Intellectual Property Law Archives - Page 2 of 14

May 4, 2020

Online marketplaces like Grailed, GOAT and The RealReal have emerged in recent years as fashion retail disruptors. Emerging online marketplaces have provided high-fashion consumers and “sneakerheads” access to an incredible assortment of “genuine” new, used, and vintage clothing, shoes, and accessories, often in a peer-to-peer marketplace, for well-below retail prices. As with eBay in its 2010 dispute with Tiffany & Co., however, these emerging second-hand fashion marketplaces are now having to defend their use of genuine trademarks and marketing of counterfeit goods.

Background

A recent case concerning second-hand fashion marketplaces involves a dispute between iconic fashion house, Chanel, and high fashion consignment-retailer, The RealReal. Chanel needs no introduction, but to those unfamiliar with The RealReal, it is an online and brick and mortar consignment shop that sells high-fashion second-hand merchandise to consumers through an online “marketplace.” The RealReal prides itself on its rigorous authentication process designed to ensure that every item for sale on The RealReal is “100% the real thing.” Unfortunately, these authenticity guarantees were not “100%” supported by its sales, as at least seven counterfeit Chanel items were sold to consumers by The RealReal.

The Court’s Decision

On March 30, 2020, Judge Vernon S. Broderick of the United States Southern District of New York issued a notable decision on Chanel’s trademark infringement and counterfeiting claims against The RealReal. Judge Broderick distinguished the Second Circuit’s decision in Tiffany v. eBay and denied The RealReal’s motion to dismiss Chanel’s counterfeiting and false advertising claims. The Court, however, granted The RealReal’s motion to dismiss Chanel’s trademark infringement claims.

Counterfeiting Claim

Chanel brought trademark counterfeiting claims against The RealReal pursuant to 15 U.S.C. § 1114(1)(a) on the grounds that The RealReal had sold counterfeit Chanel products through its marketplace. In its motion to dismiss, The RealReal analogized its marketplace to eBay’s and argued that it was not liable for the sale of counterfeit products in its marketplace. The RealReal maintained that the Second Circuit decision rendered in Tiffany v. eBay should prevent the Court from holding The RealReal liable to Chanel.

The Tiffany Court held that eBay’s knowledge that users sold counterfeit goods on its marketplaces could not be the basis for a direct trademark infringement or counterfeiting liability because eBay had consistently removed counterfeit listings and taken steps to identify and remove any counterfeit Tiffany products for sale. The RealReal argued that, like eBay, it has implemented stringent measures to ensure the authenticity of the products in its marketplace and that it does not knowingly list counterfeit products for sale.

Despite these similarities, Judge Broderick rejected The RealReal’s argument and found that The RealReal’s marketplace differed significantly from eBay’s. The Court’s distinction was largely premised on the fact that The RealReal “takes possession of all items and physically evaluates every item to authenticate it.” Chanel Inc. v. RealReal, Inc., 18-CV-10626 (S.D.N.Y. Mar 30, 2020). The Court found that while eBay serves as merely a sales platform for peer-to-peer third party sales, and is not involved in any aspect of the individual sales, The RealReal is heavily involved with every aspect of every sale on its marketplace.

The Court found that, as a result, “The RealReal itself controls a secondary market for trademarked luxury goods, and by curating the product offered through that market and defining the terms on which customers can purchase those products, The RealReal reaps substantial benefit.” Id. at 22. Therefore, the Court held that The RealReal should bear the burden of the potential liabilities and permitted Chanel’s counterfeiting claims to proceed.

Takeaways

Tiffany v. eBay was previously understood to provide broad protections for online marketplaces from direct liability under anti-counterfeiting laws so long as the marketplace took substantial steps to thwart the sale of counterfeit goods. Judge Broderick, however, took a narrower view of Tiffany v. eBay decision in finding that online marketplaces with substantial control of product authentication and marketing could be held responsible for the sale of counterfeit goods. Although the full implications of this decision on online marketplaces are yet to be seen, companies similar to the RealReal, and entrepreneurs pursuing like-ventures, should take heed of the distinctions drawn in this case.

Trademark Infringement Claim

Chanel’s also alleged trademark infringement claims against The RealReal pursuant to 15 U.S.C. § 1114(1) based on The RealReal’s use of genuine Chanel trademarks. To determine whether there was a likelihood of consumer confusion, the Court applied the eight-factor Polaroid test that the Second Circuit adopted in Polaroid Corp v. Polarad Electronics Corp., 287 F.2d 492 (2d Cir. 1961).

