Category: Trademarks

Categories
Trademarks

Consumer Perception Wins the Day: A Case Overview of USPTO v. Booking.com

The following post comes from Ryan Reynolds, a rising 3L at Scalia Law and a Research Assistant at CPIP.

U.S. Supreme Court buildingBy Ryan Reynolds

Last week, the Supreme Court in USPTO v. Booking.com held that a combination of an otherwise generic term and a generic top-level domain (TLD) may be protected as a trademark so long as consumers perceive it as capable of distinguishing among the members of a class of goods or services and not as a reference to the class itself. The Court rejected the nearly per se rule applied by the United States Patent and Trademark Office (USPTO) that such combinations are necessarily generic.

The Background

Between 2011 and 2012, Booking.com filed four trademark registration applications for the “Booking.com” mark with the USPTO. The USPTO denied the registrations because it found that the mark was generic as applied to online hotel reservation services. On appeal, the Trademark Trial and Appeal Board (TTAB) affirmed the denial. The TTAB analyzed “Booking” and “.com” separately and found the mark generic.

The Lanham Act provides that a trademark is “any word, name, symbol, or device” used by a person in commerce “to identify and distinguish his or her goods . . . from those manufactured or sold by others and to indicate the source of the goods.” Five categories of marks are recognized under the Lanham Act that have varying levels of protection. Fanciful, arbitrary, and suggestive marks receive immediate protection. Descriptive marks only receive protection upon showing secondary meaning, that is, once consumers understand the mark to communicate a single source. Lastly, generic marks can never receive trademark protection. A generic mark does not help a consumer distinguish one good or service from another; it instead merely refers to the common name of the good or service itself. The restriction on generic marks is based on the concern that competitors should have free use of the terms necessary to identify their products or services to consumers.

Having lost at the TTAB, Booking.com then filed suit in the U.S. District Court for the Eastern District of Virginia. The district court applied the primary significance test, which states: “[T]he primary significance of the registered mark to the relevant public . . . shall be the test for determining whether the registered mark has become the generic name of goods or services in connection with which it has been used.” The district court held that “Booking.com” was a descriptive mark that had acquired secondary meaning, based on the perception of the mark by the relevant consuming public. On appeal, the U.S. Court of Appeals for the Fourth Circuit affirmed, finding that “Booking.com” was eligible for trademark protection. The USPTO then petitioned the Supreme Court for a writ of certiorari, which was granted.

The Arguments

The central issue was whether the Lanham Act had legislatively overruled the Supreme Court’s 132-year-old decision in Goodyear’s India Rubber Glove Mfg. Co. v. Goodyear Rubber Co. In Goodyear’s, the Court created a per se rule that the addition of an entity designator such as “company” to the end of an otherwise generic mark could not create a valid trademark. The Court reasoned that entity designators do not serve a source-identifying function, but instead only indicate that parties have formed an association to deal in goods or services.

The USPTO contended that, like entity designators, TLDs such as “.com” do not serve a source-identifying function as they only communicate a business’ online presence to the public. Therefore, it argued that Goodyear’s per se rule controlled the case as both lower courts had found “Booking” alone to be generic. It further argued that ruling for Booking.com would cause competitive harm by opening the door to the registration of countless generic marks. It stressed that this harm was heightened by the competitive advantages the internet already grants to Booking.com as the only party that can use its domain name. It argued that, due to these competitive advantages and the opportunity for Booking.com to pursue protection under unfair competition laws, “Booking.com” does not require trademark protection.

In contrast, Booking.com alleged that the Lanham Act had legislatively overruled Goodyear’s through its creation of the primary significance test. It argued that the primary significance test is the exclusive test for all marks to determine genericism, with the Lanham Act creating no special category for domain names as marks. Likewise, Booking.com maintained that the piecemeal analysis by the USPTO of “Booking” and “.com” separately went against the Lanham Act’s directive to assess the mark as a whole for purposes of registration.

Booking.com further contended that the primary significance test reinforces the aims of trademark law by helping consumers navigate the marketplace. By requiring marks to pass both the primary significance test and show secondary meaning in order to receive protection as a descriptive mark, non-source-identifying marks are eliminated. Booking.com also pointed out that the USPTO has inconsistently applied Goodyear’s per se rule by allowing marks similar to “Booking.com” to be registered, and this inconsistency has not caused harm to fair competition in the marketplace. It also warned that the USPTO’s per se rule would usher in a “mass extinction event” for hundreds of registered marks.

 The Ruling

In its opinion affirming the Fourth Circuit’s decision, the Supreme Court rejected the USPTO’s per se rule as to combination terms like “Booking.com.” The majority opinion, authored by Justice Ginsburg and joined by seven other justices, held: “Whether any given ‘generic.com’ term is generic, we hold, depends on whether consumers in fact perceive that term as the name of a class or, instead, as a term capable of distinguishing among members of the class.”

The majority stated that USPTO’s reliance on Goodyear’s was flawed since it would find terms ineligible for trademark protection even if consumers would understand them to signify source: “That bedrock principle of the Lanham Act is incompatible with an unyielding legal rule that entirely disregards consumer perception.” The majority reasoned that the Court’s decision in Goodyear’s stood only for the proposition that a “compound of generic elements is generic if the combination yields no additional meaning to consumers capable of distinguishing the goods or services.” Thus, the majority held that a consumer could understand “Booking.com” to refer to the source of the goods or services and not merely to describe the website itself.

Addressing the anticompetitive arguments raised by the USPTO, the majority noted that the concern of hindering competitors “attends any descriptive mark” and that the likelihood of confusion and fair use doctrines would “guard against the anticompetitive effects.” Further, the majority rejected the USPTO’s argument that unfair competition laws could provide an adequate remedy for Booking.com, stating that there is “no cause to deny Booking.com the same benefits Congress accorded other marks qualifying as nongeneric.” Lastly, the majority declined to “open the door to cancellation of scores of currently registered marks” due to the inconsistency of the USPTO’s own application of the per se rule for which it argued.

