The Briefing by Weintraub Tobin

The recent Reilly v. Wozniak 9th Circuit decision upheld a 1950s ruling that requires a promise to pay to be present for an implied contract to exist. Scott Hervey and Josh Escovedo discuss this case and how the Desny decision applies to idea theft cases in California in this episode of The Briefing by the IP Law Blog. Watch this episode on the Weintraub YouTube channel here. Show Notes: S: In a previous episode we discussed recent applications of the 1950 case, Desny v Wilder, which set the ground rules for an idea theft case in California. A recent non-citable 9th Circuit opinion on an idea theft looks at the promise to pay element.  We are going to talk about this on the next installment of The Briefing by the IP Law Blog. In California, an idea theft claim is based in large part on the California supreme court case of Desny v Wilder. In Desny, the plaintiff Victor Desny wrote a script depicting the real-life story of Floyd Collins, a boy who made headlines after he was trapped in a cave eighty feet underground.  In an effort to market his script, Desny called Billy Wilder, a writer, producer and director at Paramount Pictures. Desny could not get through to Wilder and subsequently stripped his scrip to the bare facts so that Wilder’s secretary could copy it in short-hand over the phone.  After reading his synopsis, Desny told Wilder’s secretary that Wilder and Paramount could use the script only if they paid him a reasonable amount for doing so.  Shortly thereafter, Wilder created his own movie script mirroring Densy’s. Because Densy’s script was based on historical facts, and because Desny only conveyed the bare minimum of those facts to Wilder’s secretary, both parties conceded for the purpose of the appeal that the synopsis was not sufficiently original to form the basis of a federal copyright claim. The Court, however, held that Densy stated sufficient facts to establish the existence of an implied-in-fact contract between the parties. The California Supreme Court explained that where an idea is furnished by one party to another, a contract sometimes may be implied even in the absence of an express promise to pay; a contract exists where “the circumstances preceding and attending disclosure, together with the conduct of the offeree acting with knowledge of the circumstances, show a promise to pay.” J: In the recent case of Ralph Reilly v. Steve Wozniak, et al, Reilly, an IT professor, claimed that he had a verbal agreement with Wozniak to create a new high-tech online university based on a course design and outline developed by Reilly.  Apparently, at least accordingly to Reilly, the two shook hands on a deal, and Reilly developed the course outline.  Later Reilly learned that Wozniak had partnered with Southern Career Institute Inc. to create “Woz U.”  Reilly claims that he went to two pitch meetings with Wozniak.  Wozniak claimed that he never agreed to compensate Reilly and further that he never made any money off of Reilly’s idea because Southern Career Institute reached out to Wozniak to license his name and likeness. S: In an appeal from the district court’s dismissal of Reilly’s contract claim, Reilly argued that a party claiming breach of a contract for conveyance and use of an idea does not need to show that the claimant offered the idea to the defendant for sale, because California law provides a broad equitable basis to find implied-in-fact contracts for the use of ideas.  Reilly alleged that it was understood that he and Wozniak would “jointly market,” and be his “partner in exploiting,” Reilly’s idea.  The court said that these facts, as alleged by Reilly, do not show an offer for sale but rather the intent to enter into future business relationships.  According to the 1987 9th Circuit case of Aliotti v R. Dakin and Co., “no contract may be implied where an idea has been disclosed not to gain compensation for that idea but for the sole purpose of inducing the defendant to enter a future business relationship.” It was in this precise context, the contemplation of a partnership, that Aliotti and Faris held that an idea must be disclosed for sale for an implied-in-fact contract to exist. As such, the 9th Circuit said that the district court did not err in granting summary judgment because there was no genuine dispute of fact as to whether Reilly offered his idea to Wozniak for sale. J: What about the 9th Circuit’s 2011 holding in Montz v Pilgrim, in which the court said that it sees “no meaningful difference between the conditioning of use on payment … and conditioning use on the granting of a partnership interest in the proceeds of the production.” This ruling seems contrary to that. S: The 9th Circuit did say that in Montz, and I can see how readers of the short ruling could be confused.  To understand what the 9th Circuit is saying here, you have to go back to the district court’s ruling on the motion for summary judgment.  There the district court drilled down on what Reilly was pitching to Wozniak.  Reilly wasn’t pitching an idea for Wozniak to acquire.  Rather, what Reilly pitched was the concept that Reilly could use Wozniak’s name as part of a pitch to potential financiers for an online computer school.   An implied-in-fact contract requires a “reasonable expectation of payment which can be inferred from the facts and circumstances.”  The district court found that the evidence establishes that Reilly initially solicited Wozniak’s “endorsement” to start the Woz Institute of Technology, but not an agreement for payment. The alleged “deal” between Wozniak and Reilly – strongly contested by Wozniak – happened much later.   As you know, that won’t support a Desny claim J: The court in Desny commented on that specific factual scenario: “[t]he idea man who blurts out his idea without having first made his bargain has no one but himself to blame for the loss of his bargaining power. The law will not in any event, from demands stated subsequent to the unconditioned disclosure of an abstract idea, imply a promise to pay for the idea, for its use, or for its previous disclosure.” S: The district court found that a reasonable juror could not conclude that Plaintiff and Wozniak formed an implied-in-fact contract under Desny because that Plaintiff did not seek to sell anything to him.  I think the 9th Circuit potentially confused the issue with its discussion of Aliotti when it could have just said that the district court did not err in granting summary judgment because there was no genuine dispute of fact as to whether Reilly offered his idea to Wozniak for sale.