The Court also applied the three nominative fair use factors derived from New Kids on the Block v. News America Publishing, Inc., 971 F.2d 302 (9th Cir. 1992). After analyzing the facts of the case using the applicable factors, the Court determined that The RealReal’s use of Chanels genuine trademarks constitutes nominative fair use. The Court reasoned that retailers are permitted to use genuine trademarks to describe products so long as the retailer does not create confusion by implying affiliation with the genuine trademark holder.

Likelihood of Confusion and Nominative Fair Use

In its Polaroid analysis, the Court found that: 1) Chanel’s marks are incredibly strong and recognizable; 2) despite competing against Chanel’s primary market offerings, evidence shows that The RealReal’s secondary market may in fact bolster the primary market; and 3) Chanel showed no evidence of actual consumer confusion. Balancing the factors, the Court concluded that “it is highly unlikely that a customer buying a secondhand Chanel product from The RealReal . . . would confuse the nature of the The RealReal’s business, the source of its products, or its affiliation—or lack thereof—with Chanel.” Chanel at 18.

The Court reached the same conclusion in its analysis of the nominative fair use factors, finding that “Chanel has not plausibly alleged facts suggesting that The RealReal ‘stepped over the line into a likelihood of confusion by using [Chanel’s] mark[s] too prominently or too often, in terms of size, emphasis, or repetition.” The Court also noted that The RealReal’s assurances of product authenticity, without more, were insufficient to create a likelihood of consumer confusion.

Because the Court found that Chanel had not demonstrated a likelihood of consumer confusion, overuse of Chanel’s marks, or an inaccurate depiction of the relationship between the parties, the Court granted The RealReal’s motion to dismiss Chanel’s trademark infringement claims. The Court also held that The RealReal’s use of Chanel’s marks amounted to nominative fair use.

Takeaways

Judge Broderick’s ruling essentially confirms the common understanding of the use of genuine marks to sell secondhand goods; nevertheless, this was a welcome affirmation for online marketplaces. In the wake of this decision, online retailers should remain cautious about their use of unaffiliated brands’ trademarks to ensure the use of genuine marks does not signal confusing affiliations to consumers.

Read the full decision here. For information on how CASTAYBERT PLLC can assist you with your intellectual property needs, visit our intellectual property page here.

March 20th, 2019 – Last week New York’s newest tourist attraction opened at Hudson Yards. The Vessel, designed by Heatherwick Studio, is a honeycombed shaped structure with 154 staircases latticed throughout and is quite picturesque. However upon further inspection into Hudson Yards Terms and Conditions – it appears that ERY Vessel LLC, the company responsible for running the structure, claims ownership to any and all photographs taken onsite prompting outcry from the public, writers, and critics.

For more details on this story – check out this article posted dezeen this week.

For information on Castaybert PLLC’s experience with intellectual property, please click here.

Generally copyrights are only issued to the author of the original work. The Work Made for Hire doctrine is an exception to this rule where an employer is the owner of the work and the copyright, but this is contingent on whether the creator is an independent contractor or employee.

When an employer hires an independent contractor to produce an artistic work, the copyright remains with the independent contractor unless he or she agrees to license or transfer those rights. The Work Made for Hire exception as applied to independent contractors, on the other hand, specifically requires (1) for both parties to sign a written agreement; (2) the agreement must specifically state that the work is a Work Made for Hire; and (3) the artistic work must fall under one or more 9 specific types of work.

These types are:

• Contribution to a collective work,

• Part of a motion picture or other audiovisual work,

• A translation,

• A supplementary work,

• A compilation,

• An instructional text,

• A test,

• Answer material for a test, or

• An atlas.

Thus if an employer, instead of the independent contractor, provides an agreement that includes appropriate Work Made for Hire language, then it is imperative that the work itself still fits into one of the nine enumerated categories.

The Work Made for Hire exception as applied to employees requires that the work is created within the scope of their employment; either created on the job or at the direction of their employer. While this seems to be more straightforward, there are of course gray areas – specifically, what is an employee? The Supreme Court has ruled that employment status is determined by weighing a number of factors examining how much control the employer has over a person’s work. In the case of freelancers, especially those with long-term contracts, it is best to clarify these things at the outset to avoid hiccups down the line.

