2023 was a big year for U.S. intellectual property law. Major developments occurred in every area. Here are the highlights.
Copyright
Fair Use
Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith et al.
This was one of the top copyright cases of 2022. It was a case that was pushing the limits of the transformative fair use of photographs. The Supreme Court issued a ruling in the case in May. The decision is significant because it finally reined in the “transformative use” doctrine that the Court first announced in Campbell v. Acuff-Rose Music back in 1994. In that case, 2 Live Crew had copied key parts of the Roy Orbison song, “Oh, Pretty Women” to make a parody of the song in its own rap style. The Court held that the 2 Live Crew version, although reproducing portions of both the original song and the original recording of it without permission, transformed it into something else. Therefore, even though it infringed the copyright, the 2 Live Crew version was for a transformative purpose and therefore protected as fair use.
In the thirty years since Campbell, lower courts have been applying the “transformative use” principle announced in Campbell in diverse and divergent ways. Some interpretations severely eviscerated the copyright owner’s exclusive right to make derivative works. Their interpretations often conflicted. What one circuit called transformative “fair use” another circuit called actionable infringement. Hence the need for Supreme Court intervention.
In 1984, Vanity Fair licensed one of photographer Lynn Goldsmith’s photographs of Prince to illustrate a magazine article about him. Per the agreement, Andy Warhol made a silkscreen using the photograph for the magazine and Vanity Fair credited the original photograph to Goldsmith. Unknown to her, however, Warhol proceeded to make 15 additional works based on Goldsmith’s photograph withour her permission.. In 2016, the Andy Warhol Foundation for the Arts licensed one of them to Condé Nast as an illustration for one of their magazines. The Foundation received a cool $10,000 for it, with neither payment nor credit given to Goldsmith. The Foundation then filed a lawsuit seeking a declaration that its use of the photograph was a protected fair use under 17 U.S.C. § 107. The district court granted declaratory judgment in favor of the Foundation. The Second Circuit Court of Appeals reversed, ruling that the four-factor “fair use” analysis favored Goldsmith. The Supreme Court sided with the Court of Appeals.
Noting that it was not ruling on whether Warhol’s making of works using the photograph was fair use, the Court limited its analysis to the narrow question whether the Foundation’s licensing of the Warhol work to Condé Nast was fair use. On that point, the Court determined that the use of the photograph to illustrate a story about Prince was identical to the use Goldsmith had made of the photograph (i.e., to illustrate a magazine article about Prince.) Unlike 2 Live Crew’s use of “Oh, Pretty Woman,” the purpose of the use in this case was not to mock or parody the original work.
The case is significant for vindicating the Copyright Act’s promise to copyright owners of an exclusive right to make derivative works. While Warhol put his own artistic spin on the photograph – and that might have been sufficient to sustain a fair use defense if he had been the one being sued – the Warhol Foundation’s and Condé Nast’s purpose was no different from Goldsmith’s, i.e., as an illustration for an article about Prince. Differences in the purpose or character of a use, the Court held, “must be evaluated in the context of the specific use at issue.” Had the Warhol Foundation been sued for displaying Warhol’s modifications of the photograph for purposes of social commentary in its own gallery, the result might have been different.
Although the holding is a seemingly narrow one, the Court did take the opportunity to disapprove the lower court practice of ending a fair use inquiry at the moment an infringer asserted that an unauthorized copy or derivative work was created for a purpose different from the original author’s.
Statute of Limitations and Damages
Warner Chappell Music, Inc. v. Nealy
The U.S. Supreme Court has granted certiorari to review this Eleventh Circuit decision. At issue is whether a copyright plaintiff may recover damages for infringement that occurred outside of the limitations period, that is, infringement occurring more than three years before a lawsuit was filed.
The circuits are split on this question. According to the Second Circuit, damages are recoverable only for acts of infringement that occurred during the 3-year period preceding the filing of the complaint. The Ninth and Eleventh Circuits, on the other hand, have held that as long as the lawsuit is timely filed, damages may be awarded for infringement that occurred more than three years prior to the filing, at least when the discovery rule has been invoked to allow a later filing. In Nealy, the Eleventh Circuit held that damages may be recovered for infringement occurring more than three years before the claim is filed if the plaintiff did not discover the infringement until some time after it first began.
A decision will be coming in 2024.
Artificial Intelligence
Copyrightability
Thaler v. Perlmutter, et. al.
