gTLDs are Already Causing Confusion – Just Ask Wayne Knight and TMZ

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UPDATED July 15, 2015

Actor Wayne Knight (best known as Newman on Seinfeld) was forced to tweet his “proof of life” on Twitter, after a website that uses the domain name TMZ.today reported that he was killed in a traffic accident and the story went viral.  It has been reported that many users credited the story of the death of Wayne Knight because it was circulated with attribution to the website TMZ.today.  TMZ is well known as a major source of real entertainment news and celebrity gossip.  TMZ uses the domain name TMZ.com, but the domain name TMZ.today links to an entirely different website called ebuzzd.com that is actually an unrelated, deliberately fake news website – a website dedicated to hoaxes.

Wayne Knight’s concerns aside, this story presents important lessons for trademark holders and domain name registrants:  New generic Top Level Domains (gTLDs) are here and must be reckoned with.  TMZ.com is not TMZ.today, but it’s a good bet that a substantial portion of the consuming public does not know that.  Will the consuming public realize that your company website “XYZ.com” is not affiliated with XYZ.Today, XYZ.News, XYZ.Info, XYZ.Web, XYZ.Blog, XYZ.Corp, XYZ.Inc, XYZ.London, XYZ.Charity or XYZ.Porn, or any of the 600+ other non-branded gTLDs that are available now and coming online within the next two years?

For a trademark holder, it can be a daunting prospect to try to police that many possible confusing domain names, but there are cost-effective brand protection strategies and solutions.  They begin with recognizing the issue, and making sure that you have taken all appropriate steps to protect your trademarks and domain names.  The most basic step is to obtain U.S. trademark registrations for your important trademarks – especially for your primary brand.  That is the key to many of the solutions that are offered at http://trademark-clearinghouse.com/, the administrative service established by ICANN to help control issuance of gTLDs.   Then, set a strategy that includes monitoring the “Sunrise Periods,” during which registered trademark holders can take the most efficient steps to protect against spurious registrations of confusingly similar domain names with the new gTLDs.

The best and most cost-effective methods of protection against gTLD infringers and domain name cybersquatters will be discussed in future blog posts.  Available methods include preemptive registration, blocking and various forms of policing.  Conkle, Kremer & Engel routinely guides its clients to protect their valuable intellectual property and domain names, including taking proactive steps to address the new threats to trademarks posed by gTLDs.  Contact us if you have questions and need assistance.


 

UPDATE July 15, 2015:  Another example of misuse of gTLD domain extensions happened again and demonstrates that real money can change hands when gTLD domain name extensions are abused.  Twitter stock jumped on July 14, 2015 after what appeared to be the Bloomberg Business website posted a news article reporting that Twitter had received a $31 billion buyout offer.  The story was fake, but it passed for real news by being posted on a website designed as a counterfeit of the Bloomberg Business website and using a new gTLD:  www.bloomberg.market.  The real Bloomberg website is actually found at www.bloomberg.com.  To help make a convincing appearance, the www.bloomberg.market website included links back to the real www.bloomberg.com website.  Enough readers were fooled that Twitter stock price spiked after news of the purported buyout offer was picked up in legitimate media.  gTLD confusion may continue to be a problem for trademark holders until they take affirmative steps to limit the possibilities of confusion and abuse.

 

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Spain Enjoins ISP from Allowing User to Infringe Copyrights

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The Barcelona Court of Appeal recently issued a judgment holding an Internet Service Provider (ISP) subject to injunction due to copyright infringement by one of its users.  This ruling is consistent with the EU’s Copyright Directive, Recital 59, which provides:

In the digital environment, in particular, the services of intermediaries may increasingly be used by third parties for infringing activities. In many cases such intermediaries are best placed to bring such infringing activities to an end. Therefore, without prejudice to any other sanctions and remedies available, rightholders should have the possibility of applying for an injunction against an intermediary who carries a third party’s infringement of a protected work or other subject-matter in a network.

Spain authorized injunctions against intermediaries in article 8(3) of its Copyright Act.

In the Barcelona case Promusicae, an association of Spanish music producers, learned that someone was using the Direct Connect P2P network to make available in a shared folder 5,000 music files including copyrighted music.  In Spain, ISPs are not obligated to identify their users for purposes of civil lawsuits, so the only identification of the user available to the claimants was a nickname and IP address.

