December 2007

From the editors of Wolters Kluwer Law & Business, this update describes important developments from CCH and Aspen Publishers intellectual property and computer law publications.

If you have any comments or suggestions concerning the information provided or the format used, we'd like to hear from you. Please send your comments to john.arden@wolterskluwer.com.

COPYRIGHT

Damages Recoverable for Harm to Reputation, Loss of Good Will
Damages for reputational harm and loss of good will were recoverable in a copyright infringement action, the federal district court in St. Paul ruled, refusing to strike the portion of a homebuilder's copyright infringement complaint seeking such damages. A custom home builder argued that damages for reputational harm and loss of good will resulting from consumer confusion could be sought only with respect to a claim under the Lanham Act. However, Section 504(b) of the Copyright Act, which allows a copyright owner to recover "actual damages and profits," does not distinguish between actual damages and damages stemming from reputational harm or loss of good will. Rather, the text of Section 504(b) suggests, and other courts have held, that a copyright owner may seek actual damages, including damages to reputation and good will in a copyright action. A copyright owner is entitled to such damages as long there is proof that the damages resulted directly from the copyright infringement (U.S. Home Construction dba Lundgren Bros. Construction v. R.A. Kot Homes, Inc., D Minn, 2007 Copyright Law Decisions ¶29,471).

Bipartisan Group Introduces Bill to Crack Down on Copyright Violations
A bill to enhance remedies for violations of intellectual property laws (H.R. 4279) was introduced and referred to the House Committee on the Judiciary on December 5, 2007. The "Prioritizing Resources and Organization for Intellectual Property Act of 2007" would strengthen the civil and criminal laws relating to copyright and trademark infringement and create several new government positions with the power to enforce the new law. The legislation was sponsored by House Judiciary Committee Chairman John Conyers (D-MI), and co-sponsored by four more Democrats and five Republicans, including Lamar Smith (R-Tex). The bill was referred on December 7 to the Subcommittee on Courts, the Internet, and Intellectual Property, which held hearings on the bill on December 13. A related Senate bill (S. 522) was introduced and referred to the Senate Judiciary Committee on February 7, 2007. The Committee held hearings on the legislation on November 7, 2007.

Co-Owner of Infringing Song Not Liable for Infringement
Even though a music publisher had partial ownership interest in the copyright of an infringing song and had received royalties in connection with the song, it was not liable for the infringement, the United States Court of Appeals in Cincinnati held. The publisher's song infringed a record company's recording because it contained sampled and interpolated portions of the company's song without a license. However, the publisher did not issue any licenses authorizing use of the infringing song, control the public performance of the song, or perform the song itself. The publisher's ownership interest and receipt of royalties did not permit an inference that the publisher granted a license. The music publisher was not liable for vicarious or contributory infringement absent evidence that the publisher induced, caused, or contributed to the infringing conduct of composers who sampled and interpolated portions of the record company's song without authorization (Bridgeport Music, Inc. v. WB Music Corp., 6th Cir, 2007 Copyright Decisions ¶29,474).

TRADEMARK

Tobacco Containers Too Dissimilar for Confusion to Result
A producer of roll-your-own cigarette tobacco could not pursue claims against a competitor for infringing or diluting its registered mark TOP by using the phrase "Fresh-Top Canister" on product packaging, the U.S. Court of Appeals in Chicago has held. The parties' respective canister labels were so visually dissimilar that it was next to impossible to believe that any consumer would confuse the products. No consumer could miss the differences between the complaining producer's TOP brand, featuring a picture of a spinning top, and the competitor's ZIG-ZAG brand, including a picture of a French Zouave soldier. The colors and typographic elements of each producer's can created distinctive trade dresses, the court said. The tobacco company's dilution claims were rejected because its TOP brand was not "famous" for purposes of the federal trademark dilution statute. TOP was an old and recognized brand in the loose-cigarette-tobacco market, but the word "top" was commonly used in the tobacco business, and it was too common and widely used to be famously distinctive as an indicator of source (Top Tobacco, L.P. v. North Atlantic Operating Co., Inc., 7th Cir., CCH Trademark Law Guide ¶61,152).

