Plaintiff Stephanie Sinclair brought suit against Defendant Mashable and its parent company, alleging copyright infringement when Mashable posted Sinclair’s photograph on its website without Sinclair’s authorization.  The Court originally granted Defendants’ Motion to Dismiss, finding that the Defendants had a valid sublicense from Instagram to post the photograph. However, on a rare grant of a Plaintiff’s Motion for Reconsideration, the Court revised its original decision and determined that there was insufficient evidence showing that Instagram granted Mashable a sublicense.

            Stephanie Sinclair is an acclaimed photojournalist whose work addresses gender and human rights issues.  She posts her photographs both on a searchable personal website and on her Instagram account.  The particular photograph at issue in this case is entitled “Child, Bride, Mother/Child Marriage in Guatemala,” which concerns child brides in Guatemala. It was posted publicly on her Instagram account. Mashable is a digital media website, known for content generation and aggregating news stories from across the internet. Mashable reached out to Sinclair to license the photograph, but Sinclair refused Mashable’s offer.  Mashable published the photograph anyway, embedding the Instagram version of the photograph in an article about female photographers and refusing Sinclair’s request to take the photograph down.

            The Court maintained its original holding that Sinclair, by agreeing to Instagram’s Terms of Use, authorized Instagram to grant sublicenses to Instagram API users.  Consequently, Instagram content creators must still endeavor to understand exactly what rights they are giving away when they choose to make public posts by reading through Instagram’s Terms of Use.

However, while the Court originally held that Instagram had granted Mashable a sublicense to embed the photograph, on reconsideration it determined that Instagram’s API Policy may not convey explicit consent to the API users to use copyrighted works.  A license to a copyrighted work must convey the licensor’s explicit consent. The Policy’s statement that it was intended to “help broadcasters and publishers discover content, get digital rights to media, and share media using web embeds” could be subject to different interpretations.

While Sinclair will get another chance to pursue her claim against Mashable, there is no saving grace for Instagram account-holders whose content is shared by the explicit permission of Instagram.

In a summary order, the Court of Appeals for the Second Circuit recently side-stepped a difficult question currently facing copyright law: whether the human body is a sufficiently tangible medium of expression to warrant copyright protection.  

Plaintiff Sammy Mourabit (“Mourabit”), a makeup artist, provided makeup services for a 2013 fashion photoshoot (the “2013 Photoshoot”).  Defendant Steven Klein (“Klein”) photographed the 2013 Photoshoot.  Two years later, Klein collaborated with Defendants Francois Nars and Shiseido Inc. (“Shiseido”) to create a holiday makeup collection.  In promoting the collection, Klein and Shiseido used one of the photographs Klein had taken during the 2013 Photoshoot without crediting Mourabit.  In 2018, Mourabit obtained a copyright registration for a drawing of the relevant makeup artistry.  Shortly thereafter, Mourabit filed suit in New York state court alleging copyright infringement of the registered drawing, and state law claims of unjust enrichment, unfair competition, and misappropriation based on the alleged misuse of the makeup artistry itself.  The case was promptly removed to the Southern District of New York.  In a subsequent court filing, Mourabit conceded that his copyright claim should be dismissed, leaving the issue of whether the state law claims were preempted by the Copyright Act.  Upon a motion to dismiss by the Defendants, the Court dismissed Mourabit’s copyright claim given his earlier concession and further dismissed his state law claims on the basis that they were indeed preempted. 

State law claims are preempted by the Copyright Act if (1) “the claim applies to a work of authorship fixed in a tangible medium of expression and falling within the ambit of one of the categories of copyrightable works,” and (2) “the claim seeks to vindicate legal or equitable rights that are equivalent to one of the bundle of exclusive rights already protected by copyright law.”  The District court found Mourabit’s claims preempted under this test.  Mourabit appealed to the Second Circuit on the limited grounds that under the first prong of this test, the makeup artistry (1) does not fall within the scope of one of the categories of protectable works; and (2) the makeup was not fixed in a tangible medium of expression. 