Without identifying the primary infringer, the copyright holders sued the ISP, R Cable y Telecomunicaciones Galicia.  The appellate court found that there was infringement and that the copyright holders were entitled to an injunction against the ISP that was providing internet access to the infringer, enabling the infringement.  The injunction required the ISP to permanently stop providing internet access to the infringing user, stopping the infringement.

This was the first ruling of its kind in Spain, but analogous rights against intermediaries are available in the U.S. and EU countries.  Conkle, Kremer & Engel assists its clients to protect and enforce their IP rights in copyrights, trademarks and patents worldwide.

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CK&E’s Judgment of $6.2 million for Unpaid Sales Commissions Upheld on Appeal

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The California Court of Appeal has unanimously upheld the $6.2 million judgment that Conkle, Kremer & Engel won at trial for a sales representative who had been deprived of $2 million in commissions he had earned.

Peter Reilly was a retired electronics industry executive who agreed to use his extensive contacts in the industry to bring new business to a growing manufacturing company, Inquest Technology, Inc.  After Reilly was not paid commissions for the contacts that he brought to Inquest, he asked Conkle, Kremer & Engel for help.

Reilly-Inquest_Team

Reilly v. Inquest – Plaintiff’s Trial and Appeal Team

CK&E’s Eric S. Engel and H. Kim Sim were the trial lawyers who devised the case strategy.  Key to the strategy was establishing by discovery and summary judgment motion the intricate requirements to impose liability against Inquest under a rarely-used law called the Independent Wholesale Sales Representatives Contractual Relations Act of 1990, California Civil Code section 1738.10 (“the Act”).  The main attraction of the Act is that jury awards for willful violations are trebled by the court and attorneys’ fees are awarded to a successful plaintiff.  Few laws in commercial litigation impose a penalty of three-times actual damages – that is a greater multiplier than most permissible punitive damages awards.

CK&E was able to prove that the sales representative relationship that Reilly had with Inquest met the particular requirements of the Act.  At trial, a unanimous jury found that Reilly procured sales for which he should have been paid $2,065,702 in commissions, based on the testimony of Reilly’s damages expert Thomas Neches.  The trial court then applied the Act’s penalty of treble damages to award Reilly a $6.2 million judgment, plus attorneys’ fees and interest, to enter the Judgment for Peter Reilly against Inquest Technology on Jury Verdict.

Of course, the Defendants appealed the judgment.  On July 31, 2013, the Reilly v. Inquest Technology case led to the first published decision of a California Court of Appeal to uphold a judgment trebling damages and awarding attorneys’ fees under the Act.  Anthony Kornarens was the appellate lawyer for Reilly, with assistance by CK&E.  In a unanimous decision, the Court of Appeal determined that Reilly’s judgment of $6.2 million was well supported by the evidence presented at trial, and that Reilly’s claims for unpaid sales commissions were within the special protections of the Act.

Click here for the full copy of the California Court of Appeal decision:  Reilly v Inquest Court of Appeal Decision, Case No. G046291 (July 31, 2013)

Watch for our future posts about the Act, including how CK&E proved that Inquest’s owners were also liable for the full amount of the $6.2 million judgment even though they were not subject to the Act.

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Lead in Baby Food? Failure to Warn Leads to Unusual Prop 65 Trial

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Proposition 65 actions are notoriously expensive and difficult to defend.  For that reason, most Prop 65 cases settle.  But a rare case involving allegedly high levels of lead in baby food, packaged fruits and juices is in trial in the Alameda Superior Court.

In September 2011, the Environmental Law Foundation (one of a handful of organizations in California that files Prop 65 actions in the name of the public interest) brought a lawsuit against food companies Beech-Nut Nutrition, Dole, Gerber, Del Monte Foods, and many others.  ELF claimed that the manufacturers made and sold baby and children’s food containing lead, without a warning as required by Prop 65, California’s Safe Drinking Water and Toxic Enforcement Act.

What is at stake in the Prop 65 action is whether baby food and children’s food such as carrot and potato baby food, grape juice and fruit cocktail must include a warning that the foods contain a chemical known to the state of California to cause cancer or reproductive harm.  Naturally, the food manufacturers do not wish to be forced to warn potential consumers that their foods contain harmful chemicals.

