March 2010

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.

COPYRIGHTS

Unfinished Works of Art Are Entitled to Protection Under VARA
The Visual Artists Rights Act (VARA) applies to unfinished works of art, the U.S. Court of Appeals in Boston has ruled. Therefore, a visual artist’s moral rights were protected even though his sculptural installation was unfinished. Sufficient evidence supported the artist’s claim that a museum of contemporary art violated his “right to integrity” by continuing to work on his unfinished sculptural installation without his authorization and exhibiting the distorted artwork to the public. He also asserted a viable claim under the Copyright Act that the museum violated his exclusive right to display his sculptural installation, even unfinished, publicly.

VARA guarantees moral rights of attribution and integrity, and protects both the reputations of certain visual artists and the works of art they create. VARA is a part of the Copyright Act. Because the Copyright Act’s definition of “work of visual art” includes unfinished works, VARA also must be read to protect unfinished, but “fixed,” works of art that, if completed, would qualify for protection. Summary judgment in favor of the museum was reversed (Massachusetts Museum of Contemporary Art Foundation, Inc. v. Büchel, 1stCir, CCH Copyright Law Decisions ¶29,876; IntelliConnect User Link).

Statutory Damages Awarded per Work, Not per Infringement
The use of a single musical composition embodied in multiple sound recordings was one “work” for purposes of the recovery of statutory damages, the federal district court in Nashville has ruled. Therefore, a copyright licensing administrator sought a dramatically higher amount of damages than was permitted by the Copyright Act when it demanded $150,000 per each act of infringement of musical compositions.

The licensing administrator allegedly owned 215 copyrighted musical compositions, but not the 308 sound recordings embodying the 215 musical compositions. Each of the sound recordings was not a separate and independent “work” for which statutory damages could be awarded. Each work required a separate registration to recover statutory damages. Therefore, the licensing administrator could recover statutory damages for only the 215 musical compositions, not for the 308 sound recordings (MCS Music America, Inc. v. Yahoo! Inc., MDTenn, CCH Copyright Law Decisions ¶29,881; IntelliConnect User Link).

“Shocking” $2 Million Award against File-Sharer Reduced
A jury's $1.92 million damage award against an individual file-sharer for downloading and distributing 24 copyrighted songs on a peer-to-peer file-sharing network was so shocking and excessive as to warrant remittitur, according to the federal district court in Minneapolis. Remittitur of a jury’s award is appropriate only if “the verdict is so plainly unjust or grossly excessive as to shock the conscience of the court,” the court explained.

Section 504 of the Copyright Act permits a copyright owner to elect to recover actual damages or statutory damages in a minimum amount of $750 per infringing act or, in the case of willful infringement, up to a maximum of $150,000 per infringement. The minimum award was inadequate because the file-sharer knowingly and willfully infringed the recording companies’ copyrights and was unremorseful. However, the jury’s $80,000 per song assessment against an individual consumer was patently unjust, even taking into account the importance of deterring illegal file-sharing, according to the court.

The court reasoned that $2,250 per infringed song, or three times the statutory minimum, totaling $54,000 represented the maximum amount the jury could possibly have awarded without being shocking or grossly excessive. Many federal statutes, including the Digital Millennium Copyright Act, establish treble damages as the upper limit to address a party’s willful or particularly damaging behavior, the court explained. The court also granted the recording companies' request to amend the judgment to include a permanent injunction (Capitol Records Inc. v. Thomas-Rasset, DMinn, CCH Computer Cases ¶49,884; IntelliConnect User Link).

TRADEMARKS

University of South Carolina Cannot Register “SC” Logo
The successful opposition by the University of Southern California ("Southern California") of an application by the University of South Carolina ("South Carolina") to register a design mark consisting of a stylized, interlocking representation of the letters "SC" for clothing, including baseball uniforms, has been affirmed by the U.S. Court of Appeals for the Federal Circuit. The Trademark Trial and Appeal Board correctly determined that South Carolina's mark was likely to be confused with Southern California's registered standard character "SC" mark, as used on various goods, including key rings, emblems, umbrellas, luggage, towels, blankets, and flags.

