Supreme Court Tag

The Uncertain Legal Future of Embedded Photographs in Tweets by Julia Paranyuk

The Uncertain Legal Future of Embedded Photographs in Tweets

Designers, brands, retailers, news outlets, and many other companies have taken advantage of the advent of social media platforms like Twitter, Instagram, and Facebook as a means of reaching a wide array of consumers. Through the use of embedding and linking, companies frequently re-share photos obtained from other sources. Recently, however, a slew of organizations were subject to legal attack for engaging in this commonplace practice.

In 2016, nine news organizations and blogs were sued over their use of a photo of New England Patriots quarterback, Tom Brady, pictured with Boston Celtics’ General Manager, Danny Ainge, and NBA star, Kevin Durant. Photographer Justin Goldman initially snapped the photo, after which he uploaded it to Snapchat. The photo went viral, with other users uploading it to Twitter. Numerous news outlets published articles on their websites, wherein the photo was included by embedding users’ Tweets. Notwithstanding these news organizations’ use of conventional embedding procedures—i.e., including an embedded code that directs viewers to the original source—Goldman sued, arguing that his copyright ownership of the photo had been violated.

On February 15, 2018, Judge Katherine B. Forrest of the U.S. District Court for the Southern District of New York issued a surprising ruling in Goldman v. Breitbart, denying summary judgment and holding that when the defendant organizations’ posted embedded Tweets on their websites, they violated plaintiff’s exclusive display right. Judge Forrest began her unexpected ruling by acknowledging that when the Copyright Act was amended in 1976, tweets and embedded links were unimaginable. Almost forty years later, applying the Act in a transformed landscape to novel, unanticipated technologies, Judge Forrest took an expansive reading. This interpretation could sound the death knell to many organizations’ and individuals’ traditional use of Twitter and other online networking platforms. Most recently, in May of 2019, Goldman reached a settlement with one of the defendants, Time, Inc., in essence precluding any further appeals in the case. Consequentially, Judge Forrest’s 2018 ruling, and its potential implications, remains good law in New York.

Ultimately, designers, retailers, and all other companies now face an uncertain future, wherein familiar internet practices, such as embedding or linking photos from third party sources into posts, may need to be reconsidered. Now, only time will determine the approach higher courts will take with regard to embedded images and copyright infringement. In prior similar cases, the Ninth Circuit applied the “Server Test,” which imposes liability for publishing copyright materials when the copyrighted image is hosted on the publisher’s own server, but not when it is embedded or linked from a third-party source. While Forrest’s 2018 ruling eschewed the “Server Test,” as new cases are brought in coming years, it will be critical to see whether other Circuits depart from the “Server Test,” adhere to it, or create a different approach for analyzing copyright infringement in the social media context.

Supreme Court Holds That Trademark Licensor Cannot Terminate License Due to Bankruptcy by Julia Paranyuk

On April 23, 2019, China announced critical amendments to its Trademark Law that aim to address bad-faith trademark registration. The new amendments are scheduled to take effect on November 1, 2019. Given western brands’ and designers’ vulnerability to targeting by bad-faith applicants in China in recent years, these amendments present a much-welcomed reform. Nevertheless, given the intricacies of China’s enforcement proceedings, and the ambiguity around certain provisions, uncertainty remains as to the effectiveness of these recent developments.

The Trademark Squatting Landscape in China

The 2019 amendments are perceived as a necessary and indispensable development, required to eliminate trademark applications made in bad faith. In recent years, western brands have been plagued with bad-faith trademarks registered in China. Many western companies, both well-established and newly formed, fall victim to trademark hoarding and trademark ransom schemes, which damage their business and stymie their company’s growth.

Trademark squatting in the Chinese market takes several forms, ranging from trademark extortionists seeking to hold trademarks for ransom to bad-faith trademark applicants endeavoring to dominate the Chinese market with counterfeit goods. Although a substantial portion of western brands do not engage in direct business in China, many of these companies have been subject to trademark piracy—and some companies that fell prey to such schemes may have even been unaware.

