Beginning August 3, 2019, all foreign-domiciled trademark applicants, registrants and parties to Trademark Trial and Appeal Board (TTAB) proceedings must be represented by an attorney who is licensed to practice in the United States, according to the final rule recently issued by the United States Patent and Trademark Office (USPTO).  This means that all new applications, renewal filings and TTAB disputes filed on behalf of any foreign entity or individual must be filed by a U.S.-licensed attorney.  For purposes of this final rule, “foreign-domiciled” means either an individual with a permanent legal residence outside of the United States or its territories, and/or an entity headquartered outside the United States or its territories.

The USPTO has made this rule change to address a growing number of filings from foreign pro se parties that are either inaccurate or even fraudulent and that do not comply with U.S. trademark law or the USPTO’s rules. The USPTO hopes that this final rule will increase USPTO customer compliance with U.S. trademark law and USPTO regulations, improve the accuracy of trademark submissions, and safeguard the integrity of the U.S. trademark register.

In the short term, this final rule might be seen by international entities and individuals outside of the U.S. as an inconvenience or an unnecessary added expense. Assuming the rule accomplishes the USPTO’s stated goals of tightening compliance with U.S. trademark law and USPTO rules, and reducing fraudulent documents and applications submitted to the USPTO, however, the final rule could reduce costs for applicants across the board by eliminating the need for applicants to challenge fraudulent registrations or respond to likelihood of confusion refusals based on fraudulent applications and registrations. By implementing this rule, the USPTO could make the trademark system more efficient, more reliable, and more consistent, which will have the ultimate effect of helping everyone who uses or relies on the USPTO.

Note that this requirement of a U.S.-licensed attorney does not apply to the filing of Madrid applications through the World Intellectual Property Organization. For Madrid applications submitted with all formalities and statutory requirements already satisfied and in condition for publication, the USPTO will waive the requirement until the Madrid system is updated to allow for the designation of a US-licensed attorney. In the event of an office action on a Madrid application, a U.S.-licensed attorney will still need to be retained, as usual.

In March, news broke that stationary bike maker Peloton Interactive had been slapped with a copyright infringement lawsuit seeking more than $150 million in damages (Downtown Music Publishing LLC, et al. v. Peloton Interactive, Inc., Case No. 1:19-cv-02426 (S.D.N.Y.). The lawsuit, filed by ten music publishers, claimed that “more than 1,000 musical works” were used in Peloton’s [cycling videos] without appropriate synchronization licenses. The publishers’ original complaint painted Peloton as a $4 billion tech giant raking in money on the backs of copyright holders all while willfully ignoring its obligations to those copyright holders.

On Tuesday, Peloton slapped back, filing Counterclaims against both the music publisher plaintiffs and the National Music Publisher’s Association (“NMPA”) for anti-trust violations of the Sherman Act and tortious interference. Contrary to the claims of the Complaint, Peloton argues in its Counterclaims that it did attempt to negotiate appropriate licensing, and that it has entered into licenses with publishers and the performing rights organizations for the use of the songs, but that its efforts were stymied by the anticompetitive behavior of the NMPA and the named music publishers.

The problem, Peloton claims, is that the publishers’ synchronization license structure (traditionally done on a song-by-song basis) is ill-suited to Peloton’s situation where a catalog-wide license would be more appropriate. In the copyright world, synchronization licenses allow a licensee to synchronize music with visual media of some kind. Peloton alleges that it invested tens of millions of dollars building systems and an infrastructure to enable licensing mechanisms appropriate for its business. It attempted to negotiate with NMPA for these sync licenses even while the NMPA would not identify the specific publishes on whose behalf it was negotiating, and even while the NMPA insisted on payment for song licenses from every publisher regardless of whether Peloton had any desire to actually use that publisher’s songs. When license negotiations ultimately broke down in early 2019, Peloton attempted to pursue licenses directly with the music publishers whose works Peloton desired to use on its service. However, these negotiations suddenly ceased “in a near-simultaneous and identical fashion”, which Peloton believes was the result of pressure from NMPA and its leadership.

The lawsuit, and Peloton’s counterclaims, highlight issues that have long existed in the copyright world, including the concentration of publishing rights in a relatively small number of entities, a great imbalance of negotiating power for businesses both small and large looking to license copyrighted works, and even a lack of transparency as to who owns rights to various musical works. While the Music Modernization Act of 2018 sought to address some of these issues, some of its key components (like a centralized ownership database) have yet to be established. Time will tell whether this lawsuit will bring further changes to the copyright industry or whether Peloton will be forced to bend its practices to match the current licensing structure.

 

 

Fuct, a L.A. based clothing brand will be infront of the U.S. Supreme later this month. In the past, the United States Patent and Trademark Office (“USPTO”) has prohibited registration of marks that constitute immoral or scandalous matter, as well as marks that are disparaging. In 2017, the Supreme Court famously overturned the USPTO’s ban on “disparaging” trademarks when it permitted registration of the mark “The Slants” for an Asian-American rock band (Matal v. Tam, 137 S. Ct. 1744 (2017)). Now the Supreme Court will turn its attention to the question of whether the scandalous-marks provision is similarly unconstitutional.

