An Outline of Intellectual Property Law

Yin Huang

May 13, 2010

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Contents

1 Patents 31.1 Diamond v. Chakrabarty . . . . . . . . . . . . . . . . . . . . . 31.2 Parke-Davis & Co. v. H. K. Mulford & Co. . . . . . . . . . . . 41.3 State Street Bank & Trust Co. v. Signature Financial Group,

Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51.4 In re Bilski . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2 Copyright 72.1 Feist Publications v. Rural Telephone Service . . . . . . . . . 72.2 Baker v. Selden . . . . . . . . . . . . . . . . . . . . . . . . . . 82.3 Morrissey v. Proctor & Gamble . . . . . . . . . . . . . . . . . 92.4 CCC Information Services v. Maclean Hunter Market Reports,

Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92.5 Assessment Technologies of Wisconsin, LLC v. WIREdata, Inc. 112.6 Sparaco v. Lawler, Matusky & Skelly Engineers LLP . . . . . 12

3 Trademark and Trade Dress 133.1 Qualitex Co. v. Jacobson Products Co., Inc. . . . . . . . . . . 133.2 Zatarain’s, Inc. v. Oak Grove Smokehouse, Inc. . . . . . . . . 143.3 Two Pesos, Inc. v. Taco Cabana, Inc. . . . . . . . . . . . . . . 163.4 Kohler Co. v. Moen Inc. . . . . . . . . . . . . . . . . . . . . . 173.5 In re General Electric Broadcasting Company, Inc. . . . . . . . 183.6 In re Clarke . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

4 The Right of Publicity 194.1 Midler v. Ford Motor Co. . . . . . . . . . . . . . . . . . . . . 194.2 White v. Samsung Electronics America, Inc. . . . . . . . . . . 204.3 Wendt I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224.4 Wendt II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

5 Term Limits 235.1 Eldred v. Ashcroft . . . . . . . . . . . . . . . . . . . . . . . . 23

6 Fair Use 256.1 Harper & Row, Publishers, Inc., v. Nation Enterprises . . . . . 256.2 Sony Corp. of America v. Universal City Studios, Inc. . . . . . 276.3 Campbell v. Acuff-Rose Music, Inc. . . . . . . . . . . . . . . . 28

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6.4 UMG Recordings, Inc. v. MP3.com, Inc. . . . . . . . . . . . . 296.5 Anderson v. Stallone . . . . . . . . . . . . . . . . . . . . . . . 30

7 Remedies 317.1 eBay, Inc. v. MercExchange, LLC . . . . . . . . . . . . . . . . 317.2 Sony Corp. of America v. Universal City Studios, Inc. (cont’d) 337.3 MGM Studios Inc. v. Grokster, Ltd. . . . . . . . . . . . . . . . 347.4 Dickinson v. Zurko . . . . . . . . . . . . . . . . . . . . . . . . 357.5 Harrods Ltd. v. Sixty Internet Domain Names . . . . . . . . . 377.6 RealNetworks, Inc. v. Streambox, Inc. . . . . . . . . . . . . . . 377.7 Universal City Studios, Inc. v. Reimerdes . . . . . . . . . . . . 39

1 Patents

1.1 Diamond v. Chakrabarty

1.1.1 Overview

Chakrabarty appeals the denial of a patent for a man-made microorganism.

1.1.2 Facts

Chakrabarty had developed a new kind of bacterium, which could metabolizehydrocarbons. This metabolism was accomplished through two biochemicalpathways hitherto unknown in nature. Because such a feature might wellprove useful in the treatment of oil spills, Chakrabarty applied for a patent.In addition to patents on the process for producing the bacteria and theinoculum on which it could be grown, he also applied for a patent on thebacteria themselves. The first two patents were granted, but the third wasdenied.

1.1.3 Issue

Are bacteria with entirely man-made biochemical pathways patent-eligible?

1.1.4 Holding

Such bacteria are patent-eligible.

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1.1.5 Reasoning

The standards for granting patents have historically been interpreted broadly,so that a wide range of inventions may qualify as “manufactures” or “compo-sitions of matter” within the definition of the Patent Act. Here, Chakrabartyhas created bacteria with features not existing in nature. This is differentfrom the case in which a scientist discovers an existing phenomenon, such asthe discovery that two types of bacteria can coexist without interference. Di-amond has argued that the Plant Patent Act and related statutes bar patentson living things. This argument is without merit because even those statutesrecognized the distinction between naturally occurring things and artificialthings. Diamond’s fears of the consequences of unrestrained research are alsounjustified. Even if research might produce dangerous knowledge, the courtsare powerless to regulate the progress of science.

Justice Brennan, dissenting. The majority has misread the relevantstatutes. The Plant Act and related statutes should be read to prohibit thepatenting of living things.

1.2 Parke-Davis & Co. v. H. K. Mulford & Co.

1.2.1 Overview

Parke-Davis & Co. (P) sued on the theory that H. K. Mulford & Co. (D)had infringed on its patent for adrenaline extracted from animal glands.

1.2.2 Facts

Parke-Davis & Co. (“Parke-Davis”) had developed a new way to isolateadrenaline from the glands of animals. This new isolate was considerablypurer than those that had been available and therefore medically superior.Parke-Davis was granted a patent for any substance which possess the phys-iological characteristics of the isolate. Parke-Davis now sues on the theorythat a similar product made by H. K. Mulford & Co. (“Mulford”) infringeson that patent.

1.2.3 Issue

May Parke-Davis patent its form of isolated adrenaline?

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1.2.4 Holding

Parke-Davis may patent its form of isolated adrenaline.

1.2.5 Reasoning

The isolate produced by Parke-Davis is qualitatively different from olderisolates. Although one might regard Parke-Davis’s product as merely a betterpurification, its isolate differs from previous ones in that Parke-Davis hasmanaged to remove salts and other unwanted components from the crudeanimal glands. The line between new substances and different purities ofexisting substances should be drawn on the basis of common usage ratherthan technical distinctions.

1.3 State Street Bank & Trust Co. v. Signature Finan-cial Group, Inc.

1.3.1 Overview

A dispute arose as to whether Signature could patent a business method tiedto a particular machine.

1.3.2 Facts

Signature had developed a system for managing the portfolios of institutionalinvestors. The system, known as “Hub and Spoke,” allowed institutions topool their resources to facilitate management of funds. When Signature triedto patent the system, the Patent and Trademark Office (PTO) denied thepatent.

1.3.3 Issue

Was the PTO correct in denying the patent?

1.3.4 Holding

The PTO was not correct in denying the patent.

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1.3.5 Reasoning

Insofar as the process described in the patent application is tied to a partic-ular machine, the process should not be automatically invalidated for fallingunder the “mathematical algorithm exception” or the “business method ex-ception” of patent law.

1.4 In re Bilski

1.4.1 Overview

Bilski appealed the denial of a patent for a business method.

1.4.2 Facts

Bilski had developed a method for hedging risk in the market for commodi-ties. The method essentially created a middleman between buyers and sellers.The middleman’s role was to offer commodities to buyers and sellers at fixedprices, there by insulating those parties from price fluctuations. The Patentand Trademark Office denied a patent for the method.

