IP Intelligence Report

IP Intelligence Report

Insight on Intellectual Property

FTC Says That Sponsors of Pinterest Contests Should Require Users to Post Pins with Hashtags Warning When Pins are Posted for a Prize

Editor’s Note: This blog post is a joint submission with BakerHostetler’s Data Privacy Monitor blog.

Authored by: Gerald Ferguson and Alan Pate

In a March 20, 2014 closing letter sent to fashion company Cole Haan, the FTC warned that use of the hashtag #WanderingSole in conjunction with a recent Pinterest contest did not adequately communicate the “material connection” between Pinterest contestants and Cole Haan and violates Section 5 of the FTC Act. Although the FTC declined to bring an enforcement action against Cole Haan, the findings of the letter have important implications for brands running contests and promotions on social media.

Cole Haan’s contest rules instructed contestants to create Pinterest boards titled “Wandering Sole” and pin five Cole Haan shoe images to the board. Contestants were also required to post their “favorite places to wander” and include the hashtag #WanderingSole in each pin description. The most creative qualifying entry would receive a $1,000 shopping spree from Cole Haan.

In the FTC’s closing letter, the FTC found that each Pinterest board was in fact an endorsement of Cole Haan products. Prior to sending the closing letter, the FTC had conducted an investigation into whether Cole Haan’s contest violated Section 5 of the FTC Act by soliciting these entries. Pursuant to its authority under Section 5 of the FTC Act, the FTC requires the disclosure of any material connection between a marketer and an endorser when their relationship is not otherwise apparent. According to the FTC, the financial incentive to pin Cole Haan products (i.e. the $1,000 prize) was a material connection between Cole Haan and contestants. The FTC stated that it did not believe that the use of “#WanderingSole” adequately disclosed this material connection to others who may view the entry boards.

Ultimately, the FTC declined to bring an enforcement action against Cole Haan. The FTC cited, among other considerations, the fact that the FTC had yet to publically address whether an entry into a contest is a form of material connection or whether a pin on Pinterest may constitute an endorsement.

Although the FTC did not bring an enforcement action in this case, it has now given clear notice to the business community on this issue. It is likely that the FTC will pursue enforcement actions against brands that fail to adequately disclose such material connections in the future. Accordingly, brands running contests on social media should be cautioned to clearly and conspicuously display contest rules and notices on any social media pages where they host and promote their contests. Further, brands may be advised to include the word “contest” or “sweep” in any hashtags associated with their sweepstakes or contest entries.

For more information on complying with the FTC’s rules on endorsements, see the FTC’s revised Guides Concerning the Use of Endorsements and Testimonials in Advertising.

Yelp Denied Attempt to Keep Its Online Reviewers’ Identities Anonymous

In 2012, a local rug cleaning company in Virginia, Hadeed Oriental Rug Cleaning (“Hadeed”), filed a defamation action against the authors of seven critical reviews it received on Yelp, indicating that the reviews falsely stated that Hadeed provided poor service.  Hadeed allegedly could not locate the reviewers in its customer database and believed them to be competitors, not customers. The dispute therefore implicates a set of facts atypical of your average, run-of-the-mill Yelp review.  But it nonetheless remains informative to service providers reviewed on Yelp as well as their reviewers.

Along with the complaint, Hadeed issued Yelp a subpoena to ascertain the reviewers’ identities. Yelp objected to the subpoena on a number of grounds including that Hadeed had not complied with Virginia’s law setting out the procedure for subpoenas to identify anonymous Internet users.  Towards the end of 2012, the circuit court enforced the subpoena, even imposing a $500 sanction and an award of $1,000 in attorneys’ fees to Hadeed. Yelp appealed.

Yelp’s appeal argued that the First Amendment required that Hadeed show merit on both the facts and the law before such a subpoena could be enforced.  But the Virginia appellate court’s decision declined to find that its unmasking statute was unconstitutional.

Yelp urged the court to adopt the standards in other states that require more than Virginia’s statute.  For example, Yelp pointed to a New Jersey case, (Dendrite Int’l v. Doe No. 3) where the standard articulated includes the requirement for a court to “balance the defendant’s First Amendment right to anonymous free speech against the strength of the prima facie case presented and the necessity for the disclosure . . . to allow the plaintiff to properly proceed.”  Yelp also pointed to a Delaware case (Doe v. Cahill), outlining a standard requiring the plaintiff to, among other things, support the defamation claim with facts sufficient to defeat a summary judgment motion.  Most jurisdictions follow Dendrite or Cahill.

