By Marie-Andrée Weiss
Adidas owns multiple trademark registrations in the European Union and the U.S. for its famous three stripe design, and it fiercely protects them. It has filed, and won, several trademark infringement suits, and regularly sends cease-and-desist letters asking brands to stop selling shoes or clothes bearing stripes.
In February 2017, Adidas filed a notice of opposition with the U.S. Patent and Trademark Office Trademark Trial and Appeal Board (TTAB) to the registration of a mark that Tesla Motors was seeking to register for articles of clothing. The mark would have consisted of “three equal length horizontal stylized lines in the manner of a stylized number 3.” The trademark has since been abandoned after an inter-partes decision by the TTAB.
On 17 February 2017, Adidas also filed a trademark infringement and dilution suit against competitor Puma North America Inc. in the district court of Oregon. Adidas claimed that Puma’s new model of soccer cleats, which bear four diagonal stripes on each side, infringes on the Adidas trademark as it is likely to cause consumer confusion as to the source of the footwear. Adidas voluntarily dismissed the case on 28 February 2017, likely following successful negotiations with Puma.
On 14 February 2017, the Barcelona Football Club abandoned its application to register a mark in class 28, for sporting articles, following a notice of opposition filed by Adidas on 31 October 2016, and an inter-partes decision by the TTAB. The abandoned mark consisted of “a square containing seven vertical stripes. The 1st, 3rd, 5th and 7th stripes from the left are blue, and the remaining three stripes are garnet.”
On 17 March 2017, Adidas filed a trademark infringement and dilution suit in the Eastern District of North Carolina, against fashion company Juicy Couture, which came to fame some 15 years ago for creating a velour tracksuit. Adidas claimed that some jackets and pants, bearing stripes on their sleeves and sides, infringe several of its trademarks.
Adidas has won or settled all of the trademark infringement cases it has filed. Will the streak ever end?
The scope of the three-stripe trademark
What exactly do the Adidas trademarks protect? Are all three stripes claimed by Adidas under the trademark? Are all stripes on shoes and clothing, regardless of the number of stripes, claimed by Adidas?
Adidas owns several federal trademark registrations in the U.S. for a mark consisting “of three parallel stripes applied to footwear, the stripes are positioned on the footwear upper in the area between the laces and the sole,” (see here, here, or here). Adidas also owns trademarks for clothing bearing the three stripes (see here) and even for verbal trademarks using the term “3 stripes,” such as the trademark “THE BRAND WITH THE 3 STRIPES.” Does that mean that Adidas has a monopoly for just about every trademark featuring three stripes, every trademark featuring two or four stripes, or even for clothing featuring any number of stripes?
The February 2017 complaint against Puma stated that Adidas has been using the three-stripe trademark on shoes since 1952 and on apparel since 1967. While easily recognizable, Adidas’s three-stripe trademark is also simple: three stripes, often shown diagonally on the sides of shoes, on the sleeves of a training jacket, or the sides of training pants, shorts, or shirts. The three stripes are all of the same width when seen together, but this width varies from trademark to trademark. The distance between each stripe also varies.
In the USPTO Design Search Code Manual, category 26 is for “geometric figures and solids.” 26.17 is for “lines, bands, bars, chevrons and angles” and 26.17.01 is for “straight line(s), band(s) or bar(s).” 26.17.05 is the code for “horizontal line(s), band(s) or bar(s).”
The design search codes for the trademark which Tesla sought to register were 26.17.01 and 26.17. A recent search in the TESS database for a mark with a 26.17. 01 code yielded 89,266 records and a search for marks with the 26.17.05 code yielded 81,820 records. Amongst the 26.17.05 results, 14 were filed by Adidas.
The mark which Tesla sought to register was described in the application as consisting of “three equal length horizontal stylized lines in the manner of a stylized number 3.” Yet the stripes were not similar to Adidas stripes, which are cut in a neat angle. Tesla’s stripes were cut on the side in a soft curve, resembling a Japanese wood beam or roof. The Barcelona Football Club was trying to register as a trademark the stripes which are seen on its own logo, which is itself a registered trademark! Indeed, many sports teams around the world sport stripes on their uniforms. A stripe is a stripe is a stripe. Yet Adidas opposed these two trademark registrations.
Is Adidas going too far?
