Pattishall IP Blog

September 3, 2015

California Amends Advertising Law to Provide Guidance for “Made in USA”

Filed under: Advertising, False Advertising — Tags: , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 4:06 pm

BLC - Low Resby Bradley L. Cohn, Partner

Good news for manufacturers! On September 1, 2015, California amended its false advertising law to provide much-needed guidance on use of “Made in USA” and similar designations of domestic origin.

Effective January 1, 2016, California law provides that “Made in USA” may be used on products where the foreign content is 5% or less of the wholesale value of the product. The law also allows “Made in USA” to be used where the foreign content is up to 10% of the wholesale value of the product, if the manufacturer can show that the foreign components or ingredients cannot be produced or sourced in the United States.

California’s “Made in USA” law has been the subject of significant discussion in recent years, because the statute itself had not provided a clear threshold requirement for domestic or foreign content. There were also concerns that the law was not in conformity with the Federal Trade Commission’s approach for use of “Made in USA”. Multiple class-action lawsuits have been filed over the years against businesses accused of violating the California law, even where defendants claimed that they were in compliance with federal “Made in USA” guidelines.

California’s “Made in USA” statute can be found at Section 17533.7 of the Business and Professions Code. The amendment is California Senate bill 633, approved by the governor on September 1, 2015.

If you have any questions concerning California’s “Made in USA” statute, or false advertising class action defense generally, please feel free to contact Bradley Cohn or Jessica Ekhoff.

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Bradley L. Cohn is a partner with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois. Pattishall McAuliffe represents both plaintiffs and defendants in trademark, false advertising, copyright, trade secret and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and advertising issues. Mr. Cohn’s practice focuses on litigation, transactions, and counseling in domestic and international trademark, trade dress, advertising, data privacy unfair competition, trade secret, right of publicity, Internet, and copyright law.

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July 8, 2015

REDSKINS Trademark Registrations Still Canceled After Appeal to Federal Court

Filed under: Constitution, Litigation, TM Registration — Tags: , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 12:45 pm

PB LRby Phillip Barengolts, Partner

Today, the District Court for the Eastern District of Virginia has upheld an administrative ruling that canceled federal trademark registrations for the REDSKINS nickname of the Washington football team despite the team’s constitutional and other challenges. Pro-Football, Inc. v. Blackhorse, Case No. 14-cv-01043 (E.D. Va. July 8, 2015). [1]

Last year, on June 18, 2014, the Trademark Trial and Appeal Board of the United States Patent and Trademark Office (“TTAB”) canceled six of Washington’s federal registrations for the trademark REDSKINS because the name disparages Native Americans.[2] The team appealed the ruling to federal court. It argued, essentially, that Section 2(a) of the Federal Trademark Act (the “Lanham Act”), which prohibits the federal registration of potentially disparaging trademarks, is unconstitutional and that the Native American petitioners did not prove that the REDSKINS trademark is, in fact, disparaging. On cross-motions for summary judgment, the Eastern District of Virginia sided with the Native American petitioners on all counts.

The decision highlights an important aspect of trademark practice. As the Court admonished the parties, this case concerns the right of the Washington football team to register the REDSKINS trademark– not the team’s right to use the mark. The TTAB also highlighted this point in its decision, but mass media, and even many attorneys, confused this point.

The rights conferred by registration are important and valuable , but the TTAB only has the right to decide whether a trademark may be registered, it has no authority to stop the use of a trademark. Section 2(a) of the Lanham Act, at issue in this dispute, only applies to registration of trademarks. As the Court stated, “Thus, regardless of this Court’s ruling, [the team] can still use the Redskins Marks in commerce.”

As a practical matter, however, a trademark owner who is not permitted to register its preferred mark often chooses not to use that mark, but, ultimately, it is the trademark owner’s choice. This point is crucial for the Court’s decision and crucial for an understanding of when and why to bring an action before the TTAB.[3]

As a result of this limited application of Section 2(a) of the Lanham Act, the statute survived the constitutional challenge brought by the team. In particular, the Court found that Section 2(a) does not even implicate the First Amendment precisely because it does not prohibit the use of a trademark, and therefore, does not prohibit or impinge on any speech.

