Archive | February 2013

Fraley v. Facebook, Inc. Settlement and Privacy Law

By: Anny Mok

Many people may recall receiving an email earlier this year regarding a settlement in Fraley v. Facebook, Inc., a class action suit brought against Facebook. The plaintiffs claimed that the social networking site misappropriated users’ information by featuring them in “Sponsored Stories”. These stories appear on users’ Facebook page and consist of an advertiser’s logo combined with names of Facebook members who “likes” the advertised company.  Advertisers pay Facebook to be featured as “Sponsored Stories.”

Plaintiffs allege that Facebook used its own users’ information to generate revenue without consent and violated California’s Right of Publicity Statute, Civil Code § 3344; California’s Unfair Competition Law, Business and Professions Code § 17200, et seq. (“UCL”); and the common law doctrine of unjust enrichment.

California’s Right of Publicity Statute is based on the tort of “Appropriation of Name or Likeness”. The Restatement (Second) of Torts §652C states: “One who appropriates to his own use or benefit the name or likeness of another is subject to liability to the other for invasion of his privacy.” Under comment (c) of Restatement §652C, liability for appropriation requires that “the defendant must have appropriated to his own use or benefit the reputation, prestige, social or commercial standing, public interest or other values of the plaintiff’s name or likeness.”

This tort aims to protect people’s reputations and prevent exploitation of their identity. The interest protected is one’s dignity. It is based on the privacy law theory that an individual should have exclusive control of their identity and representations of their name or likeness. Control includes the right to grant others the privilege of publishing one’s name or picture for commercial reasons. In other words, someone should have to give permission before their name or picture is used in a way that benefits or endorses someone else’s business.

In many instances, the users probably did not intend to endorse the product. Perhaps they did not even want to disclose information that associated them with the product or service. The plaintiffs argued that when they clicked “like” on certain pages, they were unaware that Facebook would interpret those as endorsements of various brands or services. They claim that both Facebook and the advertisers were making huge profits from this advertising method while the members themselves were essentially “unpaid and unknowing spokespersons” for products. Additionally, the plaintiffs say that they could not have consented because the Terms of Use that they agreed to when they registered for a Facebook account was before the creation of “Sponsored Stories”.

Back in December, both parties reached a settlement of twenty million dollars. The $20 million will cover attorneys’ fees and will potentially be divided among Facebook users who appeared in the “Sponsored Stories” advertisements. The email was distributed to notify potential claimants of the settlement. More information about the settlement can be found at http://www.fraleyfacebooksettlement.com/.

Already, LLC v. Nike and its Impact on Trademark Protection

By, Kevin Kehrli

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On January 9th, 2013, the Supreme Court decided a trademark matter that may have implications that go far beyond the parties involved.  Already v. Nike involved one of Nike’s most popular line of shoes, Air Force 1s, and its trademark.  Nike sued Already L.L.C., alleging that two lines of the company’s shoes, “Soulja Boys” and “Sugars,” infringed and diluted the Air Force 1 trademark.  Already denied the infringement, and counterclaimed that the Air Force 1 trademark is invalid.  Four months after the counterclaim, likely worried about the prospect of losing its trademark in its Air Force 1 line, Nike’s attorneys issued a “Covenant Not to Sue,” stating that Already’s actions no longer “infringe or dilute the NIKE Mark at a level sufficient to warrant the substantial time and expense of continued litigation.”  The covenant also contained provisions in which Nike promised that it “would not raise against Already or any affiliated entity any trademark or unfair competition claim based on any of Already’s existing footwear designs, or any future Already designs that constituted a ‘colorable imitation’ of Already’s current products.” SC Slip Op p. 2.  Nike then moved to dismiss its own claims with prejudice and Already’s claims without prejudice, claiming that the covenant had extinguished the case or controversy.

Already sought to pursue the claim based on three arguments.  First, Already offered evidence that it planned on introducing new versions of its shoe line into the market.  Next, it presented affidavits showing that potential investors would not consider investment unless Nike’s trademark is invalidated.  Finally, it claimed that “Nike had intimidated retailers into refusing to carry Already’s shoes.” SC Slip Op. 2.  The District Court dismissed Already’s counterclaim, finding that the covenant was written broadly enough to protect the new versions as “colorable imitations” and that Already did not produce evidence to show that they planned to develop any shoes that would not be covered by the covenant.  Therefore, it “held there was no longer ‘a substantial controversy . . . of sufficient immediacy and reality to warrant the issuance of a declaratory judgment’.” Slip op p. 3. (quoting Med-Immune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007)).  The Second Circuit affirmed, but added factors to guide courts in their assessment of whether or not a covenant “eliminates a justiciable case or controversy.” Slip op 3.  While ultimately it is a “totality of the circumstances” determination, the Second Circuit stated that courts should look to “the language of the covenant, whether the covenant covers future, as well as past, activity and products, and evidence of intention . . . on the part of the party asserting jurisdiction to engage in conduct not covered by the covenant.”

In its opinion, the Supreme Court applied the “voluntary cessation doctrine,” which imposes a “formidable burden of showing that it is absolutely clear the alleged wrongful behavior could not be expected to recur.” Slip Op. 4 (quoting Friends of the Earth, Inc. v. Laidlaw Environment Services (TOC), Inc., 455 U.S. 283, 289 (1982)).

