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In TASER International, Inc. v. PhaZZer Electronics, Inc. et al, 6-16-cv-00366 (FLMD July 21, 2017, Order), a Florida District Court took the drastic step of entering a default judgment in favor of Plaintiff Taser, along with an award of compensatory and treble damages, an award of reasonable attorneys’ fees and costs, and injunctive relief because of Defendant Phazzer’s discovery failures and abusive litigation tactics.  According to the Court, since the outset of the litigation, Phazzer had engaged in a pattern of bad faith conduct designed and intended to delay, stall, and increase the cost of the litigation.  The Court determined no relief other than terminating sanctions would be adequate to address Phazzer’s repeated violations.  In the case, Plaintiff Taser filed a complaint against Defendant Phazzer for patent and trademark infringement, false advertising, and unfair competition.

In the order granting the terminating sanctions, the Court began by summarizing the “abusive litigation and discovery practices” it found the Defendant undertook during the litigation.  Specifically, the Court noted that after three motions to compel, and after the case had been ongoing for nearly a year, plaintiff “TASER still has not received the most basic information regarding the details and relationships between Phazzer and its manufacturer/suppliers/distributors of the accused . . .[infringing] product.”  In addition, the Court noted that while Taser had been attempting to schedule depositions for five months, Phazzer continued to assert that “[e]very one of the handful of critical witnesses associated with Phazzer, a small, closely-held company, are represented to be on vacation, out of the country, in surgery, or convalescing.”

Furthermore, after multiple failures by corporate representative for Phazzer to appear when required, the Court order that a representative of Phazzer must attend a hearing on their counsel’s request to withdraw, cautioning that “[f]ailure to comply with this Order may result in imposition of sanctions, including entry of a default or default judgment against the offending party or counsel.”  However, the Court noted that no representative from Phazzer Electronics attended the hearing in clear violation of the Court’s Order.  Moreover, in addition to the “flagrant discovery abuse and contemptuous behavior exhibited by Phazzer,” the Court also cited to numerous attempts by Phazzer to derail the litigation by repeatedly attempting to stay the proceedings, and by filing a last minute emergency motion for a protective order.

As for legal authority for its terminating and others sanctions ordered against Phazzer, the Court stated Rule 37 of the Federal Rules of Civil Procedure “allows district court judges broad discretion to fashion appropriate sanctions for the violation of discovery orders.”  The Court then noted Rule 37 “authorizes a variety of sanctions, such as, striking pleadings, rendering a default judgment, and holding the disobeying party in contempt of court.”  Furthermore, Rule 37 provides that “the court must order the disobedient party, attorney advising that party, or both to pay the reasonable expenses, including attorney’s fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust.”

Although the sanction of default is seen as a “last resort,” the Court reasoned a party’s “willfull or bad faith disregard” for discovery orders may call for this type of sanction when the party failed to comply with a court order compelling discovery and warning that the failure to comply might result in a default judgment.  The Court also noted bad faith may be found through “delaying or disrupting the litigation or hampering enforcement of a court order.”  The Court then found that Defendant Phazzer engaged in the above-described misconduct with the subjective intent to abuse the judicial process.  Thus, the Court found the imposition of terminating sanctions, along with compensatory and treble damages, attorneys’ fees and costs, and a permanent injunction to be “necessary to adequately punish Phazzer for its wanton and repetitive disregard of this Court’s orders and as a consequence of its willful abuse of the discovery process. The imposition of lesser sanctions would underrepresent the seriousness of the offensive conduct.”

Although an extreme example, this case is a good reminder to parties and attorneys alike that all litigation must be taken seriously and that the discovery process must be respected.  Failure to do so can lead to sanctions, up to and including terminating sanctions in particularly egregious cases.

