Tag: trademark


The Copyright Implications of AI-Generated Art


Today we are witnessing the rapid advancement of artificial intelligence (AI) technologies which are capable of generating human-like images, audio, and text.1 While many people are excited by these AI technologies, these advancements have also rung the warning bell for many individuals in creative industries who believe that AI technologies are exploiting their work and harming their profession as a whole. This is especially a concern for the art industry

 

Recently, AI technologies which generate images have become increasingly sophisticated. These AI technologies are programmed to learn how to generate images from scraping publicly accessible data – in this case images – from the internet.2 Consequently, artists are becoming concerned about how their artwork online is being exploited by large companies to train their AI to create new works, often for a profit.

 

Last year, artists around the world took to the internet and reposted images of a red prohibition circle over the letters “AI” in protest of image-generating AI. The first person to post this image appears to be an artist named Alexander Nanichtkov who stated in a tweet that “AI creates the ‘art’ you see on the backs of artists being exploited . . . AI ‘art’ is currently scraping the web for art and uses it in datasets. No artist gave consent to have their art used. We were not compensated.” 3 In the face of these concerns, many legal professionals are currently considering the extent to which intellectual property rights – particularly copyrights – serve to protect the work of artists.

 

AI Generated

 

A variation of the symbol posted in protest of AI generated art.4

 

Under the Copyright Act, copyright protection is only granted to “original works of authorship.” 5While there is no law or provision of the United States Constitution which defines who may be considered an “author,” the UnitedStates Copyright Office (USCO) tends to only recognize copyrights for works “created by a human being.” 6 Courts actually have a history of denying copyright protection to non-human authors. For instance, in Naruto v. Slater the Ninth Circuit Court of Appeals held that Naruto, a crested macaque, did not have legal standing to claim copyright infringement under the Copyright Act for pictures that Naruto took 7 himself. And for those wondering, Naruto’s claims were filed by the People for the Ethical Treatment of Animals (PETA).8

 

Beyond the context of copyright protection for animals, courts have also considered cases regarding copyright protection for AI systems.This past April, the Supreme Court declined to hear an appeal from a computer scientist named Stephen Thaler, who filed a suit to claim a copyright on behalf of hisAI system, known as Device for Autonomous Bootstrapping of Unified Sentience (DABUS).9 Although Thaler argued that DABUS created the works autonomously, the Court upheld the decision of the lower courts and the USCO, and declined his appeal “on the grounds that the AI couldn’t be considered the legal creator of those works.” While these decisions may seem promising to human artists since they deny copyright protection to non-human authors, the issue of AI generating images is far from settled.

 

The U.S. Patent and Trademark Office acknowledges when these AI technologies scrape data from the internet to generate images, this process “will almost by definition involve the reproduction of entire works or substantial portions thereof,”10 and as a result, copyright infringement seems quite plausible. In fact, a recent decision by the USCO has ruled that AI generated works – whether that is art, writing, or music – will not be granted copyright protection. 11 This decision arose from a copyright application for a comic called Zarya of the Dawn, which used original writing alongside art generated by Midjourney, an AI program.12 In their letter to Zarya creator Kristina Kashtanova, the USCO explained how “the office will not register works produced by a machine or mere mechanical intervention from a human author” and how the crucial question is “whether the ‘work’ is basically one of human authorship, with the computer . . .merely being an assisting instrument, or whether the traditional elements of authorship in the work . . . were actually conceived and executed not by man but by a machine.” 13

 

book

 

The cover page and second page of Zarya of the Dawn14

 

On the other hand, OpenAI, a company that uses AI generating tools, has argued that the works created by AI tools should be protected since they qualify as fair use since the process of scraping data from the internet is done to “create a useful generative AI system and the copies aren’t made available to the public.” 15 To provide another recent example, this past February Getty Images sued Stability AI alleging that it “copied at least 12 copyrighted images from Getty Images’websites” to train their Stable Diffusion AI program.16 While Stability AI responded with a fair use defense, Getty argues that this defense is inapplicable since Stability AI’s AIprogram undermines the market for Getty’s copyrighted material. At the same time, Stability AI is also facing a class action lawsuit from several artists alleging copyright infringement due to the use of their images to train their AI programs.

 

AI image-generating tools have also caused controversies since they can scrape data to mimic a particular artist’s style.This past January, DeviantArt – an online art website – was sued for copyright infringement after they began offering a new service in which users could pay a monthly subscription to access an AI art generator.17 This AI art generator was trained on the artwork of artists who uploaded their art to DeviantArt for free,and users could enter a text prompt to generate images.18 Furthermore, users of this AI tool could even input a specific artist’s name in order to create an image which replicated that exact artist’s style.19 The claim argues that this constitutes copying and consequently breaches copyright. 20 While this may seem like a clearcase of copyright infringement, not everyone in the legal community agrees. For example, Andres Guadamuz, a legal school at the University of Sussex, believes that these AI tools are simply learning patterns from the original works, brushstrokes, and styles which are not covered by copyright law.21

 

To add another layer of complexity to this matter, the USCO has stated that an AI-generated work could be copyrightable if an individual can prove that “they themselves put a meaningful amount of creative effort into the final content.” 22 In other words, while a company that uses an AI system, which scrapes images from the internet to produce new content, may be found to have committed copyright infringement, if that company can prove they added ameaningful amount of creative effort to the final product, then the company could actually argue that they have a valid copyright in the new work.23 This would overcome the previous problem that individuals have faced when they tried to make an AI system a copyright holder.

 

This does not mean however, that minimal contributions made to an AI-generated work would automatically qualify for copyright protection. The Director of the USCO Shira Perlmutter stated “If a work’s traditional elements of authorship were produced by a machine, the work lacks human authorship and theOffice will not register it.”24 For example, if an AI system produced a work solely based on a human prompt then the “’traditional elements of authorship’ are determined and executed by the technology – not the human user.”25 On the other hand, if an AI-system produced a work of art based on a human prompt,and then that finished work was then edited further using Photoshop, the USCO has stated that a copyright is more likely to be granted.26

 

This new stance on the copyrightability of AI-generated works brings with it a wide array of new problems. For example,there is no definitive standard or test which could be used to determine whether a company or individual has made a meaningful enough contribution to an AI-generated work which would qualify it for copyright protection. As previously mentioned, the Director of the USCO Shira Perlmutter stated that if a meaningful human contribution is made to an AI-generated image, through Photoshop for example, then the AI-generated work could qualify for copyright protection.However, there would need to be further clarification or case law on how much Photoshop editing would be required to qualify as a meaningful contribution to the work. Companies could quickly make contributions to an AI-generated work on Photoshop and as a result they could defeat copyright infringement claims.This would be especially harmful to artists whose original works are used without their consent to train these AI systems which then create new works fora profit. Additionally, these new works created by AI systems could be sold at a far cheaper price since producing them is drastically quicker than the cost of human artists creating original works. This could lead to severe economic harms to human artists and could have even greater implications for theart industry as a whole.

 

Despite the bleakness of this situation, there may be a light at the end of the tunnel which could prevent generative-AI from gettingout of hand and inflicting severe harm on human creators. One popular method which has been discussed to control the rapid growth of generative-AI is theimplementation of some sort of licensing system.27 This type of licensing system would require companies using generative-AI to pay copyright holders a fee forusing their works in training their AI systems. This licensing system could offset some of the harm caused by generative-AI since human artists could refuse to license their original works, or they could at least be compensated for allowing their work to be used to train an AI system. Unfortunately, this licensing systemmay not address the greater problem of unfair competition between generative-AI and human artists since companies could produce new works at a far quicker and cheaper rate than human artists creating original works.

 

Due to the recent advancement of AI technologies and their benefits, it is likely that generative-AI systems will continue to be used for the foreseeable future. Furthermore, since these AI technologies are very new, our laws and courts are not fully prepared to handle the quickevolution of these new technologies. As a result, the consequences and effects of generative-AI systems must be continually considered since they can pose substantial harm to human artists.

 

1 Eric Revell, AI complicates copyright law, YAHOO! FINANCE (May 19, 2023), https://finance.yahoo.com/news/ai-complicates-copyright-law-131932670.html.

 

2Id.

 

3 Butlerian Jihad, ARTISTS MASS PROTEST AGAINST AI STEALING THEIR WORK BY SHARING ANTI-AI LOGO, THE_BYTE (Dec. 16, 2022),. https://futurism.com/the-byte/artists-protest-ai

 

4Verity Babbs, Digital Artists Are Pushing Back Against AI, HYPERALLERGIC (Mar. 6, 2023), https://hyperallergic.com/806026/digital-artists-are-pushing-back-against-ai/.