“Chewy Vuiton” Dog Toys Were “Effective Parodies”
A pet toy maker's marketing of "Chewy Vuiton" dog chew toys did not infringe or dilute a luxury handbag designer's LOUIS VUITTON marks, the U.S. Court of Appeals in Richmond, Virginia has held, affirming a decision of the federal district court in Alexandria (CCH Trademark Law Guide ¶60,929). The pet toy maker's products were effective parodies of the designer's products—they were small, plush imitations of the designer's handbags and evoked the marks and design, albeit irreverently and incompletely. The dog toys conveyed enough of the original design to allow consumers to appreciate the point of the parody but stopped well short of appropriating the entire marks that the designer claimed. The strength of the designer's marks enhanced the toys' parodic effect and resulted in reducing the likelihood of confusion, in the court's view. It was precisely because LOUIS VUITTON was so well-recognized as a mark for the designer's handbags that consumers would understand that the pet toys were a parody. The differences between the marks were sufficiently obvious, and the parody was sufficiently blatant, that consumers would not mistake the dog toys' source or sponsorship on the basis of mark similarity. The products themselves were also sufficiently dissimilar to avoid confusion. Even the designer's most proximate products—dog collars, leashes, and pet carriers—were fashion accessories, not dog toys. The parties sold their products through different channels—the dog toys were sold in pet stores, whereas the designer's goods were sold through its own stores and boutiques. The designer's contention that a parody "automatically" constituted actionable dilution was rejected (Louis Vuitton Malletier S.A. v. Haute Diggity Dog, LLC, 4th Cir., CCH Trademark Law Guide ¶61,137).

Checkerboard Pattern Was Not Generic Design for Shoes
Casual and athletic shoe producer California Board Sports, Inc. (CBSI) was not entitled to a ruling on summary judgment that its use of a checkerboard pattern on casual and athletic shoes did not infringe competitor Vans, Inc.'s use of a similar design on similar products, according to the federal district court in San Diego. Vans' checkerboard mark was valid and non-generic, and genuine issues of material fact existed as to whether a likelihood of confusion existed, including the factors of the similarity of the respective designs, the strength of Vans' registered trademark in its checkerboard pattern, and the intent by CBSI to copy Vans' design. Vans' long-term and extensive use of its registered checkerboard design had not caused the pattern to become generic for casual slip-on shoes marketed to the skate and surf community, the court said. A black and white checkerboard lacked independent distinctiveness, but it fell into the class of designs that were eligible to acquire secondary meaning as an identification of source. Vans produced enough evidence of secondary meaning to create a genuine issue of material fact. Specifically, a consumer survey found that 45 percent of male purchasers of casual and athletic shoes who had purchased such shoes in the past three months misidentified a third-party manufacturer's slip-on shoe that copied the checkerboard pattern as a shoe that was made by Vans. A genuine issue of material fact existed as to whether protection of the checkerboard pattern as a mark would impose a significant non-reputation-related competitive advantage. The checkerboard pattern was used widely in the fashion industry and was desirable as a shoe pattern, but consumer survey evidence offered by Vans supported a plausible case that the checkerboard pattern's appeal to consumers came primarily from its association with Vans' shoes (California Board Sports, Inc. v. Vans, Inc., SD Cal., CCH Trademark Law Guide ¶61,145).

