Intellectual Property

The motion picture Wolf of Wall Street was based on a book of the same title written by Jordan Belmont.  In the book, Andrew Greene, who was director, general counsel, and head of the corporate finance department at Stratton Oakmont between 1993 and 1996, was discussed extensively.  In the book, Greene is referred to by his nickname “Wigwam” (a reference to his toupee) and described as engaging in criminal conduct.  In the motion picture, Wolf of Wall Street a minor character named Nicky Koskoff, who wears a toupee and went by the nickname “Rugrat” is depicted as engaging in unsavory and illegal behavior.  This includes engaging in adulterous/sexual acts at work and participating in criminal money laundering schemes orchestrated by one of the founders of Stratton Oakmont, Jordan Belmont (played by Leonardo DiCaprio).  Greene sued Paramount Pictures and the film’s producers on the grounds that the Koskoff character presented a defaming portrayal of himself.

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Following the America Invents Act, a petition for inter partes review (“IPR”) has become a common method for challenging the validity of a patent before the Patent Trial and Appeal Board (“PTAB”) at the United States Patent and Trademark Office (“USPTO”).  Such challenges are often brought by petitioners in response to a patent owner suing them for patent infringement.  But what happens to the IPR if the parties settle the infringement lawsuit?

When parties settle the underlying dispute, they can request that the IPR be terminated.  Under 35 U.S.C. § 317(a),

An inter partes review instituted under this chapter shall be terminated with respect to any petitioner upon the joint request of the petitioner and the patent owner, unless the Office has decided the merits of the proceeding before the request for termination is filed.

However, under 35 U.S.C. § 317(b), any settlement agreement, including any collateral agreements that are referenced, must be filed with the USPTO before the termination of the IPR.  Specifically, the statute states:

Any agreement or understanding between the patent owner and a petitioner, including any collateral agreements referred to in such agreement or understanding, made in connection with, or in contemplation of, the termination of an inter partes review under this section shall be in writing and a true copy of such agreement or understanding shall be filed in the Office before the termination of the inter partes review as between the parties. At the request of a party to the proceeding, the agreement or understanding shall be treated as business confidential information, shall be kept separate from the file of the involved patents, and shall be made available only to Federal Government agencies on written request, or to any person on a showing of good cause.

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Unicolors, Inc. creates and markets artistic design fabrics to various garment manufacturers.  Some of these designs are marketed to the public and placed in its showroom while other designs are considered “confined” works that Unicolor sells to certain customers. Unicolors withholds marketing them to the general public for a set period of time. In order to save money, Unicolors often times groups various designs into a “single work” when filing with the U.S. Copyright office for copyright registration.  The Ninth Circuit in Unicolors v. H&M Hennes & Mauritz (May 29, 2020), recently addressed whether this practice, grouping both public and “confined” works into a single registration application, creates a valid copyright that Unicolors could enforce.

The specific design at issue in the case was part of a “single unit registration” of 31 different designs that Unicolor registered with the copyright office in 2011.  In 2015, H&M stores began selling a jacket and skirt that contained art work that Unicolors alleged was identical to its 2011 design and thus infringed on Unicolors’ 2011 copyright.

Although Unicolors’ 2011 registration consisted of 31 separate designs, a number of these designs were designated as “confined” designs that were made for specific customers and withheld from the public for a couple of months. At the expiration of that waiting period, Unicolors would then place the “confined” works in its show room and/or market them to other customers.  Although Unicolors engaged in this practice with respect to the 2011 registration, it represented in that registration application that the first publication date of the 31 designs was January 15, 2011 which testimony established was the date when Unicolors presented the designs to its employee-sales people and not to the general public.

The trial court allowed Unicolors claim to go to a jury, which returned a verdict in Unicolors favor and awarded it nearly $850,000 in damages.  After denying H&M’s renewed motion for judgment as a matter of law or for new trial (and after Unicolors accepted a reduction of damages to $266,000), the trial court awarded Unicolors more than $500,000 in attorneys’ fees.  H&M appealed these decisions to the Ninth Circuit.

The two elements that a plaintiff must prove to establish copyright infringement are: “(1) ownership of a valid copyright; and (2) copying of constituent elements of the work that are original.”  The Ninth Circuit’s analysis in Unicolors focused only on the first prong – ownership of a valid copyright.  As to this issue, the Ninth Circuit recognized that “a registration certificate issued by the U.S. Register of Copyrights constitutes prima facie evidence of the validity of a plaintiff’s copyright.”

The Ninth Circuit continued by recognizing that the issue of copyright ownership is rarely contested given that “the mere receipt of a registration certificate issued by the Register of Copyrights ordinarily satisfies” this element.  However, the Ninth Circuit cautioned that a registration certificate cannot confer ownership “if the registrant secured the registration by knowingly including inaccurate information in the application for copyright registration that, if known by the Register of Copyrights, would have caused it to deny registration.”  Normally, once a defendant claims that a plaintiff has included inaccurate information in its registration application with knowledge that it was inaccurate, the district court is required to submit this evidence to the Register of Copyrights “to advise whether the inaccurate information, if known, would have caused [it] to refuse registration.”

H&M contended that the district court erred because H&M’s renewed motion had established that while Unicolors had used a single copyright registration for the 31 separate works, they did not offer or sell these works “in some integrated manner.”  In fact, the evidence showed that at least nine of the works were considered “confined” and were sold separately and exclusively to individual customers separate from the other 22 works that comprised the registration.  The district court rejected H&M’s arguments because: (1) it believed that invalidation required that H&M establish that Unicolors intended to defraud the Copyright Office; and (2) although Unicolors may have marketed and sold the various works separately, “that did not mean all of the works were not first made available to the public – i.e., published – on the same day.”

The Ninth Circuit disagreed with both of these findings.  It began by recognizing that it had previously suggested that intent-to-defraud was a requirement for registration validation; however, it noted that it had clarified last year that no such intent-to-defraud requirement existed.

In turning to the next factor, i.e., the issue of “a single unit of publication,” the Court recognized that this was an issue of first impression.  It decided, however, that in looking at the clear language in the Copyright Act, “the plain meaning of `single unit’ … requires that the registrant first publish the collection of works in a singular, bundled collection.”  That is, in looking to the common definitions of the words in the phrase “a single unit of publication,” the Court interpreted these to mean “some singular, bundled item that contains all works identified in the registration.”

The Court reached this interpretation by applying the principle noscitur a sociis, or “birds of a feather flock together,” that requires “that words in statutes are given more precise content by neighboring words.” In applying this to the issue before it, the Ninth Circuit held that “a collection of works does not qualify as a `single unit of publication’ unless all individual works of the collection were first published as a singular, bundled unit.”

After reaching this determination, the Ninth Circuit concluded that the evidence was clear that Unicolors had not established that it “published” these designs as a “singular, bundled unit” because at least some of the designs “were initially made available only to individual, exclusive customers.”  The Ninth Circuit found that the evidence supported a finding that Unicolors knew that the information in its copyright registration application was inaccurate and that the district court, based on this evidence, should have requested the Register of Copyrights to weigh in on whether it would have refused the registration in light of these facts.  Because the trial court had not done this, the Ninth Circuit concluded that it had erred and therefore reversed the entry of judgment and award of attorney’s fees and remanded the case to the trial court to submit an inquiry to the Register of Copyrights as normally required.

The Unicolors decision is a reminder that attorneys litigating copyright infringement should not necessarily take the first prong of proving in infringement case, i.e., ownership of a valid copyright, for granted. Further investigation or discovery on this issue may be warranted, especially in the case where multiple designs or works are registered as a single work.

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.