On April 10, 2013, Florida revised several provisions of its game promotion statute, which will likely change how for-profit brands and non-profit entities offer contests and sweepstakes within the State and to its residents. In particular, these revisions include:

• A game promotion can only be operated by a for-profit organization on a limited and occasional basis as an advertising or marketing tool in connection with and incidental to bona fide sales of consumer products or services, if no purchase is necessary to play; and

• Non-profit entities and charitable organizations cannot operate a game promotion.

On the flip side, Florida still requires registration and bonding with the Florida Department at least seven (7) days prior to the start date for sweepstakes offering prizes over $5,000. Further, Florida still requires that the full Official Rules are clearly posted in all retail outlets, material terms are published in all advertising, winners list are available by request at no charge, and that sponsors file a list of all winners with the Florida Department for prizes more than $25 within sixty (60) days after the winners are selected.

For violations, Florida may impose a civil penalty of up to $1,000 per violation, an injunction, and/or referral for criminal prosecution (in rare cases).

For more information about Florida’s revised game promotion law or other advertising and promotions issues, please contact Radiance Harris or your DLA Piper attorney.

By Scott W. Pink

On March 12, 2013, the Federal Trade Commission issued its long-awaited update to its 2000 guidance on disclosures in online marketing and advertising.

The guidance, entitled .com Disclosures: How to Make Effective Disclosures in Digital Advertising, not only reaffirms many of the FTC’s longstanding principles for effective online disclosures, but also provides guidance as to how those principles will be applied to new technologies that have emerged since 2000, such as mobile phones and tablets with more limited space, banner ads and multimedia messaging, and social media platforms such as Facebook and Twitter.

The FTC has broad powers under Section 5 of the FTC Act to protect consumers from “unfair and deceptive acts or practices.”i Under the FTC Act, the FTC has long required effective disclosures for claims that would otherwise be deceptive or misleading without them. .com Disclosures is designed to help businesses comply with the FTC Act by providing examples and direction on how to avoid unfair and deceptive practices through appropriate disclosures in their online and mobile marketing.

Application of advertising principles to online marketing

One of the key questions confronting the FTC when it was updating its guidance was whether it needed to develop any new principles for the new devices and forms of communications that have emerged since 2000. As an initial matter, the FTC emphasizes that the same basic principles of advertising law that apply to other forms of advertising equally apply to the new forms of online marketing: that is, advertising must be truthful and not misleading or deceptive, advertisers must have substantiation for their claims, and advertising must not be unfair.

The general rules relating to the use of disclosures also apply to online marketing.

Disclosures are required when an express or implied advertising claim is likely to be misleading without qualifying information. The disclosure can only qualify or limit the claim; it cannot contradict the claim. Moreover, the disclosure must be presented “clearly and conspicuously” such that the consumer is likely to view it. The question for advertisers is how to satisfy this requirement given the unique features and limitations of online ads, including advertising delivered via social media platforms or on mobile devices.

Factors to be used in evaluating online disclosures

The FTC incorporated and expanded its previous factors for determining whether a disclosure is clear and conspicuous to account for online advertising on devices such as mobile phones. The FTC now considers:

- The placement of the disclosure in the advertisement and its proximity to the claim it is qualifying

- The prominence of the disclosure

- Whether the disclosure is unavoidable

- The extent to which items in other parts of the advertisement might distraction attention from the disclosure

- Whether the disclosure needs to be repeated several times in order to be effectively communicated, or because consumers may enter the site at different locations or travel through the site on paths that cause them to miss the disclosure

- Whether disclosures in audio messages are presented in an adequate volume and cadence and visual disclosures appear for a sufficient duration

- Whether the language of the disclosure is understandable to the intended audience.

Marketers should consider whether their disclosures are adequate from the perspective of a reasonable consumer. If a certain disclosure cannot be adequately conveyed on a specific device such as a mobile phone, the FTC recommends discontinuing the claim on that device. The FTC also encourage marketers to monitor disclosures to make sure they are actually reaching consumers.

Application of factors to online marketing

The following is some specific guidance from the FTC as to how these factors will be applied:

Proximity and placement

The basic principle is that a disclosure must be near the claim in order to be clear and conspicuous.

The following are some principles to guide advertisers in satisfying this requirement:

- A disclosure is therefore more effective if it is viewed simultaneously with the triggering claim on the same screen.

- The FTC discourages burying disclosures at the bottom of a page or after a substantial gap where they are likely to be missed.

- If a consumer must scroll in order to view a disclosure, the FTC recommends using text or visual cues to let users know where the disclosure is. Those prompts should be labeled to indicate the relevance and importance of the disclosure. For example, “See below for additional fees” is specific enough to be considered sufficient, whereas “details below” is likely to be considered too general.

- Advertisers should consider optimizing their websites for mobile devices to ensure that disclosures that might be sufficient on a computer are not too small or require scrolling when viewed on a mobile device.

- Disclosures in connection with an online transaction should appear before the consumer purchases a product or service.

