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Former Chicago Bulls player Michael Jordan, arguably “the greatest basketball player of all time,” was inducted into the Basketball Hall of Fame on September 11, 2009. Time, Inc., publisher of Sports Illustrated, produced a special edition to celebrate Jordan’s career, available only in stores. It was offered for sale from October 2009 – January 2010.

A Time sales representative offered Jewel Food Stores, Inc. free advertising space in that special issue for stocking the magazine in its stores. Jewel’s full-page color advertisement ran on the inside back cover of the magazine. The ad congratulated Jordan on his accomplishments, displayed a large pair of basketball shoes with Jordan’s number “23,” and prominently featured the Jewel-Osco registered logo and tagline “Good things are just around the corner.” The ad text also contained a reference to Jordan as having been “just around the corner” in Chicago for many years. Jordan sued Jewel for trademark, right of publicity, deceptive trade practices, and unfair competition violations. The magazine also contained a full-page congratulatory ad by Jewel’s Chicago rival, Dominick’s Finer Foods, who Jordan sued in a pending separate action.

The U.S. District Court for the Northern District of Illinois dismissed the case, finding that Jewel’s ad was noncommercial speech protected under the First Amendment to the U.S. Constitution and that the constitutional immunity applied to the entire case. Jordan appealed on the basis that the ad was unprotected commercial speech. The parties agreed that the court could not apply the federal and state claims in the complaint if the ad constituted noncommercial speech under the First Amendment.

The U.S. Court of Appeals for the Seventh Circuit reversed the dismissal, finding that the ad was “garden variety” commercial speech, a form of image advertising aimed at promoting the Jewel-Osco brand. The Seventh Circuit noted that Jordan is a “sports icon whose name and image are deeply embedded in the popular culture and easily recognized around the world,” a desirable celebrity endorser who closely guards the use of his identity. It observed that the Supreme Court has mainly adopted the commercial speech doctrine in cases involving public law entities, such as municipalities, public universities, the Postal Service, state utilities, and the like. However, the Supreme Court has not resolved the conflict between intellectual property rights and free speech rights in cases between private parties, and the lower courts have applied a conflicting mix of tests. Because of the parties’ agreement, the Seventh Circuit did not decide that issue.

In a rare unanimous decision, the United States Supreme Court resolved a circuit court split over the proper framework to determine standing to bring false advertising claims under the Lanham Act.

Lexmark International, Inc., a notable manufacturer of laser printers, also sells the only style of toner cartridges that work with those printers. To restrict third parties from refurbishing used Lexmark toner cartridges to sell in competition with Lexmark, Lexmark developed a microchip to disable their cartridges after the toner runs out. Lexmark intended to require customers to return cartridges to Lexmark for replacement of the toner and microchip. To that end, Lexmark introduced a “Prebate” program on each of its toner cartridge packages, which advised the consumer that by opening the package, the customer consented to return the empty toner cartridge to Lexmark in exchange for a 20% discount.

Static Control Components, Inc. replicated the Lexmark microchip, which it sold to third parties to allow the refill and resale of used Lexmark cartridges. In response, Lexmark sent letters to most of the companies in the toner cartridge remanufacturing business, incorrectly advising them that it was illegal to use Static Control’s products to refurbish Lexmark’s toner cartridges. Lexmark also sued Static Control, alleging that Static Control’s microchips violated the Copyright Act, 17 U.S.C. §101 and the Digital Millennium Copyright Act, 17 U.S.C. §1201. The copyrights in question related to Lexmark’s software contained in the toner cartridge microchips.

Static Control filed a counterclaim alleging that Lexmark engaged in false advertising under § 43(a) of the Lanham Act. Static Control claimed that the Lexmark “Prebate” program purposefully misled consumers to believe that they were legally bound by the terms stated on the Lexmark package and, therefore, were required by law to return Lexmark’s toner cartridges to Lexmark. Static Control further asserted that the letters Lexmark sent to the remanufacturing businesses falsely advised that it was illegal to use Static Control’s products to refurbish Lexmark’s toner cartridges. Static Control contended that Lexmark materially misrepresented “the nature, characteristics, and qualities” of Static Control’s and Lexmark’s products. Static Control further maintained that Lexmark’s misrepresentations injured Static Control by diverting sales and harming its business reputation.

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Supreme Court resolves split over standing to bring false advertising claims

Michael Jordan’s suit reinstated challenging Jewel magazine ad

Intellectual Property NewsletterVol. 1, 2014

Serving clients for more than 120 years.

