- In This Issue -
May/June 2012

Message from the Chair
Dominique Shelton
Inside the Journal
Jeffrey Mandell
"Appropriation Art": Second Circuit Appeal in Cariou v. Prince
By Sarah L. Cronin and Mariya Kupershmidt
Betty Boop in Blunderland: Ninth Circuit trademark ruling in Fleischer Studios v. A.V.E.L.A
By Jonathan Hyman
Viacom v. YouTube: Second Circuit requires "knowledge" finding for DMCA safe harbor
By Daniel Lifschitz
Interview: Kim Richardson
Privacy attorney at Disney
Interviewed by Brian Walker
Recent Cases
Submission Guidelines
Journal Editor
Jeffrey Mandell
Contact: Jeff@MandellADR.com

Decide for yourself:
A comparison of one of Cariou's photograph and Prince's use of the image can be found here. Additional works in the Canal Zone series can be found here, as well as here.

Volume 2, Number 2 • Archive of Past Issues
Entertainment Law and IP Section Home Page - ELIPS
An ePublication of the Los Angeles County Bar Association

Message from the Chair

Thank you all for your participation in the LA County Bar's Entertainment Law and Intellectual Property Section ("ELIPS"). Your involvement in ELIPS is critical to our mission of serving the Entertainment and IP law community. We hope you will follow us on Twitter, like us on Facebook, and sign up for our group on Linked in. Please also keep an eye out for our substantive MCLE programs. These programs are stellar opportunities to learn from experts in the field as well as connect with your colleagues. Speaking of connecting, don't miss our informal networking socials. These are informal meetings at various new restaurant locations where are members can unwind after work and meet their counterparts in other law firms, in-house, on the Bench, and neutrals in ADR.

Finally, please consider writing an article for the Journal. Your insights and thoughts are interesting to your colleagues and elevate our collective dialogue! If you are interested, please send your ideas to Jeffrey Mandell of Mandell ADR at jeff@MandellADR.com.

We look forward to hearing from you.

Dominique Shelton
Entertainment Law and IP Section
(ELIPS) Chair

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From the Editor

Inside this Issue of the Journal

Welcome to the May/June issue of the Entertainment & Intellectual Property Law Journal. Here's a brief preview of this issue's contents:

1. Cariou v. Prince: Second Circuit Appeal:
The Court will hear oral arguments on this "appropriation art" case, perhaps as early as this month. At issue: whether an artist may incorporate some or all of another copyright holder's existing work into a new work, without permission from the "appropriated" work's copyright holder. Infringement or fair use? Sarah Cronin and Mariya Kupershmidt bring us up to date in "Appropriation Art: What's Fair Got to Do With It?"
2. Betty Boop: Ninth Circuit Ruling: Fleischer Studios prevails in trademark claim based on the well known cartoon character, notwithstanding flaws in the Betty Boop chain of title.
3. Viacom v. YouTube: Second Circuit Ruling and Remand to District Court on narrow issue. The Second Circuit upheld trial court's application of the safe harbor provision in the Digital Millenium Copyright Act. But the case is remanded to District Court the question of whether YouTube had knowledge of Viacom's asserted copyright violations. Jonathan Lipschitz provides a briefing on where things stand now.
4. Interview & Profile: Kim Richardson, Principal Counsel at the Walt Disney Company in the Corporate Legal Data Privacy Group shares her thoughts on rapidly evolving privacy law and provides advice to lawyers interested in this rapidly evolving field.
5. Entertainment & IP Litigator Survey: There's still time to vote in our survey: How is court-ordered/requested mediation affecting your practice? What is opposing counsel doing, and what is the mediator thinking? Everyone who replies will receive a summary of the results. Click here for more info and the survey itself.

Save These Dates For Our MCLE Seminars in June!
June 12, 2012 - lunchtime
Managing and Reducing Litigation Costs: Suggestions from In-House, Outside Counsel and ADR
June 28, 2012 - 6:30 pm
Business and Legal Issues re: Entertainment & IP Start-Ups
Click for Details

Write for the Journal and get published!
The Law Journal is actively looking for articles, case notes, practice tips and interviews.
Click here for our submission guidelines.

Jeffrey Mandell
Journal Editor

Email: jeff@MandellADR.com

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Cariou v. Prince: Second Circuit Appeal


Sarah L. Cronin

Mariya Kupershmidt

Appropriation Art: What's Fair Got To Do With It?
By Sarah L. Cronin and Mariya Kupershmidt*

*Sarah L. Cronin is an associate, and Mariya Kupershmidt is a former associate, at Kelley Drye & Warren LLP. Ms. Cronin litigates copyright, trademark, and contract disputes. Ms. Kupershmidt is now an associate at Hansen, Jacobson, et al., LLP, where she practices transactional entertainment law.

In Cariou v. Prince a court sitting in the Southern District of New York held that that well-known “appropriation artist” Richard Prince was liable for copyright infringement after he used copyrighted images, without consent, in his collection of twenty-nine collages and paintings entitled “Canal Zone.”1 The district court ordered the infringing pieces to be turned over and impounded, destroyed, or otherwise disposed.2 Eight of the pieces had already been sold for a total of $10,480,000, while seven of the other pieces had been exchanged for art with an estimated value between $6,000,000 and $8,000,000.3 Needless to say, Prince immediately appealed.4 Oral argument on that appeal may proceed in the Second Circuit Court of Appeals as early as May 2012.5

In the simplest terms, “appropriation art” is a phrase used to describe art that incorporates images or objects that already exist.6 Throughout the twentieth century artists have appropriated existing images both as a mode of creating new art and as a method for articulating social criticism.7 By the middle of the twentieth century, it had become commonplace for artists to incorporate images from popular culture and prior art into new artistic works.8 The idea behind certain contemporary appropriation art is to challenge the idea that all art must be created entirely by the artist and to shift the focus of artistic creation from the craftsmanship of the artist towards the perception of the artist and his or her ability to juxtapose disparate elements in a way that creates new meaning.9

In this article we discuss one aspect of the holding in Cariou v. Prince:that in order for a secondary work to be transformative, it must comment on the original work.  The article is organized as follows.  First, the background facts of Cariou v. Prince are discussed.  Next, we discuss the district court’s analysis with respect to transformative use, including some of the individual cases relied on by the court.  Finally, there is a brief survey of how other circuits have applied the transformative use doctrine.

Cariou v. Prince
Professional photographer Patrick Cariou brought a copyright infringement action against Richard Prince after Prince incorporated forty-one copyrighted photographs of Rastafarians from Cariou’s book entitled Yes, Rasta, into various paintings and collages assembled in his Canal Zone series.10 In some of his pieces, Prince enlarged, cropped, tinted, or painted-over the images taken from Yes, Rasta, while in other pieces Prince incorporated both Cariou’s images and other appropriated images from other sources and original painting.11 Of the twenty-nine pieces that make up the Canal Zone series, twenty-eight of them include images taken from Yes, Rasta.12

The District Court’s Ruling On Transformative Use
On cross-motions for summary judgment, the district court held that Prince’s use of Cariou’s images was not fair use and that he was liable for copyright infringement.13

Copyright law recognizes that not all copying is copyright infringement and allows some opportunity for fair use of copyrighted materials in order to fulfill the purpose of copyright law, “[t]o promote the Progress of Science and useful Arts . . . .”14 The fair use defense was codified in Section 107 of the 1976 Copyright Act, which identifies four nonexclusive factors for assessing fair use, the first of which is the purpose and character of the use.15 The heart of the analysis of the first factor is whether and to what extent the challenged use is “transformative” – i.e., whether the use “adds something new, with a further purpose or different character, altering the first with new expression, meaning or message,” or whether it “merely ‘supersede[s] the objects’ of the original creation.”16

The district court held that transformative use requires the secondary use to comment on the original work.17 Specifically, the court stated that, “all of the precedent that [it] can identify imposes a requirement that the new work in some way comment on, . . . or critically refer back to the original works,” so that the only way Prince’s paintings could be transformative is if they “comment on [Cariou’s] photos.”18 Notably, Prince testified that he didn’t “really have a message” in his work, nor did he have a particular interest in the original meaning of the photographs he uses.19

Prince’s appeal to the Second Circuit Court of Appeals takes issue with this aspect of the court’s ruling, contending that the court incorrectly applied the fair use doctrine in light of existing precedent, by imposing a requirement that a work must comment on the original in order to be deemed “transformative.”20 Disagreeing with the court’s emphasis on Prince’s damaging deposition testimony, Prince argues that his reluctance to articulate a specific artistic intent “is consonant with the core post-modern belief that an artist’s intent is irrelevant because an artwork’s meaning is manifold, malleable, and does not have one single meaning in the eye of the viewer.”21

The Transformative Use Cases Relied On By The Court
The decisions relied on by the district court do not appear to impose any requirement that the secondary use comment on or criticize the original work in order to be transformative, except in the context of parody, which by definition requires a comment on the underlying work22