The Supreme Court will bring finality to several IP disputes this year. Scott Hervey and Josh Escovedo provide an overview of the trademark and copyright cases to watch on this episode of The Briefing by the IP Law Blog. Watch this episode on the Weintraub YouTube channel here.   Show Notes: Josh: It’s always good to start off the year with an overview of the trademark and copyright cases to watch for the year. This year, we have a couple of cases that we’ve previously discussed on The Briefing when they were on appeal with the circuit courts, but we will now see the Supreme Court bring finality to the issues. Scott: This sounds like great information to me, Josh. Let’s get into it. Josh: We’ll start with Andy Warhol Foundation v. Goldsmith, which we’ve discussed at length on this show. In that case, the Supreme court will decide whether the Andy Warhol Foundation made fair use of a photo of the late artist Prince. In short, the matter at issue will address when a work is sufficiently transformative to qualify for fair use protection under the Copyright Act. In the matter below, the Second Circuit reversed the decision of the District Court and held that the Warhol work was not transformative because it maintained the “essential elements of its source material” and was not “fundamentally different and new.” This is the first time since 1994 that the Supreme Court has addressed fair use in the context of an artistic work. This is one I’ll be looking forward to. Scott: Next, we have Abitron Austria GmbH v. Hetronic International. In that case, US-based remote-control maker Hetronic International sued its former European partners Abitron Austria for trademark infringement. The Defendants in that action argued that since 97% of the sales related to the verdict were “purely foreign” and no one affiliated with the companies was based in the United States, Hetronic International needed to pursue the action abroad. Of course, Hetronic disagrees and contends that trademark law under the Lanham Act extends beyond U.S. Boards. This case should bring clarity to an issue that is constantly disputed in sizable Lanham Act cases—the materiality of foreign sales. For that reason, TM practitioners will certainly be keeping an eye on this one. Josh: Next up is my favorite case of the year. Jack Daniel’s v. VIP Products. As many of you know, this is the Ninth Circuit dispute arising out of VIP Products creation of a parodic dog toy styled like a Jack Daniel’s bottle but called Bad Spaniels. The toy is filled with comedic references related to dogs, but it’s no laughing matter to Jack Daniel’s. The case will determine the proper balance between trademark rights and free speech. The district court and the Ninth Circuit found that VIP’s use was protected by the First Amendment. Now, the Supreme Court will determine whether the Ninth Circuit made the right decision, and will provide some guidance and hopefully clarity on how these competing interests must be balanced. As we’ve discussed in the past, there is a difference in opinion on how these matters should be addressed and given the low bar for artistic relevance, it is imperative that the Court provide guidance, as these disputes will continue to arise. Scott: We’re definitely looking forward to that one. Next up, we have Genius v. Google. This action is present before the Supreme Court, but the Court has not yet granted cert. In this case, Genius sued Google for breach of contract over music transcriptions. In the petition for cert, Genius argued that the Second Circuit and the District Court wrongfully found that a preemption clause in the Copyright Act precluded its breach claim against Google and LyricFind for allegedly stealing song lyrics from its site for Google’s search result. The Second Circuit’s decision, affirming the decision below, held that Genius hadn’t shown that its claims are “qualitatively different” from a copyright claim on lyrics, which notably it didn’t hold the copyright to. The petition states that the Court must clarify whether the Copyright Act’s preemption clause permits a plaintiff to use “state-law contract remedies to enforce a promise not to copy and use its content.” The Supreme Court has requested the Solicitor General’s opinion on whether copyright law preempts the breach of contract claim. All in all, this sounds like pretty interesting case as well. Josh: It sure does. And finally, we have Green v. DOJ. In that case, two computer scientists have challenged the Digital Millennium Copyright Act’s ban on circumventing digital locks on copyrighted works. The engineers filed suit against the federal government seeking to enjoin enforcement of the DMCA’s anti-trafficking and anti-circumvention provisions. The district court refused and the DC Circuit affirmed the decision below. Apparently, the DC Circuit also commented that it lacks jurisdiction over claims of facial unconstitutionality on First Amendment grounds because the District Court did not rule on that issue. The case has been remanded to the District Court for further consideration. I suspect this case will be pending for a while, but we’ll keep an eye on it just the same. Scott: In fact, we’ll keep an eye on all of these cases. Thanks for sharing, Josh.

The start of a new year is a good opportunity for companies to review and take stock of their intellectual property assets. Scott Hervey and Josh Escovedo talk about the importance of this review on this episode of The Briefing by the IP Law Blog. Watch this episode on the Weintraub YouTube channel here. Show Notes: Scott: As 2023 commences, it’s time for companies to take review and take stock of their intellectual property assets.  This applies to companies that have never taken serious steps to protect intellectual property, and those companies that understand the value of intellectual property and take active steps to secure and protect those assets.   We are going to talk about this on this next installment of the Briefing by the IP Law Blog Scott: Intellectual property is a company asset, just like inventory.  No CEO or CFO would think of running a company where they didn’t know the extent of company inventory.  Likewise, it makes no sense for a company not to have a firm understanding of all of its potential intellectual property assets.  Even companies that regularly take steps to protect intellectual property through, for example, registering trademarks, or registering copyrights, a yearly review can prove beneficial. Josh: Understanding the extent of a company’s IP holdings usually start with what’s known to the company, such as all registered copyrights, trademarks or patents, domestic and foreign.  After compiling a list of those IP assets, the next step would be to review what the company is using and compare that to the list of registered or pending IP.  For trademarks, a good place to start is the company’s marketing and promotional materials, website, mobile app, and social media.  If these materials show use of trademarks, logos, or slogans that are not already the subject of a trademark registration or application, then these marks should be cleared for use to prevent unintended liabilities, and they should be considered for possible registration. Scott: Don’t overlook company social media accounts, domain names, and toll-free numbers, which may also serve as potential trademarks.  