IP Law Chat : IP Law Chat -- Hendricks & Lewis, intellectual property, trademark, copyright and technology attorneys

The primary point of interest in this case is the Ninth Circuit's rejection of the copyright misuse defense to a claim of copyright infringement alleged by Apple.  With this rejection, there is still only a single case in which the Ninth Circuit has upheld the use of the defense, Practice Mgmt. Info. Corp. v. Am. Med. Ass'n, 121 F.3d 516 (9th Cir. 1997), amended by 133 F.3d 1140 (9th Cir. 1998).

Beginning in April 2008, Psystar began manufacturing and selling personal computers originally named "OpenMac" and later renamed "Open Computers," on which Psystar had installed a copy of Mac OS X through use of imaging (details of the exact process are described in the Ninth Circuit's opinion).  Psystar shipped its Open Computers with an unopened copy of Mac OS X purchased from Apple or third party vendors.  "The unopened copy enabled Psystar to maintain it had purchased a copy of Mac OS X for each computer it sold, but the computer actually was to run on the copy of the altered Mac OS X installed in the Psystar computer."

Apple then sued Psystar for, among other things, copyright infringement and Psystar counterclaimed for a declaratory judgment that "Apple was misusing its copyright in Mac OS X by requiring purchasers to run their copies only on Apple computers."  Specifically challenged was the following provision of Apple's Software License Agreement ("SLA"):

This License allows you to install, use and run one (1) copy of the Apple Software on a single-Apple-labeled computer at a time.  You agree not to install, use or run the Apple Software on any non-Apple labeled computer, or to enable others to do so.

On cross motions for summary judgment, the district court concluded, in relevant part, that Psystar had infringed Apple's exclusive right to create derivative works and that Apple's SLA was not unduly restrictive and was therefore not copyright misuse.

The Ninth Circuit affirmed that conclusion

principally because [Apple's] licensing agreement was intended to require the operating system to be used on the computer it was designed to operate, and it did not prevent others from developing their own computer or operating systems.  These licensing agreements were thus appropriately used to prevent infringement and control use of the copyrighted material.

 In reaching that conclusion, the Ninth Circuit opined a bit about the proliferation of license agreements, rather than sales, in the software industry, which it stated was a result of the first sale doctrine.  The court also cited to its (relatively) recent opinion in Vernor v. Autodesk, Inc., 621 F.3d 1102 (9th Cir. 2010) (previously blogged here) in which it upheld a license agreement and rejected the first sale defense.  In particular, the Ninth Circuit cited the three-factor test adopted in Vernor to distinguish between a software license and a sale of a copy of copyrighted software:

[A] software user is a licensee rather than an owner of a copy where the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user's ability to transfer the software; and (3) imposes notable use restrictions.

Under this test, the Ninth Circuit readily concluded that those, like Psystar, who purchased copies of Mac OS X were licensees not owners of those copies because Apple's SLA states that the software is licensed, not sold (which still seems like a non-factor to me as most if not all owners of copyrighted software will characterize the transaction as a license) and imposed significant use and transfer restrictions with respect to the copies of the software.

Thus, because Apple's SLA was a valid license agreement that reasonably restricted use of the software without preventing the development of competing products, Psystar's copyright misuse defense failed.

The case cite is Apple Inc. v. Psystar Corp., No. 10-15113 (9th Cir. Sept. 28, 2011).

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Microsoft's motion for summary judgment in its opposition to Apple's attempt to register its APP STORE mark ended with something of a whimper last week, with the TTAB denying the motion with essentially no substantive discussion.  Details of the opposition proceeding and the parties' briefing on Microsoft's summary judgment motion can be found here.

Despite extensive briefing by the parties, the TTAB concluded that Microsoft had failed to show that there were no genuine disputes of material fact.  In particular, with respect to Microsoft's claim that Apple's APP STORE mark is generic, the TTAB found "that genuine disputes of material fact exist, at a minimum, regarding how the relevant public primarily uses or understands the term APP STORE[.]"

The TTAB's opinion can be found here.