For more information on how Castaybert PLLC can help you in securing, defending, or enforcing Works Made Hire Agreements with freelancers, please click here.

The basic tenet of copyright law is that protection is available for “original works of authorship fixed in any tangible medium of expression.” The most common example of a work that is eligible for copyright protection is a painting or sculpture. Once the work is fixed it is afforded protection and others cannot reproduce, make derivatives, publicly display, or distribute the work. But, copyright does not last forever. Once the copyright on a work has expired, it enters the public domain. While Congress has amended the time for copyright protection over the years, it is generally understood that any work created before 1924 has entered the public domain. As such, there is no doubt that the works of the Old Masters displayed in museums are part of the public domain.

Despite this understanding museums, like the Metropolitan Museum of Art, sell reproductions of these works as posters in their gift store and these posters include a copyright notice. So how is it possible that the museum can own the copyright in the poster when the original work is in the public domain?

It is commonly understood that merely reproducing artwork that is in the public domain cannot extend copyright protect or else the expiration of copyright would cease to exist. Therefore, the poster cannot be seen as merely a reproduction of the original work, but rather a completely new work eligible for its own copyright protection. For a work that incorporates material from the public domain or other copyrighted works to garner copyright protection, the creator must disclaim the preexisting material and the material remaining that has not been disclaimed must have some creativity.

Using this framework, the posters produced by museums of their masterworks can only be copyrightable based on the design and creative choices in the poster itself and the underlying work would be disclaimed. Note this does not give museum goers free reign to commercially exploit the photographs they take of the master works displayed. Most museums have a terms of service that patrons agree to when they purchase a ticket to enter which stipulates they are not allowed to use their photos for commercial gain.

Please click here for more information on how Castaybert PLLC can help register, enforce, or protect your copyright.

November 1, 2018 — On October 11, 2018, Donald Trump, with Kid Rock at his side, signed the Orrin G. Hatch-Bob Goodlatte Music Modernization Act (“MMA” or “the Act”) in an effort to modernize copyright law in an era where digital streaming is king. Possibly most notably, the MMA creates a Mechanical Licensing Collective that is responsible for offering and administering blanket licenses to qualified personas and entities, collect and distribute royalties from digital music providers, and locate copyright holders whose works are used in other sound recordings among other functions. The Act is comprised of three bills concerned with royalties and licensing: 1) the CLASSICS Act, 2) the AMP Act, and 3) the Fair Play Fair Pay Act of 2017. Taking them in turn…

The CLASSICS Act

The CLASSICS Act (or Compensating Legacy Artists for the Songs, Service, and Important Contributions to Society Act) finally brings pre-1972 sound recordings into the federal copyright regime. By doing so, it ensures that artists who recorded music before February 15, 1972 will receive royalties and licensing fees when their songs or streamed or played on the radio. It also grants pre-1972 sound recording copyright holders the same exclusive rights (found in 17 U.S.C. § 106) and remedies (found in 17 U.S.C. §§ 502-505, 1203) as post-1972 sound recording copyright holders have enjoyed for years. As such, we have finally reached the long-awaited end to the confusing web of common law and state statutory rights governing pre-1972 sound recordings.

The AMP Act

The AMP Act (or Allocation for Music Producers Act) codifies the “Letter of Direction” practice, somewhat streamlining the ability for music producers, mixers, and sound engineers who took part in the creation of a sound recording to obtain royalties. AMP requires the Copyright Royalty Board to “reasonably implement a policy that provides . . . for acceptance of instructions from a [copyright holder] . . . to distribute to a producer, mixer, or sound engineer who was part of the creative process that created a sound recording.” Sec. 302(a)(5)(A), H.R. 1551-115 (2018). AMP also provides producers, mixers, or sound engineers (among others) to file for, and receive so long as the copyright holder does not object, royalties in the event that they are unable to obtain a Letter of Direction from the copyright holder. Codification of this longtime practice will help streamline the letter of direction process and provide oft-forgotten creatives behind the marquee artists a statutory means of securing royalties payments for their works.

