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

Max Fleischer, head of Fleischer Studios, Inc. (referred to by the court as "Original Fleischer"), created the well-known cartoon character Betty Boop in 1930.  Some 10 years later, Original Fleischer abandoned Betty Boop and sold the rights to her cartoons and her character and in 1946, Original Fleischer was dissolved.

In the early 1970s, Mr. Fleischer's family attempted to revive his cartoon business, incorporated a new entity (the plaintiff in the case) under the same name as the Original Fleischer and attempted to repurchase the rights to the Betty Boop character.  Based on those purchases, Plaintiff Fleischer believed that it was the exclusive owner of the Betty Boop character copyright and trademark and licensed the character for use on merchandise based on that belief.  (For whatever reason, the Ninth Circuit's factual statement of the case seems rather cursory and somewhat lacking in clarity.  The District Court's summary judgment opinion on the copyright infringement claim, found here, provides a more detailed explanation of the history.)

The defendants in the case also license Betty Boop merchandise based on a copyright on vintage posters featuring the Betty Boop image that defendant A.V.E.L.A. restored.

The parties disputed whether Plaintiff Fleischer owned the exclusive copyright to the Betty Boop character.  On summary judgment, the District Court concluded that plaintiff had failed to satisfy its burden of proof regarding the chain of title to the copyright ultimately leading to the plaintiff and therefore dismissed the plaintiff's copyright infringement claim.  The District Court also dismissed Plaintiff Fleischer's trademark infringement claim concluding that the plaintiff had failed to submit proper evidence of a registered federal trademark for the Betty Boop image, that the fractured ownership and use of the Betty Boop name destroyed plaintiff's trademark rights, and that the plaintiff did not establish common law trademarks of the Betty Boop name or image.

According to the majority opinion, Plaintiff Fleischer asserted several alternative chains of title to the Betty Boop character copyright before the District Court but had abandoned all but one of those chains on appeal.  Specifically, Plaintiff Fleischer asserted the following chain of title on appeal:

Original Fleischer transferred its rights to Paramount Pictures, Inc. (Paramount) in 1941; Paramount transferred those rights to UM&M TV Corp. (UM&M) in 1955; in 1958, UM&M transferred these rights to National Telefilm Associates, Inc. (NTA), which became Republic Pictures in 1986; and finally, Republic Pictures transferred the exclusive copyright to Fleischer in 1997.

In granting summary judgment on Plaintiff Fleischer's copyright infringement claim, the District Court specifically concluded that the plaintiff had failed to meet its burden of proof regarding the transfer of rights from UM&M to NTA and from NTA to Republic Pictures, thereby destroying the chain of title allegedly leading to the plaintiff.

 The Ninth Circuit affirmed the District Court's decision, concluding that Paramount did not transfer the Betty Boop character to UM&M under a 1955 purchase agreement, which transferred rights to certain Betty Boop cartoons.  The court relied on language in the agreement that stated:

Anything to the contrary notwithstanding, no grant or assignment is made hereunder to [UM&M] of the characters and characterizations contained in said Sold Photoplays or said literary material, or of the copyrights in said characters or characterizations, or of any production or other rights in said characters and characterizations, or to use said characters and characterizations or the names of said characters or trade names, trademark and names of the series of Sold Photoplays or of said literary material in any manner except . . . only as part of the particular Sold Photoplay in which they or any of them are contained. . . .

Although it questioned the propriety of looking to subsequent behavior given this contractual language, the Ninth Circuit did note Paramount's subsequent transfer of the Betty Boop character copyright to Harvey Films in support of its conclusion that Paramount did not transfer that copyright earlier to UM&M.

Thus, because the Ninth Circuit concluded that Paramount did not transfer the Betty Boop character copyright to UM&M the chain of title leading to Plaintiff Fleischer was broken and plaintiff's copyright infringement claim was therefore properly dismissed.

The Ninth Circuit also affirmed the District Court's decision dismissing Plaintiff Fleischer's trademark infringement claim (District Court's opinion can be found here) 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.

Circuit Judge Susan P. Graber filed a dissenting opinion taking issue with the majority's conclusions as to the chain of title issue on Plaintiff Fleischer's copyright infringement claim.

