SCOTUS: Willfulness Not Required for Trademark Infringement Plaintiff to Recover Defendant’s Profits

By on April 29, 2020
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Author: Patrick Mulkern

On April 23, 2020, the Supreme Court resolved a long-standing circuit split regarding whether a trademark infringement plaintiff must show willfulness as a prerequisite to recovery of the defendant’s profits. In Romag Fasteners, Inc. v. Fossil, Inc., Case No. 18-1233 (Apr. 23, 2020),1 a near-unanimous Court2 lowered the bar for half the country, announcing: no, a trademark holder need not show willfulness before it can recover the accused infringer’s profits.

Summary of Underlying Dispute

Petitioner Romag Fasteners, Inc. (“Romag”) sells magnetic snap fasteners for use with leather goods, while Respondent Fossil, Inc. (“Fossil”) sells fashion accessories. The parties entered an agreement under which Fossil would use Romag’s fasteners in Fossil’s handbags. Eventually, Romag learned that Fossil’s manufacturer was using counterfeit fasteners instead of authentic Romag products.

At trial, the jury agreed with Romag, finding that Fossil had infringed and acted “in callous disregard” of Romag’s rights—but ultimately rejected the contention that Fossil had acted “willfully” as that term had been defined by the judge. Therefore, pursuant to then-applicable Second Circuit precedent under which a trademark plaintiff must first prove the infringement was willful, Romag could not recover Fossil’s profits. A well-defined split among the circuit courts on this issue led to the Supreme Court’s grant of certiorari.

Court’s Decision

The Court’s decision can be broken down into three sections: a statutory interpretation portion, a historical analysis portion, and a policy argument portion.

The statutory interpretation segment began with the language of the Lanham Act, noting the only limitation on recovery under Section 1117(a) (including “defendant’s profits”) was “subject to the principles of equity.” The Court explained why this limitation was significant, as the Lanham Act does explicitly require willfulness as a precondition for profits under Section 1125(c) (governing dilution)—but Romag had proceeded under Section 1125(a) (relating to false or misleading use of trademarks). The Court identified a slew of instances in which the Lanham Act clearly required specific mental states,3 and concluded that “this court [does not] usually read into statutes words that aren’t there. It’s a temptation we are doubly careful to avoid when Congress has (as here) included the term in question elsewhere in the very same statutory provision.”

The Court then reviewed Fossil’s argument that “principles of equity” provided a historical basis for requiring willfulness—an argument that the Court characterized as a “curious suggestion.” Citing first to Black’s Law Dictionary, then treatises from the 1800s, as well as several of the Supreme Court’s own decisions, the Court held “principles of equity” is a “trans-substantive” concept and does not relate or call to mind any trademark-specific requirements. Even if the Court were to assume the Lanham Act sought to incorporate common law principles, it was “far from clear whether trademark law historically required a showing of willfulness before allowing a profits remedy.” On this point, the Court acknowledged competing authority—with Fossil’s cases seeming requiring willfulness, and the fact that “Romag cites other cases that expressly rejected any such rule”—and then reiterated “the ordinary, trans-substantive principle that a defendant’s mental state is relevant to assigning an appropriate remedy.”

Finally, the Court’s decision concluded by identifying the parties’ competing policy arguments, then punted, stating, “the place for reconciling competing and incommensurable policy goals like these is before policymakers” (i.e., Congress).

Concurring Opinions

Justices Alito, Breyer, and Kagan wrote one of two concurrences, in which they simply reiterated the point that “willfulness is a highly important consideration in awarding profits under § 1117(a), but not an absolute precondition.” Justice Sotomayor wrote the other concurrence, in which she rejected the majority’s suggestion that profits would (or should) ever be awarded for innocent infringement, but agreed in the ultimately judgment. In so finding, she wrote to explicitly disagree with any interpretation of the Lanham Act in which profits could be awarded “for innocent or good-faith trademark infringement[.]”

Impact

This decision lowers the bar for nearly half the country, as the First, Second, Eighth, Ninth, Tenth, and D.C. Circuits had previously used willfulness as a threshold requirement in trademark infringement claims seeking defendants’ profits. Now, it is likely that defendant’s profits analysis will track that which has been used in the Third, Fourth, Fifth, Sixth, Seventh, and Eleventh Circuits, where willfulness was just one of several factors in a flexible analysis. See, e.g., Quick Techs., Inc. v. Sage Grp. PLC, 313 F.3d 338, 349 (5th Cir. 2002) (stating that “willful infringement” is “an important factor”).

Ultimately, the following passage from the Court’s opinion (together with the language found in both concurring opinions) will likely serve as support for those circuit courts that wish to make willfulness a key factor in their analysis going forward:

[I]t is a principle long reflected in equity practice where district courts have often considered a defendant’s mental state, among other factors, when exercising their discretion in choosing a fitting remedy. . . . Given these traditional principles, we do not doubt that a trademark defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate. But acknowledging that much is a far cry from insisting on the inflexible precondition to recovery Fossil advances.

About the author: Patrick J. Mulkern is an associate in Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group. His practice focuses on intellectual property litigation and transactional matters, with a particular emphasis on patent, trademark, and trade secret litigation. Mr. Mulkern is a registered patent attorney and his biography can be found here.
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1 https://www.supremecourt.gov/opinions/19pdf/18-1233_5he6.pdf.
2 Justice Gorsuch delivered the opinion of the court, with which all but one justice joined. Justice Sotomayor concurred in the judgment only.
3 See, e.g., § 1117(b) (requiring treble damages and attorney’s fees when certain conduct is intentional); § 1117(c) (increasing cap on statutory damages for certain willful violations); § 1118 (permitting courts to destroy infringing items for any violation of section 1125(a) or any willful violation of section 1125(c)); § 1114 (providing certain innocent infringers subject only to injunction); § 1125(d)(1)(A)(i) (prohibiting certain conduct only if undertaken with “bad faith intent”).

Filed under Trademark, Trademark Infringement

Lions, Tigers, and Trademarks: IP Lessons from “Tiger King”

By on April 28, 2020
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Author: Alison Pringle

Netflix’s recent docu-series “Tiger King” has quarantined Americans captivated—a reported 34 million viewers binged the series within the first ten days of its release alone. Amongst the series’ tiger-related exploits lies a bitter trademark lawsuit brought against the series’ mullet-sporting anti-hero Joseph Maldonado-Passage (known to viewers as “Joe Exotic”).

Maldonado-Passage created the Oklahoma-based “GW Exotic Animal Memorial Park” and filled it with tigers, lions, and other exotic animals. Throughout the 2000s, Maldonado-Passage became infamous in animal rights circles for breeding tiger cubs and exhibiting his animals at malls across the country.

The “Tiger King” series chronicles the long-standing feud between Maldonado-Passage and Carole Baskin. Baskin is the founder of “Big Cat Rescue,” a non-profit sanctuary for big cats. Maldonado-Passage was eventually put on trial after an unsuccessful plot to murder Baskin went awry. While Maldonado-Passage is currently serving a twenty-two year prison sentence for attempted murder-for-hire and violations of the Endangered Species Act, it was a trademark judgment that served as the catalyst for Exotic’s downfall.

