April 16, 2024
As you probably know, my practice focuses primarily on intellectual property law. Nonetheless, many of the cases I handle tend to cross over into other legal areas, and, for whatever reason, lately I’ve handled a bunch of matters related to restrictive covenants and trade secrets. It’s an area of law I’ve dealt with before, but this sudden uptick of cases at one time is definitely out of the ordinary. Maybe it is something in the water — or maybe it has to do with the Federal Trade Commission’s proposal to ban non-compete agreements, along with the New York State legislature passing a bill banning them (Governor Hochul vetoed it.) It’s hard to say. But it is an interesting, and, if you’re a business owner, important subject.
So let’s talk about restrictive covenants, trade secrets, how they relate to each other, and the enforceability of restrictive covenants because, based on my recent experience, there’s a good deal of misunderstanding — even among lawyers — about what restrictive covenants can and can’t do, what trade secrets actually are, and the enforceability of restrictive covenants.
A note about terminology: Media coverage of the FTC’s proposed ban or relevant state legislation focuses on “non-competes” — agreements where an employee agrees not to compete against his or her employer after leaving employment. In my view, non-competes are just one type of restrictive covenant — the umbrella term I’m using here. This term encompasses not just “non-competes,” but also agreements barring a former employee from soliciting his or her former employer’s customers, vendors, or employees.
Ok, let’s get down to business: Are restrictive covenants enforceable? The short (and very lawyerly) answer is: it depends. Under existing law, restrictive covenants are enforceable to the extent that they are necessary to protect the former employer’s legitimate interest(s), don’t impose an undue hardship on the employee, and aren’t harmful to the public.
These are key points. In New York (where I’m based), courts look at a couple of things (there are some variations between states) to determine if a restrictive covenant meets these criteria. For example, is the covenant for a reasonable time period and is it limited to a reasonable area? One that limits a former employee’s ability to work for companies that directly compete with the former employer for six months may well be reasonable. One that bars a former employee from working anywhere in the world for 50 years, though? Probably not.
In determining whether a restrictive covenant is reasonable, courts also look at whether it’s necessary to protect an employer’s interest. Usually this means that courts want to see that there are trade secrets, confidential information, and relationships an employee developed through his or her employment that need to be protected. In my experience, this is where we run into problems.
Have I seen people take their former employer’s trade secrets, or confidential or highly proprietary information, to their next job? Absolutely. But are there other cases where the information might not really be secret or proprietary? Yes, because there seem to be a lot of misconceptions about what really constitutes a trade secret or confidential information.
For starters, just because an employer calls something a trade secret or says something is confidential, doesn’t mean that a court is going to agree. In fact, courts understand these terms very differently from most people. I think that if you asked a group of reasonably well educated people whether an employer’s client list is a trade secret, most would probably say it is. However, unless it would be really hard or almost impossible to figure out the identity of the clients on that list, many courts will say that list is not not a trade secret. The same goes for a list of vendors.
In other words, in many circumstances, what people think are trade secrets aren’t actually trade secrets. In turn, this means that many restrictive covenants are less enforceable than many employers hope or believe.
However, there are a whole bunch of significant qualifications to this. Most importantly, just because a restrictive covenant may not be enforceable, or may be only partially enforceable, an employee doesn’t have the freedom to do whatever they want with their employer’s information. While someone is employed, they’re required to act in their employer’s best interests; they can’t, for example, influence a client to take its business elsewhere. Similarly, as a general rule, work product created during an employment relationship and on an employer’s equipment, belongs to the employer.
So while our governments and their agencies fight it out over changes to restrictive covenants, make sure you understand what any that apply to you or your company actually can enforce or prevent.
April 2, 2024
In March 2018, iconic fashion house Chanel sued What Goes Around Comes Around (“WGACA”), a reseller of luxury goods à la Poshmark and The RealReal (which Chanel has also sued). These retailers are essentially online thrift stores (WGACA is also brick-and-mortar), solely trafficking in high-end designer goods and apparel instead of ratty Wranglers and stained JCPenney tops.
WGACA, Poshmark, The RealReal, and others of their ilk tout how recycling luxury items is good for the environment (not to mention their bottom lines); Chanel, however, finds their practices less than noble. In its lawsuit, Chanel accused WGACA of trademark infringement and false advertising by selling unauthorized Chanel products and using the Chanel trademark too prominently in its marketing. I wanted to highlight this case because it’s an important lesson in what is and is not permitted when it comes to using someone else’s trademarks and other materials associated with a brand.
Full disclosure: Another reason I find this case interesting is that as the quality of mass retailers gets worse and worse every year, the only way for me to find well-made goods at a non-astronomical price is through the resale market. So yeah, I’m a little personally involved here.
