Wearable art or a devilish rip-off? That’s the question posed by a recent collaborative release by art cooperative MSCHF Product Studio and musician Lil Nas X – the limited edition “Satan Shoes.” The Satan Shoes are constructed from Nike Air Max 97 shoes and feature a black and red motif, a pentagram charm on the laces, and the writing “Luke 10:18” which refers to the biblical verse “I saw Satan fall like lightening from heaven.” The shoes also contain red ink in the soles and a drop of human blood, which was provided by MSCHF team members.[1] The shoes, priced at $1,018, sold out in minutes and are individually numbered from 1 to 666, as is common with copies of artistic works. The collaboration came after the release of Lil Nas X’s music video for his song “Montero (Call Me by Your Name)”, which features several biblical motifs and includes the musician gyrating on Satan. Both the music video and the Satan Shoes have generated significant controversy on social media, including Tweets from individuals boycotting Nike over perceived involvement with the shoes, which feature the Nike Swoosh prominently on the side and tongue of the shoe.

Nike put out a statement confirming it is not involved with the shoes, and filed a lawsuit against MSCHF on claims of trademark infringement and trademark dilution. Pointing to the upheaval on social media about the shoes, Nike claims that there is significant confusion in the marketplace that Nike is involved with or endorsed the Satan Shoes.[2] Nike also petitioned the Eastern District Court in New York for a preliminary injunction and restraining order, halting further sales and shipments of the shoes.[3] The Court granted the restraining order, finding that Nike had shown a sufficient likelihood of success on some of its claims and a likelihood of irreparable harm.[4] MSCHF, which has been described previously by The New York Times, as the “Banksy of the Internet”,[5] does not dispute that it used Nike’s mark. Rather, it believes that its use is excusable because it was used in an artistic context.

MSCHF defines itself as “a conceptual art collective known for interventions that engage fashion, art, tech, and capitalism in various, often unexpected, mediums.”[6] And indeed, consistent with their mission, MSCHF has previously put out similar art-shoe projects involving “involuntary collaborations” with brands. These projects have included the “Birkinstock”, Birkenstock style sandals that are made using refashioned Hermes Birkin bags and the “Jesus Shoe”, a natural foil to the controversial Satan Shoe. The Jesus Shoe, which sold for $3,000 a pair, were also created from Nike Air Max 97 trainers, and contained holy water from the River Jordan in the soles. The laces featured a gold crucifix charm on the shoe and the verse Matthew 14:25 stitched on the side, which reads: “And in the fourth watch of the night he came to them, walking on the sea.” The Jesus Shoes, created in 2019, were intended by MSCHF to comment on the absurdity of collaboration culture.[7] Specifically, MSCHF states: “As a manifested speculative artwork, Jesus Shoes conflates celebrity collab culture and brand worship with religious worship into a limited edition line of art objects.”[8] And despite the presence of the Nike Swoosh on the Jesus Shoes and Nike’s lack of involvement, as well as public backlash against the shoes, Nike did not take any adverse action against MSCHF or the Jesus Shoes in 2019.

MSCHF again argues for the Satan Shoes, which also incorporate the Nike Swoosh (albeit more prominently than the Jesus Shoe), that a necessary part of art is to create inside of the real world; “We believe it is better to make art that participates directly in its subject matter. It is stronger to do a thing, than to talk about a thing. MSCHF makes artworks that live directly in the systems they critique, instead of hiding inside white-walled galleries.”[9] Indeed, MSCHF believes itself to be using the Nike Swoosh to make an artistic statement rather than in a consumer context, and that the Nike Swoosh contributes to the overall artistic message.[10] MSCHF is a regular creator of pieces using consumer items, with its first release being “The Persistence of Chaos”, which comprised a 2008 Windows laptop loaded with six malware programs that had purportedly caused millions in damage worldwide. Earlier this year, MSCHF released “Axe No. 5”, a limited run perfume that mixed Axe Body Spray and Chanel No. 5 perfume.[11] While the quality of the artwork may be debatable in certain circles, it is undeniable that these works are seen at least by their creator as art intended to inspire social commentary and discussion, making it unsurprising that it is seeking artistic exemption from infringement in the present dispute. MSCHF specifically argues that its products are not commercial products, but instead a limited run of individually numbered works of art sold to discerning, sophisticated purchasers.[12]

Regardless of ultimate ideologies and feelings brought about by the Satan Shoes, these shoes present an interesting opportunity to explore the collision between trademark law and the First Amendment. To the chagrin of some trademark holders, the First Amendment does provide leeway for creative use of trademarks in an artistic context, even when that use may result in a likelihood of consumer confusion.

Trademark Infringement and the First Amendment

For many years the courts grappled with how to reconcile the First Amendment’s freedom of speech protections with the Lanham Act’s policy of preventing consumer confusion and deception; however, many courts have since settled on some version of the test first introduced by the Second Circuit in Rogers v. Grimaldi.[13] The goal of the Rogers test is to limit the application of the Lanham Act to expressive works where “the public interest in avoiding consumer confusion outweighs the public interest in free expression.”[14] Thus, the First Amendment and Lanham Act tolerate some levels of likelihood of confusion as to not chill protected expressive speech. Under the Rogers test, the use of another’s mark in an expressive work will not be actionable under the Lanham Act unless it “has no artistic relevance to the underlying work whatsoever, or if it has some artistic relevance, unless [it] explicitly misleads as to the source or content of the work.”[15] These factors are not a rigid test to be applied mechanically, but instead a balancing test that recognizes that the trademark rights of the senior user and the public’s right to not be confused must be carefully weighed against the artistic license granted to the junior user.[16]

The first consideration, “artistic relevance”, is a factual issue that evaluates the relevance of the mark to the overall work as a whole. This degree of relevance is purposefully low—above zero—to avoid forcing judges to make what are essentially subjective judgments about the mark’s intrinsic artistic value in the context of an expressive work.[17] Thus, courts have been extremely liberal in finding artistic relevance, and very few cases have found no artistic relevance.[18] For this reason, it is highly likely the Court would find the Satan Shoes to be using the Nike Swoosh in an artistically relevant way.

