Copyright Claims Board (CCB) Update

The CASE Act of 2020 establishes a Copyright Claims Board (CCB). Attorney Tom James explains what the CCB is and what it will do.

by Tom James, Minnesota attorney

In December 2020, Congress passed the Copyright Alternative in Small-Claims Enforcement Act of 2020. More commonly known as the CASE Act, it directs the Copyright Office to establish a Copyright Claims Board (CCB). The CCB is a three-member board within the Copyright Office. It is empowered to hear and decide copyright infringement claims amounting to $30,000 or less.

CCB staffing

The Copyright Office has nearly completed all of the steps needed to be undertaken in order to implement the CASE Act. Copyright claims officers have been selected. Attorney-advisors, a program specialist, and a paralegal have been selected.

Rulemaking

The Office published a Final Rule on August 18, 2021, with a Clarification published April 22, 2022.

A final rule for small claims procedures for library and archive opt-outs and class actions was published on March 9, 2022.

A final rule on initiation of proceedings and related procedures was published on March 25, 2022.

A final rule on law student representatives and business entity representation was published on April 8, 2022.

The comment period has closed for a final rule on active proceedings on evidence.

The CCB is expected to be up and running in June, 2022.

What the CCB will look like

The new CCB is a voluntary process for claims totaling up to $30,000. Claimants may elect to file claims in federal court instead if they prefer.

Although located in Washington, DC, proceedings will be conducted entirely electronically and remotely. It will not be necessary to travel to the District of Columbia in order to file or defend against a claim.

Proceedings will be presided over by three judges appointed by the Librarian of Congress.

The statute of limitations (normally three years) applies to claims filed with the CCB in the same way it applies to court proceedings.

Again, the proceeding is voluntary. A party who is served a claim that has been filed with the CCB has a right to opt out. The party filing the claim then has the right to file the claim in court instead.

The CCB has the power to issue a determination by default if a party fails to respond to a properly served claim or fails to participate in the proceeding without exercising the opt-out right. The CCB may also dismiss or issue a default determination against a claimant who fails to prosecute the claim, misses deadline, or otherwise fails to comply with board rules.

Registration

One major advantage of the new CCB is that an infringement claim may be filed even if the Copyright Office has not issued a registration certificate yet. In order to file a claim, however, you must have submitted an application to register the work, either prior to filing the infringement claim or simultaneously with filing the CCB claim.

If your registration application is refused, the CCB will dismiss your claim without prejudice. This means you may still file the claim in federal court.

This is different from the rule that applies when filing a claim initially in federal court. A claim of infringement of a U.S. work normally may not be filed in federal court until after the U.S. Copyright Office has either issued a registration certificate or officially refused to issue a registration.

Available remedies

Total damages awarded cannot exceed $30,000. As in a court filing, the claimant may elect either statutory damages, on one hand, or actual damages or lost profits on the other.

The CCB does not have the power to issue injunctions. It can, however, include in its determination a requirement that a party stop or modify certain activities if the party has agreed to do so.

Attorney fees and costs are not recoverable unless the other party has acted in bad faith. There is a $5,000 cap if the other party is represented by an attorney. Otherwise, the cap is $2,500. In some extraordinary circumstances, a higher amount may be awarded.

Review and appeal of CCB decisions

If you disagree with a CCB determination, you have several options:

  • Request CCB reconsideration
  • Seek review by the Register of Copyrights
  • Request a federal district court to reverse or correct the CCB determination (only possible in certain circumstances.)

Enforcement of CCB decisions

If an infringer fails to pay the amount the CCB has ordered, the claimant may bring an action in federal district court to enforce payment.

Need help with a copyright matter? Contact attorney Thomas James.

For Whom the Za Tolls Update

You’re driving the Florida Keys when suddenly you get a hankering for pizza. Tragically there is no toll booth in sight. Minnesota attorney Tom James explains.

by Minnesota attorney Tom James

The trademarks at issue in the case Minnesota attorney Tom James discusses

“You’re driving over the ocean in the Florida Keys when suddenly you get a hankering for a slice of pizza. Unfortunately, there is no toll booth in sight. What will you do?”