Chanel, Inc. v. WGACA, LLC, went to trial in January of this year. On February 6, the jury returned a verdict for Chanel and awarded them $4 million in statutory damages for willful trademark infringement. How did they reach this conclusion?
Let’s start with some background. Under the first sale doctrine, once a genuine product is sold, the person who purchases it is free to resell it without risk of liability to the brand owner. Likewise, it’s totally fine to use someone else’s brand or trademark to accurately describe the pre-owned item in sales materials. For example, I can snap a photo of a pair of Nike Air Force 1s or a Birkin bag taking up space in my closet, list it for sale on eBay or Facebook Marketplace and use the brand name in my written description along with pics of the brands’ trademarks (assuming the item I’m listing is genuine) — provided I use the marks or brand names only to the extent necessary to describe what I’m selling, and I don’t do anything that might suggest that I’m affiliated with Nike or Hermès or that either company is endorsing my resale of the items.
While there was no question that many (although not all) of the goods WGACA offered were genuine, WGACA ran into trouble with Chanel because there was significant evidence that WGACA used Chanel’s marks too prominently and too often. For example, on social media, it hashtagged posts with #WGACACHANEL. Elsewhere, WGACA featured a Chanel mark more prominently than its own brand mark. Moreover, WGACA’s website and other communications included the statement “WGACA CHANEL – 100% Authenticity Guaranteed.” The jury appears to have viewed this as WGACA suggesting it was endorsed by or had a relationship with Chanel, and on this basis, ruled for Chanel.
WGACA also sold items that, according to Chanel, were never approved for retail, including handbags with voided or pirated serial numbers as well as decorative items Chanel lent to retailers. On this issue the District Court granted summary judgment in favor of Chanel, finding these items were never authorized for sale by anyone, much less WGACA.
What lessons should resellers take away from this? For starters, there’s plenty of room to truthfully advertise the resale of authentic luxury goods. However, it’s important to have specific processes in place to vet any advertising to make sure it doesn’t suggest an affiliation with the brand where there isn’t one. In a similar vein, resellers need to develop programs that ensure the goods they offer for sale are authentic and were originally sold by the brand or, if that’s not always possible, to accurately communicate with consumers.
But the case isn’t closed yet. It remains before the District Court on Chanel’s request that WGACA be prevented from, among other things, using Chanel’s marks to promote WGACA’s business; including the word Chanel in any hashtags; and using in its advertising any Chanel-branded items other than items actually for sale by WGACA.
I’m curious to see what happens at the preliminary injunction hearing. Here, I’m particularly interested in what the Court has to say about the use of hashtags on social media because this seems like an area where, to date, most courts have assumed that a hashtag using a brand name is infringing or gives rise to liability. Perhaps this Court will give us a more nuanced analysis. I hope so, since I believe that resellers like WGACA and The RealReal will continue to thrive as consumers look to both save money and purchase goods with a smaller environmental impact which, as mentioned above, is a key element in these resellers’ marketing. Of course, one could question whether their “green” claims constitute false advertising, but that’s a question for another day.
March 19, 2024
I’ve posted quite a bit about the growing legal battles involving AI companies, copyright infringement, and the right of publicity. These are still early days in the evolution of AI so it’s hard to envision all the ways the technology will develop and be utilized, but I predict AI is going to come up against even more existing intellectual property laws — specifically, trademark law.
For example, in its lawsuit against Open AI and others (which I wrote about here), the New York Times Company alleged the Defendants engaged in trademark dilution. To take a step back, trademark dilution happens when someone uses a “famous” trademark (think Nike, McDonalds, UPS, etc.) without permission, in a way that weakens or otherwise harms the reputation of the mark’s owner. This could happen when an AI platform, in response to a user query, delivers flat-out wrong or offensive content and attributes it to a famous brand such as the New York Times. Thus, according to the Times’ complaint, when asked “what the Times said are ‘the 15 most heart-healthy foods to eat,’” Bing Chat (a Microsoft AI product) responded with, among other things, “red wine (in moderation).” However, the actual Times article on the subject “did not provide a list of heart-healthy foods and did not even mention 12 of the 15 foods identified by Bing Chat (including red wine).” Who knows where Bing got its info from, but if the misinformation and misattribution causes people to think less of the “newspaper of record,” that could be construed as trademark dilution.
There are, however, potential pitfalls for brands who want to use trademark dilution to push back against AI platforms. It’s difficult to discover, expensive to pursue and there can be a lot of ambiguity about whether a brand is “famous” and able to be significantly harmed by trademark dilution. In the New York Times’ case, the media giant has the resources to police the Internet and to file suits; nor should there be any dispute that is a “famous” brand with a reputation that is vitally important. But smaller companies may not have the resources to search for situations where AI platforms incorrectly attribute information, or have a platform visible enough to meaningfully correct the record. Plus, calculating the brand damage from AI “hallucinations” will be very difficult and costly. Also, this area of the law does nothing for brands that aren’t “famous.”
