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June 2012 Archives

June 1, 2012

Google Books Update

By Mary E. Rasenberger

Judge Chin issued his decisions today in the two motions in the Google Books case. He refused to dismiss the Authors Guild and ASMP for lack of associational standing, as predicted, and he certified the authors' class represented by the Authors Guild.

The case will go forward on the merits this summer.

Judge Chin called Google on the inconsistency of its arguments (as noted in the Authors Guild's and ASMP's briefs). Google scanned works indiscriminately claiming fair use - with no case-by-case analysis whatsoever - and here it is now arguing that fair use issues have to be analyzed on a case-by-case basis (and hence the right holders can't all be represented by an association).

Here's a quote from the decision:

Furthermore, given the sweeping and undiscriminating nature of Google's unauthorized copying, it would be unjust to require that each affected association member litigate his claim individually. When Google copied works, it did not conduct an inquiry into the copyright ownership of each work; nor did it conduct an individualized evaluation as to whether posting "snippets" of a particular work would constitute "fair use." It copied and made search results available en masse. Google cannot now turn the tables and ask the Court to require each copyright holder to come forward individually and assert rights in a separate action. Because Google treated the copyright holders as a group, the copyright holders should be able to litigate on a group basis.

The decision is availiable at: http://blog.authorsguild.org/wp-content/uploads/2012/06/2012-May-31-Authors-Guild-v-Google-Class-Cert-Opinion.pdf

June 2, 2012

Weekly Issues in the News

By Geisa Balla

Gucci v. Guess

Gucci won $4.6 million in its trademark infringement trial against Guess. Gucci had alleged that Guess was trying to "Gucci-ize" its products by selling wallets, bags, belts, shoes and other items with designs similar or identical to Gucci's. The lawsuit alleged that Guess's products confused the consumers and diluted Gucci's brand. After three years of litigation, in April, three-week non-jury trial was held in the Southern District of New York before Judge Shira Scheindlin. Gucci was asking for $120 million in damages from the lawsuit. On May 21, 2012, Judge Scheindlin released a 104-page opinion, holding that Gucci may recover just $4.66 million in its lawsuit. The decision stated that while Guess infringed some trademarks, Gucci was not entitled to damages reflecting lost sales or harm to its brand, and an analysis from its damages expert was deemed "highly speculative." Judge Scheindlin also awarded Gucci a permanent injunction against Guess's use of three of the four challenged designs.

The permanent injunction applies to a design with green-red-green stripes, a stylized "Square G," and a group of four interlocking "G"s known as a "Quattro G." Guess is satisfied with the decision, and its CEO Paul Marciano said that the decision showed that Gucci had "overreached" and "misled the court with a number of facts that were unsupported by the evidence."


Microsoft and Motorola

On May 24, 2012, a German court ruled in a hearing that Motorola Mobility infringed Microsoft's patents by offering the option in its mobile phones to send a longer text in a batch of several messages. Microsoft said in a statement: "We're pleased the court agreed today that Motorola has infringed Microsoft's intellectual property, and we hope Motorola will be willing to join other Android device makers by taking a license to our patents." Motorola expects a written decision and will then explore its options, including a possible appeal. The two companies, as well as other makers of mobile devices, are involved in several disputes across the globe over software features of the latest smartphones.



On May 23, 2012, a California jury decided that Google's Android mobile platform did not infringe on Oracle's patents. In this lawsuit, Oracle alleged that Google's Android phone trampled on its intellectual property rights to the Java programming language, which connects programs and operating systems. The issue in question was whether such computer language can be copyrighted. Google argued that it did not violate Oracle's patents, and that Oracle cannot copyright certain parts of Java, which is publicly available software. The jury decided in Google's favor on the patent issue. Although the jury found earlier that Oracle had proven copyright infringement for parts of Java, it could not unanimously agree on whether Google could fairly use that material. Without a finding on fair use, Oracle cannot recover damages on most of its copyright claims.

U.S. District Judge William Alsup has not yet decided several issues that could determine how a potential mistrial on the copyright issues would unfold.


Net Neutrality Rules

The legal fight over the U.S. government's new Internet traffic rules will likely drag into 2013. In 2010, the Federal Communications Commission (FCC) adopted "net neutrality" rules that forbid broadband providers from blocking access to lawful content, while leaving flexibility for providers to manage their networks. The rules were seen as a compromise, but still upset both public interest groups and industry players, which have filed suits challenging the rules.

Verizon Communications Inc. filed suit in September 2011, asking the court to have the rules thrown out, arguing that the FCC was "arbitrary" and "capricious" and acted beyond its statutory authority. Public interest groups have criticized the rules as being too weak, saying that the FCC was swayed by industry players. These and other cases were consolidated before the U.S. Court of Appeals for the District of Columbia. On May 25, 2012, counsel for the numerous parties proposed a briefing schedule with the U.S. Court of Appeals for the District of Columbia, setting November 21, 2012 as the deadline for their final briefs. If this schedule is accepted, oral arguments will likely be scheduled in 2013. The FCC has expressed confidence in the legal foundation for the rules, and recently unveiled the members of a net-neutrality oversight panel that will monitor the impact of the rules and make recommendations. Netflix, Comcast, AT&T and Walt Disney Co are among the companies represented on the advisory panel, as well as advocacy groups such as the Internet Society and National Urban League.


Gaylord v. United States

The Federal Circuit held that artist Frank Gaylord is entitled to royalty damages against the U.S. Postal Service (USPS). Plaintiff Gaylord created "The Column," a group of 19 stainless steel columns that form the centerpiece of the Korean War Memorial on the National Mall in Washington D.C. In 2002, after securing a license agreement from the photographer, the USPS issued a 37-cent stamp depicting "The Column", commemorating the 50th anniversary of the signing of the armistice ending the War. Roughly 86.8 million stamps were sold, as well as retail goods containing the image. The USPS also licensed the image to retailers but did not seek Gaylord's permission (he typically licenses his work for a 10% royalty fee).