For example, in Rogers v. Koons,photographer Art Rogers sued appropriation artist Jeff Koons after Koons took a photograph taken by Rogers of a man and his wife holding puppies23 that Koons had found in a gift shop, tore off the copyright symbol, and instructed the image to be turned into a sculpture “as per photo.”24 In response to Koons’ defense that his work constituted a parody or satire of society at large, the Second Circuit considered whether Koons’ sculpture commented on the underlying photograph.25 The court held that Koons’ work did not constitute a parody because the object of the parody was not the photograph of the puppies itself.26 Notably, the court found that Koons had used the “identical expression of the idea that Rogers created.”27

In Blanch v. Koons, Koons created a collage painting consisting of fragmented images of four pairs of women’s legs dangling over images of desserts and set against the background of Niagara Falls.28 One of the pairs of legs came from an advertisement in Allure magazine.29 Koons made several changes to the photograph before incorporating it into his collaged work, including cropping, inverting, and modifying the image in significant ways.30 Koons articulated that his objective in using the photo was to comment “on the social and aesthetic consequences of mass media,” thus using it “in the creation of new information, new aesthetics, new insights and understandings.”31 Characterizing Koons’ use of the image as satire, the court found that the use was transformative because Koons had a sharply distinct purpose in using the photograph than the plaintiff in creating it.32

In the biography context, the Second Circuit found that use of thumbnail versions of copyrighted concert posters in a book chronicling the history of the Grateful Dead constituted fair use.33 Like Cariou, Appellant attempted to argue that each reproduced image should have been accompanied by comment or criticism and that simply placing the image in a new context was not transformative.34 The court expressly disagreed with such a requirement and found that defendant’s actual use of each image was sufficiently “transformative” because it was different from the original expressive purpose of the concert posters.35

Finally, in Castle Rock Entm’t, Inc. v. Carol Pub. Group, Inc.,the Second Circuit failed to find that a trivia quiz book based on the television show Seinfeld was sufficiently transformative where the court concluded that the book’s purpose was merely to repackage the hit television series by “simply pos[ing] trivia questions” in order to entertain viewers of the show.36 The court’s decision was not necessarily premised upon a failure to comment on the underlying work, but rather on the fact that the book’s purpose was the same as that of the original, to entertain fans of the television show, and held that the book lacked transformative purpose.

Transformative Purpose Analyzed In Other Circuits
Although varied, the decisions of other circuits do not set forth a requirement that a secondary work comment on or criticize the original work to be deemed sufficiently transformative.

For example, in Ty, Inc. v. Publications Intern Ltd., a publisher utilized photographs of plaintiff’s copyrighted Beanie Babies in collectors’ guides.37 The Seventh Circuit held that the guides were akin to book reviews, and not infringing derivative works, because they contained some criticism of the Beanie Baby manufacturer as well as additional information about the estimated value of the Beanie Babies as collectors’ items.38 However, in the opinion, Judge Posner took the opportunity to criticize the Second Circuit’s Seinfeld decision, opining that the failure to comment on Seinfeld itself or contemporary television culture should not have precluded a finding of fair use because “the [ ] doctrine is not intended to set up the courts as judges of the quality of expressive works.”39

The Ninth Circuit has found uses of copyrighted works to be transformative in the absence of commentary on the original work.  In Mattel Inc. v. Walking Mountain Productions, the court held that a series of photographs depicting Mattel’s legendary Barbie doll in various sexualized positions juxtaposed with vintage kitchen appliances was a transformative fair use.40 Although the court did discuss whether the photographs commented on the doll, it did so only in its threshold determination of parody, not as a requirement for the use to be transformative.41 Moreover, in Perfect 10, Inc. v. Amazon.com, Inc., the court found that Google’s practice of providing users with thumbnail images in response to an image search was “highly transformative” because a search engine provides a wholly different use for the original work, placing images “in a different context such that the plaintiff’s work is transformed into a new creation.”42

Cariou v. Prince highlights the current tension between appropriation art and traditional copyright law: “is it a well-recognized form of artistic expression deserving of fair use, [or] is it instead rank infringement?”43 As courts grapple with applying existing copyright law to this changing nature of art, they will have to be careful to formulate the limits of fair use in order to foster the purpose of copyright – to ensure protection for original works of authorship and to incentivize the creation of new forms of artistic expression.

1784 F. Supp. 2d 337 (S.D.N.Y. 2011).
2Id. at 355-56.
3Id. at 350-51.
4Cariou v. Prince, 784 F.Supp.2d 337 (S.D.N.Y. 2011), appeal docketed, No. 11-1197 (2nd Cir. Mar. 28, 2011).
5Id., Dkt. No. 216.
6For a helpful discussion of what is appropriation art and its historical development, see E. Kenly Ames, Note, BeyondRogers v. Koons: A Fair Use Standard for Appropriation, 93 Colum. L. Rev. 1473, 1477 (1993).  For a discussion of an economic approach to appropriation art, see William M. Landes, Copyright, Borrowed Images and Appropriation Art: An Economic Approach, (December 2002) U. Chicago Law & Economics, Olin Working Paper No. 113 (2d Series).  For further discussion of copyright tensions in the art world, see Randy Kennedy, Apropos Appropriation, The New York Times, Dec. 28, 2011, www.nytimes.com/2012/01/01/arts/design/richard-prince-lawsuit-focuses-on-limits-of-appropriation.html?pagewanted=1&_r=1.  For an additional definition of appropriation art, see Tate Collection Glossary definition of Appropriation, available at www.tate.org.uk/collections/glossary/definition.jsp?entryId=23
7Ames, supra note 6, at 1477.
8Id. at 1478.
9Id. at 1479.
10784 F. Supp. 2d at 344.
13Id. at 342-43.
14Id. at 346 (citing Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (1994) (quoting U.S. Const., Art. I, § 8, cl. 8)).
15 Id. at 347 (citing 17 U.S.C. § 107(1)-(4)); Campbell, 510 U.S. at 575, 577-78 (1994) (determination of fair use defense is an open-ended and context-sensitive inquiry and “calls for case-by-case analysis” in light of the purpose of copyright – to “promote the Progress of Science and useful Arts.”).
16Id. at 347.  In the landmark fair use decision Campbell v. Acuff-Rose, the Supreme Court significantly clarified the proper application of the first fair use factor.  510 U.S. 569, 578-79, 583 (determining that a rap song poking fun at Roy Orbison’s ballad “Oh, Pretty Woman” was a permissible parody of the original because it “reasonably could be perceived as commenting . . . on the naiveté of the original of an earlier day.”) (citing Pierre Leval, Toward a Fair Use Standard, 103 HARV. L. REV. 1105, 1111 (1990)).
17784 F.Supp.2d at 348.
18Id. at 348-49.
19Id. at 349.
20Joint Brief and Special Appendix for Defendants-Appellants at 39, Cariou v. Prince et al., No. 11-1197-cv (2d Cir. Oct. 26, 2011), 2011 WL 5325288.
21Id. at 37.
22The court cites a number of parody cases, which are not particular helpful since Prince did not claim to be making a parody of Cariou’s work.  For example, in Leibovitz v. Paramount Pictures Corp., the Second Circuit found that Paramount’s re-creation of Annie Leibovitz’s iconic Vanity Fair cover featuring a pregnant and nude Demi Moore in an advertisement for a slapstick comedy constituted a transformative use.   137 F.3d 109, 111-12, 114, 117 (2d Cir. 1998).  Separate from this finding, the court determined that the advertisement was a parody because it could “reasonably be perceived as commenting, through ridicule, on what a viewer might reasonably think is the undue self-importance conveyed by the subject of Leibovitz’s photograph.”  Id.
23 Co-author Sarah Cronin was family friends with the subject of Art Roger’s photograph, Jim Scanlon, who resided in Marin County, California until he passed away in May 2005.
24960 F.2d 301, 305 (2d Cir. 1992).
25Id. at 309.  Notably, however, the court did not apply the transformative use inquiry in evaluating the first fair use factor because the Supreme Court had not yet decided Campbell v. Acuff-Rose.
26 Id. at 310.
27Id. at 308.
28467 F.3d 244, 247-48.
30Id. at 248.
31Id. at 253 (internal citations omitted).
32Id. at 252-54.  Nearly a decade and a half earlier, however, the Second Circuit held against Jeff Koons on his fair use defense in Roger v. Koons et al., a case that the district court in Cariou v. Prince relied upon. 960 F.2d 301 (2d Cir. 1992).  The court determined that Koons’ creation of a large sculpture based on plaintiff’s copyrighted photograph was not fair use.  Id. at 312.  Notably, however, the court did not apply the transformative use inquiry in evaluating the first fair use factor because the Supreme Court had not yet decided Campbell v. Acuff-Rose.  Instead, the court asked whether the original was copied “in good faith to benefit the public or primarily for the commercial interests of the infringer.”  Id. at 309.  The court did conduct an evaluation of whether Koons’ sculpture commented on the underlying photograph, but this was only in response to Koons’ defense that his work constituted a parody or satire of society at large.  Id.  The court held that Koons’ work did not constitute a parody because the object of the parody was not the photograph of the puppies itself.  Id. at 310.  Because the point of parody is to comment on the original work, and because the transformative use standard predated the court’s fair use analysis, the decision can hardly be said to impose a requirement that a secondary use comment on the underlying work to qualify as transformative.
33 Bill Graham Archives v. Dorling Kindersley Ltd. et al., 448 F.3d 605, 615 (2d Cir. 2006).
34Id. at 609.
35Id. at 609, 611 (“[W]e agree with the district court that DK was not required to discuss the artistic merits of the images to satisfy this first factor of fair use analysis,” finding that appellee’s use of the disputed images was transformative both when accompanied by referencing commentary and when standing alone.).
36Castle Rock Entertainment, Inc. v. Carol Publishing Group, 467 F.3d 132,142-43 (2d Cir. 1998).
37Ty, Inc. v. Publications Intern Ltd.,292 F.3d 512 (7th Cir. 2002).
38Id. at 519-20.
39Id. at 523.
40Mattel Inc. v. Walking Mountain Productions, et al.,353 F.3d 792, 796, 806 (9th Cir. 2003).
41Id. at 801-02.  In Elvis Presley Enters, Inc. v. Passport Video, the Ninth Circuit found that defendant’s use of video clips in a biography of Elvis Presley were not consistently transformative, as many “[we]re simply rebroadcast for entertainment purposes that Plaintiffs rightfully own.”  Elvis Presley Enters., Inc. v. Passport Video, 349 F.3d 622, 628-29 (9th Cir. 2003)(explaining that the use of the clips were transformative where “the clips play only for a few seconds and are used for reference purposes while a narrator talks over them or interviewees explain their context in Elvis’ career,” but not transformative where the clips “play without much interruption, . . . [and t]he purpose of showing these clips likely goes beyond merely making a reference for a biography, but instead serves the same intrinsic entertainment value that is protected by Plaintiffs’ copyrights”).  Nevertheless, the court found the first factor to be a close issue, acknowledging that “[c]ourts have described new works as ‘transformative’ when the works use copyrighted material for purposes distinct from the purpose of the original material,” and not only if they comment on the underlying work.  Id. at 629. (emphasis added).
42Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1165 (9th Cir. 2007).  Fair use decisions in other circuits also suggest that criticism or commentary is not a requirement for a finding of transformative purpose and/or fair use.  In the Eleventh Circuit, in Suntrust Bank v. Houghton Mifflin Co., the court held that it was unlikely that plaintiff would be able to overcome the defense that plaintiff’s book, The Wind Done Gone, was a fair use of Margaret Mitchell’s novel Gone With the Wind because it was a parody and criticism of “the depiction of slavery and relationships between blacks and whites” in her novel.  Suntrust Bank v. Houghton Mifflin Co.,268 F.3d 1257, 1269, 1271 (11th Cir. 2001).  The court never suggested that commentary was necessary for a use to be transformative, but instead looked to whether a commentary of the original existed in applying the definition of parodyId. at 1268.  Ultimately, the court found that the new work contained strong parodic elements that made the use transformative and fair.  Id. at 1271, 1276.  Additionally, in A.V. ex. rel. Vanderhye v. iParadigms, LLC, the Fourth Circuit found that iParadigms’ use of students’ papers to operate a service designed to detect whether a paper was plagiarized was a fair use because the use of the papers served an entirely different function than the original purpose of the papers.  A.V. ex rel. Vanderyhye v. iParadigms, LLC, 562 F.3d 630, 639 (4th Cir. 2009).  The court completely rejected the notion that a work can only be transformative if it comments on or substantially alters the original work.  Id. (“The use of a copyrighted work need not alter or augment the work to be transformative in nature.  Rather, it can be transformative in function or purpose without altering or actually adding to the work.”).
43William F. Patry, 4 Patry on Copyright § 10:100 (2011).

