COVID-19 has shuttered businesses across the globe with no “grand return” day yet in sight. Looking to generate revenue while brick and mortar locations are closed, businesses are turning to the online sales and services, many for the first time. Fine dining restaurants that have never before offered takeout are now doing so, shops are holding sales using social media, and restaurant food purveyors are now selling to the general public. Local boutiques that have before never had an online storefront are now conducting website sales and local porch deliveries. In one interesting case, the reservations website Tock recently pivoted to offer “Tok to Go” and is managing takeout orders for the restaurants on their platform.[1] For smaller businesses now scrambling to adjust to today’s virtual market, website privacy policies are likely not at the top of the priority list. However, if material changes have been made to the business’ website to accept online orders, and the website is now newly collecting the personal data of visitors, the website privacy policy must be updated.

A website privacy policy is an important legally binding document that notifies visitors as to the types of personal information gathered from visitors and how the website operator uses, stores, manages, and/or distributes that information. Types of personal information that are typically gathered from websites that allow account creations and/or online purchases include names, email addresses, phone numbers, billing and shipping addresses, payment information, and other data. Websites may also passively gather data about the users’ device and location including GPS data, IP address, service provider, ISP, website traffic, and additional data through cookies, web pixels, and other tracking technologies. Regardless of whether the user actually reads the privacy policy, the policy is intended to govern the user’s interactions with the website and how the website operator can use the data provided by visitors.

The general rule on privacy policies is that the disclosures must be clear, complete, and not misleading. If the privacy policy states that the website operator does not sell user data, then the website operator should not be selling user data. Federal legislation on privacy policies is limited; however, the Federal Trade Commission has taken up the mantle of bringing regulatory actions against companies whose actual data practices conflict with their privacy policies and against companies who post misleading privacy policies. In 2019, the FTC imposed a $5 billion penalty and sweeping new privacy restrictions on Facebook, which the FTC charged with violating FTC orders by deceiving users about their ability to control the privacy of their personal information.[2] The FTC consent judgment claims that Facebook repeatedly used deceptive disclosures and settings for user privacy preferences that allowed Facebook to share users’ personal information with third party apps downloaded by the user’s Facebook Friends without the knowledge of the user. While the Facebook penalty is the largest ever levied by the FTC, the agency has routinely brought enforcement actions against entities whose privacy policies did not meaningfully provide notice before sharing personal information or using the collected data in a substantively different manner than described in the policy.

For many local and small businesses, websites can be fairly basic. A local restaurant may have a webpage that just displays the menu, location, and hours of operation. A local boutique may have a webpage that only displays hours of operation, location, and a few frames from its recent Instagram posts. For websites like these that do not use tracking technologies, account creation, online ordering, or any other kind of user interaction features, privacy polies can be fairly basic since little personal information is being collected. But with the pivot to an online model, if a website is now accepting personal information to fulfill online orders, the privacy policy needs to be updated to account for those changes.

That need for update goes double for any businesses located in California or with significant enough contacts to California to make the business subject to the new California Consumer Privacy Act (CCPA). The CCPA, which went into effect in January 2020, requires that each website have a Privacy Policy that advises California consumers of the various rights the CCPA gives to them. The CCPA gives California consumers several rights with regards to the data collected about them, including the rights to: (1) request disclosure of the business’ data collection and sales practices for the particular consumer; (2) request a copy of the personal information collected about the consumer during the 12 months before the request; (3) have the collected information deleted, with certain exceptions; (4) request that the personal information not be sold to third parties; and (5) not be discriminated against for exercising any of these rights. Despite requests from industry groups for delay due to COVID-19 logistical issues, the California Attorney General will not be delaying enforcement of the CCPA, which is scheduled to begin on July 1, 2020.

Privacy policies are not exciting, but they are a vital aspect of doing business and collecting data online. If your business has recently expanded its online offerings, be sure your privacy policy covers those changes.

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[1] Kristen Hawley, “Your Reservation Has Been Canceled: How apps like OpenTable, Tock, and Resy are pivoting to keep themselves – and restaurants – afloat in a world without bookings”, Eater, Vox Media (Apr. 22, 2020) (https://www.eater.com/2020/4/22/21223993/reservation-apps-coronavirus-changes).

[2] “FTC Imposes $5 Billion Penalty and Sweeping New Privacy Restrictions on Facebook”, Federal Trade Commission (Jul. 24, 2019) (https://www.ftc.gov/news-events/press-releases/2019/07/ftc-imposes-5-billion-penalty-sweeping-new-privacy-restrictions).

We previously reported that the United States Patent and Trademark Office granted a 30 day extension for many proceedings in response to the COVID-19 pandemic. The time period for this extension has been extended. As of time of publication, the USPTO has issued Orders granting a 30 day extension for (1) the specific filings set forth below that (2) had deadlines which fell between March 27, 2020 and May 31, 2020, extending the time period from the prior cut-off of April 30.  To invoke this extension, the filing must be accompanied by a statement that the delay in responding was due to the COVID-19 outbreak as specified in the Order.

Patent:

  1. reply to an Office notice issued during pre-examination processing by a small or micro entity;
  2. reply to an Office notice or action issued during examination or patent publication processing;
  3. issue fee;
  4. notice of appeal under 35 U.S.C. § 134 and 37 C.F.R. § 41.31;
  5. appeal brief under 37 C.F.R. § 41.37;
  6. reply brief under 37 C.F.R. § 41.41;
  7. appeal forwarding fee under 37 C.F.R. § 41.45;
  8. request for an oral hearing before the Patent Trial and Appeal Board (PTAB) under 37 C.F.R. § 41.47;
  9. response to a substitute examiner’s answer under 37 C.F.R. § 41.50(a)(2);
  10. amendment when reopening prosecution in response to, or request for rehearing of, a PTAB decision designated as including a new ground of rejection under 37 C.F.R. § 41.50(b);
  11. maintenance fee, filed by a small or micro entity; or
  12. request for rehearing of a PTAB decision under 37 C.F.R. § 41.52.