1.4.3 Issue

Did the PTO correctly deny the patent?

1.4.4 Holding

The PTO correctly denied the patent.

1.4.5 Reasoning

A claimed process is eligible for a patent only if it (1) is tied to a particularmachine or apparatus or (2) transforms an article into a different state orthing. Bilski has failed to structure his claim as to fall under either category.Bilski claims nothing more than a method of hedging risk. The method doesnot form some part of a larger concrete process.

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2 Copyright

2.1 Feist Publications v. Rural Telephone Service

2.1.1 Overview

Rural Telephone Service (P) sued for copyright infringement after Feist Pub-lications (D) copied some of the listings from its telephone directory.

2.1.2 Facts

Rural Telephone Service (“Rural”) had published an annual telephone di-rectory in compliance with state law. Feist Publications (“Feist”) was apublisher of a regional telephone directory, which covered a much largergeographic area than directories like those published by Rural. Feist hadalready obtained licenses to use listings from the directories in much of thearea it intended to cover. Rural remained the sole holdout. Unable to nego-tiate a license, Feist copied the listings it needed without Rural’s permission.After Rural’s investigation revealed that Feist’s directory contained severalfictitious listings that Rural had inserted to detect copying, Rural sued forcopyright infringement.

2.1.3 Issue

Does Rural hold a copyright over the listings in its telephone directory?

2.1.4 Holding

Rural does not hold a copyright over such listings.

2.1.5 Reasoning

A basic principle of copyright law is that facts are not copyrightable whilecompilations of facts are. The distinction rests on the presence of originality.Originality exists when independent creation is coupled with a modicumof creativity. This hurdle is low, but it does exist. Facts themselves arenot copyrightable because they were not created by any particular person.Compilations of facts are copyrightable only to the extent that the producerof the compilation exercised some creativity in assembling the facts. Here,Rural’s listings are so uncreative as to fall below even the low standard of

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originality. Rural’s argument that it exercised creativity in selecting theinformation to be listed fails because such information is required by statelaw. Rural also cannot argue that alphabetization of the listings constitutescreativity, as alphabetization is so common and standard as to leave no roomfor discretion.

2.2 Baker v. Selden

2.2.1 Overview

Selden (P) sued after Baker (D) used a system of bookkeeping that had beenset out in a book whose copyright was held by Selden.

2.2.2 Facts

Selden had acquired the copyright to a book that described a system ofbookkeeping. The system amounted to a common method of bookkeepingmodified so as to take up less space. Selden subsequently discovered thatBaker was using a system substantially similar to the one set out in his bookand sued on the theory that Baker’s system infringed on his copyright.

2.2.3 Issue

May a system of bookkeeping be protected solely through the copyright to abook describing that system?

2.2.4 Holding

A system of bookkeeping may not be so protected.

2.2.5 Reasoning

Selden has confused the domain of copyright with that of patent. Copyrightcan protect only particular expressions of ideas, not the ideas themselves. Itwould have been proper for Selden to sue if someone had copied his book,but he has no recourse against someone who has merely used the idea thebook describes. If Selden wants to protect his system of bookkeeping fromuse by others, the only way to do so is by obtaining a patent.

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2.3 Morrissey v. Proctor & Gamble

2.3.1 Overview

Morrissey (P) sued after Proctor & Gamble (D) copied the instructions fora sweepstakes organized by Morrissey.

2.3.2 Facts

Morrissey had organized a sweepstakes, providing instructions on how en-trants should enter. The instructions stated that entrants should providetheir social security numbers, phone numbers, and other basic information.Proctor & Gamble (“P & G”) held a sweepstakes and used similar instruc-tions. Morrisssey then sued P & G for copyright infringement.

2.3.3 Issue

May the instructions for a sweepstakes, which permit of little variation intheir expression, be copyrighted?

2.3.4 Holding

Such instructions cannot be copyrighted.

2.3.5 Reasoning

Although copyright generally attaches to any expression that passes musterunder the standard of originality, an exception has been carved out in caseswhere the idea to be expressed allows so few forms of expression that allowingcopyright over such expressions would exclude all but a few copyright holdersfrom expressing the idea at all. Instructions for sweepstakes fall into thiscategory.

2.4 CCC Information Services v. Maclean Hunter Mar-ket Reports, Inc.

2.4.1 Overview

Maclean Hunter Market Reports (P) sued CCC Information Services (D) forcopyright infringement.

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2.4.2 Facts

Maclean Hunter Market Reports (“Maclean”) publishes the Red Book, aguidebook setting forth the values of used cars throughout the nation. TheRed Book gives estimates of the values of many types of vehicles accordingto make and model as well as geographic region. Values are also adjustedaccording to the condition of the car, including mileage and certain optionalfeatures. The values are not calculated using mathematical formulas. Rather,they reflect the editors’ judgment as to how much each kind of car is worth.CCC Information Services (“CCC”) has effectively incorporated the entiretyof the Red Book into its own computerized listing of used-car values.

2.4.3 Issue

(1) Does the Red Book have enough originality to qualify for copyright? (2)Is CCC’s use of the information protected by the merger doctrine? (3) Is theinformation contained in the Red Book part of the public domain?

2.4.4 Holding

(1) The Red Book has enough originality. (2) CCC is not protected by themerger doctrine. (3) The Red Book’s information is not in the public domain.

2.4.5 Reasoning

The court below erred in holding that the Red Book consists of copyright-ineligible facts. The evidence plainly points toward the opposite conclusion.The listings in the Red Book are not produced in a formulaic or mechanicalway. Rather, each listing involves the discretion of the editors in estimatinghow much that particular car is worth. Such discretion manifests sufficientoriginality to give rise to copyright protection. Originality also exists in theRed Book’s breakdown of car values by geographic region.

The merger doctrine should not be applied to the Red Book listings asthese listings are not “ideas” within the meaning of the doctrine. The mergerdoctrine is intended to protect only “building block” ideas that are essentialto the advancement of science and similar pursuits. It is not intended toprotect broader ideas, like the listings, which may reflect individual tastesand opinions. Expanding the merger doctrine to cover the Red Book listingswould leave very little under copyright protection.

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The mere fact that the government has adopted the Red Book as a stan-dard for insurance payouts does not mean that the Red Book has therebyentered the public domain. Such a holding would be constitutionally prob-lematic under the Takings Clause.

2.5 Assessment Technologies of Wisconsin, LLC v. WIRE-data, Inc.

2.5.1 Overview

Assessment Technologies of Wisconsin (P) sued WIREdata (D) for copyrightinfringement.

2.5.2 Facts

WIREdata (“Wire”) wanted to obtain data regarding real property for usein real-estate listings. These data included facts such as the owner, address,and valuation of each house. This information was routinely collected by taxassessors and made available by the government. Under Wisconsin’s “openrecords” law, Wire had already obtained access to the vast majority of datait needed. The exceptions consisted of a few areas where tax assessors usedsoftware produced by Assessment Technologies (“AT”) to gather and storethe data. Wire sued to compel disclosure of these records. Alarmed by theefforts of Wire, AT brought suit against it for copyright infringement.