For preemption purposes, the first aspect of this challenge requires only that the work fit into one of the copyrightable categories “in a broad sense.”  The Court found that the makeup fell within “pictorial, graphical, and sculptural” works, because the makeup is “essentially a painting that is displayed on a person’s face”, thus “potentially subject to copyright protection” and within the “broad ambit” of this category for preemption purposes.

As for the second aspect of this challenge, “[a] work is ‘fixed’ in a tangible medium of expression when its embodiment in a copy …, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.”  17 U.S.C. § 101.  Mourabit challenged the District Court’s holding on the grounds that human skin is not a sufficiently “tangible medium of expression” and that the makeup as applied was not sufficiently permanent to constitute fixation.  The Second Circuit, however, affirmed the decision of the District Court on the basis that the makeup was fixed in the photograph taken by Klein with Mourabit’s authorization, expressly refusing to answer whether skin is a tangible medium of expression.

The Second Circuit’s opinion leaves much to be desired, as the question of whether the human body is a tangible medium of expression is but one of many questions presented by the rise of tattoo and makeup culture.  The Court even noted that this question has sparked a “lively academic debate.”  Since, as the Court put it, these types of works are essentially paintings on skin, it seems likely that their copyrightability will be confirmed, albeit most likely subject to licenses granted to the owners. 

The Federal Circuit recently issued two opinions regarding fee awards in patent cases, both of which show the Court’s reticence to award fees in contravention of the “American Rule” where each party bears its own costs.  As such, if patent litigants seek fees as an exception to this rule (e.g., under 35 U.S.C. § 285), they should tie those fees to judicial proceedings and provide fact-specific arguments that demonstrate the reasonableness of their positions.

First, in Amneal Pharm., LLC v. Almirall, LLC, the Federal Circuit held that 35 U.S.C. § 285, which permits “[t]he court in exceptional cases [to] award reasonable attorney fees to the prevailing party,” does not authorize the Federal Circuit to award fees for work completed during an inter partes review (IPR).  Amneal moved to voluntarily dismiss its appeal to the Patent Trial and Appeal Board’s final written decision in an IPR.  Although Almirall agreed with the dismissal, it, nonetheless, sought attorney fees for the IPR proceeding pursuant to § 285.  In denying Almirall’s request, the Federal Circuit relied on the plain meaning of the statute language, as well as binding precedent from the Court of Customs and Patent Appeals (“CCPA”).  As predecessor to the Federal Circuit, the CCPA heard appeals from the Patent Office (but not from the district courts) and refused to interpret § 285 to apply to proceedings before administrative agencies.  Indeed, § 285 refers to “the court” which “speaks only to awarding fees that were incurred during, in close relation to, or as a direct result of, judicial proceedings.”[1]

Second, for fees requests properly associated with judicial proceedings, the prevailing party’s request must establish the exceptional nature of the losing party’s case with ample fact-specific support.  In Munchkin, Inc. v. Luv N’ Care, Ltd., Munchkin sued Luv N’ Care (“LNC”) for trademark infringement and unfair competition claims.  A year later, with the court’s approval, Munchkin amended its complaint to include patent infringement claims, among others.  Later in the litigation, Munchkin dismissed its non-patent claims with prejudice; subsequently, the patent-at-issue was invalidated through an IPR.  The district court affirmed the Board’s decision, and Munchkin dismissed its patent infringement claims.  Based on LNC’s arguments that Munchkin should have been aware of the substantive weakness of the patent’s validity,[2] the district court found the case exceptional and granted LNC’s motion for fees.[3]

The Federal Circuit held that the district court had abused its discretion and reversed the grant of attorney’s fees because the issues that determine an exceptional case were not litigated (the case was dismissed), so a fuller explanation of the court’s assessment of LNC’s position was needed.  “The merits … were all freshly considered issues for the district court … but LNC failed to make the detailed, fact-based analysis of Munchkin’s litigating position to establish they were wholly lacking in merit.”[4]  The Federal Circuit pointed out that IPR institution and invalidation did not in make Munchkin’s case unreasonable.  Nor did Munchkin’s later dismissal of the case and LNC’s superficial assertion of Munchkin’s purported awareness of the weakness of the patent’s validity—without a clear invalidity or inequitable conduct theory—make Munchkin’s position unreasonable.