In her brief concurrence, Justice Sotomayor raised two observations. First, she noted her appreciation for the dissent’s skepticism of consumer-survey evidence as an “unreliable indicator of genericness.” Second, she observed that the USPTO may have properly “concluded based on such dictionary and usage evidence, that Booking.com is in fact generic” and that the district court may have erred in concluding otherwise—an issue that was not before the Supreme Court.

In his dissent, Justice Breyer argued in favor of the USPTO’s per se rule, stating that the Lanham Act had not repudiated Goodyear’s and that its “principle is sound as a matter of law and logic.” In addition to tracing many of the same arguments advanced by the USPTO in its briefs, Justice Breyer criticized the “fact-specific” approach established by the majority to determine genericism. He claimed that survey evidence is an unreliable metric of genericness and that there would be little to stop the registration of countless generic marks. Justice Breyer argued that this influx of “generic.com” marks would open the door to potentially serious anticompetitive consequences, and he contended that the Court’s decision may lead to costly litigation that will “no doubt chill others from using variants on the registered mark and privilege established firms over new entrants to the market.”

While the ultimate consequences are not yet known, this decision clearly marks the strong resolution of the Supreme Court that, where genericism is concerned, consumer perception is key.

Categories
Copyright Patents Trademarks

From Star Wars to La La Land: How Intellectual Property Fuels Films

The following post comes from Mandi Hart, a rising third-year law student at Antonin Scalia Law School, George Mason University, who worked as a video producer before going to law school.

cameraBy Mandi Hart

Movies are a first-love in America and around the world, and their production is made possible by the existence of intellectual property (IP) rights. Although most moviegoers may not recognize the vital role that IP plays in film, without it, screens would be dark. This post explains the critical role that copyright, trademark, and patents play in film production and financing.

Copyright is the Lifeblood of Movies

Copyright secures to creators certain exclusive rights in their original works of authorship, including rights of reproduction, distribution, public display, performance, and the creation of derivative works. These exclusive rights make it possible for creators and copyright owners to deploy their creative works as property rights in a free market.

Copyright’s exclusive right to distribute creative works is particularly important in the film industry. Distribution deals are essential to the filmmaking process, as many filmmakers finance the production of their movies by selling the exclusive right to distribute their film in a given territory. Distributors purchase these rights via a pre-sale, committing to pay a certain amount to the producer when the completed film is delivered in accordance with technical specifications. The pre-sale agreement serves as collateral for bank loans that provide actual cash for a film’s production. Once a film is completed and delivered, the payment from the distributor is then used to pay back the loan.

Without copyright, producers would have no distribution rights to sell in the first place, and without distribution deals, many producers wouldn’t be able to secure the funding necessary to make their movies.

Copyright also makes it possible for authors to option pre-existing works for adaptation into movies. An author or publisher can sell a film producer the right to create a derivative work from a novel, short story, play, or comic book. And films themselves might inspire derivative works—think of the breadth and popularity of Star Wars movies and shows today, 40 years after the original movie was released. Copyright not only protects the original creative works that often serve as the foundation for films, it also makes possible the many licensing deals that turn individual films into trilogies, series, or full-blown universes.

Copyright also fuels the music and sounds we hear in movies. From original scores and sound effects to the innumerable songs licensed for use in movies, copyright ensures that the people involved in the creation of movie sounds—whether artists, composers, or engineers—are incentivized and rewarded for their contributions.

By giving artists and creators a property right in the fruits of their artistic labor, copyright provides the foundation for the creation of movies as we know them today.

Trademark Helps Movies Get Made and Protects Their Brands 

Just as copyright protects several aspects of any given film, trademark helps establish and protect a movie’s brand while providing supplemental sources of financing. As studios move away from traditional film financing mechanisms due to economic recession, consolidation within the industry, and risk-aversion in credit markets, a growing number of producers are looking for new funding sources. Product placement has become an increasingly common source of financing, providing mutual benefit to producers and marketers.

Featuring recognizable brands in a film enables a producer to leverage the reputation and public perception of certain products to craft characters and settings. Indeed, a character may become identified with a particular brand or product—think James Bond driving an Aston Martin, ET eating Reeses Pieces, or Carrie Bradshaw wearing Manolo Blahnik. A product may even become a character itself, as with the Wilson volleyball in Castaway.

The inclusion of known brands lends authenticity to the world of the film and the characters inhabiting it. When Mia asks Sebastian to get the keys to her Prius from a valet in La La Land, and Sebastian sees nothing but Prius key fobs on the valet stand, more is communicated to the audience than just the type of car Mia drives. Viewers get a sense of the world in which Mia lives, her friends and associates, and her subculture and values.

And of course, Prius benefits from the connection with an acclaimed film that won multiple Academy awards. While product placement represents a creative choice, it is also a shrewd business move for producers in need of funds and marketers looking for more subtle promotional opportunities than the traditional hard-sell advertisement.

Additionally, trademark serves to protect merchandise and ancillary products created in connection with a film. Marketing trademark-protected clothing, toys, home appliances, bedding, wallpaper, and other film-related merchandise is another critical source of revenue for producers, particularly those hoping to build a film franchise. Just as copyright is central to film financing and content, trademarks make an increasingly vital contribution to production funding and the creation of on-screen worlds.

But Without Patented Technology, Films Wouldn’t Exist

In addition to copyright and trademark, patents also play an essential role in film. A patented invention—the kinetoscope—allowed individual, consecutive images imprinted onto film to be projected in order and at speeds capable of creating the illusion of movement. Thomas Edison, holder of the kinetoscope’s patent, began documenting the world around him and created the first microdocumentaries for exhibition to paying customers. Across the Atlantic, the Lumiere brothers also embraced the possibilities that early film technology offered, creating short fiction films, the most enduring of which, Trip to the Moon, is still watched to this day.