2.5.3 Issue

May data that is otherwise publicly available be subject to copyright protec-tion simply by virtue of being stored within proprietary software?

2.5.4 Holding

Such data may not be subject to copyright protection.

2.5.5 Reasoning

Sequestering copyright-ineligible facts within a copyrightable program doesnot bar others from copying those facts. Wire is not seeking to duplicate AT’ssoftware. Rather, it seeks only to duplicate the facts stored and organized

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by that software. The facts themselves are not copyrightable, so AT has nobasis for a claim. AT also cannot argue that the requisite data are availablefrom handwritten sources. The tax assessors in areas where AT’s software isbeing used no longer take notes by hand.

2.6 Sparaco v. Lawler, Matusky & Skelly EngineersLLP

2.6.1 Overview

Sparaco (P) sued Lawler, Matusky & Skelly Engineers (D) after the lattercopied the plans he had developed for the construction of a building.

2.6.2 Facts

Sparaco had been hired by a developer to create a city-mandated “site plan”for the construction of an assisted-living facility. Essentially a map detail-ing the plot of land to be developed, the site plan consisted of informationsuch as the topography of the land, the intended location and footprint ofthe building, and other landscaping details. Following the completion ofthe plan, Sparaco registered it as a copyrighted map and technical drawing.Sparaco also executed an agreement with the developer to the effect thatthe plans would not be used by architects than those originally hired un-less Sparaco was additionally compensated. Sometime thereafter, logisticalproblems evidently forced the developer to hire Lawler Matusky & SkellyEngineers (“Lawler”) to replace the original architects. Sparaco offered todraft a new site plan for Lawler, but the developer refused. Lawler then useda modified version of Sparaco’s site plan in its own work. The modified planwas eventually filed with the city.

2.6.3 Issue

May Sparaco claim copyright over the site plan?

2.6.4 Holding

Sparaco may claim copyright over the site plan to the extent that it containsinformation beyond basic facts.

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2.6.5 Reasoning

Although the factual elements of a map, such as the layout of the land, arenot copyrightable, elements requiring the discretion of the mapmaker are.These elements include the level of detail, color-coding, and the placement oflegends. Although the court below analogized the site plan to an idea thatwas too general to be copyrighted, this analysis is flawed. Sparaco’s site planprovides sufficiently concrete detail to facilitate the development of the land.It contains enough specific expression to fall under copyright protection.

3 Trademark and Trade Dress

3.1 Qualitex Co. v. Jacobson Products Co., Inc.

3.1.1 Overview

Qualitex (P) sued Jacobson Products (D) for using a color over which it hadclaimed trademark.

3.1.2 Facts

Qualitex (“Qualitex”) manufactures pads for use on dry-cleaning machines.The pads have a distinct green-gold color. Jacobson Products (“Jacobson”),a competing maker of dry-cleaning pads, started using the shade on its ownproducts. Qualitex sued Jacobson for trademark infringement.

3.1.3 Issue

May a trademark consist solely of a color?

3.1.4 Holding

A trademark may consist solely of a color.

3.1.5 Reasoning

The essential function of trademark is to identify the source of a product.In doing so, it helps consumers to make purchasing decisions and allows amanufacturer to benefit from its reputation. The courts have allowed trade-marks for features such as the shape of a Coca-Cola bottle and the smell

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of fragrant sewing thread. There is no reason to exclude color. Althoughcolor itself does not immediately signify a product’s source, over time it mayacquire secondary meaning. When such secondary meaning has attached toa color, it qualifies for trademark protection. Furthermore, color in the cur-rent context does not fall under the functionality doctrine, which states thattrademark cannot be extended to features that properly fall under the rubricof patents. There is no suggestion that the green-gold color used by Qualitexis peculiarly suitable for the uses to which dry-cleaning pads are put.

Jacobson’s arguments against trademarking Qualitex’s color lack merit.Jacobson has argued that the trademarking of colors might lead to colorconfusion, which might cause consumers to be confused by different shadesof the same color. This contention fails because courts have regularly allowedtrademarks on similar-sounding product names. Courts are competent toevaluate whether one trademark is so similar to another as to cause confusion.Jacobson also argues that colors are in limited supply. This argument failsbecause color would be protected by the functionality doctrine if such werethe case. Finally, Jacobson argues that alternatives other than color exist.This contention begs the question; in some cases, it may not be feasible touse anything other than color as an identifier.

3.2 Zatarain’s, Inc. v. Oak Grove Smokehouse, Inc.

3.2.1 Overview

Zatarain’s (P) sued Oak Grove Smokehouse (D) for trademark infringement.

3.2.2 Facts

Zatarain’s manufactures prepackaged batter for use in the preparation of friedfoods. Among its products are those known as “Fish-Fri” and “Chick-Fri.”Oak Grove Smokehouse (“Oak Grove”) manufactures similar products anddesignates them by the names “fish fry” and “chicken fry.” Zatarain’s suedOak Grove on the theory that the naming of Oak Grove’s products infringedupon Zatarain’s trademarks.

3.2.3 Issue

(1) Does Zatarain’s hold a trademark for the terms “Fish-Fri” and “Chick-Fri”? (2) If so, does Oak Grove have a fair-use defense against Zatarain’s

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claims of trademark infringement?

3.2.4 Holding

(1) Zatarain’s holds a trademark for “Fish-Fri” but not “Chick-Fri.” (2) OakGrove has a fair-use defense.

3.2.5 Reasoning

Whether a term may be trademarked depends on its classification. A termmay be (1) generic, (2) descriptive, (3) suggestive, (4) arbitrary, or (5) fan-ciful. Generic terms are categorically barred from trademark protection,as they are essential to the identification of a particular type of product.Descriptive terms are usually not eligible for trademark unless they have ac-quired secondary meaning. The trademark-seeker bears the burden of prov-ing that such secondary meaning exists. Suggestive, arbitrary, and fancifulterms are generally granted trademark protection.

The lower court was correct in holding that “Fish-Fri” is a descriptiveterm with secondary meaning while “Chick-Fri” is not. Both “Fish-Fri” and“Chick-Fri” are descriptive terms, as they are closely connected to the prod-ucts they describe. There are a limited number of ways to described friedfish and fried chicken. The existence of other possible terms for describingsuch food does not elevate either of Zatarain’s terms above the status ofdescriptive terms. The evidence shows that Zatarain’s has spent consider-able amounts of money in promoting Fish-Fri. Surveys show that the term“Fish-Fri” has consequently come to be associated with Zatarain’s productin particular. These facts establish secondary meaning for the term “Fish-Fri.” The evidence, however, does not allow a similar conclusion as to anysecondary meaning surrounding “Chick-Fri.”

Oak Grove has a fair-use defense in the case of Fish-Fri. Zatarin’s hasno claim to the use of “fish fry” in the purely descriptive sense. Oak Groveused the term in good faith and packaged its products in such a way as toavoid confusion with those of Zatarain’s. Confusion at the point of purchasewould be nearly impossible.

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3.3 Two Pesos, Inc. v. Taco Cabana, Inc.