The second factor, “explicitly misleading” requires a plaintiff to prove that the mark’s use expressly and obviously misleads as to the source of the work. “Explicitly mislead” requires more than a finding of a likelihood of confusion. The Second Circuit has emphasized that the “finding of the likelihood of confusion must be particularly compelling to outweigh the First Amendment interest recognized in Rogers.”[19] The Ninth Circuit has cautioned that the “explicitly misleads” requires proof that the content, packaging, or advertising of the accused work clearly conveys the message that the plaintiff is affiliated with the work. This factor would be harder for MSCHF to fight against. The Satan Shoes do alter the Nike Air Max 97 shoes, but they do so in a manner similar to other collaborations Nike has done with other artists and entities.[20] With that said, several courts, including the Second Circuit, have issued decisions implying that “explicitly misleading” may require overt and express misstatements by the alleged infringer and not merely use of the mark.[21] MSCHF has never claimed any involvement or collaboration with Nike, and has consistently stated that its collaboration partner for the Satan Shoes is Lil Nas X and not Nike.

Since the Rogers factors were introduced over 30 years ago, other courts have also introduced additional considerations when evaluating artistic works in the context of a trademark infringement dispute. These considerations were collected by the US District Court in Colorado in Stouffer v. National Geographic Partners, LLC and include:

  • Whether the senior and junior users of the mark identify the same or similar kind of goods and services.
  • To what extent the junior user added his or her own expressive content to the work beyond the mark itself.
  • Whether the timing of the junior user’s use of the mark suggests a motive to capitalize on the popularity of the senior user’s mark.
  • In what way, if any, the mark is artistically related to the underlying work, service or product.
  • Statements made by the junior user to the public that suggest a non-artistic purpose.
  • Statements made or conduct engaged in in private by the junior user that suggests a non-artistic purpose.[22]

Each of these factors and others could be considered by the Court in addition to the Rogers test in efforts to balance Nike’s rights in its trademarks against MSCHF’s rights in creative expression.

Trademark Dilution and the First Amendment

What is also concerning to Nike is trademark dilution. Under the Trademark Dilution Revision Act, owners of distinctive famous are entitled to injunctions where a junior user’s use of the famous mark causes dilution by blurring or tarnishing the mark, regardless of any actual or likely confusion, of competition, or any actual economic injury.[23] Nike has established in prior cases that the Nike Swoosh is famous,[24] so the larger question is whether the Satan Shoes are likely to tarnish the Nike Swoosh and whether that risk of tarnishment is so great that it outweighs MSCHF’s creative expression rights. Courts have frequently enjoined the tarnishment of a mark through association with unsavory or scandalous goods, persons, or services.[25] Nike argues in its Complaint that the Satan Shoes are causing dilution by tarnishment by associating the Nike Swoosh with satanic symbols and imagery.

A straightforward application of dilution laws may lead to the conclusion that the Satan Shoes tarnish the Nike Swoosh, despite MSCHF’s claimed noncommercial use (which is exempted from dilution laws). But the First Amendment issues further influence this analysis, particularly after the Supreme Court’s 2017 decision in Matal v. Tam.[26] In Tam, the Court evaluated the constitutionality of the disparagement clause in federal trademark law after an Asian-American musical group named “The Slants” was refused trademark registration because the name was disparaging to those of Asian descent. The eight justices[27] unanimously agreed that the law violated the free speech clause of the First Amendment because the government was discriminating against certain trademarks based upon viewpoint and was targeting offensive expression with the intent of discouraging its use.

While scholars have long mused that dilution laws may run contrary to the First Amendment, the Tam decision and other recent jurisprudence have raised the question among legal commentators as to whether dilution laws could be overturned or found unconstitutional.[28] Prior to Tam, courts had generally avoided First Amendment scrutiny of trademark laws, arguing that intellectual property laws regulate commercial conduct and not speech.[29] The Federal Circuit en banc decision in In re Tam recognized this hesitation, conceding that “courts have been slow to appreciate the expressive power of trademarks.”[30] For Tam, the Asian-American band specifically picked the name “The Slants” in an act of reclamation of the derogatory term and was expressive speech. Recognizing that modern trademarks operate in socially significant ways, which can often go beyond just the products or services the mark holder offers, ultimately results in the question of how far trademark law will bend to accommodate expressive speech.[31]

Because famous marks are more likely to be appropriated for an expressive purpose, dilution is brought into sharp focus. As observed by Professor Robert Denicola more than 30 years before Tam, famous marks have particular utility in expressive works:

Famous trademarks offer a particularly powerful means of conjuring up the image of their owners, and thus become an important, perhaps at times indispensable, part of the public vocabulary.  Rules restricting the use of well-known trademarks may therefore restrict the communication of ideas. When this occurs, the confrontation between trademark protection and free speech can no longer be ignored. . . . Since a trademark may frequently be the most effective means of focusing attention on the trademark owner or its product, the recognition of exclusive rights encompassing such use would permit the stifling of unwelcome discussion. Though other means of communication may be available, trademark use often offers opportunities unmatched by more conventional methods of expression.[32]

MSCHF has not specifically stated why it chose Nike shoes specifically for the Jesus Shoes or Satan Shoes, but given Nike’s immense brand value, topping the Brand Finance “most valuable apparel companies” for 7 years,[33] there is certainly a probability that the choice to use Nike shoes specifically was distinctly related to MSCHF’s artistic message.

For the time being, it looks like these questions will go unanswered. On April 8, 2021, Nike and MSCHF announced that they had reached a settlement. As part of the settlement, MSCHF has agreed to a voluntary recall and will buy back any Satan Shoes and Jesus Shoes for the original retail price. MSCHF’s attorney indicated that they are pleased with the settlement and feel that the publicity the case brought to MSCHF and its artistic works achieved the artistic purpose of the Satan Shoes and Jesus Shoes.[34] Settling the case will allow MSCHF to focus on new artistic works, the next of which is scheduled to drop on April 12, 2021.[35] Whether any buyers of the Satan Shoes or Jesus Shoes will take MSCHF upon their refund offer remains to be seen.

