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The Grand Theft Auto (“GTA”) video game series is one of the most successful video games of all time. In April 2005, the maker of GTA was sued for trademark infringement as a result of its inclusion of a fictional strip club in its game that bore a resemblance to a real strip club in East Los Angeles. On November 5, 2008, the Ninth Circuit in the case E.S.S. Entertainment 20002, Inc. v. Rockstar Videos, Inc., et al. issued its opinion in this case involving video games and virtual strip clubs and reaffirmed the protections of the First Amendment as a defense to trademark infringement claims.

Rockstar Games, Inc. (“Rockstar”) manufactures the GTA video game series, which includes Grand Theft Auto: San Andreas. The games take place in fictional cities resembling actual American urban areas. Each game is accompanied by a disclaimer stating that the locations depicted are fictional. GTA: San Andreas was created to emulate the West Coast “gangster” culture and depicts the virtual city of Los Santos, which is intended to imitate actual Los Angeles neighborhoods.

In creating the Los Santos portion of the game, some of the computer artists visited Los Angeles to take reference photographs. They then returned to their studios in Scotland where they changed the images from the photographs as necessary to fit into the fictional Los Santos city. One of the computer artists testified that they did not seek to “re-creat[e] a realistic depiction of Los Angeles; rather, [they] were creating `Los Santos’ a fictional city that lampooned the seedy underbelly of Los Angeles and the people, business and places [that] comprise it. “ One of the businesses depicted in Los Santos was a cartoon-style strip club called the “Pig Pen.”

E.S.S. Entertainment 2000, Inc. (“ESS”) operates a strip club featuring nude females in East Los Angeles called the Play Pen Gentlemen’s Club (“Play Pen”). ESS claims that Rockstar’s depiction of a fictional strip club called the “Pig Pen” infringed its trademark and trade dress associated with its “Play Pen” club.

Although the video game artists took some inspiration from their photographs of the Play Pen, they also used photographs of other East Los Angeles locations to design other aspects of the fictional “Pig Pen.” These aspects included different characteristics of the “Pig Pen” building and different signage.

In April 2005, ESS sued Rockstar for various claims, including trademark infringement and unfair competition. ESS claimed that Rockstar used the Play Pen’s distinctive logo and trade dress without its authorization and created a likelihood of confusion among consumers as to whether ESS endorsed or was otherwise associated with the GTA video game. The U.S. District Court granted Rockstar’s summary judgment against all of ESS claims and held that the First Amendment protected Rockstar against liability. [The court also addressed and rejected Rockstar’s defense of the nominative fair use doctrine which is not discussed in this article.]

In considering Rockstar’s First Amendment defense, the Ninth Circuit began by recognizing that it had adopted the Second Circuit’s approach from Rogers v. Grimaldi (2d Cir. 1989) 875 F.2d 994, which “requires courts to construe the Lanham Act `to apply to artistic works only where the public interest in avoiding consumer confusion outweighs the public interest in free expression.’” Furthermore, an artistic work’s use of a trademark that otherwise would constitute trademark infringement under the Lanham Act is not actionable “unless the [use of the mark] has no artistic relevance to the underlying work whatsoever or if it has some artistic relevance unless [it] explicitly misleads as to the source or the content of the work.” The Ninth Circuit recognized that although the test was traditionally applied to the use of a trademark in the title of an artistic work, it found no reason why it should not also apply to the use of a trademark in the body of an artistic work.

The Ninth Circuit continued by recognizing that it had adopted the Rogers approach in the case, Mattel, Inc. v. MCA Records, Inc. (9th Cir. 2002) 296 F.3d 894. There, Mattel, the maker of “Barbie” dolls, sued MCA for trademark infringement with regard to the title of a song the company released called “Barbie Girl.” The court recognized that the song was a commentary “about Barbie and the values … she [supposedly] represents.” In considering the two prongs of the Rogers test, the court recognized that the first prong was straightforward because the song was about Barbie and the use of Barbie in the title was clearly relevant to the underlying work. As to the second prong, the Ninth Circuit made an important point in observing “the only indication that Mattel might be associated with the song is the use of Barbie in the title. If this were enough to satisfy this prong of the Rogers test, it would render Rogers a nullity.”