The original film technologies, to both capture and display moving images, gave birth to a new form of leisure and entertainment. In less than three decades an entire industry had been established to exploit the commercial value of film and to satisfy the growing public appetite for movies.

Sound recording and playback technology revolutionized the industry and were followed just a few years later by technicolor, the debut of which—in The Wizard of Oz—changed filmmaking forever. Patented technologies created, then upended, the film industry, and to this day provide the foundation upon which advancements in filmmaking and viewer experience are based.

Just as the development of VistaVision in the 1950s gave directors more onscreen real estate and enabled sweeping scenic compositions, the implementation of Dolby Surround Sound in the 1980s allowed composers and sound editors to weave rich sonic tapestries. Composers were able to create complex filmic symphonies, and sound editors could immerse the audience more deeply into the world of the film by literally enveloping them in the movie’s aural field.

The switch from analog to digital, and the integration of computer technology into filmmaking, allowed for special effects unlike anything seen before. Computer-generated images put an end to an era of hand-drawn animation and manual splicing, as entire worlds could be created and manipulated digitally. Today, the development of 3D and virtual reality technology are set to revolutionize the film industry, changing the way images are captured and exhibited. Add to the distribution mechanisms numerous exhibition platforms (laptop, tablet, cell phone, etc.), and it is obvious the central role that patented technology plays in film creation and consumption.

Conclusion

In any given film, copyright, trademark, and patent play crucial roles in crafting the story, securing financing, and translating script to screen. Copyright secures property rights in (and incentivizes the creation of) original films as well as adaptations of prior works, while trademark contributes to the development of setting and characters. As an industry founded on patented technology, filmmaking relies on the innovation made possible by a patent system that encourages and incentivizes inventors. Those who developed sound recording and transmission technology, technicolor, panoramic projection, and many other innovations at the heart of moviemaking could not—and would not—have done so without the assurance that they would own the fruits of their innovative labor.

Next time you settle into a plush reclining chair, as the lights dim and the trailers begin, think about all the intellectual property embedded in the story you watch play out on-screen, because without it, that story wouldn’t exist.

Categories
ITC Trademarks

CPIP Founders File Amicus Brief on Behalf of 11 Law Professors in Converse v. ITC

a gavel lying on a table in front of booksCPIP Founders Adam Mossoff & Mark Schultz filed an amicus brief today on behalf of 11 law professors in Converse v. International Trade Commission, a trademark case currently before the Federal Circuit.

In late-2014, Converse filed a complaint with the International Trade Commission alleging that more than thirty companies, including Skechers, Walmart, New Balance, and Highline, were violating Section 337 of the Tariff Act of 1930 by importing and selling infringing shoes. Converse owns a registered trademark on the midsole of its iconic Chuck Taylor All Star shoe, including the signature toe cap, toe bumper, and midsole stripes:

patent drawing of a Converse shoe

An administrative law judge found that Converse owns a valid registered trademark and that each respondent sold at least one infringing knock-off. That opinion was later reversed by the Commission, which held that Converse’s registered trademark was invalid. In the Commission’s opinion, Converse failed to prove that its iconic midsole had acquired secondary meaning—though it nevertheless found that Converse’s trademark would have been violated had it been valid. Converse has now appealed that ruling to the Federal Circuit.

The amicus brief filed by Professors Mossoff & Schultz argues that the Commission failed to properly consider the fundamental role of trademark law in securing the productive labors of companies like Converse that create famous products like its Chuck Taylor All Star shoe. The brief was co-signed by Professors Gregory Dolin, Christopher Frerking, Hugh Hansen, Jay Kesan, Irina D. Manta, Kristen Osenga, Eric Priest, Ted Sichelman, and Saurabh Vishnubhakat.

The Summary of Argument from the amicus brief is copied below:

SUMMARY OF ARGUMENT

This case deals with one of the most iconic, long-lived brands in the footwear industry: the Chuck Taylor athletic shoe. As one of the first massively successful athletic shoe products—selling hundreds of millions of pairs over the past 80 years—the name and design of these athletic shoes is an exemplar of the successful commercial goodwill that trademark law is intended to promote and secure to innovative commercial enterprises like Converse. Unfortunately, the International Trade Commission (Commission) chose to ignore the fundamental importance of investment in goodwill—to trademark law generally and to the establishment of secondary meaning specifically.

The appellant addresses the numerous doctrinal and factual infirmities with the Commission’s decision, and thus amici offer an additional legal and policy insight into this case that is necessary to understand the full scope of the Commission’s error: the Commission contradicted a fundamental precept of modern trademark law that it secures the valuable goodwill created by companies like Converse through their productive labors in creating, manufacturing and marketing iconic, famous products like the Chuck Taylor athletic shoes. See Qualitex v Jacobson, 514 U.S. 159, 163-64 (1995) (“The law thereby encourages the production of quality products, and simultaneously discourages those who hope to sell inferior products by capitalizing on a consumer’s inability quickly to evaluate the quality of an item offered for sale.”).

In addition to protecting consumers from significant costs and other harms imposed on them by commercial pirates, it is a longstanding, fundamental policy in trademark law to secure the valuable goodwill created by innovative commercial enterprises in selling products in the marketplace. See, e.g., Partridge v. Menck, 5 N.Y. Ch. Ann. 572, 574 (1847) (stating a trademark owner “is entitled to protection against any other person who attempts to pirate upon [its] goodwill”). Courts recognize these two key, mutually reinforcing policies in trademark law—securing goodwill and protecting consumers—as two sides of the same coin. See Groenveld Transport Efficiency v Lubecore Intern., Inc., 730 F.3d 494, 512 (6th Cir. 2013) (“Trademark law’s likelihood-of-confusion requirement . . . incentivizes manufacturers to create robust brand recognition by consistently offering good products and good services, which results in more consumer satisfaction. That is the virtuous cycle envisioned by trademark law, including its trade-dress branch.”). These two policies necessarily work together to ensure that trademark law functions properly.

