copyright – Page 2 – Attorney Evan Brown

January 6, 2024 Contracts, Copyright

Shake Shack shakes off typeface breach of contract claim

In an ongoing federal case in New York, the well-loved restaurant Shake Shack finds itself embroiled in a copyright and contract dispute with House Industries, a typeface foundry known for developing the Neutraface font. House Industries accused Shake Shack of using the Neutraface font in Shake Shack’s logos and signage without the necessary licensing, claiming that Shake Shack breached Hose Industries’ End User License Agreement (EULA).

The Core of the Dispute

House Industries’ argument centered around its claim that Shake Shack used the proprietary Neutraface font software for commercial purposes, specifically in logos and signage, without obtaining the appropriate permissions. House Industries asserted – in a counterclaim brought against Shake Shack, who had filed a declaratory judgment action against House Industries – that this breached the EULA, which explicitly prohibits use of the Neutraface font software in logos or for the sale of products (unless the user pays an additional license fee).

Shake Shack moved to dismiss the counterclaim. It argued that House Industries failed to provide plausible, non-speculative allegations sufficient to substantiate a breach of contract claim. Moreover, Shake Shack contended that the contract claim was preempted by the Copyright Act. The court agreed with Shake Shack and dismissed House Industries’ claims.

The Court’s Analysis and Ruling

In assessing the breach of contract claim, the court found significant deficiencies in House Industries’ allegations. To establish a breach of contract, House Industries had to demonstrate the existence of an agreement, performance by House Industries, breach by Shake Shack, and resultant damages. House Industries, however, could not substantiate the existence of a contract between itself and Shake Shack. The details of Shake Shack’s assent to the EULA, including who agreed to it and when, were notably absent in House Industries’ claim. The court noted that mere speculation and the inability to identify a specific agreement or its terms were insufficient to sustain a breach of contract claim.

The court also delved into the issue of preemption under the Copyright Act. The central question was whether House Industries’ claim attempted to enforce rights equivalent to those protected under copyright law. The court determined that the Neutraface glyphs, being graphic or pictorial works, fell within the subject matter of copyright. (It is interesting to note that House Industries did not assert that Shake Shack violated the EULA by using the font software without authorization. “House Industries has pleaded no details whatsoever concerning Shake Shack’s alleged use of the proprietary software.”)

Despite House Industries’ assertions to the contrary, the court concluded that the claims were qualitatively similar to a copyright infringement claim. This portion of the analysis was particularly interesting. Copyright law covers pictorial or graphic works – the category in which the glyphs would fall. But type faces are specifically excluded from copyright protection (37 C.F.R. § 202.1(e)). That exclusion did not matter. Even though the glyphs were not subject to copyright protection, they were the type of works copyright protects. Since House Industries’ claim was equivalent to a claim under the Copyright Act concerning these types of works, the court found the breach of contract claim preempted by the Copyright Act.

Implications and Conclusion

This ruling highlights the complexities of intellectual property rights concerning the use of digital assets like fonts in commercial endeavors. It underscores the importance for companies to clearly understand and comply with licensing agreements when using digital creations. This case serves as a reminder of the nuanced legal landscape governing the intersection of technology, art, and commerce.

Shake Shack Enterprises v. Brand Design Company, Inc., 2023 WL 9003713 (S.D.N.Y. December 28, 2023)

See also:

January 4, 2024 Copyright, DMCA, Trademarks, Unfair Competition

cPanel gets injunction to shut down sophisticated counterfeiting enterprise

The purveyor of cPanel – the well-known hosting automation software – has successfully obtained an injunction against an overseas enterprise accused of engaging in an elaborate scheme to sell unauthorized access to the cPanel software. A federal court in Oregon has issued a wide-ranging injunction against the defendants’ unauthorized activities.