In turning to the GTA matter, the Ninth Circuit noted that ESS conceded that the GTA game was artistic and, therefore, the Rogers test would apply. ESS argued, however, that the incorporation of the “Pig Pen” into the game had no artistic relevance and that it was explicitly misleading. ESS argued that its claim was distinguishable from that in Mattel in that (1) the game was not “about” the Play Pen in the way the “Barbie Girl” song was “about” the Barbie doll and (2) unlike Barbie, the Play Pen was not a cultural icon.

The Ninth Circuit reasoned that ESS missed the point. Under past cases, courts have held that the use of a trademark with “no artistic relevance to the underlying work whatsoever” does not merit First Amendment protection. The court reasoned “in other words, the level of relevance merely must be above zero. It is true that the game is not `about’ the Play Pen the way that Barbie Girl was about Barbie, but given the low threshold the game must surmount, that fact is hardly dispositive.” The Ninth Circuit also recognized that while the Play Pen has little cultural significance, the same could be said about many East Los Angeles individual establishments. However, its distinctiveness lay in the “look and feel” of the neighborhood and that characterization is relevant to Rockstar’s artistic goal, which was to develop a cartoon-style parody of East Los Angeles. The Ninth Circuit concluded that to include a strip club that is similar in look and feel to the Play Pen did indeed have at least “some artistic relevance.”

Turning to the second prong, the Ninth Circuit recognized that this prong is directly aimed at the purpose of trademark law, namely, to “avoid confusion in the marketplace by allowing a trademark owner to prevent others from duping consumers into buying a product they mistakenly believe is sponsored by the trademark owner.” The Ninth Circuit held that the only relevant issue was whether GTA would confuse its players into thinking that the Play Pen was somehow behind the Pig Pen or that it sponsors the GTA game. The Ninth Circuit recognized that the mere use of the trademark alone cannot suffice to make it explicitly misleading and that the GTA game was not complimentary to the Play Pen strip club in that video games and strip clubs do not go together “like a horse and carriage.” The Ninth Circuit did not find any evidence that the buying public would “reasonably have believed that ESS produced the video game or, for that matter, that Rockstar operated a strip club.” Furthermore, there was no evidence that a player would be misled into believing that ESS had provided whatever expertise, support or unique strip club knowledge it possesses to the production of GTA.

The Ninth Circuit concluded that Rockstar’s modification of ESS’ trademark was not explicitly misleading and was thus protected by the First Amendment against ESS’ trademark infringement claim. Since the First Amendment defense applied equally to all of ESS’s state claims, the Ninth Circuit held that the district court had properly dismissed the entire case against Rockstar.

Given the Ninth Circuit’s ruling in the ESS case, defendants in trademark infringement cases should keep in mind whether First Amendment protections can provide an affirmative defense to the plaintiff’s claims.

Sometimes a law is passed which tackles incredibly complex issues and causes seismic shifts in entire industries. Unfortunately, nothing like that happened in time for this article. However, early this month President Bush signed into law Senate Bill 3325 – the Enforcement of Intellectual Property Rights Act of 2008. This new law amends existing federal intellectual property laws to enhance remedies for violations of intellectual property rights and creates a Cabinet level position to coordinate protection of intellectual property, both domestically and abroad, to promote education and to facilitate criminal prosecution of infringers. This bill was backed heavily by the RIAA, MPAA and other organizations who represent content owners. A summary of the changes implanted by the act are as follows.

Enhancements to Civil Intellectual Property Laws

The first section of Title I of the Act makes some modifications to the requirement that prior to instituting copyright infringement action a plaintiff must have registered the work being infringed. First, the Act limits the registration requirements for civil actions, meaning that the government can pursue criminal copyright infringement actions without the copyright owner having ever filed and obtained a copyright registration for the work being infringed. Second, the Act introduces a harmless error provision to the registration requirement. An infringer can no longer avoid liability if the registration covering the work allegedly infringed contains inaccurate information.

The second section of Title I of the Act introduces a new tool for copyright owners combating infringement. Under the newly revised Section 503(a) of the Copyright Act, a court may now impound all of allegedly infringing copies or phonorecords, all plates, molds, masters, and other means or methods of which the allegedly infringing copies or phonorecords were made, and all records documenting the manufacture and sale of the allegedly infringing copies or phonorecords. These new tools were previously only enjoyed by trademark owners who sought to impound counterfeit goods under the Lanham Act.