The case cite is Fleischer Studios, Inc. v. A.V.E.L.A., Inc., No. 09-56317 (9th Cir. Feb. 23, 2011).

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Second time was the charm for this case.

Vericheck, Inc. provides electronic financial transaction processing services including check verification and related services.  It obtained a Georgia state registration for its VERICHECK service mark but was unable to obtain federal registration because of a prior registration by an Arizona company.  Vericheck also unsuccessfully attempted to obtain the domain name vericheck.com in 1999.

David Lahoti acquired the vericheck.com domain name in 2003, claiming he contemplated beginning a business of transaction verification and security.  But the vericheck.com website only redirected visitors to a website containing search results, including links to Vericheck's competitors.  Lahoti earned income when users clicked links on the website to which they were redirected.

Vericheck contacted Lahoti in 2004 and offered to purchase the vericheck.com domain name but negotiations ended.  Vericheck filed an arbitration complaint under the Uniform Domain Name Dispute Resolution Policy and the arbitrator ordered the transfer of the vericheck.com domain name to Vericheck. 

Instead of doing so, Lahoti filed a declaratory judgment action seeking a declaration that he did not violate the Lanham Act's cybersquatting or trademark infringement provisions.  Vericheck then counterclaimed alleging violations of, in part, the Lanham Act and the Anti-Cybersquatting Consumer Protection Act ("ACPA").

On cross motions for summary judgment, the District Court concluded that Lahoti had acted in a bad faith attempt to profit from use of the vericheck.com domain name.

In a subsequent bench trial, the District Court found for Vericheck on all claims, concluding in relevant part that the VERICHECK mark was inherently distinctive.  On the first appeal, the Ninth Circuit vacated the District Court's opinion and remanded for further proceedings, concluding that the District Court's reasoning with respect to the question of whether the mark was distinctive was contrary to federal trademark law.  The Ninth Circuit's opinion in the first appeal can be found here.

On remand, the District Court again concluded that the VERICHECK mark was suggestive and again found in favor of Vericheck.

In the second appeal, the Ninth Circuit concluded that the District Court had followed its instructions on remand and properly discussed the principles on the issue of distinctiveness that the Ninth Circuit had articulated.  The Ninth Circuit further held that the District Court's conclusion based on its analysis was not clearly erroneous and therefore affirmed the District Court's finding that the VERICHECK mark is distinctive.

The Ninth Circuit further affirmed the District Court's finding of a likelihood of confusion, its finding of violations of the ACPA and the Washington Consumer Protection Act, and its award of attorneys' fees to Vericheck.

The case cite is Lahoti v. Vericheck, Inc., No. 10-35388 (9th Cir. Feb. 16, 2011).

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A somewhat long story short, plaintiff brought a copyright infringement claim that involved a dispute as to plaintiff's ownership of the copyright.  Finding that it was time-barred, the District Court granted summary judgment on plaintiff's copyright infringement claim.

The Second Circuit affirmed, holding that where, as in that case, the copyright ownership claim was time-barred and ownership is the dispositive issue, the copyright infringement claim is likewise barred, agreeing with the Sixth and Ninth Circuits.

The case cite is Kwan v. Schlein, No. 09-5205 (2d Cir. Jan. 25, 2011).

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Chapman Kelley, a nationally-recognized artist known for his paintings of landscapes and flowers, obtained permission to install a wildflower display in Grant Park in downtown Chicago.  The display, called "Wildflower Works," was promoted as "living art" and included two elliptical flower beds, each of which were nearly as large as a football field, featuring a variety of native wildflowers edged with borders of gravel and steel.

Wildflower Works existed for some 20 years (much more detailed history in the Seventh Circuit's opinion) but in 2004 the Chicago Park District made changes to the display, decreasing it from approximately 66,000 square feet to approximately 30,000 square feet and remaking the elliptical flower beds into rectangles.

Kelley then sued the Park District for, in part, violating his moral rights under the Visual Artists Rights Act of 1990 ("VARA"), specifically, the right "to prevent any intentional distortion, mutilation, or other modification of that work which would be prejudicial to his or her honor or reputation, and any intentional distortion, mutilation, or modification of that work is a violation of that right[.]"