The takeaway: Litigants seeking fees and a finding that a case was exceptional—especially when the case has not been fully litigated by the court—must provide a fact-intensive, substantive analysis and explanation of the weakness and unreasonableness of the losing party’s position through which the court can support such a finding.

[1] Amneal Pharm. LLC, No. 2020-1106, 2020 WL 2961939, at *5.

[2] Notably, the Board adopted LNC’s broader claim construction, which was the lynchpin for the invalidating prior art, and the district court adopted Munchkin’s narrower claim construction in the Markman hearing. 

[3] LNC’s fee request included the fees for litigating the IPR.  However, the Federal Circuit did not address the issue of whether 35 U.S.C. § 285 allows for the recovery of attorney fees in the IPR proceeding.

[4] Munchkin, No. 2019-1454, at *9.

The cannabis industry is subject to a confusing, complex web of laws that differ among each state, all while marijuana remains illegal at the federal level.  Unable to register trademarks related to cannabis and marijuana with the federal U.S. Patent and Trademark Office or seek protection in federal courts, business owners in the cannabis industry must turn to state law and courts to protect the good will of their marks.  Rock City illustrates the relief offered by state courts to cannabis IP owners, the Arkansas Circuit Court granting a preliminary injunction in favor of a plaintiff cannabis dispensary’s trademark.

Rock City Harvest, doing business as Harvest Cannabis Dispensary, moved for a preliminary injunction against Natural State Wellness Dispensary (NSWD) and Natural State Wellness Enterprises (NSWE) for changing their names to Harvest House of Cannabis and Harvest of Newport, respectively. Rock City had adopted the name in 2017, submitted with its application to operate a medical cannabis dispensary in Conway, Arkansas.  It was the only applicant to use the name Harvest, and it was the first to register Harvest as a trademark with the Arkansas Secretary of State.  In 2019, it received approval to change the name on its license from Rock City Harvest to Harvest Cannabis Dispensary.  It began using the name on signage in August of that year and selling cannabis in labeled packaging in October.  NSWD and NSWE changed their names in January of 2020, NSWD first selling cannabis in February 2020, and as of April 2020, NSWE had not made any sales of cannabis.

Instead of extensively examining the legality of the parties’ operations, as a federal court would have done, the Arkansas court moved on to evaluate the plaintiff’s motion under Arkansas law and the preliminary injunction factors—whether the plaintiff is likely to succeed on the merits, whether the plaintiff is likely to suffer irreparable harm without the injunction, whether the balance of hardship is in the plaintiff’s favor, and whether an injunction is in the public interest.  The court found that the parties were direct competitors selling the same medical cannabis, and that defendants’ use was confusingly similar and subject to instances of actual confusion.  Further, that plaintiff was harmed by the confusing use. 

Significantly, the court noted that while there was no national market for the sale of cannabis, the plaintiff was the first to use Harvest for the sale of cannabis in Arkansas, and Arkansas was not a “zone of natural expansion” for use of Harvest in relation to cannabis in other states.  Rock City, at 6.  Other cannabis businesses using the term “Harvest” “disclose[d] to [their] investors that [they] will not be able to register any United States federal trademarks for cannabis products. The public is entitled to rely on this disclosure.”  Id. Thus, seeking protection and being the first user of a mark within state borders is critically important for receiving protection in that particular state, as protection is not automatically extended across state lines.