He filed suit in 2006 under 28 U.S.C. 1498(b) for copyright infringement. The Federal Circuit held that Gaylord owned the copyright and that USPS was liable for infringement, but remanded for determination of damages. On remand, the Court of Federal Claims limited Gaylord's damages to $5,000, finding that this was the upper limit in the "zone of reasonableness" around Gaylord's actual damages. The court denied Gaylord's claim for 10% royalties, find that neither 28 U.S.C. § 1498(b) nor the Copyright Act authorized a royalty-based award for copyright infringement. Instead, the court applied the "zone of reasonableness" approached used in Steve Altman Photography v. United States, and set the limit at $5,000 because the USPS argued that it had never paid more than $5,000 to license an image and had a policy against paying royalties. Gaylord appealed.

On May 14, 2012, the Federal Circuit reversed, vacating the lower court's damages decision and remanding for determination of market value of the infringing use and award of prejudgment interest. The Federal Circuit found that the lower court should not have relied only on the USPS's self-serving statements of its internal policies, but should have considered Gaylord's typical royalty rate of 8 to10%, the 8% royalty rate charged by the USPS to use "The Column", and the various ways in which the USPS used the image. The Federal Circuit also held that the lower court erred in denying prejudgment interest, as Section 1487(b) permits recovery of a plaintiff's "reasonable and entire compensation," which includes "delay compensation."


Slander in New York

The New York Appellate Division, Third Department held on June 1, 2012 that it is no longer slander in New York to falsely call someone gay. The decision stems from a lawsuit filed by Mark Yonaty, who alleged that a woman spread a rumor about him in hopes that Yonaty's girlfriend would break up with him. He said the comment hurt and ultimately destroyed the relationship. The decision wipes out decades of rulings that calling someone gay is defamatory. In a unanimous decision, Justice Thomas Mercure stated: "These appellate division decisions are inconsistent with current public policy and should no longer be followed," as qualifying being called gay as defamatory is "based on a false premise that it is shameful and disgraceful to be described as lesbian, gay or bisexual."


June 5, 2012

Dispute Resolution Project at the Straus Institute of Pepperdine University

Straus Institute has launched an innovative new Dispute Resolution Project relating to the Entertainment, Media and Sports Industries. All these industries are highly developed, yet continually evolving with constant frictions among various labor, creative, technology and other constituencies. These frictions lead to regular judicial and other confrontations in relation to collective bargaining, intellectual property, commercial and other issues. While law school curricula have historically focused on the substantive law relating to these areas, with a particular emphasis on litigation, ADR has not been a principal focus of any national law school in respect to them. Straus Institute is particularly well-positioned to develop and implement a series of different programs to address this gap in academic and professional education.

Under the leadership of its Managing Director, William Nix, and Faculty Director, Maureen Weston, this new Straus Project will among other things, work to develop domestic and international off-Campus programs for Internships/Externships and on building employment and other networking opportunities with professionals and organizations in these industries. Further details on this new Project are available on the Straus website at: http://law.pepperdine.edu/straus/news/entertainment-media-sports-project.htm

For any questions, please contact:

William Nix,Chairman
Creative Projects Group

Los Angeles Office:
14011 Ventura Blvd.
Suite 206 East
Sherman Oaks, CA 91423-3533
818.763.0374 (Tel)
818.788-7406 (Fax)

June 8, 2012

Weekly Issues in the News

By Geisa Balla


Nancy Silberkleit and Jon Goldwater, the co-CEOs of the company that publishes Archie comics, ended their dispute over control of the company through a settlement (which is being challenged by other family members) on Wednesday, June 6th. "Nancy Silberkleit and Jon Goldwater are no longer in an adversarial position, and they are beginning their working relationship anew," said Silberkeit's attorney. "She's thrilled to have settled this extremely upsetting matter." Goldwater is a son of one of the company's founders, while Silberkleit is another founder's daughter-in-law. They became co-CEOs in 2009. Goldwater sought to strip Silberkleit of her role at the company, claiming that she was an erratic troublemaker who sexually harassed employees, made bad business moves and once intimidated people in the office by parading a former football player. Silberkleit claimed that Goldwater was a chauvinist who demeaned her, kept her in the dark about the company's finances, and that he invented false allegations to seize control of the company. She claimed defamation and sought $100 million in damages. Silberkleit controls 50 percent of the company and Goldwater owns 25 percent. A trust set up by Goldwater's late half brother, Richard, owns the rest. Goldwater's three nieces Lisa, Taylor and Summer Goldwater, are the trust's beneficiaries.

Initially the nieces stood on the sidelines, assuming that their uncle was acting in their best interests. However, they decided to involve themselves this winter after suspecting that their uncle was misusing company assets, and trying to keep them unaware of it. The nieces filed papers in the litigation, saying that both CEOs' "hands are dirty." Supreme Court Justice Shirley Kornreich stated that the nieces were not in a legal position to weigh in on the settlement, but they could file a suit of their own. Attorneys for the three nieces said the they "will be pursuing the requisite steps to protect the interest of the trust and its beneficiaries."



The U.S. Attorney for the Southern District of New York filed a civil forfeiture lawsuit in the Southern District of New York on April 4th against Sotheby's, claiming that a 10th Century A.D. sandstone statute was illicitly removed from Cambodia. The U.S. is seeking right, title and interest in the statue. The complaint alleges that Sotheby's plans to sell the statue, despite warnings that looters had stolen the piece from its rightful place in the Prasat Chen Temple in Koh Kewr in northern Cambodia. The statute was torn from its place in the 1960s or 1970s, during civil unrest in Cambodia. It then fell into the hands of a private collector in Belgium, whose heirs reached an agreement to sell it on consignment to Sotheby's in March 2011. Cambodian officials notified Sotheby's that the statue had been looted, and the parties had been negotiating a settlement to the dispute for the last year. "The ... statue is imbued with great meaning for the people of Cambodia and, as we allege, it was looted from the country during a period of upheaval and unrest, and found its way to the United States," Manhattan U.S. Atty. Preet Bharara said in a statement released by his office. "With today's action, we are taking an important step toward reuniting this ancient artifact with its rightful owners." Sotheby's disputed the allegations, stating that the statute "was legally imported into the United States and all relevant facts were openly declared."


Lauryn Hill

Eight-time Grammy winner Lauryn Hill has been charged with failing to file income tax returns for several years with the Internal Revenue Service (IRS). The U.S. Attorney's Office in New Jersey said that Hill earned more than $1.6 million during 2005, 2006 and 2007, the three years that she failed to file returns. Her primary source of income is royalties from the music and film industries. She also owns and operates four corporations: Creations Music Inc., Boogie Tours Inc., L.H. Productions 2001 Inc., and Studio 22, Inc. Hill is scheduled to appear before a federal magistrate on June 29th. She faces a maximum penalty of a year in prison and $100,000 in each of the three charges against her.


