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This month we discuss Section 230, NFTs and trademark issues, Adidas’s stripes, FAO Schwarz, and more.

What does Section 230 have to do with trademarks?

Apparently a lot, according to the Third Circuit.  On September 23, 2021 the U.S. Court of Appeals for the Third Circuit held in Hepp v. Facebook, 14 F.4th 204 (3rd Cir., Sept. 23, 2021) that a state right of publicity claim against Facebook was not barred by Section 230 of the Communications Decency Act of 1996 (CDA).  To understand the significance of this decision, it is important to understand §230’s mandate.

In developing the CDA, Congress pursued an umbrella policy objective to promote continued development of the Internet and preserve a competitive free market for Internet and interactive computer services.  Passed by the House on August 4, 1995, the complete underlying policy was laid out in §230(b):

  1. to promote the continued development of the Internet and other interactive computer services . . .;
  2. to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation;
  3. to encourage the development of technologies which maximize user control over what information is received by individuals, families, and schools who use the Internet and other interactive computer services;
  4. to remove disincentives for the development and utilization of blocking and filtering technologies that empower parents to restrict their children’s access to objectionable or inappropriate online material; and
  5. to ensure vigorous enforcement of Federal criminal laws to deter and punish trafficking in obscenity, stalking, and harassment by means of computer.

As finally enacted, §230 provides as follows: “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”  In other words, websites are not liable for third party content.

The CDA was a response to case law in the 1990s imposing strict liability upon content publishing platforms and the rising concern over Internet pornography.  The idea was to balance both a rising concern by legislators over Internet pornography, and this newfound liability for content publishing platforms (i.e. websites, bulletin boards etc.) that terrorized Internet service providers.  The middle ground is §230: a complete bar to liability for third party content.

An important carve out from §230’s broad immunity, however, is §230(e)(2) which states: “[n]othing in this section shall be construed to limit or expand any law pertaining to intellectual property.”  So intellectual property lawsuits over third party content are not preempted by Section 230.

This is where Hepp v. Facebook comes in.  Hepp sued various entities hosting images of Hepp, a television newscaster, that were taken without her consent.  The photos were edited to include various memes and unwanted commentary, and one such image ended up on Facebook (the image was featured in a Facebook advertisement soliciting users to chat with “single women”).  Hepp thus sued Facebook based upon a right of publicity claim in the Eastern District of Pennsylvania.  Facebook moved to dismiss, arguing that Hepp’s state law right of publicity claim was preempted by §230.

The district court granted Facebook’s motion to dismiss, finding that §230’s immunity preserves only federal intellectual property claims, and not diverse state laws.  On appeal, the Third Circuit reversed finding that “right of publicity and trademarks are close analogues” and thus when Congress stated “intellectual property” it was referring to all intellectual property (state and federal) and right of publicity fits within that bucket.

This strained analysis overlooks the fact that right of publicity, which emanates from the right of privacy, is more akin to defamation (which §230 unequivocally preempts) than trademarks, which come from a consumer protection background.  It also overlooks the policy considerations driving the CDA, as outlined above, that created broad protections allowing innovation and free speech online to flourish since the 1990s.  Without §230’s immunity, it is unlikely that we would have anything resembling the Twitter, Instagram, TikTok, and Snapchat landscape we have today.

The Third Circuit ruling marks a split with the Ninth Circuit’s 2007 decision in Perfect 10, Inc. v. CCBill LLC, which held that only federal intellectual property law claims are subject to section §230’s carve out.  This case may make it to the Supreme Court given the issues involved.

When Brands Sue NFT Creators for Trademark Infringement

On January 14, 2022, Hermès filed a 47-page complaint against NFT creator Mason Rothschild in the Southern District of New York asserting a variety of claims including trademark infringement, false designation of origin, trademark dilution, cybersquatting and a number of state law claims.  According to its complaint, Rothschild “is a digital speculator who is seeking to get rich quick by appropriating the brand METABIRKINS for use in creating, marketing, selling, and facilitating the exchange” of NFTs.  Hermès further alleges that Rothschild “simply rips off Hermès’ famous BIRKIN trademark by adding the generic prefix ‘meta’ to the famous trademark BIRKIN.”