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[1] Bryan Peitsch, “Nike Sues over Unauthorized ‘Satan Shoes’”, The New York Times (last updated April 9, 2021) (https://www.nytimes.com/2021/03/28/style/nike-satan-shoes-lil-Nas-x.html).

[2] Id.

[3] Bill Donahue, “Nike Wins Restraining Order on Lil Nas X ‘Satan Shoes’”, Law360.com (Apr. 1, 2021) (https://www.law360.com/articles/1371374/nike-wins-restraining-order-on-lil-nas-x-satan-shoes-).

[4] Order, Nike, Case No. 1:12-cv-019679-EK-PK (E.D.N.Y. Apr. 1, 2021).

[5] Sanam Yar, “The Story of MSCHF, a Very Modern . . . Business?”, The New York Times (updated Mar. 30, 2021) (available at https://www.nytimes.com/2020/01/30/style/MSCHF-sneakers-culture.html).

[6] Satan Shoe Statement, MSCHF.com (Apr. 1, 2021) (https://mschf.xyz/statement.pdf).

[7] Stephanie Dube Dwilson, “’Satan Shoes’ with Drops of Blood Announced by Company Behind ‘Jesus Shoes’”, Heavy, Inc. (Mar. 29, 2021) (https://heavy.com/news/nike-satan-shoes/). Heavy.com

[8] Satan Shoe Statement, MSCHF.com (Apr. 1, 2021) (https://mschf.xyz/statement.pdf).

[9] Id.

[10] Id.

[11] “Axe No. 5”, MSCHF (https://axenumbercensored.com/).

[12] MSCHF specifically argues that its purchasers could only obtain the shoes through MSCHF’s proprietary app, and who would be already familiar with the nature of MSCHF’s works and approach to art. Letter from MSCHF Counsel (Mar. 31, 2021) (available at https://www.documentcloud.org/documents/20536836-nike_v_mschf_defendant_letter).

[13] 6 McCarthy on Trademarks and Unfair Competition § 31.1440 (5th ed.).

[14] Rogers v. Grimaldi, 875 F.2d 994, 999 (2d Cir. 1989).

[15] Id. at 999.

[16] 6 McCarthy § 31:144.50

[17] Id.

[18] Lynn M. Jordan & David M. Kelly, “Another Decade of Rogers v. Grimaldi: Continuing to Balance the Lanham Act with the First Amendment Rights of Creators of Artistic Works,” 109 TMR 833, 838 (September-October 2019).

[19] 6 McCarthy § 31:144.50.

[20] See Nike News – Collaborations (last accessed Apr. 7, 2021) (https://news.nike.com/collaborations).

[21] Jordan, 109 TMR at 852.

[22] 400 F.Supp.2d 1161, 1179 (D. Colo. 2019).

[23] 15 U.S.C. § 1125(c)(1).

[24] See e.g., Nike, Inc. v. Nikepal Intern., Inc., 2007 WL 2782030 (E.D. Ca. Sept. 18, 2007); Nike Inc. v. Variety Wholesalers, Inc., 274 F.Supp. 2d 1352 (S.D. Ga. 2003).

[25] Anheuser-Busch, Inc. v. Balducci Publications, 28 F.3d 769, 777 (8th Cir. 1994).

[26] 137 S. Ct. 1744 (2017).

[27] Justice Neil Gorsuch did not participate in the consideration or decision.

[28] Lisa P. Ramsey, “Free Speech Challenges to Trademark Law After Matal v. Tam”, 56 Hous. L. Rev. 401 (2018); Sara Gold, “Does Dilution ‘Dilute’ the First Amendment?: Trademark Dilution and the Right to Free Speech after Tam and Brunetti”, 59 IDEA: L. Rev. Franklin Pierce Center for Intell. Prop. 483, 489 (2019) (student work).

[29] Alfred C. Yen, “Choosing the Consequences of Tam and Brunetti”, 16 Chi.-Kent J. Intell. Prop. 396,

[30] 137 S. Ct. 1744 (2017).

[31] Giulio Ernesto Yaquinto, “The Social Significance of Modern Trademarks: Authorizing the Appropriation of Marks as Source Identifiers for Expressive Works”, 95 Tex. L. Rev. 739 (Feb. 2017) (student work).

[32] Robert C. Denicola, “Trademarks as Speech: Constitutional Implications of the Emerging Rationales for the Protection of Trade Symbols,” 1982 Wis. L. Rev. 158, 195–197

[33] “Nike Tops Brand Finance’s Most Valuable Brands List, Rolex Claims ‘Strongest’ Title”, TheFashionLaw.com (Apr. 8, 2021) (https://www.thefashionlaw.com/nike-tops-brand-finances-of-most-valuable-brands-rolex-claims-strongest-title/).

[34] Hannah Albarazi, “Nike Resolves Bad Blood with Lil Nas X ‘Satan Shoes’ Seller”, Law360.com (Apr. 8, 2021).

[35] MSCHF (https://mschf.xyz/).

Trademarks are use-based rights, meaning that a trademark is only entitled to be registered if the mark is actually in use. Likewise, the registrant must continue to use the mark in commerce in order to maintain registration and must take action to renew a trademark registration at various milestones (year 5, 10, 20, 30, etc.). In so doing, trademark owners are required to submit specimen materials showing that the mark is still in use in interstate commerce. For years, these renewals were on a quasi-honor system whereby the registrant needed only submit one specimen showing use in commerce per each registered class. But in order to crack down on trademark squatting, the USPTO has started to issue quality checks at random that require the registrants submit additional specimen to show that all goods and/or services in specified classes are still in use. Now, the Trademark Office has instituted a new fee to combat squatting on abandoned rights. The fee appears to act almost like a fine. If the registrant is required to delete goods, services, or classes in response to one of these quality checks, the USPTO will impose a $250 per class fee. The USPTO recently advised that there are two ways to avoid paying this additional fee: (1) delete the goods, services, or classes when filing the Section 8 or 71 Declaration; or, (2) file a Section 7 Request to Amend a registration prior to submitting a Section 8 or 71 Declaration. If the Section 7 Request to Amend a registration is filed prior to filing a Section 8 or 71 Declaration and the only amendment requested is the deletion of goods, services, and/or classes, the Section 7 Request to Amend is free.

