An owner of a trademark or service mark used in commerce may request registration on the principal register by filing an application with United States Patent and Trademark Office.  The registration provides certain benefits including prima facie proof of ownership and validity and constructive use throughout the country.  While registration is great for brand management and protection, once the registration is obtained notice should be provided.  

15 U.S.C. 1111 provides that a registrant may give notice that its mark is registered by displaying with the mark the words “registered U.S. Patent and Trademark Office” or “Reg. U.S. Pat. & Tm. Off.” or the R enclosed within a circle ®.  The statute further provides that in any suit for infringement by a registrant failing to give notice of registration, no profits or damages shall be recovered under the provisions of this chapter unless the defendant had actual notice of the registration.  While this statute does not create a defense in an infringement action, it does limit the remedies a registrant may pursue. A registrant who fails to provide notice of registration may still obtain an injunction but will not be able to recover damages and profits, unless the registrant can prove the defendant had actual notice of the registration.    

A registrant should be sure to put a notice adjacent to the mark when used in connection with the brand of goods or services subject to the registration. The notice should be put on a label, box, or website, as may be appropriate, to give this notice of registration.  If an infringement action becomes necessary, the registrant will want the be able to pursue all possible remedies, and not be limited by registrant’s own failure to give notice.   

In the fall of 2023, the Biden Administration issued the Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence.[1] In section 5.2 of the order, the administration charged the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office (USTPO) with three directives:

1. Publish guidance to USPTO patent examiners and applicants addressing inventorship and the use of AI, including generative AI, in the inventive process and how inventorship issues ought to be analyzed;

2. Issue additional guidance to address other considerations at the intersection of AI and IP, which could include updated guidance on patent eligibility to address innovation in AI and critical and emerging technologies; and

3. Consult with the Director of the United States Patent Office and issue recommendation to the President on potential executive actions relating to copyright and AI.

Accordingly, the USPTO responded to its first directive and issued its Inventorship Guidance for AI-Assisted Inventions on February 13, 2024.[2] The guidance provides that AI-assisted inventions are not categorically unpatentable. Instead, an analysis utilizing the Pannu factors determines if the human inventor(s) has made a significant contribution to each claim in the patent or patent application. The USPTO also provides examples in its guidance, as well as more specific examples on its website.[3]

In the fall of 2022, the Federal Circuit in Thaler v. Vidal affirmed the holding “that only a natural person can be an inventor.”[4] This holding remains aligned with the policy that patents function to incentivize and reward human ingenuity. However, the court did not answer the question of AI as a joint inventor.

In its guidance, the USPTO makes clear that the term “individual” throughout the MPEP refers to a human being.[5] When naming the inventor(s), the inclusion of AI or any system will render the invention unpatentable.[6] While there is no requirement for a named inventor to contribute to every claim in an application,[7] at least one named inventor must have invented each claim.[8] Therefore, in the case of an individual working solely with an AI system, the individual must significantly contribute to every claim. The guidance tells us that to significantly contribute means to meet the Pannu factors.

Under the Pannu factors, each inventor must: “(1) contribute in some significant manner to the conception or reduction to practice of the invention, (2) make a contribution to the claimed invention that is not insignificant in quality, when that contribution is measured against the dimension of the full invention, and (3) do more than merely explain to the real inventors well-known concepts and/or the current state of the art.”[9] In its footnote, the guidance explains that the mention of reduction to practice in the Pannu factors is an acknowledgement of the simultaneous conception and reduction to practice doctrine used in unpredictable technologies.[10] Applicants are reminded that the main inquiry is that of conception.[11] The Pannu factors are not a basis to conclude that reduction to practice, alone, is sufficient to demonstrate inventorship.[12]

To assist applicants and USPTO personnel in determining inventorship, the guidance provides a non-exhaustive list of “guiding principles” for the application of the Pannu factors in AI-assisted inventions:

1. The use of AI does not negate a person’s contributions as an inventor if the person contributes significantly to the invention.

2. Merely presenting a problem to an AI system may not be a significant contribution. However, a significant contribution could be found in the construction of the prompt in view of a specific problem to elicit a particular solution from the AI.

3.Although reducing an invention to practice alone is not a significant contribution, a person who makes a significant contribution to the output to create an invention may be a proper inventor, even if that person is unable to establish conception until the invention has been reduced to practice.

4. The designing, building, or training of the AI system in view of a specific problem to elicit a particular solution may be a significant contribution to the invention created with the AI system.

5. A person simply owning or overseeing an AI system that is used in the creation of an invention, without providing a significant contribution to the conception of the invention, does not make that person an inventor.[13]

These guiding principles attempt to alleviate some uncertainty surrounding “a significant contribution” under the Pannu factors. Applicants would be wise to keep the Pannu factors, as well as these principles, in mind early in the invention process. In addition, an inventorship analysis will assist an applicant in drafting the claims, as the USPTO requires an inventor (or one of the joint inventors) to significantly contribute to each claim.

As for the various duties of patent owners and applicants, the USPTO claims it is not changing or modifying its duty of disclosure.[14] However, the USPTO reminds those of their existing duty of disclosure and its applicability to the inventorship inquiry. Parties have a duty to disclose to the USPTO information that raises a prima facie case of unpatentability or that is inconsistent with a position an applicant takes in asserting inventorship or opposing its rejection.[15] This information could include evidence of an inventor’s lack of a significant contribution to the invention because the person’s purported contribution(s) was made by an AI system.