South Carolina did not appeal the Trademark Trial and Appeal Board’s findings that the marks were legally identical or would appear on the same classes of goods. South Carolina disputed the TTAB’s determination that the parties' trade channels overlapped, specifically, the Board’s interpretation of language in Southern California's registration, specifying that its goods were sold in “university authorized channels of trade,” as including any trade channels that are or could be authorized or approved by Southern California. Such an interpretation did not contradict the plain meaning of the phrase, the appellate court said. The TTAB’s determination that the marks were legally identical and would appear on the same classes of goods in the same trade channels was sufficient to support a finding of likelihood of confusion.

The court also rejected South Carolina’s counterclaim for cancellation of one of Southern California's registrations for its “SC” logo mark on the ground that the mark created a false association with the state of South Carolina. The letters “SC” were not “unmistakably associated” with the state South Carolina, but were used by the public to refer to many entities (University of Southern California v. University of South Carolina, FedCir, CCH Trademark Law Guide ¶61,559; IntelliConnect User Link).

Foreign Ads for Cuban Cigars Did Not Constitute “Use” in U.S.
A Cuban cigar maker’s alleged advertising activities in connection with the mark GUANTANAMERA did not constitute unfair competition under Sec. 43(a) of the Lanham Act, according to the federal district court in Washington, D.C. A U.S. cigar maker seeking to register its own GUANTANAMERA mark failed to provide sufficient evidence that the Cuban company’s actions would produce substantial effects on U.S. commerce, justifying extraterritorial application of the Lanham Act.

The U.S. company asserted that the Cuban company had placed ads featuring the GUANTANAMERA mark in foreign cigar industry magazines with U.S. circulation. More than mere advertising was needed to constitute unfair competition, the court said. The U.S. company failed to show that the Cuban company was launching an ad campaign aimed at U.S. consumers. The ad in question appeared in a European magazine in German. Advertising in a foreign magazine did not constitute use in commerce in the United States. There was no allegation that the Cuban company sold its products in the United States.

In addition, a third-party website based in Canada that made reference to the Cuban company’s brand was not “use” of the mark in the United States and did not create a likelihood of confusion, the court said. The Cuban company held registrations or applications for GUANTANAMERA in more than 75 countries and sold its cigars worldwide. Thus, its products were likely to be found on foreign websites. Moreover, any use of the mark would be by the website operator, not the Cuban company, the court noted (Guantanamera Cigar Co. v. Corporacion Habanos, S.A., D DC CCH Trademark Law Guide ¶61,563; IntelliConnect User Link; CCH Trademark Law Guide ¶61,564; IntelliConnect User Link; CCH Trademark Law Guide ¶61,565; IntelliConnect User Link).

COMPUTER AND INTERNET LAW

No Privacy Right in Content on Unsecured Wireless Network
A defendant charged with transportation and possession of child pornography had no reasonable expectation of privacy in the contents of a shared iTunes library that could be accessed by any computer within range of his unsecured wireless network, the federal district court in Portland, Oregon has ruled. A neighbor called the police when she discovered 25-30 suspected child pornography images in the defendant's iTunes library, which she was able to access when her computer inadvertently became connected to the defendant's wireless network.

To claim Fourth Amendment privacy protection, an individual must demonstrate a subjective expectation that his activities are private and his expectation must be one that society recognizes as reasonable. Because of the ease and frequency with which people use others' wireless networks, the public has a diminished expectation of privacy in information broadcast via an unsecured wireless network router compared to information transmitted through a hardwired or password-protected network, the court determined. In this case, the defendant not only failed to password-protect his network, but also set his iTunes software to share his music, movies, and pictures with other computers on his wireless network.

The court also ruled that accessing the defendant’s files did not constitute a violation of the Wiretap Act, which expressly exempts the interception of or access to “an electronic communication made through an electronic communication system that is configured so that such electronic communication is readily accessible to the general public” 18 U.S.C. §2511(g)(i). The defendant's wireless network was configured so that any electronic communication emanating from his computer via his iTunes program was “readily accessible to any member of the general public with a Wi-Fi enabled laptop,” the court observed (U.S. v. Ahrndt, DOre, CCH Computer Cases ¶49,885; IntelliConnect User Link).

