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<strong>American</strong> <strong>University</strong>—Washington College of Law<br />
<strong>Intellectual</strong><br />
<strong>Property</strong> <strong>Brief</strong><br />
www.ipbrief.net<br />
Volume 4 Issue 3 Spring 2013<br />
In this issue:<br />
Copyright’s Online Destiny, or: How to Stop Worrying and Love the Net<br />
by Chad Guo<br />
Of Oatmeal, Bears, and NPEs: Ensuring Fair, Effective, and Affordable Copyright<br />
Enforcement Through Copyright Insurance<br />
by Evan McAlpine<br />
Show Me The Money: Movie Quotes as <strong>Intellectual</strong> <strong>Property</strong><br />
by Rebecca Shaw<br />
Unchecked Monopolies: The Questionable Constitutionality of Design Patent and<br />
Product Design Trade Dress Overlap in Light of Egyptian Goddess, Inc. v. Swisa, Inc.<br />
by Ellie B. Atkins<br />
The Prior User Rights Defense: Working Silently in the Background to Change the<br />
Way Businesses Protect Their Inventions<br />
by Mikhael Mikhalev<br />
Featured Blog Posts and Updates<br />
by the IP <strong>Brief</strong> Staff<br />
The <strong>American</strong> <strong>University</strong> Washington College of Law <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong> is licensed under a Creative Commons Attribution 3.0 United States License.
Table of Contents<br />
Copyright’s Online Destiny, or: How to Stop<br />
Worrying and Love the Net<br />
by Chad Guo<br />
Of Oatmeal, Bears, and NPEs: Ensuring Fair,<br />
Effective, and Affordable Copyright Enforcement<br />
Through Copyright Insurance<br />
by Evan McAlpine<br />
Show Me The Money: Movie Quotes as <strong>Intellectual</strong><br />
36<br />
<strong>Property</strong><br />
by Rebecca Shaw<br />
Unchecked Monopolies: The Questionable<br />
Constitutionality of Design Patent and Product<br />
Design Trade Dress Overlap in Light of Egyptian<br />
Goddess, Inc. v. Swisa, Inc.<br />
by Ellie B. Atkins<br />
The Prior User Rights Defense: Working Silently<br />
in the Background to Change the Way Businesses<br />
Protect Their Inventions<br />
by Mikhael Mikhalev<br />
Featured Blog Posts<br />
Facebook Sued for Patent Infringement Over Like<br />
Button and Timeline Function<br />
by Asha Velay<br />
Led Zeppelin to Release Entire Back Catalogue to<br />
the Internet Streaming Community<br />
by Matthew Bernstein<br />
8<br />
19<br />
57<br />
72<br />
85<br />
86<br />
www.ipbrief.net<br />
22 Spring 2013 2013
2012-2013 Staff<br />
Editor-in-Chief<br />
Griffin Barnett<br />
Senior Managing Editor<br />
Seth Dennis<br />
Symposium Chair<br />
Jonathan Stroud<br />
Senior Articles Editor<br />
Brian Dudley<br />
Events Chair<br />
Jessica Jones<br />
Marketing & Outreach Chair<br />
Kate Collins<br />
Blog Editors<br />
Sarah Leggin<br />
Hasan Tbeleh<br />
Chelsea Zimmerman<br />
Sarah Zucco<br />
Section Editors<br />
TJ Johnson: Patent<br />
Brandon Marsh: Trademark<br />
Greg Meditz: Copyright<br />
Benjamin Ross: Technical<br />
Senior Staff<br />
Sean Braun Daniel Jang Brenna Sackman<br />
Tim Callery Sitara Kadalbal Carrie Sager<br />
Sophia Castillo Allison Keeley Corsica Smith<br />
Alexander Dowd Jeff Kettle Thomas Snyder<br />
Kathleen Hudik John Langlois Asha Elizabeth Velay<br />
Caroline Jamet Greg Melus Tamara Winegust<br />
Jess Robinson<br />
Junior Staff<br />
Michael Basile Melissa Grosett Alexis Patterson<br />
Christopher Bergin Kristin Josey Benjamin Ratichek<br />
Matthew Bernstein John Kashuba Stephenie Reimer<br />
Ken Brady Lana Khoury Maggie Scales<br />
Liliana Burnett Priya Mahajan Shannon Schoultz<br />
Christine Casaceli Madison Mandell Aarati Singal<br />
Alexander Coren Jeremy Merkel Jason Sokel<br />
Natasha Dhillon Brian Nistler Jack Vidovich<br />
Alexandra El-Bayeh Brooke Olaussen Brianna Weber-Wakelam<br />
Alexis Espanet Mark Patrick Amelia Wong<br />
Deborah Goldman<br />
William Xu<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
3 3
Submissions<br />
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our upcoming issues. Please submit completed papers<br />
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44 Spring 2013 2013
Guest Blogging<br />
Got something to say? The IP <strong>Brief</strong> is now accepting<br />
submissions for guest blog posts on IP<strong>Brief</strong>.net. Blog<br />
posts can be on any IP-related topic. Send your 1-3 page<br />
submission with a 1-2 sentence blurb and relevant picture<br />
to ipbrief@wcl.american.edu. Our staff will read through<br />
all submissions, pick the best and most timely, and post<br />
them for our IP-focused readers to read and comment.<br />
Events<br />
The IP <strong>Brief</strong> 2nd Annual Symposium took place on<br />
Friday, April 12th, 2013 at the <strong>American</strong> <strong>University</strong><br />
Washington College of Law.<br />
A webcast of our 2nd Annual Symposium is currently<br />
available at http://www.ipbrief.net/symposium/2ndannual-symposium/<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
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66 Spring 2013 2013
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<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
7
Copyright’s Online Destiny, or: How to Stop Worrying and Love<br />
the Net<br />
by Chad Guo 1<br />
1<br />
Introduction<br />
The controversy surrounding the Stop Online<br />
Piracy Act (SOPA) and the PROTECT <strong>Intellectual</strong><br />
<strong>Property</strong> Act (PIPA) served both as the latest in a long<br />
line of conflicts between technology and copyright<br />
holders and also as an indication of things to come.<br />
While the need to reconcile the copyright interest of<br />
content producers with the interests of technological<br />
developers remains of principal importance, the SOPA/<br />
PIPA protest introduced an increasingly powerful<br />
element—the interest of content consumers and<br />
technology users. In terms of legal implications, the<br />
rise of the consumers as a force to be reckoned with<br />
represents a failure in the online intellectual property<br />
market at best and a reassertion of the fundamentally<br />
anarchical culture of cyberspace at worst. To remain<br />
relevant in the online context, copyright law must<br />
return to its most basic roots, where its primary purpose<br />
of serving the public interest aligns closest with the<br />
needs of the cyberspace community.<br />
The struggle between copyright and technology<br />
seems like a tale as old as time, made more pronounced<br />
by the unique attributes of the Internet. Ever since<br />
the Internet emerged as a medium for the fast and<br />
seemingly unlimited distribution of copyrighted<br />
works, a war has been brewing between copyright<br />
and technology. Copyright owners have tried to<br />
maintain the same rights and control over their creative<br />
works that they had outside of the digital world.<br />
Meanwhile, the developers and users of technology<br />
create new capabilities and habits that perhaps<br />
unintentionally, but quite effectively frustrate all efforts<br />
at traditional copyright enforcement. Skirmishes flare<br />
up occasionally—usually when a new technology<br />
threatens to further reduce the control of copyright<br />
owners. 2 Thus, in a way, the SOPA/PIPA debacle was<br />
1. Chao “Chad” Guo is a 2013 J.D. candidate at the <strong>American</strong><br />
<strong>University</strong> Washington College of Law, where he works as a student<br />
attorney for the Glushko-Samuelson <strong>Intellectual</strong> <strong>Property</strong> Law<br />
Clinic. He holds a B.A. double major in English and International<br />
Relations from the <strong>University</strong> of Virginia. Chad would like to thank<br />
Professor Michael Carroll, Brian Dudley, and Alexandra Sternberg<br />
for their help on this article.<br />
2. See generally Sony Corp. of Am. v. Universal City Studios,<br />
merely the latest incident to break the fragile détente.<br />
On the other hand, an interesting new<br />
development occurred when a counteroffensive led by<br />
online entities successfully repelled the most recent<br />
copyright incursion into the online world. 3 The key<br />
to the victory lay in the empowering of consumers as<br />
an effective lobbying force, as many websites directed<br />
visitors to call or write their Congressmen. 4 Faced<br />
with unexpected pressure from their constituents, many<br />
lawmakers reconsidered or abandoned their support for<br />
the legislation. 5 Consequently, the SOPA/PIPA bills<br />
ended up on the congressional backburner. 6<br />
The grassroots effort of the SOPA/PIPA<br />
Inc., 464 U.S. 417, 417 (1984) (regarding videocassette recorder<br />
technology); Am. Broad. Co., Inc., v. Aereo, Inc., 874 F. Supp.<br />
2d 373, 373 (S.D.N.Y. 2012) (detailing a technology that enables<br />
television watching online); Brian Stelter, A DVR Ad Eraser Causes<br />
Tremors at TV Upfronts, N.Y. Times, May 16, 2012, http://www.<br />
nytimes.com/2012/05/17/business/media/dish-networks-hoppercuts-ads-and-causes-tremors-at-tv-upfronts.html?pagewanted=all<br />
(“Some reviewers have already called the feature, named Auto<br />
Hop, a dream come true for consumers. But for broadcasters and<br />
advertisers, it is an attack on an entrenched television business<br />
model, and it must be strangled, lest it spread.”).<br />
3. See Amy Chozick, Tech and Media Elite Are Likely to<br />
Debate Piracy, N.Y. Times<br />
July 9, 2012, available at http://www.nytimes.<br />
com/2012/07/10/business/media/tech-and-media-elite-are-likely-todebate-piracy.html?_r=0<br />
(“Congress, overwhelmed by the popular<br />
opposition, quickly backpedaled, leaving the legislation to die.”).<br />
4. Deborah Netburn, Wikipedia: SOPA protest led 8 million<br />
to look up reps in Congress, L.A. Times Blog (Jan. 19, 2012,<br />
10:42 AM), http://latimesblogs.latimes.com/technology/2012/01/<br />
wikipedia-sopa-blackout-congressional-representatives.html<br />
(reporting that “8 million U.S. readers took Wikipedia’s suggestion<br />
and looked up their congressional reps from the site” while “4.5<br />
million people had signed [Google’s] petition asking lawmakers to<br />
reject [SOPA and PIPA]”).<br />
5. See Paul Tassi, Internet Blackout Causes 18 Senators to<br />
Flee from PIPA, Forbes.com<br />
(Jan. 19, 2012, 9:29 AM), http://www.forbes.com/sites/<br />
insertcoin/2012/01/19/internet-blackout-causes-18-senators-to-fleefrom-pipa/<br />
(including a list of Senators who withdrew support for<br />
the bill).<br />
6. Stephanie Condon, PIPA, SOPA put on hold in wake of<br />
protests, CBSNews.com<br />
(Jan. 20, 2012, 9:41 AM), http://www.cbsnews.com/8301-<br />
503544_162-57362675-503544/pipa-sopa-put-on-hold-in-wakeof-protests/<br />
(“Senate and House leaders announced Friday they are<br />
postponing work on two controversial anti-piracy bills in the wake<br />
of large online protests that spurred several congressmen to rethink<br />
the legislation.”).<br />
8 Spring 2013
protestors also highlights the importance of the law in<br />
the ongoing conflict. While copyright holders have<br />
consistently looked to copyright law for support as<br />
they advance towards gaining more ground, copyright<br />
law may just as well serve the purposes of the online<br />
community in resisting efforts to control the Internet<br />
and its users. In other words, the Internet community’s<br />
apparent belief—that copyright holders’ need to<br />
be compensated fully 7 for the use of their creative<br />
works online should defer to the interest of a free<br />
and open Internet—could very well have support in<br />
legal doctrines. 8 These doctrines then could provide<br />
a way to harmonize intellectual property law with<br />
online behavior and perhaps provide some measure of<br />
satisfaction to all parties.<br />
This Article discusses the role of copyright law<br />
as applied to the Internet environment in light of past<br />
and current developments involving copyright holders,<br />
technology developers, and now consumers. Part I<br />
provides a brief background on the jurisprudence of<br />
copyright law as applied to technological developments<br />
in the entertainment and related industries. Part II<br />
examines both statutory and case law that supports<br />
the separation of copyright’s exclusive rights from<br />
traditional, direct financial compensation to copyright<br />
holders. Part III explores the policy implications of<br />
altering the compensation scheme of copyright holders<br />
on the Internet. Finally, Part IV concludes that the law<br />
need only serve the public interest, and it is the industry<br />
that must compromise when faced with a conflict<br />
between copyright and technology.<br />
I. Background<br />
The purpose of copyright is explicitly stated in<br />
the highest law of the land. Given its progress-oriented<br />
purpose, it is paradoxical how often copyright struggles<br />
when faced with new, groundbreaking technology.<br />
An examination of the jurisprudence of copyright law<br />
encountering new technologies may help to shed some<br />
light into this paradoxical relationship.<br />
A. The Original Purpose and Subsequent<br />
Codifications of Copyright Law<br />
Article I, Section 8, Clause 8 of the United<br />
States Constitution provides: “The Congress shall have<br />
Power . . . [t]o promote the Progress of Science and<br />
useful Arts, by securing for limited Times to Authors<br />
and Inventors the exclusive Right to their respective<br />
7. Compensated “fully” means that copyright holders would<br />
be compensated under purely market-based conditions, as opposed<br />
to statutorily determined compensation or no compensation at all.<br />
8. See infra Part II.<br />
Writings and Discoveries.” 9 Other fields of law should<br />
be so lucky as to have their purpose so explicitly stated<br />
in the ultimate source of their authority. 10<br />
The goal of copyright does not focus so much<br />
on the interests of the authors and inventors as it does<br />
on the public interest goal of promoting progress<br />
of the sciences, which has been interpreted to mean<br />
knowledge and creativity in general. 11 Providing<br />
financial compensation to authors and inventors is<br />
merely the means by which creative advancements<br />
are incentivized, but financial compensation is not<br />
the end goal itself. 12 By that logic, then, in instances<br />
where the public interest would best be achieved by<br />
limiting or denying an author or inventor the exclusive<br />
right to his or her works, the law should and can<br />
readily support such curtailment. 13 The Copyright<br />
Act already specifically limits the copyright holder’s<br />
exclusive rights to an enumerated bundle. 14 The rights<br />
granted by copyright law are also limited to a specific<br />
set. 15 These include, among others, the exclusive<br />
right of reproduction and the exclusive right of public<br />
performance. 16<br />
In addition to the limitation of enumerating<br />
the rights available to copyright holders, two legal<br />
doctrines limit these rights even further. First, the<br />
constitutional clause itself provides for “limited times”<br />
during which the author’s right to his or her work is<br />
exclusive. 17 This notion is reflected in the doctrine<br />
of public domain, by which the author’s exclusive<br />
9. U.S. Const. art. I, § 8, cl. 8.<br />
10. But see William Fisher, Theories of <strong>Intellectual</strong> <strong>Property</strong>,<br />
in New Essays in the Legal and Political Theory of <strong>Property</strong> 168,<br />
171–74 (Stephen R. Munzer ed., 2001) (surveying three additional<br />
theories of intellectual property).<br />
11. See Infodek, Inc. v. Meredith-Webb Printing Co., Inc.,<br />
830 F. Supp. 614, 621 n.8 (N.D. Ga. 1993) (“[T]he use of the term<br />
‘science’ relates to copyrights and is generally given its eighteenth<br />
century meaning of knowledge or learning.”).<br />
12. When considering who is being incentivized, it is<br />
important to note that the incentives are not solely for those who<br />
create copyrighted works, but also extends to those who would<br />
invest and produce the works. Producers and investors require<br />
assurance that the money they put into a creative endeavor will<br />
yield fruit. 144 Cong. Rec. H9950 (daily ed. Oct. 7, 1998)<br />
(statement of Rep. Coble) (“When works are protected by<br />
copyright, they attract investors who can exploit the work for<br />
profit.”). This means that copyright also protects the investment<br />
interests of persons or entities other than the artists themselves.<br />
13. See infra text accompanying notes 14–20.<br />
14. 17 U.S.C. § 106 (2006).<br />
15. Id.<br />
16. Id. § 106(1), (4).<br />
17. U.S. Const. art. I, § 8, cl. 8 (“The Congress shall have<br />
Power . . . [t]o promote the Progress of Science and useful Arts, by<br />
securing for limited Times to Authors and Inventors the exclusive<br />
Right to their respective Writings and Discoveries.”) (emphasis<br />
added).<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
9
property rights in a work are terminated by the simple<br />
passage of time. 18 Once a work enters into the public<br />
domain, parties other than the author may use or enjoy<br />
the work however they wish.<br />
Second, copyright law recognizes the doctrine<br />
of fair use. 19 Fair use directly invokes the public<br />
interest purpose of copyright by denying authors an<br />
exclusive right to their work when usage by another<br />
party is perceived to be fair in the eyes of the law. 20 For<br />
both public domain and fair use, the copyright holder<br />
has no control over his or her original work. This has<br />
resulted in numerous interpretations of narratives in<br />
the public domain 21 as well as diverse commentary and<br />
criticism on certain works through fair use. 22<br />
On principle, the Copyright Clause of the<br />
Constitution and the Copyright Act form the most<br />
basic understanding of copyright. The verbiage and<br />
the legal doctrines created by the texts are clearly<br />
directed at serving the public interest. Yet in practice,<br />
copyright, or at least the perception of copyright,<br />
has been viewed as serving the interests of certain<br />
industries at the expense of the larger public. 23 The true<br />
intent of copyright law is often lost in conversations<br />
18. 17 U.S.C. §§ 301–04 (2006).<br />
19. Id. § 107.<br />
20. While fair use is recognized as a defense to copyright<br />
infringement, there is a school of thought that would deem fair use<br />
to be a right in and of itself. Compare Harper & Row Publishers,<br />
Inc. v. Nation Enters., 471 U.S. 539, 561 (1985) (“The drafters<br />
resisted pressures from special interest groups to create presumptive<br />
categories of fair use, but structured the provision as an affirmative<br />
defense requiring a case-by-case analysis.”), with Peter Jaszi,<br />
Copyright, Fair Use and Motion Pictures, 3 Utah L. Rev. 715, 719<br />
(2007) (“More recently, the United States Supreme Court has made<br />
it clear that fair use is one of the mechanisms by which copyright<br />
recognizes the principle of freedom of expression that is enshrined<br />
in the First Amendment to the U.S. Constitution: without fair<br />
use, copyright law could be found unconstitutional as applied to<br />
expressive activities . . . .”). In other words, if copyright protection<br />
is an exception to the right to free speech, and fair use is the<br />
exception to copyright protection, does not fair use simply restore<br />
the right to free speech? See id. at 719.<br />
21. See The League of Extraordinary Gentlemen (20th<br />
Century Fox 2003) (noting that the movie was based on a film<br />
adaptation of a comic series that utilizes characters almost entirely<br />
from the public domain such as Allan Quatermain, Captain Nemo,<br />
Ishmael, and Tom Sawyer); Trivia for The League of Extraordinary<br />
Gentlemen (2003), IMDB.com, http://www.imdb.com/title/<br />
tt0311429/trivia (last visited Oct. 20, 2012) (“All of the characters<br />
except [one] have fallen into the public domain, which means that<br />
anybody can write about them.”).<br />
22. See generally Campbell v. Acuff-Rose Music, Inc., 510<br />
U.S. 569, app. A, B (1994).<br />
23. See Lawrence Lessig, Copyright’s First Amendment, 48<br />
UCLA L. Rev. 1057, 1069 (2001) (“The ordinary person doesn’t<br />
notice, because the ordinary person has become so accustomed to<br />
the idea that culture is managed—that corporations decide what<br />
gets released when, and that the law can be used to protect criticism<br />
when the law is being used to protect property—that the ordinary<br />
person can’t imagine the world of balance our Framers created.”).<br />
involving the vast amounts of revenue generated by<br />
the sale of copyrighted works. Just precisely how this<br />
contradictory perception came into being involves<br />
looking into a most curious legal history.<br />
To their credit, United States courts have long<br />
recognized the public interest aim of copyright law.<br />
This purpose is perhaps best articulated by the Second<br />
Circuit in Berlin v. E.C. Publications, Inc., 24 a case<br />
about song parody lyrics published in a magazine. In<br />
Berlin, the copyright owners brought suit against Mad<br />
Magazine for infringing on the copyrighted lyrics of<br />
twenty-five popular songs. 25 While finding that there<br />
was no infringement, the court also laid out the purpose<br />
of copyright law quite clearly. The court elaborated<br />
that “the financial reward guaranteed to the copyright<br />
holder is but an incident of this general objective,<br />
rather than an end in itself.” 26 The court then stated,<br />
“[a]s a result, courts in passing upon particular claims<br />
of infringement must occasionally subordinate the<br />
copyright holder’s interest in a maximum financial<br />
return to the greater public interest in the development<br />
of art, science and industry.” 27 This fluid standard—<br />
balancing the interests of copyright holders with those<br />
of the public as particular infringement claims arose—<br />
would be put to the test time and again, as the next<br />
section demonstrates.<br />
B. Traditional Copyright Versus New<br />
Technology<br />
The clear purpose of copyright law<br />
notwithstanding, numerous fights have emerged and<br />
presented many opportunities for lawmakers to address<br />
how copyright applies to emerging technologies. A<br />
prominent illustration of such a conflict occurred when<br />
cable television emerged and threatened the exclusive<br />
right of transmission of the copyright holders through<br />
broadcast television. 28 The conflict seemingly wrote<br />
the script for future battles: 1) in the exposition, a<br />
technology emerges that makes copyrighted content<br />
more accessible to the public; 2) however, the<br />
technology renders the current efforts of the copyright<br />
holder to receive compensation for his or her work<br />
more difficult, if not impossible; 3) as the action rises,<br />
the copyright holder looks to the law to exercise some<br />
measure of control over the new technology so that the<br />
current copyright enforcement efforts remain effective;<br />
which in turn leads to 4) the climactic battle in the<br />
24. 329 F.2d 541 (2nd Cir. 1964).<br />
25. Id. at 542.<br />
26. Id. at 543–44.<br />
27. Id. at 544.<br />
28. H.R. Rep. No. 94-1476, at 88–89 (1976), reprinted in 1976<br />
U.S.C.C.A.N. 5659, 5703.<br />
10 Spring 2013
courts for a resolution.<br />
When cable television first emerged, it allowed<br />
certain areas to receive broadcast television that had<br />
previously been unavailable due to poor over-theair<br />
reception. 29 However, the mechanism by which<br />
cable infrastructure received the broadcast television<br />
signals and then transmitted the signals to consumers<br />
implicated one of the enumerated exclusive rights<br />
of those who held the copyrights to the broadcasted<br />
content. 30 This created a dilemma. Though the<br />
broadcasters’ content reached a larger audience through<br />
cable technology, the broadcasters needed some<br />
measure of control over the retransmission of their<br />
content pursuant to copyright law. 31 Copyright law<br />
allows for broadcasters to consent to the retransmission<br />
of their content in exchange for compensation. 32<br />
However, cable providers argued that having to<br />
negotiate retransmission consent fees with each<br />
and every broadcaster would be burdensome and<br />
inefficient, especially when broadcast signals were free<br />
over the air. 33<br />
The conflict between television broadcasters<br />
and cable technology resulted in a compromise—<br />
namely, the statutory licensing scheme that has since<br />
been applied to several other technologies. 34 At a basic<br />
level, statutory licensing allows for anyone to make<br />
and distribute reproductions of copyrighted works<br />
without the consent of the copyright owner as long as<br />
that person pays a statutorily established royalty to the<br />
copyright owner. In addition to cable retransmission,<br />
statutory licensing has been applied to satellite<br />
retransmission of broadcast television signals as well as<br />
29. See Fortnightly Corp. v. United Artists Television,<br />
Inc., 392 U.S. 390, 391–92 (1968) (providing some background<br />
information on an early cable system); H.R. Rep. No. 94-1476, at<br />
88, reprinted in 1976 U.S.C.C.A.N. at 5702–03 (“A typical system<br />
consists of a central antenna which receives and amplifies television<br />
signals and a network of cables through which the signals are<br />
transmitted to the receiving sets of individual subscribers.”).<br />
30. See 17 U.S.C. § 106(4) (2006) (granting copyright holders<br />
the exclusive right of public performance). Public performance<br />
has been interpreted to include the transmission and broadcasting<br />
of television signals. See David v. Showtime/The Movie Channel,<br />
Inc., 697 F. Supp. 752, 758–59 (S.D.N.Y. 1988). However, this<br />
interpretation was not always the case. See Teleprompter Corp. v.<br />
Columbia Broad. Sys., Inc., 415 U.S. 394, 408–09 (explaining that<br />
the regulation was subsequently superseded by statute, which led<br />
to the statutory licensing scheme in place today); Fortnightly, 392<br />
U.S. at 400–01.<br />
31. See Fortnightly, 392 U.S. at 391–92.<br />
32. See 47 U.S.C. § 325(b) (2006).<br />
33. See H.R. Rep. No. 94-1476, at 89, reprinted in 1976<br />
U.S.C.C.A.N. at 5704 (“The Committee recognizes, however, that it<br />
would be impractical and unduly burdensome to require every cable<br />
system to negotiate with every copyright owner whose work was<br />
retransmitted by a cable system.”).<br />
34. 17 U.S.C. §111(c) (2006); see also Id. §§ 114(d)(1), (2).<br />
retransmission of audio works over Internet radio. 35<br />
A few years later, the emergence of the<br />
videocassette recorder (VCR) also posed a problem<br />
to copyright holders in the motion picture industry.<br />
Videocassette recorders were challenged as copyright<br />
infringing technology in a case that reached the<br />
Supreme Court. In Sony Corp. of America v. Universal<br />
City Studios, Inc., 36 various entertainment studios sued<br />
the manufacturers of home VCR’s and alleged that use<br />
of the recorders amounted to copyright infringement<br />
of commercially sponsored television. 37 Universal<br />
Studios argued that by selling the allegedly infringing<br />
technology, the manufacturers were liable for<br />
contributory copyright infringement. 38 The Court held<br />
that the sale of VCR’s did not constitute contributory<br />
copyright infringement. 39 The Sony Court made a point<br />
to note that copyrights were not designed to provide a<br />
special private benefit. 40 Instead, the Court noted that<br />
the granting of copyrights is only a means to achieve an<br />
important public purpose, namely to motivate creative<br />
activity and to allow public access to the products of<br />
creative activity. 41<br />
After the Sony decision, Congress passed the<br />
Audio Home Recording Act (AHRA) in 1992. 42 Like<br />
statutory licensing before it, the AHRA codified a<br />
compromise between copyright holders—the movie<br />
industry—and technology developers—in this case,<br />
the producers of VCRs. 43 The AHRA created a blank<br />
media levy that required developers of recording<br />
devices and blank media to pay royalties to copyright<br />
holders based on a statutorily defined formula. 44 In<br />
exchange, the developers were granted immunity from<br />
claims for copyright infringement. 45 While the blank<br />
media levy has very notable limitations, 46 the royalty<br />
system allows for the coexistence of copyrighted works<br />
alongside technology that perfects making copies of<br />
such works. 47<br />
35. Currently, while statutory licensing covers transmissions<br />
via Internet radio, it does not cover the permanent downloading and<br />
copying of works over the Internet. See 17 U.S.C. § 114(d)(1).<br />
36. 464 U.S. 417 (1984).<br />
37. Id. at 417.<br />
38. Id. at 419.<br />
39. Id. at 417.<br />
40. Id. at 429.<br />
41. Id.<br />
42. 17 U.S.C. ch. 10 (2006).<br />
43. Statement by President George Bush Upon Signing S.<br />
1623, 1992 U.S.C.C.A.N. 3609.<br />
44. 17 U.S.C. §§ 1003–04 (2006).<br />
45. See id. § 1008.<br />
46. See Recording Indus. Ass’n of Am. v. Diamond<br />
Multimedia Sys., Inc., 180 F.3d 1072, 1078 (9th Cir. 1999)<br />
(excluding computer hard drives from the scope of the AHRA).<br />
47. Although Sony Corp. of Am. v. Universal City Studios,<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
11
In both instances with cable and recording<br />
technologies, the law recognized that a compromise,<br />
a give and take, was preferable to strictly enforcing<br />
the provisions of the Copyright Act. Curiously, when<br />
the Internet and its associated technologies implicate<br />
copyright law, the law has followed another path, and<br />
copyright holders have opted to enforce copyright<br />
protections instead of compromising for mutual<br />
benefit. The information sharing capabilities of the<br />
Internet presented problems the likes of which the<br />
entertainment industries have never seen. Not only<br />
could perfect copies of copyrighted music be created,<br />
but the copies also could be distributed instantaneously<br />
to potential consumers worldwide. The unauthorized<br />
copying and distributing of copyright works became<br />
known as piracy. 48 Concern over the Internet’s<br />
effect on copyright led Congress to pass the Digital<br />
Millennium Copyright Act (DMCA) in 1998. 49 The<br />
DMCA was meant to strengthen copyright protections<br />
in the online context. 50 However, there were still<br />
questions that needed answering in the courtroom.<br />
The online activity of file-sharing earned<br />
the wrath of the music industry in 2001. 51 A circuit<br />
Inc., had already solidified the legality of videocassette recorders,<br />
the AHRA allowed for fuller coverage of all audio recording<br />
technology—and blank media used to facilitating recording—that<br />
fell within its scope.<br />
48. The word choice, “piracy,” is both inaccurate and<br />
unfortunate. The term is inaccurate because copyright infringement<br />
is not quite the same as theft—and copyright holders had a difficult<br />
time convincing the public to perceive it as such. Theft implies that<br />
the copyright holder is deprived enjoyment of the property after<br />
the unauthorized copying. See Black’s Law Dictionary (9th ed.<br />
2009); see also Theft, Merriam-Webster Online Dictionary, http://<br />
www.merriam-webster.com/dictionary/theft (last visited Oct. 19,<br />
2012). However, this is not the case because only a copy is made<br />
and the original remains untouched with its owner. Nor can the<br />
unauthorized distributor be said to be taking the prospective profits<br />
of the copyright holder since there is no guarantee that a consumer<br />
would reliably buy something that is not available for free. The<br />
piracy label also proves unfortunate due to the romantic notions<br />
associated with classical pirates in popular culture, and many socalled<br />
online pirates embraced the nomenclature. See The Pirate<br />
Bay: About, ThePirateBay.se, https://thepiratebay.se/about (last<br />
visited Oct. 20, 2012).<br />
49. Statement by President William J. Clinton Upon Signing<br />
H.R. 2281, 1998 U.S.C.C.A.N. 671.<br />
50. Id. The DMCA represents the United States’<br />
implementation of the World <strong>Intellectual</strong> <strong>Property</strong> Organization’s<br />
twin treaties meant to address the concerns about copyright in<br />
the digital age. Id. An important provision in the DMCA is its<br />
safe harbor provision, which provides immunity to online service<br />
providers from copyright infringement under certain conditions.<br />
See 17 U.S.C. § 512 (2006).<br />
51. File-sharing presented an interesting case because it was<br />
not immediately apparent that such behavior implicated one of<br />
the exclusive rights of copyright holders. Unlike downloading<br />
from a website, which is analogous to direct reproduction,<br />
file-sharing could be viewed as merely the sharing by users of<br />
copyright-protected songs they already purchased. But see A&M<br />
court held in a subsequent case that the uploading<br />
and downloading of copyrighted works was not fair<br />
use. In A&M Records, Inc. v. Napster, Inc., 52 the Ninth<br />
Circuit examined the activities of the then popular<br />
online file-sharing service Napster with respect to<br />
interpersonal transmission of copyrighted works. The<br />
Napster court ruled that facilitating the downloading of<br />
copyrighted music infringed upon the exclusive right<br />
of reproduction and distribution. 53 Furthermore, using<br />
copyright works in this way does not qualify as fair<br />
use. 54<br />
The Supreme Court later strengthened the<br />
copyright holders’ victory over file-sharing. In MGM<br />
Studios, Inc. v. Grokster, Ltd., 55 the Court unanimously<br />
held that file-sharing companies could be liable for<br />
inducing copyright infringement. 56 In Grokster, the<br />
file-sharing companies sought to rely on the Sony<br />
decision, 57 which had held that the mere production<br />
of technology capable of facilitating copyright<br />
infringement could not constitute contributory<br />
infringement if the technology had substantial noninfringing<br />
uses. 58 However, the Grokster Court<br />
distinguished the Sony decision by holding that when<br />
a company induces infringing behavior through the<br />
promotion of its technology, it no longer has the<br />
protection of Sony. 59<br />
Despite these victories, copyright holders<br />
still claim to suffer considerable harm from the<br />
unauthorized consumption of media on the Internet. 60<br />
Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1015 (9th Cir. 2001)<br />
(discussing how direct economic benefit is not required for a finding<br />
that an allegedly infringing use is commercial in nature).<br />
52. 239 F.3d 1004 (9th Cir. 2001).<br />
53. Id. at 1014.<br />
54. Id. at 1019. After Napster, it is firmly established in legal<br />
jurisprudence that downloading and file-sharing of copyrighted<br />
music infringes upon a copyright holder’s rights. However, could<br />
such behavior still be permitted? The question is this: could<br />
Napster have survived (legally) if it, or Internet service providers,<br />
had paid statutory royalties to the copyright holders? The Napster<br />
court declined to allow Napster to use a compulsory license<br />
scheme because it could not reconcile Napster’s service with any<br />
of the enumerated circumstances in copyright law that allowed for<br />
compulsory licenses. Id. at 1028. However, the implication is an<br />
amendment would be necessary to bring online activities such as<br />
file-sharing within the purview of statutory licensing.<br />
55. 545 U.S. 913 (2005).<br />
56. Id. at 913–14.<br />
57. Id. at 933.<br />
58. Sony Corp. of Am. v. Universal City Studios, Inc., 464<br />
U.S. 417, 417 (1984).<br />
59. Grokster, 545 U.S. at 935–36.<br />
60. See Motion Pictures Association of America Industry<br />
Reports, MPAA.org, http://www.mpaa.org/policy/industry (last<br />
visited Oct. 22, 2012) (containing a list of industry reports on the<br />
harms of online piracy and copyright infringement); Recording<br />
Industry Association of America Piracy Impact Studies, RIAA.com,<br />
12 Spring 2013
Most recently, these industries supported SOPA and<br />
PIPA as the latest push towards tightening enforcement<br />
of copyright laws. 61 Yet the pushback from the online<br />
community, bolstered by public support, stymied the<br />
efforts of the copyright holders. 62 Perhaps then, in light<br />
of the apparent failures of these enforcement efforts,<br />
a statutory compromise may yet provide the proper<br />
solution.<br />
II.<br />
statutory Solutions in the Analogous<br />
Situations of Cable Television and Digital<br />
Audio Recording Devices Provide Ample<br />
Support for a Compromise between Copyright<br />
Holders and Internet Interests<br />
Copyright holders certainly have good cause<br />
for clinging to the traditional business model of making<br />
money directly from selling their copyrighted content<br />
in the marketplace. This traditional business model has<br />
worked splendidly for the entertainment industries. 63<br />
Given the highly lucrative nature of the entertainment<br />
industry, marketplace financial compensation serves<br />
as a very strong incentive for business as usual. 64<br />
However, from a legal standpoint, no reason exists as to<br />
why copyright law should concern itself with ensuring<br />
the traditional business model survives in the Internet<br />
age. 65<br />
http://www.riaa.com/keystatistics.php?content_selector=researchreport-journal-academic<br />
(last visited Oct. 22, 2012). For<br />
the purposes of this Article, the harm and losses claimed by<br />
the entertainment industry are presumed to be accurate and<br />
unexaggerated.<br />
61. Cecilia Kang, House introduces Internet piracy bill,<br />
Post Tech (Oct. 26, 2011, 6:12 PM), http://www.washingtonpost.<br />
com/blogs/post-tech/post/house-introduces-internet-piracybill/2011/10/26/gIQA0f5xJM_blog.html<br />
(“Hollywood, media firms<br />
and the U.S. Chamber of Commerce immediately hailed the bill,<br />
saying the government needs to take a stronger stance to prevent the<br />
rampant illegal use of online content.”).<br />
62. See Art Brodsky, The Web Can’t Declare Victory Just Yet—<br />
If Ever, Pub. Knowledge Pol’y Blog (Jan. 24, 2012), http://www.<br />
publicknowledge.org/blog/web-cant-declare-victory-just-yet-if-ever<br />
(detailing the efforts and effects of the SOPA/PIPA protests).<br />
63. See generally Domestic Movie Theatrical Market<br />
Summary 1995 to 2012, The-Numbers.com, http://www.thenumbers.com/market/<br />
(last visited Oct. 25, 2012) (providing figures<br />
for the movie industry).<br />
64. It is debatable whether business as usual has yielded<br />
any real creativity or has merely resulted in studios churning out<br />
simplistic product to cater to the widest audience possible. Courts<br />
do not make judgments on the artistic merits of creative works,<br />
nor should they. Instead, whether financial compensation actually<br />
stimulates creativity, or in other words, does money actually<br />
produce true art, is a discussion best left to liberal arts scholars.<br />
However, there is an argument to be made that genuine artistic<br />
expression is not and cannot be motivated by financial gain.<br />
65. See Berlin v. E.C. Publ’ns, Inc., 329 F.2d 541, 543–44<br />
(2nd Cir. 1964).<br />
A. The Law Does Not Require Market-<br />
Based Compensation to Copyright<br />
Holders<br />
The text of the Constitution and copyright law<br />
unquestionably demonstrate that copyright is a limited<br />
right, conditioned on the principle that it must serve<br />
the public interest. 66 In that sense, copyright more<br />
closely resembles a privilege than a right. Accordingly,<br />
there are important statutory limitations—namely<br />
public domain and fair use—on the exclusive right of<br />
copyright holders. 67<br />
Under both public domain and fair use, the<br />
copyright holder receives no compensation for the<br />
consumption or use of their copyrighted work. 68<br />
Therefore, these doctrines support the notion that<br />
financial compensation, although by far the most<br />
popular means of incentivizing creativity, is not the end<br />
goal of copyright, but rather a means to an end. 69<br />
The many instances during which an emerging<br />
technology threatened to upset the established business<br />
model of entrenched entities demonstrate that, very<br />
often, the two sides struck a deal and compromised<br />
to allow the introduction of the technology, while<br />
ensuring that copyright owners received some measure<br />
of compensation for the curtailment of their exclusive<br />
rights. The emergence of cable technology threatened<br />
the broadcast industry and led to the compromise of<br />
statutory licensing. 70 Like cable technology, which<br />
infringed upon the broadcast industry’s exclusive right<br />
of public performance, the Internet and its content<br />
distribution technologies infringe upon the music and<br />
motion picture industries’ right of reproduction. Also,<br />
like the numerous broadcasters with which cable<br />
companies would have had to negotiate retransmission<br />
consent, the number of musical and motion picture<br />
copyright holders with which Internet providers 71<br />
66. See supra Part I. a.; see also U.S. Const. art. I, § 8, cl.<br />
8; 17 U.S.C. § 106 (2006) (enumerating rights); 17 U.S.C. § 107<br />
(2006) (codifying fair use); 17 U.S.C. §§ 301–04 (2006) (setting the<br />
limited duration of copyrights).<br />
67. The statutorily created limitations make a great deal of<br />
sense when viewing copyright law in its proper context. Copyright<br />
law and intellectual property law in general, by their very nature,<br />
infringe upon one of humanity’s most important freedoms—the<br />
freedom of speech or expression. See Jaszi, supra note 20, at 719.<br />
68. Copyright holders receive no compensation from public<br />
domain or fair use because they do not have the exclusive rights to<br />
their works under these two doctrines.<br />
69. See Berlin, 329 F.2d at 543–44.<br />
70. See H.R. Rep. No. 94-1476, at 89 (1976), reprinted in<br />
1976 U.S.C.C.A.N. 5659, 5704.<br />
71. Internet service providers, as the gatekeepers of the<br />
Internet, are probably the party on whom it makes the most sense<br />
to place the responsibility of collecting fees for statutory licensing.<br />
See William W. Fisher III, Promises to Keep 219 (Stanford<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
13
would have to negotiate separate licensing fees would<br />
also be astronomical. Lawmakers recognized that such<br />
inefficiency justifies the implementation of statutory<br />
licenses for cable providers. 72 Similarly, lawmakers<br />
could also recognize that requiring Internet service<br />
providers to negotiate licensing fees for music online<br />
would be burdensome to the point of inefficiency. 73<br />
Therefore, the framework of a statutory license could<br />
easily be applied to the online context. 74<br />
Similarly, the advent of digital recording<br />
technologies led to the compromise now found in the<br />
statutory language of the Audio Home Recording Act.<br />
Like digital audio recording devices, which allowed<br />
consumers to record copyrighted music, 75 the Internet<br />
also greatly facilitates the duplication of copyrighted<br />
music and movies. Also, like the developers of<br />
digital recording technologies who wanted protection<br />
from copyright infringement suits while being able<br />
to continue manufacturing their products, 76 Internet<br />
technology developers also would likely desire<br />
legal assurances that both the development of their<br />
technology could continue and that they would not be<br />
made liable for any infringement claims. Lawmakers<br />
codified a compromise that exchanged statutorily<br />
defined royalties for protection from infringement<br />
suit liability. 77 Likewise, lawmakers could also use<br />
similar statutory terms to allow copyright holders and<br />
Internet technology developers to come to a similar<br />
compromise.<br />
No such compromise has been brokered for<br />
the Internet, but the established framework from either<br />
statutory licensing or AHRA blank media royalties 78 are<br />
readily applicable. 79 The question becomes whether<br />
such a solution would resolve the concerns of all the<br />
<strong>University</strong> Press 2004).<br />
72. See H.R. Rep. No. 94-1476, at 89, reprinted in 1976<br />
U.S.C.C.A.N. at 5704.<br />
73. Id. (demonstrating congressional recognition of the burden<br />
of excessive negotiations).<br />
74. The exact fee amount would still be a point of negotiation<br />
between the interested parties, as it was with statutory licensing.<br />
75. See Recording Indus. Ass’n of Am. v. Diamond<br />
Multimedia Sys., Inc., 180 F.3d 1072, 1073–74 (9th Cir. 1999)<br />
(explaining the “brave new world of Internet music distribution” by<br />
describing how digital recording technology works).<br />
76. See H.R. Rep. No. 102-873(I), at 24 (1992) (describing the<br />
exemptions as “critical components” of the legislation).<br />
77. See 17 U.S.C. §§ 1003, 1008 (2006).<br />
78. The compensation system under the AHRA is far from<br />
perfect, but imperfect compensation still is legal because copyright<br />
law does not require financial compensation to be equal to market<br />
levels. See discussion supra Section II.A.<br />
79. See Fisher, supra note 71, at 202–03; A Better Way<br />
Forward: Voluntary Collective Licensing of Music File Sharing,<br />
EFF.org, https://www.eff.org/wp/better-way-forward-voluntarycollective-licensing-music-file-sharing<br />
(last visited Oct. 19, 2012).<br />
parties involved. This includes the copyright holders,<br />
the developers of Internet and related technologies, and<br />
now the consumers.<br />
B. Statutorily Defined Compensation<br />
Would Resolve the Conflict Between<br />
Copyright Holders and Internet<br />
Interests<br />
If the provisions of the new compensation<br />
scheme mirror those of previous ones, they will address<br />
many of the problems caused by consumption of<br />
copyrighted works on the Internet. Copyright holders<br />
would be guaranteed a way to receive compensation<br />
for their works. Internet service providers would be<br />
shielded from liability. In theory, 80 all parties should<br />
take away some measure of satisfaction.<br />
Theoretically, copyright holders will be able<br />
to receive steady compensation for producing content<br />
that goes onto the Internet, though the compensation<br />
scheme will not necessarily be perfect. Indeed, they<br />
would have to gamble all of the revenue currently<br />
generated through direct sales in the market in hopes<br />
of recovering the revenue through the new statutorily<br />
defined compensation system. Depending on how<br />
the statutory compensation is set, revenue from the<br />
new compensation may not satisfactorily cover their<br />
losses. However, if piracy truly deprives them of the<br />
amount of revenue that they claim, perhaps imperfect<br />
compensation would nevertheless be preferable to the<br />
current system. This dynamic is perhaps already the<br />
generally accepted premise of blank media royalties. 81<br />
Although the compensation received by copyright<br />
holders through such royalties may not perfectly<br />
offset the compensation lost through private copying,<br />
copyright holders certainly prefer getting some money<br />
to none at all.<br />
Internet service providers would receive<br />
protection from infringement liability. While they<br />
have not been targeted for contributory infringement<br />
claims yet, 82 they may one day find themselves in those<br />
crosshairs. While it is true that the Internet is capable<br />
of substantial non-infringing uses, under Grokster,<br />
such a capability would not necessarily protect Internet<br />
service providers from liability. 83 A compromise would<br />
solidify that protection, and Internet service providers<br />
would not even pay for it themselves since they<br />
80. See infra Part III for the practical implications.<br />
81. See Fisher, supra note 71, at 86–87.<br />
82. Online service providers already have been targeted<br />
for contributory infringement claims. See Viacom Int’l, Inc. v.<br />
YouTube, Inc., 676 F.3d 19, 25–26 (2d Cir. 2012).<br />
83. See MGM Studios, Inc. v. Grokster, Ltd., 545 U.S. 913,<br />
935–36 (2005).<br />
14 Spring 2013
could pass on any costs to the customers. 84 Similarly,<br />
Internet service providers would become immune<br />
from lawsuits regardless of the degree of knowledge<br />
they had regarding infringing content, which currently<br />
has become an increasingly contentious part of the<br />
DMCA’s safe harbor protections. 85<br />
Finally, what would such a compensation<br />
scheme mean for the piracy problem? Establishing<br />
a compensation scheme would not directly solve the<br />
piracy problem, but it likely would do so indirectly.<br />
Websites that offer unauthorized downloads and<br />
transfers of copyrighted content would have no reason<br />
to shut themselves down initially. However, once<br />
copyright owners fully embrace the model of providing<br />
content for free, which is not really free, the piracy<br />
websites would no longer be providing a unique<br />
service. The competition from legitimate sources of<br />
content would likely push them out of existence. 86<br />
That is how the solution would work in theory.<br />
How such a compensation scheme would work in<br />
practice, if it would work at all, requires an entirely<br />
different analysis.<br />
III.<br />
understanding the Nature of All<br />
Interested Parties, Particularly the<br />
Consumers, in the Internet Context is<br />
Crucial to Maintaining the Relevancy of<br />
Copyright Law Online<br />
Aside from the legal concerns, numerous<br />
policy concerns need to be addressed to adopt a new<br />
compensation scheme that would radically alter how<br />
the entertainment industry operates online. When<br />
considering the difficulties, however, it remains<br />
important to remember what necessitates them—a<br />
demonstration of consumer desire and the adjustment<br />
that copyright law must make to continue to serve the<br />
public interest. The SOPA/PIPA protests showed that<br />
the consumers of the Internet and its content cared<br />
more about ensuring the free and open exchange of<br />
ideas than they did about eliminating online piracy.<br />
The previous section framed the conflict<br />
84. Cable systems and blank media producers operate in<br />
this fashion by transferring the costs of such statutory fees to their<br />
customers through their prices.<br />
85. See 17 U.S.C. § 512 (2006); YouTube, 676 F.3d at 30.<br />
86. Consider the example of the prohibition of alcohol. See<br />
U.S. Const. amend. XVIII (repealed 1933). During Prohibition,<br />
criminal figures amassed great wealth because they were willing to<br />
provide a service that legitimate business could not. See Organized<br />
Crime—<strong>American</strong> Mafia, Law Library—<strong>American</strong> Law and Legal<br />
Information, http://law.jrank.org/pages/11944/Organized-Crime-<br />
<strong>American</strong>-Mafia.html (last visited Nov. 28, 2012). After the repeal<br />
of Prohibition, such criminal elements no longer had a market<br />
because what was once illegal was now legal. See id.<br />
largely, if not exclusively, in terms of copyright holders<br />
versus technology developers. However, through<br />
all the conflicts, the consumers have always been an<br />
interested party. 87 What the SOPA/PIPA protest also<br />
showed was that, properly mobilized, the consumers<br />
have tremendous power in fighting legislation. 88<br />
Dealing with the newly empowered class of consumers<br />
requires examining just what to make of the strong<br />
resistance that consumers have towards copyright<br />
enforcement online. On the one hand, this resistance<br />
may be characterized as market failure. In that sense,<br />
the problem is a familiar one, and one that familiar<br />
solutions could easily address. On the other hand,<br />
this resistance may reveal the revolutionary impact<br />
the Internet has had in shaping culture. The Internet’s<br />
anarchical structure and participatory culture may have<br />
fundamentally altered the way in which the public<br />
interacts with media and entertainment in the digital<br />
space. If that is the case, then the challenge becomes<br />
finding a solution that will be regarded as legitimate<br />
both to the Internet constituency and to the original aim<br />
of copyright law.<br />
A. Characterizing the Piracy Problem as<br />
Market Failure<br />
Even if the entertainment and media industries<br />
resist abandoning traditional business models with the<br />
argument that the new compensation scheme is not<br />
fair and that it undermines the market, 89 the law has an<br />
answer to those arguments. There are many instances<br />
in which the government must institute a regulatory<br />
scheme to ensure that certain socially desirable ends<br />
are met. 90 More relevantly, the legislative history of<br />
87. See Sony Corp. of Am. v. Universal City Studios, Inc., 464<br />
U.S. 417, 429 (1984) (“The monopoly privileges that Congress may<br />
authorize are neither unlimited nor primarily designed to provide<br />
a special private benefit. Rather, the limited grant is a means by<br />
which an important public purpose may be achieved. It is intended<br />
to . . . allow the public access to the products of [creative] genius<br />
after the limited period of exclusive control has expired.”).<br />
88. See Brodsky, supra note 62.<br />
89. A statutory licensing or royalty scheme need not be<br />
completely unresponsive to market forces. For example, royalty<br />
payments could be made to various artists based on the amount of<br />
play their audio or video receives. See Fisher, supra note 71, at<br />
223–24. See generally Online Measurement, Nielsen.com, http://<br />
nielsen.com/us/en/measurement/online-measurement.html (last<br />
visited Nov. 29, 2012).<br />
90. The most notable example of a government-imposed<br />
compensation scheme would be taxes, used to pay for public goods.<br />
See Wendy J. Gordon, Fair Use as Market Failure: A Structural<br />
and Economic Analysis of the Betamax Case and its Predecessors,<br />
82 Colum. L. Rev. 1600, 1610–11 (1982) (discussing the<br />
compulsory payment for public goods dynamic). Understandably,<br />
government regulation of the creative industries would be highly<br />
undesirable, but it is worth noting that creative industries such as<br />
television and radio have long been subject to federal regulation.<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
15
the Copyright Act’s statutory licensing sections has<br />
provided that the government may step in and impose<br />
a compensation scheme when there is market failure. 91<br />
The question then becomes: has there been a failure<br />
in the online market for copyrighted content such as<br />
music and movies?<br />
Copyright holders would argue that the market<br />
has not failed, but merely needs stricter enforcement<br />
to ensure its function. However, stricter enforcement<br />
has rarely been the answer when copyright confronts<br />
technology, as the examples of statutory licensing<br />
and blank media royalties have demonstrated. Nor<br />
does enforcement appear particularly effective given<br />
the online piracy problem. Certainly, if piracy is the<br />
problem to the extent that the motion picture and<br />
music industries make it out to be, 92 piracy itself may<br />
be considered to be a market failure in the sense that<br />
there appears to be a widespread unwillingness to pay<br />
for copyrighted content in the traditional sense. 93 A<br />
statutorily imposed compensation scheme then very<br />
well could solve the problem in the same way that taxes<br />
solve the public goods problem, 94 and just as statutory<br />
licensing cable licensing solved the retransmission<br />
consent problem for cable and satellite television.<br />
If piracy itself constitutes market failure, then<br />
the resistance shown by consumers to SOPA/PIPA may<br />
be characterized as market failure as well. Perhaps<br />
consumers resist the imposition of laws to enforce the<br />
traditional business models because they do not find<br />
the traditional business models to be worth protection. 95<br />
91. See H.R. Rep. No. 94-1476, at 89 (1976), reprinted in<br />
1976 U.S.C.C.A.N. 5659, 5704.<br />
92. See discussion supra note 60.<br />
93. The entertainment industry seems to believe that the<br />
unwillingness results from the public’s ignorance that such practices<br />
are illegal and harmful, as evidenced by their efforts to reeducate<br />
the public through public service announcements. Eric Perrott,<br />
Relatively New Anti-Piracy PSA: Another Analogy Comparison<br />
of Piracy to Stealing Cars or an Effective Message?, Am. U.<br />