Following a bench trial, the District Court found for the Park District on Kelley's VARA claim, concluding that although Wildflower Works could be classified as both a painting and a sculpture and therefore qualified as a work of visual art under VARA, it was insufficiently original for copyright, a foundational requirement for Kelley's claim.  Alternatively, the District Court concluded that Wildflower Works was site-specific art and that VARA did not apply to such art, following the First Circuit's decision in Phillips v. Pembroke Real Estate, Inc., 459 F.3d 128 (1st Cir. 2006).

The Seventh Circuit affirmed the judgment in favor of the Park District on the VARA claim but for different reasons than those stated by the District Court.

The Seventh Circuit first took issue with the District Court's conclusion that Wildflower Works was both a painting and a sculpture and therefore a work of visual art as defined in VARA.  The court emphasized that the definition in VARA was meant to be limiting with respect to the types of works to which VARA applied:

VARA's definition of "work of visual art" operates to narrow and focus the statute's coverage; only a "painting, drawing, print, or sculpture," or an exhibition photograph will qualify.  These terms are not further defined, but the overall structure of the statutory scheme clearly illuminates the limiting effect of this definition.  Copyright's broad general coverage extends to "original works of authorship," and this includes "pictorial, graphic, and sculptural works."  17 U.S.C. 102(a)(5).  The use of the adjectives "pictorial" and "sculptural" suggests flexibility and breadth in application.  In contrast VARA uses the specific nouns "painting" and "sculpture."  To qualify for moral-rights protection under VARA, Wildflower Works cannot just be "pictorial" or "sculptural" in some aspect or effect, it must actually be a "painting" or a "sculpture."  Not metaphorically or by analogy, but really.

Although clearly doubtful of the District Court's conclusion, the Seventh Circuit ultimately did not resolve the question because the Park District had not challenged the conclusion, an omission that the court called "astonishing."

Instead, the Seventh Circuit turned to the question of whether Wildflower Works merited copyright protection in the first instance, ultimately concluding that it did not.  The court disagreed with the District Court's conclusion that Wildflower Works lacked sufficient originality.  Rather, it concluded that the impediment to copyright was "that a living garden lacks the kind of authorship and stable fixation normally required to support copyright."

 A living garden like Wildflower Works is neither authored nor fixed as those terms are understood in copyright law, the Seventh Circuit concluded:

Simply put, gardens are planted and cultivated, not authored.  A garden's constituent elements are alive and inherently changeable, not fixed.  Most of what we see and experience in a garden--the colors, shapes, textures, and scents of the plants--originates in nature, not in the mind of the gardener.  At any given moment in time, a garden owes most of its form and appearance to natural forces, though the gardener who plants and tends it obviously assists.  All this is true of Wildflower Works, even though it was designed and planted by an artist.

Of course, a human "author"--whether an artist, a professional landscape designer, or an amateur backyard gardener--determines the initial arrangement of the plants in a garden.  This is not the kind of authorship required for copyright.  To the extent that seeds or seedlings can be considered a "medium of expression," they originate in nature, and natural forces--not the intellect of the gardener--determine their form, growth, and appearance.  Moreover, a garden is simply too changeable to satisfy the primary purpose of fixation; its appearance is too inherently variable to supply a baseline for determining questions of copyright creation and infringement.

Thus, because Wildflower Works was neither "authored" nor "fixed" for purposes of copyright, it could not qualify for moral-rights protection under VARA.

The Seventh Circuit also took issue with the District Court's adoption of the First Circuit's holding in Phillips that all site-specific art is excluded from VARA, questioning the First Circuit's interpretation of VARA.  Nonetheless, although the court clearly had doubts as to the First Circuit's holding, it ultimately did not decide the question because it resolved Kelley's VARA claim on other grounds.

The case cite is Kelley v. Chicago Park District, Nos. 08-3701 & 08-3712 (7th Cir. Feb. 15, 2011).

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Levi Strauss sued Abercrombie & Fitch in 2007 claiming, in relevant part, that Abercrombie's stitching design used on the back pockets of its jeans diluted Levi's registered stitching design also used on the back pockets of its jeans.