The Court also found that the federal trademark registration program is government speech under the Supreme Court’s recent decision in Walker v. Tex. Div., Sons of Confederate Veterans, Inc., 135 S. Ct. 2239 (2015).[4] Basically, this means that “the federal government may determine the contents and limits of programs that it creates and manages.” The Court also ruled that the term “may disparage” in Section 2(a) of the Lanham Act is not impermissibly vague – generally or as applied to the team. Finally, the TTAB’s ruling was not an impermissible taking because a trademark registration is not a property interest, as opposed to the underlying trademark itself, which is.

As to the team’s challenges to the ruling that the term REDSKINS may disparage Native Americans, the Court found that evidence found in dictionaries, scholarly and media references, and statements from Native Americans were sufficient to uphold the TTAB’s ruling.

In the previous iteration of this battle, the D.C. Circuit Court of Appeals upheld a ruling that laches barred the Native Americans’ suit. Pro-Football, Inc. v. Harjo, 415 F.3d 44 (D.C. Cir. 2005).[5] Here, for reasons not worth getting into, the District Court found that laches did not apply.

Undoubtedly, the team will appeal this decision to the Fourth Circuit. So, the saga of the REDSKINS trademark registration continues.

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Phillip Barengolts is a partner with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois. Pattishall McAuliffe represents both plaintiffs and defendants in trademark, false advertising, copyright, trade secret and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and advertising issues. Mr. Barengolts’ practice focuses on litigation, transactions, and counseling in domestic and international trademark, trade dress, advertising, unfair competition, trade secret, Internet, and copyright law. He teaches trademark and copyright litigation at John Marshall Law School, and co-authored Trademark and Copyright Litigation, published by Lexis Publishing.

Footnotes:

[1] The full 70-page opinion can be found here: http://www.pattishall.com/pdf/PFI%20v%20Blackhorse%20Decision.pdf

[2] Further background and earlier coverage on the TTAB decision can be found here: http://blog.pattishall.com/2014/06/18/redskins-trademark-registrations-canceled-after-8-more-years-of-litigation/.

[3] The recent decision in B&B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293, 575 U.S. __ (2015), may have changed this calculus. See http://blog.pattishall.com/2015/03/25/supreme-court-holds-that-issues-decided-by-the-ttab-may-be-preclusive-in-federal-court/. The decision can be found here: http://scholar.google.com/scholar_case?case=15316530830472719965.

[4] http://scholar.google.com/scholar_case?case=2629371590163032730.

[5] http://scholar.google.com/scholar_case?case=2204191829610278162.

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July 7, 2015

Amazon.com Sued for Bait and Switch

Filed under: Internet, Litigation, Trademark (General) — Tags: , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 2:52 pm

baa_hiresBy: Brett A. August

In an important case for all companies whose products are sold on Amazon.com, the Ninth Circuit Court of Appeals overturned a district ruling yesterday that Amazon could not be sued for trademark infringement when it presented the goods of one watch maker in response to a search for another brand of watches.  In Multi Time Machine Inc. v. Amazon.com Inc., Case No. 13-55575, the Ninth Circuit (in a 2-1 decision) ruled that Amazon’s practices could confuse consumers into believing the watches displayed in the search results are put out by a company related to the manufacturer of the searched-for watches.

This is an important result for all vendors of branded goods who believe they are losing business to competitors due to Amazon’s failure to tell users of its website that the goods for which the customer is searching are not available on Amazon.com. The court noted that Amazon’s competitors – such as Buy.com and Overstock.com –  inform customers when the goods in their search terms are not sold on those websites.

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Brett August is a partner with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois.  Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, and unfair competition trials and appeals. The firm advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues.  Brett’s practice focuses on domestic and international trademark, copyright, unfair competition, and Internet counseling and litigation.

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June 4, 2015

Wait, Wait, Don’t Tell Me – The Gov’t has Reduced Filing Fees ?