Metabirkins are basically digital renderings depicting furry Birkin bags.  According to Rothschild, “MetaBirkins is a collection of 100 unique Birkin NFTs created with faux fur in a range [of] contemporary color and graphic executions.”

In an Instagram post pre-dating the filing of this lawsuit, and posted in responses to Hermès’ cease and desist demand, Rothschild took the position that the use of METABIRKIN to sell NFTs of furry Birkin bags “is a playful abstraction of an existing fashion-culture landmark . . . [and] a commentary on fashion’s history of animal cruelty, and its current embrace of fur-free initiatives and alternative textiles.”  Some of these NFTs apparently go for as high as $45,000.

Hermès seeks a court order requiring Rothschild to cease his activities, surrender the domain name to Hermès, and pay damages including his profits from selling the digital assets.  This past week, Rothschild filed a motion to dismiss, claiming that the suit should be dismissed in its entirety based upon First Amendment arguments.

Interesting case to watch for anyone interested in NFTs and brand expansion into the metaverse.

The case is  Hermès International, et al. v. Mason Rothschild, 1:22-cv-00384 (SDNY).

BIG PIANO Sues FAO Schwarz for Trademark Infringement

Creator of the giant floor keyboard featured in the film “Big” in the 1980’s called the “Big Piano” has filed an action against the proprietors of famed toy store FAO Schwarz.  The action, commenced in the US District Court for the Eastern District of Pennsylvania in late 2021, seeks injunctive relief and damages on multiple bases including federal claims of passing off/false designation of origin, trade dress infringement, trademark infringement and false advertising, as well as state law causes of action for right of publicity violation, breach of contract, common law unfair competition, unfair trade practices, unjust enrichment, dilution and tortious interference with contractual relations.

Plaintiff Remo Saraceni alleges that he is the creator of the Big Piano and the owner of U.S. Trademark 5,349,746 for BIG PIANO for keyboard instruments, electronic musical keyboards and piano keyboards.  According to the suit, Pennsylvania based Saraceni’s creation received national media recognition in the early 1980’s which led FAO Schwarz to order a series of the keyboards and create a showroom for the Big Piano in its then flagship store on New York’s Fifth Avenue.  Saraceni claims the installation became a major attraction and caught the eye of the screenwriters of the movie “Big” leading to the inclusion of a famous scene in which the main character dances on the keyboard.  Per Saraceni, his Big Piano’s trade dress is distinctive and unique, his own likeness and identity have become “synonymous” with the Big Piano, and the mark BIG PIANO has become distinctive and acquired secondary meaning.

Apparently all was well between Saraceni and FAO Schwarz until the Fifth Avenue store closed in 2015.  Plaintiff alleges that a John Doe defendant – a corporation owning or an affiliate of named defendant MerchSource, LLC – purchased the FAO Schwarz brand with the intention of reopening a New York store.  In October 2016, Saraceni alleges that he and the defendants entered into negotiations for use of Plaintiff’s Big Piano in the new store.  In 2017, Saraceni was invited to MerchSource’s offices and, specifically, an FAO Schwarz branded showroom in which “[o]ne of the products on display was a piano mat identical to Plaintiff’s piano mat that was branded with the BIG PIANO marks.”  Following this, MerchSource apparently provided an affidavit by a member of the LLC attesting, inter alia, that:

  • The packaging bearing plaintiff’s BIG PIANO mark shown during Saraceni’s visit to the showroom “was created solely for the purposes of honoring Remo Saraceni’s visit and without intent to infringe…”;
  • The packaging bearing plaintiff’s BIG PIANO mark was not shown to third parties;
  • MerchSource and its parents and affiliates “have no intent to use the trademark BIG PIANO under the FAO brand in commerce…” in connection with pianos, toy pianos, electronic keyboards or “any other item that would infringe Remo Saraceni’s trademark rights”;
  • MerchSource and its parents and affiliates have not and will not so use the BIG PIANO trademark; and
  • Acknowledgement that purchase of products from Remo Saraceni “does not include transfer of intellectual property rights.”

(A copy of the May 2017 affidavit is attached to plaintiff’s Amended Complaint.)

Saraceni claims that he provided defendants with a Big Piano “as a token of good faith during negotiations” for use at a trade show and in temporary retail before launch of a new flagship store, however Defendants ceased negotiations before any agreement was reached.

