American University—Washington College of Law Intellectual … · The controversy surrounding the Stop Online Piracy Act (SOPA) and the PROTECT Intellectual Property Act (PIPA)

IntellectualAmerican University—Washington College of Law

Property BriefVolume 4 Issue 3 Spring 2013

In this issue:

The American University Washington College of Law Intellectual Property Brief is licensed under a Creative Commons Attribution 3.0 United States License.

www.ipbrief.net

by Chad GuoCopyright’s Online Destiny, or: How to Stop Worrying and Love the Net

by Evan McAlpine

Of Oatmeal, Bears, and NPEs: Ensuring Fair, Effective, and Affordable Copyright Enforcement Through Copyright Insurance

by Rebecca ShawShow Me The Money: Movie Quotes as Intellectual Property

by the IP Brief StaffFeatured Blog Posts and Updates

by Ellie B. Atkins

Unchecked Monopolies: The Questionable Constitutionality of Design Patent and Product Design Trade Dress Overlap in Light of Egyptian goddEss, inc. v. swisa, inc.

by Mikhael Mikhalev

The Prior User Rights Defense: Working Silently in the Background to Change the Way Businesses Protect Their Inventions

2 Spring 20132 Spring 2013

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Featured Blog Posts

Table of Contents

by Evan McAlpine


57Unchecked Monopolies: The Questionable Constitutionality of Design Patent and Product Design Trade Dress Overlap in Light of Egyptian goddEss, inc. v. swisa, inc.

Show Me The Money: Movie Quotes as Intellectual Property

36

85

86

by Rebecca Shaw

by Ellie B. Atkins

Facebook Sued for Patent Infringement Over Like Button and Timeline Function

Led Zeppelin to Release Entire Back Catalogue to the Internet Streaming Community

by Asha Velay

by Matthew Bernstein

72The Prior User Rights Defense: Working Silently in the Background to Change the Way Businesses Protect Their Inventions

by Mikhael Mikhalev

8Copyright’s Online Destiny, or: How to Stop Worrying and Love the Net

by Chad Guo

19

3American University Intellectual Property Brief 3American University Intellectual Property Brief

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8 Spring 2013

1IntroductIon

The controversy surrounding the Stop Online Piracy Act (SOPA) and the PROTECT Intellectual Property Act (PIPA) served both as the latest in a long line of conflicts between technology and copyright holders and also as an indication of things to come. While the need to reconcile the copyright interest of content producers with the interests of technological developers remains of principal importance, the SOPA/PIPA protest introduced an increasingly powerful element—the interest of content consumers and technology users. In terms of legal implications, the rise of the consumers as a force to be reckoned with represents a failure in the online intellectual property market at best and a reassertion of the fundamentally anarchical culture of cyberspace at worst. To remain relevant in the online context, copyright law must return to its most basic roots, where its primary purpose of serving the public interest aligns closest with the needs of the cyberspace community.

The struggle between copyright and technology seems like a tale as old as time, made more pronounced by the unique attributes of the Internet. Ever since the Internet emerged as a medium for the fast and seemingly unlimited distribution of copyrighted works, a war has been brewing between copyright and technology. Copyright owners have tried to maintain the same rights and control over their creative works that they had outside of the digital world. Meanwhile, the developers and users of technology create new capabilities and habits that perhaps unintentionally, but quite effectively frustrate all efforts at traditional copyright enforcement. Skirmishes flare up occasionally—usually when a new technology threatens to further reduce the control of copyright owners.2 Thus, in a way, the SOPA/PIPA debacle was

1. Chao “Chad” Guo is a 2013 J.D. candidate at the American University Washington College of Law, where he works as a student attorney for the Glushko-Samuelson Intellectual Property Law Clinic. He holds a B.A. double major in English and International Relations from the University of Virginia. Chad would like to thank Professor Michael Carroll, Brian Dudley, and Alexandra Sternberg for their help on this article.

2. See generally Sony Corp. of Am. v. Universal City Studios,

merely the latest incident to break the fragile détente. On the other hand, an interesting new

development occurred when a counteroffensive led by online entities successfully repelled the most recent copyright incursion into the online world.3 The key to the victory lay in the empowering of consumers as an effective lobbying force, as many websites directed visitors to call or write their Congressmen.4 Faced with unexpected pressure from their constituents, many lawmakers reconsidered or abandoned their support for the legislation.5 Consequently, the SOPA/PIPA bills ended up on the congressional backburner.6

The grassroots effort of the SOPA/PIPA

Inc., 464 U.S. 417, 417 (1984) (regarding videocassette recorder technology); Am. Broad. Co., Inc., v. Aereo, Inc., 874 F. Supp. 2d 373, 373 (S.D.N.Y. 2012) (detailing a technology that enables television watching online); Brian Stelter, A DVR Ad Eraser Causes Tremors at TV Upfronts, n.Y. tImes, May 16, 2012, http://www.nytimes.com/2012/05/17/business/media/dish-networks-hopper-cuts-ads-and-causes-tremors-at-tv-upfronts.html?pagewanted=all (“Some reviewers have already called the feature, named Auto Hop, a dream come true for consumers. But for broadcasters and advertisers, it is an attack on an entrenched television business model, and it must be strangled, lest it spread.”).

3. See Amy Chozick, Tech and Media Elite Are Likely to Debate Piracy, n.Y. tImes

July 9, 2012, available at http://www.nytimes.com/2012/07/10/business/media/tech-and-media-elite-are-likely-to-debate-piracy.html?_r=0 (“Congress, overwhelmed by the popular opposition, quickly backpedaled, leaving the legislation to die.”).

4. Deborah Netburn, Wikipedia: SOPA protest led 8 million to look up reps in Congress, L.A. tImes BLog (Jan. 19, 2012, 10:42 AM), http://latimesblogs.latimes.com/technology/2012/01/wikipedia-sopa-blackout-congressional-representatives.html (reporting that “8 million U.S. readers took Wikipedia’s suggestion and looked up their congressional reps from the site” while “4.5 million people had signed [Google’s] petition asking lawmakers to reject [SOPA and PIPA]”).

5. See Paul Tassi, Internet Blackout Causes 18 Senators to Flee from PIPA, ForBes.com

(Jan. 19, 2012, 9:29 AM), http://www.forbes.com/sites/insertcoin/2012/01/19/internet-blackout-causes-18-senators-to-flee-from-pipa/ (including a list of Senators who withdrew support for the bill).

6. Stephanie Condon, PIPA, SOPA put on hold in wake of protests, cBsnews.com

(Jan. 20, 2012, 9:41 AM), http://www.cbsnews.com/8301-503544_162-57362675-503544/pipa-sopa-put-on-hold-in-wake-of-protests/ (“Senate and House leaders announced Friday they are postponing work on two controversial anti-piracy bills in the wake of large online protests that spurred several congressmen to rethink the legislation.”).

Copyright’s Online Destiny, or: How to Stop Worrying and Love the Net

by Chad Guo1

9American University Intellectual Property Brief

protestors also highlights the importance of the law in the ongoing conflict. While copyright holders have consistently looked to copyright law for support as they advance towards gaining more ground, copyright law may just as well serve the purposes of the online community in resisting efforts to control the Internet and its users. In other words, the Internet community’s apparent belief—that copyright holders’ need to be compensated fully7 for the use of their creative works online should defer to the interest of a free and open Internet—could very well have support in legal doctrines.8 These doctrines then could provide a way to harmonize intellectual property law with online behavior and perhaps provide some measure of satisfaction to all parties.

This Article discusses the role of copyright law as applied to the Internet environment in light of past and current developments involving copyright holders, technology developers, and now consumers. Part I provides a brief background on the jurisprudence of copyright law as applied to technological developments in the entertainment and related industries. Part II examines both statutory and case law that supports the separation of copyright’s exclusive rights from traditional, direct financial compensation to copyright holders. Part III explores the policy implications of altering the compensation scheme of copyright holders on the Internet. Finally, Part IV concludes that the law need only serve the public interest, and it is the industry that must compromise when faced with a conflict between copyright and technology.

I. BAckground

The purpose of copyright is explicitly stated in the highest law of the land. Given its progress-oriented purpose, it is paradoxical how often copyright struggles when faced with new, groundbreaking technology. An examination of the jurisprudence of copyright law encountering new technologies may help to shed some light into this paradoxical relationship.

A. The Original Purpose and Subsequent Codifications of Copyright Law

Article I, Section 8, Clause 8 of the United States Constitution provides: “The Congress shall have Power . . . [t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective

7. Compensated “fully” means that copyright holders would be compensated under purely market-based conditions, as opposed to statutorily determined compensation or no compensation at all.

8. See infra Part II.

Writings and Discoveries.”9 Other fields of law should be so lucky as to have their purpose so explicitly stated in the ultimate source of their authority.10

The goal of copyright does not focus so much on the interests of the authors and inventors as it does on the public interest goal of promoting progress of the sciences, which has been interpreted to mean knowledge and creativity in general.11 Providing financial compensation to authors and inventors is merely the means by which creative advancements are incentivized, but financial compensation is not the end goal itself.12 By that logic, then, in instances where the public interest would best be achieved by limiting or denying an author or inventor the exclusive right to his or her works, the law should and can readily support such curtailment.13 The Copyright Act already specifically limits the copyright holder’s exclusive rights to an enumerated bundle.14 The rights granted by copyright law are also limited to a specific set.15 These include, among others, the exclusive right of reproduction and the exclusive right of public performance.16

In addition to the limitation of enumerating the rights available to copyright holders, two legal doctrines limit these rights even further. First, the constitutional clause itself provides for “limited times” during which the author’s right to his or her work is exclusive.17 This notion is reflected in the doctrine of public domain, by which the author’s exclusive

9. u.s. const. art. I, § 8, cl. 8.10. But see William Fisher, Theories of Intellectual Property,

in new essAYs In the LegAL And PoLItIcAL theorY oF ProPertY 168, 171–74 (Stephen R. Munzer ed., 2001) (surveying three additional theories of intellectual property).

11. See Infodek, Inc. v. Meredith-Webb Printing Co., Inc., 830 F. Supp. 614, 621 n.8 (N.D. Ga. 1993) (“[T]he use of the term ‘science’ relates to copyrights and is generally given its eighteenth century meaning of knowledge or learning.”).

12. When considering who is being incentivized, it is important to note that the incentives are not solely for those who create copyrighted works, but also extends to those who would invest and produce the works. Producers and investors require assurance that the money they put into a creative endeavor will yield fruit. 144 cong. rec. H9950 (daily ed. Oct. 7, 1998) (statement of Rep. Coble) (“When works are protected by copyright, they attract investors who can exploit the work for profit.”). This means that copyright also protects the investment interests of persons or entities other than the artists themselves.

13. See infra text accompanying notes 14–20. 14. 17 U.S.C. § 106 (2006).15. Id.16. Id. § 106(1), (4). 17. u.s. const. art. I, § 8, cl. 8 (“The Congress shall have

Power . . . [t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”) (emphasis added).

10 Spring 2013

property rights in a work are terminated by the simple passage of time.18 Once a work enters into the public domain, parties other than the author may use or enjoy the work however they wish.

Second, copyright law recognizes the doctrine of fair use.19 Fair use directly invokes the public interest purpose of copyright by denying authors an exclusive right to their work when usage by another party is perceived to be fair in the eyes of the law.20 For both public domain and fair use, the copyright holder has no control over his or her original work. This has resulted in numerous interpretations of narratives in the public domain21 as well as diverse commentary and criticism on certain works through fair use.22

On principle, the Copyright Clause of the Constitution and the Copyright Act form the most basic understanding of copyright. The verbiage and the legal doctrines created by the texts are clearly directed at serving the public interest. Yet in practice, copyright, or at least the perception of copyright, has been viewed as serving the interests of certain industries at the expense of the larger public.23 The true intent of copyright law is often lost in conversations

18. 17 U.S.C. §§ 301–04 (2006).19. Id. § 107.20. While fair use is recognized as a defense to copyright

infringement, there is a school of thought that would deem fair use to be a right in and of itself. Compare Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 561 (1985) (“The drafters resisted pressures from special interest groups to create presumptive categories of fair use, but structured the provision as an affirmative defense requiring a case-by-case analysis.”), with Peter Jaszi, Copyright, Fair Use and Motion Pictures, 3 utAh L. rev. 715, 719 (2007) (“More recently, the United States Supreme Court has made it clear that fair use is one of the mechanisms by which copyright recognizes the principle of freedom of expression that is enshrined in the First Amendment to the U.S. Constitution: without fair use, copyright law could be found unconstitutional as applied to expressive activities . . . .”). In other words, if copyright protection is an exception to the right to free speech, and fair use is the exception to copyright protection, does not fair use simply restore the right to free speech? See id. at 719.

21. See the LeAgue oF extrAordInArY gentLemen (20th Century Fox 2003) (noting that the movie was based on a film adaptation of a comic series that utilizes characters almost entirely from the public domain such as Allan Quatermain, Captain Nemo, Ishmael, and Tom Sawyer); Trivia for The League of Extraordinary Gentlemen (2003), ImdB.com, http://www.imdb.com/title/tt0311429/trivia (last visited Oct. 20, 2012) (“All of the characters except [one] have fallen into the public domain, which means that anybody can write about them.”).

22. See generally Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, app. A, B (1994).

23. See Lawrence Lessig, Copyright’s First Amendment, 48 ucLA L. rev. 1057, 1069 (2001) (“The ordinary person doesn’t notice, because the ordinary person has become so accustomed to the idea that culture is managed—that corporations decide what gets released when, and that the law can be used to protect criticism when the law is being used to protect property—that the ordinary person can’t imagine the world of balance our Framers created.”).

involving the vast amounts of revenue generated by the sale of copyrighted works. Just precisely how this contradictory perception came into being involves looking into a most curious legal history.

To their credit, United States courts have long recognized the public interest aim of copyright law. This purpose is perhaps best articulated by the Second Circuit in Berlin v. E.C. Publications, Inc.,24 a case about song parody lyrics published in a magazine. In Berlin, the copyright owners brought suit against Mad Magazine for infringing on the copyrighted lyrics of twenty-five popular songs.25 While finding that there was no infringement, the court also laid out the purpose of copyright law quite clearly. The court elaborated that “the financial reward guaranteed to the copyright holder is but an incident of this general objective, rather than an end in itself.”26 The court then stated, “[a]s a result, courts in passing upon particular claims of infringement must occasionally subordinate the copyright holder’s interest in a maximum financial return to the greater public interest in the development of art, science and industry.”27 This fluid standard—balancing the interests of copyright holders with those of the public as particular infringement claims arose—would be put to the test time and again, as the next section demonstrates.

B. Traditional Copyright Versus New Technology

The clear purpose of copyright law notwithstanding, numerous fights have emerged and presented many opportunities for lawmakers to address how copyright applies to emerging technologies. A prominent illustration of such a conflict occurred when cable television emerged and threatened the exclusive right of transmission of the copyright holders through broadcast television.28 The conflict seemingly wrote the script for future battles: 1) in the exposition, a technology emerges that makes copyrighted content more accessible to the public; 2) however, the technology renders the current efforts of the copyright holder to receive compensation for his or her work more difficult, if not impossible; 3) as the action rises, the copyright holder looks to the law to exercise some measure of control over the new technology so that the current copyright enforcement efforts remain effective; which in turn leads to 4) the climactic battle in the

24. 329 F.2d 541 (2nd Cir. 1964).25. Id. at 542.26. Id. at 543–44.27. Id. at 544.28. h.r. reP. no. 94-1476, at 88–89 (1976), reprinted in 1976

U.S.C.C.A.N. 5659, 5703.


courts for a resolution. When cable television first emerged, it allowed

certain areas to receive broadcast television that had previously been unavailable due to poor over-the-air reception.29 However, the mechanism by which cable infrastructure received the broadcast television signals and then transmitted the signals to consumers implicated one of the enumerated exclusive rights of those who held the copyrights to the broadcasted content.30 This created a dilemma. Though the broadcasters’ content reached a larger audience through cable technology, the broadcasters needed some measure of control over the retransmission of their content pursuant to copyright law.31 Copyright law allows for broadcasters to consent to the retransmission of their content in exchange for compensation.32 However, cable providers argued that having to negotiate retransmission consent fees with each and every broadcaster would be burdensome and inefficient, especially when broadcast signals were free over the air.33

The conflict between television broadcasters and cable technology resulted in a compromise—namely, the statutory licensing scheme that has since been applied to several other technologies.34 At a basic level, statutory licensing allows for anyone to make and distribute reproductions of copyrighted works without the consent of the copyright owner as long as that person pays a statutorily established royalty to the copyright owner. In addition to cable retransmission, statutory licensing has been applied to satellite retransmission of broadcast television signals as well as

29. See Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390, 391–92 (1968) (providing some background information on an early cable system); h.r. reP. no. 94-1476, at 88, reprinted in 1976 U.S.C.C.A.N. at 5702–03 (“A typical system consists of a central antenna which receives and amplifies television signals and a network of cables through which the signals are transmitted to the receiving sets of individual subscribers.”).

30. See 17 U.S.C. § 106(4) (2006) (granting copyright holders the exclusive right of public performance). Public performance has been interpreted to include the transmission and broadcasting of television signals. See David v. Showtime/The Movie Channel, Inc., 697 F. Supp. 752, 758–59 (S.D.N.Y. 1988). However, this interpretation was not always the case. See Teleprompter Corp. v. Columbia Broad. Sys., Inc., 415 U.S. 394, 408–09 (explaining that the regulation was subsequently superseded by statute, which led to the statutory licensing scheme in place today); Fortnightly, 392 U.S. at 400–01.

31. See Fortnightly, 392 U.S. at 391–92.32. See 47 U.S.C. § 325(b) (2006).33. See h.r. reP. no. 94-1476, at 89, reprinted in 1976

U.S.C.C.A.N. at 5704 (“The Committee recognizes, however, that it would be impractical and unduly burdensome to require every cable system to negotiate with every copyright owner whose work was retransmitted by a cable system.”).

34. 17 U.S.C. §111(c) (2006); see also Id. §§ 114(d)(1), (2).

retransmission of audio works over Internet radio.35 A few years later, the emergence of the

videocassette recorder (VCR) also posed a problem to copyright holders in the motion picture industry. Videocassette recorders were challenged as copyright infringing technology in a case that reached the Supreme Court. In Sony Corp. of America v. Universal City Studios, Inc.,36 various entertainment studios sued the manufacturers of home VCR’s and alleged that use of the recorders amounted to copyright infringement of commercially sponsored television.37 Universal Studios argued that by selling the allegedly infringing technology, the manufacturers were liable for contributory copyright infringement.38 The Court held that the sale of VCR’s did not constitute contributory copyright infringement.39 The Sony Court made a point to note that copyrights were not designed to provide a special private benefit.40 Instead, the Court noted that the granting of copyrights is only a means to achieve an important public purpose, namely to motivate creative activity and to allow public access to the products of creative activity.41

After the Sony decision, Congress passed the Audio Home Recording Act (AHRA) in 1992.42 Like statutory licensing before it, the AHRA codified a compromise between copyright holders—the movie industry—and technology developers—in this case, the producers of VCRs.43 The AHRA created a blank media levy that required developers of recording devices and blank media to pay royalties to copyright holders based on a statutorily defined formula.44 In exchange, the developers were granted immunity from claims for copyright infringement.45 While the blank media levy has very notable limitations,46 the royalty system allows for the coexistence of copyrighted works alongside technology that perfects making copies of such works.47

35. Currently, while statutory licensing covers transmissions via Internet radio, it does not cover the permanent downloading and copying of works over the Internet. See 17 U.S.C. § 114(d)(1).

36. 464 U.S. 417 (1984).37. Id. at 417.38. Id. at 419.39. Id. at 417.40. Id. at 429.41. Id.42. 17 U.S.C. ch. 10 (2006).43. Statement by President George Bush Upon Signing S.

1623, 1992 U.S.C.C.A.N. 3609.44. 17 U.S.C. §§ 1003–04 (2006). 45. See id. § 1008. 46. See Recording Indus. Ass’n of Am. v. Diamond

Multimedia Sys., Inc., 180 F.3d 1072, 1078 (9th Cir. 1999) (excluding computer hard drives from the scope of the AHRA).

47. Although Sony Corp. of Am. v. Universal City Studios,

12 Spring 2013

In both instances with cable and recording technologies, the law recognized that a compromise, a give and take, was preferable to strictly enforcing the provisions of the Copyright Act. Curiously, when the Internet and its associated technologies implicate copyright law, the law has followed another path, and copyright holders have opted to enforce copyright protections instead of compromising for mutual benefit. The information sharing capabilities of the Internet presented problems the likes of which the entertainment industries have never seen. Not only could perfect copies of copyrighted music be created, but the copies also could be distributed instantaneously to potential consumers worldwide. The unauthorized copying and distributing of copyright works became known as piracy.48 Concern over the Internet’s effect on copyright led Congress to pass the Digital Millennium Copyright Act (DMCA) in 1998.49 The DMCA was meant to strengthen copyright protections in the online context.50 However, there were still questions that needed answering in the courtroom.

The online activity of file-sharing earned the wrath of the music industry in 2001.51 A circuit

Inc., had already solidified the legality of videocassette recorders, the AHRA allowed for fuller coverage of all audio recording technology—and blank media used to facilitating recording—that fell within its scope.

48. The word choice, “piracy,” is both inaccurate and unfortunate. The term is inaccurate because copyright infringement is not quite the same as theft—and copyright holders had a difficult time convincing the public to perceive it as such. Theft implies that the copyright holder is deprived enjoyment of the property after the unauthorized copying. See BLAck’s LAw dIctIonArY (9th ed. 2009); see also Theft, merrIAm-weBster onLIne dIctIonArY, http://www.merriam-webster.com/dictionary/theft (last visited Oct. 19, 2012). However, this is not the case because only a copy is made and the original remains untouched with its owner. Nor can the unauthorized distributor be said to be taking the prospective profits of the copyright holder since there is no guarantee that a consumer would reliably buy something that is not available for free. The piracy label also proves unfortunate due to the romantic notions associated with classical pirates in popular culture, and many so-called online pirates embraced the nomenclature. See The Pirate Bay: About, thePIrAteBAY.se, https://thepiratebay.se/about (last visited Oct. 20, 2012).

49. Statement by President William J. Clinton Upon Signing H.R. 2281, 1998 U.S.C.C.A.N. 671.

50. Id. The DMCA represents the United States’ implementation of the World Intellectual Property Organization’s twin treaties meant to address the concerns about copyright in the digital age. Id. An important provision in the DMCA is its safe harbor provision, which provides immunity to online service providers from copyright infringement under certain conditions. See 17 U.S.C. § 512 (2006).

51. File-sharing presented an interesting case because it was not immediately apparent that such behavior implicated one of the exclusive rights of copyright holders. Unlike downloading from a website, which is analogous to direct reproduction, file-sharing could be viewed as merely the sharing by users of copyright-protected songs they already purchased. But see A&M

court held in a subsequent case that the uploading and downloading of copyrighted works was not fair use. In A&M Records, Inc. v. Napster, Inc.,52 the Ninth Circuit examined the activities of the then popular online file-sharing service Napster with respect to interpersonal transmission of copyrighted works. The Napster court ruled that facilitating the downloading of copyrighted music infringed upon the exclusive right of reproduction and distribution.53 Furthermore, using copyright works in this way does not qualify as fair use.54

The Supreme Court later strengthened the copyright holders’ victory over file-sharing. In MGM Studios, Inc. v. Grokster, Ltd.,55 the Court unanimously held that file-sharing companies could be liable for inducing copyright infringement.56 In Grokster, the file-sharing companies sought to rely on the Sony decision,57 which had held that the mere production of technology capable of facilitating copyright infringement could not constitute contributory infringement if the technology had substantial non-infringing uses.58 However, the Grokster Court distinguished the Sony decision by holding that when a company induces infringing behavior through the promotion of its technology, it no longer has the protection of Sony.59

Despite these victories, copyright holders still claim to suffer considerable harm from the unauthorized consumption of media on the Internet.60

Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1015 (9th Cir. 2001) (discussing how direct economic benefit is not required for a finding that an allegedly infringing use is commercial in nature).

52. 239 F.3d 1004 (9th Cir. 2001).53. Id. at 1014.54. Id. at 1019. After Napster, it is firmly established in legal

jurisprudence that downloading and file-sharing of copyrighted music infringes upon a copyright holder’s rights. However, could such behavior still be permitted? The question is this: could Napster have survived (legally) if it, or Internet service providers, had paid statutory royalties to the copyright holders? The Napster court declined to allow Napster to use a compulsory license scheme because it could not reconcile Napster’s service with any of the enumerated circumstances in copyright law that allowed for compulsory licenses. Id. at 1028. However, the implication is an amendment would be necessary to bring online activities such as file-sharing within the purview of statutory licensing.

55. 545 U.S. 913 (2005).56. Id. at 913–14.57. Id. at 933.58. Sony Corp. of Am. v. Universal City Studios, Inc., 464

U.S. 417, 417 (1984).59. Grokster, 545 U.S. at 935–36.60. See Motion Pictures Association of America Industry

Reports, mPAA.org, http://www.mpaa.org/policy/industry (last visited Oct. 22, 2012) (containing a list of industry reports on the harms of online piracy and copyright infringement); Recording Industry Association of America Piracy Impact Studies, rIAA.com,


Most recently, these industries supported SOPA and PIPA as the latest push towards tightening enforcement of copyright laws.61 Yet the pushback from the online community, bolstered by public support, stymied the efforts of the copyright holders.62 Perhaps then, in light of the apparent failures of these enforcement efforts, a statutory compromise may yet provide the proper solution.

II. stAtutorY soLutIons In the AnALogous sItuAtIons oF cABLe teLevIsIon And dIgItAL AudIo recordIng devIces ProvIde AmPLe suPPort For A comPromIse Between coPYrIght hoLders And Internet Interests

Copyright holders certainly have good cause for clinging to the traditional business model of making money directly from selling their copyrighted content in the marketplace. This traditional business model has worked splendidly for the entertainment industries.63 Given the highly lucrative nature of the entertainment industry, marketplace financial compensation serves as a very strong incentive for business as usual.64 However, from a legal standpoint, no reason exists as to why copyright law should concern itself with ensuring the traditional business model survives in the Internet age.65

http://www.riaa.com/keystatistics.php?content_selector=research-report-journal-academic (last visited Oct. 22, 2012). For the purposes of this Article, the harm and losses claimed by the entertainment industry are presumed to be accurate and unexaggerated.

61. Cecilia Kang, House introduces Internet piracy bill, Post tech (Oct. 26, 2011, 6:12 PM), http://www.washingtonpost.com/blogs/post-tech/post/house-introduces-internet-piracy-bill/2011/10/26/gIQA0f5xJM_blog.html (“Hollywood, media firms and the U.S. Chamber of Commerce immediately hailed the bill, saying the government needs to take a stronger stance to prevent the rampant illegal use of online content.”).

62. See Art Brodsky, The Web Can’t Declare Victory Just Yet—If Ever, PuB. knowLedge PoL’Y BLog (Jan. 24, 2012), http://www.publicknowledge.org/blog/web-cant-declare-victory-just-yet-if-ever (detailing the efforts and effects of the SOPA/PIPA protests).

63. See generally Domestic Movie Theatrical Market Summary 1995 to 2012, the-numBers.com, http://www.the-numbers.com/market/ (last visited Oct. 25, 2012) (providing figures for the movie industry).

64. It is debatable whether business as usual has yielded any real creativity or has merely resulted in studios churning out simplistic product to cater to the widest audience possible. Courts do not make judgments on the artistic merits of creative works, nor should they. Instead, whether financial compensation actually stimulates creativity, or in other words, does money actually produce true art, is a discussion best left to liberal arts scholars. However, there is an argument to be made that genuine artistic expression is not and cannot be motivated by financial gain.

65. See Berlin v. E.C. Publ’ns, Inc., 329 F.2d 541, 543–44 (2nd Cir. 1964).

A. The Law Does Not Require Market-Based Compensation to Copyright Holders

The text of the Constitution and copyright law unquestionably demonstrate that copyright is a limited right, conditioned on the principle that it must serve the public interest.66 In that sense, copyright more closely resembles a privilege than a right. Accordingly, there are important statutory limitations—namely public domain and fair use—on the exclusive right of copyright holders.67

Under both public domain and fair use, the copyright holder receives no compensation for the consumption or use of their copyrighted work.68 Therefore, these doctrines support the notion that financial compensation, although by far the most popular means of incentivizing creativity, is not the end goal of copyright, but rather a means to an end.69

The many instances during which an emerging technology threatened to upset the established business model of entrenched entities demonstrate that, very often, the two sides struck a deal and compromised to allow the introduction of the technology, while ensuring that copyright owners received some measure of compensation for the curtailment of their exclusive rights. The emergence of cable technology threatened the broadcast industry and led to the compromise of statutory licensing.70 Like cable technology, which infringed upon the broadcast industry’s exclusive right of public performance, the Internet and its content distribution technologies infringe upon the music and motion picture industries’ right of reproduction. Also, like the numerous broadcasters with which cable companies would have had to negotiate retransmission consent, the number of musical and motion picture copyright holders with which Internet providers71

66. See supra Part I. a.; see also U.S. Const. art. I, § 8, cl. 8; 17 U.S.C. § 106 (2006) (enumerating rights); 17 U.S.C. § 107 (2006) (codifying fair use); 17 U.S.C. §§ 301–04 (2006) (setting the limited duration of copyrights).

67. The statutorily created limitations make a great deal of sense when viewing copyright law in its proper context. Copyright law and intellectual property law in general, by their very nature, infringe upon one of humanity’s most important freedoms—the freedom of speech or expression. See Jaszi, supra note 20, at 719.

68. Copyright holders receive no compensation from public domain or fair use because they do not have the exclusive rights to their works under these two doctrines.

69. See Berlin, 329 F.2d at 543–44.70. See h.r. reP. no. 94-1476, at 89 (1976), reprinted in

1976 U.S.C.C.A.N. 5659, 5704.71. Internet service providers, as the gatekeepers of the

Internet, are probably the party on whom it makes the most sense to place the responsibility of collecting fees for statutory licensing. See wILLIAm w. FIsher III, PromIses to keeP 219 (Stanford

14 Spring 2013

would have to negotiate separate licensing fees would also be astronomical. Lawmakers recognized that such inefficiency justifies the implementation of statutory licenses for cable providers.72 Similarly, lawmakers could also recognize that requiring Internet service providers to negotiate licensing fees for music online would be burdensome to the point of inefficiency.73 Therefore, the framework of a statutory license could easily be applied to the online context.74

Similarly, the advent of digital recording technologies led to the compromise now found in the statutory language of the Audio Home Recording Act. Like digital audio recording devices, which allowed consumers to record copyrighted music,75 the Internet also greatly facilitates the duplication of copyrighted music and movies. Also, like the developers of digital recording technologies who wanted protection from copyright infringement suits while being able to continue manufacturing their products,76 Internet technology developers also would likely desire legal assurances that both the development of their technology could continue and that they would not be made liable for any infringement claims. Lawmakers codified a compromise that exchanged statutorily defined royalties for protection from infringement suit liability.77 Likewise, lawmakers could also use similar statutory terms to allow copyright holders and Internet technology developers to come to a similar compromise.

No such compromise has been brokered for the Internet, but the established framework from either statutory licensing or AHRA blank media royalties78 are readily applicable.79 The question becomes whether such a solution would resolve the concerns of all the

University Press 2004).72. See h.r. reP. no. 94-1476, at 89, reprinted in 1976

U.S.C.C.A.N. at 5704.73. Id. (demonstrating congressional recognition of the burden

of excessive negotiations).74. The exact fee amount would still be a point of negotiation

between the interested parties, as it was with statutory licensing. 75. See Recording Indus. Ass’n of Am. v. Diamond

Multimedia Sys., Inc., 180 F.3d 1072, 1073–74 (9th Cir. 1999) (explaining the “brave new world of Internet music distribution” by describing how digital recording technology works).

76. See H.R. reP. no. 102-873(I), at 24 (1992) (describing the exemptions as “critical components” of the legislation).

77. See 17 U.S.C. §§ 1003, 1008 (2006).78. The compensation system under the AHRA is far from

perfect, but imperfect compensation still is legal because copyright law does not require financial compensation to be equal to market levels. See discussion supra Section II.A.

79. See FIsher, supra note 71, at 202–03; A Better Way Forward: Voluntary Collective Licensing of Music File Sharing, eFF.org, https://www.eff.org/wp/better-way-forward-voluntary-collective-licensing-music-file-sharing (last visited Oct. 19, 2012).

parties involved. This includes the copyright holders, the developers of Internet and related technologies, and now the consumers.

B. Statutorily Defined Compensation Would Resolve the Conflict Between Copyright Holders and Internet Interests

If the provisions of the new compensation scheme mirror those of previous ones, they will address many of the problems caused by consumption of copyrighted works on the Internet. Copyright holders would be guaranteed a way to receive compensation for their works. Internet service providers would be shielded from liability. In theory,80 all parties should take away some measure of satisfaction.

Theoretically, copyright holders will be able to receive steady compensation for producing content that goes onto the Internet, though the compensation scheme will not necessarily be perfect. Indeed, they would have to gamble all of the revenue currently generated through direct sales in the market in hopes of recovering the revenue through the new statutorily defined compensation system. Depending on how the statutory compensation is set, revenue from the new compensation may not satisfactorily cover their losses. However, if piracy truly deprives them of the amount of revenue that they claim, perhaps imperfect compensation would nevertheless be preferable to the current system. This dynamic is perhaps already the generally accepted premise of blank media royalties.81 Although the compensation received by copyright holders through such royalties may not perfectly offset the compensation lost through private copying, copyright holders certainly prefer getting some money to none at all.

Internet service providers would receive protection from infringement liability. While they have not been targeted for contributory infringement claims yet,82 they may one day find themselves in those crosshairs. While it is true that the Internet is capable of substantial non-infringing uses, under Grokster, such a capability would not necessarily protect Internet service providers from liability.83 A compromise would solidify that protection, and Internet service providers would not even pay for it themselves since they

80. See infra Part III for the practical implications.81. See FIsher, supra note 71, at 86–87.82. Online service providers already have been targeted

for contributory infringement claims. See Viacom Int’l, Inc. v. YouTube, Inc., 676 F.3d 19, 25–26 (2d Cir. 2012).

83. See MGM Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 935–36 (2005).


could pass on any costs to the customers.84 Similarly, Internet service providers would become immune from lawsuits regardless of the degree of knowledge they had regarding infringing content, which currently has become an increasingly contentious part of the DMCA’s safe harbor protections.85

Finally, what would such a compensation scheme mean for the piracy problem? Establishing a compensation scheme would not directly solve the piracy problem, but it likely would do so indirectly. Websites that offer unauthorized downloads and transfers of copyrighted content would have no reason to shut themselves down initially. However, once copyright owners fully embrace the model of providing content for free, which is not really free, the piracy websites would no longer be providing a unique service. The competition from legitimate sources of content would likely push them out of existence.86

That is how the solution would work in theory. How such a compensation scheme would work in practice, if it would work at all, requires an entirely different analysis.

III. understAndIng the nAture oF ALL Interested PArtIes, PArtIcuLArLY the consumers, In the Internet context Is crucIAL to mAIntAInIng the reLevAncY oF coPYrIght LAw onLIne

Aside from the legal concerns, numerous policy concerns need to be addressed to adopt a new compensation scheme that would radically alter how the entertainment industry operates online. When considering the difficulties, however, it remains important to remember what necessitates them—a demonstration of consumer desire and the adjustment that copyright law must make to continue to serve the public interest. The SOPA/PIPA protests showed that the consumers of the Internet and its content cared more about ensuring the free and open exchange of ideas than they did about eliminating online piracy.

The previous section framed the conflict

84. Cable systems and blank media producers operate in this fashion by transferring the costs of such statutory fees to their customers through their prices.

85. See 17 U.S.C. § 512 (2006); YouTube, 676 F.3d at 30.86. Consider the example of the prohibition of alcohol. See

u.s. const. amend. XVIII (repealed 1933). During Prohibition, criminal figures amassed great wealth because they were willing to provide a service that legitimate business could not. See Organized Crime—American Mafia, LAw LIBrArY—AmerIcAn LAw And LegAL InFormAtIon, http://law.jrank.org/pages/11944/Organized-Crime-American-Mafia.html (last visited Nov. 28, 2012). After the repeal of Prohibition, such criminal elements no longer had a market because what was once illegal was now legal. See id.

largely, if not exclusively, in terms of copyright holders versus technology developers. However, through all the conflicts, the consumers have always been an interested party.87 What the SOPA/PIPA protest also showed was that, properly mobilized, the consumers have tremendous power in fighting legislation.88 Dealing with the newly empowered class of consumers requires examining just what to make of the strong resistance that consumers have towards copyright enforcement online. On the one hand, this resistance may be characterized as market failure. In that sense, the problem is a familiar one, and one that familiar solutions could easily address. On the other hand, this resistance may reveal the revolutionary impact the Internet has had in shaping culture. The Internet’s anarchical structure and participatory culture may have fundamentally altered the way in which the public interacts with media and entertainment in the digital space. If that is the case, then the challenge becomes finding a solution that will be regarded as legitimate both to the Internet constituency and to the original aim of copyright law.

A. Characterizing the Piracy Problem as Market Failure

Even if the entertainment and media industries resist abandoning traditional business models with the argument that the new compensation scheme is not fair and that it undermines the market,89 the law has an answer to those arguments. There are many instances in which the government must institute a regulatory scheme to ensure that certain socially desirable ends are met.90 More relevantly, the legislative history of

87. See Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 429 (1984) (“The monopoly privileges that Congress may authorize are neither unlimited nor primarily designed to provide a special private benefit. Rather, the limited grant is a means by which an important public purpose may be achieved. It is intended to . . . allow the public access to the products of [creative] genius after the limited period of exclusive control has expired.”).

88. See Brodsky, supra note 62.89. A statutory licensing or royalty scheme need not be

completely unresponsive to market forces. For example, royalty payments could be made to various artists based on the amount of play their audio or video receives. See Fisher, supra note 71, at 223–24. See generally Online Measurement, nIeLsen.com, http://nielsen.com/us/en/measurement/online-measurement.html (last visited Nov. 29, 2012).

90. The most notable example of a government-imposed compensation scheme would be taxes, used to pay for public goods. See Wendy J. Gordon, Fair Use as Market Failure: A Structural and Economic Analysis of the Betamax Case and its Predecessors, 82 coLum. L. rev. 1600, 1610–11 (1982) (discussing the compulsory payment for public goods dynamic). Understandably, government regulation of the creative industries would be highly undesirable, but it is worth noting that creative industries such as television and radio have long been subject to federal regulation.

16 Spring 2013

the Copyright Act’s statutory licensing sections has provided that the government may step in and impose a compensation scheme when there is market failure.91 The question then becomes: has there been a failure in the online market for copyrighted content such as music and movies?

Copyright holders would argue that the market has not failed, but merely needs stricter enforcement to ensure its function. However, stricter enforcement has rarely been the answer when copyright confronts technology, as the examples of statutory licensing and blank media royalties have demonstrated. Nor does enforcement appear particularly effective given the online piracy problem. Certainly, if piracy is the problem to the extent that the motion picture and music industries make it out to be,92 piracy itself may be considered to be a market failure in the sense that there appears to be a widespread unwillingness to pay for copyrighted content in the traditional sense.93 A statutorily imposed compensation scheme then very well could solve the problem in the same way that taxes solve the public goods problem,94 and just as statutory licensing cable licensing solved the retransmission consent problem for cable and satellite television.

If piracy itself constitutes market failure, then the resistance shown by consumers to SOPA/PIPA may be characterized as market failure as well. Perhaps consumers resist the imposition of laws to enforce the traditional business models because they do not find the traditional business models to be worth protection.95

91. See H.R. reP. no. 94-1476, at 89 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5704.

92. See discussion supra note 60. 93. The entertainment industry seems to believe that the

unwillingness results from the public’s ignorance that such practices are illegal and harmful, as evidenced by their efforts to reeducate the public through public service announcements. Eric Perrott, Relatively New Anti-Piracy PSA: Another Analogy Comparison of Piracy to Stealing Cars or an Effective Message?, Am. u. InteLL. ProP. BrIeF (May 12, 2011, 8:37 AM), http://www.ipbrief.net/2011/05/14/relatively-new-anti-piracy-psa-another-analogy-comparison-of-piracy-to-stealing-cars-or-an-effective-message/. However, if the public innately or instinctively believes that a practice is legal, no amount of reeducation is likely to dissuade individuals from continuing that practice. Again, consider the example of Prohibition. See generally sYLvIA engdAhL, Amendments xvIII And xxI: ProhIBItIon And rePeAL (Greenhaven 2009) (noting that respect for the law greatly diminished during the unpopular prohibition of alcohol). In such instances, the law must bend to the will of the people or else risk criminalizing a substantial portion of the public who had no real intention to violate the law.

94. See Gordon, supra note 90, at 1610–11.95. See YochAI BenkLer, the weALth oF networks 462 (Yale

Press 2006) (“Ubiquitous low-cost processors, storage media, and networked connectivity have made it practically feasible for individuals, alone and in cooperation with others, to create and exchange information, knowledge, and culture in patterns of social reciprocity, redistribution, and sharing, rather than proprietary,

Perhaps the old business models are no longer supportable.96 The introduction of a new compensation scheme may be precisely what is needed then to serve the interests of all parties.

B. Legitimizing the Law in the Culture of Cyberspace

A far larger problem would be the highly likely scenario that consumers, and the technology developers,97 reject any kind of statutorily mandated payment to copyright holders.98 In other words, what do the consumers really get out of such a new statutory compensation arrangement? Theoretically, consumers would receive the ability to do what they have wanted to do all along—that is, to consume and use copyrighted works freely. That is not to say that copying and distributing songs over the Internet would suddenly become legalized.99 However, being that it no longer presents a problem to copyright holders, the threat of legal action disappears to the point where it becomes de facto legal. The problem with this theoretical benefit is that consumers may do whatever they desire, no matter what the law is.

To look at it another way, the piracy problem and the consumer resistance to laws aimed at greater suppression of piracy may indicate that there is a fundamental disconnect between the consumers and producers of copyrighted works on the Internet. Furthermore, the protests demonstrate that even the lawmakers themselves severely misread the reactions of the people. The consumers—the users of the Internet—may have no desire to accommodate either copyright holders or the law in an effort to maintain any semblance of the current framework of intellectual property.100

market-based production.”).96. See id. at 468. 97. The consumers play a major role in whether Internet

service providers would accept the new compensation scheme. The incentive for Internet service providers to pay these royalties lies in the potential immunity from litigation. However, providers would only be willing to pay if consumers were willing to bear the added costs.