COMPUTER & INTERNET LAW

Class Action Denied for Electronic Publication of Unregistered Works
A federal district court did not have the authority to certify a class of authors and approve a settlement of their copyright infringement claims arising from the unauthorized electronic reproduction of their works, the U.S. Court of Appeals in New York City has ruled. The class consisted mainly of freelance authors who entered into contracts with publishers for publication of their works in print media. The contracts did not authorize the publishers to electronically reproduce the works or license them to others for electronic reproduction, but the publishers did so anyway. The authors asserted that the unauthorized publication of their works in electronic or digital formats infringed their copyrights. It was undisputed that the overwhelming majority of claims within the class involved infringement of unregistered copyrights. The settlement had to be vacated because federal district courts lack statutory subject matter jurisdiction over infringement claims arising from unregistered copyrights, according to the appeals court. The court held that the Copyright Act's registration requirement is a jurisdictional prerequisite to an infringement action. Section 411(a) of the Copyright Act, which regulates a district court's authority to adjudicate a copyright claim, provides that "no action for infringement of the copyright in any United States work shall be instituted until pre-registration or registration of the copyright claim has been made in accordance with this title." Thus, under the plain language of Section 411(a), registration or pre-registration must occur before a plaintiff can assert a valid infringement claim, according to the appeals court (In re: Literary Works in Electronic Databases Copyright Litigation, 2d Cir, CCH Guide to Computer Law ¶49,436).

Identity Theft Victim May Pursue Data Breach Claim
A determination that a health care alliance was not negligent as a matter of law for allegedly failing to secure customers' personal information maintained on its computers was justified as to two customers, but was erroneous as to a third customer who was the victim of identity fraud, the U.S. Court of Appeals in San Francisco has determined. During a burglary at the health care alliance's headquarters, computer servers containing hard drives with customers' personal information—including names, addresses, and social security numbers—were stolen. The negligence claim asserted by a customer who was the victim of six instances of identity theft following the break-in should not have been dismissed at the summary judgment stage, the court ruled. To survive summary judgment, the customer was not required to show that the burglary was the sole cause of the identity fraud incidents, but only that it was more likely than not that it was a "substantial factor in bringing about the result." The customer presented sufficient evidence from which a reasonable jury could infer that a causal relationship existed between the theft of the health care company's hard drives and the identity fraud incidents he suffered. This evidence included the fact that the customer's identity fraud incidents began six weeks after the hard drives were stolen, that the customer never had been the victim of identity theft in the past, and that the information contained on the stolen hard drives was the same type needed to open fraudulent credit accounts. The appeals court upheld the dismissal of the negligence claims asserted by two customers who did not allege harm from any actual misuse of their personal information, but only claimed damages in the form of credit monitoring insurance they purchased after the burglary. The customers produced no evidence that the break-in significantly exposed their information or created a significantly increased risk of harm resulting from misuse of their information, the court noted (Stollenwerk v. Tri-West Health Care Alliance, 9th Cir., CCH Guide to Computer Law ¶49,434).

ASPEN IP and Computer Law Publications

Law of Electronic Commerce, Fourth Edition, by Jane K. Winn and Benjamin Wright
The 2008-1 Supplement recently went live on the Intellectual Property/Computer and Internet Law tab of the CCH Internet Research Network. This publication covers the business, technology, and legal issues involved in electronic commerce, including the technologies and business models that constitute electronic commerce today; domain name conflicts, shrink wrap agreements, and traditional contract issues; electronic records in litigation; record-keeping duties and liabilities; the liability of service providers; confidentiality and control of data; and federal and state regulation of electronic markets.

This latest supplement includes updates on (1) technological developments, including the growth of web services, Web 2.0, and authentication and identity management; (2) Section 230 immunity for Internet service providers; (3) the transferability of IP assets and the assignment of executory contracts in bankruptcy; (4) employee privacy rights; (5) legal issues raised by employee “blogging”; (6) the unauthorized practice of law and attorney advertising in the online context; (7) anti-“spam” litigation; (8) international developments; and (9) online contracting.

Hot Topic of the Month

Recording Industry’s Lawsuits Against Individuals
The recording industry’s attempt to halt unauthorized copying of music by filing lawsuits against individuals has received a great deal of media attention in recent months.

In October 2007, a federal jury in Duluth, Minnesota found that an individual had willfully infringed the copyrights in songs through online file sharing and awarded damages of $220,000 to the Recording Industry Association of America (RIAA). In assessing damages, the jury ordered the individual to pay $9,250 for each of the 24 songs she was found to have infringed. The individual announced that she will appeal the ruling on the question of whether making a file available for download on a peer-to-peer network constitutes a “distribution” within the Copyright Act. (Virgin Records America, et al. v. Jammie Thomas, DC Minn., October 24, 2007).