According to the USPTO, the duty of reasonable inquiry will remain the same, as well.[16] Identical to FRCP 11(b), the duty calls for an “inquiry reasonable under the circumstances” to ensure that (1) the paper is not being presented for any improper purpose; (2) the legal contentions are warranted by law; (3) the allegations and other factual contentions have evidentiary support; (4) and the denials of factual contentions are warranted on the evidence.[17] As for AI-assisted inventions, this inquiry should include questions about whether and how AI is being used in the creation process. Applicants and patent practitioners should conduct their own assessment of whether the contributions made by the natural person(s) rise to the level of inventorship as expressed in the USPTO’s guidance.

While the continuous evolution of AI will likely require further modifications to the idea of “inventorship,” this guidance will likely lead the courts’ analyses for now. The USPTO’s five guiding principles given above aim to counteract the ambiguity of a significant contribution in the Pannu factors. Applicants and practitioners should utilize these principles early in the application process as they are likely to appear in the litigation of AI-assisted inventions. For further assistance, the USPTO provides more specific examples of significant and insignificant contributions on its website.[18] The period for public comment on this guidance will remain open until May 13, 2024.

Special thanks to Michael Doggett, LSU Law Class of 2024, for his research and assistance in writing this article.

[1] Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence | The White House

[2] 89 Fed. Reg. 10043 (Feb. 13, 2024).

[3] AI-related resources | USPTO (Example 1 and Example 2 under “Inventorship”).

[4] Thaler v. Vidal, 43 F.4th 1207, 1213 (Fed. Cir. 2022), cert denied, 143 S. Ct. 1783 (2023).

[5] 89 Fed. Reg. 10046 (Feb. 13, 2024) (citing Thaler v. Vidal, 43 F.4th at 1211).

[6] Id.

[7] MPEP 2109.01.

[8] 35 U.S.C. 115(a) (“An application for patent that is filed under section 111(a) or commences the national stage under section 371 shall include, or be amended to include, the name of the inventor for any invention claimed in the application.”) (emphasis added).

[9] Pannu v. Iolab Corp, 155 F.3d 1344, 1351 (Fed. Cir. 1998).

[10] 89 Fed. Reg. 10047, fn.32 (Feb. 13, 2024).

[11] Id.

[12] Id.

[13] 89 Fed. Reg. 10048 (Feb. 13, 2024) (paraphrased).

[14] 89 Fed. Reg. 10049 (Feb. 13, 2024).

[15] 35 U.S.C. 101.

[16] 89 Fed. Reg. 10050 (Feb. 13, 2024).

[17] 37 CFR 11.18(b)(2).

[18] AI-related resources | USPTO (Example 1 and Example 2 under “Inventorship”).

On December 11, 2023, the Copyright Review Board affirmed the Copyright Office’s decision to reject Ankit Sahni’s application to register the AI-generated work depicted above.  The artwork, entitled “SURYAST” was based on a photograph taken by Sanhi, which Sanhi submitted into the RAGHAV Artificial Intelligence Painting App (“RAGHAV”) and instructed to paint in the style of Vincent van Gogh’s “Starry Night”.  Sanhi submitted to the Copyright Office that he also chose “a variable value determining the amount of style transfer” for the program to apply. In effect, Sanhi was attempting to register the artwork as a derivative of his photograph.

The Copyright Office initially rejected the application on the premise that it lacked the human authorship necessary to support a copyright claim, specifically rejecting Sanhi’s assertions that the work contained some human creative input. Instead, the Copyright Office stated that the “human authorship cannot be distinguished or separated from the final work produced by the computer program.”

Sanhi sought reconsideration, which the Copyright Office rejected again.  The Copyright Office opined that the work was a classic example of a derivative work in that it was a digitalization of a photograph. Because copyright in derivative works is in the transformative elements of the work (rather than the work as a whole), current guidance would require that the derivative work’s transformative elements be created by a human author.  Under this framework, the Office noted that derivative works are analyzed to determine whether the new authorship of the derivative work meets the statutory requirements for protection. Here, the Office found that the RAGHAV app contributed the new elements and, therefore, the derivative authorship was not the result of human creativity or authorship.

On July 10, 2023, Sanhi requested a second reconsideration, this time asserting the human elements of the work and attempting to downplay RAGHAV’s role as that of an “assistive software tool” akin to Adobe photo editing software. The Board also rejected these arguments, but its reasoning is instructive as to how AI-generated work may be found to be protectable in the future.

The opinion heavily cites the relatively recent decision by the U.S. District Court for the District of Columbia in Thaler v. Perlmutter, 2023 WL 5333236, which reasoned that the originator of a copyrightable work must be human to be protectable under the law.[1] For more information on the Thaler decision, please see our prior article at Thaler v. Shira Perlmutter, et al.: The Intersection of Human Control Over Artificial Intelligence and Human Authorship as a Necessary Requirement of Copyright .

The Board also cites to recent guidance promulgated by the Copyright Office. In effect, when analyzing AI-generated material, the Copyright Office must decide whether the human or the computer program is the “creator” of the generated work.