98. See Mike Masnick, Why A Music Tax Is A Bad Idea, techdIrt (Dec. 9, 2008, 11:40 AM), http://www.techdirt.com/articles/20081209/0144083060.shtml.

99. This sentiment is an important distinction because even the Audio Home Recording Act’s provision shields developers of recording technology, not users, just as the DMCA shields online service providers and not end users. Compare 17 U.S.C. § 1008 (2006), with id. § 512.

100. See generally John Perry Barlow, A Declaration of the Independence of Cyberspace, eFF.org (last visited Oct. 19, 2012), https://projects.eff.org/~barlow/Declaration-Final.html; Josh Levy, After SOPA: A Declaration of Internet Freedom, huFFIngtonPost.com (July 1, 2012, 10:32 PM), http://www.huffingtonpost.com/josh-


In light of this, the equally possible notion is perhaps the Internet creates a jurisdiction where traditional copyright simply cannot be enforced to the extent that it is enforced outside of cyberspace.101 Might the Internet be governed by a different set of laws or rules than the physical world?102 Is the Internet every bit the haven for lawless rogues that the high seas were for pirates during the golden age of piracy?103 Perhaps, then, the lawless pirates understand more about cyberspace than the law and lawmakers.

Alternatively, framed another way, the culture of the Internet, and its empowering effect on the individual, could offer another explanation for the power shift whereby consumers want to take control of the content they support and consume. The Internet and social media have conditioned users to be more vocal and participatory.104 No longer will consumers sit idly by and allow the industries they support to remain callous to their desires about how they want to consume media.105 This shift is not necessarily a

levy/after-sopa-a-declaration_b_1641959.html.101. See mAdhAvI sunder, From goods to the good LIFe 29

(Yale University Press 2012) (stating that “[m]eanwhile, rapid-fire technological advances and new forms of creative output, from YouTube and MySpace to the advent of open-source collaborative networks, garage bands, remix culture, and the World Wide Web itself, undermine utilitarian intellectual property law’s very premise: that intellectual property rights are necessary to incentivize creation.” This suggests that technological advances may even undermine the incentive based purpose of intellectual property law.).

102. See generally Lawrence Lessig, The Law of the Horse: What Cyberlaw Might Teach, 113 hArv. L. rev. 501 (1999).

103. The fictional Captain Jack Sparrow, from Disney’s PIrAtes oF the cArIBBeAn franchise, espouses that the only rules that matter are defined solely by the capabilities of any individual. PIrAtes oF the cArIBBeAn: the curse oF the BLAck PeArL (Walt Disney Studios 2003) (“The only rules that really matter are these: what a man can do and what a man can’t do.”).

104. See sunder, supra note 101, at 35 (“Changing technologies and social mores have made culture more interactive and participatory.”). Might the exclusionary nature of intellectual property protection then be fundamentally at odds with the evolution of an increasingly inclusionary culture? Some theorists would argue that the Internet almost demands a shift from proprietary models of production towards nonproprietary ones. See BenkLer, supra note 95, at 462.

105. See BenkLer, supra note 95, at 467 (“Some of the time that used to be devoted to passive reception of standardized finished goods through a television is now reoriented towards communicating and making together with others, in both tightly and loosely knit social relations.”). Furthermore, despite their role as the audience for content, consumers are often an afterthought when players in the entertainment industry fight over money, as evidenced by the dropping of certain television networks and programs during carriage disputes between television programmers and distributors. See Brian Stelter, DirecTV-Viacom Dispute Turns Into Blackout Reality, medIA decoder—nYtImes.com (July 11, 2012, 10:19 AM), http://mediadecoder.blogs.nytimes.com/2012/07/11/viacom-directv-standoff-causes-channel-blackout-in-20-million-households/. Consumers may now be able to make their displeasure known in

bad thing and may simply represent the next step in cultural evolution. Evolution requires adaptation. The entertainment industry simply needs to adapt and to bend more to the will of their consumers, or customers. This should be nothing new to the industry, which like any business, ought to obey the age-old maxim that the customer is always right.106

Throughout all of this, the law need only do one thing to remain legitimate: continue to promote the public interest. And the public has spoken that they have more interest in keeping the Internet free of controls and regulations if such control means even the potential of stifling ideas and innovation online. Insomuch as the free expression of ideas is every bit as crucial to the progress of the sciences and the useful arts, if not more so than financial incentives, copyright law would continue to fulfill its original, constitutional mandate even if it no longer facilitated traditional market-based compensation to copyright holders.

Iv. concLusIon

Copyright does not function merely to grant copyright holders exclusive rights to their works, but rather the law also must promote progress in the creative fields. Copyright is not a tool for maintaining control of copyrighted works as a means to preserve business models for maximizing profits from creative works. It merely provides incentives that will promote creative expression. The incentives—financial compensation—are the means, not the ends towards which copyright law strives to achieve. Understanding this fundamental principle of copyright law will be crucial to working out a compromise, a peace accord, of sorts between copyright holders and the online community—including both technology developers and consumers.

The music and movie industries are only a couple of the many industries that must contemplate how to adapt to online distribution of their products. Books may soon have to deal with the same problem as electronic books become the norm. Finally, as video drives the increase in broadband technology, television will soon migrate online as well. While the natural tendency may be to hold onto the business models that have worked offline, the nature of the Internet may ultimately frustrate those efforts. Instead, all parties involved would be better served to look forward and implement a system that better serves the interests of

much louder ways than in the past. 106. The industry already cares deeply about what consumers

want. It needs only now to pay more attention to how the consumers want to view and use that content.

18 Spring 2013

the consumers, consisting of the greater public who use the Internet more and more with each passing day. Considering that the purpose of copyright law also functions to promote the interests of the public, there is no reason why copyright should not also change to accommodate the demands of the Internet community.


1ABstrAct

Increasing copyright infringement and high litigation costs have left many independent content producers without the means to effectively commercialize their creations. However, this problem can be solved with inspiration from the patent world, where non-practicing entities (NPEs) have, among other things, given independent inventors additional options for commercializing their inventions. If adopted by the copyright world, an NPE would also provide more enforcement options to creators of copyrighted material, but would best do so by selling copyright insurance. This would allow it to legally pursue infringers on behalf of its insured clients, and give clients maximum control over their content. This system will eliminate rampant copyright infringement while simultaneously opening new markets for insurance providers, increasing the value of copyrighted works, and making copyright enforcement more efficient.

IntroductIon

Matthew Inman runs an online cartoon called “The Oatmeal.”2 His business model is simple: he draws cartoons and monetizes them via merchandising and ad revenue.3 In early 2010, though, Inman learned that a content aggregator,4 funnyjunk.com, was displaying hundreds of copies of his work,5 without

1. Candidate, M.S., Intellectual Property Management and Markets at the Illinois Institute of Technology. Thanks to Professor Edward Lee, Professor David Schwartz, and Grant Schakelford for their teaching, guidance, and coaching throughout the writing process. Thanks also to my brother, Bob McAlpine, for providing the inspiration for this article.

2. Matthew Inman, About the Oatmeal, the oAtmeAL, http://theoatmeal.com/pages/about (last visited Feb. 21, 2013).

3. Danny Bradbury, The Oatmeal beat Funnyjunk, but other cartoonists aren’t so lucky, guArdIAn (June 21, 2012, 1:55 AM), http://www.guardian.co.uk/technology/2012/jun/21/oatmeal-carreon-comics-property.

4. A content aggregator is a website that does not produce any content, but rather assembles content from other sources into one place.

5. Matthew Inman, What should I do about FunnyJunk.com, the oAtmeAL, http://theoatmeal.com/blog/funnyjunk (last visited Feb. 21, 2013).

link-backs or attribution. Accordingly, he requested the site’s administrator remove the infringing copies via a DMCA takedown notice.6

After fruitlessly sending these requests for a year,7 Inman grew frustrated with the Digital Millennium Copyright Act (DMCA) process, and resorted to the power of the press to protect his intellectual property.8 He wrote two blog-posts on his website9 ranting about his stolen comics, and then let the issue rest.10 One year later, though, he received a letter from FunnyJunk’s attorney, demanding him to remove his posts about FunnyJunk and to pay twenty-thousand dollars for alleged defamation and false advertising.11 In the following weeks, Inman retaliated with more blog posts and then raised more than ten times the requested amount, which he donated to charity to spite FunnyJunk.12 He also sent FunnyJunk’s attorney a drawing of his mother attempting to seduce a bear, along with several pictures of the charity money.13 FunnyJunk then sued Inman for trademark infringement and inciting others to cyber-vandalism.14 After some brief legal foot-stepping, FunnyJunk ultimately honored Inman’s original request by blocking its users from accessing his content and it then dismissed its lawsuit.15

6. Id. 7. Id. 8. Id.9. Id. 10. Id. 11. Dan Mitchell, Bear Seduction and the Copyright

Conundrum, sFweekLY BLogs (June 12, 2012, 11:00 AM), http://blogs.sfweekly.com/thesnitch/2012/06/bear_seduction_and_the_

copyrig.php. 12. Matthew Inman, FunnyJunk is threatening to file a federal

lawsuit against me unless I pay $20,000 in damages, the oAtmeAL, http://theoatmeal.com/blog/funnyjunk_letter (last visited Feb. 21, 2012).

13. Matthew Inman, As promised, here’s the photo of $211,223.04 in cash we raised for charity, the oAtmeAL, http://theoatmeal.com/blog/charity_money (last visited Feb. 21, 2012).

14. Complaint at 1, Carreon v. Inman, No. 12-CV-03112 (N.D. Cal., June 15, 2012).

15. Michael Cavna, ‘The Oatmeal’ v. FunnyJunk Lawyer: Why Charles Carreon dropped his Indiegogo charity lawsuit, wAsh. Post BLog (July 6, 2012, 12:43 AM), http://www.washingtonpost.com/blogs/comic-riffs/post/the-oatmeal-v-funnyjunk-lawyer-why-charles-carreon-dropped-his-indiegogo-charity-lawsuit/2012/07/06/gJQAND0pQW_blog.html.


by Evan McAlpine1

20 Spring 2013

While few could have predicted that a simple copyright dispute would escalate to such comical proportions, the story nonetheless illustrates a salient issue in modern copyright enforcement. The Internet allows individuals to engage in mass copying and redistribution with only a few mouse-clicks, while owners of copyright-protected material lack comparable countermeasures. For example, copyright owners bear the burden of identifying and policing infringers,16 but most are unable to afford the cost of enforcing their rights against these copiers.17 Under the current system, a mass infringer operates at little cost, while the copyright owner must spend a substantial sum to protect his rights.18 While copyright protection may be considered just another cost of doing business for large organizations such as Disney or Universal, the expense of litigation is often an insurmountable obstacle to an individual whose rights have been violated.19

A similar situation exists in patent law. There, while the cost of enforcement remains high, a solution has evolved that allows patent owners to more efficiently and effectively protect their property. The non-practicing entity (NPE) is an organization that does not seek to sell patented products, but rather specializes in licensing and enforcing patents.20 Accordingly, they have dramatically changed the landscape of patent law, albeit with a great deal of controversy, by providing independent inventors with an additional source of capital, and with cheaper and more effective enforcement options.21

With only minor changes, the copyright world could adopt a similar model, whereby owners rely on third-parties to enforce their intellectual property rights. These copyright-based NPEs would fill a growing void by providing copyright owners with an effective and affordable mechanism for protecting their property, and in the process give owners the ability to realize more value from their property and more ways to protect it.

This Note proposes using NPEs in copyright law to solve the problem of mass online copyright infringement. Part I begins with an overview of copyright infringement both before and after the

16. 17 U.S.C. § 512(c)(1)(A)(iii) (2006). 17. Remedies for Small Copyright Claims: Hearing Before

the Subcomm. on Courts, the Internet, and Intell. Prop., of the H. Comm. on the Judiciary, 109th Cong. 45–46 (2006) [Copyright Claims Hearing] (statement of the United States Copyright Office).

18. Id. at 45–47.19. Id. 20. See infra section I.C. 21. Michael Risch, Patent Troll Myths Exposed, InteLL. Asset

mgmt. mAg., July/Aug. 2012, at 74.

Internet became the primary method of content distribution, and highlights the changes in business structure that have altered the copyright enforcement paradigm. It next discusses Righthaven’s failed attempt to become a copyright NPE and the lessons that potential followers can learn from that company’s experiment. Finally, the section ends with an analysis of the impact of NPEs on patent law, and notes that copyright law could benefit from the alternative enforcement mechanisms these organizations provide.

In Part II, this Note proposes introducing NPEs into the copyright world in order to achieve more affordable and effective copyright enforcement. This section explains that, unlike patent NPEs that own their intellectual property outright, a copyright NPE will be most effective by insuring the copyrights of others and using the doctrine of subrogation to enforce its client’s rights against infringers. It then explains the basic mechanics of how such an organization would work, and then discusses the benefits that these organizations would give to society.

Part III addresses the potential criticisms of this proposal. Specifically, it explains how the fair use doctrine will not prevent copyright insurers from operating profitably. It also addresses concerns that copyright insurers will use their power to bully infringers into unfair settlements. Finally, it explains how copyright insurers will not adversely affect fair users or free speech.

I. coPYrIght owners need new enForcement mechAnIsms

Over the past several decades, advances in technology have given copyright owners new and powerful ways to monetize their creations.22 The Internet and, specifically, social networks allow owners to distribute their works to increasingly larger markets and to exercise greater control over how their property is used. However, the Internet also allows individuals to copy, redistribute, and pirate on a massive scale and in ways that the law cannot yet effectively control.23 Accordingly, copyright owners cannot rely

22. Promoting Investment and Protecting Commerce Online: The Art Act, The Net Act and Illegal Streaming: Hearing Before the Subcomm. on Intell. Prop., Competition, and the Internet H. Comm. on the Judiciary, 112th Cong. 16 (Mar. 14, 2011) [hereinafter Subcomm. Hearing] (statement of Maria A. Pallante, Register of Copyrights).

23. The “Stop Online Piracy Act”: Hearing on H.R. 3261 Before the H. Comm. on the Judiciary, 112th Cong. 1 (Nov. 16, 2011) (statement of Maria A. Pallante, Register of Copyrights).


on traditional copyright enforcement mechanisms.24 Rather, they need new tools to protect their property against the new threats of the online world.

A. The Problem of Copyright

Infringement

In recent Congressional testimony, Maria Pallante, the Register of Copyrights, articulated the problem of mass copyright infringement, saying:

[W]hen infringers blatantly distribute, stream, and otherwise disseminate copyrighted works on the Internet, they often do so because they have no expectation of enforcement. Unfortunately, the more these kinds of actions go unchecked, the less appealing the Internet will be for creators of and investors in legitimate content. In other words, Internet piracy not only usurps the copyright value chain for any one work, it also threatens the rule of copyright law in the 21st century.25

Unlike in the pre-Internet world, today anyone with a computer can create and distribute content, and anyone with a computer can infringe and pirate content. Because the Internet has so fundamentally altered the way individuals create, distribute, and consume content,26 the law protecting that content must fundamentally change as well. As Ms. Pallante noted, without a change to provide adequate enforcement mechanisms, many creators will simply stop creating.27

1. Traditional Copyright Enforcement Mechanisms

Before home recording technology became widely available in the 1990s, most content was created, produced, and distributed by large organizations. For example, to professionally produce a music album, a record company must pay for recording, editing, marketing, and distributing.28

24. Id.25. Id. at 2. 26. Subcomm. Hearing, supra note 22, at 16.27. Id. at 2.28. record IndustrY AssocIAtIon oF AmerIcA, Let’s PLAY: the

AmerIcAn musIc BusIness 6 (2010).

Because trained professionals perform these functions, and because the final product shipped to market is a tangible good, the costs are incredibly high.29 Accordingly, large-scale content production was an enterprise in which only large organizations could operate.

Further, the enforcement system envisioned by copyright law was appropriate for such organizations. Because the law allows a copyright owner to sue when her work is infringed, simple business sense dictates that the work in question must be at least be as valuable as the cost of the litigation to protect it,30 or that the owner must have a sufficiently good chance of winning the suit and recouping his costs.31 Further, the high cost of bringing creative works to market would require the work to be at least as valuable as the cost of creating and distributing it.32 Combined with the fact that these works were commercialized by large organizations, the ability to use the court system to protect a copyright was an appropriate enforcement mechanism. Large organizations were willing to incur the expense of protecting their works through litigation because they only invested in a product that was worth at least the cost of commercialization and defense.

While traditional litigation was an adequate remedy for large organizations, the fair use doctrine33 provided a mechanism for individuals and smaller entities to use copyrighted material without fear of legal retribution by the larger and more powerful organizations. Under traditional enforcement models, this doctrine worked well because it helped normalize the unequal power relationship between large and small entities. Further, the doctrine tacitly recognized that, because of the massive differences between the large organization and individual copier, the individual’s copying was unlikely to cause harm to the organization’s product. Indeed, when content

29. Id. at 3, 6. 30. No rational person would spend $30,000 to protect a

copyright only worth $20,000. 31. 17 U.S.C. § 505 (2006). 32. A business would not sell a product for ten dollars if it cost

them fifteen dollars to produce it. 33. The fair use doctrine allows unauthorized use of

copyrighted materials under certain conditions. 17 U.S.C. § 107 (2006) (“[T]he fair use of a copyrighted work . . . is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.”).

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production was a capital-intensive industry, logic dictated that only a well-funded entity could cause significant damage through infringement.

2. The Internet and Mass Copyright Infringement

While copyright enforcement mechanisms were effective in the world of the 1976 Copyright Act, the Internet has fundamentally altered the business of content production.34 Unlike the example in the previous section, producing and distributing a music album today requires only a microphone, basic recording software, and an Internet connection. The world of content production is no longer capital-intensive and dominated by large entities.35 Rather, organizations such as the New York Times and NBC operate on a distribution model similar to that of the average blogger: they post content to their websites and rely on advertising revenue to make a profit.36 Accordingly, content is cheaper to produce and cheaper to infringe. The result is that more individuals are producing and distributing their own content, but do not have effective or affordable tools to fight infringement.37

While online content distribution is extremely cheap, protecting that content is impossibly expensive.38 First, copyright owners bear the burden of policing their own work.39 When they find unauthorized copying online, they must ask the website administrator to remove the offending material, and the owner can only sue for infringement if the work is not removed “expeditiously.”40 When the work is widely copied, this process can become incredibly time-consuming and lead to high opportunity costs. In the words of Matthew Inman, “trying to police copyright infringement on the Internet is like strolling into the Vietnamese jungle circa 1964 and politely asking

34. Subcomm. Hearing, supra note 22, at 16.35. Justin Bachman, The Big Record Labels’ Not-So-Big

Future, Bus. wk. (Oct. 11, 2007), http://www.businessweek.com/stories/2007-10-10/the-big-record-labels-not-so-big-futurebusinessweek-business-news-stock-market-and-financial-advice.

36. Eriq Gardner, The Righthaven Experiment: A Journalist Wonders if the Copyright Troll Who Sued Him was Somehow . . . Right?, A.B.A. J., May 2012, at 36.

37. See Am. InteLL. ProP. LAw Ass’n, rePort oF the economIc surveY 2011, at 35 (stating the median cost of copyright litigation for disputes with less than $1,000,000 at risk was $200,000 in 2011).

38. Id. 39. 17 U.S.C. § 512(c)(1)(A)(iii) (2006). 40. Id.

everyone to use squirt guns.”41 Second, most content creators today do not have the resources to protect their property through litigation.42 Even if they did, few copyright owners would be willing to spend thousands of dollars in court costs and attorney’s fees to recover only a fraction of their costs in a damage award. The result is that many copyright owners have been “left . . . to compete with thieves.”43

Indeed, most infringers know that they are unlikely to face the consequences of their actions because enforcement is too expensive. Because there is rarely a credible threat of litigation, and because infringing costs even less than creating, they are able to make a profit at the expense of content producers.44 For example, infringers use unauthorized works to generate ad revenue on their sites.45 They simultaneously divert traffic from the work’s original source, which decreases the owner’s ad revenue.46 Accordingly, a content producer may invest substantial energy in distributing his work online, only to be left remediless against the destructive effects of a few mouse-clicks. The infringer contributes nothing new to society and prospers at the producer’s expense, who, because of mass copyright infringement, has increasingly fewer incentives to invest resources into creating new works.

B. Copyright Enforcement and

Righthaven

Recognizing the problem of mass online copyright infringement, a company called Righthaven began a doomed attempt at third-party copyright enforcement in 2010.47 It was built on a simple model: acquire limited rights to copyrighted material and then aggressively pursue infringers.48 While its experiment ultimately ended in failure, the lessons learned were not in vain. Despite some legal technicalities that ultimately proved to be fatal, Righthaven demonstrated that a third-party copyright enforcement entity has the potential to be effective, profitable, and beneficial to its clients.

41. Inman, supra note 5. 42. See Copyright Claims Hearing, supra note 17. 43. Subcomm. Hearing, supra note 22, at 1. 44. Id. 45. Id. 46. Id. 47. Steve Green, Legal attack dog sicked on websites accused

of violating R-J copyrights, LAs vegAs sun (Aug. 4, 2010, 2:00 AM), http://www.lasvegassun.com/news/2010/aug/04/unlikely-targets-emerging-war-media-content/.

48. Id.


1. Righthaven’s Business Model

Righthaven sought to provide copyright enforcement services to content producers, specifically newspaper publishers.49 It entered into agreements with several media companies in which it acquired limited rights to their copyright portfolios in return for a share in the proceeds of any litigation it won based on those copyrights.50 These agreements gave Righthaven “all copyrights requisite to have Righthaven recognized as the copyright owner of the work for purposes of Righthaven being able to claim ownership,”51 and limited Righthaven’s ability to exploit the copyrights to merely suing for infringement.52 Further, Righthaven was obligated to reassign its interest in the copyrights to their owners if it did not pursue litigation within a specified time period.53

Once Righthaven acquired these rights, it identified infringers, who were always individuals or small organizations, and demanded them to pay a settlement fee or face litigation.54 It used aggressive tactics and the threat of costly litigation to induce most to quickly negotiate and pay the settlement fee.55 When an infringer refused to negotiate a payment and opted to defend its activity in court, Righthaven asked for the defendant’s domain name to be forfeited as part of the judgment.56 In short, Righthaven’s strategy was to use its legal muscle to quickly and cheaply secure settlement payments from parties that lacked resources to defend themselves, and to spend time and money in court only when absolutely necessary.

2. Why Righthaven Failed

Despite its aggressive tactics, Righthaven went defunct less than two years after it was founded.57 Because many of the people it sued were sympathetic

49. Gardner, supra note 36, at 37. 50. Righthaven, LLC v. Hoehn, 792 F. Supp. 2d 1138, 1142

(D. Nev. 2011). 51. Id. at 1143. 52. Id. at 1142. 53. Id. at 1145. 54. Green, supra note 47.55. Steve Green, About Righthaven, vegAs Inc (Nov. 29,

2010, 12:00 AM), http://www.vegasinc.com/news/2010/nov/29/about-righthaven.

56. Steve Green, Judge Strikes Righthaven Website Domain Demand, vegAs Inc (Apr. 16, 2011, 2:05 AM), http://www.vegasinc.com/news/2011/apr/16/judge-strikes-righthaven-website-domain-demand.

57. Steve Green, Righthaven Receiver Moves to Fire CEO Steven Gibson, LAw vegAs sun (June 25, 2012, 5:22 PM), http://www.vegasinc.com/news/2012/jun/25/righthaven-receiver-moves-fire-ceo-steven-gibson.

defendants and protected by the fair use doctrine,58 and because the courts determined that it did not have standing to sue for copyright infringement, Righthaven lost every case it litigated.59 Accordingly, the company’s assets were turned over to a court-appointed receiver, and its founder is now under investigation by the Nevada State Bar.60

First, Righthaven’s business model was flawed because it only sought to enforce copyrights against infringers who were likely to give in to settlement demands.61 Because individuals and small organizations typically do not have the resources or desire to fight lengthy court battles, Righthaven was able to use the specter of litigation to strong-arm these parties into modest settlement agreements.62 However, while this strategy may have looked good on paper; it backfired in practice. While most infringers quickly settled, some did not. In those cases that were heard in court, judges ruled in favor of the defendants.63 Furthermore, as some defendants increasingly won cases against Righthaven, others became less likely to settle infringement claims, and more likely to litigate. Consequently, Righthaven spent more money in court than it was prepared to and cquired a reputation as a copyright “troll” out to make easy money at the expense of defenseless individuals, both in and out of court. Accordingly, courts grew less sympathetic to Righthaven’s complaints and more favorable towards the defendants.

Second, Righthaven’s business model was flawed because it failed to identify which infringers were protected by the fair use doctrine and which were not. In many of these cases, the court found that although the defendants had engaged in unlawful copying, their use of the material was a fair use and therefore not an infringement.64 For example, in

58. Id. 59. See generally Comprehensive List of Copyright

Infringement Lawsuits Filed by Righthaven, LLC, rIghthAven LAwsuIts (last visited Apr. 20, 2013), http://righthavenlawsuits.com/lawsuits.html (listing of every Righthaven lawsuit and its disposition).

60. Steve Green, Three Attorneys Face Righthaven Inquiry by State Bar, vegAs Inc (Jan. 12, 2012, 7:52 PM), http://www.vegasinc.com/news/2012/jan/12/three-attorneys-face-righthaven-inquiry-state-bar.

61. Green, supra note 47. 62. Id. 63. Steve Green, Righthaven Ordered to Pay Attorney’s Fees

in Another Case, vegAs Inc (June 14, 2012, 7:15 PM), http://www.vegasinc.com/news/2012/jun/14/righthaven-ordered-pay-attorneys-fees-another-case.

64. See Righthaven LLC v. Realty One Group, No. 2:10-CV-1036 (D. Nev. Oct. 19, 2010); Righthaven LLC v. Klerks, No. 2:10-CV-00741 (D. Nev. Sept. 17, 2010).

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Righthaven, LLC v. Hoehn,65 the court found that although the defendant had copied and re-posted an entire copyrighted newspaper article, his use was a fair use.66 Righthaven lost money in litigation and in settlement potential because it was unable to determine which infringers were fair users.67 Furthermore, because Righthaven sued many fair use defendants, its image suffered even more, and in addition to pursuing ill-equipped defendants, it also harassed individuals for their legitimate use of copyrighted material.68

Third, and finally, the most serious flaw with Righthaven’s business model was that the company never acquired standing to sue for copyright infringement.69 Federal statute dictates that the legal or beneficial owner of one of the six exclusive rights under a copyright the right to sue for infringement. As interpreted by the courts, this provision requires a plaintiff to own one of the exclusive rights enumerated in the Copyright Act.70 For example, in Silvers v. Sony Pictures Entertainment, Inc.,71 the court found that the plaintiff did not have standing to sue for copyright infringement because she had only acquired the bare right to sue for infringement.72

When Righthaven acquired an interest in Stephens Media’s copyright portfolio, it gained “all copyrights requisite to have Righthaven recognized as the copyright owner of the Work for purposes of Righthaven being able to claim ownership as well as the right to seek redress for past, present and future

65. 792 F. Supp. 2d 1138 (D. Nev. 2011).66. Id. at 1150.67. Green, supra note 63. 68. Nate Anderson, Class-action lawsuit targets Righthaven’s

“extortion litigation”, Ars technIcA (May 18, 2011, 12:57 PM), http://arstechnica.com/tech-policy/2011/05/class-action-lawsuit-targets-righthavens-extortion-litigation.

69. Righthaven, LLC v. Democratic Underground, 791 F. Supp. 2d 968, 976 (D. Nev. 2011).

70. 17 U.S.C. § 106 (2006) (“[T]he owner of copyright under this title has the exclusive rights to do and to authorize any of the following: (1) to reproduce the copyrighted work in copies or phonorecords; (2) to prepare derivative works based upon the copyrighted work; (3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending; (4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; (5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and (6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.”).

71. Silvers v. Sony Pictures Entm’t, Inc., 402 F.3d 881 (9th Cir. 2005).

72. Id.

infringements of the copyright, both accrued and un-accrued, in and to the Work.”73 The court found that this agreement did not give Righthaven ownership over any of the exclusive rights under a copyright, and Righthaven therefore did not have standing to bring the suit.74 Accordingly, all of the 276 cases Righthaven brought were dismissed, and Righthaven was often ordered to pay the defendant’s litigation costs.75

Furthermore, after Righthaven accrued over $300,000.00 in attorney’s fees owed to its opponents,76 a federal judge ordered all of the company’s tangible and intangible assets delivered to a court-appointed receiver, which was sold to satisfy its debts.77 Although the company still has two cases pending in the Ninth Circuit Court of Appeals, it is essentially defunct.78 Righthaven’s attempt to provide an alternate copyright enforcement mechanism was a colossal failure. However, this failure is a valuable lesson for future attempts at alternative enforcement: a third-party copyright enforcer must overcome the hurdles of fair use and standing in order to be effective and profitable.

C. Lessons in Third-Party Enforcement

from Patent Law

In patent law, organizations known as NPEs operate on a business model similar to Righthaven’s. However, unlike Righthaven, NPEs have been enormously successful and have had a profound effect on the landscape of patent law.79 In addition to acquiring rights to patents and then suing infringers, they seek to build revenue streams by licensing their patents to others.80 Accordingly, NPEs in patent law have provided an effective and affordable solution to the problem of expensive litigation. Due to the many similarities between patent law and copyright law, it seems appropriate to look to these entities for answers to the problem of inaccessible copyright enforcement.

73. Righthaven LLC v. Hoehn, 792 F. Supp. 2d at 1146 (D. Nev. 2011).

74. Id. 75. See Righthaven LLC v. Wolf, 813 F. Supp. 2d 1265, 1273

(D. Nev. 2011); Righthaven LLC v. Eiser, No. 2:10-CV-3075, (D.S.C. Jan. 13, 2012).

76. Green, supra note 63. 77. Steve Green, Judge Strips Righthaven of Rights to 278

Copyrights and its Trademark, vegAs Inc (Mar. 5, 2012, 7:29 PM), http://www.vegasinc.com/news/2012/mar/05/judge-strips-righthaven-rights-278-copyrights-and-/.

78. Id.79. Id.80. Joff Wild, A War by Any Other Name, InteLL. Asset

mgmt., Nov./Dec. 2009, at 4.


1. The Structure of a Non-Practicing Entity in Patent Law

Large NPEs operate on one of two models. Organizations such as Acacia Technologies work by acquiring patents, licensing the use rights to those patents, and suing infringers.81 Conversely, organizations such as RPX Corporation are known as defensive patent aggregators (DPAs).82 These NPEs work by building patent portfolios and licensing them for defensive use, essentially providing risk management services via a pool of patents that its clients may use to defend themselves from litigation.83

Under the first model, NPEs provide a clearing-house function: they identify valuable patents, acquire them, and then assert them through licensing negotiations or litigation. Companies use these types of NPEs as a cheap alternative to in-house research and development: the NPE has already located and acquired the needed technology and is usually able to provide it for less than the cost of research and development. Once a license is agreed upon, the company is able to start producing its product immediately. This arrangement is similar to a common cross-licensing deal,84 except that it is one-sided, which makes the whole process more efficient.

Under the second model, NPEs provide risk management services in the form of patent protection. Here, an NPE aggregates a large pool of patents that its clients can use to defend against infringement suits. Although some commentators, and even some DPAs, claim that this business model provides strategic defense against “trolling” behavior, Jiaqing Lu points out that both models are necessary in today’s patent ecosystem.85 Under his theory, both varieties of NPEs

81. Profile, AcAcIA, http://acaciatechnologies.com/aboutus_main.htm (last visited Apr. 20, 2013) (“Acacia Research Corporation’s subsidiaries partner with inventors and patent owners, license the patents to corporate users, and share the revenue. Our partners are primarily individual inventors and small companies with limited resources to deal with unauthorized users but include some large companies wanting to generate revenues from their patented technologies.”).

82. rPx, http://www.rpxcorp.com (last visited Apr. 20, 2013) (“Every member of our client network receives a license to every patent and patent right we own.”).

83. Id. (“RPX helps corporations manage their exposure to patent risk by providing a rational alternative to traditional litigation strategy. Our solution offers a market-based solution in which we proactively acquire high-risk patents before they can become a costly legal problem for our clients.”).

84. BLAck’s LAw dIctIonArY 1003 (9th ed. 2009) (“An agreement between two or more patentees to exchange licenses for their mutual benefit and use of the licensed product.”).

85. Jiaqing Lu, The Economics and Controversies of Nonpracticing Entities (NPEs): How NPEs and Defensive Patent

complement each other by providing unique services to the market.

2. The Judicial Response to Non-

practicing Entities

Although U.S. courts have yet to address whether patent law should treat NPEs differently than other patent users, several courts have heard infringement cases in which NPEs have been principle players. For example, in eBay v. MercExchange, LLC,86 the Supreme Court considered whether an injunction should automatically issue against a party liable of patent infringement.87 Writing for the Court, Justice Thomas rejected the appellate court’s view that a party’s “‘lack of commercial activity in practicing the patents’ would be sufficient to establish that the patent holder would not suffer irreparable harm if an injunction did not issue.”88 He noted instead that “some patent holders, such as university researchers or self-made inventors, might reasonably prefer to license their patents, rather than undertake efforts to secure the financing necessary to bring their works to market themselves.”89 However, Justice Kennedy, in a concurring opinion, argued that a court should consider “the economic function of the patent holder.” Justice Kennedy noted that for NPEs, “an injunction, and the potentially serious sanctions arising from its violation, can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent.”90

Further, in z4 Technologies v. Microsoft,91 the district court for the Eastern District of Texas denied z4’s request to enjoin Microsoft’s infringing use of its software patent.92 In this case, z4 argued that it had made a significant effort to commercialize its patents, and that Microsoft’s continuing infringement would limit its ability to sell its product.93 Because Microsoft and z4 were not direct competitors, the court found that z4 would not be irreparably harmed by the infringement, and that monetary damages were an

Aggregators will Change the License Market, Part II, 48 Les nouveLLes 147, 151 (2012).

86. 547 U.S. 388 (2006). 87. Id. 88. Id. at 393 (quoting Mercexchange, L.L.C., v. eBay, Inc.,

275 F. Supp. 2d 695, 712 (E.D. Va. 2003)). 89. Id. 90. Id. at 396 (Kennedy, J., concurring). 91. 434 F. Supp. 2d 437 (E.D. Tex. 2006).92. Id. at 438.93. Id. at 440.

26 Spring 2013

adequate award.94 Essentially, it said that Microsoft’s use would not dissuade others from purchasing z4’s software because it only used the software in its own products. However, the court overlooked the harm that Microsoft’s continuing use would inflict on z4’s ability to license its software.

For NPEs, the implications of this decision are dire: if a judge can deny an injunction in part because the parties are not competitors, NPEs will always operate at a disadvantage. Because infringers will be less likely to be enjoined when sued by an NPE rather than by a direct competitor, they will be more likely to litigate claims brought by NPEs, and NPEs will accordingly have to accept lower licensing fees. Although the law has yet to speak directly to the issues presented by NPEs, it seems far from reaching a consensus.

3. The Impact of Non-Practicing Entities

in Patent Law

As seen in eBay v. MercExchange, NPEs have both friends and enemies.95 Supporters argue that NPEs benefit the patent system by lowering transaction costs, which makes the patent market more efficient,96 giving individual inventors a more efficient way to enforce their rights,97 and providing an additional source of capital to individual inventors and startup companies.98 However, their opponents argue that NPEs are ruining the patent system because they use low-value patents to extort large licensing fees from productive companies,99 try to maximize their profits by waiting for an industry to develop before asserting their patents,100 and freeload off of the patent system without contributing anything in return.101

However, a recent empirical study by Michael Risch shows that most of these arguments have no factual support. In fact, his data revealed that NPEs have had a significant impact on patent law in only two ways: they help individual inventors enforce claims

94. Id. at 444.95. See Damian Myers, Reeling in the Patent Troll: Was eBay

v. MercExchange Enough?, 14 J. InteLL. ProP. L. 333 (2007); Sannu Shrestha, Trolls or Market-Makers? An Empirical Analysis of Nonpracticing Entities, 110 coLum. L. rev. 114 (2010).

96. James McDonough, The Myth of the Patent Troll: An Alternative View of the Function of Patent Dealers in an Idea Economy, 56 emorY L. J. 189, 211 (2006).

97. Risch, supra note 21, at 74.98. Shrestha, supra note 95, at 150. 99. Myers, supra note 95, at 354. 100. Mark Lemley & Carl Shapiro, Patent Holdup and

Royalty Stacking, 85 texAs L. rev. 1991, 1995 (2007). 101. Wild, supra note 80, at 4.

against large entities, and provide additional sources of capital to individual inventors trying to license their patents.102 Risch found that 29% of patents enforced by NPEs were acquired from individual inventors,103 and that they enforced twice as many individual inventor patents as a random sampling of other litigated patents.104 Furthermore, he found that because NPEs are able to pursue high-stakes patent litigation,105 and because they have greater bargaining power with which to negotiate settlement deals,106 they are often the individual inventor’s only viable option for protecting his rights.

Risch’s study shows that, while NPEs are active and visible, they operate under the same parameters as productive entities. Rather than being freeloaders, rent-seekers, or trolls, they have most noticeably impacted patent law by providing effective and affordable enforcement mechanisms to individual inventors. Accordingly, NPEs have shown that third-party enforcement is a viable solution to the problem of high litigation and enforcement costs.

4. What can Copyright Law Learn from Patent NPEs?

NPEs in patent law have most dramatically benefitted individual inventors via enhanced enforcement and licensing opportunities.107 In addition, they provide defense, risk management, and research and development services to larger clients.108 Of these services, copyright owners could benefit most from better enforcement and risk management, and a third-party copyright enforcer, or copyright NPE, should look to patent NPEs for guidance in these areas.

Patent NPEs are able to help individual inventors protect their works because they are better situated to use the legal system to enforce their rights.109 Accordingly, a copyright NPE must be able to prosecute claims of infringement against even the most sophisticated infringers, and must have sufficient bargaining power to negotiate settlement agreements with large infringers. Ultimately, the copyright NPE must have a revenue stream that enables it to

102. Id.103. Id.104. Id.105. Id.106. Id.107. Risch, supra note 21 108. See discussion supra notes 80–81. 109. Risch, supra note 21, at 74. (“NPE litigation may be

the best way for garage inventors to capitalize on their patents if infringers refuse to license.”).


aggressively assert its rights. Furthermore, patent users also benefit from the

risk management services provided by defensive patent aggregators. With a large pool of patents available for licensing, the NPE has a reliable revenue source, and its clients essentially have insurance against the risk of being sued for infringement. A copyright NPE should adopt this model with some slight modifications. It could aggregate a large pool of copyrights, and use the fees generated by its clients to pursue infringers, rather than to defend against claims of infringement.

NPEs have been successful in patent law, and a copyright NPE should seek to emulate their successes. When looking to patent NPEs for solutions to the problem of high enforcement costs in copyright law, a would-be copyright NPE will find that the benefits of third-party enforcement accrue primarily to individual actors and small entities, and should target its efforts accordingly. Just as there are a variety of NPEs in patent law, the fact that there are also a variety of content creators in copyright law indicates that a similar variety of NPEs should exist here as well.

II. coPYrIght LAw shouLd encourAge the deveLoPment oF nPes

Copyright law will benefit from NPEs in many ways that patent law has benefited from NPEs. Just as patent NPEs provide additional sources of capital to independent inventors and add credibility to any claims of infringement,110 copyright NPEs will also benefit content producers in similar ways. Furthermore, as there are different business models for patent NPEs, so too will there be multiple business models for copyright NPEs.

Depending on its clientele, a copyright NPE may not be able to effectively operate by owning copyrights outright. Where producers such as musicians and dancers operate by both creating and performing their works, such a system would take too much control from them and greatly decrease their ability to profit from their property. Here, the most efficient method of third-party copyright enforcement will be through a copyright insurance system. Under this system, content producers will be able to insure their works against infringement, and insurance providers will be able to pursue infringers in the

110. Id.

court system via the doctrine of subrogation. Content producers will always receive compensation for harm caused by infringers, and insurance providers will, in addition to collecting premiums for their services, be able to use the legal system to pursue infringers.

A. Copyright Insurance is the Best Third-Party Enforcement Mechanism

Patent NPEs benefit society primarily by providing an additional source of capital to independent inventors, and by providing them with enforcement services against larger entities that often infringe with impunity.111 In copyright law, an NPE would provide these same services, although by different mechanisms. By providing insurance for copyright infringement, a copyright NPE would be able to pursue infringers, while insuring that individual copyright owners are compensated for their harm.

1. Copyright Insurance for Content

Creators

A copyright insurance regime is the most effective mechanism for a copyright NPE to operate under because it will provide the NPE a steady income flow while simultaneously giving the owner more effective and affordable enforcement options. This insurance would work like most other insurance plans; a policyholder will pay a premium to insure her property against harm. Like other forms of insurance, the insured will determine the value112 of her property, and insure it for a sum that does not exceed that amount. When the insured object is damaged, the policyholder files a claim with the insurance company, who then compensates her for her loss. In a copyright insurance policy, the content producer will primarily insure against infringement,113 and will accordingly file a claim whenever its work is infringed. It is important to note, though, that under this system, the insured, not the insurer, bears the responsibility of discovering and reporting infringing uses.114

Also, the content producer will always be compensated for the harm caused by the infringement,

111. See id. 112. A simple Google search for “copyright valuation” yields

a list of several firms that specialize in this service. 113. However, the policy could also be extended to cover

theft, abandonment, etc.114. The burden of discovering infringing works is not

significant. A Google search for one’s copyrighted property will often yield many infringing uses. Also, content creators will normally have networks of colleagues and fans that will notify them of unauthorized uses.

28 Spring 2013

up to the amount it has insured against. For example, if the work was insured for ten-thousand dollars, the insurance company will pay up to ten-thousand dollars for any infringement of that work. Accordingly, an infringement of that work worth five-thousand dollars will yield five-thousand dollar payment from the insurer. Conversely, if the infringement caused harm in excess of ten-thousand dollars, the owner would be entitled to pursue the infringer for the remainder of the damage.

Copyright insurance offers security from infringers while leaving the owner’s copyright intact, and completely within her control. While the insurance policy allows the owner to be compensated for her harm without self-help or the legal system, it does not destroy her ability to use these mechanisms to enforce her rights. Although the insurance policy will often be the cheapest and most effective method for the owner to receive compensation, it does not obligate her to forego her other rights.