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Betty Boop's Trial

Betty Boop's Trial1: Betty in Blunderland2
Fleischer Studios v. A.V.E.L.A.
By Jonathan Hyman

Betty Boop's Rise to Fame3
Betty Boop was created by Max Fleischer and other animators and appeared in comic strips and a film series released by Paramount Pictures in the 1930s. Betty Boop has had a long history on the big and small screen, and is a true American icon. Like most recent American icons, she has also had a long history in our courts. In fact, Betty is no stranger to IP lawsuits. She was the subject of a 1930s infringement lawsuit filed by actress Helen Kane who thought the character was based on her and misappropriated her likeness.

More recently Betty found herself in court when Fleischer Studios, Inc., the alleged heir apparent of the rights to Betty Boop via creator Max Fleischer, sued A.V.E.L.A. and others for copyright and trademark infringement for unauthorized use of the Betty Boop image on handbags and t-shirts.

Judge for a Day4 (District Court Case)
The district court granted summary judgment for the defendants on both claims. Fleischer Studios was not able to establish that it had clear title to the copyrights. The court held that the convoluted and complicated ownership history of the copyrights in the Betty Boop character did not vest these rights in Fleischer Studios. Thus, Fleischer Studios was barred from pursuing the copyright claims.

Although the court found that Fleischer Studios had some trademark rights in Betty Boop, the court held that Fleischer Studios did not timely submit evidence that it owned a federal registration and therefore had no presumption of owning a valid mark. In the absence of a federal registration, a plaintiff must establish that its mark has acquired secondary meaning. The court held that Fleischer Studios could not meet this burden based on the fact that there was fractured ownership of the Betty Boop trademarks and, therefore, it could not establish that it owned common law trademark rights in the Betty Boop name or image. Accordingly, the defendants were not guilty of trademark infringement.

Not surprisingly, Fleischer Studios appealed the district court decision to the Ninth Circuit.

No! No! A Thousand Times No!! 5 (Ninth Circuit's First Decision)
On February 23, 2011, the Ninth Circuit panel of J. Clifford Wallace and Susan P. Graber, Circuit Judges, and Richard Mills, sitting by designation, affirmed the district court's dismissal of the copyright claims on the ground that Fleischer Studios had failed to establish a proper chain of title. 6

The Ninth Circuit also affirmed the district court's dismissal of the trademark claims. However, it did so based on an argument nether briefed nor advanced by the parties in oral argument or addressed by the district court. Instead, the Ninth Circuit held that the parties' arguments were mooted by controlling precedent: International Order of Job's Daughters v. Lindberg & Co., 633 F.2d 912 (9th Cir. 1980). The court held sua sponte that the depiction of Betty Boop on the A.V.E.L.A.'s goods was aesthetically functional and not a trademark.

The Ninth Circuit's decision breathed life into the doctrine of aesthetic functionality. The Ninth Circuit believed the Betty Boop case was factually indistinguishable from Job's Daughters. In Job's Daughters, the women's organization Job's Daughters sued jewelry maker Lindberg because it sold jewelry with the organization's insignia without a license. The defendants in each case were not using the names or images of the right holders as trademarks, but were using them as a functional element on products. The Ninth Circuit believed that consumers were not buying A.V.E.L.A.'s products because they were made by or affiliated with the owner of the Betty Boop image, but because the images were aesthetically "cute." In Job's Daughters, the court held that "[t]rademark law does not prevent a person from copying so-called 'functional' features of a product which constitute the actual benefit that the consumer wishes to purchase, as distinguished from an assurance that a particular entity made, sponsored, or endorsed a product." The Ninth Circuit held that A.V.E.L.A.'s use of the Betty Boop image on its merchandise was not done in a source-identifying manner, and thus not as a trademark, but instead as a functional product. According to the Ninth Circuit, A.V.E.L.A. never promoted the products as "official" Betty Boop merchandise or otherwise affirmatively indicated sponsorship and Fleischer Studios had no evidence that customers were misled about the origin, sponsorship, or endorsement of A.V.E.L.A.'s products. Quoting Job's Daughters, the Ninth Circuit held that as the "name and [Betty Boop image] were functional aesthetic components of the product, not trademarks. There could be, therefore, no infringement." Interestingly, the reliance on Job's Daughters itself seems inconsistent with more recent Ninth Circuit opinions. For example, in First Brands Corp. v. Fred Meyer, Inc., 809 F.2d 1378, 1382 n.3 (9th Cir. 1987), Clicks Billiards, Inc. v. Sixshooters, Inc., 251 F.3d 1252, 1260 (9th Cir. 2001), and Au-tomotive Gold v. Volkswagen of America (457 F.3d 1062, 9th Cir. 2006), the Ninth Circuit substantially limited the aesthetic functionality doctrine. In Au-tomotive Gold, VW and Audi sued Auto Gold, the maker of key chains and other items with the Audi and VW trademarks. Auto Gold argued that its use was protected by the doctrine of aesthetic functionality. The Ninth Circuit rejected Auto Gold's arguments, holding that purely aesthetic product features that are source-identifying and not functional are still entitled to protection as trademarks – especially as the Audi and VW trademarks increased the marketability of Auto Gold's products. The Court noted that to hold otherwise would be the "death knell for trademark protection."

