In a move that could upend the US theatrical exhibition landscape, the Antitrust Division of the Department of Justice has announced that it will seek court approval to terminate the Paramount Consent Decrees.

The Paramount Consent Decrees went into effect in 1948 following the decision of the Supreme Court in United States v. Paramount Pictures that the major studios were violating antitrust law. At that time, the studios had total control over all aspects of the industry. They had talent under long-term contracts, full control over production and ownership of the theaters in which their movies were shown. When it came to licensing pictures to theaters that they didn’t own, they indulged in practices such as block booking—forcing theaters to book less attractive features in order to get the more desirable ones—and circuit dealing—offering to deal exclusively with favored theater chains in order to extract more favorable terms. The DOJ’s move would permit the studios to get back into theater ownership immediately and, after a two-year adjustment period, would lift the ban on block booking and circuit dealing.

In a speech before the ABA, Assistant Attorney General Makan Delrahim explained that the DOJ’s position is that the Consent Decree has served its purpose. Given the passage of time and the effect of the decree itself, he said, there is no way that the studios could reinstate the horizontal cartel of the late 1940s. Vertical integration, moreover, is no longer subject to blanket prohibition under current antitrust law. As a further factor in the DOJ’s decision, Delrahim pointed to the changes in the theatrical exhibition business that have been wrought by streaming services.

The National Association of Theater Owners came out in opposition to the proposal last year when the DOJ first announced that it was evaluating the Consent Decree. Following the Department’s recent official announcement, the Directors Guild of America has likewise announced its opposition, calling it a “step in the wrong direction.”

Neflix’s original series “When They See Us” was released in May of this year and portrayed the prosecution of five teenagers of color who were wrongfully convicted of raping a white woman in Manhattan’s Central Park in 1989.  The series depicts the detectives and police abusing the teens, isolating them from their parents, and subjecting them to continuous hours of questioning without food or bathroom breaks to elicit false confessions.  In Part 4 of the series, after the actual culprit came forward, the Manhattan assistant district attorney confronts the lead detective on the case and says in reference to the detective’s interrogation of the teens, “You squeezed statements out of them after 42 hours of questioning and coercing, without food, bathroom breaks, withholding parental supervision… The Reid Technique has been universally rejected.  That’s truth to you.”

John E. Reid & Associates, which developed and trademarked The Reid Technique as a means of effectively interviewing, questioning, and interrogating suspects, begs to differ and filed suit against Netflix on Monday for defamation and false light because of these statements.  Reid claims its technique does not involve, and rather prohibits, striking or assaulting a suspect, making any promises of leniency, denying a suspect any rights, conducting excessively long interrogations, or denying a suspect any physical needs.  Reid adds that its technique urges extreme caution when interviewing juveniles and that the techniques used to interview the teens in “When They See Us” do not represent the Reid method.   Reid further takes issue with the allegation that the technique is “universally rejected,” though this statement could be viewed by the court as a matter of opinion and therefore beyond the scope of defamation.

Another open question is whether these statements are comments of and concerning John E. Reid & Associates or its founder, John Reid, as opposed to the product Reid created.  If the comments are seen as attacking a product, Reid’s claims may be better suited for a trade libel cause of action, which would require proof of actual damages as opposed to just general harm, and/or a dilution of its trademark by tarnishment under the Lanham Act.

Also of note is that the detective in the episode responds to the statement saying he did not know what technique he used in interrogating the teens, which suggests that the overall context in which the allegedly defamatory statements were made conveys a degree of doubt as to whether the interrogation involved The Reid Technique.  Under this view, it would appear that the series took a neutral stance on the technique and crafted the dialogue to allow the viewers to conclude whether the technique was used and/or was responsible for the way the teens were mistreated.  Anticipating this argument, Reid argues that the character playing the assistant district attorney and who accuses the detective of employing The Reid Technique is portrayed as intelligent and credible, while the detective is depicted as a bad actor.

Netflix has not publicly commented on the suit but is expected to file an answer sometime next month.