Prominence

The advertiser must also make sure disclosures are prominently placed so as to draw attention. Disclosures should be in a font at least as large as the claim they are related to and in a color that noticeably contrasts with the screen background.

Advertisers should also consider how the disclosure will be viewed on different devices – what is viewable on a desktop device may not be as prominent on a smartphone. If a disclosure is too small to read on a phone, or the text doesn’t wrap, then the disclosure is probably not adequate for mobile devices.

Merely providing disclosures on an online ordering or check-out page is not adequate if consumers can purchase the same product at a bricks-and-mortar store or third-party online retailer without ever viewing the disclosure.

Finally, you need to make sure you provide the disclosure prominently in all forms of media in which the claim is presented.

Hyperlinks

Advertisers have long relied on the use of hyperlinks to provide disclosures. The FTC recognizes that hyperlinks can be effective, but cautions they should not be used when the disclosure is an integral part of the claim or conveys important information such as material additional cost, health, and safety information. Moreover, if you need to use a hyperlink, the following are some basic principles to follow:

- Make the link obvious.

- Label it appropriately so as to convey its true nature and importance. For example, general terms such as “disclaimer,” “more information,” “details,” “terms and conditions,” and “fine print” are likely to be insufficient. By contrast, specific references such as “Get Service Plan Pricing” or “Restocking fee applies to all returns” convey the specific nature and importance of the hyperlink and are probably adequate.

- Be consistent in the use of hyperlink styles, make getting to the disclosure easy.

- Place the hyperlink as close as possible to the relevant information it is qualifying.

- Make sure the page that is hyperlinked contains the relevant disclosures in a manner that is easy for the consumer to find.

- Monitor click-through rates and modify the link if consumers are not frequently accessing the disclosure.

Space-constrained ads

Some online advertisements such as banner ads and tweets are by definition space-constrained and offered as a teaser to encourage consumers to click through to the website to get more information. Even if the ad on a mobile device is small, claims that require qualification are not excused from the disclosure requirements, and so if those requirements cannot be satisfied the claim should not be made or should be modified.

The FTC recommends including disclosure language in the ad when possible, such as “Ad” or “Sponsored” to inform consumers the message was sponsored by an advertiser, and providing an obvious hyperlink when the disclosure won’t fit. The FTC also encourages creativity in using scrolling text or rotating panels to inform consumers about the location of a disclosure.

Pop-up disclosures

Pop-up disclosures can alert consumers to disclosures, but also present their own set of challenges. The FTC warns that advertisers should not disclose necessary information in pop-ups that can be blocked by pop-up software. Even if the pop-ups cannot be blocked, some consumers may not read the information because they don’t associate information in a pop-up with a certain claim or product.

Advertisers can avoid these problems by requiring a consumer to take an affirmative step in order to proceed past the pop-up, such as requiring consumers to choose between “yes” and “no” buttons.

Distracting factors in ads

The FTC reiterates the principle that an entire ad will be viewed in its entirety in evaluating whether a disclosure was adequate. The FTC recommends that elements such as sound, graphics, links and “add to cart” buttons do not distract the consumer from viewing the disclosure.

Multimedia messages

Online ads often contain audio, video and animated segments with claims that require qualification. The disclosure should accompany the claim in whichever media the claim is originally made:

- For audio claims, advertisers should make sure the audio disclosure is at a volume and cadence that a reasonable consumer would hear and understand.

- For written or printed claims, disclosures should be in writing, not solely in an audio or video clip where they could be missed if a device is on silent.

- Video disclosures should be displayed for a duration that allows consumers to notice, read, and understand them.

For advertisers and marketers

All advertisers and marketers, and their agencies, should review and apply the guidance in .ecom Disclosures to their online marketing activities. This requires careful planning and creativity in applying these principles to the continually changing and evolving world of online communications, including the creation of new techniques and tools to ensure effective disclosures.

For more information about the .com Disclosures, please contact Scott W. Pink.

Remarks Blog: What motivated you to learn more about the law of other countries?

Afef Mars: It is important to work to prove our skills as lawyers in a global setting.  Through scientific and technological advances in recent years, the world is growing ever smaller such that travel in the virtual world takes place within seconds.  The practice of law has always intrigued me. Ever since I was a young girl, I dreamed of being a lawyer.  Now that I am practicing, I want to continually strive to develop creative solutions for my clients.  Sometimes, in Tunisia, the body of law that exists does not cover the issue one must address so it can be necessary to understand how other countries are handling similar scenarios.

AM: I travelled to the United States to learn about the American legal system and practice of law because it is my view that, as a lawyer, one should never be out of touch with modern advances in the legal field and techniques.  In my observations, the practice of law in the Unites States is technically advanced as are methods used by American lawyers.  Furthermore, U.S. law is appealing to me because it is very developed in a number of areas. 