In finding that the covenant meets this formidable burden, the Supreme Court listed several factors as influential.  First, it is “unconditional and irrevocable.”  Next, it extends beyond legal protection and “prohibits Nike from making any claim or any demand.”  It also grants protection to Already’s distributors and customers. And finally, it covers any colorable imitations, protecting previous, present, and future designs.

The first notable point from this case is the long-term risk involved when a party issues a covenant that meets this formidable burden.  While Nike likely granted this covenant because it was worried about preserving the validity of the Air Force 1 trademark, the company is now at risk of serious trademark dilution.  Because of the extreme breadth required for such a covenant to moot litigation, Already and its distributors essentially have free reign to develop products similar to Air Force 1s without the worry of Nike taking any action against them.  Even worse for Nike, the covenant is irrevocable and indefinite.  It remains to be seen whether Already will push the limits of this covenant, but if they do, it will be interesting to see how both Nike and the courts approach the situation.

This holding also represents a major victory for trademark holders.  If the Supreme Court had held that such a covenant did not moot the counterclaim for trademark validity, trademark holders would have to take into account that when filing an infringement suit, they would face the risk of having the status of their trademark questioned with no means to dismiss it.

Further, the Court’s reasoning and Justice Kennedy’s concurrence will have strategic implications for parties defending against trademark infringement claims.  Because the burden of showing that the covenant was broad enough fell upon Nike, as emphasized by Justice Kennedy, Already’s answer and counterclaim should have focused on showing that they were developing products that would fall in “the grey area” outside the scope of such a covenant, but within the scope of non-infringement.  Obviously, Already did not expect Nike to make the strategic move of granting the covenant, but it is now essential for those who plan to defend an infringement claim with a counterclaim for invalidity to take this into account.  More specifically, a party should attempt to show that they plan to develop products that would fall into a grey area of coverage if such a covenant is granted.  Doing so could be beneficial in two ways.  First, it would make the original claimant’s burden more difficult, thus increasing the likelihood that the court would find that a justiciable case or controversy remains.  Alternatively, the original claimant who meets this burden would have to create an even broader covenant than it would have done if the answer and counterclaims did not include such information.

Finally, the Court’s broad language in its opinion leaves open the possibility that the logic applied here may extend beyond trademark litigation.  Particularly, the Court stated that “allowing Nike to unilaterally moot the case “subverts” the important role federal courts play in the administration of federal patent and trademark law.” Slip op. p. 12.  It follows, then, that if a patent holder files an infringement suit, which is countered by a challenge to the patent in question, a patent-holder looking to moot the case, should keep this substantial burden placed on Nike in mind if issuing a covenant not to sue.

Copyright Infringement or Tribute?

It is typical for artists to be inspired by the creation of others. Even some of the greatest painters in history have reportedly used the work of others as inspiration. There is, however, a difference between inspiration and blatant copying. An artist might be flattered if another artist is inspired by his work and makes a creation as a tribute to the original. On the other hand, he would undoubtedly be annoyed if someone copied his work and then claim it as a new original creation.

During a visit to the SCOPE Miami art fair in December, Jason Levesque did a double take in front of two paintings by Josafat Miranda. The paintings were not just similar to his photographs – it was almost an exact rendition of his compositions. Levesque was obviously upset by these unauthorized copies. After all, he was the one who posed the models and made the creative decisions on how the image would look. Miranda was trying to capitalize on Levesque’s creative labor. The paintings were being sold for around $4,000 and no credit was attributed to Jason Lesvesque. Instead of confronting Miranda, Levesque exposed the artist on Facebook by posting the original photographs next to the paintings. After the discovery, the gallery promptly removed Miranda’s work. (An article with pictures of the comparisons is available here.)

It is unknown whether Levesque intends to bring a copyright infringement suit against Miranda, but if he decides to, he would have a very good claim. The facts are similar to Rogers v. Koons. Rogers v. Koons, 960 F.2d 301 (2d Cir. 1992). In Rogers, a sculptor gave his artisans a copy of a photograph and told them to create a three-dimensional sculpture based on the image. This was done without the knowledge or consent of the photograph owners.

One of the elements of copyright infringement is “substantial similarity”. There is substantial similarity if reasonable jurors can look at both works and would not differ on whether the copied work was directly appropriated from a copyrighted work. Miranda recreated Levesque’s photos without making any substantial changes. A jury would definitely be able to tell that Miranda’s paintings were direct copies. Just like how the sculptor did not make a significant expressive difference by transferring a two-dimensional photograph into a three-dimensional sculpture, Miranda did not change the expression of the photographs by putting them into painting form.

In Rogers, the sculptor tried to argue that the sculpture fell under the Fair Use Doctrine codified in §107 of the 1976 Copyright Act. Under the doctrine, there is no copyright infringement if the copied work was used for purposes such as criticism, commentary, or parody. The court rejected this argument. They found that the sculptor’s intent was commercial in nature; he was trying to make a profit. The purpose of the sculpture was to be sold as art, not to make a commentary or a parody of the photograph.

Josafat Miranda tried to make a similar argument. He claimed that his paintings were a “tribute” to Levesque. That argument is questionable because at no point did he give Levesque any credit. The paintings were not just “based” on the photographs, they were “copied” from them. Like the sculptor in Rogers, Miranda’s purpose was to make a profit out of someone else’s talent.