Tag: IP Litigation

Breaking News – Hermès Makes History With First NFT Trademark Trial Victory

A New York City jury just returned a verdict in favor of Hermès in a historic dispute between the luxury fashion house and digital artist Mason Rothschild over Hermès’ alleged trademark rights relating to Hermès’ famous Birkin handbag. The jury awarded Hermès $133,000 in total damages for trademark infringement, dilution, and cybersquatting.

The jury finding that the First Amendment did not shield Rothschild from liability in connection with his MetaBirkins NFTs project is significant, particularly as this matter involved the first trial by jury to consider the interplay of free speech and trademark protection in the context of NFTs. This decision, which may be appealed, provides guidance for artists, brands, and others seeking ingress into metaverse, including to what extent “real world” intellectual property rights apply to and may be enforced in virtual worlds.

Haute-ly Contested NFTs

Throughout the dispute over this past year, the parties have contested each other’s characterization of the MetaBirkins NFTs. To Hermès, the MetaBirkins NFTs are merely the instruments of a “digital speculator” looking to exploit one of its most exclusive assets via NFTs. In contrast, Rothschild argues that the MetaBirkins NFTs project, a series of 100 NFT images that depict a range of reimagined Hermès Birkin bags featuring a variety of colorful fur, is digital art and a commentary on the famed BIRKIN bag, consumerism, and animal cruelty within the fashion industry. As a result, he argues that the MetaBirkins NFTs are artistic works that should be shielded from liability under the free speech principles of the First Amendment of the Constitution. The nine-member jury disagreed, finding that the MetaBirkins NFTs were more like commodities that are subject to trademark and other laws, rather than artwork. A factor that may have influenced the jury’s decision was evidence suggesting that Rothschild may have seen the MetaBirkins NFTs as a “cash cow.” This may have cast doubt on the authenticity of his characterization of the MetaBirkins NFTs as an art project.

The Test is Yet to Come

Although the jury found the MetaBirkins NFTs to be infringing, the final disposition of this dispute remains pending with the possibility of appeal. Given the importance of the issues at stake, the outcome of this case is bound to be subject to debate regardless of any appeal.

Moreover, while no NFT-specific legal test appears to have emerged from this case and the legal landscape for IP in the Metaverse (and beyond) continues to lack clear guidance, this case has nonetheless provided insight on how courts (and juries) may view the interplay of IP and NFTs. The ultimate outcome of this landmark case is likely to form the basis of the emerging law involving IP rights and NFTs.

© 2023 ArentFox Schiff LLP
For more Intellectual Property Legal News, click here to visit the National Law Review

Supreme Court to Consider First Amendment Protection for Parody Dog Toy

The Supreme Court of the United States has agreed to consider the scope of protection afforded by the First Amendment to commercial parody products that feature the unauthorized use of another party’s trademark(s). Jack Daniel’s Properties, Inc. v. VIP Products LLC, Case No. 22-148 (Supr. Ct. Nov. 21, 2022) (certiorari granted). The questions presented are as follows:

  1. Whether humorous use of another’s trademark as one’s own on a commercial product is subject to the Lanham Act’s traditional likelihood-of-confusion analysis, or instead receives heightened First Amendment protection from trademark-infringement claims.
  2. Whether humorous use of another’s mark as one’s own on a commercial product is “noncommercial” under 15 U.S.C. § 1125(c)(3)(C), thus barring as a matter of law a claim of dilution by tarnishment under the Trademark Dilution Revision Act.

This is the second time Jack Daniel’s has filed a petition for certiorari in connection with this case. The Supreme Court first considered the matter in January 2021, following the US Court of Appeals for the Ninth Circuit’s decision to vacate and remand the district court’s finding of trademark infringement, reverse the judgment on dilution and uphold the validity of Jack Daniel’s trademark and trade dress rights.

The case then returned to the district court, which granted summary judgment to VIP Products. The Ninth Circuit affirmed and then Jack Daniel’s filed its second petition for certiorari.

The Supreme Court will seek to settle the long-standing split amongst the US Courts of Appeal regarding the proper analysis for parody in trademark infringement and dilution claims and the scope of protection afforded to it via the First Amendment.