2. Copyright Insurance for Insurance

Providers

A copyright insurance provider will operate by collecting premiums from its policyholders, paying claims for infringement damages, and then suing infringers. The insurance provider will have standing to sue for infringement because once it compensates a policyholder for its injuries, it will acquire the legal right to sue the offending party through the doctrine of subrogation.115 As a legally sophisticated entity, the insurance provider will be able to use its resources and expertise to add credibility to its enforcement efforts in a way that a private individual could not, and in a way that will deter potential infringers from their illegal activities. Further, by collecting premiums from policyholders, the provider will insure that it has ample resources with which to pursue infringers, and sufficient funds to compensate instances of infringement.

First, when a policyholder’s insured property is infringed, the insurance provider will evaluate

115. In re Hamada, 291 F.3d 645, 649 (9th Cir. 2002) (“In general terms, subrogation is the substitution of one party in place of another with reference to a lawful claim, demand or right. It is a derivative right, acquired by satisfaction of the loss or claim that a third party has against another. Subrogation places the party paying the loss or claim (the “subrogee”) in the shoes of the person who suffered the loss (“the subrogor”). Thus, when the doctrine of subrogation applies, the subrogee succeeds to the legal rights and claims of the subrogor with respect to the loss or claim.”); see also Mutual Servs. Cas. Ins. Co. v. Elizabeth State Bank, 265 F.3d 601, 629 (7th Cir. 2001).

the cost of the infringement, and then compensate the policyholder according to the terms of the policy. However, before a copyright is insured, it will be appraised, just like any other piece of insured property. This will insure that the amount paid by the provider will reflect the actual damage caused by the infringement, including damage to value, actual and potential sales, reputation, and potential licensing deals.

Second, once the insurance provider has fully compensated the policy owner, it will be free to sue the infringer to recover the amount it paid to its insured. Because insurance providers typically have greater bargaining power than individuals, and because the insurance provider, and not the content producer, will bring suit, the infringer will have greater incentive to settle the case. Just as NPEs in patent law provide bargaining power and capital to independent inventors, copyright insurance providers will lend similar credibility to their clients.

Furthermore, not every instance of infringement will result in a lawsuit. Often, online copyright infringement is not worth the cost of a lawsuit,116 and would be dealt with outside of court. However, because an infringer would receive a “cease and desist” letter from an organization rather than an individual, it would have greater incentive to stop its infringing behavior. From the provider’s point of view, a takedown notice, even without a settlement, will be a valuable tool because it will prevent future infringing uses, which will in turn lower the number of future claims it must pay.

Ultimately, the insurance provider, with the very credible threat of litigation it presents to infringers, will be able to control infringement more efficiently than an individual could. Based on the value of the copyright and the amount of damage caused by the infringement, the insurance provider would be able to determine whether to use litigation, negotiation, or a simple takedown request.

B. Copyright Insurance is the Best Solution to Online Infringement, and the Most Effective Model for an NPE in Copyright Law

Copyright insurance will solve the problem of expensive and inaccessible copyright enforcement

116. See, e.g., Danny Bradbury, The Oatmeal beat FunnyJunk, but other cartoonists aren’t so lucky, guArdIAn (June 21, 2012, 1:55 AM), http://www.guardian.co.uk/technology/2012/jun/21/oatmeal-carreon-comics-property (noting that the highest paid online cartoonists make about $108 per day. Additionally, litigation can cost as much as two to three-thousand dollars per day.).


mechanisms by allowing infringement claims to be prosecuted by organizations with the means to do so, and by giving producers an immediate and adequate remedy. It offers an alternative to the status quo, which is more efficient, more equitable, and more consistent with other areas of the law.

1. Copyright Insurance is More Efficient than Traditional Enforcement

First, a copyright insurance program will incentivize the creation of new works by offering producers more ways to realize value from their property. By guaranteeing payment for legitimate injuries, and by allowing sophisticated parties to prosecute claims of copyright infringement on behalf of their clients, copyright insurance will reduce the risk that harm caused by infringement will go uncompensated. This means that producers will realize more value from their creations, and will in turn be motivated to produce more works.

Furthermore, producers will spend less time trying to protect their works, and more time creating new works. Just as NPEs in patent law allow inventors to continue to invent by taking care of the legal issues associated with the patent, so too will copyright insurance give producers more resources with which to create new works. By allowing the producer to receive immediate compensation for her harm while the insurance provider addresses the legal issues involved in the infringement, the producer has more resources with which to create new works.

Second, insurance companies will reduce instances of infringement because they, unlike their clients, have a bargaining position from which they can negotiate settlements. Because most copyright infringements are not worth the cost of a trial,117 and because most individuals cannot afford the cost of litigation,118 private efforts to halt infringement are often fruitless. However, when a sophisticated organization with the ability to pursue litigation attempts to settle an infringement dispute outside of court, the infringer will more likely stop his illegal activity than when a private individual sends the same letter.

Furthermore, because of their greater leverage and bargaining power, insurance providers will be able to stop infringement before litigation or even negotiations become necessary, which will ultimately lower the cost of enforcement. Because action taken by

117. Id. 118. Id.

an insurance provider will more likely stop offending activity, it is less likely that the dispute will grow to a size that will require litigation. Accordingly, every party involved in the dispute, including the court and the taxpayers, will benefit from more efficiently settled conflicts.

Third, copyright insurance will lower transaction costs in copyright enforcement by increasing certainty and stability in enforcement mechanisms. Because content producers will know that they will be compensated for harm caused by infringement, they will work less to protect their property. Rather, the insurance provider, to recover the value of its payments, will seek compensation from the infringer. This is a more efficient system because, as between the insurer and the insured, the insurer is in the best position to, and can most cheaply seek redress for the harm. The insurer, because its business will be enforcing copyrights, will be able to navigate all aspects of the dispute resolution process more efficiently and cheaply than could a private individual.

Finally, insurance providers will be better able to determine which instances of infringement will be worth litigating than private individuals. Just like NPEs in patent law, insurance providers will decide to pursue claims based primarily on the likelihood of success, and will accordingly litigate only meritorious claims.119 In contrast, when individuals file suit, their decisions are often colored by emotion,120 and the perceived inequities of the situation.121 The result is a court system burdened by frivolous claims. However, by preventing meritless and low value claims from being litigated, insurance providers will decrease the burden on the courts, and lower the average cost of litigation across the entire legal landscape.

2. Copyright Insurance is Consistent

with Related Areas of Law, and an Appropriate Remedy for Mass Copyright Infringement

Copyright infringement is an unfortunate reality of the online world. While no one denies that such infringement is illegal, the fact remains that no one has been able to find an effective solution to the problem.122 However, by encouraging the development

119. See Risch, supra note 21, at 74. 120. Kathryn Abrams, Emotions in the Mobilization of Rights,

46 hArv. c.L.-c.L.L. rev. 573 (2011). 121. Russell B. Korobkin & Thomas S. Ulen, Law and

Behavioral Science: Removing the Rationality Assumption from Law and Economics, 88 cAL. L. rev. 1135–36 (2000).

122. Subcomm. Hearing, supra note 22, at 1.

30 Spring 2013

of copyright insurance, the copyright system would more accurately reflect the realities of the online world. Furthermore, by having infringement claims litigated by third parties, copyright practice would be more consistent with tort law practice and with the other subsets of intellectual property law.

First, the copyright system is notorious for its inability to evolve at the same speed as technology, and it must constantly be tweaked to prevent it from becoming entirely obsolete.123 By developing a copyright insurance system, the law would tacitly recognize that many content producers cannot afford to defend their property and that the Internet presents challenges to copyright law that are too big to be confronted by individuals. Just as traditional tort law accepted that many parties who had legitimate grievances could not afford to seek redress through the courts, copyright law must recognize that many copyright owners cannot afford to use the courts to satisfy their claims. By creating a copyright insurance system, many owners would receive compensation they otherwise would not, and the law would be better able to protect content producers’ intellectual property.

Second, copyright insurance would increase the cohesion between copyright law and tort law, while maintaining its conformity to the other subsets of intellectual property law. By allowing insurance providers to prosecute infringement for their clients, injured parties will not have to rely on their own, often limited, resources to get compensation for their injuries. Accordingly, copyright law, just like tort law, will recognize that because insurance companies depend on litigation for a large part of their business, and because it is more difficult for individuals to be productive when they are involved in litigation, it is more efficient for insurance companies, rather than individuals, to litigate claims.

Also, copyright insurance will require copyright owners to maintain and defend their property to some extent. Because copyright owners will have to file a claim to be compensated for infringement, they will have to remain diligent in locating unauthorized uses of their property. In patent124 and trademark125 law—and even in traditional property law126—owners are also required to maintain their ownership interest in

123. Id. 124. The USPTO has a graduated fee structure for maintaining

patents. See http://www.uspto.gov/web/offices/ac/qs/ope/fee031913.htm (last visited Apr. 21, 2013).

125. See, e.g., The Murphy Door Bed Co., Inc. v. Interior Sleep Sys., Inc., 874 F.2d 95, 101–02 (2d Cir. 1989).

126. See, e.g., O’Keefe v. Snyder, 416 A.2d 862, 869 (N.J. 1980).

their property. This is because the law seeks to reward productivity and industry, and to hold otherwise would result in waste, as owners would receive the benefit of legal protection with no duty in return. In a copyright insurance system, this requirement will prevent unused and unwanted intellectual property from being enforced for illegitimate gain, as logic dictates that few resources will be used to defend something of little value.

3. Copyright Insurance is More Equitable than the Current Enforcement Mechanisms

Copyright insurance will allow content producers to receive compensation for any instance of infringement, and will also preserve their ability to determine when and how they will enforce their rights. Under the current system, copyright owners are rarely able to obtain a remedy for their injuries, or even to enforce their rights at all.127 However, because copyright insurance will always compensate an owner for his injury, more owners will recover for their harms, and, necessarily, more infringers will pay for the harm they cause. The result is a more equitable copyright system where more injuries are compensated, and more defendants are held accountable for their actions.

Furthermore, by requiring a copyright owner to file a claim in order to receive compensation, the owner retains complete control over which infringements will be prosecuted. Because a copyright owner may not want to sue every infringer, such as people with disabilities, charitable organizations, or educational institutions, this requirement provides indirect protection to such parties, and allows the owner greater control of how others use his work. In the Righthaven saga, for example, the media organizations that sold their rights suffered damage to their reputations when Righthaven’s aggressive tactics drew the attention of bloggers and news organizations.128 Here, though, a copyright owner could avoid such negative associations by allowing certain instances of infringement, or by seeking to resolve them privately before filing a claim with the insurance provider. Regardless of the owner’s preferred enforcement mechanism, though, the end result is a dispute resolution system wherein content

127. Promoting Investment and Protecting Commerce Online: Legitimate Sites v. Parasites (Part I & II): Hearing Before the Subcomm. on Intell. Prop., Competition, and the Internet H. Comm. on the Judiciary, 112th Cong. 19 (Mar. 14, 2011) (statement of Maria A. Pallante, Register of Copyrights).

128. When Righthaven was still filing lawsuits, the Las Vegas Sun, and blogs such as TechDirt and Ars Technica, provided regular coverage and commentary on the proceedings.


producers have more control in how their rights are enforced, and where they are more likely to receive compensation for their harm.

C. How Will Copyright Insurance Work?

Just as the theoretical underpinnings of and justifications for copyright insurance are fairly straightforward, so to is its application to real world situations. In the introductory section of this Note involving the Matthew Inman and FunnyJunk, copyright insurance would have solved the problem quickly, effectively, and fairly, and it would have conferred a benefit on each party involved. Mr. Inman would have received compensation for his injury, FunnyJunk would have saved the expense of an attorney, its attorney would have avoided personal humiliation and unwanted attention, the insurance company would have received premiums from Mr. Inman, and taxpayers would have been spared the expense of federal litigation.

1. Copyright Insurance and The Oatmeal

When Mr. Inman first noticed that his works were being infringed, he used self-help in the form of a DMCA takedown notice to protect his property. With a simple copyright insurance policy, though, the dispute would have ended almost before it began. Mr. Inman could have filed a claim for copyright infringement rather than attempt to resolve the problem on his own. He would have been compensated for the damage caused by the unauthorized posting, and the insurance company would have approached FunnyJunk about its infringing activity. Faced with a demand from the insurance company, FunnyJunk would have been more diligent in its efforts to remove the infringing material, as continued violations would have almost certainly lead to litigation and a settlement demand. Furthermore, because the owners of other material on FunnyJunk’s website would likely have copyright insurance, FunnyJunk would have more incentive to thoroughly police its site, as each instance of infringement would be more likely pursued by an insurance provider.

Because the potential of a lawsuit by an insurance company would have made FunnyJunk police its site more diligently, Mr. Inman would not have felt the need to use public opinion in his fight to stop the unauthorized use of his work. Accordingly, all of the charges leveled against Mr. Inman would have never been filed, and neither party would have born the

expense of attorney’s fees and court costs. Under the copyright insurance system, then, infringement disputes would be more likely to be resolved in their early stages, and the chances of such dramatic escalation would be greatly reduced.

2. The Business Model for Copyright Insurance

Copyright insurance will benefit content producers, and will allow insurance companies to profit while doing so. In addition to receiving premiums, insurance companies will, through subrogation, acquire the right to sue for infringement on behalf of their policyholders. With two options for making a profit, both the insured and insurer will be in a better position than they would have been without the insurance policy.

First, insurance companies will charge a premium that guarantees them a profit. Policyholders will be able to buy as much or as little insurance as they need or want, which will affect the amount of the premium. The insurance company will use the amount for which the copyright is insured in conjunction with the likelihood of infringement to calculate the premium. The resulting payment will allow the insurance company to compensate the policyholder for each instance of infringement while still being able to make a profit.

Once the insurance company pays the policyholder for its injury, it will acquire the legal right to seek compensation from the offending party.129 Although this will not always result in litigation, if the infringement causes significant harm, the insurance company will be able to fully litigate the claim to receive the compensation it is entitled to. Because copyright law will be a primary part of its business, it will be able to conduct the litigation more cheaply and more effectively than most. Accordingly, the insurance company will be in a better position to settle claims, and will often be able to acquire adequate compensation without fully trying the case. Furthermore, even if the case is fully litigated, the insurance company will have a variety of remedies to choose from,130 including the option to recover attorneys’ fees,131 which means it will have a better chance of recovering its losses through the court.

129. See discussion supra note 115. 130. 17 U.S.C. §§ 502–505 (2006) (providing the remedies

for copyright infringement include injunctions, attorney’s fees and injunction, costs, and damages as well as and profits).

131. Id. § 505.

32 Spring 2013

Copyright insurance is pragmatic both in theory and in its application. It provides content producers with an effective tool to fight copyright infringement, as well as a method through which to receive adequate compensation. Copyright insurance also enables insurance companies to provide remedies to injured creators while still generating profits. Furthermore, its accompanying economic incentives will encourage insurance companies to avail themselves of the court system only to pursue the worst offenders. The result will be a simple system that efficiently and comprehensively solves the problem of online copyright infringement.

III. crItIcIsms oF coPYrIght InsurAnce

Copyright insurance provides an effective, efficient, and affordable solution to mass copyright infringement. Granted, critics of this concept argue that the fair use doctrine will make copyright insurance ineffective, that insurance providers will coerce settlement agreements, and that the owners will profit at the content providers’ expense. Each criticism addresses a legitimate area of concern. Still, while copyright insurance may have various negative consequences, the probability that they will occur is remote. Even so, the benefit that will accrue to society under this program outweighs the criticisms presented.

A. The Fair Use Doctrine Will Not Render Copyright Insurance Ineffective

An argument that opponents could make is that the fair use doctrine renders it too difficult for insurance companies to predict copyright infringement and insure the content providers yet remain profitable organizations. The fair use doctrine is an affirmative defense against a claim of copyright infringement.132 For example, if charged with copyright infringement, a defendant may claim that, although he did use the work, his use was a “fair use” and, therefore, not an infringement. Doing so would constitute an absolute defense against copyright infringement claims.133 One could argue that this, in turn, could render the program unprofitable and thus ineffective.

Although this argument demonstrates a valid flaw within the copyright insurance system, it is unlikely that this deficiency presents a significant

132. See Barton Beebe, An Empirical Study of U.S. Copyright Fair Use Option, 1978-2005, 156 U. Pa. L. Rev. 549, 549 (2008); see also 17 U.S.C. § 107 (2006).

133. See 17 U.S.C. § 107.

handicap to the program. Firstly, disputes between providers and policyholders over whether an infringing use is a fair use will be rare. Secondly, fair use will not make copyright insurance unpredictable to the point of unprofitability. Thirdly, while fair use is considered a broad and vague area of copyright law, courts have already consistently applied this doctrine, enabling insurance companies to make informed decisions as to fair use. Lastly, the perceived vagueness of fair use does not display enough risk factors to discourage insurance providers from entering the copy right insurance business.

To begin with, insurance providers are generally required by law to provide an explanation of the denial of a claim.134 A disgruntled policyholder would be able to provide outside counsel with the provider’s opinion of why the use was fair. If the policyholder’s attorney agreed with the assessment of the fair use claim, the dispute would most likely be dropped. Alternatively, if the provider’s explanation were deemed unacceptable, the policyholder would still have a right to pursue the infringer independent of the insurer, and, depending on the jurisdiction, may have the option to seek tort,135 contract,136 or statutory137 remedies against the provider for denying the claim in bad faith. The provider’s potential liability is an incentive for it to handle claims fairly. The policyholder’s ability to sue after his claim is denied also prevents insurance providers from exercising too much power over copyright litigation, and demonstrates that the copyright insurance program is feasible.

Additionally, insurance providers regularly insure businesses against claims of copyright infringement as part of standard commercial general liability policy.138 Accordingly, there exists a

134. See, e.g., 215 ILL. comP. stAt. § 5/154.6(n). (“Any of the following acts by a company . . . constitutes an improper claims practice . . . . Failing in the case of the denial of a claim or the offer of a compromise settlement to promptly provide a reasonable and accurate explanation of the basis in the insurance policy or applicable law for such denial or compromise settlement.”).

135. See, e.g., Sanderson v. Allstate Ins. Co., 738 F. Supp. 432, 435 (D. Colo. 1990) (citing Williams v. Farmers Insurance Group, Inc., 781 P.2d 156 (Colo. App. 1989)); see also id. (holding that the state’s insurance law did not preclude a common law action for bad faith claim denial).

136. See, e.g., Chamberlaine & Flowers, Inc. v. Smith Contracting, Inc., 341 S.E.2d 414, 417 (W. Va. 1986) (holding that failure to pay an insurance claim is nonfeasance, rather than misfeasance, and therefore a contractual claim).

137. See, e.g., mo. rev. stAt. § 375.420 (2012); 40 PA. cons. stAt. § 1171.5(10) (2012).

138. The standard form commercial general liability policy, as provided by the Insurance Services Office, extends coverage for advertising injuries, which it defines as an “injury arising out of an offense committed during the policy period occurring in the course


significant body of relevant history and applicable case law.139 Using this data insurance companies could determine the likelihood of a given work being infringed, and furthermore the likelihood of that use being a fair use. Incidentally, Professor Barton Beebe published an empirical study of fair use litigation in which he detailed the win rates of fair use defendants.140 Insurance providers, as statistic-generating machines, should be capable of distilling the same elements Professor Beebe studied and reformulating them to fit their needs. This would allow the companies to profitably predict fair use and reinforce the effectiveness of the copyright insurance program.

Furthermore, despite the perception that the fair use doctrine is part of a broad and vague area of copyright law,141 courts have already applied this doctrine with consistency.142 The doctrine is uniformly applied to an extent that most judges discuss it formulaically and rather mechanically.143 Accordingly, insurance providers could incorporate this data into their models that determine where to set their premiums. Because they could make case-by-case judgments of whether a use is fair, this insurance program will work.

Finally, insurance providers would not be dissuaded from entering a copyright insurance market as they regularly insure products whose level of risk is difficult to predict on a case-by-case basis.144 For example, individuals regularly insure their cars against accidents, and their homes against floods, fires, and tornados. At an individual level, the contingency insured against is extremely difficult to predict. In contrast, by pooling145 clients and evaluating the risk in a large sample of individuals, the insurance provider is able to predict the average rate of risk. In copyright

of the named insured’s advertising activities, if the injury arises out of libel, slander, defamation, violation of right of privacy, piracy, unfair competition or infringement of copyright, title or slogan.”

139. See, e.g., Euroconcepts, Inc. v. Hartford Cas. Ins. Co., 378 F. App’x 716 (9th Cir. 2011); Delta Computer Corp. v. Frank, 196 F.3d 589 (5th Cir. 1999).

140. Beebe, supra note 132.141. See R. Polk Wagner, The Perfect Storm: Intellectual

Property and Public Values, 74 FordhAm L. rev. 423, 431 (2005). 142. Beebe, supra note 132, at 584 (noting that the outcomes

of the first and fourth elements of the fair use test correspond with the outcome of the case 81.5% and 83.8% of the time, respectively).

143. Id. at 561. 144. stAtIstIcs, nAIc, http://www.naic.org/cipr_statistics.htm

(last visited Feb. 23, 2013). 145. Pooling refers to the practice of assessing the risk within

a large group of products. By determining the rate at which the contingency will occur within the group, the insurance provider is able set its premiums at a level that will guarantee profitability.

insurance, this translates to insurance providers establishing a rate at which its clients will win or lose fair use arguments, and to the notion that an insurance program is feasible.

Because there is data to show the probability of a successful fair use defense,146 insurance providers could calculate the amount of risk inherent in copyright insurance and will be able to plan accordingly.

B. Copyright Insurance Providers Will Not Bully Fair Users Into Settlement Agreements

Another criticism of copyright insurance is that insurance providers will adopt the trollish tactics of Righthaven by bullying ill-equipped parties into costly settlement agreements. Because the law does not prevent copyright owners from using aggressive tactics to protect their works, opponents of copyright insurance will argue that insurance providers will use their size and sophistication to unfairly negotiate settlement payments. The insurance providers, in contrast to Righthaven, would have legal standing to sue,147 and as a result the threat of a lawsuit would be much more potent.

First, copyright insurers are not likely to seek improper settlement agreements from legitimate users because they will only be able to pursue the claims that they have honored. As the insurance company will have to pay its policyholder before it can acquire the right to sue,148 it will be incentivized to only pursue cases from which it can profit. Accordingly, an insurance provider will not pursue infringers unless those infringers will be able to pay an amount that is greater than the cost of both the claim and the resources spent on the settlement or litigation efforts.

The reason Righthaven pursued so many questionable claims is that it usually only had to pay the cost of demanding and negotiating the settlement.149 If a defendant with a meritorious defense did not acquiesce, Righthaven could always dismiss the case and cut its losses.150 Because it did not have to invest

146. Beebe, supra note 132. 147. See discussion supra note 115. 148. Id. 149. In many cases, Righthaven simply had to pay the sixty-

five dollar fee to register its copyright in the infringed work, send a standard cease-and-desist letter to the infringer, and then negotiate a settlement. See Steve Green, Attorneys Accuse Righthaven of Settlement Shakedown, LAs vegAs sun (Oct. 8, 2010, 1:50 AM), http://www.lasvegassun.com/news/ 2010/oct/08/attorneys-accuse-righthaven-settlement-shakedown.

150. Fed. r. cIv. P. 41(a)(1) (allowing a plaintiff to voluntarily dismiss an action). Righthaven did this twenty-nine

34 Spring 2013

significant resources into pursuing an infringer, like an insurance provider will have to do via payment of the claim, Righthaven was able to shake down potential infringers with little regard for the consequences of its acts.151 If it had been required to compensate its clients before it could pursue infringers, it is likely that Righthaven would have only sued users that caused legitimate harm.

Second, copyright insurance providers will not adopt trollish tactics because they will want to maintain a good reputation with their clients and potential customers. As business entities, insurance providers will compete with each other for market share.152 In addition to providing quality services, they will also have to gain and keep the trust of their customers. Judging by the almost universal hatred with which the judiciary and the general public view Righthaven,153 few insurance providers, if any, will be willing to embark on a similar path.

Third, as between the content producer and the content infringer, it is better for society that the law favors the producer. The content producer invests her time, money, and creative energy into bringing new works into existence. Conversely, the infringer merely redistributes the work of others for his own personal gain. While high litigation costs deter the producer from protecting her intellectual property, they should be used instead to deter infringers from stealing others’ creative output.

C. Copyright Insurance Will Not Unfairly

Benefit Insurance Providers and Content Producers at the Expense of Fair Users and Free Speech

Finally, opponents of copyright insurance argue

times during its filing stint. Most of the voluntary dismissals occurred in the last months of 2011. For the complete list, see Comprehensive List of Copyright Infringement Lawsuits Filed By Righthaven, LLC, rIghthAven LAwsuIts, http://righthavenlawsuits.com/ lawsuits.html (last visited Apr. 21, 2013).

151. For example, Righthaven unknowingly sued an autistic blogger on a fixed income in early 2011. See Righthaven, LLC v. Hill, No. 1:11-CV-00211 (D. Colo. Sept. 9, 2011).

152. Auto Insurance, Ins. InFo. Inst., http://www.iii.org/facts_statistics/auto-insurance.html (last visited Feb. 23, 2013) (showing that in 2011, the market share controlled by the top ten private automobile insurers were, with one exception, within two percentage points of each other. This indicates healthy competition in the industry).

153. See, e.g., Righthaven LLC v. Democratic Underground LLC, 791 F. Supp. 2d. 968, 979 (D. Nev. 2011) (ordering Righthaven to show cause as to why it should be sanctioned for “flagrant misrepresentation” to the court). A simple Google search for “Righthaven” yields a plethora of sites devoted criticizing the organization.

that it will improperly benefit insurance providers and content producers at the expense of infringing fair users and free speech in general. Because copyright insurance would give producers more effective ways to prevent their works from being infringed,154 it would necessarily increase a copier’s liability for infringement, and accordingly produce a “chilling effect” on the exchange of ideas and information. As copyright exists to increase creative expression, such a system would run contrary to the fundamental values of copyright law, and of American jurisprudence in general.

While this objection raises a legitimate concern as to the effect of copyright insurance on society as a whole, it is unlikely to cause significant problems, and, even if it does, the benefits of the program far outweigh its costs.

First, it is doubtful that copyright insurance will have a significant chilling effect on the free exchange of information. In fact, the law specifically exempts pure information from copyright protection.155 Rather, only certain forms of expression may be copyrighted.156 For example, a newspaper article is protected under copyright law, but the underlying story cannot be copyrighted.157 Therefore, an insurance provider will only obtain the enforcement rights to a particular expression, not to the underlying content. These rights cannot be used to stifle the legitimate flow of ideas, only the illegitimate copying of protected expression.

Second, copyright law incentivizes creativity by granting producers a limited monopoly over their works,158 and not by encouraging copiers to infringe with impunity. Because copiers do not provide society with anything new, the law does not protect their activity, and further considers it as offense to content producers.159 Accordingly, although copyright insurance will undeniably decrease the amount of free information available to the public,160 it will only do so

154. See discussion supra Part III.B.1. 155. 17 U.S.C. § 102(b) (2012) (“In no case does copyright

protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.”) (emphasis added).

156. Id. § 102(a). 157. Int’l News Serv. v. Associated Press, 248 U.S. 215, 234

(1918) (“In considering the general question of property in news matter, it is necessary to recognize its dual character, distinguishing between the substance of the information and the particular form or collocation of words in which the writer has communicated it.”).

158. 17 U.S.C. § 106.159. See id. § 501. 160. See supra pp. 5–8.


with the protected works that would not have been free but for their infringement.

Third, even if legitimate users of copyrighted materials are harmed by copyright insurance, the increased incentive to create new works provided by insurance will yield a net benefit to society. Currently, because enforcing copyrights is so expensive,161 unauthorized copiers operate at an advantage over producers. They can infringe with impunity up to a certain point, knowing that their actions must cause a certain amount of harm before they will incite the owner to action. However, by making copyrights easier to enforce, copyright insurance will give producers better footing in their fight against infringers, and essentially lower the threshold at which infringers operate. Ultimately, because producers provide new works and ideas, and infringers merely freeload off of the producers, society will benefit if the producer is given more rights.

concLusIon

Mass online copyright infringement remains a serious problem in the American economy. While copyright owners have struggled to find effective enforcement mechanisms, their neighbors in patent law have found a mechanism by which they can efficiently protect their rights. In patent law, third-party enforcement via non-practicing entities has been an incredibly successful method for pulling value from patents, fighting infringement, and providing additional sources of capital for individual inventors. Accordingly, to acquire similar benefits, copyright law should annex the basic principle of third-party enforcement and transform it into copyright insurance.

By developing a robust copyright insurance system, copyright owners would benefit from increased compensation for infringement, more value in their works, and the services of a sophisticated and professional organization for litigation. Professional copyright enforcement would discourage would-be infringers from their illegitimate activity, and thereby increase the profitability of content producers. Furthermore, copyright insurance is well suited to existing law, will have a minimum impact on legitimately fair uses of protected works, and will encourage, rather than stifle, the creation of new ideas. Overall, copyright insurance is the most equitable solution to the problem of mass online copyright infringement.

161. Am. InteLL. ProP. LAw Ass’n, supra note 37.

36 Spring 2013

Show Me The Money: Movie Quotes as Intellectual Property

by Rebecca Shaw

ABstrAct

Movie quotes are valuable. They make movie studios money and enrich our cultural lexicon through our everyday quoting of movie lines. These movie quotes have value, but are they protectable? And if so, which legal regime would extend protection to movie quotes? After reviewing the relevant legal landscape, this article determines that these valuable phrases could be protected under copyright and trademark law by the courts in infringement actions. But how far should this protection stretch? Extending protection to movie quotes presents the unsettling possibility of overprotection, which can lead to the restriction of free expression and the shrinking of our cultural commons. In light of these concerns, this article argues that movie quotes warrant a very limited scope of protection—something akin to moral rights. It is only through a narrow scheme of protection that the public’s right of free expression and our cultural commons can avoid peril.

IntroductIon

How much would you pay for a word? A phrase? A sentence? Phrases are worth millions of dollars. Just ask Michael Buffer, the proud owner of the trademark “Let’s get ready to rumble.”1 In three years, the trademark raked in $150 million through licensing and infringement litigation.2 The value of phrases and words is also evident in the movie industry, as words and phrases compose the scripts that are the essence of movies. And why not? The movie industry stands as one of the leading revenue generators in the United States.3 Production companies will pay for their

1. LET’S GET READY TO RUMBLE, Registration No. 2,405,492.

2. Andrew Chang, Squeezing Millions from a Phrase: How a Few Words, in the Right Hands, Can Mean a Fortune, ABcnews.com, Apr. 11, 2002, http://abcnews.go.com/International/story?id=80018.

3. In 2002, the United States combined projected revenue for motion pictures, television, and video was $17 billion. stePhen e. sIwek, coPYrIght IndustrIes In the u.s. economY: the 2004 rePort v, 9 (2004) (noting that the report was prepared for the International Intellectual Property Association). “There were $13.8 billion in film and television exports in 2009, up 3% over

words. In 2007, the script for The Lovely Bones sold for $70 million.4 Production companies use titles—words and short phrases—to market their movies, and they spend a good deal of money on them too. In the 1990s, Disney paid $600 thousand for the rights to the movie title “Ransom.”5

These figures illustrate the immense value inherent to these words. What if movie production companies took after Mr. Buffer and proactively tried to capitalize on the value of their movie quotes outside of merchandising,6 pursuing other legal avenues for revenue generation and value exploitation? Mr. Buffer lamented the fact that no one capitalized on the famous quote “Show me the money!” from Jerry Maguire.7 The time may come when a production company sets up a strategy to mine the dormant gold from its characters’ words. Our intellectual property laws do not, and should not, support rights holders overreaching and taking these quotes from the mouths of those who have a right to use them.

This article analyzes whether movie quotes are protectable under two intellectual property regimes—copyright and trademark law—and the rights of publicity, as the potential protection of movie quotes depends on how and why the words are used.8 Even

2008, and up 37% over 2005.” motIon PIcture AssocIAtIon oF AmerIcA, the economIc contrIButIon oF the motIon PIcture & teLevIsIon IndustrY to the unIted stAtes (2010). Further, the motion picture “industry had a positive services trade surplus of $11.9 billion in 2009, or 8% of the total U.S. private-sector trade surplus in services.” Id. Additionally, “the motion picture and television services surplus was larger than the surpluses of the telecommunications, management and consulting, legal, medical, computer, and insurance services sectors.” Id. In 2002, the revenue generated through box office sales was $9.1 billion. MOTION PICTURE ASSOCIATION OF AMERICA, THEATRICAL MARKET STATISTICS (2011).

4. Patrick Goldstein, Cost of Movie Scripts Adds up to a Lot More Than Just Dollars, chI. trIB., June 10, 2007, at Arts & Entertainment 15, available at http://articles.chicagotribune.com/2007-06-10/news/0706080609_1_scripts-lovely-bones-dreamworks.

5. Patrick Goldstein, Hey, Let’s Play the Movie Title Game!, Los AngeLes tImes, Aug. 20, 1997, at F1, available at http://articles.latimes.com/1997/aug/20/entertainment/ca-24037.

6. “Merchandising is a multi-billion dollar enterprise.” JoAnnA r. JeremIAh, merchAndIsIng InteLLectuAL ProPertY rIghts § 1.1, at 1 (1997).

7. Chang, supra note 2.8. See Richard W. Stim, E.T. Phone Home: The Protection


if movie quotes are protectable, significant policy arguments strongly oppose making movie quotes the property of one rights holder. In Part I, a review of the relevant legal landscape, this article determines whether movie quotes are protectable under any of the three legal regimes. Protection of movie quotes boils down to what is known as the “if value, then right” theory. If something is valuable, one should have the right to exploit it and, more importantly, the corollary right to receive revenues from that exploitation. Because value exists in these movie quotes, which are arguably independent property rights, someone should have a right to exploit them. This article first reviews the current state of copyright law because movie quotes are pieces of larger copyrightable works—scripts and motion pictures. Consequently, movie quotes might find some level of protection as literary works under this regime. This article determines that courts will protect movie quotes under copyright law, although these quotes are not copyrightable.9 In doing so, this article identifies the danger of courts allowing copyright holders to use a single movie quote—without anything more—to defeat a claim of fair use in an infringement action. Consequently, current copyright law could allow an uncopyrightable quote from a copyrighted movie script to prevent any use of the script, thus making the movie quote a powerful and silencing rights-protection tool. This article addresses this chilling proposition in depth. This article proceeds by considering the protection of movie quotes under the law of trademarks, as movie quotes are embedded in our culture and are strongly associated with particular movies. This article reviews the objectives of the Lanham Act and the basic legal framework for the protection of a mark. This article then applies these propositions to movie quotes, concluding that they cannot be used as trademarks in connection with a movie.

Finally, this article considers the potential value of rights of publicity, which have been extended to catchphrases. By analyzing the right of publicity not of an actor, a producer, or even a fictional character, but of a movie itself, current law suggests that movie

of Literary Phrases, 7 u. mIAmI ent. & sPorts L. rev. 65, 67–68 (1989).

9. This article delves into this distinction in the discussion below, but offers a brief summary here. Generally, a movie quote is not sufficiently original to stand on its own as a copyrightable work. However, a movie quote can receive protection in an infringement action while still not being independently copyrightable, as a movie script would be.

quotes cannot be protected under rights of publicity.After surveying the intellectual property

landscape to determine if movie quotes are protectable intellectual property, this article presents several policy arguments in support of little to no protection of movie quotes under any legal regime. First, movie quotes are part of the cultural commons. By incorporating these quotes into our cultural lexicon, the public adds value to movie quotes, granting the public the right to use them freely. Second, the overextension of intellectual property rights to movie quotes intrudes on First Amendment rights. Finally, courts risk allowing trademark law to substitute for copyright protection by extending trademark protection to movie quotes. In essence, aggressively protecting movie quotes would stifle our cultural commons and restrict free speech.

I. “there’s goLd In them thAr hILLs”10 — IF vALue, then rIght

The logic is simple: if something is valuable, then you should have the right to exploit that value by excluding others from using it.11 The right/value theory, the premise that “if value, then right,” has been primarily used in connection with establishing new property rights in intangible assets.12 However, this concept was controversial when first introduced13 and continues to be criticized by scholars.14 Nevertheless, courts use the right/value theory in common law to determine and enforce rights15 and could continue this

10. destrY rIdes AgAIn (Universal Pictures 1939).11. Lawrence Lessig nicely summarizes the theory through the

lens of piracy when he writes:Creative work has value; whenever I use, or take, or build

upon the creative work of others, I am taking from them something of value. Whenever I take something of value from someone else, I should have their permission. The taking of something of value from someone else without permission is wrong. It is a form of piracy.

LAwrence LessIg, Free cuLture 18 (Penguin eds., 1st ed. 2005).

12. Int’l News Serv. v. Associated Press, 248 U.S. 215, 239–40 (1918) (finding value in “hot news” because the news was made valuable “as the result of organization and the expenditure of labor, skill, and money”); see also Haelan Labs., Inc. v. Topps Chewing Gum, Inc., 202 F.2d 866, 868 (2d Cir. 1953) (“Whether [something] be labelled [sic] a ‘property’ right is immaterial; for here, as often elsewhere, the tag ‘property’ simply symbolizes the fact that courts enforce a claim which has pecuniary worth.”).

13. See Int’l News Serv., 248 U.S. at 246 (Holmes, J., dissenting) (“Property, a creation of law, does not arise from value, although exchangeable-a matter of fact.”).

14. See Rochelle Cooper Dreyfuss, Expressive Genericity: Trademarks as Language in the Pepsi Generation, 65 notre dAme L. rev. 397, 407 (1990) (“The fallacies in the right/value theory can be revealed in a number of ways.”).

15. See San Francisco Arts & Athletics, Inc. v. U.S. Olympic

38 Spring 2013

reliance to expand intellectual property rights.16

Movie quotes have strong value. In many instances, they can “sell” a movie through trailers or advertising, or entice people to see the movie repeatedly. What is The Wizard of Oz without “[t]here’s no place like home?” Movie quotes imbue the movie with all of its memorable “moments”:17 “You had me at hello;”18 “This is the beginning of a beautiful friendship;”19 and “I think we’re going to need a bigger boat.”20 Each quote is “kind of a verbal shorthand for the film.”21

Production companies invest time and money in movie quotes when they pour money into bidding on and developing a script before a film is even made. Actors deliver them with the perfect inflection, gesture, and nuance so that viewers repeat them, sometimes incessantly, when they leave the theater.22 Thus, the value of movie quotes derives from both the movie itself and the cultural value that it acquires when viewers fold it into their daily lives and, thus, into our culture.23 Regardless of the source of a movie quote’s value, either from the public or the movie itself, under the value/right theory production companies argue that they should have a right to exploit the enormous value their movie quote represents. The question is, how far will production companies go to enforce and expand their rights in court?

Comm., 483 U.S. 522, 532 (1987) (explaining that in the context of trademarks, “when a word acquires value ‘as the result of organization and the expenditure of labor, skill, and money’ by an entity, that entity constitutionally may obtain a limited property right in the word.”) (quoting Int’l News Serv., 248 U.S. at 239).

16. See Dreyfuss, supra note 14, at 405 (finding that courts are likely to use the value/right theory to expand the reach of trademark owners’ rights).

17. Piet Levy, Yeah, Baby! You Heard It Here First: Quotes Speak for Themselves, but Had Help Learning to Talk, mILwAukee J. sentIneL, June 21, 2005, at E Cue. These particular quotes are why the American Film Institute aired a three-hour special on the 100 greatest American movie quotes. One of the criteria for judging was “cultural impact,” in which jurors took into account whether viewers use the quotes in their own lives, whether the quote had circulated through popular culture, and whether the quote had become part of the American lexicon. American Film Institute, AFI 100 Years . . . 100 Movie Quotes, http://www.afi.com/100years/quotes.aspx (last visited Nov. 15, 2011).

18. JerrY mAguIre (TriStar Pictures 1996).19. cAsABLAncA (Warner Bros. Pictures 1942).20. JAws (Zanuck/Brown Productions 1975).21. Levy, supra note 17 (quoting Michael T. Marsden, co-

editor of the Journal of Popular Film and Television).22. Donna Isabell Walker, “Yeah, Baby!,” greenvILLe news,

Jan. 30, 2005, at D.1 (“Those lines and phrases can . . . worm their way into your vocabulary.”).

23. See Levy, supra note 17 (showing that movie quotes have become part of popular culture); Walker, supra note 22 (writing that memorable quotes become part of our cultural lexicon).

A. “But you didn’t get his permission, and that’s copyright infringement”24 — Copyright

The most logical place to begin the analysis of potential protection of movie quotes is copyright, as this area of the law has directly addressed the protection of short phrases and words. Copyright protection extends to creative works generally, such as movie scripts, novels, and song lyrics. Copyright is a constitutionally based form of intellectual property protection that covers literary, dramatic, artistic, and certain other intellectual works.25 Screenplays qualify as copyrightable dramatic works, and movie quotes comprise parts of the screenplay. If copyright protects the screenplay then, so the logic goes, why cannot copyright extend to a movie quote independent of the larger work? For example, copyright would protect the script to Gone With the Wind and “Frankly, my dear, I don’t give a damn.” With this in mind, this article first reviews the pertinent copyright law landscape and then applies these principles to determine if movie quotes could, indeed, stand alone as protectable intellectual property.

1. General Principles of Copyright Law

Copyright law promotes the progress of the arts and dissemination of knowledge by giving authors a limited monopoly in the exclusive rights to their works.26 To be entitled to copyright protection, a work must be original and “fixed in a tangible medium of expression.”27 Originality, in the context of copyright law, is not novelty, but rather independent creation.28 To satisfy the originality requirement of copyright, a work must possess at least some minimal level of creativity.29 In Feist Publications v. Rural Telephone

24. the PeoPLe vs. LArrY FLYnt (Columbia Pictures 1996).25. u.s. const., art. 1, § 8, cl. 8. See generally 1 meLvILLe

B. nImmer & dAvId nImmer, nImmer on coPYrIght § 1.08 (4th ed. 1994 & Supp. 2010) (reviewing the scope of works protected under the Constitution); Tom Bragelman, Copyright Law in and Under the Constitution: The Constitutional Scope and Limits to Copyright Law in the United States in Comparison With the Scope and Limits Imposed by Constitutional and European Law on Copyright Law in Germany, 27 cArdozo Arts & ent L.J. 99, 104–09 (2009) (reviewing the scope of “writings” under the art. 1, § 8, cl. 8 of the Constitution).

26. u.s. const., art. 1, § 8, cl. 8. This limited monopoly lasts for the author’s life plus 70 years. 17 U.S.C. § 302(a) (2006).

27. 17 U.S.C. § 102(a).28. Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340,

345 (1991).29. Id.