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The U.S. District Court for the Eastern District of Kentucky granted Lexmark’s motion to dismiss Static Control’s false advertising claim, holding that Static Control lacked “prudential standing” to bring the claim, relying on a multifactor balancing test set forth in Associated General Contractors of America, Inc. v. Carpenters, 459 U.S.519 (1983). The District Court found that there were “more direct plaintiffs in the form of remanufacturers of Lexmark’s cartridges” and that Static Control’s injury was “remote” because it was a mere byproduct of the “supposed manipulation of consumers’ relationships with remanufacturers.” The District Court further held that Lexmark’s “alleged intent [was] to dry up spent cartridge supplies at the remanufacturing level, rather than at the [Static Control] supply level, making the remanufacturers Lexmark’s intended target.”

The U.S. Court of Appeals for the Sixth Circuit reversed the dismissal of Static Control’s claim. In doing so, the Sixth Circuit identified three competing approaches to determine whether a plaintiff has standing to sue for false advertising under the Lanham Act: (1) the multifactor assessment outlined in Associated General Contractors, observed by the Third, Fifth, Eighth and Eleventh Circuits; (2) the categorical test, which only permitted Lanham Act suits by an actual competitor, followed by the Seventh, Ninth and Tenth Circuits; and (3) the “reasonable interest approach,” recognized only by the Second Circuit, under which a Lanham Act plaintiff had standing if the claimant could demonstrate a reasonable interest to be protected against false advertising, with a reasonable basis to believe that the interest was likely to be damaged by the false advertising. The Sixth Circuit applied the Second Circuit’s reasonable-interest test and concluded that Static Control had standing because it “alleged a cognizable interest in its business reputation and sales to remanufacturers and sufficiently alleged that th[o]se interests were harmed by Lexmark’s statements to the remanufacturers that Static Control was engaging in illegal conduct.”

The United States Supreme Court granted certiorari to decide “the appropriate analytical framework for determining a party’s standing to maintain an action for false advertising under the Lanham Act.” The Supreme Court rejected all three prior tests developed and applied by the circuit courts in favor of a two-prong “zone-of-

interests” inquiry grounded in principles that, according to the Court, are traditionally applied to statutorily created causes of action.

The Supreme Court relied on the well-settled rule of law that a statutory cause of action is presumed to extend only to a plaintiff who falls within the “zone of interests” protected by the statute invoked, and whose injury is proximately caused by a violation of the statute. The Court highlighted that the Lanham Act has an express purpose to protect persons engaged in commerce from unfair competition, defined in common law as injuries to business reputation and present or future sales. To come within the “zone-of-interests” in a § 43(a) false advertising claim, a plaintiff must allege an injury to a commercial interest in business reputation or sales. A plaintiff suing for false advertising must also show that the reputational or economic injury “flows directly from the deception wrought by the defendant’s advertising,” which occurs when the “deception of consumers causes them to withhold trade from the plaintiff.” With these principles in mind, the Court found that Static Control came within the class of

plaintiffs authorized to sue under § 43(a) because its alleged injuries of lost sales and damage to business reputation fell within the “zone of interests” protected by the Lanham Act. The Court concluded that Static Control should have a chance to prove its case of false advertising against Lexmark in the District Court.

The Supreme Court has clearly delineated a two-prong pleading requirement for a plaintiff to adequately allege a cause of action for false advertising under § 43(a) of the Lanham Act. The plaintiff

must allege (and eventually prove): (1) an injury to a commercial interest in sales or business reputation that is (2) proximately caused by the defendant’s misrepresentations. It is no longer necessary for the plaintiff to prove that it is a direct competitor of the defendant to be able to bring a false advertising case. The Lexmark decision clarifies an important area of intellectual property law that has been inconsistently handled by the federal courts since the introduction of the Lanham Act in 1946. The Lexmark decision also addresses the scope of false advertising liability, which is particularly important to keep in mind when using print, internet and social media advertising.

Source: Lexmark International, Inc. v. Static Control Components, Inc., U.S. Supreme Court, No. 12-873, March 25, 2014

“The Supreme Court has clearly delineated a two-prong pleading requirement for a plaintiff to adequately allege a cause of action for false advertising under § 43(a) of the Lanham Act.”

The Federal Trade Commission provides “Green Guides” under Section 5 of the FTC Act to help marketers avoid making deceptive or unfair statements regarding the environmental attributes of their products. These guidelines offer general principles that apply to all environmental marketing claims, advise how consumers are likely to interpret particular claims, and instruct marketers through examples how to qualify environmental claims to avoid deceiving consumers.

