How ChatGPT and other generative AI may affect the legal industry

ChatGPT

A Brief Introduction to ChatGPT

“ChatGPT, or similar language models, has the potential to significantly impact the legal industry in various ways”, says ChatGPT when prompted, “how is ChatGPT going to affect the legal industry”. ChatGPT is a machine learning based technology created by OpenAI, an American artificial intelligence (“AI”) research lab aiming to make AI globally user-friendly and accessible.¹ Since OpenAI’s launching of ChatGPT in November 2022, ChatGPT has become one of the most accessible and user-friendly AI models available to the public. Reaching 100 million users in just over two months, ChatGPT may be the fastest-growing consumer app in internet history, and there is no doubt about its influence on various fields such as finance, government, technology, etc.²

The legal industry has access to ChatGPT and other generative AIs at their disposal as well. Seeing a potential for success in the legal field, OpenAI released its latest version of ChatGPT called GPT-4 in March 2023. GPT-4 currently powers CoCounsel, the very first AI legal assistant program now widely used by the legal industry.³ GPT-4 can perform tasks typically handled by lawyers, such as reviewing documents, preparing for a deposition, conducting legal research, and summarizing documents.⁴ As AI advances at an unprecedented speed, its potential impact on the legal profession, especially for lawyers and paralegals, can be evaluated.

ChatGPT’s impact on the Legal Profession

a. What ChatGPT can do

Put simply, generative AI like ChatGPT collects a colossal amount of information and data, breaks it down into small units, analyzes these small units, and puts them together.⁵ Taking advantage of the generative AI’s ability to access and quickly access vast amounts of information, ChatGPT-4 can perform advanced tasks such as drafting documents, legal research, predictive analysis, contract review analysis, and due diligence.⁶ In fact, a LexisNexis survey from March 2022 revealed that over half of the New York lawyers who participated in the survey expressed that they had already used generative AI at work or were planning on doing so.⁷ Currently, the services in the legal profession most likely impacted by AI are those that involve routine and repetitive tasks which are mostly handled by junior associates, leading to cost savings for law firms as AIs can perform those tasks faster.⁸ A study done in March 2023, by researchers at Princeton University, University of Pennsylvania, and New York University, predicted that the industry most vulnerable to the new AI was legal services. ⁹ Another research by Goldman Sachs also predicted that 44 percent of legal work could be automated.¹⁰

The rise of generative AI could also affect the demand for legal services due to its affordability and accessibility. The LexisNexis survey revealed that of around 2,000 consumers in the legal market, around 15% of them stated that they had already tried generative AI for legal advice or assistance.¹¹ As generative AIs become more and more advanced, the number of people turning to AIs for relatively simple legal services are likely to increase and attorneys will see a decrease in the number of potential clients for certain types of legal work.

b. What ChatGPT cannot do

Despite its enthusiastic reception and hype, ChatGPT as of now still remains more as a prospect, according to its inceptor; co-founder and CEO of OpenAI Sam Altman tweeted in December 2022 that ChatGPT is “incredibly limited but good enough at some things to create a misleading impression of greatness.”¹²

A perfect example of his comment comes from a lawyer who used ChatGPT to draft a brief. Most recently in May 2023, a New York lawyer used ChatGPT to draft a brief opposing a motion to dismiss filed against an in-flight personal injury case filed in the Southern District Court of New York.¹³ When the lawyer asked ChatGPT to search for relevant cases to include in his opposition, ChatGPT cited more than half a dozen cases involving flight injuries.¹⁴ The brief contained pinpoint citations from cases such as Martinez v. Delta Air Lines, Zicherman v. Korean Air Lines, and Varghese v. China Southern Airlines.¹⁵ However, it turned out that ChatGPT had invented those cases and the lawyer who did not think that ChatGPT could “make up” cases used them without confirming the validity of the cases. The lawyer was eventually penalized to pay $ 5,000 for sanctions under Federal Rule of Civil Procudure Rule 11 for submitting pleadings that contain arguments that have no evidentiary support.¹⁶

In addition to the aforementioned problem of ChatGPT “making up” facts, ChatGPT is also not up-to-date. ChatGPT does not update its database automatically and/or regularly. ¹⁷ The current version has only been tested with information up to 2021.¹⁸ Therefore, ChatGPT is not aware of and/or does not have any information after 2021, which means its collection of case law, statutes, local ordinances, legislature, news, etc. is outdated and may sometimes even be irrelevant. For example, ChatGPT does not have in its database most recent U.S. Supreme Court cases such as Dobbs v. Jackson Women’s Health Organization that overturned Roe v. Wade in June 2022 and Students for Fair Admissions, Inc. v. President and Fellows of Harvard College that struck down affirmative action in June 2023. Furthermore, because ChatGPT operates by processing potentially inaccurate information, it also produces inaccurate information, with OpenAI claiming a factual accuracy rate between 70-80%.¹⁹ In such a fast paced world where facts have become ever more important, outdatedness and inaccuracy can result in significant negative impact on users in various ways. This in turn means that it is still a little early for people to fully rely on the information and/or work product produced by generative AI assistance.

Legal Implications that Comes with the Increased Use of AI in the Legal Field

a. Privacy

Another concern with generative AI tools like ChatGPT is privacy. According to the OpenAI’s product and service privacy policy, “data ingested into the public ChatGPT model becomes part of the data repository and is not kept private,” and therefore the data could be breached and private information could be leaked.²⁰ Hence there is a potential violation of a duty of confidentiality in using public generative AI, and many firms either ban or only allow limited use of generative AI in fear of privacy violation.²¹ Similarly, private users should keep in mind that the data they put in the public AI could be exposed.

b. Copyright

As explained previously, generative AI such as ChatGPT creates text based on a vast amount of data that is already out, and a huge part of which is copyrighted. Courts’ ruling on whether ChatGPT’s use of such work constitutes an act of copying works that are protected by copyright is not clear because there has not been a case raising the issue. However, it is an implication that users, especially lawyers, need to keep in mind. On the other hand, whether work created by the generative AI can be copyrighted is another interesting question; there is not an abundance of cases regarding the issue. However, the U.S. Copyright Office in its formal guidance said that works created by AI may be copyrightable, provided that the work involves sufficient human authorship. ²²

Verdict?

Artificial intelligence has more heavily been integrated in people’s everyday lives than they may have realized. From customer service, education, content creation, and businesses, more people are turning to tax-filing softwares such as Turbotax to file their tax returns and more and more websites are using AI chat-systems to direct and help customers. The advancement and development of AI are likely not ending anytime soon. In February 2023, Google launched Bard, its experimental artificial intelligence²³ and Meta also introduced its own artificial intelligence, LLaMA (Large Language Model Meta AI).²⁴ The tech industry’s seemingly infinite possibilities fuel competition and investments, and nobody can predict how fast and far it can take us. According to UBS, the AI services market is expected to grow to $90 billion by 2025.²⁵ However, amidst the possibilities, the example of the New York lawyer who used ChatGPT to draft a brief with nonexistent cases reminds us that artificial intelligence is at its core “artificial.”

After a brief pause, ChatGPT added when asked “how is ChatGPT going to affect the legal industry”: “However, it’s important to note that while ChatGPT can be a useful tool, it should not be seen as a substitute for human legal expertise. Legal professionals will still play a crucial role in interpreting and applying the law, exercising judgment, and providing tailored advice to clients. Additionally, ethical considerations surrounding the use of AI in the legal industry, such as privacy, data security, and bias, need to be addressed to ensure responsible and fair deployment.”

¹OpenAI,https://openai.com/ (last visited July 18, 2023).

² Sawdah Bhaimiya, ChatGPT May Be the Fastest-Growing Consumer App in Internet History, Reaching 100 Million Users in Just Over 2 Months, UBS Report Says, Business Insider (Feb. 2, 2023), https://www.businessinsider.com/chatgpt-may-be-fastest-growing-app-in-history-ubs-study-2023-2.

³Casetext https://casetext.com/ (last visited July 18, 2023).

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⁵ Kevin Roose, How Does ChatGPT Really Work?, N.Y.Times (Mar. 28, 2023),https://www.nytimes.com/2023/03/28/technology/ai-chatbots-chatgpt-bing-bard-llm.html

⁶The Potential Impact of Generative AI on Law Firms, FairfaxAssociates.com (May 10, 2023), https://fairfaxassociates.com/insights/the-potential-impact-of-generative-ai-on-law-firms/

⁷Generative AI Captures Iagination of Lawyers, Law Students, Consumers Alike, LexisNexis.com (Mar. 20, 2023), https://www.lexisnexis.com/community/pressroom/b/news/posts/generative-ai-captures-imagination-of-lawyers-law-students-consumers-alike

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⁹Jan Hatzius, Joseph Briggs, Devesh Kodnani & Giovanni Pierdomenico, The Potentially Large Effects of Artificial Intelligence on Economic Growth, Goldman Sachs (Mar. 26, 2023), https://www.gspublishing.com/content/research/en/reports/2023/03/27/d64e052b-0f6e-45d7-967b-d7be35fabd16.html

¹⁰Ed Felton, Manav Raj & Robert Seamans, How will Language Modelers like ChatGPT Affect Occupations and Industries?, Social Science Research Network (Mar. 6, 2023), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4375268.

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¹² Sam Altman (@sama), Twitter (Dec. 10, 2022 7:11 PM), https://twitter.com/sama/status/1601731295792414720?lang=en.