Trademark Litigation

In 2005, the Big Cat Rescue Corp. registered a BIG CAT RESCUE logo for charitable fund raising services, animal rescue services, and entertainment services such as animal exhibition1:

After trying to shut down Maldonado-Passage for years, it was Baskin’s trademark rights that allowed her to finally pounce and take legal action against him. In 2011, Big Cat Rescue filed a lawsuit in the Middle District of Florida against Maldonado-Passage and GW Exotic after the latter adopted the trade name “BIG CAT RESCUE ENTERTAINMENT.” Big Cat Rescue alleged Maldonado-Passage and GW Exotic sought to disparage Big Cat Rescue through the “BIG CAT RESCUE ENTERTAINMENT” mark by causing the public to believe Big Cat Rescue was engaged in the exploitation of exotic animals.

For a trademark infringement claim, a plaintiff must show that: (1) it has developed a protectable trademark right in a trademark; (2) the defendant uses a confusingly similar mark in such a way that creates a likelihood of confusion, mistake and/or deception with the public; and (3) the plaintiff incurred damages as a result of the defendant’s infringing actions.

Big Cat Rescue’s trademark registration evidenced its rights in the “BIG CAT RESCUE” mark. Big Cat Rescue also did not have a large hurdle to jump in demonstrating Maldonado-Passage’s “BIG CAT RESCUE ENTERTAINMENT” mark was confusingly similar to the “BIG CAT RESCUE” mark. Big Cat Rescue further presented three key facts demonstrating Maldonado-Passage willfully infringed its mark.

First, Maldonado-Passage created the below ad featuring the “BIG CAT RESCUE ENTERTAINMENT” mark over a photo of a snow-leopard’s eyes, which Big Cat Rescue alleged was “virtually identical” to a photograph Big Cat Rescue used as the banner for its website at the time. The ad for the Oklahoma-based zoo displayed a Florida telephone number and the words “Florida Office,” which Big Cat Rescue argued would confuse the public into believing “Big Cat Rescue Entertainment” was affiliated with the Florida-based Big Cat Rescue.

Second, Big Cat Rescue demonstrated Maldonado-Passage used the BIG CAT RESCUE ENTERTAINMENT mark to try to divert Google traffic to his sites rather than those of Big Cat Rescue. A Facebook post created by a user named “Joe Exotic” stated, “If you must know, I registered Big Cat Rescue Entertainment and leased the name out so you could ruin BCR on Google all by yourself, and it is working. LOL.” Another “Joe Exotic” post referred to Big Cat Rescue Entertainment as “My new company LOL.” Maldonado-Passage attributed both posts to hackers.

Finally, Big Cat Rescue alleged Maldonado-Passage had also sought to file the trade name “The Caroll Baskin Entertainment Group.”

In defense of the infringement claim, Maldonado-Passage argued in his pre-trial statement that his actions were a necessary response to BCR’s campaign of disseminating misinformation about him in an effort to shut him down:

Defendants had no alternative but to respond, in part, by reflecting the egregious conduct of BCR and the Baskins back upon BCR through a counter-campaign designed to do nothing more than cause BCR to suffer from its own misconduct.

…

This lawsuit, and BCR’s abuse of copyright laws, is merely one more tool for the Baskins and BCR in their all-out assault on Defendants.

This argument did not absolve Maldonado-Passage from liability for the trademark claims brought against him. The parties ultimately stipulated to entry of a consent judgment against Defendants prior to trial.

References to Baskin’s Late Husband Excluded from Trademark Trial

Of note for fans of the series and legal procedure buffs, Big Cat Rescue filed a motion in limine to exclude any reference at trial to Baskin’s late husband, Jack Donald Lewis. Lewis’s 1997 disappearance remains a significant source of controversy and was featured heavily in the docu-series. Throughout his feud with Baskin, Maldonado-Passage frequently spouted his belief that Baskin killed Lewis and fed him to one of her tigers. Maldonado-Passage even went so far as to reference Lewis’s disappearance in his pretrial statement and press releases related to the lawsuit. As Big Cat Rescue argued, and the Court affirmed in granting the motion (unsurprisingly), mention of Lewis’s disappearance would likely prejudice a jury against Big Cat Rescue and had no relevance to the trademark infringement claims at issue.

Trademark Judgment

 The docu-series demonstrates the power and value of a trademark as well as the potentially high stakes of an infringement suit. The trademark judgment aided in eventually bringing down the “Tiger King.” Big Cat Rescue was able to recover all of Maldonado-Passage and GW Exotic’s profits from their mall road shows during the time period Defendants adopted the “BIG CAT RESCUE ENTERTAINMENT” mark. Total gross receipts from Defendants’ road shows between 2010 and 2011 equaled $653,000.00. Big Cat Rescue was also entitled to $300,000 for its attorneys’ fees and costs related to the trademark lawsuit, amounting to a total judgment of $953,000.

As shown in the series, the judgment financially ruined Maldonado-Passage and GW Exotic. Big Cat Rescue’s aggressive judgment enforcement actions seem to have sent Maldonado-Passage into a tailspin that eventually led to him hiring a hitman to take out Baskin.

Tiger King offers much in the way of Jerry Springer-esque entertainment and nothing when it comes to moral guidance. Viewers can take away one lesson, though: don’t use your competitor’s trademark as a weapon and brag about it on the internet.

Alison Pringle is an associate in Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group. Her practice focuses on intellectual property and commercial litigation, with an emphasis on trademark, copyright, contract, technology, and privacy disputes. She also counsels clients on transactional intellectual property issues. Ms. Pringle’s biography can be found here.
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1 USPTO Serial No. 76568568. In 2014, the Big Cat Rescue Corp. also registered the word mark BIG CAT RESCUE under USPTO Serial No. 85850084.

Filed under Trademark, Trademark Infringement

SCOTUS Redefines State “Piracy”

By on April 21, 2020
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Author: Alison Pringle

The Supreme Court recently ruled in favor of keeping state governments immune from copyright infringement lawsuits in Allen v. Cooper (Case No. 18-877). The decision affirmed the Fourth Circuit’s dismissal of a videographer’s infringement claim against the state of North Carolina.

The Shipwreck Footage in Dispute

The copyrighted material at issue involved footage of wreckage from the Queen Anne’s Revenge, famed pirate Blackbeard’s ship that ran aground off North Carolina’s coast in 1718. Videographer Frederick Allen spent over a decade creating videos and photos of the ship’s underwater excavation. Allen later registered copyrights in the works.

The dispute began when North Carolina used Allen’s footage as part of an online marketing campaign. The State hosts frequent Blackbeard-festivals and its Maritime Museum features artifacts from the Queen Anne’s wreckage. The State used Allen’s works to promote its Blackbeard-related tourism.

Lower Court Rulings

Allen sued for monetary damages after the State posted his photos of the shipwreck online allegedly without payment or permission.

North Carolina argued sovereign immunity precluded Allen’s suit against the State and moved to dismiss. The District Court for the Eastern District of North Carolina refused to dismiss Allen’s claims but the Fourth Circuit reversed, finding Congress had not abrogated the States’ immunity from copyright infringement suits.