In this case, the Commission disregarded the dual policies that animate trademark law by focusing solely on consumer issues while denying Converse its justly earned legal protection for its long-established and valuable goodwill. Thus, amici believe that the Commission’s decision should be reversed solely on the grounds of this contradiction of fundamental trademark policy. This is a case in which commercial pirates have undoubtedly “tread closely on the heels of [a] very successful trademark,” and thus are within the “long shadow which competitors must avoid” that is cast by Converse’s valuable goodwill in its famous mark—the Chuck Taylor athletic shoe design. Kenner Parker Toys Inc. v. Rose Art Industries, Inc., 963 F2d 350, 353-54 (Fed. Cir. 1992) (quotations and citations omitted).

To read the amicus brief, please click here.

Categories
Copyright Infringement Trademarks Uncategorized

Criminal Copyright Infringement is Crime of "Moral Turpitude"

Cross-posted from the Law Theories blog.

sheet musicThis past Friday, the Board of Immigration Appeals held that criminal copyright infringement constitutes a “crime involving moral turpitude” under immigration law. The Board reasoned that criminal copyright infringement is inherently immoral because it involves the willful theft of property and causes harm to both the copyright owner and society.

The respondent, Raul Zaragoza-Vaquero, was indicted in 2012 for selling illicit CDs of popular artists including Justin Bieber, Lady Gaga, and Jennifer Lopez over a five-year period. After a three-day trial, the jury found Zaragoza-Vaquero guilty of criminal copyright infringement under Section 506(a)(1)(A), which makes it a crime to “willfully” infringe “for purposes of commercial advantage or private financial gain.” The crime was a felony under Section 2319(b)(1) because it involved the “reproduction or distribution, . . . during any 180-day period, of at least 10 copies or phonorecords, of 1 or more copyrighted works, which have a total retail value of more than $2,500.” Zaragoza-Vaquero was sentenced to 33 months in prison and ordered to pay $36,000 in restitution.

Under immigration law, an alien who has been ordered removed from the United States may ask the Attorney General to cancel the removal order. However, there is an exception for “any alien convicted of . . . a crime involving moral turpitude,” in which case the Attorney General is powerless to cancel the removal. Zaragoza-Vaquero was ordered removed in early 2015, and the Immigration Judge pretermitted his application to have the removal order cancelled by the Attorney General. The Immigration Judge held that criminal copyright infringement is a “crime involving moral turpitude,” thus making Zaragoza-Vaquero ineligible for such cancellation. On appeal, the Board agreed, rejecting Zaragoza-Vaquero’s bid to have the Attorney General consider his removal.

Even though crimes of “moral turpitude” have been removable offenses since 1891, Congress has never defined what the phrase means nor listed the crimes that qualify. That job instead has been left to immigration judges and the federal courts. In 1951, the U.S. Supreme Court noted that “crimes in which fraud was an ingredient have always been regarded as involving moral turpitude.” Indeed, many property crimes have been held to involve “moral turpitude” when committed willfully because there is the criminal intent to defraud the property owner of its rights. “Moral turpitude” has thus been found to exist in numerous crimes against property, including arson, burglary, embezzlement, extortion, blackmail, bribery, false pretenses, forgery, larceny, receiving or transporting stolen goods, and check or credit card fraud.

Crimes against intellectual property have likewise been found to involve “moral turpitude.” For example, the Ninth Circuit held in 2008 that the use of counterfeit marks, in violation of state law, is “a crime involving moral turpitude because it is an inherently fraudulent crime.” The Ninth Circuit reasoned: “Either an innocent purchaser is tricked into buying a fake item; or even if the purchaser knows the item is counterfeit, the owner of the mark has been robbed of its value. The crime is really a species of theft. . . . The commission of the crime necessarily defrauds the owner of the mark, or an innocent purchaser of the counterfeit items, or both.”

Similarly, the Board of Immigration Appeals held in 2007 that trafficking in counterfeit goods, in violation of federal law, is a crime of “moral turpitude.” The Board reasoned that the conviction required the federal prosecutor to prove that the defendant “intentionally trafficked” and “knowingly used a spurious trademark that was likely to confuse or deceive others.” Even though the statute did not require proof that the defendant had the specific intent to defraud, the Board held that such trafficking involved “moral turpitude” because it is “inherently immoral” to willfully exploit the property owner and the public.

Turning back to Zaragoza-Vaquero, the Board defined “moral turpitude” as “conduct that shocks the public conscience as being inherently base, vile, or depraved, and contrary to accepted rules of morality and the duties owed between persons or to society in general.” The Board then noted that trafficking in counterfeit goods has been held to be a crime of “moral turpitude” because it involves (1) “theft of someone else’s property,” (2) “proof of intent to traffic,” (3) “societal harm,” and (4) “dishonest dealing and deliberate exploitation of the public and the mark owner.”

Reasoning by analogy to these trafficking cases, the Board ultimately held that criminal copyright infringement “must also be a crime involving moral turpitude.” Criminal copyright infringement statutes “were enacted to protect a form of intellectual property,” and offenses “must be committed willfully, meaning that a defendant must voluntarily and intentionally violate a known legal duty not to infringe a copyright.” The Board noted that criminal copyright infringement “also involves significant societal harm,” since “piracy” has “harmed the film and recording industries, including actors, artists, and musicians.” It pointed to a recent report by the Government Accountability Office, which found that “intellectual property crimes cause negative effects on health, safety, and lost revenue.”

