COPYRIGHTS

A forgotten right the government can’t take away

If you have followed the news lately, you’ve probably have heard about the United States Patent and Trademark Office’s (USPTO) board decision to cancel the Washington Redskin’s federal trademark registrations covering their name and graphical logo. The USPTO had determined that the term, “Redskin” and the graphical logo associated with the NFL team, violated trademark laws’ prohibition against scandalous or immoral subject matter at the time the mark was registered.

It should be noted that this isn’t the first time the USPTO has come to such a conclusion with respect to the football team. The courts reversed the previous determination on a procedural issue regarding whether or not the individual that brought the cancellation action had standing to sue. It was interesting to see some of the initial commentary regarding the decision and the lack of knowledge about trademark law and the nature of trademark rights.

No matter your particular view of the underlying case, the situation with the Redskins is a good example of the public’s misperception of trademarks, how trademark rights are accrued, and why trademark registrations can carry more benefits in the eyes of the public than those actually conveyed under the law.

The most interesting aspect of the discussion is the mistaken belief that trademark rights are granted by the government. In fact, at the most basic base level, trademark rights are created by an individual or company’s use of a trademark to identify their goods or services in commerce. By naming your product “XYZ” and selling it in the marketplace you accrue what are called, “common law rights.” The longer you use it and more geographic areas your goods and services are sold, the strong your rights become.  These rights are not contingent on any government approval or certificate.

However, while the federal registration does not create trademark rights per se, it does grant you certain extra add advantages. First and foremost, for smaller businesses the benefits of the federal registration definitely make sense as they will protect your mark nationwide, even if you haven’t sold product or provided your services in all 50 dates. This can be important if a company has plans to start regionally and slowly expand operations or a larger geographic region or even nationwide.

Without a federal registration, a business could find itself in the position of looking to enter into a new market where another common law user has already established rights in that geographic area. Therefore you will either be barred from entering that area or, if you do work in that area, you will have to do so under a different name. This can severely hamper and make more costly marketing and brand awareness campaigns. Larger companies (e.g. Microsoft) don’t necessarily have this problem due to the fact that they can launch products and services nationwide. Therefore, they create common law rights in all geographic areas from the get-go. While federal registration is still important to larger companies, they will still have powerful rights even if they just rely on common law trademark rights.

As the 2014-2015 football season starts up, think twice about producing Redskins merchandise to line your pockets. Though the USPTO did cancel the Redskins federal trademark registrations, you are out of luck for cashing in on the brand.

The law still recognizes strong common law rights in the Redskins name and logo, and you will more likely find yourself on the other side of a lawsuit for trademark infringement and counterfeiting if you endeavor on that path. Furthermore, the team has vowed to appeal the USPTO’s ruling to the federal courts. Given the history of the case and the seemingly thin factual support for the USPTO’s decision, there stands a high likelihood that the Redskins would prevail on an appeal.

Hazy times for Colorado’s marijuana businesses

Many businesses are dealing with the impacts of Colorado’s foray into recreational marijuana. Often, this uncertainty is focused on how the new laws and regulations will be implemented. While compliance with the Colorado regulatory framework is often the first priority of companies associated with the marijuana industry, another important legal issue is lurking below the surface, and unfortunately how it is resolved remains to be seen. The issue concerns an area of intellectual property law that all businesses have – trademarks.

Trademarks protect identifiers of the source of goods in commerce – essentially they protect brands. Trademarks can be any non-functional aspect of a product or service that identify its source. They can be business or product names, logos, or even things such as product packaging or design (e.g., the shape of an I-Phone or a Coke bottle).
The law protecting trademarks has two main purposes. The first is to protect the goodwill built up by business owners with the consuming public.

Basically, we don’t want a company to spend 20-plus years building a good reputation only to have another company come in and adopt a mark that is intended to ride on the coattails of the first company. The second purpose is to protect the consuming public. Essentially, when you go and buy a Coke, you do so because you have certain expectations about the product including quality, price etc. Therefore, the law recognizes that it is in the public’s best interest to not allow dish water to be bottled and sold to the unsuspecting consumer as a Coke or for a fly-by-night company to sell shoddy knock off shoes as a pair of Nikes.

There are basically two types of trademarks – registered and unregistered. Unregistered trademarks (also called common law trademarks) arise from the business’ use of the terms to identify its goods. The scope of protection for common law trademarks is generally narrow. Fights about the geographic scope of common law trademark rights often get down to the zip code level. Because of these limitations it is not preferable to just rely on common law rights.

