Tag Archives: #infringement

Second Circuit Limits Copyright Damages to Three-Year Period Before Suit

By Sara Gates

How do you square Psihoyos with Petrella, two of the most significant copyright statute of limitations cases in recent years?  Courts and attorneys alike have struggled with that question since the Second Circuit and the Supreme Court, respectively, handed down these two copyright decisions within the span of a month in 2014.  For the most part, courts have read the decisions separately, acknowledging the Petrella court’s three-year look-back period for a plaintiff’s recovery of monetary damages in a copyright action, while continuing to apply the Psihoyos court’s “discovery” rule, which extends the time when the Copyright Act’s statute of limitations period starts to run based on when the copyright owner “discovers” the infringement.

It was not until earlier this month that the Second Circuit took up the damages question in Sohm v. Scholastic Inc., No. 18-2110, 2020 WL 2375056 (2d Cir. May 12, 2020), and decided that, though the discovery rule is binding precedent in the circuit, the Supreme Court’s decision in Petrella counsels that there is a only a three-year lookback period from when suit is filed to determine the extent of monetary damages available.  Reversing the lower court’s decision on this point, the Second Circuit determined that a copyright plaintiff’s recovery is limited to damages incurred during the three years prior to filing suit.  The decision lends an advantage to copyright defendants where plaintiffs delay in bringing suit, yet still seek to recover expansive damages dating back as far as they can count. 

In the case, a photographer, Joseph Sohm, brought a copyright infringement action against Scholastic Inc., which had used 89 of Sohm’s photographs in various publications, outside the limited license granted by Sohm’s third-party licensing agent.  On cross-motions for partial summary judgment, the district court dealt with a host of copyright issues, ultimately finding that Scholastic only infringed the copyrights in six photographs.  Notably, the district court considered Scholastic’s arguments that the Copyright Act’s three-year statute of limitations barred Sohm’s claims as to certain uses of the photographs, and that Sohm’s damages should be limited to those incurred during the three years prior to filing suit.  The court rejected both of Scholastic’s arguments, finding the discovery rule adopted by the Second Circuit in Psihoyos v. John Wiley & Sons, Inc., 748 F.3d 120 (2d Cir. 2014), was still good law and that the Supreme Court’s decision in Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663 (2014), should not be read to establish a time limit on the recovery of damages distinct from the discovery-based statute of limitations.

On cross-appeal to the Second Circuit, Scholastic urged the court to forego the discovery rule, and to instead adopt an “injury rule” (i.e., so the three-year statute of limitations period starts to run from the time of the copyright owner’s injury), to determine when Sohm’s claims accrued for statute of limitations purposes.  Citing Psihoyos as binding precedent in the Second Circuit that had not been overturned, the court disagreed with Scholastic’s position and affirmed the discovery rule, sticking with the majority of the circuit courts that have adopted the rule.  Scholastic’s second argument, however, fared better.

Asserting that, even if the discovery rule applies, Scholastic argued that Sohm still should not be able to recover damages for more than three years prior to commencement of the action, relying on language from Petrella.  Specifically, Scholastic noted that the Petrella court stated: “[u]nder the [Copyright] Act’s three-year provision, an infringement is actionable within three years, and only three years, of its occurrence” and that “the infringer is insulated from liability for earlier infringements of the same work.”  Though Sohm opposed Scholastic’s interpretation, calling it dicta, the Second Circuit disagreed, finding that this portion of the opinion was necessary to the result, so it acts as binding precedent.  Accordingly, the Second Circuit concluded that, notwithstanding the discovery rule, the Supreme Court “explicitly dissociated the Copyright Act’s statute of limitations from its time limit on damages” and “delimited damages to the three years prior to the commencement of a copyright infringement action.”  

While the Second Circuit did not adopt Scholastic’s proposed injury rule, its holding severely limits the copyright owner’s recovery when the discovery rule is applied.  For example, if an infringement occurred ten years ago, but was only recently discovered, prompting the copyright owner to file suit, the copyright owner would only be able to recover damages for the three years prior to filing, and would not be able to “look back” through the ten years since the infringement. 