The sophistication of defendants’ actions

Plaintiff’s evidence showed that defendants – under the brand “Licenseman” – changed the cPanel software in several ways. Defendants allegedly made it so that any requests for licensing or technical help from cPanel went to Licenseman’s servers instead. The modified software hid messages about trial licenses expiring and would delete itself if cPanel’s tech team tried to access a server with this altered software. The changes involved “wrapped binaries” in the software, which tricked the system into using licenses meant for other cPanel systems. This meant many people could use the same cPanel license illegally.

cPanel’s legal claims

cPanel sued for:

copyright infringement;
the trafficking of circumvention devices in violation of the DMCA, 17 U.S.C. § 1201(a)(2);
trademark infringement and unfair competition under 15 U.S.C. § 1114, 1125(a);
trademark counterfeiting under 15 U.S.C. § 1114; and
cybersquatting under ACPA, 15 U.S.C. § 1125(d).

cPanel asked the court to enter a preliminary injunction to stop the unlawful activity. The court granted the motion. In reaching its decision, it found that plaintiff was likely to succeed on all five of its claims, in light of the overwhelming evidence indicating that defendants were behind the actions of the Licenseman entity.

The court’s decision

On the copyright infringement claim, the court found that plaintiffs had shown ownership of the allegedly infringed material by presenting evidence of its registered copyright claims. Plaintiffs presented evidence that defendants had infringed on plaintiff’s exclusive right to prepare derivative works of the software by altering cPanel software to permit access via illicit licenses.

As for the DMCA circumvention claim, the court found that defendants sold re-engineered, illicit cPanel licenses that, as advertised, manipulated the binary of the cPanel software so that people could use the cPanel software without purchasing a subscription from plaintiff. And defendants trafficked—that is, sold—such licenses via their websites. Thus, every element of DMCA trafficking liability had been met.

Concerning trademark infringement and unfair competition, the court likewise found that plaintiff had established a likelihood of success on the merits of its claims. Plaintiff submitted evidence that it owns a registration for the CPANEL mark, which served as prima facie evidence of exclusive rights to use the mark. And defendant’s actions were “highly” likely to confuse customers. The fact that illicit license users had sought plaintiff’s customer service suggested that users had actually been confused and not exercised a great deal of care in pursuing cPanel licenses.

Finding that plaintiff had shown likelihood of success on its counterfeiting claim, the court noted that plaintiff’s CPANEL mark identifies computer software facilitating the management and configuration of internet web servers, and defendants were using that exact mark to sell illicit licenses to plaintiff’s software.

Finally, on the cybersquatting claim, the court found plaintiffs to be likely to succeed on the merits where the disputed domain names incorporated the CPANEL mark and were used to sell infringing items “which itself prove[d] bad faith.”

Because plaintiff also showed irreparable harm from the alleged activity, that defendants’ loss of business if enjoined was not an unfair tipping of the equities, and that the public interest would benefit from the prohibition of the alleged conduct, the court granted the injunction.

cPanel, LLC v. Asli, 2024 WL 35674 (D.Or. January 3, 2024)

NB: Great work on the case by Venkat and team.

December 28, 2023 Copyright, Trademarks

Online platforms will have to answer for sales of alleged counterfeit products

A federal court in New York has denied the motion to dismiss filed by Chinese online platforms Alibaba and AliExpress in a lawsuit brought by a toymaker alleging that these companies’ merchant customers were engaged in contributory trademark and copyright infringement through the online sale of counterfeit products.

Background of the Case

Plaintiff toymaker accused the Alibaba defendants of facilitating the sale of counterfeit products on their platforms. The lawsuit stemmed from the activities of around 90 e-commerce merchants who were reportedly using the platforms to sell to sell fake goods.