20150401_130237 by arctic_whirlwind licensed under CC BY-ND 2.0

Currently standing nine games back of the Atlanta Braves in the National League East and vying for a National League Wild Card spot, the last thing the Phillies need is to have to fight to keep its most valuable player on the team.  I am not talking about Bryce Harper (who has largely underperformed this year given his mega 13-year $330 million contract signed this past offseason).  Rather, I am talking about the one personality that has consistently delivered for the organization in each and every one of its 41 years of service:  the Phillie Phanatic.

Debuting in 1978, the Phanatic has been a staple of the Phillies organization, performing slapstick humor to entertain the fans, players, and even umpires at Phillies home games and making countless appearances at charity functions and other off the field events.  But the Phanatic may be entering free agency for the 2020 season because of a dispute over its copyright between the Phillies and the creative design and marketing company Harrison/Erickson, Inc, which created the world famous Miss Piggy of the Muppets as well as other notable characters.  Harrison/Erickson teamed up with the Phillies to develop the Phanatic image, concept, and costume in the 1970s, and in 1984 executed a purportedly perpetual assignment to the Phillies of its copyrights in the mascot for $215,000.  However, in June of this year the firm announced it intends to invoke Section 203 of the U.S. Copyright Act which permits authors to terminate a transfer or license of copyright after thirty-five years from the date the transfer or license was made, regardless of its terms.  Such a termination would result in the reversion of any and all rights Harrison/Erickson assigned in 1984 and could preclude the Phillies from displaying the mascot at any future games or events, or on any new merchandise.

The purpose of Section 203 is to give an author an opportunity to regain its rights in a copyrighted work on the theory that the author may have had little bargaining power at the time the assignment was made and that the work may now be worth far more than what it was at the time of assignment.  In this case, Harrison/Erickson received the equivalent of around $533,000 present value for the mascot when it assigned its rights in 1984 whereas now the Phanatic, the most popular mascot in baseball, is arguably worth tens of millions of dollars if not more.

Of course, the Phillies will not go down looking.  The Phillies filed an action in the Southern District of New York earlier this month for declaratory relief that the Phanatic can never be removed from their roster.  The Phillies argue, at minimum, that they are co-authors of the mascot and that Harrison/Erickson has no rights under Section 203 or otherwise to terminate the Phillies’ copyrights in the Phanatic.  The Phillies also contend Harrison/Erickson already had an opportunity to renegotiate the terms of the assignment as the mascot debuted in 1978, and six years later, after the Phanatic began to gain considerable popularity, Harrison/Erickson executed a perpetual assignment for a significant sum.  The Phillies further asserted their rights in the Phanatic’s name and image under the Lanham Act as a potential means of still establishing a grounds for use even if Harrison/Erickson is determined to be the sole author of the mascot.

As this new case is still very much in the first inning, it may be a while before the parties officially settle the score.  Absent an extension, Harrison/Erickson’s response to the Phillies’ complaint is due September 2, 2019.

Image from 123RF Limited

The U.S. Supreme Court this week officially pulled the plug on the Lanham Act’s prohibition on the registration of trademarks that comprise “immoral” or “scandalous” matter on First Amendment grounds.  The prohibition, found in Section 2(a) of the Act, was already on life support after the Court’s 2017 decision in In re Tam found the U.S. Patent and Trademark Office’s refusal to register the name of an Asian rock band called “THE SLANTS” constituted an impermissible viewpoint-based restriction on speech.  This gave streetwear designer Erik Brunetti the green light to proceed with his longstanding dispute with the USPTO.

As previously reported, Brunetti had sought to trademark his brand name “FUCT” since 2011 to no avail.  Ultimately, however, Brunetti successfully challenged the refusal in the Federal Circuit which found denying Brunetti registration simply because his mark was deemed to be “immoral” and/or “scandalous” violated the First Amendment.  The government petitioned for certiorari.

The Supreme Court unanimously found the “immoral” component of Section 2(a) to be unconstitutional, and a 6-3 majority struck down the “scandalous” portion as well.  Justice Elena Kagan penned the opinion of the Court and recognized that the section unlawfully empowered the USPTO to promote certain messages while disfavoring others.   For instance, Kagan notes the USPTO granted registration of marks to the Drug Abuse Resistance Education (D.A.R.E.) program while refusing to register the marks “BONG HITS 4 JESUS”, “YOU CAN’T SPELL HEALTHCARE WITHOUT THC”, and “MARIJUANA KOLA.”