Filed under: TM Registration, Trademark (General) — Tags: , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 3:33 pm

rws_high_resby Robert W. Sacoff, Partner

The big news (this will sound a little wonky, but you really should know it) is that the USPTO has just recently (effective January 17, 2015) reduced certain trademark filing fees.  How often does that happen ?

Previously, the government fee for the filing mode most commonly used, TEAS, was $325 per class, for an electronic filing. Paper filing is still possible, at a higher fee, $375 per class, but hardly anybody does it any more.  Many applicants eschewed the “TEAS PLUS” option, even though it had and still has a lower filing fee (previously $275, reduced now to $225, per class) because it handcuffs you to using only the exact wording for the goods and services that comes straight out of the Acceptable ID Manual, which can be problematic for all but the simplest product descriptions.  But now, the USPTO has created a new filing mode, called TEAS RF, for Trademark Electronic Application System Reduced Fee (they do love their acronyms), which is an attractive hybrid.  It lowers the filing fee to $275 per class, and requires only that you do what you probably do anyway, like file everything electronically, provide an email address, and agree to email communications with the USPTO. It does not restrict you to using the exact ID Manual terminology like the TEAS PLUS option still does. USPTO data since January shows the desired results: “regular” TEAS applications have dropped, TEAS RF applications have increased, and overall efficiency has improved. See the Director’s Forum blog post of May 29, 2015 at http://www.uspto.gov/blog/.

The recent rulemaking also reduced the renewal filing fee from $400 to $300 per class.  You will still have to file a Section 8 Declaration of Use when you renew (the procedure was bifurcated previously to comply with the TLT, Trademark Law Treaty), and the Section 8 filing fee is still $100 per class.

The filing options, fees and requirements are laid out in a nice USPTO chart at http://www.uspto.gov/trademarks-application-process/filing-online/reduced-fees-teas-application-filing-options

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Robert Sacoff is a partner with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois. Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, trade secret and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues.

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March 25, 2015

Supreme Court holds that issues decided by the TTAB may be preclusive in Federal Court

Filed under: Litigation, TTAB — Tags: , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 9:53 am

Widmaier_Uli_1 F LRBy: Uli Widmaier

A.  The Supreme Court’s Holding

On March 24, 2015, the Supreme Court held for the first time that “a court should give preclusive effect to TTAB decisions if the ordinary elements of issue preclusion are met.” B&B Hardware, Inc. v. Hargis Industries, Inc., No. 13-352, slip op. at 2.

In other words, “[s]o long as the other ordinary elements of issue preclusion are met, when the usages adjudicated by the TTAB are materially the same as those before the district court, issue preclusion should apply.” Id., slip op. at 22. The Supreme Court remanded the case for a determination whether the conditions for preclusion are met. Id.

B.  The Reach of the Supreme Court’s Opinion

In B&B, the issue to which preclusion may apply was likelihood of confusion. But the principle announced by the Supreme Court is not limited to likelihood of confusion. Given the wording and rationale of the Supreme Court’s opinion, practitioners and trademark owners should expect any TTAB decision to have a preclusive effect if it meets the conditions for preclusion articulated by the Supreme Court. These conditions are discussed below.

That would include TTAB decisions on issues such as secondary meaning, inherent distinctiveness, genericness, abandonment, functionality, dilution, and others. Any TTAB decision on these and other issues will be preclusive if it meets the Supreme Court’s conditions. Therefore, the potential reach of the Supreme Court’s holding is broad and may have substantial implications for trademark owners.

C.  Facts

B&B owns the mark SEALTIGHT for metal fasteners in the aerospace industry; Hargis owns the mark SEALTITE for metal fasteners in the construction trade. Slip op. at 6. B&B opposed Hargis’s application to register SEALTITE and prevailed in the TTAB, which found a likelihood of confusion between the two marks. Id. at 6-7.

