Out With a Bang

Almost a year ago, we wrote about a dispute between bridal designer Hayley Paige Gutman and her former employer over who owned social media accounts bearing her name. With the prevalence of social media and its importance for marketing, it seemed like it was only a matter of time until this issue came up again. And here it is. 

Vital Pharmaceutical, which makes an energy drink called Bang (we’ve written about Bang before), filed for bankruptcy in 2022. As part of the bankruptcy, Vital sought a declaration that it, not its former CEO John Owoc, owned the social media accounts @bangenergy.ceo (TikTok and Instagram) and @BangEnergyCEO (Twitter/X). In response, Owoc claimed that he had used these accounts to cultivate a personality and the accounts belonged to him, not Vital.

The bankruptcy court granted Vital’s motion for summary judgment against Owoc. In reaching this conclusion, the Court created its own, new test for determining ownership of social media accounts because, in its view, the law had failed to keep up with the times. 

Specifically, the court examined: (1) the existence of a documented property interest, i.e. an employment agreement or similar stating that certain social media accounts belong to the company; (2) who controls access to the social media accounts; and (3) the use of the account, for example, whether the account is used to promote the company’s products or to create a persona that goes beyond the company’s products. 

Based on these factors, the bankruptcy court determined that despite the social media account names referring to Vital’s CEO, they belonged to the company and not its former chief executive. While there was no agreement documenting that the accounts belonged to the company (one point to Owoc), the court noted that Vital employees had access to and created and posted content for the accounts.  This included posting things without Owoc’s approval. In addition, a large majority of posts featured Bang-branded products rather than Owoc’s personal content, indicating that the accounts should be the property of Vital, and not Owoc. Two points to Vital. 

The court declined to follow the test used by another bankruptcy court in an earlier, similar case because that case predated “the emergence of the social media influencer, among other changes” in the use of social media. Specifically, the prior decision did not consider the existence of agreements that may establish the ownership of social media accounts (factor #1 in the Vital Pharmaceutical case). 

The big takeaway from all this is that brands need to be very careful about establishing and using social media accounts and, in a dispute over who owns an account, it’s important to establish how social media accounts are used. 

(Epilogue: On July 31 Vital was purchased by Monster Beverage, so we can all hope someone other than Owoc will carry on as @BangEnergyCEO.)  

Does X Rate a Trade Secret?

Earlier this summer, an attorney for the company once known as Twitter and now called X (more on the wisdom, or lack thereof, of this rebranding can be found here), sent a cease and desist letter to Meta (formerly known as Facebook). The letter accused Meta of engaging “in systematic, willful, and unlawful misappropriation of Twitter’s trade secrets and other intellectual property.” According to Twitter/X, Meta did this by hiring “dozens of former Twitter employees” that Meta knew “previously worked at Twitter; that these employees had and continue to have access to Twitter’s trade secrets and other highly confidential information; that these employees owe ongoing obligations to Twitter; and that many of these employees have improperly retained Twitter documents and electronic devices.” Twitter/X claimed that Meta relied on these former employees in developing Threads (a rival app to Twitter/X that Meta introduced in July).

Trade secrets can be an important source of value, but they generally get less attention than their more well-known intellectual property cousins — trademarks, copyrights, and patents.  This probably has something to do with the fact that there wasn’t a federal trade secret law until Congress enacted the Defend Trade Secrets Act in 2016 and, in order to exist (or be the subject of litigation) trade secrets have to be, well, secret. Meaning that if a company thinks someone has stolen theirs, management may be leery of litigation that could provide details about the secrets in public court filings.  

Does Elon Musk have a case against Meta? Maybe. 

While there is no one definition of a trade secret, it is described in California’s version of the 1979 Uniform Trade Secrets Act as “information, including a formula, pattern, compilation, program, device, method, technique, or process” that provides economic value to its owner and is not generally known outside of the business. In this Twitter/X vs. Meta affair, the letter to Meta fails to specify anything about the nature of the supposed trade secrets or “other intellectual property” that the former Twitter employees had access to. And while Twitter’s lawyer asserts that Meta “deliberately” assigned the former Twitter employees to work on Threads, the letter doesn’t actually identify any such employees. As a result, it seems pretty unlikely that there’s much basis for Twitter/X’s claim.  (In its response to Twitter’s letter, Meta states that no one on the Threads engineering team is a former Twitter employee.)