Intell. Prop. <strong>Brief</strong> (May 12, 2011, 8:37 AM), http://www.ipbrief.<br />
net/2011/05/14/relatively-new-anti-piracy-psa-another-analogycomparison-of-piracy-to-stealing-cars-or-an-effective-message/.<br />
However, if the public innately or instinctively believes that a<br />
practice is legal, no amount of reeducation is likely to dissuade<br />
individuals from continuing that practice. Again, consider<br />
the example of Prohibition. See generally Sylvia Engdahl,<br />
Amendments XVIII and XXI: Prohibition and Repeal (Greenhaven<br />
2009) (noting that respect for the law greatly diminished during the<br />
unpopular prohibition of alcohol). In such instances, the law must<br />
bend to the will of the people or else risk criminalizing a substantial<br />
portion of the public who had no real intention to violate the law.<br />
94. See Gordon, supra note 90, at 1610–11.<br />
95. See Yochai Benkler, The Wealth of Networks 462 (Yale<br />
Press 2006) (“Ubiquitous low-cost processors, storage media,<br />
and networked connectivity have made it practically feasible for<br />
individuals, alone and in cooperation with others, to create and<br />
exchange information, knowledge, and culture in patterns of social<br />
reciprocity, redistribution, and sharing, rather than proprietary,<br />
Perhaps the old business models are no longer<br />
supportable. 96 The introduction of a new compensation<br />
scheme may be precisely what is needed then to serve<br />
the interests of all parties.<br />
B. Legitimizing the Law in the Culture of<br />
Cyberspace<br />
A far larger problem would be the highly<br />
likely scenario that consumers, and the technology<br />
developers, 97 reject any kind of statutorily mandated<br />
payment to copyright holders. 98 In other words,<br />
what do the consumers really get out of such a new<br />
statutory compensation arrangement? Theoretically,<br />
consumers would receive the ability to do what they<br />
have wanted to do all along—that is, to consume and<br />
use copyrighted works freely. That is not to say that<br />
copying and distributing songs over the Internet would<br />
suddenly become legalized. 99 However, being that it<br />
no longer presents a problem to copyright holders, the<br />
threat of legal action disappears to the point where<br />
it becomes de facto legal. The problem with this<br />
theoretical benefit is that consumers may do whatever<br />
they desire, no matter what the law is.<br />
To look at it another way, the piracy problem<br />
and the consumer resistance to laws aimed at greater<br />
suppression of piracy may indicate that there is a<br />
fundamental disconnect between the consumers<br />
and producers of copyrighted works on the Internet.<br />
Furthermore, the protests demonstrate that even the<br />
lawmakers themselves severely misread the reactions<br />
of the people. The consumers—the users of the<br />
Internet—may have no desire to accommodate either<br />
copyright holders or the law in an effort to maintain<br />
any semblance of the current framework of intellectual<br />
property. 100<br />
market-based production.”).<br />
96. See id. at 468.<br />
97. The consumers play a major role in whether Internet<br />
service providers would accept the new compensation scheme. The<br />
incentive for Internet service providers to pay these royalties lies in<br />
the potential immunity from litigation. However, providers would<br />
only be willing to pay if consumers were willing to bear the added<br />
costs.<br />
98. See Mike Masnick, Why A Music Tax Is A Bad Idea,<br />
Techdirt (Dec. 9, 2008, 11:40 AM), http://www.techdirt.com/<br />
articles/20081209/0144083060.shtml.<br />
99. This sentiment is an important distinction because even<br />
the Audio Home Recording Act’s provision shields developers of<br />
recording technology, not users, just as the DMCA shields online<br />
service providers and not end users. Compare 17 U.S.C. § 1008<br />
(2006), with id. § 512.<br />
100. See generally John Perry Barlow, A Declaration of the<br />
Independence of Cyberspace, EFF.org (last visited Oct. 19, 2012),<br />
https://projects.eff.org/~barlow/Declaration-Final.html; Josh Levy,<br />
After SOPA: A Declaration of Internet Freedom, HuffingtonPost.<br />
com (July 1, 2012, 10:32 PM), http://www.huffingtonpost.com/josh-<br />
16 Spring 2013
In light of this, the equally possible notion<br />
is perhaps the Internet creates a jurisdiction where<br />
traditional copyright simply cannot be enforced to<br />
the extent that it is enforced outside of cyberspace. 101<br />
Might the Internet be governed by a different set of<br />
laws or rules than the physical world? 102 Is the Internet<br />
every bit the haven for lawless rogues that the high<br />
seas were for pirates during the golden age of piracy? 103<br />
Perhaps, then, the lawless pirates understand more<br />
about cyberspace than the law and lawmakers.<br />
Alternatively, framed another way, the culture<br />
of the Internet, and its empowering effect on the<br />
individual, could offer another explanation for the<br />
power shift whereby consumers want to take control<br />
of the content they support and consume. The Internet<br />
and social media have conditioned users to be more<br />
vocal and participatory. 104 No longer will consumers<br />
sit idly by and allow the industries they support to<br />
remain callous to their desires about how they want<br />
to consume media. 105 This shift is not necessarily a<br />
levy/after-sopa-a-declaration_b_1641959.html.<br />
101. See Madhavi Sunder, From Goods to the Good Life 29<br />
(Yale <strong>University</strong> Press 2012) (stating that “[m]eanwhile, rapid-fire<br />
technological advances and new forms of creative output, from<br />
YouTube and MySpace to the advent of open-source collaborative<br />
networks, garage bands, remix culture, and the World Wide<br />
Web itself, undermine utilitarian intellectual property law’s very<br />
premise: that intellectual property rights are necessary to incentivize<br />
creation.” This suggests that technological advances may even<br />
undermine the incentive based purpose of intellectual property<br />
law.).<br />
102. See generally Lawrence Lessig, The Law of the Horse:<br />
What Cyberlaw Might Teach, 113 Harv. L. Rev. 501 (1999).<br />
103. The fictional Captain Jack Sparrow, from Disney’s<br />
Pirates of the Caribbean franchise, espouses that the only rules<br />
that matter are defined solely by the capabilities of any individual.<br />
Pirates of the Caribbean: The Curse of the Black Pearl (Walt<br />
Disney Studios 2003) (“The only rules that really matter are these:<br />
what a man can do and what a man can’t do.”).<br />
104. See Sunder, supra note 101, at 35 (“Changing<br />
technologies and social mores have made culture more interactive<br />
and participatory.”). Might the exclusionary nature of intellectual<br />
property protection then be fundamentally at odds with the<br />
evolution of an increasingly inclusionary culture? Some theorists<br />
would argue that the Internet almost demands a shift from<br />
proprietary models of production towards nonproprietary ones. See<br />
Benkler, supra note 95, at 462.<br />
105. See Benkler, supra note 95, at 467 (“Some of the<br />
time that used to be devoted to passive reception of standardized<br />
finished goods through a television is now reoriented towards<br />
communicating and making together with others, in both tightly and<br />
loosely knit social relations.”). Furthermore, despite their role as<br />
the audience for content, consumers are often an afterthought when<br />
players in the entertainment industry fight over money, as evidenced<br />
by the dropping of certain television networks and programs during<br />
carriage disputes between television programmers and distributors.<br />
See Brian Stelter, DirecTV-Viacom Dispute Turns Into Blackout<br />
Reality, Media Decoder—NYTimes.com (July 11, 2012, 10:19 AM),<br />
http://mediadecoder.blogs.nytimes.com/2012/07/11/viacom-directvstandoff-causes-channel-blackout-in-20-million-households/.<br />
Consumers may now be able to make their displeasure known in<br />
bad thing and may simply represent the next step in<br />
cultural evolution. Evolution requires adaptation. The<br />
entertainment industry simply needs to adapt and to<br />
bend more to the will of their consumers, or customers.<br />
This should be nothing new to the industry, which like<br />
any business, ought to obey the age-old maxim that the<br />
customer is always right. 106<br />
Throughout all of this, the law need only do<br />
one thing to remain legitimate: continue to promote<br />
the public interest. And the public has spoken that<br />
they have more interest in keeping the Internet free of<br />
controls and regulations if such control means even<br />
the potential of stifling ideas and innovation online.<br />
Insomuch as the free expression of ideas is every bit<br />
as crucial to the progress of the sciences and the useful<br />
arts, if not more so than financial incentives, copyright<br />
law would continue to fulfill its original, constitutional<br />
mandate even if it no longer facilitated traditional<br />
market-based compensation to copyright holders.<br />
IV.<br />
conclusion<br />
Copyright does not function merely to grant<br />
copyright holders exclusive rights to their works,<br />
but rather the law also must promote progress in the<br />
creative fields. Copyright is not a tool for maintaining<br />
control of copyrighted works as a means to preserve<br />
business models for maximizing profits from creative<br />
works. It merely provides incentives that will promote<br />
creative expression. The incentives—financial<br />
compensation—are the means, not the ends towards<br />
which copyright law strives to achieve. Understanding<br />
this fundamental principle of copyright law will be<br />
crucial to working out a compromise, a peace accord,<br />
of sorts between copyright holders and the online<br />
community—including both technology developers and<br />
consumers.<br />
The music and movie industries are only a<br />
couple of the many industries that must contemplate<br />
how to adapt to online distribution of their products.<br />
Books may soon have to deal with the same problem<br />
as electronic books become the norm. Finally, as video<br />
drives the increase in broadband technology, television<br />
will soon migrate online as well. While the natural<br />
tendency may be to hold onto the business models that<br />
have worked offline, the nature of the Internet may<br />
ultimately frustrate those efforts. Instead, all parties<br />
involved would be better served to look forward and<br />
implement a system that better serves the interests of<br />
much louder ways than in the past.<br />
106. The industry already cares deeply about what consumers<br />
want. It needs only now to pay more attention to how the<br />
consumers want to view and use that content.<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
17
the consumers, consisting of the greater public who<br />
use the Internet more and more with each passing day.<br />
Considering that the purpose of copyright law also<br />
functions to promote the interests of the public, there<br />
is no reason why copyright should not also change to<br />
accommodate the demands of the Internet community.<br />
18 Spring 2013
Of Oatmeal, Bears, and NPEs: Ensuring Fair, Effective, and Affordable<br />
Copyright Enforcement Through Copyright Insurance<br />
by Evan McAlpine 1<br />
1<br />
Abstract<br />
Increasing copyright infringement and<br />
high litigation costs have left many independent<br />
content producers without the means to effectively<br />
commercialize their creations. However, this problem<br />
can be solved with inspiration from the patent world,<br />
where non-practicing entities (NPEs) have, among<br />
other things, given independent inventors additional<br />
options for commercializing their inventions. If<br />
adopted by the copyright world, an NPE would<br />
also provide more enforcement options to creators<br />
of copyrighted material, but would best do so by<br />
selling copyright insurance. This would allow it<br />
to legally pursue infringers on behalf of its insured<br />
clients, and give clients maximum control over their<br />
content. This system will eliminate rampant copyright<br />
infringement while simultaneously opening new<br />
markets for insurance providers, increasing the value of<br />
copyrighted works, and making copyright enforcement<br />
more efficient.<br />
Introduction<br />
Matthew Inman runs an online cartoon called<br />
“The Oatmeal.” 2 His business model is simple: he<br />
draws cartoons and monetizes them via merchandising<br />
and ad revenue. 3 In early 2010, though, Inman learned<br />
that a content aggregator, 4 funnyjunk.com, was<br />
displaying hundreds of copies of his work, 5 without<br />
1. Candidate, M.S., <strong>Intellectual</strong> <strong>Property</strong> Management and<br />
Markets at the Illinois Institute of Technology. Thanks to Professor<br />
Edward Lee, Professor David Schwartz, and Grant Schakelford<br />
for their teaching, guidance, and coaching throughout the writing<br />
process. Thanks also to my brother, Bob McAlpine, for providing<br />
the inspiration for this article.<br />
2. Matthew Inman, About the Oatmeal, The Oatmeal, http://<br />
theoatmeal.com/pages/about (last visited Feb. 21, 2013).<br />
3. Danny Bradbury, The Oatmeal beat Funnyjunk, but other<br />
cartoonists aren’t so lucky, Guardian (June 21, 2012, 1:55 AM),<br />
http://www.guardian.co.uk/technology/2012/jun/21/oatmealcarreon-comics-property.<br />
4. A content aggregator is a website that does not produce any<br />
content, but rather assembles content from other sources into one<br />
place.<br />
5. Matthew Inman, What should I do about FunnyJunk.com,<br />
The Oatmeal, http://theoatmeal.com/blog/funnyjunk (last visited<br />
Feb. 21, 2013).<br />
link-backs or attribution. Accordingly, he requested the<br />
site’s administrator remove the infringing copies via a<br />
DMCA takedown notice. 6<br />
After fruitlessly sending these requests<br />
for a year, 7 Inman grew frustrated with the Digital<br />
Millennium Copyright Act (DMCA) process, and<br />
resorted to the power of the press to protect his<br />
intellectual property. 8 He wrote two blog-posts on his<br />
website 9 ranting about his stolen comics, and then let<br />
the issue rest. 10 One year later, though, he received a<br />
letter from FunnyJunk’s attorney, demanding him to<br />
remove his posts about FunnyJunk and to pay twentythousand<br />
dollars for alleged defamation and false<br />
advertising. 11 In the following weeks, Inman retaliated<br />
with more blog posts and then raised more than ten<br />
times the requested amount, which he donated to<br />
charity to spite FunnyJunk. 12 He also sent FunnyJunk’s<br />
attorney a drawing of his mother attempting to seduce<br />
a bear, along with several pictures of the charity<br />
money. 13 FunnyJunk then sued Inman for trademark<br />
infringement and inciting others to cyber-vandalism. 14<br />
After some brief legal foot-stepping, FunnyJunk<br />
ultimately honored Inman’s original request by<br />
blocking its users from accessing his content and it then<br />
dismissed its lawsuit. 15<br />
6. Id.<br />
7. Id.<br />
8. Id.<br />
9. Id.<br />
10. Id.<br />
11. Dan Mitchell, Bear Seduction and the Copyright<br />
Conundrum, SFWeekly Blogs (June 12, 2012, 11:00 AM), http://<br />
blogs.sfweekly.com/thesnitch/2012/06/bear_seduction_and_the_<br />
copyrig.php.<br />
12. Matthew Inman, FunnyJunk is threatening to file a federal<br />
lawsuit against me unless I pay $20,000 in damages, The Oatmeal,<br />
http://theoatmeal.com/blog/funnyjunk_letter (last visited Feb. 21,<br />
2012).<br />
13. Matthew Inman, As promised, here’s the photo of<br />
$211,223.04 in cash we raised for charity, The Oatmeal, http://<br />
theoatmeal.com/blog/charity_money (last visited Feb. 21, 2012).<br />
14. Complaint at 1, Carreon v. Inman, No. 12-CV-03112 (N.D.<br />
Cal., June 15, 2012).<br />
15. Michael Cavna, ‘The Oatmeal’ v. FunnyJunk Lawyer: Why<br />
Charles Carreon dropped his Indiegogo charity lawsuit, Wash.<br />
Post Blog (July 6, 2012, 12:43 AM), http://www.washingtonpost.<br />
com/blogs/comic-riffs/post/the-oatmeal-v-funnyjunk-lawyer-whycharles-carreon-dropped-his-indiegogo-charity-lawsuit/2012/07/06/<br />
gJQAND0pQW_blog.html.<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
19
While few could have predicted that a simple<br />
copyright dispute would escalate to such comical<br />
proportions, the story nonetheless illustrates a<br />
salient issue in modern copyright enforcement. The<br />
Internet allows individuals to engage in mass copying<br />
and redistribution with only a few mouse-clicks,<br />
while owners of copyright-protected material lack<br />
comparable countermeasures. For example, copyright<br />
owners bear the burden of identifying and policing<br />
infringers, 16 but most are unable to afford the cost of<br />
enforcing their rights against these copiers. 17 Under the<br />
current system, a mass infringer operates at little cost,<br />
while the copyright owner must spend a substantial<br />
sum to protect his rights. 18 While copyright protection<br />
may be considered just another cost of doing business<br />
for large organizations such as Disney or Universal,<br />
the expense of litigation is often an insurmountable<br />
obstacle to an individual whose rights have been<br />
violated. 19<br />
A similar situation exists in patent law.<br />
There, while the cost of enforcement remains high, a<br />
solution has evolved that allows patent owners to more<br />
efficiently and effectively protect their property. The<br />
non-practicing entity (NPE) is an organization that does<br />
not seek to sell patented products, but rather specializes<br />
in licensing and enforcing patents. 20 Accordingly,<br />
they have dramatically changed the landscape of<br />
patent law, albeit with a great deal of controversy, by<br />
providing independent inventors with an additional<br />
source of capital, and with cheaper and more effective<br />
enforcement options. 21<br />
With only minor changes, the copyright world<br />
could adopt a similar model, whereby owners rely on<br />
third-parties to enforce their intellectual property rights.<br />
These copyright-based NPEs would fill a growing void<br />
by providing copyright owners with an effective and<br />
affordable mechanism for protecting their property, and<br />
in the process give owners the ability to realize more<br />
value from their property and more ways to protect it.<br />
This Note proposes using NPEs in copyright<br />
law to solve the problem of mass online copyright<br />
infringement. Part I begins with an overview of<br />
copyright infringement both before and after the<br />
Internet became the primary method of content<br />
distribution, and highlights the changes in business<br />
structure that have altered the copyright enforcement<br />
paradigm. It next discusses Righthaven’s failed<br />
attempt to become a copyright NPE and the lessons<br />
that potential followers can learn from that company’s<br />
experiment. Finally, the section ends with an analysis<br />
of the impact of NPEs on patent law, and notes that<br />
copyright law could benefit from the alternative<br />
enforcement mechanisms these organizations provide.<br />
In Part II, this Note proposes introducing NPEs<br />
into the copyright world in order to achieve more<br />
affordable and effective copyright enforcement. This<br />
section explains that, unlike patent NPEs that own their<br />
intellectual property outright, a copyright NPE will be<br />
most effective by insuring the copyrights of others and<br />
using the doctrine of subrogation to enforce its client’s<br />
rights against infringers. It then explains the basic<br />
mechanics of how such an organization would work,<br />
and then discusses the benefits that these organizations<br />
would give to society.<br />
Part III addresses the potential criticisms<br />
of this proposal. Specifically, it explains how the<br />
fair use doctrine will not prevent copyright insurers<br />
from operating profitably. It also addresses concerns<br />
that copyright insurers will use their power to bully<br />
infringers into unfair settlements. Finally, it explains<br />
how copyright insurers will not adversely affect fair<br />
users or free speech.<br />
I. Copyright Owners Need New<br />
Enforcement Mechanisms<br />
Over the past several decades, advances in<br />
technology have given copyright owners new and<br />
powerful ways to monetize their creations. 22 The<br />
Internet and, specifically, social networks allow owners<br />
to distribute their works to increasingly larger markets<br />
and to exercise greater control over how their property<br />
is used. However, the Internet also allows individuals<br />
to copy, redistribute, and pirate on a massive scale<br />
and in ways that the law cannot yet effectively<br />
control. 23 Accordingly, copyright owners cannot rely<br />
16. 17 U.S.C. § 512(c)(1)(A)(iii) (2006).<br />
17. Remedies for Small Copyright Claims: Hearing Before<br />
the Subcomm. on Courts, the Internet, and Intell. Prop., of the H.<br />
Comm. on the Judiciary, 109th Cong. 45–46 (2006) [Copyright<br />
Claims Hearing] (statement of the United States Copyright Office).<br />
18. Id. at 45–47.<br />
19. Id.<br />
20. See infra section I.C.<br />
21. Michael Risch, Patent Troll Myths Exposed, Intell. Asset<br />
Mgmt. Mag., July/Aug. 2012, at 74.<br />
22. Promoting Investment and Protecting Commerce Online:<br />
The Art Act, The Net Act and Illegal Streaming: Hearing Before<br />
the Subcomm. on Intell. Prop., Competition, and the Internet H.<br />
Comm. on the Judiciary, 112th Cong. 16 (Mar. 14, 2011)<br />
[hereinafter Subcomm. Hearing] (statement of Maria A. Pallante,<br />
Register of Copyrights).<br />
23. The “Stop Online Piracy Act”: Hearing on H.R. 3261<br />
Before the H. Comm. on the Judiciary, 112th Cong. 1 (Nov. 16,<br />
2011) (statement of Maria A. Pallante, Register of Copyrights).<br />
20 Spring 2013
on traditional copyright enforcement mechanisms. 24<br />
Rather, they need new tools to protect their property<br />
against the new threats of the online world.<br />
A. The Problem of Copyright<br />
Infringement<br />
In recent Congressional testimony, Maria<br />
Pallante, the Register of Copyrights, articulated the<br />
problem of mass copyright infringement, saying:<br />
[W]hen infringers blatantly<br />
distribute, stream, and otherwise<br />
disseminate copyrighted works<br />
on the Internet, they often do so<br />
because they have no expectation<br />
of enforcement. Unfortunately,<br />
the more these kinds of actions go<br />
unchecked, the less appealing the<br />
Internet will be for creators of and<br />
investors in legitimate content. In<br />
other words, Internet piracy not<br />
only usurps the copyright value<br />
chain for any one work, it also<br />
threatens the rule of copyright law<br />
in the 21st century. 25<br />
Unlike in the pre-Internet world, today anyone with<br />
a computer can create and distribute content, and<br />
anyone with a computer can infringe and pirate<br />
content. Because the Internet has so fundamentally<br />
altered the way individuals create, distribute, and<br />
consume content, 26 the law protecting that content must<br />
fundamentally change as well. As Ms. Pallante noted,<br />
without a change to provide adequate enforcement<br />
mechanisms, many creators will simply stop creating. 27<br />
1. Traditional Copyright Enforcement<br />
Mechanisms<br />
Before home recording technology became<br />
widely available in the 1990s, most content<br />
was created, produced, and distributed by large<br />
organizations. For example, to professionally<br />
produce a music album, a record company must pay<br />
for recording, editing, marketing, and distributing. 28<br />
24. Id.<br />
25. Id. at 2.<br />
26. Subcomm. Hearing, supra note 22, at 16.<br />
27. Id. at 2.<br />
28. Record Industry Association of America, Let’s Play: The<br />
<strong>American</strong> Music Business 6 (2010).<br />
Because trained professionals perform these functions,<br />
and because the final product shipped to market<br />
is a tangible good, the costs are incredibly high. 29<br />
Accordingly, large-scale content production was an<br />
enterprise in which only large organizations could<br />
operate.<br />
Further, the enforcement system envisioned by<br />
copyright law was appropriate for such organizations.<br />
Because the law allows a copyright owner to sue when<br />
her work is infringed, simple business sense dictates<br />
that the work in question must be at least be as valuable<br />
as the cost of the litigation to protect it, 30 or that the<br />
owner must have a sufficiently good chance of winning<br />
the suit and recouping his costs. 31 Further, the high cost<br />
of bringing creative works to market would require the<br />
work to be at least as valuable as the cost of creating<br />
and distributing it. 32 Combined with the fact that these<br />
works were commercialized by large organizations, the<br />
ability to use the court system to protect a copyright<br />
was an appropriate enforcement mechanism. Large<br />
organizations were willing to incur the expense of<br />
protecting their works through litigation because they<br />
only invested in a product that was worth at least the<br />
cost of commercialization and defense.<br />
While traditional litigation was an adequate<br />
remedy for large organizations, the fair use doctrine 33<br />
provided a mechanism for individuals and smaller<br />
entities to use copyrighted material without fear of<br />
legal retribution by the larger and more powerful<br />
organizations. Under traditional enforcement<br />
models, this doctrine worked well because it helped<br />
normalize the unequal power relationship between<br />
large and small entities. Further, the doctrine tacitly<br />
recognized that, because of the massive differences<br />
between the large organization and individual copier,<br />
the individual’s copying was unlikely to cause harm<br />
to the organization’s product. Indeed, when content<br />
29. Id. at 3, 6.<br />
30. No rational person would spend $30,000 to protect a<br />
copyright only worth $20,000.<br />
31. 17 U.S.C. § 505 (2006).<br />
32. A business would not sell a product for ten dollars if it cost<br />
them fifteen dollars to produce it.<br />
33. The fair use doctrine allows unauthorized use of<br />
copyrighted materials under certain conditions. 17 U.S.C. §<br />
107 (2006) (“[T]he fair use of a copyrighted work . . . is not an<br />
infringement of copyright. In determining whether the use made<br />
of a work in any particular case is a fair use the factors to be<br />
considered shall include—(1) the purpose and character of the<br />
use, including whether such use is of a commercial nature or is for<br />
nonprofit educational purposes; (2) the nature of the copyrighted<br />
work; (3) the amount and substantiality of the portion used in<br />
relation to the copyrighted work as a whole; and (4) the effect of<br />
the use upon the potential market for or value of the copyrighted<br />
work.”).<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
21
production was a capital-intensive industry, logic<br />
dictated that only a well-funded entity could cause<br />
significant damage through infringement.<br />
2. The Internet and Mass Copyright<br />
Infringement<br />
While copyright enforcement mechanisms<br />
were effective in the world of the 1976 Copyright Act,<br />
the Internet has fundamentally altered the business<br />
of content production. 34 Unlike the example in the<br />
previous section, producing and distributing a music<br />
album today requires only a microphone, basic<br />
recording software, and an Internet connection. The<br />
world of content production is no longer capitalintensive<br />
and dominated by large entities. 35 Rather,<br />
organizations such as the New York Times and NBC<br />
operate on a distribution model similar to that of the<br />
average blogger: they post content to their websites<br />
and rely on advertising revenue to make a profit. 36<br />
Accordingly, content is cheaper to produce and cheaper<br />
to infringe. The result is that more individuals are<br />
producing and distributing their own content, but<br />
do not have effective or affordable tools to fight<br />
infringement. 37<br />
While online content distribution is<br />
extremely cheap, protecting that content is impossibly<br />
expensive. 38 First, copyright owners bear the burden<br />
of policing their own work. 39 When they find<br />
unauthorized copying online, they must ask the website<br />
administrator to remove the offending material, and the<br />
owner can only sue for infringement if the work is not<br />
removed “expeditiously.” 40 When the work is widely<br />
copied, this process can become incredibly timeconsuming<br />
and lead to high opportunity costs. In the<br />
words of Matthew Inman, “trying to police copyright<br />
infringement on the Internet is like strolling into the<br />
Vietnamese jungle circa 1964 and politely asking<br />
34. Subcomm. Hearing, supra note 22, at 16.<br />
35. Justin Bachman, The Big Record Labels’ Not-So-Big<br />
Future, Bus. Wk. (Oct. 11, 2007), http://www.businessweek.<br />
com/stories/2007-10-10/the-big-record-labels-not-so-bigfuturebusinessweek-business-news-stock-market-and-financialadvice.<br />
36. Eriq Gardner, The Righthaven Experiment: A Journalist<br />
Wonders if the Copyright Troll Who Sued Him was Somehow . . .<br />
Right?, A.B.A. J., May 2012, at 36.<br />
37. See Am. Intell. Prop. Law Ass’n, Report of the Economic<br />
Survey 2011, at 35 (stating the median cost of copyright litigation<br />
for disputes with less than $1,000,000 at risk was $200,000 in<br />
2011).<br />
38. Id.<br />
39. 17 U.S.C. § 512(c)(1)(A)(iii) (2006).<br />
40. Id.<br />
everyone to use squirt guns.” 41 Second, most content<br />
creators today do not have the resources to protect their<br />
property through litigation. 42 Even if they did, few<br />
copyright owners would be willing to spend thousands<br />
of dollars in court costs and attorney’s fees to recover<br />
only a fraction of their costs in a damage award. The<br />
result is that many copyright owners have been “left . .<br />
. to compete with thieves.” 43<br />
Indeed, most infringers know that they are<br />
unlikely to face the consequences of their actions<br />
because enforcement is too expensive. Because there<br />
is rarely a credible threat of litigation, and because<br />
infringing costs even less than creating, they are able to<br />
make a profit at the expense of content producers. 44 For<br />
example, infringers use unauthorized works to generate<br />
ad revenue on their sites. 45 They simultaneously divert<br />
traffic from the work’s original source, which decreases<br />
the owner’s ad revenue. 46 Accordingly, a content<br />
producer may invest substantial energy in distributing<br />
his work online, only to be left remediless against the<br />
destructive effects of a few mouse-clicks. The infringer<br />
contributes nothing new to society and prospers at the<br />
producer’s expense, who, because of mass copyright<br />
infringement, has increasingly fewer incentives to<br />
invest resources into creating new works.<br />
B. Copyright Enforcement and<br />
Righthaven<br />
Recognizing the problem of mass online<br />
copyright infringement, a company called Righthaven<br />
began a doomed attempt at third-party copyright<br />
enforcement in 2010. 47 It was built on a simple model:<br />
acquire limited rights to copyrighted material and then<br />
aggressively pursue infringers. 48 While its experiment<br />
ultimately ended in failure, the lessons learned were<br />
not in vain. Despite some legal technicalities that<br />
ultimately proved to be fatal, Righthaven demonstrated<br />
that a third-party copyright enforcement entity has the<br />
potential to be effective, profitable, and beneficial to its<br />
clients.<br />
41. Inman, supra note 5.<br />
42. See Copyright Claims Hearing, supra note 17.<br />
43. Subcomm. Hearing, supra note 22, at 1.<br />
44. Id.<br />
45. Id.<br />
46. Id.<br />
47. Steve Green, Legal attack dog sicked on websites accused<br />
of violating R-J copyrights, Las Vegas Sun (Aug. 4, 2010, 2:00<br />
AM), http://www.lasvegassun.com/news/2010/aug/04/unlikelytargets-emerging-war-media-content/.<br />
48. Id.<br />
22 Spring 2013
1. Righthaven’s Business Model<br />
Righthaven sought to provide copyright<br />
enforcement services to content producers, specifically<br />
newspaper publishers. 49 It entered into agreements<br />
with several media companies in which it acquired<br />
limited rights to their copyright portfolios in return for<br />
a share in the proceeds of any litigation it won based on<br />
those copyrights. 50 These agreements gave Righthaven<br />
“all copyrights requisite to have Righthaven recognized<br />
as the copyright owner of the work for purposes of<br />
Righthaven being able to claim ownership,” 51 and<br />
limited Righthaven’s ability to exploit the copyrights to<br />
merely suing for infringement. 52 Further, Righthaven<br />
was obligated to reassign its interest in the copyrights<br />
to their owners if it did not pursue litigation within a<br />
specified time period. 53<br />
Once Righthaven acquired these rights, it<br />
identified infringers, who were always individuals<br />
or small organizations, and demanded them to pay a<br />
settlement fee or face litigation. 54 It used aggressive<br />
tactics and the threat of costly litigation to induce most<br />
to quickly negotiate and pay the settlement fee. 55 When<br />
an infringer refused to negotiate a payment and opted<br />
to defend its activity in court, Righthaven asked for<br />
the defendant’s domain name to be forfeited as part of<br />
the judgment. 56 In short, Righthaven’s strategy was<br />
to use its legal muscle to quickly and cheaply secure<br />
settlement payments from parties that lacked resources<br />
to defend themselves, and to spend time and money in<br />
court only when absolutely necessary.<br />
2. Why Righthaven Failed<br />
Despite its aggressive tactics, Righthaven<br />
went defunct less than two years after it was founded. 57<br />
Because many of the people it sued were sympathetic<br />
49. Gardner, supra note 36, at 37.<br />
50. Righthaven, LLC v. Hoehn, 792 F. Supp. 2d 1138, 1142<br />
(D. Nev. 2011).<br />
51. Id. at 1143.<br />
52. Id. at 1142.<br />
53. Id. at 1145.<br />
54. Green, supra note 47.<br />
55. Steve Green, About Righthaven, Vegas Inc (Nov. 29,<br />
2010, 12:00 AM), http://www.vegasinc.com/news/2010/nov/29/<br />
about-righthaven.<br />
56. Steve Green, Judge Strikes Righthaven Website Domain<br />
Demand, Vegas Inc (Apr. 16, 2011, 2:05 AM), http://www.<br />
vegasinc.com/news/2011/apr/16/judge-strikes-righthaven-websitedomain-demand.<br />
57. Steve Green, Righthaven Receiver Moves to Fire CEO<br />
Steven Gibson, Law Vegas Sun (June 25, 2012, 5:22 PM), http://<br />
www.vegasinc.com/news/2012/jun/25/righthaven-receiver-movesfire-ceo-steven-gibson.<br />
defendants and protected by the fair use doctrine, 58<br />
and because the courts determined that it did not have<br />
standing to sue for copyright infringement, Righthaven<br />
lost every case it litigated. 59 Accordingly, the<br />
company’s assets were turned over to a court-appointed<br />
receiver, and its founder is now under investigation by<br />
the Nevada State Bar. 60<br />
First, Righthaven’s business model was<br />
flawed because it only sought to enforce copyrights<br />
against infringers who were likely to give in to<br />
settlement demands. 61 Because individuals and small<br />
organizations typically do not have the resources or<br />
desire to fight lengthy court battles, Righthaven was<br />
able to use the specter of litigation to strong-arm these<br />
parties into modest settlement agreements. 62 However,<br />
while this strategy may have looked good on paper; it<br />
backfired in practice. While most infringers quickly<br />
settled, some did not. In those cases that were heard<br />
in court, judges ruled in favor of the defendants. 63<br />
Furthermore, as some defendants increasingly won<br />
cases against Righthaven, others became less likely to<br />
settle infringement claims, and more likely to litigate.<br />
Consequently, Righthaven spent more money in court<br />
than it was prepared to and cquired a reputation as<br />
a copyright “troll” out to make easy money at the<br />
expense of defenseless individuals, both in and out of<br />
court. Accordingly, courts grew less sympathetic to<br />
Righthaven’s complaints and more favorable towards<br />
the defendants.<br />
Second, Righthaven’s business model was<br />
flawed because it failed to identify which infringers<br />
were protected by the fair use doctrine and which<br />
were not. In many of these cases, the court found<br />
that although the defendants had engaged in unlawful<br />
copying, their use of the material was a fair use and<br />
therefore not an infringement. 64 For example, in<br />
58. Id.<br />
59. See generally Comprehensive List of Copyright<br />
Infringement Lawsuits Filed by Righthaven, LLC, Righthaven<br />
Lawsuits (last visited Apr. 20, 2013), http://righthavenlawsuits.<br />
com/lawsuits.html (listing of every Righthaven lawsuit and its<br />
disposition).<br />
60. Steve Green, Three Attorneys Face Righthaven Inquiry<br />
by State Bar, Vegas Inc (Jan. 12, 2012, 7:52 PM), http://www.<br />
vegasinc.com/news/2012/jan/12/three-attorneys-face-righthaveninquiry-state-bar.<br />
61. Green, supra note 47.<br />
62. Id.<br />
63. Steve Green, Righthaven Ordered to Pay Attorney’s Fees<br />
in Another Case, Vegas Inc (June 14, 2012, 7:15 PM), http://www.<br />
vegasinc.com/news/2012/jun/14/righthaven-ordered-pay-attorneysfees-another-case.<br />
64. See Righthaven LLC v. Realty One Group, No. 2:10-CV-<br />
1036 (D. Nev. Oct. 19, 2010); Righthaven LLC v. Klerks, No. 2:10-<br />
CV-00741 (D. Nev. Sept. 17, 2010).<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
23
Righthaven, LLC v. Hoehn, 65 the court found that<br />
although the defendant had copied and re-posted an<br />
entire copyrighted newspaper article, his use was a<br />
fair use. 66 Righthaven lost money in litigation and in<br />
settlement potential because it was unable to determine<br />
which infringers were fair users. 67 Furthermore,<br />
because Righthaven sued many fair use defendants, its<br />
image suffered even more, and in addition to pursuing<br />
ill-equipped defendants, it also harassed individuals for<br />
their legitimate use of copyrighted material. 68<br />
Third, and finally, the most serious flaw<br />
with Righthaven’s business model was that the<br />
company never acquired standing to sue for copyright<br />
infringement. 69 Federal statute dictates that the legal<br />
or beneficial owner of one of the six exclusive rights<br />
under a copyright the right to sue for infringement.<br />
As interpreted by the courts, this provision requires a<br />
plaintiff to own one of the exclusive rights enumerated<br />
in the Copyright Act. 70 For example, in Silvers v. Sony<br />
Pictures Entertainment, Inc., 71 the court found that<br />
the plaintiff did not have standing to sue for copyright<br />
infringement because she had only acquired the bare<br />
right to sue for infringement. 72<br />
When Righthaven acquired an interest in<br />
Stephens Media’s copyright portfolio, it gained “all<br />
copyrights requisite to have Righthaven recognized<br />
as the copyright owner of the Work for purposes of<br />
Righthaven being able to claim ownership as well as<br />
the right to seek redress for past, present and future<br />
65. 792 F. Supp. 2d 1138 (D. Nev. 2011).<br />
66. Id. at 1150.<br />
67. Green, supra note 63.<br />
68. Nate Anderson, Class-action lawsuit targets Righthaven’s<br />
“extortion litigation”, Ars Technica (May 18, 2011, 12:57 PM),<br />
http://arstechnica.com/tech-policy/2011/05/class-action-lawsuittargets-righthavens-extortion-litigation.<br />
69. Righthaven, LLC v. Democratic Underground, 791 F.<br />
Supp. 2d 968, 976 (D. Nev. 2011).<br />
70. 17 U.S.C. § 106 (2006) (“[T]he owner of copyright<br />
under this title has the exclusive rights to do and to authorize any<br />
of the following: (1) to reproduce the copyrighted work in copies<br />
or phonorecords; (2) to prepare derivative works based upon<br />
the copyrighted work; (3) to distribute copies or phonorecords<br />
of the copyrighted work to the public by sale or other transfer<br />
of ownership, or by rental, lease, or lending; (4) in the case of<br />
literary, musical, dramatic, and choreographic works, pantomimes,<br />
and motion pictures and other audiovisual works, to perform the<br />
copyrighted work publicly; (5) in the case of literary, musical,<br />
dramatic, and choreographic works, pantomimes, and pictorial,<br />
graphic, or sculptural works, including the individual images of a<br />
motion picture or other audiovisual work, to display the copyrighted<br />
work publicly; and (6) in the case of sound recordings, to perform<br />
the copyrighted work publicly by means of a digital audio<br />
transmission.”).<br />
71. Silvers v. Sony Pictures Entm’t, Inc., 402 F.3d 881 (9th<br />
Cir. 2005).<br />
72. Id.<br />
infringements of the copyright, both accrued and unaccrued,<br />
in and to the Work.” 73 The court found that<br />
this agreement did not give Righthaven ownership<br />
over any of the exclusive rights under a copyright, and<br />
Righthaven therefore did not have standing to bring<br />
the suit. 74 Accordingly, all of the 276 cases Righthaven<br />
brought were dismissed, and Righthaven was often<br />
ordered to pay the defendant’s litigation costs. 75<br />
Furthermore, after Righthaven accrued over<br />
$300,000.00 in attorney’s fees owed to its opponents, 76<br />
a federal judge ordered all of the company’s tangible<br />
and intangible assets delivered to a court-appointed<br />
receiver, which was sold to satisfy its debts. 77 Although<br />
the company still has two cases pending in the Ninth<br />
Circuit Court of Appeals, it is essentially defunct. 78<br />
Righthaven’s attempt to provide an alternate copyright<br />
enforcement mechanism was a colossal failure.<br />
However, this failure is a valuable lesson for future<br />
attempts at alternative enforcement: a third-party<br />
copyright enforcer must overcome the hurdles of fair<br />
use and standing in order to be effective and profitable.<br />
C. Lessons in Third-Party Enforcement<br />
from Patent Law<br />
In patent law, organizations known as NPEs<br />
operate on a business model similar to Righthaven’s.<br />
However, unlike Righthaven, NPEs have been<br />
enormously successful and have had a profound<br />
effect on the landscape of patent law. 79 In addition to<br />
acquiring rights to patents and then suing infringers,<br />
they seek to build revenue streams by licensing their<br />
patents to others. 80 Accordingly, NPEs in patent law<br />
have provided an effective and affordable solution to<br />
the problem of expensive litigation. Due to the many<br />
similarities between patent law and copyright law, it<br />
seems appropriate to look to these entities for answers<br />
to the problem of inaccessible copyright enforcement.<br />
73. Righthaven LLC v. Hoehn, 792 F. Supp. 2d at 1146 (D.<br />
Nev. 2011).<br />
74. Id.<br />
75. See Righthaven LLC v. Wolf, 813 F. Supp. 2d 1265, 1273<br />
(D. Nev. 2011); Righthaven LLC v. Eiser, No. 2:10-CV-3075,<br />
(D.S.C. Jan. 13, 2012).<br />
76. Green, supra note 63.<br />
77. Steve Green, Judge Strips Righthaven of Rights to 278<br />
Copyrights and its Trademark, Vegas Inc (Mar. 5, 2012, 7:29<br />
PM), http://www.vegasinc.com/news/2012/mar/05/judge-stripsrighthaven-rights-278-copyrights-and-/.<br />
78. Id.<br />
79. Id.<br />
80. Joff Wild, A War by Any Other Name, Intell. Asset<br />
Mgmt., Nov./Dec. 2009, at 4.<br />
24 Spring 2013
1. The Structure of a Non-Practicing<br />
Entity in Patent Law<br />
Large NPEs operate on one of two models.<br />
Organizations such as Acacia Technologies work<br />
by acquiring patents, licensing the use rights to<br />
those patents, and suing infringers. 81 Conversely,<br />
organizations such as RPX Corporation are known as<br />
defensive patent aggregators (DPAs). 82 These NPEs<br />
work by building patent portfolios and licensing<br />
them for defensive use, essentially providing risk<br />
management services via a pool of patents that its<br />
clients may use to defend themselves from litigation. 83<br />
Under the first model, NPEs provide a<br />
clearing-house function: they identify valuable patents,<br />
acquire them, and then assert them through licensing<br />
negotiations or litigation. Companies use these types<br />
of NPEs as a cheap alternative to in-house research and<br />
development: the NPE has already located and acquired<br />
the needed technology and is usually able to provide<br />
it for less than the cost of research and development.<br />
Once a license is agreed upon, the company is able<br />
to start producing its product immediately. This<br />
arrangement is similar to a common cross-licensing<br />
deal, 84 except that it is one-sided, which makes the<br />
whole process more efficient.<br />
Under the second model, NPEs provide risk<br />
management services in the form of patent protection.<br />
Here, an NPE aggregates a large pool of patents that<br />
its clients can use to defend against infringement<br />
suits. Although some commentators, and even some<br />
DPAs, claim that this business model provides strategic<br />
defense against “trolling” behavior, Jiaqing Lu points<br />
out that both models are necessary in today’s patent<br />
ecosystem. 85 Under his theory, both varieties of NPEs<br />
81. Profile, Acacia, http://acaciatechnologies.com/<br />
aboutus_main.htm (last visited Apr. 20, 2013) (“Acacia Research<br />
Corporation’s subsidiaries partner with inventors and patent owners,<br />
license the patents to corporate users, and share the revenue. Our<br />
partners are primarily individual inventors and small companies<br />
with limited resources to deal with unauthorized users but include<br />
some large companies wanting to generate revenues from their<br />
patented technologies.”).<br />
82. RPX, http://www.rpxcorp.com (last visited Apr. 20, 2013)<br />
(“Every member of our client network receives a license to every<br />
patent and patent right we own.”).<br />
83. Id. (“RPX helps corporations manage their exposure to<br />
patent risk by providing a rational alternative to traditional litigation<br />
strategy. Our solution offers a market-based solution in which we<br />
proactively acquire high-risk patents before they can become a<br />
costly legal problem for our clients.”).<br />
84. Black’s Law Dictionary 1003 (9th ed. 2009) (“An<br />
agreement between two or more patentees to exchange licenses for<br />
their mutual benefit and use of the licensed product.”).<br />
85. Jiaqing Lu, The Economics and Controversies of<br />
Nonpracticing Entities (NPEs): How NPEs and Defensive Patent<br />
complement each other by providing unique services to<br />
the market.<br />
2. The Judicial Response to Nonpracticing<br />
Entities<br />
Although U.S. courts have yet to address<br />
whether patent law should treat NPEs differently<br />
than other patent users, several courts have heard<br />
infringement cases in which NPEs have been principle<br />
players. For example, in eBay v. MercExchange,<br />
LLC, 86 the Supreme Court considered whether an<br />
injunction should automatically issue against a party<br />
liable of patent infringement. 87 Writing for the Court,<br />
Justice Thomas rejected the appellate court’s view that<br />
a party’s “‘lack of commercial activity in practicing<br />
the patents’ would be sufficient to establish that the<br />
patent holder would not suffer irreparable harm if<br />
an injunction did not issue.” 88 He noted instead that<br />
“some patent holders, such as university researchers<br />
or self-made inventors, might reasonably prefer to<br />
license their patents, rather than undertake efforts to<br />
secure the financing necessary to bring their works to<br />
market themselves.” 89 However, Justice Kennedy, in a<br />
concurring opinion, argued that a court should consider<br />
“the economic function of the patent holder.” Justice<br />
Kennedy noted that for NPEs, “an injunction, and the<br />
potentially serious sanctions arising from its violation,<br />
can be employed as a bargaining tool to charge<br />
exorbitant fees to companies that seek to buy licenses<br />
to practice the patent.” 90<br />
Further, in z4 Technologies v. Microsoft, 91 the<br />
district court for the Eastern District of Texas denied<br />
z4’s request to enjoin Microsoft’s infringing use of<br />
its software patent. 92 In this case, z4 argued that it<br />
had made a significant effort to commercialize its<br />
patents, and that Microsoft’s continuing infringement<br />
would limit its ability to sell its product. 93 Because<br />
Microsoft and z4 were not direct competitors, the court<br />
found that z4 would not be irreparably harmed by the<br />
infringement, and that monetary damages were an<br />
Aggregators will Change the License Market, Part II, 48 Les<br />
Nouvelles 147, 151 (2012).<br />
86. 547 U.S. 388 (2006).<br />
87. Id.<br />
88. Id. at 393 (quoting Mercexchange, L.L.C., v. eBay, Inc.,<br />
275 F. Supp. 2d 695, 712 (E.D. Va. 2003)).<br />
89. Id.<br />
90. Id. at 396 (Kennedy, J., concurring).<br />
91. 434 F. Supp. 2d 437 (E.D. Tex. 2006).<br />
92. Id. at 438.<br />
93. Id. at 440.<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
25
adequate award. 94 Essentially, it said that Microsoft’s<br />
use would not dissuade others from purchasing z4’s<br />
software because it only used the software in its own<br />
products. However, the court overlooked the harm that<br />
Microsoft’s continuing use would inflict on z4’s ability<br />
to license its software.<br />
For NPEs, the implications of this decision<br />
are dire: if a judge can deny an injunction in part<br />
because the parties are not competitors, NPEs will<br />
always operate at a disadvantage. Because infringers<br />
will be less likely to be enjoined when sued by an<br />
NPE rather than by a direct competitor, they will be<br />
more likely to litigate claims brought by NPEs, and<br />
NPEs will accordingly have to accept lower licensing<br />
fees. Although the law has yet to speak directly to the<br />
issues presented by NPEs, it seems far from reaching a<br />
consensus.<br />
3. The Impact of Non-Practicing Entities<br />
in Patent Law<br />
As seen in eBay v. MercExchange, NPEs have<br />
both friends and enemies. 95 Supporters argue that<br />
NPEs benefit the patent system by lowering transaction<br />
costs, which makes the patent market more efficient, 96<br />
giving individual inventors a more efficient way to<br />
enforce their rights, 97 and providing an additional<br />
source of capital to individual inventors and startup<br />
companies. 98 However, their opponents argue that<br />
NPEs are ruining the patent system because they use<br />
low-value patents to extort large licensing fees from<br />
productive companies, 99 try to maximize their profits by<br />
waiting for an industry to develop before asserting their<br />
patents, 100 and freeload off of the patent system without<br />
contributing anything in return. 101<br />
However, a recent empirical study by Michael<br />
Risch shows that most of these arguments have no<br />
factual support. In fact, his data revealed that NPEs<br />
have had a significant impact on patent law in only two<br />
ways: they help individual inventors enforce claims<br />
94. Id. at 444.<br />
95. See Damian Myers, Reeling in the Patent Troll: Was eBay<br />
v. MercExchange Enough?, 14 J. Intell. Prop. L. 333 (2007);<br />
Sannu Shrestha, Trolls or Market-Makers? An Empirical Analysis of<br />
Nonpracticing Entities, 110 Colum. L. Rev. 114 (2010).<br />
96. James McDonough, The Myth of the Patent Troll: An<br />
Alternative View of the Function of Patent Dealers in an Idea<br />
Economy, 56 Emory L. J. 189, 211 (2006).<br />
97. Risch, supra note 21, at 74.<br />
98. Shrestha, supra note 95, at 150.<br />
99. Myers, supra note 95, at 354.<br />
100. Mark Lemley & Carl Shapiro, Patent Holdup and<br />
Royalty Stacking, 85 Texas L. Rev. 1991, 1995 (2007).<br />
101. Wild, supra note 80, at 4.<br />
against large entities, and provide additional sources<br />
of capital to individual inventors trying to license their<br />
patents. 102 Risch found that 29% of patents enforced<br />
by NPEs were acquired from individual inventors, 103<br />
and that they enforced twice as many individual<br />
inventor patents as a random sampling of other litigated<br />
patents. 104 Furthermore, he found that because NPEs<br />
are able to pursue high-stakes patent litigation, 105 and<br />
because they have greater bargaining power with which<br />
to negotiate settlement deals, 106 they are often the<br />
individual inventor’s only viable option for protecting<br />
his rights.<br />
Risch’s study shows that, while NPEs are<br />
active and visible, they operate under the same<br />
parameters as productive entities. Rather than being<br />
freeloaders, rent-seekers, or trolls, they have most<br />
noticeably impacted patent law by providing effective<br />
and affordable enforcement mechanisms to individual<br />
inventors. Accordingly, NPEs have shown that thirdparty<br />
enforcement is a viable solution to the problem of<br />
high litigation and enforcement costs.<br />
4. What can Copyright Law Learn from<br />
Patent NPEs?<br />
NPEs in patent law have most dramatically<br />
benefitted individual inventors via enhanced<br />
enforcement and licensing opportunities. 107 In addition,<br />
they provide defense, risk management, and research<br />
and development services to larger clients. 108 Of these<br />
services, copyright owners could benefit most from<br />
better enforcement and risk management, and a thirdparty<br />
copyright enforcer, or copyright NPE, should<br />
look to patent NPEs for guidance in these areas.<br />
Patent NPEs are able to help individual<br />
inventors protect their works because they are better<br />
situated to use the legal system to enforce their<br />
rights. 109 Accordingly, a copyright NPE must be able<br />
to prosecute claims of infringement against even the<br />
most sophisticated infringers, and must have sufficient<br />
bargaining power to negotiate settlement agreements<br />
with large infringers. Ultimately, the copyright<br />
NPE must have a revenue stream that enables it to<br />
102. Id.<br />
103. Id.<br />
104. Id.<br />
105. Id.<br />
106. Id.<br />
107. Risch, supra note 21<br />
108. See discussion supra notes 80–81.<br />
109. Risch, supra note 21, at 74. (“NPE litigation may be<br />
the best way for garage inventors to capitalize on their patents if<br />
infringers refuse to license.”).<br />
26 Spring 2013
aggressively assert its rights.<br />
Furthermore, patent users also benefit from the<br />
risk management services provided by defensive patent<br />
aggregators. With a large pool of patents available for<br />
licensing, the NPE has a reliable revenue source, and<br />
its clients essentially have insurance against the risk of<br />
being sued for infringement. A copyright NPE should<br />
adopt this model with some slight modifications. It<br />
could aggregate a large pool of copyrights, and use the<br />
fees generated by its clients to pursue infringers, rather<br />
than to defend against claims of infringement.<br />
NPEs have been successful in patent law,<br />
and a copyright NPE should seek to emulate their<br />
successes. When looking to patent NPEs for solutions<br />
to the problem of high enforcement costs in copyright<br />
law, a would-be copyright NPE will find that the<br />
benefits of third-party enforcement accrue primarily to<br />
individual actors and small entities, and should target<br />
its efforts accordingly. Just as there are a variety of<br />
NPEs in patent law, the fact that there are also a variety<br />
of content creators in copyright law indicates that a<br />
similar variety of NPEs should exist here as well.<br />
II.<br />
Copyright Law Should Encourage the<br />
Development of NPEs<br />
Copyright law will benefit from NPEs in many<br />
ways that patent law has benefited from NPEs. Just as<br />
patent NPEs provide additional sources of capital to<br />
independent inventors and add credibility to any claims<br />
of infringement, 110 copyright NPEs will also benefit<br />
content producers in similar ways. Furthermore, as<br />
there are different business models for patent NPEs, so<br />
too will there be multiple business models for copyright<br />
NPEs.<br />
Depending on its clientele, a copyright NPE<br />
may not be able to effectively operate by owning<br />
copyrights outright. Where producers such as<br />
musicians and dancers operate by both creating and<br />
performing their works, such a system would take too<br />
much control from them and greatly decrease their<br />
ability to profit from their property. Here, the most<br />
efficient method of third-party copyright enforcement<br />
will be through a copyright insurance system. Under<br />
this system, content producers will be able to insure<br />