B&B also sued Hargis in federal district court for trademark infringement. After the TTAB had found in B&B’s favor, B&B argued before the district court that the TTAB’s decision precluded Hargis from further contesting the issue of likelihood of confusion. The court rejected B&B’s argument, and the jury found in favor of Hargis on likelihood of confusion. B&B appealed to the Eighth Circuit, lost, and then prevailed before the Supreme Court.

D.  Issue Preclusion

The Supreme Court explained issue preclusion as follows: “[w]hen an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.” Slip op. at 9, quoting Restatement (Second) of Judgments, §27, p. 250 (1980). Importantly, “issue preclusion is not limited to those situations in which the same issue is before two courts.” Slip op. at 9 (emphasis in original). Therefore, a decision by an administrative agency may also have issue preclusive effect. Id. (more…)

March 16, 2015

‘Blurred Lines’ Verdict Creates Unpredictable Music Copyright Landscape

Filed under: Copyright — Tags: , , , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 3:47 pm

Jason Koransky F HRby Jason Koransky, Associate

The recent verdict that Robin Thicke and Pharrell Williams’ hit “Blurred Lines” infringed the copyright to the late Motown legend Marvin Gaye’s composition “Got To Give It Up” has generated significant media attention.[1] And this coverage has certainly been compounded by the eye-popping $7.4 million in damages the California jury awarded Gaye’s heirs.

Controversy and debate have raged about whether the jury was correct, with the primary issue being whether Thicke and Williams actually copied “Got To Give It Up,” or were simply inspired by Gaye’s late-’70s soul/funk composition. Of course, copyright protection does not extend to a musical idea, genre, or overall “feel” of a song. Rather, copyright protects a musical expression fixed in a tangible medium — here, the written composition filed with the U.S. Copyright Office for “Got To Give It Up.” (Gaye’s estate does not own the copyright to the sound recording of “Got To Give It Up,” and thus could not assert that “Blurred Lines” infringed the recording.)

Thicke and Williams made this idea vs. expression dichotomy the primary issue in their complaint for a declaratory judgment of non-infringement: “Being reminiscent of a ‘sound’ is not copyright infringement. The intent in producing ‘Blurred Lines’ was to evoke an era. In reality, the Gaye defendants are claiming ownership of an entire genre, as opposed to a specific work . . . .”

The jury disagreed with this argument. Weighing evidence such as competing expert testimony, recordings of the compositions (interestingly, the judge only allowed the jury to hear a new recording of Gaye’s composition that was made for the litigation and which was based on the music filed with the Copyright Office), and testimony from Thicke and Williams regarding the creation of “Blurred Lines,” the jury found that Thicke and Williams incorporated too many elements of “Got To Give It Up” into “Blurred Lines,” such that it crossed the line from “inspired by” to “copying.”

Does this verdict represent a slippery slope in copyright law, in which songwriters now have grounds to plead infringement when another composition has a similar “feel” but does not actually copy a song? Further, could this decision extend to other media, such as film, literary works, or photography, in which new works are often inspired by those which precede them? (more…)

January 22, 2015

Supreme Court Finds Tacking to Be an Issue of Fact

Filed under: Trademark (General) — Tags: , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 9:17 am

Jason Koransky F HRby Jason Koransky, Associate

The doctrine of “tacking” deals with priority in trademark law. A trademark owner “tacks on” its period of using an earlier version of its mark to the time it has been using the current version of the mark. For tacking to be accepted by the court or the T.T.A.B., however, the respective versions of the marks must be “legal equivalents,” creating “the same, continuing commercial impression.” In a rare opportunity to decide a substantive issue of trademark law, on January 21 the Supreme Court in a unanimous opinion held that tacking is an issue to be decided by a jury. See Hana Financial, Inc. v. Hana Bank, 574 U.S. __ (2015). In affirming the Ninth Circuit’s decision that tacking is an issue of fact, the Court settled a circuit split, with the Federal Circuit and Sixth Circuit having held tacking to be an issue of law.