The USPTO has indicated that the goal of imposing a fee for deletions made after a Section 8 or 71 Declaration is filed and before the Declaration is accepted is to heighten the integrity of the trademark register through obtaining more accurate and up to date information from registrants. The USPTO recently issued additional guidance regarding best practices aimed at avoiding this additional fee for certain deletions. These best practices include: (1) creating a checklist for evaluating and confirming the use of the trademark in commerce with registered goods and services; (2) keeping notes regarding the people and records utilized to obtain this information; and, (3) keeping a record of evidence of current use in commerce, such as photos of each good bearing the trademark, printouts or screenshots of supporting webpages with the date and URL, and copies of print advertising or promotional materials. Following these best practices will provide the information necessary to determine whether certain goods, services, or classes should be left off a Section 8 or 71 Declaration, especially if followed when a Section 8 or 71 Declaration deadline is approaching. Following the best practices above is equally helpful when a Section 8 or 71 Declaration deadline is far off, as the Section 7 Request to Amend a registration is free to file when done for the purpose of deleting goods, services, or classes from a registration, which offers protection in the future from having to pay the new $250 filing fee for having to delete certain goods, services, or classes after a Section 8 or 71 Declaration has been filed.

Future Proof Brands, L.L.C. (“Future Proof”) filed a trademark infringement action against Molson Coors Beverage Co. (“Coors”) objecting to its use of the mark Vizzy.  Future Proof used and registered the mark Brizzy as a brand of hard seltzer containing carbonated water, alcohol and in most cases fruit flavors.   When Coors branded its hard seltzer Vizzy, Future Proof objected and sued seeking an injunction.  Coors denied infringement claiming that it branded Vizzy by amalgamating its two prominent attributes, namely, vitamin C and fizzy.  It noted that numerous other companies have carbonated products with a variant of fizzy, including Fizzy Pink Lemonade, Fizzy Mango, Fizzy Fox, Fizzy Juice, and others.   After the district court denied issuing a preliminary injunction, Future Proof appealed.

The Fifth Circuit analyzed the digits of confusion, including (1) the type of mark infringed, (2) similarity between the marks, (3) similarity of the products, (4) identity of the retail outlets and purchasers, (5) identity of the advertising media used, (6) defendant’s intent, (7) evidence of actual confusion, and (8) the degree of care exercised by the potential purchasers.  The district court had concluded that the third, fourth and fifth digits favored granting the injunction.  Neither party contested that decision, so the Fifth Circuit did not consider those digits, but focused on the remaining digits.

The district court had found the mark Brizzy to be descriptive.   However, the Fifth Circuit disagreed concluding Brizzy is not descriptive because it does not convey an immediate idea about the characteristics of hard seltzers.   The Fifth Circuit found that Brizzy is suggestive because consumers must exercise imagination and infer that Brizzy is a play on fizzy and not on other words.   However, the Court also noted that because of the numerous third-party uses, it agreed with the district court that the mark Brizzy is weak.

As to similarity, the Fifth Circuit focused on the differences in packaging, namely the shapes of the cans, design features and wording.  Further, the Fifth Circuit considered the initial consonants and aural similarities.  It concluded that the district court did not err in concluding this digit “only marginally in favor of granting the injunction”.

In analyzing the digit of intent, Future Proof claimed that Coors and its executives were aware of and had notice of Brizzy when they began marketing Vizzy.  However, the Fifth Circuit found that mere awareness is not enough to establish intent.  Instead, the inquiry must focus on whether the defendant intended to derive benefits from the reputation of the plaintiff and the Court must rely on evidence that a defendant imitated packaging material or adopted similar distribution methods.   Future Proof provided no such evidence and thus there was no established bad intent.

The only instance of actual confusion cited involved a wholesaler, not a consumer.  According to the Fifth Circuit, a fleeting mix-up of names is not sufficient to establish actual confusion.

Finally, the Fifth Circuit concluded that the low price of the product was not sufficient to establish a lack of care in terms of the purchasing decision.  Future Proof failed to provide an affidavit or testimony to show a lack of consumer care.

After conducting the digit analysis, the Fifth Circuit concluded that a finding of likelihood of confusion does not have to be supported by a majority of the digits, and each digit must be weighed differently for each case.  Although the district court had found three of the factors supported an injunction, and one other marginally so, the Fifth Circuit found no error in the district court’s reliance on the other four factors, which weighed against an injunction, especially the two digits that have special importance, namely, intent and actual confusion.   The Court found that the district court did not commit error in concluding that Future Proof failed to carry its burden of showing the likelihood of confusion and affirmed the district court ruling.

 

Semiconductor chip giant Intel was hit with a massive, $2.175 billion dollar verdict this week over infringement claims of two patents owned by VLSI Technology LLC.[1] So, the next time your patent counsel warns that “patent infringement damages can be nontrivial,” please take heed.

In April 2019, VLSI Technology filed three infringement suits against Intel in the U.S. District Court for the Western District of Texas accusing various Intel processors of infringement.[2] The two patents that ultimately won the day covered a method for minimizing operating voltage to avoid failure of memory in a data process system (U.S. Patent No. 7,523,373) and a system and method for managing clock speed in electronic devices (U.S. Patent No. 7,725,759).

The jury found that Intel (1) literally infringed the data process system patent, which means that the Intel product contained or “practiced” all of the elements of the patented invention[3] and (2) infringed the clock speed patent through the so called “doctrine of equivalents.” A product or process that does not literally infringe a patent claim may still infringe under this doctrine if the differences between the accused product and the patented invention are insubstantial.[4] The jury determined that the system within the Intel processor, although not exactly the same, was similar enough to the VLSI patent to infringe.