Justices Sonia Sotomayor, Stephen Breyer, and John Roberts partly dissented over concerns that striking the prohibition of the registration of “scandalous” matter would require the government to register marks so obscene and/or hateful that they could incite a violent reaction.  “Just think about how you might react if you saw someone wearing a t-shirt or using a product emblazoned with an odious racial epithet,” Breyer warned.  The dissent argued the “scandalous” provision of the law could be salvaged because it does not attack ideas, but rather only how those ideas are expressed.

The majority disagreed but left the door open to Congress to adopt, in Justice Alito’s words, “a more carefully focused statute that precludes the registration of marks containing vulgar terms that play no real part in the expression of ideas.”  In other words, if a mark was deemed wholly obscene under the Miller test (which is a standard as nebulous as the word “obscene” itself), it could theoretically still be refused registration if Congress so chooses.  Congress could also theoretically redraft Section 2(a) to cover marks that constitute fighting words and/or have the likely impact of inciting imminent violence.  But a broad ban on marks the USPTO finds to be “immoral” and/or “scandalous” is a thing of the past.

The United States Supreme Court decided this week that purchasers of apps through the Apple App Store have standing under federal antitrust law to bring a class-action lawsuit against the tech giant.

The Sherman Antitrust Act makes it unlawful for any person to “monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States…” 26 Stat. 209, 15 U.S.C. § 2.  Section 4 of the Clayton Act in turn provides that “any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue…” 38 Stat. 731, 15 U.S.C. §15(a) (emphasis added).  The issue in this case is the scope of the phrase “any person… injured.”

The Plaintiffs are four iPhone owners who sued Apple, alleging that the company has monopolized the retail market for the sale of apps and has unlawfully used its monopolistic power to charge consumers higher-than-competitive prices.

To sell an app in the App Store, app developers must pay Apple a $99 annual membership fee along with 30% of the sales price of any app.  According to the complaint, the 30% commission is “pure profit” for Apple – a cost these plaintiff-consumers argue is passed on to them.  In a competitive environment with other retailers, Plaintiffs reason, “Apple would be under considerable pressure to substantially lower its 30% profit margin.”  But by contract and through technological limitations, the App Store is the only place where iPhone owners may lawfully buy apps.

Apple moved to dismiss, arguing that the iPhone owners lack standing to sue because they are not direct purchasers from Apple under the “Illinois Brick doctrine” established by the Supreme Court in 1977, which determined that indirect consumers of products lack Article III standing to bring antitrust charges against producers of those products.

In that case, Illinois Brick Company manufactured and distributed concrete blocks.  It sold the blocks primarily to masonry contractors who sold masonry structures to general contractors.  Those general contractors in turn sold their services for large construction projects to the state of Illinois, the ultimate consumer of the blocks.

The State sued Illinois Brick under the Sherman Act, alleging that the company had engaged in a conspiracy to fix the price of concrete blocks.  As a result, the State alleged, it was forced to pay more for the concrete blocks than it would have paid absent the price-fixing conspiracy.  However, the Supreme Court ruled that the State could not bring an antitrust action against Illinois Brick because it had not purchased concrete blocks directly from Illinois Brick, but was several steps removed from the alleged antitrust violator in the distribution chain.

Accordingly, Apple argued that the consumer-plaintiffs in this case could not sue Apple for antitrust injuries because – like the State in Illinois Brick – they were not “direct purchasers” from Apple since the App Store deals in apps created and sold by independent developers.

The Court, however, was unpersuaded.  Unlike the consumer in Illinois Brick, the Court reasoned, “the iPhone owners here are not consumers at the bottom of a vertical distribution chain who are attempting to sue manufacturers at the top of the chain.”  Here, “the absence of an intermediary in the distribution chain between Apple and the consumer is dispositive.”