Service Co.,30 the Supreme Court explained, “the requisite level of creativity is extremely low; even a slight amount will suffice.”31 For instance, writing a short note on a cocktail napkin to remind yourself to take the trash out and pick up the kids would satisfy the originality requirement.32

Despite the low bar for originality, copyright does not extend to any “idea, procedure, process, system, method of operation, concept, principle, or discovery.”33 Copyright only covers the expression of these uncopyrightable elements.34 This is known as the “idea/expression” dichotomy.35 It represents the proposition that facts and ideas are available for all to use, whereas an individual’s expression of these ideas and facts is copyrightable.36 For instance, you cannot copyright the idea of two young lovers whose families are feuding. However, you can copyright the entire screenplay that originally expresses and plays out this very idea.37

Related to the idea/expression dichotomy is the concept of merger, where the expression is so inextricably merged with an idea that that there are a limited number of ways in which to express the idea.38 This is known as the “merger doctrine.” For instance, there are only so many ways to describe grocery products on an online grocery shopping system, and accordingly, such descriptions are uncopyrightable.39 There are also only so many ways to write certain movie quotes to express a crazy man’s threat, such as “You talkin’ to me?”,40 or a woman’s desire for a little breathing room, such as “I want to be alone.”41

Along with being original, a work must be

30. Id.31. Id. (presenting what is hereafter referred to as the “Feist

rule”).32. See id.33. 17 U.S.C. § 102(b).34. Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S.

539, 557 (1989); Baker v. Selden, 101 U.S. 99, 103 (1879).35. Feist Publ’ns v. Rural Tel. Serv. Co., 499 U.S. 340, 350

(1991); see Baker, 101 U.S at 103.36. Feist, 499 U.S. at 350; Baker, 101 U.S. at 103.37. For example, how many versions of Romeo and Juliet

have you seen?38. Morrissey v. Procter & Gamble Co., 379 F.2d 675, 678

(1st Cir. 1967) (“When the uncopyrightable subject matter is very narrow, so that ‘the topic necessarily requires,’ if not only one form of expression, at best only a limited number, to permit copyrighting would mean that a party . . . by copyrighting a mere handful of forms, could exhaust all possibilities of future use” [of the expression.]) (internal citations omitted).

39. See MyWebGrocer, LLC v. Hometown Info, Inc., 375 F.3d 190, 194 (2d Cir. 2004).

40. tAxI drIver (Columbia Pictures 1976).41. grAnd hoteL (Metro-Godlwyn-Mayer 1932).

“fixed” in a “tangible medium of expression.”42 The fixation requirement is flexible. A movie script, and of course movie quotes, can be fixed on a movie reel, a DVD, a computer chip, a hard drive, and old-fashioned paper.43

In reviewing just the above principles of copyright law, one could legitimately conclude that a movie quote should be copyrightable. A quote could be sufficiently original standing on its own and fixed in a tangible medium of expression. However, the Copyright Office and a majority of the courts would disagree.

2. Copyright Office Policies and the Courts

As noted above, courts could consider arbitrary and fanciful original movie quotes copyrightable literary expression, as neither the Copyright Clause nor the Copyright Act rule out such copyrightability.44 However, “mere words and short phrases, even if they occur in a copyrighted work, do not themselves enjoy protection against copying.”45 For example, literary titles are not copyrightable under the Copyright Act.46 This proposition is based in part on the Copyright Office’s longstanding policy of barring registration of single words and short phrases.47 The Copyright Office has steadfastly held to this policy, even intervening where courts have attempted to expand copyright to single words and short phrases.48

An illustrative example of the Copyright Office’s adherence to its practice of not registering single words or short phrases is Cook v. Robbins,49 an

42. 17 U.S.C. § 102(a) (2006).43. See id. § 101 (defining “fixed” as embodied in a medium

“sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration”). Because movies and their respective scripts and quotes are sufficiently fixed, this article will not focus on the fixation requirement for copyright protection.

44. See nImmer, supra note 25, § 2.16, at 185–86 (discussing the copyrightability of titles, which consist of short phrases).

45. Arvelo v. Am. Int’l Ins. Co., Copy. L. Rep. (CCH) P27,493, at *2 (1st Cir. 1995).

46. See nImmer, supra note 25, § 2.16, at 185 (“It is . . . clear, as a matter of statutory construction by the courts (as well as Copyright Office Regulations), that titles may not claim statutory copyright.”) (footnotes omitted).

47. 37 C.F.R. § 202.1(a) (2005) (excluding from protection “[w]ords and short phrases such as names, titles, and slogans”); see u.s. coPYrIght oFFIce, coPYrIght cIrcuLAr 34: coPYrIght ProtectIon not AvAILABLe For nAmes, tItLes, or short PhrAses (2010).

48. See Justin Hughes, Size Matters (or Should) in Copyright Law, 74 FordhAm L. rev. 575, 591 (2005).

49. Cook v. Robbins, Nos. 98-36242, 99-35141 (9th Cir. Nov.

40 Spring 2013

unpublished case from the Ninth Circuit. Wade Cook was the author of a best-selling book titled Wall Street Money Machine, in which he used “his experiences as a former taxi cab driver to advocate strategies for stock and stock option transactions.”50 The Ninth Circuit found that two short phrases from Cook’s book were copyrightable, referring to evidence that the two phrases were, according to author Cook, “an ‘important part of my book.’”51 Two of the investment concepts that Cook developed for and presented in the book are the “meter drop” and the “rolling stock.”52 Anthony Robbins, a financial expert, taught several financial seminars in which the driving theme was the “ring toss concept.” However, once Robbins read Cook’s Wall Street Money Machine, he incorporated “meter drop” and “rolling stock” into a new seminar called “Financial Power.”53 Specifically, the Financial Power seminar manual included the phrase “meter drop” nine times and “rolling stock” twice.54 In later editions of the Financial Power manual, the phrase “meter drop” appeared in six places, but “rolling stock” was eliminated.55

Cook filed for copyright infringement of Wall Street Money Machine based on eleven different passages from the Financial Power manual.56 The jury found that Robbins had infringed two of the four phrases at issue—“Money is made on the Meter Drop” and “No one I know has come up with a name for the type of investing I call ‘Rolling Stocks’”—and awarded Cook $655,900 in damages. 57 Subsequently, Robbins moved for judgment as a matter of law. The judge granted the motion because Cook did not prove a causal relation between the infringing phrases and Robbins’s profits from his Financial Power seminars.58

On appeal, the Ninth Circuit reversed the district court and ordered the jury award to be reinstated. The court based its reasoning on the Feist rule that to be entitled to copyright protection, a work must possess a minimal level of creativity and that the

16, 2000).50. Id. at *3.51. Id.52. Id. “Meter drop” describes the technique of making small

gains in lieu of waiting for a single big transaction. Id. A “rolling stock” is “stock that tends to consistently roll up to a specific price point and then drop down to a specific price point in an obvious pattern of repeated waves.” Id.

53. Id. at *3–4.54. Id. at *4.55. Id.56. Id.57. Id. at *6.58. Id.

required level is extremely low to satisfy “originality.”59 The court focused on Robbins’s testimony that he used Cook’s “unique phrases because of their creativity” and that he had never used the terms “meter drop” or “rolling stock” before reading Cook’s book.60 Consequently, the court concluded that “Cook’s complete expressions in conveying the meaning of ‘meter drop’ and ‘rolling stock’ are creative, even if only minimally so, and are protected by his copyright in Wall Street Money Machine.”61

The Ninth Circuit’s decision greatly concerned the Copyright Office, as it believed that the Ninth Circuit had ignored the “longstanding fundamental doctrine of copyright law” that copyright law does not protect short phrases.62 Further, the Office feared that if the decision from one of the leading copyright circuits stood, the Copyright Office’s “longstanding examination practices,” codified in Rule 202.1(a) and reflected in Compendium II: Copyright Office Practices,63 would be eroded.64 Consequently, the Office recommended to the Department of Justice that the United States intervene to request rehearing en banc.65 However, no intervention was required. Before the U.S. Government had decided on a course of action, the parties settled and the Ninth Circuit ordered the withdrawal of the opinion.66

As evidenced by its planned intervention in Cook, the Copyright Office remains dedicated to maintaining the fundamental principle that single words and short phrases are unprotected by copyright.

Similar to the Copyright Office, courts generally67 do not find single words and short phrases

59. Id. at *12.60. Cook v. Robbins, Nos. 98-36242, 99-35141, at *12 (9th

Cir. Nov. 16, 2000).61. Id. at *12–13.62. Letter from David O. Carson, Gen. Counsel, U.S.

Copyright Office, to Robert E. Kopp, Civil Div., U.S. Dep’t of Justice (Dec. 13, 2000) (copy on file with author) [hereinafter Carson Letter I]. The letter even notes that the Ninth Circuit acknowledged the “words and short phrases doctrine” in a previous case. Id.; see Sega Enters. v. Accolade, Inc., 977 F.2d 1510, n. 7 (9th Cir. 1993).

63. The Compendium is the Office’s internal manual of guidelines for examination applications to register copyrights. The Office is currently revising the Compendium. u.s. coPYrIght oFFIce, PrIorItIes And sPecIAL ProJects oF the unIted stAtes coPYrIght oFFIce 13 (2011), available at http://www.copyright.gov/docs/priorities.pdf.

64. Carson Letter I, supra note 60.65. Id.66. Letter from David O. Carson, Gen. Counsel, U.S.

Copyright Office, to Robert E. Kopp, Civil Div., U.S. Dep’t of Justice (Dec. 26, 2000) (copy on file with author); Hughes, supra note 46, at 591.

67. Generally does not mean never, as Cook v. Robbins demonstrates. See Health Grades, Inc. v. Robert Wood Johnson


copyrightable because they do not possess the requisite amount of originality to receive copyright protection.68 Many courts refer to Rule 202.1(a) in making this decision.69 For instance, the Central District of California District Court, in Columbia Pictures Indus. v. Miramax Films Corp.,70 refused to consider a copyright infringement claim in the movie tag line

Univ. Hosp., Inc., 634 F. Supp. 2d 1226, 1238 (D. Colo. 2009) (“[I]t does not make sense to state categorically that no combination of numbers or words short enough to be deemed a ‘phrase’ can possess ‘at least some minimal degree of creativity’” as required for copyright protection under Feist); Johnston v. Twentieth Century-Fox Film Corp., 187 P.2d 474, 482 (Cal. Ct. App. 1947) (“[A] person may have a property right and the right to the exclusive use of arbitrary or fictitious or fanciful or artificial or technical names or titles.”). However, as Professors Nimmer states, “Such suggestions, however, must be regarded as contrary to the generally prevailing rule that [short words and phrases] may not claim copyright protection under either common law or statutory copyright principles.” nImmer, supra note 25, § 2.16, at 186.

68. 37 C.F.R. 202.1(a); see Hutchins v. Zoll Med. Corp., 492 F.3d 1377, 1385 (Fed. Cir. 2007) (holding that “[c]opyright does not protect individual words and ‘fragmentary’ phrases when removed from their form of presentation and compilation”); CMM Cable Rep, Inc. v. Ocean Coast Props., Inc., 97 F.3d 1504, 1519 (1st Cir. 1996) (“It is axiomatic that copyright law denies protection to ‘fragmentary words and phrases’ . . . on the grounds that these materials do not exhibit the minimal level of creativity necessary to warrant copyright protection.”) (internal citations omitted); Acuff-Rose Music, Inc. v. Jostens, Inc., 988 F. Supp. 289, 294 (S.D.N.Y. 1997) (finding the song lyric “You’ve got to stand for something or you’ll fall for anything” uncopyrightable because the phrase lacked the requisite originality and did not originate with the song’s creators); see also Kepner-Tregoe, Inc. v. Leadership Software, Inc., 12 F.3d 527, 534 (5th Cir. 1994) (finding that “specific words, phrases, and sentences” were not copyrightable); Arica Inst., Inc. v. Palmer, 970 F.2d 1067, 1072–73 (2d Cir. 1992) (noting that single words and short phrases in copyrighted text were not copyrightable). See generally nImmer, supra note 25, § 2.01[b] (discussing the copyrightability of words and short phrases in the context of originality).

69. See Southco, Inc. v. Kanebridge Corp., 390 F.3d 276, 286 (3d Cir. 2004) (“We believe that the Copyright Office’s longstanding practice of denying registration to short phrases merits deference.”); CMM Cable Rep, Inc., 97 F.3d at 1520 (“Copyright Office’s own interpretive regulations explicitly embrace this rule of non-copyrightability” of words and short phrases.); Prunte v. Universal Music Grp., Inc., 699 F.Supp.2d 15, 25–26, 29 (D.D.C. 2010) (citing to Rule 202.1(a) in finding titles, words, and short phrases are not copyrightable); Magic Mktg., Inc. v. Mailing Servs. of Pittsburgh, Inc., 634 F. Supp. 769, 771–72 (W.D. Penn. 1986) (using Rule 202.1(a) to support the proposition that words and phrases do “not exhibit the minimal level of creativity necessary to warrant copyright protection.”); see also Kitchens of Sara Lee, Inc. v. Nifty Foods Corp., 266 F.2d 541, 544 (2d Cir. 1959) (finding that while this policy “does not have the force of statute, it is a fair summary of the law”). However, in one case, the District of Colorado was unconvinced about the stature of the Copyright Office regulations, finding that they were “a rough starting point for an originality analysis, not a shortcut for avoiding this analysis. Short phrases are typically unprotectable because they are either insufficiently independent or insufficiently creative or both.” Health Grades, Inc., 634 F. Supp. 2d at 1238. This court’s view has not taken hold.

70. 11 F. Supp. 2d 1179 (S.D. Cal. 1998).

“PROTECTING THE EARTH FROM THE SCUM OF THE UNIVERSE,” finding it unprotected by copyright because of the Copyright Office’s bar against words and short phrases.71 Thus, under the majority of the case law, movie quotes fall in the category of “short words and phrases” and, therefore, are not copyrightable.72

Additionally, individuals hauled into court to defend a copyright infringement claim have two defenses. This article discusses these in the context of alleged infringement of short phrases from a larger copyrighted work. First, the defendant can argue de minimis copying. Under this theory, the copyright owner fails to prove that the defendant has taken enough of the copyrighted work to satisfy the required elements of substantial similarity to support an infringement claim.73 The second line of defense available is fair use. Under fair use, a defendant’s otherwise infringing copying of another’s material does not qualify as illegal provided the defendant copied the material for a limited and transformative purpose.74

3. The De Minimis Defense

For a plaintiff to have a successful prima facie copyright infringement case, she must establish that the defendant has copied her work.75 Copying, in this context, has two components the plaintiff must prove: (1) that the defendant actually copied protected elements of her copyrighted work, and (2) that the defendant’s subsequent work is substantially similar to the original work.76 Where the copying is so minimal that it cannot uphold a finding of substantial similarity, it is considered de minimis.77 As discussed

71. Id. at 1185.72. Murray Hill Publ’ns, Inc. v. ABC Commc’ns, Inc.,

264 F.3d 622, 633 (6th Cir. 2001) (declining to extend copyright protection to a movie quote because it was an “insignificant part of a much larger work and it is a phrase or slogan not worthy of copyright protection in its own right”); see nImmer, supra note 25, § 2.01(b), at 16–17 (referring to the majority rule that short words and phrases are not copyrightable).

73. nImmer, supra note 25, § 13.03(A)(2)(a), at 58–59; see Connor Moran, How Much Is too Much? Copyright Protection of Short Portions of Text in the United States and European Union After Infopaq International A/S V. Danske Dagblades, 6 wAsh. J. L. tech. & Arts 247, 249 (2011). This article will expand on substantial similarity in the larger de minimis discussion.

74. nImmer, supra note 25, § 13.05. This article expands upon what limited and transformative purpose qualify as fair use below.

75. Id. § 13.01 (noting that the second element is the plaintiff’s ownership of the copyright in the allegedly infringed work).

76. Id. § 13.01(B).77. Id. As Judge Learned Hand wrote over a century ago,

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above, copyright does not protect all elements of a work—like ideas or facts—but only those that contain a minimal level of creativity to satisfy copyright’s originality requirement.78 Copyright extends only to the expression of those unprotected elements.79

Copying similar or identical words or short phrases generally qualifies as de minimis and does not constitute infringement.80 Nevertheless, protection of short phrases in the infringement context has varied widely across different courts and cases.81 What is more, courts have suggested that particularly original or important phrases or single words from a larger copyrighted work might merit protection in a copyright infringement claim.82 These cases crucially do not find that these words or phrases are copyrightable—that is, capable of standing alone as copyrightable works under the Copyright Act83 apart from the larger work that spawned them. These cases clearly indicate that short phrases could receive protection in the limited context of a suit for a copyright infringement action.84 Thus, it appears that courts are willing to find short phrases protectable in a copyright infringement action,

“Even where there is some copying, that fact is not conclusive of infringement. Some copying is permitted. In addition to copying, it must be shown that this has been done to an unfair extent.” W. Publ’g Co. v. Edward Thompson Co., 169 F. 833, 861 (C.C.E.D.N.Y. 1909).

78. Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 345 (1991).

79. Id.80. See CMM Cable Rep, Inc. v. Ocean Coast Props., Inc., 97

F.3d 1504, 1519–20 (1st Cir. 1996) (finding no substantial similarity based on defendant’s use of an identical phrase to describe a radio call-in competition similar to plaintiff’s); Stratchborneo v. Arc Music Corp., 357 F. Supp. 1393, 1404 (S.D.N.Y. 1973) (finding the song lyric “Got my mojo working but it just won’t work on you” not sufficiently unique or qualitatively significant to support a finding of substantial similarity).

81. Compare Dawn Assocs. v. Links, 203 U.S.P.Q. 831, 835 (N.D. Ill. 1978) (finding substantial similarity, and thus copyright infringement, in defendants’ use of the sentence, from plaintiff’s screenplay, “When there is no more room in hell . . . the dead will walk the earth” in advertising materials), with Stratchborneo, 357 F. Supp. at 1404 (failing to find substantial similarity in defendants’ use of a song lyric because it was not sufficiently unique to support such a finding).

82. See Heim v. Universal Pictures Corp., Inc., 154 F.2d 480, 487 n.8 (2d Cir. 1946) (suggesting that copyright protection would be accorded such lines as “Euclid alone has looked on Beauty bare” and “Twas brillig and the slithy toves” in a copyright infringement action); Life Music, Inc. v. Wonderland Music Co., 241 F. Supp. 653, 656 (S.D.N.Y.1965) (suggesting that a single word “SUPERCALAFRAJALISTICK-ESPEEALADOJUS” was “conceivably” protectable in an infringement action).

83. As discussed above, copyrightable works must satisfy the statutory requirements of copyrightable subject matter—fixation and originality—in § 102.

84. See nImmer, supra note 25, § 2.01(B), at 17 n.41 (“[The court] was not discussing copyrightability, but rather the extent of copying necessary to establish an infringement.”).

if the court finds that the phrases are sufficiently original or significant to the original work.

4. Fair Use

Fair use, unlike the de minimis defense, is an affirmative defense.85 Under the doctrine of fair use, otherwise infringing uses of a copyrighted work do not subject an individual—an amateur filmmaker, perhaps—to liability because such uses are socially and culturally valuable.86 The Copyright Act lists four factors the courts use to determine if a defendant’s use of a work is indeed a fair use:

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.87

As fair use relates to movie quotes, the length of the alleged infringement, here a line from a long movie script, implicates primarily the first and third factors. Courts should not, however, analyze these factors in isolation; rather, “[a]ll are to be explored, and the results weighed together, in light of the purposes of copyright.”88

Unlike most modern movies, no two fair use analyses are alike. A court’s decision depends on the significance it places on each factor in its analysis.89

85. Id. § 13.05, at 155.86. See Iowa State Univ. Research Found., Inc. v. Am. Broad.

Cos., 621 F.2d 57, 60 (2d Cir. 1980) (“The doctrine of fair use . . . permits courts to avoid rigid application of the copyright statute when, on occasion, it would stifle the very creativity which that law is designed to foster.”).

87. 17 U.S.C. § 107 (2006). In an attempt to provide further guidance for the courts in determining whether a use is fair, the preamble to § 107 lists the following protected purposes: “criticism, comment, news reporting, teaching . . . , scholarship, or research.” Id. However, this is not an exhaustive list of fair use examples, so courts are not limited to these uses in considering what constitutes a protective purpose in their fair use analyses. Bouchat v. Baltimore Ravens Ltd. P’ship, 619 F.3d 301, 307–08 (4th Cir. 2010) (citing Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 561 (1985)).

88. Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 578 (1994).

89. For example, the importance courts (including the Supreme Court) place on the fourth factor has waxed and waned. See, e.g., Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 566 (1985) (“This last factor is undoubtedly the single most

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Depending how a court marshals the fair use factors, a seemingly fair use can become decidedly infringing in litigation. In other words, no one knows if a use is fair until a court has conducted its analysis, especially when “there is no amount of copying so small as to be presumptively fair use.”90

The discussion above illustrates the flexibility of the fair use analysis, but that same flexibility often produces unpredictable and inconsistent results. Indeed, fair use is a difficult doctrine for courts to apply. To begin, the Copyright Act provides no guidance as to the relative weight a court should ascribe to each of the four factors.91 Additionally, the Copyright Act delineates each factor in only the most general terms,92 leaving courts with seemingly complete discretion in deciding whether any one factor is present in any specific case.93 In other words, the Copyright Act offers courts little guidance in rendering any fair use decision because it is silent on how to apply these nicely bundled, broadly defined, four factors. As one court expressed it, the doctrine of fair use is “the most troublesome in the whole of copyright law.”94 The troublesome nature of the doctrine can

important element of fair use.”); Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 476 (1984) (Blackmun, J., dissenting) (“[P]erhaps the most important, [is] the ‘effect of the use upon the potential market for or value of the copyrighted work.’”); Princeton Univ. Press v. Michigan Document Servs., Inc., 99 F.3d 1381, 1407 (6th Cir. 1996) (Ryan, J., dissenting) (“The fourth factor is the single most important element of fair use.”). But see Castle Rock Entm’t, Inc. v. Carol Publ’g Grp., Inc., 150 F.3d 132, 145 (2d Cir. 1998) (“The Supreme Court has recently retreated from its earlier cases suggesting that the fourth statutory factor is the most important element of fair use.”); Am. Geophysical Union v. Texaco, Inc., 60 F.3d 913, 926 (2d Cir. 1994) (suggesting that the Supreme Court has “abandon[ed] the idea that any factor enjoys primacy [and] instructs that ‘[a]ll [four factors] are to be explored, and the results weighed together, in light of the purposes of copyright.’”) (citing Campbell, 510 U.S. at 578).

90. Campbell, 510 U.S. at 577; Moran, supra note 71, at 251. 91. Sony Corp. of Am., 464 U.S. at 476 (Blackmun, J.,

dissenting); nImmer, supra note 25, § 13.05; see 17 U.S.C. § 107 (2006) (failing to offer any guidance on how to weigh the four factors put forth).

92. nImmer, supra note 25, § 13.05; see 17 U.S.C. § 107.93. nImmer, supra note 25, § 13.05; see Elizabeth Dauer &

Allison Rosen, Copyright Law and the Visual Arts: Fairey v. AP, 8 u. denv. sPorts & ent. LAw J. 93, 103 (2010) (identifying the “broad discretion given trial judges in applying the four fair use factors”); Giselle Fahimian, How the IP Guerrillas Won: ®TMark, Adbusters, Negativland, and the “Bullying Back” of Creative Freedom and Social Commentary, 2004 stAn. tech. L. rev. 1, 39 (2004) (identifying the application of the fair use doctrine as “often haphazard and arbitrary” because of the “broad discretion of courts with regard to the weight given to each [fair use] factor”); Joseph P. Liu, Copyright and Time: A Proposal, 101 mIch. L. rev. 409, 453 (2002) (writing that “Congress expressly contemplated that fair use would remain a flexible doctrine that judges could freely adapt to meet changing circumstances”).

94. Dellar v. Samuel Goldwyn, Inc., 104 F.2d 661 (2d Cir.

produce disconcerting results.

5. Copyright Law Principles as (Mis)Applied by the Courts

Despite the general proposition that short phrases are not copyrightable, some courts have extended protection to these ordinarily uncopyrightable phrases,95 including movie quotes. Moreover, some courts do so without a fair use or de minimis analysis.96 The implication of this line of jurisprudence is significant for movie quotes as it represents the danger that courts could find a perfectly legitimate use of a movie quote infringes another’s copyright.

One primary example is Universal City Studios, Inc. v. Kamar Indus., Inc.,97 in which the court reviewed both trademark and copyright infringement claims in considering the likelihood of success on the merits as part of a preliminary injunction analysis. In Kamar, the district court concluded that the lines “I love you, E.T.” and “E.T. phone home!” from the movie E.T.: The Extra-Terrestrial, spoken by the eponymous E.T., were copyrightable.98

Before conducting its copyright and trademark infringement analyses, the court determined that Universal had valuable trademark rights in both the famous E.T. character and the name “E.T.”99 In doing so, the court did not expressly find that Universal had rights in the quotes “E.T., phone home” and “I love you, E.T.”100

Nevertheless, the court listed as “findings of fact” that Universal had established trademarks in the character and the name “E.T.” and that Kamar had likely infringed on these trademarks. Specifically, the court wrote that the quotes “would be recognized

1939) (per curiam). See, e.g., Sony Corp. of Am., 464 U.S. 417, 475 (1984) (Blackmun, J., dissenting); Maxtone-Graham v. Burtchaell, 803 F.2d 1253, 1255 (2d Cir. 1986); Triangle Publ’ns, Inc. v. Knight-Ridder Newspapers, Inc., 626 F.2d 1171, 1174 (5th Cir. 1980); Wojnarowicz v. American Family Ass’n, 745 F. Supp. 130, 142 (S.D.N.Y. 1990); Time, Inc. v. Bernard Geis Assocs., 293 F. Supp. 130, 144 (S.D.N.Y. 1968); see also 4 NIMMER, supra note 25, § 13.05.

95. See Hughes, supra note 46, at 583–84 (describing Universal City Studios, Inc v. Kamar Indus., Inc, in which short phrases from the movie E.T.: The Extra Terrestrial were considered protected by copyright).

96. Id.97. 217 U.S.P.Q. 1162 (S.D. Tex. 1982).98. Id. at 1164.99. Id. at 1164.100. Id. at 1164–65. The court describes these quotes as

thematic tropes that drove the overarching theme of movie’s story. Id. at 1165 (“These themes are consistently emphasized and repeated throughout the movie in the sentences “I love you, E.T.” and “E.T. phone home!!”).

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readily by the average lay observer as having been appropriated from Universal’s copyrighted motion picture”;101 and that Kamar’s “unauthorized use of the name “E.T.” on its products, and its reproduction of lines of dialogue from [the film] are likely to cause confusion as to the source of Kamar’s products.”102 Note that the court did not characterize Kamar’s use of the quotes as “unauthorized” as it did the name “E.T.”

After making these factual findings, the court delved into its copyright analysis, stretching both the facts and the law to establish de facto copyright protection of the two famous quotes from the movie.103 Using the average lay observer test to determine if Kamar’s use was copyright infringement,104 the court reasoned that the “E.T.” quotes on Kamar’s products “would be readily recognizable to the lay observer as key lines of dialogue from the copyrighted movie.”105 Taking a further leap, the court concluded that Kamar had infringed Universal’s copyrights.106

It appears that because the court found that the “E.T.” name and character were Universal’s valuable trademarks, it did not conduct any sort of recognizable copyright analysis, such as a de minimis or a fair use analysis, but based its decision on how important the quotes were to the film.107 Under the court’s theory, if a movie quote is “readily recognizable” in terms of its relationship to the movie, it will be protected by copyright.108 Kamar’s specific application of copyright law, however, seems to be anomalous—the only case directly citing to its copyright infringement rationale distinguished the cases’ facts.109 Further, the

101. Id. at 1165.102. Id.103. Hughes, supra note 46, at 584.104. Kamar Indus., Inc., 217 U.S.P.Q. at 1166 (articulating

the test as “whether an average lay observer would recognize the alleged copy as having been appropriated from a copyrighted work”).

105. Id. 106. Id.107. See Hughes, supra note 46, at 584. This reasoning is

similar to the Ninth Circuit’s rationale in Cook v. Robbins, which so disturbed the Copyright Office. See Cook v. Robbins, Nos. 98-36242, 99-35141, at *3, *12 (9th Cir. Nov. 16, 2000); Carson Letter I, supra note 60.

108. The court’s reasoning is strikingly similar to a “secondary meaning” analysis in trademark law. See supra Part I.B.1 (discussing secondary meaning and its significant role in federal trademark law).

109. See Murray Hill Publ’ns, Inc. v. ABC Communs., Inc., 264 F.3d 622, 633 (6th Cir. 2001) (“Neither is the Line a ‘readily recognizable’ portion of the Movie as were the disputed lines considered by the court in Universal City Studios, Inc. v. Kamar Industries Inc.”). Though Kamar has not gained precedential value, the proposition for which it stands—a court will protect an uncopyrightable short phrase in an infringement action decision if the specific phrase is deemed important to the larger

court’s confused conclusion likely resulted from the intertwined trademark/copyright analysis,110 preventing the case’s reasoning from gaining traction, and from being published in the federal reporter.111 Nevertheless, it does indicate that a movie quote could be protectable intellectual property under copyright law, though it is not copyrightable.

Continuing in Kamar’s trend, courts have found that a defendant’s use of a short textual, not copyrightable, excerpt in a secondary work is not a fair use. Courts do so under the doctrine of qualitatively substantial copying, which allows courts to extend the short excerpt protection from infringement.112 This clearly pertains to movie quotes, which are short textual excerpts of a larger work. The doctrine of qualitatively substantial copying concerns the third fair use factor, in which courts consider both the quantitative and the qualitative nature of the defendant’s use.113 In other words, courts examine not only the length of the appropriated text, but “whether [the defendant’s use is reasonable] in light of the purpose and character of the use.”114 In measuring the qualitative substantiality of an allegedly infringing use, the courts rely on

work—is not anomalous.110. Hughes, supra note 46, at 583.111. In Dawn Assocs. v. Links, 203 U.S.P.Q. 831 (N.D. Ill

1978), which preceded Kamar, the court conducted a very similar analysis to the court in Kamar to find both copyright and trademark infringement in the use of a line from the plaintiff’s screenplay and advertising materials. Id. at 385. Like in Kamar, the trademark and copyright issues were intertwined in the court’s analysis, and the court did not conduct a fair use or de minimis analysis in finding copyright infringement. Id. Further, the court did not distinguish the plaintiff’s screenplay—a large copyrighted work—from the plaintiff’s advertising—consisting of the allegedly infringed phrase “When there is no room left in hell . . . dead will walk the earth”—in finding infringement. Id. Consequently, the decision does not indicate whether the court would have found infringement if only copyright in the screenplay were at issue. Notably, no subsequent case has followed or even cited to Dawn Associates, including Kamar, for its copyright infringement analysis.

112. Hughes, supra note 46, at 585–86.113. 17 U.S.C. § 107(3). This doctrine has existed for some

time and is firmly established. See Roy Exp. Co. Establishment of Vaduz, Liechtenstein, Black, Inc. v. Columbia Broad. Sys., Inc., 503 F. Supp. 1137, 1145 (S.D.N.Y. 1980) (finding that copying excerpts of less than two minutes each from four films ranging from seventy-two to eighty-nine minutes could be found to be “qualitatively substantial” even if “quantitatively small”); Story v. Holcombe, 23 F. Cas. 171, 173 (C.C.D. Ohio 1847) (“The infringement of a copyright does not depend so much upon the length of the extracts as upon their value. If they embody the spirit and the force of the work in a few pages, they take from it that in which its chief value consists.”).

114. Peter Letterese & Assocs., Inc. v. World Inst. of Scientology Enters., 533 F.3d 1287, 1314 (11th Cir. 2008); see Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 588 (1994) (determining, in the context of parody, “how much more is reasonable will depend . . . on the extent to which the [secondary use’s] overriding purpose and character is to parody the original”).


plaintiffs’ assertions of the excerpted text’s importance and the courts’ own subjective determinations of such importance.115 Consequently, as Professor Hughes recognized, “it is clear that [the qualitatively substantial doctrine] can produce de facto protection of short [textual] phrases.”116

The Supreme Court applied the doctrine of qualitatively substantial copying in Harper & Row Publications, Inc. v. Nation Enterprises,117 finding de facto protection in short excerpts from a book. Former President Gerald Ford had contracted with Harper & Row and Reader’s Digest to publish his memoirs.118 The publishing contract gave the publishers the right to license prepublication excerpts.119 As the book neared publication, the publishers decided to exploit the first serial rights and entered into an exclusive prepublication licensing agreement with Time.120 However, these plans were thwarted when The Nation sneakily acquired a copy of the Ford manuscript and quickly prepared a news story composed of paraphrases, facts, and quotes taken directly from the manuscript.121 Scooped by The Nation article, Time cancelled its piece and reneged on its contractual agreements with Harper & Row.122 Harper & Row sued The Nation for copyright infringement, and in response, The Nation argued fair use.123

In framing its fair use analysis, the Court stated, “the unpublished nature of a work is a key, though not necessarily determinative, factor tending to negate a defense of fair use.”124 The Court found that the first factor—the purpose of the use—weighed in favor of infringement, as The Nation’s “stated purpose [was] scooping the forthcoming hardcover and Time abstracts.”125 Moving onto the second factor,

115. See, e.g., Campbell, 510 U.S. at 587 (holding that the third factor requires courts to consider not only the quantity of the materials taken, but also “their quality and importance” to the original work); Harper & Row Publ’ns, Inc. v. Nation Enters., 471 U.S. 539, 564–65 (1985) (emphasizing that a fair use analysis places greater weight on the importance of the material copied than the amount of material copied).

116. Hughes, supra note 46, at 587.117. 471 U.S. 539 (1985).118. Id. at 542. (noting that although this case did not deal

with movie quotes, it provided the framework for how court would likely apply the doctrine of qualitative substantiality in the movie quote context).

119. Id.120. Id.121. Id. at 543.122. Id.123. Id. at 544–45.124. Id. at 554–55 (internal quotation marks omitted) (“The

author’s right to control the first public appearance of his first undisseminated expression will outweigh a claim of fair use.”).

125. Id. at 562.

the nature of the copied work, the Court focused on the unpublished status of President Ford’s memoir and found that this factor weighed heavily in favor of Harper & Row.126 However, the Court qualified its conclusion by stating that “substantial quotations might qualify as fair use in a review of a published work or a news account of a speech that had been delivered to the public or disseminated to the press.”127

The Court then addressed the third factor, the amount and substantiality of the portion used, and found that, while the amount taken by The Nation was quantitatively insignificant, namely 300 to 400 words out of a 200,000-word book, “The Nation took ‘what was essentially the heart of the book’ . . . because they qualitatively embodied Ford’s distinctive expression.”128 Finally, the Court found that the fourth factor, the market effect of the defendant’s use on the original work, clearly weighed in favor of Harper & Row, because there was an actual effect on the market in the form of Time’s cancellation of its contracted serialization.129 After conducting the fair use analysis, the Court concluded that The Nation’s use of these verbatim excerpts from the unpublished manuscripts was not a fair use.130

In a vehement dissent, Justice Brennan decried that the majority’s “zealous defense of the copyright owner’s prerogative will . . . stifle the broad dissemination of ideas copyright is intended to nurture.”131 He argued that the Court had broadened copyright owners’ rights beyond traditional bounds by applying an “exceedingly narrow definition of the scope of fair use.”132

The Court’s reasoning in Harper & Row has been applied to subsequent fair use cases involving unpublished works,133 and its “heart of the work”

126. Id. at 563–64.127. Harper & Row, 471 U.S. 539, 564 (1985) (indicating

that taking isolated phrases is likely a fair use and that “[s]ome of the briefer quotes . . . are arguably necessary . . . to convey the facts. . . . But The Nation did not stop at isolated phrase and instead excerpted subjective descriptions and portraits of public figures.”).

128. Id. at 564–65.129. Id. at 567.130. Id. at 569.131. Id. at 579 (Brennan, J., dissenting).132. Id. Justice Brennan also rejected the Court’s categorical

presumption against fair use of unpublished works. Id. at 595. 133. See, e.g., Wright v. Warner Books, Inc., 953 F.2d 731,

738 (2d Cir. 1991); Salinger v. Random House, Inc., 811 F.2d 90, 95–99 (1987). These courts applied almost a bright-line rule, refusing to find fair use where a copyrighted work was unpublished. However, in 1992, Congress amended § 107 to add the following: “The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.” 17 U.S.C. § 107 (1992). Subsequently, courts have considered the unpublished nature of a work as but one factor

46 Spring 2013

language has been appropriated by many courts in analyzing fair use134 outside of the context of unpublished works. The most important factor in Harper & Row was the unpublished status of the appropriated work, not the amount of the work taken, and the decision’s rationale should be confined to the facts of the case.

The logical result of expanding the protection of short phrases into the realm of published works and movie quotes is the stifling of free expression, as Justice Brennan predicted.135 Nevertheless, the consequence of giving the doctrine of qualitative substantiality such great weight is that courts find short phrases protectable under their fair use analysis. Under this doctrine, an uncopyrightable movie quote could defeat a claim of fair use, merely for having “quality and importance,” which a movie quote can undoubtedly develop.136

In sum, a court could find a single movie quote protectable, while not copyrightable, in an infringement action so long as the rights holder, or the court in its analysis, identifies it as a qualitatively important part of the copyrighted screenplay and story therein. While this possibility of protection under copyright law would not arise until the rights holder initiates an infringement action, the power of the movie quote to protect the entire copyrighted work and perhaps defeat what would be a fair use in other circumstances exists and seems to be growing stronger. This potential poses a serious threat to our cultural commons and to our right to free expression.

to consider in a fair use analysis. See Sundeman v. Seajay Soc’y, 142 F.3d 194, 204–05 (4th Cir. 1998) (finding fair use in quoting portions of a deceased author’s unpublished novel in scholarly paper).

134. See, e.g., Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 587 (1994); Los Angeles News Serv. v. KCAL-TV Channel 9, 108 F.3d 1119, 1122 (9th Cir. 1997); Princeton Univ. Press v. Mich. Document Servs., Inc., 99 F.3d 1381, 1406 (6th Cir. 1996); Religious Tech. Ctr. v. Netcom On-Line Commc’n Servs., Inc., 923 F. Supp. 1231, 1247 (N.D. Cal. 1995).

135. Harper & Row Publ’ns, Inc. v. Nation Enters., 417 U.S. 539, 579 (1985) (Brennan, J., dissenting); see Hughes, supra note 46, at 586–91 (discussing the legacy of the Harper & Row decision). See also Cook v. Robbins, Nos. 98-36242, 99-35141, 14711–13 (9th Cir. Nov. 16, 2000) (citing readily to Harper & Row and showing that the Ninth Circuit tracked the Court’s construction of the fair use doctrine).

136. See generally Universal City Studios, Inc. v. Kamar Indus., Inc., 217 U.S.P.Q. 1162, 1165–66 (S.D. Tex. 1982).

B. “That’s my official trademark catchphrase that I got from the Web!”137 — Trademarks

The second most logical intellectual property regime under which a rights holder would want to protect her valuable movie quote is trademark law. Movie quotes have already been trademarked, but only in connection with merchandising the movie from which the quote sprung, such as by placing quotes on mugs, T-shirts, and posters.138 This section focuses on the applicability of trademark law to a movie quote used in connection with and as a source identifier for a specific movie, rather than a film series.139

1. Framework of Federal Trademark Law

The Lanham Act140 provides federal protection for trademark holders.141 Trademarks are words, names, or symbols used by an entity or person “to

137. dIsAster movIe (Universal Studios 2008).138. See, e.g., THERE’S NO PLACE LIKE HOME,

Registration No. 2,540,752 (indicating that the trademark covers men’s, women’s, and children’s clothing; from the movie The Wizard of Oz); THERE’S NO PLACE LIKE HOME, Registration No. 2,522,947 (highlighting that the trademark covers posters, books, calendars, gift-wrapping paper, and other paper goods); VOTE FOR PEDRO, Registration No. 3,248,228 (delineating that the trademark covers calendars, greeting cards, bumper stickers, and other paper goods; from the movie Napoleon Dynamite); VOTE FOR PEDRO, Registration No. 3,238,048 (stating that the trademark only covers novelty buttons); U.S. Trademark Application, Serial No, 85,444,895 (filed Oct. 11, 2011) (representing the application for THERE’S NO PLACE LIKE HOME in connection with mugs, bowls, plates, and other “earthenware goods”). However, many applications for registration consisting of movie quotes in connection with move products have been abandoned. See, e.g., U.S Trademark Application Serial No. 75,398,912 (filed Dec. 2, 1997) (abandoned Oct. 7, 2001) (presenting the application for THERE’S NO PLACE LIKE HOME in connection with motion picture films); U.S. Trademark Application Serial No. 73,374,299 (filed Jul. 12, 1982) (abandoned Nov. 4, 1983) (identifying the application for E.T. in connection with motion picture films).

139. In a large segment of the entertainment industry, movies are just one component of a larger line of merchandising, especially in children’s entertainment. Think of the Harry Potter series, Lemony Snicket’s A Series of Unfortunate Events series, or the Star Wars franchise. The quotes from movies can be an integral part of such a merchandising or franchising campaign, such as “Use the force, Luke.” It is, indeed, intriguing to look at movie quotes in this context, to see if this will have any effect on the protection of the movie quotes. However, the analysis will likely not change if solely focusing on the movie quotes. As discussed above, quotes from E.T.: The Extraterrestrial received protection in such a merchandising context. See Universal City Studios, Inc. v. Kamar Indus., Inc., 217 U.S.P.Q. 1162, 1169 (S.D. Tex. 1982).

140. 15 U.S.C. § 1051 et seq. (2006).141. This section focuses solely on protection under this

federal scheme. Thus, all definitions and analyses pertain to federal trademark law.


identify and distinguish his goods, including a unique product”142 from those produced by others and “to identify the source.”143 Your toothpaste, delicious candy bar, romance vampire novel, and aging car all fall under the broad category of goods. Service marks,144 close cousins of trademarks, “identify and distinguish the services of one person . . . from the services of others and to indicate the source of the services.”145 Service marks, unlike trademarks, include “[t]itles, character names, and other distinctive features of radio or television programs.”146 For example, both “E.T.”—the character name—and “JIFFY LUBE” are service marks.147

Under the Lanham Act, sellers and producers’ time, energy, and advertising expenditures investments are protected from others who may subsequently use the rights holder’s mark on their products.148 Thus, the purpose of trademark law is twofold: (1) to prevent consumer confusion over the source of goods or services and (2) to enable producers to differentiate their products from others on the market.149 Because they are used to identify the source of products, trademarks are “a very peculiar kind of property [because, unlike copyrights, trademarks have] no existence apart from the goodwill of the product or service it symbolizes.”150

The primary means to secure protection under the Lanham Act requires a mark holder to also establish

142. 15 U.S.C. § 1127.143. Id.144. This article will refer to these marks as “trademarks”

and “service marks” when discussing one individually. When discussing both, this article uses the term “marks.”