This is not the first time that Adidas sued a company over the use of stripes on shoes or clothing, even if more or less than three stripes are featured. Adidas sued several European retailers in the late nineties over the use of two stripes on the side of sports clothes, which eventually led to the European Court of Justice ruling in 2008, in Adidas AG and Others v. Marca Mode CV and Others, that Adidas’ competitors could not “be authorized to infringe the three-stripe logo registered by Adidas by placing on the sports and leisure garments marketed by them stripe motifs which are so similar to that registered by Adidas that there is a likelihood of confusion in the mind of the public” (at 32).
While there may be a need for signs which do not have a distinctive character, such as stripes, to be available for competitors, this need “cannot be taken into account in the assessment of the scope of the exclusive rights of the proprietor of a trade mark” (ruling of the Court). The European Court of Justice thus chose to protect the public against any likelihood of confusion.
U.S. fashion manufacturers also encounter legal difficulties when using stripes on garments, and their frustration is mounting. On 3 March 2017, fashion retailer and manufacturer Forever 21 filed a complaint against Adidas, asking the Central District Court of California for a declaratory judgment of non-infringement of trademark. Forever 21 claims that Adidas is now “essentially asserting that no item of clothing can have any number of stripes in any location without infringing Adidas trademarks.” Forever 21 is “[t]ired of operating with a cloud over its head with regard to its right to design and sell clothing items bearing ornamental/decorative stripes” and “has decided that enough is enough… This matter is ripe for a declaratory judgment.” However, Forever 21 voluntarily dismissed the case on 13 March 2017.
Stripes are never out of fashion, and fashion designers frequently use them on the side of pants or jackets. Is this infringement? Forever 21 had claimed that “Adidas should not be allowed to claim that Adidas, alone, has a monopoly on striped clothing.” The retailer filed the suit after receiving yet another cease and desist letter sent by Adidas, this time asking Forever 21 to stop selling clothes bearing four stripes, including a sports bra, tee shirts and pants. Forever 21 claimed that “[a]ny use of stripes on clothing sold by Forever 21 is ornamental, decorative, and aesthetically functional.”
Adidas had sent a similar letter to Forever 21 in June 2015, which claimed that a sweat shirt featuring Snoopy, with stripes on its cuffs, bottom and collar, was infringing. However, varsity jackets, or letterman jackets, traditionally sport stripes in similar places, and Forever 21 indeed described its Snoopy shirt as featuring “generic varsity-style stripe pattern.” Is Adidas too aggressive in enforcing its mark?
A need to police the mark
These cease and desist letters illustrate what trademark owner must do to avoid losing their rights through failure to control use. Section 45 of the Trademark Act states that a mark is abandoned when “any course of conduct of the owner, including acts of omission as well as commission, causes the mark to… lose its significance as a mark.” This includes failing to adequately police the mark against third-party use. Also, the three-stripe mark is famous, thus making trademark dilution another concern for Adidas. In fact, even just the appearance of dilution is a concern, since trademark owners only need to prove a likelihood of dilution, not actual dilution, after the enactment of the Trademark Dilution Revision Act of 2006. Adidas does not want its three stripes to strike out. But is it the general public which ends up losing?
By Marie-Andrée Weiss
On 24 January 2017, Judge Abrams from the Southern District of New York (SDNY) granted a motion to dismiss from a video director who had been sued for violation of Section 43(a) of the Lanham Act by an actress featured in an anti-street-harassment video he had directed, and which he later licensed for use in an TGI Friday’s appetizers advertisement. The case is Roberts v. Bliss, No. 15-CV-10167.
Plaintiff had been hired to appear in “10 Hours Walking in NYC as a Woman,” (the video) which was filmed by hidden camera to show the amount of catcalling directed at women walking on the streets. The actress was filmed for 10 hours walking in the streets of Manhattan, while men commented on her appearance and asked for her phone number. The footage was edited to a 1.56 minute video, which ended with a message urging viewers to donate to a non-profit organization dedicated to fighting street harassment, which had commissioned the video.
The video was directed and produced by Defendant Rob Bliss. He posted the video on YouTube in October 2014, and it went viral within 24 hours, receiving 10 million views in the first 24 hours of its posting. It has now been seen some 44 million times. After the video went viral, Bliss used it on his professional website to advertise his services. In February 2015, he licensed the video to a Colorado advertising agency, which used it to create two ads for TGI Friday’s, a fifteen-second ad and a thirty-second ad (the ad).
The ad starts with a black screen with the text, ”Nobody likes a catcaller,” and then shows clips of the video, with oversized pictures of new TGI Friday’s appetizers entirely covering Plaintiff’s body. This gives the impression that men on the street are expressing their admiration for mozzarella sticks or potato skins. The ad ends with another black screen which reads: “But who can blame someone for #AppCalling?”
