Mary Siceloff

When Disney chose to delay the production and release of merchandise related to The Child—commonly referred to as Baby Yoda—from its hit series, The Mandalorian, it created a significant opportunity for unlicensed fans to create and sell such merchandise. According to statements released by the Walt Disney Company, it intentionally delayed the production of Baby Yoda merchandise to avoid any leaks about the character’s existence until The Mandalorian aired. Because the first episode of The Mandalorian was not released until November 12, 2019, the Walt Disney Company was left with minimal time to release related merchandise. In fact, the Walt Disney Company was only able to roll out limited merchandise in advance of the holiday season, presumably losing a substantial sum of money it would have earned if it had released its full assortment of Baby Yoda gear before the holidays. Of course, as is usually the case with Disney and Star Wars fans, when Disney and LucasFilms fail to deliver, the fans intervene—this is the way.

If you go to Etsy, you’ll find a substantial variety of Baby Yoda merchandise, including without limitation, t-shirts, crochet dolls, coffee mugs, stickers, tumblers, keychains, and bookmarks. Make no mistake, none of it is officially licensed. Every merchant on Etsy that is selling Baby Yoda merchandise is infringing Disney’s copyright in the character. Knowing that, you might be wondering, why doesn’t Disney just put a stop to it by enforcing their copyright? The Digital Millennium Copyright Act includes a mechanism through which a copyright holder can almost immediately have an infringing user’s material taken offline. Similarly, the Copyright Act enables a copyright holder to sue to enforce their intellectual property rights and to obtain injunctive relief precluding the infringing user from using the mark. We all know Disney can afford to take action, and those of us who regularly deal with intellectual property know that Disney aggressively polices its intellectual property. So why hasn’t Disney taken action?

The answer is they have, but there are just too many infringing merchants on Etsy for Disney to deal with. Disney has recently taken action against these infringing users by contacting Etsy, identifying certain users, and requesting that their infringing listings be taken offline. As a result, Etsy has been deactivating the listings identified by Disney and warning merchants they should not re-list the product unless the dispute is worked out with the copyright holder. But as you can see by searching for Baby Yoda on Etsy, there are still nearly 12,000 search results. This is because there are so many merchants selling these counterfeit goods that Disney cannot send out takedown notices and/or cease and desist letters fast enough. In order to do so, Disney would have to regularly review Etsy for infringing goods, examine each of the goods, and send a new takedown notice or cease and desist letter.

Some sites, such as YouTube, provide a more efficient mechanism through which copyright holders can enforce their rights by utilizing an automated tool to identify all infringing content. Unfortunately for Disney, Etsy does not. Instead, Etsy requires copyright holders to review all search results and deal with the infringing merchants on a case-by-case basis. This process is time consuming and requires substantial resources from the copyright holder. But as a result of the Digital Millennium Copyright Act’s safe-harbor provision, which enables Etsy to avoid most liability for infringement perpetrated by its users, Etsy isn’t incentivized to make the process more efficient for copyright holders. In other words, it isn’t really Etsy’s problem, so why should Etsy concern itself?

Nonetheless, Disney could likely dedicate adequate resources to this issue to eradicate the presence of such counterfeit goods on Etsy. However, doing so would be a time-consuming and costly endeavor. Disney will have to decide whether it is worth the time and effort to shut down every merchant on Etsy, or whether it should selectively target the larger, more harmful infringing merchants. The latter would obviously be a more economical approach, but Disney has proven in the past that it is willing to go the extra mile to protect its intellectual property as a matter of principle. While that approach may not make sense for all businesses, it works for companies like Disney that have virtually unlimited resources. Whether Disney will take this approach, however, remains to be seen. One thing is for certain: begun, the Baby Yoda wars have.

In the early 2000’s, an all-girl band called 3LW performed a song called “Playas Gon’ Play,”  which was written by Sean Hall and Nathan Butler.  “Playas Gon’ Play” was initially released in May, 2001 and rose to number 81 on the Billboard’s Hot 100 chart.  The album on which “Playas Gon’ Play” appeared sold over One Million copies and 3LW performed the song numerous times on national television.  The chorus of “Playas Gon’ Play” consists of the following lyrics:

Playas, they gonna play
And haters, they gonna hate
Ballers, they gonna ball
Shot callers, they gonna call
That ain’t got nothin’ to do
With me and you
That’s the way it is
That’s the way it is.