Twiter/X may also have a problem because, to qualify for protection, it has to have made “efforts that are reasonable under the circumstances to maintain its secrecy.” In the event of litigation, this would require it to show the time, effort, resources, and processes used to develop the secrets, as well as the value of the trade secrets and whether Twitter/X limited access to any secrets to those who need to know. This could be hard for Twitter/X if, numerous Twitter/X employees left the company with its trade secrets as the letter from Twitter/X’s lawyer indicates.  

Moreover, if there are any trade secrets, Twitter/X needs to act quickly because, in determining the existence of a trade secret, courts may consider how vigilant it was in protecting its purported trade secrets.  This means that if Twitter/X really believes its former employees are using its trade secrets to benefit Meta, it needs to quickly bring litigation (or arbitration) to enforce its rights.  However, the fact that more than a month has passed since the letter to Meta from Twitter/X’s attorney without any legal action suggests that there’s not really a basis for a trade secret claim, and this is all just bluster from the world’s richest man. 

Which no one would consider a secret at all. 

Toying With Rogers

The Rogers test is something we’ve talked about before (here and here).

This test comes from Rogers v. Grimaldi. In that case, the actress Ginger Rogers sued the studio that released a film titled Ginger and Fred, claiming the film’s use of her name implied that she sponsored the movie. Rogers lost in the lower court and appealed to the Second Circuit, which affirmed the lower court’s decision dismissing Roger’s case.

In its decision, the Second Circuit held that where the title of an artistic work includes a celebrity’s name “suppressing an artistically relevant though ambiguous[ly] title[d] film” on trademark grounds would “unduly restrict expression.” Thus, the Second Circuit concluded that trademark law does not apply unless the “title has no artistic relevance to the underlying work whatsoever, or, if it has some artistic relevance, unless the title explicitly misleads as to the source or content of the work.”

This test was meant to allow artists to use trademarks without permission when the use has artistic relevance to their work and does not explicitly mislead consumers into thinking the celebrity endorsed the work. Put another way, it aimed to avoid conflicts between the First Amendment and federal trademark law (a/k/a Lanham Act), at least when it comes to the name of a film. Legally speaking, this isn’t crazy.

However, there’s a problem. The Rogers test is made up. The Second Circuit’s opinion in Rogers doesn’t provide any citations for this test or explain where it comes from. This has become a problem especially because courts have expanded the Rogers test far beyond its original confines.

Notably, in 2020 the Ninth Circuit in Jack Daniel’s Properties, Inc. v. VIP Products LLC dismissed a case brought by the bourbon manufacturer on grounds that it could not satisfy Rogers in a case against the manufacturer of a squeaky dog toy shaped like a bottle of Jack Daniels. The Ninth Circuit found that the dog toy at issue was “expressive” because it “communicates a ‘humorous message.’” This is pretty far from where we started — a film directed by Federico Fellini that told the story of fictional performers named Ginger and Fred.

In early June the Supreme Court unanimously reversed the Ninth Circuit’s decision in Jack Daniel’s Properties, Inc. The Supreme Court held that where a trademark is being used as a trademark — that is, to indicate the source of goods or services — the trademark owner does not have to satisfy Rogers. It further concluded that the dog toy shape and label parodying Jack Daniels branding was just that: a trademark being used to indicate the source of the dog toy.

In its main opinion, which was unanimous, the Supreme Court went out of its way to say that it was not explicitly overruling Rogers and took no view as to its ongoing viability. However, five Justices filed concurring opinions to make certain points. Notably, three justices — Gorsuch, Thomas, and Barrett — wrote a one-paragraph opinion “to underscore that lower courts should handle Rogers v. Grimaldi… with care.”

Since then, the Supreme Court sent another case that involved the application of Rogers back to the Ninth Circuit for reconsideration in light of its Jack Daniels ruling. In that case — Diece-Lisa Industries, Inc. v. Disney Store USA, LLC — toymaker Diece-Lisa sued a bunch of Disney-affiliated companies for trademark infringement, claiming that the “Lots-O’-Huggin’” (aka “Lotso”) character in the 2010 film Toy Story 3 too closely resembles Diece-Lisa’s “Lots of Hugs” bear. (The Ninth Circuit had previously declined requests that Rogers should not apply or should be limited and had instead ruled that Diece-Lisa’s case had to be dismissed under the Rogers test.)

