Abelman, Frayne & Schwab - May 15, 2002 Newsletter

Procter & Gamble filed a Community trademark application for BABY-DRY to protect diapers and disposable diapers in Classes 16 and 25. The application was refused on the basis that BABY-DRY is descriptive being composed "only of a simple combination of the non-distinctive words baby and dry, thus consisting exclusively of an indication which may serve in trade to designate the intended purpose of goods such as those for which registration is sought, i.e., keeping a baby dry".

Procter & Gamble appealed, but its administrative appeal was dismissed. Proctor & Gamble filed a further appeal to the European Court of Justice ("ECJ"). The ECJ found that the mark BABY-DRY is a "syntactically unusual juxtaposition" which amounted to a "lexical invention" in the English language. The ECJ held the mark inherently distinctive for the claimed goods and therefore registrable. This decision will have impact on the national trademark offices as well as the Community trademark office.

United Kingdom - Arsenal Football Club plc v. Reed - Must a sign be used as a trademark for infringement to arise?

Arsenal Football Club plc ("AFC") is the owner of the registered United Kingdom trademarks ARSENAL and GUNNERS and two designs marks composed of a cannon and a crest covering clothing (collectively "the ARSENAL marks"). Reed has sold AFC memorabilia for 30 years without a license from AFC. Reed's goods include scarves bearing the ARSENAL marks.

AFC brought an action against Reed for passing-off and trademark infringement. The claim for passing-off was dismissed. In respect to the infringement action, Reed defended by asserting that his use of the ARSENAL marks did not constitute "use in a trade mark sense" but served as "badges of allegiance". The court indicated it accepted Reed's arguments, but citing conflicting precedent, has referred the case to the European Court of Justice for instruction on the issue.

This will be an important case for licensors in the European Union.

Adoption of New Service Classes

The World Intellectual Property Organization’s Nice Classification has been amended to create three new classes of services for trademark registrations. Class 42 has been revised and new classes 43, 44 and 45 have been added. The Classes are as follows:

Class 42: Scientific and technological services, and research and design relating thereto; Industrial analysis and research services; Design and development of computer hardware and software; Legal services

Class 43: Services for providing food and drink; Temporary accommodation

Class 44: Medical services; Veterinary services; Hygienic and beauty care for humans or animals; Agriculture, horticulture and forestry services

Class 45: Personal and social services rendered by others to meet the needs of individuals (e.g., social event services, funeral services, matrimonial agencies, etc.); Security services for the protection of property and individuals.

Existing registrations in the United States covering Class 42 will be reclassified, as necessary, on renewal.

Copyrights

WIPO Phonograms and Performances Treaty to take effect May 20, 2002

On February 20, 2002, Honduras formally joined the WIPO Phonograms and Performances Treaty. With 30 signatory states, the Treaty is now expected to take effect on May 20, 2002. The Treaty, which was originally adopted in 1996 is intended to introduce new international rules to protect the rights of music performers and producers in the context of developing information and communication technologies. The Treaty is intended to bring international copyright law into line with the digital age by providing performers and producers with further exclusive rights over the distribution of performances and sound recordings.

Eldred v. Ashcroft - United States Supreme Court to hear first amendment challenge to Copyright Extension Act

Eldred v. Ashcroft - The United States Supreme Court granted certiorari in challenge to the 1998 Sonny Bono Copyright Term Extension Act. In a challenge under the First Amendment to the 1998 Sonny Bono Copyright Term Extension Act, extending the term of copyright generally for twenty years, the Court of Appeals for the District of Columbia Circuit held in Eldred v. Ashcroft that the term of copyright is "categorically immune from challenge under the First Amendment." The Court also rejected the view that the "promote Progress" requirement of the Copyright Clause is an independent restraint on Congress' power. See extended discussion of this case below.

Domain Names

European Union approves the creation of the .eu domain suffix

The European Union approved the creation of the .eu domain suffix. Activation of the domain suffix requires coordination with IANA (the Internet Assigned Numbers Authority) and ICANN. The last time a new ccTLD was added was in March 2000 when .ps was designated to Palestine. .eu is not expected to become active before 2003.