By comparison, the Virginia statute can be satisfied, among other requirements, with a “legitimate, good faith basis” that the communications may be defamatory.  The court distilled its instructions to the following, in sum and substance.  A plaintiff must show that:

1. the plaintiff has given notice of the subpoena to the ISP, who in turn provided notice to the anonymous communicator;

2. either the communications are or may be “tortious” (here, defamatory), or the plaintiff has a “legitimate, good faith basis” for believing the same;

3. other “reasonable efforts to identify the anonymous communicator has proven fruitless;

4. the identity sought is central to advance the claim, related to the claim or defense, or directly relevant to the claim or defense. Here, the court must balance the interests of the anonymous communicator against the interests of the plaintiff.

5. there is no pending motion challenging the viability of the suit; and

6. the entity to whom the subpoena is addressed likely has responsive information.

In declining to adopt the Dendrite or Cahill standard, the Virginia appellate court found that there are many unmasking statutes around the country applying a spectrum of standards, and that Virginia’s statute was adopted considering authority from other states.  It noted, “[a]lthough the case law has coalesced around the basic framework of the Dendrite and Cahill standards, they are not the only courts to articulate a standard for identifying anonymous Internet speakers.”

Finally, with the exception of one concurring and dissenting judge who felt that Hadeed had not presented enough evidence that the reviewers were competitors not customers, the majority of the Virginia appeals court found that Hadeed had met the statute’s requirements and upheld the subpoena.

Since the decision, there has been some debate over its effect given the fact that the statute has limited jurisdiction. However, it does show that Yelp and other ISPs allowing online reviews and doing business in Virginia are not immune to having to give up information about their users.  As pointed out in case commentary such as law360, the approach of a small business suing their putative customers can be fraught with complication, and may be the reason there is little case law in this area.  There are many other approaches a business can take, including working with the site to get the post removed.

GoldieBlox and the Three Beastie Boys

It was the ad video gone viral of three young girls proudly showing off their elaborate Rube Goldberg machine made of repurposed pink toys.  They sang “it’s time to change, we deserve to see a range” and called for girls “to code the new apps” and “to grow up knowing that they can engineer that.” GoldieBlox is a toy company started by Debbie Sterling, an engineering graduate of Stanford who noticed how deeply girls are underrepresented in that field.  Her startup company talks about “disrupting the pink aisle” and sells construction toys for girls.

How fitting, then, that they decided to borrow from the Beastie Boys’ 1987 song “Girls” to express this sentiment in their advertising.  All the lyrics in the ad are set to the catchy tune of “Girls” but replace the original lyrics that called for girls “to do the dishes” and “to clean up my room” and other such tasks.

Reportedly, the Beastie Boys wrote a letter to Goldieblox about the ad saying the video constitutes copyright infringement.  In a preemptive response, Goldieblox sued the Beastie Boys along with Island Def Jam Music Group, Rick Rubin and others in the Northern District of California seeking a declaratory judgment that their work does not infringe.  They argued that the work is a clear criticism and parody of the original, and should thus be covered by the fair use doctrine. Their complaint calls the Beastie Boys’ version “highly sexist” and states that the “specific goal of the parody is to make fun of the Beastie Boys song, and to further the company’s goal to break down gender stereotypes and to encourage young girls to engage in activities that challenge their intellect.”

A discussion of the fair use defense in this context would likely center on the first of the four factors of the fair use defense found in 17 U.S.C § 107:  “the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes.” Indeed, Goldieblox would likely have strong arguments that the purpose of the work is criticism and parody, looking to the Supreme Court decision in another parody song suit, Campbell v Acuff Rose Music, for guidance. There, 2 Live Crew’s rap version of Roy Orbison’s “Oh, Pretty Woman” was considered a fair use because it was a parody of the original. Despite the fact that there was a commercial element there, the Supreme Court found that “[t]he language of the statute makes clear that the commercial or nonprofit educational purpose of a work is only one element of the first factor enquiry into its purpose and character.”