It will be interesting to see what the Ninth Circuit does here particularly as not only was Lotso a character in an expressive work, but Disney also sold dolls based on the movie character. If the case does make its way back to the Supreme Court, that court may have to confront the continuing viability of Rogers as well as what happens when there is both an expressive use (i.e. Lotso the movie character) and a more purely commercial use (i.e. the toy sold by Disney).

This case will serve as an interesting test of the Supreme Court’s ruling in Jack Daniels and may help to clarify the reach of that case.

Who Owns Taco Tuesday?

Did you know that every time you say “Taco Tuesday,” you’re using someone’s trademark?

At least for right now… But a new legal petition is looking to change that. In May, Mexican fast-food behemoth Taco Bell filed a proceeding with the United States Patent and Trademark Office (“USPTO”) against Taco John’s, a Wyoming-based fast-food chain that, unbeknownst to the average burrito lover, actually trademarked the phrase “Taco Tuesday” way back in 1989. 

Taco Bell’s petition is a rare work of legal writing — written, at times, in colloquial English, it has moments where it’s even pretty funny. One extract: “People like tacos on Tuesday. They just do. It’s even fun to say: ‘Taco Tuesday.’ Tacos have the unique ability to bring people together and bring joy to their lives on an otherwise mediocre day of the week.” (For another great example of this kind of “brand voice” legal writing, see this Netflix cease and desist letter.) In support of its campaign, Taco Bell has even enlisted LeBron James, who himself tried to trademark the phrase “Taco Tuesday” in 2019, but had his application rejected because the USPTO found the term to be too common to serve as a trademark. 

Suffice it to say that Taco John’s, which currently owns the trademark for “Taco Tuesday” in every state except New Jersey (don’t ask; that’s a topic for another blog post), is not amused. It responded to Taco Bell’s petition to cancel its trademark by noting, among other things, that Taco Bell is not seeking to cancel Taco John’s trademark in order to bring people happiness, but rather “in an effort to sell more tacos.” 

In a statement released by Taco Bell, James — the NBA’s all-time leading scorer and self-appointed taco promoter — said, “‘Taco Tuesday’ is a tradition that everyone should be able to celebrate. All restaurants, all families, all businesses — everybody…it’s a celebration that nobody should own.”

Taco John’s will probably lose the right to prevent others from using the phrase “Taco Tuesday” because, as the USPTO pointed out in connection with James’ application, the phrase has become ubiquitous and, as such, has lost its ability to function as a trademark. This is what’s called “genericide,” when trademarks cease to be associated with a brand and the brand loses its rights. 

However this spicy little kerfuffle pans out, it’s a lesson in what trademark owners should and can do to prevent genericide from happening to them (NB: the following tips may be most productively read while enjoying a chalupa supreme): 

  1. Keep in mind the purpose of a trademark. Trademarks are intended to indicate the source of a good or service. When, for example, the Xerox Corporation started making photocopiers, the intent was that a consumer who saw the word “Xerox” on a copy machine would know that the machine was made by the Xerox Corporation and not some other manufacturer like Pitney Bowes. 
  2. Use your mark as a trademark and make sure others do too. Problems arise when a trademark is used to describe the thing or the service itself instead of a specifically-branded thing or service. For example, Xerox ran into trouble when consumers started using the word “Xerox” to refer to both the process of copying a document and the copied document itself, instead of a machine made by Xerox or a copy made by a Xerox machine. Once upon a time, the company addressed this through a clever ad campaign informing consumers “when you use ‘Xerox’ the way you use ‘aspirin,’ we get a headache.” (This was a clever play on the fact that “aspirin” was once a brand name but became generic.) Their goal was to get people to use the word “photocopy” instead of “Xerox,” and while the impact on conversation in the copy room is certainly debatable, Xerox maintained its trademark.
  3. Have a generic noun ready to go. When you develop your trademark make sure you have a generic noun to be used with the trademark when communicating your brand to consumers, competitors, and the media. For example, Xerox is careful to say “Xerox photocopiers,” not “Xeroxes.”
  4. Enforce your rights. It’s great to get a trademark, but that’s just half of the battle. If a trademark ceases to be associated solely with the company that owns it, the mark no longer identifies the source of the goods or services. This means that to keep a trademark, the party that owns it has to constantly stop others from using its trademark and not wait for years until someone disputes their right to it. Stopping others can be through sending cease and desist letters, bringing an action to enforce trademark rights, or opposing efforts by another company to register a similar trademark.
  5. Use the Ⓡ symbol. This lets others know that a word or a phrase has been registered as a trademark. But remember: if the word or phrase hasn’t been registered as a trademark with the USPTO, you can’t use the Ⓡ symbol.
  6. Keep detailed records. This includes records of your  advertising costs, revenue figures, and unsolicited press mentions, all of which help to prove “acquired distinctiveness.” 

However the taco case turns out, rest easy knowing nothing can stop us from eating tacos on Tuesday . . . or on any other day.

AI Face Replacement: A Class Act(ion)?

Intellectual property class action lawsuits have, historically, been relatively rare. But here, at the dawn of AI, everything is changing fast, and we already have what appears to be the first attempt at an AI-related class action: Young v. NeoCortext, Inc.

This action is currently pending in the Central District of California against the owners of Reface, a “deep fake” generative AI app that enables users to replace a celebrity’s face in a still photo from a film or TV with their own face. The app includes a searchable catalog that allows a user to select the star whose face they want to replace. This library includes images of Kyland Young — a finalist in season 23 of CBS’ Big Brother — who is seeking to represent a class of California residents including musicians, athletes, celebrities “and other well-known individuals” who have had their “name, voice, signature, photograph, or likeness” displayed in Reface.

Young alleges that Reface’s inclusion of his image violates his rights under California’s right of publicity statute. This law protects individuals against the unauthorized use of their image, name, or voice to advertise or sell a product. His claim hinges on a specific detail: Reface promotes paid subscriptions with a free version that allows users to generate an image with their face in the place of a celebrity. Images generated by the free version are watermarked with Reface’s logo and say “made with Reface app.” According to Young, this amounts to an ad for the paid version of the Reface app. Thus, he claims that Reface’s owner is exploiting his image (and the image of other celebrities and demi-celebrities) to encourage users to purchase the paid version of the app, which brings the app within the ambit of California’s right of publicity statute.

Lawyers for Neocortext, which owns the app, have moved to dismiss the complaint. They argue, among other things, that Plaintiff’s claims are preempted by the Copyright Act and are barred by the First Amendment.

On preemption, Defendant argues that since images of Young used on the app are owned by CBS, not Young, any action for the unauthorized use of these images would have to be brought by CBS, not Plaintiff. It argues that CBS’ claims (if any) would sound in copyright infringement, not a violation of the right of publicity. It seems likely that the Defendant will prevail on this argument.

Even if the Defendant doesn’t prevail on this argument and the case survives the motion to dismiss, this copyright issue could create problems certifying a class. One issue courts consider in determining whether a suit can be heard as a class action is “commonality.” This requires judges to consider if the potential class members (in this case, other celebrities) are likely to have more issues in common than not. The possibility that some claims might be preempted by copyright law while others are not might lead the judge to conclude that common issues don’t predominate. This could preclude the certification of the action as a class action.

Defendant also argues that Plaintiff’s claim should be dismissed because it “violates the expressive rights of Defendant and its users that are guaranteed by the First Amendment.” Here, Defendant claims that modifying celebrity images to convey an idea or message can be an exercise of creative self-expression within the scope of the First Amendment, and thus Reface performs a “transformative use,” which brings it outside of the ambit of California’s right of publicity statute.

All in all, at least on copyright preemption, Defendant’s arguments seem more convincing.

With that said, this lawsuit points to how AI is making it easier to manipulate celebrities’ images. This will undoubtedly lead to more right of publicity lawsuits.

AI’s First Court Appearance is an Epic Fail

Well, that didn’t take long.

A pair of lawyers and their firm have very publicly and quite thoroughly embarrassed themselves by asking ChatGPT for case citations that turn out to have been made up by the trendy AI chatbot.

There are so many points of stupidity and laziness here: The global frenzy to adopt ChatGPT, the inability or failure of attorneys to understand new technology, one lawyer’s unthinking reliance on the work of a colleague, a law firm practicing in an area it is not equipped to handle … Let’s break it all down.

New York City law firm Levidow, Levidow & Oberman was working on what is, in most ways, an entirely unremarkable lawsuit: Roberto Mata v. Avianca. Their client — Roberto Mata — sued the airline Avianca claiming that, while on a 2019 flight from San Salvador to New York’s JFK airport, an airline employee failed to take sufficient care in operating a metal serving cart that hit Mata in the knee and seriously injured him.

In January 2023 Avianca moved to dismiss the case in the Southern District of New York Court, asserting the statute of limitations had expired. In March, Plaintiff’s counsel — Peter LoDuca — replied with an affidavit claiming otherwise. In his affidavit, LoDuca cited decisions from several cases including Varghese v. China Southern Airlines and Zicherman v. Korean Air Lines, both of which were supposedly decided by the 11th Circuit Court of Appeals.

Avianca’s counsel quickly pointed out there was no evidence that those or other cases cited by Plaintiff’s counsel existed or, if they did exist, stood for the propositions that Plaintiff said they did.

The judge — P. Kevin Castel — was perplexed, and ordered LoDuca to file an affidavit attaching copies of the cases he cited. LoDuca complied — well, sort of. He submitted an affidavit that attached what he claimed were the official court decisions.

Defendant’s counsel again notified the Court that the cases did not exist or did not actually say what Plaintiff’s counsel had represented.

The judge, now rather angry, ordered LoDuca to show up in Court and explain exactly how he came to submit an affidavit — a sworn document — citing and attaching non-existent cases. In response, LoDuca submitted another affidavit saying that he had relied on Steven Schwartz, another attorney in his firm, to research and draft his affidavit. (By way of background, LoDuca and Schwartz have been practicing law for more than 30 years.)

And this is where the story goes from weird to bad. Really bad.

The reason LoDuca was appearing in Court instead of Schwartz is because Schwartz isn’t admitted to practice in federal court. He’s only admitted in state court where the case started out. To make matters worse, it turns out that despite the fact that Levidow, Levidow & Oberman were representing Mr. Mata in federal court, its lawyers didn’t have a subscription that allowed them to search federal cases.

Without this access to federal cases, Schwartz turned to what he thought was a new “super-search engine” (his words) he had heard about: ChatGPT. He typed questions, and the AI responded with what seemed to Schwartz to be genuine case citations, often peppered with friendly bot chat like “hope that helps!” What could possibly go wrong? A good deal. Because the cases ChatGPT provided Schwartz didn’t actually exist.

On June 8, 2023, the judge held a hearing to determine whether LoDuca, Schwartz, and their firm should be sanctioned.

At this hearing, LoDuca admitted he had neither read the cases cited nor made any legitimate effort to determine if they were real. He argued he had no reason not to rely on the citations Schwartz provided. Schwartz, embarrassed, said he had no reason to believe that ChatGPT wasn’t providing accurate information. Both admitted that, in hindsight, they should have been more skeptical. Counsel for Schwartz argued that lawyers are notoriously bad with technology (personally, I object to this characterization). Throughout the hearing, the packed courtroom gasped.

Cringe-inducing, to be sure. But looking deeper, there’s more to fault here than a tech-challenged attorney blindly relying on some “super search engine” to research case citations. The bigger problem is that, even after Avianca’s lawyers pointed out they couldn’t find any evidence that the cases existed or said what Plaintiff’s lawyer said they said, Plaintiff’s attorneys — LoDuca and Schwartz — persisted in trying to establish that the “cases” they relied on were real despite possessing absolutely no evidence for it. Even after Schwartz couldn’t find the cases through a Google search, neither he nor LoDuca checked the publicly available court records to see if the cases were real. Moreover, they seem to have disregarded some pretty clear signs that the “cases” were, at best, problematic. For example, one case begins as a wrongful death case against an airline and, a paragraph or two later, magically transforms into someone suing because he was inconvenienced when a flight was canceled.

Should the duo and their firm be sanctioned? In general, the standard for sanctions is whether those involved acted in bad faith. Everyone here insisted that their conduct did not meet this standard. Rather, they claimed they were simply mistaken in not knowing how ChatGPT worked or that it couldn’t be trusted.

The judge certainly didn’t seem to see things that way. He was appalled that Schwartz and DoLuca didn’t try to verify (or, apparently, even read) the “cases” they cited. In court, the judge read aloud a few lines from one of the fake opinions, pointing out the text was “legal gibberish.” In addition, while LoDuca, Schwartz and their firm might not have been trying to lie to the court, it’s hard to believe that they fulfilled their obligation to make “an inquiry reasonable under the circumstances,” which is what is required under one of the rules applicable here.

The judge reserved a decision on sanctions, so stay tuned.

The Supreme Court Rules on Goldsmith v. Warhol

We’ll keep this brief as the U.S. Supreme Court’s May 18 decision in Goldsmith v. Andy Warhol Foundation for the Visual Arts, Inc. has already been examined by many others. For example, here, here and here. Also, there will be much more to come as people have time to digest the Court’s ruling and the dissent.

The majority decision, written by Justice Sotomayor, held that Andy Warhol’s artwork Orange Prince, based on a photograph by Lynn Goldsmith and used by Condé Nast on the cover of a 2016 special edition magazine celebrating Prince’s life, was not sufficiently transformative. The Court concluded that the first fair use factor — the “purpose and character” of the second work — favored Goldsmith and not the Foundation. The Court rested its decision largely on the fact that Goldsmith’s photo and Orange Prince both could have served as the magazine cover and, significantly, Condé Nast chose to use Orange Prince as a substitute for Goldsmith’s photo on its magazine. One key point: the creation of Orange Prince went beyond the terms of the publisher’s original 1984 license for Goldsmith’s photo and Goldsmith wasn’t credited as the photographer when Condé Nast used the image in 2016.

By focusing on the fact that Warhol’s adaptation competed commercially with Goldsmith’s original for this specific application, the Court largely avoided having to answer the question of to what extent Warhol’s image visually transformed Goldsmith’s image. This is probably a good thing as judges should not moonlight as art critics. This decision allowed the Court to preserve the right of copyright holders to make derivative works, which would have likely been threatened by a ruling for the Foundation.

However, not everyone on the Court agreed. Justice Kagan wrote a blistering dissent in which she accused the majority of ignoring the extent to which Warhol was a transformative artist.

This focus on Warhol’s overall legacy, however, has its limits as it is not helpful when the next case deals with an artist who is far less famous or has a much less immediately identifiable style than Warhol (which is pretty much everyone). Moreover, Justice Kagan’s hypothesis that Condé Nast selected Orange Prince over the Goldsmith photo because the editors preferred the aesthetics of the Orange Prince ignores one obvious possibility — Conde Nast went with the Warholized image because they thought it would sell more copies of the magazine. The dissent’s failure to recognize Warhol’s unique level of fame and its commercial impact is a pretty big blind spot.

Putting all of that aside, as noted above, the majority’s opinion has the advantage of shifting at least some of the analysis away from having a judge (or a jury) determining the transformativeness of an artwork. However, the majority’s decision does have problems. For starters, it collapses or combines the first fair use factor (“the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes”) and the fourth fair use factor (“the effect of the use upon the potential market for or value of the copyrighted work”). Moreover, the idea that Warhol’s use of Goldsmith’s photo is fair use if the image hangs in a museum, but not if it’s on the cover of a magazine is odd. What would have happened if Orange Prince was on the cover of an issue of Vanity Fair that looked at celebrity culture or a catalog of a museum exhibition? Is the analysis different and do artists (and lawyers) now have to make judgments for each particular use? That would seem to be a bad thing. We shall see.

When Instant Messages Need to Last

Taking a break from our focus on trademark and copyright lawsuits, let’s look at a current high-profile case raising an issue that impacts all sorts of litigation — the obligation to preserve documents, including ephemeral messaging like online chats.

Why does this matter? In litigation, the discovery process requires each side to preserve documents and other materials relevant to the lawsuit so they can be provided to the opposing side. This obligation is triggered as soon as a party knows that litigation might happen. (We’re simplifying, but that’s the gist.) When a litigation starts, companies will often put in place a “litigation hold,” alerting employees who might have relevant information that they have to preserve documents. A litigation hold will also generally involve overriding the processes that might ordinarily delete emails, documents, etc. 

Failure to preserve or provide these materials can have serious consequences. In extreme cases, a court will dismiss a plaintiff’s case or find against a defendant that has failed to comply with its obligation to preserve documents. 

That brings us to a current lawsuit against Google brought by consumers, state attorneys general and app developers, claiming the omnipresent tech giant illegally monopolized the market for Android apps. During discovery, the plaintiffs noticed that Google hadn’t produced its employees’ instant messages related to the case. When the plaintiffs raised this issue, Google made some surprising revelations — its internal chats are generally deleted after 24 hours and it hadn’t suspended this automatic deletion for employees subject to the litigation hold in this case. Instead, Google allowed them to decide whether or not to preserve their instant messages.

Google is certainly no stranger to litigation holds. The company specifically trains employees to “communicate with care” because of the possibility of communications becoming public through discovery, and automatically preserves company emails that are subject to a litigation hold. And obviously, one of the world’s most powerful tech companies was perfectly capable of turning off auto-delete for the specific employees involved. Instead, Google simply told them not to discuss topics related to the litigation on chat but, if they did, to retain those specific chats if they felt the content was relevant. It was all self-policed: Google didn’t do anything to require employees to save chats or ever check to see if employees were complying. Only after the plaintiffs raised the issue during discovery did Google change its settings so that chats were saved by default. 

In its attempt at explanation, Google argued that employees’ chats were mostly used for social purposes, even though the record (and common knowledge) clearly indicates that workplace chats are constantly used for substantive business purposes which, in this case, included matters relevant to the antitrust litigation. 

The court, understandably, was not impressed by this argument. It concluded that as a result of Google’s lax policies, employees failed to save chats related to this litigation. The court also found that since employees were aware chats weren’t being preserved, they freely engaged in “off the record” convos related to the case knowing they couldn’t be used in court. The judge specifically rebuked Google for allowing employees to decide which chats could be used as evidence, pointing out that staffers probably wouldn’t be capable of making those judgments. 

Ultimately, the court was very concerned about the intentionality of Google’s conduct, concluding that Google “intended to subvert the discovery process, and that Chat evidence was ‘lost with the intent to prevent its use in litigation’ and ‘with the intent to deprive another party of the information’s use in the litigation.’” The judge made it clear he believed Google was trying to destroy pertinent evidence, and directed Google to pay plaintiffs’ fees in connection with bringing this motion. The court also said that it would set a non-monetary sanction against Google at the end of discovery when the court is in a position to better determine what has been lost.

Overall lesson here: if you’re in a litigation, immediately start preserving all documents related to the case, including chats, just as you would to any other type of messages.

 

Artificial Intelligence on Trial

The last few months have seen an explosion in chatter about AI, specifically, freely available AI chatbots and apps like ChatGPT, DALL-E-2, Soundful and more that can create text, images, and music in response to prompts entered by a user. Internet forums are overflowing with examples of people using these apps to create “a love song that sounds like it was played by the Beatles in 1966” or “a painting of a three-legged horse in the style of Picasso” or “a 2,000-word story about colonizing the moon by Ernest Hemingway.” ChatGPT is already the fastest-growing app of all time and, naturally, people fear these AIs will quickly replace actual humans for the creation of commercial art and entertainment. We’re also starting to see some lawsuits involving AI-generated art infringing on copyrights. Everything is pretty much at the complaint stage, so there’s not too much to report on — yet. With that said, what follows are some of the places where I think we’re going to see legal battles. 

Before diving into the legal issues, it’s worth taking a step back and thinking about how AI works. At a high level, AI platforms take in a ton of information and “learn” patterns about that information. Show an AI a coffee cup, and it “knows” what a coffee cup is. “Feed” it a banana, and it can create another banana in any color or pattern a user asks of it. Everything an AI can do begins from something that already exists.

Ok. On to the legal issues that will have to be sorted out by creators or, ultimately, in the courts.

  1. How similar is the output of an AI platform to the material it was trained on? If it’s too close, the output could be infringing. On the other hand, if the output is based on unprotectable components, then there’s no infringement. However, the line between copyrighted and unprotected is not always clear. 
  2. Do AI platforms need to license the underlying materials used to create a new image or song to avoid claims of copyright infringement? In order for an AI platform to review information, it needs to make a copy of it. If work being used as a basis for an AI-generated product is copyrighted (or copyrightable), unless the platform has obtained a license, the act of copying may be infringing. 
  3. If AI imitates an artist, does the output infringe on the artist’s right of publicity which, in some states, extends to an artist’s persona?
  4. What happens if the output from an AI platform includes a trademark? It’s not hard to imagine AI creating works that include trademarks. One doubts trademark owners will be happy about this. 
  5. Sometimes the AI platforms are just wrong or false. These statements could be defamatory, but who is legally responsible? The platform, or the person who gave the platform the prompts? 

We’ll follow the action here as it unfolds. 

A Princely Pickle: Supreme Court Edition

We spent the last two posts diving into Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith and some of the cases leading up to it. You can read those posts here and here. 

Now, let’s turn to the oral argument before the Supreme Court and the Justices’ questions for the parties in that case. 

As the appellant, the Warhol Foundation went first. Its central argument was that Warhol’s changes to Lynn Goldsmith’s photo of Prince gave Warhol’s work a different meaning or message. Specifically, its lawyer argued that Goldsmith’s photo is a photorealistic portrait of Prince while Warhol’s work is a depiction of the dehumanizing effects of celebrity. Based on this, according to the Foundation, Warhol’s Prince Series made fair use of Goldsmith’s photo. 

The Justices had some doubts. They wanted to know how a court should determine whether new work has a sufficiently distinct meaning or message to qualify for fair use. The Foundation responded that Courts could look at a range of things in determining the meaning and message of a given artwork including: (1) evidence from the creators; (2) expert testimony; and (3) the judges own impressions. Justice Alito, however, noted that it could be hard to figure out what “meaning or message” to pay attention to because people might see things not intended by the artist. 

The Foundation also faced questions about how to square its position with the fact that copyright law gives the right to create derivative works to the original artist — in this case, Goldsmith. (A derivative work is an adaptation of the original, for example, a translation of or a film made from a book.) In line with this, the Justices wanted to know whether a second artist performing another artist’s song in a way that conveys a different meaning is enough to avoid a claim of copyright infringement. The Foundation responded that it would require looking at other fair use factors. For example, whether the second work competed with the original. 

Here, Justice Sotomayor pointed out (rightly) that this pretty much destroyed the Foundation’s argument as the Prince Series definitely competed with Goldsmith’s photograph as an illustration for an article about Prince’s life. The Foundation tried to avoid this by arguing that Goldsmith’s photo and the Prince Series had different audiences (and, compared to Goldsmith’s photos, the Prince Series fetched, um, princely sums). 

Goldsmith’s attorney faced the Justices next. Among other things, she argued that a party claiming fair use should have to show that it needed to use the original work. In response, the Justices wanted to know the source for the test she was proposing. Goldsmith’s attorney responded that it came from the Supreme Court’s decision in Campbell. Justice Kagan was skeptical though. She noted that Campbell didn’t actually say that. Rather, it says that “if you need the original work, that’s the paradigmatic case.” Justice Kagan also noted that even if the second creator didn’t “need” the original work, there are plenty of situations where the new work is sufficiently transformative to be fair use. By way of example, Justice Kagan noted that Campbell uses “Warhol as an example of how somebody can take an original work and make it be something entirely different and that’s exactly what the fair use doctrine wants to protect.” 

Goldsmith’s attorney also noted movie, music, and publishing industry groups supported Goldsmith’s position and were “horrified” by the Warhol Foundation’s position because it would essentially eliminate the right to control derivative works as set forth in the Copyright Act. She pointed out that the Warhol Foundation’s position would allow someone to create a movie where Darth Vader is a hero, not a villain, and claim fair use. 

Finally, the Court heard from the United States government. It argued that the Court should not focus on a work’s meaning or message because it would destabilize long-established licensing markets, which have worked just fine in creating new and derivative works. It also argued that the Court should consider whether the second use has a distinct purpose or does it supersede the original, and, also, what is the justification for copying. 

According to the US, both of these factors point against a finding of fair use in this case because the Foundation has never tried to show that Warhol’s copying of Goldsmith’s photo was essential to accomplish a new or distinct purpose. Put another way, the government argues that you can’t use another artist’s work to directly compete with that artist’s work unless there’s a justification for the copying. 

Stay tuned. We should have a decision soon.