This was an APA proceeding initiated in the federal district court of the District of Columbia for review of the United State Copyright Office’s refusal to register a copyright in an AI-generated work. In August, the district court upheld the Copyright Office’s decision that an AI-generated work is not protected by copyright, asserting that “human creativity is the sine qua non at the core of copyrightability….” For purposes of the Copyright Act, only human beings can be “authors.” Machines, non-human animals, spirits and natural forces do not get copyright protection for their creations.
An appeal of the decision is pending in the D.C. Circuit Court of Appeals.
Infringement
Many cases that were filed or are still pending in 2023 allege that using copyrighted works to train AI, or creating derivative works using AI, infringes the copyrights in the works so used. Most of these cases make additional claims as well, such as claims of unfair competition, trademark infringement, or violations of publicity and DMCA rights.
I have been blogging about these cases throughout the year. Significant rulings on the issues raised in them are expected to be made in 2024.
Trademark
Parody Goods
Jack Daniels’s Properties Inc. v. VIP Products
For more information about this case, read Balancing the First Amendment on Whiskey and Dog Toys.
This is the “parody goods” case. VIP Products used the “Bad Spaniels” name to market its dog toys, which were patterned on the distinctive shape of a Jack Daniel’s whiskey bottle. VIP filed a lawsuit seeking a declaratory judgment that its product did not infringe the Jack Daniel’s brand. Jack Daniel’s counterclaimed for trademark infringement and dilution. Regarding infringement, VIP claimed First Amendment protection. Regarding dilution, VIP claimed the use was a parody of a famous mark and therefore qualified for protection as trademark fair use. The district court granted summary judgment to VIP.
The Supreme Court reversed. The Court held that when an alleged infringer uses the trademark of another (or something confusingly similar to it) as a designation of source for the infringer’s own goods, it is a commercial, not an expressive, use. Accordingly, the First Amendment is not a consideration in such cases.
Rogers v. Grimaldi had held that when the title of a creative work (in that case, a film) makes reference to a trademark for an artistic or expressive purposes (in that case, Fred Astaire and Ginger Rogers), the First Amendment shields the creator from trademark liability. In the Jack Daniel’s case, the Court distinguished Rogers, holding that it does not insulate the use of trademarks as trademarks (i.e. as indicators of the source or origin of a product or service) from ordinary trademark scrutiny. Even though the dog toys may have had an expressive purpose, VIP admitted it used Bad Spaniels as a source identifier. Therefore, the First Amendment does not apply.
The Court held that the same rule applies to dilution claims. The First Amendment does not shield parody goods from a dilution claim when the alleged diluter uses a mark (or something confusingly similar to it) as a designation of source for its own products or services.
International Law
Abitron Austria v. Hetronic International
Here, the Supreme Court held that the Lanham Act does not have extraterritorial reach. Specifically, the Court held that Sections 1114(1)(a) and 1125 (a)(1) extend only to those claims where the infringing use in commerce occurs in the United States. They do not extend to infringement occurring solely outside of the United States, even if consumer confusion occurs in the United States.
The decision is a reminder to trademark owners that if they want to protect their trademark rights in other countries, they should take steps to protect their rights in those countries, such as by registering their trademarks there.
Patents
Patents are beyond the scope of this blog. Even so, a couple of developments are worth noting.
Enablement
Amgen v. Sanofi
In this case, the Supreme Court considered the validity of certain patents on antibodies used to lower cholesterol under the Patent Act’s enablement requirement (35 U.S.C. sec. 112(a)). At issue was whether Amgen could patent an entire genus of antibodies without disclosing sufficient information to enable a person skilled in the art to create the potentially millions of antibodies in it. The Court basically said no.
If a patent claims an entire class of processes, machines, manufactures, or compositions of matter, the patent’s specification must enable a person skilled in the art to make and use the entire class. In other words, the specification must enable the full scope of the invention as defined by its claims.
Amgen v. Sanofi, 598 U.S. ____ (2023)
Executive Power
In December, the Biden administration asserted that it can cite “excessive prices” to justify the exercise of Bayh-Dole march-in rights. The Biden Administration also has continued to support a World Trade Organization TRIPS patent waiver for COVID-19 medicines. These developments are obviously of some concern to pharmaceutical companies and members of the patent bar.
Conclusion
My vote for the most the significant IP case of 2023 is Andy Warhol Foundation v. Goldsmith. Lower courts had all but allowed the transformative use defense to swallow up the exclusive right of a copyright owner to create derivative works. The Supreme Court provided much-needed correction. I predict that in 2024, the most significant decisions will also be in the copyright realm, but they will have to do with AI.
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