The Fair Play Fair Pay Act of 2017

The Fair Play Fair Pay Act (“FPFP”) incorporates aspects of the CLASSICS Act and the AMP Act, while adding new wrinkles as well. In addition to requiring payment for pre-1972 sound recordings by closing a loophole exploited by digital streaming services and codifying the Letters of Direction practice, the FPFP creates a performance right for sound recordings on AM/FM radio and establishes a “willing buyer/willing seller” regime that ensures copyright holders receive fair market value for their recordings across all platforms and ensures songwriter royalties are undisturbed. The “willing buyer/willing seller” regime updates old law which required the Copyright Royalty Board to consider free-market conditions to determine fair rates. The

Conclusion

The Music Modernization Act is a much-needed revamp to an outdated copyright system.While it’s passing may not address all of the areas necessary to bring copyright law into the 21st century, bringing pre-1972 sound recordings into the federal regime, providing an updated royalties system that should provide fair pay to artists, and creating a clearer path for members of the creative process behind copyrighted works to obtain royalties is a step in the right direction.On the other hand, it will be interesting to see if the mechanical licensing regime leads to greater efficiency and whether the new scheme to distribute unclaimed royalties could lead to windfalls for the traditional licensing powers.

You can read the full text of the music modernization act here.

For more information on how Castaybert PLLC can assist you with copyright matters, visit here.

Jan. 1, 2019 — André Castaybert, principal attorney at Castaybert PLLC, has received a “Preeminent” AV rating in ethical standards and legal ability from the 2019 Martindale-Hubbell peer review. This is the highest possible honor that Martindale-Hubbell can bestow upon an attorney. This marks 6 consecutive years that André has received this award.

Last week, we saw some movement in the high-profile lawsuit between the Andy Warhol Foundation and photographer, Lynn Goldsmith, regarding Warhol’s iconic Prince portrait series produced in 1984. Both parties have made their pleas and filed cross-motions for summary judgment which could lead to a decision from the court clarifying the boundaries of fair use in copyright law.

In 1984, Goldsmith gave Vanity Fair a license for a one time use of her photo of the musical artist, Prince, as source material for an illustration by Warhol. Warhol created the illustration as well as 15 other portraits of Prince. In 2016, shortly after Prince’s death, the foundation licensed one of those portraits to Conde Nast for the cover of a magazine. It was around this time that Goldsmith learned of the Warhol series after seeing the images posted online.

Last year, the Andy Warhol foundation filed a pre-emptive lawsuit against Goldsmith in order to squash her claims that Warhol’s Prince portrait series is a violation of her exclusive rights under copyright law. The Foundation claims that there is no evidence of copying as it is unclear which photo Warhol was inspired by; but more importantly they claim that the series is an exercise of the fair use doctrine due to the work’s transformative nature and the fact it does not usurp Goldsmith’s market. Goldsmith, on the other hand, claims that the essence of her photograph is still present in the portrait series and that there is an overlap in the markets for the work.

The decision from the court as to whether Warhol’s portraits constitute fair use will help clarify the boundaries of the doctrine as it relates to appropriation art. This is especially important after a controversial 2013 decision from the 2nd Circuit which was widely seen as expanding the doctrine and led other circuits to question whether the test for transformative use was too broad.

For more details about the Warhol case, please click here.
A copy of the complaint filed by the Warhol Foundation can be found here.

Click here for more information on how Castaybert PLLC can assist you in either enforcing or defending your artistic rights.

October 4, 2018.

So, you own a piece of art that you want to sell. Can you take and use pictures of the artwork to promote its sale without running afoul of copyright laws? Yes, you can according to a recent decision from the Southern District of New York in Stern v. Lavender (“Stern”).

Overview

In Stern, long-time studio assistants of noted photographer Bert Stern alleged that Stern gave them original copies of his famous photos from Marilyn Monroe’s last photoshoot before her death. The defendants, seeking to sell the photos, captured images of the photos which they posted on eBay, Amazon, and other digital retail websites to promote the sale. In response, Stern’s widow brought suit against the former studio assistants, alleging the promotional photographs violated 17 U.S.C. § 106 of the Copyright Act, which grants copyright holders the exclusive right to create derivative works.

Fair Use

The defendants argued that their promotional photographs constituted Fair Use pursuant to Section 107 of the Copyright Act. The Fair Use doctrine permits non-copyright holders to use copyrighted works without permission depending on a balancing of four factors:

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

The Southern District Court stopped short of resolving the case in favor of the defendants due to a factual dispute surrounding ownership of the photographs in question that could not be resolved at the summary judgment phase. In spite of this, the Court considered the above factors in finding that photographs of copyrighted works made to promote the sale of a copyrighted work constitute Fair Use under the Copyright Act.