Some of you might remember an article I wrote several years ago that began this way. I was alluding to the strange case of a state turnpike authority that was suing a pizzeria for trademark infringement. Here is a very belated update on that case.

The lawsuit

The New Jersey Turnpike Authority filed a federal lawsuit against Jersey Boardwalk, a Florida pizzeria, for trademark infringement. It claimed the pizzeria’s mark was so similar to its mark that people were likely to mistakenly assume the pizza restaurant was connected in some way with the New Jersey Turnpike Authority. It accused the pizzeria of trading on the good will of the New Jersey Turnpike Authority. It sought an injunction, compensatory damages, and treble damages, claiming trademark infringement, dilution, and unfair competition.

Disposition

The court ultimately dismissed the lawsuit on jurisdictional grounds. The court noted that the pizzeria does not have any stores in New Jersey. It had only made sales to a handful of New Jersey customers, and they were online sales. These contacts with New Jersey were “too attenuated to put the Defendants on notice that they would be subject to a trademark infringement suit in New Jersey,” the court ruled.

Nor did the company’s use of the word “Jersey” amount to purposeful availment of the privilege of doing business in New Jersey. Using the name of a state to conjure consumer interest in nostalgia or exoticism is not what “purposeful availment” of a state’s services or resources means, for purposes of Due Process analysis.  

USPTO proceedings

Years before this litigation, the Turnpike Authority had filed an opposition to the pizzeria’s application to register its mark. The United States Trademark Trials and Appeals Board (TTAB) dismissed the Turnpike Authority’s opposition to the pizzeria’s registration of the trademark for restaurant services.

After the registration certificate was issued, the Turnpike Authority filed a petition to cancel it. The U.S. TTAB denied the petition . The Board found that the Turnpike Authority failed to establish likelihood of confusion with its registered trademark for highway maintenance and information services. The Board did not believe that consumers would expect restaurant and highway maintenance services to come from the same source.

It is one of those kinds of cases that can make you simultaneously scratch and shake your head.

Man with raised eyebrow. This is not Cokato attorney Tom James
(Not me.)

Contact attorney Tom James

Need help with a trademark or copyright matter? Contact Cokato, Minnesota attorney Tom James.

Newly Public Domain Works

The Cokato Copyright Attorney shares excerpts from selected works that are in the public domain now.

by Minnesota attorney Thomas James (not Ernest Hemingway, the guy in the picture)

I am, of course, late with this. Where other writers have simply listed works by author, title and description, however, this article includes quotations from them. Does it get any better than this? I think not. 

Why are they public domain now?

Copyright protection is not eternal. It only lasts for the number of years specified by law. After that, the work is said to have entered the public domain, meaning that anyone may copy, distribute, perform, display or make new works from it.

In the United States, the U.K., Russia, and most of the European Union, a copyright lasts for 70 years after the author’s death. Accordingly, the works of authors who died in 1951 are now in the public domain. In Canada and most of Asia and Africa, copyrights last for 50 years after the author’s death.

Different rules apply to older works. I explain these in more detail in my books. For our purposes here, we can safely say that U.S. works first published in or before 1926 are now in the public domain, and all pre-1923 sound recordings are now in the public domain.

These rules are subject to exceptions. For example, the U.S. terms of copyright for works made for hire are different from the terms of copyright for other kinds of works.

Derivative works might not be in the public domain

I have seen a lot of articles declaring that when a work enters the public domain, people no longer need to worry about being sued for copyright infringement. Technically speaking, this is true, but it is important to clearly identify the version of the work that is in the public domain.

Suppose Arthur Conan Doyle published a “Sherlock Holmes” mystery prior to 1923. Suppose, further, that he published a sequel to it in 1928. In the sequel, he added certain details that did not appear in the previous version. If you were to try your hand at writing a Holmes mystery now, and you included some of the details that first appeared in the 1928 story, then you may be guilty of copyright infringement.