Alexander Wang

On June 4th, Alexander Wang Inc. answered the class action complaint filed earlier this year, denying the allegations. The complaint was filed in March 2012 by two former employees of Alexander Wang Inc., and alleged that the company essentially ran a sweatshop in Chinatown in Manhattan, where it violated labor laws by failing to provide proper compensation, denied the workers bathroom breaks, and fired them when they complained about their work conditions. The answer claimed that Alexander Wang Inc. "has complied with all applicable wage and hour and leave laws, and there is no basis whatsoever for plaintiffs' frivolous and entirely unsupportable accusations." It further claimed that plaintiffs were "properly paid all wages owed ... provided with regular and multiple breaks during their work time ... [and] eligible for and provided with paid vacation, paid sick days, paid holidays, paid personal days, medical and dental insurance and other benefits."



The determination of Apple's motion to ban the sale of Samsung Electronics's Galaxy 10.1 tablets is delayed on procedural grounds. Apple filed a lawsuit against Samsung last year in the U.S. District Court, Northern District of California, alleging that Samsung "slavishly" copied the iPhone and iPad. Samsug denied the claims and countersued. Judge Lucy Koh denied Apple's motion to ban the sale of Samsung smartphones and the Galaxy 10.1 tablet. An appeals court told Judge Koh to reconsider her decision, and Apple promptly re-applied for the ban. On June 4th, Judge Koh denied Apple's motion on procedural grounds, stating that the appeals court must formally cede jurisdiction back to her before she could consider it. In a court filing last month Apple stated: "Each day that Samsung continues to sell its infringing Tab 10.1 causes additional harm to Apple through design dilution, lost sales, lost market share, and lost future sales of tag-along products." The parties attended court ordered mediation in May, which failed to produce a settlement.


Jerry Sandusky

Jury selection ended on Wednesday, June 6th, in the Jerry Sandusky child sex abuse trial. The jury consists of seven women and five men. Sandusky has been charged with 52 counts of molesting 10 boys over a 15-year period. He has pleaded not guilty and is facing more than 500 years in prison if convicted on all counts. Prosecutors allege that Sandusky met the boys through his charity Second Mile, and some of the assaults occurred at Penn State facilities. "The trial in this case will start on Monday morning. We anticipate that it will take at most three weeks and be done by the last day of June," Judge John Cleland said on Wednesday. Many of the jurors have close ties to Penn State: one is a professor there, one is an administrative assistant, another is a dance teacher and one is a 2007 graduate of the university. Sandusky appeared upbeat and animated during the jury selection. At one point he joked with reporters, saying: "What did you guys do to deserve me? How did you guys get stuck with this? Ay yi yi." ABC News reported that intimate love letters written by Sandusky to one of his accusers, Victim 4, will be read into testimony in trial. Victim 4 is expected to be the first witness to testify, and he is expected to show gifts Sandusky gave him during the alleged relationship.


Kevin Costner and Stephen Baldwin

Jury selection began this week in a federal lawsuit between Steven Baldwin and his business partner Spyridon C. Contogouris, and Kevin Costner. Baldwin claims that Costner cheated him out of his share of a multi-million dollar deal, under which British Petroleum bought 32 oil-and-water separation devices that were developed by a Costner-owned company. The deal was struck after the Macondo well blew out in April 2010, spewing more than four million barrels of crude into the Gulf of Mexico, in the largest accidental oil spill in history. Baldwin and Contogouris claim they were not told about the deal with BP before they agreed to sell their shares in a company that had been set up to market Costner's devices. The defendants allege that they were duped out of a portion of an $18 million deposit from BP for the devices.


Social Media

The New York City Bar Association stated in an ethics opinion released Monday, June 4th that lawyers can conduct research on social media websites, so long as they do not communicate with potential or sitting jurors. "Communication, in this context, should be understood broadly, and includes not only sending a specific message, but also any notification to the person being researched that they have been the subject of an attorney's research efforts," according to the opinion. "Even if the attorney does not intend for or know that a communication will occur, the resulting inadvertent communication may still violate the rule." The opinion cautions against the risk that may arise if research is done on a social media service that alerts users when another individual has viewed their profiles. "The central question an attorney must answer before engaging in jury research using a particular site or service is whether her actions will cause the juror to learn of the research," the opinion says. The definition of "communication" was intentionally left open-ended to account for the evolution of social media sites. "It is the duty of the attorney to understand the functionality and privacy settings of any service she wishes to utilize for research, and to be aware of any changes in the platforms' settings or policies to ensure that no communication is received by a juror or venire member."


June 12, 2012

Legal Basics for Artists

By Carol Steinberg

EASL's Fine Art and Pro Bono Steering Committees presented a panel discussion on Legal Basics for Artists in Bushwick on June 1st in connection with Bushwick's Open Studio weekend. The event was a great success, with much appreciation expressed by the artists and attorneys who attended. Judith Prowda, Immediate Past Chair of the Section, conceived the idea for a panel when she took her students from Sotheby's Institute of Art out to Bushwick earlier in the year. Judith moderated the panel, which consisted of "Copyright Basics", presented by Carol Steinberg, one of EASL's Pro Bono Steering Committee members, "Moral Rights", with Richard Altman, and "Artist-Gallery Agreements", with Megan Maxwell, EASL's Co-Chair of the Digital Media Committee. Innes Smolansky, EASL's Second Judicial District Representative organized the wonderful reception both before and after the panel discussion, which was enjoyed by all.

About 80 artists and a few lawyers attended the event, which consisted of a reception, panel discussion and Q&A. The program was held at the Diana H. Jones Senior Center in the heart of Bushwick, where photographer Daryl-Ann Saunders, curated a wonderful exhibit at the center itself.

Carol began her discussion with the following hypothetical and image of an abstract painting:

A producer from the Brooklyn Academy of Brooklyn (BAM) contacted an artist
whose work she saw in a gallery in Bushwick, and asked the artist to re-
create the work as a backdrop for a BAM production. The work would be a work-
for-hire, the artist would receive $5,000 in compensation, she could hire an
assistant, and must include images of a man and woman on the backdrop.