Registered marks are those in which the trademark owner has sought registration of the trademark with a state or with the federal government. Each state’s laws are different and can range from highly complex systems to Colorado’s system, which basically just defaults back to common law protection. Most trademarks are protected under the federal Lanham Act. Trademarks registered under the Lanham Act are enforceable in all 50 states even if the business hasn’t had sales nationwide.

The problem facing Colorado companies that are involved in or sell goods or services related to the marijuana industry is that, generally speaking, the law doesn’t allow for trademarks rights in goods or services that are illegal. On a broad level this makes sense; if you are conducting an illicit activity, you shouldn’t be able to sue someone else for doing the same illicit activity under a similar name. Doing so would tend to legitimize the illegal activity. But what happens when something is legal under state law but illegal under federal law?

Usually the answer would be that the state law is invalid due to the Supremacy Clause of the United States Constitution. However, this inconvenient fact is essentially the third rail in the marijuana debate. Even though the last two administrations have looked the other way, marijuana is still illegal federally. The federal controlled substances act prohibits among other things the manufacturing, distributing, dispensing or possession of certain controlled substances including marijuana and marijuana-based substances.

Additionally the CSA makes it illegal to sell, or offer for sale any drug paraphernalia (“any product, equipment or material which is primarily intended or designed for use in manufacturing, compounding, producing, preparing, injecting, ingesting, inhaling or otherwise introducing into the human body a controlled substance”) 21 U.S.C. §863. Because of this a company will not be granted federal trademark registration for marijuana or marijuana paraphernalia. Therefore a business owner cannot get a federal trademark for the name of their dispensary or their own brand they might assign to a particular strain of marijuana. Additionally a business owner would also be denied federal common law protection for any such mark under the Lanham Act.

Things most likely don’t fare much better under a state common law analysis. While there isn’t any case law out on this yet, but strictly going by the law, a court would have to deny state common law protection as well, due to the Supremacy Clause. This causes a huge conundrum – how are marijuana business owners supposed to protect their goodwill?  How do we protect consumers that rely on brand names to make purchasing decisions regarding, quality, strength and safety?

Most ironically, a grower could produce a new strain, protect it with a plant patent, and give it a new name. If someone infringed the patent the grower could sue and obtain an award for damages. However, if the same individual sold an existing (non-patented) stain under the same brand name as the patented strain, the grower might not have any recourse.

So does this mean that marijuana-related businesses should just ignore trademarks? I would say that is not a wise choice. There are still many strategies that a business can use to get the most protection possible under both state and federal law, which while might not be ideal, it is definitely better than nothing. Additionally, sophisticated legal counsel can also employ other areas of intellectual property may also prove helpful in protecting brand identity.

Lastly, we really are in a situation of wait and see. Until either the federal law is changed, or some cases concerning these companies move their way through the courts, it’s all a bit hazy.

The perils of third-party IP policy shifts

Gammers Teach us a lesson on the perils of shifting 3rd Party IP Policies.

 

Before Christmas a client gave me a heads up about some new developments in Youtube’s Content ID System that was causing an uproar in the gamming community and others who monetize their YouTube videos.  The conflict stems from what appears to be overally aggressive actions on YouTube’s part to attempt to deal with copyright infringement on its service.  While YouTube’s actions may not directly affect a lot of mainstream businesses, it can serve as a good lesson for those that use 3rd party providers to host and disseminate content for their business and how a change in policies by these third parties can radically affect one’s business.

 

It all started in early to mid-December when content owners started receiving notices that their vlogs (video blogs) were flagged for violating copyright law.  As a result the content was either removed or all revenue created by the post through the hosting of ads was funneled to the copyright owner (often without the copyright owners request).  The main problem with the system is that it is automated and apparently isn’t triggered by a request from the copyright owner.  Therefore, there have been a lot of questionable flagging, some of which most likely constitute fair use.  One of the more humorous responses (at least in my opinion) was posted by a YouTube user here: http://www.youtube.com/watch?v=JQfHdasuWtI  (Caution NSFW).  Personally, I like the example of a video interviewing representatives from the game Tomb Raider that gets flagged because there are images of the game and sound from the game in the background.  Others that have been flagged are reviews of products that might include a brief clip or a screenshot of a user interface.

 

The YouTube policy once again puts the concept of fair use in the spotlight.  The fair use doctrine, allows for use of copyrighted works without the copyright owners permission in certain circumstances.  In general use for purposes such as criticism, comment, news reporting, teaching, scholarship or research are generally not considered an infringement of a third parties copyright.  The rationale is that the 3rd parties use is not merely to copy but to use limited pieces of the work in a transformative way by incorporating it into a new work.  The trick is, in an age where so much content is being generated how do you separate the truly infringing works from those that would fall under fair use.  With millions and millions of videos on YouTube, it is certainly a daunting task. Often time companies cast a very broad net with the knowledge that some legitimate use will be included.