Another area where trademark law and AI seem destined to face off is under the sections of the Lanham Act — the Federal trademark law — that allows celebrities to sue for non-consensual use of their persona in a way that leads to consumer confusion, or others to sue for false advertising that influences consumer purchasing decisions. AI makes it pretty easy to manipulate a celebrity’s (or anyone’s) image or video to do and say whatever a user wants, which opens up all sorts of troublesome trademark possibilities.
Again, there are a couple of serious limitations here. For starters, the false endorsement prong likely only applies to celebrities or others who are well-known and does little to protect the rest of us. Perhaps more important (and terrifying), it seems likely that there will be significant issues in applying the Lanham Act’s provisions on false advertising in the context of deepfakes in political campaigns — like, for example, the recent robocall in advance of the New Hampshire primary that sounded like it was from President Biden. To avoid problems with the First Amendment, the Lanham Act is limited to commercial speech and thus will be largely useless for dealing with this type of AI abuse.
One other potentially interesting (and creepy) area where AI and trademark law might intersect is when it comes to humans making purchasing decisions through an AI interface. For example, a user tells a chatbot to order a case of “ShieldSafe disinfecting wipes,” but what shows up on their porch is a case of “ShieldPro disinfecting wipes” (hat tip to ChatGPT for suggesting these fictional names). While the mistake of a few letters might mean nothing to an algorithm (or even to a consumer who just wants to clean a toilet), it’s certainly going to anger a ShieldSafe Corp. that wants to prevent copycat companies from stealing their customers (and keep their business from going down that aforementioned toilet).
March 5, 2024
Continuing from a previous post reflecting on the seven years since starting my law practice, here are a few more things I’ve learned along the way about business development, entrepreneurship, and growing a law firm. Hopefully, some (or all) resonate with anyone working to grow their career or business.
When I first started my firm, and for several years after, I spent a lot of time thinking there had to be a clear and logical blueprint for business development. If I could just find the right program, join the ideal networking group, or read the best book on the subject, surely I’d be able to grow my business to where I felt it should be. It was particularly easy to succumb to this kind of thinking when I was feeling unsure about what I was doing, if I hadn’t hit a milestone I wanted to reach, or if I saw someone else posting how their firm was killing it. Obviously, my not measuring up was because I hadn’t yet found the right program, group, or book.
I now know that’s not how it works. Having tried a lot of programs, joined (and left) many networking groups, and read a slew of books, I’ve come to the most definite conclusion that, at least for me, there is no one perfect formula to grow a law firm (or any business). I’m sure the various programs, groups, and books work for some people. I, however, am not one of them. And I’m quite certain I’m not alone in that. So, with that in mind, what has worked for me?
First, starting and growing a business takes confidence and the ability to put yourself out there, in emotional and financial harm’s way. It’s a big risk. Some people have no problem here; but again, I am not one of them and the prescriptions of a given program, group, or book weren’t going to change this for me. The solution could only come from within. And that meant spending time thinking about what made it so hard for me to have the confidence that comes so easily to others. Ultimately, I understood it was a fear of criticism. I’ve talked about this a bit before in that previous post, but the tl;dr is I was always terrified that if I wrote something on LinkedIn, on my blog, or in an email, someone somewhere was going to say it was stupid. I suspect some of this fear has to do with gender, but that’s an issue for another day.
What helped me get over this? It began by simply recognizing and acknowledging the issue. Therapy (duh!!) was big. Meditation helped as well. I also work with a fabulous business coach who often gives me new ways of thinking about things. I have a bunch of different pieces of advice she’s given me over the years written down where I can refer to them when needed (frequently!). One of my favorites is a reminder that we all tell ourselves stories and hold certain beliefs, but we need to look at data to see if the stories have any truth to them. I also work with a wonderful writer and editor on a lot of my posts and articles. This allows me to get my ideas down quickly without constantly judging or second-guessing myself, knowing someone else will make sure there are no incomplete thoughts or missing punctuation.
Secondly, I’ve learned that sometimes doing something is better than doing something perfectly — and way better than doing nothing. I, like many others who have gone to fancy schools, worked for BigLaw, and grabbed at every gold ring along the way, tend to think that everything I do has to be perfect. Obviously, with legal work, exactitude is crucial. However, when it comes to business development, I realized that by getting bogged down in the search for the perfect way to do something, I often didn’t get anything done. Again, outside help has been really important for me in putting aside my urge toward perfection and focusing on just getting things done even if they’re not 100% perfect. Over time, paying attention to what works and what doesn’t has helped me refine my approach so that even when I know I’m not perfect, I keep moving in the right direction.