For more Supreme Court and Litigation News, click here to visit the National Law Review.

© 2022 McDermott Will & Emery

Intellectual Property: Understand It to Protect What You Own, Drive Value to Your Business and Positively Impact Your Bottom Line

Intellectual Property (or “IP”) is commonly defined as a group of legal rights that provide protection over things people and businesses create or invent. It might sound straightforward, but there is a lot of confusion over what can actually be protected and what cannot.

Who needs to be concerned with IP Protection?

We’ve all heard the phrase, “hindsight is 20/20”. That’s especially true when it comes to IP protection. So often people and businesses do not realize a new creation or innovation should be protected until it is too late. If you are creating or developing within your space, you need to have an IP strategy to avoid any unintentional disclosure missteps. And, when you are creating, be careful to:

  • Make records. They should be accurate, dated, and corroborated.
  • Research the competitive landscape early and identify both opportunities for protection and risks of infringement.
  • Use a non-disclosure agreement or contract before collaborating with another business or other people, such as consultants.

What are some of the biggest IP challenges business owners and employers need to overcome?

The goal for your IP strategy needs to be: Identify, Protect, Monetize.  The question business owners need to answer is how they can most effectively achieve this. The first step is understanding the applicable types of IP that are protectible and the steps needed to secure protection  of each.

Intellectual Property Type The Value

Trade Secret

 No registration fees or costs. Goes into effect upon creation and can last forever. Protection available at the state and federal levels.

Non-Disclosure Agreement/Contract (or “NDA”)

 Very affordable and flexible but, it only binds the contracting parties. An NDA should be used with your employees and other businesses you deal with concerning sensitive business information.

 

Copyright

 

 Free and automatic upon creation, register for significant added value. Protection available only at the federal level and registration is required to enforce protection.

Trademark/Service

 Commercial differentiation, quality identifier and price enhancement. Low cost and can last forever but must police others’ misuse.

How can an IP strategy affect your bottom line?

It’s important to understand there is no “one-size fits all” approach to IP. The correct IP strategy must be tailored to your unique business. While some businesses may be overspending on a scattered approach to protecting IP, other businesses may not be investing enough and potential losing out on what could have been an important revenue stream.

© 2022 Davis|Kuelthau, s.c. All Rights Reserved
For more articles about IP Law, visit the NLR Intellectual Property section.

Mission Products v. Tempnology: SCOTUS Holds that Rejection of Trademark License in Bankruptcy Does Not Terminate the Right to Use the Mark

On May 20, 2019, the U.S. Supreme Court held by a vote of 8-1 that a trademark licensor’s rejection in bankruptcy of a trademark license does not terminate the licensee’s right to use the licensed mark.Mission Products Holdings, Inc. v. Tempnology, LLC, No. 17-1657, 587 U.S. ___ (2019). In so holding, the Court resolved a circuit split on the issue. The Court reversed the decision of the First Circuit, which held that Tempnology’s rejection of a trademark license under the Bankruptcy Code had the effect of terminating Mission Products’ right to use the licensed marks. The Court expressly affirmed the reasoning of the Seventh Circuit in Sunbeam Products, Inc. v. Chicago Am. Mfg., LLC, 686 F.3d 372 (7th Cir. 2012), and held that rejection of a trademark license constitutes a pre-petition breach of the license agreement but does not otherwise terminate the licensor’s and licensee’s rights and obligations under the license agreement.

The Court’s opinion, authored by Justice Kagan, considered section 365 of the Bankruptcy Code, 11 U.S.C. §365. Specifically, the Court considered section 365(a), which permits a debtor in bankruptcy to reject any executory contract 1, and section 365(g), which provides that the debtor’s rejection “constitutes a breach of such contract.” 11 U.S.C. §365(a), (g).