Similarly, the fact that the original Winnie the Pooh story is now in the public domain does not mean that movies based on the book are, too. A derivative work may still be copyright-protected even after the work on which it is based has entered the public domain.

Here is a small sampling of some of the many works that are in the public domain this year.

The Sun Also Rises

“you can’t get away from yourself by moving from one place to another.”

–Ernest Hemingway

Ernest Hemingway as a young man

The Castle

“Illusions are more common than changes in fortune.”

–Franz Kafka

The Moral Obligation to Be Intelligent

“It is hard to believe that the declaration of antifascism is nowadays any more a mark of sufficient grace in a writer than a declaration against disease would be in a physician or a declaration against accidents would be in a locomotive engineer. The admirable intention in itself is not enough and criticism begins and does not end when the intention is declared.”

–John Erskine

Main Street

“She did not yet know the immense ability of the world to be casually cruel….”

–Sinclair Lewis

Soldier’s Pay

“The saddest thing about love, Joe, is that not only the love cannot last forever, but even the heartbreak is soon forgotten.”

–William Faulkner

The Waves

“the poem, I think, is only your voice speaking.”

–Virginia Woolf

Notes on Democracy

“Under the pressure of fanaticism, and with the mob complacently applauding the show,democratic law tends more and more to be grounded upon the maxim that every citizen is,by nature, a traitor, a libertine, and a scoundrel.In order to dissuade him from his evil-doing the police power is extended until it surpasses anything ever heard of in the oriental monarchies of antiquity.”

–H.L. Mencken

Weary Blues

I got the weary blues

And I can’t be satisfied.

Got the weary blues

And can’t be satisfied.

I ain’t happy no mo’

And I wish that I had died.

Langston Hughes

Nanook of the North (film)

"Nanook of the North" movie poster

Purple Cow

I never saw a purple cow;

I never hope to see one.

But I can tell you anyhow

I’d rather see than be one!

Gelett Burgess

Pack Up Your Troubles

‘Pack up your troubles in an old kit bag, and smile, smile, smile.”

–George Asaf

Walter Trier’s illustrations for Emil and the Detectives

Minnesota attorney Thomas James using Walter Trier's public domain cover art as an illustration in this article

Winnie the Pooh

“Some people talk to animals. Not many listen though. That’s the problem.”

–A.A. Milne

Unicolors v. H&M Hennes & Mauritz

Unicolors | Cokato attorney Thomas James shows how Congressional inaction to fix a bad law can lead to unusual interpretive gymnastics in the judicial branch.

By Thomas James, Minnesota attorney

In Fourth Estate Public Benefits Corp. v. Wall-Street.com LLC, 139 S. Ct. 881, 889 (2019), the United States Supreme Court interpreted 17 U.S.C. § 411(a) to mean that a copyright owner cannot file an infringement claim in federal court without first securing either a registration certificate or an official notice of denial of registration from the Copyright Office. In an Illinois Law Review article, I argued that this imposes an unduly onerous burden on copyright owners and that Congress should amend the Copyright Act to abolish the requirement. Unfortunately, Congress has not done that.

Congressional inaction to correct a harsh law with potentially unjust consequences predictably leads to judicial decisions exercising the power of statutory interpretation to ameliorate the consequences. The Court’s decision today in Unicolors v. H&M Hennes & Mauritz, __ U.S. __ (No. 20-915, February 24, 2022) is a case in point.

The district court proceedings

Unicolors owns the copyrights in various fabric designs. The company sued H&M Hennes & Mauritz (H&M), claiming that H&M had infringed them. The jury rendered a verdict in favor of Unicolor, but H&M moved for judgment as a matter of law (notwithstanding the jury verdict). H&M argued that Unicolors had failed to satisfy the requirement of obtaining a registration certificate prior to commencing suit. Although Unicolors had obtained a registration, H&M argued that the registration was not a valid one.

Specifically, H&M argued that Unicolors had improperly applied to register multiple works with a single application. According to 37 CFR § 202.3(b)(4) (2020), a single application cannot be used to register multiple works unless all of the works in the application were included in the same unit of publication. The 31 fabric designs, H&M contended, had not all been first published at the same time in a single unit; some had been made available separately exclusively to certain customers. Therefore, they could not be registered together as a unit of publication.