Based on those findings, the jury awarded $1.5B in damages for infringement of the data process system patent and $675M in damages for infringement of the clock speed patent. These are staggering amounts, even for a Silicon Valley staple like Intel.

So how did Intel wind up in this predicament? The short answer is that the U.S. (and other countries in general) take extreme lengths to protect and encourage innovation. In fact, the creation of patent rights is specifically delineated in the U.S. Constitution:

Article I Section 8, Clause 8 – Patent and Copyright Clause of the Constitution. [The Congress shall have power] “To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”

To protect those rights, 35 U.S.C. § 284 provides that the minimum statutory compensatory damages award owed to a patent holder by an infringer is a “reasonable royalty.” In litigation, a reasonable royalty is generally determined based on a hypothetical negotiation occurring between the parties.[5] That is, what amount of money would it have taken for a reasonable patent holder to allow the infringer to make, use, sell its patented invention at the time before the litigation began.

But the reasonable royalty is the minimum. In addition to the hypothetical royalty damages, a patent holder may also seek “lost profits” in certain circumstances. The lost profits damages seek to compensate the patent holder for any lost sales or price erosion that resulted from the infringing product’s presence in the market.

Multiplying the reasonable royalty and lost profits for expensive tech integrated into near endless amounts of electronic devices can amount to major damages, as it did here. In truth, the damages could have been worse under patent law. Had the jury found the case to be “exceptional”, the jury would have been able to enhance the damages up to three times the amount. One example of an “exceptional case” is willful infringement, such as when an infringer knows about the patent and infringes anyway. The jury here determined that Intel was not “willful” in its infringement; otherwise, Intel may have been liable for over $6B. To put this in perspective, Intel could have been held liable for the equivalent of the entire 2019 GDP of the Maldives, which was 148th of 211 countries ranked by GDP.[6]

But that is not all. In addition to compensatory damages, a court may award reasonable attorney fees to the prevailing party under 35 U.S.C. § 285. Reasonableness is dependent upon a lot of factors, not the least of which is the amount at stake. Even a relatively low 20% contingency fee on $2.1B is over $425M.

And like a game show, there really is more. Patent infringement also carries the possibility of injunctive relief. Thus, while the billions in damages is impressive, the real power lie in VLSI’s potential ability to prevent Intel from importing, making, using, selling, offering for sale any of its products that infringe the patents.

There is no doubt that this award will be appealed and will likely be reduced in some capacity. But the moral of the story is to take patent rights and infringement seriously. First, protect your own rights. By obtaining a patent, the inventor/company may protect their rights in federal court against anyone that makes, sells, or uses the invention for a two-decade period. And, second, but equally as important, do your due diligence on new products. Should you find yourself the recipient of a cease and desists letter, call your patent attorney.

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[1] VLSI is indirectly owned by the Japanese tech firm SoftBank Group.

[2] This is one of various infringement cases brought by VLSI against Intel. Intel also attempted to invalidate the patents at the Patent Office by filing inter partes review requests on certain asserted claims across six of the patents at issue in WDTX between May and October of 2020. The Patent Trial and Appeals Board denied all of the requests.

[3] The product or process is said to infringe when it has everything mentioned in the claim.  Stiftung v. Renishaw PLC, 945 F.2d 1173, 1178, 20 U.S.P.Q.2d 1094, 1098 (Fed. Cir. 1991). On the other hand, a product or process that does not have each and every element recited in the claim should not be considered a literal infringement.  Mas-Hamilton, 156 F.3d at 1211, 48 U.S.P.Q.2d at 1015.

[4] Warner-Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17, 41 U.S.P.Q.2d 1865 (1997).  Digital Biometrics, Inc. v. Indentix, Inc., 149 F.3d 8855, 1349, 47 U.S.P.Q.2d 1418, 1428 (Fed. Cir. 1998).  In making a determination under the doctrine of equivalents, the court may consider whether the accused product or process performs substantially the same function, in substantially the same way, to obtain substantially the same result as the claimed invention.  Dawn Equip. Co. v. Kentucky Farms Inc., 140 F.3d 1009, 1016, 46 U.S.P.Q.2d 1109, 1113 (Fed. Cir. 1998).

[5] Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1312 (Fed. Cir. 2011)

[6] https://worldpopulationreview.com/countries/countries-by-gdp

The Fifth Circuit Court of Appeal recently addressed a copyright infringement claim by local jazz musician Paul Batiste.  Batiste alleged that a hip-hop duo infringed his musical work.  However, the Court concluded that Batiste had failed to produce evidence for a reasonable jury to infer that the defendants had access to his music or to find a striking similarity between his songs and those of the defendants.

The infringement based on copying can be proven by actual evidence of copying or by showing the defendant had access to the work and substantial similarity.  Batiste tried to prove Defendants had access to his works asserting there has been widespread dissemination of his music and a chain of events link his music to the defendants.  To show widespread dissemination courts have concluded that the plaintiff must show that the works have enjoyed considerable success or publicity.  While Batiste claimed his work was sold nationwide, the records showed meager sales in only a handful of local stores.  Further, Batiste admitted his downloads and streams had been sparse.  These really did not begin until 2013 which was after the defendants had released all but one of the alleged infringing songs.  Additionally, the chain of events theory was not successful either.  Evidence that the defendants were near a store that sold Batiste’s records created only a bare possibility of access.  The court found no reasonable jury could find more than a bare possibility that the defendants had an opportunity to hear and copy Batiste’s.

The court further noted that Batiste offered no admissible evidence of similarities aside from audio recordings of the songs themselves.  The court stated that after carefully reviewing each of his songs and the defendants’ songs that allegedly infringed, the songs were in no way similar enough for a reasonable jury to find striking similarity.  Because Batiste could not show access or striking similarity, he cannot prove factual copying.

The Fifth Circuit further addressed the issue of attorney’s fees.  Section 505 of the Copyright Act provides that a district court may award reasonable attorneys fees to the prevailing party.  The court stated that given the objective unreasonableness of Batiste’s claims, his history of litigation misconduct and his pattern of filing overaggressive copyright actions, the district court did not abuse its discretion in awarding fees to the defendant under the Act.