The Supreme Court affirmed by ruling Congress lacked a valid constitutional basis to abrogate North Carolina’s sovereign immunity under existing legislation. The ruling required a deep dive into constitutional interpretation and congressional power.

Congressional Action and Constitutional Limitations

Generally, under Eleventh Amendment sovereign immunity, federal courts cannot hear lawsuits brought by individuals against a non-consenting state. However, a court may permit such suits if: (1) Congress has enacted “unequivocal statutory language” abrogating the States’ immunity from suit;1 and (2) a constitutional provision allows Congress to encroach on the States’ sovereignty.2

In the early 1990’s, Congress passed two acts abrogating the States’ sovereign immunity with respect to copyright and patent litigation via the Copyright Remedy Clarification Act (“CRCA”)3 and “Patent Remedy Act” (“PRA”)4—fulfilling the first prong for abrogation based on unequivocal statutory language.5 The remaining issue for the Allen Court was whether Congress had the power to abrogate the States’ immunity from copyright infringement suits via the CRCA.

The Court considered two constitutional provisions that would arguably allow Congress to pass such legislation: Article I, Section 8 and Section 5 of the Fourteenth Amendment.

Congress Lacked Authority to Abrogate State Immunity Under Article I, Section 8

Article I, Section 8, Clause 8, also known as the Constitution’s “Intellectual Property Clause,” gives Congress the power to grant copyrights and patents.6 Under this Clause, copyright holders are entitled to certain “exclusive” rights in their creations and generally have the right to exclude others from using their works without permission.

Allen argued the Intellectual Property Clause should be construed as granting Congress the power to pass legislation abrogating the States’ sovereign immunity as to copyright lawsuits. Allen contended the Intellectual Property Clause could not provide an “exclusive” right to copyright holders if government infringers could pillage their works with immunity. According to Allen, it was “antithetical” to allow any government to infringe the rights Congress has secured:

When states infringe the exclusive federal rights that Congress is charged with securing, Congress can make states pay for doing so.7

The Court rejected this argument under precedent from Florida Prepaid v. College Savings Bank, determining that Article I did not confer such power on Congress.8

In Florida Prepaid, the Court ruled Congress lacked the power to abrogate State immunity from patent litigation pursuant to the Intellectual Property Clause. Thus, the Intellectual Property Clause could not support the PRA. The Allen Court extended its Florida Prepaid ruling with respect to the CRCA: Congress could not use its Article I powers to circumvent the limits sovereign immunity places upon federal jurisdiction. In delivering the Allen opinion, Justice Elena Kagan stated:

[T]he power to ‘secur[e]’ an intellectual property owner’s ‘exclusive Right’ under Article I stops when it runs into sovereign immunity.

With the Intellectual Property Clause negated as a potential source of Congressional authority for the CRCA, the Court next turned to the Fourteenth Amendment.

The CRCA Exceeded Congress’s Authority to Abrogate State Immunity Under the Fourteenth Amendment

The Fourteenth Amendment’s Due Process Clause provides that no State shall deprive any person of life, liberty, or property without due process of law.9 As the Court acknowledged in Allen, copyrights are a form of property.

Section Five of the Fourteenth Amendment authorizes Congress to enforce the commands of the Due Process Clause by creating legislation limiting the States’ authority. Thus, Congress can abrogate the States’ sovereign immunity under this clause. However, this abrogation must be “congruent and proportional” to the Fourteenth Amendment injury.10 In other words, Congress must only create remedies that are a proportionate response to the constitutional rights at issue.

The Allen Court ruled the CRCA exceeded Congress’s Section Five authority because it went too far in abrogating sovereign immunity for any and every infringement suit.

The Court looked to the nature and extent of State copyright infringement at the time of the CRCA’s passing in relation to the scope of Congress’s response. The Court found the CRCA’s broad abrogation of immunity was disproportionate where Congress identified only twelve instances of State-instigated copyright infringement. Further, of those twelve instances, only two constituted willful infringement (i.e. sufficient to raise a constitutional issue.).11 In the Court’s view, these examples did not identify a serious constitutional problem justifying complete abrogation of States’ sovereign immunity against infringement claims.

The Court emphasized that, like the PRA, the CRCA was overly broad where it did not set any limits on abrogation. For example, neither statute confined abrogation to suits alleging willful infringement or infringement authorized by state policy. Rather, both the PRA and CRCA impermissibly “exposed all States to the hilt—on a record that failed to show they had caused any discernible constitutional harm (or, indeed, much harm at all).”

Consequently, the Court ruled the CRCA failed the “congruence and proportionality” test. Evidence of Fourteenth Amendment injury supporting the CRCA was “exceedingly” slight and the CRCA’s “indiscriminate scope” was too out of proportion to any due process problem.

Can States Now Use Copyrighted Material Without Permission and With Impunity?

The Allen ruling presents uncertainty for copyright holders who fear States can now use their works without permission and consequence. For example, as the ruling stands, States can theoretically upload and use copyrighted movies and music onto government websites. As Justice Breyer posited to North Carolina’s counsel during oral argument:

What the state decides to do with its own website, charging $5 or something, is to run Rocky, Marvel, whatever, Spider-Man, and perhaps Groundhog Day, all right? Now, great idea. Several billion dollars flows into the treasury. Okay? Now, if you win, why won’t that happen?12

The future of copyright law as it pertains to States is indeed unclear. However, as the Court noted in its opinion, States generally respect copyright law and intentional infringement is uncommon.13 Additionally, while States are currently immune from infringement suits for monetary damages, copyright holders may still seek an injunction against an individual state employee responsible for the infringement under Ex Parte Young, 209 U.S. 123 (1908). Further, any third parties who facilitate or participate in state-sponsored infringement cannot expect immunity.

The Court also suggested States might be subject to private infringement suits in the future. Justice Kagan invited Congress to create new legislation addressing State copyright infringement that, unlike the CRCA, is narrowly tailored and designed to redress or prevent unconstitutional conduct, stating:

That kind of tailored statute can effectively stop States from behaving as copyright pirates. Even while respecting constitutional limits, it can bring digital Blackbeards to justice.

Read the Court’s opinion in its entirety here.

Alison Pringle is an associate in Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group. Her practice focuses on intellectual property and commercial litigation, with an emphasis on trademark, copyright, contract, technology, and privacy disputes. She also counsels clients on transactional intellectual property issues. Ms. Pringle’s biography can be found here.
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1 Seminole Tribe of Fla. v. Florida, 517 U. S. 44, 54 (1996)
2 Kimel v. Florida Bd. of Regents, 528 U. S. 62, 78 (2000)
3 Any State “shall not be immune, under the Eleventh Amendment [or] any other doctrine of sovereign immunity, from suit in Federal court” for copyright infringement. 17 U. S. C. § 511(a)
4 Also known as the “Patent and Plant Variety Protection Clarification Act”
5 17 U.S.C. § 511(a); 35 U.S.C. § 296(a)
6 “The Congress shall have power … to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” Article I, § 8, cl. 8.
7 Transcript of Oral Argument heard November 5, 2019, p. 3:11-14
8 527 U.S. 627 (1999)
9 Amendment XIV, § 1
10 City of Boerne v. Flores, 521 U.S. 507, 520 (1997)
11 In Florida Prepaid and Allen, the Court defined an unconstitutional infringement as “intentional conduct” for which there is no adequate state remedy.
12 Transcript of Oral Argument heard November 5, 2019, p. 36:17-37:2
13 Copyright Office, Copyright Liability of States and the Eleventh Amendment 103 (1988) (Oman Report)

Filed under Copyright, Copyright Claims, Copyright Infringement

High Fashion Invades Runeterra – Fascinating IP Issues in the Collaboration Between League of Legends and Louis Vuitton

By on March 19, 2020
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Author: Jing Zhao

In September of 2019, Riot Games (“Riot”) announced its partnership with Louis Vuitton (“LV”). Riot is the video game developer, publisher, and eSports tournament organizer for the popular multiplayer online battle arena game League of Legends (“League”). League is a strategy game where players control an in-game character, called a “Champion,” to battle other players’ Champions and to achieve an objective.