The district court denied the motion, holding that a registration may be valid even if contains inaccurate information, provided the registrant did not know the information was inaccurate.

The  Ninth Circuit’s reversal

On appeal, the Ninth Circuit Court of Appeals acknowledged that Unicolors had failed to satisfy the “single unit of publication” requirement. The Court, however, viewed Unicolors’ characterization of the group of works, in its application, as a “unit of publication” as a mistake of law rather than fact. It is normally a bedrock principle of the law that although mistake of fact may sometimes be asserted as an excuse, ignorance of the law generally cannot be. Since Unicolors had known the relevant facts, namely, that some of the designs had been reserved for some customers separately from the others, its characterization of the group, in the copyright application, as a “unit of publication” was a mistake of law, not fact. Applying the traditional rule that ignorance of the law is not an excuse, the Ninth Circuit held that Unicolor’s registration was not valid.

The United States Supreme Court granted certiorari.

The Supreme Court’s reversal of the reversal

Section 411(b)(1) says that a registration is valid unless it contains information that the applicant knew was inaccurate. Bucking the traditional maxim that ignorance of the law is not an excuse, the Court interpreted the word know, in this context, to include knowledge of either an applicable fact or an applicable law.  The Court drew upon legislative history suggesting that Congress intended to deny infringers the ability to exploit loopholes.

This is actually a good point. A major objective of international copyright treaties and conventions has been to eliminate formalities in the enforcement of copyrights. Registration is one such formality. One may legitimately ask, however, whether Congress’s decision to impose a requirement of obtaining either a certificate of registration or an official denial of registration from the Copyright Office as a precondition to enforcing a copyright reflected an intention to impose and enforce formalities despite the clear intent of treaties by which the United States has agreed to be bound. Not all other countries impose this formal prerequisite to copyright enforcement. In fact, legal scholars both here and abroad have criticized the United States for enacting and enforcing this formality.

The Court dismissed the traditional legal maxim that ignorance of the law is not an excuse by suggesting it only applies to criminal laws. As Justice Thomas points out in his dissent, however, a requirement to “know” a law (or a legal requirement) ordinarily is satisfied, even in civil cases, by constructive knowledge; actual knowledge is not necessary. Citizens generally are charged with the responsibility of knowing what the laws are, whether they are criminal or civil laws. It is not a defense to the imposition of punitive damages in a tort case, for example, that the defendant did not know that he might be subject to a larger damages award if he acted with intentional or reckless disregard for other people’s rights or lives. That ignorance of the law is not an excuse is a large part of the reason for the existence of legal advisers and the legal profession in general.

Thomas points out that in a previous cases, the Court has distinguished between a “willfulness” requirement, which requires proof of actual knowledge, and a “knowledge” requirement, as to which either actual or constructive knowledge normally may suffice. See Cheek v. United States, 498 U.S. 192, 201–203 (1991); Intel Corp. Investment Policy Comm. v. Sulyma, 589 U. S. ___ (2020) (slip op., at 6–7). Indeed, the Court has acknowledged that other “knowledge” requirements in the Copyright Act may be satisfied by either actual or constructive knowledge.

Reading between the lines a little, I think there is room for speculation that some members of the Court regard the prelitigation registration requirement as a formality which, as such, is not really in keeping with the spirit of international treaties calling for the abolition of copyright formalities. Rather than allow a formality to stand in the way of an attempt to enforce a copyright, it is conceivable that the Court chose to deploy its power of judicial interpretation to effect what it believed to be the most just result in this case.

Conclusion

Another old legal maxim I remember from law school is “Hard cases make bad law.” It is too soon to tell how the Court’s decision in this case will play out in practice, but the Court’s allowance of an infringement action to proceed despite the fact that the plaintiff provided false information (whether factual or legal) when securing the registration does seem to open a fairly large can of worms.