A federal registration of a trademark with the United States Patent and Trademark Office constitutes constructive notice of a registrant’s claim of ownership thereof.  Pursuant to 15 U.S.C. §1111, a registrant may give notice that the mark is registered by displaying with the mark the words “registered in U.S. Patent and Trademark Office” or “reg. U.S. Pat. & Tm. Off.” or the letter “R” enclosed within a circle.  More importantly, this statute provides that in any suit for infringement under this chapter by such a registrant failing to give such notice of registration, no profits and damages shall be recovered unless the defendant had actual notice of the registration.  While a holder of a registered mark is under no obligation to give notice of the registration before seeking relief, a consequence of failing to give such notice is a limitation on the remedies that can be recovered.  The failure to display statutory notice or prove actual notice limits the monetary recovery.  Moral of the story — upon obtaining a Federal registration, do not forget to put the statutory notice adjacent to the registered mark.

Buried in the 5,500-page Consolidated Appropriations Act for 2021 among various COVID-19 relief was the Trademark Modernization Act of 2020 (“TMA”). The TMA, which will become effective on December 27, 2021, makes several important amendments to federal trademark law (the Lanham Act) intended to modernize trademark application examinations and clean house of trademark registrations for marks not used in commerce. For litigants, the TMA also adds important clarity to the Lanham Act’s standard for obtaining injunctive relief by restoring the rebuttable presumption of irreparable harm called into question by the Supreme Court’s decision in eBay v. MercExchange, LLC, 547 U.S. 388 (2006). A summary of these key changes for trademark registrations and trademark litigation follows.

Ex Parte Challenges to Current Trademark Registrations

A significant impetus for the TMA was comments during a 2019 hearing before the House Subcommittee on Courts, Intellectual Property, and the Internet concerning “clutter” and “deadwood” on the United States Patent and Trademark Office (“USPTO”) trademark registers. As of July 18, 2019, the USPTO trademark register comprised approximately 2.4 million registrations.[1]  As testified by Commissioner for Trademarks Mary Boney Denison, the USPTO had seen an increase in trademark applications or registration maintenance filings that contained false or misleading claims and information, particularly with regard to specimens of use.[2] Trademark applicants are required to submit evidence with their applications that the applied-for trademark is actually being used in commerce in the class of goods or services listed on their respective application. Trademark owners are required to regularly submit similar evidence to maintain their registrations. Commissioner Denison testified that the USPTO has increasingly received fake or digitally altered specimens that do not actually show use of the mark in commerce as required by the Lanham Act.[3] These false submissions, as well as excessive registrations for marks no longer in use, limit the usefulness of Trademark Register and significantly increase trademark clearance costs.

The TMA seeks to address these issues through two new ex parte proceedings. The first mechanism, an ex parte reexamination, permits third parties to challenge use-based registrations where the trademark owner swore that the marks were used in commerce, either in the application itself or in a statement of use. This mechanism allows the USPTO to reexamine the accuracy of the applicant’s claim of use at the time the averment was made. The second mechanism primarily targets foreign applications that claim use under Lanham Act section 44(e) or 66(a)—which allows foreign applicants to bypass submitting a statement of use in lieu of providing evidence of trademark registration in another country—and allows challenges to marks that have never been used in commerce. These proceedings can each be initiated by submitting testimony or evidence establishing a prima facie case of non-use, or the Director of the USPTO may determine on his or her own initiative that a prima facie case of nonuse exists. The registrant will then have the opportunity to respond to the alleged prima facie case. The registration will then either be cancelled, subject to the registrant’s right of appeal to the Trademark Trial and Appeal Board, or confirmed valid. A validity decision will preclude all further ex parte challenges to the registration.

These ex parte mechanisms add renewed focus to the Lanham Act’s requirement of “use” for trademark rights. The Lanham Act requires “bona fide use of a trademark in the ordinary course of trade.” For goods, that can include consistently placing the trademark on the product or its packaging, labels, or tags or, if it is impractical to use on the product itself, invoices and documents associated with the sale of the goods. For services, use can include advertising in connection with actual offers for the services.[4] Given these new mechanisms and an increase in fraudulent applications, USPTO trademark examiners may more strictly scrutinize specimens of use for compliance with trademark use requirements. To avoid unnecessary delays in trademark applications, applicants should take care to ensure specimens meet the requirements of the Trademark Manual of Examining Procedure (“TMEP”) and that their use actually qualifies as trademark use. Experience intellectual property counsel can help clients navigate the TMEP and trademark application procedures.

Changes to Trademark Registration Examination Procedures

The Lanham Act currently requires trademark applicants to respond to office actions issued during the examination within 6 months. The TMA now allows the USPTO increased flexibility to set shorter response deadlines. Specifically, the USPTO can, through regulations, set shorter response periods between 60 days to 6 months, provided applicants can receive extensions of time to respond up to the standard 6 months. Much like extensions of time granted by the USPTO for patent applications, any such extension requests will incur additional fees.

Formalization of the Informal Protest Procedure

Though not a formal process, the USPTO has long allowed third parties to submit evidence regarding registrability of a mark during examination of a trademark application. Section 3 of the TMA now formalizes that process by: (1) expressly allowing third party evidence submissions; (2) setting requirements that the submission include identification of the grounds for refusal to which the submission relates; and (3) authorizing the USPTO to charge a fee for the submission. The USPTO is required to act on that submission within two months of its filing. The decision on the submission is final, but the applicant may raise any issue regarding the grounds for refusal in the application or any other proceeding.