The USPTO argues in this case that the scandalous matter limitation is permissible because it is viewpoint-neutral unlike the prior disparagement provision – an issue that was expressly “left open” by Justices Alito and Kennedy in the disparagement decision. The application of the scandalous marks limitation often turns on the context of the trademark and the potential consumer’s perception. However, the USPTO insists that the limitation does not necessarily look at an applicant’s subjective intent or viewpoint, but rather prohibits only offensive methods of expressing an idea.

Erik Brunetti, owner of the Fuct brand, argues that the scandalous matter limitation should be treated just like the disparagement clause was treated, and should be ruled unconstitutional. Brunetti argues that the USPTO’s scandalous matter limitation has not been applied in a viewpoint neutral way to prevent registration of “profanity, excretory and sexual matter”, but has also blocked proposed third-party marks like “Coffee Nazi” for a book series, “Taliban Cookie Company” for online wholesale and retail store services, or “Acapulco Gold” for suntan lotion. Meanwhile, the USPTO has allowed registration of trademarks for “FCUK”, “WTF is up with my love life?!”, “Famous Feces”, “Poop”, “Irish by intercourse”, “Satan’s Piss”, and “Mile High 69”. Among other things, Brunetti argues that this purportedly selective application of the scandalous matter limitation proves that the USPTO’s ban is not content-neutral.

The case, Iancu v. Brunetti, No. 18-302, is set for oral argument on April 15.

For years, copyright owners have faced uncertainty as to when they could file a copyright infringement claim. Title 17 U.S.C. § 411(a) states that “no civil action for infringement of the copyright in any United States work shall be instituted until … registration of the copyright claim has been made in accordance with this title.” Courts had been split as to whether this required an issued registration before suit (the “registration approach”), or whether just the act of filing a copyright application satisfied this requirement (the “application approach”).

Last week, the U.S. Supreme Court resolved that question, holding that “registration” occurs, and a copyright claimant may commence an infringement suit, when the Copyright Office registers a copyright. This can mean long delays before filing, as the current administrative backlog at the Copyright Office has resulted in processing times of seven months on average. It also has encouraged many current litigants to withdraw pending lawsuits that had been based on the application approach precedent – including for example the wave of copyright infringement lawsuits filed against the video games Fortnite and NBA2K over dances included in those games.

The most important takeaway from this decision is for copyright owners to register their works early. Expedited application processing is still available through the “special handling” process, but only in certain situations and at a cost of $800 per claim. The Supreme Court also made a point to highlight that the “registration approach” would not deprive owners of substantive rights, because they can still recover damages for infringement that occurred both before and after registration. Early registration can avoid both of these issues and ensure a copyright owner’s ability to promptly bring litigation when the need arises.

The value of technology-driven startup companies is often heavily dependent on a company’s ownership of intellectual property and the value associated with that intellectual property.  Blockchains can serve an important role in proving ownership, usage, and ultimately the value of intellectual property.

Blockchains are a revolutionary technology that use a distributed network of computers (nodes) solving complex cryptography to securely record data and transactions on a ledger.  The ledger can be monitored in real time by all nodes in the network, and can only be edited with the combined efforts of at least 51% of the nodes in the network.  This makes the information stored on blockchains with a substantial number of independent (e.g., peer-to-peer) nodes highly reliable and transparent.  Blockchains will underlay the next generation of data storage and management, and will affect intellectual property in three important ways:

  1. Proving Ownership

Once copyrightable, trademarkable, or patentable work is added to a blockchain, the blockchain will forever provide an auditable record of ownership of the underlying intellectual property – down to the original party that added the intellectual property to the blockchain.  This will facilitate audits of the rights to specific intellectual property, and reduce or entirely remove the need for associated insurance.

  1. Proving value

Blockchains may be programmed to record every time intellectual property is accessed for things such as trademark or patent applications.  They can also record every time intellectual property is accessed by a party other than the owner, which can provide an accurate record of use of the intellectual property that can be efficiently analyzed, assigned a value, and monetized.  This will streamline the ability to accurately value intellectual property in the context of funding rounds, or mergers and acquisitions.

  1. Smart Contracts

Blockchains may be programed to execute complex software and computer codes in a way that ensures every executed line of code is accurately recorded and auditable.  Agreements for intellectual property rights can be coded into and automatically executed by a blockchain.  For example, an agreement whereby one party licenses the rights to use a trademark to another party for monthly payments can be coded into a blockchain, and the blockchain will execute smart contracts to automatically release the appropriate amount of funds each month.  Additionally, the blockchain may monitor the use of the trademark, and automatically revoke the license or increase payments owed if misappropriation of the trademark is detected or the underlying agreement is otherwise violated.

Ultimately, startup companies with significant intellectual property will find blockchains integral in proving ownership and value of their intellectual property, and should consult professionals regarding recording their intellectual property on a blockchain.