Which brings me to a third thing that’s helped me: consistency. In other words, practice. For me, the act of doing something over and over again has been hugely helpful in becoming more comfortable with it. Truthfully, I’m not sure how exactly I stumbled on this, but it works for me. What you’re reading right now is a perfect example: when I started writing these posts, each and every one was a torturous struggle through hours of pain. Now several years and countless posts later, simply through repetition, the process has become much easier. And that, I assure you, feels great.
February 20, 2024
The Second Circuit recently issued a(nother) decision in the dispute between bridalwear designer Hayley Paige Gutman and her former employer, JLM Couture, Inc. over ownership of Instagram and Pinterest accounts Gutman created while employed by JLM. You can find background on this case here.
The Second Circuit reversed the District Court’s 2022 decision, which held JLM owned the accounts. More notably, the Second Circuit rejected the lower court’s six factor test considering how the account describes itself; whether the account was promoted on the employer entity’s advertisements or publicity materials and linked to other internet platforms of the entity; whether it promoted the business; and whether employees of the entity (other than the account creator) had access to and managed the account.
In reversing the lower court, the Second Circuit held social media accounts “should be treated in the first instance like any other form of property,” and, in figuring out who currently owns one, courts should look to who owned it when it was created and whether there is any evidence the account was ever transferred to someone else. “[T]he law has long accommodated new technologies within existing legal frameworks,” the Circuit wrote. Translation: “Enough with the new tests already. We have plenty.”
Overall, the Second Circuit’s conclusion lines up with what I suggested in a New York Law Journal article last month: Who Owns a Social Media Account? It’s Pretty Simple, Really. The article is paywalled, but the gist is this: Courts should stop coming up with new tests to determine whether a social media account belongs to a business or an individual associated with the business and, instead, look to existing and well-established legal frameworks to determine ownership.
Hopefully, this is what will happen when the District Court takes up Gutman’s case again. Here, the Second Circuit sent the case back to the lower court with a note that the ownership of the social accounts may turn, at least in part, on the terms of service of the relevant social media platforms and, specifically, does “ownership” of a social media account include the right to transfer the account to another. The Second Circuit also suggested that the District Court might want to separate the ownership of content posted on the accounts from the ownership of the accounts themselves, noting that rights to the accounts and rights to the accounts’ content may or may not be the same.
And on it goes. I’ll be paying particular attention to what the District Court says about the role of the terms of service for social media accounts. As we all know, social media companies change their terms of service — a lot. Does this approach give an outsized role to the terms of service even though the litigants in cases over ownership of social media accounts have no input into the terms of those agreements? Second, how will courts factor in changes to terms of service that parties may or may not be aware of, particularly as at least one of the parties to a dispute over ownership of a social media account probably never agreed to the terms of service? I suspect these issues will mean the District Court downplays the significance of the terms of service and instead looks at doctrines governing the ownership of other intangible property. Because tests that are well established… tend not to fail.
January 30, 2024
I started my law firm in February 2017. As I approach that anniversary again, I have some reflections on the lessons I’ve learned over the past seven years.
First, some background. Early in my career, I worked at two large NYC firms (i.e. BigLaw). My experience at those firms is a story for another day, but if you want an idea what that life is like, others have a more recent tale to tell.
After leaving BigLaw, I spent more than 10 years at a litigation boutique. My colleagues were incredibly good to me over that decade, teaching me a lot about how to be an effective lawyer. They supported me when I needed to get my feet underneath me after the death of both of my parents, and then when I got married and had a baby. But I reached a point where not only had I learned everything they had to teach me, I knew that I needed and wanted something else for my next chapter. I spent about a year figuring out what I wanted to do (while still working full time) and, ultimately, decided I couldn’t see myself working for someone else anymore. Also, having worked for people who had started their own law firms, I figured it couldn’t be that hard.
To a certain extent, I was right. It wasn’t that hard. However, in some ways, I was really, really wrong. I hadn’t fully anticipated the amount of reflection and introspection required to not just build something, but to build something that works for me and my clients. I believe the lessons I learned are worth sharing because they apply not only in the context of a small law firm, but to anyone trying to develop a client base.
First, I am not for every client, and not every client is for me. This has probably been the hardest thing for me to learn and an area where I’ve repeatedly failed to take my own advice, although I keep trying. I’ve slowly learned to interview potential clients so I can decide if they’re people I want to work with and, most importantly, to say no to those I think aren’t going to align with how I work and what my firm is about.
Why does this matter so much? Working with clients who aren’t a good fit can feel like a chore. It’s a drain on my time and energy and, I suspect that no matter how hard I try, these clients are going to be disappointed with my work. It’s not a formula for success, especially considering I get about 99 percent of my business from referrals. I know there will be attorneys better suited for the people I turn down, and I do my best to help those potential clients find them.