Fiat loses United Kingdom Administrative Domain Name Dispute

In October 2001, Fiat lodged a complaint with the .uk domain registry Nominet over alleged abuse of domain names containing Fiat trademarks. WDOT Internet had registered fiatvans.co.uk, fiatfinance.co.uk and alfaromeofinance.co.uk. Fiat asked WDOT to transfer the names, offering £500 a domain. When WDOT failed to respond, Fiat filed an administrative dispute before Nominet. Nominet ascertained that WDOT Internet had ceased trading and that title to the names had passed to the Crown.

However, the Nominet arbitrator found that although "on the balance of probabilities" Fiat did have rights to the domain names, Fiat had not produced evidence of confusion, which would be grounds for "abusive registration". Fiat's complaints were therefore dismissed.

Nominet's current dispute policy came into force September 2001. Since that time, only five out of the 35 cases heard have gone in the respondent's favour. Fiat now faces trying to retrieve the names from the Crown, or waiting for the names to lapse and then re-registering them.

Barcelona.com - Foreign Trademarks are subject of Anticybersquatting Protection Act

The United States District Court for the Easter District of Virginia (the "US District Court") recently rendered a decision in the dispute over the barcelona.com domain name. The dispute first arose as a result of a complaint by the City of Barcelona ("the City") under the ICANN Uniform Dispute Resolution policy ("UDRP"). WIPO, the panel hearing the UDRP dispute, granted transfer of the domain name to the City.

The Registrant filed an appeal from the UDRP decision requesting the US District Court for a declaratory judgment asserting that its registration of the domain name was not unlawful; the City counterclaimed under the Anticybersquatting Consumer Protection Act (ACPA) asking that Network Solutions, Inc. be ordered to transfer the domain name to the City's Council.

The US District Court upheld the ruling of the arbitrator in the UDRP finding that:

1) the City owned a legally valid Spanish trademark for the word BARCELONA; and

2) the Registrant took advantage of the normal confusion of an Internet user who would expect to reach the City through the barcelona.com domain name; and

3) the Registrant acted in bad faith in incorporating a company under the name Barcelona.com Inc. and attempting to profit from the sale of the domain name.

With respect to the City's counterclaim, the US District Court found that:

1) it was the intention of the framers of the ACPA that ACPA also govern the protection of foreign trademarks and that as such, the Spanish trademark BARCELONA was valid for the purposes of the ACPA; and

2) the Registrant had a bad faith intent to profit from the BARCELONA trademark; and

3) that the domain name was confusingly similar to the City's trademark.

The US District Court ordered the domain name transferred to the City's Council.

The decision is interesting as it appears to support the application of the ACPA to foreign trademarks.

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Discussions

Eldred v. Ashcroft: Will the First Amendment Swallow the Copyright Act?

by Alan J. Hartnick, , Adjunct Professor, New York University, School of Law, and Partner, Abelman, Frayne & Schwab.

(This article first appeared in the New York Law Journal of March 14, 2002)

Another important copyright case, Eldred v. Ashcroft, will be decided by an activist Supreme Court. The background: the conventional view is that the doctrine of fair use in copyright law provides sufficient First Amendment values, so that the First Amendment, of its own force, does not apply to the Copyright Act. In a challenge under the First Amendment to the 1998 Sonny Bono Copyright Term Extension Act, extending the term of copyright generally for twenty years, the Court of Appeals for the District of Columbia Circuit held in Eldred v. Ashcroft that the term of copyright is "categorically immune from challenge under the First Amendment." The Court also rejected the view that the "promote [] Progress" requirement of the Copyright Clause is an independent restraint on Congress' power.

In 2001, two appellate court cases, considered that the First Amendment did apply to copyright law. In the Gone With the Wind-The Wind Done Gone case, the 11th Circuit in Suntrust Bank, for the first time, rejected a copyright preliminary injunction on First Amendment grounds. And in a First Amendment challenge to the new Chapter XII of the Copyright Act, the Second Circuit in Corley did apply an intermediate First Amendment standard in judging the constitutionality of the new anti-circumvention act.

