Blog: The IP Law Blog

What was once illegal is now a thriving industry. That’s right—I’m talking about cannabis. But my initial statement isn’t entirely accurate. Although Alaska, California, Colorado, Illinois, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont, and Washington have legalized cannabis, the drug remains a Schedule I narcotic under the federal Controlled Substances Act. While buying, selling, and using cannabis is legal under state law in certain jurisdictions, such conduct is arguably a federal crime in every jurisdiction due to the Controlled Substances Act. It’s a lot to take in, and it gives rise to numerous issues and questions concerning our government’s federalist system. But you all know this blog focuses on intellectual property, so by now I’m sure you’re wondering: what’s the significance to intellectual property of the dichotomy between the way federal and certain state law treats cannabis? Well, to oversimplify the problem, it means that businesses in the cannabis industry are without federal intellectual-property rights, which are by far the most powerful and expansive intellectual-property rights in the country.

Since I deal mostly with trademarks, I’ll address the Lanham Act for purposes of this discussion. The USPTO Trademark Manual of Examining Procedure (“TMEP”) Section 907 explains that “[u]se of a mark in commerce must be lawful use to be the basis for federal registration of the mark.” Section 907 also states, “Generally, the USPTO presumes that an applicant’s use of the mark in commerce is lawful and does not inquire whether such use is lawful unless the record or other evidence shows a clear violation of law, such as the sale or transportation of a controlled substance.” (Emphasis added.) The same section further states that “[r]egardless of state law, the federal law provides no exception to the above-referenced provisions for marijuana for ‘medical use.’” (See TMEP § 907 [citing Gonzales v. Raich, 545 U.S. 1, 27, 29 (2005) and United States v. Oakland Cannabis Buyers’ Coop., 532 U.S. 483, 491 (2001)].) Thus, any attempt to register a trademark relating to the sale or production of marijuana will be refused on the grounds that the applicant’s use of the mark in commerce is unlawful.

Therefore, since members of the cannabis industry are unable to register their marks with the United States Patent and Trademark Office, they are also unable to bring suit for trademark infringement under the Lanham Act. Section 32 of the Lanham Act (15 U.S.C. § 1114) only creates a cause of action for infringement of federally registered trademarks. Additionally, while Section 43 of the Lanham Act (15 U.S.C. § 1125) generally creates a federal cause of action for owners of unregistered trademarks, many believe the federal courts will refuse to permit those in the cannabis industry to avail themselves of this protection. Notably, Section 1125 makes no reference to the claimant’s “use in commerce,” thereby avoiding incorporation of the Lanham Act’s definition of commerce, which is “all commerce which may lawfully be regulated by Congress.” As such, there is an argument that members of the cannabis industry should be permitted to bring suit under Section 43 of the Lanham Act. But until the case law becomes clearer, this may be a risk unworthy of your client’s resources since it may result in a dismissal of your client’s claim after costly motion practice that puts you right back where you started.

Considering the inability to obtain a federal registration and the uncertainty, and partial inability, that creates with respect to policing the subject trademark under the Lanham Act, how can members of the cannabis industry protect their marks? There are two ways and one is certainly more favorable than the other. First, the company can rely upon state trademark laws. While they aren’t as powerful and expansive as the rights provided to holders of federally registered trademarks under the Lanham Act, state registration and trademark laws provide the trademark user with reasonably adequate protections. For example, under California’s Model State Trademark Law (Bus. & Prof. Code § 14200, et seq.), a registered trademark owner obtains trademark rights and the ability to enforce the mark throughout the state. This is a marked improvement over common-law rights, which are geographically restricted to the area where the user conducts business. Thus, under the common law, a Sacramento-based cannabis producer, who only sells product in the Greater Sacramento Area, could only enforce its rights in the same region. As a result, a cannabis producer in Los Angeles could potentially use the same or a confusingly similar mark as the Sacramento-based producer without consequence. That’s not a desirable outcome, and as such, state registration is preferable.

Since federal law prohibits the players in the cannabis industry from engaging in interstate commerce, state-law trademark protection is probably adequate for now. The competition is likely to be the heaviest within the state and therefore being able to enforce trademark rights statewide is probably most important. However, such rights and enforcement mechanisms won’t protect a trademark user in California from a party using a confusingly similar trademark in a neighboring state like Nevada or Oregon. In those instances, the trademark user would likely have to risk relying upon Section 43 of the Lanham Act to bring their claim, but such a claim would likely be futile because the claimant would have to rely upon their common-law rights, which are geographically restricted, and would likely be unable to demonstrate out-of-state use of the relevant trademark. Thus, relying upon the trademark law of the state is clearly an imperfect fix.