Hall and Butler sued Taylor Swift, her co-authors on “Shake It Off,” as well as various other parties related to “Shake It Off” and the album on which it was included.  Hall and Butler alleged a single claim of copyright infringement premised upon the lyrical similarities between “Playas Gon’ Play” and “Shake It Off.”

On Swift’s motion to dismiss, the sole issue before the court was whether any elements of “Shake It Off” were substantially similar to protectable elements of “Playas Gon’ Play.”  Unlike most music cases, here the court was not called upon to consider the relevant songs’ sound.  Here the court was to focus on similarities between portions of the songs’ lyrics.  The court noted that the only obvious similarities between the two works is that “Playas Gon’ Play” contains the lyrics “Playas, they gonna play / And haters, they gonna hate,” and “Shake It Off” contains the lyrics “Cause the players gonna play, play, play, play, play / And the haters gonna hate, hate, hate, hate, hate.” Before considering whether this satisfied substantial similarity, the court considered whether the allegedly infringed elements of Hall and Butler’s song – the lyrics “Playas, they gonna play / And haters, they gonna hate” are eligible for protection under the Copyright Act.

The Copyright Act protects “original” works of authorship fixed in any tangible medium of expression. The court noted that songs or a portion of a song “must be sufficiently original and creative to warrant copyright protection.”  Originality signifies “that the work originates in the author rather than having been copied from past sources” and creativity signifies “that the work has a spark that goes beyond the banal or trivial.”

The district court found the allegedly infringed phrases to be “too brief, unoriginal and uncreative to warrant protection under the Copyright Act.”  Hall and Butler appealed the dismissal to the Ninth circuit who then reviewed the case de novo.

On appeal, the 9th Circuit took issue with the basis of the district court’s dismissal based on lack of originality. In noting that originality is a question of fact, the court quoted the late Supreme Court justice Oliver Wendell Holmes, Jr. who once wrote, “It would be a dangerous undertaking for persons trained only to the law to constitute themselves final judges of the worth of pictorial illustrations, outside of the narrowest and most obvious limits.”  The 9th Circuit held that when the appeals court concluded that, “for such short phrases to be protected under the Copyright Act, they must be more creative than the lyrics at issue here,” the district court constituted itself as the final judge of the worth of an expressive work.  Because the absence of originality is not established either on the face of the complaint or through the judicially noticed matters, the appeals court reversed the district court’s dismissal under Rule 12(b)(6).

In the grand scheme of copyright litigation in the 9th Circuit, this decision will make it much more difficult (if not impossible) for a defendant to put an early end to a frivolous infringement case.  Courts routinely dismiss copyright infringement claims because they fail to show infringement of an original work.  In the 9th Circuit, that’s not going to be possible any longer.  Now, the determination of originality will require costly discovery.

In a unanimous ruling, the U.S. Supreme Court in Peter v. NantKwest, case number 18-801, struck down the U.S. Patent and Trademark Office’s (USPTO) recent and often-criticized effort to recoup its legal fees – even in cases it loses – because it violates the so-called American Rule, which says U.S. litigants must typically pay for their own lawyers.

The Patent Act creates two mutually exclusive pathways to challenge an adverse decision by the USPTO. The first permits judicial review by direct appeal to the United States Court of Appeals for the Federal Circuit. There is “no opportunity for the applicant to offer new evidence” in a §141 proceeding, and the Federal Circuit “must review the PTO’s decision on the same administrative record that was before the [agency].”

The second pathway allows applicants to file a new civil action against the USPTO in federal district court.  Unlike §141, §145 “permits the applicant to present new evidence . . . not presented to the PTO.” The district court “acts as a factfinder when new evidence is introduced in a §145 proceeding” and must make de novo determinations that take into account “both the new evidence and the administrative record before the PTO.”

The parties may appeal the district court’s final decision to the Federal Circuit. Because §145 does not limit an applicant’s ability to introduce new evidence to challenge the denial of a patent, it can result in protracted litigation. As a condition for permitting such extensive review, the Patent Act requires applicants who avail themselves of §145 to pay “[a]ll the expenses of the proceedings.” The question the Court thus had to consider is whether such “expenses” include the salaries of attorney and paralegal employees of the USPTO.