Trademark:

  1. response to an Office action, including a notice of appeal from a final refusal, under 15 U.S.C. § 1062(b) and 37 C.F.R. §§ 2.62(a) and 2.141(a);
  2. statement of use or request for extension of time to file a statement of use under 15 U.S.C. § 1051(d) and 37 C.F.R. §§ 2.88(a) and 2.89(a);
  3. notice of opposition or request for extension of time to file a notice of opposition under 15 U.S.C. § 1063(a) and 37 C.F.R. §§ 2.101(c) and  § 2.102(a);
  4. priority filing basis under 15 U.S.C. § 1126(d)(1) and 37 C.F.R. § 2.34(a)(4)(i);
  5. priority filing basis under 15 U.S.C. § 1141g and 37 C.F.R. § 7.27(c);
  6. transformation of an extension of protection to the United States into a U.S. application under 15 U.S.C. § 1141j(c) and 37 C.F.R. § 7.31(a);
  7. affidavit of use or excusable nonuse under 15 U.S.C. § 1058(a) and 37 C.F.R. § 2.160(a);
  8. renewal application under 15 U.S.C. § 1059(a) and 37 C.F.R. § 2.182; or
  9. affidavit of use or excusable nonuse under 15 U.S.C. § 1141k(a) and 37 C.F.R. § 7.36(b).

Please note that the Order is limited to certain filings and does not extend the deadlines to file patent applications with the USPTO. Anyone seeking to maintain provisional patent application priority should immediately consult with his or her attorney. Additionally, the continued extensions are placing some pending trademark applications in limbo. Ordinarily, trademark applications are published for a period of 30 days to allow third parties to oppose the mark.  Because the Trademark Order extends the opposition period, applications cannot complete this stage of the application process and pass to the next stage, which is typically allowance.

For a full copy of the USPTO’s new notices, please see Patent Notice and Trademark Notice. Interested parties should always check the USPTO for the most up to date information on filings.

 

Intellectual property comprises some of the most valuable assets a business may hold – its brands, patents, know-how, and other intangible rights that make the business unique.  The intellectual property assets (IP) throughout the energy sector—upstream, midstream, downstream and service providers along the way—will be affected as more energy companies seek bankruptcy relief in the wake of both the oil price war and the Covid-19 pandemic. Even companies not considering bankruptcy for themselves are likely to be affected when their IP licensors or licensees file for bankruptcy.

There is no one-size-fits-all answer to IP or bankruptcy issues, much less when they collide in a licensor or licensee’s bankruptcy case. A creditor-licensor of intellectual property rights is in a vastly different position than a creditor-licensee who takes its rights from a newly bankrupt party. This article explains some of the rights and obligations of the non-debtor licensor and licensee of IP. It also provides a brief overview of how potential IP buyers can benefit from Section 363 of the Bankruptcy Code, which allows them to acquire a bankrupt entity’s IP assets free and clear of that entity’s liabilities.

1. Rights and restrictions by a licensor against the debtor-licensee.

When an IP licensee files bankruptcy (i.e., becomes the “debtor” in a bankruptcy case), the non-debtor licensor may be placed in a precarious position.  Debtors are debtors because they cannot (or will not) pay their debts. If the debtor-licensee was already behind on license payments, and then files bankruptcy, the non-debtor licensor’s first instinct may be to terminate the license. Once the bankruptcy is filed, however, the licensor cannot unilaterally terminate the license without bankruptcy court approval.  The filing of a bankruptcy petition triggers an “automatic stay,” which prevents creditors from taking any actions against the debtor and its estate due to pre-bankruptcy debts. Violations of the automatic stay can carry hefty fines or worse; therefore, it is imperative to tread carefully and seek advice of counsel before taking any actions against a bankrupt debtor. Moreover, many courts have found that the “automatic termination” clauses that trigger upon a filing of bankruptcy are unenforceable. Thus, before terminating the license, the non-debtor licensor must obtain permission to do so from the bankruptcy court.

A bankruptcy filing gives the debtor-licensee great latitude in how to treat what is termed an “executory” IP license. The classification of a license as “executory” is an important distinction because a debtor-licensee may elect to reject (terminate), assume (keep the license as-is), or assign (effectively, sell or otherwise transfer)[1] an executory license. See 11 U.S.C. §365. While the bankruptcy statute does not define the term, a contract is generally considered “executory” if each party has ongoing obligations to perform in some way, and courts have been overly accommodating in finding contracts to be executory. For example, some courts have determined that a licensor’s continued obligation not to sue its licensee for infringement caused the license to be executory. Obligations as simple as a licensee’s requirement to maintain confidentiality, appropriately mark a patented product, or provide accounting of sales have been found to satisfy the “continued obligation” requirement.

A licensee’s ability to assume or assign a license may raise great alarm to a licensor concerned that its rights could fall into the hands of an ineffective licensee or a competitor.  Luckily, the power to assign or assume a license is not absolute. Section 365(c)(1) of the Bankruptcy Code prevents a debtor-licensee from assigning or assuming an executory contract when (a) the licensor does not consent to the assumption/assignment and (b) applicable law otherwise excuses the licensor from accepting performance or rendering performance to another party. While an anti-assignment clause in the license will be disregarded for these purposes, a clause that specifically allows assignment under certain circumstances may be used to provide the requisite consent. A non-debtor licensor should insert itself into negotiations about a possible sale and assignment of a license to ensure that its rights are protected, and it should be prepared to file an objection to the assignment with the bankruptcy court when necessary to protect and preserve its rights.