However, there are arguments circling on the other side as well, that the purpose here is really not criticism, but selling a product.  After all—this is not a commercial song, but a commercial advertisement.  And perhaps there are even arguments about the nature of parody itself, given that there are questions whether the Beastie Boys’ song was ever to be taken seriously anyway.  As put forth in an article in Salon, “[i]nstead of hiding behind the thoroughly lame excuse that ‘The song was sexist, ergo we can take it to sell our toys,’ GoldieBlox could instead put on its big girls pants and make something awesome now with its creative talent.”

GoldieBlox now appears to be backing down and endeavoring to do just that: focus instead on its products.

As reported here by Pitchfork, the two remaining members of the Beastie Boys, Adam Horovitz  (“Ad-Rock”) and Michael Diamond (“Mike D”), responded to the suit with a letter. It noted that they were “very impressed with the creativity and the message behind your ad,” but indicated “as creative as it is, make no mistake, your video is an advertisement that is designed to sell a product, and long ago, we made a conscious decision not to permit our music and/or name to be used in product ads.”

On November 27, GoldieBlox issued an open letter to the Beastie Boys, saying that while they believe the work is a fair use, they want to respect the wishes of the late Beastie Boys’ member, Adam Yauch, whose will reflects his request that his music never be used in advertisements. They said they would remove the video, that they are “huge fans,” and that they didn’t know about Yauch’s wishes.  It is nice to hear that this tale seems to heading toward a happy ending for the parties involved.  Though it appears, then, that there may be no legal battle on the issue of fair use.

Until next time . . .

Google Prevails in the Latest Chapter of the Google Books Litigation

On November 15, Judge Chin of the Southern District of New York issued a long-awaited decision  in the Google Books case, Authors Guild, Inc. v. Google Inc.  Google Books—the project through which Google provides access to over twenty million books to the public—obtained some of its books from libraries without permission from the copyright owners.  When a library allows its books to be scanned, Google provides full digital copies of those books to that library only.  Books scanned from libraries that are not in the public domain can otherwise only be viewed by the public in “snippets,” or small, verbatim excerpts.

The plaintiffs originally filed their class action eight years ago alleging that Google’s scanning and digital display of books without permission infringed the owners’ copyrights.  They alleged Google infringed by unauthorized reproduction (by scanning the books); unauthorized distribution (through the provision of full digital copies to the libraries); and unauthorized display (through the display of snippets of the books to the public). Judge Chin rejected an initial settlement agreement on the grounds that it was not a fair resolution of the class action, and the case continued with a fight over two issues:  (1) whether the plaintiffs were certifiable as a class; and (2) whether Google’s actions were protected under the fair use doctrine.  The Second Circuit concluded that resolving whether the fair use defense applied might inform or even moot the class certification issue, and it remanded the case to the Southern District on the issue of fair use.

Section 107 of the Copyright Act, identifies “criticism, comment, news reporting, teaching . . ., scholarship, or research” as purposes for which there is not an infringement of copyright, along with four factors to consider in this determination. Judge Chin found that Google’s use of the books “provides significant public benefits” by allowing readers and researchers to efficiently find books, advancing the progress of the arts and sciences and striking a balance between the rights of authors and other individuals.  He also found that the ability for Google Books to facilitate search made it transformative use, just as thumbnail images to facilitate search had been found to be transformative by the Ninth Circuit.  A summary of the discussion of each of the four factors is here:

  • The Purpose and Character of the Use – Judge Chin found Google’s use to be transformative because digitization helps people find books and search their text, rather than a use for expressive purposes. The fact that Google is a commercial enterprise did not prevent this factor from weighing in favor of fair use because Google did not sell the scans or the snippets and did not run ads on the books’ information pages. This first factor weighed strongly in favor of fair use.
  • The Nature of the Copyrighted Works – The fact that the vast majority of the works at issue were nonfiction and the fact that all of the works were published weighed in favor of fair use.
  • Amount and Substantiality of the Portion Used – Although Google did scan the full text of the books, this factor weighed only slightly against a finding of fair use because scanning the entire book was necessary for Google’s search functionality and because Google limited the amount of text displayed through the use of snippets.
  • Effect of Use Upon Potential Market or Value – This factor weighed strongly in favor of a finding of fair use because Judge Chin found that Google Books actually enhanced the market by increasing the audience for books.