The Green Guides suggest that prior to making any environmental claims, marketers ensure that all reasonable interpretations of their claims are truthful, not misleading, and supported by a reasonable basis – through reliable scientific evidence such as tests, analyses, research or studies by an objective qualified person who is generally accepted in the profession. The guidelines also recommend, in part, that marketers:

• Place clear disclosures regarding an environmental claim in plain language and in large type in close proximity to the claim;

• Specify whether an environmental claim refers to a product, the product’s packaging, a service, or a portion thereof;

• Avoid making environmental claims that overstate an attribute or benefit, such as “50% more recycled content than before” when the recycled content only increased from 2% to 3%;

• Clearly identify comparative environmental claims like “20% more recycled content” to avoid consumer confusion about the comparison;

• Refrain from making broad, unqualified claims that a product is “environmentally friendly,” “eco-friendly” or

FTC’s “Green Guides” Advise about Environmental Marketing Claims

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“green” because such claims are likely to suggest that the product has specific and far-reaching environmental benefits and may improperly convey that a product has no negative environmental impact;

• Abstain from making unqualified degradable claims for a solid waste product unless it can be proven that the entire product or package will completely break down to its natural state within a year of customary disposal;

• Steer clear of making unqualified degradable claims for items destined for landfills, incinerators, or recycling facilities when these items will not degrade within a year;

• Explicitly qualify compostable, ozone, recyclable, recycled content, and source reduction claims; • Avoid environmental certifications or seals that do not clearly convey the basis for the certification, because such seals or certifications are likely to convey that the

product has general environmental benefits; • Properly qualify claimed carbon emissions reductions to

ensure that (a) the same reduction is not sold more than one time, (b) a misrepresentation is not made regarding emission reductions that have already occurred or will occur in the future, and (c) no implications are conveyed that a carbon offset represents an emission reduction if the reduction, or the activity that caused the reduction, was required by law;

• Draft qualified claims when advertising that a product, package or service is “free of abc,” or “does not contain xyz”, when the product, package or service contains or uses substances that pose similar environmental risks as abc or xyz;

• Conduct competent and reliable scientific research to support a claim that a product, package or service is “non-toxic” for humans and the environment or clearly and prominently qualify the non-toxic claims to avoid deception;

• Unequivocally qualify any claims that a product or package is made with “renewable energy” or that a service uses “renewable energy” if fossil fuel, or electricity derived from fossil fuel, is used to manufacture any part of the advertised item or is used to power any part of the advertised services, unless the marketer has matched such non-renewable energy use with renewable energy certificates; and

• Plainly qualify any “made with renewable materials” claims unless the product or package (excluding minor incidental components) is made entirely with renewable materials.

As the FTC notes, “[t]he Green Guides are not agency rules or regulations. Instead, they describe the types of environmental claims the FTC may or may not find deceptive under Section 5 of the FTC Act. Under Section 5, the agency can take enforcement action against deceptive claims, which ultimately can lead to Commission orders prohibiting deceptive advertising and marketing and fines if those orders are later violated.”

Source: For a complete copy of the Green Guides, visit: http://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-issues-revised-green-guides/greenguides.pdf

The purpose of copyright protection under Article I, § 8, cl. 8 of the United States Constitution is “[t]o promote the Progress of Science and the useful Arts.” To further that purpose, Congress included the fair use defense in § 107 of the Copyright Act of 1976, as an affirmative defense to a claim of copyright infringement from engaging in activities like criticism, comment, news reporting, teaching, scholarship or research. A determination of fair use is made on a case by case basis, weighing the following four non-exclusive statutory factors: (1) the purpose and character of the use, (2) the nature of the copyrighted work, (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole, and (4) the effect of the use upon the potential market for or value of the copyrighted work.

Fair use is necessary to advance the arts and sciences by stimulating creative activity among authors, artists, and inventors, while allowing others to use protected works in a limited fashion. However, what exactly constitutes the advancement of arts and sciences is not a bright-line rule.