 

5 17 U.S.C. § 102

 

6Revell, supra note 1.

 

7Naruto v. Slater, 888 F.3d 418, 426 (9th Cir. 2018).

 

8Revell, supra note 1.

 

9Id.

 

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11 Sam Sachs, US Copyright Office Rules AI-generated artwork, content not legally protected, WFLA (Feb. 23, 2023, 2:30 PM),https://www.wfla.com/news/national/us-copyright-office-rules-ai-generated-artwork-content-not-legally-protected/.

 

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14Richard Lawler, The US Copyright Office says you can’t copyright Midjourney AI-generated images, THE VERGE (Feb. 22, 2023, 9:06 PM),https://www.theverge.com/2023/2/22/23611278/midjourney-ai-copyright-office-kristina-kashtanova.

 

15Id.

 

16Id.

 

17 Darian Woods & Adrian Ma, AI-generated images breach copyright law, artists say, NPR (Feb. 7, 2023), https://www.npr.org/2023/02/07/1155185861/ai-generated-images-breach-copyright-law-artists-say.

 

18Id.

 

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22Katyanna Quach, AI-generated art can be copyrighted, say US officials – with a catch, THE REGISTER (Mar. 16, 2023), https://www.theregister.com/2023/03/16/ai_art_copyright_usco/.

 

23Id.

 

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27Kai Nicol-Schwarz & Tim Smith, Why Harry Potter is the copyright timebomb under generative AI models, SIFTED (May 18, 2023), https://sifted.eu/articles/generative-ai-copyright.

 



NFT-based Trademark Infringements: Trends & Risk Mitigation Strategies


      1.   NFTs and Trademarks: General Overview

    Interest in blockchain technologies, cryptocurrencies, and particularly non-fungible tokens (NFTs) is steadily increasing. According to Eric Anziani, COO of Crypto.com, “NFTs really started initially with the digital art side. But it’s going to be a lot more powerful. It will be the tool that represents any digital type of assets in virtual worlds going forward. So the applications are tremendous1.”

     

    Basically, an NFT is a (i) cryptographic on the blockchain; (ii) representing an asset; (iii) that is unique and non-interchangeable. For instance, Finzer D. describes NFTs as: “unique, digital items with blockchain-managed ownership2.” Indeed, NFTs, powered by blockchain, have unique qualities which can be applied in different industries and businesses including fine arts, gaming, digital identity, certification, licensing, etc. In this respect, the sudden economic growth of the NFT market is understandable. Businesses also tend to use NFTs as marketing tools and as a creative way for building the brand’s image.

     

    In the meantime, the rise of the NFT market poses new legal challenges, including those in the realm of intellectual property and especially trademark law. Two main trends are worth highlighting. First, there is a significant increase of trademark filing activity around NFT brands. Second, the number of new NFT-related enforcement cases is constantly increasing, including a number of high-profile litigation cases.

     

      1.   Prosecution: How to Trademark your NFT and Avoid Infringing Third-Parties Trademarks

    With increased media coverage and popularity, U.S. NFT trademark applications skyrocketed during the past year.

     

    According to open sources, there was a 552% increase in NFT trademark applications with the U.S. patent agency between August 2021 and January 20223. In January alone, about 450 filings for NFT-related trademarks were received4. [Graphical representation of the data is below.]

     

    NFT Trademark Infringements: Trends and Risk Mitigation Strategies | Best Corporate Law Firm in New York City

     

    [Source: https://finbold.com/u-s-nft-trademarks-applications-skyrocketed-400x-in-2021-with-15-registrations-daily-in-2022/]

     

    Some of the latest examples of NFT-related trademark applications include:

     

    NUMBER
    DESIGNATION
    APPLICANT
    FILING DATE
    GOODS/SERVICES
    97273630
    MONSTER
    Monster Energy Company
    February 18, 2022
    IC 009 (e.g., virtual goods, software enabling users to experience virtual reality and augmented reality visualization, manipulation, and immersion…) IC 035 (e.g., retail store and online retail store services) IC 041 (entertainment services) IC 042 (providing on-line non-downloadable software; platform as a service (PaaS) and software as a service (SaaS))
    97261560
    NYSE
    New York Stock Exchange (NYSE Group, Inc.)
    February 10, 2022
    IC 009 (e.g., virtual goods, software enabling users to experience virtual reality and augmented reality visualization, manipulation, and immersion) IC 035 (e.g., provision of an online marketplace) IC 036 (e.g., financial exchange of virtual currency in the field of digital currency) IC 042 (e.g., computer services, electronic storage of cryptocurrency)
    97226848
    NETAVERSE
    Brooklyn Nets, LLC
    January 19, 2022
    IC 025 (Clothing)
    97244783
    NFT Starter
    NFT Starter Inc.
    January 28, 2022
    IC 009 (Downloadable image files containing artwork, video clips, writings, and multimedia authenticated by non-fungible tokens (NFTs))
    97251874
    NFT BEER
    Columbia Craft, LLC.
    February 3, 2022
    IC 032 (Beer) IC 036 (Financial exchange of crypto assets; Financial services) IC 041 (Entertainment services)
    97253179
    NFT Trademark Infringements: Trends and Risk Mitigation Strategies | Best Corporate Law Firm in New York City
    McDonald’s Corporation
    February 04, 2022
    IC 043 (operating a virtual restaurant)
    97257474
    NFT Trademark Infringements: Trends and Risk Mitigation Strategies | Best Corporate Law Firm in New York City
    Victoria’s Secret Stores Brand Management, LLC
    February 14, 2022
    IC 009 (e.g., downloadable virtual goods) IC 035 (e.g., retail store services featuring virtual goods) IC 041 (entertainment services)
    97206583
    L’ORÉAL
    L’ORÉAL
    Jan. 06, 2022
    IC 009 (Downloadable virtual goods) IC 035 (e.g., retail store and online retail store services) IC 041 (Providing an interactive website for virtual reality game services; Entertainment services)
    97096366
    NFT Trademark Infringements: Trends and Risk Mitigation Strategies | Best Corporate Law Firm in New York City
    Nike, Inc.
    October 27, 2021
    IC 009 (downloadable virtual goods) IC 035 (retail store services featuring virtual goods) IC 041 (entertainment services)
    90602664
    ANDY WARHOL
    The Andy Warhol Foundation for the Visual Arts, Inc.
    March 25, 2021(Published on February 22, 2022)
    IC 009 (downloadable image and multimedia files containing artwork, text, audio, video, games relating to art, collectables, and Non-Fungible Tokens) IC 041 (providing on-line digital publications in the nature of blogs, articles, e-books, podcasts, and videos in the fields of art, artwork, and NFTs (non-fungible tokens) via the Internet (not downloadable)) IC 042 (e.g., providing temporary use of online non-downloadable simulation software for trading non-fungible tokens used with blockchain technology)

     

    Considering this increased focus on obtaining trademark protection for NFTs, it is essential to note that all general trademark registration requirements apply to NFT-related trademarks. In particular, trademarks are always registered for specific classes of goods and services (their intended use). In most cases, NFT-related trademarks are registered for the following classes:

     

        • International Class 009 (downloadable virtual goods)
        • International Class 035 (online retail store, business services)
        • International Class 036 (financial, banking services)
        • International Class 041 (entertainment services)

     

    Trademarkers must make a preliminary assessment of what classes and services to specify, form an accurate description of services/goods involved, and analyze descriptiveness and potential consumer confusion. According to the USPTO, registering a trademark usually takes about 12-18 months.

     

      1.   Enforcement: Unauthorized Use of Trademarks in the NFT-based Projects

    Obtaining a trademark registration can be essential to prohibit third parties from unauthorized use of the trademarked designations in their NFT-based projects. However, since NFTs are so new, most brands have not established comprehensive trademark protections specifically for NFT-related goods and services.

     

    In the meantime, many NFT-based projects started to use famous trademarked brands without any consent from their owners. For example, a collection of 100 virtual versions of Hermès handbags appeared as NFTs created by Mason Rothschild at his metabirkin.com website. The name “METABIRKIN” was used for the project. This project inevitably implicated trademark rights and triggered a trademark lawsuit. On January 14, 2022, the rights holder of BIRKIN trademarks, Hermès, filed a trademark infringement and dilution lawsuit against Mason Rothschild.