It is exciting for me to gain experience in a legal system that has such a large body of precedent in many diverse practice areas.  I found this to be especially true during my time working with the DLA Piper Trademark, Copyright, and Media Practice Group in Washington, D.C.  During this time, I developed a better understanding of the practice of trademark law.  Federal trademark law in the United States is more developed than Tunisian trademark law.  I am impressed by the organization and the specificity of U.S. trademark statutes. 

RB: Tell us more about your impression of United States trademark law.

AM: Trademark law encompasses many different industries which gives lawyers the opportunity to specialize and develop skills to gain competency and eventually become recognized experts in a particular area of trademark law such as fashion, food and beverage, media, etc.  The law continues to evolve with rapidly changing business practices and technological advances.  At the same time, the lawyer is presented with opportunities to further develop these specialized skills and potentially create new precedent which may be better suited for the changing market. 

Specifically, I am very interested in the role of trademark law in the franchise sector.  Trademarks are an integral part of any franchise system, and the diversity of franchise systems gives a lawyer the ability to practice in a wide variety of areas, allowing her to exercise creative legal strategy for her clients.

RB: Do you have any parting thoughts for our readers on how this experience has benefited you?

AM: In closing, I find it beautiful when lawyers incorporate new techniques and methods into the practice of law.  I am confident my experience at DLA Piper will be of great value to me throughout my professional career, presently and in my future business ventures in Tunisia. This experience and what I have learned here has given me a renewed sense of excitement and enthusiasm for the practice of law upon my return to Tunisia. 

1. The fashion industry is a trillion dollar business that deserves protection just like any other industry. The more distinctive the brand or product (think, Louis Vuitton or Chanel), the more consumers have to pay for it. Therefore, there is immense value for fashion companies to settle some form of intellectual property protection, whether it is trademark, copyright or patent protection, for their designs.

2. Patents, particularly the design patent, are the most under-utilized mechanism for protection in the fashion industry. A design patent protects the overall aesthetic appearance of a design (i.e., the ornamental aspects or shape of an article), whereas a utility patent protects how an object operates or functions (i.e., the functional/utilitarian features). Unlike utility patents which are costly and very difficult to register, design patents are the easiest and most cost-effective form of protection. However, the primary issue with design patents is, of course, timeliness since fashion is constantly changing and it takes about 6 to 8 months to secure a registration. By that time, the subject design is likely already widely-circulated in commerce and either on the "hot" or "not" list in fashion. In addition, if fashion companies fail to file for a design patent at the outset (i.e., before the subject design is widely-circulated, duplicated and/or knocked-off in the marketplace), they could forfeit their right to obtain a design patent because the design would no longer be considered original.

3. Companies should always remember to run clearance searches on their style and product names. Although the style and product names may not be as important or front-and-center as a trademark per se, a company could be at risk of receiving a nasty-gram from a competitor for using a similar or identical style or product name.

4. Litigation is a quite costly and time-consuming luxury. Therefore, for disputes between competitors, it is sometimes best to amicably settle the matter in lieu of extensive litigation. Designs become obsolete so quickly and, therefore, unless the dispute involves a company's "bread and butter" fashion item, it may not be worth the time or money to litigate.

As an emerging worldwide leader in fashion law, DLA Piper aims to stay abreast of the latest trends and developments in fashion law to better serve its clients in this very robust and ever-changing industry. For more information about DLA Piper's fashion law practice, contact Ann Ford or Radiance Harris.

The famous Kardashian sisters are making news again, but this time not for their well-known reality television show Keeping Up With the Kardashians. Kim, Kourtney and Khloe Kardashian launched a line of personal care and makeup products in 2012 under the mark KHROMA, and their beauty care products are currently sold at nationwide retaliers including CVS, Ulta, Sears and Kmart. However, the Kardashian sisters are being sued in federal court for trademark infringement for use of the mark KHROMA.

Kroma Cosmetics, located in Orlando, Florida, has also sued the Kardashains for trademark infringement. Celebrity make-up artist Lee Tillett filed a trademark application in November 2010 for her mark KROMA, and claimed a first-use date in commerce of 2004. Tillett’s KROMA mark achieved registration in January 2012, and Tillett now seeks to enforce the registration against the Kardashians.

Notably, the Kardashian’s licensing company filed an intent-to-use trademark application for the mark KARDASHIAN KHROMA in June 2012, but the application received an initial Office Action asserting a likelihood of confusion with Tillett’s KROMA mark, along with another mark owned by Kim Kardashian. It is also worth noting that the word “kroma” means “color” in Greek.

Since both of these lawsuits were recently filed, it remains to be seen whether the parties will settle out of court or continue to litigate these matters.

A Texas-registered trademark can protect your company’s name, logo or slogan from use by another business in Texas. Texas trademark registration generally offers a simpler, faster and less expensive alternative to federal trademark registration for businesses that operate solely within Texas and do not plan to expand outside of the state.

However, the revised Texas Trademark Act, which took effect on September 1, 2012, may undercut some of these advantages by bringing Texas trademark law more closely in line with federal trademark law.

It remains to be seen whether these tradeoffs ultimately will make state trademark registration a more or less attractive option for Texas-based businesses going forward.

