NFTs and Copyright

The rise in popularity of nonfungible tokens (NFTs) has generated considerable controversy and confusion about whether and how copyright law applies to them. In this article, Cokato, Minnesota attorney Thomas James discusses the interplay between NFTs and U.S. copyright law.

by Minnesota attorney Thomas James

The rise in popularity of nonfungible tokens (NFTs) has generated considerable controversy and confusion about whether and how copyright law applies to them. In this article, Cokato, Minnesota attorney Thomas James explains what they are and discusses the interplay between NFTs and U.S. copyright law.

Minnesota attorney Thomas James illustrates discussion of NFTs with a digitized copy of Van Gogh's "Starry Night"

Just for fun, call up an attorney and say, “Hey, I‘ve got a quick question for you. Can I make, sell and buy NFTs without getting into copyright trouble?” Depending on the attorney’s age, area of practice, and musical tastes, the answers you get may be anything from “What makes you think that selling shares of the Nichiyu Forklift Thailand company could raise copyright issues?” to “The answer, my friend, is blowing in the wind” – and many variants in between.

(More probably, someone other than the attorney would answer the phone and ask, “Would you like to set up an appointment?” That, however, would not help to make the point.)

Incidentally, don’t really make a telephone call like this “just for fun.” I was only joking I wouldn’t want you to incur unnecessary legal fees or be accused of making an unwanted or disturbing telephone call.

The point is that many members of the legal profession are scrambling just as much as everybody else is to understand NFTs and how copyright laws apply to them. The aim of this article is to reduce some of the confusion by shedding some light on what NFTs are and how copyright laws may apply to them.

What are NFTs?

NFT stands for “non-fungible token.”

Great. Now what the heck is that? Well, let’s break it down.

Fungible vs. Non-fungible

An item is said to be “fungible” if it is interchangeable with similar items. For example, if a retailer orders 100 pounds of red potatoes from a wholesaler, the contract is most likely one for the purchase of fungible goods. The retailer most likely has not specifically identified any particular potato that must be included in the batch, so long as they’re all of merchantable quality. By contrast, if an art collector enters into a contract to purchase an original painting by Peter Doig, it is almost certainly going to be a contract for a non-fungible product (the painting.) The buyer of a non-fungible item wants a specifically identified item.

Currency is a good illustration of the difference. When you cash a check at a bank, you don’t really care which particular bills and coins you are given in exchange for the check, so long as the amount you are given is equal to the amount specified on the check. The currency in this situation is fungible. By contrast, if you present a check for $4 million dollars to a rare coin vendor to purchase a 1913 Liberty V nickel, you would not consider it acceptable for the vendor to give you a standard-issue 2019 nickel in its place. The rare coin in this example is not fungible, i.e., it is non-fungible.

Tokens

A token is something that represents or stands for something else. New York City old-timers may recall subway tokens – small, coin-shaped objects representing the right of access to a subway train. Casino chips are tokens representing specified amounts of money.

A digital token is a programmable digital unit that is recorded on a digital ledger using blockchain technology. There are a lot of different kinds of digital tokens. They can represent physical goods or digital goods.

Bitcoins are examples of fungible digital tokens. Digital NFTs, on the other hand, most commonly represent art, a photograph, music, a video, a meme, or a digitized scan of some other kind. Cryptopunks, pixelated images of characters each one of which is unique and different from others, are some of the earliest NFTs, but many other examples abound.

Ethereum has developed standards for digital tokens. The ERC-721 standard governs digital NFTs. Under this standard, every NFT must have a tokenID. The tokenID is generated when the token is created. Every NFT also must have a contract address. This is a blockchain address that can be viewed using a blockchain scanner. The combination of tokenID and contract address is unique for each NFT.

Blockchains

Both fungible and nonfungible tokens are built and reside on blockchains. A blockchain is simply a database that stores information in digital format. Think of them as digital ledgers. They are called “block” chains because information is stored in groups (“blocks”). When a block reaches its storage capacity, it is closed and linked to the previously filled block. A new block will be formed for any new data that is added later. As this process repeats, a chain of records is created. Hence the “chain” in blockchain. Each block is time-stamped.

Blockchains are simply record-keeping mechanisms. They work well for many, but not all, kinds of digital files. They play a significant role in cryptocurrency systems, as they maintain a secure, decentralized record of transactions. They are not as efficient, however, for large digital files like artwork, videos, sound recordings, and so on. In these cases, a nonfungible token, not the actual file, can be made a part of the chain. This is why, in addition to a tokenID and contract address, an NFT will frequently contain the creator’s wallet address and a link to the work the token represents.

One of the most important things to remember about NFTs, for purposes of copyright law, is that although they might contain a creative work within them, more typically they link to a work in some way. They are pieces of code containing a link; they are not typically the works themselves.  

Transfers of NFTs vs. transfers of copyrights

NFTs representing artwork sometimes sell for millions of dollars. Perhaps this explains the popular misconception that the copyright in the work the NFT represents gets transferred along with the NFT. No, buying an NFT representing a work of art does not, by itself, give the buyer the rights of a copyright owner. You might think that you must be getting something more than a string of code when you buy an NFT, but no. In the United States anyway, an assignment of copyright must be express and made in a writing signed by the copyright owner (or the copyright owner’s authorized agent.)

Of course, if a written contract does expressly provide for the assignment of the copyright, then a transfer of a copyright may co-occur with the transfer of an NFT. In the absence of such a contractual provision, however, buying an NFT does not transfer the copyright in the artwork it represents. Instead, it operates in a way similar to the way buying a copy of a copyrighted book or a print of copyrighted artwork does.

The question whether the transfer of an NFT gives the transferee a copyright license is a little more complicated.

In the United States, an exclusive copyright license, like an outright transfer, must be in writing. A non-exclusive license, on the other hand, may be either express or implied. In addition, it is possible to code any type of agreement into a smart contract (an agreement that is written in code and stored on a blockchain.) If the existence of a valid copyright license can be proven, then the nature and extent of the NFT transferee’s rights may be governed by its terms.