145. 15 U.S.C. § 1127.146. Id.147. See, e.g., E.T., Registration No. 1,314,514; JIFFY LUBE,

Registration No. 1,384,672.148. 1 J. thomAs mccArthY, mccArthY on trAdemArks

And unFAIr comPetItIon, § 2:30 (4th ed. 1996); Lauren P. Smith, Trademarks to the Movies: “An Af-‘Fair Use’ to Remember”, 48 cLev. st. L. rev. 415, 418 (2000). However, “[a] large expenditure of money does not in itself create legally protectable rights.” Smith v. Chanel, Inc., 402 F.2d 562, 568 (9th Cir. 1968); see Fleetwood Co. v. Mende, 298 F.2d 797, 799 (C.C.P.A. 1962) (stating that a “vast amount of money [invested] in advertising [a] product by [a] trademark” does not, without more, give rise to a legally protectable right).

149. As Congress wrote, the Lanham Act was intended to make “actionable the deceptive and misleading use of marks” and “to protect persons engaged in such commerce against unfair competition.” 15 U.S.C. § 1127; see M. B. H. Enters, Inc. v. WOKY, Inc., 633 F.2d 50, 54 (7th Cir. 1980) (“A trade or service [mark’s] . . . purpose . . . is to separate those goods or services from others in the public consciousness, to identify them as the product of a single source, and to represent them in the mind of the public.”).

150. mccArthY, supra note 144, at § 2:15, at 39–40.

bona fide use of the mark in commerce.151 Bona fide use of a mark in commerce means a bona fide sale or transport of goods and bona fide display of the mark in the sale or advertisement for services rendered in commerce. In the context of federal trademark law, commerce includes all commercial activity “which may lawfully be regulated by Congress.”152 To maintain, and prove, ownership of mark an owner must establish (1) that it used the mark sometime in the past and (2) that its use of the mark continues into the present.153 This is known as the “continuous use requirement.” To satisfy the continuous use requirement under trademark law, this use must be of something more than a sporadic nature.154

Once an owner has a mark, the strength of that mark determines how much protection it receives in the courts. Courts have identified a spectrum of marks under which to gauge a mark’s “eligibility to trademark status and the degree of protection accorded.”155 The spectrum, in ascending order of protection, is: (1) generic, (2) descriptive, (3) suggestive, and (4) arbitrary or fanciful.156 A generic mark is the name of the product or service itself—for instance, the mark TERRIFYING HORROR MOVIE SERIES for use in connection with a super-scary horror movie series such as Saw.157 Generic terms can never function as marks to indicate the origin of goods or services.158

Descriptive terms are those that communicate information about specific characteristics or qualities of a good or service—for example, 5-MINUTE for glue that sets in five minutes.159 These terms can serve as protectable marks only if they acquire

151. 15 U.S.C. § 1127 (requiring use in commerce for marks); see 15 U.S.C. § 1051(a) (requiring bona fide use in commerce to federally register a mark).

152. 15 U.S.C. § 1127.153. mccArthY, supra note 144, § 16:9; see D. & M. Antique

Imp. Corp. v. Royal Saxe Corp., 311 F. Supp. 1261, 1272 (S.D.N.Y. 1969) (“As property rights subject to ‘ownership,’ trademarks are sui generis . . . . Ownership grows out of and depends upon the continuance of use.”).

154. mccArthY, supra note 144, § 16:9; see Dep’t of Parks & Recreation for C.A. v. Bazaar Del Mundo, Inc., 448 F.3d 1118, 1126 (9th Cir. 1996) (holding that a party “cannot rely on a few instances of use of the marks in the distant past that were ‘casual’ or had ‘little importance apparently attached to [them]’”).

155. Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2nd Cir. 1976).

156. Id.157. Park ‘N Fly, Inc. v. Dollar Park & Fly, Inc., 469 U.S.

189, 194 (1985) (“A generic term is one that refers to the genus of which the particular product is a species.”).

158. Abercrombie, 537 F.2d at 9–10; mccArthY, supra note 144, § 12:1.

159. mccArthY, supra note 144, § 11:16.

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secondary meaning.160 Secondary meaning refers to the consumers’ association of a mark with the source—the seller, manufacturer, or service provider—and not with the product or service to which the mark attaches.161 Thus, even though a term is descriptive, it can serve as a protectable trademark if consumers associate the mark with the source, such as FIVE HOUR ENERGY.

Unlike descriptive marks, suggestive marks do not require secondary meaning. Aptly named, a suggestive mark does not describe a product’s features, but suggests them.162 CHICKEN OF THE SEA163 for canned tuna represents a prominent example of this distinction. Because suggestive marks require “imagination, thought, and perception to arrive at the qualities or characteristics of the goods,” they do not require proof of secondary meaning to receive trademark protection.164

Fanciful marks are “coined” words or phrases that are created solely to function as marks,165 such as KODAK photographic supplies. Similar to fanciful marks, arbitrary marks are those “in which an otherwise common word is used in an unfamiliar way.” 166 Perhaps the most famous example of this is APPLE for computer and phone products. Both fanciful and arbitrary marks, like suggestive marks, are considered “inherently distinctive” and are protectable without secondary meaning.167 Even if a mark receives trademark protection as discussed above, a mark loses protection for the holder’s failure to use the mark in commerce168 or from becoming generic.169

Under a strict reading of the Lanham Act, a movie quote used in connection with a single movie

160. In re Nett Designs, Inc., 236 F.3d 1339, 1341 (Fed. Cir. 2001). The Lanham Act uses the term “acquired distinctiveness” in lieu of “secondary meaning.” 15 U.S.C. § 1052(f) (2006).

161. See Levi Strauss & Co. v. Blue Bell, Inc., 632 F.2d 817, 820 (9th Cir. 1980) (“[S]econdary meaning is a mental recognition in buyers’ and potential buyers’ minds that products connected with the symbol or device emanate from or are associated with the same source.”).

162. Zobmondo Entm’t, LLC v. Falls Media, LLC, 602 F.3d 1108, 1114 (9th Cir. 2010) (quoting Kendall-Jackson Winery, Ltd. v. E. & J. Gallo Winery, 150 F.3d 1042, 1047 n.8 (9th Cir. 1998)).

163. See CHICKEN OF THE SEA, Registration No. 0097192.164. In re Nett Designs, 236 F.3d at 1341; see Zobomondo

Entm’t, LLC, 602 F.3d at 1114 (defining a suggestive mark as one for which “a consumer must use imagination or any type of multistage reasoning to understand the mark’s significance”) (internal quotations and citation omitted).

165. Genesee Brewing Co. v. Stroh Brewing Co., 124 F.3d 137, 143 (2d Cir. 1997).

166. Lever Bros. Co. v. Am. Bakeries Co., 693 F.2d 251, 256 (2d Cir. 1982).

167. mccArthY, supra note 144, § 11:4.168. Id. § 17:9.169. Id. § 12:26.

would not fit into the definition of a service mark, and thus a broad reading of the Lanham Act renders a diverging reading. A movie quote used in connection with a single movie could not serve as a service mark. Our hypothetical service mark holder is not using it in connection with series of films, nor is the movie quote a “distinctive feature” of a radio or television program170 or an analogous feature, like a newspaper column title.171 The quote is a short extract taken from the larger work, the script, which is a unique literary production, unlike serial publications or broadcasts, which provide a regular service such as music, news, entertainment, etc. Neither a movie nor the movie script is a service; each is a singular artistic product.

However, under this same strict reading of the Lanham Act, a movie quote could serve theoretically as a trademark under the act if the quote were to acquire secondary meaning.172 Accordingly, a movie quote would be a descriptive mark, requiring secondary meaning to serve as a trademark.173 First, the movie itself is a “good.”174 In the United States, the motion picture industry generates a significant portion of the country’s gross domestic product through box office sales.175 Further, individuals do associate specific movie quotes with their movies of origin, such as how “Say hello to my little friend” conjures up Scarface.176 Consequently, these quotes arguably could be protected under the Lanham Act.177 However, further reflection

170. 15 U.S.C. § 1127 (2006).171. See Metro Publ’g, Ltd. v. San Jose Mercury News, 987

F.2d 637, 640 (9th Cir. 1993) (finding a newspaper column name consistent with the Lanham Act’s definition of trademark “because it serves to identify the column as the product of a particular writer or paper and to distinguish it from surrounding copy and the features of competing publications”).

172. This would be similar to the theory of literary titles serving as trademarks upon the acquisition of secondary meaning, as discussed below. See Warner Bros. Pictures, Inc., v. Majestic Pictures Corp., 70 F.2d 310, 311 (2d Cir. 1934) (explaining how a literary title can acquire secondary meaning).

173. See Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 10 (2d Cir. 1976).

174. See William S. Hendon & Anna M. Starvaggi, Using the Nonprofit Arts in the Growth of Trade?, 22 J. Arts mgmt. L & soc’Y 155, 155 (1992) (classifying movies as “artistic cultural goods”); see also sIwek, supra note 3, at i-ii (including movies in the category of “knowledge-intensive intellectual property-based goods”).

175. See sIwek, supra note 3, at 6; motIon PIcture AssocIAtIon oF AmerIcA, supra note 3; u.s. census BureAu, supra note 3, at 767 tbl.1229 (demonstrating that motion pictures are a growing aspect of the U.S. economy).

176. A search of the Internet for “movie quotes” yields thousands of Web sites dedicated to movie quotes. Search the title of your favorite film and “movie quotes,” and you will find several Web sites collecting the most memorable quotes from films such as Donnie Darko or The Maltese Falcon.

177. See Warner Bros. Pictures, 70 F.2d at 311.


and a review of the case law demonstrates the fallacy of that contention.

2. Law of Literary Titles Theory Underlying Cases Involving Literary Works

To determine the protection of movie quotes, trademark law’s treatment of titles is illustrative. Similar to the Copyright Office, the United States Patent and Trademark Office (PTO) will not register titles for single, or individual literary, works.178 However, the Lanham Act protects the title of an individual literary work in an infringement action, specifically false advertising and/or false designations of origin,179 even though the quote is not registrable as a trademark.

Despite their artistic and literary nature, movies, plays, and books are commercial products sold in the marketplace.180 As the Second Circuit explained:

[t]he purchaser of a book, like the purchaser of a can of peas has a right not to be misled as to the source of the product. Thus, it is well established that where the title of a movie or a book has acquired secondary meaning—that is, where the title is sufficiently well known that consumers associate it with

178. Trademark Manual of Examining Procedure (TMEP) § 1202.08 (6th ed. 2010); see Application of Cooper, 254 F.2d 611, 613 (C.C.P.A. 1958). However, the United States Patent and Trademark Office (PTO) will register the title of a series comprised of several works—i.e., Harry Potter series. TMEP § 1202.08(d). PTO will also register magazine/newspaper column titles. See discussion supra note 167 and accompanying text (establishing that newspaper column titles can be protected); Metro Publ’g, 987 F.2d at 640–41. However, because this article addresses a movie quote used as a trademark in connection with a single movie and not a series, such registration shall not be discussed further.

179. Specifically, § 43(a) of the Lanham Act makes liable in a civil action:

(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which--

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities.

15 U.S.C. § 1025(a).180. Rogers v. Grimaldi, 875 F.2d 994, 997 (2d Cir. 1989).

a particular author’s work—the holder of rights to that title may prevent the use of the same or confusingly similar titles by other authors.181

Accordingly, a movie title can serve as a trademark if it acquires secondary meaning.

A literary title acquires secondary meaning through consumers’ association of the title with a single source of the literary work.182 This association can be with one anonymous source183—“[t]hat is, the consumer need not know the trade name of the source, but is entitled to assume that all works or goods under that title are controlled by some single source.”184 The author of the work may serve as the single source, but a reasonable guideline is that the consumers’ association can be with the owner of the copyright in the literary work, as that entity, or person, controls the work’s use.185 Thus, a production company or publisher can serve as the source, even though consumers do not know the entity’s name. For example, which “Vote for Pedro” quoting consumers know that Twentieth Century Fox produced Napoleon Dynamite?

Literary titles will receive narrow protection in infringement suits under specific circumstances. As the court articulated in the influential case Rogers v. Grimaldi,186 the “overextension of Lanham Act restrictions in the area of titles might intrude on First Amendment values.”187 Consequently, to determine if a title merits trademark protection, courts balance the right of the trademark owner to prevent confusion against the free speech rights of the creator of the allegedly infringing literary work.188

Thus, as established in what is referred to

181. Id. at 997–98. 182. See Warner Bros. Pictures, 70 F.2d at 311; see Tri-Star

Pictures, Inc. v. Unger, 14 F. Supp. 2d 339, 348 (S.D. N.Y. 1998) (“[M]otion picture titles acquire secondary meaning when the title becomes so well known that consumers associate it with a particular author’s work.”).

183. Jackson v. Universal Int’l Pictures, 222 P.2d 433, 438 (Cal. 1950). (“There is no logical basis for holding that a public well acquainted with the title and the play could not confer secondary meaning upon that title merely because of unfamiliarity with the author’s name.”).

184. mccArthY, supra note 144, § 10:10, at 30.185. Id.; see Dastar v. Twentieth Century Fox Film Corp., 539

U.S. 23, 36 (2003) (concluding that the source of goods “refers to the producer of the tangible goods that are offered for sale, and not to the author of any idea, concept, or communication embodied in those goods”); Edgar Rice Burroughs, Inc. v. Manns Theatres, 195 U.S.P.Q. 159 (C.D. Cal. 1976).

186. 875 F.2d 994, 997–98 (2d Cir. 1989).187. Id. at 999.188. Cliffs Notes, Inc. v. Bantam Doubleday Dell Publ’g Grp.,

Inc., 886 F.2d 490, 494 (2d Cir. 1989).

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as the Rogers test, a title will not receive protection under the Lanham Act unless the title has “no artistic relevance to the underlying work [e.g., the movie] or, if it has some artistic relevance, unless the title explicitly misleads as to source or content of work.”189 For example, in Cliffs Notes, Inc. v. Bantam Doubleday Dell Publ’g Grp., Inc.,190 the court found that a parody of the Cliffs Notes books, “Spy Notes” did not infringe on the “Cliffs Notes” trademark.191 The court concluded that although the parody cover of Spy Notes conjured up the original and even used some of the same colors and features of the original design, the public interest in free expression outweighed the small chance of consumer confusion it posed, especially because parody requires mimicry of the original.192

Movie quotes may be able to function as trademarks for a single movie in light the law of literary titles. One might immediately conclude that movie quotes are more apt to serve as trademarks than movie titles. Unlike movie titles, movie quotes’ primary function in relation to a literary work is not to identify and describe the work, in this case the movie.193 Movie quotes are less inherently descriptive than movie titles because movie quotes are not “labels” designed to describe the literary work with which they are associated, as are titles.194 As singular pieces of the script taken out of context, movie quotes serve to develop the character, propel the plot, and perhaps catch on with the public. However, writers and production companies do not create a movie quote to serve as the movie’s identifier. It seems that this fact

189. Rogers v. Grimaldi, 875 F.2d 994, 999 (2d Cir. 1989). In looking to the artistic relevance at issue, the Rogers court held that “the title ‘Ginger and Fred’ surpassed the minimum threshold of artistic relevance to the film’s content” for two reasons. Id. “The central characters in the film are nicknamed ‘Ginger’ and ‘Fred,’ and these names are not arbitrarily chosen just to exploit the publicity value of their real life counterparts but instead have genuine relevance to the film’s story.” Id. Though the Rogers test originated in circumstances where a celebrity’s name was used in a title, the courts have expanded the test to pertain to all literary titles. See Cliffs Notes, 886 F.2d at 495.

190. 886 F.2d 490 (2d Cir. 1989).191. Id.192. Id. at 497.193. See Application of Cooper, 254 F.2d 611, 614–15

(C.C.P.A. 1958) (denying protection for descriptive book names). This is true unless the quote is the same as the title, such as the line “Dude, where’s my car?” from the film Dude, Where’s My Car?

194. It is well established that movie titles can acquire secondary meaning sufficient to overcome their “descriptive” status. See Rogers, 875 F.2d at 997; supra notes 183–86 and accompanying text. Like movie titles, movie quotes can acquire secondary meaning, in that viewers—the consumers—associate a certain quote with a specific movie. “Yeah, Baby!” has come to signify Austin Powers, just as “Say hello to my little friend” brings to mind Scarface.

should not preclude a rights holder from putting the movie quote to use as a trademark.

Though this has not been tested in court, a movie quote could legitimately serve as a trademark in connection with a single movie under the logic of the case law establishing trademark rights in literary titles.195 By making this conclusion, this article does not mean that it would be a registrable trademark, but that courts would afford it protection under the Lanham Act in an infringement action. First, courts have historically protected the titles of single literary works under the Lanham Act in infringement actions.196 Therefore, the fact that the quote serves to identify the source of a single movie should not be a bar to protection. Additionally, that consumers will likely not associate the movie quote with the production company, or designated rights holder, does not bar protection. As in the law of titles, consumers need only assume that the movie is controlled by some single source.197

Finally, under the Rogers test, movie quotes are artistically relevant to the movie because movie quotes are an essential expressive part of the movie.198 This is likely why our Mr. Buffer bemoaned the fact that no one capitalized on “Show me the money” from Jerry Maguire: The quote was a central part of the plot, character development, and expressive nature of the film. Accordingly, a movie quote, if used as a trademark in connection with a single movie, would likely receive protection under the Lanham Act in an infringement action.199

195. This assumes that the quote is put to use as a trademark, of course. That is, it “perform[s] the job of identification: to identify one source and distinguish it from other sources.” mccArthY, supra note 144, § 3:3, at 6.

196. See, e.g., Tri-Star Pictures, Inc. v. Unger, 14 F. Supp. 2d 339, 347–48 (S.D.N.Y. 1998) (finding that the section of Lanham Act prohibiting false designation of origin includes movie titles).

197. See mccArthY, supra note 144, § 10:10.198. See Rogers v. Grimaldi, 875 F.2d 994, 999 (2d Cir. 1989)

(emphasizing the importance of the artistic relevance of the title).199. The Lanham Act, however, provides trademark holders,

including corporate entities with a means of protection similar to the right of publicity—an action for trademark dilution. 15 U.S.C. § 1125(c) (2006). Trademark dilution is the weakening of a mark’s ability to distinguish clearly a single source. mccArthY, supra note 144, § 24:67. There are two types of dilution, namely “blurring” and “tarnishment.” 15 U.S.C. § 1125(c). Dilution by “blurring” is where the majority of the legal action is, whereas tarnishment is quite rare. See mccArthY, supra note 144, at § 24:67. Blurring occurs when the use of another’s mark creates “the possibility that the mark will lose its ability to serve as a unique identifier of the plaintiff’s product.” Playboy Enters., Inc. v. Welles, 279 F.3d 796, 805 (9th Cir. 2002) (quoting Panavision Int’l, L.P. v. Toeppen, 141 F.3d 1316, 1326 n.7 (9th Cir. 1998)). Tarnishment, however, occurs “when a famous mark is improperly associated with an inferior or offensive product or service.” Id. To file for trademark dilution or


Nevertheless, the long-term value of investing in a movie quote trademark is likely questionable. The movie quote trademark, if the movie quote catches on with the public so that the quote is used without any connection to the film, might not last very long. In other words, the mark could be deemed abandoned200 by a court if the quote became so part of the cultural lexicon201 that it dissociates itself from the movie and becomes generic, without any relation to the film that spawned it.202 If a movie quote becomes so ubiquitous as to become a cultural reference, such as “I’m as mad as hell, and I’m not going to take this anymore!”,203 rather than a source identifier, such as to the amazing 1976 film Network, a court would likely find that the production company has abandoned the mark and lost all associated trademark rights.204 As Professor Nimmer noted, “[s]uch a result is sometimes characterized as ‘abandonment,’ although the semantic usage of consumers may be entirely beyond the control of the trademark owner.”205 So, while a movie quote trademark may be protectable, it might not be the wisest investment.

tarnishment in this article’s context, a movie studio would need to have a valid movie-quote trademark, which, as we discussed above, is highly unlikely.

200. Under the Lanham Act, a mark is deemed abandoned when either:

(1) [I]ts use has been discontinued with intent not to resume such use. Intent not to resume may be inferred from circumstances. Nonuse for 3 consecutive years shall be prima facie evidence of abandonment[;] [or] (2) [A]ny course of conduct of the owner, including acts of omission as well as commission, causes the mark to become the generic name for the goods or services on or in connection with which it is used or otherwise to lose its significance as a mark. Purchaser motivation shall not be a test for determining abandonment under this paragraph.

15 U.S.C. § 1127.201. See Levy, supra note 17 (“These phrases have gotten

so deep into the language they’re being used by people who don’t know the origin. . . . They have left the arena of film into the popular culture.”); see also Ed Susman, Favorite Movie Quotes Transcend Ages, unIted Press InternAtIonAL, scIence news, Aug. 7, 2000 (“Many quotes come from movies that the people never saw.”).

202. mccArthY, supra note 144, § 17:8. An in-depth analysis of this argument is beyond the scope of this article. However, proving that a movie quote mark was abandoned would likely be difficult for several reasons, one of which being that the public likely associates a well-known quote with the movie in which it appears—i.e., “Show me the money” comes from Jerry Maguire. Nevertheless, the burden of proving that the mark, or quote, has been abandoned in litigation would likely rest on the party alleging abandonment. See 15 U.S.C. § 11,064(3) (allowing a party to petition to cancel a mark on the grounds that it has been abandoned).

203. network (Metro-Goldwyn-Mayer 1976).204. See mccArthY, supra note 144, § 17:8.205. Id.

3. Law of Slogans

If a production company is planning a massive advertising campaign for a soon-to-be-released movie, it might consider using a slogan to support said campaign. Could this slogan be a movie quote? Certainly, the quote “I’m kind of a big deal” would have served as an effectively hilarious, and appropriate, slogan for Anchorman: The Legend of Ron Burgundy.206 It would have been a creative, amusing way to communicate to potential viewers that they should see the movie—it is a big deal. Despite this valuable proposition, a movie quote is not a protectable trademark under the law governing slogans. We have all heard slogans, and sometimes even get sick of them. A slogan is a “catch phrase” used in an advertising campaign207 that “accompanies other marks such as house marks and product line marks.”208 As such, a “slogan” is intended to remind the consumer of the brand.209

Under the established case law, a movie quote could not acquire trademark protection as a slogan for a single movie title. First, a movie quote is not a brand. The quote is simply part of the product (the movie) that is being trademarked, not an actual trademark for the entire product. Therefore, a movie quote cannot get over the threshold requirement of use in connection with a brand.210

Further, a movie quote would not receive protection as a slogan because common phrases cannot obtain trademark protection under the Lanham Act, as the public will not identify it with just one source of goods.211 Most movie quotes that could be potential slogans are common phrases or slang and

206. AnchormAn: the Legend oF ron BurgundY (DreamWorks Pictures 2004).

207. Michael F. Aylward, Covering Your Tracks: Will There Be Insurance Coverage for False Marking Claims?, 3 LAndsLIde 19, 22 (2011).

208. mccArthY, supra note 144, § 7:19, at 45.209. Hugo Boss Fashions, Inc. v. Fed. Ins. Co., 252 F.3d

608, 619 (2d Cir. 2001). A brand is “[a] name or symbol used by a seller . . . to identify goods or services and to distinguish them from competitors’ goods or services.” BLAck’s LAw dIctIonArY 213 (9th ed. 2009).

210. Even if a movie title were a brand, words used as taglines to for distinctive brands are generally not protectable under trademark law. Cohn v. Petsmart, Inc., 281 F.3d 837, 842 (9th Cir. 2002).

211. M.B.H. Enters, Inc. v. WOKY, Inc., 633 F.2d 50, 54 (7th Cir. 1980); B & L Sales Assocs. v. H. Daroff & Sons, Inc., 421 F.2d 352, 354 (2d Cir. 1970); see mccArthY, supra note 144, § 7:22 (“[T]he ordinary consumer would not take such ordinary advertising phrases to identify a single source.”). PTO will not register common phrases and slogans. In re Boston Beer Co., 47 U.S.P.Q.2d 1914 (T.T.A.B. 1998).

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would thereby be precluded from serving as slogans. A search on Google returns over sixty thousand hits for “I’m kind of a big deal.” This probably makes the movie quote a common phrase, but it could receive protection as a slogan under the Lanham act if it acquires secondary meaning. While this is possible, it is a quite a feat to do so. How do you acquire secondary meaning in a phrase that is so ubiquitous in the public lexicon? For a commonly used movie quote to acquire secondary meaning, the would-be trademark owner would have to advertise to such an extent that the public would associate only one company with the common phrase where several other competing companies may be advertising with the identical language.212 That would be difficult, indeed.

Similarly, a movie quote would likely be considered a descriptive phrase that “impart[s] information” regarding the movie’s content, thus depriving it of trademark status.213 “I’m kind of a big deal” communicates Ron Burgundy, the eponymous Anchorman, with arrogance and lack of self-awareness that is central to his character and to the film. Thus, a court could reasonably consider the phrase as merely describing the movie’s content.

Finally, a movie quote would not be able to serve as a slogan because, as we have established above, a movie quote cannot be a legitimate trademark for a single movie in most circumstances. Under trademark law, a “‘slogan’ must be something, other than the house mark or product mark itself, that provides such a reminder.”214 A house mark “is a mark used on several different goods or services which themselves use a particular ‘product mark.’”215 For example, “Apple” is a house mark, whereas “iPhone” and “iPad” are product marks. In the context of movie quotes serving as marks for specific movies, the movie or the movie title would have to be the house mark, whereas the movie quote would have to be the product mark. However, the movie is a single good—to be a house mark, the mark must be used on several different goods. Thus, the movie cannot serve as its own house mark. Even though a movie quote cannot serve as a slogan, remember that it can likely receive protection as a trademark under the Lanham Act in an infringement action.216 But can a movie quote get protection under the right of publicity?

212. mccArthY, supra note 144, § 7:23.213. Packman v. Chicago Tribune Co., 267 F.3d 628, 641 (7th

Cir. 2001).214. Hugo Boss Fashions, Inc. v. Federal Ins. Co., 252 F.3d

608, 619 (2d Cir. 2001) (emphasis in original).215. mccArthY, supra note 144, § 23:43, at 217–18.216. See supra Part 1.B.2.a.

C. “It’s just publicity. It helps everyone”217— Rights of Publicity

This article analyzes right of publicity in a movie quote not in connection with an actor, a producer/director, or even a character, but in connection with a specific movie itself. The right of publicity has its origins in the right to privacy.218 The Second Circuit firmly established in Haelen Laboratories, Inc. v. Topps Chewing Gum, Inc.219 the right to publicity when it held that “in addition to and independent of that right of privacy, . . . a man has a right in the publicity value of his photograph.”220 Initially, the right of publicity was limited to the right of a person to control the commercial use of his or her identity.221 It has since expanded to cover an individual’s “name, likeness, or other indicia of identity”222 and has become an independent doctrine distinct from the right of privacy.223 It is a legal right “inherent to everyone to control the commercial use of identity and persona” and to make actionable any unpermitted taking.224 The right of publicity is based in state law.225 It is

217. the runAwAYs (River Road Entertainment 2010).218. Gil Peles, The Right of Publicity Gone Wild, 11 ucLA

ent. L. rev. 301, 304 (2004); see Samuel D. Warren & Louis D. Brandeis, The Right to Privacy, 4 hArv. L. rev. 193, 196 (1890).

219. 202 F.2d 866 (2d Cir. 1953).220. Id. at 868. The court stated that this “right might be

called a ‘right of publicity.’”221. Peles, supra note 211, at 304.222. restAtement (thIrd) oF unFAIr comPetItIon § 46 (1995). 223. See Waits v. Frito-Lay, Inc., 978 F.2d 1093 (9th Cir.

1992) (noting the right to publicity in voice); Carson v. Here’s Johnny Portable Toilets, Inc., 698 F.2d 831 (6th Cir. 1983) (establishing Carson’s right to publicity in catchphrase “Here’s Johnny”).

224. 1 J. thomAs mccArthY, the rIghts oF PuBLIcItY And PrIvAcY § 1.3 (2th ed. 2012).

225. At least nineteen states have statutes that confer a right to publicity or analogous rights on its citizens. See, e.g., cAL. cIv. code §§ 3344–3344.1 (West 1969) (disallowing the unauthorized commercial or advertising use of name, voice, signature, photograph or likeness); n.Y. cIv. rIghts LAw §§ 50, 51 (McKinney 1995) (prohibiting the unauthorized use for advertising or trade purposes, of the name, portrait or picture of any living person); 42 PA. cons. stAt. § 8316 (2002) (prohibiting the unauthorized use of name or likeness); tex. ProP. code Ann. § 26.001–.015 (West 1987) (prohibiting the unauthorized use of a deceased individual’s name, voice, signature, photograph, or likeness in any manner, including commercial and advertising uses); utAh code Ann. § 45-3-1–45-3-6 (LexisNexis 1999) (disallowing unauthorized commercial use of an individual’s personal identity in a way that implies approval or endorsement of a product or subject matter); wAsh. rev. code § 63.60.010 et seq. (1998) (recognizing that every individual or personality has a property right in the use of his name, voice, signature, photograph or likeness), held unconstitutional by Experience Hendrix, L.L.C. v. HendrixLicensing.com, LTD, 766 F. Supp. 2d 1122 (W.D. Wash. 2011).


also codified in the Lanham Act226 and articulated in Restatement (Third) of Unfair Competition.227

Since it was first established in Topps Chewing Gum, the right of publicity has expanded greatly to cover a person’s likeness,228 voice,229 catchphrase,230 or distinctive object231 that identify a person. Despite this expansion, his right has not expanded beyond the realm of human beings—non-human entities like corporations or organizations cannot claim a right of publicity.232 It appears that the courts have not heeded Professor Nimmer’s encouragement of the extension of publicity rights beyond humans: “Since animals, inanimate objects, and business and other institutions all may be endowed with publicity values, the human owners of these non-human entities should have a right of publicity (although no right of privacy) in such property.”233 Indeed, as the law stands, courts recognize a right to publicity only in humans.

226. 15 U.S.C. § 1125(a) (2006).227. restAtement, supra note 215, § 46.228. White v. Samsung Elecs. Am., Inc., 989 F.2d 1512 (9th

Cir. 1993) (finding that use of a blonde-wig-and-dress-donning robot turning letters on a game show set violated Vanna White’s right of publicity).

229. Waits v. Frito-Lay, Inc., 978 F.2d 1093 (9th Cir. 1992) (finding use of a Tom Waits “sound alike” in a snack food commercial violated Waits’s right of publicity); Midler v. Ford Motor Co., 849 F.2d 460 (9th Cir. 1988) (holding that the use of a Bette Midler “sound alike” singer in automotive advertising violated Midler’s right of publicity).

230. Carson v. Here’s Johnny Portable Toilets, Inc., 698 F.2d 831 (finding the use of Johnny Carson’s catch phrase “Here’s Johnny” in connection with portable toilets violated Carson’s right of publicity because the public identified him with that phrase).

231. Motschenbacher v. R.J. Reynolds Tobacco Co., 498 F.2d 821 (9th Cir. 1974) (holding that the use of likeness of a race car driver’s race car in an advertisement, even though viewers could not see the driver’s image, violated his right of publicity because the public would identify the driver from the car).

232. Felsher v. Univ. of Evansville, 755 N.E.2d 583, 594 (Ind. 2001) (following the “overwhelming majority of other states” that have held a corporation has not right of privacy); Univ. of Notre Dame Du Lac v. Twentieth Century-Fox Film Corp., 22 A.2d 452, 455 (N.Y.S. 1965) (finding that a university is not a “living person” under the New York statute); Schubert v. Columbia Pictures Corp., 189 Misc. 734, 742 (N.Y.S. 1947) (finding that a corporation is not a “living person” under New York publicity law); mccArthY, supra note 217, § 4:39, at 268. The farthest case law has extended the right of publicity beyond humans is to recognize a right of publicity in a music group. See Apple Corps. v. A.D.P.R., Inc., 843 F. Supp. 342, 348 (M.D. Tenn. 1993) (finding that “The Beatles” was protected under the Tennessee statute as an “individual”); Brockum Co. v. Blaylock, 729 F. Supp. 438, 466 (E.D. Pa. 1990) (recognizing a right of publicity in “The Rolling Stones”).

233. Melville Nimmer, The Right of Publicity, 19 LAw & contemP. ProBs. 203, 216 (1954).

1. Application of Law of Rights of Publicity to Movie Quotes

For a movie quote to be protected under a right of publicity, the movie itself would have to have a right to publicity. This is untenable under established case law—and common sense—as the right to publicity covers only natural persons.234 Courts have rejected extending the right of publicity to non-human entities that are composed of people, such as organizations and corporations, so courts are certainly not poised to recognize a right of publicity in an entirely inanimate object such as a movie. The thrust of this reasoning is that recognizing a right of publicity in movies, rather than in the actors therein, would distort the right beyond its original purposes.235 If movies do not have a right to privacy, just like organizations and corporations do not have a right of privacy under state statutes, then movies should not have a right of publicity. Indeed, to extend a right of publicity to movies would be absurd since it would effectively allow a movie to enforce the same rights that individuals have. This absurdity becomes abundantly clear when you consider that no court has accepted Nimmer’s invitation to extend the right of publicity to more understandable situations—for example, to animals or corporations.236

II. “PerhAPs You thInk You’re BeIng treAted unFAIrLY?”237 — whY movIe Quotes shouLd receIve LImIted ProtectIon

As illustrated above, movie quotes are likely protectable to a limited extent under copyright and trademark law in infringement actions. This is understandable because movie quotes are valuable and the rights holders should have the ability to capitalize on this value. However, this extension of

234. See, e.g., FLA. stAt. § 540.08 (1967) (noting that the statute covers a “natural person”); nev. rev. stAt. § 597.810 (explaining that the statute covers a “natural person”); n.Y. cIv. rIghts LAw § 50 (McKinney 1995) (highlighting that the statute covers a “living person”); tenn. code Ann. § 47-25-1102 (1984) (stating that the statute applies to a “human being”); Pump, Inc. v. Collins Mgmt., Inc., 746 F. Supp. 1159 (D. Mass. 1990) (expressing doubt that the Massachusetts statute covers commercial names or trademarks); Eagle’s Eye, Inc. v. Ambler Fashion Shop, Inc., 627 F. Supp. 856 (E.D. Pa. 1985) (holding that the right of publicity does not protect trademarks).

235. See mccArthY, supra note 217, § 4:39 (“The danger comes from expanding the right of publicity beyond its reason for being.”).

236. See Nimmer, supra note 226, at 216.237. stAr wArs: ePIsode v: the emPIre strIkes BAck

(Lucasfilm 1980).

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protection, and the means with which rights holders can mine the gold from their movie quotes, should be narrow, balancing the interests of the rights holder with the public interest in free expression and cultural development.238 Cultural development does not necessarily correspond with sophistication or artistry. “Toga! Toga!” is not a highbrow expression of American existentialism or an articulation of the downfall of our educational system, but it holds an important place in our cultural heritage—it is Americana 101, if you will.

Copyright and trademark protection should be extremely limited in their application here because movie quotes exist as part of our cultural commons. Our society has incorporated these lines into our cultural lexicon. Movie lines, trademarks, and famous characters all become parts of our culture, and we use them as a means of communication.239 “We’re not in Kansas anymore” no longer references only The Wizard of Oz, but means, “we are out of our comfort zone.” “We’re not in Kansas anymore” has transcended the initial meaning it had when Dorothy, played by Judy Garland, uttered the words.240 Movie quotes become a part of our daily lives and are a “particularly powerful means of conjuring up the image of their owners, [thus becoming] an important, perhaps at times indispensable, part of the public vocabulary.”241 Legal regimes that overly protect rights holders’ intellectual property restrict the use of well-known movie quotes may therefore restrict society’s communication of ideas.242 Courts should be acutely aware of this potential chilling effect on free speech and adjudicate accordingly.

The limitation on the protection of movie quotes is further buttressed by the fact that these movie quotes, in a sense, belong to and derive their value from the people. In the context of trademark law, trademarks partially serve to protect the goodwill of the trademark owner, which necessarily derives its value from the esteem in which consumers hold a

238. See, e.g., Rogers v. Grimaldi, 875 F.2d 994, 999 (2d Cir. 1989) (providing a good example of such considerations).

239. See Dreyfuss, supra note 14, at 408 (“[T]he public may enjoy the expressive dimensions of a trademark more than it values the underlying product.”).

240. If this line were protectable, countless movies would not be able to use this instantly recognizable, culturally significant line. For instance, Cypher in The Matrix says this very line to Neo when Neo arrives in the “real world.”

241. Robert C. Denicola, Trademarks as Speech: Constitutional Implications of the Emerging Rationales for the Protection of the Trade Symbols, 1982 wIs. L. rev. 158, 195–96 (1982).

242. Id. at 196.

good or service.243 Our culture fills them with meaning beyond their original sense, as they appeared as a few frames in a movie.244 However, as Professor Dreyfuss acknowledges in writing about rights of publicity, this can be readily adapted to movie quotes: “[e]ven the most heavily recoded image—the image that owes most of its strength to meaning provided by the audience—would be unavailable to the public without some investment by its initial purveyor.”245 Nevertheless, once brought to their attention, the people add the value to movie quotes. So, logically, the people deserve the right to use them freely. Under the “if value, then right theory,” the public has added the value to the quotes, so it should have the right to use them freely.

Because our society has incorporated movie quotes into its lexicon, overextension of intellectual property rights to movie quotes would intrude on First Amendment free speech rights. In copyright, fair use and the idea/expression dichotomy are “built-in First Amendment accommodations.”246 Allowing movie script rights holders to liberally defeat fair use, and thus preclude individuals from using uncopyrightable movie quotes, would infringe upon free speech rights and render the fair use provision meaningless. Furthermore, awarding protection to a short phrase like “show me the money” would chip away at the idea/expression dichotomy by practically eliminating the merger doctrine. One can say “show me the money” in only one way, and it is a phrase that individuals said before Jerry Maguire and continue to say. If courts overly extend protection to movie quotes, individuals will live in fear of litigation for potential trademark or copyright infringement if they use a movie quote in a

243. See mccArthY, supra note 144, § 2.15 (emphasizing that a trademark is “a symbol of the good will of the owner’s goods or services”).

244. “Toga! Toga!” was hilarious when it appeared in Animal House in 1972, but it has taken a life of its own after its release into the cultural lexicon. It has remained a vital part of our culture for forty years. This cannot just be because it appeared in a movie. Society’s continued use of the phrase perpetuates and increases its value.

245. Rochelle Cooper Dreyfuss, We Are Symbols and Inhabit Symbols, So Should We Be Paying Rent? Deconstructing the Lanham Act and Rights of Publicity, 20 coLum.-vLA J.L. & Arts 123, 141–42 (1996); see also Allied Artists Pictures Corp. v. Friedman, 68 Cal. App. 3d 127, 135, (Cal. Ct. App. 1977) (finding, in the context of trademarks in literary titles, that “[i]t is unimportant that the secondary meaning resulted from the activities of persons other than” the rights holder, and “[t]he critical question is whether the secondary meaning had been established in the public mind and not the precise manner in which it was created”). One could extend this logic to state that regardless of how a movie quote has acquired value the right holder should still reap the benefits of the value.

246. Eldred v. Ashcroft, 537 U.S. 186, 190 (2003).


subsequent literary work.247

As a more specific caution, courts should also be careful when protecting movie quotes under the Lanham Act. Allowing a trademark in a movie quote used in connection with a movie risks trademark law acting as a substitute for a copyright or courts finding copyright infringement where there should be fair use. Kamar, discussed above, is illustrative of such a proposition.248 While the case has not gained traction, it sets a dangerous example for courts and rights holders because its analysis provides a means for courts to skirt standards for copyright infringement and expand owners’ rights into the realm of the public sphere.249 Melding the two regimes would expand them beyond their bounds and would create a chilling effect on how individuals use others’ work.250 Additionally, fusing copyright and trademark law could gut the legislative and statutory intent of the Copyright and Lanham Acts, and render the most powerful part of these laws meaningless.251 The fusion could produce a legitimate fear of over-aggressiveness on the part of rights owners in exercising their rights and courts acquiescing by expanding the regimes’ respective realms of protection.

247. See Hughes, supra note 46, at 618 (“If a . . . short phrase . . . is independently protectable, then a person who thinks she has taken just the tiniest bit from a book . . . or other normal-size work will find herself liable for copyright infringement.”).

248. Universal City Studios, Inc. v. Kamar Indus., Inc., 217 U.S.P.Q. 1162 (S.D. Tex. 1982).

249. See Hughes, supra note 46, at 584–85 (lamenting that the Kamar opinion contained “no de minimis discussion, no fair use analysis, and no discussion of how . . . quantitatively insubstantial phrases were nevertheless so qualitatively important to the film”).

250. See Zuffa, LLC v. Justin.tv, Inc., 838 F. Supp. 2d 1102, 1106 (D. Nev. 2012) (finding that if the plaintiff “were allowed to proceed on a trademark claim for the display . . . or other trademarks inherently part of the copyrighted broadcast, [the plaintiff] would possess a mutant-copyright or perpetual copyright because nobody would ever be able to copy the video and display it regardless of whether the copyright had entered the public domain”); Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 37–38 (2003) (holding that the Lanham Act did not allow an author to bring a claim under the Act for failing to give credit for uncopyrighted material, because such a broad reading of the phrase “origin of goods” in 15 U.S.C. § 1125 would create a perpetual right to bring a copyright claim long after the copyright expired); mccArthY, supra note 144, § 6:17.50 (writing that trademark law “cannot be used as a substitute for a copyright”).

251. See Dastar Corp., 539 U.S. at 35 (“Reading ‘origin’ in § 43(a) [of the Lanham Act] to require attribution of uncopyrighted materials would pose serious practical problems. Without a copyrighted work as the basepoint, the word ‘origin’ has no discernable [sic] limits.”); Viva R. Moffat, Mutant Copyrights and Backdoor Patents: The Problem of Overlapping Intellectual Property Protection, 19 BerkeLeY tech. L.J. 1473, 1516 (2004) (“Concurrent copyright and trademark protection disrupts the balance established by Congress and deprives the public of the benefits of the copyright bargain.”).