The United States Court of Appeals for the Second Circuit considered the boundaries of the fair use defense in Cariou v. Prince, concluding that “appropriation artist” Richard Prince’s alterations of photographs taken of Rastafarians in Jamaica by classic photographer Patrick Cariou constituted fair use. In 2000, Cariou published a book of photographs entitled “Yes Rasta.” Prince purchased four copies of Cariou’s book and created thirty independent works as part of a gallery show called “Canal Zone.” Without permission from Cariou, Price altered Cariou’s photographs in a provocative way by painting over the subject’s faces, applying a tinted color to images, affixing headshots from “Yes Rasta” on other appropriated images, using inkjet printing and acrylic paint, pasting elements of musical instruments and enlarging the work up to one hundred times the size of the “Yes Rasta” photographs. Prince testified in the U.S. District Court for the Southern district of New York that he was not trying to create any new meaning or message through the “Canal Zone” show. Instead, his focus was to make a “fantastic, absolutely hip, up to date, contemporary take on the music scene.”

The District Court granted Cariou summary judgment that Prince’s work was infringing. In doing so, the court concluded that Prince’s new work had to comment on, criticize or relate historically to Cariou’s original photographs to be fair use. The district court found that Prince did not intend to comment on Cariou as a person, Cariou’s photographs, or aspects of popular culture closely associated with Cariou and/or his photographs and, therefore, rejected Prince’s fair use defense.

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In 2001, Starbucks Corporation, prominent global purveyor of specialty coffee, brought an action for trademark dilution by blurring against Wolfe’s Borough Coffee, Inc., doing business as Black Bear Micro Roastery, to enjoin Black Bear’s use of “Mister Charbucks,” “Mr. Charbucks,” and “Charbucks Blend.” Black Bear manufactures and sells roasted coffee beans.

After a trial in 2005, the United States District Court for the Southern District of New York concluded that the Charbucks Marks were not likely to dilute Starbucks’ famous Starbucks Marks. Starbucks twice appealed rulings of the District Court to the United States Court of Appeals for the Second Circuit. Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., 477 F.3d 765 (2d Cir. 2007)(“Starbucks I”); Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., 588 F.3d 97 (2d Cir. 2009)(“Starbucks II”).

In 2005, Starbucks operated 8,700 retail locations worldwide, had revenues in excess of $5 billion, and had registered over 50 United States trademark registrations. From 2000-2003, Starbucks spent over $136 million advertising and promoting its Starbucks Marks. The Starbucks Marks were “famous” within the meaning of the Federal Trademark Dilution Act (15 U.S.C. § 1125(c)(2)(A)) long before Black Bear started using its Charbucks Marks.

Black Bear was aware of the Starbucks Marks in 1997, when it developed Charbucks Blend. One reason Black Bear used the term “Charbucks” was the public perception that Starbucks roasted its beans very darkly. Soon after Black Bear began selling Charbucks Blend, Starbucks demanded that it stop, bringing suit when Black Bear refused.

At trial, Starbucks relied on the results of a consumer telephone survey in which 30.5% of the participants responded “Starbucks” when asked “What is the first thing that comes to your mind when you hear the name ‘Charbucks’?” The District Court held that there was neither actual dilution (required at the time under the federal dilution statute) nor a likelihood of confusion (required under the New York state dilution statute). Starbucks appealed and, while that appeal was pending, Congress amended the dilution statute to require only a likelihood of dilution rather than actual dilution. The amendments also defined “dilution by blurring” as an “association arising from the similarity between a mark or trade name and a mark that impairs the distinctiveness of the famous mark.” 15 U.S.C. § 1125(c)(2)(B).

Under the federal dilution statute, a court must consider all relevant factors, including (1) the degree of similarity between the mark and the famous mark, (2) the degree of inherent or acquired distinctiveness of the famous mark, (3) the extent to which the owner

of the famous mark is engaging in substantially exclusive use of the mark, (4) the degree of recognition of the famous mark, (5) whether the user of the mark intended to create an association with the famous mark, and (6) any actual association between the mark and the famous mark. Because of the change in the

law, the Second Circuit (in Starbucks I) sent the case back to the District Court for further proceedings. After analyzing the six dilution factors, the District Court again ruled in Black Bear’s favor, concluding that the marks were only minimally similar, which was enough to find no dilution. The District Court also found that Black Bear’s intent to create an association with Starbucks Marks was not in bad faith and the survey evidence was insufficient to make the actual confusion factor weigh in Starbucks’ favor. The District Court found the other factors to weigh in Starbucks’ favor.

Starbucks appealed again, and the Second Circuit (in Starbucks II) held that the District Court was correct that the marks were only minimally similar but was mistaken in finding that there had to be “substantial similarity” between the marks for dilution to be likely. The Second Circuit also observed that “degree of similarity” being only one of the six factors, even a low degree of similarity would not bar a dilution claim. The District Court also erred in requiring “bad faith” to find that the “intent to associate” factor favored Starbucks, and in requiring actual confusion to conclude that the actual association factor favored Black Bear. The Second Circuit held that the absence of actual or likely confusion did not bear directly on whether dilution is likely. Rather, the dilution analysis must focus on whether an association, arising from the similarity between the marks, impairs the distinctiveness of the famous mark.