Presumption of Irreparable Harm for Trademark Infringement Plaintiffs

The primary goal of most trademark infringement litigation is to stop the infringing behavior, typically through injunctions. Section 6 of the TMA provides that a “plaintiff seeking an injunction shall be entitled to a rebuttable presumption of irreparable harm.” This language codifies a standard that most courts had applied to establish harm before the U.S. Supreme Court’s 2006 decision in eBay v. MercExchange, LLC.[5] In eBay, the Supreme Court held that patent owners were no different than any other litigant seeking equitable relief, so those owners must demonstrate irreparable harm to be entitled to a permanent injunction. Several courts then applied eBay’s holding by extension to trademark owners, finding they also must demonstrate irreparable harm for an injunction to be warranted.[6] Some courts, like the Fifth Circuit, have struggled in their application of eBay to trademark infringement disputes, leading to confusion and disagreement among lower district courts.[7] The eBay decision thus ultimately led to a circuit split on whether the rule presuming irreparable harm remained valid in Lanham Act cases.[8]

The TMA makes clear that trademark infringement plaintiffs are entitled to the presumption that they will be irreparably harmed if the infringer is allowed to continue use of the infringing trademark. Section 6(b) further confirms the retroactivity of this presumption, stating that Section 6’s amendment “shall not be construed to mean that a plaintiff seeking an injunction was not entitled to a presumption of irreparable harm before the date of enactment of this Act.” This change increases the likelihood that trademark infringement plaintiffs will be awarded preliminary and permanent injunctive relief, decreasing overall litigation costs and evidentiary burdens on plaintiffs.

The Trademark Modernization Act of 2020 addresses a grab-bag of challenging trademark issues that together provide additional protections for trademark owners and, ultimately, consumers. Trademark owners seeking to register their marks will soon have expedited procedures to tackle fraudulent or “deadwood” registrations that block their trademark applications. The Act further resolves a circuit split for awarding an injunction, easing the burden on trademark owners to show harm. While the ultimate effect of the TMA remains to be seen, these changes should empower trademark holders with additional tools to combat problematic registrations and ease litigation burdens.

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[1] Statement of the Commissioner for Trademarks Mary Boney Denison before the United States House Subcommittee on Courts, Intellectual Property, and the Internet Committee on the Judiciary, Jul. 18, 2019 (available at https://www.uspto.gov/about-us/news-updates/statement-commissioner-trademarks-mary-boney-denison-united-states-house_).

[2] Id.

[3] Id.

[4] Services must actually be offered in connection with the advertisement to qualify as “use.” Couture v. Playdom, Inc., 778 F.3d 1379 (Fed. Cir. 2015).

[5] 547 U.S. 388 (2006).

[6] See Peter J. Karol, Trademark’s eBay Problem, 26 Fordham Intell. Prop. Media & Ent. L.J. 625, 636–653 (2016) (available at https://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=1623&context=iplj); Mark A. Lemley, Did eBay Irreparably Injury Trademark Law?, 92 Notre Dame L. Rev. 1795 (2017) . See also Gene Quinn, “Why eBay v. MercExchange Should, But Won’t, Be Overruled”, IPWatchdog.com (Feb. 16, 2020) (https://www.ipwatchdog.com/2020/02/16/ebay-v-mercexchange-wont-overruled/id=118929/).

[7] See Karol, supra n. 5 at 646–47.

[8] Testimony of Douglas A. Rettew, “Fraudulent Trademarks: How They Undermine the Trademark System and Harm American Consumers and Businesses” at p. 13, Hearing Before the Senate Committee on the Judiciary, Subcommittee on Intellectual Property (Dec. 3, 2019) (available at https://www.judiciary.senate.gov/imo/media/doc/Rettew%20Testimony.pdf).

The Case Act of 2020 provides cost-effective means to protect copyrights. With the passage of the Copyright Alternative in Small-Claims Enforcement Act of 2020 (the “CASE Act”), Congress has blessed the creation of an alternative forum for copyright infringement claims, the Copyright Claims Board (“CCB”) within the U.S. Copyright Office, in which claimants can seek to resolve certain copyright claims in a more expeditious and cost effective manner.

The CCB has authority to render decisions on copyright infringement claims, declaratory judgment claims, misrepresentation claims in connection with the Digital Millennium Copyright Act (DMCA) notifications, and counterclaims for infringement or DMCA misrepresentations that arise under the same transaction, occurrence, or agreement at issue in the primary claim. However, the board has limited jurisdiction to hear matters with a maximum amount of damages in the aggregate of $30,000, excluding fees and costs. Moreover, the CCB does not have authority over claims or counterclaims previously decided or currently pending before another court, claims or counterclaims by or against a Federal or State governmental entity, and claims or counterclaims asserted against a non-United States resident individual or entity.

In direct contrast to federal court litigation, a claimant before the CCB is only required to have a pending application for copyright registration prior to initiating an action, but the CCB cannot make a determination on a claim over a pending application until after the Copyright Office has issued a registration and the other parties have had an opportunity to address the registration certificate. Subject to the $30,000 cap mentioned above, the CCB can award actual damages and profits under existing copyright law, while considering any mitigation efforts of the infringer. Prior to the CCB’s final determination, a claimant may elect to recover statutory damages provided by existing copyright law subject to the limitations that damages for timely registered works may not exceed $15,000 for each work, and damages for works not timely registered are limited to $7,500 for each work or a total of $15,000 in any one proceeding. In awarding statutory damages, the CCB is required to consider mitigation efforts of the infringer, but not willfulness.

The 2020 Protecting Lawful Streaming Act seeks to stop widespread unlawful streaming. The Protecting Lawful Streaming Act of 2020 was introduced on December 10, 2020 by Senator Thom Tillis, and ultimately added to the omnibus Consolidated Appropriations Act, 2021 that was signed into law on December 27, 2020. (Division Q, Title II, § 211). Prior to releasing the text of the bill, Senator Tillis received heavy pushback from tech companies and free speech advocates that were concerned that the intent of the bill was to target individual online streamers. However, the language of this new provision very clearly targets commercial or for-profit websites operating as “digital transmission services” engaged in wide-spread illicit streaming or piracy. The new law prohibits unauthorized digital streaming of copyrighted work when the streaming is done willfully or for the purpose of commercial gain, and the website is: (1)primarily designed for unauthorized streaming; (2) has no commercially significant purpose other than unauthorized streaming; or (3) is intentionally marketed to promote its use for unauthorized streaming.