III. “You Are A verY AdvAnced rAce. together we cAn Look For A soLutIon.”252 — A PotentIAL steP In the rIght dIrectIon

So far, this article has pointed out the expansive rights our legal system could afford to rights holders of movie quotes. Here, this article proposes a potentially workable scope of protection for movie quotes. While a detailed proposal is beyond the scope of this article, this article lays the groundwork for a solution that will satisfy movie quote owners, people who quote movies, policy advocates, and the courts. This proposal is situated in a twilight realm of protection between copyright and trademark law that mimics the moral rights afforded to Continental authors.253 Because a movie already enjoys significant copyright protection, courts might protect individual movie quotes excised from a script and subsequently used by and attributed to another through the analog to a moral right against the quote’s misattribution. This article offers this solution with the keen awareness that such a right could be dangerously expansive, allowing rights holders to police and control any use of their movie quotes. This article does not advocate for such a broad right. This proposal is far more limited and would be reserved to the use of a movie quote that grossly misattributes or misrepresents the movie from which it originates. To illustrate, using “E.T. phone home” as the title to a pornographic film could present an actionable infringement of the movie studio’s moral rights.

Though current U.S. copyright law does not recognize “moral rights” in literary works,254 the courts

252. Ice Age: the meLtdown (Blue Sky Studios 2006).253. These rights are generally understood to be the

following: (1) the right to nonattribution—that is, to publish anonymously; and (2) the right to prevent misattribution—that is a right to both prevent your name from being attached to works that are not yours and to keep others’ names from being attached to your works. Justin Hughes, American Moral Rights and Fixing the Dastar Gap, 2007 utAh L. rev. 659; 662–63 (2007).

254. See Gilliam v. Am. Broad. Cos., 538 F.2d 14, 24 (2d Cir. 1976) (“American copyright law, as presently written, does not recognize moral rights or provide a cause of action for their violation.”). The current Copyright Act does contain a provision providing moral rights to artists. See Visual Artists Rights Act of 1990 (V.A.R.A.), Pub. L. 101-650, 104 Stat. 5089, codified at 17 U.S.C. § 106A (2006). Specifically, V.A.R.A. extends the rights of attribution and integrity to artists whose works are protected under the provision. 17 U.S.C. § 106A(a). However, V.A.R.A. applies only to “works of visual art,” expressly excluding any “motion picture or other audiovisual work, book, magazine, newspaper, periodical, data base, electronic information service, electronic publication, or similar publication.” 17 U.S.C. § 101; see 17 U.S.C. § 106A(a). Therefore, neither the authors of nor owners of the copyright to movie scripts can sue a secondary user for

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have creatively found ways to provide moral rights-like protection for the owners of copyrights to literary works. An oft-cited example is Gilliam v. American Broadcasting Companies,255 where the Second Circuit recognized a cause of action under § 43(a) of the Lanham Act in an allegation that a party broadcasted a distorted version of the plaintiff’s television show Monty Python’s Flying Circus.256 In other words, the plaintiffs prevailed on a Lanham § 43(a) cause of action based on a misattribution claim.257 This theory still holds some sway in the courts.258

There are potential problems with affording rights holders something akin to moral rights, especially where there is no clear statutory boundary for the courts to follow. Two of these potential problems are particularly threatening to the value of free expression. First, there is potential for interference with the bedrock principle of fair use, particularly by stifling the creation of derivative works such as parodies because of the fear of being sued for infringing a rights holder’s moral rights.259 Second, such an extension of rights presents an “inherent conflict [with] the desire to allow works to become a part of the public domain.”260 Only with the development of clear, limited parameters for such rights would an equitable balance be struck.261

misattribution or distortion of the script.255. 538 F.2d 14 (2d Cir. 1976). See Ilhyung Lee, Toward

an American Moral Rights in Copyright, 58 wAsh. & Lee L. rev. 795, 809 (2001) (describing Gilliam as “the most celebrated victory for authors, the pinnacle of moral rights protections, though under Lanham Act clothing”).

256. Gilliam, 538 F.2d at 24–25. Section 43(a) of the Lanham Act creates a federal remedy for the use of a “false designation of origin, false or misleading description of fact, or false or misleading representation of fact” in connection with any goods or services. 15 U.S.C. § 1125(a) (2006).

257. Hughes, supra note 246, at 670.258. See Marradi v. Capital Entm’t Indus., No. CV 01-02622

DDP, 2002 U.S. Dist. LEXIS 28488, at *16 (C.D. Cal. Nov. 22, 2002) (“An allegation that a defendant has presented to the public a ‘garbled,’ distorted version of the plaintiff’s work should be recognized as stating a cause of action under the Lanham Act.”) (citing Gilliam, 538 F.2d at 24).

259. Kimberly Y.W. Holst, A Case of Bad Credit?: The United States and the Protection of Moral Rights in Intellectual Property Law, 3 BuFFALo InteLL. ProP. L.J. 105, 116 (2006); Dane S. Ciolino, Rethinking the Compatibility of Moral Rights and Fair Use, 54 wAsh. & Lee L. rev. 33, 78 (1997).

260. Holst, supra note 252, at 116.261. See Roberta Rosenthal Kwall, Inspiration and

Innovation: The Intrinsic Dimension of the Artistic Soul, 81 notre dAme L. rev. 1945, 2006 (advocating for “a narrowly tailored right of integrity designed to vindicate the author’s right to inform the public about the original nature of her artistic message and the meaning of her work”).

concLusIon

Movie quotes are valuable intellectual property. The value of these words is both tangible and intangible. Quotes help movie studios generate greater profits and merchandizing opportunities, and they enrich our cultural lexicon. The competing considerations of rights holders and society—i.e., those who enjoy quoting movies—are evident even in listing the value inherent in movie quotes. Our court system has demonstrated it will protect rights holders’ property—including short phrases—in court. Nevertheless, while rights holders should be able to protect and enforce their rights, courts should not allow them to trample on society’s free speech and cultural commons, and society should stand up when rights holders attempt to overextend their rights. Quotes are part of the fabric of our society, and we should use them without fear of abusive litigation from rights holders.


Unchecked Monopolies: The Questionable Constitutionality of Design Patent and Product Design Trade Dress Overlap in Light

of Egyptian goddEss, inc. v. swisa, inc.by Ellie B. Atkins

IntroductIon

Last summer, Samsung suffered a large blow in what has now been dubbed by the media as the “Smartphone Wars” when Apple received a $1.05 billion dollar jury award after suing Samsung for patent and trade dress infringement.1 The policy underlying intellectual property law reflects a tension between incentivizing invention by protecting creators’ rights and maximizing the public benefit. This balance was clearly at the heart of the now notorious Apple v. Samsung case, where following the large jury award for Apple, the parties quickly issued public statements expressing opposing sentiments.2 Apple characterized the win as a victory for inventors’ rights:

The lawsuits . . . were about much more than patents or money. They were about values. At Apple, we value originality and innovation and pour our lives into making the best products on earth. We make these products to delight our customers, not for our competitors to flagrantly copy. We applaud the court for . . . sending a loud and clear message that stealing isn’t right.3

Samsung, however, emphasized the alternative side of the tension, saying, “Today’s verdict should not be viewed as a win for Apple, but as a loss for the American consumer.”4

1. See Agustino Fontevecchia, Smartphone Wars: Who Wins And Who Loses From The Apple-Samsung Patent Ruling, ForBes (last visited Mar. 11, 2013), http://www.forbes.com/sites/afontevecchia/2012/08/27/smartphone-wars-who-wins-and-who-loses-from-the-apple-samsung-patent-ruling/.

2. Brian X. Chen, Apple Beats Samsung: First Reactions, nY tImes BLog: BIts (last visited Mar. 11, 2013), http://bits.blogs.nytimes.com/2012/08/24/samsung-apple-reactions/.

3. Chen, supra note 2.4. Bryan Bishop, Samsung: Today’s Verdict ‘a Loss for the

American Consumer’, the verge (last visited Apr. 11, 2013), http://www.theverge.com/2012/8/24/3266653/samsung-todays-apple-

As intellectual property law continues to evolve, the underlying policy goals endure unchanged. This recent case highlights the economic importance of intellectual property law5 and serves as an example of a rights holder seeking to maximize his protection by obtaining overlapping rights. In fact, Apple obtained both design patent protection and trade dress protection for the iPhone and iPad, the products at the heart of this dispute.6 In light of the high financial stakes,7 it is important that courts remain diligently committed to preserving the balance between benefitting the public and incentivizing innovation. However, in a 2008 decision, the Federal Circuit shifted the balance of intellectual property rights, blending design patent and trade dress in a way this Comment argues is potentially unconstitutional.8

Conflating these two intellectual property rights tilts the underlying balance strongly in favor of the inventor or rights holder. Design patents are constitutionally granted for a limited amount of time,9 whereas trade dress protection exists

trial-statement-loss-american-consumer.5. The jury awarded Apple $1.05 billion for Samsung’s

infringement. See Connie Guglielmo, Apple Wins Over Jury in Samsung Patent Dispute, Awarded $1.05 Billion in Damages, ForBes (last visited Mar. 11, 2013), http://www.forbes.com/sites/connieguglielmo/2012/08/24/jury-has-reached-verdict-in-apple-samsung-patent-suit-court-to-announce-it-shortly/.

6. Apple obtained registered trade dress for the iPhone design, but also asserted unregistered trade dress protection in this case. See Nilay Patel, Apple vs. Samsung: inside a jury’s nightmare, the verge (last visited Apr. 11, 2013), www.theverge.com/2012/8/23/3260463/apple-samsung-jury-verdict-form-nightmare.

7. Part of the $1.05 billion award in the Apple v. Samsung case was attributable to trade dress infringement and design patent infringement. See Guglielmo, supra note 5; see also Debra Cassens Weiss, Adidas Award of $305M in Trademark Infringement Case May be Record, ABA JournAL news (last visited Mar. 11, 2013), http://www.abajournal.com/news/article/adidas_award_of_305m_in_trademark_infringement_case_may_be_record/ ($305 million jury award for trademark infringement).

8. See Egyptian Goddess, Inc. v. Swisa, Inc. 543 F.3d 665 (Fed. Cir. 2008) (abridging the previous design patent infringement test and establishing the ordinary observer test as the sole analysis for design patent infringement).

9. See U.S. const. art. 1, § 8, cl. 8 (“Congress shall have power to . . . promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”).

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potentially indefinitely.10 Considered an important case for clarifying the design patent infringement test, Egyptian Goddess, Inc. v. Swisa, Inc.,11 also, perhaps inadvertently, tore down a wall separating product design trade dress protection from design patents when it abridged the previous design patent infringement test and adopted a test remarkably similar to the infringement test for trade dress. Courts repeatedly stated prior to Egyptian Goddess that parties may pursue trade dress protection for a product design already protected by a design patent because they considered the two protections separate and distinct bodies of law granting independent rights.12 However, following the Egyptian Goddess decision, the rights grew alarmingly close, theoretically allowing for parties to undermine the policy considerations supporting these legal doctrines.13 The potential for abuse is specifically concerning for product design trade dress, which requires a showing of secondary meaning14 a burden much lessened by the existence of a design patent granting monopolized use for fourteen years.15

This Comment will argue that the rationale

10. See Krueger Int’l, Inc. v. Nightingale Inc., 915 F. Supp. 595, 605 (1996) (explaining that trademarks’ indefinite protection depends on the strength and duration of the public’s recognition of the mark); see also 1 mccArthY on trAdemArks And unFAIr comPetItIon § 8:1 (4th ed.) (noting trade dress receives the same protection as trademarks under the Lanham Act).

11. 543 F.3d 665 (Fed. Cir. 2008).12. See W.T. Rogers Co. v. Keene, 778 F.2d 334, 337 (7th Cir.

1985) (citing their separate infringement tests as justification for the allowance of trade dress and design patent overlap); Application of Mogen David Wine Corp., 140 U.S.P.Q. 575, 549 (1964) (“In our opinion, trademark rights, or rights under the law of unfair competition, which happen to continue beyond the expiration of a design patent, do not ‘extend’ the patent monopoly. They exist independently of it, under different law and for different reasons.”).

13. The potential overlap of design patent and trade dress protection could provide an extended patent monopoly. Justification for the patent law monopoly is that the right is time-limited. However, as the rights begin to merge closer together it is more difficult to condone allowing a design patent holder to obtain indefinite trade dress protection for the same ornamental design subject of a design patent. See Krueger Int’l, Inc., 915 F. Supp. at 604-05 (stating the policy goals of patent law are to encourage invention by providing a limited monopoly whereas the goals of trademark law are to prevent consumer confusion as to the source of the goods).

14. See Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205 (2000) (deciding that product design trade dress requires secondary meaning to establish the distinctiveness necessary for trade dress protection).

15. See Winning Ways, Inc. v. Holloway Sportswear, Inc., 903 F. Supp. 1457, 1460-61 (D. Kan. 1995) (“Granting trade dress protection to an item for which a patent has expired creates tension because the product may have obtained secondary meaning or inherent distinctiveness precisely because the product was patented. If so, the trade dress protection does not have an independent basis and effectively extends the monopoly granted by the patent.”).

for allowing trade dress protection proceeding from an expired or current design patent is erroneous in light of the Egyptian Goddess test for design patent infringement. In focusing on the infringement test, it will assess whether trade dress (particularly for product design) and design patents are actually distinct, independent legal doctrines. This Comment will conclude that courts should hold parties seeking trade dress protection for product design where they already have a design patent to a higher standard, in line with the Supreme Court’s goals in Wal-Mart Stores Inc., v. Samara Brothers, Inc.16

Part I will discuss the history of design patent and trade dress protection. Specifically, it will assess the history of the infringement tests for each intellectual property doctrine and the rationales underlying the infringement tests. Furthermore, it will evaluate case law before and after Egyptian Goddess to compare courts’ design patent infringement analysis. It will also review case law prior to Egyptian Goddess that assessed the coexistence of design patent and trade dress to further examine courts’ varying rationales. Part II will assess whether design patents and product design trade dress are really distinct, independent legal doctrines. Assessing the substantial shift caused by Egyptian Goddess, the Comment will argue that courts’ previous reasoning for allowing design patent and trade dress overlap—that the legal regimes are separate and distinct—is now erroneous because the two protections have been rendered nearly identical over time. By analyzing potential situations in which this may allow for extended protection, this Comment will discuss the potential unconstitutionality of this protective overlap and its opposition to patent and trademark policy. In conclusion, this Comment will recommend a more stringent standard for product design trade dress where the design was previously, or is currently, protected by a design patent to ensure these legal doctrines do, in fact, remain independent and distinct. Specifically, requiring strong proof of distinctiveness for secondary meaning may provide the necessary safeguard from unchecked design monopolies.

16. See Samara Bros., Inc., 529 U.S. at 212 (recognizing that trade dress for product design, like a color, does not immediately serve a source-defining function in the minds of consumers, and thus, since it is not inherently distinctive, should require secondary meaning to establish distinctiveness before trade dress protection attaches).


I. BAckground

A. The History and Basic Principles of Patent Law

Patent law authority is derived from the Constitution.17 The Constitution provides, in what is commonly referred to as the Intellectual Property Clause, “Congress shall have power to . . . promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”18 This clause provides the constitutional authority for patent rights, laying out the framework for providing a time-limited monopoly in an effort to incentivize invention.19 Patents are a negative right in that they require no positive action be taken by a patent holder and provide only for the right to exclude others from using or selling a patented invention.20 Patent law has three central purposes: first, to encourage and reward invention; second, to disclose inventions; and, third, to protect the public domain by maintaining stringent patentability requirements.21

B. desIgn PAtents

There are two types of patents: utility patents for functional inventions and design patents for ornamental designs. Protection for design patents was codified in 1842 to fill a gap that existed between copyright and patent law.22 There are fundamental differences between utility and design patents, most

17. See U.S. const. art. 1, § 8, cl. 8.18. Id.19. See Wilcox & Gibbs Sewing-Mach. Co. v. Gibbens Frame,

17 F. 623, 624 (S.D.N.Y. 1883) (explaining that patent law provides a benefit to both the inventor and the public because the inventor is given a limited monopoly and the public benefits from the invention’s disclosure).

20. See Cont’l Paper Bag Co. v. E. Paper Bag Co., 210 U.S. 405, 425 (1908) (describing the patent right as the “right to exclude”).

21. Aronson v. Quick Point Pencil Co., 440 U.S. 257, 262 (1979).

22. See Susan Scafidi et al., Panel II: The Global Contours of IP Protection for Trade Dress, Industrial Design, Applied Art, and Product Configuration, 20 FordhAm InteLL. ProP. medIA & ent. L.J. 783, 787 (2010) (explaining that design patents do not have a functionality component like utility patents because they were created to “fill the gap between copyright and patent protection”), see also Dennis D. Crouch, A Trademark Justification for Design Patent Rights, 24 hArv. J.L. & tech. (2010) (manuscript at 41), available at http://ssrn.com/abstract_id=1656590 (recounting the Commissioner of Patents’ remarks in support of the Patent Act of 1902 when he testified that the role of design patents would be as a “gap-fill[er]” for the space between utility patents and copyright law).

notably the functionality requirement and the length of protection.23 Utility patents last for twenty years beginning on the application filing date, whereas the term for a design patent is only fifteen years.24 Moreover, functionality is a requirement for the issuance of a utility patent, but it is not a requirement for a design patent.25 Previously, design patents were routinely mischaracterized and underutilized.26 However, throughout the past decade, design patenting has experienced rapid growth.27 Some of the growth correlates to the creation of the Court of Appeals for the Federal Circuit in 1982, a court established to unify and strengthen the patent system.28 However, other design patent growth spikes correlate with recent landmark trade dress cases such as Samara Bros. and TrafFix, cases that resulted in more stringent trade dress requirements and thereby made design patents more appealing.29 Additionally, the recent Egyptian

23. See 35 U.S.C. §§ 171, 173 (2011), amended by Patent Law Treaties Implementation Act of 2012, Pub. L. No. 112-211, 126 Stat. 1527.

24. Compare 35 U.S.C. § 154(a)(2) (2011) (dictating the term length for a utility patent), with 35 U.S.C. § 173 (2011) amended by Patent Law Treaties Implementation Act of 2012, Pub. L. No. 112-211, 126 Stat. 1527 (dictating the term length for a design patent); see also Jeff John Roberts, From Ipads to Crocs, New Patent Law Protects Design, BLoomBerg BusInessweek (Dec. 28, 2012), www.businessweek.com/articles/2012-12-28/from-ipads-to-crocs-new-patent-law-protects-design#p1 (discussing the recently-signed Patent Law Treaties Implantation Act of 2012, which changed the design patent term from fourteen years to fifteen years, and speculating that the United States Patent and Trademark Office should expect a dramatic rise in design patent applications as a result of the new law).

25. Compare 35 U.S.C. § 101 (2011), with 35 U.S.C. § 171 (2011); see also Crouch, supra note 22 (manuscript at 9) n. 36 (noting that the requirements for a utility patent are that the invention be new, useful, and classifiable into one of four categories, whereas the requirements for a design patent are that it be new, original, ornamental, and a design for an article of manufacture).

26. See Scott D. Locke, Fifth Avenue and the Patent Lawyer: Strategies for Using Design Patents to Increase the Value of Fashion and Luxury Goods Companies, 5 J. mArshALL rev. InteLL. ProP. L. 40, 53 (2005) (acknowledging that some refer to design patents as “soft or minor patents”).

27. See Crouch, supra note 22 (manuscript at 16-20) (documenting the dramatic increase in design patents over the course of the last decade); see also Roberts, supra note 24 (predicting that design patents will become even more popular as a result of the newly-signed Patent Law Treaties Imlantation Act of 2012).

28. See Id. (manuscript at 17-18).29. See id. (suggesting that the these cases resulted in stricter

requirements for trade dress protection because the Samara Bros., Inc. holding required that trade dress for product design obtain secondary meaning before protection attaches, and the court in Traffix stated that there should be a strong presumption of functionality where a utility patent previously existed, which created a strong hurdle for those seeking trade dress protection on a

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Goddess case may explain some of the latest design patent popularity.30 Recently decided in 2008, this case simplified the design patent infringement test, lessening the burden for rights holders to prove design patent infringement.31

The process of obtaining a design patent can be much faster than that of other intellectual property rights. In comparison to trade dress, obtaining a design patent, a process referred to as “prosecution,” is a much simpler and faster process.32 Whereas trade dress protection for product design requires secondary meaning before protection attaches, design patents can be issued even before the product is used in commerce or known to the consumer.33 Prior to Egyptian Goddess, courts used a test for evaluating design patent infringement that consisted of two steps.34 First, courts employed the ordinary observer test, which assessed whether an ordinary observer would be deceived by the allegedly infringing design into thinking it was the patented object.35 Second, courts applied the point of novelty test, which required that the allegedly infringing device incorporated the same point of novelty as the patented device.36 Novelty is a requirement for

feature previously covered by a utility patent). 30. See Bruce A. Kugler & Craig W. Mueller, A Fresh

Perspective on Design Patents, 38-Jul coLo. LAw. 71 (2009) (suggesting there will be a surge in design patents after the Egyptian Goddess decision).

31. Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665, 668 (Fed. Cir. 2008).

32. See Crouch, supra note 22, (manuscript at 18-19) (noting that the design patent issueance rate is more than ninety percent and suggesting that this rate results from the fact that design patents are not closely scruitnized by the patent examiners). Design patents issue much faster than trade dress, particularly trade dress for product design, which requires secondary meaning before any rights attach. Compare Id. (manuscript at 20) (calculating that nearly half of the design patents issued in 2009 were under review for less than a year), with Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205, 211 (2000) (establishing product design trade dress requires secondary meaning to establish the distinctiveness necessary for trade dress protection). See also Roberts, supra note 24 (quoting a lawyer who stated he believes the prosecution process for design patents is relataively easy and has obtained a design patent in approximately sixty days).

33. See Crouch, supra note 22, (manuscript at 23-24) (explaining Apple’s multi-layered protection approach, which included a design patent application filed weeks before its public release date, followed by trademark registration for the same design).

34. See generally Egyptian Goddess, Inc., 543 F.3d 665 (discussing the merits of the second step of design patent infringement, namely, the point of novelty test).

35. See Egyptian Goddess, Inc., 543 F.3d at 670 (explaining the history of the ordinary observer test, which originated from Gorham Co. v. White, 81 U.S. 511 (1871)).

36. See id. (crediting Litton Systems, Inc. v. Whirlpool Corp., 728 F.2d 1423 (Fed. Cir. 1984), as the creator of the point

design patentability.37 A design is considered novel if an ordinary observer would consider the design to be different from prior designs, rather than a mere modification of an existing design, when viewing the design as a whole.38

Egyptian Goddess eliminated the second step, taking issue with the applicability of the point of novelty test.39 The court reasoned that the point of novelty test required exaggerated emphasis on small, often inconsequential, differences between the patented and accused products, thereby assigning undue importance to a feature simply because it could be characterized as novel.40 In this landmark case, Egyptian Goddess sued Swisa, Inc. for design patent infringement of its nail buffer.41 Egyptian Goddess’ nail buffer consisted of a rectangular hollow tube with a square cross-section that featured buffer surfaces on three of its four sides.42 Swisa’s product was a rectangular, hollow tube with a square cross-section, but it had buffer surfaces on all four sides.43 In finding no infringement and ruling for Swisa, the Federal Circuit said “no reasonable fact-finder could find that EGI met its burden of showing, by a preponderance of the evidence, that an ordinary observer, taking into account the prior art, would believe the accused design to be the same as the patented design.”44 The Federal Circuit stressed in its decision that an ordinary observer with knowledge of the relevant prior art is well-equipped to determine whether two designs are substantially similar. Thus, the court argued, adopting the Ordinary Observer test as the sole test for infringement better achieves the original goals of the Point of Novelty Test and avoids the Point of Novelty

of novelty test because it held that proof of similarity under the ordinary observer test was not enough to prove design patent infringement).

37. See 35 U.S.C.A. § 171 (stating a design must be “new” to be patentable).

38. See generally Sarah Burstein, Visual Invention, 16 LEWIS & CLARK L. REV. 169 (2012).

39. Egyptian Goddess, Inc., 543 F.3d at 671-78 (discussing potential problems with the point of novelty test including that it is difficult to apply where there are multiple point of novelty).

40. See id. at 677 (taking issue with the point of novelty serving as an excuse for potential design patent infringers).

41. See id. at 682-83. However, after establishing the new test, the Court did not remand to the lower court, instead analyzing the case itself. Ultimately, it found the relevant consumer was unlikely to be deceived by the allegedly infringing device. See Perry J. Saidman, Egyptian Goddess Exposed! But Not in the Buff(er) . . ., 90 J. PAT. & TRADEMARK OFF. SOC’Y 859, 880-87 (2008) (arguing the Federal Circuit misapplied the test to the facts of this case).

42. See Egyptian Goddess, 543 F.3d at 668. 43. See id.44. Id. at 682.


Test pitfalls.45

c. History and Basic Principles of Trademark Law

Unlike patent and copyright law, trademark law does not derive its authority from the Intellectual Property clause of the Constitution.46 Instead, trademark law is grounded in the Lanham Act,47 which draws its constitutional authority from the Commerce Clause.48 The primary goal of trademark law is to prevent consumer confusion as to the source of goods and to protect companies’ good will.49 This doctrine of law strives to ensure that companies are able to properly distinguish their goods from others so that consumers may easily ascertain the source of goods they see in commerce.50 A trademark must be distinctive to receive Lanham Act protection, and distinctiveness may be acquired either inherently or through secondary meaning.51 Distinctiveness is assessed on a sliding scale ranging from generic terms to arbitrary or fanciful words.52 Generic marks are not granted any protection, whereas an arbitrary or fanciful mark receives automatic protection upon its use in commerce.53 Between these two ends of the spectrum are descriptive terms and suggestive terms.54 Suggestive terms, like arbitrary or fanciful terms, are considered to be

45. See id. at 677-78 (reasoning that an ordinary observer would be naturally drawn to the differences between the claimed and accused designs that render them distinct from prior art).

46. Trademark Law is derived from the Lanham Act 15 U.S.C. §§ 1051-1141(n).

47. Id.48. U.S. CONST. art. 1, § 8, cl. 3.49. See Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763,

767-68 (1992) (describing the purposes of the Lanham Act as preventing deception and protecting against unfair competition).

50. See id. (citing 15 U.S.C. § 1127 in discussing eligibility of marks only if they serve source-identifying purposes).

51. See id. at 768 (setting forth the “general rule” that trademarks may achieve distinctiveness either inherently or by acquisition); see also Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir. 1976) (setting fourth the four categories of distinctiveness).

52. See Abercrombie & Fitch Co., 537 F.2d at 9 (“Arrayed in an ascending order which roughly reflects their eligibility to trademark status and the degree of protection accorded, these classes are (1) generic, (2) descriptive, (3) suggestive, and (4) arbitrary or fanciful.”).

53. See id. (explaining that a mark may become cancelled at any point if it becomes generic, a burden no secondary meaning can overcome because it would put competitors at an unfair disadvantage).

54. See id. (clarifying that descriptive words may obtain protection upon a showing of secondary meaning, but that suggestive words do not).

inherently distinctive and thus trademark protection is granted automatically upon the product’s use in commerce.55 However, merely descriptive terms require an additional showing of secondary meaning (or five years use in commerce) before trademark protection attaches.56 Secondary meaning requires that, in the minds of the public, the primary significance of the mark is to identify the source of the product rather than the product itself.57 This does not necessarily mean that the consumer must know which specific source the goods come from, only that the consumer must know it comes from a single, albeit often unknown, source.58 In analyzing secondary meaning, courts look to a non-exhaustive list of factors, none of which are alone determinative, including advertising costs, consumer studies, media coverage, amount of sales, and length and exclusivity of the trade dress use.59

Additionally, trademark law restricts protection to those marks that are not functional.60 The functionality doctrine forbids a producer to control a useful product feature, which would inhibit legitimate competition, in adherence to the overarching goals of trademark law of protecting the consumer by promoting competition and protecting companies’ reputations.61 A product feature is considered functional if it is essential to the use or purpose of the article or if it affects the cost or quality of the article and would put competitors

55. See id. (explaining suggestive marks were created to fill the large void between merely descriptive and arbitrary marks).

56. See id. at 10 (suggesting that the five year exception was created so as not to deprive the mark owner who has put forth substantial effort and money into creating good will and brand recognition).

57. See Qualitex Co. v. Jacobson Products Co., 514 U.S. 159, 163 (1995) (assessing secondary meaning in determining whether a color can achieve trademark protection (citing Inwood Laboratories, Inc. v. Ives laboratories, Inc., 456 U.S. 844, 851, n. 11 (1982))).

58. See mccArthY, supra note 10, § 3:1 (stating that the purpose of trademarks is to distinguish the source of one seller’s goods from another source’s goods).

59. See Topps Co. v. Gerrit J. Verburg Co., 1996 U.S. Dist. LEXIS 8556, at *15 (S.D.N.Y. 1996) (weighing factors such as Topps’ advertising, sales success, and extended exclusive use in the United States to determine that the Ring Pop trade dress has achieved secondary meaning).

60. See Qualitex Co., 514 U.S. at 165 (“The functionality doctrine prevents trademark law, which seeks to promote competition by protecting a firm’s reputation, from instead inhibiting legitimate competition by allowing a producer to control a useful product feature.”).

61. See Krueger Int’l, Inc. v. Nightingale, Inc., 915 F. Supp. 595, 605 (S.D.N.Y. 1996) (“the doctrine serves to promote competition by protecting advances in functional design from being monopolized and encouraging the broadest dissemination of useful design features.” (quoting Warner Bros. v. Gay Toys, Inc., 724 F.2d 327, 331 (2d Cir. 1983) (internal quotation marks omitted)). See also mccArthY, supra note 10, § 7:26[3][b].

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at a significant, non-reputation related disadvantage.62

d. Trade Dress

The Lanham Act also protects trade dress, which is either the product packaging of a good or the product design or configuration, so long as it serves a source-identifying function.63 Trade dress protection can protect the product itself, the design of the product, the package design, or even “features such as size, shape, color or color combinations, texture, [or] graphics.”64

The Supreme Court created separate distinctiveness rules for product packaging and product design in Wal-Mart Stores, Inc. v. Samara Brothers, Inc.65 In this trade dress infringement case, Samara Brothers, Inc. sued when Wal-Mart intentionally began selling direct replicas of Samara Brothers baby clothes.66 Following Supreme Court precedent in Taco Cabana,67 Samara Brothers argued that its marks were inherently distinctive and thus did not require proof of secondary meaning.68 The Court required proof of secondary meaning for Samara Brothers clothing, while still upholding Taco Cabana, by classifying Taco Cabana’s trade dress as product packaging and Samara Brothers’ trade dress as product design.69 Thus, the Taco Cabana decision came to stand for the premise that product packaging is inherently distinctive and does not require proof of secondary meaning, whereas the Samara Brothers case asserted that product design is not inherently distinctive, therefore requiring proof of secondary meaning before trade dress protection attaches.70

Trade dress infringement is analyzed according to the same consumer confusion test used for trademark

62. See Inwood Labs. v. Ives Labs., 456 U.S. 844, 850 n.10 (1982).

63. See Krueger Int’l, 915 F. Supp. at 601 (setting forth the different interpretations of trade dress as either the total image of the product or particular features).

64. See id. (quoting LeSportsac, Inc. v. KMart Corp., 754 F.2d 71, 75 (2d Cir. 1985)).

65. 529 U.S. 205 (2000). 66. See id. at 207-08 (discussing Wal-Mart’s actions in

sending its designer photographs of plaintiff’s goods and requesting exact replicas to be sold in Wal-Mart stores).

67. Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763 (1992). 68. See Samara Bros., 529 U.S. at 214-15 (dismissing

respondent’s contention that Two Pesos forbids requiring all product design trade dress to show secondary meaning).

69. See id. (finding the décor in the Taco Cabana restaurant qualifies as product packaging rather than product design).

70. Once something has proven distinctiveness, the party seeking trade dress protection must also establish that the mark is non-functional.

infringement.71 Each federal circuit employs their own version of a multi-factor test for infringement focused on whether or not the consumer would be confused as to the source of the goods.72 The federal circuit tests differ slightly, but generally reflect the same eight factors: strength of the mark, proximity of the goods, similarity of the marks, actual confusion, similar marketing channels, consumer sophistication, bad faith of the defendant, and quality of the defendant’s goods.73

e. A Brief History of the Relevant Case Law

1. Courts’ interpretation of design patent infringement and the focal shift resulting from Egyptian Goddess

Prior to Egyptian Goddess, courts employed the two-part infringement test.74 For example, in Hosley International Trading Corp. v. K Mart Corp.,75 plaintiff Hosley International Trading Corporation had a design patent for the ornamental design of a cauldron-shaped votive candleholder, which it claimed was infringed by the defendant. The court found no infringement, citing the second prong of the two-part test, namely that the two designs did not incorporate the same point of novelty.76 In Metrokane, Inc. v. Wine Enthusiast,77 Metrokane sued for design patent infringement concerning its corkscrew opening device, trademarked and sold under the name “the Rabbit.”78 The court granted summary judgment for the defendants, finding design patents inappropriate for part of the device and a lack of substantial similarity between the two devices.79

After eliminating the second part of the two-part test in Egyptian Goddess, courts naturally began to

71. See Taco Cabana, Inc., 505 U.S. at 766 (applying the likelihood of confusion test to trade dress infringement).

72. See e.g., Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492, 493 (2d Cir. 1961); AMF Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979).

73. See AMF Inc., 599 F.2d at 341 (explaining the multi-factor test for infringement).

74. See Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665, 670 (Fed. Cir. 2008) (explaining the previously used two-part test that consisted of the ordinary observer test and the point of novelty test).

75. 237 F. Supp. 2d 907, 911 (N.D. Ill. 2002).76. See id. at 912-13 (denying plaintiff’s motion for summary

judgment after finding that defendant’s accused device did not incorporate the same ring and raised pattern on the handle that served as a point of novelty for plaintiff’s device).

77. 185 F. Supp. 2d 321 (S.D.N.Y. 2002).78. Id. at 324.79. Id. at 327-30.


focus on ordinary observer confusion in infringement cases.80 In Huztler Manufacturing Co. v. Bradshaw International Inc.,81 Huztler sought an injunction barring the sale of Bradshaw’s products, which Huztler alleged infringed its design patents for garlic and onion food-preserving storage containers.82 The court granted Huztler’s preliminary injunction, finding that the two products would appear visually very similar to an ordinary consumer shopping for the product.83

2. The Supreme Court’s Long-Standing

Skepticism of Overlapping Rights

The Supreme Court has long viewed overlapping rights, or more specifically rights stemming from a current or expired patent, with skepticism.84 For example, in Singer Manufacturing Co. v. June Manufacturing Co.,85 the plaintiff, Singer, had many utility patents for its sewing machines, and upon expiration of those patents, competitors entered into the field copying the functional aspects of the machines and calling them Singer sewing machines.86 Singer sued, claiming trademark rights in the name Singer, and attempted to prevent its competitors from copying the name and design of Singer machines.87 Although the Court ultimately ruled that the competitors were barred from using the name Singer on their goods, it recognized that the competitors were, however, free to copy the design and form of the machine:

It is self-evident that on the expiration of a patent the monopoly created by it ceases to exist, and the right to make the thing formerly covered by the patent becomes public property. It is upon this condition that the patent is granted. It follows, as

80. See Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665, 671 (Fed. Cir. 2008) (eliminating the second part test, and thus shifting the focus to the first prong of the test: confusion amongst ordinary observers).

81. Hutzler Mfg. Co. v. Bradshaw Int’l, Inc., 11 CIV. 7211 PGG, 2012 WL 3031150 at *1 (S.D.N.Y. July 25, 2012).

82. Id.83. Id. at *13-15.84. See Dastar Corp. v. Twentieth Century Fox Film Corp.,

539 U.S. 23 (2003); Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225 (1964); Kellogg Co. v. Nat’l Biscuit Co., 305 U.S. 111 (1938); Singer Mfg. Co. v. June Mfg. Co., 163 U.S. 169 (1896).

85. 163 U.S. 169 (1896).86. Id. at 170.87. Id.

a matter of course, that on the termination of the patent there passes to the public the right to make the machine in the form in which it was constructed during the patent.88

Echoing this same sentiment, the Court in a more recent case, Sears, Roebuck & Co. v. Stiffel Co.,89 wrote “when [a] patent expires, the monopoly created by it expires, too, and the right to make the article—including the right to make it in precisely the shape it carried when patented—passes to the public.”90

In each of these cases, the Court emphasized its concern with maintaining an equal balance between the public domain and the benefit to the designer or inventor. Specifically, the Court addresses its unease with rights holders exploiting or manipulating various protections to circumvent the legal intentions of each, specifically, their limitations.

3. Lower Courts’ Inconsistent Case Law Concerning Trade Dress and Design Patent Overlap

Despite courts’ longstanding reservations about potential protective overlap, many courts do allow simultaneous protection, and it is very common for plaintiffs to obtain multiple forms of intellectual property protection.91 In 1995, the Southern District of New York addressed the validity of trade dress protection for a product feature already protected by a design patent in Hubbell Inc. v. Pass & Seymour, Inc.92 Hubbell sued defendants Pass & Seymour and Legrand for trade dress infringement concerning Hubbell’s electrical products.93 The defendants, citing Supreme Court precedent, argued that Hubbell’s expired design patents for their product precluded trade dress protection.94 The court rejected this view, reiterating that trade dress and patent law are separate bodies of law, with independent policy justifications, different

88. Id. at 185.89. 376 U.S. 225 (1964).90. Id. at 230.91. See Crouch, supra note 22 (manuscript at 45) (explaining

that it is not uncommon for patent litigation to also include allegations of copyright, trade dress, and unfair competition charges).

92. Hubbell Inc. v. Pass & Seymour, Inc., 883 F. Supp. 955, 957-58 (S.D.N.Y. 1995).

93. See id. (discussing Hubbell’s trade dress for its plugs and connectors).

94. See id. at 959 (stressing the unlawful nature of extending the patent monopoly).

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sources of authority, and separate infringement tests.95 A year later, the same court in Topps Co.

v. Gerrit J. Verburg Co.96 went a step further in finding that the existence of an expired design patent “presumptively indicates that the design at issue is not de jure functional.”97 In this case, Topps Co., creator of the Ring Pop, sued Gerrit J. Verburg Co. for the defendant’s Diamond Pop, alleging trade dress infringement.98 After finding that the Ring Pop had achieved secondary meaning, the court also addressed the potential functionality of the trade dress, which if found to be functional would bar trade dress protection.99 Addressing the expired design patent, the court echoed its sentiment from Hubbell Inc. in finding no conflict between trademark and patent overlap, but also indicated that the existence of a design patent could prove beneficial to a party seeking trade dress protection in that it served to show non-functionality.100

Again in 1996 the Southern District of New York reiterated that “[a] design patent is analytically distinct from a protectable trade dress, and industrial products may qualify for both kinds of protection without violating the policy goals of either patent or trade dress law.”101 Similar to its decision in Topps, the court argued trade dress protection does not extend a design patent monopoly, that when a design patent expires it becomes copyable, just not “in such a way

95. See id. (comparing the goals of patent law and trademark law and concluding patent law seeks to further invention whereas trademark law seeks to protect the consumer from brand or source confusion); id. at 960 (discussing the history of patent and trademark coexistence); id. (“The trademark owner has an indefinite term of protection, it is true, but in an infringement suit must also prove secondary meaning and likelihood of confusion, which the owner of a design patent need not do; there is therefore no necessary inconsistency between the two modes of protection.” (quoting W.T. Rogers Co. v. Keene, 778 F.2d 334, 337 (7th Cir. 1985)).

96. No. 96 Civ. 7302, 1996 U.S. Dist. LEXIS 18556 (S.D.N.Y. Dec. 13, 1996).

97. See id. at *30. 98. See id. at *1-5 (noting the substantial similarities between

the two products such as the sales method, configuration of the product, and product packaging).

99. See id. (finding no “particular manufacturing need or requirement” for the configuration of the Ring Pop design, and noting that this design was probably more difficult and costly to manufacture than other available designs).

100. See id. at *29-30 (suggesting that the existence of a design patent helps parties overcome the burden of showing non-functionality in obtaining trade dress protection); see also E.Z. Bowz, L.L.C. v. Professional Product Research Co., 2003 WL 22068573 No. 00 Civ. 8670 (S.D.N.Y. 2003), at *24 (finding a design patent to be helpful evidence of non-functionality, and thus also helpful in establishing trade dress protection).

101. See Krueger Int’l Inc. v. Nightingale Inc., 915 F. Supp. 595, 604 (S.D.N.Y. 1996) (clearing up “common misconceptions” concerning design patent and trade dress overlap).

that customers are deceived about what they are buying.”102

Many years prior to these cases the Court of Customs and Patent Appeals103 (C.C.P.A.) paved the way for the later decisions in finding no issue with trade dress protection and design patent overlap. Twice, in In re Mogen David Wine Corp.104 and In re Honeywell, Inc.,105 the C.C.P.A. overturned the Trademark Trial and Appeal Board (T.T.A.B.) to find that trade dress does not extend a design patent monopoly.106 Interestingly, despite the C.C.P.A.’s previous decision in In re Mogen David Wine Corp., the T.T.A.B. again denied registration of a trademark where a design patent already existed, reasoning it would undermine patent law policy. Predictably, the C.C.P.A. reversed, citing its earlier decision.

While the previous cases are representative of the majority viewpoint,107 some courts do reach alternative conclusions.108 Notably, in Winning Ways, Inc. v. Holloway Sportswear Inc., the district court expressed hesitation about the coexistence of design patent and trade dress protection, saying,

[g]ranting trade dress protection to an item for which a patent has expired creates tension because the product may have obtained secondary meaning or inherent distinctiveness precisely because the product was patented. If so, the trade dress protection does not

102. See id. at 605. (alluding to the trade dress infringement test, which analyzes consumer confusion).

103. This court was the precursor to the court of appeals for the federal circuit. See History of the United States Court of Appeals for the Federal Circuit, the FederAL cIrcuIt hIstorIcAL socIetY, http://www.federalcircuithistoricalsociety.org/historyofcourt.html (last visited April. 11, 2013).

104. 328 F.2d 925 (C.C.P.A. 1977).105. 532 F.2d 180 (C.C.P.A. 1976).106. In re Mogen David Wine Corp., 328 F.2d at 1266; In re

Honeywell, Inc., 532 F.2d at 183.107. Julia A. Matheson & Stephen L. Peterson, Combine

and Conquer: How the Synthesis of Design Patent and Trade Dress Achieve Maximum Protection for Your Product Design, FInnegAn (May 2009), http://www.finnegan.com/resources/articles/articlesdetail.aspx?news=74f843be-c63a-40cc-8ae0-007bc50fdd99.