[W]hether the ‘work’ is basically one of human authorship, with the computer [or other device] merely being an assisting instrument, or whether the traditional elements of authorship in the work (literary, artistic, or musical expression or elements of selection, arrangement, etc.) were actually conceived and executed not by man but by a machine.[2]

This determination must be made on a case-by-case basis.  If all of a work’s “traditional elements of authorship” are generated by AI, the work cannot be registered due to a lack of human authorship.  However, if the work containing AI-generated material also contains sufficient human authorship to support a claim to copyright, then the Office will register the human’s contributions. For this reason, an applicant seeking to protect the human elements of a co-generated work should submit a limitation in the copyright application noting which materials are AI-generated and not protectable.

The decision by the board was very specific to the facts presented. Sanhi made a compelling argument to aggrandize his involvement, captioning it as “conceiving, creating and selecting an original [base] image,” “selection of the style image,” and “selecting a specific variable value determining the amount and manner of style transfer” which “cumulatively resulted in the [Work], which is the direct outcome of [his] creative expression and contribution.” But the Board was unconvinced. Rather, the Board simplified his contributions to three inputs (selecting a photo, providing a style, and providing a variable to the amount of style to which the program would apply), which ultimately did not have any control over where elements were placed or how they would ultimately appear. The Board rebuffed Sanhi’s argument that RAGHAV acted akin to “a camera, digital tablet, or a photo-editing software program,” instead finding that the program (and not Sanhi) made the determinative and creative steps in creating the work. The important takeaway is that Sanhi’s selection of inputs does not render the work copyrightable. Copyright law only protects the particular expression of an idea and not the idea itself.  Thus, the  inputs represent an unprotectable idea or concept, and not the particular expression of that idea, which was created by the AI program.

This opinion stands as another warning to those creating works with generative artificial intelligence. The Copyright Office and Courts continue to rule against the protection of works created by AI. As these opinions are rendered, we hope a line will solidify definitively showing what is protectable. In the meantime, it should be noted that nothing prevents Sanhi from registering his original photograph which he took with a camera. 

The Copyright Review Board’s decision is available at https://copyright.gov/rulings-filings/review-board/docs/SURYAST.pdf.

[1] See id. At *4 (“By its plain text, the 1976 Act . . . requires a copyrightable work to have an originator with the capacity for intellectual, creative, or artistic labor. Must that originator be a human being to claim copyright protection? The answer is ‘yes.’”)

[2] Copyright Registration Guidance: Works Containing Material Generated by Artificial Intelligence, 88 Fed. Reg. 16,190, 16,192 (Mar. 16, 2023) (quoting U.S. COPYRIGHT OFFICE, SIXTY-EIGHTH ANNUAL REPORT OF THE REGISTER OF COPYRIGHTS FOR THE FISCAL YEAR ENDING JUNE 30, 1965, 5 (1966));

The big patent news this holiday season involves a purported ban on the new Apple Watch. In October 2023, the International Trade Commission (the “ITC”) ruled that the blood oxygen monitoring features in these devices infringed a patent from Masimo, a medical device company. (Inv. No. 337-TA-1266). In response, Apple has announced that it will stop selling the affected watches at its stores and online effective December 24, 2023. This ruling will impact Apple’s watch sales, which news outlets report to be an estimated $16 billion dollar industry. Why then do the headlines on this story notably lack the large damage awards one would typically see in a finding of patent infringement? The answer highlights some of the pros and cons of using the ITC to enforce patents over federal district courts.

The ITC is a quasi-judicial federal agency with broad investigative responsibilities on matters of international trade. An increasingly popular function of the ITC is serving as an alternate forum to litigate intellectual property disputes arising under Section 337 of the Tariff Act of 1930, as amended (19 U.S.C. § 1337), commonly referred to as a “Section 337 investigation.” Section 337 vests the ITC with authority to investigate and issue decisions involving importation of articles that constitute unfair competition, which includes the importation of articles infringing on a valid patent, trademark, or copyright.

The ITC provides a lot of practical benefits over a traditional district court litigation. Section 337 investigations are assigned to an Administrative Law Judge (“ALJ”) that oversees the entirety of the proceeding, beginning once the ITC’s investigation begins. Compared to district court litigation, which can (and often does) drag on for years, a trial-like hearing in ITC proceedings generally occurs within one year from the IP owner’s complaint of unfair competition. Indeed, here, Masimo obtained the ultimate ban in less than two years from instituting the proceeding. And it did so in front of administrative law judges and not a lay jury which is likely to have some semblance of bias for Apple and its products. This has saved Masimo a lot of time and resources.

However, the ITC is very limited in the types of relief it can grant. The headlines on the Apple Watch ban notably lack any discussion about damages because the ITC has no authority to award damages for infringement. The ITC only has the power to grant injunctive relief, generally in the form of an Exclusion Order that prohibits the importation of infringing goods into the United States. Specifically, the ITC has no jurisdiction over products that are already in the United States. Only a U.S. District court can enjoin the sale of goods within the United States. As such, the ban does not prevent Apple or its suppliers from continuing to sell products that have already been imported into or otherwise are manufactured in the U.S.

If the Final Determination includes a finding of infringement, like it did against Apple, the ITC has the power to issue an Exclusion Order, either Limited (“LEO”) or General (“GEO”). A LEO excludes the importation of infringing goods by the infringing party named in the Section 337 investigation. A GEO, however, provides for the widespread exclusion of the importation of infringing goods regardless of the importing party’s identity or involvement in the Section 337 investigation. The orders are provided to U.S. Customs and Border Protection (i.e., “Customs”), which is tasked with the enforcement of these Exclusion Orders and preventing the importation of infringing goods into the U.S. Exclusion Orders are prospective in nature, however, and do not impact the use or sale of goods that are already in the United States.