Plaintiff sued Bliss, his company, and the non-profit which had originally commissioned the ad, claiming that the ad misleadingly implied that she had endorsed the ad and the appetizers, in violation of Section 43(a) of the Lanham Act, which forbids false endorsements. She also claimed that her right of publicity under New York law had been violated. Claims against the non-profit were later dropped.
The Section 43(a) false endorsement claim fails
Plaintiff claimed that she had not licensed her identity or persona to be used in the ads and would not have done so if offered to license it. She claimed that the ad violates Section 43(a) of the Lanham Act, as it “depicted [her] persona and conveyed the false impression to a substantial group of viewers… that she had participated in, authorized or endorsed the [ad]” (Complaint, p. 12-13).
While right of publicity laws generally forbid using a person’s likeness for commercial purposes, the Lanham Act, which prohibits the unauthorized use of personal identity in endorsements or advertising, may also be used to that effect. Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) prohibits:
“us[ing] in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which… is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or… in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities.”
Judge Abrams cited Burck v. Mars, Inc., a 2008 SDNY case, which enumerated the elements of a false endorsement claim under the Lanham Act, which require that “the defendant, (1) in commerce, (2) made a false or misleading representation of fact (3) in connection with goods or services (4) that is likely to cause consumer confusion as to the origin, sponsorship, or approval of the goods or services”.
The ad did not use Plaintiff’s persona
Plaintiff did not claim that her name had been used, but instead her “persona,” which indeed could fall within the scope of Section 43(a), as its broad terms may indeed protect persona.
Judge Abrams examined what exactly is a “persona” and noted that it is defined by the Oxford English Dictionary as “the aspect of a person’s character that is displayed to or perceived by others.” He also quoted two 1992 Ninth Circuit cases recognizing persona. In Waits v. Frito Lay, a case about the unauthorized imitation of Tom Waits‘ voice, the court held that an artist’s distinctive voice and style was part of his persona. In White v. Samsung Elecs. Am. Inc., the court recognized that Vanna White had a right to her individual style and stance within the context of the set of Wheel of Fortune, where she had become famous; therefore, an ad could not use a robot in a blonde wig and pink dress on a set resembling Wheel of Fortune.
In this case, Judge Abrams was not convinced by Plaintiff’s claim “because neither she, nor any representation of her, her image, or her persona, appear in the TGI Friday’s advertisement, and the ad contains no false or misleading statement suggesting that she endorsed TGI Friday’s or its appetizers.” He noted further that “the superimposed renderings of appetizers cover [Plaintiff’s] entire body.”
Judge Abrams also noted that Plaintiff could not claim that she is so associated with her performance that the ad falsely implies that she endorsed the appetizers, because the Second Circuit held in Oliveira v. Frito Lays, Inc. that a signature performance, which is one in which a “widespread audience associates with the performing artist,” cannot be claimed as a trademark. In Oliveira, the Court found that Astrud Gilberto, the singer who first sang The Girl From Ipanema, could not claim her performance as a trademark and thus claim her rights had been infringed by the use of her performance in an ad without her permission. Judge Abrams noted that TGI Friday’s had purchased a license for the video, just as Frito Lays had purchased a license to use The Girl from Ipanema in the potato chip ad. Judge Abrams concluded that the ad did not falsely imply that Plaintiff endorsed the products, noting again that Plaintiff is not seen at all in the ads.
There is no likelihood of confusion as to Plaintiff’s sponsorship because the ad is parody
Judge Abrams also found that Plaintiff did not prove that consumers were likely to be confused as to her sponsorship of the ad. He quoted Burck, where the SDNY found that if a trademark is parodied, it may be “enough to result in no confusion under the statutory likelihood of confusion analysis.” Thus, if there is a parody, there is probably not consumer confusion. This had also been noted in January 2016 by Judge Furman of the SDNY in the Louis Vuitton v. My Other Bag case, which was recently affirmed by the Second Circuit (see here for a former discussion of the case in the TTLF newsletter). In that case, Judge Furman discussed the parody of a trademarks at length, and observed that “a parody clearly indicates to the ordinary observer that the defendant is not connected in any way with the owner of the… trademark.” In Bliss, Judge Abrams found the ad to be “a clear parody” of the video, which “in no way suggests that [Plaintiff] was championing the product used to mock the video for its own commercial benefit.”