 

The YouTube situation is another manifestation of the clash between content owners and those who wish to use small amounts of the pre-existing content in an on line context.  For example, an online retailer may want to show screen images of a certain video game to potential customers, or may want to create on-line reviews of the games or computer programs in order to help their customers make purchasing decisions. In the context of a product review, the use of those images or video most likely would fall under the preview of fair use.   If you are a big enough retailer, you may simply host those review on your own website and you most likely would not be affected.  However, smaller enterprises often times rely on YouTube to actually host the content, even if the company includes an embed link to the video on its home page.  Therefore these companies and individuals are at the mercy of YouTube’s intellectual property policies and user agreements, which have and continue to evolve over time.  Essentially, a business that relies on you tube i) exclusively to provide its content based product or ii) uses YouTube essentially as a hosting platform for its content based marketing materials is always subject at some level to YouTube and Google’s (YouTube’s parent company) prevailing views of intellectual property rights.  This can subject businesses to great harm, if the business has not made other preparations.  For companies that provide video product reviews for their customers, they may want to consider hosting the content on their own website as opposed to exclusively on YouTube or Facebook.  Failure to do so can put businesses behind the eight ball in the event the tech company they are relying on has a sudden change in policy.

By | January 29th, 2014|COPYRIGHTS, CYBER LAW, Fair Use, INTELLECTUAL PROPERTY|0 Comments

The murky law of fair use

Weird Al doing a Michael Jackson song parody?

In our practice, we deal not only with the enforcement of intellectual property rights, but we also do a fair amount of defense of accused infringers. One of the surest ways of getting into an intellectual property dispute (aside from illegally downloading movies using BitTorrent) is to make reference to, mention or otherwise utilize someone else’s intellectual property.

While this may seem obvious, it can creep up in the business context in unexpected ways. Generally speaking, business will cite that they are allowed to do their activities under the doctrine of “Fair Use.” Additionally, it is important to note that there is a difference in running afoul of the law and being embroiled in a conflict with another business. While a company’s actions may be justified legally, it may still find itself in a dispute which can cost a lot of money, time and resources.

These issues come up in two different areas of intellectual property – copyright and trademark. While each area of law adopts a concept that allows certain usage by parties other than the owner, the concepts are quite different in what they allow third parties to do.

In general, trademark law can be seen as more lenient when it comes to the commercial use than copyright law, which is somewhat understandable given the objectives of each type of protection. The goals of trademark law are to: 1) prevent consumer confusion in the marketplace between the source, sponsorship or affiliation of different goods, and 2) to protect the goodwill built with respect to trademarks by their owners.

Copyright has a slightly different focus of protecting the benefits to society derived from the labors of those who create creative works. The underscoring notion is that unimpeded copying of creative works will lessen the incentive for authors to create such works, which will yield an overall undesirable outcome. To that end, copyrights have a definite term (in theory) and then become part of the public domain, free for all to use. Trademarks, on the other hand, can be indefinite as long as the owner continues to use the mark to identify its goods or services.

Fair Use in copyright law generally favors noncommercial use whose benefits are mainly felt by society as a whole. It covers limited usage for things such as criticism, comment, new reporting, teaching, scholarship or research. The use will be treated more favorably if the use is “transformative” as opposed to mere copying, meaning that the user has added something of their own to the work. In determining whether a use constitutes a fair use under copyright law, a four-factor test is applied:

1) Whether the use is commercial in nature or is for nonprofit educational purposes;
2) The nature of the copyrighted work;
3) The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
4) The effect of the use upon the potential market for or value of the copyrighted work.

As a rule of thumb, the more artistic the use, the more likely it could qualify as a fair use. On the other hand, the more commercial the use, the less likely it will be considered fair use. Simply put: Weird Al doing a parody of a Michael Jackson song – okay. But using a photo or music in an advertisement without the copyright holder’s permission – not okay.

While these broad generalizations might be pretty easy to determine what is OK and what is not, in reality these determinations are often highly complex and are always very fact determinative.

Because of the explicitly commercial nature of trademarks, the law is more allowing of use of someone else’s mark in a commercial environment. However, there are still restrictions and business owners still need to be extremely careful to not run afoul of the law.