The prevalence of bad-faith trademarks in China is a consequence of China’s first-to-file system, low filing fees, laissez-faire review, and absence of sufficient procedures to prevent trademarking abuses. While many companies do not see the need in spending the time and/or money registering a trademark in China prior to entering the Chinese market, China-based pirates act quickly and seize the opportunity to register the marks in China despite no intent to use the trademarks. Once such bad-faith trademarks are registered and approved, western brands had been left scrambling with the few remedial options offered by China’s pirate-friendly regime.  Unlike in first-to-use countries like the United States, China’s first-to-file system fosters a hospitable environment for bad-faith applicants since users are not required to demonstrate “intent to use” the trademark. Rather, applicants need only pay a modest filing fee. Absent a requirement for substantial evidentiary support verifying an applicant’s need for the trademark, quick-thinking pirates who identify trends in western markets are able to acquire numerous trademarks, hoarding the trademarks for ransom or using the marks to develop a robust counterfeit market in China. Since China does not impose a maximum cap on the number of trademarks one entity or individual may hold, pirates have been free to exploit the system, amassing an exorbitant number of bad-faith trademarks and profiting off of ransom settlements for each mark. The lack of procedural demands imposed on pirates for responding to invalidation appeals, the absence of penalties and/or fines for pirates, and lawyers’ willingness to represent pirates faced with invalidation suits curated an atmosphere wholly favorable to pirates and utterly disadvantageous to western brands who fall victim to trademark squatting.

The frequency of such piracy has forced western brands to expend exorbitant investigation and litigation costs to invalidate bad-faith marks. In cases where trademark squatters register marks solely for ransom purposes, a non-use cancellation attempt is often an unfruitful path for brand owners, since this route requires waiting numerous years to demonstrate a pattern of non-use. On other hand, in instances where pirates register marks for counterfeiting purposes, non-use cancellation is not a viable option, since the marks are in fact “in use.” Given China’s lack of an established system for invalidating bad-faith trademarks, even the most striking cases of trademark squatting have been difficult to invalidate, generating drawn-out trademark disputes that cost western brands thousands of dollars and last several years. For example, CFDA’s 2018 data indicates that pirates targeting small and mid-sized fashion firms demand from $315,000 to $1.1 million and receive up to $310,000 after extensive negotiation. Taken in conjuncture, the ransom demands, litigation fees and timing delays, render the transaction costs of remedying piracy issues enormous.

Given the injurious effects of China’s trademark laws and the paramount industry concerns raised, reforms were essential.

Starting the Conversation with the Chinese Government

In March 2018, Steven Kolb, President and Chief Executive Officer of CFDA and Douglas Hand of Hand Baldachin LLP travelled to China to meet with representatives of the Chinese National People’s Congress and members of China’s Patent and Trademark Office. During their trip, Mr. Hand and Mr. Kolb sought to shed light on systemic abuses in the Chinese trademark system and advocated for reforms in China’s trademarking procedures. Upon providing insight onto the destructive effects of bad-faith trademarks on western brands, Chinese consumers, and Chinese markets, Mr. Hand and Mr. Kolb offered numerous proposals for improving the Chinese trademark system.

Mr. Kolb and Mr. Hand emphasized several overarching reform proposals aimed at alleviating piracy concerns and increasing scrutiny on bad-faith applicants. These suggestions generally mirrored the perceived ails of the current Chinese system, offering potential solutions to deep-rooted issues. Mr. Kolb and Mr. Hand encouraged the adoption of a more demanding trademark registration review process, wherein obvious bad-faith applications would be rejected at the outset. They also advocated for increasing transaction costs for pirates, so as to make bad-faith trademarking a less lucrative industry for users. Additionally, proposals for imposing fines for bad-faith trademarking and shifting the burden to applicants to demonstrate “good faith” were suggested. It was also recommended that designers’ personal names be afforded greater protection, given the ease with which emerging designers’ names spread to foreign countries upon their entry into western markets. The reform proposals put forward by Mr. Kolb and Mr. Hand sparked a critical conversation amongst Chinese government officials and laid the groundwork for the amendments adopted in 2019.