The Court’s Rationale

The court’s decision to deny the motion to dismiss turned on several allegations that suggest the Alibaba defendants played a more complicit role than that of a passive service provider. These allegations included:

Specific Awareness of Infringement: The Alibaba defendants were allegedly well-informed about the infringing activities of several merchants, including some named in the lawsuit. The Alibaba defendants should have known of these instances from orders in six separate lawsuits against sellers on the platforms.
Continued Proliferation of Infringing Listings: Despite this awareness, the platforms reportedly allowed the continued presence and proliferation of infringing listings. This included listings from merchants already flagged under Alibaba’s “three-strike policy” for repeat offenders.
Promotion of Infringing Listings: Plaintiff alleged the Alibaba defendants actively promoted infringing listings. The Alibaba defendants reportedly granted “Gold Supplier” and “Verified” statuses to infringing merchants, sold related keywords, and even promoted these listings through Google and promotional emails.
Financial Gains from Infringements: Crucially, plaintiff argued that the Alibaba defendants financially benefited from these activities by attracting more customers, encouraging merchants to purchase additional services, and earning commissions on transactions involving counterfeit goods.

DMCA Safe Harbor Provisions Not Applicable

The court rejected the Alibaba defendants’ argument that safe harbor provisions under the Digital Millennium Copyright Act (DMCA) applied at this stage of the litigation. The DMCA safe harbor is typically an affirmative defense to liability, and for it to apply at the motion to dismiss stage, such defense must be evident on the face of the complaint. The court found that in this case, it was not.

Implications of the Ruling

This decision is relevant to purveyors of online products who face the persistent challenges of online enforcement of intellectual property rights. Remedies against overseas companies in situations such as this are often elusive. The case provides a roadmap of sorts concerning the types of facts that must be asserted to support a claim against an online provider in the position of the Alibaba defendants.

Kelly Toys Holdings, LLC v. 19885566 Store et al., 2023 WL 8936307 (S.D.N.Y. December 27, 2023)

October 25, 2023 Copyright, DMCA

No knowledge of infringement, no secondary copyright liability for YouTube

This case underscores that platforms like YouTube, when promptly addressing DMCA takedown notices, are not necessarily held liable for user-uploaded content that infringes copyright.

Plaintiff sued defendant YouTube accusing it of secondary copyright infringement liability — that YouTube was contributorily and vicariously liable for infringement concerning three videos that nonparty TV-Novosti (operator of various RT channels, including RT Arabic) posted on YouTube. These videos contained content from documentary videos plaintiff had created and for which it owned the copyright.

Defendant moved to dismiss the complaint. The lower court granted the motion to dismiss. Plaintiff filed a motion for leave to file an amended complaint, which the court denied. That court had determined that the proposed amendments would be futile. Plaintiff sought review with the Second Circuit, arguing it had sufficiently alleged YouTube’s liability under theories of contributory and vicarious liability. On appeal, the court affirmed the denial of the motion to amend.

The court rejected plaintiff’s argument that YouTube was liable for infringement by failing to delete TV-Novosti’s entire YouTube account. Plaintiff’s argument apparently went something like this: “We made YouTube aware of the infringement by sending a DMCA takedown notice. Though YouTube took down the videos (which it did not catch in its copyright-detection technology) once it found out about them, by continuing to provide the platform for this infringer, YouTube took on liability for the infringement.”

The court held that it agreed with the lower court’s denial of the motion for leave to amend. “[B]ecause YouTube promptly and permanently removed the [allegedly infringing videos] from its platform once it received the plaintiff’s DMCA notices, the Amended Complaint does not permit an inference that YouTube acted in concert with TV-Novosti.”

Business Casual Holdings, LLC v. YouTube, LLC, 2023 WL 6842449 (2d Cir., October 17, 2023)

July 8, 2023 Artificial Intelligence, Copyright

Does a human who edits an AI-created work become a joint author with the AI?

If a human edits a work that an AI initially created, is the human a joint author under copyright law?