A U.S. federal court had occasion to address the subject of implied copyright licenses in the case of Pelaez v. McGraw Hill, 399 F. Supp. 3d 120 (S.D.N.Y. 2019). There, the court ruled that the test for an implied license is whether the parties’ conduct, taken as a whole, demonstrates an intent to grant a license. The court pointed out that an implied license cannot be based on the unilateral expectations of one person. A party’s subjective belief that he or she has been granted a license is not enough. The totality of facts and circumstances must be such that a court could reasonably infer that both parties intended a license.

Copyright ownership arises at the time an original, creative, expressive work is fixed in a tangible medium. Registration is not required. Despite this feature of copyright law, some countries make registration of the copyright a prerequisite to enforcing it in court. The United States is such a country.

Some people believe that because blockchain operates as an unalterable record of ownership, it serves as a substitute for registration with the U.S. Copyright Office. This is not the case.

The U.S. Copyright Act requires the copyright in a domestic work to be registered with the Copyright Office before an infringement claim may be filed in court. 17 U.S.C. § 411. It does not make an exception for cases in which ownership is sought to be proven by a “poor man’s copyright” (i.e., submitting into evidence the postmark on an envelope in which you have mailed a copy of the work to yourself), much less for a digital NFT.

Of course, a registration certificate only creates a presumption of copyright ownership. The presumption is rebuttable. Could evidence such as the date on which an NFT representing the work was created and written into the blockchain be used to rebut that presumption? Possibly. Then again, how probative is that evidence? Anyone can make a false ownership claim and write it into the blockchain, just as anyone can mail an infringing copy of a work to themselves.

Unless Congress amends the Copyright Act to make blockchain a substitute for registration with the Copyright Office, it would be foolhardy to rely on blockchain as a registration alternative.

Infringement

Is minting an NFT associated with a copyrighted work, without permission, infringement? The answer to this question is not as simple as you might think.

The exclusive rights of a copyright owner include reproduction, distribution, public display, public performance, and the making of derivative works. An NFT containing only a tokenID, contract address and a link to a work is merely a string of code associated with a work; it is not the work itself. If an NFT only contains a link to the work, not the work itself, then it is difficult to see how minting an NFT would violate any of the exclusive rights of a copyright owner.

Of course, if the NFT itself contains copyright-protected elements of the work (and this would have to be something more than the title, artist name and a link), then it might be a reproduction or a derivative of the work. In this situation, creating an NFT without the copyright owner’s permission could constitute infringement, since the copyright owner has the exclusive right to make copies and derivatives of the work.

If the link points to a copy or derivative work that the link creator created in violation of the copyright owner’s exclusive rights to make copies and derivative works, then the link creator could incur two kinds of infringement liability. Even if minting an NFT does not itself infringe a copyright, including in it a link to an infringing copy of a copyright-protected work could result in contributory liability for infringement if that person knows or should know that it will facilitate or encourage unauthorized copying (or other unauthorized use) of a copyrighted work. And of course, there would be direct liability for making the copy or the derivative work without the copyright owner’s permission.

The first sale doctrine

Under U.S. copyright law, the purchaser of a lawfully acquired copy of a copyrighted work may resell that copy without first getting the copyright owner’s permission, unless a contract governing the acquisition of the copy provides otherwise. This is why purchasing a paperback copy of The Andromeda Strain on Amazon.com and later reselling it at a garage sale will not subject you to liability for infringing the copyright owner’s exclusive right to distribute copies of the work.

Does the first sale doctrine also apply to NFTs?

The first sale doctrine generally does not apply to resales of digital goods. This is because a sale of a digital file normally will require making a copy of the file. That would violate the copyright owner’s exclusive right to reproduce his or her work. See, e.g., Capitol Records LLC v. ReDigi Inc. (2d Cir. 2018) (refusing to apply the first sale doctrine to the resale of an MP3 file because the resale would require making an unauthorized reproduction of the original MP3 file).

NFTs, however, arguably are distinguishable from MP3 files. A purchaser of an NFT does not buy the digital file containing the copyright-protected work. An NFT buyer simply purchases a token. Reselling a token does not involve reproducing the work itself. cf. Disney Enterprises Inc. v. Redbox Automated Retail LLC (C.D. Cal. Feb. 20, 2018 (first sale doctrine inapplicable to digital download codes because they are options to create a physical copy, not actual sales of copies).

If the transferee of an NFT uses it to access the copyrighted work, and in the course of doing so, the work is reproduced or distributed, then it would seem that the transferee could, at that point, be liable for copyright infringement. There would also appear to be a potential risk of liability for contributory infringement on the part of the NFT seller, at least in some cases.

Of course, this should not be a problem if the copyright owner has authorized resales by NFT buyers.

Contact Minnesota attorney Thomas James

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No Trademark Registration .sucks

The U.S. Trademark Office denied an application to register “.sucks” as a trademark. The Court of Appeals affirmed. Cokato attorney Tom James explains.

by Cokato attorney Tom James

the stylized font claimed for the "SUCKS" trademark discussed in this article by Cokato attorney Tom James

Most people are familiar with a few gTLDs (generic top level domains). The gTLDs .com, .net, .biz, .info, .edu and .gov come to mind. The list of available gTLDs has grown considerably over the past few years, however. Now there are literally hundreds of them. (View the full list here.) Some examples: .food, .auction, .dog, .beer.

And .sucks.

The United States Trademark Office denied an application to register that gTLD as a trademark. The Federal Circuit Court of Appeals just affirmed that decision. The case is Vox Populi Registry, Ltd., No. 2021-1496 (Fed. Cir., February 2, 2022).

The applications

Vox is the domain registry operator for the .SUCKS gTLD. The company filed two trademark applications with the USPTO. One was for the standard character mark .SUCKS in Class 42 (computer and scientific services) for “[d]omain registry operator services related to the gTLD in the mark” and in Class 45 (personal and legal services) for “[d]omain name registration services featuring the gTLD in the mark” as well as “registration of domain names for identification of users on a global computer network featuring the gTLD in the mark.” The other application was for the stylized form of the mark, as shown in the illustration accompanying this article.

The examining attorney refused both applications, on the ground that they failed to operate as trademarks, i.e., as source identifiers. The TTAB agreed, finding that consumers will perceive “.sucks” as merely one of several gTLDs that are used in domain names, not as a source identifier.

Concerning the claim in the stylized form, the Board concluded that although the pixelated font resembling how letters were displayed on early LED screens is not common today, it is not sufficiently distinctive to qualify for trademark protection in this case.