their works against infringement, and insurance<br />
providers will be able to pursue infringers in the<br />
110. Id.<br />
court system via the doctrine of subrogation. Content<br />
producers will always receive compensation for harm<br />
caused by infringers, and insurance providers will, in<br />
addition to collecting premiums for their services, be<br />
able to use the legal system to pursue infringers.<br />
A. Copyright Insurance is the Best Third-<br />
Party Enforcement Mechanism<br />
Patent NPEs benefit society primarily by<br />
providing an additional source of capital to independent<br />
inventors, and by providing them with enforcement<br />
services against larger entities that often infringe with<br />
impunity. 111 In copyright law, an NPE would provide<br />
these same services, although by different mechanisms.<br />
By providing insurance for copyright infringement,<br />
a copyright NPE would be able to pursue infringers,<br />
while insuring that individual copyright owners are<br />
compensated for their harm.<br />
1. Copyright Insurance for Content<br />
Creators<br />
A copyright insurance regime is the most<br />
effective mechanism for a copyright NPE to operate<br />
under because it will provide the NPE a steady income<br />
flow while simultaneously giving the owner more<br />
effective and affordable enforcement options. This<br />
insurance would work like most other insurance<br />
plans; a policyholder will pay a premium to insure her<br />
property against harm. Like other forms of insurance,<br />
the insured will determine the value 112 of her property,<br />
and insure it for a sum that does not exceed that<br />
amount. When the insured object is damaged, the<br />
policyholder files a claim with the insurance company,<br />
who then compensates her for her loss. In a copyright<br />
insurance policy, the content producer will primarily<br />
insure against infringement, 113 and will accordingly file<br />
a claim whenever its work is infringed. It is important<br />
to note, though, that under this system, the insured, not<br />
the insurer, bears the responsibility of discovering and<br />
reporting infringing uses. 114<br />
Also, the content producer will always be<br />
compensated for the harm caused by the infringement,<br />
111. See id.<br />
112. A simple Google search for “copyright valuation” yields<br />
a list of several firms that specialize in this service.<br />
113. However, the policy could also be extended to cover<br />
theft, abandonment, etc.<br />
114. The burden of discovering infringing works is not<br />
significant. A Google search for one’s copyrighted property will<br />
often yield many infringing uses. Also, content creators will<br />
normally have networks of colleagues and fans that will notify them<br />
of unauthorized uses.<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
27
up to the amount it has insured against. For example,<br />
if the work was insured for ten-thousand dollars, the<br />
insurance company will pay up to ten-thousand dollars<br />
for any infringement of that work. Accordingly, an<br />
infringement of that work worth five-thousand dollars<br />
will yield five-thousand dollar payment from the<br />
insurer. Conversely, if the infringement caused harm<br />
in excess of ten-thousand dollars, the owner would be<br />
entitled to pursue the infringer for the remainder of the<br />
damage.<br />
Copyright insurance offers security from<br />
infringers while leaving the owner’s copyright intact,<br />
and completely within her control. While the insurance<br />
policy allows the owner to be compensated for her<br />
harm without self-help or the legal system, it does not<br />
destroy her ability to use these mechanisms to enforce<br />
her rights. Although the insurance policy will often be<br />
the cheapest and most effective method for the owner<br />
to receive compensation, it does not obligate her to<br />
forego her other rights.<br />
2. Copyright Insurance for Insurance<br />
Providers<br />
A copyright insurance provider will operate<br />
by collecting premiums from its policyholders, paying<br />
claims for infringement damages, and then suing<br />
infringers. The insurance provider will have standing<br />
to sue for infringement because once it compensates<br />
a policyholder for its injuries, it will acquire the legal<br />
right to sue the offending party through the doctrine<br />
of subrogation. 115 As a legally sophisticated entity, the<br />
insurance provider will be able to use its resources and<br />
expertise to add credibility to its enforcement efforts<br />
in a way that a private individual could not, and in<br />
a way that will deter potential infringers from their<br />
illegal activities. Further, by collecting premiums<br />
from policyholders, the provider will insure that it<br />
has ample resources with which to pursue infringers,<br />
and sufficient funds to compensate instances of<br />
infringement.<br />
First, when a policyholder’s insured property<br />
is infringed, the insurance provider will evaluate<br />
115. In re Hamada, 291 F.3d 645, 649 (9th Cir. 2002) (“In<br />
general terms, subrogation is the substitution of one party in place<br />
of another with reference to a lawful claim, demand or right. It<br />
is a derivative right, acquired by satisfaction of the loss or claim<br />
that a third party has against another. Subrogation places the party<br />
paying the loss or claim (the “subrogee”) in the shoes of the person<br />
who suffered the loss (“the subrogor”). Thus, when the doctrine of<br />
subrogation applies, the subrogee succeeds to the legal rights and<br />
claims of the subrogor with respect to the loss or claim.”); see also<br />
Mutual Servs. Cas. Ins. Co. v. Elizabeth State Bank, 265 F.3d 601,<br />
629 (7th Cir. 2001).<br />
the cost of the infringement, and then compensate<br />
the policyholder according to the terms of the<br />
policy. However, before a copyright is insured, it<br />
will be appraised, just like any other piece of insured<br />
property. This will insure that the amount paid by the<br />
provider will reflect the actual damage caused by the<br />
infringement, including damage to value, actual and<br />
potential sales, reputation, and potential licensing deals.<br />
Second, once the insurance provider has fully<br />
compensated the policy owner, it will be free to sue the<br />
infringer to recover the amount it paid to its insured.<br />
Because insurance providers typically have greater<br />
bargaining power than individuals, and because the<br />
insurance provider, and not the content producer, will<br />
bring suit, the infringer will have greater incentive to<br />
settle the case. Just as NPEs in patent law provide<br />
bargaining power and capital to independent inventors,<br />
copyright insurance providers will lend similar<br />
credibility to their clients.<br />
Furthermore, not every instance of<br />
infringement will result in a lawsuit. Often, online<br />
copyright infringement is not worth the cost of a<br />
lawsuit, 116 and would be dealt with outside of court.<br />
However, because an infringer would receive a “cease<br />
and desist” letter from an organization rather than an<br />
individual, it would have greater incentive to stop its<br />
infringing behavior. From the provider’s point of view,<br />
a takedown notice, even without a settlement, will be a<br />
valuable tool because it will prevent future infringing<br />
uses, which will in turn lower the number of future<br />
claims it must pay.<br />
Ultimately, the insurance provider, with<br />
the very credible threat of litigation it presents to<br />
infringers, will be able to control infringement more<br />
efficiently than an individual could. Based on the value<br />
of the copyright and the amount of damage caused by<br />
the infringement, the insurance provider would be able<br />
to determine whether to use litigation, negotiation, or a<br />
simple takedown request.<br />
B. Copyright Insurance is the Best<br />
Solution to Online Infringement, and<br />
the Most Effective Model for an NPE<br />
in Copyright Law<br />
Copyright insurance will solve the problem<br />
of expensive and inaccessible copyright enforcement<br />
116. See, e.g., Danny Bradbury, The Oatmeal beat FunnyJunk,<br />
but other cartoonists aren’t so lucky, Guardian (June 21, 2012, 1:55<br />
AM), http://www.guardian.co.uk/technology/2012/jun/21/oatmealcarreon-comics-property<br />
(noting that the highest paid online<br />
cartoonists make about $108 per day. Additionally, litigation can<br />
cost as much as two to three-thousand dollars per day.).<br />
28 Spring 2013
mechanisms by allowing infringement claims to be<br />
prosecuted by organizations with the means to do so,<br />
and by giving producers an immediate and adequate<br />
remedy. It offers an alternative to the status quo, which<br />
is more efficient, more equitable, and more consistent<br />
with other areas of the law.<br />
1. Copyright Insurance is More Efficient<br />
than Traditional Enforcement<br />
First, a copyright insurance program will<br />
incentivize the creation of new works by offering<br />
producers more ways to realize value from their<br />
property. By guaranteeing payment for legitimate<br />
injuries, and by allowing sophisticated parties to<br />
prosecute claims of copyright infringement on behalf<br />
of their clients, copyright insurance will reduce<br />
the risk that harm caused by infringement will go<br />
uncompensated. This means that producers will realize<br />
more value from their creations, and will in turn be<br />
motivated to produce more works.<br />
Furthermore, producers will spend less time<br />
trying to protect their works, and more time creating<br />
new works. Just as NPEs in patent law allow inventors<br />
to continue to invent by taking care of the legal issues<br />
associated with the patent, so too will copyright<br />
insurance give producers more resources with which<br />
to create new works. By allowing the producer to<br />
receive immediate compensation for her harm while the<br />
insurance provider addresses the legal issues involved<br />
in the infringement, the producer has more resources<br />
with which to create new works.<br />
Second, insurance companies will reduce<br />
instances of infringement because they, unlike their<br />
clients, have a bargaining position from which they<br />
can negotiate settlements. Because most copyright<br />
infringements are not worth the cost of a trial, 117<br />
and because most individuals cannot afford the cost<br />
of litigation, 118 private efforts to halt infringement<br />
are often fruitless. However, when a sophisticated<br />
organization with the ability to pursue litigation<br />
attempts to settle an infringement dispute outside of<br />
court, the infringer will more likely stop his illegal<br />
activity than when a private individual sends the same<br />
letter.<br />
Furthermore, because of their greater leverage<br />
and bargaining power, insurance providers will be<br />
able to stop infringement before litigation or even<br />
negotiations become necessary, which will ultimately<br />
lower the cost of enforcement. Because action taken by<br />
117. Id.<br />
118. Id.<br />
an insurance provider will more likely stop offending<br />
activity, it is less likely that the dispute will grow to<br />
a size that will require litigation. Accordingly, every<br />
party involved in the dispute, including the court and<br />
the taxpayers, will benefit from more efficiently settled<br />
conflicts.<br />
Third, copyright insurance will lower<br />
transaction costs in copyright enforcement by<br />
increasing certainty and stability in enforcement<br />
mechanisms. Because content producers will know<br />
that they will be compensated for harm caused by<br />
infringement, they will work less to protect their<br />
property. Rather, the insurance provider, to recover<br />
the value of its payments, will seek compensation from<br />
the infringer. This is a more efficient system because,<br />
as between the insurer and the insured, the insurer<br />
is in the best position to, and can most cheaply seek<br />
redress for the harm. The insurer, because its business<br />
will be enforcing copyrights, will be able to navigate<br />
all aspects of the dispute resolution process more<br />
efficiently and cheaply than could a private individual.<br />
Finally, insurance providers will be better able<br />
to determine which instances of infringement will be<br />
worth litigating than private individuals. Just like<br />
NPEs in patent law, insurance providers will decide<br />
to pursue claims based primarily on the likelihood of<br />
success, and will accordingly litigate only meritorious<br />
claims. 119 In contrast, when individuals file suit, their<br />
decisions are often colored by emotion, 120 and the<br />
perceived inequities of the situation. 121 The result is a<br />
court system burdened by frivolous claims. However,<br />
by preventing meritless and low value claims from<br />
being litigated, insurance providers will decrease the<br />
burden on the courts, and lower the average cost of<br />
litigation across the entire legal landscape.<br />
2. Copyright Insurance is Consistent<br />
with Related Areas of Law, and<br />
an Appropriate Remedy for Mass<br />
Copyright Infringement<br />
Copyright infringement is an unfortunate<br />
reality of the online world. While no one denies that<br />
such infringement is illegal, the fact remains that no<br />
one has been able to find an effective solution to the<br />
problem. 122 However, by encouraging the development<br />
119. See Risch, supra note 21, at 74.<br />
120. Kathryn Abrams, Emotions in the Mobilization of Rights,<br />
46 Harv. C.L.-C.L.L. Rev. 573 (2011).<br />
121. Russell B. Korobkin & Thomas S. Ulen, Law and<br />
Behavioral Science: Removing the Rationality Assumption from<br />
Law and Economics, 88 Cal. L. Rev. 1135–36 (2000).<br />
122. Subcomm. Hearing, supra note 22, at 1.<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
29
of copyright insurance, the copyright system would<br />
more accurately reflect the realities of the online world.<br />
Furthermore, by having infringement claims litigated<br />
by third parties, copyright practice would be more<br />
consistent with tort law practice and with the other<br />
subsets of intellectual property law.<br />
First, the copyright system is notorious for its<br />
inability to evolve at the same speed as technology,<br />
and it must constantly be tweaked to prevent it from<br />
becoming entirely obsolete. 123 By developing a<br />
copyright insurance system, the law would tacitly<br />
recognize that many content producers cannot afford<br />
to defend their property and that the Internet presents<br />
challenges to copyright law that are too big to be<br />
confronted by individuals. Just as traditional tort<br />
law accepted that many parties who had legitimate<br />
grievances could not afford to seek redress through<br />
the courts, copyright law must recognize that many<br />
copyright owners cannot afford to use the courts to<br />
satisfy their claims. By creating a copyright insurance<br />
system, many owners would receive compensation they<br />
otherwise would not, and the law would be better able<br />
to protect content producers’ intellectual property.<br />
Second, copyright insurance would increase<br />
the cohesion between copyright law and tort law,<br />
while maintaining its conformity to the other subsets<br />
of intellectual property law. By allowing insurance<br />
providers to prosecute infringement for their clients,<br />
injured parties will not have to rely on their own,<br />
often limited, resources to get compensation for their<br />
injuries. Accordingly, copyright law, just like tort<br />
law, will recognize that because insurance companies<br />
depend on litigation for a large part of their business,<br />
and because it is more difficult for individuals to be<br />
productive when they are involved in litigation, it is<br />
more efficient for insurance companies, rather than<br />
individuals, to litigate claims.<br />
Also, copyright insurance will require<br />
copyright owners to maintain and defend their property<br />
to some extent. Because copyright owners will have to<br />
file a claim to be compensated for infringement, they<br />
will have to remain diligent in locating unauthorized<br />
uses of their property. In patent 124 and trademark 125<br />
law—and even in traditional property law 126 —owners<br />
are also required to maintain their ownership interest in<br />
their property. This is because the law seeks to reward<br />
productivity and industry, and to hold otherwise would<br />
result in waste, as owners would receive the benefit of<br />
legal protection with no duty in return. In a copyright<br />
insurance system, this requirement will prevent unused<br />
and unwanted intellectual property from being enforced<br />
for illegitimate gain, as logic dictates that few resources<br />
will be used to defend something of little value.<br />
3. Copyright Insurance is More Equitable<br />
than the Current Enforcement<br />
Mechanisms<br />
Copyright insurance will allow content<br />
producers to receive compensation for any instance<br />
of infringement, and will also preserve their ability<br />
to determine when and how they will enforce their<br />
rights. Under the current system, copyright owners<br />
are rarely able to obtain a remedy for their injuries, or<br />
even to enforce their rights at all. 127 However, because<br />
copyright insurance will always compensate an owner<br />
for his injury, more owners will recover for their harms,<br />
and, necessarily, more infringers will pay for the harm<br />
they cause. The result is a more equitable copyright<br />
system where more injuries are compensated, and more<br />
defendants are held accountable for their actions.<br />
Furthermore, by requiring a copyright owner to<br />
file a claim in order to receive compensation, the owner<br />
retains complete control over which infringements<br />
will be prosecuted. Because a copyright owner may<br />
not want to sue every infringer, such as people with<br />
disabilities, charitable organizations, or educational<br />
institutions, this requirement provides indirect<br />
protection to such parties, and allows the owner greater<br />
control of how others use his work. In the Righthaven<br />
saga, for example, the media organizations that sold<br />
their rights suffered damage to their reputations when<br />
Righthaven’s aggressive tactics drew the attention of<br />
bloggers and news organizations. 128 Here, though, a<br />
copyright owner could avoid such negative associations<br />
by allowing certain instances of infringement, or by<br />
seeking to resolve them privately before filing a claim<br />
with the insurance provider. Regardless of the owner’s<br />
preferred enforcement mechanism, though, the end<br />
result is a dispute resolution system wherein content<br />
123. Id.<br />
124. The USPTO has a graduated fee structure for maintaining<br />
patents. See http://www.uspto.gov/web/offices/ac/qs/ope/<br />
fee031913.htm (last visited Apr. 21, 2013).<br />
125. See, e.g., The Murphy Door Bed Co., Inc. v. Interior<br />
Sleep Sys., Inc., 874 F.2d 95, 101–02 (2d Cir. 1989).<br />
126. See, e.g., O’Keefe v. Snyder, 416 A.2d 862, 869 (N.J.<br />
1980).<br />
127. Promoting Investment and Protecting Commerce Online:<br />
Legitimate Sites v. Parasites (Part I & II): Hearing Before the<br />
Subcomm. on Intell. Prop., Competition, and the Internet H. Comm.<br />
on the Judiciary, 112th Cong. 19 (Mar. 14, 2011) (statement of<br />
Maria A. Pallante, Register of Copyrights).<br />
128. When Righthaven was still filing lawsuits, the Las Vegas<br />
Sun, and blogs such as TechDirt and Ars Technica, provided regular<br />
coverage and commentary on the proceedings.<br />
30 Spring 2013
producers have more control in how their rights are<br />
enforced, and where they are more likely to receive<br />
compensation for their harm.<br />
C. How Will Copyright Insurance Work?<br />
Just as the theoretical underpinnings of<br />
and justifications for copyright insurance are fairly<br />
straightforward, so to is its application to real world<br />
situations. In the introductory section of this Note<br />
involving the Matthew Inman and FunnyJunk,<br />
copyright insurance would have solved the problem<br />
quickly, effectively, and fairly, and it would have<br />
conferred a benefit on each party involved. Mr.<br />
Inman would have received compensation for his<br />
injury, FunnyJunk would have saved the expense of<br />
an attorney, its attorney would have avoided personal<br />
humiliation and unwanted attention, the insurance<br />
company would have received premiums from Mr.<br />
Inman, and taxpayers would have been spared the<br />
expense of federal litigation.<br />
1. Copyright Insurance and The Oatmeal<br />
When Mr. Inman first noticed that his works<br />
were being infringed, he used self-help in the form<br />
of a DMCA takedown notice to protect his property.<br />
With a simple copyright insurance policy, though,<br />
the dispute would have ended almost before it began.<br />
Mr. Inman could have filed a claim for copyright<br />
infringement rather than attempt to resolve the problem<br />
on his own. He would have been compensated for<br />
the damage caused by the unauthorized posting,<br />
and the insurance company would have approached<br />
FunnyJunk about its infringing activity. Faced with<br />
a demand from the insurance company, FunnyJunk<br />
would have been more diligent in its efforts to remove<br />
the infringing material, as continued violations would<br />
have almost certainly lead to litigation and a settlement<br />
demand. Furthermore, because the owners of other<br />
material on FunnyJunk’s website would likely have<br />
copyright insurance, FunnyJunk would have more<br />
incentive to thoroughly police its site, as each instance<br />
of infringement would be more likely pursued by an<br />
insurance provider.<br />
Because the potential of a lawsuit by an<br />
insurance company would have made FunnyJunk<br />
police its site more diligently, Mr. Inman would not<br />
have felt the need to use public opinion in his fight to<br />
stop the unauthorized use of his work. Accordingly, all<br />
of the charges leveled against Mr. Inman would have<br />
never been filed, and neither party would have born the<br />
expense of attorney’s fees and court costs. Under the<br />
copyright insurance system, then, infringement disputes<br />
would be more likely to be resolved in their early<br />
stages, and the chances of such dramatic escalation<br />
would be greatly reduced.<br />
2. The Business Model for Copyright<br />
Insurance<br />
Copyright insurance will benefit content<br />
producers, and will allow insurance companies to profit<br />
while doing so. In addition to receiving premiums,<br />
insurance companies will, through subrogation, acquire<br />
the right to sue for infringement on behalf of their<br />
policyholders. With two options for making a profit,<br />
both the insured and insurer will be in a better position<br />
than they would have been without the insurance<br />
policy.<br />
First, insurance companies will charge a<br />
premium that guarantees them a profit. Policyholders<br />
will be able to buy as much or as little insurance as<br />
they need or want, which will affect the amount of the<br />
premium. The insurance company will use the amount<br />
for which the copyright is insured in conjunction<br />
with the likelihood of infringement to calculate the<br />
premium. The resulting payment will allow the<br />
insurance company to compensate the policyholder for<br />
each instance of infringement while still being able to<br />
make a profit.<br />
Once the insurance company pays the<br />
policyholder for its injury, it will acquire the legal<br />
right to seek compensation from the offending party. 129<br />
Although this will not always result in litigation, if the<br />
infringement causes significant harm, the insurance<br />
company will be able to fully litigate the claim to<br />
receive the compensation it is entitled to. Because<br />
copyright law will be a primary part of its business,<br />
it will be able to conduct the litigation more cheaply<br />
and more effectively than most. Accordingly, the<br />
insurance company will be in a better position<br />
to settle claims, and will often be able to acquire<br />
adequate compensation without fully trying the case.<br />
Furthermore, even if the case is fully litigated, the<br />
insurance company will have a variety of remedies<br />
to choose from, 130 including the option to recover<br />
attorneys’ fees, 131 which means it will have a better<br />
chance of recovering its losses through the court.<br />
129. See discussion supra note 115.<br />
130. 17 U.S.C. §§ 502–505 (2006) (providing the remedies<br />
for copyright infringement include injunctions, attorney’s fees and<br />
injunction, costs, and damages as well as and profits).<br />
131. Id. § 505.<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
31
Copyright insurance is pragmatic both in<br />
theory and in its application. It provides content<br />
producers with an effective tool to fight copyright<br />
infringement, as well as a method through which<br />
to receive adequate compensation. Copyright<br />
insurance also enables insurance companies to provide<br />
remedies to injured creators while still generating<br />
profits. Furthermore, its accompanying economic<br />
incentives will encourage insurance companies to avail<br />
themselves of the court system only to pursue the worst<br />
offenders. The result will be a simple system that<br />
efficiently and comprehensively solves the problem of<br />
online copyright infringement.<br />
III.<br />
Criticisms of Copyright Insurance<br />
Copyright insurance provides an effective,<br />
efficient, and affordable solution to mass copyright<br />
infringement. Granted, critics of this concept<br />
argue that the fair use doctrine will make copyright<br />
insurance ineffective, that insurance providers will<br />
coerce settlement agreements, and that the owners<br />
will profit at the content providers’ expense. Each<br />
criticism addresses a legitimate area of concern. Still,<br />
while copyright insurance may have various negative<br />
consequences, the probability that they will occur is<br />
remote. Even so, the benefit that will accrue to society<br />
under this program outweighs the criticisms presented.<br />
A. The Fair Use Doctrine Will Not Render<br />
Copyright Insurance Ineffective<br />
An argument that opponents could make is<br />
that the fair use doctrine renders it too difficult for<br />
insurance companies to predict copyright infringement<br />
and insure the content providers yet remain profitable<br />
organizations. The fair use doctrine is an affirmative<br />
defense against a claim of copyright infringement. 132<br />
For example, if charged with copyright infringement,<br />
a defendant may claim that, although he did use the<br />
work, his use was a “fair use” and, therefore, not an<br />
infringement. Doing so would constitute an absolute<br />
defense against copyright infringement claims. 133 One<br />
could argue that this, in turn, could render the program<br />
unprofitable and thus ineffective.<br />
Although this argument demonstrates a<br />
valid flaw within the copyright insurance system, it<br />
is unlikely that this deficiency presents a significant<br />
132. See Barton Beebe, An Empirical Study of U.S. Copyright<br />
Fair Use Option, 1978-2005, 156 U. Pa. L. Rev. 549, 549 (2008);<br />
see also 17 U.S.C. § 107 (2006).<br />
133. See 17 U.S.C. § 107.<br />
handicap to the program. Firstly, disputes between<br />
providers and policyholders over whether an infringing<br />
use is a fair use will be rare. Secondly, fair use will not<br />
make copyright insurance unpredictable to the point<br />
of unprofitability. Thirdly, while fair use is considered<br />
a broad and vague area of copyright law, courts have<br />
already consistently applied this doctrine, enabling<br />
insurance companies to make informed decisions as<br />
to fair use. Lastly, the perceived vagueness of fair<br />
use does not display enough risk factors to discourage<br />
insurance providers from entering the copy right<br />
insurance business.<br />
To begin with, insurance providers are<br />
generally required by law to provide an explanation<br />
of the denial of a claim. 134 A disgruntled policyholder<br />
would be able to provide outside counsel with the<br />
provider’s opinion of why the use was fair. If the<br />
policyholder’s attorney agreed with the assessment of<br />
the fair use claim, the dispute would most likely be<br />
dropped. Alternatively, if the provider’s explanation<br />
were deemed unacceptable, the policyholder would<br />
still have a right to pursue the infringer independent<br />
of the insurer, and, depending on the jurisdiction,<br />
may have the option to seek tort, 135 contract, 136 or<br />
statutory 137 remedies against the provider for denying<br />
the claim in bad faith. The provider’s potential liability<br />
is an incentive for it to handle claims fairly. The<br />
policyholder’s ability to sue after his claim is denied<br />
also prevents insurance providers from exercising too<br />
much power over copyright litigation, and demonstrates<br />
that the copyright insurance program is feasible.<br />
Additionally, insurance providers regularly<br />
insure businesses against claims of copyright<br />
infringement as part of standard commercial general<br />
liability policy. 138 Accordingly, there exists a<br />
134. See, e.g., 215 Ill. Comp. Stat. § 5/154.6(n). (“Any of<br />
the following acts by a company . . . constitutes an improper claims<br />
practice . . . . Failing in the case of the denial of a claim or the<br />
offer of a compromise settlement to promptly provide a reasonable<br />
and accurate explanation of the basis in the insurance policy or<br />
applicable law for such denial or compromise settlement.”).<br />
135. See, e.g., Sanderson v. Allstate Ins. Co., 738 F. Supp.<br />
432, 435 (D. Colo. 1990) (citing Williams v. Farmers Insurance<br />
Group, Inc., 781 P.2d 156 (Colo. App. 1989)); see also id. (holding<br />
that the state’s insurance law did not preclude a common law action<br />
for bad faith claim denial).<br />
136. See, e.g., Chamberlaine & Flowers, Inc. v. Smith<br />
Contracting, Inc., 341 S.E.2d 414, 417 (W. Va. 1986) (holding<br />
that failure to pay an insurance claim is nonfeasance, rather than<br />
misfeasance, and therefore a contractual claim).<br />
137. See, e.g., Mo. Rev. Stat. § 375.420 (2012); 40 Pa. Cons.<br />
Stat. § 1171.5(10) (2012).<br />
138. The standard form commercial general liability policy,<br />
as provided by the Insurance Services Office, extends coverage for<br />
advertising injuries, which it defines as an “injury arising out of an<br />
offense committed during the policy period occurring in the course<br />
32 Spring 2013
significant body of relevant history and applicable<br />
case law. 139 Using this data insurance companies<br />
could determine the likelihood of a given work being<br />
infringed, and furthermore the likelihood of that<br />
use being a fair use. Incidentally, Professor Barton<br />
Beebe published an empirical study of fair use<br />
litigation in which he detailed the win rates of fair<br />
use defendants. 140 Insurance providers, as statisticgenerating<br />
machines, should be capable of distilling<br />
the same elements Professor Beebe studied and<br />
reformulating them to fit their needs. This would<br />
allow the companies to profitably predict fair use and<br />
reinforce the effectiveness of the copyright insurance<br />
program.<br />
Furthermore, despite the perception that<br />
the fair use doctrine is part of a broad and vague<br />
area of copyright law, 141 courts have already applied<br />
this doctrine with consistency. 142 The doctrine is<br />
uniformly applied to an extent that most judges<br />
discuss it formulaically and rather mechanically. 143<br />
Accordingly, insurance providers could incorporate<br />
this data into their models that determine where to set<br />
their premiums. Because they could make case-bycase<br />
judgments of whether a use is fair, this insurance<br />
program will work.<br />
Finally, insurance providers would not be<br />
dissuaded from entering a copyright insurance market<br />
as they regularly insure products whose level of risk<br />
is difficult to predict on a case-by-case basis. 144 For<br />
example, individuals regularly insure their cars against<br />
accidents, and their homes against floods, fires, and<br />
tornados. At an individual level, the contingency<br />
insured against is extremely difficult to predict. In<br />
contrast, by pooling 145 clients and evaluating the risk<br />
in a large sample of individuals, the insurance provider<br />
is able to predict the average rate of risk. In copyright<br />
of the named insured’s advertising activities, if the injury arises out<br />
of libel, slander, defamation, violation of right of privacy, piracy,<br />
unfair competition or infringement of copyright, title or slogan.”<br />
139. See, e.g., Euroconcepts, Inc. v. Hartford Cas. Ins. Co.,<br />
378 F. App’x 716 (9th Cir. 2011); Delta Computer Corp. v. Frank,<br />
196 F.3d 589 (5th Cir. 1999).<br />
140. Beebe, supra note 132.<br />
141. See R. Polk Wagner, The Perfect Storm: <strong>Intellectual</strong><br />
<strong>Property</strong> and Public Values, 74 Fordham L. Rev. 423, 431 (2005).<br />
142. Beebe, supra note 132, at 584 (noting that the outcomes<br />
of the first and fourth elements of the fair use test correspond with<br />
the outcome of the case 81.5% and 83.8% of the time, respectively).<br />
143. Id. at 561.<br />
144. Statistics, NAIC, http://www.naic.org/cipr_statistics.htm<br />
(last visited Feb. 23, 2013).<br />
145. Pooling refers to the practice of assessing the risk within<br />
a large group of products. By determining the rate at which the<br />
contingency will occur within the group, the insurance provider is<br />
able set its premiums at a level that will guarantee profitability.<br />
insurance, this translates to insurance providers<br />
establishing a rate at which its clients will win or lose<br />
fair use arguments, and to the notion that an insurance<br />
program is feasible.<br />
Because there is data to show the probability<br />
of a successful fair use defense, 146 insurance providers<br />
could calculate the amount of risk inherent in copyright<br />
insurance and will be able to plan accordingly.<br />
B. Copyright Insurance Providers Will<br />
Not Bully Fair Users Into Settlement<br />
Agreements<br />
Another criticism of copyright insurance is<br />
that insurance providers will adopt the trollish tactics<br />
of Righthaven by bullying ill-equipped parties into<br />
costly settlement agreements. Because the law does<br />
not prevent copyright owners from using aggressive<br />
tactics to protect their works, opponents of copyright<br />
insurance will argue that insurance providers will<br />
use their size and sophistication to unfairly negotiate<br />
settlement payments. The insurance providers, in<br />
contrast to Righthaven, would have legal standing to<br />
sue, 147 and as a result the threat of a lawsuit would be<br />
much more potent.<br />
First, copyright insurers are not likely to seek<br />
improper settlement agreements from legitimate users<br />
because they will only be able to pursue the claims<br />
that they have honored. As the insurance company<br />
will have to pay its policyholder before it can acquire<br />
the right to sue, 148 it will be incentivized to only<br />
pursue cases from which it can profit. Accordingly,<br />
an insurance provider will not pursue infringers unless<br />
those infringers will be able to pay an amount that is<br />
greater than the cost of both the claim and the resources<br />
spent on the settlement or litigation efforts.<br />
The reason Righthaven pursued so many<br />
questionable claims is that it usually only had to pay<br />
the cost of demanding and negotiating the settlement. 149<br />
If a defendant with a meritorious defense did not<br />
acquiesce, Righthaven could always dismiss the case<br />
and cut its losses. 150 Because it did not have to invest<br />
146. Beebe, supra note 132.<br />
147. See discussion supra note 115.<br />
148. Id.<br />
149. In many cases, Righthaven simply had to pay the sixtyfive<br />
dollar fee to register its copyright in the infringed work, send a<br />
standard cease-and-desist letter to the infringer, and then negotiate<br />
a settlement. See Steve Green, Attorneys Accuse Righthaven of<br />
Settlement Shakedown, Las Vegas Sun (Oct. 8, 2010, 1:50 AM),<br />
http://www.lasvegassun.com/news/ 2010/oct/08/attorneys-accuserighthaven-settlement-shakedown.<br />
150. Fed. R. Civ. P. 41(a)(1) (allowing a plaintiff to<br />
voluntarily dismiss an action). Righthaven did this twenty-nine<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
33
significant resources into pursuing an infringer, like an<br />
insurance provider will have to do via payment of the<br />
claim, Righthaven was able to shake down potential<br />
infringers with little regard for the consequences of<br />
its acts. 151 If it had been required to compensate its<br />
clients before it could pursue infringers, it is likely that<br />
Righthaven would have only sued users that caused<br />
legitimate harm.<br />
Second, copyright insurance providers will not<br />
adopt trollish tactics because they will want to maintain<br />
a good reputation with their clients and potential<br />
customers. As business entities, insurance providers<br />
will compete with each other for market share. 152 In<br />
addition to providing quality services, they will also<br />
have to gain and keep the trust of their customers.<br />
Judging by the almost universal hatred with which the<br />
judiciary and the general public view Righthaven, 153<br />
few insurance providers, if any, will be willing to<br />
embark on a similar path.<br />
Third, as between the content producer and<br />
the content infringer, it is better for society that the law<br />
favors the producer. The content producer invests her<br />
time, money, and creative energy into bringing new<br />
works into existence. Conversely, the infringer merely<br />
redistributes the work of others for his own personal<br />
gain. While high litigation costs deter the producer<br />
from protecting her intellectual property, they should<br />
be used instead to deter infringers from stealing others’<br />
creative output.<br />
C. Copyright Insurance Will Not Unfairly<br />
Benefit Insurance Providers and<br />
Content Producers at the Expense of<br />
Fair Users and Free Speech<br />
Finally, opponents of copyright insurance argue<br />
times during its filing stint. Most of the voluntary dismissals<br />
occurred in the last months of 2011. For the complete list, see<br />
Comprehensive List of Copyright Infringement Lawsuits Filed By<br />
Righthaven, LLC, Righthaven Lawsuits, http://righthavenlawsuits.<br />
com/ lawsuits.html (last visited Apr. 21, 2013).<br />
151. For example, Righthaven unknowingly sued an autistic<br />
blogger on a fixed income in early 2011. See Righthaven, LLC v.<br />
Hill, No. 1:11-CV-00211 (D. Colo. Sept. 9, 2011).<br />
152. Auto Insurance, Ins. Info. Inst., http://www.iii.org/<br />
facts_statistics/auto-insurance.html (last visited Feb. 23, 2013)<br />
(showing that in 2011, the market share controlled by the top ten<br />
private automobile insurers were, with one exception, within two<br />
percentage points of each other. This indicates healthy competition<br />
in the industry).<br />
153. See, e.g., Righthaven LLC v. Democratic Underground<br />
LLC, 791 F. Supp. 2d. 968, 979 (D. Nev. 2011) (ordering<br />
Righthaven to show cause as to why it should be sanctioned for<br />
“flagrant misrepresentation” to the court). A simple Google search<br />
for “Righthaven” yields a plethora of sites devoted criticizing the<br />
organization.<br />
that it will improperly benefit insurance providers and<br />
content producers at the expense of infringing fair<br />
users and free speech in general. Because copyright<br />
insurance would give producers more effective ways<br />
to prevent their works from being infringed, 154 it<br />
would necessarily increase a copier’s liability for<br />
infringement, and accordingly produce a “chilling<br />
effect” on the exchange of ideas and information. As<br />
copyright exists to increase creative expression, such a<br />
system would run contrary to the fundamental values<br />
of copyright law, and of <strong>American</strong> jurisprudence in<br />
general.<br />
While this objection raises a legitimate concern<br />
as to the effect of copyright insurance on society as a<br />
whole, it is unlikely to cause significant problems, and,<br />
even if it does, the benefits of the program far outweigh<br />
its costs.<br />
First, it is doubtful that copyright insurance<br />
will have a significant chilling effect on the free<br />
exchange of information. In fact, the law specifically<br />
exempts pure information from copyright protection. 155<br />
Rather, only certain forms of expression may be<br />
copyrighted. 156 For example, a newspaper article is<br />
protected under copyright law, but the underlying story<br />
cannot be copyrighted. 157 Therefore, an insurance<br />
provider will only obtain the enforcement rights to a<br />
particular expression, not to the underlying content.<br />
These rights cannot be used to stifle the legitimate flow<br />
of ideas, only the illegitimate copying of protected<br />
expression.<br />
Second, copyright law incentivizes creativity<br />
by granting producers a limited monopoly over their<br />
works, 158 and not by encouraging copiers to infringe<br />
with impunity. Because copiers do not provide<br />
society with anything new, the law does not protect<br />
their activity, and further considers it as offense to<br />
content producers. 159 Accordingly, although copyright<br />
insurance will undeniably decrease the amount of free<br />
information available to the public, 160 it will only do so<br />
154. See discussion supra Part III.B.1.<br />
155. 17 U.S.C. § 102(b) (2012) (“In no case does copyright<br />
protection for an original work of authorship extend to any idea,<br />
procedure, process, system, method of operation, concept, principle,<br />
or discovery, regardless of the form in which it is described,<br />
explained, illustrated, or embodied in such work.”) (emphasis<br />
added).<br />
156. Id. § 102(a).<br />
157. Int’l News Serv. v. Associated Press, 248 U.S. 215, 234<br />
(1918) (“In considering the general question of property in news<br />
matter, it is necessary to recognize its dual character, distinguishing<br />
between the substance of the information and the particular form or<br />
collocation of words in which the writer has communicated it.”).<br />
158. 17 U.S.C. § 106.<br />
159. See id. § 501.<br />
160. See supra pp. 5–8.<br />
34 Spring 2013
with the protected works that would not have been free<br />
but for their infringement.<br />
Third, even if legitimate users of copyrighted<br />
materials are harmed by copyright insurance, the<br />
increased incentive to create new works provided by<br />
insurance will yield a net benefit to society. Currently,<br />
because enforcing copyrights is so expensive, 161<br />
unauthorized copiers operate at an advantage over<br />
producers. They can infringe with impunity up to a<br />
certain point, knowing that their actions must cause<br />
a certain amount of harm before they will incite the<br />
owner to action. However, by making copyrights<br />
easier to enforce, copyright insurance will give<br />
producers better footing in their fight against infringers,<br />
and essentially lower the threshold at which infringers<br />
operate. Ultimately, because producers provide new<br />
works and ideas, and infringers merely freeload off of<br />
the producers, society will benefit if the producer is<br />
given more rights.<br />
Conclusion<br />
Mass online copyright infringement remains<br />
a serious problem in the <strong>American</strong> economy. While<br />
copyright owners have struggled to find effective<br />
enforcement mechanisms, their neighbors in patent<br />
law have found a mechanism by which they can<br />
efficiently protect their rights. In patent law, thirdparty<br />
enforcement via non-practicing entities has been<br />
an incredibly successful method for pulling value<br />
from patents, fighting infringement, and providing<br />
additional sources of capital for individual inventors.<br />
Accordingly, to acquire similar benefits, copyright<br />
law should annex the basic principle of third-party<br />
enforcement and transform it into copyright insurance.<br />
By developing a robust copyright insurance<br />
system, copyright owners would benefit from<br />
increased compensation for infringement, more value<br />
in their works, and the services of a sophisticated and<br />
professional organization for litigation. Professional<br />
copyright enforcement would discourage wouldbe<br />
infringers from their illegitimate activity, and<br />
thereby increase the profitability of content producers.<br />
Furthermore, copyright insurance is well suited<br />
to existing law, will have a minimum impact on<br />
legitimately fair uses of protected works, and will<br />
encourage, rather than stifle, the creation of new ideas.<br />
Overall, copyright insurance is the most equitable<br />
solution to the problem of mass online copyright<br />
infringement.<br />
161. Am. Intell. Prop. Law Ass’n, supra note 37.<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
35
Show Me The Money: Movie Quotes as <strong>Intellectual</strong> <strong>Property</strong><br />
by Rebecca Shaw<br />
Abstract<br />
Movie quotes are valuable. They make movie<br />
studios money and enrich our cultural lexicon through<br />
our everyday quoting of movie lines. These movie<br />
quotes have value, but are they protectable? And if so,<br />
which legal regime would extend protection to movie<br />
quotes? After reviewing the relevant legal landscape,<br />
this article determines that these valuable phrases<br />
could be protected under copyright and trademark law<br />
by the courts in infringement actions. But how far<br />
should this protection stretch? Extending protection<br />
to movie quotes presents the unsettling possibility of<br />
overprotection, which can lead to the restriction of free<br />
expression and the shrinking of our cultural commons.<br />
In light of these concerns, this article argues that movie<br />
quotes warrant a very limited scope of protection—<br />
something akin to moral rights. It is only through a<br />
narrow scheme of protection that the public’s right of<br />
free expression and our cultural commons can avoid<br />
peril.<br />
Introduction<br />
How much would you pay for a word? A<br />
phrase? A sentence? Phrases are worth millions of<br />
dollars. Just ask Michael Buffer, the proud owner of<br />
the trademark “Let’s get ready to rumble.” 1 In three<br />
years, the trademark raked in $150 million through<br />
licensing and infringement litigation. 2 The value of<br />
phrases and words is also evident in the movie industry,<br />
as words and phrases compose the scripts that are the<br />
essence of movies. And why not? The movie industry<br />
stands as one of the leading revenue generators in the<br />
United States. 3 Production companies will pay for their<br />
1. LET’S GET READY TO RUMBLE, Registration No.<br />
2,405,492.<br />
2. Andrew Chang, Squeezing Millions from a Phrase: How a<br />
Few Words, in the Right Hands, Can Mean a Fortune, ABCNEWS.<br />
com, Apr. 11, 2002, http://abcnews.go.com/International/<br />
story?id=80018.<br />
3. In 2002, the United States combined projected revenue for<br />
motion pictures, television, and video was $17 billion. Stephen<br />
E. Siwek, Copyright Industries in the U.S. Economy: The 2004<br />
Report v, 9 (2004) (noting that the report was prepared for the<br />
International <strong>Intellectual</strong> <strong>Property</strong> Association). “There were<br />
$13.8 billion in film and television exports in 2009, up 3% over<br />
words. In 2007, the script for The Lovely Bones sold<br />
for $70 million. 4 Production companies use titles—<br />
words and short phrases—to market their movies, and<br />
they spend a good deal of money on them too. In the<br />
1990s, Disney paid $600 thousand for the rights to the<br />
movie title “Ransom.” 5<br />
These figures illustrate the immense value<br />
inherent to these words. What if movie production<br />
companies took after Mr. Buffer and proactively tried<br />
to capitalize on the value of their movie quotes outside<br />
of merchandising, 6 pursuing other legal avenues for<br />
revenue generation and value exploitation? Mr. Buffer<br />
lamented the fact that no one capitalized on the famous<br />
quote “Show me the money!” from Jerry Maguire. 7<br />
The time may come when a production company<br />
sets up a strategy to mine the dormant gold from its<br />
characters’ words. Our intellectual property laws do<br />
not, and should not, support rights holders overreaching<br />
and taking these quotes from the mouths of those who<br />
have a right to use them.<br />
This article analyzes whether movie quotes are<br />
protectable under two intellectual property regimes—<br />
copyright and trademark law—and the rights of<br />
publicity, as the potential protection of movie quotes<br />
depends on how and why the words are used. 8 Even<br />
2008, and up 37% over 2005.” Motion Picture Association of<br />
America, The Economic Contribution of the Motion Picture &<br />
Television Industry to the United States (2010). Further, the<br />
motion picture “industry had a positive services trade surplus of<br />
$11.9 billion in 2009, or 8% of the total U.S. private-sector trade<br />
surplus in services.” Id. Additionally, “the motion picture and<br />
television services surplus was larger than the surpluses of the<br />
telecommunications, management and consulting, legal, medical,<br />
computer, and insurance services sectors.” Id. In 2002, the revenue<br />
generated through box office sales was $9.1 billion. MOTION<br />
PICTURE ASSOCIATION OF AMERICA, THEATRICAL<br />
MARKET STATISTICS (2011).<br />
4. Patrick Goldstein, Cost of Movie Scripts Adds up to a<br />
Lot More Than Just Dollars, Chi. Trib., June 10, 2007, at Arts<br />
& Entertainment 15, available at http://articles.chicagotribune.<br />
com/2007-06-10/news/0706080609_1_scripts-lovely-bonesdreamworks.<br />
5. Patrick Goldstein, Hey, Let’s Play the Movie Title Game!,<br />
Los Angeles Times, Aug. 20, 1997, at F1, available at http://articles.<br />
latimes.com/1997/aug/20/entertainment/ca-24037.<br />
6. “Merchandising is a multi-billion dollar enterprise.”<br />
Joanna R. Jeremiah, Merchandising <strong>Intellectual</strong> <strong>Property</strong> Rights<br />
§ 1.1, at 1 (1997).<br />
7. Chang, supra note 2.<br />
8. See Richard W. Stim, E.T. Phone Home: The Protection<br />
36 Spring 2013
if movie quotes are protectable, significant policy<br />
arguments strongly oppose making movie quotes the<br />
property of one rights holder.<br />
In Part I, a review of the relevant legal<br />
landscape, this article determines whether movie quotes<br />
are protectable under any of the three legal regimes.<br />
Protection of movie quotes boils down to what is<br />
known as the “if value, then right” theory. If something<br />
is valuable, one should have the right to exploit it<br />
and, more importantly, the corollary right to receive<br />
revenues from that exploitation. Because value exists<br />
in these movie quotes, which are arguably independent<br />
property rights, someone should have a right to exploit<br />
them.<br />
This article first reviews the current state<br />
of copyright law because movie quotes are pieces<br />
of larger copyrightable works—scripts and motion<br />
pictures. Consequently, movie quotes might find some<br />
level of protection as literary works under this regime.<br />
This article determines that courts will protect movie<br />
quotes under copyright law, although these quotes are<br />
not copyrightable. 9 In doing so, this article identifies<br />
the danger of courts allowing copyright holders to use<br />
a single movie quote—without anything more—to<br />
defeat a claim of fair use in an infringement action.<br />
Consequently, current copyright law could allow an<br />
uncopyrightable quote from a copyrighted movie script<br />
to prevent any use of the script, thus making the movie<br />
quote a powerful and silencing rights-protection tool.<br />
This article addresses this chilling proposition in depth.<br />
This article proceeds by considering<br />
the protection of movie quotes under the law of<br />
trademarks, as movie quotes are embedded in our<br />
culture and are strongly associated with particular<br />
movies. This article reviews the objectives of the<br />
Lanham Act and the basic legal framework for the<br />
protection of a mark. This article then applies these<br />
propositions to movie quotes, concluding that they<br />
cannot be used as trademarks in connection with a<br />
movie.<br />
Finally, this article considers the potential<br />
value of rights of publicity, which have been extended<br />
to catchphrases. By analyzing the right of publicity not<br />
of an actor, a producer, or even a fictional character,<br />
but of a movie itself, current law suggests that movie<br />
of Literary Phrases, 7 U. Miami Ent. & Sports L. Rev. 65, 67–68<br />
(1989).<br />
9. This article delves into this distinction in the discussion<br />
below, but offers a brief summary here. Generally, a movie quote is<br />
not sufficiently original to stand on its own as a copyrightable work.<br />
However, a movie quote can receive protection in an infringement<br />
action while still not being independently copyrightable, as a movie<br />
script would be.<br />
quotes cannot be protected under rights of publicity.<br />
After surveying the intellectual property<br />
landscape to determine if movie quotes are protectable<br />
intellectual property, this article presents several policy<br />
arguments in support of little to no protection of movie<br />
quotes under any legal regime. First, movie quotes<br />
are part of the cultural commons. By incorporating<br />
these quotes into our cultural lexicon, the public adds<br />
value to movie quotes, granting the public the right<br />
to use them freely. Second, the overextension of<br />
intellectual property rights to movie quotes intrudes on<br />
First Amendment rights. Finally, courts risk allowing<br />
trademark law to substitute for copyright protection by<br />
extending trademark protection to movie quotes. In<br />
essence, aggressively protecting movie quotes would<br />
stifle our cultural commons and restrict free speech.<br />
I. “There’s gold in them thar hills” 10 — If<br />
Value, Then Right<br />
The logic is simple: if something is valuable,<br />
then you should have the right to exploit that value<br />
by excluding others from using it. 11 The right/value<br />
theory, the premise that “if value, then right,” has been<br />
primarily used in connection with establishing new<br />
property rights in intangible assets. 12 However, this<br />
concept was controversial when first introduced 13 and<br />
continues to be criticized by scholars. 14 Nevertheless,<br />
courts use the right/value theory in common law to<br />
determine and enforce rights 15 and could continue this<br />
10. Destry Rides Again (Universal Pictures 1939).<br />
11. Lawrence Lessig nicely summarizes the theory through the<br />
lens of piracy when he writes:<br />
Creative work has value; whenever I use, or take, or build<br />
upon the creative work of others, I am taking from them something<br />
of value. Whenever I take something of value from someone else,<br />
I should have their permission. The taking of something of value<br />
from someone else without permission is wrong. It is a form of<br />
piracy.<br />
Lawrence Lessig, Free Culture 18 (Penguin eds., 1st ed.<br />
2005).<br />
12. Int’l News Serv. v. Associated Press, 248 U.S. 215, 239–<br />
40 (1918) (finding value in “hot news” because the news was made<br />
valuable “as the result of organization and the expenditure of labor,<br />
skill, and money”); see also Haelan Labs., Inc. v. Topps Chewing<br />
Gum, Inc., 202 F.2d 866, 868 (2d Cir. 1953) (“Whether [something]<br />
be labelled [sic] a ‘property’ right is immaterial; for here, as often<br />
elsewhere, the tag ‘property’ simply symbolizes the fact that courts<br />
enforce a claim which has pecuniary worth.”).<br />
13. See Int’l News Serv., 248 U.S. at 246 (Holmes, J.,<br />
dissenting) (“<strong>Property</strong>, a creation of law, does not arise from value,<br />
although exchangeable-a matter of fact.”).<br />
14. See Rochelle Cooper Dreyfuss, Expressive Genericity:<br />
Trademarks as Language in the Pepsi Generation, 65 Notre Dame<br />
L. Rev. 397, 407 (1990) (“The fallacies in the right/value theory can<br />
be revealed in a number of ways.”).<br />
15. See San Francisco Arts & Athletics, Inc. v. U.S. Olympic<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
37
eliance to expand intellectual property rights. 16<br />