First Sale Doctrine

It is worth noting that the Court also found that the defendants, if they are indeed the rightful owners of the original copies of the photographs at issue, were undoubtedly permitted to sell the works pursuant to 17 U.S.C. § 109(a), known as the First Sale Doctrine.

Conclusion

Final pre-trial conference for this case is scheduled for November 8, 2018, when the Court will decide whether the defendants are indeed the lawful owners of the photographs at issue. If the Court finds that the defendants are the lawful owners, they will prevail on a fair use defense. Otherwise, the Court’s fair use finding will simply serve as favorable precedent for art collectors and dealers looking to sell copyrighted works.

Find the full decision on Justia here.

To learn how CASTAYBERT PLLC can assist you with an art law issue, click here.

Recent news that Christie’s will auction off a piece of artificial intelligence art raises important questions about the legal implications of artificial intelligence art (“AI art”). The artwork to be sold was created at the direction of Paris-based collective, Obvious, consisting of Hugo Caselles-Dupré, Pierre Fautrel and Gauthier Vernier, and is titled “Edmond De Belamy.” Among the concerns raised by the algorithm-signed painting include authorship, authenticity, automation and ethics. Each issue could have widespread ramifications on the art market, and therefore demand the attention of artists and art collectors who collect, create, and sell artwork.

Creating AI Artworks

Artists generally create artificial intelligence art using generative adversarial networks (GANs). These networks permit computers to study a library of images or sounds to create original content. The computer then creates an expressive work and judges the success of that work against the library images. Finally, the computer makes incremental improvements based on the results. Although artists generally curate the media library used to create the works, that is where their control of the artificial intelligence’s artistic output ends. This lack of artistic control over the final product raises compelling questions about authorship and copyright ownership of artificial intelligence art.

AI Art and the Law

Jessica Fjeld, assistant director of the Cyberlaw Clinic at Harvard Law School, insists that regardless of the artist’s control over the final output, the artist—not the AI—is the author of the finished product. Under this view, artificial intelligence is merely another tool for artists to employ in creating expressive works. The more interesting question to Ms. Fjeld arises when different individuals create or direct the inputs, learning algorithms, trained algorithms, and outputs. If different individuals create or direct the GAN, media library, learning algorithm, trained algorithm, and final output, who should own the copyright? The answer is unclear, and the inquiry is further muddied when artists include copyrighted imagery in the media libraries used to create artificial intelligence art.

Conclusion

The emergence of artificial intelligence art could have transformative effects on the art market, so collectors and artists should stay abreast of the developments in this area. For a deeper discussion of these issues, read Sam Gaskin’s Artsy article here.

Learn more about how Castaybert PLLC can assist you with Art Law matters here.

Can a plaintiff recover trade secrets damages from a defendant for the costs the defendant avoided by misappropriating plaintiff’s trade secrets?

Apparently not, according to the New York Court of Appeals. In E.J. Brooks Co. v. Cambridge Security Seals, 2018 WL 2048724 (N.Y. May 3, 2018), the New York Court of Appeals announced that a plaintiff seeking compensatory damages for unfair competition may only recover what the plaintiff would have earned if not for the defendant’s wrongs—not the amount that defendant saved, received, or earned through its wrongful actions. Id. at *4. The Court also held that plaintiff’s asserting unjust enrichment claims are not permitted to recover compensatory damages from defendants for their avoided costs.

The majority’s decision invoked a vehement dissent in which Judge Rowan Wilson, joined by Judges Rivera and Fahey, expressed concerns about the majority’s “unnecessarily narrow interpretation of damages,” its conflation of damages at law and in equity, and its incoherence with existing New York Unfair Competition Law.

E.J. Brooks significantly limits the scope of compensatory damages recoverable by plaintiffs in trade secret and unfair competition actions in New York. Rather than permitting plaintiffs to recover for competitive advantages conferred on defendants found guilty of engaging in unfair competition, the Court capped plaintiff’s damages at the amount of actual loses incurred. As noted by the dissent, this has the potential to incentivize economic espionage and discourage innovation, making the decision highly questionable as a matter of policy.

For a more detailed analysis of the case, see Muhammad U. Faridi and A. Robert Quirk’s New York Law Journal Article, “Unfair Competition, Trade Secrets Damages Limited to Plaintiff’s Losses Under NY Law,” published June 25, 2018.

To read the full E.J. Brooks opinion visit the New York Court of Appeals’ website here.

To learn about how Castaybert PLLC can assist with trade secret matters, please click here.