Vox appealed the part of the decision relating to the stylized font to the Federal Circuit Court of Appeals. The court affirmed.

The standard character mark

Under the Lanham Act, a service mark may be registered only if it functions to “identify and distinguish the services of one person . . . from the services of others and to indicate the source of the services.” 15 U.S.C. § 1127. Matter that merely conveys general information about a product or service generally does not function as a source identifier.

In this case, the court held that substantial evidence supported the Board’s finding that consumers will view this standard character mark as only a non-source identifying part of a domain name rather than as a trademark. The court pointed to specimens from Vox’s website that treated domain names ending in “.sucks” as products. rather than as identifier of Vox’s services. Consumers are likely to see gTLDs as part of domain names, not as identifiers of domain name registry operators.

The stylized design

Design or stylization can sometimes make an otherwise unregistrable mark registrable, provide the stylization creates an impression on consumers that is distinct from the words or letters themselves. Here, the Board determined that because of the ubiquity of the font in the early days of computing, consumers would view the pixelated lettering as ordinary rather than as a source identifier.

It appears that Vox did not claim that the stylized presentation of .SUCKS had acquired distinctiveness. If it had done so – and if it could present persuasive evidence of acquired distinctiveness – then the stylized mark might have been registrable.

Conclusion

Does this decision mean that a gTLD can never serve as a trademark? No. To give just one example, AMAZON is both a gTLD and a trademark. The import of the case is only that a gTLD is not likely to be registrable as a service mark for a domain name registry service, where consumers are more likely to see it as simply being a part of a domain name, not as an identifier of a particular domain registry service.

Contact Tom James

Contact Cokato attorney Tom James for help with trademark registration.

Compulsory E-Book Licensing

In 2020, New York legislators introduced bills to require book publishers to offer licenses to libraries to allow them to make digital copies of books (“e-books”) available to the public. The idea has spread to other states. Cokato attorney Tom James explains why these proposals do not rest on solid legal ground.

by Cokato attorney Tom James

Stockholm Library, photo by Marcus Hansson for use in e-book licensing article by Cokato attorney Tom James
Photo credit: Marcus Hansson Creative Commons Attribution 2.0 Generic

In 2020, New York legislators introduced bills (S2890 and A5837) to require book publishers to offer licenses to libraries to allow them to make digital copies of books (“e-books”) available to the public.

The idea has spread to other states. Legislators in Rhode Island (H6246), Maryland (HB518 and SB432), Missouri (HB2210) and Illinois (SB3167) have introduced similar bills. Groups in Connecticut, Texas, Virginia, and Washington are lobbying for similar legislation in those states.

The New York bill passed out of the legislature, but Governor Kathy Hochul vetoed it. Maryland, on the other hand, enacted their bill into law. See Md. Code, Educ. §§ 23-701, 23-702 (2021). It was slated to go into effect on January 1, 2022. Bills in other states are still pending.

AAP lawsuit

The Association of American Press Publishers (AAP) filed a complaint seeking declaratory and injunctive relief against the State of Maryland in federal district court in December, 2021, asserting that the new law is preempted by the federal Copyright Act.  The district court has granted a preliminary injunction against the enforcement of the new law.

Preemption

Governor Kathy Hochul vetoed the New York bill because she believed that federal copyright law preempts the field of copyright regulation. Assuming it is not settled or dismissed, the AAP lawsuit should sort that question out. In the meantime, here is why I believe Governor Hochul is correct.

Express preemption

The Supremacy Clause of the U.S. Constitution makes the “Constitution, and the Laws of the United States which shall be made in Pursuance thereof . . . the supreme Law of the Land . . . any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” U.S. CONST. art. VI, cl. 2. For this reason, Congress may enact legislation expressly preempting state laws. Pacific Gas & Elec. Co. v. State Energy Res. Conservation and Dev. Comm’n, 461 U.S. 190, 203 (1983). Congress did this in § 301(a) of the 1976 Copyright Act:

“all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 and 103 . . . are governed exclusively by this title….”

17 U.S.C. § 301(a)

Of course, like nearly all legislation, the Copyright Act contains an exception (more familiarly known as a “loophole.”) Despite the preemption of state laws regulating copyrights, states may regulate “activities violating legal or equitable rights that are not equivalent to any of the exclusive rights within the general scope of copyright as specified in section 106.” 17 U.S.C. §§ 301(a), (b)(3). Those exclusive rights are the rights to reproduce, distribute, publicly display, publicly perform, and make derivative works based on a copyright-protected work.

Literary works are protected by copyright whether they are in paper or digital form. The question, then, is whether state laws creating what amount to compulsory licenses regulate or impinge upon the exclusive rights of copyright owners, or whether they regulate something else that is not covered by the Copyright Act. As indicated, the Copyright Act gives copyright owners the exclusive rights to distribute, publicly display, and publicly perform their works. A state law dictating to a copyright owner how, when and to whom s/he may exercise those rights (such as by granting a license) would certainly appear to regulate and impinge upon the exclusive rights of copyright owners.

Implied preemption

Even if Congress had not expressly preempted state regulation of the exclusive rights of copyright owners, it seems likely that the same conclusion would be reached on other grounds anyway.

The United States Supreme Court has held that even if Congress has not expressly preempted state laws – or if express preemption is not determinative because the “loophole” might apply – state laws relating to a particular subject matter may be implicitly preempted in some cases. Arizona v. U.S., 567 U.S. 387, 398–400 (2012).

There are two kinds of implied preemption: conflict preemption and field preemption. Field preemption occurs when Congress has “legislated so comprehensively” in a field that it has “left no room for supplementary state legislation.” R. J. Reynolds Tobacco Co. v. Durham Cty., 479 U.S. 130, 140 (1986). Conflict preemption occurs when a state law “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Crosby v. Nat’l Foreign Trade Council, 530 U.S. 363, 373 (2000); see also ASCAP v. Pataki, 930 F. Supp. 873, 878 (S.D.N.Y. 1996).

Like an express preemption with a loophole, implied preemption does not apply if the state-created right protects a substantial “interest[ ] outside the sphere of congressional concern in the [copyright] laws.’” In re Jackson, 972 F.3d 25, 34–37 (2d Cir. 2020) (internal punctuation and citation omitted). On the other hand, if the state law is “little more than camouflage for an attempt to exercise control over the exploitation of a copyright,” then it is preempted. Id. at 38.