The Ninth Circuit also relied on Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003) - noting that both parties failed to cite this case as well. The Ninth Circuit interpreted Dastar to stand for the proposition that "where a copyright is in the public domain, a party may not assert a trademark infringement action against an alleged infringer if that action is essentially a substitute for a copyright infringement action." Doing so would "circumvent the Copyright Act and allow trademark holders perpetual rights to exploit their creative work." Accordingly, the Ninth Circuit held that if it "ruled that A.V.E.L.A.'s depictions of Betty Boop infringed Fleischer Studios' trademarks, the Betty Boop character would essentially never enter the public domain."

The court's decision instilled great fear in trademark owners over the Ninth Circuit's apparent sharp limitation of trademark rights through its reliance on Job's Daughters to revive the doctrine of aesthetic functionality and Dastar to curtail trademark rights of copyrighted works. Fleischer Studios filed a request for rehearing and rehearing en banc and was joined by a slew of amici including various entertainment organizations (MPAA); various sports leagues (NFL, MLB, NBA, NHL, and The Collegiate Licensing Co.); INTA; and the licensor of the work of author Edgar Rice Burroughs.

The New Deal Show7 (Ninth Circuit's Second Decision)
Rather than rehear the case en banc, the same Ninth Circuit panel issued a new opinion on August 19, 2011, reversing itself on the trademark claims. 8

The panel still cut off Fleischer Studios's copyright claims for the same reasoning in its first opinion – in fact the copyright portion of both decisions is identical. However, with regard to the trademark claims, the new decision made no reference of aesthetic functionality, Job's Daughters, or Dastar, and, instead, focused on whether Fleischer Studios had valid trademark rights. The Ninth Circuit's second opinion scrutinized the evidence set forth by Fleischer Studios and upheld the district court's decision that much of that evidence was untimely filed with the district court, including proof that Fleischer Studios owned a federal registration for Betty Boop. However, the Ninth Circuit held that, even if Fleischer Studios did not own a registration, it could still assert common law rights.

The Ninth Circuit held that fractured ownership can make it difficult for a trademark owner to establish secondary meaning, as consumers would not associate Betty Boop with one particular source. However, the Ninth Circuit held that the "mere fact of fractured ownership is not, by itself, conclusive evidence of a lack of secondary meaning" and, citing Universal City Studios, Inc. v. Nintendo Co., 578 F. Supp. 911, 923-25 (S.D.N.Y. 1983), held that "[t]here must be something more" to support such a finding. For example, there was no evidence of extensive use and licensing of similar images by other companies or that there widespread confusion as to who owned the rights. The Ninth Circuit did not believe that the incomplete record established in the district court supported a finding that Fleischer Studios could not establish secondary meaning at all. The Ninth Circuit overruled the district court's grant of summary judgment to A.V.E.L.A. and remanded the case back to the district court for further proceedings on Fleischer Studios's trademark infringement claims.

We Did It 9 (for now)
Much to the joy of Fleischer Studios and other rights holders, the Ninth Circuit's second opinion moved away from aesthetic functionality and, instead, focused its analysis more properly on the extent of Fleischer Studios's rights. Furthermore, the absence of Dastar in the opinion brought Ninth Circuit back in line with decisions of other circuits which recognize that trademark rights can survive expiration of copyright rights in some situations. The rehearing by the same panel was an interesting twist in this case and it is unknown why the panel reversed itself or seemed to contradict established precedents in the first place. The Ninth Circuit's change of heart returns the case back to the district court for further proceedings. Although the copyright claims are off the table, Fleischer Studios can still pursue its trademark claims. Be sure to stay tuned for Betty Boop's Ups and Downs10 in the courts.

1 Titles of actual Betty Boop cartoon from June 15, 1934. Additional titles of actual Betty Boop cartoons are used throughout this article with the date of release.
2 April 6, 1934.
3 May 18, 1934
4 September 20, 1935
5 May 24, 1935.
6 The decision can be found here www.ca9.uscourts.gov/datastore/opinions/2011/02/23/09-56317.pdf.
7 October 22, 1937
8 The decision can be found here www.ca9.uscourts.gov/datastore/opinions/2011/08/19/09-56317.pdf.
9 April 24, 1936
10 October 14, 1932

First Betty Boop Ninth Circuit case was: Fleischer Studios, Inc. v. A.V.E.L.A., Inc.
636 F.3d 1115 (9th Cir. February 23, 2011)

Second Betty Boop Ninth Circuit case was: Fleischer Studios, Inc. v. A.V.E.L.A., Inc.
654 F.3d 958 (9th Cir. August 19, 2011


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DMCA Safe Harbor Updates

Viacom v. YouTube on DMCA Knowledge Requirements
By Daniel Lifschitz

Dan Lifschitz is a third-year student at Loyola Law School in Los Angeles, and an editor of the International Law Review.

After five years of litigation, the Second Circuit has finally issued an opinion in the Viacom v. YouTube case,1 only months after the Ninth Circuit's verdict in the very similar UMG v. Shelter Capital case.2 Both Viacom and YouTube have been vociferously arguing over how to interpret the "safe harbors" of the 1998 Digital Millennium Copyright Act ("DMCA"), and the Second Circuit has responded with a rather Solomonic answer; while it makes it clear that the District Court construed certain aspects of the applicable law correctly, and that Viacom will have to demonstrate YouTube possessed more than mere general knowledge of infringing activity occurring on its website in order to lose the protection of the safe harbors, it vacated the grant of summary judgment for YouTube and revived certain aspects of the dispute, providing Viacom with numerous avenues of attack to pursue.

The Controversy and Applicable Law

YouTube was sued in 2007 by Viacom (directly) and Premier League/Bourne Co. (in a class action), each alleging direct and secondary copyright infringement over a combined total of nearly 77,000 clips found on YouTube's website (the "clips-in-suit").3 YouTube defended itself by asserting section 512(c) of the DMCA, which the District Court noted (and the Second Circuit upheld) "protects a defendant from all affirmative claims for monetary relief" arising out of infringement "by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for [a] service provider."4

However, as noted, the section 512(c) safe harbor only covers infringement "at the direction of a user of material..."5 and is contingent upon a scienter requirement outlined in section 512(c)(1)(A), which denies application to service providers who do not act expeditiously to remove instances of infringement they either have actual knowledge of, under section 512(c)(1)(A)(i), or constructive knowledge of, under section 512(c)(1)(A)(ii).6 That constructive knowledge provision, more commonly described as "red flag knowledge," arises when a service provider is "aware of facts or circumstances from which infringing activity is apparent."7 Furthermore, section 512(c)(1)(B) states that a service provider loses the safe harbor if it has "the right and ability to control" any infringing activity to which a financial benefit is directly attributable.8

The District Court's Opinion

In its ruling, the District Court dismissed most theories advanced by Viacom as to YouTube's liability. It denied that any replication, transmittal or display of YouTube videos fell outside of "infringement of copyright by reason of ... storage at the direction of the user";9 it held that section 512(c)(1)(A)(i) and (ii) both "describe knowledge of specific and identifiable infringements of particular individual items." and that "[m]ere knowledge of [the] prevalence of such activity in general is not enough";10 and it concluded that section 512(c)(1)(B)'s prohibition on receiving "a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity" "requires knowledge of [the activity to be controlled], which must be item-specific." 11

The Second Circuit's Opinion

Scope of Use "By Reason of" User Storage

The Second Circuit agreed with the District Court's finding that most of YouTube's functionality fell within the safe harbor of user-directed activity, such as those that facilitate access to user-stored material by making copies in different coding for display purposes or promote access by showing thumbnails of "related " videos to users.12 One software function involving "syndication" (or licensing) of videos to third parties, however, might not be "at the direction of the user," so the Court remanded for fact-finding as to whether any of the clips-in-suit had been licensed to third parties by YouTube.13

Objective (Red Flag) v. Subjective (Actual) Knowledge

The Second Circuit substantively upheld the District Court's reading of section 501(c)(1)(A), noting that the very nature of a service provider's obligation to remove infringing content contemplates knowledge or awareness of specific infringing material (as expeditious removal is possible only if the provider knows with particularity which items to remove).14 In doing so, it rejected Viacom's argument that requiring "aware[ness] of facts or circumstances" for red flags to apply would render section 501(c)(1)(ii) duplicative of "actual knowledge" under section 501(c)(1)(i).15 The Court explained that actual knowledge means subjective belief (whether a provider actually or "subjectively" knew of specific infringement), while red flags incorporate a standard of objective reasonableness (whether a service provider was subjectively aware of facts that would have made the specific infringement "objectively" obvious to a reasonable person).16 But the Second Circuit agreed with the District Court that both involve knowledge of specific infringing material rather than general awareness of the same.17