Of course, no one can always pick and choose clients. Like everyone else, I need to make a living. But screening clients carefully is critical regardless of your field, and this holds particularly true for what I do — commercial litigation. I frequently have adversaries who think that the best way to litigate is to be incredibly unpleasant (generally, it’s not, but that’s a subject for another post), and I don’t need to deal with this and a difficult relationship with a client at the same time, especially when a part of my job is sometimes to deliver bad news to the people I represent. Of course, this isn’t to say that my relationships with clients are all sunshine and flowers and unicorns who poop rainbows. The nature of the litigation beast is that sometimes things are going to get tense. All part of the job. However, focusing on working with simpatico clients is a north star that has been incredibly helpful, and has gotten me to a place where I work more and more with people I respect and trust — and who respect and trust me.
A second key lesson I’ve learned is to make time for the uncomfortable and the unpleasant. In my experience, to run a successful business you’re going to have to do some things that are difficult or you don’t enjoy. For a long time, what I hated more than anything was marketing myself. I felt I had no idea what I was doing and I was really afraid that someone out there on the Internet was going to criticize my marketing efforts. As I look back, I realize this self-doubt was something I picked up at one of the firms I worked at previously, but that too is a story for another day.
Because of this, for the longest time I would start every day intending to write a blog post, a newsletter, or something for LinkedIn, but because I found this marketing work so uncomfortable it was all too easy to push it aside in favor of other, less unpleasant or less scary things. Then, when I blew it off I would get frustrated with myself and feel bad about not doing the work. Suffice it to say, this was a pretty awful spiral that I do not recommend.
My solution began with recognizing the pattern, then blocking out an hour in the middle of each day to devote to growing my firm (I’m writing this during this time). Do I use this hour wisely and productively every day? Of course not. But do I use it wisely and productively more often than not? Yes. This doesn’t necessarily solve the problem of feeling uncomfortable doing things to market my firm — I still am — but it does make sure I don’t avoid it.
Stay tuned for more and let me know if there are any business development topics you’d like to see me talk about. I know we can all benefit from an exchange of ideas.
January 16, 2024
I closed out 2023 by writing about one lawsuit over AI and copyright and we’re starting 2024 the same way. In that last post, I focused on some of the issues I expect to come up this year in lawsuits against generative AI companies, as exemplified in a suit filed by the Authors Guild and some prominent novelists against OpenAI (the company behind ChatGPT). Now, the New York Times Company has joined the fray, filing suit late in December against Microsoft and several OpenAI affiliates. It’s a big milestone: The Times Company is the first major U.S. media organization to sue these tech behemoths for copyright infringement.
As always, at the heart of the matter is how AI works: Companies like OpenAI ingest existing text databases, which are often copyrighted, and write algorithms (called large language models, or LLMs) that detect patterns in the material so that they can then imitate it to create new content in response to user prompts.
The Times Company’s complaint, which was filed in the Southern District of New York on December 27, 2023, alleges that by using New York Times content to train its algorithms, the defendants directly infringed on the New York Times’ copyright. It further alleges that the defendants engaged in contributory copyright infringement and that Microsoft engaged in vicarious copyright infringement. (In short, contributory copyright infringement is when a defendant was aware of infringing activity and induced or contributed to that activity; vicarious copyright infringement is when a defendant could have prevented — but didn’t — a direct infringer from acting, and financially benefits from the infringing activity.) Finally, the complaint alleges that the defendants violated the Digital Millennium Copyright Act by removing copyright management information included in the New York Times’ materials, and accuses the defendants of engaging in unfair competition and trademark dilution.
The defendants, as always, are expected to claim they’re protected under “fair use” because their unlicensed use of copyrighted content to train their algorithms is transformative.
What all this means is that while 2023 was the year that generative AI exploded into the public’s consciousness, 2024 (and beyond) will be when we find out what federal courts think of the underlying processes fueling this latest data revolution.
I’ve read the New York Times’ complaint (so you don’t have to) and here are some takeaways:
- The Times Company tried (unsuccessfully) to negotiate with OpenAI and Microsoft (a major investor in OpenAI) but were unable to reach an agreement that would “ensure [The Times] received fair value for the use of its content.” This likely hurts the defendants’ claims of fair use.
- As in the other lawsuits against OpenAI and similar companies, there’s an input problem and an output problem. The input problem comes from the AI companies ingesting huge amounts of copyrighted data from the web. The output problem comes from the algorithms trained on the data spitting out material that is identical (or nearly identical) to what they ingested. In these situations, I think it’s going to be rough going for the AI companies’ fair use claim. However, they have a better fair use argument where the AI models create content “in the style of” something else.
