V-I-C-T-O-R-Y for Varsity Brands, Inc. in Supreme Court Battle Over Decorative Elements of Cheerleading Uniforms by Alexandra Taylor, Esq.

On Wednesday, the U.S. Supreme Court issued its highly-anticipated Opinion on the copyrightability of design elements found in plaintiff’s cheerleading uniforms. In its initial lawsuit filed in 2010, Varsity Brands, Inc., the country’s largest cheerleading supplier, argued that Star Athletica, L.L.C. infringed its copyrighted designs consisting of chevrons, stripes, various line designs, and color blocks. Under the Copyright Act, “useful items”, such as an underlying garment, are barred from copyright protection. The case brought differing rulings in the lower courts as to whether the decorative elements in the garments were separable enough from the underlying garment to be eligible for copyright protection.

After “widespread disagreement” in the lower courts as to the ability to copyright such designs, the Supreme Court established a two-part test for determining when a design element in a useful item can be protected:

A feature incorporated into the design of a useful article is eligible for copyright protection only if the feature (1) can be perceived as a two- or three-dimensional work of art separate from the useful article, and (2) would qualify as a protectable pictorial, graphic, or sculptural work—either on its own or fixed in some other tangible medium of expression—if it were imagined separately from the useful article into which it is incorporated.

The Supreme Court found that the test was satisfied in the instant case. Expectedly, the fashion industry lobbied for a lenient standard to allow more copyright protection, while consumer groups sought a more strict approach to foster competition. Though the Supreme Court limited the holding to two- or three-dimensional works of art, and not copyright protection for the underlying garment itself, the Court’s ruling has wide spread implications for fashion and related industries for companies and individuals to take advantage of.

For the full Opinion, the case is Star Athletica, L.L.C. v. Varsity Brands, Inc., et al., No. 15-866 (U.S. March 22, 2017).

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The U.S. Supreme Court Continues Its Interest in Intellectual Property

This past Tuesday, the U.S. Supreme Court agreed to review the Federal Circuit’s decision in three intellectual property cases. Two of the cases involve patents. And the third is a copyright case.

Highmark Inc.v. Allcare Health Management Sys., Docket No. 121163, is a patent case and concerns awarding attorney’s fees in exceptional cases. The question presented is “[w]hether a district court’s exceptional-case finding…based on its judgment that a suit is objectively baseless, is entitled to deference.”

Octane Fitness, LLC v. ICON Health & Fitness, Inc., Docket No. 12-1184, is the second patent case, and concerns the Federal Circuit’s test for finding exceptional cases to award attorney fees. The question presented is whether the Federal Circuit’s test for determining an exceptional case creates an unbalance in attorney fee awards between prevailing plaintiffs and prevailing defendants.

Petrella v. MGM, Docket No. 12-1315, is the copyright case, and concerns the statute of limitations for bringing a copyright infringement suit. The question presented is “[w]hether the nonstatutory defense of laches is available without restriction to bar all remedies for civil copyright claims filed within the three-year statute of limitations prescribed…”

Viacom v. YouTube: Safe-Harbor Protection on Appeal

On April 5, 2012, the Second Circuit Court of Appeals issued its long-anticipated ruling in Viacom International Inc., et al. v. YouTube, Inc. The case has implications for companies with websites that permit the posting of user-generated content or third-party content and may impact a defense to copyright infringement under the Digital Millennium Copyright Act’s (DMCA) “safe harbor” provisions.

The case essentially deals with the language of the notice and take-down provisions of the DMCA and the practical reality that popular websites handle mass quantities of purportedly user-generated content, some of which may happen to infringe. YouTube users, when uploading content, agree to YouTube’s terms of use, which provide that users agree not to submit copyrighted material without the permission of the copyright owner. Despite this, users upload copyrighted material without the proper authorization. Copyright owners have the ability to send a “take-down” notice to YouTube, under the DMCA, which YouTube honors. However, as a practical matter, due to the sheer volume of infringement present on YouTube, copyright owners are unable to keep up; the take-down notices that would need to be sent became far too burdensome for the copyright owners, thus leading to this lawsuit.

The District Court, in June 2010, held that even though a jury could find YouTube was generally aware of the uploading of infringing content to its website, it had no liability for infringement because it had designated an agent for the receiving of take-down notices and the swift removal of the infringing content upon receipt of the notices. The court stated that to find YouTube liable, Viacom would have to show YouTube had actual knowledge that a particular clip was infringing; it was not enough to have general knowledge that infringing content was present on the site.