Further, the Court expressed concern that Apple’s limited theory of standing would “provide a roadmap for monopolistic retailers to structure transactions with manufacturers or suppliers so as to evade antitrust claims by consumers and thereby thwart effective antitrust enforcement.”

The Court’s decision empowering app purchasers to sue for antitrust injury could become impactful in other media contexts.  For instance, a few weeks ago, YouTube TV subscribers received the unfortunate news that the price for an online bundle of television networks would soon increase.  After the Google division reached a pricey content licensing deal with Discovery, YouTube TV passed along the additional cost to consumers.  Notably, those who signed up for the service through Apple had to pay even more.

Whether the conduct of Apple (and others) actually rises to the level of an antitrust violation has yet to be decided.  But the high court’s decision rejecting a too-narrow definition of “direct purchaser” gives more consumers a bite at the antitrust apple.

Image from 123RF Limited

After almost four years of litigation between TBS late-night talk show host Conan O’Brien and comedy writer Alex Kaseberg over five jokes Kaseberg alleged Conan and his writing team stole from Kaseberg’s Twitter feed, the clashing comics finally reached a settlement.  Though the terms of the agreement are confidential, both parties seem relieved the case has finally run its course.

O’Brien told Variety that the dispute ended “amicably.”  He added, “I stand by every word I have written here, but I decided to forgo a potentially farcical and expensive jury trial in federal court over five jokes that don’t even make sense anymore.  Four years and countless legal bills have been plenty.”

Kaseberg also seemed content with dropping the curtain.  “As a professional comedy writer, all I want to do is make people laugh and stand up for the things I believe in,” Kaseberg told Variety.  “I am proud my case helped shed light on an issue facing all comedy writers and am happy to have been part of contributing legal precedent on the issue of protection afforded to jokes.”

The five jokes that set all of this into motion seemed innocent enough.  They consisted of a jeer about Patriots’ quarterback Tom Brady giving Seahawks’ coach Pete Carroll the new Chevy Colorado that Brady promised to the “MVP” of Superbowl XLIX, a gag about a hypothetical street named after Bruce Jenner having to be renamed “cul-de-sacless,” a jest about a discovery that the Washington Monument is ten inches shorter than previously recorded because of “shrinkage” from cold weather, a jab teasing commercial airline passengers for always fighting over the armrest, and a taunt of the Oakland Raiders for their seemingly perpetual futility.

As previously reported, O’Brien knocked out two jokes on summary judgment on the grounds that they were independently created and/or too different from Kaseberg’s jokes for a jury to conclude that they were copied.  But the jeers about Pete Carroll, Bruce Jenner, and the Washington Monument remained in play and raised serious concerns over determining whether a newsworthy joke poking fun at current events could be said to have infringed a similar but slightly different joke that pokes fun at the same facts and events.  Given that the jokes at issue in this case were newsworthy, the judge found that the jokes would have to be “virtually identical” to be actionable.  However, the court was unwilling to decide this issue at summary judgment and set the stage for a long and arduous journey toward trial – a journey surely most comedians would like to avoid.  And for good reason.  Copyright infringement is no laughing matter.

A fashion designer and two luxury department stores have landed in hot water after selling products reminiscent of “The King of Cool”. While right of publicity cases frequently turn on alleged appropriation of a celebrity’s name or likeness, the case here seeks to extend a celebrity’s personal brand to cover his fashion choices.

Chadwick McQueen, the son of the late Steve McQueen, has filed suit against Tom Ford, Neiman Marcus, and Bergdorf Goodman for trademark infringement, violation of the right of publicity, false endorsement, and unfair competition. Chadwick and City National Bank control his father’s estate, including intellectual property rights. The McQueen Estate filed suit in Los Angeles County California Superior Court.

Tom Ford, Neiman Marcus, and Bergdorf Goodman previously offered a Tom Ford “McQueen Cardigan” and a Tom Ford “Wool McQueen Cardigan” for sale on their websites. In the McQueen Estate’s lawsuit, the plaintiffs allege that the line of sweaters offered by Tom Ford closely resemble those worn and made famous by Steve McQueen. According to the complaint, by offering this line of sweaters, Tom Ford capitalized on McQueen’s popularity as a fashion icon and his well-known image. The plaintiffs argue that the wool cardigan sweater with a distinctive shawl collar is “synonymous with McQueen”. In support of this contention, the complaint cites an article posted on the website “Style Girlfriend,” which describes McQueen’s distinctive taste in sweaters and describes him as “the lord of manly knitwear.”