It’s evident that the incongruity between federal and state law on cannabis has created significant obstacles to registering and enforcing intellectual-property rights. However, until the Controlled Substances Act is amended, this is the world we live in. Although the uncertainty gives rise to stimulating questions of law, it also creates massive frustration and risk for clients seeking to protect their interests. With that said, with legalization continuing to grow, I suspect the federal courts will provide greater clarity before Congress amends the Controlled Substances Act. It is imperative that intellectual-property attorneys advising clients on these issues keep themselves apprised of such developments.

(This article was republished with permission by ABA Business Law Today on 6/2/2020, available here.)

Certain literary or graphic characters may, in some cases, enjoy copyright protection. Think James Bond – or Batman and even his Batmobile.  Recently, the Ninth Circuit was called upon to determine whether the Moodsters, “anthropomorphized characters representing human emotions,” are subject to the same copyright protection as Batman.  Sadly, the Ninth Circuit concluded they do not.

The Moodsters were created by an expert on children’s emotional intelligence and development, Denise Daniels. She created the Moodsters to “help children cope with strong emotions like loss and trauma.”  In 2005, Ms. Daniels and her team released an initial product called The Moodsters Bible.  The Moodsters Bible told the story of five characters who were “color-coded anthropomorphic emotions” that represented a different emotion: pink–love, yellow-happiness, blue-sadness, red-anger and green-fear. Two years later, Ms. Daniels and her team released a 30-minute television pilot featuring the Moodsters called, “The Amoodsment Mixup.”  In 2015, Ms. Daniels and her team had developed a line of toys and books featuring the Moodsters that were sold at Target and other retailers.

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Eventually, it was bound to happen. A patent application was filed by a machine. Well, not exactly. A human being filed a patent application naming a machine as the inventor.

The machine was an artificial intelligence machine described as a “creativity machine.” Its name was listed as “DABUS Invention Generated by Artificial Intelligence.” The invention was called “Devices and Methods for Attracting Enhanced Attention.”

The human’s name was Stephen L. Thaler. Mr. Thaler filed U.S. patent application no. 16/524,350 in the PTO on July 29, 2019. He also filed a statement acknowledging that because existing law does not allow a machine to own property, he was the assignee of DABUS’s invention. He said that he was the legal representative of DABUS, and was the applicant for the patent application. Mr. Thaler did not file the required oath or declaration, which is the inventor’s statement, signed under oath, that they believe they are the original inventor of the invention.

After the application was filed, the PTO sent the applicant a notice requiring that the missing oath or declaration be submitted. The applicant responded with a petition seeking to vacate the notice, which was denied. The applicant filed a petition requesting reconsideration.

In his petition, the applicant argued that inventorship should not be limited to natural persons. He said that DABUS was “programmed as a series of neural networks that have been trained with general informant in the field of endeavor to independently create the invention.” He further explained that DABUS was not created to solve a specific problem and was not trained on data relevant to the invention, but was able to “recognize” that the invention was novel.

In an unsurprising decision, the PTO denied the petition. The PTO relied on the patent statutes, which provide that “whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter… may obtain a patent….” (35 USC section 101) and define an inventor as “the individual… who invented or discovered the subject matter of the invention” (35 USC section 100(a)). The PTO found that these statutes indicate that inventors must be natural persons.

The PTO also cited a Federal Circuit case holding that the state cannot be an inventor. In University of Utah v. Max-Planck…., 734 F.3d 1315, 1323 (Fed. Cir. 2013), the court had held that conception of the invention determines inventorship, and that conception is the “formation in the mind of the inventor of a definite and permanent idea of the complete and operative invention.” In other cases, the Federal Circuit has held that corporations cannot be inventors. Based on these decisions, the PTO concluded that only natural persons could be inventors.

So, DABUS will have to wait. Some day, the law might just allow machines to be named as inventors.

Listen to this podcast episode here.

The battle started almost six years ago. A Utah-based company known as Dan Farr Productions (“DFP”) decided to use San Diego Comic Convention’s (“SDCC”) registered trademark COMIC-CON in conjunction with its own comic and popular arts convention, resulting in SDCC filing suit in the Southern District of California. SDCC alleged in its complaint that it has the exclusive right to utilize its COMIC-CON trademarks and has done so in connection with its comic convention since 1970.