Finally, because the ITC is part of the executive branch, the U.S. President has the power to disapprove a ban. The President has 60 days from the order to review and effectively veto the order. While this veto power has only been used five times in the history of the ITC, it was last used in 2013 when President Obama overturned a ban related to the Apple iPhone. (Inv. No. 337-TA-794). If the President does not veto the ban, it will be finalized, and Apple will be entitled to appeal the determination to the Federal Circuit.

This blog is an update to “Legal Issues with Using AI to Create Content – Written with Help from AI” by Devin Ricci on April 28, 2023

On August 18th, the United States District Court for the District of Columbia issued an opinion stating that Artificial Intelligence (AI) generated artwork lacks “human authorship,” thus it cannot be the subject of a valid copyright claim. This decision raises many issues regarding copyright ownership that will require further court involvement and/or policy reform.

The primary challenge arising from AI-generated artwork pertains to copyright existence and ownership. Copyright law traditionally assigns authorship to individuals who create original works. However, in the case of AI, determining authorship becomes complex. Some argue that since AI systems are essentially tools programmed by humans, the programmers should retain authorship rights. Others believe that if AI can autonomously create something new without direct human intervention, it should be granted certain rights. This debate challenges the very essence of copyright law, which is built around the concept of human creativity.

Case Summary

The plaintiff, Stephen Thaler, used the “Creativity Machine,” a generative AI technology, to generate a piece of artwork. Thaler was unsuccessful with obtaining a copyright registration for the AI-generated artwork. In the copyright application, Thaler identified “Creativity Machine” as the author. The United States Copyright Office (“USCO”) denied the application because the work “lack[ed] the human authorship necessary to support a copyright claim.” Thereafter, Thaler filed a complaint in the D.C. District Court against the USCO and its director requesting the refusal be set aside and the AI-generated artwork be registered.

Thaler filed a motion for summary judgment arguing that AI-generated work is copyrightable because the Copyright Act provides protection to “original works of authorship.” This argument was premised on Thaler’s assertion that “author” is not explicitly defined in the Copyright Act and that the ordinary meaning of “author” encompasses generative AI. Ultimately, the D.C. District Court disagreed. The Court held the Copyright Act plainly requires human authorship. As explained by the Court, an “author” is “an originator with the capacity for intellectual, creative, or artistic labor,” which is necessarily a human being.

Implications and Considerations

This decision raises a host of questions and demonstrates that a more comprehensive legal framework is required as AI generated content becomes more sophisticated and prevalent. AI has revolutionized various industries, and the realm of creative expression is no exception. AI-generated artwork has gained significant attention in recent years, raising fascinating questions about the intersection of technology, creativity, and intellectual property rights. As AI systems create artwork independently, it becomes imperative to analyze the implications of this emerging trend on copyright, ownership, and the very definition of creativity. The legal framework is continually evolving and there are many issues that content creators, artists, and marketing companies need to be cognizant of as the legal framework develops.

If this ruling is upheld, a work created solely by AI theoretically is not susceptible to copyright protection at all. Because copyright law is preemptive, meaning it exclusively governs the subject matter of claims that fall within the purview of the Copyright Act, this could severely limit the ability to prevent infringement of an AI-generated work. In theory, because the work would not be protectable, there is no property right to infringe and may not be a legal basis to prevent third party use of the material. 

It is important to note that this recent decision may not stretch to underlying works created by a human, or to the extent a human could be considered a co-author of AI-generated content. In any event, it does implicate works where AI is fully creating the work with little to no human involvement. For example, if you use a program similar to the Creativity Machine and type into the program: “create a picture of Santa getting run over by a reindeer with cookies flying everywhere and a dog laughing,” the resulting image would not be protectable under this decision. In particular, advertising companies should be aware that AI-generated advertisements may not be subject to copyright protection.

However, there must be some middle ground between complete human authorship and complete AI-generated content. AI might be utilized in developing a work, but if there is enough human involvement it should be fair to say there is human authorship. Perhaps a photographer snaps a photograph and uses an AI editing tool to filter/edit the photo. Is the photographer’s involvement enough to make the edited photo a human-authored work? How much human involvement is required to constitute authorship? Courts will have to wrestle with the intersection of AI’s involvement in creative works to sort out these questions. Otherwise, it will be up to Congress to create a new framework for addressing AI generated or augmented works.

Conclusion

AI-generated artwork represents a groundbreaking fusion of technology and creativity that challenges established norms in the art and legal worlds. The complex questions it raises about copyright, authorship, and the essence of creativity underscore the need for collaborative efforts among legal experts, artists, programmers, and policymakers. Balancing the rights of human creators and the capabilities of AI will shape the future landscape of artistic expression and intellectual property rights.

On June 29, 2023, the Supreme Court adopted a restrictive view of the extraterritorial application of the Lanham Act, holding that federal trademark law cannot support a claim for trademark infringement against solely foreign conduct.