2019 Amendments to Article 4, 33, and 44 of the 2013 PRC Trademark Law

In April of 2019, China adopted key new regulations, which will change China’s approach to trademarks in several respects. First, the standards for trademark registration have been heightened. Article 4 of the 2013 PRC Trademark Law’s added the phrase, “Applications for the registration of trademarks in bad faith that are not intended to be used should be rejected,” renders Article 4 the new vehicle for regulating trademark squatters.  Article 7.1 requires applicants have a bona fide intention to use the trademark and demands that applicants provide “demonstrable evidence” of such intention to use. Although this evidence standard is vague, its caveats will likely be determined through the amendments’ implementation process.

Second, punitive and statutory damages will now be imposed for trademark infringers and trademark agents who provide assistance in piracy schemes. The amendments increased statutory damages to approximately $743,000 in instances where calculating precise damages would be too arduous. Additionally, the revised punitive damages scheme no longer calls for treble damages, now providing quintupled damages in instances of “bad faith” or other “serious circumstances.” Although it remains to be seen whether trademark applicants will be subject to fines for bad-faith applications, as opposed to only trademark agents and agencies, this measure imposes costs on pirates that were previously nonexistent, thus providing a deterrent both for individual trademark squatters and their trademark agent aiders.

While these amendments constitute a long-awaited first step in regulating pervasive trademark squatting in China, the scope of their impact remains to be seen. Several concerns remain, such as the possibility that Article 4’s language does not prohibit registration of counterfeit trademarks registered with intent to use. Furthermore, the harshness of the new damages penalties is ambiguous, for China’s courts have previously been hesitant to levy fines. Similarly, the breadth of the fines’ applicability, as between trademark applicants and agents, is unsettled. In the months after the amendments become effective on November 1, 2019, their implementation will serve as a bellwether for the stringency with which they will be enforced.

Impact on Western Brands

Notwithstanding the indeterminate aspects of these amendments’ implementation, these changes have the capacity to provide substantial positive benefits for western brands. The more rigorous trademark application review that Mr. Kolb and Mr. Hand advocated for during their trip to China has the potential of lowering western brands’ transaction costs and litigation expenses. Moreover, a decreased frequency of piracy and trademark squatting will afford western brands the opportunity to enter Chinese markets and take advantage of China’s lower-cost sourcing options. The hope of these amendments for western brands is that emerging designers will face less of a pressing urge to immediately register their trademarks in China upon launching their brands in the U.S. market, since there will ostensibly be less fear of pirates’ ability to successfully register trademarks in bad faith.

Thus, with strict implementation, these amendments may facilitate CFDA members’ ability to increase profits by expanding market reach to Chinese consumers and markets, while saving money on trademark invalidation litigation and disputes. Although the force of implementation and administration is yet to be seen, it appears highly likely that these amendments are a step in the right direction.

On April 23, 2019, China announced critical amendments to its Trademark Law that aim to address bad-faith trademark registration. The new amendments are scheduled to take effect on November 1, 2019. Given western brands’ and designers’ vulnerability to targeting by bad-faith applicants in China in recent years, these amendments present a much-welcomed reform. Nevertheless, given the intricacies of China’s enforcement proceedings, and the ambiguity around certain provisions, uncertainty remains as to the effectiveness of these recent developments.

The Trademark Squatting Landscape in China

The 2019 amendments are perceived as a necessary and indispensable development, required to eliminate trademark applications made in bad faith. In recent years, western brands have been plagued with bad-faith trademarks registered in China. Many western companies, both well-established and newly formed, fall victim to trademark hoarding and trademark ransom schemes, which damage their business and stymie their company’s growth.

Trademark squatting in the Chinese market takes several forms, ranging from trademark extortionists seeking to hold trademarks for ransom to bad-faith trademark applicants endeavoring to dominate the Chinese market with counterfeit goods. Although a substantial portion of western brands do not engage in direct business in China, many of these companies have been subject to trademark piracy—and some companies that fell prey to such schemes may have even been unaware.

