|Sixth Circuit Delves into Murky Issue of Conceptual Separability over Copyrightability of Cheerleading Uniform Designs|
On August 19, 2015, the U.S. Court of Appeals for the Sixth Circuit ruled that the decorative designs on a cheerleading uniform is copyrightable, reversing a lower court’s decision that the uniform's decorative elements could not be protected by copyright. The decision is the latest dive into an area of copyright law that has “confounded courts and scholars,” as the Sixth Circuit panel described it.
In brief, the majority concluded that the stripes, chevrons, zigzags and color block designs on the uniform in question are protectable because those visual elements are conceptually separable from the “utilitarian aspects” of the uniforms—which, broadly defined, are to “cover the body, wick away moisture, and withstand the rigors of athletic movements.”
The majority of the three judge appellate panel disagreed with the determination made by the court below that “a cheerleading uniform is not a cheerleading uniform” without those design elements, noting that a “[a] plain white cheerleading top and plain white skirt still cover the body and permit the wearer to cheer, jump, kick and flip.” The court also concluded that the arrangement of the design features are “wholly unnecessary to the performance of” the uniform’s ability to serve its utilitarian function, and are therefore conceptually separable.
The Copyright Act provides that “useful articles”—those “having an intrinsic utilitarian function that is not merely to portray the appearance of the article or to convey information”—receive protection “only if, and only to the extent that, [they] incorporate pictorial, graphic, or sculptural features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article.” This "separability" rule is designed to prevent copyright law from impeding free competition in the manufacture and sale of useful articles, but it has proven to be complicated to apply in practice. In particular, because apparel items have both functional and creative design aspects, the separability rule has been notoriously difficult to apply, causing courts to find that many works of fashion are not protectable through current copyright law.
Courts have adopted various different approaches to the conceptual separability doctrine. In fact, the Sixth Circuit’s surveyed nine different approaches that courts have taken as they “struggled mightily to formulate a test” to determine whether a piece of apparel is copyrightable.
The opinion is notable in that the Sixth Circuit has now formulated a unique approach of its own, creating a new five-part test to reach its conclusion. At the end of the day, though, the court relied on well-settled copyright principles to reach its determination, drawing the following analogy: “The Copyright Act protects fabric designs, but no...Read More
|More retailers roll out in-store “beacons” to encourage consumers to make purchases|
Last year, we reported on the trend toward the use of in-store “beacons” as a way for brick-and-mortar stores to communicate directly with consumers while they are physically in stores, in order to entice customers to buy their products while they are still in the store. In particular, we summarized legal issues that these beacons raise, from consumer privacy, to false advertising, employment law, intellectual property, and cyber piracy issues. A year later, these concerns have not been enough to slow the trend. Tech Crunch is reporting that major retailers continue to invest in this technology, with malls and major retailers across the United States investing in technological infrastructure that allows them send information about deals as well as recommendations directly to consumers’ smartphones. Tech Crunch reports:
Consumers, so far, have been somewhat accepting of the technology, likely because they’re in better control of it – they can choose whether to opt in, or can simply switch off their Bluetooth to disable the alerts. According to a November 2014 study by marketing platform provider Swirl, 73 percent of consumers even indicated that beacon campaigns increased the likelihood of purchase during their visit.
It will be interesting to see how consumer perception of this technology changes as it becomes more commonplace, and as retailers—and potentially brand owners—increase the number of messages sent to consumers’ devices and experiment with new content.
|Heavy Metal: Restrictions on the Sale of Jewelry in California|
This post was prepared by Vanessa Adriance of Gibson Dunn.
Many manufacturers use lead and cadmium in costume jewelry for a variety of purposes. For example, lead can be used to make a piece of jewelry heavier, can brighten colors, and can help to stabilize or soften plastic components of jewelry. But jewelry containing these metals is subject to a variety of controls in California markets. First, lead and cadmium are both listed as carcinogens and reproductive toxicants under California’s Proposition 65, which mandates warnings on products that create “exposures” to any of more than 900 listed chemicals if that exposure exceeds certain levels. In the case of lead, this “safe harbor” level below which warnings are not required is set at .5 micrograms per day, and unwarned cadmium exposures are capped at 4.1 micrograms per day for oral exposures and .05 micrograms per day for inhalation exposures.