The Copyright Act “creates a balance between the artist’s right to control the work during the term of the copyright protection and the public’s need for access to creative works.” Stewart v. Abend, 495 U.S. 207, 228 (1990); see also College Entrance Examination Bd. v. Pataki, 889 F. Supp. 554, 564 5 (N.D.N.Y. 1995) (evaluation of “the balance struck by Congress between copyright owners found in § 106 of the Copyright Act and the exceptions to those exclusive rights found in §§ 107–118 of the same Act” leads to a finding that the state law is preempted). Congress has struck that balance by giving the author a right “arbitrarily to refuse to license one who seeks to exploit the work.” Stewart, 495 U.S. at 229. See also Lawlor v. Nat’l Screen Serv. Corp., 270 F.2d 146, 154 (3d Cir. 1959) (the right to exclude others is a corollary to the licensing right).

Courts have been fairly consistent in finding that copyright law preempts state laws “that direct a copyright holder to distribute and license against its will or interests.” See, e.g., Orson, Inc. v. Miramax Film Corp., 189 F.3d 377, 386 (3d Cir. 1999), cert. denied, 529 U.S. 1012 (2000). An argument might be made that states have the power to regulate the terms of a license. That, however, is significantly different from requiring a rights holder to grant licenses. At least one court has held that state laws that “appropriate[] a product protected by the copyright law for commercial exploitation against the copyright owner’s wishes” are preempted by the federal Copyright Act. Orson, Inc. v. Miramax Film Corp., 189 F.3d 377, 386 (3d Cir. 1999), cert. denied, 529 U.S. 1012 (2000). A fortiori, a state law that appropriates a content creator’s exclusive right to decide whether and how to allow others to exercise one of his or her exclusive federally protected rights should be held to be preempted.

Moreover, the Copyright Act already covers the kinds of special concessions that copyright owners need to make to public libraries. Publishers should not be subjected to a complex array of state and federal laws making inroads into their federally protected rights, particularly where those inroads could vary significantly from state to state.

The “public interest”

Those who advocate for legislation of this kind typically assert the public interest in having access to literary works. The public certainly does have an interest in having access to literary works. The public also has an interest in having access to food. Does that mean government should force grocers to give a share of their inventory away to the public? That is essentially what these bills do to publishers, albeit indirectly.

One reason people will buy their own copy of a printed book instead of simply reading a library copy is that they do not want to have to get up out of their chairs and make a trip to a library. Digital copies are much easier to access, however. It generally may be done without ever having to get up out of one’s chair. An author may spend hundreds, or even thousands, of hours of his or her time researching, writing, compiling, proofing and editing a book. The least a reader – or a government acting on behalf of reader – can do is pay a couple of bucks for that, rather than using the strong arm of the law to force works to be made freely available online to anyone who applies for a library card – which often is also free, as well.

Absence of need

In any event, most publishers already make their digital catalogs available to public libraries. Something like half a billion digital check-outs from public libraries already occur every year. So why are some states trying to mandate this kind of licensing instead of simply allowing publishers and distributors to continue offering and negotiating licenses as they have been?

That question is open to speculation. One possibility is the “reasonable rate” requirement these bills would mandate publishers to offer to libraries. Who determines what a reasonable rate is? Well, it could be left to state courts to try to figure out. More likely, though, states would delegate authority to an agency of the state to determine rates. States with legislators and regulators who have a greater interest in being liked by their voting constituents than by a handful of published authors can reasonably be expected to set rates for those authors’ works below what they may have earned in a free market.

Concluding thought

The risk to publishers – and more importantly, to authors – should be obvious. Allowing states to require authors and publishers to sell their works at rates dictated by each state, most probably below market, would undermine the ultimate purpose of the Copyright Clause (U.S. Const. Art. 1, § 8), which is “[t]o promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”

I fear that the continuing outbreaks of state bills like these – which seem extremely likely to be declared unconstitutional – might someday impel Congress to enact a compulsory digital licensing system for e-books on a federal level. If that happens, it will be vitally important for authors, publishers, authors’ organizations and agents to actively monitor and participate in the process.

Contact attorney Tom James

Need help with copyright registration or a copyright matter? Contact attorney Tom James.

Dune It Wrong

The crypto group Spice DAO shelled out €2.66 million – about $3 million – for a rare book. The group announced that it had plans to digitize the book and distribute it to the public, produce an animated series based on the book for a streaming service, “support derivative projects,” and burn the book as an “incredible marketing stunt.” What could possibly go wrong?

by Thomas James Minnesota attorney

Dune cover for commentary by Thomas James Minnesota attorney

Dune is a widely-acclaimed 1965 science fiction novel by Frank Herbert. It is set in the future, at a time when feudalism exists on an interstellar scale. A wildly popular novel, Herbert wrote five sequels to it.

In 1974, director Alexander Jodorowsky resolved to adapt the book to film. The plan, however, ultimately was scrapped for lack of funds. It is not hard to see why. Jodorowsky envisioned an hours-long film with a score by Pink Floyd and appearances by such luminaries as Orson Welles and Mick Jagger. Weird artist Salvador Dali signed on to play a part, reportedly asking to be paid $100,000 per minute of screen time.

Before the project was scrapped, however, Jodorowsky compiled a book of concept art to present to studio executives. It included a storyboard sketched by the famous French cartoonist Moebius, along with set and character designs. Only a limited number of copies of it were made, and it is believed that only ten copies still exist today.

In November, one of these copies went up for auction at Christie’s. Appraisers expected it to sell for around $40,000. In the past, a copy of the book sold for $28,000 at auction. The crypto group Spice DAO, however, shelled out €2.66 million – about $3 million – for it. The group announced that it had plans to digitize the book and distribute it to the public, produce an animated series based on the book for a streaming service, “support derivative projects,” and burn the book as an “incredible marketing stunt.”

What could possibly go wrong?

It was a grand plan, except for one thing: Buying a copy of a book does not transfer the copyright along with it.