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Keeping it short and to-the-point, in case it still was not clear, the Ninth Circuit reiterated that the presumption of irreparable harm for obtaining injunctive relief in copyright infringement cases is no longer good law after the Supreme Court's decisions in 2006 and 2008:

We conclude that presuming irreparable harm in a copyright infringement case is inconsistent with, and disapproved by, the Supreme Court's opinions in eBay [Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006)] and Winter [v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008)]. . . .  Thus, our long-standing precedent finding a plaintiff entitled to a presumption of irreparable harm on a showing of likelihood of success on the merits in a copyright infringement case . . . has been effectively overruled. . . .  Accordingly, we hold that even in a copyright infringement case, the plaintiff must demonstrate a likelihood of irreparable harm as a prerequisite for injunctive relief, whether preliminary or permanent.

The case cite is Flexible Lifeline Systems, Inc. v. Precision Lift, Inc., No. 10-35987 (9th Cir. Aug. 22, 2011).

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In an opinion that seemed almost uncomfortable at times with its conclusion, the Second Circuit joined the Ninth Circuit in holding that the Copyright Act's so-called "first sale" defense to copyright infringement does not apply to copies of copyrighted works manufactured outside the United States.

John Wiley & Sons publishes journals and books that are sold domestically and internationally.  Wiley's wholly-owned subsidiary ("Wiley Asia") manufactures the books sold in foreign countries.

To help subsidize his educational costs in the U.S., defendant Supap Kirtsaeng's friends and family shipped him foreign edition textbooks printed outside the U.S. by Wiley Asia, which he then sold on websites like eBay.

Wiley sued Kirtsaeng in the Southern District of New York alleging, in part, that Kirtsaeng's conduct constituted copyright infringement.

Kirtsaeng requested a jury instruction charging the jury that the first sale doctrine was a defense to copyright infringement but the District Court denied the request, rejecting the applicability of the defense to foreign editions of the books.

Along with evidentiary issues, Kirtsaeng appealed the conclusion that the first sale defense was unavailable but the Second Circuit affirmed.

The Second Circuit first looked to the statutory language of the first sale doctrine in Section 109(a) of the Copyright Act:

Notwithstanding the provisions of section 106(3), the owner of a particular copy . . . lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy[.]

(Emphasis added).

Focusing on the phrase "lawfully made under this title," the Second Circuit ultimately concluded that it was "utterly ambiguous text" because it

could plausibly be interpreted to mean any number of things, including: (1) "manufactured in the United States," (2) "any work made that is subject to protection under this title," or (3) "lawfully made under this title had this title been applicable."

Given this ambiguity, the Second Circuit concluded that it was "best" to interpret the first sale doctrine in a way that best comports with Section 602(a)(1) of the Copyright Act and the Supreme Court's opinion in Quality King Distributors, Inc. v. L'anza Research Int'l, Inc., 523 U.S. 135 (1998).

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The Ninth Circuit first addressed this appeal involving copyright and trademark claims relating to the Betty Boop cartoon character in February, 2011, issuing an opinion affirming the District Court's decision with respect to both claims.  That decision was previously blogged here.

The Ninth Circuit has now withdrawn that opinion and issued a superseding opinion that reached the same conclusion as to the copyright claim but not as to the trademark claim.

 As described in my post describing the Ninth Circuit's February decision, the Ninth Circuit affirmed the dismissal of plaintiff Fleischer's trademark infringement claim

concluding that Defendant A.V.E.L.A. was using Betty Boop as a functional aesthetic component of the products, not as a trademark.  The Ninth Circuit further concluded that allowing Plaintiff Fleischer to assert a trademark infringement claim would run afoul of the Supreme Court's decision in Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), by preventing the Betty Boop character from ever entering the public domain.

But in its new opinion, the Ninth Circuit took a different stance.

As to the use of the Betty Boop image as a trademark, the court concluded that Fleischer had failed to provide sufficient evidence of secondary meaning to withstand summary judgment.

But as to the Betty Boop word mark, the Ninth Circuit agreed that "the fractured ownership of a trademark may make it legally impossible for a trademark holder to prove secondary meaning."  Nonetheless, the court held that it could not resolve this issue as a matter of law because the only evidence was "the possibility that other copyright owners may be destroying the secondary meaning in the Betty Boop mark," which, standing alone, was insufficient to support summary judgment.

The Ninth Circuit also concluded that it could not "ascertain a legal basis" for the District Court's conclusions that there was no evidence that A.V.E.L.A.'s use represented a use of the Betty Boop word mark in commerce or that any such use was likely to cause consumer confusion.