Although requiring either actual or constructive knowledge of specific infringements, the Second Circuit nonetheless held that summary judgment had been granted prematurely.18 In particular, it noted that certain pieces of evidence (such as e-mails between YouTube's founders that discussed the legality of certain clips on the site) may raise an issue of material fact as to YouTube's knowledge regarding specific instances of infringement.19 Consequently, the issue was remanded for further consideration to determine whether the clips as to which there might be specific actual or constructive knowledge were actually clips-in-suit.20

Willful Blindness in the DMCA context

Although the term is not expressly used in the DMCA, the Second Circuit agreed with Viacom that knowledge of infringement could alternatively be demonstrated by "willful blindness" on YouTube's part – "conscious avoidance" amounting to knowledge, where it "'was aware of a high probability of the fact in dispute and consciously avoided confirming that fact.'"21 The only limitation on this doctrine created by the DMCA is found in section 512(m), which states that a service provider has no general duty to monitor content.22 Because there must be willful blindness as to specific potential infringements, the doctrine is not the mere failure to monitor generally, and so section 512(m) does not preclude proof of willful blindness to demonstrate knowledge or awareness of specific instances of infringement under the DMCA.23 Since the District Court did not expressly address the willful blindness concept or its application to DMCA safe harbors, the Second Circuit remanded for findings of fact on that issue as well. 24

The "Right and Ability to Control" Test
The control-and-benefit concept under section 512(c)(1)(B) derives from common law vicarious liability, "[w]hen the right and ability to supervise coalesce with an obvious and direct financial interest in the exploitation of copyrighted materials—even in the absence of actual knowledge that the copyright mono[poly] is being impaired."25 While the parties disputed the impact of the DMCA on that common law concept,26 the Second Circuit ultimately rejected all proposed tests—plaintiffs', defendants', the District Court's, and the Ninth Circuit's—and held that the "right and ability to control" infringing activity "requires something more than the ability to remove or block access to materials posted on a service provider's website," but less than item-specific knowledge. 27

Although its explanation was somewhat amorphous, the Court said that control in this context could exist in circumstances under which a service provider is "exerting substantial influence on the activities of users, without necessarily—or even frequently—acquiring knowledge of specific infringing activity."28 The court only gave two examples of this occurring. First, it noted that such control might exist in a case such as Perfect 10, Inc. v. Cybernet Ventures, Inc., "where the service provider instituted a monitoring program with 'detailed instructions regard[ing] issues of layout, appearance, and content,' also forbidding certain types of content and refusing access to users who failed to comply with its instructions."29 Second, it suggested that facts such as those in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., an inducement case which "premises liability on purposeful, culpable expression and conduct," might show the level of control necessary under section 512(c)(1)(B).30 It then sent the case back to the District Court to further explore what the "right and ability to control" might look like under such an approach, and to apply its results to the facts of the instant case.31

While some have been quick to proclaim the Second Circuit's reversal of summary judgment as a victory for media plaintiffs generally, it should be noted that many of the points in Viacom's favor are fairly fact-specific. Liability for syndication simply means that service providers are not likely to utilize such an arrangement going forward, and while the "smoking gun" YouTube e-mails in Viacom's possession may ultimately satisfy the scienter requirements explicated by the Second Circuit, future defendants might utilize much more stringent internal communications protocols to ensure that they do not produce the same unfavorable evidence that YouTube did during its unsophisticated early years. More generally, plaintiffs' abilities to adequately demonstrate such scienter on the part of defendants in order to strip away the protections of the DMCA have been reduced to item-specific knowledge or willful blindness as to specific infringements, a far cry from the general awareness of infringement many content producers would prefer to constitute "red flag knowledge."

Ultimately, the Second Circuit opinion is very open-ended. While it at least settles the "red flag" issue definitively in theory (if not in practice), it leaves questions as to what evidentiary standard is required to demonstrate either willful blindness or right and ability to control. The MPAA has already sought to capitalize on this in its ongoing lawsuit against file-sharing locker service Hotfile, citing the Second Circuit's ruling to support its assertion that, among other things, "service providers can obtain knowledge of infringing activity that disqualifies them from DMCA safe harbor from sources other than copyright owner takedown notices."32 Hotfile, in return, claims that the MPAA's interpretation "badly distorts the important aspects of the YouTube decision."33 Because the issues left unresolved by the Second Circuit's opinion will give plaintiffs greater ability to survive summary judgment until subsequent case law establishes further precedent, safe harbor litigation is likely to increase in both complexity and cost as plaintiffs search for the pieces of evidence that would show willful blindness or control, leaving neither side certain what that threshold showing will be. Thus, for the foreseeable future, one cannot be sure just how safe the DMCA's safe harbor actually is.

1Viacom Int’l v. YouTube, No. 10-3270, 2012 WL 113085 (2d Cir. Apr. 5, 2012) (hereinafter “Viacom”).
2UMG Recordings, Inc. v. Shelter Capital Partners LLC, 667 F.3d 1022 (9th Cir. 2011).
3Viacom at 13.
4Id. at 33.
517 U.S.C. § 512(c) (emphasis added).
617 U.S.C. § 512(c)(1)(A).
717 U.S.C. § 512(c)(1)(A)(ii).
817 U.S.C. § 512(c)(1)(B).
9Viacom at 14.
11Id. at 24.
12Id. at 29-31.
13Id. at 31-32.
14Id. at 16.
15Id. at 16-17.
16Id. at 17.
17Id. at 19.
19Id. at 19-22.
20Id. at 22.
21Id. at 23.
2217 U.S.C. § 512(m).
23Viacom at 23-24.
24Id. at 24.
25Id. at 26 (quoting Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d304, 407 (2d Cir. 1963); cf. Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930 n.9 (2005)).
26Id. at 25-26.
27Id. at 27-28.
28Id. at 28.
29Id.(citing Perfect 10, Inc. v. Cybernet Ventures, Inc.,213 F. Supp. 2d 1146 (C.D. Cal. 2002)). 
30Id. (citing Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005)). 
31Id. at 28-29.
32Pl.’s Notice of Supp. Authority, Disney, et al. v. Hotfile Corp., No. 11-CIV-20427 at 3 (S.D. Fla. April 11, 2012), available at http://docs.justia.com/cases/federal/district-courts/florida/flsdce/1:2011cv20427/373206/443/0.pdf?ts=1334313121.
33Defs.’ Resp. to Pl.'s Notice of Supp. Authority, Disney, et al. v. Hotfile Corp., No. 11-20427 at 2 (S.D. Fla. April 12, 2012), available at http://docs.justia.com/cases/federal/district-courts/florida/flsdce/1:2011cv20427/373206/444/.

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Interview with Kim Richardson

Interviewed by Brian Walker
(Student at Howard Law School)

Kim Richardson is Principal Counsel at the Walt Disney Company in the Corporate Legal Data Privacy Group in Burbank, Calif., where she advises on data privacy and security compliance for the company's global operations. Prior to assuming her current role, Ms. Richardson served as Executive Counsel for Disney Consumer Products, and was responsible for negotiating and drafting global merchandise license agreements and acting as chief legal counsel for Disney's e-commerce and catalog business.

Ms. Richardson was interviewed by Brian Walker, Howard University School of Law, second year student and Chief Operating Officer of The Creative Mind Group.

Q. Why do you believe that data privacy is an important issue impacting businesses today?
A. Businesses are becoming increasingly reliant on technology and data. New technologies have changed the ways in which consumers interact with content and how businesses advertise their products and services. New technologies also facilitate global operations by offering increasing capabilities for storing and moving large amounts of information. Thus, content is consumed digitally and interactively, advertising takes place online, and information is stored in the "cloud." These business trends converge around information and make data privacy important for businesses across many industries. With heightened attention to privacy issues in the media, a growing prevalence of class action litigation, and an increase in regulatory activity both in the U.S. and abroad, I believe that privacy will continue to have a growing impact on businesses across many sectors in the days to come.

Q. What are the most important skills most needed in your current role? Why?
A. Data privacy is a fluid area of law, rapidly evolving with changes in technology. Consequently privacy counsel need to be comfortable in adapting to changes and working in gray areas. It's important stay abreast of new developments in technology and the law. There are a number of educational resources available to assist with this, as well as professional organizations such as the International Association of Privacy Professionals, that connect privacy professionals from a diversity of industries and functions through networking events and educational seminars. And as with any legal role, strong analytical skills, good judgment and effective communication are key skills required for success.

Q. How was your experience working at a firm?
A. Working at a firm was a great experience that offered an excellent opportunity for me to learn and grow as a new lawyer. My firm staffed projects in a way that provided me with valuable hands-on practical experience that went beyond the research and writing to include arguing motions, taking depositions, and participating in arbitrations and trials. I was also able to gain substantive expertise in the legal areas of greatest interest to me – entertainment and intellectual property. All of this helped me to acquire knowledge and skills that would prove transferable to my in-house roles. While I greatly enjoyed my law firm experience as a litigator, I decided I wanted to apply that experience to becoming a transactional attorney in-house, where I could be more involved in facilitating the day-to-day operations of a business.