The District Court entered judgment in favor of Abercrombie on Levi's claim for dilution under the Trademark Dilution Revision Act of 2006 ("TDRA"), concluding that Levi had not established that Abercrombie was using a mark "identical or nearly identical" to Levi's stitching design mark (pictures of the two designs are attached to the Ninth Circuit's opinion).  The question on appeal was whether this "identical or nearly identical" standard survived the enactment of the TDRA, which replaced the Federal Trademark Dilution Act ("FTDA").

The Ninth Circuit first traced the origins of the "identical or nearly identical" standard back to New York state dilution law, which pre-dated the adoption of the FTDA in 1996.  The court then examined Ninth Circuit case law applying the standard, which tied it to the language, legislative history and purpose of the FTDA.

The Ninth Circuit then described the passage of the TDRA and ultimately concluded that, for a variety of reasons, the "identical or nearly identical" standard did not survive the enactment of the statute.  In particular, the court noted that "[s]everal aspects of the TDRA are worth noting":

The first . . . is that Congress did not merely make surgical linguistic changes to the FTDA in response to Moseley.  Instead, Congress created a new, more comprehensive federal dilution act.  Furthermore, any reference to the standards commonly employed by the courts of appeals--"identical," "nearly identical," or "substantially similar"--are absent from the statute.  The TDRA defines "dilution by blurring" as the "association arising from the similarity between a mark or a trade name and a famous mark that impairs the distinctiveness of the famous mark." . . .  Moreover, in the non-exhaustive list of dilution factors that Congress set forth, the first is "[t]he degree of similarity between the mark or trade name and the famous mark." . . .  Thus, the text of the TDRA articulates a different standard for dilution from that which we utilized under the FTDA.

In looking further at the statutory language of the TDRA, the Ninth Circuit concluded that it did "not require that a plaintiff establish that the junior mark is identical, nearly identical or substantially similar to the senior mark in order to obtain injunctive relief."  Instead, a plaintiff must show that the junior mark "is likely to impair the distinctiveness of the famous mark" based on the factors set forth in the TDRA, which include the degree of similarity of the marks.

The court also rejected Abercrombie's argument that post-TDRA Ninth Circuit cases demonstrated that the "identical or nearly identical" standard survived passage of the TDRA, concluding that the issue was not "presented or squarely resolved" in any of the three cases (Visa Int'l Serv. Ass'n v. JSL Corp., No. 08-15206, 2010 WL 2559003 (9th Cir. June 28, 2010); Jada Toys, Inc. v. Mattel, Inc., 518 F.3d 628 (9th Cir. 2008); Perfumebay.com Inc. v. eBay, Inc., 506 F.3d 1165 (9th Cir. 2007)).

Finally, the Ninth Circuit held that it could not conclude that the District Court's legal error in employing the "identical or nearly identical" standard was harmless as the use of the standard "permeated the court's analysis and provided the basis upon which the court evaluated the evidence."  The Ninth Circuit thus reversed the District Court's judgment in favor of Abercrombie on Levi's claim under the TDRA.

The case cite is Levi Strauss & Co. v. Abercrombie & Fitch Trading Co., No. 09-16322 (9th Cir. Feb. 8, 2011).

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Defendant Anodyne Therapy, LLC successfully defended against Plaintiff Nightingale Home Healthcare, Inc.'s Lanham Act claim and the district court awarded Anodyne its attorneys' fees in the amount of $72,747 under Section 1117(a) of the Lanham Act, which allows such an award to the prevailing party in "exceptional cases."  Nightingale appealed, claiming that it was not an exceptional case justifying such an award.

The Seventh Circuit, Judge Posner writing, addressed at some length the meaning of the word "exceptional" under this section of the Lanham Act.

First, the Seventh Circuit summarized the varying standards employed by its sister circuits.  The Fourth, Sixth, Tenth and D.C. Circuits applied different tests depending on whether the plaintiff or the defendant prevailed.  The Second, Fifth, and Eleventh Circuits require prevailing defendants and plaintiffs to prove that their opponent litigated in bad faith.  The First, Third, Eighth, and Ninth Circuits do not distinguish between prevailing plaintiffs and defendants and do not require a showing of bad faith (though the Ninth Circuit has used language that could equate to bad faith).

