Edited by Paul Devinsky and Rita Weeks

TRADEMARKS / CONFUSING SIMILARITY

Parody Not a Defense When Trademarks Are Confusingly Similar

by Ulrika E. Mattsson

The Trademark Trial and Appeal Board (the TTAB) held that a novelty T-shirt company's trademark registration showing a polo player falling off his horse was confusingly similar to the famous trademark logo owned Ralph Lauren for a polo player sitting on his horse.  The TTAB further found that "parody is not a defense if the marks are otherwise confusingly similar."  PRL USA Holdings v. Thread Pit, Cancellation No. 92047436 (TTAB, May 14, 2012). 

Ralph Lauren petitioned to cancel a trademark registration owned Thread Pit for a logo showing a polo player falling off his horse, arguing, among other things, likelihood of confusion of the two marks.  Thread Pit asserted as an affirmative defense that its use of its mark is a parody of Ralph Lauren's marks.  They also argued that the fame of Ralph Lauren's marks served to lessen the likelihood of confusion with Ralph Lauren's mark, because fame of a mark heightens the public's awareness of variances in marks.

The TTAB disagreed finding that the Threat Pit mark to be confusingly similar to the Ralph Lauren marks.  The TTAB concluded that 40 years of use, substantial advertising and expenditure, media exposure and substantial sales via many retail stores, supported its finding that Ralph Lauren's marks are famous and therefore entitled to a wide scope of protection.  The goods involved are in part identical and, as the TTAB noted, there are no restrictions in the identifications set forth in the registrations.  With regard to the channels of trade and classes of purchasers of the respective goods, the TTAB concluded that the classes of consumers and channels of trade are presumed to include the normal channels of trade for these goods, as sold to the normal classes of consumers.  Therefore, the TTAB found that the similarities between Ralph Lauren's and Thread Pit's goods, channels of trade and classes of purchasers favor a finding of likelihood of confusion. 

The TTAB further observed that when the goods are identical, a lesser degree of similarity between the marks is necessary to find confusion likely.  Here in each logo, the horses are in an identical position with the left front leg curling back and crossing the right rear legs, the reins drape in the same manner, and the polo mallet extends from the rider at the same angle.  The only difference in the appearance of the marks is the position of the rider.  The TTAB held that given the fame of Ralph Lauren's marks, the points of similarities in appearance, connotation and commercial impression outweigh the dissimilarities.

Finally, the TTAB held that Thread Pit's argument that their logo was a parody of Ralph Lauren's polo player logo and a parody of that elite, luxury lifestyle "is not a defense if the marks are otherwise confusingly similar."  The TTAB concluded that parodying a lifestyle is not a parody of a trademark. 

COPYRIGHTS / LITIGATION

South Park a Parody?  No, Really?

Please contact Paul Devinsky

The U.S. Court of Appeals for the Seventh Circuit ruled in favor of Viacom and South Park Digital Studios (SPDS), makers of the animated television show South Park, in dismissing a copyright infringement action that was still in the initial pleading stages.  Addressing the procedural and substantive grounds for dismissing the suit, the 7th Circuit found waiver and determined that only two pieces of evidence, the works in issue, were needed to prove SPDS's fair use defense.  Brownmark Films LLC v. Comedy Partners et al., Case No. 11-2620 (7th Cir. June 7, 2012) (Cudahy, J.).  As such, the dispute was resolved without the burdens or expense of discovery and trial. 

Brownmark owned a copyright in a video that went viral on the Internet.  The viral video was later parodied on an episode of South Park.  In the episode "Canada on Strike," the South Park creators spoofed a strike by the Writers' Guild of America by depicting striking Canadians demanding a share of the "internet money" they believed was owed to them as a result of disseminating viral videos and online content.  To illustrate the point, the South Park Elementary school boys decided to create a viral video in order to earn enough "internet money" to put an end to the Canadian strike.  In the episode, the South Park characters earn substantial "theoretical dollars" through their viral video "What What (In the Butt)" (WWITB).  The WWITB video parodies the original Brownmark video featuring an adult male singing and dancing in tight pants.

When Brownmark filed suit against the creators of South Park, the complaint cited to both the original version of the WWITB video, as well as the parody version airing on South Park, yet neither work was submitted to the district court.  SPDS moved for dismissal under Rule 12(b)(6), arguing that the South Park version of the video fell within the fair use defense of § 107 of the Copyright Act. When moving for dismissal, SPDS submitted both the original and parody WWITB videos to the court.  Brownmark responded to the motion only by contesting whether the district court could dismiss the complaint based on SPDS's affirmative defense.  In other words, Brownmark addressed the pleading requirements and the federal rules but did not address the substance of the fair use defense arguments.  After the district court granted the motion to dismiss, Brownmark appealed. 

On appeal, the 7th Circuit first analyzed whether the district court erred in considering SPDS's fair use defense in the context of a Rule 12(b)(6) motion to dismiss for failure to state a claim.  Acknowledging that a court ruling on a Rule 12(b)(6) motion cannot typically consider matters outside of the "four corners" of the complaint, the panel explained that the incorporation by reference doctrine provided the means by which the court could consider documents attached to a motion to dismiss if those documents are referred to in the complaint.  Here, the original work and the allegedly infringing work were both referenced in the Brownmark complaint (and subsequently attached to the Rule 12(b)(6) briefing papers). The 7th Circuit notes that a Rule 12(c) motion for judgment on the pleadings would have been a more procedurally correct vehicle for SPDS to challenge the allegations, but the attachment of the disputed videos converted the motion to dismiss to a motion for summary judgment.  Ultimately, the court elected to go through the fair use analysis without quibbling over the miscaptioning for SPDS's motion.