Classical Fair Use is when a business uses a term not as a mark but in a descriptive sense. Therefore, the owners of the Aspen trademark for ski resorts cannot preclude someone from using the term Aspen to refer to the Colorado town or the tree.  Additionally, you can generally use a third party’s trademarks to refer to their own goods. This usually comes up when your product or service is complementary to another, or you are engaged in comparative advertising. Some jurisdictions call this use Nominative Fair Use.

In Colorado, the  U.S. 10th Circuit Court of Appeals has not officially adopted the defense of Nominative Fair Use, but various district court decisions have stated that such a use does not cause a likelihood of confusion. Therefore, in general companies can state that their accessory is designed to be used with an iPhone or an Xbox, or that more people prefer Coke over Pepsi (or vice versa). However, there are important restrictions placed on the use. For example, you only should use the trademark as much as necessary to identify the other person’s mark. Excessive use of their third party mark could be interpreted as an attempt to leverage the other party’s mark for your own benefit. As with copyrights, what constitutes proper use of a third party mark is a complex analysis and utilization of qualified intellectual property counsel is essential.

The last consideration when using third party copyrights or trademarks in your business is more of a practical consideration rather than a legal one. A lot of business owners (and business lawyers) do not understand the laws regarding use of others’ intellectual property. Often clients will get threats of lawsuits even though we believe that their use is permitted by the law. People often get emotionally attached to these sorts of things and do not appreciate someone else using them.

While your position may be vindicated, in the end these disputes, do take time and money to sort out. Therefore, if a company is highly risk adverse and would rather stay away from any potential problems (regardless whether they are in the right), then the best course of action would be not to engage in any use of another company or individual’s intellectual property.

Hey, that’s mine! The ins and outs of grey markets and the law

At some time or another, anyone who produces a product or commercializes a copyrightable work will inevitably run into the situation where you see your products being resold by someone that is not you or one of your direct distributors.

Oftentimes, this becomes an issue for a business because of the price at which the items are being sold (usually lower than the business would like) or possibly because of the bad reputation of the seller in question. Other times, it is a grey market situation where goods that were originally produced and sold in overseas markets make their way back to the United States.

The question my clients have is almost universally, “How do I stop this?” Generally speaking, the answer is that in the United States, it is either extremely difficult to stop it or you flat out cannot stop it at all, due to a theory of law called the Right of First Sale.

The Right of First Sale doctrine is recognized in both trademark and copyright law. Trademark law protects source identifiers of goods and services – basically brand names and logos. Copyright, on the other hand, protects creative works of authorship – books, movies, music, etc. While slightly different in the technical application, in copyright and trademark law the underlying theory is essentially that the owner of a branded item or creative work is entitled to control and receive compensation for the first sale of the product.

The first sale is just that, the first sale of the product – regardless if it is to a retail consumer or to a distributor/wholesaler. Therefore, authors are entitled to royalties only on the first sale of their book and not any subsequent resale of the book. On the basic level this makes sense and allows for a robust secondary market of used goods. Think of the pain it would be if you had to pay a royalty to J.K Rowling for selling a used copy of Harry Potter on Amazon, or if you sold your Specialized Shiv time trial bike on eBay.

However, the questions can get a bit more sticky when the seller isn’t unloading unwanted items, but is instead engaged in a commercial enterprise and the goods might be new instead of used. For example, what happens if due to market conditions a product is sold at a lower price in a foreign country than it is in the United States?

Depending on the price differential, there may be an arbitrage situation where a foreign purchaser can purchase the product in the foreign country and then turn around and sell it to American consumers for less than the domestic retail prices at a guaranteed profit. This very scenario came before the Supreme Court in the case of Kirstaeng v. John Wiley & Sons. In the case, a student named Kirstaeng from Thailand came to the United States to study at Cornell and U.S.C.

Since college is not cheap, the entrepreneurial student sought ways to defer his expenses. One thing he noticed was that textbooks were a lot cheaper in Thailand than they are in the United States, so Kirstaeng arranged to buy legal copies of popular textbooks in Thailand, import them here and resell them at a large profit – somewhere in the ballpark of $100,000.

The publisher, not liking this, sued and originally obtained a $600,000 judgment against Kirstaeng. The Supreme Court in a 6-3 decision overwhelmingly overturned the lower court decision. The Court also did something that it normally doesn’t do in copyright cases – it drew a clear line in the sand.

As long as the copyrighted works that were made overseas were done legitimately (not counterfeited), then the first sale doctrine applied and the copyright holder cannot ban their importation and sale in the United States. Similarly under trademark law, as long as a party is merely stocking and reselling the goods (no modification to the goods), then the first sale doctrine applies.