Riot’s two-way partnership with LV allows LV to design a travel case for League’s World Championship trophy. In addition, LV will also design in-game cosmetic items for League. These cosmetics, called skins, modify the Champion’s appearance. Riot sells skins and other virtual cosmetic items to its players via in-game micro-transactions. For its part, LV unveiled the LVxLoL collection, a League-themed set of real-world merchandise, which sold out within an hour of launch. The collection included shirts, parkas, trousers, shoes, and accessories inspired by two League characters, and featuring the bespoke “Louis Vuitton x League of Legends” monogram pattern.

While the license agreement between Riot and Louis Vuitton remains confidential, several fascinating issues arise in the unique setting of video game collaborations.

1. Ownership and control

The core of this partnership is that both companies, Riot and LV, get to use the other’s intellectual property to promote their own goods in their own established markets. But LV operates in the real world, whereas League resides in the virtual realm. Thus, the cross-licensing between the companies require different considerations as applied to each company.

For LV’s real-world merchandise, LV does not maintain control over its items after the merchandise is sold. On the other hand, in-game cosmetic items are game-specific, meaning upon purchase, the user can only use that item in the video game the item was designed for. This also means that Riot still possesses ultimate control over the item itself. Riot can modify the item or even take it back from the player.

As a result, the cross-license should address what happens to these items if Riot and LV ever part ways. After all, conceptually, Riot can not only stop selling LV-inspired cosmetics in-game, but it could also remove the ones that already exist in game. But doing so will likely irk players who bought and paid for the items. As a result, Riot may insist on a perpetual license that exists post-termination for existing virtual LV items.

2. Unauthorized Duping

One of the known and common problems in video games, including League, is “duping,” whereby players use unauthorized or unintended mechanisms to duplicate cosmetic items for free. This can either be accomplished through finding “glitches” or “bugs,” which are in-game coding mistakes that the game developer inadvertently created, or “hacks” or “cheats,” which are external programs that a player either impermissibly injects into the game, or attaches onto the game through third-party software.

Duping LV-designed virtual items is an added complication, as the duplicated item not only impermissibly uses LV’s IP, but could diminish the overall prestige of the brand itself. After all, LV is a luxury brand, built upon the idea that its products are exclusive and hard-to-obtain, and wide-distribution of its products dilutes that image. In addition, while Riot is the sole seller of its virtual items now, this micro-transaction model might change with its expansion of games. Other gaming platforms, most notably Steam, uses a marketplace model, where players are able to buy and sell their own items to each other, while giving the game developer a cut of their profits. If Riot changes to a marketplace model, then duping may also dilute the market value of existing LV items in League.

The Riot-LV agreement therefore should address Riot’s responsibility to protect LV-designed virtual items, or alternatively, grant LV the right to enforce infringement in Riot games.

3. Champion availability and viability

Nike makes the uniforms for NFL teams. So no matter which teams wins the Super Bowl, the NIKE mark can be seen on the teams. LV likely wants the same thing here – for an entire new customer audience (gamers) to see and be exposed to the LV brand, especially at the biggest e-sports events and tournaments. But, as with all competitive video games, certain Champions are better than others. Thus, they are picked more often and appear more often in games, especially at the highest levels with the largest number of viewers. And LV may not create skins for every character. In fact, there are currently only two skins released, and League currently hosts 148 Champions, the majority of which are not free-to-play. A Champion that is not unlocked to all players creates a disincentive for players to purchase skins on that Champion.

The Riot-LV agreement may therefore contain a clause that obligates Riot to ensure player access to Champions and to ensure a Champion is competitive, for Champions which LV designed skins for, so as to promote the sale of those skins.

About the author: Jing Zhao is a registered patent attorney and a member of Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group. Ms. Zhao has a degree in computer science, and her commercial litigation practice focuses on intellectual property and ERISA disputes, with a special interest in emerging intellectual property and other legal issues in the eSports industry. Ms. Zhao’s biography can be found here

Filed under License Agreement

SCOTUS Grants Google’s Cert Petition in Oracle API Dispute

By on January 7, 2020
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Author: Mary E. Csarny

On November 15, the Supreme Court granted certiorari in Google v. Oracle, indicating potential resolution on the contentious litigation that has been dubbed Silicon Valley’s “Lawsuit of the Decade.”i On January 6, 2019, Google filed its Petitioner Brief, with Respondent Oracle’s brief due next month.

Background

As followers of this litigation will recall, Oracle sued Google in 2010, alleging Google’s use of the Java programing language and declarations (specifically 37 Java APIs) in building the Android platform amounted to copyright and patent infringement.ii A victory for Oracle would not only result in significant damages for unpaid royalties, but also impact the future of API use. At the District Court, a jury determined Google did infringe the copyright as to the compilable code for the 37 Java API packages, and then deadlocked on the issue of whether the use constituted fair use. The jury found no copyright infringement as to the documentation for the Java API packages, but found infringement as to one snippet of code. However, on the issue of copyrightability of the APIs generally (which was simultaneously tried to the presiding District Court judge), Judge William Alsup concluded that APIs were not copyrightable in the first place as a matter of law.iii The jury found no patent infringement.

On appeal, the Federal Circuit considered the Copyright Act’s legislative history explaining that literary works subject to copyright protection include computer programs to the extent that the expression of original ideas is distinguished from the ideas themselves.iv The Federal Circuit reversed, holding that the structure, sequence, and organization of an API is copyrightable and remanded on the issue of whether Google’s use was a permissible fair use.v Following this reversal, Google filed its first petition for writ of certiorari, with the Supreme Court’s inviting the U.S. Solicitor General to express the United States’ views regarding whether the petition should be granted. The Court denied the petition in accordance with the Solicitor General’s position that no review was necessary.

On remand from the Federal Circuit, a jury determined Google’s use of the 37 Java APIs was protected by the fair use doctrine. Oracle appealed and the Federal Circuit overturned the jury verdict holding that, as a matter of law, Google’s use was not protected by the fair use doctrine.vi

Google’s second and current petition for a writ of certiorari raises two issues: (1) Whether copyright protection extends to a software interface; and (2) whether, as the jury found, the petitioner’s use of a software interface in the context of creating a new computer program constitutes fair use.