The food companies’ defenses are being tried to Superior Court Judge Steven A. Brick.  The food companies claim that their products contain only trace levels of lead that are below the level required for a Prop 65 warning.  They also claim that the lead is “naturally occurring” in the foods and therefore no duty to warn is required under the “naturally occurring” exposure defense to Prop 65.  Finally, the food companies have argued that Prop 65’s warning requirements are preempted by the Food, Drug and Cosmetic Act and the Nutrition Labeling and Education Act.  They contend that the FDA has determined that the baby food and children’s food in question do not pose unacceptable risks to health, so a Prop 65 warning requirement would create a conflict between federal and state law.

This will be a closely-watched case, because the Court’s ruling on these defenses is likely to have a significant impact on the defenses available to businesses faced with Prop 65 actions in the future.  Regardless of the outcome, CK&E’s lawyers will continue to work with businesses to help them develop a plan of compliance so that they can achieve their goal of minimizing the risk of being named as a defendant in a Prop 65 lawsuit.  If a lawsuit is threatened or filed, CK&E’s lawyers apply can create and implement effective and cost-efficient defense strategies to minimize its impact.

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Deal done? Maybe Not, if it’s a Copyright Sale

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Copyright ownership sales are generally controlled by ordinary state contract laws, but there are some limits when dealing with an agent of the copyright owner. In the recent case of MVP Entertainment v. Frost, a film producer offered to purchase the movie rights to author Mark Frost’s book, “The Match: The Day the Game of Golf Changed Forever.” The purchaser dealt with the attorney for the owner. In response to an email by the purchaser offering purchase terms, the attorney replied by email, “done . . . thanks!” Under many state laws that might have been enough to transfer ownership, but not so under copyright law.

The Copyright Act (17 U.S.C. § 204(a)) says that “transfer of copyright ownership . . . is not valid unless . . . a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.” An attorney is an agent, so the attorney’s email saying the deal is “done” should be enough, shouldn’t it? Not quite, said the California Court of Appeal in MVP, because the owner disputed that his attorney had the owner’s actual authority to sell the copyright. In other words, the attorney was not the “owner’s duly authorized agent” for that purpose.

But the purchaser claimed it was led to believe that the attorney had authority, which is a theory known as “ostensible agency.” Under California law, a property owner can be bound by the acts of another person (the “ostensible agent”) whom the owner “intentionally or by want of ordinary care, causes or allows” another (the purchaser) to believe had the owner’s authority. Contracts can be created by “ostensible agents” in many circumstances. But the MVP decision held that copyright transfers cannot be done by “ostensible agents.” Copyright law requires that the purchaser deal directly with the owner, or with an agent expressly and “duly authorized” to act on behalf of the owner, with the goal that copyright interests are not inadvertently given and there is no uncertainty about what rights were transferred.

The takeaway from MVP is, when buying copyrights it’s wise to get the owner’s signature.  CK&E lawyers routinely guide clients through transfers and licensing of intellectual property including copyrights, trademarks and patent rights. As well, when a client’s rights in intellectual property are threatened, CK&E lawyers respond with effective enforcement.

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Facebook Status Update: I’ve Been Served

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Social media is entering a new legal realm:  At least one court has recognized that a Facebook message can be used to serve a defendant with documents in litigation.  Historically, service of process has been most often accomplished by serving papers in person, or sometimes by U.S. Mail, to assure the court that a party has received due notice and an opportunity to respond to the legal proceedings.  But service of process is not always accomplished by such old fashioned means.  In a new twist, in Federal Trade Commission v. PCCARE247 Inc., United States District Court, Southern District of New York, Case No. 12 Civ. 7189 (PAE), Judge Paul A. Engelmayer ruled that the FTC could serve legal papers on defendants who were located in India by a combination of email and Facebook messages.  Service by email has been recognized in limited circumstances by other courts, and Judge Engelmayer emphasized that service of process by Facebook message would not be appropriate in every circumstance.  The court noted that the FTC had shown that the particular email and Facebook accounts were actively used by the defendants, and the defendants had already appeared in the litigation through counsel that had since withdrawn from representing them.

