Fall 2021 Survey of Copyright, Trademark and Privacy Cases of Note Across the Federal Courts

By Carolyn Wimbly Martin and Margaret Horstman

On November 8, 2021, the Supreme Court heard oral arguments in the case Unicolors Inc. v. H&M Hennes & Mauritz LP, 2021 U.S. Dist. LEXIS 160223 (Aug. 20, 2021). The Justices were critical of Unicolors due to the company’s inconsistent arguments in its brief and petition for certiorari. Unicolors’ brief addressed what knowledge of application errors is needed for invalidation, while the company’s petition for certiorari addressed the question of whether evidence of fraud must be shown to prove a copyright registration is invalid. The case began in the Central District of California in 2016, when Unicolors filed suit against H&M for copyright infringement. After the court ruled in favor of Unicolors, holding that the company had a valid copyright, H&M appealed to the Ninth Circuit. The Ninth Circuit reversed and decided that the lower court erred when it required H&M to show that Unicolors had an intent to defraud the Copyright Office. See Unicolors, Inc. v. H&M Hennes & Mauritz, LP, 959 F. 3d 1194 (9th Cir. 2020).

While Unicolors is the only trademark, copyright or privacy case before the Supreme Court so far this term, there are several cases of interest across the Federal Circuits that are worth noting. Here we highlight some of them.

Belmora LLC v. Bayer Consumer Care AG & Bayer Healthcare LLC, petition for cert. filed (U.S. 2021) (No. 21-195)

The Supreme Court recently denied pharmaceutical company Belmora’s petition for a writ of certiorari to address a question of trademark territoriality that the Supreme Court had never addressed — whether the owner of a foreign trademark may bring a § 43(a) claim under the Lanham Act based on harm to foreign sales of products covered by that mark. Belmora LLC v. Bayer Consumer Care AG & Bayer Healthcare LLC, 819 F.3d 697 (4th Cir. 2016) (No.15-1335).

In February 2005, the U.S. Patent and Trademark Office (“USPTO”) granted pharmaceutical company Belmora LLC a trademark registration for FLANAX, under which Belmora proceeded to market and sell its FDA-approved Flanax naproxen sodium Pain Reliever Tablets, with bilingual packaging and in neighborhoods with significant minority populations and Spanish speakers. Pharmaceutical giant Bayer Consumer Care AG (“Bayer”) had purchased the rights to the Mexican trademark for FLANAX in September 2005, under which Bayer continued to sell a similar high-strength pain reliever called Flanax that had been on the Mexican market since 1976. However, Bayer did not offer such products in the U.S. to avoid competing against itself. Br. for Appellants at 46, Belmora v. Bayer, 819 F.3d 697.

After the Trademark Trial & Appeal Board (“TTAB”) granted a petition by Bayer to cancel Belmora’s registration based on Bayer’s Mexican mark, Belmora challenged the decision in the Eastern District of Virginia, and the Court subsequently dismissed Bayer’s Lanham Act claims. On appeal, the Fourth Circuit reversed that decision, holding that the Lanham Act does not expressly require use of a U.S. trademark in U.S. commerce to bring a claim. Belmora filed its second petition for a writ of certiorari in the decades-long battle, contending that the Fourth Circuit’s holding increased the possibility of a circuit split and that such a decision could have a drastic impact on the trademark community. These risks may now be exacerbated by a lack of Supreme Court guidance.

Sulzer Mixpac AG v. A&N Trading Co. et al., 988 F.3d 174 (2d Cir. 2021)

Sulzer Mixpac AG has filed a petition for review by the Supreme Court after the Second Circuit found the company’s multi-colored dental products were not protected under trademark law due to their functionality. Mixpac argues that this ruling “jeopardizes scores of well-known trademarks,” and the current circuit split on the issue of trademark functionality “renders this case worthy” of review.