Despite taking a beating from public interest groups and the media, the RIAA continues its tactic of filing lawsuits against individuals—reportedly more than 20,000 lawsuits in all. Yet, “music sharing” continues unabated and sales of music recordings continue to fall.

College Deterrent Program
As part of a college deterrent program, the RIAA has sought to enter into pre-litigation settlements, providing college students “the opportunity to resolve copyright infringement claims against them at a discounted rate before a formal lawsuit is filed.” The program encourages students to settle a suit for around $3,000 by entering a credit card number at www.p2plawsuits.com.

Since February 2007, the RIAA has sent pre-litigation settlement letters to 268 colleges, complaining about 5,010 unidentified students. The RIAA has asked the colleges to “forward the letter to the appropriate network user” and has subpoenaed some colleges to identify the file-sharing students.

According to a December 31, 2007 article in the New York Times (“In the Fight Over Piracy, A Rare Stand for Privacy”), one university has fought back. The University of Oregon—through the Oregon Attorney General—filed a motion to quash the subpoena on the grounds that the RIAA violated student privacy laws and engaged in questionable investigative practices.

Oregon Attorney General Hardy Myers questioned whether MediaSentry, an investigative company hired by the recording industry, used data mining techniques to obtain private and confidential information unrelated to copyright infringement. The company maintained that it collected information that peer-to-peer networks make available to anyone. The matter is pending.

Contrary to much media and Internet reactions, the college litigation program is working by raising public awareness of the problem of file sharing, according to the RIAA. “Everybody used to think this was legal,” said RIAA President Cary Sherman. “Now everybody knows it’s illegal.”

“Personal Use”
Another RIAA action—against an Arizona man who has kept a collection of 2,000 recordings on his personal computer—has prompted controversy over whether the industry group has upped the ante and gone after copying for purely personal use.

A December 30, 2007 article in the Washington Post (“Download Uproar: Industry Goes After Personal Use”) focused on the RIAA’s action against Jeffrey Howell, a Scottsdale, Arizona resident who transferred 2,000 recordings from legally-purchased CDs to his personal computer.

The article maintained that the RIAA, in legal documents filed in the suit, argued that copying for personal use constituted “stealing,” even though this practice consistently has been held to be fair use.

Bloggers and other commentators pointed out that the RIAA actually alleged that Mr. Howell infringed the music copyrights by copying and placing the music on a “shared folder.” Recognizing this distinction, the Washington Post eventually attached a correction to the online version of the article.

The correction acknowledged that the original story stated that the RIAA maintained that it was “illegal for someone who has legally purchased a CD to transfer that music into his computer,” whereas the recording industry actually argued that Howell’s actions were illegal “because the songs were located in a ‘shared folder’ on his computer for distribution on a peer-to-peer network.”

This controversy is certain to continue as long as the recording industry pursues litigation against individuals for copying and sharing music.

NEW PRODUCTS

Privacy Law in Marketing Is Subject of CCH Reporter
Information gathered through marketing efforts can be personal, valuable, and subject to a variety of U.S. and international laws and regulations governing its collection, protection, and use. That’s why Wolters Kluwer Law & Business has launched a new publication (in print and online) to help untangle the complex web of legal regulation from around the world. CCH Privacy Law in Marketing brings together treatise-style explanations by D. Reed Freeman, Jr. and J. Trevor Hughes with the full text of privacy laws and regulations from the U.S. and 35 foreign jurisdictions (provided in English translation).

Topics include telemarketing, e-mail marketing, marketing to wireless devices, cookies and web beacons, information security, identity theft, "phishing," children’s privacy, fax marketing, online privacy policies, use of Social Security numbers, and international privacy law. Monthly reports include new and amended laws and regulations, court decisions and other new developments, a list of pending legislation, and an informative newsletter. For further information about Privacy Law in Marketing, call the CCH customer service department (1-800-248-3248) or visit the CCH Online Store (http://onlinestore.cch.com) and search the keyword “privacy.”