3.3.1 Overview

Taco Cabana (P) sued Two Pesos (D) for infringing its trade dress.

3.3.2 Facts

Taco Cabana operated a chain of Mexican restaurants in the San Antonioarea. The restaurants had Mexican-themed decor, which consisted of brightcolors, paintings, awnings, and Mexican artifacts. Two Pesos, a newer restau-rant chain, operated restaurants with similar decors in Houston and othercities, though its market has never included San Antonio. Sometime there-after, Taco Cabana expanded into Two Pesos’s market and sued Two Pesosfor infringement of trade dress. The jury found that Taco Cabana had atrade dress that was inherently distinctive but without secondary meaning.

3.3.3 Issue

May a trade dress that is inherently distinctive receive protection under theLanham Act even though it lacks secondary meaning?

3.3.4 Holding

Such a trade dress may receive protection.

3.3.5 Reasoning

The Lanham Act says nothing about secondary meaning in relation to tradedress. It would be improper to read such a requirement into the Act, fordoing so might place a burden on upstart businesses. Such businesses wouldbe unable to protect their trade dress until they had operated for long enoughfor that trade dress to acquire secondary meaning. Denying protection forinherently distinctive trade dress would also allow competitors to copy suchtrade dress without consequence.

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3.4 Kohler Co. v. Moen Inc.

3.4.1 Overview

Kohler objected to Moen’s attempt to obtain trademark protection for theshape of its faucet handles.

3.4.2 Facts

Moen sought trademark protection for the distinctive design of its faucet han-dles. In support of its request, Moan produced voluminous evidence showingthat the design of the faucet handles were distinctive and non-functional.The evidence included a survey showing that a vast majority of respondentsidentified the design of the handles with Moen. Kohler thereafter sued, argu-ing that the granting of a trademark would give Moen advantages normallyavailable only through patent.

3.4.3 Issue

May the design of a faucet handle receive protection as a trademark?

3.4.4 Holding

The design of a faucet handle may receive such protection.

3.4.5 Reasoning

Kohler contests the trademark on the theories (1) that the trademark wouldeffectively grant a perpetual patent and (2) that it would be anticompetitive.Both contentions lack merit. Trademark law is distinct from patent in thatit does not address functional elements. Trademark is not anticompetitivebecause the supply of distinctive names and symbols for use as identifyingmarks is practically infinite. Granting a “monopoly” in the use of one par-ticular trademark has no effect on competing businesses.

Cudahy, Circuit Judge, dissenting. The particular configuration of aproduct, such as a faucet, should be considered generic. In granting a trade-mark over such a feature, the Patent and Trademark Office has effectivelyoffered protection that should only be available through a patent.

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3.5 In re General Electric Broadcasting Company, Inc.

3.5.1 Overview

General Electric Broadcasting Company (“General Electric”) sought to reg-ister as a service mark the sound of a ship’s bell.

3.5.2 Facts

General Electric operates a radio station. At each half hour, the station tellslisteners the time by playing a recording of a ship’s bell with the appropriatenumber of rings. The sound is then followed by a verbal announcement ofthe time. General Electric applied for protection of the sound as a servicemark, but protection was denied.

3.5.3 Issue

May the ringing of a ship’s bell act as a service mark?

3.5.4 Holding

The ringing of a ship’s bell may not act as a service mark absent evidencethat it indicates to listeners the producer of the sound.

3.5.5 Reasoning

The Lanham Act expressly states that no trademark should be refused regis-tration on account of its nature. Under this standard, a variety of sounds havebeen registered as service marks. These include the sound of a creaking door,the ringing of the Liberty Bell, and a series of musical notes. There is, how-ever, a distinction between “distinctive” and “commonplace” sounds. Whiledistinctive sounds are registered without additional evidence, a commonplacesound must be shown to have acquired secondary meaning. Because GeneralElectric has produced no evidence of such secondary meaning, the servicemark must be denied.

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3.6 In re Clarke

3.6.1 Overview

Clarke sought trademark protection for scented sewing thread and embroi-dery yarn.

3.6.2 Facts

Clarke sells scented sewing thread and embroidery yarn. Clarke has submit-ted declarations and evidence showing that no other businesses sell scentedyarn and that the scent has come to identify her products.

3.6.3 Issue

May a scent be protected as a trademark?

3.6.4 Holding

A scent may be protected as a trademark.

3.6.5 Reasoning

The Examining Attorney below has argued that a smell cannot qualify asa trademark because it is merely a pleasant feature of the product ratherthan an identifier of its source. This contention lacks merit in light of theevidence. Fragrance is not a natural characteristic of thread or yarn. Clarkehas spent considerable resources and effort promoting this peculiar aspectof her products. That she has not adverted to a particular smell as thetrademark should not prevent the scent from serving as such.

4 The Right of Publicity

4.1 Midler v. Ford Motor Co.

4.1.1 Overview

Midler (P) sued Ford Motor Company (D) for using a likeness of her voicewithout permission.

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4.1.2 Facts

Ford Motor Company (“Ford”) had proposed to hire Midler to sing for acommercial, but Midler refused. Ford, which held a license to use the in-tended song itself, then hired a different singer to imitate Midler’s voice.The result was so convincing as to be virtually indistinguishable from Mi-dler’s own singing. The commercial made no explicit references to Midler;only the likeness of her voice was used.

4.1.3 Issue

May a famous singer recover from a party that uses a likeness of her voicewithout permission?

4.1.4 Holding

Such a singer may recover.

4.1.5 Reasoning

It is important to realize that this case does not fall under the scope of copy-right or conventional definitions of the unauthorized use of one’s identity.Copyright law offers no protection against imitations of a particular singer’srendition of a song. Likewise, Midler cannot claim that Ford used her iden-tity improperly since the commercial does not make use of her name, voice,signature, or other identifying features. Nonetheless, Midler should recoverfor Ford’s unauthorized use of a likeness of her voice. A voice, just like aface, is an identifying feature protected by the law. Ford itself admitted thatpayment would be appropriate when it first sought to hire Midler and, whenefforts failed, to replace her with a sound-alike.

4.2 White v. Samsung Electronics America, Inc.

4.2.1 Overview

Vanna White (P) sued Samsung Electronics America (D) for evoking heridentity in an television commercial.

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4.2.2 Facts

Samsung Electronics America (“Samsung”) produced a television commercialthat showed a robot standing in front of the Wheel of Fortune game board.White sued Samsung for “appropriating her identity.”

4.2.3 Issue

Does Samsung’s commercial infringe White’s right of publicity?

4.2.4 Holding

The commercial infringes White’s right of publicity.

4.2.5 Reasoning

Kozinski, Circuit Judge, dissenting. The majority has erred by grantedcelebrities a sweeping right that drastically expands the protections normallyafforded by intellectual-property laws. Samsung has not used an actual like-ness of White in its commercial. In fact, the effectiveness of the commercialdepends not on the robot itself but the fact that it is standing in front of theWheel of Fortune game board. Without the game board, no one would rec-ognize the robot as a parody of White. The majority has effectively grantedWhite an exclusive right to what she does for a living.