¹³Benjamin Weiser & Nate Schweber, The ChatGPT Lawyer Explains Himself, N.Y.Times (June 8. 2023), https://www.nytimes.com/2023/06/08/nyregion/lawyer-chatgpt-sanctions.html

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¹⁵ Benjamin Weiser, Here’s What Happens When Your Lawyer Uses ChatGPT, N.Y.Times (May 27, 2023),https://www.nytimes.com/2023/05/27/nyregion/avianca-airline-lawsuit-chatgpt.html.

¹⁶ Mata v. Avianca, Inc., No. 54 Civ. 1461 (S.D.N.Y. June 22, 2023), available at https://storage.courtlistener.com/recap/gov.uscourts.nysd.575368/gov.uscourts.nysd.575368.54.0_3.pdf; see also Debra Cassens Weiss, Lawyers Who ‘Doubled Down’ and Defended ChatGPT’s Fake Cases Must Pay $5K, Judge Says, ABA Journal (June 26, 2023), https://www.abajournal.com/web/article/lawyers-who-doubled-down-and-defended-chatgpts-fake-cases-must-pay-5k-judge-says.

¹⁷ OpenAI, What is ChatGPT?, https://help.openai.com/en/articles/6783457-what-is-chatgpt (last visited July 18, 2023).

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¹⁹OpenAI, GPT-4, https://openai.com/research/gpt-4 (last visited July 18, 2023).

²⁰Skye Witley, ChatGPT Tempts Big Law Despite AI Accuracy, Privacy Worries (2), Bloomberg Law (June 1, 2023), https://news.bloomberglaw.com/privacy-and-data-security/chatgpt-tempts-big-law-despite-ai-accuracy-data-privacy-worries.

²¹ Stephanie Pacheco, ANALYSIS: AI Has Entered the Chat- Is the Legal Industry Ready?, Bloomberg Law (May 10, 2023),https://news.bloomberglaw.com/bloomberg-law-analysis/analysis-ai-has-entered-the-chat-is-the-legal-industry-ready.

²²Copyright Registration Guidance: Works Containing Material Generated by Artificial Intelligence, 88 Fed. Reg. 16, 190 (Mar. 16, 2023) (to be codified at 37 C.F.R. § 202); see also Blake Brittain, AI-created Images Lose U.S. Copyrights in Test for New Technology, Reuters (Feb. 22, 2023), https://www.reuters.com/legal/ai-created-images-lose-us-copyrights-test-new-technology-2023-02-22/.

²³ Sundar Pichai, An Important Next Step on Our AI Journey, Google (Feb. 6, 2023), https://blog.google/technology/ai/bard-google-ai-search-updates/.

²⁴ Introducing LLaMA: A foundational, 65-billion-parameter large language model, MetaAI (Feb. 24, 2023),https://ai.facebook.com/blog/large-language-model-llama-meta-ai/.

²⁵UBS Editorial Team, Let’s Chat about ChatGPT, UBS (Feb. 23, 2023),https://www.ubs.com/global/en/wealth-management/our-approach/marketnews/article.1585717.html.

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/.

¹²Id.

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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.

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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.

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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/.

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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.

Attorney-Client Privilege: Protections and Pitfalls

Attorney Client Privilege: Protection and Pitfalls

Inadvertent disclosure of privileged documents is an issue that periodically arises for lawyers and clients. Recently, Infowar host and founder, Alex Jones’ attorneys had to deal with an inadvertent disclosure to the opposing parties of cellphone records protected by attorney-client privilege during the Sandy Hook massacre defamation case proceeding against him.¹ Understanding how to deal with inadvertent disclosure and what remedies are available is an important aspect of legal practice because attorneys can find themselves (or their client) suffering from an inadvertent disclosure of protected information or, conversely, being presented with inadvertently disclosed documents.

Privilege? What is that? Do I Have It?

In order to understand the legal parameters of returning attorney-client privileged material, it needs to be understood by what is meant when referring to “attorney-client privilege”, “inadvertent disclosure of privileged material,” and “protective orders ordering return of inadvertently disclosed information.” Remember, the client is the holder of the privilege.

In today’s legal proceedings, New York courts almost exclusively rely upon the common law in their application of “attorney-client privilege.”¹ This is evidenced in the case, People v Belge, where the Onondaga County Court ordered the defendant to produce corporate records as per a subpoena duces tecum, but the appellant refused and claimed that these records were protected by attorney-client privilege. The Onondaga County Supreme Court held the defendant in contempt and sentenced to the Onondaga County Correctional Facility at Jamesville after defendant rejected the Court’s order of providing the records in camera.³Upon the defendant’s subsequent appeal, the Appellate Court stated that the appellant-defendant was not referring to Fifth Amendment privilege, but rather to the privilege of confidentiality in an attorney-client relationship.⁴The Court ruled that for information to be protected under “attorney-client privilege”, there must be an attorney-client relationship and “the information must have been given with the expectation of confidentiality and for the purpose of obtaining legal…advice.”⁵The Court affirmed the Court’s ruling that the appellant was contemptuous, but vacated the sentencing and remanded the case back to the Onondaga County Court to allow the appellant to make a disclosure of the records under oath.⁶

Attorney | Top New York Attorneys

Can I Lose My Privilege? What If I Send Accidentally Reveal Something?

Next, having established what constitutes “attorney-client privilege”, we move to the inadvertent disclosure of privileged material and reclaiming that material via protective order. Previously, some courts held that inadvertent disclosure of privilege documentation served as an automatic waiver of said privilege because the client and attorney possess sufficient means to preserve the secrecy of a communication, and because disclosure makes achievement of the benefits of the privilege impossible.⁷ Thankfully, this jurisprudence has been augmented to a more forgiving common law rule, which states that inadvertently disclosed material is still protected under attorney-client privilege, subject to the satisfaction of several factors.⁸ For privileged information to remain protected under “attorney-client privilege” when inadvertently disclosed, it needs to be shown that: (1) it was the client’s intention to retain the confidentiality of the privileged material; (2) the client took reasonable steps to prevent disclosure; (3) the client promptly objected to the disclosure; and, (4) the party claiming the waiver would not be prejudiced if a protective order is issued for said privileged materials.⁹ Furthermore, the burden of proving that the privilege applies is on the party asserting the privilege.¹⁰Next, if during a proceeding, a court concludes that inadvertent disclosure was not a waiver of “attorney-client privilege”, then that finding serves as grounds for returning the privileged documentation back to the party moving for the protective order, but this demand of return has to be expressed in the motion for the protective order.¹¹ Comment 4(2) of Rule 4.4 of the ABA Model Rules of Professional Conduct states the following regarding the return of inadvertent documentation: “Whether the lawyer is required to take additional steps, such as returning the document or electronically stored information, is a matter of law beyond the scope of these Rules, as is the question of whether the privileged status of a document or electronically stored information has been waived.”

In Manufacturers and Traders Trust Co. v. Servotronics, Inc., plaintiff, Manufacturers and Traders Trust Co., and Defendant, Servotronics Inc., executed two agreements, the Debt Modification Agreement and the Sinking Fund Agreement.¹² The defendant discovered that six documents were inadvertently disclosed to the plaintiff.¹³ The defendant moved for a protective order for the documents to be returned and for an injunction preventing the plaintiff from utilizing the six documents.¹⁴ Special Term denied the defendant’s motion.¹⁵The Appellate Court unanimously reversed and granted the protective order, thus returning the six documents.¹⁶ The Court first ruled that the six documents were protected by “attorney-client privilege” because Defendant satisfied the rule constructed in People v. Belge.¹⁷ The Court then ruled that the inadvertent disclosure of the six documents did not serve as a waiver of “attorney-client privilege.”¹⁸ Utilizing the four factors mentioned above, the Court reasoned that it was not the defendant’s intention to disclose the documents, as evidenced by the vice-president of the defendant bank stating that they did not intend to disclose.¹⁹ To satisfy the second factor, the Court stated that the defendant took reasonable steps to prevent disclosure, as evidenced by the screening of all the material by the defendant’s lawyers prior to handing over the materials to the plaintiff.²⁰ For the third factor, the Court stated it was sufficient that, after learning about the inadvertent disclosure, the defendant only took two days to initiate proceedings for a protective order.²¹ For the fourth and final factor, the Court concluded that a protective order would not prejudice the plaintiff because the defendant quickly began proceedings and didn’t exacerbate the error by testimony.²²

Regarding the last factor, which addresses prejudice towards the party claiming waiver of privilege, the party claiming waiver of attorney-client privilege is prejudiced when it relies on the contents of the inadvertently disclosed information and the information is relevant to the case in question.²³ In the case, AFA Protective Systems, Inc. v. City of New York, after a series of failed settlement discussions between the parties from December 1994 and November 1998, plaintiff AFA informed defendant City of New York via letter that they have in their possession a memorandum, dated February 17, 1994, written by one of the former defendant’s attorneys.²⁴ AFA stated their intention to file this memorandum with the Court in support of its summary judgment motion.²⁵ City of New York soon thereafter objected to AFA’s intended use of the memorandum claiming that the content of the memorandum is protected by attorney-client privilege.²⁶ Utilizing the four factors test established by Manufacturers and Traders Trust Co., the Appellate Court stated that the City of New York knew for four years that the memorandum was in AFA’s possession.²⁷ There is no evidence to suggest that the City of New York, after learning of AFA’s possession of the memo, demanded its return nor is there evidence of the City figuring out whether the memo was inadvertently or unlawfully disclosed.²⁸ Therefore, the Court held that granting a protective order would be prejudicial to AFA because the memo is relevant to this case and AFA relied on the contents of the memo in support of their summary judgment motion.²⁹ The Court reversed the lower court’s decision and denied the City of New York’s motion for a protective order.³⁰

