Covertech Fabricating Inc v. TVM Building Products Inc

Too often the silence of contracting parties must be filled by the voice of the courts. Such is the case here, where we are called upon to resolve a trademark dispute in which no written contract designates ownership, and, in the process, to clarify the paradigm through which common law ownership of an unregistered trademark is determined when the initial sale of goods bearing the mark is between a manufacturer and its exclusive distributor. The District Court in this case awarded ownership to the manufacturer, but did so on the basis of the first use test, and found the distributor liable for infringement and fraud before rejecting its defense of acquiescence and awarding damages under the Lanham Act. Because the District Court failed to recognize and apply the rebuttable presumption of manufacturer ownership that we conclude pertains where priority of ownership is not otherwise established, and because the District Court incorrectly relied on gross sales unadjusted to reflect sales of infringing products to calculate damages, we will affirm on alternative grounds as to ownership, will affirm as to fraud and acquiescence, and will vacate and remand as to damages.

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Mavrix Photographs, LLC v. LiveJournal, Inc.

Digital Millennium Copyright Act

The panel (1) reversed the district court’s holding, on summary judgment, that the defendant was protected by the safe harbor of the Digital Millennium Copyright Act from liability for posting the plaintiff’s photographs online and (2) vacated a discovery order.

The panel held that the safe harbor set forth in 17 U.S.C. § 512(c) would apply if the photographs were posted at the direction of users. The defendant, a social media platform, posted the photographs after a team of volunteer moderators, led by an employee of the defendant, reviewed and approved them. The panel held that whether the photographs were posted at the direction of users depended on whether the acts of the moderators could be attributed to the defendant. Disagreeing with the district court, the panel held that the common law of agency applied to the defendant’s safe harbor defense. Because there were genuine factual disputes regarding whether the moderators were the defendant’s agents, the panel reversed the district court’s summary judgment and remanded the case for trial. The panel also discussed the remaining elements of the safe harbor affirmative defense. If an internet service provider shows that the infringing material was posted “at the direction of the user,” it must then also show that (1) it lacked actual or red flag knowledge of the infringing material; and (2) it did not financially benefit from infringements that it had the right and ability to control. The panel held that to fully assess actual knowledge, the fact finder must consider not only whether the copyright holder has given notice of the infringement, but also the service provider’s subjective knowledge of the infringing nature of the posts. The panel held that to determine whether the defendant had red flag knowledge, the fact finder would need to assess whether it would be objectively obvious to a reasonable person that material bearing a generic watermark or a watermark referring to the plaintiff’s website was infringing. When assessing the service provider’s right and ability to control the infringements, the fact finder should consider the service provider’s procedures that existed at the time of the infringements and whether the service provider had “something more” than the ability to remove or block access to posted materials.

Finally, the panel vacated the district court’s order denying discovery of the moderators’ identities.

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Maloney v. T3Media, Inc.

California Anti-SLAPP Statute / Copyright Act

The panel affirmed the district court’s order granting T3Media’s special motion to strike, pursuant to California’s anti-SLAPP statute, the action brought by plaintiffs/former student-athletes Patrick Maloney and Tim Judge, alleging that T3Media exploited their likenesses commercially. Plaintiffs alleged that T3Media exploited their likenesses by selling non-exclusive licenses permitting consumers to download photographs from the National Collegiate Athletic Association’s Photo Library for non-commercial use. Plaintiffs asserted statutory and common law publicity-right claims and an unfair competition claim under California law. The California anti-SLAPP statute, Cal. Civ. Proc. Code § 425.16, was enacted to allow for early dismissal of meritless first amendment cases aimed at chilling expression though litigation.

Section 301 of the federal Copyright Act adopted a twopart test to determine whether a state law claim was preempted by the Act; first, whether the subject matter of the state claim fell within the subject matter of copyright, as described in 17 U.S.C. §§ 102 and 103; and second, if so, whether the rights asserted under state law were equivalent to the rights contained in 17 U.S.C. § 106.

At step one of the Copyright Act test, the panel held that the subject matter of the state law claims fell within the subject matter of copyright. Specifically, the panel held that a publicity-right claim may proceed when a likeness is used non-consensually on merchandise or in advertising; but where a likeness has been captured in a copyrighted artistic visual work and the work itself is being distributed for personal use, a publicity-right claim is little more than a thinly-disguised copyright claim because it seeks to hold a copyright holder liable for exercising his exclusive rights under the Copyright Act. The panel concluded that plaintiffs’ publicity-right claims and the derivative Unfair Competition Law claim challenged control of the artistic work itself, and accordingly, the subject matter of the state law claims fell exclusively within the subject matter of copyright.

At step two, the panel held that the rights plaintiffs asserted were equivalent to rights within the general scope of copyright.

The panel concluded that plaintiffs’ state law claims were preempted by section 301 of the federal Copyright Act because plaintiffs sought to hold T3Media liable for exercising rights governed exclusively by copyright law. The panel further held that plaintiffs could not demonstrate a reasonable probability of prevailing on their challenged claims; and the district court did not err in granting the special motion to strike, and dismissing without leave to amend.

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Unicolors, Inc. v. Urban Outfitters, Inc.

The panel affirmed the district court’s judgment in favor of the plaintiff in a copyright infringement case involving fabric designs.

Affirming the district court’s summary judgment in favor of the plaintiff on the issue of copyright infringement, the panel held that the district court did not err in its application of the subjective “intrinsic test.” The panel held that where the extrinsic similarity of two works is so strong that the works are near duplicates save for superficial differences, the district court may properly conclude that no reasonable jury could find that the works are not substantially similar in their overall concept and feel. The panel also held that it was permissible to infer copying in this case, even absent evidence of access.

The panel held that the district court did not err in concluding, on summary judgment, that the plaintiff had validly registered a fabric design as part of a collection. Affirming the district court’s judgment after a jury trial on the issues of willful infringement and damages, the panel held that substantial evidence supported the jury’s verdict because the evidence showed that the defendant acted with reckless disregard for the possibility that the fabric it sampled was protected by copyright.

The panel addressed additional issues in a concurrently filed memorandum disposition.

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Vetter v. McAtee

A jury trial on several claims and counter-claims, including trademark infringement and breach of partnership agreement, resulted in judgments adverse to both parties. They have now appealed and cross-appealed citing several errors that they believe the trial court committed. We affirm.

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