Resources

Last year’s Ninth Circuit’s decision in Funky Films, Inc. v. Time Warner Entertainment is a reminder just how complex and complicated it can be proving copyright infringement. Funky Films involved a claim that the award winning Home Box Office mini-series “Six Feet Under” infringed Funky Films’ screenplay “The Funk Parlor.” At issue on appeal was the district’s court conclusion that “The Funk Parlor” and “Six Feet Under” were not substantially similar.

In order to bring a claim for copyright infringement, a plaintiff must establish (1) ownership of a valid copyright, and (2) copying of protected elements of the plaintiff’s work. Ordinarily, ownership is established by way of a copyright registration certificate and tends not to be the subject of much debate. Courts spend most of their time and effort analyzing the elements of the infringement prong. Absent evidence of direct copying, “proof of infringement” involves fact-based showings that the defendant had “access” to the plaintiff’s work and that the two works are “substantially similar.”

In Funky Films, the district court assumed that the defendant had access to the plaintiff’s work. Ordinarily, in order to establish “access” a plaintiff must show that the defendant had an opportunity to view or copy the plaintiff’s work. This opportunity must be a “reasonable opportunity” and not a “bare possibility” in the sense that anything is possible.

Access can be established by way of circumstantial evidence. A court will consider either (1) a particular chain of events which establishes a link between plaintiff’s work and the defendant’s access (e.g., dealings with a movie studio or record label), or (2) that the plaintiff’s work has been widely disseminated.

After establishing access, a court will turn to whether the two works are substantially similar. In the Ninth Circuit, substantial similarity is inextricably linked to the issue of access. This is known as the “inverse ratio rule” and requires lower standard of proof of substantial similarity when a high degree of access is shown.

Proof of substantial similarity is satisfied by a two part test of extrinsic similarity and intrinsic similarity. The extrinsic test is objective in nature and requires the plaintiff to identify specific criteria which it alleges have been copied. The intrinsic test is an examination of an ordinary person’s subjective impression of the similarities between the two works, and is the exclusive province of the jury. Since Funky Films addressed the district court’s grant of summary judgment, the court’s focus was the extrinsic test.

Applying the extrinsic test the Ninth Circuit found that at a very high level of generality, both works shared certain plot similarities. However, this would not be enough to support plaintiff’s burden as general plot ideas are not protected by copyright law. After substantial review of the plot, characters, themes, setting, mood, pace, dialogue, and sequence of events of the two works, the court found no similarities and upheld the district court’s grant of summary judgment.

The Ninth Circuit’s decision in Funky Films is a reminder that satisfying the extrinsic test can be difficult and require substantial proof. The extrinsic test often requires analytical dissection of a work and expert testimony. In cases such as Funky Films the focus is not on basic plot ideas for the stories, but articulable similarities between protectable elements (e.g., not scenes a faire) of the two works.

Last week Keith Urban, the Grammy nominated country singer from Australia, sued Keith Urban, a New Jersey painter, for use of the website www.keithurban.com. The suit filed in federal court alleges that Keith Urban, the painter, is infringing on the singer’s trademark rights by misleading internet users into believing that the website is owned by the singer. The website, which has been owned and registered by the painter since 1999, sells oil paintings through the website. Upon entering the site users see the following: “You have reached the site of Keith Urban. To those who don’t know, oil painting is one of my hobbies.” Users are then directed to a link which displays several paintings. The singer claims this use infringes on the Keith Urban trademark by violating the Anticybersquatting Consumer Protection Act, the Federal Trademark Dilution Act, and federal unfair competition laws. This article will examine the claims against the painter under the Anticybersquatting Consumer Protection Act.

The Anticybersquatting Consumer Protection Act (ACPA), established in 1999, provides trademark holders protection from cybersquatters. Cybersquatting is registering and using a domain name in bad faith with the intent of profiting from the goodwill created by another’s trademark. Cybersquatters often seek to sell the domain name to the trademark holder at an inflated price. In the early days of the internet, who ever registered a domain first had rights to that domain name. Many individuals bought names hoping to later sell them for exorbitant sums of money. For example, the generic domain name business.com sold for 7.5 million dollars in 1999. Concerned about this environment as it relates to federally registered trademarks, Congress passed the ACPA. The ACPA gives trademark owners legal remedies against defendants who cybersquat.