Judge Chin’s broad approach to fair use may embolden companies whose public benefit lies in the use of technology for the betterment of society.   Although, this story is not quite over yet—the Authors Guild has already announced its plan to appeal the decision.    We’ll keep on reading, as the future of this case is sure to be a page-turner.

Starbucks Coffee, Burned Again

This past Friday, Starbucks received yet another blow in its 12-year long trademark dispute against Wolfe’s Borough Coffee Inc.  The Second Circuit affirmed U.S. District Judge Laura Taylor Swain’s decision and found that Starbucks failed to prove that Wolfe Borough’s “Charbucks,” “Mister Charbucks,” and “Mr. Charbucks” marks were likely to dilute its brand.  As such, the three-judge panel denied Starbucks’ request for an injunction against the family-owned, New Hampshire-based coffee company.

Under the Trademark Dilution Revision Act of 2006 (the controlling law in this case) courts are required to balance six factors to determine whether one mark is likely to dilute another: 1) the degree of similarity between the mark or trade name and the famous mark, 2) the degree of inherent or acquired distinctiveness of the famous mark, 3) the extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark, 4) the degree of recognition of the famous mark, 5) whether the user of the mark or trade name intended to create an association with the famous mark, and 6) any actual association between the mark or trade name and the famous mark. See § 1125(c)(2)(B). The TDRA factors are designed to determine whether one trademark is likely to confuse consumers by “blurring” the trademark of another brand.

The Second Circuit agreed with the District Court’s analysis, finding that the lack of an actual association between the Charbucks and Starbucks marks outweighed the distinctiveness, exclusive use, and high recognition of the Starbucks mark. The central issue here was whether consumers were likely to confuse Charbucks for Starbucks.

To help show consumer confusion, Starbucks commissioned a 600-person telephone survey.  Consumers were asked: 1) What is the first thing that comes to your mind when you hear the name Charbucks, spelled C-H-A-R-B-U-C-K-S? and 2) Can you name any company or store that you think might offer a product called Charbucks? Although “[t]he number one association of the name ‘Charbucks’ in the minds of consumers is with the brand ‘Starbucks,’” the Second Circuit found that the District Court was correct to discount the survey.  The survey only focused on consumer associations with the word “Charbucks” and not associations with the actual packaging of the Charbucks blends.

As reported by Law360, counsel for Wolfe’s Borough stated, “The Second Circuit recognized what we have long believed: Black Bear’s ‘Charbucks Blend’ and ‘Mr. Charbucks’ do not dilute any of Starbucks’ marks. This is an important trademark case, establishing that dilution by blurring is very difficult to prove when the marks are dissimilar and when the evidence of actual association between the marks is weak, as it was here.”

A representative from Starbucks commented, “We are respecting the court’s decision.”

Legislative Watch: Trade Facilitation and Trade Enforcement Reauthorization Act of 2013

Editor’s Note: This article was originally published as a BakerHostetler Executive Alert on November 13, 2013

Authored by: Heather J. McDonald and Jenna Felz

A proposed U.S. Senate Bill has the potential to change the way in which intellectual property infringement is reported and enforced. U.S. Senate Bill 662 (“S. 662″), the Trade Facilitation and Trade Enforcement Reauthorization Act of 2013, has recently been the subject of lobbying efforts by the Chamber of Commerce and a number of businesses and trade groups eager for more stringent intellectual property protections. Introduced to the U.S. Senate on March 22, 2013, it has since been referred to the Senate Committee on Finance, which held a hearing on the bill in May but has not yet taken further action. The U.S. House of Representatives has introduced a related bill, H.R. 3004, the Reducing Waste and Increasing Efficiency in Trade Act, which was referred to the House Committee on Ways and Means in August 2013. Parties interested in moving S. 662 forward have written a letter to the bill’s co-sponsors, U.S. Senators Max Baucus of Montana and Orrin Hatch of Utah, urging Senate finance leaders to send the bill to the Senate floor this year for a vote.

S. 662 reauthorizes existing trade facilitation and enforcement functions, and adds new provisions designed to enhance cooperation on intellectual property protection between and among federal agencies, the private sector, and the international business community. Notably, the bill adds a provision amending the Tariff Act of 1930 that empowers the Commissioner of the U.S. Customs and Border Protection Agency (“Commissioner”) to provide copyright and trademark owners with information concerning infringements of their intellectual property rights. The provision gives the Commissioner the unprecedented ability to share actual samples and unredacted images of counterfeit goods, including packaging and label information, with copyright and trademark owners.