In general, you are free to do anything with the physical copy of a work you purchase – read it, decorate your restaurant or coffee shop with it, shred it, let your children color it. You are not free, however, to do anything you want with the intangible property embodied in it. When you buy a book, you do not acquire a right to make copies and distribute them to the public. You also do not acquire the right to make derivative works (new works based on the original work) or the right to “support derivative projects.” For these things, you would need to acquire either a license or outright ownership of the copyright from the copyright owner. If you don’t, then you may be liable for copyright infringement.

What about burning the book?

As I said, buying a copy of a book generally gives you the right to do whatever you want with the physical copy (as distinguished from the intangible property embodied in it.) I imagine many college students and zealous guardians of public morals will be delighted with this news, if they do not already know it.

There is an important exception to this rule, however. The Visual Artists Rights Act of 1990, 17 U.S.C. § 106A (“VARA”), is a U.S. law that gives the author of a work of the visual arts the rights to (a) claim authorship of the work; and (b) prevent the use of his or her name as the author of any work of visual art which he or she did not create. In addition, the author of a work of the visual arts has the right to prevent the use of his or her name as the author of the work in the event of a distortion, mutilation, or other modification of the work. Further, the author has a right to “prevent any destruction of a work of recognized stature, and any intentional or grossly negligent destruction of that work is a violation of that right.” Id.

VARA is clear that these rights are personal to the author. Even if you acquire both a physical copy and ownership of the copyright, you do not acquire the right to destroy a work of visual art, if it is protected by VARA.

For purposes of VARA, a protected “work of visual art” is a drawing, painting, print or sculpture existing either in a single copy or in a limited edition of 200 or fewer copies that are signed and consecutively numbered by the author.

If the copy at issue here falls into this category – if it is was signed and consecutively numbered by the author – then burning the book would be unlawful.

Conclusion

Consulting with an attorney before making a significant purchase of intellectual property – or what you think is intellectual property – can be worthwhile at times.

Contact Thomas James, Minnesota attorney

Need help with a copyright matter? Contact Cokato, Minnesota attorney Thomas James at the Law Office of Tom James.

The Trademark Modernization Act

Not many people are aware that tucked into the 5,593-page Act are two major pieces of intellectual property legislation: the Copyright Alternative in Small-Claims Enforcement Act and the Trademark Modernization Act. Since the TM Act just went into effect, it seems appropriate to address it first.

By Tom James, Minnesota attorney

Outdated books not in Minnesota attorney Tom James' law library

The Consolidated Appropriations Act of 2021 was signed into law on December 27, 2020. Most people have heard of the provisions relating to COVID-19, such as rental and other kinds of financial assistance, and Title XIV of Division FF of Section 2 (COVID-19 Consumer Protection Act). Most people are probably also aware that it contains the usual annual appropriations for things like the promotion of women’s interests. Not as many people are aware, however, that tucked into the 5,593-page Act are two major pieces of intellectual property legislation: the Copyright Alternative in Small-Claims Enforcement Act (“the CASE Act of 2020”) and the Trademark Modernization Act (“the TM Act of 2020.”) I will be talking about the CASE Act in later articles. Since the TM Act just went into effect, it seems appropriate to address it first.

Injunctions against infringement

In order to obtain an injunction, it is necessary to convince a court that you will suffer irreparable harm unless the court issues one. That can be difficult – and expensive – to do.

Historically, courts relieved some of the burden on trademark owners by applying a rebuttable presumption of irreparable harm upon a showing of likelihood of confusion. The United States Supreme Court, however, disrupted that practice in some circuits in 2006. In eBay, Inc. v. MercExchange, 547 U.S. 388 (2006), the Court held that an injunction against patent infringement cannot be granted unless the plaintiff makes an evidentiary showing that irreparable harm will ensue unless an injunction is granted. A split in the circuits resulted with respect to the question whether the requirement also applies to injunctions against trademark infringement. Some courts continued to apply the presumption; others did not.

The TM Act resolves the split. Now, 15 U.S.C. § 1116(a) requires courts in all jurisdictions to apply a rebuttable presumption of irreparable harm upon a finding of likelihood of confusion with a federally registered trademark, when an injunction is sought under the Lanham Act. In the case of a motion for a preliminary injunction or TRO, the presumption arises upon a showing of likelihood of success on the merits of an infringement claim brought under the Lanham Act.

The rebuttable presumption applies not only to infringement claims, but also to claims for injunctive relief with respect to false advertising, unfair competition, trademark dilution, or cyberpiracy under Section 43 of the Lanham Act.

By codifying this rebuttable presumption in the Lanham Act, the TMA removes uncertainty in the law and makes it easier for trademark owners to establish entitlement to injunctive relief.

Throwing out unused trademarks

If you’ve ever conducted a trademark search at the USPTO website, you’ve probably noticed an overabundance of registrations. In many cases, a trademark is registered in more categories of products and services than is really needed. Trademarks are often registered for good or services that either never have been used, or are not current being used, in connection with the mark. The TM Act provides new ways of clearing some of them out.

Expungement

The TM Act makes non-use a grounds for cancellation of a trademark registration. Cancellation of a trademark upon proof of abandonment is not new. The ability to remove unused goods or services from the coverage of the registration is. Moreover, an expungement does not require proof that the registrant has stopped using the mark since it was registered. To the contrary, it allows claims that a trademark has never been used (or has never been used for specified goods or services) to be made.

It is now possible to initiate a proceeding (called an “expungement”) to cancel a registration or narrow the categories of goods and services on the grounds of non-use.

Anyone may file an expungement petition. It may be brought between three and ten years after the registration. Until December 27, 2023, petitions to expunge trademarks may be brought with respect to registrations that are more than three years old, even if they are more than 10 years old. Thereafter, a petition may be brought only if the registration is between three and 10 years old.

Reexamination

The TM Act also makes it possible to petition the Trademark Office to reexamine the registration of a trademark. Under the TM Act, it will now be possible to seek the cancellation of a trademark on the grounds of that it was not actually used in commerce prior to the registration date. There is a 5-year limitations period for filing such a petition, measured from the date of issuance of the registration.

Who may initiate a proceeding

Anyone may initiate a proceeding. In addition, the USPTO may commence one on its own initiative. The filing fee is $400 per class of goods or services.

Appeals

The director’s determination with respect to an expungement or reexamination petition may be appealed. A party seeking to challenge the determination must first seek review from the Trademark Trials and Appeals Board (TTAB). Further review may then be sought from the Federal Circuit court of appeals.