The Ninth Circuit thus vacated the District Court's decision and remanded the case for further proceedings with respect to the trademark infringement claim relating to the Betty Boop word mark.

The case cite is Fleischer Studios, Inc. v. A.V.E.L.A., Inc., No. 09-56317 (9th Cir. Aug. 19, 2011).

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Technically, this was not a trademark or trade name infringement case, as the court was quick to point out, but that fact only made the case that much more interesting particularly given the court's reasoning.

Defendant Shoe Show and plaintiff Almeda Mall (technically, the mall's predecessor in interest) entered into a lease agreement under which Shoe Show would operate a retail shoe store in the mall under the trade name "The SHOE DEPT."  The lease prohibited Shoe Show from operating another business under that name or any "substantially similar trade-name" within two miles of the store in the mall.  The lease also gave Shoe Show the option to terminate the lease provided that, among other things, Shoe Show was not in default under the lease.

During the term of the lease, Shoe Show opened a retail shoe store under the name SHOE SHOW in a commercial center located about 400 feet from the perimeter of the mall containing The SHOE DEPT.  Almeda did not object or take any action with respect to the SHOE SHOW store.

Instead, some time later, Shoe Show gave notice that it was exercising its option to terminate the lease early.  At that time, Almeda rejected the early termination notice contending that Shoe Show was in default of the lease by virtue of its operation of the SHOE SHOW store.  Almeda then sued Shoe Show for breach of the lease.

On cross motions for summary judgment, the district court held in Almeda's favor, concluding that the two stores had substantially similar trade names (The SHOE DEPT. and SHOE SHOW), awarding damages and attorneys' fees to Almeda.

The Fifth Circuit agreed with the district court that the phrase "substantially similar trade-name" in the lease agreement was not ambiguous:

The district court surmised (and we agree) that the subject phrase, as used in the trade name provision of the Lease, prohibits Shoe Show from opening and operating any business within[] two miles of the Leased Premises under a name that "identifies a business" and has essential elements in common with "The SHOE DEPT."  For purposes of identification, "business" refers to the party conducting the operation, not to the nature of the operation that it conducts.

That about ended the Fifth Circuit's agreement with the district court, however.

At the outset, the Fifth Circuit thought it important to note what the trade name provision of the lease did not specify, specifically, among other things, it did not prohibit Shoe Show from operating a retail shoe store within the specified radius nor did it explicitly prohibit Shoe Show from using either of its two other "widely used trade names, SHOE SHOW or BURLINGTON SHOES."  The court also seemed to find it significant that this was not a trademark infringement case:

We remain mindful that this is not a trademark, patent, or copyright case and does not involve infringement or appropriation of such a right by a stranger against the holder of the right.  Rather, this trade name case implicates precisely the opposite, viz., the express contractual effort to limit the use of a trade name by its rightful holder.

In the end, the Fifth Circuit disagreed with the district court concluding that, "when examined in the context of the entire Lease and the history of the confection, 'The SHOE DEPT.' and 'SHOE SHOW' are not substantially similar trade names within the intendment of the Lease's trade name provision."

The Fifth Circuit concluded that the word "shoe" would not be considered as a factor in determining whether the two trade names "SHOE SHOW" and "The SHOE DEPT." were substantially similar because it was "descriptive only" (presumably the court means generic, in trademark terms).  The word "shoe" also would not be considered in the substantial similarity determination because the lease did not prohibit Shoe Show from operating a "footwear operation" within the proscribed radius and

Almeda . . . has to have known that--absent an express prohibition in the Lease of the use of SHOE SHOW or BURLINGTON SHOES--any facility opened and operated by Shoe Show within (or, for that matter, beyond) two miles of the Leased Premises would almost certainly employ one of those trade names, each of which includes the generic or descriptive term "shoe."

Looking then to the remaining part of the two trade names, "DEPT." and "SHOW," the Fifth Circuit concluded that the words had "very different meanings" and were not synonyms.  It also felt that the words implied two functionally different establishments:

The retail shoe store dubbed "The SHOE DEPT." inside Almeda's shopping mall could well be thought of by the average shopper as that mall's footwear department, division, specialty, or the like.  By contrast, the space occupied by SHOE SHOW in the nearby commercial center is not located inside a mall and has the appearance to the general public of a free-standing commercial space.  More to the point, the word "show" conveys a connotation different from "department."  When, as here, "SHOW" (1) designates an exterior space or premises in a commercial center and (2) is modified by an adjective (shoe) to identify the kind of "show" being conducted in that space, a reasonable inference is that it is a place in which to view and inspect shoes, boots, sandals, and the like, but not necessarily a place in which to purchase footwear.