The Second Circuit, on appeal, affirmed in part and reversed in part the district court’s ruling. While the Second Circuit affirmed the district court’s finding that the DMCA requires actual knowledge of specific infringing activity, it remanded the case because it found that a reasonable juror could reasonably find YouTube did, in fact, have such specific knowledge. Ruling that the willful blindness doctrine could be applied in certain situations under the DMCA, the court further remanded to determine whether YouTube was “willfully blind” to infringing activity on its site. Finally, while the court affirmed the district court’s holding that the “right and ability to control” infringing activity requires item-specific knowledge, it remanded the issue for further fact finding, despite the court’s reluctance to articulate the level of knowledge that would be needed to find the requisite control.

While additional appeals in the Second Circuit appear likely, the Second Circuit’s ruling, at this time, emphasizes the increased need for online service providers to be proactive in complying with the DMCA (e.g., acting on specific facts that may be obvious signals of copyright infringement), rather than just waiting to receive a takedown notice. It also shows that it will be more difficult for online service providers to prevail on a motion for summary judgment in cases involving the DMCA’s safe harbor provisions. Online service providers and content owners will definitely be watching how this case continues to develop.

The First Sale Doctrine: The Supreme Court Will Take A Second Look

Back in December 2010, in the case of Costco Wholesale Corp. v. Omega S.A., 131 S. Ct. 565, 96 USPQ2d 2025 (2010), Omega brought suit against Costco after Costco legally acquired Omega watches from a distributor and sold the watches for almost $700 less than the suggested retail price after the watches, which were manufactured overseas and intended for sale outside the U.S., were imported into the U.S. The case was notable because manufacturers typically attempt to block the importation of goods through counterfeit claims or claims of trademark infringement. In this case, however, the goods in question were genuine, so Omega attempted, with success, to block Costco’s sale of the gray-market goods through a copyright infringement action by asserting an interest in a copyright of a logo that was shown on the watch.

The U.S. Supreme Court’s even split (because Justice Kagan had to recuse herself) resulted in affirming the Ninth Circuit’s holding that the “first sale” doctrine applies only to copyrighted items that are made and distributed in the United States, without setting a precedent. The “first sale” doctrine, codified in 17 U.S.C. § 109, is essentially a concept that allows a purchaser of a copyrighted work “lawfully made under [Title 17]” the ability to dispose of their copy without the authority of the copyright owner. The Ninth Circuit reasoned that because Title 17 only applies in the United States, the “first sale” doctrine does not apply in the case because the Omega watches, which were not made in the United States, were therefore not “lawfully made under this title.”

The Supreme Court on April 16, however, accepted an opportunity to revisit the issue, when it granted certiorari in Kirtsaeng v. John Wiley & Sons, No. 11-697. The case, which will be heard the next term, involves Supap Kirtsaeng, a native of Thailand, who came to the U.S. for his college and graduate studies. Kirtsaeng decided to help pay for his education by selling textbooks online. Kirtsaeng’s family and friends in Thailand would purchase foreign editions of textbooks that were manufactured abroad and send them to Kirtsaeng to sell for a small profit on eBay. John Wiley & Sons (Wiley), a publisher of those textbooks, sold the textbooks abroad through an Asian subsidiary, with a percentage of the profits going back to the parent company.

Wiley brought suit in federal court for copyright (and trademark) infringement against Kirtsaeng. Kirtsaeng argued that his sales were permissible pursuant to the first-sale doctrine, i.e., that Wiley could not stop the reselling of its goods. His argument was rejected by the court, which stated that the doctrine did not apply to goods made overseas. A jury then found Kirtsaeng intentionally violated Wiley’s copyrights and awarded Wiley $600,000. The decision was upheld by the Second Circuit which, however, noted the “undesirable” public policy implication of following the Ninth Circuit’s reasoning in Costco, which essentially gives companies incentive to outsource their manufacturing. A dissent, however, argued that a copy of a work made outside the U.S., with the authorization of the copyright owner, could constitute a work “lawfully made” under the Copyright Act.

While it will be up to the Court to decide whether the first sale doctrine applies to goods that are produced abroad and are subsequently imported into the U.S., a spokesperson at Wiley commented that “[t]he 2nd Circuit correctly concluded that those seeking to profit from the creative works of others cannot evade our intellectual property laws by importing copies from overseas.” On the other hand, Orrick Rosenkranz, who will likely argue on Kirtsaeng’s behalf, observes that “[t]his notion that we would give foreign made goods greater protection than local goods makes no sense at all to me.”

The Court’s decision will likely be determined by Justice Kagan, who will be able to participate this time around and present the key vote. The outcome of the case will undoubtedly have a major impact on the gray market, that is, the trading of commodities through distribution channels which, while legal, are unofficial; unauthorized; or unintended by the original manufacturer, much like the Costco case. With the ever-increasing practice of producing goods overseas, businesses will also need to pay close attention for the Court’s decision, as they will need to be aware of whether goods that are lawfully manufactured and sold abroad may be subject to copyright infringement actions if they are imported into the U.S. without the copyright owner’s authorization.