Madrid Protocol registrations

A foreign or Madrid Protocol registration under Sections 44(e) or 66 cannot be cancelled on this new ground of non-use if the nonuse was due to special circumstances excusing the non-use.

Office Action response deadlines

Currently, trademark applicants have six months to respond to an Office Action. The TM Act authorizes the USPTO to specify a shorter time period.

The USPTO has announced that people (other than Madrid Section 66(a) applicants) will have three months, instead of six, to respond to office actions. For $125, you can request a 3-month extension. This shorter time period, however, will not be implemented until December 1, 2022.

Third-party evidence in examinations

Finally, the Act facilitates the submission and consideration of evidence submitted by third parties during the examination process. In the past, opponents of an application for registration typically initiated an opposition proceeding to contest a registration application. Under the new provisions, we are likely to see more attempts to forestall registration even before the application is published for opposition.

The Law Office of Tom James

Need help with a trademark matter? Whether it’s an application to register a trademark, an expungement or re-examination petition, an opposition proceeding, or an appeal, Cokato Minnesota attorney Thomas James at the Tom James Law Office can help you.

Take my course on Trademark Law

Enroll in attorney Tom James’s 90-minute on-demand course, “Trademark Law: Key Concepts” at Udemy to learn the basics of U.S. trademark law.

The Top Copyright Cases of 2021

Scales of justice relating to top copyright cases as compiled by Minnesota attorney Thomas James

by Minnesota attorney Thomas James

I initially had set out to put together a “Top 10” list. Really, though, I think the list can be boiled down to three. Admittedly, this is only my personal opinion. Time will tell. Nevertheless, for what it’s worth, here is my list of the 3 Top Copyright Cases of 2021.

Google v. Oracle America

Google v. Oracle America, __ U.S. __, 141 S. Ct. 1183 (2021)

This United States Supreme Court decision is the culmination of many years of litigation between tech giants Google and Oracle.

At issue was Google’s copying of 11,500 lines of code of the Java SE API. Illustrating the murkiness of the “fair use” concept, the United States Supreme Court declared that this was fair use.

The case highlights the relatively weak protection that copyright offers for computer programs. The functional aspects of a computer program are better protected by patent than copyright.

It is dangerous to read too much into the decision, though. It does not mean that computer program copyrights are worthless To the contrary, the case was decided on the basis of fair use. Google’s copying of the code was infringement. “Fair use” simply means that a court came to the conclusion that a particular defendant should not be held liable for a particular kind or instance of infringement. Another court could come to a different conclusion in a different case involving different parties, a different kind of computer program, and a different kind of use of it.

Warhol v. Goldsmith

Andy Warhol Foundation for the Visual Arts v. Goldsmith, No. 19-2420 (2nd Cir. 2021).

This case is notable primarily because of the celebrities involved. Lynn Goldsmith took a photograph of Prince in her studio in 1981. Andy Warhol created a series of silkscreen prints and pencil illustrations based on it. Goldsmith sued for infringement of the copyright in the photograph. The district court found in favor of Warhol, citing the transformative use doctrine. The Court of Appeals reversed, asserting that the district court misapplied the four “fair use” factors.

Reversals of “fair use” findings on appeal are not uncommon. They illustrate the nebulous nature of the four-factor test that courts use to evaluate fair use claims.

Design Basics v. Signature Construction

Design Basics v. Signature Construction, No. 19-2716 (7th Cir. 2021).

Design Basics holds registered copyrights in thousands of floor plans for single-family homes. The company attempts to secure “prompt settlements” of infringement claims. The court ruled against the company on an infringement claim, finding that these designs consisted mainly of unprotectable stock elements, much of which were dictated by functional considerations and existing design considerations.

Architectural designs are protected by copyright, but the protection is thin. Only a “strikingly similar” work can give risk to an infringement claim. In other words, infringement of an architectural work requires a showing of extremely close copying.

Need help with a copyright registration or a copyright matter? Contact the Cokato Copyright Attorney Tom James.

Diversifying Copyrights

Photo by Christina@wocintechchat.com on Unsplash

by Thomas James, Law Office of Tom James, Cokato MN

This week, the Copyright Alliance and the U.S. Chamber of Commerce’s Global Innovation and Policy Center hosted a program called A Conversation on Diversity and Inclusion in Copyright. The aim was “to discuss ways to promote and facilitate increased participation from underrepresented communities.” (www.msk.com/newsroom-events-1343.)  

The facts about racial and ethnic disparities in copyright registration ownership are hard to come by. Findings in a George Washington University Faculty Research Paper, however, are a bit surprising. Black authors and creators, it seems, are actually over-represented here. Apparently, it is authors of Hispanic origin who are under-represented.

Economic Inequality

Regardless of the reason for the meeting, it is good to see that it is bringing attention to the long-standing economic unfairness of the U.S. system .To give you an idea of what the problem is, think about this: The registration fee for a single work is $125 ($65 or $45 if you file online). A lucky few score jobs as technical writers or creators of other kinds of content. Their copyrights are almost always owned by their employers as “works made for hire.” This can shift responsibility for fees to the employer. The down side of “work for hire” is that the real artists and authors lose ownership of their creative works.

For freelance writers and creators, the going rate for article writers is $0 to $20 per article. Meanwhile, due to the proliferation of free music on the Internet, the average songwriter can expect to make $0 or less per song. Only a tiny percentage of songwriters make enough money to cover the cost of registering a copyright in a song. As for painters, well, there’s a reason “starving artist” is such a familiar expression. Group registration is sometimes possible, and when it is, some money can be saved that way. In many cases, however, this option is not available.

Learn how to register music copyrights yourself

The United States and most other countries, by treaty, do not require a work to be registered in order to get copyright protection. A copyright arises as soon as a creative work is fixed in a tangible medium of expression. That’s great, but owning a copyright won’t do you much good if you need a registration certificate to enforce it. As I said in an Illinois Law Review article, the United States should eliminate its pre-litigation registration requirement.

Maybe the diversity, equity and inclusion movement will finally bring Congress around to doing something.

Need help registering a copyright? Contact Thomas James at the Law Office of Tom James. I also offer online courses.

Copyright as Killjoy: Can You Be Sued For Sharing a Joke?