Movie quotes have strong value. In many<br />
instances, they can “sell” a movie through trailers<br />
or advertising, or entice people to see the movie<br />
repeatedly. What is The Wizard of Oz without “[t]<br />
here’s no place like home?” Movie quotes imbue the<br />
movie with all of its memorable “moments”: 17 “You<br />
had me at hello;” 18 “This is the beginning of a beautiful<br />
friendship;” 19 and “I think we’re going to need a bigger<br />
boat.” 20 Each quote is “kind of a verbal shorthand for<br />
the film.” 21<br />
Production companies invest time and money<br />
in movie quotes when they pour money into bidding<br />
on and developing a script before a film is even made.<br />
Actors deliver them with the perfect inflection, gesture,<br />
and nuance so that viewers repeat them, sometimes<br />
incessantly, when they leave the theater. 22 Thus, the<br />
value of movie quotes derives from both the movie<br />
itself and the cultural value that it acquires when<br />
viewers fold it into their daily lives and, thus, into our<br />
culture. 23 Regardless of the source of a movie quote’s<br />
value, either from the public or the movie itself, under<br />
the value/right theory production companies argue that<br />
they should have a right to exploit the enormous value<br />
their movie quote represents. The question is, how far<br />
will production companies go to enforce and expand<br />
their rights in court?<br />
Comm., 483 U.S. 522, 532 (1987) (explaining that in the context<br />
of trademarks, “when a word acquires value ‘as the result of<br />
organization and the expenditure of labor, skill, and money’ by an<br />
entity, that entity constitutionally may obtain a limited property<br />
right in the word.”) (quoting Int’l News Serv., 248 U.S. at 239).<br />
16. See Dreyfuss, supra note 14, at 405 (finding that courts are<br />
likely to use the value/right theory to expand the reach of trademark<br />
owners’ rights).<br />
17. Piet Levy, Yeah, Baby! You Heard It Here First: Quotes<br />
Speak for Themselves, but Had Help Learning to Talk, Milwaukee J.<br />
Sentinel, June 21, 2005, at E Cue. These particular quotes are why<br />
the <strong>American</strong> Film Institute aired a three-hour special on the 100<br />
greatest <strong>American</strong> movie quotes. One of the criteria for judging<br />
was “cultural impact,” in which jurors took into account whether<br />
viewers use the quotes in their own lives, whether the quote had<br />
circulated through popular culture, and whether the quote had<br />
become part of the <strong>American</strong> lexicon. <strong>American</strong> Film Institute, AFI<br />
100 Years . . . 100 Movie Quotes, http://www.afi.com/100years/<br />
quotes.aspx (last visited Nov. 15, 2011).<br />
18. Jerry Maguire (TriStar Pictures 1996).<br />
19. Casablanca (Warner Bros. Pictures 1942).<br />
20. Jaws (Zanuck/Brown Productions 1975).<br />
21. Levy, supra note 17 (quoting Michael T. Marsden, coeditor<br />
of the Journal of Popular Film and Television).<br />
22. Donna Isabell Walker, “Yeah, Baby!,” Greenville News,<br />
Jan. 30, 2005, at D.1 (“Those lines and phrases can . . . worm their<br />
way into your vocabulary.”).<br />
23. See Levy, supra note 17 (showing that movie quotes have<br />
become part of popular culture); Walker, supra note 22 (writing that<br />
memorable quotes become part of our cultural lexicon).<br />
A. “But you didn’t get his permission,<br />
and that’s copyright infringement” 24 —<br />
Copyright<br />
The most logical place to begin the analysis<br />
of potential protection of movie quotes is copyright,<br />
as this area of the law has directly addressed the<br />
protection of short phrases and words. Copyright<br />
protection extends to creative works generally, such as<br />
movie scripts, novels, and song lyrics. Copyright is<br />
a constitutionally based form of intellectual property<br />
protection that covers literary, dramatic, artistic, and<br />
certain other intellectual works. 25 Screenplays qualify<br />
as copyrightable dramatic works, and movie quotes<br />
comprise parts of the screenplay. If copyright protects<br />
the screenplay then, so the logic goes, why cannot<br />
copyright extend to a movie quote independent of the<br />
larger work? For example, copyright would protect the<br />
script to Gone With the Wind and “Frankly, my dear, I<br />
don’t give a damn.” With this in mind, this article first<br />
reviews the pertinent copyright law landscape and then<br />
applies these principles to determine if movie quotes<br />
could, indeed, stand alone as protectable intellectual<br />
property.<br />
1. General Principles of Copyright Law<br />
Copyright law promotes the progress of the<br />
arts and dissemination of knowledge by giving authors<br />
a limited monopoly in the exclusive rights to their<br />
works. 26 To be entitled to copyright protection, a work<br />
must be original and “fixed in a tangible medium of<br />
expression.” 27 Originality, in the context of copyright<br />
law, is not novelty, but rather independent creation. 28<br />
To satisfy the originality requirement of copyright,<br />
a work must possess at least some minimal level of<br />
creativity. 29 In Feist Publications v. Rural Telephone<br />
24. The People vs. Larry Flynt (Columbia Pictures 1996).<br />
25. U.S. Const., art. 1, § 8, cl. 8. See generally 1 Melville<br />
B. Nimmer & David Nimmer, Nimmer on Copyright § 1.08 (4th ed.<br />
1994 & Supp. 2010) (reviewing the scope of works protected under<br />
the Constitution); Tom Bragelman, Copyright Law in and Under<br />
the Constitution: The Constitutional Scope and Limits to Copyright<br />
Law in the United States in Comparison With the Scope and Limits<br />
Imposed by Constitutional and European Law on Copyright Law<br />
in Germany, 27 Cardozo Arts & Ent L.J. 99, 104–09 (2009)<br />
(reviewing the scope of “writings” under the art. 1, § 8, cl. 8 of the<br />
Constitution).<br />
26. U.S. Const., art. 1, § 8, cl. 8. This limited monopoly lasts<br />
for the author’s life plus 70 years. 17 U.S.C. § 302(a) (2006).<br />
27. 17 U.S.C. § 102(a).<br />
28. Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340,<br />
345 (1991).<br />
29. Id.<br />
38 Spring 2013
Service Co., 30 the Supreme Court explained, “the<br />
requisite level of creativity is extremely low; even a<br />
slight amount will suffice.” 31 For instance, writing a<br />
short note on a cocktail napkin to remind yourself to<br />
take the trash out and pick up the kids would satisfy the<br />
originality requirement. 32<br />
Despite the low bar for originality, copyright<br />
does not extend to any “idea, procedure, process,<br />
system, method of operation, concept, principle, or<br />
discovery.” 33 Copyright only covers the expression of<br />
these uncopyrightable elements. 34 This is known as<br />
the “idea/expression” dichotomy. 35 It represents the<br />
proposition that facts and ideas are available for all to<br />
use, whereas an individual’s expression of these ideas<br />
and facts is copyrightable. 36 For instance, you cannot<br />
copyright the idea of two young lovers whose families<br />
are feuding. However, you can copyright the entire<br />
screenplay that originally expresses and plays out this<br />
very idea. 37<br />
Related to the idea/expression dichotomy<br />
is the concept of merger, where the expression is so<br />
inextricably merged with an idea that that there are a<br />
limited number of ways in which to express the idea. 38<br />
This is known as the “merger doctrine.” For instance,<br />
there are only so many ways to describe grocery<br />
products on an online grocery shopping system, and<br />
accordingly, such descriptions are uncopyrightable. 39<br />
There are also only so many ways to write certain<br />
movie quotes to express a crazy man’s threat, such as<br />
“You talkin’ to me?”, 40 or a woman’s desire for a little<br />
breathing room, such as “I want to be alone.” 41<br />
Along with being original, a work must be<br />
“fixed” in a “tangible medium of expression.” 42 The<br />
fixation requirement is flexible. A movie script, and of<br />
course movie quotes, can be fixed on a movie reel, a<br />
DVD, a computer chip, a hard drive, and old-fashioned<br />
paper. 43 In reviewing just the above principles of<br />
copyright law, one could legitimately conclude that a<br />
movie quote should be copyrightable. A quote could<br />
be sufficiently original standing on its own and fixed<br />
in a tangible medium of expression. However, the<br />
Copyright Office and a majority of the courts would<br />
disagree.<br />
2. Copyright Office Policies and the<br />
Courts<br />
As noted above, courts could consider arbitrary<br />
and fanciful original movie quotes copyrightable<br />
literary expression, as neither the Copyright Clause<br />
nor the Copyright Act rule out such copyrightability. 44<br />
However, “mere words and short phrases, even if they<br />
occur in a copyrighted work, do not themselves enjoy<br />
protection against copying.” 45 For example, literary<br />
titles are not copyrightable under the Copyright Act. 46<br />
This proposition is based in part on the Copyright<br />
Office’s longstanding policy of barring registration of<br />
single words and short phrases. 47 The Copyright Office<br />
has steadfastly held to this policy, even intervening<br />
where courts have attempted to expand copyright to<br />
single words and short phrases. 48<br />
An illustrative example of the Copyright<br />
Office’s adherence to its practice of not registering<br />
single words or short phrases is Cook v. Robbins, 49 an<br />
30. Id.<br />
31. Id. (presenting what is hereafter referred to as the “Feist<br />
rule”).<br />
32. See id.<br />
33. 17 U.S.C. § 102(b).<br />
34. Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S.<br />
539, 557 (1989); Baker v. Selden, 101 U.S. 99, 103 (1879).<br />
35. Feist Publ’ns v. Rural Tel. Serv. Co., 499 U.S. 340, 350<br />
(1991); see Baker, 101 U.S at 103.<br />
36. Feist, 499 U.S. at 350; Baker, 101 U.S. at 103.<br />
37. For example, how many versions of Romeo and Juliet<br />
have you seen?<br />
38. Morrissey v. Procter & Gamble Co., 379 F.2d 675, 678<br />
(1st Cir. 1967) (“When the uncopyrightable subject matter is<br />
very narrow, so that ‘the topic necessarily requires,’ if not only<br />
one form of expression, at best only a limited number, to permit<br />
copyrighting would mean that a party . . . by copyrighting a mere<br />
handful of forms, could exhaust all possibilities of future use” [of<br />
the expression.]) (internal citations omitted).<br />
39. See MyWebGrocer, LLC v. Hometown Info, Inc., 375 F.3d<br />
190, 194 (2d Cir. 2004).<br />
40. Taxi Driver (Columbia Pictures 1976).<br />
41. Grand Hotel (Metro-Godlwyn-Mayer 1932).<br />
42. 17 U.S.C. § 102(a) (2006).<br />
43. See id. § 101 (defining “fixed” as embodied in a medium<br />
“sufficiently permanent or stable to permit it to be perceived,<br />
reproduced, or otherwise communicated for a period of more than<br />
transitory duration”). Because movies and their respective scripts<br />
and quotes are sufficiently fixed, this article will not focus on the<br />
fixation requirement for copyright protection.<br />
44. See Nimmer, supra note 25, § 2.16, at 185–86 (discussing<br />
the copyrightability of titles, which consist of short phrases).<br />
45. Arvelo v. Am. Int’l Ins. Co., Copy. L. Rep. (CCH)<br />
P27,493, at *2 (1st Cir. 1995).<br />
46. See Nimmer, supra note 25, § 2.16, at 185 (“It is . . .<br />
clear, as a matter of statutory construction by the courts (as well as<br />
Copyright Office Regulations), that titles may not claim statutory<br />
copyright.”) (footnotes omitted).<br />
47. 37 C.F.R. § 202.1(a) (2005) (excluding from protection<br />
“[w]ords and short phrases such as names, titles, and slogans”);<br />
see U.S. Copyright Office, Copyright Circular 34: Copyright<br />
Protection Not Available for Names, Titles, or Short Phrases<br />
(2010).<br />
48. See Justin Hughes, Size Matters (or Should) in Copyright<br />
Law, 74 Fordham L. Rev. 575, 591 (2005).<br />
49. Cook v. Robbins, Nos. 98-36242, 99-35141 (9th Cir. Nov.<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
39
unpublished case from the Ninth Circuit. Wade Cook<br />
was the author of a best-selling book titled Wall Street<br />
Money Machine, in which he used “his experiences<br />
as a former taxi cab driver to advocate strategies for<br />
stock and stock option transactions.” 50 The Ninth<br />
Circuit found that two short phrases from Cook’s book<br />
were copyrightable, referring to evidence that the two<br />
phrases were, according to author Cook, “an ‘important<br />
part of my book.’” 51 Two of the investment concepts<br />
that Cook developed for and presented in the book are<br />
the “meter drop” and the “rolling stock.” 52 Anthony<br />
Robbins, a financial expert, taught several financial<br />
seminars in which the driving theme was the “ring<br />
toss concept.” However, once Robbins read Cook’s<br />
Wall Street Money Machine, he incorporated “meter<br />
drop” and “rolling stock” into a new seminar called<br />
“Financial Power.” 53 Specifically, the Financial Power<br />
seminar manual included the phrase “meter drop” nine<br />
times and “rolling stock” twice. 54 In later editions<br />
of the Financial Power manual, the phrase “meter<br />
drop” appeared in six places, but “rolling stock” was<br />
eliminated. 55<br />
Cook filed for copyright infringement of Wall<br />
Street Money Machine based on eleven different<br />
passages from the Financial Power manual. 56 The<br />
jury found that Robbins had infringed two of the four<br />
phrases at issue—“Money is made on the Meter Drop”<br />
and “No one I know has come up with a name for<br />
the type of investing I call ‘Rolling Stocks’”—and<br />
awarded Cook $655,900 in damages. 57 Subsequently,<br />
Robbins moved for judgment as a matter of law. The<br />
judge granted the motion because Cook did not prove<br />
a causal relation between the infringing phrases and<br />
Robbins’s profits from his Financial Power seminars. 58<br />
On appeal, the Ninth Circuit reversed the<br />
district court and ordered the jury award to be<br />
reinstated. The court based its reasoning on the Feist<br />
rule that to be entitled to copyright protection, a work<br />
must possess a minimal level of creativity and that the<br />
16, 2000).<br />
50. Id. at *3.<br />
51. Id.<br />
52. Id. “Meter drop” describes the technique of making small<br />
gains in lieu of waiting for a single big transaction. Id. A “rolling<br />
stock” is “stock that tends to consistently roll up to a specific price<br />
point and then drop down to a specific price point in an obvious<br />
pattern of repeated waves.” Id.<br />
53. Id. at *3–4.<br />
54. Id. at *4.<br />
55. Id.<br />
56. Id.<br />
57. Id. at *6.<br />
58. Id.<br />
required level is extremely low to satisfy “originality.” 59<br />
The court focused on Robbins’s testimony that he used<br />
Cook’s “unique phrases because of their creativity”<br />
and that he had never used the terms “meter drop”<br />
or “rolling stock” before reading Cook’s book. 60<br />
Consequently, the court concluded that “Cook’s<br />
complete expressions in conveying the meaning of<br />
‘meter drop’ and ‘rolling stock’ are creative, even if<br />
only minimally so, and are protected by his copyright<br />
in Wall Street Money Machine.” 61<br />
The Ninth Circuit’s decision greatly concerned<br />
the Copyright Office, as it believed that the Ninth<br />
Circuit had ignored the “longstanding fundamental<br />
doctrine of copyright law” that copyright law does<br />
not protect short phrases. 62 Further, the Office feared<br />
that if the decision from one of the leading copyright<br />
circuits stood, the Copyright Office’s “longstanding<br />
examination practices,” codified in Rule 202.1(a)<br />
and reflected in Compendium II: Copyright Office<br />
Practices, 63 would be eroded. 64 Consequently, the<br />
Office recommended to the Department of Justice that<br />
the United States intervene to request rehearing en<br />
banc. 65 However, no intervention was required. Before<br />
the U.S. Government had decided on a course of action,<br />
the parties settled and the Ninth Circuit ordered the<br />
withdrawal of the opinion. 66<br />
As evidenced by its planned intervention<br />
in Cook, the Copyright Office remains dedicated to<br />
maintaining the fundamental principle that single words<br />
and short phrases are unprotected by copyright.<br />
Similar to the Copyright Office, courts<br />
generally 67 do not find single words and short phrases<br />
59. Id. at *12.<br />
60. Cook v. Robbins, Nos. 98-36242, 99-35141, at *12 (9th<br />
Cir. Nov. 16, 2000).<br />
61. Id. at *12–13.<br />
62. Letter from David O. Carson, Gen. Counsel, U.S.<br />
Copyright Office, to Robert E. Kopp, Civil Div., U.S. Dep’t of<br />
Justice (Dec. 13, 2000) (copy on file with author) [hereinafter<br />
Carson Letter I]. The letter even notes that the Ninth Circuit<br />
acknowledged the “words and short phrases doctrine” in a previous<br />
case. Id.; see Sega Enters. v. Accolade, Inc., 977 F.2d 1510, n. 7<br />
(9th Cir. 1993).<br />
63. The Compendium is the Office’s internal manual of<br />
guidelines for examination applications to register copyrights. The<br />
Office is currently revising the Compendium. U.S. Copyright<br />
Office, Priorities and Special Projects of the United States<br />
Copyright Office 13 (2011), available at http://www.copyright.gov/<br />
docs/priorities.pdf.<br />
64. Carson Letter I, supra note 60.<br />
65. Id.<br />
66. Letter from David O. Carson, Gen. Counsel, U.S.<br />
Copyright Office, to Robert E. Kopp, Civil Div., U.S. Dep’t of<br />
Justice (Dec. 26, 2000) (copy on file with author); Hughes, supra<br />
note 46, at 591.<br />
67. Generally does not mean never, as Cook v. Robbins<br />
demonstrates. See Health Grades, Inc. v. Robert Wood Johnson<br />
40 Spring 2013
copyrightable because they do not possess the requisite<br />
amount of originality to receive copyright protection. 68<br />
Many courts refer to Rule 202.1(a) in making this<br />
decision. 69 For instance, the Central District of<br />
California District Court, in Columbia Pictures Indus.<br />
v. Miramax Films Corp., 70 refused to consider a<br />
copyright infringement claim in the movie tag line<br />
Univ. Hosp., Inc., 634 F. Supp. 2d 1226, 1238 (D. Colo. 2009) (“[I]<br />
t does not make sense to state categorically that no combination<br />
of numbers or words short enough to be deemed a ‘phrase’ can<br />
possess ‘at least some minimal degree of creativity’” as required for<br />
copyright protection under Feist); Johnston v. Twentieth Century-<br />
Fox Film Corp., 187 P.2d 474, 482 (Cal. Ct. App. 1947) (“[A]<br />
person may have a property right and the right to the exclusive use<br />
of arbitrary or fictitious or fanciful or artificial or technical names or<br />
titles.”). However, as Professors Nimmer states, “Such suggestions,<br />
however, must be regarded as contrary to the generally prevailing<br />
rule that [short words and phrases] may not claim copyright<br />
protection under either common law or statutory copyright<br />
principles.” Nimmer, supra note 25, § 2.16, at 186.<br />
68. 37 C.F.R. 202.1(a); see Hutchins v. Zoll Med. Corp.,<br />
492 F.3d 1377, 1385 (Fed. Cir. 2007) (holding that “[c]opyright<br />
does not protect individual words and ‘fragmentary’ phrases when<br />
removed from their form of presentation and compilation”); CMM<br />
Cable Rep, Inc. v. Ocean Coast Props., Inc., 97 F.3d 1504, 1519<br />
(1st Cir. 1996) (“It is axiomatic that copyright law denies protection<br />
to ‘fragmentary words and phrases’ . . . on the grounds that these<br />
materials do not exhibit the minimal level of creativity necessary<br />
to warrant copyright protection.”) (internal citations omitted);<br />
Acuff-Rose Music, Inc. v. Jostens, Inc., 988 F. Supp. 289, 294<br />
(S.D.N.Y. 1997) (finding the song lyric “You’ve got to stand for<br />
something or you’ll fall for anything” uncopyrightable because the<br />
phrase lacked the requisite originality and did not originate with<br />
the song’s creators); see also Kepner-Tregoe, Inc. v. Leadership<br />
Software, Inc., 12 F.3d 527, 534 (5th Cir. 1994) (finding that<br />
“specific words, phrases, and sentences” were not copyrightable);<br />
Arica Inst., Inc. v. Palmer, 970 F.2d 1067, 1072–73 (2d Cir. 1992)<br />
(noting that single words and short phrases in copyrighted text were<br />
not copyrightable). See generally Nimmer, supra note 25, § 2.01[b]<br />
(discussing the copyrightability of words and short phrases in the<br />
context of originality).<br />
69. See Southco, Inc. v. Kanebridge Corp., 390 F.3d 276,<br />
286 (3d Cir. 2004) (“We believe that the Copyright Office’s<br />
longstanding practice of denying registration to short phrases merits<br />
deference.”); CMM Cable Rep, Inc., 97 F.3d at 1520 (“Copyright<br />
Office’s own interpretive regulations explicitly embrace this rule<br />
of non-copyrightability” of words and short phrases.); Prunte v.<br />
Universal Music Grp., Inc., 699 F.Supp.2d 15, 25–26, 29 (D.D.C.<br />
2010) (citing to Rule 202.1(a) in finding titles, words, and short<br />
phrases are not copyrightable); Magic Mktg., Inc. v. Mailing Servs.<br />
of Pittsburgh, Inc., 634 F. Supp. 769, 771–72 (W.D. Penn. 1986)<br />
(using Rule 202.1(a) to support the proposition that words and<br />
phrases do “not exhibit the minimal level of creativity necessary<br />
to warrant copyright protection.”); see also Kitchens of Sara Lee,<br />
Inc. v. Nifty Foods Corp., 266 F.2d 541, 544 (2d Cir. 1959) (finding<br />
that while this policy “does not have the force of statute, it is a<br />
fair summary of the law”). However, in one case, the District<br />
of Colorado was unconvinced about the stature of the Copyright<br />
Office regulations, finding that they were “a rough starting point<br />
for an originality analysis, not a shortcut for avoiding this analysis.<br />
Short phrases are typically unprotectable because they are either<br />
insufficiently independent or insufficiently creative or both.”<br />
Health Grades, Inc., 634 F. Supp. 2d at 1238. This court’s view has<br />
not taken hold.<br />
70. 11 F. Supp. 2d 1179 (S.D. Cal. 1998).<br />
“PROTECTING THE EARTH FROM THE SCUM<br />
OF THE UNIVERSE,” finding it unprotected by<br />
copyright because of the Copyright Office’s bar against<br />
words and short phrases. 71 Thus, under the majority<br />
of the case law, movie quotes fall in the category of<br />
“short words and phrases” and, therefore, are not<br />
copyrightable. 72<br />
Additionally, individuals hauled into court<br />
to defend a copyright infringement claim have two<br />
defenses. This article discusses these in the context<br />
of alleged infringement of short phrases from a<br />
larger copyrighted work. First, the defendant can<br />
argue de minimis copying. Under this theory, the<br />
copyright owner fails to prove that the defendant has<br />
taken enough of the copyrighted work to satisfy the<br />
required elements of substantial similarity to support<br />
an infringement claim. 73 The second line of defense<br />
available is fair use. Under fair use, a defendant’s<br />
otherwise infringing copying of another’s material does<br />
not qualify as illegal provided the defendant copied the<br />
material for a limited and transformative purpose. 74<br />
3. The De Minimis Defense<br />
For a plaintiff to have a successful prima<br />
facie copyright infringement case, she must establish<br />
that the defendant has copied her work. 75 Copying,<br />
in this context, has two components the plaintiff<br />
must prove: (1) that the defendant actually copied<br />
protected elements of her copyrighted work, and (2)<br />
that the defendant’s subsequent work is substantially<br />
similar to the original work. 76 Where the copying is so<br />
minimal that it cannot uphold a finding of substantial<br />
similarity, it is considered de minimis. 77 As discussed<br />
71. Id. at 1185.<br />
72. Murray Hill Publ’ns, Inc. v. ABC Commc’ns, Inc.,<br />
264 F.3d 622, 633 (6th Cir. 2001) (declining to extend copyright<br />
protection to a movie quote because it was an “insignificant part<br />
of a much larger work and it is a phrase or slogan not worthy of<br />
copyright protection in its own right”); see Nimmer, supra note 25,<br />
§ 2.01(b), at 16–17 (referring to the majority rule that short words<br />
and phrases are not copyrightable).<br />
73. Nimmer, supra note 25, § 13.03(A)(2)(a), at 58–59; see<br />
Connor Moran, How Much Is too Much? Copyright Protection of<br />
Short Portions of Text in the United States and European Union<br />
After Infopaq International A/S V. Danske Dagblades, 6 Wash.<br />
J. L. Tech. & Arts 247, 249 (2011). This article will expand on<br />
substantial similarity in the larger de minimis discussion.<br />
74. Nimmer, supra note 25, § 13.05. This article expands<br />
upon what limited and transformative purpose qualify as fair use<br />
below.<br />
75. Id. § 13.01 (noting that the second element is the<br />
plaintiff’s ownership of the copyright in the allegedly infringed<br />
work).<br />
76. Id. § 13.01(B).<br />
77. Id. As Judge Learned Hand wrote over a century ago,<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
41
above, copyright does not protect all elements of a<br />
work—like ideas or facts—but only those that contain<br />
a minimal level of creativity to satisfy copyright’s<br />
originality requirement. 78 Copyright extends only to<br />
the expression of those unprotected elements. 79<br />
Copying similar or identical words or short<br />
phrases generally qualifies as de minimis and does not<br />
constitute infringement. 80 Nevertheless, protection of<br />
short phrases in the infringement context has varied<br />
widely across different courts and cases. 81 What is<br />
more, courts have suggested that particularly original<br />
or important phrases or single words from a larger<br />
copyrighted work might merit protection in a copyright<br />
infringement claim. 82 These cases crucially do not find<br />
that these words or phrases are copyrightable—that is,<br />
capable of standing alone as copyrightable works<br />
under the Copyright Act 83 apart from the larger work<br />
that spawned them. These cases clearly indicate that<br />
short phrases could receive protection in the limited<br />
context of a suit for a copyright infringement action. 84<br />
Thus, it appears that courts are willing to find short<br />
phrases protectable in a copyright infringement action,<br />
“Even where there is some copying, that fact is not conclusive<br />
of infringement. Some copying is permitted. In addition to<br />
copying, it must be shown that this has been done to an unfair<br />
extent.” W. Publ’g Co. v. Edward Thompson Co., 169 F. 833, 861<br />
(C.C.E.D.N.Y. 1909).<br />
78. Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340,<br />
345 (1991).<br />
79. Id.<br />
80. See CMM Cable Rep, Inc. v. Ocean Coast Props., Inc., 97<br />
F.3d 1504, 1519–20 (1st Cir. 1996) (finding no substantial similarity<br />
based on defendant’s use of an identical phrase to describe a radio<br />
call-in competition similar to plaintiff’s); Stratchborneo v. Arc<br />
Music Corp., 357 F. Supp. 1393, 1404 (S.D.N.Y. 1973) (finding<br />
the song lyric “Got my mojo working but it just won’t work on<br />
you” not sufficiently unique or qualitatively significant to support a<br />
finding of substantial similarity).<br />
81. Compare Dawn Assocs. v. Links, 203 U.S.P.Q. 831, 835<br />
(N.D. Ill. 1978) (finding substantial similarity, and thus copyright<br />
infringement, in defendants’ use of the sentence, from plaintiff’s<br />
screenplay, “When there is no more room in hell . . . the dead will<br />
walk the earth” in advertising materials), with Stratchborneo, 357<br />
F. Supp. at 1404 (failing to find substantial similarity in defendants’<br />
use of a song lyric because it was not sufficiently unique to support<br />
such a finding).<br />
82. See Heim v. Universal Pictures Corp., Inc., 154 F.2d<br />
480, 487 n.8 (2d Cir. 1946) (suggesting that copyright protection<br />
would be accorded such lines as “Euclid alone has looked on<br />
Beauty bare” and “Twas brillig and the slithy toves” in a copyright<br />
infringement action); Life Music, Inc. v. Wonderland Music Co.,<br />
241 F. Supp. 653, 656 (S.D.N.Y.1965) (suggesting that a single<br />
word “SUPERCALAFRAJALISTICK-ESPEEALADOJUS” was<br />
“conceivably” protectable in an infringement action).<br />
83. As discussed above, copyrightable works must satisfy the<br />
statutory requirements of copyrightable subject matter—fixation<br />
and originality—in § 102.<br />
84. See Nimmer, supra note 25, § 2.01(B), at 17 n.41 (“[The<br />
court] was not discussing copyrightability, but rather the extent of<br />
copying necessary to establish an infringement.”).<br />
if the court finds that the phrases are sufficiently<br />
original or significant to the original work.<br />
4. Fair Use<br />
Fair use, unlike the de minimis defense, is<br />
an affirmative defense. 85 Under the doctrine of fair<br />
use, otherwise infringing uses of a copyrighted work<br />
do not subject an individual—an amateur filmmaker,<br />
perhaps—to liability because such uses are socially<br />
and culturally valuable. 86 The Copyright Act lists four<br />
factors the courts use to determine if a defendant’s use<br />
of a work is indeed a fair use:<br />
(1) the purpose and character of the<br />
use, including whether such use is of<br />
a commercial nature or is for nonprofit<br />
educational purposes; (2) the nature of<br />
the copyrighted work; (3) the amount<br />
and substantiality of the portion used<br />
in relation to the copyrighted work as a<br />
whole; and (4) the effect of the use upon<br />
the potential market for or value of the<br />
copyrighted work. 87<br />
As fair use relates to movie quotes, the length of the<br />
alleged infringement, here a line from a long movie<br />
script, implicates primarily the first and third factors.<br />
Courts should not, however, analyze these factors<br />
in isolation; rather, “[a]ll are to be explored, and the<br />
results weighed together, in light of the purposes of<br />
copyright.” 88<br />
Unlike most modern movies, no two fair use<br />
analyses are alike. A court’s decision depends on the<br />
significance it places on each factor in its analysis. 89<br />
85. Id. § 13.05, at 155.<br />
86. See Iowa State Univ. Research Found., Inc. v. Am. Broad.<br />
Cos., 621 F.2d 57, 60 (2d Cir. 1980) (“The doctrine of fair use . . .<br />
permits courts to avoid rigid application of the copyright statute<br />
when, on occasion, it would stifle the very creativity which that law<br />
is designed to foster.”).<br />
87. 17 U.S.C. § 107 (2006). In an attempt to provide further<br />
guidance for the courts in determining whether a use is fair, the<br />
preamble to § 107 lists the following protected purposes: “criticism,<br />
comment, news reporting, teaching . . . , scholarship, or research.”<br />
Id. However, this is not an exhaustive list of fair use examples, so<br />
courts are not limited to these uses in considering what constitutes a<br />
protective purpose in their fair use analyses. Bouchat v. Baltimore<br />
Ravens Ltd. P’ship, 619 F.3d 301, 307–08 (4th Cir. 2010) (citing<br />
Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 561<br />
(1985)).<br />
88. Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 578<br />
(1994).<br />
89. For example, the importance courts (including the<br />
Supreme Court) place on the fourth factor has waxed and waned.<br />
See, e.g., Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S.<br />
539, 566 (1985) (“This last factor is undoubtedly the single most<br />
42 Spring 2013
Depending how a court marshals the fair use factors,<br />
a seemingly fair use can become decidedly infringing<br />
in litigation. In other words, no one knows if a use is<br />
fair until a court has conducted its analysis, especially<br />
when “there is no amount of copying so small as to be<br />
presumptively fair use.” 90<br />
The discussion above illustrates the flexibility<br />
of the fair use analysis, but that same flexibility often<br />
produces unpredictable and inconsistent results.<br />
Indeed, fair use is a difficult doctrine for courts to<br />
apply. To begin, the Copyright Act provides no<br />
guidance as to the relative weight a court should<br />
ascribe to each of the four factors. 91 Additionally,<br />
the Copyright Act delineates each factor in only the<br />
most general terms, 92 leaving courts with seemingly<br />
complete discretion in deciding whether any one factor<br />
is present in any specific case. 93 In other words, the<br />
Copyright Act offers courts little guidance in rendering<br />
any fair use decision because it is silent on how to<br />
apply these nicely bundled, broadly defined, four<br />
factors. As one court expressed it, the doctrine of fair<br />
use is “the most troublesome in the whole of copyright<br />
law.” 94 The troublesome nature of the doctrine can<br />
important element of fair use.”); Sony Corp. of Am. v. Universal<br />
City Studios, Inc., 464 U.S. 417, 476 (1984) (Blackmun, J.,<br />
dissenting) (“[P]erhaps the most important, [is] the ‘effect of the use<br />
upon the potential market for or value of the copyrighted work.’”);<br />
Princeton Univ. Press v. Michigan Document Servs., Inc., 99 F.3d<br />
1381, 1407 (6th Cir. 1996) (Ryan, J., dissenting) (“The fourth factor<br />
is the single most important element of fair use.”). But see Castle<br />
Rock Entm’t, Inc. v. Carol Publ’g Grp., Inc., 150 F.3d 132, 145<br />
(2d Cir. 1998) (“The Supreme Court has recently retreated from its<br />
earlier cases suggesting that the fourth statutory factor is the most<br />
important element of fair use.”); Am. Geophysical Union v. Texaco,<br />
Inc., 60 F.3d 913, 926 (2d Cir. 1994) (suggesting that the Supreme<br />
Court has “abandon[ed] the idea that any factor enjoys primacy<br />
[and] instructs that ‘[a]ll [four factors] are to be explored, and the<br />
results weighed together, in light of the purposes of copyright.’”)<br />
(citing Campbell, 510 U.S. at 578).<br />
90. Campbell, 510 U.S. at 577; Moran, supra note 71, at 251.<br />
91. Sony Corp. of Am., 464 U.S. at 476 (Blackmun, J.,<br />
dissenting); Nimmer, supra note 25, § 13.05; see 17 U.S.C. § 107<br />
(2006) (failing to offer any guidance on how to weigh the four<br />
factors put forth).<br />
92. Nimmer, supra note 25, § 13.05; see 17 U.S.C. § 107.<br />
93. Nimmer, supra note 25, § 13.05; see Elizabeth Dauer &<br />
Allison Rosen, Copyright Law and the Visual Arts: Fairey v. AP,<br />
8 U. Denv. Sports & Ent. Law J. 93, 103 (2010) (identifying the<br />
“broad discretion given trial judges in applying the four fair use<br />
factors”); Giselle Fahimian, How the IP Guerrillas Won: ® TM ark,<br />
Adbusters, Negativland, and the “Bullying Back” of Creative<br />
Freedom and Social Commentary, 2004 Stan. Tech. L. Rev. 1, 39<br />
(2004) (identifying the application of the fair use doctrine as “often<br />
haphazard and arbitrary” because of the “broad discretion of courts<br />
with regard to the weight given to each [fair use] factor”); Joseph P.<br />
Liu, Copyright and Time: A Proposal, 101 Mich. L. Rev. 409, 453<br />
(2002) (writing that “Congress expressly contemplated that fair use<br />
would remain a flexible doctrine that judges could freely adapt to<br />
meet changing circumstances”).<br />
94. Dellar v. Samuel Goldwyn, Inc., 104 F.2d 661 (2d Cir.<br />
produce disconcerting results.<br />
5. Copyright Law Principles as (Mis)<br />
Applied by the Courts<br />
Despite the general proposition that short<br />
phrases are not copyrightable, some courts have<br />
extended protection to these ordinarily uncopyrightable<br />
phrases, 95 including movie quotes. Moreover, some<br />
courts do so without a fair use or de minimis analysis. 96<br />
The implication of this line of jurisprudence is<br />
significant for movie quotes as it represents the danger<br />
that courts could find a perfectly legitimate use of a<br />
movie quote infringes another’s copyright.<br />
One primary example is Universal City<br />
Studios, Inc. v. Kamar Indus., Inc., 97 in which the court<br />
reviewed both trademark and copyright infringement<br />
claims in considering the likelihood of success on the<br />
merits as part of a preliminary injunction analysis.<br />
In Kamar, the district court concluded that the lines<br />
“I love you, E.T.” and “E.T. phone home!” from the<br />
movie E.T.: The Extra-Terrestrial, spoken by the<br />
eponymous E.T., were copyrightable. 98<br />
Before conducting its copyright and trademark<br />
infringement analyses, the court determined that<br />
Universal had valuable trademark rights in both the<br />
famous E.T. character and the name “E.T.” 99 In doing<br />
so, the court did not expressly find that Universal had<br />
rights in the quotes “E.T., phone home” and “I love<br />
you, E.T.” 100<br />
Nevertheless, the court listed as “findings of<br />
fact” that Universal had established trademarks in the<br />
character and the name “E.T.” and that Kamar had<br />
likely infringed on these trademarks. Specifically,<br />
the court wrote that the quotes “would be recognized<br />
1939) (per curiam). See, e.g., Sony Corp. of Am., 464 U.S. 417, 475<br />
(1984) (Blackmun, J., dissenting); Maxtone-Graham v. Burtchaell,<br />
803 F.2d 1253, 1255 (2d Cir. 1986); Triangle Publ’ns, Inc. v.<br />
Knight-Ridder Newspapers, Inc., 626 F.2d 1171, 1174 (5th Cir.<br />
1980); Wojnarowicz v. <strong>American</strong> Family Ass’n, 745 F. Supp. 130,<br />
142 (S.D.N.Y. 1990); Time, Inc. v. Bernard Geis Assocs., 293 F.<br />
Supp. 130, 144 (S.D.N.Y. 1968); see also 4 NIMMER, supra note<br />
25, § 13.05.<br />
95. See Hughes, supra note 46, at 583–84 (describing<br />
Universal City Studios, Inc v. Kamar Indus., Inc, in which short<br />
phrases from the movie E.T.: The Extra Terrestrial were considered<br />
protected by copyright).<br />
96. Id.<br />
97. 217 U.S.P.Q. 1162 (S.D. Tex. 1982).<br />
98. Id. at 1164.<br />
99. Id. at 1164.<br />
100. Id. at 1164–65. The court describes these quotes as<br />
thematic tropes that drove the overarching theme of movie’s<br />
story. Id. at 1165 (“These themes are consistently emphasized and<br />
repeated throughout the movie in the sentences “I love you, E.T.”<br />
and “E.T. phone home!!”).<br />
43<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
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eadily by the average lay observer as having been<br />
appropriated from Universal’s copyrighted motion<br />
picture”; 101 and that Kamar’s “unauthorized use of the<br />
name “E.T.” on its products, and its reproduction of<br />
lines of dialogue from [the film] are likely to cause<br />
confusion as to the source of Kamar’s products.” 102<br />
Note that the court did not characterize Kamar’s use of<br />
the quotes as “unauthorized” as it did the name “E.T.”<br />
After making these factual findings, the court<br />
delved into its copyright analysis, stretching both<br />
the facts and the law to establish de facto copyright<br />
protection of the two famous quotes from the movie. 103<br />
Using the average lay observer test to determine if<br />
Kamar’s use was copyright infringement, 104 the court<br />
reasoned that the “E.T.” quotes on Kamar’s products<br />
“would be readily recognizable to the lay observer as<br />
key lines of dialogue from the copyrighted movie.” 105<br />
Taking a further leap, the court concluded that Kamar<br />
had infringed Universal’s copyrights. 106<br />
It appears that because the court found that the<br />
“E.T.” name and character were Universal’s valuable<br />
trademarks, it did not conduct any sort of recognizable<br />
copyright analysis, such as a de minimis or a fair use<br />
analysis, but based its decision on how important the<br />
quotes were to the film. 107 Under the court’s theory,<br />
if a movie quote is “readily recognizable” in terms<br />
of its relationship to the movie, it will be protected<br />
by copyright. 108 Kamar’s specific application of<br />
copyright law, however, seems to be anomalous—the<br />
only case directly citing to its copyright infringement<br />
rationale distinguished the cases’ facts. 109 Further, the<br />
101. Id. at 1165.<br />
102. Id.<br />
103. Hughes, supra note 46, at 584.<br />
104. Kamar Indus., Inc., 217 U.S.P.Q. at 1166 (articulating<br />
the test as “whether an average lay observer would recognize the<br />
alleged copy as having been appropriated from a copyrighted<br />
work”).<br />
105. Id.<br />
106. Id.<br />
107. See Hughes, supra note 46, at 584. This reasoning is<br />
similar to the Ninth Circuit’s rationale in Cook v. Robbins, which<br />
so disturbed the Copyright Office. See Cook v. Robbins, Nos. 98-<br />
36242, 99-35141, at *3, *12 (9th Cir. Nov. 16, 2000); Carson Letter<br />
I, supra note 60.<br />
108. The court’s reasoning is strikingly similar to a<br />
“secondary meaning” analysis in trademark law. See supra Part<br />
I.B.1 (discussing secondary meaning and its significant role in<br />
federal trademark law).<br />
109. See Murray Hill Publ’ns, Inc. v. ABC Communs.,<br />
Inc., 264 F.3d 622, 633 (6th Cir. 2001) (“Neither is the Line a<br />
‘readily recognizable’ portion of the Movie as were the disputed<br />
lines considered by the court in Universal City Studios, Inc.<br />
v. Kamar Industries Inc.”). Though Kamar has not gained<br />
precedential value, the proposition for which it stands—a court will<br />
protect an uncopyrightable short phrase in an infringement action<br />
decision if the specific phrase is deemed important to the larger<br />
court’s confused conclusion likely resulted from the<br />
intertwined trademark/copyright analysis, 110 preventing<br />
the case’s reasoning from gaining traction, and from<br />
being published in the federal reporter. 111 Nevertheless,<br />
it does indicate that a movie quote could be protectable<br />
intellectual property under copyright law, though it is<br />
not copyrightable.<br />
Continuing in Kamar’s trend, courts have<br />
found that a defendant’s use of a short textual, not<br />
copyrightable, excerpt in a secondary work is not a fair<br />
use. Courts do so under the doctrine of qualitatively<br />
substantial copying, which allows courts to extend the<br />
short excerpt protection from infringement. 112 This<br />
clearly pertains to movie quotes, which are short textual<br />
excerpts of a larger work. The doctrine of qualitatively<br />
substantial copying concerns the third fair use factor,<br />
in which courts consider both the quantitative and<br />
the qualitative nature of the defendant’s use. 113 In<br />
other words, courts examine not only the length of the<br />
appropriated text, but “whether [the defendant’s use<br />
is reasonable] in light of the purpose and character of<br />
the use.” 114 In measuring the qualitative substantiality<br />
of an allegedly infringing use, the courts rely on<br />
work—is not anomalous.<br />
110. Hughes, supra note 46, at 583.<br />
111. In Dawn Assocs. v. Links, 203 U.S.P.Q. 831 (N.D. Ill<br />
1978), which preceded Kamar, the court conducted a very similar<br />
analysis to the court in Kamar to find both copyright and trademark<br />
infringement in the use of a line from the plaintiff’s screenplay and<br />
advertising materials. Id. at 385. Like in Kamar, the trademark<br />
and copyright issues were intertwined in the court’s analysis, and<br />
the court did not conduct a fair use or de minimis analysis in finding<br />
copyright infringement. Id. Further, the court did not distinguish<br />
the plaintiff’s screenplay—a large copyrighted work—from the<br />
plaintiff’s advertising—consisting of the allegedly infringed phrase<br />
“When there is no room left in hell . . . dead will walk the earth”—<br />
in finding infringement. Id. Consequently, the decision does not<br />
indicate whether the court would have found infringement if only<br />
copyright in the screenplay were at issue. Notably, no subsequent<br />
case has followed or even cited to Dawn Associates, including<br />
Kamar, for its copyright infringement analysis.<br />
112. Hughes, supra note 46, at 585–86.<br />
113. 17 U.S.C. § 107(3). This doctrine has existed for some<br />
time and is firmly established. See Roy Exp. Co. Establishment of<br />
Vaduz, Liechtenstein, Black, Inc. v. Columbia Broad. Sys., Inc., 503<br />
F. Supp. 1137, 1145 (S.D.N.Y. 1980) (finding that copying excerpts<br />
of less than two minutes each from four films ranging from seventytwo<br />
to eighty-nine minutes could be found to be “qualitatively<br />
substantial” even if “quantitatively small”); Story v. Holcombe,<br />
23 F. Cas. 171, 173 (C.C.D. Ohio 1847) (“The infringement of a<br />
copyright does not depend so much upon the length of the extracts<br />
as upon their value. If they embody the spirit and the force of the<br />
work in a few pages, they take from it that in which its chief value<br />
consists.”).<br />
114. Peter Letterese & Assocs., Inc. v. World Inst. of<br />
Scientology Enters., 533 F.3d 1287, 1314 (11th Cir. 2008); see<br />
Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 588 (1994)<br />
(determining, in the context of parody, “how much more is<br />
reasonable will depend . . . on the extent to which the [secondary<br />
use’s] overriding purpose and character is to parody the original”).<br />
44<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
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plaintiffs’ assertions of the excerpted text’s importance<br />
and the courts’ own subjective determinations of such<br />
importance. 115 Consequently, as Professor Hughes<br />
recognized, “it is clear that [the qualitatively substantial<br />
doctrine] can produce de facto protection of short<br />
[textual] phrases.” 116<br />
The Supreme Court applied the doctrine of<br />
qualitatively substantial copying in Harper & Row<br />
Publications, Inc. v. Nation Enterprises, 117 finding de<br />
facto protection in short excerpts from a book. Former<br />
President Gerald Ford had contracted with Harper &<br />
Row and Reader’s Digest to publish his memoirs. 118<br />
The publishing contract gave the publishers the right<br />
to license prepublication excerpts. 119 As the book<br />
neared publication, the publishers decided to exploit<br />
the first serial rights and entered into an exclusive<br />
prepublication licensing agreement with Time. 120<br />
However, these plans were thwarted when The Nation<br />
sneakily acquired a copy of the Ford manuscript<br />
and quickly prepared a news story composed of<br />
paraphrases, facts, and quotes taken directly from the<br />
manuscript. 121 Scooped by The Nation article, Time<br />
cancelled its piece and reneged on its contractual<br />
agreements with Harper & Row. 122 Harper & Row<br />
sued The Nation for copyright infringement, and in<br />
response, The Nation argued fair use. 123<br />
In framing its fair use analysis, the Court<br />
stated, “the unpublished nature of a work is a key,<br />
though not necessarily determinative, factor tending<br />
to negate a defense of fair use.” 124 The Court found<br />
that the first factor—the purpose of the use—weighed<br />
in favor of infringement, as The Nation’s “stated<br />
purpose [was] scooping the forthcoming hardcover<br />
and Time abstracts.” 125 Moving onto the second factor,<br />
115. See, e.g., Campbell, 510 U.S. at 587 (holding that the<br />
third factor requires courts to consider not only the quantity of<br />
the materials taken, but also “their quality and importance” to the<br />
original work); Harper & Row Publ’ns, Inc. v. Nation Enters.,<br />
471 U.S. 539, 564–65 (1985) (emphasizing that a fair use analysis<br />
places greater weight on the importance of the material copied than<br />
the amount of material copied).<br />
116. Hughes, supra note 46, at 587.<br />
117. 471 U.S. 539 (1985).<br />
118. Id. at 542. (noting that although this case did not deal<br />
with movie quotes, it provided the framework for how court would<br />
likely apply the doctrine of qualitative substantiality in the movie<br />
quote context).<br />
119. Id.<br />
120. Id.<br />
121. Id. at 543.<br />
122. Id.<br />
123. Id. at 544–45.<br />
124. Id. at 554–55 (internal quotation marks omitted) (“The<br />
author’s right to control the first public appearance of his first<br />
undisseminated expression will outweigh a claim of fair use.”).<br />
125. Id. at 562.<br />
the nature of the copied work, the Court focused on<br />
the unpublished status of President Ford’s memoir<br />
and found that this factor weighed heavily in favor of<br />
Harper & Row. 126 However, the Court qualified its<br />
conclusion by stating that “substantial quotations might<br />
qualify as fair use in a review of a published work or a<br />
news account of a speech that had been delivered to the<br />
public or disseminated to the press.” 127<br />
The Court then addressed the third factor, the<br />
amount and substantiality of the portion used, and<br />
found that, while the amount taken by The Nation<br />
was quantitatively insignificant, namely 300 to 400<br />
words out of a 200,000-word book, “The Nation<br />
took ‘what was essentially the heart of the book’ . . .<br />
because they qualitatively embodied Ford’s distinctive<br />
expression.” 128 Finally, the Court found that the fourth<br />
factor, the market effect of the defendant’s use on the<br />
original work, clearly weighed in favor of Harper &<br />
Row, because there was an actual effect on the market<br />
in the form of Time’s cancellation of its contracted<br />
serialization. 129 After conducting the fair use analysis,<br />
the Court concluded that The Nation’s use of these<br />
verbatim excerpts from the unpublished manuscripts<br />
was not a fair use. 130<br />
In a vehement dissent, Justice Brennan<br />
decried that the majority’s “zealous defense of the<br />
copyright owner’s prerogative will . . . stifle the<br />
broad dissemination of ideas copyright is intended to<br />
nurture.” 131 He argued that the Court had broadened<br />
copyright owners’ rights beyond traditional bounds<br />
by applying an “exceedingly narrow definition of the<br />
scope of fair use.” 132<br />
The Court’s reasoning in Harper & Row has<br />
been applied to subsequent fair use cases involving<br />
unpublished works, 133 and its “heart of the work”<br />
126. Id. at 563–64.<br />
127. Harper & Row, 471 U.S. 539, 564 (1985) (indicating<br />
that taking isolated phrases is likely a fair use and that “[s]ome<br />
of the briefer quotes . . . are arguably necessary . . . to convey the<br />
facts. . . . But The Nation did not stop at isolated phrase and instead<br />
excerpted subjective descriptions and portraits of public figures.”).<br />
128. Id. at 564–65.<br />
129. Id. at 567.<br />
130. Id. at 569.<br />
131. Id. at 579 (Brennan, J., dissenting).<br />
132. Id. Justice Brennan also rejected the Court’s categorical<br />
presumption against fair use of unpublished works. Id. at 595.<br />
133. See, e.g., Wright v. Warner Books, Inc., 953 F.2d 731,<br />
738 (2d Cir. 1991); Salinger v. Random House, Inc., 811 F.2d<br />
90, 95–99 (1987). These courts applied almost a bright-line rule,<br />
refusing to find fair use where a copyrighted work was unpublished.<br />
However, in 1992, Congress amended § 107 to add the following:<br />
“The fact that a work is unpublished shall not itself bar a finding<br />
of fair use if such finding is made upon consideration of all the<br />
above factors.” 17 U.S.C. § 107 (1992). Subsequently, courts<br />
have considered the unpublished nature of a work as but one factor<br />
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language has been appropriated by many courts<br />
in analyzing fair use 134 outside of the context of<br />
unpublished works. The most important factor in<br />
Harper & Row was the unpublished status of the<br />
appropriated work, not the amount of the work taken,<br />
and the decision’s rationale should be confined to the<br />
facts of the case.<br />
The logical result of expanding the protection<br />
of short phrases into the realm of published works<br />
and movie quotes is the stifling of free expression,<br />
as Justice Brennan predicted. 135 Nevertheless, the<br />
consequence of giving the doctrine of qualitative<br />
substantiality such great weight is that courts find short<br />
phrases protectable under their fair use analysis. Under<br />
this doctrine, an uncopyrightable movie quote could<br />
defeat a claim of fair use, merely for having “quality<br />
and importance,” which a movie quote can undoubtedly<br />
develop. 136<br />
In sum, a court could find a single movie quote<br />
protectable, while not copyrightable, in an infringement<br />
action so long as the rights holder, or the court in its<br />
analysis, identifies it as a qualitatively important part<br />
of the copyrighted screenplay and story therein. While<br />
this possibility of protection under copyright law would<br />
not arise until the rights holder initiates an infringement<br />
action, the power of the movie quote to protect the<br />
entire copyrighted work and perhaps defeat what would<br />
be a fair use in other circumstances exists and seems<br />
to be growing stronger. This potential poses a serious<br />
threat to our cultural commons and to our right to free<br />
expression.<br />
to consider in a fair use analysis. See Sundeman v. Seajay Soc’y,<br />
142 F.3d 194, 204–05 (4th Cir. 1998) (finding fair use in quoting<br />
portions of a deceased author’s unpublished novel in scholarly<br />
paper).<br />
134. See, e.g., Campbell v. Acuff-Rose Music, Inc., 510 U.S.<br />
569, 587 (1994); Los Angeles News Serv. v. KCAL-TV Channel<br />
9, 108 F.3d 1119, 1122 (9th Cir. 1997); Princeton Univ. Press v.<br />
Mich. Document Servs., Inc., 99 F.3d 1381, 1406 (6th Cir. 1996);<br />
Religious Tech. Ctr. v. Netcom On-Line Commc’n Servs., Inc., 923<br />
F. Supp. 1231, 1247 (N.D. Cal. 1995).<br />
135. Harper & Row Publ’ns, Inc. v. Nation Enters., 417<br />
U.S. 539, 579 (1985) (Brennan, J., dissenting); see Hughes, supra<br />
note 46, at 586–91 (discussing the legacy of the Harper & Row<br />
decision). See also Cook v. Robbins, Nos. 98-36242, 99-35141,<br />
14711–13 (9th Cir. Nov. 16, 2000) (citing readily to Harper & Row<br />
and showing that the Ninth Circuit tracked the Court’s construction<br />
of the fair use doctrine).<br />
136. See generally Universal City Studios, Inc. v. Kamar<br />
Indus., Inc., 217 U.S.P.Q. 1162, 1165–66 (S.D. Tex. 1982).<br />
B. “That’s my official trademark<br />
catchphrase that I got from the<br />
Web!” 137 — Trademarks<br />
The second most logical intellectual property<br />
regime under which a rights holder would want to<br />
protect her valuable movie quote is trademark law.<br />
Movie quotes have already been trademarked, but only<br />
in connection with merchandising the movie from<br />
which the quote sprung, such as by placing quotes on<br />
mugs, T-shirts, and posters. 138 This section focuses on<br />
the applicability of trademark law to a movie quote<br />
used in connection with and as a source identifier for a<br />
specific movie, rather than a film series. 139<br />
1. Framework of Federal Trademark Law<br />
The Lanham Act 140 provides federal protection<br />
for trademark holders. 141 Trademarks are words,<br />
names, or symbols used by an entity or person “to<br />
137. Disaster Movie (Universal Studios 2008).<br />
138. See, e.g., THERE’S NO PLACE LIKE HOME,<br />
Registration No. 2,540,752 (indicating that the trademark covers<br />
men’s, women’s, and children’s clothing; from the movie The<br />
Wizard of Oz); THERE’S NO PLACE LIKE HOME, Registration<br />
No. 2,522,947 (highlighting that the trademark covers posters,<br />
books, calendars, gift-wrapping paper, and other paper goods);<br />
VOTE FOR PEDRO, Registration No. 3,248,228 (delineating<br />
that the trademark covers calendars, greeting cards, bumper<br />
stickers, and other paper goods; from the movie Napoleon<br />
Dynamite); VOTE FOR PEDRO, Registration No. 3,238,048<br />
(stating that the trademark only covers novelty buttons); U.S.<br />
Trademark Application, Serial No, 85,444,895 (filed Oct. 11,<br />
2011) (representing the application for THERE’S NO PLACE<br />
LIKE HOME in connection with mugs, bowls, plates, and other<br />
“earthenware goods”). However, many applications for registration<br />
consisting of movie quotes in connection with move products<br />
have been abandoned. See, e.g., U.S Trademark Application<br />
Serial No. 75,398,912 (filed Dec. 2, 1997) (abandoned Oct. 7,<br />
2001) (presenting the application for THERE’S NO PLACE LIKE<br />
HOME in connection with motion picture films); U.S. Trademark<br />
Application Serial No. 73,374,299 (filed Jul. 12, 1982) (abandoned<br />
Nov. 4, 1983) (identifying the application for E.T. in connection<br />
with motion picture films).<br />
139. In a large segment of the entertainment industry, movies<br />
are just one component of a larger line of merchandising, especially<br />
in children’s entertainment. Think of the Harry Potter series,<br />
Lemony Snicket’s A Series of Unfortunate Events series, or the Star<br />
Wars franchise. The quotes from movies can be an integral part of<br />
such a merchandising or franchising campaign, such as “Use the<br />
force, Luke.” It is, indeed, intriguing to look at movie quotes in<br />
this context, to see if this will have any effect on the protection of<br />