     

    According to the complaint, Hermès alleges that Rothschild is trying to “get rich quick by appropriating the brand MetaBirkins for use in creating, marketing, selling, and facilitating the exchange of digital assets known as non-fungible tokens” and “make his fortune” by swapping out Hermès’ “real life” rights for “virtual rights5.” Hermès specifically asserts the following causes of action:

     

        1. Trademark Infringement (unauthorized use of the BIRKIN Mark resulted in Rothschild unfairly benefiting from Hermès’ advertising and promotion and profiting from Hermès’ reputation and the BIRKIN Mark).

        2. False Designations of Origin (falsely or misleadingly describe and/or represent the METABIRKINS NFTs as those of Hermès)

        3. Trademark Dilution (Rothschild intentionally and willfully utilized the BIRKIN Mark to trade on Hermès’ reputation and goodwill)

        4. Cybersquatting (registration and use of the Infringing Domain cause consumers to falsely believe that the METABIRKINS Website and the infringing METABIRKINS NFTs are affiliated with, endorsed or approved by Hermès)

        5. Injury to Business Reputation and Dilution (New York General Business Law)

        6. Common Law Trademark Infringement

        7. Misappropriation and Unfair Competitionunder New York Common Law

     

    In particular, according to Hermès, the “METABIRKINS brand simply rips off Hermès’ famous BIRKIN trademark by adding the generic prefix ‘meta’ to the famous trademark BIRKIN.” At the same time, Rothschild claimed, “I’m not creating or selling fake Birkin bags. I’ve made artworks that depict imaginary, fur-covered Birkin bags6.” Rothschild appealed to First Amendment rights and the prevalent “Rogers test” which helps to determine the balance between protecting artistic expression and avoiding potential confusion with a famous mark.

     

    Currently, multiple versions of the test exist, but a decision in this case could make applications more uniform and create a new standard for use of trademarks in expressive work. On such a possibility, Susan Scafidi, the director of Fordham University’s Fashion Law Institute, opined that “[this case] has the potential to provide guidance on how art and fashion will coexist in the digital world.”

     

    Another relevant high-profile case is Nike, Inc. v. StockX7. Nike filed a complaint against StockX, the operator of an online resale platform for various brands of sneakers, apparel, luxury handbags, electronics, and other collectible goods that purports to provide authentication services to its customers. According to Nike, “without Nike’s authorization or approval, StockX is “minting” NFTs that prominently use Nike’s trademarks, marketing those NFTs using Nike’s goodwill, and selling those NFTs at heavily inflated prices to unsuspecting consumers who believe or are likely to believe that those “investible digital assets” (as StockX calls them) are, in fact, authorized by Nike when they are not8.”

     

    Nike asserts the following causes of action:

     

        1. Trademark Infringement (StockX’s unauthorized use of Nike’s Asserted Marks constitutes trademark infringement of Nike’s federally registered trademarks, which has caused damage to Nike and the substantial business and goodwill embodied in Nike’s trademarks in violation of Section 32 of the Lanham Act)

        2. False Designations of Origin / Unfair Competition (StockX’s unauthorized use of Nike’s Asserted Marks and/or confusingly similar marks constitutes a false designation of origin that is likely to cause consumer confusion, mistake, or deception as to the origin, sponsorship, or approval of

        3. Trademark Dilution (Nike’s Asserted Marks have become distinctive and “famous”… StockX’s use of Nike’s Asserted Marks and/or confusingly similar marks has been intentional and willful)

        4. Injury to Business Reputation (New York General Business Law)

        5. Common Law Trademark Infringement and Unfair Competition (that StockX acted knowingly, willfully, wantonly, oppressively, fraudulently, maliciously, and in conscious disregard of Nike’s rights).

     

    The overlap between this lawsuit and the MetaBirkin case is apparent and StockX will likely also claim fair use and First Amendment protection.

     

    In this respect, these cases may be landmarks which will influence future cases involving allegations of trademark infringements by NFT-based projects.

     

      1.   Enforcement: NFTs and Cybersquatting

    As a related but separate issue, the recent increase in NFT-related domain name disputes has given rise to a new wave of arbitral litigation using the Uniform Domain-Name Dispute-Resolution Policy (UDRP). This is in no small part due to “cybersquatters” registering NFT-related domain names using well-known trademarks.

     

    For instance, an UDRP dispute arose involving the domain name “nftmorganstanley.com” unrelated to the actual Morgan Stanley financial services firm9. Upon the complaint of Morgan Stanley, the UDPR panel considered the registered domain name confusingly similar to the trademark owned by the firm.

     

    The UDRP panel found that the registrant of the nftmorganstanley.com domain name had no rights or legitimate interests in it and that the domain name was registered and used in bad faith. The panel in part determined that the use of competing pay-per-click links indicated bad faith. Due to this, the panel ordered the domain name transferred to Morgan Stanley.

     

    WhatsApp also faces unauthorized registration of several NFT-related domain names (nftwhatsapp.click, nftwhatsapp.com, nftwhatsapp.net, whatsappnft.click, whatsappnft.com and whatsappnft.net). Such domain names were registered on the name of Turkish individuals and organizations. WhatsApp filed the respective complaint with the WIPO Arbitration and Mediation Center. The Panel considered the complaint and stated the following: “The incorporation of a well-known trademark into a domain name by a registrant having no plausible explanation for doing so may be, in and of itself, an indication of bad faith10” The Panel ordered that the disputed domain names be transferred to the complainant.

     

    From these examples, the addition of the descriptive NFT acronym does not prevent a finding of confusing similarity and subsequent transfer of a domain name to the actual trademark holder. As in all cybersquatting cases, demonstration of a lack of the registrant’s rights or legitimate interests in the disputed domain names and evidence of bad faith registration can be informative in decision-making processes.

     

    Overall, the UDRP is a valuable instrument that can be used against “crypto-squatters” trying to capitalize on the registration of NFT-related domain names.

     

      1.   Conclusions and Further Implications

    The growth of the NFT market has spurred the increase of NFT-related trademark applications as well as new trademark infringements including those brought under UDPR litigation and fair use / first amendment protections.

     

    It seems reasonable to expect more high profile NFT-related trademark cases in the future. In addition to analyzing infringement and cybersquatting cases, we can expect NFT-related disputes in the Trademark Trial and Appeal Board (TTAB) as well as contracts arising from trademark licensing and assignment.

     

    In the meantime, both right-holders and owners of NFT-based projects can mitigate their legal risks associated with the possible trademark infringements in a variety of ways. In particular, right-holders and owners can:

     

        1. Register trademarks specifically for NFT-related goods and services

        2. Register domain names with the acronym “nft.”

        3. For trademark holders, monitor the use of trademarks in NFT-based projects and registration of relevant trademarks and domain names in the name of third parties. In case of potential violations, immediately take appropriate action (e.g., sending cease-and-desist letters)

        4. For NFT-based projects, make a risk assessment with regards to the used designations/logos used as part of their projects

        5. Carefully form and articulate enforcement/litigation strategy and respective argumentation.

 

1 NFTs: The metaverse economy. Financial Times (2022). Available at: URL: https://www.ft.com/partnercontent/crypto-com

 

2 Finzer D. (2021) The Non-Fungible Token Bible: Everything you need to know about NFTs. Available at: URL: https://blog.opensea.io/guides/non-fungible-tokens/

 

3 Sujha Sundararajan. U.S. NFT Trademark Filings Soared 400X Since 2021. Available at: https://www.fxempire.com/news/article/u-s-nft-trademark-filings-soared-400x-since-2021-902155

 

4 Justinas Baltrusaitis. U.S. NFT trademarks applications skyrocketed 400x in 2021 with 15 registrations daily in 2022. Available at: https://finbold.com/-s-nft-trademarks-applications-skyrocketed-400x-in-2021-with-15-registrations-daily-in-2022/

 

5 Hermes Complaint, 1. Available at: URL:

https://www.ledgerinsights.com/wp-content/uploads/2022/01/MetaBirkins-Hermes-v-Rothschild.pdf

 

6Agence France-Presse, Hermès suing American artist over NFTs inspired by its Birkin bags. Jan 22, 2022. Available at: URL: https://www.theguardian.com/technology/2022/jan/22/hermes-suing-american-artist-over-nfts-of-its-birkin-bags#:~:text=French%20luxury%20group%20Herm%C3%A8s%20has,but%20ownership%20cannot%20be%20forged.