The following are key changes to keep in mind if your business is considering whether to apply for a Texas-registered trademark:

Additional documentation now is required for new applications and renewals. In Texas, a mark must be “in use” before the application for its registration is filed. The Revised Act now requires that applicants notarize their applications and submit three specimens of the mark as actually used. Under the prior law, the applicant’s signature and two specimens of the mark sufficed. Acceptable specimens of a trademark in use include actual labels or tags affixed to goods or materials. Renewal applications also now require a notarized signature, as well as a specimen showing that the mark remains in use.

The Texas Secretary of State’s “likelihood of confusion” review now encompasses federal trademarks. Under prior law, the Texas SOS could not issue a certificate of registration if the applicant’s trademark was likely to cause confusion with any existing Texas trademark. The Revised Act significantly expands this “likelihood of confusion” review by requiring the Texas SOS to review an applicant’s trademark against both Texas registered marks and all unabandoned marks registered with the United States Patent and Trademark Office (USPTO) to determine whether any likelihood of confusion exists before issuance. This revision most likely will lengthen the application process and could significantly increase the number of rejections issued by the Texas SOS going forward.

Registration and renewal terms have been reduced to five years. Previously, a registered trademark expired on the tenth anniversary of its registration. The Revised Act reduces the registration term to five years. In this respect, the Revised Act diverges from federal trademark law under the Lanham Act, which provides for a ten-year term of registration, but brings Texas in line with other states such as California and Massachusetts, where the trend has been to reduce registration terms in order to remove “deadwood” (i.e., marks no longer in use) from the trademark register. Under the Revised Act, trademarks also must be renewed at five-year intervals.

A trademark dilution claim now may have more teeth. Under prior Texas law, the owner of a distinctive trademark could assert a claim against another party for dilution of the mark (i.e., diminishing the distinctiveness or reputation of a trademark). Dilution cases typically arise where a trademark is being used by another party on products that do not compete with (and have no relationship to) the trademark owner’s products.

The Revised Act limits trademark dilution actions to those marks that are famous and distinctive, a higher threshold for a trademark owner to meet and one now in line with the federal requirements for a trademark dilution claim. The Revised Act also contains clear definitions of “dilution by blurring” and “dilution by tarnishment,” in accord with federal law. In practice, this revision should ultimately benefit trademark owners. Texas trademark attorneys have frequently noted that the former dilution provisions were too vaguely drafted and thus courts rarely enforced them. With the enactment of the revised law, a Texas trademark owner now may have a greater likelihood of success proceeding against a party who is blurring or tarnishing its registered mark.

The owner of a Texas-registered trademark now may recover additional monetary damages. For a Texas trademark owner, the most welcome change in the Revised Act should be the expanded monetary rewards now available in litigation against an infringer. Under prior law, for monetary recovery, a Texas-registered trademark owner had to prove its actual damages (i.e. the cost of sales diverted by the defendant due to the infringement), which was difficult to establish because it required showing the amount of sales actually lost due to the confusion created by the infringer. The Revised Act now allows the trademark owner to receive the infringer’s profits derived from violation of the trademark − an easier showing in litigation. In addition, under the Revised Act, when a court finds the infringer acted with actual knowledge of the trademark or in bad faith, the infringer now may be required to pay triple the amount of damages awarded, as well as the trademark owner’s attorneys’ fees.

The Digital Millennium Copyright Act (“DMCA”) was passed in 1998 and makes it illegal to circumvent digital rights management protections, including software. Given the rapid pace at which technology changes, Congress also granted the Librarian of Congress the power to issue exemptions to the DMCA every three years. The latest round of exemptions were issued on October 28, 2012.

The Librarian also issued an exemption concerning “jailbreaking” your smartphone. Most cell phones have protective software that only allows “authorized” software to run on the device. The process of jailbreaking involves bypassing the software so you can run unauthorized software on your smartphone. The term “jailbreaking” refers to circumventing an iPhone whereas the term “rooting” refers to circumventing an Android, although both refer to the same process. Jailbreaking became popular as people sought to obtain software or other downloads that were unavailable on Apple’s App store, and remains so today.

The irony is that the Librarian issued an exemption making it permissible to jailbreak your smartphone, but decided not to issue the same exemption for tablets. Many people were left scratching their heads as tablets and smartphones have become almost interchangeable in terms of functionality. However, the Librarian reasoned that the definition of “tablet,” as proposed, was too broad and might encompass technology beyond a traditional tablet, such as an e-reader, tablet PC, or hand-held video game.

For now, people are free to jailbreak their smartphones to download software beyond the software authorized for their iPhone or Android, but not so when it comes to your iPad or other personal tablet. The Librarian’s exemption will be in place for another three years, at which time it remains to be seen whether the Librarian will re-visit the issue or whether the Librarian will be forced to address the next and latest technology.

The Conference consisted of sessions on alternative fee arrangements, business development, diversity and pro bono projects, social media brand building, and team building. Of course, the highlights of the Conference were the very humorous group commercials on the DLA Piper IPT brand and the entertaining Karaoke night. We look forward to next year’s Conference!