The majority’s decision also runs afoul of the Copyright Act by hinderingthe production of parodies protected by the Act. Under the decision, evena copyright holder might be prevented from licensing his work for use in aparody because he may have to obtain the consent of every actor or celebrityappearing in the work. In the worst case, the producer of a parody in onemight find himself sued by some minor celebrity from another state eventhough the producer in all likelihood knew nothing of the celebrity before.

Finally, the majority’s decision is a breathtaking infringement of the FirstAmendment. It tries to limit the very process of reminding the public of acelebrity. The limitations imposed by the majority will tend to impoverishthe public domain and hinder the future development of artistic works.

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4.3 Wendt I

4.3.1 Citation

Wendt v. Host Int’l, Inc., 125 F.3d 806 (9th Cir. 1997)

4.3.2 Overview

Wendt (P) sued Host International for improper use of his likeness.

4.3.3 Facts

George Wendt (P) and John Ratzenberger, actors on the television showCheers, sued Host International (“Host”) for improper use of their images.Host had created animatronic robots resembling the two actors and placedthem outside airport bars. The robots were displayed in a setting similar tothe bar shown in Cheers. The trial court granted summary judgment in favorof Host on grounds that Wendt had failed to establish any genuine disputeas to whether the robots actually looked like their real-life counterparts.

4.3.4 Issue

Has Wendt raised a genuine dispute as to a material fact in claiming thatthe robots resemble Ratzenberger and him?

4.3.5 Holding

Wendt has raised such an issue.

4.3.6 Reasoning

The trial court should have submitted the question of whether the robotsresembled Wendt and Ratzenberger to a jury instead of ruling as a matterof law. The robots, however, should be viewed independently of the contextin which they are displayed. The common-law right of publicity protectsan individual from all forms of improper exploitation of his or her image,including infringement through animatronic robots. Host cannot claim thatis actually producing a likeness of the actors’ respective characters in theshow as opposed to the actors themselves; an actor does not give up his rightto publicity by portraying a fictional character.

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4.4 Wendt II

4.4.1 Citation

Wendt v. Host Int’l, Inc., 197 F.3d 1284 (9th Cir. 1999)

4.4.2 Holding

The Ninth Circuit declined to rehear Wendt I.

4.4.3 Reasoning

Kozinski, Circuit Judge, dissenting. A scenario feared in White v.Samsung has come to pass. Here, a copyright holder is struggling with ac-tors over who may ultimately permit the creation of derivative works. Underthe Copyright Act, there would be no question that Host, having permissionfrom Paramount Studios to use the characters from Cheers, is entitled toset up the animatronic robots. The drastic extension of publicity rights inWhite v. Samsung, however, has allowed Wendt and Ratzenberger to chal-lenge what would otherwise be a completely legitimate use of their characters.The majority’s decision here makes it very difficult for a copyright holder todictate any way in which its copyrighted work might be used, as there is oftenno meaningful distinction between exploiting the likeness of a character andexploiting the likeness of the actor portraying that character.

5 Term Limits

5.1 Eldred v. Ashcroft

5.1.1 Overview

Eldred seeks to invalidate the Copyright Term Extension Act (“CTEA”).

5.1.2 Facts

Eldred and other petitioners make use of copyrighted works that entered thepublic domain. They challenge the CTEA on several constitutional grounds.

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5.1.3 Issue

(1) Does the extension of the term of copyright protection violate the con-stitutional provision of a “limited” term of copyright? (2) Does the CTEA“promote the Progress of Science”? (3) Does the CTEA amount to an un-constitutional regulation of free speech?

5.1.4 Holding

(1) The extension of copyright does not violate any constitutional provisions.(2) The CTEA does “promote the Progress of Science.” (3) The CTEA isnot an unconstitutional regulation of free speech.

5.1.5 Reasoning

Congress has historically enacted copyright extensions without question asto the constitutionality of its measures. Eldred does not argue that the newcopyright term granted by the CTEA violates the constitutional requirementof a “limited” term. Rather, he argues only that retroactive application of theterm to existing works would be unconstitutional. Congress has explicitlystated that the uniform application of copyright extensions is intended topreserve fairness, so that authors are not afforded greater or lesser protectiondepending on when they happen to publish their works. In any case, thelength of copyright term lies generally within the discretion of Congress.

It is also within the discretion of Congress to decide what is the best wayof advancing the objectives of the Copyright Clause. Eldred argues that theCopyright Clause is intended to secure a quid pro quo: the author receivescopyright protection now in exchange releasing the work to the public domainlater. The history of copyright legislation, however, shows that this quid proquo should be understood to include extensions of copyright. Congress is atliberty to write a guarantee of future extension into legislation. It also hasthe power to achieve the same effect through historical precedent.

Eldred also contends without merit that the CTEA amounts to an un-constitutional restriction on free speech. To the contrary, the purpose of theCopyright Clause is to promote the creation and publication of free expres-sion. To that end, copyright law already contains provisions to guaranteefree speech. Ideas are not copyrightable, and the free-use defense allows thecopying of works for purposes like academic research and parody.

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Justice Stevens, dissenting. Although early congressional decisions shouldbe afforded deference on the grounds that they reflect the intentions of theframers, later decisions are not entitled to such judicial leeway. The Copy-right Act of 1831 in no way reflects the intentions of the framers, who werelong dead by then. It does not establish the constitutionality of copyrightextensions. Under the majority’s analysis, Congress would have the powerto extend copyright indefinitely.

Justice Breyer, dissenting. The majority has given Congress the leewayto grant an effectively perpetual copyright that benefits private parties. Fromthe standpoint of the author, there is nor real difference between a copyrightof the current length and a perpetual copyright. Because royalties tend todecay as a work gets older, the regime established by the CTEA alreadygrants more than 99% of the value that can be expected to be derived froma perpetual copyright in any case. It is absurd to suggest that extension ofcopyright beyond the death of an author would somehow encourage an authorto produce more works during his or her lifetime. Rather, the primary effectwould be to make it difficult for the public to make use of the work, evenafter its commercial value has long since disappeared. In fact the “limitedtime” provision was intended specifically to avoid the sort of situation thatthe CTEA has created.

6 Fair Use

6.1 Harper & Row, Publishers, Inc., v. Nation Enter-prises

6.1.1 Overview

Harper & Row (P) sued Nation Enterprises (D) for making unauthorized useof excerpts from the memoir of Gerald Ford.

6.1.2 Facts

Harper & Row (“Harper”) was about to publish a memoir written by formerpresident Gerald Ford. It had reached an agreement with Time magazine,under which Time would pay for permission to publish excerpts from thememoir before the release of the book. Nation Enterprises (“Nation”), the

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publisher of Nation magazine, apparently obtained a leaked copy of the mem-oir. Nation then proceeded to lift excerpts from the copy and to incorporatethose excerpts into a story of its own. The Nation story was designed to“scoop” (i.e., preempt) the story that Time had been planning. When theNation story was published, Time refused to pay Harper the full fee for accessto the memoir. Harper then sued Nation.