In this case, the petitioner Hana Financial began using its HANA FINANCIAL mark in commerce in 1995, and in 1996 obtained a federal registration of a logo that included the HANA FINANCIAL mark for financial services. Meanwhile, in 1994, the respondent Hana Bank started to advertise financial services under the name Hana Overseas Korean Club in the United States, targeting Korean expatriates. These advertisements included the name “Hana Bank” in Korean. In 2000, Hana Bank changed its name to Hana World Center, and in 2002 it started operating a bank in the U.S. called Hana Bank.

In 2007, Hana Financial sued Hana Bank for infringing its HANA FINANCIAL mark, and in response Hana Bank claimed priority based on tacking. The case went to trial, at which the jury was given a tacking instruction. The jury found that Hana Bank did not infringe the HANA FINANCIAL mark, and the district court denied Hana Financial’s motion for judgment as a matter of law.

In its brief and straightforward opinion, the Court wrote that tacking was properly in the jury’s hands as an issue of fact because “the tacking inquiry operates from the perspective of an ordinary purchaser or consumer.” It emphasized that it has “long recognized . . . that, when the relevant question is how an ordinary person or community would make an assessment, the jury is generally the decisionmaker that ought to provide the fact-intensive answer.”

The Court acknowledged that courts could decide a tacking issue in a bench trial or on summary judgment or judgment as a matter of law when the facts warrant such a determination. But when the parties request a jury trial, and summary judgment or JMOL is not warranted, tacking must be decided by the jury.

The Court rejected the four arguments Hana Financial made for why tacking is an issue of law. First, even though the “legal equivalents” test in tacking involves the application of a legal standard, the court found no reason why the jury could not properly apply that standard, essentially stating in dicta that the jury could consider this mixed question of law and fact. Next, it rejected Hana Financial’s argument that tacking questions must be decided by comparing the marks at issue to the marks in other tacking cases. Third, it found that juries deciding tacking would not make the trademark system “unpredictable.” Finally, it found that courts have not historically decided the issue of tacking as a matter of law, and that Hana Financial’s cited cases in which the court ruled on tacking included bench trials and summary judgments.

On its facts, Hana holds only that tacking an issue of fact for the jury. But the analysis seems to apply to other issues in trademark law as well, such as likelihood of confusion – even though the opinion does not address these other issues. If Hana is extended to such other issues, it could make it more difficult to obtain summary judgment in trademark litigation.

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Jason Koransky is an associate with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois. Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, trade secret and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues. Jason’s practice focuses on trademark, trade dress, copyright and false advertising litigation, domestic and international trademark prosecution and counseling, and privacy issues. He is co-author of the book Band Law for Bands, published by the Chicago-based Lawyers for the Creative Arts.

 

 

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January 20, 2015

2015 Resolution: Privacy Compliance

Filed under: Privacy — Tags: , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 11:05 am

Jason Koransky F HRby Jason Koransky, Associate

“Privacy law” cannot be confined to a small, orderly box. Rather, it is a complicated, sprawling, and sometimes difficult tangle of federal and state laws. From the federal Fair Credit Reporting Act and Electronic Communications Privacy Act to state laws addressing use and disclosure of arrest and conviction information, privacy law implicates a broad range of business activities.

Importantly, these laws have major implications for companies that gather, assemble, or otherwise use their customers’ personal identifying information. With so many different types of businesses increasingly focused on creating relationships with their customers by collecting and using personal information, these laws affect a growing number of entities — sometimes in ways that are not readily apparent. Further, data breaches that result in the release of personal information frequently appear in national headlines and often lead to lawsuits.

And privacy law constantly evolves.

For example, proposed federal legislation (the Personal Data Protection and Breach Accountability Act) could potentially create a uniform law addressing requirements to notify consumers in the event of a data breach, which would largely replace the existing patchwork of incongruous state laws. Another piece of proposed federal legislation (the Data Broker Accountability and Transparency Act) would create requirements for a business to ensure the maximum possible accuracy of the personal information it collects and provide people a means to access, review, and dispute this information. In addition, President Obama recently discussed federal legislation to protect student data.