 

7Nike, Inc. v. StockX. Available at: URL: https://dockets.justia.com/docket/new-york/nysdce/1:2022cv00983/574411

 

8Nike Complaint, 2. Available at: https://heitnerlegal.com/wp-content/uploads/Nike-v-StockX.pdf

StockX’s Vault NFTs by creating the false and misleading impression StockX’s Vault NFTs are produced by, authorized by, or otherwise associated with Nike)

 

9 Morgan Stanley v. Joseph Masci. Available at: https://www.adrforum.com/domaindecisions/1940938.htm

10 WhatsApp, LLC v. Domain Admin, Isimtescil.net / Whoisprotection.biz / Mohammed Alkurdy, Evan Digital Technology Group. Available at: https://www.wipo.int/amc/en/domains/search/text.jsp?case=D2021-2329

 



PepsiCo: Serial Trademark Infringer or Coincidence?


On June 15, 2021, a food startup named Rise Brewing filed suit against PepsiCo in the U.S. District Court for the Northern District of Illinois. The startup has begun to make a name for itself by selling canned cold-brew coffee. Rise Brewing has alleged that the well-known company PepsiCo has infringed on their trademark with their recent launch of a Mountain Dew-branded energy drink called Rise.1

 

History of Infringement

According to Forbes, the notorious food, snack, and soda company, PepsiCo, is valued at an astounding $18.2 billion.2 PepsiCo has had its fair share of trademark infringement cases in the past, where they have been sued by brands such as VitaminWater, Polar seltzer, and Simply Orange Juice.

 

A more recent lawsuit was filed in the United States District Court for the Southern District of Texas, where a temporary nationwide restraining order had halted PepsiCo’s release of a Gatorade product called Gatorlyte. The order had been issued due to a sports beverage named Electrolit made by a Mexican company.

 

According to Laboratorios Pisa S.A. de C.V. v. PepsiCo, Inc., PepsiCo allegedly copied the Mexican companies’ product packaging. Before the issuance of the restraining order, PepsiCo shipped roughly $1.7 million worth of Gatorlyte after spending $1.3 million on media and $18 million of product development. 3 The Court considered three facts in determining whether recall of the product, which was already rolled out nationwide, was justified. These three factors were “(1) the willful or intentional infringement by the defendant; (2) whether the risk of confusion to the public and injury to the trademark owner is greater than the burden of the recall to the defendant; and (3) substantial risk of danger to the public due to the defendant’s infringing activity.”4

 

The Court reasoned that “recall is an extreme remedy” and “therefore they did not find sufficient indicia of willful infringement, confusion to the public that outweighs the onerousness of a recall, or a sufficient risk of danger to the public to justify a full recall of GATORLYTE” at the time of the case.5

 

The Court then turned to the balancing of the parties’ hardships. The Court stated that although PepsiCo’s investments were significant, the Court did not find that a temporary restraining order would affect the investments to such a degree that would be problematic. Additionally, PepsiCo decided to release their product line despite the initial issuance of a Temporary Restraining Order and the then-pending hearing on another Temporary Restraining Order. The Court turned to the Mexican companies’ argument that PepsiCo was aware of the rights in the Electrolit trade dress, so PepsiCo, therefore, accepted all risks of infringement. Trade dress is the look or feel of the product, in this case, Electrolit’s trade dress was their companies protected product packaging.

 

The two companies reached a confidential settlement earlier this spring, ending the case permanently and, therefore, lifting the temporary restraining order.

 

U.S. District Court for the Northern District of Illinois

 

On June 15, 2021, Rise Brewing Company (hereinafter “Rise Brewing”) filed a trademark infringement lawsuit against PepsiCo, alleging that PepsiCo has infringed on their trademark with their recent launch of a Mountain Dew-branded energy drink called Rise.6 The issue in the complaint arose out of the energy drinks use of the word “Rise,” written horizontally across the top of the can, in a fashion almost identical to Rise Brewing.

 

Rise Brewing created a canned caffeine drink that lacks the chemicals, dairy, fat, and sugar commonly associated with traditional energy and coffee drinks. The brand features the words RISE horizontally across the can, with Brewing Co. located just underneath. Shortly before the complaint was filed, PepsiCo released its own RISE-branded caffeine drink. Rise Brewing alleged the PepsiCo brand marketed itself as a morning caffeinated beverage to replace ready-to-drink coffee drinks such as RISE.

 

Rise Brewing alleges that PepsiCo’s actions are causing “reverse confusion” in violation of the Lanham Act. Traditionally, in a trademark infringement case, the defendant is the “junior user” of the mark, and the plaintiff is the “senior user.” This type of trademark infringement causes consumers to believe the defendant or its products are associated with the plaintiff or its products. Here, Rise Brewing alleges that it is the opposite. In a reverse confusion case, the consumer confusion for association goes the other way. Meaning, due to PepsiCo’s size, reputation, and power, consumers are confused into thinking that Rise Brewing’s RISE drinks are associated with PepsiCo.

 

The concept of reverse confusion was established in Big O Tire Dealers, Inc. v. Goodyear Tire & Rubber Co.7 In that case, the Court stated that it was essential to recognize something other than traditional confusion to prevent “anyone with adequate size and resources [from] adopt[ing] any trademark and develop[ing] a new meaning for that trademark as identification of the second user’s products.”8 Rise Brewing alleges this case is a classic case of reverse confusion, demonstrating what the Big O court was trying to prevent.

 

Rise Brewing owns multiple valid registered trademarks with the United States Patent and Trademark Office (“USPTO”), as shown below.

 

 PepsiCo: Serial Trademark Infringer or Coincidence? | Law Firm of Dayrel Sewell PepsiCo: Serial Trademark Infringer or Coincidence? | Law Firm of Dayrel Sewell pepsiCo case full case

 

Chart demonstrating Rise Brewing’s registered trademarks

 

Rise Brewing’s trademark registrations are valid and in full force and effect. It claims to use its RISE Marks through extensive advertising, marketing, and sale of goods bearing the marks. Because of this, Rise Brewing claims that the RISE Marks have become invaluable assets of the Rise Brewing Company, serving as a symbol of their high-quality product.

 

Rise Brewing would like the court to enter preliminary and permanent injunctions restraining PepsiCo and all of its affiliates from the continued use of its trademark, to recover its costs and reasonable attorneys’ fees, in an amount to be determined, and various amounts of awards for damages and profits.

 

Following the guidance of previous cases involving PepsiCo’s trademark infringement, Rise Brewing will likely be granted a preliminary injunction and/or grant damages sought. Rise Brewing has built its company from the ground up, creating and protecting their ideas through the use of registered trademarks. PepsiCo’s power in the market is far greater than Rise Brewing’s. The ability for large companies to prey on the hard work of smaller companies should be carefully monitored and regulated by the courts. This fact pattern is remarkably similar to previous cases filed by smaller companies, like Gatorlyte, against PepsiCo, where the smaller company has almost regularly been granted an injunction. The timing of this case makes it quite difficult for Rise Brewing because of the sheer amount of money that was put into the launch by PepsiCo. Because of this, it is more likely that the court will grant damages from this case, or in the chance PepsiCo would like to settle, Rise Brewing could possibility recover at least a small portion of the money PepsiCo will have made from their product launch. In the event of a settlement, like previous cases, the terms will likely remain confidential. If PepsiCo would like to continue to use the word Rise, Rise Brewing could also offer license to PepsiCo. This case is another example that reverse confusion is still present, despite the Big O court’s precedent.

 

Conclusion

As the case continues, it is essential to remember how valuable intellectual property (patents, trademarks, copyrights, trade secrets) is. Intellectual property, and its protections, foster growth and discovery, allowing for expanding new technology and resources worldwide.

 

1 See RiseandShine Corp. v. PepsiCo Inc., Case No. 1:21-cv-03198.

 

2 FORBES (Jun. 29, 2021), https://www.forbes.com/companies/pepsi/?sh=24c9d6a2bc31.

 

3 CASETEXT (Jun. 29, 2021), https://casetext.com/case/laboratorios-pisa-sa-de-cv-v-pepsico-inc/?PHONE_NUMBER_GROUP=C.

 

4 Id.

 

5 Id.

 

6 See RiseandShine Corp. v. PepsiCo Inc., Case No. 1:21-cv-03198.

 

7 Big O Tire Dealers, Inc. v. Goodyear Tire & Rubber Co., 561 F.2d 1365 (10th Cir. 1977).

 

8 Id. at 1372.



Trademark Parodies – Flawed or Fair use?


The reworked “fair use” defense has provoked debate because it provides excessively broad immunity to certain types of parodies and other expressive uses of trademarks.1 This Article will explore whether the Trademark Dilution Revision Act (TDRA) promotes a flawed treatment of parodies with regard to sub-clauses that provide selective shelter, and exonerating some parodies from liability while impugning others.2 The principal flaw that is discussed in this Article relates to the parody provision and its application of the trademark use test for determining whether a parody is fair. The provision is pliable in that it can be both lenient and strict on parodies.