In 2014, the Washington Redskins lost a battle before the Trademark Trial and Appeal Board (“TTAB”) where the petitioner, a group of Native American activists, sought cancellation of the “Washington Redskins” trademark, which had been used for over 80 years. Immediately after the decision, the Redskins sought recourse through the United States District Court, which is one of two appropriate venues for an appeal from the TTAB. However, the Redskins didn’t have any better luck there as Judge Gerald Bruce Lee affirmed the TTAB’s ruling in 2015, finding that the mark, and its related marks, are offensive to Native Americans and therefore ineligible for federal trademark protection under the Lanham Act, which prohibits registration of trademarks that “may disparage” or bring people into contempt. The Redskins, displeased with Judge Bruce Lee’s ruling, eventually petitioned the Supreme Court for certiorari, but the Court refused to hear the matter, finding that a similar case, In re Tam, stemming from the Federal Circuit, was preferable for review.

In In re Tam, the front man for an Asian-American rock band known as the Slants, sought registration of the band’s name through the United States Patent and Trademark Office (“USPTO”), but was denied registration on the ground that the mark is disparaging. Accordingly, Tam sought appellate review before the Federal Circuit, which is the other appropriate venue for a USPTO or TTAB appeal, claiming that the disparagement clause of the Lanham Act violates the First Amendment’s Free Speech Clause. The Federal Circuit sided with Tam and ordered the TTAB to register the mark. The TTAB, dissatisfied with the Federal Circuit’s ruling, sought Supreme Court review, which as stated above, was granted.

The matter of Matal v. Tam was argued before the Supreme Court on January 18, 2017 and the Court issued its opinion on June 19, 2017. In an 8-0 decision, with Justice Neil Gorsuch taking no part in the consideration or decision of the case, the Court affirmed the Federal Circuit’s decision. Justice Alito, delivering the opinion of the Court, stated that “The disparagement clause violates the First Amendment’s Free Speech Clause,” and “Contrary to the Government’s contention, trademarks are private, not government speech.” He further stated that:

The Commercial market is well-stocked with merchandise that disparages prominent figures and groups, and the line between commercial and non-commercial speech is not always clear, as this case illustrates. If affixing the commercial label permits the suppression of any speech that may lead to political or social “volatility,” free speech would be endangered.

Despite this favorable ruling for free speech, Justice Alito cautioned that the government still “has an interest in preventing speech expressing ideas that offend.” But he and the Court believe the disparagement clause in its current form is too broad. He stated that:

The clause reaches any trademark that disparages any person, group, or institution. It applies to trademarks like the following: “Down with racists,” “Down with sexists,” “Down with homophobes.” It is not an anti-discrimination clause; it is a happy-talk clause. In this way, it goes much further than is necessary to serve the interest asserted.

So interestingly, while the opinion is clearly a victory for Tam, the Slants, and the Redskins, Justice Alito left open the door for some form of governmental regulation of ideas that offend.

On the other hand, Justice Alito was clear that trademark registration does not constitute governmental speech, which has inferior free speech protection. So it’s reasonable to conclude that irrespective of Justice Alito’s cautionary proclamation, the Court will not allow the TTAB or USPTO to continue cancelling and rejecting trademarks it finds disparaging, irrespective of any amendment or narrowing to the disparagement clause. However, the most appropriate interpretation of the Court’s opinion is likely that the disparagement clause, in its current form, is unconstitutional and overbroad in its scope, but while the trademark registration does not constitute governmental speech, commercial speech is not without governmental regulation. As such, it is likely that Congress will amend the Lanham Act and narrow the scope of the disparagement clause, then the TTAB will cancel, or the USPTO will reject, a trademark under the revised disparagement clause. Only then will we learn exactly how far the Court is willing to go to protect free speech, but based upon Justice Alito’s remarks regarding the danger of treating commercial speech any differently, it seems likely that the Court would rule in favor of free speech again.

As you likely know, Amazon is taking the world by storm. Whether it is through its convenient offering of household goods, and pretty much anything else you can imagine, to your door, or through its expansive selection of movies and television shows provided through its Amazon Prime streaming service, Amazon is a major player in multiple industries. Recently, Amazon surprised the general public when it agreed to purchase Whole Foods Market for $13.7 billion and judging from its recently trademark application, Amazon is nowhere near done with its expansion.