Really?

In any event, the result may have been driven by the Fifth Circuit's explicitly stated opinion that Almeda was trying to gain a benefit by litigation that it was not able to get in the lease:

If Almeda's predecessor expected to be able to block Shoe Show's use of either or both of those trade names [SHOE SHOW and BURLINGTON SHOES], it should have included them expressly in the Lease's list of forbidden trade names, just as it did with The SHOE DEPT.  To sign a lease containing that omission and thereafter come into court with a collateral attack on the use of one of those two known trade names based on nothing more than the amorphous ban on "substantially similar" trade names should not and will not be countenanced -- especially when (1) the generic word, shoe, is universally descriptive of the non-barred act of operating a retail footwear store, and (2) SHOW is not substantially similar to The . . . DEPT.

The court's characterization of the "substantially similar" standard as "amorphous" is notable.  One might call the "confusingly similar" standard similarly amorphous.

Would the result have been different if this had been a case of trademark or trade name infringement?  Who knows honestly but infringement case or not, some of the Fifth Circuit's reasoning seems a bit of a stretch.

One judge did dissent from the Fifth Circuit's opinion, agreeing with the reasoning of the district court, a copy of which can be found here.

The case cite is Almeda Mall, L.P. v. Shoe Show, Inc., No. 10-20587 (5th Cir. Aug. 8, 2011).

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Another Righthaven copyright infringement case before the District of Nevada is headed for closed case status.

Yesterday, another judge from the District of Nevada granted defendant Dean Mostofi's motion to dismiss based on Righthaven's lack of standing.

The Court's standing analysis mirrored that of earlier decisions (see here, here and here):  to have standing to sue for copyright infringement, a plaintiff must be the owner of one of the exclusive rights of copyright and the bare right to sue for infringement is not one of those rights.  Here, the agreement defining the relationship between Righthaven and the original owner of the copyrights with respect to the copyrights (the Strategic Alliance Agreement ("SAA")) "expressly denies Righthaven any right from future assignments other than the bare right to bring and profit from a copyright infringement action."

The Court also declined to consider amendments to the SAA made since the filing of the complaint in the action, stating that the existence of federal jurisdiction is generally determined based upon the facts as they exist at the time the complaint was filed.

Additionally, the Court concluded that even if it were to consider the SAA amendments, "these cosmetic adjustments do not alter the fact that Plaintiff has failed to sufficiently allege whether or not Stephens Media assigned the copyrighted Work to Righthaven pursuant to the SAA, as amended or not."

Thus, "[b]ecause the SAA prevents Plaintiff from obtaining any of the exclusive rights necessary to maintain standing in a copyright infringement action and because Plaintiff fails to sufficiently allege an assignment of rights from Stephens Media to Plaintiff, the Court finds that Plaintiff lacks standing in this case."

Complaint dismissed.

The case cite is Righthaven LLC v. Mostofi, No. 2:10-CV-1066-KJD-GWF (D. Nev. July 13, 2011).

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This is a case that I always intended to blog about but never quite got to; a recent decision in the case gave me an opportunity to follow up on the case.

Plaintiff Amaretto Ranch Breedables filed its original complaint against Ozimals in December 2010, alleging claims for, among others, misrepresentation under the Digital Millennium Copyright Act ("DMCA"), tortious interference, unfair competition and misuse of copyright.  The parties competed in the "market of virtual animal sellers" in Second Life; "Amaretto created a breedable horse and associated virtual horse food" and Ozimals sold "virtual breedable bunnies."

According to the original complaint, the dispute generally involved Ozimals' DMCA takedown notification issued to Second Life:

13.  On or about December 1, 2010 Ozimals submitted a DMCA Notification to Linden Research, Inc., owners of Second Life, claiming copyrights to "in world" items, such as "the scripts, the screen displays, expression and game play generated by those scripts for a breedable virtual animal in the form of a bunny" and that the "in world" Amaretto Horses Product Line infringed Ozimals' alleged copyrights, therefore requiring Second Life, pursuant to its Terms of Service and 17 U.S.C. [Section] 512, in order to preserve its Safe Harbor status, to takedown Amaretto's products during the present busy holiday shopping season.

