Supreme Court issued its opinion in the case of Already LLC v. Nike Inc. Nike sued a small sneaker company, Already, for allegedly infringing on Nike’s Air Force 1 sneakers. Already filed a countersuit to void its relevant trademarks. Even after Nike dropped the case and filed a covenant, or promise, that it would not sue Already ever again, Already refused to drop its own case. In a unanimous decision, the Supreme Court held that because Nike had promised not to sue, Already did not have standing. That is, Already’s challenge was moot and no longer valid. Chief Justice John Roberts, writing for the Supreme Court, explained that if the case continued, parties in future cases would be encouraged to use litigation as a “weapon” instead of as a “last resort for settling disputes.”

 ADVERTISING AND PRIVACY LAW

A Cornucopia of Food-Labeling Class Actions

The year 2013 saw an increase in the number of class action lawsuits challenging healthy claims on food labels. In June, Barbara’s Bakery settled a suit disputing its “all natural” labeling, agreeing to create a $4 million fund, to reimburse consumers. In addition, under the terms of the settlement, Barbara’s Bakery agreed to participate in a third-party verification program before using such labeling again. Naked Juice also settled a class action lawsuit in July challenging the “all natural” and “non-GMO” statements on its products. Naked Juice set aside $9 million for consumers. While the U.S. Food and Drug Administration has yet to fill the regulatory gap in this area, in September, the agency issued rules on gluten-free labeling. The FDA set out specific terms under which manufacturers could use “gluten-free” in connection with their goods. Manufacturers must be in compliance with these rules by August 2014.

Do Not Track Requests

A new law in California, which became effective January 1, 2014, requires Internet service providers to disclose how they respond to consumers’ “do not track” requests. The law ensures that consumers understand whether the “do not track” functions of their browser are effective. The new law applies to any website used by a California resident, meaning nearly every website.

Who Can File False Advertising Actions?

In December, the U.S. Supreme Court heard arguments in Lexmark International v. Static Control Components, a rare false advertising case. Lexmark, a computer printer company, sold toner cartridges, controlled by a microchip, which were intended to be used only once. Static Control sold replacement microchips to third parties, which enabled consumers to reuse Lexmark’s cartridges. At issue are false statements, which Lexmark allegedly made, suggesting that it was illegal to use cartridges containing Static Control’s microchips. Static Control sued under the Lanham Act, the federal false advertising law.

Before the Supreme Court, Lexmark argued that Static Control should not be permitted to challenge its practices under the Lanham Act because the parties do not compete in the same market. Static Control responded that because Lexmark’s false statements were directed at Static Control, it had a “reasonable interest” in filing the suit. Later this year, the Supreme Court will establish the proper framework for deciding who has standing to make a false advertising claim under the Lanham Act.

The year 2014 is well on its way to becoming a transformative year in the areas of copyright, trademark, and advertising law. As mentioned above, the Internet is expanding to include hundreds of new gTLDs. In addition, the U.S. Supreme Court has agreed to hear two copyright-related cases of significance this term, including ABC vs. Aereo, which involves a challenge to the legality of a television streaming technology. This case could have broad implications for Internet streaming and cloud computing for years to come.

 © 2014 McNees Wallace & Nurick LLC

IP Year in Review is presented with the understanding that the publisher does not render specific legal, accounting or other professional service to the reader. Due to the rapidly changing nature of the law, information contained in this publication may become outdated. Anyone using this material must always research original sources of authority and update this information to ensure accuracy and applicability to specific legal matters. In no event will the authors, the reviewers or the publisher be liable for any damage, whether direct, indirect or consequential, claimed to result from the use of this material.

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