The rapidly expanding legal importance of social media is illustrated by the fact that less than a year earlier, in Fortunato v. Chase Bank USA, another USDC case in the Southern District of New York, Case No. 11 Civ. 6608, Judge John F. Keenan refused to accept Facebook as a means of service of process on a party.  Observing that “[s]ervice by Facebook is unorthodox to say the least,” Judge Keenan found that Facebook service would violate constitutional due process requirements, in large part because the court had not been shown to reasonable certainty that the Facebook profile actually belonged to the defendant who was being served.

Legislatures have also noticed the increasing legal importance of social media.  In February 2013, Texas State Representative Jeff Leach introduced a bill that would allow substituted service through social media websites.  If enacted, H.B. No. 1989 would allow Texas courts to prescribe as a method of service an electronic communication sent to the defendant through a social media website if the court finds:  (1) the defendant maintains a social media page on that website; (2) the profile on the social media page is the profile of the defendant; (3) the defendant regularly accesses the social media page account; and (4) the defendant could reasonably be expected to receive actual notice if the electronic communication were sent to the defendant’s account.  The Texas bill is the first of its kind, and it is likely that other states will consider similar legislation.

It seems safe to say that email and Facebook messages will not be the only technological methods by which service of process will be permitted in the future.  As Judge Engelmayer observed, “history teaches that, as technology advances and modes of communication progress, courts must be open to considering requests to authorize service via technological means of then-recent vintage, rather than dismissing them out of hand as novel.”  While people may not feel ready to be informed they are being sued by messages on Facebook, Twitter or LinkedIn, that day may not be far off.  The cautionary lesson is that email and other electronic means of communication need to be monitored for legal demands, notices or court filings, because a prompt legal response may be required.

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Keeping "Competition" in California’s Unfair Competition Law

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California’s Unfair Competition Law (UCL) provides broad protections to both consumers and businesses, prohibiting any form of conduct that can be found to be an “unlawful, unfair or fraudulent business act or practice.”  (California Business & Professions Code § 17200)  The UCL is particularly powerful because it can reach conduct that is not specifically illegal under any other law, and can also provide a remedy for any acts or omissions that are prohibited under other state or federal laws even if those laws do not allow private citizens to sue when they are violated.  A recent example is the case of Law Offices of Mathew Higbee v. Expungement Assistance Services, in which a lawyer used the UCL to sue a credit repair service that was not licensed to practice law. The lawyer alleged that he too was in the credit repair business and, as a result of the defendant’s violations of California’s attorney licensing requirements,  the competing lawyer was required to lower his prices and spend more money on advertising, lost clients and revenue, and the value of his law firm had diminished. Ordinarily, the statutes requiring a license to practice law cannot be enforced by private citizens. But here, the UCL was held to “borrow” the statutory violation to show an “unlawful business act or practice” that gave the plaintiff a claim.

Those already familiar with UCL know that it was modified by Proposition 64 in 2004, tightening the standing requirements so that an action could only be brought by a “person who has suffered injury in fact and has lost money or property” as a result of the alleged unfair competition. (B&PC section 17204)  Some courts had struggled with this new requirement, at times suggesting that the plaintiff would have to show that the defendant had directly taken money from the plaintiff as a result of the unfair competition.  Such a requirement would effectively eliminate “competition” out of the Unfair Competition Law:  It is rare that a business competitor could show that it gave money or property directly to a competitor as a result of unfair competition – and if it did happen, the plaintiff would probably have a breach of contract or fraud claim and probably would not need to use the UCL.

But over time it has become clear that Prop 64 did not not eliminate unfair competition claims between competitors.  In the Law Offices of Mathew Higbee case, the Court of Appeal in Orange County held that the UCL does not require that the parties have had direct dealings with each other in order to succeed “in alleging at least an identifiable trifle of injury as necessary for standing under UCL.”  The Court surveyed the law before and after Prop 64, and found the cases supportive of a rule that permitted business competitors to make unfair competition claims.  The standing requirement does not require in every instance that the parties have had direct dealings with each other. The Court emphasized that, provided that the “identifiable trifle of injury” resulting from the acts of unfair competition can be shown, “the UCL does not leave the court hamstrung, unable to even consider an action seeking injunctive relief just because the defendant engages in its purportedly unlawful activity via the Internet and has not had any direct business dealings with the plaintiff.”

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