In this case, the licensor, Tempnology, manufactured clothing and accessories designed to stay cool when used in exercise. Tempnology sold those products under the name “Coolcore” with related logos and labels. Tempnology entered into a license agreement with Mission Products, which granted, among other things, a non-exclusive license to use the Coolcore trademark in the United States and elsewhere. In 2015, less than a year before the license was to expire, Tempnology filed a petition for bankruptcy under Chapter 11 of the Bankruptcy Code. Tempnology exercised its option under section 365(a) to reject the license agreement, as it was still executory, and the Bankruptcy Court approved the rejection. The parties agreed that the rejection had two effects. First, Tempnology could stop performing under the license agreement, and second, Mission Products could assert a pre-bankruptcy petition claim for damages 2. 

Tempnology argued that its rejection of the license agreement also terminated the rights it previously granted Mission Products to use the Coolcore marks. Tempnology based its argument on a negative inference it drew from the fact that, over the years, Congress had adopted provisions in section 365 that allowed the other party in a rejected contract to continue exercising its contractual rights. Of particular relevance was section 365(n), which provides that if the licensor of certain intellectual property rights, such as patents, rejects the license, the licensee can continue to use the patented technology as long as it makes the payments required under the license. 11 U.S.C. §365(n).  Section 365(n) specifically excluded trademark licenses. See 11 U.S.C. §365(n). Tempnology argued that, because section 365(n) excludes trademark licenses, a negative inference should be drawn that Congress intended for trademark licenses to terminate upon rejection.

The Court rejected Tempnology’s arguments. In so doing, the Court first relied on the language in section 365(g), which provides that a rejection constitutes a breach. While a breaching debtor can stop performing its remaining obligations under the license, it cannot rescind the license. The Court went on to note that the section 365(n) provision allowing a licensee to continue using licensed intellectual property other than trademarks was a reaction to a Fourth Circuit decision – Lubrizol Enterprises v. Richmond Metal Finishers, 756 F.2d 1043 (4th Cir. 1985) – which held that a patent licensee’s rejection of an executory contract had the effect of revoking the grant of a patent license. The Court in Mission Products explained that “Congress’s repudiation of Lubrizol for patent contracts does not show any intent to ratify that decision’s approach for almost all others. Which is to say that no negative inference arises.” (emphasis in original).

The Court also rejected Tempnology’s arguments based on a trademark licensor’s duty to monitor and exercise quality control over licensed goods and services. Tempnology argued that if rejection does not terminate the license, the debtor-licensor is forced to choose between expending scarce resources on quality control, or forgoing expending such resources and thereby risking the loss of a valuable asset, presumably because use without quality control would lead to a naked license. The Court observed that these concerns, while possibly serious, “would allow the tail to wag the Doberman.” The Court explained that the ability to reject a contract under section 365 allows a debtor to escape its future contract obligations, but it does not exempt the debtor from all burdens that generally-applicable law, in this case the law on trademarks, imposes on the owner of the trademark.

Tempnology also argued that the case is moot because, it claimed, Mission Products could not recover damages.3The Court held that the case is not moot, as Mission Products would be able to recover damages. 

The Mission Products decision is important for several reasons.  First, it resolves the split that had developed between those courts holding that rejection results in a breach and those holding that rejection terminates the right to use a licensed mark. Second, resolving the split removes uncertainty faced by trademark licensors and licensees who are forced to consider what might happen if a licensor declares bankruptcy. Moreover, resolving this uncertainty avoids the need to use expensive and complex steps, such as placing licensed marks in a bankruptcy-remote entity, in order to avoid the effect of a licensor’s bankruptcy. 

[1] An executory contract refers to a contract that neither party has finished performing.[2] In its opinion, the Court noted that pre-petition creditors often receive only cents on the dollar of their bankruptcy claims.

[3]The lone dissent, by Justice Gorsuch, also argued mootness on the ground that the license had already expired by the time the bankruptcy court confirmed the rejection and declared that Mission Products could not use the mark.

© 2019 Brinks Gilson Lione. All Rights Reserved.

This post was written by David S. Fleming and Emily Kappers of Brinks Gilson Lione.