What’s Next

When viewed alongside its June 2019 grant of certiorari in Georgia v. Public Resource Org., Inc.vii concerning the copyrightability of legislative annotations in light of the government edicts doctrine, the Supreme Court’s grant of certiorari may indicate a willingness to re-examine copyrightability. The Court’s 21st century copyright jurisprudence has generally favored strengthening protections for copyright holders.viii Indeed, its initial refusal to grant Google’s first petition for certiorari following the Federal Circuit’s holding that APIs are copyrightable at least passively reinforced a broad approach to copyrightability.

The Court’s most recent copyright decisions rely on textualist reasoning and were both unanimously decided. It upheld the lower court’s reliance on the plain text of 17 U.S.C. § 411(a) requiring “registration” (rather than application for registration) to occur before commencing an infringement suit in Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC, et al.I,ix and limited the statutory damages for copyright infringement to those six categories of costs provided in the federal statute authorizing district courts to award costs in Rimini Street, Inc., et al. v. Oracle USA, Inc., et al.x Although the present matter does not present so obvious a conclusion as Fourth Estate and demands a more technical analysis than required in Rimini Street, the Justices’ textualism in both cases instruct followers of this matter to give particular credence to the parties’ textual arguments. Although much of the narrative surrounding this litigation has focused on the practical impact on technology and innovation,xi the litigants focus briefing on the Copyright Act’s text and judicial interpretation. Google’s petition for certiorari cites the Copyright Act’s exclusion of “method of operation[s]”xii and the correlating legislative history arguably demonstrating Congress’ intent “‘to make clear that the expression adopted by the programmer is the copyrightable element in a computer program’ while ‘the actual processes or methods embodied in the program are not within the scope of the copyright law.’”xiii Oracle, too, presents at least one textualist argument, pointing out that the Copyright Act covers “literary works,” defined as works “expressed in words, numbers, or other verbal or numerical symbols.”xiv

The Court’s last attempt to consider whether innovation in the software space was entitled to copyright protection ended in deadlock,xv but the court has since replaced six justices who appear willing to reface this challenge. Justice Kavanaugh has entered the fray of copyright jurisprudence by authoring the recent Rimini Street, Inc. decision and before his appointment Justice Gorsuch faced the issue of copyrightability of new technologies in the 10th Circuit, where he faced the issue of whether a party held a valid copyright on digital models.xvi He drew guidance from prior Supreme Court reasoningxvii regarding the copyrightability of photographs, finding instructive the Court’s application of copyrightability standards to the new technology of the day.xviii Justice Gorsuch’s conclusion in Meshwerks, that digital models can possess the originality required to be fully protectable in copyright but the particular digital models were not copyrightable might predict his approach to the copyrightability issue in Google v. Oracle.xix

No matter the outcome on the copyrightability and fair use questions raised in Google’s petition, the decision in this case is a much anticipated resolution to the decades-long dispute and could mark a new beginning for the use of software interfaces.
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i Ward, Aaron “Google v. Oracle: Silicon Valley Braces for ‘Lawsuit of the Decade’ as Google Petitions for Cert to decide API Copyrightability” Jolt Digest (March 13, 2019). https://jolt.law.harvard.edu/digest/google-v-oracle-silicon-valley-braces-for-lawsuit-of-the-decade-as-google-petitions-for-cert-to-decide-api-copyrightability.
ii Oracle America, Inc. v. Google Inc., 3:10-cv-03561-WHA (N.D. Cal. Aug. 12, 2010).
iii Oracle Am., Inc. v. Google Inc., 872 F. Supp. 2d 974 (N.D. Cal. 2012).
iv Oracle Am., Inc. v. Google Inc., 750 F.3d 1339, 1354 (Fed. Cir. 2014).
v Id., 1381.
vi Oracle Am., Inc. v. Google LLC, 886 F.3d 1179, 1210 (Fed. Cir. 2018).
vii Georgia v. Public.Resource.Org, Inc., 139 S. Ct. 2746 (June 24, 2019).
viii See “Institutional Fracture” Minnesota Law Review 102:803, 820-821 (2017).
ix Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC, et al., 139 S.Ct. 881 (2019)
x Rimini Street, Inc., et al. v. Oracle USA, Inc., et al, 139 S. Ct. 873 (2019).
xi See Hardy, Quentin “Oracle-Google Dispute Goes to Heart of Open-Source Software” NY Times (May 19, 2016) (https://www.nytimes.com/2016/05/20/technology/oracle-google-dispute-goes-to-heart-of-open-source-software.html); Liptak, Adam “Supreme Court to Hear Google and Oracle Copyright Case” NY Times (Nov. 15, 2019) (https://www.nytimes.com/2019/11/15/us/supreme-court-google-oracle.html).
xii 17 U.S.C. 102(b)
xiii Supreme Court Docket No. 18-956, Petition for a Writ of Certiorari p. 17 (citing H.R. Rep. No. 1476, 94th Cong., 2d Sess. 56-57 (1976); S. Rep. No. 473, 94th Cong., 1st Sess. 54 (1975)).
xiv Supreme Court Docket No. 18-956, Brief in Opposition, p. 13 (citing 17 U.S.C. 102(a); 101).
xv Lotus Dev. Corp. v. Borland Int’l, Inc., 516 U.S. 233 (1996)
xvi Meshwerks, Inc. v. Toyota Motor Sales U.S.A., Inc., 528 F.3d 1258 (10th Cir. 2008)
xvii Burrow-Giles Lithographic Co. v. Sarony, 111 U.S. 53, 58 (1884)
xviii Id., 1263.
xix Id. 1266.

Filed under Copyright, Patent Infringement

Introducing the Copyright Small Claims Court

By on November 22, 2019
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Author: Jing Zhao

On October 22, 2019, the U.S. House of Representatives passed the Copyright Alternative in Small-Claims Enforcement Act of 2019, also known as “CASE.” H.R. 2426 S. 1273, 116th Cong. (1st Sess. 2009)

The Senate still has to vote on CASE before it can become law. If successful, CASE will amend title 17 of the United States Code to establish an alternative dispute resolution (“ADR”) program for copyright small claims, and for other purposes. Disputes over copyright claims of relatively modest value may not be efficient in federal court. CASE’s goal is to create a simpler and more affordable judicial process for these disputes.

Here is what CASE seeks to establish.

Who are the Adjudicators?

CASE will establish a Copyright Claims Board (“Board”) in the Copyright Office that will serve as an alternative forum in which parties may voluntarily seek to resolve copyright claims. S. 1273 § 1502(a). The Board will consist of three Copyright Claims Officers. S. 1273 § 1502(b)(1). There will also be at least two Copyright Claims Attorneys to assist in the administration of the Board. S. 1273 § 1502(b)(2).

What claims would the Board review?

Only straight-forward copyright infringement-related claims and defenses, including (1) a claim for infringement; (2) a declaration of noninfringement; (3) a claim for misrepresentation in connection with a notification or counter notification; (4) respective counterclaims; (5) respective legal or equitable defense; or (6) other related claims arising out of the same infringing activity. S. 1273 § 1504(c).

Exceptions to the claims listed above are (1) claims that are pending in a court, or have been finally adjudicated in a court, (2) claims against a Federal or State governmental entity, and (3) claims against persons or entities residing outside the U.S. S. 1273 § 1504(d).

The Board may also dismiss claims that are too complex or too lengthy to administer. S. 1273 § 1505(f)(3).