The right of publicity claim was not addressed by the federal court
Since Judge Abrams dismissed the federal law claim which had justified federal jurisdiction, he declined to review the New York right of publicity claim.
New York’s right of publicity law is codified in New York Civil Rights Law, Section 50-5, and protects the right to privacy of a person if a “person, firm or corporation” uses her “name, portrait or picture” for “advertising purposes, or for the purposes of trade… without having first obtained the written consent of such person”.
Would Plaintiff be more successful in her claim that her persona had been used without her permission in a New York court? As noted in a previous TTLF newsletter, some state’s right of publicity laws protect personas, such as the Alabama Right of Publicity Act which protects the right of publicity of individuals “in any Indicia of Identity,” and thus extend its protection to persona. This is not the case in New York.
Actress Lindsay Lohan recently argued that the protection of New York’s right of publicity includes her persona, which she claimed is composed of various elements such as a bikini, shoulder-length blonde hair, jewelry, a cell phone, sunglasses, a loose white top, and her signature ‘peace sign’ pose. he Appellate division of the New York Supreme Court dismissed her claim on 1 September 2016, because New York law only protects against unauthorized use of a person’ name, portrait, or picture— not a persona. However, in February 2017 the New York Court of Appeals accepted review of this case, and so may affirm or modify the narrow scope of the New York’s right of publicity.
Plaintiff has appealed her federal case and is likely to pursue her New York right of publicity case. Regardless, this case highlights the dangers of performing without a written contract. Plaintiff alleged in her complaint that she agreed to participate in the project without being compensated because the video had been presented to her as a public service announcement against street harassment. She received death and rape threats after appearing in the original video. This case brings in mind the Garcia v. Google case (discussed in a previous TTLF newsletter here) where an actress unsuccessfully claimed copyright in her performance. There are no neighboring rights provided to performers in U.S. law, unlike, say, French law, which grants performers a droit voisin,, a sort of property right over their interpretation of the work protected by copyright . In a statement, Plaintiff wrote that “the rights of all actors and other creative artists are increasingly threatened by those who profit commercially from their content without paying for it.” Should U.S. law give performers a neighboring right?
By Gabriel M. Lentner
On 16 March 2017, the NAFTA tribunal issued its final award in the case of Eli Lilly v Canada, dismissing the claim.
Two patents of the U.S. pharmaceutical company known as ‘Eli Lilly’ were invalidated by the Canadian federal courts based on judicial interpretations of the utility requirements contained in the Canadian patent statute (referred to as the ‘promise utility doctrine’). Eli Lilly alleged that these interpretations, and in particular the courts’ adoption of the promise utility doctrine, departed dramatically from prior Canadian patent law. On this basis, Eli Lilly initiated proceedings against Canada under Chapter 11 of NAFTA claiming that the invalidation of its patents amounted to unlawful expropriation of its intellectual property (NAFTA Article 1110) and a violation of the Minimum Standard Treatment (NAFTA Article 1105).
The Tribunal dismissed the alleged breaches stating that the Claimant had not met the required burden of proof. However, it noted inter alia that, contrary to what Canada argued, not only may a denial of justice serve as a basis of liability for judicial measures, but also other conduct which ‘may also be sufficiently egregious and shocking, such as manifest arbitrariness or blatant unfairness’. It held that invalidation under naturally evolving patent laws is not a breach of legitimate expectations but also suggested that a violation could take place when ‘a fundamental or dramatic change in Canadian patent law’ occurs.
Finally, the Tribunal noted that the evolution of the Canadian legal framework, in relation to Claimant’s patents, could not sustain a claim of arbitrariness or discrimination amounting to a violation of NAFTA Articles 1105 or 1110.
The award comes at a time of heightened interest (and criticism) surrounding the use of Investor-State Dispute Settlement (ISDS) for the protection of intellectual property rights (see cases of Philip Morris v Australia and Philip Morris v Uruguay).The Tribunal was careful not to dismiss out of hand IP-based ISDS claims, but similarly did not provide any further clarification regarding such cases and the applicable legal standards for IP protection. Thus, this case will not necessarily serve to reduce the uncertainties in this area of law, and as a result, as one commentator put it, it rather further opened the door to such claims.
By Martin Miernicki
On 10 February 2017, Italy ratified the Agreement on a Unified Patent Court. Already, the UK had announced their commitment to continuing the ratification process of the agreement, despite the ongoing “Brexit”-discussion.