Trademarks, Bankruptcy, and Leverage: What Manufacturers and Other Trademark License Parties Should Know About A Potential Landmark Case Before the Supreme Court

On February 20, 2019, the United States Supreme Court heard oral arguments in the case Mission Products, Inc. v. Tempnology, LLC. The case has important implications for manufacturers and other parties to trademark licenses when a trademark licensor files, or threatens to file, bankruptcy. Lower courts including the First Circuit found that, in the event of a trademark licensor bankruptcy filing, the licensor may reject the trademark license, prevent the licensee from further use of the license, and leave the licensee with the sole remedy of filing a claim in the bankruptcy case. Other courts have disagreed with the effect of a trademark license rejection in bankruptcy, finding that a trademark licensee may retain certain rights following a licensor rejection. When the Supreme Court rules, the Tempnology case is slated to be a landmark decision both on the general issue of what rejection truly means in bankruptcy and on the specific issue of whether a trademark licensee’s rights can essentially be destroyed in a licensor bankruptcy case.

The decision is likely to have broad implications for trademark license parties no matter which way the Supreme Court rules. If the court holds that the rejection of a trademark license effectively terminates the rights of a licensee, both licensors and licenses will know that such a “nuclear option” is available in bankruptcy and negotiating leverage will swing heavily toward a licensor. On the other hand, a decision finding that licensees retain rights post-rejection will make a bankruptcy filing a much less attractive option for a licensor as a solution for dealing with a licensee. Both trademark licensors and licensees should, therefore, be aware that the bankruptcy sword or shield (depending on your perspective) may be about to change.

The Tempnology case involved Tempnology, LLC, a company that manufactured athletic sportswear and licensed the right to use its COOLCORE trademark and related rights to a licensee called Mission Product Holdings, Inc. More details about the company, the bankruptcy court decision, and the First Circuit decision can be found here. In summary, Tempnology attempted to use its Chapter 11 bankruptcy filing as a means to terminate the rights of the trademark license to Mission. Normally, following the rejection of an agreement such as a license in a bankruptcy case, non-debtor parties are limited to filing a general unsecured claim. Depending on the case, general unsecured claimants may receive much less than the face value of their claims. However, some courts have held that rejection does not “vaporize” a licensee’s rights and the non-debtor licensee thus may retain certain post-rejection enforcement rights. To that point, outside of the bankruptcy context, a licensor’s breach of a trademark license agreement does not mean that the licensee no longer has any rights in the license. In fact, state law provides a number of licensee remedies short of termination.

On appeal to the First Circuit, the court disagreed with the characterization that refusing to permit post-rejection rights would “vaporize” a trademark licensee’s rights. The licensee continued to have rights, the court noted, but they were limited to filing a claim for rejection damages. The court further noted that the purpose of rejection under the Bankruptcy Code is to free a debtor of costly obligations and that this purpose would be thwarted if a trademark licensor debtor were required to deal with post-rejection assertions of rights by the licensee.

Mission appealed to the Supreme Court and certiorari was granted on October 26, 2018. While Mission requested review of several issues, the Supreme Court limited the matter to one issue: whether a debtor/licensor’s rejection of a license agreement terminates rights of the licensee that would survive the licensor’s breach under applicable non-bankruptcy law. In addition to the briefs filed by the parties, there were several notable amici curiae briefs, the majority of which adopted Mission’s position that a trademark licensee should retain certain rights post-rejection. Such amici curiae briefs in support of Mission included the United States, the New York Intellectual Property Law Association, a number of revered law professors, and the International Trademark Association. Moreover, the United States, as represented by the Assistant to the Solicitor General, participated in oral argument in support of Mission.

During the oral arguments, the Justices probed the issue of a trademark licensor’s obligations, including contractual obligations under the terms of a license as well as obligations to maintain the trademark under the Lanham Act. This is an important point because rejection is designed to relieve a debtor of its contractual obligations in order to unburden the bankruptcy estate. The Lanham Act, however, may impose continuing obligations on the licensor with respect to the rejected license. Mission argued that Bankruptcy Code section 365 and the concept of rejection speaks to contractual obligations and that the obligation to maintain a trademark is outside the agreement. Justice Breyer challenged the argument with an analogy of a landlord for an igloo whose obligation included air conditioning the premises: “You know, you break your promise to air condition, no more igloo.” There were also some notable statements from the United States, which called the Tempnology’s position “extortionate” because the threat of a rejection would put the licensee to the “choice between paying a higher royalty payment or shutting down their business and firing all their workers.”