A Bittersweet Victory: The Ninth Circuit Reaffirms DMCA Protection

In 2007, Universal Music Group (UMG) brought a lawsuit against Veoh Networks (Veoh), a video hosting website, alleging that Veoh facilitated copyright infringement by providing a website that hosted videos containing music owned by UMG. On December 20, 2011, the Ninth Circuit Court of Appeals upheld a summary judgment in favor of Veoh and held that Veoh was protected by the Digital Millennium Copyright Act’s (DMCA) “safe harbor” provisions. In other words, it found in order to be protected by the safe harbor provisions of the DMCA, sites making files uploaded by users publicly available are required to remove infringing content only when the site becomes aware of the specific infringing content, for example, by means of a DMCA takedown notice.

While Veoh’s website was found to be perfectly legal, its victory is bittersweet; the small startup company filed for bankruptcy early in 2010 from the high cost of defending its case. Its victory, however, was an important victory for the Internet, as a whole, and may also have implications toward the outcome of the case between Viacom and YouTube.

The case also brings to light why the SOPA/PIPA bills before the House and Senate are cause for concern. The DMCA allows companies like Veoh to keep its business running while a case is being litigated. The SOPA/PIPA bills, however, would have immediately shut Veoh’s website down before it even had its day in court, thereby keeping Veoh from running its business which, in this case, was ultimately found to be perfectly legal. There is cause for concern when copyright holders abuse the law to stymie innovative new startups. The SOPA/PIPA bills will be back on Congress’ agenda when it reconvenes in January.

Excess Baggage: The Hangover’s New Woes

The first lawsuit was brought by a tattoo artist for copyright infringement. A second lawsuit was brought by a stunt man for damages he suffered while shooting a scene. A third lawsuit was brought by a man who alleged the movie was based on a script chronicling his Asian excursion. Continuing this string of lawsuits, Louis Vuitton now brings a fourth lawsuit against Warner Bros., for its movie “The Hangover Part II.”

The luxury brand filed its lawsuit in New York and alleges that a piece of luggage featured in one scene of the movie was a fake and contends that ithas been damaged by consumer confusion after dialogue used in the movie has allegedly became a catchphrase, of sorts. The scene in question involves the character Alan, played by Zach Galifianakis, saying “Careful, that’s a Louis…that is a Louis Vuitton,” and fails to silence the “s” in “Louis.” The company, suing for trademark dilution, false designation of origin, and unfair competition, is seeking damages and an injunction to stop Warner Bros. from distributing the movie on DVD as long as the luggage remains in the scene.

Intellectual Property Protection at the Border

The United States Customs and Border Protection (CBP), a bureau of Homeland Security, is a powerful ally in the fight against trademark and copyright infringement. Because intellectual property is a “negative right,” allowing right holders to prohibit others from making or copying without permission what has been created, it is the right holders’ responsibility to police their intellectual property and protect their goodwill against counterfeit goods or confusingly similar items.
The CBP assists right holders by serving as their “eyes and ears” and preventing foreign entities from importing “gray market” goods that are counterfeit or confusingly similar to goods bearing a federal registration number. The CBP accomplishes this by maintaining a recordation system for marks registered on the principal register with the United States Patent and Trademark Office or copyrights registered with the United States Copyright Office.

In order to simplify the process of recording federally registered trademarks and copyrights for right holders, the CBP has released the Intellectual Property Rights e-Recordation (IPRR) application system online.

Prior to beginning the e-Recordation application, the following items should be readily accessible:

  1. United States Patent and Trademark Office Registration Number or the United States Copyright Office Registration Number;
  2. Digital Images of the protected mark/work in “.jpg” or “.gif” format; and
  3. Familiarization with the applicable regulations for trademarks, 19 CFR 133.1, et seq.; and copyrights, 19 CFR 133.31, et seq.

It is important to remember that the right holders agree to supply all documents specified in 19 CFR 133.3, for trademarks; and 19 CFR 133.33, for copyrights; upon request. Failure to comply with such requests will result in the recordation being suspended, pending receipt of the documents, and prevent timely enforcement of the right holders’ intellectual property.

All applications will be processed in the order in which they are received and a separate application will be required for each recordation. The recordation fee for copyrights is $190, and the recordation fee for trademarks is $190 per International Classification of Goods. Upon completion of the recordation process, the CBP’s recordation database will allow CBP officers to monitor imports at each of the country’s 317 ports of entry.

For additional information on the Customs and Border Protection enforcement program, and how to obtain a recordation, please visit the CBP’s website or contact Maxey Law Offices.