In this case, Keith Urban, the singer, alleges that the Keith Urban, the painter, is cybersquatting on the domain name www.keithurban.com. In order to receive relief, the singer must show that the painter:

1) has a bad faith intent to profit from the registered trademark (Keith Urban); and

2) registers, traffics in, or uses a domain name that is identical, confusingly similar, or, in cases of famous marks, dilutive of a mark that is distinctive or famous at the time the domain name was registered.

The Act defines many non-exclusive factors that show bad faith. These include offering to sell or transfer the domain name for financial gain; acquiring similar domain names relating to the same mark; diverting consumers from the owner’s online location to a site accessible under the domain name that harms the goodwill of the mark; supplying false information when registering the domain name; and not using the site for a bona fide noncommercial or fair use purpose.

The court will consider these factors to determine if the painter acted in bad faith in obtaining the domain name. Examining the website, it appears that the painter uses his domain name for commercial purposes, specifically to sell paintings as well as advertisements. Also, the web site does not state that the painter is not the famous singer. In fact, the web page subtly implies that the painter and the famous singer are the same. The message that states, “To those who don’t know, oil painting is one of my hobbies” implies that the owner is someone well known. This creates the appearance that the singer is the owner of the site and also paints as a hobby. The web page also stresses that the paintings are available for sale in a “very limited edition.” This language may cause unwitting fans to purchase limited art work of their favorite singer. These factors show bad faith.

On the other hand, no evidence suggests that the painter is seeking to sell the domain name for a profit. The painter is selling his art but on a very limited basis. The painter does not disclaim that he is not the singer, but he also does not proclaim this fact. A more significant factor favoring the painter is that he registered the domain name in 1999, and the domain name he registered was his actual name. Based on these facts, the court will determine if the painter acted in bad faith.

In addition, the singer must prove that his trademark was famous or distinctive when the painter registered the domain name. The painter registered the domain name in May, 1999. Although the singer was well known in Australia at this time, he was not well known in the United States. In October 1999, he released a self-titled album which produced three top ten country singles over the next two years. In 2001, he won awards for top male country vocalist cementing his status as a star in the music industry. The singer, however, must prove that his trademark Keith Urban was famous at the time the painter registered the domain name in May, 1999. This will be difficult for the singer to establish considering the above facts. If the singer is unable to prove this he was in fact famous at the time of registration, he will not be eligible for relief under the ACPA even if the painter acted in bad faith.

This is not the only recourse for the singer. The singer has also sued the painter on other federal trademark grounds as well as for unfair competition. Although the singer might prevail on these claims, the painter’s registration and use of the domain name before the singer’s mark became famous will be difficult to overcome.

The Motion Picture Association Says “Yes!”

Last month, in a lawsuit filed in the U.S. District Court for the Southern District of New York, the Motion Picture Association of America (MPAA) companies sued Load ‘N Go Video, a small company that loads customer purchased DVDs onto their personal iPods, for copyright infringement and violating the Digital Millennium Copyright Act (DMCA).

Based out of Boston, Load ‘N Go was founded in 2005 to help consumers get video content on to their portable media players, such as iPods. Load ‘N Go sells iPods and DVDs to their customers, who pay the company an additional charge to load purchased DVDs onto their iPod or other portable video player. Load ‘N Go then sends both the customized iPod and original purchased DVDs back to the customer.

Paramount Pictures, Twentieth Century Fox, Universal Studios, Warner Bros Entertainment, Disney Enterprises, Columbia TriStar Television and Columbia Pictures

The MPAAs describe in its complaint that before releasing their copyrighted works in DVD format, they employ a Content Scramble System (CSS), which is an encryption-based DVD access control and copy prevention system that provides for protection of copyrighted content. According to the MPAA, the service provided by Load ‘N Go circumvents the CSS, thus violating the DMCA. The MPAA further highlights that Load ‘N Go has not been granted a license to copy, distribute or exploit their copyrighted works or to circumvent the CSS.