The prevalence of bad-faith trademarks in China is a consequence of China’s first-to-file system, low filing fees, laissez-faire review, and absence of sufficient procedures to prevent trademarking abuses. While many companies do not see the need in spending the time and/or money registering a trademark in China prior to entering the Chinese market, China-based pirates act quickly and seize the opportunity to register the marks in China despite no intent to use the trademarks. Once such bad-faith trademarks are registered and approved, western brands had been left scrambling with the few remedial options offered by China’s pirate-friendly regime.  Unlike in first-to-use countries like the United States, China’s first-to-file system fosters a hospitable environment for bad-faith applicants since users are not required to demonstrate “intent to use” the trademark. Rather, applicants need only pay a modest filing fee. Absent a requirement for substantial evidentiary support verifying an applicant’s need for the trademark, quick-thinking pirates who identify trends in western markets are able to acquire numerous trademarks, hoarding the trademarks for ransom or using the marks to develop a robust counterfeit market in China. Since China does not impose a maximum cap on the number of trademarks one entity or individual may hold, pirates have been free to exploit the system, amassing an exorbitant number of bad-faith trademarks and profiting off of ransom settlements for each mark. The lack of procedural demands imposed on pirates for responding to invalidation appeals, the absence of penalties and/or fines for pirates, and lawyers’ willingness to represent pirates faced with invalidation suits curated an atmosphere wholly favorable to pirates and utterly disadvantageous to western brands who fall victim to trademark squatting.

The frequency of such piracy has forced western brands to expend exorbitant investigation and litigation costs to invalidate bad-faith marks. In cases where trademark squatters register marks solely for ransom purposes, a non-use cancellation attempt is often an unfruitful path for brand owners, since this route requires waiting numerous years to demonstrate a pattern of non-use. On other hand, in instances where pirates register marks for counterfeiting purposes, non-use cancellation is not a viable option, since the marks are in fact “in use.” Given China’s lack of an established system for invalidating bad-faith trademarks, even the most striking cases of trademark squatting have been difficult to invalidate, generating drawn-out trademark disputes that cost western brands thousands of dollars and last several years. For example, CFDA’s 2018 data indicates that pirates targeting small and mid-sized fashion firms demand from $315,000 to $1.1 million and receive up to $310,000 after extensive negotiation. Taken in conjuncture, the ransom demands, litigation fees and timing delays, render the transaction costs of remedying piracy issues enormous.

Given the injurious effects of China’s trademark laws and the paramount industry concerns raised, reforms were essential.

Starting the Conversation with the Chinese Government

In March 2018, Steven Kolb, President and Chief Executive Officer of CFDA and Douglas Hand of Hand Baldachin LLP travelled to China to meet with representatives of the Chinese National People’s Congress and members of China’s Patent and Trademark Office. During their trip, Mr. Hand and Mr. Kolb sought to shed light on systemic abuses in the Chinese trademark system and advocated for reforms in China’s trademarking procedures. Upon providing insight onto the destructive effects of bad-faith trademarks on western brands, Chinese consumers, and Chinese markets, Mr. Hand and Mr. Kolb offered numerous proposals for improving the Chinese trademark system.

Mr. Kolb and Mr. Hand emphasized several overarching reform proposals aimed at alleviating piracy concerns and increasing scrutiny on bad-faith applicants. These suggestions generally mirrored the perceived ails of the current Chinese system, offering potential solutions to deep-rooted issues. Mr. Kolb and Mr. Hand encouraged the adoption of a more demanding trademark registration review process, wherein obvious bad-faith applications would be rejected at the outset. They also advocated for increasing transaction costs for pirates, so as to make bad-faith trademarking a less lucrative industry for users. Additionally, proposals for imposing fines for bad-faith trademarking and shifting the burden to applicants to demonstrate “good faith” were suggested. It was also recommended that designers’ personal names be afforded greater protection, given the ease with which emerging designers’ names spread to foreign countries upon their entry into western markets. The reform proposals put forward by Mr. Kolb and Mr. Hand sparked a critical conversation amongst Chinese government officials and laid the groundwork for the amendments adopted in 2019.

