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In this day of online consumerism, the success of a product can change drastically with a simple addition, or subtraction, of a “star.” In October of 2018, a whistleblower shed light on the drastic measure one particular company, Sunday Riley Skincare, had taken to ensure its products’ “stars,” and their corresponding success, remained as high as possible.  According to this whistleblower and former employee, as well as a subsequent complaint brought by the Federal Trade Commission, Sunday Riley’s managers attempted to solidify its products’ standing in the cosmetics market by posting various positive fake reviews and attempting to bury negative reviews of their products on Sephora.com.

Between October 2015 and August 2017, Sunday Riley’s employees posted fake positive reviews on Sephora’s website, and would strategically “Dislike” negative reviews in an effort to have such reviews removed.  According to the FTC, this strategy came from the very top, with Sunday Riley’s founder urging her employees to dislike any negative reviews and use VPNs (“virtual private networks”) while posting reviews in order to hide their identity. According to its founder, this would “directly translate[] to sales” for Sunday Riley. There is even some indication that this type of behavior took place as recently as April of 2018, as interns of Sunday Riley were encouraged to write fake reviews for the company.

In its complaint, the FTC alleges that Sunday Riley committed two violations of the FTC act: 1) it made false or misleading claims that the fake reviews reflected the opinions of impartial ordinary users of the products; and 2) it deceptively failed to disclose, after implying the reviews were written by users of the product, that reviews were written by Sunday Riley employees. Shortly after bringing its complaint, the FTC approved a proposed consent order to settle these allegations. In particular, pursuant to the order, Sunday Riley would be prohibited from misrepresenting the status of an endorser or person reviewing a product. Further, going forward, Sunday Riley employees could only endorse one of the company’s products if they clearly and conspicuously disclose their connection to the products.

Not all commissioners agreed with this proposed settlement, however, as the proposed settlement moved forward by a narrow three to two margin.  Commissioners Rohit Chopra and Rebecca Kelly Slaughter voted against the settlement, and issued a separate statement in which they expressed concern that the proposed settlement does not go far enough in light of Sunday Riley’s behavior.  Notably, Chopra and Slaughter commented in their letter that the “proposed settlement includes no redress, no disgorgement of ill-gotten gains, no notice to consumers, and no admission of wrongdoing. Sunday Riley and its CEO have clearly broken the law, and the Commission has ordered that they not break the law again.”

Now, the FTC must publish the proposed settlement in the Federal Register, and open it up to public comment for thirty days.  After that time, the Commission will consider said comments and determine whether or not to finalize the proposed settlement.

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“The” is the most commonly used word in the English language.  However, “trademarks” and “common” are not typically synonymous; rather, a trademark “is a word, phrase, symbol, and/or design that identifies and distinguishes the source of the goods of one party from those of others.”  So how could anyone imagine that the most commonly used word could, in fact, distinguish or identify the source of goods to any degree?  Well, if anyone was able to trademark “The”, the most commonly used word in the English language, it may just be “THE” Ohio State University, who applied to register “The” on August 8, 2019.

College football fans know it well – Buckeyes football players don’t play simply for Ohio State University; rather, they play for THE Ohio State University. For years, Ohio State’s football team has solidified itself as one of the top programs in the country. Fans and players alike take great pride in that success, and as an homage to Ohio State’s formal name, “The Ohio State University,” they have taken to emphasizing the “THE” when verbalizing the school’s name. For example, if anyone has watched an NFL game where the players on the broadcast announce what college they attended, former Buckeyes players announce their alma mater as “THE” Ohio State University.

Importantly, Ohio didn’t attempt to simply trademark the use of “The” in all shapes and forms, but instead sought to register “The” as a standalone brand for apparel. In fact, even prior to registering for the mark, Ohio State sold T-shirts and other apparel with “THE” printed on it. One would imagine that, many onlookers, when they see the emphasized “THE” accompanied with the school’s red and silver colors, may find themselves thinking of the Ohio State Buckeyes. Similarly, one could argue that, in at least a football setting, when someone says or writes “THE” with extra emphasis, most observers would expect “Ohio State University” to follow.

