July 23, 2024
What do Baby Reindeer and Inventing Anna have in common? Sure, both are miniseries on Netflix. More interestingly, though, and more pertinent to this blog (since I’m not Roger Ebert), both are subjects of defamation lawsuits against the streaming giant. Nor is either action the first; I previously wrote about Linda Fairstein’s defamation lawsuit against Netflix over how she was portrayed in When They See Us. (That case settled in early June.)
These two current cases touch on slightly different aspects of defamation law. Inventing Anna tells the “based on a true story” of con artist Anna Sorokin, who posed as an heiress and defrauded a variety of New York institutions and individuals out of somewhere around $275,000. In addition to the protagonist, the series portrays several of her real life friends, including Rachel DeLoache Williams, the plaintiff in the lawsuit. Williams claims the series’ version of her is false and defamatory, especially in scenes showing her character abandoning a depressed Sorokin in Morocco and thus painting her as a “disloyal” and “dishonest” villain (instead of a victim who was defrauded by Sorokin to the tune of $62K).
Netflix sought to dismiss the lawsuit on grounds the allegedly defamatory statements were substantially true or were not defamatory. It argued that the show’s creators have a “literary license” to give their interpretation of events, and the characterization of Williams was an opinion, protected by the First Amendment from defamation claims.
The District Court did not see things this way and in March of this year it denied the motion finding that, at the very least, some portions of Netflix’s portrayal of Williams were false and capable of a defamatory interpretation. Specifically, the Court concluded that the issue of whether Sorokin was actually distraught in Morocco, or if that was an invention of the producers, is a question of fact that can be proven true or false. (To oversimplify things a bit, only false statements of fact can serve as a basis for a claim of defamation.) “Whether Sorokin was in a troubled state and Williams left her at that point can be proven true or false,” the judge wrote. The Court further concluded that showing the Williams character ditching a friend when she was depressed could indeed leave viewers with a negative view of the real Williams, and thus serve as the basis for a defamation claim. The case is proceeding.
In contrast, the Baby Reindeer case will focus on the question of whether the series’ portrayal of the character Martha is “of and concerning” a real-life person — the plaintiff, Fiona Harvey.
Baby Reindeer, which begins with the words “this is a true story,” was written by Richard Gadd, who also plays central character Donny Dunn, a not very funny wannabe comedian. It’s a fictionalized version of Gadd’s own life, and part of Donny’s saga involves being stalked by a character named Martha, which Gadd drew off a real experience.
According to the lawsuit, filed in early June, Harvey claims Gadd based Martha on her and cites several similarities between real life and fiction, including that both Martha and Harvey are Scottish lawyers of about the same age who live in London. The suit also claims that Harvey bears an “uncanny resemblance to ‘Martha’” (or at least the actress who plays the character), and “‘Martha’s’ accent, manner of speaking and cadence, is indistinguishable . . .” from Harvey’s.
Moreover, one plot point in Baby Reindeer (I’m trying to avoid spoilers as the show has a lot of twists and turns that would sound ridiculous if you haven’t watched it) mirrors something that Harvey tweeted at Gadd in 2014. Because of these similarities, according to the Complaint, within days of the series airing Internet sleuths determined she was the basis for Martha and began subjecting her to social media vitriol. “As a result of [Netflix’s] lies, malfeasance and utterly reckless misconduct, Harvey’s life had been ruined,” the suit states.
Harvey claims she was defamed by Netflix because Baby Reindeer portrays Martha as “a twice convicted criminal” who spent five years in prison for stalking people, as well as physically and sexually assaulting Donny. Harvey says she has never been convicted of any crime and did not attack the real-life Gadd.
The interesting issue here is that relevant case law doesn’t include, as a test, whether a fictional character can have their real-life basis be identified by Internet sleuths. Rather, the inquiry is generally whether a person who knows the plaintiff would reasonably conclude that the plaintiff was the fictional character, or in this case, whether friends and acquaintances of Harvey would link her with Martha. Netflix has been pretty adamant that it took steps to disguise the identity of the real Martha. Since there are numerous elements in the Martha character’s storyline that are clearly not connected to anything in Harvey’s real life, it seems very possible that the real Martha is someone other than Harvey. But the Internet has spoken, and that’s enough for Harvey to sue Netflix for $170 million.
We’ll have to see how all this pans out; it should make for pretty good legal viewing (although nowhere near as popular as Baby Reindeer itself, which is set to become Netflix’s most-streamed show ever).
One final note: Some people have asked me if I think there’s something wrong with Netflix’s legal vetting of shows. The answer: maybe, but let’s keep in mind that Netflix produces A LOT OF CONTENT, and obviously most of it isn’t causing trouble. That said, it seems like the streaming behemoth should start to exercise a bit more caution when greenlighting these series based on real stories, because there is a lot of money at stake, the Internet is rife with people looking to dig up the “truth,” and someone, somewhere, may very well cry defamation.
July 10, 2024
I’m a litigator (you probably know that). I’m also a mom to a tween (that might be new information!). Both are generally very rewarding, but can also sometimes be a huge PITA.
They go together much better than you might expect because, oddly enough, I’ve found that some of the things I’ve learned as a parent make me a better lawyer and vice versa.
Because I had a few days off for Independence Day last week, I was able to spend some much-needed time with my family, along with some friends and their two-year-old. And during those languid summer days of leisure I was able to reflect on the overlap between practicing law and raising a kid.
A few highlights:
- Sometimes you just have to wait it out. Toddlers and tweens have their angry, stubborn and argumentative moods, and often nothing you say or do is going to get them out of one. Trying can even make it worse. This is also true for adversaries, clients, and judges. Sometimes people just need a beat or two to come around on their thinking, and your actions aren’t going to get a child, an adversary, a client or a judge to where you want them to be any faster. Sometimes the best approach is to simply say your piece briefly and then be quiet.
- Just because someone is loud, it doesn’t mean you have to give in to their demands or be loud back. As in point number one above, sometimes the child’s moods come with a lot of screaming or yelling. Same with clients and adversaries. It doesn’t help to respond in kind. More often than not, at least for me, the best approach is to keep on doing what I’m doing and not let all the noise change my path toward the end goal.
- However, listening is important. While #1 and #2 can be crucial, never completely tune out what’s being said. Sometimes in the midst of a person’s screaming fit, they’ll say some little pearl that highlights what’s really motivating the outburst (in the case of a tween) or a sticking point (in the case of an adversary). It’s important to be present, listen for those moments and store them away in case they prove useful down the line.
Of course, when it comes to a child, you know that someday, somehow, EVENTUALLY they’ll grow up and act like adults. I’m not going to comment on some adversaries.
June 25, 2024
The web is rife with articles explaining the importance of protecting a business’s trademarks. Some of them are even on this blog!
These articles usually (and correctly) point out that if someone is potentially infringing on your business’s trademark, it’s important to send a cease and desist letter or, if necessary, file a lawsuit because if others start to use your mark (or something like it) and the business doesn’t protect it, you can eventually lose trademark protection.
However, sometimes, it might be better not to start the legal ball rolling. I say this even though I’m a litigator, and yes, one of the ways I earn my living is by helping businesses sue for trademark infringement. Why? A couple of recent cases highlight the importance of taking a step back and thinking things through before sending that cease and desist letter or filing a lawsuit.
For starters, Trader Joe’s case against its employee union, Trader Joe’s United. The union sells mugs, tee shirts, and other merch branded with their Trader Joe’s United logo to raise money for organizing locations throughout the supermarket chain. Trader Joe’s claimed trademark infringement and sued. For comparison, here are Trader Joe’s marks:
And here’s what the union used:
The District Court granted the union’s motion, writing that it felt “compelled to put legal formalisms to one side and point out the obvious. This action is undoubtedly related to an existing labor dispute. It strains credulity to believe that the present lawsuit — which itself comes dangerously close to the line of Rule 11 — would have been filed absent the organizing efforts that Trader Joe’s employees have mounted (successfully) in multiple locations across the country.” In other words, the Court was saying that the real reason Trader Joe’s sued was to try and shut down the union, and that given the “extensive and ongoing legal battles of the Union’s organizing efforts at multiple stores, Trader Joe’s claim that it was genuinely concerned about the dilution of its brand resulting from [the Union’s] mugs and buttons cannot be taken seriously.” The Court went on to hold that no reasonable consumer would think that the union’s merch originated with Trader Joe’s — the central inquiry in a trademark infringement case. The Court also awarded the union its legal fees, noting in its decision that the case stood out “in terms of its lack of substantive merit . . . .” Ouch.
Famed restaurateur David Chang and his company, Momofuku, also recently lost a trademark battle they probably wish they hadn’t started. On the bright side for Chang and Momofuku, there was no lawsuit, and they weren’t unceremoniously kicked out of court like Trader Joe’s. However, they did have to issue an apology after sending a bunch of cease-and-desist letters to other Asian-American-owned businesses demanding that they cease and desist using the term “Chili Crunch.” (For those of you who mostly stick to milder foods, Momofuku Chili Crunch is a packaged “spicy-crunchy chili oil that adds a flash of heat and texture to your favorite dishes.”)
There was a lot of pushback on these letters from the recipients, who posted them to social media and shared them with mainstream media outlets, highlighting how Chang and Momofuku were trying to assert rights over a generic term frequently used in Asian and Asian-American gastronomic offerings. The companies (rightly) felt that Chang and Momofuku were trying to use their status and financial resources to attack other Asian-American-owned companies unjustifiably.
And then, there’s the case of the Los Angeles Police Foundation, a private group affiliated with the Los Angeles Police Department. It sent a cease and desist letter to a company selling tee shirts emblazoned with the words “Fuck the LAPD” on top of the Los Angeles Lakers logo.
In its letter, the LAPF asserted it is “one of two exclusive holders of intellectual property rights pertaining to trademarks, copyrights and other licensed indicia for (a) the Los Angeles Police Department Badge; (b) the Los Angeles Police Department Uniform; (c) the LAPD motto ‘To Protect and Serve’; and (d) the word ‘LAPD’ as an acronym/abbreviation for the Los Angeles Police Department . . .”
There are a lot of whiffs here for the LAPF. Strike one: Government agencies can’t get trademark protection for their names. Strike two: The LAPF isn’t the LAPD, so they have no basis for claiming infringement on something that isn’t even theirs. Strike three (it’s a doozy): Obviously, the logo on these shirts belongs to the Lakers, not the LAPF. Strike four: It’s fairly safe to assume that the shirt is meant as a parody and/or a political commentary, which are protected under the First Amendment.
Worth noting here is the tee shirt manufacturer’s carefully crafted response to the LAPF after receiving the cease-and-desist letter: “LOL, no.” That was literally the entirety of the tee shirt maker’s response—points for clarity, conciseness, and all-around humor.
What does this all mean? Well, if you send a cease and desist letter or file suit to protect a trademark you don’t actually have (LAPF), or if you’re trying to accomplish a goal that is not related to actually protecting your trademark (Trader Joe’s), you’re just going to be embarrassed. And while the Momofuku matter is more complicated and nuanced, it’s fair to say many companies use the term “Chili Crisp,” making Momofuku’s efforts to trademark it seem like the work of a bully.
So, the lesson here is that legal claims don’t exist in a vacuum. Examine the validity of your claims, but also consider the potential negative publicity and damage to your reputation before firing off cease-and-desists willy-nilly or filing suit. Even if you win in court, sometimes public opinion is the final judge, and no business wants to upset that judge.
June 11, 2024
The long-running dispute between wedding dress designer Hayley Paige Gutman and her former employer JLM Couture over ownership of the social media accounts she created and that bear her name is at last over.
On May 8, the District Court revised its earlier preliminary injunction and restored control of the @misshayleypaige Instagram, Pinterest and TikTok accounts to Gutman. In its decision, the Court held JLM couldn’t establish that the social media accounts belonged to JLM at their inception or that Gutman had transferred ownership to JLM.
In case you’re new to my analysis of the very public case (at least to Gutman’s 1 million-plus followers), I originally wrote about it here and, more recently, here.
How did the District Court reach a conclusion that is 180 degrees from its earlier decisions?
Well, in March 2024 the Second Circuit disagreed with the six-factor test the District Court created to determine ownership of the social media accounts and remanded the case back to the District Court with instructions to look at the accounts as normal property rather than through novel tests (a decision I heartily agreed with). After that, the District Court requested and received additional briefing on whether JLM could show that it either owned the accounts at the time they were created or that ownership was subsequently transferred to JLM, and that Gutman only had access to the social media accounts because she was a JLM employee.
In its analysis, the Court found:
- Gutman opened the Instagram account at the recommendation of a friend;
- She was at least partially motivated to create the accounts for personal use even if she saw them as potentially useful in promoting products manufactured by JLM;
- The Instagram was initially linked to her personal Facebook account;
- The Instagram account wasn’t linked to the JLM Facebook account until four years later; and
- The first five Instagram posts were clearly personal, as were early pins on Pinterest
According to the Court, taken together, these facts showed that Gutman created the accounts for personal use and not solely as a JLM employee, even if she did later use them to promote JLM products, allowed JLM employees access to them, and included links to JLM accounts.
Thus, since JLM couldn’t establish a valid claim to ownership of the social media accounts when they were created, it would have to show that the accounts were transferred to it. It was unable to do this for several reasons including the fact that Instagram’s terms of service prevent a user from transferring an account.
There were a few other interesting factors in the mix. For one, while Gutman’s contract with JLM included licensing her name to JLM for commercial purposes, she retained the right to use her name for non-commercial purposes. Thus, the Court found her use of @misshayleypaige as a handle on social media was not on its own a basis for finding that her social media accounts belong to JLM. And, as the Second Circuit found, the social media accounts themselves do not qualify as works for hire.
Gutman had also signed an employment manual with JLM in which she agreed that she would use her time during her workday only for employment-related activities; that her use of the Internet during that time was for job-related activities; and all intellectual properties she created belonged to JLM. The order modifying the preliminary injunction noted that even if Gutman’s posting on social media during working hours was a violation of JLM’s employment manual, it doesn’t mean that, despite JLM’s arguments, it was tantamount to her transferring her social media accounts to JLM. It does suggest, however, that JLM has a legitimate claim to the content Gutman posted on her social media accounts.
What’s really interesting here is that, in the end, the final decision in the District Court is opposite to the results reached by just about every other court that has looked at usage to determine ownership of a social media account. Will the Gutman decision reverberate throughout the growing number of legal disputes in this area, and give pause to companies who rely heavily on consumer relationships through the Instagram posts of highly visible employees and brand ambassadors?
What’s next? Well, not much. Shortly after the most recent decision from the District Court, Gutman and JLM resolved all matters in a settlement agreement that included Gutman paying JLM (well, its bankruptcy estate) $263,000. In exchange, Gutman was released from her non-compete agreement which would have continued for another 18 months or so.
May 29, 2024
If you’re into hip hop, you’re probably familiar with a photograph of rapper The Notorious B.I.G., a/k/a Biggie Smalls, looking contemplative behind designer shades with the Twin Towers of the World Trade Center in the distance behind him. However, you might not know this well-known portrait has been the subject of litigation for the past five years and that litigation settled just before a trial was supposed to start earlier this year.
Photographer Chi Modu snapped the picture (the “Photo”) in 1996, originally for the cover of The Source hip hop monthly. However, after the magazine used another image, and Biggie was killed a year later, Modu began licensing the image to various companies, including Biggie’s heirs’ own marketing company. The Photo became famous and, after the destruction of the World Trade Center in 2001, what is now commonly called “iconic.”
There was no beef (do people still say that?) between Modu and Biggie’s heirs until 2018 when, according to an attorney for Chi Modu’s widow (the photographer himself passed away in 2021), Modu tried to negotiate increased licensing fees with Notorious B.I.G. LLC (“BIG”), which owns and controls the intellectual property rights of the late rapper’s estate.
Apparently, Modu and BIG weren’t able to reach an agreement because BIG brought suit against Modu and a maker of snowboards bearing the image, asserting claims for federal unfair competition and false advertising, trademark infringement, violation of state unfair competition law and violation of the right of publicity.
In a countersuit, Modu asserted his copyright in the Photo of Biggie preempted all of BIG’s claims. Modu argued that BIG’s claims were nothing more than an attempt to interfere with his right to reproduce and distribute the Photo, as permitted under Section 301 of the Copyright Act.
In December 2021, BIG sought a preliminary injunction barring Modu from selling merchandise including skateboards, shower curtains and NFTs incorporating the Photo, claiming these uses violated its exclusive control of Biggie’s right of publicity. (BIG had previously settled with the snowboard manufacturer.)
In June 2022, the Court granted the injunction in part, concluding that the sale of skateboards and shower curtains was not preempted by the Copyright Act as they did not involve the sale of the Photo itself but rather items featuring the Photo. In its order, it prohibited Modu’s estate from selling merchandise featuring the Photo or licensing the Photo for such use. However, the Court permitted Modu’s estate to continue selling reproductions of Modu’s photo as “posters, prints and Non-Fungible Tokens (‘NFTs’).” The Court found that the posters, prints and NFTs were “within the subject matter of the Copyright Act [as t]hey relate to the display and distribution of the copyrighted works themselves, without a connection to other merchandise or advertising.”
This decision follows a line of cases that distinguish between the exploitation of a copyright and the sale of products “offered for sale as more than simply a reproduction of the image.” In the former situation, a copyrighted work will take precedence over a right of publicity claim. In the latter, where the products feature something more than just the copyrighted work, a right of publicity claim is likely to prevail.
Not surprisingly, given the risks for both sides, the case settled just prior to the start of the trial. Although the contours of the settlement were not made public, presumably it allowed Modu’s estate to continue selling the Photo as posters of it remain available for purchase on the photographer’s website.
May 14, 2024
I’ve posted a few times this year thoughts (here and here) on some of the lessons I’ve learned since starting my law practice, hoping they may be helpful to others in their own business or career.
Now, I’m back with more although this lesson is less about growing and running a business and more about how to deal with (really) unpleasant people, which is something they don’t teach in law school but definitely should.
More specifically, recently I found myself negotiating with a lawyer who easily ranks as one of the three most unpleasant adversaries I’ve ever met. We’d be on the phone and he’d constantly interrupt me with rude lectures on how, in his view, things should be done; he’d follow these verbal assaults with condescending emails purporting to explain basic points of law with which I am quite familiar, thank you very much. (Amusingly, these emails contained glaring errors which I, being generous of spirit, refrained from pointing out.)
While all this was painfully unfolding, my new assistant (hallelujah!) was indexing the topics I’ve covered in my past posts and the monthly email newsletters I send out (the emails are concise and fun; if you’re interested in subscribing, sign up here). While reviewing the results, I came upon a pre-pandemic newsletter where I discussed the Netflix documentary Knock Down the House, which follows Alexandria Ocasio-Cortez and three other women who ran for Congress in 2018. In the documentary, AOC gives herself a pep talk before facing then-incumbent Joseph Crowley in a debate. She repeats the mantra, “I need to take up space. I need to take up space. I am here!” This had immediately resonated with me, a female commercial litigator who was constantly having to contend with dismissive male attorneys.
AOC’s message was in my mind during my recent back-and-forth with the aforementioned adversary, Mr. Condescension, Esq. Earlier in my career I would have soldiered through this kind of interaction by putting on a brave face, trying to outsmart my opponent while letting him set the rules of engagement, and tossing at night running through all the things I should have said or done. In those wee hours, I would even start to think that maybe I wasn’t that good at my job (imposter syndrome, anyone?). However, keeping AOC’s “I need to take up space. I am here!” in my head has helped me change this internal dialog and my interactions with opposing counsel.
I’ve also altered my approach to confrontational or potentially confrontational calls. Rather than let an adversary set the agenda for a call, I write down my goals, which can be as simple as being able to truthfully tell a court that I got on the phone with an adversary (many courts require this before submitting a dispute for resolution).
I also write down the tone I plan to maintain on the call: conciliatory, simply, aggressively, etc. I keep this in front of me during the call or any other related interaction. For me, it’s a visible indicator of how I want the dispute to progress toward my end goal and a reminder to stay focused rather than let anyone cause me to veer off the path I’ve set.
Obviously, this isn’t to say that I never deviate from my intentions or outlines. I’m no robot, after all. But by working this way, I am able to make sure I — and, more importantly, my client’s objectives — take up space.
It’s also not to say that I’m 100 percent successful at following my own advice and everything is rainbows and unicorns forevermore. It takes focus and practice. That’s why I make time each week to reflect on where things have gone well and where they have not, reviewing how I’ve stuck to the plan or veered from my approach. Doing this helps me figure out new ways to improve, and keeps those sleepless nights at bay.
April 30, 2024
Lately, I’ve had privacy on my mind. It’s a little personal. After all, it feels like every 30 seconds I’m clicking on or looking at something that wants a piece of my data. And privacy is at the heart of the legislation that just passed which, because of national security concerns, would either effectively ban TikTok in the United States or force the Chinese company that owns it to divest. It’s also central to the book I’m currently reading, Your Face Belongs to Us, which exposes the efforts of a stealth startup to create an enormous database of faces for use by police departments across the United States. My skin is crawling.
Nor does the grossness stop there. Heard of “sharenting”? It’s a mashup of “sharing” and “parenting” that refers to what happens when parents put their kids lives online — often, for profit. A few weeks ago I got sucked into the rabbit hole of Utah “momfluencer” Ruby Franke and her 8 Passengers YouTube channel. That channel documented the life of her family of six children with a focus on parenting advice within her Mormon faith. I’ll spare you the details but suffice it to say that Franke has since pleaded guilty to four counts of aggravated child abuse and is serving time.
Did her children ever want to be part of her YouTube sensation? Does it even matter?
The right of publicity, which I’ve written about in the past (see here and here), including its relationship to AI, is supposed to serve as a kind of limitation. Simply put, the right of publicity is a form of intellectual property protection that prevents the unauthorized use of a person’s name, likeness, photograph, etc. for commercial benefit. However, there’s a big limitation here. The First Amendment, as currently interpreted, limits the right of publicity to speech that is purely commercial. This means that, because Franke was documenting her family’s life, even if there was clearly a financial benefit, she was free to proceed without fear of a right of publicity claim. (She was also free to proceed because as a parent, she could consent for her children to appear on YouTube whether they liked it or not.)
While I don’t have a lot of faith that this interpretation of the First Amendment is going to change anytime soon, my general state of alarm over privacy did make me think about other times where questions about the public dissemination of private information have come up and the relationship of these issues to technology.
Notably, in 1890 Samuel Warren and Louis Brandeis (who went on to become a Supreme Court justice and have a university named for him) authored an article called “The Right to Privacy.” This article, which is frequently cited as the origin of the right of publicity, was prompted by the invention of the Eastman Kodak camera. As Warren and Brandeis noted, “[i]nstantaneous photographs and newspaper enterprise have invaded the sacred precincts of private and domestic life; and numerous mechanical devices threaten to make good the prediction that ‘what is whispered in the closet shall be proclaimed from the house-tops.’”
Interestingly, besides the right of publicity, the article discusses three other possible causes of action to protect privacy — false light, public disclosure of private facts, and invasion of privacy. These rights are premised on something that we seem to have lost along the way: the idea that each of us has a right to maintain control over certain information as private. Or, as Warren and Brandeis put it, “the more general right of the individual to be let alone.” They premise this right “not on the principle of private property, but that of an inviolate personality.” In particular, they call attention to the fact that there’s a difference between expressing thoughts or ideas — the “conscious products of labor” — and “often involuntary expression… in the ordinary conduct of life.”
It’s hard to imagine any phrase from the 19th century hitting home so hard today. In an era dominated by social media, AI deepfakes, cameras everywhere, and a relentless stream of true crime documentaries and podcasts made without the need for permission from victims or their families, it seems like there are no boundaries between what is private and what is public anymore.
I don’t have any great answers here other than to say that it seems like it’s time to revisit the idea that Warren and Brandeis so eloquently promoted: that each person has a right to be left alone unless they say otherwise, regardless of their age or their celebrity.
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).
