Category: blog


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 & Risk Mitigation Strategies


      1.   NFTs and Trademarks: General Overview

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

     

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

     

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

     

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

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

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

     

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

     

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

     

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

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

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

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

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

        6. Common Law Trademark Infringement

        7. Misappropriation and Unfair Competitionunder New York Common Law

     

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

     

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

     

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

     

    Nike asserts the following causes of action:

     

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

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

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

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

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

     

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

     

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

     

      1.   Enforcement: NFTs and Cybersquatting

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

     

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

     

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

     

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

     

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

     

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

     

      1.   Conclusions and Further Implications

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

     

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

     

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

     

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

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

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

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

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

 

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

 

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

 

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

 

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

 

5 Hermes Complaint, 1. Available at: URL:

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

 

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

 

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

 

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

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

 

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

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

 



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.

 

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  • 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.

 

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  • 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

TransUnion, 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.

 

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

 

Chart demonstrating Rise Brewing’s registered trademarks

 

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

 

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

 

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

 

Conclusion

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

 

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

 

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

 

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

 

4 Id.

 

5 Id.

 

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

 

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

 

8 Id. at 1372.



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 efforts6.

 

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

 

eSports Industry Growth | Law Firm of Dayrel Sewell
Turner Tenney (“Tfue”) wearing his Faze Clan team uniform

 

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.

 

esports industry growth | Law Firm of Dayrel Sewell
Turner Tenney (“Tfue”) showing off his game streaming setup

 

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

 

 

Are Tattoos Protected By Copyright Laws | NBA 2K videogame | Copyrighting Tattoos in Sports Video Games
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.’).

 

 2 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.

 

3 Christie 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.

 

 4 Id.

 

5 Id.

 

6 1976 General Revision of Copyright Law, Pub. L. No. 94-553, 90 Stat. 2541.

 

7 17 U.S.C. §  202.

 

8 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.

 

 9 Id.

 

 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.

 

 12 Id.

 

 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.

 

 14 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.

 

 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.



Trademark Parodies – Flawed or Fair use?


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

 

I. Trademark Dilution Revision Act

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

 

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

 

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

 

II. Exploring the TDRA Flaw

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2 Id. at 92.

 

3 Id.

 

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

 

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

 

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

 

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

 

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

 

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

 

10 Id. at 84.

 

11 Id. at 89.

 

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

 

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

 

14 Id. at 97.

 

15 Id.  at 96.

 

16 Id.

 

17 Id. at 97.

 

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

 

19 Id.

 

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

 

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

 

22 Id. at 93.

 

23 Id.

 

24 Id.



Trademark Law Implications of AM General v. Activision


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

 

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

 

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

 

Trademark law
Corporate logo of Activision

 

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

Brooklyn Law Firm
Corporate logo of A.M. General

 

 

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

 

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

 

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

 

1 15 U.S.C. § 1127 (1946). 

 

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

 

 3 Id. at *5.



Prince’s purple: without rain or color trademark protection


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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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