On July 6, 2017, Amazon filed a trademark application for “prepared food kits composed of meat, poultry, fish, seafood, fruit and/or vegetable.” The trademark that Amazon seeks to register is WE DO THE PREP.  YOU BE THE CHEF. Does this concept sound familiar? Perhaps even a bit like Blue Apron? If so, that’s probably because it is exactly like Blue Apron. If you aren’t familiar with Blue Apron, it is a meal-kit delivery service backed by major venture capital groups, including Fidelity and Bessemer Venture Partners. It was founded in August 2012 and has enjoyed major success to date. According to the Times Herald, as of September 2016, Blue Apron had shipped 8 million meal servings. This success led to the company going public last month.

Since that time, the value of Blue Apron’s stock has declined steadily, but it recently took its hardest hit when Amazon’s trademark application hit the public sphere, resulting in more than a ten percent drop in price per share. But what does this mean? And more importantly for purposes of this article, how is it related to intellectual property? Well, although there are likely various factors involved in the further decline of Blue Apron’s stock price, such as overvaluation, the most recent drop in stock price is likely caused by Amazon’s extraordinary goodwill.

Usually, when we discuss a mark’s goodwill, it is the product of the owner building goodwill in the mark through its use in commerce. But here, we have an instance where the mark has never been used in commerce and it already has substantial goodwill. The reason is that WE DO THE PREP. YOU BE THE CHEF. is inherently imbued with Amazon’s sizable goodwill. Not to mention, in light of the pending Whole Foods buyout, the mark is likely benefitting from Whole Foods’s goodwill, as consumers likely anticipate that Amazon will utilize Whole Foods products in its food kits. Although I don’t think that has been confirmed or even mentioned by anyone in the know, it is a reasonable assumption. Either way, it is clear that the mark is riding the coattails of its parent company and its parent company’s soon-to-be acquired subsidiary to give itself a head start into the food delivery marketplace. Whether that is indicative of future success in the marketplace remains to be seen.

In today’s age of rapid fire social media, posting to feed the ever growing hunger of a digitally connected audience has become second nature to celebrities and other influencers.  In fact, the larger the number of followers, the greater the compulsion to constantly connect.  And that’s where the problems can arise.

The facts underlying the claim seemed innocuous enough.  Hip hop celebrity Sean “Diddy” Combs was delivering an inspirational speech to young students at a new charter school he founded in Harlem.  Professional photographer Matthew McDermott took a picture of Combs surrounded by students; the picture eventually accompanied an online article in the New York Post.  McDermott’s name was featured in the credits identifying him as the photographer.  A few weeks later, Combs posts the picture on his Instagram account with comments about the charter school.  The result, a copyright infringement lawsuit for Combs.

Taking issue with Combs’ posting of the photo (and not including his credit), McDermott filed a lawsuit.  In the lawsuit, McDermott claimed that Combs did not license the photograph from him, that Combs removed his photography credit and that the page with the photograph received over 40,000 likes.  McDermott alleged that by publishing the photograph on his Instagram page, Combs infringed his copyright,  Technically, McDermott’s claim is accurate.  Under Section 106 of the Copyright Act, the owner of a copyright has the exclusive rights to (a)  reproduce the copyrighted work in copies, and (b) in the case of a picture, display the copyrighted work publicly.  Combs allegedly violated both of these rights by copying the picture from the New York Post and then posting it on his Instagram page.

McDermott’s second claim was one not regularly seen: a claim that Combs had violated Section 1202 of the Copyright, enacted pursuant to the Digital Millennium Copyright Act.  Section 1202 provides that no one shall, without the permission of the copyright owner (1) intentionally remove or alter any copyright management information; or (2) distribute, or publicly perform works knowing that copyright management information has been removed without the permission of the copyright owner knowing or having reasonable grounds to know, that it will induce, enable, facilitate, or conceal an infringement.  The term “copyright management information” is defined in the section as any of the following information conveyed in connection with copies of a work: (1) the name of, and other identifying information about, the author of a work; and (2) the name of, and other identifying information about, the copyright owner of the work, including the information set forth in a notice of copyright.