Mixpac is a Swiss manufacturer of dental products and sells a system for “mixing adhesives” that combines two different chemicals to make impressions of teeth. The system has three different components that must be combined to use the product. According to Mixpac’s petition, it has used its “Candy Colors” on its dental products for over 20 years to “distinguish its mixing tips from competitors’ and signal superior quality.” Mixpac has trademark registrations for the “Candy Colors” yellow, teal, blue, pink, purple and brown, while other manufacturers of similar products use different colors or no colors at all. A&N Trading Company distributes mixing tips manufactured by Seil Global, a company that has previously been enjoined from selling candy-colored mixing tips that infringe upon Mixpac’s patent. See Sulzer MixPac USA, Inc. v. Seil Glob. Co. LTD, 2011 U.S. Dist. LEXIS 157446, at *2 (S.D.N.Y. Dec. 23, 2011). Despite this order, A&N “displayed and advertised Seil Global’s mixing tips” that featured colors “identical or nearly identical to the colors on Mixpac’s mixing tips.”

Most recently, the Second Circuit found that Mixpac never held a valid trademark, relying upon the decision in Dippin’ Dots, Inc. v. Frosty Bites Distrib., LLC, 369 F.3d 1197 (11th Cir. 2004), in which the Eleventh Circuit found that Dippin’ Dots could not register a trademark for the colors of their ice cream because they were used to signify flavor, not the brand. The panel reasoned that the “Candy Colors” used by Mixpac are meant to signify the tips’ diameters, not the product’s source or Mixpac’s brand.

The outcome of this petition could impact well-known brands that have concurrently functional and source-identifying trademarks. For example, Maker’s Mark has trademarked the red wax on its bottles – an indicator of source and a functional portion of the packaging that protects the cork – and Converse’s Chuck Taylors have a trademark for the rubber toe of their sneakers, which protects the wearer’s toes.

While the First, Fourth, Sixth, Seventh, Eighth, Ninth and Federal Circuits all consider multiple factors beyond the degree of utility when determining whether a trademark or trade dress is functional, Mixpac argues that the Second Circuit ignored this consensus by not considering such factors. Mixpac urges that the Second and Ninth Circuits hear a “disproportionate share” of trademark cases but diverge in the way they handle functionality.

Should the Supreme Court accept the case, it will address whether all factors of functionality – existence of a utility patent, advertising that demonstrates utilitarian aspects of the trademark, facts relating to alternative designs and facts showing whether the design results from ease of manufacture – must be considered when determining the validity of a trademark.

Cothron v. White Castle Sys. Inc., 467 F. Supp. 3d 604 (N.D. Ill. 2020)

In September 2021, the Seventh Circuit heard Cothron v. White Castle Sys. Inc., considering the question of whether the Illinois Biometric Privacy Information Act (“BIPA”) is violated each time workers’ data is scanned or disclosed, or whether violations are limited to the initial disclosure of such information. Latrina Cothron, a White Castle manager, claimed that White Castle violated BIPA by requiring workers to provide fingerprint authentication to access their pay stubs. Cothron alleged the company did not obtain adequate consent prior to collecting her fingerprint data and subsequently provided the information to third-party vendors without her permission. The District Court held that Cothron violated the law, with each individual collection and disclosure constituting a violation under Section 15(b) of BIPA.

On appeal to the Seventh Circuit, White Castle argued that a violation occurs solely with the initial biometric collection or disclosure. Contrarily, Cothron claimed the panel should uphold the lower court’s ruling or, alternatively, certify the question to the Illinois Supreme Court. If the panel decides to rule on the case itself, it has the opportunity to address two important questions: (1) what acts violate the informed consent provisions of BIPA and (2) when do violations under BIPA accrue? This ruling could have significant financial ramifications for employers because, under BIPA, businesses are responsible for damages of $1,000 per negligent violation and $5,000 per willful violation.

