The nearly two-year legal saga between television host Tavis Smiley and PBS appears headed for its final chapter next month when the parties face off in trial.  Central to the dispute is the meaning and scope of the morals clause in Smiley’s contract with PBS.  PBS terminated its 14-year partnership with Smiley in 2017 for violating the clause after multiple allegations of sexual misconduct against Smiley surfaced.  Smiley filed suit in February of 2018 for breach of contract claiming that PBS’s invocation of the morals clause is simply a pretext for racial discrimination.  PBS countered alleging Smiley was the one who breached their agreement by violating the morals clause.

Although morals clauses are considered industry standard in Hollywood originating in the 1920s after silent-movie star Roscoe “Fatty” Arbuckle was famously accused of raping and killing an actress days after signing an unprecedented $3 million deal with Paramount Pictures, the precise meaning and scope of such clauses are notoriously ambiguous, making them often difficult to enforce.  In this instance, Smiley’s 2015 contract – the agreement at issue in this dispute – provides that he “shall not commit any act or do anything which might tend to bring [him] into public disrepute, contempt, scandal, or ridicule, or which might tend to reflect unfavorably on PBS…”.  This leads inevitably to questions of just what constitutes “public disrepute,” “contempt,” “scandal,” or “ridicule,” or counts as behavior that “might tend to reflect unfavorably on PBS.”

Washington D.C. Superior Court Judge Yvonne Williams provided some clarity in a ruling on January 2, 2020 that any alleged misconduct that predates Smiley’s contract with PBS (i.e., before 2015) does not come within the scope of the provision.  Since PBS claims its decision to terminate Smiley was based not only on misconduct that allegedly occurred before 2015 but also on misconduct that allegedly happened in 2015, 2016 and 2017, PBS’s counterclaim for breach of contract is still in play.  But Smiley may argue that since many of the earlier allegations were reported before the parties entered into the 2015 agreement, PBS had knowledge of these allegations yet still signed Smiley, thus waiving whatever moral objections PBS may have had to Smiley’s alleged behavior.

Also, given the ambiguity of the provision, Smiley may be able to challenge whether the allegations against him actually reflected unfavorably on PBS in light of other hosts and public figures that have appeared on PBS who were similarly accused of sexual misconduct including Charlie Rose, David Letterman, and Plácido Domingo.  The court may have hinted as to whether it would find such an argument persuasive when it denied Smiley’s motion to compel PBS to produce any records of other PBS personnel being accused of sexual misconduct as a “fishing expedition.”  But it is the jury that will decide the parties’ fate come February.

To follow up a story we two previous blogs (here and here), Redbox and Disney have settled their lawsuit over Redbox’s sale of download codes from Disney “combo packs.”

Combo packs were sets that Disney sold comprising a Blu-Ray and DVD of a movie plus a code that the purchaser could use to download a digital copy. Redbox bought combo packs at retail, broke them apart and sold the download codes separately from the physical discs.

Disney sought a preliminary injunction based on copyright infringement in February of 2018. Both parties’ arguments relied heavily on conflicting interpretations of the first sale doctrine, which states that once a person lawfully acquires a copy of a copyrighted work, she may then freely transfer it to others. There was no dispute that this doctrine permitted Redbox to sell or rent the Blu-Ray and DVD copies it acquired, but they differed on its applicability to the download codes. Redbox asserted that the paper slips containing the download codes were legally indistinguishable from the physical discs, while Disney’s position was that the codes were not themselves copies but only keys to permit consumers to create copies on their own computers.

The District Court agreed with Disney on the first sale issue, but interestingly, did not grant the preliminary injunction because it found that the terms of Disney’s license agreements for the download codes constituted misuse of copyright. The court found that under those agreements, the movies could only be downloaded by persons currently in possession of the discs with which they had been packaged. This meant that Disney was leveraging its copyrights to force consumers to sacrifice the free right to dispose of the physical discs that would otherwise be clearly permitted under the first sale doctrine.

After suffering such a narrow loss, it was a simple matter for Disney to revise the license terms for its download codes to say simply that the codes could not be sold separately. This was sufficient to overcome the copyright misuse argument, and Disney got its preliminary injunction in September 2018.

Although a preliminary injunction frequently brings an end to copyright litigation, Redbox fought on for another year. It continued to press its first sale arguments and attempted to bolster its allegations of copyright misuse by claiming that Disney was engaging in anticompetitive behavior to protect the launch of the Disney+ streaming service. Finally, however, in mid-November of this year the parties called it a day. Redbox agreed to a permanent injunction against selling download codes and gave the District Court continued jurisdiction to enforce its terms.

 

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.”

Netflix’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.