The case is Abitron Austria GmbH v. Hetronic International, Inc. Hetronic, an Oklahoma-based corporation, sells a wide range of radio remote controls in over forty-five countries, all of which are marked by their distinctive black-and-yellow trade dress. In 2006, Hetronic entered distribution and licensing agreements with Hydronic Steuersysteme GmbH (later purchased by Abitron Austria GmbH). These agreements authorized Hydronic to build and sell Hetronic-branded products so long as the parts were purchased directly from Hetronic.  In 2011, Hydronic began reverse-engineering Hetronic parts and contracted new suppliers to source them. When Abitron purchased Hydronic in 2014, they began selling products identical to Hetronic’s remote controls in foreign markets with the recognizable black-and-yellow coloring. Prior to litigation, Abitron’s global sales revenue from infringing products amounted to over $90 million, of which $240,000 came from U.S. sales.

A jury in the District Court for the Western District of Oklahoma awarded Hetronic $90 million in damages for Lanham Act violations to account for their lost revenue in both the U.S. and abroad. The District Court also granted Hetronic’s motion for a permanent injunction against Abitron’s infringement activities worldwide. The Tenth Circuit affirmed the injunction but narrowed it to the countries in which Hetronic marketed and sold products. 

The Supreme Court granted certiorari on the issue of whether the Lanham Act applies to infringing uses of trademarks outside of the United States. To assess the issue, the Court applied a two-step framework. The Court first asked if the statute explicitly applies to foreign conduct. The Lanham Act applies to persons who, without the consent of the trademark registrant, “use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark…[if] such use is likely to cause confusion…”. No mention is made of foreign versus domestic use of a mark, so the Court found the Lanham Act did not explicitly indicate it applies to foreign conduct.

Second, the Court considered the “focus” of the statute and whether the “conduct relevant to the focus” occurred in the U.S. Hetronic argued that the goal of the Lanham Act is to avoid consumer confusion or mistake, and so long as consumer confusion is likely to occur in the U.S., it does not matter whether the infringing products are sold in the U.S. or abroad. In response, Abitron contended – and the Supreme Court ultimately agreed – that the focus of the Lanham Act is to avoid the unauthorized use of a trademark in U.S. commerce, meaning that profits lost to trademark infringers abroad cannot be recovered in U.S. courts. “Use in commerce” is the “dividing line between foreign and domestic applications of these Lanham Act provisions.” Therefore, the basis of Abitron’s liability for infringing product sales is limited to the goods sold directly to U.S. customers, a mere $240,000.

The Court unanimously agreed that the infringement scope was limited to domestic activity but split 5-4 on the issue of when an infringing activity becomes “domestic”. Writing for the majority, Justice Alito opined that an infringing use is only domestic when the use in commerce occurs within a U.S. state or territory. Justice Sotomayor penned a concurrence in which she agreed with the overall finding but suggested that the trademark infringement provisions of the Lanham Act could extend to foreign sales when there is a likelihood of U.S. consumer confusion. 

During oral argument Justice Jackson posed hypothetical questions about how the Lanham Act could apply to foreign sales of infringing goods later resold in the U.S., such as when an American traveler purchases counterfeit designer purses in another country and then resells them inside of the U.S. Justice Jackson continues this line of thinking, writing that the Lanham Act could apply to a foreign company whose goods are resold in the U.S. or who engages in online activities that penetrate U.S. commerce without a physical presence in the country.

In many ways, the decision is unsurprising. The Supreme Court’s decision aligns with the international norm of each country granting and enforcing their own trademark rights within their own borders. In the future, U.S. trademark owners will need to seek relief in foreign jurisdictions if the infringement occurs outside of the U.S. The Supreme Court’s focus on “use in commerce” also aligns with prior U.S. case law in which courts have established jurisdiction over foreign companies that sold infringing goods in the U.S. Yet, the opinion also leaves open questions. The majority opinion explicitly limited the scope of the decision, stating that the case did not present the opportunity to deeply explore the meaning of “use in commerce”, so the particulars of that phrase will be left to the lower courts, leaving some uncertainty as to what would constitute actual participation in domestic commerce.

Read the opinion here.

Special thanks to Mattie Kleinpeter, Tulane Law Class of 2024, for her research and assistance in writing this article.

United States District Court Judge P. Kevin Castel issued an opinion on June 22, 2023, imposing sanctions and other penalties on the attorneys who relied on the artificial intelligence application, ChatGPT, in citing to fake cases in pleadings submitted to the court earlier this year.

Judge Castel’s thirty-four page opinion details the missteps of the lawyers, including filing the submission citing the fake cases, failing to withdraw the submission after opposing counsel identified the fake cases, doubling down on the existence of such cases when their validity was called into question, offering false information to the court in order to obtain an extension to a court ordered deadline, and providing “shifting and contradictory explanations” as to how and why the bogus case citations were submitted to the court.

The opinion makes clear that the real issue was the fact that the lawyers continued to mislead the court. Judge Castel wrote that, had the lawyers come clean about their actions shortly after they received the opposing parties’ brief questioning the existence of the cases, the outcome may have been different. While “poor and sloppy research” would amount to mere “objectively unreasonable” actions, the court found that the lawyers acted with subjective bad faith in violation of Federal Rule of Civil Procedure 11 based on all the subsequent failures to disclose.

Luckily for the offending attorneys, the court found that their submission of the fake opinions did not constitute a violation of 18 U.S.C. § 505. The statute states that it is a crime to knowingly forge the signature of a United States Judge or the seal of a federal court. Because the fake opinions did not include a signature or seal, the statute was not violated. But the court noted that the submission of fake opinions raises concerns with protecting the integrity of federal judicial proceedings and is an abuse of the adversary system.