And be sure to confirm that all domain names and social media accounts are registered to the company; you would be surprised at how many times a domain name or social media account is registered to an individual company employee and not the company itself.  Also, if the company has changed the graphic user interface to any of its technology products or has changed product packaging, point of sale displays, or product design, these may also be protectable trade dress. Josh: When looking into company assets protectable under the federal copyright laws, one should check the company’s website, marketing materials, manuals, YouTube videos, podcasts, posted content on Instagram, TikTok and the like, photos, software, blog posts, articles, white papers, etc.  Although the cost benefit analysis of securing protection may result in a conclusion that registration does not economically make sense for every single piece of content, the company should at least maintain inventory of its copyrightable works. Scott: A company should always be aware of any new inventions under development, and its good practice to investigate the status of any inventions developed by company employees during the past year.  Such inventions may be protectable under federal patent laws.  An inventor must secure a patent application within a very short period of time in order to prevent the work from falling into the public domain.  Companies that routinely produce new inventions should put into place a process which enables inventors to disclose a potential invention to a responsible executive well prior to the invention being disclosed to the general public. Josh: In addition, a company should take stock of those items that it considers proprietary trade secrets.  Trade secrets are items not generally known by the public but have economical value and are the subject of reasonable precautions to maintain their secrecy.  In general, trade secrets have no duration of protectability and there is not a method for registering a trade secret in the United States. Scott: Items that may be protected by state trade secret laws include software source code and related documentation; customer lists, employee knowledge, training and experience; proprietary terminologies, definitions and formulas; specially developed customer information; sales practices; negative information such as negative results from research and development projects; and customer and consumer surveys.  Each of the above could constitute proprietary trade secrets depending upon whether its owner took reasonable steps to maintain its trade secret status. Scott: A special note about customer data.  In addition to regularly reviewing IP assets, a company should regularly make sure that its privacy and data use policies comport with the manner in which it collects and uses customer and employee data.  In the US, privacy laws are generally driven by state law, but there may be applicable federal law depending on the nature of the information collected.  If a company conducts business internationally, it may have to adhere to the privacy laws of foreign countries. Josh: After looking at all known IP assets, look into what may be unknown.  Sometimes marketing departments and independent divisions spin out valuable intellectual property assets that, for one reason or another, never made it past the desk of general counsel or a responsible executive. Scott: Intellectual property rights acquired by way of contractual agreements may sometimes be overlooked.  Items that were developed or created through the use of independent contractors, such as consultants, photographers, website and application developers, software developers, advertising agencies, graphic artists, production companies, and the like may be company assets depending on contract terms.  If the company intends to own all of the rights, including any intellectual property rights, in the works created by these independent contractors then the agreements with these independent contractors should have proper intellectual property vesting language – such as work made for hire language and/or an assignment provision.  If the agreements with these independent contractors were only verbal or did not contain such language, then the company needs to make another resolution: make sure it actually owns the intellectual property it paid for.   Sticking to this resolution would include a review of standard independent contractor and employment agreements to confirm they have proper assignment language and confidentiality provisions. Josh: Unintended liabilities can also result from the company’s interaction with independent contractors that have been hired to create something for the company.  Whether it is a website designer hired to redesign a company website, a software developer hired to work on a company’s app, a graphic artist hired to create a new logo or artwork, or a copyrighter hired to write content, we have seen countless instances of these types of vendors taking shortcuts and “borrowing” assets from existing sources.  Unless a company executive is closely managing these vendors when they do their work, it would difficult to determine whether or not they engaged in acts that may be considered infringement until such time as the company receives a cease and desist letter. Scott: However, there are precautionary steps a company can take to prevent unintended liabilities.  A company should always have written agreements with vendors which unconditionally requires them to indemnify the company for any claims of infringement resulting from the works they were hired to create.  Additionally, a company should require these vendors to carry insurance that would provide coverage for such a claim (either E&O or professional liability insurance) and that the company be named an additional insured on such policies. Josh: Lastly and most important, the company should have a general understanding of who they are doing business with.   A little time spent researching whether the vendor has negative claims with the Better Business Bureau, has licensing issues, generally has satisfied customers, whether there are any lawsuits pending, etc., can tell a company quite a bit about the work habits and ethics of any potential vendor. Scott: After a working intellectual property inventory list has been created, the next step is to identify those items that are already the subject of active protection efforts (i.e. pending or issued registrations) and those that are not.  Then, the company executives, along with corporate counsel and if appropriate outside intellectual property counsel, should review the list of unprotected intellectual property assets and determine whether taking steps to secure protection makes economic sense.  Sometimes, a company might find that the cost to secure protection of an intellectual property asset outweighs the potential economic value of that asset or that protection would be duplicative.  