Technically and legally speaking, the MPAA makes valid points, as the DMCA prohibits the circumvention of copy protection. However, taken to its logical extreme, a buyer could be subject to legal liability for ripping purchased DVDs at home without first seeking permission or purchasing the content again, through a service provider such as iTunes, for specific portable media player use. Critics note that the studios are effectively attempting to force consumers to buy the same content twice—once on DVD and another time in a format suitable for the iPod or other portable media device.

Load ‘N Go asserts that the process it uses does not involve decryption and further, that it is engaging in “fair use” for copyright purposes and that such fair use trumps the MPAA’s claims under the Copyright Act and the DMCA. Fair use is a doctrine that allows limited use of copyrighted material without requiring permission from the rights holders. Section 107 of the Copyright Act of 1976 contains a list of various purposes for which the reproduction of a particular work may be considered “fair” and lays out four factors to be considered in determining whether or not a particular use is fair:

1. the purpose and character of the use, including whether such use is of commercial nature or is for nonprofit educational purposes;

2. the nature of the copyrighted work;

3. 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.

(17 U.S.C.§ 107.)

Although there is historical precedent of the fair use doctrine with copying and backing up CDs and software, the MPAA distinguishes DVDs because of their encryption copy protection. This area of law is still highly controversial and hotly contested. To date, the motion picture studios have been successful in protecting its copyrighted works. However, with the rapid growth and expansion of the Internet and portable media devices, the stage is set for new interpretations and/or exceptions to be carved out of the DMCA.

Stay tuned…

By Andrea Anapolksy

In the wake of jury selection for the Coco-Cola Co. theft trade secrets trial and Apple Computer’s two-year quest to discover who leaked trade secret information about an unreleased Apple product to several online blog sites, misappropriation of a company’s trade secrets may have become increasingly more difficult to prevent. This article will be the first of a two-part series which examines the trade secrets doctrine and recent developments related to it. This article in particular will assess the doctrine of trade secrets under California law and will offer available remedies on avoiding misappropriation.

Treatment of Trade secrets under California law.

Under California law, the trade secrets doctrine is found primarily in two statutes: the California Uniform Trade Secrets Act, Civil Code §§ 3426 et. seq., (the “UTSA”) and Penal Code §499c.

The penal code provides that anyone who intends to “deprive or withhold the control of a trade secret from its owner” or has the “intent to appropriate a trade secret to his or her own use” or to the use of someone else, may be guilty of theft. (Penal Code § 499c)

The Civil Code, provides the definitions to “misappropriation” and “trade secrets”. The term “misappropriation” has a specific legal meaning and is divided into two distinct types of misuse: acquisition by improper means, and the use or disclosure without express or implied consent. (Civil Code § 3426.1) Under the first type of misuse, “improper means” may include: “theft, bribery, misinterpretation, breach or inducement of a breach of duty to maintain secrecy, or espionage through electronic or other means.” (Civil Code § 3426.1(a)) Under the second type of misuse, courts have extended the definition to capture situations in which a former employee’s use or disclosure of confidential customer information to solicit new customers or accounts for a new employer constitutes the “misappropriation” of a trade secret.” (Merrill, Lynch, Pierce, Fenner & Smith, Inc. v. Garcia, 127 F.Supp.2d 1305, 1306 (C.D. Cal. 2000))

In an effort to reflect California’s commitment to protect proprietary business information, California courts constructed a broad definition of “trade secrets” that often captures information commonly and frequently accumulated in the normal course of running a business. Under California law, a trade secret may include a pattern, formula, program, device, method, technique, or process. While these examples may not appear to rise to the level of a protection deserving of source code, for example, such information may be eligible for protection as a trade secret if such information has two salient characteristics: (1) it gains independent (actual or potential) economic value from not being generally known to the public or to other parties (competitors, associates) which could obtain economic value from its disclosure or use; and (2) it is subject to efforts that are reasonable under the circumstances to maintain its secrecy. (Civil Code § 3426.1(d)) Therefore, as long as a company takes reasonable measure(s) to protect what it considers proprietary business information, and if the value of the information is actually or potentially based on the fact that it is a secret, then California courts will consider extending the trade secrets doctrine to protect customer lists, plans, spreadsheets, corporate records, offers and so on.