What remedies would the Board be able to award?

Damages: Actual damages, profits, and statutory damages. S. 1273 § 1504(e)(1). The total monetary award is capped at $30,000 per proceeding, and $15,000 per claim. Id.

Injunctions: Injunctive relief is given in the form of an agreement between the parties, and the agreement can also include monetary awards. S. 1273 § 1504(e)(2).

Attorneys’ fees and costs up to $5,000, or costs up to $2,500 if a party appears pro se. The Board will only award fees and costs when it finds bad faith conduct. S. 1273 § 1504(e)(3).

Effect of the Board’s determination

CASE Actions are subject to judicial review. S. 1273 § 1503(g). Determination does not preclude litigation or re-litigation and should not be cited as legal precedent. S. 1273 § 1507. While a claim is before the Board, if that same claim is also being litigated in a district court, then the district court should issue a stay. S. 1273 § 1509(a).

Additional information about the ADR program

Participation in the ADR program is voluntary, and parties have the right to pursue their claims in court instead. S. 1273 § 1504(a).

Participants do not have to appear in-person. S. 1273 § 1506(c)(1). Unless physical evidence is necessary, all documents are submitted over the internet. S. 1273 § 1506(c)(2). Participants can be represented by an attorney. S. 1273 § 1506(d).

The statute of limitations for the ADR program is the same as that under the Copyright Act, 3 years. S. 1273 § 1504(b).

What other purpose does CASE serve?

The main purpose of CASE is to establish an ADR program. Its other purpose is to establish a study.

Within 3 years of the Board’s first issued determination, the Register of Copyrights shall conduct a study on the effectiveness of the Board on: (1) whether CASE needs any adjustments, particularly with respect to its claims and damages; and (2) whether the Board needs expansion to offer mediation and other ADR services. The Register of Copyrights is to report its findings to Congress.

What are the pros of CASE?

CASE would give independent creators a practical way to enforce their rights without having to hire an attorney or fight the infringement in court. Music makers and songwriters are big supporters of CASE. Other independent creators that would benefit greatly from CASE are photographers, illustrators, graphic artists, authors, bloggers, YouTubers and other types of creators and small businesses.

What are the cons of CASE?

CASE caters to less sophisticated parties, who will likely be self-represented. CASE Actions may expose these less sophisticated parties to potential abuse. For example, a CASE Action might create greater opportunities for claimants to potentially obtain settlements from unsophisticated and unrepresented defendants because many small claims do not involve damages as high as $30,000. The relatively small amount of damages at issue may deter defendants from engaging counsel and more likely to accede to settlement payments to resolve the claims.

Some observers believe that CASE may create a “default judgment mill.” An accused infringer who fails to opt-out within 60 days of receiving notice of a claim is subject to default. S. 1273 § 1506. Unsophisticated parties may not appreciate the implication of a default. However, by the same token, this opt-out provision would allow more sophisticated defendants to avoid the copyright ADR program, forcing claimants into federal court. S. 1273 § 1505(g)(1).

The effect of CASE and whether it achieves the desired results of providing a sensible, affordable forum for small value claims remains to be seen, if and when CASE is passed and signed into law and enacted.

About the author: Jing Zhao is a registered patent attorney and a member of Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group. Ms. Zhao has a degree in computer science, and her commercial litigation practice focuses on intellectual property and ERISA disputes, with a special interest in emerging intellectual property and other legal issues in the eSports industry. Ms. Zhao’s biography can be found here.

Filed under CASE, Copyright, Copyright Claims, Copyright Infringement

Design Patents on Truck Parts Are Valid

By on July 31, 2019
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Author: Susan Meyer

In a recent decision, the Federal Circuit Court of Appeals ruled that design patents on Ford truck hoods and headlights are not invalid as functional articles, holding “the aesthetic appeal of a design to consumers is inadequate to render that design functional.” Automotive Body Parts Association v. Ford Global Technologies, LLC, No. 2018-1613 (Fed. Cir., July 23, 2019).

According to a patent attorney, design patents protect a “new, original and ornamental design for an article of manufacture.” 35 U.S.C. § 171(a). Established law prohibits design patents on primarily functional designs due to their lack of ornamentality. Utility patents, on the other hand, must be functional to be patentable. Valid design patents may contain some functional elements but may not claim a “primarily functional” design. “If a particular design is essential to the use of the article, it cannot be the subject of a design patent.” L.A. Gear, Inc. v. Thom McAn Shoe Co., 988 F.2d 1117, 1123 (Fed. Cir. 1993).

This case was brought by the Automotive Body Parts Association (ABPA), who asked the court to hold that the aesthetic appeal, and not the mechanical or utilitarian aspect, of a patent design may render it functional. The court declined to adopt the ABPA’s unique argument.

The designs at issue are below.

Ford testified that a design team, and not engineers, designed the ornamental features for the hood and headlights, and although engineers reviewed the final designs, there were no changes to the aesthetic designs based on engineering or functional requirements. The court stressed the importance of prior tests that looked at the presence or absence of alternative designs. Of course, there are a variety of hood and headlight designs available.

Overall, the court found the ABPA’s arguments that designs that derive commercial value from their aesthetic appeal are functional, would gut the principles of design patents: “The very thing . . . for which [the] patent is given is that which gives a peculiar and distinctive appearance, its aesthetic.” The commercial edge the design may give a patent owner is “exactly the type of market advantage manifestly contemplated by Congress in the laws authorizing design patents.”

This recent ruling from the Federal Circuit clarifies that design patent defendants should not focus on whether a design’s aesthetic appeal is functional, but rather focus on the functionality of the article of manufacture itself. Patent owners will do well to develop evidence early of invention by designers and not engineers, and of a variety of design options in the field to show the lack of functional necessity for the particular patented design.

About the author: Susan B. Meyer is a partner and co-chair of Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group. She is a registered patent attorney whose practice focuses on intellectual property litigation, prosecution, and counseling for clients in a wide variety of industries and technologies. Ms. Meyer’s biography can be found here.

Filed under Patent

Effective August 3, 2019, the U.S. Patent and Trademark Office Makes a Big Splash through the Adoption of its New Trademark Law Concerning Foreign Trademark Applicants in an Effort to Preserve and Protect the Trademark Registry

By on July 31, 2019
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Author: Gregory Brescia

On August 3, 2019, non-U.S. domiciliaries will require representation by a U.S. licensed patent lawyer for all matters related to trademark applications, registrations, and parties to Trademark Trial and Appeal Board Proceedings (collectively referred herein as, “foreign applicants”). See Federal Register – Trademark Laws as of August 3, 2019. In addition to the adoption of the above, the USPTO is requiring all U.S. licensed attorneys representing foreign trademark applicants to submit proof of their active state bar membership. The purpose of this recent adoption resonates from the USPTO’s efforts to (1) improve the quality of the federal trademark register; (2) stop the unlicensed practice of law before the USPTO; and (3) assist in regulatory compliance.

Many foreign applicants may ask: “how will this impact me?” Prior to the adoption of this new rule, foreign applicants had the ability to prosecute and handle all trademark-related matters on their own behalf. Of course, foreign applicants had the ability to retain foreign counsel as well, so long as certain requirements were met. With the adoption of this new rule, foreign applicants will be required to retain U.S. counsel to file applications, respond to office actions, correspond with examining attorneys at the USPTO, and handle post registration submissions.