 

I. Trademark Dilution Revision Act

Trademark, Trademark Dilution Revision Act, United States Patent and Trademark Office, trademark parodies | Law firm of Dayrel sewell
Depiction of the registered trademark symbol

 

The language of the TDRA appears to implicitly divide parodies into two distinct groups: source denoting parodies and non-source denoting parodies. Non-source denoting parodies are artistic parodies- that are not used as trademarks and are treated with leniency, whereas source-identifying parodies generally receive strict treatment3. A plain reading of the provision appears to confer blanket immunity to all parodies as long as they are not being utilized as indicators of source(s) for goods or services4. On the other hand, it imposes liability on parodies that function as trademarks without suitable inquiry into the nature or impact of the parody in question.5,6 This parody approach fails to adequately assess forms of harm since it focuses exclusively on the classification of the parody’s status, rather than the effect.

 

The focus of inquiry should be on the effect of the parody in relation to the original trademark’s distinctive quality or reputation, with consideration regarding the investment to establish such distinctiveness, and not just on the status and presence of commercial or trademark use.  However, this is not the case because the TDRA’s fair use provision fails to appropriately distinguish parodies that convey an artistic or social message from those that tarnish a senior mark.7  The broad language of the exception allows tarnishing use to be exempt from liability so long as the parody in question is not utilized as a source indicator.8 The “fair use” provision appears to provide automatic immunity to non-source denoting parodies, as it stipulates that only these types of parodies that do not function as designators of source, are eligible for exemption under the provision.9 The exemption is justified by the First Amendment.

 

II. Exploring the TDRA Flaw

 

Parodies are expressive by nature.10 For this reason, some parodist choose to present their parodies as “works of art” to the public; such representations can be made without any connection to goods or services, and occasionally, without the expectation of commercial gains.11

 

Still, these parodies can be harmful to the original trademark owner when free-riding occurs, or some harm to the goodwill of the mark because of confusion or false misrepresentation. Free-riding occurs when the parodist receives a benefit from the association between their mark and the well-known mark12. Although some have argued these actions are permissible because they align with the First Amendment justification, and ensure that the original owner shall not be able to monopolize the famous creation, this view fails to consider the investment the original owner sacrificed to establish the identity of being “well-known” or “famous.” As a result, parodists can reap where they have not sown. 

 

Courts have confirmed that the TDRA applies different treatments to parodies based on their categorial status. The TDRA enactment amended the fair use defense by adding an expressed defense for noncommercial use; this plain language of the provision explicitly excluded source denoting parodies. Therefore, courts relied on the main dilution factors provided by the Act, instead of the fair use exception, to immunize source denoting parodies from liability. 13

 

In Louis Vuitton Malletier S.A. v. Haute Diggity Dog, LLC, the court confirmed that the parody clause in the fair use provision is not exhaustive in its coverage of non-dilutive parodies.14 This case set a precedent which allows parodies that are being used as a trademark to sell goods in commerce to be exempted from liability for dilution, in certain circumstances.15 The court’s analysis indicates that a parody does not necessarily need to satisfy the fair use provision in order to be exonerated from liability.16

 

Louis Vuitton, Trademark, trademark parodies
Depiction of the Louis Vuitton logo

 

The courts affirmations justify the concerns with the TDRA’s fair use parody clause, as it demonstrates that the provision is both too broad in some respects, but also too narrow in others.17 The provision is broad as it largely immunizes all non-source denoting parodies from liability without assessing the message communicated by the parody and its effect on the reputation of the mark. If the message promotes a negative impact on the goodwill of the original trademark owner or free-riding occurs, the original owner will have no claim against the parodist, and the First Amendment justification trumps the original owner’s interest or disfavored effects. On the other hand, the provision is too narrow because it excludes certain source-denoting parodies that may not be deserving of protections because of the extraordinary investments original owners take to establish a specialized distinction for the mark. 

 

Allowing protection under these circumstances, permits the parodist to take advantage of trademark owners marketing investments and efforts they may have taken years to establish. Further, the treatment permits free riding. Consequently, the approach to the treatment of parodies effectively ‘dilutes’ trademark owners of the right to obtain an appropriate remedy against parodist who have tarnished their marks by engaging in an unfair or offensive comparison, and parodist who has benefited from the original owner’s investments.

 

An example of these effects is demonstrated in Mattel, Inc. v. Walking Mountain Productions. In this case, the parodist is an artist who posed nude Barbie dolls in photographs that displayed Barbie getting attacked by vintage household appliances.18 Although the artist failed to use the term “Barbie,” the art itself irrefutably involved the trademarked doll and the titles reflected that fact.19 The message of the parody meant to diminish the Barbie persona that was established by Mattel through successful marketing.20 Mattel had purportedly established Barbie as “the ideal American woman” and a symbol of “American girlhood.”21 Is it unfair for a parodist to attempt to destroy the goodwill or reputation of the mark? The law certainly does not think so because such actions are viewed as an exercise of the First Amendment right. 

 

Barbie, trademark, fair use, trademark parodies
Image of a Barbie

 

But what if the only reason the parodist receives an audience or attention is because of “Barbie.” Is the original owner now entitled to a claim? Had it not been for the original owner, the parody would likely have never been created, nor would the parody have received the level of attention attained. But for the original owner’s investments toward establishing the mark’s goodwill, it is likely the parody would be non-existent, or at the very least would not have obtained the level of attention it received. If these photos only receive attention because of “Barbie,” does that mean the parodist is permitted to free-ride off of the famous mark owner’s marketing efforts and investments that may have taken the owner years to establish? Trademark law is permitting parodist to reap what the original owners have taken years to sow! It could take a trademark-owner years to establish a distinct attractiveness in the marketplace. However, a parodist need only use the famous mark under the guise of a parody and receive the same benefits of attractiveness through association, at a fraction of the time and monetary investment that was devoted by the original owner.

 

Under these protections lays the question of fairness, which arises when there is harm from the parodist belittling the reputation of the mark that is being ridiculed.22 Still, the current parody provision does not possess sufficient nuance to assess the type or extent of damage inflicted on the senior mark, caused by the tarnishing effects of the parody.23 Particularly, it fails to provide guidance on the level and quality of ridicule that is considered “acceptable” for a parody.24 This raises some concerns; virtually many cases of non-trademark expressive use would receive protection under the Act. The TDRA arguably tilts the balance too far in favor of non-trademark use parodies. 

 

 1 Eugene Lim, Of Chew Toys & Designer Handbags: A Critical Analysis of the “Parody” Exception under the U.S Trademark Dilution Revision Act, 35 CAMPBELL L. REV. 83, 90 (2012).

 

2 Id. at 92.

 

3 Id.

 

4 Eugene Lim, Of Chew Toys & Designer Handbags: A Critical Analysis of the “Parody” Exception under the U.S Trademark Dilution Revision Act, 35 CAMPBELL L. REV. 83, 92 (2012); Justin Gunnell, Evaluation of the Dilution-Parody Paradox in the Wake of the Trademark Dilution Revision Act of 2006, 26 CARDOZO ARTS & ENTERTAINMENT 441, 455 (2008).

 

5 Eugene Lim, Of Chew Toys & Designer Handbags: A Critical Analysis of the “Parody” Exception under the U.S Trademark Dilution Revision Act, 35 CAMPBELL L. REV. 83, 92 (2012).

 

6 It’s the courts duty to inquire about the nature or impact of the parody which is determined through the infringement factors discussed in the following section.

 

7 Eugene Lim, Of Chew Toys & Designer Handbags: A Critical Analysis of the “Parody” Exception under the U.S Trademark Dilution Revision Act, 35 CAMPBELL L. REV. 83, 93 (2012).

 

8 Eugene Lim, Of Chew Toys & Designer Handbags: A Critical Analysis of the “Parody” Exception under the U.S Trademark Dilution Revision Act, 35 CAMPBELL L. REV. 83, 93 (2012); Justin Gunnell, Evaluation of the Dilution-Parody Paradox in the Wake of the Trademark Dilution Revision Act of 2006, 26 CARDOZO ARTS & ENTERTAINMENT 441, 455 (2008).

 

9 Eugene Lim, Of Chew Toys & Designer Handbags: A Critical Analysis of the “Parody” Exception under the U.S Trademark Dilution Revision Act, 35 CAMPBELL L. REV. 83, 92-93 (2012).