So what is a business owner to do? There are a few different things to try to minimize the impact. The first would be to take a look at your pricing structure. Are there any markets in which you might be at risk for an arbitrage situation? In theory, exchange rates should equal out prices, but sometimes distortions do occur.

Don’t just look at foreign markets, because these situations can happen in domestic markets as well. An example would be a pricing decision concerning a large clearance sale. Could a savvy party buy a large amount of clearance items and then resell them on eBay? Careful pricing and quantity limit strategies can help eliminate this risk.

Additionally, if you sell your products through authorized distributors that you have contractual agreements with, you can add language that prevents the distributor from selling the products back into the United States, or allows you to revoke their distributorship if they violate lot size restrictions or if they knowingly sell to customers that intend to export the products back into the United States. While these strategies are not foolproof, they are the best tools that companies have to combat these sorts of situations.

By | April 15th, 2013|BUSINESS LAW, COPYRIGHTS, TRADEMARKS|0 Comments

The $64,000 Innovation Question

What do Yahoo, telecommuting and intellectual property legal services have in common?

At first glance, the popular answer may be “Absolutely nothing.” But those three seemingly unrelated topics might actually have a profound effect on your business and the quality of your intellectual property legal representation.

Yahoo made some waves last month by issuing an edict that it was discontinuing its telecommuting program.  While many in the techno press panned the decision as backward thinking, Yahoo’s rationale is actually quite interesting.  Yahoo’s reasoning was not based on efficiency, productivity or employee morale, it was based on innovation.

Yes, innovation—that magical moment sparked by conversations and personal interaction at the vending machine, water cooler and even in the restroom.  While some studies have shown an increase in worker productivity through the use of telecommuting, studies by Google and Isaac Kohane of Harvard Medical School have shown that people who work in close proximity create a positive impact on a company’s business, including innovation.  Therefore, telecommuting may work for those who perform repetitive routine tasks as their productivity may increase, but it may not be so effective for employees whose jobs rely on collaboration with other individuals.

For example, telecommuting may work well for telemarketers, call centers, help desks, etc., but probably will not work well for people in product development or other strategic departments.  While individual employees may feel that their performance or efficiency increases through telecommuting, the performance of the company as a whole may actually decrease.

Effect of Face-to-Face Interaction on Innovation

So what does this have to do with the delivery of legal services, and in particular legal services pertaining to intellectual property?  Intellectual property is different from a lot of other areas of the law in that it is based mainly on federal statutes.  Most other areas of law are primarily based on state law.  State unauthorized practice of law rules generally limit the possible pool of attorneys that can represent a particular client.  If a lawsuit is filed in Colorado state court, for instance, it can only be tried by attorneys that are admitted to the Colorado Bar.

Because most intellectual property cases are based on federal laws, they are considered a nationwide practice.  Thus, an attorney in New York can represent a client in San Francisco for IP matters.  This fact has created many “firms” that advertise on a nationwide basis.  Oftentimes these firms offer cut rates and rely on a high-volume business model that offers only limited contact over email or the phone.

While we are big believers in technology and frequently employ it with our clients that live out of state or in remote parts of Colorado, nothing beats good old face-to-face interaction.  The spontaneous conversations that happen often lead to insights that help us represent our clients better.  Sometimes it’s the ability to manipulate and play with a prototype with the inventor present; other times it’s sitting down and listening to a few tracks of a musician’s CD, or even visiting a client’s business to understand their processes and how they do what they do.  Unfortunately, many times these intangibles cannot be communicated in a phone call, email or even over Skype.

Recently, I was watching a local program on PBS that featured representatives from local wine and spirits companies.  They were commenting on how consumers in Colorado really get into the “buy locally” concept.  A representative from Shanahan’s Whiskey recounts seeing consumers pulling out bottle after bottle in a liquor store looking for one that was bottled by a specific individual or bottled while listening to specific bands.

If people take such care in buying whiskey, why not take the same care in choosing a law firm to protect some of your companies most valuable assets?  The plain and simple truth is that while technology is great, it simply cannot replace actual human interactions.  Virtual law firms and out of state high volume legal service “mills” can offer a lower price point; however, they cannot offer the quality of representation that one gets when you meet face to face, and the client learns about the firm, and even more importantly, the firm learns the ins and outs of its client’s intellectual property.

While technology is a wonderful tool, there are some things it cannot replace:  The chance meeting at the water cooler that sparks a revolutionary idea, the impression left by someone’s office space, or the sweet sound of a note being played through an all tube guitar amp.  Some things just still need to be done the low tech way.