The primary changes that foreign applicants will see through the adoption of this new rule include the following:

  1. New applications filed by foreign applicants on or before August 3, 2019 under Sections 1 or 44 of the Lanham Act must obtain U.S. counsel to prosecute a complete application from inception through maintenance.
  2. New applications filed by foreign applicants on or after August 3, 2019 under section 66(a) of the Lanham Act, a subsection of the Madrid Protocol, will not require U.S. counsel for the initial filing so long as prior to the publication, the foreign application submitted satisfies all formalities and statutory requirements. In the event the application does not meet all the formalities and statutory requirements, U.S. counsel is required.
  3. For applications filed by foreign applicants prior to August 3, 2019 that require further action, applicants must retain U.S. counsel to handle any actions, including post-registrations maintenance.
  4. Retaining U.S. counsel is not necessary for applications filed by foreign applicants prior to August 3, 2019; however, U.S. counsel must be retained for any subsequent actions.
  5. Retaining U.S. counsel is required for marks registered by foreign applicants prior to August 3, 2019 for handling any post registration actions, as well as any post registration maintenance on or after August 3, 2019.

As discussed above, the adoption and implementation of this new rule is cornerstone of the USPTO’s initiative to preserve and protect the quality of the U.S. Trademark Registry. We encourage foreign applicants to take these recent changes seriously as they can have a significant impact on the validity and their current and future U.S. trademark portfolios. Moving forward, Gordon Rees Scully Mansukhani’s Intellectual Property team will monitor the development and implications associated with the USPTO’s recent rule adoption. Should you have any questions, comments or concerns regarding the USPTO’s new rule, please feel free to contact our offices.

About the author: Gregory Brescia is a registered patent attorney and a member of Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group. His practice focuses on intellectual property prosecution and litigation. He also counsels clients on intellectual property enforcement and corporate transactions involving formation, compliance, and licensing. Mr. Brescia’s biography can be found here.

Filed under Foreign Trademark Registration, Trademark, USPTO

Damages in Trademark Infringement: Is Willfulness Required for Defendant’s Profits?

By on July 25, 2019
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Author: Patrick Mulkern

Introduction

On June 28, 2019, the Supreme Court agreed to take up a case that looks to settle an equally-divided circuit split regarding the threshold evidentiary showing required before a trademark infringement plaintiff can recover the infringer’s profits. In Romag Fasteners, Inc. v. Fossil, Inc. et al., Case No. 18-1233, the petitioner sought a writ of certiorari on the question of: “Whether, under section 35 of the Lanham Act, 15 U.S.C. § 1117(a), willful infringement is a prerequisite for an award of an infringer’s profits for a violation of Section 43(a), 15 U.S.C. § 1125(a).”

Underlying Dispute

The case stems from a long-standing dispute between Petitioner Romag Fasteners, Inc. (“Romag”) and Respondents Fossil, Inc. and its retailers (collectively, “Fossil”). Romag sells patented magnetic snap fasteners under the ROMAG trademark. Fossil designs and distributes various items like handbags. In 2002, Romag and Fossil entered into an agreement where Fossil would use Romag’s fasteners in its products. In 2010, however, Romag discovered certain Fossil products were being sold in the United States with counterfeit fasteners bearing the ROMAG mark.

Romag brought suit against Fossil in November 2010, alleging both patent and trademark infringement. In April 2014, a jury found that Fossil had infringed Romag’s trademark, infringed Romag’s patent, but that none of Fossil’s violations were willful. The jury then awarded about $90,000 in Fossil profits to Romag “to prevent unjust enrichment” and another $6.7 million in profits to Romag “to deter future trademark infringement”—attributing 1% of Fossil’s profits to its trademark infringement. The district court ultimately determined, however, that “Romag is not entitled to any award of profits as a result of [its] failure to prove that Fossil’s trademark infringement was willful.”

Romag appealed to the Federal Circuit, which affirmed the district court’s ruling, though noting the circuit split on the issue of whether willfulness was required for an award of an infringer’s profits. Romag then filed a writ petition, seeking resolution of two questions: (1) the trademark question raised here, and (2) an unrelated patent question involving laches. The Supreme Court had addressed the second patent question in an intervening decision and so Romag’s petition was granted, the Federal Circuit’s decision was recalled, and the case was remanded to the district court for evaluation of that patent damages issue.

In November 2017, the district court entered an amended judgment. Romag again appealed, though Fossil opposed review of the trademark issue claiming it had already been litigated. In February 2019, the Federal Circuit agreed with Fossil and limited the appeal to the patent damages issues. Romag then petitioned the Supreme Court for review.

Petition for Certiorari

Romag’s petition is predicated on the significant and stark split among the circuits with respect to whether a trademark plaintiff must establish willful infringement before it can be entitled to an award of the infringer’s profits. Six have said “yes, they do”; six have said “no, they do not.”

The Third, Fourth, Fifth, Sixth, Seventh, and Eleventh Circuits do not require a willfulness showing before an award of profits. Instead, the infringer’s intent is just one of several factors in a flexible analysis. See, e.g., Quick Techs., Inc. v. Sage Grp. PLC, 313 F.3d 338, 349 (5th Cir. 2002) (“plain language of 1117(a)” includes no bright-line rule; “willful infringement” is instead “an important factor which must be considered”).

The First, Second, Eighth, Ninth, Tenth, and D.C. Circuits do require a threshold showing of willfulness before a plaintiff can litigate their entitlement to recover an infringer’s profits. The Second, Eighth, Ninth, Tenth, and D.C. Circuits require that willfulness showing in all instances. See, e.g., Stone Creek, Inc. v. Omnia Italian Design, Inc., 875 F.3d 426, 441 (9th Cir. 2017) (“willfulness remains a prerequisite for awarding a defendant’s profits”). The First Circuit requires a willfulness showing only if the litigants are not direct competitors. See, e.g., Fishman Transducers, Inc. v. Paul, 84 F.3d 187, 191 (1st Cir. 2012) (describing the direct-competition context as the “primary exception” to the “usual[] require[ment]” of willfulness).

Against this backdrop, Romag argued that a willfulness requirement “often determines whether the mark holder can recover any monetary remedy for a trademark violation” for compensation based on a plaintiff’s actual damages “is often difficult to measure and obtain.” Pet. at 20. While many courts require actual confusion to receive damages, “literally hundreds of cases . . . have universally acknowledged that proof of actual confusion is extremely difficult, if not almost impossible, to secure.” Id. Therefore, Romag explained, “[a]n award of the infringer’s profits . . . can be the difference between a meaningful recovery for trademark infringement and no recovery at all.”

Next Steps

The Supreme Court granted the petition without comment. Though not yet formally set, a joint motion following the petition being granted suggests the case will be heard during the January 2020 term—with a decision likely announced in Summer 2020. Given the binary outcome that is likely to result—yes, willfulness is required; or no, willfulness is not required—the decision may potentially have a significant impact on the scope of damages available in trademark cases for half the country. Whether they become easier or more difficult to secure for that half, though, remains to be seen.