Of course, the Court’s decision does not rule out a dismissal of an infringement action if the defendant can prove that the plaintiff had actual knowledge that he or she was providing false information at the time of applying for registration. Actual knowledge, however, can be very difficult to prove.

More importantly, how much mileage are courts going to let people get out of a claim that they did not know the law when they applied for registration? For example, will a person who purchases a copy of a book and then files an application to register the copyright in it be allowed to proceed with an infringement claim because he “did not know” that merely buying a copy of a work does not amount to a purchase of the copyright? (cf. these guys.)

Of course, copyright ownership can still be disputed in an infringement proceeding even after the Court’s decision in this case. Except in the rare case where it can be proven that an applicant actually knew his works did not qualify for the kind of registration application he used, however, it seems like the Court’s decision opens up the copyright registration application process to a great deal of potential abuse, at least when the “error” is not obvious enough for the Copyright Office to detect from the face of the application itself.

Once again, I would suggest that perhaps Congress should just consider abolishing the pre-litigation registration requirement.

Digital Tokens and Trademarks

The Nike and “JRR Token” cases

by Cokato attorney Tom James

Minting and selling digital tokens can raise copyright issues, trademark issues, or both. I talked about copyright issues in a previous post. In this article, I outline the trademark aspects of digital tokens.

Image that was displayed on the website to which the domain name jrrtoken.com resolved, displayed in Tom James article solely for purposes of illustrating an article about digital tokens and trademarks

Blockchains and digital tokens

You can find a quick explanation of what blockchains and digital tokens (fungible and non-fungible) are in this article.

People use digital tokens for various reasons, including:

  • Cryptocurrency. Fungible tokens are used for this purpose.
  • Authentication. Some companies use NFTs as an authentication system for their customers, especially for high-end or luxury goods.
  • Advertising/Publicity. Companies sometimes distribute collectibles or other branded merchandise as a way of increasing brand awareness. NFTs offer one more way of doing that.
  • Revenue. Non-fungible tokens (NFTs) increasingly are sold at auctions. Sometimes a decent profit can be made this way.

Trademarks

A trademark is something that operates as an identifier of the source or origin of a product or service, distinguishing a particular product or service from those marketed by other people or companies.

Many kinds of things can serve as trademarks. Words, letters, symbols, logos, sounds, motions, colors, trade dress (product packaging or design), architecture, etc.  – and combinations of them – can potentially serve as trademarks, provided they operate as such.

Functional aspects of a product, packaging or other trade dress cannot be claimed as trademarks. This includes both utilitarian and aesthetic functionality. The presence of a drive-through window cannot be claimed as a fast food company’s trademark. Why not? Because it is not just ornamental; it serves a useful function. The orange flavor of a beverage or chewable tablet cannot be claimed as a trademark because it enhances the consumer’s enjoyment (or tolerance) of the product. That is to say, it serves an aesthetic function. You get the idea.

Trademark protection for digital tokens

Like an identifier of any other product or service, an identifier of the source or origin of an NFT or other digital token may be protected as a trademark, provided it operates as trademark, is distinctive, is nonfunctional, and is not likely to cause consumer confusion.

There are people and companies whose only business is dealing in digital products and services.  In addition, a growing number of owners of existing trademarks for non-digital products (such as shoes, books, clothing, and so on) are now marketing digital goods, as well.

For a list of major brands that have filed NFT trademark applications in the United States, check out this Trademark Tote Board.

Some examples of companies that have filed for trademark protection of identifiers of NFTs include Nike, Converse, Mattel, Lion’s Gate, Estee Lauder Cosmetics, Kiss Catalog Ltd. Famous personalities (or their representatives), such as Kobe Bryant and Jay-Z are also filing trademark applications. The New York Stock Exchange has filed an application to register “NYSE” as a trademark for a marketplace for the trading of NFTs.

The most common classes in which digital tokens and services related to them are registered are IC 9 (downloadable software and media); IC 35 (business services), IC 36 (financial, banking, and real estate services), and IC 42 (scientific and technical services). This is not an exhaustive list.