Depending on the circumstances, a licensor may urge the bankruptcy court to treat license payments that accrue while a bankruptcy case is pending as an administrative claim. If accepted, the claim would be entitled to priority over some other claims against the estate and paid during the course of bankruptcy. If unsuccessful, however, this action may be detrimental to the licensor’s rights.

2. Rights and restrictions of the licensee against a debtor-licensor.

When a licensor files bankruptcy, a licensee will logically fear that it will lose the rights to continue using a critical piece of technology. After all, the same statutes that allow a bankrupt licensee to reject, assign, or assume an executory contract also apply to the licensor. Importantly, Section 365(n) of the Bankruptcy Code protects a licensee’s ability to continue business as usual in some regards. Notably, even if a bankrupt licensor rejects an IP license, the licensee can elect to either (1) accept the termination and assert a breach of contract claim or (2) continue to act on the license as it existed on the day the bankruptcy petition was filed. In effect, as long as the licensee continues to uphold its end of the license (e.g., pay royalties, appropriately mark and account for product sold, etc.), the licensee will be entitled to continue using the technology or other licensed IP as it existed when the bankruptcy petition was filed. One important caveat is that the licensee’s rights will often not extend to any improvement to the technology made after the petition is filed. Moreover, the licensee is on its own if an infringement claim is made against it. A licensor who has rejected a license will not be required to perform any obligations under the license, such as defending its licensee from infringement claims, other than to refrain from suing the licensee for infringement.

It is important to note that the particular provisions of Section 365(n) only apply to copyright, patent and trade secret/know-how licenses; they do not apply to trademark licenses.  For information on a recent Supreme Court ruling concerning trademarks and bankruptcy, see our article at https://www.louisianalawblog.com/business-and-corporate/recent-united-states-supreme-court-decision-tackles-question-of-what-happens-when-bankruptcy-meets-intellectual-property/.

3. Issues and benefits of acquisitions through bankruptcy – the 363 sale.

Sales of a bankrupt company’s assets through Section 363 of the Bankruptcy Code offer a great opportunity for a solvent company to expand its patent portfolio, acquire desirable IP licenses, and otherwise expand its IP.  Bankruptcy sales are a specialized form of asset acquisition; a potential buyer should engage experienced counsel to guide it through the process and avoid potential landmines.  One particularly attractive aspect of “363 Sales,” as they are often called, is that purchasers of estate assets can usually obtain those assets free and clear of any liens and encumbrances.[2]  The buyer can often take the assets free of any unknown liabilities, such as infringement claims that pre-date the sale.

As with any asset purchase, due diligence will need to be performed on the assets (IP) to be acquired. Unlike typical deals, however, sales through the bankruptcy are often subject to a relatively short timeline. Due diligence of the bankrupt assets is typically compressed and may have to be performed without substantial assistance from the bankrupt seller, who often lacks the necessary funds or infrastructure to assist. Diligence is particularly important because the seller may cease to exist as a going concern soon after the sale closes.  Post-closing indemnities are rare, and trying to enforce one may be practically impossible.  This risk is typically factored into the purchase price for the assets.

Moreover, portfolios are often acquired in less than pristine shape. It costs money to maintain IP rights: both U.S. and foreign patent and trademark registrations require the payment of maintenance fees to remain in force, and many foreign countries require these payments annually. The failure to pay these fees at any time may result in the abandonment of the rights. As such, the potential purchaser needs to ascertain the status of all significant intellectual property rights and develop a plan during the due diligence to take over and cure[3] any issues or defects that may exist. Likewise, to the extent that pending applications are acquired, the purchaser needs to be ready to take over these applications in whatever state they exist and take immediate action to perfect these rights. Kean Miller maintains relationships with foreign IP attorneys who are ready to assist our clients in the protection of their rights across the globe.

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[1] Perhaps the biggest concern is that a debtor-licensee may assign its license to a competitor of the licensor.

[2] Chapter 11 Bankruptcy permits licensees of the estate’s IP to petition the Court to protect their interest by insuring that the licensees be permitted to continue using the technology.

[3] Some jurisdictions allow for the revival of IP rights upon the payment of the owed annuity and a surcharge, while others require the owner to file a petition explaining why the payment was missed. Depending on the circumstances, forfeited rights may not be able to be revived.

 

This article first appeared on the Louisiana Law Blog here

The COVID-19 pandemic has made people race to wash hands, stock up on toilet paper and sanitizer, and transition to working from home. But a separate group of “opportunistic” individuals have run another race—to the United States Patent and Trademark Office. As of April 2, 2020, more than 85 trademark applications have been filed for COVID-19 and Coronavirus related marks. The applied-for marks are largely for t-shirts, hats, apparel and stickers, but applications have also been filed for vaccines (“COVID-19 VAX”), rubber bracelets (“WASH YOUR HANDS!”), and beer (“SOCIAL DISTANCING”). A similar trend has been seen in China, with applications filed related to Huoshen Mountain Hospital, Leishen Mountain Hospital, and Dr. Li Wenliang.[1]

While some may find this move surprising, this pattern is familiar to intellectual properly lawyers. Whenever a new phrase or slogan enters the larger public consciousness, “enterprising” individuals will dash to the USPTO to file trademark applications. When President Donald Trump tweeted the word “Covfefe” in 2017, more than 40 separate trademark application were filed. Several applications for the phrase “Philly Special” were filed after the Philadelphia Eagles ran a trick play by that name during Super Bowl LII. Numerous applications were filed for “#MeToo” after the MeToo movement went viral in 2017. Most of these applications are unsuccessful and are abandoned.

The majority of the COVID-19 trademark applications will likely be rejected and abandoned because they rely on a fundamental misunderstanding of how trademark registrations work. The purpose of a trademark is to identify the source of the goods or services for the consuming public. Trademark law ensures that when you buy a soda with the words “Coca-Cola” on it, you can be confident that it actually is a Coca-Cola product and not a Red Bull. For this reason, unlike patents, trademark registrations do not rely on a “first to file” system. Rather, trademark rights are established through use of the mark, so the applicant must demonstrate that it is actually using the mark as a trademark in commerce before a registration is issued. Contrary to the beliefs likely behind most of these applications, slapping “I HEART CORONAVIRUS” on trucker hats and selling them is typically not enough to constitute use in commerce. Such use is considered “ornamental use” rather than an actual designation of the origin of the product and thus is grounds for rejection.