McDermott claimed that by removing the credit that was included with the photograph as it was displayed in the New York Post, Combs violated both of the above provisions of the DMCA.

Since McDermott had registered his copyright in the photograph, if found liable for infringement, Combs could face liability for statutory damages up to $150,000 and attorney fees; add to that another potential $25,000 in liability for the DMCA violation.  According to a filing with the court, Combs and McDermott have settled the dispute.  As such, we will never know whether Combs could have defeated the infringement claim with a fair use argument.  Additionally, we will never know whether the court would have accepted McDermott’s claim that his photo credit qualified as “copyright management information.” (Certain courts read Section 1202 as applicable only to technological copyright protection methods and digital methods of conveying copyright management information.)  One thing is for certain:  this most likely ended up being one expensive Instagram post for Combs.

Simon Tam is the lead singer of the rock group call “The Slants’, which is composed of Asian-Americans.  Tam applied for federal trademark registration of the band’s name.  While the term “slants” is a derogatory term for persons of Asian descent, Tam adopted the name “to ‘reclaim’ and ‘take ownership’ of stereotypes about people of Asian ethnicity,” thereby hopefully removing the term’s denigrating effect.  Despite the positive intention, the United States Patent and Trademark Office (“USPTO”) denied the trademark application for “The Slants” under a law prohibiting registration of trademarks that may “disparage … or bring … into contemp[t] or disrepute” any “persons, living or dead.”  15 U.S.C. §1052(a).  However, in its recent decision in Matal v. Tam, the United States Supreme Court found that this law violates the Free Speech Clause of the First Amendment of the U.S. Constitution.  As the Supreme Court opines, it is a bedrock principle of the First Amendment that “[s]peech may not be banned on the ground that it expresses ideas that offend.”

The Lanham Act, enacted in 1946, serves as the foundation of our current federal trademark law.  A goal of this Act is to provide federal “protection of trademarks in order to secure to the owner of the mark the goodwill of his business and to protect the ability of consumers to distinguish among competing producers.”  The Lanham Act, however, excludes registration of certain trademarks.  For example, under 15 U.S.C. §1052(e)(1), “a trademark cannot be registered if it is ‘merely descriptive or deceptively misdescriptive’ of goods.”  Further, under 15 U.S.C. §1052(d), a trademark cannot be registered “if it is so similar to an already registered trademark or trade name that it is ‘likely … to cause confusion, or cause mistake, or to deceive.’”  In the case of the trademark “The Slants”, the USPTO invoked another exclusion, the disparagement clause of 15 U.S.C. §1052(a), to deny registration of the trademark.  The disparagement clause prohibits registration of a trademark that “may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute …”

Ultimately, the Supreme Court determined that the disparagement clause of 15 U.S.C. §1052(a) is unconstitutional “viewpoint” discrimination.  The Court noted that the law “applies equally to marks that damn Democrats and Republicans, capitalists and socialists, and those arrayed on both sides of every possible issue.” But even though “the clause evenhandedly prohibits disparagement of all groups,” it is still viewpoint discrimination because it “denies registration to any mark that is offensive to a substantial percentage of the members of any group.”  As the Supreme Court has previously stated, “the public expression of ideas may not be prohibited merely because the ideas are themselves offensive to some of their hearers.”

The Court next had to determine whether the Government’s action and this statute could survive constitutional scrutiny given that it amounted to viewpoint discrimination.  The Court considered whether trademarks are commercial speech because at least some of the justices held the opinion that the Government’s regulation of trademarks would be subject to the more relaxed scrutiny described in Central Hudson Gas & Elec. Corp. v. Public Serv. Comm’n of N.Y. rather than strict scrutiny.  In concurring opinions, other justices asserted that whenever the government creates regulations of speech because of the ideas it conveys, the regulations are subject to strict scrutiny regardless of whether the speech can be characterized as commercial in nature.  Despite this disagreement between the justices, they all concurred in the finding that “the disparagement clause violates the Free Speech Clause of the First Amendment” because it was determined that the law could not even survive the relaxed standard of scrutiny.    Therefore, Tam has the right to register his trademark “The Slants”.