In a nutshell, Morales’ claimed trademark rights in BLUE IVY, and the federal registration for same, does not necessarily prevent Beyonce and Jay-Z from securing trademark rights in or a federal registration for BLUE IVY CARTER for goods or services unrelated to event planning services.  Trademark rights are jurisdictional and only apply to the specific goods or services on which it is being used in commerce, not to all goods and services worldwide.  Therefore, Morales does not have rights to the BLUE IVY mark for all goods and services, just event planning services and perhaps related goods and services. The same limitation applies to Beyonce and Jay-Z, despite their “kitchen sink” approach in the BLUE IVY CARTER Application, and all other current or prospective trademark owners.

Indeed, Morales may have staked her claim to the purported BLUE IVY mark in the event planning space, but not necessarily in other categories, such as clothing, music, cosmetics, or product merchandising. These categories, among others which are unrelated to event planning, are still fair game for the proposed BLUE IVY CARTER trademark.

Madonna is the center of attention again regarding alleged misappropriation (remember the “Express Yourself” debate?).  The “Material Girl” is once again en vogue on the copyright docket in the Ninth Circuit.  According to IPLaw360, record label VMG Saloul LLC has sued Madonna, her record label, and a co-composer (collectively, “Madonna”) with whom she worked to compose and produce the smash-hit “Vogue” for copyright infringement.

VMG alleges that Madonna covertly incorporated pieces of their late-seventies disco track “Love Break” into the infamous 1990 hit single “Vogue”.  In an attempt to bypass the Copyright Act’s statute of limitations, VMG argues that it was unable to detect such copying until new technology was developed in 2011.

Madonna quickly denied that any copying took place.  However, most interesting about the Material Girl’s motion is her observation that VMG’s “new technology” argument effectively wipes out any chances of success in this infringement suit.

Further, the Copyright Act tries to incentivize creativity and offers protection for original works of authorship.  While the Copyright Act does not define originality, courts have ruled that only a minimum degree of creativity is required to meet the originality standard for copyright protection.  In other words, so long as the work was independently created by the author(s),and not motivated in bad faith, this minimum degree is met.  Copyright only protects the author, or in this case, the composers’ artistic expression—not the underlying ideas.

 If an ordinary person would have to use a special technology, or require guidance on how to evaluate a work to prove two works are substantially similar, the success of the claim is unlikely.  Art is inspired by great creative works from all parts of history, inspiration is key and direct copying should be avoided at all costs.  Here, Madonna recognizes one of the major policy aims of the Copyright Act: it exists to protect original creativity, while allowing inspiration by other artists’ works and vice versa.

Do you think the ordinary observer test creates too low of a threshold?  Should a claimant be allowed to bring a late claim as a result of new technology? 

While New York has Fashion Week, September has proved to be Fashion Month in the Senate. On September 10, 2012, Senator Charles Schumer (D-NY) introduced S.3523 the “Innovative Design Protection Act of 2012” (“the Bill”).  The Bill, aimed at extending intellectual property protection to fashion designs, was approved by the Senate Judiciary Committee on September 20, 2012.

WHAT DOES THIS MEAN FOR FASHION DESIGNERS?  

It is no secret that intellectual property protection for fashion designs has been a heavily debated issue in the legislature since 2006.  While one would think the fashion community would be ecstatic about protection for original designs and creativity, in an industry with diverse stake holders, many are concerned about the potential implications of this Bill and its effects on fashion designers’ rights.

Although exceptional limits exist in each of the methods fashion designers may use to try to protect their designs, fashion designers today rely primarily on trademark, patent, and anti-counterfeiting laws as the main sources of protection for their intellectual property.  Additionally, fashion designers are afforded very limited protection under the current iteration of the Copyright Act.  Trademarks are used to protect the integrity of the designers’ brands.  Patents are useful for some fashion designs, although due to the lengthy application and registration process, the need for a patent is often obsolete by season’s end.

The proposed pieces of legislation to-date have tried to provide protection for fashion design under the Copyright Act, calling for a three year term of protection for original articles of apparel.  Under these proposed bills, the standard for copyright infringement would be articles which are “substantially similar” containing only minor or trivial differences. 

This standard has caused concerned across a wide spectrum of fashion designers, from innovative designers to the more conservative designers, for its practical challenges in enforcement.  Fashion is a collective effort of designers who receive inspiration from all aspects of their daily lives, generations past, and other designers.  An essential element in fashion is recycling and renovating.  Therefore, designers are not only concerned about protecting their own designs, but also the risks associated with their own designs in the future.  

The new Bill seeks a practical, designer-friendly solution which avoids the overreach of legislation.  This Bill specifically provides that the design owner of the design must provide notice of the design’s protection to any person the design owner believes has violated or will violate his rights under the Copyright Act.  Once a designer issues this written notice, a mandatory 21-day waiting period would be imposed before he could file an infringement action.