The Board’s holding that criminal copyright infringement is a crime of “moral turpitude” thus extends the long line of cases finding that crimes against property are inherently immoral when the criminal intentionally defrauds the owner of its rights. While many will surely balk at the suggestion that there’s anything immoral about criminal copyright infringement, I think the Board reached the right conclusion—both in the moral and legal sense. A defendant such as Zaragoza-Vaquero, who for years willfully infringed for profit, has acted in a way that shocks the conscience and has shown a conscious disregard for the rights of others. And while prosecutors need not show the specific intent to defraud in securing such a conviction, the element of willfulness suffices to establish the intent to defraud the copyright owner of its property.

Categories
Copyright Patent Law Trade Secrets Trademarks Uncategorized

Scalia Law Alums Help Arts & Entertainment Advocacy Clinic Draft Influential Amicus Brief

jennifer-atkins
Jennifer Atkins of Cloudigy Law

Last spring, the Arts & Entertainment Advocacy Clinic at Scalia Law School filed an amicus brief on behalf of intellectual property law scholars in the Fox News v. TVEyes copyright infringement case. Assisting the students on the project was practicing IP attorney and Scalia Law alum Jennifer Atkins, who volunteered her time—and the time of her firm, Cloudigy Law—to work closely with the Clinic to craft a professional and influential brief.

Cloudigy Law is a boutique intellectual property law firm located in Tysons Corner, Virginia, that was founded by Antigone Peyton, another Scalia Law alum. Expanding the firm’s reach into all areas of IP law, Antigone recruited other Scalia Law alums including Clyde Findley and Jennifer Atkins to build a “cloud-based” intellectual property and technology firm that stresses client communication and offers an innovative service model that big law firms can’t match. Cloudigy’s attorneys stay on top of current developments in IP law through their Decoding IP blog, which includes podcast discussions of the issues important to their clients.

As a result of its unique approach and dedication to the client, Cloudigy has grown to eleven attorneys and technologists who offer high quality strategic advice to help identify and protect IP and realize its value. The firm uses sophisticated enterprise collaboration technology to effectively share knowledge and deadlines within its litigation team and with its clients. Cloudigy values the relationships it has built with smaller clients, and it has adapted and responded to changes in the legal services market to suit their needs.

Jennifer got involved with the Arts & Entertainment Advocacy Clinic through her Scalia Law alumni connections, partnering with Clinic Director and CPIP Senior Scholar Sandra Aistars and meeting with students to discuss project strategy. Because of her background as an appellate clerk for the Honorable E. Grady Jolly at the United States Court of Appeals for the Fifth Circuit and her extensive appellate practice experience as a partner with Kirkland & Ellis, Jennifer was a perfect match for the Clinic—according to Professor Aistars, Jennifer was an “ideal and impressive partner.”

Emphasizing the role of an amicus brief in litigation, Jennifer encouraged the students to assume perspectives different than those of the parties and to utilize effective writing techniques to produce an outstanding brief that would be useful to the court. As the students worked through drafts, Jennifer made valuable suggestions that helped them get at the underlying policy issues and flesh out a persuasive argument. Working alongside a seasoned professional through the amicus brief process was a truly invaluable experience for the Clinic students and something that they’ll draw on as they begin their legal careers. Jennifer also expressed her appreciation for the opportunity to guide the students through the process, saying it was a “great way for us to give back to our law school.”

As the Arts & Entertainment Advocacy Clinic begins another semester of work, connections with Scalia Law alums and IP professionals* will continue to provide the students with unique opportunities and to foster the mutually beneficial relationships that represent Scalia Law’s esteemed IP law program.

*Lawyers and IP professionals who would like the Clinic to weigh in on a pro-artist copyright case or who would like to explore other volunteer opportunities with the Arts & Entertainment Advocacy Clinic may contact Sandra Aistars at saistars@gmu.edu.

Categories
Copyright History of Intellectual Property Innovation Inventors Trade Secrets Trademarks Uncategorized

Strong IP Protection Provides Inventors and Creators the Economic Freedom to Create

Here’s a brief excerpt of a post by Terrica Carrington that was published on IPWatchdog.

CPIP went against the grain with this conference, and showed us, bit by bit, what our world might look like today without intellectual property rights. Music wouldn’t sound the same. Movies wouldn’t look the same. You wouldn’t be reading this on your smartphone or have access to the cutting-edge biopharma and healthcare products that you rely on. And some of our greatest artists and inventors might be so busy trying to make ends meet that they would never create the amazing artistic works and inventions that we all enjoy. In short, CPIP explored how intellectual property rights work together as a platform that enables us to innovate, share, and collaborate across industries to develop incredible new products and services at an astounding rate.

To read the rest of this post, please visit IPWatchdog.

Categories
Administrative Agency Copyright High Tech Industry Innovation International Law Internet Inventors ITC Patent Law Remedies Software Patent Trademarks Uncategorized

Digital Goods and the ITC: The Most Important Case That Nobody is Talking About

circuit boardBy Devlin Hartline & Matthew Barblan

In its ClearCorrect opinion from early 2014, the International Trade Commission (ITC) issued cease and desist orders preventing the importation of infringing digital goods into the United States. The ITC’s 5-1 opinion has since been appealed to the Federal Circuit, with oral argument scheduled for the morning of August 11th, and the case has drawn a number of amicus briefs on both sides. Despite receiving little attention in media or policy circles, the positive consequences of the ITC’s decision are significant.

This case is important because the problem of the importation of infringing digital goods continues to grow. The ITC’s authority over digital goods can be a powerful tool for creators and innovators against a threat that has only gotten worse, and it would permit the ITC to go about doing what it’s always done in the intellectual property space—protecting our borders from the threat of foreign infringing goods. Interestingly, a look at the proceedings in the ITC and the briefs now before the Federal Circuit reveals how some parties now opposing the ITC’s authority over digital goods had argued for the opposite just a few years back.