The Arkansas Court’s decision provides a promising example to cannabis trademark owners that a vindication of their rights is possible at least at the state level, a stopgap where the federal level fails.  Further, it emphasizes the importance of cannabis IP owners to follow all possible procedures within cannabis-legal states to register and protect their trademarks, as they are subject to that protection within a limited geographic area.  

A federal judge recently ruled that the inclusion of the chorus of a children’s song in a documentary about burlesque dancers amounted to fair use.  The decision shows just how impactful the evolving transformative use issue can be in a fair use analysis.

Tamita Brown, along with two coauthors (“the Authors”), wrote, arranged, and recorded the children’s song Fish Sticks n’ Tater Tots (the “Song”) in 2011.  On March 3, 2017, Defendants, Inc. (“Amazon”), Netflix, Inc. (“Netflix”), and Apple Inc. (“Apple”) (collectively, “Defendants”) released the documentary film Burlesque:  Heart of the Glitter Tribe (the “Film”) on their streaming platforms.  The Film depicts a group of burlesque dancers in Portland, Oregon by means of interviews, backstage happenings, and on-stage performances.  One of these segments features an on-stage performance by “Babs Jamboree,” whose food-themed performance explored the concept of the “reverse mermaid,” i.e., a mermaid with the head of a fish but the legs of a woman.  At one point during the performance, “Jamboree steps behind a sign labeled ‘hot oil’ and emerges, having removed her fish head and changed into brown leggings to appear as though she has been transformed into fish sticks.”  At this point, the Song plays for eight seconds, repeating the chorus “fish sticks n’ tater tots” five times.

In February 2019, the Authors filed suit in the United States District Court for the Southern District of New York alleging copyright infringement based on the unauthorized reproduction and performance of the Song.  In November 2019, Defendants jointly moved to dismiss the claims against Netflix and Apple pursuant to Federal Rule of Civil Procedure 12(b)(6), and for judgment on the pleadings on the claims against Amazon pursuant to Rule 12(c).  Defendants’ motions were based entirely on fair use. 

The Court granted Defendants’ motions, finding their use of the Song in the Film to constitute a fair use.  As to the first factor, the purpose and character of the use, the Court found the allegedly infringing use to be sufficiently transformative.  The Song, which was originally written as a children’s song about eating a cafeteria lunch, had been used in a risqué scene depicting “decidedly mature themes that portray fish sticks not as a lunch food, but as a component of a ‘reverse mermaid.’”  In reaching this conclusion, the Court was not persuaded by the fact that the Song was unaltered, finding that the “new and different function” sufficient to supporting a finding that the use was transformative.  The Court also declined to expressly rule on whether the Film was a documentary serving an educational purpose or more commercial in nature, noting the potential commercial nature of the use was not significant given the transformative nature of the use.  Concerning the second factor, the nature of the copyrighted work, the Court found this factor neutral because the transformative nature of the use rendered this factor “of limited usefulness.”  Likewise, factor three, the amount and substantiality used, was found to favor fair use because the portion of the Song used, despite potentially being the heart of the song, was necessary to achieve the transformative purpose of Defendants’ use.  Finally, the Court found the fourth factor, the effect of the use on the potential market for the work, weighed in favor of fair use because the Film targeted a different market than the Song.  Again pointing to the same consideration, the Court noted “[a]s the Film’s use is transformative of the original, the potential market … would not opt to acquire the copy of a limited eight seconds of the Song in preference to the original.”  The Court discounted arguments concerning the effect of this use potential licensing markets because they were not alleged in the complaint, and only made in response to Defendants’ motions.

This case demonstrates how the transformative use test has all but supplanted the statutorily mandated four-factor test, leading to perverse results that ignore key criteria such as the commercial nature of the use.  Such results would likely not be achieved under a faithful application of the traditional (again, statutorily mandated) four-factor test, and demonstrate the ongoing erosion of the value of copyrights in the modern era.