In addition to Proposition 65, which mandates a warning in the case of exposures exceeding safe harbor levels, lead and cadmium content in jewelry is also controlled by the state’s “Metal-Containing Jewelry” law, which is codified at California Health and Safety Code sections 25214.1 through 25214.4.2. The law began as a codification of a 2006 consent judgment in a Proposition 65 case addressing lead in jewelry, and was subsequently amended to include cadmium as well. It forbids the manufacture, shipping, selling, and offering for sale of jewelry in California unless the jewelry is made from a specific set of materials laid out in the law. (Cal. Health & Saf. Code § 25214.2.) It creates lead and cadmium restrictions for those materials, and establishes separate, lower lead and cadmium thresholds for “children’s jewelry” and “body-piercing jewelry.” For example, “children’s jewelry” sold or offered for sale in California may not contain any component or be made of any material that is more than 0.03% cadmium by weight. (Cal. Health & Saf. Code § 25214.2(d).)
The law applies to any person who manufactures, ships, sells, or offers for sale jewelry for retail sale in California. (Cal. Health & Saf. Code § 25214.2.) Businesses of all sizes are subject to the law, including large retail “box” stores, online stores and web sites, discount stores, craft stores, businesses selling children's jewelry in vending machines, tattoo shops, body piercing shops, people who make and sell their own jewelry, and mail order companies. Manufacturers and suppliers are required to provide certification that their jewelry does not contain cadmium or lead in violation of the law. This certification can be in the form of a certification document, or may be displayed or on the packaging of the jewelry or on the container in which it is shipped. (Cal. Health & Saf. Code § 25214.3.1.) This certification also provides an affirmative d...Read More
|EU Antitrust Focus on E-Commerce Expected to have Significant Impact|
The European Union antitrust chief, Commissioner Margrethe Vestager, recently announced a major EU-wide inquiry on market restrictions on e-commerce . This horizontal market investigation is part of a top priority of the European Commission (i.e. the European Digital Single Market). This investigation is likely to significantly change the regulatory framework for retail commerce in Europe. It affects brands, manufacturers, distributors, internet market places and both offline and online retailers. The EU antitrust department will first investigate the market situation, seeking to understand the retail market dynamics from the perspective of removing restrictions on internet commerce and intra EU cross border trade. Typically, the EU authority will send questionnaires to the companies and collect an ample sample of contracts. In the process, the authority can open individual antitrust infringement procedures. The probe may also result in further policy guidance, inter alia concerning the balance between offline and online retail and the respective legal rights of the supply chain stakeholders. This Brussels initiative will be coordinating with ongoing enforcement and market studies at the European National States level. Additional implications in the digital chapter of the Transatlantic Trade and Investment Partnership negotiations are also possible.
|New Supreme Court Case Ups the Ante on Trademark Opposition Proceedings|
On March 24, 2015, the U.S. Supreme Court issued a decision that requires courts in trademark cases to give greater consideration to prior decisions of the Patent and Trademark Office's Trademark Trial and Appeal Board ("TTAB") as to whether two trademarks are likely to be confused. In B&B Hardware, Inc. v. Hargis Industries, Inc., 13-352 (U.S. Mar. 24, 2015), the Court held that "consistent with principles of law that apply in innumerable contexts . . . a court should give preclusive effect to TTAB decisions if the ordinary elements of issue preclusion are met." Slip op. at 2.
There are a number of interesting facets to this decision (detailed here). The bottom line for trademark owners--including most fashion, retail, and consumer products companies—is that trademark owners can no longer be cavalier about ignoring the results of administrative proceedings over whether a trademark registration should be allowed. Many courts had been dismissive of these kind of administrative determinations, and often allowed litigants to retry likelihood of confusion issues de novo if a related dispute made its way into federal court. The B&B Hardware case will make that more dangerous, because courts of appeal will likely look closely to see if the elements of issue preclusion were present in prior TTAB determinations. The Court hinted at some important limitations on issue preclusion, but it may not be apparent whether these limits apply until after a TTAB proceeding is completed.