In deciding that Sohm could not recover damages more than three years prior to filing suit, the Second Circuit became the first circuit to adopt this interpretation of Petrella.  Though other district courts outside the Second Circuit have addressed the issue—including a district court in the Ninth Circuit, Johnson v. UMG Recordings, Inc., No. 2:19-cv-02364-ODW, 2019 WL 5420278 (C.D. Cal. Oct. 23, 2019), which took the opposite position and permitted damages outside the three-year period—until other circuits weigh in, it is unclear whether the Second Circuit’s interpretation will become majority rule or whether a circuit split again destined for the Supreme Court is on the horizon. 

Ninth Circuit Holds First Amendment Tolerates Whiskey-Inspired Parody Dog Toys in Trade Dress Spat

By Scott J. Sholder

A legal decision that simultaneously upholds the foundational tenets of free speech while quoting a dog toy’s claim to be “43% Poo by Vol” and “100% Smelly” is a welcome spot of levity in these trying and stressful times. The Ninth Circuit offered both in VIP Products v. Jack Daniel’s Properties, Inc., a recent decision holding that the First Amendment shields parodic uses of trademarks and trade dress in consumer products.

Background

Between 2007 and 2017, VIP Products LLC (“VIP”) sold dog toys called “Silly Squeakers,” which were designed to look like bottles of well-known beverages “but with dog-related twists” – in this case, “Bad Spaniels” as a play on Jack Daniel’s. The Bad Spaniels toy, introduced in 2013, resembles a Jack Daniel’s bottle, features a picture of a dog, and sports the phrase “the Old No. 2, on your Tennessee Carpet” and the above-mentioned “alcohol” content description. (A bottle of Jack Daniel’s bears the phrases “Old No. 7 Brand Tennessee Sour Mash Whiskey.”) VIP claimed that the purpose of its toys’ design was to comment on “the humanization of the dog in our lives” and “corporations [that] take themselves very seriously.”

Jack Daniel’s Properties, Inc. (“JDP”) was apparently one of those companies and did not take kindly to VIP’s canine-inspired take on its iconic brand of spirits. In 2014 JDP wrote to VIP demanding that it “cease all further sales of the Bad Spaniels toy.” In response, VIP filed an action seeking a declaratory judgment of non-infringement or dilution of JDP’s trademark rights, a ruling that the “Jack Daniel’s trade dress and bottle design are not entitled to trademark protection,” and cancellation of JDP’s registered bottle design. JDP counterclaimed for trademark and trade dress infringement as well as trademark dilution by tarnishment.

After dueling summary judgment motions, the district court, among other rulings, denied VIP’s First Amendment defenses and confirmed the protectability of JDP’s trade dress. A four-day bench trial on JDP’s dilution claim and likelihood of confusion resulted in a ruling in favor of JDP and a permanent injunction against sales of the Bad Spaniels toy. VIP appealed to the Ninth Circuit Court of Appeals, which issued a mixed ruling, affirming the protectability of JDP’s trade dress but reversing the lower court’s ruling on the First Amendment.

Ninth Circuit Decision

The appeals court, in addressing VIP’s First Amendment defense, explained that the Lanham Act’s “likelihood of confusion” standard generally “seeks to strike the appropriate balance between the First Amendment and trademark rights,” but in the context of artistic expression, a more stringent test in favor of free speech applies because likelihood of confusion “fails to account for the full weight of the public’s interest in free expression.” The Ninth Circuit explained that it had adopted, in Mattel, Inc. v. MCA Records, a test originally promulgated by the Second Circuit in the seminal case Rogers v. Grimaldi, which dealt with protectable names used in the titles of expressive works. That test requires a plaintiff to demonstrate that a defendant’s use of the plaintiff’s name/mark in an expressive work is either (1) “not artistically relevant to the underlying work” or (2) “explicitly misleads consumers as to the source or content of the work.” The court’s analysis focused on the threshold issue of why a dog toy is considered an expressive work, the key question being whether the work “communicat[es] ideas or express[es] points of view.”

The panel explained that expressive works are “not rendered non-expressive simply because” they are sold commercially, yet do not need to be the “expressive equivalent of Anna Karenina or Citizen Kane.” The Bad Spaniels toys were expressive works because they communicated a “humorous message” through “word play to alter the serious phrase that appears on a Jack Daniel’s bottle – ‘Old No. 7 Brand’ – with a silly message – ‘The Old No. 2.'” The juxtaposition of an “irreverent representation of the trademark with the idealized image created by the mark’s owner” rendered the Bad Spaniels toy a First Amendment-protected work conveying the message that “business and product images need not always be taken too seriously.” This message was key; the vessel of the dog toy was effectively deemed irrelevant (and, the court noted, its conclusion was consistent with a 2007 Fourth Circuit decision protecting parodic dog toys based on Louis Vuitton hand bags).