There could be less drastic readings of both these two appellate court cases so that the constitutional issue could have been avoided. For the Gone With the Wind case, a new comment defense could be added to the parody defense in fair use. It is difficult to claim that The Wind Done Gone is simply a parody of Gone With the Wind: a comment defense about racism under the rubric of fair use could explain the case. For the Corley anti-circumvention case, the new Chapter XII deals with copyright piracy in the earliest stages, before the work was copied, and therefore, before the normal rules of the copyright law would apply. The new Chapter XII does not concern copyright infringement of original works: it concerns circumvention and unlawful accessing of copyright protection systems - a kind of firewall.

What is the relationship between Copyright Law and the First Amendment? A very prestigious group, including Amici who are teachers and students of constitutional law and the First Amendment and who have studied its application to copyright, petitioned for a writ of certiorari in the Eldred case. The Supreme Court granted certiorari on February 19, 2002.

What are the ideas of the scholars? The balance of the articles reflect the ideas of the scholars and uses in some instances their very language.

The dispute is that the D.C. Circuit failed to recognize that (1) the Copyright Clause contains its own limitation and (2) any legislation that substantially increases the set of circumstances under which the Copyright Law prohibits expression previously permitted must be scrutinized under the appropriate First Amendment standard.

The arguments:

1. The Lack of Power over the Public Domain. Article 1, Section 8, Clause 8, the constitutional Copyright Clause is both a grant and a limitation. There is no public domain clause in the Constitution. Absent the requirement that Congress "promote the Progress of Science", these would be no Copyright Clause reason to restrict Congress' power over the public domain. Yet the Supreme Court has clearly indicated that such a power is beyond Congress' Patent and Copyright Clause power.

2. The Need for Originality. "Writings" could be original or non-original. The limitation of originality must derive from the "promote [] Progress" requirement. There is no other textual authority for this restriction.

3. Based on 1 and 2 above, the introductory language of the Copyright Clause constitutes a limit of congressional power over the term of copyright. Congress cannot shift the boundaries of copyright, including term extension, unless it "promote[s] Progress".

4. Harper & Row does not apply. Harper & Row concerns copyright actions sounding in trespass. In Eldred, the D.C. Circuit's application of Harper & Row was mistaken. In Harper & Row, the Supreme Court was asked and did not craft a public figure exception in the enforcement of a copyright. Because there is no First Amendment right to trespass, the enforcement of a particular copyright is internal to copyright law. There can be no First Amendment right to challenge the legal rules under which property rights are set.

5. The First Amendment Applies. For a statute modifying the Copyright Act itself, such as the Term Extension Act, there is no textual reason to except copyright law from ordinary First Amendment analysis. Nor is there any history to suggest that the Framers imagined copyright law to be exempt from First Amendment review in order to determine if term extension "promote[s] Progress."

6. The "Non Laughable" Reasons for Term Extension. It is impossible to create incentives by retroactive extension of the term of protection for works already created. The incentive subsisting prior to the extension was sufficient to bring them into being. As to prospective extension, the discounted present value of any revenue stream to be recaptured eight decades or more is insignificant. On the other hand, perhaps "harmonization" with other countries supports creativity, but the rub is that the D.C. Circuit in Eldred never properly considered them in light of the appropriate First Amendment standard.

7. Beyond the Issues. The Petition for Certiorari goes beyond the issues of the case to add: "Whether Congress is constrained by the plan language of the Copyright Clause will determine the scope of Congress' power to pass legislation to protect databases, or further to withdraw work from the public domain". Such argument, to me, is an unnecessary expansion.

The scholars then requested that the Supreme Court remand the Term Extension Act under the First Amendment standard appropriate for laws specifically aimed at non-content regulation of expression in pursuit of legitimate state interests, which requires some decree of heightened scrutiny. Notwithstanding, and to the surprise of many, Supreme Court granted certiorari.