As a result, brand owners should evaluate opposition proceedings that are instituted against them more carefully, consider whether the more informal format of TTAB proceedings may suit their litigation goals, and generally take them more seriously, so they do not need to explain after the fact why issue preclusion should not apply. The Supreme Court was clear that if a trademark owner is dissatisfied with a TTAB determination, it must take advantage of its options for judicial review, and seek an immediate appeal, or else it could find itself precluded from trying to reargue the issue.
Interestingly, this is the second trademark case that the Supreme Court has issued this year, after having avoided trademark decisions for nearly a decade. The new B&B decision did not explicitly address the Court’s earlier decision in Hana Financial, Inc. v. Hana Bank, 13-1211 (U.S. Jan. 21, 2015).
|Complying with California’s Proposition 65 in the age of online commerce|
This post was prepared by Vanessa Adriance of Gibson Dunn.
California’s Office of Environmental Health Hazard Assessment (OEHHA) will hold a public hearing regarding changes to the regulations implementing California’s Safe Drinking Water and Toxic Enforcement Act of 1986, commonly referred to as “Proposition 65,” on March 25, 2015. The proposed changes are far-reaching, and include specific provisions addressing what constitutes a “clear and reasonable” warning that complies with Proposition 65 for the purposes of online retail—an area previously not directly addressed by the regulations or the case law applying Proposition 65.
By way of background, Proposition 65 was enacted via California’s ballot initiative process in 1986. (California Health & Saf. Code § 25249.5 et seq.) As it applies to consumer goods, including apparel and fashion accessories, Proposition 65 is intended to be an informational statute. As such, it requires any person who exposes a consumer to any of more than 900 chemicals deemed to be either carcinogens or reproductive toxicants while “in the course of doing business” to first provide a warning about that exposure. (Id. at § 25249.5.)
Proposition 65 has created an enormous amount of litigation since its passage, due in large part to the provision of the law that permits any taxpayer to sue “in the public interest” to enforce the law. (Id. at § 25249.7(d).) Proposition 65 litigation involving shoes, vinyl handbags and cosmetic cases, and costume jewelry have all made their way through the California courts in the last several years, and plaintiff’s attorneys are constantly on the lookout for new products that they can target. Making compliance even more challenging, OEHHA is constantly updating the list of chemicals subject to the law.
Once it is shown that a product contains a listed chemical, the “exposure” requirement is generally easily met and difficult to dispute in litigation. For example, if a consumer could physically put a product in their mouths (even if that is not its intended use) then plaintiff’s attorneys will argue that an exposure is created. The same is true of things that a purchaser might touch with their hands such that a chemical might rub off, which could them be consumed if they touch their mouths or eyes. There may well be other defenses to a claim based on a piece of apparel, such as that the chemical makeup of the print is such that the listed chemical cannot actually be transferred, or that exposures fall within “safe harbor” levels, but those defenses can be very time consuming and costly to assert, often requ...Read More
|Fate of Lupita Nyong'o's Oscar dress puts spotlight on need to secure high-profile fashions|
The concept of fashion law and criminal law rarely collide quite as spectacularly as the February 26, 2014 report in the New York Daily News that the $150,000 pearl gown worn by Oscar winner Lupita Nyong’o during the recent Academy Awards ceremony had been stolen from the actress’ hotel room at the London West Hollywood hotel. Of course, theft is theft, whether the item stolen is a famous gown or simple cash, jewelry, or personal property. It may, however, be more difficult for thieves to fence a unique dress that was seen by millions of viewers around the world, which may explain why the thief reportedly anonymously returned the dress days later. (Or it may be that the thief simply learned that the dress was not really made of genuine pearls as had been widely reported.)