The unitary patent – an overview
The legal basis for the unitary patent is the so-called “patent package” adopted between 2012 and 2013. It consists of three main instruments:
- Regulation (EU) No 1257/2012 creating a unitary patent (Unitary Patent Regulation)
- Council Regulation (EU) No 1260/2012 on translation arrangements (Unitary Patent Translation Regulation)
- Agreement on a Unified Patent Court (UPC Agreement)
The patent package is the result of an enhanced cooperation (art. 326 et seq. TFEU) between, originally, 25 EU member states. Italy joined in 2015, leaving Spain and Croatia as the only member states not participating in the enhanced cooperation. The adoption of the patent package was accompanied by several disputes, especially regarding translation arrangements.
The unitary patent (European patent with unitary effect) supplements the options for the international protection of patents like the protection systems under the Patent Cooperation Treaty (PCT) or the European Patent Convention (EPC). The unitary patent is designed as a European patent issued by the European Patent Office (EPO) under the EPC. A European patent granted with the same set of claims in respect of all the participating member states can, upon request of the patent owner, benefit from the unitary effect under the Unitary Patent Regulation. In this case, the patent provides uniform protection and has equal effect in the participating member states (art. 3 of the Unitary Patent Regulation). Translations – in addition to those required under the EPC procedure – may be necessary if a dispute arises relating to the infringement of a unitary patent and during a transitional period (article 4, 6 of the Unitary Patent Translation Regulation). The Unified Patent Court (UPC) has jurisdiction for the unitary patents according to the UPC Agreement.
Entry into force
The Unitary Patent Regulation’s entry into force is linked to the UPC Agreement (art. 18). The same applies to the Unitary Patent Translation Regulation (art. 7). The UPC Agreement will enter into force upon the ratification of thirteen member states, including France, Germany, and the UK (as the countries with the highest number of European patents). As of March 2017, 12 signatory states, including France, have ratified the agreement.
What can be expected?
The British announcement to continue preparing for ratification was somewhat surprising given the current circumstances involving Brexit. It remains to be seen how the UK government will proceed, especially in light of the upcoming negotiations between the EU and the UK on their future relationship. The announcement alludes to this point, saying, “[t]he decision to proceed with ratification should not be seen as pre-empting the UK’s objectives or position in the forthcoming negotiations with the EU.” Furthermore, British minister Jo Johnson presented a favorable explanatory memorandum on the UPC to the British Parliament earlier this year. In turn, Italy’s ratification highlights that the preparation for the unitary patent is ongoing, and shows that the patent package could indeed enter into force sooner than later. Meanwhile, the UPC Preparatory Committee is working towards the phase of provisional application, which it expects to start in spring 2017.
 Spain unsuccessfully asked the ECJ to annul the Unitary Patent Regulation, see Spain v. European Parliament, C‑146/13 (2015).
By Marie-Andrée Weiss
The Third Chamber of the Court of Justice of the European Union (CJEU) ruled on 10 November 2016 that it is legal under EU law for a library to lend an electronic copy of a book. However, only one copy of the e-book can be borrowed at the time, the first sale of the e-book must have been exhausted in the EU, and the e-book must have been obtained from a lawful source. The case is Vereniging Openbare Bibliotheken v. Stichting Leenrecht, C-174-15.
Article 2 of Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society (the InfoSoc Directive) provides authors exclusive rights in their works, including, under its Article 3, the exclusive right to communicate their works to the public by wire or wireless means. Its Article 4 provides that these exclusive rights are exhausted by the first sale or by other transfers of ownership of the work in the EU.
Article 6(1) of Directive 2006/115/EC of the European Parliament and of the Council of 12 December 2006 on the rental right and lending right and on certain rights related to copyright in the field of intellectual property, the Rental and Lending Rights Directive (RLR Directive), gives Member States the right to derogate from the exclusive public lending right provided to authors by Article 1 of the RLR Directive, provided that authors are compensated for such lending.
Article 15c(1) of the Dutch law on copyright, the Auteurswet, authorizes lending of a copy of a literary, scientific, or artistic work, provided that the rightsholder consented to the lending and is compensated for it. The Minister of Justice of the Netherlands set up a foundation to that effect, the Stichting Onderhandelingen Leenvergoedingen (StOL), which collects lending rights payments as a lump sum from lending libraries and then distributes those payments to rightsholders through collective management organizations.
The Dutch government took the view that e-books are not within the scope of the public lending exception of the Auteurswet and drafted a new law on that premise. The Vereniging Openbare Bibliotheken (VOB), which represents the interests of all the public libraries in the Netherlands, challenged this draft legislation and asked the District Court of The Hague to declare that Auteurswet covers lending of e-books.