After years of litigation, which was apparently filled with gamesmanship on the part of DFP and its counsel, SDCC prevailed on a motion for summary judgment. DFP met SDCC’s claim for infringement with an affirmative defense that SDCC’s marks were “generic ab initio.” In other words, DFP argued that COMIC-CON was generic before SDCC’s first use. The district court disagreed, finding that the evidence tendered by DFP was insufficient to support the argument that COMIC-CON was generic before SDCC’s first use. The Ninth Circuit reviewed this decision de novo and found that the district court properly granted summary judgment in favor of SDCC.

The Ninth Circuit also addressed the district’s court attorneys’ fees and costs award. DFP appealed the district court’s order granting SDCC over $3.7 million for attorney’s fees and costs, claiming that the district court erred because the case was not “exceptional” as required by SunEarth, Inc. v. Sun Earth Solar Power Co., 839 F.3d 1179 (9th Cir. 2016) (en banc) (per curiam). The Ninth Circuit reviewed the award, applying an abuse of discretion standard, and found that the district court did not abuse its discretion in awarding reasonable attorneys’ fees. The Ninth Circuit recognized that that district courts should analyze the “totality of the circumstances” to determine if a case is exceptional, using the preponderance of the evidence standard. SunEarth, 839 F.3d at 1181. The Ninth Circuit found that the district court properly applied the totality of the circumstances standard and focused primarily on the “unreasonable manner” in which DFP litigated the case. Specifically, the district court noted that DFP repeatedly failed to comply with court rules, re-litigated issues already decided, and engaged in gamesmanship. Given the district court’s findings and consideration of these factors, the Ninth Circuit held that the district court did not abuse its discretion deeming the case “exceptional” and granting attorneys’ fees under 15 U.S.C. § 1117(a).

As to the amount, DFP failed to challenge the hourly rates and reasonableness of timesheets for SDCC’s attorneys at the district-court level or on appeal. Instead, DFP argued that there must be a causal connection between the misconduct rendering the case exceptional and the particulars of the fee award. The Ninth Circuit found no authority supporting this argument, and stated that, regardless, the district court found that Defendants engaged in misconduct at every stage of the litigation, rendering an award of attorney’s fees related to the entire case proper.

The only portion of the district court’s fee and cost award that the Ninth Circuit took issue with was the award of $212,323.56 for expert witness fees. The Ninth Circuit found that although successful plaintiffs are entitled to “the costs of the action” under the Lanham Act, the Lanham Act does not provide the “explicit statutory authority” required to award litigation expenses beyond the six categories of costs set forth in the general costs statute. See 28 U.S.C. §§ 1821, 1920. Accordingly, because the general cost statute doesn’t reference expert witness fees, the district court erred in awarding such costs to SDCC under the Lanham Act. As such, the Ninth Circuit vacated that portion of the judgment.

Overall, the Ninth Circuit’s review was favorable to SDCC. The appellate court affirmed the summary judgment in favor of SDCC, finding DFP infringed SDCC’s COMIC-CON trademarks and that DFP’s “generic ab initio” argument lacked evidentiary support. And although the Ninth Circuit vacated the portion of the judgment awarding SDCC expert witness fees, it affirmed the remainder of the attorney’s fees award, leaving approximately $3.5 million of the award intact. SDCC certainly could have done worse.

On Monday, May 4, 2020, the Supreme Court of the United States heard oral argument in United States Patent and Trademark Office v. Booking.com, B.V.  For the first time in the history of the Court, the argument was live streamed via multiple outlets, including CNN, enabling us trademark junkies to listen to the argument in real time. Although it was surely an unfamiliar circumstance for the Court and its litigants, the hearing was mostly without issue. Returning to the case at issue, in USPTO v. Booking.com, the Court addressed whether a business can create a registrable trademark by adding a generic top-level domain name like “.com” to an otherwise unprotectable generic term. Specifically, the Supreme Court addressed whether BOOKING.COM is entitled to trademark registration.

The dispute arose in 2012 when Booking.com sought to register BOOKING.COM as a service mark for its online reservation services. The USPTO’s examining attorney determined that “booking” is generic for hotel reservation services, relying upon dictionary definitions of “booking” and “.com” and the use of “booking” by various other third parties who offer similar services. The examining attorney ultimately refused registration arguing that combining a generic term like “booking” with “.com” simply communicates to consumers that the business offers its services online.

Booking.com sought review of the refusal in the U.S. District Court for the Eastern District of Virginia (“District Court”). The District Court agreed with the USPTO that “booking” is generic for the services provided, but unlike the USPTO, the District Court found that combining “booking” with “.com” results in a term that is descriptive, not generic. Because descriptive, unlike generic, marks are entitled to protection if the user can establish the existence of secondary meaning, the District Court considered evidence to determine if consumers recognize BOOKING.COM as a source of services rather than a type of services. After considering survey evidence and evidence of extensive advertising expenditures proffered by Booking.com, the District Court held that that BOOKING.COM is entitled to trademark protection. The decision was affirmed by the Fourth Circuit Court of Appeals. The USPTO petitioned and the Supreme Court granted certiorari.