108. See Stormy Clime Ltd. v. ProGroup, Inc., 809 F.2d 971, 977-78 (2d Cir. 1987) (“Courts must proceed with caution in assessing claims to unregistered trademark protection in the design of products so as not to undermine the objectives of the patent laws . . . . Since trademark protection extends for an unlimited period, expansive trade dress protection for the design of products would prevent some functional products from enriching the public domain.”).


have an independent basis and effectively extends the monopoly granted by the patent.109

This minority viewpoint indicates some courts remain suspicious of the potential coexistence of design patent and trade dress, recognizing the overlap’s potential to undermine the policy goals of the legal doctrines in tipping the benefits largely in favor rights holder and out of the public’s favor.

II. AnALYsIs

In light of the Egyptian Goddess design patent infringement test shift, the potential coexistence of trade dress following the issuance of a design patent undermines the constitutional grant and policy goals of patent law.110 Prior to Egyptian Goddess, courts justifying simultaneous trade dress and design patent protection reasoned that the two were distinct bodies of law, evidenced by their separate policy goals and infringement tests.111 In light of the fact that trade dress and design patents now adhere to similar infringement tests, the boundaries of these rights are also nearly identical.112 The potential for overlap is most concerning for product design trade dress, which the Supreme Court ruled in Samara Brothers could never be inherently distinctive.113 As a result, the Court

109. See Winning Ways, Inc. v. Holloway Sportswear, Inc., 903 F. Supp. 1457, 1460-61 (D. Kan. 1995) (emphasizing adherence to the underlying policy goals of patent law in noting that the public’s access is still restricted where trade dress protection attaches to a design that should have fallen into the public domain following the design patent’s expiration).

110. This Comment argues that following Egyptian Goddess, the infringement tests for design patents and trade dress became nearly identical, thereby conflating the rights and the protections associated with them. As such, a rights holder could potentially obtain both design patent protection and trade dress protection, which would allow him to extend the patent monopoly right in substance, but not in name.

111. See, e.g., In re Mogen David Wine Corp., 328 F.2d 925, 579 (C.C.P.A. 1964) (“In our opinion, trademark rights, or rights under the law of unfair competition, which happen to continue beyond the expiration of a design patent, do not “extend” the patent monopoly. They exist independently of it, under different law and for different reasons.”).

112. The court in Egyptian Goddess abridged the infringement test for design patents, eliminating the point of novelty test and re-focusing infringement on consumer confusion. See Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665, 671 (Fed. Cir. 2008). The infringement test for trade dress also hinges on the likelihood of consumer confusion; AMF Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979) (explaining the multi-factor test for infringement). As such, both legal doctrines protect the rights holder from products that might deceive a consumer in the marketplace.

113. See Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529

required that all product design trade dress achieve secondary meaning before trade dress protection attaches.114 Allowing trade dress protection where a design patent already protects the same feature significantly lessens the burden that the Supreme Court established in Samara Brothers.115 That burden, establishing secondary meaning, will be significantly lessened by the years of monopolized use resulting from the patent.116

A. The Egyptian Goddess holding lessens the burden for rights holders in proving infringement and further merges design patents with trade dress.

Prior to Egyptian Goddess, design patent infringement was not as common as the two-part test was often a difficult hurdle for patent holders to overcome.117 Even where a party could show that an

U.S. 205, 214-15 (2000) (distinguishing product design from product packaging and finding that the former cannot be inherently distinctive).

114. Id. at 215.115. See id. at 212-13 (explaining that product design serves

more than just a source-designating function and thus secondary meaning should be established as a burden to show that it does in fact serve a source-identifying function before trade dress protection attaches).

116. Secondary meaning is established when in the minds of the relevant consumers, the trademark or trade dress comes to serve a source-identifying function. mccArthY, supra note 10, § 15:1. If potential consumers are prevented from utilizing the same design patented feature(s), the product design will begin to serve as a differentiating function for the brand, thus separating it from the competitors’ products. It will then also more easily become a source-identifying feature rather than a descriptive feature for the product because of its unique status as the only product with that design amongst its competitors. For example, if a particularly popular salt and pepper shaker was shaped as a penguin, and the company that sold this product obtained a design patent for the penguin shape, it could use that design patent to prevent any competitor from selling a similar good in a similar penguin shaped design. Thus, consumers will begin to associate the penguin shape with the source of the good (the company that makes it) and not as an indicator that the product is a salt and pepper shaker, which hypothetically may have been the case if competitors were able to copy the design and the penguin shape became an increasingly popular shape for salt and pepper shakers. Additionally, the design patent will give the company fifteen years of production that can serve as evidence of continued sales, which would help establish secondary meaning. See mccArthY, supra note 10, § 15:1 (4th ed.) (stating that evidence of secondary meaning may consist of direct evidence, in the form of a customer survey, or circumstantial evidence, in the form of the input of the seller or circumstantial evidence, which can consist of evidence of sales volume, length of time used, and the quantity and quality of advertising and promotion exposing customers to the symbol).

117. See Hosley Int’l Trading Corp. v. K Mart Corp., 237 F. Supp. 2d 907, 911 (N.D. Ill. 2002) dismissed sub nom. Hosley Int’l Trading Corp. v. Designco, 79 F. App’x 429 (Fed. Cir. 2003) (noting that the case “not surprisingly” turned on whether the two devices

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ordinary observer would be deceived by the allegedly infringing product, oftentimes the points of novelty would be different, thus stifling a party’s claim for infringement. Hosley Intern. Trading Corp. v. K Mart Corp.118 provides a good example of this exact scenario. This case concerns a design patent for the ornamental design of cauldron-shaped votive candleholders, which plaintiff Hosley International Trading Corporation alleged was infringed by Designco.119 In defense, Designco argued that its products do not incorporate the same two points of novelty as plaintiff’s patent.120 Agreeing with the defense, the court found that the patentee’s points of novelty were not incorporated by the defendant, and thus granted Designco’s motion to dismiss despite finding that the defendant’s design might deceive an ordinary observer.121

Prior to Egyptian Goddess, courts focused largely on the actual design patents, rather than the perspective of the typical consumer, to find infringement. In Metrokane, Inc. v. Wine Enthusiast,122 a design patent infringement case concerning a lever-operated corkscrew device for opening wine, the court in finding no infringement reiterated the two-part infringement test, but placed little emphasis on the perspective of the relevant consumer.123 Even in its assessment of the ordinary observer test—the first part of the infringement test—the court did not address the point of view of the consumer, instead substituting its own interpretation of the design patent drawings to determine the similarity of the goods.124

Following the Egyptian Goddess decision, courts began to determine infringement according to consumer deception. Although the Ordinary Observer Test was utilized before Egyptian Goddess, it received much greater emphasis afterwards when it became the sole measurement for infringement. As such, courts began to place less emphasis on the claims in the design patents and began to focus on consumer deception.

In interpreting the Ordinary Observer test, courts understood the ordinary observer to be a typical purchaser and accordingly found infringement when

incorporated the same point of novelty). 118. Id.119. Id. at 908.120. Id. at 912.121. Id. at 911-12.122. 185 F. Supp. 2d 321 (S.D.N.Y. 2002).123. See id.124. See id. at 330 (analyzing the independent visual features

of the devices one by one and concluding “the overall visual impressions they create are markedly different” without assessing how an ordinary purchaser might construe the similarity of the goods).

a typical consumer might be confused as to the source of the goods during a typical shopping experience.125 In Huztler Mfg. Co. v. Bradshaw Int’l Inc.,126 the court assessed design patent infringement by focusing on consumer deception instead of the design patent claims.127 Despite the fact that the similarities of the ornamental designs are typically assessed by the design patent drawings, the court assessed consumer deception in commerce: “Accordingly, the ‘ordinary observer’ here is someone who has seen, shopped for, or purchased food storage items of similar design.”128

B. A comparison of the design patent and trade dress infringement tests following Egyptian Goddess demonstrates how the two doctrines are now the same.

Patentees were pleased with the Egyptian Goddess holding because it lessened the burden for proving infringement.129 While the Federal Circuit’s concerns in Egyptian Goddess130 were legitimate, its actions in simply eliminating the second step of the previous infringement test did not account for the potential new problems this shift might create.131

The Supreme Court sought to reinstate the

125. See e.g., Hutzler Mfg. Co. v. Bradshaw Int’l, Inc., 11 CIV. 7211 PGG, 2012 WL 3031150, at *15 (S.D.N.Y. July 25, 2012); Minka Lighting, Inc. v. Maxim Lighting Int’l, Inc., No. Civ. A. 3:06–CV–995–K, 2009 WL 691594, at *4 (N.D. Tex. Mar. 16, 2009) (“The ordinary observer is therefore a member of the public who is currently shopping for or has recently purchased lighting fixtures—indeed, a ‘purchaser of things of similar design.’”).

126. 11 CIV. 7211 PGG, 2012 WL 3031150 (S.D.N.Y. July 25, 2012).

127. Hutzler, 2012 WL 3031150, at *13 (S.D.N.Y. July 25, 2012) (“patent infringement can be found for a design that is not identical to the patented design.” (internal quotation marks omitted) (quoting Braun Inc. v. Dynamics Corp. of America, 975 F.2d 815, 820 (Fed. Cir. 1992))); see also id. at *14 (“The Federal Circuit has made clear that it is error for a trial court to focus on ‘each [design] element separately instead of analyzing the design as a whole from the perspective of an ordinary observer.’” (quoting Amini Innovation Corp. v. Anthony California, Inc., 439 F.3d 1365, 1372 (Fed. Cir. 2006))).

128. See Hutzler, 2012 WL 3031150, at *7.129. Marta Kowalczyk, Design Patent Infringement: Post-

Egyptian Goddess, 2010 u. ILL. J.L. tech. & PoL’Y 239, 253-54 (2010) (arguing that the elimination of the point of novelty test strengthened design patent holders’ rights because the burden in infringement cases had been shifted from the plaintiff to the accused infringer).

130. See Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665, 677 (Fed. Cir. 2008) (articulating concerns with the point of novelty test regarding its potential for abuse by design patent infringers).

131. This Comment suggests that amending the infringement test also significantly altered the metes and bounds of the design patent property rights.


goals articulated in Gorham Mfg. Co. v. White,132 stating that the test for design patent infringement “must be sameness of appearance, and mere difference of lines in the drawing or sketch, a greater or smaller number of lines, or slight variances in configuration, if sufficient to change the effect upon the eye, will not destroy the substantial identity.”133 The Court further explained that the test need not be analyzed from the viewpoint of an expert.134 In light of this goal, the court in Egyptian Goddess also looked to see if an ordinary observer would perceive the two designs to be substantially the same such as to deceive the observer into purchasing one over the other. Indeed, this test has been referred to as similar to the trade dress infringement test,135 and the words of the new test explicitly parallel trade dress infringement concerns.136

Both tests focus on a layperson’s opinion. The design patent infringement test focuses on the layperson and not an expert because an expert would be highly unlikely to ever find two objects so similar as to the point of deception. Similarly, trade dress is concerned with an ordinary consumer and not an expert in the field. Moreover, the test seems to be concerned with an ordinary consumer of the goods, another factor likening this infringement test to trademark law.137 Indeed, after Egyptian Goddess it appeared that both trademark infringement and design patent infringement were most concerned with the possibility of the average consumer’s likelihood of deception.

c. Allowing the coexistence of design patent and trade dress protection contradicts the Constitutional grant of authority for intellectual property protections for a limited time.

Not only is the potential overlap resulting in

132. 81 U.S. 511 (1871). 133. Id. at 526-27. 134. See id. at 527 (suggesting that an expert’s perspective

would never warrant finding infringement because every small change may seem large to someone well-versed in the field).

135. See Kugler, supra note 30, at 71 (describing the design patent infringement test post Egyptian Goddess as “somewhat analogous to a likelihood of confusion test, a concept primarily related to trademark law”).

136. See Crouch, supra note 22 (manuscript at 30) (“the minute distinction between design patent distinctiveness and trade dress distinctiveness may be that a trademark functions to indicate the source of goods while a design patent focuses on the appaearance of the goods themeselves. These two . . . are, of course, largely overlapping.” (internal quotation marks omitted)).

137. See Gorham Mfg. Co. v. White, 81 U.S. 511, 528 (1871) (emphasizing that the analysis should focus on the principal purchasers of the goods).

automatic secondary meaning concerning for policy implications, but it is also contrary to the constitutional grant of patent authority.138 The Intellectual Property Clause of the Constitution explicitly states that a patent will issue only for a “limited time.”139 Trademark law, which is not bound by the Intellectual Property clause of the Constitution, may potentially function indefinitely if the party consistently renews its right and uses the mark.140 If courts continue to allow coexistence of these rights, it may allow for an extended patent monopoly.141 Recognizing the similarity of these rights, evidenced by their nearly identical infringement tests, allowing trade dress protection following a design patent could indefinitely extend the same rights and protections granted by the previous design patent. This potential extension is contrary to the basic tenants of trademark law142 and upsets the delicate balance patent law seeks to preserve by depleting the public domain without any added benefit to the public as a result.

Concerned with overprotection, the Supreme Court in Samara Brothers ruled that product design must always show secondary meaning before trade dress protection attaches.143 Allowing the overlap of these rights would undermine the Supreme Court’s expressed goals in Samara Brothers by lessening the secondary meaning burden for product design.144 While secondary meaning does require some affirmative step(s) to be taken by the rights holder (such as advertising or sales), fifteen years of

138. The Constitution grants authority of a patent for a “limited time.” U.S. const. art. 1, § 8, cl. 8.

139. U.S. const. art. 1, § 8, cl. 8.140. See The Lanham Act, 15 U.S.C. § 1051 (2002) (drawing

its authority from the Commerce Clause of the Constitution, it is not limited by the constitutional mandate that the authority be for a limited time).

141. Because the trade dress and design patent protection are arguably nearly identical following Egyptian Goddess, allowing the overlap of protection would essentially create an extended right. This rights overlap is particularly troublesome because together they cancel out each other’s limitations. Trade dress protection for product design requires that secondary meaning be established before the protection attaches, a burden much lessened by the immediate protection a design patent grants. Design patents allow immediate protection, but they are limited because they only last for a short period of time. However, trade dress protection could extend the same right indefinitely.

142. Trademark law is commonly thought of as an extension of unfair competition law.

143. See generally Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205 (2000).

144. See id. at 212 (explaining that design is like color in that it cannot be inherently distinctive, and thus requiring product designs to show they have established a source-identifying function in the consumers’ eyes before allowing trade dress protection to attach).

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exclusive use granted by a design patent significantly decreases that burden, and the steps necessary to secure secondary meaning become much easier.145 Moreover, a design patent may issue before a good even is used in commerce and can be obtained much faster than trade dress protection.146 Thus, assuming, as this comment argues, that the rights are nearly identical, the immediate protection granted by a design patent undermines the benefit to the public and the free competition—the heart of the Supreme Court’s concerns in Samara Brothers.147

Some courts have justified overlapping protection by citing the differences between the two areas of law.148 For example, the Southern District of New York repeatedly cited the differences between design patents and trade dress as rationale for allowing overlapping rights. In cases pre-dating Egyptian Goddess, such as Hubbell, the court cited the differences in the purposes behind each area of law as reason for allowing overlapping protection.149 However, this rationale would no longer stand in light of Egyptian Goddess, because the rationales might remain distinct, but the practical effect of their protection is nearly identical.

In fact, many courts have even cited the existence of a design patent as evidence that the trade dress is not functional, a bar trade dress rights seekers must overcome before protection attaches.150 Courts

145. See mccArthY, supra note 10, § 15:1 (4th ed. 2003) (describing secondary meaning as fact-dependent and listing forms of evidence secondary meaning as customer surveys, evidences of sales volume, the length of time the mark has been used, and quality and quantity of advertising).

146. See Crouch, supra note 22, at 20 (calculating that nearly half of the design patents issued in 2009 were under review for less than a year).

147. See Samara Bros, 529 U.S. at 215 (predicting that consumers would be harmed if product design trade dress was considered always inherently distinctive).

148. See Hubbell Inc. v. Pass & Seymour, Inc., 883 F. Supp. 955, 959 (S.D.N.Y. 1995) (comparing the goals of patent law and trademark law and concluding that the two are distinct areas of law because patent seeks to further invention whereas trademark law seeks to protect the consumer from brand or source confusion); id. at 960 (“The trademark owner has an indefinite term of protection, it is true, but in an infringement suit must also prove secondary meaning and likelihood of confusion, which the owner of a design patent need not do; there is therefore no necessary inconsistency between the two modes of protection.” (quoting W.T. Rogers Co. v. Keene, 778 F.2d 334, 337 (7th Cir. 1985))).

149. See Hubbell Inc. v. Pass & Seymour, Inc., 883 F. Supp. 955, 959 (S.D.N.Y. 1995) (citing the differences between the trade dress and design patent infringement tests as justification for allowing their overlapping protection).

150. See E-Z Bowz, L.L.C. v. Prof’l Prod. Research Co., No. 00 Civ. 8670, 2003 WL 22068573, at *24 (S.D.N.Y. 2003) (finding a design patent to be helpful evidence of non-functionality, and thus also helpful in establishing trade dress protection).

have said that the existence of a design patent helps to establish that a design on a piece of manufacture is not functional and that the existence of a design patent prior to trade dress protection does not upset policy concerns because upon the expiration of a patent, a design may be copied so long as it does not confuse a consumer.151

Interestingly, some courts remained skeptical of overlapping rights even before Egyptian Goddess.152 Specifically, in Winning Ways, the district court expressed hesitation about the coexistence of design patent and trade dress protection.153 In particular, the court was concerned that secondary meaning may be achieved only because of the previously issued design patent.154 Although it remained the minority viewpoint, this case indicates that some courts remained concerned about potential overprotection resulting from overlapping rights.

d. Addressing the alternative argument: what is the proper role for design patents?

Design patents were originally codified to fill a gap between utility patents and copyright law.155 As a result, some have theorized that the proper role for design patents is to continue to serve as a legal gap filler, protecting areas from which trade dress specifically has reseeded.156 Dennis Crouch has observed that design patents are well suited to serve a “bootstrapping” role, specifically as a tool to help

151. See id.; Krueger Int’l, Inc. v. Nightingale Inc., 915 F. Supp. 595, 601 (S.D.N.Y. 1996) (noting that trade dress infringement requires consumer confusion).

152. See Matheson, supra note 102, at 2; Stormy Clime, Ltd. v. ProGroup, Inc., 809 F.2d 971, 977-78 (2d Cir. 1987) (“Courts must proceed with caution in assessing claims to unregistered trademark protection in the design of products so as not to undermine the objectives of the patent laws . . . . Since trademark protection extends for an unlimited period, expansive trade dress protection for the design of products would prevent some functional products from enriching the public domain.”).

153. See generally Winning Ways, Inc. v. Holloway Sportswear, Inc., 913 F. Supp. 1454, 1462 (D. Kan. 1996).

154. See id. at 1460-61; 903 F. Supp. 1457 (“Granting trade dress protection to an item for which a patent has expired creates tension because the product may have obtained secondary meaning or inherent distinctiveness precisely because the product was patented. If so, the trade dress protection does not have an independent basis and effectively extends the monopoly granted by the patent.”); see also supra note 106.

155. See Crouch, supra note 22, at 41 (discussing the “gap-filling” role of design patents).

156. See generally id. (justifying the purpose of design patents as filling the holes that other intellectual property doctrines, specifically trademark and trade dress, have left unprotected).


rights holders secure trade dress protection.157 He mentions three specific ways the existence of a design patent alleviates the burden of establishing trade dress.158 First, he notes that design patents may serve as evidence of non-functionality.159 The functionality doctrine is a strict burden all trade dress rights seekers must overcome.160 A design patent, while not enough on its own, serves as strong evidence that the design is not functional.161 Second, the existence of a design patent facilitates the acquisition of secondary meaning.162 Exclusive use for fifteen years severely lessens the burden of establishing secondary meaning, which requires that consumers view the design primarily as a source indicator and not as the product itself.163 Finally, Crouch suggests that a design patent can protect a design immediately, filling the period of time that a rights holder would otherwise have to wait unprotected against copy-cat competitors before trade dress protection came to fruition.164

Yet, it is precisely these gaps that trade dress and trademark law must leave open to maintain an equal benefit to the consumers and the rights holders. These gaps represent the tradeoffs rights holders give up to the public domain. Allowing design patents to fill all of these gaps tips the balance strongly in favor of rights holders and depletes the public domain.165 This is injurious to the public and counter to the policy goals of trademark law.166 Moreover, it is counter to the

157. Id. (manuscript at 38-40). 158. Id. (discussing what he calls design patent

“bootstrapping”).159. See id. (manuscript at 38-49) (calling this phenonmenon

the “anti-TrafFix doctrine”). 160. See Qualitex Co. v. Jacobson Products Co., 514 U.S. 159,

165 (1995) (describing the functionality doctrine as a necessary feature of trademark law to promote free and open competition).

161. See Topps Co. v. Gerrit J. Verburg Co., No. 96 Civ. 7302, 1996 U.S. Dist. LEXIS 18556, at *29-30 (S.D.N.Y. Dec. 13, 1996); E.Z. Bowz, L.L.C. v. Prof’l Prod. Research Co., 2003 WL 22068573 No. 00 Civ. 8670 (S.D.N.Y. 2003), at *24. The requirements for proving functionality, or lack thereof, for a design patent and trademark or trade dress differ, and thus the existence of a design patent does not serve as enough evidence in and of itself to establish nonfunctionality. See Crouch, Supra note 22 (manuscript at 39) (discussing Keystone Mfg. Co. v. Jaccard Corp., a case in which the district court allowed trade dress rights to attach to the same design once protected by a design patent and asserting that a design patent “simply serves as another piece of evidence to be used by the jury in determiing non-functionality.”).

162. See Crouch, supra note 22 (manuscript at 40) (explaining that the existence of a design patent does not alone establish secondary meaning, but significantly eases the burden).

163. Id.164. Id.165. The constant goal of intellectual property law is to

maintain a balance between incentivizing invention and protecting the public.

166. See Krueger Int’l, Inc. v. Nightingale Inc., 915 F. Supp.

Supreme Court’s goals as stated in Samara Brothers.167

E. Trade dress protection where there is a utility patent: the TrafFix interpretation

Although the Supreme Court has not yet addressed the effect of an expired design patent on the issuance of trade dress protection, it has analyzed the effect of an expired utility patent. In Traffix Devices, Inc. v. Marketing Displays, Inc.,168 defendant Marketing Displays began copying plaintiff’s two-spring sign feature, which was created to keep the sign standing despite strong wind.169 Traffix Devices, Inc. had obtained a utility patent for this feature, and upon the patent’s expiration Marketing Displays, Inc. began copying the device.170 Traffix Devices, Inc. sued for trade dress protection, arguing its product had achieved the necessary secondary meaning.171 The Court held that the existence of utility patent creates a strong presumption that a design is functional and thus ineligible for trade dress protection.172 However, the Court was careful to state that the existence of a utility patent is not necessarily determinative of functionality, but a big aspect for a court to consider.173

Conversely, many courts have interpreted the existence of a design patent as evidence that the design seeking trade dress protection is not functional.174

595, 604-05 (S.D.N.Y. 1996) (stating the goals of trademark law are to prevent consumer confusion as to the source of the goods).

167. See Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205, 213 (2000) (explaining that product design (as compared to product packaging) is more akin to color in that the “consumer predisposition to equate the feature with the source does not exist . . . even the most unusual of product designs-such as a cocktail shaker shaped like a penguin-is intended not to identify the source, but to render the product itself more useful or more appealing”). But see Crouch, supra note 22 (manuscript at 6) (suggesting that Samara Brothers narrowed trade dress protection precisely because of the availability of design patent protection).

168. See Traffix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23, 25-26 (2001).

169. See id. (explaining the successful, wind-resistent two-spring device was also a visible feature of the signs).

170. See id. (discussing that defendant not only deliberately waited for the utility patent to expire so that he could copy the plaintiff’s sign features, but also similarly named his company).

171. See id. at 26-27 (reviewing procedural posture whereby the district court found no evidence of secondary meaning and alternatively that the device was functional).

172. See id.173. See id. at 30 (describing disproving functionality as

a “heavy burden” that can be dispelled by showing the feature is “merely an ornamental, incidental, or arbitrary aspect of the device”).

174. See E.Z. Bowz, L.L.C. v. Prof’l Prod. Research Co., 2003 WL 22068573 No. 00 Civ. 8670 (S.D.N.Y. 2003), at *24 (noting that a design patent is helpful evidence of non-functionality).

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However, the existence of a design patent on the same subject matter for which trade dress protection is sought should also trigger courts to examine with great scrutiny whether overlapping rights would be constitutional.

F. Readjusting courts’ interpretations of overlapping rights: a recommendation for moving forward

The Supreme Court’s decisions in Egyptian Goddess and Samara Brothers should cause courts to reconsider so easily granting trade dress protection where a design patent currently, or previously, existed.175 Of course, the existence of a design patent may still be helpful in determining non-functionality, but the burden of showing secondary meaning should remain stringent. As it stands currently, a design patent provides fifteen years of exclusive use.176 Moreover, design patent prosecution is a much easier and faster process than the steps necessary for obtaining trade dress protection.177 As such, a party seeking the strongest protection for a design can obtain a design patent before that design is used in commerce, use the fifteen years (or less) granted by the patent as an aid in establishing secondary meaning, and then when either seeking to register the trade dress or assert unregistered trade dress rights, use the design patent as existence of non-functionality.178

The Egyptian Goddess infringement test shift lessened the burden on design patent holders for proving infringement.179 However, it also greatly altered the metes and bounds of the patent property right. As it now stands, according to the current infringement test, a design patent and trade dress protection offer nearly identical protective rights.180

175. See discussion infra concerning how a design patent can be used as a useful tool in establishing trade dress protection.

176. 35 U.S.C. § 173. 177. See Crouch, supra note 22 (manuscript at 18-21)

(discussing the rapidity at which design patents are issued and the available means for speeding up the process).

178. See id. (manuscript at 38-40) (disccusing what he calls “bootstrapping,” or the process whereby a rights owner uses a design patent to fill the holes not protected by trade dress and as a tool in establishing distinctiveness and nonfunctionality).

179. See Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665 (Fed. Cir. 2008) (abridging the previous design patent infringement test by eliminating the second step and establishing the ordinary observer test as the sole analysis for design patent infringement).

180. See Crouch, supra note 22 (manuscript at 3) (“Both regimes focus on the visual appearance of a product or its packaging and both regimes allow the rights-holder to exclude others from uses that lead to customer confusion.”).

Allowing design patents to fill the holes left open by trade dress thus only further blurs design patent and trade dress protection.

In line with the Supreme Courts goals in Samara Brothers—to enhance the standard required for trade dress protection—courts should not allow parties to use a design patent as an easy road to showing secondary meaning.181 Certainly the party seeking trade dress protection will still carry the burden of using the good in commerce and marketing the good; however, the burden of achieving secondary meaning will certainly be lessened by fifteen years of exclusive use. Following the Court’s rationale in TrafFix, this Comment urges courts to view the existence of a current or expired design patent as strong evidence that the design is not distinctive. The Court ruled in TrafFix that the existence of a utility patent would trigger a presumption that the trade dress was functional.182 Similarly, the existence of a design patent should be trigger the presumption that the mark is not distinctive. Of course, for product design trade dress the mark already requires secondary meaning to acquire the distinctiveness necessary for trade dress protection.183 The existence of a design patent in this situation would therefore trigger a stronger showing of secondary meaning. Courts should view the design patent as a sign that the rights seeker’s path to secondary meaning was significantly lessened by the patent monopoly, and thus courts should require that the secondary meaning necessary for distinctiveness be more persuasive than would be necessary otherwise.

concLusIon

The concerns of overlapping rights and extended monopolies have real and tangible effects on the marketplace and competition. The headline grabbing cases such as Apple v. Samsung help remind courts and the public of the costs, both financially and to the free marketplace, of loose regulations and casual scrutiny.

The Supreme Court has long regarded overlapping rights with skepticism. This suspicion

181. The Supreme Court in Samara Brothers recognized that product design for trade dress does not inherently serve a source-identifying function. Thus, it requires a showing of acquired distinctiveness (secondary meaning) before trade dress protection can attach. Fifteen years of exclusive use, granted by a design patent, would severely lessen, if not nearly eradicate, the burden the Supreme Court sought to establish in Samara Brothers.

182. TrafFix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23, 31 (2001).

183. See Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205, 216 (2000).


is necessary to ensure that the intellectual property rights remained balanced. The underlying policy goals require that the greatest benefit possible be bestowed to both the public and the inventors, to incentivize and to ensure society profits as a result. This is no different in the case of overlapping trade dress protection and design patents. Although previously courts were able to justify overlapping rights by citing the distinct differences between these two protective rights, they have since merged in a way that allowing overlapping rights without further scrutiny could result in prolonged, unconstitutional monopolistic use. The Court of Appeals for the Federal Circuit in Egyptian Goddess altered the infringement test for design patents and in so doing, also altered the defined property rights associated with design patents. As such, the infringement test and the protective rights of design patents are now nearly identical to those of trade dress. Allowing design patents to serve as useful aids in establishing trade dress undermines the stated goals of trade dress protection. The protective gaps left by trade dress protection are not due to congressional or judicial oversight, but are a result of careful consideration and recognition of the delicate balance intellectual property law seeks to maintain. The protective holes are space that is dedicated to the public domain. If design patents are able to fill those gaps, the public domain—and public—suffers as a result. Consequently, courts must be careful in their consideration of trade dress and design patents for identical subject matter. Moreover, the United States Patent and Trademark Office should also remain diligent when assessing the registration of trade dress for subject matter already protected, or previously protected, by a design patent. The consequences of not doing so may have severe anti-competitive effects. Large companies such as Apple and Nike consistently seek to bolster their intellectual property protective measures, and in allowing this overlap, their competitors are put at a severe disadvantage.

In line with the Court’s decisions in TrafFix and Samara Brothers, the existence of a design patent should trigger a presumption that the trade dress is not distinctive. In the case where the party seeks trade dress protection for product design, which already requires secondary meaning (acquired distinctiveness), the burden on the rights seeking party should be stronger than it would be otherwise to prove that the public views the trade dress as an indication of source.

Bearing in mind this recommendation, courts can continue to evaluate, and allow, some overlapping rights. It is commonplace for one product to be

protected by multiple facets of intellectual property law. However, in light of the recent shift in the protective boundaries of design patents, it is imperative that courts remain diligent in preventing rights holders from extending what the Constitution mandates are “limited rights.”184

184. U.S. Const. Art. 1, § 8, cl. 8.

72 Spring 2013

The Prior User Rights Defense: Working Silently in the Background to Change the Way Businesses Protect Their Inventions

by Mikhael Mikhalev1

1I. the AmerIcA Invents Act

The Leahy-Smith America Invents Act (AIA) was signed into law on September 16, 2011,2 and includes the most substantial changes to the patent laws since they were codified in 1952.3 The purpose of the changes include minimizing unnecessary litigation costs, improving patent quality, harmonizing the U.S. system with the best parts of other major patent systems, encouraging U.S. manufacturing, and ensuring that the U.S. patent system fulfills the Constitutional imperative4 to “promote the Progress of Science and useful Arts.”5

Among the many changes to the laws, the most important changes help transition the U.S. patent system from a first-to-invent to a first-to-file system of awarding patents.6 Under the new laws, an inventor obtains priority for a patent right based on his or her date of filing their patent application, not the date they conceived the invention.7 Through these changes, the patent laws will now better promote progress by granting an exclusive patent right to the first person to file a patent application, thus encouraging early disclosure. Disclosure will allow others to build upon the advances described in the patent application. This will increase the public storehouse of knowledge and rapidly increase the progress of science.8

However, the AIA does carve out a defense to

1. Mikhael obtained his J.D. at the S.J. Quinney College of Law at the University of Utah and is currently employed at Maschoff Brennan, scheduled to sit for the Utah bar in July 2013. The views expressed in this article by the author are those of the author and are not to be attributed to employers or clients.

2. Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125 Stat. 284 (2011) (codified as amended in scattered sections of 35 U.S.C.).

3. Patent Act of 1952, Pub. L. No. 82-593, 66 Stat. 792 (1952); h.r. reP. no. 112-98, at 38 n.4 (“Congress has not enacted comprehensive patent law reform in nearly 60 years.”).

4. h.r. reP. no. 112-98, at 38–40.5. u.s. const. art. I, § 8, cl. 8.6. h.r. reP. no. 112-98, at 42.7. Id.8. See generally William Fisher, Theories of Intellectual

Property, in new essAYs In the LegAL And PoLItIcAL theorY oF ProPertY (Cambridge University Press, 2001), available at http://www.law.harvard.edu/faculty/tfisher/iptheory.html (discussing the moral and philosophical justifications for intellectual property rights).

infringement that may avail a first inventor that is not the first-to-file a patent application. The AIA expands an already existing defense to infringement based on prior commercial use, commonly referred to as the “prior user rights defense.”9 This defense may protect a party that was first to invent the patented invention,10 but did not file for a patent and instead, commercially used the invention for one year.

The prior user rights defense is necessary in balancing the equitable interests of an earlier user with the goals of promoting disclosure and accelerating innovation that are central to our patent system.11 This balance is met by allowing the earlier inventor/user to continue uninterrupted commercial use of the invention, while also allowing the later inventor (who filed for a patent and disclosed the invention) to obtain a patent enforceable against all others.12

However, critics of the expanded prior user rights defense claim that it will negatively impact innovation, start-up enterprises, small businesses, or individual inventors.13 These critics argue that this defense makes patents less valuable, and that small businesses and individual inventors will not be able to take advantage of the defense because they often do not have the manufacturing capabilities to obtain prior user rights.14 Others argue that the defense will encourage companies to keep their inventions as trade secrets, thereby stifling innovation by not allowing other parties to build upon a patent disclosure.15

9. h.r. reP. no. 112-98, at 44.10. But see 35 U.S.C. § 273 (2011) (illustrating that the

requirements of the prior user rights defense do not include that the prior user be the first inventor).

11. Gary L. Griswold & F. Andrew Ubel, Prior User Right—A Necessary Part of a First-to-File System, 26 J. mArshALL L. rev. 567, 572 (1993).

12. Id.13. See Charles R.B. Macedo, First-to-File: Is American

Adoption of the International Standard in Patent Law Worth the Price?, 18 AIPLA Q.J. 193, 228 (1990) (arguing that big companies will still be able to outspend small companies in obtaining prior user rights, giving them an unfair advantage).

14. Chris P Konkol, Prior-Invention Rights: The Excluded Middle, 77 J. PAt. & trAdemArk oFF. soc’Y 666, 670 (1995); Edward L. MacCordy, The Threat of Proposed Patent Law Changes to the Research University, 20 J.c. & u.L. 295, 303 (1994).

15. See Nicholas Mattingly, Prior User Rights: Rewarding Those Who Don’t Contribute, IPwAtchdog (Mar. 11, 2012, 1:56 pm), http://www.ipwatchdog.com/2012/03/11/prior-user-rights-


This Article will examine the structure of the prior user rights defense, as well as its potential impact on litigation and the United States patent system as a whole. It will discuss the entities that will benefit from this new system and how these policy changes will affect the way businesses operate.

II. the structure oF the PrIor user rIghts deFense

The old version of the prior user rights defense was codified in 35 U.S.C. § 273 in 1999, and was limited only to business method patents. It was enacted in response to State Street Bank & Trust Co. v. Signature Financial Group, Inc.,16 in which the Court of Appeals for the Federal Circuit affirmed that business methods are eligible subject matter for patenting.17 The decision created uncertainty because United States businesses could be liable for patent infringement for continued use of internal business processes that were thought to be unpatentable.18 Although this early version of Section 273 was very narrow, the State Street Bank decision also sparked congressional debate for broader prior user rights.19

The 2011 AIA significantly expanded Section 273 prior user rights by extending the defense to all technologies, not just business method patents.20 The defense is now available to parties who 1) commercially employed the invention, 2) in the United States, 3) in connection with an internal commercial use, an arm’s length sale, or an arm’s length transfer of a useful end result of the commercial use, 4) more than one year before the earlier of either the filing date of the patent application or the date of public disclosure by the patentee during the patentee’s grace period.21

Senator Leahy expressed his intent that this section be applied broadly during the Senate’s September 2011 consideration of the House-passed bill:

rewarding-those-who-dont-contribute/id=22742/ (arguing that prior user rights weaken patents and protect companies that choose to prevent others from building upon their inventions by keeping them secret).

16. 149 F.3d 1368 (Fed. Cir. 1998), cert. denied, 525 U.S. 1093 (1999).

17. Id.; Intellectual Property And Communications Omnibus Reform Act, h.r. reP. no. 106-464, at 122 (1999).

18. h.r. reP. no. 106-464, at 122 (1999).19. See, e.g., AdvIsorY comm.’n on PAtent LAw reForm,

102nd cong., rePort to the sec. oF com. (Comm. Print 1992); Patent Harmonization Act, H.R. 4978, 102d Cong. § 3 (1992).

20. Compare 35 U.S.C. § 273 (2006), with amended 35 U.S.C. § 273 (2011).

21. 35 U.S.C. § 273(a) (2012).

The phrase “commercially used the subject matter” is intended to apply broadly, and to cover a person’s commercial use of any form of subject matter, whether embodied in a process or embodied in a machine, manufacture, or composition of matter that is used in a manufacturing or other commercial process.22

The AIA includes several limitations to the prior user rights defense. The defense is personal and may not be licensed, assigned, or transferred unless there is an assignment or transfer of the entire business to which the defense relates.23 The defense is geographically limited to prior uses that occur in the United States.24 If a person acquires the defense through an assignment or transfer, then the defense is limited to the sites where the invention was used prior to the critical date.25 Furthermore, the defense may not be raised against patents owned by or assigned to universities or affiliated technology transfer organizations.26 A party may lose the ability to assert the defense if they have abandoned commercial use of the subject matter at issue.27

The prior user rights defense is also limited to parties acting “in good faith.”28 In addition, the party asserting the defense must be a true inventor: a person may not assert the prior user rights defense if the subject matter was derived from the patentee or persons in privity with the patentee.29 Two provisions of the new Section 273 are aimed at discouraging frivolous litigation. First, a defendant asserting the prior user rights defense must prove the requisite elements by clear and convincing evidence.30 Second, if a party asserts the prior user rights defense without a reasonable basis, the court “shall” find the case exceptional for the purpose of awarding attorney fees.31

22. 157 cong. rec. S5440 (daily ed. Sept. 8, 2011) (statement of Sen. Leahy).

23. 35 U.S.C. § 273(a)(1) (2012).24. Id. § 273(e)(1).25. Id. § 273(e)(1)(C).26. Id. § 273(e)(5).27. Id. § 273(e)(4).28. Id. § 273(a)(1).29. Id. § 273(e)(2).30. Id. § 273(b).31. Id. § 273(f).

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III. the PrIor user rIghts deFense wILL LIkeLY never Be successFuLLY Asserted In LItIgAtIon

Although the AIA constitutes a major policy change that will shift the balance of patent rights, the prior user rights defense will rarely be asserted in litigation. Instead, the prior user rights defense will lurk in the background and substantially change the way our patent system operates. Companies may choose to protect their inventions with trade secrets instead of patents. University patents will become stronger because they are not subject to the defense, and companies will be encouraged to license and acquire university patents. Non-practicing entities will have a more difficult time asserting their patent rights, and instead will be encouraged to quickly license or assign their patents to manufacturers. Although these changes will be substantial, they will not significantly impact patent litigation.

A. Many Alleged Infringers Will Not Qualify for the Prior User Rights Defense

The statute sets out many conditions that must be met before the defense applies. Dennis Crouch, a notable patent commentator, described the requirements as being “like the eye of the needle” and “difficult to pass through.”32 Many prior users will not qualify for the defense,33 and few companies will be willing to “bet their factory” on successfully asserting this defense.

The first major hurdle is the timing requirement. An accused infringer must be able to show that they began to commercially use the invention at least one year before the patentee’s filing date.34

Alternatively, if the patentee publicly disclosed the invention before filing then the accused infringer must show commercial use even further in advance of the filing date, all the way back to one year before the date of public disclosure.35

Inventors who choose not to file a patent application and instead decide to keep their invention secret are subject to a long period of uncertainty. Assuming the inventor has access to all pertinent

32. Dennis Crouch, Prior User Rights Defense, PAtentLYo (Feb. 1, 2011), http://www.patentlyo.com/patent/2012/02/prior-user-rights-defense.html.

33. Prior User Rights: Strengthening U.S. Manufacturing and Innovation, Hearing Before the Subcomm. on Intellectual Prop., Competition & the Internet of the H. Comm. on the Judiciary, 112th Cong. 78, at 67 (2012) (prepared statement of Dennis Crouch).

34. 35 U.S.C. § 273(a)(2)(A) (2012).35. Id. § 273(a)(2)(B).

public disclosures, the inventor must still “sweat it out” for one year in the hopes that no other true inventor files for a patent application during that time period. Furthermore, if someone else did in fact file a patent application within the one-year time period, inventors that decided to keep their invention secret would not find out about the application until it is published by the USPTO eighteen months later.36 Thus, inventors that choose to keep their inventions secret have up to two and a half years of uncertainty before they will know whether they satisfy the timing requirement of Section 273.

With such a long period of uncertainty, many qualifying prior uses may be irrelevant and no longer in use by the time that the USPTO issues the relevant patent. Financial constraints on the USPTO have caused a severe backlog, leading to a delay of several years for an average patent application to be issued as a patent.37 Many recently issued U.S. patents have an effective filing date of more than four years earlier.38 This means prior users may have a window of at least five years to legally practice the invention without needing the prior user defense.39 In some practice areas, five years is enough to make a technology obsolete because a user can move to a different, improved technology.40

The statute also requires good faith and prohibits derivation.41 The party asserting the defense must have independently invented the claimed invention. Reverse engineering, observation, or any other methods of obtaining the invention from the patent owner are prohibited.42 Independent invention by two separate parties is not common in most technological fields, so the circumstances under which the prior user rights defense may be raised are unusual. Furthermore, independent invention by more than one party may support a finding of patent invalidity for obviousness, which is discussed below.43

The defense may not be asserted against institutions of higher education and associated

36. See 37 C.F.R. § 1.211 (2005) (requiring the USPTO to publish patent applications promptly after the expiration of a period of eighteen months from the earliest filing date).

37. Crouch, supra note 32.38. Id.39. Id.40. Id.41. 35 U.S.C. § 273(a)(1), (e)(2) (2012).42. See id. § 273 (e)(2) (“A person may not assert a defense

under this section if the subject matter on which the defense is based was derived from the patentee or persons in privity with the patentee.”).

43. See infra part 2.D.


technology transfer offices.44 From 1969 to 2008, 58,701 patents have been granted to universities.45 Although university-owned patents represented only 1.46% of all granted utility patents,46 this number is still significant and will prevent some defendants from asserting the prior user rights defense because the patent is owned by a university.