Another provision of S. 662 requires the Department of Homeland Security to develop and execute an educational campaign for travelers entering or leaving the United States about the legal, economic, and public health and safety implications of acquiring merchandise that infringes intellectual property rights. The bill also suggests that the Commissioner work with the U.S. Patent and Trademark Office to develop a system that allows for simultaneous recordation of trademarks and copyrights with both the U.S. Customs and the U.S. Patent and Trademark office. The authors of the letter in support of S. 662 acknowledge that the bill contains controversial measures regarding antidumping and countervailing duty enforcement, but urge the Senate Finance Committee to nevertheless work to move the bill forward. This is a bill to track in the final months of 2013.

If you have any questions about the material presented in this alert, please contact Heather J. McDonald at hmcdonald@bakerlaw.com or 212.589.4285 or your regular BakerHostetler contact.

Supreme Court Declines Opportunity to Review Test for Copyright Fair Use

After the Second Circuit ruling in Cariou v. Prince, which we wrote about on this blog here, photographer Patrick Cariou felt that the decision was too subjective, calling it an “I know it when I see it” approach for determining when a work is transformative—or, in other words, when a work that appropriates copyright material has the requisite “something new” so as to qualify for fair use protection under U.S. copyright law.  Last week, the U.S. Supreme Court declined Cariou’s Petition for a review of the Second Circuit decision and the application of the copyright fair use standard.

The above artwork (resized), shows Prince’s Graduation (left) side by side with a photo from Cariou’s Yes Rasta.  A decision on transformative use for Graduation was remanded back to district court.

The Second Circuit found that 25 out of 30 pieces of artwork from Richard Prince’s collection “Canal Zone” at the Gagosian Gallery—pieces that appropriate varying degrees of elements from Cariou’s “Yes, Rasta” photograph collection—met the test for fair use. The other five were sent back to the district court for a determination there. A partial dissent questioned whether the appellate court should have opined on the transformative nature of a work without expert opinions or the opportunity for further evidence. It also questioned whether the lack of Prince’s own explanation as to a transformative purpose to his work should have been disregarded.

The continued battle in the petition briefs reflect the main arguments about fair use generally—on the one side, that it is too giving, leaving copyright holders open to rampant use of their works, and leaving online photos and images particularly vulnerable.  And, on the other side, it is not giving enough, squelching free expression particularly where an artist speaks with a language using what came before it – copyrighted or not.

Fair use is a four-part test found in 17 U.S.C. 107.  “Transformative use” is part of the discussion of the first factor: “the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes.” The seminal case on transformative use is Campbell v. Acuff Rose Music, Inc. which involved a musical parody that was deemed a fair use.   Incorporating some of the points from the Cariou v Prince dissent, Cariou argued that the Second Circuit extended the application of Campbell.  They argued that Campbell does not require a determination of whether it can “reasonably be perceived” that a work is transformative unless the defendant has explained and defended his purpose as transformative.

Among other arguments, Cariou also put forth that the Second Circuit did not weigh the four fair use factors correctly, and did not focus enough on the third factor, the substantiality of the copying.  He argued, further, that there was a circuit split in the Second Circuit’s use of the fourth factor—the effect of the use upon the potential market for the copyrighted work.  He claimed that the Second Circuit’s emphasis on the fact that Cariou had not aggressively marketed his work “overlooks the statutory focus on potential markets and conflicts with decisions of other circuits.”

Prince responded that the Second Circuit properly applied Campbell and did not create a circuit split in its treatment of the fourth fair use factor because it concluded that Cariou would not “develop or license secondary uses in the vein of Prince’s artworks.”

Both sides received considerable support from interested parties throughout the life of the case. As Cariou v. Prince now reaches the end of this appeal, for now, appropriation artists and other supporters of Richard Prince appear to have carried the day.

New COPPA Requirements for Mobile Apps and Websites Now in Effect

On June 3, 2013, we wrote about the new COPPA requirements coming into effect starting July 1, including a variety of requirements intended to keep up with advances in technology and how children interact with mobile apps and websites.  These have now come into effect, and I’ve provided a more expanded discussion of these issues here in Bloomberg BNA Social Media & Policy Report.