The all-stars professors of constitutional law who supported the petition: Professors Lessig, Nesson, Zittrain, Neuborne, Balkin, Benkler, Rosenfeld, and Slaughter. This article cannot summarize the depth of knowledge that the scholars brought to their presentation to the Supreme Court. Sometimes, ideas require time to percolate.

One idea is a new definition of copyright. The Amici proposed a unusual definition. Rather than state that copyright protects the author's exclusive right to the use and reproduction of his or her expression, the definition becomes:

"Copyright law... is a law aimed at improving the marketplace in expression, which is implemented by suppressing some expression - perhaps derivative, perhaps imitative - so as to support other expression - original and creative."

And that, from the prism of the First Amendment, is the purpose of copyright law. It is directly aimed at speech, and, for passionate believers in the First Amendment, any changes should be subject to heightened scrutiny under the First Amendment.

Why did the Supreme Court grant certiorari? That is hard to know. Some say that Justice Stephen G. Breyer may be the reason, based upon an article he wrote as a young law professor: On the other hand, our treaty obligations under TRIPS-GATT required copyright restoration, which changed the public domain. Members of Berne had to restore copyright under Article 18 of the Berne Convention. And then, the EU changed the duration from life plus 50 years to life plus 70 years to match German law. If we did not harmonize, U.S. authors and their assignees could be deprived of EU revenue, under the Berne rule of the shorter term of copyright protection, with U.S. then being the shorter term unless duration were changed. These reasons could justify a legitimate state interest under a heightened First Amendment analysis, but none of this was not done in Eldred.

And so, more than "speech" was involved. We had our treaty obligations as well as the needs for copyright harmonization. In the pending Supreme Court case, we shall soon see the interplay, if any, between copyright and the First Amendment. The Supreme Court decision will really pit constitutional purists against pragmatists.

Endnotes

1. Rosemont Enter. Inc. v. Random House, Inc., 366 F. 2d 303 (2d Cir. 1966).

2. Eldred v. Ashcroft [Reno], 239 F. 3d 372, 375 (D.C. Cir. 2001).

3. Suntrust Bank v. Houghton Mifflin Co., 268 F. 3d 1257 (11th Cir. 2001).

4. Universal City Studios, Inc. v. Corley, 273 F. 3d 429 (2d Cir. 2001).

5. Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 149 (1989).

6. Harper & Row Publications, Inc. v. Nation Enter., 471 U.S. 539 (1985).

7. Petition Docket No. 01-618, #150; petition granted 2/19/02.

8. The Uneasy Case for Copyright, 84 Harv. L. Rev. 281 (1970).

9. A parallel case, Golan v. Ashcroft, is proceeding in the U.S. District Court of the District of Colorado (Civil Action No. 01-B-1854) Plaintiffs complain that the Term Extension Act and copyright restoration under §514 of the Uruguay Round Agreement Act, 108 Stat. 4976 (1994), exceeds the Constitution's bounds. Pending before the court is a motion under F.R.C.P. §12(b)(6) that the complaint fails to state a cause of action. As in Eldred, the plaintiffs are represented by, among others, Professors Lessig, Zittrain and Nesson.

IP Licensing and United States Department of Commerce Mandatory Annual Reports for Foreign Transactions

The March 31 deadline for submitting BE- reports to the U.S. Department of Commerce for foreign transactions during 2001 has passed. BE- reports relate to international monetary transfers to or from U.S. persons and are filtered to exempt smaller transactions. If your company hasn’t been submitting reports, it may be that its foreign monetary transactions hasn’t exceeded the threshold reporting levels. However, this matter should generally be investigated, since with the numerous mergers that have taken place, companies that haven’t previously been required to make reports may discover that they are obligated to do so.

The form that is most familiar to intellectual property licensors is BE-93, Annual Survey of Royalties, License Fees and other Receipts and Payments, that covers payment for intangible personal property, licensed out, licensed in, sold or purchased by unaffiliated persons. You have to look separately at the payments paid out and received, and a report is due if either exceeds $2MM. BE-93 report, the specific parties involved are not named and royalties are totaled collectively by country with taxes being segregated. A parent company is generally responsible for reporting for its subsidiaries and controlled entities. Also the first recipient of a foreign payment is responsible for reporting the entire payment even though a portion is redistributed to another U.S. person.