The ITC Proceedings

This case began in March of 2012, when Align Technology Inc. filed a complaint with the ITC alleging that its only competitor, ClearCorrect Operating LLC, violated Section 337 of the Tariff Act of 1930 by importing digital goods that infringed several of its orthodontic patents. Section 337, codified at 19 U.S.C. § 1337, makes unlawful the “importation . . . of articles” that infringe “valid and enforceable” patents, copyrights, or trademarks, and it declares that the ITC “shall investigate any alleged violation of this section on complaint under oath or upon its initiative.”

There are two statutory remedies available to a complainant in an ITC proceeding. The first is an exclusion order, which dictates that “the articles concerned . . . be excluded from entry into the United States.” Exclusion orders are issued by the ITC and enforced by the U.S. Customs and Border Protection. The second remedy is a cease and desist order, which directs any person violating Section 337 “to cease and desist from engaging in the unfair methods or acts involved.” The ITC enforces its own cease and desist orders through the imposition of civil penalties, recoverable in the federal district courts.

Align’s complaint with the ITC involved its patented Invisalign System, a “proprietary method for treating crooked and misaligned teeth” using modern plastic aligners instead of old-fashioned metal braces. Align alleged that ClearCorrect violated Section 337 by importing “digital models, digital data and treatment plans that . . . infringe or induce infringement of” its patents, and it asked the ITC to “issue permanent cease and desist orders” prohibiting ClearCorrect from importing the digital files. In response, ClearCorrect argued that “no articles” had been imported since the digital data associated with the teeth aligners were not themselves “articles.”

This was the primary bone of contention: The ITC only has statutory authority over the “importation . . . of articles,” and if digital goods are not “articles,” then the ITC has no jurisdiction. After an administrative law judge (ALJ) determined that the digital files at issue were indeed “articles” within the meaning of Section 337, ClearCorrect petitioned the ITC to review that determination. The ITC took the case and solicited comments from the public as to whether electronic transmissions are “articles” under Section 337.

The ITC ultimately sided 5-to-1 with Align. On the threshold issue of whether electronic transmissions constitute “articles” under Section 337, the ITC affirmed the ALJ’s conclusion that they do: “[T]he statutory construction of ‘articles’ that hews most closely to the language of the statute and implements the avowed Congressional purpose for Section 337 encompasses within its scope the electronic transmission of the digital data sets at issue in this investigation.” This was consistent, said the ITC, with the “legislative purpose . . . to prevent every type of unfair act in connection with imported articles . . . and to strengthen protection of intellectual property rights.”

Appeal to the Federal Circuit

Having lost at the ITC, ClearCorrect appealed to the Federal Circuit. There, it focused its arguments on the statutory question of whether digital goods constitute “articles” under Section 337.

Public Knowledge and the Electronic Frontier Foundation (EFF) filed an amicus brief calling the ITC’s decision “sweeping and unprecedented,” and they urged the Federal Circuit to reject the ITC’s “overzealous construction” of the term “articles.” Aside from the statutory issue, the digital rights groups suggested that there were “important reasons” why Section 337 “ought not cover telecommunications.” They stressed the “real and unanswered questions about the enforcement role” ISPs would play, and they noted how ISPs “could be required to actively block transmission of certain content.”

It’s worth noting that no ISPs were involved in the ClearCorrect litigation—only ClearCorrect itself was subject to a cease and desist order. But this ISP question seems to be the reason why the case drew their attention: The real concern wasn’t whether ClearCorrect had infringed Align’s patents; it was whether the ITC had the authority to issue cease and desist orders to ISPs. This sentiment was echoed in an amicus brief by the Internet Association, which includes Google, arguing that the internet “should not be restricted to national borders” because of “the unforeseeable but far-reaching results that would follow.”

The policy arguments made by Public Knowledge, the EFF, Google, and others were essentially circular: The internet should be “open” so we shouldn’t let the ITC “close” it. But that begs the question of what the ideal “open” internet looks like, and what illegal activities should or should not be tolerated in the digital space. We shut our borders to infringing physical goods. What makes infringing digital goods so special? A right is only as good as the remedies available to enforce it, so why should we give short shrift to the property rights of artists, creators, and innovators?

Align’s intervenor brief took the groups to task: “The amici briefs supporting ClearCorrect brim with hyperbole.” Align noted that the ITC “only asserts jurisdiction over the ‘articles” that are electronically transmitted, not over all acts of transmission.” It pointed out that it is the “owner, importer, or consignee” of the “articles” that violates Section 337, not the carrier, and it said that the claim that the ITC could issue cease and desist orders against ISPs for “data transmission activities” is “baseless.”

Supporting the ITC’s understanding of “articles,” an amicus brief filed by the Association of American Publishers explained that the ITC’s “authority over electronically transmitted copyrighted works is critical because . . . there has been rapid growth in digital publications.” It pointed to the rise in digital piracy “at the expense of U.S. creators and innovators.” It urged that affirming the ITC’s decision was “crucial” since it “will help ensure that unfair trade practices abroad do not harm the livelihoods” of those that “rely on copyright protection.”

An amicus brief filed by Nokia supporting the ITC also noted the importance of protecting intellectual property: “Stripping the Commission of its long-exercised authority over electronic transmissions could gravely damage the protection of valid patent rights through Section 337 investigations.” It pointed out that holding otherwise would lead to “absurd results” since the ITC would have jurisdiction over software “imported on a USB stick or CD-ROM” but not software disseminated by “electronic transmission.” Such a result would be “wholly contrary to the remedial purpose of Section 337.” Nokia concluded that the ITC’s “authority should not wax and wane as technology develops new methods of dissemination.”

The MPAA and the RIAA likewise submitted an amicus brief supporting the ITC. The industry groups pointed out that “illegal downloads and illegal streaming” account for most of the infringement losses they suffer, and they argued that “copyright protection is essential to the health” of their industries. They urged the Federal Circuit to affirm the ITC because “Section 337 is a powerful mechanism for stopping illegal electronic imports,” and doing so “would give effect to the intent of Congress that Section 337 protect U.S. industries from all manner of unfair acts in international trade.”