Conversely, in federal court, when the inadvertently disclosed information is not vital to the arguments presented by the party claiming the waiver, then they wouldn’t be prejudiced if a protective order is issued. For instance, in Employers Ins. Co. of Wausau v. Skinner, in response to document requests, Plaintiff delivered 396 documents to Defendants Skinner.³¹ Amongst these documents was an email that the Plaintiff later claimed was inadvertently disclosed.³² Thus, Employers motioned for a protective order ordering Skinner to return or destroy the original and copies made of the email and to preclude Skinner from utilizing the email in any way.³³ Upon evaluation of the prejudice factor, the Court stated that although the contents of the email related to the present action, the contents of the email are not vital to Skinner’s arguments.³⁴ The Court reasoned that Skinner would still be capable of making their arguments even without the contents of the email.³⁵

Similarly, in Long Island Lighting Co. v. Allianz Underwriters Ins. Co., the Appellate Court stated that a protective order prohibiting the use of plaintiff LILCO’s December 1993 Report, an internal report marked “Privileged and Confidential Attorney Work Product Attorney-Client Communication”, would not be prejudicial towards the defendants because the defendants’ motion for summary judgment was supported by over 200 documents, other than the December 1993 Report.³⁶ The December 1993 Report was not vital enough to make granting a protective order prejudicial against the defendants.³⁷

Attorney Client Privilege

In conclusion, the arguments and precedent alluded to above signifies that inadvertently disclosed information protected by attorney-client privilege is not always protected. Rather, in certain scenarios, the claim of attorney-client privilege will not be sufficient enough to warrant a protective order, especially when there are factors that may be prejudicial to the other party. Relevance of the information to the matter at hand, and the actions of both the client and their counsel, are key factors that the Court considers prior to making a determination on whether certain information should remain in confidence. Thus, it is increasingly important for attorneys to monitor, undergo multiple reviews, and establish internal systems that ensure protection of all attorney-client privileged information before any inadvertent disclosure occurs, as there is no assurance that such mistakes will be rescindable.

¹See David L. Hudson Jr., Alex Jones case shows inadvertent disclosure of electronically stored information is a real risk, ABA Journal, Oct. 27, 2022, https://www.abajournal.com/web/article/alex-jones-case-shows-inadvertent-disclosure-of-electronically-stored-information-is-a-real-risk.

²See Spectrum Systems Intern. Corp. v. Chemical Bank, 78 N.Y.2d 371 (N.Y. 1991); People v. Belge, 59 A.D.2d 307 (4th Dep’t 1977); Forman v. Henkin, 93 N.E.3d 882, 887 (N.Y. 2018); BDO USA, LLP v. Franz, 208 A.D.3d 1088 (1st Dep’t 2022).

³People v. Belge, 399 59 A.D.2d 307, 308 (4th Dep’t 1977).

⁴See id.

⁵Id.

⁶Id. at 309.

⁷Manufacturers and Traders Trust Co. v. Servotronics, Inc., 132 A.D.2d 392, 398 (4th Dep’t 1987); Enterprise Architectural Sales, Inc. v. Magnetic Builders Group LLC, 193 A.D.3d 411 (1st Dep’t 2021); Delta Financial Corp. v. Morrison, 819 N.Y.S.2d 425, 429 (Sup Ct, Nassau County 2006).

⁸Manufacturers and Traders Trust Co., 522 N.Y.S.2d at 395.

⁹Id. at 398, 399.

¹⁰Id. at 398.

¹¹Campbell v. Aerospace Products Intern., 37 A.D.3d 1156, 1157 (4th Dep’t 2007).

¹²Manufacturers and Traders Trust Co., 522 N.Y.S.2d at 393.

¹³Id.

¹⁴Id.

¹⁵Id.

¹⁶Id. at 399.

¹⁷Id. at 395.

¹⁸Id. at 393.

¹⁹Id. at 398.

²⁰Id. at 399.

²¹Id.

²²Manufacturers and Traders Trust Co., 522 N.Y.S.2d at 399.

²³AFA Protective Systems, Inc. v. City of New York, 13 A.D.3d 564, 565 (2d Dep’t 2004).

²⁴Id.

²⁵Id.

²⁶Id.

²⁷Id. at 565.

²⁸Id.

²⁹Id.

³⁰Id.

³¹Employers Ins. Co, 2008 WL 4283346 at *1.

³²Id.

³³Id. at *10.

³⁴Id.

³⁵Id.

³⁶Long Island Lighting Co. v. Allianz Underwriters Ins. Co., 301 A.D.2d 23, 31 (1st Dep’t 2002).

³⁷Id.

Mechanical Doping: The Running War on Super Shoes

Ever since Pheidippides ran from Marathon to Athens, athletes of all levels have marveled at the pursuit of running a marathon.¹ 26.2 miles is an incredibly daunting task, and professionals to amateurs alike have learned to respect the distance – the race does not owe anyone anything. The allure of competitive racing is the act of accomplishing something that many others cannot, as well as breaking personal barriers and records. For years, feats in professional distance running saw few advances and many runners were reaching unbreakable plateaus using the same shoes they’ve been wearing for years (with very minor advances in shoe technology). However, in recent years, many big players in sportswear have begun to develop what are now being called “super shoes.”² Basically, this category of running footwear is inclusive of any shoe that is meant to be fast and lightweight with enough cushion and bounce to propel your next step to the finish.³ However, it is the implementation of a few more specific attributes that has garnered attention from runners, coaches, and sports journalists worldwide – carbon plates and engineered mesh upper.⁴ The addition of this plate, along with lightweight yet stable uppers, allows for a greater energy return during a runner’s stride and was marketed to have increased running economy by roughly over 4%, hence Nike’s naming of their shoe to be the “Vaporfly 4%.”⁵

Runners in Nike's Vaporfly & Alphafly | Best Corporate Law Firm in New York City

Runners in Nike’s Vaporfly & Alphafly

Super shoes are highly controversial by their very nature, and many consider them to be a form of “mechanical doping.”⁶ Mechanical doping has been at the subject of controversy in other endurance sports like swimming and cycling, as products in production have been banned for the unfair advantages that they offer the athletes who use them.⁷ Further, many regulations have needed to be put into place to prevent and monitor this form of “doping” by sports and rules federations around the globe.⁸ The advantages these super shoes offer to runners are no exception, as they seem highly unfair to runners who compete without them and almost appear illegal. In fact, Nike’s original Vaporfly model was banned from competition initially.⁹ Professional marathon runner and motivational athlete Eliud Kipchoge broke the all-time world record for his sub 2-hour marathon time in one of Nike’s super shoes, the Alphafly Next%¹⁰, and many athletes and critics were quick to discredit his time and overlook his race as a result almost entirely obtained because of his shoes.¹¹ The reasoning adopted by these critics, albeit flawed¹², does have roots in a serious issue regarding those shoes. The main reason for this argument was because, at the time, Nike was the only player in the sport making sneakers at this caliber and with this level of new technology.¹³ Their running shoe technology was groundbreaking, and non-Nike sponsored athletes were surely paying the price.¹⁴ Athletes at all levels that were not sponsored by Nike could not seem to catch a break, as, until recently, athletes at the podium were all sporting Nike running shoes alongside their medals and accolades. But now, seemingly every competing sportswear company that produces high-level running shoes is releasing models that can compete with Nike’s. Nike is still considered the mecca of running shoe producers to many, yet various athletes are breaking records and out-running Nike athletes in non-Nike shoes.¹⁵ Now, Nike is fighting back to remain at the top of the super shoe food chain.¹⁶

Super shoes | Runners in Nike's Vaporfly & Alphafly | Best Corporate Law Firm in New York City

Eliud Kipchoge with Alphafly Next%’s

To very little surprise, the most popular competitor for Nike in this running shoe arms race is Adidas. The Checks vs. Stripes feud seems to date back nearly as far as Nike’s inception itself.¹⁷ You can imagine Adidas’ frustration when a company decades younger has soared to the top of nearly every sports market.¹⁸ But Adidas has been able to rival Nike’s Vaporfly and Alphafly models with the introduction of the Adidas Adios Pro line.¹⁹ These Adidas shoes are made using Primeknit technology, while Nike’s are made using patented Flyknit technology, and this is where the issue lies.²⁰ Nike claims that Adidas has stolen their “game-changing” technology for various product designs, seeking injunctive relief as well as monetary damages.²¹ Before this complaint filed by Nike, Adidas lost in the U.S. Court of Appeals for the Federal Circuit to Nike after alleging that Nike violated two patents owned by Adidas.²² As part of their request for injunctive relief, Nike has further requested that the U.S International Trade Commission block all imports of various Adidas shoe models that allegedly infringe on Nike’s patented designs and technology.²³ These patents that Nike seeks to protect are some of the most crucial aspects to the Vaporfly and Alphafly designs, as they allow the shoe to be extremely lightweight and comfortable, which in turn increases running performance in users.²⁴ This technology is constantly being improved upon and changed, so it is uncertain whether these patent disputes are worth it for these companies in the long term, but for now they do not appear to be going away. Nike will attempt to protect their designs to stay on top, while Adidas will fight to remain as competitive as they can be as a late player to the game. While many other running brands, like Asics²⁵, have developed a more unique model of super shoe, it is notable that Nike and Adidas are seemingly the only players that wish to compete not only with the entire market, but with each other in a separate battle to the finish.