Q. What are the major differences between practicing in-house and practicing at a firm?
A. From my experience, substantive differences in practice primarily stemmed from the area of the law and the function, rather than the difference of working in-house or in private practice. Working in litigation, transactional and compliance roles across a number of substantive legal areas all emphasize different skill sets. However, variations between in-house versus private practice do exist. While private counsel are generally handling specific matters, in-house counsel are involved in the day-to-day operations of the business. Consequently, it's important for in-house counsel to understand the business at a deeper level, from both an operational and structural standpoint. This facilitates development of a strong relationship of trust with stakeholders within the organization, so that you are viewed as a valued advisor and member of the business team. It's also important that in-house counsel be able to think outside of the box and help develop creative solutions that advance business goals.

Q. What advice can you provide to attorneys or law students who want to practice entertainment law?
A. It's often said that success comes when preparation meets opportunity and I believe that's true. Whether you are an existing attorney or a law student, my advice is to prepare by gaining knowledge and skills that are transferable to entertainment practice, and to create opportunity by developing a strong network of people that can help you achieve our goals.

As an existing attorney, look for opportunities to work in substantive areas related to entertainment and gain exposure to entertainment clients. Learn as much as you can about the business. Don't be afraid to take a position in order to get your foot in the door of a company of interest. Valuable experience and exposure can lead you to recognizing your specific interests as well as understanding the business or industry you are working in. Moreover, your engagement with other practitioners and professionals in these roles can assist you in developing a larger network. Additionally, active involvement with professional and alumni organizations can provide an excellent opportunity for expanding your network.

For current law students or even college students, it is never too early to begin preparing for your professional career. Ways to attain relevant knowledge and experience include taking intellectual property courses and entertainment seminars. Use research and writing opportunities to learn more about issues impacting the entertainment industry and demonstrate your interest. Also, interning with an organization in the fields of practice in which you wish to become an attorney can lead to a wealth of practical skills. Remember that you are building your personal brand so make these opportunities count. The people you come in contact with may become valuable resources and mentors.

Q. How did you start your career?
A. I began my Disney career as a production and human resources attorney for Walt Disney Feature Animation. Before working in-house, I practiced as a litigation associate with Mitchell Silberberg and Knupp LLP, where I litigated entertainment contract, intellectual property, employment and product liability matters. I am graduate of Harvard Law School and UCLA, where I graduated magna cum laude with a B.A. in communications.

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Hold the Date for these MCLE Seminars

June 12, 2012 - Lunchtime
Managing and Reducing Litigation Costs: Suggestions from In-House, Outside Counsel and ADR

June 28, 2012 - 6:30 pm
Business and legal issues re: Entertainment & IP based start-ups

For further information on either seminar, contact Fatima Jones at fjones@lacba.org.
Register by Phone with Visa, MasterCard or AMEX: Call (213) 896-6560 Monday-Friday, 9:00 a.m.- 5:00 p.m.

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Recent Cases

Federal summaries provided by Irfan Lateef of Knobbe Martens www.kmob.com

In Abbott Point of Care Inc. v. Epocal, Inc.,the Federal Circuit affirmed the district court’s grant of Epocal’s motion to dismiss for Abbott’s lack of standing.
Abbott sued Epocal for infringing patents of which both Epocal and Abbott claim ownership.  The sole inventor, Lauks, who assigned the patents to Epocal, was previously subject to an employment agreement and a later consulting agreement under a predecessor to Abbott.  Abbott asserted that because the consulting agreement carried forward the assignment covenant of the earlier employment agreement, Abbott owned the patented inventions which were conceived during the term of the consulting agreement.  The district court found that the consulting agreement did not continue the assignment covenant, and therefore Abbott lacked standing to sue because it did not own the patents.
The Federal Circuit affirmed.  The Federal Circuit held that the plain language of the consulting agreement continued some covenants of the prior employment agreement, but not the assignment covenant.  This interpretation was supported by the fact that the consulting agreement had provisions that directly contradicted portions of the prior employment agreement’s assignment provisions.  Because the consulting agreement had no assignment provisions, Lauks had no obligation to assign inventions from the consulting period to Abbott’s predecessor.


In Falana v. Kent State University,the Federal Circuit affirmed the district court’s judgment as to inventorship and found the district court’s exceptional case determination and attorney fees award as not final.


Kent Displays, Inc. (a spin-off of Kent State University) and Dr. Seed (collectively, “KDI”) hired Dr. Falana to synthesize chiral organic molecules for improved LCDs.  Falana developed a synthesis protocol for making a novel genus of chemical compounds.  Using his protocol, Falana synthesized a compound KDI considered a “great improvement” and that represented “significant progress,” but did not satisfy the goals of the project.  After Falana left KDI, Seed used Falana’s protocol to synthesize a similar compound that met KDI's goals.  KDI then filed the patent at issue, which claimed the genus of compounds.  Falana sued to be listed as an inventor.  After a bench trial, the district court concluded that Falana contributed to the conception of the claimed invention by, among other things, developing the synthesis protocol.  Additionally, the court ruled the case to be exceptional and awarded attorney fees.

The Federal Circuit affirmed the inventorship judgment, holding that "the conception of a chemical compound necessarily requires knowledge of a method for making the compound."  Where the method requires more than the exercise of ordinary skill, "the discovery of that method is as much a contribution to the compound as the discovery of the compound itself."  Therefore, “a putative inventor who envisioned the structure of a novel genus of chemical compounds and contributes the method of making that genus contributes to the conception of that genus.”  The Federal Circuit also held that the exceptional case determination was not properly before it because the attorney fees amount had not been finalized, and refused to exercise pendent jurisdiction over the issue.


In HTC Corp. v. IPCom GmbH & Co., KG,the Federal Circuit reversed district court’s summary judgment of invalidity. 
In a declaratory judgment suit, defendant IPCom appealed from the district court’s summary judgment of invalidity of claims related to a cellular telephone network.  The claims at issue recite: "A mobile station for use with a network including a first base station and a second base station that achieves a handover [from the first to the second] by: [six recited method steps], the mobile station comprising: an arrangement for reactivating the link with the first base station if the handover is unsuccessful." Plaintiff HTC successfully argued that the challenged claims were indefinite for claiming both apparatus and method steps.
The Federal Circuit reversed.  The Federal Circuit held that the plain meaning of the claim language and the specification indicates that the network performs the recited process steps, not the claimed mobile station.  The claims are therefore not indefinite because they "merely describe the network environment in which the mobile station must be used," and do not recite method steps that must be performed by the mobile station.  A single statement by the applicant during prosecution referring to "the claimed process" was not sufficient to change this construction.
Alternatively, HTC argued that the claims were invalid for failing to disclose a structure corresponding to the recited "arrangement for reactivating" means plus function limitation.  The district court held that the corresponding structure was a processor and transceiver, which was sufficient.  The Federal Circuit disagreed, holding that disclosure of an algorithm sufficient to transform the processor and transceiver into a special-purpose computer designed to implement the recited function was also required.  However, this issue was waived because HTC failed to raise it in the district court, and the Federal Circuit declined to consider the issue for the first time on appeal. 


In Ninestar Technology Co. v. International Trade Commission, the Federal Circuit affirmed the International Trade Commission (ITC) finding that Ninestar was in violation of an ITC order under 19 U.S.C. § 1337.
Ninestar appealed a decision of the ITC, which found Ninestar in violation of a cease and desist order, and levied a civil penalty.  Ninestar argued that the ITC incorrectly found infringement and that the ITC order violates not only the constitutional principle of separation of powers but also the constitutional right to notice, clarity, and a jury trial.  Regarding infringement, Ninestar argued that its importation into the United States of products manufactured and sold outside the United States are permissible under the first-sale doctrine.  The Federal Circuit held that the first sale doctrine did not apply because the authorized first sale must have occurred under the United States patent.  The Federal Circuit affirmed the civil penalty in light of Ninestar executives admitting to knowingly importing and selling infringing articles after the issuance of the order, and manipulating shipping dates and descriptions  of the cartridges as remanufactured, in an attempt to contravene the ITC order.   
The Federal Circuit heard Ninestar's arguments regarding unconstitutionality, despite these issues not being raised in the lower proceedings.  The Federal Circuit held that the ITC order is not unconstitutional because, by creating a civil fine for violation of ITC orders, the legislature did not enact a statutory scheme akin to a criminal scheme.  The Federal Circuit stated that "only the clearest proof will suffice to override legislative intent and transform what has been denominated a civil remedy into a criminal penalty."  The Federal Circuit additionally stated that because the amount of the civil penalty was tied to actual sales figures and lost earnings for the patent owner, the penalty did not amount to a criminal penalty.  Furthermore, the Federal Circuit held that because the ITC and the power to impose civil penalties was created by legislation, the seventh amendment right to trial by jury is not implicated.  A legislatively created right before an administrative agency is not "a suit at common law," and therefore, the seventh amendment right does not ensure the right to a trial by jury in such cases.