As a procedural matter, the court did not address the substance of the two-prong Rogers test because the district court had not even found that Bad Spaniels was an expressive work. The court therefore vacated the lower court’s finding of infringement and remanded for an analysis of the Rogers test.

The Ninth Circuit panel went on to reverse the trial court’s ruling that VIP had diluted JDP’s trademark because noncommercial use of a mark is not dilutive, and VIP had not engaged in purely commercial speech. Specifically, VIP had done more than simply propose a commercial transaction by creating “protected expression” even though it was selling a product. Because VIP’s humorous message was protected by the First Amendment, its use of the JDP trade dress could not have diluted JDP’s brand.

The VIP case is the most recent example of the continued expansion of the Rogers test into a more encompassing First Amendment safeguard, at least in the Ninth Circuit. In 2008, the Ninth Circuit held in E.S.S. Entertainment 2000, Inc. v. Rock Star Videos, Inc., that, in the context of video games, the Rogers test applied not only to trademark use in titles of artistic works, but also to material in the body of the works. And just two years ago, in Twentieth Century Fox Television v. Empire Distribution, Inc., the court held that Fox’s use of the name “Empire” for its hit TV show was protected by the First Amendment against claims of trademark infringement by record label Empire Distribution, opening the Rogers umbrella to cover Fox’s promotional uses of the “Empire” mark for live musical performances, cast appearances, and on consumer goods like T-shirts and champagne glasses. The VIP decision represents a predictable next step of expansion of the Rogers doctrine out of the realm of creative media properties like television and video games (for which merchandising is ancillary) to consumer goods as a distinct category of creative expression.

VIP is a clear victory for creators of expressive works, reinforcing the importance of balancing trademark rights with artistic expression and the ability of creators of even garden-variety consumer products to make a living from the fruits of that expression. Brand owners, on the other hand, will likely see the decision as a weakening of trademark protections and a blank check for content creators to profit from uses of marks outside traditional artistic content. Of course, VIP is only binding in the Ninth Circuit, but it stands to reason that other like-minded courts such as the Second Circuit (originator of the Rogers test) and the Fourth Circuit (which addressed the Louis Vuitton dog toy case mentioned above) may follow suit. While creators of expressive products may take some more comfort in their First Amendment rights, trademark proprietors should carefully assess the facts of brewing disputes, especially in these circuits, before asserting claims. And, particularly with parody products, brand owners should consider whether litigation is the best solution or if there are other compromises like disclaimers or outside-the-box business solutions.

This article was published by the Media Law Resource Center (MLRC) on May 6, 2020

Supreme Court Rejects Willfulness Requirement for Profit Awards in Trademark Infringement Actions

By Sara Gates

In a recent decision of considerable importance for trademark practitioners, the U.S. Supreme Court finally resolved a longstanding split among the circuits when the Court held that willfulness is not required to award the plaintiff profits in a trademark infringement action. Romag Fasteners, Inc v. Fossil, Inc., No. 18-1233, 2020 WL 1942012 (U.S. Apr. 23, 2020). Justice Gorsuch delivered the majority opinion in the unanimous decision, expressly rejecting the willfulness prerequisite to profit awards adopted by the Second and Ninth Circuits, which both handle a high volume of the nation’s trademark cases.

Background

The case before the Court involved a dispute over handbag fasteners between Romag Fasteners, Inc., a company that manufacturers the fasteners, and Fossil, Inc., a company that uses the fasteners on its handbags. For years, Romag and Fossil worked together under an agreement that permitted Fossil to use Romag’s fasteners on its handbags. As Romag later discovered, however, factories in China making Fossil products were using counterfeit fasteners, instead of Romag’s products. Believing that Fossil was not policing these factories, Romag sued Fossil for trademark infringement and false representation (along with other claims, including patent infringement).