the movie quotes. However, the analysis will likely not change if<br />
solely focusing on the movie quotes. As discussed above, quotes<br />
from E.T.: The Extraterrestrial received protection in such a<br />
merchandising context. See Universal City Studios, Inc. v. Kamar<br />
Indus., Inc., 217 U.S.P.Q. 1162, 1169 (S.D. Tex. 1982).<br />
140. 15 U.S.C. § 1051 et seq. (2006).<br />
141. This section focuses solely on protection under this<br />
federal scheme. Thus, all definitions and analyses pertain to federal<br />
trademark law.<br />
46 Spring 2013
identify and distinguish his goods, including a unique<br />
product” 142 from those produced by others and “to<br />
identify the source.” 143 Your toothpaste, delicious<br />
candy bar, romance vampire novel, and aging car<br />
all fall under the broad category of goods. Service<br />
marks, 144 close cousins of trademarks, “identify and<br />
distinguish the services of one person . . . from the<br />
services of others and to indicate the source of the<br />
services.” 145 Service marks, unlike trademarks, include<br />
“[t]itles, character names, and other distinctive features<br />
of radio or television programs.” 146 For example, both<br />
“E.T.”—the character name—and “JIFFY LUBE” are<br />
service marks. 147<br />
Under the Lanham Act, sellers and producers’<br />
time, energy, and advertising expenditures investments<br />
are protected from others who may subsequently use<br />
the rights holder’s mark on their products. 148 Thus, the<br />
purpose of trademark law is twofold: (1) to prevent<br />
consumer confusion over the source of goods or<br />
services and (2) to enable producers to differentiate<br />
their products from others on the market. 149 Because<br />
they are used to identify the source of products,<br />
trademarks are “a very peculiar kind of property<br />
[because, unlike copyrights, trademarks have] no<br />
existence apart from the goodwill of the product or<br />
service it symbolizes.” 150<br />
The primary means to secure protection under<br />
the Lanham Act requires a mark holder to also establish<br />
142. 15 U.S.C. § 1127.<br />
143. Id.<br />
144. This article will refer to these marks as “trademarks”<br />
and “service marks” when discussing one individually. When<br />
discussing both, this article uses the term “marks.”<br />
145. 15 U.S.C. § 1127.<br />
146. Id.<br />
147. See, e.g., E.T., Registration No. 1,314,514; JIFFY LUBE,<br />
Registration No. 1,384,672.<br />
148. 1 J. Thomas McCarthy, McCarthy on Trademarks<br />
and Unfair Competition, § 2:30 (4th ed. 1996); Lauren P. Smith,<br />
Trademarks to the Movies: “An Af-‘Fair Use’ to Remember”, 48<br />
Clev. St. L. Rev. 415, 418 (2000). However, “[a] large expenditure<br />
of money does not in itself create legally protectable rights.” Smith<br />
v. Chanel, Inc., 402 F.2d 562, 568 (9th Cir. 1968); see Fleetwood<br />
Co. v. Mende, 298 F.2d 797, 799 (C.C.P.A. 1962) (stating that a<br />
“vast amount of money [invested] in advertising [a] product by [a]<br />
trademark” does not, without more, give rise to a legally protectable<br />
right).<br />
149. As Congress wrote, the Lanham Act was intended to<br />
make “actionable the deceptive and misleading use of marks”<br />
and “to protect persons engaged in such commerce against unfair<br />
competition.” 15 U.S.C. § 1127; see M. B. H. Enters, Inc. v.<br />
WOKY, Inc., 633 F.2d 50, 54 (7th Cir. 1980) (“A trade or service<br />
[mark’s] . . . purpose . . . is to separate those goods or services<br />
from others in the public consciousness, to identify them as the<br />
product of a single source, and to represent them in the mind of the<br />
public.”).<br />
150. McCarthy, supra note 144, at § 2:15, at 39–40.<br />
bona fide use of the mark in commerce. 151 Bona fide<br />
use of a mark in commerce means a bona fide sale or<br />
transport of goods and bona fide display of the mark<br />
in the sale or advertisement for services rendered in<br />
commerce. In the context of federal trademark law,<br />
commerce includes all commercial activity “which may<br />
lawfully be regulated by Congress.” 152 To maintain,<br />
and prove, ownership of mark an owner must establish<br />
(1) that it used the mark sometime in the past and (2)<br />
that its use of the mark continues into the present. 153<br />
This is known as the “continuous use requirement.” To<br />
satisfy the continuous use requirement under trademark<br />
law, this use must be of something more than a<br />
sporadic nature. 154<br />
Once an owner has a mark, the strength of that<br />
mark determines how much protection it receives in<br />
the courts. Courts have identified a spectrum of marks<br />
under which to gauge a mark’s “eligibility to trademark<br />
status and the degree of protection accorded.” 155<br />
The spectrum, in ascending order of protection, is:<br />
(1) generic, (2) descriptive, (3) suggestive, and (4)<br />
arbitrary or fanciful. 156 A generic mark is the name of<br />
the product or service itself—for instance, the mark<br />
TERRIFYING HORROR MOVIE SERIES for use in<br />
connection with a super-scary horror movie series such<br />
as Saw. 157 Generic terms can never function as marks<br />
to indicate the origin of goods or services. 158<br />
Descriptive terms are those that communicate<br />
information about specific characteristics or qualities<br />
of a good or service—for example, 5-MINUTE<br />
for glue that sets in five minutes. 159 These terms<br />
can serve as protectable marks only if they acquire<br />
151. 15 U.S.C. § 1127 (requiring use in commerce for marks);<br />
see 15 U.S.C. § 1051(a) (requiring bona fide use in commerce to<br />
federally register a mark).<br />
152. 15 U.S.C. § 1127.<br />
153. McCarthy, supra note 144, § 16:9; see D. & M. Antique<br />
Imp. Corp. v. Royal Saxe Corp., 311 F. Supp. 1261, 1272 (S.D.N.Y.<br />
1969) (“As property rights subject to ‘ownership,’ trademarks are<br />
sui generis . . . . Ownership grows out of and depends upon the<br />
continuance of use.”).<br />
154. McCarthy, supra note 144, § 16:9; see Dep’t of Parks &<br />
Recreation for C.A. v. Bazaar Del Mundo, Inc., 448 F.3d 1118, 1126<br />
(9th Cir. 1996) (holding that a party “cannot rely on a few instances<br />
of use of the marks in the distant past that were ‘casual’ or had<br />
‘little importance apparently attached to [them]’”).<br />
155. Abercrombie & Fitch Co. v. Hunting World, Inc., 537<br />
F.2d 4, 9 (2nd Cir. 1976).<br />
156. Id.<br />
157. Park ‘N Fly, Inc. v. Dollar Park & Fly, Inc., 469 U.S.<br />
189, 194 (1985) (“A generic term is one that refers to the genus of<br />
which the particular product is a species.”).<br />
158. Abercrombie, 537 F.2d at 9–10; McCarthy, supra note<br />
144, § 12:1.<br />
159. McCarthy, supra note 144, § 11:16.<br />
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47
secondary meaning. 160 Secondary meaning refers to the<br />
consumers’ association of a mark with the source—the<br />
seller, manufacturer, or service provider—and not with<br />
the product or service to which the mark attaches. 161<br />
Thus, even though a term is descriptive, it can serve<br />
as a protectable trademark if consumers associate the<br />
mark with the source, such as FIVE HOUR ENERGY.<br />
Unlike descriptive marks, suggestive marks<br />
do not require secondary meaning. Aptly named, a<br />
suggestive mark does not describe a product’s features,<br />
but suggests them. 162 CHICKEN OF THE SEA 163<br />
for canned tuna represents a prominent example of<br />
this distinction. Because suggestive marks require<br />
“imagination, thought, and perception to arrive at<br />
the qualities or characteristics of the goods,” they do<br />
not require proof of secondary meaning to receive<br />
trademark protection. 164<br />
Fanciful marks are “coined” words or phrases<br />
that are created solely to function as marks, 165 such<br />
as KODAK photographic supplies. Similar to<br />
fanciful marks, arbitrary marks are those “in which<br />
an otherwise common word is used in an unfamiliar<br />
way.” 166 Perhaps the most famous example of this<br />
is APPLE for computer and phone products. Both<br />
fanciful and arbitrary marks, like suggestive marks, are<br />
considered “inherently distinctive” and are protectable<br />
without secondary meaning. 167 Even if a mark receives<br />
trademark protection as discussed above, a mark loses<br />
protection for the holder’s failure to use the mark in<br />
commerce 168 or from becoming generic. 169<br />
Under a strict reading of the Lanham Act, a<br />
movie quote used in connection with a single movie<br />
160. In re Nett Designs, Inc., 236 F.3d 1339, 1341 (Fed. Cir.<br />
2001). The Lanham Act uses the term “acquired distinctiveness” in<br />
lieu of “secondary meaning.” 15 U.S.C. § 1052(f) (2006).<br />
161. See Levi Strauss & Co. v. Blue Bell, Inc., 632 F.2d 817,<br />
820 (9th Cir. 1980) (“[S]econdary meaning is a mental recognition<br />
in buyers’ and potential buyers’ minds that products connected with<br />
the symbol or device emanate from or are associated with the same<br />
source.”).<br />
162. Zobmondo Entm’t, LLC v. Falls Media, LLC, 602 F.3d<br />
1108, 1114 (9th Cir. 2010) (quoting Kendall-Jackson Winery, Ltd. v.<br />
E. & J. Gallo Winery, 150 F.3d 1042, 1047 n.8 (9th Cir. 1998)).<br />
163. See CHICKEN OF THE SEA, Registration No. 0097192.<br />
164. In re Nett Designs, 236 F.3d at 1341; see Zobomondo<br />
Entm’t, LLC, 602 F.3d at 1114 (defining a suggestive mark as<br />
one for which “a consumer must use imagination or any type<br />
of multistage reasoning to understand the mark’s significance”)<br />
(internal quotations and citation omitted).<br />
165. Genesee Brewing Co. v. Stroh Brewing Co., 124 F.3d<br />
137, 143 (2d Cir. 1997).<br />
166. Lever Bros. Co. v. Am. Bakeries Co., 693 F.2d 251, 256<br />
(2d Cir. 1982).<br />
167. McCarthy, supra note 144, § 11:4.<br />
168. Id. § 17:9.<br />
169. Id. § 12:26.<br />
would not fit into the definition of a service mark,<br />
and thus a broad reading of the Lanham Act renders a<br />
diverging reading. A movie quote used in connection<br />
with a single movie could not serve as a service mark.<br />
Our hypothetical service mark holder is not using it<br />
in connection with series of films, nor is the movie<br />
quote a “distinctive feature” of a radio or television<br />
program 170 or an analogous feature, like a newspaper<br />
column title. 171 The quote is a short extract taken from<br />
the larger work, the script, which is a unique literary<br />
production, unlike serial publications or broadcasts,<br />
which provide a regular service such as music, news,<br />
entertainment, etc. Neither a movie nor the movie<br />
script is a service; each is a singular artistic product.<br />
However, under this same strict reading of the<br />
Lanham Act, a movie quote could serve theoretically as<br />
a trademark under the act if the quote were to acquire<br />
secondary meaning. 172 Accordingly, a movie quote<br />
would be a descriptive mark, requiring secondary<br />
meaning to serve as a trademark. 173 First, the movie<br />
itself is a “good.” 174 In the United States, the motion<br />
picture industry generates a significant portion of the<br />
country’s gross domestic product through box office<br />
sales. 175 Further, individuals do associate specific<br />
movie quotes with their movies of origin, such as how<br />
“Say hello to my little friend” conjures up Scarface. 176<br />
Consequently, these quotes arguably could be protected<br />
under the Lanham Act. 177 However, further reflection<br />
170. 15 U.S.C. § 1127 (2006).<br />
171. See Metro Publ’g, Ltd. v. San Jose Mercury News, 987<br />
F.2d 637, 640 (9th Cir. 1993) (finding a newspaper column name<br />
consistent with the Lanham Act’s definition of trademark “because<br />
it serves to identify the column as the product of a particular<br />
writer or paper and to distinguish it from surrounding copy and the<br />
features of competing publications”).<br />
172. This would be similar to the theory of literary titles<br />
serving as trademarks upon the acquisition of secondary meaning,<br />
as discussed below. See Warner Bros. Pictures, Inc., v. Majestic<br />
Pictures Corp., 70 F.2d 310, 311 (2d Cir. 1934) (explaining how a<br />
literary title can acquire secondary meaning).<br />
173. See Abercrombie & Fitch Co. v. Hunting World, Inc.,<br />
537 F.2d 4, 10 (2d Cir. 1976).<br />
174. See William S. Hendon & Anna M. Starvaggi, Using<br />
the Nonprofit Arts in the Growth of Trade?, 22 J. Arts Mgmt. L<br />
& Soc’y 155, 155 (1992) (classifying movies as “artistic cultural<br />
goods”); see also Siwek, supra note 3, at i-ii (including movies in<br />
the category of “knowledge-intensive intellectual property-based<br />
goods”).<br />
175. See Siwek, supra note 3, at 6; Motion Picture<br />
Association of America, supra note 3; U.S. Census Bureau, supra<br />
note 3, at 767 tbl.1229 (demonstrating that motion pictures are a<br />
growing aspect of the U.S. economy).<br />
176. A search of the Internet for “movie quotes” yields<br />
thousands of Web sites dedicated to movie quotes. Search the title<br />
of your favorite film and “movie quotes,” and you will find several<br />
Web sites collecting the most memorable quotes from films such as<br />
Donnie Darko or The Maltese Falcon.<br />
177. See Warner Bros. Pictures, 70 F.2d at 311.<br />
48 Spring 2013
and a review of the case law demonstrates the fallacy<br />
of that contention.<br />
2. Law of Literary Titles Theory<br />
Underlying Cases Involving Literary<br />
Works<br />
To determine the protection of movie quotes,<br />
trademark law’s treatment of titles is illustrative.<br />
Similar to the Copyright Office, the United States<br />
Patent and Trademark Office (PTO) will not register<br />
titles for single, or individual literary, works. 178<br />
However, the Lanham Act protects the title of an<br />
individual literary work in an infringement action,<br />
specifically false advertising and/or false designations<br />
of origin, 179 even though the quote is not registrable as<br />
a trademark.<br />
Despite their artistic and literary nature,<br />
movies, plays, and books are commercial products sold<br />
in the marketplace. 180 As the Second Circuit explained:<br />
[t]he purchaser of a book, like the<br />
purchaser of a can of peas has a right<br />
not to be misled as to the source of the<br />
product. Thus, it is well established<br />
that where the title of a movie or a book<br />
has acquired secondary meaning—that<br />
is, where the title is sufficiently well<br />
known that consumers associate it with<br />
178. Trademark Manual of Examining Procedure (TMEP)<br />
§ 1202.08 (6th ed. 2010); see Application of Cooper, 254 F.2d<br />
611, 613 (C.C.P.A. 1958). However, the United States Patent and<br />
Trademark Office (PTO) will register the title of a series comprised<br />
of several works—i.e., Harry Potter series. TMEP § 1202.08(d).<br />
PTO will also register magazine/newspaper column titles. See<br />
discussion supra note 167 and accompanying text (establishing that<br />
newspaper column titles can be protected); Metro Publ’g, 987 F.2d<br />
at 640–41. However, because this article addresses a movie quote<br />
used as a trademark in connection with a single movie and not a<br />
series, such registration shall not be discussed further.<br />
179. Specifically, § 43(a) of the Lanham Act makes liable in a<br />
civil action:<br />
(1) Any person who, on or in connection with any goods or<br />
services, or any container for goods, uses in commerce any word,<br />
term, name, symbol, or device, or any combination thereof, or any<br />
false designation of origin, false or misleading description of fact,<br />
or false or misleading representation of fact, which--<br />
(A) is likely to cause confusion, or to cause mistake, or<br />
to deceive as to the affiliation, connection, or association of such<br />
person with another person, or as to the origin, sponsorship, or<br />
approval of his or her goods, services, or commercial activities by<br />
another person, or<br />
(B) in commercial advertising or promotion, misrepresents<br />
the nature, characteristics, qualities, or geographic origin of his or<br />
her or another person’s goods, services, or commercial activities.<br />
15 U.S.C. § 1025(a).<br />
180. Rogers v. Grimaldi, 875 F.2d 994, 997 (2d Cir. 1989).<br />
a particular author’s work—the holder<br />
of rights to that title may prevent the<br />
use of the same or confusingly similar<br />
titles by other authors. 181<br />
Accordingly, a movie title can serve as a trademark if it<br />
acquires secondary meaning.<br />
A literary title acquires secondary meaning<br />
through consumers’ association of the title with a<br />
single source of the literary work. 182 This association<br />
can be with one anonymous source 183 —“[t]hat is, the<br />
consumer need not know the trade name of the source,<br />
but is entitled to assume that all works or goods under<br />
that title are controlled by some single source.” 184 The<br />
author of the work may serve as the single source, but a<br />
reasonable guideline is that the consumers’ association<br />
can be with the owner of the copyright in the literary<br />
work, as that entity, or person, controls the work’s<br />
use. 185 Thus, a production company or publisher can<br />
serve as the source, even though consumers do not<br />
know the entity’s name. For example, which “Vote<br />
for Pedro” quoting consumers know that Twentieth<br />
Century Fox produced Napoleon Dynamite?<br />
Literary titles will receive narrow protection<br />
in infringement suits under specific circumstances.<br />
As the court articulated in the influential case Rogers<br />
v. Grimaldi, 186 the “overextension of Lanham Act<br />
restrictions in the area of titles might intrude on First<br />
Amendment values.” 187 Consequently, to determine<br />
if a title merits trademark protection, courts balance<br />
the right of the trademark owner to prevent confusion<br />
against the free speech rights of the creator of the<br />
allegedly infringing literary work. 188<br />
Thus, as established in what is referred to<br />
181. Id. at 997–98.<br />
182. See Warner Bros. Pictures, 70 F.2d at 311; see Tri-Star<br />
Pictures, Inc. v. Unger, 14 F. Supp. 2d 339, 348 (S.D. N.Y. 1998)<br />
(“[M]otion picture titles acquire secondary meaning when the title<br />
becomes so well known that consumers associate it with a particular<br />
author’s work.”).<br />
183. Jackson v. Universal Int’l Pictures, 222 P.2d 433, 438<br />
(Cal. 1950). (“There is no logical basis for holding that a public<br />
well acquainted with the title and the play could not confer<br />
secondary meaning upon that title merely because of unfamiliarity<br />
with the author’s name.”).<br />
184. McCarthy, supra note 144, § 10:10, at 30.<br />
185. Id.; see Dastar v. Twentieth Century Fox Film Corp., 539<br />
U.S. 23, 36 (2003) (concluding that the source of goods “refers to<br />
the producer of the tangible goods that are offered for sale, and not<br />
to the author of any idea, concept, or communication embodied in<br />
those goods”); Edgar Rice Burroughs, Inc. v. Manns Theatres, 195<br />
U.S.P.Q. 159 (C.D. Cal. 1976).<br />
186. 875 F.2d 994, 997–98 (2d Cir. 1989).<br />
187. Id. at 999.<br />
188. Cliffs Notes, Inc. v. Bantam Doubleday Dell Publ’g Grp.,<br />
Inc., 886 F.2d 490, 494 (2d Cir. 1989).<br />
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49
as the Rogers test, a title will not receive protection<br />
under the Lanham Act unless the title has “no artistic<br />
relevance to the underlying work [e.g., the movie] or, if<br />
it has some artistic relevance, unless the title explicitly<br />
misleads as to source or content of work.” 189 For<br />
example, in Cliffs Notes, Inc. v. Bantam Doubleday<br />
Dell Publ’g Grp., Inc., 190 the court found that a<br />
parody of the Cliffs Notes books, “Spy Notes” did<br />
not infringe on the “Cliffs Notes” trademark. 191 The<br />
court concluded that although the parody cover of Spy<br />
Notes conjured up the original and even used some of<br />
the same colors and features of the original design, the<br />
public interest in free expression outweighed the small<br />
chance of consumer confusion it posed, especially<br />
because parody requires mimicry of the original. 192<br />
Movie quotes may be able to function as<br />
trademarks for a single movie in light the law of<br />
literary titles. One might immediately conclude that<br />
movie quotes are more apt to serve as trademarks<br />
than movie titles. Unlike movie titles, movie quotes’<br />
primary function in relation to a literary work is not<br />
to identify and describe the work, in this case the<br />
movie. 193 Movie quotes are less inherently descriptive<br />
than movie titles because movie quotes are not “labels”<br />
designed to describe the literary work with which they<br />
are associated, as are titles. 194 As singular pieces of<br />
the script taken out of context, movie quotes serve to<br />
develop the character, propel the plot, and perhaps<br />
catch on with the public. However, writers and<br />
production companies do not create a movie quote to<br />
serve as the movie’s identifier. It seems that this fact<br />
should not preclude a rights holder from putting the<br />
movie quote to use as a trademark.<br />
Though this has not been tested in court, a<br />
movie quote could legitimately serve as a trademark<br />
in connection with a single movie under the logic of<br />
the case law establishing trademark rights in literary<br />
titles. 195 By making this conclusion, this article does<br />
not mean that it would be a registrable trademark,<br />
but that courts would afford it protection under the<br />
Lanham Act in an infringement action. First, courts<br />
have historically protected the titles of single literary<br />
works under the Lanham Act in infringement actions. 196<br />
Therefore, the fact that the quote serves to identify<br />
the source of a single movie should not be a bar to<br />
protection. Additionally, that consumers will likely<br />
not associate the movie quote with the production<br />
company, or designated rights holder, does not bar<br />
protection. As in the law of titles, consumers need only<br />
assume that the movie is controlled by some single<br />
source. 197 Finally, under the Rogers test, movie quotes<br />
are artistically relevant to the movie because movie<br />
quotes are an essential expressive part of the movie. 198<br />
This is likely why our Mr. Buffer bemoaned the fact<br />
that no one capitalized on “Show me the money” from<br />
Jerry Maguire: The quote was a central part of the<br />
plot, character development, and expressive nature<br />
of the film. Accordingly, a movie quote, if used as a<br />
trademark in connection with a single movie, would<br />
likely receive protection under the Lanham Act in an<br />
infringement action. 199<br />
189. Rogers v. Grimaldi, 875 F.2d 994, 999 (2d Cir. 1989).<br />
In looking to the artistic relevance at issue, the Rogers court held<br />
that “the title ‘Ginger and Fred’ surpassed the minimum threshold<br />
of artistic relevance to the film’s content” for two reasons. Id.<br />
“The central characters in the film are nicknamed ‘Ginger’ and<br />
‘Fred,’ and these names are not arbitrarily chosen just to exploit<br />
the publicity value of their real life counterparts but instead have<br />
genuine relevance to the film’s story.” Id. Though the Rogers test<br />
originated in circumstances where a celebrity’s name was used in a<br />
title, the courts have expanded the test to pertain to all literary titles.<br />
See Cliffs Notes, 886 F.2d at 495.<br />
190. 886 F.2d 490 (2d Cir. 1989).<br />
191. Id.<br />
192. Id. at 497.<br />
193. See Application of Cooper, 254 F.2d 611, 614–15<br />
(C.C.P.A. 1958) (denying protection for descriptive book names).<br />
This is true unless the quote is the same as the title, such as the line<br />
“Dude, where’s my car?” from the film Dude, Where’s My Car?<br />
194. It is well established that movie titles can acquire<br />
secondary meaning sufficient to overcome their “descriptive”<br />
status. See Rogers, 875 F.2d at 997; supra notes 183–86 and<br />
accompanying text. Like movie titles, movie quotes can acquire<br />
secondary meaning, in that viewers—the consumers—associate a<br />
certain quote with a specific movie. “Yeah, Baby!” has come to<br />
signify Austin Powers, just as “Say hello to my little friend” brings<br />
to mind Scarface.<br />
195. This assumes that the quote is put to use as a trademark,<br />
of course. That is, it “perform[s] the job of identification: to<br />
identify one source and distinguish it from other sources.”<br />
McCarthy, supra note 144, § 3:3, at 6.<br />
196. See, e.g., Tri-Star Pictures, Inc. v. Unger, 14 F. Supp. 2d<br />
339, 347–48 (S.D.N.Y. 1998) (finding that the section of Lanham<br />
Act prohibiting false designation of origin includes movie titles).<br />
197. See McCarthy, supra note 144, § 10:10.<br />
198. See Rogers v. Grimaldi, 875 F.2d 994, 999 (2d Cir. 1989)<br />
(emphasizing the importance of the artistic relevance of the title).<br />
199. The Lanham Act, however, provides trademark holders,<br />
including corporate entities with a means of protection similar to<br />
the right of publicity—an action for trademark dilution. 15 U.S.C.<br />
§ 1125(c) (2006). Trademark dilution is the weakening of a mark’s<br />
ability to distinguish clearly a single source. McCarthy, supra note<br />
144, § 24:67. There are two types of dilution, namely “blurring”<br />
and “tarnishment.” 15 U.S.C. § 1125(c). Dilution by “blurring”<br />
is where the majority of the legal action is, whereas tarnishment is<br />
quite rare. See McCarthy, supra note 144, at § 24:67. Blurring<br />
occurs when the use of another’s mark creates “the possibility that<br />
the mark will lose its ability to serve as a unique identifier of the<br />
plaintiff’s product.” Playboy Enters., Inc. v. Welles, 279 F.3d 796,<br />
805 (9th Cir. 2002) (quoting Panavision Int’l, L.P. v. Toeppen, 141<br />
F.3d 1316, 1326 n.7 (9th Cir. 1998)). Tarnishment, however, occurs<br />
“when a famous mark is improperly associated with an inferior or<br />
offensive product or service.” Id. To file for trademark dilution or<br />
50 Spring 2013
Nevertheless, the long-term value of investing<br />
in a movie quote trademark is likely questionable. The<br />
movie quote trademark, if the movie quote catches on<br />
with the public so that the quote is used without any<br />
connection to the film, might not last very long. In<br />
other words, the mark could be deemed abandoned 200<br />
by a court if the quote became so part of the cultural<br />
lexicon 201 that it dissociates itself from the movie<br />
and becomes generic, without any relation to the<br />
film that spawned it. 202 If a movie quote becomes so<br />
ubiquitous as to become a cultural reference, such as<br />
“I’m as mad as hell, and I’m not going to take this<br />
anymore!”, 203 rather than a source identifier, such as to<br />
the amazing 1976 film Network, a court would likely<br />
find that the production company has abandoned the<br />
mark and lost all associated trademark rights. 204 As<br />
Professor Nimmer noted, “[s]uch a result is sometimes<br />
characterized as ‘abandonment,’ although the semantic<br />
usage of consumers may be entirely beyond the control<br />
of the trademark owner.” 205 So, while a movie quote<br />
trademark may be protectable, it might not be the<br />
wisest investment.<br />
tarnishment in this article’s context, a movie studio would need to<br />
have a valid movie-quote trademark, which, as we discussed above,<br />
is highly unlikely.<br />
200. Under the Lanham Act, a mark is deemed abandoned<br />
when either:<br />
(1) [I]ts use has been discontinued with intent not to resume<br />
such use. Intent not to resume may be inferred from circumstances.<br />
Nonuse for 3 consecutive years shall be prima facie evidence of<br />
abandonment[;] [or]<br />
(2) [A]ny course of conduct of the owner, including acts of<br />
omission as well as commission, causes the mark to become<br />
the generic name for the goods or services on or in connection<br />
with which it is used or otherwise to lose its significance as a<br />
mark. Purchaser motivation shall not be a test for determining<br />
abandonment under this paragraph.<br />
15 U.S.C. § 1127.<br />
201. See Levy, supra note 17 (“These phrases have gotten<br />
so deep into the language they’re being used by people who don’t<br />
know the origin. . . . They have left the arena of film into the<br />
popular culture.”); see also Ed Susman, Favorite Movie Quotes<br />
Transcend Ages, United Press International, Science News, Aug.<br />
7, 2000 (“Many quotes come from movies that the people never<br />
saw.”).<br />
202. McCarthy, supra note 144, § 17:8. An in-depth analysis<br />
of this argument is beyond the scope of this article. However,<br />
proving that a movie quote mark was abandoned would likely be<br />
difficult for several reasons, one of which being that the public<br />
likely associates a well-known quote with the movie in which it<br />
appears—i.e., “Show me the money” comes from Jerry Maguire.<br />
Nevertheless, the burden of proving that the mark, or quote,<br />
has been abandoned in litigation would likely rest on the party<br />
alleging abandonment. See 15 U.S.C. § 11,064(3) (allowing a<br />
party to petition to cancel a mark on the grounds that it has been<br />
abandoned).<br />
203. Network (Metro-Goldwyn-Mayer 1976).<br />
204. See McCarthy, supra note 144, § 17:8.<br />
205. Id.<br />
3. Law of Slogans<br />
If a production company is planning a<br />
massive advertising campaign for a soon-to-bereleased<br />
movie, it might consider using a slogan to<br />
support said campaign. Could this slogan be a movie<br />
quote? Certainly, the quote “I’m kind of a big deal”<br />
would have served as an effectively hilarious, and<br />
appropriate, slogan for Anchorman: The Legend of Ron<br />
Burgundy. 206 It would have been a creative, amusing<br />
way to communicate to potential viewers that they<br />
should see the movie—it is a big deal. Despite this<br />
valuable proposition, a movie quote is not a protectable<br />
trademark under the law governing slogans. We have<br />
all heard slogans, and sometimes even get sick of them.<br />
A slogan is a “catch phrase” used in an advertising<br />
campaign 207 that “accompanies other marks such as<br />
house marks and product line marks.” 208 As such, a<br />
“slogan” is intended to remind the consumer of the<br />
brand. 209 Under the established case law, a movie quote<br />
could not acquire trademark protection as a slogan for a<br />
single movie title. First, a movie quote is not a brand.<br />
The quote is simply part of the product (the movie) that<br />
is being trademarked, not an actual trademark for the<br />
entire product. Therefore, a movie quote cannot get<br />
over the threshold requirement of use in connection<br />
with a brand. 210<br />
Further, a movie quote would not receive<br />
protection as a slogan because common phrases<br />
cannot obtain trademark protection under the Lanham<br />
Act, as the public will not identify it with just one<br />
source of goods. 211 Most movie quotes that could be<br />
potential slogans are common phrases or slang and<br />
206. Anchorman: The Legend of Ron Burgundy<br />
(DreamWorks Pictures 2004).<br />
207. Michael F. Aylward, Covering Your Tracks: Will There<br />
Be Insurance Coverage for False Marking Claims?, 3 Landslide<br />
19, 22 (2011).<br />
208. McCarthy, supra note 144, § 7:19, at 45.<br />
209. Hugo Boss Fashions, Inc. v. Fed. Ins. Co., 252 F.3d<br />
608, 619 (2d Cir. 2001). A brand is “[a] name or symbol used by a<br />
seller . . . to identify goods or services and to distinguish them from<br />
competitors’ goods or services.” Black’s Law Dictionary 213 (9th<br />
ed. 2009).<br />
210. Even if a movie title were a brand, words used as<br />
taglines to for distinctive brands are generally not protectable under<br />
trademark law. Cohn v. Petsmart, Inc., 281 F.3d 837, 842 (9th Cir.<br />
2002).<br />
211. M.B.H. Enters, Inc. v. WOKY, Inc., 633 F.2d 50, 54<br />
(7th Cir. 1980); B & L Sales Assocs. v. H. Daroff & Sons, Inc.,<br />
421 F.2d 352, 354 (2d Cir. 1970); see McCarthy, supra note 144,<br />
§ 7:22 (“[T]he ordinary consumer would not take such ordinary<br />
advertising phrases to identify a single source.”). PTO will not<br />
register common phrases and slogans. In re Boston Beer Co., 47<br />
U.S.P.Q.2d 1914 (T.T.A.B. 1998).<br />
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51
would thereby be precluded from serving as slogans.<br />
A search on Google returns over sixty thousand hits<br />
for “I’m kind of a big deal.” This probably makes the<br />
movie quote a common phrase, but it could receive<br />
protection as a slogan under the Lanham act if it<br />
acquires secondary meaning. While this is possible,<br />
it is a quite a feat to do so. How do you acquire<br />
secondary meaning in a phrase that is so ubiquitous in<br />
the public lexicon? For a commonly used movie quote<br />
to acquire secondary meaning, the would-be trademark<br />
owner would have to advertise to such an extent that<br />
the public would associate only one company with<br />
the common phrase where several other competing<br />
companies may be advertising with the identical<br />
language. 212 That would be difficult, indeed.<br />
Similarly, a movie quote would likely be<br />
considered a descriptive phrase that “impart[s]<br />
information” regarding the movie’s content, thus<br />
depriving it of trademark status. 213 “I’m kind of a big<br />
deal” communicates Ron Burgundy, the eponymous<br />
Anchorman, with arrogance and lack of self-awareness<br />
that is central to his character and to the film. Thus, a<br />
court could reasonably consider the phrase as merely<br />
describing the movie’s content.<br />
Finally, a movie quote would not be able to<br />
serve as a slogan because, as we have established<br />
above, a movie quote cannot be a legitimate trademark<br />
for a single movie in most circumstances. Under<br />
trademark law, a “‘slogan’ must be something, other<br />
than the house mark or product mark itself, that<br />
provides such a reminder.” 214 A house mark “is a mark<br />
used on several different goods or services which<br />
themselves use a particular ‘product mark.’” 215 For<br />
example, “Apple” is a house mark, whereas “iPhone”<br />
and “iPad” are product marks. In the context of movie<br />
quotes serving as marks for specific movies, the movie<br />
or the movie title would have to be the house mark,<br />
whereas the movie quote would have to be the product<br />
mark. However, the movie is a single good—to<br />
be a house mark, the mark must be used on several<br />
different goods. Thus, the movie cannot serve as its<br />
own house mark. Even though a movie quote cannot<br />
serve as a slogan, remember that it can likely receive<br />
protection as a trademark under the Lanham Act in<br />
an infringement action. 216 But can a movie quote get<br />
protection under the right of publicity?<br />
212. McCarthy, supra note 144, § 7:23.<br />
213. Packman v. Chicago Tribune Co., 267 F.3d 628, 641 (7th<br />
Cir. 2001).<br />
214. Hugo Boss Fashions, Inc. v. Federal Ins. Co., 252 F.3d<br />
608, 619 (2d Cir. 2001) (emphasis in original).<br />
215. McCarthy, supra note 144, § 23:43, at 217–18.<br />
216. See supra Part 1.B.2.a.<br />
C. “It’s just publicity. It helps<br />
everyone” 217 — Rights of Publicity<br />
This article analyzes right of publicity in<br />
a movie quote not in connection with an actor, a<br />
producer/director, or even a character, but in connection<br />
with a specific movie itself. The right of publicity<br />
has its origins in the right to privacy. 218 The Second<br />
Circuit firmly established in Haelen Laboratories, Inc.<br />
v. Topps Chewing Gum, Inc. 219 the right to publicity<br />
when it held that “in addition to and independent<br />
of that right of privacy, . . . a man has a right in the<br />
publicity value of his photograph.” 220 Initially, the<br />
right of publicity was limited to the right of a person<br />
to control the commercial use of his or her identity. 221<br />
It has since expanded to cover an individual’s “name,<br />
likeness, or other indicia of identity” 222 and has become<br />
an independent doctrine distinct from the right of<br />
privacy. 223 It is a legal right “inherent to everyone to<br />
control the commercial use of identity and persona”<br />
and to make actionable any unpermitted taking. 224<br />
The right of publicity is based in state law. 225 It is<br />
217. The Runaways (River Road Entertainment 2010).<br />
218. Gil Peles, The Right of Publicity Gone Wild, 11 UCLA<br />
Ent. L. Rev. 301, 304 (2004); see Samuel D. Warren & Louis D.<br />
Brandeis, The Right to Privacy, 4 Harv. L. Rev. 193, 196 (1890).<br />
219. 202 F.2d 866 (2d Cir. 1953).<br />
220. Id. at 868. The court stated that this “right might be<br />
called a ‘right of publicity.’”<br />
221. Peles, supra note 211, at 304.<br />
222. Restatement (Third) of Unfair Competition § 46 (1995).<br />
223. See Waits v. Frito-Lay, Inc., 978 F.2d 1093 (9th Cir.<br />
1992) (noting the right to publicity in voice); Carson v. Here’s<br />
Johnny Portable Toilets, Inc., 698 F.2d 831 (6th Cir. 1983)<br />
(establishing Carson’s right to publicity in catchphrase “Here’s<br />
Johnny”).<br />
224. 1 J. Thomas McCarthy, The Rights of Publicity and<br />
Privacy § 1.3 (2th ed. 2012).<br />
225. At least nineteen states have statutes that confer a<br />
right to publicity or analogous rights on its citizens. See, e.g.,<br />
Cal. Civ. Code §§ 3344–3344.1 (West 1969) (disallowing the<br />
unauthorized commercial or advertising use of name, voice,<br />
signature, photograph or likeness); N.Y. Civ. Rights Law §§ 50,<br />
51 (McKinney 1995) (prohibiting the unauthorized use for<br />
advertising or trade purposes, of the name, portrait or picture of<br />
any living person); 42 Pa. Cons. Stat. § 8316 (2002) (prohibiting<br />
the unauthorized use of name or likeness); Tex. Prop. Code Ann.<br />
§ 26.001–.015 (West 1987) (prohibiting the unauthorized use of<br />
a deceased individual’s name, voice, signature, photograph, or<br />
likeness in any manner, including commercial and advertising<br />
uses); Utah Code Ann. § 45-3-1–45-3-6 (LexisNexis 1999)<br />
(disallowing unauthorized commercial use of an individual’s<br />
personal identity in a way that implies approval or endorsement<br />
of a product or subject matter); Wash. Rev. Code § 63.60.010 et<br />
seq. (1998) (recognizing that every individual or personality has a<br />
property right in the use of his name, voice, signature, photograph<br />
or likeness), held unconstitutional by Experience Hendrix, L.L.C.<br />
v. HendrixLicensing.com, LTD, 766 F. Supp. 2d 1122 (W.D. Wash.<br />
2011).<br />
52 Spring 2013
also codified in the Lanham Act 226 and articulated in<br />
Restatement (Third) of Unfair Competition. 227<br />
Since it was first established in Topps Chewing<br />
Gum, the right of publicity has expanded greatly to<br />
cover a person’s likeness, 228 voice, 229 catchphrase, 230<br />
or distinctive object 231 that identify a person. Despite<br />
this expansion, his right has not expanded beyond<br />
the realm of human beings—non-human entities like<br />
corporations or organizations cannot claim a right of<br />
publicity. 232 It appears that the courts have not heeded<br />
Professor Nimmer’s encouragement of the extension<br />
of publicity rights beyond humans: “Since animals,<br />
inanimate objects, and business and other institutions<br />
all may be endowed with publicity values, the human<br />
owners of these non-human entities should have a<br />
right of publicity (although no right of privacy) in<br />
such property.” 233 Indeed, as the law stands, courts<br />
recognize a right to publicity only in humans.<br />
226. 15 U.S.C. § 1125(a) (2006).<br />
227. Restatement, supra note 215, § 46.<br />
228. White v. Samsung Elecs. Am., Inc., 989 F.2d 1512 (9th<br />
Cir. 1993) (finding that use of a blonde-wig-and-dress-donning<br />
robot turning letters on a game show set violated Vanna White’s<br />
right of publicity).<br />
229. Waits v. Frito-Lay, Inc., 978 F.2d 1093 (9th Cir.<br />
1992) (finding use of a Tom Waits “sound alike” in a snack food<br />
commercial violated Waits’s right of publicity); Midler v. Ford<br />
Motor Co., 849 F.2d 460 (9th Cir. 1988) (holding that the use of<br />
a Bette Midler “sound alike” singer in automotive advertising<br />
violated Midler’s right of publicity).<br />
230. Carson v. Here’s Johnny Portable Toilets, Inc., 698<br />
F.2d 831 (finding the use of Johnny Carson’s catch phrase “Here’s<br />
Johnny” in connection with portable toilets violated Carson’s right<br />
of publicity because the public identified him with that phrase).<br />
231. Motschenbacher v. R.J. Reynolds Tobacco Co., 498 F.2d<br />
821 (9th Cir. 1974) (holding that the use of likeness of a race car<br />
driver’s race car in an advertisement, even though viewers could not<br />
see the driver’s image, violated his right of publicity because the<br />
public would identify the driver from the car).<br />
232. Felsher v. Univ. of Evansville, 755 N.E.2d 583, 594 (Ind.<br />
2001) (following the “overwhelming majority of other states” that<br />
have held a corporation has not right of privacy); Univ. of Notre<br />
Dame Du Lac v. Twentieth Century-Fox Film Corp., 22 A.2d 452,<br />
455 (N.Y.S. 1965) (finding that a university is not a “living person”<br />
under the New York statute); Schubert v. Columbia Pictures Corp.,<br />
189 Misc. 734, 742 (N.Y.S. 1947) (finding that a corporation is not<br />
a “living person” under New York publicity law); McCarthy, supra<br />
note 217, § 4:39, at 268. The farthest case law has extended the<br />
right of publicity beyond humans is to recognize a right of publicity<br />
in a music group. See Apple Corps. v. A.D.P.R., Inc., 843 F.<br />
Supp. 342, 348 (M.D. Tenn. 1993) (finding that “The Beatles” was<br />
protected under the Tennessee statute as an “individual”); Brockum<br />
Co. v. Blaylock, 729 F. Supp. 438, 466 (E.D. Pa. 1990) (recognizing<br />
a right of publicity in “The Rolling Stones”).<br />
233. Melville Nimmer, The Right of Publicity, 19 Law &<br />
Contemp. Probs. 203, 216 (1954).<br />
1. Application of Law of Rights of<br />
Publicity to Movie Quotes<br />
For a movie quote to be protected under a right<br />
of publicity, the movie itself would have to have a right<br />
to publicity. This is untenable under established case<br />
law—and common sense—as the right to publicity<br />
covers only natural persons. 234 Courts have rejected<br />
extending the right of publicity to non-human entities<br />
that are composed of people, such as organizations<br />
and corporations, so courts are certainly not poised to<br />
recognize a right of publicity in an entirely inanimate<br />
object such as a movie. The thrust of this reasoning<br />
is that recognizing a right of publicity in movies,<br />
rather than in the actors therein, would distort the right<br />
beyond its original purposes. 235 If movies do not have a<br />
right to privacy, just like organizations and corporations<br />
do not have a right of privacy under state statutes, then<br />
movies should not have a right of publicity. Indeed, to<br />
extend a right of publicity to movies would be absurd<br />
since it would effectively allow a movie to enforce<br />
the same rights that individuals have. This absurdity<br />
becomes abundantly clear when you consider that no<br />
court has accepted Nimmer’s invitation to extend the<br />
right of publicity to more understandable situations—<br />
for example, to animals or corporations. 236<br />
II.<br />
“Perhaps you think you’re<br />
being treated unfairly?” 237 — Why<br />
Movie Quotes Should Receive<br />
Limited Protection<br />
As illustrated above, movie quotes are likely<br />
protectable to a limited extent under copyright and<br />
trademark law in infringement actions. This is<br />
understandable because movie quotes are valuable<br />
and the rights holders should have the ability to<br />
capitalize on this value. However, this extension of<br />
234. See, e.g., Fla. Stat. § 540.08 (1967) (noting that the<br />
statute covers a “natural person”); Nev. Rev. Stat. § 597.810<br />
(explaining that the statute covers a “natural person”); N.Y. Civ.<br />
Rights Law § 50 (McKinney 1995) (highlighting that the statute<br />
covers a “living person”); Tenn. Code Ann. § 47-25-1102 (1984)<br />
(stating that the statute applies to a “human being”); Pump, Inc. v.<br />
Collins Mgmt., Inc., 746 F. Supp. 1159 (D. Mass. 1990) (expressing<br />
doubt that the Massachusetts statute covers commercial names or<br />
trademarks); Eagle’s Eye, Inc. v. Ambler Fashion Shop, Inc., 627 F.<br />
Supp. 856 (E.D. Pa. 1985) (holding that the right of publicity does<br />
not protect trademarks).<br />
235. See McCarthy, supra note 217, § 4:39 (“The danger<br />
comes from expanding the right of publicity beyond its reason for<br />
being.”).<br />
236. See Nimmer, supra note 226, at 216.<br />
237. Star Wars: Episode V: The Empire Strikes Back<br />
(Lucasfilm 1980).<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
53
protection, and the means with which rights holders<br />
can mine the gold from their movie quotes, should<br />
be narrow, balancing the interests of the rights<br />
holder with the public interest in free expression and<br />
cultural development. 238 Cultural development does<br />
not necessarily correspond with sophistication or<br />
artistry. “Toga! Toga!” is not a highbrow expression<br />
of <strong>American</strong> existentialism or an articulation of the<br />
downfall of our educational system, but it holds<br />
an important place in our cultural heritage—it is<br />
<strong>American</strong>a 101, if you will.<br />
Copyright and trademark protection should<br />
be extremely limited in their application here because<br />
movie quotes exist as part of our cultural commons.<br />
Our society has incorporated these lines into our<br />
cultural lexicon. Movie lines, trademarks, and famous<br />
characters all become parts of our culture, and we<br />
use them as a means of communication. 239 “We’re<br />
not in Kansas anymore” no longer references only<br />
The Wizard of Oz, but means, “we are out of our<br />
comfort zone.” “We’re not in Kansas anymore” has<br />
transcended the initial meaning it had when Dorothy,<br />
played by Judy Garland, uttered the words. 240 Movie<br />
quotes become a part of our daily lives and are a<br />
“particularly powerful means of conjuring up the<br />
image of their owners, [thus becoming] an important,<br />
perhaps at times indispensable, part of the public<br />
vocabulary.” 241 Legal regimes that overly protect rights<br />
holders’ intellectual property restrict the use of wellknown<br />
movie quotes may therefore restrict society’s<br />
communication of ideas. 242 Courts should be acutely<br />
aware of this potential chilling effect on free speech<br />
and adjudicate accordingly.<br />
The limitation on the protection of movie<br />
quotes is further buttressed by the fact that these<br />
movie quotes, in a sense, belong to and derive their<br />
value from the people. In the context of trademark<br />
law, trademarks partially serve to protect the goodwill<br />
of the trademark owner, which necessarily derives<br />
its value from the esteem in which consumers hold a<br />
238. See, e.g., Rogers v. Grimaldi, 875 F.2d 994, 999 (2d Cir.<br />
1989) (providing a good example of such considerations).<br />
239. See Dreyfuss, supra note 14, at 408 (“[T]he public may<br />
enjoy the expressive dimensions of a trademark more than it values<br />
the underlying product.”).<br />
240. If this line were protectable, countless movies would not<br />
be able to use this instantly recognizable, culturally significant line.<br />
For instance, Cypher in The Matrix says this very line to Neo when<br />
Neo arrives in the “real world.”<br />
241. Robert C. Denicola, Trademarks as Speech:<br />
Constitutional Implications of the Emerging Rationales for the<br />
Protection of the Trade Symbols, 1982 Wis. L. Rev. 158, 195–96<br />
(1982).<br />
242. Id. at 196.<br />
good or service. 243 Our culture fills them with meaning<br />
beyond their original sense, as they appeared as a few<br />
frames in a movie. 244 However, as Professor Dreyfuss<br />
acknowledges in writing about rights of publicity, this<br />
can be readily adapted to movie quotes: “[e]ven the<br />
most heavily recoded image—the image that owes most<br />
of its strength to meaning provided by the audience—<br />
would be unavailable to the public without some<br />
investment by its initial purveyor.” 245 Nevertheless,<br />
once brought to their attention, the people add the value<br />
to movie quotes. So, logically, the people deserve the<br />
right to use them freely. Under the “if value, then right<br />
theory,” the public has added the value to the quotes, so<br />
it should have the right to use them freely.<br />
Because our society has incorporated movie<br />
quotes into its lexicon, overextension of intellectual<br />
property rights to movie quotes would intrude on First<br />
Amendment free speech rights. In copyright, fair use<br />
and the idea/expression dichotomy are “built-in First<br />
Amendment accommodations.” 246 Allowing movie<br />
script rights holders to liberally defeat fair use, and<br />
thus preclude individuals from using uncopyrightable<br />
movie quotes, would infringe upon free speech<br />
rights and render the fair use provision meaningless.<br />
Furthermore, awarding protection to a short phrase like<br />
“show me the money” would chip away at the idea/<br />
expression dichotomy by practically eliminating the<br />
merger doctrine. One can say “show me the money”<br />
in only one way, and it is a phrase that individuals said<br />
before Jerry Maguire and continue to say. If courts<br />
overly extend protection to movie quotes, individuals<br />
will live in fear of litigation for potential trademark or<br />
copyright infringement if they use a movie quote in a<br />
243. See McCarthy, supra note 144, § 2.15 (emphasizing that<br />
a trademark is “a symbol of the good will of the owner’s goods or<br />
services”).<br />
244. “Toga! Toga!” was hilarious when it appeared in Animal<br />
House in 1972, but it has taken a life of its own after its release into<br />
the cultural lexicon. It has remained a vital part of our culture for<br />
forty years. This cannot just be because it appeared in a movie.<br />
Society’s continued use of the phrase perpetuates and increases its<br />
value.<br />
245. Rochelle Cooper Dreyfuss, We Are Symbols and<br />
Inhabit Symbols, So Should We Be Paying Rent? Deconstructing<br />
the Lanham Act and Rights of Publicity, 20 Colum.-VLA J.L. &<br />
Arts 123, 141–42 (1996); see also Allied Artists Pictures Corp.<br />
v. Friedman, 68 Cal. App. 3d 127, 135, (Cal. Ct. App. 1977)<br />
(finding, in the context of trademarks in literary titles, that “[i]t is<br />
unimportant that the secondary meaning resulted from the activities<br />
of persons other than” the rights holder, and “[t]he critical question<br />
is whether the secondary meaning had been established in the<br />
public mind and not the precise manner in which it was created”).<br />
One could extend this logic to state that regardless of how a movie<br />
quote has acquired value the right holder should still reap the<br />
benefits of the value.<br />
246. Eldred v. Ashcroft, 537 U.S. 186, 190 (2003).<br />
54 Spring 2013
subsequent literary work. 247<br />
As a more specific caution, courts should<br />
also be careful when protecting movie quotes under<br />
the Lanham Act. Allowing a trademark in a movie<br />
quote used in connection with a movie risks trademark<br />
law acting as a substitute for a copyright or courts<br />
finding copyright infringement where there should<br />
be fair use. Kamar, discussed above, is illustrative of<br />
such a proposition. 248 While the case has not gained<br />
traction, it sets a dangerous example for courts and<br />
rights holders because its analysis provides a means<br />
for courts to skirt standards for copyright infringement<br />
and expand owners’ rights into the realm of the<br />
public sphere. 249 Melding the two regimes would<br />
expand them beyond their bounds and would create a<br />
chilling effect on how individuals use others’ work. 250<br />
Additionally, fusing copyright and trademark law could<br />
gut the legislative and statutory intent of the Copyright<br />
and Lanham Acts, and render the most powerful part of<br />
these laws meaningless. 251 The fusion could produce<br />
a legitimate fear of over-aggressiveness on the part<br />
of rights owners in exercising their rights and courts<br />
acquiescing by expanding the regimes’ respective<br />
realms of protection.<br />
247. See Hughes, supra note 46, at 618 (“If a . . . short phrase<br />
. . . is independently protectable, then a person who thinks she has<br />
taken just the tiniest bit from a book . . . or other normal-size work<br />
will find herself liable for copyright infringement.”).<br />
248. Universal City Studios, Inc. v. Kamar Indus., Inc., 217<br />
U.S.P.Q. 1162 (S.D. Tex. 1982).<br />
249. See Hughes, supra note 46, at 584–85 (lamenting that<br />
the Kamar opinion contained “no de minimis discussion, no fair use<br />
analysis, and no discussion of how . . . quantitatively insubstantial<br />
phrases were nevertheless so qualitatively important to the film”).<br />
250. See Zuffa, LLC v. Justin.tv, Inc., 838 F. Supp. 2d 1102,<br />
1106 (D. Nev. 2012) (finding that if the plaintiff “were allowed<br />
to proceed on a trademark claim for the display . . . or other<br />
trademarks inherently part of the copyrighted broadcast, [the<br />
plaintiff] would possess a mutant-copyright or perpetual copyright<br />
because nobody would ever be able to copy the video and display<br />
it regardless of whether the copyright had entered the public<br />
domain”); Dastar Corp. v. Twentieth Century Fox Film Corp., 539<br />
U.S. 23, 37–38 (2003) (holding that the Lanham Act did not allow<br />
an author to bring a claim under the Act for failing to give credit for<br />
uncopyrighted material, because such a broad reading of the phrase<br />
“origin of goods” in 15 U.S.C. § 1125 would create a perpetual<br />
right to bring a copyright claim long after the copyright expired);<br />
McCarthy, supra note 144, § 6:17.50 (writing that trademark law<br />
“cannot be used as a substitute for a copyright”).<br />
251. See Dastar Corp., 539 U.S. at 35 (“Reading ‘origin’ in<br />
§ 43(a) [of the Lanham Act] to require attribution of uncopyrighted<br />
materials would pose serious practical problems. Without a<br />
copyrighted work as the basepoint, the word ‘origin’ has no<br />
discernable [sic] limits.”); Viva R. Moffat, Mutant Copyrights<br />
and Backdoor Patents: The Problem of Overlapping <strong>Intellectual</strong><br />
<strong>Property</strong> Protection, 19 Berkeley Tech. L.J. 1473, 1516 (2004)<br />
(“Concurrent copyright and trademark protection disrupts the<br />
balance established by Congress and deprives the public of the<br />
benefits of the copyright bargain.”).<br />
III.<br />
“You are a very advanced race.<br />
Together we can look for a<br />
solution.” 252 — A Potential Step in<br />
the Right Direction<br />
So far, this article has pointed out the<br />
expansive rights our legal system could afford to rights<br />
holders of movie quotes. Here, this article proposes<br />
a potentially workable scope of protection for movie<br />
quotes. While a detailed proposal is beyond the<br />
scope of this article, this article lays the groundwork<br />
for a solution that will satisfy movie quote owners,<br />
people who quote movies, policy advocates, and the<br />
courts. This proposal is situated in a twilight realm<br />
of protection between copyright and trademark law<br />
that mimics the moral rights afforded to Continental<br />
authors. 253 Because a movie already enjoys significant<br />
copyright protection, courts might protect individual<br />
movie quotes excised from a script and subsequently<br />
used by and attributed to another through the analog to<br />
a moral right against the quote’s misattribution. This<br />
article offers this solution with the keen awareness that<br />
such a right could be dangerously expansive, allowing<br />
rights holders to police and control any use of their<br />
movie quotes. This article does not advocate for such<br />
a broad right. This proposal is far more limited and<br />
would be reserved to the use of a movie quote that<br />
grossly misattributes or misrepresents the movie from<br />
which it originates. To illustrate, using “E.T. phone<br />
home” as the title to a pornographic film could present<br />
an actionable infringement of the movie studio’s moral<br />
rights.<br />
Though current U.S. copyright law does not<br />
recognize “moral rights” in literary works, 254 the courts<br />
252. Ice Age: The Meltdown (Blue Sky Studios 2006).<br />
253. These rights are generally understood to be the<br />
following: (1) the right to nonattribution—that is, to publish<br />
anonymously; and (2) the right to prevent misattribution—that is<br />
a right to both prevent your name from being attached to works<br />
that are not yours and to keep others’ names from being attached to<br />