Can. Hockey, LLC v. Tex. A&M Univ. Ath. Dep’t, 2021 U.S. App. LEXIS 27012, No. 20-20503 (5th Cir. 2021) and Can. Hockey, LLC v. Marquardt, 2021 U.S. App. LEXIS 27006, No. 20-20530 (5th Cir. 2021)

Author Michael Bynum and his publisher have asked the Fifth Circuit to reconsider their recent decision to dismiss a lawsuit against Texas A&M that alleged its Athletic Communications Director, Brad Marquardt, illegally posted an article that contained portions of a book written by Bynum. The Fifth Circuit held that state sovereign immunity barred a federal Takings Claim against Texas A&M, holding that copyrights are not protected by the Takings Clause. Bynum argues that the Supreme Court has found the Takings Clause protects personal property, stating that that “private property [shall not] be taken for public use, without just compensation,” including intellectual property.

The court held that the Athletic Department had “arm-of-the-state” status and that it therefore qualifies for the same state sovereign immunity as the University. Accordingly, Bynum’s only claim that could overcome sovereign immunity is its claim under the Copyright Remedy Clarification Act (“CRCA”), which the Court rejected.

Marquardt also attempted to appeal the decision. However, his appeal depended on issues of fact, so the panel refused to consider it.

The potential rehearing of this case is of consequence to copyright holders because it will determine whether state actors can be held liable under the Takings Clause for similar infringing behaviors in the future.

Hunley et al v. Instagram, LLC, 2021 U.S. Dist. LEXIS 177667, No. 21-cv-03778-CRB (N.D. Cal. 2021)

In May, Instagram was sued in the Northern District of California by two photojournalists for violations of copyright law by allowing embedding of images on third-party websites. The parties agreed that Instagram was not a direct infringer; therefore, the plaintiffs had to demonstrate that there was an underlying act of infringement by a third party to show secondary liability against Instagram. The District Court recently dismissed this claim, holding there was no direct infringement and declining to overrule or narrow “binding precedent.”

The Ninth Circuit uses the “server test,” which states that an Internet service provider (“ISP”) can only directly infringe a copyright if it hosts and transmits the material from its own servers. The case, Perfect 10, Inc. v. Google, Inc., 653 F.3d 976 (9th Cir. 2011), determined that merely linking copyrighted images is not a violation of a copyright and the image must be electronically stored and shown directly to others to violate a copyright holder’s exclusive display right. In a somewhat technical decision, the court determined that Instagram had not violated this right because embedding images does not require storing them on Instagram’s servers. This case could potentially alter the future liability of ISPs if it is appealed.

Hall v. Swift, 2019 U.S. App. LEXIS 36143, No. 18-55426 (9th Cir. 2019)

A California Federal Court will soon hear Taylor Swift’s argument to end a 2017 lawsuit that alleges copyright infringement of the song “Playas Gon’ Play” by early 2000’s girl group 3LW in Swift’s 2014 hit “Shake it Off.” Songwriters Sean Hall and Nathan Butler allege that the song’s use of the words “players” and “haters” in the exact same combination infringes on the lyrics in the 3LW song. While Swift’s song uses the lyrics “‘Cause the players gonna play, play, play, play, play and the haters gonna hate, hate, hate, hate, hate,” the 3LW songs includes the lyrics “playas are gon’ play, and haters are gon’ hate.”

A federal court dismissed the case in 2018, holding that the original lyrics lacked the “modicum of originality and creativity required for copyright protection.” See Hall v. Swift, 2018 U.S. Dist. LEXIS 43575, No. CV 17-6882-MWF (ASx) at *2-3 (C.D. Cal. 2018). But the Ninth Circuit determined that Hall and Butler had cleared the low bar of originality required for copyright protection. Along with her argument that the songs are dissimilar, Swift puts forth an argument under the merger doctrine, stating the idea of these lyrics can only be portrayed in a limited number of ways. The upcoming decision in federal court will determine how high the originality bar is for copyright protection.

Lutzker & Lutzker will continue to provide periodic updates on IP and privacy litigation that is relevant to both businesses and consumers.