On the state level, examples of new laws being implemented include those related to on-line privacy rights of minors, how websites can collect personal identifying information, and information that an employer may ask a potential employee on a job application.

These laws have tangible and far-reaching implications for businesses, which certainly cannot be taken lightly or ignored. Many businesses now have privacy and information-security offices, which monitor compliance and handle issues that arise. Privacy and data security audits, legal risk assessments, and finding solutions for potential red flag privacy issues are essential to minimize the risk of a data breach and minimize the liability from ensuing lawsuits. Solution-based privacy analyses include, for example:

  • Reviewing how a company uses its consumers’ personal identifying information;
  • Reviewing privacy policies associated with websites, apps, and other products or services;
  • Analyzing systems in place to train employees on the use of consumers’ personal identifying information, as well as systems in place to protect this data; and
  • Reviewing actions that have been taken in past data breaches.

While we cannot predict much of what may occur in 2015, we can say with confidence that during this year privacy issues will continue to grow, evolve, and significantly affect businesses in this information age.

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Jason Koransky is an associate with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois. Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, trade secret and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues. Jason’s practice focuses on trademark, trade dress, copyright and false advertising litigation, domestic and international trademark prosecution and counseling. He is co-author of the book Band Law for Bands, published by the Chicago-based Lawyers for the Creative Arts.

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October 2, 2014

Not Quite “Happy Together” – Recording Industry Scores Significant Victory in First Major Pre-1972 Sound Recordings Performance Rights Decision

Filed under: Copyright, Internet, Litigation — Tags: , , , , , , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 9:40 am

by Jason Koransky, Associate

When Sirius XM broadcasts “Happy Together,” “It Ain’t Me Babe,” and other hit recordings from The Turtles through its satellite and Internet radio services, it infringes the copyrights to these recordings, according to a court in the Central District of California.

In an order issued September 22, 2014, in Flo & Eddie Inc. v. Sirius XM Inc., 2:13-cv-05693 (C.D. California: Public performances of pre-1972 sound recordings protected by California copyright law)[1], the record industry scored a significant victory in the first major court ruling on the issue of state copyright protection for public performances of pre-1972 sound recordings. The court granted Flo & Eddie summary judgment on its claim that Sirius’ unlicensed public performances of its sound recordings violated California Civil Code § 980(a)(2), the section in California’s copyright statute that applies to pre-1972 sound recordings. Flo & Eddie is the corporation owned and operated by Howard Kaylan and Mark Volman, founding members and the lead singer and guitarist, respectively, of the 1960s pop group The Turtles. Because the case involves only California state law, however, the court’s ruling is limited in scope to public performances of these recordings in the state of California.

This case is one of a series of lawsuits that seek royalties for public performances by new media music services such as Sirius XM and Pandora of sound recordings created before February 15, 1972, based on the argument that state law protects these recordings from such unlicensed uses. While music compositions have long enjoyed copyright protection under U.S. copyright law, only in 1972 did Congress extend copyright protection to sound recordings. Individual states, however, had enacted their own copyright statutes, which co-existed with the federal Copyright Act until the enactment of the 1976 Copyright Revision Act, which preempted these state laws. The 1976 federal law, however, expressly carved out a preemption exemption to sound recordings created before February 15, 1972. See 17 U.S.C. § 301(c) (“With respect to sound recordings fixed before February 15, 1972, any rights or remedies under the common law or statutes of any State shall not be annulled or limited by this title until February 15, 2067.”)

In 1995, Congress expanded the rights attached to a sound recording when it passed the Digital Performance Right in Sound Recordings Act, which added digital audio transmissions of sound recordings to the exclusive bundle of rights a copyright grants. See 17 U.S.C. § 106(6). SoundExchange has emerged as the performance rights organization that collects the compulsory license fees that non-interactive digital music services—including Sirius XM—pay to perform these recordings.