As a result of this Supreme Court decision, another longstanding dispute was resolved almost immediately.  The Justice Department and five Native Americans fighting the NFL’s Washington Redskins’ trademark dropped their opposition.  While the opponents find the Redskins’ trademark to be an offensive slur, in light of the ruling in Tam, the basis for their challenge to the Redskins’ trademark evaporated, bringing an end to legal fights that date back almost 25 years.

In early 2016, pending resolution of the Tam matter and related cases, the USPTO informally suspended processing of applications for trademarks that potentially violate any aspect of 15 U.S.C. §1052(a), including not just potentially disparaging marks but also those that could fall under another clause of §1052(a) prohibiting a trademark that “[c]onsists of or comprises immoral, deceptive, or scandalous matter.”  What happens now?  While the Supreme Court did not specifically address the “immoral, deceptive, or scandalous” language in Tam, does the reasoning apply equally to immoral and scandalous trademarks?  For example, will the USPTO now allow Erik Brunetti’s trademark for his brand “Fuct”?   It seems likely.

Will this ruling impact patents as well?  As others have pointed out, the Manual of Patent Examining Procedure (“MPEP”) currently instructs patent examiners to reject or object to offensive subject matter and drawings.  For example, MPEP Section 1504.01(e) entitled “Offensive Subject Matter” instructs that “[d]esign applications which disclose subject matter which could be deemed offensive to any race, religion, sex, ethnic group, or nationality, such as those which include caricatures or depictions, should be rejected as nonstatutory subject matter under 35 U.S.C. 171.”  Further, MPEP Section 608 states entitled “Disclosure” states that

[i]f during the course of examination of a patent application, an examiner notes the use of language that could be deemed offensive to any race, religion, sex, ethnic group, or nationality, he or she should object to the use of the language as failing to comply with 37 CFR 1.3 which proscribes the presentation of papers which are lacking in decorum and courtesy. The inclusion of such proscribed language in a federal government publication would not be in the public interest. Also, the inclusion in application drawings of any depictions or caricatures that might reasonably be considered offensive to any group should be similarly objected to.

An application should not be classified for publication under 35 U.S.C. 122(b) and an examiner should not pass the application to issue until such language or drawings have been deleted, or questions relating to the propriety thereof fully resolved.

While it is not clear how often these MPEP procedures are applied in practice and even though they are procedural rather than statutory in nature, they represent Government “regulation” of expression of an invention.  Wouldn’t one expect rejection of patent applications under these sections of the MPEP to be unconstitutional under the reasoning in Tam?  Only time will tell just how far the Tam ruling opens the door for intellectual property protection for what many may find offensive.  But the First Amendment protects our right free speech whether or not others find it offensive.

I admit that the title of this article may be a bit deceiving.  Making films, like any other production of art, is almost always an act of free speech.  However, the Ninth Circuit was recently faced with a dilemma of determining this issue in connection with an anti-SLAPP motion brought against a screen writer who claimed that the defendants had failed to pay him for using his idea to make the film, The Purge.

Douglas Jordan-Benel, a writer, wrote a screenplay he titled, Settlers Day, which described an annual, state-sponsored 24-hour period in which citizens were allowed to commit any crime without legal ramifications.  Jordan-Benel registered his screenplay with the Writers Guild of America and the U.S. Copyright Office.  Shortly after writing the screenplay, his manager emailed the United Talent Agency (“UTA”) about the screenplay.  After receiving permission, the screenplay was submitted to UTA for review.  A few days later, UTA notified Jordan-Benel’s manager that they had read the screenplay and were going to “pass.”  However, someone at UTA apparently forwarded the screenplay to another client and he and a partner later wrote a screenplay that they called, The Purge; which Jordan-Benel later alleged stole ideas from his screenplay.  The Purge movie was released in 2013 and produced by Universal City Studios, LLC.