Runners in Nike's Vaporfly & Alphafly | Best Corporate Law Firm in New York City

Nike Alphafly Next% vs. Adidas Adios Pro

It is difficult to deny the extent and breadth of Nike’s impact on sportswear and the running world.²⁶ While their competitive edge remains prevalent, many new players in the game of elite super shoe production seem to be startling the industry leader. It will be very interesting to see how this case ultimately plays out, as it will set important precedents in running shoe technology advances as super shoes only seem to be getting better and better with each new model. Moreover, it will be just another landmark case in the ongoing battle between Nike and Adidas to see who truly reigns supreme as the top sportswear brand.²⁷

As this case continues, and as progressively more people pick up competitive racing as a result of the Covid-19 pandemic²⁸, it is likely for us to see many similar complaints and cases regarding running shoe technology begin to develop. And it makes sense – superpower companies will always try to protect technology and products that they believe to be proprietary and top-notch, and smaller corporations will always fight to remain competitive in a market dominated by only a fraction of the total players. As of July 2022, Adidas and Nike are both set to release brand new models of their super shoes, the Adizero Adios Pro 3 and the Alphafly Next% 3 respectively, before the Fall 2022 marathon season.²⁹ This will indeed make for a very interesting sneaker battle come time for the results of the fall circuit, and possibly the king of super shoes will be crowned once and for all.

¹See Dean Karnazes, The Real Pheidippides Story, Runner’s World (Dec. 6, 2016), https://www.runnersworld.com/runners-stories/a20836761/the-real-pheidippides-story/.

²Jonathon Taylor, Super shoes: Explaining athletics’ new technological arms race, The Conversation (Mar. 2, 2021, 7:47 AM), https://theconversation.com/super-shoes-explaining-athletics-new-technological-arms-race-156265.

³See Jonathon Taylor, Super shoes: Explaining athletics’ new technological arms race, The Conversation (Mar. 2, 2021, 7:47 AM), https://theconversation.com/super-shoes-explaining-athletics-new-technological-arms-race-156265; Bryce Dyer, Nike Vaporfly ban: why World Athletics had to act against the high-tech shoes, The Conversation (Feb. 6, 2020, 6:50 AM), https://theconversation.com/nike-vaporfly-ban-why-world-athletics-had-to-act-against-the-high-tech-shoes-131249.

⁴E.g. Jonathon Taylor, Super shoes: Explaining athletics’ new technological arms race, The Conversation (Mar. 2, 2021, 7:47 AM), https://theconversation.com/super-shoes-explaining-athletics-new-technological-arms-race-156265.

⁵Id.

⁶E.g. THE CURIOUS CASE OF MECHANICAL DOPING, Sneaker Speculation (May 7, 2020), https://sneakerspeculation.com/2020/05/07/the-curious-case-of-mechanical-doping/.

⁷See id.

⁸See id.

⁹E.g. Stuart Greenwood, Kicking up a storm – a breakdown of Nike’s ground-breaking and controversial range of running shoes, AA Thornton (Feb. 2020), https://www.aathornton.com/nike-vaporfly/; Wall Street Journal, The Controversy Behind Nike’s Vaporfly Running Shoe, Explained | WSJ, YouTube (Jan. 23, 2020), https://www.youtube.com/watch?v=wVXrIaPuP7c.

¹⁰Luis Torres, How Eliud Kipchoge and the Nike AlphaFly Made History, Nice Kicks (Oct. 14, 2019), https://www.nicekicks.com/how-eliud-kipchoge-and-the-nike-alphafly-made-history/.

¹¹See James Witts, Technological doping: The science of why Nike Alphaflys were banned from the Tokyo Olympics, Science Focus (Sept. 4, 2021, 4:00 PM), https://www.sciencefocus.com/the-human-body/nike-alphafly-banned-technological-doping/.

¹²See Brian Metzler, Banning Kipchoge’s Shoes Is the Dumbest Take in Running Right Now, Runner’s World (Oct. 21, 2019), https://www.runnersworld.com/gear/a29533576/ban-kipchoge-nike-shoes-vaporfly/.

¹³E.g. Running shoe tech: The Emperor’s clothes, and the issues for the integrity of running, The Science of Sport (Feb. 6, 2020), https://sportsscientists.com/2020/02/running-shoe-tech-the-emperors-clothes-and-the-issues-for-the-integrity-of-running/.

¹⁴THE CURIOUS CASE OF MECHANICAL DOPING, Sneaker Speculation (May 7, 2020), https://sneakerspeculation.com/2020/05/07/the-curious-case-of-mechanical-doping/.

¹⁵See Tony Owusu, Adidas Runs Into Nike FlyKnit Patent Lawsuit, TheStreet (Dec. 10, 2021, 9:18 AM), https://www.thestreet.com/investing/nike-sues-adidas-flyknit-patent.

¹⁶E.g. Rachel Bernardo, How Adidas Develops Adizero For World Record Performances, Believe In The Run (Apr. 21, 2022), https://www.believeintherun.com/adidas-adizero-roads-to-records/.

¹⁷NIKE VS ADIDAS: A CLASH OF GIANTS TO DOMINATE THE SNEAKER MARKET, AIO bot (Oct. 6, 2017), https://www.aiobot.com/nike-and-adidas-fight/.

¹⁸Id.

¹⁹See Brandon Law, Comparison: Nike Alphafly Next% vs Adidas Adizero Adios Pro, Running Shoes Guru (last visited July 6, 2022), https://www.runningshoesguru.com/comparison/nike-alphafly-next-vs-adidas-adizero-adios-pro/.

²⁰Id.

²¹Id.

²²See Blake Britian, Nike asks U.S. agency to block Adidas shoe imports, citing patents, Reuters (Dec. 9, 2021, 12:16 PM), https://www.reuters.com/legal/transactional/nike-asks-us-agency-block-adidas-shoe-imports-citing-patents-2021-12-09/; Brendan Pierson, IN BRIEF: Nike prevails in shoe patent dispute with Adidas, Reuters (June 25, 2020, 6:57 PM), https://www.reuters.com/article/ip-nike/in-brief-nike-prevails-in-shoe-patent-dispute-with-adidas-idUSL1N2E22SN.

²³Id.

²⁴Tony Owusu, Adidas Runs Into Nike FlyKnit Patent Lawsuit, TheStreet (Dec. 10, 2021, 9:18 AM), https://www.thestreet.com/investing/nike-sues-adidas-flyknit-patent.

²⁵Cory Smith, ASICS Challenges Nike Super Shoe With ‘MetaSpeed Sky’: Review, Gear Junkie (Mar. 29, 2021), https://gearjunkie.com/footwear/asics-metaspeed-sky-running-shoe-review.

²⁶E.g. id.

²⁷See Nike vs Adidas Case Study: Who Is Winning? All You Need To Know, 440 Industries (Sept. 23, 2021), https://440industries.com/nike-vs-adidas-case-study-who-is-winning-all-you-need-to-know/.

²⁸Wings for Life World Run, Running becoming increasingly popular, Red Bull (Jan 2, 2021), https://www.redbull.com/in-en/running-becoming-increasingly-popular.

²⁹See Taylor Willson, NIKE VS ADIDAS: BATTLE OF THE “SUPER SHOE”, Highsnobiety (June 15, 2022), https://www.highsnobiety.com/p/nike-alphafly-next-2-adios-pro-3-super-shoe-info/.

NFT-based Trademark Infringements: Trends and Risk Mitigation Strategies

1. 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. 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.]

[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

McDonald’s Corporation

February 04, 2022

IC 043 (operating a virtual restaurant)

97257474

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

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:
1. 1. - 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. 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. 1. 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. 1. 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. 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. 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. 1. 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

TransUnion Case Law in Privacy-related Cases: Comment on the Article “Statutory Violations Not Enough to Give Rise to a Cause of Action for Class Actions says U.S. Supreme Court”

TransUnion Case Law in Privacy-related Cases | Best Corporate Law Firm in New York City

In the recent article “Statutory Violations Not Enough to Give Rise to a Cause of Action for Class Actions says U.S. Supreme Court“, we have analyzed the high-profile case TransUnion v. Ramirez and, specifically, the Supreme Court’s reasoning on the standard of proving tort damages in class actions. The full article with a detailed analysis of the case is available via the link above.

In this comment, we would like to elaborate on the privacy implications of TransUnion v. Ramirez and, in particular, analyze the post-TransUnion case law of the Second Circuit from the perspective of privacy laws.

The Factual Analysis

To briefly summarize the facts of the case¹: A credit reporting agency, TransUnion, was sued by Sergio Ramirez who was denied from buying a car because he was on a “terrorist list” according to the consumer report provided by TransUnion.

The issue is that TransUnion’s software aimed to facilitate the compilation of personal and financial information about individual consumers (OFAC Name Screen Alert) generated many false positives because many consumers shared names with those included in the OFAC list.

In this respect, Ramirez filed a class-action lawsuit alleging TransUnion’s alleging that it violated the Fair Credit Reporting Act (FCRA) by failing to follow reasonable procedures to ensure the accuracy of

the credit report information, disclose the inaccurate terrorist list match upon request, and include a notice of their rights under FCRA.