Ordinary violations can amount to being fined and/or imprisonment for up to three years, while violations concerning works being prepared for commercial public performance allow for fines and/or imprisonment for up to five years if the violator knew or should’ve known that the work was being prepared for commercial public performance. Repeat offenders may be sentenced to prison for up to ten years for second and subsequent convictions under this section.

If you had ears in mid-2014, you’ve heard pop-star Taylor Swift’s Billboard Hot 100 song, “Shake it Off.” The lyrics feature a catchy phrase (apologies in advance for getting it stuck in your head):

‘Cause the players gonna play, play, play, play, play

And the haters gonna hate, hate, hate, hate, hate

Baby, I’m just gonna shake, shake, shake, shake, shake

I shake it off, I shake it off’

Based on these lyrics, two song writers from 3LW, an all-girl group that gained popularity in the early 2000s, sued Taylor Swift for alleged copyright infringement of their song Playas Gon’ Play. The suit was filed back in 2017 in the U.S. District Court for Central California.

In this latest development, Swift filed a motion to dismiss with the district court on the ground that the disputed lyrics lacked sufficient originality to enjoy copyright protection, for various reasons. The district court agreed with Swift, and the plaintiffs appealed to the Ninth Circuit. The Ninth Circuit reversed the dismissal on the ground that the originality of the lyrics could not be determined as a matter of law and remanded the case back to the district court with the directive to consider Swift’s alternative arguments in support of the motion to dismiss.

Both sides filed supplemental briefs, with Swift arguing that Plaintiffs’ claim is precluded because the unprotected ideas underlying the alleged copied words merged with those words, rendering them unprotectable too. That is, Swift alleged that the “merger doctrine” precluded copyright protection because there is practically only one way to express the idea of “people will do what they will do”.[1]

Copyright protection does not extend to ideas, only to expression. And the merger doctrine recognizes that “some ideas can only be expressed in a limited number of ways. . . . When expression is so limited, idea and expression merge.”[2]  In that situation, because the would-be copyright owner cannot own the idea itself, courts cannot protect the expression.

Citing the merger doctrine, Swift argued that the expressions players gonna play and haters gonna hate were merged with the underlying idea that “people will do what they will do.” The district court disagreed that such a finding was appropriate at this stage in the litigation, holding that:

But, as Plaintiffs note, their lyrics, as alleged, are more complex than people will do what they will do, and it is not abundantly clear from the Complaint that there are sufficiently few means of expressing this idea.

Accordingly, the district court denied Swift’s motion. So, for now, Plaintiffs’ case will “keep cruising, can’t stop, won’t stop moving.”[3]

The case is: Sean Hall et al. v. Taylor Swift et al., Case No. CV 17-6882-MWF.

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[1] Courts will not protect a copyrighted work from infringement if the idea underlying the work can be expressed only in one way, lest there be a monopoly on the underlying idea. See EtsHokin v. Skyy Spirits, Inc., 225 F.3d 1068, 1082 (9th Cir. 2000)).

[2] See e.g., Zalewski v. Cicero Builder Dev., Inc., 754 F.3d 95, 102 (2d Cir. 2014) (internal cites omitted).

[3] Lyrics to “Shake it Off” by Taylor Swift, with Max Martin, Shellback.

In United States Patent & Trademark Office v. Booking.com B. V.,[1] SCOTUS held that a mark styled as “generic.com” is eligible for federal trademark registration if the applicant shows  “generic.com” is not a generic name to consumers. Although the Court did not expressly say so, this decision chips away at the rule that generic terms cannot become protectable marks.[2]

A travel-reservation agency known as “Booking.com” sought to register a trademark for its website of the same name with the United States Patent and Trademark Office (“PTO”). The PTO denied the registration concluding that the term “Booking.com” is a generic name, a name of a class of products or services instead of a specific brand. So, BOOKING.COM was ineligible for federal trademark registration.

According to the PTO, “booking” was a generic term for online hotel-reservations, and the combination of generic term with “.com” did not overcome this finding.[3] Booking.com sought judicial review, and the District Court determined that BOOKING.COM—unlike the term “booking” standing alone—is not generic. The Court of Appeals affirmed and the PTO sought review with SCOTUS.

The 8–1 majority opinion plays out a clash between two principles of trademark law: the ability to distinguish one’s goods from another’s based on consumer recognition and the need to leave generic terms in the public domain.[4]

The PTO relied on the principle articulated in Goodyear’s India Rubber Glove Mfg. Co. v. Goodyear Rubber Co., 128 U. S. 598 (1888), which stated that a generic term followed by word “company” is not trademark-eligible. But the majority opinion distinguished the prior ban on generic terms by noting that that the mark “generic.com” implies a specific website domain that is only occupied by one entity at a time. So, if the public perceives “generic.com” as a specific brand name—which, in the case of BOOKING.COM, consumer surveys indicate it does—the term acquires the descriptiveness needed for federal trademark registration.[5]

Although the majority noted that marks like BOOKINGS.COM would be “weak” marks that would necessarily be difficult to enforce in court, Justice Breyer, the lone dissenter, urged that the majority underestimated the anticompetitive effects of the holding. According to Justice Breyer, “[t]erms that merely convey the nature of the producer’s business should remain free for all to use.”[6]

With this decision, SCOTUS has decisively expanded the availability of federal registration for domain names containing generic terms. This relaxing of the sweeping anti-generic rule may indicate an uptick in trademark registrations for historically generic terms (as long as they include “.com”).

The author wishes to thank their law clerk, Joseph Balhoff, for their assistance in preparing this article. 

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[1] The opinion is available at: https://d2qwohl8lx5mh1.cloudfront.net/5OsQDpOQ2dJ63nh0n-PMog/content.

[2] See Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir. 1976).

[3] United States Patent & Trademark Office v. Booking.com B. V., No. 19-46, 2020 WL 3518365, at *2 (U.S. June 30, 2020).

[4] Id. at *9 (Breyer, J., dissenting).

[5] Id.

[6] Id. at *9 (citing Goodyear, 128 U.S. at 603).