Not only is it pertinent to understand what types of proprietary information may benefit from protection under the trade secrets doctrine, it is also worth mentioning that even if employers do not actually know of an employee’s misappropriation of a former employer’s trade secret, the current employer may be held liable. Under the UTSA, liability is based on constructive knowledge, not actual knowledge. (Civil Code § 3426.1(b)(2)(B)(ii)(iii)) This standard may implicate an employer in situations where an employer should have known of the misappropriation, as shown in one case where an employer repeatedly used proprietary information which had been previously protected as a trade secret by an employee’s former employer. (Cadence Design Systems, Inc. v. Avant! Corp., 29 Cal. 4th 215 (2002)) While the current employer did not actually know of the misappropriation, the Court stated that the employer’s repeated use of such proprietary information was one factor which it relied on to impute constructive knowledge of the misappropriation to the current employer. (Id., at 226) Of course, the standard of constructive knowledge is fact-specific, but it is something to keep in mind.

Remedies to Mitigate Misappropriation.

The most important step toward protecting a company’s trade secrets is for the hiring party to always reduce its intentions to writing. As will be discussed in a subsequent article, California Courts generally do not uphold non-competition agreements. An alternative is to prepare nondisclosure agreements. While nondisclosure agreements vary—depending on the nature and scope of the disclosure, the parties involved, and the value of the trade secret—most, if not all nondisclosure agreements should include a clear description of the trade secret, permissible uses of the trade secret, a duty of confidentiality, a remedy for non-compliance with the duty of confidentiality (such as injunctive relief), a duty to disclose prior agreements which could prevent the employee from using proprietary information acquired from a prior employer and the term of the agreement (which may last indefinitely or until a certain event, such as when the information is released to the public through a channel other than misappropriation). While it is highly improbable that any company can prevent the misappropriation of its trade secrets, creating a nondisclosure agreement, among several steps it should take to help mitigate potential misappropriation and liability.

In 2006, Federal District Courts throughout the country were asked to decide if purchasing and using trademark-protected keywords to trigger internet advertising constitute trademark violations as contemplated by the Lanham Act. Unfortunately for advertisers, these rulings were inconsistent. In 2007, this trend continues with the Eastern District of Pennsylvania ruling in J.G. Wentworth v. Settlement Funding, LLC, No. 06-0597 (E.D. Pa. Jan. 4, 2007). In J.G. Wentworth, the court siding with advertisers, ruled that using trademark-protected words to trigger internet advertising does not violate trademark law.

J.G. Wentworth (“Wentworth”) and Settlement Funding (“Settlement”) are finance companies that specialize in providing immediate cash payments in exchange for the rights to future payments from structured settlements, annuities, and other assets. Plaintiff, Wentworth, is the market leader for these types of products and holds trademarks that are heavily promoted through television and internet advertising. Wentworth sued Settlement for using Wentworth’s trademarks to draw internet traffic to Settlement’s website.

Settlement used Wentworth’s trademarks in two ways. The first manner in which Settlement used the trademarks was through Google’s AdWords program. Using Google’s internet search engine, internet users search Google’s database of websites by entering keywords. Based on these keywords, Google presents an ordered list according to relevancy to the user. The user then is able to click on any website link they desire. With Google’s AdWords program, advertisers can place bids on certain keywords. When the advertiser’s keyword is entered into the search engine, the advertiser’s link to their website is displayed in the “Sponsored Links” section of the web page. Each time a user clicks on this link, the advertiser pays Google a fee. Settlement used keywords “J.G. Wentworth” and “Wentworth” to increase traffic to their website. Whenever a user typed in the keyword “J.G. Wentworth,” a sponsored link advertising Settlement’s website would appear alongside the other search results. Wentworth maintained that Settlement’s use of the J.G. Wentworth trademark in this manner infringed upon plaintiff’s trademark rights.