The class-action was filed on behalf of a class of 8,185 people all suffering from TransUnion’s matching practices. However, only 1,853 of the class, including Ramirez, had their false reports containing OFAC alerts provided to the third-party companies.

Decision and Analysis: A Privacy Law Perspective

The Supreme Court held that members of the class-action lawsuit whose credit files were provided to third-party businesses suffered concrete harm from TransUnion’s actions. However, those whose files were not transferred lacked standing to sue under Article III. In our earlier article, we have discussed important procedural and policy issues and considerations related to this case. In the meantime, this case also has significant privacy implications because the Supreme Court significantly shaped the enforcement landscape for many privacy laws.

Specifically, from the privacy perspective, the Supreme Court restricted private rights of action in privacy actions by introducing a “concrete harm” for Article III standing to seek damages. According to the Supreme Court, “[c]entral to assessing concreteness is whether the asserted harm has a ‘close relationship’ to a harm traditionally recognized as providing a basis for a lawsuit in American courts.” TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 210 L. Ed. 2d 568, 2200 (2021). In other words, a mere statutory violation does not give a plaintiff a cause of action against a defendant.

Taking into account the essence of many privacy violations and the notion of privacy harms², determining what constitutes concrete harm exactly can be very challenging. In particular, as mentioned in the dissenting opinion of Justice Thomas, “even setting aside everything already mentioned— the Constitution’s text, history, precedent, financial harm, libel, the risk of publication, and actual disclosure to a third party—one need only tap into common sense to know that receiving a letter identifying you as a potential drug trafficker or terrorist is harmful.” TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 210 L. Ed. 2d 568, 2223 (2021).

In this respect, the Supreme Court’s decision is highly criticized by leading privacy scholars as “undermining the effectiveness of many privacy laws” and being “wrong and troubling on many levels.” Id. According to Keats Citron & Daniel J. Solove, “the Court’s test for recognizing concrete injuries is severely flawed. The Court’s application of its test is also marred by an inadequate understanding of privacy harms”. Id.

These conclusions are based on the detailed analysis of the notion of “privacy harm” in the broad sense (including “emotional distress harm” and “data quality harm”). Indeed, it seems reasonable to argue that “a credit report with inaccurate information like denoting someone as a terrorist as in TransUnion poses a significant risk of economic and reputational harm” and “[i]t can be hard for individuals to find out about errors, and when they do, third parties will ignore requests to correct them without the real risk of litigation costs.”. Id.

However, despite the risk of future harm was not recognized as sufficiently concrete to satisfy Article III standing, the Supreme Court recognized that “a person exposed to a risk of future harm may pursue forward-looking, injunctive relief to prevent the harm from occurring, at least so long as the risk of harm is sufficiently imminent and substantial.”. TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 210 L. Ed. 2d 568, 2210 (2021). Specifically, the Supreme Court clarified that when it is impossible to prove a “concrete harm,” there is still an opportunity to enforce statutory rights through the injunctive relief. In practice, this means that those whose credit reports contain inaccurate information could request TransUnion to amend this information, prohibit it from transferring with third parties, or undertake other measures aimed to prevent the harm from occurring.

Thus, from a privacy perspective, it provides guidance for courts and parties on how to assess intangible harms. In the meantime, the TransUnion case imposes significant limitations on the enforcement of privacy violations and, as mentioned in Thome v. Sayer L. Grp., P.C., “questions remain about how to implement TransUnion’s guidance.”. Thome v. Sayer L. Grp., P.C., No. 20-CV-3058-CJW-KEM, 2021 WL 4690829, 7 (N.D. Iowa Oct. 7, 2021).

Post-TransUnion Case Law

Interestingly, since the decision was delivered on June 25, 2021, courts actively applied and analyzed the TransUnion decision. As for February 2022, there are more than 300 decisions that, in their reasoning, referred to the TransUnion case⁴.

These cases include both those directly related to privacy violations, including privacy of communications as part of the debt collection litigation under FDCPA⁶ as well as a wide range of other class actions including antitrust, labor, First Amendment rights and specific state law statutes.

Despite the TransUnion decision only addressed federal court standing under Article III, courts tend to use TransUnion guidance in actions arising under state law.

For instance, it seems insightful to analyze the recent case considered in the Court of Appeals of the Second Circuit – Maddox v. Bank of New York Mellon Trust Company, N.A. Maddox v. Bank of New York Mellon Trust Co., No. 19-1774 (2d Cir. 2021)¹⁰. In this case, mortgagors (the “Maddoxes”) brought an action against the mortgagee, alleging that mortgagee’s failure to timely record mortgagors’ satisfaction of mortgage. The district court stated that mortgagors had Article III standing to seek statutory damages from the Bank for its violation of New York’s mortgage-satisfaction-recording statutes (the “statutes”).

The District Court denied the Maddoxes’ motion for judgment on the pleadings. Mortgagors filed an interlocutory appeal claiming to have Article III standing to seek statutory damages. The appeal was certified.

However, on rehearing in light of the intervening authority of TransUnion LLC v. Ramirez, which was held after the TransUnion decision, the Court of Appeals of the Second Circuit held that mortgagors did not satisfy a test of “concrete harm”, and thus, they lacked Article III standing to pursue claims for statutory penalties in federal court. As part of its analysis, the Court of Appeals of the Second Circuit noted the following:

“In sum, TransUnion established that in suits for damages plaintiffs cannot establish Article III standing by relying entirely on a statutory violation or risk of future harm: “No concrete harm; no standing.”

“Our original opinion observed that a statutory right is considered “substantive” if it protects against a harm that has a close relationship to a harm traditionally regarded as providing a basis for a lawsuit in American courts. The violation of a substantive right, the opinion explained, constitutes a concrete injury in fact sufficient to establish Article III standing without any additional showing. TransUnion clarified, however, that the type of harm that a statute protects against is of little (or no) import; what matters is “whether the alleged injury to the plaintiff has a ‘close relationship’ to a harm ‘traditionally’ recognized as providing a basis for a lawsuit in American courts.” 141 S. Ct. at 2204 (emphasis added) (quoting Spokeo, 578 U.S. at 341, 136 S.Ct. 1540). In other words, plaintiffs must show that the statutory violation caused them a concrete harm, regardless of whether the statutory rights violated were substantive or procedural.”. Id.

As for the privacy-related post-TransUnion cases, the illustrative example is the recent case Bohnak v. Marsh & McLennan Cos., Inc. Bohnak v. Marsh & McLennan Cos., 2022 WL 158537 (S.D.N.Y. 2022).

In this case, plaintiffs (Bohnak and Smith) brought a nationwide class action complaint against defendants (specifically, companies Marsh & McLennan Companies, Inc. and Marsh & McLennan Agency, LLC) for alleged injuries arising from a data breach compromising plaintiffs’ personally-identifiable information in defendants’ possession. Plaintiffs bring state-law claims for: (1) negligence, (2) breach of implied contract, and, (3) breach of confidence.

In its analysis, the United States District Court (S.D. New York) made several references to the TransUnion case. In particular, the court noticed the following:

“Although TransUnion foreclosed Plaintiffs’ reliance on the mere future risk of harm, it did not foreclose Plaintiffs’ second theory. Plaintiffs may have Article III standing, so long as they plausibly allege that the exposure to identity theft itself “causes a separate concrete harm.” Bohnak, 2022 WL at 5. I hold that they do. Certain types of intangible harms have long been judicially cognizable, and are therefore, concrete. These include reputational harm and privacy-related harms that form the basis for the common-law torts of defamation, public disclosure of private information (“PDPF”), and intrusion upon seclusion.”

“In light of the TransUnion Court’s admonition that common-law analogs need not provide “an exact duplicate,” as well as its explicit reference to PDPF as an example of traditionally judicially cognizable intangible harm, I find the fit sufficiently close. Accordingly, I hold that Plaintiffs have alleged an intangible concrete injury, analogous to that associated with the common-law tort of public disclosure of private information, and therefore have Article III standing.”. Bohnak, 2022 WL at 5.

Thus, the Court applied the TransUnion decision to determine the criteria for public disclosure of private information. Interestingly, despite the claim was overall dismissed for failure to state a claim11, the Complaint managed to satisfy the requirements of Article III, as prescribed by the TransUnion decision, and shed light on the application of the TransUnion “concrete harm” test in privacy-related cases considered in the Second Circuit.

TransUnion Case Law in Privacy-related Cases | Best Corporate Law Firm in New York City

Trends and Conclusions

Overall, TransUnion v. Ramirez is a landmark case that has debatable, but definitely strong influence on Article III standing regarding concrete harm, including enforcement in privacy-related cases. In particular, the TransUnion “concrete” harm test is adapted by courts of the Second Circuit.

In practice, this means that now plaintiffs, including those who are willing to enforce their privacy rights in the Second Circuit and, specifically, recover damages, should take into account the necessity to show the evidence of “concrete” harm as defined by the Supreme Court in TransUnion v. Ramirez. Otherwise, plaintiffs may consider pursuing an alternative course of action (e.g., injunctive relief).

¹ TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 210 L. Ed. 2d 568 (2021); Statutory Violations Not Enough to Give Rise to a Cause of Action for Class Actions says U.S. Supreme Court.

² Citron, Danielle Keats and Solove, Daniel J., Privacy Harms (February 9, 2021). GWU Legal Studies Research Paper No. 2021-11, GWU Law School Public Law Research Paper No. 2021-11, Available at SSRN: https://ssrn.com/abstract=3782222 or http://dx.doi.org/10.2139/ssrn.3782222.