The District Court then determined that factors 2-5 favored Starbucks but again found that the first factor (similarity of the marks) favored Black Bear because the marks were only minimally similar when Black Bear’s packaging was viewed in context. The District Court also discounted Starbucks’ survey evidence because consumers were asked only about the isolated word Charbucks, and did not see the packaging. Balancing all the factors, the District Court again found no likelihood of dilution and Starbucks appealed again.

In affirming the District Court, the Second Circuit reviewed the history of the dilution laws and concluded that the importance of the six factors could vary with the facts, so that some factors might be irrelevant and other factors could also be considered that were not in the statute. The Second Circuit held that the District Court did not err concerning the minimal degree of similarity between the marks and the weakness of the association between the marks. Moreover, Black Bear’s intent to create an association with Starbucks did not raise a presumption of actual association, as the two factors are distinct, although related. In addition, the survey evidence was weak and failed to demonstrate actual dilution because it did not present the mark as it was used in commerce, with a distinctive color scheme, font, and layout. In balancing the factors, the Second Circuit found that the finding of minimal similarity weighed heavily in Black Bear’s favor. Other factors being in Starbucks’ favor did not overcome the weak evidence of an actual association between the marks.

Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., U.S. Court of Appeals for the Second Circuit, 12-364-cv, November 15, 2013

“Charbucks” is not a blurring trademark dilution of “Starbucks”

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The Seventh Circuit noted that commercial speech can be constitutionally protected but that governmental burdens on such speech are scrutinized more leniently than on fully protected noncommercial speech. Commercial speech is defined by the Supreme Court as “speech that proposes a commercial transaction,” but that definition is merely a starting point for analysis. Other communications that contain discussions of important public issues might also constitute commercial speech, such as ads that link a product to a current public debate. Courts must give effect to the common sense distinction between commercial and other forms of speech. Where a communication contains both noncommercial and commercial elements, relevant considerations include whether (1) the speech is an advertisement, (2) the speech refers to a specific product, and (3) the speaker has an economic motivation for the speech. No one factor is sufficient and all factors need not be present.

The Seventh Circuit found the ad to be commercial speech despite not proposing a commercial transaction but rather a congratulatory salute to Jordan. The literal meaning of the words in the ad is not all that matters because commercial advertising is highly creative, is often supported by sophisticated marketing research, and frequently relies on subtle cues. An ad can be commercial if it promotes brand awareness or loyalty, with a commercial message that is general and implicit rather than specific and explicit. Although Jewel’s ad both congratulates Jordan and promotes Jewel’s supermarkets, the Seventh Circuit concluded that its unmistakable commercial function of enhancing the Jewel-Osco brand in consumers’ minds was easily inferred and the dominant message. Unlike an ad congratulating a local community group, an ad congratulating a famous athlete can only be understood as a promotional device for the advertiser, allowing the advertiser to benefit

from the commercial value of the celebrity’s identity.

The logo, observed the court, is prominently featured in a bold red style in the center of the page, in a font larger than any other on the page. It draws attention to Jewel-Osco’s sponsorship of the tribute. Also, the text

contains Jewel’s tagline. Jewel intended the ad to foster goodwill among Chicagoans and Jordan’s fans to increase patronage at Jewel-Osco’s stores. Although the ad does not contain any text about Jewel’s products, product-specific art, or photography, the Seventh Circuit concluded that Jewel’s “image” or brand advertising invited readers to patronize their local Jewel store. The ad promoted brand loyalty rather than a specific product but was nevertheless commercial. Even Jewel’s copywriter thought that the ad was “too selly” and “hitting too much over the head.” The Seventh Circuit determined that the ad was a form of image advertising aimed at promoting goodwill for the Jewel-Osco brand by “exploiting public affection for Jordan at an auspicious moment in his career.” It was not an article, column, news photograph, or illustration, but an advertisement serving a commercial purpose.

The Seventh Circuit concluded that Jewel’s ad was like television ads by corporate sponsors for Olympic athletes, which couple the advertiser’s logo or brand name with images of the athletes and expressions of support for the U.S. Olympic team. An outright sales pitch is not required. In addition, the Seventh Circuit observed that the noncommercial and commercial messages were not inextricably intertwined, which would afford the ad the higher standard of

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noncommercial speech, because there was “no law of man or nature” that compelled Jewel to combine the noncommercial and commercial messages as it did. The Seventh Circuit remanded the case to the District Court to determine if Jordan could provide proof that the ad caused a likelihood of confusion that Jordan sponsored or endorsed Jewel’s products and services.