The second manner in which Settlement used Wentworth’s trademarks was in the keyword portion of Settlement’s meta tags of its website. Meta tags are hidden code imbedded in websites to help search engines determine the relevancy of web pages to particular search terms. Wentworth asserted that Settlement used plaintiff’s trademarks in their meta tags to increase traffic to their website whenever the term “J.G. Wentworth” was searched. Whenever a user typed in “J.G. Wentworth” into a search engine, links to Settlement would appear in the search results. Wentworth also claimed that this use of Wentworth’s marks infringe upon their trademark rights.

Based on these uses, Wentworth sued Settlement for intentionally confusing customers as well as diverting potential customers from their website to Settlement’s site. Wentworth claimed that not only was defendant stealing customers, Settlement was eroding the distinctiveness of Wentworth’s mark causing loss profits for Wentworth.

To determine if the there was a trademark violation, Wentworth needed to establish that (1) the mark is legally protectable; (2) the mark is owned by Wentworth; and (3) Settlement’s use of the mark is likely to create confusion concerning the source of the goods and services. The issue in this case centered on the third prong, specifically, did Settlement use the mark in commerce and did that use create consumer confusion.

The court first addressed whether or not the purchase and use of a trademark-protected keyword to trigger internet advertising constitutes a use in commerce as contemplated by the Lanham Act. Courts have been divided on this issue. Some courts have taken the position that there can be no liability unless a trademark is used in a way that identifies the products and services. (Wells Fargo & Co. v. WhenU.com, Inc., 293 F. Supp. 2d 734, 757 (E.D. Mich. 2003)). Since the meta tags and the Google AdWords program are invisible to the public and do not identify the source of the goods, there can be no “use” of the trademark.

Other courts have taken the opposite approach on this issue. In examining a similar issue concerning Google’s AdWords program, a New Jersey District Court held that using this technology did satisfy the “use” requirement. (Buying for the Home, LLC v. Humble Abode, LLC, 2006 WL 3000459 (D.N.J. Oct. 20, 2006)). The court reasoned that purchasing another’s trademark to trigger advertising was a “use” because it entailed a purchase in commerce based on the value of another’s trademark while being used to trigger advertising for goods and services. Siding with the New Jersey court, the present court found that Settlement’s uses of Wentworth’s trademarks constituted “use” under the Lanham Act.

Finding that there was a use of the mark, the court had to determine if that use created a likelihood of confusion. Likelihood of confusion exists where “consumers viewing the mark would probably assume that the product or service it represents is associated with the source of a different product or service identified by a similar mark.” (Checkpoint Sys., Inc. v. Check Point Software Techs., Inc., 269 F.3d 270, 280 (3d Cir. 2001)). Courts have reasoned that initial interest confusion is actionable under the Lanham Act. Initial interest confusion occurs when a competitor misleads a potential purchaser into an initial interest in the competitor’s goods by using another’s trademark. This confusion is actionable even if confusion as to the source of the goods would be dispelled by the time the goods are sold.

The court in this case acknowledged a Third Circuit opinion that did not apply initial interest confusion to meta tags and rejected a Ninth Circuit argument that found confusion does occur because the web-user is “directed” to certain websites. The court here held that as a matter of law, using Google AdWords and meta tags did not result in any actionable likelihood of confusion. The court based this decision on the belief that users choose among the search results presented to them. Users are not forced or “directed” to particular sites, and therefore, no initial interest confusion exists.

Since the court was unable to find a likelihood of consumer confusion from Settlement’s use of Wentworth’s trademarks, the court found for Settlement. Even though courts have gone back and forth on these issues, the Eastern District of Pennsylvania was the first court to rule as a matter of law that even if plaintiff’s trademarks are used to trigger ads or search results, plaintiff will lose if the trademarks are not displayed. Despite this ruling, courts are still widely split on this issue and will remain so until the Supreme Court rules.