In November 2018, a new FAO Schwarz store was opened in New York City which included what plaintiff characterizes as a “knockoff version” of Plaintiff’s piano mat and a “confusingly similar imitation of the Big Piano….”  Saraceni accuses defendants of promoting the return of the “Big Piano” to FAO Schwarz and intentionally trading on the reputation and good will of Saraceni’s Big Piano via advertising, media releases and marketing including an appearance on QVC in the shopping network’s studio in Westchester, PA.

Defendant MerchSource has moved to dismiss the Amended complaint as against MerchSource, citing lack of jurisdiction in the EDPA generally and, specifically, failure to state a claim for violation of right of publicity, tortious interference with contractual and prospective business relationship and claims based upon trade dress.  On February 1, 2022, the court granted defendant’s motion for lack of jurisdiction and dismissed the case.  Defendant reportedly has filed a declaratory judgement action in New York. Stay tuned for any further developments.

The case is Remo Saraceni v. MerchSource LLC and John Does, 21-cv-04947 USDC EDPA.

Adidas’ Lawsuit against Thom Browne over the latter’s use of stripes on athletic-style clothing

In 2021, Adidas sued U.S. clothier Thom Brown in the Southern District of New York for trademark infringement, unfair competition, and dilution over Brown’s use of stripes.  According to Adidas’ complaint, Brown “has expanded its product offerings far beyond [its] formal wear and business attire specialty,” and is “now offering for sale and selling athletic-style apparel and footwear featuring two, three, or four parallel stripes in a manner that is confusingly similar to adidas’s three-stripe mark.”  At issue is Adidas’ well known three stripe designs.  Over the past ten years, if not longer, Adidas has sued a number of parties to protect its “widely recognized” trademark that act as an “indicator of the origin of adidas’s goods.”

In October of 2021, Brown sought to dismiss Adidas’ complaint, referring to Adidas’ suit as “vague and ambiguous” because Adidas’ identifies 24 federal trademark registrations but does not identify “any specific product or design that [it] contends infringes any specific trademark registration.”  According to Browne, Adidas’ claims are “too vague to provide adequate notice as to the identity of the allegedly infringing product or the factual basis for its trademark infringement, unfair competition and dilution claims.”  Brown further argued that this vagueness is further exacerbated by the fact that the 24 marks in question feature stripes on different “lengths, color patterns, line spacing, placement and product type.”

While the suit is pending in New York, Brown has filed suit against Adidas in a London court, seeking to invalidate over 20 Adidas trademarks due to a purported lack of distinctiveness and/or non-use for at least five years.

Brown’s motion to dismiss remains undecided.  This is an interesting case to watch, but it is unlikely the court will outright dismiss the suit.  Rather, Adidas will be given another chance to plead its causes of action.

The case is adidas America, Inc., et. al., v. Thom Browne, Inc., 1:21-cv-05615 (SDNY).

PepsiCo Blocked From Using “Mtn Dew Rise Energy” During TM Dispute

On November 5, 2021, U.S. District Judge Lorna G. Schofield preliminarily blocked PepsiCo from using the mark “Mtn Dew Rise Energy” in association with its canned energy drinks while it litigates trademark infringement claims brought against it by Rise Brewing, a coffee company that owns registered “Rise” marks.  Before the alleged infringement occurred, the parties met to discuss a possible partnership, but that never materialized.

Rise claims that PepsiCo infringed on its “Rise” marks when PepsiCo launched its fruit-flavored caffeinated canned drink using “Mtn Dew Rise Energy.”  Both companies’ products use the word “Rise” prominently at the top of the can in large, bold letters. Rise sued PepsiCo in federal court, and requested a preliminary injunction.

Judge Schofield granted the motion, ruling that without the injunction, Rise was at risk of being overshadowed by PepsiCo’s use of the mark because of the size and fame of PepsiCo.  This represents a classic example of reverse confusion in which a junior user overpowers the senior user’s mark, according to the judge.  The judge found that the marks are confusingly similar in appearance, and the parties’ products are sold in proximity and through the same trade channels.  Thus, the judge ruled, consumers may believe that the goods are affiliated.

Dunnington Bartholow & Miller Trademark Bulletin Committee: Olivera Medenica (Partner), Donna Frosco (Of Counsel); Betsy Dale & Kamanta Kettle (Associates).


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