By | March 26th, 2013|COPYRIGHTS, GENERAL INTEREST, INVENTION PROMOTERS|0 Comments

Revenge of the prom dress: Fashion Wars episode 100,001

Over the years, our firm has represented numerous apparel companies with regard to intellectual property matters, and we have observed many of the difficulties these companies face in protecting the value of their designs. The interesting aspect facing apparel companies is that often times the “low brow” fashion of graphic T-shirts and sneakers are more protectable than the “high brow,” haute-couture fashions of world-famous designers.

Apparel companies are a good example of where two different theories of intellectual property protection come together and, to some extent, overlap. When applied to an apparel company, the two main forms of protection we are talking about are trademarks and copyrights.

While design patents may be applicable, the practical considerations of time and cost usually rule them out for fashion-oriented clothing; they cost too much and take too long to gain the protection. In the case of the graphic T-shirt, the graphical design that is applied to the T-shirt is protectable under copyright law as two-dimensional artwork. Therefore, another T-shirt company cannot copy the graphical design or, with knowledge of someone else’s design, create something that is substantially similar.

On the other hand, decorative elements such as the three stripes that appear on Adidas shoes are protectable trade dress and as in the Payless case, shoes with two or four similar stripes are considered to infringe Adidas’s trademark rights. In each of these instances, it is important to note that the design of the clothes themselves is not protectable, only the aesthetic design elements that are added to the clothing.

Producers of high-end designer clothing have a bit more of a challenge when it comes to protecting their products. In these sorts of situations, the actual design of the clothes is most often the desired aspect of the product. The tough thing for the designers is that these features are not currently protectable under any theory of law in the United States.

This is why you can go to your local discount clothing retailer and buy designer “knock offs.” In the recent case of Jovani Fashion, Ltd. v. Fiesta Fashions, the 2nd Circuit Court of Appeals upheld this concept by stating the it is well settled that articles of clothing are considered “useful articles” and are not protected by the copyright act and that design elements may have protection under copyright law only in the situation where the elements are 1) physically severable or 2) conceptually severable from the clothing itself.

The case involved a fight surrounding the design of prom dresses. Specifically, Jovani claimed that Fiesta illegally copied Jovani’s design for a prom gown that had an “arrangement of decorative sequins and crystals on the dress bodice; horizontal satin ruching at the dress waist ,and layers of tulle on the skirt.”

While I am not exactly sure what ruching or tulle are, they don’t seem to be a stand-alone product that you can remove and sell by themselves. Furthermore the adornment of the clothing with these features doesn’t seem to transform the concept of the gown into something altogether different; it’s still a gown, now it just has ruching and tulle.

So what would satisfy the courts requirements? In the case, the court cites Halloween costumes for one, although I would probably guess that most of Cee Lo Green’s outfits would also qualify.

So what does all of this mean for clothing and apparel companies out there? If you make Halloween costumes you should be pretty pleased with the decision because you can copyright your costume designs and sue infringers to your heart’s content.  Likewise, manufactures of articles such as T-shirts, hoodies and other clothes that incorporate printed graphical designs – those graphical designs are copyrightable and you would be wise to get registrations on all of your designs.

If you make clothing that won’t change over time and isn’t really based on yearly trends (think Levi Jeans), then design patents may be an interesting route to protect the aesthetic look of your clothes. To those that are looking to get into high fashion, some thoughtful planning on how you are going to insulate yourself from the knock-off issue is probably in order.

One solution might be to have a business operation that isn’t directly affiliated with your high-end line that sells lower priced knock-offs. That will allow you to capture both market segments and hopefully avoid the issue of someone else profiting off of your hard work.

Of course, there are always calls to amend the copyright laws to allow for the protection of clothing designs and legislation to do that is introduced every year. Ultimately, these bills fail because when you start to get into it these issues, they are complex. For example, could a company copyright something like the butterfly collar and essentially have a monopoly on it for 95 years?

Although the chance of getting something through Congress is probably pretty small, apparel companies would be wise to keep a watchful eye on what is going on in Washington. It could change the nature of your business overnight.

By | December 11th, 2012|COPYRIGHTS, TRADEMARKS|0 Comments

The perils of public-generated content

There is a well-known phrase known to businesses relying on the internet to help drive marketing and sales: “Content is king.”

That phrase has expanded, in the wake of businesses turning to Facebook and YouTube and in the development and use of better consumer digital cameras and video. That new and improved phrase is this: “User-generated content is king.” Soliciting user-generated content (UGC) is often an attractive marketing strategy: It engages customers and cultivates much-desired online content for a business all at the same time.