Tempnology responded by arguing that a trademark license involves a special relationship that deals with the trademark owner’s reputation. The Justices challenged Tempnology on that point by asking how a licensor’s breach would be treated outside of bankruptcy. When pressed on the point, Tempnology could not point to any case law or other authority that would compel the licensee to stop using the license as a result of the licensor’s breach. Justice Kagan succinctly summarized the parties’ positions that Mission was arguing rejection means breach and Tempnology was arguing that rejection means rescission. The fact that the applicable Bankruptcy Code section – section 365(g) – uses the word “breach” suggests that the Justices may be leaning in favor of Mission in the case. Note, however, the issue of mootness may preclude a substantive decision in this case. Both Justices Gorsuch and Sotomayor asked pointed questions on why the case is not moot on a number of grounds, including the fact that no court actually entered an order specifically preventing Mission from using the COOLCORE trademark post-rejection. The United States responded that the effect of the bankruptcy court order was to prevent such usage. It is not entirely clear, but it seemed that the Justices were able to get past the issue of mootness.

The issues in the Tempnology case have broad implications on whether a Chapter 11 bankruptcy can be used as a sword by a trademark licensor to relieve itself of what it perceives as burdensome licensee obligations. Under the law as adopted by the First Circuit, the scales are tipped decidedly in the favor of a debtor/licensor. If the Supreme Court rules in favor of Mission, it will provide clarity on what exactly rejection means in these circumstances and it will constitute a significant readjustment of negotiating leverage.

 

© 2019 Foley & Lardner LLP
This post was written by Jason B. Binford of Foley & Lardner LLP.
Read more in SCOTUS Litigation on the National Law Review’s Litigation type of law page.

Supreme Court Clarifies Copyright Law: “Application” v. “Registration” Finally Resolved

On Monday, March 4, 2019, the United States Supreme Court issued an opinion that clarified the long-standing issue of whether a plaintiff bringing a copyright infringement action has to have an issued registration or just a pending application. Justice Ginsburg, writing for a unanimous court, sided with the “registration approach,” which requires a litigant to have an issued registration, or a rejected application, subject to certain limited exceptions. For decades, copyright owners and their attorneys faced a patch-work of circuit and district court decisions that required either (i) an issued registration to institute an infringement action or (ii) merely have made an application to register the work(s) at issue. This decision provides certainty going forward.

In Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC, No. 17-571, the copyright owner Fourth Estate sued Wall-Street for use of news articles after a licensing agreement between the parties was terminated. Fourth Estate sued Wall-Street and its owner after it applied to register for copyright registrations for the news articles at issue but before any registrations issued. The District Court dismissed the action on defendants’ motion, the Eleventh Circuit affirmed, and the Supreme Court affirmed.

Under the Copyright Act of 1976, as amended, copyright protection attaches to “original works of authorship”— prominent among them, literary, musical, and dramatic works—“fixed in any tangible medium of expression.” 17 U.S.C. § 102(a). Before pursuing a claim for infringement, a copyright owner must comply with § 411(a)’s requirement that “registration of the copyright claim has been made.” Although rights exist before registration, the registration is a requirement that must be administratively exhausted before filing suit. An owner therefore must have an issued registration or a refusal to register from the Copyright Office. The Supreme Court referred to this as “an administrative exhaustion requirement.”

Limited exceptions apply. For example, for works that are particularly vulnerable to predistribution infringement, such as movies or musical compositions, an owner may apply for “preregistration” in which the Copyright Office conducts a limit review. Once a work is “preregistered” the owner may bring suit. However, the owner must also go on and fully register the work thereafter to maintain the action. Another exception covers live broadcasts. Suit may be brought before registration but must be made within three months of the first transmission.

For owners of copyright protected works, the take-away lesson from this decision is to register more of the works that could be subject to infringement. Strategies for protecting works, such as furniture, apparel, and musical works, have become more nuanced and strategic in recent years.

 

Copyright © 2019 Womble Bond Dickinson (US) LLP All Rights Reserved.
Read More IP news on the National Law Review’s IP Type of law page.