Who has the better argument here? Obviously, both sides argued that the text of Section 337 favored their positions. ClearCorrect and its supporters claimed that “articles” should be interpreted narrowly to include only tangible goods, while the ITC and its supporters wanted a read of the statute that allows the ITC to continue to fulfill its mission even as new technology and methods of trade become more common. What may come as a surprise, however, is that many of the groups now seeking to limit the ITC’s jurisdiction were arguing just the opposite a few years ago.

Remember the OPEN Act?

It may seem like ages ago, but it’s been less than four years since Congress debated the Stop Online Piracy Act (SOPA) and the PROTECT IP Act. Those two bills would have explicitly afforded artists and creators robust tools to use in the federal district courts against foreign rogue sites that aim their infringements at the United States. Many vocal opponents of the bills supported an alternative approach: the OPEN Act. Under the OPEN Act, the ITC would have been given explicit authority to investigate complaints against foreign rogue sites that import infringing digital goods into the United States.

The OPEN Act’s sponsors set up a website at keepthewebopen.com where members of the public could see the text of the bill and suggest changes to it. The website included an FAQ to familiarize supporters with the thinking behind the OPEN Act. As to why online infringement was an issue of international trade, the FAQ pointed out that “there is little difference between downloading a movie from a foreign website and importing a product from a foreign company.”

When advocating for the OPEN Act as a good alternative to SOPA and the PROTECT IP Act, the bill’s sponsors touted the ITC as being a great venue for tackling the problems of foreign rogue sites. Among the claimed virtues were its vast experience, transparency, due process protection, consistency, and independence:

For well over 80 years, the independent International Trade Commission (ITC) has been the venue by which U.S. rightsholders have obtained relief from unfair imports, such as those that violate intellectual property rights. Under Section 337 of the Tariff Act of 1930 – which governs how the ITC investigates rightsholders’ request for relief – the agency already employs a transparent process that gives parties to the investigation, and third party interests, a chance to be heard. The ITC’s process and work is highly regarded as independent and free from political influence and the department already has a well recognized expertise in intellectual property and trade law that could be expanded to the import of digital goods.

The Commission already employs important safeguards to ensure that rightsholders do not abuse their right to request a Commission investigation and the Commission may self-initiate investigations. Keeping them in charge of determining whether unfair imports – like those that violate intellectual property rights – [sic] would ensure consistent enforcement of Intellectual Property rights and trade law.

Some of the groups now arguing that the ITC shouldn’t have jurisdiction over digital goods openly supported the OPEN Act. Back in late 2011, the EFF stated that it was “glad to learn that a bipartisan group of congressional representatives has come together to formulate a real alternative, called the OPEN Act.” The EFF liked the bill because the “ITC’s process . . . is transparent, quick, and effective” and “both parties would have the opportunity to participate and the record would be public.” It emphasized how the “process would include many important due process protections, such as effective notice to the site of the complaint and ensuing investigation.”

Google likewise thought that giving the ITC jurisdiction over digital goods was a great idea. In a letter posted to its blog in early 2012, Google claimed that “there are better ways to address piracy than to ask U.S. companies to censor the Internet,” and it explicitly stated that it “supports alternative approaches like the OPEN Act.” Google also signed onto a letter promoting the virtues of the ITC: “This approach targets foreign rogue sites without inflicting collateral damage on legitimate, law-abiding U.S. Internet companies by bringing well-established International trade remedies to bear on this problem.”

Conclusion

The ITC has been protecting our borders against the importation of infringing goods for nearly a century now. As technology and trade evolves, it makes perfect sense to let the ITC continue to do its job by protecting our borders against the importation of infringing digital goods. This is an important tool for our innovators and creators in combating the ever-growing flood of foreign infringing goods.

The fact that many of those who supported the OPEN Act are now supporting ClearCorrect suggests that for them this appeal isn’t really about whether digital goods are “articles” under Section 337. The ITC is an appropriate venue for all of the reasons the supporters of the OPEN Act publicized just over three years ago: The process is transparent, there’s ample due process protections, the commissioners are experienced and independent, and their decisions are consistent.

As the 5-1 opinion suggests, affirming the ITC’s decision should be an easy choice for the Federal Circuit. Let’s hope the Federal Circuit does the right thing for our artists and innovators.

Categories
Copyright Injunctions Internet Remedies Trademarks Uncategorized

CloudFlare Enjoined From Aiding Infringers: Internet Unbroken

Just how far does a court’s power to enjoin reach into cyberspace? It’s clear enough that those directly posting or hosting infringing content are subject to an injunction. But what about a company such as CloudFlare that provides content delivery network and domain name server services? Does an injunction under Rule 65 against anyone acting in “active concert or participation” with an online infringer apply to an internet infrastructure company such as CloudFlare? CloudFlare recently argued that its service is “passive” and untouchable, but a district court vehemently—and rightly—disagreed.

The controversy started with the shutdown of the Grooveshark music streaming service pursuant to a settlement agreement with the major record label plaintiffs this past April. Back in September of 2014, Grooveshark and its two founders were found directly and indirectly liable for copyright infringement. After the district court held that their infringement was “willful,” thus subjecting them to potential statutory damages exceeding $736 million for the 4,907 works-in-suit, they consented to paying $50 million in damages and shutting down the grooveshark.com site rather than risk it with a jury.

But the demise of Grooveshark was short-lived, and just days after publicly apologizing for failing “to secure licenses from right holders,” two copycat sites popped up at different top-level domains: grooveshark.io and grooveshark.pw. The record label plaintiffs filed a new complaint and obtained ex parte relief, including a temporary restraining order (TRO), against the new sites. Upon receipt of the TRO, Namecheap, the registrar for both sites, disabled the .io and .pw domain names. When another copycat site was established at grooveshark.vc, the domain name was quickly disabled by Dynadot, the registrar, after it received the TRO.