The Court stayed the proceedings and requested a preliminary ruling from the CJEU on the question of whether Articles 1(1), 2(1)(b) and 6(1) of the Renting and Lending Rights Directive authorize e-lending, provided that only one library user can borrow the e-book at a time by downloading a digital copy of a book which has been placed on the server of a public library.
If this is indeed authorized by the Directive, the District Court asked the CJUE whether article 6 of the Directive requires that the copy of the e-book which is lent has been brought into circulation by an initial sale or other transfer of ownership within the European Union by the rightsholder, or with her consent within the meaning of Article 4(2) of the InfoSoc Directive.
The District Court also asked whether Article 6 of the RLR Directive requires that the e-book which is lent was obtained from a lawful source.
Finally, the District asked the CJEU to clarify whether e-lending is also authorized (if the copy of the e-book which has been brought into circulation by an initial sale or other transfer of ownership within the European Union by the right holder or with her consent) when the initial sale or transfer was made remotely by downloading.
First: Is e-lending legal under the renting and lending rights directive?
The CJEU noted that Article 1(1) of the RLR Directive does not specify whether it also covers copies which are not fixed in a physical medium, such as digital copies (§ 28). The CJEU interpreted “copies” in the light of equivalent concepts of the WIPO Copyright Treaty of 20 December 1996, which was approved by the European Community, now the European Union. Its Article 7 gives authors the exclusive right to authorize “rentals” of computer programs. However, the Agreed Statements concerning the WIPO Copyright Treaty, which is annexed to the WIPO Treaty, explains that Article 7’s right of rental “refer[s] exclusively to fixed copies that can be put into circulation as tangible objects,” thus excluding digital copies from the scope of Article 7.
The Court noted, however, that “rental” and “lending” are separately defined by the RLR Directive. Article 2(1) (a) defines “rental” as “making available for use, for a limited period of time and for direct or indirect economic or commercial advantage,” while Article 2(1) (b) defines “lending” as “making available for use, for a limited period of time and not for direct or indirect economic or commercial advantage, when it is made through establishments which are accessible to the public.” The Court examined preparatory documents preceding the adoption of Directive 92/100, which the RLD Directive codified and reproduced in substantially identical terms, and noted that there was “no decisive ground allowing for the exclusion, in all cases, of the lending of digital copies and intangible objects from the scope of the RLR Directive.” The Court also noted that Recital 4 of the RLR Directive states that copyright must adapt to new economic developments and that e-lending “indisputably forms part of those new forms of exploitation and, accordingly, makes necessary an adaptation of copyright to new economic developments” (§ 45).
The CJEU noted that borrowing an e-book as described by the District Court in its preliminary question “has essentially similar characteristics to the lending of printed works,” considering that only one e-book can be borrowed at the time (§ 53). The CJEU therefore concluded that that “lending” within the meaning of the RLR Directive includes lending of a digital copy of a book.
Second: May only e-books first sold in the EU be lent?
The InfoSoc Directive provides that the exclusive distribution rights of the author are exhausted within the EU after the first sale or other transfer of ownership in the EU of the work by the right holder or with his consent. Article 1(2) of the RLR Directive provides that the right to authorize or prohibit the rental and lending of originals and copies of copyrighted works is not exhausted by the sale or distribution of originals and copies of works protected by copyright.
The CJEU examined Article 6(1) of the RLR Directive in conjunction with its Recital 14, which states it is necessary to protect the rights of the authors with regards to public lending by providing for specific arrangements. This statement must be interpreted as establishing a minimal threshold of protection, which the Member States can exceed by setting additional conditions in order to protect the rights of the authors (at 61).
In our case, Dutch law required that an e-book made available for lending by a public library had been put into circulation by a first sale, or through another transfer of ownership, by the right holder or with his consent within the meaning of Article 4(2) of the InfoSoc Directive. The Court mentioned that Attorney General Szpunar had pointed out in his Opinion that if a lending right is acquired with the consent of the author, it may be assumed that the author’s rights are sufficiently protected, which may not be the case if the lending is made under the derogation provided by Article 6(1) (Opinion at 85). AG Szpunar concluded that therefore only e-books which had been made first available to the public by the author should be lent. The CJEU ruled that Member States may subject as condition to e-lending the fact that the first sale of the e-book has been exhausted in the EU by the right holder.
Third: May a copy of an e-book obtained from an unlawful source be lent?