Ultimately, the implicated lawyers were required to pay a penalty of $5,000 and to send letters to each individual judge falsely identified as the author of the fake opinions. Judge Castel’s opinion is a reminder that while a court may be forgiving of a lawyer’s choice to cut corners, lying to the court is still sanctionable.

Cite: Mata v. Avianca, Inc., No. 22-cv-1461, slip op. (S.D. NY. June 22, 2023).

Images from Opinion of the Supreme Court of the United States.

On June 8, 2023, the United States Supreme Court unanimously ruled in favor of Jack Daniel’s in the case of Jack Daniel’s Properties, Inc. v. VIP Products LLC, 599 U.S. ___ (2023). The case arose from Jack Daniel’s complaint about VIP’s sale of a dog toy designed to resemble a bottle of Jack Daniel’s whiskey. As shown below, there is no question that the VIP bottle is designed to resemble the Jack Daniel’s bottle, although several of the notable components are modified for comedic purposes.  For example, “Jack Daniel’s” is replaced with “Bad Spaniels”, and references to Old No. 7, is replaced with a numeric nod to dog excrement.

Jack Daniel’s sent a cease and desist letter to VIP shortly after the product launched. VIP filed suit, seeking a declaratory judgment that Bad Spaniels neither infringed nor diluted the Jack Daniel’s brand. Jack Daniel’s countersued, and the District Court initially ruled in favor of Jack Daniel’s, finding both infringement and dilution by tarnishment.

The 9th Circuit reversed on appeal. Finding that the design of the Bad Spaniels bottle was an “expressive work” parodying the elements of the Jack Daniel’s bottle for non-commercial purposes, the 9th Circuit held that the District Court erred in not applying the threshold First Amendment test derived from Rogers v Grimaldi, 875 F. 2d 994, 999 (2nd Cir. 1989). 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.” 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.” 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. The 9th Circuit remanded the dispute to the District Court to review in light of the Rogers test, where the District Court found that Jack Daniel’s could not prove the VIP product had no artistic relevance nor that the product was explicitly misleading.  The 9th Circuit affirmed the ruling, and the Supreme Court granted certiorari.

In a 9-0 opinion drafted by Justice Elena Kagan, the Supreme Court reversed the 9th Circuit’s holding. The Supreme Court criticized the 9th Circuit’s opinion that “because Bad Spaniels ‘communicates a humorous message,’ it is automatically entitled to Rogers’ protection.” The Court noted that applying Rogers to all matters where there is an expressive element would impermissibly extend Rogers to nearly all facets of life and potentially supplant the purpose of trademark law.  The Court explained that trademarks act “as source identifiers—as things that function to ‘indicate the source’ of goods, and so to ‘distinguish’ them from ones ‘manufactured or sold by others.’ And because of this, “trademarks are often expressive, in any number of ways.”

The opinion stresses that the defendant’s use must be considered in determining the applicability of the Rogers test. Citing to a litany of cases, the Court noted that the Rogers test has traditionally been used only in the context of “non-trademark” use, i.e., where the defendant has used the mark at issue in a “non-source-identifying way”, typically in an expressive function. For example, as noted by J. Kagan, the Ninth Circuit applied the Rogers test to evaluate the band Aqua’s song “Barbie Girl” when toymaker Mattel sued the group for trademark infringement. Here, the record presented evidence—including even VIP’s own admission—that VIP used the design elements as a source identifier for its products. As such, the Rogers test should not have been applied. 

The Court further reversed the 9th Circuit’s ruling as to the “fair use” defense related to dilution by tarnishment. The 9th Circuit opined that VIP’s use of the mark was non-commercial in nature even if it was used to sell a product because it “parodies” and “conveys a humorous message.” Without setting the limits of “noncommercial use”, the Court expressly rejected the opinion that every parody or humorous commentary would automatically benefit from this defense. Instead, the Court again turned to the purpose of the use as codified in Section 43 of the Lanham Act, finding that the defense does not apply when the use is as a designation of source for the person’s own goods or services, as VIP had admitted its use to be. 

In summation, the Court held as follows and remanded the case for further proceedings consistent therewith:

Today’s opinion is narrow. We do not decide whether the Rogers test is ever appropriate, or how far the “noncommercial use” exclusion goes. On infringement, we hold only that Rogers does not apply when the challenged use of a mark is as a mark. On dilution, we hold only that the noncommercial exclusion does not shield parody or other commentary when its use of a mark is similarly source-identifying. It is no coincidence that both our holdings turn on whether the use of a mark is serving a source-designation function. The Lanham Act makes that fact crucial, in its effort to ensure that consumers can tell where goods come from.

As the opinion notes, the Court did not make any decisions as to whether VIP actually infringed Jack Daniel’s trademark rights. That decision will be in the Ninth Circuit’s hands, who are ordered to review the dispute without using the Rogers test. Jack Daniel’s must still demonstrate that VIP’s products are likely to confuse an ordinary consumer as to the affiliation between VIP and Jack Daniel’s and dilute Jack Daniel’s brand, although such was already determined when the matter was first heard by the District Court. This case will likely be watched closely by famous brands who often find their brands parodied in unrelated products, as they seek to prevent any damage to their brand image.