your works. Justin Hughes, <strong>American</strong> Moral Rights and Fixing the<br />
Dastar Gap, 2007 Utah L. Rev. 659; 662–63 (2007).<br />
254. See Gilliam v. Am. Broad. Cos., 538 F.2d 14, 24 (2d<br />
Cir. 1976) (“<strong>American</strong> copyright law, as presently written, does<br />
not recognize moral rights or provide a cause of action for their<br />
violation.”). The current Copyright Act does contain a provision<br />
providing moral rights to artists. See Visual Artists Rights Act of<br />
1990 (V.A.R.A.), Pub. L. 101‐650, 104 Stat. 5089, codified at 17<br />
U.S.C. § 106A (2006). Specifically, V.A.R.A. extends the rights of<br />
attribution and integrity to artists whose works are protected under<br />
the provision. 17 U.S.C. § 106A(a). However, V.A.R.A. applies<br />
only to “works of visual art,” expressly excluding any “motion<br />
picture or other audiovisual work, book, magazine, newspaper,<br />
periodical, data base, electronic information service, electronic<br />
publication, or similar publication.” 17 U.S.C. § 101; see 17<br />
U.S.C. § 106A(a). Therefore, neither the authors of nor owners<br />
of the copyright to movie scripts can sue a secondary user for<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
55
have creatively found ways to provide moral rightslike<br />
protection for the owners of copyrights to literary<br />
works. An oft-cited example is Gilliam v. <strong>American</strong><br />
Broadcasting Companies, 255 where the Second Circuit<br />
recognized a cause of action under § 43(a) of the<br />
Lanham Act in an allegation that a party broadcasted<br />
a distorted version of the plaintiff’s television show<br />
Monty Python’s Flying Circus. 256 In other words,<br />
the plaintiffs prevailed on a Lanham § 43(a) cause of<br />
action based on a misattribution claim. 257 This theory<br />
still holds some sway in the courts. 258<br />
There are potential problems with affording<br />
rights holders something akin to moral rights,<br />
especially where there is no clear statutory boundary<br />
for the courts to follow. Two of these potential<br />
problems are particularly threatening to the value<br />
of free expression. First, there is potential for<br />
interference with the bedrock principle of fair use,<br />
particularly by stifling the creation of derivative<br />
works such as parodies because of the fear of being<br />
sued for infringing a rights holder’s moral rights. 259<br />
Second, such an extension of rights presents an<br />
“inherent conflict [with] the desire to allow works to<br />
become a part of the public domain.” 260 Only with<br />
the development of clear, limited parameters for such<br />
rights would an equitable balance be struck. 261<br />
Conclusion<br />
Movie quotes are valuable intellectual property. The<br />
value of these words is both tangible and intangible.<br />
Quotes help movie studios generate greater profits<br />
and merchandizing opportunities, and they enrich<br />
our cultural lexicon. The competing considerations<br />
of rights holders and society—i.e., those who enjoy<br />
quoting movies—are evident even in listing the value<br />
inherent in movie quotes. Our court system has<br />
demonstrated it will protect rights holders’ property—<br />
including short phrases—in court. Nevertheless, while<br />
rights holders should be able to protect and enforce<br />
their rights, courts should not allow them to trample<br />
on society’s free speech and cultural commons, and<br />
society should stand up when rights holders attempt to<br />
overextend their rights. Quotes are part of the fabric<br />
of our society, and we should use them without fear of<br />
abusive litigation from rights holders.<br />
misattribution or distortion of the script.<br />
255. 538 F.2d 14 (2d Cir. 1976). See Ilhyung Lee, Toward<br />
an <strong>American</strong> Moral Rights in Copyright, 58 Wash. & Lee L. Rev.<br />
795, 809 (2001) (describing Gilliam as “the most celebrated victory<br />
for authors, the pinnacle of moral rights protections, though under<br />
Lanham Act clothing”).<br />
256. Gilliam, 538 F.2d at 24–25. Section 43(a) of the Lanham<br />
Act creates a federal remedy for the use of a “false designation of<br />
origin, false or misleading description of fact, or false or misleading<br />
representation of fact” in connection with any goods or services. 15<br />
U.S.C. § 1125(a) (2006).<br />
257. Hughes, supra note 246, at 670.<br />
258. See Marradi v. Capital Entm’t Indus., No. CV 01-02622<br />
DDP, 2002 U.S. Dist. LEXIS 28488, at *16 (C.D. Cal. Nov. 22,<br />
2002) (“An allegation that a defendant has presented to the public<br />
a ‘garbled,’ distorted version of the plaintiff’s work should be<br />
recognized as stating a cause of action under the Lanham Act.”)<br />
(citing Gilliam, 538 F.2d at 24).<br />
259. Kimberly Y.W. Holst, A Case of Bad Credit?: The United<br />
States and the Protection of Moral Rights in <strong>Intellectual</strong> <strong>Property</strong><br />
Law, 3 Buffalo Intell. Prop. L.J. 105, 116 (2006); Dane S. Ciolino,<br />
Rethinking the Compatibility of Moral Rights and Fair Use, 54<br />
Wash. & Lee L. Rev. 33, 78 (1997).<br />
260. Holst, supra note 252, at 116.<br />
261. See Roberta Rosenthal Kwall, Inspiration and<br />
Innovation: The Intrinsic Dimension of the Artistic Soul, 81 Notre<br />
Dame L. Rev. 1945, 2006 (advocating for “a narrowly tailored<br />
right of integrity designed to vindicate the author’s right to inform<br />
the public about the original nature of her artistic message and the<br />
meaning of her work”).<br />
56 Spring 2013
Unchecked Monopolies: The Questionable Constitutionality of<br />
Design Patent and Product Design Trade Dress Overlap in Light<br />
of Egyptian Goddess, Inc. v. Swisa, Inc.<br />
by Ellie B. Atkins<br />
Introduction<br />
Last summer, Samsung suffered a large blow<br />
in what has now been dubbed by the media as the<br />
“Smartphone Wars” when Apple received a $1.05<br />
billion dollar jury award after suing Samsung for patent<br />
and trade dress infringement. 1 The policy underlying<br />
intellectual property law reflects a tension between<br />
incentivizing invention by protecting creators’ rights<br />
and maximizing the public benefit. This balance<br />
was clearly at the heart of the now notorious Apple v.<br />
Samsung case, where following the large jury award<br />
for Apple, the parties quickly issued public statements<br />
expressing opposing sentiments. 2 Apple characterized<br />
the win as a victory for inventors’ rights:<br />
The lawsuits . . . were about<br />
much more than patents or<br />
money. They were about<br />
values. At Apple, we value<br />
originality and innovation and<br />
pour our lives into making<br />
the best products on earth.<br />
We make these products to<br />
delight our customers, not for<br />
our competitors to flagrantly<br />
copy. We applaud the court for<br />
. . . sending a loud and clear<br />
message that stealing isn’t<br />
right. 3<br />
Samsung, however, emphasized the alternative side<br />
of the tension, saying, “Today’s verdict should not<br />
be viewed as a win for Apple, but as a loss for the<br />
<strong>American</strong> consumer.” 4<br />
1. See Agustino Fontevecchia, Smartphone Wars: Who<br />
Wins And Who Loses From The Apple-Samsung Patent Ruling,<br />
Forbes (last visited Mar. 11, 2013), http://www.forbes.com/sites/<br />
afontevecchia/2012/08/27/smartphone-wars-who-wins-and-wholoses-from-the-apple-samsung-patent-ruling/.<br />
2. Brian X. Chen, Apple Beats Samsung: First Reactions,<br />
NY Times Blog: Bits (last visited Mar. 11, 2013), http://bits.blogs.<br />
nytimes.com/2012/08/24/samsung-apple-reactions/.<br />
3. Chen, supra note 2.<br />
4. Bryan Bishop, Samsung: Today’s Verdict ‘a Loss for the<br />
<strong>American</strong> Consumer’, The Verge (last visited Apr. 11, 2013), http://<br />
www.theverge.com/2012/8/24/3266653/samsung-todays-apple-<br />
As intellectual property law continues to<br />
evolve, the underlying policy goals endure unchanged.<br />
This recent case highlights the economic importance of<br />
intellectual property law 5 and serves as an example of<br />
a rights holder seeking to maximize his protection by<br />
obtaining overlapping rights. In fact, Apple obtained<br />
both design patent protection and trade dress protection<br />
for the iPhone and iPad, the products at the heart of<br />
this dispute. 6 In light of the high financial stakes, 7 it is<br />
important that courts remain diligently committed to<br />
preserving the balance between benefitting the public<br />
and incentivizing innovation. However, in a 2008<br />
decision, the Federal Circuit shifted the balance of<br />
intellectual property rights, blending design patent and<br />
trade dress in a way this Comment argues is potentially<br />
unconstitutional. 8<br />
Conflating these two intellectual property<br />
rights tilts the underlying balance strongly in favor<br />
of the inventor or rights holder. Design patents<br />
are constitutionally granted for a limited amount<br />
of time, 9 whereas trade dress protection exists<br />
trial-statement-loss-american-consumer.<br />
5. The jury awarded Apple $1.05 billion for Samsung’s<br />
infringement. See Connie Guglielmo, Apple Wins Over Jury in<br />
Samsung Patent Dispute, Awarded $1.05 Billion in Damages,<br />
Forbes (last visited Mar. 11, 2013), http://www.forbes.com/sites/<br />
connieguglielmo/2012/08/24/jury-has-reached-verdict-in-applesamsung-patent-suit-court-to-announce-it-shortly/.<br />
6. Apple obtained registered trade dress for the iPhone<br />
design, but also asserted unregistered trade dress protection in<br />
this case. See Nilay Patel, Apple vs. Samsung: inside a jury’s<br />
nightmare, The Verge (last visited Apr. 11, 2013), www.theverge.<br />
com/2012/8/23/3260463/apple-samsung-jury-verdict-formnightmare.<br />
7. Part of the $1.05 billion award in the Apple v. Samsung<br />
case was attributable to trade dress infringement and design patent<br />
infringement. See Guglielmo, supra note 5; see also Debra Cassens<br />
Weiss, Adidas Award of $305M in Trademark Infringement Case<br />
May be Record, ABA Journal News (last visited Mar. 11, 2013),<br />
http://www.abajournal.com/news/article/adidas_award_of_305m_<br />
in_trademark_infringement_case_may_be_record/ ($305 million<br />
jury award for trademark infringement).<br />
8. See Egyptian Goddess, Inc. v. Swisa, Inc. 543 F.3d 665<br />
(Fed. Cir. 2008) (abridging the previous design patent infringement<br />
test and establishing the ordinary observer test as the sole analysis<br />
for design patent infringement).<br />
9. See U.S. Const. art. 1, § 8, cl. 8 (“Congress shall have<br />
power to . . . promote the progress of science and useful arts by<br />
securing for limited times to authors and inventors the exclusive<br />
right to their respective writings and discoveries.”).<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
57
potentially indefinitely. 10 Considered an important<br />
case for clarifying the design patent infringement<br />
test, Egyptian Goddess, Inc. v. Swisa, Inc., 11 also,<br />
perhaps inadvertently, tore down a wall separating<br />
product design trade dress protection from design<br />
patents when it abridged the previous design patent<br />
infringement test and adopted a test remarkably<br />
similar to the infringement test for trade dress. Courts<br />
repeatedly stated prior to Egyptian Goddess that<br />
parties may pursue trade dress protection for a product<br />
design already protected by a design patent because<br />
they considered the two protections separate and<br />
distinct bodies of law granting independent rights. 12<br />
However, following the Egyptian Goddess decision,<br />
the rights grew alarmingly close, theoretically allowing<br />
for parties to undermine the policy considerations<br />
supporting these legal doctrines. 13 The potential for<br />
abuse is specifically concerning for product design<br />
trade dress, which requires a showing of secondary<br />
meaning 14 a burden much lessened by the existence of<br />
a design patent granting monopolized use for fourteen<br />
years. 15<br />
This Comment will argue that the rationale<br />
10. See Krueger Int’l, Inc. v. Nightingale Inc., 915 F. Supp.<br />
595, 605 (1996) (explaining that trademarks’ indefinite protection<br />
depends on the strength and duration of the public’s recognition<br />
of the mark); see also 1 McCarthy on Trademarks and Unfair<br />
Competition § 8:1 (4th ed.) (noting trade dress receives the same<br />
protection as trademarks under the Lanham Act).<br />
11. 543 F.3d 665 (Fed. Cir. 2008).<br />
12. See W.T. Rogers Co. v. Keene, 778 F.2d 334, 337 (7 th Cir.<br />
1985) (citing their separate infringement tests as justification for<br />
the allowance of trade dress and design patent overlap); Application<br />
of Mogen David Wine Corp., 140 U.S.P.Q. 575, 549 (1964) (“In<br />
our opinion, trademark rights, or rights under the law of unfair<br />
competition, which happen to continue beyond the expiration of<br />
a design patent, do not ‘extend’ the patent monopoly. They exist<br />
independently of it, under different law and for different reasons.”).<br />
13. The potential overlap of design patent and trade<br />
dress protection could provide an extended patent monopoly.<br />
Justification for the patent law monopoly is that the right is timelimited.<br />
However, as the rights begin to merge closer together it is<br />
more difficult to condone allowing a design patent holder to obtain<br />
indefinite trade dress protection for the same ornamental design<br />
subject of a design patent. See Krueger Int’l, Inc., 915 F. Supp.<br />
at 604-05 (stating the policy goals of patent law are to encourage<br />
invention by providing a limited monopoly whereas the goals of<br />
trademark law are to prevent consumer confusion as to the source<br />
of the goods).<br />
14. See Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529<br />
U.S. 205 (2000) (deciding that product design trade dress requires<br />
secondary meaning to establish the distinctiveness necessary for<br />
trade dress protection).<br />
15. See Winning Ways, Inc. v. Holloway Sportswear, Inc.,<br />
903 F. Supp. 1457, 1460-61 (D. Kan. 1995) (“Granting trade dress<br />
protection to an item for which a patent has expired creates tension<br />
because the product may have obtained secondary meaning or<br />
inherent distinctiveness precisely because the product was patented.<br />
If so, the trade dress protection does not have an independent basis<br />
and effectively extends the monopoly granted by the patent.”).<br />
for allowing trade dress protection proceeding from<br />
an expired or current design patent is erroneous in<br />
light of the Egyptian Goddess test for design patent<br />
infringement. In focusing on the infringement test,<br />
it will assess whether trade dress (particularly for<br />
product design) and design patents are actually distinct,<br />
independent legal doctrines. This Comment will<br />
conclude that courts should hold parties seeking trade<br />
dress protection for product design where they already<br />
have a design patent to a higher standard, in line with<br />
the Supreme Court’s goals in Wal-Mart Stores Inc., v.<br />
Samara Brothers, Inc. 16<br />
Part I will discuss the history of design<br />
patent and trade dress protection. Specifically, it<br />
will assess the history of the infringement tests for<br />
each intellectual property doctrine and the rationales<br />
underlying the infringement tests. Furthermore, it will<br />
evaluate case law before and after Egyptian Goddess<br />
to compare courts’ design patent infringement analysis.<br />
It will also review case law prior to Egyptian Goddess<br />
that assessed the coexistence of design patent and trade<br />
dress to further examine courts’ varying rationales.<br />
Part II will assess whether design patents and product<br />
design trade dress are really distinct, independent legal<br />
doctrines. Assessing the substantial shift caused by<br />
Egyptian Goddess, the Comment will argue that courts’<br />
previous reasoning for allowing design patent and trade<br />
dress overlap—that the legal regimes are separate and<br />
distinct—is now erroneous because the two protections<br />
have been rendered nearly identical over time. By<br />
analyzing potential situations in which this may allow<br />
for extended protection, this Comment will discuss the<br />
potential unconstitutionality of this protective overlap<br />
and its opposition to patent and trademark policy. In<br />
conclusion, this Comment will recommend a more<br />
stringent standard for product design trade dress where<br />
the design was previously, or is currently, protected<br />
by a design patent to ensure these legal doctrines do,<br />
in fact, remain independent and distinct. Specifically,<br />
requiring strong proof of distinctiveness for secondary<br />
meaning may provide the necessary safeguard from<br />
unchecked design monopolies.<br />
16. See Samara Bros., Inc., 529 U.S. at 212 (recognizing that<br />
trade dress for product design, like a color, does not immediately<br />
serve a source-defining function in the minds of consumers, and<br />
thus, since it is not inherently distinctive, should require secondary<br />
meaning to establish distinctiveness before trade dress protection<br />
attaches).<br />
58 Spring 2013
I. Background<br />
A. The History and Basic Principles<br />
of Patent Law<br />
Patent law authority is derived from the<br />
Constitution. 17 The Constitution provides, in what<br />
is commonly referred to as the <strong>Intellectual</strong> <strong>Property</strong><br />
Clause, “Congress shall have power to . . . promote<br />
the progress of science and useful arts by securing for<br />
limited times to authors and inventors the exclusive<br />
right to their respective writings and discoveries.” 18<br />
This clause provides the constitutional authority for<br />
patent rights, laying out the framework for providing<br />
a time-limited monopoly in an effort to incentivize<br />
invention. 19 Patents are a negative right in that they<br />
require no positive action be taken by a patent holder<br />
and provide only for the right to exclude others from<br />
using or selling a patented invention. 20 Patent law has<br />
three central purposes: first, to encourage and reward<br />
invention; second, to disclose inventions; and, third,<br />
to protect the public domain by maintaining stringent<br />
patentability requirements. 21<br />
B. Design Patents<br />
There are two types of patents: utility patents<br />
for functional inventions and design patents for<br />
ornamental designs. Protection for design patents<br />
was codified in 1842 to fill a gap that existed between<br />
copyright and patent law. 22 There are fundamental<br />
differences between utility and design patents, most<br />
17. See U.S. Const. art. 1, § 8, cl. 8.<br />
18. Id.<br />
19. See Wilcox & Gibbs Sewing-Mach. Co. v. Gibbens Frame,<br />
17 F. 623, 624 (S.D.N.Y. 1883) (explaining that patent law provides<br />
a benefit to both the inventor and the public because the inventor<br />
is given a limited monopoly and the public benefits from the<br />
invention’s disclosure).<br />
20. See Cont’l Paper Bag Co. v. E. Paper Bag Co., 210<br />
U.S. 405, 425 (1908) (describing the patent right as the “right to<br />
exclude”).<br />
21. Aronson v. Quick Point Pencil Co., 440 U.S. 257, 262<br />
(1979).<br />
22. See Susan Scafidi et al., Panel II: The Global Contours of<br />
IP Protection for Trade Dress, Industrial Design, Applied Art, and<br />
Product Configuration, 20 Fordham Intell. Prop. Media & Ent.<br />
L.J. 783, 787 (2010) (explaining that design patents do not have<br />
a functionality component like utility patents because they were<br />
created to “fill the gap between copyright and patent protection”),<br />
see also Dennis D. Crouch, A Trademark Justification for Design<br />
Patent Rights, 24 Harv. J.L. & Tech. (2010) (manuscript at 41),<br />
available at http://ssrn.com/abstract_id=1656590 (recounting the<br />
Commissioner of Patents’ remarks in support of the Patent Act of<br />
1902 when he testified that the role of design patents would be as<br />
a “gap-fill[er]” for the space between utility patents and copyright<br />
law).<br />
notably the functionality requirement and the length<br />
of protection. 23 Utility patents last for twenty years<br />
beginning on the application filing date, whereas<br />
the term for a design patent is only fifteen years. 24<br />
Moreover, functionality is a requirement for the<br />
issuance of a utility patent, but it is not a requirement<br />
for a design patent. 25<br />
Previously, design patents were routinely<br />
mischaracterized and underutilized. 26 However,<br />
throughout the past decade, design patenting has<br />
experienced rapid growth. 27 Some of the growth<br />
correlates to the creation of the Court of Appeals for<br />
the Federal Circuit in 1982, a court established to<br />
unify and strengthen the patent system. 28 However,<br />
other design patent growth spikes correlate with recent<br />
landmark trade dress cases such as Samara Bros. and<br />
TrafFix, cases that resulted in more stringent trade<br />
dress requirements and thereby made design patents<br />
more appealing. 29 Additionally, the recent Egyptian<br />
23. See 35 U.S.C. §§ 171, 173 (2011), amended by Patent Law<br />
Treaties Implementation Act of 2012, Pub. L. No. 112-211, 126<br />
Stat. 1527.<br />
24. Compare 35 U.S.C. § 154(a)(2) (2011) (dictating the term<br />
length for a utility patent), with 35 U.S.C. § 173 (2011) amended by<br />
Patent Law Treaties Implementation Act of 2012, Pub. L. No. 112-<br />
211, 126 Stat. 1527 (dictating the term length for a design patent);<br />
see also Jeff John Roberts, From Ipads to Crocs, New Patent Law<br />
Protects Design, Bloomberg Businessweek (Dec. 28, 2012), www.<br />
businessweek.com/articles/2012-12-28/from-ipads-to-crocs-newpatent-law-protects-design#p1<br />
(discussing the recently-signed<br />
Patent Law Treaties Implantation Act of 2012, which changed<br />
the design patent term from fourteen years to fifteen years, and<br />
speculating that the United States Patent and Trademark Office<br />
should expect a dramatic rise in design patent applications as a<br />
result of the new law).<br />
25. Compare 35 U.S.C. § 101 (2011), with 35 U.S.C. §<br />
171 (2011); see also Crouch, supra note 22 (manuscript at 9)<br />
n. 36 (noting that the requirements for a utility patent are that<br />
the invention be new, useful, and classifiable into one of four<br />
categories, whereas the requirements for a design patent are that<br />
it be new, original, ornamental, and a design for an article of<br />
manufacture).<br />
26. See Scott D. Locke, Fifth Avenue and the Patent Lawyer:<br />
Strategies for Using Design Patents to Increase the Value of<br />
Fashion and Luxury Goods Companies, 5 J. Marshall Rev. Intell.<br />
Prop. L. 40, 53 (2005) (acknowledging that some refer to design<br />
patents as “soft or minor patents”).<br />
27. See Crouch, supra note 22 (manuscript at 16-20)<br />
(documenting the dramatic increase in design patents over<br />
the course of the last decade); see also Roberts, supra note 24<br />
(predicting that design patents will become even more popular as a<br />
result of the newly-signed Patent Law Treaties Imlantation Act of<br />
2012).<br />
28. See Id. (manuscript at 17-18).<br />
29. See id. (suggesting that the these cases resulted in stricter<br />
requirements for trade dress protection because the Samara<br />
Bros., Inc. holding required that trade dress for product design<br />
obtain secondary meaning before protection attaches, and the<br />
court in Traffix stated that there should be a strong presumption<br />
of functionality where a utility patent previously existed, which<br />
created a strong hurdle for those seeking trade dress protection on a<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
59
Goddess case may explain some of the latest design<br />
patent popularity. 30 Recently decided in 2008, this case<br />
simplified the design patent infringement test, lessening<br />
the burden for rights holders to prove design patent<br />
infringement. 31<br />
The process of obtaining a design patent can<br />
be much faster than that of other intellectual property<br />
rights. In comparison to trade dress, obtaining a<br />
design patent, a process referred to as “prosecution,”<br />
is a much simpler and faster process. 32 Whereas trade<br />
dress protection for product design requires secondary<br />
meaning before protection attaches, design patents can<br />
be issued even before the product is used in commerce<br />
or known to the consumer. 33<br />
Prior to Egyptian Goddess, courts used a<br />
test for evaluating design patent infringement that<br />
consisted of two steps. 34 First, courts employed the<br />
ordinary observer test, which assessed whether an<br />
ordinary observer would be deceived by the allegedly<br />
infringing design into thinking it was the patented<br />
object. 35 Second, courts applied the point of novelty<br />
test, which required that the allegedly infringing<br />
device incorporated the same point of novelty as<br />
the patented device. 36 Novelty is a requirement for<br />
feature previously covered by a utility patent).<br />
30. See Bruce A. Kugler & Craig W. Mueller, A Fresh<br />
Perspective on Design Patents, 38-Jul Colo. Law. 71 (2009)<br />
(suggesting there will be a surge in design patents after the Egyptian<br />
Goddess decision).<br />
31. Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665, 668<br />
(Fed. Cir. 2008).<br />
32. See Crouch, supra note 22, (manuscript at 18-19) (noting<br />
that the design patent issueance rate is more than ninety percent and<br />
suggesting that this rate results from the fact that design patents are<br />
not closely scruitnized by the patent examiners). Design patents<br />
issue much faster than trade dress, particularly trade dress for<br />
product design, which requires secondary meaning before any rights<br />
attach. Compare Id. (manuscript at 20) (calculating that nearly half<br />
of the design patents issued in 2009 were under review for less than<br />
a year), with Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S.<br />
205, 211 (2000) (establishing product design trade dress requires<br />
secondary meaning to establish the distinctiveness necessary for<br />
trade dress protection). See also Roberts, supra note 24 (quoting<br />
a lawyer who stated he believes the prosecution process for design<br />
patents is relataively easy and has obtained a design patent in<br />
approximately sixty days).<br />
33. See Crouch, supra note 22, (manuscript at 23-24)<br />
(explaining Apple’s multi-layered protection approach, which<br />
included a design patent application filed weeks before its public<br />
release date, followed by trademark registration for the same<br />
design).<br />
34. See generally Egyptian Goddess, Inc., 543 F.3d 665<br />
(discussing the merits of the second step of design patent<br />
infringement, namely, the point of novelty test).<br />
35. See Egyptian Goddess, Inc., 543 F.3d at 670 (explaining<br />
the history of the ordinary observer test, which originated from<br />
Gorham Co. v. White, 81 U.S. 511 (1871)).<br />
36. See id. (crediting Litton Systems, Inc. v. Whirlpool<br />
Corp., 728 F.2d 1423 (Fed. Cir. 1984), as the creator of the point<br />
design patentability. 37 A design is considered novel<br />
if an ordinary observer would consider the design to<br />
be different from prior designs, rather than a mere<br />
modification of an existing design, when viewing the<br />
design as a whole. 38<br />
Egyptian Goddess eliminated the second<br />
step, taking issue with the applicability of the point<br />
of novelty test. 39 The court reasoned that the point<br />
of novelty test required exaggerated emphasis on<br />
small, often inconsequential, differences between<br />
the patented and accused products, thereby assigning<br />
undue importance to a feature simply because it could<br />
be characterized as novel. 40 In this landmark case,<br />
Egyptian Goddess sued Swisa, Inc. for design patent<br />
infringement of its nail buffer. 41 Egyptian Goddess’<br />
nail buffer consisted of a rectangular hollow tube with<br />
a square cross-section that featured buffer surfaces<br />
on three of its four sides. 42 Swisa’s product was a<br />
rectangular, hollow tube with a square cross-section,<br />
but it had buffer surfaces on all four sides. 43 In finding<br />
no infringement and ruling for Swisa, the Federal<br />
Circuit said “no reasonable fact-finder could find that<br />
EGI met its burden of showing, by a preponderance<br />
of the evidence, that an ordinary observer, taking<br />
into account the prior art, would believe the accused<br />
design to be the same as the patented design.” 44 The<br />
Federal Circuit stressed in its decision that an ordinary<br />
observer with knowledge of the relevant prior art<br />
is well-equipped to determine whether two designs<br />
are substantially similar. Thus, the court argued,<br />
adopting the Ordinary Observer test as the sole test for<br />
infringement better achieves the original goals of the<br />
Point of Novelty Test and avoids the Point of Novelty<br />
of novelty test because it held that proof of similarity under the<br />
ordinary observer test was not enough to prove design patent<br />
infringement).<br />
37. See 35 U.S.C.A. § 171 (stating a design must be “new” to<br />
be patentable).<br />
38. See generally Sarah Burstein, Visual Invention, 16 LEWIS<br />
& CLARK L. REV. 169 (2012).<br />
39. Egyptian Goddess, Inc., 543 F.3d at 671-78 (discussing<br />
potential problems with the point of novelty test including that it is<br />
difficult to apply where there are multiple point of novelty).<br />
40. See id. at 677 (taking issue with the point of novelty<br />
serving as an excuse for potential design patent infringers).<br />
41. See id. at 682-83. However, after establishing the new<br />
test, the Court did not remand to the lower court, instead analyzing<br />
the case itself. Ultimately, it found the relevant consumer was<br />
unlikely to be deceived by the allegedly infringing device. See<br />
Perry J. Saidman, Egyptian Goddess Exposed! But Not in the<br />
Buff(er) . . ., 90 J. PAT. & TRADEMARK OFF. SOC’Y 859, 880-87<br />
(2008) (arguing the Federal Circuit misapplied the test to the facts<br />
of this case).<br />
42. See Egyptian Goddess, 543 F.3d at 668.<br />
43. See id.<br />
44. Id. at 682.<br />
60 Spring 2013
Test pitfalls. 45<br />
C. History and Basic Principles of<br />
Trademark Law<br />
Unlike patent and copyright law, trademark<br />
law does not derive its authority from the <strong>Intellectual</strong><br />
<strong>Property</strong> clause of the Constitution. 46 Instead,<br />
trademark law is grounded in the Lanham Act, 47 which<br />
draws its constitutional authority from the Commerce<br />
Clause. 48 The primary goal of trademark law is to<br />
prevent consumer confusion as to the source of goods<br />
and to protect companies’ good will. 49 This doctrine<br />
of law strives to ensure that companies are able to<br />
properly distinguish their goods from others so that<br />
consumers may easily ascertain the source of goods<br />
they see in commerce. 50<br />
A trademark must be distinctive to receive<br />
Lanham Act protection, and distinctiveness may<br />
be acquired either inherently or through secondary<br />
meaning. 51 Distinctiveness is assessed on a sliding<br />
scale ranging from generic terms to arbitrary or fanciful<br />
words. 52 Generic marks are not granted any protection,<br />
whereas an arbitrary or fanciful mark receives<br />
automatic protection upon its use in commerce. 53<br />
Between these two ends of the spectrum are descriptive<br />
terms and suggestive terms. 54 Suggestive terms,<br />
like arbitrary or fanciful terms, are considered to be<br />
45. See id. at 677-78 (reasoning that an ordinary observer<br />
would be naturally drawn to the differences between the claimed<br />
and accused designs that render them distinct from prior art).<br />
46. Trademark Law is derived from the Lanham Act 15 U.S.C.<br />
§§ 1051-1141(n).<br />
47. Id.<br />
48. U.S. CONST. art. 1, § 8, cl. 3.<br />
49. See Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763,<br />
767-68 (1992) (describing the purposes of the Lanham Act as<br />
preventing deception and protecting against unfair competition).<br />
50. See id. (citing 15 U.S.C. § 1127 in discussing eligibility of<br />
marks only if they serve source-identifying purposes).<br />
51. See id. at 768 (setting forth the “general rule” that<br />
trademarks may achieve distinctiveness either inherently or by<br />
acquisition); see also Abercrombie & Fitch Co. v. Hunting World,<br />
Inc., 537 F.2d 4, 9 (2d Cir. 1976) (setting fourth the four categories<br />
of distinctiveness).<br />
52. See Abercrombie & Fitch Co., 537 F.2d at 9 (“Arrayed<br />
in an ascending order which roughly reflects their eligibility to<br />
trademark status and the degree of protection accorded, these<br />
classes are (1) generic, (2) descriptive, (3) suggestive, and (4)<br />
arbitrary or fanciful.”).<br />
53. See id. (explaining that a mark may become cancelled at<br />
any point if it becomes generic, a burden no secondary meaning<br />
can overcome because it would put competitors at an unfair<br />
disadvantage).<br />
54. See id. (clarifying that descriptive words may obtain<br />
protection upon a showing of secondary meaning, but that<br />
suggestive words do not).<br />
inherently distinctive and thus trademark protection<br />
is granted automatically upon the product’s use in<br />
commerce. 55 However, merely descriptive terms<br />
require an additional showing of secondary meaning<br />
(or five years use in commerce) before trademark<br />
protection attaches. 56 Secondary meaning requires that,<br />
in the minds of the public, the primary significance of<br />
the mark is to identify the source of the product rather<br />
than the product itself. 57 This does not necessarily<br />
mean that the consumer must know which specific<br />
source the goods come from, only that the consumer<br />
must know it comes from a single, albeit often<br />
unknown, source. 58 In analyzing secondary meaning,<br />
courts look to a non-exhaustive list of factors, none of<br />
which are alone determinative, including advertising<br />
costs, consumer studies, media coverage, amount of<br />
sales, and length and exclusivity of the trade dress<br />
use. 59<br />
Additionally, trademark law restricts<br />
protection to those marks that are not functional. 60 The<br />
functionality doctrine forbids a producer to control a<br />
useful product feature, which would inhibit legitimate<br />
competition, in adherence to the overarching goals of<br />
trademark law of protecting the consumer by promoting<br />
competition and protecting companies’ reputations. 61 A<br />
product feature is considered functional if it is essential<br />
to the use or purpose of the article or if it affects the<br />
cost or quality of the article and would put competitors<br />
55. See id. (explaining suggestive marks were created to fill<br />
the large void between merely descriptive and arbitrary marks).<br />
56. See id. at 10 (suggesting that the five year exception was<br />
created so as not to deprive the mark owner who has put forth<br />
substantial effort and money into creating good will and brand<br />
recognition).<br />
57. See Qualitex Co. v. Jacobson Products Co., 514 U.S. 159,<br />
163 (1995) (assessing secondary meaning in determining whether a<br />
color can achieve trademark protection (citing Inwood Laboratories,<br />
Inc. v. Ives laboratories, Inc., 456 U.S. 844, 851, n. 11 (1982))).<br />
58. See McCarthy, supra note 10, § 3:1 (stating that the<br />
purpose of trademarks is to distinguish the source of one seller’s<br />
goods from another source’s goods).<br />
59. See Topps Co. v. Gerrit J. Verburg Co., 1996 U.S. Dist.<br />
LEXIS 8556, at *15 (S.D.N.Y. 1996) (weighing factors such as<br />
Topps’ advertising, sales success, and extended exclusive use in<br />
the United States to determine that the Ring Pop trade dress has<br />
achieved secondary meaning).<br />
60. See Qualitex Co., 514 U.S. at 165 (“The functionality<br />
doctrine prevents trademark law, which seeks to promote<br />
competition by protecting a firm’s reputation, from instead<br />
inhibiting legitimate competition by allowing a producer to control<br />
a useful product feature.”).<br />
61. See Krueger Int’l, Inc. v. Nightingale, Inc., 915 F.<br />
Supp. 595, 605 (S.D.N.Y. 1996) (“the doctrine serves to promote<br />
competition by protecting advances in functional design from being<br />
monopolized and encouraging the broadest dissemination of useful<br />
design features.” (quoting Warner Bros. v. Gay Toys, Inc., 724 F.2d<br />
327, 331 (2d Cir. 1983) (internal quotation marks omitted)). See<br />
also McCarthy, supra note 10, § 7:26[3][b].<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
61
at a significant, non-reputation related disadvantage. 62<br />
D. Trade Dress<br />
The Lanham Act also protects trade dress,<br />
which is either the product packaging of a good or the<br />
product design or configuration, so long as it serves a<br />
source-identifying function. 63 Trade dress protection<br />
can protect the product itself, the design of the product,<br />
the package design, or even “features such as size,<br />
shape, color or color combinations, texture, [or]<br />
graphics.” 64<br />
The Supreme Court created separate<br />
distinctiveness rules for product packaging and product<br />
design in Wal-Mart Stores, Inc. v. Samara Brothers,<br />
Inc. 65 In this trade dress infringement case, Samara<br />
Brothers, Inc. sued when Wal-Mart intentionally<br />
began selling direct replicas of Samara Brothers baby<br />
clothes. 66 Following Supreme Court precedent in Taco<br />
Cabana, 67 Samara Brothers argued that its marks were<br />
inherently distinctive and thus did not require proof<br />
of secondary meaning. 68 The Court required proof<br />
of secondary meaning for Samara Brothers clothing,<br />
while still upholding Taco Cabana, by classifying Taco<br />
Cabana’s trade dress as product packaging and Samara<br />
Brothers’ trade dress as product design. 69 Thus, the<br />
Taco Cabana decision came to stand for the premise<br />
that product packaging is inherently distinctive and<br />
does not require proof of secondary meaning, whereas<br />
the Samara Brothers case asserted that product design<br />
is not inherently distinctive, therefore requiring proof<br />
of secondary meaning before trade dress protection<br />
attaches. 70<br />
Trade dress infringement is analyzed according<br />
to the same consumer confusion test used for trademark<br />
62. See Inwood Labs. v. Ives Labs., 456 U.S. 844, 850 n.10<br />
(1982).<br />
63. See Krueger Int’l, 915 F. Supp. at 601 (setting forth the<br />
different interpretations of trade dress as either the total image of<br />
the product or particular features).<br />
64. See id. (quoting LeSportsac, Inc. v. KMart Corp., 754 F.2d<br />
71, 75 (2d Cir. 1985)).<br />
65. 529 U.S. 205 (2000).<br />
66. See id. at 207-08 (discussing Wal-Mart’s actions in<br />
sending its designer photographs of plaintiff’s goods and requesting<br />
exact replicas to be sold in Wal-Mart stores).<br />
67. Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763 (1992).<br />
68. See Samara Bros., 529 U.S. at 214-15 (dismissing<br />
respondent’s contention that Two Pesos forbids requiring all product<br />
design trade dress to show secondary meaning).<br />
69. See id. (finding the décor in the Taco Cabana restaurant<br />
qualifies as product packaging rather than product design).<br />
70. Once something has proven distinctiveness, the party<br />
seeking trade dress protection must also establish that the mark is<br />
non-functional.<br />
infringement. 71 Each federal circuit employs their own<br />
version of a multi-factor test for infringement focused<br />
on whether or not the consumer would be confused as<br />
to the source of the goods. 72 The federal circuit tests<br />
differ slightly, but generally reflect the same eight<br />
factors: strength of the mark, proximity of the goods,<br />
similarity of the marks, actual confusion, similar<br />
marketing channels, consumer sophistication, bad faith<br />
of the defendant, and quality of the defendant’s goods. 73<br />
E. A <strong>Brief</strong> History of the Relevant<br />
Case Law<br />
1. Courts’ interpretation of design patent<br />
infringement and the focal shift<br />
resulting from Egyptian Goddess<br />
Prior to Egyptian Goddess, courts employed<br />
the two-part infringement test. 74 For example, in<br />
Hosley International Trading Corp. v. K Mart Corp., 75<br />
plaintiff Hosley International Trading Corporation<br />
had a design patent for the ornamental design of a<br />
cauldron-shaped votive candleholder, which it claimed<br />
was infringed by the defendant. The court found no<br />
infringement, citing the second prong of the two-part<br />
test, namely that the two designs did not incorporate<br />
the same point of novelty. 76 In Metrokane, Inc. v.<br />
Wine Enthusiast, 77 Metrokane sued for design patent<br />
infringement concerning its corkscrew opening<br />
device, trademarked and sold under the name “the<br />
Rabbit.” 78 The court granted summary judgment for<br />
the defendants, finding design patents inappropriate for<br />
part of the device and a lack of substantial similarity<br />
between the two devices. 79<br />
After eliminating the second part of the twopart<br />
test in Egyptian Goddess, courts naturally began to<br />
71. See Taco Cabana, Inc., 505 U.S. at 766 (applying the<br />
likelihood of confusion test to trade dress infringement).<br />
72. See e.g., Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d<br />
492, 493 (2d Cir. 1961); AMF Inc. v. Sleekcraft Boats, 599 F.2d 341<br />
(9th Cir. 1979).<br />
73. See AMF Inc., 599 F.2d at 341 (explaining the multi-factor<br />
test for infringement).<br />
74. See Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665,<br />
670 (Fed. Cir. 2008) (explaining the previously used two-part test<br />
that consisted of the ordinary observer test and the point of novelty<br />
test).<br />
75. 237 F. Supp. 2d 907, 911 (N.D. Ill. 2002).<br />
76. See id. at 912-13 (denying plaintiff’s motion for summary<br />
judgment after finding that defendant’s accused device did not<br />
incorporate the same ring and raised pattern on the handle that<br />
served as a point of novelty for plaintiff’s device).<br />
77. 185 F. Supp. 2d 321 (S.D.N.Y. 2002).<br />
78. Id. at 324.<br />
79. Id. at 327-30.<br />
62 Spring 2013
focus on ordinary observer confusion in infringement<br />
cases. 80 In Huztler Manufacturing Co. v. Bradshaw<br />
International Inc., 81 Huztler sought an injunction<br />
barring the sale of Bradshaw’s products, which Huztler<br />
alleged infringed its design patents for garlic and onion<br />
food-preserving storage containers. 82 The court granted<br />
Huztler’s preliminary injunction, finding that the two<br />
products would appear visually very similar to an<br />
ordinary consumer shopping for the product. 83<br />
2. The Supreme Court’s Long-Standing<br />
Skepticism of Overlapping Rights<br />
The Supreme Court has long viewed<br />
overlapping rights, or more specifically rights<br />
stemming from a current or expired patent, with<br />
skepticism. 84 For example, in Singer Manufacturing<br />
Co. v. June Manufacturing Co., 85 the plaintiff, Singer,<br />
had many utility patents for its sewing machines, and<br />
upon expiration of those patents, competitors entered<br />
into the field copying the functional aspects of the<br />
machines and calling them Singer sewing machines. 86<br />
Singer sued, claiming trademark rights in the name<br />
Singer, and attempted to prevent its competitors from<br />
copying the name and design of Singer machines. 87<br />
Although the Court ultimately ruled that the<br />
competitors were barred from using the name Singer<br />
on their goods, it recognized that the competitors<br />
were, however, free to copy the design and form of the<br />
machine:<br />
It is self-evident that on the<br />
expiration of a patent the<br />
monopoly created by it ceases to<br />
exist, and the right to make the<br />
thing formerly covered by the<br />
patent becomes public property.<br />
It is upon this condition that the<br />
patent is granted. It follows, as<br />
80. See Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665,<br />
671 (Fed. Cir. 2008) (eliminating the second part test, and thus<br />
shifting the focus to the first prong of the test: confusion amongst<br />
ordinary observers).<br />
81. Hutzler Mfg. Co. v. Bradshaw Int’l, Inc., 11 CIV. 7211<br />
PGG, 2012 WL 3031150 at *1 (S.D.N.Y. July 25, 2012).<br />
82. Id.<br />
83. Id. at *13-15.<br />
84. See Dastar Corp. v. Twentieth Century Fox Film Corp.,<br />
539 U.S. 23 (2003); Sears, Roebuck & Co. v. Stiffel Co., 376 U.S.<br />
225 (1964); Kellogg Co. v. Nat’l Biscuit Co., 305 U.S. 111 (1938);<br />
Singer Mfg. Co. v. June Mfg. Co., 163 U.S. 169 (1896).<br />
85. 163 U.S. 169 (1896).<br />
86. Id. at 170.<br />
87. Id.<br />
a matter of course, that on the<br />
termination of the patent there<br />
passes to the public the right to<br />
make the machine in the form<br />
in which it was constructed<br />
during the patent. 88<br />
Echoing this same sentiment, the Court in a more<br />
recent case, Sears, Roebuck & Co. v. Stiffel Co., 89<br />
wrote “when [a] patent expires, the monopoly created<br />
by it expires, too, and the right to make the article—<br />
including the right to make it in precisely the shape it<br />
carried when patented—passes to the public.” 90<br />
In each of these cases, the Court emphasized<br />
its concern with maintaining an equal balance between<br />
the public domain and the benefit to the designer or<br />
inventor. Specifically, the Court addresses its unease<br />
with rights holders exploiting or manipulating various<br />
protections to circumvent the legal intentions of each,<br />
specifically, their limitations.<br />
3. Lower Courts’ Inconsistent Case Law<br />
Concerning Trade Dress and Design<br />
Patent Overlap<br />
Despite courts’ longstanding reservations<br />
about potential protective overlap, many courts do<br />
allow simultaneous protection, and it is very common<br />
for plaintiffs to obtain multiple forms of intellectual<br />
property protection. 91 In 1995, the Southern District<br />
of New York addressed the validity of trade dress<br />
protection for a product feature already protected by a<br />
design patent in Hubbell Inc. v. Pass & Seymour, Inc. 92<br />
Hubbell sued defendants Pass & Seymour and Legrand<br />
for trade dress infringement concerning Hubbell’s<br />
electrical products. 93 The defendants, citing Supreme<br />
Court precedent, argued that Hubbell’s expired<br />
design patents for their product precluded trade dress<br />
protection. 94 The court rejected this view, reiterating<br />
that trade dress and patent law are separate bodies of<br />
law, with independent policy justifications, different<br />
88. Id. at 185.<br />
89. 376 U.S. 225 (1964).<br />
90. Id. at 230.<br />
91. See Crouch, supra note 22 (manuscript at 45) (explaining<br />
that it is not uncommon for patent litigation to also include<br />
allegations of copyright, trade dress, and unfair competition<br />
charges).<br />
92. Hubbell Inc. v. Pass & Seymour, Inc., 883 F. Supp. 955,<br />
957-58 (S.D.N.Y. 1995).<br />
93. See id. (discussing Hubbell’s trade dress for its plugs and<br />
connectors).<br />
94. See id. at 959 (stressing the unlawful nature of extending<br />
the patent monopoly).<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
63
sources of authority, and separate infringement tests. 95<br />
A year later, the same court in Topps Co.<br />
v. Gerrit J. Verburg Co. 96 went a step further in<br />
finding that the existence of an expired design patent<br />
“presumptively indicates that the design at issue is<br />
not de jure functional.” 97 In this case, Topps Co.,<br />
creator of the Ring Pop, sued Gerrit J. Verburg Co.<br />
for the defendant’s Diamond Pop, alleging trade<br />
dress infringement. 98 After finding that the Ring<br />
Pop had achieved secondary meaning, the court also<br />
addressed the potential functionality of the trade dress,<br />
which if found to be functional would bar trade dress<br />
protection. 99 Addressing the expired design patent, the<br />
court echoed its sentiment from Hubbell Inc. in finding<br />
no conflict between trademark and patent overlap, but<br />
also indicated that the existence of a design patent<br />
could prove beneficial to a party seeking trade dress<br />
protection in that it served to show non-functionality. 100<br />
Again in 1996 the Southern District of New<br />
York reiterated that “[a] design patent is analytically<br />
distinct from a protectable trade dress, and industrial<br />
products may qualify for both kinds of protection<br />
without violating the policy goals of either patent or<br />
trade dress law.” 101 Similar to its decision in Topps,<br />
the court argued trade dress protection does not extend<br />
a design patent monopoly, that when a design patent<br />
expires it becomes copyable, just not “in such a way<br />
95. See id. (comparing the goals of patent law and trademark<br />
law and concluding patent law seeks to further invention whereas<br />
trademark law seeks to protect the consumer from brand or<br />
source confusion); id. at 960 (discussing the history of patent<br />
and trademark coexistence); id. (“The trademark owner has an<br />
indefinite term of protection, it is true, but in an infringement suit<br />
must also prove secondary meaning and likelihood of confusion,<br />
which the owner of a design patent need not do; there is therefore<br />
no necessary inconsistency between the two modes of protection.”<br />
(quoting W.T. Rogers Co. v. Keene, 778 F.2d 334, 337 (7th Cir.<br />
1985)).<br />
96. No. 96 Civ. 7302, 1996 U.S. Dist. LEXIS 18556 (S.D.N.Y.<br />
Dec. 13, 1996).<br />
97. See id. at *30.<br />
98. See id. at *1-5 (noting the substantial similarities between<br />
the two products such as the sales method, configuration of the<br />
product, and product packaging).<br />
99. See id. (finding no “particular manufacturing need or<br />
requirement” for the configuration of the Ring Pop design, and<br />
noting that this design was probably more difficult and costly to<br />
manufacture than other available designs).<br />
100. See id. at *29-30 (suggesting that the existence of a<br />
design patent helps parties overcome the burden of showing nonfunctionality<br />
in obtaining trade dress protection); see also E.Z.<br />
Bowz, L.L.C. v. Professional Product Research Co., 2003 WL<br />
22068573 No. 00 Civ. 8670 (S.D.N.Y. 2003), at *24 (finding a<br />
design patent to be helpful evidence of non-functionality, and thus<br />
also helpful in establishing trade dress protection).<br />
101. See Krueger Int’l Inc. v. Nightingale Inc., 915 F. Supp.<br />
595, 604 (S.D.N.Y. 1996) (clearing up “common misconceptions”<br />
concerning design patent and trade dress overlap).<br />
that customers are deceived about what they are<br />
buying.” 102<br />
Many years prior to these cases the Court of<br />
Customs and Patent Appeals 103 (C.C.P.A.) paved the<br />
way for the later decisions in finding no issue with<br />
trade dress protection and design patent overlap.<br />
Twice, in In re Mogen David Wine Corp. 104 and In<br />
re Honeywell, Inc., 105 the C.C.P.A. overturned the<br />
Trademark Trial and Appeal Board (T.T.A.B.) to<br />
find that trade dress does not extend a design patent<br />
monopoly. 106 Interestingly, despite the C.C.P.A.’s<br />
previous decision in In re Mogen David Wine Corp.,<br />
the T.T.A.B. again denied registration of a trademark<br />
where a design patent already existed, reasoning it<br />
would undermine patent law policy. Predictably, the<br />
C.C.P.A. reversed, citing its earlier decision.<br />
While the previous cases are representative<br />
of the majority viewpoint, 107 some courts do reach<br />
alternative conclusions. 108 Notably, in Winning Ways,<br />
Inc. v. Holloway Sportswear Inc., the district court<br />
expressed hesitation about the coexistence of design<br />
patent and trade dress protection, saying,<br />
[g]ranting trade dress protection<br />
to an item for which a patent<br />
has expired creates tension<br />
because the product may have<br />
obtained secondary meaning<br />
or inherent distinctiveness<br />
precisely because the product<br />
was patented. If so, the trade<br />
dress protection does not<br />
102. See id. at 605. (alluding to the trade dress infringement<br />
test, which analyzes consumer confusion).<br />
103. This court was the precursor to the court of appeals<br />
for the federal circuit. See History of the United States Court<br />
of Appeals for the Federal Circuit, The Federal Circuit<br />
Historical Society, http://www.federalcircuithistoricalsociety.org/<br />
historyofcourt.html (last visited April. 11, 2013).<br />
104. 328 F.2d 925 (C.C.P.A. 1977).<br />
105. 532 F.2d 180 (C.C.P.A. 1976).<br />
106. In re Mogen David Wine Corp., 328 F.2d at 1266; In re<br />
Honeywell, Inc., 532 F.2d at 183.<br />
107. Julia A. Matheson & Stephen L. Peterson, Combine<br />
and Conquer: How the Synthesis of Design Patent and Trade<br />
Dress Achieve Maximum Protection for Your Product Design,<br />
Finnegan (May 2009), http://www.finnegan.com/resources/articles/<br />
articlesdetail.aspx?news=74f843be-c63a-40cc-8ae0-007bc50fdd99.<br />
108. See Stormy Clime Ltd. v. ProGroup, Inc., 809 F.2d<br />
971, 977-78 (2d Cir. 1987) (“Courts must proceed with caution in<br />
assessing claims to unregistered trademark protection in the design<br />
of products so as not to undermine the objectives of the patent laws<br />
. . . . Since trademark protection extends for an unlimited period,<br />
expansive trade dress protection for the design of products would<br />
prevent some functional products from enriching the public<br />
domain.”).<br />
64 Spring 2013
have an independent basis<br />
and effectively extends the<br />
monopoly granted by the<br />
patent. 109<br />
This minority viewpoint indicates some courts remain<br />
suspicious of the potential coexistence of design patent<br />
and trade dress, recognizing the overlap’s potential to<br />
undermine the policy goals of the legal doctrines in<br />
tipping the benefits largely in favor rights holder and<br />
out of the public’s favor.<br />
II.<br />
Analysis<br />
In light of the Egyptian Goddess design patent<br />
infringement test shift, the potential coexistence of<br />
trade dress following the issuance of a design patent<br />
undermines the constitutional grant and policy goals<br />
of patent law. 110 Prior to Egyptian Goddess, courts<br />
justifying simultaneous trade dress and design patent<br />
protection reasoned that the two were distinct bodies<br />
of law, evidenced by their separate policy goals<br />
and infringement tests. 111 In light of the fact that<br />
trade dress and design patents now adhere to similar<br />
infringement tests, the boundaries of these rights are<br />
also nearly identical. 112 The potential for overlap is<br />
most concerning for product design trade dress, which<br />
the Supreme Court ruled in Samara Brothers could<br />
never be inherently distinctive. 113 As a result, the Court<br />
109. See Winning Ways, Inc. v. Holloway Sportswear,<br />
Inc., 903 F. Supp. 1457, 1460-61 (D. Kan. 1995) (emphasizing<br />
adherence to the underlying policy goals of patent law in noting that<br />
the public’s access is still restricted where trade dress protection<br />
attaches to a design that should have fallen into the public domain<br />
following the design patent’s expiration).<br />
110. This Comment argues that following Egyptian Goddess,<br />
the infringement tests for design patents and trade dress became<br />
nearly identical, thereby conflating the rights and the protections<br />
associated with them. As such, a rights holder could potentially<br />
obtain both design patent protection and trade dress protection,<br />
which would allow him to extend the patent monopoly right in<br />
substance, but not in name.<br />
111. See, e.g., In re Mogen David Wine Corp., 328 F.2d 925,<br />
579 (C.C.P.A. 1964) (“In our opinion, trademark rights, or rights<br />
under the law of unfair competition, which happen to continue<br />
beyond the expiration of a design patent, do not “extend” the patent<br />
monopoly. They exist independently of it, under different law and<br />
for different reasons.”).<br />
112. The court in Egyptian Goddess abridged the infringement<br />
test for design patents, eliminating the point of novelty test and<br />
re-focusing infringement on consumer confusion. See Egyptian<br />
Goddess, Inc. v. Swisa, Inc., 543 F.3d 665, 671 (Fed. Cir. 2008).<br />
The infringement test for trade dress also hinges on the likelihood<br />
of consumer confusion; AMF Inc. v. Sleekcraft Boats, 599 F.2d 341<br />
(9th Cir. 1979) (explaining the multi-factor test for infringement).<br />
As such, both legal doctrines protect the rights holder from products<br />
that might deceive a consumer in the marketplace.<br />
113. See Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529<br />