In ruling that the Jewel ad was commercial speech, the Seventh Circuit gave Jordan the assist he needed to pursue his lawsuit in the

district court. Winning the likelihood of confusion claim, however, will not be a slam-dunk. Jordan has the burden of proof that the inclusion of the

Jewel logo and tagline in a one-time message congratulating him on his induction to the Basketball Hall of Fame caused a likelihood of confusion that he was a Jewel sponsor and/or endorsed its products. Ultimately, the district court will decide whether Jordan is practicing sound brand management or is out of bounds.

Source: Michael Jordan v. Jewel Food Stores, Inc., No. 12-1992, U.S. Court of Appeals for the Seventh Circuit, February 19, 2014

“Commercial speech is defined by the Supreme Court as ‘speech that proposes a commercial transaction,’ but that definition is merely a starting point for analysis.”

The U.S. Seventh Circuit Court of Appeals has concluded that a man who wrote a song called “Natasha,” about an ill-fated romance between a U.K. man and a Ukraine woman, cannot maintain a copyright infringement claim against Elton John and Bernard Taupin for their famous song “Nikita,” about a Western man who sees and desires a Communist woman he can never meet.

In 1982, while working as a photographer on a Russian cruise ship, Guy Hobbs had a brief love affair with a Russian waitress. He was unsuccessful in publishing his song “Natasha,” inspired by that romance. Hobbs registered the copyright for his song in the U.K. in 1983 and sent it to several publishers, including Big Pig Music, Ltd., John and Taupin’s publisher. Big Pig also rejected the song. In 1985, John released “Nikita,” copyrighted by Big Pig with John and Taupin listed on the registration. Hobbs did not see the written lyrics to “Nikita” until 2001. He tried unsuccessfully to get compensation from John and Taupin and, in 2012, filed suit against them and Big Pig for copyright infringement in the U.S. District Court for the Northern District of Illinois. Although this was 27 years after “Nikita” was written and 11 years after Hobbs first encountered it, none of the defendants raised the Copyright Act’s three-year statute of limitations as a defense.

The District Court granted the defendants’ motion to dismiss the complaint for failure to state a claim. The judge concluded that none of the allegedly similar elements in the two songs, considered alone or in combination, was sufficient to constitute copyright infringement. The judge believed that a Seventh Circuit case, Peters v. West, 692 F.3d 629 (7th Cir. 2012), held that a copyright infringement claim could not be based on a combination of elements that could not be protected individually, no matter how unique the combination.

On appeal, the Seventh Circuit found no infringement because the two songs were not substantially similar. To establish a copyright infringement claim, Hobbs had to prove (1) ownership of a valid copyright and (2) unauthorized copying of the original portions of the

Seventh Circuit rejects copyright challenge to Elton John song

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The Second Circuit reversed, holding that copyright law imposes no requirement that a new work comment on the original or its author in order to be fair use. Further, the Second Circuit found that a secondary work may constitute fair use even if it does not serve one of the purposes identified in the Copyright Act (i.e., criticism, comment, news, reporting, teaching, scholarship, and research), if the new work alters the original with new expression, meaning or message.

The Second Circuit heavily relied on a finding that Prince’s “Canal Zone” works were transformative of Cariou’s “Yes Rasta” photographs, noting that the heart of a fair use inquiry lies within the first statutory factor, the manner in which the copied work is used. If a secondary work transforms the original work by creating new information, character, expression, or meaning, the secondary work furthers the purpose of copyright protection. The issue, however, is how to determine when a secondary work is transformative.

The court relied on the Seventh Circuit’s conclusion in Brownmark Films, LLC v. Comedy Partners, 682 F.3d 687 (7th Cir. 2012), that the only evidence necessary to decide whether something is transformative is a side-by-side comparison of the original work to the secondary work. When comparing Cariou’s “Yes Rasta” photographs to Prince’s “Canal Zone” artwork, the Second Circuit did not consider any expert evidence and employed its own artistic assessment, holding twenty-five of Prince’s works were transformative since they “manifest an entirely different aesthetic from Cariou’s photographs” because “Cariou’s serene and deliberately composed portraits and landscape photographs depict natural beauty of Rastafarians and their surrounding environs,” while “Prince’s crude and jarring works...are hectic and provocative...” with “collages on canvas that incorporate color, feature distorted human and other forms and settings, and measure between ten and nearly a hundred times the size of the [Cariou] photographs.” The critical inquiry is how the work in question appears to the reasonable observer, not what an artist might say about the intent of the work.