Many of these applications will likely also fail for the same reason the “covfefe” applications failed—it is incapable of being a source identifier. In the USPTO Office Actions rejecting the “covfefe” applications, the Office recognized that covfefe was a term originally written by President Trump in a tweet, which then went viral over the internet in news articles and social media postings, and ultimately led to a proliferation of apparel, mugs, beer, stickers, and other products with “covfefe” printed on them. As stated by the USPTO: “[b]ecause consumers are accustomed to seeing this slogan or term commonly used in everyday speech by many different sources, the public will not perceive the term or slogan as a trademark or service mark that identifies the source of the applicant’s goods, but rather only as conveying an informational message.”[2] The same is true of COVID-19, Coronavirus, and Social Distancing. These terms are now a permanent part of our daily vernacular and have been used countless times by thousands of sources. It is highly unlikely that “COVID-19”, “Coronavirus”, or “Social Distancing” could ever uniquely identify a specific person or entity as a source of goods.

These applications are frequently filed without an attorney involved, so misunderstandings about trademarks are not caught before the filing fees are paid. Ultimately, many of these knee jerk applications are a waste of time and money.

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[1] Aaron Wininger, “Chinese Trademark Office Cracks Down on Malicious Filing of Coronavirus-Related Trademarks”, The National Law Review, National Law Forum, LLC (https://www.natlawreview.com/article/chinese-trademark-office-cracks-down-malicious-filing-coronavirus-related-trademarks)

[2] USPTO Office Action for Serial No. 87470872 (8/14/2017) (http://tsdr.uspto.gov/documentviewer?caseId=sn87470872&docId=OOA20170814085059#docIndex=1&page=1)

Companies that rely upon trade secret information must remain diligent with their rights at all time – one inadvertent disclosure could, in theory, kill trade secret protection. As such, companies will need to adapt and revamp their security measures to account for the mass adoption of teleworking in response to the COVID-19 pandemic. The Uniform Trade Secrets Act[1] protects certain information that “[i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” Unfortunately, the applicable statutes do not offer guidance on pandemics, and Courts have not yet had the opportunity to weigh in on what is considered reasonable under these circumstances. Nevertheless, although there is no “one size fits all” approach to protecting trade secrets, here are some practical and simple solutions that may help limit exposure and demonstrate reasonable measures to protect information under the current circumstances:

1. Non-disclosure and confidentiality agreements remain key. It is more important now than ever to clearly delineate how trade secret information will be protected at the front end of a relationship. Trade secret cases often turn on the existence of written confidentiality agreements. COVID-19 is not going to change this. But, it is clear that many companies are making broader and faster concessions to secure work than they otherwise may have in the past. Companies cannot overlook the important protections afforded by simple confidentiality agreements and the confidentiality clauses in contracts.

2. Security measures need to be maintained and/or adapted. As always, access to trade secret information should be limited to those on a need to know basis. Companies often limit access to certain network drives or physical files containing sensitive information. But, this may become difficult to monitor when the majority of employees are working remotely.

Policies should be written, and instructions should be given on how employees are to secure information they access from home. In more sophisticated companies, this may be provided in a specified telework agreement; others may rely on published policies and e-mails that specify how this information should be accessed and used. Common examples of security measures include prohibiting the viewing of information on non-work computers; requiring employees use secured internet connections, such as password protected WiFi and LAN lines to access information on the company network; limiting what documents can be viewed or printed in physical form (and by whom); and instructing employees on how to safeguard information in their possession. Beyond the initial access point, information sent to others should ideally be encrypted and password protected, and companies should continue to monitor the network to ensure that only authorized users have access.

Even if employees are teleworking, closed offices remain a security concern. Lawful access to the office may be prohibited, but that will not stop a determined thief. Traditional security measures (locks, alarms, etc.) should continue to be used to secure offices and access to data.

3. Important information should be marked appropriately. Appropriately designating documents as having confidential or proprietary information is one of the simplest measures a company can take to put both its own employees and all third parties (vendors, customers, etc.) on notice of what the company deems protectable confidential information. A good confidentiality agreement will not require information to be marked as “confidential” to invoke protection, but this does not negate the importance of this step. Likewise, merely marking a document as “Confidential” does not make it so; Companies still need to take other measures to affirmatively protect the information. Notices can be as simple as marking a page “Confidential and Proprietary” to an affirmative statement: “This Document contains confidential and proprietary information belonging to [Company]. This document and its contents shall not be used or disseminated in whole or in part without [Company]’s express written permission.”

4. Limit information provided in sales pitches. A delicate balance must be struck between securing work and securing your trade secrets. Defendants in trade secret litigation always look at sales pitches for leaks in trade secret information. While current conditions may prevent the all-disclosing trade show pitch (my favorite), an improperly trained sales staff is still likely to give away secrets from home. Companies should scrub their marketing materials or any confidential or proprietary information and train their sales staff on what not to say when pitching for work.

Even in this crisis, companies must continue to take measures today to protect their trade secrets for tomorrow.  A failure to do so may cause the company to irreparably lose its rights. This article provides some simple, practical measures that can assist a company in safeguarding its rights during this crisis and beyond. But, circumstances are different for every company and for every trade secret (e.g., software, manufacturing processes, and chemical formulae are protected in different manners). As such, this article cannot take the place of specific advice from competent counsel.

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[1] The Uniform Trade Secrets Act has been adopted by over 47 states and the District of Columbia, and was adapted in creating the Federal Defend Trade Secrets Act.