Jordan-Benel later sued and alleged copyright infringement and that certain defendants were liable for breach of an implied in fact contract based on his submission of his Settlers Day script.  The defendants filed an anti-SLAPP motion seeking to have the breach of contract claim dismissed claiming that it arose “from an act in furtherance of [their] rights of petition or free speech …”.  The District Court denied the motion finding that Jordan-Benel’s breach of the implied contract claim was not based on the making of the film per se; but rather, on defendants’ failure to pay for the use of his ideas in making the film.  Therefore, the anti-SLAPP statute did not apply because the claim was not based on protected activity.  The defendants appealed this decision to the Ninth Circuit.

In Jordan-Benel v. Universal City Studios, et al., (June 20, 2017), the Ninth Circuit began by recognizing that California’s anti-SLAPP statute only applies to “a cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech“ under the California and/or U.S. Constitutions.  It noted that California had enacted the anti-SLAPP statute “to deter lawsuits [intended to]`primarily to chill the valid exercise of the constitutional rights of freedom of speech’.”  In essence, a defendant must first show that the plaintiff’s claim arises from an act in furtherance of the defendant’s free speech rights and if such showing is made, then the burden shifts to the plaintiff to show that they have probability of prevailing on their claim.  Here, the defendants claimed in their anti-SLAPP motion that Jordan-Benel’s claim for breach of contract arose from the creation, production, distribution and content of The Purge film. Thus, since such conduct was protected under anti-SLAPP, the Court should have dismissed Jordan-Benel’s contract claim.

The Ninth Circuit concluded that the district court properly denied the anti-SLAPP motion.  It focused its inquiry on two related questions: “(1) From what conduct does the claim arise? and (2) Is that conduct in furtherance of the rights of petition or free speech?”  The Ninth Circuit noted that the California Supreme Court has explained: “that a cause of action arguably may have been `triggered’ by protected activity does not entail that it is one arising from such … [T]he critical consideration is whether the cause of action is based on the defendant’s protected free speech or petitioning activity.”  That is, even though engaging in a protected activity may be related to plaintiff’s complaint that does not necessarily mean that the complaint is arising from such protected activity thereby triggering the anti-SLAPP statute.

The Ninth Circuit continued by stating that it would focus on the specific act of wrongdoing” that was challenged by the plaintiff.  It recognized that California has allowed breach of implied in fact contract claims like Jordan-Benel’s and requires a plaintiff to allege the following: “(1) He submitted the screenplay for sale to the defendants; (2) he conditioned the use of the screenplay on payment; (3) the defendants knew or should have known of the condition; (4) the defendants voluntarily accepted the screenplay; (5) the defendants actually used the screenplay; and (6) the screenplay had value.”  In essence, this claim is not necessarily an “idea theft” cause of action but rather one of an “implied promise to pay the reasonable value of the material disclosed.”  In applying this analysis to Jordan-Benel’s claims, it concluded that he was not suing due solely to the fact that defendants made The Purge film; but rather, that they failed to pay him for the use of his screenplay ideas.  Thus, the Ninth Circuit concluded that the district court properly held that he anti-SLAPP statute did not apply to Jordan-Benel’s contract claim.

The Ninth Circuit went further and rejected the defendants’ claim that the Court should apply a broader “but for” analysis.  In essence, the defendants urged the Court to apply the anti-SLAPP statute by arguing that Jordan-Benel would have no claim against them “but for” their making of The Purge film.  Although the Ninth Circuit recognized that the anti-SLAPP statute is to be construed broadly, it could find no legal authority for the proposition that it was intended to apply when protected activity is not the target of the claim as here.

The Ninth Circuit concluded that the defendants’ alleged failure to pay for the use of the plaintiff’s ideas in making of The Purge film was not conduct that was in furtherance of their right of free speech.  Thus, it affirmed the district court’s denial of the anti-SLAPP motion.

James Kachmar is a shareholder in Weintraub Tobin Chediak Coleman Grodin’s litigation section.  He represents corporate and individual clients in both state and federal courts in various business litigation matters, including trade secret misappropriation, unfair business competition, stockholder disputes, and intellectual property disputes.  For additional articles on intellectual property issues, please visit Weintraub’s law blog at www.theiplawblog.com.