According to the U.S. Patent and Trademark Office, the McQueen Estate owns multiple federal trademark registrations for the mark “STEVE MCQUEEN”. According to one registration for the mark (Reg. No. 3948067), “STEVE MCQUEEN” is registered for use with knit shirts, coats, jackets, shirts, sweaters, t-shirts, among other apparel.

The lawsuit alleges Tom Ford’s “McQueen Cardigan” and “Wool McQueen Cardigan” were offered for $2,390. Both sweaters are now unavailable on the Tom Ford official website. However, the “Merino McQueen Cardigan” is currently listed on Tom Ford’s website and priced at $1,690. The complaint further alleges that Bergdorf Goodman sold a “Steven McQueen Cardigan” that was advertised as “pure cashmere cardigan in Steven McQueen style.”

The complaint states that neither Tom Ford nor Neiman Marcus has a license to use the intellectual property owned by the Steve McQueen estate. As a result, the complaint alleges that Tom Ford’s sale of the “Steve McQueen Cardigan” creates a false impression that the McQueen Estate authorized the line of products. Plaintiffs argue that the defendants used Steve McQueen’s name, likeness, and persona to market the “McQueen” sweaters, causing consumer confusion as to the “source, origin, sponsorship, and association” of the product line.

The McQueen Estate is seeking actual damages, lost profits, two million dollars in statutory damages for each registered trademark that it alleges has been infringed, and attorneys’ fees. The estate is also seeking an injunction barring the defendants from using the “STEVE MCQUEEN” trademarks.

The Los Angeles Superior Court will decide.

This is an update on my blog post regarding the face-off between the Writers Guild of America (WGA) and the major talent agencies, through the Association of Talent Agencies (ATA).

To summarize–OMG!! 

The WGA issued an ultimatum requiring the agents to sign their Code of Conduct forswearing package commissions. This is the practice by which agencies are paid directly out of the budget of television shows rather than by taking 10% of their clients’ gross earnings. It’s not disputed that this practice sometimes results in agents making more than their clients on a show. The agents see this as a win-win, since the writers save the commission on their fees. The WGA sees it as creating a conflict of interest that ultimately harms writers. For the last several months, Hollywood held its breath in the hope that the parties would bridge this divide. This did not happen. The WGA directed its members to fire their agents, which over 7,000 have done so far.

The result makes compelling water cooler conversation but is otherwise a bloody mess. Here is the latest.

  • The WGA has filed suit against the ATA and the Big Four agencies (WME, CAA, ICM and UTA), alleging that the practice of collecting package commissions constitutes breach of fiduciary duty and unfair competition under state and federal law.
  • The entire ecosystem under which writers found jobs is upended. Under the California Talent Agencies Act (TAA), only licensed talent agents can “procure” employment for writers. The WGA has issued a statement delegating authority to managers and lawyers to find work for writers notwithstanding the statute, but many (including the ATA) question the union’s authority to do so. The WGA has offered to indemnify lawyers and managers against TAA claims. So far, however, no one has taken it up on this offer.
  • Lawyers, but especially managers are in a tight spot. They have writer clients to service without agencies to back them up and provide cover. They can procure employment for their clients in violation of the TAA, at risk of being required to disgorge any commissions received if their client files a claim with the State Labor Commissioner. Meanwhile, the big agencies have made it clear that they will not look kindly upon managers and lawyers who encroach upon their territory, and will remember who their friends are when this dispute is finally resolved.
  • No one knows how open writing assignments will be filled, since this was a central role of the agencies. The WGA has set up an online database to facilitate matchmaking, and showrunners are falling back on their personal networks. These are early days, however. There will undoubtedly be loss of efficiency in staffing but how serious it will be and who will suffer remains to be seen.
  • The endgame is far from clear. The consistent position of the WGA has been that it will simply not  tolerate packaging any longer. It even rejected out of hand an eleventh-hour offer by the ATA to negotiate a split of package commissions. On the other hand, package commissions have comprised a major part of agencies’ revenues for over forty years. It is hard to see the Big Four giving them up, and they have the financial strength to function without commissions from writer deals indefinitely. If both sides insist on playing out the litigation option, we are in for years of stalemate. Without venturing any predictions, here are some possible outcomes, some likelier than others:
    • Midsized and smaller agencies break ranks, sign the Code of Conduct and poach Big Four clients.
    • New staffing mechanisms develop that work so well that writers wonder why they ever thought they needed agents in the first place.
    • Writers become frustrated and exhausted, abandon the union and go back to their agents.
    • The WGA turns on the managers, asserting that their practice of producing on their clients’ projects is a breach of fiduciary duty and conflict of interest.
    • The ATA sues the managers for violating the TAA and for unfair competition.
    • The ATA and WGA make a deal and bury the hatchet. (This is actually bound to happen eventually.)