 

10 Id. at 84.

 

11 Id. at 89.

 

12 Iowa State University, Trademark Legal Basics, (Apr. 1, 2019), https://www.trademark.iastate.edu/basics .

 

13 Eugene Lim, Of Chew Toys & Designer Handbags: A Critical Analysis of the “Parody” Exception under the U.S Trademark Dilution Revision Act, 35 CAMPBELL L. REV. 83, 99 (2012).

 

14 Id. at 97.

 

15 Id.  at 96.

 

16 Id.

 

17 Id. at 97.

 

18 Mattel Inc. v. Walking Mountain Prods., 353 F. 3d 792 (9th Cir. 2003).

 

19 Id.

 

20 Successful marketing requires a huge investment of time, money, and consistency over a period of time.

 

21Mattel Inc. v. Walking Mountain Prods., 353 F. 3d 792 (9th Cir. 2003).

 

22 Id. at 93.

 

23 Id.

 

24 Id.



Trademark Law Implications of AM General v. Activision


Video games have grown in realism since the days of pong on an Atari console.  As technology allows for higher resolutions and graphics, so does the need for attention to detail.  In certain cases, video game developers try to depict the real world.  There are legal implications when this real-world depiction goal includes trademark protected items, such as Humvees.

 

trademark law | Trademark infringement: AM General vs. Activision Blizzard

 

The federal Lanham Act governs trademarks at the federal level.  There are two basic requirements: (1) that a mark be definable and (2) used in commerce. 1  You need to be able to know what the mark symbolizes when you see it and use it in business to get the Lanham Act’s protections.  However, these protections are not all-encompassing. 

 

Trademark law
Corporate logo of Activision

 

The Call of Duty video game franchise remains one of the most popular entertainment products in the world, with millions of copies sold.  The “Modern Warfare” subset of that franchise depicts modern militaries in action.  These games try to immerse a player in combat.  The game attempts to do this through the depiction of actual military equipment, including Humvees.  Activision, the company making the games, was sued by the Humvee’s manufacturer (AM General) for their unauthorized depiction of the Humvee in the games. 2

Brooklyn Law Firm
Corporate logo of A.M. General

 

 

The Humvee is a registered trademark of AM General.  Trademarks are an important component of business practices around the world.  Think the Nike swoosh, and how the swoosh is so identifiable and important to Nike as a business.  One might think that copying the symbol or mark would be a violation of the law.  AM General certainly thought so and sued.  The reality of trademark law is more nuanced than one may believe.  Having a Trademark does not necessarily mean that no one else can use it for any reason, as we can see from the results of A.M. General v. Activision.

 

It is a reasonable assumption that using someone’s mark in a profit-making enterprise would be a violation of the law.  Courts will weigh more than the commercial interest of the trademark holder when making decisions.  In A.M. General v. Activision, the court applied a legal test that allows for use of a Trademark so long as the origin of the trademark is not mistakenly identified.  In the video games in question, this misleading behavior does not occur.  In fact, the use of the Humvee is important to the experience of the game, even though the actual maker of the vehicle is not specifically identified in the game.

 

In their decision, a federal district court found that the use of the Humvee in the game did not violate the Lanham Act, and thus Activision was not liable to A.M. General.3  If A.M. General appeals to the Supreme Court, and the Supreme Court upholds the decision, there are significant implications for trademark law.  Artists, if they could prove that depiction of a trademark is essential to the artistic experience, and does not misrepresent that trademark too much, would be able to depict that trademark without fear of legal consequences.

 

1 15 U.S.C. § 1127 (1946). 

 

2 AM General, L.L.C. v. Activision Blizzard, Inc., No. 17 Civ. 8644, 2020 WL 1547838, at *1 (S.D.N.Y. Mar. 31, 2020).

 

 3 Id. at *5.



Prince’s purple: without rain or color trademark protection


In October 2018, Paisley Park Enterprises filed an application with the USPTO (U.S. Patent and Trademark Office) for the registration of a color mark for music, live performance, and museum-related uses [1]. Paisley Park Enterprises is known for being decedent Prince Rogers Nelson’s company. In August 2017, the Prince Estate and Pantone created a purple color called “Love Symbol #2” to represent Prince [2]. The Pantone Matching system is useful to define particular shades of color, and to ensure a consistent use of the same color for one company [3].

 

The custom color created by Paisley and Pantone
The custom color created by Paisley and Pantone

 

In 1985, U.S. courts held that colors could be protected under trademark law [4]. Owens-Corning was the first company in the U.S. to hold a color mark. The fact that colors can be protected by a trademark is a natural expansion of trademark law since trademark may protect words, logos, sounds, designs, smells, and other designations [5].

 

To be protectible under trademark law, a mark has to be distinctive. A mark can be inherently distinctive if that mark is fanciful (an example would be a made-up or invented word, such as Exxon), arbitrary (a mark having no relationship with the goods or services being sold, for example Apple for computers), or suggestive (it requires imagination from the consumer to reach a conclusion as to the nature of the goods or services, for example Mustang for cars). If a mark is descriptive, it is not inherently distinctive and a showing of secondary meaning is required in order to be protectible. In the Qualitex case, the U.S. Supreme Court held that colors could be distinctive and protected under trademark law, but the court specified that a color can never be inherently distinctive. Since a color cannot be inherently distinctive, the applicant for a color mark is always required to show secondary meaning [6]. To establish secondary meaning, an applicant must show that the consumers associate the mark to the source of the product or services, and not to the products or services themselves [7]. In other words, the applicant must show that the mark is a source identifier.

 

The secondary meaning requirement may be justified by the argument that the number of possible colors to be used by competitors could be greatly diminished if the courts and the USPTO were to give trademark rights too easily on trademark applications for color marks. A requirement of secondary meaning limits that possible depletion of the possible colors to be used. Courts may be reluctant to give trademark protection for color marks too lightly, since in some instances there might be underlying reasons behind the use of certain colors. An example is the color orange for safety-related companies and products. Another possible issue is the idea of shade confusion, courts may have difficulties in determining which colors are similar enough to constitute a trademark infringement, and which are not.

 

Prince's company registers the color purple as a trademark | Law Firm of Dayrel Sewell
Prince’s cover for the Purple Rain Album

 

Functionality is a bar to trademark protection. If a mark is functional, it can not be protected under trademark law, even if the mark holder would have been able to show secondary meaning. The courts use two tests in order to determine whether a mark is functional or not. A mark is functional under the first test (known as the Qualitex test) if the exclusive use of the mark would put competitors at a significant non-reputation-related disadvantage [8]. Under the second test (the Inwood test), a feature is functional if it is essential to the use or purpose of the article, or if it affects the article’s cost or quality [9]. To be non-functional, a mark has to be non-functional under both tests. The concept of aesthetic functionality, absent from the statutes but recognized by virtually every court in the U.S., is also a possible barrier to the registration of a color mark. This concept applies in the case of features which have no functional utility, but that consumers want, often for aesthetic reasons. In most cases relating to aesthetic functionality, the first test of functionality is satisfied as an exclusive use would put competitors at a significant non-reputation-related disadvantage, and the mark is then deemed functional. A color mark may be functional in some instances according to this aesthetic functionality concept.

 

In a case opposing Christian Louboutin to Yves Saint Laurent, courts held the trademark protection on Christian Louboutin’s red sole to be enforceable, but that this protection only covered shoes when the red sole contrasted with the upper of the shoe [10]. That protection is thus limited and does not extend to the manufacture and sale of monochrome red shoes with a red sole, such as the red Yves Saint Laurent’s shoe at issue. This decision allowed Louboutin to benefit from trademark protection on its red sole without putting its competitors at a significant non-reputation-related disadvantage.

 

Prince's company registers the color purple as a trademark
Louboutin’s red soles

 

The USPTO refused to register Paisley Park Enterprises’ “Love Symbol #2” mark because consumers do not perceive this color as a source identifier according to the USPTO. The USPTO noted that album covers from other artists such as Cam’ron and Kanye West also included the use of the color purple, and that the purple color was not distinctive of Paisley Park Enterprises’ products and services as it is a commonly used color in the sale of products and services in the same class. [11]

 

Purple Haze Album | Trademark & Protection
Cam’ron cover for Purple Haze Album

 

Color is often used as a source identifier by companies. Tiffany’s Robin’s Egg blue color, which is used on their boxes, is protected by a trademark, the Tiffany Blue hue has been held to be distinctive through an acquired secondary meaning. UPS also registered its brown color as a trademark [12]. Paisley Park Enterprises may try to show that the particular purple color they are trying to register serves as a source identifier, and they may argue that consumers associate this purple color to Prince. If Paisley Park Enterprises manages to show secondary meaning, the USPTO will be likely to accept the registration of the “Love Symbol #2” color mark.