We also note that this is the second case within the past month where the Supreme Court reined in a fair-use defense in the context of the nature of the use. In Andy Warhol Found. for the Visual Arts, Inc. v. Goldsmith, 598 U.S. ___ (2023), which we discussed here, the Supreme Court declined to extend fair use to the Andy Warhol Foundations’ licensing of a Warhol print that was based on a photograph of Prince. In that case, the Court focused on the economical use and purpose of the original photograph. The Supreme Court is clearly sending a message that fair use will continue to be fact intensive to the specific issue at hand and that the specific use of the contested material is a crucial focus point. 

When award-winning photographer Lynn Goldsmith snapped a portrait of the artist formerly known as Prince for Newsweek in 1981, she could not have predicted the cultural and legal impact the pop legend’s portrait would have. In 1984, Vanity Fair sought to license the photograph for an “artist reference” in a story about the musician. Goldsmith agreed to license a one-time use of the photograph with full attribution. Vanity Fair commissioned Andy Warhol to create a silkscreen using Goldsmith’s image and used Warhol’s piece in the magazine with attribution as promised. However, Andy Warhol would go on to create 15 additional works using the Goldsmith photograph, now known as the artist’s “Prince Series.” Although Warhol created the Prince Series nearly forty years ago and three years prior to Warhol’s death, it was not until 2016 when Condé Nast featured the “Orange Prince,” one of Warhol’s silkscreen prints, as part of its tribute to Prince’s passing that Goldsmith learned of the additional reproductions. Condé Nast paid the Andy Warhol Foundation for the Visual Arts, Inc. (“AWF”) $10,000 for the license, while Goldsmith received neither a license fee nor a source credit.

Upon failure to resolve the matter privately, AWF filed suit against Goldsmith, seeking a declaratory judgment that Warhol’s works did not infringe Goldsmith’s copyright in the original photograph, or, in the alternative, Warhol’s works constituted fair use of the subject photograph.[1] The Southern District of New York granted summary judgment to AWF on its claim of fair use, but the Second Circuit Court of Appeals reversed.

The Copyright Act motivates creativity by granting the author of an original creative work rights to reproduce their work, prepare derivatives works, and (in the case of pictorial or graphic works) display the copyrighted works publicly. This ownership interest in the creative work is balanced with the general public’s need to access the creative arts and exercise First Amendment rights. The fair use doctrine (the basis of AWF’s copyright infringement defense) allows use of a copyrighted work by persons other than the author for “purposes such as criticism, comment, news reporting, teaching . . ., scholarship, or research”[2] and is evaluated through multiple factors. On petition for writ of certiorari, AWF asked the Supreme Court to evaluate whether the Condé Nast licenses are fair use based on just the first fair use factor, “the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes.”[3] On this issue, the Supreme Court agreed with the Second Circuit that the first factor of fair use favored Goldsmith. Because AWF did not dispute that the remaining fair use factors favored Goldsmith, the Court affirmed the Second Circuit’s finding of copyright infringement.

The first factor of fair use considers the nature of and reasons for a copier’s use of an original work.[4] “The larger the difference, the more likely the . . . factor weighs in favor of fair use. The smaller the difference, the less likely.”[5] When the original and the copy share a similar purpose, there is a concern that the copy will substitute for the original. Because the copyright owner has the exclusive right to prepare derivative works of their original—that is, recasts, transformations, or adaptations of the original work—the copy must be substantially transformative to have a different purpose or character than the original and that degree of transformation must also be balanced against any commercial nature of the use.

AWF argued that the Prince Series is sufficiently transformative of Goldsmith’s original photograph because the artworks convey a different meaning or message than her photograph. Yet, because the first use factor focuses on the degree in which the infringing use has a different purpose or character, the Court ultimately sided with Goldsmith. The majority found that AWF’s licensing of the “Orange Prince” copy to Condé Nast is not a substantially different purpose than Goldsmith’s photograph. Goldsmith took the original photograph and licensed it to Newsweek for use in an article about Prince, and then similarly licensed the work to Vanity Fair in association with an article about Prince. AWF licensed the “Orange Prince” to Condé Nast for an article about Prince. “As portraits of Prince used to depict Prince in magazine stories about Prince, the original photograph and AWF’s copying use of it share substantially the same purpose,” wrote Justice Sonia Sotomayor for the majority.

The majority opinion stresses that its opinion is limited to AWF’s license to Condé Nast: “Only . . . AWF’s commercial licensing of ‘Orange Prince’ to Condé Nast, is alleged to be infringing. We limit our analysis accordingly. In particular, the Court expresses no opinion as to the creation, display, or sale of any of the original Prince Series works.”[6] A concurrence written by Justice Neil Gorsuch (joined by Justice Ketanji Brown Jackson) further argued that the subsequent use (AWF’s licensing to Condé Nast) is the relevant inquiry rather than considering the original copier’s (Andy Warhol) intent in creating the “Orange Prince.” Conversely, Justice Elena Kagan’s (joined by Justice John Robert’s) condemnatory dissent sharply criticized the majority’s purported failure to appreciate how Warhol’s work differed from Goldsmith’s photograph. The dissent specifically cited to the Court’s decision just over two years ago in Google LLC v. Oracle America, Inc., where Warhol’s works were deemed the “perfect exemplar of a ‘copying use that adds something new and different.’”[7] The majority opinion dismisses the dissent as “a false equivalence between AWF’s commercial licensing and Warhol’s original creation” which results in “a series of misstatements and exaggerations, from the dissent’s very first sentence.”[8]

Most often in fair use inquiries, the dispute focuses on a copier’s use of the copyrighted work. It is not often a court is presented with the issue of a third party’s independent use (that is, use without the involvement of the copy’s creator) of the subsequent work. The majority opinion is narrow and focuses on one specific fair use factor in the context of one specific use. The Court’s decision cautions that the motivations behind the third party’s use must be considered on their own merit, rather than allowing the use and motivations of the original work to automatically transfer to the third party’s use.