In Bard Peripheral Vascular, Inc. v. W.L. Gore & Associates, Inc., the Federal Circuit affirmed the district court's judgment of no improper inventorship, anticipation, obviousness, or lack of written description, and the award of enhanced damages, attorneys' fees, costs, and an ongoing royalty.
Bard originally applied for the asserted patent in 1974.  While still pending, the application was the subject of a lengthy Interference between Goldfarb (Bard) and Cooper (Gore).  The patent finally issued to Goldfarb in 2002, and Bard asserted it against Gore.  A jury found that the patent was not invalid for improper inventorship (for omitting Cooper), anticipation, obviousness, or lack of written description, and that Gore willfully infringed.  The jury awarded Bard lost profits and reasonably royalties of $185 million, based on a reasonable royalty rate of 10%.  The district court denied Gore's post-trial motions and awarded Bard enhanced damages of $371 million and attorneys' fees and costs of $19 million. The district court denied Bard's motion for a permanent injunction, however, instead awarding an ongoing royalty of between 12.5% to 20%.
The Federal Circuit affirmed all of the district court's judgments.  With respect to inventorship, the Federal Circuit held that substantial evidence supported a finding that Cooper did not contribute to Goldfarb's conception in a significant way, but rather merely told Goldfarb what was already known in the art when he supplied tubing to Goldfarb for testing.  The Federal Circuit held that the finding of no anticipation was warranted where the art was not enabled, and non-obviousness was supported by evidence that the cited references did not disclose the key feature of the invention.  The Federal Circuit agreed that claims that did not recite a particular feature did not lack written description support where that feature was not an essential element of the invention.  Regarding the finding of willfulness, the Federal Circuit noted that Bard presented substantial evidence to satisfy both prongs of In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007), and the jury could have reasonably concluded that Gore's opinion of counsel was not objective because the bases of invalidity in the opinion were "directly contrary to arguments that Gore had previously made before the PTO" and based on references reviewed extensively by the PTO, and because opinion counsel represented Gore both before and after the asserted patent issued.


In Fort Properties, Inc. v. American Master Lease LLC, the Federal Circuit affirmed the district court’s grant of summary judgment of invalidity under 35 U.S.C. § 101.

The patent in suit claimed an investment method of aggregating real property to form an investment portfolio and issuing shares of the investment subject to a master agreement designed to conform with certain tax code provisions.  The district court — issuing its ruling after the Federal Circuit's In re Bilski, 545 F.3d 943 (Fed. Cir. 2008),decision but before the Supreme Court's subsequent decision in Bilski v. Kappos, 130 S. Ct. 3218 (2010) — invalidated all claims under 35 U.S.C. § 101 as failing the machine or transformation test.

The Federal Circuit, despite the intervening Supreme Court Bilski decision, affirmed the district court’s judgment of invalidity, holding that the claims attempted to capture an unpatentable abstract idea.  The Federal Circuit noted that claims 1–31 did not require the use of a computer, and held that the abstract idea was not patentable even though the claimed method required several real world steps because, under Bilski, an "abstract concept cannot be transformed into patentable subject matter merely because of connections to the physical world through deeds, contracts and real property."  Moreover, although claims 32–41 included a limitation that a computer “generate a plurality of deedshares,” this limitation did not “play a significant part in permitting the claimed method to be performed,” nor did it “impose meaningful limits on the claims’ scope.”


In Marine Polymer Technologies, Inc. v HemCon Inc.,the Federal Circuit affirmed the trial court's judgment of infringement and damages, and concluded that intervening rights do not apply to claims in a reexamination that have not been amended and are not new.
Marine sued HemCon for infringing patent claims that included a "biocompatible" limitation.  The district court construed "biocompatible" to mean "no detectable biological reactivity as determined by biocompatibility tests" and entered summary judgment of infringement.  The jury found that the patent was valid and that Marine was entitled to $29M in damages.  During the trial, HemCon filed a request for ex parte reexamination of the patent.  In reexam, the examiner rejected the claims as invalid over the prior art based on a broader construction of the term "biocompatible" ("little or no detectable reactivity"), which the examiner adopted because certain dependent claims recited reactivity test scores corresponding to slight or mild reactivity.  In response, Marine deleted the dependent claims that were inconsistent with the narrower construction, and argued that the district court's narrower construction should be adopted.  With all conflicting dependent claims canceled, the examiner adopted the narrower construction and allowed the claims, after the district court had entered its final judgment.  On appeal, a panel of the Federal Circuit reversed the district court's judgment on the grounds that HemCon had acquired intervening rights during reexamination.  Marine petitioned for en banc rehearing. 
En banc, an evenly divided Federal Circuit affirmed the district court's claim construction and judgment regarding infringement and damages.  The Federal Circuit held that, while the district court's construction was inconsistent with the dependent claims reciting some amount of reactivity (which were present during the trial), the doctrine of claim differentiation is "not a hard and fast rule."  Here, the specification disclosed in an example that compounds "of the invention" exhibit no detectable reactivity, and this trumped the claim differentiation argument.
Regarding intervening rights, HemCon argued that the scope of the asserted claims substantively changed during reexamination when Marine cancelled the dependent claims and persuaded the examiner to adopt the narrower claim construction.  The Federal Circuit concluded, by a 6-4 margin, that there were no intervening rights because § 307(b) specifies that only "amended or new" claims incorporated during reexamination will be susceptible to intervening rights.  The additional question of whether the claim is "substantively changed" is reached only if the claim at issue is "amended or new."  The Federal Circuit held that arguments and concessions made by the applicant during reexam do not constitute "amendments."  For purposes of §307(b), a claim is "amended" only if the claim language itself is changed.  Therefore, Marine's cancellation of dependent claims did not "amend" the asserted claims. 

Judges Dyk, Gajarsa, Reyna, Wallach, and Linn dissented from the en banc opinion.  They argued that the district court's claim construction was improper because the doctrine of claim differentiation presumes a claim interpretation is improper where it nullifies dependent claims.  This presumption is overcome only when the construction is compelled by the written description or prosecution history, which was not the case here.  Judges Dyk, Gajarsa, Reyna, and Wallach also dissented from the court's intervening rights decision, arguing that case law and intervening rights statutes compel an interpretation of "amended" that does not require a change in the language of the claims.  Because Marine Polymer "clearly and unambiguously disclaimed the scope of its claim" during reexam, they felt that intervening rights should exist.


In Mayo Collaborative Services v. Prometheus Laboratories, Inc., a unanimous Supreme Court issued an important ruling regarding what constitutes patentable subject matter, especially in the field of personalized medicine and diagnostics.  The Court reiterated its long held view that “laws of nature, natural phenomena, and abstract ideas” are not patentable, but “an application of a law of nature” may be patentable if the claims recite sufficient additional steps.  Here, the Court determined that because the claimed methods recited a law of nature – a discovered correlation between metabolite levels of a drug in a patient’s blood and the response of that patient to drug therapy — the methods are not patentable, unless they have additional features that ensure that the method is not an attempt to monopolize the law of nature itself. 

The Court concluded that the correlation between metabolite levels and optimal drug dosage was merely setting forth the unpatentable law of nature, and that the additional recited steps of administering the drug and determining the level of metabolite added “nothing specific to the laws of nature other than what is well-understood, routine, conventional activity, previously engaged in by those in the field.”  Giving no weight to the additional recited steps, the Court held that the claims were not eligible for patent monopoly. 

The Court’s holding appears to limit the patentable subject matter for diagnostic inventions.  Applying the Court’s ruling correlations between something measured and a physiologic condition may be interpreted as laws of nature, and the technologies for measuring those conditions may be conventional.  Similarly, because the discovery of a drug’s action on a patient may also be characterized as a natural phenomenon, method of treatment claims, previously deemed transformative through the step of administering the drug, may also be called into question.  It will require careful patent drafting and thoughtful consideration to avoid falling into the “laws of nature” trap.

Besides the obvious impact on patentability of personalized medicine, diagnostics, and methods of treatment, the Court’s reasoning may also be utilized to further limit the scope of patentable subject matter as related to computer implemented methods that involve algorithms, particularly where recited additional computer implemented steps may be well-understood, routine, conventional activities, previously engaged in by those in the field.

Finally, the Supreme Court’s unanimous ruling and broad interpretation of the “laws of nature” exception to patentability may foreshadow a drastic narrowing of gene patent eligibility — an issue that is likely to be before the Court in the future.


In In re MSTG, Inc., the Federal Circuit denied MSTG’s petition for writ of mandamus on the grounds that privilege does not protect settlement negotiations from discovery.