U.S. copyright law (at 17 U.S.C. § 101) considers a work to be a “joint work” if it is made by two or more authors intending to mix their contributions into a single product. So, if a human significantly modifies or edits content that an AI originally created, one might think the human has made a big enough contribution to be considered a joint author. But it is not that straightforward. The law looks for a special kind of input: it must be original and creative, not just technical or mechanical. For instance, merely selecting options for the AI or doing basic editing might not cut it. But if the human’s editing changes the work in a creative way, it might just qualify as a joint author.

Where the human steps in.

This blog post is a clear example. ChatGPT created all the other paragraphs of this blog post (i.e. not this one). I typed this paragraph out from scratch. I have gone through and edited the other paragraphs, making what are obviously mechanical changes. For example, I didn’t like how ChatGPT used so many contractions. I mean, I did not like how ChatGPT used so many contractions. I suspect those are not the kind of “original” contributions that the Copyright Act’s authors had in mind to constitute the level of participation to give rise to a joint work. But I also added some sentences here and there, and struck some others. I took the photo that goes with the post, cropped it, and decided how to place it in relation to the text. Those activities are likely “creative” enough to be copyrightable contributions to the unitary whole that is this blog post. And then of course there is this paragraph that you are just about done reading. Has this paragraph not contributed some notable expression to make this whole blog post better than what it would have been without the paragraph?

Let’s say the human editing does indeed make the human a joint author. What rights would the human have? And how would these rights compare to any the AI might have? Copyright rights are generally held by human creators. This means the human would have rights to copy the work, distribute it, display or perform it publicly, and make derivative works.

Robot rights.

As for the AI, here’s where things get interesting. U.S. Copyright law generally does not recognize AI systems as authors, so they would not have any rights in the work. But this is a rapidly evolving field, and there is ongoing debate about how the law should treat creations made by AI.

This leaves us in a peculiar situation. You have a “joint work” that a human and an AI created together, but only the human can be an author. So, as it stands, the AI would not have any rights in the work, and the human would. Here’s an interesting nuance to consider: authors of joint works are pretty much free to do what they wish with the work as they see fit, so long as they fulfill certain obligations to the other authors (e.g., account for any royalties received). Does the human-owner have to fulfill these obligations to the purported AI-author of the joint work? It seems we cannot fairly address that question if we have not yet established that the AI system can be a joint author in the first place.

Where we go from here.

It seems reasonable to conclude that a human editing AI-created content might qualify as a joint author if the changes are significant and creative, not just technical. If that’s the case, the human would have full copyright rights under current law, while the AI would not have any. As these human-machine collaborations continue to become more commonplace, we will see how law and policy evolve to either strengthen the position that only “natural persons” (humans) can own intellectual property rights, or to move in the direction of granting some sort of “personhood” to non-human agents. It is like watching science fiction unfold in reality in real time.

What do you think?

June 6, 2023 Contracts, Copyright

What is a copyright license and why do you need one?

A copyright license is a formal agreement that allows another party to exercise rights in a copyright-protected work legally, which would otherwise infringe on the copyright owner’s exclusive rights. This agreement can be limited or extensive, temporary or perpetual, depending on the terms upon which the parties agree. A license does not transfer the copyright ownership; it simply grants specific permissions to the licensee. Features of a copyright license often include:

The scope of use: This sets forth which rights the licensee may exercise. It could specify whether the licensee can reproduce, distribute, publicly perform, display, or create derivative works from the copyrighted material.
Geographic location: The license might provide where the copyrighted material can be used.
Duration: This sets forth how long the licensee can exercise rights in the copyrighted material.
Exclusivity: It indicates whether the copyright owner can grant similar licenses to others.

Absent certain limited situations such as fair use, need a copyright license to legally exercise rights in someone else’s copyrighted work. Infringing on a copyright – using it without permission – can lead to legal consequences, including liability in court and the obligation to pay the other side’s attorney’s fees. For businesses, obtaining a copyright license can help them use, incorporate, and benefit from a copyrighted work, such as software, a piece of music, or a photograph, while respecting the legal rights of the copyright owner.