In November, 2013, the United States Supreme Court rejected Cariou’s writ of certiorari, leaving the Second Circuit’s ruling in place. In March 2014, the parties reached an out of court settlement, so the question of who is a reasonable observer and

whether that person would find the remaining five works to be transformative, will not be decided.

In late 2013, the U.S. District Court for the Southern District of New York again fell short of providing a bright-line rule. In The Author’s Guild,

Inc. v. Google, Inc., the district court ruled that it was fair use for Google to digitize the full text of millions of copyright protected books without permission because Google used the protected books to create an “invaluable research tool” that “advances the

progress of arts and sciences.” The court rejected a long-running challenge from individual authors and the Author’s Guild, a non-profit advocacy group of authors, who claimed that Google infringed on countless copyrights through its “Google Books” program, begun in 2004 to digitally scan more than 20 million written works in their entirety.

Participating libraries can download a digital copy of each book scanned from their collections, but cannot obtain digital copies created from another library’s collection. Google creates more than one copy of each book it scans from the library collections, and maintains digital copies of each book on its servers and back-up tapes. Google has never requested permission from, nor provided compensation to, copyright holders for the digital copying or verbatim display of their copyrighted books.

Google uses optical character recognition technology to generate machine-readable text, creating a digital copy of each book. Google analyzes each scan and creates a comprehensive index of all scanned books. The index links each word or phrase

appearing in each book with all of the locations in all of the books in which that word or phrase is found. The index allows a search for a particular word or phrase to return a result including the most relevant books in which the word or phrase is found. A user can search the full text of all the books on the Google Books database.

As a research tool, Google’s search engine responds to queries customized by a user to return a list of books in which the user’s search terms appear. The results are broken down into two pages: “About the Book” and “snippet view.” The “About the Book” page provides a user with advertisement-free information about a book in question, including links to sellers of the book and/or libraries that list the book in their collections. In the snippet view, Google divides each page into eighths for a “snippet” of verbatim text. Each search generates three snippets, but performing multiple searches using different search terms can return different snippets so that a single user can view many different snippets from a book by making a series of consecutive and slightly different searches. However, Google has taken security measures to prevent users from viewing a complete copy of a book from snippet view, such as “blacklisting” at least 10% of the pages in each book so that those pages will not appear as a snippet.

In September 2005, plaintiffs filed a lawsuit against Google alleging that Google committed copyright infringement by scanning copyrighted books and making them available for search without permission of the copyright holders. Google’s defense was fair use under §107 of the Copyright Act. The district court agreed that the plaintiffs had established a

“In late 2013, the U.S. District Court for the Southern District of New York again fell short of providing a bright-line rule.”

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work. Hobbs could show unauthorized copying by proving (a) the defendants had an opportunity to copy the work and (b) the two works were substantially similar. The parties agreed for purposes of the motion that Hobbs owned a valid copyright for “Natasha” and that they had an opportunity to copy it so substantial similarity was the only issue.

Hobbs argued that “Nikita” appropriated the unique selection, arrangement, and combination of certain elements in “Natasha,” namely:

(1) A theme of impossible love between a Western man and a Communist woman during the Cold War;

(2) References to events that never happened;(3) Descriptions of the beloved’s light eyes;(4) References to written correspondence to the beloved;(5) Repetition of the beloved’s name, the word “never,” the

phrase “to hold you,” the phrase “I need you,” and some form of the phrase “you will never know”; and

(6) A title that is a one-word, phonetically-similar title consisting of a three-syllable female Russian name, both beginning with the letter “N” and ending with the letter “A.”

However, as the court noted, the Copyright Act does not protect general ideas, only the particular expression of an idea. In addition, the Act does not protect “incidents, characters or settings are as a practical matter indispensable, or at least standard, in the treatment of a given topic. After reviewing the songs’ lyrics, the court concluded that the first four allegedly similar elements are expressed differently in the two songs and that the remaining two elements are “rudimentary, commonplace, standard, or unavoidable in love songs.”