But Sirius did not pay, and SoundExchange did not attempt to collect, royalties for pre-1972 recordings, as these do not have federal copyright protection. The digital public performance rights that owners of these sound recordings possess have existed in a sort of legal limbo based on the interpretations of state copyright statutes. Flo & Eddie owns the rights to The Turtles’ recordings, and tested these legal waters by suing Sirius for violating California copyright law—and bringing claims for unfair competition, conversion, and misappropriation—for broadcasting its sound recordings.

The case boiled down to statutory construction. The applicable statute, California Civil Code § 980(a)(2), reads (with emphasis added):

The author of an original work of authorship consisting of a sound recording initially fixed prior to February 15, 1972, has an exclusive ownership therein until February 15, 2047, as against all persons except one who independently makes or duplicates another sound recording that does not directly or indirectly recapture the actual sounds fixed in such prior recording, but consists entirely of an independent fixation of other sounds, even though such sounds imitate or simulate the sounds contained in the prior sound recording.

Flo & Eddie argued that “exclusive ownership” of sound recordings encompasses the right to control public performances of these recordings. Sirius argued that because the statute did not expressly specify the public performance right, it was not included in the “exclusive ownership” of a recording. Based on the plain language of the statute, its legislative history, and two court decisions which implied that the California statute granted the owner of a sound recording the exclusive right to control public performances of its recordings, the court agreed with Flo & Eddie’s interpretation. As such, because no dispute existed that Sirius had broadcast The Turtles’ recordings without a license, the court granted Flo & Eddie’s summary judgment motion that these public performances infringed their sound recording copyrights. The court also granted Flo & Eddie summary judgment on its unfair competition, conversion, and misappropriation claims.

This case has the potential to create significant revenue streams for major record labels and other owners of pre-1972 sound recordings. Conversely, it presents new licensing and business challenges to Internet, satellite, and other new media non-interactive music service providers. Of course, a treasure trove of artistically and commercially successful music was recorded before 1972—think Elvis, The Beatles, Jimi Hendrix, Miles Davis, Duke Ellington … the list could go on and on. A huge void would exist if Sirius simply stopped broadcasting these recordings. As such, the full implications of the decision in the Flo & Eddie case may take years to emerge, especially considering that the decision applies only in California. For example, a court interpreting another state’s law could issue an opposite decision. But in practicality, Sirius could most likely not block its broadcasts from California. So if this decision is affirmed on appeal, new licensing requirements will likely emerge for digital public performances of pre-1972 sound recordings.

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Jason Koransky is an associate with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois. Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, trade secret and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues. Jason’s practice focuses on trademark, trade dress, copyright and false advertising litigation, as well as domestic and international trademark prosecution and counseling. He is co-author of the book Band Law for Bands, published by the Chicago-based Lawyers for the Creative Arts.

[1] http://www.soundexchange.com/wp-content/uploads/2014/09/Flo-Eddie-v.-Sirius-XM-Order-on-MSJ.pdf

 

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June 26, 2014

Aereo’s Internet-Based Television Streaming Services May Be Wizardry, But the Supreme Court is in No Mood for Magic

Filed under: Copyright, Internet, Litigation — Tags: , , , , , , , , , , — Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP @ 12:17 pm

Ekhoff_Jessica_2 F LRby Jessica Ekhoff, Associate

Describing its Internet-based television streaming services, tech start-up Aereo proclaims, “It’s not magic. It’s wizardry.”[1] In yesterday’s 6-3 decision the Supreme Court disagreed, or at the very least, adopted a staunchly anti-wizardry stance.[2]

Justice Breyer, writing for the majority in American Broadcasting Cos. v. Aereo, Inc., characterized the issue before the Court as whether “Aereo, Inc., infringes this exclusive right [of public performance under §106(4) of the Copyright Act] by selling its subscribers a technologically complex service that allows them to watch television programs over the Internet at about the same time as the programs are broadcast over air.”[3] Despite Aereo’s self-description as a mere equipment supplier doing no “performing” of its own, the Court held in the affirmative.

The Court analyzed the issue in two parts: whether Aereo “performed” under the Copyright Act, and if so, whether the performance was “public.”

In concluding that Aereo did, in fact, perform under the Copyright Act, the majority of the Court turned to the 1976 amendments to the Act, which were adopted, in large part, to bring community antenna television, or CATV—the precursor to cable television—within the scope of the Act. CATV functioned by placing antennas on hills above cities, then using coaxial cables to carry the television signals received by the antennas into subscribers’ homes. CATV did not select which programs to carry, but rather served as a conduit for the transmission and amplification of television signals. Before the 1976 amendments, Supreme Court precedent considered CATV to be a passive equipment supplier that did not “perform” under the Act.[4] After the amendments, to “perform” an audiovisual work such as a television program meant “to show its images in any sequence or to make the sounds accompanying it audible.”[5] CATV thus “performed” the shows it transmitted because it both showed the television programs’ images to its subscribers, and made the accompanying sounds audible. Over a strong dissent authored by Justice Scalia[6], the majority found that, because its services were so similar to those once offered by CATV, Aereo also “performed” under the post-1976 definition of the term.[7]

Having determined that Aereo’s services constitute a performance under the Copyright Act, the Court next turned to the issue of whether those performances are public. Aereo argued its services do not constitute public performance because whenever a subscriber selects a program to watch, Aereo places a unique copy of the show in that subscriber’s folder on Aereo’s hard drive, which no one other than that subscriber can view. If another subscriber wants to watch the same show, she will receive her own copy of the program in her own folder from Aereo. The Court dismissed this argument, finding the “technological difference” inconsequential in light of Congress’s clear intent to bring anything analogous to CATV within the scope of the Copyright Act’s requirements. Under the post-1976 Act, an entity performs a copyrighted work publicly any time it “transmits” a performance. A performance is “transmitted” when it is communicated by any device or process beyond the place from which it is sent, whether the recipients receive the transmission at the same time and place, or at different times and places.[8] Aereo therefore publicly performs a copyrighted television program each time its system sends a copy of that program to a subscriber’s personal Aereo folder.

The majority characterized its holding as a “limited” one, and was careful to emphasize that its decision does not apply to other new technologies, such as cloud-based storage and remote storage DVRs. But with a slew of amici curiae predicting the decision could have a catastrophic impact on the tech industry, there are surely some who will take no comfort from the Court’s assurances. Aereo, unfortunately, may not have a spell to resurrect itself.

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Jessica Ekhoff is an associate with Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP, a leading intellectual property law firm based in Chicago, Illinois. Pattishall McAuliffe represents both plaintiffs and defendants in trademark, copyright, trade secret and unfair competition trials and appeals, and advises its clients on a broad range of domestic and international intellectual property matters, including brand protection, Internet, and e-commerce issues. Jessica’s practice focuses on trademark, trade dress, copyright and false advertising litigation, as well as film clearance, media and entertainment, and brand management.

[1] https://www.aereo.com/about

[2] http://www.supremecourt.gov/opinions/13pdf/13-461_l537.pdf

[3] American Broadcasting Cos. v. Aereo, Inc., No. 13-461, slip op. at 1, 573 U.S. __ (2014).

[4] Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390 (1968); Teleprompter Corp. v. Columbia Broadcasting System, Inc., 415 U.S. 394 (1974).

[5] 17 U.S.C. § 101.

[6] Justice Scalia argues that Aereo does not “perform” because it is the subscriber, rather than Aereo, who selects the program she wishes to watch, which in turn activates the individual antennae Aereo has assigned to her for the purpose of viewing that program. This means it is the subscriber who is doing the performing, since she is the one rousing Aereo’s antennae from dormancy and calling up a specific program to watch. Justice Scalia went on to note that although he disagrees with the majority’s interpretation of “perform,” he agrees that Aereo’s activities ought not to be allowed, either because Aereo is secondarily liable for its subscribers’ infringement of the Networks’ performance rights, or because it is directly liable for violating the Networks’ reproduction rights. If future courts fail to find Aereo liable under either of those theories, Justice Scalia advocates relying on Congress to close the loophole. Slip Op. at 12.

[7] Slip Op. at 8.

[8] 17 U.S.C. § 101.

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