This article first appeared on the Louisiana Law Blog here

In addition to providing financial support to individuals and small business, the much discussed CARES Act also authorized government agencies like the US Patent and Trademark Office (USPTO) to extend certain deadlines prescribed by statute. As of time of publication, the USPTO has granted a 30 day extension for (1) the specific filings set forth below that (2) had deadlines which fell between March 27, 2020 and April 30, 2020.  To invoke this extension, the filing must be accompanied by a statement that the delay in responding was due to the COVID-19 outbreak as specified in the Order.

Patent:

i. reply to an Office notice issued during pre-examination processing by a small or micro entity;

ii. reply to an Office notice or action issued during examination or patent publication processing; issue fee;

iii. notice of appeal under 35 U.S.C. § 134 and 37 C.F.R. § 41.31;

iv. appeal brief under 37 C.F.R. § 41.37;

v. reply brief under 37 C.F.R. § 41.41;

vi. appeal forwarding fee under 37 C.F.R. § 41.45;

vii. request for an oral hearing before the Patent Trial and Appeal Board (PTAB) under 37 C.F.R. § 41.47;

vii. response to a substitute examiner’s answer under 37 C.F.R. § 41.50(a)(2);

x. amendment when reopening prosecution in response to, or request for rehearing of, a PTAB decision designated as including a new ground of rejection under 37 C.F.R. § 41.50(b);

xi. maintenance fee, filed by a small or micro entity; or

xii. request for rehearing of a PTAB decision under 37 C.F.R. § 41.52.

Trademark:

i. response to an Office action, including a notice of appeal from a final refusal, under 15 U.S.C. § 1062(b) and 37 C.F.R. §§ 2.62(a) and 2.141(a);

ii. statement of use or request for extension of time to file a statement of use under 15 U.S.C. § 1051(d) and 37 C.F.R. §§ 2.88(a) and 2.89(a);

iii. notice of opposition or request for extension of time to file a notice of opposition under 15 U.S.C. § 1063(a) and 37 C.F.R. §§ 2.101(c) and  § 2.102(a);

iv. priority filing basis under 15 U.S.C. § 1126(d)(1) and 37 C.F.R. § 2.34(a)(4)(i);

v. priority filing basis under 15 U.S.C. § 1141g and 37 C.F.R. § 7.27(c);

vi. transformation of an extension of protection to the United States into a U.S. application under 15 U.S.C. § 1141j(c) and 37 C.F.R. § 7.31(a);

vii. affidavit of use or excusable nonuse under 15 U.S.C. § 1058(a) and 37 C.F.R. § 2.160(a);

viii. renewal application under 15 U.S.C. § 1059(a) and 37 C.F.R. § 2.182; or

ix. affidavit of use or excusable nonuse under 15 U.S.C. § 1141k(a) and 37 C.F.R. § 7.36(b).

Note that the Order opens the door for an applicant to petition for additional relief; however, the Order does not extend the deadlines to file patent applications with the USPTO. Anyone seeking to maintain provisional patent application priority should immediately consult with his or her attorney.

For a full copy of the USPTO’s notices, please see:

https://www.uspto.gov/sites/default/files/documents/Patents%20CARES%20Act.pdf for patent and

https://www.uspto.gov/sites/default/files/documents/TM-Notice-CARES-Act.pdf for trademark.

This article first appeared on the Louisiana Law Blog here

Intellectual Property (IP) clearance should be an integral part of business planning, regardless of the size of the business. IP clearance may be as simple as checking the proper trademark databases before choosing a name for a new business or subsidiary.  In other situations, IP clearance may include conducting an extensive patent search and analysis prior to building a new industrial facility.  IP clearance is the process of checking whether IP owned by others may be an impediment to your new venture.  Or to put it more bluntly, IP clearance is undertaken to minimize the risk that your new business venture will be a losing defendant in an infringement suit.

IP clearance should be proportional to the scale of the business venture. It makes no sense to spend several thousand dollars in legal and search firm fees conducting extensive trademark searches in far-flung jurisdictions for a new single location auto repair business. Similarly, it is poor business judgment to spend hundreds of thousands of dollars in product development costs and zero on IP clearance, when you can be met with an IP infringement suit enjoining sales of the new product and potentially stripping you of profits.

Businesses should consider the potential risk and then conduct the proper, proportionate IP clearance to minimize the risk. As with any legal liability risk, it is impossible to achieve 100% elimination of the risk from IP infringement lawsuits.   Good business judgment should guide the decision as to the level of IP clearance needed for each circumstance.  In some cases the risk may be better known, such as when a known competitor has dominated the market with a history of aggressive enforcement of its IP rights.  In that scenario, it may be necessary only to look at the IP held by that single competitor, as opposed to trying to search the entire landscape of applicable IP held by others.

Consultation with experienced IP counsel can provide you with IP clearance options and estimates for those options.  With that knowledge, you can make a fully informed business decision that protects your company’s resources.

In a sequel to its Matal v. Tam decision last year, SCOTUS held that the so called “immoral or scandalous” ban on trademarks was unconstitutional in a 6-3 ruling on June 24.  In the Tam decision, SCOTUS declared the “disparagement” clause of the Lanham Act to be unconstitutional under the First Amendment, but left open the question as to whether the Trademark Office could deny registrations for being immoral or scandalous.[1]

Enter Erik Brunetti and his clothing line “FUCT” (it’s pronounced as four letters, F-U-C-T, but you may read it differently, and according to SCOTUS, “you would hardly be alone”).[2] The Trademark Office denied Brunetti registration of “FUCT” under the “immoral or scandalous” clause of the Lanham Act. Burnetti brought a First Amendment challenge to the “immoral or scandalous” bar in the Federal Circuit, which invalidated the provision. In upholding the First Circuit’s decision, SCOTUS found that, like the over turned disparagement clause, “the ‘immoral or scandalous’ bar similarly discriminates on the basis of viewpoint and so collides with the Court’s First amendment doctrine.”[3]

Under the immoral or scandalous ban, the Lanham Act would permit registration of marks that “champion society’s sense of rectitude and morality, but not marks that denigrate those concepts.”[4] The Trademark Office found that FUCT did not pass that test and labeled the mark “a total vulgar” and “therefore [] unregistrable.”[5] Justice Kagan, who penned the majority opinion, may have channeled Dr. Sues when noting that:

“Love rules”?    “Always  be  good”?    Registration  follows.    “Hate  rules”?   “Always  be  cruel”?    Not  according  to  the  Lanham  Act’s “immoral or scandalous” bar.