Worried? Confused? Me too. I need a break. What’s on TV?

A change in the rules for Oscar eligibility proposed by the Academy of Motion Pictures Arts and Sciences (AMPAS) may violate antitrust laws, according to the Department of Justice.

At issue is whether feature-length films produced by streaming services like Netflix should be eligible for Oscar consideration, even though they don’t have a significant theatrical run. The DOJ weighed in on the issue in the wake of reports that Academy board member Steven Spielberg was planning to push for such a rule change.

Spielberg first made his views on the subject known last year, telling ITV News that, while Netflix and other streaming platforms have elevated the quality of television, “once you commit to a television format, you’re a TV movie… If it’s a good show [it] deserve[s] an Emmy, but not an Oscar.” In Spielberg’s view, the movie theater experience is essential to truly appreciate and reward the cinematic art form. His proposed rule change would preclude Oscar eligibility for films that do not have a significant theatrical run.

But in a March 21 letter, DOJ antitrust chief, Makan Delrahim warned the Academy that such a rule may violate Section 1 of the Sherman Act, which “prohibits anticompetitive agreements among competitors.”

“Accordingly,” Delrahim cautioned, “agreements among competitors to exclude new competitors can violate the antitrust laws when their purpose or effect is to impede competition by goods or services that customers purchase and enjoy but which threaten the profits of incumbent firms…

[I]f the Academy adopts a new rule to exclude certain types of films, such as films distributed via online streaming services, from eligibility for the Oscars, and that exclusion tends to diminish the excluded films’ sales, that rule could therefore violate Section 1.”

The proposed rule change was seen by some as a direct attack on Netflix. Though the streaming service has garnered increasing acclaim for its feature films – including Alfonso Cuaron’s “Roma”, which took home three Oscars this year – it typically does not release its films in theaters.

Netflix responded to reports of Spielberg’s comments early last month, tweeting:

“We love cinema. Here are some things we also love:

  • Access for people who can’t always afford, or live in towns without, theaters
  • Letting everyone, everywhere enjoy releases at the same time
  • Giving filmmakers more ways to share art[.]

These things are not mutually exclusive.”

Notwithstanding Netflix’s populist appeal, the DOJ’s position in defense of the streaming service’s Oscar aspirations simply may not hold water.

First, the objective of antitrust law is to protect the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up. Accordingly, the Sherman Act does not prohibit every restraint of trade, only those that are unreasonable. The DOJ’s position on the Academy’s proposed rule assumes both the manner and degree to which consumers are ultimately impacted by Oscar noms.  The anticompetitive impact may very well be too minor, speculative, or indirect to be considered “unreasonable.”

Second, the Academy is not a trade association in the model contemplated by the Sherman Act. Per se violations of the Act include plain arrangements among competing individuals or businesses to fix prices, divide markets, or rig bids.  Despite the Academy’s origins as a “company union,” today, it’s a collective of individuals from across the international film community.   Its membership includes several streaming service execs, and the majority of members have no particular studio affiliation or allegiance.

The Board of Governors will meet on April 23 for its annual awards rules meeting. The Academy hasn’t said whether it will consider the rule change.