6.1.3 Issue

Does Nation’s use of the excerpts qualify as “fair use”?

6.1.4 Holding

Nation’s use does not qualify as fair use.

6.1.5 Reasoning

Although the doctrine of fair use was intended to protect First Amendmentfree speech, its applicability is especially narrow when unpublished worksare at issue. The right to control publication is an essential right affordedby copyright law. Without the ability to control the release of a work andto market the work beforehand, authors would have little incentive to cre-ate works in the first place. Nation should not be permitted to carry outinfringement of a soon-to-be-published work under the guise of news report-ing. If every memoir by a public figure could be appropriated by non-payingpublishers, then no such memoir would ever be able to earn its author aprofit.

Congress has provided four factors for evaluating whether a particularuse is fair use: (1) the purpose and character of the use; (2) the nature ofthe copyrighted work; (3) the substantiality of the portion used in relationto the copyrighted work as a whole; (4) the effect on the potential marketfor or value of the copyrighted work. Here, Nation has made (1) a blatantattempt to profit from the leaked manuscripts. It does not even pretend tohave any innocent motive. Nation has also (2) copied a manuscript of signif-icant expressive value. Employees of Harper and Time were required to signconfidentiality agreements prior to accessing the material. Although Nationcopied only a small portion of the manuscript, it lifted (3) the most powerfulpassages. Finally, there is a (4) real possibility that Nation’s unauthorizedpublication will prove detrimental to sales of the actual book.

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6.2 Sony Corp. of America v. Universal City Studios,Inc.

6.2.1 Overview

Universal City Studios (“Universal”) (P) sued Sony Corporation of America(“Sony”) (D) for facilitating copyright infringement.

6.2.2 Facts

Sony had just introduced its Betamax VCR. Users of these new VCRs beganto record shows for the purpose of “time-shifting,” or viewing the said showsat times other than their broadcast times. The trial evidence showed thatthe majority of users owned ten or fewer tapes and that more than half ofusers did not plan to re-watch recorded shows. Universal sued on the theorythat Sony was liable for indirect infringement of its copyright on TV shows.

6.2.3 Issue

(1) Are there substantial non-infringing uses of Sony’s VCRs? (2) Doesunauthorized time-shifting qualify as fair use?

6.2.4 Holding

(1) There are substantial non-infringing uses of Sony’s VCRs. (2) Unautho-rized time-shifting qualifies as fair use.

6.2.5 Reasoning

(1) Indirect liability exists only if there are no substantial non-infringinguses of the VCRs. Here, the facts show that non-infringing uses do exists.Universal’s programs account for less than 10% of all programming on theair. The relief requested by Universal would be too broad because it wouldcategorically bar the use of VCRs for recording TV shows, even if the copy-right holders to those programs consented to such recording. The recordshows that a substantial fraction of content owners would not object to therecording of their shows.

(2) Time-shifting, even if unauthorized, nonetheless qualifies as fair use.The Copyright Act requires courts to weigh factors such as the commercialor non-commercial nature of the use and the potential impact of the use on

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the market for the copyrighted work. Here, time-shifting is plainly a non-commercial use. The non-commercial nature of time-shifting the burden ofproving probable harm onto Universal. Universal, in turn, has failed to carrythis burden. Although Universal contends that time-shifting runs afoul of “apoint of philosophy,” it has not adverted to any factual basis for fears thattime-shifting would erode its market.

6.3 Campbell v. Acuff-Rose Music, Inc.

6.3.1 Overview

Acuff-Rose Music (“Acuff-Rose”) (P) sued Campbell (D) for writing a parodyof a song.

6.3.2 Facts

Campbell and his band, 2 Live Crew, had written a parody of the song“Pretty Woman,” whose copyright had been assigned to Acuff-Rose. Prior toreleasing the parody, Campbell requested permission from Acuff-Rose to mar-ket the parody. The request made it clear that Campbell would credit Acuff-Rose for the original song. After Acuff-Rose refused, Campbell nonethelessreleased the parody, which became a success. Acuff-Rose then sued Campbellfor copyright infringement.

6.3.3 Issue

Does the parody qualify as fair use?

6.3.4 Holding

The parody qualifies as fair use.

6.3.5 Reasoning

The Copyright Act requires the courts to evaluate four factors when decidingwhether a particular use qualifies as fair use: (1) the purpose and charac-ter of the use, (2) the nature of the copyrighted work, (3) the amount andsubstantiality of the portion used in relation to the copyrighted work as a

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whole, and (4) the effect of the use upon the potential market of the copy-righted work. For a parody, it is important under criterion (1) whether thework makes a sufficient attempt to ridicule the original. It does not matterwhether the parody is artful or in good taste. Here, the alteration of thelyrics of the original amounts to a sufficient “transformation” of the originalthat Campbell’s work may be said to ridicule, rather than copy, the origi-nal. Criterion (2) is of little help in the current case because it contemplatesderivative works other than parodies. Criterion (3) entails some of the fac-tors considered under criterion (1) since the context of the derivative work isimportant. Parody, by definition, must copy enough of the original to be rec-ognizable. As long as the copying is not excessive, fair use should be found.Here, Campbell copied only the opening lines, changing the lyrics drasticallyas the song progressed. In all, he copied no more than was necessary. It isunlikely for the purposes of criterion (4) that the parody would significantlyreduce the market for the original work.

6.4 UMG Recordings, Inc. v. MP3.com, Inc.

6.4.1 Overview

UMG Recordings (“UMG”) (P) sued MP3.com (D) for copyright infringe-ment.

6.4.2 Facts

MP3.com had introduced a new service that allowed users to stream copy-righted music from the Internet to their computers. MP3.com had evidentlyobtained copies of the songs in question by converting thousands of record-ings into MP3 format. Although UMG held the copyright to the music inquestion, MP3.com required users to verify that they owned a copy of thealbum by inserting the CD containing the album into the computer for afew seconds. Immediately upon verification, the user was allowed to streamthe music from the Internet. When UMG sued for copyright infringement,MP3.com argued that its service was fair use.

6.4.3 Issue

Does the service offered by MP3.com qualify as fair use?

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6.4.4 Holding

The service does not qualify as fair use.

6.4.5 Reasoning

MP3.com’s service fails every factor the four-factor test for fair use statedin the Copyright Act. With regard to (1) the purpose and character ofthe use, MP3.com has simply copied the recordings owned by UMG. Thereis no attempt to “transform” the music. Although MP3.com contends thatoffering the music online should be considered transformative, simply shiftingthe content from one medium to another has never held to be an adequatedefense against an infringement claim. With regard to (2) the nature ofthe copyrighted work, there is no question that MP3.com has infringed thecopyrighted “core” of the works in question. With regard to (3) the amountand substantiality of the portion copied in relation to the original work, thereis again no question that MP3.com has carried out a wholesale copying ofUMG’s music. With regard to (4) the effect of the use upon the potentialmarket for the copyrighted work, MP3.com has taken actions detrimental toany such market. MP3.com cannot argue that it is operating in a marketas yet unexplored by the copyright holder. The copyright holder has thesole prerogative of entering new markets. In any case, the record shows thatUMG has already made efforts to distribute its music online by entering intovarious licensing agreements.