But, even considering these unique indicators, the USPTO refused to register “The” as a trademark—at least for now. In issuing its decision, the USPTO refused registration “because the applied-for mark as used on the specimen of record is merely a decorative or ornamental feature of applicant’s clothing, and, thus, does not function as a trademark to indicate the source of applicant’s clothing and to identify and distinguish applicant’s clothing from others.” Ohio State, however, still has an opportunity to amend its application, and may be granted a trademark if it can prove that its “extensive use and promotion of the mark allowed consumers now directly to associate the mark with [Ohio State] as the source of the goods.”

So, for at least the time being, “The” remains a non-trademarked term—which is a relief, as I used “the” 47 times in this post alone.

CBD Oil

On September 10, 2019, the Federal Trade Commission (FTC) posted a press release on its website stating that it sent warning letters to three unidentified companies that sell cannabidiol (CBD) products.  CBD is a chemical compound that is derived from cannabis that is legal under federal law (although still illegal in some states), and is often advertised as having health benefits.  According to the FTC, the companies had advertised on their websites that CBD could be used to treat a variety of diseases, including cancer, AIDS, diabetes, arthritis, PTSD, and depression, among other things.  This is not the first time the FTC has sent out warning letters to CBD companies.  In March 2019, the FTC and the Food and Drug Administration sent out joint warning letters to other companies for allegedly making similar types of health claims.

While the dialogue around CBD oils (and marijuana in general) has shifted over the last decade, the warning letters the FTC sent out are a good reminder that regardless of what product a company is selling, it needs scientific support for its claims about the health benefits of that product.  As put by the FTC in another recent press release: “The gist of the warning letters is that the companies should review their product promises – including representations conveyed through testimonials – to ensure they’re backed up by competent and reliable scientific evidence. Like any other advertiser, CBD sellers who make unsubstantiated health claims could be subject to law enforcement.”  All companies, including those that sell CBD oils, should make sure they comply with the FTC’s guidelines regarding health claims or risk being subject to the FTC’s scrutiny.  The FTC provides resources for curious advertisers; for example, some tips can be found here.

During this coming term, the U.S. Supreme Court will hear an interesting case involving the State of Georgia’s ability to copyright the annotations to the Official Code of Georgia Annotated (“OCGA”).  The issue is framed as follows: “Whether the government edicts doctrine extends to—and thus renders uncopyrightable—works that lack the force of law, such as the annotations in the Official Code of Georgia Annotated.”

34126235 - copyrightThe State of Georgia argues that there is a distinction between the law itself, which it agrees is not copyrightable, and the OCGA annotations it hires a private entity to create, which it says have no legal force and are copyrightable.  The opposing party in the case, Public.Resource.Org, Inc., is a non-profit advocacy group that argues the law belongs to the people and thus cannot be copyrighted.  In the underlying decision, the Eleventh Circuit sided with the latter, ruling that “the People are the ultimate authors of the annotations,” which are “inherently public domain material and therefore uncopyrightable.”  As a result, the Eleventh Circuit found Public.Resource.Org., Inc. not to have committed copyright infringement by posting various OCGA volumes and supplements online.

The State of Georgia’s petition to the Supreme Court for certiorari on the issue was granted, and numerous amicus curiae briefs have been filed, demonstrating this is an issue many organizations and people care about (indeed, one brief was filed by 119 law students, 54 solo practitioners and small-firm attorneys, and 21 law professors/educators). The Supreme Court will likely issue a ruling next year.

 

Late last month, the United States Patent & Trademark Office (“USPTO”) issued a Notice seeking comments as to whether Artificial Intelligence (“AI”) can be considered an inventor on a patent.  Its questions “are designed to cover a variety of topics from patent examination policy to whether new forms of intellectual property protected are needed.”

This caused some of us to wonder whether the same could be asked for trademarks and copyrights.  Although the USPTO’s request relates solely to patents, which lend themselves to inventions that utilize or are even developed by AI, one cannot help but envision situations where AI assists in creating other forms of intellectual property too.  Indeed, we already know that AI is creating materials, such as news updates for various organizations, that could be subject to multiple forms of IP rights, making the question even more appropriate.

Confirming exactly that, a post on the USPTO’s Leadership blog states that the patent-related Notice is “only the first step” and that the USPTO plans to “examine the full spectrum of intellectual property policy issues that have arisen, or may arise, as AI technologies become more advanced.”  This includes looking at “AI’s impact on existing intellectual property, including copyright and trademarks, to considering if new legal rights are needed in the wake of more advanced AI.”