Regardless, the incident highlights an important facet of award ceremony fashions. Each year, it becomes clearer that the fashions worn on Oscar night are big business, which complicates questions as to whether the focus on award-season style undervalues the creative contributions of the individuals being honored at these ceremonies. The designers of these fashions, however, also deserve credit for the countless time, energy, and creative output poured into developing a new look that will generate a buzz on Oscar night. And often, they see their work exploited only hours later by companies that proudly sell knockoffs of even the most unique and original designs. As a result, it would not be surprising to see the brands that outfit the stars—or the celebrities themselves—arrange for increased security, not only in the days after high-profile events (where celebrities can make for tempting targets), but also in the days leading up to it, in order to preserve as much of a head start on copycats as possible. As we have noted previously, because the U.S. does not protect fashion designs in the same way as many other countries, it is very important for fashion brands to be strategic in applying the legal protections that do exist.
|Recent Developments Highlight Continuing Risks for Retailers Related to Data Privacy and Cybersecurity|
On February 17, Gibson Dunn released its annual Cybersecurity and Data Privacy Outlook and Review, describing key data privacy and security events from 2014 and an overview of anticipated trends for the near future. Among other topics, the review provides a summary of recent developments with respect to both litigation and legislation that has arisen from recent data breaches at prominent retailers.
In particular, the closely watched Target breach litigation raised the issue of whether plaintiffs suffered harm in connection with a data breach targeting a national retail chain. In this multidistrict litigation, a Minnesota district court found that plaintiffs satisfied the standing requirements, at least at the pleading stage, by alleging plaintiffs suffered "unlawful charges, restricted or blocked access to bank accounts, inability to pay other bills, and late payment charges or new card fees." In re Target Corp. Customer Data Sec. Breach Litig., No. MDL 14-2522, 2014 WL 7192478, at *2 (D. Minn. Dec. 18, 2014). Target had argued that the plaintiffs did not allege injury because they failed to "allege that their expenses were unreimbursed or say whether they or their bank closed their accounts." Id. But the court found that those arguments "set a too-high standard for Plaintiffs to meet" and that "Plaintiffs' allegations plausibly allege that they suffered injuries that are 'fairly traceable' to Target's conduct." Id. (citations omitted).
A more permanent response may come in the form of bills that have been introduced in Congress to address such data breaches, such as the Personal Data Privacy and Security Act of 2014, S. 1897, sponsored by Senator Patrick Leahy (D-VT), which would create a federal standard for notifying customers of a data breach and impose additional restrictions on the storage of customer data, including requiring the implementation of a comprehensive data privacy security program. The Review provides details on the bill and other legislative proposals under consideration.
The Review also discusses recent litigation developments over California's Song-Beverly Credit Card Act of 1971 ("Song-Beverly"), Cal. Civ. Code §§ 1747, et seq., which prohibits merchants from requesting or requiring a customer's personal identification information as a condition of accepting a credit card payment. California courts, however, have tended to place fraud prevention practices beyond Song-Beverly's reach. See, e.g., Flores v. Chevron U.S.A. Inc., 217 Cal. App. 4th 337, 340 (2013) (granting summary judgment because requiring California customers to enter ZIP codes in pay-at-the-pump gas station transactions in locations with a high risk of fraud constituted a "special purpose" under §1747.08(c)(4) of the Act). In Ambers v. Buy.com, Inc., No. 13-c...Read More
|Update on Cyberattacks and Data Breaches Provides Useful Information for Retail Industry|
On February 3, 2015, Gibson Dunn attorneys Ryan Bergsieker and Richard Cunningham delivered a presentation to help retailers and other companies prepare for the possibility of a cyberattack or data breach—including minimizing the exposure associated with the Federal Trade Commission investigations, state Attorneys General inquiries, and private lawsuits that commonly follow a breach. The presentation was focused on how data breaches occur, the legal standards enforced by government regulators regarding whether companies’ cyber-defenses are adequate, and—most importantly—the steps companies can take to minimize the risk of a breach and be prepared if a breach occurs. The slides used in the presentation can be found here.
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