Undeterred, the defendants publicly taunted the plaintiffs and registered yet another copycat site at grooveshark.li. Rather than continuing this global game of domain name Whac-A-Mole, the plaintiffs served the TRO on CloudFlare, the service utilized by the defendants for each of the infringing domains. And this is where things got interesting. Rather than swiftly complying with the TRO, as the domain name registrars had done, CloudFlare lawyered up and contended that it was beyond the court’s reach.

In its briefing to the court, CloudFlare argued that it played merely a passive role for its customers—including the defendants and their copycat site—by resolving their domain names and making their websites faster and more secure. CloudFlare disavowed the ability to control any content on the copycat site, and it denied that it was in active concert or participation with the defendants:

Active concert requires action, and CloudFlare has taken none. Participation means assisting a defendant in evading an injunction. CloudFlare has not so assisted defendants and, in fact, has no ability to stop the alleged infringement. Even if CloudFlare—and every company in the world that provides similar services—took proactive steps to identify and block the Defendants, the website would remain up and running at its current domain name.

CloudFlare did not deny that the defendants utilized its services; it instead argued that the TRO would not remove the infringing site from the internet. Thus, CloudFlare’s position hinged on its own passivity and on the futility of enjoining it from providing services to the defendants.

A moment’s reflection reveals the superficiality of this position. The fact that CloudFlare had no control over the content of the copycat site was not dispositive. The question was whether CloudFlare aided the defendants, and there was no doubt that it did. It was not only the defendants’ authoritative domain name server, it also optimized and secured their copycat site. That the defendants could have used other services did not erase the fact that they were using CloudFlare’s services. And once CloudFlare was served with the TRO and made aware of the copycat site, its continued provision of services to the defendants constituted active concert or participation.

CloudFlare’s policy arguments were similarly unpersuasive. It suggested that the TRO “would transform a dispute between specific parties into a mandate to third parties to enforce” the plaintiffs’ rights “against the world in perpetuity.” Of course, that is not what happened here. The question was not who else in the world the TRO reached; the question was whether the TRO reached CloudFlare because it aided the defendants.

CloudFlare further argued that it could not be enjoined because “Congress explicitly considered and rejected granting such authority to the courts with respect to Internet infrastructure providers and other intermediaries for the purpose of making a website disappear from the Internet.” To enjoin it, CloudFlare proposed, would be to pretend that the Stop Online Piracy Act (SOPA) “had in fact become law.” This argument, however, completely ignored the fact that courts have long been empowered to enjoin those in active concert or participation with infringers.

In reply, the record label plaintiffs rebuffed CloudFlare’s claim that it was not aiding the defendants: “CloudFlare’s steadfast refusal to discontinue providing its services to Defendants – who even CloudFlare acknowledges are openly in contempt of this Court’s TRO – is nothing short of breathtaking.” They pointed to how CloudFlare continued to aid the defendants, even after being on notice of the TRO: “[T]he failure of an Internet service provider to stop connecting users to an enjoined website, once on notice of the injunction, readily can constitute aiding and abetting for purposes of Rule 65.”

In the real world, CloudFlare markets the benefits of its services to its customers. It touts its content delivery network as delivering “the fastest page load times and best performance” through its “34 data centers around the world.” It boasts having “web content optimization features that take performance to the next level.” It offers robust “security protection” and “visitor analytics” to its customers. And its authoritative domain name server proudly serves “43 billion DNS queries per day.” But when it came to the defendants’ copycat site, it claimed to be a “passive conduit” that in no way helped them accomplish their illicit goals. This disingenuousness is, to borrow the plaintiffs’ term, “breathtaking.”

District Judge Alison J. Nathan (S.D.N.Y.) made short work in rejecting CloudFlare’s shallow denials. She noted that there was no factual question that CloudFlare operated the defendants’ authoritative domain name server and optimized the performance and security of their copycat site. The question was whether these acts were passive such that CloudFlare was not in “active concert or participation” with the defendants. Judge Nathan held that the services CloudFlare provided to the defendants were anything but passive:

CloudFlare’s authoritative domain name server translates grooveshark.li as entered in a search browser into the correct IP address associated with that site, thus allowing the user to connect to the site. Connecting internet users to grooveshark.li in this manner benefits Defendants and quite fundamentally assists them in violating the injunction because, without it, users would not be able to connect to Defendants’ site unless they knew the specific IP address for the site. Beyond the authoritative domain name server, CloudFlare also provides additional services that it describes as improving the performance of the grooveshark.li site.

Furthermore, Judge Nathan dismissed CloudFlare’s argument that it was not helping the defendants since they could simply use other services: “[J]ust because another third party could aid and abet the Defendants in violating the injunction does not mean that CloudFlare is not doing so.” And to CloudFlare’s concern that the TRO was overly broad, Judge Nathan reasoned that the issue before her was CloudFlare’s own actions, not those of other, possibly more attenuated, third parties: “[T]he Court is addressing the facts before it, which involve a service that is directly engaged in facilitating access to Defendants’ sites with knowledge of the specific infringing names of those sites.”

This TRO wasn’t about the “world at large,” and it wasn’t about turning the companies that provide internet infrastructure into the “trademark and copyright police.” It was about CloudFlare knowingly helping the enjoined defendants to continue violating the plaintiffs’ intellectual property rights. Thankfully, Judge Nathan was able to see past CloudFlare’s empty and hyperbolic position. Protecting intellectual property in the digital age is difficult enough, but it’s even more challenging when services such as CloudFlare shirk their responsibilities. In the end, reason trumped rhetoric, and, best of all, the internet remains unbroken. In fact, it’s now even better than before.

Further reading: Leo Lichtman, Copyright Alliance, Bringing Accountability to the Internet: Web Services Aiding and Abetting Rogue Sites Must Comply With Injunctions