SCOTUS also provided other examples of registrations shot down by the Trademark Office under the immoral or scandalous ban in comparison with other marks with the same subject matter that were registered:

  • YOU   CAN’T   SPELL   HEALTHCARE WITHOUT THC for pain-relief medica-tion, MARIJUANA COLA and KO KANE for beverages, because it is scandalous to “inappropriately glamoriz[e]drug abuse.” — but registered D.A.R.E. TO RESIST DRUGS AND VIOLENCE and SAY NO TO DRUGS—REALITY IS THE BEST TRIP IN LIFE;
  • BONG HITS 4 JESUS because it “suggests that people should engage in an illegal activity [in connection with] worship” and because “Christians would be morally out-raged by a statement that connects Jesus Christ with illegal drug use.”— but registered PRAISE   THE   LORD   for   a   game   and   JESUS DIED FOR YOU on clothing; and
  • marks reflecting support for al-Qaeda (BABY AL QAEDA and AL-QAEDA on t-shirts) “because the bombing of civilians and other terrorist acts are shocking to the sense of decency and call out for condemnation—but registered WAR ON TERROR MEMORIAL.”

SCOTUS called these moves “understandable”, but reiterated its holding in Tam that “a law disfavoring ‘ideas that offend’ discriminates based on viewpoint, in violation of the First Amendment.”[6]

SCOTUS also dismissed the government’s argument to narrow  the  statutory  bar  to ‘marks  that  are  offensive  [or]  shocking  to  a  substantial segment of the public because of their mode of expression, independent  of  any  views  that  they  may  express.’”[7] In doing so, SCOUTS refused to “rewrite a law to conform it to constitutional requirements” and noted that the bar “stretches far beyond the Government’s proposed construction” and does not “draw the line at lewd, sexually explicit, or profane marks. Nor does it refer only to marks whose ‘mode of expression,’ independent of viewpoint, is particularly offensive.”[8]

This opinion provides practitioners with not only a trip back to CONLAW 101, but also with a refresher on statutory construction. And it may, for now, leave the door open for marks like FUCT. But as Justice Alito noted in his concurrence, Congress is free to rewrite and adopt a more “carefully focused” statute that could preclude registration for marks containing “vulgar terms that play no real part in the expression of ideas.” In the meantime, we expect an upsurge in filings before Congress can act.

The entire opinion can be viewed here.

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[1] See Offensive Trademarks are Protected Under the First Amendment, https://www.intellectualproperty.law/2017/06/offensive-trademarks-protected-first-amendment/. Under the Lanham Act, the Trademark Office administers a federal resgiration system for trademarks. See 15 U.S.C. §§ 1051, 52.

[2] Incu v. Brunetti, 588 U. S. ____ , 1–2 (2019).

[3] Id. at Syllabus.

[4] Id.

[5] Id. at 3.

[6] Id. at 8.

[7] Id. at 9.

[8] Id. (citing United States v. Stevens, 559 U.S. 460, 481 (2010).

On March 4, 2019 the United States Supreme Court issued a unanimous decision in Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC  clearing up that registration is a jurisdictional prerequisite to filing a copyright action.  In the opinion authored by Justice Ginsburg, the Supreme Court concluded that a copyright claimant may commence an infringement suit after the Copyright Office registers a copyright, not when a copyright owner merely submits the application, materials, and registration fee to the Copyright Office.  In the action, the parties agreed that 17 U.S.C. 411(a) bars a copyright owner from suing for infringement until “registration … has been made.” However, Fourth Estate argued that “registration …has been made” when a copyright owner submits the application, materials, and fee required for registration.  The Supreme Court rejected Fourth Estate’s application approach stating the specific context of section 411 permits only one reading, namely that the phrase “registration … has been made” refers to the Copyright Office’s act of granting registration, not to the copyright claimant’s mere request for registration.  Pursuant to section 408(a), an owner’s rights exist apart from registration; however, except in very limited circumstances, an owner must exhaust the administrative requirement of registration before filing suit to enforce any such ownership rights.

Whether you keep up with the Kardashians or you are just a casual Instagram user, you have probably been exposed to social media influencer posts. Due to social media’s increased marketing importance, companies will offer free products, money or other compensation to social media “influencers”, i.e. users that boast at least 2,000 or more genuine followers. “Macroinfluencers” with millions of followers can often command $10,000 or more for a single product endorsement on Instagram. Influencers have been used by industries including hotels and travel services, fitness, cosmetics, clothing and accessories, food and beverage, restaurants, dietary supplements, and a litany of other consumer products and services. Similar to celebrity brand ambassadors, these influencers provide “peer” recommendations to their followers with the intent of directing the followers to purchase the endorsed products and services. These posts are often successful and have led to increased profits for many brands.