6.5 Anderson v. Stallone

6.5.1 Overview

Anderson (P) sued Stallone (D) for copying an idea for a movie.

6.5.2 Facts

Stallone had already starred in the movies Rocky I, II, and III. Stallonewas fleshing out the idea for Rocky IV when Anderson wrote out his ownidea for the movie. Anderson subsequently met with studio executives, whoapparently promised that Anderson would receive payment if his idea wasused in connection with the movie. Sometime thereafter, Stallone revealedthat Rocky IV would indeed revolve around Anderson’s ideas. Anderson,

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however, learned that he would receive no payment after all. Anderson suedStallone for infringing the copyright on the treatment of Rocky IV.

6.5.3 Issue

Is Stallone liable for infringing any copyright protecting Anderson’s treat-ment?

6.5.4 Holding

Stallone is not liable for any such infringement.

6.5.5 Reasoning

Anderson is not entitled to relief because his treatment essentially copiescharacters created by Stallone. The copying of material created by Stal-lone is so pervasive throughout Anderson’s treatment that it is entitled tono copyright protection at all. As shown by the facts determined at trial,the characters in Anderson’s treatment were not merely similar to those cre-ated by Stallone; they were wholesale copies. Furthermore, Anderson hasadvanced no basis in precedent for his extraordinary claim that the creatorof an unauthorized derivative work is entitled to recover against the originalcopyright holder for making use of part of that derivative work.

7 Remedies

7.1 eBay, Inc. v. MercExchange, LLC

7.1.1 Overview

MercExchange (P) sued eBay (D) for infringing a patent on online auctions.

7.1.2 Facts

MercExchange had obtained a patent for an electronic marketplace in whicha centralized authority facilitated the sale of goods between individuals. Al-though MercExchange attempted to license the technology to eBay, eBayapparently declined to accept any licensing agreement and instead launchedits own auction site. MercExchange then sued for patent infringement. The

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district court held that an injunction against eBay should automatically is-sue. The Court of Appeals held that an injunction should be granted onlyin extraordinary cases.

7.1.3 Issue

What should be the standard for granting injunctions in patent cases?

7.1.4 Holding

The courts should use the traditional four-factor test in determining whetheran injunction should issue in a case of patent infringement.

7.1.5 Reasoning

It is settled law that the a plaintiff must demonstrate (1) that it has sufferedan irreparable injury; (2) that remedies available at law are inadequate; (3)that a remedy in equity is warranted after considering the balance of hard-ships between plaintiff and defendant; and (4) that an injunction would beconsistent with the public interest. The district court and the Court of Ap-peals both erred by applying broad rules instead of engaging in the traditionalfour-factor analysis. The district court erred by holding that injunctionsshould not issue absent special circumstances while the Court of Appealserred in the opposite direction by holding that injunctions should issue as amatter of course. In particular, the district court incorrectly suggested thatnon-practicing patent-holders were subject to a presumption against harm.There exist many patent holders, such as university researchers, who becauseof financial limitations or other reasons may prefer to license their inventionsrather than develop them directly. Such individuals should not be denied theprotection of patents. This Court has consistently has consistently rejectedattempts to replace equitable principles with inflexible rules.

Chief Justice Roberts, with whom Justice Scalia and Justice Gins-burg join, concurring. Although the Court reaches the correct conclu-sion, it should have given more consideration to issue arising uniquely inthe context of patents. If earlier cases have consistently granted injunctionsafter applying the four-factor test, then such precedent may suggest thatan injunction is indeed the appropriate remedy for the majority of patent

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disputes. The Court should take into account the peculiar nature by whichsome patent holders might choose to profit from their patents. In particular,a growing number of firms now acquire patents with the sole intention ofextracting licensing fees from the actual producers of the patented technolo-gies. The Court should be careful to prevent injunctions from becoming ameans of extracting exorbitant payments from licensees.

7.2 Sony Corp. of America v. Universal City Studios,Inc. (cont’d)

7.2.1 Overview

Please see the facts stated above.

7.2.2 Issue

Has Sony incurred indirect liability for copyright infringement through itssale of VCRs?

7.2.3 Holding

Sony has not incurred indirect liability.

7.2.4 Reasoning

Universal has failed to carry its burden of proving that Sony should be heldresponsible for any infringement committed by the users of Betamax VCRs.It is insufficient merely to allege that a particular piece of equipment couldconceivably be used for infringement. Rather, it is necessary to show thatSony had actual or constructive knowledge that the buyers of its VCRs wouldbe likely to engage in copyright infringement. The record shows that no suchknowledge exists. Sony had no direct contact with customers aside from theactual sale of each VCR itself. No Sony employee participated in the in-fringing activities of its consumers, and there is no evidence to suggest thatany infringing consumer acted on the suggestions of Sony’s advertisements.Furthermore, the rule that should be applied in the current case should beanalogized to the “staple article of commerce doctrine” long used in patentlaw. That doctrine states that a product should not be considered to facili-tating infringement unless it is capable only of infringing uses.

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7.3 MGM Studios Inc. v. Grokster, Ltd.

7.3.1 Overview

MGM Studios (“MGM”) (P) sued Grokster (D) and StreamCast Networks(“StreamCast”) (D) for facilitating copyright infringement by distributingKazaa file-sharing software.

7.3.2 Facts

Grokster and StreamCast distributed similar peer-to-peer file-sharing soft-ware. Although the software was capable of being used for non-infringingpurposes, the trial evidence showed that more than 90% of the files sharedusing the software were unauthorized copies of songs and movies, includingthose owned by MGM. The evidence also showed that both companies haddeveloped their software in the wake of the litigation surrounding Napsterand that their aim was to capture as many Napster users as possible. To thisend, StreamCast developed Napster-compatible software for the purpose ofinducing Napster users to switch to its service. Grokster promoted itself toNapster users through similar means. In addition, both companies openlyacknowledged that substantial numbers of their users were committing copy-right infringement. Both companies responded to e-mails from users askingabout copyright issues, and on one occasion legal counsel remarked that alawsuit would be good for publicity.

7.3.3 Issue

Should Grokster and StreamCast be secondarily liable for copyright infringe-ment?

7.3.4 Holding

Grokster and StreamCast should be liable.

7.3.5 Reasoning

The Court of Appeals erred in holding that Grokster and StreamCast mayescape liability simply because their products are capable of non-infringinguses. In reaching this conclusion, the court below has interpreted the ruleestablished in Sony far too broadly. There, the court addressed the extent to

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which secondary liability could be based on an inference that the technologyin question allowed no substantial uses other than infringement. Where theoutcome turns on such inferences alone, a court is not allowed to find liabilitywhen significant non-infringing uses exist.

By contrast, the case here turns on direct evidence rather than inferences.The Sony rule does not limit liability when direct evidence of knowledge ofinfringement exists. The record establishes beyond dispute that Groksterand StreamCast knew of the infringing activities of its users and that bothcompanies in fact encouraged that infringement. Both companies attemptedto position themselves as Napster substitutes, directly offering users advice onthe potential legal ramifications of file-sharing. That both companies derivemost of their revenue from advertising, as opposed to the shared contentitself, and their failure to actively restrain the sharing of copyrighted contentstrongly suggests that they are turning a blind eye to infringement.