 

Tiffany & Co. Trademark
Tiffany & Co. famous blue box (robin’s-egg blue or forget-me-not blue)

 

[1] http://www.thefashionlaw.com/home/princes-estate-is-seeking-federal-trademark-protection-for-his-purple-pantone-hue
[2] https://www.pantone.com/about/press-releases/2017/the-prince-estate-and-pantone-unveil-love-symbol-number-2
[3] https://www.ipwatchdog.com/2018/07/14/can-you-trademark-a-color/id=99237/
[4] In re Owens-Corning Fiberglas Corp., 774 F.2d 1116 (Fed. Cir. 1985)
[5] Restatement of the Law (Third), Unfair Competition : §9 Definitions of TM and service mark
[6] Qualitex Co. v. Jacobson Products Co. Inc., 514 U.S. 159 (1995)
[7] https://tmep.uspto.gov/RDMS/TMEP/current#/current/TMEP-1200d1e10316.html
[8] Qualitex Co. v. Jacobson Products Co. Inc., 514 U.S. 159 (1995)
[9] Inwood Laboratories Inc. v. Ives Laboratories, Inc., 456 U.S. 844 (1982)
[10] Christian Louboutin, SA v. Yves St. Laurent America Holding, Inc, 709 F.3d 140 (2d Cir 2013)
[11] http://www.thefashionlaw.com/home/us-trademark-body-says-prince-was-not-the-only-musician-to-make-use-of-the-color-purple
[12] https://www.ups.com/media/en/trademarks.pdf 



Intellectual Property Implications for the Booming E-sports Industry


The term e-sports is short for electronic sports and has come to be associated with describing video games competitions.  Much like traditional sports, there are amateur and professional scenes for the sports in question.  There are also teams and contracts, leagues, and sponsorships.  However, e-sports are very early in their lifespan and thus the infrastructure is not as well developed as traditional sports in many ways.  Visas, for example, are routinely denied to competitors to go to events because they do not fit the traditional definition of an athlete or businessman.  Specific contracts between players and teams are kept secret with unethical strategies being used.  The basic terms of these contracts also are slanted heavily in favor of the organization, with players unable to argue for better conditions.  Many of these issues do not exist for traditional sports; contracts in the NFL for example are highly regulated, teams must abide by clearly defined rules, (including forced buyouts in the NBA, such as what happened to the L.A. Clippers) and rarely are athletes denied visas to compete.

 

This lack of infrastructure, direct precedent, and general lack of legal knowledge on both the parts of players, organizations, and to an extent the companies, is likely the cause behind all of the issues that exist in the e-sports scene.  It must be stressed that there is very little scholarly research done about e-sports, even less so in legal scholarship.  For many of the issues discussed in this blog post, very few have any research of any sort conducted and most of the sources will be press articles that are not peer-reviewed or under any formal scrutiny.  In this sense, the issue of lack of infrastructure also extends to the scholarship itself.  This blog post seeks to be an introduction to the field of exports, while highlighting some potential issues that may exist in the field regarding copyright and trademarks.

 

E-sports has been growing year after year in its size and has never been bigger.  In terms of viewership the largest e-sports event of 2015 was the League of Legends LCS 2016 with over 43 million unique viewers and a peak of 14 million concurrent viewers worldwide.  The prize-pool for the event was $6.7 million USD.  The second largest event, called the International 2016, an e-sports event featuring the game DotA 2, had a peak viewership of 8 million  and an $20 million USD prize pool.  Championships matches for LCS and the International have filled up entire sports stadiums and smaller events still are able to occupy large convention spaces.  These statistics are not very surprising in light of the fact that over 150 million Americans play video games, with more than half of all households owning some sort of dedicated games console and 40% of Americans responding that they play three hours or more of video games each week.  Of course, these statistics are not directly translatable to e-sports because the study did not specify between e-sports titles and non-e-sports titles.  The study for instance, did not differentiate between individuals who played video games on mobile devices (phones, tablets) as opposed to traditional gaming devices (portable, home, personal computer).  Of the largest e-sports titles in terms of revenue, sponsorship, and prize money, the vast majority of them are only available on personal computer (League of Legends, DotA 2, Starcraft II, Counter-Strike Global Offensive are all personal computer exclusive games), so it stands to reason that there may not be direct correlation between the figures.

 

Nevertheless, the size of the e-sports industry is hard to deny, even when it is evaluated separately from the gaming industry as a whole.  According to SuperData research, the e-sports industry generates around $748 million USD in sponsorships, pro-players, ticket sales, gambling, merchandising, ticket sales, and other direct revenue.  This figure does not include game sales, sales of downloadable content, or microtransactions; (in game payments which can offer direct benefits ingame, most often in mobile games such as the ability to purchase extra plays in Candy Crush) it only looks at the revenue that e-sports directly generates through competitions).

 

Unlike traditional sports, e-sports themselves are software that some entity has copyright control over.  No individual or entity owns football for instance, so theoretically one could organize a football tournament and no one could stop the tournament on the basis of the organizers not having the rights to the game.  Originally, Blizzard Entertainment (the creators of Starcraft) found it more difficult to restrict Korean broadcasting of games and tournaments.  When the successor to Starcraft, Starcraft 2 was released, the game could not be played without a direct connection to Blizzard, thus allowing Blizzard to control licensing more directly. This mistake has not been repeated by League of Legends, in which the game cannot be played offline and thus allowing for Riot to have complete control over the game.  Interestingly enough, both Counter-Strike Global Offensive and DotA 2 can be played on local area network (allowing for non-internet multiplayer gameplay on multiple computers) and are both owned by Valve Entertainment.  However, this likely ties into Valve’s business strategy with these two games, which relies heavily on community generated content and will be detailed later in the paper.

 

Proprietary control is very important when it comes to e-sports.  Many gaming companies have learned from the mistakes of Blizzard Entertainment, who was unable to control KESPA (Korean Esports Association, which was responsible for organizing pro players, granting licenses, scheduling showtimes on Korean television, etc.) for many years and as a result did not receive a portion of the direct revenue generated from the e-sports scene for Starcraft Brood War.  For the most part, now all of the largest tournaments are sponsored and funded by the companies themselves.  The International is funded by Valve, LCS is funded by Riot, Starcraft II is funded by Blizzard and they sublease broadcasting rights to several different Korean companies.  Nearly all of these games have their largest tournaments broadcast on Twitch.tv, an online streaming website that allows for people to watch gameplay footage in real time.  Because of the primarily online distribution of e-sports content (with the exception of South Korea) this furthermore allows the companies not to have to rely on other broadcasting companies to show their tournaments.  Indeed, streaming has become so lucrative that YouTube is beginning to expand their streaming capabilities for games.

 

Blizzard and Kespa reaching - e-sports

  (Blizzard and Kespa reaching an agreement regarding broadcasting rights)

 

Third party e-sports leagues are being brought into line, but instead of shutting them down they allow them to continue with a license.  A great example of this happening occurred with the Super Smash Brothers community.  In 2013, EVO was sent a cease and desist letter by a lawyer in Nintendo stating that they were not allowed to broadcast Super Smash Brother Melee.  However, after online backlash, especially considering that Melee had been a staple at EVO for years, Nintendo reversed the decision.  To this day, there are those who believe (like myself) that this decision was actually made in error, given that the decision was immediately reversed and no such decision was made before, there is a suspicion that the lawyer may simply have been new and didn’t know what he was doing.  Regardless, after the EVO 2013 incident, Nintendo started to reach out to tournament organizers and sponsored them.  In 2014 and 2015, Nintendo not only licensed broadcasting rights to MLG (Major League Gaming), EVO, APEX 2015 (the premier Smash tournament where all versions of the game are played) and many other leagues, but also sponsored the events, providing money, equipment, and promotion on their Twitter and Facebook pages.

 

complete sponsor list for EVO 2014 - e-sports

       (complete sponsor list for EVO 2014)

 

Leasing and sponsoring the tournament also had other benefits for Nintendo.  A fan-made modification to Super Smash Brothers Brawl, referred to as Project M, was very popular and featured in many tournaments.  However, because Project M was not a Nintendo product, not only did they not receive money from it (it was a free download, but the makers received donations) but it also created a product that could potentially compete with their products. Many users online noted that when they played Smash 4 for the first time that the game felt similar to Project M.  When Nintendo began to sponsor these tournaments, Project M disappeared from the event listings in its entirety, although this cannot be definitely linked to Nintendo, it is very likely that Project M’s omission was a stipulation by Nintendo for sponsorship.  In 2015, the makers of Project M would cease their development of the mod in its entirety, the reason they claim was not because they were targeted by any legal action by Nintendo but rather because they saw it as a potential hurdle in the future and wished to avoid it.