Not surprisingly, the CJEU answered in the negative to this question, noting that one of the objectives of the RLR Directive, as stated by its Recital 2, is to combat piracy and that allowing illegal copies to be lent would “amount to tolerating, or even encouraging, the circulation of counterfeit or pirated works and would therefore clearly run counter to that objective” (at 68).
The Court did not answer the fourth question as it had been submitted only in the case the Court would rule that it is not necessary that the first sale of the e-books being lent had been exhausted in the EU.
This is a welcome decision since, as noted by AG Szpunar in his Opinion, it is crucial for libraries to be able to adapt to the fact that more and more people, especially younger ones, are now reading e-books instead of printed books.
By Marie-Andrée Weiss
The First Chamber of the Court of Justice of the European Union (CJEU) held on 10 November 2016, that the famous Rubik’s cube cannot be registered as a three-dimensional mark because its shape performs the technical function of the goods, a three-dimensional puzzle. The case is Simba Toys GmbH & Co. KG v. EUIPO, C-30/15 P.
The validity of the Rubik’s cube trade mark was challenged by a competitor
British company Seven Towns Ltd., acting on behalf of Rubik’s Brand Ltd., filed in April 1996 an application for registration of a Community trade mark at the Office for Harmonisation in the Internal Market (OHIM), now named the European Union Intellectual Property Office (EUIPO), for a three-dimensional sign, the famous Rubik’s cube. The mark was registered in April 1999 and renewed in November 2006.
A few days later, competitor Simba Toys applied to have the trade mark declared invalid under Council Regulation 40/94, which has been repealed and was replaced by Council Regulation 207/2009. The CJEU considered the case to be still governed by Council Regulation 40/94. Articles 1 to 36 are the same in both Regulations, and so the case is relevant under current EU trademark law.
Article 7(1)(e)(ii) of Council Regulation 40/94 prevents registration as a trademark of a sign, such as the Rubik’s cube product, “which consists exclusively of… the shape of goods which is necessary to obtain a technical result.” The CJEU had held in the 2002 Koninklijke Philips Electronics NV v. Remington Consumer Products Ltd. that a sign consisting exclusively of the shape of a product cannot be registered as a trademark if the essential functional features of the shape are attributable only to a technical result (Philips § 79 and § 80).
Simba Toys argued that the Rubik’s cube mark should be declared invalid under the grounds [absolute ground for refusal] that the mark is the shape of the goods necessary to achieve a technical result. According to Simba, the Rubik’s cube black lines are attributable to technical functions of the three-dimensional puzzle.
The OHIM dismissed Simba’s application for a declaration of invalidity and the Second Board of Appeal of OHIM affirmed the dismissal in September 2009, reasoning that the shape of the trade mark does not result from the nature of the Rubik’s cube itself. On 25 November 2014, the General Court dismissed the action for annulment as unfounded. Simba appealed to the CJEU.
What are the essential characteristics of the Rubik’s cube trade mark?
The essential characteristics of three-dimensional signs are the most important elements of the signs, Lego Juris v. OHIM, C-48/09, § 68 and 69. They must be properly identified by the competent trademark registration authority, Lego Juris v. Ohim § 68, which must then determine whether the essential characteristics all perform the technical function of the goods (General Court § 41). The General Court identified the essential characteristics of the Rubik’s cube trademark is a “cubic grid structure,” that is the cube itself and the grid structure appearing on each of its surfaces (General Court § 45). Simba did not challenge this finding on appeal at the CJEU.
Do the essential characteristics of Rubik’s cube perform the technical function of the goods?
Under Article 4 of Regulation 40/94 and Regulation 207/2009, any sign capable of being represented graphically can be a trade mark, unless, under article 7(1)(e)(ii) of both Regulations, the sign consists exclusively of the shape of goods which is necessary to obtain a technical result.
Article 7(1) grounds for refusal to register a mark must be interpreted in light of the public interest underlying them. The public interest underlying Article 7(1)(e)(ii) is to prevent the use of trademark law to obtain a monopoly on technical solutions or the functional characteristics of a product (General Court § 32, citing Lego Juris v. OHIM, § 43). Advocate General Szpunar explained further in his Opinion that allowing such marks to be registered would give the registrant “an unfair competitive advantage” and thus trade mark law cannot be used “in order to perpetuate, indefinitely, exclusive rights relating to technical solutions” (AG Szpunar Opinion § 32 and § 34).