About the author: Patrick J. Mulkern is an associate in Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group. His practice focuses on intellectual property litigation and transactional matters, with a particular emphasis on patent, trademark, and trade secret litigation. Mr. Mulkern is a registered patent attorney and his biography can be found here.

Filed under Trademark Infringement

Is Playing a Video Game on YouTube a Public Performance?

By on July 23, 2019
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Author: Jing Zhao

In October 2017, Epic Games sued Konstantin Vladimirovich Rak and two other individuals.1 You may have never heard of Epic Games, but you have likely heard of Fortnite – an online battle-royale game that has become widely popular among the teen and pre-teen populace. Epic Games is Fortnite’s developer and publisher.

The Defendants in Epic Games’ lawsuit created software cheats that allowed players to modify Fortnite to give themselves competitive advantages—known as “cheats” in gaming parlance—over other players. Mr. Rak then created and posted a video on YouTube to advertise his cheats. The video features gameplay and a demonstration of the cheat in action. This was the hook Epic Games needed. In its lawsuit, Epic Games alleges copyright infringement by accusing Defendants of “displaying Fortnite publicly without Epic’s permission.”2

The copyright violation Epic Games refers to is based on 17 U.S.C. § 106(4), which states “[the owner of copyright under this title has the exclusive rights to do and to authorize] in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly.”3

On Epic Games’ Motion for Default Judgment, the United States District Court for the Northern District of California touched upon the “fundamental question of whether playing a video game and posting footage of that gameplay to YouTube, constitutes ‘perform[ing a] copyrighted work publicly’ for the purposes of 17 U.S.C. § 106(4) in the first place.”4 While the Court declined to make a ruling, it did not grant default judgment to Epic Games.5 By late 2018, Epic Games voluntarily dismissed this case.

This raises the question: is playing a video game and posting it online for others a public performance that violates copyright?

In 1989, the Fourth Circuit Court of Appeals in Red Baron-Franklin Park, Inc. v. Taito Corp., found an arcade infringed a video game company’s copyright on a video game when the arcade purchased the video game circuit boards without consent for use in its arcades. The court ruled that video games qualify as an “audiovisual work” as defined by 17 U.S.C. § 1016 and a performance upon activation.7 Thus, the court concluded that playing the video game in an arcade constitutes “public performance.”8

In 1996, in Allen v. Academic Games League of America, Inc., a game developer for board games sued a nonprofit organizer of a tournament for students playing the board game.9 The plaintiff alleged the organizer violated his 17 U.S.C. § 106(4) right to publicly “perform” his games. The Ninth Circuit Court of Appeals affirmed summary judgment in favor of the defendant, holding “the interpretation of ‘play,’ as used to define ‘perform’ in § 101 of the Copyright Act, has generally been limited to instances of playing music or records.”10 The court refused to extend the term “play” to “the playing of games” because “[t]o do so would mean interpreting the Copyright Act in a manner that would allow the owner of a copyright in a game to control when and where purchasers of games may play the games and this court will not place such an undue restraint on consumers.”11

In 2004, in Valve Corp. v. Sierra Entertainment, Inc., the game developer and publisher Valve sued another game developer and publisher Sierra Entertainment for breach of a software publishing agreement involved in Sierra Entertainment’s distribution of Valve’s game in a cyber-café.12 The District Court for the Western District of Washington addressed, in passing, the right to publicly perform video games. Rejecting Sierra Entertainment’s reliance on Allen in its argument that playing video games in public is not a public performance, the court interpreted Allen’s ruling as “whether the performance is fee-based is an important factor in determining whether the performance is public.”13 The court declined to make a definitive ruling on whether playing video games constitutes a public performance, but noted “Red Baron involved the same ‘pay-for-play’ gaming transaction that is at issue in this case [involving playing a video game in a cyber-café].”14

In 2010, in Miller v. Facebook, Inc., the plaintiff is Miller, a software developer and owner of the copyright of a video game called “Boomshine.”15 Miller sued an individual, Yao Wei Yeo, who unlawfully reproduced the “look and feel” of Miller’s game and distributed the game, under the name “ChainRxn,” through Facebook.16 The United States District Court for the Northern District of California held that “Yeo’s alleged publication of the ChainRxn video game for play by Facebook users constituted a public performance of plaintiff’s copyrighted work under 17 U.S.C. § 106(4). Just as Congress considered the ‘reading a literary work aloud’ as a performance rather than display of a literary work, the reading of Boomshine’s copyrighted source or machine code by a computer (resulting in the presentation of the video game to the user) could be seen as an analogous performance of the underlying work. Admittedly, this area of the law is still developing.”17

Under these authorities, it would appear that the Fortnite-cheat video may be a public performance because it involves a pay-for-play gaming transaction. Not only did Mr. Rak publish his video with the intent to sell his cheat software, but each click of his video on YouTube also generates profit. Thus, the profit-driven nature of the video may place it in within the reach of 17 U.S.C. § 106(4).

About the author: Jing Zhao is a registered patent attorney and a member of Gordon Rees Scully Mansukhani’s Intellectual Practice Group. Ms. Zhao has a degree in computer science, and her practice focuses on commercial litigation, employment law and intellectual property, with a special interest in emerging legal issues in the eSports industry. Ms. Zhao’s biography can be found here.
_______________________________________________________________________

1 Epic Games, Inc. v. Mendes, Case Number 3:17-cv-06223-LB, U.S. District Court for the California Northern District (San Francisco).
2 Epic Games, Inc. v. Mendes, Case Number 3:17cv6223, Complaint, ¶9.
3 17 U.S.C. § 101 defines what it means to “perform a work” as “to recite, render, play, dance, or act it, either directly or by means of any device or process or, in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible.” 17 U.S.C. § 101 also defines “public” performance as “(1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or (2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.”
4 Epic Games, Inc. v. Mendes, 2018 U.S.Dist.LEXIS 98719, at *19-20 (N.D. Cal. June 12, 2018) (edits in original).
5 Id. at *22-23.
6 Red Baron-Franklin Park, Inc. v. Taito Corp, 883 F.2d 275, 278 (4th Cir. 1989).
7 Id. (citations omitted) (“the television monitor displays a series of images and the loudspeaker makes audible their accompanying sounds. The exhibition of its images in sequence constitutes a ‘performance’ of an audiovisual work. Indeed, it is the sequential showing of its images that distinguishes the ‘performance’ of an audiovisual work from its ‘display,’ which is defined as a nonsequential showing of individual images”).
8 Id. at 278-79.
9 Allen v. Academic Games League of Am., Inc., 89 F.3d 614 (9th Cir. 1996).
10 Id. at 616 (citations omitted).
11 Id.
12 Valve Corp. v. Sierra Entm’t, Inc., 431 F.Supp.2d 1091 (W.D. Wash. 2004).
13 Valve Corp., 431 F.Supp.2d at 1097.
14 Id.
15 Miller v. Facebook, Inc., 2010 U.S.Dist.LEXIS 61715, at *1-2 (N.D. Cal. May 28, 2010).
16 Id. at *2.
17 Id. at *14 (citing H.R. REP. NO. 94-1476, at 63 (1976)).

Filed under Copyright

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