In an effort to curtail pecuniary hardship for potentially infringing fashion designers, damages would be calculated from the date the infringement action was filed, not the date on which the infringing articles were first sold.

The Senate approved this Bill on a voice vote.  Now, we will have to wait and see how the fashion and legal communities respond.

What do you think about the fashion design community’s collective attitude to limit damages, even though individual designers are at risk of infringement?

The Council for Responsible Nutrition this week released a searchable database of every National Advertising Division decision since 2007 involving advertising for dietary supplements. The database includes the decision date, challenger, advertiser, product, category of supplement, type of claim, examples of the challenged claims, and referral status. There are 140 cases included in the database, 13 of which were referred to a government agency for enforcement. The database does not otherwise include the outcome of the case, which can be obtained through subscription access to the online archive.

This helpful tool is available to the public on the Council for Responsible Nutrition's website.

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Reproduced with permission from Patent,Trademark & Copyright Law Daily, (Sept. 12, 2012). Copyright 2012 by The Bureau of National Affairs, Inc. (800-372-1033) <http://www.bna.com>

By Tamlin H. Bason 

Both parties claimed victory after the U.S. Court of Appeals for the Second Circuit Sept. 5 determined that Christian Louboutin's trademark on red soled shoes was valid and that Yves Saint Laurent's monochrome red shoe did not infringe the registered mark. Christian Louboutin S.A. v. Yves Saint Laurent America Holding Inc., 2d Cir., No. 11-3303-cv, 9/5/12).

Bernstein, who argued the case on behalf of YSL, said that the ruling went beyond his expectations. Rather than merely affirming the district court's refusal to grant a preliminary injunction, he noted, the appeals court instead disposed of the entire trademark infringement claim. “We didn't anticipate that this would be the likely outcome of the appeal,” Bernstein said, reacting the Second Circuit's decision.

Louboutin, however, also had cause to celebrate the decision, particularly since the district court had threatened to cancel its trademark registration pursuant to its determination that a single color can never serve as a protectable trademark in the fashion industry (158 PTD, 8/16/11). That threat, coupled with the district court's order rejecting Louboutin's motion for a preliminary injunction against YSL's continued sale of monochromatic red shoes, promoted Louboutin to seek interlocutory review from the Second Circuit.

“I think the [Second Circuit's] decision is about as important as it gets,” Louboutin's attorney, Harley I. Lewin of McCarter & English, New York, told BNA. “I don't know how you can get more important than fighting for the lifeblood of your company and winning.”

Lewin added, however, “I could have done without the monochromatic exception.”

Appeals Court Rejects Per Se Rule

Judge Victor Marrero of the Southern District of New York determined that Christian Louboutin's trademark registration for red soled shoes was not enforceable. In fact, the court indicated that it was inclined to cancel the registration.

Single color trademarks can never be enforceable in the fashion world, Marrero said, because such trademarks would stifle competition and give the mark's owner an unfair competitive advantage. Thus, the district court recognized a per se rule against single color marks in the fashion industry. Moreover, the district court determined that the red sole mark was aesthetically functional, and therefore could be not enforced against Yves Saint Laurent. Both determinations were made pursuant to the court's rejection of Louboutin's motion for a preliminary injunction that would have prevented YSL from selling its monochromatic red shoes. Because the court's order came at such an early stage in the proceedings, the record was not yet fully developed, a fact seized upon by many critics of Marrero's decision.

“People in the fashion were shocked by this per se rule that was created with no record and that said fashion was different” than other fields in which single color marks can serve as a protectable mark, Susan Scafidi, a law professor at Fordham University, New York, and founder of the Fashion Law Institute, told BNA.

Lewin said he was also caught off-guard by the district court's ruling. “Judge Marrero's decision changed the game,” Lewin said. “What began as a question of enforcement of a registered trademark … became a question of [whether the trademark was valid] because of what Marrero did,” Lewin said.

The Second Circuit soundly rejected the per se rule. Looking to Qualitex Co. v. Jacobson, 514 U.S. 159, 34 USPQ2d 1161 (1995), Judge José A. Cabranes said, “the Supreme Court specifically forbade the implementation of a per se rule that would deny protection for the use of a single color as a trademark in a particular industrial context.”

Modification of Mark ‘Unorthodox' But ‘Efficient.'

Registered with the Patent and Trademark Office in 1998 for women's high fashion designer footwear, Louboutin's trademark (No. 3,361,597) “consists of a lacquered red sole on footwear,” according to the registration's description.

A court can, under 15 U.S.C. § 1119, “order the cancellation of registrations, in whole or in part, restore canceled registrations, and otherwise rectify the register with respect to the registrations of any party to the action.”

The appeals court exercised those powers to modify Louboutin's mark so that it was protectable only against red soled women's shoes that had a contrasting upper color. The court instructed the PTO “to limit the registration of the Red Sole Mark to only those situations in which the red lacquered outsole contrasts in color with the adjoining ‘upper' of the sole.”