Furthermore, the university exception will result in universities playing an increasing role in the patent landscape because their patents will be invulnerable to the prior user rights defense. Companies will prefer to license university patents because they will provide a more predictable and stronger exclusive right. The university exception may also encourage companies to fund university research, because the patent rights a university can acquire are stronger than that of a private research firm. The percentage of total patents filed by universities will likely increase with the passage of the AIA, and thus so will the amount of patents invulnerable to the prior user rights defense.

Finally, Section 273 only applies to patents issued on or after the effective date of the AIA on September 16, 2011.47 As of May 1, 2012, there were approximately 2.1 million U.S. patents in force.48 Less than 150,000 of those were issued after the effective date of the AIA.49 Thus, the prior user defense will not be applicable to most patents in force, but this will change over time as more patents are issued.

Even if a defendant is able to meet all of the requirements for asserting the prior user rights defense, strategic concerns will often encourage a party to take an alternative course of action.

B. Many Defendants will Prefer an

Invalidity Defense Instead of the Prior User Rights Defense

If both invalidity and prior user rights are available as a defense, then a defendant is better off asserting invalidity. Invalidity does not come with as many restrictions and limitations as the prior user

44. Id. § 273(e)(5).45. usPto PAtent technoLogY monItorIng teAm, U.S.

Colleges and Universities Utility Patent Grants 1969-2008, Ptmt LIst oF vIewABLe rePorts (Dec. 20, 2010), http://www.uspto.gov/web/offices/ac/ido/oeip/taf/univ/asgn/table_1_2008.htm.

46. Id.47. 35 U.S.C. § 273 (2012).48. Dennis Crouch, How Many US Patents are In-

Force?, PAtentLYo (May 4, 2012), http://www.patentlyo.com/patent/2012/05/how-many-us-patents-are-in-force.html.

49. Id.

rights defense. Furthermore, asserting prior user rights in litigation may be risky because an alleged infringer must admit that their actions would otherwise constitute infringement and the scope of the prior user rights defense is uncertain because there is no case law on the topic.

Invalidating a patent is more attractive to an alleged infringer because there is no one-year commercial use requirement.50 Also, invalidity does not include a site restriction, and prior art is not limited to activity in the United States.51 Further, the invalidity defense may be asserted against university patents.52 Finally, invalidating a patent may protect assignees, licensees, and other affiliates from charges of infringement.53

In the prior user rights defense, the burden of proof is on the defendant to establish a prior commercial use by clear and convincing evidence, which is the same burden as invalidity.54 However, in most cases it will be clear to a defendant whether they have enough evidence to establish a prior commercial use. Companies cannot do business without records, and the records of commercial use are normally voluminous and easy to access and to prove.55

50. 35 U.S.C. § 282 (2012) (defining the defenses to infringement as not providing for a site restriction or requiring a commercial use).

51. Compare 35 U.S.C. § 273 (requiring prior user rights activity to occur in the United States), with 35 U.S.C. § 102 (2012) (describing prior art for novelty and loss of right to a patent).

52. 35 U.S.C. § 273(5).53. Compare 35 U.S.C. § 273(e)(1)(A) (providing that the

prior user rights defense is a personal defense, which may only be asserted by the party that commercially used the invention), with 35 U.S.C. § 282 (2012) (not restricting the invalidity defense). Therefore, in many situations, contracting parties may be subject to an indemnity clause that will encourage the indemnifying party to assert invalidity because the defense will be effective for both parties.

54. 35 U.S.C. § 273(b) (“A person asserting [the prior user rights defense] shall have the burden of establishing the defense by clear and convincing evidence.”); see also 35 U.S.C. § 282 (stating that a granted “[p]atent shall be presumed valid” and that the party asserting invalidity has the burden to overcome this presumption, but without specifying an evidentiary standard). However, the Federal Circuit requires parties to prove invalidity by clear and convincing evidence. Pfizer, Inc. v. Apotex, Inc., 480 F.3d 1348, 1359 (Fed. Cir. 2007) (“[T]he patent challenger bears the burden of proving the factual elements of invalidity by clear and convincing evidence.”). Some scholars have argued in favor of reducing this standard. See Etan S. Chatlynne, The Burden of Establishing Patent Validity: Maintaining a Heightened Evidentiary Standard Despite Increasing “Verbal Variances,” 31 cArdozo L. rev. 297, 319-20 (2009) (discussing the arguments for reducing the standard but ultimately arguing in favor of retaining the clear and convincing standard).

55. Charles L. Gholz, Prior User Rights, the new PAtent LAw And whAt It meAns to You, oBLon sPIvAk (2011), available at http://www.ieeeusa.org/calendar/seminars/AIA-seminar/documents/

76 Spring 2013

From the very nature of business, if there is truly a commercial use, there will be evidence documenting the use such as equipment invoices, receipts, employee testimony, and internal memorandums.

In addition to the high burden of proof, defendants will be cautious in asserting the prior user rights defense because the defense is subject to an attorney’s fee shifting provision. Under 35 U.S.C. § 273, if the prior user rights defense is pleaded without a reasonable basis, the case shall be declared an exceptional one for the purpose of awarding attorney’s fees.56 This provision takes away the broad discretion that courts usually have to award attorney’s fees.57 Defendants may be accused of not having a reasonable basis to assert this defense unless they produce a separate opinion of counsel, which would put a substantial burden on the defendant. The risk this attorney’s fee shifting provision places on the defendant is a deterrent to the assertion of a prior user rights defense.

The invalidity defense applies to a broader range of infringement actions than the prior user rights defense. Invalidity renders the entire patent ineffective against a defendant.58 On the other hand, the prior user rights defense is not a general license.59 It is limited only to the specific subject matter of the established commercial use.60 There are two exceptions to this limitation: 1) the prior user may increase the quantity or volume of the prior use and 2) the prior user may make improvements to the prior use, but only as long as the improvements do not infringe the asserted patent.61

1. The First Exception: Increasing the Quantity or Volume of the Prior Use

The first exception allows a prior user to expand quantity or volume of a prior use, but to what

GholzPRIORUSERRIGHTS22Oct11.pdf.56. 35 U.S.C. § 273(f) (2012) (referring to 35 U.S.C. § 285

that applies generally to patent infringement cases and provides that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party”).

57. In determining whether or not a case is “exceptional” under Section 285, courts look at “the totality of the circumstances.” Yamanouchi Pharm. Co., Ltd. v. Danbury Pharmacal, Inc., 231 F.3d 1339, 1347 (Fed. Cir. 2000).

58. 35 U.S.C. § 102 (2012) (describing prior art that may anticipate a patent).

59. 35 U.S.C. § 273(e)(3) (2012).60. Id.61. Id. (“[T]he defense shall also extend to variations in the

quantity or volume of use of the claimed subject matter, and to improvements in the claimed subject matter that do not infringe additional specifically claimed subject matter of the patent.”).

extent? Without any judicial interpretation the lines are unclear. For example, hypothetical Chair Company manufactures chairs that are subject to Patent X, and they have a prior user rights defense for this use, but Chair Company wants to expand its production. If Chair Company has room in their factory, they can probably safely buy more of the same equipment they use to produce the patented chairs. But, can Chair Company open a new factory in Omaha, and buy more equipment for that factory?

The USPTO has interpreted the prior user rights defense to be geographically limited to cover only those sites where the invention was used before the critical date.62 To support this interpretation the USPTO cites what is now codified as 35 U.S.C. § 273 (e)(1)(C),63 but this section appears to limit the site restriction only to circumstances where the prior user rights defense was acquired by a party as part of an assignment or transfer.64

If the USPTO’s interpretation of site restriction is correct, to what extent does it apply? Can Chair Company purchase the vacant lot next to their chair factory and expand its production facility, or is that considered a new site? If Chair Factory already owns the vacant lot and it simply wants to make its existing factory bigger, then that would probably be considered part of the same site, and simply a permissible increase in the “quantity or volume of use of the claimed subject matter.”65 However, it would be difficult to apply a site restriction without rendering ineffective the provision of the Act that allows a party to increase the quantity or volume of production.

Furthermore, the site exception draws an arbitrary and unfair distinction between companies that are easily able to expand into surrounding areas and companies that are not. To build on the above hypothetical, both Chair Company and Stool Builder have prior user rights for patented chairs. Chair Company owns a factory on a hundred-acre site in the Utah desert. Stool Builder’s factory is located in downtown New York City where expansion is impractical. Both Stool Builder and Chair Company

62. u.s. PAtent And trAdemArk oFFIce, rePort on the PrIor user rIghts deFense 1, 7 (2012), available at http://www.uspto.gov/aia_implementation/20120113-pur_report.pdf.

63. Id.64. See 35 U.S.C. § 273(e)(1)(C) (2012) (“A defense under

this section, when acquired by a person as part of an assignment or transfer described in subparagraph (B), may only be asserted for uses at sites where the subject matter that would otherwise infringe a claimed invention is in use before the later of the effective filing date of the claimed invention or the date of the assignment or transfer of such enterprise or line of business.”).

65. Id. § 273(e)(3).


want to expand their prior use under the “quantity or volume of use” exception. There is no reason why Stool Builder should not be able to open a new separate site in Utah simply because it doesn’t have a large location like Chair Company, who can expand on the land where its factory is located. In this sense the USPTO’s site exception may unfairly restrict parties with a proper prior user rights defense.

However, a site exception may make sense in some circumstances. Say Bobby Builder has a prior commercial use because he built ten of the Patent X patented chairs in his garage and sold them in arm’s length transactions on the Internet over one year ago. Bobby obtained a ten-million dollar loan from the bank and now wants to expand his chair making enterprise by building factories in all fifty states. If the site restriction in Section 273 did not apply to Bobby because he is the original prior user, then Bobby would have an unlimited right to expand his minor prior use. This would be an unreasonable extension of Bobby’s prior user rights defense and an unfair abrogation of the Patent X right to exclude because Bobby’s minor prior use does not justify an expansion of Bobby’s enterprise to create an enormous national corporation.

An analysis of the legislative history of the AIA indicates that Congress intended the site exception to apply only in cases of a transfer of prior user rights. Section 273 (e)(1)(C) was copied identically from the pre-AIA Section 273 (b)(7), with little discussion regarding the site exception.66 However, a 1999 AIPA Committee Report did comment on the site exception’s application, stating:

Specifically, when the enterprise or line of business to which the defense relates has been transferred, the defense may be asserted only for uses at those sites where the subject matter was used before the later of the patent filing date or the date of transfer of the enterprise or line of business. A site is a factory site or other major facility in which an enterprise or line of business has made a significant capital investment, and does not include, for example, offsite locations for development of software components or manufacture of parts or

66. See Joe Matal, A Guide to the Legislative History of the America Invents Act: Part II of II, 21 Fed. cIr. B.J. 540 (2012), 570-71, available at http://www.uspto.gov/aia_implementation/guide_to_aia_part_2.pdf (exhaustively describing the legislative history of Section 273(e)(1)). Compare 35 U.S.C. § 273(e)(1)(C) (2012), with 35 U.S.C. § 273(b)(7) (2006).

ingredients.67

Thus, Congress intended the site restriction to only apply in cases where a business was transferred along with the prior user right. A site restriction is not mentioned anywhere else in either parts of the report on the legislative history of the AIA.68

Ultimately, courts may have to decide to what extent a prior user may expand the quantity or volume of their prior use, and whether a site restriction applies to limit this expansion. However, it may be unlikely that this issue will ever be litigated because the risks of litigating prior user rights will be outweighed by other options that the accused infringer has to defend the suit. Furthermore, courts have not interpreted these prior use exceptions, and a party would be subject to significant uncertainty in asserting a prior use defense. This uncertainty is significantly lower for invalidity because of well-established case law.69

2. The Second Exception: Improvements not Covered by the Patent

The second exception has the potential to create a huge barrier for a prior user’s ability to assert the defense. Although the second exception permits the prior user to make improvements,70 the prior user is prohibited from improving its production process when its prior use does not cover all of the subject matter asserted in the patent.71 This exception may also work to reign in increases in quantity or volume that are permitted in the first exception because increases in production capacity will often be accompanied by improvements to the production process. If such improvements are covered by the patent, then the prior user will not be able to expand his production process through the improvements.

This can be best illustrated by building on our Bobby Builder example. Bobby has a prior use from building patented chairs in his garage, but he wants to expand his prior use nationally. Although Bobby built the chairs by hand, if his process is going to be commercially viable on a national scale, he must automate the production process so the chairs

67. h.r. reP. no. 106-287, at 49 (1999).68. Matal, supra note 66; Joe Matal, A Guide to the

Legislative History of the America Invents Act: Part I of II, 21 Fed. cIr. B.J. 436 (2012), available at http://www.uspto.gov/aia_implementation/guide-to-aia-p1.pdf.

69. However, the AIA does modify 35 U.S.C. § 102, so there is still the possibility for uncertainty.

70. 35 U.S.C § 273(e)(2) (2012).71. Id. § 273(e)(3).

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can be produced on an assembly line. Unfortunately for Bobby, various aspects of assembly-line chair manufacturing and automation are covered by Patent X. Thus, Bobby is foreclosed from expanding his production process on a national level regardless of whether there is a site limitation in Section 273.72

The second limitation on improvements also limits a prior user’s options in litigation. Bringing up the prior user rights defense may be a bad strategic move for an accused infringer because it may act as an admission of infringing activity. In effect, accused infringers may have to choose between asserting the defense and arguing that their activities are non-infringing.

c. Prior User Rights and the Markman Hearing

To successfully assert the prior user rights defense, the prior user must argue that his actions are within the scope of the asserted patent.73 The claims relating to the scope of the patent are decided as a matter of law by the court during a Markman hearing, often early in litigation.74 At that time, the accused infringer must decide whether to argue that the patent is broad or narrow in scope. If the accused infringer argues that the patent is narrow in scope, he may establish that his actions are non-infringing because they are not covered by the claims. However, if an accused infringer argues that the patent is broad in scope, he may establish that his prior use is covered by the scope of the patent. A conflict arises because an accused infringer will not be able to effectively argue both non-infringement and prior user rights, and he must decide on a particular strategy before the case is fully developed.

This conflict does not exist for invalidity defenses because invalidity renders the entire patent invalid, regardless of potential infringing activity and claim interpretation.75 An accused infringer can argue that the patent is narrow in scope during the Markman hearing and then later assert that the patent is invalid. The litigation risk of asserting the prior user rights defense depends on the timing of the Markman hearing, which may vary significantly depending on jurisdiction and judicial discretion.76

72. 35 U.S.C. § 273(e)(3) (2012).73. Id.74. Markman v. Westview Instruments, Inc., 517 U.S. 370,

388–91 (1996).75. See generally 35 U.S.C. § 282 (2012) (presenting defenses

to patent infringement).76. Mark R. Malek, Markman Exposed: Continuing Problems

d. The Invalidity Defense Will Be Available in Most Circumstances Where Prior User Rights Are Asserted

If a defendant is able to assert a prior user rights defense, in most circumstances he will also have good arguments for invalidity. The two ways a patent may be invalidated in the context of prior user rights is through anticipation77 and obviousness.78

After the AIA comes into full force, obviousness will become a defendant’s best argument for invalidity in prior user rights scenarios. Under 35 U.S.C. § 103, patentees are prohibited from obtaining patents for obvious inventions.79 Courts will look at a variety of factors to determine whether a patent was granted for an obvious invention.80

Prior user rights scenarios will usually invoke many factors that favor obviousness. Prior user rights require multiple instances of independent creation of the same invention, which strongly indicates that an invention was obvious.81 The existence of prior user rights will often be accompanied with market forces or design incentives that prompted a patentee to create a predictable variation.82

A defendant’s case for invalidity will be further bolstered by the fact that the later filed patent must have a priority date that is at least one year later than the user’s date of commercial use.83 Courts will have little qualms with finding a patent obvious in cases where the inventor was not the first to invent, by a whole year, and then later asserted the patent against

with Markman Hearings, 7 u. FLA. J. tech. L. & PoL’Y 196, 198 (2002), available at http://ipmall.info/hosted_resources/Markman/malek.pdf (“Most U.S. District Courts do not have a prescription for the timing of Markman hearings. Therefore, in most jurisdictions, a Markman hearing can be held at any time during the patent litigation (e.g., anytime between the beginning of discovery to just before jury instructions are given by the judge).”).

77. 35 U.S.C. § 102(a) (2012).78. Id. § 103(a).79. Id. (“A patent may not be obtained . . . if the differences

between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.”).

80. See KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007) (providing a thorough analysis of obviousness factors).

81. Id.; Crouch, supra note 32 (“[T]he existence of multiple independent creators of the same invention tends to suggest that the invention itself was obvious and therefore unpatentable.”).

82. KSR Int’l Co., 550 U.S. at 417 (reasoning that Section 103 likely bars patentability if market forces or design incentives prompted predictable variations of a technology).

83. Crouch, supra note 32.


an earlier inventor. This is especially true for courts that are transitioning from a first-to-invent system that traditionally rewards a first inventor with patent rights.

Claiming invalidity for anticipation under 35 U.S.C. § 102(a) will be more difficult for a defendant to argue but may be appropriate in some circumstances. As amended by the AIA, 35 U.S.C. § 102(a) states that a person shall not be entitled to a patent if the invention was “patented, described in a printed publication, or in public use, on sale, or otherwise available to the public” before the effective filing date.84 Thus, Section 102(a) sets out categories of prior art that will anticipate and invalidate a patent if it was available to the public before the filing date.

A prior commercial use may indicate that invalidating prior art may be available. The categories of prior art that would be most useful to a prior commercial use defendant are “public use, on sale, or otherwise available to the public.”85 In litigation, a defendant may have to decide whether to argue that their prior commercial use was public or private. If a defendant’s prior commercial use is public enough to qualify as “available to the public,” then the patent is invalid.86

The circumstance where an alleged infringer will have a prior use defense but will not have an invalidity defense will be very rare. The alleged infringer’s use must be a trade secret that does not qualify as prior art under Section 102.87 However, if the prior commercial use was truly secret, it is very unlikely that a prior commercial user would be charged with infringement in the first place. Thus in many scenarios where a patentee brings suit against a party that can assert a prior user rights defense, the defendant has a good argument that their actions were public enough to constitute prior art to invalidate the patent.

Where prior user rights can be successfully asserted in litigation, a defense of invalidity for obviousness or anticipation will almost always be available and preferable. Currently, patents are commonly litigated on the basis of invalidity: approximately 2800 patent invalidity suits are filed

84. 35 U.S.C. § 102(a) (2012).85. Id.86. Id. See generally Egbert v. Lippmann, 104 U.S. 333,

336 (1881) (“[T]o constitute the public use of an invention it is not necessary that more than one of the patented articles should be publicly used . . . . [S]econdly, . . . whether the use of an invention is public or private does not necessarily depend upon the number of persons to whom its use is known.”).

87. 35 U.S.C. § 102 (2012).

annually.88 Of those, 97% are settled before trial.89 Cases involving prior user rights scenarios will be more likely to be settled than ordinary invalidity cases. Very few patent disputes will qualify for prior user rights, those that do qualify will likely be settled, and those that aren’t settled are more likely to be litigated for invalidity.

e. Both Plaintiffs and Defendants Have Strong Incentives to Settle in Prior User Rights Scenarios

For invalidity and non-infringement defenses, determining likelihood of success is much more difficult because it depends on claim construction, which occurs at the Markman hearing after substantial discovery.90 However in cases of prior user rights, a defendant will usually be confident—whether or not they will be able to establish prior user rights—regardless of claim construction. This will simplify the settlement process and make prior user rights cases very unlikely to go to trial because in most circumstances the outcome of litigation will be predictable.

A patent owner who is confronted with a prior user rights defense by an accused infringer has even greater incentives to settle than the defendant. If an alleged patent infringer discloses activity that may qualify for the prior user rights defense, the patentee will be aware that the same activity could potentially invalidate the patent. In this case, the best course of action for a patentee would be to grant a license to the alleged infringer. This license would likely be similar or broader than a prior user right. That way, the patent will be insulated from invalidity, as long as the defendant’s prior commercial use is sufficiently secret. Then the patentee may still enforce the patent against others, and the defendant can get the benefit of using an exclusive right without having to spend money to enforce it.

Of course, the patent owner will never obtain damages for patent infringement damages such as lost profits or reasonable royalties. If a patent owner believes their patent will withstand an invalidity

88. Jason Rantanen, Patent Suit Filings for 2010 Show a Slight Rise, PAtentLYo (Jan. 28, 2011), http://www.patentlyo.com/patent/2011/01/patent-suit-filings-for-2010-show-a-slight-raise.html.

89. Paul F. Morgan, Guest Post: Microsoft v. i4i—Is the Sky Really Falling?, PAtentLYo (Jan. 9, 2011), http://www.patentlyo.com/patent/2011/01/microsoft-v-i4i-is-the-sky-really-falling.html.

90. Markman v. Westview Instruments, Inc., 52 F.3d 967, 984 (Fed. Cir. 1995).

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challenge and a prior user rights defense, then they may decide to pursue litigation, but the patent owner runs the risk of losing their entire patent to invalidity.

F. Prior Experience also Indicates that the Prior User Rights Defense will be Rarely Litigated

Previous experience with prior user rights in the United States and the world further indicates that the defense will never be successfully litigated. In the thirteen years since the prior user rights defense was created for business methods, the defense has not been successfully raised once.91 This evidence is particularly persuasive because business methods are prone to independent, prior invention.92 In other practice areas, the occurrence of prior user rights will be rare because independent invention is less common.

The experience of other industrialized countries also indicates that the prior user rights defense will not be litigated. The United States is the only country in the world that still employs the first-to-invent standard; every other patent-granting country awards a patent to the first inventor to file an application.93 Pursuant to a congressional mandate, the USPTO conducted a lengthy study comparing the patent laws of the United States and other industrialized countries.94 The study found that all industrialized countries employing a first-to-file system also have some form of prior user rights.95 The study also concluded that prior user rights were rarely litigated in other countries, and will not be commonly litigated in the United States.96 Although countries varied in the way they defined prior use, countries were similar in the fact that the defense is not commonly asserted.97 In some countries, such as Australia, prior user rights have never been litigated.98

Although the prior user rights defense will not be commonly litigated, it will still create a substantial change in our patent system because innovators will

91. Comments from Paul Morgan, PTO Requested Comments on the AIA “Prior Commercial Use” Defense Legislation (Oct. 13, 2011), available at http://www.uspto.gov/aia_implementation/pur-2011oct13-paul_morgan.pdf.

92. U.S. Patent and Trademark Office, supra note 62, at 38.93. Id. at 47.94. Id. at 8.95. Id. at 13.96. Id. at 38.97. Keith Kupferschmid, Prior User Rights: The Inventor’s

Lottery Ticket, 21 AIPLA Q.J. 213, 223 (1993).98. Comments from David Tadgell, Institute of Patent and

Trademark Attorneys, PTO Requested Comments on the AIA “Prior Commercial Use” Defense Legislation (Nov. 10, 2011), available at http://www.uspto.gov/aia_implementation/pur-2011nov10-ipta.pdf.

have to decide whether to rely on patents, defensive disclosure publications, or trade secrets to protect their inventions.

g. Defensive Disclosures Versus Prior User Rights

In transitioning to the new patent laws, companies will have a to choose whether to 1) keep their inventions secret and rely on prior user rights or 2) create “defensive disclosures” and release their inventions to the public. Defensive disclosures include publications and patent applications and operate as prior art that can be used to invalidate a competitor’s patent.99

Defensive disclosures provide a number of advantages over prior user rights. A prior use must predate an accuser’s patent or earlier disclosure by one year, but a defensive disclosure only needs to predate an accuser’s patent or disclosure by one day.100 Furthermore, a defensive disclosure can be combined with other prior art to render a patent invalid.101 Patents not only act as defensive disclosures, but they may also provide a valuable right to exclude competitors.

Defensive disclosures may also be less expensive than prior user rights. Publication is the least expensive disclosure option and may be practically free if published on the Internet. Patenting is considerably more expensive than publication. Prior user rights fit in somewhere in between patenting and publication because prior user rights require internal documentation which is more expensive than publication but still much less expensive than obtaining a patent.

Defensive disclosures also have certain disadvantages over prior user rights. Most obviously, a defensive disclosure requires a company to disclose to the public their hard-earned inventions. A company that discloses their invention using a defensive disclosure can lose trade secret protection for that improvement.102 Furthermore, a defensive disclosure

99. See 35 U.S.C. § 102(a) (2011) (“A person shall be entitled to a patent unless . . . the invention was patented or described in a printed publication . . . .”).

100. Compare 35 U.S.C. § 273 (2012) (prior user rights), with id. § 102 (2012) (prior art for defensive disclosures).

101. See KSR Int’l Co. v. Teleflex, Inc., 550 U.S. 398, 415-23 (2007) (discussing the requirements to combine prior art references).

102. See Unif. Trade Secrets Act § 1 (1985) (“Trade secrets are defined as, information, including a formula, pattern, compilation, program, device, method, technique, or process, that: . . . is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”) Disclosure would violate these reasonable efforts. Id.


teaches competitors about the invention, but nothing prohibits competitors from using that information to make further improvements. This leaves the door open for competitors to develop improvements and obtain patents that exclude the company that created the original invention from using the improvements.

Prior commercial use can be continuously documented; however, a patent disclosure is created once and either published or submitted to the USPTO. Patent applications may be amended and additional publications may be published, but a company is unlikely to revisit a defensive disclosure that it has deemed adequate. A defensive disclosure may not include all the details necessary to completely invalidate a patent.103 Prior user rights may play an important role in filling these potential gaps in defensive disclosures.

Additionally, inventors working at companies may fail to appreciate that their inventions are patentable. In such cases, companies may not file for a patent or otherwise create a defensive disclosure. In these cases continuous documentation of commercial use may step in to protect the company from infringement actions.

In cases of computer programs, processes, or manufacturing methods, trade secret protection with the benefit of prior user rights may be more appropriate than a defensive disclosure. With the Supreme Court casting significant uncertainty on patent eligible subject matter,104 those inventions on the edge of subject matter eligibility may be better off with trade secret protection because there is less risk of disclosing to the public an invention that is later invalidated for a lack of subject matter eligibility.

The most comprehensive policy a company can employ is one that employs both defensive disclosures

103. Peter S. Weissman, America Invents Act’s Prior Use Defense, LexoLogY (Sept. 28, 2012), http://www.lexology.com/library/detail.aspx?g=2a93e65e-b37c-491e-96da-8d275bfc92a0.

104. See, e.g., Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1305 (2012) (holding that a process patent for correlations between blood test results and the appropriate dosage of a specific medication is not eligible for a patent because the correlation is a law of nature). The Prometheus decision has been heavily criticized for conflating the two separate patent law concepts of patent eligibility under 35 U.S.C. § 101 and obviousness under 35 U.S.C. § 103, as well as potentially invalidating many patents relating to the biotech, medical diagnostics and pharmaceutical industries. See, e.g., Robert R. Sachs, Punishing Prometheus: The Supreme Court’s Blunders in Mayo v. Prometheus, PAtentLYo (Mar. 26, 2012), http://www.patentlyo.com/patent/2012/03/punishing-prometheus-the-supreme-courts-blunders-in-mayo-v-prometheus.html.; Gene Quinn, Killing Industry: The Supreme Court Blows Mayo v. Prometheus, IPwAtchdog (Mar. 20, 2012, 1:44 pm), http://www.ipwatchdog.com/2012/03/20/supreme-court-mayo-v-prometheus/id=22920/.

and prior user rights.105 This will require companies to 1) file for patents for major identified inventions, 2) employ a strict policy of confidentiality to protect trade secrets, and 3) document commercial activities to establish prior user rights. This policy would ensure that companies maximize their return on research and development by obtaining a valuable right to exclude; meanwhile, they would obtain prior user rights that will insulate them from patent infringement lawsuits for insignificant inventions. Furthermore, prior user rights could serve as a back-up to defensive disclosures that turn out to be insufficient to protect the company from infringement actions.106

Iv. the BeneFIts oF the PrIor user rIghts deFense

Many critics of the prior user rights defense argue that this defense will weaken patents and create uncertainty. They argue that there is no way to determine whether a granted patent will be subject to prior user rights, and this will make enforcing the patent difficult.107

Other critics believe that prior user rights will burden small businesses and individual inventors.108 Smaller entities will have to compress the timeline in which they innovate, identify patentable innovations, and seek a patent. If an entity does not work quickly, it will either lose patent rights forever, or be subject to threats from a competitor’s patent. This will create a “race to the patent office.”109 The critics argue that larger, established businesses will probably be able to incorporate the innovation costs, investment costs, and legal costs of a first-to-file system more easily, giving them the advantage.110

However, the first-to-file system along with prior user rights will actually be beneficial to small businesses because it will decrease litigation and eliminate costly priority determinations that existed

105. Weissman, supra note 103 (listing issues such as technical gaps that result when technological details are omitted when writing for a more sophisticated audience).

106. Id.107. E.g., Robert L. Rohrback, Prior User Rights: Roses or

Thorns?, 2 u. BALt. InteLL. ProP. L.J. 1, *16-17 (1993).108. Id. at *19.109. See Ashby Jones, Inventors Race to File Patents: U.S.

Rule Change Taking Effect Saturday Will Make Process Harder, Costlier, wALL st. J. (Mar. 14, 2003), available at http://www.lexology.com/library/detail.aspx?g=2a93e65e-b37c-491e-96da-8d275bfc92a0.

110. Emmett Collazo, Patent System Reform in 2011: Costs Expected To Increase on Small Businesses, Ieee-usA todAY’s engIneer (last visited on Mar. 30, 2013), http://www.todaysengineer.org/2011/Oct/patent-reform.asp.

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under the first-to-invent system. Under the first-to-invent system, so-called “secret prior art” may exist in the form of prior undisclosed inventions that have not been abandoned, suppressed, or concealed.111 Such prior art may first appear during patent prosecution or during litigation.

The AIA eliminated several types of secret prior art, including prior secret invention by another inventor and prior knowledge transferred from another to the patent applicant under.112 The secrecy of these prior art references created problems because patentability could not be fully evaluated by going through the arduous process of obtaining additional information from interested parties.113 Furthermore, secrecy gave interested parties more of an opportunity to create or destroy documents after the fact.114 Making patentability based upon publicly available information can hypothetically lead to some unfair outcomes, but it has the massive benefit of providing clear notice to anyone who takes the time to look.115 Both small and large businesses will acquire patent rights that are not subject to the uncertainty of this secret prior art.

The AIA retains one form of secret prior art: a prior filing of a patent application by “another inventor” will be deemed prior art as of its filing date.116 This is secret prior art because patent applications are kept secret by the USPTO for eighteen months after they are filed.117 However, this prior art is only temporarily secret because such a reference cannot be used as prior art unless and until it is made public through either publication or patenting. Thus, by the time the reference can be used it is already publically available.

Under the new system, first inventors will normally be the first to file and will obtain priority for a patent. But if they are not the first to file they will either 1) be in possession of invalidating prior art, 2) be secretly using the invention without ever being discovered, or 3) have a prior user rights defense. Only

111. Robert A. Armitage & Richard C. Wilder, Harmonization: Will It Resuscitate a Patent System Suffocating Its Small Entity Users with Cost and Complexity?, 1 u. BALt. InteLL. ProP. L.J. 116, 117-18 (1993).

112. Compare 35 U.S.C. § 102 (2012), with 35 U.S.C. § 102(g)–(f) (2006).

113. Dennis Crouch & Jason Rantanen, Did the AIA Eliminate Secret Prior Art?, PAtentLYo (Oct. 10, 2012), http://www.patentlyo.com/patent/2012/10/did-the-aia-eliminate-secret-prior-art.html.

114. Id.115. Id.116. 35 U.S.C. § 102(a)(2) (2012), formerly defined by 35

U.S.C. § 102(e) in the pre-AIA act. 117. 37 C.F.R. § 1.211 (2005) (requiring the USPTO to

publish patent applications promptly after the expiration of a period of eighteen months from the earliest filing date).

in narrow situations will a first inventor lose the race to the patent office and not have a remedy. This perceived unfairness is necessary to encourage swift disclosure of new inventions in order to accelerate scientific research and boost progress. In all of the aforementioned scenarios, deep-pocketed litigation is not required. Small businesses and startups without lots of money will benefit from the increased security in their patents, and will be more resistant to bullying from larger litigious corporations.

Prior user rights will also encourage foreign companies to manufacture in the United States. Foreign entities’ USPTO-issued patents will be subject to prior user rights.118 However, the foreign entities cannot assert prior user rights based upon activities in their home countries.119 Thus, foreign entities can only benefit from the existence of prior user rights if their prior commercial use is in the United States.

Without prior user rights, United States businesses would be at a disadvantage to foreign companies. All major United States trading partners operate on a first-to-file system with prior user rights.120 If the United States did not have prior user rights, domestic businesses could be liable for domestic infringement against a foreign-based company that holds a USPTO-issued patent, but the domestic business would not be able to assert a foreign patent against a foreign entity in a jurisdiction that provides prior user rights.121 This imbalance could lead to strategic decisions to locate manufacturing outside of the United States to prevent disruptions to operations or interference with the use of assets.122 United States interests are particularly at risk because of the high percentage of USPTO-issued patents awarded to foreign inventors.123

Non-practicing entities (NPE), more commonly known as “patent trolls,” will also be disadvantaged by

118. 35 U.S.C. § 273 (2012) (covering domestic and foreign entities without distinction).

119. Id. (specifying that the prior commercial use must be in the United States).

120. u.s. PAtent And trAdemArk oFFIce, supra note 62, at 52.121. Kupferschmid, supra note 97, at 221; Griswold, supra

note 11, at 577.122. Gary Griswold, Consultant and Chair Emeritus of the

Coalition for 21st Century Patent Reform, Comments at the Public Hearing on the Study of Prior User Rights 12–13 (Oct. 25, 2011), available at http://www.uspto.gov/aia_implementation/20111025-prior-userrights-transcript.pdf.

123. See PerFormAnce And AccountABILItY rePort FIscAL YeAr 2011, 163, 165, 168 (2011), available at http://www.uspto.gov/about/stratplan/ar/2011/USPTOFY2011PAR.pdf. (issuing 124,252 patents to residents of foreign countries out of a total of 244,430 patents issued, amounting to over fifty percent of the total patents issued).


the existence of the prior user rights defense. 124 NPE’s will not be able to assert the prior user rights defense because they do not practice their invention. However, every patent that every NPE, except for universities, owns will be subject to the prior user rights defense.125 Thus, NPE’s and other companies will have a greater incentive to quickly license or commercialize their inventions. If companies commercialize their inventions faster, consumers obtain the benefits of those inventions faster, and innovation progresses at a faster rate.

Prior user rights enhance protection available for non-patented innovations and trade secrets,126 and may discourage patent filing in some technology sectors. At first glance this may seem to undermine the policy of disclosure to encourage innovation. However, the opposite is true. This policy will increase innovation because companies will have more freedom to operate without being worried about infringing minor patents.

As a result, small advances will be protected by trade secrets because they will not be worth expending resources on prosecuting a patent or litigating. On the other hand, major advances will still be patented because they will come with a broad right to exclude others. Both small business and large businesses will have to spend less money on litigation because they will not have to worry about infringing a patent for every small, insignificant innovation. Patents will be obtained only for those technologies that are really worth patenting.

The university exception to prior user rights was added in response to concerns expressed by the higher education community that prior user rights may impair the ability of universities to license patents on upstream research results.127 University-derived inventions will become more valuable because their patents are excluded from the prior user rights defense.128 In order to add security to their patents, companies may choose to forego in-house research and development and instead fund research at universities. Companies may choose to structure their university funding transactions so that when universities obtain

124. Holly Forsberg, The Attractiveness of Trolling: The Impact of Recent Judicial Activity on Non-Practicing Entities, 12 u. PItt. J. tech. L. & PoL’Y 1, 2 (2011).

125. 35 U.S.C. § 273(e)(5) (2012).126. u.s. PAtent And trAdemArk oFFIce, supra note 62, at 5. 127. America Invents Act: Hearing on H.R. 1249 Before the

Subcomm. on Intellectual Property, Competition, and the Internet of the House Comm. on the Judiciary, 112th Cong. 97–98 (2011), (Statement of John C. Vaughn, Exec. Vice President, Ass’n of Am. Univs.).

128. 35 U.S.C. § 273(e)(5) (2011).

patents on the funded research, the companies simply obtain a royalty-free, potentially exclusive license. Universities will benefit from this extra funding, and by combining them with government grants, the universities potentially may become major players in certain patent-related industries.

v. concLusIon

The American Invents Act will produce some major changes to our patent system. The change from a first-to-invent to a first-to-file system and the accompanying prior user rights will have the greatest impact on the way companies do business. However, the impact will not be felt by significantly increasing litigation. The prior user rights defense will rarely be asserted, and most litigation will continue to focus on patent validity.

Instead, the changes will occur in the way businesses operate. Some will choose to protect their inventions with trade secrets instead of patents because the prior user rights defense bolsters existing protections for trade secrets. Most will continue to obtain patents on more important inventions because patents grant a powerful right to exclude that which trade secrets do not. Furthermore, universities will become increasingly bigger players in the patent community, and private funding of universities will increase.

Both small businesses and larger corporations will see a decrease in litigation as there will no longer be complex priority battles with changing dates of conception and reduction to practice. Instead, prior user rights will be proven by evidence of commercial use, which will be relatively easy to establish for both big and small companies. Parties will not be willing to expend significant resources litigating matters with highly predictable outcomes.

Those that will be disadvantaged because of prior user rights will be non-practicing entities and foreign companies that do not manufacture in the United States. Both types of entities will see their patents devalued by prior user rights; but these parties will not be able to assert the prior user rights defense against others as their activities will not qualify as a prior use. However, both types of entities have a solution to this problem. Foreign companies can choose to relocate manufacturing to the United States, and non-practicing entities may quickly assign or license their patents to manufacturers. Bringing infringement lawsuits will become a less attractive option for both types of entities. This will increase

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manufacturing in the United States and encourage innovation.

Overall, the American Invents Act will minimize unnecessary litigation costs, improve the quality of granted patents, harmonize the United States patent system with the best parts of other major patent systems, encourage domestic manufacturing, and “promote the Progress of Science and useful Arts.”129

129. u.s. const. art. I, § 8, cl. 8.


Facebook Sued for Patent Infringement Over “Like” Button and Timeline Function

by Asha Velay

*This blog post was originally published on February 19, 2013 at http://www.ipbrief.net.

Mark Zuckerberg is not going to “like” this.

A Dutch Patent-holding company, Rembrandt Social Media, filed a complaint against Facebook last week in the U.S. District Court of Virginia, acting on behalf of the widow and family of Dutch programmer, Joannes Jozef Everardus Van Der Meer. According to Van Der Meer’s camp, the late programmer patented Facebook’s “like” and “timeline” functions in 1998, six years before Zuckerberg launched Facebook.

Van Der Meer tried to capitalize on his inventions after he was granted the patents in 2001 and 2002. He founded a company called Aduna, and bought the domain name “surfbook.com.” Surfbook was intended to be a social networking site in the form of an online diary that allows users to approve data by using a “like” button. The complaint states that Surfbook also lets users “collect personal information and third-party content, organize the information chronologically on a personalized Web page, and share the information with a selected group of people, such as the end user’s friends, through the use of user-settable privacy levels.” Van Der Meer passed away in 2004 before he was able market his website and fully utilize his inventions.

Although he is not a household name like Mark Zuckerberg, Van Der Meer’s legal team believes he was a highly influential social networking pioneer. “We believe Rembrandt’s patents represent an important foundation of social media as we know it, and we expect a judge and jury to reach the same conclusion based on the evidence,” said Rembrandt’s attorney, Tom Melsheimer.

What is potentially damaging is that Facebook is more than aware of Van der Meer’s patents. In June, Facebook was granted a patent for a method of running cross-platform applications on wireless devices. In its application, one of Van der Meeer’s patents was even cited as a reference.

The outcome of this case could encourage more litigation if Rembrandt prevails. Facebook did not always have the “like” function; this was a relatively recent enhancement in Facebook’s evolution from a college social networking site to the world’s most popular social network. If Facebook comes up with more enhancements, more companies could be encouraged to pursue litigation over individual functions. Rembrandt Social Media has sued for unspecified royalties. No word from Facebook yet, but this is exactly why the site needs a “dislike” button.

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Led Zeppelin to Release Entire Back Catalogue to the Internet Streaming Community

by Matthew Bernstein

*This blog post was originally published on January 26, 2013 at http://www.ipbrief.net.

If you are anything like me, you probably do a lot of things over and over again hoping for different results each time. Some people call it insanity – I call it optimism. Ever since Spotify came to the U.S., I have been holding out hope that music from one of my favorite classic rock bands, Led Zeppelin, would become accessible. Every few days, I would log in to Spotify and search for Led Zeppelin, and each time the results would come up empty. In any case, it appears that the day will soon be upon us when the Zeppelin tunes we all know and love will all be available for our Internet streaming pleasure. More importantly, I am neither insane nor a hopeless optimist.

According the New York Times, the band is in the process of negotiating with several streaming services for the right to stream their entire catalog of classic rock music. While many classic acts (such as the Beatles, Pink Floyd, and others) continue to be hesitant to partner with streaming services, Led Zeppelin’s willingness to do so represents a major endorsement of the services as an integral way that people listen to music in the foreseeable future.

Spotify, which recently partnered with Metallica (another band that has long been skeptical of their music on the Internet), is one of the biggest players in the music streaming industry, and it would not be surprising for Led Zeppelin to sign a deal with them. In charging users a small subscription fee for unlimited access to an extensive library of music, Spotify is able to attract a large worldwide user base and generate enough revenue to provide substantial royalties to rights holders and artists. If Led Zeppelin, one of the biggest bands in rock history, were to partner with the service, this user base would likely see significant increases and even more money would be generated.

Another interesting development is a recent decision by the Copyright Royalty Board to increase the music royalties that must be paid by

Sirius XM satellite radio. According to the New York Times, the decision will gradually raise the rates from the current eight percent of Sirius XM’s gross revenue to eleven percent in 2017. While the decision does not affect the rates for Internet radio, those rates are only in place through 2015, and it is possible that this decision could be influential in bringing about higher royalty rates for Internet radio in the long run.

Each of these developments makes the future of the music industry an exciting prospect. Whereas the Internet used to be an enemy of the recording industry, it appears that it may grow to be a great asset. Through these developments, people worldwide will continue to gain cheap access to all of the music they want while rights holders can receive the payment they deserve.


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American University—Washington College of Law Intellectual … · The controversy surrounding the Stop Online Piracy Act (SOPA) and the PROTECT Intellectual Property Act (PIPA)