Trademarks perform a number of important functions. Scott Hervey and Josh Escovedo discuss the spectrum of trademark strength in this episode of The Briefing by the IP Law Blog. Watch this episode here.   Show Notes: Scott: Trademarks perform a number of important functions. They are consumer road signs; they tell consumers which products to buy. They are a company’s public persona; they epitomize of all the positive (and negative) qualities of a company or a product. Lastly, trademarks represent a solemn promise to the purchasing public that the products or services branded with a company’s mark will meet certain standards. Yet, even with marks as important as they are, some business select marks that are intrinsically weak and have limited protection. WE are going to talk about the spectrum of trademark strength on this installment of The Briefing by the IP Law Blog Scott: Trademarks can be one of the more valuable assets a company owns. Trademarks generate brand equity based on the amount a consumer will pay for a branded product as compared to a non-branded product. For some companies, brand equity can make up a substantial portion of its value. For example, according to a 2001 ranking by Interbrand, the Coca-Cola brand, valued at $68,945,000, represents 61% of Coca-Cola’s market capitalization as of July, 2001. Xerox’s brand, valued at $6,019,000, represents 93% of Xerox’s market capitalization as of July, 2001. Josh: In business, branding comes as second nature. In order to survive in a competitive environment, a business must separate itself and its products from the pack and summarize these differences in a concise and succinct manner. This is even more important for emerging companies who are new to the field and in competition against established businesses with market share. Scott: Given the important function of trademarks, it is imperative that an emerging company identify its marks, analyze whether the marks are strong or weak, and then protect the stronger marks from infringement, being diluted and from becoming generic due to public misuse. Josh For the most part, a trademark can be anything. According to the Lanham Act, the Federal law that deals with trademark issues, a trademark can be a word, a saying, or a logo.  A Trademark can even consist of a sound (think Intel), color (pink for Corning ware fiberglass insulation) and a smell.  As long as the proposed mark meets the essential purpose of functioning as a trademark, that is, it serves to identify the manufacturer of the goods or provider of the services, it can properly be categorized as a trademark. The proposed mark must mentally trigger an association between the mark owner and the goods or services bearing the mark, otherwise it is not a trademark. Scott: And while it’s true that a trademark can be anything, not everything can and should be a trademark. Josh: That’s right Scott.  There are certain marks that will be denied protection as a trademark. Marks which consist of immoral, deceptive or scandalous matter or matter which disparages any person, living or dead, institutions, beliefs or national symbols, are not registrable or protectable. Scott: Neither are marks which resemble flags of code or arms or other insignias of the United States or of any state or municipality or of any foreign nation, or marks which utilize the name, portrait or signature of a particular living individual without that individuals consent  Also, marks which consist or comprise of a portrait of a deceased president of the United States are not registrable during the life of the president’s widow except by written consent of the widow  In addition, certain organizations, by acts of Congress, have been granted exclusive rights to use certain marks.  For example, the United States Olympic Committee has been granted exclusive right to use a number of “Olympic” symbols, marks and terms Josh: Marks which describe the intended purpose, function or use of the goods, the size of the goods, desirable characteristics of the goods, the nature of the goods or the end effect upon the user are really not the best choice for a trademark. This type of mark is considered merely descriptive and is not registerable on the principal register absent establishing secondary meaning. Scott: Its iron Josh how often companies gravitate toward a descriptive mark.   The penchant for a descriptive mark was explained to me by a client – they work because the consumer knows exactly what they are getting.  That’s useful in the short term but does nothing for brand building. Josh: Here is a few examples of descriptive marks – NICE ‘N SOFT® for bathroom tissue or PARK ‘N FLY® for off-airport auto parking services are descriptive marks.  The same is true with respect to marks that identify the place in which the goods or services originate and therefore are geographically descriptive. Scott: The major reasons for not protecting marks that are merely descriptive is to prevent the owner of a mark from inhibiting competition in the sale of particular goods and to maintain freedom of the public to use language which naturally describes the goods or services, thus avoiding the possibility of harassing infringement suits by the registrant against others who use the mark when advertising or describing their own product Josh: Marks that are merely self-laudatory and descriptive of the alleged merit of a product are regarded as being descriptive. Laudation does not per se prevent a slogan or mark from being registerable. Like other descriptive marks, a mark that is self-laudatory may be registerable upon establishing secondary meaning.  However, courts have refused registration even on the Supplemental Register of marks that are so highly laudatory and descriptive of the alleged product that they are incapable of functioning as a trademark Scott: One step up from descriptive marks, but miles away as far as protectability goes, are suggestive marks.  Suggestive marks are registerable on the Principal Register without proof of secondary meaning.  Suggestive marks are those which, while not really descriptive of the product’s qualities, nevertheless, suggest some benefit or property of the product.  An example involves ROACH MOTEL® for insect traps, in which this mark was enforced against an infringer using “Roach Inn.”  The Court explained, We do not find the mark ROACH MOTEL® to be a merely descriptive mark.  While roaches may live in some motels against the will of the owners, motels are surely not built for roaches to live in.  Hence, the mark is fanciful on conception. Indeed, its very incongruity is what catches one’s attention  Josh: The determination of whether a mark is merely descriptive and therefore not registerable absent evidence of secondary meaning or merely suggestive has always been a challenging task.  The Trademark Trial and Appeal Board (the quasi-judicial body responsible for adjudicating issues which arise concerning the registration of a trademark ) has opined that there is “a thin line of demarcation involved in making a determination as to whether a term or slogan is suggestive or merely descriptive and, apropos, thereto, when a term stops suggesting and begins to describe the goods in connection with which it is used, it is, at times, a difficult question to resolve.” Scott: The Board suggested that in determining whether a mark has crossed the threshold from suggestiveness to descriptiveness, the following factors should be analyzed:  (1) is the mark used in a trademark sense and not in a descriptive manner to describe the goods; (2) is the mark an expression that would be or is commonly used to describe the goods; (3) does the mark possess some degree of ingenuity in its phraseology; (4) does the mark say something at least a little different from what might be expected from a product, or say expected things in an unexpected way; and (5) does the mark possess more than a single meaning, namely, a double-entendre, which imparts to it a degree of ingenuity and successfully masks or somewhat obscures the intended commercial message Josh: The strongest marks are those which are coined words, having no intrinsic meaning or arbitrary words which, although they might exist as words in the English language, have no conceivable rational connection to the product, e.g. KODAK® (coined) for film and CAMEL® (arbitrary) for cigarettes.  Because such coined or arbitrary marks are inherently distinctive, no proof of secondary meaning is necessary before a court will protect the trademark rights of the senior user of such marks.  