“Modifying the mark may have been more efficient, and less traumatic to Christian Louboutin than cancelling the mark and forcing them to reapply for a registration,” Scafidi said. “So while it is a little unorthodox to modify a trademark without making a clear determination on something like an aesthetic functionality defense, I think it was efficient decision making on behalf of the court,” Scafidi said.

Marc Reiner, chair of the Intellectual Property Group at Anderson Kill & Olick, New York, also thought that the court's modification of the registration was “unusual.” In a statement, Reiner said:

Louboutin claimed that it owned trademark rights to any red sole on a woman's high-heeled shoe. The court added the limitation that the red sole must contrast with the color of the rest of the shoe. This definition is probably a more accurate description of what customers associate with Louboutin, but courts generally rule whether the party's stated trademark is valid or not rather than define the parameters of the trademark. That said, I believe this is the correct ruling

Robust Guidance on Aesthetic Functionality

Although the appeals court never ruled on whether Louboutin's trademark was aesthetically functional, it dedicated a considerable portion of its order fleshing out that doctrine and how it applies to the fashion industry.

“Even if Qualitex could be read to permit an industry-specific per se rule of functionality (a reading we think doubtful), such a rule would be neither necessary nor appropriate here,” the court said. Thus, although it agreed with Marrerro that “in the fashion industry, color can serve as a tool in the palette of a designer, rather than as mere ornamentation,” that fact alone does not mean that single color marks can never be protectable in fashion, it said.

The focus of every aesthetic functionality analysis should be whether the registered mark “can accommodate consumers' somewhat conflicting interests in being assured enough product differentiation to avoid confusion as to source and in being afforded the benefits of competition among producers,” the court said, quoting Stormy Clime Ltd. v. ProGroup Inc., 809 F.2d 971, 1 USPQ2d 2026 (2d Cir. 1987).

However, before reaching that analysis in the instant case, the court determined that Louboutin's registration only applied to contrasting colors. It thus modified the registration, and held that YSL's monochromatic shoes were not infringing.

Lewin said the court's guidance on the aesthetic functionality doctrine will be invaluable going forward. He said that at the conclusion of the January oral arguments Cabranes asked him what he wanted out of the court's ruling. Lewin told him that in addition to a reversal of the district court's decision, Louboutin wanted an order that provided methodical guidance on how the aesthetic functionality doctrine should be applied in future cases.

“Though the court made no ruling on functionality, it took six pages of its decision in laying out exactly what we requested,” Lewin said. “It is very clear that they intended to guide at least the circuit, more carefully perhaps than prior decisions [have done].”

Is Louboutin's Mark Still in Danger?

Bernstein also welcomed the court's aesthetic functionality guidance, and suggested that we may not have to wait long to see how district court's interpret the Second Circuit's opinion.

The Second Circuit remanded the case so that the district court could rule on YSL's counterclaims, one of which seeks a cancellation of Louboutin's mark.

“Right now it is our intention to pursue our counterclaims, Bernstein said. “We brought them because we think they are appropriate.”

Bernstein noted that although this case dealt with a monochromatic line of shoes, in the past YSL has made red soled shoes that had contrasting uppers.

“It is our view that nobody should be able to preclude Yves Saint Laurent from using red in the future, if it is making the choice not to indicate the brand, but using it for aesthetic fashion related reasons,” Bernstein said.

Bernstein predicted that after viewing the entire record, Marrero will agree and will cancel Louboutin's trademark for being aesthetically functional.

Should Case Have Been Brought?

“This case was an example of why it's so important to pick your battles well,” Reiner said in a statement. “YSL was not only a well-funded opponent, but there also was a reduced likelihood of confusion because YSL's shoe was monochromatic and the red sole did not stand out. Because of this poor choice, Louboutin not only wasted resources on the litigation but also needlessly put its valuable red-sole trademark in jeopardy. Had Louboutin lost the ability to prevent others from using a contrasting red sole, the result would have been catastrophic for the brand.”

Bernstein agreed. “They frankly never should have brought the case in the first place,” he said. “I think Christian Louboutin is in a substantially worse position than when they brought the lawsuit,” he added, noting that Louboutin's trademark has been scaled back from its original registration.

Although Lewin didn't speak to whether his client should have filed the complaint in the first place, he said that Louboutin was eased with the Second Circuit's ruling.

“We are very aware that lawyers, judges, and the fashion industry in general has been closely watching this case around the world, and we think a decision like this will aid Christian Louboutin enormously.”

To avoid being classified as an illegal lottery, one of the three elements must be eliminated. Naturally, the “prize” element cannot be removed.  Therefore, legal compliance means eliminating either consideration or chance.  However, since prizes and chance are central to sweepstakes where the winners are randomly drawn, companies should not require consideration (whether monetary or non-monetary).  Accordingly, a legal sweepstakes should not require participants to pay or exert significant effort (i.e., high volume tweeting or sharing) for eligibility or entry, or purchase a product or service to improve their odds of winning.