The issues of fact went to the jury, which agreed with Romag’s view and found that, while Fossil had acted with callous disregard, its actions were not willful. Though the jury made its advisory awards, the Judge Janet Bon Arterton of the U.S. District Court for the District of Connecticut determined that Romag could not recover Fossil’s profits on the trademark infringement claim without a finding of willfulness. On appeal to the Federal Circuit, the Court upheld the district court’s decision, finding that it was consistent with Second Circuit precedent (the District of Connecticut sits within the Second Circuit). Romag’s writ of certiorari to the Supreme Court followed, and the Court granted the writ, presumably to resolve the outstanding circuit split that has persisted for more than 20 years.

Decision

The Court did just that in its recent decision, which fully and finally rejected the view that a showing of willfulness is a prerequisite to a profit award in trademark infringement actions. As the Court explained, while the infringer’s state of mind is certainly an important and valuable consideration, it is by no means a requirement for a court to award a trademark owner the infringer’s profits.

In reaching the decision, the Court relied heavily on the text of the Lanham Act, the statute governing recovery of federal trademark violations, and, specifically, 15 U.S.C. § 1117, the Lanham Act’s damages provision. The Court pointed out that states of mind, or mens rea, are carefully addressed in that section of the statute, as they are throughout the entirety of the Lanham Act. For example, the plain text of § 1117(a) provides for recovery of an award of the infringer’s profits for any violations of 15 U.S.C. § 1125(a) (i.e., trademark infringement), but for violations of § 1125(c) (trademark dilution) the statute clearly requires a willful violation for such an award:

When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action. . . .

17 U.S.C. § 1117(a) (emphasis added).

The Court determined that the use of the term “willful” in one instance in § 1117(a), but not in another, indicated Congress’ intent with regard to how mental states should be treated vis á vis profit awards for particular violations. Likewise, in other sub-sections of § 1117, mental states are included judiciously in certain instances, but not others. As the Court, in its interpretation of the law, is careful not to read words into statutes that are not present, it declined to adopt the Second and Ninth Circuit’s interpretations and read in a “willful” requirement for violations of § 1125(a).

The Court similarly rejected other arguments lodged by Fossil, again turning to the text of the statute. For instance, Fossil argued a profit award was appropriate pursuant to “principles of equity” in § 1117(a). The Court discussed the definition and meaning of “principles of equity,” finding it unlikely that Congress intended for this language to denote such a narrow rule regarding profit awards. Even considering pre-Lanham Act case law, the Court again noted that there was no clear rule regarding a willfulness prerequisite, leading the Justices to the conclusion that, at most, mens rea was an historically important consideration in awarding profits but never a requirement. As the Court pointed out, the importance of mens rea has continued under the Lanham Act, as reflected in the provision of greater statutory damages for willful violations in § 1117(c). Finally, the Court briefly rejected Fossil’s policy argument, stating that the Court would instead leave the policy decisions to the policymakers in Congress.

With this decision, trademark plaintiffs will face one less obstacle when establishing their entitlement to an award of a defendant’s profits. In practical terms, courts will likely see fewer motions for summary judgment on willfulness, as defendants may no longer use this tool to foreclose a plaintiff’s ability to obtain the defendant’s profits. Though the Court’s decision that courts may award profits absent a finding of willfulness may, in theory, open the doors to more profit awards, it is unlikely to result in windfalls to plaintiffs. As courts have long recognized, the infringer’s state of mind bears on the relief the trademark owner should receive.

The Supreme Court echoed the well-established notion that an infringer’s state of mind bears on the relief the plaintiff should receive when it clearly articulated that a defendant’s mental state “is a highly important consideration in determining whether an award of profits is appropriate” in trademark infringement actions. Romag, 2020 WL 1942012, at *4. There is just no particular mental state required for profit awards, so it remains in the discretion of the courts, and juries, to determine what is appropriate under the circumstances.

This article was published by the Media Law Resource Center (MLRC) on May 6, 2020

Nancy Wolff Featured in ABA Grassroots Initiative Discussing the CASE Act

As part of ABA Day, Nancy participated in a CASE Act Introduction and discussed implications of The Copyright Alternative in Small-Claims Enforcement (CASE) Act of 2019 and its creation of the Copyright Claims Board as an alternative forum to pursue low-value claims of $30,000 or less. Listen to the panel here.