On May 13, 2020, the United States District Court for the Central District of California granted summary judgment to all corporate and individual defendants with respect to Plaintiff’s non-source-code, “know-how”-based Defend Trade Secret Act (“DTSA”) (18 U.S.C. §§ 1830-1839) claims seeking relief for misappropriation of trade secrets.  All source-code based claims were previously dismissed.  The court reasoned that for each claim of trade secret misappropriation, the Plaintiff failed to “identify the trade secrets and carry the burden of showing that they exist.”[1]

Three individuals (Gray, Dusseault, and Efremidze) worked for Calaborate developing the scheduling application Klutch.  Calaborate attempted to sell Klutch to StubHub.  However, the deal did not close, and Gray, Dusseault, and Efremidze left Calaborate to work as independent contractors for StubHub.  Calendar Research subsequently purchased Calaborate and the Klutch assets.  Calendar Research brought claims against StubHub, its corporate parent, eBay, and the former employees under the DTSA and the Computer Fraud and Abuse Act (18 U.S.C. § 1030).  The court previously granted partial summary judgment to the corporate defendants because StubHub had not used any of Calaborate’s source code in its application.  However, Calendar Research was not precluded from pursuing claims that StubHub misappropriated the code in ways other than directly using it in its applications.

To bring a successful trade secret misappropriation claim, the plaintiff must demonstrate that: (1) it possessed a trade secret, (2) the defendant misappropriated the trade secret, and (3) the defendant’s misappropriation caused or threatened damage to the plaintiff.  However, with three years of litigation and two rounds of in-depth discovery including hundreds of thousands of documents, Plaintiff was unable to demonstrate that it possessed a trade secret.  Namely, Plaintiff did not describe any trade secrets with sufficient particularity to separate them from general knowledge in the trade or special knowledge of those skilled in the trade.

When the purported trade secrets concern a highly specialized field (such as software) or are incremental variations, “a more exacting level of particularity may be required to distinguish the alleged trade secrets from matters already known to persons skilled in that field.”[2]  Nonetheless, Plaintiff, through its expert, presented broad, catchall phrases and voluminous lists of technical terms rather than identifying the specific set of “methods, techniques, processes, procedures, programs, or codes” that could establish certain aspects of Klutch as trade secrets.[3]  Without such particularity, the court further would be unable to determine whether the purported trade secret has “independent economic value . . . from not being generally known” or if Plaintiff had “taken reasonable measures to keep [the] information secret.”[4]

Although the former employees allegedly kept or wiped Calaborate’s devices, deleted or delayed the return of software keys, or retained Calaborate documents on third-party, online platforms, the court could not determine if purported trade secrets were misappropriated because such trade secrets were not sufficiently defined by Plaintiff.

An important takeaway from this case is the importance of trade secret owners having an internal system to sufficiently identify, categorize, and sort the trade secrets so that any necessary litigation can be brought quickly and efficiently, and those trade secrets can be identified with sufficient particularity to increase the likelihood of surviving motions to dismiss and motions for summary judgment.

[1] Calendar Research LLC v. StubHub, Inc. et. al., No. 2:17-cv-04062-SVW-SS, at *4 (C.D. Cal. May 13, 2020).

[2] Id. at *7.

[3] 18 U.S.C. § 1839 (3).

[4] 18 U.S.C. § 1839 (3)(A)-(B).

A contentious copyright opinion by the Sixth Circuit reversed the district court’s summary judgment decision, finding that fact issues precluded summary judgment on whether one songwriter repudiated the other’s co-authorship, or whether their agreement transferred ownership and, as such, could be terminated pursuant to 17 U.S.C. § 203.  Between the three Circuit Judges, the ruling resulted in a majority opinion, a separate concurring opinion, and a separate dissenting opinion.