For the General Court, Article 7(1)(e)(ii) applies only if the essential characteristics of the mark perform the technical functions of the goods “and have been chosen to perform that function.” It does not apply if these characteristics are the result of that function (General Court § 53). Simba argued in front of the CJEU that the General Court erred in this interpretation of Article 7(1)(e)(ii).
Simba claimed that the black lines of the cube performed a technical function (General Court § 51). But the General Court found that an objective observer is not able to infer by looking at the graphic representation of the Rubik’s cube mark that the black lines are rotatable (General Court § 57). The General Court held that Simba’s “line of argument… [was] essentially based on knowledge of the rotating capability of the vertical and horizontal lattices of the Rubik’s cube. However, it [was] clear that that capability cannot result from the black lines in themselves or, more generally, from the grid structure which appears on each surface of the cube… but at most from [an invisible] mechanism internal to that cube” (General Court § 58). Therefore, the grid structure on each surface of the cube “d[id] not perform, or are not even suggestive of, any technical function” (General Court § 60). The General Court concluded that registering the Rubik’s cube shape did not create a monopoly on a technical solution and mechanical puzzles competitors could also incorporate movable or rotatable elements (General Court § 65).
But, for AG Szpunar, the General Court erred in its analysis as it should have taken into account the function of the Rubik’s cube, which is a three-dimensional puzzle consisting of movable elements. He noted that in both the Philips and the Lego Juris cases, the competent authorities had analyzed the shape of the goods using additional information other than the graphic representation (AG Szpunar Opinion § 86). While the competent authority does not have to concern itself with hidden characteristics, it must nevertheless analyze “the characteristics of the shape arising from the graphic representation from the point of view of the function of the goods concerned” (AG Szpunar Opinion § 88).
The CJEU followed its AG’s Opinion on this point and found that the General Court should have defined the technical function of the actual goods, namely, the three-dimensional puzzle, and it should have taken this into account when assessing the functionality of the essential characteristics of that sign (CJEU § 47). The General Court “interpreted the criteria for assessing Article 7(1)(e)(ii) . . . too narrowly”(CJEU § 51) and should have taken into account the technical function of the goods represented by the sign when examining the functionality of the essential characteristics of that sign (CJEU § 52). Failing to do so would have allowed the trademark owner to broaden the scope of trademark protection to cover any three dimensional puzzles with elements in the shape of a cube (CJEU § 52).
This case confirms, after Pi-Design AG v. Bodum, that the CJEU takes the view that the essential characteristics of a trade mark must not be assessed solely by the competent authority based on visually analyzing the mark as filed, but that the authority must also identify the essential characteristics of a sign, in addition to the graphic representation and any other descriptions filed at the time of the application for registration. This is necessary to protect the public interest underlying Article 7(1)(e)(ii), which is to ensure that economic operators cannot improperly appropriate for themselves a mark which incorporates a technical solution.
By Martin Miernicki
On 4 August 2016, the U.S. Department of Justice (DOJ) published a closing statement concluding its review of the ASCAP and BMI Consent Decrees. It stated that said decrees prohibited ASCAP and BMI from issuing fractional licenses and required them to offer full-work licenses. Both ASCAP and BMI immediately announced to fight the opinion, the latter seeking a declaratory judgement, asking the “rate court” for its opinion.
The court’s opinion
In its declaratory judgement, the court rejected the DOJ’s interpretation of the BMI Consent Decrees, ruling that “nothing in the Consent Decree gives support to the [Antitrust] Division’s view.” It held that the issue of full-work licensing remained unregulated by the Consent Decree; rather, this question should be analyzed under other applicable laws, like copyright or contract law. In conclusion, the court explained that the decree “neither bars fractional licensing nor requires full-work licensing.” The court furthermore distinguished the question at hand from its decision in BMI v. Pandora, where it struck down attempts by major publishers to partially withdraw rights from BMI’s collective licensing regime.
The way forward
The court’s opinion is a clear success for BMI, but also for ASCAP, since it can be expected that Judge Stanton’s ruling will be influential in analogous questions regarding the ASCAP Consent Decree. However, this success is not final. BMI reported that the DOJ appealed the decision on 11 November 2016. It is hence up to the Court of Appeals for the Second Circuit to clarify the meaning of the decree.
 Under a full-work license, a user obtains the right to publicly perform the entire work, even if not all co-owners are members of the organization issuing the license. Conversely, a fractional license only covers the rights held by the licensing organization.
 BMI v. Pandora, Inc., No. 13 Civ. 4037 (LLS), 2018 WL 6697788 (S.D.N.Y. Dec. 19, 2013).