It is surprising to find so many different standards for awarding attorneys' fees in Lanham Act cases.  The failure to converge may be an illustration of "circuit drift": the heavy caseloads and large accumulations of precedent in each circuit induce courts of appeals to rely on their own "circuit law," as if each circuit were a separate jurisdiction rather than all being part of a single national judiciary enforcing a uniform body of federal law.  But whether the difference in standards generates actual differences in result is unclear because the opinions avoid commitment by using vague words and explicit escape clauses, with the Tenth Circuit's catchall ("perhaps for other reasons as well") taking the prize.

Given the variety of standards, the Seventh Circuit started with "first principles," looking to the reasons for the limited exception to the American Rule under which each party bears its own litigation costs.  Of particular interest is the explicit acknowledgment that parties may use litigation for anti-competitive purposes:

A more practical concern is the potential for businesses to use Lanham Act litigation for strategic purposes--not to obtain a judgment or defeat a claim but to obtain a competitive advantage independent of the outcome of the case by piling litigation costs on a competitor.

Ultimately, the Seventh Circuit adopted a standard for "exceptional" cases that it believed "capture[d] the concerns that underlie the various tests and offer[ed] a pathway through the semantic jungle":

We conclude that a case under the Lanham Act is "exceptional," in the sense of warranting an award of reasonable attorneys' fees to the winning party, if the losing party was the plaintiff and was guilty of abuse of process in suing, or if the losing party was the defendant and had no defense yet persisted in the trademark infringement or false advertising for which he was being sued, in order to impose costs on his opponent.

The Seventh Circuit emphasized, however, that the standard was not intended to require an elaborate inquiry into the state of mind of the losing party:

[A] proceeding for an award of attorneys' fees is not a suit; it is a tail dangling from a suit.  We don't want the tail to wag the dog, and this means that an elaborate inquiry into the state of mind of the party from whom reimbursement of attorneys' fees is sought should be avoided.  It should be enough to justify the award if the party seeking it can show that his opponent's claim or defense was objectively unreasonable--was a claim or defense that a rational litigant would pursue only because it would impose disproportionate costs on his opponent--in other words only because it was extortionate in character if not necessarily in provable intention.  That should be enough to make a case "exceptional."

In the case before it, the Seventh Circuit concluded that the facts amply met this standard--Plaintiff's Lanham Act claim had "no possible merit" and the district court found that Plaintiff had made the claim in an attempt to coerce a price reduction from Defendant.  It thus affirmed the district court's award of attorneys' fees and granted Anodyne's motion for its fees and costs on appeal.

The case cite is Nightingale Home Healthcare, Inc. v. Anodyne Therapy, LLC, No. 10-2327 (7th Cir. Nov. 23, 2010).

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United Fabrics International, Inc. holds a copyright to a collection of fabric designs that it alleges defendants C&J Wear, Inc., Lucky Kim International, Inc. and Macy's, Inc. infringed.  Although United Fabrics had a copyright registration for the collection, on summary judgment the district court sua sponte dismissed the case, concluding that United Fabrics lacked standing because it failed to establish ownership of a valid copyright.  Specifically, the district court concluded, in part, that United Fabrics' evidence was insufficient to establish the chain of title of the source artwork for the collection to United Fabric.

The Ninth Circuit reversed, concluding that both the district court's ruling and the defendants' argument suffered from the same defect, namely, the conclusion that United Fabrics had failed to offer sufficient evidence to establish ownership of a valid copyright.  That reasoning skipped a step, the Ninth Circuit concluded.  Specifically, United Fabrics' copyright registration was prima facie evidence of the validity of the copyright and the facts stated in the certificate.  It was therefore defendants' burden to rebut the presumption, which they had failed to do at least at this stage in the litigation:

As the copyright claimant, United is presumed to own a valid copyright, . . . and the facts stated therein, including the chain of title in the source artwork, are entitled to the presumption of truth. . . .  By failing to point to any evidence indicating that the copyright was invalid, . . . Macy's has failed to rebut the presumption.

The case cite is United Fabrics Int'l, Inc. v. C&J Wear, Inc., No. 09-56499 (9th Cir. Jan. 26, 2011).

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