³ Solove, Daniel J. and Citron, Danielle Keats, Standing and Privacy Harms: A Critique of TransUnion v. Ramirez (July 28, 2021). 101 Boston University Law Review Online 62 (2021), Available at SSRN: https://ssrn.com/abstract=3895191.

⁴ Specifically, based on the Westlaw search, as for February 01, 2022, there are 312 cases where courts referred to TransUnion v. Ramirez.

⁵ See e.g., In re American Medical Collection Agency, Inc. Customer Data Security Breach Litigation, Slip Copy (D.N.J., 2021), Wadsworth v. Kross, Lieberman & Stone, Inc., 12 F.4th 665 (7th Cir. 2021), 12 F.4th 665, 668–69 (7th Cir. 2021); JOSE AVINA, Plaintiff, v. RADIUS GLOBAL SOLUTIONS, LLC, Defendant., No. 21 CV 295, 2021 WL 6752293 (N.D. Ill. Nov. 4, 2021); Bohnak v. Marsh & McLennan Cos., Inc., No. 21 CIV. 6096 (AKH), 2022 WL 158537 (S.D.N.Y. Jan. 17, 2022).

⁶ In re FDCPA Mailing Vendor Cases, No. CV 21-2312, 2021 WL 3160794, at *1 (E.D.N.Y. July 23, 2021), Lupia v. Medicredit, Inc., 8 F.4th 1184 (10th Cir. 2021), Kola v. Forster & Garbus LLP, No. 19-CV-10496 (CS), 2021 WL 4135153 (S.D.N.Y. Sept. 10, 2021); Sputz v. Alltran Fin., LP, No. 21-CV-4663 (CS), 2021 WL 5772033 (S.D.N.Y. Dec. 5, 2021).

⁷ See e.g., In re EpiPen (Epinephrine Injection, USP) Marketing, Sales Practices and Antitrust Litigation, Slip Copy (D.Kan., 2021)

⁸ Ellsworth v. Schneider National Carriers, Inc., Slip Copy (C.D.Cal., 2021); Rosario v. Icon Burger Acquisition LLC, No. 21-CV-4313(JS)(ST), 2022 WL 198503 (E.D.N.Y. Jan. 21, 2022).

⁹ CARLOS VICTORINO & ADAM TAVITIAN, individually, & on behalf of other members of the general public similarly situated, Plaintiffs, v. FCA US LLC, a Delaware limited liability company, Defendant., No. 16CV1617-GPC(JLB), 2021 WL 4124245, at *4–5 (S.D. Cal. Sept. 9, 2021); Ass’n of Am. Physicians & Surgeons v. United States Food & Drug Admin., 13 F.4th 531 (6th Cir. 2021)

¹⁰ Maddox v. Bank of New York Mellon Tr. Co., N.A., 19 F.4th 58, 59 (2d Cir. 2021).

¹¹ As mentioned by the Court, “it [the Complaint] ultimately falls short in establishing that Plaintiffs have suffered legally cognizable injury to support their substantive claims.”

Statutory Violations Not Enough to Give Rise to a Cause of Action for Class Actions says U.S. Supreme Court

Supreme Court Says Statutory Violations Not Enough to Give Rise | Law firm of Dayrel Sewell

The Supreme Court’s recent decision in TransUnion v. Ramirez has narrowed Article III standing by making it more difficult for plaintiffs to initiate class action lawsuits against corporate defendants who violate federal statutes. Here, the Court found that violation of a federal statute alone does not give rise to the level of a “concrete injury” for a plaintiff’s Article III standing. The plaintiff must have suffered a “concrete injury” to have Article III standing in order to seek relief in a court of law. This decision has serious consequences for tort class action lawsuits and corporate activities in general.

Details of the case

TransUnion is a credit reporting agency that compiles personal and financial information about individual consumers and creates a consumer report that is sent to third party companies to determine the consumer’s creditworthiness. TransUnion had an add-on to their product called the OFAC Name Screen Alert that was available for third party businesses to order. This add-on would compare the name of the consumer against a list maintained by the United States Treasury Department’s Office of Foreign Assets Control (OFAC).¹ This list denotes known terrorists, drug traffickers, and other serious criminals.² If a consumer’s first and last name appeared on the OFAC list, TransUnion would place an alert on the credit report, stating that the person is a potential match. Unfortunately, this product generated many false positives, as many consumers shared names with those on the OFAC list.³ Plaintiff Sergio Ramirez was one such consumer, as he discovered at a Nissan Dealership in California.⁴ The dealership refused to sell him the car because the credit report they ran on Ramirez falsely indicated that he was a suspected terrorist.⁵

Ramirez brought suit against TransUnion, alleging that it violated the Fair Credit Reporting Act by failing to follow reasonable procedures to ensure the accuracy of the credit report information.⁶ Ramirez obtained a class action for his suit, with a class of 8,185 people all suffering from same or similar harms by TransUnion’s alleged violation of the statute. Only 1,853 of the class, including Ramirez, had their false reports containing OFAC alerts provided to the third-party companies.⁷ The other 6,332 did not have their reports sent to the third-party companies.

Writing for the majority in a split 5-4 decision, Justice Kavanaugh found that while the 1,853 class members whose reports were sent did suffer a harm, the same was not true for the remaining 6,332.⁸ In his reasoning, Justice Kavanaugh stated that to have a claim for tort damages, a plaintiff must have standing by the standards set in Article III of the Constitution.⁹ The plaintiff must have a “personal stake” in their case.¹⁰ The plaintiff must show a “concrete” harm that was caused by the defendant and can be redressed by judicial relief.¹¹ In defining “concrete harm”, the Court cited its decision in Spokeo v. Robins, 578 U.S. ____ (2016), stating that the harm must have a close relationship to a harm traditionally recognized in American courts.¹² However, a mere violation of a federal statute does not give a plaintiff a cause of action against a defendant.¹³ The plaintiff must have suffered a concrete harm as well.¹⁴

Reputational harms, as in this case, bear a close relationship to the traditional tort of defamation. This was the case for the 1,853 class members whose reports were sent to third-party companies.¹⁵ A misleading statement that deems a consumer a terrorist bears a close relationship to defamation, especially when it is made available to a third-party company. Statements like these had an adverse effect on these 1,853 class members.¹⁶ However, the remaining 6,332 class members suffered no harm by TransUnion’s violation of the statute, as their false reports were never sent to any third-party company.¹⁷ he inaccuracy of the statements themselves, nor the violation of the statute, were not enough to give these 6,332 class members a cause of action.¹⁸

Reasoning and Future Implications

Justice Kavanaugh justified his reasoning by highlighting the separation of powers between Congress and the judiciary. Justice Kavanaugh mused that without Article III’s concrete harm requirement, Congress could hypothetically allow plaintiff to sue a corporate defendant over a statutory violation without that plaintiff having any personal stake in the case.¹⁹

In reality, this ruling could eliminate a potential check that corporations had against them from corporate malfeasance. Such a ruling will surely impact future class action suits against corporate defendants, as every individual class member must now have suffered a harm by the defendant’s actions. This will make attorneys who handle class actions much more careful with who they add into a class when suing in federal court.²⁰ Furthermore, corporations could now have more freedom to violate statutes that do not necessarily harm plaintiffs directly in a “concrete way”, like the FDCPA, or the TCPA.²¹ Rulings like this reflect the U.S. Supreme Court’s continuing conservative shift since former President Trump’s appointment of three conservative justices on the bench during his presidency.

In his dissent, however, Justice Thomas noted that this might be a pyrrhic victory for TransUnion, as state courts are not bound by the limitations set by Article III as stated by Justice Kavanaugh.²² States like Illinois and New York have more lenient standing requirements than federal courts, and include more liberal judges who are friendlier to “no-injury” class action lawsuits.²³ Furthermore, half of the states have adopted measures that recognize statutory violations as a harm that can give rise to a cause of action.²⁴ This could encourage plaintiff attorneys to go “jurisdiction shopping”, as they can pick out plaintiffs who reside in more liberal states and bring suit there, maybe even in multiple states. This could provide an incentive to credit reporting agencies like TransUnion to maintain accurate reporting, lest they deal with multiple lawsuits in multiple forums. However, this would also clog up the courts even more, with multiple lawsuits being filed over the same cause of action.

¹ TransUnion LLC v. Ramirez, 594 U.S. . ____, 1 (2021).

² Id.

³ Id. at 8.

⁴ Id.

⁵ Id.

⁶ Id.

⁷ Id. at 9.

⁸ Id. at 20.

⁹ Id. at 11.

¹⁰ Id. (citing Reins v. Byrd, 521 U.S. 811 (1997)).

¹¹ Id.

¹² Id. at 12.

¹³ Id. at 14.

¹⁴ Id.

¹⁵ Id. at 20.

¹⁶ Id.

¹⁷ Id. at 22.

¹⁸ Id. at 26.

¹⁹ Id. at 17.

²⁰ John Ryan, Barbara Fernandez & David Schultz, TRANSUNION V. RAMIREZ: WHAT DOES IT MEAN? ACA INTERNATIONAL (2021), https://www.acainternational.org/news/transunion-v-ramirez-what-does-it-mean (last visited Jul 1, 2021).