Significant also to the finding of infringement is that the remaining fair use factors—including the fourth factor, “the effect of the use upon the potential market for or value of the copyrighted work”—was admitted to favor Goldsmith. In fact, that is precisely what occurred in this matter. Throughout her career, Goldsmith regularly photographed celebrities and licensed those photographs to magazines for articles about that celebrity. Condé Nast needed a picture of Prince for its 2016 memorial article about Prince, and it licensed the “Orange Prince” from AWF instead of Goldsmith’s photograph. This use “served the same essential purpose of depicting Prince in a magazine commemorating his life and career.”[9]

Despite the pains made by the majority to limit the opinion’s reach, this decision will likely have significant ramifications for the art world, particularly art markets and licensing. While here the original artist’s use itself is unaddressed, the decision may temper a creator’s ability to market new creative works that incorporate copyrighted works. The fair use doctrine’s intent is to protect use of copyrighted works in particular contexts and has particular importance in artistic criticism and parody. Though a creator may still be able to express themselves artistically using the copyrighted work, finding a gallery or dealer willing to accept the work may prove more challenging. For those willing to accept the work, expect strong warranties and artist indemnification contract clauses.

Read the Supreme Court’s opinion here.

Special thanks to William Wildman, Loyola University New Orleans College of Law, Class of 2023, for his assistance in the researching and drafting of this post.

[1] See Andy Warhol Found. for the Visual Arts, Inc. v. Goldsmith, 382 F.Supp. 3d 312 (S.D. N.Y. 2019).

[2] 17 U.S.C. § 107.

[3] Id.

[4] Andy Warhol Found. for the Visual Arts, Inc. v. Goldsmith, 598 U.S. ___ (2023).

[5] Id.

[6] Id. at ____ (slip op. 21).

[7] Id. at ____ (dissent op. 2).

[8] Id. at ____ (slip op. 22, n. 10).

[9] Id. at ___ (slip op. 23, n. 11).

On May 10, 2023, the Texas State Senate passed H.B. 4, titled the Texas Data Privacy and Security Act (“TDPSA”), sending the bill to Governor Abbott’s desk for final signature. If signed into law, Texas will join a growing contingency of states enforcing comprehensive data privacy laws for their residents.

This alert provides answers to some general questions about the TDPSA as it is currently written. Be on the lookout for additional updates about the Act once signed by Governor Abbott.

Who will be required to comply with the TDPSA?

The TDPSA will regulate persons and entities that: (a) conduct business in Texas or produce products or services consumed by Texas residents; (b) processes or engages in the sale of personal data; and (c) is not a small business as defined by the U.S. Small Business Administration, unless the small business is involved in the sale of sensitive personal information. This applicability standard is broader than many other state privacy laws previously enacted because it does not have a revenue threshold. Rather, the applicability is based on whether the business qualifies a “small business”, which is a variable, context-specific standard, the status of which can be undone by its affiliations.

If you are a small business, but you are selling Texas residents’ sensitive personal data, the TDPSA will require you to obtain the data subject’s consent prior to sale.

Does my business process or sell personal data under the TDPSA?

“Personal data” is defined as any information that is linked or reasonably linkable to an identified or identifiable individual. If you are processing personal data, that means that your business is collecting, using, storing, disclosing, analyzing, deleting, or modifying of personal data. “Sale” means the sharing, disclosing, or transferring of personal data for monetary or other valuable consideration to a third party. We have seen, particularly in California, that “sale” can have significantly broader applications than traditional notions of what constitutes a sale, such as receipt of analytic data. It has yet to be seen whether this Act would take a similar broad approach.

What rights would be granted to Texas residents?

Texas residents could soon have certain rights related to their personal data, including rights of access, correction, deletion, portability, the right to opt out of certain processing, and the right to appeal a controller’s decision regarding a rights request. The Act could also require data minimization, processing limitations, data security, non-discrimination, third-party contracting, and data protection assessments, as well as impose certain requirements directly on entities who process data on behalf of a party that makes decisions on how that data is used.

Which other states have comprehensive privacy laws?

As of this writing, seven states have signed comprehensive data privacy laws. California was the first state with the California Consumer Privacy Act (“CCPA”), effective as of January 2020. California’s amendments to the CCPA and the Virginia’s Consumer Data Protection Act (“VCDPA”) became effective January 1, 2023. Colorado and Connecticut’s laws will go into effect on July 1, 2023, while Iowa and Indiana’s will go into effect in 2025 and 2026, respectively. Similar laws from Montana and Tennessee are also awaiting final signature.

When will the TDPSA be effective?

If signed, the TDPSA will be effective on March 1, 2024.

Who is responsible for enforcement? Is there a private right of action?

The TDPA does not contain a private right of action. Rather, all enforcement will be through the Texas Attorney General, but the AG can make a civil investigative demand following a consumer request.

What is the penalty for violations?

The penalty is $7,500 per violation plus attorney fees and investigation costs incurred by the AG.

Once the final act is signed, Kean Miller will provide additional resources regarding compliance with this Act. If you want to discuss this possible new Act in further detail, contact your privacy counsel.