A form that was designed to provide information about international mineral and petroleum development projects is BE-47, Annual Survey of Construction, Engineering, Architectural, and Mining Services. The U.S. person is excused from reporting if the gross value of all contracts is less than $1MM; however, in this event, as in the case of any other exemption relied on hereunder, the U.S. person should keep confirming records to support that it is exempted. Clients are cautioned that in the present environment, prompt and timely submission of the appropriate BE forms has assumed an added importance.

Other BE-forms pertain to insurance transactions between U.S. and foreign persons (BE-48); financial services transactions between U.S. and foreign persons (BE-82); and a general catch-all form ( BE-22), which serves as a safety net to pick up any $1MM plus transactions that may have been missed by the more specific BE- forms. And there are still other BE-forms (BE-29 and BE-36) that are directed toward foreign airline and ocean carrier owners that transport freight or passengers to or from the U.S. , which forms are required to be submitted by such parties’ U.S. agents.

References: Code of Federal Regulations, Title 15 Commerce and Foreign Trade, Volume 3,

Part 801- Survey of International Trade in Services Between U.S. and Foreign Persons. If forms, further information or our assistance is desired, please contact us.

United States Trademarks: Specimens of Use

Eventually, every U.S. trademark registration owner will have to prove that the mark is in use. In most cases, the proof is required before you can receive a registration; but even where an application is based on a foreign registration, use must be shown before the sixth anniversary of registration.

If it were simply a matter of submitting “evidence” of use, then such things as advertisements and invoices would be acceptable. Unfortunately, U.S. law requires evidence of use of the mark “on the goods.” This means that generally, to show use of a trademark on goods, you must submit a picture of the goods showing the trademark on the product or its packaging. The Trademark Office also accepts labels or tags showing the trademark, if they are normally attached to the goods. It also accepts instruction manuals featuring the trademark, if the manuals accompany the goods. Finally, use of the trademark in a point-of-sale display associated with the goods will be sufficient use.

While a mention of the trademark in an article, on an Internet site, or in an advertisement might reasonably show that the mark is in use, only the very specialized types of proof which show the mark in use “on the goods” are acceptable to the Trademark Office.

There are some Internet uses which are acceptable. For example, there might be pictures on the Internet showing the trademark on the goods. Or if the trademark does not appear on the goods, an Internet page might still be sufficient proof of use if the trademark appears on the same page where the user can purchase the goods online. This is a type of point of sale display.

Showing proof of use for services is somewhat easier. Here, the Trademark Office will accept advertisements as long as they feature the trademark being used to offer the services.

For both goods and services, it is essential that the trademark as used match the drawing of the trademark originally submitted. If the specimen differs from the drawing, it will be rejected. So if a mark is registered as CAVERN CLUB 23 and the specimens show use as simply CLUB 23, the specimens will be rejected. The Trademark Office will not permit a mark to be altered after an application is filed unless the change is so minor as to be immaterial. For example, we could amend DRIFTERS to DRIFTER, but we could probably not amend RED KNIGHT to SCARLET KNIGHT, even though the meaning is similar.

It is also essential that the mark be used in connection with all the goods and services listed in the registration. The Trademark Office will only require proof of use for one of the items in each class, but we must still disclose any goods or services on which the mark is no longer in use.

Often a mark’s use changes over time and while once it may have been used to identify pens, now it identifies razors. Those are different goods, and the Trademark Office will not accept a specimen showing use of razors if the only goods listed in the registration are pens. A new application would be necessary to protect the use on razors and the existing registration for pens would have to be abandoned.

The lesson here is that the U.S. Trademark Office is extremely particular regarding what can be a specimen of use. And even if you have a proper specimen, it still can be rejected if it doesn’t match exactly the mark and the goods or services registered. If you have any questions regarding what is a proper specimen, we invite you to call upon our expertise in this area.