Some companies have come to regret that marketing move, however, as users who generate content are bringing suit when their material appears in future advertising, marketing or other company collateral, as McDonalds recently found out.

In the McDonald’s case, the wheels were set in motion in 2008 when McDonald’s hosted a “Big Mac Chant” contest on MySpace. Contestants created videos of their chants and uploaded them to the website. One participant, Daniel Calden uploaded a video of him in sunglasses with a sock puppet singing “Big Mac. Big Mac. Big Mac.  Everybody wants to eat a Big Mac.” Nothing came from the entry, although a few days after it was submitted it was removed, and Mr. Calden’s inquiries with McDonald’s and their marketing firm went unanswered.

A year later, McDonald’s launched a commercial involving a fish mounted on a wall singing to a man about wanting a Filet-o Fish sandwich. Three years later, Calden filed suit against McDonald’s and their marketing company for theft of intellectual property, breach of the contest contract, copyright infringement and a host of other theories. (Interestingly, the statute of limitations on a copyright infringement case is three years.) McDonald’s fired back with a motion to dismiss the claims, citing among other reasons, that the works are not similar in the least except that both works contained men, non-human characters, and music about McDonald’s sandwiches.

Probably the McDonald’s case is one where the plaintiff is fishing for a settlement.  However, it serves as a good example of the perils of soliciting UGC. No doubt McDonalds crafted their contest contract in a careful manner, which will definitely help them in the case, however even careful drafting might not prevent a business from being sued. While wanting to be involved with customers on a more interactive basis is an admirable objective, business owners must remember that generally people are passionate about their creations and creative works. They can and often do get very possessive and angry if they feel they have been taken advantage of – even if they assigned their rights to the company in the contest rules. Something that might make good business sense to a marketing professional may leave a customer feeling cheated, taken advantage of, or betrayed.

The worlds of contests and UGC also have a lot of legal issues associated with them.  Contests are subject to state gaming laws and can potentially lead to serious liability for illegal gambling if not structured correctly. Additionally, a business will want to make sure that it owns any UCG submitted and that the contestant is not entitled to any additional compensation other than what is provided for in the contest rules – even if they are not the contest winner.

These contracts need to be tightly drafted. Otherwise a company could wake up with a much-enlarged audience resulting from an online initiative, but simultaneously be subject to not just intellectual property violations, but illegal gaming issues as well.

“Content is King,” still applies, but care and caution could help a company’s online efforts from also becoming costly.

Avoidance: Understandable, but Often Painful

This is about pain — the avoidable kind.

Lawyers can get a bad rap for shark-ism and sometimes, that’s fair. In this case, however, the pain is shared across the board, by both the lawyers and the clients. No one, including a hard-working and ethical attorney, likes seeing people have to spend blood, time and money on heartbreak and angst that is fairly easy and cheap to avoid.

Our firm has been involved in a number of litigations that were very costly to our clients, but which could have been avoided. For the most part, those costs could have been side-stepped if the clients had engaged an IP attorney to help them set up intellectual property policies and procedures; properly protect the intellectual property (IP); and clearly define ownership.

Human nature being what it is and cash always being tight in a young growing company, non-essential tasks and expenditures are often put off as more pressing fires are fought. This short-sightedness, however, can come back to haunt. It can be painful to witness.

The math is simple: An IP attorney review of website content may cost up to $1000, depending on its size. However, if one or more third-party photos are found on the site, an expensive five- or six-figure copyright infringement settlement could be immediately eliminated.

Moreover, seeking the blessing of an IP attorney and filing for trademark registration before settling on a brand for a new product or service might set an enterprise back less than a couple thousand dollars, but could save hundreds of thousands of dollars in litigation when, for example, a well-heeled competitor decides the brand is too close to one of theirs.

Registering copyrights for important materials and images typically cost a few hundred dollars each. It’s money well spent. Doing so can deter competitors from copying all or in part of the fruits of a business’ hard work and expenditures. Infringement could cost $150,000 per instance in statutory damages.

A business that institutes and follows a trade secrets policy that includes non-compete agreements with key employees might cost a few grand, all said and done. However, instituting a trade-secrets policy could prevent employees from being able to take specific knowledge learned while employed to a competitor. Not doing so, can cause a business to lose a competitive advantage worth hundreds of thousands if not millions of dollars over time.