The third and fourth sections of the Act address the civil penalties that may be imposed in counterfeiting cases under the Lanham Act. Section 35(b) of the Lanham Act has been amended to impose treble damages not only against individuals who engage in the sale or distribution of counterfeit goods, but also against those who provide the goods or services necessary for the sale or distribution of counterfeit goods. The Act also doubles statutory damages available under the Lanham act in counterfeiting cases. Now, in cases involving use of a counterfeit mark, the plaintiff is entitled to an award of statutory damages of not less than $1,000 (up from $500) but no more than $200,000 (up from $100,000) per counterfeit mark per type of goods or services sold or distributed. If the court finds that the use of the counterfeit mark was willful, the court may now award up to $2,000,000 (up from $1,000,000) per counterfeit mark per type of goods or services sold or distributed.

The Act also amends Section 602 of the Copyright Act which previously addressed the importation of infringing copies or phonorecords. The Act now provides that the importation into the United States, and now the exportation from the United States, of copies or phonorecords which, if sold within the United States would be infringing goods, shall constitute copyright infringement.

New Forfeiture Laws

Title II of the Act adds a new forfeiture provision for civil and criminal infringement. Under the new forfeiture provisions not only are infringing copies or counterfeit items subject to forfeiture and destruction, but also any property used or intended to be used in any manner to commit or facilitate the infringement. Also subject to forfeiture are the proceeds from the infringing activities. The new forfeiture provision also provides for the forfeiture and destruction of property involved in the unauthorized recording of live musical performances or motion pictures.

Creation Of An Intellectual Property Enforcement Coordinator and Budget Appropriations

Title III contains the most controversial provision of the Act; the creation of a Cabinet level position to oversee and coordinate the enforcement of intellectual property. The “IP Czar” has quite a job description. This person shall be responsible for coordinating the development of a strategic plan to combat and reduce counterfeit and infringing goods in the domestic and international markets, disrupting and eliminating domestic and international counterfeiting and infringing networks, working with foreign nations to establish international standards and policies for the protection and enforcement of intellectual property rights, and taking active steps to protect United States Intellectual Property rights in foreign nations.

Also included in the Act are appropriations totaling $275,000,000 ($55,000,000 per fiscal year beginning in 2009 and continuing through 2013) for the Department of Justice and FBI to combat intellectual property infringement. The Department of Justice shall have access to $25,000,000 per year to make grants available to the states and local law enforcement entities for training, prevention, enforcement, and prosecution of intellectual property theft and infringement crimes. The FBI and the Attorney General for the Criminal Division of the DOJ get a total of $30,000,000 per year in appropriations for the investigation and prosecution of intellectual property crimes, including adding 10 additional operational agents of the BBI designated to support the Computer Crime and Intellectual Property Section of the Criminal Division of the DOJ in the investigation and coordination of intellectual property crimes; ensuring that at least one FBI agent provides support to the Computer Hacking and Intellectual Property Crime Unit in the DOJ for investigating and prosecuting computer hacking or intellectual property crimes; for FBI training in investigating and prosecuting intellectual property crime; and for the assignment of at least two assistant United States attorneys to each United States Attorneys Office who shall be responsible for investigating and prosecuting computer hacking and intellectual property crimes.

Senator Lahey who sponsored the bill stated that “intellectual property makes up some of the most valuable, and most vulnerable, property we have” and that we “need to do more to protect it from theft and abuse if we hope to continue being a world leader in innovation.” According to Lahey, the protection of intellectual property has an impact on the U.S. economy. “If we make better and stronger efforts to combat counterfeiting and piracy”, Lahey stated “we will also enjoy more jobs, greater returns, productivity, and more taxes being paid rather than having infringers and thieves enjoy the financial gains of wrong doing.” According to the Recording Industry Association of America (RIAA) “global piracy of copyrighted material costs the U.S. economy $58 billion per year and more than 370,000 jobs and $16 billion in earnings for U.S. workers.”

As a lawyer who represents business engaged in the creation and exploitation of copyrighted content and branded products, I concur that intellectual property are incredibly valuable assets and that companies in the content creation and exploitation business contribute significantly to the economy. But given the current economic situation, should the government spend $275,000,000 to help the RIAA and MPAA members combat global privacy? Do we really want Jack Bauer hunting down DVD pirates in China?