The Everly case centers on the authorship of the song Cathy’s Clown, a popular song from 1960 performed by the Everly Brothers, Phil and Don.  Both Everly brothers were initially credited as co-authors, and both received royalties from the publisher of the song, to whom the brothers had assigned the copyrights in the composition.  Around 1980, Don Everly began to claim that he was the sole author of the composition, eventually entering into an agreement with Phil whereby Phil agreed to release all of his rights in the composition to Don.  Following that agreement, Don received all royalties and public credit.  The issue was whether this agreement effectuated a repudiation of authorship or a repudiation of ownership.  If the former, it was too late for Phil’s heirs to assert he was an author and terminate the agreement under 17 USC 203.  If the later, it was not. 

With proper notice, the owner of a copyright has the right to terminate a grant of that copyright after a period of time has passed.  When his right to notice the termination of his copyright grant to the publisher arose in 2011, Don exercised it, claiming sole ownership of the composition.  After Phil’s death, his heirs also filed notices of termination—in 2014 to the publisher, and in 2016 to Don seeking to regain Phil’s rights in the song from Don.  The district court found that Don had repudiated Phil’s authorship in 2011, triggering the statute of limitations on Phil’s claim for authorship.  As the statute of limitations had run, the district court found for Don Everly on summary judgment.  On appeal, the Sixth Circuit considered whether Don had expressly repudiated his brother’s authorship claim and triggered the statute of limitations in 2011.

A claim for copyright ownership must be brought within three years of a plain and express repudiation of ownership by one party against another. Express repudiation can be by direct communication, the publishing of the work without appropriate credit, or if a co-author learns that they are not receiving royalties which they are owed.  The Sixth Circuit differentiated a claim for copyright ownership with a claim for copyright authorship, but found that express repudiation should also apply to an authorship claim to avoid uncertainty. 

In considering Don’s actions towards Phil, while there was disagreement among the judges as to when a repudiation of authorship claim accrues (at the time of discovery of repudiation or upon occurrence of an event creating a cognizable claim), the majority agreed there was an issue of fact as to whether repudiation of authorship occurred.  Judge Guy, dissenting, believed that there was no question that Don expressly repudiated Phil’s authorship claim more than three years before Phil’s heirs filed suit.

The Sixth Circuit’s decision demonstrates the importance of properly identifying authorship of copyrighted works from the outset and the risks associated with efforts to correct authorship after the fact.  When such a situation arises, copyright owners should make clear in any settlement agreement that the issue of authorship is being resolved to avoid the possibility that the dispute may need to be addressed again 35 years later.

On April 27, 2020, in a 5-4 decision with two dissenting opinions, the United States Supreme Court held that the annotations included in Georgia’s official statute are not copyrightable.  The ruling, authored by Chief Justice Roberts, was based on the majority’s conclusion that work performed in official legislative capacity does not qualify as “authorship” under the Copyright Act, thereby precluding the vesting of copyright protection.

The State of Georgia has one official code—the “Official Code of Georgia Annotated,” or OCGA—which includes the text of every Georgia statute currently in force, as well as various non-binding supplementary materials.  Those non-binding supplementary materials, specifically annotations providing summaries and listing related materials, were at issue in the case.  Georgia employs a “Code Revision Commission” to assemble the OCGA.  The Commission in turn contracts with LexisNexis, who performs the bulk of the work, pursuant to a work-made-for-hire agreement granting Lexis the exclusive right to publish, distribute, and sell the OCGA. 

Georgia and the Commission sued Public.Resource.Org (“PRO”), a nonprofit organization, after PRO posted the OCGA online and distributed copies of the OCGA to third parties.  The District Court concluded that the annotations were eligible for copyright protection and thus granted summary judgment and permanent injunction in favor of the State.  On appeal, the Eleventh Circuit reversed, finding the work “attributable to the constructive authorship of the People” and thus not subject to copyright protection.