 

Third party leagues are becoming more valuable as well, as their production companies, industry knowledge, and connections make them very valuable to both investors and gaming companies.  It also allows for the company to have more control over their e-sports presence.  In 2015, ESL (Electronics Sports League) was acquired by a Swedish Media company for $87 million USD, because the company saw the worth in the future.  In 2016, MLG, (Major League Gaming) was purchased by Activision-Blizzard for a rumored $46 million USD in order to better promote their esports titles (which include Starcraft, Warcraft, Call of Duty, Heroes of the Storm, Hearthstone, etc.).  By absorbing the league, it is able to better control the tournament.  Another example would be in how Nintendo sponsors tournaments.  At these tournaments, the traditional commercial break, where an ad would be run on the streaming website (usually Twitch.tv) was instead replaced with Nintendo commercials and promotions. For example, Nintendo brought a setup of the then-unreleased game Splatoon for attendees to play a demo of at Apex 2015.  Greater company involvement and control allows for greater control of the message.

 

A potentially interesting issue that could have a large impact on the e-sports scene is the idea of copyrighting concepts and game mechanics.  It is well established in copyright law that you cannot copyright archetypes and settings, for example while you can copyright Spiderman, you cannot copyright the idea of a superhero who has spider-based powers in New York City. Although untested in the realm of video games however, it seems that this principle also applies to game mechanics.

 

e-sports

    (comparison of Dota 2 versus League of Legends) 

 

The U.S. Copyright Office statement on this matter seems pretty succinct. The Office states that the “methods of playing a game” are unprotected according to the statement and “similar methods” may be used. (https://www.copyright.gov/fls/fl108.pdf)   This is consistent with the history of several e-sports titles.  An example that highlights this is the history of DotA, League of Legends, Heroes of Newerth, Heroes of the Storm, and SMITE.  The original DotA was a fan modification for Warcraft III, developed by several enthusiasts.  Over time, the developer split up to pursue their own projects.  Guinsoo, one of the original developers, would end up creating League of Legends and Icefrog, another original developer, would be hired by Valve to create DotA 2.  Heroes of Newerth was a game that had similar game mechanics as the other two and also was derived from the original DotA.  With the popularity of what was then called DotA-style games arising, other companies jumped into the mix, Blizzard created a game known as Blizzard DotA, and Hi-Rez studios created SMITE.  All of these games retained elements from DotA, for example leveling, three lanes, items, 5 versus 5 games, etc.  However, even though these games all derived heavily from the same source and were very mechanically similar, there were very few legal problems between all of these companies.

 

In fact, the only lawsuit filed within the realm of DotA-style games was filed for trademark reasons, not copyright.  Blizzard, the owner of Warcraft III which is the game the original DotA was derived from, claimed that Valve could not commercialize the name because it belonged to the Blizzard community and would create confusion as to if DotA 2 was a Blizzard product.  The end result was that Blizzard conceded the rights to commercially use DotA to Valve while Valve conceded that non-commercial work (the original DotA for instance) could use the DotA name freely.  To that end, Blizzard changed the name of their game from Blizzard Dota to Blizzard All Stars, and the final name for the game was Heroes of the Storm.

 

As the newest medium to express creative ideas, video games have a long ways to go before significant legal findings are made about it.  And as far as e-sport goes, there will be a long time before the legal issue present within the field get any significant attention by legal scholars…certainly when more money is involved.  While it is true that the entirety of e-sports revenue generated worldwide is larger than that of the NBA, the field still needs more time to expand its audience beyond those who play video games and attract those who also do not.  In the meantime however, familiarizing oneself with the history and potential legal issues of e-sports will help any lawyer who wishes to get into video games related litigation in the future.  Video games are the next big frontier.

 

Although many legal issues, especially with e-sports, will be familiar to lawyers who are otherwise unfamiliar with video games (for example, players contracts or trademark law) there are many more potential issues that are unexplored and have potentially large ramifications.  Intellectual property (IP) lawyers will be at the forefront of this effort, as they are best suited for interpreting older statutes that never had video games in mind when they were written to be applied towards video games.  Already there is a growing number of lawyers involved in video games, whether it is the popular Video Games Attorney who gained notoriety by helping smaller studios sue larger companies or the legal divisions of Activision-Blizzard and other large companies.  Navigating this unknown frontier of IP law requires the guidance of an experienced IP attorney. 

 

For more information please visit our site: https://sewellnylaw.com/intellectual-property

 

 

 

 

 



Redskins Trademark Fumble


Redskins Trademark Fumble

 
 

The LAW FIRM OF DAYREL SEWELL, PLLC is pleased to announce that Messrs. Sewell’s and Fine’s recent, featured publication, “The “Redskins” Trademark: Turn-over on Downs”, appears in this month’s IPFrontline newsletter (Trademark Turn-over on Downs).

 

Redskins Trademark Fumble

 

For decades, the National Football League’s “REDSKINS” trademarks have been under siege. Activists, concerned citizens, Native American groups, lawyers, and politicians have boisterously levied meritorious arguments against a trademark that has defined an American professional football team for almost a century. While this coalition has attracted a great deal of societal attention, it has only recently secured judicial support.

 

For decades, the NFL has stood firmly behind its “Redskin” trademark, as has the majority of Redskins fans. The term “redskin” subsequently no longer enjoys widespread use in America as a word describing the Native American people. The case, Pro-Football Inc. v. Blackhorse, offers an extensive analysis of the term and its implications. After carefully weighing the evidence, the Eastern District of Virginia ultimately determined that the term “redskin” is disparaging to the Native American population, and is subsequently undeserving of continued federal registration.

 

In sum, the Eastern District of Virginia affirmed the TTAB determination that the term “redskins” would not enjoy continued registration as a trademark on the basis that the term is, and was always, likely to disparage a “substantial composite” of the Native American population.

 

Today, it is largely undisputed that the term “redskin” is, by definition, offensive as a descriptor for Native Americans. Fast-forwarding, several years later, the NFL’s Washington Redskins team is now known as the Washington Commanders; it was only a matter of time before the team’s ownership wilted under the mounting legal, economic, and public policy pressures.

 

You are encouraged to comment and receive free updates by subscribing to the firm’s Blog and Press Release sections.

 


Continuing Legal Education, Networking, and Refreshments


The LAW FIRM OF DAYREL SEWELL, PLLC is pleased to announce that Dayrel will be co-presenting a Continuing Legal Education (CLE) course called “Intellectual Property Fundamentals: What Every Attorney Needs to Know” on Monday, May 19, 2014 at the Brooklyn Bar Association.

This Continuing Legal Education event will provide practicing attorneys with a primer to issue spot, analyze, and provide better value to their clients by competently addressing the various intellectual property issues that arise in a myriad of business transactions and lawsuits.

Along with an overview of the main intellectual property areas of patent, trademark, and copyright, this course will provide key practice points, current case law, and analytical framework that are sure to add value to your practice.

While many attorneys lack the STEM background required to become a registered U.S. Patent Attorney, one would be remiss to ignore the significant, valuable intellectual property ramifications of various business decisions. From employment contracts to social media to portfolio licensing, intellectual property is all around us.

Intellectual property (IP) is an overarching term for the legal protection of creations, inventions, products or processes that originate from a person’s mind or ‘intellect’. Generally-speaking, intellectual property fits into one of four distinct categories: patents, trademarks, copyrights, and trade secrets. While some of the principles are similar to real property, there is a plethora of rules and laws to protect such intellectual inventions both domestically and internationally.

The United States Patent and Trademark Office (USPTO) is the federal agency for granting U.S. patents and registering trademarks. In doing this, the USPTO fulfills the mandate of Article I, Section 8, Clause 8, of the Constitution that the legislative branch “promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” The USPTO registers trademarks based on the commerce clause of the Constitution (Article I, Section 8, Clause 3). Additionally, The USPTO advises the president of the United States, the secretary of commerce, and U.S. government agencies on intellectual property (IP) policy, protection, and enforcement; and promotes the stronger and more effective IP protection around the world.

Refreshments and networking will immediately follow the CLE presentation. The attached flyer contains further course and registration information. You are encouraged to attend this fun and informative event. We look forward to seeing you!

Intellectual Property Fundamentals What Every Attorney Needs to Know

Continuing Legal Education, Networking, and Refreshments

The USPTO for intellectual property fundamentals