2019 Amendments to Article 4, 33, and 44 of the 2013 PRC Trademark Law

In April of 2019, China adopted key new regulations, which will change China’s approach to trademarks in several respects. First, the standards for trademark registration have been heightened. Article 4 of the 2013 PRC Trademark Law’s added the phrase, “Applications for the registration of trademarks in bad faith that are not intended to be used should be rejected,” renders Article 4 the new vehicle for regulating trademark squatters.  Article 7.1 requires applicants have a bona fide intention to use the trademark and demands that applicants provide “demonstrable evidence” of such intention to use. Although this evidence standard is vague, its caveats will likely be determined through the amendments’ implementation process.

Second, punitive and statutory damages will now be imposed for trademark infringers and trademark agents who provide assistance in piracy schemes. The amendments increased statutory damages to approximately $743,000 in instances where calculating precise damages would be too arduous. Additionally, the revised punitive damages scheme no longer calls for treble damages, now providing quintupled damages in instances of “bad faith” or other “serious circumstances.” Although it remains to be seen whether trademark applicants will be subject to fines for bad-faith applications, as opposed to only trademark agents and agencies, this measure imposes costs on pirates that were previously nonexistent, thus providing a deterrent both for individual trademark squatters and their trademark agent aiders.

While these amendments constitute a long-awaited first step in regulating pervasive trademark squatting in China, the scope of their impact remains to be seen. Several concerns remain, such as the possibility that Article 4’s language does not prohibit registration of counterfeit trademarks registered with intent to use. Furthermore, the harshness of the new damages penalties is ambiguous, for China’s courts have previously been hesitant to levy fines. Similarly, the breadth of the fines’ applicability, as between trademark applicants and agents, is unsettled. In the months after the amendments become effective on November 1, 2019, their implementation will serve as a bellwether for the stringency with which they will be enforced.

Impact on Western Brands

Notwithstanding the indeterminate aspects of these amendments’ implementation, these changes have the capacity to provide substantial positive benefits for western brands. The more rigorous trademark application review that Mr. Kolb and Mr. Hand advocated for during their trip to China has the potential of lowering western brands’ transaction costs and litigation expenses. Moreover, a decreased frequency of piracy and trademark squatting will afford western brands the opportunity to enter Chinese markets and take advantage of China’s lower-cost sourcing options. The hope of these amendments for western brands is that emerging designers will face less of a pressing urge to immediately register their trademarks in China upon launching their brands in the U.S. market, since there will ostensibly be less fear of pirates’ ability to successfully register trademarks in bad faith.

Thus, with strict implementation, these amendments may facilitate CFDA members’ ability to increase profits by expanding market reach to Chinese consumers and markets, while saving money on trademark invalidation litigation and disputes. Although the force of implementation and administration is yet to be seen, it appears highly likely that these amendments are a step in the right direction.

Supreme Court Decision On Copyright Registration Requirement

In a unanimous decision authored by Justice Ruth Bader Ginsburg, the Supreme Court held that a lawsuit may not be brought for copyright infringement until the U.S. Copyright Office has acted – either granting or refusing an application for registration.  As this blog noted last year, there was a circuit split as to whether a plaintiff could sue once the application was filed.  The courts that held that filing an application was sufficient reasoned that the plaintiff would ultimately be entitled to sue after the Copyright Office weighed in, no matter the decision, so there was no reason to wait.  The Supreme Court disagreed, holding that the registration requirement means what it says and that a registration must be granted or refused by the Copyright Office before a lawsuit may be brought.

As we have previously suggested, the Court’s decision will likely make bringing an infringement suit more difficult because applicants will have to wait for the Copyright Office to respond to their application, a process that could take nine months or more.  Alternatively, potential copyright owners who want to sue might feel the need to register their works immediately through the Copyright Office’s five-day expedited process, which costs $800, and could get prohibitively expensive when registering multiple works.