Each panelist spoke for 20 minutes, and Carol covered the basics of copyright and fair use, by focusing on how copyright is created, the exclusive rights of the copyright owner, work for hire, and the importance of registration. She showed images of Patrick Cariou's photographs from Yes Rasta and the appropriated images in Richard Prince' paintings, the subject of the Cariou v. Prince lawsuit, to illustrate the application of the fair use factors. Then she applied the legal basics to the BAM hypothetical and advised as to how the basic deal should be revised.

Richard Altman, who litigated at least two of the landmark Visual Artists Rights Act (VARA) cases, told the stories of important moral rights cases and showed a wonderful clip of the sculptural installation which was the subject of the Carter v. Helmsley-Spear litigation. (Carter v. Helmsley-Spear 71 F.3d 77 (2d Cir.1995), cert.den. 517 U.S. 1208 (1996)). He shared the story of the Soho Wall case, where artist Forrest Myers had been commissioned to erect projections on the wall of a building at Houston and Broadway. (Board of Managers of Soho Int'l Arts Condominium v. City of New York, 2005 U.S. Dist. LEXIS 9139 (S.D.N.Y. May 13, 2005)(decision after bench trial), 2004 U.S. Dist. LEXIS 17807 (S.D.N.Y. Sept. 8, 2004)(summary judgment decision) and 2003 U.S. Dist. LEXIS 13201 (S.D.N.Y., July 29, 2003). Subsequently, when the owner of the landmarked building wanted to remove the sculpture to use the wall for advertising, the City Landmarks Preservation Commission refused to permit it. Three-way litigation then ensued among the City, the owner and Myers, who engaged Richard to defend his rights under VARA. He then described "the nasty legal battle" where ultimately the work was restored to the building, with the owner obtaining a small portion of the lower wall for advertising revenue. Richard pointed out, as the Tilted Arc (Richard Serra) case illustrated, that when art conflicts with real estate in the U.S., art usually loses. He then described the Carter case, in which ultimately the court found the installation to be a work for hire (and thus not protected by VARA) despite the fact that the artists had a prior agreement that they alone held the copyright in the work (a much criticized decision). Richard also added his personal perspective. Several years later when the work had still not been torn down, he served on a panel where one of the lawyers for Helmsley-Spear said the work was not torn down for years despite the legal win. Richard said he was surprised that it had not been torn down, and the lawyer told Richard that the case was fought to prove a point --that artists cannot dictate what goes into their buildings.

Megan Maxwell then talked about contracts in general, typical agreements or lack thereof in the art world, and the artist consignment statute, which benefits artists by protecting the proceeds of sales of art and protects the art from the claws of creditors. Megan pointed out that contracts express the understanding of the parties and that many artists and galleries do not have written agreements. She discussed the basic provisions that should be included in artist gallery agreements and further described a gallery's fiduciary obligations to the artist.

The panel concluded with robust Q & A. The artists had many good questions. Further, Daniel Braun, a new EASL member, asked an interesting question about the legal implications of street art. Many stayed to speak individually with the panelists and to enjoy the refreshments.

June 14, 2012

Pace I.P., Sports & Entertainment Law Forum Seeks Article Submissions

The Pace I.P., Sports & Entertainment Law Forum (PIPSELF), Pace Law School 's first online publication dedicated to the discussion of emerging legal issues in the Intellectual Property, Sports and Entertainment law fields, is seeking articles to be published in its third annual publication in spring of 2013.

To learn more about PIPSELF, and to read current and previous issues, please click on the following link: http://digitalcommons.pace.edu/pipself/.

PIPSELF is seeking a diverse assortment of articles from professors, students, attorneys and other professionals that address cutting-edge topics in the areas of Intellectual Property, Sports and Entertainment law.

Please submit completed articles to Joseph Randall via e-mail at jrandall@law.pace.edu by September 1, 2012.

Joseph Randall
Acquisitions Editor, PIPSELF
Pace University School of Law
J.D. Candidate, 2013

June 15, 2012

Weekly Issues in the News

By Geisa Balla

Kevin Costner and Stephen Baldwin

Kevin Costner won his jury trial against Stephen Baldwin on Thursday, June 14th. Baldwin and his business partner Spyridon Contougouris filed a lawsuit in U.S. District Court for the East District of Louisiana, alleging that Costner cheated him out of a multimillion-dollar deal to sell oil cleanup devices to BP after the 2010 Gulf of Mexico oil spill. Baldwin alleged that Costner hid the details of a deal with BP before Baldwin and his partner sold their stake in the company. Costner's attorneys argued that Baldwin and Contogouris were not entitled to any payments because they sold their shares in the company before the deal with BP was sealed. The plaintiffs' attorney repeatedly accused Costner of lying about the nature of his communications with BP executives before they sealed the deal. The 8-person jury deliberated for less than two hours and awarded no damages. Costner told reporters after the trial: "My name means more to me than money. . . That's why we wanted to get to the truth of this." Counsel for Baldwin stated "The bigger celebrity won."


The University of Alabama v. New Life Art Inc.

The U.S. Court of Appeals for the Eleventh Circuit ruled on June 11th that a sports artist did not violate the University of Alabama's trademark rights by selling a painting of the school's football games. Artist Daniel Moore started painting famous sports scenes in 1979, and in 2002, his alma matter said that he needed permission to depict the team's uniforms. The school then filed suit in 2005. In 2009 an Alabama district court reached a split conclusion, finding that the artist's paintings and prints were protected by free speech but that his unlicensed calendars, coffee mugs and other items were not. Both parties appealed. The Eleventh Circuit affirmed the lower court ruling regarding Moore's paintings and prints, and added his calendars to the category of protected artistic expression. Judge Lanier Anderson wrote the unanimous decision, stating: "Moore's paintings, prints and calendars very clearly are embodiments of artistic expression, and are entitled to full First Amendment protection."