The Wall Street Journal featured an interesting article on a company which has been asserting trademark rights in the design of Michigan State highway signs.  

Apparently, the brothers invested heavily to stake their claim in the M22 design, pursuing enforcement actions against users of other Michigan State highway signs. One such target was the Good Hart General Store in Good Hart, Michigan, which had sought to use M119, the local highway where it is located, on various goods. The Good Hart General Store responded by petitioning the Michigan Attorney General to intervene. This past Spring, the Michigan AG ruled that all State highway signs, including M22, are in the public domain.

Where the brothers have already secured federal trademark registrations for "M22," what effect will the Michigan AG’s decision have on their purported trademark rights? Should individuals or companies be allowed to claim trademark rights in road signs or designations where they serve a different purpose?

For the full story, please check out the article Highway M-22 Logo Revisited, by Matthew Dolan, which appeared in the print edition on September 5, 2012 at A8.

Apparently, the brothers invested heavily to stake their claim in the M22 design, pursuing enforcement actions against users of other Michigan State highway signs. One such target was the Good Hart General Store in Good Hart, Michigan, which had sought to use M119, the local highway where it is located, on various goods. The Good Hart General Store responded by petitioning the Michigan Attorney General to intervene. This past Spring, the Michigan AG ruled that all State highway signs, including M22, are in the public domain.

Where the brothers have already secured federal trademark registrations for "M22," what effect will the Michigan AG’s decision have on their purported trademark rights? Should individuals or companies be allowed to claim trademark rights in road signs or designations where they serve a different purpose?

For the full story, please check out the article Highway M-22 Logo Revisited, by Matthew Dolan, which appeared in the print edition on September 5, 2012 at A8.

However, the Second Circuit raises one caveat to its ruling – third party uses of the red sole on monochrome red shoes are allowed.   Therefore, Louboutin’s trademark rights do not extend to monochrome shoes.   As a result, YSL and other shoe manufacturers are apparently still free to incorporate red bottoms so long as the entire shoe is the color red.  To that end, is this decision a true victory for Louboutin or YSL?

We are delighted to introduce DLA Piper’s newest blog, Technology’s Legal Edge™, which addresses the global issues facing companies in the areas of e-commerce and social media, IT sourcing, outsourcing, and privacy and data security. We offer timely legal perspectives on cutting-edge issues in these dynamic areas of law.

Contributing to the blog are members of DLA Piper’s leading global Technology, Sourcing and Commercial practice. Among their recent posts:

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“How tech startups can protect IP” – a Bloomberg interview with Mark Radcliffe

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DLA Piper’s Global Data Protection Laws Handbook – now available online

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“Australia to introduce substantial reforms to privacy law” – an explanation of new legislation to be presented to Parliament

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FTC issues final privacy report – sets forth best practices, calls for legislation

We hope this blog will become a practical resource for your business.

The Internet Corporation for Assigned Names and Numbers (ICANN) has just announced that the target "Reveal Day" for its new generic Top Level Domain ("gTLD") program - the day when the list of gTLDs that have been applied for is announced - will be 13 June 2012. This date will be eagerly awaited by brandowners, both those who have applied to register their brands as gTLDs (and will want to see whether anyone has applied for similar domains which may be in competition with their application), and those who may wish to object to a gTLD application which is confusingly similar to their brand.

Teething Problems

The announcement follows a software glitch in ICANN's gTLD application system (known as "TAS"), which allowed some users to view other users' gTLD applications. This situation has understandably caused applicants some concern that third parties may have been able to find out about their application, and perhaps react to it by filing a competing application. Most applicants have to date been keeping their cards close to their chests and not revealing that they were applying, nor what they were applying for. ICANN has offered a refund of the application fees to applicants who wish to withdraw their applications.

The problems with TAS led to the application system being suspended on 12 April (the date when the application period was due to close), and re-opened from 22 to 30 May (this further period did not allow new applications to be filed, but merely for existing applicants to verify and finalise their applications). These developments will have caused over a month's delay to roll-out of the new domain extensions; "Reveal Day" had originally been scheduled for the start of May.

Uptake

While the failure of its IT system is highly embarrassing for ICANN (and one wonders what future "glitches" may occur in later stages of the program), there is no denying that the level of uptake of the new gTLDs has been high. ICANN says that at the time the system was taken offline, the system held 2,091 separate applications. In addition, ICANN says there were 214 potential applications that were registered prior to the 29 March application cut-off date, but whose payments had not yet been received or reconciled.

Next Steps

Both applicants and non-applicants will need to carefully consider how to protect their brands in light of the new gTLD program. We will be sending a further alert to clients shortly after Reveal Day to outline the key processes involved going forward, including the possibility of filing an objection to an application.

One of the packed meetings at the United States-China Adjudication Conference was the trademark breakout session, conducted for the most part in Chinese, with simultaneous translations. Several high-ranking judges in the IPR Tribunal spoke on trademark developments. From a U.S. perspective, there is a keen interest in the protection of well known trademarks either registered or unregistered in China.