Due to this long wait time, we generally encourage potential owners of copyrighted works to register their works promptly to ensure that they hold a copyright in the event an infringement does occur.  The relatively small copyright registration fee of $55 allows for copyright owners to register more works and the availability of generous statutory damages and attorneys fees awards also incentivizes the registration of works before infringement begins.  Read Supreme Court decision here: Copyright registration decision

Supreme Court to Resolve Split Regarding Copyright Registration Requirement

Section 411(a) of the U.S. Copyright Act provides that an action for copyright infringement may be brought after “preregistration or registration of the copyright claim has been made in accordance with this title” or “where the deposit, application, and fee required for registration have been delivered to the Copyright Office in proper form and registration has been refused.”  The courts are split as to whether a copyright claim may be brought once the copyright application, deposit, and fee is delivered to the Copyright Office or whether the plaintiff must wait until the Copyright Office responds to the application. The Fifth and Ninth Circuits have held the former, under the “application approach,” while the Tenth and Eleventh Circuits have held the latter, under the “registration approach.”  The First, Second, Third, Fourth, Seventh, and D.C. Circuits have all acknowledged the divide, but refused to decide one way.  The Supreme Court recently granted certiorari to an Eleventh Circuit case, Fourth Estate Public Benefit Corporation v. Wall-Street.com, to address this question.

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Supreme Court Strikes Down Prohibition on “Offensive” Trademark Registration

On June 19, the Supreme Court ruled in Matal v. Tam that the Patent and Trademark Office (PTO) could no longer deny trademark registrations for “marks that disparage the members of a racial or ethnic group.” Before this decision, the PTO used the Lanham Act’s Disparagement Clause as its legal basis for prohibiting protection for offensive names. The Court held, however, that the Disparagement Clause violated the First Amendment, reasoning that “Speech may not be banned on the ground that it expresses ideas that offend.”

The Court’s decision has important ramifications for the NFL’s Washington Redskins and other sports teams with names and mascots that many consider to be offensive. The “Redskins” was considered racially offensive on several occasions by the PTO and was held to be ineligible for federal trademark registration. The Supreme Court’s decision allows for the Redskins name to receive the benefits of federal registration.

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Supreme Court Significantly Narrows Where Patent Cases May Be Brought

On May 22, the Supreme Court reversed a ruling from the Federal Circuit which allowed for patent infringement cases to be brought in any district where the defendant conducts business. Liquid sweetener brand TC Heartland was sued by Kraft Food Brands in Delaware, its state of incorporation, and unsuccessfully moved to transfer venue to the Southern District of Indiana, where it primarily conducts business.

The relevant patent venue statute, 18 U.S.C. § 1400(b), states that any patent infringement case may be brought in the district where the defendant resides or has a regular and established place of business. However, the 1957 Supreme Court decision in Fourco Glass Co. v. Transmirra Products Corp. provided a more narrow definition of “resides,” holding that “resides” refers only to the defendant’s state of incorporation. TC Heartland appealed to the Supreme Court to instead adopt the definition from the 1990 Federal Circuit case VE Holding Corp. v. Johnson Gas Appliance, which more broadly interpreted “resides” to include any venue in which a defendant conducts business.

In the 8-0 majority opinion written by Justice Thomas, the Court concluded that a domestic corporation “resides” only in its state of incorporation and thus a patent holder invoking § 1400(b) is limited to bring suit only in the defendant’s state of incorporation. The Court’s decision is a significant defeat for the many patent holders who hope to file in the Eastern District of Texas, which has become a popular forum for plaintiffs. As the majority of the defendants in these patent cases are not incorporated in the Eastern District of Texas, the VE Holding Corp. decision would likely cause many patent cases to transfer to Delaware, a common state of incorporation for domestic companies.

Supreme Court Rules That Elements of Apparel Design are Copyrightable

In a closely watched case, the U.S. Supreme Court ruled today that decorative elements of a cheerleading uniform can be protectable by U.S. copyright law.  The opinion was much anticipated because clothing has generally been considered to be a “useful article” that is not subject to copyright.  This issue has not been squarely addressed by the Supreme Court before today and lower courts were in, as the Court put it, “widespread disagreement” on the proper standard to apply.

The majority opinion was written by Justice Thomas and joined by four other justices.  Justice Thomas’ opinion held that an element of clothing could be protected if it “can be perceived as a two- or three-dimensional work of art separate from the useful article” and it would qualify for copyright “if it were imagined separately from the useful article into which it is incorporated.”  The Court found that the designs represented on the surface of the cheerleading uniform could meet that standard in principle.  (The Court demurred on the issue of whether the particular designs in question are actually sufficiently original to be copyrightable and limited its ruling to surface designs in general.)

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