Third Circuit Issues Two Student Internet Speech Rulings
The U.S. Court of Appeals in Philadelphia simultaneously issued two opinions addressing whether students' First Amendment free speech rights were violated when schools suspended them for their off-campus creation of fake MySpace.com profiles of their principals. The court resolved the First Amendment question differently on the facts of each case. In both cases, however, the court ruled that the schools’ disciplinary actions did not violate the students’ parents’ due process right to control the education or upbringing of their children.

In Layshock v. Hermitage School District, the appeals court found that a student’s right to free expression was violated by a high school because it failed to establish a causal nexus between the student’s lewd and vulgar fake profile and any alleged “substantial disruption” of school operations, particularly in view of the fact that three other vulgar and disparaging fake MySpace profiles of the principal were posted by students who were not disciplined by the school. The court rejected the school's argument that the student’s conduct occurred on-campus because the student “entered school property” by accessing the school district’s public website and misappropriating a photo of the principal.

In J.S. v. Blue Mountain School District, a middle school did not violate a student's free speech rights by suspending her for creating a fake profile alluding to the principal’s interest and engagement in illegal conduct and sexually inappropriate behavior, including pedophilia. Although the disruption at the school ultimately was not substantial, under Tinker v. Des Moines Independent Community School District, 393 U.S. 503 (1969), school officials need only prove that they had a well-founded, reasonable belief that the challenged expression would “materially and substantially disrupt the work and discipline of the school” or interfere with the rights of others. It was reasonable for school officials to believe that the student’s profile—which had been viewed by several students and made known to parents—threatened to cause a substantial disruption and significantly undermine the principal’s authority (Layshock v. Hermitage School District, 3dCir, CCH Computer Cases ¶49,881; IntelliConnect User Link; J.S. v. Blue Mountain School District, 3dCir, CCH Computer Cases ¶49,882; IntelliConnect User Link).

Hot Topic of the Month

FTC Finds Sensitive Data Leaked from Businesses to P2P Networks
The Federal Trade Commission announced on February 22 that it had notified nearly 100 organizations that personal information—including sensitive data about customers and/or employees—emanating from the organizations' computer networks had been shared and was available on peer-to-peer (P2P) file-sharing networks where it could be accessed and used to commit identity theft or fraud.

The notices went to both private and public entities, including schools and local governments, the agency said. The agency also disclosed that it has opened non-public investigations of other companies whose customer or employee information has been exposed on P2P networks.

The notification letters urged recipients to review their security practices—and, if appropriate, the practices of contractors and vendors—to ensure that they are reasonable, appropriate, and in compliance with the law. The agency posted samples of the letters (Letter A, Letter B, and Letter C), which state, “It is your responsibility to protect such information from unauthorized access, including taking steps to control the use of P2P software on your own networks and those of your service providers.” The FTC warned that failure to prevent such information from being shared to a P2P network may constitute a violation of law, including the Gramm-Leach-Bliley Act and Section 5 of the FTC Act.

The FTC also recommended that entities consider whether to notify affected customers and employees that their information is available on P2P networks. Many state federal regulatory agencies have laws or guidelines about business notification responsibilities in these circumstances, the Agency noted.

Text of the announcement appears here on the FTC website. To help businesses manage the security risks presented by file-sharing software, the FTC released a new business education brochure, “Peer-to-Peer File Sharing: A Guide for Business,” describing the risks and recommend ways to manage them.

Wolters Kluwer Law & Business Publications

Trade Regulation Talk — Top Ten Business Law Blog
Trade Regulation Talk, a blog published by the CCH Trade Regulation Group, has been listed in the top 10 of the “50 Great Business Law Blogs” elected by the Career Overview website. The 50 blogs were described as “filled with news, legislation, cases and counsel that every lawyer can read and use.”

The “Top Ten” were chosen as the best on the web “because they are popular, helpful, and powerfully thorough.” Others in the top ten included the Wall Street Journal Law Blog and the ABA Journal Blawgs.

Trade Regulation Talk provides news and views in the areas of antitrust, franchising, consumer protection, advertising, privacy, and civil RICO law. It may be found here.