Pelicans Photo

An interesting trademark story recently unfolded involving an NBA draft pick and a team’s new star player.  In this year’s NBA draft, the New Orleans Pelicans drafted college standout Zion Williamson with the first overall pick. This pick was almost unanimously a no brainer: Zion Williamson is one of the most anticipated basketball players to come out of college in years.  With this anticipation, both Williamson and the Pelicans saw a marketing opportunity, and in particular an opportunity centered around what Williamson sees as his own catch phrase: “Let’s Dance.”  With that in mind, the Pelicans filed an application with the Trademark Office the day after the NBA draft for that very phrase.  Shortly thereafter, Williamson also filed a trademark application for “Let’s Dance.”

Obviously, this string of events would have the potential to lead to some real issues: possible litigation, royalty and licensing fights, and not to mention an NBA team alienating its young superstar. With these thoughts in mind, the Pelicans wisely decided to withdraw their trademark claim by filing an “express abandonment” of their request. Now, the path is (relatively) clear for one of the NBA’s youngest stars to trademark his favorite phrase, and stamp “Let’s Dance” on clothing, beverages, and everything in between.

Earlier this month, the United States Patent & Trademark Office’s (USPTO) finalized and announced a rule requiring foreign trademark applicants to be represented by a United States licensed attorney when applying for a US trademark registration .  The rule covers individuals with a permanent legal residence outside the US or its territories and entities with their principal place of business outside the US or its territories.  There is no change to the rule for domestic trademark applicants, who are still not required to be represented by an attorney.

According to the USPTO, the rule is intended to (1) increase USPTO customer compliance with US trademark law and USPTO regulations, (2) improve the accuracy of trademark submissions to the USPTO, and (3) safeguard the identity of the US trademark register.  In explaining the rule, the USPTO articulated, “We discovered an increasing number of foreign trademark applicants, registrants, and parties are filing inaccurate and possibly fraudulent submissions with the USPTO that do not comply with U.S. trademark law or the USPTO’s rules. Often, these submissions are made with the assistance of foreign individuals or entities not authorized to represent applicants at the USPTO.”  It appears the USPTO’s action came as a result of the increasing number of questionable, inaccurate, or potentially fraudulent Chinese applications specifically.

The rule becomes effective August 3, 2019.

It’s old news by now, but the Supreme Court ruled earlier this week that the immoral and scandalous  trademark ban set forth in Section 2(a) of the Lanham Act is unconstitutional under the First Amendment because it disfavors certain ideas and thus discriminates based on viewpoint.  Practically, this means that the United States Patent and Trademark Office (USPTO) can no longer refuse to register such marks.

This is the second case the Supreme Court has decided on two related provisions of Section 2(a) of the Lanham Act — the disparaging trademark ban and the immoral/scandalous trademark ban.  Almost exactly two years ago, the Supreme Court ruled in a case involving the rock band The Slants (which also impacted the Redskins NFL team, a case the Supreme Court did not hear) that the disparaging trademark ban was unconstitutional.  Mirroring that ruling, the Supreme Court has now reached the same conclusion on the immoral/scandalous trademark ban in a case involving the streetwear brand Fuct.  The USPTO, which argued in both cases in favor of maintaining the bans, hoped the Supreme Court would view the two provisions differently, but it did not (more specifically, the majority did not).

Interestingly, the justices appear to have left open an avenue for future legislation more narrowly tailored to a ban that may be upheld — such as a ban on lewd, sexually explicit, and profane marks.  Attorneys around the country are trying to predict what Congress may do in response, but nothing is clear or immediate yet.

This blog has followed these cases for years.  For a full history on The Slants case, see here, here, here, here.  For a full history on the Redskins case, see here and here.  For a full history on the Fuct case, see here, here, and here.

Since 1995, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) have maintained intellectual property licensing guidelines, most recently updated in 2017.  Those guidelines, titled “Antitrust Guidelines for the Licensing of Intellectual Property,” discuss how the FTC and DOJ evaluate licensing for patents, copyrights, trade secrets, and know-how and how they analyze potential antitrust violations. The agencies explain that the guidelines are designed to provide information to businesses and consumers on how they enforce intellectual property licensing and are intended to both protect consumers and promote competition and innovation.