MSTG sued several cell phone companies for patent infringement, and eventually settled on terms including licenses or options to license the patents.  In a subsequent suit against AT&T involving some of the same patents, an issue arose relating to the amount of a reasonable royalty.  During discovery, MSTG produced the final settlement agreements from its prior disputes, and the district court denied AT&T's motion for discovery related to the prior settlement negotiations.  Subsequently, MSTG's damages expert opined that the prior settlement agreements were not relevant to the hypothetical royalty rates between MSTG and AT&T, based in part on testimony of an MSTG executive regarding the prior settlement negotiations.  AT&T requested reconsideration of its discovery request related to the negotiations, and the district court granted discovery, reasoning that the settlement negotiations could shed light on whether the licenses could be considered a basis for calculating a reasonable royalty between AT&T and MSTG.
On petition to the Federal Circuit for a writ of mandamus, MSTG asserted that communications related to reasonable royalties and damages should be protected from discovery under a settlement negotiation privilege, and that the district court had abused its discretion by ordering discovery of the same.  Noting that this issue was a matter of first impression, the Federal Circuit rejected MSTG’s petition and determined that no such settlement negotiation privilege exists and that Rule 26 provides sufficient protection against abusive discovery.  The Federal Circuit concluded that the district court had not abused its discretion in granting discovery because, as a matter of fairness, MSTG cannot have its expert rely on information from MSTG's executives about the settlement negotiations and deny discovery as to those same negotiations.


In USPPS, Ltd. v. Avery Dennison Corp., the Federal Circuit affirmed the Fifth Circuit’s order transferring the case to the Federal Circuit and affirmed the district court’s dismissal of USPPS’s claims for breach of fiduciary duty and fraud as untimely.

Avery entered into a licensing and manufacturing agreement with a patent applicant that owned an application related to personalized postage stamps.  Under the agreement, Avery was responsible for prosecuting the application and paying all related expenses.  The applicant later transferred ownership of the application to USPPS.  The application was eventually rejected by the PTO, and Avery allowed the application to go abandoned.  USPPS sued Avery and its attorneys, alleging breach of fiduciary duty and fraud, including malfeasance in failing to get the patent issued.  The district court dismissed the complaint as barred by the four-year statute of limitations, and USPPS appealed.  The Fifth Circuit transferred the appeal to the Federal Circuit, finding that federal patent law was a necessary element of the claims.

The Federal Circuit agreed that it has jurisdiction over the case under 28 U.S.C. § 1338 because an important underlying question is whether the application was patentable over the prior art.  The Federal Circuit affirmed the ruling that the complaint was time barred because USPPS filed the complaint more than four years after the alleged injury occurred, and the exceptions of the “discovery rule” (tolling where the injury could not be discovered) or “fraudulent concealment” (tolling where the defendant fraudulently conceals the cause of action) did not apply.

Judges O’Malley and Mayer concurred, agreeing that Federal Circuit precedent required the exercise of jurisdiction over the state law claims, but argued that the Federal Circuit should revisit its earlier decisions en banc because they conflict with Supreme Court precedent and result in jurisdictional overreach. 

Judge Prost also concurred, arguing that the Federal Circuit’s jurisdiction over the case was appropriate because substantial issues of patent law were implicated.


In Kappos v. Hyatt, the Supreme Court held that, in a civil action brought pursuant to 35 U.S.C. § 145, there are no limitations on a patent applicant’s ability to introduce new evidence beyond those in the Federal Rules of Evidence and the Federal Rules of Civil Procedure.
Applicant Hyatt's claims were rejected by a PTO examiner as lacking written description support, and the BPAI affirmed the rejection.  Hyatt filed an action in district court under § 145, challenging the PTO's decision.  In the action, Hyatt sought to introduce a new written declaration into evidence to overcome the rejection.  The district court denied entry of the declaration, holding that applicants are precluded from presenting new evidence.  The Federal Circuit disagreed and vacated the judgment, and the Director of the PTO appealed to the Supreme Court.  
The Supreme Court affirmed the Federal Circuit's holding that a patent applicant's ability to introduce new evidence in a §145 proceeding is not limited beyond the limitations imposed by the Federal Rules of Evidence and the Federal Rules of Civil Procedure.  Moreover, when new conflicting evidence is introduced, the district court must make de novo factual findings that take account of both the new evidence and the administrative record before the PTO.  The district court can accord respect to the decisions of the PTO by using its broad discretion in deciding what weight to give the new evidence.

California state cases provided by LACBA

LACBA Intellectual Property Case Summaries
Monday, April 9, 2012 - In action by fabric printer against retailer and its vendor for infringement of copyrighted design, the sale of more than 50,000 yards of fabric bearing the design created a genuine dispute of material fact as to whether the design was widely disseminated, where it could reasonably be inferred that many or most of the purchasers were in the area where plaintiff and defendant vendor were located and the dissemination occurred over a four-year period immediately preceding alleged infringement. Where comparison of defendants’ allegedly infringing design and plaintiff’s copyrighted design revealed objective similarities in protectable elements, triable issue existed as to whether designs were "substantially similar." Plaintiff’s erroneous inclusion of two previously published designs in what was registered as an unpublished collection did not invalidate that registration where plaintiff did not intend to defraud Copyright Office and where Copyright Office allowed plaintiff to correct the error through a supplementary registration.
     L.A. Printex Industries, Inc. v. Aeropostale, Inc.
     filed April 9, 2012
     Cite as 10-56187
     Full text click here
Monday, March 12, 2012 - In action by operator of skydiving center against company that advertised and promoted skydiving--and allegedly did so in such a manner as to make it appear that the two companies were related--district court correctly ruled that statements by defendant to the effect that it owned skydiving facilities or that customers could redeem certificates issued by defendant at locations where they in fact could not were materially false within the meaning of the Lanham Act. In upholding jury’s award of damages, district court properly considered the great value of plaintiff’s original reputation, the costly harm of defendant’s customer confusion, and the geographic extent of potential customer grievances. Challenge to lost profits award was unavailing on appeal where it was based entirely on an attack on substance and credibility of expert testimony to which defendant did not object at or before trial. District court abused its discretion in enhancing Lanham Act damages where its primary motive was to punish rather than to deter.
     Skydive Arizona, Inc. v. Quattrocchi
     filed March 12, 2012
     Cite as 10-16099
     Full text click here
Thursday, February 16, 2012 - Complaint contained an adequate statement of plaintiffs’ claim of vicarious copyright infringement where it alleged that copyrighted musical compositions were publicly performed at restaurant owned by defendants and where it pleaded specific facts to raise a plausible inference that defendants exercised control over and financially benefitted from the performance venue. Testimony of percipient witness as to which musical compositions were played at defendant’s venue was properly admitted; this is not a subject that requires expert testimony. Witness’s testimony that the live band he saw perform at defendants’ venue  introduced the songs they were playing as a particular musician’s standard, copyrighted works and proceeded to play them--and that he saw a disc jockey play four tracks from a CD of copyrighted songs, the titles of which he obtained from the CD jewel case--was sufficient to eliminate any triable issue as to whether the tracks and compositions were "performed" as that term is used in the Copyright Act. Defendants proffered no evidence tending to contradict  testimony that the eight copyrighted compositions at issue were publicly performed at the venue on the night witness was there. Defendant’s self-serving declaration denying ownership of venue was insufficient to establish a triable issue as to whether he and his corporation were liable for the infringing performances there. There was overwhelming evidence that they exercised and derived a financial benefit from the musical performances, including their ownership of the liquor license; defendant testified that he had full control of the premises, including the right to decide which musical acts performed there; and the manager testified that his paychecks were issued by the corporate defendant. Award of costs and attorney fees was not an abuse of discretion where defendants could have avoided liability by purchasing a valid license at any point during the seven years in which plaintiffs’ licensing agency importuned them to do so, and where much of the fees and costs were occasioned by defendants’ "obfuscation" of their corporate structure.
     Range Road Music, Inc.  v. East Coast Foods, Inc.
     filed February 16, 2012
     Cite as 10-55691
     Full text click here

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Submission Guidelines

Submission Guidelines for the Entertainment & Intellectual Property Law Journal
We publish original articles, case notes/updates, interviews and practice tips. If you have already written an article that meets our guidelines, please send us a one-paragraph description, along with the proposed article as an attachment, to the Editor (address below).

Article Guidelines:
1) Our intent is to publish timely, original articles and features, written by and for busy lawyers who work at law firms, practice in-house, teach or who are otherwise professionally involved with entertainment, copyright, trademark and other sectors of IP.

2) Writing must be original and not previously published (with two exceptions: articles distributed only within your law firm, company or other employer (in any form, including a blog); and original material distributed as hand-outs for a symposium or other MCLE event).

3) Articles should run 750-1,200 words. Case notes should be at least 500 words. Exceptions for longer articles may be made within the editor's discretion. We do not publish law review articles.

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5. Law students articles should accompanied by a sign-off from a professor or employer (to make sure the article's content is up to date and accurate).

To contact the editor, please e-mail Jeffrey Mandell at jeff@mandelladr.com (and please also cc LacbaElipsJournal@gmail.com). Include the words "Journal Inquiry" in the subject line of your email.

We look forward to hearing from you, and to publishing your work in the Entertainment and Intellectual Property Law Journal.

Jeffrey Mandell

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