required that all product design trade dress achieve<br />
secondary meaning before trade dress protection<br />
attaches. 114 Allowing trade dress protection where<br />
a design patent already protects the same feature<br />
significantly lessens the burden that the Supreme<br />
Court established in Samara Brothers. 115 That burden,<br />
establishing secondary meaning, will be significantly<br />
lessened by the years of monopolized use resulting<br />
from the patent. 116<br />
A. The Egyptian Goddess holding lessens<br />
the burden for rights holders in proving<br />
infringement and further merges design<br />
patents with trade dress.<br />
Prior to Egyptian Goddess, design patent<br />
infringement was not as common as the two-part<br />
test was often a difficult hurdle for patent holders to<br />
overcome. 117 Even where a party could show that an<br />
U.S. 205, 214-15 (2000) (distinguishing product design from<br />
product packaging and finding that the former cannot be inherently<br />
distinctive).<br />
114. Id. at 215.<br />
115. See id. at 212-13 (explaining that product design serves<br />
more than just a source-designating function and thus secondary<br />
meaning should be established as a burden to show that it does<br />
in fact serve a source-identifying function before trade dress<br />
protection attaches).<br />
116. Secondary meaning is established when in the minds<br />
of the relevant consumers, the trademark or trade dress comes to<br />
serve a source-identifying function. McCarthy, supra note 10, §<br />
15:1. If potential consumers are prevented from utilizing the same<br />
design patented feature(s), the product design will begin to serve<br />
as a differentiating function for the brand, thus separating it from<br />
the competitors’ products. It will then also more easily become<br />
a source-identifying feature rather than a descriptive feature for<br />
the product because of its unique status as the only product with<br />
that design amongst its competitors. For example, if a particularly<br />
popular salt and pepper shaker was shaped as a penguin, and<br />
the company that sold this product obtained a design patent for<br />
the penguin shape, it could use that design patent to prevent any<br />
competitor from selling a similar good in a similar penguin shaped<br />
design. Thus, consumers will begin to associate the penguin shape<br />
with the source of the good (the company that makes it) and not<br />
as an indicator that the product is a salt and pepper shaker, which<br />
hypothetically may have been the case if competitors were able<br />
to copy the design and the penguin shape became an increasingly<br />
popular shape for salt and pepper shakers. Additionally, the design<br />
patent will give the company fifteen years of production that can<br />
serve as evidence of continued sales, which would help establish<br />
secondary meaning. See McCarthy, supra note 10, § 15:1 (4th<br />
ed.) (stating that evidence of secondary meaning may consist of<br />
direct evidence, in the form of a customer survey, or circumstantial<br />
evidence, in the form of the input of the seller or circumstantial<br />
evidence, which can consist of evidence of sales volume, length<br />
of time used, and the quantity and quality of advertising and<br />
promotion exposing customers to the symbol).<br />
117. See Hosley Int’l Trading Corp. v. K Mart Corp., 237 F.<br />
Supp. 2d 907, 911 (N.D. Ill. 2002) dismissed sub nom. Hosley Int’l<br />
Trading Corp. v. Designco, 79 F. App’x 429 (Fed. Cir. 2003) (noting<br />
that the case “not surprisingly” turned on whether the two devices<br />
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65
ordinary observer would be deceived by the allegedly<br />
infringing product, oftentimes the points of novelty<br />
would be different, thus stifling a party’s claim for<br />
infringement. Hosley Intern. Trading Corp. v. K Mart<br />
Corp. 118 provides a good example of this exact scenario.<br />
This case concerns a design patent for the ornamental<br />
design of cauldron-shaped votive candleholders, which<br />
plaintiff Hosley International Trading Corporation<br />
alleged was infringed by Designco. 119 In defense,<br />
Designco argued that its products do not incorporate<br />
the same two points of novelty as plaintiff’s patent. 120<br />
Agreeing with the defense, the court found that the<br />
patentee’s points of novelty were not incorporated by<br />
the defendant, and thus granted Designco’s motion<br />
to dismiss despite finding that the defendant’s design<br />
might deceive an ordinary observer. 121<br />
Prior to Egyptian Goddess, courts focused<br />
largely on the actual design patents, rather than<br />
the perspective of the typical consumer, to find<br />
infringement. In Metrokane, Inc. v. Wine Enthusiast, 122<br />
a design patent infringement case concerning a leveroperated<br />
corkscrew device for opening wine, the court<br />
in finding no infringement reiterated the two-part<br />
infringement test, but placed little emphasis on the<br />
perspective of the relevant consumer. 123 Even in its<br />
assessment of the ordinary observer test—the first part<br />
of the infringement test—the court did not address the<br />
point of view of the consumer, instead substituting its<br />
own interpretation of the design patent drawings to<br />
determine the similarity of the goods. 124<br />
Following the Egyptian Goddess decision,<br />
courts began to determine infringement according to<br />
consumer deception. Although the Ordinary Observer<br />
Test was utilized before Egyptian Goddess, it received<br />
much greater emphasis afterwards when it became<br />
the sole measurement for infringement. As such,<br />
courts began to place less emphasis on the claims in<br />
the design patents and began to focus on consumer<br />
deception.<br />
In interpreting the Ordinary Observer test,<br />
courts understood the ordinary observer to be a typical<br />
purchaser and accordingly found infringement when<br />
incorporated the same point of novelty).<br />
118. Id.<br />
119. Id. at 908.<br />
120. Id. at 912.<br />
121. Id. at 911-12.<br />
122. 185 F. Supp. 2d 321 (S.D.N.Y. 2002).<br />
123. See id.<br />
124. See id. at 330 (analyzing the independent visual features<br />
of the devices one by one and concluding “the overall visual<br />
impressions they create are markedly different” without assessing<br />
how an ordinary purchaser might construe the similarity of the<br />
goods).<br />
a typical consumer might be confused as to the source<br />
of the goods during a typical shopping experience. 125<br />
In Huztler Mfg. Co. v. Bradshaw Int’l Inc., 126 the<br />
court assessed design patent infringement by focusing<br />
on consumer deception instead of the design patent<br />
claims. 127 Despite the fact that the similarities of<br />
the ornamental designs are typically assessed by the<br />
design patent drawings, the court assessed consumer<br />
deception in commerce: “Accordingly, the ‘ordinary<br />
observer’ here is someone who has seen, shopped for,<br />
or purchased food storage items of similar design.” 128<br />
B. A comparison of the design patent<br />
and trade dress infringement tests<br />
following Egyptian Goddess<br />
demonstrates how the two<br />
doctrines are now the same.<br />
Patentees were pleased with the Egyptian<br />
Goddess holding because it lessened the burden for<br />
proving infringement. 129 While the Federal Circuit’s<br />
concerns in Egyptian Goddess 130 were legitimate, its<br />
actions in simply eliminating the second step of the<br />
previous infringement test did not account for the<br />
potential new problems this shift might create. 131<br />
The Supreme Court sought to reinstate the<br />
125. See e.g., Hutzler Mfg. Co. v. Bradshaw Int’l, Inc., 11<br />
CIV. 7211 PGG, 2012 WL 3031150, at *15 (S.D.N.Y. July 25,<br />
2012); Minka Lighting, Inc. v. Maxim Lighting Int’l, Inc., No. Civ.<br />
A. 3:06–CV–995–K, 2009 WL 691594, at *4 (N.D. Tex. Mar. 16,<br />
2009) (“The ordinary observer is therefore a member of the public<br />
who is currently shopping for or has recently purchased lighting<br />
fixtures—indeed, a ‘purchaser of things of similar design.’”).<br />
126. 11 CIV. 7211 PGG, 2012 WL 3031150 (S.D.N.Y. July 25,<br />
2012).<br />
127. Hutzler, 2012 WL 3031150, at *13 (S.D.N.Y. July 25,<br />
2012) (“patent infringement can be found for a design that is not<br />
identical to the patented design.” (internal quotation marks omitted)<br />
(quoting Braun Inc. v. Dynamics Corp. of America, 975 F.2d 815,<br />
820 (Fed. Cir. 1992))); see also id. at *14 (“The Federal Circuit has<br />
made clear that it is error for a trial court to focus on ‘each [design]<br />
element separately instead of analyzing the design as a whole<br />
from the perspective of an ordinary observer.’” (quoting Amini<br />
Innovation Corp. v. Anthony California, Inc., 439 F.3d 1365, 1372<br />
(Fed. Cir. 2006))).<br />
128. See Hutzler, 2012 WL 3031150, at *7.<br />
129. Marta Kowalczyk, Design Patent Infringement: Post-<br />
Egyptian Goddess, 2010 U. Ill. J.L. Tech. & Pol’y 239, 253-54<br />
(2010) (arguing that the elimination of the point of novelty test<br />
strengthened design patent holders’ rights because the burden<br />
in infringement cases had been shifted from the plaintiff to the<br />
accused infringer).<br />
130. See Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665,<br />
677 (Fed. Cir. 2008) (articulating concerns with the point of novelty<br />
test regarding its potential for abuse by design patent infringers).<br />
131. This Comment suggests that amending the infringement<br />
test also significantly altered the metes and bounds of the design<br />
patent property rights.<br />
66 Spring 2013
goals articulated in Gorham Mfg. Co. v. White, 132<br />
stating that the test for design patent infringement<br />
“must be sameness of appearance, and mere difference<br />
of lines in the drawing or sketch, a greater or smaller<br />
number of lines, or slight variances in configuration,<br />
if sufficient to change the effect upon the eye, will not<br />
destroy the substantial identity.” 133 The Court further<br />
explained that the test need not be analyzed from the<br />
viewpoint of an expert. 134 In light of this goal, the<br />
court in Egyptian Goddess also looked to see if an<br />
ordinary observer would perceive the two designs<br />
to be substantially the same such as to deceive the<br />
observer into purchasing one over the other. Indeed,<br />
this test has been referred to as similar to the trade<br />
dress infringement test, 135 and the words of the new test<br />
explicitly parallel trade dress infringement concerns. 136<br />
Both tests focus on a layperson’s opinion.<br />
The design patent infringement test focuses on the<br />
layperson and not an expert because an expert would<br />
be highly unlikely to ever find two objects so similar<br />
as to the point of deception. Similarly, trade dress is<br />
concerned with an ordinary consumer and not an expert<br />
in the field. Moreover, the test seems to be concerned<br />
with an ordinary consumer of the goods, another factor<br />
likening this infringement test to trademark law. 137<br />
Indeed, after Egyptian Goddess it appeared that both<br />
trademark infringement and design patent infringement<br />
were most concerned with the possibility of the average<br />
consumer’s likelihood of deception.<br />
C. Allowing the coexistence of design<br />
patent and trade dress protection<br />
contradicts the Constitutional grant<br />
of authority for intellectual property<br />
protections for a limited time.<br />
Not only is the potential overlap resulting in<br />
132. 81 U.S. 511 (1871).<br />
133. Id. at 526-27.<br />
134. See id. at 527 (suggesting that an expert’s perspective<br />
would never warrant finding infringement because every small<br />
change may seem large to someone well-versed in the field).<br />
135. See Kugler, supra note 30, at 71 (describing the design<br />
patent infringement test post Egyptian Goddess as “somewhat<br />
analogous to a likelihood of confusion test, a concept primarily<br />
related to trademark law”).<br />
136. See Crouch, supra note 22 (manuscript at 30) (“the<br />
minute distinction between design patent distinctiveness and<br />
trade dress distinctiveness may be that a trademark functions to<br />
indicate the source of goods while a design patent focuses on the<br />
appaearance of the goods themeselves. These two . . . are, of<br />
course, largely overlapping.” (internal quotation marks omitted)).<br />
137. See Gorham Mfg. Co. v. White, 81 U.S. 511, 528 (1871)<br />
(emphasizing that the analysis should focus on the principal<br />
purchasers of the goods).<br />
automatic secondary meaning concerning for policy<br />
implications, but it is also contrary to the constitutional<br />
grant of patent authority. 138 The <strong>Intellectual</strong> <strong>Property</strong><br />
Clause of the Constitution explicitly states that a patent<br />
will issue only for a “limited time.” 139 Trademark<br />
law, which is not bound by the <strong>Intellectual</strong> <strong>Property</strong><br />
clause of the Constitution, may potentially function<br />
indefinitely if the party consistently renews its right and<br />
uses the mark. 140<br />
If courts continue to allow coexistence of these<br />
rights, it may allow for an extended patent monopoly. 141<br />
Recognizing the similarity of these rights, evidenced<br />
by their nearly identical infringement tests, allowing<br />
trade dress protection following a design patent could<br />
indefinitely extend the same rights and protections<br />
granted by the previous design patent. This potential<br />
extension is contrary to the basic tenants of trademark<br />
law 142 and upsets the delicate balance patent law seeks<br />
to preserve by depleting the public domain without any<br />
added benefit to the public as a result.<br />
Concerned with overprotection, the Supreme<br />
Court in Samara Brothers ruled that product design<br />
must always show secondary meaning before trade<br />
dress protection attaches. 143 Allowing the overlap<br />
of these rights would undermine the Supreme<br />
Court’s expressed goals in Samara Brothers by<br />
lessening the secondary meaning burden for product<br />
design. 144 While secondary meaning does require<br />
some affirmative step(s) to be taken by the rights<br />
holder (such as advertising or sales), fifteen years of<br />
138. The Constitution grants authority of a patent for a<br />
“limited time.” U.S. Const. art. 1, § 8, cl. 8.<br />
139. U.S. Const. art. 1, § 8, cl. 8.<br />
140. See The Lanham Act, 15 U.S.C. § 1051 (2002) (drawing<br />
its authority from the Commerce Clause of the Constitution, it is<br />
not limited by the constitutional mandate that the authority be for a<br />
limited time).<br />
141. Because the trade dress and design patent protection are<br />
arguably nearly identical following Egyptian Goddess, allowing the<br />
overlap of protection would essentially create an extended right.<br />
This rights overlap is particularly troublesome because together<br />
they cancel out each other’s limitations. Trade dress protection<br />
for product design requires that secondary meaning be established<br />
before the protection attaches, a burden much lessened by the<br />
immediate protection a design patent grants. Design patents allow<br />
immediate protection, but they are limited because they only last<br />
for a short period of time. However, trade dress protection could<br />
extend the same right indefinitely.<br />
142. Trademark law is commonly thought of as an extension<br />
of unfair competition law.<br />
143. See generally Wal-Mart Stores, Inc. v. Samara Bros.,<br />
Inc., 529 U.S. 205 (2000).<br />
144. See id. at 212 (explaining that design is like color in<br />
that it cannot be inherently distinctive, and thus requiring product<br />
designs to show they have established a source-identifying function<br />
in the consumers’ eyes before allowing trade dress protection to<br />
attach).<br />
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67
exclusive use granted by a design patent significantly<br />
decreases that burden, and the steps necessary to<br />
secure secondary meaning become much easier. 145<br />
Moreover, a design patent may issue before a good<br />
even is used in commerce and can be obtained much<br />
faster than trade dress protection. 146 Thus, assuming,<br />
as this comment argues, that the rights are nearly<br />
identical, the immediate protection granted by a design<br />
patent undermines the benefit to the public and the<br />
free competition—the heart of the Supreme Court’s<br />
concerns in Samara Brothers. 147<br />
Some courts have justified overlapping<br />
protection by citing the differences between the<br />
two areas of law. 148 For example, the Southern<br />
District of New York repeatedly cited the differences<br />
between design patents and trade dress as rationale<br />
for allowing overlapping rights. In cases pre-dating<br />
Egyptian Goddess, such as Hubbell, the court cited<br />
the differences in the purposes behind each area of<br />
law as reason for allowing overlapping protection. 149<br />
However, this rationale would no longer stand in<br />
light of Egyptian Goddess, because the rationales<br />
might remain distinct, but the practical effect of their<br />
protection is nearly identical.<br />
In fact, many courts have even cited the<br />
existence of a design patent as evidence that the trade<br />
dress is not functional, a bar trade dress rights seekers<br />
must overcome before protection attaches. 150 Courts<br />
145. See McCarthy, supra note 10, § 15:1 (4th ed. 2003)<br />
(describing secondary meaning as fact-dependent and listing forms<br />
of evidence secondary meaning as customer surveys, evidences of<br />
sales volume, the length of time the mark has been used, and quality<br />
and quantity of advertising).<br />
146. See Crouch, supra note 22, at 20 (calculating that nearly<br />
half of the design patents issued in 2009 were under review for less<br />
than a year).<br />
147. See Samara Bros, 529 U.S. at 215 (predicting that<br />
consumers would be harmed if product design trade dress was<br />
considered always inherently distinctive).<br />
148. See Hubbell Inc. v. Pass & Seymour, Inc., 883 F. Supp.<br />
955, 959 (S.D.N.Y. 1995) (comparing the goals of patent law and<br />
trademark law and concluding that the two are distinct areas of law<br />
because patent seeks to further invention whereas trademark law<br />
seeks to protect the consumer from brand or source confusion); id.<br />
at 960 (“The trademark owner has an indefinite term of protection,<br />
it is true, but in an infringement suit must also prove secondary<br />
meaning and likelihood of confusion, which the owner of a design<br />
patent need not do; there is therefore no necessary inconsistency<br />
between the two modes of protection.” (quoting W.T. Rogers Co. v.<br />
Keene, 778 F.2d 334, 337 (7th Cir. 1985))).<br />
149. See Hubbell Inc. v. Pass & Seymour, Inc., 883 F. Supp.<br />
955, 959 (S.D.N.Y. 1995) (citing the differences between the<br />
trade dress and design patent infringement tests as justification for<br />
allowing their overlapping protection).<br />
150. See E-Z Bowz, L.L.C. v. Prof’l Prod. Research Co., No.<br />
00 Civ. 8670, 2003 WL 22068573, at *24 (S.D.N.Y. 2003) (finding<br />
a design patent to be helpful evidence of non-functionality, and thus<br />
also helpful in establishing trade dress protection).<br />
have said that the existence of a design patent helps<br />
to establish that a design on a piece of manufacture is<br />
not functional and that the existence of a design patent<br />
prior to trade dress protection does not upset policy<br />
concerns because upon the expiration of a patent, a<br />
design may be copied so long as it does not confuse a<br />
consumer. 151<br />
Interestingly, some courts remained skeptical<br />
of overlapping rights even before Egyptian Goddess. 152<br />
Specifically, in Winning Ways, the district court<br />
expressed hesitation about the coexistence of design<br />
patent and trade dress protection. 153 In particular, the<br />
court was concerned that secondary meaning may be<br />
achieved only because of the previously issued design<br />
patent. 154 Although it remained the minority viewpoint,<br />
this case indicates that some courts remained concerned<br />
about potential overprotection resulting from<br />
overlapping rights.<br />
D. Addressing the alternative argument:<br />
what is the proper role for design<br />
patents?<br />
Design patents were originally codified to<br />
fill a gap between utility patents and copyright law. 155<br />
As a result, some have theorized that the proper role<br />
for design patents is to continue to serve as a legal<br />
gap filler, protecting areas from which trade dress<br />
specifically has reseeded. 156 Dennis Crouch has<br />
observed that design patents are well suited to serve<br />
a “bootstrapping” role, specifically as a tool to help<br />
151. See id.; Krueger Int’l, Inc. v. Nightingale Inc., 915<br />
F. Supp. 595, 601 (S.D.N.Y. 1996) (noting that trade dress<br />
infringement requires consumer confusion).<br />
152. See Matheson, supra note 102, at 2; Stormy Clime, Ltd.<br />
v. ProGroup, Inc., 809 F.2d 971, 977-78 (2d Cir. 1987) (“Courts<br />
must proceed with caution in assessing claims to unregistered<br />
trademark protection in the design of products so as not to<br />
undermine the objectives of the patent laws . . . . Since trademark<br />
protection extends for an unlimited period, expansive trade dress<br />
protection for the design of products would prevent some functional<br />
products from enriching the public domain.”).<br />
153. See generally Winning Ways, Inc. v. Holloway<br />
Sportswear, Inc., 913 F. Supp. 1454, 1462 (D. Kan. 1996).<br />
154. See id. at 1460-61; 903 F. Supp. 1457 (“Granting<br />
trade dress protection to an item for which a patent has expired<br />
creates tension because the product may have obtained secondary<br />
meaning or inherent distinctiveness precisely because the product<br />
was patented. If so, the trade dress protection does not have an<br />
independent basis and effectively extends the monopoly granted by<br />
the patent.”); see also supra note 106.<br />
155. See Crouch, supra note 22, at 41 (discussing the “gapfilling”<br />
role of design patents).<br />
156. See generally id. (justifying the purpose of design<br />
patents as filling the holes that other intellectual property doctrines,<br />
specifically trademark and trade dress, have left unprotected).<br />
68 Spring 2013
ights holders secure trade dress protection. 157 He<br />
mentions three specific ways the existence of a design<br />
patent alleviates the burden of establishing trade<br />
dress. 158 First, he notes that design patents may serve<br />
as evidence of non-functionality. 159 The functionality<br />
doctrine is a strict burden all trade dress rights<br />
seekers must overcome. 160 A design patent, while not<br />
enough on its own, serves as strong evidence that the<br />
design is not functional. 161 Second, the existence of a<br />
design patent facilitates the acquisition of secondary<br />
meaning. 162 Exclusive use for fifteen years severely<br />
lessens the burden of establishing secondary meaning,<br />
which requires that consumers view the design<br />
primarily as a source indicator and not as the product<br />
itself. 163 Finally, Crouch suggests that a design patent<br />
can protect a design immediately, filling the period of<br />
time that a rights holder would otherwise have to wait<br />
unprotected against copy-cat competitors before trade<br />
dress protection came to fruition. 164<br />
Yet, it is precisely these gaps that trade dress<br />
and trademark law must leave open to maintain an<br />
equal benefit to the consumers and the rights holders.<br />
These gaps represent the tradeoffs rights holders give<br />
up to the public domain. Allowing design patents to<br />
fill all of these gaps tips the balance strongly in favor of<br />
rights holders and depletes the public domain. 165 This<br />
is injurious to the public and counter to the policy goals<br />
of trademark law. 166 Moreover, it is counter to the<br />
157. Id. (manuscript at 38-40).<br />
158. Id. (discussing what he calls design patent<br />
“bootstrapping”).<br />
159. See id. (manuscript at 38-49) (calling this phenonmenon<br />
the “anti-TrafFix doctrine”).<br />
160. See Qualitex Co. v. Jacobson Products Co., 514 U.S. 159,<br />
165 (1995) (describing the functionality doctrine as a necessary<br />
feature of trademark law to promote free and open competition).<br />
161. See Topps Co. v. Gerrit J. Verburg Co., No. 96 Civ.<br />
7302, 1996 U.S. Dist. LEXIS 18556, at *29-30 (S.D.N.Y. Dec.<br />
13, 1996); E.Z. Bowz, L.L.C. v. Prof’l Prod. Research Co., 2003<br />
WL 22068573 No. 00 Civ. 8670 (S.D.N.Y. 2003), at *24. The<br />
requirements for proving functionality, or lack thereof, for a design<br />
patent and trademark or trade dress differ, and thus the existence of<br />
a design patent does not serve as enough evidence in and of itself to<br />
establish nonfunctionality. See Crouch, Supra note 22 (manuscript<br />
at 39) (discussing Keystone Mfg. Co. v. Jaccard Corp., a case in<br />
which the district court allowed trade dress rights to attach to the<br />
same design once protected by a design patent and asserting that a<br />
design patent “simply serves as another piece of evidence to be used<br />
by the jury in determiing non-functionality.”).<br />
162. See Crouch, supra note 22 (manuscript at 40) (explaining<br />
that the existence of a design patent does not alone establish<br />
secondary meaning, but significantly eases the burden).<br />
163. Id.<br />
164. Id.<br />
165. The constant goal of intellectual property law is to<br />
maintain a balance between incentivizing invention and protecting<br />
the public.<br />
166. See Krueger Int’l, Inc. v. Nightingale Inc., 915 F. Supp.<br />
Supreme Court’s goals as stated in Samara Brothers. 167<br />
E. Trade dress protection where there is a<br />
utility patent: the TrafFix<br />
interpretation<br />
Although the Supreme Court has not<br />
yet addressed the effect of an expired design patent on<br />
the issuance of trade dress protection, it has analyzed<br />
the effect of an expired utility patent. In Traffix<br />
Devices, Inc. v. Marketing Displays, Inc., 168 defendant<br />
Marketing Displays began copying plaintiff’s twospring<br />
sign feature, which was created to keep the<br />
sign standing despite strong wind. 169 Traffix Devices,<br />
Inc. had obtained a utility patent for this feature, and<br />
upon the patent’s expiration Marketing Displays, Inc.<br />
began copying the device. 170 Traffix Devices, Inc.<br />
sued for trade dress protection, arguing its product had<br />
achieved the necessary secondary meaning. 171 The<br />
Court held that the existence of utility patent creates a<br />
strong presumption that a design is functional and thus<br />
ineligible for trade dress protection. 172 However, the<br />
Court was careful to state that the existence of a utility<br />
patent is not necessarily determinative of functionality,<br />
but a big aspect for a court to consider. 173<br />
Conversely, many courts have interpreted the<br />
existence of a design patent as evidence that the design<br />
seeking trade dress protection is not functional. 174<br />
595, 604-05 (S.D.N.Y. 1996) (stating the goals of trademark law are<br />
to prevent consumer confusion as to the source of the goods).<br />
167. See Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529<br />
U.S. 205, 213 (2000) (explaining that product design (as compared<br />
to product packaging) is more akin to color in that the “consumer<br />
predisposition to equate the feature with the source does not exist . .<br />
. even the most unusual of product designs-such as a cocktail shaker<br />
shaped like a penguin-is intended not to identify the source, but to<br />
render the product itself more useful or more appealing”). But see<br />
Crouch, supra note 22 (manuscript at 6) (suggesting that Samara<br />
Brothers narrowed trade dress protection precisely because of the<br />
availability of design patent protection).<br />
168. See Traffix Devices, Inc. v. Marketing Displays, Inc., 532<br />
U.S. 23, 25-26 (2001).<br />
169. See id. (explaining the successful, wind-resistent twospring<br />
device was also a visible feature of the signs).<br />
170. See id. (discussing that defendant not only deliberately<br />
waited for the utility patent to expire so that he could copy the<br />
plaintiff’s sign features, but also similarly named his company).<br />
171. See id. at 26-27 (reviewing procedural posture whereby<br />
the district court found no evidence of secondary meaning and<br />
alternatively that the device was functional).<br />
172. See id.<br />
173. See id. at 30 (describing disproving functionality as<br />
a “heavy burden” that can be dispelled by showing the feature<br />
is “merely an ornamental, incidental, or arbitrary aspect of the<br />
device”).<br />
174. See E.Z. Bowz, L.L.C. v. Prof’l Prod. Research Co., 2003<br />
WL 22068573 No. 00 Civ. 8670 (S.D.N.Y. 2003), at *24 (noting<br />
that a design patent is helpful evidence of non-functionality).<br />
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69
However, the existence of a design patent on the<br />
same subject matter for which trade dress protection<br />
is sought should also trigger courts to examine with<br />
great scrutiny whether overlapping rights would be<br />
constitutional.<br />
F. Readjusting courts’ interpretations of<br />
overlapping rights: a recommendation<br />
for moving forward<br />
The Supreme Court’s decisions in Egyptian<br />
Goddess and Samara Brothers should cause courts to<br />
reconsider so easily granting trade dress protection<br />
where a design patent currently, or previously,<br />
existed. 175 Of course, the existence of a design patent<br />
may still be helpful in determining non-functionality,<br />
but the burden of showing secondary meaning should<br />
remain stringent.<br />
As it stands currently, a design patent provides<br />
fifteen years of exclusive use. 176 Moreover, design<br />
patent prosecution is a much easier and faster process<br />
than the steps necessary for obtaining trade dress<br />
protection. 177 As such, a party seeking the strongest<br />
protection for a design can obtain a design patent<br />
before that design is used in commerce, use the fifteen<br />
years (or less) granted by the patent as an aid in<br />
establishing secondary meaning, and then when either<br />
seeking to register the trade dress or assert unregistered<br />
trade dress rights, use the design patent as existence of<br />
non-functionality. 178<br />
The Egyptian Goddess infringement test<br />
shift lessened the burden on design patent holders<br />
for proving infringement. 179 However, it also greatly<br />
altered the metes and bounds of the patent property<br />
right. As it now stands, according to the current<br />
infringement test, a design patent and trade dress<br />
protection offer nearly identical protective rights. 180<br />
175. See discussion infra concerning how a design patent can<br />
be used as a useful tool in establishing trade dress protection.<br />
176. 35 U.S.C. § 173.<br />
177. See Crouch, supra note 22 (manuscript at 18-21)<br />
(discussing the rapidity at which design patents are issued and the<br />
available means for speeding up the process).<br />
178. See id. (manuscript at 38-40) (disccusing what he calls<br />
“bootstrapping,” or the process whereby a rights owner uses a<br />
design patent to fill the holes not protected by trade dress and as a<br />
tool in establishing distinctiveness and nonfunctionality).<br />
179. See Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665<br />
(Fed. Cir. 2008) (abridging the previous design patent infringement<br />
test by eliminating the second step and establishing the ordinary<br />
observer test as the sole analysis for design patent infringement).<br />
180. See Crouch, supra note 22 (manuscript at 3) (“Both<br />
regimes focus on the visual appearance of a product or its<br />
packaging and both regimes allow the rights-holder to exclude<br />
others from uses that lead to customer confusion.”).<br />
Allowing design patents to fill the holes left open by<br />
trade dress thus only further blurs design patent and<br />
trade dress protection.<br />
In line with the Supreme Courts goals in<br />
Samara Brothers—to enhance the standard required for<br />
trade dress protection—courts should not allow parties<br />
to use a design patent as an easy road to showing<br />
secondary meaning. 181 Certainly the party seeking<br />
trade dress protection will still carry the burden of<br />
using the good in commerce and marketing the good;<br />
however, the burden of achieving secondary meaning<br />
will certainly be lessened by fifteen years of exclusive<br />
use. Following the Court’s rationale in TrafFix, this<br />
Comment urges courts to view the existence of a<br />
current or expired design patent as strong evidence that<br />
the design is not distinctive. The Court ruled in TrafFix<br />
that the existence of a utility patent would trigger a<br />
presumption that the trade dress was functional. 182<br />
Similarly, the existence of a design patent should be<br />
trigger the presumption that the mark is not distinctive.<br />
Of course, for product design trade dress the mark<br />
already requires secondary meaning to acquire the<br />
distinctiveness necessary for trade dress protection. 183<br />
The existence of a design patent in this situation would<br />
therefore trigger a stronger showing of secondary<br />
meaning. Courts should view the design patent as a<br />
sign that the rights seeker’s path to secondary meaning<br />
was significantly lessened by the patent monopoly, and<br />
thus courts should require that the secondary meaning<br />
necessary for distinctiveness be more persuasive than<br />
would be necessary otherwise.<br />
Conclusion<br />
The concerns of overlapping rights and<br />
extended monopolies have real and tangible effects<br />
on the marketplace and competition. The headline<br />
grabbing cases such as Apple v. Samsung help remind<br />
courts and the public of the costs, both financially and<br />
to the free marketplace, of loose regulations and casual<br />
scrutiny.<br />
The Supreme Court has long regarded<br />
overlapping rights with skepticism. This suspicion<br />
181. The Supreme Court in Samara Brothers recognized that<br />
product design for trade dress does not inherently serve a sourceidentifying<br />
function. Thus, it requires a showing of acquired<br />
distinctiveness (secondary meaning) before trade dress protection<br />
can attach. Fifteen years of exclusive use, granted by a design<br />
patent, would severely lessen, if not nearly eradicate, the burden the<br />
Supreme Court sought to establish in Samara Brothers.<br />
182. TrafFix Devices, Inc. v. Marketing Displays, Inc., 532<br />
U.S. 23, 31 (2001).<br />
183. See Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S.<br />
205, 216 (2000).<br />
70 Spring 2013
is necessary to ensure that the intellectual property<br />
rights remained balanced. The underlying policy goals<br />
require that the greatest benefit possible be bestowed to<br />
both the public and the inventors, to incentivize and to<br />
ensure society profits as a result.<br />
This is no different in the case of overlapping<br />
trade dress protection and design patents. Although<br />
previously courts were able to justify overlapping<br />
rights by citing the distinct differences between these<br />
two protective rights, they have since merged in a<br />
way that allowing overlapping rights without further<br />
scrutiny could result in prolonged, unconstitutional<br />
monopolistic use. The Court of Appeals for the Federal<br />
Circuit in Egyptian Goddess altered the infringement<br />
test for design patents and in so doing, also altered the<br />
defined property rights associated with design patents.<br />
As such, the infringement test and the protective rights<br />
of design patents are now nearly identical to those of<br />
trade dress. Allowing design patents to serve as useful<br />
aids in establishing trade dress undermines the stated<br />
goals of trade dress protection. The protective gaps left<br />
by trade dress protection are not due to congressional<br />
or judicial oversight, but are a result of careful<br />
consideration and recognition of the delicate balance<br />
intellectual property law seeks to maintain. The<br />
protective holes are space that is dedicated to the public<br />
domain. If design patents are able to fill those gaps, the<br />
public domain—and public—suffers as a result.<br />
Consequently, courts must be careful in their<br />
consideration of trade dress and design patents for<br />
identical subject matter. Moreover, the United States<br />
Patent and Trademark Office should also remain<br />
diligent when assessing the registration of trade dress<br />
for subject matter already protected, or previously<br />
protected, by a design patent. The consequences<br />
of not doing so may have severe anti-competitive<br />
effects. Large companies such as Apple and Nike<br />
consistently seek to bolster their intellectual property<br />
protective measures, and in allowing this overlap, their<br />
competitors are put at a severe disadvantage.<br />
In line with the Court’s decisions in TrafFix<br />
and Samara Brothers, the existence of a design patent<br />
should trigger a presumption that the trade dress is not<br />
distinctive. In the case where the party seeks trade<br />
dress protection for product design, which already<br />
requires secondary meaning (acquired distinctiveness),<br />
the burden on the rights seeking party should be<br />
stronger than it would be otherwise to prove that the<br />
public views the trade dress as an indication of source.<br />
Bearing in mind this recommendation, courts<br />
can continue to evaluate, and allow, some overlapping<br />
rights. It is commonplace for one product to be<br />
protected by multiple facets of intellectual property<br />
law. However, in light of the recent shift in the<br />
protective boundaries of design patents, it is imperative<br />
that courts remain diligent in preventing rights holders<br />
from extending what the Constitution mandates are<br />
“limited rights.” 184<br />
184. U.S. Const. Art. 1, § 8, cl. 8.<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
71
The Prior User Rights Defense: Working Silently in the Background<br />
to Change the Way Businesses Protect Their Inventions<br />
by Mikhael Mikhalev 1<br />
1<br />
I. The America Invents Act<br />
The Leahy-Smith America Invents Act (AIA)<br />
was signed into law on September 16, 2011, 2 and<br />
includes the most substantial changes to the patent laws<br />
since they were codified in 1952. 3 The purpose of the<br />
changes include minimizing unnecessary litigation<br />
costs, improving patent quality, harmonizing the<br />
U.S. system with the best parts of other major patent<br />
systems, encouraging U.S. manufacturing, and ensuring<br />
that the U.S. patent system fulfills the Constitutional<br />
imperative 4 to “promote the Progress of Science and<br />
useful Arts.” 5<br />
Among the many changes to the laws, the<br />
most important changes help transition the U.S. patent<br />
system from a first-to-invent to a first-to-file system of<br />
awarding patents. 6 Under the new laws, an inventor<br />
obtains priority for a patent right based on his or her<br />
date of filing their patent application, not the date they<br />
conceived the invention. 7 Through these changes,<br />
the patent laws will now better promote progress by<br />
granting an exclusive patent right to the first person<br />
to file a patent application, thus encouraging early<br />
disclosure. Disclosure will allow others to build upon<br />
the advances described in the patent application. This<br />
will increase the public storehouse of knowledge and<br />
rapidly increase the progress of science. 8<br />
However, the AIA does carve out a defense to<br />
1. Mikhael obtained his J.D. at the S.J. Quinney College<br />
of Law at the <strong>University</strong> of Utah and is currently employed at<br />
Maschoff Brennan, scheduled to sit for the Utah bar in July 2013.<br />
The views expressed in this article by the author are those of the<br />
author and are not to be attributed to employers or clients.<br />
2. Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125<br />
Stat. 284 (2011) (codified as amended in scattered sections of 35<br />
U.S.C.).<br />
3. Patent Act of 1952, Pub. L. No. 82-593, 66 Stat. 792<br />
(1952); H.R. Rep. No. 112-98, at 38 n.4 (“Congress has not enacted<br />
comprehensive patent law reform in nearly 60 years.”).<br />
4. H.R. Rep. No. 112-98, at 38–40.<br />
5. U.S. Const. art. I, § 8, cl. 8.<br />
6. H.R. Rep. No. 112-98, at 42.<br />
7. Id.<br />
8. See generally William Fisher, Theories of <strong>Intellectual</strong><br />
<strong>Property</strong>, in New Essays in the Legal and Political Theory of<br />
<strong>Property</strong> (Cambridge <strong>University</strong> Press, 2001), available at http://<br />
www.law.harvard.edu/faculty/tfisher/iptheory.html (discussing<br />
the moral and philosophical justifications for intellectual property<br />
rights).<br />
infringement that may avail a first inventor that is not<br />
the first-to-file a patent application. The AIA expands<br />
an already existing defense to infringement based on<br />
prior commercial use, commonly referred to as the<br />
“prior user rights defense.” 9 This defense may protect<br />
a party that was first to invent the patented invention, 10<br />
but did not file for a patent and instead, commercially<br />
used the invention for one year.<br />
The prior user rights defense is necessary in<br />
balancing the equitable interests of an earlier user with<br />
the goals of promoting disclosure and accelerating<br />
innovation that are central to our patent system. 11<br />
This balance is met by allowing the earlier inventor/<br />
user to continue uninterrupted commercial use of the<br />
invention, while also allowing the later inventor (who<br />
filed for a patent and disclosed the invention) to obtain<br />
a patent enforceable against all others. 12<br />
However, critics of the expanded prior user<br />
rights defense claim that it will negatively impact<br />
innovation, start-up enterprises, small businesses, or<br />
individual inventors. 13 These critics argue that this<br />
defense makes patents less valuable, and that small<br />
businesses and individual inventors will not be able to<br />
take advantage of the defense because they often do not<br />
have the manufacturing capabilities to obtain prior user<br />
rights. 14 Others argue that the defense will encourage<br />
companies to keep their inventions as trade secrets,<br />
thereby stifling innovation by not allowing other parties<br />
to build upon a patent disclosure. 15<br />
9. H.R. Rep. No. 112-98, at 44.<br />
10. But see 35 U.S.C. § 273 (2011) (illustrating that the<br />
requirements of the prior user rights defense do not include that the<br />
prior user be the first inventor).<br />
11. Gary L. Griswold & F. Andrew Ubel, Prior User Right—A<br />
Necessary Part of a First-to-File System, 26 J. Marshall L. Rev.<br />
567, 572 (1993).<br />
12. Id.<br />
13. See Charles R.B. Macedo, First-to-File: Is <strong>American</strong><br />
Adoption of the International Standard in Patent Law Worth the<br />
Price?, 18 AIPLA Q.J. 193, 228 (1990) (arguing that big companies<br />
will still be able to outspend small companies in obtaining prior<br />
user rights, giving them an unfair advantage).<br />
14. Chris P Konkol, Prior-Invention Rights: The Excluded<br />
Middle, 77 J. Pat. & Trademark Off. Soc’y 666, 670 (1995);<br />
Edward L. MacCordy, The Threat of Proposed Patent Law Changes<br />
to the Research <strong>University</strong>, 20 J.C. & U.L. 295, 303 (1994).<br />
15. See Nicholas Mattingly, Prior User Rights: Rewarding<br />
Those Who Don’t Contribute, IPWatchdog (Mar. 11, 2012, 1:56<br />
pm), http://www.ipwatchdog.com/2012/03/11/prior-user-rights-<br />
72 Spring 2013
This Article will examine the structure of the<br />
prior user rights defense, as well as its potential impact<br />
on litigation and the United States patent system as a<br />
whole. It will discuss the entities that will benefit from<br />
this new system and how these policy changes will<br />
affect the way businesses operate.<br />
II.<br />
The Structure of the Prior User Rights<br />
Defense<br />
The old version of the prior user rights<br />
defense was codified in 35 U.S.C. § 273 in 1999,<br />
and was limited only to business method patents. It<br />
was enacted in response to State Street Bank & Trust<br />
Co. v. Signature Financial Group, Inc., 16 in which<br />
the Court of Appeals for the Federal Circuit affirmed<br />
that business methods are eligible subject matter for<br />
patenting. 17 The decision created uncertainty because<br />
United States businesses could be liable for patent<br />
infringement for continued use of internal business<br />
processes that were thought to be unpatentable. 18<br />
Although this early version of Section 273 was very<br />
narrow, the State Street Bank decision also sparked<br />
congressional debate for broader prior user rights. 19<br />
The 2011 AIA significantly expanded Section<br />
273 prior user rights by extending the defense to<br />
all technologies, not just business method patents. 20<br />
The defense is now available to parties who 1)<br />
commercially employed the invention, 2) in the United<br />
States, 3) in connection with an internal commercial<br />
use, an arm’s length sale, or an arm’s length transfer of<br />
a useful end result of the commercial use, 4) more than<br />
one year before the earlier of either the filing date of<br />
the patent application or the date of public disclosure<br />
by the patentee during the patentee’s grace period. 21<br />
Senator Leahy expressed his intent that<br />
this section be applied broadly during the Senate’s<br />
September 2011 consideration of the House-passed bill:<br />
The phrase “commercially used the<br />
subject matter” is intended to apply<br />
broadly, and to cover a person’s<br />
commercial use of any form of<br />
subject matter, whether embodied in<br />
a process or embodied in a machine,<br />
manufacture, or composition of matter<br />
that is used in a manufacturing or other<br />
commercial process. 22<br />
The AIA includes several limitations to the<br />
prior user rights defense. The defense is personal<br />
and may not be licensed, assigned, or transferred<br />
unless there is an assignment or transfer of the entire<br />
business to which the defense relates. 23 The defense<br />
is geographically limited to prior uses that occur in<br />
the United States. 24 If a person acquires the defense<br />
through an assignment or transfer, then the defense is<br />
limited to the sites where the invention was used prior<br />
to the critical date. 25 Furthermore, the defense may<br />
not be raised against patents owned by or assigned<br />
to universities or affiliated technology transfer<br />
organizations. 26 A party may lose the ability to assert<br />
the defense if they have abandoned commercial use of<br />
the subject matter at issue. 27<br />
The prior user rights defense is also limited<br />
to parties acting “in good faith.” 28 In addition, the<br />
party asserting the defense must be a true inventor:<br />
a person may not assert the prior user rights<br />
defense if the subject matter was derived from the<br />
patentee or persons in privity with the patentee. 29<br />
Two provisions of the new Section 273 are<br />
aimed at discouraging frivolous litigation. First, a<br />
defendant asserting the prior user rights defense must<br />
prove the requisite elements by clear and convincing<br />
evidence. 30 Second, if a party asserts the prior user<br />
rights defense without a reasonable basis, the court<br />
“shall” find the case exceptional for the purpose of<br />
awarding attorney fees. 31<br />
rewarding-those-who-dont-contribute/id=22742/ (arguing that prior<br />
user rights weaken patents and protect companies that choose to<br />
prevent others from building upon their inventions by keeping them<br />
secret).<br />
16. 149 F.3d 1368 (Fed. Cir. 1998), cert. denied, 525 U.S.<br />
1093 (1999).<br />
17. Id.; <strong>Intellectual</strong> <strong>Property</strong> And Communications Omnibus<br />
Reform Act, H.R. Rep. No. 106-464, at 122 (1999).<br />
18. H.R. Rep. No. 106-464, at 122 (1999).<br />
19. See, e.g., Advisory Comm.’n On Patent Law Reform,<br />
102nd Cong., Report To The Sec. Of Com. (Comm. Print 1992);<br />
Patent Harmonization Act, H.R. 4978, 102d Cong. § 3 (1992).<br />
20. Compare 35 U.S.C. § 273 (2006), with amended 35 U.S.C.<br />
§ 273 (2011).<br />
21. 35 U.S.C. § 273(a) (2012).<br />
22. 157 Cong. Rec. S5440 (daily ed. Sept. 8, 2011) (statement<br />
of Sen. Leahy).<br />
23. 35 U.S.C. § 273(a)(1) (2012).<br />
24. Id. § 273(e)(1).<br />
25. Id. § 273(e)(1)(C).<br />
26. Id. § 273(e)(5).<br />
27. Id. § 273(e)(4).<br />
28. Id. § 273(a)(1).<br />
29. Id. § 273(e)(2).<br />
30. Id. § 273(b).<br />
31. Id. § 273(f).<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
73
III.<br />
The Prior User Rights Defense Will Likely<br />
Never Be Successfully Asserted in Litigation<br />
Although the AIA constitutes a major policy<br />
change that will shift the balance of patent rights, the<br />
prior user rights defense will rarely be asserted in<br />
litigation. Instead, the prior user rights defense will<br />
lurk in the background and substantially change the<br />
way our patent system operates. Companies may<br />
choose to protect their inventions with trade secrets<br />
instead of patents. <strong>University</strong> patents will become<br />
stronger because they are not subject to the defense,<br />
and companies will be encouraged to license and<br />
acquire university patents. Non-practicing entities will<br />
have a more difficult time asserting their patent rights,<br />
and instead will be encouraged to quickly license or<br />
assign their patents to manufacturers. Although these<br />
changes will be substantial, they will not significantly<br />
impact patent litigation.<br />
A. Many Alleged Infringers Will<br />
Not Qualify for the Prior User<br />
Rights Defense<br />
The statute sets out many conditions that must<br />
be met before the defense applies. Dennis Crouch, a<br />
notable patent commentator, described the requirements<br />
as being “like the eye of the needle” and “difficult to<br />
pass through.” 32 Many prior users will not qualify for<br />
the defense, 33 and few companies will be willing to “bet<br />
their factory” on successfully asserting this defense.<br />
The first major hurdle is the timing<br />
requirement. An accused infringer must be able to<br />
show that they began to commercially use the invention<br />
at least one year before the patentee’s filing date. 34<br />
Alternatively, if the patentee publicly disclosed the<br />
invention before filing then the accused infringer must<br />
show commercial use even further in advance of the<br />
filing date, all the way back to one year before the date<br />
of public disclosure. 35<br />
Inventors who choose not to file a patent<br />
application and instead decide to keep their invention<br />
secret are subject to a long period of uncertainty.<br />
Assuming the inventor has access to all pertinent<br />
32. Dennis Crouch, Prior User Rights Defense, PatentlyO<br />
(Feb. 1, 2011), http://www.patentlyo.com/patent/2012/02/prioruser-rights-defense.html.<br />
33. Prior User Rights: Strengthening U.S. Manufacturing and<br />
Innovation, Hearing Before the Subcomm. on <strong>Intellectual</strong> Prop.,<br />
Competition & the Internet of the H. Comm. on the Judiciary, 112th<br />
Cong. 78, at 67 (2012) (prepared statement of Dennis Crouch).<br />
34. 35 U.S.C. § 273(a)(2)(A) (2012).<br />
35. Id. § 273(a)(2)(B).<br />
public disclosures, the inventor must still “sweat it out”<br />
for one year in the hopes that no other true inventor<br />
files for a patent application during that time period.<br />
Furthermore, if someone else did in fact file a patent<br />
application within the one-year time period, inventors<br />
that decided to keep their invention secret would not<br />
find out about the application until it is published by<br />
the USPTO eighteen months later. 36 Thus, inventors<br />
that choose to keep their inventions secret have up to<br />
two and a half years of uncertainty before they will<br />
know whether they satisfy the timing requirement of<br />
Section 273.<br />
With such a long period of uncertainty, many<br />
qualifying prior uses may be irrelevant and no longer<br />
in use by the time that the USPTO issues the relevant<br />
patent. Financial constraints on the USPTO have<br />
caused a severe backlog, leading to a delay of several<br />
years for an average patent application to be issued as<br />
a patent. 37 Many recently issued U.S. patents have an<br />
effective filing date of more than four years earlier. 38<br />
This means prior users may have a window of at least<br />
five years to legally practice the invention without<br />
needing the prior user defense. 39 In some practice<br />
areas, five years is enough to make a technology<br />
obsolete because a user can move to a different,<br />
improved technology. 40<br />
The statute also requires good faith and<br />
prohibits derivation. 41 The party asserting the defense<br />
must have independently invented the claimed<br />
invention. Reverse engineering, observation, or any<br />
other methods of obtaining the invention from the<br />
patent owner are prohibited. 42 Independent invention<br />
by two separate parties is not common in most<br />
technological fields, so the circumstances under which<br />
the prior user rights defense may be raised are unusual.<br />
Furthermore, independent invention by more than one<br />
party may support a finding of patent invalidity for<br />
obviousness, which is discussed below. 43<br />
The defense may not be asserted against<br />
institutions of higher education and associated<br />
36. See 37 C.F.R. § 1.211 (2005) (requiring the USPTO to<br />
publish patent applications promptly after the expiration of a period<br />
of eighteen months from the earliest filing date).<br />
37. Crouch, supra note 32.<br />
38. Id.<br />
39. Id.<br />
40. Id.<br />
41. 35 U.S.C. § 273(a)(1), (e)(2) (2012).<br />
42. See id. § 273 (e)(2) (“A person may not assert a defense<br />
under this section if the subject matter on which the defense is<br />
based was derived from the patentee or persons in privity with the<br />
patentee.”).<br />
43. See infra part 2.D.<br />
74 Spring 2013
technology transfer offices. 44 From 1969 to 2008,<br />
58,701 patents have been granted to universities. 45<br />
Although university-owned patents represented only<br />
1.46% of all granted utility patents, 46 this number is<br />
still significant and will prevent some defendants from<br />
asserting the prior user rights defense because the<br />
patent is owned by a university.<br />
Furthermore, the university exception will<br />
result in universities playing an increasing role<br />
in the patent landscape because their patents will<br />
be invulnerable to the prior user rights defense.<br />
Companies will prefer to license university patents<br />
because they will provide a more predictable and<br />
stronger exclusive right. The university exception may<br />
also encourage companies to fund university research,<br />
because the patent rights a university can acquire<br />
are stronger than that of a private research firm. The<br />
percentage of total patents filed by universities will<br />
likely increase with the passage of the AIA, and thus so<br />
will the amount of patents invulnerable to the prior user<br />
rights defense.<br />
Finally, Section 273 only applies to patents<br />
issued on or after the effective date of the AIA on<br />
September 16, 2011. 47 As of May 1, 2012, there were<br />
approximately 2.1 million U.S. patents in force. 48 Less<br />
than 150,000 of those were issued after the effective<br />
date of the AIA. 49 Thus, the prior user defense will<br />
not be applicable to most patents in force, but this will<br />
change over time as more patents are issued.<br />
Even if a defendant is able to meet all of the<br />
requirements for asserting the prior user rights defense,<br />
strategic concerns will often encourage a party to take<br />
an alternative course of action.<br />
B. Many Defendants will Prefer an<br />
Invalidity Defense Instead of the<br />
Prior User Rights Defense<br />
If both invalidity and prior user rights are<br />
available as a defense, then a defendant is better off<br />
asserting invalidity. Invalidity does not come with<br />
as many restrictions and limitations as the prior user<br />
44. Id. § 273(e)(5).<br />
45. USPTO Patent Technology Monitoring Team, U.S.<br />
Colleges and Universities Utility Patent Grants 1969-2008, PTMT<br />
List of Viewable Reports (Dec. 20, 2010), http://www.uspto.gov/<br />
web/offices/ac/ido/oeip/taf/univ/asgn/table_1_2008.htm.<br />
46. Id.<br />
47. 35 U.S.C. § 273 (2012).<br />