In addition to or in lieu of traditional social media influencers, companies are also looking to their own employees to serve as online brand ambassadors, participate in ad campaigns, and to share content on social media about the company. Since the advertising budget for “employee influencers” is relatively low, many companies are implementing employee advocacy programs and incentivizing employees to be spokesmen for the company in their own circles. Certain commentators have listed employee advocacy as one of the social media strategies to watch in 2019.[1]

This young, alternative form of advertising and endorsement has caught the attention of federal agencies. Starting in March 2017, the Federal Trade Commission began notifying companies using compensated influencers that the relationship between the company and the influencer needed to be made clear in a disclosure. The FTC’s Endorsement Guidelines state that if there is a “material connection” between an endorser and an advertiser (i.e., a connection that might affect the weight or credibility that a customer would give the endorsement), then that connection must be clearly and conspicuously disclosed.[2]  The FTC has stated that these guidelines apply to social media, and both marketers and endorsers are required to comply.[3] In April 2017, the FTC sent letters to almost 100 celebrities, athletes and other influencers, as well as the marketers of the brands endorsed, regarding the disclosure obligations.[4] Since that time, the FTC also settled its first formal complaint against social media influencers—gaming influencers Trevor “TmarTn” Martin and Thomas “Syndicate” Cassell.  These men were charged with failing to properly disclose that: (1) they owned the online gambling company that they were promoting; and (2) they paid other well-known online gaming influencers to promote the platform without disclosing the financial relationship.[5] Despite the additional FTC “educational notifications” to influencers[6] and complaints to the FTC by watchdog groups,[7] some marketing commentators claim that the majority of influencer posts are still not compliant.[8]

Most recently, the Securities and Exchange Commission entered the influencer realm when it charged boxer Floyd Mayweather Jr. and music producer DJ Khaled.  Mayweather and Khaled were promoting investing in Centra Tech, Inc.’s initial cryptocurrency offerings (ICO) on social media without disclosing that they had been paid for the promotions.[9] The SEC had previously warned that cryptocurrency sold in ICOs may be securities and that those who offer and sell securities in the U.S. must comply with federal securities laws— including disclosure of payment for promotional statements.[10] The SEC has since settled with Khaled and Mayweather, requiring them to return the $350,000 they collectively received from Centra Tech (who is currently under SEC investigation for fraud).[11] Mayweather also agreed to pay a $300,000 fine to the SEC, abstain from promoting other investments for three years, and to cooperate with the SEC’s investigation. Khaled also agreed to a $100,000 fine to the SEC and to abstain from similar promotions for two years.

The FTC’s continued letters and notifications shed light on the agencies’ interest in helping influencers and brands to be more transparent about their relationships. These educational letters are often the first step in an FTC crackdown, so influencers and brands would be well advised to ensure their posts are compliant. As businesses set their marketing plans for 2019, now would be the time to ensure that any arrangements with influencers or employee advocates are appropriately detailed. While the FTC regulations (or SEC for financial products) provide more specific guidance, the below items offer some general tips and considerations.

  1. Confirm whether social media posts need to include FTC disclosures. The FTC requires a clear and conspicuous disclosure if there is a “material connection” between an influencer and brand that might materially affect the credibility of the endorsement (meaning, where the connection is not reasonably expected by the audience).[12] Material connections can include, but are not limited to, a business or family relationship, employment relationship, monetary payments, or free products.

Disclosure is not required when the material connection between the endorser and the marketer is expected. For example, if a doctor was featured in a television advertisement claiming that an anti-snoring product is, in his opinion, the best he has ever seen, a viewer would reasonably expect the doctor to be compensated for appearing in the ad and a disclosure would not need to be made. However, a viewer may be unlikely to expect that the doctor is an owner in the company or that the doctor received a percentage of the product sales, so the advertisement should clearly and conspicuously disclose such a connection.[13]

The time when the incentive is promised is also a factor. If a restaurant asks its patrons to post pictures and honest reviews of its food on Instagram, and the patrons have no reason to expect compensation or benefit from the restaurant before making the post, then the restaurant’s later decision to send the posters a free dessert coupon will likely not require a disclosure. However, if patrons were specifically informed that a social media post would result in being given the coupon or that their pictures and reviews may be used in the restaurant’s advertising, then those opportunities may be seen as having value and may need to be disclosed.

  1. The disclosure must be clear. Disclosures must be clear enough that an ordinary reader understands the relationship between the poster and the brand. The FTC has cautioned against vague references like “Thank you [Brand Name]”, “#ambassador”, “#[Product]_Rocks”, and similar language that shows just an appreciation of the product/company. Instead, the FTC encourages clear statements like “[Brand] gave me this product to try”, “Thanks [Company] for the free product”, “Sponsored”, “Promotion” or “Paid ad”. For platforms like Twitter that limit the number of characters you can use, the FTC recommends starting the tweet with “Ad:” or “#ad.”
  1. The disclosure must be conspicuous. The FTC advises that the disclosure should be: (1) close to the claims to which they relate; (2) in a font that is easy to read; (3) in a font shade that stands out against the background; (4) for video ads, on the screen long enough to be noticed, read, and understood; and (5) for audio disclosures, read at a cadence that is easy for consumers to follow and in words the listener will understand.

Certain platforms like Instagram limit the amount of text on photostreams when viewed on a smartphone, so longer descriptions are truncated with only the first few lines viewed unless the user clicks “more”. The FTC requires that the disclosure be presented without having to click “more”. It is not sufficient for an influencer to make a general disclosure on the influencer’s profile page or through links to a separate disclosure page; rather, a disclosure must appear on each endorsement post. Similarly, the FTC cautions that the disclosure should not be buried in a long string of hashtags.

In response to the FTC’s enforcement, platforms like YouTube and Instagram have added a feature where posts can be tagged as “paid”. While these can be helpful tools, they are not foolproof.  For example, the paid tag could be sufficient when only one product is pictured in an Instagram post. But if the sponsored product appears with other products—some compensated and others not compensated—then additional disclosures may need to be made. The brand and influencer need to carefully evaluate whether the tags are sufficient or if additional statements need to be made, as it is the brand or influencer that will be responsible for the failure to properly disclose—not the platform.

  1. The endorsement must be true. This requirement is true of all advertising. An influencer cannot provide a review of a service or product that the influencer has not personally used. The influencer also cannot post that the sampled product or service is amazing and #newfavorite when the influencer hated it and would never use it again. A brand looking to use influencers should not require the influencer to make a positive post if the influencer did not have a positive experience.
  1. Monitor the influencer. Even if the influencer claims they follow legal requirements, the brand or company is still responsible for ensuring that the influencer is true to their word. Brands should regularly monitor or review the influencer’s post(s) to ensure that the posting is compliant, as the brand can still be responsible for the failure to disclose.

These above tips provide some initial considerations to brands that are using influencers and the influencers make the posts. Any written agreement between the brand and influencers should include obligations to comply with FTC guidelines. Companies that are considering an employee advocacy program would be well advised to ensure that their employee social media policies carefully detail the requirements for employee endorsements online. Consultation with an attorney to prepare these agreements or social media policies or to review proposed influencer posts are a good step towards avoiding unwanted regulatory attention.

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[1] See Lilach Bullock, “5 Social Media Strategies That Will Grow Your Business in 2019”, Forbes (Dec. 20, 2018) (available at https://www.forbes.com/sites/lilachbullock/2018/12/20/5-social-media-strategies-that-will-grow-your-business-in-2019/). See also Ryan Erskine, “The Key to Increasing Your Brand’s Reach by 561%? Your Employees.”, Forbes (Jun. 30, 2018) (available at https://www.forbes.com/sites/ryanerskine/2018/06/30/the-key-to-increasing-your-brands-reach-by-561-your-employees/#3331b89429bb); Steve Cocheo, “Employee Advocacy in Banking: Aligning Culture & Content in Social Media Channels”, The Financial Brand (Nov. 15, 2018) (available at https://thefinancialbrand.com/76838/social-media-employee-trust-consumer-banking-postbeyond/).

[2] 16 C.F.R. § 255; “The FTC’s Endorsement Guides: What People Are Asking”, Federal Trade Commission (Sept. 2017) (available at https://www.ftc.gov/tips-advice/business-center/guidance/ftcs-endorsement-guides-what-people-are-asking).

[3] “FTC Staff Reminds Influencers and Brands to Clearly Disclose Relationship”, Federal Trade Commission (Apr. 19, 2017) (available at https://www.ftc.gov/news-events/press-releases/2017/04/ftc-staff-reminds-influencers-brands-clearly-disclose). One survey done in May 2017 showed that at least 90% of celebrity influencer posts were not compliant with the FTC guidelines. “93% of Top Celebrity Social Media Endorsements Violate FTC Guidelines”, Mediakix (May 31, 2017) (available at http://mediakix.com/2017/05/celebrity-social-media-endorsements-violate-ftc-instagram/#gs.SHytKyU).

[4] Lesley Fair, “Influencers, are you #materialconnection #disclosures #clearandconspicuous?”, Federal Trade Commission (Apr. 19, 2017) (available at https://www.ftc.gov/news-events/blogs/business-blog/2017/04/influencers-are-your-materialconnection-disclosures).

[5] “CSGO Lotto Owners Settle FTC’s First-Ever Complaint Against Individual Social Media Influencers”, Federal Trade Commission (Sept. 7, 2017) (available at https://www.ftc.gov/news-events/press-releases/2017/09/csgo-lotto-owners-settle-ftcs-first-ever-complaint-against).

[6] Id.; see also Sam Sabin, “DeGeneres, Minaj Among Celebrities Whose Social Posts Drew FTC Interest in Past Year”, Morning Consult (Oct. 5, 2018) (available at https://morningconsult.com/2018/10/05/degeneres-minaj-among-celebrities-whose-social-posts-drew-ftc-interest-in-past-year/).

[7] See, e.g., “TINA.org Files FTC Complaint Against Diageo for Deceptive Influencer Marketing of Ciroc”, Truth in Advertising, Inc. (Dec. 11, 2018) (available at https://www.truthinadvertising.org/ciroc-press-release/).

[8] See Sam Sabin, “A Year After Major Actions, FTC’s Influencer Marketing Guidelines Still Overlooked”, Morning Consult (Oct. 4, 2018) (available at https://morningconsult.com/2018/10/04/a-year-later-ftcs-influencer-marketing-guidelines-still-largely-ignored/).

[9] Ahiza Garcia, “DJ Khaled, Floyd Mayweather Jr. charged with promoting cryptocurrency without disclosing they were paid”, CNN Business (Nov. 30, 2018) (available at https://www.cnn.com/2018/11/29/tech/dj-khaled-floyd-mayweather-coin-crypto-sec/index.html). Part of the increased scrutiny by the SEC is likely due to the SEC’s criminal charges of fraud against Centra Tech, which allege that Centra Tech “sold investors on false promises of new technologies and partnerships with legitimate businesses.” Frances Coppola, “SEC Fines Floyd Mayweather and DJ Khaled for Illegally Promoting a Fraudulent ICO”, Forbes (Nov. 29, 2018) (available at https://www.forbes.com/sites/francescoppola/2018/11/29/floyd-mayweather-and-dj-khaled-were-paid-to-promote-a-fraudulent-ico/#9c4b6c14665e).

[10] “Two Celebrities Charged with Unlawfully Touting Coin Offerings”, U.S. Securities and Exchange Commission (Nov. 29, 2018) (available at https://www.sec.gov/news/press-release/2018-268).

[11] Nathaniel Popper, “Floyd Mayweather and DJ Khaled Are Fined in I.C.O. Crackdown”, The New York Times (Nov. 29, 2018) (available at https://www.nytimes.com/2018/11/29/technology/floyd-mayweather-dj-khaled-sec-fine-initial-coin-offering.html).

[12] 16 C.F.R. § 255.5.

[13] 16 C.F.R. § 255.5.