In the United States, a trademark arises by operation of law when a valid mark is used in commerce as a trademark. By “valid mark,” I mean a mark that meets the requirements for one in the United States. It must be distinctive, nonfunctional, not likely to cause confusion about the source or origin of a product or service, and it must be used in commerce as a source identifier.

The JRR Token

The recent WIPO decision in Tolkien Estate Ltd. V. Domain Investments/Matthew Jensen illustrates the interplay of digital tokens and trademark law.

In this case, a Florida resident marketed and offered for sale digital tokens corresponding to a digital currency. He registered “jrrtoken.com” as a domain name for the conduct of this business. J.R.R. Tolkien’s estate filed a UDRP claim challenging this registration. The estate owns the trademark in “J.R. R. Tolkien,” which is registered as a trademark in both the U.K. and the U.S. The website of this domain name resolved to a website at “thetokenofpower.com.” That website included images of wizards, including one which the panel found looked like Gandalf from The Hobbit, and the phrase, “The One Token That Rules Them All.”

The panel found that “jrrtoken,” although not identical, is confusingly similar to “J R R Tolkien,” noting that “[w]hen viewed quickly, the disputed domain name and the . . . trademark look similar.”

The panel concluded that the name was selected for the purpose of creating a false and misleading association with J. R. R. Tolkien and profiting from the author’s reputation and goodwill.

Using a trademark in parody is a protected fair use. The panel here, however, did not regard the use to be parody. It found nothing humorous or funny in the domain name. It was “just a domain name chosen due to its similarities with the Complainant’s trademarks to take commercial advantage of its evocation.” The website was “clearly a commercial venture, which is clever but not humorous.”

Finding that the registration was in bad faith, the panel ordered the domain name transferred to the Tolkien estate.

Nike v. StockX

This month, Nike, Inc. filed a complaint in federal court against StockX, LLC for trademark infringement, dilution and other causes of action allegedly arising out of StockX’s alleged unauthorized use of Nike trademarks to mint NFTs. StockX allegedly claims its NFTs represent physical  Nike products that it stores in its vault.

This case demonstrates the importance of the distinction between an NFT and the product it represents. The first sale doctrine normally protects a reseller from trademark infringement liability. For example, if you legally purchase a pair of Nike brand shoes, then you are entitled to resell them at a garage sale without incurring trademark infringement liability. If StockX legally purchased Nike products and is reselling them without altering the labels on them, then the first sale doctrine might shelter the company from trademark infringement liability. Tokens, however, are not shoes.

It is sometimes possible for two different companies to use the same (or substantially similar) marks to market different kinds of goods or services. For example, one company may use DELTA to market airline services; another may use it to market faucets; and still another may use it to market electronics. The same mark, however, generally cannot be used to market the same, similar or related goods or services.

What is a “related” product or service? Basically, it is a product or service that a consumer could reasonably expect a company to expand into selling. For example, a consumer could reasonably expect a company that currently only sells computers to expand into the market for printers and other computer peripherals as well. Even if a company is currently only selling computers, you should expect to be sued for trademark infringement if you use their trademark to sell peripherals.

Expect courts to be called upon to decide whether consumers could reasonably expect a company to expand into the NFT market. That might be easier for the court in the Nike case to determine, if Nike establishes that it made its intention to move into the NFT market publicly known. It might not be as easy for a court to decide this question in other cases. Expect to see a lot more companies announcing their entry, or intention to enter, into the digital token market.

Dilution

It should be noted that it is not always safe to use an existing company’s trademark even for completely different, unrelated goods. If the trademark is famous, then using it in a way that blurs its distinctiveness or tarnishes its reputation is also unlawful. This is known as “dilution.”

Licensing

If you have a great idea for an NFT using characters or other trademarks that someone else owns, consider obtaining a license to use the trademarks. True, you might have to share profits with the trademark owner, but that could be a small price to pay compared to how much you stand to lose if you are hauled into court for violating trademark rights.

Need help with a trademark registration?

Ready to register a trademark? Contact the Law Office of Tom James.

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

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