- The Times Company’s case against Microsoft comes, in part, from the fact that Microsoft is alleged to have “created and operated bespoke computing systems to execute the mass copyright infringement . . .” described in the complaint.
- OpenAI allegedly favored “high-quality content, including content from the Times” in training its LLMs.
- When prompted, ChatGPT can regurgitate large portions of the Times’ journalism nearly verbatim. Here’s an example taken from the complaint showing the output of ChatGPT on the left in response to “minimal prompting,” and the original piece from the New York Times on the right. (The differences are in black.)
- According to the New York Times this content, easily accessible for free through OpenAI, would normally only be available behind their paywall. The complaint also contains similar examples from Bing Chat (a Microsoft product) that go far beyond what you would get in a normal search using Bing. (In response, OpenAI says that this kind of wholesale reproduction is rare and is prohibited by its terms of service. I presume that OpenAI has since fixed this issue, but that doesn’t absolve OpenAI of liability.)
- Because OpenAI keeps the design and training of its GPT algorithms secret, the confidentiality order here will be intense because of the secrecy around how OpenAI created its LLMs.
- While the New York Times Company can afford to fight this battle, many smaller news organizations lack the resources to do the same. In the complaint, the Times Company warns of the potential harm to society of AI-generated “news,” including its devastating effect on local journalism which, if the past is any indication, will be bad for all of us.
Stay tuned. OpenAI and Microsoft should file their response, which I expect will be a motion to dismiss, in late-February or so. When I get those, I’ll see you back here.
December 19, 2023
This year has brought us some of the early rounds of the fights between creators and AI companies, notably Microsoft, Meta, and OpenAI (the company behind ChatGPT). In addition to the Hollywood strikes, we’ve also seen several lawsuits between copyright owners and companies developing AI products. The claims largely focus on the AI companies’ creation of “large language models” or “LLMs.” (By way of background, LLMs are algorithms that take a large amount of information and use it to detect patterns so that it can create its own “original” content in response to user prompts.)
Among these cases is one filed by the Authors Guild and several prominent writers (including Jonathan Franzen and Jodi Picoult) in the Southern District of New York. It alleges OpenAI ingested large databases of copyrighted materials, including the plaintiffs’ works, to train their algorithms. In early December, the plaintiffs amended their complaint to add Microsoft as a defendant alleging that Microsoft knew about and assisted OpenAI in its infringement of the plaintiffs’ copyrights.
Because it is the end of the year, here are five “things to look for in 2024” in this case (and others like it):
- What will defendants argue on fair use and how will the Supreme Court’s 2023 decision in Goldsmith impact this argument? (In 2023 the SCOTUS ruled that Andy Warhol’s manipulation of a photograph by Lynn Goldsmith was not transformative enough to qualify as fair use.)
- Does the fact that the output of platforms like ChatGPT isn’t copyrightable have any impact on the fair use analysis? The whole idea behind fair use is to encourage subsequent creators to build on the work of earlier creators, but what happens to this analysis when the later “creator” is merely a computer doing what it was programmed to do?
- Will the fact that OpenAI recently inked a deal with Axel Springer (publisher of Politico and Business Insider) to allow OpenAI to summarize its news articles as well as use its content as training data for OpenAI’s large language models affect OpenAI’s fair use argument?
- What impact, if any, will this and other similar cases have on the business model for AI? Big companies and venture capital firms have invested heavily in AI, but if courts rule they must pay authors and other creators for their copyrighted works it dramatically changes the profitability of this model. Naturally, tech companies are putting forth numerous arguments against payment, including how little each individual creator would get considering how large the total pool of creators is, how it would curb innovation, etc. (One I find compelling is the idea that training a machine on copyrighted text is no different from a human reading a bunch of books and then using the knowledge and sense of style gained to go out and write one of their own.)
- Is Microsoft, which sells (copyrighted) software, ok with a competitor training its platform on copyrighted materials? I’m guessing that’s probably not ok.
These are all big questions with a lot at stake. For good and for ill, we live in exciting times, and in the arena of copyright and IP law I guarantee that 2024 will be an exciting year. See you then!
December 5, 2023
The web is rife with information and advice on how to register a trademark and, more importantly, how to protect one once you’ve got it. Much of the latter boils down to policing your mark by sending cease and desist letters whenever you suspect someone is infringing it. Good advice and, in many cases, all you need to ward off an infringer or potential infringer. But cease and desist letters aren’t always enough. Two recent cases highlight different routes that businesses traveled to protect their marks, one wrapping up quickly while the other dragged on for six years of litigation, with opposite results.
The rapid resolution came in a proceeding Mattel, Inc. brought this summer against Burberry Ltd. For anyone who has been living under a rock, Mattel makes Barbie — the dolls, the movie, the inescapable cultural “phenomenon.” The toy company brought an action before the United States Patent and Trademark Office to prevent fashion house Burberry — perhaps best known for its famous plaid-lined trenchcoats — from registering the mark “BRBY.”
Mattel claimed BRBY was likely to cause confusion because it is “visually similar” to Barbie and, “when spoken aloud, the marks are phonetically identical.” What’s more, according to Mattel, the likelihood of confusion was increased because many products sold by Mattel bearing the Barbie trademark overlap with the types of goods that Burberry was proposing to make with the BRBY mark, such as clothing, jewelry, and cosmetics. As the action stated, “[c]onsumers would be likely to wonder if, or assume that, [Burburry’s goods] are licensed by or affiliated with [Mattel].”
It’s impossible to tell exactly what went down in the proceeding because the parties reached an undisclosed settlement. However, Burberry subsequently withdrew its application to register the BRBY mark so I think we can take it as game over — in just under four months. If you ask me, it seems unlikely that anyone was going to get confused between Barbie and BRBY even though the vowelless mark could be pronounced in the same way. But clearly, Burberry figured the value of the BRBY mark wasn’t enough to justify protracted litigation.
At the other end of the spectrum, we have a federal litigation between Alfwear, Inc. and Mast-Jaegermeister US, Inc. (“MJUS”), initially filed in August 2017 and, after six years in the courts, concluded this September with the 10th Circuit Court of appeals affirming the lower court’s grant of MJUS’ motion for summary judgment.
Alfwear is a Salt Lake City company that makes outdoor apparel and gear under the brand name “KÜHL” (yes, it’s German for “cool”) and has registered trademarks for this brand name. MJUS is the US-based distribution arm of the German company that makes a herbal liqueur under the brand name — you guessed it — Jägermeister, which had a fairly repulsive shot of popularity in the mid-aughts as the drink of choice for frat parties.
As stated in the 10th Circuit’s decision, in 2016 MJUS “launched an advertising campaign to distance itself from its association with ‘pukey frat guys’ and spring break parties and remake the Jägermeister image as a ‘more premium’ brand and emphasize its German heritage.” Mast-Jaegermeister’s campaign did this by incorporating German words such as “kühl” “perfekt,” “and “dekadent ” into phrases such as “Drink it ice kühl” and “Be kühl — throw it back.” These phrases, which were intended to be easily understood by English speakers, were consistently accompanied by the Jägermeister mark.
In August 2017, Alfwear filed suit against MJUS, asserting that MJUS’s unauthorized use of the term “kühl” in connection with the advertising of MJUS’s goods or services infringed Alfwear’s registered trademarks and constituted federal and common law unfair competition. The district court held that MJUS’s use of “kühl” did not infringe on Alfwear’s “KÜHL” trademark, which it uses on its line of outdoor products, “because no reasonable juror could find a likelihood of confusion between the parties’ marks.” Yet Alfwear, refusing to back off, appealed and the case trundled on.
The 10th Circuit affirmed the district court, agreeing that MJUS’s use of “kühl” was unlikely to cause any consumer confusion and noting that MJUS had never put the word “kühl” on a Jagermeister bottle or any promotional clothing, and that Alfwear and MJUS’s products generally occupied distinct markets. (It is, however, worth mentioning that Alfwear has a pending trademark application for “KÜHL” in connection with wine, which presumably suggests that Alfwear is contemplating entering a market closer to that in which MJUS sells its products.)
So why did Mattel triumph in a matter of months while Alfwear fought MJUS for six years and, ultimately, lost? Was Mattel’s case really that much stronger than the one brought by the maker of KÜHL? Well, one key distinction is that there is overlap between Mattel’s Barbie-branded products and what Burberry sells, whereas there is no current overlap between KÜHL and Jägermeister. Knowing this, should Alfwear have realized it had a weaker case than Mattel and backed off earlier or not filed suit at all?
I think not. It isn’t always easy to accurately predict whether you’ll win or lose a trademark dispute because there are so many variables. Is your adversary going to be reasonable (like Burberry) or stand firm (MJUS)? How much time and effort have you and your adversary invested? Do you know all of your adversary’s motivations?
With that said, despite the risks, protecting a mark through litigation is a critical part of maintaining a mark and its value. Each time you don’t defend your mark, it potentially weakens your rights to it in the future. This is cumulative and can make it possible for others to obtain similar marks for their products. Moreover, even a loss might have a silver lining. It can aid in future decision-making when considering expansion into new markets.
November 21, 2023
This week, I’m taking a break from talking about court cases and instead focusing on a draft bill aimed at creating a federal right of publicity that was introduced in October by a bipartisan group of Senators. A quick refresher: the right of publicity allows an individual to control the use of their voice, and laws or cases governing this right exist in about two-thirds of the states.
Now, with generative AI and “deepfake” technology, celebrities and entertainment companies are pushing for greater protection against the creation of unauthorized digital replicas of a person’s image, voice, or visual likeness. And the Senate, it appears, is responding, raising concerns among digital rights groups and others about First Amendment rights and limits on creative freedom.
Before diving into the specifics of the bill and its potential implications, I want to step back and talk about the underlying reasons for intellectual property laws. These laws are the subject of entire law school classes (I took several of them), but I can quickly summarize two fundamental reasons why they exist. The first is to encourage artistic works and inventions, an idea that can be found in the U.S. Constitution. The idea is that allowing creators (in the case of copyright law) and inventors (in the case of patent law) to exclusively reap the economic benefits of their work will incentivize people to make art and invent useful things. Notably, both copyrights and patents are in effect for a limited amount of time: for patents, 20 years from the date of the application, while copyrights run for the life of the creator plus 70 years (note that length; it’s going to come up again).
The second reason is to prevent consumer confusion. This is the central concern of trademark and unfair competition laws, which are intended to ensure that no one other than the company associated with a particular good or service is selling that good or service.
The idea behind the right of publicity (you can read more about it in the context of generative AI here), includes a dash of both of these rationales. It ensures that individuals can profit from their investment in their persona by preventing others from using their name, likeness, voice, etc., without their permission. It also prevents brands from claiming someone endorsed a product without that person’s consent.
With generative AI and the ease with which anyone can now create a digital replica of a celebrity to endorse a product or perform a song, artists and entertainment companies are worried that the current patchwork of state laws isn’t enough. Hence, the Nurture Originals, Foster Art, and Keep Entertainment Safe Act of 2023 or the NO FAKES Act of 2023, which, if enacted, would create a federal right of publicity. (A side question: in hiring staff, do Members of Congress test job applicants’ ability to come up with wacky bill titles that can be made into acronyms? Because this one certainly took some legitimate skill.)
The bill protects against the creation of an unauthorized “digital replica,” which the NO FAKES Act describes as: “a newly created, computer-generated, electronic representation of the image, voice, or visual likeness of an individual that is [nearly indistinguishable] from the actual image, voice, or visual likeness of an individual; and is fixed in a sound recording or an audiovisual work in which that individual did not actually perform or appear.”
In other words, NO FAKES bars using a computer to create an audiovisual work or a recording that looks or sounds very much like a real person when that person has not consented. This proposed right bars the creation of a digital replica during a person’s lifetime and for 70 years after death (the same as existing copyright laws). In the case of a dead person, the person or entity that owns the rights to the deceased’s publicity rights (often, the deceased’s heirs) would have to consent to the creation of a digital replica.
If NO FAKES is passed, anyone who creates an unauthorized digital replica can be sued by the person who controls the rights; the rights holder can also sue anyone, like a website or streaming platform, who knowingly publishes, distributes, or transmits a digital replica without consent. This is true even if the work includes a disclaimer stating the work is unauthorized.
That said, the Act as currently drafted does include some exceptions intended to protect the First Amendment. For example, NO FAKES states that it is not a violation of the Act to create a digital replica that is used as part of a news broadcast or documentary or for purposes of “comment criticism, scholarship, satire, or parody.”
Some other things to note:
- The right to control the creation of a digital replica does not extend to images that are unaccompanied by audio.
- The draft bill states that the right to control digital replicas “shall be considered to be a law pertaining to intellectual property for the purposes of section 230(e)(2) of the Communications Act of 1934. This means that Internet service providers cannot rely on Section 230 to avoid liability.
Now, it is likely the draft will have undergone significant amendments and revisions if and when it is passed. As mentioned above, digital rights groups and others worry that the right of publicity can be used to litigate against speech protected by the First Amendment, as public figures in the past have tried when they don’t like something that has been said about them in the media.
To me, the Act seems a bit suspicious. You may notice I’ve stressed how the Act extends protection against digital replicas to 70 years post-mortem, the same exact length as copyright protection. Isn’t this expansiveness a bit much considering the current state of play is no federal right of publicity at all? The extreme length of the proposed protection, coupled with the Act eliminating the use of disclaimers as a shield for liability, suggests NO FAKES is less about protecting the public and more designed to prolong celebrities’ and entertainment companies’ abilities to profit. After all, the right to publicity created in the NO FAKES Act can be sold by an actor or their heirs to a company like, say, a movie studio… that could then, in theory, continue to feature digital replicas of the aged or deceased actor in their films unchallenged for seven decades after death. Thelma and Louise 4: Back From the Abyss is coming, and Brad Pitt won’t look a day over 30.
Good, perhaps, for Brad Pitt. The rest of us, maybe not.