The guidelines embody three general principles:  “(a) for the purpose of antitrust analysis, the Agencies apply the same analysis to conduct involving intellectual property as to conduct involving other forms of property, taking into account the specific characteristics of a particular property right; (b) the Agencies do not presume that intellectual property creates market power in the antitrust context; and (c) the Agencies recognize that intellectual property licensing allows firms to combine complementary factors of production and is generally procompetitive.”

Ultimately, the agencies hope the guidelines will aid in predicting whether the agencies would challenge a particular practice as anticompetitive. To achieve that goal, the guidelines provide a thorough analysis of various antitrust considerations—e.g. types of affected markets, horizontal and vertical relationships, and the rule of reason—and include a number of illustrative examples. The guidelines identify a few arrangements that are likely to receive scrutiny: horizontal restraints, minimum resale price maintenance, tying arrangements, exclusive dealing, cross-licensing and pooling arrangements, grantbacks, and certain transfers of intellectual property rights. The guidelines also explain the “safety zone” where the agencies will not challenge a restraint if it is not facially anticompetitive and the licensing parties account for no more than 20% of each relevant, significantly affected market.

Notably absent in the list of intellectual property rights discussed in the guidelines is trademarks. The guidelines explain, “Although the same general antitrust principles that apply to other forms of intellectual property apply to trademarks as well, these Guidelines deal with technology transfer and innovation-related issues that typically arise with respect to patents, copyrights, trade secrets, and know-how agreements, rather than with product-differentiation issues that typically arise with respect to trademarks.”

When undertaking their evaluation of intellectual property licensing, the FTC and DOJ focus on an actual licensing practice and its effects, not on the formal terms of a licensing agreement. Their approach is to analyze whether a particular practice is likely to have anticompetitive effects and whether such practice is reasonably necessary to achieve competitive benefits outweighing those effects.

Those interested or concerned in how the FTC and DOJ may view certain intellectual property licensing practices can review the guidelines at any time on the FTC’s website.

Earlier this month, the Federal Trade Commission (FTC) and the U.S. Food and Drug Administration (FDA) issued warning letters to four companies using social media influencers to post on their behalf.  According to the FTC and the FDA, the social media influencers’ posts were in violation of advertising and labeling laws due to misbranding and failure to disclose material information.  The letters highlight the importance of companies following all advertising laws when using social media influencers.

The Federal Food, Drug, and Cosmetic Act (FD&C Act) prohibits the misbranding of a product through false or misleading labeling.  The FTC Act prohibits unfair or deceptive acts or practices in or affecting commerce.  Thus, social media advertisements that mislead, are unfair, or fail to disclose material health or safety risks violate these acts.  What should companies relying on social media influencers do?  Educate influencers on disclosure obligations and monitor all advertisements.  Companies are responsible for ensuring all advertising, including advertisements promoted through social media, is in compliance with all legal obligations.

The FTC also provided additional guidance to companies relying on social media influencers.  According to the FTC’s Guides Concerning Use of Endorsements and Testimonials in Advertising, 16 C.F.R. § 255.5 (2018) (Endorsement Guides), social media influencers must state if there is a “material connection” between an endorser and the marketer of a product.  Connections that might affect the weight or credibility that consumers give the endorsement should be clearly and conspicuously disclosed, unless the connection is already clear from the context of the communication containing the endorsement.  As the FTC explained:

If your company has a material connection to someone endorsing your products, that relationship should be clearly and conspicuously disclosed in the endorsements, unless the relationship is otherwise apparent. To be both “clear” and “conspicuous,” the disclosure should use unambiguous language and stand out. Consumers should be able to notice the disclosure easily, and not have to look for it. For example, consumers viewing posts in their Instagram streams on mobile devices typically see only the first two lines of a longer post unless they click “more,” and many consumers may not click “more.” Therefore, an endorser should disclose any material connection above the “more” button. In addition, where there are multiple tags, hashtags, or links, readers may just skip over them, especially where they appear at the end of a long post.

If your company has a written social media policy that addresses the disclosure of material connections by endorsers, you may want to evaluate how it applies to the posts identified in this letter and to posts by other endorsers of your products. If your company does not have such a policy, you may want to consider implementing one that provides appropriate guidance to your endorsers. You may also want to review your company’s social media marketing to ensure that posts contain necessary disclosures and they are clear and conspicuous.

“These letters are a reminder that companies who use social media influencers to promote their products must comply with all applicable advertising requirements,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection.