The Copyright Small Claims Court will be commencing operations in a few weeks (late June, 2022), and Oliver & Grimsley is pleased to announce that we will be providing both plaintiff and defense services for copyright small claims actions.
Copyright small claims actions should be a cost effective way of enforcing copyrights in the United States, if the copyright holder is primarily seeking a determination of infringement, and willing to receive an award of no more than $30,000. There are some considerations to keep in mind, however.
One advantage is that Copyright small claims actions can be filed without having previously received a certificate of registration, and without filing an application for special expedited status (which is expensive). However, an application for a certificate of registration must have at least been filed at the time of filing a small claims action.
The ability to file small claims efficiently should also provide a slightly better basis for pre-litigation resolution, as prior to this, it has always been a bit of a poker game to figure out whether an actual full suit would be filed in Federal court. Federal cases are very expensive, and if the copyright was not timely registered (see note 1), no statutory remedies or attorneys fees are available. With the ability to file claims informally, for much less cost, and without significant risk of years of discovery, a defendant receiving a cease and desist letter will have to more carefully consider whether a small claims action might be filed. However, the defendant receiving a small claims complaint can treat that claim as a true case or controversy, opt out of the proceeding, and commence a declaratory judgment action in some remote location, so this risk is not mitigated with the small claims process.
The biggest problem with the small claims process is that the small claims court is not mandatory – it is elective. If a defendant has such a claim filed against it, it can “opt out” of the proceeding, in which case “If you opt out, the CCB will dismiss the claim against you, but the claimant can still bring the same claim in federal court.” See https://ccb.gov/respondent/. Therefore, a plaintiff could go to the trouble of filing the small claim, spending money and filing fees, only to have the defendant opt out, and then the plaintiff has to start all over again in Federal court. It is virtually never cost effective to file a Federal court claim in the $30,000 range, so it will be easy for defendants who determine their risk is only at or around that number, to opt out and thus bet that the plaintiff will not follow through.
On the other hand, if a defendant believes that the claim is higher than $30,000, and there is real risk of plaintiff winning and also collecting fees (see note 1) – then opting in might make sense for the defendant.
In short, there is no one answer whether a plaintiff should file in small claims, and no one right answer whether a defendant should opt out. However, as the process is currently set up, it is generally going to be more likely that a defendant elects to opt out, especially where the plaintiff failed to timely register their copyright, and cannot seek statutory damages and the collection of attorney fees.
Note 1: Under 17 U.S.C. § 412, statutory remedies and attorneys fees are not available to a plaintiff/copyright holder unless the effective date of registration is either within 3 months of first publication of the work, “or 1 month after the copyright owner has learned of the infringement,” https://www.copyright.gov/title17/92chap4.html#412
NFTs are unique, effectively non-destructible tokens stored in the blockchain – a decentralized ledger system that uses computing resources to validate the holder of cryptographically unique data without reliance on a single source of truth such as a bank or government [further reading]. The NFT references a link to a resource – typically on the internet or in a game – where some content is available. An NFT has a single owner (which can be an entity), and generally NFT’s cannot be subdivided once they are created, though they can be transferred.
An NFT can represent anything – digital art, a book, a page from a movie script, a signature, a title document to a car or house or real estate, an in game “skin” or custom article, a representation of something in a virtual reality construct (currently being referred to as the metaverse), like clothing, shoes and so on. It can also link to something that is itself a representation of something tangible – for example, an NFT can link to a digital object that might be used in a game, as an avatar or in the metaverse, but that also is created tangibly (for example, this shoe created using artificial intelligence), or it can be an electronic representation of part of the notes to a very famous song. A decent list of many potential uses of NFTs is set out in this article 15 NFT Use Cases That Could Go Mainstream.
NFTs were originally born from a desire to find a way to establish the “provenance” (title) to digital art. See NFTs Weren’t Supposed to End Like This. As pointed out in that article, the blockchain cannot actually store the thing it points to – for example, an image – there is not enough space. It only has the space to really hold a link to that image. As NFT use becomes both widespread and also, referencing property that the NFT holder might not own, many legal issues are now coming to light.
Who owns an NFT and exactly what do they own?
A case filed a few days ago on February 1st is challenging the sale of the “very first NFT” by Sotheby’s for 1.47 million dollars. Free Holdings Inc. v McCoy et al., case number 1:22-cv-00881 (S.D.N.Y). In that case the Plaintiff claims that the sale of the NFT, which is apparently a copy of the original token the founder of NFT’s created, violated its ownership rights to the actual NFT, which it claims to have in its wallet. The defendants have apparently asserted that the actual NFT (the digital token itself) was “removed” or “burned” from the Namecoin blockchain where it was created, and thus does not even exist. The plaintiff is claiming that the original owner allowed the token to “expire” and it somehow renewed that token and placed it in its wallet.
This case presents a novel issue . . . what does “title” to an NFT really mean? The NFT itself is represented solely electronically (a token stored in a blockchain), and only functions electronically – once retrieved, it points to a resource on the internet and identifies the person holding the token as the true owner of … what? That link? The actual resource that is at that link? Is a picture of the token framed as art actually the NFT (and who owns the token itself, the text string)? That token is publicly viewable by anyone – the blockchain just limits how it can be transferred, and identifies the NFT holder as at least someone who has digital rights to the link. Is the token itself a copyright? We may get some guidance in the Free Holdings case.
A person who purchases an NFT should be aware that they are only really purchasing a public and decentralized proof system that establishes that they are the owner of the token, because that token is in their wallet. The actual thing displayed at that resource location probably is under copyright protection, and the owner of the copyright is probably not transferring ALL of the rights to the copyright in whatever that resource depicts. However, there is probably at least an implied license to publicly display whatever the NFT points to on the internet (or in a game, or the metaverse, or wherever that content can be displayed). The result is very similar to the result when someone buys a physical painting or art object. While they have title to that thing (the tangible thing, the painting) – in the absence of a very specific agreement, they do not own the copyright represented by that thing.
What rights must a person who creates an NFT have to the underlying content or server?
Those are very good questions. Could I create an NFT to any URL on the internet (i.e. to any picture that is publicly viewable) and sell that? Do I have to be the “owner” of that image or have any license to it? Do I have to control the web server that serves that image upon a request? What disclosures do I have to make to a purchaser of the NFT as to what rights they are receiving, whether I am the copyright holder of the image, or that I control the server? Does the contract imply I will perpetually, until the end of time, maintain that server and that resource location? What happens if I go bankrupt, or the blockchain service I used goes bankrupt, or the server company? Can multiple NFTs be sold that point to the same resource? Does the NFT platform owe a duty of due diligence to verify rights in the underlying resource? There is nothing built into the NFT or blockchain system that requires unique resource links. Even if an NFT provider limited links to be unique, other NFT providers need not respect that prior link and can create NFTs in their blockchain, pointing to the same resource.
Most NFTs are sold using “smart contracts” – which are essentially a series of pre-made instructions in the blockchain that, when triggered, simply occur. See How smart contracts work. No human sees them, nor reviews them, approves them, or checks they were made or not made. The whole idea is that the blockchain system itself verifies the “transaction” occurred, without human involvement and without a centralized verification system (such as an intermediary bank, certificate signer, government title repository etc). They are not the proper place to agree to whatever license rights and obligations are connected to the underlying resource represented in an NFT. Even if they were, the smart contract process will not meet electronic signature requirements under UETA or ESIGN which are applicable in the US. Those terms would have to be in the underlying terms of service of the NFT provider and the NFT seller.
These issues will play out under traditional legal principles – in the author’s view predominantly under contract law (based on what the terms of service of the NFT provider and seller say), under advertising law – what disclosures must an NFT seller make to meet the requirements of advertising law – that the sale was induced by truthful, non-misleading and fair representations about the NFT?, under the law of publicity rights (use of a person’s likeness to sell a product or service), and of course finally under intellectual property law, principally copyright law.
On that last point, at least under US law, a question arises whether the Digital Millennium Copyright Act notice and take down provisions will apply to NFT transactions. For example, suppose person X sells an NFT to a linked resource at location Y, and was not the owner of the copyright of the image there. If the purchaser does nothing else (such as displaying that image embedded in a game or web page) – can the copyright owner force the NFT platform to take that down that link – assuming the copyright owner does not control that resource? Is that NFT itself a violation of 15 USC 1125(a), indicating a false association with the owner of the copyright (or perhaps implicitly stating the NFT owner owns the copyright?). Under certain cases in the US (e.g. Dastar), misrepresentation as to authorship is often not an actionable.
Are NFT providers liable for NFT sales that violate the rights of a third party?
Most third parties will not have agreed to the NFT provider’s terms of service, which undoubtedly will disclaim liability for any claims arising from acts of the NFT seller. If the third party’s rights are violated, can they sue the NFT provider? In the US, the NFT provider may have immunity under Section 230 of the Communications Decency Act if the NFT is “information provided by another information content provider”. But is it? The NFT provider actually creates the NFT and provides the functionality. However, the NFT owner is the person creating the information that is stored in the NFT.
Summary and some recommendations
There are more questions than answers today, however in any NFT sale transaction, at least the following should be closely reviewed:
The terms of Service of the NFT Platform provider. A buyer will be agreeing to these terms. They are likely not favorable to the Buyer, and also likely not negotiable. As a result, the value of that NFT is highly dependent on the reputation and likelihood of that platform staying in business.
The terms and conditions of the sale from the Seller. Does the Seller represent it has the IP rights to the resource? That they are unique? Will not be resold in a different NFT? Is their liability limited or remedy limited?
Some diligence into the actual art/resource/item should be done – and this may be very difficult. There are no real regulations in this area (outside of general unfair and deceptive consumer protection laws) – so even finding the true author or owner of a work may be very difficult – even in the US where we sort of have a registration system. The less able a buyer is to verify the provenance of the underlying resource, the more strongly worded the representations, warranties and consequences of breach should be. In a worse case, an escrow should be set up so that some post transaction verification can occur before all, or at least some, of the actual transfer of the cryptocurrency occurs.
 – Etherscan defines a wallet as follows: “A wallet address is a publicly available address that allows its owner to receive funds from another party. To access the funds in an address, you must have its private key.” Link
On June 30, 2020, the United States Supreme Court rendered its opinion in the landmark trademark case United States Patent and Trademark Office, et al. v. Booking .com.591 U.S. (2020). This decision may be helpful for those who wish to seek a federal trademark registration where the primary mark includes a top level domain (TLD) identifier, such as “.com” and where the domain name itself may be generic or highly descriptive of the service offered at that domain. Prior to this decision the United States Patent and Trademark Office (PTO) had taken the position that such marks would not be eligible for registration because of the generic nature of the term(s) preceding the TLD portion of the domain (the portion preceding .com). However, certain issues, such as the issue of “consumer perception,” as discussed below, will most certainly be the subject of debate and dispute between these trademark applicants and the PTO.
In this case the online travel agency Booking.com sought to register the trademark BOOKING.COM related to its website for lodging reservations and related services and was denied registration by the PTO. The PTO determined that BOOKING.COM was a generic term not entitled to federal trademark registration. Generic terms can never be registered because they merely identify the class of service or product being offered and not the source of that product or service. Accordingly, it was the PTO’s position that BOOKING merely identified the class of service of making or “booking” a lodging reservation and .COM referred to a website.
Booking.com appealed the PTO’s decision to the District Court which ruled in Booking.com’s favor. The PTO then appealed this decision to the Court of Appeals which also ruled in Booking.com’s favor. The PTO made its final appeal to the Supreme Court which agreed to hear the case.
Affirming both the District Court and Court of Appeals, the Supreme Court, in an 8-1 decision, held that “[a] term styled “generic.com” is a generic name for a class of goods or services only if [emphasis added] the term has that meaning to consumers.” Thus, if it is determined that consumers do not find “generic.com” to be generic to a class of goods or services, but rather unique to goods or services of the entity seeking the trademark, the mark is eligible for registration. In this case, it was determined by the lower courts and uncontested by the PTO before the Supreme Court that consumers did not think BOOKING.COM referred to online hotel-registrations as a class, but rather specifically to the online travel agency Booking.com. Thus, BOOKING.COM, for online lodging registration services, is entitled to federal trademark protection on the principal trademark registry.
As a result of this Supreme Court decision, consumer perception will determine whether a “generic.com” mark can be a registered trademark. The question that will be asked with every such trademark application is “what do consumers think ‘generic.com’ means?” This begs the question, “how do we determine what consumers think something means?” The Supreme Court gives us some insight into this issue by stating that “[e]vidence…can include not only consumer surveys, but also dictionaries, usage by consumers and competitors, and any other source of evidence bearing on how consumers perceive a term’s meaning.” The Supreme Court does offer a word of caution with regard to surveys. “Surveys can be helpful evidence of consumer perception but require care in their design and interpretation.”
There will now likely be a flurry of trademark applications for “generic.com” marks in the wake of the Supreme Court’s decision. While the ruling is certainly favorable to trademark applicants, consumer perception and the method(s) used to try and determine what consumers think something means should be carefully considered beforehand.
Recently celebrating its one-year anniversary, the Never Settle Show has been an industry game-changer in television broadcasting. By blending traditional TV production and innovative technology, the Show engages with a real-time audience from all over the world for participation in the Show by live video streaming and connecting with social platforms such as Twitter, Facebook, Snapchat, Periscope, Instagram, and YouTube Live. The real-time audience communicates and interacts with guests through the Show’s social media.
In 2010, Mario Armstrong won an Emmy Award for Best TV Show Host and he was honored with another nomination in 2015 and again in 2018. The Show recently finished its second season and is looking forward to announcing its third season.
Last week, the Ninth Circuit upheld the lower court ruling that the artists of the 2013 “Blurred Lines” best-selling single infringed the copyright of Marvin Gaye’s 1977 song “Got To Give It Up”.
In 2013, the family of the late Marvin Gaye sued musicians Pharrell Williams, Robin Thicke, and T.I. (Clifford Harris, Jr.), and related recording companies, for copyright infringement. “Blurred Lines” was the best-selling single in the world that year and the Gaye family believed it to be similar in composition to Marvin Gaye’s 1977 song “Got To Give It Up”. In 2015, the trial jury agreed. After three years of an appeal process brought by the musician defendants, the United States Court of Appeals for the Ninth Circuit upheld the infringement ruling (Williams, et al. v. Gaye, et al. Case No. 15-56880)(March 21, 2018).
The decision was not unanimous. Judge Nguyen wrote a dissenting opinion stating that the songs “differ in melody, harmony, and rhythm.” She also noted that it can be “challenging for judges untrained in music to parse two pieces of sheet music for extrinsic similarity. But however difficult this exercise, we cannot simply defer to the conclusions of experts about the ultimate finding of substantial similarity. […] Judges must still decide whether, as a matter of law, these elements collectively support a finding of substantial similarity.” This ruling ultimately changes the music industry landscape moving forward, as it is arguable that the decision improperly protects an artist’s form of musical style. The majority opinion written by Judge Milan D. Smith, Jr., however, focused mostly on the technicalities of the case and the grounds for appeal, determining that the trial court erred only in finding Interscope Records and T.I. liable.
The Gaye family is entitled to approximately a $5.3 million-dollar judgement and running royalties of 50% on future songwriter and publishing revenues. The damages breakdown consisted of: $3,188,528 in actual damages, plus profits of $1,768,192 against Thicke and $357,631 against Williams (and companies collecting royalties on William’s behalf). TI and his associated recording company were cleared of any infringement.
***To investigate or consider copyright protection for music, lyrics, or other works of art, or for more information, please contact Pamela K. Riewerts, Esq., partner at Oliver & Grimsley, LLC. Pamela may be reached via email at: email@example.com
How Famous is the Coca-Cola bottle design? Not quite enough to protect small differences
Design patents are an increasingly useful tool in product configuration protection, but as Coca-Cola recently learned, even a famous product design has its limits. As surely everyone knows, Coca-Cola owns a protected famous trademark for it’s original hour-glass bottle shape featuring fluted ridged lines. Earlier this year, however, the European Union (“EU”) Court denied trademark protection to Coca-Cola for a newly evolved, smooth shaped bottle. The Coca-Cola Company v. Office from Harmonisation in the Internal Market (Trademarks and Designs)(OHIM) 2016.
Under EU law, a trademark may consist of “the shape of goods”, as long as the shape is distinguishable from other third-party products. Coca-Cola’s original hour-glass bottle featuring ripple contours is “one of the most famous shapes in the world… is so distinctive it could be recognized in the dark” Coca-Cola stated. However, the EU court found that Coca-Cola failed to establish that the new smooth bottle design had acquired distinctive familiar connection and character through use.
Coca-Cola originally developed the fluted contoured bottle in the U.S. in 1915 to distinguish its bottle from competitors making similar bottles. Cola-Cola developed a glass “bottle so distinct that you would recognize if by feel in the dark or lying broken on the ground.” After several years of continuous use the unique distinction and recognition lead to trademark protection.
The new smooth bottle shape maintains the hour-glass bulge in the center of the bottle consistent with the original bottle shape, but does not feature the rippled contours that brought the original bottle its worldwide recognition. Although Coca-Cola argued that the smooth bottle is “a natural evolution” of the traditional bottle, both the EU Trademark Office in 2014 and the EU court in 2016, denied the request for trademark protection.
Strategies to Secure Initial Product Appearance and Shape Protection via Design Patents
Similar to the EU, U.S law also allows for trademark protection of product configuration and packaging that acquire distinctiveness over time. See Section 43(a) of the Lanham Act, Section 15 U.S. Code 1051. However, the design must gain “secondary meaning” as the Supreme Court has ruled that “a product’s design is distinctive, and therefore protectible, only upon a showing of secondary meaning”. See Walmart v. Samara.
Design patents can fill this “use” gap – as they also have the ability to protect unique product appearance and packaging at initial launch of products. This form of protection can serve as the first line of protection to claim ownership of distinctive shapes before the established passage of time that later may provide a basis for prolonged customer recognition which eventually may be used to establish trademark protection for the source of origin of the product. While design patent protection has a definitive term of protection– 15 years (See Manual of Patent Examining Procedures (MPEP) 1501), trademark protection, once established, may continue perpetually so long as the trademark is in use.
Coca-Cola first obtained U.S. design patents on its ornamental bottle shape in 1916, and again on it’s redesigned contoured bottle in 1923 and 1937. Design patent protection at that time lasted 14 years (currently 15 years). Years later in April 1960, after the product gained established customer recognition over time, Coca-Cola obtained federal trademark registration for its fluted contour bottle shape, thereby enabling the company to protect its fluted bottle design indefinitely with continuous use and protecting the iconic bottle that it is today.
If Coca-Cola is seeking to protect its new bottle shape in the U.S., one avenue may be to investigate the availability of design patent protection for the initial protection of the new bottle shape, and then look to secure trademark protection after prolonged continued use of the product. This strategy faired well for Coca-Cola in obtaining initial design patent protection and then continued trademark protection of its original rippled bottle shape.
Discussing these concepts in the current age – the design elements of product are becoming very important. For example, Apple protected its iPhone design and recovered significant damages against Samsung for infringement. Car manufacturers have recently filed claims against game manufacturers for digitizing their car shapes into a game. See as an example BMW v Turbosquid.
Should you seek Design Patent Protection for the Appearances and Shapes on Products or Packaging?
A protectable design must be manifested in the appearance of the product and consist of “visual ornamental characteristics embodied in, or applied to, an article of manufacture. The subject matter of a design patent application may relate to the configuration or shape of an article, to the surface ornamentation applied to an article, or to the combination of configuration and surface ornamentation.” MPEP 1500 et seq.; 35 USC 171 et seq. Design protection is based on specifically drawn product figures made in accordance with the U.S. Patent Office Rules, and submitted to the U.S. Patent Office with a patent application in order to identify the legal metes and bounds of the protected design. If you are interested in preventing others from making, using, selling or importing the same or similar product shape or appearance, you may want to engage a patent attorney to investigate whether design patent protection may be available for your product or packaging. An investigation generally consists of a preliminary search and initial evaluation of your product shape or appearance as being new, novel and non-obvious in order to meet the requirements of the U.S. Patent Office.
Should you Trademark the Appearance and Shape of Products or Packaging?
You do not need to register a trademark with the U.S. Trademark Office to establish trademark rights. Protection is established through use of the trademark. However, without federal registration, the trademark is only enforceable in the geographic area where the product is sold. A federal registration on the principal register, however, provides additional advantages and is likely beneficial in most cases primarily because a federally registered trademark on the principal register establishes nationwide priority throughout the entire U.S. Therefore, registration ultimately gives you the right to prevent others from using or registering your trademark nationwide and provides notice to third-parties of your registration. It should be noted that even with principal register trademark protection you cannot prevent someone in a remote location where you do not actually market or sell your product from using a trademark or product design that is confusingly similar until you actually enter that market. A registered trademark is also presumed valid and may eliminate certain invalidity arguments after 5 years of continuous use (incontestability).
How to Register Appearances and Shapes on Products or Packaging:
In order to register your product shape or packaging in the U.S. Patent and Trademark Office, as a trademark your packaging or product design must have acquired secondary meaning – that is, unique, original, and recognizable by consumers as the source of origin. Can the public identify your company as the source of origin of the product or the packaging by its distinctive features?
If a product design or packaging is not inherently distinctive it can still be registered after it acquires distinctiveness through long use, known as secondary meaning.
There are three ways that a mark itself may be inherently distinctive—if its intrinsic nature serves to identify a particular source.
1) Fanciful trademarks, such as a made-up word (Xerox- a created name with no other meaning than acting as a trademark);
2) Arbitrary trademarks, having no relation to the product other than as a means of identifying the company that produces it (Apple computers- a word in the English language not related to the product);
3) Suggestive trademarks, providing a link between the characteristics of a particular product and its producer (Microsoft- suggestive of software for microcomputers).
Generally, any mark that meets one of these criteria qualifies for trademark protection without any specific proof that consumers associate the mark with the specific source of the product.
To prove that the trademark product or packaging has acquired distinctiveness through secondary meaning, a mark must be shown to be distinct in the minds of the consumer and with a recognizable source of origin. Proving distinctive secondary meaning, however, is often expensive and legally challenging and often involves consumer surveys for recognition.
If you are interested in filing a design patent and/or registering your product configuration or packaging with the USPTO, you should contact an attorney to investigate, advise, and file an application for your product or packaging for registration.