DISH Network

The Southern District of California found on summary judgment that Sonicview, makers of satellite receivers, violated the Digital Millennium Copyright Act (DMCA) and the Federal Communications Act. DISH Network and two of its affiliates filed suit against Sonicivew, alleging that Sonicview's receivers allowed pirates to obtain DISH Network signals without authorization by circumventing DISH Network's encryption system. The DMCA prohibits the manufacture of any technology which "is primarily designed or produced for the purpose of circumventing a technological measure that effectively controls access to a work protected [by copyright]." The court found that Sonicview violated the DMCA, as its receivers could serve no other purpose but to pirate satellite images. The court also found Sonicview liable under the Federal Communications Act, which prohibits a person from manufacturing or distributing any device or equipment knowing that the device is primarily used in the unauthorized decryption of satellite signals. The court awarded the plaintiffs over $64 million in damages and issued a permanent injunction.


Brantley et al v. NBC Universal Inc.

The Ninth Circuit has affirmed for a second time the dismissal of a putative class action of cable and satellite subscribers alleging violations of Section 1 of the Sherman Act. The plaintiffs in the class action alleged that cable and satellite programmers and distributors had illegally tied the purchase of popular channels to less desirable channels, requiring subscribers to purchase expensive multi-channel packages as opposed to choosing channels a la carte. The plaintiffs alleged that the tying of the "must have" and low demand channels reduced consumers' choices and drove prices higher. However, the plaintiffs did not allege that the tying of these channels foreclosed competition with independent programmers. The Ninth Circuit affirmed the district court's dismissal of the Third Amended Complaint due to the plaintiffs' failure to properly allege injury to competition. The court explained that market conditions might be such that a specific tying arrangement does not have anticompetitive effects, or may be a response to a competitive market rather than an attempt to circumvent competition. Therefore, the court concluded that proper allegations setting forth injury to competition were essential.


Ralph Lauren and Rolex

The USPTO's Trial and Appeal Board issued an opinion last week, finding that Ralph Lauren's requested RLX marks for jewelry and watches would not cause confusion with Rolex's marks. Rolex first opposed the marks in 2006, arguing that RLX was too similar to the marks previously registered by Rolex. The USPTO held that the test is not whether the marks can be distinguishable in a side-by-side comparison, but rather whether they are sufficiently similar, in their entities, to confuse consumers about the source of the products. Rolex argued that consumers might associate Ralph Lauren and Rolex, mistakenly assuming that the brands had collaborated. To support this claim, Rolex pointed out that the two brands often co-sponsor sporting events, where, for example at Wimbeldon, courtside clocks are Rolex and the ball boys are outfitted by Ralph Lauren. Ralph Lauren argued that the inclusion of the Ralph Lauren name alleviated any likelihood of confusion. The USPTO judges agreed that in the context of jewerly and watch marks, the combination of Ralph Lauren's initials with an X indicates an expansion of Lauren's product line, not an encroachment on Rolex's mark. Rolex can now appeal the decision to the U.S. Court of Appeals for the Federal Circuit.


June 22, 2012

Weekly Issues in the News

By Geisa Balla

Louis Vuitton v. Warner Brothers

S.D.N.Y. Judge Andrew Carter dismissed Louis Vuitton's suit against Warner Brothers for the use of Vuitton's mark in the movie "The Hangover Part II." In the movie, Zach Galifianakis' character Alan arrives at the airport with a baggage cart full of luggage bearing the Louis Vuitton toile mark, as well as a matching satchel. When Ed Helms' character tries to move Alan's satchel, Alan snaps, "Careful, that is a Louis Vuitton." (except he mispronounces Louis as Lewis.) Louis Vuitton took offense to the depiction in the movie because the satchel was a knockoff by Diophy, which sells Louis Vuitton fakes throughout the United States.

Vuitton filed the lawsuit against Warner Brothers, claiming that the movie diluted its mark and violated the Lanham Act by misleading customers. Judge Carter dismissed the lawsuit, holding that Warner Brothers was protected by the First Amendment. Carter relied on the 2nd Circuit Court of Appeals decision Rogers v. Grimaldi, which established the standard for weighing trademark claims in the context of artistic expression. Under Rogers v. Grimaldi, artistic works are protected under the First Amendment, unless there is a "particularly compelling likelihood" that consumers will be misled. Carter reasoned that Vuitton's two theories--that movie viewers would believe Alan's bag as genuine, or that they would think Vuitton had approved the appearance of the knockoff supplier's product--did not overcome the Rogers v. Grimaldi standard. "First, it is highly unlikely that an appreciable number of people watching the film would even notice that Alan's bag is a knock-off," he wrote. "Furthermore, Louis Vuitton's position assumes that viewers of the film would take seriously enough Alan's statements about designer handbags (even about those he does not correctly pronounce) that they would attribute his views to the company that produced the film. This assumption is hardly conceivable, and it does not cross the line into the realm of plausibility." Carter also emphasized the humor that Alan is supposed to convey, stating that his reference to his bag "comes across as funny because he mispronounces the French 'Louis' like the English 'Lewis,' and ironic because he cannot correctly pronounce the brand name of one of his expensive possessions, adding to the image of Alan as a socially inept and comically misinformed character."


FCC Ruling

The Supreme Court of the United States ruled on June 21, 2012 that the Federal Communications commission (FCC) cannot enforce its current policies against fleeting expletives and nudity on over-the-air programs, both live and scripted. The case stemmed from 2002 and 2003 awards shows on News Corp.'s Fox Television network, when singer Cher blurted out an expletive and Nicole Richie used two expletives. The FCC had said that the network violated its indecency rules. The case also involved a seven-second nudity shot on a 2003 "NYPD Blue" episode on Walt Disney Co.'s ABC network. Writing a unanimous decision, Justice Kennedy based the decision on the Constitutional Due Process requirement, saying that the broadcasters had to be given fair notice of the policy and the restrictions. "A fundamental principle in our legal system is that laws which regulate persons or entities must give fair notice of conduct that is forbidden or required," he wrote in the 18-page opinion. Under the FCC's policy from 2001 and amended in 2004, broadcasters could be fined for airing a single profanity blurted out on a live show or for brief nudity. The decision holds that the FCC's standards were vague as applied to the broadcasts at issue in the case, but did not decide the larger question of whether the indecency policy violated constitutional free-speech rights.