In considering the issue, the Court started with the bedrock principle that “[e]ach litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise.”  This is known as the American Rule, which has “roots in our common law reaching back to at least the 18th century.”  However, the USPTO argued the American Rule did not apply here because it is only applied when a statute awards fees to a “prevailing party,” and this was not a “prevailing party” case since the USPTO was entitled to its expenses regardless of whether it won or lost.

The Court rejected this argument reasoning it has never suggested that any statute is exempt from the presumption against fee shifting or limited its American Rule inquiries to “prevailing party” statutes. Rather, the Court has developed a line of precedents addressing statutory deviations from the American Rule that do not limit attorney’s fees awards to prevailing parties.  The Court further reasoned the presumption against fee shifting is particularly important here because reading §145 to permit an unsuccessful government agency to recover attorney’s fees from a prevailing party “would be a radical departure from longstanding fee-shifting principles adhered to in a wide range of contexts.”  Thus, the Court determined the American Rule does apply here and provides the starting point for assessing whether §145 authorizes payment of the USPTO’s legal fees.

Therefore, to determine whether Congress intended to depart from the American Rule presumption, the Court “look[s] to the language of the section” at issue. While “[t]he absence of [a] specific reference to attorney’s fees is not dispositive,” Congress must provide a sufficiently “specific and explicit” indication of its intent to overcome the American Rule’s presumption against fee shifting. In doing so, the Court found Section 145’s plain text does not overcome the American Rule’s presumption against fee shifting because the reference to “expenses” in §145 does not invoke attorney’s fees with the kind of “clarity we have required to deviate from the American Rule.”

Specifically, the Court found the definition of “expenses” in the statute, while capacious enough to include attorney’s fees, does not provide sufficient guidance.  The Court explained the mere failure to foreclose a fee award “neither specifically nor explicitly authorizes courts to shift [fees].” But, the Court reasoned the complete phrase “expenses of the proceeding” would not have been commonly understood to include attorney’s fees at the time §145 was enacted.  Moreover, the modifier “all” does not transform “expenses” to reach an outlay it would not otherwise include.  Instead, in common statutory usage, the term “expenses” alone has never been considered to authorize an award of attorney’s fees with sufficient clarity to overcome the American Rule presumption. In addition, the appearance of “expenses” and “attorney’s fees” together across various other statutes indicates that Congress understands the terms to be distinct and not inclusive of each other. Therefore, the Court found Section 145’s plain text does not overcome the American Rule’s presumption against fee shifting to permit the USPTO to recoup its legal personnel salaries as “expenses of the proceedings.”

The Court next considered the USPTO’s argument that, on occasion, the Court itself has used the term “expenses” to mean “attorney’s fees.”  However, the Court quickly rejected this argument, reasoning in common statutory usage, the term “expenses” alone has never been considered to authorize an award of attorney’s fees with sufficient clarity to overcome the American Rule presumption.

The Court also explained the Patent Act’s history reinforces that Congress did not intend to shift attorney’s fees in §145 actions. The Court noted there is no evidence that the original Patent Office ever paid its personnel from sums collected from adverse parties. In addition, the Court noted that the USPTO has not, until this litigation, sought its attorney’s fees under §145. Thus, the history of the Patent Act also reaffirms the Court’s view that the statute does not specifically or explicitly authorize the USPTO to recoup its lawyers’ or paralegals’ pro rata salaries in §145 civil actions.

Thus, in sum, the Court concluded that the USPTO cannot recover the pro rata salaries of its legal personnel under §145 and therefore affirmed the judgment of the Court of Appeals for the Federal Circuit.

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For additional articles on intellectual property issues, please visit Weintraub’s law blog at www.theiplawblog.com.

One of the most common forms of relief sought in trade secret litigation is an injunction preventing the defendants from using or disclosing the plaintiff’s trade secret information.  Although temporary restraining orders and/or preliminary injunctions may be obtained that are in place during the lawsuit, a permanent injunction is entered after trial and typically has no set time period for expiration.  There are various statutes that allow a defendant to seek to modify or dissolve a trade secret injunction at a later date, including a showing that the information that is the subject of the injunction is no longer entitled to trade secret protection.  The recent decision in Global Protein Products, Inc. v. Le (Cal. 6th App. Dist.) helps illustrate the high hurdle a defendant must clear in order to obtain such relief.

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