48. Dennis Crouch, How Many US Patents are In-<br />
Force?, PatentlyO (May 4, 2012), http://www.patentlyo.com/<br />
patent/2012/05/how-many-us-patents-are-in-force.html.<br />
49. Id.<br />
rights defense. Furthermore, asserting prior user<br />
rights in litigation may be risky because an alleged<br />
infringer must admit that their actions would otherwise<br />
constitute infringement and the scope of the prior user<br />
rights defense is uncertain because there is no case law<br />
on the topic.<br />
Invalidating a patent is more attractive to<br />
an alleged infringer because there is no one-year<br />
commercial use requirement. 50 Also, invalidity does<br />
not include a site restriction, and prior art is not<br />
limited to activity in the United States. 51 Further, the<br />
invalidity defense may be asserted against university<br />
patents. 52 Finally, invalidating a patent may protect<br />
assignees, licensees, and other affiliates from charges<br />
of infringement. 53<br />
In the prior user rights defense, the burden<br />
of proof is on the defendant to establish a prior<br />
commercial use by clear and convincing evidence,<br />
which is the same burden as invalidity. 54 However,<br />
in most cases it will be clear to a defendant whether<br />
they have enough evidence to establish a prior<br />
commercial use. Companies cannot do business<br />
without records, and the records of commercial use are<br />
normally voluminous and easy to access and to prove. 55<br />
50. 35 U.S.C. § 282 (2012) (defining the defenses to<br />
infringement as not providing for a site restriction or requiring a<br />
commercial use).<br />
51. Compare 35 U.S.C. § 273 (requiring prior user rights<br />
activity to occur in the United States), with 35 U.S.C. § 102 (2012)<br />
(describing prior art for novelty and loss of right to a patent).<br />
52. 35 U.S.C. § 273(5).<br />
53. Compare 35 U.S.C. § 273(e)(1)(A) (providing that the<br />
prior user rights defense is a personal defense, which may only be<br />
asserted by the party that commercially used the invention), with<br />
35 U.S.C. § 282 (2012) (not restricting the invalidity defense).<br />
Therefore, in many situations, contracting parties may be subject<br />
to an indemnity clause that will encourage the indemnifying party<br />
to assert invalidity because the defense will be effective for both<br />
parties.<br />
54. 35 U.S.C. § 273(b) (“A person asserting [the prior user<br />
rights defense] shall have the burden of establishing the defense by<br />
clear and convincing evidence.”); see also 35 U.S.C. § 282 (stating<br />
that a granted “[p]atent shall be presumed valid” and that the party<br />
asserting invalidity has the burden to overcome this presumption,<br />
but without specifying an evidentiary standard). However, the<br />
Federal Circuit requires parties to prove invalidity by clear and<br />
convincing evidence. Pfizer, Inc. v. Apotex, Inc., 480 F.3d 1348,<br />
1359 (Fed. Cir. 2007) (“[T]he patent challenger bears the burden of<br />
proving the factual elements of invalidity by clear and convincing<br />
evidence.”). Some scholars have argued in favor of reducing this<br />
standard. See Etan S. Chatlynne, The Burden of Establishing Patent<br />
Validity: Maintaining a Heightened Evidentiary Standard Despite<br />
Increasing “Verbal Variances,” 31 Cardozo L. Rev. 297, 319-20<br />
(2009) (discussing the arguments for reducing the standard but<br />
ultimately arguing in favor of retaining the clear and convincing<br />
standard).<br />
55. Charles L. Gholz, Prior User Rights, The New Patent<br />
Law and What it Means to You, Oblon Spivak (2011), available at<br />
http://www.ieeeusa.org/calendar/seminars/AIA-seminar/documents/<br />
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75
From the very nature of business, if there is truly a<br />
commercial use, there will be evidence documenting<br />
the use such as equipment invoices, receipts, employee<br />
testimony, and internal memorandums.<br />
In addition to the high burden of proof,<br />
defendants will be cautious in asserting the prior user<br />
rights defense because the defense is subject to an<br />
attorney’s fee shifting provision. Under 35 U.S.C.<br />
§ 273, if the prior user rights defense is pleaded<br />
without a reasonable basis, the case shall be declared<br />
an exceptional one for the purpose of awarding<br />
attorney’s fees. 56 This provision takes away the broad<br />
discretion that courts usually have to award attorney’s<br />
fees. 57 Defendants may be accused of not having a<br />
reasonable basis to assert this defense unless they<br />
produce a separate opinion of counsel, which would<br />
put a substantial burden on the defendant. The risk<br />
this attorney’s fee shifting provision places on the<br />
defendant is a deterrent to the assertion of a prior user<br />
rights defense.<br />
The invalidity defense applies to a broader<br />
range of infringement actions than the prior user rights<br />
defense. Invalidity renders the entire patent ineffective<br />
against a defendant. 58 On the other hand, the prior user<br />
rights defense is not a general license. 59 It is limited<br />
only to the specific subject matter of the established<br />
commercial use. 60 There are two exceptions to this<br />
limitation: 1) the prior user may increase the quantity<br />
or volume of the prior use and 2) the prior user may<br />
make improvements to the prior use, but only as long<br />
as the improvements do not infringe the asserted<br />
patent. 61<br />
1. The First Exception: Increasing the<br />
Quantity or Volume of the Prior Use<br />
The first exception allows a prior user to<br />
expand quantity or volume of a prior use, but to what<br />
GholzPRIORUSERRIGHTS22Oct11.pdf.<br />
56. 35 U.S.C. § 273(f) (2012) (referring to 35 U.S.C. § 285<br />
that applies generally to patent infringement cases and provides that<br />
“[t]he court in exceptional cases may award reasonable attorney<br />
fees to the prevailing party”).<br />
57. In determining whether or not a case is “exceptional”<br />
under Section 285, courts look at “the totality of the circumstances.”<br />
Yamanouchi Pharm. Co., Ltd. v. Danbury Pharmacal, Inc., 231 F.3d<br />
1339, 1347 (Fed. Cir. 2000).<br />
58. 35 U.S.C. § 102 (2012) (describing prior art that may<br />
anticipate a patent).<br />
59. 35 U.S.C. § 273(e)(3) (2012).<br />
60. Id.<br />
61. Id. (“[T]he defense shall also extend to variations in the<br />
quantity or volume of use of the claimed subject matter, and to<br />
improvements in the claimed subject matter that do not infringe<br />
additional specifically claimed subject matter of the patent.”).<br />
extent? Without any judicial interpretation the lines<br />
are unclear. For example, hypothetical Chair Company<br />
manufactures chairs that are subject to Patent X, and<br />
they have a prior user rights defense for this use, but<br />
Chair Company wants to expand its production. If<br />
Chair Company has room in their factory, they can<br />
probably safely buy more of the same equipment they<br />
use to produce the patented chairs. But, can Chair<br />
Company open a new factory in Omaha, and buy more<br />
equipment for that factory?<br />
The USPTO has interpreted the prior user<br />
rights defense to be geographically limited to cover<br />
only those sites where the invention was used before<br />
the critical date. 62 To support this interpretation the<br />
USPTO cites what is now codified as 35 U.S.C. § 273<br />
(e)(1)(C), 63 but this section appears to limit the site<br />
restriction only to circumstances where the prior user<br />
rights defense was acquired by a party as part of an<br />
assignment or transfer. 64<br />
If the USPTO’s interpretation of site restriction<br />
is correct, to what extent does it apply? Can Chair<br />
Company purchase the vacant lot next to their chair<br />
factory and expand its production facility, or is that<br />
considered a new site? If Chair Factory already owns<br />
the vacant lot and it simply wants to make its existing<br />
factory bigger, then that would probably be considered<br />
part of the same site, and simply a permissible increase<br />
in the “quantity or volume of use of the claimed subject<br />
matter.” 65 However, it would be difficult to apply a site<br />
restriction without rendering ineffective the provision<br />
of the Act that allows a party to increase the quantity or<br />
volume of production.<br />
Furthermore, the site exception draws an<br />
arbitrary and unfair distinction between companies<br />
that are easily able to expand into surrounding areas<br />
and companies that are not. To build on the above<br />
hypothetical, both Chair Company and Stool Builder<br />
have prior user rights for patented chairs. Chair<br />
Company owns a factory on a hundred-acre site in<br />
the Utah desert. Stool Builder’s factory is located<br />
in downtown New York City where expansion is<br />
impractical. Both Stool Builder and Chair Company<br />
62. U.S. Patent and Trademark Office, Report on the Prior<br />
User Rights Defense 1, 7 (2012), available at http://www.uspto.<br />
gov/aia_implementation/20120113-pur_report.pdf.<br />
63. Id.<br />
64. See 35 U.S.C. § 273(e)(1)(C) (2012) (“A defense under<br />
this section, when acquired by a person as part of an assignment or<br />
transfer described in subparagraph (B), may only be asserted for<br />
uses at sites where the subject matter that would otherwise infringe<br />
a claimed invention is in use before the later of the effective filing<br />
date of the claimed invention or the date of the assignment or<br />
transfer of such enterprise or line of business.”).<br />
65. Id. § 273(e)(3).<br />
76 Spring 2013
want to expand their prior use under the “quantity or<br />
volume of use” exception. There is no reason why<br />
Stool Builder should not be able to open a new separate<br />
site in Utah simply because it doesn’t have a large<br />
location like Chair Company, who can expand on the<br />
land where its factory is located. In this sense the<br />
USPTO’s site exception may unfairly restrict parties<br />
with a proper prior user rights defense.<br />
However, a site exception may make sense in<br />
some circumstances. Say Bobby Builder has a prior<br />
commercial use because he built ten of the Patent X<br />
patented chairs in his garage and sold them in arm’s<br />
length transactions on the Internet over one year<br />
ago. Bobby obtained a ten-million dollar loan from<br />
the bank and now wants to expand his chair making<br />
enterprise by building factories in all fifty states. If the<br />
site restriction in Section 273 did not apply to Bobby<br />
because he is the original prior user, then Bobby would<br />
have an unlimited right to expand his minor prior use.<br />
This would be an unreasonable extension of Bobby’s<br />
prior user rights defense and an unfair abrogation of the<br />
Patent X right to exclude because Bobby’s minor prior<br />
use does not justify an expansion of Bobby’s enterprise<br />
to create an enormous national corporation.<br />
An analysis of the legislative history of the<br />
AIA indicates that Congress intended the site exception<br />
to apply only in cases of a transfer of prior user rights.<br />
Section 273 (e)(1)(C) was copied identically from<br />
the pre-AIA Section 273 (b)(7), with little discussion<br />
regarding the site exception. 66 However, a 1999 AIPA<br />
Committee Report did comment on the site exception’s<br />
application, stating:<br />
Specifically, when the enterprise or<br />
line of business to which the defense<br />
relates has been transferred, the defense<br />
may be asserted only for uses at those<br />
sites where the subject matter was used<br />
before the later of the patent filing date<br />
or the date of transfer of the enterprise<br />
or line of business. A site is a factory<br />
site or other major facility in which an<br />
enterprise or line of business has made<br />
a significant capital investment, and<br />
does not include, for example, offsite<br />
locations for development of software<br />
components or manufacture of parts or<br />
66. See Joe Matal, A Guide to the Legislative History of the<br />
America Invents Act: Part II of II, 21 Fed. Cir. B.J. 540 (2012),<br />
570-71, available at http://www.uspto.gov/aia_implementation/<br />
guide_to_aia_part_2.pdf (exhaustively describing the legislative<br />
history of Section 273(e)(1)). Compare 35 U.S.C. § 273(e)(1)(C)<br />
(2012), with 35 U.S.C. § 273(b)(7) (2006).<br />
ingredients. 67<br />
Thus, Congress intended the site restriction to only<br />
apply in cases where a business was transferred along<br />
with the prior user right. A site restriction is not<br />
mentioned anywhere else in either parts of the report on<br />
the legislative history of the AIA. 68<br />
Ultimately, courts may have to decide to what<br />
extent a prior user may expand the quantity or volume<br />
of their prior use, and whether a site restriction applies<br />
to limit this expansion. However, it may be unlikely<br />
that this issue will ever be litigated because the risks of<br />
litigating prior user rights will be outweighed by other<br />
options that the accused infringer has to defend the suit.<br />
Furthermore, courts have not interpreted these prior use<br />
exceptions, and a party would be subject to significant<br />
uncertainty in asserting a prior use defense. This<br />
uncertainty is significantly lower for invalidity because<br />
of well-established case law. 69<br />
2. The Second Exception: Improvements<br />
not Covered by the Patent<br />
The second exception has the potential to<br />
create a huge barrier for a prior user’s ability to assert<br />
the defense. Although the second exception permits<br />
the prior user to make improvements, 70 the prior user<br />
is prohibited from improving its production process<br />
when its prior use does not cover all of the subject<br />
matter asserted in the patent. 71 This exception may also<br />
work to reign in increases in quantity or volume that<br />
are permitted in the first exception because increases<br />
in production capacity will often be accompanied<br />
by improvements to the production process. If such<br />
improvements are covered by the patent, then the prior<br />
user will not be able to expand his production process<br />
through the improvements.<br />
This can be best illustrated by building on<br />
our Bobby Builder example. Bobby has a prior use<br />
from building patented chairs in his garage, but he<br />
wants to expand his prior use nationally. Although<br />
Bobby built the chairs by hand, if his process is going<br />
to be commercially viable on a national scale, he<br />
must automate the production process so the chairs<br />
67. H.R. Rep. No. 106-287, at 49 (1999).<br />
68. Matal, supra note 66; Joe Matal, A Guide to the<br />
Legislative History of the America Invents Act: Part I of II, 21<br />
Fed. Cir. B.J. 436 (2012), available at http://www.uspto.gov/aia_<br />
implementation/guide-to-aia-p1.pdf.<br />
69. However, the AIA does modify 35 U.S.C. § 102, so there<br />
is still the possibility for uncertainty.<br />
70. 35 U.S.C § 273(e)(2) (2012).<br />
71. Id. § 273(e)(3).<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
77
can be produced on an assembly line. Unfortunately<br />
for Bobby, various aspects of assembly-line chair<br />
manufacturing and automation are covered by Patent<br />
X. Thus, Bobby is foreclosed from expanding his<br />
production process on a national level regardless of<br />
whether there is a site limitation in Section 273. 72<br />
The second limitation on improvements also<br />
limits a prior user’s options in litigation. Bringing up<br />
the prior user rights defense may be a bad strategic<br />
move for an accused infringer because it may act as<br />
an admission of infringing activity. In effect, accused<br />
infringers may have to choose between asserting<br />
the defense and arguing that their activities are noninfringing.<br />
C. Prior User Rights and the<br />
Markman Hearing<br />
To successfully assert the prior user rights<br />
defense, the prior user must argue that his actions are<br />
within the scope of the asserted patent. 73 The claims<br />
relating to the scope of the patent are decided as a<br />
matter of law by the court during a Markman hearing,<br />
often early in litigation. 74 At that time, the accused<br />
infringer must decide whether to argue that the patent<br />
is broad or narrow in scope. If the accused infringer<br />
argues that the patent is narrow in scope, he may<br />
establish that his actions are non-infringing because<br />
they are not covered by the claims. However, if an<br />
accused infringer argues that the patent is broad in<br />
scope, he may establish that his prior use is covered by<br />
the scope of the patent. A conflict arises because an<br />
accused infringer will not be able to effectively argue<br />
both non-infringement and prior user rights, and he<br />
must decide on a particular strategy before the case is<br />
fully developed.<br />
This conflict does not exist for invalidity<br />
defenses because invalidity renders the entire patent<br />
invalid, regardless of potential infringing activity and<br />
claim interpretation. 75 An accused infringer can argue<br />
that the patent is narrow in scope during the Markman<br />
hearing and then later assert that the patent is invalid.<br />
The litigation risk of asserting the prior user rights<br />
defense depends on the timing of the Markman hearing,<br />
which may vary significantly depending on jurisdiction<br />
and judicial discretion. 76<br />
72. 35 U.S.C. § 273(e)(3) (2012).<br />
73. Id.<br />
74. Markman v. Westview Instruments, Inc., 517 U.S. 370,<br />
388–91 (1996).<br />
75. See generally 35 U.S.C. § 282 (2012) (presenting defenses<br />
to patent infringement).<br />
76. Mark R. Malek, Markman Exposed: Continuing Problems<br />
D. The Invalidity Defense Will Be<br />
Available in Most Circumstances<br />
Where Prior User Rights Are<br />
Asserted<br />
If a defendant is able to assert a prior user<br />
rights defense, in most circumstances he will also have<br />
good arguments for invalidity. The two ways a patent<br />
may be invalidated in the context of prior user rights is<br />
through anticipation 77 and obviousness. 78<br />
After the AIA comes into full force,<br />
obviousness will become a defendant’s best argument<br />
for invalidity in prior user rights scenarios. Under 35<br />
U.S.C. § 103, patentees are prohibited from obtaining<br />
patents for obvious inventions. 79 Courts will look at<br />
a variety of factors to determine whether a patent was<br />
granted for an obvious invention. 80<br />
Prior user rights scenarios will usually invoke<br />
many factors that favor obviousness. Prior user rights<br />
require multiple instances of independent creation of<br />
the same invention, which strongly indicates that an<br />
invention was obvious. 81 The existence of prior user<br />
rights will often be accompanied with market forces or<br />
design incentives that prompted a patentee to create a<br />
predictable variation. 82<br />
A defendant’s case for invalidity will be further<br />
bolstered by the fact that the later filed patent must<br />
have a priority date that is at least one year later than<br />
the user’s date of commercial use. 83 Courts will have<br />
little qualms with finding a patent obvious in cases<br />
where the inventor was not the first to invent, by a<br />
whole year, and then later asserted the patent against<br />
with Markman Hearings, 7 U. FLA. J. Tech. L. & Pol’y 196, 198<br />
(2002), available at http://ipmall.info/hosted_resources/Markman/<br />
malek.pdf (“Most U.S. District Courts do not have a prescription for<br />
the timing of Markman hearings. Therefore, in most jurisdictions,<br />
a Markman hearing can be held at any time during the patent<br />
litigation (e.g., anytime between the beginning of discovery to just<br />
before jury instructions are given by the judge).”).<br />
77. 35 U.S.C. § 102(a) (2012).<br />
78. Id. § 103(a).<br />
79. Id. (“A patent may not be obtained . . . if the differences<br />
between the subject matter sought to be patented and the prior art<br />
are such that the subject matter as a whole would have been obvious<br />
at the time the invention was made to a person having ordinary skill<br />
in the art to which said subject matter pertains.”).<br />
80. See KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007)<br />
(providing a thorough analysis of obviousness factors).<br />
81. Id.; Crouch, supra note 32 (“[T]he existence of multiple<br />
independent creators of the same invention tends to suggest that the<br />
invention itself was obvious and therefore unpatentable.”).<br />
82. KSR Int’l Co., 550 U.S. at 417 (reasoning that Section<br />
103 likely bars patentability if market forces or design incentives<br />
prompted predictable variations of a technology).<br />
83. Crouch, supra note 32.<br />
78 Spring 2013
an earlier inventor. This is especially true for courts<br />
that are transitioning from a first-to-invent system that<br />
traditionally rewards a first inventor with patent rights.<br />
Claiming invalidity for anticipation under 35<br />
U.S.C. § 102(a) will be more difficult for a defendant<br />
to argue but may be appropriate in some circumstances.<br />
As amended by the AIA, 35 U.S.C. § 102(a) states that<br />
a person shall not be entitled to a patent if the invention<br />
was “patented, described in a printed publication,<br />
or in public use, on sale, or otherwise available to<br />
the public” before the effective filing date. 84 Thus,<br />
Section 102(a) sets out categories of prior art that will<br />
anticipate and invalidate a patent if it was available to<br />
the public before the filing date.<br />
A prior commercial use may indicate that<br />
invalidating prior art may be available. The categories<br />
of prior art that would be most useful to a prior<br />
commercial use defendant are “public use, on sale, or<br />
otherwise available to the public.” 85 In litigation, a<br />
defendant may have to decide whether to argue that<br />
their prior commercial use was public or private. If a<br />
defendant’s prior commercial use is public enough to<br />
qualify as “available to the public,” then the patent is<br />
invalid. 86<br />
The circumstance where an alleged infringer<br />
will have a prior use defense but will not have an<br />
invalidity defense will be very rare. The alleged<br />
infringer’s use must be a trade secret that does not<br />
qualify as prior art under Section 102. 87 However, if<br />
the prior commercial use was truly secret, it is very<br />
unlikely that a prior commercial user would be charged<br />
with infringement in the first place. Thus in many<br />
scenarios where a patentee brings suit against a party<br />
that can assert a prior user rights defense, the defendant<br />
has a good argument that their actions were public<br />
enough to constitute prior art to invalidate the patent.<br />
Where prior user rights can be successfully<br />
asserted in litigation, a defense of invalidity for<br />
obviousness or anticipation will almost always<br />
be available and preferable. Currently, patents<br />
are commonly litigated on the basis of invalidity:<br />
approximately 2800 patent invalidity suits are filed<br />
annually. 88 Of those, 97% are settled before trial. 89<br />
Cases involving prior user rights scenarios will be more<br />
likely to be settled than ordinary invalidity cases. Very<br />
few patent disputes will qualify for prior user rights,<br />
those that do qualify will likely be settled, and those<br />
that aren’t settled are more likely to be litigated for<br />
invalidity.<br />
E. Both Plaintiffs and Defendants<br />
Have Strong Incentives to Settle<br />
in Prior User Rights Scenarios<br />
For invalidity and non-infringement defenses,<br />
determining likelihood of success is much more<br />
difficult because it depends on claim construction,<br />
which occurs at the Markman hearing after substantial<br />
discovery. 90 However in cases of prior user rights,<br />
a defendant will usually be confident—whether or<br />
not they will be able to establish prior user rights—<br />
regardless of claim construction. This will simplify<br />
the settlement process and make prior user rights<br />
cases very unlikely to go to trial because in most<br />
circumstances the outcome of litigation will be<br />
predictable.<br />
A patent owner who is confronted with a prior<br />
user rights defense by an accused infringer has even<br />
greater incentives to settle than the defendant. If an<br />
alleged patent infringer discloses activity that may<br />
qualify for the prior user rights defense, the patentee<br />
will be aware that the same activity could potentially<br />
invalidate the patent. In this case, the best course of<br />
action for a patentee would be to grant a license to<br />
the alleged infringer. This license would likely be<br />
similar or broader than a prior user right. That way, the<br />
patent will be insulated from invalidity, as long as the<br />
defendant’s prior commercial use is sufficiently secret.<br />
Then the patentee may still enforce the patent against<br />
others, and the defendant can get the benefit of using<br />
an exclusive right without having to spend money to<br />
enforce it.<br />
Of course, the patent owner will never obtain<br />
damages for patent infringement damages such as<br />
lost profits or reasonable royalties. If a patent owner<br />
believes their patent will withstand an invalidity<br />
84. 35 U.S.C. § 102(a) (2012).<br />
85. Id.<br />
86. Id. See generally Egbert v. Lippmann, 104 U.S. 333,<br />
336 (1881) (“[T]o constitute the public use of an invention it is<br />
not necessary that more than one of the patented articles should be<br />
publicly used . . . . [S]econdly, . . . whether the use of an invention<br />
is public or private does not necessarily depend upon the number of<br />
persons to whom its use is known.”).<br />
87. 35 U.S.C. § 102 (2012).<br />
88. Jason Rantanen, Patent Suit Filings for 2010 Show a<br />
Slight Rise, PatentlyO (Jan. 28, 2011), http://www.patentlyo.com/<br />
patent/2011/01/patent-suit-filings-for-2010-show-a-slight-raise.<br />
html.<br />
89. Paul F. Morgan, Guest Post: Microsoft v. i4i—Is the Sky<br />
Really Falling?, PatentlyO (Jan. 9, 2011), http://www.patentlyo.<br />
com/patent/2011/01/microsoft-v-i4i-is-the-sky-really-falling.html.<br />
90. Markman v. Westview Instruments, Inc., 52 F.3d 967, 984<br />
(Fed. Cir. 1995).<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
79
challenge and a prior user rights defense, then they may<br />
decide to pursue litigation, but the patent owner runs<br />
the risk of losing their entire patent to invalidity.<br />
F. Prior Experience also Indicates<br />
that the Prior User Rights<br />
Defense will be Rarely Litigated<br />
Previous experience with prior user rights in<br />
the United States and the world further indicates that<br />
the defense will never be successfully litigated. In the<br />
thirteen years since the prior user rights defense was<br />
created for business methods, the defense has not been<br />
successfully raised once. 91 This evidence is particularly<br />
persuasive because business methods are prone to<br />
independent, prior invention. 92 In other practice areas,<br />
the occurrence of prior user rights will be rare because<br />
independent invention is less common.<br />
The experience of other industrialized countries<br />
also indicates that the prior user rights defense will not<br />
be litigated. The United States is the only country in<br />
the world that still employs the first-to-invent standard;<br />
every other patent-granting country awards a patent<br />
to the first inventor to file an application. 93 Pursuant<br />
to a congressional mandate, the USPTO conducted a<br />
lengthy study comparing the patent laws of the United<br />
States and other industrialized countries. 94 The study<br />
found that all industrialized countries employing a<br />
first-to-file system also have some form of prior user<br />
rights. 95 The study also concluded that prior user rights<br />
were rarely litigated in other countries, and will not be<br />
commonly litigated in the United States. 96 Although<br />
countries varied in the way they defined prior use,<br />
countries were similar in the fact that the defense is<br />
not commonly asserted. 97 In some countries, such as<br />
Australia, prior user rights have never been litigated. 98<br />
Although the prior user rights defense will not<br />
be commonly litigated, it will still create a substantial<br />
change in our patent system because innovators will<br />
91. Comments from Paul Morgan, PTO Requested Comments<br />
on the AIA “Prior Commercial Use” Defense Legislation (Oct. 13,<br />
2011), available at http://www.uspto.gov/aia_implementation/pur-<br />
2011oct13-paul_morgan.pdf.<br />
92. U.S. Patent and Trademark Office, supra note 62, at 38.<br />
93. Id. at 47.<br />
94. Id. at 8.<br />
95. Id. at 13.<br />
96. Id. at 38.<br />
97. Keith Kupferschmid, Prior User Rights: The Inventor’s<br />
Lottery Ticket, 21 AIPLA Q.J. 213, 223 (1993).<br />
98. Comments from David Tadgell, Institute of Patent and<br />
Trademark Attorneys, PTO Requested Comments on the AIA “Prior<br />
Commercial Use” Defense Legislation (Nov. 10, 2011), available at<br />
http://www.uspto.gov/aia_implementation/pur-2011nov10-ipta.pdf.<br />
have to decide whether to rely on patents, defensive<br />
disclosure publications, or trade secrets to protect their<br />
inventions.<br />
G. Defensive Disclosures Versus<br />
Prior User Rights<br />
In transitioning to the new patent laws,<br />
companies will have a to choose whether to 1) keep<br />
their inventions secret and rely on prior user rights<br />
or 2) create “defensive disclosures” and release their<br />
inventions to the public. Defensive disclosures include<br />
publications and patent applications and operate as<br />
prior art that can be used to invalidate a competitor’s<br />
patent. 99<br />
Defensive disclosures provide a number of<br />
advantages over prior user rights. A prior use must<br />
predate an accuser’s patent or earlier disclosure by<br />
one year, but a defensive disclosure only needs to<br />
predate an accuser’s patent or disclosure by one day. 100<br />
Furthermore, a defensive disclosure can be combined<br />
with other prior art to render a patent invalid. 101 Patents<br />
not only act as defensive disclosures, but they may also<br />
provide a valuable right to exclude competitors.<br />
Defensive disclosures may also be less<br />
expensive than prior user rights. Publication is the least<br />
expensive disclosure option and may be practically free<br />
if published on the Internet. Patenting is considerably<br />
more expensive than publication. Prior user rights fit<br />
in somewhere in between patenting and publication<br />
because prior user rights require internal documentation<br />
which is more expensive than publication but still much<br />
less expensive than obtaining a patent.<br />
Defensive disclosures also have certain<br />
disadvantages over prior user rights. Most obviously,<br />
a defensive disclosure requires a company to disclose<br />
to the public their hard-earned inventions. A company<br />
that discloses their invention using a defensive<br />
disclosure can lose trade secret protection for that<br />
improvement. 102 Furthermore, a defensive disclosure<br />
99. See 35 U.S.C. § 102(a) (2011) (“A person shall be entitled<br />
to a patent unless . . . the invention was patented or described in a<br />
printed publication . . . .”).<br />
100. Compare 35 U.S.C. § 273 (2012) (prior user rights), with<br />
id. § 102 (2012) (prior art for defensive disclosures).<br />
101. See KSR Int’l Co. v. Teleflex, Inc., 550 U.S. 398,<br />
415-23 (2007) (discussing the requirements to combine prior art<br />
references).<br />
102. See Unif. Trade Secrets Act § 1 (1985) (“Trade<br />
secrets are defined as, information, including a formula, pattern,<br />
compilation, program, device, method, technique, or process,<br />
that: . . . is the subject of efforts that are reasonable under the<br />
circumstances to maintain its secrecy.”) Disclosure would violate<br />
these reasonable efforts. Id.<br />
80 Spring 2013
teaches competitors about the invention, but nothing<br />
prohibits competitors from using that information to<br />
make further improvements. This leaves the door open<br />
for competitors to develop improvements and obtain<br />
patents that exclude the company that created the<br />
original invention from using the improvements.<br />
Prior commercial use can be continuously<br />
documented; however, a patent disclosure is created<br />
once and either published or submitted to the USPTO.<br />
Patent applications may be amended and additional<br />
publications may be published, but a company is<br />
unlikely to revisit a defensive disclosure that it<br />
has deemed adequate. A defensive disclosure may<br />
not include all the details necessary to completely<br />
invalidate a patent. 103 Prior user rights may play<br />
an important role in filling these potential gaps in<br />
defensive disclosures.<br />
Additionally, inventors working at companies<br />
may fail to appreciate that their inventions are<br />
patentable. In such cases, companies may not file for<br />
a patent or otherwise create a defensive disclosure. In<br />
these cases continuous documentation of commercial<br />
use may step in to protect the company from<br />
infringement actions.<br />
In cases of computer programs, processes, or<br />
manufacturing methods, trade secret protection with<br />
the benefit of prior user rights may be more appropriate<br />
than a defensive disclosure. With the Supreme Court<br />
casting significant uncertainty on patent eligible subject<br />
matter, 104 those inventions on the edge of subject matter<br />
eligibility may be better off with trade secret protection<br />
because there is less risk of disclosing to the public an<br />
invention that is later invalidated for a lack of subject<br />
matter eligibility.<br />
The most comprehensive policy a company can<br />
employ is one that employs both defensive disclosures<br />
103. Peter S. Weissman, America Invents Act’s Prior Use<br />
Defense, Lexology (Sept. 28, 2012), http://www.lexology.com/<br />
library/detail.aspx?g=2a93e65e-b37c-491e-96da-8d275bfc92a0.<br />
104. See, e.g., Mayo Collaborative Servs. v. Prometheus<br />
Labs., Inc., 132 S. Ct. 1289, 1305 (2012) (holding that a process<br />
patent for correlations between blood test results and the<br />
appropriate dosage of a specific medication is not eligible for a<br />
patent because the correlation is a law of nature). The Prometheus<br />
decision has been heavily criticized for conflating the two separate<br />
patent law concepts of patent eligibility under 35 U.S.C. § 101<br />
and obviousness under 35 U.S.C. § 103, as well as potentially<br />
invalidating many patents relating to the biotech, medical<br />
diagnostics and pharmaceutical industries. See, e.g., Robert R.<br />
Sachs, Punishing Prometheus: The Supreme Court’s Blunders in<br />
Mayo v. Prometheus, PatentlyO (Mar. 26, 2012), http://www.<br />
patentlyo.com/patent/2012/03/punishing-prometheus-the-supremecourts-blunders-in-mayo-v-prometheus.html.;<br />
Gene Quinn,<br />
Killing Industry: The Supreme Court Blows Mayo v. Prometheus,<br />
IPWatchdog (Mar. 20, 2012, 1:44 pm), http://www.ipwatchdog.<br />
com/2012/03/20/supreme-court-mayo-v-prometheus/id=22920/.<br />
and prior user rights. 105 This will require companies<br />
to 1) file for patents for major identified inventions,<br />
2) employ a strict policy of confidentiality to protect<br />
trade secrets, and 3) document commercial activities<br />
to establish prior user rights. This policy would ensure<br />
that companies maximize their return on research and<br />
development by obtaining a valuable right to exclude;<br />
meanwhile, they would obtain prior user rights that will<br />
insulate them from patent infringement lawsuits for<br />
insignificant inventions. Furthermore, prior user rights<br />
could serve as a back-up to defensive disclosures that<br />
turn out to be insufficient to protect the company from<br />
infringement actions. 106<br />
IV.<br />
The Benefits of the Prior User Rights<br />
Defense<br />
Many critics of the prior user rights defense<br />
argue that this defense will weaken patents and<br />
create uncertainty. They argue that there is no way<br />
to determine whether a granted patent will be subject<br />
to prior user rights, and this will make enforcing the<br />
patent difficult. 107<br />
Other critics believe that prior user rights will<br />
burden small businesses and individual inventors. 108<br />
Smaller entities will have to compress the timeline in<br />
which they innovate, identify patentable innovations,<br />
and seek a patent. If an entity does not work quickly,<br />
it will either lose patent rights forever, or be subject<br />
to threats from a competitor’s patent. This will create<br />
a “race to the patent office.” 109 The critics argue that<br />
larger, established businesses will probably be able to<br />
incorporate the innovation costs, investment costs, and<br />
legal costs of a first-to-file system more easily, giving<br />
them the advantage. 110<br />
However, the first-to-file system along with<br />
prior user rights will actually be beneficial to small<br />
businesses because it will decrease litigation and<br />
eliminate costly priority determinations that existed<br />
105. Weissman, supra note 103 (listing issues such as<br />
technical gaps that result when technological details are omitted<br />
when writing for a more sophisticated audience).<br />
106. Id.<br />
107. E.g., Robert L. Rohrback, Prior User Rights: Roses or<br />
Thorns?, 2 U. Balt. Intell. Prop. L.J. 1, *16-17 (1993).<br />
108. Id. at *19.<br />
109. See Ashby Jones, Inventors Race to File Patents: U.S.<br />
Rule Change Taking Effect Saturday Will Make Process Harder,<br />
Costlier, Wall St. J. (Mar. 14, 2003), available at http://www.<br />
lexology.com/library/detail.aspx?g=2a93e65e-b37c-491e-96da-<br />
8d275bfc92a0.<br />
110. Emmett Collazo, Patent System Reform in 2011:<br />
Costs Expected To Increase on Small Businesses, IEEE-USA<br />
Today’s Engineer (last visited on Mar. 30, 2013), http://www.<br />
todaysengineer.org/2011/Oct/patent-reform.asp.<br />
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under the first-to-invent system. Under the first-toinvent<br />
system, so-called “secret prior art” may exist in<br />
the form of prior undisclosed inventions that have not<br />
been abandoned, suppressed, or concealed. 111 Such<br />
prior art may first appear during patent prosecution or<br />
during litigation.<br />
The AIA eliminated several types of secret<br />
prior art, including prior secret invention by another<br />
inventor and prior knowledge transferred from<br />
another to the patent applicant under. 112 The secrecy<br />
of these prior art references created problems because<br />
patentability could not be fully evaluated by going<br />
through the arduous process of obtaining additional<br />
information from interested parties. 113 Furthermore,<br />
secrecy gave interested parties more of an opportunity<br />
to create or destroy documents after the fact. 114 Making<br />
patentability based upon publicly available information<br />
can hypothetically lead to some unfair outcomes, but<br />
it has the massive benefit of providing clear notice to<br />
anyone who takes the time to look. 115 Both small and<br />
large businesses will acquire patent rights that are not<br />
subject to the uncertainty of this secret prior art.<br />
The AIA retains one form of secret prior<br />
art: a prior filing of a patent application by “another<br />
inventor” will be deemed prior art as of its filing date. 116<br />
This is secret prior art because patent applications<br />
are kept secret by the USPTO for eighteen months<br />
after they are filed. 117 However, this prior art is only<br />
temporarily secret because such a reference cannot<br />
be used as prior art unless and until it is made public<br />
through either publication or patenting. Thus, by the<br />
time the reference can be used it is already publically<br />
available.<br />
Under the new system, first inventors will<br />
normally be the first to file and will obtain priority for<br />
a patent. But if they are not the first to file they will<br />
either 1) be in possession of invalidating prior art,<br />
2) be secretly using the invention without ever being<br />
discovered, or 3) have a prior user rights defense. Only<br />
111. Robert A. Armitage & Richard C. Wilder, Harmonization:<br />
Will It Resuscitate a Patent System Suffocating Its Small Entity<br />
Users with Cost and Complexity?, 1 U. Balt. Intell. Prop. L.J.<br />
116, 117-18 (1993).<br />
112. Compare 35 U.S.C. § 102 (2012), with 35 U.S.C. §<br />
102(g)–(f) (2006).<br />
113. Dennis Crouch & Jason Rantanen, Did the AIA Eliminate<br />
Secret Prior Art?, PatentlyO (Oct. 10, 2012), http://www.patentlyo.<br />
com/patent/2012/10/did-the-aia-eliminate-secret-prior-art.html.<br />
114. Id.<br />
115. Id.<br />
116. 35 U.S.C. § 102(a)(2) (2012), formerly defined by 35<br />
U.S.C. § 102(e) in the pre-AIA act.<br />
117. 37 C.F.R. § 1.211 (2005) (requiring the USPTO to<br />
publish patent applications promptly after the expiration of a period<br />
of eighteen months from the earliest filing date).<br />
in narrow situations will a first inventor lose the race to<br />
the patent office and not have a remedy. This perceived<br />
unfairness is necessary to encourage swift disclosure of<br />
new inventions in order to accelerate scientific research<br />
and boost progress. In all of the aforementioned<br />
scenarios, deep-pocketed litigation is not required.<br />
Small businesses and startups without lots of money<br />
will benefit from the increased security in their patents,<br />
and will be more resistant to bullying from larger<br />
litigious corporations.<br />
Prior user rights will also encourage foreign<br />
companies to manufacture in the United States.<br />
Foreign entities’ USPTO-issued patents will be subject<br />
to prior user rights. 118 However, the foreign entities<br />
cannot assert prior user rights based upon activities in<br />
their home countries. 119 Thus, foreign entities can only<br />
benefit from the existence of prior user rights if their<br />
prior commercial use is in the United States.<br />
Without prior user rights, United States<br />
businesses would be at a disadvantage to foreign<br />
companies. All major United States trading partners<br />
operate on a first-to-file system with prior user rights. 120<br />
If the United States did not have prior user rights,<br />
domestic businesses could be liable for domestic<br />
infringement against a foreign-based company that<br />
holds a USPTO-issued patent, but the domestic<br />
business would not be able to assert a foreign patent<br />
against a foreign entity in a jurisdiction that provides<br />
prior user rights. 121 This imbalance could lead to<br />
strategic decisions to locate manufacturing outside of<br />
the United States to prevent disruptions to operations<br />
or interference with the use of assets. 122 United States<br />
interests are particularly at risk because of the high<br />
percentage of USPTO-issued patents awarded to<br />
foreign inventors. 123<br />
Non-practicing entities (NPE), more commonly<br />
known as “patent trolls,” will also be disadvantaged by<br />
118. 35 U.S.C. § 273 (2012) (covering domestic and foreign<br />
entities without distinction).<br />
119. Id. (specifying that the prior commercial use must be in<br />
the United States).<br />
120. U.S. Patent and Trademark Office, supra note 62, at 52.<br />
121. Kupferschmid, supra note 97, at 221; Griswold, supra<br />
note 11, at 577.<br />
122. Gary Griswold, Consultant and Chair Emeritus of the<br />
Coalition for 21st Century Patent Reform, Comments at the Public<br />
Hearing on the Study of Prior User Rights 12–13 (Oct. 25, 2011),<br />
available at http://www.uspto.gov/aia_implementation/20111025-<br />
prior-userrights-transcript.pdf.<br />
123. See Performance and Accountability Report Fiscal<br />
Year 2011, 163, 165, 168 (2011), available at http://www.uspto.<br />
gov/about/stratplan/ar/2011/USPTOFY2011PAR.pdf. (issuing<br />
124,252 patents to residents of foreign countries out of a total of<br />
244,430 patents issued, amounting to over fifty percent of the total<br />
patents issued).<br />
82 Spring 2013
the existence of the prior user rights defense. 124 NPE’s<br />
will not be able to assert the prior user rights defense<br />
because they do not practice their invention. However,<br />
every patent that every NPE, except for universities,<br />
owns will be subject to the prior user rights defense. 125<br />
Thus, NPE’s and other companies will have a greater<br />
incentive to quickly license or commercialize their<br />
inventions. If companies commercialize their<br />
inventions faster, consumers obtain the benefits of<br />
those inventions faster, and innovation progresses at a<br />
faster rate.<br />
Prior user rights enhance protection available<br />
for non-patented innovations and trade secrets, 126<br />
and may discourage patent filing in some technology<br />
sectors. At first glance this may seem to undermine<br />
the policy of disclosure to encourage innovation.<br />
However, the opposite is true. This policy will increase<br />
innovation because companies will have more freedom<br />
to operate without being worried about infringing<br />
minor patents.<br />
As a result, small advances will be protected by<br />
trade secrets because they will not be worth expending<br />
resources on prosecuting a patent or litigating. On<br />
the other hand, major advances will still be patented<br />
because they will come with a broad right to exclude<br />
others. Both small business and large businesses will<br />
have to spend less money on litigation because they<br />
will not have to worry about infringing a patent for<br />
every small, insignificant innovation. Patents will be<br />
obtained only for those technologies that are really<br />
worth patenting.<br />
The university exception to prior user rights<br />
was added in response to concerns expressed by the<br />
higher education community that prior user rights may<br />
impair the ability of universities to license patents<br />
on upstream research results. 127 <strong>University</strong>-derived<br />
inventions will become more valuable because<br />
their patents are excluded from the prior user rights<br />
defense. 128 In order to add security to their patents,<br />
companies may choose to forego in-house research and<br />
development and instead fund research at universities.<br />
Companies may choose to structure their university<br />
funding transactions so that when universities obtain<br />
124. Holly Forsberg, The Attractiveness of Trolling: The<br />
Impact of Recent Judicial Activity on Non-Practicing Entities, 12<br />
U. Pitt. J. Tech. L. & Pol’y 1, 2 (2011).<br />
125. 35 U.S.C. § 273(e)(5) (2012).<br />
126. U.S. Patent and Trademark Office, supra note 62, at 5.<br />
127. America Invents Act: Hearing on H.R. 1249 Before the<br />
Subcomm. on <strong>Intellectual</strong> <strong>Property</strong>, Competition, and the Internet<br />
of the House Comm. on the Judiciary, 112th Cong. 97–98 (2011),<br />
(Statement of John C. Vaughn, Exec. Vice President, Ass’n of Am.<br />
Univs.).<br />
128. 35 U.S.C. § 273(e)(5) (2011).<br />
patents on the funded research, the companies simply<br />
obtain a royalty-free, potentially exclusive license.<br />
Universities will benefit from this extra funding,<br />
and by combining them with government grants, the<br />
universities potentially may become major players in<br />
certain patent-related industries.<br />
V. Conclusion<br />
The <strong>American</strong> Invents Act will produce some<br />
major changes to our patent system. The change<br />
from a first-to-invent to a first-to-file system and the<br />
accompanying prior user rights will have the greatest<br />
impact on the way companies do business. However,<br />
the impact will not be felt by significantly increasing<br />
litigation. The prior user rights defense will rarely be<br />
asserted, and most litigation will continue to focus on<br />
patent validity.<br />
Instead, the changes will occur in the way<br />
businesses operate. Some will choose to protect<br />
their inventions with trade secrets instead of patents<br />
because the prior user rights defense bolsters existing<br />
protections for trade secrets. Most will continue to<br />
obtain patents on more important inventions because<br />
patents grant a powerful right to exclude that which<br />
trade secrets do not. Furthermore, universities will<br />
become increasingly bigger players in the patent<br />
community, and private funding of universities will<br />
increase.<br />
Both small businesses and larger corporations<br />
will see a decrease in litigation as there will no longer<br />
be complex priority battles with changing dates of<br />
conception and reduction to practice. Instead, prior<br />
user rights will be proven by evidence of commercial<br />
use, which will be relatively easy to establish for both<br />
big and small companies. Parties will not be willing<br />
to expend significant resources litigating matters with<br />
highly predictable outcomes.<br />
Those that will be disadvantaged because<br />
of prior user rights will be non-practicing entities<br />
and foreign companies that do not manufacture in<br />
the United States. Both types of entities will see<br />
their patents devalued by prior user rights; but these<br />
parties will not be able to assert the prior user rights<br />
defense against others as their activities will not<br />
qualify as a prior use. However, both types of entities<br />
have a solution to this problem. Foreign companies<br />
can choose to relocate manufacturing to the United<br />
States, and non-practicing entities may quickly assign<br />
or license their patents to manufacturers. Bringing<br />
infringement lawsuits will become a less attractive<br />
option for both types of entities. This will increase<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
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manufacturing in the United States and encourage<br />
innovation.<br />
Overall, the <strong>American</strong> Invents Act will<br />
minimize unnecessary litigation costs, improve the<br />
quality of granted patents, harmonize the United States<br />
patent system with the best parts of other major patent<br />
systems, encourage domestic manufacturing, and<br />
“promote the Progress of Science and useful Arts.” 129<br />
129. U.S. Const. art. I, § 8, cl. 8.<br />
84 Spring 2013
Facebook Sued for Patent Infringement Over “Like” Button and<br />
Timeline Function<br />
by Asha Velay<br />
*This blog post was originally published on February 19, 2013 at http://www.ipbrief.net.<br />
this.<br />
Mark Zuckerberg is not going to “like”<br />
A Dutch Patent-holding company,<br />
Rembrandt Social Media, filed a complaint against<br />
Facebook last week in the U.S. District Court of<br />
Virginia, acting on behalf of the widow and family<br />
of Dutch programmer, Joannes Jozef Everardus<br />
Van Der Meer. According to Van Der Meer’s<br />
camp, the late programmer patented Facebook’s<br />
“like” and “timeline” functions in 1998, six years<br />
before Zuckerberg launched Facebook.<br />
Van Der Meer tried to capitalize on his<br />
inventions after he was granted the patents in<br />
2001 and 2002. He founded a company called<br />
Aduna, and bought the domain name “surfbook.<br />
com.” Surfbook was intended to be a social<br />
networking site in the form of an online diary<br />
that allows users to approve data by using a<br />
“like” button. The complaint states that Surfbook<br />
also lets users “collect personal information and<br />
third-party content, organize the information<br />
chronologically on a personalized Web page, and<br />
share the information with a selected group of<br />
people, such as the end user’s friends, through the<br />
use of user-settable privacy levels.” Van Der Meer<br />
passed away in 2004 before he was able market his<br />
website and fully utilize his inventions.<br />
The outcome of this case could encourage<br />
more litigation if Rembrandt prevails. Facebook<br />
did not always have the “like” function; this was<br />
a relatively recent enhancement in Facebook’s<br />
evolution from a college social networking site<br />
to the world’s most popular social network. If<br />
Facebook comes up with more enhancements,<br />
more companies could be encouraged to pursue<br />
litigation over individual functions. Rembrandt<br />
Social Media has sued for unspecified royalties.<br />
No word from Facebook yet, but this is exactly<br />
why the site needs a “dislike” button.<br />
Although he is not a household name<br />
like Mark Zuckerberg, Van Der Meer’s legal<br />
team believes he was a highly influential social<br />
networking pioneer. “We believe Rembrandt’s<br />
patents represent an important foundation of<br />
social media as we know it, and we expect a judge<br />
and jury to reach the same conclusion based on<br />
the evidence,” said Rembrandt’s attorney, Tom<br />
Melsheimer.<br />
What is potentially damaging is that<br />
Facebook is more than aware of Van der Meer’s<br />
patents. In June, Facebook was granted a patent for<br />
a method of running cross-platform applications<br />
on wireless devices. In its application, one of Van<br />
der Meeer’s patents was even cited as a reference.<br />
<strong>American</strong> <strong>University</strong> <strong>Intellectual</strong> <strong>Property</strong> <strong>Brief</strong><br />
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Led Zeppelin to Release Entire Back Catalogue to the Internet<br />
Streaming Community<br />
by Matthew Bernstein<br />
*This blog post was originally published on January 26, 2013 at http://www.ipbrief.net.<br />
If you are anything like me, you probably<br />
do a lot of things over and over again hoping for<br />
different results each time. Some people call it<br />
insanity – I call it optimism. Ever since Spotify<br />
came to the U.S., I have been holding out hope<br />
that music from one of my favorite classic rock<br />
bands, Led Zeppelin, would become accessible.<br />
Every few days, I would log in to Spotify and<br />
search for Led Zeppelin, and each time the results<br />
would come up empty. In any case, it appears that<br />
the day will soon be upon us when the Zeppelin<br />
tunes we all know and love will all be available for<br />
our Internet streaming pleasure. More importantly,<br />
I am neither insane nor a hopeless optimist.<br />
According the New York Times, the<br />
band is in the process of negotiating with several<br />
streaming services for the right to stream their<br />
entire catalog of classic rock music. While many<br />
classic acts (such as the Beatles, Pink Floyd, and<br />
others) continue to be hesitant to partner with<br />
streaming services, Led Zeppelin’s willingness<br />
to do so represents a major endorsement of the<br />
services as an integral way that people listen to<br />
music in the foreseeable future.<br />
Sirius XM satellite radio. According to the New<br />
York Times, the decision will gradually raise the<br />
rates from the current eight percent of Sirius XM’s<br />
gross revenue to eleven percent in 2017. While the<br />
decision does not affect the rates for Internet radio,<br />
those rates are only in place through 2015, and it<br />
is possible that this decision could be influential<br />
in bringing about higher royalty rates for Internet<br />
radio in the long run.<br />
Each of these developments makes the<br />
future of the music industry an exciting prospect.<br />
Whereas the Internet used to be an enemy of the<br />
recording industry, it appears that it may grow to<br />
be a great asset. Through these developments,<br />
people worldwide will continue to gain cheap<br />
access to all of the music they want while rights<br />
holders can receive the payment they deserve.<br />
Spotify, which recently partnered with<br />
Metallica (another band that has long been<br />
skeptical of their music on the Internet), is one<br />
of the biggest players in the music streaming<br />
industry, and it would not be surprising for Led<br />
Zeppelin to sign a deal with them. In charging<br />
users a small subscription fee for unlimited access<br />
to an extensive library of music, Spotify is able to<br />
attract a large worldwide user base and generate<br />
enough revenue to provide substantial royalties to<br />
rights holders and artists. If Led Zeppelin, one of<br />
the biggest bands in rock history, were to partner<br />
with the service, this user base would likely see<br />
significant increases and even more money would<br />
be generated.<br />
Another interesting development is a<br />
recent decision by the Copyright Royalty Board to<br />
increase the music royalties that must be paid by<br />
86 Spring 2013
Washington <strong>American</strong> College <strong>University</strong>—Washington of Law | <strong>American</strong> College <strong>University</strong> of Law<br />
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