The licensing process also facilitates economic growth and cultural exchange by providing a legal framework for creators to monetize their work and for users to access and incorporate it into their own creations. For the creator, licensing can provide a source of income and allows it to control how and where its work is used. For the user, the license offers a way to legally and ethically utilize a work that adds value to its own product, service, or project.

See also:

Intellectual property issues in a speaker’s agreement

January 23, 2023 Copyright

Do you have to register your copyright?

When it comes to protecting your creative work, one question that often comes up is whether you need to register your copyright. The short answer is that you don’t have to, but it’s generally a good idea to do so.

As soon as you create a work and fix it in a tangible form, such as by writing it down or recording it, you automatically have copyright protection. This means that you have exclusive rights to reproduce, distribute, perform, and display your work, and to create derivative works based on it. However, simply having copyright protection doesn’t necessarily give you the tools you need to enforce it.

That’s where copyright registration comes in. By registering your work with the Copyright Office in the United States (or a similar organization in other countries), you gain several important benefits. One of the most significant is the ability to sue for infringement in federal court. If someone is using your work without your permission and you haven’t registered your copyright, the court will not hear your case. But if you have registered your copyright within a certain time period, you can pursue your case and, also seek statutory damages and attorneys’ fees. These can be substantial, even if you can’t prove that you actually suffered any damages.

Another benefit of registration is that it can be used as evidence of the validity of your copyright in court. For example, if someone is accused of infringing your copyright and they claim that your work is not original or that you don’t own the rights to it, having a registration certificate can help to prove that your work is valid and that you are the rightful copyright holder.

In summary, while copyright registration is not mandatory, it’s a good idea to register your work because it provides a means to enforce the rights of copyright holders if someone is using it without permission and also can be used as evidence in court if any infringement claim arises.

Evan Brown is a technology and intellectual property attorney in Chicago. Follow him on Twitter at @internetcases.

Company successfully defends against trade dress and copyright infringement claims over online software tool

trade dress

A federal court in Delaware dismissed most of the intellectual property infringement claims concerning a competing online room-planning software tool. The court held that plaintiff’s trade dress infringement and breach of contract claims failed, and that its copyright infringement claims failed, except for those allegations relating to the copying of computer code.

No trade dress protection where look and feel was functional

On the trade dress claim, plaintiff had identified fifteen elements that formed a cohesive “look and feel” of its software. And the court found – based on extensive use, wide advertisement and appearance in industry publications – that the trade dress had acquired secondary meaning. But the court found that the look and feel was merely functional and not subject to trade dress protection.

Copyright infringement – mixed bag

Similarly, the court dismissed the copyright infringement claim regarding the selection, arrangement and coordination of visual elements of the program. In the court’s view, these elements were merely functional and thus not subject to copyright protection. The court dismissed the copyright infringement claim as well concerning the tool’s graphics. On this point the court was even more bold – it found after a visual comparison of the works that they simply were not similar.

The court allowed the copyright infringement claim concerning the program’s code to move forward. It found that plaintiff had alleged both access and similarity. Plaintiff had also alleged that defendant repeatedly accessed the program to stress test the design, and that there were extensive similarities in the tools’ mechanics. These allegations were enough to survive a motion to dismiss.

Browsewrap not enough

Finally, the breach of contract claim failed, not on the basis of preemption as one might expect, but because the court found plaintiff had not sufficiently alleged that a contract had been formed. Plaintiff asserted that its website’s terms of service prohibited copying of the software, and that defendant’s employees should have been aware of those terms on a browsewrap theory – there was a link to the terms at the bottom of the page. But the court would not find that plaintiff alleged enough facts to plausibly allege that defendant’s employees manifested assent to those browsewrap terms.