Kevin Durant

Guitarist Mark Durante, known as "Durantula", filed a trademark infringement suit on June 20th against Oklahoma City Thunder star Kevin Durant and Nike. Durantula has performed under his stage name since the 1980s, and he trademarked his name in 2010. The lawsuit alleges that Durant, Nike and one of Durant's sponsors, the memorabilia company Panini America, are infringing on Mark Durante's trademark DURANTULA by using that nickname on items like basketballs and photographs and in shoe campaigns. The complaint alleges that Durante is a long-time Chicago musician. He released an album under the name Durantula and has maintained the website durantula.com for more than 10 years. Durante has asserted rights to a "common law mark" on Durantula in connection with music, recordings, apparel, T-shirts and related merchandise, as well as a "registered mark" on music, ringtones, sound recordings and the like. Intellectual Property litigator Joseph Gioconda states that Durante's lawsuit could be problematic, as it might be difficult to show that consumers will confuse a 23-year old basketball player with a middle-aged rocker. Gioconda believes that Durante will most likely rely on the theory of reverse confusion, claiming that people will believe that Durante ripped off Durant.


Dinosaur Skeleton from Mongolia

Manhattan U.S. Attorney Preet Bharara filed a lawsuit on June 18th, seeking to return to Mongolia a 70 million year old skeleton of a Tyrannosaurus Bataar, a smaller cousin of the Tyrannosaurus Rex. The dinosaur skeleton was discovered in 1946 during a joint Soviet-Mongolian expedition to the Gobi Desert. Since 1924, Mongolia has enacted laws declaring dinosaur fossils to be the property of the government, and criminalized their export. The lawsuit seeks the forfeiture of the skeleton from Heritage Auctions of Texas, the auction company that sold it for more than $1 million last month to an undisclosed buyer. In a statement Bharara said: "A piece of the country's natural history was stolen with it, and we look forward to returning it to its rightful place." Last month the Heritage Auctions of Texas agreed to help the Mongolian government investigate the ownership of the skeleton, and a state district judge in Dallas granted the Mongolian government a temporary restraining order to prevent the transfer of ownership until it was determined whether it was illegally obtained from Mongolia.


A copyright infringement lawsuit was filed on June 13, 2012 against Jay-Z in Los Angeles. Patrick White alleges that Jay-Z's portions of his 2010 book "Decoded," which is a collection of lyrics and the story behind their meanings, were lifted from White's writing. "In 2009, my personal computer was compromised, resulting in my personal work to be used in Jay-Z's book 'Decoded' which was released in 2010," White alleged in the handwritten lawsuit. "The book contains various expressions/colors/phrases which correlates to my work," he continued. "After contacting or attempting to contact the co-author, I got no reply." Author Dream Hampton and Random House Publishing are also listed as defendants in the lawsuit.


Change in Law to Provide Funding Alternative for Entertainment Entrepreneurs

On April 5th, President Obama signed the Jumpstart Our Business Startups (JOBS) Act into law, which included the Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012 (the Crowdfund Act or the Act) (http://www.govtrack.us/congress/bills/112/hr3606). The Crowdfund Act will ease the restrictions that had limited the ability of entrepreneurs, including artists, to finance their projects by raising small amounts of money from everyday investors online. Although securities cannot be offered for sale under the exemption from registration created by the Act (the crowdfunding exemption) until the SEC completes its rulemaking, the Act will soon impact many entertainment entrepreneurs seeking funds to finance films and other artistic endeavors, as well as their legal advisors.

Crowdfunding can be defined as a collective effort to pool money, popular today through the Internet, to support a project, cause or organization. It has become an increasingly common and effective way for entrepreneurs and artists to finance business and creative endeavors, making it easy to solicit financing from anyone with internet access and available capital.

Compliance with U.S. securities laws prior to the Crowdfund Act, however, required that crowdfunding be restricted to rewards, pre-payment, donation, and interest-free loan-based models, limiting the full possibilities of crowdfunding to stimulate entrepreneurship. A security is an investment of money in a common enterprise with an expectation of profits arising from the efforts of others. When a security is offered to the public over the Internet or through other means, the offering party is required to meet registration and ongoing disclosure requirements with the SEC. While this serves the public interest in helping guard against potential fraud, the time and expense involved in meeting these requirements make public offerings impractical for almost all start-ups and small businesses, and especially for artists. There are several exemptions to the public registration requirement, but prior to the Crowdfund Act, none would apply to a crowdfunding equity model where a financial stake in a business or project could be promoted online to the general investing public.

The challenge with equity crowdfunding is to create a regulatory framework that unlocks its full small business-stimulus possibility while mitigating the serious risk of fraud that comes with easing restrictions on the public solicitation of investment opportunities online. The SEC is charged with adopting and enforcing rules required to implement the Act that are due within 270 days of its signing into law (i.e., before January 1, 2013), but the Act itself provides baseline rules that include a combination of funding caps, rules governing websites that offer securities under the crowdfunding exemption and targeted disclosure and reporting obligations.


• It sets a $1 million cap on the amount that can be raised over a 12 month period by an issuer offering unregistered securities under the crowdfunding exemption. Any securities sold by the issuer, whether under the crowdfunding exemption or not, count toward this $1 million limit.

• It sets a cap on the amount each investor can invest in a single offering made under the exemption, with different limits based on investors' annual income or net worth.

• It requires that transactions entered into under the crowdfunding exemption be conducted through an intermediary that meets requirements set out in the Act. Such intermediaries must register with the SEC as a "funding portal", conduct background checks on the officers, directors and significant (20% or more) stockholders of the issuer, announce a minimum financing target pursuant to which funds will only be disbursed to the issuer once reached and screen investors with questions designed to demonstrate sufficient financial acumen to appreciate the unique risks of an investment in securities under the crowdfunding exemption.

• It requires that the issuer file certain basic information about itself with the SEC and make a variety of other disclosures available to its intermediaries and investors, including its intended use of the proceeds and certain financial information (the extent of which depends on the overall amount of financing the issuer has sought under the crowdfunding exemption over the past 12 months).

Each of these requirements and others will be further elaborated on in the forthcoming SEC rules, which will determine the complexity of the funding portal registration process and in effect, when securities can start being offered under the crowdfunding exemption.

Other key features of the Act limit the resale of securities purchased under the exemption, prohibit issuers from advertising the terms of an offering and provide a remedy for investors harmed by an issuer or intermediary's material misstatements or omissions. One challenge the SEC must consider is its fraud prosecution strategy where, with potential damages that may often be very small, victims may not have the financial incentive to incur the expense of seeking legal redress. States, however, will also be able to take action against issuers and intermediaries for fraud, despite the Act's preemption of state blue sky laws.