Take my joke.
Please.
I could use the statutory damages.

Take my joke.

Please.

I could use the statutory damages

by Thomas James, Law Office of Tom James

You might have noticed that Spotify has removed a lot of comedy performances recently. You might be wondering what is going on. Did Jim Gaffigan offend someone? Are Kevin Hart and John Mulaney defecting to form an underground comedy railroad with Dave Chappelle? No, it isn’t either of those things. Yes, somebody probably was offended, but that is not the reason behind Spotify’s decision. It’s copyright.

The problem arises from the fact that when a company licenses the right to share recorded performances, it is really licensing the rights in at least two different works: the sound recording and the underlying composition. The performance and the thing performed. When a person writes a song, he or she owns a copyright in the composition. If someone makes an authorized recording of a performance of it, then that person owns a copyright in the sound recording. The songwriter owns the copyright in the music; the producer and performing artists own copyright in the sound recording.

In the music world, different agencies manage the licensing of these two kinds of copyrights. SoundExchange manages a lot of the licensing of sound recordings; agencies like ASCAP and BMI handle the licensing of musical compositions. Historically, performing rights organizations like ASCAP and BMI have focused on music. They have not collected royalties on behalf of spoken word creators. Recently, however, new organizations have sprung up to fill this need. One of them is Spoken Giants. The organization reportedly has acquired an impressive roster of clients – Jeff Foxworthy, Lewis Black, Patton Oswald, Tom Segura, the estate of Don Rickles. According to their website, the company represents tens of thousands of works.

Spotify has removed a lot of spoken word content because an impasse has been reached in negotiations over spoken word copyright licensing. The Copyright Royalties Board, pursuant to a consent decree, sets songwriter royalty rates for various kinds of uses of musical compositions, which agencies like ASCAP and BMI use when administering music licenses. Until recently, however, no one has gone to bat for writers of spoken word performances. There are no governmentally established royalty rates for them. They must be privately negotiated. Spotify has pulled many spoken word performances from its offerings because a negotiated agreement has not been reached yet.

Should your dad be shaking in his boots?

The U.S. Copyright Act allows for the recovery of statutory damages even if no actual damage can be proven to have resulted from an infringement. Liability for infringement can exist even if no one profited from it or intended to profit from it. This would seem to make everyone potentially liable for repeating a joke they heard someone else tell. Is it true? Can a person be sued for repeating a joke someone else made up?

Copyright protection for jokes

In theory, it is possible for a joke, or at least a particular telling of it, to be protected by copyright. There are some important limitations on liability, however.

Fixation

First, of course, there can be no infringement if there is no copyright. It must be established that the joke is, in fact, protected by copyright. A copyright in a work does not exist unless and until the work is fixed in a tangible medium. If you hear someone telling a joke that nobody has ever recorded or written down, and the telling of the joke was not recorded, either, then no copyright exists. No copyright, no infringement.

Originality and creativity

Copyrights cannot be acquired by copying someone else’s work. If, for example, Paula, without securing an assignment of the copyright or at least a performance license, repeats a joke she read in a book, and Henny hears and repeats it, Paula should not win if she sues Henny for infringement. The owner of the copyright in the book might have a claim, but Paula would not.

The independent creation doctrine is another obstacle to copyright protection for jokes. If two people independently create the same joke, and neither one copied the other – not even subconsciously – then they each own a copyright and neither one is guilty of infringing the other.

Public domain

If a joke is so old that the copyright has expired, then it is in the public domain. In that case, anyone can use it any way they want. Currently, the term of most (not all, but most) copyrights is 70 years plus the life of the author. In many cases, this would easily put your dad in the clear.

By the way, if you are looking for some good medieval humor, try Poggio Barcciolini’s Facetiae.

Expression vs. facts

Copyright only protects expression; it does not protect facts or information. Consequently, the facts stated in a joke, if any, are not protected by copyright. For example, consider the joke, “There is a scale that measures not only weight but also body fat, bone mass, and water percentage. Now you can choose four different reasons to be ashamed.” Most of that joke conveys factual information. That part is not protected by copyright. The only question is whether the punch line is.

Idea vs. expression

Since copyright only protects expression, it makes sense that an idea also does not get copyright protection.

The distinction between an idea and an expression might be the biggest obstacle to copyright protection of a joke there is. A situation with humorous implications is considered an unprotectable idea. This was established in the case of Nichols v. Universal Pictures Corp, 45 F.2d 119 (2d Cir. 1930). There, a writer sued a production company for creating a comedy show involving a Jewish man marrying an Irish-Catholic woman, with characters demonstrating stereotypical characteristics of members of those demographic groups. Although the writer had created a story based on the same premise, he lost the case. The court ruled that the ideas on which a story was based are not protected by copyright.

This can present a formidable problem for comedy writers. Even if they come up with a great idea for a joke or comedy routine, they will not be able to prevent other comedians from using it, so long as these other comedians come up with sufficiently different ways of telling it.

The idea-vs-expression dichotomy is made even more difficult to surmount by virtue of the merger doctrine. This is a legal principle that says that if there are limited ways to express an idea, the idea will merge with the expression of the idea and the expression will receive no copyright protection. The classic examples are a recipe or a set of rules for a game. A recipe is an idea. A set of rules for a game is also an idea. Therefore, to the extent a recipe merely states what is needed to know to make the concoction, it is not protected by copyright.

To the extent a rules list merely explains how the game is played, it is not protected by copyright. In these cases, the idea is said to have “merged” with the expression, so the expression does not receive copyright protection. The only expression in a recipe or a set of game rules that gets copyright protection is that which is not necessary to the preparation of the dish or the playing of the game. (This probably explains why so many recipe publishers include extraneous anecdotes and fluff in them.)

You can imagine how this could present a problem for a gag-writer. Jokes express ideas, hopefully amusing ones. For this reason, a bare-bones pun, or a one-liner like the ones that Henny Youngman and Rodney Dangerfield would tell, are less likely to be protected by copyright than are comedy routines that involve a lot of extraneous detail.

Fair use

The Fair Use Doctrine is a defense to copyright that may present an obstacle to the enforcement of a copyright in a joke sometimes. In general, the doctrine says that people may use copyrighted material in commentary, reporting, teaching, research, and sometimes other uses, if four broadly worded factors weigh in favor of allowing such use without liability for infringement:

  • The purpose and character of the use
  • The nature of the work
  • The amount and substantiality of the portion copied
  • The effect of the use on the market for the work.