Justice Ginsburg, with whom the Chief Justice and Justice Kennedyjoin, concurring. There was no evidence to permit any serious suggestionthat appreciable levels of fair use were taking place. The absence of fair usestrongly suggests that secondary liability should be found.

Justice Breyer, with whom Justice Stevens and Justice O’Connorjoin, concurring. It is unnecessary to reinterpret the Sony standard as theCourt suggests. Rather, it is enough simply to hold that the mere 10% ofshared files that do not infringe copyright is insufficient to meet the criterionof “substantial” non-infringing uses.

7.4 Dickinson v. Zurko

7.4.1 Overview

A dispute arose as to the standard of review to be applied when the Courtof Appeals for the Federal Circuit (“CAFC”) reviews the decisions of thePatent and Trademark Office (“PTO”).

7.4.2 Facts

Zurko applied for a patent, but the PTO denied the patent on the groundthat the invention was obvious in light of prior art. Zurko then sought review

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by the CAFC, which concluded that it should apply the court/court standardof review.

7.4.3 Issue

What standard should the CAFC use in reviewing decisions of the PTO?

7.4.4 Holding

The CAFC should use the court/agency standard.

7.4.5 Reasoning

The Administrative Procedure Act (“APA”) set forth a standard for appel-late review of the decisions of executive agencies. The APA specifies thatappellate courts are to use a court/agency standard of review as opposed tothe court/court standard used in reviewing the decisions of trial courts. Thecourt/agency standard is predicated on whether a “reasonable mind” wouldaccept the evidence supporting a certain conclusion whereas the court/courtstandard requires the reviewing judge to have a “definite and firm convic-tion” that the lower judge has created a factual error. The former is generallyconsidered to accord greater deference to the agency under review.

Although Dickinson argues that precedent has established the court/courtstandard as an “additional requirement” as defined in the APA, he has failedto produce sufficient evidence to support this view. In particular, the APAexpressly states that any such requirement should be recognized “by law” asopposed to common usage alone. A survey of the case law reveals that noconsensus actually exists as to use of the court/court standard in reviewingagency decisions. Ruling in favor of Dickinson would tend to create ratherthan to resolve problems surrounding the standard of review.

Chief Justice Rehnquist, with whom Justice Kennedy and JusticeGinsburg join, dissenting. The practice of the patent bar and the CAFCdoes support the contention that the court/court standard should be viewedas an ‘additional requirement” as defined in the APA.

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7.5 Harrods Ltd. v. Sixty Internet Domain Names

7.5.1 Overview

Harrods (P) commenced an in rem action for domain names that allegedlyinfringed its trademark.

7.5.2 Facts

Harrods had formed several subsidiaries in South America. Eventually, Har-rods severed its ties with subsidiaries, leaving them to operate as independentbusinesses. When the subsidiaries registered domain names similar to thoseused by Harrods, Harrods sued under the Anticybersquatting Consumer Pro-tection Act (ACPA).

7.5.3 Issue

Is bad faith in registering domain names a prerequisite to in rem liabilityunder the ACPA?

7.5.4 Holding

Bad faith is a prerequisite to in rem liability.

7.5.5 Reasoning

The text and legislative history of the ACPA makes it clear that a plaintiffmust allege bad faith, even in an in rem action. Indeed, the ACPA is intendedto protect consumers against purposeful attempts to profit from the goodwillof established businesses, not to prevent persons from registering domainnames for legitimate uses. The plaintiff’s concerns that the bad-faith rulewould make it difficult to prevail in an in rem action are unfounded. Thevery fact that an in rem action is necessary points to bad faith on the partof the registrant.

7.6 RealNetworks, Inc. v. Streambox, Inc.

7.6.1 Overview

RealNetworks (P) sued Streambox (D) under the DMCA for distributing acircumvention device.

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7.6.2 Facts

RealNetworks had established a system for streaming multimedia files fromcontent providers’ servers to users’ computers. The system consisted of Re-alServer software, which content providers used to serve content, and Re-alPlayer software, which allowed end users to access content arriving fromRealServers. The system contained two measures designed to prevent usersfrom making unauthorized copies of streamed content. First, RealServerand RealPlayer engage in an authentication process known as the “SecretHandshake,” by which RealServer ascertains that it is indeed communicat-ing with RealPlayer. Following the Secret Handshake, RealPlayer then de-tects a “Copy Switch” in the streamed content, which specifies whether theconsumer may download a separate copy of the content. The facts showedthat many content providers had chosen to distribute their content throughRealPlayer because of the copy protection it afforded.

Streambox produced Streambox VCR software, which masquerades asRealPlayer and ignores the Copy Switch. By this means, Streambox VCRallows users to make unauthorized copies of streamed content.

7.6.3 Issue

Does the DMCA prohibit the distribution of Streambox VCR?

7.6.4 Holding

The DMCA prohibits the distribution of Streambox VCR.

7.6.5 Reasoning

The Secret Handshake and Copy Switch plainly constitute a “technologi-cal measure” that “effectively controls access” to content under the DMCA.Streambox VCR “circumvents” these measures by masquerading as RealPlayerand ignoring the Copy Switch. It is important to note that “effective” protec-tion need not provide ironclad or even significant protection against efforts tobypass restrictions on copying. Rather, all that is required is for the measureto prevent copying in the ordinary course of use. Streambox has violated theDMCA because its software is (1) primarily designed to facilitate circum-vention and (2) has limited significant purposes beyond circumvention. Thiscase differs from Sony. There, some copyright holders had at least implicitly

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consented to copying. Here, copyright holders have chosen RealNetworksspecifically because it disallows copying.

7.7 Universal City Studios, Inc. v. Reimerdes

7.7.1 Overview

A dispute arose as to whether the software DeCSS violated the DMCA.

7.7.2 Facts

DeCSS was a computer program that bypassed the encryption scheme thatnormally rendered DVD video inaccessible to devices that failed to providethe correct decryption key. Manufacturers of DVD players were required topay movie studios, such as Universal, for licenses to the decryption keys.After being enjoined from distributing DeCSS, the defendants engaged in“electronic civil disobedience” by urging other websites to distribute DeCSSand providing links from its website to those sites.

7.7.3 Issue

Did the defendant’s actions violate the DMCA’s prohibition on trafficking incircumvention devices?

7.7.4 Holding

The defendant’s actions so violate the DMCA.

7.7.5 Reasoning

The defendant first argues that that “effective” control of access under theDMCA necessitates resistance against attempts at circumvention. This con-struction of the statute is flawed because it would prevent the courts fromenforcing its anti-circumvention provisions precisely where those provisionsare needed. The defendant has not shown that DeCSS was undertaken withany legitimate research goals, so it does not fall under the DMCA’s reverse-engineering exception. Furthermore, the doctrine of fair use does not protectthe defendant here; the defendant is being sued for circumvention, not forthe copying of any content.

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