Besides fraud, there are other issues that may be difficult for the SEC to address. In a typical seed investment, lawyers, financial advisors and other representatives of the investor negotiate tagalong rights and other preferences to make sure that early-stage investors' interests are protected. Otherwise, early investors could become completely diluted as the company moves on to later-stage capital raises. The Act anticipates this concern, requiring that the issuer provides a description of its capital structure and the terms of the offering, including how crowdfunding investors "may be materially limited, diluted, or qualified by the rights of any other class of security of the issuer." Nonetheless, it will be a major challenge for disparate small investors to replicate the leverage and sophistication that enables an angel investor to receive offering terms that merits its capital risk.

While small business hiring and commercial innovation are the most common themes used to tout the Crowdfund Act, the Act is also likely to impact the arts. Crowdfunding already has a special role in the creative community for a variety of reasons. Audience taste is extremely difficult to predict, and crowdfunded creative projects benefit from public feedback before production begins. They go forward when enough potential consumers (who are also likely to promote it to others) use their money to express interest and belief in a project, in contrast to hierarchical decision-making. Independent contributors are also free from public relations and corporate conflict concerns that can otherwise hinder financial support for unorthodox works.

First-time filmmakers and other less-established artists have historically had even fewer legal financing options than other entrepreneurs. Angel investors or banks will rarely finance a creative project helmed by a novice. Before websites like Kickstarter and Indiegogo came along, friends, family, personal savings and credit cards were often the only way to fund such an independent endeavor.

These platforms are still likely to thrive once the crowdfunding exemption takes effect. While much less onerous than the requirements for a public offering, complying with the Crowdfund Act and forthcoming SEC rules will still require significant care and expense. Retaining full control over a project successfully funded by a Kickstarter or similar campaign will also appeal to many artists over the challenges of dealing with stockholders from an issuance under the crowdfunding exemption. Additionally, individuals that currently contribute to the arts are unlikely to begin supporting only those projects that have the possibility of profit, particularly when being presented with information on how risky are such investments.

In many cases, however, issuing securities under the crowdfunding exemption will be the preferred method of financing a film or other creative project. It will be of particular interest to those filmmakers and other artists with projects that are more commercially-oriented and have substantial budgetary requirements. As David Marlett, Executive Director of the National Crowdfunding Association, has pointed out, filmmakers could raise more than $1 million for a single film by having multiple offerings under the crowdfunding exemption spaced at least 12 months apart.

In comments to the SEC (http://www.sec.gov/comments/jobs-title-iii/jobstitleiii-22.htm), prominent entertainment attorney and author Mark Litwak made the case that the forthcoming rules should consider certain differences between films and other creative endeavors relative to "traditional businesses". Litwak's suggestions for regulating film financing under the crowdfunding exemption include:

• requiring filmmakers to rigorously document and report expenditures, including a limit that only 10% of the funds raised are used for cash payments (with all other expenses to be paid by check or credit card so that there is a record);

• requiring that a script or synopsis, line item budget and deadline for completion be provided to potential investors; and

• requiring a final cost report be issued to investors on completion and that updates to investors are provided every 90 days until the film is released.

Such distinctions could help facilitate the use of the crowdfunding exemption for films and other creative works by further protecting investors from fraud.

Anyone considering offering stock under the new exemption will need to carefully review the Act, the forthcoming SEC rules and other guidance, consider the costs against other funding alternatives and consult an attorney. Despite the expenses and challenges, the crowdfunding exemption could have broad implications on the arts and development of artists.

Ronald L. Barabas is a Corporate and Entertainment Attorney at Di Santo Bowles Bruno & Lutzer LLP. He can be contacted at rbarabas@disantobowles.com.

June 29, 2012

Grant of Cert for Nike in Trademark Case

By Gergana H. Miteva
Miteva Law PC www.mitevalaw.com

On Monday the United States Supreme Court granted certiorari to a case involving a Nike shoe design trademark (http://www.supremecourt.gov/orders/courtorders/062512d4f1zor.pdf). In early 2010, only a few months after Nike sued another shoe manufacturer for trademark infringement, it "abruptly" dropped the case and presented the defendant with a "Covenant Not to Sue", promising not to challenge any of the defendant's current or previous shoe designs. The defendant, apparently unconvinced by the covenant, moved to proceed with its counterclaim to invalidate the mark and cancel its registration. Both the Southern District of New York and the Second Circuit court sided with Nike (http://www.pattishall.com/pdf/Nike_v_Already.pdf), and held that since the defendant was no longer exposed to potential litigation pursuant the covenant not to sue, the court had no subject matter jurisdiction over the counterclaim. [http://newsandinsight.thomsonreuters.com/Legal/News/ViewNews.aspx?id=50949&terms=%40ReutersTopicCodes+CONTAINS+%27ANV%27]

The defendant's successful petition for certiorari (http://newsandinsight.thomsonreuters.com/uploadedFiles/Reuters_Content/2012/06_-_June/Trademark%20Nike.pdf) argued that the Second Circuit's decision diverged from a Ninth Circuit decision issued in 2000 (http://archive.ca9.uscourts.gov/coa/newopinions.nsf/2E84E99FE610B5F88825695200757AB0/$file/9915099.PDF?openelement) which allowed counterclaims challenging the validity of a trademark to proceed despite the plaintiff's promise not to sue. In the California case, the plaintiff offered to waive all of its trademark infringement, dilution, and unfair competition claims against the defendant's use of the "masters.com" domain. The court held that the plaintiff's promises did not divest the court from jurisdiction to hear the defendant's counterclaims.

This case taps into the very core of strategic decision making for trademark owners. Nike placed itself in a somewhat precarious situation by first suing to enforce its trademark and later voluntarily dismissing the suit, signaling apprehension that its mark may be invalidated. This move, planned or not, may backfire regardless of the outcome. Even if the Supreme Court finds that there is no jurisdiction over the counterclaim, Nike might still be vulnerable to competitors wishing to get a free ride on its popularity. Nike's apparent lack of confidence in the validity of this trademark might embolden opportunistic companies to manufacture products with similar designs and names.