With the motion properly before the court, it addressed the fair use issue.  Since Brownmark never argued the merits of the fair use defense in the district court, the 7th Circuit concluded that those arguments were waived on appeal.  Despite finding waiver on the merits, the court analyzed each of the fair use factors and agreed with the district court that this was "an obvious case of fair use."  In determining whether a work constitutes fair use, the district court correctly considered the non-exclusive factors including  the purpose and character of the use, the nature of the copyrighted work, the amount and substantiality of the portion of the copyrighted work used in relation to the copyrighted work as a whole and the effect of the use upon the potential market value of the copyrighted work. 

Although discovery may often be required to weigh these factors, in this particular case, the court concluded that the merits of the claim could be evaluated simply by viewing the two works side by side.  The South Park episode was definitively found to be a parody of the original WWITB video.  The 7th Circuit explained that the South Park video had "transformative value" because its use was calculated to "comment on and critique the social phenomenon that is the 'viral video.'"  Despite using a substantial portion of Brownmark's work, the court held that South Park's version of the WWITB video did not "supplant" the original work.  Lastly, the court drew an interesting conclusion as to the market effect of the parody video; noting that since there is no "internet money" to be made on Brownmark's viral video and the only ensuing revenues would come from advertising dollars, the South Park spoof of the original work likely increased the value of Brownmark's work.  In other words, since the value of viral videos is tied to the number of online views, the alleged infringement (by way of a nationalbroadcast) would—ironically—actually boost the number of views for the original work.  Accordingly, Brownmark's video would not have declined in value following the airing of the parody.  Having evaluated all the factors, the district court's fair use finding was affirmed.

Practice Note:  This case is notable for recognizing that intellectual property claims may be brought in an effort to impose litigation costs and force a settlement but that the federal rules provide sufficient tools to squelch frivolous suits before litigation costs become a significant obstacle. 

COPYRIGHTS / DAMAGES

Postal Service Must Pay Reasonable Royalty for Copyright Infringement

by Rose Whelan

Considering the proper measure of damages under 28 U.S.C. § 1498(b), the U.S. Court of Appeals for the Federal Circuit vacated the trial court's damages award and remanded to the Court of Federal Claims to determine the fair value of a license for the full scope of the Postal Service's infringing use.  Gaylord v. U.S., Case No. 11-5097 (Fed. Cir., May, 14,2012) (Moore,  J.).

Frank Gaylord is the creator and holder of a copyright interest in "The Column," a group of nineteen stainless steel sculptures representing a platoon of solders.  "The Column" is the centerpiece of the Korean War Veterans' Memorial on the National Mall in Washington, D.C.  In 2002, the United States Postal Service issued a postal stamp and sold retail goods commemorating the 50th anniversary of the Korean War, featuring a photograph of "The Column."  In 2006, Mr. Gaylord sued the United States under § 1498(b), which waives sovereign immunity for copyright infringement.  In a previous appeal, the Federal Circuit held that the Postal Service was liable for copyright infringement and identified three general classes of infringing items: stamps that were used to send mail, unused stamps retained by collectors and retail goods featuring an image of the stamp.  In the prior case, the Federal Circuit remanded for damages. 

On remand, the Court of Federal Claims rejected Mr. Gaylord's claim for a 10 percent royalty on about $30.2 million in revenue allegedly generated by the Postal Service, as well as his claim for prejudgment interest.  In determining damages, the lower court employed a "zone of reasonableness" standard to determine the copyright owner's actual damages.  Applying this framework, the lower court determined that the "zone of reasonableness" for the value of a license on Mr. Gaylord's copyright was between $1,500 and $5,000 based on evidence of prior postal services licenses. 

The Federal Circuit rejected the lower court's approach and adopted the same approach to damages under § 1498(b) that its predecessor court adopted for damages under § 1498(a), which waives sovereign immunity for patent infringement.  The Federal Circuit determined that the "reasonable and entire compensation" provided for (in both §§ 1498(a) and (b)), entitled a copyright holder compensatory damages only, not to non-compensatory damages. 

In this case, the Court determined that the appropriate measure of compensatory damages under § 504 of the Copyright Law was the fair market value of a license covering the defendant's use and that the proper value of this license should be calculated based on a hypothetical arms-length negotiation between the parties.  The lower court erred by restricting its focus to the Postal Services' past payments and internal policies and was instructed on remand to consider all evidence relevant to a hypothetical negotiation, including Mr. Gaylord's past royalties of between 8 percent and 10 percent.  The Federal Circuit also instructed that the lower court may conclude that different license fees are appropriate for the three categories of infringing goods identified in its prior opinion. 

In addition, the Federal Circuit vacated and remanded the lower court's denial of prejudgment interest, holding that sovereign immunity does not limit prejudgment interest under 28 U.S.C. § 1498(b).

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