The Supreme Court affirmed the opinion of the Eleventh Circuit, although for different reasons.  The Supreme Court found the Eleventh Circuit’s test was not necessary given the straightforward application of the “the government edits doctrine.”  Under this doctrine, “officials empowered to speak with the force of law cannot be the authors of—and therefore cannot copyright—the works they create in the course of their official duties.”  Extending century-old precedent in which the Court held that judges cannot be authors of the works they prepare “in the discharge of their judicial duties,” the Court held that legislators likewise cannot be authors of works created in discharge of their legislative duties.  Because the Court found that the Commission “functions as an arm” of the Georgia legislature and the annotations were prepared under Georgia law as an act of legislative authority, the Court held that the Commission could not be an author of the annotations entitled to copyright protection.  The Court warned of the implications of creating an “economy-class” version of the code, which may not contain some of the clarifying aspects of what the Court called the “first-class” version of the law.  Specifically, the Court noted:

If everything short of statutes and opinions were copyrightable, then States would be free to offer a whole range of premium legal works for those who can afford the extra benefit.  A State could monetize its entire suite of legislative history.  With today’s digital tools, States might even launch a subscription or pay-per-law service.

Notably, two dissenting opinions were offered.  In the first, Justices Thomas and Alito disagreed with the majority’s reading of precedent, finding it a conclusory “magic wand of ipse dixit.”  According to this dissent, the factors warranting public accessibility of judicial opinions and official legislative history—most notable, the force of law—were not present for the annotations at issue.  And countering the majority, they noted “[p]erhaps, to the detriment of all, many States will stop producing annotated codes altogether.  Were that to occur, the majority’s fear of an “economy-class” version of the law will truly become a reality.”  Justice Ginsburg also issued a dissenting opinion, in which Justice Breyer joined, on the grounds that the annotations do not fall within the realm of lawmaking: “the placement of annotations in the OCGA does not alter their auxiliary, nonlegislative character.”

On April 23, 2020, the United States Supreme Court resolved an even circuit split[1] by unanimously holding that willful infringement is not a pre-condition to a profits award in a trademark infringement suit.  This ruling increases the likelihood that, in the affected Circuits, more trademark infringement suits will settle for higher amounts or will go to trial, as trademark owners hold out for potential profits awards rather than settle.  In the underlying district court case, the jury found that Fossil had infringed Romag’s trademark but had not done so willfully.  Therefore, the district court, following Second Circuit precedent, refused Romag’s request for Fossil’s profits earned as a result of the trademark violation, which was affirmed by the Federal Circuit.

In vacating the Federal Circuit’s judgment and finding that willfulness is not required for an award of profits, the Supreme Court relied on the plain language of the governing provision of the Lanham Act, 15 U.S.C. § 1117(a): “When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established . . . the plaintiff shall be entitled, . . . subject to the principles of equity to recover . . . defendant’s profits,” and held that willfulness is a precondition for trademark dilution under § 1125(c), not 1125(a), the provision for false or misleading use of trademarks.

The Supreme Court further rejected Fossil’s attempt to rely on the statute’s “subject to the principles of equity” language to show that willfulness is required to disgorge profits for false or misleading use of a trademark.  The phrase “principles of equity” is more applicable to fundamental rules across many claims and practice areas rather than a particular rule about mens rea in this distinct area of law, as supported by Supreme Court precedent, language in other sections of the Lanham Act, dictionaries, and legal treatises and handbooks.  Additionally, the Supreme Court noted that the history of trademark law does not add clarity about the mental state requirement because cases exist on both sides of the willfulness wall.

Numerous other sections in the Lanham Act directly address mens rea requirements for remedies, e.g., §§ 1117(b), 1117(c), and 1118.  Therefore, the Supreme Court concluded, the omission of a mens rea requirement in the provision for false or misleading use of trademarks is significant and was, presumably, intentional.  The Supreme Court acknowledged that “a trademark defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate,” but did not provide guidance for determining when an award of lost profits is appropriate.  Thus, it has been left to the discretion of the courts to determine when the facts of a case warrant an award of an infringer’s profits.  However, the Supreme Court’s comment that mental state is a “highly important consideration” suggests that disgorgement of profits may still be reserved by the courts for cases where, even if not explicitly found by the finder of fact, willfulness is strongly implied.