Owners of valuable trademarks, however, also stand to benefit greatly from a favorable outcome in this case. If they gain the ability to enforce their marks without fearing invalidation, the risk of going to court to enforce them would decrease substantially. The down side of this is that it may inspire an increase in big name trademark owners flexing their muscles against small competitors by going to court with the option to voluntarily dismiss the case if the other side signals ability and willingness to litigate all the way.

Weekly Issues in the News

By Geisa Balla

Frances Williams Preston

Frances Williams Preston, the former president of BMI, passed away on June 13th in Nashville of congestive heart failure at the age of 83. She was surrounded by her family.

In 1958, Preston was a Nashville radio station receptionist when BMI hired her to open a southern regional office. By the time she retired as president and chief executive of BMI in 2004, she had been long known as one of the most successful and influential executives in the music industry and a key figure in Nashville's growth as a major music center. Preston fought passionately for the rights of songwriters, composers and music publishers. "She truly felt that writers were not properly compensated, and she spent her life fighting for them," said Del Bryant, who succeeded Preston as BMI's president and chief executive. "She was a well-known face on the Hill [in Washington, D.C.] and had a tremendous relationship with some of the leading legislators of her time." Preston nurtured the career of countless songwriters and mentored them throughout the years. "There's still people that I keep in touch with that I signed in the early days, like Willie Nelson, Dolly Parton and Kris Kristofferson," she told the Associated Press in 2002. "That was my favorite part of the business. But you've got to get into the business of the business in order to help them."

Preston is survived by her three sons, William Kirk Preston, David J. Preston and Donald L. Preston; six grandchildren; and a great-granddaughter.


South Park

The U.S. Court of Appeals for the Seventh Circuit upheld a lower court decision that the fair use defense applied to a 2008 South Park Episode that lampooned a 2007 viral video "What What (In The Butt.) (WWITB) Brownmark Films, owners of the original WWITB video, claimed that the fair use did not apply. The lower could had held that South Park's version, featuring the character Butters, made transformative use of the original by somehow doing "the seemingly impossible -- making the 'WWITB' video even more absurd by replacing the African-American male singer with a naive and innocent 9-year-old boy dressed in adorable outfits." The Seventh Circuit explained that Brownmark Films had waived its fair use argument by not addressing the argument in the Rule 12(b)(6) stage. Rather, it had only argued that the matter should go to trial. However, "even if Brownmark were not barred from offering argument that SPDS did not engage in fair use, we agree with the district court that this is an obvious case of fair use. When a defendant raises a fair use defense claiming his or her work is a parody, a court can often decide the merits of the claim without discovery or a trial. When the two works in this case are viewed side-by-side, the South Park episode is clearly a parody of the original WWITB video, providing commentary on the ridiculousness of the original video and the viral nature of certain YouTube videos." The Court further stated: "Despite Brownmark's assertions to the contrary, the only two pieces of evidence needed to decide the question of fair use in this case are the original version of WWITB and the episode at issue."


The Expendables

Judge Jed Rakoff has dismissed a copyright infringement suit filed against Sylvester Stallone that had alleged that he copied the film The Expendables. Marcus Webb filed a lawsuit against Sylvester Stallone in October 2011, claiming that the 2010 film The Expendables was "strikingly similar" to his own copyrighted work. Webb's script was titled The Cordoba Caper, about "a team of elite, highly-trained mercenaries." Webb claimed that Stallone and co-writer David Callaham may have had access to it, as the script was shopped around Hollywood for several years. Stallone denied the allegations. In a motion to dismiss, the defense argued that Webb wrote his script after Callaham had already written three drafts of the screenplay, and that Webb had no information that Stallone or Callahan had ever seen The Cordoba Caper. The defense also argued that the alleged similarities were merely ideas, and that the overall concept and the feel of the two works were vastly different. Judge Rakoff agreed with the defense, issuing a short order on Monday, June 25th, granting the defendants' motion "in all respects," and promising a fuller written opinion soon.


The Black Keys v. Pizza Hut, Home Depot

The Black Keys filed copyright infringement lawsuits against Pizza Hut and the Home Depot on June 21st, claiming that the former misused the song "Gold on the Ceiling" in a recent advertisement and that the latter did not have permission to use elements of the song "Lonely Boy" in an ad promoting power tools. Both songs are from the band's "El Camino" album, released in 2011. The suits claim that both companies were given written notices that the ads misused The Black Keys' music. Neither company received permission to use musical elements from the songs. The advertisements do not include any vocals. The lawsuits seek unspecified damages of more than $75,000 each, and orders preventing the continued use of the songs in the commercials.



On June 22nd, U.S. District Court Judge Gary Feess denied CBS' request for a temporary restraining order against ABC's new reality series "The Glass House". CBS filed the suit in May, claiming that "The Glass House" uses proprietary information from "Big Brother." ABC denied the allegations, arguing that the similarities between the shows--a group of strangers living in a house and competing against each other--are boilerplate elements of most reality TV shows. The judge sided with ABC, holding that, "The Court finds that CBS has failed to demonstrate an entitlement to the preliminary relief sought." The court also stated that "while it cannot say that CBS will not prevail at trial, it has concluded that success on the merits is unlikely. . . The evidence indicates to the Court that "Big Brother's" alleged trade secrets were either already known to the business ... were readily capable of being 'reverse-engineering' based on information disclosed in the public domain ...or were not adequately protected as trade secrets." The judge also noted that "CBS has failed to persuade the Court that it will suffer immediate and irreparable injury if 'Glass House' airs."

"We're pleased the Court agreed with ABC's arguments that 'The Glass House' is a very different show and people working in the reality television industry should not be prevented from bringing their skills to a new employer," stated an ABC release following Judge Fees' decision Friday. "We are thrilled viewers will now get a chance to continue to enjoy and participate in ABC's 'The Glass House.'" In its statement, CBS said: "Win, lose or draw on the TRO, we fully intend to proceed with our claims against Disney/ABC for copyright infringement and misappropriation of trade secrets over 'The Glass House,' which may still warrant more injunction proceedings depending on the content of each episode."


About June 2012

This page contains all entries posted to The Entertainment, Arts and Sports Law Blog in June 2012. They are listed from oldest to newest.

May 2012 is the previous archive.

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