²¹ TransUnion v. Ramirez: The Supreme Court Further Narrows Article III Standing And Rejects “No Injury” Class Actions, JD SUPRA (2021), https://www.jdsupra.com/legalnews/transunion-v-ramirez-the-supreme-court-1255306/ (last visited Jul 1, 2021).

²² TransUnion 594 U.S. at 49.

²³ TransUnion v. Ramirez: The Supreme Court Further Narrows Article III Standing And Rejects “No Injury” Class Actions, JD SUPRA (2021), https://www.jdsupra.com/legalnews/transunion-v-ramirez-the-supreme-court-1255306/ (last visited Jul 1, 2021).

²⁴ Thomas R. Bennett, The Paradox of Exclusive State-Court Jurisdiction Over Federal Claims, 105 Minn. Law Review, 121, 1233. (2021).

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.

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.

eSports Contracts

The electronic sports industry (“eSports”) has skyrocketed since the early 2000s thanks in part to gaming dominant streaming services like Twitch. It is estimated that the number of US digital gamers will jump by around five percent in 2020 to 174.7 million. ¹It is also estimated that eSports will garner an audience of 495 million viewers in 2020 and reach over $1 billion in revenue for the first time ever. ²This unprecedented increase in popularity has given rise to professional gamers, gaming personalities, and content creators (“professional gamers”). With professional gamers being paid from as low as $1,000 a month to as high as $6 million a year, one has to examine how eSports contracts are managed. ³eSports contracts are a complicated issue because of the relative newness and unpredictability of the eSports market.

eSports Industry Growth | Law Firm of Dayrel Sewell — Graph showing the growth projection of internet users and U.S. digital gamers

Since eSports is a fairly new market, it functions in a largely unregulated space where “there is a lack of standardized contracts, no collective bargaining, and unestablished standard working conditions.”⁴ In addition, there is a general imbalance in the levels of commercial sophistication of contracting parties. Many times, eSports contracts are agreed upon between unrepresented young gamers with little commercial experience and large media companies with large amounts of resources. As a result, eSports contracts may end up being unfair and unethical. Back in December 2019, an anonymous professional gamer (“Player 1”) leaked a contract that illustrates the unfair and unethical working conditions that gamers may be subjected to.⁵ The contract in question stated that if Player 1 was transitioned to a substitute player then he or she must live stream games for 120 hours per month without receiving any salary for his or her efforts^6.

Perhaps more alarmingly, an exclusivity clause in the contract prevents the player in question from working elsewhere – despite being an independent contractor, not an employee – and they only receive income that’s earned from solo live streams. If streaming in collaboration with the organisation or a sponsor, then the organisation retains 100 percent of the revenue generated by the player. There’s nothing stopping the organisation from forcing a sponsored stream upon the player, creating a potentially turbulent and unpredictable schedule in which they’re unable to earn any sort of income⁷.

Although it is impossible to know for sure, it is highly possible that other professional gamers may be locked into similar unfair contracts.⁸

Recently, Turner Tenney, popularly known online as “Tfue” found himself in a contract dispute with Faze Clan, his former eSports team. On May of 2019, Tfue filed a lawsuit against Faze Clan in California State Court arguing that the contract (“Gamer Agreement”) that he signed with the team back in 2018 was “oppressive, onerous, and one-sided in favor of Faze Clan.⁹” They claimed that the Gamer Agreement allowed Faze Clan to collect up to 80 percent of what he earned from third parties.¹⁰ Tfue also claimed that the Gamer Agreement hindered his ability to obtain his own sponsorship deals without the prior written consent of Faze Clan.¹¹ Faze Clan denied all allegations made by Tfue, and released a Twitter statement claiming that it has not collected any of Tfue’s tournament winnings, Twitch revenue, YouTube revenue, or revenue from any special platforms. Faze Clan added that it has only received $60,000 in relation to the Gamer Agreement, while Tfue has experienced an “incredible growth” in popularity from his affiliation with Faze.¹²To make things even more complicated, Tfue classified himself as an “artist” and also alleged that Faze Clan violated California’s Talent Agency Act (“TAA”) because it was not a licensed talent agency. The TAA protects artists and prevents unlicensed talent agencies from making “binding promises on behalf of a performer.” As a result, artists’ contracts with unlicensed talent agencies are non-binding and the artists can recover all fees earned by an unlicensed talent agency.¹³

Based on a “forum selection clause” in the Gamer Agreement, Faze Clan brought a countersuit in New York Federal Court alleging that Tfue disparaged the team in violation of his contract, stole its confidential information, and interfered with business contracts and relationships in order to start his own rival eSports team. As a result of the New York case, the California court offered to either dismiss its case and let the case move forward in New York with California’s TAA applied or stay its case until the New York case is completed.¹⁴ After summary motions were rejected, Faze Clan and Tfue decided to settle and Tfue was released from the Gamer Agreement. Although, Tfue’s lawsuit was never settled in court, it sheds light on some eSports contract issues that have to be resolved.

The first issue it sheds light on is what constitutes an “oppressive, onerous, and one-sided” contract? A court may find a contract unconscionable and refuse to enforce it if is “unfair or oppressive to one party in a way that suggests abuses during its formation.¹⁵

A contract is most likely unconscionable if it is substantively unfair and unfairly bargained for. “An absence of meaningful choice by the disadvantaged party is often used to prove unfair bargaining.¹⁶” In Tfue’s case, he already had an established brand and most likely had options to sign with other companies. Additionally, Faze Clan argued that he was an adult when he agreed to the contract and that they took a risk by signing him. It could be argued that the terms of the Gamer Agreement were fair when it was first signed and Tfue simply wanted to get out of the contract once his popularity skyrocketed. Allowing Tfue out of his contract creates a slippery slope. It opens up the door to other professional gamers who may want out of their contracts once they are no longer favorable to them. This will likely result in eSports companies not wanting to take risks on less established gamers. For example, companies will not want to spend time, money, and resources to help popularize professional gamers if said gamers can easily dishonor their contracts. Since eSports is a relatively new field there are no standards for what constitutes a fair eSports contract. Only time will tell when such standards will be set.

The next issue that needs to be tackled is if professional gamers should fall under the scope of “artists” in the TAA. Under California’s labor code, “artists” include actors, actresses, radio artists, musical artists, musical organizations, directors, writers, cinematographers, composers, lyricists, arrangers, models, and “other artists and persons rendering professional services in motion picture, theatrical, radio, television and other entertainment enterprises.¹⁷” It could be argued that professional gamers fall under this category because many of them write, direct, and act in their own videos on social media platforms. Additionally, what is considered to be “rendering professional services . . . in other entertainment enterprises” is vague and could be stretched to encompass playing video games for the entertainment of others. If professional gamers gain recognition as artists somewhere down the line, eSports companies will then have to register as talent agencies in order to properly conduct business within California.

As time goes on, more eSports contract disputes will probably arise. Because of this, the eSports world must find a way to deal with or prevent these disputes. The World Esports Association (WESA), an eSporting organization created by different eSports companies, tried to tackle this issue by creating an arbitration court for eSports matters.¹⁸ Although this is a step in the right direction, the arbitration court has its issues. Unlike normal courts of law, the arbitration courts set up right now do not have a way to enforce their verdicts.¹⁹ Additionally, all arbitration decisions are final and cannot be appealed.²⁰ These factors combined with the fact that the arbitration court was created by eSports companies will likely turn some players away due to fear of impartiality.²¹ Esports contracts will no doubt be a hot button issue in the near future. Before contract disputes become a crisis, the eSports community as a whole must set standards and guidelines for eSports contracts and disputes. Additionally, eSports companies need to protect themselves from lawsuits when drafting new contracts and professional gamers need to protect themselves from signing bad contracts.

¹ eMarketer Editors, US Twitch Usage Accelerates amid Lockdowns eMarketer adds 4 million US users to 2020 forecast, EMARKETER (September 3, 2020), https://www.emarketer.com/content/us-twitch-usage-accelerates-amid-lockdowns.

² NEWZOO, Newzoo Global Esports Market Report 2020 | Light Version (2020), https://resources.newzoo.com/hubfs/Reports/Newzoo_Free_2020_Global_Esports_Market_Report.pdf?utm_campaign=Esports%20Market%20Report&utm_medium=email&_hsmi=83771038&_hsenc=p2ANqtz-_yaR_311hJhLBRa7l_ZAcE1cKQ4dZB330x0N8I9YU7_4BdnEHwjMgVRHk6tjsT94qhIVesmoLYXmRuMwv0bEeNNwF8jA&utm_content=83771038&utm_source=hs_automation

3 Alexander Lee, When work is play: A look at the financial lives of professional gamers, POLICYGENIUS (September 11, 2019), https://www.policygenius.com/blog/esports-athlete-finances/; ESPORTS EARNINGS, Top 100 Highest Overall Earnings (Accessed September 13, 2020), https://www.esportsearnings.com/players.

⁴ Josh Hunt, Esports contract dispute: Seeking to set an industry standard, LEXOLOGY (July 3, 2019), https://www.lexology.com/library/detail.aspx?g=d2b658ba-9ef8-4599-9626-1e0ac85cc348.

⁵ Adam Fitch, Player contract illustrates unfair and unethical conditions, https://esportsinsider.com/2019/12/unfair-player-contract.