14.  On or about December 9, 2010, Amaretto submitted a Counter DMCA Notification to Linden Research, Inc. requesting that it reject Ozimals [sic] claims for copyright infringement because the claimed copyright violation was based on mistaken information, misidentification of material in question, or deliberate misreading of the law.

At the time the original complaint was filed, no takedown of content had actually occurred however and the Court subsequently entered both a temporary restraining order and a preliminary injunction preventing a takedown of plaintiff's "Horse Product Line" in Second Life.

Ozimals then filed a motion to dismiss plaintiff's claims for (1) misrepresentation under the DMCA; (2) tortious interference; (3) unfair competition under California statutory law; and (4) copyright misuse, as stated in plaintiff's first amended complaint.

In April 2011, the Court granted Ozimals' motion to dismiss in part.  Specifically, the Court dismissed with prejudice plaintiff's claim for misrepresentation under the DMCA because there had been no takedown of plaintiff's content, which is required under the statute.  The Court likewise dismissed plaintiff's tortious interference claim but without prejudice to amend the claim to allege additional facts.

Plaintiff then filed a second amended complaint now alleging claims for:  (1) a declaratory judgment of invalidity and/or non-infringement of copyright and of misuse of copyright; (2) unfair competition under California law; (3) defamation; (4) trade libel; (5) intentional interference with contract; and (6) tortious interference with prospective business advantage.

Ozimals again moved to dismiss certain of the claims in plaintiff's second amended complaint, which the Court similarly granted in part.  Specifically, the Court granted the motion to dismiss plaintiff's common law unfair competition claim, its tortious interference claim and the other state law claims to the extent they were based on Ozimals' DMCA takedown notification.

As to the latter part of the Court's order, the Court held that plaintiff's state law claims based on Ozimals' allegedly improper DMCA takedown notifications were preempted by the DMCA, thereby agreeing with two earlier decisions from the Northern District of California.  See Lenz v. Universal Music Corp., No. C 07-03783 JF (N.D. Cal. Apr. 8, 2008); Online Policy Group v. Diebold, Inc., 337 F. Supp. 2d 1195 (N.D. Cal. 2004).  The Court concluded that

[t]hese cases stand for the propositions that (1) a DMCA Takedown Notification is a creature of a federal statutory regime, and (2) that regime preempts any state law claim based on an allegedly improper DMCA Takedown Notification.

The Court acknowledged the "rhetorical thrust" of plaintiff's argument against preemption, namely that "it is unfair to leave it without a remedy by holding both that (1) it cannot state a DMCA misrepresentation claim because no takedown occurred and (2) its related state law claims are preempted."

But the preemption analysis did not turn on whether plaintiff would be left without a remedy; rather,

the preemption analysis turns on whether federal law conflicts with state law and/or occupies a particular field.  Such is the case here because DMCA Takedown Notifications are a creature of federal law, and there is a specific federal remedy for their misuse.

Result...preemption.

The case cite is Amaretto Ranch Breedables, LLC v. Ozimals, Inc., No. C 10-05696 CRB (N.D. Cal. July 8, 2011).

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UPDATE:  On July 12, 2011, Coventry First filed a Notice of Voluntary Dismissal without prejudice of its complaint against the unnamed defendants who were never "formally served," according to the dismissal.  Following is the original post about the lawsuit.

There is no shortage of reports about the complaint filed by Coventry First, "a leading company in the life settlement industry," against unnamed defendants for the use of the "domain" <twitter.com/coventryfirst>, so I'll keep this brief.

Coventry First makes the typical claims of, among others, trademark infringement and false designation of origin under the Lanham Act, but also asserts a claim under the Anti-Cybersquatting Consumer Protection Act ("ACPA").  Specifically, Coventry First alleges that defendants registered, operate, traffic in and/or otherwise use "the domain name twitter.com/coventryfirst," which incorporates its COVENTRY FIRST trademark.  The complaint doesn't appear to specifically allege that these purported activities were done with "a bad faith intent to profit" from the mark--an element required by the ACPA--but it does state that the alleged use of the mark in the "domain name" is unauthorized.

The case cite is Coventry First, LLC v. Does 1-10, No. 2:11-cv-03700-JS (E.D. Pa.), filed June 7, 2011.  You can find a copy of the complaint here.

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