Unfortunately, “fair use” is not a well-defined concept. Courts are not always in agreement about how to balance these factors. Appellate reversals of district judge opinions on the matter are not uncommon.

Epitaph

Just kidding.

Recognizing the rights of comedy writers does not have to mean the death of fun. For one thing, it is important to keep in mind what “infringement” means and what it does not mean. There are lots of uses a person can make of copyrighted material without putting himself or herself at risk of being sued for infringement. If you buy a copyrighted painting or print, you can display it in your home, so long as you do not open your home to the public and you do not charge a fee for your guests to view it. The same is true of a movie on DVD. You can play a DVD recording that you purchased as many times as you want to in your own home, so long as you do not invite the public in and so long as you do not charge a fee.

Similarly, there should be no problem with re-telling a joke to family and friends in private. Although even limited reproduction and distribution of a copyrighted work can result in infringement liability, an unauthorized performance or display only becomes infringement, in the United States, when it is a public one. Re-sharing a joke in a public forum could be a problem, if none of the obstacles to infringement enforcement that I have discussed in this article apply. Re-telling a joke to members of your family or a small circle of friends for no fee, on the other hand, is not likely to get you into hot water.

Not for copyright reasons, anyway.

Minnesota attorney Thomas James is a lawyer at the Law Office of Tom James in Cokato, MN. He is the author of several law review articles and books, including E-Commerce Law and Website Law. In his spare time, he likes to look for spare time.

“Sales and Use Tax Nexus: The Way Forward for Legislation” by Tom James

By Tom James, Published in 2020

By Tom James, Published in 2020

Read the full article at: open.mitchellhamline.edu

“Sales and Use Tax Nexus: The Way Forward for Legislation,” Mitchell-Hamline Law Journal of Public Policy & Practice, vol. 41, no. 1 (2020)

Corbello v. Valli: Copyright Estoppel and Asserted Truths

You can claim a copyright in fiction, but no one can claim a copyright in facts. What happens if somebody copies something you claimed to be fact but it turns out to be fiction? Can you sue for infringement?

by Thomas B. James, copyright attorney at the Law Office of Tom James in Cokato, Minnesota

It is black letter law that copyright only protects expression. No one can claim a copyright in facts. As long as you use your own words, you are free to repeat factual information that someone else has reported, even if the report is protected by copyright.

What happens, though, if the information you copy, although purportedly factual, turns out to be fictional?

Logically, you might think that the copying could be infringement  In some cases, depending on what and how the material is copied, it might be. Under the copyright estoppel doctrine, however, copying material that the author/publisher represented to be factual is not infringement even if the purported facts are not true.

The Ninth Circuit recently had occasion to expound upon this principle.

Corbello v. Valli

Corbello v. Valli et al., Case No. 17-16337 (9th Cir., September 8, 2020) was a copyright infringement suit brought by the estate of a co-author of an autobiography of Tommy De Vito, one of the original members of the Four Seasons. The work was never published, De Vito, however, gave a copy of it to Frankie Valli. Valli was working on Jersey Boys, a Broadway play based on the band’s history. The plaintiff claimed that various scenes in the play were copied from the unpublished autobiography.

After trial, the jury found that infringement had occurred. The judge, however, entered judgment as a matter of law for the defendants, holding that the alleged infringement involved historical facts. As such, the judge ruled, they were not protected by copyright.

On appeal, the plaintiff argued that the copied scenes included embellishments that were not historical facts. As such, counsel argued, they should be treated as fiction rather than facts. The Court disagreed. It didn’t matter if the scenes presented in the autobiography were actually true or not, the Court ruled. Under the doctrine of copyright estoppel, which the Court renamed “the asserted truth doctrine,” neither actual facts nor material that is presented as factual are protected by copyright.

Copyright estoppel is a well-established copyright defense. It holds that if an author represents a work to be factual, or historically accurate, then he or she cannot later claim, in court, that the work, or parts of it, are fictional. The principle is predicated on the idea that readers of purportedly nonfiction works should be entitled to rely on the author’s representations about the truthfulness of the matters asserted in them.

Asserted Truths

Because the term estoppel is bound up with the concepts of culpability and detrimental reliance, the Court decided the term does not accurately reflect the nature of the defense in copyright law. In copyright law, a defendant may invoke the defense without having to make a showing that the author intended to make a false representation on which other people would rely. It also is not necessary to prove that any particular person was actually deceived. It is enough to show, simply, that the author intended readers to think the work was factual.

Published vs. unpublished works

Because a showing of detrimental reliance is not necessary, it does not matter if the work is published or unpublished. The pertinent question is simply whether the material, as written, purports to be factual.

Truthfulness as a literary device

Sometimes a work of fiction will be presented in what looks like a traditional nonfiction format. A short story writer, for example, might choose to tell the tale through a series of imagined newspaper articles. A screenplay might include a scene where a fictional news anchor reports a plot development as if it were a breaking news story. Orson Welles gained notoriety for using truthfulness as a literary device in his radio play, “War of the Worlds.” He told the fictional story through a series of what sounded like actual news broadcasts. Fictional works that use truthfulness as a literary device do not come within the meaning of “purported facts.”

The question in all cases is how the work, taken as a whole, is presented. Although many people mistook Welles’ play for actual news broadcasts, he included multiple disclaimers during the broadcast to the effect that it was just a fictional story made up for entertainment purposes. It was not presented as fact.

Unbelievable facts

The Court correctly observed that material may be excluded from copyright protection when it is presented as factual even if people are not likely to believe it. The alleged “facts” reported in a  purportedly autobiographical account of being abducted by aliens, for example, may be repeated without fear of copyright infringement liability. The pertinent question is not whether the information presented in a work is, in fact true.  What matters is whether it is presented as a true statement of fact.

Conclusion

Corbello is only precedential in the Ninth Circuit. Nevertheless, because it builds logically upon a cogent exposition of the asserted rights doctrine (nee copyright estoppel), courts in other jurisdictions are likely to consider it persuasive.

The key take-away: Copyright protects expression, not ideas, facts, or purported facts.

Contact Thomas James at the Law Office of Tom James.

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