The Supreme Court’s holding in Romag Fastener’s, Inc. v. Fossil Group, Inc. is an important development for both trademark owners and alleged infringers.  The ruling is likely to spark more litigation in the overturned circuits by trademark owners who are now able to seek a disgorgement of profits more easily.  With a better chance of garnering a sizeable lost profits award—without the need for defendant’s conduct to be found willful—plaintiffs will be motivated to take their cases through trial in the hopes of a substantial damages award.  No longer are damages akin to a binary, all-or-nothing event where, with willfulness, both lost profits and treble damages were available, but absent such a finding, a path toward a sizeable damages award was largely foreclosed.

[1] The First, Second, Eighth, Ninth, Tenth, and D.C. Circuits required willful infringement prior to disgorgement of an infringer’s profits, but the Third, Fourth, Fifth, Sixth, Seventh, and Eleventh did not.  Hodges, Benjamin, Final Briefs Filed with SCOTUS in Romag Fasteners Case on Trademark Infringement Damages,, Dec. 9, 2019.

The Federal Circuit recently held that trademarks for product packaging consisting of certain colors arranged in a particular design or pattern can be inherently distinctive, regardless of whether the design has any defined peripheral shape or border.  In re Forney Indus., Inc., Case No. 19-1073 (Fed. Cir. April 8, 2020) (“Decision”). The Court did not decide whether the mark at issue was inherently distinctive, it remanded for consideration of that question, but the decision does establish for future trademark applicants that the PTO must evaluate marks consisting exclusively of color designs for inherent distinctiveness, and cannot dismiss them out of hand.  However, as comparison with Forney’s previous, unsuccessful attempt before the 10th Circuit demonstrates, the claimed mark should be clearly delimited and expressible.

The issue on appeal in Forney concerned the Trademark Trials and Appeals Board (“TTAB”)’s rejection of Forney Industries’ application to register a proposed product packaging mark, replicated at the right.  Id. at 2.

Per the applicant’s description of the mark, the dashed border “merely depict[s] placement of the mark” on product packaging, but does not claim any particular shape of that packaging.   In re Forney Industries, Inc., 127 U.S.P.Q.2d 1787, Opinion at 8 (TTAB Sept. 10, 2018) (precedential) (“TTAB Opinion”).  Although the visual depiction controls over verbal descriptions, the Court described the mark as “the color red fading into yellow in a gradient, with a horizontal black bar at the end of the gradient.”  Decision, at 9.

The Federal Circuit found that the Board legally erred in concluding that (1) “a color-based trade dress mark can never be inherently distinctive without differentiating between product design and product packaging marks,” and (2) “product packaging marks that employ color cannot be inherently distinctive in the absence of an association with a well-defined peripheral shape or border.”  Id. at 6.  The Court found that none of Wal-mart, Qualitex, or Two Pesos supported the plenary prohibitions embodied in the TTAB Opinion.  Crucially, the Court found that the TTAB had failed to analyze the claimed mark as a product packaging mark (which, the Board’s decision admitted, can be inherently distinctive),  rather than as a product design mark (which cannot).

The Court further held that Forney’s mark was a symbol consisting not just of certain colors, but of colors arranged in a particular design, which can be inherently distinctive, and further found the TTAB’s requirement that a color mark have a defined peripheral shape to have no basis in law.  This decision is significant in view of, and consistent with the Tenth Circuit’s opinion in Forney Indus. Inc. v. Daco of Missouri, Inc., 835 F.3d 1238 (10th Cir. 2016), where the Tenth Circuit rejected Forney’s previous attempt to secure trademark protection of its product packaging design.  However, in that case, rather than a single, clearly defined design and color pattern, Forney sought to claim a much vaguer and more varied milieu of colors and patterns.  See TTAB Opinion at 14, n. 19.  Forney’s subsequent narrowing of its claimed mark to a single, clearly delimited pattern and color palette was likely critical to its success before the Federal Circuit.