Having clear and concise intellectual property clauses drafted for use in contracts with third party contractors sets an organization back a few saw bucks. Alternatively, the matter often ends up in federal court as the business and the contractor both claim ownership to a valuable piece of IP. If lucky, the experience will settle before trial and a company may only be out a $100,000 or so.

Many a wise business owner understands these warnings, but immediate demands call out.  The phone rings or a colleague comes into the office, or a deliverable needs immediate attention. Several years later, a complaint and the prospect of spending hundreds of thousands of dollars defending the company in court presents itself.

Sometimes an ounce of prevention truly is world’s better than a cure. No one likes to watch money eaten up after-the-fact on avoidable circumstances. IP protective measures can and often are an easy and preventative business strategy — and the truth is that everyone, including good lawyers, feel better about that.

Kurt Leyendecker is a founding member of the intellectual property law boutique, Leyendecker & Lemire. Leyendecker & Lemire specialize in patents, trademarks and related complex civil litigation. Kurt Leyendecker can be reached directly at 303.768.0123 or kurt@coloradoiplaw.com. Visit www.coloradoiplaw.com for further information, including Leyendecker & Lemire’s weekly blog, “Control, Protect & Leverage.” 

Caution: You’ve been hacked—and sued

The newest legal challenge on the horizon for businesses may be the rise of what is known as “The Copyright Troll.”  Copyright Trolls are generally companies formed by attorneys whose sole purpose is to secure the enforcement rights from content providers (usually movies) and then find infringers (using a special software) — wherein those same attorneys sue the infringers in federal district court.

Simply put, these lawyers build a list of people who illegally download things like movies or photographs and when they’ve built a list, they sue them all on behalf of the movie maker.

A few years back, the movies were pretty high brow, usually independent films that were nominated for Academy Awards. The Hurt Locker is an example. The Trolls filed suit naming several hundred John Does, subpoenaed the infringers’ ISP for the account information corresponding to the IP address that downloaded the movie, and sent out a demand letter.

In truth, a lot of the alleged infringers probably downloaded the movie, which is illegal. The amounts to settle were relatively low — $1,500 -$2,500.  The infringers sheepishly paid the money and learned a bit of a lesson to share with their kids: Don’t steal other people’s copyrighted creative work.  It’s a bit of a slick business model:  Everything is geared for economies of scale and the demand was priced low enough that it didn’t make economic sense to fight it.

However, the current iteration of The Troll takes the business model to another level.  The movies are not as high-brow and generally involve pornography. This change has introduced a shift in the demographics of people coming into our offices with demand letters.

Gone were the thirty-somethings that were good with technology and downloaded pirated movies using bit torrent software even though they knew it was wrong. They were replaced with retirees – grandmothers and great-grandmothers who are not so computer savvy.  By and large, these older folks also have unsecured wireless networks, so neighbors or other third parties download the content using their network.

An additional twist: Most consumer wireless routers do not extend back far enough to provide the alleged infringer with the exonerating evidence of who actually downloaded the content. Additionally, the demands are still relatively low when compared to the cost to legally fight the allegations, but also high enough to cause pain to those on a fixed income.

Here’s the ugly, new situation nearly anyone with a computer can face: A client of ours was out of the country with no one home when a download supposedly took place —some allegedly downloaded pornography on their computer. They received a demand letter from a Troll for $8,000.

Does the elderly couple fight the allegation or pay the eight grand? To prevail, the Troll/plaintiff must prove that the defendant (our client) actually infringed the copyrights, so the accuser must work to win. But once named in a federal lawsuit a defendant is going to be spending money regardless – either they settle the case or they have to defend it. Getting you out of the case will costs thousands at a minimum and more realistically will be in the tens of thousands of dollars.

These instances are concerning because they are also beginning to show a sophistication in those committing the infringement – the ability to utilize viruses or hack passwords. Additionally, the demands from the Trolls seem to be going up as well.  We expect to see demands go even higher than $8,000.00.

While most WIFI routers have the ability to have pretty good encryption that would withstand a brute force attack, must businesses do not use strong enough passwords.  A thirteen character password that is made up of random numbers and letters is generally recognized as being sufficient. Anything short of that and you are most likely at risk. Readily available programs can break weak passwords in under an hour.

Moreover, business owners need to make sure their work computers and any machine that connects to its network are free of bit torrent software, as they could be liable for the infringing acts of their employees.

Finally, businesses should always have up-to-date virus software on all of their computers and perform routine scans to minimize the chance that a third party is entering the network through an infected machine. Not only do these precautions prevent the potential theft of your business data, they can help prevent you and your business from landing in the middle of a German pornography copyright infringement lawsuit. And that ain’t pretty — or cheap.