An 11th Circuit Opinion in the ‘Floribama Shore’ trademark case provides guidance on establishing artistic relevance under the Rogers Test. Scott Hervey and Josh Escovedo talk about this case in this episode of The Briefing by the IP Law Blog. Watch this episode here. Show Notes: Scott: Despite challenges to the application of the Rogers test outside of traditional artistic works, the Rogers test remains a valuable defense to TV and movie producers sued for trademark infringement. Establishing that the producer’s use of the allegedly infringing mark has artistic relevance is one of the two factors of Rogers and a recent 11th Circuit opinion cementing MTV’s win over the use of Floribama Shore as the title of a docu-series shows provides guidance on steps producers should take in order to establish the existence of artistic relevance. Scott: MTV FLORIBMA SHORE is the title of an MTV docu-series modeled after the JERSEY SHORE franchise.  The series purports to celebrate youth culture, profiling a summer of fun for eight young adults in the Florida panhandle. The Flora-Bama Lounge is a restaurant and marina facility located on the Florida Alabama border that has been in operation since 1964.  The owners of the lounge were not happy with MTV’s use of FLORIBAMA as the title of its series, especially after MTV held a few casting sessions at the Flora Bama Lounge, and sued for trademark infringement. Josh: In the district court case MTV moved for summary judgment which was granted. The owners of the Flora-Bama lounge appealed to the 11th circuit. Scott: In the 9th Circuit (as well as the 2nd, 5th, 6th and 11th Circuits), the test for determining whether the use of a third-party trademark in an expressive work (i.e, use of a brand within a movie, TV series, video game, etc., including as part of the title of an expressive work is the 2nd circuit’s test from the 1989 case of Rogers v. Grimaldi. The Rogers test was adopted by the 9th Circuit in Mattel inc v MCA Records (better known as the “Barbie Girl” case). Under the Rogers test, the use of a third-party mark in an expressive work does not violate the Lanham Act “unless the title has no artistic relevance to the underlying work whatsoever, or, if it has some artistic relevance, unless the title explicitly misleads as to the source or the content of the work.” Under the Rogers test, the first inquiry is whether the use of the third-party mark has “some artistic relevance”. The threshold for this test is extremely low; basically, if the level of artistic relevance is more than zero, this is satisfactory. If there is greater than zero artistic relevance in the use of the third-party mark, the next analysis is whether the use of the third-party mark explicitly misleads as to the source or content of the work. Josh: In its opinion the court goes into great detail over how MTV eventually chose the title to its series.  MTV wanted to build out the Jersey Shore franchise like the Real Housewives, by establishing multiple series in different locations.  MTV began to develop a seventh Shore series, this one focused on Southern beach culture Scott: MTV commissioned a survey of 300 young people familiar with the region to measure awareness and perceptions of the culture and nightlife in various beach towns in the “gulf Shore” region spanning from Biloxi, Mississippi, to Panama City Beach, Florida. The report noted the term “Florabama” to describe the region. Of the 300 people surveyed, about 34% had heard of the term “Flora-bama,” with half of the 34% identifying it as the bar and the other half identifying it as the region.  The filming location for the series was Panama City Beach, 100 miles from the lounge.  An MTV executive testified that the selection of MTV ‘Floribama Shore’ was the title of the series was driven by finding a title, like Jersey Shore, that would “define the subculture” featured in the series, that “Floribama” offered “a very distinct sense of what part of the country and subculture that is.” This executive ALSO testified that because Florida has “multiple subcultures,” a name like “Florida Shore” would not have sufficiently identified the Gulf Coast setting. And “Florida Shore,” of course, would include Miami, which McCarthy noted “has its own sort of codes.” Josh: The court also noted that MTV wanted a Jerseyesque type of show and Floribama screamed louder than Gulf Shore. Scott: Even though the bar for artistic relevance is low, I still think it’s a good idea for producers to go through the additional step to actually lay the groundwork for establishing artistic relevance at the time the producer makes its choice to use a potentially infringing mark

The Supreme Court granted Jack Daniel’s petition for certiorari and will hear the trademark infringement case involving a parody dog chew toy that resembles the Jack Daniel’s Whiskey Bottle. Scott Hervey and Josh Escovedo discuss this latest development in this episode of The Briefing by the IP Law Blog. Watch this episode here.  

The heirs of the author who wrote an article upon which “Top Gun” is based, claims the film’s sequel is an infringing derivative work. Paramount has since filed a motion to dismiss the case. Scott Hervey and Josh Escovedo discuss this on The Briefing by the IP Law Blog. Watch this episode here. Show Notes: Scott: We previously reported on the copyright lawsuit filed by the heirs of the author who wrote an article upon which Top Gun is based alleging that “Top Gun Maverick” is an infringing derivative work. Paramount recently filed a motion to dismiss, arguing that the sequel to the 1986 motion picture, Top Gun, does not infringe the copyright in Ehud Yonay’s magazine article. The District Court denied Paramount’s motion to dismiss. We are going to talk about that on this installment of the Briefing…by the IP law blog. Scott: In May 1983, California magazine published the article Top Guns, by Ehud Yonay. This article was an inside look at the real Navy Fighter Weapons School Top Gun based out of Miramar California. When the article was published, it was optioned and in the credits for Top Gun Yonay is credited on the original movie as a writer of the magazine article. On January 23, 2018, the Yonays properly availed themselves of their right to recover the copyright to this article by sending Paramount a statutory notice of termination under Copyright Act, and then filing it with the Copyright Office.as we have discussed previously on this program, subject to the satisfaction of certain conditions, Section 203 of the Copyright Act permits authors or their successors to terminate copyright assignments and licenses that were made on or after January 1, 1978. Upon termination, all rights in the work that were covered by the grant revert to the author, however any derivative work prepared under authority of the grant before its termination may continue to be utilized under the terms of the grant after it is terminated, but this privilege does not extend to the preparation of other derivative works after termination. Josh: Paramount filed a motion to dismiss, arguing that that the works are not substantially similar because the Yonay article is a work of unprotectable fact.  In order to state a claim for infringement a plaintiff must show substantial similarity between the works’ protected elements.  Determining whether works are substantially similar involves a two-part analysis consisting of the ‘extrinsic test’ and the ‘intrinsic test.’” The extrinsic test “assesses the objective similarities of the two works, focusing only on the protectable elements of the plaintiff’s expression, Scott: In its motion to dismiss Paramount argued that in applying the extrinsic test and by filtering out the elements that are not protected under copyright law – that is facts, ideas, scenes faire (which are situations and incidents that flow necessarily or naturally from a basic plot premise) and stock elements – the two works are not substantially similar.   In its motion to dismiss Paramount argues that all elements that are alleged to be similar – the history and operations of the “Top Gun” academy; that the pilots pull off risky aerial maneuvers, that manner of combat training and the tactical discussions the pilots have; descriptions and depictions of fighter jets, including their exorbitant cost; pilots doing push-up exercises; pilots’ use of “call signs” as nicknames and depictions of camaraderie amongst pilots, including bar excursions and games —are reported in the Article as factual. Josh: As we predicted, it seems that Yonay’s counsel were ready for Paramount and had evasive maneuvers ready to go.   In reading the district court’s denial of Paramount’s motion to dismiss, the key argument which resonated with the court was, essentially, that it would be contrary to 9th Circuit precedent to dismiss Yonay’s case at such an early stage.  Because the analytical dissection required to separate protectable from non-protectable elements…which also generally involves expert testimony…. and thereafter the determination of substantial similarity between protected elements of works are “usually extremely close issues of fact, the Ninth Circuit generally disfavors dismissals on the ground of substantial similarity at the Rule 12(b)(6) stage., Scott: In its opposition to Paramount’s motion to dismiss, the Yonay’s argue that but for Ehud Yonay’s literary efforts and his story’s evocative prose and narrative, Top Gun and its sequel would not exist. The Yonay’s argue that if Paramount was only interested in facts about the Miramar Naval Air Station, it would have drawn inspiration from the Senate Report Paramount equated Yonay’s article to. The Yonays argue that it was the expressive imagery, startling action, character traits, and themes contained within the original article that were the reason why Paramount optioned the article in the first place.  The Yonay’s point to a list of more than seventy (70) alleged substantial similarities between the original article and the sequel.  That was enough for the court. Josh: The court found that here are enough alleged similarities between the article and Top Gun Maverick for reasonable minds to differ on the issue of substantial similarity, including the filtering out of unprotected elements and additional development of the factual record would shed light on the issues pertinent to the Court’s analysis under the extrinsic test. Scott: I do think the court made the right call here.  The article is not a humdrum recitation of facts; it is a story.  And while facts themselves are not protectable under copyright, the selection and arrangement of those facts and the manner in which the facts are expressed are protectable.  Given that the Yonays were able to present to the court 70 instances of similarities presumably not based on pure facts, greater exploration into these similarities would be necessary.

The U.S. Supreme Court will weigh in on the reach of the Lanham Act and whether it can protect against the infringement of a U.S. trademark in a foreign territory. Scott Hervey and Josh Escovedo discuss this case in this episode of The Briefing by the IP Law Blog. Watch this episode here. Show Notes: Scott: What’s the reach of the Lanham act? Can it protect against the infringement of a U.S. trademark in a foreign territory? The U.S. Supreme Court is taking up the appeal of a 10th Cir case of Abitron Austria GmbH v. Hetronic International, Inc. to hopefully shed light on the matter. This is what we are talking about on this installment of the Briefing by the IP Law Blog. Scott: Here are the underlying facts of Abitron Austria GmbH v. Hetronic International, Inc. Hetronic International, Inc., a U.S. company, manufactures radio remote controls—used to remotely operate heavy-duty construction equipment.  The Defendants distributed Hetronic’s Products in Europe. The distributor relationship deteriorated, and the Defendants began manufacturing their own products—identical to Hetronic’s—and selling them under Hetronic. Brand in Europe. Hetronic sued Abitron in the U.S., and a jury in the Western District of Oklahoma awarded Hetronic over $100 million in damages, most of which related to Defendants’ trademark infringement relating to sales outside of the US. Then on Hetronic’s motion, the district court entered a worldwide injunction barring Defendants from selling their infringing products.  On appeal to the 10th Circuit, the defendants insist that the Lanham Act’s reach doesn’t extend to their conduct, which generally involved foreign defendants making sales to foreign consumers. Josh: The Lanham Act governs federal trademark and unfair competition disputes. It subjects to liability any person who uses in commerce any . . . “colorable imitation of a registered mark,” or “[a]ny person who . . . uses in commerce any” word, false description, or false designation of origin that “is likely to cause confusion . . . or to deceive as to the affiliation,” origin, or sponsorship of any goods.  the Act defines commerce broadly as “all commerce which may lawfully be regulated by Congress. The sole Supreme Court case on the exterritorial application of the Lanham Act is the 70-year-old case of Steele v. Bulova Watch Co., That case involved a Lanham Act claim brought by the Bulova Watch Company, against Sidney Steele, a U.S. citizen residing in Texas. Using component parts he had procured from the United States and Switzerland, Steele assembled watches in Mexico City and branded them ‘Bulova’. The “Bulova Watch Company’s Texas sales representative received numerous complaints from retail jewelers in the Mexican border area [of Texas] whose customers brought in for repair defective ‘Bulovas’ which upon inspection often turned out not to be products of that company.  The Supreme Court held that Steele’s activities were covered by the Lanham Act. The fact that [Steele] affixed the mark ‘Bulova’ in Mexico City rather than in the US was not determinative..” The Court explained that Steele’s “operations and their effects” were “not confined within the territorial limits of” Mexico. Steele had bought components for his watches in the United States.  And Steele’s watches filtered through the Mexican border into the US,” and those “competing goods could well reflect adversely” on Bulova’s “trade reputation in markets cultivated by advertising here as well as abroad.”. The Court further noted that because Steele did not have trademark rights to the “Bulova” mark under Mexican law, applying the Lanham Act to his conduct would not create any conflict with foreign law. Scott: Presently a number of federal circuits have different frameworks for the exterritorial application of the Lanham Act.  The 10th circuit ended up adopting the framework from the First Circuit’s McBee v. Delica Co. Under McBee, where the case is about the “foreign activities of foreign defendants,” the Lanham Act applies “only if the complained-of activities have a substantial effect on [U.S.] commerce, viewed in light of the purposes of the Lanham Act.”  The 10th Circuit also noted, in adopting this test, that if a plaintiff successfully shows that a foreign defendant’s conduct has had a substantial effect on U.S. commerce, courts should also consider whether the extraterritorial application of the Lanham Act would create a conflict with trademark rights established under the relevant foreign law. Josh: The lower court found that the defendant’s conduct had a substantial effect on U.S. commerce. Scott: Right. The district court noted that Hetronic presented more than enough evidence to show that the defendants’ foreign infringing  conduct had a substantial effect on U.S. commerce,” The district court that  “Besides the millions of euros worth of infringing products that made their way into the United States after initially being sold abroad, defendants also diverted tens of millions of dollars of foreign sales from the defendants  that otherwise would have ultimately flowed into the United States.”  Ultimately, the jury in the district court awarded Hetronic $113 Million in damages resulting mostly from the defendant’s foreign activity; the verdict was appealed to the 10th circuit, where it was upheld (although the 10th circuit trimmed the worldwide injunction issued by the lower court to apply to only the countries in which Hetronic currently markets and sells its products. Josh: In January 2022, Abitron Austria and related companies petitioned the supreme court for a review of the 10th circuit’s ruling; Abitron argued that 97% of the sales were for  products made “in foreign countries, by foreign companies, to foreign customers, for use in foreign countries,” The appeals court’s decision to award damages for all of the defendants’ worldwide sales on the grounds that 3% substantially affects U.S. commerce “would allow a very small tail to wag a very large dog,” In May 2022, the Supreme Court asked the Biden administration for the solicitor general to file a brief for the “views of the United States.” Scott: In September 2022, the US Solicitor General filed a brief supporting the Supreme Court’s review of the case. Interestingly, the Solicitor General noted a failure in not only the framework adopted by the 10th Cir for determining the extraterritorial reach of the Lanham Act but the framework adopted by all other circuits…. that each of the tests adopted by the courts of appeals has failed to focus on whether a foreign use is likely to cause U.S. consumer confusion. Josh: The Solicitor General also noted that the ruling in the 10th Circuit conflicts with the Fourth Circuit’s decision in Tire Engineering & Distribution, LLC v. Shandong Linglong Rubber Co., In Tire Engineering. In that case, the Fourth Circuit rejected a Lanham Act claim that relied on a diversion-of-sales theory, concluding that “harm to a U.S. company’s income from foreign infringement” did not support the application of the Lanham Act where the defendant that used the mark was a foreign company. Scott: In early November 2022, the Supreme Court agreed to review Abitron Austria GmbH et al. v. Hetronic International Inc. As is customary, the Supreme Court offered no commentary on its grant of review, and a briefing schedule will be issued later Josh: Thanks, Scott.

In this 100th episode of The Briefing by the IP Law Blog, Scott Hervey and Josh Escovedo talk about a company founded by Jack Nicklaus that was awarded a preliminary injunction enjoining him from using his name, image, & likeness in commercial endorsement deals. Watch this episode here. Show Notes: Scott: A company founded by Jack Nicklaus, Nicklaus Companies, LLC has been awarded a preliminary injunction which enjoins Jack Nicklaus from using his name, image and likeness in commercial endorsement deals.  The judge who entered the ruling called it awkward, but its an interesting look at the interplay between non-compete clauses and the transfer of name, image and likeness rights.  We are going to discuss this case on this installment of the briefing by the IP law blog. Scott: In 2007, Jack Nicklaus and GBI Investors, a company owned and controlled by Jack Nicklaus, entered into an agreement with Nicklaus Companies, LLC. a company formed by real estate magnate Howard Milstein, whereby for $145m Nicklaus Companies purchased certain assets of GBI which included substantial portfolio of trademark registrations and applications related to Mr. Nicklaus’ name and signature and “Golden Bear” nickname in the United States and various other countries around the world – more than 600 in the US and 50 other countries.  Also included in the purchase was the exclusive right to the golf course design services rendered by GBI and marketing, promotional and branding businesses of GBI, which included the right to use Nicklaus’s name, image and likeness. The complaint alleges that Nicklaus Companies because the sole owner of and the rights to use all of the intellectual property related to Jack Nicklaus. GBI and Mr. Nicklaus became members of the Company, and Mr. Nicklaus became a manager. Josh: In 2017 Jack Nicklaus retired from his day to day involvement with Nicklaus Companies but, according to the complaint, he still provided services on Nicklaus Companies or its subsidiaries when required. However, the complaint alleges that after Jack Nicklaus retired he repeatedly participated in deals for the use of his name, likeness and trademarks, including personal endorsements outside of the Nicklaus Companies which included Jack Nicklaus being paid to promote a European Tour golf tournament, which included the tournament’s right to use certain Nicklaus IP.  The complaint also alleges that Jack Nicklaus attempted to steer a Nicklaus company opportunity for a marketing and endorsement relationship to a one-off personal appearance deal for his own personal benefit to the detriment of the Nicklaus Companies.  The complaint also alleges that Nicklaus is directly competing with the Nicklaus Companies for golf course design projects and he is personally negotiating to renew his endorsement deal with Rolex. Scott: In the plaintiff’s motion for the temporary restraining order, the plaintiff argues that the 2007 transaction resulted in the purchase of all   golf course design services branded and identified under the Nicklaus, Jack Nicklaus and Jack Nicklaus Signature brands, the various marketing, promotional, and branding activities involving the use and licensing of Jack Nicklaus’ persona endorsements, other commercial rights to publicity, and intellectual property related to his identity and history as a recognizable public figure.  The transaction documents included a purchase agreement whereby GBI transferred the assets, rights and business interests to Nicklaus Companies, a non-compete agreement that Jack Nicklaus signed personally which restricted him from competing with the plaintiff, including providing his personal services as a spokesman or authorize the promotional use of his name or likeness for the business, products or services in competition with Nicklaus Companies for as long as GBI retains an ownership interest in the company, sufficient to elect at least two (2} members of the Board of Managers, but in no event for a period of less than ten (10) years after the date of the Closing” Josh: In opposition to the TRO, Jack Nicklaus argued that he is free to conduct his own business because the non-compete agreement he signed in connection with the 2007 transaction expired when he left Nicklaus Companies in 2017 and most certainly when GBI transferred all of its interests to in Nicklaus Companies back to the company in August 2022…which transfer the company contends is not valid.  Nicklaus argued that it was GBI that sold assets and businesses to the Plaintiffs, not him personally and that he was only bound by the non-compete. Scott: The crux of Jack Nicklaus’ argument was laid out by his counsel in the oral arguments on the TRO motion…that Jack Nicklaus personally never transferred any rights to the Nicklaus Companies personally, that GBI transferred whatever rights it had to the Nicklaus Companies and there was no transfer of Mr. Nicklaus’ name, image, and likeness to GBI before GBI made the transfer to the Nicklaus Companies.  His attorney argued that   The Nicklaus companies assumed that the initial transfer of rights between Jack Nicklaus and GBI occurred, but it didn’t, there’s no documentary evidence it occurred. Josh: So essentially, Jack Nicklaus’ attorney was arguing that, despite the transfer of all of the trademark rights and the rights to golf course design and endorsement and sponsorship business in the name of Jack Nicklaus, because Jack Nicklaus never transferred his name and likeness rights to GBI, once the non-compete expires he can use the name Jack Nicklaus to compete with the Nicklaus Companies in those business sectors. Scott: That’s right.  But it seems that argument did not resonate with the court.  After a 3 day hearing New York Supreme Court Justice Joel Cohen entered a preliminary injunction prohibiting Jack Nicklaus from using his name and likeness to compete with the Nicklaus Companies, although Jack Nicklaus can compete with the Nicklaus Companies for golf course design jobs, he can’t use his name and likeness in doing so.   While the non-compete has expired, the ownership of the Jack Nicklaus intellectual property is with the Nicklaus Companies, and that isn’t something that expires,” Justice Cohen said. “The exploitative value of his name as an endorser of products and the like is where the line is drawn.” Josh: The holding makes sense.  Where a public figure trademarks their name or nickname (such as “the Rock”) and then transfers those trademark rights, any right of publicity one may have in that name or nickname is subject to the trademark rights held by that third party. Scott: Agreed.  And this raises the question about how public figures should go about protecting their “brand”, especially when that brand becomes the brand of a business. It’s easy to address when that business is controlled by the celebrity, but when it’s no longer controlled by the celebrity or when the business takes out loans that are secured by business assets – which generally always include company trademarks, as seen in this case, it can become complicated and convoluted very quickly.

Adidas, which manufactures and sells the wildly popular “Yeezy” line of shoes in partnership with rapper Kanye West, recently terminated the relationship after anti-Semitic statements by the star. In this episode of The Briefing by the IP Law Blog, Scott Hervey and Josh Escovedo discuss the trademark and contract issues that Adidas is navigating with shoe designs and future related designs. Watch the video here. Read the Adidas press release here. Show notes: Josh: Following its split from rapper Kanye West, Adidas has announced that it owns the designs formerly associated with the Yeezy mark. We will be discussing how and why that is possible on this installment of the Briefing by the IP Law Blog. Following a personal meltdown that included various antisemitic statements, Kanye West has been abandoned by a variety of his partners and representatives. Among those partners is Adidas, the company that makes and distributes his highly sought after Yeezy shoes. And when I say highly sought after, I mean that these shoes are nearly impossible to get for retail price. If you want a pair, unless you have a connection, you probably have to buy them on the aftermarket. Nonetheless, while the shoe represents a golden ticket for Adidas, Kanye West’s behavior left the company with no choice but to cut ties and move on. But this left a lot of people wondering, would Adidas continue to sell its holy grail of shoes? And more importantly, could Adidas continue to sell the shoes? Scott: That really comes down to a couple of issues. First, can Adidas continue to market shoes in connection with the Yeezy trademark, assuming that it wanted to? The answer to that question is no. That trademark is owned by Kanye West, and presumably, when Adidas terminated its relationship with West, it consequently terminated its license to utilize West’s intellectual property. Josh: That’s right. And the second issue is whether Adidas can continue to use past shoe designs, shoe designs that have been created but not yet released, or shoe designs similar to those that consumers have come to expect from the Yeezy brand. Now that would generally depend on a couple of things. First, it would depend on who is actually coming up with the designs. If Kanye West were the party who came up with the designs and he had licensed the right to use those designs to Adidas, it is possible that Adidas would no longer be able to exploit the intellectual property. In fact, Kanye West was responsible for many, if not all, of the designs. But, that’s where the second thing comes into play. Irrespective of who created the designs, if the contract between Kanye West and Adidas clearly stated that Adidas is the owner of the designs, that would be dispositive. Scott: And it turns out that’s the case. Adidas has come out and said that its contract with West provides that Adidas is the owner of the shoe designs. Accordingly, while Adidas cannot use the Yeezy trademark, and it probably wouldn’t want to as the mark has been significantly tarnished over the last few weeks, Adidas is free to continue selling prior designs and releasing new designs of a similar spirit, the latter of which it would probably free to do anyway. Josh: I suppose this is a prime example of one of the reasons why a company responsible for distribution of a product would want to maintain rights to the designs. It is an extreme example, but it is an example nonetheless. If Adidas had not reserved the rights to the design, and it were not the creator, it would be in a position where it would be unable to continue marketing its wildly successful product. Instead, because of prudent contracting, Adidas is able to do so. Scott:  That’s right. Still, Adidas has said that it will cease production of all Yeezy-related products for the time being. To borrow a term from Disney, I suspect they’ll be putting these back in the Vault and bringing them out at an opportune moment. If these shoes were hard to get when they were being released on a regular basis, I would imagine they are going to be even harder to get when they are resurrected. This has been very interesting, Josh. Thanks for sharing. Josh: Thanks, Scott.