Although each song tells of an impossible romance between a Western man and a Communist woman, they express different stories of impossible romance due to conflict. “Natasha” is the story of two people who are briefly intimate but forced to part because of the Iron Curtain. In contrast, “Nikita” is the story of a man who sees from afar and never gets to meet the woman of his desire because she is on the other side of a “line” held in by “guns and gates” (possibly a reference to the Berlin Wall). The way each song expresses unfulfilled desires or events that never occur is different. Although both songs refer to a woman with light eyes, the eyes are also described differently. The correspondence referred to in the songs is also different. Accordingly, Hobbs could not rely on a “unique selection, arrangement, and combination of” dissimilar expressions.

The Seventh Circuit also found that although the last two allegedly similar elements were expressed in similar ways in both songs they were standard fare in popular love songs and, therefore, could not be a basis for finding that the songs were substantially similar. Therefore, as a matter of law, the songs do not share enough unique features to support a copyright infringement claim.

This case is a good example of the difference between unprotected ideas and the protected expression of those ideas, a basic concept in copyright law.

Source: Guy Hobbs v. Elton John, No 12-3652, U.S. Court of Appeals for the Seventh Circuit, July 17, 2013

prima facie case for copyright infringement because Google, without authorization, digitally reproduced millions of copyrighted books, maintained copies of those books for itself on its servers and backup tapes, made digital copies for the Library Project partners to download, and displayed snippets of the books to the public. However, the district court sided with Google that the fair use defense allowed Google to use the protected works without permission from the copyright owners, even though Google Books digitized entire copies of books, which is usually a red flag in any fair use analysis. In granting Google summary judgment, the district court focused largely on the transformative nature of Google Books. The district court reasoned that Google’s use of the copyrighted works is “highly transformative” because the words in the scanned books are “being used in a way that they had not been used before.” Specifically, Google Books has created new and useful research tools by compiling a comprehensive word index, using book text to facilitate searches through the display of snippets, and transforming book text into data for purposes of substantive research like data and text mining. It was of no consequence to the fair use determination that Google is a for-profit entity and Google Books is a largely commercial enterprise, because Google does not engage in the direct commercialization of the copyrighted works. Google does not sell the scans it makes of the books, it does not sell the snippets it displays, and it does not run ads on the “About the Book” pages that contain snippets. For the reasons stated in the friend of the court briefs, the court found that Google Books provides significant public benefits because it “advances the progress of the arts and sciences, while maintaining respectful consideration for the rights of authors and other creative individuals, and without adversely impacting the rights of copyright holders.”

Although this decision provides examples of what constitutes advancement of the arts and sciences under the Copyright Act (positive impact in education, research, accessibility to books and preservation of books), it still falls short of providing a

bright-line rule and expands the fair use defense analysis to include after-the-infringement considerations of usefulness or importance to society. The full impact of this decision will be delayed, as the plaintiffs are appealing the ruling to the Second Circuit.

Sources:

Cariou v. Prince, U.S. Court of Appeals for the Second Circuit, No. 11-1197-cv, April 25, 2013, cert. denied, November 12, 2013

The Authors Guild, Inc v. Google, Inc., U.S. District Court for the Southern District of New York, No. 05 Civ. 8136 (DC), November 14, 2013

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A R N S T E I N & L E H R L L P I S A M E M B E R O F T H E I N T E R N A T I O N A L L A W Y E R S N E T W O R K

This newsletter provides information on current legal issues. The information should not be construed as legal advice or opinion in particular situations or applications. © 2014 Arnstein & Lehr LLP. All rights reserved.

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Intellectual Property NewsletterVol. 1, 2014

www.arnstein.com

The Intellectual Property Practice Group counsels clients on matters related to the protection of trademarks, copyrights, domain names and trade secrets, including patent, trademark and copyright applications and litigation, rights of privacy and publicity, review of websites and advertising claims, and preparation and registration of contest and game promotion rules.

CONTRIBUTORS

Ms. Grubner is a partner in the firm’s Chicago office. She concentrates her practice on intellectual property, specializing in trademarks, copyrights, domain names, sweepstakes, contests, and game promotions.

Judith L. Grubner312.876.7885jlgrubner@arnstein.com

Mr. Newman is a partner in the firm’s Chicago office and a member of the firm’s Intellectual Property Practice Group. Mr. Newman focuses his practice on intellectual property law, including patents, trademarks, copyrights, and trade secrets.

David L. Newman312.876.7184dlnewman@arnstein.com

Ms. Waitzman is an associate in the firm’s Chicago office and a member of the firm’s Litigation Practice Group. Ms. Waitzman’s practice includes media, entertainment and communications cases.

Kathleen M. Waitzman312.876.7853kwaitzman@arnstein.com

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