⁶ Id

⁷ Id

⁸ Id

⁹ Christina Settimi, Fortnite Star Tfue Settles Dispute With FaZe Clan, Ending Esports’ First Major Employment Lawsuit, FORBES (August 26, 2020), https://www.forbes.com/sites/christinasettimi/2020/08/26/fortnite-star-tfue-settles-dispute-with-faze-clan-ending-esports-first-major-employment-lawsuit/#2a36d27222d8

¹⁰ Id

¹¹ Jordan Crook, Pro gamer Tfue files lawsuit against esports org over ‘grossly oppressive’ contract, TECH CRUNCH (May 21, 2019), https://techcrunch.com/2019/05/21/pro-gamer-tfue-files-lawsuit-against-esports-org-over-grossly-oppressive-contract/

¹² Id

¹³ Anthony Zaller, Tfue v. Faze Clan – Esports lawsuit raises many California employment legal issues, CALIFORNIA UNEMPLOYMENT LAW REPORT (May 24, 2019), https://www.californiaemploymentlawreport.com/2019/05/tfue-v-faze-clan-esports-lawsuit-raises-many-california-employment-legal-issues/

¹⁴ Jordan Benson, Op Ed: Tfue v. FaZe – a dip into the case and its impact on esports, EFUSE (March 23, 2020), https://efuse.gg/learning/efuse/tfue-faze-legal-jbens0n.

¹⁵ Cornell Law School, Unconscionability, LEGAL INFORMATION INSTITUTE (Accessed September 13, 2020), https://www.law.cornell.edu/wex/unconscionability.

¹⁶ Id

¹⁷ Cal. Lab. Code § 1700.4 (West)

¹⁸ Hans Oelschlägel, Announcing the founding of WESA – the World Esports Association, ESL (May 13, 2016), https://www.eslgaming.com/article/announcing-founding-wesa-world-esports-association-2856; Sam Cooke, WESA announces esports’ first arbitration court, ESPORTS INSIDER (November 3, 2016),

¹⁹ Ryan Boonstra, Player 3 Has Entered the Game: Arbitration Comes to the eSports Industry, 10, 1 ARB. LAW REV. 102, 115 (2018). https://elibrary.law.psu.edu/cgi/viewcontent.cgi?article=1245&context=arbitrationlawreview

²⁰ Id

²¹ Id

Copyrighting Tattoos in Sports Video Games: Can LeBron James License His Image?

Tattoos are permanent, often complex, creative, and original pieces of work created by a tattoo artist. Recently, litigation has come up regarding tattoos on famous athletes. While most issues involving tattoos on athletes are more easily handled — such as J.R. Smith’s tattoo of the brand Supreme on his leg¹ — there are questions of whether a tattoo is subject to copyright protection when it is prominently displayed and reproduced on a famous athlete in a video game. This question is at the center of a lawsuit filed by Solid Oak Sketches against Take Two Interactive Software as well as two other producers of the popular NBA 2K video games based on the video games’ reproductions of players’ tattoos, including LeBron James.²

Logo for the 2020 version of the NBA 2K videogame

A similar issue arose in 2011, in which tattoo artist S. Victor Whitmill claimed to have copyright ownership of Mike Tyson’s face tattoo, with the tattoo in question given to Tyson in 2003³. Whitmill sued Warner Bros., claiming that the popular film Hangover 2 infringed on his work when they reproduced Tyson’s tattoo on a main character’s face⁴. While Whitmill’s complaint failed to temporarily enjoin the studio from releasing the film in theaters, the case was settled out of court and now leaves an underwhelming amount of case law on the subject.⁵

Are Tattoos Protected By Copyright Laws | Mike Tyson tattoo | Copyrighting Tattoos in Sports Video Games — Mike Tyson with his famous tattoo displayed prominently

The Copyright Act of 1976 gives protection to artists that establish that: (1) their creation is the type of work that is protectable; (2) their creation is an original and creative work; and (3) the creation is affixed to a tangible medium for expression.⁶ Further, § 202 of the Copyright Act states that “ownership of a copyright… is distinct from ownership of any material object in which the work is embodied.”⁷ This means that a tattoo artist does in fact have copyright ownership over original and creative tattoos that they give, even when those tattoos are on another person’s body. However, there is an implied license that allows people to freely and publicly display their tattoos — for example, on television, film, and magazines — so for most people, this is not a problem.⁸However, this issue has arisen because LeBron’s tattoos are not only being displayed, but they are being digitally reproduced in a video game, causing an issue for copyright infringement issue.⁹

The company Solid Oak Sketches obtained the copyrights for two of LeBron James’ four tattoos in question — the portrait of his child and the area code — before suing in 2016 because they were used in the NBA 2K series.¹⁰ Take Two argues a fair use defense, stating that the tattoos are covered under fair use and are not a critical component of the video games, seen only fleetingly or rarely.¹¹ However, that argument may not hold water due to the time and energy put into recreating both the athletes and tattoos with incredible accuracy.¹² Further, this argument did not survive the motion to dismiss, with Judge Laura Taylor Swain finding that the defenses presented by Take Two are fact-intensive and will require more evidence.¹³

Are Tattoos Protected By Copyright Laws | Copyrighting Tattoos in Sports Video Games | Lebron James in NBA 2K 2014 — Lebron James in real life (left) and Lebron James in NBA 2K 2014 (right)

New York University intellectual property law professor Christopher Jon Sprigman says to the New York Times that Solid Oak’s lawsuit “amounts to a shakedown and copyright trolling,” stating further that “[t]hey shouldn’t be allowed to tell LeBron James that he can’t take deals to license his likeness… the ability of the celebrity, or really anyone, to do that is an element of their personal freedom.”¹⁴ LeBron James states that his tattoos are a part of his “persona and identity,” saying that if he is not shown with his tattoos, it would not be an accurate depiction of himself.¹⁵ In a Declaration of Support for the defendants from LeBron James, he states that the four tattoos in question were “inked in Akron, Ohio,” and in each case, he had a conversation with the tattooist about what he wanted inked on his body.¹⁶

The outcome of this case will set an important precedent on whether or not tattoo artists can demand monetary compensation every time a celebrity’s likeness has been reproduced. Since the rise of litigation, players’ unions and sports agents have been advising athletes to secure licensing agreements before they get tattooed, in order to protect their future interests.¹⁷ This way, the athletes have secured their rights while giving artists have an incentive to sign rather than pass up a celebrity client who could be a walking advertisement for their art¹⁸.

_¹ Cam Wolf, NBA Tells J.R. Smith to Cover Up His Supreme Tattoo Or Else, GQ (Oct. 1, 2018), https://www.gq.com/story/jr-smith-supreme-tattoo-nba?verso=true (in which Cleveland Cavaliers’ J.R. Smith was told by the National Basketball Association that they would fine him for every game of the season that he failed to cover up the Supreme logo on his leg, citing the League’s Collective Bargaining Agreement, which states that ‘a player may not, during any game, display any commercial, promotional, or charitable name, mark, logo, or other identification… on his body.’).

_²Jason M. Bailey, Athletes Don’t Own Their Tattoos. That’s a Problem for Video Game Developers, New York Times (Dec. 27, 2018), https://www.nytimes.com/2018/12/27/style/tattoos-video-games.html.

^₃Christie D’Zurilla, ‘Hangover 2’ Tattoo Lawsuit Over Mike Tyseon-style Ink is Settled, Los Angeles Times (June 22, 2011), https://latimesblogs.latimes.com/gossip/2011/06/hangover-tattoo-dispute-ed-helms-hangover-2-tattoo.html.

^₄Id.

^₅Id.

^₆1976 General Revision of Copyright Law, Pub. L. No. 94-553, 90 Stat. 2541.

^₇17 U.S.C. § 202.

^₈Jason M. Bailey, Athletes Don’t Own Their Tattoos. That’s a Problem for Video Game Developers, New York Times (Dec. 27, 2018), https://www.nytimes.com/2018/12/27/style/tattoos-video-games.html.

^₉Id.

¹⁰ Id.

₁₁ Bryan Wiedey, Tattoos in Sports Video Games Face Legal Issue, Sporting News (Oct. 19, 2018), http://www.sportingnews.com/us/other-sports/news/madden-lawsuit-over-tattoos-nba-2k-lebron-james-ea-sports-2k-sports/16xvqkb1d2hbm1lzs6u3iljaap.

^₁₂Id.

^₁₃ Thomas Baker, NBA 2K Tattoo Copyright Suit Offers Two Compelling Legal Arguments, but Only One Seems Practical, Forbes (Jan. 4, 2019), https://www.forbes.com/sites/thomasbaker/2019/01/04/lebron-smartly-sides-with-the-producers-of-nba-2k-in-tattoo-copyright-case-but-will-that-be-enough/#4e08f33c7663.

^₁₄Jason M. Bailey, Athletes Don’t Own Their Tattoos. That’s a Problem for Video Game Developers, New York Times (Dec. 27, 2018), https://www.nytimes.com/2018/12/27/style/tattoos-video-games.html.

^₁₅ Solid Oak Sketches, LLC v. 2K Games, Inc. and Take-Two Interactive Software, 1:16-cv-00724, ECF No. 134 (Aug. 24, 2018). (Found at https://www.scribd.com/document/386980896/2018-08-24-Declaration-dckt-134-0#from_embed).

^₁₆ Id., at 1.

^₁₇ Jason M. Bailey, Athletes Don’t Own Their Tattoos. That’s a Problem for Video Game Developers, New York Times (Dec. 27, 2018), https://www.nytimes.com/2018/12/27/style/tattoos-video-games.html.

^₁₈ Id.

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