In short, the USPTO has two arguments. First, it argues that the matter is controlled by Goodyear’s India Rubber Glove Mfg. Co. v. Goodyear Rubber Co., 128 U.S. 598, a pre-Lanham Act case from 1888. The USPTO argues that under Goodyear, Booking.com could not add a “corporate identifier” such as “Company” to a generic term to create a protectable trademark, and as such, it cannot simply add “.com” to a generic term to do so. According to the USPTO, the addition of “.com” to a generic term is nothing more than an identifier indicating that the company’s services are provided online. Second, the USPTO argues that the Fourth Circuit’s decision would permit businesses to monopolize language by registering generic terms as domain names, and then using those trademark rights to preclude competitors from referring to their products by the generic term.

On the other hand, Booking.com argues that Goodyear was superseded by the Lanham Act in 1946. Booking.com argues that, as amended in 1984, the Lanham Act requires courts and the USPTO to determine the primary significance of the mark to the relevant public when analyzing whether a trademark has become generic. Booking.com contends the same test should apply when analyzing whether a term is generic or descriptive, and that consumer surveys are the best way to assess primary significance. Accordingly, because Booking.com’s survey evidence indicates that the public recognizes BOOKING.COM as a trademark rather than a category of service, the mark should be deemed descriptive rather than generic. Therefore, Booking.com reasoned that, because Booking.com established secondary meaning in BOOKING.COM, the mark is entitled to registration, the Court should affirm the Fourth Circuit’s decision.

As usual, the Court had difficult questions for both sides during oral argument, with Justice Thomas even breaking his year-long silence to make inquiries to both parties. In my opinion, the Court had more difficult and troubling questions for the USPTO, but it would be inaccurate to say that the Court wasn’t concerned with the potential monopolistic advantages that could come with its affirmation of the Fourth Circuit’s decision. If I had to guess, I think the Court will affirm the decision, but I will write about the Court’s opinion when it is issued.

For some time there has been a split among the Federal circuits as to whether evidence of willfulness is required in order to award disgorgement of profits for trademark infringement under Section 1125(a) of the Lanham Act.  The split stems from how each Federal circuit interprets Section 1117(a) of the Lanham Act which was amended in 1999.  The section reads as follows:

When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled . . . subject to the principles of equity, to recover (1) defendant’s profits . . .

A number of Federal Circuits, including the Second and the Ninth, have interpreted the above to require a showing of willfulness for disgorgement in Section 1125(a) cases.  Six Federal Circuits do not.  On April 23, 2020 the United States Supreme Court made clear where it stands.

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A party accused of infringing a patent may challenge the validity of the patent in the federal court infringement litigation or in separate administrative proceedings in the Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB). One of the methods available in the PTAB is an inter partes review (IPR), which was created by the America Invents Act.

In order to file a petition for IPR, the challenger must argue that some or all of the claims of the patent are invalid on certain grounds, including novelty and nonobviousness, and must show that there is a “reasonable likelihood” that they will prevail on at least one claim.  The statutes require that a petition for IPR be filed within one year of the challenger being served with a complaint for patent infringement.  35 USC section 315(b).   The PTAB reviews the petition and decides whether to institute IPR.  The decision whether to institute IPR is not appealable.  35 USC section 314(d). 

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Burbank High School runs a music program that reportedly provided the inspiration for the hit TV show, Glee. It is nationally known for the competitive show choirs its students participate in as part of the program. To defray the costs of fielding several choirs, a non-profit booster club was formed to help fundraise for the music education program. The booster club puts on a couple of annual fundraising shows, Burbank Blast and Pop, which include both the Burbank High School choirs as well as a number of other competitive choirs. The choirs’ music director serves as the liaison between the school’s choirs and the booster club.

The music director hired an arranger to create custom sheet music for two shows to be performed at the fundraisers: Rainmaker and 80’s Movie Montage. In creating these performances, the arranger used snippets from the following songs: Magic (originally performed by Olivia Newton John) and (I’ve Had the) Time of My Life (by Bill Medley and Jennifer Warnes) as well as Hotel California and Don’t Phunk with my Heart. After several performances, Tresona Multimedia, LLC, sued the music director, the booster club and parent-members of the booster club for copyright infringement. Tresona Multimedia alleged that it owned the copyrights to the above songs and that its copyright interests were infringed upon because no licenses were obtained to allow the use of the above songs in the performances.

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