Design With Friends, Inc. v. Target Corporation, 2022 WL 4448197 (D. Delaware, September 23, 2022)

Company president may be liable for vicarious copyright infringement

vicarious liability copyright

Plaintiff sued a company and its president for copyright infringement, over some photos that the company published online. The individual defendant moved to dismiss the claim against him, arguing that the complaint (1) did not plead any facts concerning action that he took, (2) did not try to pierce the company’s corporate veil, and (3) contained no facts to establish that the company is the alter ego of the individual defendant. Plaintiff conceded it was neither pursuing an alter-ego theory nor seeking to pierce the corporate veil. Instead, plaintiff argued that the individual defendant was vicariously liable for the company’s infringement. The court denied the motion to dismiss.

The court looked first to Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005), which provides that one infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it. But then it cited to later Tenth Circuit cases (e.g., Diversey v. Schmidly, 738 F.3d 1196 (10th Cir. 2013)) which state the test for vicarious liability a bit differently. Under Diversey, “[v]icarious liability attaches when the defendant ‘has the right and ability to supervise the infringing activity’ and ‘has a direct financial interest in such activities.” There is no mention of declining to exercise the right to stop or limit the infringement under this test, as there is in Grokster.

The court found that the plaintiff’s claims for vicarious liability against the individual defendant survive because the complaint alleged that defendant was the owner and president of the company, had the ability to supervise and control content on the website, and received a financial benefit from the operation of the website. It rejected the individual defendant’s argument that the claim should fail because there were no allegations that he declined to exercise the right to stop or limit the infringement.

Great Bowery v. Best Little Sites, 2022 WL 2074253 (D. Utah June 9, 2022)

Can you sue a platform for not following DMCA takedown procedures?

platform DMCA takedown

Plaintiff sued YouTube after the platform took down one of plaintiff’s videos in response to a DMCA takedown notice. She claimed YouTube failed to follow the procedures in 17 U.S.C. §512 by, for example, not providing her with a physical signature of the copyright owner and otherwise not following the “exact course of the DMCA guidelines.” YouTube moved to dismiss and the court granted the motion.

It held that §512 serves to provide safe harbor protections from copyright infringement liability to platforms. Section 512 does not, however, give rise to a standalone basis to sue a platform.

When a copyright owner sends a DMCA takedown notice to a platform, it must include substantially the following:

A physical or electronic signature of a person authorized to act on behalf of the owner of an exclusive right that is allegedly infringed.
Identification of the copyrighted work claimed to have been infringed, or, if multiple copyrighted works at a single online site are covered by a single notification, a representative list of such works at that site.
Identification of the material that is claimed to be infringing or to be the subject of infringing activity and that is to be removed or access to which is to be disabled, and information reasonably sufficient to permit the service provider to locate the material.
Information reasonably sufficient to permit the service provider to contact the complaining party, such as an address, telephone number, and, if available, an electronic mail address at which the complaining party may be contacted.
A statement that the complaining party has a good faith belief that use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law.
A statement that the information in the notification is accurate, and under penalty of perjury, that the complaining party is authorized to act on behalf of the owner of an exclusive right that is allegedly infringed.

If the notification does not include substantially these items, then if the platform leaves the content up, the insufficient notification will not be considered to have placed the platform on notice of the alleged infringing activity. So if the copyright holder sues the platform for copyright infringement, it will have to plead other facts showing that the platform is liable for infringement. Relatedly, if the platform acts expeditiously to remove or disable access to allegedly infringing content when it gets knowledge via a valid takedown notice, it will have an affirmative defense to a claim of copyright infringement.

In this case, the court confirmed the notion that the DMCA provides this safe harbor to the platform but does not give the person whose content has been taken down the right to sue the platform. The court does not mention – but it remains relevant – that one whose content has been taken down can seek a remedy under 17 U.S.C. §512(f) against a party who sends a takedown notice while knowingly materially misrepresenting that the content is infringing. But that is not the course plaintiff in this case took – she sued YouTube for not following the requirements that apply to copyright holders. And she lost.

Finley v. YouTube, 2022 WL 704835 (N.D. Cal., March 9, 2022)